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;
†        The company's failure to receive anticipated new contract awards and the
         related impacts on staffing levels and cost;
†        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;
†        Difficulties or delays incurred in the execution of contracts, including
         performance by our joint venture or teaming partners, resulting in cost
         overruns or liabilities;
†        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),
         political and social conditions;
†        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 limited
         to, those from foreign operations and the ongoing audits by tax
         authorities;
†        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 at (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

Consolidated revenue for the three months ended June 30, 2009 was $5.3 billion, reflecting a 8 percent decrease when compared to the corresponding three months in 2008, as the result of reduced revenue contributions from the Oil & Gas, Global Services and Power segments. Consolidated revenue for the six months ended June 30, 2009 increased 5 percent to $11.1 billion compared to $10.6 billion for the first six months of the prior year, driven by revenue increases in the Oil & Gas, Industrial & Infrastructure and Government segments.

Net earnings attributable to Fluor Corporation were $169 million, or $0.93 per diluted share, and $374 million, or $2.05 per diluted share, for the three and six months ended June 30, 2009, compared to net earnings attributable to Fluor Corporation of $208 million, or $1.12 per diluted share, and $345 million or $1.86 per diluted share for the corresponding periods of 2008. The decrease in net earnings attributable to Fluor Corporation for the three months ended June 30, 2009 compared to the three months ended June 30, 2008 was primarily because the results for the 2008 period included a pre-tax gain of $79.2 million from the sale of a joint venture interest in a wind power project in the United Kingdom. The increase in net earnings attributable to Fluor Corporation for the six months ended June 30, 2009 when compared to the six months ended June 30, 2008 was primarily due to higher contributions associated with project execution activities in the Oil & Gas and Government segments. The magnitude of this increase was reduced by the pre-tax gain of $79.2 million from the sale of the United Kingdom joint venture interest in the second quarter of 2008. The global recession continues to impact 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 and six months ended June 30, 2009 was 36.6 percent and 34.5 percent, respectively compared to 38.3 percent and 37.7 percent for the corresponding periods of 2008. The lower effective tax rate for the three and six month periods ending June 30, 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 for the three and six months ended June 30, 2009 were $6.8 billion and $12.3 billion, respectively, compared to new awards of $6.4 billion and $12.1 billion for the three and six months ended June 30, 2008. The Oil & Gas and Industrial & Infrastructure segments were the major contributors to the new award activity in the 2009 periods. Approximately 75 percent of consolidated new awards for the six months ended June 30, 2009 were for projects located outside of the United States.

Consolidated backlog at June 30, 2009 was $30.9 billion compared to $33.0 billion at June 30, 2008. The decline in backlog is primarily due to project cancellations and scope reductions in the Oil & Gas segment in the first quarter of 2009. As of June 30, 2009, approximately 59 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       Six Months Ended
                        June 30,                June 30,
(in millions)       2009        2008        2009        2008

Revenue          $  3,028.3   $ 3,342.2   $ 6,397.8   $ 5,945.5
Segment profit        180.8       169.0       381.6       306.5

Revenue for the three months ended June 30, 2009 decreased 9 percent when compared to the same quarter in the prior year due to reduced project execution activities as a number of large projects progress toward completion. Revenue for the six months ended June 30, 2009 increased by 8 percent when compared to the first six months of 2008, reflecting growth from the significant number of new projects awarded over the last few years.

Segment profit for the three months ended June 30, 2009 increased 7 percent compared to the second quarter of 2008 even

though revenue declined. Segment profit for the six months ended June 30, 2009 increased 25 percent and outpaced revenue growth when compared to the corresponding period of the prior year. The increase in segment profit in the 2009 periods is primarily attributable to the net positive impact of forecast adjustments for certain projects that are nearing completion, which were primarily due to the approval of change orders and successful resolution of disputed items.

New awards for the three months ended June 30, 2009 were $2.9 billion, compared to $3.0 billion for the corresponding period of 2008. Current quarter awards included a major Canadian oil sands project. Backlog at June 30, 2009 decreased 25 percent to $15.8 billion compared to $20.9 billion at June 30, 2008. The decrease in backlog is primarily the result of cancellations and scope reductions of certain projects in the first quarter of 2009.

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.

INDUSTRIAL & INFRASTRUCTURE



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



                   Three Months Ended       Six Months Ended
                        June 30,                June 30,
(in millions)       2009         2008       2009        2008

Revenue          $    998.2    $  912.5   $ 2,174.7   $ 1,708.7
Segment profit         34.1       121.4        62.2       150.8

Revenue for the three months ended June 30, 2009 increased 9 percent compared to the three months ended June 30, 2008 as a result of growth in the infrastructure and manufacturing and life sciences business lines. Revenue for the six months ended June 30, 2009 increased 27 percent over the respective prior year period due to growth across all business lines.

Segment profit for the three and six months ended June 30, 2009 was lower than the segment profit for the corresponding periods of the prior year primarily because the results for the 2008 periods included a pre-tax gain of $79.2 million from the sale of a joint venture interest in a wind power project in the United Kingdom. In addition, the current periods were impacted by lower margins for certain projects in the mining and metals and manufacturing and life sciences business lines due to a higher content of construction activity, which generally carries lower margins.

New awards for the three months ended June 30, 2009 were $2.2 billion compared to $2.4 billion for the 2008 comparison period. New awards for the six months ended June 30, 2009 were $4.8 billion compared to $2.8 billion for the corresponding period of 2008. The increase in new awards for the six month period is attributable to substantial bookings in the mining and metals business line. Backlog increased to $9.8 billion at June 30, 2009 compared to $7.1 billion at June 30, 2008. The increase is primarily attributable to awards in the mining and metals business line during 2009.

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

Total assets in the segment increased to $636 million at June 30, 2009 from $536 million at December 31, 2008 primarily due to the increased level of project execution activities.

GOVERNMENT



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



                   Three Months Ended       Six Months Ended
                        June 30,                June 30,
(in millions)       2009         2008        2009       2008

Revenue          $    478.9    $  300.4   $    849.7   $ 580.1
Segment profit         33.5        11.1         61.2      18.8

Revenue for the three and six months ended June 30, 2009 increased 59 percent and 46 percent, respectively, compared to the corresponding periods in 2008 primarily as the result of 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. The higher revenue in the 2009 periods is offset somewhat by reduced volume at the Hanford Environmental Management Project in Washington.

Segment profit for the three and six months ended June 30, 2009 was significantly higher compared to the three and six months ended June 30, 2008 primarily due to the contributions from the LOGCAP IV task orders, FEMA task orders and a favorable outcome of $15.3 million related to requests for equitable adjustment on a fixed-price contract at the Bagram Air Base in Afghanistan.

New project awards for the three months ended June 30, 2009 were $866 million compared to $87 million for the 2008 period. Current quarter awards included multi-year funding at Savannah River related to the American Recovery and Reinvestment Act (ARRA), LOGCAP IV task orders and FEMA Public Assistance task orders. At the end of the second quarter of 2009, the company was notified that it had won the LOGCAP IV competition for northern Afghanistan, with a total contract value of potentially more than $7.5 billion over the next five years. New awards under the contract will be recognized as specific task orders are incrementally funded. Backlog of $974 million at June 30, 2009 increased significantly compared to June 30, 2008 backlog of $316 million, primarily due to the multi-year ARRA funding at Savannah River.

Total assets in the Government segment were $425 million at June 30, 2009 compared to $326 million at December 31, 2008. The increase in total assets corresponded to an increase in working capital to support project execution activities.

GLOBAL SERVICES



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



                   Three Months Ended       Six Months Ended
                        June 30,                June 30,
(in millions)       2009         2008       2009       2008

Revenue          $    452.3    $  696.1   $  994.4   $ 1,402.3
Segment profit         34.1        66.1       89.6       119.6

Revenue and segment profit decreased during the three and six months ended June 30, 2009 compared to the same periods in 2008, primarily due to declining volumes of capital work and continued delay of refinery turnarounds and shutdowns which impacted the operations and maintenance business line. Global Services began to be impacted by the global recession during the fourth quarter of 2008, particularly for natural resource prospects. The drop in commodity prices and the overall economic environment have caused delays of work originally planned for late 2008 and 2009.

Segment profit margin decreased from 9.5 percent for the second quarter of 2008 to 7.5 percent for the second quarter of 2009 primarily due to delayed work in the operations and maintenance business line. Segment profit margin for the six months ended June 30, 2009 increased slightly compared to the same period in 2008, driven by results in the equipment business line.

New awards for the three months ended June 30, 2009 were $533 million compared to $673 million for the same period in 2008. The decrease is the result of significantly lower renewals from existing clients in 2009. Backlog at June 30, 2009 was $2.6

billion, down slightly from $2.7 billion at June 30, 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 short-duration operations and maintenance activities and from these non-backlog reporting business lines.

Total assets in the Global Services segment increased to $843 million at June 30, 2009 from $763 million at December 31, 2008, primarily as the result of an increase in working capital to support the equipment business line.

POWER



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



                   Three Months Ended       Six Months Ended
                        June 30,                June 30,
(in millions)       2009         2008        2009       2008

Revenue          $    334.9    $  522.4   $    673.8   $ 944.0
Segment profit         26.8        24.8         47.0      45.8

Revenue for the three and six months ended June 30, 2009 decreased 36 percent and 29 percent, respectively, compared to the three and six months ended June 30, 2008 primarily due to the expected reduction in project execution activities on the Luminant Oak Grove coal-fired power project that is progressing closer to completion. Segment profit margin for the three and six months ended June 30, 2009 improved compared to the corresponding periods of 2008 primarily due to a greater mix of higher margin engineering and front-end projects and project completion adjustments for two emissions control programs.

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 second quarter of 2009 were $192 million compared to $206 million in the second quarter of 2008. Backlog at June 30, 2009 was $1.8 billion compared to $1.9 billion at June 30, 2008.

Total assets in the Power segment increased to $176 million at June 30, 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 and six months ended June 30, 2009 was $42.0 million and $67.4 million, respectively, reflecting a 32 percent and 33 percent decrease from $61.7 million and $101.2 million in the same periods of 2008. This decrease is primarily due to reduced compensation cost and the impact of overhead reduction efforts in the current year periods.

Net interest income of $3.4 million and $8.0 million during the three and six month periods ended June 30, 2009 decreased from net interest income of $12.2 million and $22.2 million during the corresponding periods 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, with some of the latter being long-term.

Income tax expense for the three and six months ended June 30, 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 June 30, 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 six months ended June 30, 2009, cash provided by operating activities of $380.0 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 $19 million were made by the company during the six months ended June 30, 2009. During the six months ended June 30, 2008, cash provided by operating activities of $690.3 million resulted primarily from earnings sources and increases in client advance billings.

Cash utilized by investing activities was $936.9 million in the first half of 2009 compared with $373.9 million in the 2008 comparison period as the company increased its investments in marketable securities. The company holds excess cash in bank deposits and marketable securities which are governed by the company's investment policy. This policy 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. Investing activities during 2008 include proceeds of $79 million from the sale of a joint venture interest in a wind power project in the United Kingdom. Capital expenditures of $120.6 million in the six months ended June 30, 2009 were level with the $127.1 million of capital expenditures during the 2008 period. Capital expenditures during the first half of 2009 consisted primarily of expenditures relating to equipment operations.

Cash flows from financing activities in the first half of 2009 included the repurchase of 1,800,000 shares of the company's common stock for $61.3 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 six months ended June 30, 2009, exchange rates for functional currencies for most of the company's international operations strengthened against the U.S. dollar, resulting in an unrealized translation gain 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 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 current cash and marketable security 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 operating performance have earned it strong credit ratings resulting in continued access to the financial markets. The company's total debt to total capitalization ("debt-to-capital") ratio, which is based on shareholders' equity, at June 30, 2009 was 4.4 percent compared to 5.3 percent at December 31, 2008. As of June 30, 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 second quarter of 2009 and the Notes were therefore classified as short-term debt. During the six months ended June 30, 2009, holders converted $12 million of the Notes in exchange for the principal balance owed in cash plus 75,997 shares of the company's common stock. The company does not know the timing or principal amount of the remaining Notes that may be presented for conversion in the future. Available cash balances will be used to satisfy any principal

. . .