Fluor reports strong second quarter results
Fluor Reports Strong Second Quarter Results; New Awards and Backlog Surge
- Record $5.8 Billion in New Awards
- 17 Percent Sequential Increase in Backlog to $18.0 Billion
Irving, United States of America – Fluor Corporation (NYSE:FLR) 2006-08-07 announced financial results for its second quarter ended June 30, 2006. Revenues for the second quarter increased 18 percent to $3.5 billion, up from $2.9 billion in the second quarter of 2005. Net earnings were $66.6 million, or $0.74 per diluted share, compared with a loss of $16.4 million, or $0.19 per diluted share for the same period last year. Operating profits rose sharply to $161.5 million, with substantial increases from the Oil & Gas, Government, Global Services and Industrial & Infrastructure segments compared to a year ago. Operating margins rose to 4.7 percent, up from 1.1 percent a year ago. The second quarter of 2005 was impacted by charges relating to an unfavorable jury verdict on a resort hotel project in the Caribbean and other project issues.
New awards for the second quarter were a record breaking $5.8 billion, up from $3.2 billion a year ago. The quarter included $2.6 billion in new Oil & Gas project awards and $2.3 billion in Industrial & Infrastructure awards. Consolidated backlog rose 17 percent to $18.0 billion, compared with $15.4 billion at March 31, 2006.
"Fluor had a phenomenal quarter, particularly from a new awards perspective," said Chief Executive Officer Alan Boeckmann. "The strength in new awards and backlog is indicative of our ability to provide world-class engineering, construction and project management expertise to complex capital projects globally."
Corporate G&A expense for the quarter was $54.3 million, including $8.8 million associated with the relocation of the corporate headquarters to the Dallas, Texas area, $3.4 million due to the adoption of accounting rule FAS123-R relating to stock-based compensation, and $3.3 million due to higher compensation costs. This compares with $27.7 million in G&A expense a year ago, which included a $4.2 million gain from the sale of real estate. Fluor’s cash and securities at quarter end were $585 million, down from $654 million last quarter, primarily due to substantial outstanding working capital balances on work for the Federal Emergency Management Agency (FEMA), which are expected to be collected over the next two quarters.
Revenue and net income for the first half reflect strong performance across the company, which was bolstered by substantial contributions from the Government group’s disaster relief work for FEMA, reconstruction work in Iraq and the Fernald project for the Department of Energy. Earnings Per Share guidance for the full year remains at a range of $2.90 to $3.20 per share, reflecting the fact that the three government programs mentioned above are nearly complete and should provide a significantly lower contribution in the second half of 2006.
Fluor’s Oil & Gas segment reported revenues of $1.3 billion, up from $1.2 billion in the second quarter of last year. Operating profit rose 54 percent to $76.5 million, compared to $49.6 million a year ago, with operating margins improving to 5.9 percent from 4.1 percent last year. Margin improvement was driven in part by recognition of profits on completed projects. New awards were very strong across the upstream, downstream and petrochemical markets, and include the previously announced RasGas project in Qatar, valued at over $1 billion. Backlog grew by 23 percent to $8.4 billion, up from $6.8 billion last quarter.
Fluor’s Industrial & Infrastructure segment reported revenue of $749.1 million, up 34 percent from $557.9 million a year ago. Operating profit for the quarter was $17.8 million, compared to a $63.8 million loss a year ago that was primarily the result of an unfavorable verdict on a hotel resort in the Caribbean. The charge was partially reversed in the third quarter of last year after the judge in the case overturned the verdict and a settlement was reached. Operating margins rose to 2.4 percent in the second quarter, compared with 1.8 percent last quarter, driven by solid project progress and performance. New awards included the previously announced San Francisco-Oakland Bay bridge project valued at $717 million. Backlog improved 42 percent over last quarter to $5.4 billion.
The Government segment reported second quarter revenues of $816.2 million, up from $647.2 million a year ago. Operating profit increased to $24.7 million, up from $19.5 million in the second quarter of 2005. Operating margins were even with a year ago at 3.0 percent. The positive impact of FEMA work which began in late 2005 was offset by loss provisions of $21 million on two embassy projects and $8 million for higher costs to complete a project in Afghanistan.
Revenue for the Global Services segment grew 26 percent to $483.5 million, from $382.8 million a year ago. Operating profit increased 70 percent to $39.9 million, up from $23.5 million a year ago. Operating margins increased to 8.2 percent from 6.1 percent a year ago. Improved operating profits and margins were primarily a result of hurricane relief support work.
Fluor’s Power segment reported $105.9 million in revenue, down from $119.0 million in the second quarter of 2005. For the quarter, the Power segment reported operating profit of $2.6 million compared to $3.1 million a year ago. Operating profit margin was level with a year ago at 2.6 percent.
Results for the Six Months
Net earnings for the first six months of 2006 were $155.4 million, or $1.74 per diluted share. This compares with $31.0 million, or $0.36 per diluted share, for the first six months of 2005. As previously mentioned, results for the first half of 2005 included a pre-tax charge of $65.0 million for a hotel project in the Caribbean. Revenues for the 2006 six-month period rose 22.5 percent to $7.1 billion, compared with $5.8 billion in 2005.
About Fluor Corporation
Fluor Corporation (NYSE: FLR) provides services on a global basis in the fields of engineering, procurement, construction, operations and maintenance and project management. Now headquartered in Irving, Texas, Fluor is a FORTUNE 500 company with revenues of $13.2 billion in 2005. For more information, visit www.fluor.com
Forward-Looking Statements: This release contains forward-looking statements, including, without limitation, statements relating to, future backlog, revenue and earnings, expected performance of the Company’s business and the expansion of the markets which the Company serves. The forward-looking statements are based on current management expectations and involve risks and uncertainties. Actual results may differ materially as a result of a number of factors, including, among other things: failure to achieve projected backlog, revenue and/or earnings levels; the timely and successful implementation of strategic initiatives; customer cancellations of, or scope adjustments to, existing contracts; difficulties or delays incurred in the execution of contracts; decreased capital investment or expenditures, or a failure to make anticipated increased capital investment or expenditures, by the Company’s clients; the Company’s failure to receive anticipated new contract awards; increased liability risks in any of the markets the Company serves; the Company’s inability to successfully convert front-end engineering services into future project awards; the cyclical nature of many of the markets the Company serves; and, changes in global business, economic, political and social conditions. Caution must be exercised in relying on these and other forward-looking statements. Due to known and unknown risks, the Company’s results may differ materially from its expectations and projections.
Additional information concerning these and other factors can be found in press releases as well as the Company’s public periodic filings with the Securities and Exchange Commission, including the discussion under the heading "Item 1A. Business — Company Risk Factors" in the Company’s Form 10-K filed on March 1, 2006 and Form 10-Q filed on May 8, 2006. Such filings are available either publicly or upon request from Fluor’s Investor Relations Department: 469-398-7220. The Company disclaims any intent or obligation to update its forward-looking statements in light of new information or future events.