Fluor Corporation (NYSE:FLR) Q4 2019 Earnings Conference Call - Final Transcript
Sep 25, 2020 • 08:30 am ET
Alan L. Boeckmann
been working throughout the pandemic to complete these reviews and put us in position to file our audited financial statements. This committee determined the scope of its review and had full access to the Company's personnel and documentation. This investigation included document collection and interviews across all Fluor EPC segments, both domestic and international. If I can put a finer point on the breadth of the task at hand, we reviewed projects from 2016 to 2019, and it represented the majority of the Company's lump-sum portfolio based on revenue. It's fair to say that the review was comprehensive and extremely thorough.
Consistent with my own comments in February of 2020, the review concluded that the errors were related to the timing of charges and revenue and not the magnitude. To correct for this, the Company has restated its financial results for the years 2016 through 2018 and for each of the interim quarterly periods previously issued for 2018 and 2019 to reflect the underlying performance of the Radford project. I would refer you to the 10-K for a full explanation as it relates to this project.
And in addition to the restatement on Radford, we also identified several other errors that were quantitatively immaterial but that were also corrected in the restatement. In addition to the restated amounts, we also recognized in total a reduction of cumulative pretax earnings that were reported through September 30 of 2019 by a total of $3.8 million.
Please turn to slide 3. As a result of this investigation, we determined that we had material weaknesses in our internal controls over financial reporting. In response, the Company has begun to implement a remediation plan to address these weaknesses. This plan includes personnel actions up to and including separations for personnel involved in projects associated with material weaknesses; additional monitoring procedures to help ensure policies and procedures are consistently followed at the project level; improved guidance on project forecasting principles, including the assessment of variable consideration at the project level; new tools and templates to standardize documentation and reporting; and lastly, improved and enhanced trading on required policies and procedures, including our code of conduct and our process for elevating concerns.
While it has taken longer than hoped to complete this review and issue our audited financial statements, we are confident that the special committee's review was comprehensive and thorough and believe we are well down the path in restoring confidence in our financial reporting.
Next, I want to shift gears, and I want to talk to you about where we stand relative to the strategic review that we held and unannounced last of September, and I'll ask you to turn to slide 4. Very soon after taking our positions in May of 2019, Carlos and I initiated a strategic review. And during that review, we realized that we were facing significant project losses and those were associated with our announcement in the second quarter. The Company also experienced a credit downgrade during that time.