FLUOR CORPORATION
The following discussion and analysis should be read in conjunction with our
financial statements and our 2020 10-K. Except as the context otherwise
requires, the terms Fluor or the Registrant, as used herein, are references to
Fluor and its predecessors 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
revenue and earnings levels, cash flow and liquidity, new awards and 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 wish to caution readers that forward-looking statements, including
disclosures which use words such as we "believe," "anticipate," "expect,"
"estimate" and similar statements, are subject to various risks and
uncertainties which could cause actual results of operations to differ
materially from expectations. Factors potentially contributing to such
differences include, among others:
•The severity and duration of the COVID-19 pandemic and actions by governments,
businesses and individuals in response to the pandemic;
•The cyclical nature of many of the markets we serve and our clients'
vulnerability to downturns, which may result in decreased capital investment or
expenditures and reduced demand for our services;
•Our failure to receive anticipated new contract awards and the related impact
on revenue, earnings, staffing levels and cost;
•Failure to accurately estimate the cost and schedule for our contracts,
resulting in cost overruns or liabilities, including those related to project
delays and those caused by the performance of our clients, subcontractors,
suppliers and joint venture or teaming 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;
•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, resulting in reduced profits or losses;
•Cybersecurity breaches of our systems and information technology;
•Civil unrest, security issues, labor conditions and other unforeseeable events
in the countries in which we do business, resulting in unanticipated losses;
•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;
•Inability to maintain safe work sites;
•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 liability claims by our clients;
•Differences between our actual results and the assumptions and estimates used
to prepare our financial statements;
•Client delays or defaults in making payments;
•Failure of our suppliers or subcontractors to provide supplies or services at
the agreed-upon levels or times;
•Uncertainties, restrictions and regulations impacting our government contracts;
•The inability to hire and retain qualified personnel;
•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;
•Possible systems and information technology interruptions;
•The impact of anti-bribery and international trade laws and regulations;
•Our ability to secure appropriate insurance;
•The failure to be adequately indemnified for our nuclear services;
•The loss of business from one or more significant clients;
•The failure to adequately protect intellectual property rights;
•Impairments to goodwill, investments, deferred tax assets or other intangible
assets;
•Failure to maintain an effective system of internal controls;
•Failure to prepare and timely file our periodic reports, which limits our
access to public markets to raise debt and equity capital and restricts our
ability to issue equity securities;
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•The restatement of certain of our previously issued consolidated financial
statements, which may result in unanticipated costs and may affect investor
confidence and our reputation;
•The availability of credit and restrictions imposed by credit facilities, both
for us and our clients, suppliers,
subcontractors or other partners;
•Possible limitations of bonding or letter of credit capacity;
•Failure to obtain favorable 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;
•Failure to successfully implement our strategic and operational initiatives;
•The risks associated with acquisitions, dispositions or other investments,
including the failure to successfully integrate acquired businesses; and
•Restrictions on possible transactions imposed by our charter documents and
Delaware law.
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 can be no assurance that future developments affecting us
will be those anticipated by us. Any forward-looking statements are subject to
the risks, uncertainties and other factors that could cause actual results of
operations, financial condition, cost reductions, acquisitions, dispositions,
financing transactions, operations, expansion, consolidation and other events to
differ materially from those expressed or implied in such forward-looking
statements.
Our actual results may differ materially from our expectations or projections.
While most risks affect only future cost or revenue, some risks may relate to
accruals that have already been reflected in earnings. Our failure to receive
payments of accrued amounts or incurrence of liabilities in excess of amounts
previously recognized could result in future charges. As a result, readers
should recognize and consider the inherently uncertain nature of forward-looking
statements and not place undue reliance on them.
Additional information concerning these and other factors can be found in our
press releases and periodic filings with the SEC , including the 2020 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) 398-7070. 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
During the first quarter of 2021, we changed the composition of our segments to
implement our new strategy and to pursue opportunities in our designated
markets. We now report our operating results in four reportable segments as
follows: Energy Solutions, Urban Solutions, Mission Solutions and Other. Segment
operating information and assets for 2020 have been recast to conform to these
changes.
In the first quarter of 2021, we also committed to a plan to sell our Stork
business, which had previously represented the majority of operations from our
former diversified services segment. Our plan to sell the AMECO equipment
business remains unchanged. Therefore, both Stork and AMECO are reported as Disc
Ops along with other immaterial operations. We expect to complete the sale of
Stork before the end of the first quarter of 2022 and the sale of AMECO within
the first half of 2021. The assets and liabilities of the Stork and AMECO
businesses are classified as held for sale for all periods presented.
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--------------------------------------------------------------------------------Table of Contents (In millions) THREE MONTHS ENDED MARCH 31 2021 2020 Revenue Energy Solutions$ 991.0 $ 1,359.3 Urban Solutions 1,194.2 1,592.2 Mission Solutions 753.3 746.2 Total revenue$ 2,938.5 $ 3,697.7 Segment profit (loss) $ and margin % Energy Solutions$ 2.2 0.2 %$ (5.9) (0.4) % Urban Solutions 29.8 2.5 % 51.3 3.2 % Mission Solutions 43.6 5.8 % 32.1 4.3 % Other (15.7) NM (22.8) NM Total segment profit (loss) $ and margin % (1)$ 59.9
2.0 %
Corporate G&A (65.5) (33.6) Impairment, restructuring and other exit costs (26.4) (102.4) Foreign currency gain (loss) (11.3) 45.2 Interest expense, net (17.1) (4.6) Earnings (loss) attributable to NCI from Cont Ops 32.8 9.1 Earnings (loss) from Cont Ops before taxes (27.6) (31.6) Income tax expense (benefit) 0.6 (62.3) Net earnings (loss) from Cont Ops (28.2) 30.7
Less: Net earnings (loss) attributable to NCI from Cont Ops
32.8 9.1
Net earnings (loss) attributable to Fluor from Cont
Ops $ (61.0) $ 21.6
New awards
Energy Solutions $ 1,609.3 $ 1,542.3
Urban Solutions 1,061.3 1,607.8
Mission Solutions 991.8 684.0
Total new awards $ 3,662.4 $ 3,834.1
New awards related to projects located outside of
the U.S. 67% 58%
March 31, December 31,
Backlog 2021 2020
Energy Solutions $ 11,097.2 $ 11,020.5
Urban Solutions 9,693.2 9,224.1
Mission Solutions 3,001.3 2,899.5
Total backlog $ 23,791.7 $ 23,144.1 Backlog related to projects located outside of the
65% 64%
Backlog related to lump-sum projects 57% 60%
(1) Total segment profit (loss) is a non-GAAP financial measure. We believe that
total segment profit (loss) provides a meaningful perspective on our results as
it is the aggregation of individual segment profit (loss) measures that we use
to evaluate and manage our performance.
Our business has been adversely affected by the economic impacts of the outbreak
of COVID-19 and the steep decline in oil prices that occurred in the early part
of 2020. These events have created significant uncertainty and economic
volatility and disruption, which have impacted and may continue to impact our
business. We have experienced, and may continue to experience, reductions in
demand for certain of our services and the delay or abandonment of ongoing or
anticipated projects due to our clients', suppliers' and other third parties'
diminished financial condition or financial distress, as well as governmental
budget constraints. Although we initially assessed our project estimates for
COVID-19 during the first quarter of 2020, estimating isolated COVID-19 effects
became increasingly difficult to measure. Our estimates reflect our best
assessment of project results inclusive of COVID-19 effects, which have been
dynamic as our projects have seen changes in prevailing regulations as COVID-19
cases crested and fell. These impacts may continue or worsen under prolonged
stay-at-home, social
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distancing, travel restrictions and other similar orders or restrictions.
Significant uncertainty still exists concerning the magnitude of the impact and
duration of these events.
During 2021, consolidated revenue declined primarily due to volume declines on
Energy Solutions and Urban Solutions projects, principally for projects which
were completed or nearing completion. The revenue decline in 2021 was further
compounded by COVID-19 related delays on certain large projects.
Total segment profit improved during the 2021 Quarter due to the adverse impacts
of COVID-19 and expected credit losses recognized during the 2020 Quarter. The
improvement in total segment profit in 2021 included the favorable resolution of
certain client matters but was diminished by the factors driving the decline in
revenue described above.
Impairment, Restructuring and Other Exit Costs
Impairment expense, included in Cont Ops, is summarized as follows:
Three Months Ended
March 31,
(in thousands) 2021 2020
Impairment expense:
Equity method investments in Energy Solutions
- 16,269
Total impairment expense $ 26,392 $ 102,365 Impairment expense, included in Disc Ops, is summarized as follows:
Three Months Ended Three Months Ended March 31,
March 31, 2021 2020
(in thousands) Stork Stork AMECO Total
Impairment expense:
Goodwill $ 12,700
- 26,671 - 26,671
Fair value adjustment and expected costs
associated with sale 7,800 - 87,700 87,700
Total impairment expense $ 20,500 The effective tax rate on earnings (loss) from Cont Ops for the 2021 Quarter was (2.2)% compared to 197.5% for the 2020 Quarter. The effective tax rate in 2021 was unfavorably impacted by the increase in the valuation allowances against certain deferred benefits, primarily related to US net operating losses. The effective tax rate in 2020 was favorably impacted by the effect of the CARES Act on us. This 2020 benefit was offset by an increase in the valuation allowance against foreign tax credit carryforwards and certain foreign losses, as well as a small addition to uncertain tax benefits. Earnings attributable to NCI from Cont Ops, for which income taxes are not typically our responsibility, favorably impacted the effective tax rate for the 2021 Quarter. The lack of broad based new awards could continue to put pressure on our future earning streams, particularly in the Energy Solutions segment. The modest increase in backlog during 2021 primarily resulted from new award activity outpacing work performed. During the 2021 Quarter, we removed approximately$1 billion from backlog due to the cancellation of a chemicals project inNorth America . Backlog included$1.6 billion for projects in a loss position as ofMarch 31, 2021 . Although backlog reflects business that is considered to be firm, cancellations, deferrals or scope adjustments may occur. Backlog is adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate. Backlog differs from RUPO discussed elsewhere. RUPO includes only the amount of revenue we expect to recognize under contracts with definite terms and substantive termination provisions. Segment Operations Energy Solutions Revenue in 2021 decreased compared to 2020 due to significant declines in the volume of execution activities for a large upstream project as well as several downstream and chemicals projects nearing completion, the absence of planned revenue from a canceled chemicals project inNorth America and COVID-19 related delays at a liquefied natural gas project. The revenue decline in 2021 was partially offset by the ramp up of execution activities for a chemicals project. 29 -------------------------------------------------------------------------------- Table of Contents Segment profit in 2021 was adversely affected by an expense of$29 million related to an embedded foreign currency derivative. Segment profit in 2020 was adversely affected by the recognition of reserves totaling$55 million for expected credit losses, as well as margin diminution arising from the initial recognition of COVID-19 related schedule delays and associated cost growth. Excluding these items, segment profit declined in 2021 due to the reduced execution activity for the upstream, downstream and chemicals projects discussed above as well as an increase in overhead. The change in segment profit margin was attributable to the same factors affecting segment profit. New awards in 2021 increased compared to 2020 due to an incremental award for a refinery project inMexico . Backlog increased during the 2021 Quarter despite the cancellation of a chemicals project inNorth America . Although we expect to benefit from opportunities in the chemicals and non-traditional oil and gas markets, the lack of broad based new awards could continue to put pressure on the segment's earnings in the near and intermediate term. Urban Solutions Revenue in 2021 decreased compared to 2020 primarily due to the nearing completion of two data center projects inEurope , slower progress on a large mining project inSouth America due to COVID-19 restrictions and a decline in the volume of execution activities on a mining project inAustralia . Segment profit in 2021 declined compared to 2020 due to the impacts of COVID-19 on the large mining project inSouth America , the nearing completion of the data center projects inEurope and forecast revisions for cost-to-complete on two infrastructure projects. The decline in segment profit in 2021 was partially offset by the favorable resolution of a long-standing customer dispute and favorable adjustments for commercial close out of a completed project. The change in segment profit margin was attributable to the same factors affecting segment profit. New awards in 2021 decreased compared to 2020 partly due to more selectivity in project pursuits and delayed procurement efforts by many of our clients. In addition, we booked a significant North American steel project in the 2020 Quarter. New awards in the 2021 Quarter included a large life sciences project inEurope . Backlog increased slightly during the 2021 Quarter due to this award coupled with reduced burn as discussed above. Backlog included$1.4 billion for projects in a loss position as ofMarch 31, 2021 . Our staffing business does not report new awards or backlog. Mission Solutions Revenue in 2021 remained relatively flat compared to 2020. Increased execution activity at ourDOE project sites and an increase in projected performance scores on several projects during the 2021 Quarter was offset by a decrease in execution activity on army logistics assistance programs inAfghanistan andAfrica . The increase in segment profit in 2021 was substantially driven by favorable contract modifications and increased execution activity on ourDOE projects as well as the increase in projected performance scores on several projects. These effects were partially offset by the decrease in execution activity on army logistics assistance programs inAfghanistan andAfrica . The increase in segment profit margin was driven by these same factors. New awards in 2021 increased compared to 2020 due to extensions on a nuclear decontamination and decommissioning contract inOhio and an environmental cleanup contract inIdaho . Backlog increased slightly during the 2021 Quarter due to the new award activity. Backlog included$1.0 billion of unfunded government contracts as of bothMarch 31, 2021 andDecember 31, 2020 . Other Other includes the operations of NuScale. NuScale expenses included in the determination of segment loss were reported net of qualified reimbursable expenses of$15 million and$13 million during the 2021 Quarter and 2020 Quarter, respectively. During the 2021 Quarter, JGC Holdings Corporation invested$40 million in NuScale. We and our advisors continue to engage with potential investors and capital providers to fund NuScale's path to commercialization. 30 --------------------------------------------------------------------------------
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Corporate and Other Matters
Three Months Ended
March 31,
(in millions) 2021 2020
Corporate G&A
Compensation $ 57.6 $ 18.8
SEC investigation / Internal review costs 2.7 2.0
Other 5.3 12.8
Corporate G&A $ 65.6 $ 33.6
The increase in compensation expense in the 2021 Quarter was primarily due to
higher stock price driven compensation on liability awards, as our stock price
increased from the date of grant to the closing price on March 31, 2021 . Lower
levels of compensation expense were recognized during the 2020 Quarter primarily
due to the deferral of long-term incentive award issuances until the latter half
of 2020, as compared to the 2021 Quarter.
The increase in net interest expense during the 2021 Quarter was primarily
attributable to costs incurred to refinance our credit facility as well as a
decrease in interest income driven by lower interest rates in the 2021 Quarter
compared to the 2020 Quarter.
We announced in January 2021 that we had begun an undertaking to substantially
reduce our overhead costs. Although we have not satisfied the requirements to
recognize charges for any restructurings for the 2021 undertaking, we are likely
to recognize expense later in 2021.
Critical Accounting Estimates
Fair Value Measurements. During the 2021 Quarter, we performed interim
impairment testing of our goodwill associated with Stork and recognized
impairment expense of $13 million , which was included in Disc Ops. All other
factors being equal, a one hundred basis point change in the discount rate used
in the valuation of goodwill would change the fair value by $25 million .
Recent Accounting Pronouncements
Item is described more fully in the Notes to Financial Statements.
Litigation and Matters in Dispute Resolution
Item is described more fully in the Notes to Financial Statements.
LIQUIDITY AND FINANCIAL CONDITION
Our liquidity is provided by available cash and cash equivalents and marketable
securities, cash generated from operations, capacity under our credit facilities
and, when necessary, access to the 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, cash generated from operations,
along with our unused credit capacity and cash position, is sufficient to
support operating requirements, but we do have our credit facility and our 2023
Notes maturing in the next 24 months. We regularly review our sources and uses
of liquidity and may pursue opportunities to increase our liquidity position to
address upcoming maturities.
As of March 31, 2021 , letters of credit totaling $414 million were outstanding
under our $1.65 billion credit facility, which matures in February 2023 . The
credit facility contains customary financial covenants, including a
debt-to-capitalization ratio that cannot exceed 0.65 to 1.0, 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, defined in the amended credit
facility, of $1.5 billion which may be reduced to $1.25 billion upon the
repayment of debt. The credit facility also 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, such collateral consisting broadly of our U.S.
assets. Borrowings under the facility, which may be denominated in USD, EUR, GBP
or CAD, bear interest at a base rate, plus an applicable borrowing margin. As of
March 31, 2021 , our financial covenants limited our further borrowings to
approximately $869 million , although no amounts were drawn.
Cash and cash equivalents combined with marketable securities were $2.0 billion
as of March 31, 2021 and $2.2 billion as of December 31, 2020 . 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 $987 million and $984 million as of March 31, 2021 and December 31, 2020 ,
respectively. Non-U.S. cash and cash equivalents exclude deposits of U.S. legal
entities that are
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either swept into overnight, offshore accounts or invested in offshore,
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 $608 million and $655 million as of March 31, 2021
and December 31, 2020 , respectively) were not necessarily readily available for
general purposes. We also consider the extent to which client advances (which
totaled $101 million and $80 million as of March 31, 2021 and December 31, 2020 ,
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 March 31, 2021 and December 31,
2020 , other than unremitted earnings required to meet our working capital and
long-term investment needs in non-U.S. foreign jurisdictions where we operate.
Three Months Ended
March 31,
(in thousands) 2021 2020
OPERATING CASH FLOW $ (230,553) $ (63,743) INVESTING CASH FLOW Proceeds from sales and maturities (purchases) of marketable securities
4,731 806
Capital expenditures (30,141) (30,094)
Proceeds from sales of property, plant and equipment 8,301 13,465
Investments in partnerships and joint ventures (47,829) (5,971)
Other 433 56
Investing cash flow (64,505) (21,738)
FINANCING CASH FLOW
Dividends paid - (14,700)
Other borrowings 3,264 22,203
Distributions paid to NCI (8,418) (2,751)
Capital contributions by NCI 42,101 19,968
Other (8,557) (2,092)
Financing cash flow 28,390 22,628
Effect of exchange rate changes on cash 5,687 (63,472)
Increase (decrease) in cash and cash equivalents (260,981) (126,325)
Cash and cash equivalents at beginning of period 2,198,781 1,997,199
Cash and cash equivalents at end of period $
1,937,800
Cash paid during the quarter for: Interest$ 29,784 $ 26,624 Income taxes (net of refunds) 31,794 7,486 32
-------------------------------------------------------------------------------- Table of Contents Operating Activities Cash flows from operating activities result primarily from our EPC activities and are affected by 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 the 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 and the payments 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 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. Our operating cash flow for the 2021 Quarter was negatively impacted by increased funding of COVID-19 costs on our projects, higher cash payments of Corporate G&A (including the timing and extent of employee bonuses) and increased tax payments. We contributed$10 million and$7 million into our DB plans during the 2021 Quarter and 2020 Quarter, respectively. We expect to contribute up to$16 million to our DB plans during 2021, which is expected to be in excess of the minimum funding required. The remaining obligations under our Dutch DB plan may be settled in late 2021, subject to regulatory approval. If the plan is settled, we expect that any deferred pension costs in AOCI would be reclassified to earnings upon settlement. NuScale expenses were$16 million and$23 million for the 2021 Quarter and 2020 Quarter, respectively, and were reported net of qualified reimbursable expenses of$15 million and$13 million during the 2021 Quarter and 2020 Quarter, respectively. Capital contributions by NuScale's NCI holders, which reduced the need for additional funding from Fluor in the 2021 Quarter, are discussed below. Investing Activities 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 byU.S. Government -related securities, high-grade commercial paper and high quality short-term and medium-term fixed income securities. Capital expenditures are primarily related to construction equipment associated with equipment operations now included in Disc Ops, as well as expenditures for facilities and investments in information technology. Proceeds from the disposal of property, plant and equipment are primarily related to the disposal of construction equipment associated with the equipment business in Disc Ops. Investments in unconsolidated partnerships and joint ventures in the 2021 quarter included a$26 million capital contribution to COOEC Fluor, which satisfied our contractual funding requirements, as well as capital contributions to a recently formed Mission Solutions joint venture. There were no significant investments in unconsolidated partnerships and joint ventures in the 2021 quarter. Financing Activities We have a common stock repurchase program, authorized by our Board of Directors, to purchase shares in the open market or privately negotiated transactions at our discretion. As ofMarch 31, 2021 , over 10 million shares could still be purchased under the existing stock repurchase program, although we don't have any immediate intent to begin such repurchases. Quarterly cash dividends of$0.10 per share were declared in the fourth quarter of 2019 and paid in the first quarter of 2020. We suspended our dividend duringApril 2020 . The payment and level of future cash dividends is subject to the discretion of our Board of Directors. Other borrowings represent short-term bank loans and other financing arrangements associated with Stork. 33 -------------------------------------------------------------------------------- Table of Contents Distributions paid to holders of NCI represent cash outflows to partners of consolidated partnerships or joint ventures created primarily for the execution of single contracts or projects. Distributions in the 2021 Quarter primarily related to a transportation joint venture project inthe United States . Distributions in the 2020 Quarter were not significant. Capital contributions by NCI during the 2021 Quarter primarily related to JGC Holdings Corporation's$40 million investment in NuScale. We and our advisors continue to engage with potential investors and capital providers to fund NuScale's path to commercialization. Capital contributions by NCI during the 2020 Quarter primarily related to 3 transportation joint venture projects. Effect of Exchange Rate Changes on Cash During the 2021 Quarter, most major foreign currencies strengthened against theU.S. dollar resulting in unrealized translation gains of$3 million , of which$6 million related to cash held by foreign subsidiaries. During the 2020 Quarter, most major foreign currencies weakened against theU.S. dollar resulting in unrealized translation losses of$111 million , of which$63 million related to cash held by foreign subsidiaries. The cash held in foreign currencies will primarily be used for project-related expenditures in those currencies, and therefore our exposure to exchange gains and losses is generally mitigated. Off-Balance Sheet Arrangements Letters of Credit As ofMarch 31, 2021 , letters of credit totaling$414 million were outstanding under committed lines of credit, and letters of credit totaling$927 million were outstanding under uncommitted lines of credit. Letters of credit are provided in the ordinary course of business primarily 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$16 billion as ofMarch 31, 2021 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. Sustainability Our sustainability mission envisions meeting the needs of our clients while conducting business in a socially, economically and environmentally responsible manner to the benefit of current and future generations, thereby creating value for all stakeholders. We help clients safeguard the environment, conserve energy, protect lives and strengthen economies and social structures of communities. As a key priority for our sustainability program, we have committed to reduce our greenhouse gas emissions. Early in 2021, we committed to achieving net zero emissions for Scopes 1 and 2 absolute greenhouse gas emissions by the end of 2023. We have a Sustainability Committee to oversee our sustainability policies, strategies and programs. The Sustainability Committee includes representatives from each of our business segments, as well as a cross-functional team of subject matter experts from communications, health, safety and environmental, investor relations and legal, who serve as advisors to the Sustainability Committee. In furtherance of our Board of Directors' commitment to sustainability, our Governance Committee reviews and receives reports from management on our sustainability efforts. Item 3. Quantitative and Qualitative Disclosures about Market Risk There have been no material changes to market risk during the 2021 Quarter. Accordingly, the disclosures provided in the 2020 10-K remain relevant. 34
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