Fluor(FLR) - 2024 Q3 - Quarterly Report

Glossary of Terms This section defines key terms and abbreviations used throughout the filing to enhance report comprehension - Provides definitions and abbreviations for key terms used throughout the filing, aiding in the understanding of the report's content[5][6] Part I: Financial Information This section provides unaudited condensed consolidated financial statements, management's discussion, and related disclosures Item 1: Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including the statement of operations, comprehensive income (loss), balance sheet, cash flows, and changes in equity, along with detailed notes Statement of Operations This statement details the company's revenues, costs, and profits over specific periods, culminating in net earnings and earnings per share | Metric | 3ME Sep 30, 2024 ($M) | 3ME Sep 30, 2023 ($M) | 9ME Sep 30, 2024 ($M) | 9ME Sep 30, 2023 ($M) | | :---------------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Revenue | 4,094 | 3,963 | 12,055 | 11,654 | | Cost of revenue | (4,006) | (3,712) | (11,689) | (11,243) | | Gross profit | 88 | 251 | 366 | 411 | | Operating profit | 49 | 218 | 277 | 172 | | Net earnings attributable to Fluor | 54 | 206 | 282 | 161 | | Basic EPS available to Fluor common stockholders | 0.32 | 1.18 | 1.65 | 0.73 | | Diluted EPS available to Fluor common stockholders | 0.31 | 1.15 | 1.63 | 0.72 | Statement of Comprehensive Income (Loss) This statement presents net earnings and other comprehensive income components, reflecting the total change in equity from non-owner sources | Metric | 3ME Sep 30, 2024 ($M) | 3ME Sep 30, 2023 ($M) | 9ME Sep 30, 2024 ($M) | 9ME Sep 30, 2023 ($M) | | :---------------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net earnings | 25 | 181 | 219 | 119 | | Foreign currency translation adjustment | 37 | (25) | (12) | 40 | | Total OCI, net of tax | 31 | (26) | (28) | 37 | | Comprehensive income attributable to Fluor | 84 | 177 | 253 | 195 | Balance Sheet This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time | Metric | Sep 30, 2024 ($M) | Dec 31, 2023 ($M) | | :-------------------------- | :---------------- | :---------------- | | Total Current Assets | 5,265 | 5,063 | | Total Noncurrent Assets | 1,835 | 1,910 | | Total Assets | 7,100 | 6,973 | | Total Current Liabilities | 2,982 | 3,163 | | Long-term Debt | 1,116 | 1,158 | | Total Equity | 2,341 | 2,052 | Statement of Cash Flows This statement categorizes cash inflows and outflows from operating, investing, and financing activities over a period | Metric | 9ME Sep 30, 2024 ($M) | 9ME Sep 30, 2023 ($M) | | :-------------------------- | :-------------------- | :-------------------- | | Operating Cash Flow | 501 | (96) |\ | Investing Cash Flow | (129) | (46) |\ | Financing Cash Flow | 22 | 131 |\ | Cash and Cash Equivalents at End of Period | 2,912 | 2,421 | Statement of Changes in Equity This statement details the changes in each component of shareholders' equity over the reporting period | Metric | Dec 31, 2023 ($M) | Sep 30, 2024 ($M) | | :------------------------------------ | :---------------- | :---------------- | | Total Shareholders' Equity | 1,940 | 2,251 | | Noncontrolling Interests (NCI) | 112 | 90 | | Total Equity | 2,052 | 2,341 | Notes to Financial Statements These notes provide additional detail and context to the financial statements, explaining accounting policies and significant transactions 1. Principles of Consolidation This section outlines the company's consolidation policies, including the planned deconsolidation of NuScale and its financial impact - NuScale will be deconsolidated in Q4 2024, with an anticipated gain of $1.6 billion based on a stock price of $13.15 for 126 million shares. The investment will subsequently be recognized at fair value on a mark-to-market basis[25] 2. Recent Accounting Pronouncements This section discusses the impact of recently issued accounting standards on the company's financial reporting - No new accounting pronouncements were implemented during the 2024 Quarter[26] - FASB ASUs 2023-05 (joint ventures), 2023-07 (segment expenses), 2023-09 (income tax disclosures), and 2024-03 (income statement expense disaggregation) are not expected to materially impact consolidated results, but will require new disclosures in future periods[27][28][29][30] 3. Earnings Per Share This section provides detailed calculations and factors influencing basic and diluted earnings per share | Metric | 3ME Sep 30, 2024 ($M) | 3ME Sep 30, 2023 ($M) | 9ME Sep 30, 2024 ($M) | 9ME Sep 30, 2023 ($M) | | :---------------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Net earnings attributable to Fluor | 54 | 206 | 282 | 161 | | Net earnings available to Fluor common stockholders | 54 | 169 | 282 | 105 | | Weighted average common shares outstanding (Millions) | 171 | 144 | 171 | 143 | | Basic EPS available to Fluor common stockholders ($) | 0.32 | 1.18 | 1.65 | 0.73 | | Diluted EPS available to Fluor common stockholders ($) | 0.31 | 1.15 | 1.63 | 0.72 | - The conversion feature of 2029 Notes had a dilutive impact on EPS in Q3 2024 due to the average market price of $47.17 per share exceeding the conversion price of $45.37 per share, adding 484,208 shares to diluted shares outstanding[32] 4. Operating Information by Segment and Geographic Area This section disaggregates revenue and profit data by business segment and geographical region, offering insights into operational performance | Segment | 3ME Sep 30, 2024 Revenue ($M) | 3ME Sep 30, 2023 Revenue ($M) | 9ME Sep 30, 2024 Revenue ($M) | 9ME Sep 30, 2023 Revenue ($M) | | :------------------ | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Energy Solutions | 1,428 | 1,553 | 4,456 | 4,886 | | Urban Solutions | 1,931 | 1,431 | 5,240 | 3,842 | | Mission Solutions | 635 | 655 | 1,940 | 2,009 | | Other | 100 | 324 | 419 | 917 | | Total Revenue | 4,094 | 3,963 | 12,055 | 11,654 | | Segment | 3ME Sep 30, 2024 Profit ($M) | 3ME Sep 30, 2023 Profit ($M) | 9ME Sep 30, 2024 Profit ($M) | 9ME Sep 30, 2023 Profit ($M) | | :------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Energy Solutions | 50 | 177 | 193 | 355 | | Urban Solutions | 68 | 66 | 223 | 121 | | Mission Solutions | 45 | 38 | 108 | 84 | | Other | (46) | (5) | (95) | (108) | | Total Segment Profit| 117 | 276 | 429 | 452 | | Geographic Area | 3ME Sep 30, 2024 Revenue ($M) | 3ME Sep 30, 2023 Revenue ($M) | 9ME Sep 30, 2024 Revenue ($M) | 9ME Sep 30, 2023 Revenue ($M) | | :-------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | North America | 2,877 | 2,609 | 8,177 | 8,022 | | Asia Pacific | 475 | 442 | 1,476 | 1,203 | | Europe | 590 | 640 | 1,923 | 1,682 | | Central and South America | 113 | 201 | 315 | 599 | | Middle East and Africa | 39 | 71 | 164 | 148 | | Total Revenue | 4,094 | 3,963 | 12,055 | 11,654 | 5. Income Taxes This section details the company's effective tax rates, income tax expense, and significant tax-related events | Metric | 3ME Sep 30, 2024 (%) | 3ME Sep 30, 2023 (%) | 9ME Sep 30, 2024 (%) | 9ME Sep 30, 2023 (%) | | :---------------------------------------- | :------------------- | :------------------- | :------------------- | :------------------- | | Effective Tax Rate | 70.9 | 30.4 | 44.0 | 59.1 | | Total Income Tax Expense ($M) | 61 | 79 | 172 | 172 | - Received a refund of $169 million, including interest, from the IRS in 2024 YTD attributable to the 2013 tax year, originally recognized as a receivable in 2020 pursuant to the CARES Act[44] 6. Partnerships and Joint Ventures This section provides information on investments in partnerships and joint ventures, including associated liabilities and funding commitments - Investments in a loss position of $230 million were included in other accrued liabilities as of September 30, 2024, primarily for anticipated losses on two legacy infrastructure projects[46] - The aggregate carrying value of unconsolidated VIEs was a net asset of $183 million as of September 30, 2024, with future funding commitments of $57 million[47] 7. Guarantees This section outlines the company's performance guarantees and their potential financial exposure - The maximum potential amount of future payments under outstanding performance guarantees was estimated to be $13 billion as of September 30, 2024[49] - The performance guarantee obligation was not material as of September 30, 2024, and December 31, 2023[50] 8. Contingencies and Commitments This section details significant legal actions and other commitments that could impact the company's financial position - Santos Ltd. filed an action against Fluor Australia seeking AUD $1.47 billion; a panel recommended judgment for Santos on claims valued at approximately AUD $790 million, despite a project liability cap of AUD $236 million. Court decisions on Fluor's application to set aside the reference and Santos's application to adopt the panel's report are pending[53] - NTTA is demanding $227 million in damages from PLC (a joint venture including Fluor) for alleged breaches of contract or negligence related to retaining walls on a highway project completed in 2012[55][57] 9. Contract Assets and Liabilities This section presents the balances and changes in contract assets and liabilities, including unbilled receivables and work in progress | Metric | Sep 30, 2024 ($M) | Dec 31, 2023 ($M) | | :---------------------------------------- | :---------------- | :---------------- | | Contract Assets | 1,063 | 991 | | - Unbilled receivables - reimbursable contracts | 978 | 854 | | - Contract work in progress - lump-sum contracts | 85 | 137 | | Revenue recognized from contract liabilities as of Jan 1 | 478 | 566 | - Recorded $609 million of revenue associated with claims and unapproved change orders for costs incurred to date as of September 30, 2024, up from $531 million at December 31, 2023[58] 10. Remaining Unsatisfied Performance Obligations This section details the total value and expected timing of revenue from remaining unsatisfied performance obligations | Period | Sep 30, 2024 ($M) |\ | :------------------ | :---------------- |\ | Within 1 year | 16,333 |\ | 1 to 2 years | 8,966 |\ | Thereafter | 3,758 |\ | Total RUPO | 29,057 | 11. Debt and Letters of Credit This section provides information on the company's outstanding debt, credit facilities, and letters of credit | Debt Type | Sep 30, 2024 ($M) | Dec 31, 2023 ($M) | | :-------------------------- | :---------------- | :---------------- | | 2028 Notes (4.250%) | 556 | 600 | | 2029 Notes (1.125% Convertible) | 575 | 575 | | Total Debt | 1,116 | 1,158 | - Outstanding letters of credit totaled $483 million under the $1.8 billion committed credit facility and $946 million under uncommitted lines as of September 30, 2024[62][63] - Redeemed $44 million of aggregate outstanding 2028 Notes during 2024 YTD with an immaterial earnings impact[63] 12. Convertible Preferred Stock This section details the conversion of all outstanding convertible preferred stock to common stock in September 2023 - In September 2023, all outstanding Convertible Preferred Stock (CPS) was converted to common stock, including a $27 million make-whole payment, and all dividends on the CPS ceased[64] 13. Fair Value Measurements This section provides fair value measurements for financial instruments, distinguishing between those measured at fair value and those with carrying values | Financial Instrument (Assets) | Sep 30, 2024 Total Fair Value ($M) | Dec 31, 2023 Total Fair Value ($M) | | :---------------------------- | :--------------------------------- | :--------------------------------- | | Trading securities | 17 | 12 | | Derivative assets | 1 | 7 | | Financial Instrument (Liabilities) | Sep 30, 2024 Total Fair Value ($M) | Dec 31, 2023 Total Fair Value ($M) | | :--------------------------------- | :--------------------------------- | :--------------------------------- | | NuScale warrants | 6 | 12 | | Derivative liabilities | 1 | 4 | | Financial Instrument (Not Fair Value) | Sep 30, 2024 Carrying Value ($M) | Sep 30, 2024 Fair Value ($M) | Dec 31, 2023 Carrying Value ($M) | Dec 31, 2023 Fair Value ($M) | | :------------------------------------ | :------------------------------- | :--------------------------- | :------------------------------- | :--------------------------- | | Cash | 2,104 | 2,104 | 1,357 | 1,357 | | Cash equivalents | 808 | 808 | 1,162 | 1,162 | | Marketable securities, current | 94 | 94 | 69 | 69 | | 2028 Senior Notes | 553 | 548 | 597 | 573 | | 2029 Senior Notes | 563 | 703 | 561 | 626 | 14. Stock-Based Compensation This section details the types, grants, and fair values of stock-based compensation awards issued to executives and employees - In 2024 YTD, 438,594 RSUs were granted to executives and directors at a weighted-average grant date fair value of $37.62 per share, generally vesting over three years[72] - Stock options for 178,644 shares were awarded to executives during 2024 YTD at a weighted-average exercise price of $37.02 per share, generally vesting over 3 years and expiring 10 years after the grant date[73] - Performance-based award units totaling 272,844 were awarded to Section 16 officers during 2024 YTD, with 80% earned based on earnings before taxes targets over three 1-year periods and 20% based on 3-year cumulative TSR relative to S&P 500[74][75] | Liability Awards ($M) | 3ME Sep 30, 2024 | 3ME Sep 30, 2023 | 9ME Sep 30, 2024 | 9ME Sep 30, 2023 | | :-------------------------------------------------- | :--------------- | :--------------- | :--------------- | :--------------- | | SGI awards (G&A) | 10 | 14 | 22 | 24 | | Performance-based awards for non-Section 16 officers (G&A) | (3) | 5 | 7 | 17 | Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, and cash flows, including forward-looking statements, segment performance, and liquidity CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This statement highlights the inherent risks and uncertainties that could cause actual results to differ materially from forward-looking projections - Forward-looking statements are subject to risks and uncertainties, including cyclical markets, failure to secure new contracts, inaccurate cost/schedule estimates, intense competition, inability to retain personnel, joint venture partner non-performance, supply chain issues, cybersecurity breaches, civil unrest, project cancellations, and adverse litigation outcomes[82] Results of Operations This section analyzes the company's revenue, profit, and key financial metrics, discussing factors influencing performance across segments - Completed the sale of Stork's continental Europe operations for $67 million in March 2024, recognizing an $11 million gain on sale in 2024 YTD[85] - Entered into a definitive sale agreement for Stork's U.K. operations, expected to close as early as Q1 2025, with no material earnings impact anticipated[86] - NuScale will be deconsolidated in October 2024, with an anticipated $1.6 billion gain in Q4 2024, and the investment will be recognized at fair value thereafter[87] | Metric | 3ME Sep 30, 2024 ($M) | 3ME Sep 30, 2023 ($M) | 9ME Sep 30, 2024 ($M) | 9ME Sep 30, 2023 ($M) | | :---------------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Total Revenue | 4,094 | 3,963 | 12,055 | 11,654 | | Total Segment Profit | 117 | 276 | 429 | 452 | | Net earnings attributable to Fluor | 54 | 206 | 282 | 161 | | Total New Awards | 2,699 | 4,976 | 12,815 | 11,920 | | Total Backlog (Sep 30, 2024 / Dec 31, 2023) | 31,319 | 29,441 | | | - Revenue increased during the 2024 Quarter and 2024 YTD primarily driven by an increase in execution activities on several recently awarded projects in the Urban Solutions segment, partially offset by declines in Energy Solutions and Mission Solutions[94] - Segment profit declined during the 2024 Quarter and 2024 YTD primarily driven by the initial recognition of inflation-adjusted variable consideration on certain downstream projects during the 2023 Quarter and 2023 YTD and lower contributions from a large Energy Solutions project in the late stages of execution[95] - The effective tax rate was 70.9% for the 2024 Quarter (vs. 30.4% in 2023 Quarter) and 44.0% for 2024 YTD (vs. 59.1% in 2023 YTD)[96] - Energy Solutions revenue declined due to projects nearing completion and prior-year inflation-adjusted variable consideration, while segment profit declined due to similar factors and a $57 million charge for a Mexican joint venture subcontract[98][99] - Urban Solutions revenue significantly increased due to ramp-up of life sciences, metals, mining, and green steel projects. Segment profit significantly improved in 2024 YTD due to a change order agreement on a legacy infrastructure project[101][103] - Mission Solutions revenue slightly declined, but segment profit and margin improved due to increased execution activities on DOE contracts and the absence of prior-year cost growth charges[105][106] | Entity | 3ME Sep 30, 2024 Profit (Loss) ($M) | 3ME Sep 30, 2023 Profit (Loss) ($M) | 9ME Sep 30, 2024 Profit (Loss) ($M) | 9ME Sep 30, 2023 Profit (Loss) ($M) | | :------------------ | :---------------------------------- | :---------------------------------- | :---------------------------------- | :---------------------------------- | | NuScale | (40) | (19) | (100) | (71) | | Stork | (6) | 14 | 6 | 25 | | AMECO | — | — | (1) | (62) | | Segment Profit (Loss) | (46) | (5) | (95) | (108) | - G&A expenses decreased in Q3 2024 and 2024 YTD, primarily driven by lower performance-based compensation, including annual bonus projections[111] - No material changes in critical accounting policies and estimates from those disclosed in the 2023 10-K[112] LIQUIDITY AND CAPITAL RESOURCES This section assesses the company's ability to meet its financial obligations, detailing cash sources, uses, and capital management strategies - The company's liquidity arises from available cash and cash equivalents and marketable securities, cash generated from operations, capacity under credit facilities, and access to capital markets, which are believed to be sufficient for at least the next 12 months[114] - Cash and cash equivalents combined with marketable securities increased to $3.0 billion as of September 30, 2024, from $2.6 billion at December 31, 2023[118] - The company will soon be initiating a plan to return capital to its shareholders based on its financial condition and improved liquidity[120] | Cash Flow Category | 9ME Sep 30, 2024 ($M) | 9ME Sep 30, 2023 ($M) | | :-------------------------- | :-------------------- | :-------------------- | | Operating Cash Flow | 501 | (96) | | Investing Cash Flow | (129) | (46) | | Financing Cash Flow | 22 | 131 | - Operating cash flow for 2024 YTD significantly improved, driven by decreases in working capital on several large projects, customer payments, distributions from joint ventures of $252 million, and a $169 million IRS refund[125] - Capital expenditures in 2024 YTD primarily related to improvements to the new office lease in Houston, while proceeds from sales of assets included $67 million for Stork's European business[127] - Financing cash flow was impacted by the redemption of $44 million of 2028 Notes in 2024 YTD, the issuance of $575 million of 2029 Notes in 2023, the conversion of CPS, and $80 million in proceeds from NuScale share issuance[129][130][132][134] - As of September 30, 2024, letters of credit totaling $483 million were outstanding under committed lines and $946 million under uncommitted lines, including $460 million for two lump-sum projects in Kuwait[136] - The maximum potential amount of future payments under outstanding performance guarantees was estimated to be $13 billion as of September 30, 2024[137] Item 3: Quantitative and Qualitative Disclosures about Market Risk There have been no material changes to market risk during 2024 YTD, and the disclosures provided in the 2023 10-K remain relevant - No material changes to market risk during 2024 YTD; disclosures provided in the 2023 10-K remain relevant[138] Item 4: Controls and Procedures The principal executive and financial officers concluded that disclosure controls and procedures were effective as of the end of the reporting period. There were no material changes to internal control over financial reporting - Disclosure controls and procedures were effective as required by Rule 13a-15(e) or 15d-15(e) of the Exchange Act[139] - No changes to internal control over financial reporting (ICFR) occurred during the period that have materially affected, or are reasonably likely to materially affect, ICFR[140] Changes in Consolidated Backlog (Unaudited) Total backlog increased to $31,319 million as of September 30, 2024, with $12,815 million in new awards for the nine-month period | Metric | 3ME Sep 30, 2024 ($M) | 3ME Sep 30, 2023 ($M) | 9ME Sep 30, 2024 ($M) | 9ME Sep 30, 2023 ($M) | | :---------------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Backlog, beginning of period (July 1 / Jan 1) | 32,304 | 25,483 | 29,441 | 26,049 | | New awards | 2,699 | 4,976 | 12,815 | 11,920 | | Adjustments and cancellations, net | 377 | (519) | 1,023 | (404) | | Work performed | (4,061) | (3,936) | (11,960) | (11,561) | | Backlog, September 30 | 31,319 | 26,004 | 31,319 | 26,004 | - Backlog as of September 30, 2024, increased from December 31, 2023, primarily due to an award for a large life sciences project[91] Part II: Other Information This part covers legal proceedings, risk factors, equity security sales, mine safety disclosures, other information, and a list of exhibits Item 1: Legal Proceedings The company is involved in various legal proceedings, with material pending matters disclosed in Part I, Item 1 of this 10-Q. Management periodically assesses liabilities and contingencies based on the latest information available - The company is party to a number of legal proceedings and other matters, with material pending legal proceedings disclosed in Part I, Item 1 of this Q3 2024 10-Q[145][146] Item 1A: Risk Factors There have been no material changes to the company's risk factors from the 2023 10-K. However, earnings are subject to volatility due to recurring fair value measurements of the investment in NuScale, which will be marked-to-market based on stock price fluctuations - There have been no material changes from the risk factors as disclosed in the 2023 10-K[146] - Earnings are subject to volatility due to recurring fair value measurements of the investment in NuScale, which will be measured at fair value on a recurring basis using the prevailing price of NuScale's stock on balance sheet dates, starting in Q4 2024[146][147] Item 2: Unregistered Sales of Equity Securities and Use of Proceeds No shares were purchased under the company's equity repurchase program during the quarter ended September 30, 2024. The Board authorized an additional 20 million shares for the repurchase program in November 2024 | Period | Total Number of Shares Purchased (Shares) | Average Price Paid per Share ($) | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Program (Shares) | | :------------------------- | :---------------------------------------- | :------------------------------- | :------------------------------------------------------------------------------------- | | July 1 — July 31, 2024 | — | — | 10,513,093 | | August 1 — August 31, 2024 | — | — | 10,513,093 | | September 1 — September 30, 2024 | — | — | 10,513,093 | | Total | — | — | | - In November 2024, the Board authorized an additional 20,000,000 shares to the stock repurchase program[150] Item 4: Mine Safety Disclosures No mine safety disclosures were reported for the period - No mine safety disclosures[151] Item 5: Other Information Mark E. Fields, Group President, Project Execution, adopted a Rule 10b5-1 trading arrangement on August 26, 2024, for the sale of up to 100,000 common shares and exercise of up to 9,066 stock options, terminating on January 23, 2026 - Mark E. Fields, Group President, Project Execution, adopted a Rule 10b5-1 trading arrangement on August 26, 2024, for the sale of up to 100,000 shares of common stock and the exercise of up to 9,066 stock options, subject to certain conditions, with the arrangement terminating on January 23, 2026[151] Item 6: Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate documents, certifications, and XBRL-related files - Lists all exhibits filed with the Form 10-Q, including Amended and Restated Certificate of Incorporation, Bylaws, CEO/CFO certifications (Sections 302 and 906), and Inline XBRL documents[152] Signatures This section confirms the official signing of the report by the company's principal financial and accounting officers - The report was signed by Joseph L. Brennan, Chief Financial Officer, and John C. Regan, Chief Accounting Officer, on November 7, 2024[154]