Fluor Corporation — FY2022 Form 10-K
Business context and reporting period. Fluor provides engineering, procurement and construction, project management, fabrication and related services globally. It reports Energy Solutions, Urban Solutions, Mission Solutions and Other (including NuScale, Stork and remaining AMECO operations). This filing covers the fiscal year ended December 31, 2022; the supplied filing text reports annual results, not separate fourth-quarter results.
Financial performance and position
| Metric | FY2022 | FY2021 |
|---|---|---|
| Revenue | $13.744 billion | $14.156 billion |
| Gross profit / margin | $355 million / 2.6% | $454 million / 3.2% |
| Operating profit (loss) | $209 million | $(273) million |
| Net earnings (loss) attributable to Fluor | $145 million | $(440) million |
| Net earnings available to common shareholders; diluted EPS | $106 million; $0.73 | $(464) million; $(3.29), including discontinued operations |
| Operating cash flow | $31 million | $25 million |
| Cash and cash equivalents at year-end | $2.439 billion | $2.209 billion |
| Total debt at year-end | $1.130 billion | $1.192 billion |
| Total backlog | $26.049 billion | $20.800 billion |
Segment profit was $427 million (3.1% margin), versus $415 million (2.9%) in 2021. Energy Solutions earned $301 million, Urban Solutions $3 million, Mission Solutions $136 million, and Other recorded a $13 million loss. The effective tax rate on continuing operations was 70%, principally affected by valuation allowances and the geographic mix of earnings. Total assets were $6.827 billion and shareholders’ equity was $1.786 billion at year-end.
Cash, cash equivalents and marketable securities totaled approximately $2.624 billion at year-end; management separately cited $2.5 billion after the subsequent redemption of the remaining 2023 Notes. Fluor reported $819 million of borrowing capacity under its committed facility and no borrowings on that facility. Letters of credit were $394 million under committed lines and $909 million under uncommitted lines.
Material changes versus FY2021
- Revenue declined about 3%, primarily as projects neared completion in Urban Solutions and Mission Solutions. Segment profit was broadly stable, but gross profit and gross margin fell.
- New awards nearly doubled to $19.815 billion from $9.970 billion, lifting backlog about 25%. Reimbursable work rose to 63% of backlog from 41%; lump-sum and guaranteed-maximum work declined to 37% from 59%.
- Urban Solutions’ segment profit fell to $3 million from $38 million. FY2022 included charges of $86 million on a highway project, $54 million on an international bridge project and $35 million on an automated people mover project. FY2021 included a $138 million charge on the bridge project.
- Reported operating profit improved from a loss in FY2021, when Fluor recorded $290 million of impairment expense and a $198 million pension-settlement loss. FY2022 included a $24 million net impairment benefit, reflecting a $63 million reversal partly offset by $40 million of goodwill impairment, and a $42 million pension-settlement gain.
- NuScale became publicly traded through a reverse recapitalization; Fluor retained control and approximately 56% ownership at year-end. The transaction provided $341 million of cash, and Fluor sold about 5% of its NuScale interest for $107 million.
Outlook, risks and unusual items
- Fluor expects to perform approximately 55% of year-end backlog during 2023. Backlog is not guaranteed revenue and remains subject to client cancellations, deferrals, scope changes and execution risk. It includes $1.8 billion of legacy loss-position projects.
- Management said cash from operations, available credit and cash balances should support operating needs for at least the next 12 months. The $1.8 billion revolving credit facility was extended in February 2023 to February 2026. The remaining €129 million of 2023 Notes was redeemed in January 2023; the company expected to address its 2024 Notes through liquidity, operating cash flow or a securities issuance.
- Key operating risks include lump-sum cost overruns, schedule delays, inflation and supply-chain costs, labor availability, subcontractor and joint-venture performance, client payment delays, project claims, foreign exchange and geopolitical disruption. Management suspended new investment in Russia and was winding down existing obligations; it said affected-region backlog was not significant to future revenue or margin.
- The SEC and DOJ investigations concerning 2019 project charges and project accounting, financial reporting and governance remained unresolved. Fluor recorded an accrual in Q4 2022 but said it could not predict the outcome or potential impact. The filing also describes significant project disputes and claims, including Santos’ AUD $1.47 billion claim, Sadara counterclaims totaling $574 million, and Barrick’s claim of $364 million net of amounts acknowledged due to Fluor. These asserted amounts are not stated as probable losses.
- Outstanding performance guarantees had a stated maximum potential payment amount of $15 billion, representing remaining work costs; Fluor said the related performance-guarantee obligation was not material at year-end. The scale of guarantees is not equivalent to an expected cash loss.
- Series A preferred stock carries a 6.5% cumulative dividend; $39 million was paid in 2022. Early company-initiated conversion may require a make-whole payment, estimated at $64–$72 million at year-end, and conversion would dilute common shareholders.
- Fluor reported effective disclosure controls and internal control over financial reporting; the auditor issued unqualified opinions on the financial statements and internal controls. The auditor identified long-term revenue recognition estimates on certain large, long-duration lump-sum contracts as a critical audit matter.
Important facts for investors to verify
- Progress, margin and cash conversion of the $26.0 billion backlog, especially the $1.8 billion of loss-position projects and the large increase in reimbursable awards.
- Updated forecasts, claims and potential further charges for the highway, bridge and automated people mover projects.
- Developments and any additional accruals, penalties or settlements relating to the SEC/DOJ investigations and material project disputes.
- Cash accessibility, including amounts held by consolidated joint ventures and NuScale, and the timing and funding plan for the 2024 Notes.
- NuScale’s operating and funding needs, Fluor’s plans for its majority investment, and any effect of preferred-stock conversion or dividends on common shareholders.