Fluor Corp 10-Q for FY2021 Q2
Fluor Corp (FLR)
10-Q
2021-08-06
For: 2021-06-30
View Original
Added on
April 08, 2026
About this 10-Q
Fluor Corp filed this 10-Q on August 6, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).
Headline figures
Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $3.24B
- down 13.3% from $3.73B a year earlier
- Net loss
- $114.45M
- compared with a net loss of $24.99M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended June 30, 2021
Or
For the transition period from to
Commission File Number: 1-16129
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | ||||||||||
| incorporation or organization) | Identification No.) | ||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| ☒ | Accelerated filer | ☐ | |||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý
As of July 30, 2021, 141,416,214 shares of the registrant’s common stock, $0.01 par value, were outstanding.
FLUOR CORPORATION
FORM 10-Q
| TABLE OF CONTENTS | PAGE | ||||||||||
1
Glossary of Terms
The definitions and abbreviations set forth below apply to the indicated terms used throughout this filing.
| Abbreviation/Term | Definition | ||||
| 2020 10-K | Annual Report on Form 10-K for the year ended December 31, 2020 | ||||
| 2020 Period | Six months ended June 30, 2020 | ||||
| 2020 Quarter | Three months ended June 30, 2020 | ||||
| 2021 Period | Six months ended June 30, 2021 | ||||
| 2021 Quarter | Three months ended June 30, 2021 | ||||
| AOCI | Accumulated other comprehensive income (loss) | ||||
| ASC | Accounting Standards Codification | ||||
| ASU | Accounting Standards Update | ||||
| Cont Ops | Continuing operations | ||||
| G&A | General and administrative expense | ||||
| COVID-19 | Coronavirus pandemic | ||||
| DB plan | Defined benefit pension plan | ||||
| Disc Ops | Discontinued operations | ||||
| DOE | U.S. Department of Energy | ||||
| EPC | Engineering, procurement and construction | ||||
| EPS | Earnings (loss) per share | ||||
| Exchange Act | Securities Exchange Act of 1934 | ||||
| Fluor | Fluor Corporation | ||||
| GAAP | Accounting principles generally accepted in the United States | ||||
| ICFR | Internal control over financial reporting | ||||
| LNG | Liquefied natural gas | ||||
| NCI | Noncontrolling interests | ||||
| NM | Not meaningful | ||||
| NuScale | NuScale Power, LLC | ||||
| OCI | Other comprehensive income (loss) | ||||
| Q2 2021 10-Q | Quarterly Report on Form 10-Q for the three and six months ended June 30, 2021 | ||||
| RSU | Restricted stock units | ||||
| RUPO | Remaining unsatisfied performance obligations | ||||
| SEC | Securities and Exchange Commission | ||||
| Stork | Stork Holding B.V. and subsidiaries | ||||
| SMR | Small modular reactor | ||||
| VIE | Variable interest entity | ||||
2
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| (in thousands, except per share amounts) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| General and administrative expense | ( | ( | ( | ( | |||||||||||||||||||
| Impairment, restructuring and other exit costs | ( | ( | ( | ||||||||||||||||||||
| Foreign currency gain (loss) | ( | ( | |||||||||||||||||||||
| Operating profit | ( | ( | |||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | |||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Earnings (loss) from Cont Ops before taxes | ( | ( | ( | ||||||||||||||||||||
| Income tax expense (benefit) | ( | ||||||||||||||||||||||
| Net earnings (loss) from Cont Ops | ( | ( | ( | ||||||||||||||||||||
Less: Net earnings (loss) from Cont Ops attributable to NCI | ( | ||||||||||||||||||||||
| Net earnings (loss) from Cont Ops attributable to Fluor | ( | ( | ( | ||||||||||||||||||||
| Net earnings (loss) from Disc Ops attributable to Fluor | ( | ( | ( | ( | |||||||||||||||||||
| Net earnings (loss) attributable to Fluor | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Less: Dividends on convertible preferred stock | |||||||||||||||||||||||
| Net earnings (loss) available to Fluor common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Basic EPS available to Fluor common stockholders | |||||||||||||||||||||||
| Net earnings (loss) from Cont Ops | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
| Net earnings (loss) from Disc Ops | ( | ( | ( | ( | |||||||||||||||||||
| Diluted EPS available to Fluor common stockholders | |||||||||||||||||||||||
| Net earnings (loss) from Cont Ops | $ | ( | $ | ( | $ | ( | $ | ||||||||||||||||
| Net earnings (loss) from Disc Ops | ( | ( | ( | ( | |||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
3
FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
UNAUDITED
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| Net earnings (loss) from Cont Ops | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||
| Net earnings (loss) from Disc Ops | ( | ( | ( | ( | ||||||||||||||||||||||
| Net earnings (loss) | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| OCI, net of tax: | ||||||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ( | ||||||||||||||||||||||||
| Ownership share of equity method investees’ OCI | ( | ( | ( | ( | ||||||||||||||||||||||
| DB plan adjustments | ||||||||||||||||||||||||||
| Unrealized gain (loss) on hedges | ( | ( | ||||||||||||||||||||||||
| Total OCI, net of tax | ( | ( | ||||||||||||||||||||||||
| Comprehensive income (loss) | ( | ( | ( | |||||||||||||||||||||||
| Less: Comprehensive income (loss) attributable to NCI | ( | |||||||||||||||||||||||||
| Comprehensive income (loss) attributable to Fluor | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
4
FLUOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
UNAUDITED
| (in thousands, except share and per share amounts) | June 30, 2021 | December 31, 2020 | ||||||||||||
| ASSETS | ||||||||||||||
| Current assets | ||||||||||||||
Cash and cash equivalents ($ | $ | $ | ||||||||||||
Marketable securities ($ | ||||||||||||||
Accounts receivable, net ($ | ||||||||||||||
Contract assets ($ | ||||||||||||||
Other current assets ($ | ||||||||||||||
| Current assets held for sale | ||||||||||||||
| Total current assets | ||||||||||||||
| Noncurrent assets | ||||||||||||||
Property, plant and equipment, net ($ | ||||||||||||||
| Investments | ||||||||||||||
| Deferred taxes | ||||||||||||||
| Deferred compensation trusts | ||||||||||||||
| Goodwill | ||||||||||||||
Other assets ($ | ||||||||||||||
| Noncurrent assets held for sale | ||||||||||||||
| Total noncurrent assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| LIABILITIES AND EQUITY | ||||||||||||||
| Current liabilities | ||||||||||||||
Accounts payable ($ | $ | $ | ||||||||||||
| Short-term borrowings | ||||||||||||||
Contract liabilities ($ | ||||||||||||||
Accrued salaries, wages and benefits ($ | ||||||||||||||
Other accrued liabilities ($ | ||||||||||||||
| Current liabilities related to assets held for sale | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Long-term debt | ||||||||||||||
| Deferred taxes | ||||||||||||||
Other noncurrent liabilities ($ | ||||||||||||||
| Noncurrent liabilities related to assets for sale | ||||||||||||||
| Contingencies and commitments | ||||||||||||||
| Equity | ||||||||||||||
| Shareholders’ equity | ||||||||||||||
Preferred stock — authorized | ||||||||||||||
Common stock — authorized | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
| AOCI | ( | ( | ||||||||||||
| Retained earnings | ||||||||||||||
| Total shareholders’ equity | ||||||||||||||
| NCI | ||||||||||||||
| Total equity | ||||||||||||||
| Total liabilities and equity | $ | $ | ||||||||||||
The accompanying notes are an integral part of these financial statements.
5
FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
| Six Months Ended June 30, | ||||||||||||||
| (in thousands) | 2021 | 2020 | ||||||||||||
| OPERATING CASH FLOW | ||||||||||||||
| Net earnings (loss) | $ | ( | $ | ( | ||||||||||
| Adjustments to reconcile net earnings (loss) to operating cash flow: | ||||||||||||||
| Impairment expense - Cont Ops | ||||||||||||||
| Impairment expense - Disc Ops | ||||||||||||||
| Depreciation | ||||||||||||||
| Amortization of intangibles | ||||||||||||||
| (Earnings) loss from equity method investments, net of distributions | ( | |||||||||||||
| Loss on sale of AMECO-North America | ||||||||||||||
| (Gain) loss on sales of assets | ( | |||||||||||||
| Stock-based compensation | ||||||||||||||
| Deferred taxes | ( | |||||||||||||
| Net retirement plan accrual (contributions) | ( | ( | ||||||||||||
| Changes in assets and liabilities | ( | ( | ||||||||||||
| Other | ( | |||||||||||||
| Operating cash flow | ( | |||||||||||||
| INVESTING CASH FLOW | ||||||||||||||
| Purchases of marketable securities | ( | ( | ||||||||||||
| Proceeds from the sales and maturities of marketable securities | ||||||||||||||
| Capital expenditures | ( | ( | ||||||||||||
| Proceeds from sales of assets | ||||||||||||||
| Proceeds from sale of AMECO-North America | ||||||||||||||
| Investments in partnerships and joint ventures | ( | ( | ||||||||||||
| Other | ||||||||||||||
| Investing cash flow | ( | ( | ||||||||||||
| FINANCING CASH FLOW | ||||||||||||||
| Proceeds from issuance of preferred stock | ||||||||||||||
| Purchase and retirement of debt | ( | |||||||||||||
| Dividends paid | ( | |||||||||||||
| Other borrowings (debt repayments) | ( | |||||||||||||
| Distributions paid to NCI | ( | ( | ||||||||||||
| Capital contributions by NCI | ||||||||||||||
| Taxes paid on vested restricted stock | ( | ( | ||||||||||||
| Other | ( | |||||||||||||
| Financing cash flow | ||||||||||||||
| Effect of exchange rate changes on cash | ( | |||||||||||||
| Increase (decrease) in cash and cash equivalents | ( | |||||||||||||
| Cash and cash equivalents at beginning of period | ||||||||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||||||||
The accompanying notes are an integral part of these financial statements.
6
FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
UNAUDITED
| (in thousands, except per share amounts) | Preferred Stock | Common Stock | Additional Paid-In Capital | AOCI | Retained Earnings | Total Shareholders' Equity | NCI | Total Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||
| BALANCE AS OF MARCH 31, 2021 | $ | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||
| Net earnings (loss) | — | — | — | — | — | — | ( | ( | ( | ( | ||||||||||||||||||||||
| OCI | — | — | — | — | — | — | ( | |||||||||||||||||||||||||
| Issuance of convertible preferred stock | — | — | — | — | — | |||||||||||||||||||||||||||
| Distributions to NCI | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||
| Capital contributions by NCI | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Other NCI transactions | — | — | — | — | — | — | ( | |||||||||||||||||||||||||
| Stock-based plan activity | — | — | — | — | — | |||||||||||||||||||||||||||
| BALANCE AS OF JUNE 30, 2021 | $ | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||
| (in thousands, except per share amounts) | Preferred Stock | Common Stock | Additional Paid-In Capital | AOCI | Retained Earnings | Total Shareholders' Equity | NCI | Total Equity | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||
| BALANCE AS OF DECEMBER 31, 2020 | $ | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||
| Net earnings (loss) | — | — | — | — | — | — | ( | ( | ( | |||||||||||||||||||||||
| OCI | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||
| Issuance of convertible preferred stock | — | — | — | — | — | |||||||||||||||||||||||||||
| Distributions to NCI | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||
| Capital contributions by NCI | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
| Other NCI transactions | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||
| Stock-based plan activity | — | — | — | — | ||||||||||||||||||||||||||||
| BALANCE AS OF JUNE 30, 2021 | $ | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
7
FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Continued)
UNAUDITED
| (in thousands, except per share amounts) | Common Stock | Additional Paid-In Capital | AOCI | Retained Earnings | Total Shareholders' Equity | NCI | Total Equity | |||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||
| BALANCE AS OF MARCH 31, 2020 | $ | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||
| Net earnings (loss) | — | — | — | — | ( | ( | ( | |||||||||||||||||||
| OCI | — | — | — | — | ||||||||||||||||||||||
| Distributions to NCI | — | — | — | — | — | — | ( | ( | ||||||||||||||||||
| Capital contributions by NCI | — | — | — | — | — | — | ||||||||||||||||||||
| Other NCI transactions | — | — | — | — | ||||||||||||||||||||||
| Stock-based plan activity | — | — | — | |||||||||||||||||||||||
| BALANCE AS OF JUNE 30, 2020 | $ | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||
| (in thousands, except per share amounts) | Common Stock | Additional Paid-In Capital | AOCI | Retained Earnings | Total Shareholders' Equity | NCI | Total Equity | |||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||
| BALANCE AS OF DECEMBER 31, 2019 | $ | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||
| Net earnings (loss) | — | — | — | — | ( | ( | ( | |||||||||||||||||||
| — | — | — | — | ( | ( | — | ( | |||||||||||||||||||
| OCI | — | — | — | ( | — | ( | ( | ( | ||||||||||||||||||
Dividends ($ | — | — | — | — | ( | ( | — | ( | ||||||||||||||||||
| Distributions to NCI | — | — | — | — | — | — | ( | ( | ||||||||||||||||||
| Capital contributions by NCI | — | — | — | — | — | — | ||||||||||||||||||||
| Other NCI transactions | — | — | — | — | ( | |||||||||||||||||||||
| Stock-based plan activity | — | — | — | |||||||||||||||||||||||
| BALANCE AS OF JUNE 30, 2020 | $ | $ | $ | ( | $ | $ | $ | $ | ||||||||||||||||||
The accompanying notes are an integral part of these financial statements.
8
1. Principles of Consolidation
These financial statements do not include footnotes and certain financial information normally presented annually under GAAP, and therefore, should be read in conjunction with our 2020 10-K. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end. Although such estimates are based on management’s most recent assessment of the underlying facts and circumstances utilizing the most current information available, our reported results of operations may not necessarily be indicative of results that we expect for the full year.
The financial statements included herein are unaudited. In management's opinion, they contain all adjustments of a normal recurring nature which are necessary to present fairly our financial position and our operating results as of and for the interim periods presented. All significant intercompany transactions of consolidated subsidiaries are eliminated. Certain amounts in 2020 have been reclassified to conform to the 2021 presentation, which includes the segregation of Disc Ops and assets and liabilities held for sale. Segment operating information for 2020 has been recast to reflect changes in the composition of our reportable segments during 2021. Certain amounts in tables may not total or agree to the financial statements due to immaterial rounding differences. Management has evaluated all material events occurring subsequent to June 30, 2021 through the filing date of this Q2 2021 10-Q.
Quarters are typically 13 weeks in length but, due to our annual period ending on December 31, the number of weeks in a reporting period may vary slightly during the year and for comparable prior year periods. We report our quarterly results of operations based on periods ending on the Sunday nearest March 31, June 30 and September 30, allowing for a 13-week quarter. For clarity of presentation, all periods are presented as if the periods ended on March 31, June 30 and September 30.
2. Recent Accounting Pronouncements
Accounting pronouncements that were implemented by us during the 2021 Period
In the first quarter of 2021, we adopted ASU 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity's Own Equity,” which simplifies accounting for convertible instruments and the application of the derivatives scope exception for contracts in our own equity. ASU 2020-06 eliminates two of the three models in the current guidance that require separating embedded conversion features from convertible instruments and also eliminates some of the requirements for equity classification. ASU 2020-06 also addresses how convertible instruments are accounted for in the diluted EPS calculation. The adoption did not have any impact on our financial statements.
9
3. Earnings Per Share
Potentially dilutive securities include convertible preferred stock, stock options, RSUs, restricted stock and performance-based award units. Diluted EPS reflects the assumed exercise or conversion of all dilutive securities using the if-converted and treasury stock methods. In computing diluted EPS, only securities that are actually dilutive are included.
| (in thousands, except per share amounts) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||
| Net earnings (loss) from Cont Ops attributable to Fluor | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||
| Less: Dividends on convertible preferred stock | ||||||||||||||||||||||||||
| Net earnings (loss) from Cont Ops available to Fluor common stockholders | ( | ( | ( | |||||||||||||||||||||||
| Net earnings (loss) from Disc Ops attributable to Fluor | ( | ( | ( | ( | ||||||||||||||||||||||
| Net earnings (loss) available to Fluor common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Weighted average common shares outstanding | ||||||||||||||||||||||||||
| Diluted effect: | ||||||||||||||||||||||||||
Convertible preferred stock(1) | ||||||||||||||||||||||||||
Stock options, RSUs, restricted stock and performance-based award units(1) | ||||||||||||||||||||||||||
| Weighted average diluted shares outstanding | ||||||||||||||||||||||||||
| Basic EPS available to Fluor common stockholders: | ||||||||||||||||||||||||||
| Net earnings (loss) from Cont Ops | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||
| Net earnings (loss) from Disc Ops | ( | ( | ( | ( | ||||||||||||||||||||||
| Diluted EPS available to Fluor common stockholders: | ||||||||||||||||||||||||||
| Net earnings (loss) from Cont Ops | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||
| Net earnings (loss) from Disc Ops | ( | ( | ( | ( | ||||||||||||||||||||||
| (1) Anti-dilutive securities not included in shares outstanding | ||||||||||||||||||||||||||
4. Operating Information by Segment and Geographic Area
During the first quarter of 2021, we changed the composition of our segments to implement our new strategy and to pursue opportunities in our designated markets. We now report our operating results as follows: Energy Solutions, Urban Solutions, Mission Solutions and Other. Segment operating information and assets for 2020 have been recast to conform to these changes.
Energy Solutions focuses on energy transition, chemicals, LNG, and traditional oil and gas opportunities. The segment is pursuing new opportunities emerging in the energy transition market including carbon capture, green chemicals, hydrogen, biofuels and other low carbon energy sources. The segment also continues to provide EPC services for the oil, gas and petrochemical industries.
Urban Solutions focuses on mining, metals, advanced technologies, manufacturing, life sciences, infrastructure and professional staffing services.
10
Mission Solutions focuses on federal agencies across the U.S. government and select international opportunities. These include, among others, the DOE, the Department of Defense, the Federal Emergency Management Agency and intelligence agencies. Mission Solutions includes the Radford and Warren projects which were previously reported in the Other segment.
Other now includes only the operations of NuScale.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||
| Energy Solutions | $ | $ | $ | $ | ||||||||||||||||||||||
| Urban Solutions | ||||||||||||||||||||||||||
| Mission Solutions | ||||||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||||||||||||
| Segment profit (loss) | ||||||||||||||||||||||||||
| Energy Solutions | $ | $ | $ | $ | ||||||||||||||||||||||
| Urban Solutions | ( | ( | ||||||||||||||||||||||||
| Mission Solutions | ||||||||||||||||||||||||||
| Other | ( | ( | ( | ( | ||||||||||||||||||||||
| Total segment profit (loss) | $ | $ | $ | $ | ||||||||||||||||||||||
| G&A | ( | ( | ( | ( | ||||||||||||||||||||||
| Impairment, restructuring and other exit costs | ( | ( | ( | |||||||||||||||||||||||
| Foreign currency gain (loss) | ( | ( | ||||||||||||||||||||||||
| Interest income (expense), net | ( | ( | ( | ( | ||||||||||||||||||||||
| Earnings (loss) from Cont Ops attributable to NCI | ( | |||||||||||||||||||||||||
| Earnings (loss) from Cont Ops before taxes | $ | ( | $ | $ | ( | $ | ( | |||||||||||||||||||
Energy Solutions. Segment profit for the 2021 Quarter and 2021 Period benefitted from the negotiation of change orders, scope increases and cost improvements across numerous projects. Both periods also benefitted from the collection of previously reserved accounts receivable and the reversal of the related provision. The increases in 2021 were partially offset by losses on embedded foreign currency derivatives. Segment profit for the 2020 Period was adversely affected by the recognition of reserves for expected credit losses on aged receivables and COVID-19 related cost growth.
Urban Solutions. Segment profit for the 2021 Quarter and 2021 Period included a project charge of $138 0.72 20 69 million and $139 million for the 2021 Quarter and 2021 Period, respectively, and $62 million and $139 million for the 2020 Quarter and 2020 Period, respectively.
Mission Solutions. Segment profit for the 2021 Quarter and 2021 Period benefitted from increased execution activity on our DOE projects, higher than anticipated performance-based fees and the release of COVID-19 cost reserves, partially offset by a decline in execution activity on army logistics and life support programs in Afghanistan and Africa.
Other. During the 2021 Period, JGC Holdings Corporation, GS Energy and IHI Corporation invested a combined $100 million in NuScale. Fluor and its advisors continue to engage with potential investors and capital providers to fund NuScale's path to commercialization.
11
NuScale expenses included in the determination of segment loss were as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| NuScale expenses | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Less: Reimbursable expenses | ||||||||||||||||||||||||||
| Segment loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| (in millions) | June 30, 2021 | December 31, 2020 | ||||||||||||
| Energy Solutions | $ | $ | ||||||||||||
| Urban Solutions | ||||||||||||||
| Mission Solutions | ||||||||||||||
| Other | ||||||||||||||
Revenue by project location follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| North America | $ | $ | $ | $ | ||||||||||||||||||||||
| Asia Pacific (includes Australia) | ||||||||||||||||||||||||||
| Europe | ||||||||||||||||||||||||||
| Central and South America | ||||||||||||||||||||||||||
| Middle East and Africa | ||||||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | ||||||||||||||||||||||
5. Impairment, Restructuring and Other Exit Costs
Impairment
We did not recognize any impairment expense in Cont Ops during the 2021 and 2020 Quarters. Impairment expense, included in Cont Ops, for the 2021 and 2020 Periods is summarized as follows:
| Six Months Ended June 30, | |||||||||||||||||||||||
| (in thousands) | 2021 | 2020 | |||||||||||||||||||||
| Impairment expense: | |||||||||||||||||||||||
| Energy Solutions' equity method investment | $ | $ | |||||||||||||||||||||
| Information technology assets | |||||||||||||||||||||||
| Total impairment expense | $ | $ | |||||||||||||||||||||
Our business has been adversely affected by the economic impacts of the outbreak of COVID-19 and the steep decline in oil prices that occurred in the early part of 2020. These events have created significant uncertainty and economic volatility and disruption, which have impacted and may continue to impact our business. We have experienced, and may continue to experience, reductions in demand for certain of our services and the delay or abandonment of ongoing or anticipated projects due to our clients’, suppliers’ and other third parties’ diminished financial condition or financial distress, as well as governmental budget constraints. These impacts may continue or worsen under prolonged stay-at-home, social distancing, travel restrictions and other similar orders or restrictions. Significant uncertainty still exists concerning the magnitude of the
12
impact and duration of these events, as well as our potential to make recovery from our clients pursuant to the contract and under rule of law. Because of these events, we performed interim impairment testing of our goodwill, intangible assets and investments during the 2020 Period, pursuant to which we recognized the impairment expense on an equity method investment and IT assets. We also recognized impairment expense on goodwill and intangible assets associated with the Stork business, now included in Disc Ops.
The valuation of our equity method investments utilized unobservable Level 3 inputs based on the investee's forecast of anticipated volumes and overhead absorption in a cyclical business.
Restructuring and Other Exit Costs
During 2019, we initiated a restructuring plan designed to optimize costs and improve operational efficiency. These efforts primarily relate to the rationalization of resources, investments, real estate and overhead across various geographies. Our recognition of costs for the planned restructuring activities was substantially completed by the end of 2020. Restructuring costs of $4
A reconciliation of our restructuring liabilities follows:
| (in thousands) | Severance | Lease Exit Costs | Total | ||||||||
| Balance as of December 31, 2019 | $ | $ | $ | ||||||||
| Restructuring charges accrued during the period | |||||||||||
| Cash payments / settlements during the period | ( | ( | ( | ||||||||
| Currency translation | |||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | ||||||||
| Cash payments / settlements during the period | $ | ( | $ | $ | ( | ||||||
| Currency translation | ( | ( | |||||||||
| Balance as of June 30, 2021 | $ | $ | $ | ||||||||
6. Income Taxes
7. Cash Paid for Interest and Taxes
| Six Months Ended June 30, | ||||||||
| (in thousands) | 2021 | 2020 | ||||||
| Cash paid for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes (net of refunds) | ||||||||
8. Partnerships and Joint Ventures
13
ownership or participation interest with decision making and distribution of expected gains and losses typically being proportionate to the ownership or participation interest. Many of the partnership and joint venture agreements provide for capital calls to fund operations, as necessary. Accounts receivable related to work performed for unconsolidated partnerships and joint ventures included in “Accounts receivable, net” was $218 million and $207 million as of June 30, 2021 and December 31, 2020, respectively.
One of our more significant joint ventures is COOEC Fluor, in which we have a 49 % ownership interest. COOEC Fluor owns, operates and manages the Zhuhai Fabrication Yard in China’s Guangdong province. We made a capital contribution of $26 million to the joint venture during the first quarter of 2021, which satisfied our contractual funding requirements.
During the 2021 Quarter, we sold our 10 % ownership interest in an infrastructure joint venture and recognized a gain of $20 million, which was included in Urban Solutions' segment profit. During the 2020 Quarter, we sold our 50 % ownership interest in Sacyr Fluor and recognized a loss of $11 million, which was included in Energy Solutions' segment profit.
Variable Interest Entities
The aggregate carrying value of unconsolidated VIEs (classified under both "Investments” and “Other accrued liabilities”) was a net asset of $65 million and $174 million as of June 30, 2021 and December 31, 2020, respectively. Some of our VIEs have debt; however, such debt is typically non-recourse in nature. Our maximum exposure to loss as a result of our investments in unconsolidated VIEs is typically limited to the aggregate of the carrying value of the investment and future funding necessary to satisfy the contractual obligations of the VIE. Future funding commitments as of June 30, 2021 for the unconsolidated VIEs were $57 million.
In some cases, we are required to consolidate certain VIEs. As of June 30, 2021, the carrying values of the assets and liabilities associated with the operations of the consolidated VIEs were $1.4 billion and $718 million, respectively. As of December 31, 2020, the carrying values of the assets and liabilities associated with the operations of the consolidated VIEs were $1.2 billion and $688 million, respectively. The assets of a VIE are restricted for use only for the particular VIE and are not available for our general operations.
We have agreements with certain VIEs to provide financial or performance assurances to clients, as discussed elsewhere.
9. Guarantees
10. Contingencies and Commitments
14
The following disclosures for commitments and contingencies have been updated since the matter was presented in the 2020 10-K.
Since May 2018, purported shareholders have filed various complaints against Fluor and certain of its current and former executives in the U.S. District Court for the Northern District of Texas. The plaintiffs purport to represent a class of shareholders who purchased or otherwise acquired Fluor common stock from August 14, 2013 through February 14, 2020, and seek to recover damages arising from alleged violations of federal securities laws. These claims are based on statements concerning Fluor’s internal and disclosure controls, risk management, revenue recognition, and Fluor’s gas-fired power business, which plaintiffs assert were materially misleading. As of May 26, 2020, these complaints have been consolidated into one matter. We filed a motion to dismiss the matter on July 1, 2020. The motion was granted in part on May 5, 2021, and as a result the Court dismissed with prejudice all allegations except those related to a single statement made in 2015 about one gas-fired power project. While no assurance can be given as to the ultimate outcome of this matter, we do not believe it is probable that a loss will be incurred. Accordingly, we have not recorded any liability as a result of this action.
Since September 2018, ten separate purported shareholders' derivative actions were filed against current and former members of the Board of Directors, as well as certain of Fluor’s current and former executives. Fluor is named as a nominal defendant in the actions. These derivative actions purport to assert claims on behalf of Fluor and make substantially the same factual allegations as the securities class action matter discussed above and seek various forms of monetary and injunctive relief. These actions are pending in Texas state court (District Court for Dallas County), the U.S. District Court for the District of Delaware, the U.S. District Court for the Northern District of Texas, and the Court of Chancery of the State of Delaware. Certain of these actions were consolidated and stayed, at least while our motion to dismiss was pending in the securities class action matter. We anticipate seeking a further stay until final resolution of the securities class action. While no assurance can be given as to the ultimate outcome of this matter, we do not believe it is probable that a loss will be incurred. Accordingly, we have not recorded any liability as a result of these actions.
There have been no changes to the disclosures for the following commitments and contingencies since the matter was presented in the 2020 10-K.
Fluor Australia Ltd., our wholly-owned subsidiary (“Fluor Australia”), completed a cost reimbursable engineering, procurement and construction management services project for Santos Ltd. (“Santos”) involving a large network of natural gas gathering and processing facilities in Queensland, Australia. On December 13, 2016, Santos filed an action in Queensland Supreme Court against Fluor Australia, asserting various causes of action and seeking damages and/or a refund of contract proceeds paid of approximately AUD $1.47 billion. Santos has joined Fluor to the matter on the basis of a parent company guarantee issued for the project. We believe that the claims asserted by Santos are without merit and we are vigorously defending these claims. While no assurance can be given as to the ultimate outcome of this matter, we do not believe it is probable that a loss will be incurred. Accordingly, we have not recorded any liability as a result of this action.
Fluor Limited, our wholly-owned subsidiary (“Fluor Limited”), and Fluor Arabia Limited, a partially-owned subsidiary
(“Fluor Arabia”), completed cost reimbursable engineering, procurement and construction management services for Sadara Chemical Company (“Sadara”) involving a large petrochemical facility in Jubail, Kingdom of Saudi Arabia. On August 23, 2019, Fluor Limited and Fluor Arabia Limited commenced arbitration proceedings against Sadara after it refused to pay invoices totaling approximately $100 million due under the contracts. As part of the arbitration proceedings, Sadara has asserted various counterclaims for damages and/or a refund of contract proceeds paid totaling approximately $574 million against Fluor Limited and Fluor Arabia Limited. We believe that the counterclaims asserted by Sadara are without merit and are vigorously defending these claims. While no assurance can be given as to the ultimate outcome of the counterclaims, we do not believe it is probable that a loss will be incurred in excess of amounts reserved for this matter. Accordingly, we have not recorded any further liability as a result of the counterclaims.
Various wholly-owned subsidiaries of Fluor, in conjunction with a partner, TECHINT, (“Fluor/TECHINT”) performed engineering, procurement and construction management services on a cost reimbursable basis for Barrick Gold Corporation involving a gold mine and ore processing facility on a site straddling the border between Argentina and Chile. In 2013 Barrick terminated the Fluor/TECHINT agreements for convenience and not due to the performance of Fluor/TECHINT. On August 12, 2016, Barrick filed a notice of arbitration against Fluor/TECHINT, demanding damages and/or a refund of contract proceeds paid of not less than $250 million under various claims relating to Fluor/TECHINT’s alleged performance. Proceedings were
15
suspended while the parties explored a possible settlement. In August 2019, Barrick drew down $36 million of letters of credit from Fluor/TECHINT ($24 million from Fluor and $12 million from TECHINT). Thereafter, Barrick proceeded to reactivate the arbitration. In December 2020, Barrick and Fluor/TECHINT exchanged detailed statements of claim and counterclaim pursuant to which Barrick's claim against Fluor/TECHINT now totals approximately $330 million. We believe that the claims asserted by Barrick are without merit and are vigorously defending these claims. While no assurance can be given as to the ultimate outcome of this matter, we do not believe it is probable that a loss will be incurred. Accordingly, we have not recorded any liability as a result of these claims.
Other Matters
We periodically evaluate our positions and the amounts recognized with respect to all our claims and back charges. As of June 30, 2021 and December 31, 2020, we had recorded $215 million and $216 million, respectively, of claim revenue for costs incurred to date. Additional costs, which will increase the claim revenue balance over time, are expected to be incurred in future periods. We had no material disputed back charges to suppliers or subcontractors as of June 30, 2021 and December 31, 2020.
From time to time, we enter into contracts with the U.S. government and its agencies. Government contracts are subject to audits and reviews by government representatives with respect to our compliance with various restrictions and regulations applicable to government contractors, including but not limited to the allowability of costs incurred under reimbursable contracts. In connection with performing government contracts, we maintain reserves for estimated exposures associated with these matters.
Our operations are subject to and affected by federal, state and local laws and regulations regarding the protection of the environment. We maintain reserves for potential future environmental cost where such obligations are either known or considered probable, and can be reasonably estimated. We believe that our reserves with respect to future environmental cost are adequate and such future cost will not have a material effect on our consolidated financial position or results of operations.
In February 2020, we announced that the SEC is conducting an investigation and has requested documents and information related to projects for which we recorded charges in the second quarter of 2019. In April 2020, Fluor received a subpoena from the U.S. Department of Justice (“DOJ”) seeking documents and information related to the second quarter 2019 charges; certain of the projects associated with those charges; and certain project accounting, financial reporting and governance matters. Such inquiries are ongoing, and we have continued to respond to the SEC and DOJ and cooperate in these investigations.
16
11. Contract Assets and Liabilities
The following summarizes information about our contract assets and liabilities:
| (in millions) | June 30, 2021 | December 31, 2020 | ||||||
| Information about contract assets: | ||||||||
| Contract assets | ||||||||
| Unbilled receivables - reimbursable contracts | $ | $ | ||||||
| Contract work in progress - lump-sum contracts | ||||||||
| Contract assets | $ | $ | ||||||
| Advance billings deducted from contract assets | $ | $ | ||||||
| Six Months Ended June 30, | ||||||||
| (in millions) | 2021 | 2020 | ||||||
| Information about contract liabilities: | ||||||||
| Revenue recognized that was included in contract liabilities as of January 1 | $ | $ | ||||||
12. Remaining Unsatisfied Performance Obligations
We estimate that our RUPO will be satisfied over the following periods:
| (in millions) | June 30, 2021 | ||||
| Within 1 year | $ | ||||
| 1 to 2 years | |||||
| Thereafter | |||||
| Total RUPO | $ | ||||
17
13. Debt and Letters of Credit
| (in thousands) | June 30, 2021 | December 31, 2020 | |||||||||
| Borrowings under credit facility | $ | $ | |||||||||
| Current: | |||||||||||
| Other borrowings | $ | $ | |||||||||
| Long-term: | |||||||||||
| Senior Notes | |||||||||||
| 2023 Notes | $ | $ | |||||||||
| Unamortized discount on 2023 Notes | ( | ( | |||||||||
| Unamortized deferred financing costs | ( | ( | |||||||||
| 2024 Notes | |||||||||||
| Unamortized discount on 2024 Notes | ( | ( | |||||||||
| Unamortized deferred financing costs | ( | ( | |||||||||
| 2028 Notes | |||||||||||
| Unamortized discount on 2028 Notes | ( | ( | |||||||||
| Unamortized deferred financing costs | ( | ( | |||||||||
| Total long-term | $ | $ | |||||||||
Credit Facility
As of June 30, 2021, letters of credit totaling $431 million were outstanding under our $1.65 billion credit facility, which matures in February 2023. The credit facility contains customary financial covenants, including a debt-to-capitalization ratio that cannot exceed 0.65 to 1.0 , a limitation on the aggregate amount of debt of the greater of $750 million or €750 million for our subsidiaries, and a minimum liquidity threshold of $1.5 billion, defined in the amended credit facility, which may be reduced to $1.25 billion upon the repayment of debt. The credit facility also contains provisions that will require us to provide collateral to secure the facility should we be downgraded to BB by S&P and Ba2 by Moody's, such collateral consisting broadly of our U.S. assets. Borrowings under the facility, which may be denominated in USD, EUR, GBP or CAD, bear interest at a base rate, plus an applicable borrowing margin. As of June 30, 2021, we could have borrowed an additional $783 million under our existing credit facility.
Uncommitted Lines of Credit
As of June 30, 2021, letters of credit totaling $915 million were outstanding under uncommitted lines of credit, although no amounts were drawn.
Senior Notes
14. Preferred Stock
In May 2021, we issued 600,000 shares of Series A 6.5 % cumulative perpetual convertible preferred stock in a private placement transaction involving a limited number of qualified institutional buyers.
The preferred stock, with respect to dividend rights or rights upon liquidation, winding-up or dissolution of Fluor, ranks (i) senior to all classes of common stock and to each other class of capital stock or series of preferred stock established after the issuance of the Series A preferred stock except in certain circumstances and (ii) junior to the our existing and future indebtedness.
18
The preferred stock does not have a maturity date. Cumulative cash dividends on the preferred stock are payable at an annual rate of 6.5 % quarterly in arrears on February 15, May 15, August 15 and November 15, beginning on August 15, 2021, upon declaration of the dividend by our Board of Directors. Dividends accumulate from the most recent date on which dividends have been paid or, if no dividends have been paid, from the first date of original issuance of the preferred stock. At June 30, 2021, $5 million of dividends on the preferred stock were accumulated however no amounts had been declared or accrued. In July 2021, our Board of Directors approved the payment of a total preferred stock dividend of $10 million.
Each share of preferred stock has a liquidation preference of $1,000 per share, plus accumulated but unpaid dividends, and is convertible, at the holder's option at any time into 44.9585 shares of our common stock per share of preferred stock. The conversion rate is subject to certain customary adjustments, but no payment or adjustment for accumulated but unpaid dividends will be made upon conversion, subject to certain limited exceptions. The preferred stock may not be redeemed by us; however, we may, at any time on or after May 20, 2022, elect to cause all outstanding shares of preferred stock to be automatically converted into shares of our common stock at the conversion rate, subject to certain conditions (and, if such automatic conversion occurs prior May 20, 2024, the payment of a cash make-whole premium). If a “make-whole fundamental change” occurs, we will in certain circumstances be required to increase the conversion rate for a holder who elects to convert its shares of preferred stock in connection with such make-whole fundamental change.
The shares of preferred stock have no voting rights except if and when dividends on the preferred stock are in arrears and have been unpaid with respect to six or more quarterly dividend payment dates (whether or not consecutive). In such events, the holders of the preferred stock would be entitled to elect two additional directors to the board of directors. Such voting rights are exercisable until all dividends in arrears have been paid in full, at which time the voting rights and the term of the two additional directors terminate.
15. Fair Value Measurements
The following table delineates assets and liabilities that are measured at fair value on a recurring basis:
| June 30, 2021 | December 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Hierarchy | Fair Value Hierarchy | |||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Total | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Deferred compensation trusts(1) | $ | $ | $ | — | $ | — | $ | $ | $ | — | $ | — | ||||||||||||||||||||||||||||||||||||||
Derivative assets(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Commodity | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative liabilities(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency | $ | $ | — | $ | $ | — | $ | $ | — | $ | $ | — | ||||||||||||||||||||||||||||||||||||||
| Commodity | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
_________________________________________________________
(1) Consists of registered money market funds and an equity index fund. These investments, which are trading securities, represent the net asset value at the close of business of the period based on the last trade or official close of an active market or exchange.
19
We have measured assets and liabilities held for sale and certain other impaired assets at fair value on a nonrecurring basis.
The following summarizes information about financial instruments that are not required to be measured at fair value :
| June 30, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||
| (in thousands) | Fair Value Hierarchy | Carrying Value | Fair Value | Carrying Value | Fair Value | ||||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||||||||
Cash(1) | Level 1 | $ | $ | $ | $ | ||||||||||||||||||||||||
Cash equivalents(2) | Level 2 | ||||||||||||||||||||||||||||
Marketable securities(2) | Level 2 | ||||||||||||||||||||||||||||
Notes receivable, including noncurrent portion(3) | Level 3 | ||||||||||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||||||||
2023 Senior Notes(4) | Level 2 | $ | $ | $ | $ | ||||||||||||||||||||||||
2024 Senior Notes(4) | Level 2 | ||||||||||||||||||||||||||||
2028 Senior Notes(4) | Level 2 | ||||||||||||||||||||||||||||
Other borrowings(5) | Level 2 | ||||||||||||||||||||||||||||
_________________________________________________________
(1) Cash consists of bank deposits. Carrying amounts approximate fair value.
(2) The carrying amounts of these time deposits approximate fair value because of the short-term maturity of these instruments. Amortized cost is not materially different from the fair value.
(3) Notes receivable are carried at net realizable value which approximates fair value. Factors considered in determining the fair value include the credit worthiness of the borrower, current interest rates, the term of the note and any collateral pledged as security. Notes receivable are periodically assessed for impairment.
(4) The fair value of the Senior Notes was estimated based on the quoted market prices and Level 2 inputs.
(5) Other borrowings represent bank loans and other financing arrangements which mature within one year. The carrying amount of borrowings under these arrangements approximates fair value because of the short-term maturity.
16. Stock-Based Compensation
Our executive and director stock-based compensation plans are described more fully in the 2020 10-K. In the 2021 Period, RSUs totaling 596,391 were granted to executives and directors at a weighted-average grant date fair value of $18.67 per share. RSUs granted to executive officers in 2021 and 2020 generally vest over three years . RSUs granted to directors in 2021 and 2020 vested upon grant. The fair value of RSUs represents the closing price of our common stock on the date of grant.
Stock options for the purchase of 481,626 shares at a weighted-average exercise price of $17.96 per share were awarded to executives during the 2021 Period. The exercise price of options represents the closing price of our common stock on the date of grant. The options granted in 2021 and 2020 generally vest over three years and expire ten years after the grant date.
Performance-based award units totaling 613,868 were awarded to executive officers during the 2021 Period. These awards generally vest after a period of 3 years and contain annual performance conditions for each of the 3 years of the vesting period. Under GAAP, performance-based awards are not deemed granted until the performance targets have been established. The performance targets for each year are generally established in the first quarter. Accordingly, only one-third of the units awarded in any given year are deemed to be granted each year of the 3 year vesting periods. During 2021, the following units were granted for GAAP purposes:
20
| Performance-based Award Units Granted in 2021 | Weighted Average Grant Date Fair Value Per Share | |||||||
| 2021 Performance Award Plan | $ | |||||||
| 2020 Performance Award Plan | $ | |||||||
| 2019 Performance Award Plan | $ | |||||||
The number of units are adjusted at the end of each performance period based on achievement of certain performance targets and market conditions, as defined in the award agreements. The grant date fair value is determined by adjusting the closing price of our common stock on the date of grant for the effect of the market condition. Units granted under the 2021, 2020 and 2019 performance award plans can only be settled in our stock and are accounted for as equity awards.
There were no RSUs, options or performance-based award units awarded to executives during the 2020 Period. Instead, RSUs, options and performance-based award units were awarded to executives in September 2020 following the filing of our 2019 10-K.
17. Retirement Plans
Net periodic pension expense for our DB plans includes the following components:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||||||||
| (in thousands) | Location of Component | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||
| Service cost | Cost of revenue | $ | $ | $ | $ | ||||||||||||||||||||||||
| Interest cost | Corp G&A | ||||||||||||||||||||||||||||
| Expected return on assets | Corp G&A | ( | ( | ( | ( | ||||||||||||||||||||||||
| Amortization of prior service credit | Corp G&A | ( | ( | ( | ( | ||||||||||||||||||||||||
| Recognized net actuarial loss | Corp G&A | ||||||||||||||||||||||||||||
| Net periodic pension expense | $ | $ | $ | $ | |||||||||||||||||||||||||
We currently expect to contribute up to $16 million into our DB plans during 2021, which we expect to be in excess of the minimum funding required. During the 2021 Period, we made contributions of approximately $12 million.
In addition to our DB plans, we participate in multiemployer pension plans for unionized construction and maintenance craft employees. Company contributions, based on the hours worked by employees covered under various collective bargaining agreements, are recognized as net periodic pension expense. Upon withdrawal from a multiemployer plan, we may have an obligation to make additional contributions for our share of any unfunded benefit obligation, but only if we do not meet the requirements of any applicable exemptions. For one of our discontinued operations, we participate in one multiemployer plan in which we are aware of a significant unfunded benefit obligation. However, we believe we qualify for an exemption and do not believe we have a probable payment to the plan. Therefore, we have not recognized a liability related to this unfunded benefit obligation.
18. Derivatives and Hedging
Derivatives Designated as Hedges
As of June 30, 2021, we had total gross notional amounts of $517 million of foreign currency contracts outstanding (primarily related to the Canadian Dollar, Chinese Yuan, British Pound, Euro, Indian Rupee and Philippine Peso) that were designated as hedges. These foreign currency contracts are of varying duration, none of which extend beyond December 2024. There were no commodity contracts outstanding that were designated as hedges as of June 30, 2021.
21
The fair values of derivatives designated as hedging instruments follows:
| Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||||||||||||||||
| (in thousands) | Balance Sheet Location | June 30, 2021 | December 31, 2020 | Balance Sheet Location | June 30, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||||||
| Foreign currency contracts | Other current assets | $ | $ | Other accrued liabilities | $ | $ | ||||||||||||||||||||||||||||||||
| Foreign currency contracts | Other assets | Noncurrent liabilities | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||
The after-tax amount of gain (loss) recognized in OCI associated with derivative instruments designated as cash flow hedges follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| Cash Flow Hedges (in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| Foreign currency contracts | ( | ||||||||||||||||||||||
| Commodity contracts | ( | ||||||||||||||||||||||
| ( | |||||||||||||||||||||||
The after-tax amount of gain (loss) reclassified from AOCI into earnings associated with derivative instruments designated as cash flow hedges follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
| Cash Flow Hedges (in thousands) | Location of Gain (Loss) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||
| Foreign currency contracts | Cost of revenue | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||
| Commodity contracts | Cost of revenue | ( | ( | |||||||||||||||||||||||||||||
| Interest rate contracts | Interest expense | ( | ( | ( | ( | |||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||
Derivatives Not Designated as Hedges
As of June 30, 2021, we also had total gross notional amounts of $175 million of foreign currency contracts and $27 million of commodity contracts outstanding that were not designated as hedges. The foreign currency contracts primarily related to contract obligations denominated in nonfunctional currencies. The fair value of derivatives not designated as hedges, as well as the associated gains and losses were not material for any period presented.
22
19. Other Comprehensive Income (Loss)
The components of OCI follow:
| Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||||||
| (in thousands) | Before-Tax Amount | Tax Benefit (Expense) | Net-of-Tax Amount | Before-Tax Amount | Tax Benefit (Expense) | Net-of-Tax Amount | ||||||||||||||||||||||||||||||||
| OCI: | ||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | $ | ( | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||
| Ownership share of equity method investees’ OCI | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| DB plan adjustments | ( | ( | ||||||||||||||||||||||||||||||||||||
| Unrealized gain (loss) on hedges | ( | |||||||||||||||||||||||||||||||||||||
| Total OCI | ( | |||||||||||||||||||||||||||||||||||||
| Less: OCI attributable to NCI | ( | ( | ||||||||||||||||||||||||||||||||||||
| OCI attributable to Fluor | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||||||
| (in thousands) | Before-Tax Amount | Tax Benefit (Expense) | Net-of-Tax Amount | Before-Tax Amount | Tax Benefit (Expense) | Net-of-Tax Amount | ||||||||||||||||||||||||||||||||
| OCI: | ||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||
| Ownership share of equity method investees’ OCI | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||
| DB plan adjustments | ||||||||||||||||||||||||||||||||||||||
| Unrealized gain (loss) on hedges | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Total OCI | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||
| Less: OCI attributable to NCI | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| OCI attributable to Fluor | $ | ( | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||
23
The changes in AOCI balances follow:
| (in thousands) | Foreign Currency Translation | Ownership Share of Equity Method Investees’ OCI | DB Plans | Unrealized Gain (Loss) on Hedges | AOCI, Net | ||||||||||||||||||||||||
| Attributable to Fluor: | |||||||||||||||||||||||||||||
| Balance as of March 31, 2021 | $ | ( | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||
| OCI before reclassifications | ( | ( | |||||||||||||||||||||||||||
| Amounts reclassified from AOCI | ( | ( | |||||||||||||||||||||||||||
| Net OCI | ( | ( | |||||||||||||||||||||||||||
| Balance as of June 30, 2021 | $ | ( | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||
| Attributable to NCI: | |||||||||||||||||||||||||||||
| Balance as of March 31, 2021 | $ | ( | $ | $ | $ | $ | ( | ||||||||||||||||||||||
| OCI before reclassifications | ( | ( | |||||||||||||||||||||||||||
| Amounts reclassified from AOCI | |||||||||||||||||||||||||||||
| Net OCI | ( | ( | |||||||||||||||||||||||||||
| Balance as of June 30, 2021 | $ | ( | $ | $ | $ | $ | ( | ||||||||||||||||||||||
| (in thousands) | Foreign Currency Translation | Ownership Share of Equity Method Investees’ OCI | DB Plans | Unrealized Gain (Loss) on Hedges | AOCI, Net | ||||||||||||||||||||||||
| Attributable to Fluor: | |||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | $ | ( | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||
| OCI before reclassifications | ( | ||||||||||||||||||||||||||||
| Amounts reclassified from AOCI | ( | ( | |||||||||||||||||||||||||||
| Net OCI | ( | ( | |||||||||||||||||||||||||||
| Balance as of June 30, 2021 | $ | ( | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||
| Attributable to NCI: | |||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | $ | ( | $ | $ | $ | $ | ( | ||||||||||||||||||||||
| OCI before reclassifications | ( | ( | |||||||||||||||||||||||||||
| Amounts reclassified from AOCI | |||||||||||||||||||||||||||||
| Net OCI | ( | ( | |||||||||||||||||||||||||||
| Balance as of June 30, 2021 | $ | ( | $ | $ | $ | $ | ( | ||||||||||||||||||||||
24
| (in thousands) | Foreign Currency Translation | Ownership Share of Equity Method Investees’ OCI | DB Plans | Unrealized Gain (Loss) on Hedges | AOCI, Net | ||||||||||||||||||||||||
| Attributable to Fluor: | |||||||||||||||||||||||||||||
| Balance as of March 31, 2020 | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||
| OCI before reclassifications | ( | ||||||||||||||||||||||||||||
| Amounts reclassified from AOCI | |||||||||||||||||||||||||||||
| Net OCI | ( | ||||||||||||||||||||||||||||
| Balance as of June 30, 2020 | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||
| Attributable to NCI: | |||||||||||||||||||||||||||||
| Balance as of March 31, 2020 | $ | ( | $ | $ | $ | $ | ( | ||||||||||||||||||||||
| OCI before reclassifications | |||||||||||||||||||||||||||||
| Amounts reclassified from AOCI | |||||||||||||||||||||||||||||
| Net OCI | |||||||||||||||||||||||||||||
| Balance as of June 30, 2020 | $ | ( | $ | $ | $ | $ | ( | ||||||||||||||||||||||
| (in thousands) | Foreign Currency Translation | Ownership Share of Equity Method Investees’ OCI | DB Plans | Unrealized Gain (Loss) on Hedges | AOCI, Net | ||||||||||||||||||||||||
| Attributable to Fluor Corporation: | |||||||||||||||||||||||||||||
| Balance as of December 31, 2019 | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||
| OCI before reclassifications | ( | ( | ( | ( | |||||||||||||||||||||||||
| Amounts reclassified from AOCI | |||||||||||||||||||||||||||||
| Net OCI | ( | ( | ( | ( | |||||||||||||||||||||||||
| Balance as of June 30, 2020 | $ | ( | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||
| Attributable to NCI: | |||||||||||||||||||||||||||||
| Balance as of December 31, 2019 | $ | ( | $ | $ | $ | $ | ( | ||||||||||||||||||||||
| OCI before reclassifications | ( | ( | |||||||||||||||||||||||||||
| Amounts reclassified from AOCI | |||||||||||||||||||||||||||||
| Net other comprehensive income (loss) | ( | ( | |||||||||||||||||||||||||||
| Balance as of June 30, 2020 | $ | ( | $ | $ | $ | $ | ( | ||||||||||||||||||||||
25
Information about reclassifications out of AOCI follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
| (in thousands) | Location in Statement of Operations | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||
| Component of AOCI: | ||||||||||||||||||||||||||||||||
| Ownership share of equity method investees’ OCI | Cost of revenue | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||
| Income tax benefit | Income tax expense (benefit) | |||||||||||||||||||||||||||||||
| Net of tax | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||
| DB plan adjustments | G&A | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||||||||||
| Income tax benefit | Income tax expense (benefit) | ( | ||||||||||||||||||||||||||||||
| Net of tax | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||
| Unrealized gain (loss) on derivative contracts: | ||||||||||||||||||||||||||||||||
| Commodity and foreign currency contracts | Various accounts(1) | $ | $ | ( | $ | $ | ||||||||||||||||||||||||||
| Interest rate contracts | Interest expense | ( | ( | ( | ( | |||||||||||||||||||||||||||
| Income tax benefit | Income tax expense (benefit) | ( | ( | |||||||||||||||||||||||||||||
| Net of tax | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||
20. Discontinued Operations
In the first quarter of 2021, we committed to a plan to sell our Stork business, which had previously represented the
majority of operations from our former diversified services segment. We sold the North American operations of the AMECO equipment business in May 2021 for $71 million and recognized a loss on the sale of $25 million.
Impairment expense, included in Disc Ops, is summarized as follows:
| Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||
| (in thousands) | Stork | AMECO | Stork | AMECO | Stork | AMECO | |||||||||||||||||||||||||||||
Impairment expense: (1) | |||||||||||||||||||||||||||||||||||
| Goodwill | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Intangible customer relationships | |||||||||||||||||||||||||||||||||||
| Fair value adjustment and expected costs associated with sale | |||||||||||||||||||||||||||||||||||
| Total impairment expense | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
The fair value of the AMECO assets were determined using a combination of observable level 2 inputs, including indicative offers and ongoing negotiations for the related assets.
26
The fair value of the Stork assets were determined using an income based approach that utilized unobservable Level 3 inputs, including significant management assumptions such as expected awards, forecasted revenue and operating margins, weighted average cost of capital, working capital assumptions and general market trends and conditions.
The customer relationships' valuation approach utilized unobservable Level 3 inputs including ranges of assumptions of long-term revenue growth from 2 % to 5.5 % with a weighted average of 2.4 %, weighted average cost of capital of 12 % and a customer attrition factor of 10 %.
Disc Ops information follows:
| Three Months Ended June 30, 2021 | Three Months Ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Stork | AMECO | Other | Total | Stork | AMECO | Other | Total | |||||||||||||||||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Cost of revenue | |||||||||||||||||||||||||||||||||||||||||||||||
| Gross Profit | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| G&A | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
Impairment expense (1) | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Loss on sale of AMECO North America | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency gain (loss) | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Operating profit | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Interest (expense) income, net | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Earnings (loss) before taxes from Disc Ops | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Net earnings (loss) from Disc Ops | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||
| Less: Net earnings (loss) from Disc Ops attributable to NCI | |||||||||||||||||||||||||||||||||||||||||||||||
| Net earnings (loss) from Disc Ops attributable to Fluor | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||
(1) Impairment expense during the 2021 Quarter represents the effect of including Stork's cumulative foreign currency translation balance in the impairment assessment.
27
| Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Stork | AMECO | Other | Total | Stork | AMECO | Other | Total | ||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||
| Cost of revenue | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Gross profit | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| G&A | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||
Impairment expense (1) | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Loss on sale of AMECO North America | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency gain (loss) | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Operating profit | ( | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Interest (expense) income, net | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||
| Earnings (loss) before taxes from Disc Ops | ( | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
| Net earnings (loss) from Disc Ops | ( | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
| Less: Net earnings (loss) from Disc Ops attributable to NCI | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Net earnings (loss) from Disc Ops attributable to Fluor | ( | ( | ( | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||
(1) Impairment expense during the 2021 Quarter represents the effect of including Stork's cumulative foreign currency translation balance in the impairment assessment.
28
The following summarizes information related to assets and liabilities classified as held for sale:
| June 30, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||
| (in thousands) | Stork | AMECO | Other | Total from Disc Ops | Other Assets and Liabilities from Cont Ops | Total | Stork | AMECO | Other | Total from Disc Ops | Other Assets and Liabilities from Cont Ops | Total | |||||||||||||||||||||||||||||
| Accounts receivable, net | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Contract assets | |||||||||||||||||||||||||||||||||||||||||
| Other current assets | |||||||||||||||||||||||||||||||||||||||||
| Current assets held for sale | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Property, plant and equipment, net | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Goodwill | |||||||||||||||||||||||||||||||||||||||||
| Investments | |||||||||||||||||||||||||||||||||||||||||
| Other assets | |||||||||||||||||||||||||||||||||||||||||
Noncurrent assets held for sale(1) | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Total assets held for sale | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Accounts payable | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Short-term borrowings | |||||||||||||||||||||||||||||||||||||||||
| Contract liabilities | |||||||||||||||||||||||||||||||||||||||||
| Accrued salaries, wages and benefits | |||||||||||||||||||||||||||||||||||||||||
| Other accrued liabilities | |||||||||||||||||||||||||||||||||||||||||
| Current liabilities held for sale | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Noncurrent liabilities held for sale(1) | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Total liabilities held for sale | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
(1) Noncurrent assets and liabilities held for sale as of June 30, 2021 are reported as current given the expected sale timing.
Our cash flow information included the following activities related to Disc Ops:
| Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||||||||||||||
| (in thousands) | Stork | AMECO | Total | Stork | AMECO | Total | |||||||||||||||||||||||||||||
| Capital expenditures | ( | ( | ( | ( | ( | ( | |||||||||||||||||||||||||||||
29
FLUOR CORPORATION
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our financial statements and our 2020 10-K. Except as the context otherwise requires, the terms Fluor or the Registrant, as used herein, are references to Fluor and its predecessors and references to the company, we, us, or our as used herein shall include Fluor, its consolidated subsidiaries and joint ventures.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements made herein, including statements regarding our projected revenue and earnings levels, cash flow and liquidity, new awards and backlog levels and the implementation of strategic initiatives are forward-looking in nature. Under the Private Securities Litigation Reform Act of 1995, a “safe harbor” may be provided to us for certain of these forward-looking statements. We wish to caution readers that forward-looking statements, including disclosures which use words such as we “believe,” “anticipate,” “expect,” “estimate” and similar statements, are subject to various risks and uncertainties which could cause actual results of operations to differ materially from expectations. Factors potentially contributing to such differences include, among others:
•The severity and duration of the COVID-19 pandemic and actions by governments, businesses and individuals in response to the pandemic;
•The cyclical nature of many of the markets we serve and our clients' vulnerability to downturns, which may result in decreased capital investment or expenditures and reduced demand for our services;
•Our failure to receive anticipated new contract awards and the related impact on revenue, earnings, staffing levels and cost;
•Failure to accurately estimate the cost and schedule for our contracts, resulting in cost overruns or liabilities, including those related to project delays and those caused by the performance of our clients, subcontractors, suppliers and joint venture or teaming partners;
•Intense competition in the global EPC industry, which can place downward pressure on our contract prices and profit margins and may increase our contractual risks;
•Failure of our joint venture partners to perform their venture obligations, which could impact the success of those ventures and impose additional financial and performance obligations on us, resulting in reduced profits or losses;
•Cybersecurity breaches of our systems and information technology;
•Civil unrest, security issues, labor conditions and other unforeseeable events in the countries in which we do business, resulting in unanticipated losses;
•Project cancellations, scope adjustments or deferrals, or foreign currency fluctuations, that could reduce the amount of our backlog and the revenue and profits that we earn;
•Inability to maintain safe work sites;
•Repercussions of events beyond our control, such as severe weather conditions, natural disasters, pandemics, political crises or other catastrophic events, that may significantly affect operations, result in higher cost or subject the company to liability claims by our clients;
•Differences between our actual results and the assumptions and estimates used to prepare our financial statements;
•Client delays or defaults in making payments;
•Failure of our suppliers or subcontractors to provide supplies or services at the agreed-upon levels or times;
•Uncertainties, restrictions and regulations impacting our government contracts;
•The inability to hire and retain qualified personnel;
•The potential impact of changes in tax laws and other tax matters including, but not limited to, those from foreign operations, the realizability of our deferred tax assets and the ongoing audits by tax authorities;
•Possible systems and information technology interruptions;
•The impact of anti-bribery and international trade laws and regulations;
•Our ability to secure appropriate insurance;
•The failure to be adequately indemnified for our nuclear services;
•The loss of business from one or more significant clients;
•The failure to adequately protect intellectual property rights;
•Impairments to goodwill, investments, deferred tax assets or other intangible assets;
•The availability of credit and restrictions imposed by credit facilities, both for us and our clients, suppliers,
subcontractors or other partners;
•Possible limitations of bonding or letter of credit capacity;
30
•Failure to obtain favorable results in existing or future litigation, regulatory proceedings or dispute resolution proceedings (including claims for indemnification), or claims against project owners, subcontractors or suppliers;
•Failure of our employees, agents or partners to comply with laws, which could result in harm to our reputation and reduced profits or losses;
•The impact of new or changing legal requirements, as well as past and future environmental, health and safety regulations including climate change regulations;
•Failure to successfully implement our strategic and operational initiatives;
•The risks associated with acquisitions, dispositions or other investments, including the failure to successfully integrate acquired businesses; and
•Restrictions on possible transactions imposed by our charter documents and Delaware law.
Any forward-looking statements that we may make are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those anticipated by us. Any forward-looking statements are subject to the risks, uncertainties and other factors that could cause actual results of operations, financial condition, cost reductions, acquisitions, dispositions, financing transactions, operations, expansion, consolidation and other events to differ materially from those expressed or implied in such forward-looking statements.
Our actual results may differ materially from our expectations or projections. While most risks affect only future cost or revenue, some risks may relate to accruals that have already been reflected in earnings. Our failure to receive payments of accrued amounts or incurrence of liabilities in excess of amounts previously recognized could result in future charges. As a result, readers should recognize and consider the inherently uncertain nature of forward-looking statements and not place undue reliance on them.
Additional information concerning these and other factors can be found in our press releases and periodic filings with the SEC, including the 2020 10-K. These filings are available publicly on the SEC’s website at http://www.sec.gov, on our website at http://investor.fluor.com or upon request from our Investor Relations Department at (469) 398-7070. We cannot control such risk factors and other uncertainties, and in many cases, cannot predict the risks and uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements. These risks and uncertainties should be considered when evaluating Fluor and deciding whether to invest in our securities. Except as otherwise required by law, we undertake no obligation to publicly update or revise our forward-looking statements, whether as a result of new information, future events or otherwise.
Results of Operations
During the first quarter of 2021, we changed the composition of our segments to implement our new strategy and to pursue opportunities in our designated markets. We now report our operating results in four reportable segments as follows: Energy Solutions, Urban Solutions, Mission Solutions and Other. Segment operating information and assets for 2020 have been recast to conform to these changes.
In the first quarter of 2021, we also committed to a plan to sell our Stork business, which had previously represented the majority of operations from our former diversified services segment. The sale of the majority of the AMECO equipment business was completed during May 2021. Therefore, both Stork and AMECO are reported as Disc Ops along with other immaterial operations. We expect to complete the sale of Stork and the remaining AMECO operations near the end of this year or early in 2022. The assets and liabilities of the Stork and AMECO businesses are classified as held for sale for all periods presented.
31
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||||||||||||||
| Revenue | ||||||||||||||||||||||||||||||||||||||
| Energy Solutions | $ | 1,319.1 | $ | 1,498.0 | $ | 2,310.0 | $ | 2,857.2 | ||||||||||||||||||||||||||||||
| Urban Solutions | 1,210.2 | 1,512.5 | 2,404.5 | 3,104.8 | ||||||||||||||||||||||||||||||||||
| Mission Solutions | 707.1 | 724.4 | 1,460.4 | 1,470.6 | ||||||||||||||||||||||||||||||||||
| Total revenue | $ | 3,236.4 | $ | 3,734.9 | $ | 6,174.9 | $ | 7,432.6 | ||||||||||||||||||||||||||||||
| Segment profit (loss) $ and margin % | ||||||||||||||||||||||||||||||||||||||
| Energy Solutions | $ | 109.2 | 8.3 | % | $ | 42.7 | 2.9 | % | $ | 111.4 | 4.8 | % | $ | 36.8 | 1.3 | % | ||||||||||||||||||||||
| Urban Solutions | (68.4) | (5.6) | % | 38.5 | 2.5 | % | (38.6) | (1.6) | % | 89.9 | 2.9 | % | ||||||||||||||||||||||||||
| Mission Solutions | 44.9 | 6.4 | % | 9.7 | 1.3 | % | 88.6 | 6.1 | % | 41.8 | 2.8 | % | ||||||||||||||||||||||||||
| Other | (18.5) | NM | (18.5) | NM | (34.2) | NM | (41.3) | NM | ||||||||||||||||||||||||||||||
Total segment profit (loss) $ and margin %(1) | $ | 67.2 | 2.1 | % | $ | 72.4 | 1.9 | % | $ | 127.2 | 2.1 | % | $ | 127.2 | 1.7 | % | ||||||||||||||||||||||
| G&A | (31.5) | (42.6) | (97.1) | (76.2) | ||||||||||||||||||||||||||||||||||
| Impairment, restructuring and other exit costs | — | (3.8) | (26.4) | (106.2) | ||||||||||||||||||||||||||||||||||
| Foreign currency gain (loss) | (30.4) | 0.8 | (41.7) | 46.0 | ||||||||||||||||||||||||||||||||||
| Interest expense, net | (10.8) | (10.4) | (27.9) | (15.0) | ||||||||||||||||||||||||||||||||||
| Earnings (loss) from Cont Ops attributable to NCI | (7.7) | 6.4 | 25.1 | 15.5 | ||||||||||||||||||||||||||||||||||
| Earnings (loss) from Cont Ops before taxes | (13.2) | 22.8 | (40.8) | (8.7) | ||||||||||||||||||||||||||||||||||
| Income tax expense (benefit) | (1.2) | (31.3) | (1.8) | 30.9 | ||||||||||||||||||||||||||||||||||
| Net earnings (loss) from Cont Ops | $ | (14.4) | $ | (8.5) | $ | (42.6) | $ | 22.2 | ||||||||||||||||||||||||||||||
| Less: Net earnings (loss) from Cont Ops attributable to NCI | (7.7) | 6.4 | 25.1 | 15.5 | ||||||||||||||||||||||||||||||||||
| Net earnings (loss) from Cont Ops attributable to Fluor | $ | (6.7) | $ | (14.9) | $ | (67.7) | $ | 6.7 | ||||||||||||||||||||||||||||||
| Less: Dividends on convertible preferred stock | 4.9 | — | 4.9 | — | ||||||||||||||||||||||||||||||||||
| Net earnings (loss) from Cont Ops available to Fluor common stockholders | $ | (11.6) | $ | (14.9) | $ | (72.6) | $ | 6.7 | ||||||||||||||||||||||||||||||
| New awards | ||||||||||||||||||||||||||||||||||||||
| Energy Solutions | $ | 660.7 | $ | 197.3 | $ | 2,270.0 | $ | 1,739.6 | ||||||||||||||||||||||||||||||
| Urban Solutions | 617.2 | 790.6 | 1,678.6 | 2,398.4 | ||||||||||||||||||||||||||||||||||
| Mission Solutions | 92.3 | 941.3 | 1,084.1 | 1,625.3 | ||||||||||||||||||||||||||||||||||
| Total new awards | $ | 1,370.2 | $ | 1,929.2 | $ | 5,032.7 | $ | 5,763.3 | ||||||||||||||||||||||||||||||
| New awards related to projects located outside of the U.S. | 70% | 53% | ||||||||||||||||||||||||||||||||||||
32
| Backlog | June 30, 2021 | December 31, 2020 | ||||||||||||
| Energy Solutions | $ | 10,633.0 | $ | 11,020.5 | ||||||||||
| Urban Solutions | 8,013.5 | 9,224.1 | ||||||||||||
| Mission Solutions | 2,427.4 | 2,899.5 | ||||||||||||
| Total backlog | $ | 21,073.9 | $ | 23,144.1 | ||||||||||
| Backlog related to projects located outside of the U.S. | 69% | 64% | ||||||||||||
| Backlog related to lump-sum projects | 63% | 60% | ||||||||||||
(1)Total segment profit (loss) is a non-GAAP financial measure. We believe that total segment profit (loss) provides a meaningful perspective on our results as it is the aggregation of individual segment profit (loss) measures that we use to evaluate and manage our performance.
Our business has been adversely affected by the economic impacts of the outbreak of COVID-19 and the steep decline in oil prices that occurred in the early part of 2020. These events have created significant uncertainty and economic volatility and disruption, which have impacted and may continue to impact our business. We have experienced, and may continue to experience, reductions in demand for certain of our services and the delay or abandonment of ongoing or anticipated projects due to our clients’, suppliers’ and other third parties’ diminished financial condition or financial distress, as well as governmental budget constraints. Although we initially assessed our project estimates for COVID-19 during the first quarter of 2020, estimating isolated COVID-19 effects became increasingly difficult to measure. Our estimates reflect our best assessment of project results inclusive of COVID-19 effects, which have been dynamic as our projects have seen changes in prevailing regulations as COVID-19 cases crested and fell. These impacts may continue or worsen under prolonged stay-at-home, social distancing, travel restrictions and other similar orders or restrictions. Significant uncertainty still exists concerning the magnitude of the impact and duration of these events, as well as our potential to make recovery from our clients pursuant to the contract and under rule of law.
During the 2021 Quarter and 2021 Period, consolidated revenue declined primarily due to volume declines on projects which were completed or nearing completion across all segments.
During the 2021 Quarter and 2021 Period, improvements in segment profit in the Energy Solutions and Mission Solutions segments were entirely offset by a significant decline in segment profit for Urban Solutions where we recognized a $138 million charge in the current quarter for procurement and subcontractor cost growth on a legacy infrastructure project.
We did not recognize any impairment expense in Cont Ops during the 2021 and 2020 Quarters. Impairment expense, included in Cont Ops, for the 2021 and 2020 Periods is summarized as follows:
| Six Months Ended June 30, | |||||||||||||||||||||||
| (in thousands) | 2021 | 2020 | |||||||||||||||||||||
| Impairment expense: | |||||||||||||||||||||||
| Energy Solutions' equity method investment | $ | 26,392 | $ | 86,096 | |||||||||||||||||||
| Information technology assets | — | 16,269 | |||||||||||||||||||||
| Total impairment expense | $ | 26,392 | $ | 102,365 | |||||||||||||||||||
We sold the North American operations of the AMECO equipment business in May 2021 for $71 million and recognized loss on the sale of $25 million. Impairment expense, included in Disc Ops, is summarized as follows:
| Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||
| (in thousands) | Stork | AMECO | Stork | AMECO | Stork | AMECO | |||||||||||||||||||||||||||||
| Impairment expense: | |||||||||||||||||||||||||||||||||||
| Goodwill | $ | — | $ | — | $ | 12,700 | $ | — | $ | 168,568 | $ | 12,300 | |||||||||||||||||||||||
| Intangible customer relationships | — | — | — | — | 26,671 | — | |||||||||||||||||||||||||||||
| Fair value adjustment and expected costs associated with sale | 52,700 | 48,276 | 60,500 | 48,276 | — | 87,700 | |||||||||||||||||||||||||||||
| Total impairment expense | $ | 52,700 | $ | 48,276 | $ | 73,200 | $ | 48,276 | $ | 195,239 | $ | 100,000 | |||||||||||||||||||||||
33
The effective tax rate on earnings (loss) from Cont Ops was (9.3)% for the 2021 Quarter and (4.5)% for the 2021 Period compared to 137.2% and 356.1% for the corresponding periods of 2020. The effective tax rate in 2021 was unfavorably impacted by the increase in the valuation allowances against foreign tax credit carryforwards and certain foreign losses. This 2021 unfavorable impact was partially offset by favorable foreign tax differential. The effective tax rate in the 2020 Period was favorably impacted by the release of valuation allowances and rate benefits resulting from the carryback of our 2019 federal net operating loss as allowed by the CARES Act. This benefit was partially offset by an increase in the valuation allowance against foreign tax credit carryforwards and certain foreign losses, as well as a small addition to uncertain tax benefits. Earnings attributable to non-controlling interests from continuing operations, for which income taxes are not typically our responsibility, favorably impacted the effective tax rate for the 2021 Period.
The lack of broad based new awards could continue to put pressure on our future earning streams. The decline in backlog during the 2021 Period primarily resulted from the removal of approximately $2 billion from backlog due to the cancellation of both a chemicals project and a steel project. Backlog included $1.2 billion for projects in a loss position as of June 30, 2021. Although backlog reflects business that is considered to be firm, cancellations, deferrals or scope adjustments may occur. Backlog is adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate. Backlog differs from RUPO discussed elsewhere. RUPO includes only the amount of revenue we expect to recognize under contracts with definite terms and substantive termination provisions.
Segment Operations - Comparisons of the 2021 Quarter to the 2020 Quarter and the 2021 Period to the 2020 Period
Energy Solutions
Revenue for the 2021 Quarter and 2021 Period decreased due to declines in the volume of execution activities for the portfolio continuing to be impacted by COVID-19 and other market uncertainties, projects nearing completion as well as the cancellation of a chemicals project in North America. The revenue declines in the 2021 Quarter and 2021 Period were partially offset by the ramp up of execution activities on an LNG project, a chemicals project and a refinery project in Mexico.
Segment profit for the 2021 Quarter and 2021 Period significantly increased. Both 2021 periods benefitted from the negotiation of change orders, scope increases and cost improvements across numerous projects. Both periods also benefitted from the collection of previously reserved accounts receivable and the reversal of the related provision. The increases in 2021 were partially offset by losses on embedded foreign currency derivatives and the decline in execution activity for projects nearing completion. Segment profit for the 2020 Period was adversely affected by the recognition of reserves for expected credit losses on aged receivables and COVID-19 related cost growth. The change in segment profit margin reflects these same factors.
New awards for the 2021 Quarter and 2021 Period increased due to incremental awards for a refinery project in Mexico. Backlog decreased during the 2021 Period primarily due to the cancellation of the chemicals project in North America. Although we expect to benefit from opportunities in the chemicals and non-traditional oil and gas markets, the lack of broad based new awards could continue to put pressure on the segment's earnings in the near and intermediate term.
Urban Solutions
Revenue for the 2021 Quarter and 2021 Period decreased due to the nearing completion of four data center projects in Europe and mining projects in South America and Australia as well as the cancellation of a rail project and a steel project that were in progress in the prior year periods. These revenue declines were partially offset by an increase in execution activities for two mining projects in South America and a roads project in North America.
Segment profit for the 2021 Quarter and 2021 Period significantly declined due to a project charge of $138 million recognized in the current quarter for procurement and subcontractor cost growth, delays and disruptions in the schedule of a legacy infrastructure project. We believe that these cost growth factors may be at least partially recoverable under the contract. However, we expect that it will require several quarters to analyze recoverability and negotiate with our client before recognizing incremental revenue for these factors. The decline in segment profit in the 2021 Period was partially offset by the favorable resolution of a long-standing customer dispute on a rail project. We also sold our interest in an infrastructure joint venture and recognized a gain of $20 million during the 2021 Quarter and 2021 Period. The change in segment profit margin reflects these same factors.
New awards for the 2021 Quarter and 2021 Period decreased partly due to more selectivity in project pursuits and delayed procurement efforts by many of our clients. New awards in the 2021 Period included a large life sciences project in Europe. Backlog declined during the 2021 Period due to the cancellation of a steel project coupled with lower new awards.
34
Backlog included $1.1 billion for projects in a loss position as of June 30, 2021. Our staffing business does not report new awards or backlog.
Mission Solutions
Revenue for the 2021 Quarter and 2021 Period remained relatively flat compared to the prior year periods.
The increase in segment profit for the 2021 Quarter and 2021 Period was substantially driven by increased execution activity on our DOE projects, higher than anticipated performance-based fees and the release of COVID-19 cost reserves, partially offset by a decline in execution activity on army logistics and life support programs in Afghanistan and Africa. The change in segment profit margin reflects these same factors.
New awards in the 2021 Quarter and 2021 Period decreased due to an extension of an environmental management contract booked in the 2020 Quarter. Backlog decreased during the 2021 Period due to the decline in new award activity. Backlog included $836 million and $1.0 billion of unfunded government contracts as of June 30, 2021 and December 31, 2020, respectively.
Other
Other includes the operations of NuScale. NuScale expenses included in the determination of segment loss were as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||||||||||||
| NuScale expenses | $ | (34.8) | $ | (39.1) | $ | (65.9) | $ | (74.6) | ||||||||||||||||||
| Less: Reimbursable expenses | 16.3 | 20.6 | 31.7 | 33.3 | ||||||||||||||||||||||
| Segment loss | $ | (18.5) | $ | (18.5) | $ | (34.2) | $ | (41.3) | ||||||||||||||||||
During the 2021 Period, JGC Holdings Corporation, GS Energy and IHI Corporation invested a combined $100 million in NuScale. During July 2021, NuScale received an additional $92 million of incremental contributions from outside investors. Fluor and its advisors continue to engage with potential investors and capital providers to fund NuScale's path to commercialization.
G&A and Other Matters
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| (in millions) | 2021 | 2020 | 2021 | 2020 | |||||||||||||||||||
| G&A | |||||||||||||||||||||||
| Compensation | $ | 23.9 | $ | 26.7 | $ | 81.5 | $ | 45.5 | |||||||||||||||
| SEC investigation / Internal review costs | 1.2 | 11.3 | 3.8 | 13.3 | |||||||||||||||||||
| Other | 6.4 | 4.6 | 11.8 | 17.4 | |||||||||||||||||||
| G&A | $ | 31.5 | $ | 42.6 | $ | 97.1 | $ | 76.2 | |||||||||||||||
The slight decrease in compensation expense during the 2021 Quarter was primarily due to performance driven compensation including annual bonus projections. The increase in compensation expense during the 2021 Period was primarily due to higher stock price driven compensation on liability awards in the first quarter of 2021.
The increase in net interest expense during the 2021 Period was primarily attributable to costs incurred to refinance our credit facility as well as a decrease in interest income driven by lower interest rates in the 2021 compared to 2020.
We announced in January 2021 that we had begun an undertaking to substantially reduce our overhead costs. Although we have not satisfied the requirements to recognize charges for any restructurings for the 2021 undertaking, we are likely to recognize expense later in 2021.
35
Critical Accounting Estimates
Fair Value Measurements. During the first quarter, we performed interim impairment testing of our goodwill associated with Stork and recognized impairment expense of $13 million, which was included in Disc Ops. All other factors being equal, a one hundred basis point change in the discount rate used in the valuation of goodwill would change the fair value by $25 million.
Recent Accounting Pronouncements
Item is described more fully in the Notes to Financial Statements.
Litigation and Matters in Dispute Resolution
Item is described more fully in the Notes to Financial Statements.
LIQUIDITY AND FINANCIAL CONDITION
Our liquidity is provided by available cash and cash equivalents and marketable securities, cash generated from operations, capacity under our credit facilities and, when necessary, access to capital markets. We have committed and uncommitted lines of credit available for revolving loans and letters of credit. We believe that for at least the next 12 months, cash generated from operations, along with our unused credit capacity and cash position, is sufficient to support operating requirements, but we do have our credit facility and our 2023 Notes maturing in the next 24 months. We regularly review our sources and uses of liquidity and may pursue opportunities to increase our liquidity position to address upcoming maturities.
As of June 30, 2021, letters of credit totaling $431 million were outstanding under our $1.65 billion credit facility, which matures in February 2023. The credit facility contains customary financial covenants, including a debt-to-capitalization ratio that cannot exceed 0.65 to 1.0, a limitation on the aggregate amount of debt of the greater of $750 million or €750 million for our subsidiaries, and a minimum liquidity threshold of $1.5 billion, defined in the amended credit facility, which may be reduced to $1.25 billion upon the repayment of debt. The credit facility also contains provisions that will require us to provide collateral to secure the facility should we be downgraded to BB by S&P and Ba2 by Moody's, such collateral consisting broadly of our U.S. assets. Borrowings under the facility, which may be denominated in USD, EUR, GBP or CAD, bear interest at a base rate, plus an applicable borrowing margin. As of June 30, 2021, we could have borrowed an additional $783 million under our existing credit facility.
Cash and cash equivalents combined with marketable securities were $2.7 billion as of June 30, 2021 and $2.2 billion as of December 31, 2020. Cash and cash equivalents are held in numerous accounts throughout the world to fund our global project execution activities. Non-U.S. cash and cash equivalents amounted to $1.0 billion and $984 million as of June 30, 2021 and December 31, 2020, respectively. Non-U.S. cash and cash equivalents exclude deposits of U.S. legal entities that are either swept into overnight, offshore accounts or invested in offshore, short-term time deposits, to which there is unrestricted access.
In evaluating our liquidity needs, we consider cash and cash equivalents held by our consolidated variable interest entities (joint ventures and partnerships). These amounts (which totaled $636 million and $655 million as of June 30, 2021 and December 31, 2020, respectively) were not necessarily readily available for general purposes. We also consider the extent to which client advances (which totaled $168 million and $80 million as of June 30, 2021 and December 31, 2020, respectively) are likely to be sustained or consumed over the near term for project execution activities and the cash flow requirements of our various foreign operations. In some cases, it may not be financially efficient to move cash and cash equivalents between countries due to statutory dividend limitations and/or adverse tax consequences. We did not consider any cash to be permanently reinvested outside the U.S. as of June 30, 2021 and December 31, 2020, other than unremitted earnings required to meet our working capital and long-term investment needs in non-U.S. jurisdictions where we operate.
36
Cash Flows
| Six Months Ended June 30, | ||||||||||||||
| (in thousands) | 2021 | 2020 | ||||||||||||
| OPERATING CASH FLOW | $ | (153,878) | $ | 64,088 | ||||||||||
| INVESTING CASH FLOW | ||||||||||||||
| Proceeds from sales and maturities (purchases) of marketable securities | (8,230) | (5,500) | ||||||||||||
| Capital expenditures | (46,275) | (58,959) | ||||||||||||
| Proceeds from sales of assets | 42,839 | 24,348 | ||||||||||||
| Proceeds from sale of AMECO-North America | 71,085 | — | ||||||||||||
| Investments in partnerships and joint ventures | (59,829) | (24,022) | ||||||||||||
| Other | 375 | 4,534 | ||||||||||||
| Investing cash flow | (35) | (59,599) | ||||||||||||
| FINANCING CASH FLOW | ||||||||||||||
| Proceeds from issuance of preferred stock | 582,000 | — | ||||||||||||
| Purchase and retirement of debt | (4,572) | — | ||||||||||||
| Dividends paid | — | (28,720) | ||||||||||||
| Other borrowings (debt repayments) | (5,922) | 20,567 | ||||||||||||
| Distributions paid to NCI | (18,177) | (10,831) | ||||||||||||
| Capital contributions by NCI | 106,019 | 39,520 | ||||||||||||
| Other | (4,013) | (2,748) | ||||||||||||
| Financing cash flow | 655,335 | 17,788 | ||||||||||||
| Effect of exchange rate changes on cash | 10,912 | (49,883) | ||||||||||||
| Increase (decrease) in cash and cash equivalents | 512,334 | (27,606) | ||||||||||||
| Cash and cash equivalents at beginning of period | 2,198,781 | 1,997,199 | ||||||||||||
| Cash and cash equivalents at end of period | $ | 2,711,115 | $ | 1,969,593 | ||||||||||
| Cash paid during the period for: | ||||||||||||||
| Interest | $ | 42,074 | $ | 38,361 | ||||||||||
| Income taxes (net of refunds) | 68,200 | 31,649 | ||||||||||||
Operating Activities
Cash flows from operating activities result primarily from our EPC activities and are affected by changes in working capital associated with such activities. Working capital levels vary from period to period and are primarily affected by our volume of work and billing schedules on our projects. These levels are also impacted by the stage of completion and commercial terms of engineering and construction projects, as well as our execution of our projects compared to their budget. Working capital requirements also vary by project and the payments terms agreed to with our clients, vendors and subcontractors. Most contracts require payments as the projects progress. Additionally, certain projects receive advance payments from clients. A typical trend for our projects is to have higher cash balances during the initial phases of execution due to deposits paid to us which then diminish toward the end of the construction phase. As a result, our cash position is reduced as customer advances are utilized, unless they are replaced by advances on other projects. We maintain cash reserves and borrowing facilities to provide additional working capital in the event that a project’s net operating cash outflows exceed its available cash balances.
Our operating cash flow for the 2021 Period was negatively impacted by increased funding of COVID-19 costs on our projects, higher cash payments of G&A (including the timing and extent of employee bonuses) and increased tax payments, most of which occurred in the first quarter of 2021. Operating cash flow for the 2021 Quarter significantly improved compared to the first quarter of 2021 due to decreased funding for the above items coupled with a decline in working capital.
37
We contributed $12 million and $10 million into our DB plans during the 2021 Period and 2020 Period, respectively. We expect to contribute up to $16 million to our DB plans during 2021, which is expected to be in excess of the minimum funding required. The remaining obligations under our Dutch DB plan may be settled in late 2021, subject to regulatory approval. If the plan is settled, we expect that any deferred pension costs in AOCI would be reclassified to earnings upon settlement. For one of our discontinued operations, we participate in one multiemployer plan in which we are aware of a significant unfunded benefit obligation. However, we believe we qualify for an exemption and do not believe we have a probable payment to the plan. Therefore, we have not recognized a liability related to this unfunded benefit obligation.
NuScale expenses were $66 million and $75 million for the 2021 Period and 2020 Period, respectively, and were reported net of qualified reimbursable expenses of $32 million and $33 million during the 2021 Period and 2020 Period, respectively. Capital contributions by NuScale's NCI holders, which reduced the need for additional funding from Fluor in the 2021 Period, are discussed below.
Investing Activities
We hold cash in bank deposits and marketable securities which are governed by our investment policy. This policy focuses on, in order of priority, the preservation of capital, maintenance of liquidity and maximization of yield. These investments may include money market funds, bank deposits placed with highly-rated financial institutions, repurchase agreements that are fully collateralized by U.S. Government-related securities, high-grade commercial paper and high quality short-term and medium-term fixed income securities.
Capital expenditures during the 2021 Period were primarily related to construction equipment on certain infrastructure projects as well as expenditures for facilities and investments in information technology.
Proceeds from sales of assets includes the sale of our 10% ownership interest in an infrastructure joint venture during the 2021 Period.
Investments in unconsolidated partnerships and joint ventures in the 2021 Period included a $26 million capital contribution to COOEC Fluor, which satisfied our contractual funding requirements, as well as capital contributions to a recently formed Mission Solutions joint venture. Investments in unconsolidated partnerships and joint ventures in the 2020 Period primarily consist of capital contributions to an infrastructure joint venture in the United States.
Financing Activities
We have a common stock repurchase program, authorized by our Board of Directors, to purchase shares in the open market or privately negotiated transactions at our discretion. As of June 30, 2021, over 10 million shares could still be purchased under the existing stock repurchase program, although we don't have any immediate intent to begin such repurchases.
In May 2021, we issued 600,000 shares of Series A 6.5% cumulative perpetual convertible preferred stock in a private placement transaction involving a limited number of qualified institutional buyers. Each share of preferred stock has a liquidation preference of $1,000 per share, plus accumulated but unpaid dividends, and is convertible, at the holder's option at any time into 44.9585 shares of our common stock per share of preferred stock. Cumulative cash dividends on the preferred stock are payable at an annual rate of 6.5% quarterly in arrears on February 15, May 15, August 15, and November 15, beginning on August 15, 2021, upon declaration of the dividend by our Board of Directors. We are not permitted to declare or pay dividends on our common stock unless all accumulated and unpaid dividends on the preferred stock have been declared and paid. Assuming that our Board of Directors approves dividends, the preferred stock will require approximately $39 million of annual dividend payments. Moreover, the issuance created added complexity to our quarterly EPS calculations. Accordingly, in determining our diluted earnings impact of the preferred stock, we will now assess the correlation between net earnings attributable to Fluor and dividends on the preferred stock as well as the effect of conversions of the preferred stock into our common stock, which could represent up to 27 million potentially dilutive shares.
In June 2021, we used a portion of the proceeds from the issuance of preferred stock to redeem $5 million of outstanding 2023 and 2024 Notes. In July 2021, we redeemed $21 million of outstanding 2023 and 2024 Notes. We expect to make further substantial debt reductions during the latter half of 2021 using the remaining proceeds from the private placement.
Quarterly cash dividends of $0.10 per common share were declared in the fourth quarter of 2019 and paid in the first quarter of 2020. We suspended our dividend during April 2020. The payment and level of future cash dividends is subject to the discretion of our Board of Directors.
38
Other borrowings (debt repayments)represent short-term bank loans and other financing arrangements associated with Stork.
Distributions paid to holders of NCI represent cash outflows to partners of consolidated partnerships or joint ventures created primarily for the execution of single contracts or projects. Distributions in the 2021 Period primarily related to a transportation joint venture project in the United States. Distributions in the 2020 Period primarily related to a mining joint venture in Chile.
Capital contributions by NCI during the 2021 Period primarily related to new investments totaling $100 million by NuScale's NCI holders. Fluor and its advisors continue to engage with potential investors and capital providers to fund NuScale's path to commercialization. Capital contributions by NCI during the 2020 Period primarily related to 3 transportation joint venture projects.
Off-Balance Sheet Arrangements
Letters of Credit
As of June 30, 2021, letters of credit totaling $431 million were outstanding under committed lines of credit, and letters of credit totaling $915 million were outstanding under uncommitted lines of credit. Letters of credit are provided in the ordinary course of business primarily to indemnify our clients if we fail to perform our obligations under our contracts. Surety bonds may be used as an alternative to letters of credit.
Guarantees
The maximum potential amount of future payments that we could be required to make under outstanding performance guarantees, which represents the remaining cost of work to be performed, was estimated to be $12 billion as of June 30, 2021.
Financial guarantees, made in the ordinary course of business in certain limited circumstances, are entered into with financial institutions and other credit grantors and generally obligate us to make payment in the event of a default by the borrower. These arrangements generally require the borrower to pledge collateral to support the fulfillment of the borrower’s obligation.
Sustainability
Our sustainability mission envisions meeting the needs of our clients while conducting business in a socially, economically and environmentally responsible manner to the benefit of current and future generations, thereby creating value for all stakeholders. We help clients safeguard the environment, conserve energy, protect lives and strengthen economies and social structures of communities.
As a key priority for our sustainability program, we have committed to reduce our greenhouse gas emissions. Early in 2021, we committed to achieving net zero emissions for Scopes 1 and 2 absolute greenhouse gas emissions by the end of 2023.
We have a Sustainability Committee to oversee our sustainability policies, strategies and programs. The Sustainability Committee includes representatives from each of our business segments, as well as a cross-functional team of subject matter experts from communications, health, safety and environmental, investor relations and legal, who serve as advisors to the Sustainability Committee. In furtherance of our Board of Directors' commitment to sustainability, our Board of Directors and Governance Committee reviews and receives reports from management on our sustainability efforts.
39
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes to market risk during the 2021 Period. Accordingly, the disclosures provided in the 2020 10-K remain relevant.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on their evaluation as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act) are effective as required by paragraph (b) of Rule 13a-15 or Rule 15d-15 of the Exchange Act.
Changes in Internal Control over Financial Reporting
There were no changes to our ICFR that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our ICFR.
40
FLUOR CORPORATION
CHANGES IN CONSOLIDATED BACKLOG
UNAUDITED
| Three Months Ended June 30, | ||||||||||||||
| (in millions) | 2021 | 2020 | ||||||||||||
| Backlog, April 1 | $ | 23,791.7 | $ | 29,041.8 | ||||||||||
| New awards | 1,370.2 | 1,929.2 | ||||||||||||
Adjustments and cancellations, net (1) | (875.3) | (460.2) | ||||||||||||
| Work performed | (3,212.7) | (3,708.1) | ||||||||||||
| Backlog, June 30 | $ | 21,073.9 | $ | 26,802.7 | ||||||||||
| Six Months Ended June 30, | ||||||||||||||
| (in millions) | 2021 | 2020 | ||||||||||||
| Backlog, January 1 | $ | 23,144.1 | $ | 29,392.3 | ||||||||||
| New awards | 5,032.7 | 5,763.3 | ||||||||||||
Adjustments and cancellations, net (1) | (980.9) | (983.4) | ||||||||||||
| Work performed | (6,122.0) | (7,369.5) | ||||||||||||
| Backlog, June 30 | $ | 21,073.9 | $ | 26,802.7 | ||||||||||
(1) During the 2021 Quarter, we removed $1 billion from backlog due to the cancellation of a steel project in North America. During the 2021 Period, we removed an additional $1 billion from backlog due to the cancellation of a chemicals project.
41
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
As part of our normal business activities, we are party to a number of legal proceedings and other matters in various stages of development. Management periodically assesses our liabilities and contingencies in connection with these matters based upon the latest information available. We disclose material pending legal proceedings pursuant to SEC rules and other pending matters as we may determine to be appropriate.
Additional information on matters in dispute may be found in Item 8 of the 2020 10-K and Part I, Item 1 of this Q2 2021 10-Q.
Item 1A. Risk Factors
There have been no material changes from our risk factors as disclosed in the 2020 10-K other than for the addition below:
Conversion of our convertible preferred stock will dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock.
In May 2021, we issued shares of Series A convertible preferred stock. The conversion of some or all of the preferred stock into our common stock will dilute the ownership interests of existing common stockholders. Any public market sales of the common stock issuable upon conversion could adversely affect the market price of our common stock.
Our convertible preferred stock has rights, preferences and privileges that are not held by, and are preferential to the rights of, our common stockholders, which could adversely affect the value of the common stock, our liquidity and our financial condition.
Holders of our preferred stock have the right to receive a payment of $1,000 per share, plus accumulated but unpaid dividends, upon our liquidation, winding up or dissolution before any payment may be made to holders of our common stock and other potentially issuable forms of equity. In addition, dividends on the preferred stock accrue and are cumulative at an annual rate of 6.50%. Subject to certain exceptions, we are not permitted to declare or pay dividends on common stock or other classes of equity that are junior to the preferred stock unless all accumulated and unpaid preferred stock dividends have been satisfied.
If dividends on the preferred stock are in arrears and unpaid for six or more quarterly dividend periods, the preferred stockholders will be entitled to elect two additional directors to our board of directors. Such voting rights and the terms of the directors so elected will continue until such time as the dividend arrearage has been rectified. In addition, holders of at least 66⅔% of the outstanding preferred stock is required to issue any equity senior to them.
These dividend obligations could impact our liquidity available for other purposes. Our obligations to and the rights of the preferred stockholders could also limit our ability to obtain additional financing, which could have an adverse effect on our financial condition. The preferred stockholders could also have divergent interests from the holders of our common stock.
Provisions attendant to our preferred stock may deter or prevent a business combination that may be favorable to our stockholders.
If a make-whole fundamental change, as defined in the certificate of designations for the preferred stock, occurs, we will in some cases be required to increase the conversion rate for a preferred stockholder that elects to convert to common stock in connection with the make-whole fundamental change. These and other provisions attendant to the preferred stock could deter or prevent a third party from acquiring us even when the acquisition may be favorable to our stockholders.
42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(c) The following table provides information for the quarter ended June 30, 2021 about purchases by the company of our common stock that has been registered pursuant to Section 12 of the Exchange Act.
Issuer Purchases of Equity Securities
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Program (1) | ||||||||||||||||||||||
| April 1 — April 30, 2021 | — | $ | — | — | 10,513,093 | |||||||||||||||||||||
| May 1 — May 31, 2021 | — | — | — | 10,513,093 | ||||||||||||||||||||||
| June 1 — June 30, 2021 | — | — | — | 10,513,093 | ||||||||||||||||||||||
| Total | — | $ | — | — | ||||||||||||||||||||||
_________________________________________________________
(1) The share repurchase program, as amended, totals 34,000,000 shares of our common stock. We may repurchase shares from time to time in open market or privately negotiated transactions, including through pre-arranged trading programs, at our discretion, subject to market conditions and other factors and at such time and in amounts that we deem appropriate.
Item 4. Mine Safety Disclosures
None.
43
Item 6. Exhibits
EXHIBIT INDEX
| Exhibit | Description | |||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
| 3.3 | ||||||||
| 3.4 | ||||||||
| 10.1 | ||||||||
| 31.1 | ||||||||
| 31.2 | ||||||||
| 32.1 | ||||||||
| 32.2 | ||||||||
| 101.INS | Inline XBRL Instance Document.* | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document.* | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document.* | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document.* | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document.* | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document.* | |||||||
| 104 | The cover page from the Company's Q2 2021 10-Q for the three and six months ended June 30, 2021, formatted in Inline XBRL (included in the Exhibit 101 attachments).* | |||||||
_______________________________________________________________________
* New exhibit filed with this report.
44
SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| FLUOR CORPORATION | |||||||||||
| Date: | August 6, 2021 | By: | /s/ Joseph L. Brennan | ||||||||
| Joseph L. Brennan | |||||||||||
| Chief Financial Officer | |||||||||||
| Date: | August 6, 2021 | By: | /s/ John C. Regan | ||||||||
| John C. Regan | |||||||||||
| Chief Accounting Officer | |||||||||||
45
Exhibit 10.1
SEPARATION AND RELEASE AGREEMENT
Garry Flowers (“Employee”) and Fluor Enterprises, Inc. (“Company”) have reached the following Separation and Release Agreement (“Agreement”) in connection with Employee’s separation from the Company. In this Agreement, the term “Parties” refers to Employee and the Company.
A. The Parties have mutually agreed that Employee will no longer serve as Executive Vice President, Project Support Services for the Company and have agreed that Employee will use the title of “Office of the CEO” as a non-Section 16 officer, from January 18, 2021 through June 30, 2021 (“Transition Period”), with Employee separating from the Company effective July 1, 2021 (“Separation Date”).
B. The Parties have voluntarily agreed to enter into this Agreement which sets forth the complete understanding between Employee and the Company regarding the commitments and obligations of the Parties.
In consideration of the foregoing premises and for other good and valuable consideration, the sufficiency and receipt of which are acknowledged, Company and Employee agree as follows:
1.Payments and Other Consideration. This Agreement shall become effective as set forth in Paragraph 4, provided that Employee does not revoke the Agreement within the time period set forth in Paragraph 4. Employee shall continue to remain employed during the Transition Period and the Company agrees to make the payments, accommodations, and other consideration as set forth below in Paragraphs 1a, 1b, 1c, 1d, and 1e provided that: (i) Employee provides the Transition Services to the Company through the Separation Date and Employee does not accept or begin employment or any engagement with a Competitive Business during the Transition Period; (ii) Employee signs and delivers to the Company a Supplemental Release and Waiver of Claims in the form attached as Exhibit 1 to this Agreement (“Supplemental Release”) within the time period set forth therein and does not subsequently revoke it within the time period set forth therein; and (iii) Employee signs and delivers to the Company the Long Term Incentives Vesting/Forfeiture Agreement (“LTI Vesting/Forfeiture Agreement”) in the form attached as Exhibit 2 to this Agreement after the Separation Date. Employee understands that the Company will deduct from any payments specified herein federal withholding taxes and other deductions the Company is required by law to make from wages and other payments to employees. Employee further understands that the payments and benefits set forth in this Paragraph 1 are all the Employee is entitled to receive from the Company in
Separation and Release Agreement-Page 1
connection with his separation from service, except for those amounts described in Paragraph 6 to which Employee may be entitled.
a.Transition Services. During the Transition Period, Employee shall assist the Company in the orderly transition of Employee’s knowledge, duties, and responsibilities to others in the Company, performing such duties on a full-time basis and making himself reasonably available for any future assistance related to any inquiry, investigation, subpoena, administrative procedure, arbitration, claim, litigation or dispute (Collectively, the “Transition Services”). The Company agrees to continue Employee’s employment during the Transition Period provided that Employee complies with all obligations under this Agreement, complies with Fluor’s Code of Business Conduct & Ethics and other Company policies, and does not perform services, directly or indirectly, in any capacity (whether as an employee, partner, consultant, agent or other arrangement) with any other company engaged in or planning to become engaged in business that directly or indirectly competes with the Company and/or its affiliates and/or parent corporation (“Competitive Business”), regardless of the location of the Competitive Business.
(i)During the Transition Period Employee shall be paid at his normal base salary as in effect immediately prior to the Transition Period (“Base Salary”) and Employee shall be eligible to participate in all health, welfare, life insurance, disability and similar plans and programs generally available to employees of the Company in accordance with the terms and conditions of such plans and programs, as amended from time to time. Employee shall be entitled to receive the perquisites and allowances generally provided by Company to executives or officers of the Company, but shall not be entitled to any severance pay other than as expressly stated in this Agreement. Employee shall transfer any Company memberships held in his name to the Company no later than June 30, 2021. The Parties agree that as of the beginning of the Transition Period on January 18, 2021 (“Transition Date”), the Change in Control Agreement between Fluor Corporation (“Fluor”) and the Employee, dated June 30, 2010, the Amended and Restated Change in Control Agreement between Fluor and the Employee, dated July 24, 2019 and executed on July 31, 2019, are all hereby terminated with immediate effect and Employee disavows any right or claim to any benefits or compensation under those agreements.
Separation and Release Agreement-Page 2
(ii)The Parties agree that if during the Transition Period Employee fails to provide the Transition Services (other than as a result of death or disability), breaches Fluor’s Code of Business Conduct & Ethics or other Company policies, or if the Company independently determines that Employee has accepted or began employment or engagement with a Competitive Business during the Transition Period, Employee shall be immediately terminated as of such date (“Termination Date”) and shall not be entitled to receive the payments and benefits set forth in this Agreement, other than any amounts that have been paid or vested prior to the Termination Date pursuant to Paragraph 1a, 1c, and 1f. Notwithstanding the foregoing, Employee will remain eligible to receive the consideration set forth in Paragraph 1f, provided Employee signs and delivers to the Company the LTI Vesting/Forfeiture Agreement and the Supplemental Release without subsequently revoking it within the time period set forth therein. For clarity, and as set forth in Paragraph 1f, any long term incentive awards granted in 2020 shall be forfeited and shall not continue to vest if Employee is terminated before February 22, 2021.
b.Separation Payment. Employee will receive a total gross payment of One Million Six Hundred Thousand Dollars ($1,600,000) (the “Separation Payment”). The Separation Payment shall be made upon the later of: (i) Employee’s last day of employment; or (ii) within two weeks after the effective date of the Supplemental Release, attached as Exhibit 1 to this Agreement.
c.Fiscal Year 2020 Bonus. Employee acknowledges that in March 2021 Employee received a bonus payment under the Fluor Corp. 2017 Performance Incentive Plan (“Incentive Plan”) for the time period covering January 1, 2020 to December 31, 2020 (Fiscal Year 2020). Employee understands that such bonus was in an amount determined by the Board of Directors of Fluor or under the Board’s delegated authority by the Organization and Compensation Committee of the Board (the “Committee”) based on (i) Employee’s target annual bonus percentage, and (ii) actual achievement of the performance measures, both as set by the Committee at its September 2020 meeting, subject to adjustments applicable to executive officers generally, with the performance rating for the strategic portion of the annual incentive determined by Fluor’s CEO. Employee acknowledges and agrees that no additional bonus payments are owed to Employee for Fiscal Year 2020.
Separation and Release Agreement-Page 3
d.Fiscal Year 2021 Bonus. Employee will be eligible to receive a prorated bonus under the Incentive Plan if Employee provides Transition Services through the end of the Transition Period and complies with all obligations under this Agreement. This bonus shall be in an amount to be determined by the “Committee” based on (i) Employee’s target annual bonus percentage, and (ii) actual achievement of the performance measures, both as set by the Committee, and will be subject to any adjustment applicable to executive officers generally, with the performance rating for the strategic portion of the annual incentive to be determined by Fluor’s CEO. The bonus referenced in this Paragraph 1d will be paid to the Employee when paid to other employees in the ordinary course in 2022, provided Employee executes and does not revoke the Supplemental Release, attached as Exhibit 1 to this Agreement. Apart from the amounts set forth in Paragraph 1c and this Paragraph 1d, the Parties agree that the Employee shall not be eligible for any future bonus payments.
e.Retention Payment. Employee will forfeit the entirety of the award set forth in the special Restricted Stock Unit retention award dated November 11, 2019 (“Retention Award”) as per the terms of the Retention Award agreement. The Parties agree that the Employee shall not be eligible for any compensation or benefits under the Retention Award.
f.Long Term Incentives. For the purpose of Employee’s Performance Award Units, Restricted Stock Units (excluding the Retention Award referenced in Paragraph 1d), Non-Qualified Stock Options, and Value Driver Incentive Awards (collectively “Long Term Incentives”), and subject to the terms and conditions set forth in the applicable incentive plans and agreements, Employee’s separation of employment on either the Separation Date or on the Termination Date will be deemed to be a qualifying retirement, provided that this Agreement, the Supplemental Release, and the LTI Vesting/Forfeiture Agreement are all executed by Employee and become effective, with the following results:
(i)Long Term Incentives granted to Employee at least one year prior to either the Separation Date or the Termination Date shall continue to vest and be payable in accordance with their terms on the dates set out in the awards notwithstanding such termination.
(ii)Long Term Incentives granted to Employee in 2020 shall continue to vest and be payable in accordance with their terms on the dates set out in the awards if Employee remains employed through February 22, 2021. For
Separation and Release Agreement-Page 4
clarity, the Long Term Incentives granted to Employee in 2020 shall be forfeited and shall not continue to vest if Employee’s employment with the Company ends before February 22, 2021.
(iii)The Parties agree that Employee will not be eligible to receive any new Long Term Incentives in 2021 or in the future.
g.Time Off With Pay (“TOWP”). All accrued unused TOWP will be included in Employee’s final pay, and paid out on the next regular pay date following his separation of employment from the Company.
h.The benefits and payments described above reflect any and all payments and benefits to which Employee may be entitled to receive under any contractual requirements as well as under the Company’s Executive Severance Policy, and are not intended to be in addition to, or duplicative of, any contractual entitlements or the Company’s Executive Severance Policy. Employee understands and agrees that he will receive no further wages, salary, notice of termination or pay in lieu of notice, severance pay, separation pay, vacation pay, bonuses, commissions, expenses, allowances, incentive payments, stock or cash awards, perquisites, or other similar payments, remuneration or benefits from the Company (or any of its current and former parent companies, subsidiaries, affiliates and related companies) other than those expressly set out in this Agreement.
2.Company Obligations Contingent on Release of Claims. Employee agrees that Employee is not entitled to any benefits and payments provided for in Paragraphs 1a, 1b, 1c, 1d, and 1f unless and until this Agreement, the Supplemental Release attached as Exhibit 1, and the LTI Vesting/Forfeiture Agreement attached as Exhibit 2 all become effective and irrevocable (if applicable) and Employee complies with all obligations and conditions set forth in this Agreement. Employee agrees that upon the receipt of the compensation provided for under Paragraph 1, Employee will have been paid in full for any/all compensation he claims to be owed by the Company with respect to services through the Transition Period, including, but not limited to, salary, wages, commissions, bonuses, or any other compensation, and disavows any right or claim to any additional compensation other than that expressly set forth herein pursuant to this Agreement, to which he becomes entitled as set forth herein.
3.Complete Release. Subject to Paragraph 9 in this Agreement, Employee, on his own behalf and on behalf of his heirs, executors, administrators, beneficiaries, representatives, successors and assigns, and all others connected with or claiming through Employee, hereby releases and forever discharges the Company, and its current and former parent companies, subsidiaries, affiliated companies, related
Separation and Release Agreement-Page 5
companies and joint ventures and each of their respective current and former officers, directors, board members, shareholders, affiliates and controlling person(s) (if any), employees, attorneys, representatives, predecessors, successors, assigns, divisions, co-employers, vendors, contractors and all other persons acting by, through, under, or in concert with any of them (collectively “Releasees”) from any and all claims, charges, complaints, lawsuits, liabilities, obligations, promises, agreements, damages, actions, causes of action, rights, demands, costs, losses, debts and expenses, injuries and grievances of any and every kind. Said release includes, but is not limited to, a full release of any and all claims for punitive damages, attorneys’ fees, injunctive relief, declaratory relief, equitable relief, loss of wages, loss of other employment, back pay, front pay, notice pay, severance pay, liquidated damages, compensatory damages, personal injury, emotional distress, mental anguish, libel, slander, defamation, vacation pay, sick pay, pension contributions or benefits, medical or health benefits, short or long term disability benefits, and any other employee benefits; and any and all claims and demands of any other kind and nature whatsoever, foreseen, unforeseen, or unforeseeable, now known or which may hereafter be discovered relating to his employment with and/or the cessation of his employment with the Company, or to any event, act or omission that has occurred as of the date this Agreement is executed, and includes, but is not limited to, to the fullest extent allowed by law, all liability arising from:
•Title VII of the Civil Rights Acts of 1964;
•the Americans with Disabilities Act of 1990;
•the Family and Medical Leave Act;
•Genetic Information Nondiscrimination Act of 2008
•the Fair Labor Standards Act;
•Sections 1981 through 1988 of Title 42 of the United States Code;
•the Age Discrimination in Employment Act of 1967;
•the Older Workers Benefit and Protection Act of 1990;
•the Uniformed Services Employment and Reemployment Act of 1994;
•the Employee Retirement Income Security Act of 1974;
•the Health Insurance Portability and Accountability Act;
•the Occupational and Safety Health Act of 1970;
•the Worker Adjustment and Retraining Notification Act;
•the Equal Pay Act;
•Executive Orders 11246 and 11141;
•the Rehabilitation Act of 1973;
Separation and Release Agreement-Page 6
•any and all local, municipal, state, or federal statutes, regulations or ordinances;
•any and all claims arising under state or federal common law;
•any and all claims arising under any other law;
•any claims for attorneys’ fees or costs.
4.Waiver of ADEA Claims. The release set forth above includes a waiver of rights and claims which Employee may have arising under the Age Discrimination in Employment Act of 1967 (Title 29, United States Code, Section 621, et seq.) (“ADEA”). In compliance with the Older Workers Benefit and Protection Act of 1990 (“OWBPA”):
a.Employee is advised to consult with an attorney before accepting this Agreement and waiving his rights and claims under the ADEA. Employee understands that by signing this release, he waives his rights and/or claims under the ADEA.
b.Review period. Employee acknowledges that he has been given a period of up to forty-five (45) days to review and consider this Agreement and to consult with an attorney, accountant and/or other advisors before signing and that the actual time he has taken for such purposes was adequate for all appropriate consultations. Any changes in this Agreement, whether material or immaterial, do not restart the running of the 45-day period.
c.Revocation period. Employee understands that he has a period of seven (7) days, commencing with the day after the date of his signature on this Agreement, to revoke this agreement. To revoke, Employee must provide written notice to Chief Human Resources Officer, Stacy Dillow. Such written notice must be received no later than 11:59 pm (CST) on the seventh day after Employee signs this Agreement.
d.This Separation and Release Agreement will not be effective or enforceable until Employee has returned the fully executed Agreement and the seven day revocation period has expired (“Effective Date”). If Employee revokes this Agreement, it shall not be effective or enforceable. Further, if this Agreement is revoked, Employee shall not be entitled to receive the payments and accommodations described in Paragraph 1, other than the payment of accrued and unused TOWP as provided for in Paragraph 1g, and any outstanding stock based awards shall be governed by the terms of the applicable award agreements.
e.Attached to this Separation and Release Agreement as Exhibit 3 is information required under the OWBPA as to eligibility for the severance
Separation and Release Agreement-Page 7
program including the class of employees covered, time limits for participation, job titles and ages of eligible employees, and job titles and ages of employees who are not eligible for the severance program.
5.Knowing and voluntary waiver of unknown claims. Employee agrees and acknowledges that he may hereafter discover facts different from, or in addition to, those he now believes to be true with respect to any or all of the claims or demands herein released. Nevertheless, the Company and Employee agree that the release set forth above shall be and will remain effective in all respects, notwithstanding the discovery of such different or additional facts.
6.Release Inapplicable to Certain Benefits. This Agreement does not include a release of Employee's right, if any, to retirement benefits under the terms of the Company's standard retirement plans and programs or to compensation Employee has deferred under the Fluor 409A Executive Deferred Compensation Program. Employee’s right to such benefits, where applicable, shall continue to be governed by and subject to the terms and conditions set out in the applicable plans, programs, and agreements. Employee is also not waiving any rights Employee may have to seek continuation coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA), benefits under applicable workers’ compensation and/or unemployment compensation statutes and/or the right to pursue claims which by law cannot be waived by signing this Agreement.
Additionally, this Agreement is not intended to eliminate or modify any indemnification rights Employee may have under the Indemnification Agreement dated November 11, 2008, the Company’s Certificate of Incorporation, or governing law. Furthermore, this Agreement does not waive any rights Employee may have as a covered person under the Company’s directors and officers liability insurance.
7.Non-Release of Future Claims. This Agreement does not waive or release any rights or claims that arise after the date the Employee signs this Agreement. In addition, the Company and Employee acknowledge and agree that the release set forth in this Agreement does not include any claims Employee may have against the Company for its failure to comply with or breach of any provision in this Agreement.
8.No Pending Claims/Lawsuits. Employee represents that he has no pending complaints, actions, charges, or claims of any nature (on his own behalf or in conjunction with any other person or entity) against the Releasees based on, or related to, any events or actions that occurred prior to the execution of this
Separation and Release Agreement-Page 8
Agreement, and that Employee is not currently aware of facts that would support any such claim. The Parties further make the following representations: (a) Employee represents that he has no knowledge of any unreported conduct by or on behalf of the Company that in his view is or may be inconsistent with applicable law, regulation, or Company standards of conduct and compliance; and (b) Company represents that it has no knowledge of any conduct by Employee that in its view is or may be inconsistent with applicable law, regulation, or Company standards of conduct and compliance and is unaware of any facts that give rise to any claim or demand against Employee.
9.Protected Rights. Notwithstanding what is stated in Paragraphs 8, 12, 13, 14, 15, 16, 17, 19 and 25, or any other provision in the Agreement or the attached Exhibits, nothing in this Agreement or in the Exhibits thereto prohibits or restricts Employee from either filing charges/complaints/inquiries with, or providing information to, any federal, state or local governmental agency or participating in a proceeding before any governmental agency responsible for the enforcement of any local, state, or federal law. However, Employee understands and agrees that, except as set forth in the following subparagraph, he will not be entitled to any financial recovery or non-monetary relief from any judgment, decision, or award upon any claim released by him regardless of who filed or initiated any such complaint, charge, or proceeding.
In addition, nothing in this agreement prohibits Employee from: (i) reporting possible violations of federal law or regulations, including any possible securities laws violations, to any governmental agency or entity, including but not limited to, the U.S. Department of Justice, the U.S. Securities and Exchange Commission, the U.S. Congress, Occupational Health and Safety Administration, or any agency Inspector General, without notice to the Company; (ii) making any other disclosures that are protected under the whistleblower provisions of federal law or regulations; or (iii) otherwise fully participating in any whistleblower programs, including the right to receive an incentive award authorized under federal statute or regulation for information provided to the Securities & Exchange Commission or any other federal regulatory or law enforcement agency.
10.Non-Admission of Wrongdoing. By making this Agreement, neither the Company nor the Employee admits that they have done anything wrong.
11.Other Officer / Director Positions. Effective as of the Transition Date, Employee shall be deemed to have resigned from any officer or director positions or trusteeships Employee holds with the Company, its parent companies and their
Separation and Release Agreement-Page 9
respective subsidiaries, joint ventures, or related entities and agrees to execute such documents as may be necessary to give effect to such resignations.
12.Return of Company Property. Employee agrees to return and deliver to the Company on or before the Separation Date all Company property, including but not limited to, any and all hard copy and/or electronic documents, records, notebooks, reports, blueprints, manuals, etc. downloaded by him or provided to him by the Company, and all documents, materials of a secret, confidential, proprietary, or attorney-client privilege nature relating to the Company’s business and which are in his possession or under his control, and to maintain the confidentiality of such materials thereafter. Employee understands and agrees that his failure to comply with the provisions of this Paragraph 12 shall constitute a breach of this Agreement. Employee understands and agrees that the Company will assert all rights and remedies under the law, and in equity, that it may be entitled to as result of any breach of this Agreement. Notwithstanding the foregoing, the Company agrees to permit Employee to retain his assigned Company iPhone and iPad and mobile hot spot; provided however that Employee understands and agrees that such equipment shall be wiped clean by appropriate Company personnel consistent with Company policy and practice. Employee understands that the Company will make a forensic copy of the contents of such equipment to comply with litigation hold obligations prior to having the equipment wiped clean. Employee agrees to cooperate with the Company’s efforts to make such forensic copies.
13.Consequences of Employee Breach of Promises. If Employee files a lawsuit based on legal claims that he has released, or otherwise breaches this Agreement, Employee understands and agrees that the Company will be entitled to assert all rights and remedies, in law and in equity, that it may be entitled to as a result of any breach of this Agreement.
14.Confidential Agreement. Employee promises that until the Company files this Agreement with the Securities and Exchange Commission, he will keep the terms, amounts and fact of this Agreement confidential, and promises not to disclose any information about this Agreement to anyone other than his spouse, attorney, financial or tax advisor, or senior members of the Company's Legal or Human Resources departments. Before Employee tells his spouse or attorney, financial or tax advisor anything about this Agreement, he will inform them of this confidentiality clause and have them agree to follow it. Nothing in this Agreement restricts Employee from discussing this Agreement, or its underlying facts or circumstances, with any governmental agency. If this Agreement is sought by
Separation and Release Agreement-Page 10
court order or otherwise compulsion of law, Employee will promptly provide Company and its counsel with sufficient notice in advance of such proposed disclosure to enable the Company to be heard with respect to any such disclosure.
15.Confidential Information. Employee understands and agrees that in the course of Employee's employment with the Company, Employee has acquired confidential information and trade secrets concerning the Company's operations such as, but not limited to, the Company’s existing and prospective customers, suppliers, sales process, information pertaining to its customers and suppliers, the Company’s future plans and its methods of doing business. Employee understands and agrees it would be extremely damaging to the Company if Employee disclosed such information to a competitor or made it available to any other company. Employee understands and agrees that such information has been divulged to him in confidence and he understands and agrees that he will keep such information secret and confidential unless disclosure is required by court order or otherwise by compulsion of law.
In view of the nature of Employee’s employment, and the information and trade secrets which Employee has received during the course of his employment, Employee also agrees that the Company would be irreparably harmed by any violation, or threatened violation of the agreements in this paragraph and that, therefore, the Company shall be entitled to injunctive relief, including any temporary restraining order, preliminary and/or permanent injunction prohibiting him from any violation or threatened violation of such agreements, without waiving any other rights or claims that the Company may have to pursue in law or equity. Employee understands and agrees that confidential information developed by him in the course of his employment by the Company shall be subject to the terms and conditions of this Agreement as if the Company furnished the same confidential information to Employee. As noted above in Paragraph 9, this Agreement does not limit Employee from providing any documents to any governmental agency, including the U.S. Securities and Exchange Commission, as part of a whistleblower action and/or a report of possible violations of any federal securities law.
Under the federal Defend Trade Secrets Act of 2016, Employee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (a) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigation a suspected violation of law; or (b) is made to Employee’s attorney in relation to a lawsuit for retaliation against Employee for reporting a suspected violation of law; or (c) is made in a complaint
Separation and Release Agreement-Page 11
or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
16.Non-Disparagement. Employee agrees that he will not take any action or make or cause to be made any false or defamatory statements, written or oral, that disparage, are inimical to, are critical of, or damage the reputation of, or that otherwise work in any way to the detriment of, or which disrupts or impairs the Company’s normal operations, or that may be potentially embarrassing to the Company or any of its past or present affiliates, subsidiaries, agents, officers, directors, shareholders, employees, representatives or agents. This paragraph is intended to apply to false or defamatory statements that may be harmful to professional reputation or personal reputation or character. The term “statements” is intended to extend to all forms of communications, including but not limited to verbal, written, e-mails, chat rooms, instant messaging, and all other forms of electronic communication. Further, if a prospective employer of Employee contacts the Company’s employment verification representative or service, such person or service will verify dates of employment and last position held, and will only disclose or verify any additional information that Employee authorizes, in writing, the Company to provide.
17.Authorized Disclosures. Nothing in Paragraphs 12, 13, 14, 15, 16, 17, and 25, or any other provision in the Agreement or exhibits thereto, shall prevent Employee or the Company from responding truthfully and accurately to any inquiry or request for information when required by court order, a government investigation or otherwise by compulsion of law. Except to the extent a disclosure without notice to the Company is permitted under the circumstances described in Paragraph 9 above, if any inquiry or request for information is required by court order or compulsion of law, Employee will provide the Company with commercially reasonable adequate notice in advance of such proposed disclosure to enable the Company to be heard with respect to any such disclosure.
Employee shall notify:
Fluor
Attention: Chief Legal Officer
6700 Las Colinas Blvd.
Irving, TX 75039
In the event of a material breach or threatened material breach of Paragraphs 12, 14, 15, and 16 the Company, in addition to its other remedies at law or in equity,
Separation and Release Agreement-Page 12
shall be entitled to injunctive or other equitable relief in order to enforce or prevent any violations of such paragraphs.
18.Section 409A.
a.It is the intention of the Parties that, to the fullest extent permitted by applicable law, payment of all benefits pursuant to Paragraph 1 of this Agreement shall be exempt from Section 409A of the Internal Revenue Code, as amended (the “Code”) and the regulations promulgated thereunder (“Section 409A) due to (i) the involuntary termination exception as set forth in Section 1.409A-1(b)((9)(iii) of the final regulations issued under Section 409A or such other exemption as may apply; (ii) the “short-term deferral” rule set forth in Section 1.409A-1(b)(4) of the final regulations issued under Section 409A; or (iii) such other exemption as may apply.
b.Notwithstanding the foregoing, to the extent any payments under this Agreement are subject to (and not exempt from) Section 409A, it is intended that such payments will comply with Section 409A as amounts payable on the earlier of a “fixed schedule” in accordance with Section 1.409A-3(i)(1)(i) of the final regulations issued under Section 409A, or a “separation from service” as set forth in Section 1.409A-1(h) of the final regulations issued under Section 409A, such that no portion of the payments will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply.
c.Each payment and benefit payable under this Agreement is intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the final regulations issued under Section 409A.
d.This Paragraph 18 is intended to comply with the requirements of Section 409A of the Code so that none of the payments and benefits to be provided hereunder will be subject to either (1) the six (6) month delay which may otherwise be required with respect to payments of deferred compensation to “specified Executives” as defined in Section 409A, and (b) any additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Employee agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Employee under Section 409A. Notwithstanding the foregoing, in the event that it is determined that the payments provided under Paragraph 1 of this Agreement
Separation and Release Agreement-Page 13
are deferred compensation that are payable pursuant to a separation from service, then such payments will be delayed for six months in accordance with the six month delay rules applicable to the Company’s other nonqualified deferred compensation plans. Neither the Company nor its affiliates shall have any liability to Employee based in whole or in part on a failure to comply with the requirements of Section 409A.
e.Employee understands and agrees that the Company offers no opinion on the taxability of any payments under this Agreement. Employee further agrees that he is solely responsible for the payment of all taxes and for the penalties and interest owing or determined to be owed by any appropriate taxing authority and that he will indemnify the Company and the Released Parties for the same.
19.Assistance in Disputes/Litigation. Employee agrees to make himself reasonably available for any future assistance related to any inquiry, investigation, claim, demand, subpoena, administrative proceeding, arbitration, litigation, or dispute (collectively “Litigation”) involving the Company, its subsidiaries, affiliates, joint ventures, or related entities as may be requested by the Company. Among other things, with reasonable advance notice, Employee will meet with the Company’s representatives and attorneys at mutually convenient times and locations to prepare for such Litigation and will appear and participate in providing evidence (written or oral testimony) in any pending or future Litigation. If Employee is called as a witness to give testimony in any legal matter, Employee understands that Employee is to answer proper questions truthfully. For Employee’s involvement and assistance with Company’s requests after July 2021, when Company seeks assistance from Employee for any purpose, including calling Employee as a witness to give testimony in any future Litigation, the Company agrees to pay Employee’s reasonable out-of-pocket expenses, and to the extent permitted by law, regulation or applicable rules of Court, lost earnings incurred directly as a result of such assistance calculated at a rate of $560 (USD) per hour less required deductions. Any compensation is not, and shall not be, in any way contingent upon the content of Employee’s testimony in the course of any Litigation matter nor shall the compensation in any way be contingent on the outcome or disposition of any such matter.
20.Modifications of Agreement. This Agreement can only be modified in writing and that writing must be signed by both the Employee and an authorized representative of the Company.
Separation and Release Agreement-Page 14
21.Headings and Interpretation of Agreement. Headings in this Agreement are inserted for reference and convenience only and are not a part of this Agreement. This Agreement will be interpreted in accordance with the plain meanings of its terms and not strictly for or against either of the Parties. The Parties agree that any ambiguities will not be construed solely against the drafting party and that any rule of law or decision that would require interpretation of any claimed ambiguities in this Agreement against the party that drafted it has no application and is expressly waived. Additionally, no course of conduct or failure or delay in enforcing the provisions of this Agreement shall be construed as a waiver of such provisions or affect the validity, binding effect or enforceability of this Agreement or any provision hereof. Employee acknowledges that, in signing this Agreement, Employee does not rely and has not relied upon any representation or statement not set forth in this Agreement with regard to the subject matter, basis, or effect of this Agreement. Employee has carefully read and understands this Agreement and had the opportunity to be/is represented by.
22.Applicable Law. This Agreement shall be governed by and construed and enforced under South Carolina, excluding the provisions thereof which refer to the laws of another jurisdiction. The Parties irrevocably agree to submit to the jurisdiction and venue of the state or federal courts in Greenville, S.C., and appropriate appellate courts therefrom, in any action or proceeding brought with respect to or in connection with this Agreement. This choice of forum and law is knowingly and voluntarily agreed to by the Parties for their mutual convenience and in exchange for the consideration provided by the Company as stated herein, and is made a material part of this Agreement.
23.Severability. If any provision or part of this Agreement is held or determined to be invalid or unenforceable for any reason, each such provision or part shall be severed from the remaining provisions of the Agreement or the Agreement shall be read and interpreted as if it did not contain such provision or part. The validity and enforceability of remaining provisions shall not be affected by any such invalid or unenforceable part or provision; however, if Employee seeks to invalidate any portion of the release in Paragraph 3 or in the Supplemental Release, and any such portion of the release is held to be unenforceable, RELEASEES may seek modification or severance of such portion or may terminate the Agreement or consider the Agreement null and void.
24.Multiple Counterparts. This Agreement may be signed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same document. PDF copies sent by email will be effective and enforceable.
Separation and Release Agreement-Page 15
25.Entire Agreement. This Agreement along with Exhibit 1 through Exhibit 3, and the governing Long Term Incentive plans and awards, which are incorporated by reference as if fully set forth herein, are the entire Agreement between Employee and the Company and supersede any and all prior negotiations, agreements, and/or understandings between the Parties pertaining to the subject matter hereof, whether written or oral. However, this Agreement does not eliminate or change the terms and conditions of any confidentiality agreement Employee may have signed at the time of hire or during his employment with the Company except that Employee may make disclosures as expressly set forth in Paragraph 9 of this Agreement. Further, neither the Company nor anyone acting on its behalf has made any promises or representations to Employee other than those expressly stated in this Agreement.
PLEASE READ THIS AGREEMENT CAREFULLY. IT CONTAINS A RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.
BY HIS SIGNATURE BELOW, EMPLOYEE ACKNOWLEDGES AND CERTIFIES THAT HE HAS CAREFULLY READ THE ENTIRETY OF THIS AGREEMENT AND THE CORRESPONDING EXHIBITS, UNDERSTANDS THEIR RESPECTIVE PROVISIONS, AND THE EFFECT OF SUCH PROVISIONS ON EMPLOYEE’S RIGHTS. EMPLOYEE FURTHER CONFIRMS THAT HE HAS NOT BEEN INFLUENCED TO EXECUTE THIS AGREEMENT BY ANY STATEMENT OR REPRESENTATION BY THE COMPANY OR ANYONE ACTING ON ITS BEHALF THAT IS NOT EXPRESSLY CONTAINED IN THIS AGREEMENT OR THE EXHIBITS ATTACHED THERETO. EMPLOYEE ALSO ACKNOWLEDGES THAT THIS AGREEMENT AND THE RELEASE AND WAIVER OF CLAIMS CONTAINED HEREIN ARE KNOWINGLY AND VOLUNTARILY ENTERED INTO.
EMPLOYEE AGREES TO EXECUTE ANY AND ALL DOCUMENTS AS MAY BE REASONABLY NECESSARY TO CARRY OUT THE TERMS AND CONDITIONS OF THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO A FOLLOW-UP RELEASE OF ALL EMPLOYMENT RELATED CLAIMS.
| May 18, 2021 | /s/ Garry Flowers | ||||||||||
| DATE SIGNED | GARRY FLOWERS | ||||||||||
| Fluor Enterprises, Inc. | |||||||||||
| May 19, 2021 | By: | /s/ Stacy L. Dillow | |||||||||
| DATE SIGNED | Chief Human Resources Officer | ||||||||||
Separation and Release Agreement-Page 16
Exhibit 1 to Separation and Release Agreement
Supplemental Release and Waiver of Claims
Complete Release of Claims. In consideration for the payments and accommodations set forth in the Separation and Release Agreement (the “Agreement”) between me and Fluor Enterprises, Inc. (the “Company”) to which this Exhibit 1 is attached, which are to be provided to me under the Agreement, to which I am not otherwise entitled and which are expressly conditioned on my signing the Agreement and each of the exhibits thereto, including this Supplemental Release and Waiver of Claims (this “Release of Claims”), and for other good and valuable consideration, the receipt and sufficiency of which I hereby acknowledge, on my own behalf and on behalf of my heirs, executors, administrators, beneficiaries, representatives, successors and assigns, and all others connected with or claiming through me, I hereby release and forever discharge the Company, and its current and former parent companies, subsidiaries, affiliated companies, related companies and joint ventures and each of their respective current and former officers, directors, board members, shareholders, affiliates and controlling person(s) (if any), employees, attorneys, representatives, predecessors, successors, assigns, divisions, co-employers, vendors, contractors and all other persons acting by, through, under, or in concert with any of them (collectively “Releasees”) from any and all claims, charges, complaints, lawsuits, liabilities, obligations, promises, agreements, damages, actions, causes of action, rights, demands, costs, losses, debts and expenses, injuries and grievances of any and every kind. Said release includes, but is not limited to, a full release of any and all claims for punitive damages, attorneys’ fees, injunctive relief, declaratory relief, equitable relief, loss of wages, loss of other employment, back pay, front pay, notice pay, severance pay, liquidated damages, compensatory damages, personal injury, emotional distress, mental anguish, libel, slander, defamation, vacation pay, sick pay, pension contributions or benefits, medical or health benefits, short or long term disability benefits, and any other employee benefits; and any and all claims and demands of any other kind and nature whatsoever, foreseen, unforeseen, or unforeseeable, now known or which may hereafter be discovered relating to my employment with and/or the cessation of my employment with the Company, or to any event, act or omission that has occurred as of the date this Release of Claims is executed, and includes, but is not limited to, to the fullest extent allowed by law, all liability arising from:
• Title VII of the Civil Rights Acts of 1964;
• the Americans with Disabilities Act of 1990;
• the Family and Medical Leave Act;
• Genetic Information Nondiscrimination Act of 2008
• the Fair Labor Standards Act;
• Sections 1981 through 1988 of Title 42 of the United States Code;
• the Age Discrimination in Employment Act of 1967;
• the Older Workers Benefit and Protection Act of 1990;
• the Uniformed Services Employment and Reemployment Act of 1994;
Separation and Release Agreement-Page 17
• the Employee Retirement Income Security Act of 1974;
• the Health Insurance Portability and Accountability Act;
• the Occupational and Safety Health Act of 1970;
• the Worker Adjustment and Retraining Notification Act;
• the Equal Pay Act;
• Executive Orders 11246 and 11141;
• the Rehabilitation Act of 1973;
• any and all local, municipal, state, or federal statutes, regulations or ordinances;
• any and all claims arising under state or federal common law;
• any and all claims arising under any other law; and
• any claims for attorneys’ fees or costs.
I understand that nothing contained in this Release of Claims shall be construed to prohibit me from filing a charge, complaint or inquiry with any governmental agency or from providing information or documents to or participating in a proceeding before any governmental agency responsible for the enforcement of any local, state or federal law; provided, however, that I hereby agree to waive my right to recover monetary damages or other individual relief in any such charge, complaint or lawsuit filed by me or by anyone else on my behalf, except for monetary awards received from a government-administered whistleblower award program under which I provided information directly to a government agency. I further understand that nothing contained in this Release of Claims shall be construed to limit, restrict or in any other way affect my communicating with any governmental agency or entity, or communicating with any official or staff person of a governmental agency or entity, concerning matters relevant to such governmental agency or entity without prior notice to the Company, and that nothing in this Release of Claims prohibits me from fully participating in any whistleblower programs, including the right to receive an incentive award authorized under federal statute or regulation for information provided to the Securities and Exchange Commission or any other federal regulatory or law enforcement agency.
Review and revocation period. I understand that the Release of Claims set forth above includes a waiver of rights and claims under the Age Discrimination in Employment Act of 1967 (Title 29, United States Code, Section 629, et. Seq.) (“ADEA”). I understand that I must sign this Release of Claims, if at all, within twenty-one (21) days following my receipt of it on my last day of employment, and in no event prior to the date that my employment with the Company terminates. I acknowledge that this Release of Claims creates legally binding obligations, and that the Company has advised me to consult an attorney before signing it. In signing this Release of Claims, I give the Company assurance that I have signed it voluntarily and with a full understanding of its terms; that I have had sufficient opportunity of not less than forty-five (45) days before signing this Release of Claims to consider its terms and to consult with an attorney, if I wished to do so; and that I have not relied on any promises or representations, express or implied, that are not set forth expressly in this Release of Claims.
Separation and Release Agreement-Page 18
I understand that I will have seven (7) days after signing this Release of Claims to revoke my signature, and that, if I intend to revoke my signature, I must do so in writing addressed and delivered to Stacy Dillow, Chief Human Resources Officer prior to the end of the seven (7)-day revocation period. I understand that this Release of Claims will become effective upon the eighth (8th) day following the date that I sign it, provided that I do not revoke my acceptance in accordance with the immediately preceding sentence.
Release Inapplicable to Certain Benefits. I understand this Release of Claims does not include a release of my right, if any, to retirement benefits under the terms of the Company’s standard retirement plans and programs or to compensation deferrals I have made under the Fluor 409A Executive Deferred Compensation Program. I understand my right to such benefits, where applicable, shall continue to be governed by and subject to the terms and conditions set out in the applicable plans, programs, and agreements. I also understand that I am not waiving any rights I may have to seek continuation coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA), benefits under applicable workers’ compensation and/or unemployment compensation statutes and/or the right to pursue claims which by law cannot be waived by signing the Agreement or this Release of Claims.
Additionally, this Release of Claims does not include a release of any indemnification rights that may exist under the: (i) Indemnification Agreement dated November 11, 2008; (ii) Company’s Certificate of Incorporation; or (iii) applicable law. In addition, this Release of Claims does not waive any coverage that may exist under the Company’s directors’ and officers’ liability insurance.
Non-release of Future Claims. I understand this Release of Claims does not waive or release any rights or claims that I may have under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964 or the Americans with Disabilities Act which arise after the date I sign this Release. In addition, I understand and agree that this Release of Claims does not include any claims I may have against the Company for its failure to comply with any provision of the Agreement.
Non-release of Indemnity Rights.
Accepted and agreed:
| Signature: | Date: | |||||||||||||
| Garry Flowers | ||||||||||||||
Separation and Release Agreement-Page 19
Exhibit 2 to Separation and Release Agreement
LONG TERM INCENTIVES VESTING/FORFEITURE AGREEMENT
This Long Term Incentives Vesting/Forfeiture Agreement (the “LTI Vesting/Forfeiture Agreement”) is between Fluor Enterprises, Inc. (the “Company”) and Garry Flowers (the “Employee”).
Underlying Premises of this Long Term Incentives Vesting/Forfeiture Agreement
Whereas Employee’s employment shall end on or about July 1, 2021 (the “Separation Date”) or be terminated before July 1 (“Termination Date”) as per the terms set forth in the Separation and Release Agreement to which this Exhibit 2 is attached (“Separation and Release Agreement”); and
Whereas Employee desires to have certain outstanding grants of unvested non-qualified stock options, restricted stock units and value driver incentives (“Long Term Incentives”) vest; and
Whereas such Long Term Incentives have certain vesting restrictions when an Employee separates their employment from the Company in connection with retirement;
NOW, THEREFORE, for good and valuable consideration, Employee and the Company hereby agree to the following terms and conditions:
1.Consideration. In exchange for the promises below, the Company agrees to vest certain outstanding Long Term Incentives of Employee in connection with retirement, as provided for in the applicable plan documents and agreements, if such Long Term Incentives were granted to Employee at least one year prior to either the Separation Date or the Termination Date. In addition, Long Term Incentives granted to Employee in 2020 shall continue to vest and be payable in accordance with their terms on the dates set out in the awards if Employee remains employed through February 22, 2021. For clarity, the Long Term Incentives granted to Employee in 2020 shall be forfeited and shall not continue to vest if Employee’s employment with the Company ends before February 22, 2021.
2.Vesting Requirement/Conditions. For the consideration provided in paragraph 1 above, Employee agrees that he will not engage in any Detrimental Activity as provided for in paragraphs 3 and 4 below
3.Detrimental Activity. Employee agrees that during the period of employment and for a period of 12 months after he is no longer employed by the Company, Employee will not, directly or indirectly, accept or become engaged in any capacity (whether as an employee, partner, consultant, agent or other arrangement) with any other company engaged in or about to become engaged in business that directly or
Separation and Release Agreement-Page 20
indirectly competes with the Company and/or its affiliates, including any parent corporation (“Competitive Business”). This restriction applies to Employee working for a Competitive Business in the same country where a Company office or project (or an affiliate’s company or office) exists or is scheduled to start within 3 months of Employee’s Separation Date or Termination Date. Such activity will be considered to be detrimental to the Company and/or its affiliates. A Competitive Business includes any engineering and/or construction company headquartered or having a physical presence in any country, county, province, or parish in which the competitive business or its affiliates conduct business operations that are substantially similar to and/or competitive with, the Company’s or an affiliate’s business operations. The foregoing obligations shall not be deemed to prohibit Employee from being an owner of less than 5% of the outstanding stock of any class of a corporation which is publicly traded, so long as Employee has no active participation in the business of such corporation. Additionally, Detrimental Activity shall also include personally soliciting or participating in or assisting in any way in the solicitation of any other employees of the Company or of any of its affiliates for a period of one year from the Termination Date or Separation Date. Employee understands and agrees that Detrimental activity shall also include failure to return the Company’s property; however, Employee understands he is not limited from providing any information or documents to any governmental agency, including the U.S. Securities and Exchange Commission, as part of a whistleblower action and/or a report of possible violations of any federal securities law as stated in Paragraph 9 of the Separation and Release Agreement. Employee may request the written consent of Fluor’s Board of Directors for any exceptions to this LTI Vesting/Forfeiture Agreement that he wants the Company to consider, which may or may not be granted.
4.Confidential / Trade Secrets / Company Proprietary Information. Employee further understands and agrees that in the course of Employee's employment with the Company, Employee has acquired and will continue to acquire confidential and proprietary information and trade secrets concerning the Company's operations, its future plans and its methods of doing business. Employee understands and agrees it would be extremely damaging and detrimental to the Company if Employee disclosed such information to a competitor, made it available to any company, or used such information to compete with the Company or its affiliates in any way. Employee further understands and agrees that such information has been divulged to him in confidence and in consideration of the promises made in this LTI Vesting/Forfeiture Agreement, and that the Company provided Employee with access to such information during his employment. Employee therefore agrees that he will not use or disclose such information to a competitor or another company and will not use such information to compete with the Company or its affiliates in any way.
Under the federal Defend Trade Secrets Act of 2016, Employee shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (a) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for
Separation and Release Agreement-Page 21
the purpose of reporting or investigating a suspected violation of law; or (b) is made to Employee’s attorney in relation to a lawsuit for retaliation against Employee for reporting a suspected violation of law; or (c) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
5.Remedies. In the event Employee breaches or threatens to breach this LTI Vesting/ Forfeiture Agreement by participating in Detrimental Activity or using or disclosing confidential/trade secrets/Company propriety information as set out in paragraphs 3 and 4 herein (for example and without limitation, Employee becomes employed or otherwise engaged by an entity that competes with the Company or an affiliate or solicits Company employees as provided above), Employee will forfeit any further vesting of any Long Term Incentive awards and may be required to repay the value of the vested awards to the Company to the extent that any vesting occurred in reliance on Employee’s promises as provided above. In addition and supplementary to other rights and remedies existing in its favor, the Company may apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions in this agreement (without posting a bond or other security).
6.Authority to Reform. Employee acknowledges and agrees that the forfeiture of unvested Long Term Incentives for voluntarily engaging in Detrimental Activity, and the geographic and time restrictions set forth herein, are reasonable and are no greater than required to adequately protect the Company’s legitimate business interests. However, if at the time of enforcement of this LTI Vesting/Forfeiture Agreement, a court shall refuse to enforce this LTI Vesting/Forfeiture Agreement, whether because the time limit is too long or because the restrictions are more extensive than is necessary to protect the business and goodwill of the Company, the Parties understand and agree and direct that the court modify the restrictions to cover the maximum period, scope, and geographic area permitted by law.
7.Governing Law and Venue. This LTI Vesting/Forfeiture Agreement shall in all respects be construed according to the laws of the State of South Carolina, excluding the provisions thereof which refer to the laws of another jurisdiction. With respect to any claim or dispute related to or arising under this LTI Vesting/Forfeiture Agreement, the Parties hereby consent to the exclusive jurisdiction, forum and venue of the state and federal courts located in Greenville, South Carolina and appropriate appellate courts therefrom. This choice of forum and law is knowingly and voluntarily agreed to by the Parties for their mutual convenience and in exchange for the consideration provided by the Company as stated herein, and is made a material part of this Agreement.
8.Entire Agreement. This LTI Vesting/Forfeiture Agreement, in conjunction with the Separation and Release Agreement, the Supplemental Release, and the Long Term Incentives’ governing plans and awards, contains the entire agreement of the Parties
Separation and Release Agreement-Page 22
with respect to the subject matter and supersedes any and all prior understandings, agreements or correspondence between the Parties. This LTI Vesting/Forfeiture Agreement may not be waived or released by the Company unless in writing signed by the Executive Chairman of Fluor. No course of conduct or failure or delay in enforcing the provisions of this LTI Vesting/Forfeiture Agreement shall be construed as a waiver of such provisions or affect the validity, binding effect or enforceability of this LTI Vesting/Forfeiture Agreement or any provision hereof.
| EMPLOYEE | |||||||||||
| May 18, 2021 | /s/ Garry Flowers | ||||||||||
| DATE SIGNED | GARRY FLOWERS | ||||||||||
| Fluor Enterprises, Inc. | |||||||||||
| May 19, 2021 | By: | /s/ Stacy L. Dillow | |||||||||
| DATE SIGNED | Chief Human Resources Officer | ||||||||||
Separation and Release Agreement-Page 23
Exhibit 3 to Separation and Release Agreement
Disclosure Notice
For purposes of compliance with the Age Discrimination in Employment Act of 1967 and the Older Workers Benefit Protection Act of 1990, this Disclosure Notice identifies: (1) the decisional unit from which the Company chose the individuals who would be terminated and offered consideration in exchange for a release of claims under a Separation and Release Agreement (the “Release”); (2) the factors the Company used to determine who was selected and not selected for termination; and (3) the job titles and ages of all individuals eligible and selected and eligible and not selected for this termination program.
Decisional Unit: The class, unit, or group of individuals covered by the program includes all officers who report directly to the Chief Executive Officer (the “Decisional Unit.”) All individuals who are being laid off were selected from this group. All employees in the Decisional Unit who are being offered consideration under a Release agreement and asked to waive claims under the ADEA must sign the agreement and return it to Fluor Enterprises, Inc. (the “Company”) within 45 days after receiving the waiver agreement, but no sooner than each of their respective Separation Dates, as defined in their agreements. Once the signed Release agreement is returned to the Company, the employee has 7 days to revoke the agreement. The Separation and Release Agreement shall not become effective or enforceable until the revocation period has expired.
Selection Criteria: Decisions regarding this workforce reduction were prompted by the Company’s reorganization and cost reduction efforts and were based on the following criteria: business and operational needs, job duties and responsibilities, position elimination, skill set, experience, and industry knowledge.
Set forth below are the job titles and ages of all individuals in the Decisional Unit who were selected for termination as part of this program and offered consideration for signing a waiver of claims as part of the Release. Also set forth below are the job titles and ages of all individuals in the Decisional Unit who were not selected for termination as part of the program or offered consideration for signing a waiver of claims. (The employees’ ages are as of January 18, 2021.)
Job Title | Age | Selected | Not Selected | ||||||||
| [Redacted - Personal Information] | |||||||||||
Separation and Release Agreement-Page 24
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David E. Constable, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Fluor Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | August 6, 2021 | By: | /s/ David E. Constable | ||||||||
| David E. Constable | |||||||||||
| Chief Executive Officer | |||||||||||
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Joseph L. Brennan, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Fluor Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | August 6, 2021 | By: | /s/ Joseph L. Brennan | ||||||||
| Joseph L. Brennan | |||||||||||
| Chief Financial Officer | |||||||||||
Exhibit 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Fluor Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
• the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
• the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: | August 6, 2021 | By: | /s/ David E. Constable | ||||||||
| David E. Constable | |||||||||||
| Chief Executive Officer | |||||||||||
A signed original of this written statement required by 18 U.S.C. Section 1350 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Fluor Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2021, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
• the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
• the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: | August 6, 2021 | By: | /s/ Joseph L. Brennan | ||||||||
| Joseph L. Brennan | |||||||||||
| Chief Financial Officer | |||||||||||
A signed original of this written statement required by 18 U.S.C. Section 1350 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.