Fluor(FLR) - 2023 Q1 - Quarterly Report

Part I: Financial Information This section presents Fluor Corporation's unaudited condensed consolidated financial statements and management's discussion and analysis for the first quarter of 2023 Item 1: Condensed Consolidated Financial Statements (Unaudited) This section presents Fluor Corporation's unaudited condensed consolidated financial statements for the three months ended March 31, 2023, including a net loss of $130 million primarily due to project charges Statement of Operations The company experienced a significant shift from a net profit to a net loss year-over-year, with revenue increasing by 20.2% while gross profit turned negative Statement of Operations (in millions) | Financial Metric | 3ME March 31, 2023 (in millions) | 3ME March 31, 2022 (in millions) | | :--- | :--- | :--- | | Revenue | $3,752 | $3,122 | | Gross Profit (Loss) | $(38) | $123 | | Operating Profit (Loss) | $(141) | $96 | | Net Earnings (Loss) Attributable to Fluor | $(107) | $48 | | Diluted EPS | $(0.82) | $0.27 | - The company experienced a significant shift from a net profit to a net loss year-over-year, with revenue increasing by 20.2% while gross profit turned negative[15] Statement of Comprehensive Income (Loss) This statement details the company's comprehensive income or loss, including net earnings and other comprehensive income components Statement of Comprehensive Income (Loss) (in millions) | Metric | 3ME March 31, 2023 (in millions) | 3ME March 31, 2022 (in millions) | | :--- | :--- | :--- | | Net Earnings (Loss) | $(130) | $56 | | Total OCI, net of tax | $46 | $29 | | Comprehensive Income (Loss) Attributable to Fluor | $(61) | $77 | Balance Sheet Total assets and total equity both decreased from the end of 2022, primarily reflecting a reduction in cash and cash equivalents and the net loss for the quarter Balance Sheet (in millions) | Account | March 31, 2023 (in millions) | December 31, 2022 (in millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $2,137 | $2,439 | | Total current assets | $4,837 | $5,044 | | Total assets | $6,630 | $6,827 | | Total current liabilities | $3,166 | $3,216 | | Total equity | $1,907 | $1,996 | - Total assets and total equity both decreased from the end of 2022, primarily reflecting a reduction in cash and cash equivalents and the net loss for the quarter[20][21] Statement of Cash Flows Operating cash outflow improved slightly year-over-year, while financing activities saw a significant cash outflow largely due to debt retirement Statement of Cash Flows (in millions) | Cash Flow Activity | 3ME March 31, 2023 (in millions) | 3ME March 31, 2022 (in millions) | | :--- | :--- | :--- | | Operating Cash Flow | $(161) | $(188) | | Investing Cash Flow | $13 | $(105) | | Financing Cash Flow | $(161) | $(16) | | Decrease in cash and cash equivalents | $(302) | $(296) | - Operating cash outflow improved slightly year-over-year[22] - Financing activities saw a significant cash outflow of $161 million, largely due to the purchase and retirement of debt amounting to $137 million[22] Statement of Changes in Equity Total equity decreased from $1,996 million at the end of 2022 to $1,907 million as of March 31, 2023, primarily driven by a net loss partially offset by Other Comprehensive Income - Total equity decreased from $1,996 million at the end of 2022 to $1,907 million as of March 31, 2023[45] - The decrease was primarily driven by a net loss of $130 million, partially offset by $46 million in Other Comprehensive Income (OCI)[45] Notes to Financial Statements This section provides detailed explanations for significant financial events, including project charges, divestitures, litigation, and debt redemptions - The Urban Solutions segment recorded a $59 million charge for rework and delays on the LAX Automated People Mover project[51] - The Mission Solutions segment included a $21 million charge for cost growth on a weapons facility project due to government-directed changes and schedule delays[91] - The company completed its AMECO divestiture with the sale of its South America business, recognizing a $60 million negative earnings impact, which included $35 million for foreign currency translation[55] - Regarding the Santos litigation, a non-binding draft report from a panel of referees recommended judgment for Fluor on claims valued at AUD $700 million but for Santos on other claims of roughly equivalent value[69] - The panel also found that a contractual liability cap of AUD $236 million did not apply[69] - The company's Remaining Unsatisfied Performance Obligations (RUPO), an indicator of future revenue, totaled $24.4 billion as of March 31, 2023[79] - In January 2023, the company redeemed the remaining €129 million of its 2023 Notes for $140 million[128] Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial results, highlighting revenue growth offset by significant project charges and a divestiture loss, while maintaining stable backlog and sufficient liquidity Results of Operations This section details segment-wise revenue and profit performance, new awards, and backlog, highlighting impacts from project charges and divestitures Segment Performance (in millions) | Segment | Revenue Q1 2023 (in millions) | Revenue Q1 2022 (in millions) | Segment Profit (Loss) Q1 2023 (in millions) | Segment Profit Q1 2022 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Energy Solutions | $1,612 | $1,174 | $88 | $54 | | Urban Solutions | $1,208 | $1,061 | $(20) | $17 | | Mission Solutions | $649 | $593 | $7 | $58 | | Other | $283 | $294 | $(90) | $(14) | - Consolidated new awards for Q1 2023 were $3.2 billion, a significant increase from $1.9 billion in Q1 2022[96][214] - Total backlog was $25.6 billion, remaining flat compared to the end of 2022[214] - The Urban Solutions segment profit was impacted by a $59 million charge on the LAX Automated People Mover project[95] - The Mission Solutions segment profit declined due to a $21 million charge on a weapons facility project[101] - The 'Other' segment loss of $90 million was primarily driven by the $60 million negative earnings impact from the sale of the AMECO South America business[95][102] Liquidity and Financial Condition The company's liquidity position, including cash reserves and credit facility availability, is discussed, along with factors affecting operating cash flow and debt management - The company's liquidity position includes $2.3 billion in cash and marketable securities as of March 31, 2023, down from $2.6 billion at the end of 2022[199] - Fluor maintains a $1.8 billion credit facility maturing in February 2026, with $828 million of borrowing capacity available as of March 31, 2023[198] - Operating cash flow was an outflow of $161 million, which is typical for the first quarter due to employee incentive payouts and was also negatively impacted by working capital increases on several large projects[202] - The company redeemed the remaining €129 million of its 2023 Notes for $140 million in January 2023 using cash on hand and aspires to partially retire some of its 2024 Notes during 2023[225] Item 3: Quantitative and Qualitative Disclosures about Market Risk The company states that there have been no material changes to its market risk during the first quarter of 2023 - There have been no material changes to market risk during the 2023 Quarter[115] Item 4: Controls and Procedures Disclosure controls and procedures were deemed effective, with no material changes to internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective as of the end of the period[116] - No changes to the company's internal control over financial reporting (ICFR) occurred during the quarter that have materially affected, or are reasonably likely to materially affect, ICFR[207] Part II: Other Information This section provides additional information on legal proceedings, risk factors, equity security sales, mine safety, and a list of exhibits Item 1: Legal Proceedings This section directs readers to the detailed disclosures on legal matters provided in Part I, Item 1 (Notes to Financial Statements) of the report - For additional information on legal proceedings, the report refers to the disclosures in Part I, Item 1, Notes to Financial Statements[119] Item 1A: Risk Factors The company reports that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K - There have been no material changes from the risk factors as disclosed in the 2022 10-K[120] Item 2: Unregistered Sales of Equity Securities and Use of Proceeds Fluor Corporation did not repurchase any equity securities during the first quarter of 2023, with over 10.5 million shares remaining authorized for repurchase Share Repurchase Activity | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 1 – January 31, 2023 | — | — | | February 1 – February 28, 2023 | — | — | | March 1 – March 31, 2023 | — | — | | Total | — | — | - As of March 31, 2023, 10,513,093 shares may yet be purchased under the company's publicly announced repurchase plan[122] Item 4: Mine Safety Disclosures This section of the report contains no mine safety disclosures - No information was provided under this item[141] Item 6: Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents and required certifications - The report includes a list of filed exhibits, such as the Amended and Restated Certificate of Incorporation, Bylaws, forms of stock-based compensation agreements, and CEO/CFO certifications pursuant to the Sarbanes-Oxley Act[142] Signatures This section contains the required certifications and signatures from the company's principal executive and financial officers Signatures The report is duly signed on May 5, 2023, by the company's Chief Financial Officer and Chief Accounting Officer - The report was signed on May 5, 2023, by Joseph L. Brennan (Chief Financial Officer) and John C. Regan (Chief Accounting Officer)[126][145]