Foster Wheeler (FWLT) 10-Q 2011 Q1 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission File Number 001-31305

FOSTER WHEELER AG

(Exact name of registrant as specified in its charter)

Switzerland (State or other jurisdiction of incorporation or organization)	98-0607469 (I.R.S. Employer Identification No.)
80 Rue de Lausanne CH 1202 Geneva, Switzerland (Address of principal executive offices)	1202 (Zip Code)

41 22 741 8000
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yesþ Noo

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesþ Noo

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filerþ Accelerated filero Non-accelerated filero(Do not check if a smaller reporting company) Smaller reporting companyo

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 123,907,971 registered shares (CHF 3.00 par value) were outstanding as of April 22, 2011.

FOSTER WHEELER AG
INDEX

Part I FINANCIAL INFORMATION
Item 1 — Financial Statements (Unaudited):	3
Consolidated Statement of Operations for the Fiscal Three Months Ended March 31, 2011 and 2010	3
Consolidated Balance Sheet as of March 31, 2011 and December 31, 2010	4
Consolidated Statement of Changes in Equity for the Fiscal Three Months Ended March 31, 2011 and 2010	5
Consolidated Statement of Cash Flows for the Fiscal Three Months Ended March 31, 2011 and 2010	6
Notes to Consolidated Financial Statements	7
Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3 — Quantitative and Qualitative Disclosures about Market Risk	50
Item 4 — Controls and Procedures	50
Part II OTHER INFORMATION
Item 1 — Legal Proceedings	51
Item 1A — Risk Factors	51
Item 2 — Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3 — Defaults Upon Senior Securities	51
Item 5 — Other Information	51
Item 6 — Exhibits	52
Signatures	53
EX-10.1
EX-10.2
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FOSTER WHEELER AG AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands of dollars, except per share amounts)
(unaudited)

	Fiscal Three Months Ended March 31,
	2011			2010
Operating revenues	$	1,036,252		$	945,573
Cost of operating revenues		936,997			773,491
Contract profit		99,255			172,082
Selling, general and administrative expenses		73,841			70,305
Other income, net		(14,266	)		(8,332	)
Other deductions, net		6,117			11,688
Interest income		(3,275	)		(2,359	)
Interest expense		3,879			4,551
Net asbestos-related provision/(gain)		400			(747	)
Income before income taxes		32,559			96,976
Provision for income taxes		7,283			21,610
Net income		25,276			75,366
Less: Net income attributable to noncontrolling interests		2,305			3,306
Net income attributable to Foster Wheeler AG	$	22,971		$	72,060
Earnings per share (see Note 1):
Basic	$	0.18		$	0.57
Diluted	$	0.18		$	0.56

See notes to consolidated financial statements.

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FOSTER WHEELER AG AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET
(in thousands of dollars, except share data and per share amounts)
(unaudited)

	March 31, 2011			December 31, 2010
ASSETS
Current Assets:
Cash and cash equivalents	$	1,102,823		$	1,057,163
Accounts and notes receivable, net:
Trade		517,676			577,400
Other		107,453			96,758
Contracts in process		171,875			165,389
Prepaid, deferred and refundable income taxes		64,132			59,977
Other current assets		43,688			37,813
Total current assets		2,007,647			1,994,500
Land, buildings and equipment, net		372,423			362,087
Restricted cash		33,259			27,502
Notes and accounts receivable — long-term		5,940			2,648
Investments in and advances to unconsolidated affiliates		232,431			217,071
Goodwill		91,765			88,917
Other intangible assets, net		65,303			66,070
Asbestos-related insurance recovery receivable		186,776			194,570
Other assets		83,697			84,078
Deferred tax assets		27,594			23,034
TOTAL ASSETS	$	3,106,835		$	3,060,477
LIABILITIES, TEMPORARY EQUITY AND EQUITY
Current Liabilities:
Current installments on long-term debt	$	12,520		$	11,996
Accounts payable		252,085			239,071
Accrued expenses		210,980			240,894
Billings in excess of costs and estimated earnings on uncompleted contracts		717,515			684,090
Income taxes payable		32,196			34,623
Total current liabilities		1,225,296			1,210,674
Long-term debt		158,060			152,574
Deferred tax liabilities		43,466			42,179
Pension, postretirement and other employee benefits		162,771			166,362
Asbestos-related liability		300,032			307,619
Other long-term liabilities		169,263			160,785
Commitments and contingencies
TOTAL LIABILITIES		2,058,888			2,040,193
Temporary Equity:
Non-vested share-based compensation awards subject to redemption		6,005			4,935
TOTAL TEMPORARY EQUITY		6,005			4,935
Equity:
Registered shares:
CHF 3.00 par value; authorized: 192,576,583 shares and 192,156,579 shares, respectively; conditionally authorized: 60,255,245 shares and 60,675,249 shares, respectively; issued: 129,368,626 shares and 128,948,622 shares, respectively; outstanding: 124,196,012 shares and 124,635,912 shares, respectively.		335,391			334,052
Paid-in capital		672,013			659,739
Retained earnings		560,559			537,588
Accumulated other comprehensive loss		(439,190	)		(464,504	)
Treasury shares (outstanding: 5,172,614 shares and 4,312,710 shares, respectively)		(128,398	)		(99,182	)
TOTAL FOSTER WHEELER AG SHAREHOLDERS’ EQUITY		1,000,375			967,693
Noncontrolling interests		41,567			47,656
TOTAL EQUITY		1,041,942			1,015,349
TOTAL LIABILITIES, TEMPORARY EQUITY AND EQUITY	$	3,106,835		$	3,060,477

See notes to consolidated financial statements.

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FOSTER WHEELER AG AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(in thousands of dollars)
(unaudited)

								Accumulated						Total Foster
								Other						Wheeler AG
	Registered		Paid-in			Retained		Comprehensive			Treasury			Shareholders’			Noncontrolling
	Shares		Capital			Earnings		Loss			Shares			Equity			Interests			Total Equity
Fiscal Three Months Ended March 31, 2010:
Balance at December 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 share units		2		(2	)		—		—			—			—			—			—
Distributions to noncontrolling interests		—		—			—		—			—			—			(4,818	)		(4,818	)
Share-based compensation expense -stock options and restricted share units		—		2,343			—		—			—			2,343			—			2,343
Excess tax benefit related to share-based compensation		—		2			—		—			—			2			—			2
Balance at March 31, 2010	$	329,538	$	621,216		$	394,241	$	(482,022	)	$	—		$	862,973		$	38,008		$	900,981
Fiscal Three Months Ended March 31, 2011:
Balance at December 31, 2010	$	334,052	$	659,739		$	537,588	$	(464,504	)	$	(99,182	)	$	967,693		$	47,656		$	1,015,349
Net income		—		—			22,971		—			—			22,971			2,305			25,276
Other comprehensive income, net of tax:
Foreign currency translation		—		—			—		21,076			—			21,076			154			21,230
Cash flow hedges		—		—			—		1,972			—			1,972			—			1,972
Pension and other postretirement benefits		—		—			—		2,266			—			2,266			(1	)		2,265
Comprehensive Income															48,285			2,458			50,743
Issuance of registered shares upon exercise of stock options		1,190		8,619			—		—			—			9,809			—			9,809
Issuance of registered shares upon vesting of restricted share units		149		(149	)		—		—			—			—			—			—
Distributions to noncontrolling interests		—		—			—		—			—			—			(8,672	)		(8,672	)
Capital contribution from noncontrolling interests		—		—			—		—			—			—			125			125
Share-based compensation expense -stock options and restricted share units		—		3,800			—		—			—			3,800			—			3,800
Excess tax benefit related to share-based compensation		—		4			—		—			—			4			—			4
Repurchase of registered shares		—		—			—		—			(29,216	)		(29,216	)		—			(29,216	)
Balance at March 31, 2011	$	335,391	$	672,013		$	560,559	$	(439,190	)	$	(128,398	)	$	1,000,375		$	41,567		$	1,041,942

See notes to consolidated financial statements.

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FOSTER WHEELER AG AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands of dollars)
(unaudited)

	Fiscal Three Months Ended March 31,
	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	25,276		$	75,366
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization		12,671			13,059
Gain on curtailment of defined benefit pension plans		—			(20,086	)
Net asbestos-related provision/(gain)		400			(747	)
Share-based compensation expense-stock options and restricted awards		4,871			4,602
Excess tax benefit related to share-based compensation		(4	)		(2	)
Deferred income tax (benefit)/provision		(10,638	)		8,605
(Gain)/loss on sale of assets		(616	)		76
Equity in the net earnings of partially-owned affiliates, net of dividends		(2,619	)		(6,403	)
Changes in assets and liabilities:
Decrease in receivables		65,912			8,492
Net change in contracts in process and billings in excess of costs and estimated earnings on uncompleted contracts		8,853			6,794
Decrease in accounts payable and accrued expenses		(19,811	)		(76,294	)
Net change in other assets and liabilities		(17,792	)		(17,679	)
Net cash provided by/(used in) operating activities		66,503			(4,217	)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments related to acquisition of businesses, net of cash acquired		—			(1,221	)
Change in restricted cash		(4,862	)		2,630
Capital expenditures		(11,530	)		(6,238	)
Proceeds from sale of assets		813			41
Net cash used in investing activities		(15,579	)		(4,788	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of shares		(29,216	)		—
Distributions to noncontrolling interests		(8,672	)		(4,818	)
Proceeds from capital contribution from noncontrolling interests		125			—
Proceeds from stock options exercised		9,101			2,034
Excess tax benefit related to share-based compensation		4			2
Proceeds from issuance of short-term debt		—			2,197
Repayment of debt and capital lease obligations		(551	)		(3,348	)
Net cash used in financing activities		(29,209	)		(3,933	)
Effect of exchange rate changes on cash and cash equivalents		23,945			(30,532	)
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		45,660			(43,470	)
Cash and cash equivalents at beginning of year		1,057,163			997,158
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	1,102,823		$	953,688

See notes to consolidated financial statements.

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FOSTER WHEELER AG AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands of dollars, except share data and per share amounts)
(unaudited)

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 days of March, June and September. The fiscal years of our non-U.S. operations are the same as the parent’s. The fiscal year of our U.S. operations is the 52- or 53-week annual accounting period ending on the last Friday in December.

     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 consolidated financial statements and notes are presented in accordance with the requirements of Form 10-Q and do not contain certain information included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010 (“2010 Form 10-K”), filed with the Securities and Exchange Commission on February 28, 2011. The consolidated balance sheet as of December 31, 2010 was derived from the audited financial statements included in our 2010 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.

     Use of Estimates— The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. Changes in estimates are reflected in the periods in which they become known. Significant estimates are used in accounting for long-term contracts including estimates of total costs, progress toward completion and customer and vendor claims, employee benefit plan obligations and share-based compensation plans. In addition, we also use estimates when accounting for uncertain tax positions and deferred taxes, asbestos liabilities and expected recoveries and when assessing goodwill for impairment, among others.

     Revenue Recognition on Long-Term Contracts— Revenues and profits on long-term contracts are recorded under the percentage-of-completion method.

     Progress towards completion on fixed-price contracts is measured based on physical completion of individual tasks for all contracts with a value of $5,000 or greater. For contracts with a value less than $5,000, progress toward completion is measured based on the ratio of costs incurred to total estimated contract costs (the cost-to-cost method).

     Progress towards completion on cost-reimbursable contracts is measured based on the ratio of quantities expended to total forecasted quantities, typically man-hours. Incentives are also recognized on a percentage-of-completion basis when the realization of an incentive is assessed as probable. We include flow-through costs consisting of materials, equipment or subcontractor services as both operating revenues and cost of operating revenues on cost-reimbursable contracts when we have overall responsibility as the contractor for the engineering specifications and procurement or procurement services for such costs. There is no contract profit impact of flow-through costs as they are included in both operating revenues and cost of operating revenues.

     Contracts in process are stated at cost, increased for profits recorded on the completed effort, less billings to the customer and progress payments on uncompleted contracts. A full provision for loss contracts is made at the time the loss becomes probable regardless of the stage of completion.

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     At any point, we have numerous contracts in progress, all of which are at various stages of completion. Accounting for revenues and profits on long-term contracts requires estimates of total estimated contract costs and estimates of progress toward completion to determine the extent of revenue and profit recognition. These estimates may be revised as additional information becomes available or as specific project circumstances change. We review all of our material contracts on a monthly basis and revise our estimates as appropriate for developments such as earning project incentive bonuses, incurring or expecting to incur contractual liquidated damages for performance or schedule issues, providing services and purchasing third-party materials and equipment at costs differing from those previously estimated and testing completed facilities, which, in turn, eliminates or confirms completion and warranty-related costs. Project incentives are recognized when it is probable they will be earned. Project incentives are frequently tied to cost, schedule and/or safety targets and, therefore, tend to be earned late in a project’s life cycle.

     Changes in estimated final contract revenues and costs can either increase or decrease the final estimated contract profit. In the period in which a change in estimate is recognized, the cumulative impact of that change is recorded based on progress achieved through the period of change. The following table summarizes the number of separate projects that experienced final estimated contract profit revisions with an impact on contract profit in excess of $1,000 relating to the revaluation of work performed in prior periods:

	Fiscal Three Months Ended March 31,
	2011			2010
Number of separate projects		7			11
Net (decrease)/increase in contract profit from the regular revaluation of final estimated contract profit revisions	$	(4,600	)	$	13,100

     The changes in final estimated contract profit revisions during the fiscal three months ended March 31, 2011 included the impact of two out-of-period corrections for reductions of final estimated profit totaling $7,800, which included final estimated profit reductions in our Global E&C Group and our Global Power Group of $3,200 and $4,600, respectively. The corrections were recorded in the current period as they were not material to previously issued financial statements, nor are they expected to be material to the full year 2011 financial statements.

     Please see Note 11 for further information related to changes in final estimated contract profit and the impact on business segment results.

     Claims are amounts in excess of the agreed contract price (or amounts not included in the original contract price) that we seek to collect from customers or others for delays, errors in specifications and designs, contract terminations, disputed or unapproved change orders as to both scope and price or other causes of unanticipated additional costs. We record claims as additional contract revenue if it is probable that the claims will result in additional contract revenue and if the amount can be reliably estimated. These two requirements are satisfied by the existence of all of the following conditions: the contract or other evidence provides a legal basis for the claim; additional costs are caused by circumstances that were unforeseen at the contract date and are not the result of deficiencies in our performance; costs associated with the claim are identifiable or otherwise determinable and are reasonable in view of the work performed; and the evidence supporting the claim is objective and verifiable. If such requirements are met, revenue from a claim may be recorded only to the extent that contract costs relating to the claim have been incurred. Costs attributable to claims are treated as costs of contract performance as incurred and are recorded in contracts in process. Our consolidated financial statements included the following regarding commercial claims:

	March 31, 2011		December 31, 2010
Assumed recovery of commercial claims	$	6,500	$	7,300
Claims yet to be incurred	$	—	$	—

     In certain circumstances, we may defer pre-contract costs when it is probable that these costs will be recovered under a future contract. Such deferred costs would then be included in contract costs upon execution of the anticipated contract. Deferred pre-contract costs were immaterial as of March 31, 2011 and December 31, 2010.

     Certain special-purpose subsidiaries in our Global Power Group business segment are reimbursed by customers for their costs of operating certain facilities over the lives of the corresponding service contracts. Depending on the specific legal rights and obligations under these arrangements, in some cases those reimbursements are treated as operating revenues at gross value and other cases as a reduction of cost.

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     Trade Accounts Receivable— Trade accounts receivable represent amounts billed to customers. In accordance with terms under our long-term contracts, our customers may withhold certain percentages of such billings until completion and acceptance of the work performed, which we refer to as retention receivables. Final payment of retention receivables might not be received within a one-year period. In conformity with industry practice, however, the full amount of accounts receivable, including such amounts withheld, are included in current assets on the consolidated balance sheet. We have not recorded a provision for the outstanding retention receivable balances as of March 31, 2011 and December 31, 2010.

     Variable Interest Entities— We sometimes form separate legal entities such as corporations, partnerships and limited liability companies in connection with the execution of a single contract or project. Upon formation of each separate legal entity, we perform an evaluation to determine whether the new entity is a VIE, and whether we are the primary beneficiary of the new entity, which would require us to consolidate the new entity in our financial results. We reassess our initial determination on whether the entity is a VIE upon the occurrence of certain events and whether we are the primary beneficiary as outlined in current accounting guidelines. If the entity is not a VIE, we determine the accounting for the entity under the voting interest accounting guidelines.

     An entity is determined to be a VIE if either (a) the total equity investment is not sufficient for the entity to finance its own activities without additional subordinated financial support, (b) characteristics of a controlling financial interest are missing (such as the ability to make decisions through voting or other rights or the obligation to absorb losses or the right to receive benefits), or (c) the voting rights of the equity holders are not proportional to their obligations to absorb losses of the entity and/or their rights to receive benefits 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.

     As of March 31, 2011 and December 31, 2010, we participated in certain entities determined to be VIEs, including a gas-fired cogeneration facility in Martinez, California, a waste-to-energy facility in Camden, New Jersey and a refinery/electric power generation project in Chile. We consolidate the operations of both the Martinez and Camden projects while we record our participation in the Chile based project on the equity method of accounting.

     Please see Note 3 for further information regarding our participation in these projects.

     Fair Value Measurements— Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial Accounting Standards Board Accounting Standards Codification, or FASB ASC, 820-10 defines fair value, establishes a fair value hierarchy that prioritizes the inputs used to measure fair value and provides guidance on required disclosures about fair value measurements. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

     Our financial assets and liabilities that are recorded at fair value on a recurring basis consist primarily of the assets or liabilities arising from derivative financial instruments and defined benefit pension plan assets. See Note 8 for further information regarding our derivative financial instruments.

     The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate fair value:

     Financial instruments valued independent of the fair value hierarchy:

• Cash, Cash Equivalents and Restricted Cash — The carrying value of our cash, cash equivalents and restricted cash approximates fair value because of the demand nature of many of our deposits or short-term maturity of these instruments.

     Financial instruments valued within the fair value hierarchy:

• Long-term Debt — We estimate the fair value of our long-term debt (including current installments) based on the quoted market prices for the same or similar issues or on the current rates offered for debt of the same remaining maturities using level 2 inputs.

• Foreign Currency Forward Contracts — We estimate the fair value of foreign currency forward contracts by obtaining quotes from financial institutions or market transactions in either the listed or over-the-counter markets, which we further corroborate with observable market data using level 2 inputs.

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• Interest Rate Swaps — We estimate the fair value of our interest rate swaps based on quotes obtained from financial institutions, which we further corroborate with observable market data using level 2 inputs.

• Defined Benefit Pension Plan Assets — In accordance with current accounting guidance, our valuations include the use of net asset values for commingled fund assets. For other defined benefit pension plan assets, we estimate the fair value at each fiscal year end based on quotes obtained from financial institutions. We further corroborate the above valuations with observable market data using level 1 and 2 inputs.

     Retirement of Shares under Share Repurchase Program— On September 12, 2008, we announced a share repurchase program pursuant to which our Board of Directors authorized the repurchase of up to $750,000 of our outstanding shares and the designation of the repurchased shares for cancellation. On November 4, 2010, our Board of Directors proposed an increase to our share repurchase program of $335,000 and the designation of the repurchased shares for cancellation, which was approved by our shareholders at an extraordinary general meeting on February 24, 2011.

     Under Swiss law, the cancellation of shares previously repurchased under our share repurchase program must be approved by our shareholders. Repurchased shares remain as treasury shares on our balance sheet until cancellation. We obtained specific shareholder approval for the cancellation of all treasury shares as of December 31, 2010 and amended our Articles of Association to reduce our share capital accordingly at our 2011 annual general meeting of shareholders on May 3, 2011. All shares acquired after December 31, 2010 will remain as treasury shares until shareholder approval for the cancellation is granted at a future general meeting of shareholders. Based on the aggregate share repurchases under our program through March 31, 2011, we are authorized to repurchase up to an additional $471,392 of our outstanding shares.

     Any repurchases will be made at our discretion in compliance with applicable securities laws and other legal requirements and will depend on a variety of factors, including market conditions, share price and other factors. The program does not obligate us to acquire any particular number of shares. The program has no expiration date and may be suspended or discontinued at any time.

     All treasury shares are carried at cost on the consolidated balance sheet until the cancellation of the shares has been approved by our shareholders and the cancellation is registered with the commercial register of the Canton of Zug in Switzerland. Upon the effectiveness of the cancellation of the shares, the cost of the shares cancelled will be removed from treasury shares, on the consolidated balance sheet, the par value of the cancelled shares will be removed from registered shares, on the consolidated balance sheet, and the excess of the cost of the treasury shares above par value will be removed from paid-in capital, on the consolidated balance sheet.

     Once repurchased, treasury shares are no longer considered outstanding, which results in a reduction to the weighted-average number of shares outstanding during the reporting period when calculating earnings per share, as described below.

     Earnings per Share— Basic earnings per share is computed by dividing net income attributable to Foster Wheeler AG by the weighted-average number of shares outstanding during the reporting period.

     Diluted earnings per share is computed by dividing net income attributable to Foster Wheeler AG by the combination of the weighted-average number of shares outstanding during the reporting period and the impact of dilutive securities, if any, such as outstanding stock options and the non-vested portion of restricted share units to the extent such securities are dilutive.

     In profitable periods, outstanding stock options have a dilutive effect under the treasury stock method when the average share price for the period exceeds the assumed proceeds from the exercise of the option. The assumed proceeds include the exercise price, compensation cost, if any, for future service that has not yet been recognized in the consolidated statement of operations, and any tax benefits that would be recorded in paid-in capital when the option is exercised. Under the treasury stock method, the assumed proceeds are assumed to be used to repurchase shares in the current period. The dilutive impact of the non-vested portion of restricted share units is determined using the treasury stock method, but the proceeds include only the unrecognized compensation cost and tax benefits as assumed proceeds.

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     The computations of basic and diluted earnings per share were as follows:

	Fiscal Three Months Ended March 31,
	2011		2010
Basic earnings per share:
Net income attributable to Foster Wheeler AG	$	22,971	$	72,060
Weighted-average number of shares outstanding for basic earnings per share		124,680,060		127,474,887
Basic earnings per share	$	0.18	$	0.57
Diluted earnings per share:
Net income attributable to Foster Wheeler AG	$	22,971	$	72,060
Weighted-average number of shares outstanding for basic earnings per share		124,680,060		127,474,887
Effect of dilutive securities:
Options to purchase shares		399,159		296,254
Non-vested portion of restricted share units		252,651		122,035
Weighted-average number of shares outstanding for diluted earnings per share		125,331,870		127,893,176
Diluted earnings per share	$	0.18	$	0.56

     The following table summarizes options not included in the calculation of diluted earnings per share as the exercise price of those options was greater than the average share price for the period, which would result in an antidilutive effect on diluted earnings per share:

	Fiscal Three Months Ended March 31,
	2011		2010
Options not included in the computation of diluted earnings per share		1,371,549		1,369,135

2. Business Combinations

     In December 2010, we acquired the assets of a proprietary sulfur recovery technology business for $1,000. The sulfur recovery technology is used to treat gas streams containing hydrogen sulfide for the purpose of reducing the sulfur content of fuel products and to recover a saleable sulfur by-product. The acquisition includes patents, know-how and skilled personnel. 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 Engineering and Construction Group (“Global E&C Group”) business segment.

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 50% noncontrolling interest in a project 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 41.65% 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 minority shareholder’s right to approve activities of the project that most significantly impact the project’s economic performance which include the right to approve or reject the annual financial (capital and operating) budget and the annual operating plan, the right to approve or reject the appointment of the general manager and senior management, and approval rights with respect to capital expenditures beyond those included in the annual budget.

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     On February 27, 2010, an earthquake occurred off the coast of Chile that caused significant damage to our unconsolidated affiliate’s facility in Chile. As a result of the damage, the project’s facility suspended normal operating activities on that date. Subsequent to that date, our unconsolidated affiliate filed a claim with its insurance carrier. A preliminary assessment of the extent of the damage was completed and an estimate of the required cost of repairs was developed. Based on the assessment and cost estimate, as well as correspondence received from the insurance carrier, we expect the property damage insurance recovery to be sufficient to cover the costs of repairing the facility. The insurance carrier also provided a preliminary assessment of the business interruption insurance recovery due to our unconsolidated affiliate, and has advanced insurance proceeds against this assessment. Based on this assessment, we expect the business interruption insurance recovery to substantially compensate our unconsolidated affiliate for the loss of profits while the facility has suspended normal operating activities. Our unconsolidated affiliate’s receivable related to the remaining balance under their property damage and business interruption insurance recovery assessment was approximately $53,500 as of March 31, 2011, which is included in current assets in the table below. The facility is currently operating in testing mode and is expected to resume normal operating activities in the fiscal second quarter of 2011.

     The summarized financial information presented below for the project in Chile includes an estimated recovery under a property damage insurance policy sufficient to cover the costs that have been incurred to repair the facility and an estimated recovery under a business interruption insurance policy for fixed costs along with an estimated recovery for lost profits during the period that the facility has suspended normal operating activities.

     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) based on where the projects are located:

	March 31, 2011				December 31, 2010
	Italy		Chile		Italy		Chile
Balance Sheet Data:
Current assets	$	379,189	$	87,983	$	396,512	$	70,381
Other assets (primarily buildings and equipment)		414,921		115,375		395,264		117,779
Current liabilities		185,549		53,499		202,658		43,909
Other liabilities (primarily long-term debt)		291,323		43,927		275,466		50,132
Net assets		317,238		105,932		313,652		94,119

	Fiscal Three Months Ended March 31,
	2011				2010
	Italy		Chile		Italy		Chile
Income Statement Data:
Total revenues	$	29,417	$	20,817	$	99,638	$	10,623
Gross profit		12,067		129		18,977		4,487
Income before income taxes		9,256		14,766		13,903		4,171
Net earnings		5,647		11,813		7,912		3,462

     Our investment in these unconsolidated affiliates is recorded within investments in and advances to unconsolidated affiliates on the consolidated balance sheet and our equity in the net earnings of these unconsolidated affiliates is recorded within other income, net on the consolidated statement of operations. The investments and equity earnings of the projects in Italy and project in Chile are included in our Global E&C Group and Global Power Group business segments, respectively. Our consolidated financial statements reflect the following amounts related to these unconsolidated affiliates:

	Fiscal Three Months Ended March 31,
	2011		2010
Equity in the net earnings of partially owned affiliates	$	12,493	$	6,289
Distributions from equity affiliates	$	9,677	$	—

	March 31, 2011		December 31, 2010
Total investment in equity affiliates	$	214,899	$	200,668

     Our equity earnings for our project in Chile during the fiscal three months ended March 31, 2011 and 2010 were $9,887 and $2,831, respectively, which included our equity interest in the after tax estimated recovery under our project in Chile’s business interruption insurance policy while the facility has suspended normal operating activities. The increase in equity earnings was driven primarily by higher marginal rates for electrical power generation included in the project’s business interruption insurance recovery. In accordance with authoritative accounting guidance on business interruption insurance, we recorded an estimated recovery for lost profits as substantially all contingencies related to the insurance claim had been resolved as of the fiscal third quarter of 2010.

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     The two electric power generation projects in Italy, owned by the companies Centro Energia Teverola S.p.A., (“CET”) and Centro Energia Ferrara S.p.A., (“CEF”), in which we hold 41.65% of the shares in each company, had long-term power off-take agreements in place with the Authority for Energy (the “Energy Authority”), which is part of the Italian Economic Development Ministry (the “Ministry”). The power off-take agreements with the Energy Authority included an incentivized tariff during the period of operation. In September 2010, the Ministry announced an option for certain projects, including those of CEF and CET, to terminate their long-term power off-take agreements with the Energy Authority in exchange for a lump-sum payment. The payment was determined by specific calculation under parameters established by the Ministry. In October 2010, CEF and CET submitted an application to terminate their power off-take agreements and, in December 2010, the Ministry approved the applications. CET and CEF recognized revenue for the full value of the termination payments in their financial statements for the year ended December 31, 2010.

     In light of the termination of the power off-take agreements, we and our respective partners at CET and CEF reviewed the economic viability of each plant. As a result, a decision was made to shut down the CET plant effective January 1, 2011. We and our partner in CEF decided to continue to operate the CEF plant at least temporarily on a merchant basis following the termination of its power off-take agreement. We and our partner in the CEF plant will continue to review the economic viability of the project and we may consider a potential sale of the plant in 2011. As a result of the foregoing operating decisions, CET and CEF recorded impairment charges during the fiscal fourth quarter of 2010 to write down their fixed assets to fair value in their financial statements. Additionally, during the fiscal fourth quarter of 2010, our investments in CET and CEF were reduced by equity losses based on the 2010 financial results of CET and CEF, inclusive of the respective impairment charges. As a result of the foregoing, the carrying value of our CET and CEF investments approximated fair value at December 31, 2010. Our equity earnings from our investments in CET and CEF during the fiscal three months ended March 31, 2011 were insignificant. Our equity earnings for our CET and CEF investments during the fiscal three months ended March 31, 2010 were $428 and $511, respectively.

     We have guaranteed certain performance obligations of the project in Chile. We do not expect that the earthquake will require us to contribute to this project under our guarantee of the project’s performance obligations.

     We have a contingent obligation, which is measured annually based on the operating results of the project in Chile for the preceding year and is shared equally with our minority interest partner. We did not have a current payment obligation under this guarantee as of March 31, 2011 and December 31, 2010.

     In addition, we have provided a $10,000 debt service reserve letter of credit to cover debt service payments in the event that the project in Chile does not generate sufficient cash flows to make such payments. We are required to maintain the debt service reserve letter of credit during the term of the project in Chile’s debt, which matures in 2014. As of March 31, 2011, no amounts have been drawn under this letter of credit and, based on our current assessment following the earthquake in Chile as described above, we do not anticipate any amounts being drawn under this letter of credit.

     We also have a wholly-owned subsidiary that provides operations and maintenance services to the Chile based project. We continue to provide our services to the project while the facility has suspended normal operating activities, as a result of the earthquake in Chile noted above, which have been focused on assessing the damage caused by the earthquake and the related repair for the facility to resume normal operating activities. We record the fees for operations and maintenance services in operating revenues on our consolidated statement of operations and the corresponding receivable in trade accounts and notes receivable on our consolidated balance sheet. Our consolidated financial statements include the following balances related to our project in Chile:

	Fiscal Three Months Ended March 31,
	2011		2010
Fees for operations and maintenance services (included in operating revenues)	$	2,660	$	2,461

	March 31, 2011		December 31, 2010
Receivable from our unconsolidated affiliate in Chile (included in trade receivables)	$	4,140	$	632

     We also have guaranteed the performance obligations of our wholly-owned subsidiary under the project in Chile’s operations and maintenance agreement. The guarantee is limited to $20,000 over the life of the operations and maintenance agreement, which extends through 2016. No amounts have ever been paid under the guarantee.

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Other Investments

     We are the majority equity partner and general partner of a gas-fired cogeneration facility in Martinez, California, and we own 100% of the equity in a waste-to-energy facility in Camden, New Jersey. We have determined that these entities are VIEs and that we are the primary beneficiary of these VIEs since we have the power to direct the activities that most significantly impact the VIE’s performance. These activities include the operations and maintenance of the facilities. Accordingly, we consolidate these entities. The aggregate net assets of these entities are presented below.

Balance Sheet Data (excluding intercompany balances):	March 31, 2011		December 31, 2010
Current assets	$	7,122	$	15,915
Other assets (primarily buildings and equipment)		107,250		102,457
Current liabilities		10,740		11,177
Other liabilities		5,081		1,791
Net assets		98,551		105,404

4. Goodwill and Other 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 related to the assessment of goodwill for impairment. There were no accumulated goodwill impairment losses as of that date. The following table provides our net carrying amount of goodwill by geographic region in which our reporting units are located:

	Global E&C Group				Global Power Group
	March 31, 2011		December 31, 2010		March 31, 2011		December 31, 2010
U.S.	$	39,357	$	39,357	$	—	$	—
Asia		1,056		1,053		—		—
Europe		—		—		51,352		48,507
Total	$	40,413	$	40,410	$	51,352	$	48,507

     During the fiscal three months ended March 31, 2010, we made a contractual payment of $1,221 related to a prior acquisition of a business in our Global E&C Group’s U.S. operations.

     The following table sets forth amounts relating to our identifiable intangible assets:

	March 31, 2011							December 31, 2010
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Amount		Amortization			Amount		Amount		Amortization			Amount
Patents	$	41,853	$	(29,191	)	$	12,662	$	41,237	$	(28,476	)	$	12,761
Trademarks		64,650		(28,645	)		36,005		63,774		(27,764	)		36,010
Customer relationships, pipeline and backlog		22,359		(5,723	)		16,636		22,329		(5,030	)		17,299
Total	$	128,862	$	(63,559	)	$	65,303	$	127,340	$	(61,270	)	$	66,070

     As of March 31, 2011, the net carrying amounts of our identifiable intangible assets were $48,597 for our Global Power Group and $16,706 for our Global E&C Group. Amortization expense related to identifiable intangible assets is recorded within cost of operating revenues on the consolidated statement of operations. The following table details amounts relating to amortization expense by period:

	Fiscal Three Months Ended March 31,
	2011		2010
Amortization expense	$	1,648	$	1,778

��
	Fiscal Years
	2011		2012		2013		2014		2015
Approximate full year amortization expense	$	6,200	$	5,900	$	5,600	$	5,300	$	5,300

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5. Borrowings

     The following table shows the components of our long-term debt:

	March 31, 2011						December 31, 2010
	Current		Long-term		Total		Current		Long-term		Total
Capital Lease Obligations	$	2,626	$	59,340	$	61,966	$	2,574	$	59,024	$	61,598
Special-Purpose Limited Recourse Project Debt:
FW Power S.r.l.		7,875		86,217		94,092		7,403		81,047		88,450
Energia Holdings, LLC at 11.443% interest, due April 15, 2015		2,019		11,220		13,239		2,019		11,220		13,239
Subordinated Robbins Facility Exit Funding Obligations:
1999C Bonds at 7.25% interest, due October 15, 2024		—		1,283		1,283		—		1,283		1,283
Total	$	12,520	$	158,060	$	170,580	$	11,996	$	152,574	$	164,570
Estimated fair value					$	187,696					$	182,602

     U.S. Senior Secured Credit Agreement— On July 30, 2010, Foster Wheeler AG, Foster Wheeler Ltd., certain of Foster Wheeler Ltd.’s subsidiaries and BNP Paribas, as Administrative Agent, entered into a four-year amendment and restatement of our U.S. senior secured credit agreement, which we entered into in October 2006. The amended and restated U.S. senior secured credit agreement provides for a facility of $450,000, and includes a provision which permits future incremental increases of up to an aggregate of $225,000 in total additional availability under the facility. The amended and restated U.S. senior secured credit agreement permits us to issue up to $450,000 in letters of credit under the facility. Letters of credit issued under the amended and restated U.S. senior secured credit agreement have performance pricing that is decreased (or increased) as a result of improvements (or reductions) in our corporate credit rating as reported by Moody’s Investors Service, which we refer to as Moody’s, and/or Standard & Poor’s, or S&P. We received a corporate credit rating of BBB- as issued by S&P during the fiscal third quarter of 2010, which, under the amended and restated U.S. senior secured credit agreement, reduces our pricing for letters of credit issued under the agreement. Based on our current credit ratings, letter of credit fees for performance and financial letters of credit issued under the amended and restated U.S. senior secured credit agreement are 1.000% and 2.000% per annum of the outstanding amount, respectively, excluding fronting fees. 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, as defined in the agreement, plus 2.000%, subject also to the performance pricing noted above.

     Fees and expenses incurred in conjunction with the execution of our amended and restated U.S. senior credit agreement were approximately $4,300 and are being amortized to expense over the four-year term of the agreement, which commenced in the fiscal third quarter of 2010.

     The assets and/or stock of certain of our subsidiaries collateralize our obligations under our amended and restated U.S. senior secured credit agreement. Our amended and restated U.S. senior secured 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 new lines of business, with respect to Foster Wheeler AG, change Foster Wheeler AG’s fiscal year or, with respect to Foster Wheeler AG, Foster Wheeler Ltd. and one of our holding company subsidiaries, directly acquire ownership of the operating assets used to conduct any business. In the event that our corporate credit rating as issued by Moody’s is at least Baa3 and as issued by S&P is at least BBB-, all liens securing our obligations under the amended and restated U.S. senior secured credit agreement will be automatically released and terminated.

     In addition, our amended and restated U.S. senior secured credit agreement contains financial covenants requiring us not to exceed a total leverage ratio, which compares total indebtedness to EBITDA, and to maintain a minimum interest coverage ratio, which compares EBITDA to interest expense. All such terms are defined in our amended and restated U.S. senior secured credit agreement. We must be in compliance with the total leverage ratio at all times, while the interest coverage ratio is measured quarterly. We have been in compliance with all financial covenants and other provisions of our U.S. senior secured credit agreement prior and subsequent to our amendment and restatement of the agreement.

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     We had approximately $296,100 and $310,100 of letters of credit outstanding under our U.S. senior secured credit agreement in effect as of March 31, 2011 and December 31, 2010, respectively. The letter of credit fees under the U.S. senior secured credit agreement outstanding as of March 31, 2011 and December 31, 2010 ranged from 1.00% to 2.00% of the outstanding amount, excluding fronting fees. There were no funded borrowings outstanding under the agreement as of March 31, 2011 or December 31, 2010.

6. Pensions and Other Postretirement Benefits

     We have defined benefit pension plans in the United States, or U.S., the United Kingdom, or U.K., Canada, Finland, France, India and South Africa, and we have other postretirement benefit plans for health care and life insurance benefits in the U.S. and Canada.

     Defined Benefit Pension Plans— Our defined benefit pension plans, or pension plans, cover certain full-time employees. Under the pension plans, retirement benefits are primarily a function of both years of service and level of compensation. The U.S. pension plans, which are closed to new entrants and additional benefit accruals, and the Canada, Finland, France and India pension plans are non-contributory. The U.K. pension plan, which is closed to new entrants and additional benefit accruals, and the South Africa pension plan are both contributory plans.

     Effective March 31, 2010, we closed the U.K. pension 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 in the fiscal three months ended March 31, 2010 of approximately £13,300 (approximately $20,100 at the exchange rate in effect at the time of the pension plan closure).

     Based on the minimum statutory funding requirements for fiscal year 2011, we are not required to make any mandatory contributions to our U.S. pension plans. The following table provides details on fiscal year 2011 mandatory contribution activity for our non-U.S. pension plans:

Contributions in the fiscal three months ended March 31, 2011	$	3,900
Remaining contributions expected for fiscal year 2011		20,300
Contributions expected for fiscal year 2011	$	24,200

     We did not make any discretionary contributions during the fiscal first three months of 2011; however, we may elect to make discretionary contributions to our U.S. and/or non-U.S. pension plans during fiscal year 2011.

     Other Postretirement Benefit Plans— Certain employees in the U.S. 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 Canada pension plans while working for us. Additionally, one of our subsidiaries in the U.S. 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.

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     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,
	2011			2010			2011			2010
	Defined Benefit						Other Postretirement
	Pension Plans						Benefit Plans
Net periodic benefit cost/(credit):
Service cost	$	369		$	1,877		$	27		$	34
Interest cost		15,611			15,375			912			1,207
Expected return on plan assets		(18,141	)		(15,180	)		—			—
Amortization of net actuarial loss		3,454			5,928			77			52
Amortization of prior service (credit)/cost		9			(425	)		(891	)		(996	)
Amortization of transition obligation		12			24			—			—
Curtailment gain*		—			(20,086	)		—			—
Net periodic benefit cost/(credit)	$	1,314		$	(12,487	)	$	125		$	297
Changes recognized in other comprehensive income:
Net actuarial loss	$	—		$	21,130		$	—		$	—
Prior service credit		—			(9,054	)		—			—
Amortization of net actuarial loss		(3,454	)		(5,928	)		(77	)		(52	)
Amortization of prior service credit/(cost)		(9	)		425			891			996
Amortization of transition obligation		(12	)		(24	)		—			—
Total recognized in other comprehensive income — before tax	$	(3,475	)	$	6,549		$	814		$	944

* During the fiscal three months ended March 31, 2010, a curtailment gain resulted from the closure of the U.K. pension plan for future benefit accrual.

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, 2011		December 31, 2010
Environmental indemnifications	No limit	$	8,100	$	8,400
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 March 31,
	2011			2010
Warranty Liability:
Balance at beginning of year	$	100,300		$	110,800
Accruals		7,600			6,800
Settlements		(4,900	)		(3,600	)
Adjustments to provisions, including foreign currency translation		100			(11,500	)
Balance at end of period	$	103,100		$	102,500

     We are contingently liable under standby letters of credit, bank guarantees and surety bonds, totaling $1,065,900 and $1,010,600 as of March 31, 2011 and December 31, 2010, respectively, primarily for guarantees of our performance on projects currently in execution or under warranty. These amounts include the standby letters of credit issued under the U.S. senior secured 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.

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     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.

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
	Balance Sheet		March 31,		December 31,		Balance Sheet		March 31,		December 31,
	Location		2011		2010		Location		2011		2010
Derivatives designated as hedging instruments
Interest rate swap contracts	Other assets		$	—	$	—	Other long-term liabilities		$	5,860	$	6,903
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		3,299		2,112		Contracts in process or billings in excess of costs and estimated earnings on uncompleted contracts		1,263		2,978
Foreign currency forward contracts	Other accounts receivable			298		367	Accounts payable			—		38
Total derivatives			$	3,597	$	2,479			$	7,123	$	9,919

     Foreign Currency Exchange Rate Risk

     We operate on a worldwide basis with substantial operations in Europe that subject us to 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 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 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.

     The notional amount of foreign currency forward contracts provides one measure of the transaction volume outstanding as of the balance sheet date. As of March 31, 2011, we had a total gross notional amount of $232,043 related to foreign currency forward contracts. Amounts ultimately realized upon final settlement of these financial instruments, along with the gains and losses on the underlying exposures within our long-term contracts, will depend on actual market exchange rates during the remaining life of the instruments. The contracts mature between fiscal years 2011 and 2013.

     We are exposed to credit loss in the event of non-performance by the counterparties. These counterparties are commercial banks that are primarily rated “BBB+” or better by S&P (or the equivalent by other recognized credit rating agencies).

     Increases in the fair value of the currencies sold forward result in losses while increases in the fair value of the currencies bought forward result in gains. For foreign currency forward contracts used to mitigate currency risk on our projects, the gain or loss from the portion of the mark-to-market adjustment related to the completed portion of the underlying project is included in cost of operating revenues at the same time as the underlying foreign currency exposure occurs. The gain or loss from the remaining portion of the mark-to-market adjustment, specifically the portion relating to the uncompleted portion of the underlying project is reflected directly in cost of operating revenues in the period in which the mark-to-market adjustment occurs. We also utilize foreign currency forward contracts to mitigate non-project related currency risks, which are recorded in other deductions, net. The gain or loss from the remaining uncompleted portion of our projects and other non-project related transactions were as follows:

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		Amount of Gain/(Loss) Recognized in
		Income on Derivatives
Derivatives Not Designated as	Location of Gain/(Loss) Recognized	Fiscal Three Months Ended March 31,
Hedging Instruments	in Income on Derivative	2011		2010
Foreign currency forward contracts	Cost of operating revenues	$	1,814	$	(1,451	)
Foreign currency forward contracts	Other deductions, net		70		(188	)
Total		$	1,884	$	(1,639	)

     The mark-to-market adjustments on foreign currency forward exchange contracts for these unrealized gains or losses are primarily recorded in either contracts in process or billings in excess of costs and estimated earnings on uncompleted contracts on the consolidated balance sheet.

     During the fiscal first three months ended March 31, 2011 and 2010, we included net cash inflows/(outflows) on the settlement of derivatives of $182 and $(2,548), respectively, within the “net change in contracts in process and billings in excess of costs and estimated earnings on uncompleted contracts,” a component of cash flows from operating activities in the consolidated statement of cash flows.

     Interest Rate Risk

     We use interest rate swap contracts to manage interest rate risk associated with some of our variable rate special-purpose limited recourse project debt. The aggregate notional amount of the receive-variable/pay-fixed interest rate swaps was $78,100 as of March 31, 2011.

     Upon entering into the swap contracts, we designate the interest rate swaps as cash flow hedges. We assess at inception, and on an ongoing basis, whether the interest rate swaps are highly effective in offsetting changes in the cash flows of the project debt. Consequently, we record the fair value of interest rate swap contracts in our consolidated balance sheet at each balance sheet date. Changes in the fair value of the interest rate swap contracts are recorded as a component of other comprehensive income.

     The impact from interest rate swap contracts in cash flow hedging relationships was as follows:

	Fiscal Three Months Ended March 31,
	2011		2010
Gain/(loss) recognized in Other comprehensive income	$	847	$	(2,936	)
Loss reclassified from Accumulated other comprehensive loss		615		1,122

9. Share-Based Compensation Plans

     Our share-based compensation plans include both restricted share units and stock option awards. The following table summarizes our share-based compensation expense and related income tax benefit:

	Fiscal Three Months Ended March 31,
	2011		2010
Share-based compensation	$	4,871	$	4,602
Related income tax benefit		81		99

     As of March 31, 2011, we had $15,338 and $19,089 of total unrecognized compensation cost related to stock options and restricted share units, respectively. Those amounts are expected to be recognized as expense over a weighted-average period of approximately 26 months.

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     We estimate the fair value of each option award on the date of grant using the Black-Scholes option valuation model. We then recognize the grant date fair value of each option as compensation expense ratably using the straight-line attribution method over the service period (generally the vesting period). The Black-Scholes model incorporates the following assumptions:

• Expected volatility — we estimate the volatility of our shares using a “look-back” period which coincides with the expected term, defined below. We believe using a “look-back” period which coincides with the expected term is the most appropriate measure for determining expected volatility.

• Expected term — we estimate the expected term using the “simplified” method, as outlined in Staff Accounting Bulletin No. 107, “Share-Based Payment.”

• Risk-free interest rate — we estimate the risk-free interest rate using the U.S. Treasury yield curve for periods equal to the expected term of the options in effect at the time of grant.

• Dividends — we use an expected dividend yield of zero because we have not declared or paid a cash dividend since July 2001 and we do not have any plans to declare or pay any cash dividends.

     We estimate the fair value of each restricted share unit award using the market price of our shares on the date of grant. We then recognize the fair value of each restricted share unit award as compensation cost ratably using the straight-line attribution method over the service period (generally the vesting period).

     Certain of our executives have been awarded performance-based restricted stock units. Under these awards, the number of restricted stock units that ultimately vest depend on our share price performance against specified performance goals, which are defined in our performance-based award agreement. We estimate the grant date fair value of the performance-based restricted share unit award using a Monte Carlo valuation model. We then recognize the fair value of each restricted share unit award as compensation cost ratably using the straight-line attribution method over the service period (generally the vesting period). During the fiscal three months ended March 31, 2011, performance-based restricted share units totaling 92,971 were granted at an estimated grant date fair value of $25.08 per unit.

     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 current accounting guidance regarding the 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 first three months ended March 31, 2011 and 2010 were as follows:

	March 31, 2011			March 31, 2010
Balance at beginning of year	$	4,935		$	2,570
Compensation cost during the period for those equity awards with intrinsic value on the grant date		2,580			2,279
Intrinsic value of equity awards vested during the period for those equity awards with intrinsic value on the grant date		(1,510	)		(20	)
Balance at end of period	$	6,005		$	4,829

     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 and other convertible or exercisable 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 share units, with an offsetting increase to our issued share capital. As of March 31, 2011, our remaining available conditional capital was 60,255,245 shares.

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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. Deferred tax assets and liabilities are established for tax attributes (credits or loss carryforwards) and temporary differences between the book and tax basis of assets and liabilities. Within each jurisdiction and taxpaying component, current and noncurrent deferred tax assets and liabilities are combined and presented as a net amount. Deferred tax assets are reduced by a valuation allowance when, based upon available evidence, it is more likely than not that the tax benefit of loss carryforwards (or other deferred tax assets) will not be realized in the future. 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. We have decreased our December 31, 2010 deferred tax assets (current and non-current) and noncurrent deferred tax liabilities in equal amounts in order to reflect the net presentation of deferred tax assets and liabilities by jurisdiction consistent with our March 31, 2011 presentation.

     Fiscal Year 2011

     Our effective tax rate for the fiscal first three months of 2011 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 14-percentage point reduction in the effective tax rate for the full year 2011.

• A valuation allowance increase for the quarter because we are unable to recognize a tax benefit for year-to-date losses subject to valuation allowance in the United States.

• Discrete items for the quarter, including, primarily, changes in judgment regarding unrecognized tax benefits and certain adjustments to deferred taxes and taxes payable for prior years.

     Both the valuation allowance increase and the discrete items for the quarter are not expected to significantly change the effective tax rate for the full year 2011.

     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 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.

• Total changes in our valuation allowance contributed to an approximate five-percentage point increase in the effective tax rate as a result of the impact of a net 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).

     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 in numerous tax jurisdictions, including the United States, several U.S. states and numerous non-U.S. jurisdictions around the world. Tax returns are also filed in jurisdictions where our subsidiaries execute project-related work. The statute of limitations varies by jurisdiction. Because of the number of jurisdictions in which we file tax returns, in any given year the statute of limitations in a number of jurisdictions may expire within 12 months from the balance sheet date. As a result, we expect recurring changes in unrecognized tax benefits due to the expiration of the statute of limitations, none of which are expected to be individually significant. With few exceptions, we are no longer subject to U.S. (including federal, state and local) or non-U.S. income tax examinations by tax authorities for years before fiscal year 2006.

     A number of tax years are under audit by the relevant tax authorities in various jurisdictions, including the U.S. and several states within the U.S. We anticipate that several of these audits may be concluded in the foreseeable future, including in the remainder of fiscal year 2011. Based on the status of these audits, it is reasonably possible that the conclusion of the audits may result in a reduction of unrecognized tax benefits. However, it is not possible to estimate the magnitude of any such reduction at this time. We recognize interest accrued on the unrecognized tax benefits in interest expense and penalties on the unrecognized tax benefits in other deductions, net on our consolidated statement of operations.

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11. Business Segments

     We operate through two business groups: ourGlobal E&C Groupand ourGlobal Power Group.

Global E&C Group

     Our Global E&C 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 facilities, distribution facilities, gasification facilities and processing facilities associated with the metals and mining sector. Our Global E&C 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. Additionally, our Global E&C Group is also involved in the development, engineering, construction, ownership and operation of power generation facilities, from conventional and renewable sources, and of waste-to-energy facilities in Europe. Our Global E&C Group generates revenues from design, engineering, procurement, 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.

Global Power Group

     Our Global Power Group designs, manufactures and erects steam generating and auxiliary equipment for electric power generating stations, district heating 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 power production facilities.

     Our Global Power Group’s steam generating equipment includes a broad range of technologies, offering independent power producers, utilities, municipalities and industrial clients high-value technology solutions for converting a wide range of fuels, such as coal, lignite, petroleum coke, oil, gas, solar, biomass, municipal solid waste and waste flue gases into steam, which can be used for power generation, district heating or for industrial processes.

Corporate and Finance Group

     In addition to these two business groups, which also represent operating segments for financial reporting purposes, we report corporate center expenses, our captive insurance operation and expenses related to certain legacy liabilities, such as asbestos, in the Corporate and Finance Group (“C&F Group”), which we also treat as an operating segment for financial reporting purposes.

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Operating Revenues

     We conduct our business on a global basis. Operating revenues by industry and business segment were as follows:

	Fiscal Three Months Ended March 31,
	2011		2010
Operating Revenues (Third-Party) by Industry:
Power generation	$	195,129	$	155,180
Oil refining		363,529		315,838
Pharmaceutical		11,184		12,597
Oil and gas		272,047		297,622
Chemical/petrochemical		153,977		132,107
Power plant operation and maintenance		28,329		24,322
Environmental		2,559		3,124
Other, net of eliminations		9,498		4,783
Total	$	1,036,252	$	945,573
Operating Revenues (Third-Party) by Business Segment:
Global E&C Group	$	823,743	$	779,684
Global Power Group		212,509		165,889
Total	$	1,036,252	$	945,573

EBITDA

     EBITDA is the primary measure of operating performance used by our chief operating decision maker. We define EBITDA as net income attributable to Foster Wheeler AG before interest expense, income taxes, depreciation and amortization.

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     A reconciliation of EBITDA to net income attributable to Foster Wheeler AG is shown below:

			Global		Global		C&F
	Total		E&C Group		Power Group		Group(1)
Fiscal Three Months Ended March 31, 2011:
EBITDA(2)	$	46,804	$	41,668	$	26,464	$	(21,328	)
Add: Net income attributable to noncontrolling interests		2,305
Less: Interest expense		3,879
Less: Depreciation and amortization		12,671
Income before income taxes		32,559
Less: Provision for income taxes		7,283
Net income		25,276
Less: Net income attributable to noncontrolling interests		2,305
Net income attributable to Foster Wheeler AG	$	22,971
Fiscal Three Months Ended March 31, 2010:
EBITDA(2)	$	111,280	$	99,933	$	29,883	$	(18,536	)
Add: Net income attributable to noncontrolling interests		3,306
Less: Interest expense		4,551
Less: Depreciation and amortization		13,059
Income before income taxes		96,976
Less: Provision for income taxes		21,610
Net income		75,366
Less: Net income attributable to noncontrolling interests		3,306
Net income attributable to Foster Wheeler AG	$	72,060

(1)	Includes general corporate income and expense, our captive insurance operation and the elimination of transactions and balances related to intercompany interest.
(2)	EBITDA includes the following:

	Fiscal Three Months Ended March 31,
	2011			2010
Net (decrease)/increase in contract profit from the regular revaluation of final estimated contract profit revisions*:
Global E&C**	$	800		$	9,200
Global Power Group**		(5,400	)		3,900
Total**		(4,600	)		13,100
Net asbestos-related provision/(gain) in C&F Group***		400			(700	)
Curtailment gain on the closure of the U.K. pension plan for future defined benefit accrual in our Global E&C Group		—			20,100

*	Please refer to “Revenue Recognition on Long-Term Contracts” in Note 1 for further information regarding changes in our final estimated contract profit.
**	The changes in final estimated contract profit revisions during the fiscal three months ended March 31, 2011 included the impact of two out-of-period corrections for reductions of final estimated profit totaling $7,800, which included final estimated profit reductions in our Global E&C Group and our Global Power Group of $3,200 and $4,600, respectively. The corrections were recorded in the current period as they were not material to previously issued financial statements, nor are they expected to be material to the full year 2011 financial statements.
***	Please refer to Note 12 for further information regarding the revaluation of our asbestos liability and related asset.

     The accounting policies of our business segments are the same as those described in our summary of significant accounting policies as disclosed in our 2010 Form 10-K. The only significant intersegment transactions relate to interest on intercompany balances. We account for interest on those arrangements as if they were third-party transactions—i.e. at current market rates, and we include the elimination of that activity in the results of the C&F Group.

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.

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     United States

     A summary of our U.S. claim activity is as follows:

	Fiscal Three Months Ended March 31,
Number of Claims by period:	2011			2010
Open claims at beginning of year		124,420			125,100
New claims		1,280			1,210
Claims resolved		(2,120	)		(880	)
Open claims at end of period		123,580			125,430

     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 first fiscal quarter of 2026. 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, 2011		December 31, 2010
Asbestos-related assets recorded within:
Accounts and notes receivable-other	$	55,858	$	54,449
Asbestos-related insurance recovery receivable		156,576		165,452
Total asbestos-related assets	$	212,434	$	219,901
Asbestos-related liabilities recorded within:
Accrued expenses	$	48,100	$	59,000
Asbestos-related liability		269,833		278,500
Total asbestos-related liabilities	$	317,933	$	337,500
Liability balance by claim category:
Open claims	$	61,977	$	78,460
Future unasserted claims		255,956		259,040
Total asbestos-related liabilities	$	317,933	$	337,500

     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 each fiscal year-end for the next 15 years. Since that time, we have recorded our estimated asbestos liability at a level consistent with ARPC’s reasonable best estimate. Our estimated asbestos liability decreased during the fiscal first three months of 2011 as a result of indemnity and defense cost payments totaling approximately $21,600, partially offset by an increase of $2,000 related to the accrual of our rolling 15-year asbestos-related liability estimate. The total asbestos-related liabilities are comprised of our estimates for our liability relating to open (outstanding) claims being valued and our liability for future unasserted claims through the first fiscal quarter of 2026.

     Our liability estimate is based upon the following information and/or assumptions: number of open claims, forecasted number of future claims, estimated average cost per claim by disease type — mesothelioma, lung cancer and non-malignancies — and the breakdown of known and future claims into disease type — mesothelioma, lung cancer or non-malignancies. The total estimated liability, which has not been discounted for the time value of money, includes both the estimate of forecasted indemnity amounts and forecasted defense costs. Total defense costs and indemnity liability payments are estimated to be incurred through the fiscal first quarter of 2026, during which period the incidence of new claims is forecasted to decrease each year. We believe that it is likely that there will be new claims filed after the first fiscal quarter of 2026, but in light of uncertainties inherent in long-term forecasts, we do not believe that we can reasonably estimate the indemnity and defense costs that might be incurred after the fiscal first quarter of 2026.

     Through March 31, 2011, total cumulative indemnity costs paid were approximately $744,300 and total cumulative defense costs paid were approximately $347,300. Historically, defense costs have represented approximately 31.8% of total defense and indemnity costs. The overall historic average combined indemnity and defense cost per resolved claim through March 31, 2011 has been approximately $3.0. The average cost per resolved claim is increasing and we believe it will continue to increase in the future.

     Over the last several years, certain of our subsidiaries have entered into settlement agreements calling for insurers to make lump-sum payments, as well as payments over time, for use by our subsidiaries to fund asbestos-related indemnity and defense costs and, in certain cases, for reimbursement for portions of out-of-pocket costs previously incurred. During the fiscal first three months of 2011, our subsidiaries reached an agreement to settle their

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disputed asbestos-related insurance coverage with an additional insurer. As a result of this settlement, we increased our asbestos-related insurance asset and recorded a gain of $1,600 in the first fiscal quarter ended March 31, 2011.

     Asbestos-related assets under executed settlement agreements with insurers due in the next 12 months are recorded within accounts and notes receivable-other and amounts due beyond 12 months are recorded within asbestos-related insurance recovery receivable. Asbestos-related insurance recovery receivable also includes our best estimate of actual and probable insurance recoveries relating to our liability for pending and estimated future asbestos claims through the first fiscal quarter of 2026. Our asbestos-related assets have not been discounted for the time value of money.

     Our insurance recoveries may be limited by insolvencies among our insurers. We have not assumed recovery in the estimate of our asbestos insurance asset from any of our currently insolvent insurers. We have considered the financial viability and legal obligations of our subsidiaries’ insurance carriers and believe that the insurers or their guarantors will continue to reimburse a significant portion of claims and defense costs relating to asbestos litigation. As of March 31, 2011 and December 31, 2010, we have not recorded an allowance for uncollectible balances against our asbestos-related insurance assets. We write off receivables from insurers that have become insolvent; there have been no such write-offs during the fiscal three months ended March 31, 2011 and 2010. Other insurers may become insolvent in the future and our insurers may fail to reimburse amounts owed to us on a timely basis. Failure to realize the expected insurance recoveries, or delays in receiving material amounts from our insurers, could have a material adverse effect on our financial condition and our cash flows.

     The following table summarizes our net asbestos-related provision/(gain):

	Fiscal Three Months Ended March 31,
	2011			2010
Provision for revaluation	$	2,000		$	3,245
Gain on the settlement of coverage litigation		(1,600	)		(3,992	)
Net asbestos-related provision/(gain)	$	400	��	$	(747	)

     Our net asbestos-related provision/(gain) is the result of our revaluation of our asbestos liability and related asset resulting from adjustments for actual settlement experience different from our estimates and the accrual of our rolling 15-year asbestos liability estimate, partially offset by gains on the settlement of coverage litigation with asbestos insurance carriers.

     The following table summarizes our approximate asbestos-related payments and insurance proceeds:

	Fiscal Three Months Ended March 31,
	2011			2010
Asbestos litigation, defense and case resolution payments	$	21,600		$	15,500
Insurance proceeds		(9,100	)		(9,100	)
Net asbestos-related payments	$	12,500		$	6,400

     We expect to have net cash outflows of $5,700 as a result of asbestos liability indemnity and defense payments in excess of insurance settlement proceeds for the full fiscal year 2011. This estimate assumes no additional settlements with insurance companies and no elections by us to fund additional payments. As we continue to collect cash from insurance settlements and assuming no increase in our asbestos-related insurance liability, the asbestos-related insurance receivable recorded on our consolidated balance sheet will continue to decrease.

     The estimate of the liabilities and assets related to asbestos claims and recoveries is subject to a number of uncertainties that may result in significant changes in the current estimates. Among these are uncertainties as to the ultimate number and type of claims filed, the amounts of claim costs, the impact of bankruptcies of other companies with asbestos claims, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, as well as potential legislative changes. Increases in the number of claims filed or costs to resolve those claims could cause us to increase further the estimates of the costs associated with asbestos claims and could have a material adverse effect on our financial condition, results of operations and cash flows.

     Based on the fiscal year-end 2010 liability estimate, an increase of 25% in the average per claim indemnity settlement amount would increase the liability by $52,300 and the impact on expense would be dependent upon available additional insurance recoveries. Assuming no change to the assumptions currently used to estimate our insurance asset, this increase would result in a charge in the statement of operations of approximately 80% of the increase in the liability. Long-term cash flows would ultimately change by the same amount. Should there be an

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increase in the estimated liability in excess of this 25%, the percentage of that increase that would be expected to be funded by additional insurance recoveries will decline.

     United Kingdom

     Some of our subsidiaries in the United Kingdom have also received claims alleging personal injury arising from exposure to asbestos. To date, 968 claims have been brought against our U.K. subsidiaries of which 289 remained open as of March 31, 2011. None of the settled claims has resulted in material costs to us. The following table summarizes our asbestos-related liabilities and assets for our U.K. subsidiaries based on open (outstanding) claims and our estimate for future unasserted claims through the first fiscal quarter of 2026:

	March 31, 2011		December 31, 2010
Asbestos-related assets:
Accounts and notes receivable-other	$	1,998	$	1,927
Asbestos-related insurance recovery receivable		30,199		29,119
Total asbestos-related assets	$	32,197	$	31,046
Asbestos-related liabilities:
Accrued expenses	$	1,998	$	1,927
Asbestos-related liability		30,199		29,119
Total asbestos-related liabilities	$	32,197	$	31,046
Liability balance by claim category:
Open claims	$	5,851	$	5,782
Future unasserted claims		26,346		25,264
Total asbestos-related liabilities	$	32,197	$	31,046

     The liability estimates are based on a U.K. House of Lords judgment that pleural plaque claims do not amount to a compensable injury and accordingly, we have reduced our liability assessment. If this ruling is reversed by legislation, the total asbestos liability and related asset recorded in the U.K. would be approximately $55,000.

Project Claims

     In the ordinary course of business, we are parties to litigation involving clients and subcontractors arising out of project contracts. Such litigation includes claims and counterclaims by and against us for canceled contracts, for additional costs incurred in excess of current contract provisions, as well as for back charges for alleged breaches of warranty and other contract commitments. If we were found to be liable for any of the claims/counterclaims against us, we would incur a charge against earnings to the extent a reserve had not been established for the matter in our accounts or if the liability exceeds established reserves.

     Due to the inherent commercial, legal and technical uncertainties underlying the estimation of all of the project claims described herein, the amounts ultimately realized or paid by us could differ materially from the balances, if any, included in our financial statements, which could result in additional material charges against earnings, and which could also materially adversely impact our financial condition and cash flows.

     Power Plant Dispute — Ireland

     In 2006, a dispute arose with a client because of material corrosion that occurred at two power plants we designed and built in Ireland, which began operation in December 2005 and June 2006. There was also corrosion that occurred to subcontractor-provided emissions control equipment and induction fans at the back-end of the power plants which is due principally to the low set point temperature design of the emissions control equipment that was set by our subcontractor. We have identified technical solutions to resolve the boiler tube corrosion and emissions control equipment corrosion and during the fiscal fourth quarter of 2008 entered into a settlement with the client under which we are implementing the technical solutions in exchange for a full release of all claims related to the corrosion (including a release from the client’s right under the original contract to reject the plants under our availability guaranty) and the client’s agreement to share the cost of the ameliorative work related to the boiler tube corrosion. Accordingly, the client withdrew its notice of arbitration in January 2009, which was originally filed in May 2008.

     Between fiscal year 2006 and the end of fiscal year 2008, we recorded charges totaling $61,700 in relation to this project. The implementation of the technical solutions is anticipated to be completed in late 2011.

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     Power Plant Arbitration — North America

     In January 2010, we commenced arbitration against our client in connection with a power plant project in Louisiana seeking, among other relief, a declaration as to our rights under our purchase order with respect to $17,800 in retention monies and an $82,000 letter of credit held by the client. The purchase order was for the supply of two boilers and ancillary equipment for the project. The project was substantially completed and released for commercial operation in February 2010. Our client is the project’s engineering, procurement and construction contractor. Under the terms of the purchase order, significant reductions to the retention and letter of credit monies are to occur upon the project’s achievement of substantial completion, which has been delayed due to failures on our client’s part to properly manage and execute the project. The client has taken the position that we are responsible for the project’s delays and, subsequent to service of our arbitration demand, has served its own arbitration demand, seeking to assess us with all associated late substantial completion liquidated damages under our purchase order, together with liquidated damages for alleged late material and equipment deliveries, and back charges for corrective work and other damages arising out of allegedly defective materials and equipment delivered by us. The client contends it is owed in excess of $69,000 under our purchase order as a result of our alleged failures. There is a risk that the client will attempt to call all or part of the letter of credit during the pendency of the proceeding. We are of the opinion that any such call would be wrongful and entitle us to seek return of the funds and any other damages arising out of the call. Our client has commenced a separate arbitration against the power plant owner, seeking monetary damages and delay liquidated damage assessment refunds for schedule and productivity impacts due to force majeure events and other power plant owner-caused delays. The power plant owner has counterclaimed seeking monetary damages for deficient plant performance including the alleged inability of the boilers to sustain reliable operation. Our client has asserted a claim against us in our arbitration with the client for damages in an unspecified amount due to alleged boiler performance problems. It is our position that the existence of the owner-to-client claim does not affect our liability under our contract with the client. We cannot predict the ultimate outcome of this dispute at this time.

Environmental Matters

     CERCLA and Other Remedial Matters

     Under U.S. federal statutes, such as the Resource Conservation and Recovery Act, Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), the Clean Water Act and the Clean Air Act, and similar state laws, the current owner or operator of real property and the past owners or operators of real property (if disposal of toxic or hazardous substances took place during such past ownership or operation) may be jointly and severally liable for the costs of removal or remediation of toxic or hazardous substances on or under their property, regardless of whether such materials were released in violation of law or whether the owner or operator knew of, or was responsible for, the presence of such substances. Moreover, under CERCLA and similar state laws, persons who arrange for the disposal or treatment of hazardous or toxic substances may also be jointly and severally liable for the costs of the removal or remediation of such substances at a disposal or treatment site, whether or not such site was owned or operated by such person, which we refer to as an off-site facility. Liability at such off-site facilities is typically allocated among all of the financially viable responsible parties based on such factors as the relative amount of waste contributed to a site, toxicity of such waste, relationship of the waste contributed by a party to the remedy chosen for the site and other factors.

     We currently own and operate industrial facilities and we have also transferred our interests in industrial facilities that we formerly owned or operated. It is likely that as a result of our current or former operations, hazardous substances have affected the facilities or the real property on which they are or were situated. We also have received and may continue to receive claims pursuant to indemnity obligations from the present owners of facilities we have transferred, which claims may require us to incur costs for investigation and/or remediation.

     We are currently engaged in the investigation and/or remediation under the supervision of the applicable regulatory authorities at two of our or our subsidiaries’ former facilities (including Mountain Top, which is described below). In addition, we sometimes engage in investigation and/or remediation without the supervision of a regulatory authority. Although we do not expect the environmental conditions at our present or former facilities to cause us to incur material costs in excess of those for which reserves have been established, it is possible that various events could cause us to incur costs materially in excess of our present reserves in order to fully resolve any issues surrounding those conditions. Further, no assurance can be provided that we will not discover additional environmental conditions at our currently or formerly owned or operated properties, or that additional claims will not be made with respect to formerly owned properties, requiring us to incur material expenditures to investigate and/or remediate such conditions.

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     We have been notified that we are a potentially responsible party (“PRP”) under CERCLA or similar state laws at three off-site facilities. At each of these sites, our liability should be substantially less than the total site remediation costs because the percentage of waste attributable to us compared to that attributable to all other PRPs is low. We do not believe that our share of cleanup obligations at any of the off-site facilities as to which we have received a notice of potential liability will exceed $500 in the aggregate. We have also received and responded to a request for information from the United States Environmental Protection Agency (“USEPA”) regarding a fourth off-site facility. We do not know what, if any, further actions USEPA may take regarding this fourth off-site facility.

     Mountain Top

     In February 1988, one of our subsidiaries, Foster Wheeler Energy Corporation (“FWEC”), entered into a Consent Agreement and Order with the USEPA and the Pennsylvania Department of Environmental Protection (“PADEP”) regarding its former manufacturing facility in Mountain Top, Pennsylvania. The order essentially required FWEC to investigate and remediate as necessary contaminants, including trichloroethylene (“TCE”), in the soil and groundwater at the facility. Pursuant to the order, in 1993 FWEC installed a “pump and treat” system to remove TCE from the groundwater. It is not possible at the present time to predict how long FWEC will be required to operate and maintain this system.

     In the fall of 2004, FWEC sampled the private domestic water supply wells of certain residences in Mountain Top and identified approximately 30 residences whose wells contained TCE at levels in excess of Safe Drinking Water Act standards. The subject residences are located approximately one mile to the southwest of where the TCE previously was discovered in the soils at the former FWEC facility. Since that time, FWEC, USEPA, and PADEP have cooperated in responding to the foregoing. Although FWEC believed the evidence available was not sufficient to support a determination that FWEC was responsible for the TCE in the residential wells, FWEC immediately provided the affected residences with bottled water, followed by water filters, and, pursuant to a settlement agreement with USEPA, it hooked them up to the public water system. Pursuant to an amendment of the settlement agreement, FWEC subsequently agreed with USEPA to arrange and pay for the hookup of several additional residences, even though TCE has not been detected in the wells at those residences. The hookups to the agreed-upon residences have been completed. FWEC is incurring costs related to public outreach and communications in the affected area, and it may be required to pay the agencies’ costs in overseeing and responding to the situation.

     FWEC is also incurring further costs in connection with a Remedial Investigation / Feasibility Study (“RI/FS”) that in March 2009 it agreed to conduct. In April 2009, USEPA proposed for listing on the National Priorities List (“NPL”) an area consisting of its former manufacturing facility and the affected residences, but it also stated that the proposed listing may not be finalized if FWEC complies with its agreement to conduct the RI/FS. FWEC submitted comments opposing the proposed listing. FWEC has accrued its best estimate of the cost of the foregoing and it reviews this estimate on a quarterly basis.

     Other costs to which FWEC could be exposed could include, among other things, FWEC’s counsel and consulting fees, further agency oversight and/or response costs, costs and/or exposure related to potential litigation, and other costs related to possible further investigation and/or remediation. At present, it is not possible to determine whether FWEC will be determined to be liable for some or all of the items described in this paragraph or to reliably estimate the potential liability associated with the items. If one or more third-parties are determined to be a source of the TCE, FWEC will evaluate its options regarding the potential recovery of the costs FWEC has incurred, which options could include seeking to recover those costs from those determined to be a source.

     Other Environmental Matters

     Our operations, especially our manufacturing and power plants, are subject to comprehensive laws adopted for the protection of the environment and to regulate land use. The laws of primary relevance to our operations regulate the discharge of emissions into the water and air, but can also include hazardous materials handling and disposal, waste disposal and other types of environmental regulation. These laws and regulations in many cases require a lengthy and complex process of obtaining licenses, permits and approvals from the applicable regulatory agencies. Noncompliance with these laws can result in the imposition of material civil or criminal fines or penalties. We believe that we are in substantial compliance with existing environmental laws. However, no assurance can be provided that we will not become the subject of enforcement proceedings that could cause us to incur material expenditures. Further, no assurance can be provided that we will not need to incur material expenditures beyond our existing reserves to make capital improvements or operational changes necessary to allow us to comply with future environmental laws.

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     With regard to the foregoing, the waste-to-energy facility operated by our Camden County Energy Recovery Associates, LP (“CCERA”) project subsidiary is subject to certain revisions to New Jersey’s mercury air emission regulations. The revisions make CCERA’s mercury control requirements more stringent, especially when the last phase of the revisions becomes effective in 2012. CCERA’s management believes that the data generated during recent stack testing tends to indicate that the facility will be able to comply with even the most stringent of the regulatory revisions without installing additional control equipment. Even if the equipment had to be installed, CCERA could assert that the project’s sponsor would be responsible to pay for the equipment. However, the sponsor may not have sufficient funds to do so or may assert that it is not so responsible. Estimates of the cost of installing the additional control equipment are approximately $30,000 based on our last assessment.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(amounts in thousands of dollars, except share data and per share amounts)

          The following is management’s discussion and analysis of certain significant factors that have affected our financial condition and results of operations for the periods indicated below. This discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto included in this quarterly report on Form 10-Q and our annual report on Form 10-K for the fiscal year ended December 31, 2010, which we refer to as our 2010 Form 10-K.

Safe Harbor Statement

          This management’s discussion and analysis of financial condition and results of operations, other sections of this quarterly report on Form 10-Q and other reports and oral statements made by our representatives from time to time may contain forward-looking statements that are based on our assumptions, expectations and projections about Foster Wheeler AG and the various industries within which we operate. These include statements regarding our expectations about revenues (including as expressed by our backlog), our liquidity, the outcome of litigation and legal proceedings and recoveries from customers for claims and the costs of current and future asbestos claims and the amount and timing of related insurance recoveries. Such forward-looking statements by their nature involve a degree of risk and uncertainty. We caution that a variety of factors, including but not limited to the factors described in Part I, Item 1A, “Risk Factors,” in our 2010 Form 10-K, which we filed with the Securities and Exchange Commission, or SEC, on February 28, 2011, and the following, could cause business conditions and our results to differ materially from what is contained in forward-looking statements:

• benefits, effects or results of our redomestication or the relocation of our principal executive offices to Geneva, Switzerland;

• the search for a permanent Chief Executive Officer;

• benefits, effects or results of our strategic renewal initiative;

• further deterioration in global economic conditions;

• changes in investment by the oil and gas, oil refining, chemical/petrochemical and power generation industries;

• changes in the financial condition of our customers;

• changes in regulatory environments;

• changes in project design or schedules;

• contract cancellations;

• changes in our estimates of costs to complete projects;

• changes in trade, monetary and fiscal policies worldwide;

• compliance with laws and regulations relating to our global operations;

• currency fluctuations;

• war and/or terrorist attacks on facilities either owned by us or where equipment or services are or may be provided by us;

• interruptions to shipping lanes or other methods of transit;

• outcomes of pending and future litigation, including litigation regarding our liability for damages and insurance coverage for asbestos exposure;

• protection and validity of our patents and other intellectual property rights;

• increasing global competition;

• compliance with our debt covenants;

• recoverability of claims against our customers and others by us and claims by third-parties against us; and

• changes in estimates used in our critical accounting policies.

          Other factors and assumptions not identified above were also involved in the formation of these forward-looking statements and the failure of such other assumptions to be realized, as well as other factors, may also cause actual results to differ materially from those projected. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described above in connection with any forward-looking statements that may be made by us.

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          In addition, this management’s discussion and analysis of financial condition and results of operations contains several statements regarding current and future general global economic conditions. These statements are based on our compilation of economic data and analyses from a variety of external sources. While we believe these statements to be reasonably accurate, global economic conditions are difficult to analyze and predict and are subject to significant uncertainty and as a result, these statements may prove to be wrong. The challenges and drivers for each of our business segments are discussed in more detail in the section entitled “—Results of Operations-Business Segments,” within this Item 2.

          We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any additional disclosures we make in proxy statements, quarterly reports on Form 10-Q, annual reports on Form 10-K and current reports on Form 8-K filed with the SEC.

Overview

          We operate through two business groups — the Global Engineering & Construction Group, which we refer to as our Global E&C Group, and our Global Power Group. In addition to these two business groups, we also report corporate center expenses, our captive insurance operation and expenses related to certain legacy liabilities, such as asbestos and other expenses, in the Corporate and Finance Group, which we refer to as the C&F Group.

          We have been exploring, and intend to continue to explore, acquisitions within the engineering and construction industry to strategically complement or expand on our technical capabilities or access to new market segments. We are also exploring acquisitions within the power generation industry to complement our Global Power Group product offering. However, there is no assurance that we will consummate any acquisitions in the future.

Summary Financial Results for the Fiscal Three Months Ended March 31, 2011

          Our summary financial results for the fiscal three months ended March 31, 2011 and 2010 are as follows:

	Fiscal Three Months Ended March 31,
	2011		2010
Consolidated Statement of Operations Data:
Operating revenues (1)	$	1,036,252	$	945,573
Contract profit (1)		99,255		172,082
Selling, general and administrative expenses (1)		73,841		70,305
Net income attributable to Foster Wheeler AG		22,971		72,060
Earnings per share :
Basic		0.18		0.57
Diluted		0.18		0.56
Net cash provided by operating activities (2)		66,503		(4,217	)

(1)	Please refer to the section entitled “—Results of Operations” within this Item 2 for further discussion.
(2)	Please refer to the section entitled “—Liquidity and Capital Resources” within this Item 2 for further discussion.

          Cash and cash equivalents totaled $1,102,823 and $1,057,163 as of March 31, 2011 and December 31, 2010, respectively.

          Net income attributable to Foster Wheeler AG decreased in the fiscal first three months of 2011, compared to the same period of 2010, primarily driven by the pretax decrease in contract profit of $72,800, partially offset by increased equity earnings in our Global Power Group’s project in Chile.

          Please refer to the discussion within the section entitled “—Results of Operations” within this Item 2.

Challenges and Drivers

          Our primary operating focus continues to be booking quality new business and executing our contracts well. The global markets in which we operate are largely dependent on overall economic growth and the resultant demand for oil and gas, electric power, petrochemicals and refined products.

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          In the engineering and construction industry, we expect long-term demand to be strong for the end products produced by our clients, and we believe that this long-term demand will continue to stimulate investment by our clients in new, expanded and upgraded facilities. The global economic downturn experienced in 2008 and 2009 caused many of our engineering and construction clients to reevaluate the size, timing and scope of their capital spending plans in relation to the kinds of energy, petrochemical and pharmaceutical projects that we execute, but as the global economic outlook continues to improve, we have noted signs of market improvement. During fiscal year 2010 and the beginning of fiscal year 2011, we have been seeing an increased number of our clients implementing their capital spending plans. Some of these clients are continuing to release tranches of work on a piecemeal basis, conducting further analysis before deciding to proceed with their investments or re-evaluating the size, timing or configuration of specific planned projects. We are also seeing clients re-activating planned projects that had previously been placed on hold and developing new projects. The challenges and drivers for our Global E&C Group are discussed in more detail in the section entitled “—Results of Operations-Business Segments-Global E&C Group-Overview of Segment,” within this Item 2.

          During fiscal year 2010 and the beginning of fiscal year 2011, we have seen an improvement in the demand in some markets for the products and services of our Global Power Group, based on increased new proposal activity. We believe this demand will continue to improve during fiscal year 2011, driven primarily by growing electricity demand and industrial production as economies around the world continue to recover. The challenges and drivers for our Global Power Group are discussed in more detail in the section entitled “—Results of Operations-Business Segments-Global Power Group-Overview of Segment,” within this Item 2.

New Orders and Backlog of Unfilled Orders

          The tables below summarize our new orders and backlog of unfilled orders by period:

	Fiscal Quarter Ended
	March 31, 2011		December 31, 2010		March 31, 2010
New orders, measured in future revenues:
Global E&C Group*	$	719,800	$	896,600	$	476,300
Global Power Group		143,700		422,600		462,200
Total*	$	863,500	$	1,319,200	$	938,500
*      Balances include Global E&C Group flow-through revenues, as defined in the section entitled “—Results of Operations-Operating Revenues” within this Item 2.
	$	338,400	$	335,100	$	58,100
	As of
	March 31, 2011		December 31, 2010		March 31, 2010
Backlog of unfilled orders, measured in future revenues	$	3,849,300	$	3,979,500	$	4,027,800
Backlog, measured in Foster Wheeler scope*	$	2,624,100	$	2,643,200	$	2,306,700
E&C man-hours in backlog (in thousands)		12,500		12,700		13,500

* As defined in the section entitled “—Backlog and New Orders” within this Item 2.

          Please refer to the section entitled “—Backlog and New Orders” within this Item 2 for further detail.

Results of Operations

Operating Revenues

	Fiscal Three Months Ended March 31,
	2011		2010		$ Change		% Change
Global E&C Group	$	823,743	$	779,684	$	44,059		5.7	%
Global Power Group		212,509		165,889		46,620		28.1	%
Total	$	1,036,252	$	945,573	$	90,679		9.6	%

          We operate through two business groups: our Global E&C Group and our Global Power Group. Please refer to the section entitled “—Business Segments,” within this Item 2, for a discussion of the products and services of our business segments.

          The composition of our operating revenues varies from period to period based on the portfolio of contracts in execution during any given period. Our operating revenues are further dependent upon the strength of the various geographic markets and industries we serve and our ability to address those markets and industries.

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          Our operating revenues by geographic region, based upon where our projects are being executed, for the fiscal three months ended March 31, 2011 and 2010, were as follows:

	Fiscal Three Months Ended March 31,
	2011		2010		$ Change			% Change
Africa	$	54,920	$	34,980	$	19,940			57.0	%
Asia		188,315		212,631		(24,316	)		(11.4	)%
Australasia and other*		240,021		253,060		(13,039	)		(5.2	)%
Europe		187,628		199,910		(12,282	)		(6.1	)%
Middle East		69,833		73,923		(4,090	)		(5.5	)%
North America		233,618		126,641		106,977			84.5	%
South America		61,917		44,428		17,489			39.4	%
Total	$	1,036,252	$	945,573	$	90,679			9.6	%

* Australasia and other primarily represents Australia, New Zealand and the Pacific Islands.

          Our operating revenues increased in the fiscal first three months of 2011, compared to the same period in 2010, primarily as a result of increased flow-through revenues of $99,000, as described below. Our operating revenues were relatively flat excluding the impact of the change in flow-through revenues in the fiscal first three months of 2011, compared to the same period in 2010, which was the net result of decreased operating revenues in our Global E&C Group, substantially offset by increased operating revenues in our Global Power Group. Foreign currency fluctuations had a minimal impact on the change in operating revenues from the fiscal first three months of 2011, compared to the same period in 2010.

          Flow-through revenues and costs result when we purchase materials, equipment or third-party services on behalf of our customer on a reimbursable basis with no profit on the materials, equipment or third-party services and where we have the overall responsibility as the contractor for the engineering specifications and procurement or procurement services for the materials, equipment or third-party services included in flow-through costs. Flow-through revenues and costs do not impact contract profit or net earnings.

          Please refer to the section entitled “—Business Segments,” within this Item 2, for further discussion related to operating revenues and our view of the market outlook for both of our operating groups.

Contract Profit

Fiscal Three Months Ended March 31,
2011		2010		$ Change			% Change
$	99,255	$	172,082	$	(72,827	)		(42.3	)%

          Contract profit is computed as operating revenues less cost of operating revenues. “Flow-through” amounts are recorded both as operating revenues and cost of operating revenues with no contract profit. Contract profit margins are computed as contract profit divided by operating revenues. Flow-through revenues reduce the contract profit margin as they are included in operating revenues without any corresponding impact on contract profit. As a result, we analyze our contract profit margins excluding the impact of flow-through revenues as we believe that this is a more accurate measure of our operating performance.

          Contract profit declined during the fiscal first three months of 2011, compared to the same period in 2010, driven by our Global E&C Group and, to a lesser extent, our Global Power Group. Our contract profit decline also included the impact of a curtailment gain of approximately $20,100 recognized in the fiscal first three months of 2010 related to our Global E&C Group’s U.K. pension plan that was closed for future defined benefit accrual. Please refer to the section entitled “—Business Segments,” within this Item 2, for further information related to contract profit for both of our operating groups.

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Selling, General and Administrative (SG&A) Expenses

Fiscal Three Months Ended March 31,
2011		2010		$ Change		% Change
$	73,841	$	70,305	$	3,536		5.0	%

          SG&A expenses include the costs associated with general management, sales pursuit, including proposal expenses, and research and development costs.

          SG&A expenses increased in the fiscal first three months of 2011, compared to the same period in 2010, primarily as a result of increased general overhead costs of $1,800 and sales pursuit costs of $1,700, while research and development costs were relatively unchanged.

Other Income, net

Fiscal Three Months Ended March 31,
2011		2010		$ Change		% Change
$	14,266	$	8,332	$	5,934		71.2	%

          Other income, net during the fiscal first three months of 2011, consisted primarily of equity earnings of $12,300 generated from our investments, primarily from our ownership interests in build, own and operate projects in Italy and Chile.

          Other income, net increased in the fiscal first three months of 2011, compared to 2010, primarily driven by significantly increased equity earnings in our Global Power Group’s project in Chile of $7,100, partially offset by decreased equity earnings of $900 related to two of our Global E&C Group’s projects in Italy that terminated their power off-take agreements with a local energy authority during the fiscal fourth quarter of 2010.

          For further information related to our equity earnings, please refer to the sections within this Item 2 entitled “—Business Segments-Global Power Group” for our Global Power Group’s project in Chile and “—Business Segments-Global E&C Group” for our Global E&C Group’s projects in Italy, as well as Note 3 to the consolidated financial statements in this quarterly report on Form 10-Q.

Other Deductions, net

Fiscal Three Months Ended March 31,
2011		2010		$ Change			% Change
$	6,117	$	11,688	$	(5,571	)		(47.7	)%

          Other deductions, net includes various items, such as legal fees, consulting fees, bank fees, net penalties on unrecognized tax benefits and the impact of net foreign exchange transactions within the period. Net foreign exchange transactions include the net amount of transaction losses and gains that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency of our subsidiaries.

          Other deductions, net in the fiscal first three months of 2011 consisted primarily of $3,400 of legal fees, $800 of bank fees, $700 of net penalties on unrecognized tax benefits and $600 of consulting fees, partially offset by a $500 net foreign exchange transaction gain. The decrease in other deductions, net in the fiscal first three months of 2011, compared to the same period in 2010, was primarily the net result of a favorable impact of $5,000 related to the change in net foreign exchange transactions.

          Net foreign exchange transactions in the fiscal first three months of 2011 resulted in a net gain of $500. The net gain was primarily driven from exchange rate fluctuations on cash balances held by certain of our subsidiaries that were denominated in a currency other than the functional currency of those subsidiaries.

Interest Income

Fiscal Three Months Ended March 31,
2011		2010		$ Change		% Change
$	3,275	$	2,359	$	916		38.8	%

          Interest income increased in the fiscal first three months of 2011, compared to the same period in 2010, primarily as a result of higher interest rates and investment yields and, to a lesser extent, higher average cash and cash equivalents balances, while the impact of foreign currency fluctuations was relatively unchanged.

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Interest Expense

Fiscal Three Months Ended March 31,
2011		2010		$ Change			% Change
$	3,879	$	4,551	$	(672	)		(14.8	)%

          Interest expense decreased in the fiscal first three months of 2011, compared to the same period in 2010, which was the net result of a favorable impact from decreased average borrowings, partially offset by increased interest expense on unrecognized tax benefits of $700.

Net Asbestos-Related Provision/(Gain)

Fiscal Three Months Ended March 31,
2011		2010			$ Change		% Change
$	400	$	(747	)	$	1,147		N/M

N/M — not meaningful

          The change in the net asbestos-related provision/(gain) in the fiscal first three months of 2011, compared to the same period in 2010, primarily resulted from a decreased gain on the settlement of coverage litigation with asbestos insurance carriers of $2,400, partially offset by a decrease in our provision related to the revaluation of our asbestos liability of $1,300. The decrease in our provision primarily related to a charge during the fiscal first three months of 2010 related to the revaluation of our asbestos liability, as actual claim settlement experience differed from our estimates.

Provision for Income Taxes

	Fiscal Three Months Ended March 31,
	2011			2010			$ Change			% Change
Provision for income taxes	$	7,283		$	21,610		$	(14,327	)		(66.3	)%
Effective Tax Rate		22.4	%		22.3	%

     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. Deferred tax assets and liabilities are established for tax attributes (credits or loss carryforwards) and temporary differences between the book and tax basis of assets and liabilities. Within each jurisdiction and taxpaying component, current and noncurrent deferred tax assets and liabilities are combined and presented as a net amount. Deferred tax assets are reduced by a valuation allowance when, based upon available evidence, it is more likely than not that the tax benefit of loss carryforwards (or other deferred tax assets) will not be realized in the future. 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. We have decreased our December 31, 2010 deferred tax assets (current and non-current) and noncurrent deferred tax liabilities in equal amounts in order to reflect the net presentation of deferred tax assets and liabilities by jurisdiction consistent with our March 31, 2011 presentation.

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Fiscal Year 2011

     Our effective tax rate for the fiscal first three months of 2011 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 14-percentage point reduction in the effective tax rate for the full year 2011.

• A valuation allowance increase for the quarter because we are unable to recognize a tax benefit for year-to-date losses subject to valuation allowance in the United States.

• Discrete items for the quarter, including, primarily, changes in judgment regarding unrecognized tax benefits and certain adjustments to deferred taxes and taxes payable for prior years.

     Both the valuation allowance increase and the discrete items for the quarter are not expected to significantly change the effective tax rate for the full year 2011.

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 contributed to an approximate 19-percentage point reduction in the effective tax rate.

• Total changes in our valuation allowance contributed to an approximate five-percentage point increase in the effective tax rate as a result of the impact of a net 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).

          We monitor the jurisdictions for which valuation allowances against deferred tax assets were established in previous years, and we evaluate, on a quarterly basis, the need for the valuation allowances against deferred tax assets in those jurisdictions. Such evaluation includes a review of all available evidence, both positive and negative, in determining whether a valuation allowance is necessary.

          For statutory purposes, the majority of the U.S. federal tax benefits, against which valuation allowances have been established, do not expire until fiscal year 2026 and beyond, based on current tax laws.

Net Income Attributable to Noncontrolling Interests

Fiscal Three Months Ended March 31,
2011		2010		$ Change			% Change
$	2,305	$	3,306	$	(1,001	)		(30.3	)%

          Net income attributable to noncontrolling interests represents third-party ownership interests in the net income of our Global Power Group’s Martinez, California gas-fired cogeneration subsidiary and our manufacturing subsidiaries in Poland and the People’s Republic of China as well as our Global E&C Group’s subsidiaries in Malaysia and South Africa. The change in net income attributable to noncontrolling interests is based upon changes in the net income of these subsidiaries and/or changes in the noncontrolling interests’ ownership interest in the subsidiaries.

          The decrease in net income attributable to noncontrolling interests in the fiscal first three months of 2011, compared to the same period in 2010, primarily resulted from our operations in South Africa. The decrease in net income attributable to noncontrolling interests also included the net impact of an increase in our operations in Martinez, California, significantly offset by a decrease from our operations in the People’s Republic of China.

EBITDA

          EBITDA, as discussed and defined below, is the primary measure of operating performance used by our chief operating decision maker.

          In addition to our two business groups, which also represent operating segments for financial reporting purposes, we report corporate center expenses, our captive insurance operation and expenses related to certain legacy liabilities, such as asbestos, in the Corporate and Finance Group, or C&F Group, which we also treat as an operating segment for financial reporting purposes.

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Fiscal Three Months Ended March 31,
2011		2010		$ Change			% Change
$	46,804	$	111,280	$	(64,476	)		(57.9	)%

          EBITDA decreased in the fiscal first three months of 2011, compared to the same period in 2010, primarily driven by decreased contract profit which included the unfavorable impact of the inclusion of a curtailment gain recognized in the fiscal first three months of 2010 related to our Global E&C Group’s U.K. pension plan that was closed for future defined benefit accrual, partially offset by increased equity earnings in our Global Power Group’s project in Chile. Please refer to the preceding discussion of each of these items within this “—Results of Operations” section.

          See the individual segment explanations below for additional details.

          EBITDA is a supplemental financial measure not defined in generally accepted accounting principles, or GAAP. We define EBITDA as income attributable to Foster Wheeler AG before interest expense, income taxes, depreciation and amortization. We have presented EBITDA because we believe it is an important supplemental measure of operating performance. Certain covenants under our U.S. senior secured credit agreement use an adjusted form of EBITDA such that in the covenant calculations the EBITDA as presented herein is adjusted for certain unusual and infrequent items specifically excluded in the terms of our U.S. senior secured credit agreement. We believe that the line item on the consolidated statement of operations entitled “net income attributable to Foster Wheeler AG” is the most directly comparable GAAP financial measure to EBITDA. Since EBITDA is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, net income attributable to Foster Wheeler AG as an indicator of operating performance or any other GAAP financial measure. EBITDA, as calculated by us, may not be comparable to similarly titled measures employed by other companies. In addition, this measure does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to fund our cash needs. As EBITDA excludes certain financial information that is included in net income attributable to Foster Wheeler AG, users of this financial information should consider the type of events and transactions that are excluded. Our non-GAAP performance measure, EBITDA, has certain material limitations as follows:

• It does not include interest expense. Because we have borrowed money to finance some of our operations, interest is a necessary and ongoing part of our costs and has assisted us in generating revenue. Therefore, any measure that excludes interest expense has material limitations;

• It does not include taxes. Because the payment of taxes is a necessary and ongoing part of our operations, any measure that excludes taxes has material limitations; and

• It does not include depreciation and amortization. Because we must utilize property, plant and equipment and intangible assets in order to generate revenues in our operations, depreciation and amortization are necessary and ongoing costs of our operations. Therefore, any measure that excludes depreciation and amortization has material limitations.

          A reconciliation of EBITDA to net income attributable to Foster Wheeler AG is shown below.

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			Global		Global		C&F
	Total		E&C Group		Power Group		Group(1)
Fiscal Three Months Ended March 31, 2011:
EBITDA(2)	$	46,804	$	41,668	$	26,464	$	(21,328	)
Less: Interest expense		3,879
Less: Depreciation and amortization		12,671
Less: Provision for income taxes		7,283
Net income attributable to Foster Wheeler AG	$	22,971
Fiscal Three Months Ended March 31, 2010:
EBITDA(2)	$	111,280	$	99,933	$	29,883	$	(18,536	)
Less: Interest expense		4,551
Less: Depreciation and amortization		13,059
Less: Provision for income taxes		21,610
Net income attributable to Foster Wheeler AG	$	72,060

(1)	Includes general corporate income and expense, our captive insurance operation and the elimination of transactions and balances related to intercompany interest.
(2)	EBITDA includes the following:

	Fiscal Three Months Ended March 31,
	2011			2010
Net (decrease)/increase in contract profit from the regular revaluation of final estimated contract profit revisions*:
Global E&C**	$	800		$	9,200
Global Power Group**		(5,400	)		3,900
Total**		(4,600	)		13,100
Net asbestos-related provision/(gain) in C&F Group***		400			(700	)
Curtailment gain on the closure of the U.K. pension plan for future defined benefit accrual in our Global E&C Group		—			20,100

*	Please refer to “Revenue Recognition on Long-Term Contracts” in Note 1 to the consolidated financial statements in this quarterly report on Form 10-Q for further information regarding changes in our final estimated contract profit.
**	The changes in final estimated contract profit revisions during the fiscal three months ended March 31, 2011 included the impact of two out-of-period corrections for reductions of final estimated profit totaling $7,800, which included final estimated profit reductions in our Global E&C Group and our Global Power Group of $3,200 and $4,600, respectively. The corrections were recorded in the current period as they were not material to previously issued financial statements, nor are they expected to be material to the full year 2011 financial statements.
***	Please refer to Note 12 to the consolidated financial statements in this quarterly report on Form 10-Q for further information regarding the revaluation of our asbestos liability and related asset.

          The accounting policies of our business segments are the same as those described in our summary of significant accounting policies as disclosed in our 2010 Form 10-K. The only significant intersegment transactions relate to interest on intercompany balances. We account for interest on those arrangements as if they were third-party transactions—i.e. at current market rates, and we include the elimination of that activity in the results of the C&F Group.

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Business Segments

Global E&C Group

	Fiscal Three Months Ended March 31,
	2011		2010		$ Change			% Change
Operating revenues	$	823,743	$	779,684	$	44,059			5.7	%
EBITDA	$	41,668	$	99,933	$	(58,265	)		(58.3	)%

Results

          Our Global E&C Group’s operating revenues by geographic region for the fiscal three months ended March 31, 2011 and 2010, based upon where our projects are being executed, were as follows:

	Fiscal Three Months Ended March 31,
	2011		2010		$ Change			% Change
Africa	$	54,920	$	34,735	$	20,185			58.1	%
Asia		118,698		187,271		(68,573	)		(36.6	)%
Australasia and other*		240,021		252,862		(12,841	)		(5.1	)%
Europe		113,376		141,807		(28,431	)		(20.0	)%
Middle East		60,931		70,540		(9,609	)		(13.6	)%
North America		181,337		59,546		121,791			204.5	%
South America		54,460		32,923		21,537			65.4	%
Total	$	823,743	$	779,684	$	44,059			5.7	%

* Australasia and other primarily represents Australia, New Zealand and the Pacific Islands.

          Our Global E&C Group experienced an increase in operating revenues of 6% in the fiscal first three months of 2011, compared to the same period in 2010. The increase in the period was primarily driven by increased flow-through revenues of $99,200, while foreign currency fluctuations had a minimal impact. Excluding flow-through revenues, our Global E&C Group’s operating revenues decreased 13% in the fiscal first three months of 2011, compared to the same period in 2010. Please refer to the “—Overview of Segment” section below for a discussion of our Global E&C Group’s market outlook.

          The decrease in our Global E&C Group’s EBITDA in the fiscal first three months of 2011, compared to the same period in 2010, resulted primarily from the net impact of the following:

• Decreased contract profit of $45,200, excluding the impact of a curtailment gain recognized in the fiscal first three months of 2010 related to our U.K. defined benefit pension plan noted below, which primarily resulted from decreased contract profit margins and, to a lesser extent, decreased volume of operating revenues, excluding flow-through revenues.

• The unfavorable impact of the inclusion of a $20,100 curtailment gain recognized in the fiscal first three months of 2010 related to our U.K. defined benefit pension plan that was closed for future benefit accrual, which was included in contract profit.

• Decreased equity earnings of $900 related to two of our Global E&C Group’s projects in Italy that terminated their power off-take agreements with a local energy authority during the fiscal fourth quarter of 2010.

• A favorable impact of $6,200 related to the change in net foreign exchange transactions, which was primarily driven from exchange rate fluctuations on cash balances held by certain of our subsidiaries that were denominated in a currency other than the functional currency of those subsidiaries.

          During 2010, two of our equity interest investments in electric power generation projects in Italy, Centro Energia Teverola S.p.A., or CET, and Centro Energia Ferrara S.p.A., or CEF, terminated long-term incentivized power off-take agreements that they had in place with the Authority for Energy. In light of the termination of the power off-take agreements, we and our respective partners at CET and CEF reviewed the economic viability of each plant. As a result, a decision was made to shut down the CET plant effective January 1, 2011. We and our partner in CEF decided to continue to operate the CEF plant at least temporarily on a merchant basis following the termination of its power off-take agreement. We and our partner in the CEF plant will continue to review the economic viability of the project and we may consider a potential sale of the plant in 2011. As a result of the foregoing operating decisions, CET and CEF recorded impairment charges during the fiscal fourth quarter of 2010 to write down their fixed assets to fair value in their financial statements. Additionally, during the fiscal fourth quarter of 2010, our investments in CET and CEF were reduced by equity losses based on CET and CEF’s 2010 financial results, inclusive of the respective impairment charges. As a result of the foregoing, the carrying value of

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our CET and CEF investments approximated fair value at December 31, 2010. Our equity earnings from our investments in CET and CEF during the fiscal three months ended March 31, 2011 were insignificant. Our equity earnings for our CET and CEF investments during the fiscal three months ended March 31, 2010 were $428 and $511, respectively. Please refer to Note 3 to the consolidated financial statements in this quarterly report on Form 10-Q for more information.

Overview of Segment

          Our Global E&C 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 facilities, distribution facilities, gasification facilities and processing facilities associated with the metals and mining sector. Our Global E&C 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. Additionally, our Global E&C Group is also involved in the development, engineering, construction, ownership and operation of power generation facilities, from conventional and renewable sources, and of waste-to-energy facilities in Europe.

	Our Global E&C 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 and contractors.
•	Environmental remediation services, together with related technical, engineering, design and regulatory services.
•	Design and supply of direct-fired furnaces, including fired heaters and waste heat recovery generators, used in a range of refinery, chemical, petrochemical, oil and gas processes, including furnaces used in its proprietary delayed coking and hydrogen production technologies.

          Our Global E&C Group owns one of the leading technologies (SYDEC^SM delayed coking) used in refinery residue upgrading, in addition to other refinery residue upgrading technologies (solvent deasphalting and visbreaking), and a hydrogen production process used in oil refineries and petrochemical plants. During the fiscal fourth quarter of 2010, our Global E&C Group acquired a proprietary sulfur recovery technology through a business acquisition. The sulfur recovery technology is used to treat gas streams containing hydrogen sulfide for the purpose of reducing the sulfur content of fuel products and to recover a saleable sulfur by-product. Additionally, our Global E&C Group has experience with, and is able to work with, a wide range of processes owned by others.

          Our Global E&C Group generates revenues from design, engineering, procurement, construction and project management activities pursuant to contracts spanning up to approximately four years in duration and generates equity earnings from returns on its noncontrolling interest investments in various power production facilities.

          In the engineering and construction industry, we expect long-term demand to be strong for the end products produced by our clients, and we believe that this long-term demand will continue to stimulate investment by our clients in new, expanded and upgraded facilities. The global economic downturn experienced in 2008 and 2009 caused many of our engineering and construction clients to reevaluate the size, timing and scope of their capital spending plans in relation to the kinds of energy, petrochemical and pharmaceutical projects that we execute.

          As the global economy has started to recover, we have noted signs of market improvement. During fiscal year 2010 and the beginning of fiscal year 2011, we have been seeing an increased number of our clients implementing their capital spending plans. Some of these clients are continuing to release tranches of work on a piecemeal basis, conducting further analysis before deciding to proceed with their investments or re-evaluating the size, timing or configuration of specific planned projects. We are also seeing clients re-activating planned projects that had previously been placed on hold and developing new projects. We are also seeing intensified competition among engineering and construction contractors, which has resulted in pricing pressure. These factors may continue through the remainder of fiscal year 2011.

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          In addition, we believe world demand for energy and chemicals will continue to grow over the long-term and that clients will continue to invest in new and upgraded capacity to meet that demand. Moreover, we have continued to be successful in booking contracts of varying types and sizes in our key end markets, including a new contract award for the front-end engineering design, or FEED, project for a chemicals complex expansion in China, a FEED and engineering. procurement, and construction management, or EPCm, project for a refinery revamp in Asia, an EPCm project for a delayed coker revamp in Europe, a refinery FEED project in South America, a feasibility study for a potash project in Canada, a FEED project for facilities related to copper production in Chile, and a detailed design contract for deepwater export pipelines in the Gulf of Mexico. Our success in this regard is a reflection of our technical expertise, our long-term relationships with clients, and our selective approach in pursuit of new prospects where we believe we have significant differentiators.

Global Power Group

	Fiscal Three Months Ended March 31,
	2011		2010		$ Change			% Change
Operating revenues	$	212,509	$	165,889	$	46,620			28.1	%
EBITDA	$	26,464	$	29,883	$	(3,419	)		(11.4	)%

Results

          Our Global Power Group’s operating revenues by geographic region for the fiscal three months ended March 31, 2011 and 2010, based upon where our projects are being executed, were as follows:

	Fiscal Three Months Ended March 31,
	2011		2010		$ Change			% Change
Africa	$	—	$	245	$	(245	)		(100.0	)%
Asia		69,617		25,360		44,257			174.5	%
Australasia and other*		—		198		(198	)		(100.0	)%
Europe		74,252		58,103		16,149			27.8	%
Middle East		8,902		3,383		5,519			163.1	%
North America		52,281		67,095		(14,814	)		(22.1	)%
South America		7,457		11,505		(4,048	)		(35.2	)%
Total	$	212,509	$	165,889	$	46,620			28.1	%

* Australasia and other primarily represents Australia, New Zealand and the Pacific Islands.

          Our Global Power Group experienced a significant increase in operating revenues in the fiscal three months ended March 31, 2011, compared to the same period in 2010. The increase was attributable to an increased volume of business, while foreign currency fluctuations had a minimal impact on the change. Please refer to the “—Overview of Segment” section below for a discussion of our Global Power Group’s market outlook.

          The decrease in our Global Power Group’s EBITDA in the fiscal first three months of 2011, compared to the same period in 2010, resulted primarily from the net impact of the following:

• Decreased contract profit of $9,200, primarily as a result of decreased contract profit margins, including the impact of an out-of-period correction for a reduction of final estimated profit of approximately $4,600 which is discussed in the preceding section within this Item 2 entitled “—Results of Operations-EBITDA”, despite a benefit from the volume increase in operating revenues noted above.

• An increase in equity earnings in our Global Power Group’s project in Chile of $7,100, driven primarily by higher marginal rates for electrical power generation included in the project’s business interruption insurance recovery. Please see below for further discussion.

          On February 27, 2010, an earthquake occurred off the coast of Chile that caused significant damage to our Global Power Group’s project in Chile. As a result of the damage, the project’s facility suspended normal operating activities on that date. The project included an estimated recovery under its business interruption insurance policy in its financial statements while the facility suspended normal operating activities. The facility is currently operating in testing mode and is expected to resume normal operating activities in the fiscal second quarter of 2011. Our Global Power Group’s equity earnings from the project in Chile in the fiscal three months ended March 31, 2011 and 2010 were $9,900 and $2,800, respectively.

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Overview of Segment

          Our Global Power Group designs, manufactures and erects steam generators and auxiliary equipment for electric power generating stations, district heating and power plants and industrial facilities worldwide. Our competitive differentiation in serving these markets is the ability of our products to cleanly and efficiently burn a wide range of fuels, singularly or in combination. In particular, our CFB steam generators are able to burn coals of varying quality, as well as petroleum coke, lignite, municipal waste, waste wood, biomass, and numerous other materials. Among these fuel sources, coal is the most widely used, and thus the market drivers and constraints associated with coal strongly affect the steam generator market and our Global Power Group’s business. Additionally, our Global Power Group 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 offers a number of other products and services related to steam generators, including:

• Designing, manufacturing and installing auxiliary and replacement equipment for utility power and industrial facilities, including surface condensers, feedwater heaters, coal pulverizers, steam generator coils and panels, biomass gasifiers, and replacement parts for steam generators.

• Installation of nitrogen-oxide, or NO_x, reduction systems and components for pulverized coal steam generators such as selective catalytic reduction systems, low NO_x combustion systems, low NO_x burners, primary combustion and overfire air systems and components, fuel and combustion air measuring and control systems and components.

• A broad range of site services including construction and erection services, maintenance engineering, steam generator upgrading and life extension, and plant repowering.

• Research and development in the areas of combustion, fluid and gas dynamics, heat transfer, materials and solid mechanics.

• Technology licenses to other steam generator suppliers in select countries.

          During fiscal year 2010 and the beginning of fiscal year 2011, we have seen an improvement in the demand in some markets for the products and services of our Global Power Group, based on increased new proposal activity. We believe this demand will continue to improve during fiscal year 2011, driven primarily by growing electricity demand and industrial production as economies around the world continue to recover. We are now seeing increased demand for our products in Asia, Eastern Europe and the Middle East which has resulted in new proposal activity.

          However, a number of constraining market forces continue to impact the markets that we serve. Political and environmental sensitivity regarding coal-fired steam generators continues to cause prospective projects utilizing coal as its primary fuel to be postponed or cancelled as clients experienced difficulty in obtaining the required environmental permits or decided to wait for additional clarity regarding governmental regulations. This environmental concern has been especially pronounced in the U.S. and Western Europe, and is linked to the view that solid-fuel-fired steam generators contribute to global warming through the discharge of greenhouse gas emissions into the atmosphere. The outlook for continued lower natural gas pricing over the next three-to-five years, driven by increasing supply and new liquefied natural gas capacity, has increased the attractiveness of natural gas, in relation to coal, for the generation of electricity. In addition, the constraints on the global credit market may continue to impact some of our clients’ investment plans as these clients are affected by the availability and cost of financing, as well as their own financial strategies, which could include cash conservation.

          Longer-term, we believe that world demand for electrical energy will continue to grow and that solid-fuel-fired steam generators will continue to fill a significant portion of the incremental growth in new generating capacity. The unfortunate recent events involving Japan’s nuclear power plant facilities has many countries reevaluating their nuclear power policy with a recognition that coal power may play a larger role to meet their long-term energy demand. Countries may decide not to pursue nuclear power for new power plant facilities or decide to accelerate the retirement schedule for existing nuclear power plant facilities, both of which could increase demand for new coal-fired power plant facilities, which in turn could improve the demand for our Global Power Group’s coal-fired steam generators. In addition, we are seeing a growing need to repower older coal plants with new more efficient and cleaner burning coal plants in order to meet environmental, financial and reliability goals set by policy makers in many countries. The fuel flexibility of our CFB steam generators enables them to burn a wide variety of fuels other than coal and to produce carbon-neutral electricity when fired by biomass. In addition, our utility steam generators can be designed to incorporate supercritical steam technology, which significantly improves power plant efficiency and reduces power plant emissions.

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          We have recently received an award to carry out the detailed engineering and supply of a pilot-scale (approximately 30 megawatt thermal, equivalent to approximately 10 megawatt electrical, or MWe) CFB steam generator, which incorporates our carbon-capturing Flexi-Burn^TM technology. Once operational, this pilot facility will be utilized to validate the design of a full-scale carbon-capturing CFB power plant. Further, we have recently signed, together with other parties, a grant agreement with the European Commission, or EC, to support the technology development of a commercial scale (approximately 300 MWe) Carbon Capture and Storage, or CCS, demonstration plant featuring our Flexi-Burn^TM CFB technology. If the technology development work demonstrates that the project meets its specified technology and investment goals, construction of the commercial scale demonstration plant could begin in 2012 and the plant could be operational by 2015. This project is one of the six European based CCS projects selected for funding by the EC under the European Energy Program for Recovery and it is the only selected project utilizing CFB technology for CCS application.

Liquidity and Capital Resources

Fiscal First Three Months of 2011 Activities

          Our cash and cash equivalents and restricted cash balances were:

	As of
	March 31, 2011		December 31, 2010		$ Change		% Change
Cash and cash equivalents	$	1,102,823	$	1,057,163	$	45,660		4.3	%
Restricted cash		33,259		27,502		5,757		20.9	%
Total	$	1,136,082	$	1,084,665	$	51,417		4.7	%

          Total cash and cash equivalents and restricted cash held by our non-U.S. entities as of March 31, 2011 and December 31, 2010 were $885,400 and $849,500, respectively.

          During the fiscal first three months of 2011, we experienced an increase in cash and cash equivalents of $45,700, primarily as a result of cash provided by operating activities of $66,500 and a favorable impact related to exchange rate changes on our cash and cash equivalents of $23,900, partially offset by cash used to repurchase our shares under our share repurchase program of $29,200 and capital expenditures of $11,500.

Cash Flows from Operating Activities

	Fiscal Three Months Ended March 31,
	2011		2010			$ Change		% Change
Net cash provided by/(used in) operating activities	$	66,503	$	(4,217	)	$	70,720		N/M

          Net cash provided by operating activities in the fiscal first three months of 2011 primarily resulted from cash provided by working capital of $51,700, net income of $29,300, which excludes non-cash charges of $4,100, partially offset by cash used for net asbestos-related payments of $12,500 (please refer to Note 12 to the consolidated financial statements in this quarterly report on Form 10-Q for further information on net asbestos-related payments) and mandatory contributions to our non-U.S. pension plans of $3,900.

          The increase in net cash provided by operating activities of $70,700 in the fiscal first three months of 2011, compared to the same period of 2010, resulted primarily from a favorable change in working capital that resulted in an increase in cash of $120,300 and decreased contributions to our non-U.S. pension plans of $9,800, partially offset by decreased cash provided by net income of $45,100 and increased net asbestos-related payments of $6,100.

          Working capital varies from period to period depending on the mix, stage of completion and commercial terms and conditions of our contracts and the timing of the related cash receipts. We generated cash from the conversion of working capital during the fiscal first three months of 2011, as cash receipts from client billings exceeded cash used for services rendered and purchases of materials and equipment. During the fiscal first three months of 2010, we used cash to fund working capital. The increase in cash provided by working capital during the fiscal first three months of 2011 was driven by the conversion of working capital to cash by our Global Power Group, partially offset by cash used to fund working capital in our Global E&C Group.

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          As more fully described below in “—Outlook,” we believe our existing cash balances and forecasted net cash provided from operating activities will be sufficient to fund our operations throughout the next 12 months. Our ability to increase or maintain our cash flows from operating activities in future periods will depend in large part on the demand for our products and services and our operating performance in the future. Please refer to the sections entitled “—Global E&C Group-Overview of Segment” and “—Global Power Group-Overview of Segment” above for our view of the outlook for each of our business segments.

Cash Flows from Investing Activities

	Fiscal Three Months Ended March 31,
	2011			2010			$ Change			% Change
Net cash used in investing activities	$	(15,579	)	$	(4,788	)	$	(10,791	)		225.4	%

          The net cash used in investing activities in the fiscal first three months of 2011 was attributable primarily to capital expenditures of $11,500 and an increase in restricted cash of $4,900.

          The net cash used in investing activities in the fiscal first three months of 2010 was attributable primarily to capital expenditures of $6,200 and a contractual payment of $1,200 related to a prior business acquisition.

          The capital expenditures in the fiscal first three months of 2011 and 2010 related primarily to project construction, leasehold improvements, information technology equipment and office equipment. Our capital expenditures increased $5,300 in the fiscal first three months of 2011, compared to the same period of 2010, as a result of increased expenditures in our Global Power Group, while capital expenditures in our Global E&C Group were relatively flat.

Cash Flows from Financing Activities

	Fiscal Three Months Ended March 31,
	2011			2010			$ Change			% Change
Net cash used in financing activities	$	(29,209	)	$	(3,933	)	$	(25,276	)		642.7	%

          The net cash used in financing activities in the fiscal first three months of 2011 was attributable primarily to the cash used to repurchase shares under our share repurchase program of $29,200. Other financing activities included cash provided from exercises of stock options of $9,100, partially offset by cash used for distributions to noncontrolling interests of $8,700.

          The net cash used in financing activities in the fiscal first three months of 2010 was attributable primarily to distributions to noncontrolling interests of $4,800 and the repayment of short-term and long-term project debt and capital lease obligations of $3,300, partially offset by proceeds from the issuance of short-term project debt of $2,200 and cash provided from exercises of stock options of $2,000.

Outlook

          Our liquidity forecasts cover, among other analyses, existing cash balances, cash flows from operations, cash repatriations, changes in working capital activities, unused credit line availability and claim recoveries and proceeds from asset sales, if any. These forecasts extend over a rolling 12-month period. Based on these forecasts, we believe our existing cash balances and forecasted net cash provided by operating activities will be sufficient to fund our operations throughout the next 12 months. Based on these forecasts, our primary cash needs will be working capital, capital expenditures, pension contributions and asbestos liability indemnity and defense costs. We may also use cash for acquisitions, discretionary pension plan contributions or to repurchase our shares under the share repurchase program, as described further below. The majority of our cash balances are invested in short-term interest bearing accounts with maturities of less than three months. We continue to consider investing some of our cash in longer-term investment opportunities, including the acquisition of other entities or operations in the engineering and construction industry or power industry and/or the reduction of certain liabilities such as unfunded pension liabilities.

          It is customary in the industries in which we operate to provide standby letters of credit, bank guarantees or performance bonds in favor of clients to secure obligations under contracts. We believe that we will have sufficient letter of credit capacity from existing facilities throughout the next 12 months.

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          We are dependent on cash repatriations from our subsidiaries to cover essentially all payments and expenses of our holding company and principal executive offices in Switzerland, to cover cash needs related to our asbestos related liability and other overhead expenses in the U.S. and, at our discretion, the acquisition of our shares under our share repurchase program, as described further below. Consequently, we require cash repatriations to Switzerland and the U.S. from our entities located in other countries in the normal course of our operations to meet our Swiss and U.S. cash needs and have successfully repatriated cash for many years. We believe that we can repatriate the required amount of cash to Switzerland and the U.S. Additionally, we continue to have access to the revolving credit portion of our U.S. senior secured credit facility, if needed.

          During the fiscal first three months of 2011, we had net cash outflows of approximately $12,500, resulting from asbestos liability indemnity and defense costs payments in excess of insurance settlement proceeds. We expect net cash outflows to be approximately $5,700 for the full fiscal year 2011. This estimate assumes no additional settlements with insurance companies or elections by us to fund additional payments. As we continue to collect cash from insurance settlements and assuming no increase in our asbestos-related insurance liability or any future insurance settlements, the asbestos-related insurance receivable recorded on our balance sheet will continue to decrease.

          On July 30, 2010, Foster Wheeler AG, Foster Wheeler Ltd., certain of Foster Wheeler Ltd.’s subsidiaries and BNP Paribas, as Administrative Agent, entered into a four-year amendment and restatement of our U.S. senior secured credit agreement, which we entered into in October 2006. The amended and restated U.S. senior secured credit agreement provides for a facility of $450,000, and includes a provision which permits future incremental increases of up to an aggregate of $225,000 in total additional availability under the facility. The amended and restated U.S. senior secured credit agreement permits us to issue up to $450,000 in letters of credit under the facility. Letters of credit issued under the amended and restated U.S. senior secured credit agreement have performance pricing that is decreased (or increased) as a result of improvements (or reductions) in our corporate credit rating as reported by Moody’s Investors Service, which we refer to as Moody’s, and/or Standard & Poor’s, or S&P. We received a corporate credit rating of BBB- as issued by S&P during fiscal year 2010, which, under the amended and restated U.S. senior secured credit agreement, reduces our pricing for letters of credit issued under the agreement. Based on the current ratings, the letter of credit fees for performance and financial letters of credit issued under the amended and restated U.S. senior secured credit agreement are 1.000% and 2.000% per annum of the outstanding amount, respectively, excluding fronting fees. This performance pricing is not expected to materially impact our liquidity or capital resources in fiscal year 2011. 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, as defined in the agreement, plus 2.000%, subject also to the performance pricing noted above.

          The assets and/or stock of certain of our U.S. and non-U.S. subsidiaries collateralize our obligations under our amended and restated U.S. senior secured credit agreement. In the event that our corporate credit rating as issued by Moody’s is at least Baa3 and as issued by S&P is at least BBB-, all liens securing our obligations under the amended and restated U.S. senior secured credit agreement will be automatically released and terminated.

          We had approximately $296,100 and $310,100 of letters of credit outstanding under our U.S. senior secured credit agreement in effect as of March 31, 2011 and December 31, 2010, respectively. There were no funded borrowings under our U.S. senior secured credit agreement outstanding as of March 31, 2011 and December 31, 2010. We do not intend to borrow under our U.S. senior secured credit facility during fiscal year 2011. Please refer to Note 5 to the consolidated financial statements in this quarterly report on Form 10-Q for further information regarding our debt obligations.

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          On February 27, 2010, an earthquake occurred off the coast of Chile that caused significant damage to our unconsolidated affiliate’s facility in Chile. As a result of the damage, the project’s facility suspended normal operating activities on that date. Subsequent to that date, our unconsolidated affiliate filed a claim with its insurance carrier. A preliminary assessment of the extent of the damage was completed and an estimate of the required cost of repairs was developed. Based on the assessment and cost estimate, as well as correspondence received from the insurance carrier, we expect the property damage insurance recovery to be sufficient to cover the costs of repairing the facility. The insurance carrier also provided a preliminary assessment of the business interruption insurance recovery due to our unconsolidated affiliate, and has advanced insurance proceeds against this assessment. Based on this assessment, we expect the business interruption insurance recovery to substantially compensate our unconsolidated affiliate for the loss of profits while the facility has suspended normal operating activities. Our unconsolidated affiliate’s receivable related to the remaining balance under their property damage and business interruption insurance recovery assessment was approximately $53,500 as of March 31, 2011. The facility is currently operating in testing mode and is expected to resume normal operating activities in the fiscal second quarter of 2011.

          We are not required to make any mandatory contributions to our U.S. pension plans in fiscal year 2011 based on the minimum statutory funding requirements. We made mandatory contributions totaling approximately $3,900 to our non-U.S. pension plans during the fiscal three months ended March 31, 2011. Based on the minimum statutory funding requirements for fiscal year 2011, we expect to make mandatory contributions totaling approximately $24,200 to our non-U.S. pension plans in fiscal year 2011, including the contributions made during the fiscal first three months of 2011. Additionally, we may elect to make discretionary contributions to our U.S. and/or non-U.S. pension plans during fiscal year 2011.

          On September 12, 2008, we announced a share repurchase program pursuant to which our Board of Directors authorized the repurchase of up to $750,000 of our outstanding shares and the designation of the repurchased shares for cancellation. On November 4, 2010, our Board of Directors proposed an increase to our share repurchase program of $335,000 and the designation of the repurchased shares for cancellation, which was approved by our shareholders at an Extraordinary General Meeting on February 24, 2011.

          Based on the aggregate share repurchases under our program through March 31, 2011, we are authorized to repurchase up to an additional $471,392 of our outstanding shares. Any repurchases will be made at our discretion in the open market or in privately negotiated transactions in compliance with applicable securities laws and other legal requirements and will depend on a variety of factors, including market conditions, share price and other factors. The program does not obligate us to acquire any particular number of shares. The program has no expiration date and may be suspended or discontinued at any time. Any repurchases made pursuant to the share repurchase program will be funded using our cash on hand. Through March 31, 2011, we have repurchased 23,271,133 shares for an aggregate cost of approximately $613,608. In April 2011, we repurchased an additional 312,200 shares for an aggregate cost of approximately $10,800. We have executed the repurchases in accordance with 10b5-1 repurchase plans as well as other privately negotiated transactions pursuant to our share repurchase program. The 10b5-1 repurchase plans allow us to purchase shares at times when we may not otherwise do so due to regulatory or internal restrictions. Purchases under the 10b5-1 repurchase plans are based on parameters set forth in the plans. For further information, please refer to Part II, Item 2 of this quarterly report on Form 10-Q.

          We have not declared or paid a cash dividend since July 2001 and we do not have any plans to declare or pay any cash dividends. Our current U.S. senior secured credit agreement contains limitations on cash dividend payments as well as other restricted payments.

Off-Balance Sheet Arrangements

          We own several noncontrolling interests in power projects in Chile and Italy. Certain of the projects have third-party debt that is not consolidated in our balance sheet. We have also issued certain guarantees for the Chile based project. Please refer to Note 3 to the consolidated financial statements in this quarterly report on Form 10-Q for further information related to these projects.

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Backlog and New Orders

          New orders are recorded and added to the backlog of unfilled orders based on signed contracts as well as agreed letters of intent, which we have determined are legally binding and likely to proceed. Although backlog represents only business that is considered likely to be performed, cancellations or scope adjustments may and do occur. The elapsed time from the award of a contract to completion of performance may be up to approximately four years. The dollar amount of backlog is not necessarily indicative of our future earnings related to the performance of such work due to factors outside our control, such as changes in project schedules, scope adjustments or project cancellations. We cannot predict with certainty the portion of backlog to be performed in a given year. Backlog is adjusted quarterly to reflect new orders, project cancellations, deferrals, revised project scope and cost and sales of subsidiaries, if any.

          Backlog measured in Foster Wheeler scope reflects the dollar value of backlog excluding third-party costs incurred by us on a reimbursable basis as agent or principal, which we refer to as flow-through costs. Foster Wheeler scope measures the component of backlog with profit potential and corresponds to our services plus fees for reimbursable contracts and total selling price for fixed-price or lump-sum contracts.

          New Orders, Measured in Terms of Future Revenues

	Fiscal Three Months Ended March 31, 2011						Fiscal Three Months Ended March 31, 2010
	Global		Global				Global		Global
	E&C Group		Power Group		Total		E&C Group		Power Group		Total
By Project Location:
North America	$	84,000	$	82,600	$	166,600	$	60,900	$	71,700	$	132,600
South America		69,100		3,900		73,000		26,100		3,000		29,100
Europe		150,500		31,100		181,600		87,400		336,800		424,200
Asia		84,200		12,400		96,600		90,400		50,600		141,000
Middle East		26,200		8,000		34,200		55,300		—		55,300
Africa		47,500		5,700		53,200		156,200		100		156,300
Australasia and other*		258,300		—		258,300		—		—		—
Total	$	719,800	$	143,700	$	863,500	$	476,300	$	462,200	$	938,500
By Industry:
Power generation	$	3,300	$	121,800	$	125,100	$	7,300	$	437,800	$	445,100
Oil refining		323,900		—		323,900		208,700		—		208,700
Pharmaceutical		7,900		—		7,900		10,000		—		10,000
Oil and gas		276,500		—		276,500		86,000		—		86,000
Chemical/petrochemical		87,600		—		87,600		153,000		—		153,000
Power plant operation and maintenance		5,200		21,900		27,100		—		24,400		24,400
Environmental		1,600		—		1,600		6,300		—		6,300
Other, net of eliminations		13,800		—		13,800		5,000		—		5,000
Total	$	719,800	$	143,700	$	863,500	$	476,300	$	462,200	$	938,500

* Australasia and other primarily represents Australia, New Zealand and the Pacific Islands.

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Backlog, Measured in Terms of Future Revenues

	As of March 31, 2011						As of December 31, 2010
	Global		Global				Global		Global
	E&C Group		Power Group		Total		E&C Group		Power Group		Total
By Contract Type:
Lump-sum turnkey	$	—	$	397,000	$	397,000	$	—	$	424,400	$	424,400
Other fixed-price		807,800		540,500		1,348,300		779,800		555,800		1,335,600
Reimbursable		2,045,300		58,700		2,104,000		2,157,900		61,600		2,219,500
Total	$	2,853,100	$	996,200	$	3,849,300	$	2,937,700	$	1,041,800	$	3,979,500
By Project Location:
North America	$	517,600	$	211,500	$	729,100	$	620,900	$	189,500	$	810,400
South America		409,100		25,600		434,700		389,200		30,400		419,600
Europe		443,100		505,500		948,600		382,500		517,800		900,300
Asia		440,200		212,000		652,200		481,200		269,300		750,500
Middle East		241,100		35,800		276,900		266,900		34,800		301,700
Africa		150,500		5,800		156,300		174,400		—		174,400
Australasia and other*		651,500		—		651,500		622,600		—		622,600
Total	$	2,853,100	$	996,200	$	3,849,300	$	2,937,700	$	1,041,800	$	3,979,500
By Industry:
Power generation	$	13,000	$	885,000	$	898,000	$	15,100	$	929,300	$	944,400
Oil refining		1,689,500		—		1,689,500		1,726,200		—		1,726,200
Pharmaceutical		37,900		—		37,900		39,800		—		39,800
Oil and gas		810,800		—		810,800		793,800		—		793,800
Chemical/petrochemical		267,500		200		267,700		331,800		200		332,000
Power plant operation and maintenance		—		111,000		111,000		—		112,300		112,300
Environmental		7,100		—		7,100		8,500		—		8,500
Other, net of eliminations		27,300		—		27,300		22,500		—		22,500
Total	$	2,853,100	$	996,200	$	3,849,300	$	2,937,700	$	1,041,800	$	3,979,500
Backlog, measured in terms of Foster Wheeler Scope
Total	$	1,637,800	$	986,300	$	2,624,100	$	1,611,300	$	1,031,900	$	2,643,200
E & C Man-hours in Backlog (in thousands)
Total		12,500				12,500		12,700				12,700

* Australasia and other primarily represents Australia, New Zealand and the Pacific Islands.

          The foreign currency translation impact on backlog and Foster Wheeler scope backlog resulted in increases of $89,200 and $74,100, respectively, as of March 31, 2011 compared to December 31, 2010.

Inflation

          The effect of inflation on our financial results is minimal. Although a majority of our revenues are realized under long-term contracts, the selling prices of such contracts, established for deliveries in the future, generally reflect estimated costs to complete the projects in these future periods. In addition, many of our projects are reimbursable at actual cost plus a fee, while some of the fixed-price contracts provide for price adjustments through escalation clauses.

Application of Critical Accounting Estimates

          Our consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America. Management and the Audit Committee of our Board of Directors approve the critical accounting policies. A full discussion of our critical accounting policies and estimates is included in our 2010 Form 10-K. We did not have a significant change to the application of our critical accounting policies and estimates during the fiscal first three months of 2011.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     During the fiscal first three months of 2011, there were no material changes in the market risks as described in our annual report on Form 10-K for the fiscal year ended December 31, 2010.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

     We maintain disclosure controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and we necessarily are required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures.

     As of the end of the period covered by this report, our interim chief executive officer and our chief financial officer carried out an evaluation, with the participation of our Disclosure Committee and management, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) pursuant to Exchange Act Rule 13a-15. Based on this evaluation, our interim chief executive officer and our chief financial officer concluded, at the reasonable assurance level, that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

     There have been no changes in our internal control over financial reporting in the quarter ended March 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     Please refer to Note 12 to the consolidated financial statements in this quarterly report on Form 10-Q for a discussion of legal proceedings, which is incorporated by reference in this Part II.

ITEM 1A. RISK FACTORS

     Information regarding our risk factors appears in Part I, Item 1A, “Risk Factors,” in our annual report on Form 10-K for the fiscal year ended December 31, 2010, which we filed with the SEC on February 28, 2011. There have been no material changes in those risk factors.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

     (c) Purchases of Equity Securities by the Issuer and Affiliated Purchasers (amounts in thousands of dollars, except share data and per share amounts).

     On September 12, 2008, we announced a share repurchase program pursuant to which our Board of Directors authorized the repurchase of up to $750,000 of our outstanding shares and the designation of the repurchased shares for cancellation. On November 4, 2010, our Board of Directors proposed an increase to our share repurchase program of $335,000 and the designation of the repurchased shares for cancellation, which was approved by our shareholders at an Extraordinary General Meeting on February 24, 2011.

     Under Swiss law, the cancellation of shares previously repurchased under our share repurchase program must be approved by our shareholders. Repurchased shares remain as treasury shares on our balance sheet until cancellation. We obtained specific shareholder approval for the cancellation of all treasury shares as of December 31, 2010 and amended our Articles of Association to reduce our share capital accordingly at our 2011 annual general meeting of shareholders on May 3, 2011. All shares acquired after December 31, 2010 will remain as treasury shares until shareholder approval for the cancellation is granted at a future general meeting of shareholders. Based on the aggregate share repurchases under our program through March 31, 2011, we are authorized to repurchase up to an additional $471,392 of our outstanding shares. The following table provides information with respect to purchases under our share repurchase program during the fiscal first quarter of 2011.

			Average		Total Number of Shares			Approximate Dollar Value
	Total Number		Price		Purchased as Part of			of Shares that May Yet Be
	of Shares		Paid per		Publicly Announced			Purchased Under the
Fiscal Month	Purchased(1)		Share		Plans or Programs			Plans or Programs
January 1, 2011 through January 31, 2011		—	$	—		—
February 1, 2011 through February 28, 2011		—		—		—
March 1, 2011 through March 31, 2011		859,904		33.96		859,904
Total		859,904	$	33.96		859,904	(2)	$	471,392

(1)

During the fiscal first quarter of 2011, we repurchased an aggregate of 859,904 shares in open market transactions pursuant to our share repurchase program. We are authorized to repurchase up to an additional $471,392 of our outstanding shares. The repurchase program has no expiration date and may be suspended for periods or discontinued at any time. We did not repurchase any shares other than through our publicly announced repurchase program.

(2)

As of March 31, 2011, an aggregate of 23,271,133 shares were purchased for a total of $613,608 since the inception of the repurchase program announced on September 12, 2008.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None.

ITEM 5. OTHER INFORMATION

     None.

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ITEM 6. EXHIBITS

Exhibit
No.	Exhibits
3.1	Articles of Association of Foster Wheeler AG. (Filed as Exhibit 3.1 to Foster Wheeler AG’s Form 8-K, dated February 6, 2009 and filed on February 9, 2009, and incorporated herein by reference.)
3.2	Organizational Regulations of Foster Wheeler AG. (Filed as Exhibit 3.2 to Foster Wheeler AG’s Form 8-K, dated February 6, 2009 and filed on February 9, 2009, and incorporated herein by reference.)
4.0	Foster Wheeler AG hereby agrees to furnish copies of instruments defining the rights of holders of long-term debt of Foster Wheeler AG and its consolidated subsidiaries to the Commission upon request.
10.1*	Third Amendment to the Employment Agreement, dated as of February 22, 2011, between Foster Wheeler Inc. and Beth Sexton.
10.2*	Employment Contract, dated as of September 13, 2006, between Foster Wheeler Energy Limited and Jonathan C. Nield.
10.3*	Form of Employee Restricted Stock Unit Award Agreement (with Performance Goals). (Filed as Exhibit 10.1 to Foster Wheeler AG’s Form 8-K, dated February 24, 2011 and filed on March 2, 2011, and incorporated herein by reference.)
23.1	Consent of Analysis, Research & Planning Corporation.
31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Umberto della Sala.
31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Franco Baseotto.
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Umberto della Sala.
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Franco Baseotto.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

* Management contract or compensation plan or arrangement.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	FOSTER WHEELER AG (Registrant)
Date: May 4, 2011	/s/Umberto della Sala
	Umberto della Sala
	Interim Chief Executive Officer,President and Chief Operating Officer
Date: May 4, 2011	/s/ Franco Baseotto
	Franco Baseotto
	Executive Vice President, Chief Financial Officer and Treasurer

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