Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 11-K

 


 

(Mark One):

 

x                              ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2011

 

or

 

o                                 TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                                to                               

 

Commission file number 001-16129

 

A.    Full title of the plan and the address of the plan, if different from that of the issuer named below:

 

Fluor Corporation Employees’ Savings Investment Plan

 

B.            Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:

 

FLUOR CORPORATION

6700 Las Colinas Boulevard

Irving, Texas 75039

 

 

 



Table of Contents

 

Audited Financial Statements

and Supplemental Schedule

 

Fluor Corporation Employees’

Savings Investment Plan

 

As of December 31, 2011 and 2010 and for the year ended December 31, 2011

 

With Report of Independent Registered Public Accounting Firm

 



Table of Contents

 

Fluor Corporation Employees’
Savings Investment Plan

 

Index to Audited Financial Statements
and Supplemental Schedule

 

 

Page

 

 

Report of Independent Registered Public Accounting Firm

3

 

 

Audited Financial Statements

 

 

 

Statements of Net Assets Available for Benefits as of December 31, 2011 and 2010

4

 

 

Statement of Changes in Net Assets Available for Benefits for the year ended December 31, 2011

5

 

 

Notes to Financial Statements

6

 

 

 

Schedule

Supplemental Schedule

 

 

 

Schedule H; Line 4i — Schedule of Assets (Held at End of Year) as of December 31, 2011

I

 



Table of Contents

 

Report of Independent Registered Public Accounting Firm

 

The Investment Committee

Fluor Corporation Employees’

Savings Investment Plan

 

We have audited the accompanying statements of net assets available for benefits of the Fluor Corporation Employees’ Savings Investment Plan as of December 31, 2011 and 2010, and the related statement of changes in net assets available for benefits for the year ended December 31, 2011. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing procedures that are appropriate in the circumstances, but not for purposes of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2011 and 2010, and the changes in its net assets available for benefits for the year ended December 31, 2011, in conformity with U.S. generally accepted accounting principles.

 

Our audits were conducted for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2011, is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. Such information is the responsibility of the Plan’s management. The information has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

 

 

 

/s/ Ernst & Young LLP

 

 

 

 

Dallas, Texas

 

June 25, 2012

 

 

3



Table of Contents

 

Fluor Corporation Employees’ Savings Investment Plan

 

Statements of Net Assets Available for Benefits

 

 

 

December 31

 

 

 

2011

 

2010

 

 

 

(In Thousands)

 

Assets

 

 

 

 

 

Investments:

 

 

 

 

 

Fluor Corporation Master Retirement Trust — at fair value

 

$

2,524,051

 

$

2,625,278

 

 

 

 

 

 

 

Receivables:

 

 

 

 

 

Company contributions

 

17,416

 

18,249

 

Notes receivable from participants

 

28,873

 

28,702

 

 

 

46,289

 

46,951

 

 

 

 

 

 

 

Net assets reflecting all investments — at fair value

 

2,570,340

 

2,672,229

 

Adjustment from fair value to contract value for fully benefit-responsive investment contracts

 

(24,911

)

(17,432

)

Net assets available for benefits

 

$

2,545,429

 

$

2,654,797

 

 

See accompanying notes.

 

4



Table of Contents

 

Fluor Corporation Employees’ Savings Investment Plan

 

Statement of Changes in Net Assets Available for Benefits

 

Year Ended December 31, 2011
(In Thousands)

 

Additions (deductions) in net assets:

 

 

 

Contributions:

 

 

 

Participants

 

$

89,394

 

Company

 

58,429

 

Rollovers

 

2,153

 

Total contributions

 

149,976

 

 

 

 

 

Net investment loss:

 

 

 

Share in net investment loss of Fluor Corporation Master Retirement Trust

 

(41,603

)

 

 

 

 

Interest income on notes receivable from participants

 

1,189

 

 

 

 

 

Benefits, terminations and withdrawals

 

(218,561

)

Administrative expenses

 

(1,630

)

Asset transfers from SMA Equipment Co., Inc. Employees 401(k) Plan

 

619

 

Asset transfers from TRS 401(k) Retirement Plan

 

642

 

Net decrease in net assets available for benefits

 

(109,368

)

 

 

 

 

Net assets available for benefits:

 

 

 

Beginning of year

 

2,654,797

 

End of year

 

$

2,545,429

 

 

See accompanying notes.

 

5



Table of Contents

 

Fluor Corporation Employees’ Savings Investment Plan

 

Notes to Financial Statements

 

December 31, 2011

 

1. Description of the Plan

 

The Fluor Corporation Employees’ Savings Investment Plan (the Plan) is a contributory defined contribution plan sponsored by Fluor Corporation (Fluor or the Company). It is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA).

 

The following provides only general information about the Plan. Participants should refer to the Plan document for a more complete description of the Plan’s provisions.

 

The Plan is managed by Fluor’s Global Benefits, Administrative and Investment Committees (collectively, the Committees). The Global Benefits Committee is responsible for plan design and funding strategies, including corporate contributions. The Administrative Committee interprets the Plan’s documents and administers the Plan on behalf of participants. The Investment Committee establishes investment policies and objectives, including the investment portfolio diversification and risk concentration guidelines, and monitors investment activity and ongoing investment performance. The Investment Committee may appoint professional investment managers to manage the investment accounts of the Fluor Corporation Master Retirement Trust (the Master Trust) in accordance with ERISA requirements and its own guidelines.

 

The Master Trust Agreement requires that The Northern Trust Company (the Trustee), either directly or indirectly, hold the Plan’s assets in a master trust and administer and distribute those assets in accordance with the Plan and the instructions of the Committees or their designees.

 

Eligibility, Contributions and Vesting

 

Certain employees of Fluor and certain of its subsidiaries are immediately eligible to participate in the Plan.

 

Participants may elect to contribute an amount ranging from 1% of their compensation, as defined, to a maximum percentage determined by the Global Benefits Committee, subject to Internal Revenue Service (IRS) limits. The maximum contribution percentage is 50%; however, the maximum contribution percentage may be decreased for highly compensated employees. Participants who have attained age fifty before the end of the plan year are eligible to make catch-up contributions.

 

Participants may change their contribution percentages at their own discretion. Such contribution percentage changes shall become effective as soon as administratively possible following receipt of the change request by the recordkeeper.

 

Company matching contributions made to the Plan are in accordance with the “safe harbor” requirements of Sections 401(k)(12) and 401(m)(11) of the Internal Revenue Code (the Code). For each participant who has completed one year of service, the Company’s matching contribution is equal to 100% of the participant’s contribution to the Plan, limited to 5% of the participant’s eligible compensation. The

 

6



Table of Contents

 

Fluor Corporation Employees’ Savings Investment Plan

 

Notes to Financial Statements (continued)

 

Company’s matching contributions are invested in the same funds as the participant contributions and may be subsequently transferred to other funds.

 

Participants are fully vested at all times in participant and Company matching contributions and earnings thereon.

 

Fluor Salaried Company Contributions

 

The Company may make an annual contribution (Company Contribution) for salaried participants that meet the one year of service eligibility requirement, excluding Fluor Daniel craft employees. No minimum contribution by the Company to the Plan is required in any Plan year. The Company Contribution is determined at the discretion of the Global Benefits Committee and may not exceed 15% of the aggregate eligible compensation of the participants, as defined in the Plan. For the year ended December 31, 2011, Fluor contributed 2% of participants’ eligible compensation to the Plan. Effective January 1, 2012, if the Company elects to make a Company Contribution, the amount of the contribution will be determined based on the participant’s total years of service with the Company as follows:

 

Total Years of Service on
Last Day of Plan Year

 

Company Contribution
(% of Compensation)

 

1-9

 

4

%

10-19

 

5

%

20-29

 

6

%

30 or more

 

7

%

 

The increase in the Company Contribution was to compensate employees who were impacted by the Company’s decision to cease further accrual in the Defined Benefit Plan of Fluor Corporation and Participating Subsidiaries as of December 31, 2011.

 

Participants vest in the above annual Company Contribution based on length of service, as defined by the various vesting schedules under the Plan.

 

The non-vested portion of terminated participant accounts is available to reduce Fluor contributions to the Plan or to pay expenses of administering the Plan, at the discretion of the Administrative Committee. Participants who terminate service by reason of retirement, death or permanent and total disability become fully vested upon termination of service.

 

Benefits, Terminations and Withdrawals

 

Upon total and permanent disability, death or retirement, participants are eligible to receive a distribution of the full value of their accounts. If employment ends for other reasons, participants are eligible to receive a distribution of their vested account balance. Distributions are made in lump-sum amounts, and participants invested in Fluor common stock may request Fluor common stock valued at current market value in lieu of or in combination with cash. If the account balance is $1,000 or less, a distribution will be made in a lump sum following the end of employment unless the participant elects a direct rollover of such account balance. If the amount to be distributed exceeds $1,000 and the participant does not request

 

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Table of Contents

 

Fluor Corporation Employees’ Savings Investment Plan

 

Notes to Financial Statements (continued)

 

a distribution, the participant’s account shall remain in the Plan and may be withdrawn or distributed at the participant’s request or as minimum required distributions beginning when the participant attains age 70½. When a participant dies, the entire amount in the participant’s account is allocated to the participant’s beneficiaries, as described in the Plan document. Under certain hardship conditions, as defined in the Plan document, participants may elect to withdraw a portion of their account balance at any time during the Plan year. Additionally, participants who have reached age 59½ have the option of withdrawing all or part of their vested account balance at any time.

 

Benefits, terminations and withdrawals are recorded when paid.

 

Notes Receivable from Participants

 

The Plan allows participants to borrow up to one-half of their account balance. In no event can the note amount be for less than $1,000, nor can it exceed $50,000, reduced by the participant’s highest note balance in the previous 12 months. Such notes bear interest as defined in the Plan document and are payable through payroll deductions or monthly installments if the employee is on unpaid leave of absence or terminated from service. The length of the note is up to a 15-year period for a primary residence note or a five-year period for all other notes. Participants are only allowed one outstanding note.

 

Income Tax Status

 

The Plan has received a determination letter from the IRS dated July 11, 2003, stating that the Plan is qualified under Section 401(a) of the Code and, therefore, the related trust is exempt from federal income taxes. Subsequent to this determination by the IRS, the Plan was amended and restated. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan’s Administrative Committee has indicated that it will maintain compliance with the qualification requirements of the Code and, as necessary, take steps to bring the Plan’s operations into compliance with the Code.

 

Accounting principles generally accepted in the United States require Plan management to evaluate uncertain tax positions taken by the Plan. The financial statement effects of a tax position are recognized when the position is more likely than not, based on the technical merits, to be sustained upon examination by the IRS. Plan management has analyzed the tax positions taken by the Plan and has concluded that as of December 31, 2011, there are no uncertain positions taken or expected to be taken. The Plan has recognized no interest or penalties related to uncertain tax positions. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. Plan management believes it is no longer subject to income tax examinations for years prior to 2008.

 

Participant Accounts

 

An individual account is maintained for each participant in each designated fund. Participant designated funds consist of the LifePath®, Stable Value, Intermediate Term Bond, Large Cap Value, S&P 500 Index, Large Cap Growth, Small Cap Value, Small Cap Growth, Non-U.S. Equity and Fluor Corporation Common Stock funds. The asset allocations of these designated funds comprise various debt and equity securities as disclosed in Notes 3 and 5. Each account is adjusted daily for contributions and net

 

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Table of Contents

 

Fluor Corporation Employees’ Savings Investment Plan

 

Notes to Financial Statements (continued)

 

investment income or loss allocated to the individual participants in each fund. If no funds are selected by the participant, then the contributions are designated to the BlackRock, Inc. (BlackRock) LifePath® funds based on participant age. Contributions into the BlackRock LifePath® funds may be subsequently allocated to other funds at the discretion of the participant. Participants are allowed to transfer a portion or all of the balance in their accounts from one investment fund to any other investment fund on a daily basis. However, participants can make transfers into the Fluor Common Stock, Large Cap Growth, Large Cap Value, Small Cap Growth, Small Cap Value, S&P 500 Index or Non-U.S. Equity funds only once per calendar month. Participants are limited in the amount they can invest in the Fluor Common Stock fund to 50% of their total account balance. Effective April 1, 2012, the limitation on investing in the Fluor Common Stock fund was reduced from 50% to 20%.

 

Other Provisions

 

Participants may contribute distributions into the Plan that were received from previous employers’ qualified retirement plans (rollover contributions). Participants are fully vested at all times in rollover contributions and the earnings thereon.

 

While the Company has not expressed any intent to terminate the Plan, it has the right to do so at any time. In the event of plan termination, participants will become 100% vested in their accounts.

 

2. Summary of Significant Accounting Policies

 

Investments

 

The Plan’s investments are commingled with the investments of various other employee benefit plans sponsored by Fluor and certain of its subsidiaries and affiliates in the Master Trust, which in turn invests in the Fluor DC Investments (as later defined). The Plan’s investments are stated at fair value as follows:

 

Corporate equity securities consist of common and preferred stocks of U.S. and non-U.S. companies, including Fluor common stock. Corporate equity securities are valued based on the last trade or official close of an active market or exchange on the last business day of the Plan year. Government securities consist primarily of U.S. government bonds and U.S. government mortgage-backed securities. Corporate bonds primarily consist of investment-grade rated bonds and notes, of which no significant concentration exists in any one rating category or industry. Government securities and corporate bonds are valued based on evaluated prices, which are determined from a compilation of primarily observable market information, broker quotes in non-active markets or similar assets. Securities not traded on the last business day are valued at the last reported bid price. The estimated fair value of the investments in the common or collective trusts represents the underlying net asset value of the shares or units of such funds as determined by the issuer.

 

The self-directed brokerage account (SDBA) is provided for participants who want more investment choices than the core options offered by the Plan. Through the SDBA, participants have access to a wide range of mutual funds. As of December 31, 2011 and 2010, the investment holdings of the participants via the SDBA included a large variety of mutual funds with no

 

9



Table of Contents

 

Fluor Corporation Employees’ Savings Investment Plan

 

Notes to Financial Statements (continued)

 

material concentration in any one investment or industry. Mutual funds are valued at fair value, which represents the net asset value of the shares of such funds as of the close of business at the end of the period.

 

Investments in the Stable Value Fund (Note 4) are stated at the fair value of the underlying synthetic guaranteed investment contracts (synthetic GICs). A synthetic GIC comprises an underlying asset and a “wrapper” contract. The fair value of synthetic GICs is calculated based on the fair values of the underlying securities, which comprise primarily fixed-income common or collective trusts, plus the fair value of the wrapper. Wrapper contracts essentially modify the investment characteristics of underlying securities to those of guaranteed investment contracts. The fair values of the wrapper contracts are based on the estimated replacement costs of the wrapper contracts. A guaranteed investment contract is an insurance contract that guarantees its owner principal repayment and a stated rate of interest for a predetermined period of time. The wrapper contracts provide that benefit-responsive distributions for specific underlying securities may be withdrawn at contract value. Contract value represents contributions made, plus interest earned, less withdrawals. Benefit-responsive distributions are generally defined as withdrawals due to a participant’s retirement, disability, death or participant-directed transfers, in accordance with the terms of the Plan.

 

Derivative instruments are recorded at their fair values, with changes in fair values reported under share in net investment income or loss of Fluor Corporation Master Retirement Trust in the statement of changes in net assets available for benefits, in accordance with Accounting Standards Codification (ASC) 815, “Derivatives and Hedging.” Derivative instruments are estimated by obtaining quotes from brokers. Derivatives in the Master Trust consist of contracts in foreign exchange forwards, futures, options and swaps. Foreign exchange forwards are used to manage risks related to exposures in foreign currency. Interest rate swaps, options and interest rate and equity futures are used to gain exposure to certain asset classes or to manage risk inherent within certain investments. The Master Trust may also invest in caps, floors, mortgage derivatives and structured notes.

 

Net investment income (loss) of the Master Trust is allocated daily to the Plan based on the ratio of fair values of the Plan’s investment in the Master Trust to the total fair value of the related Master Trust investments as of the beginning of the day.

 

Purchases and sales of investments are recorded on the trade date. Realized gains or losses on sales, redemptions or distributions of investments are based on each investment manager’s average historical cost. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date.

 

Risks and Uncertainties

 

The Master Trust invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the Statements of Net Assets Available for Benefits.

 

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Table of Contents

 

Fluor Corporation Employees’ Savings Investment Plan

 

Notes to Financial Statements (continued)

 

The Master Trust’s concentrations of credit risk are dictated by the Plan’s provisions, as well as those of ERISA and participants’ investment preferences (Note 1). The Stable Value Fund primarily invests in contracts of financial institutions with at least AA- credit ratings (Note 4). The Master Trust’s exposure to credit risk on the wrapper contracts is limited to the fair value of the contracts with each insurance company. The Investment Committee believes that no significant concentrations of credit risk exist within any investment option at December 31, 2011 and 2010, except as disclosed in Note 5.

 

Contributions

 

Participant contributions are recorded when the Company makes payroll deductions from the participant’s compensation. Company matching contributions, if any, are recorded at the same time as the participant contribution. Contributions are funded to the Plan following the payroll payment date.

 

The annual Fluor Salaried Company Contribution is recorded at the end of the Plan year and is paid by Fluor in the following year. The contribution may be made in cash or by transfer of certain other assets held by Fluor. Non-vested forfeitures were approximately $605,000 and $976,000 at December 31, 2011 and 2010, respectively. Non-vested forfeitures of $605,000 were used to reduce the 2011 employer contributions.

 

Notes Receivable from Participants

 

Notes receivable from participants represent participant loans that are recorded at their unpaid principal balance plus any accrued but unpaid interest. Interest income on notes receivable from participants is recorded when it is earned. Related fees are recorded as administrative expenses and are expensed when they are incurred. No allowance for credit losses has been recorded as of December 31, 2011 or 2010. If a participant ceases to make note repayments and Plan management deems the participant note to be a distribution, the participant note balance is reduced and a benefit payment is recorded.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates that affect the amounts reported in the financial statements, accompanying notes and supplemental schedule. Actual results could differ from those estimates.

 

Reclassification

 

Certain 2010 amounts relating to common or collective trusts in Notes 3 and 5 to the financial statements have been reclassified into debt securities and short-term investment fund to conform to the 2011 presentation.

 

Recent Accounting Pronouncements

 

In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure

 

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Table of Contents

 

Fluor Corporation Employees’ Savings Investment Plan

 

Notes to Financial Statements (continued)

 

Requirements in U.S. GAAP and IFRSs,” which amends certain guidance in ASC 820, “Fair Value Measurement.” ASU 2011-04 expands ASC 820’s existing disclosure requirements for fair value measurements and makes other amendments. ASU 2011-04 is effective for interim and annual reporting periods beginning after December 15, 2011 and will be applied on a prospective basis. Plan management is currently evaluating the effect that the provisions of ASU 2011-04 will have on the Plan’s financial statements.

 

3. Master Trust

 

Investments

 

The Master Trust Fluor manages the Plan and the TRS 401(k) Retirement Plan (collectively, the Fluor DC Investments) and the Defined Benefit Plan of Fluor Corporation and Participating Subsidiaries (the Fluor DB Investments). The Fluor DC Investments are presented as a single master trust investment account because all the investments are participant-directed. The investments held by the Master Trust are valued at fair value as described in Note 2.

 

The net assets at fair value of the Master Trust consist of the following as of December 31:

 

 

 

2011

 

2010

 

 

 

(In Thousands)

 

Assets

 

 

 

 

 

Fluor DC Investments

 

$

2,542,443

 

$

2,644,953

 

Fluor DB Investments

 

690,554

 

618,050

 

Net Assets of the Master Trust — at fair value

 

3,232,997

 

3,263,003

 

Adjustment from fair value to contract value for fully benefit-responsive investment contracts

 

(25,042

)

(17,540

)

Net Assets of the Master Trust

 

$

3,207,955

 

$

3,245,463

 

 

Net investment income for the Master Trust is as follows for the year ended December 31:

 

 

 

2011

 

 

 

(In Thousands)

 

Net investment income (loss)

 

 

 

Fluor DC Investments

 

$

(42,193

)

Fluor DB Investments

 

42,677

 

Total net investment income

 

$

484

 

 

The Fluor DC Investments The Plan’s investments consist of its proportionate share in the Fluor DC Investments held by the Master Trust, which approximated 99% of the Fluor DC Investments as of December 31, 2011 and 2010.

 

12



Table of Contents

 

Fluor Corporation Employees’ Savings Investment Plan

 

Notes to Financial Statements (continued)

 

Assets

 

The net assets of the Fluor DC Investments held by the Plan as of December 31 were as follows:

 

 

 

Fluor DC Investments

 

 

 

2011

 

2010

 

 

 

(In Thousands)

 

Assets

 

 

 

 

 

Government securities

 

$

60,958

 

$

53,518

 

Securities lending arrangements:

 

 

 

 

 

Corporate equity securities

 

9,933

 

5,259

 

Government securities

 

4,073

 

4,923

 

Securities lending collateral — non-cash

 

14,372

 

10,408

 

Corporate bonds

 

32,965

 

39,789

 

Common or collective trusts:

 

 

 

 

 

BlackRock LifePath® funds

 

747,746

 

768,306

 

U.S. equities

 

117,256

 

134,912

 

Non-U.S. equities

 

5,160

 

4,712

 

Debt securities

 

9,477

 

5,817

 

Short-term investment fund

 

21,556

 

24,457

 

Synthetic guaranteed investment contracts

 

725,905

 

692,020

 

Foreign currency and cash

 

4,518

 

46,861

 

Corporate equity securities:

 

 

 

 

 

Fluor Corporation

 

206,821

 

248,146

 

Other U.S. equities

 

351,975

 

374,532

 

Non-U.S. equities

 

75,304

 

57,941

 

Foreign currency exchange contracts

 

7,315

 

52,749

 

Investment income receivable

 

1,851

 

1,715

 

Due from brokers for securities purchased

 

21,023

 

3,192

 

Self-directed brokerage accounts — mutual funds

 

177,445

 

203,490

 

Total assets

 

2,595,653

 

2,732,747

 

Liabilities

 

 

 

 

 

Accrued expenses

 

(1,862

)

(2,073

)

Foreign currency exchange contracts

 

(7,284

)

(52,299

)

Due to brokers for securities purchased

 

(29,692

)

(23,014

)

Obligation to return collateral — non-cash

 

(14,372

)

(10,408

)

Total liabilities

 

(53,210

)

(87,794

)

Net assets of the Fluor DC Investments — at fair value

 

2,542,443

 

2,644,953

 

Adjustment from fair value to contract value for fully benefit-responsive investment contracts

 

(25,042

)

(17,540

)

Net assets of the Fluor DC Investments

 

$

2,517,401

 

$

2,627,413

 

 

The BlackRock LifePath® funds presented in the table above are common or collective trust funds for which the investment asset allocations are based on a target maturity date. These funds hold a mix of broad-market stock, bond and real estate index funds designed to gradually become more conservative as the target year in which the participants expect to access their funds approaches. Upon reaching the target year, the fund is combined with the BlackRock LifePath® Retirement Fund, which is designed to provide

 

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Table of Contents

 

Fluor Corporation Employees’ Savings Investment Plan

 

Notes to Financial Statements (continued)

 

those participants who are in retirement and withdrawing money a lower-risk investment vehicle to maintain liquidity and maximize returns over the participants’ remaining life expectancies. Participant-directed redemptions out of the BlackRock LifePath® funds can occur on a daily basis; redemptions directed by the plan sponsor require a 15 day notification period.

 

The Master Trust has a security lending program with the Trustee whereby the Trustee is authorized to lend securities owned by the Master Trust (other than Fluor common stock and securities excluded from lending from time to time by the Master Trust) to a select number of qualified borrowers (generally national and international brokerage firms). Pursuant to the agreement, security borrowers are authorized to use borrowed securities to settle trades and are obligated to return the securities to the Master Trust. All borrowed securities are secured by collateral held by the Trustee, which has a fair value of no less than 102% of the fair market value of the borrowed securities at all times. The collateral typically consists of U.S. government securities and U.S. treasury bills. The Master Trust is fully indemnified by the Trustee against any losses incurred as a result of borrower default. Securities lending net income for the Fluor DC Investments of approximately $164,000 was earned under the lending agreement during the year ended December 31, 2011.

 

Net Investment Loss

 

Net investment loss for the Fluor DC Investments for the year ended December 31, 2011, are as follows:

 

 

 

Fluor
DC Investments

 

 

 

(In Thousands)

 

Net appreciation (depreciation) in fair value of investments:

 

 

 

Government securities

 

$

4,085

 

Corporate equity securities

 

(73,931

)

Bonds

 

(143

)

Self-directed brokerage accounts — mutual funds

 

(8,657

)

Common or collective trusts

 

10,559

 

Other

 

393

 

Total net depreciation

 

(67,694

)

Interest on synthetic guaranteed investment contracts

 

20,780

 

Securities lending income

 

219

 

Interest

 

3,896

 

Dividends

 

8,583

 

Other income

 

(791

)

Securities lending expense

 

(55

)

Investment management and administrative expenses

 

(7,131

)

Total net investment loss

 

$

(42,193

)

 

Other than the Plan’s interest in the Master Trust, there are no assets held for investment that represent 5% or more of the Plan’s net assets at December 31, 2011 and 2010.

 

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Table of Contents

 

Fluor Corporation Employees’ Savings Investment Plan

 

Notes to Financial Statements (continued)

 

4. Stable Value Fund (Synthetic Guaranteed Investment Contracts)

 

The Plan’s investment in the Master Trust through its investment in the Fluor DC Investments included amounts in the Stable Value Fund, which was established for the investment of the assets of the two participating plans. Each participating plan has an undivided interest in the Stable Value Fund. Investment income and administrative expenses relating to the Stable Value Fund are allocated among the participating plans on a daily basis.

 

Investment income, net of expenses, of the Stable Value Fund totaled $19,121,880 for the year ended December 31, 2011.

 

The weighted-average yield (excluding administrative expenses) earned by the Stable Value Fund at December 31, 2011 and 2010, was 1.70% and 2.50%, respectively. The weighted-average yield earned by the Stable Value Fund, with an adjustment to reflect the actual interest rate credited to participants in the Stable Value Fund at December 31, 2011 and 2010, was 2.75% and 3.38%, respectively.

 

The Stable Value Fund enters into participating synthetic GICs. In a participating synthetic GIC, the contract holder participates in asset and liability risks. In the case of a full liquidation event, the issuer is responsible for covering any amount by which the contract value exceeds the fair value of the underlying portfolio. Risks arise when entering into any investment contract due to the potential inability of the issuer to meet the terms of the contract. To the extent that an issuer has failed to meet the terms of a contract, synthetic GICs would then also bear the risk of default or the lack of liquidity of the underlying portfolio assets.

 

The primary variables impacting the future crediting rates of the synthetic GICs are driven by the performance of the underlying assets. The Stable Value Fund is designed to reset its respective crediting rate on a quarterly basis and cannot credit an interest rate that is less than 0%. The crediting rate of the Stable Value Fund tracks current market yields on a trailing basis. The rate reset allows the Stable Value Fund to converge with the fair value of the underlying portfolio over time, assuming the portfolio continues to earn the current yield for a period of time equal to the current portfolio duration.

 

To the extent that the underlying portfolio of the Stable Value Fund has unrealized and/or realized losses, a positive adjustment is made to the adjustment from fair value to contract value and disclosed in the Statement of Net Assets Available for Benefits. Similarly, if the underlying portfolio generates unrealized and/or realized gains, a negative adjustment is made to the adjustment from fair value to contract value and disclosed in the Statement of Net Assets Available for Benefits.

 

There are certain events not initiated by Plan participants that limit the ability of the Plan to transact with the issuer at contract value. Each contract issuer specifies the events that may trigger a market value adjustment to be applied to the contract value; such events may include material amendments to the Stable Value Fund’s structure or administration; changes to the participating plans’ competing investment options, including the elimination of equity wash provisions; complete or partial termination of the Stable Value Fund, including a merger with another fund; the failure of the Stable Value Fund to qualify for exemption from federal income taxes or any required prohibited transaction exemption under ERISA; the

 

15



Table of Contents

 

Fluor Corporation Employees’ Savings Investment Plan

 

Notes to Financial Statements (continued)

 

redemption of all or a portion of the interests in the Stable Value Fund held by a participating plan at the direction of the participating plan sponsor, including withdrawals due to the removal of a specifically identifiable group of employees from coverage under the participating plan (such as a group layoff or early retirement incentive program); the closing or sale of a subsidiary, employing unit or affiliate; the bankruptcy or insolvency of a plan sponsor; the merger of the plan with another plan; or the plan sponsor’s establishment of another tax-qualified defined contribution plan; any change in law, regulation, ruling, administrative or judicial position or accounting requirement applicable to the Stable Value Fund or participating plans; and the delivery of any communication to plan participants designed to influence a participant not to invest in the Stable Value Fund.

 

At this time, Plan management does not believe that the occurrence of any such market value event that would limit the Stable Value Fund’s ability to transact at contract value with participants is probable.

 

Effective June 29, 2012, direct transfers from the Stable Value Fund to the SDBA will be prohibited and any amount transferred from the Stable Value Fund to any of the other investment options available under the Plan will not be subsequently transferred to the SDBA for a period of 90 calendar days from the initial date of transfer out of the Stable Value Fund.

 

16



Table of Contents

 

Fluor Corporation Employees’ Savings Investment Plan

 

Notes to Financial Statements (continued)

 

5. Fair Value Measurements

 

The following table presents, for each of the fair value hierarchy levels, the Fluor DC Investments’ assets and liabilities that are measured at fair value on a recurring basis as of:

 

 

 

December 31, 2011

 

December 31, 2010

 

 

 

Fair Value Measurements Using

 

Fair Value Measurements Using

 

(in thousands)

 

Total

 

Quoted Prices
in Active
Markets for
Identical Assets
or Liabilities
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

Total

 

Quoted Prices
in Active
Markets for
Identical Assets
or Liabilities
(Level 1)

 

Significant
Other
Observable
Inputs
(Level 2)

 

Significant
Unobservable
Inputs
(Level 3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Government securities (1)

 

$

65,031

 

$

 

$

65,031

 

$

 

$

58,441

 

$

 

$

58,441

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities lending collateral — non-cash

 

14,372

 

 

14,372

 

 

10,408

 

 

10,408

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

32,965

 

 

32,965

 

 

39,789

 

 

39,789

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common or collective trusts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BlackRock LifePath® funds

 

747,746

 

 

747,746

 

 

768,306

 

 

768,306

 

 

U.S. equities

 

117,256

 

 

117,256

 

 

134,912

 

 

134,912

 

 

Non-U.S. equities

 

5,160

 

 

5,160

 

 

4,712

 

 

4,712

 

 

Debt securities

 

9,477

 

 

9,477

 

 

5,817

 

 

5,817

 

 

Short-term investment fund

 

21,556

 

 

21,556

 

 

24,247

 

 

24,457

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Synthetic guaranteed investment contracts

 

725,905

 

 

725,905

 

 

692,020

 

 

692,020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fluor Corporation

 

206,821

 

206,821

 

 

 

248,146

 

248,146

 

 

 

Other U.S. equities (1)

 

361,908

 

361,908

 

 

 

379,976

 

379,855

 

121

 

 

Non-U.S. equities (1)

 

75,304

 

75,304

 

 

 

57,756

 

57,756

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency exchange contracts

 

7,315

 

 

7,315

 

 

52,749

 

 

52,749

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Self-directed brokerage accounts — mutual funds

 

177,445

 

177,445

 

 

 

203,490

 

203,490

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency exchange contracts

 

$

7,284

 

$

 

$

7,284

 

$

 

$

52,299

 

$

 

52,299

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Obligation to return collateral — non-cash

 

14,372

 

 

14,372

 

 

10,408

 

 

10,408

 

 

 


(1)Amounts include securities on loan under the security lending program discussed in Note 3 above.

 

6. Derivative Financial Instruments

 

As of December 31, 2011 and 2010, the Fluor DC Investments had total gross notional amounts outstanding of $14,862,883 and $104,502,252, respectively, for foreign exchange forward contracts with various foreign currencies primarily in Euro, GBP, AUD and Yen. In addition, the Fluor DC Investments had total gross notional amounts outstanding of $24,900,563 and $37,857,545 for interest rate futures with various fixed income securities primarily in U.S. government treasury notes as of December 31, 2011 and 2010, respectively. As of December 31, 2011, the Fluor DC Investments had options and swaps with gross notional amounts of $20,261,000 and $20,150,000, respectively, both of which had no material concentrations. As of December 31, 2010, the Fluor DC Investments had equity futures and interest rate

 

17



Table of Contents

 

Fluor Corporation Employees’ Savings Investment Plan

 

Notes to Financial Statements (continued)

 

swaps with gross notional amounts of $39,591,755 and $19,513,000, respectively, both of which had no material concentrations. The options, futures and interest rate swap instruments are settled daily. Gains (losses) associated with the derivatives were immaterial for the year ended December 31, 2011, and are reported in other income under “Net Investment Loss” in Note 3.

 

7. Party-In-Interest Transactions

 

Certain Plan investments in the common or collective trust accounts are managed by Northern Trust Investments, Inc., an affiliate of The Northern Trust Company (Trustee) and BlackRock (an investment manager), both of whom have a fiduciary responsibility to the Plan. Additionally, a portion of the Plan’s assets are invested in BlackRock common or collective trusts and Fluor common stock. Because Fluor is the Plan sponsor, transactions involving Fluor common stock qualify as party-in-interest transactions. Master Trust holdings for the Trustee, BlackRock and Fluor common stock amounted to $153,448,743, $747,746,002 and $206,820,809, respectively, as of December 31, 2011. Master Trust holdings for the Trustee, BlackRock and Fluor common stock amounted to $169,898,057, $768,306,098 and $248,146,284, respectively, as of December 31, 2010. All of the party-in-interest transactions noted above are exempt from the prohibited transaction rules.

 

Investments managed by BlackRock represented 30% and 29% of the Fluor DC Investments as of December 31, 2011 and 2010, respectively. Investments in Fluor common stock represented 8% and 9% of the Fluor DC Investments as of December 31, 2011 and 2010, respectively.

 

8. Differences Between Financial Statements and Form 5500

 

The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500 at December 31:

 

 

 

2011

 

2010

 

 

 

(In Thousands)

 

 

 

 

 

 

 

Net assets available for benefits per the financial statements

 

$

2,545,429

 

$

2,654,797

 

Add: Adjustment from contract value to fair value for fully benefit-responsive investment contracts

 

24,911

 

17,432

 

Less: Benefits payable

 

(376

)

(974

)

Net assets available for benefits per the Form 5500

 

$

2,569,964

 

$

2,671,255

 

 

18



Table of Contents

 

Fluor Corporation Employees’ Savings Investment Plan

 

Notes to Financial Statements (continued)

 

The following is a reconciliation of the share in net investment loss of the Fluor Corporation Master Retirement Trust per the financial statements to net investment loss from master trust investment accounts per the Form 5500 for the year ended December 31:

 

 

 

2011

 

 

 

(In Thousands)

 

Share in net investment loss of Fluor Corporation Master Retirement Trust per the financial statements

 

$

(41,603

)

Add: 2011 adjustment from contract value to fair value for fully benefit-responsive investment contracts

 

24,911

 

Less: 2010 adjustment from contract value to fair value for fully benefit-responsive investment contracts

 

(17,432

)

Net investment loss from master trust investment accounts per the Form 5500

 

$

(34,124

)

 

The accompanying financial statements present fully benefit-responsive contracts at contract value. The Form 5500 requires fully benefit-responsive investment contracts to be reported at fair value. Therefore, the adjustment from fair value to contract value for fully benefit-responsive investment contracts represents a reconciling item.

 

The following is a reconciliation of benefits, terminations and withdrawals per the financial statements to the Form 5500 for the year ended December 31:

 

 

 

2011

 

 

 

(In Thousands)

 

 

 

 

 

Benefits, terminations and withdrawals per the financial statements

 

$

218,561

 

Add: Benefits payable at end of year

 

376

 

Less: Benefits payable at beginning of year

 

(974

)

Benefits, terminations and withdrawals to participants per the Form 5500

 

$

217,963

 

 

Benefits payable are recorded on the Form 5500 for payments to participants who requested payment prior to December 31, 2011, but had not been paid as of that date.

 

9. Subsequent Events

 

Plan management has evaluated all material events occurring subsequent to the date of the financial statements up to the date and time this annual report is filed on Form 11-K.

 

19



Table of Contents

 

Supplemental Schedule

 



Table of Contents

 

Schedule I

 

Fluor Corporation Employees’ Savings Investment Plan

 

Schedule H; Line 4i — Schedule of Assets (Held at End of Year)

 

EIN: 33-0927079

Plan: 002

 

December 31, 2011

 

(a)

 

(b)
Identity of Issue,
Borrower,
Lessor or Similar
Party

 

(c)
Description of Investment,
Including Maturity Date,
Rate of Interest, Collateral,
Par or Maturity Value

 

(d)
Cost

 

(e)
Current
Value

 

 

 

 

 

 

 

 

 

 

 

*

 

Notes receivable from participants

 

Interest rates ranging from 3.25% to 9.50%, with varying maturities

 

 

$

28,872,721

 

 


*Party-in-interest investment that is not a “prohibited investment” under the Employee Retirement Income Security Act of 1974.

 



Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Investment Committee of the Fluor Corporation Employees’ Savings Investment Plan has duly caused this Annual Report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

Date: June 25, 2012

 

 

 

Fluor Corporation Employees’ Savings Investment Plan

 

 

 

 

 

 

 

By:

/s/ Glenn C. Gilkey

 

 

 

 

 

Glenn C. Gilkey

 

 

Member, Investment Committee

 



Table of Contents

 

EXHIBIT INDEX

 

Exhibit

 

Description

 

 

 

23.1

 

Consent of Independent Registered Public Accounting Firm