Fluor Reports First Quarter Results
Fluor Corporation (NYSE: FLR), which has significant operations in Greenville, SC, announced financial results for its first quarter ended March 31, 2017. Net earnings attributable to Fluor for the first quarter were $61 million, or $0.43 per diluted share, compared to $104 million, or $0.74 per diluted share a year ago. The primary reason for the decline in year-over-year results is the progression of our current projects from higher margin engineering activities to lower margin construction activities. Results for the quarter include a pre-tax charge of approximately $30 million for unanticipated cost increases on projects in the Industrial, Infrastructure & Power segment, as well as a pre-tax foreign exchange expense as the result of a strengthening Mexican peso, partially offset by favorable tax benefits. Consolidated segment profit for the quarter was $133 million, compared to $241 million a year ago. First quarter revenue of $4.8 billion compares to $4.4 billion in the prior year.
“We continue to experience headwinds as it relates to the timing of client capital decisions as we come off of one of the lowest commodity cycles this industry has seen in recent history,” said David Seaton, Fluor chairman and chief executive officer. “However, we still see the same prospects and the ability for the trend to reverse as we move into the second half of 2017 and beyond.”
New awards for the quarter were $2.3 billion, including $817 million in Energy, Chemicals & Mining, $777 million in Industrial, Infrastructure & Power, $546 million in Diversified Services (previously Maintenance, Modification & Asset Integrity) and $173 million in Government. Consolidated ending backlog of $41.6 billion compares to $46.0 billion a year ago.
Corporate G&A expense for the first quarter of 2017 was $45 million, compared with $55 million a year ago. Fluor’s cash and marketable securities balance at the end of the first quarter was $2.2 billion. During the quarter, the company generated $270 million in cash from operating activities, and paid out $30 million in dividends.
Outlook
In light of the lower than expected first quarter result, and, secondarily, risk around the pace of new awards and revenue for the next few quarters, the Company is revising its 2017 guidance for EPS to a range of $2.25 to $2.75 per diluted share, from the previous range of $2.75 to $3.25 per diluted share.
Business Segments
Fluor’s Energy, Chemicals & Mining segment reported segment profit of $88 million, compared to $182 million in the first quarter of 2016. Results for the quarter reflect a continued shift from high margin engineering activities to lower margin construction activities and a foreign exchange expense based on the strengthening of the Mexican peso. First quarter 2017 revenue was $2.3 billion compared to $2.4 billion a year ago. New awards for the segment totaled $817 million, and ending backlog was $20.3 billion compared to $26.8 billion a year ago.
The Industrial, Infrastructure & Power segment reported a segment loss of $6.7 million, compared to a segment profit of $12 million in the first quarter of 2016. Results for the quarter include approximately $30 million in pre-tax project expenses primarily related to a forecast adjustment on a gas-fired power project. Revenue for the segment increased 44 percent to $1.2 billion from $833 million a year ago. New awards in the first quarter were $777 million including the A10 Zuidasdok motorway project in the Netherlands. Ending backlog for the segment was $14.6 billion, up from $10.3 billion a year ago.
The Government segment reported segment profit of $29 million, compared to $17 million a year ago. Revenue for the segment increased 12 percent to $765 million from $686 million a year ago. First quarter new awards of $173 million included a multi-year services contract and additional funding for the Paducah Gaseous Diffusion Plant project. Ending backlog was $3.7 billion, down from $5.2 billion a year ago. Ending backlog reflects an adjustment to the Magnox RSRL project in the United Kingdom, which will now end in August 2019.
The Diversified Services segment reported a segment profit of $23 million in the first quarter of 2017, compared to $30 million a year ago. Revenue for the quarter was $569 million compared to $461 million in the first quarter of 2016. Results for the quarter reflect the inherent seasonality of the Stork business. New awards totaled $546 million for the quarter, and ending backlog was $2.9 billion, down from $3.7 billion a year ago.
First Quarter Conference Call
Fluor will host a conference call at 5:30 p.m. Eastern time on Thursday, May 4, which will be webcast live on the Internet and can be accessed by logging onto http://investor.fluor.com. A supplemental slide presentation will be available shortly before the call begins. The webcast and presentation will be archived for 30 days following the call.
Non-GAAP Financial Measure
This press release contains a discussion of consolidated segment profit that would be deemed a non-GAAP financial measure under SEC rules. Segment profit is calculated as revenue less cost of revenue and earnings attributable to noncontrolling interests excluding: corporate general and administrative expense; interest expense; interest income; domestic and foreign income taxes; and other non-operating income and expense items. The company believes that consolidated segment profit provides a meaningful perspective on its business results as it is the aggregation of individual segment profit measures that the company utilizes to evaluate and manage its business performance. A reconciliation of this measure to earnings before taxes is included in the press release tables.
