Fluor Corp: Form 10-Q for the period ended Sep 30, 2025

The following discussion and analysis should be read in conjunction with our financial statements and our 2024 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.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements made herein, including statements regarding our projected operating results, liquidity, capital allocation plans, 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,” "aspire," "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:

• The cyclical nature of many of the markets we serve and our clients' vulnerability to poor economic conditions, such as inflation, slow growth or 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;
• The inability to hire and retain qualified personnel;
• 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;
• Failure of our suppliers or subcontractors to provide supplies or services at the agreed-upon levels or times;
• Cybersecurity breaches of our systems and information technology;
• Exposure to political and economic risks in different countries, including tariffs and trade policies, geopolitical events and conflicts, civil unrest, security issues, labor conditions and other unforeseeable events in the countries in which we do business;
• The impact of government shutdowns and spending cuts, in particular with respect to our contracts with the U.S. government;
• 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;
• 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;
• Differences between our actual results and the assumptions and estimates used to prepare our financial statements;
• Earnings volatility due to recurring fair value measurements of our investment in NuScale;
• Client delays or defaults in making payments;
• 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 loss of business from one or more significant clients;
• The inability to adequately protect our intellectual property rights;
• 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 our strategic initiatives, including dispositions.

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 2024 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

The ultimate effect of emerging trade policies, cost escalation, and broader economic and geopolitical dynamics across our markets remains uncertain. Clients prioritizing accelerated schedules have largely maintained capital investment plans, while others facing cost pressures or low commodity prices, such as chemicals, have postponed commitments pending improved visibility. We continue to advance engineering and design work in anticipation of future investment decisions. While these delays could temper earnings growth in 2026 relative to prior assumptions, we remain focused on mitigating cost impacts on behalf of our clients and positioning for long-term opportunities. We will continue to monitor policy developments and collaborate with clients to manage risks, though the ultimate outcome of these factors cannot be determined at this time.

Revenue in the 2025 Quarter was significantly impacted by a court ruling on the long completed Santos project in Australia. We have appealed the Court decision and we are also working with our insurance carriers to address the obligations arising from the expected judgment and the costs related to the appeal. We recognized a reversal of revenue of $653 million during the 2025 Quarter, inclusive of committed insurance proceeds, representing the estimated net payment due to our customer upon judgment if no other insurance proceeds are agreed to.

We slowed our execution activities at our joint venture in Mexico beginning in the second quarter of 2025 through much of the third quarter to minimize our working capital exposure to the joint venture's primary customer. The customer has since made significant progress payments through October 2025, allowing us to begin a controlled restart of our project execution activities.

We recognize the fair value of our investment in NuScale on a mark-to-market basis based upon the prevailing price of their stock on our balance sheet dates, which resulted in a pre-tax loss of $401 million for the 2025 Quarter and a pre-tax gain of $2.3 billion for the 2025 Period. NuScale's results for the 2024 Quarter and 2024 Period were included in our Other segment as it was prior to our deconsolidation of NuScale. During the 2025 Quarter, we converted 15 million of our NuScale voting shares (along with the associated ownership units in NuScale's operating subsidiary) into registered shares. We sold 10 million of those shares for net proceeds of $414 million during the 2025 Quarter. During October 2025, we sold an additional 5 million of shares in NuScale for net proceeds of $191 million.

As of September 30, 2025, our investment in NuScale consisted of the 5 million unsold shares that were converted during September 2025 and 111 million ownership units in NuScale’s operating subsidiary coupled with associated voting shares of NuScale. During November 2025, we reached agreement with NuScale that includes the following general attributes:

• Conversion of all 111 million remaining ownership units into NuScale registered shares on a one-to-one basis. Immediately upon conversion, we may begin selling the converted shares subject to daily limitations that vary depending on defined blackout dates for NuScale;
• Voting covenant whereby we will agree to affirmatively support the expansion of NuScale’s authorized share count by up to 330 million shares;
• Imposition of NuScale trading limitations on any newly authorized shares through February 2026;
• 50% reduction in our benefits, if any, that may arise under the tax receivable agreement with NuScale;
• Modification of our exclusivity arrangement with NuScale; and
• Various mutual releases and non-disparagement provisions.

We expect to begin our monetization under a structured sale program within days, and expect that the program could be completed by the end of April 2026. We will provide more information regarding our use of proceeds, including for income taxes arising from the conversion, once we have more information about the NuScale share price on the day of conversion.

In the 2025 Period, we completed the sale of Stork's U.K. operations for $61 million. The sale did not have a material impact on the financial statements. In the 2024 Period, we completed the sale of Stork's operations in continental Europe for $67 million and recognized a gain on sale of $11 million including de-recognition of Stork's net assets and cumulative foreign currency translation. Our divestiture of the Stork business is substantially complete.

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(1) Total segment profit and margin are non-GAAP financial measures. We believe that total segment profit provides a meaningful perspective on our results as it is the aggregation of individual segment profit measures that we use to evaluate and manage our performance.

(2) Backlog at September 30, 2025 approximated backlog at December 31, 2024. We booked a multi-billion award for a life sciences project during the 2025 Period. We booked significant project adjustments related to scope increases on several large projects during the second quarter of 2025 and scope reductions on 2 large projects in the first quarter of 2025. Backlog may include significant estimated amounts of third-party, subcontracted, CFM and pass-through costs. We do not report new awards or backlog for projects related to our equity method investments even though these awards may be significant contributors to earnings in future periods. Although backlog reflects business that is considered to be firm, cancellations, deferrals or scope adjustments may occur.

(3) Includes backlog of $394 million and $702 million for ongoing legacy projects in a loss position as of September 30, 2025 and December 31, 2024, respectively.

Revenue decreased during the 2025 Quarter and 2025 Period primarily due to the reversal of previously recognized revenue of $653 million for a court ruling on the long completed Santos project in Australia as well as a decline in execution activity for Energy Solutions projects nearing completion. However, revenue in both Urban Solutions and Mission Solutions increased during the 2025 Quarter and 2025 Period due to the ramp up of execution activities on life sciences and mining projects and an increase in volume on a DOE project.

Earnings before taxes decreased during the 2025 Quarter and 2025 Period due to the same factors that impacted revenue above as well as an adjustment for delay-related effects on an infrastructure project. Earnings before taxes in the 2025 Period were also impacted by cost growth on 3 infrastructure projects for subcontracted design errors, price escalation and schedule impacts.

Net earnings (loss) excluding amounts attributable to equity method earnings (loss) were as follows:

(in millions)

Income tax expense in the 2025 Quarter and 2025 Period was significantly impacted by a lack of recognizable benefit for the Santos ruling. We continue to seek ways to create deductibility for that matter.

The effective tax rate on earnings, including equity method earnings, was 20% for the 2025 Quarter and 26% for the 2025 Period compared to 71% for the 2024 Quarter and 44% for the 2024 Period. A reconciliation of U.S. statutory federal income tax expense to income tax expense follows:

(In millions)

In July 2025, the OBBB Act, which includes a broad range of U.S. tax reforms, was signed into law. The OBBB Act did not have a material impact on our consolidated results.

Beginning in January 2024, many non-US tax jurisdictions have enacted or are in the process of enacting legislation to adopt a minimum effective tax rate described in the Global Anti-Base Erosion Model Rules, also known as Pillar Two. Pillar Two establishes a global minimum tax of 15% on large multinational corporations. We considered the applicable tax law changes in the countries in which we operate and have determined that there is no material impact to our tax provision for the 2025 Quarter or 2025 Period. We will continue to evaluate the impact of these tax law changes on future periods.

Our profit margin percentages may be favorably or unfavorably impacted by a change in the amount of CFM recorded. We record revenue on a gross basis, including CFM, when we have concluded that we are a principal with respect to such materials and services, though the timing of CFM receipt can significantly impact completion percentage.

Segment Operations

Urban Solutions

Revenue increased during the 2025 Quarter and 2025 Period due to the ramp up of execution activities on recently awarded life sciences projects and a mining project. The increase in revenue during the 2025 Period was further driven by revenue growth on a large metals project and a large mining project.

Segment profit in the 2025 Quarter and 2025 Period decreased due to an adjustment of $25 million for delay-related effects on an infrastructure project partially offset by a favorable negotiation with a designer on a separate infrastructure project as well as the ramp up of recently awarded projects in life sciences and mining. Segment profit in the 2025 Period also included forecast adjustments totaling $54 million for cost growth on 3 infrastructure projects related to subcontracted design errors, price escalation and schedule impacts partially offset by a refinement of our expected recovery from claims against our subcontractors on these same projects. The changes in segment profit margin in the 2025 Quarter and 2025 Period reflect these same factors.

New awards increased during the 2025 Quarter compared to the 2024 Quarter due to incremental awards on a mining project and a life sciences project booked in the 2025 Quarter. Backlog increased during the 2025 Period due to a large EPC award for a second multi-billion dollar pharmaceutical facility in Indiana booked during the first quarter of 2025. Our staffing business does not report new awards or backlog.

Energy Solutions

Revenue decreased during the 2025 Quarter and 2025 Period primarily due to the reversal of previously recognized revenue of $653 million for a court ruling on the long completed Santos project in Australia that will require payment to our customer once the judgment is entered. The revenue decrease was further driven by a decline in execution activity for several projects nearing completion and for certain projects at our joint venture in Mexico where we slowed our execution activities beginning in the second quarter of 2025 through much of the third quarter pending customer payment. The customer has since made significant progress payments through October 2025, allowing us to begin a controlled restart of our project execution activities. The declines in revenue were partially offset by the ramp up of execution activities on a batteries project in Poland and a chemicals project in Canada.

Segment profit and profit margin declined during the 2025 Quarter and 2025 Period due to the same factors that impacted revenue above partially offset by an increase on a large project nearing completion. Segment profit and profit margin in the 2025 Period was also impacted by the recognition of $31 million for an arbitration ruling on a fabrication project at our joint venture in Mexico that was completed in 2021. Segment profit and segment profit margin in the 2024 Period was adversely impacted by $57 million in cost growth on a construction-only subcontract executed by our joint venture in Mexico.

New awards declined during the 2025 Quarter and 2025 Period compared to the 2024 Quarter and 2024 Period. Backlog declined during the 2025 Period due to the execution pace exceeding new award activity.

Mission Solutions

Revenue increased during the 2025 Quarter and 2025 Period primarily due to an increase in project execution volume associated with a construction project for the DOE and hurricane relief efforts for FEMA, partially offset by reduced volumes on a DOE project and a DOD project. The 2025 Quarter also included the recognition of allowances for certain questioned and disputed costs on a DOD project and revenue associated with the favorable resolution of a long-standing claim. Revenue for the 2025 Period reflected the recognition of revenue reserves resulting from a ruling on a long-standing claim for a project completed in 2019.

Segment profit and profit margin declined during the 2025 Quarter due to the recognition of allowances for certain questioned and disputed costs on a DOD project mostly offset by the favorable resolution on a long-standing claim. Segment profit and profit margin declined during the 2025 Period primarily due to the recognition of revenue reserves of $28 million resulting from a ruling on a long-standing claim on a project completed in 2019.

New awards increased during the 2025 Quarter and 2025 Period. New awards in the 2025 Quarter included a six-year contract to extend our presence at the Portsmouth Gaseous Diffusion Plant in Ohio. Backlog included $1.1 billion and $665 million of unfunded government contracts as of September 30, 2025 and December 31, 2024, respectively. Unfunded backlog reflects our estimate of future revenue under awarded government contracts for which funding has not yet been appropriated. We do not report new awards or backlog for projects related to our equity method investments even though

these awards may be significant contributors to earnings in future periods.

Other

NuScale's results for the 2024 Quarter and 2024 Period were included in our Other segment as it was prior to our deconsolidation of NuScale in October 2024. In the 2025 Period, we completed the sale of Stork's operations in the U.K. and recognized a gain on sale of $7 million compared to an $11 million gain on the sale of Stork's operations in continental Europe in the 2024 Period. We expect results from our Other segment to be immaterial for 2025 and beyond.

G&A

(in millions)

The decrease in compensation expense in the 2025 Period was primarily driven by lower stock price-driven compensation and performance-based compensation. During the 2025 Quarter, we recognized severance and exit costs primarily related to certain international office closures.

Critical Accounting Policies and Estimates

There have been no material changes in our critical accounting policies and estimates from those disclosed in our 2024 10-K.

Recent Accounting Pronouncements

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, proceeds from the sales of NuScale shares, capacity under our credit facility 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, anticipated 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.

Our credit facility 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, which is a one notch downgrade from both agencies' current ratings. If we were required to provide collateral, it would consist broadly of liens on our U.S. assets.

As of September 30, 2025, letters of credit totaling $409 million were outstanding under our $2.2 billion credit facility, which matures in February 2028. This credit facility contains customary financial covenants, including a debt-to-capitalization ratio that cannot exceed 0.60 to 1.00, based upon total shareholders' equity excluding AOCI, 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 $1.1 billion, all as defined in the amended credit facility, which may be reduced to $1.0 billion upon the repayment of debt. Borrowings under the facility, which may be denominated in USD, EUR or GBP, bear interest at a base rate, plus an applicable borrowing margin. As of September 30, 2025 and through the issuance of this 10-Q, we had not made any borrowings under our credit facility. We have a sub-limit of up to $1.0 billion in aggregate cash advances and financial letters of credit available to us under our credit facility with a current borrowing capacity of $902 million.

Cash and cash equivalents combined with marketable securities were $2.8 billion and $3.0 billion as of September 30, 2025 and December 31, 2024, respectively. 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 $903 million as of September 30, 2025 and $1.1 billion as of December 31, 2024. 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 $355 million and $333 million as of September 30, 2025 and December 31, 2024, 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 $20 million and $79 million as of September 30, 2025 and December 31, 2024, 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, 2025 and December 31, 2024, other than unremitted earnings required to meet our working capital and long-term investment needs in non-U.S. foreign jurisdictions where we operate.

During the 2025 Quarter, we converted 15 million of our NuScale voting shares (along with the associated ownership units in NuScale's operating subsidiary) into registered shares. We sold 10 million of those shares for net proceeds of $414 million during the 2025 Quarter. During October 2025, we sold an additional 5 million of shares in NuScale for net proceeds of $191 million.

In the 2025 Period, we used $365 million to repurchase and cancel 9 million shares of common stock under our repurchase program. Over 19 million shares could still be purchased under the repurchase program as of September 30, 2025. We are targeting the repurchase of approximately $800 million of our stock for the period from November 2025 through February 2026, primarily using our operating cash flow and with proceeds from the NuScale shares that we converted in September 2025. We expect to use a substantial portion of prospective monetization from the November 2025 conversion toward additional share repurchases after February 2026, which amount we expect will hinge on the proceeds emanating from the monetization process.

Cash Flows

(in millions)

Operating Activities

Cash flows from operating activities result primarily from our core EPC activities and are affected by our earnings level 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 as well as 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 lump-sum 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, 2025, our backlog included $394 million for ongoing legacy projects in a loss position, including approximately $117 million of estimated unfunded losses associated therewith. The comparable amounts at December 31, 2024 were $702 million of backlog and $237 million of unfunded losses.

Our operating cash flow for the 2025 Period was negatively impacted by lower earnings. Operating cash flow for the 2025 Quarter significantly improved primarily due to decreases in working capital on several large projects as well as distributions from a large Energy Solutions joint venture. During the 2025 Period, we funded $61 million on 2 consolidated infrastructure projects. We expect a significant payment will be due to Santos during the fourth quarter of 2025 upon the expected judgment from the Court over Santos’ efforts to recover costs related to a reimbursable project completed by us in 2015.

Investing Activities

During the 2025 Quarter, we sold 10 million of shares in NuScale for net proceeds of $414 million.

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 2025 primarily related to investments in IT compared to expenditures for improvements to our new office lease in Houston in 2024.

Net proceeds from sales of assets during the 2025 Period included $61 million from the sale of Stork's U.K. operations compared to $67 million from the sale of Stork's European business in the 2024 Period.

Investments in partnerships and joint ventures in the 2025 Period included $120 million in funding on a proportionately consolidated loss project for an infrastructure joint venture, $38 million in funding on an Energy Solution joint venture and $33 million in funding to a separate infrastructure joint venture to make a legal settlement payment. Investments in partnerships and joint ventures in the 2024 Period included capital contributions to an infrastructure joint venture, an Energy Solutions joint venture and a Mission Solutions joint venture.

Return of capital from partnerships and joint ventures in the 2024 Period included capital distribution from an infrastructure joint venture.

Financing Activities

We have an ongoing stock repurchase program, authorized by our Board of Directors, to purchase shares in the open market or privately negotiated transactions at our discretion. In November 2024, the Board authorized an additional 20 million shares to the repurchase program. During the 2025 Period, we repurchased 8.9 million shares of common stock under the repurchase program for total consideration of $365 million. Since we restarted the program in the fourth quarter of 2024, a total of 11 million shares have been purchased for $490 million.

During the 2025 and 2024 Periods, we redeemed $37 million and $44 million, respectively, of aggregate outstanding 2028 Notes, with an immaterial impact on earnings in both periods.

During the 2024 Period, NuScale received $80 million in proceeds from the issuance of their common stock. NuScale was a fully consolidated subsidiary at September 30, 2024.

Letters of Credit

As of September 30, 2025, letters of credit totaling $409 million were outstanding under committed lines of credit. As of September 30, 2025, letters of credit totaling $918 million were outstanding under uncommitted lines of credit including letters of credit totaling $347 million for two lump-sum projects in Kuwait that are substantially complete except for the resolution of unapproved change orders and extension of time claims. 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 $13 billion as of September 30, 2025.

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.

There have been no material changes to market risk during 2025 Period. Accordingly, our disclosures provided in the 2024 10-K remain relevant.

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.

CHANGES IN CONSOLIDATED BACKLOG

UNAUDITED

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24