0001 - DOCUMENT AND ENTITY INFO
0001 - DOCUMENT AND ENTITY INFORMATION (USD $) | |
12 Months Ended
Dec. 31, 2008 | |
Document and Entity Information | |
Entity Registrant Name | FLUOR CORP |
Entity Central Index Key | 0001124198 |
Document Type | 10-K |
Document Period End Date | 2008-12-31 |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity Well-known Seasoned Issuer | Yes |
Entity Voluntary Filers | No |
Entity Current Reporting Status | Yes |
Entity Filer Category | Large Accelerated Filer |
Entity Public Float | $8,200,000,000 |
Entity Common Stock, Shares Outstanding | 181,525,896 |
0010 - CONSOLIDATED STATEMENT O
0010 - CONSOLIDATED STATEMENT OF EARNINGS (USD $) | |||||||||||||||||||
In Thousands, except Share data | 12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 | 12 Months Ended
Dec. 31, 2006 | ||||||||||||||||
REVENUES | |||||||||||||||||||
TOTAL REVENUE | $22,325,894 | $16,691,033 | $14,078,506 | ||||||||||||||||
TOTAL COST OF REVENUE | |||||||||||||||||||
Cost of revenue | 21,116,197 | 15,888,587 | 13,522,033 | ||||||||||||||||
Gain on sale of joint venture interest | (79,209) | ||||||||||||||||||
OTHER (INCOME) AND EXPENSES | |||||||||||||||||||
Corporate administrative and general expense | 229,169 | 193,862 | 178,817 | ||||||||||||||||
Interest expense | 11,927 | 24,015 | 23,013 | ||||||||||||||||
Interest income | (66,592) | (64,524) | (27,347) | ||||||||||||||||
Total cost and expenses | 21,211,492 | 16,041,940 | 13,696,516 | ||||||||||||||||
EARNINGS BEFORE TAXES | 1,114,402 | 649,093 | 381,990 | ||||||||||||||||
INCOME TAX EXPENSE | 393,944 | 115,774 | 118,538 | ||||||||||||||||
NET EARNINGS | $720,458 | $533,319 | $263,452 | ||||||||||||||||
EARNINGS PER SHARE* | |||||||||||||||||||
BASIC EARNINGS PER SHARE* | 4.06 | [1] | 3.06 | [1] | 1.53 | [1] | |||||||||||||
DILUTED EARNINGS PER SHARE* | 3.93 | [1] | 2.93 | [1] | 1.48 | [1] | |||||||||||||
SHARES USED TO CALCULATE EARNINGS PER SHARE* | |||||||||||||||||||
Shares used to calculate earnings per share, Basic | 177,658,000 | [1] | 174,504,000 | [1] | 172,674,000 | [1] | |||||||||||||
Shares used to calculate earnings per share, Diluted | 183,460,000 | [1] | 182,178,000 | [1] | 178,392,000 | [1] | |||||||||||||
[1]All share and per share amounts were adjusted for the July 16, 2008 two-for-one stock split. |
0020 - CONSOLIDATED BALANCE SHE
0020 - CONSOLIDATED BALANCE SHEET (USD $) | |||||||||||||||||||
In Thousands | Dec. 31, 2008
| Dec. 31, 2007
| |||||||||||||||||
CURRENT ASSETS | |||||||||||||||||||
Cash and cash equivalents | $1,834,324 | $1,175,144 | |||||||||||||||||
Marketable securities | 273,570 | 539,242 | |||||||||||||||||
Accounts and notes receivable, net | 1,227,224 | 946,565 | |||||||||||||||||
Contract work in progress | 981,125 | 977,945 | |||||||||||||||||
Deferred taxes, current | 148,276 | 151,028 | |||||||||||||||||
Other current assets | 204,143 | 269,576 | |||||||||||||||||
Total current assets | 4,668,662 | 4,059,500 | |||||||||||||||||
PROPERTY, PLANT AND EQUIPMENT | |||||||||||||||||||
Land | 46,032 | 45,919 | |||||||||||||||||
Buildings and improvements | 345,135 | 352,265 | |||||||||||||||||
Machinery and equipment | 1,087,464 | 971,190 | |||||||||||||||||
Construction in progress | 17,511 | 29,820 | |||||||||||||||||
Total property, plant and equipment | 1,496,142 | 1,399,194 | |||||||||||||||||
Less accumulated depreciation | 696,306 | 614,807 | |||||||||||||||||
Net property, plant and equipment | 799,836 | 784,387 | |||||||||||||||||
OTHER ASSETS | |||||||||||||||||||
Goodwill | 87,172 | 78,089 | |||||||||||||||||
Investments | 191,962 | 184,973 | |||||||||||||||||
Deferred taxes, noncurrent | 386,613 | 309,141 | |||||||||||||||||
Deferred compensation trusts | 225,246 | 275,317 | |||||||||||||||||
Other | 64,230 | 104,772 | |||||||||||||||||
Total other assets | 955,223 | 952,292 | |||||||||||||||||
Total assets | 6,423,721 | 5,796,179 | |||||||||||||||||
CURRENT LIABILITIES | |||||||||||||||||||
Trade accounts payable | 1,164,556 | 985,247 | |||||||||||||||||
Convertible senior notes | 133,578 | 307,222 | |||||||||||||||||
Advance billings on contracts | 999,107 | 772,485 | |||||||||||||||||
Accrued salaries, wages and benefits | 607,702 | 507,198 | |||||||||||||||||
Other accrued liabilities | 257,667 | 287,942 | |||||||||||||||||
Total current liabilities | 3,162,610 | 2,860,094 | |||||||||||||||||
LONG-TERM DEBT DUE AFTER ONE YEAR | 17,722 | 17,704 | |||||||||||||||||
NONCURRENT LIABILITIES | 572,307 | 643,922 | |||||||||||||||||
Capital Stock | |||||||||||||||||||
Preferred stock - authorized 20,000,000 shares ($0.01 par value), none issued | 0 | 0 | |||||||||||||||||
Common stock - authorized 375,000,000 shares ($0.01 par value); issued and outstanding - 181,555,921* and 177,364,640* shares in 2008 and 2007, respectively | 1,816 | [1] | 1,774 | [1] | |||||||||||||||
Additional paid-in capital | 754,089 | 705,241 | |||||||||||||||||
Accumulated other comprehensive loss | (356,969) | (74,172) | |||||||||||||||||
Retained earnings | 2,272,146 | 1,641,616 | |||||||||||||||||
Total shareholders' equity | 2,671,082 | 2,274,459 | |||||||||||||||||
Total liabilities and shareholders' equity | $6,423,721 | $5,796,179 | |||||||||||||||||
[1]Share amounts were adjusted for the July 16, 2008 two-for-one stock split. |
0021 - CONSOLIDATED BALANCE SHE
0021 - CONSOLIDATED BALANCE SHEET (Parenthetical) (USD $) | |||||||||||||||||||
Dec. 31, 2008
| Dec. 31, 2007
| ||||||||||||||||||
CONSOLIDATED BALANCE SHEET | |||||||||||||||||||
Preferred stock, par value | 0.01 | 0.01 | |||||||||||||||||
Preferred stock, shares authorized | 20,000,000 | 20,000,000 | |||||||||||||||||
Preferred stock, shares issued | 0 | 0 | |||||||||||||||||
Common stock, par value | 0.01 | 0.01 | |||||||||||||||||
Common stock, shares authorized | 375,000,000 | 375,000,000 | |||||||||||||||||
Common stock, shares issued | 181,555,921 | [1] | 177,364,640 | [1] | |||||||||||||||
Common stock, shares outstanding | 181,555,921 | [1] | 177,364,640 | [1] | |||||||||||||||
[1]Share amounts were adjusted for the July 16, 2008 two-for-one stock split. |
0030 - CONSOLIDATED STATEMENT O
0030 - CONSOLIDATED STATEMENT OF CASH FLOWS (USD $) | |||
12 Months Ended
Dec. 31, 2008 | 12 Months Ended
Dec. 31, 2007 | 12 Months Ended
Dec. 31, 2006 | |
CASH FLOWS FROM OPERATING ACTIVITIES | |||
Net earnings | $720,458,000 | $533,319,000 | $263,452,000 |
Adjustments to reconcile net earnings to cash provided by operating activities | |||
Depreciation of fixed assets | 161,562,000 | 144,862,000 | 124,142,000 |
Amortization of intangibles | 1,743,000 | 1,947,000 | 2,016,000 |
Loss on sale of building | 16,370,000 | ||
Gain on sale of joint venture interest | (79,209,000) | ||
Restricted stock and stock option amortization | 35,755,000 | 32,318,000 | 34,719,000 |
Minority interest | 8,626,000 | (6,472,000) | (14,884,000) |
Deferred compensation trust | 84,071,000 | (17,352,000) | (22,939,000) |
Deferred compensation obligation | (84,747,000) | 29,623,000 | 25,224,000 |
Funding of deferred compensation trust | (34,000,000) | (11,000,000) | (19,000,000) |
Taxes paid on vested restricted stock | (16,970,000) | (12,243,000) | (14,649,000) |
Statute expirations and tax settlements | (27,755,000) | (130,594,000) | |
Deferred taxes | 65,583,000 | (44,765,000) | 987,000 |
Stock option tax benefit, operating activities | (17,104,000) | (20,257,000) | (12,639,000) |
Retirement plan accrual, net of contributions | (154,531,000) | (26,763,000) | (5,191,000) |
Decrease (increase) in unbilled fees receivable | 118,162,000 | (5,085,000) | |
Changes in operating assets and liabilities | 273,392,000 | 325,547,000 | (57,092,000) |
Equity in earnings of investees | (12,014,000) | (16,104,000) | (16,804,000) |
Insurance proceeds | 9,345,000 | ||
Other items, operating activities | 9,879,000 | 4,814,000 | 4,559,000 |
Cash provided by operating activities | 951,109,000 | 905,042,000 | 296,161,000 |
CASH FLOWS FROM INVESTING ACTIVITIES | |||
Capital expenditures | (299,611,000) | (284,240,000) | (274,055,000) |
Purchases of marketable securities | (1,346,335,000) | (995,002,000) | |
Proceeds from the sales and maturities of marketable securities | 1,557,590,000 | 455,760,000 | |
Investments | (2,288,000) | (9,281,000) | (371,000) |
Proceeds from sale of joint venture interest | 79,209,000 | ||
Acquisitions | (12,496,000) | ||
Proceeds from disposal of property, plant and equipment | 48,495,000 | 60,396,000 | 39,326,000 |
Deconsolidation of variable interest entity | (17,190,000) | ||
Other items, investing activities | (2,031,000) | (3,875,000) | (2,717,000) |
Cash provided (utilized) by investing activities | 22,533,000 | (793,432,000) | (237,817,000) |
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Repayment of convertible debt | (173,644,000) | (22,777,000) | |
Repayment of non-recourse project financing | (23,376,000) | ||
Repayment of equity bridge loan | (19,126,000) | ||
Proceeds from issuance of non-recourse project financing | 101,665,000 | 127,284,000 | |
Capital contribution from joint venture partners | 3,784,000 | 35,143,000 | |
Stock options and warrants exercised | 13,377,000 | 12,537,000 | 31,770,000 |
Stock option tax benefit, financing activities | 17,104,000 | 20,257,000 | 12,639,000 |
Dividends paid | (89,928,000) | (70,399,000) | (52,863,000) |
Other items, financing activities | (376,000) | (201,000) | (447,000) |
Cash (utilized) provided by financing activities | (229,683,000) | 33,723,000 | 118,383,000 |
Effect of exchange rate changes on cash | (84,779,000) | 53,761,000 | 10,307,000 |
Increase in cash and cash equivalents | 659,180,000 | 199,094,000 | 187,034,000 |
Cash and cash equivalents at beginning of year | 1,175,144,000 | 976,050,000 | 789,016,000 |
Cash and cash equivalents at end of year | $1,834,324,000 | $1,175,144,000 | $976,050,000 |
0040 - CONSOLIDATED STATEMENT O
0040 - CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (USD $) | |||||||||||||||||||
Common Stock
| Additional Paid-In Capital
| Unamortized Executive Stock Plan Expense
| Accumulated Other Comprehensive Income (Loss)
| Retained Earnings
| Total
| ||||||||||||||
BEGINNING BALANCE at Dec. 31, 2005 | $1,742,000 | $629,030,000 | ($39,777,000) | $9,103,000 | $1,030,460,000 | $1,630,558,000 | |||||||||||||
SHARES, BEGINNING BALANCE at Dec. 31, 2005 | 174,176,000 | [1] | |||||||||||||||||
Comprehensive income | |||||||||||||||||||
Net earnings | 263,452,000 | 263,452,000 | |||||||||||||||||
Foreign currency translation adjustment (net of deferred taxes of $87,203, $33,947, and $13,351, respectively) | 22,725,000 | 22,725,000 | |||||||||||||||||
Pension plan adjustment, application of recognition provisions of SFAS 158 (net of deferred taxes of $0, $0, and $108,162, respectively) | (180,160,000) | (180,160,000) | |||||||||||||||||
Dividends ($0.50, $0.40, and $0.40 per share, respectively) | (70,125,000) | (70,125,000) | |||||||||||||||||
Exercise of stock options and warrants, value | 16,000 | 31,754,000 | 31,770,000 | ||||||||||||||||
Exercise of stock options and warrants, shares | 1,800,000 | [1] | |||||||||||||||||
Stock option tax benefit | 12,639,000 | 12,639,000 | |||||||||||||||||
Reclassification upon adoption of new accounting standard | (39,777,000) | 39,777,000 | |||||||||||||||||
Amortization of executive stock plan expense | 34,719,000 | 34,719,000 | |||||||||||||||||
Restricted stock cancelled for withholding tax, value | (2,000) | (14,648,000) | (14,650,000) | ||||||||||||||||
Restricted stock cancelled for withholding tax, shares | (338,000) | [1] | |||||||||||||||||
Cancellation of restricted stock, value | (456,000) | (456,000) | |||||||||||||||||
Cancellation of restricted stock, shares | (98,000) | [1] | |||||||||||||||||
Issuance of restricted stock, value | 4,000 | (4,000) | |||||||||||||||||
Issuance of restricted stock, shares | 542,000 | [1] | |||||||||||||||||
ENDING BALANCE at Dec. 31, 2006 | 1,760,000 | 653,257,000 | (148,332,000) | 1,223,787,000 | 1,730,472,000 | ||||||||||||||
SHARES, ENDING BALANCE at Dec. 31, 2006 | 176,082,000 | [1] | |||||||||||||||||
Comprehensive income | |||||||||||||||||||
Net earnings | 533,319,000 | 533,319,000 | |||||||||||||||||
Foreign currency translation adjustment (net of deferred taxes of $87,203, $33,947, and $13,351, respectively) | 56,600,000 | 56,600,000 | |||||||||||||||||
Pension plan adjustment (net of deferred taxes of $81,475, $10,535 and $0, respectively) | 17,560,000 | 17,560,000 | |||||||||||||||||
Dividends ($0.50, $0.40, and $0.40 per share, respectively) | (70,698,000) | (70,698,000) | |||||||||||||||||
Exercise of stock options and warrants, value | 6,000 | 12,531,000 | 12,537,000 | ||||||||||||||||
Exercise of stock options and warrants, shares | 666,000 | [1] | |||||||||||||||||
Stock option tax benefit | 20,257,000 | 20,257,000 | |||||||||||||||||
Issuance of common stock upon conversion of debt, value | 6,000 | (6,000) | |||||||||||||||||
Issuance of common stock upon conversion of debt, shares | 504,000 | [1] | |||||||||||||||||
Amortization of executive stock plan expense | 31,713,000 | 31,713,000 | |||||||||||||||||
Restricted stock cancelled for withholding tax, value | (2,000) | (12,127,000) | (12,129,000) | ||||||||||||||||
Restricted stock cancelled for withholding tax, shares | (264,000) | [1] | |||||||||||||||||
Cancellation of restricted stock, value | (93,000) | (93,000) | |||||||||||||||||
Cancellation of restricted stock, shares | (12,000) | [1] | |||||||||||||||||
Issuance of restricted stock, value | 4,000 | (4,000) | |||||||||||||||||
Issuance of restricted stock, shares | 394,000 | [1] | |||||||||||||||||
Repurchase of common stock, value | (287,000) | (287,000) | |||||||||||||||||
Repurchase of common stock, shares | (6,000) | [1] | |||||||||||||||||
Cumulative impact of adopting FIN 48 | (44,792,000) | (44,792,000) | |||||||||||||||||
ENDING BALANCE at Dec. 31, 2007 | 1,774,000 | 705,241,000 | (74,172,000) | 1,641,616,000 | 2,274,459,000 | ||||||||||||||
SHARES, ENDING BALANCE at Dec. 31, 2007 | 177,364,000 | [1] | |||||||||||||||||
Comprehensive income | |||||||||||||||||||
Net earnings | 720,458,000 | 720,458,000 | |||||||||||||||||
Foreign currency translation adjustment (net of deferred taxes of $87,203, $33,947, and $13,351, respectively) | (144,963,000) | (144,963,000) | |||||||||||||||||
Pension plan adjustment (net of deferred taxes of $81,475, $10,535 and $0, respectively) | (134,737,000) | (134,737,000) | |||||||||||||||||
Unrealized gain on debt securities | 331,000 | 331,000 | |||||||||||||||||
Unrealized loss on derivative contracts (net of deferred taxes of $2,055, $0, and $0, respectively) | (3,428,000) | (3,428,000) | |||||||||||||||||
Dividends ($0.50, $0.40, and $0.40 per share, respectively) | (89,928,000) | (89,928,000) | |||||||||||||||||
Exercise of stock options and warrants, value | 3,000 | 13,374,000 | 13,377,000 | ||||||||||||||||
Exercise of stock options and warrants, shares | 431,000 | [1] | |||||||||||||||||
Stock option tax benefit | 17,104,000 | 17,104,000 | |||||||||||||||||
Issuance of common stock upon conversion of debt, value | 40,000 | (40,000) | |||||||||||||||||
Issuance of common stock upon conversion of debt, shares | 4,059,000 | [1] | |||||||||||||||||
Amortization of executive stock plan expense | 35,738,000 | 35,738,000 | |||||||||||||||||
Restricted stock cancelled for withholding tax, value | (1,000) | (16,969,000) | (16,970,000) | ||||||||||||||||
Restricted stock cancelled for withholding tax, shares | (279,000) | [1] | |||||||||||||||||
Cancellation of restricted stock, value | (577,000) | (577,000) | |||||||||||||||||
Cancellation of restricted stock, shares | (20,000) | [1] | |||||||||||||||||
Issuance of restricted stock, value | 594,000 | 594,000 | |||||||||||||||||
Issuance of restricted stock, shares | 7,000 | [1] | |||||||||||||||||
Repurchase of common stock, value | (376,000) | (376,000) | |||||||||||||||||
Repurchase of common stock, shares | (6,000) | [1] | |||||||||||||||||
ENDING BALANCE at Dec. 31, 2008 | $1,816,000 | $754,089,000 | ($356,969,000) | $2,272,146,000 | $2,671,082,000 | ||||||||||||||
SHARES, ENDING BALANCE at Dec. 31, 2008 | 181,556,000 | [1] | |||||||||||||||||
[1]All share and per share amounts were adjusted for the July 16, 2008 two-for-one stock split. |
0041 - CONSOLIDATED STATEMENT O
0041 - CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Parenthetical) (USD $) | |||||||||||||||||||
In Thousands, except Per Share data | Accumulated Other Comprehensive Income (Loss)
| Retained Earnings
| Total
| ||||||||||||||||
Increase (Decrease) in Shareholders' Equity | |||||||||||||||||||
Foreign currency translation adjustment, deferred taxes | $13,351 | ||||||||||||||||||
Pension plan adjustment, application of recognition provision of SFAS 158, deferred taxes | (108,162) | ||||||||||||||||||
DIVIDENDS DECLARED PER SHARE* | 0.4 | [1] | 0.4 | [1] | |||||||||||||||
Increase (Decrease) in Shareholders' Equity | |||||||||||||||||||
Foreign currency translation adjustment, deferred taxes | 33,947 | ||||||||||||||||||
Pension plan adjustment, deferred taxes | 10,535 | ||||||||||||||||||
DIVIDENDS DECLARED PER SHARE* | 0.4 | [1] | 0.4 | [1] | |||||||||||||||
Increase (Decrease) in Shareholders' Equity | |||||||||||||||||||
Foreign currency translation adjustment, deferred taxes | 87,203 | ||||||||||||||||||
Pension plan adjustment, deferred taxes | 81,475 | ||||||||||||||||||
Unrealized loss on derivative contracts, deferred taxes | $2,055 | ||||||||||||||||||
DIVIDENDS DECLARED PER SHARE* | 0.5 | [1] | 0.5 | [1] | |||||||||||||||
[1]All share and per share amounts were adjusted for the July 16, 2008 two-for-one stock split. |
0050 - NOTES TO CONSOLIDATED FI
0050 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | |
12 Months Ended
Dec. 31, 2008 USD / shares | |
Notes to Financial Statements | |
Major Accounting Policies | Major Accounting Policies |
Principles of Consolidation | Principles of Consolidation The financial statements include the accounts of the company and its subsidiaries. The equity method of accounting is generally used for investment ownership ranging from 20percent to 50percent. Investment ownership of less than 20percent is generally accounted for on the cost method. Joint ventures and partnerships in which the company has the ability to exert significant influence, but does not control, are accounted for using the equity method of accounting. Certain contracts are executed jointly through partnerships and joint ventures with unrelated third parties. The company recognizes its proportionate share of joint venture revenue, cost and operating profit in its Consolidated Statement of Earnings and generally uses the one-line equity method of accounting in the Consolidated Balance Sheet. The company evaluates the applicability of Financial Accounting Standards Board ("FASB") Interpretation No.46 (Revised) "Consolidation of Variable Interest Entities" ("FIN46(R)") to partnerships and joint ventures at the inception of its participation and at the time of reconsideration events to ensure its accounting is in accordance with the appropriate standards. All significant intercompany transactions of consolidated subsidiaries are eliminated. Certain amounts in 2007 and 2006 have been reclassified to conform to the 2008 presentation. |
Stock Split | Stock Split On May7, 2008, the Board of Directors approved a two-for-one stock split that was paid in the form of a stock dividend on July16, 2008 to shareholders of record on June16, 2008. The stock split was accounted for by transferring approximately $1million from additional paid-in capital to common stock. All share and per share data (except par value) have been adjusted to reflect the effect of the stock split for all periods presented. The number of shares of common stock issuable upon exercise of outstanding stock options, vesting of other stock awards and the number of shares reserved for issuance under our convertible notes and various employee benefit plans were proportionately increased in accordance with the terms of the respective plans. |
Use of Estimates | Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts. These estimates are based on information available as of the date of the financial statements. Therefore, actual results could differ from those estimates. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents include securities with maturities of 90days or less at the date of purchase. Securities with maturities beyond 90days are classified as marketable securities within current assets. |
Marketable Securities | Marketable Securities Marketable securities consist primarily of time deposits placed with investment grade banks with original maturities greater than 90days, which by their nature are typically held to maturity, and are classified as such because the company has the intent and ability to hold them to maturity. Held-to-maturity securities are carried at amortized cost. The company also has investments in debt securities which are classified as available-for-sale because the investments may be sold prior to their maturity date. Available-for-sale securities are carried at fair value based on quoted market prices. |
Engineering and Construction Contracts | Engineering and Construction Contracts The company recognizes engineering and construction contract revenue using the percentage-of-completion method, based primarily on contract cost incurred to date compared to total estimated contract cost. Customer-furnished materials, labor and equipment and, in certain cases, subcontractor materials, labor and equipment, are included in revenue and cost of revenue when management believes that the company is responsible for the ultimate acceptability of the project. Contracts are segmented between types of services, such as engineering and construction, and accordingly, gross margin related to each activity is recognized as those separate services are rendered. Changes to total estimated contract cost or losses, if any, are recognized in the period in which they are determined. Pre-contract costs are expensed as incurred. Revenue recognized in excess of amounts billed is classified as current assets under contract work in progress. Amounts billed to clients in excess of revenue recognized to date are classified as current liabilities under advance billings on contracts. The company anticipates that substantially all incurred cost associated with contract work in progress at December31, 2008 will be billed and collected in 2009. The company recognizes certain significant claims for recovery of incurred cost when it is probable that the claim will result in additional contract revenue and when the amount of the claim can be reliably estimated. Unapproved change orders are accounted for in revenue and cost when it is probable that the cost will be recovered through a change in the contract price. In circumstances where recovery is considered probable but the revenue cannot be reliably estimated, cost attributable to change orders is deferred pending determination of contract price. |
Depreciation and Amortization | Depreciation and Amortization Property, plant and equipment are recorded at cost. Leasehold improvements are amortized over the shorter of their economic lives or the lease terms. Assets are depreciated principally using the straight-line method over the following ranges of estimated useful service lives, in years: December31, Estimated Useful Service Lives 2008 2007 (cost in thousands) Buildings $ 245,667 $ 263,673 2040 Building and leasehold improvements 99,468 88,592 620 Machinery and equipment* 953,770 844,946 210 Furniture and fixtures 133,694 126,244 210 * Approximately 50percent of the machinery and equipment is construction equipment that is depreciated over service lives ranging from 2 to 5years. Goodwill is not amortized but is subject to annual impairment tests. Interim testing of goodwill is performed if indicators of potential impairment exist. For purposes of impairment testing, goodwill is allocated to the applicable reporting units based on the current reporting structure. During 2008, the company completed its annual goodwill impairment tests in the first quarter and determined that none of the goodwill was impaired. Given the deterioration of economic conditions subsequent to annual impairment tests, the company performed an interim analysis of its goodwill balances at December31, 2008. No impairment was identified as a result of the interim testing. Intangibles arising from business acquisitions are amortized over the useful lives of those assets, ranging from one to nine years. |
Income Taxes, Policy | Income Taxes Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been recognized in the company's financial statements or tax returns. Judgment is required in determining the consolidated provision for income taxes as the company considers its worldwide taxable earnings and the impact of the continuing audit process conducted by various tax authorities. The final outcome of these audits by foreign jurisdictions, the Internal Revenue Service and various state governments could differ materially from that which is reflected in the Consolidated Financial Statements. In June 2006, the FASB issued FASB No.48, "Accounting for Uncertainty in Income Taxes" ("FIN48"), an interpretation of FASB Statement of Financial Accounting Standards, No.109 "Accounting for Income Taxes" ("SFAS109"). FIN48 clarifies the accounting for uncertainty in income taxes recognized in enterprises' financial statements in accordance with SFAS109. The interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Also, the interpretation provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. This interpretation is effective for fiscal years beginning after December15, 2006, and the company adopted this interpretation in the first quarter of 2007. As a result of the adoption of FIN48, the company recognized a cumulative-effect adjustment of $45million, increasing its liability for unrecognized tax benefits, interest and penalties and reducing the January1, 2007 balance of retained earnings. The company recognizes potential interest and penalties related to unrecognized tax benefits within its global operations in income tax expense. |
Earnings Per Share | Earnings Per Share Basic earnings per share ("EPS") is calculated by dividing net earnings by the weighted average number of common shares outstanding during the period. Diluted EPS reflects the assumed exercise or conversion of all dilutive securities, using the treasury stock method. Potentially dilutive securities include employee stock options and restricted stock, a warrant for the purchase of 920,000 shares prior to its exercise in September 2006 and the 1.5percent Convertible Senior Notes (see Financing Arrangements below for information about the Convertible Senior Notes). As discussed above, the company effected a two-for-one stock split that was paid on July16, 2008 in the form of a stock dividend. Accordingly, the computations of basic and diluted earnings per share have been adjusted retroactively for all periods presented to reflect the July16, 2008 stock split. At December31, 2008, 1,560,856 stock options and 137,482 shares of unvested restricted stock units were not included in the computation of diluted earnings per share because these securities were anti-dilutive. Dilutive securities included in the determination of shares used to compute diluted EPS are as follows: Year Ended December31, 2008 2007 2006 (shares in thousands) Employee stock options and restricted stock 1,160 1,552 1,402 Conversion equivalent of dilutive convertible debt 4,642 6,122 3,932 Warrant 384 Total 5,802 7,674 5,718 |
Derivatives and Hedging | Derivatives and Hedging The company mitigates certain financial exposures, including currency and commodity price risk by utilizing derivative instruments. These instruments are designated as either as fair value or cash flow hedges in accordance with SFAS No.133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS133). The company formally documents its hedge relationships at the inception of the agreements, including identification of the hedging instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction. The company also formally assesses both at inception and at least quarterly thereafter, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the fair value of the hedged items. The fair value of all derivative instruments are recognized as assets or liabilities at the balance sheet date. For fair value hedges, the effective portion of the change in the fair value of the derivative instrument is offset against the change in the fair value of the underlying asset through earnings. The effective portion of the contracts' gains or losses due to changes in fair value, associated with the cash flow hedges, are initially recorded as a component of accumulated other comprehensive income (loss) and are subsequently reclassified into earnings when the hedged items settle and impact earnings. The ineffective portion of a derivative's change in fair value is recognized in earnings immediately. The company does not enter into derivative transactions for speculative or trading purposes. At December31, 2008, the company had total gross notional amounts of $112million of foreign exchange forward contracts and $54million of commodity swap forward contracts outstanding relating to engineering and construction contract obligations. Unrealized losses of $8million for commodity swap forward contracts and unrealized gains of $3million for foreign currency forward contracts related to the company's cash flow hedges were recorded within other comprehensive income as of December31, 2008. Unrealized gains of $3million for foreign currency forward contracts related to the company's fair value hedges were recorded within the results of operations as of December31, 2008. The foreign exchange forward contracts are of varying duration, none of which extend beyond November 2010. The commodity swap forward contracts are of varying duration, none of which extend beyond 5years. All existing hedges are determined to be highly effective. As a result, the impact to earnings due to hedge ineffectiveness is immaterial for 2008, 2007 and 2006. The company limits exposure to foreign currency fluctuations in most of its engineering and construction contracts through provisions that require client payments in U.S. dollars or other currencies corresponding to the currency in which cost is incurred. As a result, the company generally does not need to hedge foreign currency cash flows for contract work performed. Under SFAS No.133, in certain limited circumstances, foreign currency payment provisions could be deemed embedded derivat |
Concentrations of Credit Risk | Concentrations of Credit Risk Accounts receivable and all contract work in progress are from clients in various industries and locations throughout the world. Most contracts require payments as the projects progress or, in certain cases, advance payments. The company generally does not require collateral, but in most cases can place liens against the property, plant or equipment constructed or terminate the contract if a material default occurs. The company maintains adequate reserves for potential credit losses and such losses have been minimal and within management's estimates. Cash and marketable securities are deposited with major banks throughout the world. Such deposits are limited to high quality institutions and limited amounts are invested in any single institution to minimize concentration of counterparty credit risk. The company has not incurred any credit risk losses related to these deposits. There are no significant concentrations of credit risk with any individual counterparty related to our derivative contracts. The company's counterparties for derivative contracts are large financial institutions selected based on profitability, balance sheet, credit ratings and capacity for timely payment of financial commitments, which are unlikely to be adversely affected by foreseeable events. The company monitors credit risk by continuously assessing the credit quality of its counterparties. |
Stock Plans, Policy | Stock Plans The company applies the provisions of SFAS No.123-R "Accounting for Share-Based Payment" ("SFAS123-R") in its accounting and reporting for stock-based compensation. SFAS123-R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Recorded compensation cost for new stock option grants is measured using the requirements of SFAS123-R for 2008, 2007 and 2006. All unvested options outstanding under the company's option plans have grant prices equal to the market price of the company's stock on the dates of grant. Compensation cost for restricted stock is determined based on the fair value of the stock at the date of grant. Compensation cost for stock appreciation rights and performance equity units is determined based on the change in the fair market value of the company's stock during the period. Upon adoption of SFAS123-R in 2006, the company elected the modified prospective method of application and, accordingly, did not restate the previously reported financial condition, operating results or the presentation of cash flows. In addition, the elimination of additional capital associated with unvested restricted shares resulted in an offsetting reversal of unamortized executive stock plan expense. Under SFAS123-R, stock-based compensation for new awards granted to retirement eligible employees is recognized over the period from the grant date to the retirement eligibility date. As part of the adoption of SFAS123-R in 2006, the impact of the accelerated expense recognition for retirement eligible participants for those share-based awards granted during the year ended December31, 2006 resulted in recognition of approximately $3million and $9million for stock options and restricted stock awards, respectively, in additional compensation expense for an aggregate after-tax impact of $0.04 per diluted share (split adjusted). Compensation expense associated with restricted stock awards granted prior to 2006 continue to be recognized using historical straight-line amortization practices based on award-specific vesting periods. |
Comprehensive Income (Loss) | Comprehensive Income (Loss) SFAS No.130, "Reporting Comprehensive Income," establishes standards for reporting and displaying comprehensive income and its components in the consolidated financial statements. The company reports the cumulative foreign currency translation adjustments, unrealized gains and losses on debt securities and derivative contracts, adjustments related to recognition of minimum pension liabilities and, starting in 2006, unrecognized net actuarial losses on such pension plans, as components of accumulated other comprehensive income (loss). The after-tax components of accumulated other comprehensive income (loss), net are as follows: Foreign Currency Translation Unrealized Gain on Debt Securities Unrealized Loss on Derivative Contracts Pension and Postretirement Benefit Obligation Accumulated Other Comprehensive Income (Loss), Net (in thousands) Balance at December31, 2005 $ 9,103 $ $ $ $ 9,103 Current period change 22,725 (180,160 ) (157,435 ) Balance at December31, 2006 31,828 (180,160 ) (148,332 ) Current period change 56,600 17,560 74,160 Balance at December31, 2007 88,428 (162,600 ) (74,172 ) Current period change (144,963 ) 331 (3,428 ) (134,737 ) (282,797 ) Balance at December31, 2008 $ (56,535 ) $ 331 $ (3,428 ) $ (297,337 ) $ (356,969 ) During 2008, exchange rates for functional currencies for most of the company's international operations weakened against the U.S. dollar, resulting in unrealized translation losses that are reflected in the foreign currency translation component of other comprehensive loss. During 2007 and 2006, exchange rates for functional currencies for most of the company's international operations strengthened against the U.S. dollar and unrealized translation gains occurred. Most of these unrealized gains or losses relate to cash balances and operating assets and liabilities held in currencies other than the U.S. dollar. |
Recent Accounting Pronouncements Not Yet Adopted | Recent Accounting Pronouncements Not Yet Adopted In December 2007, the FASB issued Statement of Financial Accounting Standard ("SFAS") No.141(R), "Business Combinations" ("SFAS141(R)"). SFAS141(R) replaces SFAS141 and establishes principles and requirements for how an acquirer recognizes and measures the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired in its financial statements. This standard is effective, on a prospective basis, for business combinations that occur in fiscal years beginning after December15, 2008. In December 2007, the FASB issued SFAS No.160, "Noncontrolling Interests in Consolidated Financial Statements" ("SFAS160"). SFAS160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parent's ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. This standard is effective for fiscal years beginning after December15, 2008. Management does not expect the adoption of this standard to have a material impact on the company's financial position, results of operations or cash flows. In March 2008, the FASB issued SFAS No.161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS161"). SFAS161 is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance and cash flows. This standard is effective for fiscal years beginning after November15, 2008. Management does not expect the adoption of this standard to have a material impact on the company's financial position, results of operations or cash flows. In May 2008, the FASB issued Staff Position APB14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB14-1"). FSP APB14-1 requires the issuer of a convertible debt instrument to separately account for the liability and equity components in a manner that reflects the entity's nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. FSP APB14-1 is effective for financial statements issued for fiscal years beginning after December15, 2008 and would be applied retrospectively to all periods presented. Management is currently evaluating the impact on the company's financial statements. In June 2008, the FASB issued FSP EITF03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities" ("FSP EITF03-6-1"). FSP EITF03-6-1 clarified that all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends participate in undistributed earnings with common shareholders. Awards of this nature are considered participating securities and the two-class method of computing basic and diluted earnings per share must be ap |
Consolidated Statement of Cash Flows | Consolidated Statement of Cash Flows The changes in operating assets and liabilities as shown in the Consolidated Statement of Cash Flows comprise: Year Ended December31, 2008 2007 2006 (in thousands) (Increase) decrease in: Accounts and notes receivable, net $ (363,065 ) $ (77,510 ) $ (68,058 ) Contract work in progress 35,651 (56,883 ) 189,588 Other current assets 105,848 (49,258 ) (65,385 ) Long-term receivables (69,716 ) (139,262 ) Increase (decrease) in: Trade accounts payable 159,715 181,197 (199,836 ) Advance billings on contracts 182,545 264,240 61,345 Accrued liabilities 152,698 133,477 164,516 (Increase) decrease in operating assets and liabilities $ 273,392 $ 325,547 $ (57,092 ) Cash paid during the year for: Interest $ 12,213 $ 33,504 $ 13,915 Income taxes 319,665 216,630 127,055 |
Income taxes | Income Taxes The income tax expense (benefit) included in the Consolidated Statement of Earnings is as follows: Year Ended December31, 2008 2007 2006 (in thousands) Current: Federal $ 184,299 $ 55,193 $ 3,836 Foreign 135,317 115,251 98,117 State and local 19,329 20,431 13,551 Total current 338,945 190,875 115,504 Deferred: Federal 41,020 (54,807 ) (20,081 ) Foreign 5,496 (17,357 ) 12,682 State and local 8,483 (2,937 ) 10,433 Total deferred 54,999 (75,101 ) 3,034 Total income tax expense $ 393,944 $ 115,774 $ 118,538 A reconciliation of U.S. statutory federal income tax expense to income tax expense is as follows: Year Ended December31, 2008 2007 2006 (in thousands) U.S. statutory federal tax expense $ 390,041 $ 227,183 $ 133,697 Increase (decrease) in taxes resulting from: State and local income taxes 22,679 15,060 4,768 Other permanent items, net 1,729 2,217 4,805 Rate change-state deferreds 10,822 Valuation allowance / (reversal), net (18,999 ) 12,943 (15,769 ) Statute expirations and tax authority settlements (27,755 ) (130,594 ) Other changes to unrecognized tax positions 26,214 Other tax return adjustments (1,932 ) (12,258 ) Extraterritorial income exclusion (828 ) (6,788 ) Other, net 35 (8,275 ) (739 ) Total income tax expense $ 393,944 $ 115,774 $ 118,538 Deferred taxes reflect the tax effects of differences between the amounts recorded as assets and liabilities for financial reporting purposes and the amounts recorded for income tax purposes. The tax effects of significant temporary differences giving rise to deferred tax assets and liabilities are as follows: December31, 2008 2007 (in thousands) Deferred tax assets: Accrued liabilities not currently deductible: Employee compensation and benefits $ 205,939 $ 182,454 Employee time-off accrual 64,603 56,066 Project and non-project reserves 125,841 136,047 Workers' compensation insurance accruals 9,306 12,226 Tax basis of investments in excess of book basis 50,783 47,620 Net operating loss carryforwards 34,564 28,295 Unrealized currency loss 13,103 6,571 Translation adjustments 33,920 Foreign tax credit carryforwards 9,413 74,769 Capital loss carryforwards 4,894 5,678 Residual U.S. tax on unremitted non-U.S. earnings 9,847 Other 49,526 28,940 Total deferred tax assets 601,892 588,513 Valuation allowance for deferred tax assets (40,058 ) (59,057 ) Deferred tax assets, |
Retirement Benefits | Retirement Benefits The company sponsors contributory and non-contributory defined contribution retirement and defined benefit pension plans for eligible employees. The defined benefit pension plans are primarily related to domestic and international engineering and construction salaried employees and U.S. craft employees. Contributions to defined contribution retirement plans are based on a percentage of the employee's compensation. Expense recognized for these plans of approximately $98million, $74million and $59million in the years ended December31, 2008, 2007 and 2006, respectively, is primarily related to domestic engineering and construction operations. Contributions to defined benefit pension plans are at least the minimum annual amount required by applicable regulations. During 2008, the company contributed $140million to the domestic defined benefit cash balance plan and an aggregate $50million to non-U.S. pension plans. Payments to retired employees under these plans are generally based upon length of service, age and/or a percentage of qualifying compensation. Net periodic pension expense for defined benefit pension plans includes the following components: Year Ended December31, 2008 2007 2006 (in thousands) Service cost $ 37,921 $ 39,032 $ 34,753 Interest cost 60,909 53,068 43,637 Expected return on assets (76,912 ) (70,085 ) (60,650 ) Amortization of transition asset 9 Amortization of prior service cost/(credits) 10 (96 ) (107 ) Recognized net actuarial loss 14,084 16,870 18,274 Net periodic pension expense $ 36,012 $ 38,789 $ 35,916 The ranges of assumptions indicated below cover defined benefit pension plans in Australia, Germany, the United Kingdom, the Netherlands and the United States. The discount rate assumption for the U.S. defined benefit plan was determined by discounting the expected future benefit payments using yields based on a portfolio of high quality corporate bonds. The discount rates for the non-U.S. defined benefit plans were determined based on high quality bond yield curves with durations consistent with the pension obligations in that country. These assumptions are based on the economic environment in each host country at the end of each respective annual reporting period. December31, 2008 2007 2006 For determining benefit obligations at year-end: Discount rates 4.75-6.50% 5.50-6.50% 4.50-6.00% Rates of increase in compensation levels 3.00-4.50% 3.00-4.00% 3.00-4.00% For determining net periodic cost for the year: Discount rates 5.50-6.50% 4.50-6.00% 4.00-5.50% Rates of increase in compensation levels 3.00-4.00% 3.00-4.00% 3.00-4.00% Expected long-term rates of return on assets 5.00-8.00% 5.00-8.00% 5.00-8.00% The company evaluates the funded status of each of its retirement plans using the above assumptions and determines the appropriate funding level considering app |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The estimated fair values of the company's financial instruments are as follows: December31, 2008 December31, 2007 Carrying Value Fair Value Carrying Value Fair Value (in thousands) Assets: Cash and cash equivalents $ 1,834,324 $ 1,834,324 $ 1,175,144 $ 1,175,144 Marketable securities* 296,464 296,464 539,242 539,242 Notes receivable, including noncurrent portion 17,052 17,052 17,782 17,782 Liabilities: 1.5% Convertible Senior Notes 133,578 208,382 307,222 785,106 5.625% Municipal Bonds 17,722 18,290 17,704 18,355 Other financial instruments: Foreign currency contracts 5,418 5,418 1,555 1,555 Commodity swap forward contracts (8,247 ) (8,247 ) * Marketable securities consists of held-to-maturity investments of $255million and available-for-sale investments of $41million, of which $23million, having maturities less than three years, are classified as non-current and are included in other assets on the Consolidated Balance Sheet. Fair values were determined as follows: The carrying amounts of cash and cash equivalents, marketable securities, short-term notes receivable, commercial paper, loan notes and notes payable approximate fair value because of the short-term maturity of these instruments. Long-term notes receivable are estimated by discounting future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. The fair value of debt obligations is estimated based on quoted market prices for the same or similar issues or on the current rates offered to the company for debt of the same maturities. Foreign currency contracts are estimated by obtaining quotes from brokers. Commodity swap forward contracts are estimated using standard pricing models with market-based inputs, which take into account the present value of estimated future cash flows. |
Fair Value, Measurement Inputs | In September 2006, the FASB issued SFAS No.157, "Fair Value Measurements" ("SFAS157"). SFAS157 establishes a common definition for fair value to be applied, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosure about such fair value measurements. In February 2007, the FASB issued SFAS No.159, "The Fair Value Option for Financial Assets and Financial Liabilities-including an amendment of FASB Statement No.115" ("SFAS159"). SFAS159 allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement of certain financial assets and liabilities under an instrument-by-instrument election. The company adopted both SFAS157 and SFAS159 in the first quarter of 2008. The required disclosures of SFAS157 have been reflected herein. The adoption of SFAS159 did not have a material impact on its financial position, results of operations or cash flows. The following table presents, for each of the fair value hierarchy levels required under SFAS No.157, the company's assets and liabilities that are measured at fair value on a recurring basis at December31, 2008: Fair Value Measurements Using Total Quoted Prices in Active Markets for Identical Assets (Level1) Significant Other Observable Inputs (Level2) Significant Unobservable Inputs (Level3) (in thousands) Assets Investments in debt securities* $ 41,393 $ 41,393 $ $ Foreign currency contracts 5,418 5,418 Liabilities Commodity swap forward contracts $ 8,247 $ $ 8,247 $ * Investments in debt securities of $18million are classified as current assets in marketable securities on the Consolidated Balance Sheet. The remaining $23million is non-current and is therefore included in other assets on the Consolidated Balance Sheet. |
Financing Arrangements | Financing Arrangements During the third quarter of 2006 the company amended and restated its Senior Credit Facility, increasing the size from $800million to $1.5billion and extending the maturity to 2011, which provides for revolving loans and letters of credit. Borrowings on committed lines bear interest at rates based on the London Interbank Offered Rate ("LIBOR") plus an applicable borrowing margin. At December31, 2008, no amounts were outstanding for commercial paper or funded loans. In addition to the $1.5billion above, the company has $900million in 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 for performance and completion guarantees on engineering and construction contracts. At December31, 2008, the company had $1.0billion in letters of credit outstanding. In addition, the company has $149million in credit lines for general purposes. The company's access to the commercial paper market has been limited as a result of the current financial crisis. The company also posts surety bonds as generally required by commercial terms, primarily on state and local government projects to guarantee its performance on contracts. Consolidated debt consists of the following: December31, 2008 2007 (in thousands) Current: 1.5% Convertible Senior Notes $ 133,578 $ 307,222 Long-Term: 5.625% Municipal Bonds 17,722 17,704 In February 2004, the company issued $330million of 1.5percent Convertible Senior Notes (the "Notes") due February15, 2024 and received proceeds of $323million, net of underwriting discounts. In December 2004, the company irrevocably elected to pay the principal amount of the Notes in cash. Interest on the Notes is payable semi-annually on February15 and August15 of each year. The Notes are convertible into shares of the company's common stock par value $0.01 per share, at a conversion rate of 35.9104 shares per each $1,000 principal amount of notes, subject to adjustment as described in the indenture. Notes are convertible during any fiscal quarter if the closing price of the company's common stock for at least 20 trading days in the 30 consecutive trading day-period ending on the last trading day of the previous fiscal quarter is greater than or equal to 130percent of the conversion price in effect on that 30thtrading day (the "trigger price"). The split-adjusted trigger price is currently $36.20, but is subject to adjustment as outlined in the indenture. The trigger price condition has been satisfied during each period since the fourth quarter of 2005 and the Notes have therefore been classified as short-term debt as of December31, 2008 and 2007. Holders of Notes were entitled to require the company to purchase all or a portion of their Notes on February17, 2009 at 100percent of the principal amount plus accrued and unpaid interest; a de minimis amount of Notes was tendered for purchase. Holders of Notes will again be entitled to have the company purchase their Notes at the same price on February15, 2014 and February15, 201 |
Other Noncurrent Liabilities | Other Noncurrent Liabilities The company maintains appropriate levels of insurance for business risks. Insurance coverages contain various retention amounts for which the company provides accruals based on the aggregate of the liability for reported claims and an actuarially determined estimated liability for claims incurred but not reported. Other noncurrent liabilities include $25million and $29million at December31, 2008 and 2007, respectively, relating to these liabilities. For certain professional liability risks the company's retention amount under its claims-made insurance policies does not include an accrual for claims incurred but not reported because there is insufficient claims history or other reliable basis to support an estimated liability. The company believes that retained professional liability amounts are manageable risks and are not expected to have a material adverse impact on results of operations or financial position. The company has deferred compensation and retirement arrangements for certain key executives which generally provide for payments upon retirement, death or termination of employment. The deferrals can earn either market-based fixed or variable rates of return, at the option of the participants. At December31, 2008 and 2007, $275million and $348million, respectively, of obligations related to these plans were included in noncurrent liabilities. To fund these obligations, the company has established non-qualified trusts, which are classified as noncurrent assets. These trusts held primarily marketable equity securities valued at $225million and $275million at December31, 2008 and 2007, respectively. Periodic changes in fair value of these trust investments, most of which are unrealized, are recognized in earnings, and serve to mitigate participants' investment results which are also reflected in earnings. |
Stock Plans | Stock Plans The company's executive stock plans provide for grants of nonqualified or incentive stock options, restricted stock awards or units and stock appreciation rights ("SARS"). All executive stock plans are administered by the Organization and Compensation Committee of the Board of Directors ("Committee") comprised of outside directors, none of whom are eligible to participate in the plans. Option grant prices are determined by the Committee and are established at the fair value of the company's common stock at the date of grant. Options and SARS normally extend for 10years and become exercisable over a vesting period determined by the Committee, which can include accelerated vesting for achievement of performance or stock price objectives. Recorded compensation cost for share-based payment arrangements for the year ended December31, 2008, totaled $21million, net of recognized tax benefits of $13million. Recorded compensation cost for share-based payment arrangements for each year ended December31, 2007 and 2006 was $22million, net of recognized tax benefits of $13million. As discussed above, the company effected a two-for-one stock split that was paid on July16, 2008 in the form of a stock dividend. Accordingly, restricted stock and stock option activity have been adjusted retroactively for all periods presented to reflect the July16, 2008 stock split. The following table summarizes restricted stock and stock option activity: Restricted Stock Stock Options Number Weighted Average Grant Date Fair Value Per Share Number Weighted Average Exercise Price Per Share Outstanding at December31, 2005 2,995,858 $ 20 1,751,208 $ 16 Granted 541,104 42 519,690 42 Expired or canceled (98,520 ) 23 (9,220 ) 37 Vested/exercised (984,274 ) 18 (880,764 ) 17 Outstanding at December31, 2006 2,454,168 $ 25 1,380,914 $ 25 Granted 393,662 45 843,640 45 Expired or canceled (11,746 ) 43 (14,768 ) 36 Vested/exercised (858,910 ) 23 (665,720 ) 19 Outstanding at December31, 2007 1,977,174 $ 30 1,544,066 $ 39 Granted 437,908 66 548,538 68 Expired or canceled (31,072 ) 47 (36,052 ) 59 Vested/exercised (860,704 ) 27 (431,310 ) 31 Outstanding at December31, 2008 1,523,306 $ 42 1,625,242 $ 50 Options exercisable at December31, 2008 229,488 $ 33 Remaining unvested options outstanding and expected to vest 1,353,881 $ 53 At December31, 2008, there were a maximum of 14,558,057 shares available for future grant under the company's various stock plans. Shares available for future grant include shares which may be granted by the Committee as either stock options, on a share-for-share basis, or restricted stock, on the basis of one share for each 1.75 available shares. Restricted stock awards issued under the plans provide that shares awarded may not be sold or otherwise transferred until restrictions have lapsed and a |
Lease Obligations | Lease Obligations Net rental expense amounted to approximately $213million, $169million and $162million in the years ended December31, 2008, 2007 and 2006, respectively. The company's lease obligations relate primarily to office facilities, equipment used in connection with long-term construction contracts and other personal property. The company's obligations for minimum rentals under non-cancelable operating leases are as follows: Year Ended December31, (in thousands) 2009 $ 57,100 2010 62,500 2011 48,400 2012 35,800 2013 23,200 Thereafter 101,300 |
Contingencies and Commitments | Contingencies and Commitments The company and certain of its subsidiaries are involved in litigation in the ordinary course of business. Additionally, the company and certain of its subsidiaries are contingently liable for commitments and performance guarantees arising in the ordinary course of business. The company and certain of its clients have made claims arising from the performance under its contracts. The company recognizes certain significant claims for recovery of incurred cost when it is probable that the claim will result in additional contract revenue and when the amount of the claim can be reliably estimated. Recognized claims against clients amounted to $202million and $246million at December31, 2008 and 2007, respectively, and are primarily included in contract work in progress in the accompanying Consolidated Balance Sheet. Amounts ultimately realized from claims could differ materially from the balances included in the financial statements. The company does not expect that claim recoveries will have a material adverse effect on its consolidated financial position or results of operations. As of December31, 2008, several matters were in the litigation and dispute resolution process. The following discussion provides a background and current status of these matters: Infrastructure Joint Venture Project The company participates in a 50/50 joint venture that is completing a fixed-price transportation infrastructure project in California. The project continues to be subject to circumstances resulting in additional cost including owner-directed scope changes leading to quantity growth, cost escalation, additional labor and schedule delays. The company continues to evaluate the impact of these circumstances on estimated total project cost, as well as claims for recoveries and other contingencies on the project. During 2007 and 2006, provisions of $25million and $30million, respectively, were recognized due to increases in estimated cost. The company continues to incur legal expenses associated with the claims and dispute resolution process. As of December31, 2008, the company has recognized in cost and revenue its $52million proportionate share of $104million of cost relating to claims recognized by the joint venture. Total claims-related costs incurred, as well as claims submitted to the client by the joint venture, are in excess of the $104million of recognized cost. As of December31, 2008, the client withheld liquidated damages totaling $51million from amounts otherwise due the joint venture and has asserted additional claims against the joint venture. The company believes that the claims against the joint venture are without merit and that amounts withheld will ultimately be recovered by the joint venture and has therefore not recognized any reduction in project revenue for its $25.5million proportionate share of the withheld liquidated damages. In addition, the client has drawn down $14.8million against letters of credit provided by the company and its joint venture partner. The company believes that the amounts drawn down against the letters of credit will ultimately be recovered by the joint venture and, a |
Other Matters | Other Matters A warrant held by a former partner in the company's e-commerce procurement venture for the purchase of 920,000 shares at $18.03 per share (split adjusted) was exercised in 2006, resulting in proceeds of $17million. The company's operations are subject to and affected by federal, state and local laws and regulations regarding the protection of the environment. The company maintains reserves for potential future environmental cost where such obligations are either known or considered probable, and can be reasonably estimated. The company believes, based upon present information available to it, that its reserves with respect to future environmental cost are adequate and such future cost will not have a material effect on the company's consolidated financial position, results of operations or liquidity. However, the imposition of more stringent requirements under environmental laws or regulations, new developments or changes regarding site cleanup cost or the allocation of such cost among potentially responsible parties, or a determination that the company is potentially responsible for the release of hazardous substances at sites other than those currently identified, could result in additional expenditures, or the provision of additional reserves in expectation of such expenditures. |
Variable Interest Entities | Variable Interest Entities In the normal course of business, the company forms partnerships or joint ventures primarily for the execution of single contracts or projects. Applying the guidance of FIN46(R), the company evaluates qualitative and quantitative information for each partnership or joint venture at inception to determine, first, whether the entity formed is a variable interest entity ("VIE") and, second, if the company is the primary beneficiary and needs to consolidate the entity. Upon the occurrence of certain events outlined in FIN46(R), the company reassesses its initial determination of whether the entity is a VIE and whether consolidation is still required. A partnership or joint venture is considered a VIE if either (a)the total equity investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b)characteristics of a controlling financial interest are missing (either the ability to make decisions through voting or other rights, the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity), or (c)the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity and/or their rights to receive the expected residual returns of the entity, and substantially all of the entity's activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights. The company is deemed to be the primary beneficiary of the VIE and consolidates the entity if the company will absorb a majority of the entity's expected losses, receive a majority of the entity's expected residual returns or both. The company considers all parties that have direct or implicit variable interests when determining if it is the primary beneficiary. The majority of the partnerships and joint ventures that are formed for the execution of the company's projects are VIEs because the total equity investment is typically nominal and not sufficient to permit the entity to finance its activities without additional subordinated financial support. However, often the VIE does not meet the consolidation requirements of FIN46(R). The contractual agreements that define the ownership structure and equity investment at risk, distribution of profits and losses, risks, responsibilities, indebtedness, voting rights and board representation of the respective parties are used to determine if the entity is a VIE and if the company is the primary beneficiary and must consolidate the entity. The partnerships or joint ventures of the company are typically characterized by a 50percent or less, non-controlling, ownership or participation interest, with decision making and distribution of expected gains and losses typically being proportionate to the ownership or participation interest. As such and as noted above, even when the partnership or joint venture is determined to be a VIE, the company is frequently not the primary beneficiary. Should losses occur in the execution of the project for which the VIE was established, the losses would be absorbed b |
Operations by Business Segment and Geographical Area | Operations by Business Segment and Geographical Area The company provides professional services in the fields of engineering, procurement, construction and maintenance as well as project management services on a global basis and serves a diverse set of industries worldwide including oil and gas, chemical and petrochemicals, transportation, mining and metals, power, life sciences and manufacturing. The company also performs operations and maintenance activities for major industrial clients and, in some cases, operates and maintains their equipment fleet. The five principal operating segments are: Oil Gas, Industrial Infrastructure, Government, Global Services and Power. The Oil Gas segment provides design, engineering, procurement, construction and project management professional services for upstream oil and gas production, downstream refining and certain integrated petrochemicals markets. The Industrial Infrastructure segment provides design, engineering, procurement and construction services to transportation, wind power, mining and metals, life sciences, telecommunications, manufacturing, commercial and institutional development, microelectronics and healthcare clients. The Government segment provides engineering, construction, contingency response, management and operations services to the United States government. The percentage of the company's consolidated revenue from the United States government was 6percent, 8percent and 20percent, respectively, during the years ended December31, 2008, 2007 and 2006. The Global Services segment includes operations and maintenance activities, small capital project engineering and execution, site equipment and tool services, industrial fleet outsourcing, plant turnaround services and supply chain solutions. In addition, Global Services provides temporary staffing of technical, professional and administrative personnel for projects in all segments. The Power segment provides engineering, procurement, construction, program management, start-up and commissioning and maintenance services to the gas fueled, solid fueled, renewables, emerging nuclear and plant betterment markets. The reportable segments follow the same accounting policies as those described in Major Accounting Policies. Management evaluates a segment's performance based upon operating profit. Intersegment revenue is insignificant. The company incurs cost and expenses and holds certain assets at the corporate level which relate to its business as a whole. Certain of these amounts have been charged to the company's business segments by various methods, largely on the basis of usage. Engineering services for international projects are often performed within the United States or a country other than where the project is located. Revenue associated with these services has been classified within the geographic area where the work was performed. Operating Information by Segment Year Ended December31, 2008 2007 2006 (in millions) External revenue Oil Gas $ 12,946 $ 8,370 $ 5,368 Industrial Infrastructure 3,470 3,385 3,171 |
Non-Operating (Income) and Expense | Non-Operating (Income) and Expense The following table summarizes non-operating (income) and expense items reported in corporate administrative and general expense: Year Ended December31, 2008 2007 2006 (in millions) Loss on sale of building $ 16 $ $ Impairment of investment 4 Other items 1 (3 ) 1 Total $ 17 $ (3 ) $ 5 |
Quarterly Financial Data (Unaudited) | Quarterly Financial Data (Unaudited) The following is a summary of the quarterly results of operations: First Quarter Second Quarter(1) Third Quarter(2) Fourth Quarter(3) (in thousands, except per share amounts) Year ended December31, 2008 Revenue $ 4,806,981 $ 5,773,570 $ 5,673,818 $ 6,071,525 Cost of revenue 4,557,832 5,381,188 5,349,528 5,748,440 Earnings before taxes 221,734 344,970 295,847 251,851 Net earnings 138,012 209,250 183,099 190,097 Earnings per share* Basic $ 0.79 $ 1.19 $ 1.03 $ 1.05 Diluted 0.75 1.13 1.01 1.04 Year ended December31, 2007 Revenue $ 3,641,804 $ 4,221,538 $ 4,115,226 $ 4,712,465 Cost of revenue 3,464,320 4,034,329 3,925,705 4,464,233 Earnings before taxes 136,293 143,559 155,263 213,978 Net earnings 84,616 95,564 93,676 259,463 Earnings per share* Basic $ 0.49 $ 0.55 $ 0.54 $ 1.48 Diluted 0.47 0.53 0.51 1.41 * Share amounts were adjusted for the July16, 2008 two-for-one stock split. (1) Cost of revenue in the second quarter of 2008 is reduced by a pre-tax gain of $79million ($0.27 per share*) from the sale of a joint venture interest in a wind power project in the United Kingdom. (2) Earnings before taxes in the third quarter of 2007 include a provision of $21million in the Government segment on a fixed-price project. (3) Earnings before taxes in the fourth quarter of 2008 includes a $16million loss related to the sale of a building in the United Kingdom. Net earnings in the fourth quarter of 2008 includes $28million of tax benefits resulting from statute expirations and tax settlements that favorably impacted the effective tax rate. Net earnings in the fourth quarter of 2007 includes a $123million tax settlement. |