The following discussion and analysis is provided to increase understanding of, and should be read in conjunction with, the Condensed Consolidated Financial Statements and notes and the company's December 31, 2008 annual report on Form 10-K. For purposes of reviewing this document, "segment profit" is calculated as revenue less cost of revenue and earnings attributable to noncontrolling interests excluding: corporate administrative and general expense; interest expense; interest income; domestic and foreign income taxes; and other non-operating income and expense items.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements made herein, including statements regarding the company's projected revenue and earnings levels, new awards and backlog levels and the implementation of strategic initiatives and organizational changes are forward-looking in nature. These forward-looking statements reflect current analysis of existing information and are subject to various risks and uncertainties. As a result, caution must be exercised in relying on forward-looking statements. Due to known and unknown risks, the company's actual results may differ materially from its expectations or projections. Factors potentially contributing to such differences include, among others:

† The current worldwide financial crisis, which may cause, accelerate or exacerbate a number of the other factors listed below;

† Client cancellations of, or scope adjustments to, existing contracts, including our government contracts that may be terminated at any time and the related impacts on staffing levels and cost;

† Decreased capital investment or expenditures, or a failure to make anticipated increased capital investment or expenditures, by the company's clients;

† The availability of credit and restrictions imposed by credit facilities, both for the company and our clients;

† The cyclical nature of many of the markets the company serves and its vulnerability to downturns such as the current worldwide economic downturn;

†          Client delays or defaults in making payments;

†          The company's failure to receive anticipated new contract awards and
the related impacts on staffing levels and cost;

†          Difficulties or delays incurred in the execution of contracts,

† Failure to meet timely completion or performance standards that could result in higher cost and reduced profits or, in some cases losses on projects;

† A failure to obtain favorable results in existing or future litigation or dispute resolution proceedings;

†          Competition in the global engineering, procurement and construction
industry;

†          Changes in global business, economic (including currency risk),

† The financial viability of our clients, subcontractors, suppliers and joint venture or teaming partners;

† Civil unrest, security issues, labor conditions and other unforeseeable events in the countries in which we do business, resulting in unanticipated losses;

†          Possible limitations of bonding or letter of credit capacity;

†          The impact of anti-bribery and international trade laws and
regulations;

†          The impact of past and future environmental, health and safety
regulations;

†          The potential impact of certain tax matters including, but not

† The company's ability to identify and successfully integrate acquisitions;

† The company's ability to secure appropriate insurance;

† Limitations on cash transfers from subsidiaries that may restrict the company's ability to satisfy financial obligations or to pay interest or principal when due on outstanding debt;

† Restrictions on possible transactions imposed by Delaware law; and

† Possible systems and information technology interruptions.

While most risks affect only future cost or revenue anticipated by the company, some risks may relate to accruals that have already been reflected in earnings. The company's failure to receive payments of accrued amounts or incurrence of liabilities in excess of amounts previously recognized, could result in a charge against future earnings.

Additional information concerning these and other factors can be found in our press releases as well as our periodic filings with the Securities and Exchange Commission, including the discussion under the heading "Item 1A. Risk Factors" in this Form 10-Q

as well as the company's Form 10-K filed February 25, 2009. These filings are available publicly on the SEC's website at http://www.sec.gov, on Fluor's website at http://investor.fluor.com or upon request from Fluor's Investor Relations Department: (469) 398-7220. Except as otherwise required by law, the company undertakes no obligation to publicly update or revise its forward-looking statements, whether as a result of new information, future events or otherwise.

RESULTS OF OPERATIONS

Net earnings attributable to Fluor Corporation were $205 million or $1.12 per diluted share for the three months ended March 31, 2009, compared to net earnings attributable to Fluor Corporation of $137 million or $0.74 per diluted share for the corresponding period of 2008.

Consolidated revenue for the three months ended March 31, 2009 increased 21 percent to $5.8 billion from $4.8 billion for the three months ended March 31, 2008, driven by revenue increases in the Oil & Gas, Industrial & Infrastructure and Government segments.

The increases in net earnings attributable to Fluor Corporation and consolidated revenue for the first quarter of 2009 when compared to the first quarter of 2008 were due to higher levels of project execution activities that have resulted from the company's strength in new award activity over the last few years. However, the global recession is impacting the near-term capital investment plans of many of the company's clients across all of the company's segments except Government.

The effective tax rate, based on the company's actual operating results for the three months ended March 31, 2009 and 2008, was 32.6 percent and 36.6 percent, respectively. The lower effective tax rate for the three month period ending March 31, 2009 was primarily attributable to the recognition of a deferred tax benefit associated with taxes on unremitted foreign earnings and increased earnings attributable to noncontrolling interests for which the taxes are not paid by the company.

Consolidated new awards of $5.5 billion for the three months ended March 31, 2009 were comparable to the new awards of $5.7 billion for the three months ended March 31, 2008. The Industrial & Infrastructure and Oil & Gas segments were the major contributors to the new award activity in the 2009 period. Approximately 77 percent of consolidated new awards for the three months ended March 31, 2009 were for projects located outside of the United States.

Consolidated backlog at March 31, 2009 was $29.1 billion compared to $31.5 billion at March 31, 2008. The decline in backlog is primarily due to project cancellations and scope reductions in the Oil & Gas segment. As of March 31, 2009, approximately 53 percent of consolidated backlog relates to international projects. Although backlog reflects business which is considered to be firm, cancellations, scope adjustments or deferrals may occur. Backlog is adjusted to reflect any known project cancellations, revisions to project scope and cost, and deferrals, as appropriate.

OIL & GAS

Revenue and segment profit for the Oil & Gas segment are summarized as follows:

                   Three Months Ended
                       March 31,
(in millions)       2009        2008

Revenue          $  3,369.6   $ 2,603.3
Segment profit        200.8       137.5

Revenue for the three months ended March 31, 2009 increased substantially compared to the corresponding period in 2008 as a result of higher project execution activities from the significant number of new projects awarded over the last few years. Segment profit and segment profit margin were both significantly improved in the current year period primarily as the result of the revenue growth and the net positive impact of certain favorable project completion adjustments, which were primarily due to the approval of change orders by clients.

New awards for the three months ended March 31, 2009 were $2.0 billion, compared to $4.3 billion for the first quarter of 2008. Current quarter awards included an expansion to an onshore production facility and a major refinery upgrade, with both projects in Russia. Backlog at March 31, 2009 decreased 20 percent to $16.3 billion compared to $20.4 billion at March 31, 2008. Cancellations and scope reductions totaling $3.5 billion were reflected in the March 31, 2009 backlog. These reductions in backlog included the cancellation of the construction portion of two hydrocracker projects located in the United States, the termination of engineering and construction for the utilities and offsites for a refinery project in Kuwait and reduced scope on a major refinery project in the United States.

The segment has been a participant in an expanding market that includes very large projects in diverse geographical locations, which are well suited to the company's global execution and project management capabilities and strong financial position. However, the global credit crisis and falling oil prices have resulted in some clients reassessing their capital spending plans for 2009 and others delaying projects in an attempt to obtain lower capital costs. As such, there is some uncertainty as to the sustainability of the high growth and profit margins recently experienced by the segment. Both first quarter 2009 new awards and backlog were impacted by the current market conditions.

INDUSTRIAL & INFRASTRUCTURE

Revenue and segment profit for the Industrial & Infrastructure segment are summarized as follows:

                   Three Months Ended
                       March 31,
(in millions)        2009        2008

Revenue          $    1,176.5   $ 796.2
Segment profit           28.1      29.4

Revenue for the three months ended March 31, 2009 increased by 48 percent compared to the first quarter of 2008 due to broad-based growth across all business lines, particularly mining and metals which had a significant revenue component related to client furnished materials. Segment profit margin of 2.4 percent for the three months ended March 31, 2009 decreased from 3.7 percent for the three months ended March 31, 2008, primarily due to a higher volume of lower margin construction-related activities as a number of projects across all business lines progressed from engineering and front-end services into on-site execution.

New awards for the three months ended March 31, 2009 were $2.5 billion compared to $386 million for the first quarter of 2008. New awards in the first quarter of 2009 were primarily driven by a large award for an iron ore mining project in northwest Australia. Backlog increased to $8.1 billion at March 31, 2009 compared to $5.7 billion at March 31, 2008 as a result of large mining and infrastructure awards.

For future quarters, the segment could be impacted by the global credit crisis and falling commodity prices, as some clients, particularly in the mining and metals business line, are reassessing their capital spending programs. Projects originally expected to be awarded in 2009 could be delayed or canceled.

GOVERNMENT

Revenue and segment profit for the Government segment are summarized as follows:

                   Three Months Ended
                       March 31,
(in millions)       2009         2008

Revenue          $    370.8    $  279.7
Segment profit         27.7         7.7

Revenue for the three months ended March 31, 2009 increased 33 percent compared to the corresponding period in the prior year primarily due to the Savannah River Site Management and Operating Project in South Carolina ("Savannah River"), Logistics Augmentation Program ("LOGCAP IV") task orders for the United States Army in Afghanistan and the Federal Emergency Management Agency ("FEMA") Public Assistance Program task orders. Both the Savannah River and LOGCAP IV projects began subsequent to the first quarter of 2008. Segment profit for the three months ended March 31, 2009 was significantly improved compared to the three months ended March 31, 2008 primarily as the result of contributions from the Savannah River project, LOGCAP IV task orders and FEMA task orders.

New project awards for the three months ended March 31, 2009 were $243 million compared to $99 million for the 2008 period. New awards in the first quarter of 2009 included task order awards for LOGCAP IV and a six-month contract extension at the Hanford Environmental Management Project in Washington. Backlog at March 31, 2009 was $574 million, up marginally from $538 million at March 31, 2008.

GLOBAL SERVICES

Revenue and segment profit for the Global Services segment are summarized as follows:

                   Three Months Ended
                       March 31,
(in millions)       2009         2008

Revenue          $    542.1    $  706.2
Segment profit         55.5        53.5

Revenue decreased 23 percent for the three months ended March 31, 2009 compared to the same period in 2008, primarily due to declining volumes of small capital work and delayed refinery turnarounds and shutdowns which impacted the operations and maintenance and equipment business lines. During the fourth quarter of 2008, Global Services began to be impacted by the current global economic downturn, particularly for natural resource prospects. The drop in commodity prices has caused delays of work originally planned for late 2008 and 2009.

Segment profit margin increased from 7.6 percent for the first quarter of 2008 to 10.2 percent for the first quarter of 2009 primarily due to an increased mix of higher margin work and improved performance in the operations and maintenance and equipment business lines.

New awards for the three months ended March 31, 2009 were $276 million compared to $637 million for the same period in 2008. Current year new awards relate primarily to new scope or new site awards for existing clients. Backlog at March 31, 2009 was $2.3 billion compared to $2.6 billion at March 31, 2008. The decline in both new awards and backlog for the segment was attributable to the global recession.

Operations and maintenance activities that have yet to be performed comprise Global Services backlog. The equipment, temporary staffing and supply chain solutions business lines do not report backlog or new awards. In recent years, Global Services has derived larger percentages of its revenue and segment profit from these non-backlog reporting business lines and from short-duration operations and maintenance activities. Therefore, Global Services revenue and profit increases may outpace backlog growth.

Total assets in the Global Services segment were $847 million at March 31, 2009 compared to $763 million at December 31, 2008. The increase in total assets corresponded to an increase in working capital to support the equipment and operations and maintenance business lines.

POWER

Revenue and segment profit for the Power segment are summarized as follows:

                   Three Months Ended
                       March 31,
(in millions)       2009         2008

Revenue          $    338.9    $  421.6
Segment profit         20.2        21.0

Revenue for the three months ended March 31, 2009 decreased 20 percent compared to the three months ended March 31, 2008 primarily due to the expected reduction in project execution activities on the Luminant Oak Grove coal-fired power project as it progresses closer to completion. Segment profit margin for the first quarter of 2009 improved compared to the first quarter of 2008 primarily due to a higher mix of higher margin engineering and front-end projects in the current quarter.

The Power segment has been impacted by delays in obtaining air permits for coal-fired power plants due to concerns over carbon emissions. In addition, power producers have been impacted by the global credit crisis and recession. New awards in the Power segment are typically large in amount, but occur on an irregular basis. New project awards in the first quarter of 2009 were $423 million compared to $290 million in the first quarter of 2008. The current quarter new awards included the Dominion Bear Garden gas-fired power project in Virginia. Backlog at March 31, 2009 was $1.9 billion compared to $2.2 billion at March 31, 2008.

Total assets in the Power segment increased to $174 million at March 31, 2009 from $130 million at December 31, 2008 due to additional working capital associated with project execution activities.

OTHER

Corporate administrative and general expense for the three months ended March 31, 2009 was $25.4 million, reflecting a 36 percent decrease from $39.5 million in the same period of 2008. This decrease is primarily due to reduced compensation cost and the impact of overhead reduction efforts in the current year period.

Net interest income of $4.6 million during the three month period ended March 31, 2009 compares with net interest income of $10.0 million during the corresponding period of 2008. This decline is primarily due to the impact of lower interest rates on interest-bearing accounts, offset somewhat by higher balances in cash and marketable securities.

Income tax expense for the three months ended March 31, 2009 and 2008 is discussed above under "Results of Operations."

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2 of the Notes to Condensed Consolidated Financial Statements.

LITIGATION AND MATTERS IN DISPUTE RESOLUTION

As of March 31, 2009, the following are some of the more significant matters relating to completed and in progress projects that are in the dispute resolution process:

Infrastructure Joint Venture Project

London Connect Project

Embassy Projects

Conex International v. Fluor Enterprises, Inc.

Fluor Corporation v. Citadel Equity Fund Ltd.

Discussion of the status of these projects is included in Note 13 to the Condensed Consolidated Financial Statements.

FINANCIAL POSITION AND LIQUIDITY

During the three months ended March 31, 2009, cash provided by operating activities of $76.1 million resulted primarily from earnings sources. The company currently expects to fund approximately $70 million to $90 million into its defined benefit pension plans during 2009, which is expected to be in excess of the minimum funding required. Contributions of approximately $15 million were made by the company during the three months ended March 31, 2009. During the three months ended March 31, 2008, cash provided by operating activities of $213.8 million resulted primarily from earnings sources and increases in client advance billings.

Cash utilized by investing activities was $340.4 million in the first quarter of 2009 compared with $269.4 million in the 2008 comparison period. The company holds excess cash in bank deposits and marketable securities which are governed by the company's investment policy, which focuses on, in order of priority, the preservation of capital, maintenance of liquidity and maximization of yield. These investments include deposits placed with highly-rated banks, high quality short-term fixed income securities, money market funds which invest in U.S. Government-related securities, repurchase agreements that are fully collateralized by U.S. Government-related securities, medium-term fixed income securities and commercial paper. Capital expenditures of $53.1 million in the three months ended March 31, 2009 were level with the $58.8 million of capital expenditures during the 2008 period. Capital expenditures during the first quarter of 2009 consisted primarily of expenditures relating to equipment operations.

Cash flows from financing activities in the first quarter of 2009 included the repurchase of 1,766,700 shares of the company's common stock for $60.1 million under its stock repurchase program. In the first quarter of 2008, the company's Board of Directors authorized an increase in the quarterly dividend payable to $0.125 per share (split adjusted) from $0.10 per share (split adjusted). Declared dividends are typically paid during the month following the quarter in which they are declared. The payment and level of future cash dividends will be subject to the discretion of the company's Board of Directors.

During the three months ended March 31, 2009, exchange rates for functional currencies for most of the company's international operations remained relatively stable against the U.S. dollar, resulting in an insignificant unrealized translation loss that is reflected in the cumulative translation component of other comprehensive income. The cash held in foreign currencies will primarily be used for project-related expenditures in those currencies, and therefore the company's exposure to realized exchange gains and losses from these balances is considered nominal.

Liquidity is provided by cash generated from operations, advance billings on contracts in progress and access to financial markets. Client advances are reduced through use in project execution and, if not replaced by advances on new projects, the company's cash position may be reduced. While the impact of continued market volatility cannot be predicted, the company believes that for the next 12 months, its high cash balances, cash generated from operations and additional advance billings, along with unused credit capacity and the option to issue debt or equity securities, if required, is expected to be sufficient to fund operating requirements. The company's conservative financial strategy and consistent performance continued to earn it strong credit ratings resulting in continued access to tighter financial markets. The company's total debt to total capitalization ("debt-to-capital") ratio, which is based on shareholders' equity, at March 31, 2009 was 4.8 percent compared to 5.3 percent at December 31, 2008. As of March 31, 2009, the company was in compliance with all of the financial covenants related to its debt agreements.

In February 2004, the company issued $330 million of 1.5 percent Convertible Senior Notes (the "Notes") due February 15, 2024 and received proceeds of $323 million, net of underwriting discounts. In December 2004, the company irrevocably elected to pay the principal amount of the Notes in cash. Notes are convertible if a specified trading price of the company's common stock (the "trigger price") is achieved and maintained for a specified period. The trigger price condition was satisfied during the fourth quarter of 2008 and the Notes were therefore classified as short-term debt as of December 31, 2008. During the first quarter of 2009, the trigger price condition was not satisfied and the Notes have therefore been classified as long-term debt as of March 31, 2009, except for $2.1 million of Notes which were in the process of being converted. During the three months ended March 31, 2009, holders converted $10 million of the Notes in exchange for the principal balance owed in cash plus 56,934 shares of the company's common stock. Although the Notes are not currently convertible, the company cannot estimate if the trigger price will be satisfied in future periods. In addition, if the trigger price is satisfied in a future period, the company does not know the timing or principal amount of the remaining Notes that may be presented for conversion. Available cash balances will be used to satisfy any principal and interest payments. Shares of the company stock will be issued to satisfy any appreciation between the conversion price and the market price on the date of conversion.

Off-Balance Sheet Arrangements

Guarantees, Insurance Arrangements and Variable Interest Entities

Guarantees The company maintains a variety of commercial commitments that are generally made available to provide support for various commercial provisions in its engineering and construction contracts. The company has $2.5 billion in committed and uncommitted lines of credit to support letters of credit. Letters of credit are provided to clients in the ordinary course of business in lieu of retention or performance and completion guarantees on engineering and construction contracts. At March 31, 2009, the company had $1.1 billion in letters of credit outstanding. The company has $121 million in credit lines for general purposes in addition to the amount above. The company also posts surety bonds as generally required by commercial terms, primarily to guarantee its performance on state and local government contracts.

In the ordinary course of business, the company enters into various agreements providing financial or performance assurances to clients on behalf of certain unconsolidated partnerships, joint ventures and other jointly executed contracts. These agreements are entered into primarily to support the project execution commitments of these entities. The guarantees have various expiration dates ranging from mechanical completion of the facilities being constructed to a period extending beyond contract completion in certain circumstances. The maximum potential payment amount of an outstanding performance guarantee is the remaining cost of work to be performed by or on behalf of third parties under engineering and construction contracts. Amounts that may be required to be paid in excess of estimated costs to complete contracts in progress are not estimable. For cost reimbursable contracts, amounts that may become payable pursuant to guarantee provisions are normally recoverable from the client for work performed under the contract. For lump-sum or fixed-price contracts, this amount is the cost to complete the contracted work less amounts remaining to be billed to the client under the contract. Remaining billable amounts could be greater or less than the cost to complete. In those cases where costs exceed the remaining amounts payable under the contract the company may have recourse to third parties, such as owners, co-venturers, subcontractors or vendors for claims. As of March 31, 2009, no material changes to the amount of financial or performance guarantees outstanding have occurred since the filing of the company's December 31, 2008 annual report on Form 10-K.

. . .