Last10K.com

Fluor Corp (FLR) SEC Filing 10-Q Quarterly report for the period ending Monday, September 30, 2019

SEC Filings

Fluor Corp

CIK: 1124198 Ticker: FLR
Exhibit 99.1

Fluor Corporation
Brian Mershon
 
6700 Las Colinas Blvd
Media Relations
 
Irving, Texas 75039
469.398.7621 tel
 
 
 
 
469.398.7000 main tel
Jason Landkamer
 
 
Investor Relations
 
 
469.398.7222 tel
 

fluorblkreglogo.jpg
News Release
 
 
 
 


FLUOR REPORTS SECOND QUARTER 2019 RESULTS

IRVING, Texas (August 1, 2019)
- Fluor Corporation (NYSE: FLR) today announced financial results for its second quarter ended June 30, 2019. The second quarter was a net loss attributable to Fluor of $555 million, or $3.96 per diluted share, compared to net earnings of $115 million, or $0.81 per diluted share a year ago. Consolidated segment loss for the quarter was $573 million compared to a profit of $194 million a year ago. Second quarter revenue was $4.1 billion compared to $4.9 billion last year.
Earnings attributable to Fluor were negatively impacted by pre-tax charges of $714 million. These charges were the result of an operational and strategic review of Fluor’s businesses, as well as project developments during the quarter. This review included meetings with clients, subcontractors and suppliers, and settlements of outstanding claims. Results for the second quarter also include $46 million, related to restructuring charges for Fluor’s Stork and equipment business operations.
New awards for the quarter were $2.4 billion, including $732 million in Energy & Chemicals, $574 million in Diversified Services, $544 million in Government and $510 million in Mining, Industrial, Infrastructure & Power. Consolidated ending backlog of $35.5 billion compares to $29.3 billion a year ago.
"We understand the implications of the magnitude of these results,” said Carlos Hernandez, Fluor’s chief executive officer. “During the quarter, we commenced a comprehensive operational and strategic

1

The following information was filed by Fluor Corp (FLR) on Thursday, August 1, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
Or
        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from          to          
Commission File Number:  1-16129
FLUOR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
 
33-0927079
(State or other jurisdiction of
 
(I.R.S. Employer
incorporation or organization)
 
Identification No.)
 
 
 
 
6700 Las Colinas Boulevard
 
 
Irving,
Texas
 
75039
(Address of principal executive offices)
 
(Zip Code)
469-398-7000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $.01 par value per share
FLR
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ý  No o
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ý  No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No ý
As of October 25, 2019, 140,174,400 shares of the registrant’s common stock, $0.01 par value, were outstanding.
 



FLUOR CORPORATION
FORM 10-Q
TABLE OF CONTENTS
PAGE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

1


PART I:  FINANCIAL INFORMATION

Item 1. Financial Statements
FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(in thousands, except per share amounts)
 
2019
 
2018
 
2019
 
2018
TOTAL REVENUE
 
$
3,937,707

 
$
3,842,235

 
$
10,622,201

 
$
11,268,305

TOTAL COST OF REVENUE
 
3,869,606

 
3,654,953

 
11,177,807

 
10,959,757

OTHER (INCOME) AND EXPENSES
 
 
 
 
 
 
 
 
Corporate general and administrative expense
 
10,362

 
61,058

 
115,426

 
134,726

Impairment, restructuring and other exit costs
 
333,988

 

 
388,027

 

Interest expense
 
18,984

 
24,238

 
56,490

 
58,131

Interest income
 
(13,965
)
 
(9,504
)
 
(40,695
)
 
(24,777
)
Total cost and expenses
 
4,218,975

 
3,730,745

 
11,697,055

 
11,127,837

EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES
 
(281,268
)
 
111,490

 
(1,074,854
)
 
140,468

INCOME TAX EXPENSE
 
490,077

 
28,710

 
368,289

 
39,260

NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS
 
(771,345
)
 
82,780

 
(1,443,143
)
 
101,208

NET EARNINGS FROM DISCONTINUED OPERATIONS
 
41,806

 
13,245

 
76,810

 
113,920

NET EARNINGS (LOSS)
 
(729,539
)
 
96,025

 
(1,366,333
)
 
215,128

LESS: NET EARNINGS (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS FROM CONTINUING OPERATIONS
 
10,260

 
14,199

 
(18,918
)
 
31,528

NET EARNINGS (LOSS) ATTRIBUTABLE TO FLUOR CORPORATION FROM CONTINUING OPERATIONS
 
(781,605
)
 
68,581

 
(1,424,225
)
 
69,680

LESS: NET EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTERESTS FROM DISCONTINUED OPERATIONS
 
2,185

 
4,481

 
7,803

 
9,013

NET EARNINGS ATTRIBUTABLE TO FLUOR CORPORATION FROM DISCONTINUED OPERATIONS
 
39,621

 
8,764

 
69,007

 
104,907

NET EARNINGS (LOSS) ATTRIBUTABLE TO FLUOR CORPORATION
 
$
(741,984
)
 
$
77,345

 
$
(1,355,218
)
 
$
174,587

AMOUNTS ATTRIBUTABLE TO FLUOR CORPORATION
 
 
 
 
 
 
 
 
Net earnings (loss) from continuing operations
 
$
(781,605
)
 
$
68,581

 
$
(1,424,225
)
 
$
69,680

Net earnings from discontinued operations
 
39,621

 
8,764

 
69,007

 
104,907

Net earnings (loss)
 
$
(741,984
)
 
$
77,345

 
$
(1,355,218
)
 
$
174,587

BASIC EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO FLUOR CORPORATION
 
 
 
 
 
 
 
 
Net earnings (loss) from continuing operations
 
$
(5.57
)
 
$
0.49

 
$
(10.17
)
 
$
0.49

Net earnings from discontinued operations
 
0.28

 
0.06

 
0.49

 
0.75

Net earnings (loss)
 
$
(5.29
)
 
$
0.55

 
$
(9.68
)
 
$
1.24

DILUTED EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO FLUOR CORPORATION
 
 
 
 
 
 
 
 
Net earnings (loss) from continuing operations
 
$
(5.57
)
 
$
0.49

 
$
(10.17
)
 
$
0.49

Net earnings from discontinued operations
 
0.28

 
0.06

 
0.49

 
0.74

Net earnings (loss)
 
$
(5.29
)
 
$
0.55

 
$
(9.68
)
 
$
1.23

SHARES USED TO CALCULATE EARNINGS PER SHARE
 
 
 
 
 
 
 
 
BASIC
 
140,163

 
140,713

 
140,027

 
140,489

DILUTED
 
140,163

 
141,549

 
140,027

 
141,366

DIVIDENDS DECLARED PER SHARE
 
$
0.21

 
$
0.21

 
$
0.63

 
$
0.63

See Notes to Condensed Consolidated Financial Statements.

2


FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
UNAUDITED
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(in thousands)
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
NET EARNINGS (LOSS)
 
$
(729,539
)
 
$
96,025

 
$
(1,366,333
)
 
$
215,128

 
 
 
 
 
 
 
 
 
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
 
(42,002
)
 
(11,733
)
 
(14,337
)
 
(44,356
)
Ownership share of equity method investees’ other comprehensive income (loss)
 
2,662

 
(6,495
)
 
(2,125
)
 
6,055

Defined benefit pension and postretirement plan adjustments
 
1,990

 
(39,803
)
 
6,093

 
(35,933
)
Unrealized loss on derivative contracts
 
(6,294
)
 
(1,952
)
 
(599
)
 
(7,694
)
Unrealized gain on available-for-sale securities
 

 

 

 
709

TOTAL OTHER COMPREHENSIVE LOSS,
NET OF TAX
 
(43,644
)
 
(59,983
)
 
(10,968
)
 
(81,219
)
 
 
 
 
 
 
 
 
 
COMPREHENSIVE INCOME (LOSS)
 
(773,183
)
 
36,042

 
(1,377,301
)
 
133,909

 
 
 
 
 
 
 
 
 
LESS: COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS
 
10,696

 
18,280

 
(12,658
)
 
39,258

 
 
 
 
 
 
 
 
 
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO FLUOR CORPORATION
 
$
(783,879
)
 
$
17,762

 
$
(1,364,643
)
 
$
94,651

See Notes to Condensed Consolidated Financial Statements.

3


FLUOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
UNAUDITED
(in thousands, except share and per share amounts)
 
September 30,
2019
 
December 31,
2018
ASSETS 
 
 

 
 

CURRENT ASSETS
 
 

 
 

Cash and cash equivalents ($477,434 and $391,635 related to variable interest entities (“VIEs”))
 
$
1,805,104

 
$
1,764,746

Marketable securities ($35,066 and $202,481 related to VIEs)
 
47,873

 
214,828

Accounts and notes receivable, net ($232,054 and $199,108 related to VIEs)
 
1,045,749

 
1,235,851

Contract assets ($291,493 and $295,812 related to VIEs)
 
996,716

 
1,130,918

Other current assets ($17,821 and $6,624 related to VIEs)
 
345,653

 
308,905

Current assets held for sale ($113,144 and $79,269 related to VIEs)
 
1,081,793

 
785,645

Total current assets
 
5,322,888

 
5,440,893

 
 
 
 
 
Property, plant and equipment (net of accumulated depreciation of $841,713 and $925,931) (net PP&E of $30,382 and $28,679 related to VIEs)
 
571,214

 
745,942

Goodwill
 
439,576

 
463,219

Investments
 
626,043

 
903,136

Deferred taxes
 
70,537

 
342,126

Deferred compensation trusts
 
359,304

 
328,814

Other assets ($39,167 and $26,447 related to VIEs)
 
494,145

 
312,908

Noncurrent assets held for sale ($12,931 related to VIEs in 2018)
 

 
376,599

TOTAL ASSETS
 
$
7,883,707

 
$
8,913,637

LIABILITIES AND EQUITY 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Trade accounts payable ($437,383 and $419,590 related to VIEs)
 
$
1,295,954

 
$
1,398,666

Short-term borrowings
 
45,240

 
26,887

Contract liabilities ($267,997 and $249,831 related to VIEs)
 
1,095,890

 
800,539

Accrued salaries, wages and benefits ($24,991 and $25,341 related to VIEs)
 
579,592

 
577,917

Other accrued liabilities ($44,077 and $49,968 related to VIEs)
 
419,352

 
367,689

Current liabilities held for sale ($80,452 and $79,872 related to VIEs)
 
414,343

 
380,815

Total current liabilities
 
3,850,371

 
3,552,513

 
 
 
 
 
LONG-TERM DEBT DUE AFTER ONE YEAR
 
1,636,905

 
1,661,565

NONCURRENT LIABILITIES
 
712,501

 
564,011

NONCURRENT LIABILITIES HELD FOR SALE
 

 
17,498

CONTINGENCIES AND COMMITMENTS
 


 


 
 
 
 
 
EQUITY
 
 
 
 
Shareholders’ equity
 
 
 
 
Capital stock
 
 
 
 
Preferred — authorized 20,000,000 shares ($0.01 par value); none issued
 

 

Common — authorized 375,000,000 shares ($0.01 par value); issued and outstanding — 140,174,400 and 139,653,824 shares in 2019 and 2018, respectively
 
1,399

 
1,396

Additional paid-in capital
 
111,857

 
82,106

Accumulated other comprehensive loss
 
(551,903
)
 
(542,478
)
Retained earnings
 
1,998,142

 
3,422,157

Total shareholders’ equity
 
1,559,495

 
2,963,181

Noncontrolling interests
 
124,435

 
154,869

Total equity
 
1,683,930

 
3,118,050

TOTAL LIABILITIES AND EQUITY
 
$
7,883,707

 
$
8,913,637

See Notes to Condensed Consolidated Financial Statements.

4


FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
UNAUDITED
 
 
Nine Months Ended
September 30,
(in thousands)
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES
 
 

 
 

Net earnings (loss)
 
$
(1,366,333
)
 
$
215,128

Adjustments to reconcile net earnings (loss) to cash provided (utilized) by operating activities:
 
 
 
 
Depreciation of fixed assets
 
129,014

 
150,592

Amortization of intangibles
 
13,032

 
14,327

(Earnings) loss from equity method investments, net of distributions
 
6,510

 
506

Gain on sale of joint venture interest
 

 
(124,942
)
Loss (gain) on sale of property, plant and equipment
 
5,690

 
(15,595
)
Impairment of long-lived assets
 
347,411

 

Amortization of stock-based awards
 
27,513

 
34,735

Deferred compensation trust
 
(36,989
)
 
(14,915
)
Deferred compensation obligation
 
34,827

 
19,320

Deferred taxes
 
270,996

 
30,969

Net retirement plan accrual (contributions)
 
(1,821
)
 
(16,552
)
Changes in operating assets and liabilities
 
627,009

 
(305,467
)
Other items
 
10,039

 
609

Cash provided (utilized) by operating activities
 
66,898

 
(11,285
)
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
Purchases of marketable securities
 
(31,165
)
 
(317,747
)
Proceeds from the sales and maturities of marketable securities
 
197,923

 
347,131

Capital expenditures
 
(140,058
)
 
(148,671
)
Proceeds from disposal of property, plant and equipment
 
56,431

 
60,863

Investments in partnerships and joint ventures
 
(34,502
)
 
(33,799
)
Return of capital from partnerships and joint ventures
 
11,733

 
20,484

Proceeds from company owned life insurance
 
12,245

 
1,040

Other items
 
2,071

 
(1,041
)
Cash provided (utilized) by investing activities
 
74,678

 
(71,740
)
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
Dividends paid
 
(88,708
)
 
(89,193
)
Proceeds from issuance of 4.250% Senior Notes
 

 
598,722

Repayment of 3.375% Senior Notes
 

 
(503,285
)
Proceeds from other borrowings
 
21,206

 
4,555

Net proceeds from issuance of commercial paper
 

 
24,449

Debt issuance costs
 

 
(4,974
)
Distributions paid to noncontrolling interests
 
(26,123
)
 
(34,688
)
Capital contributions by noncontrolling interests
 
10,581

 
4,293

Taxes paid on vested restricted stock
 
(3,572
)
 
(5,686
)
Stock options exercised
 
1,466

 
7,170

Other items
 
(1,990
)
 
(9,737
)
Cash utilized by financing activities
 
(87,140
)
 
(8,374
)
Effect of exchange rate changes on cash
 
(14,078
)
 
(32,880
)
Increase (decrease) in cash and cash equivalents
 
40,358

 
(124,279
)
Cash and cash equivalents at beginning of period
 
1,764,746

 
1,804,075

Cash and cash equivalents at end of period
 
$
1,805,104

 
$
1,679,796

See Notes to Condensed Consolidated Financial Statements.

5


FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(in thousands, except per share amounts)
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Loss
Retained
Earnings
Total Shareholders' Equity
Noncontrolling
Interests
Total
Equity
Shares
Amount
BALANCE AS OF
JUNE 30, 2019
140,174

$
1,399

$
113,042

$
(510,008
)
$
2,769,804

$
2,374,237

$
123,252

$
2,497,489

Net earnings (loss)




(741,984
)
(741,984
)
12,445

(729,539
)
Other comprehensive loss



(41,895
)

(41,895
)
(1,749
)
(43,644
)
Dividends ($0.21 per share)




(29,678
)
(29,678
)

(29,678
)
Distributions to noncontrolling interests






(10,551
)
(10,551
)
Capital contributions by noncontrolling interests






2,760

2,760

Other noncontrolling interest transactions


1,105



1,105

(1,722
)
(617
)
Stock-based plan activity


(2,290
)


(2,290
)

(2,290
)
BALANCE AS OF
SEPTEMBER 30, 2019
140,174

$
1,399

$
111,857

$
(551,903
)
$
1,998,142

$
1,559,495

$
124,435

$
1,683,930

 
 
 
 
 
 
 
 
 
(in thousands, except per share amounts)
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Loss
Retained
Earnings
Total Shareholders' Equity
Noncontrolling
Interests
Total
Equity
Shares
Amount
BALANCE AS OF
DECEMBER 31, 2018
139,654

$
1,396

$
82,106

$
(542,478
)
$
3,422,157

$
2,963,181

$
154,869

$
3,118,050

Net earnings (loss)




(1,355,218
)
(1,355,218
)
(11,115
)
(1,366,333
)
Cumulative adjustment for the adoption of ASC 842




20,544

20,544


20,544

Other comprehensive income



(9,425
)

(9,425
)
(1,543
)
(10,968
)
Dividends ($0.63 per share)


218


(89,341
)
(89,123
)

(89,123
)
Distributions to noncontrolling interests






(26,123
)
(26,123
)
Capital contributions by noncontrolling interests






10,581

10,581

Other noncontrolling interest transactions


4,188



4,188

(2,234
)
1,954

Stock-based plan activity
520

3

25,345



25,348


25,348

BALANCE AS OF
SEPTEMBER 30, 2019
140,174

$
1,399

$
111,857

$
(551,903
)
$
1,998,142

$
1,559,495

$
124,435

$
1,683,930



6


FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Continued)

(in thousands, except per share amounts)
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Loss
Retained
Earnings
Total Shareholders' Equity
Noncontrolling
Interests
Total
Equity
Shares
Amount
BALANCE AS OF
JUNE 30, 2018
140,700

$
1,406

$
111,368

$
(422,595
)
$
3,353,176

$
3,043,355

$
141,485

$
3,184,840

Net earnings




77,345

77,345

18,680

96,025

Other comprehensive loss



(59,583
)

(59,583
)
(400
)
(59,983
)
Dividends ($0.21 per share)


(128
)

(28,993
)
(29,121
)

(29,121
)
Distributions to noncontrolling interests






(2,436
)
(2,436
)
Capital contributions by noncontrolling interests






533

533

Other noncontrolling interest transactions


1,374



1,374

(957
)
417

Stock-based plan activity
49

1

9,653



9,654


9,654

BALANCE AS OF
SEPTEMBER 30, 2018
140,749

$
1,407

$
122,267

$
(482,178
)
$
3,401,528

$
3,043,024

$
156,905

$
3,199,929

 
 
 
 
 
 
 
 
 
(in thousands, except per share amounts)
Common Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Loss
Retained
Earnings
Total Shareholders' Equity
Noncontrolling
Interests
Total
Equity
Shares
Amount
BALANCE AS OF
DECEMBER 31, 2017
139,918

$
1,399

$
88,222

$
(402,242
)
$
3,654,931

$
3,342,310

$
150,089

$
3,492,399

Net earnings




174,587

174,587

40,541

215,128

Cumulative adjustment for the adoption of ASC 606




(338,738
)
(338,738
)
(963
)
(339,701
)
Other comprehensive loss



(79,936
)

(79,936
)
(1,283
)
(81,219
)
Dividends ($0.63 per share)


(250
)

(89,252
)
(89,502
)

(89,502
)
Distributions to noncontrolling interests






(34,688
)
(34,688
)
Capital contributions by noncontrolling interests






4,293

4,293

Other noncontrolling interest transactions


3,936



3,936

(1,084
)
2,852

Stock-based plan activity
831

8

30,359



30,367


30,367

BALANCE AS OF
SEPTEMBER 30, 2018
140,749

$
1,407

$
122,267

$
(482,178
)
$
3,401,528

$
3,043,024

$
156,905

$
3,199,929



7


FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED


(1) Principles of Consolidation
The Condensed Consolidated Financial Statements do not include footnotes and certain financial information normally presented annually under accounting principles generally accepted in the United States and, therefore, should be read in conjunction with the company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the "2018 10-K"). Accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end. The results of operations for the three and nine months ended September 30, 2019 may not necessarily be indicative of results that can be expected for the full year.
The Condensed Consolidated Financial Statements included herein are unaudited; however, they contain all adjustments of a normal recurring nature which, in the opinion of management, are necessary to present fairly its consolidated financial position as of September 30, 2019 and December 31, 2018 and its consolidated results of operations and cash flows for the interim periods presented. All significant intercompany transactions of consolidated subsidiaries are eliminated. Certain amounts in 2018 have been reclassified to conform to the 2019 presentation, which includes discontinued operations and assets and liabilities held for sale, as discussed below. Management has evaluated all material events occurring subsequent to the date of the financial statements up to the filing date of this Form 10-Q. 
In the third quarter of 2019, management committed to a plan to sell substantially all of its government and AMECO equipment businesses, while retaining two fixed-price projects previously included in the government segment and a few small international components of AMECO. Management has concluded that these disposal groups have met the criteria to be classified as held for sale beginning in the third quarter of 2019, and as a result, the assets and liabilities of the government and AMECO businesses have been classified as held for sale on the Condensed Consolidated Balance Sheet as of September 30, 2019 and December 31, 2018. Management has also concluded that the operations of the disposal groups qualify for discontinued operations presentation because their disposal represents a strategic shift that will have a major effect on the company's financial results. Therefore, the results of the government and AMECO businesses have been presented as earnings from discontinued operations, net of tax, in the Condensed Consolidated Statement of Operations for all periods presented. See Note 21 for further discussion of the company's discontinued operations.

Segment operating information for 2018 has been recast to reflect changes in the composition of the company’s reportable segments as discussed in Note 17.

In the first quarter of 2019, the company adopted Accounting Standards Update (“ASU”) 2016-02 (ASC Topic 842), “Leases” using the modified retrospective method in which the new guidance was applied to leases that existed or were entered into on or after January 1, 2019. Results for the reporting period beginning on January 1, 2019 have been presented under ASC 842, while prior period amounts have not been adjusted and continue to be reported in accordance with previous guidance. See Note 3 for further discussion of the adoption and the impact on the company’s financial statements.
(2) Recent Accounting Pronouncements
New accounting pronouncements implemented by the company during the first nine months of 2019 are discussed below or in the related notes, where appropriate.

In the first quarter of 2019, the company adopted ASU 2016-02 (ASC Topic 842), “Leases” and related ASUs. See Note 3 for further discussion of the adoption and the impact on the company’s financial statements.
In the first quarter of 2019, the company adopted ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” under which the company did not elect to reclassify the income tax effects stranded in accumulated other comprehensive income to retained earnings as a result of the enactment of comprehensive tax legislation, commonly referred to as the Tax Cuts and Jobs Act. As a result, there was no impact on the company’s financial position, results of operations or cash flows.
New accounting pronouncements requiring implementation in future periods are discussed below.


8


FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED

In November 2018, the FASB issued ASU 2018-18, “Clarifying the Interaction between Topic 808 and Topic 606.” This ASU clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606 when the counterparty is a customer. ASU 2018-18 is effective for interim and annual reporting periods beginning after December 15, 2019. Management does not expect the adoption of ASU 2018-18 to have a material impact on the company’s financial position, results of operations or cash flows.

In October 2018, the FASB issued ASU 2018-17, “Targeted Improvements to Related Party Guidance for Variable Interest Entities.” This ASU amends the guidance for determining whether a decision-making fee is a variable interest. ASU 2018-17 is effective for interim and annual reporting periods beginning after December 15, 2019. Management does not expect the adoption of ASU 2018-17 to have a material impact on the company’s financial position, results of operations or cash flows.

In August 2018, the FASB issued ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” This ASU requires customers in a hosting arrangement that is a service contract to capitalize certain implementation costs as if the arrangement was an internal-use software project. ASU 2018-15 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. Management does not expect the adoption of ASU 2018-15 to have a material impact on the company’s financial position, results of operations or cash flows.

In August 2018, the FASB issued ASU 2018-14, “Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans.” This ASU amends ASC 715 to add, remove and clarify certain disclosure requirements related to defined benefit pension and other postretirement plans. ASU 2018-14 is effective for fiscal years ending after December 15, 2020, with early adoption permitted. Management does not expect the adoption of ASU 2018-14 to have any impact on the company’s financial position, results of operations or cash flows.

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement.” This ASU amends ASC 820 to add, remove and modify certain disclosure requirements for fair value measurements. For example, public companies will now be required to disclose the range and weighted average used to develop significant unobservable inputs for Level 3 fair value measurements. ASU 2018-13 is effective for interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. Management does not expect the adoption of ASU 2018-13 to have any impact on the company’s financial position, results of operations or cash flows.

In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments," and issued subsequent amendments to the initial guidance within ASU 2019-04 and ASU 2019-05. The amendments in ASU 2016-13 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 and its amendments are effective for interim and annual reporting periods beginning after December 15, 2019. Management is continuing to assess the impact of adopting ASU 2016-13 on the company’s financial position, results of operations and cash flows.
The company adopted ASU 2014-09 (ASC Topic 606), “Revenue from Contracts with Customers” in the first quarter of 2018. See the 2018 10-K for a further discussion of the adoption and the impact on the company’s financial statements. In accordance with ASU 2017-13, certain of the company’s unconsolidated partnerships and joint ventures will not adopt ASC Topic 606 until the fourth quarter of 2019, at which time the company expects to record a cumulative effect adjustment which is not expected to be significant.
(3) Leases

On January 1, 2019, the company adopted ASC Topic 842, “Leases,” including the following ASUs: ASU 2016-02, ASU 2017-13, ASU 2018-01, ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01. The new guidance requires the recognition of right-of-use assets and lease liabilities on the balance sheet for leases with terms greater than 12 months or leases that contain a purchase option that is reasonably certain to be exercised. Lessees are now required to classify leases as either finance or operating leases. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease.

The company elected to utilize the package of practical expedients in ASC 842-10-65-1(f) that, upon adoption of ASC 842, allows

9


FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED

entities to (1) not reassess whether any expired or existing contracts are or contain leases, (2) retain the classification of leases (e.g., operating or finance lease) existing as of the date of adoption and (3) not reassess initial direct costs for any existing leases. The company elected to utilize the practical expedient in ASC 842-10-65-1(gg) in which an entity need not assess whether existing land easements not previously accounted for as leases contain a lease under ASC 842. The company also elected to utilize the practical expedient in ASC 842-10-15-37 in which the company has chosen to account for each separate lease component of a contract and its associated nonlease components as a single lease component.

The company adopted ASC 842 using the modified retrospective method, and accordingly, the new guidance was applied retrospectively to leases that existed as of January 1, 2019 (the date of initial application). As a result, the company has recorded total right-of-use assets of $282 million, total current lease liabilities of $72 million, total noncurrent lease liabilities of $222 million and a cumulative effect adjustment to increase retained earnings by $21 million (net of deferred taxes of $6 million) as of January 1, 2019. The increase in retained earnings primarily resulted from the recognition of previously deferred gains associated with two sale and leaseback transactions, as allowed under ASC 842-10-65-1(ee). The adoption of ASC 842 did not have a material impact on the company’s results of operations or any impact on the company’s cash flows.

The company’s right-of use assets and lease liabilities primarily relate to office facilities, equipment used in connection with long-term construction contracts and other personal property. Certain of the company’s facility and equipment leases include one or more options to renew, with renewal terms that can extend the lease term up to 10 years. The exercise of lease renewal options is at the company’s discretion. Renewal periods are included in the expected lease term if they are reasonably certain of being exercised by the company. Certain leases also include options to purchase the leased property. None of the company’s lease agreements contain material residual value guarantees or material restrictions or covenants.

Long-term leases (leases with terms greater than 12 months) are recorded on the consolidated balance sheet at the present value of the minimum lease payments not yet paid. The company uses its incremental borrowing rate to determine the present value of the lease when the rate implicit in the lease is not readily determinable. Certain lease contracts contain nonlease components such as maintenance, utilities, fuel and operator services. The company has made an accounting policy election, as allowed under ASC 842-10-15-37 and discussed above, to capitalize both the lease component and nonlease components of its contracts as a single lease component for all of its right-of-use assets. From time to time, certain service or purchase contracts may contain an embedded lease.

Short-term leases (leases with an initial term of 12 months or less or leases that are cancelable by the lessee and lessor without significant penalties) are not recorded on the consolidated balance sheet and are expensed on a straight-line basis over the lease term. The majority of the company’s short-term leases relate to equipment used on construction projects. These leases are entered into at agreed upon hourly, daily, weekly or monthly rental rates for an unspecified duration and typically have a termination for convenience provision. Such equipment leases are considered short-term in nature unless it is reasonably certain that the equipment will be leased for a term greater than 12 months.


10


FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED

The components of lease expense for the three and nine months ended September 30, 2019 were as follows:
Lease Cost / (Sublease Income)
Three Months Ended
September 30, 2019
Nine Months Ended
September 30, 2019
(in thousands)
 
 
 
 
 
 
Operating lease cost
 
$
20,280

 
 
$
62,316

 
Finance lease cost
 
 
 
 
 
 
Amortization of right-of-use assets
 
350

 
 
1,127

 
Interest on lease liabilities
 
14

 
 
54

 
Variable lease cost(1)
 
4,532

 
 
14,013

 
Short-term lease cost
 
28,580

 
 
85,780

 
Sublease income
 
(1,915
)
 
 
(5,258
)
 
Total lease cost
 
$
51,841

 
 
$
158,032

 

(1)
Primarily relates to rent escalation due to cost of living indexation and payments for property taxes, insurance or common area maintenance based on actual assessments.
Information related to the company’s right-of use assets and lease liabilities as of September 30, 2019 was as follows:
Lease Assets / Liabilities
Balance Sheet Classification
September 30, 2019
(in thousands)
 
 
 
 
Right-of-use assets
 
 
 
 
Operating lease assets
Other assets
 
$
253,336

 
Finance lease assets
Other assets
 
1,062

 
Total right-of-use assets
 
 
$
254,398

 
Lease liabilities
 
 
 
 
Operating lease liabilities, current
Other accrued liabilities
 
$
61,006

 
Operating lease liabilities, noncurrent
Noncurrent liabilities
 
217,060

 
Finance lease liabilities, current
Other accrued liabilities
 
471

 
Finance lease liabilities, noncurrent
Noncurrent liabilities
 
700

 
Total lease liabilities
 
 
$
279,237

 


11


FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED

Supplemental information related to the company’s leases for the nine months ended September 30, 2019 was as follows:
 
Nine Months Ended
September 30, 2019
(in thousands)
 
 
 
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
     Operating cash flows from operating leases
 
$
62,779

 
     Operating cash flows from finance leases
 
54

 
     Financing cash flows from finance leases
 
1,237

 
Right-of-use assets obtained in exchange for new operating lease liabilities
 
55,946

 
Right-of-use assets obtained in exchange for new finance lease liabilities
 

 
Weighted-average remaining lease term - operating leases
 
6.95 years

 
Weighted-average remaining lease term - finance leases
 
2.27 years

 
Weighted-average discount rate - operating leases
 
3.39
%
 
Weighted-average discount rate - finance leases
 
3.36
%
 


Total remaining lease payments under both the company’s operating and finance leases are as follows:
Year Ended December 31,
Operating Leases
 
Finance
Leases
(in thousands)
 
 
 
Remainder of 2019
$
22,598

 
$
62

2020
69,026

 
812

2021
50,060

 
186

2022
39,683

 
84

2023
31,893

 
77

Thereafter
97,401

 

Total lease payments
$
310,661

 
$
1,221

Less: Interest
(32,595
)
 
(50
)
Present value of lease liabilities
$
278,066

 
$
1,171



12


FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED

(4) Other Comprehensive Income (Loss)
The tax effects of the components of other comprehensive income (loss) (“OCI”) for the three months ended September 30, 2019 and 2018 are as follows:
 
 
Three Months Ended
September 30, 2019
 
Three Months Ended
September 30, 2018
(in thousands)
 
Before-Tax
Amount
 
Tax
Benefit
(Expense)
 
Net-of-Tax
Amount
 
Before-Tax
Amount
 
Tax
Benefit
(Expense)
 
Net-of-Tax
Amount
Other comprehensive income (loss):
 
 

 
 

 
 

 
 

 
 

 
 

Foreign currency translation adjustment
 
$
(47,247
)
 
$
5,245

 
$
(42,002
)
 
$
(10,357
)
 
$
(1,376
)
 
$
(11,733
)
Ownership share of equity method investees’ other comprehensive income (loss)
 
3,593

 
(931
)
 
2,662

 
(8,051
)
 
1,556

 
(6,495
)
Defined benefit pension and postretirement plan adjustments
 
2,126

 
(136
)
 
1,990

 
(48,463
)
 
8,660

 
(39,803
)
Unrealized loss on derivative contracts
 
(8,031
)
 
1,737

 
(6,294
)
 
(2,189
)
 
237

 
(1,952
)
Total other comprehensive income (loss)
 
(49,559
)
 
5,915

 
(43,644
)
 
(69,060
)
 
9,077

 
(59,983
)
Less: Other comprehensive income (loss) attributable to noncontrolling interests
 
(1,749
)
 

 
(1,749
)
 
(400
)
 

 
(400
)
Other comprehensive income (loss) attributable to Fluor Corporation
 
$
(47,810
)
 
$
5,915

 
$
(41,895
)
 
$
(68,660
)
 
$
9,077

 
$
(59,583
)


The tax effects of the components of OCI for the nine months ended September 30, 2019 and 2018 are as follows:
 
 
Nine Months Ended
September 30, 2019
 
Nine Months Ended
September 30, 2018
(in thousands)
 
Before-Tax
Amount
 
Tax
Benefit
(Expense)
 
Net-of-Tax
Amount
 
Before-Tax
Amount
 
Tax
Benefit
(Expense)
 
Net-of-Tax
Amount
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
 
$
(19,621
)
 
$
5,284

 
$
(14,337
)
 
$
(59,024
)
 
$
14,668

 
$
(44,356
)
Ownership share of equity method investees’ other comprehensive income (loss)
 
(3,302
)
 
1,177

 
(2,125
)
 
7,560

 
(1,505
)
 
6,055

Defined benefit pension and postretirement plan adjustments
 
6,518

 
(425
)
 
6,093

 
(43,580
)
 
7,647

 
(35,933
)
Unrealized loss on derivative contracts
 
(1
)
 
(598
)
 
(599
)
 
(9,274
)
 
1,580

 
(7,694
)
Unrealized gain on available-for-sale securities
 

 

 

 
1,134

 
(425
)
 
709

Total other comprehensive income (loss)
 
(16,406
)
 
5,438

 
(10,968
)
 
(103,184
)
 
21,965

 
(81,219
)
Less: Other comprehensive income (loss) attributable to noncontrolling interests
 
(1,543
)
 

 
(1,543
)
 
(1,283
)
 

 
(1,283
)
Other comprehensive income (loss) attributable to Fluor Corporation
 
$
(14,863
)
 
$
5,438

 
$
(9,425
)
 
$
(101,901
)
 
$
21,965

 
$
(79,936
)


13


FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED

The changes in accumulated other comprehensive income (“AOCI”) balances by component (after-tax) for the three months ended September 30, 2019 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
 
Accumulated
Other
Comprehensive
Income
(Loss), Net
Attributable to Fluor Corporation:
 

 
 

 
 

 
 

 
 

Balance as of June 30, 2019
$
(281,288
)
 
$
(28,459
)
 
$
(200,546
)
 
$
285

 
$
(510,008
)
Other comprehensive income (loss) before reclassifications
(40,253
)
 
2,518

 

 
(6,844
)
 
(44,579
)
Amounts reclassified from AOCI

 
144

 
1,990

 
550

 
2,684

Net other comprehensive income (loss)
(40,253
)
 
2,662

 
1,990

 
(6,294
)
 
(41,895
)
Balance as of September 30, 2019
$
(321,541
)
 
$
(25,797
)
 
$
(198,556
)
 
$
(6,009
)
 
$
(551,903
)
 
 
 
 
 
 
 
 
 
 
Attributable to Noncontrolling Interests:
 
 
 
 
 
 
 
 


Balance as of June 30, 2019
$
(3,495
)
 
$

 
$

 
$

 
$
(3,495
)
Other comprehensive income (loss) before reclassifications
(1,749
)
 

 

 

 
(1,749
)
Amounts reclassified from AOCI

 

 

 

 

Net other comprehensive income (loss)
(1,749
)
 

 

 

 
(1,749
)
Balance as of September 30, 2019
$
(5,244
)
 
$

 
$

 
$

 
$
(5,244
)


The changes in AOCI balances by component (after-tax) for the nine months ended September 30, 2019 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
 
Accumulated
Other
Comprehensive
Income
(Loss), Net
Attributable to Fluor Corporation:
 

 
 

 
 

 
 

 
 

Balance as of December 31, 2018
$
(308,747
)
 
$
(23,672
)
 
$
(204,649
)
 
$
(5,410
)
 
$
(542,478
)
Other comprehensive income (loss) before reclassifications
(12,794
)
 
(2,552
)
 

 
(2,519
)
 
(17,865
)
Amounts reclassified from AOCI

 
427

 
6,093

 
1,920

 
8,440

Net other comprehensive income (loss)
(12,794
)
 
(2,125
)
 
6,093

 
(599
)
 
(9,425
)
Balance as of September 30, 2019
$
(321,541
)
 
$
(25,797
)
 
$
(198,556
)
 
$
(6,009
)
 
$
(551,903
)
 
 
 
 
 
 
 
 
 
 
Attributable to Noncontrolling Interests:
 
 
 
 
 
 
 
 
 
Balance as of December 31, 2018
$
(3,701
)
 
$

 
$

 
$

 
$
(3,701
)
Other comprehensive income (loss) before reclassifications
(1,543
)
 

 

 

 
(1,543
)
Amounts reclassified from AOCI

 

 

 

 

Net other comprehensive income (loss)
(1,543
)
 

 

 

 
(1,543
)
Balance as of September 30, 2019
$
(5,244
)
 
$

 
$

 
$

 
$
(5,244
)


14


FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED

The changes in AOCI balances by component (after-tax) for the three months ended September 30, 2018 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 June 30, 2018
$
(242,917
)
 
$
(20,064
)
 
$
(148,188
)
 
$
(11,426
)
 
$

 
$
(422,595
)
Other comprehensive income (loss) before reclassifications
(11,333
)
 
(6,646
)
 
(56,191
)
 
(3,736
)
 

 
(77,906
)
Amounts reclassified from AOCI

 
151

 
16,388

 
1,784

 

 
18,323

Net other comprehensive income (loss)
(11,333
)
 
(6,495
)
 
(39,803
)
 
(1,952
)
 

 
(59,583
)
Balance as of September 30, 2018
$
(254,250
)
 
$
(26,559
)
 
$
(187,991
)
 
$
(13,378
)
 
$

 
$
(482,178
)
 
 
 
 
 
 
 
 
 
 
 
 
Attributable to Noncontrolling Interests:
 
 
 
 
 
 
 
 
 


Balance as of June 30, 2018
$
(2,345
)
 
$

 
$

 
$

 
$

 
$
(2,345
)
Other comprehensive income (loss) before reclassifications
(400
)
 

 

 

 

 
(400
)
Amounts reclassified from AOCI

 

 

 

 

 

Net other comprehensive income (loss)
(400
)
 

 

 

 

 
(400
)
Balance as of September 30, 2018
$
(2,745
)
 
$

 
$

 
$

 
$

 
$
(2,745
)

The changes in AOCI balances by component (after-tax) for the nine months ended September 30, 2018 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, 2017
$
(211,177
)
 
$
(32,614
)
 
$
(152,058
)
 
$
(5,684
)
 
$
(709
)
 
$
(402,242
)
Other comprehensive income (loss) before reclassifications
(43,073
)
 
5,247

 
(56,191
)
 
(10,785
)
 

 
(104,802
)
Amounts reclassified from AOCI

 
808

 
20,258

 
3,091

 
709

 
24,866

Net other comprehensive income (loss)
(43,073
)
 
6,055

 
(35,933
)
 
(7,694
)
 
709

 
(79,936
)