FLUOR CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
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Common Stock
|
|
Additional
Paid-In
Capital
|
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Accumulated
Other
Comprehensive
Income (Loss)
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|
Total
Shareholders'
Equity
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|
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|
|
(in thousands, except per share amounts)
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Retained
Earnings
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Noncontrolling
Interests
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Total
Equity
|
|
|
Shares
|
|
Amount
|
|
|
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BALANCE AS OF DECEMBER 31, 2013
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|
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161,288
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|
$
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1,613
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|
$
|
12,911
|
|
$
|
(298,201
|
)
|
$
|
4,040,664
|
|
$
|
3,756,987
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|
$
|
123,836
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|
$
|
3,880,823
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|
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Net earnings
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510,909
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|
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510,909
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136,634
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647,543
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Other comprehensive loss
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(186,011
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)
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(186,011
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)
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(7,309
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)
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|
(193,320
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)
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Dividends ($0.84 per share)
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|
|
|
|
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|
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(132,608
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)
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(132,608
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)
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(132,608
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)
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Distributions to noncontrolling interests
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|
|
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|
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|
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(138,041
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)
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(138,041
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)
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Capital contributions by noncontrolling interests
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|
|
|
|
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3,336
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3,336
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Other noncontrolling interest transactions
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|
|
|
|
|
|
|
|
751
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|
|
|
|
|
|
|
|
751
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|
|
(5,497
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)
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|
(4,746
|
)
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Stock-based plan activity
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|
|
675
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|
|
6
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|
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66,919
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|
|
|
|
|
|
|
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66,925
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|
|
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66,925
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|
Repurchase of common stock
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|
(13,331
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)
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|
(133
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)
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|
(80,581
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)
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|
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(825,369
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)
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|
(906,083
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)
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(906,083
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)
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Debt conversions
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2
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|
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|
|
|
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|
|
1
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|
|
1
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|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS OF DECEMBER 31, 2014
|
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|
148,634
|
|
$
|
1,486
|
|
$
|
|
|
$
|
(484,212
|
)
|
$
|
3,593,597
|
|
$
|
3,110,871
|
|
$
|
112,959
|
|
$
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3,223,830
|
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|
|
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|
|
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|
|
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|
Net earnings
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|
|
|
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|
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412,512
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|
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412,512
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|
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62,494
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|
|
475,006
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Other comprehensive income (loss)
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|
|
|
|
|
|
|
|
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51,437
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|
|
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|
|
51,437
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|
|
(1,267
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)
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|
50,170
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|
Dividends ($0.84 per share)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
(122,609
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)
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|
(122,609
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)
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|
|
|
|
(122,609
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)
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Distributions to noncontrolling interests
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58,986
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)
|
|
(58,986
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)
|
Capital contributions by noncontrolling interests
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
5,254
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|
|
5,254
|
|
Other noncontrolling interest transactions
|
|
|
|
|
|
|
|
|
334
|
|
|
|
|
|
|
|
|
334
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|
|
(4,302
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)
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|
(3,968
|
)
|
Stock-based plan activity
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|
|
321
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|
|
5
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|
|
54,656
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|
|
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|
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|
54,661
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|
|
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|
|
54,661
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|
Repurchase of common stock
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|
(10,105
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)
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|
(101
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)
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|
(54,789
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)
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(454,768
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)
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(509,658
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)
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|
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|
(509,658
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)
|
Debt conversions
|
|
|
168
|
|
|
|
|
|
(201
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)
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|
|
|
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(201
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)
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(201
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)
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|
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|
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|
|
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|
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BALANCE AS OF DECEMBER 31, 2015
|
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|
139,018
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|
$
|
1,390
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|
$
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|
|
$
|
(432,775
|
)
|
$
|
3,428,732
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|
$
|
2,997,347
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|
$
|
116,152
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|
$
|
3,113,499
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
281,401
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|
|
281,401
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|
|
46,048
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|
|
327,449
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
(63,894
|
)
|
|
|
|
|
(63,894
|
)
|
|
(42
|
)
|
|
(63,936
|
)
|
Dividends ($0.84 per share)
|
|
|
|
|
|
|
|
|
270
|
|
|
|
|
|
(118,265
|
)
|
|
(117,995
|
)
|
|
|
|
|
(117,995
|
)
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57,904
|
)
|
|
(57,904
|
)
|
Capital contributions by noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,072
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|
|
9,072
|
|
Other noncontrolling interest transactions
|
|
|
|
|
|
|
|
|
852
|
|
|
|
|
|
|
|
|
852
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|
|
4,314
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|
|
5,166
|
|
Stock-based plan activity
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|
|
443
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|
|
5
|
|
|
37,193
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|
|
|
|
|
|
|
|
37,198
|
|
|
|
|
|
37,198
|
|
Repurchase of common stock
|
|
|
(203
|
)
|
|
(2
|
)
|
|
2
|
|
|
|
|
|
(9,718
|
)
|
|
(9,718
|
)
|
|
|
|
|
(9,718
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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BALANCE AS OF DECEMBER 31, 2016
|
|
|
139,258
|
|
$
|
1,393
|
|
$
|
38,317
|
|
$
|
(496,669
|
)
|
$
|
3,582,150
|
|
$
|
3,125,191
|
|
$
|
117,640
|
|
$
|
3,242,831
|
|
|
|
|
|
|
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See Notes to Consolidated Financial Statements.
F-7
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Major Accounting Policies
Principles of Consolidation
The financial statements include the accounts of Fluor Corporation and its subsidiaries ("the company"). The company frequently forms joint
ventures or partnerships with unrelated third parties for the execution of single contracts or projects. The company assesses its joint ventures and partnerships at inception to determine if any meet
the qualifications of a variable interest entity ("VIE") in accordance with Accounting Standards Codification ("ASC") 810, "Consolidation." If a joint venture or partnership is a VIE and the company
is the primary beneficiary, the joint venture or partnership is fully consolidated (see Note 16 below). For partnerships and joint ventures in the construction industry, unless full
consolidation is required, the company generally recognizes its proportionate share of revenue, cost and profit in its Consolidated Statement of Earnings and uses the one-line equity method of
accounting in the Consolidated Balance Sheet, which is a common application of ASC 810-10-45-14 in the construction industry. The cost and equity methods of accounting are also used, depending on the
company's respective ownership interest and amount of
influence on the entity, as well as other factors. At times, the company also executes projects through collaborative arrangements for which the company recognizes its relative share of revenue and
cost.
All
significant intercompany transactions of consolidated subsidiaries are eliminated. Certain amounts in 2015 and 2014 have been reclassified to conform to the 2016 presentation due to
the implementation of new accounting pronouncements discussed below. Segment operating information for 2015 and 2014 has been recast to reflect changes in the composition of the company's reportable
segments as discussed in Note 17. Management has evaluated all material events occurring subsequent to the date of the financial statements up to the filing date of this annual report on
Form 10-K.
The
Consolidated Financial Statements as of and for the year ended December 31, 2016 include the financial statements of Stork Holding B.V. ("Stork") since March 1,
2016, the date of acquisition. See Note 18 for a discussion of the acquisition.
Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to
make estimates and assumptions that affect reported amounts. These estimates are based on information available through the date of the issuance of the financial statements. Therefore, actual results
could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include securities with maturities of three months or less at the date of purchase. Securities with maturities beyond
three months are classified as marketable securities within current and noncurrent assets.
Marketable Securities
Marketable securities consist of time deposits placed with investment grade banks with original maturities greater than three months, which by
their nature are typically held to maturity,
and are classified as such because the company has the intent and ability to hold them to maturity. Held-to-maturity securities are carried at amortized cost. The company also has investments in debt
securities which are classified as available-for-sale because the investments may be sold prior to their maturity date. Available-for-sale securities are carried at fair value. The cost of securities
sold is determined by using the specific identification method. Marketable securities are assessed for other-than-temporary impairment.
F-8
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Engineering and Construction Contracts
The company recognizes engineering and construction contract revenue using the percentage-of-completion method, based primarily on contract cost
incurred to date compared to total estimated contract cost. Cost of revenue includes an allocation of depreciation and amortization. Customer-furnished materials, labor and equipment and, in certain
cases, subcontractor materials, labor and equipment, are included in revenue and cost of revenue when management believes that the company is responsible for the ultimate acceptability of the project.
Contracts are generally segmented between types of services, such as engineering and construction, and accordingly, gross margin related to each activity is recognized as those separate services are
rendered. Changes to total estimated contract cost or losses, if any, are recognized in the period in which they are determined. Pre-contract costs are expensed as incurred. Revenue recognized in
excess of amounts billed is classified as a current asset under contract work in progress. Advances that are payments on account of contract work in progress of $382 million and
$343 million as of December 31, 2016 and 2015, respectively, have been deducted from contract work in progress. Amounts billed to clients in excess of revenue recognized to date are
classified as a current liability under advance billings on contracts. The company anticipates that substantially all incurred cost associated with contract work in progress as of December 31,
2016 will be billed and collected in 2017.
The
company recognizes revenue, but not profit, for certain claims (including change orders in dispute and unapproved change orders in regard to both scope and price) when it is
determined that recovery of incurred cost is probable and the amounts can be reliably estimated. Under claims accounting (ASC 605-35-25), these requirements are satisfied when (a) the
contract or other evidence provides a legal basis for the claim, (b) additional costs were caused by circumstances that were unforeseen at the contract date and not the result of deficiencies
in the company's performance, (c) claim-related costs are identifiable and considered reasonable in view of the work performed, and (d) evidence supporting the claim is objective and
verifiable. Cost, but not profit, associated with unapproved change orders is accounted for in revenue when it is probable that the cost will be recovered through a change in the contract price. In
circumstances where recovery is considered probable but the revenue cannot be reliably estimated, cost attributable to change orders is deferred pending determination of the impact on contract price.
If the requirements for recognizing revenue for claims or unapproved change orders are met, revenue is recorded only to the extent that costs associated with the claims or unapproved change orders
have been incurred. Back charges to suppliers or subcontractors are recognized as a
reduction of cost when it is determined that recovery of such cost is probable and the amounts can be reliably estimated. Disputed back charges are recognized when the same requirements described
above for claims accounting have been satisfied. The company generally provides limited warranties for work performed under its engineering and construction contracts. The warranty periods typically
extend for a limited duration following substantial completion of the company's work on a project. Historically, warranty claims have not resulted in material costs incurred, and any estimated costs
for warranties are included in the individual project cost estimates for purposes of accounting for long-term contracts.
Service Contracts
For service contracts (including maintenance contracts) that do not satisfy the criteria for revenue recognition using the
percentage-of-completion method, revenue is recognized when services are performed. Revenue recognized on service contracts that have not been billed to clients is classified as a current asset under
contract work in progress. Amounts billed to clients in excess of revenue recognized on service contracts to date are classified as a current liability under advance billings on contracts.
Research and Development
The company maintains a controlling interest in NuScale Power, LLC ("NuScale"), the operations of which are primarily research and
development activities. In May 2014, NuScale entered into a cooperative
F-9
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
agreement
establishing the terms and conditions of a funding award totaling $217 million under the DOE's Small Modular Reactor Licensing Technical Support Program. This cost-sharing award
requires NuScale to use the DOE funds to cover first-of-a-kind engineering costs associated with small modular reactor design development and certification. The DOE is to provide cost reimbursement
for up to 43 percent of qualified expenditures incurred during the period from June 1, 2014 to May 31, 2019. Costs associated with NuScale's research and development activities,
net of qualifying reimbursements under the cost-sharing award, are expensed as incurred and reported as a reduction of "Total cost of revenue" in the Consolidated Statement of Earnings. In December
2016, NuScale submitted its design certification application to the U.S. Nuclear Regulatory Commission for approval of NuScale's small modular nuclear reactor commercial power plant design. Aside from
the operations of NuScale, the
company generally does not engage in significant research and development activities for new products and services.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Leasehold improvements are amortized over the shorter of their economic lives or the lease
terms. Depreciation is calculated using the straight-line method over the following ranges of estimated useful service lives, in years:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
Estimated
Useful
Service
Lives
|
|
(cost in thousands)
|
|
2016
|
|
2015
|
|
|
|
Buildings
|
|
$
|
322,495
|
|
$
|
276,161
|
|
|
20 40
|
|
Building and leasehold improvements
|
|
|
167,552
|
|
|
158,052
|
|
|
6 20
|
|
Machinery and equipment
|
|
|
1,364,231
|
|
|
1,252,615
|
|
|
2 10
|
|
Furniture and fixtures
|
|
|
157,104
|
|
|
135,701
|
|
|
2 10
|
|
Goodwill and Intangible Assets
Goodwill is not amortized but is subject to annual impairment tests. Interim testing for impairment is performed if indicators of potential
impairment exist. For purposes of impairment testing, goodwill is allocated to the applicable reporting units based on the current reporting structure. When testing goodwill for impairment
quantitatively, the company first compares the fair value of each reporting unit with its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, a second step is performed
to measure the amount of potential impairment. In the second step, the company compares the implied fair value of reporting unit goodwill with the carrying amount of the reporting unit's goodwill. If
the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized. During 2016, the company completed its annual goodwill impairment test
and quantitatively determined that none of the goodwill was impaired. The company recorded $417 million of goodwill during 2016 in conjunction with the Stork acquisition (see Note 18).
Goodwill for each of the company's segments is presented in Note 17.
F-10
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The
following table provides a summary of the net carrying value of acquired intangible assets as of December 31, 2016 and 2015, including the weighted average life of each major
intangible asset class, in years:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
Weighted
Average
Life
|
(in thousands)
|
|
2016
|
|
2015
|
|
Customer relationships (finite-lived)
|
|
$
|
111,616
|
|
$
|
|
|
8
|
Trade names (finite-lived)
|
|
|
8,034
|
|
|
|
|
13
|
Trade names (indefinite-lived)
|
|
|
47,425
|
|
|
|
|
|
In-process research and development (indefinite-lived)
|
|
|
19,038
|
|
|
19,038
|
|
|
Other (finite-lived)
|
|
|
4,184
|
|
|
5,252
|
|
10
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
$
|
190,297
|
|
$
|
24,290
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets with finite lives are amortized on a straight-line basis over the useful lives of those assets. The aggregate amortization expense for intangible assets with finite
lives is expected to be $18 million, $17 million, $17 million, $17 million and $16 million during 2017, 2018, 2019, 2020 and 2021, respectively. Intangible assets
with indefinite lives are not amortized but are subject to annual impairment tests. Interim testing for impairment is also performed if indicators of potential impairment exist. An intangible asset
with an indefinite life is impaired if its carrying value exceeds its fair value. As of December 31, 2016, none of the company's intangible assets with indefinite lives were impaired.
In-process research and development associated with the company's investment in NuScale is considered indefinite lived until the related technology is available for commercial use.
Income Taxes
Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been recognized in the company's
financial statements or tax returns. The company evaluates the realizability of its deferred tax assets and maintains a valuation allowance, if necessary, to reduce certain deferred tax assets to
amounts that are more likely than not to be realized. The factors used to assess the likelihood of realization are the company's forecast of future taxable income and available tax planning strategies
that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted taxable income in the applicable taxing jurisdictions could affect the ultimate realization of deferred
tax assets and could result in an increase in the company's effective tax rate on future earnings.
Income
tax positions must meet a more-likely-than-not recognition threshold to be recognized. Income tax positions that previously failed to meet the more-likely-than-not threshold are
recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold are
derecognized in the first subsequent financial reporting period in which that threshold is no longer met. The company recognizes potential interest and penalties related to unrecognized tax benefits
within its global operations in income tax expense.
Judgment
is required in determining the consolidated provision for income taxes as the company considers its worldwide taxable earnings and the impact of the continuing audit process
conducted by various tax authorities. The final outcome of these audits by foreign jurisdictions, the Internal Revenue
Service and various state governments could differ materially from that which is reflected in the Consolidated Financial Statements.
F-11
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Derivatives and Hedging
The company limits exposure to foreign currency fluctuations in most of its engineering and construction contracts through provisions that
require client payments in currencies corresponding to the currencies in which cost is incurred. Certain financial exposure, which includes currency and commodity price risk associated with
engineering and construction contracts, currency risk associated with monetary assets and liabilities denominated in nonfunctional currencies and risk associated with interest rate volatility, may
subject the company to earnings volatility. In cases where financial exposure is identified, the company generally implements a hedging strategy utilizing derivative instruments as hedging instruments
to mitigate the risk. These hedging instruments are designated as either fair value or cash flow hedges in accordance with ASC 815, "Derivatives and Hedging." The company formally documents its hedge
relationships at inception, including identification of the hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction.
The company also formally assesses, both at inception and at least quarterly thereafter, whether the hedging instruments are highly effective in offsetting changes in the fair value of the hedged
items. The fair values of all hedging instruments are recognized as assets or liabilities at the balance sheet date. For fair value hedges, the effective portion of the change in the fair value of the
hedging instrument is offset against the change in the fair value of the underlying asset or liability through earnings. For cash flow hedges, the effective portion of the hedging instrument's gain or
loss due to changes in fair value is recorded as a component of accumulated other comprehensive income (loss) ("AOCI") and is reclassified into earnings when the hedged item settles. Any ineffective
portion of a hedging instrument's change in fair value is immediately recognized in earnings. The company does not enter into derivative instruments for speculative purposes. Under ASC 815, in certain
limited circumstances, foreign currency payment provisions could be deemed embedded derivatives. If an embedded foreign currency derivative is identified, the derivative is bifurcated from the host
contract and the change in fair value is recognized through earnings.
The
company maintains master netting arrangements with certain counterparties to facilitate the settlement of derivative instruments; however, the company reports the fair value of
derivative instruments on a gross basis.
Concentrations of Credit Risk
Accounts receivable and all contract work in progress are from clients in various industries and locations throughout the world. Most contracts
require payments as the projects progress or, in certain cases, advance payments. The company generally does not require collateral, but in most cases can place liens against the property, plant or
equipment constructed or terminate the contract, if a material default occurs. The company evaluates the counterparty credit risk of third parties as part of its project risk review process and in
determining the appropriate level of reserves. The company maintains adequate reserves for potential credit losses and generally such losses have been minimal and within management's estimates.
Cash
and marketable securities are deposited with major banks throughout the world. Such deposits are placed with high quality institutions and the amounts invested in any single
institution are limited to the extent possible in order to minimize concentration of counterparty credit risk.
The
company's counterparties for derivative contracts are large financial institutions selected based on profitability, strength of balance sheet, credit ratings and capacity for timely
payment of financial commitments. There are no significant concentrations of credit risk with any individual counterparty related to our derivative contracts.
The
company monitors the credit quality of its counterparties and has not incurred any significant credit risk losses related to its deposits or derivative contracts.
F-12
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Stock-Based Plans
The company applies the provisions of ASC 718, "Compensation Stock Compensation," in its accounting and reporting
for stock-based compensation. ASC 718 requires all stock-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values.
All unvested options outstanding under the company's option plans have grant prices equal to the market price of the company's stock on the dates of grant. Compensation cost for restricted stock and
restricted stock units
is determined based on the fair market value of the company's stock at the date of grant. Compensation cost for stock appreciation rights is determined based on the change in the fair market value of
the company's stock during the period. Stock-based compensation expense is generally recognized over the required service period, or over a shorter period when employee retirement eligibility is a
factor. Certain awards that may be settled in cash or company stock are classified as liabilities and remeasured at fair value at the end of each reporting period until the awards are settled.
Other Comprehensive Income (Loss)
ASC 220, "Comprehensive Income," establishes standards for reporting and displaying comprehensive income and its components in the consolidated
financial statements. The company reports the cumulative foreign currency translation adjustments, unrealized gains and losses on available-for-sale securities and derivative contracts, ownership
share of equity method investees' other comprehensive income (loss), and adjustments related to defined benefit pension and postretirement plans, as components of accumulated other comprehensive
income (loss).
The
tax effects of the components of other comprehensive income (loss) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
(in thousands)
|
|
Before-Tax
Amount
|
|
Tax
(Expense)
Benefit
|
|
Net-of-Tax
Amount
|
|
Before-Tax
Amount
|
|
Tax
(Expense)
Benefit
|
|
Net-of-Tax
Amount
|
|
Before-Tax
Amount
|
|
Tax
(Expense)
Benefit
|
|
Net-of-Tax
Amount
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
$
|
(102,707
|
)
|
$
|
38,327
|
|
$
|
(64,380
|
)
|
$
|
(166,487
|
)
|
$
|
61,892
|
|
$
|
(104,595
|
)
|
$
|
(197,361
|
)
|
$
|
71,552
|
|
$
|
(125,809
|
)
|
Ownership share of equity method investees' other comprehensive income (loss)
|
|
|
8,734
|
|
|
(2,698
|
)
|
|
6,036
|
|
|
(12,226
|
)
|
|
4,713
|
|
|
(7,513
|
)
|
|
5,892
|
|
|
(4,054
|
)
|
|
1,838
|
|
Defined benefit pension and postretirement plan adjustments
|
|
|
(5,518
|
)
|
|
381
|
|
|
(5,137
|
)
|
|
257,414
|
|
|
(94,799
|
)
|
|
162,615
|
|
|
(106,957
|
)
|
|
40,109
|
|
|
(66,848
|
)
|
Unrealized loss on derivative contracts
|
|
|
(1,064
|
)
|
|
402
|
|
|
(662
|
)
|
|
(302
|
)
|
|
176
|
|
|
(126
|
)
|
|
(2,837
|
)
|
|
773
|
|
|
(2,064
|
)
|
Unrealized gain (loss) on available-for-sale securities
|
|
|
332
|
|
|
(125
|
)
|
|
207
|
|
|
(337
|
)
|
|
126
|
|
|
(211
|
)
|
|
(700
|
)
|
|
263
|
|
|
(437
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss)
|
|
|
(100,223
|
)
|
|
36,287
|
|
|
(63,936
|
)
|
|
78,062
|
|
|
(27,892
|
)
|
|
50,170
|
|
|
(301,963
|
)
|
|
108,643
|
|
|
(193,320
|
)
|
Less: Other comprehensive loss attributable to noncontrolling interests
|
|
|
(42
|
)
|
|
|
|
|
(42
|
)
|
|
(1,267
|
)
|
|
|
|
|
(1,267
|
)
|
|
(7,309
|
)
|
|
|
|
|
(7,309
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) attributable to Fluor Corporation
|
|
$
|
(100,181
|
)
|
$
|
36,287
|
|
$
|
(63,894
|
)
|
$
|
79,329
|
|
$
|
(27,892
|
)
|
$
|
51,437
|
|
$
|
(294,654
|
)
|
$
|
108,643
|
|
$
|
(186,011
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-13
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The changes in AOCI balances by component (after-tax) for the year ended December 31, 2016 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Foreign
Currency
Translation
|
|
Ownership
Share of
Equity Method
Investees' Other
Comprehensive
Income (Loss)
|
|
Defined
Benefit
Pension and
Postretirement
Plans
|
|
Unrealized
Gain (Loss)
on Derivative
Contracts
|
|
Unrealized
Gain (Loss)
on Available-
for-Sale
Securities
|
|
Accumulated
Other
Comprehensive
Income
(Loss), Net
|
|
|
|
Attributable to Fluor Corporation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2015
|
|
$
|
(222,569
|
)
|
$
|
(37,949
|
)
|
$
|
(162,530
|
)
|
$
|
(9,255
|
)
|
$
|
(472
|
)
|
$
|
(432,775
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
|
(63,880
|
)
|
|
6,036
|
|
|
(9,888
|
)
|
|
(5,943
|
)
|
|
312
|
|
|
(73,363
|
)
|
Amount reclassified from AOCI
|
|
|
|
|
|
|
|
|
4,751
|
|
|
4,823
|
|
|
(105
|
)
|
|
9,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive income (loss)
|
|
|
(63,880
|
)
|
|
6,036
|
|
|
(5,137
|
)
|
|
(1,120
|
)
|
|
207
|
|
|
(63,894
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2016
|
|
$
|
(286,449
|
)
|
$
|
(31,913
|
)
|
$
|
(167,667
|
)
|
$
|
(10,375
|
)
|
$
|
(265
|
)
|
$
|
(496,669
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to Noncontrolling Interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2015
|
|
$
|
(114
|
)
|
$
|
|
|
$
|
|
|
$
|
(510
|
)
|
$
|
|
|
$
|
(624
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
|
(500
|
)
|
|
|
|
|
|
|
|
159
|
|
|
|
|
|
(341
|
)
|
Amount reclassified from AOCI
|
|
|
|
|
|
|
|
|
|
|
|
299
|
|
|
|
|
|
299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive income (loss)
|
|
|
(500
|
)
|
|
|
|
|
|
|
|
458
|
|
|
|
|
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2016
|
|
$
|
(614
|
)
|
$
|
|
|
$
|
|
|
$
|
(52
|
)
|
$
|
|
|
$
|
(666
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
changes in AOCI balances by component (after-tax) for the year ended December 31, 2015 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Foreign
Currency
Translation
|
|
Ownership
Share of
Equity Method
Investees' Other
Comprehensive
Income (Loss)
|
|
Defined
Benefit
Pension and
Postretirement
Plans
|
|
Unrealized
Gain (Loss)
on Derivative
Contracts
|
|
Unrealized
Gain (Loss)
on Available-
for-Sale
Securities
|
|
Accumulated
Other
Comprehensive
Income
(Loss), Net
|
|
|
|
Attributable to Fluor Corporation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2014
|
|
$
|
(119,416
|
)
|
$
|
(30,436
|
)
|
$
|
(325,145
|
)
|
$
|
(8,954
|
)
|
$
|
(261
|
)
|
$
|
(484,212
|
)
|
Other comprehensive loss before reclassifications
|
|
|
(109,361
|
)
|
|
(9,000
|
)
|
|
(5,382
|
)
|
|
(3,260
|
)
|
|
(116
|
)
|
|
(127,119
|
)
|
Amount reclassified from AOCI
|
|
|
6,208
|
|
|
1,487
|
|
|
167,997
|
|
|
2,959
|
|
|
(95
|
)
|
|
178,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive income (loss)
|
|
|
(103,153
|
)
|
|
(7,513
|
)
|
|
162,615
|
|
|
(301
|
)
|
|
(211
|
)
|
|
51,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2015
|
|
$
|
(222,569
|
)
|
$
|
(37,949
|
)
|
$
|
(162,530
|
)
|
$
|
(9,255
|
)
|
$
|
(472
|
)
|
$
|
(432,775
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to Noncontrolling Interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2014
|
|
$
|
1,328
|
|
$
|
|
|
$
|
|
|
$
|
(685
|
)
|
$
|
|
|
$
|
643
|
|
Other comprehensive loss before reclassifications
|
|
|
(1,442
|
)
|
|
|
|
|
|
|
|
(101
|
)
|
|
|
|
|
(1,543
|
)
|
Amount reclassified from AOCI
|
|
|
|
|
|
|
|
|
|
|
|
276
|
|
|
|
|
|
276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive income (loss)
|
|
|
(1,442
|
)
|
|
|
|
|
|
|
|
175
|
|
|
|
|
|
(1,267
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2015
|
|
$
|
(114
|
)
|
$
|
|
|
$
|
|
|
$
|
(510
|
)
|
$
|
|
|
$
|
(624
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-14
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The
changes in AOCI balances by component (after-tax) for the year ended December 31, 2014 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Foreign
Currency
Translation
|
|
Ownership
Share of
Equity Method
Investees' Other
Comprehensive
Income (Loss)
|
|
Defined
Benefit
Pension and
Postretirement
Plans
|
|
Unrealized
Gain (Loss)
on Derivative
Contracts
|
|
Unrealized
Gain (Loss)
on Available-
for-Sale
Securities
|
|
Accumulated
Other
Comprehensive
Income
(Loss), Net
|
|
|
|
Attributable to Fluor Corporation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2013
|
|
$
|
(164
|
)
|
$
|
(32,274
|
)
|
$
|
(258,297
|
)
|
$
|
(7,642
|
)
|
$
|
176
|
|
$
|
(298,201
|
)
|
Other comprehensive loss before reclassifications
|
|
|
(119,252
|
)
|
|
(7,958
|
)
|
|
(74,924
|
)
|
|
(2,151
|
)
|
|
(349
|
)
|
|
(204,634
|
)
|
Amount reclassified from AOCI
|
|
|
|
|
|
9,796
|
|
|
8,076
|
|
|
839
|
|
|
(88
|
)
|
|
18,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive income (loss)
|
|
|
(119,252
|
)
|
|
1,838
|
|
|
(66,848
|
)
|
|
(1,312
|
)
|
|
(437
|
)
|
|
(186,011
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2014
|
|
$
|
(119,416
|
)
|
$
|
(30,436
|
)
|
$
|
(325,145
|
)
|
$
|
(8,954
|
)
|
$
|
(261
|
)
|
$
|
(484,212
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to Noncontrolling Interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2013
|
|
$
|
7,885
|
|
$
|
|
|
$
|
|
|
$
|
67
|
|
$
|
|
|
$
|
7,952
|
|
Other comprehensive loss before reclassifications
|
|
|
(6,557
|
)
|
|
|
|
|
|
|
|
(795
|
)
|
|
|
|
|
(7,352
|
)
|
Amount reclassified from AOCI
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net other comprehensive loss
|
|
|
(6,557
|
)
|
|
|
|
|
|
|
|
(752
|
)
|
|
|
|
|
(7,309
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2014
|
|
$
|
1,328
|
|
$
|
|
|
$
|
|
|
$
|
(685
|
)
|
$
|
|
|
$
|
643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2016, 2015 and 2014, functional currency exchange rates for most of the company's international operations weakened against the U.S. dollar, resulting in unrealized translation
losses.
F-15
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The
significant items reclassified out of AOCI and the corresponding location and impact on the Consolidated Statement of Earnings are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Location in Consolidated
Statements of Earnings
|
|
(in thousands)
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
Component of AOCI:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
Gain related to a partial sale of a subsidiary
|
|
$
|
|
|
$
|
(9,932
|
)
|
$
|
|
|
Income tax benefit
|
|
Income tax expense
|
|
|
|
|
|
3,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net of tax
|
|
|
|
$
|
|
|
$
|
(6,208
|
)
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership share of equity method investees' other comprehensive loss
|
|
Total cost of revenue
|
|
$
|
|
|
$
|
(1,487
|
)
|
$
|
(15,662
|
)
|
Income tax benefit
|
|
Income tax expense
|
|
|
|
|
|
|
|
|
5,866
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net of tax
|
|
|
|
$
|
|
|
$
|
(1,487
|
)
|
$
|
(9,796
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plan adjustments
|
|
Various accounts
(1)
|
|
$
|
(7,602
|
)
|
$
|
(268,795
|
)
|
$
|
(12,922
|
)
|
Income tax benefit
|
|
Income tax expense
|
|
|
2,851
|
|
|
100,798
|
|
|
4,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net of tax
|
|
|
|
$
|
(4,751
|
)
|
$
|
(167,997
|
)
|
$
|
(8,076
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on derivative contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity and foreign currency contracts
|
|
Total cost of revenue
|
|
$
|
(6,388
|
)
|
$
|
(3,490
|
)
|
$
|
255
|
|
Interest rate contracts
|
|
Interest expense
|
|
|
(1,678
|
)
|
|
(1,678
|
)
|
|
(1,678
|
)
|
Income tax benefit (net)
|
|
Income tax expense
|
|
|
2,944
|
|
|
1,933
|
|
|
541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net of tax:
|
|
|
|
|
(5,122
|
)
|
|
(3,235
|
)
|
|
(882
|
)
|
Less: Noncontrolling interests
|
|
Net earnings attributable to noncontrolling interests
|
|
|
(299
|
)
|
|
(276
|
)
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net of tax and noncontrolling interests
|
|
|
|
$
|
(4,823
|
)
|
$
|
(2,959
|
)
|
$
|
(839
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale securities
|
|
Corporate general and administrative expense
|
|
$
|
168
|
|
$
|
152
|
|
$
|
140
|
|
Income tax expense
|
|
Income tax expense
|
|
|
(63
|
)
|
|
(57
|
)
|
|
(52
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net of tax
|
|
|
|
$
|
105
|
|
$
|
95
|
|
$
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Defined
benefit pension plan adjustments were reclassified primarily to total cost of revenue, corporate general and administrative expense and pension
settlement charge.
Recent Accounting Pronouncements
New accounting pronouncements implemented by the company during 2016 or requiring implementation in future periods are discussed below or in the
related notes, where appropriate.
In
the fourth quarter of 2016, the company adopted Accounting Standards Update ("ASU") 2014-15, "Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern."
This ASU requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date the financial statements are issued and to
provide certain disclosures if conditions or events raise substantial doubt about the entity's ability to continue as a going concern. The adoption of ASU 2014-15 did not have any impact on the
company's financial position, results of operations or cash flows.
In
the first quarter of 2016, the company adopted ASU 2015-17, "Balance Sheet Classification of Deferred Taxes" on a retrospective basis. This ASU requires entities to classify all
deferred tax assets and
F-16
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
liabilities
as noncurrent on the balance sheet instead of separating deferred taxes into current and noncurrent. As a result of the adoption of ASU 2015-17, deferred tax assets of $173 million
were reclassified from current assets to noncurrent assets on the Consolidated Balance Sheet as of December 31, 2015. The adoption of ASU 2015-17 did not have any impact on the company's
results of operations or cash flows.
In
the first quarter of 2016, the company adopted ASU 2015-16, "Simplifying the Accounting for Measurement-Period Adjustments." This ASU requires an acquirer in a business combination to
recognize adjustments to provisional amounts that are identified during the measurement period in the
reporting period in which the adjustment amounts are determined. The adoption of ASU 2015-16 did not have any impact on the company's financial position, results of operations or cash flows.
In
the first quarter of 2016, the company adopted ASU 2015-15, "Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit
Arrangements Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update)," which clarifies the presentation and measurement of
debt issuance costs incurred in connection with line of credit arrangements. The adoption of ASU 2015-15 did not have any impact on the company's financial position, results of operations or cash
flows.
In
the first quarter of 2016, the company adopted ASU 2015-07, "Disclosure for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)," which
eliminates the requirement to categorize investments measured using the net asset value practical expedient within the fair value hierarchy table. The adoption of ASU 2015-07 did not have any impact
on the company's financial position, results of operations or cash flows. However, as a result of adopting ASU 2015-07, plan assets that are reported using the net asset value practical expedient are
no longer included in the fair value hierarchy table in Note 5.
In
the first quarter of 2016, the company adopted ASU 2015-05, "Customer's Accounting for Fees Paid in a Cloud Computing Arrangement" on a prospective basis. This ASU clarifies the
circumstances under which a cloud computing customer would account for the arrangement as a license of internal-use software. The adoption of ASU 2015-05 did not have a material impact on the
company's financial position, results of operations or cash flows.
In
the first quarter of 2016, the company adopted ASU 2015-03, "Simplifying the Presentation of Debt Issuance Costs" on a retrospective basis. This ASU changes the presentation of debt
issuance costs on the balance sheet by requiring entities to present such costs as a direct deduction from the related debt liability rather than as an asset. As a result of the adoption of ASU
2015-03, debt issuance costs of $6 million were reclassified from noncurrent assets to a direct deduction of long-term debt on the Consolidated Balance Sheet as of December 31, 2015. The
adoption of ASU 2015-03 did not have any impact on the company's results of operations or cash flows.
In
the first quarter of 2016, the company adopted ASU 2015-02, "Amendments to the Consolidation Analysis." This ASU amends the consolidation guidance for VIEs and general partners'
investments in limited partnerships and modifies the evaluation of whether limited partnerships and similar legal entities are VIEs or voting interest entities. The adoption of ASU 2015-02 did not
have a material impact on the company's financial position, results of operations or cash flows.
In
the first quarter of 2016, the company adopted ASU 2015-01, "Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items." Under this ASU, an entity
will no longer be allowed to separately disclose extraordinary items, net of tax, in the income statement after income from continuing operations if an event or transaction is unusual in nature and
occurs infrequently. The adoption of ASU 2015-01 did not have any impact on the company's financial position, results of operations or cash flows.
F-17
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In
the first quarter of 2016, the company adopted ASU 2014-12, "Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved After
the Requisite Service Period." This ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition.
The adoption of ASU 2014-12 did not have any impact on the company's financial position, results of operations or cash flows.
In
January 2017, the Financial Accounting Standards Board ("FASB") issued ASU 2017-04, "Simplifying the Test for Goodwill Impairment." ASU 2017-04 removes the second step of the goodwill
impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed
the carrying amount of goodwill. ASU 2017-04 is effective for interim and annual reporting periods beginning after December 15, 2019 and will be applied prospectively. Management does not
expect the adoption of ASU 2017-04 to have any impact on the company's financial position, results of operations or cash flows.
In
January 2017, the FASB issued ASU 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business" which changes the definition of a business to assist entities
with evaluating when a set of transferred assets and activities is a business. ASU 2017-01 requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is
concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. ASU 2017-01 is effective for
interim and annual reporting periods beginning after December 15, 2017. Management does not expect the adoption of ASU 2017-01 to have any impact on the company's financial position, results of
operations or cash flows.
In
November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force)." ASU 2016-18 requires an entity
to include in its cash and cash-equivalent balances in the statement of cash flows those amounts that are deemed to be restricted cash and restricted cash equivalents. ASU 2016-18 is effective for
interim and annual reporting periods beginning after December 15, 2017. Management does not expect the adoption of ASU 2016-18 to have a material impact on the company's financial
position, results of operations or cash flows.
In
October 2016, the FASB issued ASU 2016-17, "Interests Held through Related Parties That Are Under Common Control" which amends the consolidation requirements that apply to a single
decision maker's evaluation of interests held through related parties that are under common control when it is determining whether it is the primary beneficiary of a VIE. ASU 2016-17 is effective for
interim and annual reporting periods beginning after December 15, 2016. Management does not expect the adoption
of ASU 2016-17 to have a material impact on the company's financial position, results of operations or cash flows.
In
August 2016, the FASB issued ASU 2016-15, "Classification of Certain Cash Receipts and Cash Payments." ASU 2016-15 amends the guidance in Accounting Standards Codification ("ASC")
230, which often requires judgment to determine the appropriate classification of cash flows as operating, investing or financing activities, and has resulted in diversity in practice in how certain
cash receipts and cash payments are classified. ASU 2016-15 is effective for interim and annual reporting periods beginning after December 15, 2017 and should be applied on a retrospective
basis. Management does not expect the adoption of ASU 2016-15 to have a material impact on the company's cash flows.
In
June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments." The amendments in this ASU replace the incurred loss impairment methodology in current
practice with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to estimate credit losses. ASU 2016-13 is
effective for interim and annual reporting periods beginning after December 15, 2019. Management does not expect the
F-18
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
adoption
of ASU 2016-13 to have a material impact on the company's financial position, results of operations or cash flows.
In
March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting." This ASU is intended to simplify various aspects of the accounting for share-based
payment awards, including income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows and forfeiture rate calculations. ASU 2016-09
is effective for interim and annual reporting periods beginning after December 15, 2016. Management does not expect the adoption of ASU 2016-09 to have a material impact on the company's
financial position, results of operations or cash flows.
In
March 2016, the FASB issued ASU 2016-07, "Simplifying the Transition to the Equity Method of Accounting" which eliminates the requirement to retrospectively apply equity method
accounting when an investor obtains significant influence over a previously held investment. ASU 2016-07 is effective for interim and annual reporting periods beginning after December 15, 2016,
and should be applied prospectively. Management does not expect the adoption of ASU 2016-07 to have a material impact on the company's financial position, results of operations or cash flows.
In
March 2016, the FASB issued ASU 2016-05, "Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships." This ASU clarifies that the novation of a derivative
contract in a
hedge accounting relationship does not, in and of itself, require dedesignation of that hedge accounting relationship. ASU 2016-05 is effective for interim and annual reporting periods beginning after
December 15, 2016. ASU 2016-05 can be applied on either a prospective or modified retrospective basis. Management does not expect the adoption of ASU 2016-05 to have a material impact on the
company's financial position, results of operations or cash flows.
In
February 2016, the FASB issued ASU 2016-02, "Leases: Amendments to the FASB Accounting Standards Codification," which amends the existing guidance on accounting for leases. This ASU
requires the recognition of lease assets and lease liabilities on the balance sheet, and the disclosure of key information about leasing arrangements. ASU 2016-02 is effective for interim and annual
reporting periods beginning after December 15, 2018. Early adoption is permitted and modified retrospective application is required for leases that exist or are entered into after the beginning
of the earliest comparative period in the financial statements. Management is currently evaluating the impact of adopting ASU 2016-02 on the company's financial position, results of operations or cash
flows.
In
January 2016, the FASB issued ASU 2016-01, "Financial Instruments Overall Recognition and Measurement of Financial Assets and Financial
Liabilities." This ASU requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and to recognize any changes
in fair value in net income unless the investments qualify for a practicability exception. ASU 2016-01 is effective for interim and annual reporting periods beginning after December 15, 2017.
Management does not expect the adoption of ASU 2016-01 to have a material impact on the company's financial position, results of operations or cash flows.
Revenue Recognition
In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers," which outlines a single comprehensive model for entities to
use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 outlines a five-step
process for revenue recognition that focuses on transfer of control, as opposed to transfer of risk and rewards, and also requires enhanced disclosures regarding the nature, amount, timing and
uncertainty of revenues and cash flows from contracts with customers. Major provisions include determining which goods and services are distinct and represent separate performance obligations, how
variable consideration (which may include change orders and claims) is recognized,
F-19
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
whether
revenue should be recognized at a point in time or over time and ensuring the time value of money is considered in the transaction price.
As
a result of the deferral of the effective date in ASU 2015-14, "Revenue from Contracts with Customers Deferral of the Effective Date," the company will now be
required to adopt ASU 2014-09 for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted as of interim and annual reporting periods beginning after
December 15, 2016. ASU 2014-09 can be applied either retrospectively to each prior period presented or as a cumulative-effect adjustment as of the date of adoption.
In
March 2016, the FASB issued ASU 2016-08, "Principal versus Agent Considerations (Reporting Revenue Gross versus Net)" which clarifies the principal versus agent guidance in ASU
2014-09. ASU 2016-08 clarifies how an entity determines whether to report revenue gross or net based on whether it controls a specific good or service before it is transferred to a customer.
ASU 2016-08 also reframes the indicators to focus on evidence that an entity is acting as a principal rather than as an agent.
In
April 2016, the FASB issued ASU 2016-10, "Identifying Performance Obligations and Licensing," which amends certain aspects of ASU 2014-09. ASU 2016-10 amends how an entity should
identify performance obligations for immaterial promised goods or services, shipping and handling activities and promises that may represent performance obligations. ASU 2016-10 also provides
implementation guidance for determining the nature of licensing and royalties arrangements.
In
May 2016, the FASB issued ASU 2016-12, "Narrow-Scope Improvements and Practical Expedients," which also clarifies certain aspects of ASU 2014-09 including the assessment of
collectability, presentation of sales taxes, treatment of noncash consideration, and accounting for completed contracts and contract modifications at transition.
In
December 2016, the FASB issued ASU 2016-20, "Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers," which allows an entity to determine
the provision for loss contracts at either the contract level or the performance obligation level as an accounting policy election. ASU 2016-20, 2016-12, 2016-10 and 2016-08 are effective upon
adoption of ASU 2014-09.
Management
is currently evaluating the impact of adopting ASU 2014-09, 2016-08, 2016-10, 2016-12 and 2016-20 on the company's financial position, results of operations, cash flows and
related disclosures. Adoption of these ASUs is expected to affect the manner in which the company determines the unit of account for its projects (i.e., performance obligations). Under existing
guidance, the company typically segments revenue and margin recognition between the engineering and construction phases of
its contracts. Upon adoption, the company expects that the entire engineering and construction contract will typically be a single unit of account (a single performance obligation), which will result
in a more constant recognition of revenue and margin over the term of the contract. The company will adopt ASU 2014-09 during the first quarter of 2018. The company expects to adopt this new standard
using the modified retrospective method that will result in a cumulative effect adjustment as of the date of adoption.
2. Discontinued Operations
During 2014, the company recorded an after-tax loss from discontinued operations of $205 million in connection with the reassessment of estimated loss
contingencies related to the lead business of St. Joe Minerals Corporation and The Doe Run Company in Herculaneum, Missouri, which the company sold in 1994. The tax effect associated with this
loss was $112 million. During 2015, the company recorded an after-tax loss from discontinued operations of $6 million resulting from the settlement of lead exposure cases related to the
divested lead business and the payment of legal fees incurred in connection with a pending indemnification action against the buyer of the lead business for these settlements and others. The tax
effect associated with this loss was $3 million.
F-20
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. Consolidated Statement of Cash Flows
The changes in operating assets and liabilities as shown in the Consolidated Statement of Cash Flows are comprised of:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
(Increase) decrease in:
|
|
|
|
|
|
|
|
|
|
|
Accounts and notes receivable, net
|
|
$
|
(337,775
|
)
|
$
|
190,141
|
|
$
|
(336,109
|
)
|
Contract work in progress
|
|
|
(72,419
|
)
|
|
80,742
|
|
|
50,570
|
|
Other current assets
|
|
|
19,311
|
|
|
(20,861
|
)
|
|
24,659
|
|
Other assets
|
|
|
250,332
|
|
|
(54,726
|
)
|
|
48,403
|
|
Increase (decrease) in:
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable
|
|
|
200,480
|
|
|
(57,317
|
)
|
|
(153,515
|
)
|
Advance billings on contracts
|
|
|
43,985
|
|
|
243,996
|
|
|
(63,594
|
)
|
Accrued liabilities
|
|
|
40,088
|
|
|
(38,529
|
)
|
|
31,697
|
|
Other liabilities
|
|
|
(8,609
|
)
|
|
(39,550
|
)
|
|
(10,972
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash due to changes in operating assets and liabilities
|
|
$
|
135,393
|
|
$
|
303,896
|
|
$
|
(408,861
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
72,057
|
|
$
|
40,585
|
|
$
|
23,509
|
|
Income taxes (net of refunds)
|
|
|
164,836
|
|
|
249,921
|
|
|
228,471
|
|
|
|
|
|
|
|
|
|
|
|
|
4. Income Taxes
The income tax expense (benefit) included in the Consolidated Statement of Earnings from continuing operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
120,798
|
|
$
|
22,465
|
|
$
|
126,490
|
|
Foreign
|
|
|
95,198
|
|
|
203,125
|
|
|
151,240
|
|
State and local
|
|
|
11,067
|
|
|
15,623
|
|
|
13,001
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current
|
|
|
227,063
|
|
|
241,213
|
|
|
290,731
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
58,601
|
|
|
8,867
|
|
|
74,037
|
|
Foreign
|
|
|
(65,656
|
)
|
|
(5,630
|
)
|
|
(10,353
|
)
|
State and local
|
|
|
(857
|
)
|
|
1,438
|
|
|
(1,600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred
|
|
|
(7,912
|
)
|
|
4,675
|
|
|
62,084
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
$
|
219,151
|
|
$
|
245,888
|
|
$
|
352,815
|
|
|
|
|
|
|
|
|
|
|
|
|
F-21
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A
reconciliation of U.S. statutory federal income tax expense to income tax expense is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
U.S. statutory federal tax expense
|
|
$
|
191,310
|
|
$
|
254,293
|
|
$
|
421,718
|
|
Increase (decrease) in taxes resulting from:
|
|
|
|
|
|
|
|
|
|
|
State and local income taxes
|
|
|
5,785
|
|
|
11,518
|
|
|
7,670
|
|
Other permanent items, net
|
|
|
(11,101
|
)
|
|
(5,828
|
)
|
|
(9,378
|
)
|
Noncontrolling interests
|
|
|
(16,117
|
)
|
|
(21,873
|
)
|
|
(47,822
|
)
|
Foreign losses, net
|
|
|
24,288
|
|
|
8,640
|
|
|
4,121
|
|
Valuation allowance, net
|
|
|
6,978
|
|
|
5,611
|
|
|
(12,984
|
)
|
Statute expirations and tax authority settlements
|
|
|
(13,280
|
)
|
|
(7,827
|
)
|
|
(19,331
|
)
|
Revaluation due to Section 987 tax law change
|
|
|
24,156
|
|
|
|
|
|
|
|
Other changes to unrecognized tax positions
|
|
|
2,061
|
|
|
491
|
|
|
5,574
|
|
Other, net
|
|
|
5,071
|
|
|
863
|
|
|
3,247
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
$
|
219,151
|
|
$
|
245,888
|
|
$
|
352,815
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
taxes reflect the tax effects of differences between the amounts recorded as assets and liabilities for financial reporting purposes and the amounts recorded for income tax
purposes. The tax effects of significant temporary differences giving rise to deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in thousands)
|
|
2016
|
|
2015
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
Accrued liabilities not currently deductible:
|
|
|
|
|
|
|
|
Employee compensation and benefits
|
|
$
|
117,981
|
|
$
|
124,300
|
|
Employee time-off accrual
|
|
|
94,134
|
|
|
92,507
|
|
Project and non-project reserves
|
|
|
46,219
|
|
|
22,270
|
|
Workers' compensation insurance accruals
|
|
|
10,681
|
|
|
12,083
|
|
Tax basis of investments in excess of book basis
|
|
|
69,195
|
|
|
|
|
Revenue recognition
|
|
|
17,525
|
|
|
|
|
Net operating loss carryforward
|
|
|
180,450
|
|
|
184,475
|
|
Other comprehensive loss
|
|
|
271,878
|
|
|
258,618
|
|
Other
|
|
|
5,941
|
|
|
57,285
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
814,004
|
|
|
751,538
|
|
Valuation allowance for deferred tax assets
|
|
|
(81,360
|
)
|
|
(167,360
|
)
|
|
|
|
|
|
|
|
|
Deferred tax assets, net
|
|
$
|
732,644
|
|
$
|
584,178
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
Book basis of property, equipment and other capital costs in excess of tax basis
|
|
|
(88,262
|
)
|
|
(45,611
|
)
|
Residual U.S. tax on unremitted non-U.S. earnings
|
|
|
(161,827
|
)
|
|
(95,823
|
)
|
Revenue recognition
|
|
|
|
|
|
(17,518
|
)
|
Other
|
|
|
(28,446
|
)
|
|
(30,394
|
)
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(278,535
|
)
|
|
(189,346
|
)
|
|
|
|
|
|
|
|
|
Deferred tax assets, net of deferred tax liabilities
|
|
$
|
454,109
|
|
$
|
394,832
|
|
|
|
|
|
|
|
|
|
F-22
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The
company had non-U.S. net operating loss carryforwards, related to various jurisdictions, of approximately $760 million as of December 31, 2016. Of the total losses,
$574 million can be carried forward indefinitely and $186 million will begin to expire in various jurisdictions starting in 2017.
The
company maintains a valuation allowance to reduce certain deferred tax assets to amounts that are more likely than not to be realized. The valuation allowance for 2016 and 2015 is
primarily due to the deferred tax assets established for certain net operating loss carryforwards and certain reserves on investments. The recent strong earnings history of our U.K. branch provided
enough positive evidence to release a $127 million valuation allowance on its net operating loss carryforward in 2016. This release does not impact total tax expense as it relates to branch
income which is included in the U.S. tax return. The Stork acquisition added $36 million to the valuation allowance as a result of purchase price accounting. In 2015 and 2014, we released
valuation allowance on branch net operating losses of $47 million and $24 million, respectively.
On
December 7, 2016, the U.S. Treasury issued regulations under Internal Revenue Code Section 987 ("Section 987 Regulations") which prescribes how companies are
required to calculate foreign currency translation gains and losses for income tax purposes for branches that have functional currencies other than the U.S. dollar. The issuance of the
Section 987 Regulations necessitated the reduction of deferred tax assets in the amount of $24 million.
The
company conducts business globally and, as a result, the company or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and
foreign jurisdictions. In the normal course of business, the company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Australia, Canada, the
Netherlands, South Africa, the United Kingdom and the United States. Although the company believes its reserves for its tax positions are reasonable, the final outcome of tax audits could be
materially different, both favorably and unfavorably. With a few exceptions, the company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before
2013.
In
2016, the company concluded an audit with the U.S. Internal Revenue Service ("IRS") for tax years 2012-2013. This resulted in a net reduction in tax expense of $11 million.
During 2015, the company reached a settlement on certain issues with the IRS for tax years 2004 - 2005 and concluded an audit with the IRS for tax years 2009 - 2011, which
resulted in a net reduction in tax expense of $8 million. During 2014, the company concluded an audit with the IRS for tax years 2006 - 2008. This resulted in a net reduction in
tax expense of $19 million.
The
unrecognized tax benefits as of December 31, 2016 and 2015 were $59 million and $42 million, of which $9 million and $21 million, if recognized,
would have favorably impacted the effective tax rates at the end of 2016 and 2015, respectively. The company does not anticipate any significant changes to the unrecognized tax benefits within the
next twelve months.
A
reconciliation of the beginning and ending amount of unrecognized tax benefits including interest and penalties is as follows:
|
|
|
|
|
|
|
|
(in thousands)
|
|
2016
|
|
2015
|
|
|
|
Balance at beginning of year
|
|
$
|
42,203
|
|
$
|
33,972
|
|
Change in tax positions of prior years
|
|
|
30,034
|
|
|
18,860
|
|
Change in tax positions of current year
|
|
|
|
|
|
|
|
Reduction in tax positions for statute expirations
|
|
|
(1,044
|
)
|
|
(539
|
)
|
Reduction in tax positions for audit settlements
|
|
|
(12,312
|
)
|
|
(10,090
|
)
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
58,881
|
|
$
|
42,203
|
|
|
|
|
|
|
|
|
|
F-23
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The
company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. The company had $8 million of accrued interest and penalties as
of both December 31, 2016 and 2015.
U.S.
and foreign earnings from continuing operations before taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
United States
|
|
$
|
(33,414
|
)
|
$
|
12,520
|
|
$
|
332,497
|
|
Foreign
|
|
|
580,014
|
|
|
714,032
|
|
|
872,412
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
546,600
|
|
$
|
726,552
|
|
$
|
1,204,909
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations before taxes in the United States decreased in 2016 compared to 2015 primarily due to pre-tax charges totaling $265 million related to forecast
revisions for estimated cost increases on a petrochemicals project in the Energy, Chemicals & Mining segment. Earnings from
continuing operations before taxes in foreign jurisdictions decreased in 2016 compared to 2015 primarily due to lower contributions from the Energy, Chemicals & Mining segment. Earnings from
continuing operations before taxes in the United States decreased in 2015 compared to 2014 primarily due to a pre-tax pension settlement charge of $240 million (discussed in Note 5
below). Earnings from continuing operations before taxes in foreign jurisdictions decreased in 2015 compared to 2014 primarily due to lower contributions from the mining and metals business line of
the Energy, Chemicals & Mining segment.
5. Retirement Benefits
The company sponsors contributory and non-contributory defined contribution retirement and defined benefit pension plans for eligible employees worldwide.
Defined Contribution Retirement Plans
Domestic and international defined contribution retirement plans are available to eligible salaried and craft employees. Contributions to
defined contribution retirement plans are based on a percentage of the employee's eligible compensation. The company recognized expense of $167 million, $146 million and
$150 million associated with contributions to its defined contribution retirement plans during 2016, 2015 and 2014, respectively.
Defined Benefit Pension Plans
Certain defined benefit pension plans are available to eligible international salaried employees. A defined benefit pension plan was previously
available to U.S. salaried and craft employees; however, the U.S. defined benefit pension plan (the "U.S. plan") was terminated on December 31, 2014 (see further discussion below).
Contributions to defined benefit pension plans are at least the minimum amounts required by applicable regulations. Benefit payments under these plans are generally based upon length of service and/or
a percentage of qualifying compensation.
The
company's Board of Directors previously approved amendments to freeze the accrual of future service-related benefits for salaried participants of the U.S. plan as of
December 31, 2011 and craft participants of the U.S. plan as of December 31, 2013. During the fourth quarter of 2014, the company's Board of Directors approved an amendment to terminate
the U.S. plan effective December 31, 2014. In December 2015, the company settled the remaining obligations associated with the U.S. plan. Plan
participants received vested benefits from the plan assets by electing either a lump-sum distribution, roll-over contribution to other defined contribution or individual retirement plans, or an
annuity contract with a third-party provider. As a result of the settlement, the company was relieved of any further
F-24
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
obligation.
During 2015, the company recorded a pension settlement charge of $251 million, of which $11 million was reimbursable and included in "Total cost of revenue" and
$240 million was recorded as "Pension settlement charge" in the Consolidated Statement of Earnings. The settlement charge consisted primarily of unrecognized actuarial losses included in AOCI.
The settlement of the plan obligations did not have a material impact on the company's cash position.
The
company's defined benefit pension plan in the Netherlands was closed to new participants on December 31, 2013. The company previously approved an amendment to freeze the
accrual of future service-related benefits for eligible participants of the U.K. pension plan as of April 1, 2011.
Net
periodic pension expense for the U.S. and non-U.S. defined benefit pension plans included the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension Plan
|
|
Non-U.S. Pension Plans
|
|
|
|
Year Ended December 31,
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
Service cost
|
|
$
|
|
|
$
|
6,800
|
|
$
|
3,800
|
|
$
|
19,507
|
|
$
|
20,517
|
|
$
|
16,217
|
|
Interest cost
|
|
|
|
|
|
16,116
|
|
|
31,675
|
|
|
26,435
|
|
|
26,511
|
|
|
34,536
|
|
Expected return on assets
|
|
|
|
|
|
(19,711
|
)
|
|
(30,105
|
)
|
|
(39,535
|
)
|
|
(49,066
|
)
|
|
(48,077
|
)
|
Amortization of prior service cost/(credits)
|
|
|
|
|
|
867
|
|
|
750
|
|
|
(813
|
)
|
|
(814
|
)
|
|
|
|
Recognized net actuarial loss
|
|
|
|
|
|
9,714
|
|
|
4,435
|
|
|
8,819
|
|
|
7,681
|
|
|
7,738
|
|
Loss on settlement
|
|
|
|
|
|
250,946
|
|
|
|
|
|
396
|
|
|
390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic pension expense
|
|
$
|
|
|
$
|
264,732
|
|
$
|
10,555
|
|
$
|
14,809
|
|
$
|
5,219
|
|
$
|
10,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
ranges of assumptions indicated below cover defined benefit pension plans in the United States, the Netherlands, the United Kingdom, Germany, the Philippines and Australia and are
based on the economic environment in each host country at the end of each respective annual reporting period. The discount rates for the non-U.S. defined benefit pension plans were determined
primarily based on a hypothetical yield curve developed from the yields on high quality corporate and government bonds with durations consistent with the pension obligations in those countries. The
discount rate for the U.S. plan was determined based on assumptions which reflected the intended settlement of the plan in 2015. Benefits that were assumed to be settled as lump-sum payments to plan
participants were estimated using interest rates prescribed by law. Benefits that were assumed to be settled through an annuity purchase were estimated using a blend of U.S. Treasury and high-quality
corporate bond discount rates. The expected long-term rate of return on asset assumptions utilizing historical returns, correlations and
F-25
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
investment
manager forecasts are established for each major asset category including public U.S. and international equities and government, corporate and other debt securities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension Plan
|
|
Non-U.S. Pension Plans
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
For determining projected benefit obligation at year-end:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rates
|
|
|
N/A
|
|
|
N/A
|
|
|
1.95%
|
|
|
1.90-5.00%
|
|
|
2.35-5.50%
|
|
|
2.20-5.00%
|
|
Rates of increase in compensation levels
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
2.25-7.00%
|
|
|
2.25-7.00%
|
|
|
2.25-8.00%
|
|
For determining net periodic cost for the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rates
|
|
|
N/A
|
|
|
1.95%
|
|
|
4.95%
|
|
|
1.90-5.50%
|
|
|
2.20-5.00%
|
|
|
3.55-5.00%
|
|
Rates of increase in compensation levels
|
|
|
N/A
|
|
|
N/A
|
|
|
N/A
|
|
|
2.25-7.00%
|
|
|
2.25-8.00%
|
|
|
2.25-9.00%
|
|
Expected long-term rates of return on assets
|
|
|
N/A
|
|
|
2.95%
|
|
|
4.55%
|
|
|
4.30-7.00%
|
|
|
4.90-7.00%
|
|
|
4.75-7.00%
|
|
The
company evaluates the funded status of each of its retirement plans using the above assumptions and determines the appropriate funding level considering applicable regulatory
requirements, tax deductibility, reporting considerations and other factors. The funding status of the plans is sensitive to changes in long-term interest rates and returns on plan assets, and funding
obligations could increase substantially if interest rates fall dramatically or returns on plan assets are below expectations. Assuming no changes in current assumptions, the company expects to
contribute up to $15 million to its defined benefit pension plans in 2017, which is expected to be in excess of the minimum funding required. If the discount rates were reduced by 25 basis
points, plan liabilities for the defined benefit pension plans would increase by approximately $51 million.
The
following table sets forth the target allocations and the weighted average actual allocations of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target Allocation
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
Asset category:
|
|
|
|
|
|
|
|
|
|
Debt securities
|
|
65% - 75%
|
|
|
68%
|
|
|
70%
|
|
Equity securities
|
|
20% - 30%
|
|
|
26%
|
|
|
27%
|
|
Other
|
|
0% - 10%
|
|
|
6%
|
|
|
3%
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
100%
|
|
|
100%
|
|
|
|
|
|
|
|
|
|
|
|
The
company's investment strategy is to maintain asset allocations that appropriately address risk within the context of seeking adequate returns. Investment allocations are determined
by each plan's governing body. Asset allocations may be affected by local regulations. Long-term allocation guidelines are set and expressed in terms of a target range allocation for each asset class
to provide portfolio management flexibility. Short-term deviations from these allocations may exist from time to time for tactical investment or strategic implementation purposes.
Investments
in debt securities are used to provide stable investment returns while protecting the funding status of the plans. Investments in equity securities are utilized to generate
long-term capital appreciation to mitigate the effects of increases in benefit obligations resulting from inflation, longer life expectancy and salary growth. While most of the company's plans are not
prohibited from investing in the company's common stock or debt securities, there are no such direct investments at the present time.
F-26
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Plan assets included investments in common or collective trusts (or "CCTs"), which offer efficient access to diversified investments across various asset
categories. The estimated fair value of the investments in the common or collective trusts represents the net asset value of the shares or units of such funds as determined by the issuer. A redemption
notice period of no more than 30 days is required for the plans to redeem certain investments in common or collective trusts. At the present time, there are no other restrictions on how the
plans may redeem their investments.
Debt
securities are comprised of corporate bonds, government securities, repurchase agreements and common or collective trusts, with underlying investments in corporate bonds, government
and asset backed securities and interest rate swaps. Corporate bonds primarily consist of investment-grade rated bonds and notes, of which no significant concentration exists in any one rating
category or industry. Government securities include international government bonds, some of which are inflation-indexed. Corporate bonds and government securities are valued based on pricing models,
which are determined from a compilation of primarily observable market information, broker quotes in non-active markets or similar assets.
Equity
securities are diversified across various industries and are comprised of common stocks of international companies as well as common or collective trusts with underlying
investments in common and preferred stocks. Publicly traded corporate equity securities are valued based on the last trade or official close of an active market or exchange on the last business day of
the plan's year. Securities not traded on the last business day are valued at the last reported bid price. As of both December 31, 2016 and 2015, direct investments in equity securities were
concentrated in international securities.
Other
is primarily comprised of common or collective trusts, short-term investment funds, guaranteed investment contracts and foreign currency contracts. Common or collective trusts hold
underlying investments in a variety of asset classes including commodities and foreign currency contracts. The estimated fair value of foreign currency contracts is determined from broker quotes.
Guaranteed investment contracts are insurance contracts that guarantee a principal repayment and a stated rate of interest. The estimated fair value of these insurance contracts represents the
discounted value of guaranteed benefit payments. These insurance contracts were classified as Level 3 investments, as defined below.
The
fair value hierarchy established by ASC 820, "Fair Value Measurement," prioritizes the use of inputs used in valuation techniques into the following three levels:
|
|
|
|
|
Level 1
|
|
|
|
quoted prices in active markets for identical assets and liabilities
|
Level 2
|
|
|
|
inputs other than quoted prices in active markets for identical assets and liabilities that are observable, either directly or indirectly
|
Level 3
|
|
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|
unobservable inputs
|
The
company measures and reports assets and liabilities at fair value utilizing pricing information received from third parties. The company performs procedures to verify the
reasonableness of pricing information received for significant assets and liabilities classified as Level 2.
F-27
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The
following table presents, for each of the fair value hierarchy levels required under ASC 820-10, the plan assets and liabilities of the company's non-U.S. defined benefit pension
plans that are measured at fair value on a recurring basis as of December 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
|
|
|
Fair Value Hierarchy
|
|
Fair Value Hierarchy
|
|
(in thousands)
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
$
|
3,187
|
|
$
|
3,187
|
|
$
|
|
|
$
|
|
|
$
|
2,150
|
|
$
|
2,150
|
|
$
|
|
|
$
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds
|
|
|
139,243
|
|
|
|
|
|
139,243
|
|
|
|
|
|
147,559
|
|
|
|
|
|
147,559
|
|
|
|
|
Government securities
|
|
|
276,266
|
|
|
|
|
|
276,266
|
|
|
|
|
|
169,433
|
|
|
|
|
|
169,433
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed investment contracts
|
|
|
19,075
|
|
|
|
|
|
|
|
|
19,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts and other
|
|
|
5,244
|
|
|
|
|
|
5,244
|
|
|
|
|
|
16,489
|
|
|
|
|
|
16,489
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase agreements
|
|
|
(107,328
|
)
|
|
|
|
|
(107,328
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts and other
|
|
|
(5,113
|
)
|
|
|
|
|
(5,113
|
)
|
|
|
|
|
(19,211
|
)
|
|
|
|
|
(19,211
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets measured at fair value, net
|
|
$
|
330,574
|
|
$
|
3,187
|
|
$
|
308,312
|
|
$
|
19,075
|
|
$
|
316,420
|
|
$
|
2,150
|
|
$
|
314,270
|
|
$
|
|
|
Plan assets measured at net asset value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CCTs equity securities
|
|
|
240,203
|
|
|
|
|
|
|
|
|
|
|
|
242,028
|
|
|
|
|
|
|
|
|
|
|
CCTs debt securities
|
|
|
337,265
|
|
|
|
|
|
|
|
|
|
|
|
318,103
|
|
|
|
|
|
|
|
|
|
|
CCTs other
|
|
|
41,744
|
|
|
|
|
|
|
|
|
|
|
|
29,265
|
|
|
|
|
|
|
|
|
|
|
Plan assets not measured at fair value, net
|
|
|
1,161
|
|
|
|
|
|
|
|
|
|
|
|
14,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total plan assets, net
|
|
$
|
950,947
|
|
|
|
|
|
|
|
|
|
|
$
|
920,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following table presents a reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension Plan
|
|
Non-U.S.
Pension Plans
|
|
(in thousands)
|
|
2016
|
|
2015
(1)
|
|
2016
|
|
2015
(2)
|
|
|
|
Balance at beginning of year
|
|
$
|
|
|
$
|
12,393
|
|
$
|
|
|
$
|
6,651
|
|
Actual return on plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets still held at reporting date
|
|
|
|
|
|
|
|
|
(1,268
|
)
|
|
|
|
Assets sold during the period
|
|
|
|
|
|
136
|
|
|
|
|
|
(344
|
)
|
Acquisitions
|
|
|
|
|
|
|
|
|
21,923
|
|
|
|
|
Purchases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
|
|
(12,529
|
)
|
|
|
|
|
(6,307
|
)
|
Settlements
|
|
|
|
|
|
|
|
|
(1,580
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
|
|
$
|
|
|
$
|
19,075
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-28
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
-
(1)
-
The
U.S. plan held investments in limited partnerships as of January 1, 2015. Limited partnerships were valued at the plan's proportionate share
of the estimated fair value of the underlying net assets as determined by the general partners. The limited partnerships were classified as Level 3 investments, as defined above. In
anticipation of the plan settlement, the company purchased all of the remaining investments in limited partnerships from the U.S. plan during the third quarter of 2015, as allowed under a prohibited
transaction exemption with the U.S. Department of Labor. The purchase price approximated the fair value of the investments as of September 30, 2015.
-
(2)
-
The
non-U.S. plans held common or collective trusts with underlying investments in real estate as of January 1, 2015. These assets were
classified as Level 3 investments and subsequently sold during 2015.
The
following table presents expected benefit payments for the non-U.S. defined benefit pension plans:
|
|
|
|
|
(in thousands)
|
|
Non-U.S.
Pension Plans
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2017
|
|
$
|
33,153
|
|
2018
|
|
|
33,790
|
|
2019
|
|
|
34,430
|
|
2020
|
|
|
36,287
|
|
2021
|
|
|
47,918
|
|
2022 2026
|
|
|
191,299
|
|
F-29
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Measurement
dates for the company's U.S. and non-U.S. defined benefit pension plans are December 31. The following table sets forth the change in projected benefit obligation,
plan assets and funded status of the U.S. and non-U.S. plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension Plan
|
|
Non-U.S. Pension Plans
|
|
|
|
December 31,
|
|
December 31,
|
|
(in thousands)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
Change in projected benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of
year
|
|
$
|
|
|
$
|
815,368
|
|
$
|
911,550
|
|
$
|
1,005,138
|
|
Service cost
|
|
|
|
|
|
6,800
|
|
|
19,507
|
|
|
20,517
|
|
Interest cost
|
|
|
|
|
|
16,116
|
|
|
26,435
|
|
|
26,511
|
|
Employee contributions
|
|
|
|
|
|
|
|
|
3,272
|
|
|
|
|
Currency translation
|
|
|
|
|
|
|
|
|
(80,418
|
)
|
|
(76,801
|
)
|
Actuarial (gain) loss
|
|
|
|
|
|
(40,050
|
)
|
|
96,216
|
|
|
(32,104
|
)
|
Plan amendments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
|
|
|
|
|
(22,068
|
)
|
|
(33,695
|
)
|
|
(31,711
|
)
|
Settlements
|
|
|
|
|
|
(768,185
|
)
|
|
|
|
|
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
55,799
|
|
|
|
|
Other
|
|
|
|
|
|
(7,981
|
)
|
|
(10,677
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at end of year
|
|
|
|
|
|
|
|
|
987,989
|
|
|
911,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets at beginning of year
|
|
|
|
|
|
751,268
|
|
|
920,477
|
|
|
1,032,133
|
|
Actual return on plan assets
|
|
|
|
|
|
(8,034
|
)
|
|
124,210
|
|
|
(8,349
|
)
|
Company contributions
|
|
|
|
|
|
55,000
|
|
|
14,868
|
|
|
3,446
|
|
Employee contributions
|
|
|
|
|
|
|
|
|
3,272
|
|
|
|
|
Currency translation
|
|
|
|
|
|
|
|
|
(88,852
|
)
|
|
(75,042
|
)
|
Benefits paid
|
|
|
|
|
|
(22,068
|
)
|
|
(33,695
|
)
|
|
(31,711
|
)
|
Settlements
|
|
|
|
|
|
(768,185
|
)
|
|
|
|
|
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
21,923
|
|
|
|
|
Other
|
|
|
|
|
|
(7,981
|
)
|
|
(11,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets at end of year
|
|
|
|
|
|
|
|
|
950,947
|
|
|
920,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded Status (Under)/overfunded
|
|
$
|
|
|
$
|
|
|
$
|
(37,042
|
)
|
$
|
8,927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized in the Consolidated Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension assets included in other
assets
|
|
$
|
|
|
$
|
|
|
$
|
30,977
|
|
$
|
84,328
|
|
Pension assets included in other accrued liabilities
|
|
|
|
|
|
|
|
|
(2,001
|
)
|
|
|
|
Pension liabilities included in noncurrent liabilities
|
|
|
|
|
|
|
|
|
(66,018
|
)
|
|
(75,401
|
)
|
Accumulated other comprehensive loss (pre-tax)
|
|
$
|
|
|
$
|
|
|
$
|
231,225
|
|
$
|
247,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2017, approximately $7 million of the amount of accumulated other comprehensive loss shown above is expected to be recognized as components of net periodic pension expense
for the non-U.S. plans.
Projected
benefit obligations exceeded plan assets for all defined benefit pension plans as of December 31, 2016, with the exception of the plan in the United Kingdom. In the
aggregate, these plans had projected benefit obligations of $625 million and plan assets with a fair value of $557 million as of December 31, 2016.
The
total accumulated benefit obligation for all defined benefit pension plans as of December 31, 2016 and 2015 was $919 million and $863 million, respectively. As
of December 31, 2016, the accumulated
F-30
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
benefit
obligation exceeded plan assets for certain defined benefit pension plans in the Netherlands and Germany that the company assumed in the Stork acquisition. Plan assets exceeded the accumulated
benefit obligation for each of the other non-U.S plans (including the company's legacy plan in the Netherlands) as of December 31, 2016. The accumulated benefit obligation exceeded plan assets
for the company's legacy plan in the Netherlands as of December 31, 2015. Plan assets exceeded the accumulated benefit obligation for each of the other non-U.S plans as of December 31,
2015.
Multiemployer Pension Plans
In addition to the company's defined benefit pension plans discussed above, the company participates in multiemployer pension plans for its
union construction and maintenance craft employees. Contributions are based on the hours worked by employees covered under various collective bargaining agreements. Company contributions to these
multiemployer pension plans were $108 million, $22 million and $23 million during 2016, 2015 and 2014, respectively. The increase in contributions during 2016 primarily resulted
from an increase in craft employees at two nuclear power plant projects in the United States and a refinery project in Canada. The company is not aware of any significant
future obligations or funding requirements related to these plans other than the ongoing contributions that are paid as hours are worked by plan participants. None of these multiemployer pension plans
are individually significant to the company.
The
preceding information does not include amounts related to benefit plans applicable to employees associated with certain contracts with the U.S. Department of Energy because the
company is not responsible for the current or future funded status of these plans.
6. Fair Value of Financial Instruments
The fair value hierarchy established by ASC 820, "Fair Value Measurement," prioritizes the use of inputs used in valuation techniques into the following three
levels:
|
|
|
|
|
Level 1
|
|
|
|
quoted prices in active markets for identical assets and liabilities
|
Level 2
|
|
|
|
inputs other than quoted prices in active markets for identical assets and liabilities that are observable, either directly or indirectly
|
Level 3
|
|
|
|
unobservable inputs
|
The
company measures and reports assets and liabilities at fair value utilizing pricing information received from third parties. The company performs procedures to verify the
reasonableness of pricing information received for significant assets and liabilities classified as Level 2.
F-31
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The
following table presents, for each of the fair value hierarchy levels required under ASC 820-10, the company's assets and liabilities that are measured at fair value on a recurring
basis as of December 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
|
|
|
Fair Value Hierarchy
|
|
Fair Value Hierarchy
|
|
(in thousands)
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
(1)
|
|
$
|
21,035
|
|
$
|
21,035
|
|
$
|
|
|
$
|
|
|
$
|
19,161
|
|
$
|
19,161
|
|
$
|
|
|
$
|
|
|
Marketable securities, current
(2)
|
|
|
54,840
|
|
|
|
|
|
54,840
|
|
|
|
|
|
87,763
|
|
|
|
|
|
87,763
|
|
|
|
|
Deferred compensation trusts
(3)
|
|
|
37,510
|
|
|
37,510
|
|
|
|
|
|
|
|
|
60,003
|
|
|
60,003
|
|
|
|
|
|
|
|
Marketable securities, noncurrent
(4)
|
|
|
143,553
|
|
|
|
|
|
143,553
|
|
|
|
|
|
220,634
|
|
|
|
|
|
220,634
|
|
|
|
|
Derivative assets
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
|
83
|
|
|
|
|
|
83
|
|
|
|
|
|
341
|
|
|
|
|
|
341
|
|
|
|
|
Foreign currency contracts
|
|
|
34,776
|
|
|
|
|
|
34,776
|
|
|
|
|
|
8,439
|
|
|
|
|
|
8,439
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
$
|
129
|
|
$
|
|
|
$
|
129
|
|
$
|
|
|
$
|
2,510
|
|
$
|
|
|
$
|
2,510
|
|
$
|
|
|
Foreign currency contracts
|
|
|
43,574
|
|
|
|
|
|
43,574
|
|
|
|
|
|
14,138
|
|
|
|
|
|
14,138
|
|
|
|
|
-
(1)
-
Consists
primarily of registered money market funds valued at fair value. These investments represent the net asset value of the shares of such funds
as of the close of business at the end of the period.
-
(2)
-
Consists
of investments in U.S. agency securities, U.S. Treasury securities and corporate debt securities with maturities of less than one year that
are valued based on pricing models, which are determined from a compilation of primarily observable market information, broker quotes in non-active markets or similar assets.
-
(3)
-
Consists
primarily of registered money market funds and an equity index fund valued at fair value. These investments, which are trading securities,
represent the net asset value of the shares of such funds as of the close of business at the end of the period based on the last trade or official close of an active market or exchange.
-
(4)
-
Consists
of investments in U.S. agency securities, U.S. Treasury securities and corporate debt securities with maturities ranging from one year to
three years that are valued based on pricing models, which are determined from a compilation of primarily observable market information, broker quotes in non-active markets or similar assets.
-
(5)
-
See
Note 7 for the classification of commodity and foreign currency contracts in the Consolidated Balance Sheet. Commodity and foreign currency
contracts are estimated using standard pricing models with market-based inputs, which take into account the present value of estimated future cash flows.
All
of the company's financial instruments carried at fair value are included in the table above. All of the above financial instruments are available-for-sale securities except for
those held in the deferred compensation trusts (which are trading securities) and derivative assets and liabilities. The company has determined that there was no other-than-temporary impairment of
available-for-sale securities with unrealized losses, and the company expects to recover the entire cost basis of the securities. The available-for-sale securities are made up of the following
security types as of December 31, 2016: money market funds of $21 million, U.S. agency securities of $11 million, U.S. Treasury securities of $87 million and corporate debt
securities of $100 million. As of December 31, 2015, available-for-sale securities consisted of money market funds of $19 million, U.S. agency securities of $18 million,
U.S. Treasury securities of $102 million and corporate debt securities of $189 million. The amortized cost of these available-for-sale securities is not materially different from the
fair value. During 2016, 2015 and 2014, proceeds from sales and maturities of available-for-sale securities were $286 million, $336 million and $274 million, respectively.
F-32
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In
addition to assets and liabilities that are measured at fair value on a recurring basis, the company is required to measure certain assets and liabilities at fair value on a
nonrecurring basis. See Notes 18 and 19 for further discussion of nonrecurring fair value measurements related to the company's acquisition of Stork and a partial sale of a subsidiary.
The
carrying values and estimated fair values of the company's financial instruments that are not required to be measured at fair value in the Consolidated Balance Sheet are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
|
|
|
Fair Value
Hierarchy
|
|
(in thousands)
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
(1)
|
|
Level 1
|
|
$
|
1,133,295
|
|
$
|
1,133,295
|
|
$
|
1,073,756
|
|
$
|
1,073,756
|
|
Cash equivalents
(2)
|
|
Level 2
|
|
|
696,106
|
|
|
696,106
|
|
|
856,969
|
|
|
856,969
|
|
Marketable securities, current
(3)
|
|
Level 2
|
|
|
56,197
|
|
|
56,197
|
|
|
109,329
|
|
|
109,329
|
|
Notes receivable, including noncurrent portion
(4)
|
|
Level 3
|
|
|
29,458
|
|
|
29,458
|
|
|
19,182
|
|
|
19,182
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.750% Senior Notes
(5)
|
|
Level 2
|
|
$
|
523,629
|
|
$
|
551,582
|
|
$
|
|
|
$
|
|
|
3.375% Senior Notes
(5)
|
|
Level 2
|
|
|
496,011
|
|
|
512,510
|
|
|
495,165
|
|
|
509,025
|
|
3.5% Senior Notes
(5)
|
|
Level 2
|
|
|
492,360
|
|
|
508,230
|
|
|
491,399
|
|
|
504,265
|
|
Revolving Credit Facility
(6)
|
|
Level 2
|
|
|
52,735
|
|
|
52,735
|
|
|
|
|
|
|
|
Other borrowings, including noncurrent portion
(7)
|
|
Level 2
|
|
|
35,457
|
|
|
35,457
|
|
|
|
|
|
|
|
-
(1)
-
Cash
consists of bank deposits. Carrying amounts approximate fair value.
-
(2)
-
Cash
equivalents consist of held-to-maturity time deposits with maturities of three months or less at the date of purchase. The carrying amounts of
these time deposits approximate fair value because of the short-term maturity of these instruments.
-
(3)
-
Marketable
securities, current consist of held-to-maturity time deposits with original maturities greater than three months that will mature within one
year. 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.
-
(4)
-
Notes
receivable are carried at net realizable value which approximates fair value. Factors considered by the company 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.
-
(5)
-
The
fair value of the 1.750% Senior Notes, 3.375% Senior Notes and 3.5% Senior Notes are estimated based on quoted market prices for similar issues.
-
(6)
-
Amounts
represent borrowings under the company's €125 million Revolving Credit Facility which expires in April 2017, as
discussed in Note 8. The carrying amount of the borrowings under this revolving credit facility approximates fair value because of the short-term maturity
-
(7)
-
Other
borrowings as of December 31, 2016 primarily represent bank loans and other financing arrangements assumed in conjunction with the
acquisition of Stork. See Note 18 for a further discussion of the acquisition. The majority of these borrowings mature within one year. The carrying amount of borrowings under these
arrangements approximates fair value because of the short-term maturity.
F-33
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Derivatives and Hedging
As of December 31, 2016, the company had total gross notional amounts of approximately $1 billion of foreign currency contracts (primarily related
to the British Pound, Euro, Kuwaiti Dinar and South Korean Won) and $2 million of commodity contracts outstanding relating to engineering and construction contract obligations and monetary
assets and liabilities denominated in nonfunctional currencies. The foreign currency contracts are of varying duration, none of which extend beyond December 2019. The commodity contracts are of
varying duration, none of which extend beyond December 2017. The impact to earnings due to hedge ineffectiveness was immaterial for the years ended December 31, 2016, 2015 and 2014.
The
fair values of derivatives designated as hedging instruments under ASC 815 as of December 31, 2016 and 2015 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
|
(in thousands)
|
|
Balance Sheet
Location
|
|
December 31,
2016
|
|
December 31,
2015
|
|
Balance Sheet
Location
|
|
December 31,
2016
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
Other current assets
|
|
$
|
83
|
|
$
|
326
|
|
Other accrued liabilities
|
|
$
|
129
|
|
$
|
2,195
|
|
Foreign currency contracts
|
|
Other current assets
|
|
|
13,231
|
|
|
6,865
|
|
Other accrued liabilities
|
|
|
16,543
|
|
|
12,381
|
|
Commodity contracts
|
|
Other assets
|
|
|
|
|
|
15
|
|
Noncurrent liabilities
|
|
|
|
|
|
315
|
|
Foreign currency contracts
|
|
Other assets
|
|
|
21,545
|
|
|
1,574
|
|
Noncurrent liabilities
|
|
|
27,031
|
|
|
1,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
34,859
|
|
$
|
8,780
|
|
|
|
$
|
43,703
|
|
$
|
16,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
pre-tax net losses recognized in earnings associated with the hedging instruments designated as fair value hedges for the years ended December 31, 2016, 2015 and 2014 were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Hedges (in thousands)
|
|
Location of Loss
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
|
Corporate general and administrative expense
|
|
$
|
(2,886
|
)
|
$
|
(5,191
|
)
|
$
|
(3,322
|
)
|
The
pre-tax net losses recognized in earnings on hedging instruments for the fair value hedges offset the amount of gains recognized in earnings on the hedged items in the same locations
in the Consolidated Statement of Earnings.
The
after-tax amount of gain (loss) recognized in OCI and reclassified from AOCI into earnings associated with the derivative instruments designated as cash flow hedges for the years
ended December 31, 2016, 2015 and 2014 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After-Tax Amount of Gain
(Loss) Recognized in OCI
|
|
|
|
After-Tax Amount of Gain
(Loss) Reclassified from
AOCI into Earnings
|
|
Cash Flow Hedges (in thousands)
|
|
2016
|
|
2015
|
|
2014
|
|
Location of Gain (Loss)
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity contracts
|
|
$
|
401
|
|
$
|
(728
|
)
|
$
|
(881
|
)
|
Total cost of revenue
|
|
$
|
(550
|
)
|
$
|
(385
|
)
|
$
|
(59
|
)
|
Foreign currency contracts
|
|
|
(6,344
|
)
|
|
(2,532
|
)
|
|
(1,270
|
)
|
Total cost of revenue
|
|
|
(3,224
|
)
|
|
(1,525
|
)
|
|
269
|
|
Interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(1,049
|
)
|
|
(1,049
|
)
|
|
(1,049
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(5,943
|
)
|
$
|
(3,260
|
)
|
$
|
(2,151
|
)
|
|
|
$
|
(4,823
|
)
|
$
|
(2,959
|
)
|
$
|
(839
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-34
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As of December 31, 2016, the company also had total gross notional amounts of $0.1 million of foreign currency contracts and $0.2 million of
commodity contracts outstanding that were not designated as hedging instruments. These contracts primarily related to engineering and construction and operations and maintenance contract obligations
denominated in nonfunctional currencies. A gain of less than $0.1 million associated with these contracts was included in Cost of Revenues for the year ended December 31, 2016.
8. Financing Arrangements
As of December 31, 2016, the company had a combination of committed and uncommitted lines of credit that may be used for revolving loans and letters of
credit. As of December 31, 2016, letters of credit and borrowings totaling $1.7 billion were outstanding under these committed and uncommitted lines of credit. The committed lines of
credit include a $1.7 billion Revolving Loan and Letter of Credit Facility and a $1.8 billion Revolving Loan and Letter of Credit Facility. Both facilities mature in February 2021. The
company may utilize up to $1.75 billion in the aggregate of the combined $3.5 billion committed lines of credit for revolving loans, which may be used for acquisitions and/or general
purposes. Each of the credit facilities may be increased up to an additional $500 million subject to certain conditions, and contain customary financial and restrictive covenants, including a
maximum ratio of consolidated debt to tangible net worth of one-to-one and a cap on the aggregate amount of debt of the greater of $750 million or €750 million for the
company's subsidiaries. Borrowings under both facilities, which may be denominated in USD, EUR, GBP or CAD, bear interest at rates based on the Eurodollar Rate or an alternative base rate, plus an
applicable borrowing margin.
In
connection with the Stork acquisition, the company assumed a €110 million Super Senior Revolving Credit Facility that bore interest at EURIBOR plus 3.75%. In
April 2016, the company repaid and replaced the €110 million Super Senior Revolving Credit Facility with a €125 million Revolving Credit Facility which
may be used for revolving loans, bank guarantees, letters of credit and to fund working capital in the ordinary course of business. This replacement facility expires in April 2017 and bears interest
at EURIBOR plus .75%. The €125 million Revolving Credit Facility was included in committed lines of credit as of December 31, 2016. Outstanding borrowings under this
facility amounted to €50 million (or approximately $53 million) as of December 31, 2016.
Letters
of credit are provided in the ordinary course of business primarily to indemnify the company's clients if the company fails to perform its obligations under its contracts. Surety
bonds may be used as an alternative to letters of credit.
Consolidated
debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in thousands)
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
Revolving Credit Facility
|
|
$
|
52,735
|
|
$
|
|
|
Other borrowings
|
|
|
29,508
|
|
|
|
|
Long-Term:
|
|
|
|
|
|
|
|
1.750% Senior Notes
|
|
$
|
523,629
|
|
$
|
|
|
3.375% Senior Notes
|
|
|
496,011
|
|
|
495,165
|
|
3.5% Senior Notes
|
|
|
492,360
|
|
|
491,399
|
|
Other borrowings
|
|
|
5,949
|
|
|
|
|
In
March 2016, the company issued €500 million of 1.750% Senior Notes (the "2016 Notes") due March 21, 2023 and received proceeds of
€497 million (or approximately $551 million), net of underwriting
F-35
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
discounts.
Interest on the 2016 Notes is payable annually on March 21 of each year, beginning on March 21, 2017. Prior to December 21, 2022, the company may redeem the 2016 Notes
at a redemption price equal to 100 percent of the principal amount, plus a "make whole" premium described in the indenture. On or after December 21, 2022, the company may redeem the 2016
Notes at 100 percent of the principal amount plus accrued and unpaid interest, if any, to the date of redemption. Additionally, the company may redeem the 2016 Notes at any time upon the
occurrence of certain changes in U.S.
tax laws, as described in the indenture, at 100 percent of the principal amount plus accrued and unpaid interest, if any, to the date of redemption.
In
November 2014, the company issued $500 million of 3.5% Senior Notes (the "2014 Notes") due December 15, 2024 and received proceeds of $491 million, net of
underwriting discounts. Interest on the 2014 Notes is payable semi-annually on June 15 and December 15 of each year, and began on June 15, 2015. Prior to September 15,
2024, the company may redeem the 2014 Notes at a redemption price equal to 100 percent of the principal amount, plus a "make whole" premium described in the indenture. On or after
September 15, 2024, the company may redeem the 2014 Notes at 100 percent of the principal amount plus accrued and unpaid interest, if any, to the date of redemption.
In
September 2011, the company issued $500 million of 3.375% Senior Notes (the "2011 Notes") due September 15, 2021 and received proceeds of $492 million, net of
underwriting discounts. Interest on the 2011 Notes is payable semi-annually on March 15 and September 15 of each year, and began on March 15, 2012. The company may, at any time,
redeem the 2011 Notes at a redemption price equal to 100 percent of the principal amount, plus a "make whole" premium described in the indenture.
For
the 2016 Notes, the 2014 Notes and the 2011 Notes, if a change of control triggering event occurs, as defined by the terms of the respective indentures, the company will be required
to offer to purchase the applicable notes at a purchase price equal to 101 percent of their principal amount, plus accrued and unpaid interest, if any, to the date of redemption. The company is
generally not limited under the indentures governing the 2016 Notes, the 2014 Notes and the 2011 Notes in its ability to incur additional indebtedness provided the company is in compliance with
certain restrictive covenants, including restrictions on liens and restrictions on sale and leaseback transactions.
In
conjunction with the acquisition of Stork on March 1, 2016, the company assumed Stork's outstanding debt obligations, including its 11.0% Super Senior Notes due 2017 (the
"Stork Notes"), borrowings under the €110 million Super Senior Revolving Credit Facility, and other debt obligations. On March 2, 2016, the company gave notice to all
holders of the Stork Notes of the full redemption of the outstanding €273 million (or approximately $296 million) principal amount of Stork Notes plus a redemption
premium of €7 million (or approximately $8 million) effective March 17, 2016. The redemption of the Stork Notes was initially funded with additional borrowings
under the company's $1.7 billion Revolving Loan and Letter of Credit Facility, which borrowings were subsequently repaid from the net proceeds of the 2016 Notes. Certain other outstanding debt
obligations assumed in the Stork acquisition of €20 million (or approximately $22 million) were settled in March 2016. See Note 18 for a further discussion of the
acquisition.
Other
borrowings of $35 million as of December 31, 2016 primarily represent bank loans and other financing arrangements assumed in conjunction with the acquisition of
Stork, exclusive of the Stork Notes.
As
of December 31, 2016, the company was in compliance with all of the financial covenants related to its debt agreements.
9. Other Noncurrent Liabilities
The company has deferred compensation and retirement arrangements for certain key executives which generally provide for payments upon retirement, death or
termination of employment. The deferrals
F-36
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
can
earn either market-based fixed or variable rates of return, at the option of the participants. As of December 31, 2016 and 2015, $356 million and $372 million, respectively,
of obligations related to these plans were included in noncurrent liabilities. To fund these obligations, the company has established non-qualified trusts, which are classified as noncurrent assets.
These trusts primarily hold company-owned life insurance policies, reported at cash surrender value, and marketable equity securities, reported at fair value. These trusts were valued at
$348 million and $361 million as of December 31, 2016 and 2015, respectively. Periodic changes in value of these trust investments, most of which are unrealized, are recognized in
earnings, and serve to mitigate changes to obligations included in noncurrent liabilities which are also reflected in earnings.
The
company maintains appropriate levels of insurance for business risks, including workers compensation and general liability. Insurance coverages contain various retention amounts for
which the company provides accruals based on the aggregate of the liability for reported claims and an actuarially determined estimated liability for claims incurred but not reported. Other noncurrent
liabilities included $65 million and $26 million as of December 31, 2016 and 2015, respectively, relating to these liabilities. For certain professional liability risks the
company's retention amount under its claims-made insurance policies does not include an accrual for claims incurred but not reported because there is insufficient claims history or other reliable
basis to support an estimated liability. The company believes that retained professional liability amounts are manageable risks and are not expected to have a material adverse impact on results of
operations or financial position.
10. Stock-Based Plans
The company's executive stock-based plans provide for grants of nonqualified or incentive stock options, restricted stock awards or units, stock appreciation
rights and performance-based Value Driver Incentive ("VDI") units. All executive stock-based plans are administered by the Organization and Compensation Committee of the Board of Directors
("Committee") comprised of outside directors, none of whom are eligible to participate in the executive plans. Recorded compensation cost for stock-based payment arrangements, which is generally
recognized on a straight-line basis, totaled $28 million, $36 million and $45 million for the years ended December 31, 2016, 2015 and 2014,
respectively, net of recognized tax benefits of $17 million, $21 million and $27 million for the years ended 2016, 2015 and 2014, respectively.
F-37
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The
following table summarizes restricted stock, restricted stock unit and stock option activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock or
Restricted Stock Units
|
|
Stock Options
|
|
|
|
Number
|
|
Weighted
Average
Grant Date
Fair Value
Per Share
|
|
Number
|
|
Weighted
Average
Exercise Price
Per Share
|
|
|
|
Outstanding as of December 31, 2013
|
|
|
977,766
|
|
$
|
57.36
|
|
|
2,964,707
|
|
$
|
58.63
|
|
|
|
Granted
|
|
|
370,014
|
|
|
79.06
|
|
|
684,486
|
|
|
79.19
|
|
Expired or canceled
|
|
|
(30,032
|
)
|
|
69.17
|
|
|
(58,215
|
)
|
|
73.33
|
|
Vested/exercised
|
|
|
(449,227
|
)
|
|
57.08
|
|
|
(417,970
|
)
|
|
57.67
|
|
|
|
Outstanding as of December 31, 2014
|
|
|
868,521
|
|
$
|
66.35
|
|
|
3,173,008
|
|
$
|
62.92
|
|
|
|
Granted
|
|
|
556,323
|
|
|
58.85
|
|
|
963,288
|
|
|
59.05
|
|
Expired or canceled
|
|
|
(30,484
|
)
|
|
64.74
|
|
|
(118,356
|
)
|
|
63.60
|
|
Vested/exercised
|
|
|
(456,052
|
)
|
|
62.92
|
|
|
(46,414
|
)
|
|
38.25
|
|
|
|
Outstanding as of December 31, 2015
|
|
|
938,308
|
|
$
|
63.62
|
|
|
3,971,526
|
|
$
|
62.25
|
|
|
|
Granted
|
|
|
553,415
|
|
|
46.50
|
|
|
662,001
|
|
|
46.07
|
|
Expired or canceled
|
|
|
(16,298
|
)
|
|
54.26
|
|
|
(63,229
|
)
|
|
50.25
|
|
Vested/exercised
|
|
|
(443,062
|
)
|
|
64.55
|
|
|
(88,917
|
)
|
|
41.13
|
|
|
|
Outstanding as of December 31, 2016
|
|
|
1,032,363
|
|
$
|
54.19
|
|
|
4,481,381
|
|
$
|
60.45
|
|
|
|
Options exercisable as of December 31, 2016
|
|
|
|
|
|
|
|
|
3,017,969
|
|
$
|
62.46
|
|
|
|
Remaining unvested options outstanding and expected to vest
|
|
|
|
|
|
|
|
|
1,419,510
|
|
$
|
56.30
|
|
|
|
As
of December 31, 2016, there were a maximum of 7,374,485 shares available for future grant under the company's various stock-based plans. Shares available for future grant
included shares which may be granted by the Committee as either stock options, on a share-for-share basis, or restricted stock awards, restricted stock units and VDI units on the basis of one share
for each 2.25 available shares.
Restricted
stock units and restricted shares issued under the plans provide that shares awarded may not be sold or otherwise transferred until service-based restrictions have lapsed and
any performance objectives have been attained as established by the Committee. Restricted stock units are rights to receive shares subject to certain service and performance conditions as established
by the Committee. Generally, upon termination of employment, restricted stock units and restricted shares which have not vested are forfeited. For the company's executives, the restricted units
granted in 2016, 2015 and 2014 generally vest ratably over three years. For the company's directors, the restricted units and shares granted in 2016, 2015 and 2014 vest or vested on the first
anniversary of the grant. For the years 2016, 2015 and 2014, recognized compensation expense of $27 million, $31 million and $31 million, respectively, is included in corporate
general and administrative expense related to restricted stock awards and units. The fair value of restricted stock units and shares that vested during 2016, 2015 and 2014 was $22 million,
$26 million and $35 million, respectively. The balance of unamortized restricted stock expense as of December 31, 2016 was $11 million, which is expected to be recognized
over a weighted-average period of 1.0 years.
Option
grant amounts and award dates are established by the Committee. Option grant prices are the fair value of the company's common stock at such date of grant. Options normally extend
for 10 years and
F-38
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
become
exercisable over a vesting period determined by the Committee. The options granted in 2016, 2015 and 2014 vest ratably over three years. The aggregate intrinsic value, representing the
difference between market value on the date of exercise and the option price, of stock options exercised during 2016, 2015 and 2014 was $1 million, $1 million and $8 million,
respectively. The balance of unamortized stock option expense as of December 31, 2016 was $4 million, which is expected to be recognized over a weighted-average period of
1.2 years. Expense associated with stock options for the years ended December 31, 2016, 2015 and 2014, which is included in corporate general and administrative expense in the
accompanying Consolidated Statement of Earnings, totaled $10 million, $15 million and $17 million, respectively.
The
fair value of options on the grant date and the significant assumptions used in the Black-Scholes option-pricing model are as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2016
|
|
2015
|
|
|
|
Weighted average grant date fair value
|
|
$
|
12.55
|
|
$
|
16.72
|
|
Expected life of options (in years)
|
|
|
6.1
|
|
|
5.9
|
|
Risk-free interest rate
|
|
|
1.6
|
%
|
|
1.7
|
%
|
Expected volatility
|
|
|
32.4
|
%
|
|
32.1
|
%
|
Expected annual dividend per share
|
|
$
|
0.84
|
|
$
|
0.84
|
|
The
computation of the expected volatility assumption used in the Black-Scholes calculations is based on a 50/50 blend of historical and implied volatility.
Information
related to options outstanding as of December 31, 2016 is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
|
Range of Exercise Prices
|
|
Number
Outstanding
|
|
Weighted
Average
Remaining
Contractual
Life (In Years)
|
|
Weighted
Average
Exercise Price
Per Share
|
|
Number
Exercisable
|
|
Weighted
Average
Remaining
Contractual
Life (In Years)
|
|
Weighted
Average
Exercise Price
Per Share
|
|
|
|
$30.46 - $41.77
|
|
|
136,144
|
|
|
2.2
|
|
$
|
30.46
|
|
|
136,144
|
|
|
2.2
|
|
$
|
30.46
|
|
$42.11 - $62.50
|
|
|
3,131,826
|
|
|
6.8
|
|
|
56.17
|
|
|
1,880,754
|
|
|
5.6
|
|
|
58.67
|
|
$68.36 - $80.12
|
|
|
1,213,411
|
|
|
5.3
|
|
|
74.86
|
|
|
1,001,071
|
|
|
4.9
|
|
|
73.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,481,381
|
|
|
6.3
|
|
$
|
60.45
|
|
|
3,017,969
|
|
|
5.2
|
|
$
|
62.46
|
|
As
of December 31, 2016, options outstanding and options exercisable had an aggregate intrinsic value of approximately $10 million and $5 million, respectively.
Stock-based
VDI units awarded under the plans include performance measures and are issued based on target award values. The number of units awarded is determined by dividing the
applicable target award value by the closing price of the company's common stock on the date of grant. The number of units is adjusted at the end of each performance period based on the achievement of
certain performance criteria. The VDI awards granted in 2016, 2015 and 2014 vest after a period of approximately three years. VDI awards granted during 2016 are also subject to a post-vest holding
period restriction for the period of three years. The VDI awards granted in 2016 and 2015 can only be settled in company stock and are accounted for as equity awards in accordance with ASC 718. The
VDI awards granted in 2014 may be settled in cash, based on the closing price of the company's common stock on the vesting date, or company stock. In accordance with ASC 718, the awards granted in
2014 were classified as liabilities and remeasured at fair value at the end of each reporting period until the awards are settled. Compensation expense of $8 million, $11 million and
$24 million related to stock-based VDI units is included in corporate general and administrative expense in 2016, 2015 and 2014, respectively, of which $0.4 million was paid in 2016. The
F-39
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
balance
of unamortized compensation expense associated with VDI units as of December 31, 2016 was $3 million, which is expected to be recognized over a weighted-average period of less
than one year.
11. Earnings Per Share
Basic EPS is calculated by dividing net earnings attributable to Fluor Corporation by the weighted average number of common shares outstanding during the period.
Potentially dilutive securities include employee stock options, restricted stock units and shares, VDI units and the 1.5% Convertible Senior Notes (in 2015 and 2014). Diluted EPS reflects the assumed
exercise or conversion of all dilutive securities using the treasury stock method.
The
calculations of the basic and diluted EPS for the years ended December 31, 2016, 2015 and 2014 under the treasury stock method are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands, except per share amounts)
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
Amounts attributable to Fluor Corporation:
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
281,401
|
|
$
|
418,170
|
|
$
|
715,460
|
|
Loss from discontinued operations, net of taxes
|
|
|
|
|
|
(5,658
|
)
|
|
(204,551
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
281,401
|
|
$
|
412,512
|
|
$
|
510,909
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS attributable to Fluor Corporation:
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
139,171
|
|
|
144,805
|
|
|
157,487
|
|
Earnings from continuing operations
|
|
$
|
2.02
|
|
$
|
2.89
|
|
$
|
4.54
|
|
Loss from discontinued operations, net of taxes
|
|
|
|
|
|
(0.04
|
)
|
|
(1.30
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
2.02
|
|
$
|
2.85
|
|
$
|
3.24
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS attributable to Fluor Corporation:
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
139,171
|
|
|
144,805
|
|
|
157,487
|
|
Diluted effect:
|
|
|
|
|
|
|
|
|
|
|
Employee stock options, restricted stock units and shares and VDI units
|
|
|
1,741
|
|
|
1,827
|
|
|
1,719
|
|
Conversion equivalent of dilutive convertible debt
|
|
|
|
|
|
90
|
|
|
410
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average diluted shares outstanding
|
|
|
140,912
|
|
|
146,722
|
|
|
159,616
|
|
Earnings from continuing operations
|
|
$
|
2.00
|
|
$
|
2.85
|
|
$
|
4.48
|
|
Loss from discontinued operations, net of taxes
|
|
|
|
|
|
(0.04
|
)
|
|
(1.28
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
2.00
|
|
$
|
2.81
|
|
$
|
3.20
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive securities not included above
|
|
|
3,843
|
|
|
3,408
|
|
|
769
|
|
|
|
|
|
|
|
|
|
|
|
|
During
the years ended December 31, 2016, 2015 and 2014, the company repurchased and canceled 202,650; 10,104,988; and 13,331,402 shares of its common stock, respectively, under
its stock repurchase program for $10 million, $510 million, and $906 million, respectively.
F-40
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. Lease Obligations
Net rental expense amounted to approximately $152 million, $169 million and $218 million in the years ended December 31, 2016, 2015
and 2014, respectively. The company's lease obligations relate primarily to office facilities, equipment used in connection with long-term construction contracts and other personal property. Net
rental expense in 2016 was lower compared to 2015, primarily due to a decrease in rental equipment and facilities required to support project execution activities in the Energy, Chemicals &
Mining segment. Net rental expense in 2015 was lower compared to 2014, primarily due to a decrease in rental equipment and facilities required to support project execution activities in the mining and
metals business line of the Energy, Chemicals & Mining segment as well as the Government segment.
The
company's obligations for minimum rentals under non-cancelable operating leases are as follows:
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
|
|
2017
|
|
$
|
80,600
|
|
2018
|
|
|
63,100
|
|
2019
|
|
|
50,200
|
|
2020
|
|
|
40,500
|
|
2021
|
|
|
29,900
|
|
Thereafter
|
|
|
73,200
|
|
During
2015, the company sold two office buildings located in California for net proceeds of $82 million and subsequently entered into a twelve year lease with the purchaser. The
resulting gain on the sale of the property was approximately $58 million, of which $7 million was recognized during the fourth quarter of 2015 and $4 million was recognized during
2016. These gains were included in corporate general and administrative expense in the Consolidated Statement of Earnings. The remaining deferred gain of approximately $47 million will be
amortized over the remaining life of the lease on a straight-line basis.
13. Noncontrolling Interests
The company applies the provisions of ASC 810-10-45, which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties
other than the parent, the amount of consolidated net earnings attributable to the parent and to the noncontrolling interests, changes in a parent's ownership interest and the valuation of retained
noncontrolling equity investments when a subsidiary is deconsolidated.
As
required by ASC 810-10-45, the company has separately disclosed on the face of the Consolidated Statement of Earnings for all periods presented the amount of net earnings attributable
to the company and the amount of net earnings attributable to noncontrolling interests. For the years ended December 31, 2016, 2015 and 2014, net earnings attributable to noncontrolling
interests were $46 million, $62 million and $137 million, respectively. Income taxes associated with earnings attributable to noncontrolling interests were immaterial in all
periods presented. Distributions paid to noncontrolling interests were $58 million, $59 million and $138 million for the years ended December 31, 2016, 2015 and 2014,
respectively. Capital contributions by noncontrolling interests were $9 million, $5 million and $3 million for the years ended December 31, 2016, 2015 and 2014,
respectively.
14. Contingencies and Commitments
The company and certain of its subsidiaries are subject to litigation, claims and other commitments and contingencies arising in the ordinary course of business.
Although the asserted value of these matters may be significant, the company currently does not expect that the ultimate resolution of any open matters will have a material adverse effect on its
consolidated financial position or results of operations.
F-41
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fluor
Australia Ltd., a wholly-owned subsidiary of the company ("Fluor Australia"), completed a cost reimbursable engineering, procurement and construction management services for
Santos Ltd. ("Santos") on 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 of approximately AUD $1.47 billion. The company believes that the claims asserted by Santos are without
merit and is vigorously defending these claims. Based upon the present status of this matter, the company does not believe it is probable that a loss will be incurred. Accordingly, the company has not
recorded a charge as a result of this action.
Other Matters
The company has made claims arising from the performance under its contracts. The company recognizes revenue, but not profit, for certain claims
(including change orders in dispute and unapproved change orders in regard to both scope and price) when it is determined that recovery of incurred costs is probable and the amounts can be reliably
estimated. Under claims accounting (ASC 605-35-25), these requirements are satisfied when (a) the contract or other evidence provides a legal basis for the claim, (b) additional costs
were caused by circumstances that were unforeseen at the contract date and not the result of deficiencies in the company's performance, (c) claim-related costs are identifiable and considered
reasonable in view of the work performed, and (d) evidence supporting the claim is objective and verifiable. Similarly, the company recognizes disputed back charges to suppliers or
subcontractors as a reduction of cost when the same requirements have been satisfied. The company periodically evaluates its positions and amounts recognized with respect to all its claims and back
charges. As of December 31, 2016 and 2015, the company had recorded $61 million and $30 million, respectively, of claim revenue for costs incurred to date and such costs are
included in contract work in progress. Additional costs, which will increase the claim revenue balance over time, are expected to be incurred in future periods. The company had also recorded disputed
back charges totaling $41 million as of December 31, 2016. The company believes the ultimate recovery of amounts related to these claims and back charges is probable in accordance with
ASC 605-35-25.
From
time to time, the company enters into significant contracts with the U.S. government and its agencies. Government contracts are subject to audits and investigations by government
representatives with respect to the company's 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, the company maintains reserves for estimated exposures associated with these matters.
The
company's operations are subject to and affected by federal, state and local laws and regulations regarding the protection of the environment. The company maintains reserves for
potential future environmental cost where such obligations are either known or considered probable, and can be reasonably estimated. The company believes, based upon present information available to
it, that its reserves with respect to future environmental cost are adequate and such future cost will not have a material effect on the company's consolidated financial position, results of
operations or liquidity.
15. Guarantees
In the ordinary course of business, the company enters into various agreements providing performance assurances and guarantees to clients on behalf of certain
unconsolidated and consolidated partnerships, joint ventures and other jointly executed contracts. These agreements are entered into primarily to support the project execution commitments of these
entities. The performance guarantees have various expiration dates ranging from mechanical completion of the project being constructed to a period extending beyond contract completion in certain
circumstances. The maximum potential amount of future payments that the company could be required to make under outstanding performance guarantees,
F-42
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
which
represents the remaining cost of work to be performed by or on behalf of third parties under engineering and construction contracts, was estimated to be $16 billion as of
December 31, 2016. Amounts that may be required to be paid in excess of estimated cost to complete contracts in progress are not estimable. For cost reimbursable contracts, amounts that may
become payable pursuant to guarantee provisions are normally recoverable from the client for work performed under the contract. For lump-sum or fixed-price contracts, the performance guarantee amount
is the cost to complete the contracted work, less amounts remaining to be billed to the client under the contract. Remaining billable amounts could be greater or less than the cost to complete. In
those cases where costs exceed the remaining amounts payable under the contract, the company may have recourse to third parties, such as owners, co-venturers, subcontractors or vendors for claims. The
company assessed its performance guarantee obligation as of December 31, 2016 and 2015 in accordance with ASC 460, "Guarantees," and the carrying value of the liability was not material.
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 the company 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.
16. Partnerships and Joint Ventures
In the normal course of business, the company forms partnerships or joint ventures primarily for the execution of single contracts or projects. The majority of
these partnerships or joint ventures are characterized by a 50 percent or less, noncontrolling 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.
Receivables related to work performed for unconsolidated partnerships and joint ventures included in "Accounts and notes receivable, net" in the Consolidated Balance Sheet were $392 million and
$132 million as of December 31, 2016 and 2015, respectively. The increase in this receivable balance in 2016 resulted primarily from one Energy, Chemicals & Mining joint venture
project in the United States.
For
unconsolidated partnerships and joint ventures in the construction industry, the company generally recognizes its proportionate share of revenue, cost and profit in its Consolidated
Statement of Earnings and uses the one-line equity method of accounting on the Consolidated Balance Sheet, which is a common application of ASC 810-10-45-14 in the construction industry. The equity
method of accounting is also used for other investments in entities where the company has significant influence. The company's investments in unconsolidated partnerships and joint ventures accounted
for under these methods amounted to $454 million and $292 million as of December 31, 2016 and 2015, respectively, and were classified under "Investments" and "Other accrued
liabilities" on the Consolidated Balance Sheet. The following is a summary of aggregate, unaudited balance sheet data for these unconsolidated partnerships and joint ventures where the company's
investment is presented as a one-line equity method investment: As of December 31, 2016, current assets of $3.5 billion, noncurrent assets of $1.3 billion, current
liabilities of $3.0 billion and noncurrent liabilities of $628 million; as of December 31, 2015, current assets of $3.2 billion, noncurrent assets of $444 million,
current liabilities of $2.5 billion and noncurrent liabilities of $445 million. Additionally, the following is a summary of aggregate, unaudited income statement data for unconsolidated
partnerships and joint ventures where the equity method of accounting is used to recognize the company's share of net earnings or losses of investees: Revenue of $1.6 billion,
$961 million and $879 million for 2016, 2015 and 2014, respectively; cost of revenue of $1.5 billion, $926 million and $822 million for 2016, 2015 and 2014,
respectively; net earnings of $30 million for 2016, net earnings of $14 million for 2015 and net loss of $8 million for 2014.
F-43
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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In
February 2016, the company made an initial cash investment of $350 million in COOEC Fluor Heavy Industries Co., Ltd. ("CFHI"), a joint venture in which the
company has a 49% ownership interest and Offshore Oil Engineering Co., Ltd., a subsidiary of China National Offshore Oil Corporation, has 51% ownership interest. Through CFHI, the two
companies own, operate and manage the Zhuhai Fabrication Yard in China's Guangdong province. An additional investment of $62 million was made in the third quarter of 2016 and another
$78 million is expected to be made in September 2017.
Variable Interest Entities
In accordance with ASC 810, "Consolidation," the company assesses its partnerships and joint ventures at inception to determine if any meet the
qualifications of a VIE. The company considers a partnership or joint venture a VIE if either (a) the total equity investment is not sufficient to permit the entity to finance its activities
without additional subordinated financial support, (b) characteristics of a controlling financial interest are missing (either the ability to make decisions through voting or other rights, the
obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity), or (c) the voting rights of the equity holders are not proportional
to their obligations to absorb the expected losses of the entity and/or their rights to receive the expected residual returns of the entity, and substantially all of the entity's activities either
involve or are conducted on behalf of an investor that has disproportionately few voting rights. Upon the occurrence of certain events outlined in ASC 810, the company reassesses its initial
determination of whether the partnership or joint venture is a VIE. The majority of the company's partnerships and joint ventures qualify as VIEs because the total equity investment is typically
nominal and not sufficient to permit the entity to finance its activities without additional subordinated financial support.
The
company also performs a qualitative assessment of each VIE to determine if the company is its primary beneficiary, as required by ASC 810. The company concludes that it is the
primary beneficiary and consolidates the VIE if the company has both (a) the power to direct the economically significant activities of the entity and (b) the obligation to absorb losses
of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. The company considers the contractual agreements that define the ownership structure,
distribution of profits and losses, risks, responsibilities, indebtedness, voting rights and board representation of the respective parties in determining if the company is the primary beneficiary.
The company also considers all parties that have direct or implicit variable interests when determining whether it is the primary beneficiary. As required by ASC 810, management's assessment of
whether the company is the primary beneficiary of a VIE is continuously performed.
The
net carrying value of the unconsolidated VIEs classified under "Investments" and "Other accrued liabilities" on the Consolidated Balance Sheet was a net liability of
$9 million as of December 31, 2016 and a net asset of $208 million as of December 31, 2015. The decrease in net carrying value primarily resulted from charges related to
forecast revisions for estimated cost increases on an Energy, Chemicals & Mining joint venture project. Some of the company's VIEs have debt; however, such debt is typically non-recourse in
nature. The company's maximum exposure to loss as a result of its investments in unconsolidated VIEs is typically limited to the aggregate of the carrying value of the investment and future funding
commitments. Future funding commitments as of December 31, 2016 for the unconsolidated VIEs were $42 million.
In
some cases, the company is required to consolidate certain VIEs. As of December 31, 2016, the carrying values of the assets and liabilities associated with the operations of
the consolidated VIEs were $959 million and $566 million, respectively. As of December 31, 2015, the carrying values of the assets and liabilities associated with the operations
of the consolidated VIEs were $863 million and $443 million, respectively. The assets of a VIE are restricted for use only for the particular VIE and are not available for general
operations of the company.
F-44
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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The
company has agreements with certain VIEs to provide financial or performance assurances to clients as discussed in Note 15. Below is a discussion of some of the company's more
significant or unique VIEs and related accounting considerations.
Eagle P3 Commuter Rail Project
In August 2010, the company was awarded its $1.7 billion share of the Eagle P3 Commuter Rail Project in the Denver metropolitan area. The
project is a public-private partnership between the Regional Transportation District in Denver, Colorado ("RTD") and Denver Transit Partners ("DTP"), a wholly-owned subsidiary of Denver Transit
Holdings, LLC ("DTH"), a joint venture in which the company has a 10 percent interest, with two additional partners each owning a 45 percent interest. Under the agreement, RTD
owns and oversees the addition of railways, facilities and rolling stock for three new commuter and light rail corridors in the Denver metropolitan area. RTD is funding the construction of the
railways and facilities through the issuance of $398 million of private activity bonds, as well as from various other sources, including federal grants. RTD advanced the proceeds of the private
activity bonds to DTP as a loan that is non-recourse to the company and will be repaid to RTD over the life of the concession agreement. DTP, as concessionaire, will design, build, finance, operate
and maintain the railways, facilities and rolling stock under a 35-year concession agreement. The company has determined that DTH is a VIE for which the company is not the primary beneficiary. DTH is
accounted for under the equity method of accounting. The company's maximum exposure to loss relating to its investments in DTH is limited to the carrying value of its investment of $8 million.
The
construction of the railways and facilities, which is nearing completion, is being performed through subcontract arrangements by Denver Transit Systems ("DTS") and Denver Transit
Constructors ("DTC"), construction joint ventures in which the company has an ownership interest of 50 percent and 40 percent, respectively. The company has determined that DTS and DTC
are VIEs for which the company is the primary beneficiary. Therefore, the company consolidates the accounts of DTS and DTC in its financial statements. For the years ended December 31, 2016,
2015 and 2014, the company's
results of operations included revenue of $138 million, $251 million and $361 million, respectively, from DTH. As of December 31, 2016, the combined carrying values of the
assets and liabilities of DTS and DTC were $90 million and $71 million, respectively. As of December 31, 2015, the combined carrying values of the assets and liabilities of DTS
and DTC were $96 million and $42 million, respectively. The company has provided certain performance guarantees on behalf of DTS.
17. Operations by Business Segment and Geographic Area
The company provides professional services in the fields of engineering, procurement, construction, fabrication and modularization, commissioning and maintenance,
as well as project management services, on a global basis and serves a diverse set of industries worldwide.
During
the first quarter of 2016, the company changed the composition of its reportable segments to better reflect the diverse end markets that the company serves. The company now
reports its operating results in four reportable segments as follows: Energy, Chemicals & Mining; Industrial, Infrastructure & Power; Government; and Maintenance, Modification &
Asset Integrity. Segment operating information and assets for 2015 and 2014 have been recast to reflect these changes.
The
Energy, Chemicals & Mining segment is the company's commodity-related segment which focuses on opportunities in the upstream, downstream, chemical, petrochemical, offshore and
onshore oil and gas production, liquefied natural gas, pipeline, metals and mining markets. This segment has long served a broad spectrum of commodity-based industries as an integrated solutions
provider offering a full range of design, engineering, procurement, construction, fabrication and project management services. The revenue of a single customer and its affiliates of the Energy,
Chemicals & Mining segment amounted
F-45
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
to
10 percent, 11 percent and 15 percent of the company's consolidated revenue during the years ended December 31, 2016, 2015 and 2014, respectively.
The
Industrial, Infrastructure & Power segment provides design, engineering, procurement, construction and project management services to the transportation, life sciences,
advanced manufacturing, water and power sectors. The Industrial, Infrastructure & Power segment includes the operations of NuScale Power, LLC, an Oregon-based small modular nuclear
reactor technology company, which is managed as a separate operating segment within the Industrial, Infrastructure & Power segment.
The
Government segment provides engineering, construction, logistics, base and facilities operations and maintenance, contingency response and environmental and nuclear services to the
U.S. government and governments abroad. The percentage of the company's consolidated revenue from work performed for various agencies of the U.S. government was 13 percent, 12 percent
and 11 percent during the years ended December 31, 2016, 2015 and 2014, respectively.
The
Maintenance, Modification & Asset Integrity segment is comprised of several operating segments that do not meet the requirement under ASC 280, "Segment Reporting," for
separate disclosure, and therefore, have been combined under the aggregation criteria of ASC 280. The Maintenance, Modification & Asset Integrity segment provides facility start-up and
management, plant and facility maintenance, operations support and asset management services to the oil and gas, chemicals, life sciences, mining and metals, consumer products and manufacturing
industries. The Maintenance, Modification & Asset Integrity segment includes the operations of the company's equipment business, temporary staffing, power services, as well as the recently
acquired Stork business.
The
reportable segments follow the same accounting policies as those described in Major Accounting Policies. Management evaluates a segment's performance based upon segment profit. The
company incurs cost and expenses and holds certain assets at the corporate level which relate to its business as a whole. Certain of these amounts have been charged to the company's business segments
by various methods, largely on the basis of usage. Total assets not allocated to segments and held in "Corporate and other" primarily include cash, marketable securities, income-tax related assets,
pension assets, deferred compensation trust assets and corporate property, plant and equipment.
Segment
profit is an earnings measure that the company utilizes to evaluate and manage its business performance. Segment profit is calculated as revenue less cost of revenue and earnings
attributable to noncontrolling interests excluding: corporate general and administrative expense; interest expense; interest income; domestic and foreign income taxes; other non-operating income and
expense items; and loss from discontinued operations.
F-46
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
External revenue
|
|
|
|
|
|
|
|
|
|
|
Energy, Chemicals & Mining
|
|
$
|
9,754.2
|
|
$
|
11,865.4
|
|
$
|
14,563.0
|
|
Industrial, Infrastructure & Power
|
|
|
4,094.5
|
|
|
2,264.0
|
|
|
2,854.8
|
|
Government
|
|
|
2,720.0
|
|
|
2,557.4
|
|
|
2,511.9
|
|
Maintenance, Modification & Asset Integrity
|
|
|
2,467.8
|
|
|
1,427.2
|
|
|
1,601.9
|
|
|
|
Total external revenue
|
|
$
|
19,036.5
|
|
$
|
18,114.0
|
|
$
|
21,531.6
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss)
|
|
|
|
|
|
|
|
|
|
|
Energy, Chemicals & Mining
|
|
$
|
401.5
|
|
$
|
866.6
|
|
$
|
869.2
|
|
Industrial, Infrastructure & Power
|
|
|
135.8
|
|
|
(44.9
|
)
|
|
147.5
|
|
Government
|
|
|
85.1
|
|
|
83.1
|
|
|
92.7
|
|
Maintenance, Modification & Asset Integrity
|
|
|
121.9
|
|
|
127.4
|
|
|
153.0
|
|
|
|
Total segment profit
|
|
$
|
744.3
|
|
$
|
1,032.2
|
|
$
|
1,262.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization of fixed assets
|
|
|
|
|
|
|
|
|
|
|
Energy, Chemicals & Mining
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Industrial, Infrastructure & Power
|
|
|
3.9
|
|
|
4.0
|
|
|
4.2
|
|
Government
|
|
|
2.3
|
|
|
3.2
|
|
|
5.4
|
|
Maintenance, Modification & Asset Integrity
|
|
|
139.5
|
|
|
113.4
|
|
|
111.8
|
|
Corporate and other
|
|
|
65.4
|
|
|
68.1
|
|
|
70.3
|
|
|
|
Total depreciation and amortization of fixed assets
|
|
$
|
211.1
|
|
$
|
188.7
|
|
$
|
191.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
|
|
|
|
|
|
Energy, Chemicals & Mining
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Industrial, Infrastructure & Power
|
|
|
2.2
|
|
|
6.1
|
|
|
10.4
|
|
Government
|
|
|
2.1
|
|
|
3.9
|
|
|
2.2
|
|
Maintenance, Modification & Asset Integrity
|
|
|
153.1
|
|
|
158.9
|
|
|
224.0
|
|
Corporate and other
|
|
|
78.5
|
|
|
71.3
|
|
|
88.1
|
|
|
|
Total capital expenditures
|
|
$
|
235.9
|
|
$
|
240.2
|
|
$
|
324.7
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
|
|
|
|
|
Energy, Chemicals & Mining
|
|
$
|
2,348.0
|
|
$
|
1,728.0
|
|
|
|
|
Industrial, Infrastructure & Power
|
|
|
750.1
|
|
|
544.2
|
|
|
|
|
Government
|
|
|
493.7
|
|
|
495.4
|
|
|
|
|
Maintenance, Modification & Asset Integrity
|
|
|
1,952.7
|
|
|
923.8
|
|
|
|
|
Corporate and other
|
|
|
3,671.9
|
|
|
3,934.0
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
9,216.4
|
|
$
|
7,625.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
|
|
|
|
|
Energy, Chemicals & Mining
|
|
$
|
15.5
|
|
$
|
15.5
|
|
|
|
|
Industrial, Infrastructure & Power
|
|
|
13.6
|
|
|
13.8
|
|
|
|
|
Government
|
|
|
58.0
|
|
|
58.0
|
|
|
|
|
Maintenance, Modification & Asset Integrity
|
|
|
445.1
|
|
|
24.3
|
|
|
|
|
|
|
|
|
|
Total goodwill
|
|
$
|
532.2
|
|
$
|
111.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
-
Energy, Chemicals & Mining.
Segment profit for 2016 was adversely
affected by pre-tax charges totaling $265 million (or $1.20 per diluted share) related to forecast revisions for estimated cost increases on a petrochemicals project in the United States. The
increase in total assets in the Energy, Chemicals & Mining segment resulted from the company's investment in CFHI and increased working capital in support of project execution activities.
F-47
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
-
-
Industrial, Infrastructure & Power.
Segment profit for 2015 included
a loss of $60 million (or $0.26 per diluted share) resulting from forecast revisions for a large gas-fired power plant in Brunswick County, Virginia. Segment profit for all periods included the
operations of NuScale, which are primarily for research and development activities associated with the licensing and commercialization of small modular nuclear reactor technology. NuScale expenses
included in the determination of segment profit were $92 million, $80 million and $46 million during 2016, 2015 and 2014, respectively. NuScale expenses for 2016, 2015 and 2014
were reported net of qualified reimbursable expenses of $57 million, $65 million and $38 million, respectively. (See Note 1 for a further discussion of the cooperative
agreement between NuScale and the DOE.) The increase in total assets in the Industrial, Infrastructure & Power segment resulted from increased working capital in support of project execution
activities.
-
-
Maintenance, Modification & Asset Integrity.
During 2016, 2015 and
2014, intercompany revenue for the Maintenance, Modification & Asset Integrity segment, excluded from the amounts shown above, was $524 million, $439 million and
$531 million, respectively. The increase in revenue and total assets, including goodwill, in the Maintenance, Modification & Asset Integrity resulted from the company's acquisition of
Stork.
Reconciliation of Total Segment Profit to Earnings from Continuing Operations Before Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
|
|
|
Total segment profit
|
|
$
|
744.3
|
|
$
|
1,032.2
|
|
$
|
1,262.4
|
|
Gain related to a partial sale of a subsidiary
|
|
|
|
|
|
68.2
|
|
|
|
|
Pension settlement charge
|
|
|
|
|
|
(239.9
|
)
|
|
|
|
Corporate general and administrative expense
|
|
|
(191.1
|
)
|
|
(168.3
|
)
|
|
(182.7
|
)
|
Interest income (expense), net
|
|
|
(52.6
|
)
|
|
(28.1
|
)
|
|
(11.4
|
)
|
Earnings attributable to noncontrolling interests
|
|
|
46.0
|
|
|
62.5
|
|
|
136.6
|
|
|
|
Earnings from continuing operations before taxes
|
|
$
|
546.6
|
|
$
|
726.6
|
|
$
|
1,204.9
|
|
|
|
|
|
|
|
|
|
|
|
|
-
-
Corporate general and administrative expense.
Corporate general and
administrative expense in 2016 included transaction and integration costs associated with the Stork acquisition of $25 million, organizational realignment expenses (primarily severance and
facility exit costs) of $38 million and foreign currency exchange gains of $35 million.
F-48
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Operating Information by Geographic Area
Engineering services for international projects are often performed within the United States or a country other than where the project is
located. Revenue associated with these services has been classified within the geographic area where the work was performed.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
External Revenue
Year Ended December 31,
|
|
Total Assets
As of December 31,
|
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
|
|
United States
|
|
$
|
9,891.9
|
|
$
|
7,857.3
|
|
$
|
7,466.2
|
|
$
|
4,842.4
|
|
$
|
4,306.0
|
|
Canada
|
|
|
2,170.1
|
|
|
2,459.3
|
|
|
4,133.3
|
|
|
749.5
|
|
|
800.9
|
|
Asia Pacific (includes Australia)
|
|
|
1,010.2
|
|
|
870.4
|
|
|
2,568.0
|
|
|
645.8
|
|
|
541.2
|
|
Europe
|
|
|
3,372.1
|
|
|
2,509.2
|
|
|
2,070.1
|
|
|
2,103.7
|
|
|
1,364.6
|
|
Central and South America
|
|
|
1,006.2
|
|
|
2,560.4
|
|
|
2,494.8
|
|
|
499.7
|
|
|
251.7
|
|
Middle East and Africa
|
|
|
1,586.0
|
|
|
1,857.4
|
|
|
2,799.2
|
|
|
375.3
|
|
|
361.0
|
|
|
|
Total
|
|
$
|
19,036.5
|
|
$
|
18,114.0
|
|
$
|
21,531.6
|
|
$
|
9,216.4
|
|
$
|
7,625.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Operating (Income) Expense
Non-operating expenses (net of income) of $1 million were included in corporate general and administrative expense in 2016. Non-operating
income of $7 million was included in
corporate general and administrative expense in 2015. There were no non-operating expenses during 2014.
18. Acquisitions of Stork Holding B.V.
On March 1, 2016 ("the acquisition date"), the company acquired 100 percent of Stork for an aggregate purchase price of
€695 million (or approximately $756 million), including the assumption of debt and other liabilities. Stork, based in the Netherlands, is a global provider of
maintenance, modification and asset integrity services associated with large existing industrial facilities in the oil and gas, chemicals, petrochemicals, industrial and power markets. The company
paid €276 million (or approximately $300 million) in cash consideration. The company borrowed €200 million (or approximately $217 million)
under its $1.7 billion Revolving Loan and Letter of Credit Facility, and paid €76 million (or approximately $83 million) of cash on hand to initially finance the
Stork acquisition. The €200 million borrowed under the $1.7 billion Revolving Loan and Letter of Credit Facility was subsequently repaid from the net proceeds of the 2016
Notes as discussed in Note 8.
In
conjunction with the acquisition, the company assumed Stork's outstanding debt obligations, including the Stork Notes, borrowings under a €110 million Super
Senior Revolving Credit Facility, and other debt obligations. On March 2, 2016, the company gave notice to all holders of the Stork Notes of the full redemption of the outstanding
€273 million (or approximately $296 million) principal amount of Stork Notes plus a redemption premium of €7 million (or approximately
$8 million) effective March 17, 2016. The redemption of the Stork Notes was initially funded with additional borrowings under the company's $1.7 billion Revolving Loan and Letter
of Credit Facility, which borrowings were subsequently repaid from the net proceeds of the 2016 Notes. Certain other outstanding debt obligations assumed in the Stork acquisition of
€20 million (or approximately $22 million) were settled in March 2016. In April 2016, the company repaid and replaced the €110 million Super Senior
Revolving Credit Facility with a €125 million Revolving Credit Facility that is available to fund working capital in the ordinary course of business. This replacement facility
expires in April 2017 and bears interest at EURIBOR plus .75%.
The
aggregate purchase price noted above has been allocated to the major categories of assets acquired and liabilities assumed based upon their estimated fair values as of the
acquisition date. The
F-49
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
excess
of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired, totaling €384 million (or approximately
$417 million), has been recorded as goodwill.
The
company has made certain changes to the purchase price allocation since the initial estimates reported in the first quarter of 2016. These changes primarily relate to the
following:
-
-
Identifiable intangible assets, which were originally aggregated with goodwill, have been separately reported at their estimated fair value of
€171 million (or approximately $186 million).
-
-
Deferred tax assets decreased by €2 million (or approximately $2 million) primarily to record the deferred tax
impact of valuation adjustments associated with identifiable intangible assets.
-
-
Property, plant and equipment increased by €11 million (or approximately $12 million) to reflect its estimated
fair value.
-
-
Additional fair value adjustments, primarily related to contracts, and certain balance sheet reclassifications have been made to other assets
and liabilities resulting in a net decrease of €32 million (or approximately $35 million) to net assets acquired. These adjustments did not materially affect any
individual asset or liability account.
-
-
Goodwill decreased by €148 million (or approximately $161 million) to reflect all of the changes to the purchase
price allocation noted above.
Adjustments
to the Consolidated Statement of Earnings for 2016 related to the income effects that would have been recognized in previous periods if the adjustments to provisional amounts
were recognized as of the acquisition date were not significant.
The
fair value of acquired intangible assets, which consisted primarily of customer relationships and trade names, as well as below market contracts and leases were determined using
income-based approaches that utilized unobservable Level 3 inputs, including significant management assumptions such as forecasted revenue and operating margins, customer attrition, and
weighted average cost of capital. Customer relationships are being amortized on a straight-line basis over their estimated useful lives of 8 years. Acquired trade names with finite lives are
being amortized on a straight-line basis over their estimated useful lives, ranging from 2 to 15 years. Trade names with indefinite lives are not amortized, but are subject to annual impairment
testing (See Note 1).
The
fair value of property, plant and equipment was determined using a cost-based approach that considers the estimated reproductive cost of the assets adjusted for depreciation factors,
which include physical deterioration and functional or economic obsolescence. This approach uses Level 3 inputs that are generally unobservable in the marketplace. A market-based approach was
also applied as a secondary method to estimate the fair value of certain assets. The market-based approach utilized observable Level 2 inputs for similar assets in active markets.
Goodwill
represents the excess of the purchase price over the fair value of the underlying net assets acquired. Factors contributing to the goodwill balance include the acquired
established workforce and the estimated future synergies associated with the combined operations. Of the total goodwill recorded in conjunction with the Stork acquisition, none is expected to be
deductible for tax purposes. The goodwill recognized in conjunction with the Stork acquisition has been reported in the Maintenance, Modification & Asset Integrity segment.
F-50
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The
following table summarizes the fair values of assets acquired and liabilities assumed as of the acquisition date:
|
|
|
|
|
|
|
|
(in thousands)
|
|
In EUR
|
|
In USD
|
|
|
|
Cash and cash equivalents
|
|
€
|
54,441
|
|
$
|
59,204
|
|
Accounts and notes receivable
|
|
|
167,894
|
|
|
182,585
|
|
Contract work in process
|
|
|
96,667
|
|
|
105,125
|
|
Other current assets
|
|
|
51,065
|
|
|
55,533
|
|
Property, plant and equipment
|
|
|
162,525
|
|
|
176,746
|
|
Investments
|
|
|
1,487
|
|
|
1,617
|
|
Intangible assets
|
|
|
171,000
|
|
|
185,963
|
|
Goodwill
|
|
|
383,734
|
|
|
417,310
|
|
Deferred taxes, net
|
|
|
9,867
|
|
|
10,730
|
|
Other assets
|
|
|
900
|
|
|
979
|
|
Trade accounts payable
|
|
|
(113,898
|
)
|
|
(123,864
|
)
|
Advance billings on contracts
|
|
|
(21,364
|
)
|
|
(23,234
|
)
|
Other accrued liabilities
|
|
|
(205,034
|
)
|
|
(222,975
|
)
|
Revolving credit facility and other borrowings
|
|
|
(400,228
|
)
|
|
(435,248
|
)
|
Long-term debt
|
|
|
(15,295
|
)
|
|
(16,633
|
)
|
Noncurrent liabilities
|
|
|
(65,001
|
)
|
|
(70,689
|
)
|
Noncontrolling interests
|
|
|
(2,947
|
)
|
|
(3,205
|
)
|
|
|
Net assets acquired
|
|
€
|
275,813
|
|
$
|
299,944
|
|
|
|
Since
the acquisition date, revenue and earnings from Stork of $1.2 billion and $10 million, respectively, for the year ended December 31, 2016 have been included in
the Consolidated Statement of Earnings. Integration costs of $14 million and transaction costs of $11 million were included in corporate general and administrative expense for the year
ended December 31, 2016.
The
following pro forma financial information reflects the Stork acquisition as if it had occurred on January 1, 2015 and includes adjustments for debt refinancing and transaction
costs.
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2016
|
|
2015
|
|
|
|
Pro forma revenue
|
|
$
|
19,262,991
|
|
$
|
19,786,167
|
|
Pro forma net earnings attributable to Fluor Corporation
|
|
|
283,705
|
|
|
413,040
|
|
19. Partial Sale of a Subsidiary
On September 30, 2015, the company sold 50% of its ownership of Fluor S.A., its principal Spanish operating subsidiary, to Sacyr Industrial, S.L.U.
for a cash purchase price of approximately $46 million, subject to certain purchase price adjustments. The company deconsolidated the subsidiary and recorded a pre-tax non-operating gain of
$68 million during the third quarter of 2015, which was determined based on the sum of the proceeds received on the sale and the estimated fair value of the company's retained 50%
noncontrolling interest, less the carrying value of the net assets associated with the former subsidiary. The estimated fair value of the company's retained noncontrolling interest was
$44 million as of the transaction date. The fair value was estimated using a combination of income-based and market-based valuation approaches utilizing unobservable Level 3 inputs,
including significant management assumptions such as forecasted revenue and operating margins, weighted average cost of capital and earnings multiples. Observable inputs, such as the cash
consideration received for the divested share of the entity, were also considered.
F-51
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
20. Quarterly Financial Data (Unaudited)
The following is a summary of the quarterly results of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except per share amounts)
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
|
|
Year ended December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
4,423.9
|
|
$
|
4,856.1
|
|
$
|
4,766.9
|
|
$
|
4,989.6
|
|
Cost of revenue
|
|
|
4,168.1
|
|
|
4,607.9
|
|
|
4,729.7
|
|
|
4,740.5
|
|
Earnings (loss) from continuing operations before taxes
|
|
|
189.2
|
|
|
181.4
|
|
|
(2.7
|
)
|
|
178.7
|
|
Earnings from continuing operations
|
|
|
119.0
|
|
|
120.0
|
|
|
17.4
|
|
|
71.0
|
|
Loss from discontinued operations, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
119.0
|
|
|
120.0
|
|
|
17.4
|
|
|
71.0
|
|
Net earnings attributable to Fluor Corporation
|
|
|
104.3
|
|
|
101.8
|
|
|
4.8
|
|
|
70.5
|
|
Basic earnings per share attributable to Fluor Corporation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
$
|
0.75
|
|
$
|
0.73
|
|
$
|
0.03
|
|
$
|
0.51
|
|
Loss from discontinued operations, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
0.75
|
|
|
0.73
|
|
|
0.03
|
|
|
0.51
|
|
Diluted earnings per share attributable to Fluor Corporation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from continuing operations
|
|
|
0.74
|
|
|
0.72
|
|
|
0.03
|
|
|
0.50
|
|
Loss from discontinued operations, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
0.74
|
|
|
0.72
|
|
|
0.03
|
|
|
0.50
|
|
Year ended December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
4,548.6
|
|
$
|
4,810.1
|
|
$
|
4,384.6
|
|
$
|
4,370.7
|
|
Cost of revenue
|
|
|
4,251.2
|
|
|
4,516.1
|
|
|
4,133.8
|
|
|
4,118.3
|
|
Earnings (loss) from continuing operations before taxes
|
|
|
248.9
|
|
|
238.8
|
|
|
278.2
|
|
|
(39.3
|
)
|
Earnings (loss) from continuing operations
|
|
|
165.6
|
|
|
160.7
|
|
|
186.8
|
|
|
(32.4
|
)
|
Loss from discontinued operations, net of taxes
|
|
|
|
|
|
|
|
|
(5.1
|
)
|
|
(0.6
|
)
|
Net earnings (loss)
|
|
|
165.6
|
|
|
160.7
|
|
|
181.7
|
|
|
(33.0
|
)
|
Net earnings (loss) attributable to Fluor Corporation
|
|
|
144.1
|
|
|
148.5
|
|
|
171.3
|
|
|
(51.4
|
)
|
Basic earnings (loss) per share attributable to Fluor Corporation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
$
|
0.98
|
|
$
|
1.02
|
|
$
|
1.22
|
|
$
|
(0.36
|
)
|
Loss from discontinued operations, net of taxes
|
|
|
|
|
|
|
|
|
(0.03
|
)
|
|
|
|
Net earnings (loss)
|
|
|
0.98
|
|
|
1.02
|
|
|
1.19
|
|
|
(0.36
|
)
|
Diluted earnings (loss) per share attributable to Fluor Corporation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations
|
|
|
0.96
|
|
|
1.00
|
|
|
1.21
|
|
|
(0.36
|
)
|
Loss from discontinued operations, net of taxes
|
|
|
|
|
|
|
|
|
(0.04
|
)
|
|
|
|
Net earnings (loss)
|
|
|
0.96
|
|
|
1.00
|
|
|
1.17
|
|
|
(0.36
|
)
|
Net
earnings in the second and third quarters of 2016 were adversely affected by pre-tax charges of $24 million (or $0.10 per diluted share) and $241 million (or $1.10 per
diluted share), respectively, related to forecast revisions for estimated cost increases on a petrochemicals project in the United States.
F-52
Table of Contents
FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Net
earnings in the third quarter of 2015 included a pre-tax gain of $68 million (or $0.30 per diluted share) related to the sale of 50 percent of the company's ownership
interest in its principal operating subsidiary in Spain to facilitate the formation of an Energy, Chemicals & Mining joint venture. Net earnings in the third and fourth quarters of 2015
included a pre-tax loss of $21 million (or $0.09 per diluted share) and $31 million (or $0.14 per diluted share), respectively, resulting from forecast revisions for a large gas-fired
power plant in Brunswick County, Virginia. Net earnings in the third and fourth
quarters of 2015 included pre-tax pension settlement charges of $9 million (or $0.04 per diluted share) and $231 million (or $1.04 per diluted share), respectively.
Net
earnings in 2015 included losses from discontinued operations related to the previously divested lead business of St. Joe Minerals Corporation and The Doe Run Company in
Herculaneum, Missouri. The 2015 losses from discontinued operations resulted from the settlement of lead exposure cases and the payment of legal fees incurred in connection with a pending
indemnification action against the buyer of the lead business for these settlements and others.
F-53
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