FLUOR CORP (FLR) FY 2023 MD&A

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our financial statements. A discussion and analysis of the operating results of 2022 compared to 2021 are included in our 2022 10-K and have not been repeated in this 10-K.

Developments in Our Business

We have retained Stork's North American operations, which largely consists of our operations and maintenance business owned by Fluor prior to our acquisition of Stork. This business, renamed Plant & Facility Services, is included in our Urban Solutions segment for all periods presented.

In March 2023, we sold our AMECO South America business, which included operations in Chile and Peru. This transaction marked the completion of the AMECO divestiture for total proceeds of $144 million, including $17 million in 2023. Previous AMECO divestitures included assets in Africa, the Caribbean, Mexico and North America. Upon the sale of AMECO South America in 2023, we recognized a $60 million negative earnings impact, including $35 million associated with foreign currency translation.

In August and September 2023, we completed the issuance of the 2029 Notes and the conversion of all our CPS. In December 2023, we discharged the remaining outstanding 2024 Notes. In doing so, we irrevocably transferred interest-bearing Treasury securities to the trustee of the 2024 Notes.

In 2023, we agreed to sell Stork's European business. This transaction is expected to close in the first half of 2024. However, the conditions imposed by the SPA prevent us from classifying the business as held-for-sale. In December 2023, we sold the Stork business in Latin America, largely for the assumption of debt by the purchaser. We recognized a $93 million negative earnings impact on sale, including $33 million associated with foreign currency translation.

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Results of Operations

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(1)Total segment profit is a non-GAAP financial measure. We believe that total segment profit provides a meaningful perspective on our results as it is the aggregation of individual segment profit measures that we use to evaluate and manage our performance.

(2)Backlog represents the total amount of revenue we expect to record in the future based upon contracts that have been awarded to us. Backlog is stated in terms of gross revenues and may include significant estimated amounts of third-party, subcontracted, CFM and pass-through costs. For projects related to proportionately consolidated joint ventures, we include only our percentage ownership of each joint venture's backlog. We recognize new awards into backlog when we and our client have approved the contract (written or verbal) and are committed to perform our respective obligations. 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 in this 10-K. Backlog includes the amount of revenue we expect to recognize under ongoing operations and maintenance contracts for the remainder of the current year renewal period plus up to 3 additional years if renewal is considered to be probable, while RUPO includes only the amount of revenue we expect to recognize under contracts with definite terms and substantive termination provisions.

(3)Includes backlog of $1.3 billion and $1.8 billion for legacy projects in a loss position as of December 31, 2023 and 2022, respectively.

While we experienced reductions in demand for certain services and the delay or abandonment of ongoing or anticipated projects during the COVID pandemic, our ability to win work was not materially impacted by COVID during 2023, as most of our markets and our clients' spending patterns have returned to pre-COVID norms. Although many of our projects are in a state we consider normal, we continue to deal with the effects of COVID on our operating results as our estimates are inclusive of COVID effects and client recoveries. For example, in the fourth quarter of 2023, we finalized an agreement for COVID-related relief on a single infrastructure project that caused our project level revenue assumptions to increase by $127 million.

Consolidated revenue increased in 2023 due to the ramp up of execution activities on several projects in Energy Solutions, Urban Solutions and Mission Solutions partially offset by declines in the volume of execution activity for projects which were completed or nearing completion.

Segment profit for 2023 significantly improved due to higher execution activity on several projects as well as the initial recognition of inflation-adjusted variable consideration on certain downstream projects and incentive fees on a mining project. Segment profit in 2023 further benefitted from the settlement of project claims and arbitration. Despite the improvements in segment profit in 2023, we recognized charges on 3 legacy projects for cost growth and also recognized $153 million negative earnings impact on the sales of our AMECO and Stork businesses in Latin America.

The effective tax rate on earnings from Cont Ops was 75%, 70% and (6%) for 2023, 2022 and 2021, respectively. A reconciliation of U.S. statutory federal income tax expense (benefit) to income tax expense (benefit) follows:

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In 2021, the Organization for Economic Cooperation and Development announced a framework on base erosion and profit shifting. The framework includes Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations, at a minimum rate of 15%. Multiple sets of guidance have been and continue to be issued. Many non-US tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 with the adoption of additional components in later years or are in the process of enacting legislation in future years. Pillar Two is expected to be applicable to us beginning January 1, 2024. We are continuing to evaluate the impacts of proposed, pending, and enacted legislation in the non-US tax jurisdictions we operate in as new guidance becomes available.

Our results were significantly impacted by evolving foreign currency rates in 2023. During 2023, the U.S. dollar depreciated against the Euro, British Pound and Canadian Dollar.

Our profit margin percentages may be favorably or unfavorably impacted by a change in the amount of CFM recorded. We record revenue on a gross basis, including CFM when we have concluded that we are a principal with respect to such materials and services.

The increase in backlog resulted from significant new awards booked during 2023 in Energy Solutions and Urban Solutions. In 2024, we expect to perform approximately half of our ending 2023 backlog.

Impairment

Impairment expense, included in Cont Ops, for 2022 and 2021 is summarized as follows:

We did not recognize any material impairment expense in 2023. During 2022, we reversed $63 million in impairment originally recognized in 2021 when our Stork and AMECO businesses were classified as held for sale, due primarily to remeasurement under held and used impairment criteria, for which CTA balances are excluded from carrying value.

Gain (Loss) on Pension Settlement

In 2021, we settled the majority of the obligations of our then largest DB plan, which provided retirement benefits to certain employees in the Netherlands, and recognized a loss on settlement of $198 million. In 2022, we finalized the settlement of the remaining obligations of this plan and recognized a gain on settlement of $42 million.

Segment Operations

We are one of the larger global professional services firms providing EPC, fabrication and modularization, and project management services.

Energy Solutions

Revenue in 2023 increased due to the ramp up of execution activities on our refinery projects in Mexico, chemicals projects in China and mid-scale LNG projects. These increases to revenue were partially offset by a decline in execution activity for projects nearing completion and lower revenue on an LNG project.

Segment profit in 2023 improved significantly primarily due to the initial recognition of inflation-adjusted variable consideration on certain downstream projects and due to increased execution activities on those same projects as well as construction activities on a large LNG project and the effects of favorable foreign currency remeasurement, partially offset by charges totaling $91 million for cost growth and schedule extension on a large upstream legacy project and a charge for the net arbitration result of a longstanding claim. Segment profit in 2023 also included a loss of $17 million on embedded foreign currency derivatives compared to a loss of $3 million in 2022. The increase in segment profit margin in 2023 reflects these same factors.

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New awards and backlog increased in 2023 due to awards for reimbursable EPCM contracts for 2 large chemicals projects in North America as well as a chemicals project in Poland.

Results for the fourth quarter of 2023. Segment profit in the fourth quarter of 2023 declined compared to 2022 primarily due to a large project nearing completion as well as an adjustment of $33 million for cost growth and schedule extension on the large upstream legacy project.

Urban Solutions

Revenue in 2023 increased due to the ramp up of execution activities on several recently awarded projects including a large metals project in the U.S., two life sciences projects and a semiconductor project as well as the settlement of a claim on an international bridge project. The revenue increases in 2023 were partially offset by declines in the volume of execution activity for projects nearing completion including a large mining project.

Segment profit in 2023 significantly improved. Segment profit in 2023 includes the settlement of a claim on an international bridge project compared to the recognition of $54 million in cost growth and delay mitigation costs on the same project in 2022. In 2023, we also recognized a discretionary incentive fee award on a completed mining project as well as a benefit from the favorable outcome of arbitration on a separate mining project. The increase in segment profit in 2023 compared to 2022 was also due to an $86 million charge recognized in 2022 for additional rework and schedule delays on a highway project recognized in 2022. Segment profit in 2023 also includes a favorable determination on a claim on a legacy infrastructure project. Earlier in 2023, we recognized a $59 million charge on this project for rework associated with subcontractor design errors and related schedule impacts, and we recognized a similar charge of $35 million in 2022. The increase in segment profit margin in 2023 reflects these same factors.

New awards significantly increased in 2023 due to awards for a large mining project, a metals project and a life sciences project. Backlog increased during 2023 due to the new award activity. Our staffing business does not report new awards or backlog.

Results for the fourth quarter of 2023. Segment profit in the fourth quarter of 2023 significantly increased compared to 2022 due to the settlement of a claim on an international bridge project and a favorable determination on a legacy infrastructure project.

Mission Solutions

Revenue increased in 2023 due to increased execution activities for 3 DOE contracts, 2 defense contracts, a nuclear power project that was recently terminated and FEMA hurricane support. The increase in revenue was partially offset by the completion of a contingency and humanitarian support project in 2022 and an airfield construction project in early 2023.

The decline in segment profit was substantially driven by a $30 million charge recognized in the first half of 2023 for cost growth associated with additional schedule delays on a weapons facility project as well as the completion of the 2 projects mentioned above, which offset contributions from projects with increased execution activities. We are conducting our due diligence to recover cost growth that has resulted from directed and constructive changes from the client on the weapons facility project.

New awards decreased during 2023 due to a large award booked in the prior year for a 4-year contract extension on the DOE Savannah River Site. The decline in backlog during 2023 resulted from work performed outpacing new award activity. Backlog included $2.7 billion and $3.9 billion of unfunded government contracts as of December 31, 2023 and 2022, respectively. Unfunded backlog reflects our estimate of future revenue under awarded government contracts for which funding has not yet been appropriated.

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Other

Other includes the operations of NuScale, Stork and the remaining AMECO business prior to their sale.

Segment profit in 2023 includes a $60 million negative earnings impact on the sale of our AMECO South America business (including $35 million for foreign currency translation) and a $93 million negative earnings impact on the sale of our Stork business in Latin America (including cash paid to the buyer of $31 million and $33 million for foreign currency translation). In January 2024, NuScale announced austerity measures to reduce cost including a workforce reduction, which is expected to lessen NuScale's losses in future periods.

G&A

The increase in compensation expense in 2023 was driven by higher performance-based compensation, including annual bonus projections and the effects of our higher stock price on stock-based liability awards.

Net Interest Income (Expense)

The increase in net interest income during 2023 was primarily due to an increase in interest rates earned on cash deposits including at our joint ventures in Canada and Mexico as well as the interest savings following the redemption of the 2023 Notes. Interest income was also favorably impacted by the purchase of treasury securities at a discount to their face amount using proceeds from the issuance of the 2029 Notes. These securities were irrevocably transferred to the trustee of the 2024 Notes in making their discharge.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Our significant accounting policies are described in the notes to our financial statements. The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Estimates are based on information available through the date of the issuance of the financial statements and, accordingly, actual results in future periods could differ from these estimates. Significant judgments and estimates used in the preparation of our financial statements apply to the following critical accounting policies:

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Revenue Recognition for Long-Term Contracts. We recognize our engineering and construction contract revenue over time as we provide services to satisfy our performance obligations. We generally use the cost-to-cost percentage-of-completion measure of progress as it best depicts how control transfers to our clients. The cost-to-cost approach measures progress towards completion based on the ratio of cost incurred to date compared to total estimated contract cost. Use of the cost-to-cost measure of progress requires us to prepare estimates of total expected revenue and cost to complete our projects.

CFM are included in revenue and cost of revenue when (1) we believe that we are acting as a principal rather than as an agent, (2) the contract includes construction activity and (3) we have visibility into the amount the customer is paying for the materials or there is a reasonable basis for estimating the amount. If we lose visibility mid-project, we cease recognizing future CFM but do not de-recognize previous amounts of CFM.

Due to the nature of our industry, there is significant complexity in our estimation of total expected revenue and cost, for which we must make significant judgments. Our contracts with our customers may contain several types of variable consideration, including claims, unpriced change orders, award and incentive fees, liquidated damages and penalties or other provisions that can either increase or decrease the contract price to arrive at estimated revenue. Certain variable consideration, such as award and incentive fees, generally are awarded upon achievement of certain performance metrics, program milestones or cost targets and can be based upon customer discretion. We estimate variable consideration at the most likely amount to which we expect to be entitled upon completion of a project. We include estimated amounts in the transaction price to the extent it is probable we will realize that amount. Our estimates of variable consideration and our determination of its inclusion in project revenue are based on an assessment of our anticipated performance and other information that may be available to us.

At a project level, we have specific practices and procedures to review our estimate of total revenue and cost. Each project team reviews the progress and execution of our performance obligations, which impact the project’s accounting outcome. As part of this process, the project team reviews information such as any outstanding key contract matters, progress towards completion and the related program schedule and identified risks and opportunities. The accuracy of our revenue and profit recognition in a given period depends on the accuracy of our project estimates, which can change from period to period due to a variety of factors including:

•Complexity in original design;

•Extent of changes from original design;

•Different site conditions than assumed in our bid;

•The productivity, availability and skill level of labor;

•Limitations associated with workforce distancing;

•Weather conditions when executing a project;

•The technical maturity of the technologies involved;

•Length of time to complete the project;

•Availability and cost of equipment and materials;

•Subcontractor and joint venture partner performance;

•Expected costs of warranties; and

•Our ability to recover for additional contract costs.

We recognize changes in contract estimates on a cumulative catch-up basis in the period in which the changes are identified. Such changes in contract estimates can result in the recognition of revenue in a current period for performance obligations which were satisfied or partially satisfied in prior periods. Changes in contract estimates may also result in the reversal of previously recognized revenue if the current estimate adversely differs from the previous estimate. If we estimate that a project will have costs in excess of revenue, we recognize the total loss in the period it is identified.

Fair Value Measurements. We are required to use fair value measurement techniques with inputs that require the use of estimates and involve significant judgment. These circumstances include:

•Impairment testing of goodwill and indefinite-lived intangibles when quantitative analysis is deemed necessary

•Impairment testing of long-lived assets when impairment indicators are present

•Impairment testing of investments as part of other than temporary impairment assessments when impairment indicators are present

•Fair value assessments of businesses held for sale that are reported at fair value less cost to sell

When performing quantitative fair value or impairment evaluations, we estimate the fair value of our assets by considering the results of either or both income-based and market-based valuation approaches. Under the income approach, we prepare a discounted cash flow valuation model using recent forecasts and compare the estimated fair value of each asset

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to its carrying value. Cash flow forecasts are discounted using the appropriate weighted-average cost of capital at the date of evaluation. The weighted-average cost of capital is comprised of the cost of equity and the cost of debt with a weighting for each that reflects our current capital structure which can be significantly impacted by volatility in interest rates as seen during 2023. Preparation of long-term forecasts involve significant judgments involving consideration of our backlog, expected future awards, customer attrition, working capital assumptions, and general market trends and conditions. Significant changes in these forecasts or any valuation assumptions, such as the discount rate selected, could affect the estimated fair value of our assets and could result in impairment expenses. Under the market approach, we consider market information such as multiples of comparable publicly traded companies and/or completed sales transactions to develop or validate our fair value conclusions, when appropriate and available.

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 CAPITAL RESOURCES

Our liquidity arises from available cash and cash equivalents and marketable securities, cash generated from operations, capacity under our credit facilities and, when necessary, access to 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, anticipated cash generated from operations, along with our unused credit capacity and cash position, is sufficient to support operating requirements and debt maturities. We regularly review our sources and uses of liquidity and may pursue opportunities to address our liquidity needs.

Our credit facility 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, which is a one notch downgrade from both agencies' current ratings. If we are required to provide collateral, it would consist broadly of liens on our U.S. assets.

In August 2023, we issued $575 million of 1.125% Convertible Senior Notes due August 15, 2029 and received net proceeds of $560 million. Concurrently, we entered into capped call transactions with certain banks for $73 million. We believe the entry into the capped call transactions provides us with significant protection against the potential dilution associated with the 2029 Notes. In August 2023, we completed a tender offer in which we repurchased $115 million of outstanding 2024 Notes using the proceeds from the issuance of the 2029 Notes. In January 2023, we redeemed the remaining €129 million of outstanding 2023 Notes for $140 million using cash on hand.

In December 2023, we extinguished the remaining outstanding $266 million principal amount of our 2024 Notes through a legal discharge, whereby we irrevocably transferred $262 million in interest-bearing Treasury securities to the trustee of the 2024 Notes. These securities will yield sufficient principal and interest over their remaining term to permit the trustee to satisfy the remaining principal and interest due on the 2024 Notes. Thus, we are no longer the primary obligor under the 2024 Notes.

As of December 31, 2023, letters of credit totaling $477 million were outstanding under our $1.8 billion credit facility, which matures in February 2026 and was amended in August 2023 to permit the issuance of the 2029 Notes. This credit facility contains customary financial covenants, including a debt-to-capitalization ratio that cannot exceed 0.60 to 1.00, 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 of $1.2 billion, all as defined in the amended credit facility, which may be reduced to $1.0 billion upon the repayment of debt. 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 December 31, 2023 and through the issuance of this 10-K, we had not made any borrowings under our credit facility. We have a sublimit of up to $1.0 billion in aggregate cash advances and financial letters of credit available to us under our credit facility with a current borrowing capacity of $775 million.

Cash and cash equivalents combined with marketable securities were $2.6 billion as of both December 31, 2023 and 2022. Cash balances as of December 31, 2023 and 2022 include cash and cash equivalents and marketable securities held by NuScale of $118 million and $338 million, respectively. 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 $1.1 billion as of both December 31, 2023 and 2022. Non-U.S. cash and cash equivalents exclude deposits of U.S. legal entities that are invested in offshore, overnight accounts or short-term time deposits, to which there is unrestricted access.

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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 $491 million and $706 million as of December 31, 2023 and 2022, respectively) were not necessarily readily available for general purposes. We do not include our share of cash held by our proportionately consolidated joint ventures and partnerships in our consolidated cash balances even though these amounts may be significant. We also consider the extent to which client advances (which totaled $80 million and $102 million as of December 31, 2023 and 2022, 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 December 31, 2023 and 2022, other than unremitted earnings required to meet our working capital and long-term investment needs in non-U.S. foreign jurisdictions where we operate.

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Operating Activities

Cash flows from operating activities result primarily from our EPC activities and are affected by our earnings levels and 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 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 payment 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 lump-sum 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. As of December 31, 2023, our backlog included $1.3 billion for loss projects, including $344 million of estimated unfunded losses associated therewith. The comparable amounts in 2022 were $1.8 billion of backlog and $454 million of unfunded losses.

Our operating cash flow for 2023 was positively impacted by cash settlements on certain project claims and disputes and cash distributions from 2 of our largest proportionately consolidated joint ventures and negatively impacted by increases in working capital on several large projects and higher tax payments. We also funded an estimated $129 million on loss projects during 2023. Our operating cash flow is typically lower in the first quarter of each year due to the timing of payout of employee incentive awards from the prior year. In 2024, we expect to receive a significant tax refund.

Investing Activities

2023 investing activities were significantly impacted by the purchase of U.S. Treasury securities which were subsequently transferred to the trustee of the 2024 Notes in discharging them.

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 by U.S. Government-related securities, high-grade commercial paper and high quality short-term and medium-term fixed income securities.

Capital expenditures were primarily related to construction equipment on certain infrastructure projects as well as expenditures for facilities and investments in IT.

Proceeds from sales of assets (net of cash divested) during 2023 included proceeds of $17 million for the sale of our AMECO South America business as well as $31 million in cash divested as part of the sale of the Stork business in Latin America.

Investments in unconsolidated partnerships and joint ventures in 2023 included capital contributions to a Mission Solutions joint venture and 3 infrastructure joint ventures.

Financing Activities

In August 2023, we issued $575 million of 1.125% Convertible Senior Notes (the “2029 Notes”) due August 15, 2029 and received net proceeds of $560 million. Interest on the 2029 Notes is payable semi-annually on February 15 and August 15, beginning on February 15, 2024. The conversion rate for the 2029 Notes is 22.0420 shares of common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of $45.37 per share. Holders may convert their 2029 Notes any time before May 2029 under the following conditions:

•if the last reported price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to $58.98 on each applicable trading day;

•during the 5-business day period after any 5-consecutive trading day period in which the trading price of the 2029 Notes was less than 98% of the product of the last reported stock price and the conversion rate;

•if we call any or all of the 2029 Notes for redemption; or

•upon the occurrence of specified events as described in the applicable indenture.

In addition, holders may convert their 2029 Notes any time beginning in May 2029 and prior to maturity without regard to the foregoing circumstances. Upon any conversion, we will repay the principal amount of the notes in cash and may elect

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to convey the conversion premium in any combination of cash and shares of our common stock. Certain events could cause the conversion rate to increase, including a make-whole fundamental change or redemption, but in no event will the conversion rate for a single note exceed 29.2056 shares of our common stock, other than for customary adjustments described in the applicable indenture.

After August 2026, we may elect to redeem up to all of the outstanding 2029 Notes if our common stock has a prevailing per share closing price in excess of $58.98. In such election, all principal would be settled in cash and could result in a make-whole premium if the holders also elect to convert. We may elect to pay any make-whole premium in any combination of cash and shares of our common stock.

In connection with the 2029 Notes offering, we entered into capped call transactions with certain banks. The capped call transactions are not part of the terms of the 2029 Notes and are accounted for as separate transactions. As the capped call options are indexed to our own stock, they were recorded in shareholders’ equity and are not accounted for as derivatives. The cost of the capped call transactions was $73 million which was recorded as a permanent reduction to APIC, and will not be subject to periodic remeasurement. The strike price of the capped call options corresponds to the conversion price of the 2029 Notes of $45.37 per share. The capped call options are expected to offset potential dilution to our common stock upon conversion of any 2029 Notes and/or offset any cash payments we are required to make for any conversion premium if our stock price is greater than $45.37. The upper limit of the capped calls is $68.48 per share. If our stock price exceeds $68.48, there would be unmitigated dilution and/or no offset of any cash payments attributable to the amount by which our stock exceeds the cap price. We will not be required to make any cash payments to option counterparties upon the exercise of capped call options, but we will be entitled to receive from them shares of our common stock or an amount of cash based on the amount by which the market price of our common stock exceeds the strike price of the capped calls.

In August 2023, we completed a tender offer in which we repurchased $115 million of outstanding 2024 Notes, excluding accrued interest, for consideration of $975.03 per $1,000 principal amount of the notes. In January 2023, we redeemed the remaining €129 million of outstanding 2023 Notes for $140 million. In June 2022, we redeemed €22 million of outstanding 2023 Notes for $23 million.

In September 2023, we exercised our mandatory conversion rights on our CPS in which each of the outstanding shares of CPS converted to 44.9585 shares of our common stock, plus a cash payment of $45.23 per CPS for a make-whole premium. The total make-whole premium amounted to $27 million, approximately $2 million less than the remaining undiscounted guaranteed dividend stream. First, second and third quarter CPS dividends of $10 million were paid in February, May and August 2023. Upon conversion, all dividends on the CPS have ceased. There was no obligation for accumulated but unpaid dividends after the last record date.

As a result of the reverse recapitalization, NuScale recognized cash of $341 million during 2022, consisting of $235 million in PIPE funding and $145 million in cash in trust, partially offset by transaction costs of $39 million. In April 2022, we sold approximately 5% of the ownership of NuScale to Japan NuScale Innovation, LLC for $107 million.

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 2023 related to a Mission Solutions joint venture and 2 infrastructure joint ventures.

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 of December 31, 2023, over 10 million shares could still be purchased under the existing stock repurchase program, although we do not have any immediate intent to begin such repurchases.

Letters of Credit

As of December 31, 2023, letters of credit totaling $477 million were outstanding under committed lines of credit. As of December 31, 2023, letters of credit totaling $918 million were outstanding under uncommitted lines of credit including letters of credit totaling $345 million for two lump-sum projects in Kuwait that are substantially complete except for the resolution of unapproved change orders and extension of time claims. Letters of credit are ordinarily provided 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 $15 billion as of December 31, 2023.

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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.