Fluor Corp. Posts Record Financial Results for 2008
Fluor Corporation has announced record financial results for its fiscal year ended December 31, 2008. Net earnings for 2008 rose 35 percent to a record $720 million, or $3.93 per diluted share, compared with $533 million, or $2.93 per diluted share in 2007. Consolidated operating profit for the year was $1.3 billion, up 61 percent from $802 million a year ago.
Full year results reflect very strong profit growth in all business segments, driven by a 34 percent increase in revenue and higher operating margins which improved from 4.8 percent to 5.8 percent in 2008. Full year net earnings also benefited from a lower tax rate. Revenue rose to a record $22.3 billion, up from $16.7 billion in 2007.
Full year new awards were a company record $25.1 billion, up from $22.6 billion a year ago, driven by increases in Oil & Gas and Industrial & Infrastructure. Year-end backlog was $33.2 billion, up 10 percent over the prior year. Backlog was down sequentially from the high mark of $36.5 billion at the end of the third quarter, due to several factors including an increase in the fourth quarter revenue burn rate, the impact of currency exchange on international project values, and the timing of certain new awards which closed earlier than expected, contributing to record bookings in the third quarter.
"2008 was without a doubt the strongest year in the company's history, with record-setting revenue, earnings and new awards," said Chairman and Chief Executive Officer Alan Boeckmann. "While the economic environment is creating uncertainty in a number of our markets, many of our key clients continue to invest in strategic long-term programs where Fluor excels. We remain optimistic that our substantial backlog and diversified business model will allow Fluor to deliver solid results in 2009."
Corporate G&A expense for the year increased to $229 million, from $194 million a year ago, mainly driven by an increase in compensation-related expenses and a $16 million provision for the impact of the company's decision to relocate its engineering operations in the United Kingdom. Fluor's cash and marketable securities were $2.1 billion at year-end versus $1.7 billion a year ago, and compared with $2.2 billion at the end of the third quarter.
The global economic environment, including declining demand for commodities and tight credit markets, continues to create a level of uncertainty in many of Fluor's markets. While the company sees evidence of a slowdown in certain new capital investment programs, the impact to Fluor's backlog has been relatively minor. Based on a review of Fluor's sizable backlog, a relatively robust prospect list and actions to improve overhead leverage, the company is maintaining EPS guidance at the previously issued range of $3.90 to $4.20 per share.
Fluor's Oil & Gas segment reported operating profit of $724 million, which is a 67 percent increase from 2007. Revenue increased 55 percent to $12.9 billion, an increase of $4.6 billion over 2007. New awards for the segment totaled $15.1 billion, a 12 percent increase over last year, driven mainly by sizable downstream refining awards in the United States. Ending backlog rose to $21.4 billion, a 15 percent increase from $18.5 billion a year ago.
Fluor's Industrial & Infrastructure segment reported operating profit of $208 million, a substantial increase from $101 million in 2007. Results in 2008 included a pre-tax gain of $79 million from the sale of its joint venture interest in the Greater Gabbard Offshore Wind Farm project. Improved operating results in 2008 also reflect increased contributions from mining projects. Revenue of $3.5 billion was modestly higher than last year, reflecting higher contributions from the mining and manufacturing and life sciences business lines.
New awards totaled $5.0 billion, up 50 percent from $3.4 billion last year. Year-end backlog rose to $6.7 billion, an 11 percent increase over 2007. The Government segment posted operating profit of $52 million, up 78 percent from a year ago. Improved operating results reflect strong performance on current contracts, as well as improvements resulting from the shift away from fixed price contracts where the segment incurred charges in 2007. Revenue was flat with the prior year at $1.3 billion. New awards totaled $1.4 billion for the year, including the Savannah River contract and task orders under the LOGCAP IV contract, which brought backlog at year-end to $804 million.
Operating profit for the Global Services segment grew by 14 percent in 2008 to $229 million, and revenue rose 9 percent to $2.7 billion. Improved results were mainly driven by increased performance from the equipment services business line. Full year new awards of $2.1 billion were on par with orders received for operations and maintenance activities in 2007, bringing year-end backlog to $2.6 billion. Fluor's Power segment reported operating profit of $75 million, up 98 percent from $38 million in 2007.
Revenue rose by 64 percent to $1.9 billion, reflecting significant progress on the Oak Grove coal-fired generation project and on multiple plant betterment projects. New awards in 2008 totaled $1.3 billion, including contracts for new gas-fired generation and flue gas desulfurization units. Power segment backlog was $1.8 billion at year-end, down from $2.4 billion at the end of 2007 due to progress on the Oak Grove project.
Fourth Quarter Results
Net earnings for the fourth quarter were $190 million, or $1.04 per diluted share, compared with $259 million, or $1.41 per diluted share in 2007. The fourth quarter of 2008 benefited from a low tax rate, including a $12 million reduction for the capital loss resulting from the sale of the existing office facilities in the United Kingdom. The fourth quarter of 2007 included $123 million, or 68 cents per diluted share, from the final settlement of an Internal Revenue Service income tax audit for certain prior years. Operating profit for the fourth quarter of 2008 increased 30 percent to $323 million, up from $248 million a year ago. Increased fourth quarter operating results were primarily due to growth in the Oil & Gas segment.
Corporate G&A expenses in the quarter were $32 million higher than a year ago, driven mainly by higher compensation-related expenses and a $16 million provision for the impact of the company's decision to relocate its engineering operations in the United Kingdom. Revenue for the quarter rose 29 percent to $6.1 billion, compared with $4.7 billion a year ago, reflecting increases in the Oil & Gas, Power and Government segments. Fourth quarter new awards of $4.2 billion were 34 percent lower than the same quarter in 2007, reflecting lower bookings in Oil & Gas and Industrial & Infrastructure.
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