Fluor Corporation — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. Fluor provides engineering, procurement, construction, fabrication and project-management services through Energy Solutions, Urban Solutions, Mission Solutions and Other (principally NuScale). Stork and remaining AMECO operations are reported as discontinued operations.
Financial performance and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $12.435 billion | $14.158 billion |
| Gross profit | $412 million; 3.3% margin | $400 million; 2.8% margin |
| Operating profit (loss) | $(60) million | $45 million |
| Segment profit (non-GAAP) | $374 million; 3.0% margin | $333 million; 2.4% margin |
| Net loss from continuing operations attributable to Fluor | $(182) million | $(79) million |
| Net loss from discontinued operations attributable to Fluor | $(258) million | $(356) million |
| Net loss attributable to Fluor | $(440) million | $(435) million |
| Net loss available to common stockholders | $(465) million, after $24 million of preferred dividends | $(435) million |
| Operating cash flow | $25 million | $186 million |
| Cash and cash equivalents | $2.209 billion | $2.199 billion |
| Cash plus marketable securities | $2.337 billion | $2.222 billion |
| Long-term debt | $1.167 billion | $1.701 billion |
Basic and diluted loss per share were $(1.46) from continuing operations and $(1.83) from discontinued operations in 2021. Common stock dividends have been suspended since April 2020; the company paid preferred-stock dividends in 2021.
Cash flow from operations fell substantially, with management citing working-capital increases on large projects and higher G&A cash payments. Cash and marketable securities included $630 million held by consolidated variable-interest entities that may not be readily available for general purposes. The company reported $779 million of additional borrowing capacity under its credit facility at year-end; $429 million of letters of credit were outstanding under the committed facility and $896 million under uncommitted lines.
Material changes versus the prior year
- Revenue declined 12%, reflecting completed or near-completed work and cancellations of large projects. Mission Solutions revenue was broadly flat; Energy and Urban Solutions revenue declined.
- Energy Solutions segment profit increased to $250 million from $169 million, and Mission Solutions increased to $155 million from $87 million. Urban Solutions segment profit fell to $38 million from $161 million, including a $138 million charge for cost growth and schedule disruption on a legacy infrastructure project.
- Backlog fell 18%, to $18.934 billion from $23.144 billion. New awards rose to $8.753 billion from $7.459 billion, but Fluor removed approximately $2 billion of backlog following cancellation of a steel project and a chemicals project. About 64% of year-end backlog was lump-sum or guaranteed-maximum-price work.
- Continuing-operations earnings included a $198 million loss on settling the majority of Fluor’s largest defined-benefit pension plan. The settlement primarily reclassified unrecognized actuarial losses from accumulated other comprehensive income and did not materially affect cash.
- Fluor issued $600 million of 6.5% cumulative perpetual convertible preferred stock and used most proceeds to repurchase 2023 and 2024 notes. Long-term debt declined by approximately $534 million.
Outlook, management commentary and risks
- Fluor expected to perform approximately 50% of year-end backlog during 2022. Backlog is subject to cancellations, deferrals, scope revisions and timing changes, and is not a guarantee of future revenue or earnings.
- Management said oil prices had rebounded but energy clients had not yet increased capital spending materially. It cited COVID-related disruption, inflation, supply-chain and labor cost growth, and delayed client procurement as continuing pressures. No formal revenue or earnings guidance is provided in the supplied filing text.
- Management believed cash, operating cash flow and unused credit capacity would support operating requirements for at least 12 months. In February 2022, the credit facility was amended: its size increased to $1.8 billion, maturity extended to February 2025, and the maximum debt-to-capitalization ratio tightened to 0.60:1. The company said it expected to pursue new senior notes in 2022 for 2023 and 2024 maturities.
- Fluor expected to complete the Stork and remaining AMECO sales early in 2022. NuScale agreed to a transaction in which Spring Valley Acquisition Corp. would acquire an approximately 20% interest; the anticipated closing was in the first half of 2022, subject to conditions. Fluor estimated it would retain approximately 60–70% ownership and continue consolidating NuScale.
- Significant risks include lump-sum project overruns, uncertain awards and cancellations, customer payment delays, partner and supplier performance, foreign political and currency exposure, COVID effects, and government-contract funding and compliance. The company estimated $15 billion of potential payments under outstanding performance guarantees, representing remaining work costs; it reported no related guarantee liability at year-end.
- SEC and Department of Justice investigations concerning 2019 project charges and project accounting, financial reporting and governance matters remained ongoing. Fluor was cooperating and stated that it could not predict the investigations’ outcome or timing. Significant disputes also include the Santos, Sadara and Barrick matters described in the filing. Fluor states that it is vigorously defending those claims; reported claim amounts are allegations, not established liabilities.
- Auditors issued an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective as of December 31, 2021. Long-term contract revenue and cost estimates were identified as a critical audit matter.
Key facts for investors to verify
- Whether backlog converts to revenue and cash as expected, and whether further cancellations or project-estimate revisions occur.
- Recoverability and timing of any recovery for the $138 million Urban Solutions project charge, and the eventual cost and resolution of other loss-making projects.
- Operating cash flow and working-capital trends, including the availability of cash held in joint ventures and other entities.
- Refinancing of 2023 and 2024 notes, compliance with credit-facility covenants, and the cost and dilution implications of the 6.5% convertible preferred stock.
- Outcomes of SEC/DOJ inquiries and material litigation, as well as completion and proceeds of the Stork/AMECO and NuScale transactions.