Document Entity Information
Document Entity Information | ||
3 Months Ended
Mar. 31, 2010 | Apr. 23, 2010
| |
Entity Registrant Name | FOSTER WHEELER AG | |
Entity Central Index Key | 0001130385 | |
Current Fiscal Year End Date | --12-31 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | 2010-03-31 | |
Document Fiscal Year Focus | 2,010 | |
Document Fiscal Period Focus | Q1 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 127,519,110 |
CONSOLIDATED STATEMENT OF OPERA
CONSOLIDATED STATEMENT OF OPERATIONS (USD $) | ||
In Thousands, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Operating revenues | $945,573 | $1,264,523 |
Cost of operating revenues | 773,491 | 1,101,771 |
Contract profit | 172,082 | 162,752 |
Selling, general and administrative expenses | 70,305 | 69,248 |
Other income, net | (8,332) | (8,203) |
Other deductions, net | 11,688 | 6,087 |
Interest income | (2,359) | (2,672) |
Interest expense | 4,551 | 4,167 |
Net asbestos-related (gain)/provision | (747) | 1,750 |
Income before income taxes | 96,976 | 92,375 |
Provision for income taxes | 21,610 | 18,003 |
Net income | 75,366 | 74,372 |
Less: Net income attributable to noncontrolling interests | 3,306 | 1,509 |
Net income attributable to Foster Wheeler AG | $72,060 | $72,863 |
Earnings per share (see Note 1): | ||
Basic | 0.57 | 0.58 |
Diluted | 0.56 | 0.57 |
CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET (USD $) | ||
In Thousands | Mar. 31, 2010
| Dec. 31, 2009
|
Current Assets: | ||
Cash and cash equivalents | $953,688 | $997,158 |
Accounts and notes receivable, net: | ||
Trade | 500,023 | 526,525 |
Other | 108,477 | 117,718 |
Contracts in process | 254,014 | 219,774 |
Prepaid, deferred and refundable income taxes | 41,719 | 46,478 |
Other current assets | 43,389 | 33,902 |
Total current assets | 1,901,310 | 1,941,555 |
Land, buildings and equipment, net | 377,589 | 398,132 |
Restricted cash | 30,759 | 34,905 |
Notes and accounts receivable - long-term | 1,381 | 1,571 |
Investments in and advances to unconsolidated affiliates | 223,488 | 228,030 |
Goodwill | 86,625 | 88,702 |
Other intangible assets, net | 70,491 | 73,029 |
Asbestos-related insurance recovery receivable | 236,159 | 244,265 |
Other assets | 84,437 | 87,781 |
Deferred tax assets | 82,363 | 89,768 |
TOTAL ASSETS | 3,094,602 | 3,187,738 |
Current Liabilities: | ||
Current installments on long-term debt | 35,672 | 36,930 |
Accounts payable | 251,403 | 303,436 |
Accrued expenses | 236,986 | 280,861 |
Billings in excess of costs and estimated earnings on uncompleted contracts | 631,079 | 600,725 |
Income taxes payable | 49,068 | 60,052 |
Total current liabilities | 1,204,208 | 1,282,004 |
Long-term debt | 164,197 | 175,510 |
Deferred tax liabilities | 60,679 | 62,956 |
Pension, postretirement and other employee benefits | 251,236 | 270,269 |
Asbestos-related liability | 338,273 | 352,537 |
Other long-term liabilities | 170,199 | 171,405 |
Commitments and contingencies | ||
TOTAL LIABILITIES | 2,188,792 | 2,314,681 |
Temporary Equity: | ||
Non-vested share-based compensation awards subject to redemption | 4,829 | 2,570 |
TOTAL TEMPORARY EQUITY | 4,829 | 2,570 |
Equity: | ||
Registered shares: CHF 3.00 par value; authorized: March 31,2010 - 190,696,806 shares and December 31, 2009 - 190,649,900 shares; conditionally authorized: March 31, 2010 - 62,135,022 shares and December 31, 2009 - 62,181,928 shares; issued and outstanding: March 31, 2010 - 127,488,849 shares and December 31, 2009 - 127,441,943 shares | 329,538 | 329,402 |
Paid-in capital | 621,216 | 617,938 |
Retained earnings | 394,241 | 322,181 |
Accumulated other comprehensive loss | (482,022) | (438,004) |
TOTAL FOSTER WHEELER AG SHAREHOLDERS' EQUITY | 862,973 | 831,517 |
Noncontrolling interests | 38,008 | 38,970 |
TOTAL EQUITY | 900,981 | 870,487 |
TOTAL LIABILITIES, TEMPORARY EQUITY AND EQUITY | $3,094,602 | $3,187,738 |
1_CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET (Parenthetical) | ||
Mar. 31, 2010
| Dec. 31, 2009
| |
Registered share par value in CHF | 3 | 3 |
Registered shares authorized | 190,696,806 | 190,649,900 |
Registered shares conditionally authorized | 62,135,022 | 62,181,928 |
Registered shares issued | 127,488,849 | 127,441,943 |
Registered shares outstanding | 127,488,849 | 127,441,943 |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (USD $) | |||||||||
In Thousands | Preferred Shares
| Common Shares
| Registered Shares
| Paid-in Capital
| Retained Earnings / (Accumulated Deficit)
| Accumulated Other Comprehensive Loss
| Total Foster Wheeler AG Shareholders' Equity
| Noncontrolling Interests
| Total
|
Balance at Dec. 26, 2008 | $1,262 | $914,063 | ($27,975) | ($494,788) | $392,562 | $28,718 | $421,280 | ||
Net income | 72,863 | 72,863 | 1,509 | 74,372 | |||||
Other comprehensive income, net of tax: | |||||||||
Foreign currency translation | (11,701) | (11,701) | (169) | (11,870) | |||||
Cash flow hedges | (2,768) | (2,768) | (2,768) | ||||||
Pension and other postretirement benefits | 4,598 | 4,598 | (2) | 4,596 | |||||
Comprehensive Income | 62,992 | 1,338 | 64,330 | ||||||
Issuance of common shares upon exercise of share purchase warrants | 9 | 9 | 9 | ||||||
Issuance of common shares upon vesting of restricted awards | 1 | (1) | |||||||
Cancellation of common shares and issuance of registered shares | (1,263) | 326,070 | (324,807) | ||||||
Repurchase and retirement of shares | (28) | (28) | (28) | ||||||
Issuance of registered shares upon conversion of preferred shares | 361 | (361) | |||||||
Issuance of registered shares upon vesting of restricted awards | 1 | (1) | |||||||
Distributions to noncontrolling interests | (21) | (21) | |||||||
Share-based compensation expense - stock options and restricted awards | 7,172 | 7,172 | 7,172 | ||||||
Balance at Mar. 31, 2009 | 326,432 | 596,046 | 44,888 | (504,659) | 462,707 | 30,035 | 492,742 | ||
Balance at Dec. 31, 2009 | 329,402 | 617,938 | 322,181 | (438,004) | 831,517 | 38,970 | 870,487 | ||
Net income | 72,060 | 72,060 | 3,306 | 75,366 | |||||
Other comprehensive income, net of tax: | |||||||||
Foreign currency translation | (36,452) | (36,452) | 552 | (35,900) | |||||
Cash flow hedges | (2,453) | (2,453) | (2,453) | ||||||
Pension and other postretirement benefits | (5,113) | (5,113) | (2) | (5,115) | |||||
Comprehensive Income | 28,042 | 3,856 | 31,898 | ||||||
Issuance of registered shares upon exercise of stock options | 134 | 935 | 1,069 | 1,069 | |||||
Issuance of registered shares upon vesting of restricted awards | 2 | (2) | |||||||
Distributions to noncontrolling interests | (4,818) | (4,818) | |||||||
Share-based compensation expense - stock options and restricted awards | 2,343 | 2,343 | 2,343 | ||||||
Excess tax benefit related to share-based compensation | 2 | 2 | 2 | ||||||
Balance at Mar. 31, 2010 | $329,538 | $621,216 | $394,241 | ($482,022) | $862,973 | $38,008 | $900,981 |
CONSOLIDATED STATEMENT OF CASH
CONSOLIDATED STATEMENT OF CASH FLOWS (USD $) | ||
In Thousands | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income | $75,366 | $74,372 |
Adjustments to reconcile net income to cash flows from operating activities: | ||
Depreciation and amortization | 13,059 | 10,551 |
Curtailment gain on U.K. defined benefit pension plan | (20,086) | |
Net asbestos-related (gain)/provision | (747) | 1,750 |
Share-based compensation expense - stock options and restricted awards | 4,602 | 5,354 |
Excess tax benefit related to share-based compensation | (2) | |
Deferred income taxes/(credits) | 8,605 | (149) |
Loss on sale of assets | 76 | 10 |
Equity in the net earnings of partially-owned affiliates, net of dividends | (6,403) | (6,754) |
Other noncash items | (46) | |
Changes in assets and liabilities: | ||
Decrease in receivables | 8,492 | 28,662 |
Net change in contracts in process and billings in excess of costs and estimated earnings on uncompleted contracts | 6,794 | (24,855) |
Decrease in accounts payable and accrued expenses | (76,294) | (43,674) |
Net change in other assets and liabilities | (17,679) | (3,082) |
Net cash (used in)/provided by operating activities | (4,217) | 42,139 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Payment related to acquisition of business | (1,221) | |
Change in restricted cash | 2,630 | (307) |
Capital expenditures | (6,238) | (14,643) |
Proceeds from sale of assets | 41 | 77 |
Increase in short-term investments | (27) | |
Net cash used in investing activities | (4,788) | (14,900) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Repurchase and retirement of shares | (28) | |
Distributions to noncontrolling interests | (4,818) | (21) |
Proceeds from share purchase warrants exercised | 9 | |
Proceeds from stock options exercised | 2,034 | |
Excess tax benefit related to share-based compensation | 2 | |
Proceeds from issuance of short-term debt | 2,197 | 2,925 |
Proceeds from issuance of long-term debt | 37 | |
Repayment of debt and capital lease obligations | (3,348) | (3,933) |
Net cash used in financing activities | (3,933) | (1,011) |
Effect of exchange rate changes on cash and cash equivalents | (30,532) | (21,616) |
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS | (43,470) | 4,612 |
Cash and cash equivalents at beginning of year | 997,158 | 773,163 |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $953,688 | $777,775 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | |
3 Months Ended
Mar. 31, 2010 | |
Summary of Significant Accounting Policies | 1. Summary of Significant Accounting Policies Basis of Presentation The fiscal year of Foster Wheeler AG ends on December 31 of each calendar year. Foster Wheeler AG's fiscal quarters end on the last day of March, June and September. Foster Wheeler AG's consolidated financial results for the first fiscal three months represent the period from January 1, 2010 through March 31, 2010 and December 27, 2008 through March 31, 2009 in fiscal years 2010 and 2009, respectively. Please refer to Note 1 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 ("2009 Form 10-K"), filed with the Securities and Exchange Commission on February 25, 2010, for further information on our fiscal year end and related change of country of domicile from Bermuda to Switzerland in February 2009. As part of our change of country of domicile, we cancelled our common shares and issued registered shares. In January 2010, we relocated our principal executive offices to Geneva, Switzerland. The consolidated financial results include our U.S. operations, which have a fiscal year that is the 52- or 53- week annual accounting period ending the last Friday in December, and our non-U.S. operations, which have a fiscal year ending December 31. We have evaluated all subsequent events for adjustment to or disclosure in these consolidated financial statements through the date of issuance of these consolidated financial statements. The accompanying consolidated financial statements are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments only consisted of normal recurring items. Interim results are not necessarily indicative of results for a full year. The financial statements and notes are presented in accordance with the requirements of Form 10-Q and do not contain certain information included in our 2009 Form 10-K. The consolidated balance sheet as of December 31, 2009 was derived from the audited financial statements included in our 2009 Form 10-K, but does not include all disclosures required by accounting principles generally accepted in the United States of America for annual consolidated financial statements. Certain prior period amounts have been reclassified to conform to the current period presentation. Principles of Consolidation The consolidated financial statements include the accounts of Foster Wheeler AG and all significant U.S. and non-U.S. subsidiaries as well as certain entities in which we have a controlling interest. Intercompany transactions and balances have been eliminated. In June 2009, the Financial Accounting Standards Board ("FASB") issued authoritative guidance to amend the manner in which entities evaluate whether consolidation is required for variable interest entities ("VIE"). The model for determining which enterprise has a controlling financial interest and is the primary beneficiary of a VIE has changed under the new guidance. Furthermore, the new guidance requires an ongoing reconsideration of the primary beneficiary and also amends the events that trigger a reassessment of whether an entity is a VIE. |
Business Combinations
Business Combinations | |
3 Months Ended
Mar. 31, 2010 | |
Business Combinations | 2. Business Combinations In October 2009, we acquired substantially all of the assets of the Houston operations of Atlas Engineering, Inc., a privately held company, for a purchase price of approximately $21,000. The purchase price may be increased by an estimated $12,000 for contingent consideration depending on the acquired company's EBITDA, as defined in the purchase agreement for this transaction, over the first three years after the closing date. We have recorded a liability of $9,318 on the consolidated balance sheet for the estimated fair value of the contingent consideration. The acquired company is active in upstream oil and gas engineering services. The purchase price allocation and pro forma information for this acquisition were not material to our consolidated financial statements. This company's financial results are included within our Global EC Group business segment. In April 2009, we acquired substantially all of the assets of the offshore engineering division of OPE Holdings Ltd., a Canadian company that is listed on the TSX Venture Exchange and which we refer to as OPE, for a purchase price of approximately $8,900. The purchase price may be increased by $500 if the acquired company meets certain performance targets during the first year after the closing date. The acquired company is active in upstream oil and gas engineering services. The purchase price allocation and pro forma information for this acquisition were not material to our consolidated financial statements. This company's financial results are included within our Global EC Group business segment. |
Investments
Investments | |
3 Months Ended
Mar. 31, 2010 | |
Investments | 3. Investments Investment in Unconsolidated Affiliates We own a noncontrolling interest in two electric power generation projects, one waste-to-energy project and one wind farm project in Italy and in a refinery/electric power generation project in Chile. We also own a noncontrolling interest in a project based in Italy which generates earnings from royalty payments linked to the price of natural gas. Based on the outstanding equity interests of these entities, we own 42% of each of the two electric power generation projects in Italy, 39% of the waste-to-energy project and 50% of the wind farm project. We have a notional 85% equity interest in the project in Chile; however, we are not the primary beneficiary as a result of participating rights held by the minority shareholder. In determining that we are not the primary beneficiary, we considered the activities of the project that most significantly impact the project's economic performance. We account for these investments in Italy and Chile under the equity method. The following is summarized financial information for these entities (each as a whole) in which we have an equity interest: March 31, 2010 December 31, 2009 Italy Based Projects Chile Based Project Italy Based Projects Chile Based Project Balance Sheet Data : Current assets $ 289,451 $ 46,766 $ 325,688 $ 46,311 Other assets (primarily buildings and equipment) 601,464 124,990 644,344 127,393 Current liabilities 65,587 41,828 99,111 34,982 Other liabilities (primarily long-term debt) 489,367 56,214 515,424 63,109 Net assets 335,961 73,714 355,497 75,613 Fiscal Three Months Ended March 31, 2010 March 31, 2009 Italy Based Projects Chile Based Project Italy Based Projects Chile Based Project Income Statement Data: Total revenues $ 99,638 $ 10,623 $ 104,074 $ 17,812 Gross profit 18,977 4,487 13,154 10,414 Income before income taxes 13,903 4,171 9,983 8,316 Net earnings 7,912 3,462 5,221 6,902 Our equity in the net earnings of these unconsolidated affiliates, which is recorded within other income, net on the consolidated statement of operations, totaled $6,289 and $6,252 for the fiscal three months ended March 31, 2010 and 2009, respectively. Our investment in these unconsolidated affiliates, which is recorded within investments in and advances to unconsolidated affiliates on the consolidated balance sheet, totaled $210,616 and $215,280 as of March 31, 2010 and December 31, 2009, respectively. There were no distributions received in the fiscal three months ended March 31, 2010 and 2009. We have guaranteed certain performance obligations of the Chile based project. We have a contingent obligation, which is measured annually based on the operating results of the Chile based project for the preceding year and is shared 50/50 with our minority interest partner. We did not have a current payment obligation under th |
Intangible Assets
Intangible Assets | |
3 Months Ended
Mar. 31, 2010 | |
Intangible Assets | 4. Intangible Assets We have tracked accumulated goodwill impairments since December 29, 2001, the first day of fiscal year 2002 and our date of adoption of the accounting guidelines within FASB ASC 350-20. Net carrying amount of goodwill by geographic region for our reporting units in our Global EC Group and Global Power Group were as follows: Global EC Group Global Power Group March 31, 2010 December 31, 2009 March 31, 2010 December 31, 2009 U.S. $ 36,656 $ 35,436 $ - $ - Asia 1,049 1,012 - - Europe - - 48,920 52,254 Total $ 37,705 $ 36,448 $ 48,920 $ 52,254 The following table details amounts relating to our identifiable intangible assets: March 31, 2010 December 31, 2009 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Patents $ 39,002 $ (25,472) $ 13,530 $ 39,304 $ (24,983) $ 14,321 Trademarks 63,215 (24,981) 38,234 63,676 (24,487) 39,189 Customer relationships, pipeline and backlog 21,937 (3,210) 18,727 21,934 (2,415) 19,519 Total $ 124,154 $ (53,663) $ 70,491 $ 124,914 $ (51,885) $ 73,029 As of March 31, 2010, the net carrying amounts of our identifiable intangible assets were $51,556 for our Global Power Group and $18,935 for our Global EC Group. Amortization expense related to identifiable intangible assets is recorded within cost of operating revenues on the consolidated statement of operations and totaled $1,778 and $1,229 for the fiscal three months ended March 31, 2010 and 2009, respectively. The following table shows the approximate full year amortization expense in each of the fiscal years 2010 through 2014. Fiscal Years: ApproximateAmortizationExpense 2010 $ 6,700 2011 6,500 2012 6,300 2013 5,600 2014 5,300 |
Long-term Debt
Long-term Debt | |
3 Months Ended
Mar. 31, 2010 | |
Long-term Debt | 5. Long-term Debt The following table shows the components of our long-term debt: March 31, 2010 December 31, 2009 Current Long-term Total Current Long-term Total Capital Lease Obligations $ 1,471 $ 60,162 $ 61,633 $ 1,492 $ 65,327 $ 66,819 Special-Purpose Limited Recourse Project Debt: Camden County Energy Recovery Associates 21,865 - 21,865 21,865 - 21,865 FW Power S.r.l. 6,951 89,513 96,464 7,428 95,661 103,089 Energia Holdings, LLC 3,187 13,239 16,426 3,187 13,239 16,426 Subordinated Robbins Facility Exit Funding Obligations: 1999C Bonds at 7.25% interest, due October 15, 2024 - 1,283 1,283 - 1,283 1,283 Term Loan in China at 4.78% interest, due February 25, 2011 2,198 - 2,198 - - - Term Loan in China at 4.374% interest, due January 8, 2010 - - - 2,930 - 2,930 Other - - - 28 - 28 Total $ 35,672 $ 164,197 $199,869 $ 36,930 $ 175,510 $ 212,440 U.S. Senior Credit Agreement In October 2006, we executed a five-year U.S. senior credit agreement to be used for our U.S. and non-U.S. operations. The senior credit agreement, as amended in May 2007, provides for a facility of $450,000, and includes a provision which permits future incremental increases of up to $100,000 in total availability under the facility. We can issue up to $450,000 under the letter of credit facility. A portion of the letters of credit issued under the U.S. senior credit agreement have performance pricing that is decreased (or increased) as a result of improvements (or reductions) in the credit rating of the U.S. senior credit agreement as reported by Moody's Investors Service and/or Standard Poor's ("SP"). We also have the option to use up to $100,000 of the $450,000 for revolving borrowings at a rate equal to adjusted LIBOR plus 1.50%, subject also to the performance pricing noted above. As a result of the improvement in our SP credit rating in March 2007, we achieved, and continue to maintain, the lowest possible pricing under the performance pricing provisions of our U.S. senior credit agreement. The assets and/or stock of certain of our U.S. and non-U.S. subsidiaries collateralize our obligations under our U.S. senior credit agreement. Our U.S. senior credit agreement contains various customary restrictive covenants that generally limit our ability to, among other things, incur additional indebtedness or guarantees, create liens or other encumbrances on property, sell or transfer certain property and thereafter rent or lease such property for substantially the same purposes as the property sold or transferred, enter into a merger or similar transaction, make investments, declare dividends or make other restricted payments, enter into agreements with affiliates that are not on an arms' length basis, enter into any agreement that limits our ability to create liens or the ability of a subsidiary to pay dividends, engage in any new lines of business, with |
Pensions and Other Postretireme
Pensions and Other Postretirement Benefits | |
3 Months Ended
Mar. 31, 2010 | |
Pensions and Other Postretirement Benefits | 6. Pensions and Other Postretirement Benefits We have defined benefit pension plans in the United States, the United Kingdom, France, Canada and Finland, and we have other postretirement benefit plans for health care and life insurance benefits in the United States and Canada. Defined Benefit Pension Plans Our defined benefit pension plans cover certain full-time employees. Under the plans, retirement benefits are primarily a function of both years of service and level of compensation. The U.S. pension plans, which are frozen to new entrants and additional benefit accruals, and the Canadian, Finnish and French plans are non-contributory. The U.K. plan, which is closed to new entrants, is contributory. During the fiscal first three months of 2010, we capped pensionable salary growth in the U.K. plan to a maximum of 5% and, effective March 31, 2010, we closed the plan for future defined benefit accrual. As a result of the U.K. plan closure, we recognized a curtailment gain in our statement of operations for the fiscal three months ended March 31, 2010 of approximately 13,300 (approximately $20,100 at the exchange rate in effect for the fiscal three months ended March 31, 2010). Based on the minimum statutory funding requirements for fiscal year 2010, we are not required to make mandatory contributions to our U.S. pension plans. We made mandatory and discretionary contributions totaling approximately $13,700 to our non-U.S. pension plans, which included discretionary contributions of approximately $7,800, during the fiscal three months ended March 31, 2010. Based on the minimum statutory funding requirements for fiscal year 2010, we expect to make mandatory and discretionary contributions totaling approximately $41,500 to our U.S. and non-U.S. pension plans in fiscal year 2010. Other Postretirement Benefit Plans Certain employees in the United States and Canada may become eligible for health care and life insurance benefits ("other postretirement benefits") if they qualify for and commence normal or early retirement pension benefits as defined in the U.S. and Canadian pension plans while working for us. Additionally, one of our subsidiaries in the United States also has a benefit plan, referred to as the Survivor Income Plan ("SIP"), which provides coverage for an employee's beneficiary upon the death of the employee. This plan has been closed to new entrants since 1988. The components of net periodic benefit cost/(credit) for our defined benefit pension plans and other postretirement benefit plans were as follows: Fiscal Three Months Ended March 31, 2010 March 31, 2009 Defined Benefit Pension Plans Other Postre-tirementBenefits Defined Benefit Pension Plans Other Postre-tirementBenefits United States UnitedKingdom Other Total United States UnitedKingdom Other Total Net periodic benefit cost/(credit): Service cost $ - $ 1,712 $ 165 $ 1,877 $ 34 $ - $ 1,258 $ 152 $ 1,410 $ 35 Interest cost 4,744 10,230 401 15,375 1,207 4,926 9,541 424 14,891 1,154 E |
Guarantees and Warranties
Guarantees and Warranties | |
3 Months Ended
Mar. 31, 2010 | |
Guarantees And Warranties | 7. Guarantees and Warranties We have agreed to indemnify certain third parties relating to businesses and/or assets that we previously owned and sold to such third parties. Such indemnifications relate primarily to potential environmental and tax exposures for activities conducted by us prior to the sale of such businesses and/or assets. It is not possible to predict the maximum potential amount of future payments under these or similar indemnifications due to the conditional nature of the obligations and the unique facts and circumstances involved in each particular indemnification. Maximum Carrying Amount of Liability Potential Payment March 31, 2010 December 31, 2009 Environmental indemnifications No limit $ 8,700 $ 8,800 Tax indemnifications No limit $ - $ - We also maintain contingencies for warranty expenses on certain of our long-term contracts. Generally, warranty contingencies are accrued over the life of the contract so that a sufficient balance is maintained to cover our aggregate exposure at the conclusion of the project. Fiscal Three Months Ended Warranty Liability: March 31, 2010 March 31, 2009 Balance at beginning of year $ 110,800 $ 99,400 Accruals 6,800 7,300 Settlements (3,600) (500) Adjustments to provisions (11,500) (11,300) Balance at end of period $ 102,500 $ 94,900 We are contingently liable under standby letters of credit, bank guarantees and surety bonds, totaling $960,000 and $943,100 as of March 31, 2010 and December 31, 2009, respectively, primarily for performance guarantees. These balances include the standby letters of credit issued under the U.S. senior credit agreement discussed in Note 5 and from other facilities worldwide. No material claims have been made against these guarantees, and based on our experience and current expectations, we do not anticipate any material claims. We have also guaranteed certain performance obligations in a refinery/electric power generation project based in Chile in which we hold a noncontrolling interest. See Note 3 for further information. |
Derivative Financial Instrument
Derivative Financial Instruments | |
3 Months Ended
Mar. 31, 2010 | |
Derivative Financial Instruments | 8. Derivative Financial Instruments We are exposed to certain risks relating to our ongoing business operations. The risks managed by using derivative financial instruments relate primarily to foreign currency exchange rate risk and, to a significantly lesser extent, interest rate risk. Derivative financial instruments are recognized as assets or liabilities at fair value in our consolidated balance sheet. Fair Values of Derivative Financial Instruments Asset Derivatives Liability Derivatives Location within Consolidated Balance Sheet March 31, 2010 December 31, 2009 Location within Consolidated Balance Sheet March 31, 2010 December 31, 2009 Derivatives designated as hedging instruments Interest rate swap contracts Other assets $ - $ - Other long-term liabilities $ 8,368 $ 6,554 Derivatives not designated as hedging instruments Foreign currency forward contracts Contracts in process or billings in excess of costs and estimated earnings on uncompleted contracts 1,774 1,174 Contracts in process or billings in excess of costs and estimated earnings on uncompleted contracts 4,765 4,934 Foreign currency forward contracts Other accounts receivable 385 470 Accounts payable 345 246 Total derivatives $ 2,159 $ 1,644 $ 13,478 $ 11,734 Foreign Currency Exchange Rate Risk We operate on a worldwide basis with substantial operations in Europe that subject us to U.S. dollar translation risk mainly relative to the Euro and British pound. Under our risk management policies we do not hedge translation risk exposure. All activities of our non-U.S. affiliates are recorded in their functional currency, which is typically the local currency in the country of domicile of the affiliate. In the ordinary course of business, our affiliates do enter into transactions in currencies other than their respective functional currencies. We seek to minimize the resulting foreign currency transaction risk by contracting for the procurement of goods and services in the same currency as the sales value of the related long-term contract. We further mitigate the risk through the use of foreign currency forward contracts. Currency Hedged Foreign Notional Amount of Notional Amount of Hedged Currency Exposure Forward Buy Contracts Forward Sell Contracts Functional Currency (bought or soldforward) (in equivalent U.S. dollars) (in equivalent U.S. dollars) (in equivalent U.S. dollars) British pound Euro $ 4,797 $ - $ 4,797 Australian dollar 11,024 4,497 6,527 Thai baht 1,860 1,860 - U.S. dollar 41,123 4,062 37,061 South African rand 2,342 - 2,342 Australian dollar British pound 536 - 536 Chilean peso Euro 134 - 134 Chinese |
Share-Based Compensation Plans
Share-Based Compensation Plans | |
3 Months Ended
Mar. 31, 2010 | |
Share-Based Compensation Plans | 9. Share-Based Compensation Plans Our share-based compensation plans include both restricted awards and stock option awards. Compensation cost for our share-based plans of $4,602 and $5,354 was charged against income for the fiscal three months ended March 31, 2010 and 2009, respectively. The related income tax benefit recognized in the consolidated statement of operations was $99 and $108 for the fiscal three months ended March 31, 2010 and 2009, respectively. We received $2,034 in cash from stock option exercises under our share-based compensation plans for the fiscal three months ended March 31, 2010. There were no option exercises under our share-based compensation plans for the fiscal three months ended March 31, 2009. As of March 31, 2010, we had $18,694 and $17,326 of total unrecognized compensation cost related to stock options and restricted awards, respectively. Those costs are expected to be recognized as expense over a weighted-average period of approximately 26.5 months. Our share-based compensation plans include a "change in control" provision, which provides for cash redemption of equity awards issued thereunder in certain limited circumstances. In accordance with Securities and Exchange Commission Accounting Series Release No. 268, "Presentation in Financial Statements of Redeemable Preferred Stocks," we present the redemption amount of these equity awards as temporary equity on the consolidated balance sheet as the equity award is amortized during the vesting period. The redemption amount represents the intrinsic value of the equity award on the grant date. In accordance with FASB ASC 480-10-S99-3A (formerly EITF Topic D-98, "Classification and Measurement of Redeemable Securities"), we do not adjust the redemption amount each reporting period unless and until it becomes probable that the equity awards will become redeemable (upon a change in control event). Upon vesting of the equity awards, we reclassify the intrinsic value of the equity awards, as determined on the grant date, to permanent equity. A reconciliation of temporary equity for the fiscal three months ended March 31, 2010 and 2009 were as follows: March 31,2010 March 31,2009 Balance at beginning of year $ 2,570 $ 7,586 Compensation cost during the period for those equity awards with intrinsic value on the grant date 2,279 2,754 Intrinsic value of equity awards vested during the period for those equity awards with intrinsic value on the grant date (20) (4,572) Balance at end of period $ 4,829 $ 5,768 Our articles of association provide for conditional capital of 63,207,957 registered shares for the issuance of shares under our share-based compensation plans, outstanding share purchase warrants and other convertible securities we may issue in the future. Conditional capital decreases upon issuance of shares in connection with the exercise of outstanding stock options or vesting of restricted stock units, with an offsetting increase to our issued share capital. As of March 31, 2010, our remaining available conditional capital was 62,135,022 shares. |
Income Taxes
Income Taxes | |
3 Months Ended
Mar. 31, 2010 | |
Income Taxes | 10. Income Taxes The tax provision for each year-to-date period is calculated by multiplying pretax income by the estimated annual effective tax rate for such period. Our effective tax rate can fluctuate significantly from period to period and may differ significantly from the U.S. federal statutory rate as a result of income taxed in various non-U.S. jurisdictions with rates different from the U.S. statutory rate, as a result of our inability to recognize a tax benefit for losses generated by certain unprofitable operations and as a result of the varying mix of income earned in the jurisdictions in which we operate. We have reduced our U.S. and certain non-U.S. tax benefits by a valuation allowance based on a consideration of all available evidence, which indicates that it is more likely than not that some or all of the deferred tax assets will not be realized. In periods when operating units subject to a valuation allowance generate pretax earnings, the corresponding reduction in the valuation allowance favorably impacts our effective tax rate. Conversely, in periods when operating units subject to a valuation allowance generate pretax losses, the corresponding increase in the valuation allowance has an unfavorable impact on our effective tax rate. Fiscal Year 2010 Our effective tax rate for the fiscal first three months of 2010 was lower than the U.S. statutory rate of 35% due principally to the net impact of the following: Income earned in tax jurisdictions with tax rates lower than the U.S. statutory rate, which is expected to contribute to an approximate 19-percentage point reduction in the effective tax rate for the full year 2010. A valuation allowance increase because we are unable to recognize a tax benefit for losses subject to valuation allowance in certain jurisdictions (primarily the United States), which is expected to contribute an approximatefive-percentagepoint increase in the effective tax rate for the full year 2010. Fiscal Year 2009 Our effective tax rate for the fiscal three months ended March 31, 2009 was lower than the U.S. statutory rate of 35% due principally to the impact of the following: Income earned in tax jurisdictions with tax rates lower than the U.S. statutory rate, which contributed to an approximate 19-percentage point reduction in the effective tax rate; and A valuation allowance increase because we were unable to recognize a tax benefit for losses subject to valuation allowance in certain jurisdictions (primarily the United States), which contributed to an approximatefive-percentage point increase in the effective tax rate. These variances were partially offset by losses in certain other jurisdictions for which no benefit was recognized (a valuation allowance is established) and other permanent differences. We evaluate, on a quarterly basis, the need for the valuation allowances against deferred tax assets in those jurisdictions in which we currently maintain a valuation allowance. Such evaluation includes a review of all available evidence, both positive and negative, in determining whether a valuation allowance is necessary. Our subsidiaries file income tax returns i |
Business Segments
Business Segments | |
3 Months Ended
Mar. 31, 2010 | |
Business Segments | 11. Business Segments We operate through two business groups: our Global EC Group and our Global Power Group. Global EC Group Our Global EC Group, which operates worldwide, designs, engineers and constructs onshore and offshore upstream oil and gas processing facilities, natural gas liquefaction facilities and receiving terminals, gas-to-liquids facilities, oil refining, chemical and petrochemical, pharmaceutical and biotechnology facilities and related infrastructure, including power generation and distribution facilities, and gasification facilities. Our Global EC Group is also involved in the design of facilities in new or developing market sectors, including carbon capture and storage, solid fuel-fired integrated gasification combined-cycle power plants, coal-to-liquids, coal-to-chemicals and biofuels. Our Global EC Group generates revenues from design, engineering, procurement and construction and project management activities pursuant to contracts spanning up to approximately four years in duration and from returns on its equity investments in various power production facilities. Our Global EC Group provides the following services: Design, engineering, project management, construction and construction management services, including the procurement of equipment, materials and services from third-party suppliers andcontractors. Environmental remediation services, together with related technical, engineering, design and regulatory services. Development, engineering, procurement, construction, ownership and operation of powergenerationfacilities, from conventional and renewable sources, and waste-to-energy facilities in Europe. Design and supply of direct-fired furnaces used in a wide range of refining, petrochemical, chemical, oil and gas processes, including fired heaters and waste heat recovery units. In addition, our Global EC Group also designs and supplies the fired heaters which form an integral part of its proprietary delayed coking and hydrogen production technologies. Global Power Group Our Global Power Group designs, manufactures and erects steam generating and auxiliary equipment for electric power generating stations and industrial facilities worldwide and owns and/or operates several cogeneration, independent power production and waste-to-energy facilities, as well as power generation facilities for the process and petrochemical industries. Our Global Power Group generates revenues from engineering activities, equipment supply, construction contracts, operating and maintenance agreements, royalties from licensing its technology, and from returns on its investments in several power production facilities. Our Global Power Group's steam generating equipment includes a full range of technologies, offering independent power producers, utilities and industrial clients high-value technology solutions for converting a wide range of fuels, such as coal, lignite, petroleum coke, oil, gas, solar, biomass and municipal solid waste, into steam, which can be used for power generation, district heating or for industrial processes. Our Global Power Group offers several other products and services related |
Litigation and Uncertainties
Litigation and Uncertainties | |
3 Months Ended
Mar. 31, 2010 | |
Litigation and Uncertainties | 12. Litigation and Uncertainties Asbestos Some of our U.S. and U.K. subsidiaries are defendants in numerous asbestos-related lawsuits and out-of-court informal claims pending in the United States and the United Kingdom. Plaintiffs claim damages for personal injury alleged to have arisen from exposure to or use of asbestos in connection with work allegedly performed by our subsidiaries during the 1970s and earlier. United States A summary of our U.S. claim activity is as follows: Number of Claims Fiscal Three Months Ended March 31, 2010 March 31, 2009 Open claims at beginning of year 125,100 130,760 New claims 1,210 1,300 Claims resolved (880) (1,050) Open claims at end of period 125,430 131,010 We had the following U.S. asbestos-related assets and liabilities recorded on our consolidated balance sheet as of the dates set forth below. Total U.S. asbestos-related liabilities are estimated through the fiscal first quarter of 2025. Although it is likely that claims will continue to be filed after that date, the uncertainties inherent in any long-term forecast prevent us from making reliable estimates of the indemnity and defense costs that might be incurred after that date. March 31, 2010 December 31, 2009 Asbestos-related assets recorded within: Accounts and notes receivable-other $ 65,400 $ 65,600 Asbestos-related insurance recovery receivable 203,700 208,400 Total asbestos-related assets $ 269,100 $ 274,000 Asbestos-related liabilities recorded within: Accrued expenses $ 58,600 $ 59,800 Asbestos-related liability 305,900 316,700 Total asbestos-related liabilities $ 364,500 $ 376,500 Since fiscal year-end 2004, we have worked with Analysis, Research Planning Corporation, or ARPC, nationally recognized consultants in the United States with respect to projecting asbestos liabilities, to estimate the amount of asbestos-related indemnity and defense costs at year-end for the next 15 years. Based on its review of fiscal year 2009 activity, ARPC recommended that the assumptions used to estimate our future asbestos liability be updated as of fiscal year end 2009. Accordingly, we developed a revised estimate of our aggregate indemnity and defense costs through fiscal year end 2024 considering the advice of ARPC. In fiscal year 2009, we revalued our liability for asbestos indemnity and defense costs through fiscal year end 2024 to $376,500, which brought our liability to a level consistent with ARPC's reasonable best estimate. Our estimated asbestos liability decreased during the fiscal three months ended March 31, 2010 as a result of payments totaling approximately $15,500, partially offset by an increase of $3,500 related to the rolling 15-year asbestos-related liability estimate. The amount paid for asbestos litigation, defense and case resolution was $15,500 and $20,600 for the fiscal first three months of 2010 and 2009, respectively. During the fiscal first three months of 2010 and 2009, we had net cash outflows of approximately $6,400 in both periods, resulting from asbestos liability inde |