Fluor 2011 Annual Report Download

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BUILDING
2O11 ANNUAL REPORT

Table of contents

  • Page 1
    BUILDING 2O 1 1 A N N U A L R E P O R T

  • Page 2
    ... contractors, Fluor's primary objective is to develop and execute projects on schedule, within budget and with excellence. Fluor is a FORTUNE 200 company with 43,000 employees operating globally. TABLE OF CONTENTS Shareholder Letter ...2 At-A-Glance ...6 Oil & Gas ...10 Industrial & Infrastructure...

  • Page 3
    ... John Simon Fluor founded the company in Santa Ana, California, we have grown to a worldwide force of 43,000 employees working on six continents. We have led the way in building some of the largest, most significant projects in human history. We have taken part in the birth of industries. We have...

  • Page 4
    ... end-market, began many years ago. Fluor's robust international business, representing nearly 80 percent of the backlog at the end of 2011, is a testament to our diversity. The insight of my predecessors has helped create a company that has not only survived, but thrived. I am pleased to report that...

  • Page 5
    ... rs in Billi o ns ) EAR N I N GS PE R SHAR E ( Do l l a rs ) CASH & MAR KETABLE SE CU RI T I ES ( Do l l a rs i n B i l l i o ns) "Fluor stands on a platform of global diversification, which has allowed us to build our portfolio in the face of formidable economic challenges." 2 . 761 11 2 7. 4

  • Page 6
    ...position in key markets was very evident this year. In our Industrial & Infrastructure group, mining and metals continued to be an area of substantial strength. We won a number of major new awards, including ongoing work for BHP Billiton in Australia and initial work on the Simandou iron ore project...

  • Page 7
    2O1 1 A N N UA L R E P O RT 5

  • Page 8
    .... The group provides management, engineering, procurement, construction and maintenance solutions to the mining and metals, highway and rail transit, aviation, heavy civil, manufacturing and life sciences industries all over the world. Government Government provides logistics services, base...

  • Page 9
    ... environmental compliance and emissions retrofit work. Global Services Global Services provides a wide array of solutions to help industrial clients optimize their performance. The group offers facility management, site-based maintenance, plant engineering, industrial ï¬,eet and equipment services...

  • Page 10
    8 FLUOR CORPORATION

  • Page 11
    2O1 1 A N N UA L R E P O RT 9 EX CELLENCE Celebrating 100 Years We have earned a reputation for building quality that stands the test of time. As a public company, we know that we must consistently deliver earnings and value to shareholders. We also know that we can only achieve this through ...

  • Page 12
    ... Oil in Canada and a number of other oil sands-related projects. Our Fluor Offshore Solutions team saw a significant amount of additional offshore platform work in Australia, the Philippines, North America and the Middle East. Our project portfolio continues to be more globally balanced. There...

  • Page 13
    ... opportunities and expanding our presence in a number of countries, including India, Mexico, Canada, Argentina, Brazil, Indonesia and Russia. National oil companies (NOCs) remain an important focus for the company. The unique demands that NOCs place on contractors are changing the way EPCM projects...

  • Page 14
    12 FLUOR CORPORATION Oil and Gas GLOBAL DEMAND FOR ENERGY IS HUGE AND WILL INEVITABLY INCREASE, WITH THE INTERNATIONAL ENERGY AGENCY FORECASTING SUBSTANTIAL GROWTH IN DEMAND.

  • Page 15
    2O1 1 A N N U A L R E P O R T 13

  • Page 16
    14 F LU O R C O R P O R AT I O N

  • Page 17
    ... diversification isn't the latest hot trend at Fluor. We've been in the Middle East since the '50s and China since the '70s, and we've successfully executed complex projects almost everywhere else. We have seen what can happen in global markets. We have been there before and we will continue to...

  • Page 18
    ... long-standing relationship with BHP Billiton in Australia. We continued our work with Rio Tinto, progressing the preliminary engineering stage of the Simandou iron ore development in Guinea. The group also embarked on its first U.S. mining projects in many years, with contracts in Utah and Arizona...

  • Page 19
    ...new infrastructure awards due to worldwide economic and political issues, the investment trend is upward. When economies rebound, investment will accelerate. In emerging economies, development is happening even sooner. China is now mining outside its own borders in places like Guinea and Peru. India...

  • Page 20
    18 FLUOR CORPORATION Industrial and Infrastructure LONG-TERM DEMAND FOR THE DEVELOPMENT OF LARGE INDUSTRIAL AND INFRASTRUCTURE PROGRAMS WILL CONTINUE AT A SIGNIFICANT LEVEL.

  • Page 21
    2O1 1 A N N U A L R E P O R T 19

  • Page 22
    20 FLUOR CORPORATION

  • Page 23
    2O1 1 A N N U A L R E P O R T 21 Insight 2009 Annual Report FLUOR HAS AN EXCEPTIONAL LEGACY OF BUILDING VALUE FOR ITS CLIENTS, EMPLOYEES, COMMUNITIES AND GF=L=9E& SHAREHOLDERS. IN 1942 WE BEGAN TO RECORD AND PUBLISH OUR PROGRESS. HERE ARE THE ANNUAL REPORTS THAT HAVE CHRONICLED OUR JOURNEY. ...

  • Page 24
    ...$100,000 to build a refining unit for Shell Oil Company in Wood River, Illinois. Fluor receives its largest contract to date, a project valued at over $5 billion to build a gas-gathering, treatment and transmission program for Aramco in Saudi Arabia. 1933 Fluor secures its first overseas contract...

  • Page 25
    ... and Rita. 2011 Record year-end backlog of $39.5 billion 2008 First time revenue over $20 billion 1993 Fluor trains more than 14,000 workers to help build Shell's Rayong refinery in Thailand. 2007 Fluor is awarded the world's largest polysilicon plant by LDK Solar in China, a project valued at...

  • Page 26
    ... past year, Government group employees worked nearly 1.5 million man-hours per week, achieving our best safety record in more than five years. We completed the American Recovery and Reinvestment Act funded project scope at the Savannah River Site in South Carolina - a part of our long-term contract...

  • Page 27
    ... our government customers. We are moving toward full mission life-cycle contracts by adding capabilities that address our customers' dynamic needs. We will bring additional value by leveraging the considerable breadth and depth of resources across Fluor to solve complex and challenging problems for...

  • Page 28
    28 FLUOR CORPORATION

  • Page 29
    ...N N UA L R E P O RT 29 P ASSION Celebrating 100 Years Fluor people are passionate about building. We are fortunate to be regularly involved in projects that have the power to transform communities, economies, even whole countries. We improve lives, create jobs and initiate growth that can sustain...

  • Page 30
    ... are growing where there is significant new industrial development in regions such as the Middle East, Australia, South Africa and South America. Our group has over 10,000 employees worldwide, working at more than 400 locations. In 2011, Global Services achieved new awards totaling $1.0 billion and...

  • Page 31
    ... are strengthening our position in Australia, Africa and South America, where high global demand for commodities is driving maintenance and project support needs. These markets typically lack the infrastructure, equipment or labor required to execute their projects, making Global Services a valuable...

  • Page 32
    32 FLUOR CORPORATION

  • Page 33
    2O1 1 A N N UA L R E P O RT 33 PRIDE Celebrating 100 Years Over the past century, our employees have engineered and constructed power plants that light up cities, offshore platforms and refineries that fuel commerce, highways and railways that transport people and products, and pharmaceutical ...

  • Page 34
    ... large new solar photovoltaic project for LS Power. We also established a solar presence in South Africa, leveraging the Fluor groups that are already resident in country. Awards in 2011 include two key projects in Texas - a new combined-cycle gas plant for LCRA and new environmental compliance work...

  • Page 35
    ... expect more gas-fired power projects to emerge. Developing clean coal plants with CO2 capture is possible, however, and Fluor brings a proven patented technology for CO2 capture known as Econamine FG PlusSM. We will also pursue growth through renewable projects including solar, wind and alternate...

  • Page 36
    ...er nment 4 % Gl ob al Ser vice s 6 % P ow er BACKLOG BY SEGMENT Year Ended December 31 ($ in millions) 2011 $ 15,068 19,601 1,091 1,881 1,843 $ 39,484 38% 49% 3% 5% 5% 100% 2010 2009 3% 5% 5% Oil & Gas Industrial & Infrastructure Government Global Services(1) Power(1) Total Backlog $ 14,267 16...

  • Page 37
    ...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 in the Global Services segment. Net earnings in 2008...

  • Page 38
    ...; Director of Archer Daniels Midland Company and Sempra Energy (2001) 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 Corporation (1984) (1)(3)(4) David T. Seaton...

  • Page 39
    ...L. Hopkins Group Executive, Corporate Development (1984) Peter Oosterveer Group President, Oil & Gas (1988) Richard P. Carter President, Fluor Constructors International (1983) James M. Lucas Senior Vice President, Tax and Treasury (2006) David Marventano Senior Vice President, Government Relations...

  • Page 40
    ...Site, Piketon, Ohio Job Corps Center Operations, Crystal Springs, Mississippi PAGE 35 BOTTOM RIGHT: PG&E Humboldt Bay nuclear plant site services work, Eureka, California © 2012 photo courtesy of Pacific Gas and Electric Company PAGE 31 LEFT: Rio Tinto Iron Ore rail maintenance, Western Australia...

  • Page 41
    2011 FORM 10-K

  • Page 42
    ... Boulevard Irving, Texas (Address of principal executive offices) 469-398-7000 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered 33-0927079 (I.R.S. Employer Identification...

  • Page 43
    FLUOR CORPORATION INDEX TO ANNUAL REPORT ON FORM 10-K For the Fiscal Year Ended December 31, 2011 Page PART I Item Item Item Item Item Item 1. 1A. 1B. 2. 3. 4. Business ...Risk Factors ...Unresolved Staff Comments Properties ...Legal Proceedings ...Mine Safety Disclosures ...1 11 25 25 26 26 PART ...

  • Page 44
    ... 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 sciences and manufacturing. We are also a primary service provider to the U.S. federal government; and...

  • Page 45
    ... ''Operating Information by Segment,'' which is incorporated herein by reference. Competitive Strengths As 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...

  • Page 46
    ... 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 47
    ... a full range of design, engineering, procurement, construction and project management services to a broad spectrum of energy-related industries. We serve a number of specific industries including upstream oil and gas production, downstream refining, offshore production, chemicals and petrochemicals...

  • Page 48
    ... and Central American oil, gas, power, chemical and other markets. Industrial & Infrastructure The Industrial & Infrastructure segment provides design, engineering, procurement and construction services to the transportation, wind power, mining and metals, life sciences, manufacturing, commercial...

  • Page 49
    ...facilities. Capabilities within Global Services include operations and maintenance activities, small capital project engineering and execution, site equipment and tool services, industrial fleet services, plant turnaround services, supply chain solutions and temporary staffing. Continuing operations...

  • Page 50
    ... projects and plants at locations throughout North and South America, Africa and the Middle East. Our supply chain solutions business line provides a full range of strategic sourcing solutions to help execute capital projects. Our material, equipment and subcontracted services specialists...

  • Page 51
    ... 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 52
    ... 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., the Shaw Group and URS Corporation, and international...

  • Page 53
    ... project services is more narrow and limited to only those capable of providing comprehensive equipment, tool and management services. Temporary staffing is a highly fragmented market with over 1,000 companies competing globally. The key competitive factors in this business line are price, service...

  • Page 54
    ... hourly employees, who provide support throughout the various business segments, varies in relation to the number and size of projects we have in process at any particular time. Available Information Our website address is www.fluor.com. You may obtain free electronic copies of our annual reports on...

  • Page 55
    ...a project is not executed on schedule, we may be required to pay liquidated damages. Intense competition in the engineering 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...

  • Page 56
    ... markets we serve. The demand for our services and products is dependent upon the existence of projects 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...

  • Page 57
    ... political risk including Afghanistan, Indonesia, Iraq, Russia, China and Saudi Arabia. In addition, military action or continued unrest, especially in the Middle East, could impact the supply or pricing of oil, disrupt our operations in the region and elsewhere, and increase our security costs. Our...

  • Page 58
    ...may in the future be named as a defendant in legal proceedings where parties may make a claim for damages or other remedies with respect to our projects or other matters, including liabilities associated with divested businesses. These include potential liabilities arising from the operations of the...

  • Page 59
    ... losses for us with respect to the joint venture. We enter into various joint ventures and teaming arrangements as part of our engineering, procurement and construction businesses, including ICA Fluor and project-specific joint ventures, where control may be shared with unaffiliated third parties...

  • Page 60
    ... 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, billing, accounting, purchasing, estimating, compensation and management information systems...

  • Page 61
    ... we perform significant work under the LOGCAP IV contract. Based on recent government pronouncements, the current level of Department of Defense overall spending will likely decrease. More specifically, government services being provided in the Middle East, including Afghanistan, will likely not...

  • Page 62
    ... 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 63
    ... disclosure of client or our information (including proprietary intellectual property) and could adversely affect our operating results. While management has taken steps to address these concerns by implementing sophisticated network security and internal control measures, there can be no...

  • Page 64
    ... often work on large-scale and complex projects, frequently in geographically remote locations. Our project sites can place our employees and others near large equipment, dangerous processes or highly regulated materials, and in challenging environments. Safety is a primary focus of our business and...

  • Page 65
    ... our markets and limit our opportunities for growth or reduce our revenue below current levels. We may be unable to win new contract awards if we cannot provide clients with letters of credits, bonds or other security or credit enhancements. In certain of our business lines, it is industry practice...

  • Page 66
    ... revenue and profits. Our continued success requires us to hire and retain qualified personnel. The success of our business is dependent upon being able to attract and retain personnel, including engineers, project management and craft employees around the globe and who have the necessary and...

  • Page 67
    ...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 68
    ...Facilities Operations of Fluor and its subsidiaries are conducted at both owned and leased properties in domestic and foreign locations totaling approximately 7.2 million rentable square feet. Our executive offices are located at 6700 Las Colinas Boulevard, Irving, Texas. As our business and the mix...

  • Page 69
    ... United States: Aliso Viejo, California ...Greenville, South Carolina ...Houston (Sugar Land), Texas ...Irving, Texas (Corporate Headquarters) Canada: Calgary, Alberta ...South America: Santiago, Chile ...Europe, Africa and Middle East: Al Khobar, Saudi Arabia ...Farnborough, England ...Haarlem...

  • Page 70
    ...the Consolidated Transactions Reporting System, and the cash dividends paid per share of common stock. Common Stock Price Range High Low Dividends Per Share Year Ended December 31, 2011 Fourth Quarter ...Third Quarter ...Second Quarter ...First Quarter ...Year Ended December 31, 2010 Fourth Quarter...

  • Page 71
    ... related notes included in Item 15 of this Form 10-K. Amounts are expressed in millions, except for per share and employee information: 2011 Year Ended December 31, 2010 2009 2008 2007 CONSOLIDATED OPERATING RESULTS Total revenue Earnings before taxes Net earnings attributable to Fluor Corporation...

  • Page 72
    ... 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...

  • Page 73
    ... 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...

  • Page 74
    ... years, but at lower levels in 2009 compared to both 2010 and 2011. As of December 31, 2011, approximately 78 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 general...

  • Page 75
    ...in view of the work performed, and evidence supporting the claim is objective and verifiable. Recognized claims against clients amounted to $298 million and $209 million as of December 31, 2011 and 2010, respectively. Cost, but not profit, associated with unapproved change orders is accounted for in...

  • Page 76
    ...and penalties related to unrecognized tax benefits within its global operations in income tax expense. Retirement Benefits The company accounts for its defined benefit pension plans in accordance with Statement of Financial Accounting Standards (''SFAS'') No. 87, ''Employers' Accounting for Pensions...

  • Page 77
    ... services on a global basis in the fields of engineering, procurement, construction, maintenance and project management. The company is organized into five business segments: Oil & Gas, Industrial & Infrastructure, Government, Global Services and Power. For more information on the business...

  • Page 78
    ... market that included very large project awards in diverse geographic locations, which were well suited to the company's global execution and project management capabilities and strong financial position. The global recession, changing market conditions and a decline in demand for new capacity...

  • Page 79
    ...iron ore work in Australia, as well as a major copper project in Peru. The increased new award activity in 2010 was primarily attributable to the mining and metals business line, with significant contributions from the infrastructure business line. The new awards in 2010 included an aluminum program...

  • Page 80
    ... Project and increased funding for LOGCAP IV task orders. The higher backlog in 2009 compared to 2010 was primarily due to the multi-year funding for ARRA work at the Savannah River Project site that was a new award in 2009, and partially worked off by the end of 2010. Total assets in the Government...

  • Page 81
    ... operations and maintenance activities may not contribute to ending backlog. In addition, 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 $937 million as of December 31, 2011, $824...

  • Page 82
    ... control construction program for Luminant, a new gas-fired power plant project in Texas, and a new solar power project in Arizona. New awards of $757 million in 2010 included work for nuclear preconstruction services and the renewal of the Luminant system-wide fossil maintenance program in Texas...

  • Page 83
    ... Power, a small modular nuclear reactor technology company that the company acquired a majority interest in during late 2011. The decrease in the segment's total assets in 2010 was due to a reduction in working capital for project execution activities, including the Oak Grove project. Corporate...

  • Page 84
    ... and accounts payable associated with project execution activities in the Oil & Gas segment, partially offset by increases in contract work in process. The increases in client advances and accounts payable during 2011 resulted primarily from normal project execution activities associated with...

  • Page 85
    ... in the Global Services segment. 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, a Texas-based provider of sulfur technologies for upstream gas plants...

  • Page 86
    ... Beltway Project which are discussed at ''14. Variable Interest Entities.'' 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 Exchange Rate Changes on Cash Unrealized translation gains...

  • Page 87
    ..., 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...

  • Page 88
    ... 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 89
    ..., international government securities and corporate debt securities. The company has not incurred any credit risk losses related to deposits in cash and marketable securities. The company limits exposure to foreign currency fluctuations in most of its engineering and construction contracts through...

  • Page 90
    ..., 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 that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or...

  • Page 91
    ... the consolidated balance sheets of Fluor Corporation as of December 31, 2011 and 2010 and the related consolidated statements of earnings, cash flows and equity for each of the three years in the period ended December 31, 2011 of Fluor Corporation and our report dated February 22, 2012 expressed an...

  • Page 92
    ... the fiscal year ending December 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information None. PART III Item 10. Directors, Executive Officers and Corporate Governance Executive Officers of the...

  • Page 93
    ... 2009; Group Executive, Sales, Marketing and Strategic Planning from February 2002 to October 2003; and Group Executive, Fluor Global Services from September 2001 to February 2002. Mr. Hopkins joined the company in 1984. Peter Oosterveer Mr. Oosterveer has been Group President, Oil & Gas since March...

  • Page 94
    ... 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 95
    ...company's annual stockholders meeting in 2008. The additional information required by this item is included in the ''Stock Ownership and StockBased Holdings of Executive Officers and Directors'' and ''Stock Ownership of Certain Beneficial Owners'' sections of our Proxy Statement for our 2012 annual...

  • Page 96
    ...13, 2011). Distribution Agreement between the registrant and Fluor Corporation (renamed Massey Energy Company) (incorporated by reference to Exhibit 10.1 to the registrant's Current Report on Form 8-K filed on December 7, 2000). Fluor Corporation 2000 Restricted Stock Plan for Non-Employee Directors...

  • Page 97
    ... to Exhibit 10.1 to the registrant's Current Report on Form 8-K filed on December 21, 2007). Fluor 409A Executive Deferred Compensation Program, as amended and restated effective January 1, 2012.* Fluor Corporation 2008 Executive Performance Incentive Plan (incorporated by reference to Exhibit 10...

  • Page 98
    ... 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 99
    ... by reference to Exhibit 10.38 to the registrant's Quarterly Report on Form 10-Q filed on May 5, 2011). Form of Restricted Stock Unit Agreement (with international grant language) under the Fluor Corporation 2008 Executive Performance Incentive Plan (incorporated by reference to Exhibit 10.39 to the...

  • Page 100
    ... by the undersigned, thereunto duly authorized. FLUOR CORPORATION By: /s/ D. MICHAEL STEUERT D. Michael Steuert, Senior Vice President and Chief Financial Officer February 22, 2012 Pursuant to the requirements of the Securities Exchange Act of 1934, this annual report on Form 10-K has been signed...

  • Page 101
    ... Kresa /s/ DEAN R. O'HARE Dean R. O'Hare /s/ JOSEPH W. PRUEHER Joseph W. Prueher /s/ NADER H. SULTAN Nader H. Sultan /s/ SUZANNE H. WOOLSEY Suzanne H. Woolsey Director February 22, 2012 Director February 22, 2012 Director February 22, 2012 Director February 22, 2012 Director February 22...

  • Page 102
    FLUOR CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS TABLE OF CONTENTS PAGE Report of Independent Registered Public Accounting Firm ...Consolidated Statement of Earnings ...Consolidated Balance Sheet ...Consolidated Statement of Cash Flows ...Consolidated Statement of Equity ...Notes to ...

  • Page 103
    ... three years in the period ended December 31, 2011, 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 104
    FLUOR CORPORATION CONSOLIDATED STATEMENT OF EARNINGS Year Ended December 31, 2010 (in thousands, except per share amounts) 2011 2009 TOTAL REVENUE TOTAL COST OF REVENUE OTHER (INCOME) AND EXPENSES Corporate general... 1,136,788 403,913 732,875 (47,986) $ $ $ 684,889 3.79 3.75 179,100 180,862 F-3

  • Page 105
    FLUOR CORPORATION CONSOLIDATED BALANCE SHEET December 31, 2011 December 31, 2010 (in thousands, except share amounts) ASSETS CURRENT ASSETS Cash and cash equivalents ($472,597 and $381,479 related to variable interest entities (''VIEs'')) Marketable securities, current Accounts and notes ...

  • Page 106
    ... 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 from...

  • Page 107
    ...to noncontrolling interests Partner contributions in noncontrolling interests Stock-based plan activity Repurchase of common stock Debt conversions BALANCE AS OF DECEMBER 31, 2010 Comprehensive income Net earnings Foreign currency translation adjustment of total shareholders' equity (net of deferred...

  • Page 108
    ... is generally accounted for on the cost method. Joint ventures and partnerships in which the company has the ability to exert significant influence, but does not control, are accounted for using the equity method of accounting. Certain contracts are executed jointly through partnerships and joint...

  • Page 109
    ... of deficiencies in the company's performance, claim-related costs are identifiable and considered reasonable in view of the work performed, and evidence supporting the claim is objective and verifiable. Cost, but not profit, associated with unapproved change orders is accounted for in revenue when...

  • Page 110
    ... and penalties related to unrecognized tax benefits within its global operations in income tax expense. Judgment is required in determining the consolidated provision for income taxes as the company considers its worldwide taxable earnings and the impact of the continuing audit process conducted by...

  • Page 111
    ... the company on a completed infrastructure joint venture project in California. In 2011, $11 million of this amount was recovered in a settlement with the bankrupt client. Cash and marketable securities are deposited with major banks throughout the world. Such deposits are placed with high quality...

  • Page 112
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) available-for-sale securities and derivative contracts, ownership share of equity method investee's other comprehensive loss, and adjustments related to defined benefit pension and postretirement plans, as components of ...

  • Page 113
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) the level of the employer's participation in those plans, the financial health of the plans, and the nature of the employer's commitments to the plans. ASU 2011-09 is effective for interim and annual reporting periods beginning...

  • Page 114
    ... of: (in thousands) 2011 Year Ended December 31, 2010 2009 (Increase) decrease in: Accounts and notes receivable, net Contract work in progress Other current assets Other assets Increase (decrease) in: Trade accounts payable Advance billings on contracts Accrued liabilities Other liabilities...

  • Page 115
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) A reconciliation of U.S. statutory federal income tax expense to income tax expense is as follows: (in thousands) Year Ended December 31, 2011 2010 2009 U.S. statutory federal tax expense Increase (decrease) in taxes resulting...

  • Page 116
    ... are as follows: (in thousands) December 31, 2011 2010 Deferred tax assets: Accrued liabilities not currently deductible: Employee compensation and benefits Employee time-off accrual Project and non-project reserves Workers' compensation insurance accruals Tax basis of investments in excess of book...

  • Page 117
    ...United States in 2010 decreased compared to 2009 primarily due to pre-tax charges for the gas-fired power project in Georgia in the Power segment (see ''- Power'') and pre-tax charges for the completed infrastructure joint venture project in California in the Industrial & Infrastructure segment (see...

  • Page 118
    ... 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 amount required by applicable regulations. Payments to retired employees under these plans are generally...

  • Page 119
    ... U.S. and international equities, U.S. private equities and fixed income securities. U.S. Pension Plan December 31, 2011 2010 2009 Non-U.S. Pension Plans December 31, 2011 2010 2009 For determining projected benefit obligation at year-end: Discount rates Rates of increase in compensation levels For...

  • Page 120
    ... preferred stocks and limited partnerships. Publicly traded corporate equity securities are valued based on the last trade or official close of an active market or exchange on the last business day of the plan's year. Securities not traded on the last business day are valued at the last reported bid...

  • Page 121
    ... 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, 2011, the investments in corporate bonds and government securities held by the U.S. plan were...

  • Page 122
    ..., the plan assets and liabilities of the company's U.S. and non-U.S. defined benefit pension plans that are measured at fair value on a recurring basis as of December 31, 2011 and 2010: U.S. Pension Plan December 31, 2011 Fair Value Measurements Using Quoted Prices in Active Significant Markets for...

  • Page 123
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Non-U.S. Pension Plans December 31, 2011 Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (Level 1) (Level 2) (Level 3) ...

  • Page 124
    ...U.S. and non-U.S. plans: U.S. Pension Plan December 31, 2011 2010 Non-U.S. Pension Plans December 31, 2011 2010 (in thousands) Change in projected benefit obligation Benefit obligation at beginning of year Service cost Interest cost Employee contributions Currency translation Actuarial (gain) loss...

  • Page 125
    ... to the company's U.S. defined benefit pension plans, the company and certain of its 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...

  • Page 126
    ... to change significantly in the future. The preceding information 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...

  • Page 127
    .... Consists of investments in U.S. agency securities, U.S. Treasury securities, international government and government-related securities, corporate debt securities and other debt securities with maturities ranging from one to four years which are valued at the last reported sale price on the last...

  • Page 128
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) corporate debt securities of $235 million, and other securities of $5 million. As of December 31, 2010, available-for-sale securities consisted of money market funds of $20 million, U.S. agency securities of $155 million, U.S. ...

  • Page 129
    ...399) - $ (445) During 2011 and 2010, the company recognized gains of $1.1 million and $3.6 million, respectively, in corporate general and administrative expense related to settled foreign currency forward contracts which were not designated as hedges for accounting purposes. These foreign currency...

  • Page 130
    ... on the 2011 Notes is payable semi-annually on March 15 and September 15 of each year, beginning on March 15, 2012. The net proceeds of the 2011 Notes will be used for general corporate purposes. The company may, at any time, redeem the 2011 Notes at a redemption price equal to 100 percent of...

  • Page 131
    ... 31, 2011, the company was in compliance with all of the financial covenants related to its debt agreements. 8. Other Noncurrent Liabilities The company maintains appropriate levels of insurance for business risks, including workers compensation and general liability. Insurance coverages contain...

  • Page 132
    ... 31, 2011 and 2010, respectively, relating to these liabilities. For certain professional liability risks the company's retention amount under its claims-made insurance policies does not include an accrual for claims incurred but not reported because there is insufficient claims history or other...

  • Page 133
    ...shares subject to certain service and performance conditions as established by the Committee. Generally, upon termination of employment, restricted stock units and restricted shares which have not vested are forfeited. For the years 2011, 2010 and 2009, recognized compensation expense of $25 million...

  • Page 134
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1.4 years. Expense associated with stock options for the years ended December 31, 2011, 2010 and 2009, which is included in corporate general and administrative expense in the accompanying Consolidated Statement of Earnings, ...

  • Page 135
    ...: Year Ended December 31, 2011 2010 (in thousands, except per share amounts) Net earnings attributable to Fluor Corporation Basic EPS: Weighted average common shares outstanding Basic earnings per share Diluted EPS: Weighted average common shares outstanding Diluted effect: Employee stock options...

  • Page 136
    ... in connection with long-term construction contracts and other personal property. Net rental expense in 2011 declined due to a reduction in rental equipment required to support project execution activities in the Oil & Gas and Government segments. The company's obligations for minimum rentals under...

  • Page 137
    ... connection 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 dispute relates to the company's claim for additional compensation for schedule and cost...

  • Page 138
    ... claims-related costs incurred to date for these two projects along with claims for equitable adjustment submitted or identified, exceed the amount recorded in claims revenue. All claims have been certified in accordance with federal contracting requirements. Conex International v. Fluor Enterprises...

  • Page 139
    ..., 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...

  • Page 140
    ... such expenditures. 14. 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. These partnerships or joint ventures are typically characterized by a 50 percent or less, noncontrolling...

  • Page 141
    ...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 Western Australia. Fluor SKM is a joint venture between Fluor...

  • Page 142
    ... Capital Beltway high-occupancy toll (''HOT'') lanes project in Virginia. The project is a public-private partnership between the Virginia Department of Transportation (''VDOT'') and Capital Beltway Express LLC, a joint venture in which the company has a 10 percent interest and Transurban (USA) Inc...

  • Page 143
    ..., 2011 and 2010, respectively. The Global Services segment includes operations and maintenance activities, small capital project engineering and execution, site equipment and tool services, industrial fleet services, plant turnaround services and supply chain solutions. In addition, Global Services...

  • Page 144
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) level which relate to its business as a whole. Certain of these amounts have been charged to the company's business segments by various methods, largely on the basis of usage. Engineering services for international projects are...

  • Page 145
    FLUOR CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Operating Information by Segment (in millions) Year Ended December 31, 2011 2010 2009 External revenue Oil & Gas Industrial & Infrastructure Government Global Services Power Total external revenue Segment profit (loss) Oil & ...

  • Page 146
    ... to reflect this change. Enterprise-Wide Disclosures External Revenue Year Ended December 31, 2011 2010 2009 Total Assets As of December 31, 2011 2010 (in millions) United States Canada Asia Pacific (includes Australia) Europe Central and South America Middle East and Africa Total $ 6,959.8 4,127...

  • Page 147
    ... (or $0.10 per diluted share), respectively, on a gas-fired power project in Georgia. Net earnings in the third quarter of 2010 included a pre-tax charge of $95 million (or $0.33 per diluted share) for the completed infrastructure joint venture project in California, as well as a pre-tax charge of...

  • Page 148
    ... of Fluor Corporation. TRS is a registered service mark of TRS Staffing Solutions, Inc. AMECO is a registered service mark of American Equipment Company, Inc. Site Services is a registered service mark of American Equipment Company, Inc. Econamine FG Plus is a service mark of Fluor Enterprises, Inc...

  • Page 149
    F L U O R C O R P O R AT I O N 6 7 0 0 L A S C O L I N A S B LV D IRVING, TEXAS 75039 F L U O R .C O M