Document/ExhibitDescriptionPagesSize 1: 10-Q Quarterly Report HTML 2.21M
2: EX-31.1 Certification -- §302 - SOA'02 HTML 27K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 27K
4: EX-32.1 Certification -- §906 - SOA'02 HTML 24K
5: EX-32.2 Certification -- §906 - SOA'02 HTML 24K
11: R1 Cover HTML 80K
12: R2 Condensed Consolidated Statement of Operations - HTML 130K
Unaudited
13: R3 Condensed Consolidated Statement of Comprehensive HTML 76K
Income (Loss) - Unaudited
14: R4 Condensed Consolidated Balance Sheet - Unaudited HTML 152K
15: R5 CONDENSED CONSOLIDATED BALANCE SHEET - Unaudited HTML 80K
(Parenthetical)
16: R6 Condensed Consolidated Statement of Cash Flows - HTML 116K
Unaudited
17: R7 Condensed Consolidated Statement of Changes in HTML 94K
Equity - Unaudited
18: R8 Condensed Consolidated Statement of Changes in HTML 24K
Equity - Unaudited (Parenthetical)
19: R9 Principles of Consolidation HTML 27K
20: R10 NuScale Reverse Recapitalization HTML 24K
21: R11 Recent Accounting Pronouncements HTML 34K
22: R12 Earnings Per Share HTML 67K
23: R13 Operating Information by Segment and Geographic HTML 108K
Area
24: R14 Impairment HTML 37K
25: R15 Income Taxes HTML 45K
26: R16 Partnerships and Joint Ventures HTML 27K
27: R17 Guarantees HTML 25K
28: R18 Contingencies and Commitments HTML 36K
29: R19 Contract Assets and Liabilities HTML 41K
30: R20 Remaining Unsatisfied Performance Obligations HTML 41K
31: R21 Debt and Lines of Credit HTML 49K
32: R22 Convertible Preferred Stock HTML 30K
33: R23 Fair Value Measurements HTML 92K
34: R24 Stock-Based Compensation HTML 44K
35: R25 Other Comprehensive Income (Loss) HTML 243K
36: R26 Discontinued Operations HTML 25K
37: R27 Recent Accounting Pronouncements (Policies) HTML 24K
38: R28 Earnings Per Share (Tables) HTML 66K
39: R29 Operating Information by Segment and Geographic HTML 104K
Area (Tables)
40: R30 Impairment (Tables) HTML 35K
41: R31 Income Taxes (Tables) HTML 42K
42: R32 Contract Assets and Liabilities (Tables) HTML 34K
43: R33 Remaining Unsatisfied Performance Obligations HTML 28K
(Tables)
44: R34 Debt and Lines of Credit (Tables) HTML 42K
45: R35 Fair Value Measurements (Tables) HTML 94K
46: R36 Stock-Based Compensation (Tables) HTML 42K
47: R37 Other Comprehensive Income (Loss) (Tables) HTML 246K
48: R38 Principles of Consolidation (Details) HTML 25K
49: R39 NuScale Reverse Recapitalization (Details) HTML 28K
50: R40 Earnings Per Share (Details) HTML 79K
51: R41 Earnings Per Share - Antidilutive Securities HTML 30K
Excluded from Computation of EPS (Details)
52: R42 Operating Information by Segment and Geographic HTML 71K
Area - Reportable Segments (Details)
53: R43 Operating Information by Segment and Geographic HTML 55K
Area - Narrative (Details)
54: R44 Operating Information by Segment and Geographic HTML 38K
Area - Other Segment Profit (Loss) (Details)
55: R45 Operating Information by Segment and Geographic HTML 43K
Area - Total Assets (Details)
56: R46 Operating Information by Segment and Geographic HTML 43K
Area - External Revenue and Total Assets by
Geographic Area (Details)
57: R47 Impairment - Schedule of Impairment (Details) HTML 36K
58: R48 Impairment - Narrative (Details) HTML 27K
59: R49 Income Taxes - Narrative (Details) HTML 24K
60: R50 Income Taxes - Income Tax Expense (Benefit) HTML 42K
Reconciliation (Details)
61: R51 Partnerships and Joint Ventures (Details) HTML 48K
62: R52 Guarantees (Details) HTML 28K
63: R53 Contingencies and Commitments (Details) HTML 51K
64: R54 Contract Assets and Liabilities (Details) HTML 35K
65: R55 Remaining Unsatisfied Performance Obligations HTML 36K
(Details)
66: R56 Debt and Lines of Credit - Schedule of Debt HTML 51K
(Details)
67: R57 Debt and Lines of Credit - Narrative (Details) HTML 71K
68: R58 Convertible Preferred Stock (Details) HTML 41K
69: R59 Fair Value Measurements - Recurring Basis HTML 46K
(Details)
70: R60 Fair Value Measurements - Financial Instruments HTML 61K
Not Required to be Measured at Fair Value
(Details)
71: R61 Stock-Based Compensation - Narrative (Details) HTML 49K
72: R62 Stock-Based Compensation - Schedule of HTML 34K
Performance-Based Awards Granted (Details)
73: R63 Stock-Based Compensation - Compensation Expense HTML 36K
(Details)
74: R64 Other Comprehensive Income (Loss) - Tax Effects of HTML 66K
Components of Other Comprehensive Income (Loss)
(Details)
75: R65 Other Comprehensive Income (Loss) - Changes in HTML 88K
AOCI Balances by Component (Details)
76: R66 Other Comprehensive Income (Loss) - Significant HTML 65K
Items Reclassified Out of AOCI (Details)
77: R67 Discontinued Operations - Narrative (Details) HTML 32K
80: XML IDEA XML File -- Filing Summary XML 148K
78: XML XBRL Instance -- flr-20220930_htm XML 2.90M
79: EXCEL IDEA Workbook of Financial Reports XLSX 130K
7: EX-101.CAL XBRL Calculations -- flr-20220930_cal XML 181K
8: EX-101.DEF XBRL Definitions -- flr-20220930_def XML 680K
9: EX-101.LAB XBRL Labels -- flr-20220930_lab XML 1.55M
10: EX-101.PRE XBRL Presentations -- flr-20220930_pre XML 971K
6: EX-101.SCH XBRL Schema -- flr-20220930 XSD 150K
81: JSON XBRL Instance as JSON Data -- MetaLinks 421± 629K
82: ZIP XBRL Zipped Folder -- 0001628280-22-028343-xbrl Zip 428K
(Exact name of registrant as specified in its charter)
iDelaware
i33-0927079
(State
or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
i6700 Las Colinas Boulevard
iIrving,
iTexas
i75039
(Address of principal executive offices)
(Zip
Code)
i469-i398-7000
(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
iCommon Stock, $.01 par value per share
iFLR
iNew
York Stock Exchange
i1.750% Senior Notes due 2023
iFLR 23
iNew
York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. iYesýNoo
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). iYesýNoo
Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,”“accelerated filer,”“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
iLarge
accelerated filer
☒
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
i☐
Emerging
growth company
i☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.o
Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yesi☐Noý
Other
current assets ($i34 and $i28 related to VIEs)
i381
i608
Total
current assets
i4,991
i5,181
Noncurrent
assets
Property, plant and equipment, net ($i43 and $i46 related to VIEs)
i460
i456
Investments
i612
i517
Deferred
taxes
i50
i51
Deferred
compensation trusts
i225
i330
Goodwill
i244
i249
Other
assets ($i41 and $i45 related to VIEs)
i288
i305
Total
noncurrent assets
i1,879
i1,908
Total
assets
$
i6,870
$
i7,089
LIABILITIES
AND EQUITY
Current liabilities
Accounts payable ($i277 and $i261
related to VIEs)
$
i1,071
$
i1,220
Short-term
debt and current portion of long-term debt
i167
i18
Contract
liabilities ($i361 and $i351 related to VIEs)
i769
i945
Accrued
salaries, wages and benefits ($i20 and $i27 related to VIEs)
i567
i629
Other
accrued liabilities ($ii31/ and $33 related to VIEs)
i637
i802
Total
current liabilities
i3,211
i3,614
Long-term
debt
i980
i1,174
Deferred
taxes
i63
i67
Other
noncurrent liabilities ($i55 and $i13 related to VIEs)
i586
i667
Contingencies
and commitments
i
i
Temporary
APIC
i107
i—
Equity
Shareholders’
equity
Preferred stock — authorized ii20,000,000/
shares ($ii0.01/ par value); issued and
outstanding — iiii600,000///
shares in 2022 and 2021
i—
i—
Common
stock — authorized ii375,000,000/ shares ($ii0.01/
par value); issued and outstanding — ii142,082,682/ and
ii141,434,771/ shares in 2022 and 2021, respectively
i1
i1
APIC
i1,129
i967
AOCI
(i378)
(i366)
Retained
earnings
i898
i791
Total
shareholders’ equity
i1,650
i1,393
NCI
i273
i174
Total
equity
i1,923
i1,567
Total
liabilities and equity
$
i6,870
$
i7,089
The
accompanying notes are an integral part of these financial statements.
These financial statements do not include footnotes and certain financial information presented
annually under GAAP, and therefore, should be read in conjunction with our 2021 10-K. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end. Although such estimates are based on management’s most recent assessment of the underlying facts and circumstances utilizing the most current information available, our reported results of operations may not necessarily be indicative of results that we expect for the full year.
The financial statements included herein are unaudited. We believe they contain all adjustments of a normal recurring nature which are necessary to present fairly our financial position and our operating results as of and for the periods presented. All significant intercompany transactions of consolidated subsidiaries are eliminated.
Certain amounts in tables may not total or agree back to the financial statements due to immaterial rounding differences. Management has evaluated all material events occurring subsequent to September 30, 2022 through the filing date of this Q3 2022 10-Q.
Quarters are typically 13 weeks in length but, due to our December 31 year-end, the number of weeks in a reporting period may vary slightly during the year and for comparable prior year periods. We report our quarterly results of operations based on periods ending on the Sunday nearest March 31, June 30 and September 30, allowing for 13-week interim reporting periods. For clarity of presentation, all periods are labeled as if the periods ended on March 31, June 30 and September 30.
In the first quarter of 2022, we determined that our Stork business and the remaining unsold AMECO
equipment business no longer met all of the requirements to be classified as Disc Ops, primarily as a result of uncertainties related to the timing of this sale. Therefore, both Stork and the remaining AMECO business are reported as Cont Ops for all periods presented and included in our Other segment. Further, we remeasured the carrying value of these businesses under the held and used criteria and reversed $i63 million of previously recorded impairment expense during the first quarter of 2022.
2. iNuScale
Reverse Recapitalization
In the second quarter of 2022, NuScale became a public company (ticker:SMR) through a reverse recapitalization with a public shell company, Spring Valley, resulting in the net receipt of $i341 million of cash and the assumption of $i48 million
of warrant liabilities exercisable for shares of SMR. We continue to control and consolidate NuScale. The impacts of the transaction are recognized in our third quarter results.
Under the reverse recapitalization, NuScale was the accounting acquirer of Spring Valley which held no significant assets or liabilities requiring fair value re-assessment (outside of cash and warrant liabilities).
3. iRecent
Accounting Pronouncements
iWe did not implement any new accounting pronouncements during the 2022 Period. However, we are evaluating the impact of the future disclosures that may arise under recent SEC proposals.
Potentially dilutive securities include CPS, stock options, RSUs and performance-based award units. Diluted EPS reflects the assumed exercise or conversion of all dilutive securities using the if-converted and treasury stock methods. In
computing diluted EPS, only securities that are actually dilutive are included.
i
3ME September
30,
9ME September 30,
(in millions, except per share amounts)
2022
2021
2022
2021
Net earnings (loss) from Cont Ops attributable to Fluor
$
i22
$
i42
$
i136
$
(i127)
Less:
Dividends on CPS
i10
i10
i29
i15
Net
earnings (loss) from Cont Ops available to Fluor common stockholders
i12
i32
i107
(i142)
Net
earnings (loss) from Disc Ops attributable to Fluor
i—
(i1)
i—
(i34)
Net
earnings (loss) available to Fluor common stockholders
$
i12
$
i31
$
i107
$
(i176)
Weighted
average common shares outstanding
i142
i141
i142
i141
Diluted
effect:
CPS
i—
i—
i—
i—
Stock
options, RSUs and performance-based award units
i3
i2
i2
i—
Weighted
average diluted shares outstanding
i145
i143
i144
i141
Basic
EPS available to Fluor common stockholders:
Net earnings (loss) from Cont Ops
$
i0.08
$
i0.23
$
i0.75
$
(i1.00)
Net
earnings (loss) from Disc Ops
i—
(i0.01)
i—
(i0.24)
Diluted
EPS available to Fluor common stockholders:
Net earnings (loss) from Cont Ops
$
i0.08
$
i0.22
$
i0.74
$
(i1.00)
Net
earnings (loss) from Disc Ops
i—
(i0.01)
i—
(i0.24)
Anti-dilutive
securities not included in shares outstanding:
CPS
i27
i27
i27
i13
Stock
options, RSU and performance-based award units
5. iOperating Information by Segment and Geographic Area
i
3ME September
30,
9ME September 30,
(in millions)
2022
2021
2022
2021
Revenue
Energy Solutions
$
i1,592
$
i1,365
$
i4,097
$
i3,675
Urban
Solutions
i982
i1,015
i2,946
i3,419
Mission
Solutions
i639
i723
i1,779
i2,184
Other
i399
i400
i1,212
i1,256
Total
revenue
$
i3,612
$
i3,503
$
i10,034
$
i10,534
Segment
profit (loss)
Energy Solutions
$
i59
$
i72
$
i177
$
i184
Urban
Solutions
(i54)
i18
(i31)
(i21)
Mission
Solutions
i29
i28
i115
i117
Other
(i3)
(i2)
(i8)
(i8)
Total
segment profit (loss)
$
i31
$
i116
$
i253
$
i272
G&A
(i30)
(i44)
(i146)
(i144)
Impairment
i—
(i5)
i63
(i153)
Foreign
currency gain (loss)
i34
i37
i51
(i4)
Interest
income (expense), net
i14
(i33)
i4
(i63)
Earnings
(loss) from Cont Ops attributable to NCI
(i46)
(i3)
(i31)
i22
Earnings
(loss) from Cont Ops before taxes
$
i3
$
i68
$
i194
$
(i70)
/
Energy
Solutions. Segment profit in the 2022 Quarter and 2022 Period included losses of $i5 million and $i1 million,
respectively, related to an embedded foreign currency derivative. Segment profit in the 2021 Quarter and 2021 Period included a gain of $i18 million and a loss of $i30 million,
respectively, related to the embedded derivative.
Urban Solutions. Segment profit for the 2022 Quarter included a $i64 million (or $i0.37
per share) charge for additional rework and schedule delays on a highway project, a $ii22/ million
(or $i0.09 per share) charge for cost growth and delay mitigation costs on an international bridge project and a $i21 million
(or $i0.12 per share) charge for subcontractor cost escalation and productivity estimates on an automated people mover project. Segment profit for the 2021 Quarter included forecast revisions for schedule delays and productivity on a light rail project. Segment profit for the 2022 Period included a $i86 million
(or $i0.50 per share) charge for additional rework and schedule delays on a highway project, a $i54 million
(or $ii0.23/
per share) charge for cost growth and delay mitigation costs on an international bridge project and a $i35 million (or $i0.20
per share) charge for subcontractor cost escalation and productivity estimates on an automated people mover project. Segment profit for the 2021 Period included a project charge of $i138 million (or $i0.72
per share) related to procurement and subcontractor cost growth, delays and disruptions in the schedule of the international bridge project. We continue to analyze the recoverability of these costs as claims, which could be material.
Other. Segment profit (loss) for NuScale, Stork and AMECO follows:
In April 2022, we sold approximately i5% of the ownership of NuScale to Japan NuScale Innovation, LLC for $i107 million,
subject to CFIUS review. The sale did not trigger any recognition of gain or loss because we control and consolidate NuScale before and after the sale. We have recorded $i107 million as temporary APIC on our balance sheet as of September 30, 2022, which would become permanent APIC upon CFIUS approval. If CFIUS does not approve the sale, then these amounts will be repaid to the buyer. We expect CFIUS review to be completed in the fourth quarter of 2022 or early 2023.
We
did not recognize any material impairment expense in Cont Ops during the 2022 Quarter. Impairment, included in Cont Ops, is summarized as follows:
3ME September 30,
9ME September 30,
(in
millions)
2021
2022
2021
Impairment:
Energy Solutions' equity method investment
$
i—
$
i—
$
i26
Goodwill
i—
i—
i13
Fair
value adjustment of Stork and AMECO assets
i5
(i63)
i114
Total
impairment
$
i5
$
(i63)
$
i153
/
During
the 2022 Period, we reversed $i63 million in impairment recognized in 2021 when our Stork and AMECO businesses were classified as held for sale due primarily to remeasurement under held and used impairment criteria, for which CTA balances are excluded from carrying value.
7. iIncome
Taxes
The effective tax rate on earnings (loss) from Cont Ops was i939.2% for the 2022 Quarter and i46.0%
for the 2022 Period compared to i43.5% and (i49.4)% for the corresponding periods of 2021. iA
reconciliation of U.S. statutory federal income tax expense (benefit) to income tax expense follows:
U.S statutory federal income tax expense (benefit)
$
i1
$
i14
$
i41
$
(i15)
Increase
(decrease) in taxes resulting from:
State and local income taxes
i1
(i1)
i3
(i1)
Valuation
allowance, net
i15
i11
i50
i32
Foreign
tax impact
i—
i6
(i11)
i15
Noncontrolling
interest
i10
i—
i6
(i3)
Other
i—
(i1)
i—
i7
Total
income tax expense (benefit)
$
i27
$
i29
$
i89
$
i35
8. iPartnerships
and Joint Ventures
Investments in a loss position of $i288 million and $i240 million were included in other accrued liabilities
as of September 30, 2022 and December 31, 2021, respectively, and consisted primarily of provision for anticipated losses on a legacy infrastructure project. Accounts receivable related to work performed for unconsolidated partnerships and joint ventures included in “Accounts receivable, net” was $i196 million and $i205
million as of September 30, 2022 and December 31, 2021, respectively.
During the 2022 Period, we sold the majority of our interest in an infrastructure joint venture in Canada and recognized a gain of $i11 million. During the 2021 Period, we sold our interest in an infrastructure joint venture in the U.S. and recognized a gain of $i20
million. These gains were included in Urban Solutions' segment profit.
Variable Interest Entities
The aggregate carrying value of unconsolidated VIEs (classified under both "Investments” and “Other accrued liabilities”) was a net asset of $i13 million and $i33
million as of September 30, 2022 and December 31, 2021, respectively. Some of our VIEs have debt; however, such debt is typically non-recourse in nature. Our maximum exposure to loss as a result of our investments in unconsolidated VIEs is typically limited to the aggregate of the carrying value of the investment and future funding necessary to satisfy the contractual obligations of the VIE. Future funding commitments as of September 30, 2022 for the unconsolidated VIEs were $i57
million.
We are required to consolidate certain VIEs. Assets and liabilities associated with the operations of our consolidated VIEs are presented on our balance sheet. The assets of a VIE are restricted for use only for the particular VIE and are not available for our general operations. We have agreements with certain VIEs to provide financial or performance assurances to clients, as discussed elsewhere.
9. iGuarantees
The
maximum potential amount of future payments that we could be required to make under outstanding performance guarantees, which represents the remaining cost of work to be performed, was estimated to be $i16 billion as of September 30, 2022. For cost reimbursable contracts, amounts that may become payable pursuant to guarantee provisions are normally recoverable from the client for work performed. For lump-sum 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, we may have recourse to third parties, such as owners, partners, subcontractors or vendors for claims. The performance guarantee obligation was iino/t
material as of September 30, 2022 and December 31, 2021.
We and certain of our subsidiaries are subject to litigation, claims and other commitments and contingencies arising in the ordinary course of business. The asserted value of these matters may be significant and we are unable to predict the ultimate outcome of any such matter. However, except as set forth below, we currently do not expect that the ultimate resolution of any open matters will have a material adverse effect on our financial position or results of operations.
The following disclosures for commitments and contingencies have been updated since the matter was presented in the 2021 10-K.
Since May 2018, purported shareholders have filed various complaints against Fluor and certain of
its current and former executives in the U.S. District Court for the Northern District of Texas. The plaintiffs purport to represent a class of shareholders who purchased or otherwise acquired Fluor common stock from August 14, 2013 through February 14, 2020, and seek to recover damages arising from alleged violations of federal securities laws. These claims are based on statements concerning Fluor’s internal and disclosure controls, risk management, revenue recognition, and Fluor’s gas-fired power contracts, which plaintiffs assert were materially misleading. In May 2020, these complaints were consolidated into one matter. We filed a motion to dismiss the matter in July 2020. The motion was granted in part on May 5, 2021, and as
a result the Court dismissed with prejudice all allegations except those related to a single statement made in 2015 about one gas-fired power contract. During 2021, we recorded a liability for the estimated resolution of the matter and we also recognized the effects of expected insurance coverage. In the first quarter 2022, we reached a proposed settlement with the plaintiffs. The proposed settlement has been preliminarily approved by the Court but is subject to and pending final approval, with a hearing currently scheduled for November 2022. No additional liability or insurance recovery has been recognized in 2022.
Since September 2018, ieleven
separate purported shareholders' derivative actions were filed against current and former members of the Board of Directors, as well as certain of Fluor’s current and former executives. Fluor is named as a nominal defendant in the actions. These derivative actions purport to assert claims on behalf of Fluor and make substantially the same factual allegations as the securities class action matter discussed above and seek various forms of monetary and injunctive relief. These actions are pending in Texas state court (District Court for Dallas County), the U.S. District Court for the District of Delaware, the U.S. District Court for the Northern District of Texas, and the Court of Chancery of the State of Delaware. Certain of these actions were consolidated and stayed. We anticipate that these matters will remain stayed until final resolution of the securities class action. While no assurance can be given as to the ultimate outcome of this matter, we do not believe it is
probable that a loss will be incurred. Accordingly, we have not recorded any liability as a result of these actions.
Various wholly-owned subsidiaries of Fluor, in conjunction with a partner, TECHINT, (“Fluor/TECHINT”) performed engineering, procurement and construction management services on a cost reimbursable basis for Barrick Gold Corporation involving a gold mine and ore processing facility on a site straddling the border between Argentina and Chile. In 2013 Barrick terminated the Fluor/TECHINT agreements for convenience and not due to the performance of Fluor/TECHINT. On August 12, 2016, Barrick filed a notice of arbitration against Fluor/TECHINT, demanding damages and/or a refund of contract
proceeds paid of not less than $i250 million under various claims relating to Fluor/TECHINT’s alleged performance. Proceedings were suspended while the parties explored a possible settlement. In August 2019, Barrick drew down $i36
million of letters of credit from Fluor/TECHINT ($i24 million from Fluor and $i12 million from TECHINT). Thereafter, Barrick proceeded to reactivate the
arbitration. Barrick and Fluor/TECHINT have exchanged detailed statements of claim and counterclaim pursuant to which Barrick's claim against Fluor/TECHINT now totals approximately $i364 million net of amounts acknowledged to be due to Fluor/TECHINT. We believe that the claims asserted by Barrick are without merit and are vigorously defending these claims. While no assurance can be given as to the ultimate outcome of this matter, we do not believe it is probable that a loss will be incurred. Accordingly, we have not recorded any liability as a result
of these claims.
There have been no substantive changes to the disclosures for the following commitments and contingencies since the matter was presented in the 2021 10-K.
Fluor Australia Ltd., our wholly-owned subsidiary (“Fluor Australia”), completed a cost reimbursable engineering, procurement and construction management services project for Santos Ltd. (“Santos”) involving a large network of natural gas gathering and processing facilities in Queensland, Australia. On December 13, 2016, Santos filed an action in Queensland Supreme Court against Fluor Australia, asserting various causes of action and seeking damages and/or a refund of contract proceeds paid of approximately AUD $i1.47
billion. Santos has joined Fluor to the matter on the basis of a parent company
guarantee issued for the project. We believe that the claims asserted by Santos are without merit and we are vigorously defending these claims. While no assurance can be given as to the ultimate outcome of this matter, we do not believe it is probable that a loss will be incurred. Accordingly, we have not recorded any liability as a result of this action.
Fluor
Limited, our wholly-owned subsidiary (“Fluor Limited”), and Fluor Arabia Limited, a partially-owned subsidiary
(“Fluor Arabia”), completed cost reimbursable engineering, procurement and construction management services for Sadara Chemical Company (“Sadara”) involving a large petrochemical facility in Jubail, Kingdom of Saudi Arabia. On August 23, 2019, Fluor Limited and Fluor Arabia Limited commenced arbitration proceedings against Sadara after it refused to pay invoices totaling approximately $i100
million due under the contracts. As part of the arbitration proceedings, Sadara has asserted various counterclaims for damages and/or a refund of contract proceeds paid totaling approximately $i574 million against Fluor Limited and Fluor Arabia Limited. We believe that the counterclaims asserted by Sadara are without merit and are vigorously defending these claims. While
no assurance can be given as to the ultimate outcome of the counterclaims, we do not believe it is probable that a loss will be incurred in excess of amounts reserved for this matter. Accordingly, we have not recorded any further liability as a result of the counterclaims.
Other Matters
We periodically evaluate our positions and the amounts recognized with respect to all our claims and back charges. As of both September 30, 2022 and December 31, 2021, we had recorded $ii215/
million of claim revenue for costs incurred to date. Additional costs, which will increase the claim revenue balance over time, are expected to be incurred in future periods. We had no material disputed back charges to suppliers or subcontractors as of September 30, 2022 and December 31, 2021.
Our operations are subject to and affected by federal, state and local laws and regulations regarding the protection of the environment. We maintain reserves for potential future environmental cost where such obligations are either known or considered probable, and can be reasonably estimated. We believe that our reserves with respect to future environmental cost are adequate and such future cost will not have a material effect on our financial position or results of operations.
In
February 2020, we announced that the SEC is conducting an investigation and requested documents and information related to projects for which we recorded charges in the second quarter of 2019. In April 2020 and January 2022, Fluor received subpoenas from the U.S. Department of Justice (“DOJ”) seeking documents and information related to the second quarter 2019 charges; certain of the projects associated with those charges; and certain project accounting, financial reporting and governance matters. These matters remain unresolved, and we have continued to cooperate and engage with the SEC and DOJ regarding these investigations. No assurance can be given as to the ultimate outcome of these matters, and we are not able to predict whether any legal, regulatory or reputational impacts of any allegations or resolution of these matters will have a material impact on our results.
As of September 30, 2022, letters of credit totaling $i332 million were outstanding under our $i1.8
billion credit facility, which matures in February 2025. The credit facility contains customary financial covenants, including a debt-to-capitalization ratio that cannot exceed i0.60 to i1.0,
a limitation on the aggregate amount of debt of the greater of $i750 million or €i750 million for our subsidiaries,
and a minimum liquidity threshold of $i1.2 billion, defined in the amended credit facility, which may be reduced to $i1.0
billion upon the repayment of debt. The credit facility also contains provisions that will require us to provide collateral to secure the facility should we be downgraded to BB by S&P and Ba2 by Moody's, such collateral consisting broadly of our U.S. assets. Borrowings under the facility, which may be denominated in USD, EUR, GBP or CAD, bear interest at a base rate, plus an applicable borrowing margin. As of September 30, 2022, we had availability to borrow $i845 million under our
credit facility.
Uncommitted Lines of Credit
As of September 30, 2022, letters of credit totaling $i877 million were outstanding under uncommitted lines of credit.
Senior Notes
In June 2022, we redeemed $i23
million of outstanding 2023 Notes. The gain on redemptions was not material.
In September 2021, we completed a tender offer in which we repurchased $i375 million of 2023 Notes and $i108
million of 2024 Notes, excluding accrued interest. Additionally, we redeemed $i26 million of outstanding 2023 and 2024 Notes in open market transactions during the 2021 Period. We recognized $i20
million in losses related to these redemptions which was included in interest expense.
14. iConvertible Preferred Stock
Third quarter CPS dividends of $i10 million
were paid in August 2022. In October 2022, our Board of Directors approved the payment of fourth quarter CPS dividends of $i10 million, payable in November 2022.
Each share of CPS is convertible at the holder's option at any time into i44.9585 shares of our common stock per share of CPS. The conversion rate is subject to certain customary adjustments, but no payment or adjustment for accumulated but unpaid dividends will be made upon conversion, subject to certain limited exceptions. The CPS may not be redeemed by us; however, we may, at any time on or after May 20,
2022, elect to cause all outstanding shares of CPS to be converted into shares of our common stock at the conversion rate, subject to certain conditions (and, if such conversion occurs prior to May 20, 2024, the payment of a cash make-whole premium). The most significant condition to our ability to force a conversion prior to May 2024 is the requirement that our common stock trade above $i28.92 for i20
consecutive trading days. We estimate that the cash make-whole payment would have been $i84 million at September 30, 2022 (assuming we minimally exceeded the minimum trading price to invoke the conversion). If a make-whole fundamental change, as defined in the certificate of designations for the CPS, occurs, we will in certain circumstances be required to increase the conversion rate for a holder who elects to convert shares of CPS in connection with such make-whole fundamental change.
15. iFair
Value Measurements
i
The following table delineates assets and liabilities that are measured at fair value on a recurring basis:
(1)Consists
of registered money market funds and an equity index fund. These investments, which are trading securities, represent the net asset value at the close of business of the period based on the last trade or official close of an active market or exchange.
(2)Foreign currency and commodity derivatives are estimated using pricing models with market-based inputs, which take into account the present value of estimated future cash flows.
(3) The SMR warrant liabilities are comprised of public and private placement warrants redeemable by SMR under certain conditions, both measured using the price of the public warrants. The private placement warrants are not publicly traded and have been classified as Level 2 measurements while the public warrants are classified as Level 1.
/
We
have measured assets and liabilities held for sale and certain other impaired assets at fair value on a nonrecurring basis. iThe following summarizes information about financial instruments that are not required to be measured at fair value:
(1) Cash
consists of bank deposits. Carrying amounts approximate fair value.
(2) The carrying amounts of these time deposits approximate fair value because of the short-term maturity of these instruments. Amortized cost is not materially different from the fair value.
(3)Notes receivable are carried at net realizable value which approximates fair value. Factors considered in determining the fair value include the credit worthiness of the borrower, current interest rates, the term of the note and any collateral pledged as security. Notes receivable are periodically assessed for impairment.
(4) The fair value of the Senior Notes was estimated based on the quoted market prices and Level 2 inputs.
(5)Other
borrowings represent bank loans and other financing arrangements which mature within one year. The carrying amount of borrowings under these arrangements approximates fair value because of the short-term maturity.
16. iStock-Based Compensation
Equity Awards
Our
executive and director stock-based compensation plans are described more fully in the 2021 10-K. In the 2022 and 2021 Periods, RSUs totaling i415,356 and i596,391,
respectively, were granted to executives and directors at a weighted-average grant date fair value of $i22.36 and $i18.67
per share, respectively, and generally vest over ithree years. RSUs granted to directors in 2022 and 2021 vested upon grant.
Stock options for the purchase of i250,656
and i481,626 shares at a weighted-average exercise price of $i21.90
and $i17.96 per share were awarded to executives during the 2022 and 2021 Periods, respectively. The options granted in 2022 and 2021 generally vest over ithree
years and expire iten years after the grant date.
Performance-based award units totaling i426,957
and i613,868 were awarded to Section 16 officers during the 2022 and 2021 Periods, respectively. These awards generally cliff vest after i3
years and contain annual performance conditions for each of the i3 years of the vesting period. Under GAAP, performance-based elements of such awards are not deemed granted until the performance targets have been established. The performance targets for each year are generally established in the first quarter. These awards are earned based on achievement of EPS and return on invested capital goals over three one-year periods, and earned or modified based on our three-year cumulative total shareholder return
relative to companies in the S&P 500 on the date of the award. For the majority of awards, generally only one-third of the units awarded in any given year are deemed to be granted each year of the i3-year vesting periods. iDuring
2022, the following units were granted based upon the establishment of performance targets:
For
awards granted under the 2022, 2021 and 2020 performance award plans, the number of units are adjusted at the end of each performance period based on achievement of certain performance targets and market conditions, as defined in the award agreements.
Liability Awards
SGI awards and performance-based awards for non-Section 16 executives vest and become payable at a rate of one-third of the total award each year.
i
Location
in Statement of Operations
3ME September 30,
9ME September 30,
Compensation Expense (in millions)
2022
2021
2022
2021
SGI awards
G&A
$
i10
$
i3
$
i20
$
i34
Performance-based
awards for non-Section 16 executives
(1)Gains
and losses on commodity and foreign currency derivative contracts were reclassified to "Cost of revenue" and "G&A".
18. iDiscontinued Operations
In May 2021, we sold the North American operations
of the AMECO equipment business for $i71 million and recognized a loss on the sale of $i27
million. The results for the sold operations are reported in Disc Ops in the 2021 Period and are inot material.
In our 2021 10-K, we reported additional AMECO operations and Stork operations in Disc Ops. These operations no longer qualify for all Disc Ops criteria and are now reported in Cont Ops, unless or until such time that they re-qualify for Disc Ops.
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion and analysis should be read in conjunction with our financial statements and our 2021 10-K. Except as the context otherwise requires, the terms Fluor or the Registrant, as used herein, are references to Fluor and references to the company, we, us, or our, as used herein, shall include Fluor, its consolidated subsidiaries and joint ventures.
Certain statements made herein, including statements regarding our projected operating results, liquidity and backlog levels and
the implementation of strategic initiatives are forward-looking in nature. Under the Private Securities Litigation Reform Act of 1995, a “safe harbor” may be provided to us for certain of these forward-looking statements. We caution readers that forward-looking statements, including disclosures which use words such as we “believe,”“anticipate,”“expect,”“estimate,”"commit,""will,""may" and similar statements, are subject to risks and uncertainties which could cause actual results to differ materially from stated expectations. Significant factors potentially contributing to such differences include:
•Repercussions of events beyond our control, such as severe weather conditions, natural disasters, pandemics, political crises or other catastrophic events, that may significantly affect operations, result
in higher cost or subject the company to contract claims by our clients;
•The severity and duration of the COVID pandemic and actions by governments, businesses and others in response to the pandemic;
•The cyclical nature of many of the markets we serve and our clients' vulnerability to economic downturns, such as recessions, which may result in decreased capital investment and reduced demand for our services;
•Our failure to receive anticipated new contract awards and the related impact on our operations;
•Failure
to accurately estimate the cost and schedule on our projects, potentially resulting in cost overruns or obligations, including those related to project delays and those caused by the performance of our clients, subcontractors, suppliers and partners;
•Intense competition in the global EPC industry, which can place downward pressure on our contract prices and profit margins and may increase our contractual risks;
•Failure of our joint venture partners to perform their venture obligations, which could impact the success of those ventures and impose additional financial and performance obligations on us;
•Cybersecurity breaches of our systems and information technology;
•Civil
unrest, security issues, labor conditions and other unforeseeable events in the countries in which we do business;
•Project cancellations, scope adjustments or deferrals, or foreign currency fluctuations, that could reduce the amount of our backlog and the revenue and profits that we earn;
•Differences between our actual results and the assumptions and estimates used to prepare our financial statements;
•Client delays or defaults in making payments;
•Failure of our suppliers or subcontractors to provide supplies or services at the agreed-upon levels or times;
•The inability to hire and retain qualified personnel;
•The
potential impact of changes in tax laws and other tax matters including, but not limited to, those from foreign operations, the realizability of our deferred tax assets and the ongoing audits by tax authorities;
•Our ability to secure appropriate insurance;
•The failure to be adequately indemnified for our nuclear services;
•The loss of business from one or more significant clients;
•The availability of credit and financial assurances plus restrictions imposed by credit facilities, both for us and our clients, suppliers, subcontractors or other partners;
•Adverse results in existing or future litigation, regulatory proceedings or dispute
resolution proceedings (including claims for indemnification), or claims against project owners, subcontractors or suppliers;
•Failure of our employees, agents or partners to comply with laws, which could result in harm to our reputation and reduced profits or losses;
•The impact of new or changing legal requirements, as well as past and future environmental, health and safety regulations including climate change regulations; and
•The risks associated with acquisitions, dispositions or other investments, including the failure to successfully integrate acquired businesses.
Any forward-looking statements that we may make are based on our current expectations and beliefs concerning future developments and their potential effects on us. There is no assurance that future developments affecting us will be those presently anticipated by us.
Additional information concerning these and other factors can be found in our press releases and periodic filings with the SEC, including the 2021 10-K. These filings are available publicly on the SEC’s website at http://www.sec.gov, on our website at http://investor.fluor.com
or upon request from our Investor Relations Department at (469) 398-7222. We cannot control such risk factors and other uncertainties, and in many cases, cannot predict the risks and uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements. These risks and uncertainties should be considered when evaluating Fluor and deciding whether to invest in our securities. Except as otherwise required by law, we undertake no obligation to publicly update or revise our forward-looking statements, whether as a result of new information, future events or otherwise.
Results of Operations
In the first quarter of 2022, we determined that our Stork business and the remaining unsold AMECO equipment business no longer met all of the requirements to
be classified as Disc Ops, primarily as a result of uncertainties related to the timing of this sale. Therefore, both Stork and the remaining AMECO business are reported as Cont Ops for all periods presented and included in our Other segment.
In the second quarter of 2022, NuScale became a public company (ticker:SMR) through a reverse recapitalization with a public shell company. We continue to control and consolidate NuScale. The impacts of the transaction are recognized in our third quarter results.
In the third quarter of 2022, we agreed to arrangements to facilitate the sail away of a legacy upstream project from the fabrication yard in China. These agreements reduced our exposure to liquidated damages and created partially client-funded incentives for the fabricator.
During the fourth quarter of 2022, we expect to review the combined
effects of schedule and cost estimates and to conclude on the claims potential on an international bridge project. In addition, several other current and completed projects are expected to undergo claim negotiations or dispute resolution processes during the fourth quarter of 2022. These separate evaluations could individually or in the aggregate cause a material change in the forecast for the project, which in turn could have a material effect on our fourth quarter results.
Backlog
related to projects located outside of the U.S.
53%
65%
Backlog related to lump-sum projects
42%
59%
(1)Total segment profit (loss) is a non-GAAP financial measure. We believe that total segment profit (loss) provides a meaningful perspective on our results as it is the aggregation of individual segment profit (loss) measures that we use to evaluate and manage our performance.
During the first quarter of 2022, we suspended any new investment in our Russian
operations. We have evaluated our financial exposure through September 30, 2022 and do not believe that, should existing conditions in Eastern Europe persist, we would have a material impairment of our assets. Our backlog on projects in the impacted region is not significant to future revenue or margin. We continue to monitor the circumstances in Eastern Europe and wind down our existing contractual obligations while complying with all regulatory limitations placed on new and existing business for projects and clients based in the region.
We experienced reductions in demand for certain services and the delay or abandonment of ongoing or anticipated projects during the COVID pandemic and steep decline in oil prices in early 2020. Although oil prices have rebounded, our energy clients have been hesitant to increase capital expenditures outside of energy transition projects.
The pandemic impacted our productivity, our ability to mobilize our workforce on certain projects and our supply chain at our global suppliers' facilities and our fabrication yard in China. Although many of our projects are in a state we consider normal, we continue to deal with the effects of COVID on our operating results, particularly as we consider them against how we contracted work. Our estimates reflect our best assessment of project results inclusive of COVID effects (including client recoveries), which have been dynamic as our projects have seen changes in prevailing regulations.
During the 2022 Quarter, consolidated revenue increased slightly due to the ramp up of execution activities on a refinery project in Mexico, a recently awarded mid-scale LNG projectand a chemicals project in China. During the 2022 Period, consolidated revenue declined due to volume declines
on projects which were completed or nearing completion in the Urban Solutions and Mission Solutions segments.
Segment profit for the 2022 Quarter declined significantly due to project charges on three legacy infrastructure projects. Segment profit for the 2022 Period was relatively flat compared to the 2021 Period due to significant infrastructure charges recognized during both periods.
During the 2022 Period, we reversed $63 million in impairment recognized in 2021 when our Stork and AMECO businesses were classified as held for sale due primarily to remeasurement under held and used impairment criteria, for which CTA balances are excluded from carrying value. If our Stork and AMECO businesses are sold or if they meet the held for sale criteria again, we might re-recognize some or all of the impairment expense related to remeasurement. During the 2021 Period, we recognized impairment
on goodwill and one equity method investment in the Energy Solutions segment and we also recorded fair value adjustments to our Stork and AMECO businesses which were classified as held for sale in 2021.
Our results were significantly impacted by evolving foreign currency rates in 2022. During the 2022 Quarter and 2022 Period, the U.S. dollar appreciated significantly against the Euro, the British Pound and the Canadian Dollar.
The effective tax rate on earnings (loss) from Cont Ops was 939.2% for the 2022 Quarter and 46.0% for the 2022 Period compared to 43.5% and (49.4)% for the corresponding periods of 2021. A reconciliation of U.S. statutory federal income tax expense (benefit) to income tax expense follows:
U.S
statutory federal income tax expense (benefit)
$
1
$
14
$
41
$
(15)
Increase (decrease) in taxes resulting from:
State and local income taxes
1
(1)
3
(1)
Valuation
allowance, net
15
11
50
32
Foreign tax impact
—
6
(11)
15
Noncontrolling interest
10
—
6
(3)
Other
—
(1)
—
7
Total
income tax expense (benefit)
$
27
$
29
$
89
$
35
The increase in backlog resulted from significant new awards booked during the 2022 Quarter. Although backlog reflects business that is considered to be firm, cancellations, deferrals or scope adjustments may occur. Backlog is adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and
project deferrals, as appropriate. Backlog differs from RUPO discussed elsewhere. RUPO includes only the amount of revenue we expect to recognize under contracts with definite terms and substantive termination provisions.
Segment Operations - Comparisons of the 2022 Quarter to the 2021 Quarter and the 2022 Period to the 2021 Period
Energy Solutions
Revenue for the 2022 Quarter and 2022 Period increased due to the ramp up of execution activities on a refinery project in Mexico, a recently awarded mid-scale LNG project and two chemicals projects in China partially offset by declines in the volume of execution activity for projects nearing completion.
Segment profit for the 2022 Quarter declined primarily
due to losses related to embedded foreign currency derivatives associated with projects in Mexico and declines in execution activity for projects nearing completion partially offset by increased execution activity on the recently awarded projects discussed above. Segment profit for the 2022 Period remained flat compared to the 2021 Period. The change in segment profit margin reflects the same factors affecting segment profit.
New awards in the 2022 Quarter and 2022 Period increased due to a large award for a chemicals project in China. Backlog increased during the 2022 Period due to the new award activity.
Urban Solutions
Revenue for the 2022 Quarter decreased primarily due to declines in the volume of execution activity for a large mining project nearing completion and the de-recognition of revenue resulting
from the project charges discussed below partially offset by the ramp up of execution activities on a mining project in South America, a life sciences project and an advanced technology project in the United States. Revenue for the 2022 Period decreased primarily due to the completion of three large mining projects partially offset by increased execution activities on a life sciences project and an advanced technology project in the U.S.
Segment profit for the 2022 Quarter reflects a $64 million charge for additional rework and schedule delays on a highway project, a $22 million charge for cost growth and delay mitigation costs on an international bridge project and a $21 million charge for subcontractor cost escalation and productivity estimates on an automated people mover project.Segment profit for the 2021 Quarter reflects charges
for schedule delays and productivity on a light rail project.Segment profit for the 2022 Period reflects a $86 million charge for additional rework and schedule delays on a highway project, a $54 million charge for cost growth and delay mitigation costs on an international bridge project and a $35 million charge for subcontractor cost escalation and productivity estimates on an automated people mover project. Segment profit for the 2021 Period reflects a charge of $138 million for procurement and subcontractor cost growth, delays and disruptions in schedule of the international bridge project.We continue to analyze the recoverability of these costs as claims, which could be material.
During the 2022 Period, we sold the majority of our interest in an infrastructure joint venture in Canada
and recognized a gain of $11 million. During the 2021 Period, we sold our interest in an infrastructure joint venture in the U.S. and recognized a gain of $20 million. The change in segment profit margin reflects the same factors affecting segment profit.
New awards in the 2022 Quarter increased due to a large life sciences project in Denmark awarded in the current quarter. New awards in the 2022 Period increased due to the large life sciences project as well as awards for a mining project in Australia and a highway project in Texas. Backlog increased during the 2022 Period due to the new award activity.
Mission
Solutions
Revenue for the 2022 Quarter and 2022 Period decreased compared with comparable 2021 periods primarily due to the completion of a DOE contract in the prior year and the completion of a contingency and humanitarian support project in the first quarter of 2022 partially offset by increased execution activities on three DOE contracts. Revenue for the 2022 Period further declined due to the closure of LOGCAP in Afghanistan.
New awards in the 2022 Quarter and 2022 Period increased due to a 4-year contract extension on the DOE Savannah River Site. Backlog increased during the 2022 Period due to this significant
award. Backlog included $4.4 billion and $445 million of unfunded government contracts as of September 30, 2022 and December 31, 2021, respectively. Unfunded backlog reflects our estimate of future revenue under awarded government contracts for which funding has not yet been appropriated.
Other
Other includes the operations of NuScale, Stork and the remaining AMECO business.
3ME September
30,
9ME September 30,
(in millions)
2022
2021
2022
2021
NuScale (1)
$
(15)
$
(8)
$
(44)
$
(43)
Stork
8
8
26
26
AMECO
4
(2)
10
9
Segment
profit (loss)
$
(3)
$
(2)
$
(8)
$
(8)
(1) NuScale expenses
included in the determination of segment profit were as follows:
The increase in net interest income during the 2022 Quarter and 2022 Period was primarily due to an increase in interest rates on cash deposits at our joint ventures in Canada and Mexico as well as the redemption of $509 million of 2023 and 2024 Notes in the latter half of 2021. The increase in net interest income during the 2022 Quarter and 2022 Period was further driven by a loss of $20 million on the debt redemptions which was included in interest expense during the 2021 Quarter and 2021 Period.
Recent Accounting Pronouncements
Item is described more fully in the Notes to Financial Statements.
Litigation and Matters in Dispute Resolution
Item is described
more fully in the Notes to Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity arises from available cash and cash equivalents and marketable securities, cash generated from
operations, capacity under our credit facilities and, when necessary, access to capital markets. We have committed and uncommitted lines of credit available for revolving loans and letters of credit. We believe that for at least the next 12 months, cash generated from operations, along with our unused credit capacity and cash position, is sufficient to support operating requirements and debt maturities. We regularly review our sources and uses of liquidity and may pursue opportunities to address our liquidity needs, including losses we have accrued
on certain projects.
As of September 30, 2022, letters of credit totaling $332 million were outstanding under our $1.8 billion credit facility, which matures in February 2025. The credit facility contains customary financial covenants, including a debt-to-capitalization ratio that cannot exceed 0.60 to 1.00, a limitation on the aggregate amount of debt of the greater of $750 million or €750 million for our subsidiaries, and a minimum liquidity threshold of $1.2 billion, all as defined in the amended credit facility. The credit facility also contains provisions that will require us to provide collateral if we are downgraded to BB by S&P and Ba2 by Moody's, such collateral consisting broadly of liens on our U.S. assets. Borrowings under the facility, which may be denominated in USD,
EUR, GBP or CAD, bear interest at a base rate, plus an applicable borrowing margin. As of September 30, 2022, we had availability to borrow $845 million under our credit facility.
We expect to address the maturities currently scheduled for the first quarter of 2023 and fourth quarter of 2024 through available liquidity, cash generated by our operations or via a new securities issue.
Cash and cash equivalents combined with marketable securities were $2.6 billion as of September 30, 2022 and $2.3 billion as of December 31, 2021. Cash and cash equivalents are held in numerous accounts throughout the world to fund our global project execution activities. Non-U.S. cash and cash equivalents amounted to $987 million and $992 million as of September 30,
2022 and December 31, 2021, respectively. Non-U.S. cash and cash equivalents exclude deposits of U.S. legal entities that are invested in offshore, overnight accounts or short-term time deposits, to which there is unrestricted access.
In evaluating our liquidity needs, we consider cash and cash equivalents held by our consolidated variable interest entities (joint ventures and partnerships). These amounts (which totaled $852 million and $630 million as of September 30, 2022 and December 31, 2021, respectively) were not necessarily readily available for general purposes. We do not include our share of cash held by our proportionately consolidated joint ventures and partnerships in our consolidated cash balances even though these amounts may be significant. We also consider
the extent to which client advances (which totaled $122 million and $127 million as of September 30, 2022 and December 31, 2021, respectively) are likely to be sustained or consumed over the near term for project execution activities and the cash flow requirements of our various foreign operations. In some cases, it may not be financially efficient to move cash and cash equivalents between countries due to statutory dividend limitations and/or adverse tax consequences. We did not consider any cash to be permanently reinvested outside the U.S. as of September 30, 2022 and December 31, 2021, other than unremitted earnings required to meet our working capital and long-term investment needs in non-U.S. foreign jurisdictions where we operate.
Proceeds from sales and maturities (purchases) of marketable securities
(27)
(43)
Capital expenditures
(38)
(55)
Proceeds from sales of assets
29
125
Investments
in partnerships and joint ventures
(47)
(80)
Other
19
(12)
Investing cash flow
(64)
(65)
FINANCING
CASH FLOW
Proceeds from NuScale de-SPAC transaction
341
—
Proceeds from sale of NuScale interest
107
—
Proceeds from issuance of CPS
—
582
Purchase
and retirement of debt
(23)
(525)
Dividends paid
(29)
(9)
Other borrowings (debt repayments)
6
(7)
Distributions paid to NCI
(15)
(20)
Capital
contributions by NCI
—
201
Other
(9)
(4)
Financing cash flow
378
218
Effect
of exchange rate changes on cash
(72)
(6)
Increase (decrease) in cash and cash equivalents
227
(73)
Cash and cash equivalents at beginning of period
2,209
2,199
Cash and cash equivalents
at end of period
$
2,436
$
2,126
Cash paid during the period for:
Interest
$
43
$
81
Income
taxes (net of refunds)
71
59
Operating Activities
Cash flows from operating activities result primarily from our EPC activities and are affected by our earnings levels and changes in working capital associated with such activities. Working capital levels vary from period to period and are primarily affected by our volume of work and billing schedules on our projects. These levels are also impacted by the stage of completion and commercial terms of engineering and construction projects, as well as our execution of our projects compared to their budget. Working capital requirements also vary by project and the payment terms agreed to with our clients, vendors and
subcontractors. Most contracts require payments as the projects progress. Additionally, certain projects receive advance payments from clients. A typical trend for our projects is to have higher cash balances during the initial phases of execution due to deposits paid to us which then diminish toward the end of the construction phase. As a result, our cash position is reduced as customer advances are utilized, unless they are replaced by advances on other projects. We maintain cash reserves and borrowing facilities to provide additional working capital in the event that a project’s net operating cash outflows exceed its available cash balances. As of September 30, 2022, our backlog included $2.0 billion for loss projects which may have a negative impact on our operating cash flow in future periods.
Our operating cash flow for the 2022 Period was negatively impacted by increases in working capital on several large projects, most of which occurred in the first quarter. Operating cash flow for the 2022 Quarter significantly improved compared to the first and second quarters of 2022 as working capital levels remained stable. Our operating cash flow for the 2021 Period was negatively impacted by increased funding of COVID-19 costs on our projects, higher cash payments of G&A and increased tax payments. During the fourth quarter of 2022, we expect to fund approximately $100 million of costs on loss projects, including incentives for a legacy upstream project.
During the 2022 Period, we did not make any significant contributions into our DB plans. During the 2021 Period, we contributed $13 million into our DB plans, primarily our Dutch DB plan which was settled
in late 2021.
Investing Activities
We hold cash in bank deposits and marketable securities which are governed by our investment policy. This policy focuses on, in order of priority, the preservation of capital, maintenance of liquidity and maximization of yield. These investments may include money market funds, bank deposits placed with highly-rated financial institutions, repurchase agreements that are fully collateralized by U.S. Government-related securities, high-grade commercial paper and high quality short-term and medium-term fixed income securities.
Capital expenditures in the 2022 and 2021 Periods were primarily related to construction equipment on certain infrastructure projects as well as expenditures for facilities and investments in information technology.
Proceeds
from sales of assets during the 2022 Period includes the sale of the majority of our interest in an infrastructure joint venture in Canada. Proceeds from sales of assets during the 2021 Period includes the sale of the North American operations of the AMECO equipment business for $71 million as well as our 10% ownership interest in an infrastructure joint venture in the U.S.
Investments in unconsolidated partnerships and joint ventures in the 2022 Period included capital contributions to a Mission Solutions joint venture and an infrastructure joint venture. Investments in unconsolidated partnerships and joint ventures in the 2021 Period included a $26 million capital contribution to COOEC Fluor, which satisfied our contractual funding requirements, as well as capital contributions to an Energy Solutions joint venture and a Mission Solutions joint venture.
Financing Activities
As
a result of the reverse recapitalization, NuScale received cash of $341 million, consisting of $235 million in PIPE funding and $145 million in cash in trust, partially offset by transaction costs of $39 million.
In April 2022, we sold approximately 5% of the ownership of NuScale to Japan NuScale Innovation, LLC for $107 million, which will become final after CFIUS' review.
Cumulative cash dividends on the CPS are payable at an annual rate of 6.5% quarterly in arrears on February 15, May 15, August 15 and November 15, upon declaration of the dividend by our Board of Directors. Dividends accumulate from the most recent date on which dividends have been paid. First and second quarter CPS dividends of $10 million were paid in February and May 2022. In October 2022, our Board of Directors approved the payment of fourth quarter CPS dividends of $10 million, payable in November 2022.
Each
share of CPS is convertible at the holder's option at any time into 44.9585 shares of our common stock per share of CPS. The conversion rate is subject to certain customary adjustments, but no payment or adjustment for accumulated but unpaid dividends will be made upon conversion, subject to certain limited exceptions. The CPS may not be redeemed by us; however, we may, at any time on or after May 20, 2022, elect to cause all outstanding shares of CPS to be converted into shares of our common stock at the conversion rate, subject to certain conditions (and, if such conversion occurs prior to May 20, 2024, the payment of a cash make-whole premium). The most significant condition to our ability to force a conversion prior to May 2024 is the requirement that our common stock trade above $28.92 for 20 consecutive trading days. We estimate that the cash make-whole payment would
have been $84 million at September 30, 2022 (assuming we minimally exceed the minimum trading price to invoke the conversion). If a make-whole fundamental change, as defined in the certificate of designations for the CPS, occurs, we will in certain circumstances be required to increase the conversion rate for a holder who elects to convert shares of CPS in connection with such make-whole fundamental change.
In June 2022, we redeemed $23 million of outstanding 2023 Notes. The gain on redemptions was not material.
In September 2021, we completed a tender offer in
which we repurchased $375 million of 2023 Notes and $108 million of 2024 Notes, excluding accrued interest. Additionally, we redeemed $26 million of outstanding 2023 and 2024 Notes in open market transactions during the 2021 Period. We recognized $20 million in losses related to these redemptions which was included in interest expense.
Distributions paid to holders of NCI represent cash outflows to partners of consolidated partnerships or joint ventures created primarily for the execution of single contracts or projects. Distributions in the 2022 Period related to joint ventures in all our segments. Distributions in the 2021 Period primarily related to a transportation joint venture project in the U.S.
Capital contributions by NCI during the 2021 Period primarily related to new investments
totaling $193 million by NuScale's NCI holders.
We have a common stock repurchase program, authorized by our Board of Directors, to purchase shares in the open market or privately negotiated transactions at our discretion. As of September 30, 2022, over 10 million shares could still be purchased under the existing stock repurchase program, although we don't have any immediate intent to begin such repurchases.
Off-Balance Sheet Arrangements
Lines of Credit
As of September 30, 2022, letters of credit totaling $332 million were outstanding under committed lines of credit, and letters of credit totaling $877 million were outstanding under uncommitted lines of
credit. Letters of credit are ordinarily provided to indemnify our clients if we fail to perform our obligations under our contracts. Surety bonds may be used as an alternative to letters of credit.
Guarantees
The maximum potential amount of future payments that we could be required to make under outstanding performance guarantees, which represents the remaining cost of work to be performed, was estimated to be $16 billion as of September 30, 2022.
Financial guarantees, made in the ordinary course of business in certain limited circumstances, are entered into with financial institutions and other credit grantors and generally obligate us to make payment in
the event of a default by the borrower. These arrangements generally require the borrower to pledge collateral to support the fulfillment of the borrower’s obligation.
Sustainability
Our sustainability mission envisions meeting the needs of our clients while conducting business in an environmentally and socially responsible manner. We consistently apply prudent governance principles to the benefit of current and future generations, thereby creating value for all stakeholders. Every day, we help clients safeguard the environment, conserve energy, protect lives, and strengthen the economies and social structures of communities in which our employees work and live.
As a key priority for our sustainability program, we have committed to reduce our greenhouse gas emissions. Early in 2021, we committed to achieving net zero emissions for Scopes
1 and 2 absolute greenhouse gas emissions by the end of 2023, and we believe we are on track to meet that objective.
We have a Sustainability Committee to oversee our sustainability policies, strategies and programs. The Sustainability Committee includes representatives from each of our business segments, as well as a cross-functional team of subject matter experts from communications, health, safety and environmental, human resources, supply chain, investor relations and legal, who serve as advisors to the Sustainability Committee. In furtherance of our Board of Directors' commitment to sustainability, our Board of Directors and Governance Committee reviews and receives reports from management on our sustainability efforts.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes to market risk during the 2022 Period. Accordingly, the disclosures provided in the 2021 10-K remain relevant.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on their evaluation as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act) are effective as required by paragraph (b) of Rule 13a-15
or Rule 15d-15 of the Exchange Act.
Changes in Internal Control over Financial Reporting
There were no changes to our ICFR that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our ICFR.
As part of our normal business activities, we are party to a number of legal proceedings and other matters in various
stages of development. Management periodically assesses our liabilities and contingencies in connection with these matters based upon the latest information available. We disclose material pending legal proceedings pursuant to SEC rules and other pending matters as we may determine to be appropriate.
Additional information on matters in dispute may be found in Item 8 of the 2021 10-K and Part I, Item 1 of this Q3 2022 10-Q.
Item 1A. Risk Factors
There have been no material changes from our risk factors as disclosed in the 2021 10-K.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
(c)The following table provides information for the quarter ended September 30, 2022 about purchases by the company of equity securities that have been registered pursuant to Section 12 of the Exchange Act.
Issuer Purchases of Equity Securities
Period
Total Number of Shares Purchased
Average Price Paid per Share
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
(1)The
share repurchase program, as amended, totals 34,000,000 shares. We may repurchase shares from time to time in open market or privately negotiated transactions, including through pre-arranged trading programs, at our discretion, subject to market conditions and other factors and at such time and in amounts that we deem appropriate.
The cover page from the Company's Q3 2022 10-Q for the three and nine months ended September 30, 2022, formatted in Inline XBRL (included in the Exhibit 101 attachments).*
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.