Foster Wheeler (FWLT) 8-K Index to Financial Statements

Index to Financial Statements

	Pages
Report of Independent Accountants		1
Consolidated Statement of Earnings and Comprehensive Income for each of the three years in the period ended December 27, 2002		2
Consolidated Balance Sheet at December 27, 2002 and December 28, 2001		3
Consolidated Statement of Changes in Shareholders’ Equity (Deficit) for each of the three years in the period ended December 27, 2002		4
Consolidated Statement of Cash Flows for each of the three years in the period ended December 27, 2002		5
Notes to Consolidated Financial Statements		6 - 71

Report of Independent Accountants

To the Board of Directors and Shareholders of Foster Wheeler Ltd.:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statement of earnings and comprehensive income, of shareholders’ equity (deficit) and of cash flows, present fairly, in all material respects, the financial position of Foster Wheeler Ltd. and its subsidiaries (the “Company”) at December 27, 2002 and December 28, 2001, and the results of their operations and their cash flows for each of the years in the three year period ended December 27, 2002 in conformity with accounting principles generally accepted in the United States of America. These consolidated financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

The Company has revised its consolidated financial statements to include the information set forth in Note 24 that is required by Rule 3-10 of Regulation S-X of the Securities and Exchange Commission.

As discussed in the first paragraph of Note 2 and in Notes 25 and 26 to the consolidated financial statements, the accompanying 2001 and 2000 consolidated financial statements have been restated to account for certain of the Company’s benefit plans in accordance with Statement of Financial Accounting Standard No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions”.

As discussed in Note 2 to the consolidated financial statements, effective December 29, 2001, the Company adopted Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets.”

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred significant losses in each of the years in the two-year period ended December 27, 2002 and has a shareholders’ deficit of $780,939,000 at December 27, 2002. The Company has substantial debt obligations and during 2002 it was unable to comply with certain debt covenants under the previous revolving credit agreement. Accordingly, the Company received waivers for covenant violations and ultimately negotiated new credit facilities, in August 2002. The Company was unable to comply with certain debt covenants under the new credit facility agreement and therefore obtained an amendment of such agreement. Realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s ability to return to profitability, to generate cash flows from operations, assets sales and collections of receivables to fund its operations, including obligations resulting from asbestos claims, as well as the Company maintaining credit facilities and bonding capacity adequate to conduct its business. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plan in regard to these matters is also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

PRICEWATERHOUSECOOPERS LLP
Florham Park, New Jersey
March 25, 2003, except for Note 24
as to which the date is June 18, 2003
and for Note 28 as to which the
date is July 15, 2003

1

FOSTER WHEELER LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS AND COMPREHENSIVE INCOME
(in thousands, except per share amounts)

	2002			2001			2000
				(Restated) (See Note 2)			(Restated) (See Note 2)
Revenues:
Operating revenues	$	3,519,177		$	3,315,314		$	3,891,361
Other income (including interest: 2002—$12,251; 2001—$9,060; 2000-$15,737)		55,360			77,160			77,994
Total Revenues and Other Income		3,574,537			3,392,474			3,969,355
Costs and Expenses:
Cost of operating revenues		3,426,910			3,164,025			3,565,147
Selling, general and administrative expenses		226,524			225,392			222,110
Other deductions		193,156			126,495			42,821
Minority interest		4,981			5,043			3,857
Interest expense		66,418			68,734			67,504
Dividends on preferred security of subsidiary trust		16,610			15,750			15,750
Total Costs and Expenses		3,934,599			3,605,439			3,917,189
(Loss)/earnings before income taxes		(360,062	)		(212,965	)		52,166
Provision for income taxes		14,657			123,395			15,179
Net (loss)/earnings prior to cumulative effect of a change in accounting principle		(374,719	)		(336,360	)		36,987
Cumulative effect of a change in accounting principle for goodwill, net of $0 tax		(150,500	)		—			—
Net (loss)/earnings		(525,219	)		(336,360	)		36,987
Other comprehensive (loss)/income
Cumulative effect of prior years (to December 29, 2000) of a change in accounting principle for derivative instruments designated as cash flow hedges		—			6,300			—
Change in gain on derivative instruments designated as cash flow hedges		(3,834	)		(2,466	)		—
Foreign currency translation adjustment		22,241			(10,191	)		(19,988	)
Minimum pension liability adjustment net of tax benefits: 2002 — $73,400; 2001 — $0; 2000 — 12,000)		(226,011	)		(36,770	)		(21,500	)
Comprehensive loss	$	(732,823	)	$	(379,487	)	$	(4,501	)
(Loss)/earnings per share:
Basic and Diluted
Net (loss)/earnings prior to cumulative effect of a change in accounting principle	$	(9.15	)	$	(8.23	)	$	0.91
Cumulative effect on prior years (to December 28, 2001) of a change in accounting principle for goodwill and claims		(3.67	)		—			—
Net (loss)/earnings	$	(12.82	)	$	(8.23	)	$	0.91
Shares outstanding:
Basic:
Weighted average number of shares outstanding		40,957			40,876			40,798
Diluted:
Effect of share options		—			—			7
Total diluted		40,957			40,876			40,805

See notes to financial statements.

2

FOSTER WHEELER LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(in thousands, except per share amounts)

	December 27, 2002			December 28, 2001
				(Restated) (See Note 2)
ASSETS
Current Assets:
Cash and cash equivalents	$	344,305		$	224,020
Short-term investments		271			271
Accounts and notes receivable:
Trade		599,506			726,556
Other		85,166			219,788
Contracts in process		280,601			493,599
Inventories		9,332			10,529
Prepaid, deferred and refundable income taxes		41,155			52,084
Prepaid expenses		36,071			27,529
Total current assets		1,396,407			1,754,376
Land, buildings and equipment		769,680			728,012
Less accumulated depreciation		361,861			328,814
Net book value		407,819			399,198
Restricted cash		84,793			—
Notes and accounts receivable—long-term		21,944			65,373
Investment and advances		88,523			84,514
Goodwill, net		50,214			200,152
Other intangible assets, net		72,668			74,391
Prepaid pension cost and related benefit assets		26,567			131,865
Asbestos-related insurance recovery receivable		534,045			437,834
Other assets		156,279			173,279
Deferred income taxes		69,578			4,855
TOTAL ASSETS	$	2,908,837		$	3,325,837
LIABILITIES AND SHAREHOLDERS’ EQUITY/(DEFICIT)
Current Liabilities:
Current installments on long-term debt	$	31,562		$	12,759
Bank loans		14,474			20,244
Corporate and other debt		—			297,627
Special-purpose project debt		—			75,442
Subordinated Robbins exit funding obligations		—			110,340
Convertible subordinated notes		—			210,000
Mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable interest debentures		—			175,000
Accounts payable		283,940			408,581
Accrued expenses		351,149			369,187
Estimated costs to complete long-term contracts		707,323			580,766
Advance payments by customers		87,658			65,417
Income taxes		64,517			63,257
Total current liabilities		1,540,623			2,388,620
Corporate and other debt less current installments		341,702			—
Special-purpose project debt less current installments		181,613			137,855
Capital lease obligations		58,237			—
Deferred income taxes		8,333			40,486
Pension, postretirement and other employee benefits		437,820			257,976
Asbestos-related liability		519,790			445,370
Other long-term liabilities and minority interest		109,373			103,974
Subordinated Robbins Facility exit funding obligations		107,285			—
Convertible subordinated notes		210,000			—
Mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable interest debentures		175,000			—
TOTAL LIABILITIES		3,689,776			3,374,281
Shareholders’ Deficit:
Preferred Stock		—			—
Authorized 1,500,000 shares, no par value – none outstanding
Common Stock
$1.00 par value; authorized 160,000,000 shares; issued: 2002—40,771,560 and 2001—40,771,560		40,772			40,772
Paid-in capital		201,718			201,390
Retained earnings (deficit)		(653,991	)		(128,772	)
Accumulated other comprehensive loss		(369,438	)		(161,834	)
TOTAL SHAREHOLDERS’ DEFICIT		(780,939	)		(48,444	)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT	$	2,908,837		$	3,325,837

See notes to financial statements.

3

FOSTER WHEELER LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY/(DEFICIT)
(in thousands, except per share amounts)

	2002			2001			2000
				(Restated) (See Note 2)			(Restated) (See Note 2)
Common Stock
Balance at beginning of year	$	40,772		$	40,748		$	40,748
Sold under stock options: (shares: 2001-66)		—			66			—
Bermuda reorganization		—			(42	)		—
Balance at end of year		40,772			40,772			40,748
Paid-in Capital
Balance at beginning of year		201,390			200,963			201,043
Shares issued under incentive plan and other plans		328			—			—
Stock option exercise price less par value		—			561			—
Excess of cost of treasury stock or common stock issued under incentive and other plans over market value		—			6			(80	)
Bermuda reorganization		—			(140	)		—
Balance at end of year		201,718			201,390			200,963
Retained Earnings
Balance at beginning of year		(128,772	)		212,476			185,262
Net (loss)/earnings for the year		(525,219	)		(336,360	)		36,987
Cash dividends paid:
Common (per share outstanding: 2001—$.12;2000—$.24)		—			(4,888	)		(9,773	)
Balance at end of year		(653,991	)		(128,772	)		212,476
Accumulated Other Comprehensive Loss
Balance at beginning of year		(161,834	)		(118,707	)		(77,219	)
Cumulative effect on prior years (to December 29, 2000) of a change in accounting principle for derivative instruments designated as cash flow hedges		—			6,300			—
Change in net gain on derivative instruments designated as cash flow hedges		(3,834	)		(2,466	)		—
Change in accumulated translation adjustment during the year		22,241			(10,191	)		(19,988	)
Minimum pension liability, (net of tax benefits: 2002—$73,400; 2001—$0; 2000—$12,000)		(226,011	)		(36,770	)		(21,500	)
Balance at end of year		(369,438	)		(161,834	)		(118,707	)
Treasury Stock
Balance at beginning of year		—			165			238
Common stock acquired for Treasury: (shares: 2001—3,000; 2000—28,391)		—			37			154
Shares issued under incentive and other plans (shares: 2001—3,008; 2000—20,556)		—			(20	)		(227	)
Bermuda reorganization		—			(182	)		—
Balance at end of year		—			—			165
Total Shareholders’ Equity/(Deficit)	$	(780,939	)	$	(48,444	)	$	335,315

See notes to financial statements.

4

FOSTER WHEELER LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands of dollars)

	2002			2001			2000
				(Restated) (See Note 2)			(Restated) (See Note 2)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss)/ earnings	$	(525,219	)	$	(336,360	)	$	36,987
Adjustments to reconcile net (loss) / earnings to cash flows from operating activities:
Cumulative effect of a change in accounting principle		150,500			—			—
Provision for impairment loss		18,700			—			—
Provision for restructuring		—			41,570			—
Depreciation and amortization		44,425			55,750			57,716
Deferred tax		(28,355	)		137,801			(4,016	)
Provision for loss on sale of cogeneration plants		54,500			40,300			—
Provisions for asbestos claims		26,200			—			—
Claims write downs and related contract provisions		136,200			37,000			—
Contract reserves and receivable provisions		80,500			123,600			—
Deferred dividends on Preferred Trust Securities		16,610			3,484			—
Gain on sale of land, building and equipment		(1,269	)		(10,174	)		(14,843	)
Equity earnings, net of dividends		(4,262	)		(4,658	)		(8,882	)
Other noncash items		(16,677	)		(4,331	)		(5,702	)
Changes in assets and liabilities:
Receivables		192,801			(96,607	)		(7,665	)
Contracts in process and inventories		53,361			(88,044	)		(64,938	)
Accounts payable and accrued expenses		(153,565	)		35,338			35,841
Estimated costs to complete long-term contracts		62,870			(25,026	)		(54,500	)
Advance payments by customers		18,206			5,399			19,082
Income taxes		15,535			(14,265	)		(17,613	)
Other assets and liabilities		19,304			10,542			11,789
Net cash provided / (used) by operating activities		160,365			(88,681	)		(16,744	)
CASH FLOWS FROM INVESTING ACTIVITIES
Change in restricted cash		(84,793	)		—			—
Capital expenditures		(53,395	)		(33,998	)		(45,807	)
Proceeds from sale of properties		6,282			59,672			56,703
Decrease in investments and advances		9,107			16,008			12,122
Decrease in short-term investments		93			1,530			15,230
Net cash (used)/provided by investing activities		(122,706	)		43,212			38,248
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends to common Shareholders		—			(4,888	)		(9,773	)
Partnership distribution		(2,061	)		(1,367	)		(2,599	)
Repurchase of common stock		—			(37	)		(154	)
Proceeds from convertible subordinated notes		—			202,912			—
Proceeds from the exercise of stock options		—			627			—
(Decrease)/increase in short-term debt		(7,792	)		(82,032	)		44,876
Proceeds from long-term debt		70,546			185,042			43,168
Proceeds from lease financing obligation		44,900			—			—
Repayment of long-term debt		(45,591	)		(214,724	)		(88,151	)
Net cash provided / (used) by financing activities		60,002			85,533			(12,633	)
Effect of exchange rate changes on cash and cash equivalents		22,624			(7,937	)		12,754
INCREASE IN CASH AND CASH EQUIVALENTS		120,285			32,127			21,625
Cash and cash equivalents at beginning of year		224,020			191,893			170,268
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	344,305		$	224,020		$	191,893
Cash paid during the year for:
Interest (net of amount capitalized)	$	60,973		$	74,201		$	76,439
Income taxes	$	13,508		$	15,543		$	33,551

See notes to financial statements.

5

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS
(in thousands of dollars, except per share amounts)

1. Going Concern

The accompanying consolidated financial statements are prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Realization of assets and the satisfaction of liabilities in the normal course of business are dependent on, among other things, the Company’s ability to return to profitability, to continue to generate cash flows from operations, asset sales and collections of receivables to fund its obligations including those resulting from asbestos related liabilities, as well as the Company maintaining credit facilities and bonding capacity adequate to conduct its business. The Company has incurred significant losses in each of the years in the two-year period ended December 27, 2002 and has a shareholder deficit of $780,939 at December 27, 2002. The Company has substantial debt obligations and during 2002 it was unable to comply with certain debt covenants under the previous revolving credit agreement. Accordingly, the Company received waivers of covenant violations and ultimately negotiated new credit facilities, in August 2002. While management believes its operating plans, if met, are sufficient to assure compliance with the terms of its new debt agreements, as amended, there is no assurance that the Company will do so during 2003. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s plans in regard to these matters are described below.

In August 2002, the Company finalized a Senior Credit Facility with its lender group. This facility, including a $71,000 term loan, a $69,000 revolving credit facility, and a $149,000 letter of credit facility, expires on April 30, 2005. This facility is secured by the assets of the domestic subsidiaries, the stock of the domestic subsidiaries, and 66% of the stock of the first-tier foreign subsidiaries. The facility has no scheduled repayments prior to maturity on April 30, 2005. The facility requires prepayments from proceeds of assets sales, the issuance of debt or equity, and from excess cash flow. The Company retains the first $77,000 of such amounts and also retains a 50% share of the balance. The financial covenants in the facility commence at the end of the first quarter 2003 and include a senior leverage ratio and a minimum earnings before interest, taxes, depreciation and amortization (“EBITDA”) level as described in the agreement, as amended. With the sale of Foster Wheeler Environmental Corporation on March 7, 2003, cumulative sales proceeds received, as defined in the agreement, approximate $75,000.

Amendment No. 1 to the Credit Agreement, obtained on November 8, 2002, provides covenant relief of up to $180,000 of gross pre-tax charges recorded by the Company in the third quarter of 2002. The amendment further provides that up to an additional $63,000 in pretax charges related to specific contingencies may be excluded from the covenant calculation through December 31, 2003, if incurred. In the 4^th quarter 2002, $11,000 of the contingency risks were favorably resolved, and additional project reserves were established for $19,000 leaving a contingency balance of $33,000.

Amendment No. 2 to the Credit Agreement, entered into on March 24, 2003, modifies (i) certain definitions of financial measures utilized in the calculation of the financial covenants and (ii) the Minimum EBITDA, and Senior Debt Ratio, as specified in section 6.01 of the Credit Agreement. In connection with this amendment of the Credit Agreement, the Company must make a prepayment of principal in the aggregate amount of $10,000. Refer to exhibit 10.35, filed as part of the Report on Form 10-K/A, for the complete amendment.

Due to the Company’s significant leverage, management is reviewing various options to restructure its balance sheet. Although no definitive plans have been finalized at this point, such options may include, among other things, debt for equity exchanges, debt for debt exchanges, equity for equity exchanges, and additional asset sales. There can be no assurances, however, that the Company can successfully effect any of the foregoing.

During the third quarter of 2002, the Company also completed a receivables financing arrangement of up to $40,000. The funding available to the Company is dependent on the amount and characteristics of the

6

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

1. Going Concern — (Continued)

domestic receivables. The amount available to the Company fluctuates daily, but the Company estimates that approximately $15,000 to $20,000 will be available during 2003. This financing arrangement expires in August 2005 and is subject to covenant compliance. The financial covenants commence at the end of the first quarter of 2003 and include a senior leverage ratio and a minimum EBITDA level. Noncompliance with the financial covenants allows the lender to terminate the arrangement and accelerate any amounts then outstanding. As of December 27, 2002, the Company had $0 borrowings outstanding under this facility. Refer to Note 4 for further information.

The Company initiated a comprehensive plan to enhance cash generation and to improve profitability during 2002. Management’s comprehensive plan to address the Company’s domestic liquidity issues included generating approximately $150,000 from asset sales, collection of receivables and resolving disputed claims through the end of the first quarter 2003, and an additional $40,000 over the following six months. As of December 27, 2002, the Company generated approximately $60,000 through these efforts, and with the sale of the operating business of Foster Wheeler Environmental Corporation on March 7, 2003, an additional $80,000 has been generated. An additional $10,000 has also been received through more efficient working capital management. The $40,000 is still expected to be received from asset sales and claims recoveries over the course of the year 2003. Management forecasts that the cash on hand, together with cash from operations, asset sales, collection of receivables and claims recoveries will be sufficient to fund the Company’s working capital needs through the first quarter of 2004. Failure by the Company to achieve its forecast could have a material adverse effect on the Company’s financial condition.

2. Summary of Significant Accounting Policies

Restatement — Management determined that the assets, liabilities and results of operations associated with the Company’s postretirement medical benefit plan were not properly accounted for in accordance with SFAS 106, “Employer’s Accounting for Postretirement Benefits Other Than Pensions.” The Company’s consolidated balance sheet as of December 28, 2001 and the consolidated statements of earnings and comprehensive income for each of the two years in the period ended December 28, 2001 have been revised to account for such benefit plan in accordance with SFAS 106. The effect of the adjustment was not material to the current year’s financial statements, however, management elected to restate prior years. See Note 25.

Principles of Consolidation — The consolidated financial statements include the accounts of Foster Wheeler Ltd. and all significant domestic and foreign subsidiary companies. All significant intercompany transactions and balances have been eliminated.

The Company’s fiscal year is the 52- or 53-week annual accounting period ending the last Friday in December for domestic operations and December 31 for foreign operations. For domestic operations, the years 2002, 2001 and 2000 included 52 weeks.

Use of Estimates — The preparation of financial statements in conformity with generally accepted accounting principles 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 period 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 when accounting for long-term contracts including customer and vendor claims, depreciation, employee benefit plans, taxes, asbestos litigation and expected recoveries and contingencies, among others. At December 27, 2002 and December 28, 2001 the Company has recorded commercial claims of $0 and $135,000, respectively. The decrease in recorded claims have resulted from the collection of $11,000 and a provision established for the balance of outstanding commercial claims. The Company revised its estimates of claim revenues to reflect recent adverse recovery experience, management’s desire to monetize claims, and the poor economic conditions impacting the markets served by the Company. At December 27, 2002, the Company had approximately $9,000 in requests

7

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

2. Summary of Significant Accounting Policies — (Continued)

for equitable adjustments recorded in contracts in process. This amount relates primarily to a claim against a US Government agency for a project currently being executed. If this claim were to be unsuccessful, the costs would be charged to cost of operating revenues.

Revenue Recognition on Long-term Contracts — Revenues and profits in long term fixed price contracts are recorded under the percentage of completion method. Progress towards completion is measured using the cost to cost method, the efforts expended method or variations thereof. These methods are applied consistently to all contracts having similar characteristics in similar circumstances. Under the cost to cost method, revenues and profits are recognized based on the ratio that costs incurred bear to total estimated costs. Under the efforts expended method, revenue and profits are recognized based on the ratio that incurred labor hours bear to total estimated labor hours. Variations of these two methods are used on multiyear contracts that require significant engineering effort and multiple delivery of units. These methods are subject to physical verification of actual progress towards completion.

Revenues and profits on costs reimbursable contracts are recorded as the costs are incurred. The Company includes flow-through costs consisting of materials, equipment and subcontractor costs as revenue on cost-reimbursable contracts when the Company is responsible for the engineering specifications and procurement for such costs.

Contracts in progress are stated at cost increased for profits recorded on the completed effort or decreased for estimated losses, less billings to the customer and progress payments on uncompleted contracts. Negative balances are presented as “estimated costs to complete long term contracts”.

The Company has numerous contracts that are in various stages of completion. Such contracts require estimates to determine the appropriate cost and revenue recognition. However, current estimates may be revised as additional information becomes available. If estimates of costs to complete long-term contracts indicate a loss, provision is made currently for the total loss anticipated. The elapsed time from award of a contract to completion of performance may be up to four years.

Claims are amounts in excess of the agreed contract price (or amounts not included in the original contract price) that a contractor seeks to collect from customers or others for delays, errors in specifications and designs, contract terminations, change orders in dispute or unapproved as to both scope and price or other causes of unanticipated additional costs. The Company records claims in accordance with paragraph 65 of the American Institute of Certified Public Accountants Statement of Position 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts”. This statement of position states that recognition of amounts as additional contract revenue related to claims is appropriate only if it is probable that the claims will result in additional contract revenue and if the amount can be reliably estimated. Those two requirements are satisfied by the existence of all of the following conditio ns: 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 the contractor’s 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 is 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. Such claims are currently in various stages of negotiation, arbitration and other legal proceedings.

Certain special-purpose subsidiaries in the Energy Group are reimbursed by customers for their costs, including amounts related to principal repayments of non-recourse project debt, for building and operating certain facilities over the lives of the non-cancelable service contracts. The Company records revenues relating to debt repayment obligations on these contracts on a straight-line basis over the lives of the service

8

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

2. Summary of Significant Accounting Policies — (Continued)

contracts, and records depreciation of the facilities on a straight-line basis over the estimated useful lives of the facilities, after consideration of the estimated residual value.

Cash and Cash Equivalents — Cash and cash equivalents include highly liquid short-term investments purchased with original maturities of three months or less. Cash and cash equivalents of approximately $274,000 are maintained by foreign subsidiaries as of December 27, 2002. These subsidiaries require a substantial portion of these funds to support their liquidity and working capital needs. Accordingly, these funds may not be readily available for repatriation.

Restricted Cash — Restricted cash consists of approximately $16,000 that the Company was required to deposit into escrow in connection with the Todak litigation discussed in Note 20 and approximately $69,000 that was required to collateralize letters of credit and bank guarantees. The $16,000 related to the litigation is domestic restricted cash while the $69,000 related to the letters of credit and bank guarantees is foreign restricted cash.

Short-term Investments — Short-term investments consist primarily of bonds of foreign governments and are classified as available for sale under FASB Statement No. 115 “Accounting for Certain Investments in Debt and Equity Securities”. Realized gains and losses from sales are based on the specific identification method. For the years ended 2002, 2001 and 2000, unrealized gains and losses were immaterial.

	2002		2001		2000
Proceeds from sales of short term investments	$	—	$	2,000	$	15,000
Gain/(loss)	$	—	$	—	$	600

Trade Accounts Receivable — In accordance with terms of long-term contracts, certain percentages of billings are withheld by customers until completion and acceptance of the contracts. Final payments of all such amounts withheld, which might not be received within a one-year period, are indicated in Note 4. In conformity with industry practice, however, the full amount of accounts receivable, including such amounts withheld, has been included in current assets.

Accounts and Notes Receivable Other — Non-trade accounts and notes receivable consist primarily of:

	2002		2001
Insurance claims receivables	$	35,000	$	105,200
Foreign refundable value-added tax		6,800		13,400
Cancellation of company-owned life insurance plan		—		22,000

Land, Buildings and Equipment — Depreciation is computed on a straight-line basis using composite estimated lives ranging from 10 to 50 years for buildings and from 3 to 35 years for equipment. Expenditures for maintenance and repairs are charged to operations. Renewals and betterments are capitalized. Upon retirement or other disposition of fixed assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gains or losses are reflected in earnings.

In July 2001, the FASB issued Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations” (“SFAS 143”). This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement is effective for financial statements issued for fiscal years beginning after June 15, 2002. The Company is currently assessing the impact of the adoption of this new statement.

Effective December 29, 2001, the Company adopted SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. This statement addresses the accounting for long-lived assets to be disposed of by sale and resolves significant implementation issues relating to SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of”. The provisions of this

9

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

2. Summary of Significant Accounting Policies — (Continued)

statement are effective for financial statements issued for the fiscal years beginning after December 15, 2001 and interim periods within those fiscal years. The Company’s results of operations and financial position were not affected by the initial adoption of this statement.

In 2002, the Company recorded losses of $35,500 in anticipation of a sale of its Hudson Falls waste-to-energy facility.

During the third quarter, management of the Energy Group approved a plan to convert the use of its domestic manufacturing facility to focus on the after-market service business and wind down the facility’s fabrication of new power generation equipment due to cost competitive considerations. The plan was subject to discussions with the local labor unions. In accordance with SFAS 144, the facility was tested for impairment using estimated future cash flows based on the revised use of the facility. The review indicated impairment in the facility’s carrying value of $13,400. The Company recorded the impairment loss in the third quarter and the impairment is reflected in the cost of operating revenues as depreciation in the accompanying consolidated statement of operations and comprehensive income/(loss). During the fourth quarter of 2002, the Company decided to take the necessary steps to mothball the facility. Additional charge s of $5,300 were recorded in December 2002.

Investments and Advances — The Company uses the equity method of accounting for investment ownership of between 20% and 50% in affiliates unless significant economic considerations indicate that the cost method is appropriate. The equity method is also used for investments in which ownership is greater than 50% when the Company does not have a controlling financial interest. Investment ownership of less than 20% in affiliates is carried at cost. Currently, all of the Company’s significant investments in affiliates are recorded using the equity method.

Income Taxes — Deferred income taxes are provided on a liability method whereby deferred tax assets/liabilities are established for the difference between the financial reporting and income tax basis of assets and liabilities, as well as operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Investment tax credits are accounted for by the flow-through method whereby they reduce income taxes currently payable and the provision for income taxes in the period the assets giving rise to such credits are placed in service. To the extent such credits are not currently utilized on the Company’s tax return, deferred tax assets, subject to considerations about the need for a valuation allowance, are recognized for the carryforward amounts.

Provision is made for Federal income taxes which may be payable on foreign subsidiary earnings to the extent that the Company anticipates they will be remitted. Unremitted earnings of foreign subsidiaries which have been, or are intended to be, permanently reinvested (and for which no Federal income tax has been provided) aggregated $274,549 as of December 27, 2002. It is not practicable to estimate the additional tax that would be incurred, if any, if these amounts were repatriated.

Foreign Currency — Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at year-end exchange rates and income and expenses and cash flows at monthly weighted average rates.

	2002		2001		2000
Foreign currency transaction gains	$	2,900	$	3,400	$	6,100
Foreign currency transaction gains, net of tax		1,900		2,200		4,000

10

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

2. Summary of Significant Accounting Policies — (Continued)

The Company enters into foreign exchange contracts in its management of foreign currency exposures related to commercial contracts. Changes in the fair value of derivative contracts that qualify as designated cash flow hedges are deferred until the hedged forecasted transaction affects earnings. Amounts receivable (gains) or payable (losses) under foreign exchange hedges are recognized as deferred gains or losses and are included in either contracts in process or estimated costs to complete long-term contracts. The Company utilizes foreign exchange contracts solely for hedging purposes, whether or not they qualify for hedge accounting under SFAS 133. At December 27, 2002, the Company did not meet the requirements for deferral under SFAS 133 and recorded in the year ended December 27, 2002 a gain on derivative instruments of approximately $3,500.

Inventories — Inventories, principally materials and supplies, are stated at the lower of cost or market, determined primarily on the average cost method.

Intangible Assets — Intangible assets consist principally of the excess of cost over the fair value of net assets acquired (goodwill), trademarks and patents. Patents and trademarks are being amortized on a straight-line basis over periods of 12 to 40 years. The Company periodically evaluates goodwill on a separate operating unit basis to assess recoverability, and impairments, if any, are recognized in earnings. In the event facts and circumstances indicate that the carrying amount of goodwill associated with an investment is impaired, the Company reduces the carrying amount to an amount representing the estimated undiscounted future cash flows before interest to be generated by the operation.

Effective December 29, 2001, the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”) which supersedes APB Opinion No. 17, “Intangible Assets”. The statement requires that goodwill and intangible assets with indefinite lives no longer be amortized, but instead be tested for impairment at least annually. The Company tests for impairment at the reporting unit level as defined in SFAS No. 142. This test is a two-step process. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value exceeds the carrying amount, goodwill is not considered impaired. If the carrying amount exceeds the fair value, the second step must be performed to measure the amount of the impairment loss, if any. The second step compares the implie d fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. An impairment loss would be recognized in an amount equal to the excess of the carrying amount of the goodwill over the implied fair value of the goodwill. Impairment losses have been measured as of December 29, 2001 and recognized as the cumulative effect of a change in accounting principle in 2002. SFAS No. 142 also requires that intangible assets with determinable useful lives be amortized over their respective estimated useful lives and reviewed annually for impairment in accordance with SFAS No. 144.

As of December 27, 2002 and December 28, 2001, the Company had unamortized goodwill of $50,214 and $200,152, respectively. Of the total goodwill at December 27, 2002, $50,187 related to the Energy Group while $27 related to the E&C Group. The reduction in goodwill is due to the $150,500 of impairment losses discussed below, offset by foreign currency translation adjustments of $562. In accordance with SFAS No. 142, the Company is no longer amortizing goodwill. The Company recognized $150,500 of impairment losses in 2002 related to the goodwill as a cumulative effect of a change in accounting principle. Of this total, $24,800 was associated with a waste-to-energy facility and $77,000 was associated with another reporting unit included in the operations of the Energy Group. The fair value of the facility and the operating unit were estimated using the expected present value of future cash flows. The remaining $48 ,700 relates to a reporting unit in the E&C Group. An impairment of the goodwill on this subsidiary was initially determined based upon indications of its market value from potential buyers. Based upon the market value, it was determined under step one that a potential impairment existed. The Company then completed step two and

11

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

2. Summary of Significant Accounting Policies — (Continued)

determined that a full write down of the goodwill was required. All of the other reporting units were also subjected to the first step of the goodwill impairment test.

As of December 29, 2001, the Company had unamortized identifiable intangible assets of $74,391. The following table details amounts relating to those assets as of December 27, 2002.

	As of December 27, 2002					As of December 28, 2001
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Patents	$	35,695	$	(11,973	)	$	34,994	$	(10,197	)
Trademarks		60,378		(11,432	)		59,266		(9,672	)
Total	$	96,073	$	(23,405	)	$	94,260	$	(19,869	)

Amortization expense related to patents and trademarks for 2002 was $3,535. Amortization expense is expected to approximate $3,500 each year in the next five years.

The following table presents the current and prior years reported amounts adjusted to eliminate the effect of goodwill amortization in accordance with SFAS No. 142.

	December 27, 2002			December 28, 2001			December 29, 2000
				(Restated)			(Restated)
Reported net (loss)/earnings	$	(525,219	)	$	(336,360	)	$	36,987
Add back: goodwill amortization					5,369			5,711
Adjusted net (loss)/earnings	$	(525,219	)	$	(330,991	)	$	42,698
Basic Earnings Per Share:
Reported Net Income	$	(12.82)		$	(8.23	)	$	0.91
Goodwill Amortization		—			0.13			0.14
Adjusted Net Income	$	(12.82	)	$	(8.10	)	$	1.05
Diluted Earnings per Share:
Reported Net Income	$	(12.82	)	$	(8.23	)	$	0.91
Goodwill Amortization		—			0.13			0.14
Adjusted Net income	$	(12.82	)	$	(8.10	)	$	1.05

Earnings per Share — Basic per share data has been computed based on the weighted average number of shares of common stock outstanding. In 1999, the Company adopted The Directors Deferred Compensation and Stock Award Plan (the “Plan”). Under the Plan, each non-management director is credited annually with share units of the Company’s common stock. In addition, each non-management director may elect to defer receipt of compensation for services rendered as a director, which deferred amount is credited to his or her account in the form of share units. The Company makes a supplemental contribution equal to 15% of the deferred amount. For the year ended 2002, 145,886 share units were credited in participants’ accounts. During the same period, 29,309 shares were delivered to one director upon his retirement. As of December 27, 2002, 116,576 share units were included in the calculation of basic earnings per share. For the years ended 2001 and 2000, 41,091 and 53,443 share units, respectively, were credited in participants’ accounts and are included in the calculation of basic earnings per share. Options to purchase 3,877,361 and 2,330,736 shares of common stock were not included in the computation of diluted earnings per share for the years ending December 27, 2002 and December 28, 2001, as restated, respectively, due to their antidilutive effect. The 13,085,751 shares related to the convertible subordinated notes were not included in the computation of diluted earnings per share for the years ended December 27, 2002 or December 28, 2001, as restated, due to their antidilutive effect.

12

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

2. Summary of Significant Accounting Policies — (Continued)

Stock Option Plans — The Company has two fixed option plans which reserve shares of common stock for issuance to executives, key employees, and directors. The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards (SFAS) No. 123, “Accounting for Stock-Based Compensation.” Accordingly, no compensation cost has been recognized for the stock option plans. Had compensation cost for the Company’s stock option plans been determined based on the fair value at the grant date for awards in 2002, 2001 and 2000 consistent with the provisions of SFAS No. 123, the Company’s net earnings and earnings per share would have been reduced to the pro forma amounts indicated below:

	2002			2001			2000
				(Restated)			(Restated)
Net (loss)/earnings — as reported	$	(525,219	)	$	(336,360	)	$	36,987
Net (loss)/earnings — pro forma	$	(527,832	)	$	(340,419	)	$	35,515
Earnings/(loss) per share as reported
Basic	$	(12.82	)	$	(8.23	)	$	.91
Diluted		*			*		$	.91
(Loss)/earnings per share — pro forma
Basic	$	(12.89	)	$	(8.33	)	$	.87
Diluted		*			*		$	.87

*Stock options not included in diluted earnings per share due to losses in 2002 and 2001.

The assumption regarding the stock options issued to executives in 2002, 2001, and 2000 was that 100% of such options vested in the year of grant.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

	2002		2001		2000
Dividend yield	0.00	%	1.36	%	3.18	%
Expected volatility	83.62	%	79.20	%	59.20	%
Risk free interest rate	2.90	%	4.23	%	6.46	%
Expected life (years)	5.0		5.0		5.0

Under the 1995 Stock Option Plan approved by the shareholders in April 1995 and amended in April 1999 and May 2002, the total number of shares of common stock that may be granted is 5,300,000. In April 1990, the shareholders approved a Stock Option Plan for Directors of the Company. On April 29, 1997, the shareholders approved an amendment of the Directors’ Stock Option Plan, which authorizes the granting of options on 400,000 shares of common stock to non-employee directors of the Company, who will automatically receive an option to acquire 3,000 shares each year.

These plans provide that shares granted come from the Company’s authorized but unissued or reacquired common stock. The price of the options granted pursuant to these plans will not be less than 100% of the fair market value of the shares on the date of grant. An option may not be exercised within one year from the date of grant and no option will be exercisable after ten years from the date granted.

In connection with the reorganization of Foster Wheeler Corporation on May 25, 2001, obligations under the stock option plans were assumed by Foster Wheeler Inc., an indirect wholly-owned subsidiary of the Company.

The Company also granted 1,300,000 inducement options in 2001 to its chief executive officer in connection with an employment agreement and a further 1,000,000 options in 2002 based upon an

13

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

2. Summary of Significant Accounting Policies — (Continued)

amendment to his employment agreement. The Company granted 300,000 inducement options to its chief financial officer and 255,000 inducement options to its president and chief executive officer of Foster Wheeler Power Group, Inc. in connection with their employment agreements in 2002. The price of the options granted pursuant to these agreements was fair market value on the date of the grant. One fifth of these options become exercisable each year after the date of the agreement; with all options available for exercise by the fifth anniversary of the agreement date. The options granted under these agreements expire 10 years from the date granted.

In 2002, the Company granted 250,000 options to one of its consultants. The price of the options granted was fair market value on the date of the grant. The options fully vest on March 31, 2003 and expire ten years from the date of grant. In accordance with SFAS 123, the Company recognized $328 of expense related to these options in 2002. As these options are not part of the Company’s employee stock option plans, they are not included in the information presented on the following page.

Information regarding these option plans for the years 2002, 2001, and 2000 is as follows (presented in actual number of shares):

	2002					2001					2000
	Shares			Weighted- Average Exercise Price		Shares			Weighted- Average Exercise Price		Shares			Weighted- Average Exercise Price
Options outstanding, beginning of year		4,957,621		$	16.75		3,137,621		$	23.73		2,508,362		$	27.66
Options exercised		—			—		(66,000	)		9.51		—			—
Options granted		3,627,361			1.64		1,936,250			5.30		671,486			8.76
Options cancelled or expired		(139,883	)		22.26		(50,250	)		21.07		(42,227	)		18.96
Options outstanding, end of year		8,445,099		$	10.17		4,957,621		$	16.75		3,137,621		$	23.73
Option price range at end of year		$ 1.46 to					$ 4.985 to					$ 6.34375
		$45.68750					$45.6875					to $45.6875
Option price range for exercised shares		—					$ 9.00 to					—
							$ 15.0625					—
Options available for grant at end of year		554,069					566,180					1,192,180
Weighted-average fair value of options granted during the year	$	1.11				$	3.23				$	3.38
Options exercisable at end of year		3,555,752					2,620,547					2,265,468
Weighted-average of exercisable options at end of year	$	20.35				$	26.30				$	28.63

The following table summarizes information about fixed-price stock options outstanding as of December 27, 2002:

	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding at 12/27/02		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price		Number Exercisable at 12/27/02		Weighted- Average Exercise Price
27.4375   to 28.75		89,667		1 year		28.49		89,667		28.49
32.9375   to 40.0625		160,834		2 years		36.04		160,834		36.04
29.75       to 35.25		369,167		3 years		30.20		369,167		30.20
42.1875   to 45.6875		253,584		4 years		42.62		253,584		42.62
36.9375   to 37.25		373,500		5 years		36.96		373,500		36.96
27.50       to 27.625		408,000		6 years		27.62		408,000		27.62
13.50       to 15.0625		643,000		7 years		14.17		643,000		14.17
6.34375 to 10.00		607,486		8 years		8.73		412,819		8.30
4.985     to 11.60		1,912,500		9 years		5.29		761,833		5.66
1.46       to   1.87		3,627,361		10 years		1.65		83,348		1.64
1.46       to 45.6875		8,445,099						3,555,752

14

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

2. Summary of Significant Accounting Policies — (Continued)

Reclassifications — Certain prior period amounts have been reclassified to conform to current financial statement presentation. In particular, the Engineering, Procurement and Construction business for the Power industry in the United States was reclassified from the E&C Group to the Energy Group. This allows for United States domestic power projects to be controlled by one group and better aligns the presentation with the current management reporting as well as the customer base.

Recent Accounting Developments — In June 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections”. SFAS 145 rescinds previous statements regarding the extinguishment of debt and amends SFAS 13, “Accounting for Leases” to eliminate an inconsistency between the required accounting for sale/leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale/leaseback transactions. The provisions of SFAS 145 related to the extinguishment of debt are to be applied to fiscal years beginning after May 15, 2002. The provisions of SFAS 145 related to the amendment of SFAS 13 are effective for transactions occurring after May 15, 2002. The Company is currently assessing the impact of the ado ption of this new standard.

In June 2002, the FASB issued SFAS 146 “Accounting for Costs Associated with Exit or Disposal Activities”. SFAS 146 requires liabilities associated with an exit or disposal activity be recognized at fair value when the liability is incurred. This contrasts with existing accounting requirements, under which liabilities for exit or disposal activities are recognized at the date of an entity’s commitment to an exit plan. The provisions of SFAS 146 are effective for exit or disposal activities initiated after December 31, 2002, although early adoption is permitted. The Company implemented SFAS 146 in the fourth quarter of 2002. In connection with the Company’s exit from the Dansville, NY manufacturing facility, the Company recognized $5,300 as a charge to earnings in accordance with this standard.

In December 2002, the FASB issued SFAS 148, “Accounting for Stock-Based Compensation—Transition and Disclosure”. SFAS 148 amends SFAS 123, “Accounting for Stock-Based Compensation”, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure requirements of SFAS 123 to require prominent disclosures, in both interim and annual financial statements, about the effects on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation. The provisions of SFAS 148 are effective for fiscal years ending after December 15, 2002. The provisions of this standard relating to the fair value measurements do not affect the Company as it accounts for stock-based employee compensation under the provisions of Accounting Principles Board Opinion 25, “Accounting for Stock Issued to Employees” as permitted under SFAS 123. The Company in its 2002 financial statements has implemented the disclosure requirements of this standard.

In November 2002, the FASB issued FASB Interpretation (“FIN”) 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”. This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of the guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The interpretation does not prescribe a specific approach for subsequently measuring the guarantor’s recognized liability over the term of the related guarantee. FIN 45 also incorporates, without change, the guidance in FIN 34, “Disclosure of Indirect Guarantees of Indebtedness of Others”, which is being superseded.

This Interpretation does not apply to certain guarantee contracts and the provisions related to recognizing a liability at inception for the fair value of the guarantor’s obligation do not apply to the following:

15

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

2. Summary of Significant Accounting Policies — (Continued)

a. Product warranties

b. Guarantees that are accounted for as derivatives

c. Guarantees that represent contingent consideration in a business combination

d. Guarantees for which the guarantor’s obligations would be reported as an equity item (rather than a liability)

e. An original lessee’s guarantee of lease payments when that lessee remains secondarily liable in conjunction with being relieved from being the primary obligor (that is, the principal debtor) under a lease restructuring

f. Guarantees issued between either parents and their subsidiaries or corporations under common control

g. A parent’s guarantee of a subsidiary’s debt to a third party, and a subsidiary’s guarantee of the debt owed to a third party by either its parent or another subsidiary of that parent.

However, the guarantees described in (a)-(g) above are subject to the disclosure requirements.

The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, irrespective of the guarantor’s fiscal year-end. The disclosure requirements in FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002. The Company in its 2002 financial statements has implemented the disclosure requirements of this interpretation.

3. Research and Development

For the years 2002, 2001, and 2000, approximately $10,300, $12,300 and $12,000, respectively, were spent on Company-sponsored research activities. During the same periods, approximately $18,100, $39,200 and $27,600, respectively, were spent on customer-sponsored research activities.

16

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

4. Accounts and Notes Receivable

The following tabulation shows the components of trade accounts and notes receivable:

	December 27, 2002		December 28, 2001
From long-term contracts:
Amounts billed due within one year	$	410,214	$	452,367
Retention:
Billed:
Estimated to be due in:
2002		—		65,631
2003		58,042		18,059
2004		25,481		22,246
2005		4,978		2,485
Total billed		88,501		108,421
Unbilled:
Estimated to be due in:
2002		—		127,046
2003		97,997		9,538
2004		4		—
Total unbilled		98,001		136,584
Total retentions		186,502		245,005
Total receivables from long-term contracts		596,716		697,372
Other trade accounts and notes receivable		19,387		32,172
		616,103		729,544
Less, allowance for doubtful accounts		16,597		2,988
	$	599,506	$	726,556

Provisions for non-payments of customer balances are normally addressed within the overall profit calculation of the contracts and are not specifically covered by allowances for doubtful accounts. As a result, the amount considered to be in the receivable qualifying account (allowance for doubtful accounts) does not represent the full allowance.

In the third quarter of 1998, a subsidiary of the Company entered into a three-year agreement with a financial institution whereby the subsidiary would sell an undivided interest in a designated pool of qualified accounts receivable. Under the terms of the agreement, new receivables were added to the pool as collections reduce previously sold accounts receivable. The credit risk of uncollectible accounts receivable was transferred to the purchaser. The Company serviced, administered and collected the receivables on behalf of the purchaser. Fees payable to the purchaser under this agreement were equivalent to rates afforded high quality commercial paper issuers plus certain administrative expenses and were included in other deductions, in the Consolidated Statement of Earnings and Comprehensive Income. As of December 28, 2001 $50,000 in receivables were sold under the agreement and are therefore not reflected in the accounts recei vable—trade balance in the Consolidated Balance Sheet. The agreement was terminated and repaid in early 2002 and replaced with a new facility in August 2002, as described below.

In the third quarter of 2002, the Company entered into a receivables securitization facility that matures on August 15, 2005 and is secured by a portion of the Company’s domestic trade receivables. The facility operates through the use of a wholly owned, special purpose subsidiary, Foster Wheeler Funding LLC (“FW

17

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

4. Accounts and Notes Receivable — (Continued)

Funding”) as described below. FW Funding is included in the consolidated financial statements of the Company.

FW Funding entered a Purchase, Sale and Contribution Agreement (“PSCA”) on August 15, 2002 with six of the Company’s wholly owned domestic subsidiaries. Pursuant to the PSCA, FW Funding is obligated to purchase eligible trade receivables, as defined in the PSCA, from these companies and these companies are obligated to contribute as capital their ineligible trade accounts receivable as defined in the PSCA. On August 15, 2002, FW Funding also entered into a Loan and Security Agreement with Foothill Capital Corporation and Ableco Finance Corporation LLC. Under this agreement, FW Funding has the ability to borrow up to a maximum of $40,000 using eligible trade accounts receivable as security. FW Funding pays 10% interest on all outstanding borrowings. In addition, FW Funding pays a monthly unused line fee equal to 0.5% per annum of the maximum available amount less the average daily amount of borrowings during th e preceding month. The facility is subject to covenant compliance. The financial covenants commence at the end of the first quarter of 2003 and include a senior leverage ratio and a minimum EBITDA level. Noncompliance with the financial covenants allows the lender to terminate the arrangement and accelerate any amounts then outstanding.

No amounts were outstanding under this facility as of December 27, 2002. FW Funding may increase or decrease, at its discretion, its use of the facility on a weekly basis subject to the availability of sufficient eligible trade accounts receivable and the facility’s maximum amount of $40,000. As of December 27, 2002, FW Funding held $211,700 of trade accounts receivable which are included in the consolidated balance sheet and had $21,900 of availability under the facility.

5. Contracts in Process and Inventories

Costs of contracts in process and inventories are shown below:

	2002		2001
Inventories
Materials and supplies	$	9,102	$	10,190
Finished goods		230		339
	$	9,332	$	10,529

The following tabulation shows the elements included in contract in process as related to long-term contracts:

	2002		2001
Contracts in Process
Costs plus accrued profits less earned revenues on contracts currently in process	$	346,183	$	638,238
Less, progress payments		65,582		144,639
	$	280,601	$	493,599

18

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

6. Land, Buildings and Equipment

Land, buildings and equipment are stated at cost and are set forth below:

	2002		2001
Land and land improvements	$	23,806	$	21,261
Buildings		151,462		104,869
Equipment		590,295		598,047
Construction in progress		4,117		3,835
	$	769,680	$	728,012

Depreciation expense for the years 2002, 2001, and 2000 was $54,492, $44,348, and $46,388, respectively.

7. Pensions and Other Postretirement Benefits

Pension Benefits — Domestic and certain foreign subsidiaries of the Company have several pension plans covering substantially all full-time employees. Under the plans, retirement benefits are primarily a function of both years of service and level of compensation; the domestic plans are noncontributory. Effective January 1, 1999, a cash balance program was established for the domestic plan. The pension benefit under the previous formulas remain the same for current employees if so elected, however, new employees are offered only the cash balance program. The cash balance plan resembles a savings account. Amounts are credited based on age and a percentage of earnings. At termination or retirement, the employee receives the balance in the account in a lump-sum. Under the cash balance program, future increases in employee earnings will not apply to prior service costs. It is the Company’s policy to fund the plans on a current basis to the extent deductible under existing Federal tax regulations. Such contributions, when made, are intended to provide not only for benefits attributed to service to date, but also those expected to be earned in the future. The Company also has a non-qualified, unfunded supplemental executive retirement plan which covers certain employees.

Through the year ended December 27, 2002, the Company recognized a cumulative minimum liability in its financial statements for both domestic and foreign underfunded plans in the amount of $370,649 resulting in a pre-tax charge to Other Comprehensive Income. The minimum pension liability will change from year to year as a result of revisions to actuarial assumptions, experience gains or losses and settlement rate changes.

Domestic subsidiaries of the Company have a 401(k) plan for salaried employees. The Company, for the years 2002, 2001, and 2000, contributed a 50% match of the first 6% of base pay of employee contributions, subject to the annual IRS limit which amounted to a cost of $5,507, $5,008, and $5,599, respectively.

Other Benefits — In addition to providing pension benefits, some of the Company’s domestic subsidiaries provide certain health care and life insurance benefits for retired employees. Employees may become eligible for these benefits if they qualify for and commence normal or early retirement pension benefits as defined in the pension plan while working for the Company. Benefits are provided through insurance companies. Additionally, some of the Company’s domestic subsidiaries also have a plan which provides coverage for an employee’s beneficiary upon the death of the employee.

19

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

7. Pensions and Other Postretirement Benefits — (Continued)

The following chart contains the disclosures for pension and other benefits for the years 2002, 2001 and 2000.

	Pension Benefits						Other Benefits
	2002			2001			2002			2001
										(Restated) (See Note 2)
Projected Benefit Obligation (PBO)
PBO at beginning of period	$	641,100		$	601,819		$	118,959		$	94,449
Service cost		29,044			27,248			2,785			996
Interest cost		40,874			37,856			8,255			7,227
Plan participants contributions		5,690			4,004			—			—
Plan amendments		3,091			1,973			(8,510	)		(422	)
Actuarial loss/(gain)		106,005			11,161			23,035			21,032
Benefits paid		(37,120	)		(42,091	)		(8,733	)		(8,423	)
Special termination benefits/other		(8,514	)		(140	)		(2,399	)		4,100
Foreign currency exchange rate changes		40,003			(730	)		—			—
PBO at end of period		820,173			641,100			133,392			118,959
Plan Assets
Fair value of plan assets beginning of period		521,195			575,990			—			—
Actual return on plan assets		(62,743	)		(33,736	)		—			—
Employer contributions		41,917			12,354			8,733			8,423
Plan participant contributions		5,690			4,004			—			—
Benefits paid		(37,120	)		(42,091	)		(8,733	)		(8,423	)
Other		(9,819	)		2,171			—			—
Foreign currency exchange rate changes		28,184			2,503			—			—
Fair value of plan assets at end of period		487,304			521,195			—			—
Funded Status
Funded status		(332,869	)		(119,905	)		(133,392	)		(118,959	)
Unrecognized net actuarial loss/(gain)		436,100			213,607			(14,846	)		14,500
Unrecognized prior service cost		12,507			12,219			31,308			(18,029	)
Adjustment for the minimum liability		(370,649	)		(70,270	)		—			—
Prepaid (accrued) benefit cost	$	(254,911	)	$	35,651		$	(116,930	)	$	(122,488	)

20

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

7. Pensions and Other Postretirement Benefits — (Continued)

	Pension Benefits									Other Benefits
	2002			2001			2000			2002			2001			2000
													(Restated)			(Restated)
													(See Note 2)			(See Note 2)
Net Periodic Benefit Cost
Service cost	$	29,044		$	27,248		$	28,013		$	2,785		$	996		$	1,248
Interest cost		40,874			37,856			37,642			8,255			7,227			5,905
Expected return on plan assets		(42,700	)		(51,819	)		(57,022	)		—			—			—
Amortization of transition asset		63			56			(9	)		—			—			—
Amortization of prior service cost		1,810			1,692			2,215			(2,853	)		(2,206	)		(2,165	)
Recognized actuarial loss/(gain)Other		15,453			5,020			(326	)		(5,013	)		4,396			(60	)
SFAS No.87 net periodic pension cost		44,544			20,053			10,513			3,174			10,413			4,928
SFAS No.88 cost*		1,908			1,900			—			—			—			—
Total net periodic pension cost	$	46,452		$	21,953		$	10,513		$	3,174		$	10,413		$	4,928
Weighted Average Assumptions
Discount rate		6.1	%		6.4	%		6.7	%		6.625	%		7.75	%		7.8	%
Long term rate of return		8.2	%		9.3	%		9.5	%
Salary scale		4.1	%		4.2	%		4.2	%

* Under the provision of SFAS No. 88 “Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits,” charges were recorded for a provision for the mothballing of a domestic manufacturing facility of $900, a provision for employee terminations as part of the workforce reduction of $100, and a provision for the retirement of the Company’s Vice President of Human Resources of approximately $900 in 2002; a provision for the retirement of the Company’s Chief Executive Officer resulted in a charge of $1,900 in 2001.

Health care cost trend:
2002	8.5	%
Decline to 2009	5.0	%

Assumed health care cost trend rates have a significant effect on the amounts reported for the other benefit plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:

	1-Percentage Point Increase		1-Percentage Point Decrease
Effect on total of service and interest cost components	$	709	$	(627	)
Effect on accumulated postretirement benefit obligations		10,834		(9,599	)

8. Bank Loans

The approximate weighted average interest rates on borrowings outstanding (primarily foreign) at the end of 2002 and 2001 were 4.38% and 4.28%, respectively.

Unused lines of credit for short-term bank borrowings aggregated $6,373 at year-end 2002, all of which were available outside the United States and Canada in various currencies at interest rates consistent with market conditions in the respective countries.

21

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

8. Bank Loans — (Continued)

Interest costs incurred (including dividends on preferred security) in 2002, 2001, and 2000 were $84,396, $85,202 and $83,405 of which $1,368, $718 and $151, respectively, were capitalized.

9. Corporate and Other Debt and Convertible Subordinated Notes

Corporate Debt — The Company, through its subsidiary Foster Wheeler LLC, has $200,000 Notes (the “Senior Notes") in the public market, which bear interest at a fixed rate of 6.75% per annum, payable semiannually, and mature November 15, 2005. The Senior Notes were issued under an indenture between the Company and BNY Midwest Trust Company. The Notes are not redeemable prior to maturity and are not subject to any sinking fund requirements. The Senior Notes constitute senior unsecured indebtedness of the Company and rank on parity with the Company’s other senior unsecured indebtedness.

In August 2002, the Company finalized a Senior Credit Facility with its lender group. This facility, including a $71,000 term loan, a $69,000 revolving credit facility, and a $149,000 letter of credit facility, expires on April 30, 2005. This facility is secured by the assets of the domestic subsidiaries, the stock of the domestic subsidiaries, and 66% of the stock of the first-tier foreign subsidiaries. The facility has no scheduled repayments prior to maturity on April 30, 2005. The facility requires prepayments from proceeds of assets sales, the issuance of debt or equity, and from excess cash flow. The Company retains the first $77,000 of such amounts and also retains a 50% share of the balance. The financial covenants in the facility commence at the end of the first quarter 2003 and include a senior leverage ratio and a minimum EBITDA level as described in the agreement, as amended. With the sale of Foster Wheeler Envir onmental Corporation on March 7, 2003, cumulative sales proceeds received, as defined in the agreement, approximate $75,000.

The term loan and revolving loans bear interest at the Company’s option of (a) LIBOR plus 3.50% or (b) the Base Rate plus 2.50%. The “Base Rate” means the higher of (i) the Bank of America prime rate and (ii) the Federal Funds rate plus 0.5%.

Amendment No. 1 to the Credit Agreement, obtained on November 8, 2002, provides covenant relief of up to $180,000 of gross pre-tax charges recorded by the Company in the third quarter of 2002. The amendment further provides that up to an additional $63,000 pre-tax charges related to specific contingencies may be excluded from the covenant calculation, if incurred, through December 31, 2003.

Amendment No. 2 to the Credit Agreement, entered into on March 24, 2003, modifies (i) certain definitions of financial measures utilized in the calculation of the financial covenants and (ii) the Minimum EBITDA, and Senior Debt Ratio, as specified in section 6.01 of the Credit Agreement. In connection with this amendment of the Credit Agreement, the Company must make a prepayment of principal in the aggregate amount of $10,000. Refer to exhibit 10.35, filed as part of this Report on Form 10-K, for the complete amendment.

As of December 27, 2002, $140,000 was borrowed under the Senior Credit Facility. This amount appears on the Consolidated Balance Sheet under the caption “Corporate and Other Debt.” As of December 27, 2002, $113,670 of standby letters of credit were outstanding.

22

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

9. Corporate and Other Debt and Convertible Subordinated Notes — (Continued)

Corporate and other debt consisted of the following:

	2002		2001
Senior Credit Facility (average interest rate 5.15%)	$	140,000	$	70,000
6.75% Notes due November 15, 2005		200,000		200,000
Other		6,707		27,627
		346,707		297,627
Less: Current portion		5,005		297,627
	$	341,702	$	0
Principal payments are payable in annual installments of:
2004	$	1,401
2005		340,134
2006		116
2007		51
Balance due in installments through 2007	$	341,702

Convertible Subordinated Notes — In May and June 2001, the Company issued convertible subordinated notes having an aggregate principal amount of $210,000. The notes are due in 2007 and bear interest at 6.50% per annum, payable semi-annually on June 1 and December 1 of each year, commencing December 2001. The notes may be converted into common shares at an initial conversion rate of 62.131 common shares per $1,000 principal amount, or $16.05 per common share, subject to adjustment under certain circumstances. The notes are subordinated in right of payment to all existing and future senior indebtedness of the Company. The net proceeds of approximately $202,900 were used to repay $76,300 under the 364-day revolving credit facility that expired on May 30, 2001 and to reduce advances outstanding under a revolving credit agreement. Amortization of debt issuance costs is included as a component of interest expense over the t erm of the notes.

10. Derivative Financial Instruments

The Company operates on a worldwide basis. The Company’s activities expose it to risks related to the effect of changes in the foreign-currency exchange rates. The Company maintains a foreign-currency risk-management strategy that uses derivative instruments to protect it from unanticipated fluctuations in cash flows that may arise from volatility in currency exchange rates. The Company utilizes foreign exchange contracts solely for hedging purposes, whether or not they qualify for hedge accounting under SFAS 133. At December 27, 2002, the Company did not meet the requirements for deferral under SFAS 133 and recorded in the year ended December 27, 2002 a $5,300 net gain on derivative instruments which is recorded as a reduction in cost of operating revenues on the consolidated statement of earnings and comprehensive income. The Company is exposed to credit loss in the event of non-performance by the counterparties. All of these counterparties are significant financial institutions that are primarily rated A or better by Standard & Poor’s or A2 or better by Moody’s. As of December 27, 2002, approximately $177,140 was owed to the Company by counterparties and $103,950 is owed by the Company to counterparties. A $3,834 net of tax gain was recorded in other comprehensive income as of December 28, 2001. This amount was reclassified to earnings in 2002 as the Company no longer qualified for deferral under SFAS 133.

The maximum term over which the Company is hedging exposure to the variability of cash flows is twenty-four months.

23

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

10. Derivative Financial Instruments — (Continued)

A reconciliation of current period changes, net of applicable income taxes, in accumulated other comprehensive income relating to derivatives qualifying as cash flow hedges are as follows:

Balance as of December 28, 2001	$	3,834
Reclassification to earnings		(3,834	)
Balance at December 27, 2002	$	0

11. Subordinated Robbins Facility Exit Funding Obligations

Foster Wheeler’s subordinated obligations entered into in connection with the restructuring of debt incurred to finance construction of a waste-to-energy facility in the Village of Robbins, Illinois (the “Exit Funding Agreement”) are limited to funding:

1999C Bonds 7 ¼% interest, due October 15, 2009 ($13,710) and October 15, 2024 ($77,155)	$	90,865
1999D Bonds accrued at 7% due October 15, 2009		18,000
Total	$	108,865

1999C Bonds. The 1999C Bonds are subject to mandatory sinking fund reduction prior to maturity at a redemption price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date by application by the Trustee of funds on deposit to the credit of the 1999C Sinking Fund Installment Subaccount on October 15 in the years and in the principal amounts as follows:

1999C BONDS DUE 2009
Year	Amount		Year		Amount
2003	$	1,580		2006	$	1,940
2004		1,690		2007		2,080
2005		1,810		2008		2,225
				2009		2,385
					$	13,710
1999C BONDS DUE 2024
Year						Amount
2023					$	37,230
2024						39,925
						77,155
					$	90,865

See Note 20 for further information.

12. Mandatorily Redeemable Preferred Securities

On January 13, 1999, FW Preferred Capital Trust I, a Delaware business trust which is a 100% owned finance subsidiary of the Company, issued $175,000 in Preferred Trust Securities. The Preferred Trust Securities are fully and unconditionally guaranteed by Foster Wheeler Ltd. and Foster Wheeler LLC. These Preferred Trust Securities are entitled to receive cumulative cash distributions at an annual rate of 9.0%. Distributions are paid quarterly in arrears on April 15, July 15, October 15, and January 15 of each year. Such distributions may be deferred for periods up to five years during which time additional interest accrues at 9.0%. In accordance with this provision, the Company has deferred all quarterly distributions beginning

24

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

12. Mandatorily Redeemable Preferred Securities — (Continued)

with the distribution due on January 15, 2002. Such deferred interest totals $20,100. The maturity date is January 15, 2029. Foster Wheeler can redeem these Preferred Trust Securities on or after January 15, 2004.

13. Special-purpose Project Debt

Special-purpose project debt represents debt incurred to finance the construction of cogeneration facilities or waste-to-energy projects. The notes and/or bonds are collateralized by certain assets of each project. The Company’s obligations with respect to this debt are limited to guaranteeing the operating performance of the projects.

	2002			2001
Note payable, interest varies based on one of several money market rates (2002-year-end rate 2.705%), due semiannually through July 30, 2006	$	27,907	(1)	$	33,367
Senior Secured Notes, interest 11.443%, due annually April 15, 2003 through 2015		40,077	(2)		42,075
Solid Waste Disposal and Resource Recovery System Revenue Bonds, interest 7.125% to 7.5%, due annually December 1, 2003 through 2010		88,920	(3)		97,978
Resource Recovery Revenue Bonds, interest 7.9% to 10%, due annually December 15, 2003 through 2012		48,936	(4)		52,636
		205,840			226,056
Less: Current portion		24,227			20,216
	$	181,613		$	205,840

(1) The note payable for $27,907 represents a loan under a bank credit facility to a limited partnership whose general partner is a special-purpose subsidiary.

(2) The Senior Secured Notes of $40,077 were issued in a total amount of $42,500. The notes are collateralized by certain revenues and assets of a special-purpose subsidiary which is the indirect owner of the project.

(3) The Solid Waste Disposal and Resource Recovery System Revenue Bonds totaling $88,920 were issued in a total amount of $133,500. The bonds are collateralized by a pledge of certain revenues and assets of the project, but not the plant (see Note 20).

(4) The Resource Recovery Revenue Bonds of $48,936 were issued in a total amount of $86,780. The bonds are collateralized by a pledge of certain revenues and assets of the project.

Principal payments are payable in annual installments as follows:

2004	$	23,195
2005		25,165
2006		27,072
2007		15,323
Balance due in installments through 2015		90,858
	$	181,613

25

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

14. Guarantees

The Company has provided indemnifications to third parties relating to businesses and/or assets the Company previously owned. Such indemnifications relate primarily to potential environmental and tax exposures for activities conducted by the Company prior to the sale.

	Maximum Potential Payment		Carrying Amount of Liability
Environmental indemnifications		No limit	$	5,400
Tax indemnifications		No limit	$	0

The Company provides for make good/warranty reserves on certain of its long-term contracts. Generally, these reserves are accrued over the life of the contract so that a sufficient balance is maintained to cover the exposures at the conclusion of the contract.

Balance as of December 28, 2001	$	52,700
Accruals		45,600
Settlements		(8,600	)
Adjustments to provisions		(7,800	)
Balance as of December 27, 2002	$	81,900

15. Equity Interests

The Company owns a non-controlling equity interest in three energy projects and one waste-to-energy project; three of which are located in Italy and one in Chile. Two of the projects in Italy are each 42% owned while the third is 49% owned by the Company. The project in Chile is 85% owned by the Company. However, the Company does not have a controlling financial interest in the Chilean project. Following is summarized financial information for the Company’s equity affiliates combined, as well as the Company’s interest in the affiliates.

	December 27, 2002				December 28, 2001
	Italian Projects		Chilean Project		Italian Projects		Chilean Projects
Balance Sheet Data:
Current assets	$	80,966	$	22,352	$	75,942	$	23,301
Other assets (primarily buildings and equipment)		344,993		218,990		311,584		227,019
Current liabilities		20,665		14,748		12,487		14,747
Other liabilities (primarily long-term debt)		344,148		152,949		329,030		158,124
Net assets		61,146		73,645		46,009		77,449

	December 27, 2002				December 28, 2001
	Italian Projects		Chilean Project		Italian Projects		Chilean Projects		Venezuela Project
Income Statement Data for twelve months:
Total revenues	$	171,565	$	38,425	$	159,845	$	40,546	$	4,428
Income before income taxes		31,358		10,087		21,618		10,467		2,684
Net earnings		17,648		8,372		11,955		8,689		2,582

As of December 27, 2002, the Company’s share of the net earnings and investment in the equity affiliates totaled $14,006 and $88,523, respectively. Dividends of $9,744 were received during the year 2002. The Company has guaranteed certain performance obligations of such projects. The Company’s average contingent obligations under such guarantees are approximately $2,800 per year for the four projects. The Company has provided a $10,000 debt service reserve letter of credit providing liquidity should the

26

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

15. Equity Interests — (Continued)

performance of the project be insufficient to cover the debt service payments. No amounts have been drawn under the letter of credit.

In April 2001, the Company completed the sale of its interests in two hydrogen production plants in South America. The net proceeds from these transactions were approximately $40,000. An after-tax loss of $5,000 was recorded in the second quarter relating to these sales.

16. Income Taxes

The components of (loss)/earnings before income taxes for the years 2002, 2001 and 2000 were taxed under the following jurisdictions:

	2002			2001			2000
				(Restated) (See Note 2)			(Restated) (See Note 2)
Domestic	$	(506,639	)	$	(244,809	)	$	(37,334	)
Foreign		(3,923	)		31,844			89,500
Total	$	(510,562	)	$	(212,965	)	$	52,166

The provision/(benefit) for income taxes on those earnings was as follows:

	2002			2001			2000
				(Restated) (See Note 2)			(Restated) (See Note 2)
Current tax (benefit)/expense:
Domestic	$	5,931		$	5,486		$	2,116
Foreign		10,978			22,545			15,094
Total current		16,909			28,031			17,210
Deferred tax (benefit)/expense:
Domestic		—			102,147			(14,079	)
Foreign		(2,252	)		(6,783	)		12,048
Total deferred		(2,252	)		95,364			(2,031	)
Total provision/(benefit) for income taxes	$	14,657		$	123,395		$	15,179

27

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

16. Income Taxes — (Continued)

Deferred tax liabilities (assets) consist of the following:

	2002			2001			2000
				(Restated) (See Note 2)			(Restated) (See Note 2)
Difference between book and tax depreciation	$	35,002		$	34,369		$	72,195
Pension assets		(61,279	)		7,584			22,881
Capital lease transactions		7,376			8,612			9,733
Revenue recognition		(7,210	)		5,999			16,736
Other		—			192			740
Gross deferred tax liabilities (assets)		(26,111	)		56,756			122,285
Current taxability of estimated costs to complete long-term contracts		(14,278	)		(4,297	)		(5,750	)
Income currently taxable deferred for financial reporting		(4,175	)		(5,307	)		(5,491	)
Expenses not currently deductible for tax purposes		(129,917	)		(122,983	)		(132,898	)
Investment tax credit carry forwards		(30,893	)		(30,893	)		(30,251	)
Postretirement benefits other than pensions		(67,113	)		(47,242	)		(56,250	)
Asbestos claims		(6,200	)		(7,000	)		(7,963	)
Minimum tax credits		(10,883	)		(11,073	)		(10,263	)
Foreign tax credits		(9,579	)		(6,485	)		(13,763	)
Net operating loss carryforwards		(178,067	)		(15,332	)		(68,260	)
Effect of write-downs and restructuring reserves		(40,873	)		(63,680	)		—
Other		(15,621	)		(19,871	)		(5,432	)
Valuation allowance		444,427			268,851			71,816
Net deferred tax assets		(63,172	)		(65,312	)		(264,505	)
	$	(89,283	)	$	(8,556	)	$	(142,220	)

The domestic investment tax credit carryforwards, if not used, will expire in the years 2003 through 2008. Foreign tax credit carryforwards are recognized based on their potential utilization and, if not used, will expire in the years 2004 through 2007. As reflected above, the Company has recorded various deferred tax assets. Realization is dependent on generating sufficient taxable income prior to the expiration of the various credits. Management believes that it is more likely than not that the remaining net deferred tax assets (after consideration of the valuation allowance) will be realized through future earnings and/or tax planning strategies. The amount of the deferred tax assets considered realizable, however, could change in the near future if estimates of future taxable income during the carryforward period are changed. The valuation allowance increased by $175,600 and $197,000 in 2002 and 2001, respectively. Such increase i s required under FASB 109, “Accounting for Income Taxes”, when there is an evidence of losses from domestic operations in the three most recent fiscal years. For statutory purposes, the majority of deferred tax assets for which a valuation allowance is provided in the current year do not begin expiring until 2020 and beyond, based on the current tax laws.

28

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

16. Income Taxes — (Continued)

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory rate to earnings before income taxes, as a result of the following:

	2002			2001			2000
Tax provision/(benefit) at U.S.statutory rate		(35.0	)%		(35.0	)%		35.0	%
State income taxes, net of Federal income tax benefit		0.4			1.9			6.7
Increase in valuation allowance		34.4			86.2			—
Difference in estimated income taxes on foreign income and losses, net of previously provided amounts		2.0			2.2			(7.5	)
Other		1.1			2.6			(5.1	)
		2.9	%		57.9	%		29.1	%

17. Operating Leases

The Company entered into a sale/leaseback of its waste-to-energy plant in Charleston, South Carolina, in 1989. The terms of the agreement consisted of a long-term operating lease of 25 years. The Company recorded a deferred gain of $13,800 related to this transaction which is being amortized to income over the term of the lease. As of December 28, 2001, the unamortized gain was $6,500, net of the current portion of $500 each year. The lease expense recognized for 2002 was $6,300 and for 2001 and 2000 was $7,500 per year. The Charleston facility was sold in October of 2002.

The Company and certain of its subsidiaries are obligated under other operating lease agreements primarily for office space. Rental expense for these leases totaled $32,000 in 2002, $29,800 in 2001, and $30,200 in 2000. Future minimum rental commitments on non- cancelable leases are as follows:

Fiscal year:
2003	$	26,937
2004		25,805
2005		21,208
2006		16,443
2007		15,159
Thereafter		157,574
	$	263,126

18. Capital Leases

During 2002, the Company entered into sales-leaseback transactions for office buildings in both Finland and the United States. The transactions qualified as capitalized leases. Assets under capital leases are summarized as follows:

	2002
Buildings and improvements	$	35,755
Less accumulated amortization		342
Net assets under capital lease	$	35,413

29

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

18. Capital Leases — (Continued)

The following are the minimum lease payments to be made in each of the years indicated for the capital leases in effect as of December 27, 2002:

Fiscal year:
2003	$	6,152
2004		6,152
2005		6,152
2006		6,679
2007		6,679
Thereafter		134,927
Less: Interest		(107,754	)
Net minimum lease payments under capital leases	$	58,987

19. Quarterly Financial Data (Unaudited)

	Three Months Ended
2002	March 29			June 28			Sept. 27			Dec. 27
	(Restated) (See Note 2)			(Restated) (See Note 2)			(Restated) (See Note 2)
Operating revenues	$	795,409		$	944,334		$	799,069		$	980,365
Gross earnings/(loss) from operations		83,477			48,787			(58,858	)		18,861
Net (loss) prior to cumulative effect of a change in accounting principle		(25,610	)		(85,996	)		(151,010	)		(112,103	)
Cumulative effect of a change in accounting principle for goodwill, net of $0 tax		(150,500	)
Net (loss)		(176,110	)		(85,996	)		(151,010	)		(112,103	)
Earnings/(loss) per share:
Basic	$	(4.30	)	$	(2.10	)	$	(3.69	)	$	(2.73	)
Diluted	$	(4.30	)	$	(2.10	)	$	(3.69	)	$	(2.73	)
Shares outstanding:
Basic:
Weighted average number of shares outstanding		40,920			40,945			40,963			40,999
Diluted:
Effect of stock options		*			*			*			*
Total diluted		40,920			40,945			40,963			40,999

30

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

19. Quarterly Financial Data (Unaudited) — (Continued)

	Three Months Ended
2001	March 30		June 29			Sept. 28		Dec. 28
	(Restated) (See Note 2)		(Restated) (See Note 2)			(Restated) (See Note 2)		(Restated) (See Note 2)
Operating revenues	$	682,643	$	826,882		$	808,798	$	996,991
Gross earnings from operations		74,958		84,421			68,390		(76,480	)
Net earnings		6,974		(342	)		111		(343,103	)
Earnings per share:
Basic	$	0.17	$	(0.01	)	$	0.00	$	(8.39	)
Diluted	$	0.17	$	(0.01	)	$	0.00	$	(8.39	)
Shares outstanding:
Basic:
Weighted average number of shares outstanding		40,835		40,891			40,884		40,896
Diluted:
Effect of stock options		310		360			87		*
Total diluted		41,145		41,251			40,971		40,896

* The effect of the stock options and convertible notes were not included in the calculation of diluted earnings per share as these options were antidilutive due to the quarterly loss.

20. Litigation and Uncertainties

In the ordinary course of business, the Company and its subsidiaries enter into contracts providing for assessment of damages for nonperformance or delays in completion. Suits and claims have been or may be brought against the Company by customers alleging deficiencies in either equipment or plant construction and seeking resulting alleged damages. Based on its knowledge of the facts and circumstances relating to the Company’s liabilities, if any, and to its insurance coverage, management of the Company believes that the disposition of such suits will not result in material charges against assets or earnings materially in excess of amounts previously provided in the accounts.

Some of the Company’s U.S. subsidiaries, along with many other companies, are codefendants in numerous asbestos-related lawsuits and out-of-court informal claims pending in the United States. Plaintiffs claim damages for personal injury alleged to have arisen from exposure to or use of asbestos in connection with work allegedly performed by the Company’s subsidiaries during the 1970s and prior. A summary of claim activity for the three years ended December 27, 2002 is as follows:

	Number of Claims
	2002			2001			2000
Balance, beginning of year		110,700			92,100			73,600
New claims		45,200			54,700			41,300
Claims resolved		(16,100	)		(36,100	)		(22,800	)
Balance, end of year		139,800			110,700			92,100

The amount spent on asbestos litigation defense and case resolution, substantially all of which was reimbursed or will be reimbursed from insurance coverage, was $57,200 in 2002, $66,900 in 2001, and $56,200 in 2000.

The Company has recorded assets of $569,000 relating to probable insurance recoveries of which approximately $35,000 is recorded in accounts and notes receivables, and $534,000 is recorded as long term.

31

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

20. Litigation and Uncertainties — (Continued)

The Company has funded approximately $59,000 as of December 27, 2002. The asset is an estimate of recoveries from insurers based upon assumptions relating to cost allocation and resolution of pending proceedings with certain insurers, as well as recoveries under a funding arrangement with other insurers, which has been in place since 1993. The total liability recorded is comprised of an estimated liability relating to open (outstanding) claims of approximately $337,500 and an estimated liability relating to future unasserted claims of approximately $217,300. Of the total, $35,000 is recorded in accrued expenses and $519,800 is recorded in asbestos related liability on the consolidated balance sheet. These estimates are 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; and the breakdown of known and future claims into disease type. The tota l estimated liability includes both the estimate of forecasted indemnity amounts and forecasted defense expenses. Total estimated defense costs and indemnity payments are expected to be incurred over the next sixteen years during which period new claims are expected to decline from year to year. Recently received claims also suggest that the percentage of claims to be closed without payment of indemnity costs should increase as claims are resolved during the next few years. The Company believes that it is likely that there will be new claims filed after 2018 but in light of uncertainties inherent in long term forecasts, the Company does not believe that it can reasonably estimate defense and/or indemnity costs which might be incurred after 2018. Nonetheless, the Company plans to update its forecasts periodically to take into consideration its future experience and other considerations such as legislation to continuously update its estimate of future costs and expected insurance recoveries. Historically, defense costs have represented approximately 24% of total costs. Through December 27, 2002, total indemnity costs paid, prior to insurance recoveries, were approximately $294,600 and total defense costs paid were approximately $95,100. The Company’s management after consultation with counsel, has considered the ongoing proceedings with insurers and the financial viability and legal obligations of its insurers, and believe that except for those insurers that have become or may become insolvent, the insurers or their guarantors will continue to adequately fund claims and defense costs relating to asbestos litigation. It should be noted that the estimate of the assets and liabilities related to asbestos claims and recovery is subject to a number of uncertainties that may result in significant changes in the current estimates. Among these are uncertainty as to the ultimate number of claims filed, the amounts of claim costs, the impact of bankruptcies of other companies with asbestos claims, uncer tainties 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 will cause the Company to increase further the estimates of the costs associated with asbestos claims and could have a material adverse effect on the business, financial condition, results of operations, and cash flows.

A subsidiary of the Company in the United Kingdom has also received a limited number of claims alleging personal injury arising from exposure to asbestos. None of these claims have resulted in material costs to the Company.

A San Francisco, California jury returned a verdict on March 26, 2002 finding Foster Wheeler Corporation liable for $10,600 in the case of Todak vs. Foster Wheeler Corporation. The case was brought against Foster Wheeler Corporation, the U.S. Navy, and several other companies by a 59-year-old man suffering from mesothelioma which allegedly resulted from exposure to asbestos. The Company believes there was no credible evidence presented by the plaintiff that he was exposed to asbestos contained in a Foster Wheeler Corporation product. In addition, the Company believes that the verdict was clearly excessive and should be set aside or reduced on appeal. Foster Wheeler Corporation has appealed this judgment. Management of the Company believes the financial obligation that may ultimately result from entry of a final judgment in this case will be paid by insurance.

On April 3, 2002 the United States District Court for the Northern District of Texas entered an amended final judgment in the matter of Koch Engineering Company. et al vs. Glitsch, Inc. et al. Glitsch, Inc. (now

32

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

20. Litigation and Uncertainties — (Continued)

known as Tray, Inc.) is an indirect subsidiary of the Company. This lawsuit claimed damages for patent infringement and trade secret misappropriations and has been pending for over 18 years. As previously reported by the Company, a judgment was entered in this case on November 29, 1999 awarding plaintiffs compensatory and punitive damages plus prejudgment interest in an amount yet to be calculated. This amended final judgment in the amount of $54,283 includes such interest for the period beginning in 1983 when the lawsuit was filed through entry of judgment. Post-judgment interest will accrue at a rate of 5.471 percent per annum from November 29, 1999. The management of Tray, Inc. believes that the Court’s decision contains numerous factual and legal errors subject to reversal on appeal. Tray, Inc. has filed a notice of appeal to the court of appeals.

In 1997, the United States Supreme Court effectively invalidated New Jersey’s long-standing municipal solid waste flow rules and regulations. The immediate effect was to eliminate the guaranteed supply of municipal solid waste to the Camden County Waste-to-Energy Project (the “Project”) with its corresponding tipping fee revenue. As a result, tipping fees have been reduced to market rate in order to provide a steady supply of fuel to the Project. Those market-based revenues have not been, and are not expected to be, sufficient to service the debt on outstanding bonds which were issued to construct the Project and to acquire a landfill for Camden County’s use.

The Company’s project subsidiary, Camden Country Energy Recovery Associates, LP (“CCERA”), has filed suit against the involved parties, including the State of New Jersey, seeking among other things to void the applicable contracts and agreements governing the Project. (Camden County Energy Recovery Assoc. v. N.J. Department of Environmental Protection, et al., Superior Court of New Jersey, Mercer County, L-268-98). Since 1999, the State of New Jersey has provided subsidies sufficient to ensure the payment of each of the Project’s debt service payments as it became due. In January 2002, the State of New Jersey enacted legislation providing a mechanism for state-supported refinancing of bond debt on solid waste facilities located within the state. The legislation expired on December 31, 2002, without any refinancing having been accomplished. Press reports indicate that it is unlikely that any state-suppor ted refinancing will occur in the near future, but those same reports include statements by state officials that the State will continue to ensure that debt service payments are made when due. Given the foregoing, management is seeking to identify other potential mechanisms for refinancing the Project’s bond debt. Any refinancing would likely involve restructuring CCERA’s contracts related to the Project, including its service agreement.

The bonds outstanding on the Camden Project are public debt, not debt of either the Company or CCERA, and the bonds are not guaranteed by the Company. If the State were to fail to subsidize the debt service, and there were to be a default on a debt service payment, the bondholders might proceed to attempt to exercise their remedies.

At this time, management cannot determine the ultimate outcome of the foregoing and the potential effects on CCERA and the Project. However, management believes that pending the conclusion of the foregoing litigation, the Project will continue to operate at full capacity receiving market rates for waste disposal and generating sufficient revenues to pay CCERA its service fee. Because the debt outstanding on the Camden Project is not CCERA’s, and is not secured by CCERA’s plant, the Company’s management does not believe that an attempt by the bondholders to exercise their remedies would have a material adverse effect on CCERA or the Company.

In 1996, the Company completed the construction of a recycling and waste-to-energy project located in the Village of Robbins, Illinois (the “Robbins Facility”). By virtue of the Robbins Facility qualifying under the Illinois Retail Rate Law as a qualified solid waste-to- energy facility, it was to receive electricity revenues projected to be substantially higher than the utility’s “avoided cost”. Under the Retail Rate Law, the utility was entitled to a tax credit against a state tax on utility gross receipts and invested capital. The State of Illinois (the “State”) was to be reimbursed by the Robbins Facility for the tax credit beginning after the 20^th

33

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

20. Litigation and Uncertainties — (Continued)

year following the initial sale of electricity to the utility. The State repealed the Retail Rate Law insofar as it applied to the Robbins Facility. In 1996, the Company’s project subsidiaries filed a legal action against state officials and the utility, asserting a number of claims, including a claim that the repeal should not be construed to retroactively apply to the Robbins Facility. (Now pending as Village of Robbins and Robbins Resource Recovery Partners, L.P. v. Wright, et. al., Circuit Court of Cook County, Illinois, Chancery Division, No. 00 CH 3754) (previously 96 CH 12873).

In November 2002, the Circuit Court issued a Memorandum Order, and related judgments, holding that the repeal of the Retail Rate Law could not be retroactively applied to the Robbins Facility. The defendants have appealed, and the trial court’s rulings have been stayed.

In October 1999, the Company reached an agreement (the “Robbins Agreement”) with the holders of bonds issued by the Village of Robbins to finance the construction of the Robbins Facility (the “Bondholders”). As part of the Robbins Agreement, the Company agreed to continue to contest this repeal through litigation. Pursuant to the Robbins Agreement, the Company has also agreed that any proceeds of such litigation will be allocated in a certain order of priority. Pursuant to an agreement reached with the debtor project companies and the Bondholders and approved by the bankruptcy court on March 5, 2002 (In re: Robbins Resource Recovery Partners, L.P., N.D. Illinois, Case No. 00B 25018), the foregoing allocation was modified so that any proceeds will now be allocated in the following order of priority: (1) to any attorneys entitled to a contingency fee, up to 15%; (2) up to the next $10,000, 50% to the Company, 50% to redeem outstanding 1999D Bonds; (3) to redeem all of the outstanding 1999D Bonds; (4) to reimburse the Company for any amounts paid by it in respect of the 1999D Bonds; (5) to reimburse the Company for any costs incurred by it in connection with prosecuting the Retail Rate litigation; (6) to redeem all of the outstanding 1999C Bonds; and (7) 10.6% interest on the foregoing items 4 and 5 to the Company. Then, to the extent there are further proceeds, 80% of any such proceeds shall be paid to the Indenture Trustee of Non-Recourse Robbins Bonds until an amount sufficient to repay such Bonds in full has been paid over, with the remaining 20% being paid over to the Company. After the foregoing payments shall have been made, any remaining proceeds shall be paid over to the Company.

On December 1, 1999, three special purpose subsidiaries of the Company commenced reorganization proceedings under Chapter 11 of the U.S. Bankruptcy Code in order to effectuate the terms of the Robbins Agreement. On January 21, 2000, these subsidiaries’ plan of reorganization was confirmed, and the plan was consummated on February 3, 2000.

On August 8, 2000, the Company initiated the final phase of its exit from the Robbins Facility. As part of the Robbins Agreement, the Company agreed to operate the Robbins Facility subject to being reimbursed for all costs of operation. Such reimbursement did not occur and, therefore, pursuant to the Robbins Agreement, the Company on October 10, 2000, completed the final phase of its exit from the project. The Company had been administering the project companies through a Delaware business trust, which owned the project on behalf of the Bondholders. As a result of its exit from the project, the Company is no longer administering the project companies, which project companies again commenced reorganization proceedings under Chapter 11 of the U.S. Bankruptcy Code in August and October 2000. A subsidiary of the Company reached an agreement with the debtor project companies and the requisite holders of the bonds, which was appro ved by the bankruptcy court on March 5, 2002 (In re: Robbins Resource Recovery Partners, L.P., N.D. Illinois, Case No. 00B 25018). In June 2002, the Plan of Reorganization incorporating the agreement, among other things, was confirmed and became effective. The foregoing agreement is expected to favorably resolve any issues related to the exit from the project.

The ultimate legal and financial liability of the Company in respect to all claims, lawsuits and proceedings cannot be estimated with certainty. As additional information concerning the estimates used by the Company becomes known, the Company reassesses its position both with respect to gain contingencies

34

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

20. Litigation and Uncertainties — (Continued)

and accrued liabilities and other potential exposures. Estimates that are particularly sensitive to future change relate to legal matters as these are subject to change as events evolve and as additional information becomes available during the administration and litigation process. Increases in the number of claims filed or costs to resolve those claims will cause the Company to increase further the estimates of the costs associated with such claims and could have a material adverse effect on the business, financial condition, results of operations, and cash flows.

21. Preferred Share Purchase Rights

On September 22, 1987, the Company’s Board of Directors (the “Board”) declared a dividend distribution of one Preferred Share Purchase Right (“Right”) on each share of the Company’s common stock outstanding as of October 2, 1987 and adopted the Rights Agreement, dated as of September 22, 1987 (the “Rights Agreement”). On September 30, 1997, the Board amended and restated the Rights Agreement. Each Right allows the shareholder to purchase one one-hundredth of a share of a new series of preferred stock of the Company at an exercise price of $175. Rights are exercisable only if a person or group acquires 20% or more of the Company’s common stock or announces a tender offer the consummation of which would result in ownership by a person or group of 20% or more of the Company’s common stock. In connection with the reorganization on May 25, 2001, Foster Wheeler Corpo ration Rights were exchanged for Rights of Foster Wheeler Ltd. A new rights agreement governs the Rights, although the terms are the same. The Rights, which do not have the right to vote or receive dividends, expire on May 20, 2011, and may be redeemed, prior to becoming exercisable, by the Board at $.02 per Right or by shareholder action with an acquisition proposal.

If any person or group acquires 20% or more of the Company’s outstanding common stock, the “flip-in” provision of the Rights will be triggered and the Rights will entitle a holder (other than such person or any member of such group) to acquire a number of additional shares of the Company’s common stock having a market value of twice the exercise price of each Right.

In the event the Company is involved in a merger or other business combination transaction, each Right will entitle its holder to purchase, at the Right’s then-current exercise price, a number of the acquiring Company’s common stock having a market value at that time of twice the Right’s exercise price. The Board of Directors may amend the Rights Agreement to prevent approved transactions from triggering the Rights.

22. Financial Instruments and Risk Management

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 values:

Cash and Short-term Investments — All investments are considered available for sale and the carrying amount approximates fair value because of the short-term maturity of these instruments.

Long-term Debt — The fair value of the Company’s long-term debt (including current installments) is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. The carrying amount for 2001 includes those debt issuances that were classified to current liabilities due to the covenant violations under the Company’s Revolving Credit Agreement and the potential for acceleration of debt under certain debt agreements. See Note 1 for further information.

Foreign Currency Contracts — The fair values of these financial instruments (used for hedging purposes) are estimated by obtaining quotes from brokers. The Company is exposed to market risks from fluctuations in foreign exchange rates. Financial instruments are utilized by the Company to reduce this risk. The Company does not hold or issue financial instruments for trading purposes. The Company is exposed to credit loss in the event of nonperformance by the counterparties. All of these financial instruments are with

35

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

22. Financial Instruments and Risk Management — (Continued)

significant financial institutions that are primarily rated A or better by Standard & Poor’s or A2 or better by Moody’s (see Notes 2 and 10).

Carrying Amounts and Fair Values — The estimated fair values of the Company’s financial instruments are as follows:

	2002						2001
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Nonderivatives:
Cash and short-term investments	$	344,576		$	344,576		$	224,291			$224,291
Restricted Cash		84,793			84,793			—			—
Long-term debt		(823,114	)		(532,598	)		(735,158	)		(592,517	)
Derivatives:
Foreign currency contracts		5,300			5,300			5,900			5,900

In the ordinary course of business, the Company is contingently liable for performance under standby letters of credit, bank guarantees and surety bonds totaling $718,751 and $1,025,612 as of December 27, 2002 and December 28, 2001, respectively. These balances include the standby letters of credit issued under the Revolving Credit Agreement discussed in Note 9. In the Company’s past experience, no material claims have been made against these financial instruments. Management of the Company does not expect any material losses to result from these off-balance-sheet instruments and, therefore, is of the opinion that the fair value of these instruments is zero.

As of December 27, 2002, the Company had $281,090 of foreign currency contracts outstanding. These foreign currency contracts mature between 2003 and 2004. The contracts have been established by various international subsidiaries to sell a variety of currencies and either receive their respective functional currencies or other currencies for which they have payment obligations to third parties.

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash equivalents and trade receivables. The Company places its cash equivalents with financial institutions and limits the amount of credit exposure to any one financial institution. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Company’s customer base and their dispersion across different business and geographic areas. As of December 27, 2002 and December 28, 2001, the Company had no significant concentrations of credit risk. The Company had issued a third-party financial guarantee totaling $2,750 at year-end 2002 and 2001 with respect to a partnership interest in a commercial real estate project.

23. Business Segments — Data

The business of the Company and its subsidiaries falls within two business groups. THE ENGINEERING AND CONSTRUCTION GROUP designs, engineers and constructs petroleum, chemical, petrochemical and alternative-fuels facilities and related infrastructure, including power generation and distribution facilities, production terminals, pollution control equipment, water treatment facilities and process plants for the production of fine chemicals, pharmaceuticals, dyestuffs, fragrances, flavors, food additives and vitamins. Also, the E&C Group provides a broad range of environmental remediation services, together with related technical, design and regulatory services. THE ENERGY GROUP designs, manufactures and erects steam generating and auxiliary equipment for power stations and industrial markets worldwide. Steam generating equipment includes a full range of fluidized-bed and conventional boilers firing coal, oil, gas, biomass and other municipal solid waste, waste wood and low-Btu gases. Auxiliary equipment includes feedwater heaters, steam condensers, heat-recovery equipment and low-NO_X burners. Site services related to

36

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

23. Business Segments — Data — (Continued)

these products encompass plant erection, maintenance engineering, plant upgrading and life extension and plant repowering. The Energy Group also provides research analysis and experimental work in fluid dynamics, heat transfer, combustion and fuel technology, materials engineering and solids mechanics. In addition, the Energy Group also builds, owns and operates cogeneration, independent power production and resource recovery facilities, as well as facilities for the process and petrochemical industries.

Since fiscal 2000, the Power Systems Group has been combined with the Energy Group, where the rest of the Company’s power expertise resides. The prior years amounts have been adjusted to reflect this change. This unit has a small project development team but will no longer develop waste-to-energy facilities in the United States.

The Company conducts its business on a global basis. The E&C Group accounted for the largest portion of the Company’s operating revenues and operating income over the last ten years. In 2002, the E&C Group accounted for approximately 57% of the operating revenues. The geographic dispersion of these operating revenues was as follows: 25% North America, 20% Asia, 31% Europe, 13% Middle East, 5% South America and 6% other. The Energy Group accounted for 43% of the operating revenues of the Company. The geographic dispersion of these operating revenues was as follows: 62% North America, 31% Europe, 4% Asia, 2% Middle East, and 1% South America.

Earnings of segments represent revenues less expenses attributable to that group or geographic area where the operating units are located. Revenues between business segments are immaterial and are eliminated in Corporate and Financial Services.

Export revenues account for 5.3% of operating revenues. No single customer represented 10% or more of operating revenues for 2002, 2001, or 2000.

Identifiable assets by group are those assets that are directly related to and support the operations of each group. Corporate assets are principally cash, investments and real estate.

37

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

23. Business Segments — Data — (Continued)

Summary financial information concerning the Company’s reportable segments is shown in the following table:

	Total			Engineering and Construction Group			Energy Equipment Group			Corporate and Financial Services(1)
2002
Revenues	$	3,574,537		$	2,027,531		$	1,576,774		$	(29,768	)
Interest income(2)		12,251			10,667			6,026			(4,442	)
Interest expense(2)		83,028			(415	)		21,621			61,822	(3)
Loss before income taxes and cumulative effect of a change in accounting principle for goodwill		(360,062	)		(56,513	)(4)(6)		(90,391	)(4)(5)(6)		(213,158	)(4)(5)(6)
Income taxes/(benefits)		14,657			(11,485	)		(62,859	)		89,001
Net loss before cumulative effect of a change in accounting principle for goodwill		(374,719	)		(45,028	)		(27,532	)		(302,159	)
Cumulative effect on prior years of a change in accounting principle for goodwill (net of $0 tax)		(150,500	)		(48,700	)		(101,800	)		—
Net loss		(525,219	)		(93,728	)		(129,332	)		(302,159	)
Identifiable assets		2,908,837			1,103,211			1,494,961			310,665
Capital expenditures		53,395			9,907			9,317			34,171
Depreciation and amortization		57,825			15,490	(7)		37,622	(7)		4,713
2001 (A)
Revenues	$	3,392,474		$	1,944,018		$	1,468,844		$	(20,388	)
Interest income(2)		9,060			6,551			4,108			(1,599	)
Interest expense(2)		84,484			(179	)		26,493			58,170	(3)
(Loss)/earnings before income taxes		(212,965	)		15,119	(8)		(88,186	)(8)(9)		(139,898	)(8)(9)
Income taxes/(benefits)		123,395			10,982			(27,430	)		139,843	(10)
Net (loss)/earnings		(336,360	)		4,137			(60,756	)		(279,741	)
Identifiable assets		3,325,837			1,289,207			1,758,399			278,231
Capital expenditures		33,998			11,494			15,463			7,041
Depreciation and amortization		55,750			17,721			34,470			3,559
2000 (A)
Revenues	$	3,969,355		$	2,800,222		$	1,273,510		$	(104,377	)
Interest income(2)		15,737			16,658			9,712			(10,633	)
Interest expense(2)		83,254			6,297			35,452			41,505	(3)
Earnings/(loss) before income taxes		52,166			86,113			46,875			(80,822	)
Income taxes/(benefits)		15,179			26,927			18,808			(30,556	)
Net earnings/(loss)		36,987			59,186			28,067			(50,266	)
Identifiable assets		3,507,581			1,224,826			1,772,362			510,393
Capital expenditures		45,807			32,152			12,195			1,460
Depreciation and amortization		57,716			20,386			35,099			2,231

(1) Includes general corporate income and expense, the Company’s captive insurance operation and eliminations.

(2) Includes intercompany interest charged by Corporate and Financial Services to the business groups on outstanding borrowings.

(3) Includes dividends on Preferred Security of $16,610 in 2002, $15,750 in 2000 and 2001.

38

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

23. Business Segments — Data — (Continued)

(4) Includes in 2002, revaluation of contract estimates and provisions for uncollectible receivables of $216,700 ($210,800 after tax): Engineering and Construction Group (EC) $121,650, Energy Group (Energy) $86,450 and Corporate and Financial Services (CF) $8,600; and a provision for mothballing a domestic manufacturing facility of $18,700 for Energy.

(5) Includes in 2002, anticipated loss on sale of assets of $54,500 in Energy and provisions for asbestos claim of $26,200 in CF.

(6) Includes in 2002, $79,300 ($79,000 net of tax) performance intervention activities, debt restructuring efforts, accrual for legal settlements, severance costs and increased pension, postretirement cost: $6,500 in EC, $12,700 in Energy, and $60,100 in CF.

(7) Excluded cumulative effect in 2002, goodwill change in accounting principle of $48,700 in EC and $101,800 in Energy.

(8) Includes in 2001, contract write-downs of $160,600 ($104,400 after-tax): Engineering and Construction Group $51,700, Energy Group $103,900 and Corporate and Financial Services $5,000.

(9) Includes in 2001, loss on sale of cogeneration plants in Energy Group of $40,300 ($27,900 after-tax), increased pension and postretirement benefit cost in Corporate and Financial Services of $9,100 ($6,000 after-tax), provision for domestic plant impairment of $6,100 ($4,000 after tax), severance of $4,700 ($3,100 after tax), cancellation of company owned life insurance of $20,000 ($13,000 after tax) and legal settlements and other provisions of $13,500 ($8,800 after tax).

(10) Includes in 2001, a valuation allowance for deferred tax assets of $194,600 on Corporate and Financial Services.

(A) Restated. See Note 2.

	2002			2001			2000
Equity earnings in unconsolidated subsidiaries were as follows:
Engineering and Construction Group	$	7,334		$	4,432		$	6,719
Energy Group		6,672			8,404			13,268
Total	$	14,006		$	12,836		$	19,987
Geographic Concentration
Revenues:
United States	$	1,544,827		$	1,673,457		$	1,897,038
Europe		1,923,211			1,669,409			2,099,539
Canada		136,267			126,851			77,155
Corporate and Financial Services, including eliminations		(29,768	)		(77,243	)		(104,377	)
Total	$	3,574,537		$	3,392,474		$	3,969,355
Long-lived assets:
United States	$	345,934		$	534,345		$	628,940
Europe		195,359			174,058			228,762
Canada		1,537			1,958			1,511
Corporate and Financial Services, including eliminations		76,394			47,894			44,507
Total	$	619,224		$	758,255		$	903,720

Revenues and long-lived assets are based on the country in which the contracting subsidiary is located.

39

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

23. Business Segments — Data — (Continued)

Operating revenues by industry segment for the three years ending December 2002 were as follows:

	2002			2001			2000
Power	$	1,647,135		$	1,399,450		$	1,402,411
Oil and gas/refinery		922,267			807,367			1,455,983
Pharmaceutical		404,825			485,786			300,235
Chemical		156,606			177,777			338,898
Environmental		353,981			337,248			358,571
Power production		130,843			150,990			144,600
Eliminations and other		(96,480	)		(43,304	)		(109,337	)
Total Operating Revenues	$	3,519,177		$	3,315,314		$	3,891,361

24. Consolidating Financial Information

A. 6.75% Notes

As a result of the reorganization on May 25, 2001, Foster Wheeler LLC, as successor to Foster Wheeler Corporation, became obligor for the 6.75% notes due November 15, 2005 (the “Notes”). In connection with the Company’s finalizing the Senior Credit Facility, Foster Wheeler Ltd. and the following 100% owned companies issued guarantees in favor of the holders of the Notes: Equipment Consultants, Inc., Foreign Holdings Ltd., Foster Wheeler Asia Limited, Foster Wheeler Capital & Finance Corporation, Foster Wheeler Constructors, Inc., Foster Wheeler Development Corporation, Foster Wheeler Energy Corporation, Foster Wheeler Energy Manufacturing, Inc., Foster Wheeler Energy Services, Inc., Foster Wheeler Enviresponse, Inc., Foster Wheeler Environmental Corporation, Foster Wheeler Facilities Management, Inc., Foster Wheeler Inc., Foster Wheeler International Corporation, Foster Wheeler International Holdings, Inc., Foster W heeler Power Group, Inc., Foster Wheeler Power Systems, Inc., Foster Wheeler Pyropower, Inc., Foster Wheeler Real Estate Development Corporation, Foster Wheeler Realty Services, Inc., Foster Wheeler USA Corporation, Foster Wheeler Virgin Islands, Inc., Foster Wheeler Zack, Inc., FW Mortshal, Inc., FW Technologies Holdings LLC, HFM International, Inc., Process Consultants, Inc., Pyropower Operating Services Company, Inc., and Perryville III Trust. Each of the guarantees is full and unconditional and joint and several. Foster Wheeler LLC and each of the subsidiary guarantors are 100% owned, directly or indirectly, by Foster Wheeler Ltd. The summarized consolidating financial information is presented in lieu of separate financial statements and other related disclosures of the subsidiary guarantors and issuer because management does not believe that such separate financial statements and related disclosures would be material to investors. None of the subsidiary guarantors are restricted from making distribu tions to the Company. The following represents summarized condensed consolidating financial information as of December 27, 2002 and December 28, 2001 with respect to the financial position, and for the three years ended December 27, 2002 for results of operations and for cash flows of the Company and its 100% owned and majority-owned subsidiaries.

The Foster Wheeler Ltd. column presents the parent company’s financial information. Foster Wheeler Ltd. is also a guarantor. The Foster Wheeler LLC column presents the issuer’s financial information. The Guarantor Subsidiaries column presents the financial information of all guarantors excluding that of Foster Wheeler Ltd. which is separately presented. The guarantor subsidiaries include the results of Foreign Holdings Ltd., the parent of Foster Wheeler LLC. Foster Wheeler LLC owns, directly or indirectly, the other guarantor subsidiaries and non-guarantor subsidiaries.

The comparative statements for December 28, 2001, as restated, and December 29, 2000, as restated, were revised to conform to the current financial presentation of guarantors and are presented based on the current organizational structure which was effected in May 2001.

40

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

A. 6.75% Notes — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING BALANCE SHEET
December 27, 2002
(in thousands of dollars)

	Foster Wheeler Ltd.			Foster Wheeler LLC			Guarantor Subsidiaries			Non- Guarantor Subsidiaries				Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	—		$	—		$	19,615		$	324,690		$	—		$	344,305
Accounts and notes receivable, net		—			228,428			151,070			916,680			(611,506	)		684,672
Contracts in process and inventories		—			—			187,224			110,959			(8,250	)		289,933
Other current assets		—			—			39,924			38,102			(529	)		77,497
Total current assets		—			228,428			397,833			1,390,431			(620,285	)		1,396,407
Investment in subsidiaries and others		(780,671	)		(842,608	)		687,193			88,523			936,086			88,523
Land, buildings & equipment (net)		—			—			103,489			304,330			—			407,819
Notes and accounts receivable – long-term		210,000			595,656			289,106			658,167			(1,730,985	)		21,944
Intangible assets (net)		—			—			104,349			18,533			—			122,882
Asbestos-related insurance recovery receivable		—			534,045			—			—			—			534,045
Other non-current assets		—			20,749			107,330			209,140			(2	)		337,217
TOTAL ASSETS	$	(570,671	)	$	536,270		$	1,689,300		$	2,669,124		$	(1,415,186	)	$	2,908,837
LIABILITIES & SHAREHOLDERS’ EQUITY
Accounts payable and accrued expenses	$	320		$	58,927		$	747,395		$	448,732		$	(620,285	)	$	635,089
Estimated costs to complete long-term contracts		—			—			341,299			366,024			—			707,323
Other current liabilities		(52	)		(1,085	)		28,643			170,705			—			198,211
Total current liabilities		268			57,842			1,117,337			985,461			(620,285	)		1,540,623
Corporate and other debt		—			340,000			43,678			16,261			—			399,939
Special-purpose project debt		—			—			—			181,613			—			181,613
Pension, postretirement and other employee benefits		—			—			294,133			143,687			—			437,820
Asbestos-related liability		—			519,790			—			—			—			519,790
Other long-term liabilities and minority interest		—			399,255			907,538			971,731			(2,160,818	)		117,706
Subordinated Robbins obligations		—			—			107,285			—			—			107,285
Convertible subordinated notes		210,000			—			—			—			—			210,000
Preferred trust securities		—			—			—			175,000			—			175,000
TOTAL LIABILITIES		210,268			1,316,887			2,469,971			2,473,753			(2,781,103	)		3,689,776
Common stock and paid-in-capital		242,490			242,490			242,490			444,090			(929,070	)		242,490
Retained earnings/(deficit)		(653,991	)		(653,669	)		(653,723	)		5,727			1,301,665			(653,991	)
Accumulated other comprehensive loss		(369,438	)		(369,438	)		(369,438	)		(254,446	)		993,322			(369,438	)
TOTAL SHAREHOLDERS’ EQUITY		(780,939	)		(780,617	)		(780,671	)		195,371			1,365,917			(780,939	)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	(570,671	)	$	536,270		$	1,689,300		$	2,669,124		$	(1,415,186	)	$	2,908,837

41

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

A. 6.75% Notes — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING BALANCE SHEET
December 28, 2001
(in thousands of dollars)
(Restated, See Note 2)

	Foster Wheeler Ltd.			Foster Wheeler LLC			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	—		$	—		$	40,961		$	183,059		$	—		$	224,020
Accounts and notes receivable, net		—			224,054			543,218			723,858			(544,786	)		946,344
Contracts in process and inventories		—			—			331,048			176,159			(3,079	)		504,128
Other current assets		—			—			26,467			53,417			—			79,884
Total current assets		—			224,054			941,694			1,136,493			(547,865	)		1,754,376
Investment in subsidiaries and others		(48,348	)		(111,272	)		468,133			84,514			(308,513	)		84,514
Land, buildings & equipment (net)		—			—			100,891			298,307			—			399,198
Notes and accounts receivable – long-term		210,000			595,656			294,253			686,601			(1,721,137	)		65,373
Intangible assets (net)		—			—			232,697			41,846			—			274,543
Asbestos-related insurance recovery receivable		—			437,834			—			—			—			437,834
Other non-current assets		—			15,962			96,515			197,522			—			309,999
TOTAL ASSETS	$	161,652		$	1,162,234		$	2,134,183		$	2,445,283		$	(2,577,515	)	$	3,325,837
LIABILITIES & SHAREHOLDERS’ EQUITY
Corporate and other debt	$	—		$	270,000		$	20,350		$	7,277		$	—		$	297,627
Special-purpose project debt		—			—			—			75,442			—			75,442
Subordinated Robbins obligations		—			—			110,340			—			—			110,340
Convertible subordinated notes		210,000			—			—			—			—			210,000
Preferred trust securities		—			—			—			175,000			—			175,000
Accounts payable and accrued expenses		148			457,521			1,243,621			1,345,480			(2,269,001	)		777,769
Estimated costs to complete long-term contracts		—			—			327,811			252,955			—			580,766
Other current liabilities		(52	)		—			18,350			143,378			—			161,676
Total current liabilities		210,096			727,521			1,720,472			1,999,532			(2,269,001	)		2,388,620
Special-purpose project debt		—			—			—			137,855			—			137,855
Pension, postretirement and other employee benefits		—			—			169,010			88,966			—			257,976
Asbestos-related liability		—			445,370			—			—			—			445,370
Other long-term liabilities and minority interest		—			37,678			293,049			64,347			(250,614	)		144,460
TOTAL LIABILITIES		210,096			1,210,569			2,182,531			2,290,700			(2,519,615	)		3,374,281
Common stock and paid in capital		242,162			242,162			242,162			142,337			(626,661	)		242,162
Retained earnings/(deficit)		(128,772	)		(128,663	)		(128,676	)		118,997			138,342			(128,772	)
Other comprehensive loss		(161,834	)		(161,834	)		(161,834	)		(106,751	)		430,419			(161,834	)
TOTAL SHAREHOLDERS’ EQUITY		(48,444	)		(48,335	)		(48,348	)		154,583			(57,900	)		(48,444	)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	161,652		$	1,162,234		$	2,134,183		$	2,445,283		$	(2,577,515	)	$	3,325,837

42

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

A. 6.75% Notes — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
For the Year Ended December 27, 2002
(in thousands of dollars)

	Foster Wheeler Ltd.			Foster Wheeler LLC			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—		$	1,392,043		$	2,228,851		$	(101,717	)	$	3,519,177
Other income		13,650			50,355			38,180			99,943			(146,768	)		55,360
Total revenues and other income		13,650			50,355			1,430,223			2,328,794			(248,485	)		3,574,537
Cost of operating revenues		—			—			1,440,544			2,089,827			(103,461	)		3,426,910
Selling, general and administrative expenses		—			—			127,353			99,171			—			226,524
Other deductions and minority interest		73			4,205			95,469			98,390			—			198,137
Interest expense(*)		13,749			52,785			58,797			102,721			(145,024	)		83,028
Equity in net losses of subsidiaries		(374,547	)		(370,193	)		(71,753	)		—			816,493			—
Loss before income taxes		(374,719)			(376,828	)		(363,693	)		(61,315	)		816,493			(360,062	)
Provision/(benefit) for income taxes		—			(2,322	)		10,854			6,125			—			14,657
Net loss prior to cumulative effect of a change in accounting principle		(374,719	)		(374,506	)		(374,547	)		(67,440	)		816,493			(374,719	)
Cumulative effect on prior years of a change in accounting principle for goodwill, net of $0 tax		(150,500	)		(150,500	)		(150,500	)		(24,800	)		325,800			(150,500	)
Net loss		(525,219	)		(525,006	)		(525,047	)		(92,240	)		1,142,293			(525,219	)
Other comprehensive (loss)/income:
Foreign currency translation adjustment		22,241			22,241			22,241			22,241			(66,723	)		22,241
Net (loss)/gain on derivative instruments		(3,834	)		(3,834	)		(3,834	)		284			7,384			(3,834	)
Minimum pension liability adjustment, net of tax benefit of $73,400		(226,011	)		(226,011	)		(226,011	)		(170,303	)		622,325			(226,011	)
Comprehensive loss	$	(732,823	)	$	(732,610	)	$	(732,651	)	$	(240,018	)	$	1,705,279		$	(732,823	)

(*) Includes dividends on preferred securities of $16,610.

43

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

A. 6.75% Notes — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
For the Year Ended December 28, 2001
(in thousands of dollars)
(Restated, See Note 2)

	Foster Wheeler Ltd.			Foster Wheeler LLC			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—		$	1,500,541		$	2,002,529		$	(187,756	)	$	3,315,314
Other income		8,000			38,152			58,877			100,307			(128,176	)		77,160
Total revenues and other income		8,000			38,152			1,559,418			2,102,836			(315,932	)		3,392,474
Cost of operating revenues		—			—			1,506,801			1,823,980			(166,756	)		3,164,025
Selling, general and administrative expenses		—			—			124,533			100,859			—			225,392
Other deductions and minority interest		130			2,195			84,003			71,625			(26,415	)		131,538
Interest expense(*)		8,018			28,846			66,636			103,745			(122,761	)		84,484
Equity in net (loss)/earnings of subsidiaries		(336,264	)		(343,362	)		5,493			—			674,133			—
(Loss)/earnings before income taxes		(336,412	)		(336,251	)		(217,062	)		2,627			674,133			(212,965	)
Provision/(benefit) for income taxes		(52	)		—			119,202			4,245			—			123,395
Net loss		(336,360	)		(336,251	)		(336,264	)		(1,618	)		674,133			(336,360	)
Other comprehensive (loss)/income:
Foreign currency translation adjustment		(10,191	)		(10,191	)		(10,191	)		(12,683	)		33,065			(10,191	)
Net gain/(loss) on derivative instruments		3,834			3,834			3,834			(284	)		(7,384	)		3,834
Minimum pension liability adjustment, net of tax benefit of $0		(36,770	)		(36,770	)		(36,770	)		—			73,540			(36,770	)
Comprehensive loss	$	(379,487	)	$	(379,378	)	$	(379,391	)	$	(14,585	)	$	773,354		$	(379,487	)

(*) Includes dividends on preferred securities of $15,750.

44

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

A. 6.75% Notes — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
For the Year Ended December 29, 2000
(in thousands of dollars)
(Restated, See Note 2)

	Foster Wheeler Ltd.			Foster Wheeler LLC			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—		$	1,716,846		$	2,301,901		$	(127,386	)	$	3,891,361
Other income		—			—			42,824			90,864			(55,694	)		77,994
Total revenues and other income		—			—			1,759,670			2,392,765			(183,080	)		3,969,355
Cost of operating revenues		—			—			1,592,802			2,099,731			(127,386	)		3,565,147
Selling, general and administrative expenses		—			—			119,726			102,384			—			222,110
Other deductions and minority interest		—			—			37,713			31,926			(22,961	)		46,678
Interest expense(*)								67,714			48,273			(32,733	)		83,254
Equity in net earnings of subsidiaries		36,987			36,987			78,015			—			(151,989	)		—
Earnings before income taxes		36,987			36,987			19,730			110,451			(151,989	)		52,166
(Benefit)/provision for income taxes		—			—			(17,257	)		32,436			—			15,179
Net earnings		36,987			36,987			36,987			78,015			(151,989	)		36,987
Other comprehensive loss:
Foreign currency translation adjustment		(19,988	)		(19,988	)		(19,988	)		(19,988	)		59,964			(19,988	)
Minimum pension liability adjustment, net of $12,000 tax benefit		(21,500	)		(21,500	)		(21,500	)		—			43,000			(21,500	)
Comprehensive (loss)/earnings	$	(4,501	)	$	(4,501	)	$	(4,501	)	$	58,027		$	(49,025	)	$	(4,501	)
						��

(*) Includes dividends on preferred securities of $15,750.

45

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

A. 6.75% Notes — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
For the Year Ended December 27, 2002
(in thousands of dollars)

	Foster Wheeler Ltd.			Foster Wheeler LLC			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities
Net cash (used)/provided by
Operating Activities	$	(172	)	$	(15,109	)	$	197,489		$	(3,187	)	$	(18,656	)	$	160,365
Cash Flows from Investing Activities
Change in restricted cash		—			—			(16,056	)		(68,737	)		—			(84,793	)
Capital expenditures		—			—			(40,932	)		(12,463	)		—			(53,395	)
Proceeds from sale of assets		—			—			1,783			4,499			—			6,282
(Increase)/decrease in investment and
advances		—			(350	)		(21,049	)		8,883			21,623			9,107
Decrease in short-term investments		—			—			—			93			—			93
Net cash provided/(used) by
Investing Activities		—			(350	)		(76,254	)		(67,725	)		21,623			(122,706	)
Cash Flows from Financing Activities
Dividends to Common Shareholders		—			—			—			(18,360	)		18,360			—
Decrease in short-term debt		—			—			—			(7,792	)		—			(7,792	)
Proceeds of long-term debt		—			70,000			—			546			—			70,546
Proceeds from lease financing		—			—			44,900			—			—			44,900
Repayment of long-term debt		—			—			(24,440	)		(21,151	)		—			(45,591	)
Other		172			(54,541	)		(163,185	)		236,820			(21,327	)		(2,061	)
Net cash provided/(used) by
Financing Activities		172			15,459			(142,725	)		190,063			(2,967	)		60,002
Effect of exchange rate changes on
cash and cash equivalents		—			—			143			22,481			—			22,624
Increase/(decrease) in cash and cash
equivalents		—			—			(21,347	)		141,632			—			120,285
Cash and cash equivalents, beginning
of year		—			—			40,961			183,059			—			224,020
Cash and cash equivalents, end of year	$	—		$	—		$	19,614		$	324,691		$	—		$	344,305

46

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

A. 6.75% Notes — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
For the Year Ended December 28, 2001
(in thousands of dollars)
(Restated, See Note 2)

	Foster Wheeler Ltd.			Foster Wheeler LLC			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities
Net cash (used)/provided by
Operating Activities	$	(96	)	$	(181,267	)	$	418,899		$	(71,574	)	$	(254,643	)	$	(88,681	)
Cash Flows from Investing Activities
Capital expenditures		—			(2,346	)		(17,074	)		(14,578	)		—			(33,998	)
Proceeds from sale of properties		—			—			190			59,482			—			59,672
Decrease/(increase) in investment and
advances		—			—			77,838			(61,830	)		—			16,008
Decrease in short-term investments		—			—			—			1,530			—			1,530
Net cash (used)/provided by
Investing Activities		—			(2,346	)		60,954			(15,396	)		—			43,212
Cash Flows from Financing Activities
Dividends to Common Shareholders		—			(4,888	)		(228,936	)		(25,707	)		254,643			(4,888	)
Decrease in short-term debt		—			—			(76,250	)		(5,782	)		—			(82,032	)
Proceeds from convertible subordinated
notes, net		202,912			—			—			—			—			202,912
Proceeds from long-term debt		—			178,061			(285,000	)		291,981			—			185,042
Repayment of long-term debt		—			(193,062	)		(1,601	)		(20,061	)		—			(214,724	)
Other		(202,816	)		203,502			113,620			(115,083	)		—			(777	)
Net cash provided/(used) by
Financing Activities		96			183,613			(478,167	)		125,348			254,643			85,533
Effect of exchange rate changes on
cash and cash equivalents		—			—			(347	)		(7,590	)		—			(7,937	)
Increase in cash and cash
equivalents		—			—			1,339			30,788			—			32,127
Cash and cash equivalents, beginning
of year		—			—			39,623			152,270			—			191,893
Cash and cash equivalents, end of year	$	—		$	—		$	40,962		$	183,058		$	—		$	224,020

47

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

A. 6.75% Notes — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
For the Year Ended December 29, 2000
(in thousands of dollars)
(Restated, See Note 2)

	Foster Wheeler Ltd.		Foster Wheeler LLC		Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities
Net cash provided/(used) by
Operating Activities	$	—	$	—	$	35,313		$	(89,859	)	$	37,802		$	(16,744	)
Cash Flows from Investing Activities
Capital expenditures		—		—		(13,488	)		(32,319	)		—			(45,807	)
Proceeds from sale of properties		—		—		120			56,583			—			56,703
(Increase)/decrease in investment and
advances		—		—		(73,908	)		4,444			81,586			12,122
Decrease in short-term investments		—		—		—			15,230			—			15,230
Other		—		—		2,891			(2,891	)		—			—
Net cash (used)/provided by
Investing Activities		—		—		(84,385	)		41,047			81,586			38,248
Cash Flows from Financing Activities
Dividends to Common Shareholders		—		—		(9,773	)		—			—			(9,773	)
Increase/(decrease) in short-term debt		—		—		73,730			(28,854	)		—			44,876
Proceeds from long-term debt		—		—		—			43,168			—			43,168
Repayment of long-term debt		—		—		(65,073	)		(23,078	)		—			(88,151	)
Other		—		—		64,547			52,088			(119,388	)		(2,753	)
Net cash provided/(used) by
Financing Activities		—		—		63,431			43,324			(119,388	)		(12,633	)
Effect of exchange rate changes on
cash and cash equivalents		—		—		(206	)		12,960			—			12,754
Increase in cash and cash
equivalents		—		—		14,153			7,472			—			21,625
Cash and cash equivalents, beginning
of year		—		—		25,470			144,798			—			170,268
Cash and cash equivalents, end of Year	$	—	$	—	$	39,623		$	152,270		$	—		$	191,893

48

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

B. Convertible Subordinated Notes

In May and June 2001, Foster Wheeler Ltd. issued 6.5% Convertible Subordinated Notes (“Convertible Notes”) due in 2007. The Convertible Notes are fully and unconditionally guaranteed by Foster Wheeler LLC, a 100% owned subsidiary of Foster Wheeler Ltd. Foster Wheeler LLC has assumed the obligation to fund the debt service. The following summarized consolidating financial information is presented in lieu of separate financial statements and other related disclosures of Foster Wheeler LLC because management does not believe that such separate financial statements and related disclosures would be material to investors. The following represents summarized condensed consolidating financial information as of December 27, 2002 and December 28, 2001 with respect to the financial position, and for the three years ended December 27, 2002 for results of operations and for cash flows of the Company and its 100% owned and majority-owned subsidiaries.

The Foster Wheeler Ltd. column presents the financial information of the parent company, who is also the issuer. The Guarantor Subsidiary column presents the financial information of the sole guarantor, Foster Wheeler LLC. The non-guarantor subsidiaries include the results of all direct and indirect non-guarantor subsidiaries of Foster Wheeler Ltd., including Foreign Holdings Ltd., the parent of Foster Wheeler LLC. Foster Wheeler LLC owns, directly or indirectly, the other non-guarantor subsidiaries.

The comparative statements for December 28, 2001, as restated, and December 29, 2000, as restated, were revised to conform to the current financial presentation of guarantors and are presented based on the current organizational structure which was effected in May 2001.

49

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

B. Convertible Subordinated Notes — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING BALANCE SHEET
December 27, 2002
(in thousands of dollars)

	Foster Wheeler Ltd.			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	—		$	—		$	344,305		$	—		$	344,305
Accounts and notes receivable, net		—			228,428			623,792			(167,548	)		684,672
Contracts in process and inventories		—			—			289,933			—			289,933
Other current assets		—			—			77,497			—			77,497
Total current assets		—			228,428			1,335,527			(167,548	)		1,396,407
Investment in subsidiaries and others		(780,671	)		(842,608	)		150,514			1,561,288			88,523
Land, buildings & equipment (net)		—			—			407,819			—			407,819
Notes and accounts receivable – long-term		210,000			595,656			196,944			(980,656	)		21,944
Intangible assets (net)		—			—			122,882			—			122,882
Asbestos-related insurance recovery receivable		—			534,045			—			—			534,045
Other non-current assets		—			20,749			316,468			—			337,217
TOTAL ASSETS	$	(570,671	)	$	536,270		$	2,530,154		$	413,084		$	2,908,837
LIABILITIES & SHAREHOLDERS’ EQUITY
Accounts payable and accrued expenses	$	320		$	58,927		$	743,390		$	(167,548	)	$	635,089
Estimated costs to complete long-term contracts		—			—			707,323			—			707,323
Other current liabilities		(52	)		(1,085	)		199,348			—			198,211
Total current liabilities		268			57,842			1,650,061			(167,548	)		1,540,623
Corporate and other debt		—			340,000			59,939			—			399,939
Special purpose project debt		—			—			181,613			—			181,613
Pension, postretirement and other employee benefits		—			—			437,820			—			437,820
Asbestos-related liability		—			519,790			—			—			519,790
Other long-term liabilities and minority interest		—			399,255			699,107			(980,656	)		117,706
Subordinated Robbins obligations		—			—			107,285			—			107,285
Convertible subordinated notes		210,000			—			—			—			210,000
Preferred trust securities		—			—			175,000			—			175,000
TOTAL LIABILITIES		210,268			1,316,887			3,310,825			(1,148,204	)		3,689,776
Common stock and paid in capital		242,490			242,490			242,490			(484,980	)		242,490
Retained deficit		(653,991	)		(653,669	)		(653,723	)		1,307,392			(653,991	)
Accumulated other comprehensive loss		(369,438	)		(369,438	)		(369,438	)		738,876			(369,438	)
TOTAL SHAREHOLDERS’ EQUITY		(780,939	)		(780,617	)		(780,671	)		1,561,288			(780,939	)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	(570,671	)	$	536,270		$	2,530,154		$	413,084		$	2,908,837

50

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

B. Convertible Subordinated Notes — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING BALANCE SHEET
December 28, 2001
(in thousands of dollars)
(Restated, See Note 2)

	Foster Wheeler Ltd.			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	—		$	—		$	224,020		$	—		$	224,020
Accounts and notes receivable, net		—			224,054			843,737			(121,447	)		946,344
Contracts in process and inventories		—			—			504,128			—			504,128
Other current assets		—			—			79,884			—			79,884
Total current assets		—			224,054			1,651,769			(121,447	)		1,754,376
Investment in subsidiaries and others		(48,348	)		(111,272	)		147,451			96,683			84,514
Land, buildings & equipment (net)		—			—			399,198			—			399,198
Notes and accounts receivable – long-term		210,000			595,656			240,373			(980,656	)		65,373
Intangible assets (net)		—			—			274,543			—			274,543
Asbestos-related insurance recovery receivable		—			437,834			—			—			437,834
Other non-current assets		—			15,962			294,037			—			309,999
TOTAL ASSETS	$	161,652		$	1,162,234		$	3,007,371		$	(1,005,420	)	$	3,325,837
LIABILITIES & SHAREHOLDERS’ EQUITY
Corporate and other debt	$	—		$	270,000		$	27,627		$	—		$	297,627
Special-purpose project debt		—			—			75,442			—			75,442
Subordinated Robbins obligations		—			—			110,340			—			110,340
Convertible subordinated notes		210,000			—			—			—			210,000
Preferred trust securities		—			—			175,000			—			175,000
Accounts payable and accrued expenses		148			457,521			1,422,203			(1,102,103	)		777,769
Estimated costs to complete long-term contracts		—			—			580,766			—			580,766
Other current liabilities		(52	)		—			161,728			—			161,676
Total current liabilities	$	210,096		$	727,521		$	2,553,106		$	(1,102,103	)	$	2,388,620
Special-purpose project debt		—			—			137,855			—			137,855
Pension, postretirement and other employee benefits		—			—			257,976			—			257,976
Asbestos-related liability		—			445,370			—			—			445,370
Other long-term liabilities and minority interest		—			37,678			106,782			—			144,460
TOTAL LIABILITIES		210,096			1,210,569			3,055,719			(1,102,103	)		3,374,281
Common stock and paid in capital		242,162			242,162			242,162			(484,324	)		242,162
Retained deficit		(128,772	)		(128,663	)		(128,676	)		257,339			(128,772	)
Accumulated other comprehensive loss		(161,834	)		(161,834	)		(161,834	)		323,668			(161,834	)
TOTAL SHAREHOLDERS’ EQUITY		(48,444	)		(48,335	)		(48,348	)		96,683			(48,444	)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	161,652		$	1,162,234		$	3,007,371		$	(1,005,420	)	$	3,325,837

51

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

B. Convertible Subordinated Notes — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
For the Year Ended December 27, 2002
(in thousands of dollars)

	Foster Wheeler Ltd.			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—		$	3,519,177		$	—		$	3,519,177
Other income		13,650			50,355			72,069			(80,714	)		55,360
Total revenues and other income		13,650			50,355			3,591,246			(80,714	)		3,574,537
Cost of operating revenues		—			—			3,426,910			—			3,426,910
Selling, general and administrative expenses		—			—			226,524			—			226,524
Other deductions and minority interest		73			4,205			193,859			—			198,137
Interest expense(*)		13,749			52,785			97,208			(80,714	)		83,028
Equity in net losses of subsidiaries		(374,547	)		(370,193	)		(4,313	)		749,053			—
Loss before income taxes		(374,719)			(376,828	)		(357,568	)		749,053			(360,062	)
Provision/(benefit) for income taxes		—			(2,322	)		16,979			—			14,657
Net loss prior to cumulative effect of a change in accounting principle		(374,719	)		(374,506	)		(374,547	)		749,053			(374,719	)
Cumulative effect on prior years of a change in accounting principle for goodwill, net of $0 tax		(150,500	)		(150,500	)		(150,500	)		301,000			(150,500	)
Net loss		(525,219	)		(525,006	)		(525,047	)		1,050,053			(525,219	)
Other comprehensive (loss)/income:
Foreign currency translation adjustment		22,241			22,241			22,241			(44,482	)		22,241
Net (loss)/gain on derivative instruments		(3,834	)		(3,834	)		(3,834	)		7,668			(3,834	)
Minimum pension liability adjustment, net of tax benefit of $73,400		(226,011	)		(226,011	)		(226,011	)		452,022			(226,011	)
Comprehensive loss	$	(732,823	)	$	(732,610	)	$	(732,651	)	$	1,465,261		$	(732,823	)

(*) Includes dividends on preferred securities of $16,610.

52

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

B. Convertible Subordinated Notes — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
For the Year Ended December 28, 2001
(in thousands of dollars)
(Restated, See Note 2)

	Foster Wheeler Ltd.			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—		$	3,315,314		$	—		$	3,315,314
Other income		8,000			38,152			92,928			(61,920	)		77,160
Total revenues and other income		8,000			38,152			3,408,242			(61,920	)		3,392,474
Cost of operating revenues		—			—			3,164,025			—			3,164,025
Selling, general and administrative expenses		—			—			225,392			—			225,392
Other deductions and minority interest		130			2,195			129,213			—			131,538
Interest expense(*)		8,018			28,846			109,540			(61,920	)		84,484
Equity in net (loss)/earnings of subsidiaries		(336,264	)		(343,362	)		7,111			672,515			—
Loss before income taxes		(336,412	)		(336,251	)		(212,817	)		672,515			(212,965	)
Provision/(benefit) for income taxes		(52	)		—			123,447			—			123,395
Net loss		(336,360	)		(336,251	)		(336,264	)		672,515			(336,360	)
Other comprehensive (loss)/income:
Foreign currency translation adjustment		(10,191	)		(10,191	)		(10,191	)		20,382			(10,191	)
Net gain/(loss) on derivative instruments		3,834			3,834			3,834			(7,668	)		3,834
Minimum pension liability adjustment, net of tax benefit of $0		(36,770	)		(36,770	)		(36,770	)		73,540			(36,770	)
Comprehensive loss	$	(379,487	)	$	(379,378	)	$	(379,391	)	$	758,769		$	(379,487	)

(*) Includes interest expense and dividends on preferred securities of $15,750.

53

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

B. Convertible Subordinated Notes — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
For the Year Ended December 29, 2000
(in thousands of dollars)
(Restated, See Note 2)

	Foster Wheeler Ltd.			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—		$	3,891,361		$	—		$	3,891,361
Other income		—			—			77,994			—			77,994
Total revenues and other income		—			—			3,969,355			—			3,969,355
Cost of operating revenues		—			—			3,565,147			—			3,565,147
Selling, general and administrative expenses		—			—			222,110			—			222,110
Other deductions and minority interest		—			—			46,678			—			46,678
Interest expense(*)		—			—			83,254			—			83,254
Equity in net earnings of subsidiaries		36,987			36,987			—			(73,974	)		—
Earnings before income taxes		36,987			36,987			52,166			(73,974	)		52,166
(Benefit)/provision for income taxes		—			—			15,179			—			15,179
Net earnings		36,987			36,987			36,987			(73,974	)		36,987
Other comprehensive loss:
Foreign currency translation adjustment		(19,988	)		(19,988	)		(19,988	)		39,976			(19,988	)
Minimum pension liability adjustment, net of $12,000 tax benefit		(21,500	)		(21,500	)		(21,500	)		43,000			(21,500	)
Comprehensive loss	$	(4,501	)	$	(4,501	)	$	(4,501	)	$	9,002		$	(4,501	)

(*) Includes interest expense and dividends on preferred securities of $15,750.

54

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

B. Convertible Subordinated Notes — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
For the Year Ended December 27, 2002
(in thousands of dollars)

	Foster Wheeler Ltd.			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities
Net cash (used)/provided by Operating Activities	$	(172	)	$	(15,109	)	$	233,405		$	(57,759	)	$	160,365
Cash Flows from Investing Activities
Change in restricted cash		—			—			(84,793	)		—			(84,793	)
Capital expenditures		—			—			(53,395	)		—			(53,395	)
Proceeds from sale of assets		—			—			6,282			—			6,282
(Increase)/decrease in investment and advances		—			(350	)		9,457			—			9,107
Decrease in short-term investments		—			—			93			—			93
Net cash provided/(used) by Investing Activities		—			(350	)		(122,356	)		—			(122,706	)
Cash Flows from Financing Activities
Dividends to Common Shareholders		—			—			(3,390	)		3,390			—
Decrease in short-term debt		—			—			(7,792	)		—			(7,792	)
Proceeds of long-term debt		—			70,000			546			—			70,546
Proceeds from lease financing		—			—			44,900			—			44,900
Repayment of long-term debt		—			—			(45,591	)		—			(45,591	)
Other		172			(54,541	)		(2,061	)		54,369			(2,061	)
Net cash provided/(used) by Financing Activities		172			15,459			(13,388	)		57,759			60,002
Effect of exchange rate changes on cash and cash equivalents		—			—			22,624			—			22,624
Increase/(decrease) in cash and cash equivalents		—			—			120,285			—			120,285
Cash and cash equivalents, beginning of year		—			—			224,020			—			224,020
Cash and cash equivalents, end of year	$	—		$	—		$	344,305		$	—		$	344,305

55

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

B. Convertible Subordinated Notes — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
For the Year Ended December 28, 2001
(in thousands of dollars)
(Restated, See Note 2)

	Foster Wheeler Ltd.			Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities
Net cash (used)/provided by Operating Activities	$	(96	)	$	(181,267	)	$	321,618		$	(228,936	)	$	(88,681	)
Cash Flows from Investing Activities
Capital expenditures		—			(2,346	)		(31,652	)		—			(33,998	)
Proceeds from sale of properties		—			—			59,672			—			59,672
Decrease in investment and advances		—			—			16,008			—			16,008
Decrease in short-term investments		—			—			1,530			—			1,530
Net cash (used)/provided by Investing Activities		—			(2,346	)		45,558			—			43,212
Cash Flows from Financing Activities
Dividends to Common Shareholders		—			(4,888	)		(228,936	)		228,936			(4,888	)
Increase/(decrease) in short-term debt		—			—			(82,032	)		—			(82,032	)
Proceeds from convertible subordinated notes, net		202,912			—			—			—			202,912
Proceeds from long-term debt		—			178,061			6,981			—			185,042
Repayment of long-term debt		—			(193,062	)		(21,662	)		—			(214,724	)
Other		(202,816	)		203,502			(1,463	)		—			(777	)
Net cash provided/(used) by Financing Activities		96			183,613			(327,112	)		228,936			85,533
Effect of exchange rate changes on cash and cash equivalents		—			—			(7,937	)		—			(7,937	)
Increase in cash and cash equivalents		—			—			32,127			—			32,127
Cash and cash equivalents, beginning of year		—			—			191,893			—			191,893
Cash and cash equivalents, end of year	$	—		$	—		$	224,020		$	—		$	224,020

56

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

B. Convertible Subordinated Notes — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
For the Year Ended December 29, 2000
(in thousands of dollars)
(Restated, See Note 2)

	Foster Wheeler Ltd.		Guarantor Subsidiary		Non- Guarantor Subsidiaries			Eliminations		Consolidated
Cash Flows from Operating Activities
Net cash used by Operating Activities	$	—	$	—	$	(16,744	)	$	—	$	(16,744	)
Cash Flows from Investing Activities
Capital expenditures		—		—		(45,807	)		—		(45,807	)
Proceeds from sale of properties		—		—		56,703			—		56,703
Decrease in investment and advances		—		—		12,122			—		12,122
Decrease in short-term investments		—		—		15,230			—		15,230
Net cash provided by Investing Activities		—		—		38,248			—		38,248
Cash Flows from Financing Activities
Dividends to Common Shareholders		—		—		(9,773	)		—		(9,773	)
Increase in short-term debt		—		—		44,876			—		44,876
Proceeds from long-term debt		—		—		43,168			—		43,168
Repayment of long-term debt		—		—		(88,151	)		—		(88,151	)
Other		—		—		(2,753	)		—		(2,753	)
Net cash (used) by Financing Activities		—		—		(12,633	)		—		(12,633	)
Effect of exchange rate changes on cash and cash equivalents		—		—		12,754			—		12,754
Increase in cash and cash equivalents		—		—		21,625			—		21,625
Cash and cash equivalents, beginning of year		—		—		170,268			—		170,268
Cash and cash equivalents, end of year	$	—	$	—	$	191,893		$	—	$	191,893

57

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

C. Preferred Trust Securities

On January 13, 1999 FW Preferred Capital Trust I, a Delaware Business Trust which is a 100% owned finance subsidiary of the Company, issued $175,000 in Preferred Trust Securities. The Preferred Trust Securities are fully and unconditionally guaranteed by Foster Wheeler Ltd. and Foster Wheeler LLC. Each of the guarantees is full and unconditional and joint and several. Foster Wheeler LLC has assumed the obligation to fund the debt service. These Preferred Trust Securities are entitled to receive cumulative cash distributions at an annual rate of 9.0%. Distributions are paid quarterly in arrears on April 15, July 15, October 15 and January 15 of each year. Such distributions may be deferred for periods up to five years. In accordance with this provision, the Company has deferred all quarterly distributions beginning with the distribution due on January 15, 2002. The maturity date is January 15, 2029. Foster Wheeler can redeem these Pref erred Trust Securities on or after January 15, 2004. The following summarized consolidating financial information is presented in lieu of separate financial statements and other related disclosures of the 100% owned subsidiary guarantor and issuer because management does not believe that such separate financial statements and related disclosures would be material to investors. The following represents summarized condensed consolidating financial information as of December 27, 2002 and December 28, 2001 with respect to the financial position, and for the three years ended December 27, 2002 for results of operations and for cash flows of the Company and its 100% owned and majority-owned subsidiaries.

The Foster Wheeler Ltd. column presents the parent company’s financial information. Foster Wheeler Ltd. is also a guarantor. The FW Preferred Capital Trust column presents the financial information of the issuer. The Guarantor Subsidiary column presents the financial information of Foster Wheeler LLC, but excludes that of Foster Wheeler Ltd. which is separately presented. The non-guarantor subsidiaries include Foreign Holdings Ltd., the parent of Foster Wheeler LLC. Foster Wheeler LLC owns, directly or indirectly, the other non-guarantor subsidiaries.

The comparative statements for December 28, 2001, as restated, and December 29, 2000, as restated, were revised to conform to the current financial presentation of guarantors and are presented based on the current organizational structure which was effected in May 2001.

58

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

C. Preferred Trust Securities — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING BALANCE SHEET
December 27, 2002
(in thousands of dollars)

	Foster Wheeler Ltd.			FW Preferred Capital Trust		Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	—		$	—	$	—		$	344,305		$	—		$	344,305
Accounts and notes receivable, net		—			—		228,428			623,792			(167,548	)		684,672
Contracts in process and inventories		—			—		—			289,933			—			289,933
Other current assets		—			—		—			77,497			—			77,497
Total current assets		—			—		228,428			1,335,527			(167,548	)		1,396,407
Investment in subsidiaries and others		(780,671	)		—		(842,608	)		150,514			1,561,288			88,523
Land, buildings & equipment (net)		—			—		—			407,819			—			407,819
Notes and accounts receivable — long-term		210,000			175,000		595,656			21,944			(980,656	)		21,944
Intangible assets (net)		—			—		—			122,882			—			122,882
Asbestos-related insurance recovery receivable		—			—		534,045			—			—			534,045
Other non-current assets		—			—		20,749			316,468			—			337,217
TOTAL ASSETS	$	(570,671	)	$	175,000	$	536,270		$	2,355,154		$	413,084		$	2,908,837
LIABILITIES & SHAREHOLDERS’ EQUITY
Accounts payable and accrued expenses	$	320		$	—	$	58,927		$	743,390		$	(167,548	)	$	635,089
Estimated costs to complete long-term contracts		—			—		—			707,323			—			707,323
Other current liabilities		(52	)		—		(1,085	)		199,348			—			198,211
Total current liabilities		268			—		57,842			1,650,061			(167,548	)		1,540,623
Corporate and other debt		—			—		340,000			59,939			—			399,939
Special-purpose project debt		—			—		—			181,613			—			181,613
Pension, postretirement and other employee benefits		—			—		—			437,820			—			437,820
Asbestos-related liability		—			—		519,790			—			—			519,790
Other long-term liabilities and minority interest		—			—		399,255			699,107			(980,656	)		117,706
Subordinated Robbins obligations		—			—		—			107,285			—			107,285
Convertible subordinated notes		210,000			—		—			—			—			210,000
Preferred trust securities		—			175,000		—			—			—			175,000
TOTAL LIABILITIES		210,268			175,000		1,316,887			3,135,825			(1,148,204	)		3,689,776
Common stock and paid in capital		242,490			—		242,490			242,490			(484,980	)		242,490
Retained deficit		(653,991	)		—		(653,669	)		(653,723	)		1,307,392			(653,991	)
Accumulated other comprehensive loss		(369,438	)		—		(369,438	)		(369,438	)		738,876			(369,438	)
TOTAL SHAREHOLDERS’ EQUITY		(780,939	)		—		(780,617	)		(780,671	)		1,561,288			(780,939	)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	(570,671	)	$	175,000	$	536,270		$	2,355,154		$	413,084		$	2,908,837

59

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

C. Preferred Trust Securities — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING BALANCE SHEET
December 28, 2001
(in thousands of dollars)
(Restated, See Note 2)

	Foster Wheeler Ltd.			FW Preferred Capital Trust		Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	—		$	—	$	—		$	224,020		$	—		$	224,020
Accounts and notes receivable, net		—			—		224,054			843,737			(121,447	)		946,344
Contracts in process and inventories		—			—		—			504,128			—			504,128
Other current assets		—			—		—			79,884			—			79,884
Total current assets		—			—		224,054			1,651,769			(121,447	)		1,754,376
Investment in subsidiaries and others		(48,348	)		—		(111,272	)		147,451			96,683			84,514
Land, buildings & equipment (net)		—			—		—			399,198			—			399,198
Notes and accounts receivable — long-term		210,000			175,000		595,656			65,373			(980,656	)		65,373
Intangible assets (net)		—			—		—			274,543			—			274,543
Asbestos-related insurance recovery receivable		—			—		437,834			—			—			437,834
Other non-current assets		—			—		15,962			294,037			—			309,999
TOTAL ASSETS	$	161,652		$	175,000	$	1,162,234		$	2,832,371		$	(1,005,420	)	$	3,325,837
LIABILITIES & SHAREHOLDERS EQUITY
Corporate and other debt	$	—		$	—	$	270,000		$	27,627		$	—		$	297,627
Special-purpose project debt		—			—		—			75,442			—			75,442
Subordinated Robbins obligations		—			—		—			110,340			—			110,340
Convertible subordinated notes		210,000			—		—			—			—			210,000
Preferred trust securities		—			175,000		—			—			—			175,000
Accounts payable and accrued expenses		148			—		457,521			1,422,203			(1,102,103	)		777,769
Estimated costs to complete long-term contracts		—			—		—			580,766			—			580,766
Other current liabilities		(52	)		—		—			161,728			—			161,676
Total current liabilities		210,096			175,000		727,521			2,378,106			(1,102,103	)		2,388,620
Special-purpose project debt		—			—		—			137,855			—			137,855
Pension, postretirement and other employee benefits		—			—		—			257,976			—			257,976
Asbestos-related liability		—			—		445,370			—			—			445,370
Other long-term liabilities and minority interest		—			—		37,678			106,782			—			144,460
TOTAL LIABILITIES		210,096			175,000		1,210,569			2,880,719			(1,102,103	)		3,374,281
Common stock and paid in capital		242,162			—		242,162			242,162			(484,324	)		242,162
Retained deficit		(128,772	)		—		(128,663	)		(128,676	)		257,339			(128,772	)
Accumulated other comprehensive loss		(161,834	)		—		(161,834	)		(161,834	)		323,668			(161,834	)
TOTAL SHAREHOLDERS’ EQUITY		(48,444	)		—		(48,335	)		(48,348	)		96,683			(48,444	)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	161,652		$	175,000	$	1,162,234		$	2,832,371		$	(1,005,420	)	$	3,325,837

60

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

C. Preferred Trust Securities — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
For the Year Ended December 27, 2002
(in thousands of dollars)

	Foster Wheeler Ltd.			FW Preferred Capital Trust		Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—	$	—		$	3,519,177		$	—		$	3,519,177
Other income		13,650			16,610		50,355			55,459			(80,714	)		55,360
Total revenues and other income		13,650			16,610		50,355			3,574,636			(80,714	)		3,574,537
Cost of operating revenues		—			—		—			3,426,910			—			3,426,910
Selling, general and administrative expenses		—			—		—			226,524			—			226,524
Other deductions and minority interest		73			—		4,205			193,859			—			198,137
Interest expense(*)		13,749			16,610		52,785			80,598			(80,714	)		83,028
Equity in net losses of subsidiaries		(374,547	)		—		(370,193	)		(4,313	)		749,053			—
Loss before income taxes		(374,719	)		—		(376,828	)		(357,568	)		749,053			(360,062	)
Provision/(benefit) for income taxes		—			—		(2,322	)		16,979			—			14,657
Net loss prior to cumulative effect of a change in accounting principle		(374,719	)		—		(374,506	)		(374,547	)		749,053			(374,719	)
Cumulative effect on prior years of a change in accounting principle for goodwill, net of $0 tax		(150,500	)		—		(150,500	)		(150,500	)		301,000			(150,500	)
Net loss		(525,219	)		—		(525,006	)		(525,047	)		1,050,053			(525,219	)
Other comprehensive (loss)/income:
Foreign currency translation adjustment		22,241			—		22,241			22,241			(44,482	)		22,241
Net (loss)/gain on derivative instruments		(3,834	)		—		(3,834	)		(3,834	)		7,668			(3,834	)
Minimum pension liability Adjustment, net of tax benefit of $73,400		(226,011	)		—		(226,011	)		(226,011	)		452,022			(226,011	)
Comprehensive loss	$	(732,823	)	$	—	$	(732,610	)	$	(732,651	)	$	1,465,261		$	(732,823	)

(*) Includes dividends on preferred securities of $16,610.

61

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

C. Preferred Trust Securities — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
For the Year Ended December 28, 2001
(in thousands of dollars)
(Restated, See Note 2)

	Foster Wheeler Ltd.			FW Preferred Capital Trust		Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—	$	—		$	3,315,314		$	—		$	3,315,314
Other income		8,000			15,750		38,152			77,178			(61,920	)		77,160
Total revenues and other income		8,000			15,750		38,152			3,392,492			(61,920	)		3,392,474
Cost of operating revenues		—			—		—			3,164,025			—			3,164,025
Selling, general and administrative expenses		—			—		—			225,392			—			225,392
Other deductions and minority interest		130			—		2,195			129,213			—			131,538
Interest expense(*)		8,018			15,750		28,846			93,790			(61,920	)		84,484
Equity in net (loss)/earnings of subsidiaries		(336,264	)		—		(343,362	)		7,111			672,515			—
Loss before income taxes		(336,412	)		—		(336,251	)		(212,817	)		672,515			(212,965	)
Provision/(benefit) for income taxes		(52	)		—		—			123,447			—			123,395
Net loss		(336,360	)		—		(336,251	)		(336,264	)		672,515			(336,360	)
Other comprehensive (loss)/income:
Foreign currency translation adjustment		(10,191	)		—		(10,191	)		(10,191	)		20,382			(10,191	)
Net gain/(loss) on derivative instruments		3,834			—		3,834			3,834			(7,668	)		3,834
Minimum pension liability adjustment, net of tax benefit of $0		(36,770	)		—		(36,770	)		(36,770	)		73,540			(36,770	)
Comprehensive loss	$	(379,487	)	$	—	$	(379,378	)	$	(379,391	)	$	758,769		$	(379,487	)

(*) Includes dividends on preferred securities of $15,750.

62

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

C. Preferred Trust Securities — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
For the Year Ended December 29, 2000
(in thousands of dollars)
(Restated, See Note 2)

	Foster Wheeler Ltd.			FW Preferred Capital Trust		Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—	$	—		$	3,891,361		$	—		$	3,891,361
Other income		—			15,750		—			77,994			(15,750	)		77,994
Total revenues and other income		—			15,750		—			3,969,355			(15,750	)		3,969,355
Cost of operating revenues		—			—		—			3,565,147			—			3,565,147
Selling, general and administrative expenses		—			—		—			222,110			—			222,110
Other deductions and minority interest		—			—		—			46,678			—			46,678
Interest expense(*)		—			15,750		—			83,254			(15,750	)		83,254
Equity in net earnings of subsidiaries		36,987			—		36,987			—			(73,974	)		—
Earnings before income taxes		36,987			—		36,987			52,166			(73,974	)		52,166
(Benefit)/provision for income taxes		—			—		—			15,179			—			15,179
Net earnings		36,987			—		36,987			36,987			(73,974	)		36,987
Other comprehensive loss:
Foreign currency translation adjustment		(19,988	)		—		(19,988	)		(19,988	)		39,976			(19,988	)
Minimum pension liability adjustment, net of $12,000 tax benefit		(21,500	)		—		(21,500	)		(21,500	)		43,000			(21,500	)
Comprehensive loss	$	(4,501	)	$	—	$	(4,501	)	$	(4,501	)	$	9,002		$	(4,501	)

(*) Includes dividends on preferred securities of $15,750.

63

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

C. Preferred Trust Securities — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
For the Year Ended December 27, 2002
(in thousands of dollars)

	Foster Wheeler Ltd.			FW Preferred Capital Trust		Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities
Net cash (used)/provided by Operating Activities	$	(172	)	$	—	$	(15,109	)	$	233,405		$	(57,759	)	$	160,365
Cash Flows from Investing Activities
Change in restricted cash		—			—		—			(84,793	)		—			(84,793	)
Capital expenditures		—			—		—			(53,395	)		—			(53,395	)
Proceeds from sale of assets		—			—		—			6,282			—			6,282
(Increase)/decrease in investment and advances		—			—		(350	)		9,457			—			9,107
Decrease in short-term investments		—			—		—			93			—			93
Net cash provided/(used) by Investing Activities		—					(350	)		(122,356	)		—			(122,706	)
Cash Flows from Financing Activities
Dividends to Common Shareholders		—			—		—			(3,390	)		3,390			—
Decrease in short-term debt		—			—		—			(7,792	)		—			(7,792	)
Proceeds of long-term debt		—			—		70,000			546			—			70,546
Proceeds from lease financing		—			—		—			44,900			—			44,900
Repayment of long-term debt		—			—		—			(45,591	)		—			(45,591	)
Other		172			—		(54,541	)		(2,061	)		54,369			(2,061	)
Net cash provided/(used) by Financing Activities		172			—		15,459			(13,388	)		57,759			60,002
Effect of exchange rate changes on cash and cash equivalents		—			—		—			22,624			—			22,624
Increase in cash and cash equivalents		—			—		—			120,285			—			120,285
Cash and cash equivalents, beginning of year		—			—		—			224,020			—			224,020
Cash and cash equivalents, end of year	$	—		$	—	$	—		$	344,305		$	—		$	344,305

64

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

C. Preferred Trust Securities — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
For the Year Ended December 28, 2001
(in thousands of dollars)
(Restated, See Note 2)

	Foster Wheeler Ltd.			FW Preferred Capital Trust		Guarantor Subsidiary			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities
Net cash (used)/provided by Operating Activities	$	(96	)	$	—	$	(181,267	)	$	321,618		$	(228,936	)	$	(88,681	)
Cash Flows from Investing Activities
Capital expenditures		—			—		(2,346	)		(31,652	)		—			(33,998	)
Proceeds from sale of properties		—			—		—			59,672			—			59,672
Decrease in investment and advances		—			—		—			16,008			—			16,008
Decrease in short-term investments		—			—		—			1,530			—			1,530
Net cash (used)/provided by Investing Activities		—			—		(2,346	)		45,558			—			43,212
Cash Flows from Financing Activities
Dividends to Common Shareholders		—			—		(4,888	)		(228,936	)		228,936			(4,888	)
Decrease in short-term debt		—			—		—			(82,032	)		—			(82,032	)
Proceeds from convertible subordinated notes, net		202,912			—		—			—			—			202,912
Proceeds from long-term debt		—			—		178,061			6,981			—			185,042
Repayment of long-term debt		—			—		(193,062	)		(21,662	)		—			(214,724	)
Other		(202,816	)		—		203,502			(1,463	)		—			(777	)
Net cash provided/(used) by Financing Activities		96			—		183,613			(327,112	)		228,936			85,533
Effect of exchange rate changes on cash and cash equivalents		—			—		—			(7,937	)		—			(7,937	)
Increase in cash and cash equivalents		—			—		—			32,127			—			32,127
Cash and cash equivalents, beginning of year		—			—		—			191,893			—			191,893
Cash and cash equivalents, end of year	$	—		$	—	$	—		$	224,020		$	—		$	224,020

65

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

24. Consolidating Financial Information — (Continued)

C. Preferred Trust Securities — (Continued)

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
For the Year Ended December 29, 2000
(in thousands of dollars)
(Restated, See Note 2)

	Foster Wheeler Ltd.		FW Preferred Capital Trust		Guarantor Subsidiary		Non- Guarantor Subsidiaries			Eliminations		Consolidated
Cash Flows from Operating Activities
Net cash (used) by Operating Activities	$	—	$	—	$	—	$	(16,744	)	$	—	$	(16,744	)
Cash Flows from Investing Activities
Capital expenditures		—		—		—		(45,807	)		—		(45,807	)
Proceeds from sale of properties		—		—		—		56,703			—		56,703
Decrease in investment and advances		—		—		—		12,122			—		12,122
Decrease in short-term investments		—		—		—		15,230			—		15,230
Net cash provided by Investing Activities		—		—		—		38,248			—		38,248
Cash Flows from Financing Activities
Dividends to Common Shareholders		—		—		—		(9,773	)		—		(9,773	)
Increase in short-term debt		—		—		—		44,876			—		44,876
Proceeds from long-term debt		—		—		—		43,168			—		43,168
Repayment of long-term debt		—		—		—		(88,151	)		—		(88,151	)
Other		—		—		—		(2,753	)		—		(2,753	)
Net cash (used) by Financing Activities		—		—		—		(12,633	)		—		(12,633	)
Effect of exchange rate changes on cash and cash equivalents		—		—		—		12,754			—		12,754
Increase in cash and cash equivalents		—		—		—		21,625			—		21,625
Cash and cash equivalents, beginning of year		—		—		—		170,268			—		170,268
Cash and cash equivalents, end of year	$	—	$	—	$	—	$	191,893		$	—	$	191,893

66

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

25. Restatement

Management determined that the assets, liabilities and results of operations associated with one of the Company’s postretirement medical plans were not accounted for in accordance with SFAS 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions.” The Company’s consolidated balance sheet as of December 28, 2001 and the related consolidated statements of earnings and comprehensive income, shareholder’s equity and cash flows for each of the two years in the period ended December 28, 2001 have been revised to account for the assets, liabilities and results of operations associated with this benefit plan in accordance with SFAS 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions.” The postretirement and other employee benefits other than pensions liability was increased to reflect the updated obligation, calculated on a going concern basis. The cumulative effect on shareholders’ equity as of December 29, 2000 was a decrease of $9,620. A summary of the effects of the restatement on the Company’s consolidated balance sheet, consolidated statement of earnings and comprehensive income is shown below. Refer to Note 26 for the effects of the restatement on the Company’s quarterly data.

Balance Sheet		12/28/01 As Reported			12/28/01 Restated		Statement of Earnings and Comprehensive Income		12/28/01 Year As Reported			12/28/01 Year Restated
Pension, post retirement and other employee benefits*	$	239,076		$	257,976		Other deductions	$	122,395		$	126,495
Retained earnings (deficit)	$	(109,872	)	$	(128,772	)	(Loss)/earnings before income taxes	$	(208,865	)	$	(212,965	)
Total shareholder’s equity/(deficit)	$	(29,544	)	$	(48,444	)	Provision (benefit) for income taxes	$	118,215		$	123,395
							Net (loss)/earnings	$	(327,080	)	$	(336,360	)
							(Loss)/Earnings per Share, Basic and Diluted	$	(8.00	)	$	(8.23	)

* The pension, postretirement and other employee benefits liability as reported reflects an increase of $70,927 related to a reclassification of pension liabilities from other long-term liabilities.

Balance Sheet		12/29/00 As Reported		12/29/00 Restated	Statement of Earnings and Comprehensive Income		12/29/00 Year As Reported		12/29/00 Year Restated
Beginning retained earnings (deficit)	$	194,167	$	185,262	Other deductions	$	41,721	$	42,821
Ending retained earnings (deficit)	$	222,096	$	212,476	(Loss)/earnings before income taxes	$	53,266	$	52,166
Total shareholder’s equity/(deficit)	$	344,935	$	335,315	Provision (benefit) for income taxes	$	15,564	$	15,179
					Net (loss)/earnings	$	37,702	$	36,987
					(Loss)/Earnings per Share, Basic and Diluted	$	0.92	$	0.91

67

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

26. Restatement of Quarterly Data (Unaudited)

A summary of the effects of the restatement on the Company’s quarterly financial data for the seven quarterly periods ended September 27, 2002 follows. The restatement for the quarter ended March 29, 2002 also includes the effect of the cumulative effect of the change in accounting for goodwill. This change increased the previously reported net loss for March 29, 2002 by $77,000.

Balance Sheet		3/29/02 As Reported			3/29/02 Restated		Statement of Earnings and Comprehensive Income		3/29/02 As Reported			3/29/02 Restated
Goodwill, net	$	126,301		$	49,301		Other deductions	$	55,153		$	55,553
Post retirement and other employee benefits other than pensions	$	169,515		$	188,815		(Loss)/earnings before income taxes	$	(19,326	)	$	(19,726	)
Retained earnings (deficit)	$	(208,582	)	$	(304,882	)	Net (loss) prior to cumulative effect of a change in accounting principle	$	(25,210	)	$	(25,610	)
Total shareholder’s equity/(deficit)	$	(140,909	)	$	(237,209	)	Cumulative effect of a change in accounting principle for goodwill, net of $0 tax	$	(73,500	)	$	(150,500	)
							Net (loss)	$	(98,710	)	$	(176,110	)
							(Loss) per Share, Basic and Diluted	$	(2.41	)	$	(4.30	)

Balance Sheet		6/28/02 As Reported			6/28/02 Restated		Statement of Earnings and Comprehensive Income		6/28/02 Quarter As Reported			6/28/02 Quarter Restated			6/28/02 Year to Date As Reported			6/28/02 Year to Date As Restated
Goodwill, net	$	126,806		$	49,806		Other deductions	$	67,392		$	67,792		$	105,641		$	106,441
Post retirement and other employee benefits other than pensions	$	168,798		$	188,498		(Loss)/earnings before income taxes	$	(80,901	)	$	(81,301	)	$	(100,227	)	$	(101,027	)
Retained earnings(deficit)	$	(294,178	)	$	(390,878	)	Net (loss) prior to cumulative effect of a change in accounting principle	$	(85,596	)	$	(85,996	)	$	(110,806	)	$	(111,606	)
Total shareholder’s equity/(deficit)	$	(208,278	)	$	(304,978	)	Cumulative effect of a change in accounting principle for goodwill, net of $0 tax	$	—		$	—		$	(73,500	)	$	(150,500	)
							Net (loss)	$	(85,596	)	$	(85,996	)	$	(184,306	)	$	(262,106	)
							(Loss) per Share, Basic andDiluted	$	(2.09	)	$	(2.10	)	$	(4.50	)	$	(6.40	)

68

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

26. Restatement of Quarterly Data (Unaudited) — (Continued)

Balance Sheet		9/27/02 As Reported			9/27/02 Restated		Statement of Earnings and Comprehensive Income		9/27/02 Quarter As Reported			9/27/02 Quarter Restated			9/27/02 Year to Date As Reported			9/27/02 Year to Date As Restated
Goodwill, net	$	127,089		$	50,089		Other deductions	$	23,623		$	24,023		$	129,264		$	130,464
Post retirement and other employee benefits other than pensions	$	168,635		$	188,735		(Loss)/earnings before income taxes	$	(142,310	)	$	(142,710	)	$	(242,537	)	$	(243,737	)
Retained earnings(deficit)	$	(444,788	)	$	(541,888	)	Net (loss) prior to cumulative effect of a change in accounting principle	$	(150,610	)	$	(151,010	)	$	(261,416	)	$	(262,616	)
Total shareholder’s equity/(deficit)	$	(356,837	)	$	(453,937	)	Cumulative effect of a change in accounting principle for goodwill, net of $0 tax	$	—		$	—		$	(73,500	)	$	(150,500	)
							Net (loss)/earnings	$	(150,610	)	$	(151,010	)	$	(334,916	)	$	(413,116	)
							(Loss)/Earnings per Share, Basic and Diluted	$	(3.68	)	$	(3.69	)	$	(8.18	)	$	(10.09	)

Statement of Earnings and Comprehensive Income	3/30/01 As Reported		3/30/01 Restated
Other deductions	$	24,709	$	25,734
(Loss)/earnings before income taxes	$	9,792	$	8,767
Provision (benefit) for income taxes	$	2,152	$	1,793
Net (loss)/earnings	$	7,640	$	6,974
(Loss)/Earnings per Share, Basic and Diluted	$	0.19	$	0.17

Statement of Earnings and Comprehensive Income	6/29/01 Quarter As Reported		6/29/01 Quarter Restated			6/29/01 Year to Date As Reported		6/29/01 Year to Date As Restated
Other deductions	$	13,135	$	14,160		$	21,016	$	23,066
(Loss)/earnings before income taxes	$	4,856	$	3,831		$	14,648	$	12,598
Provision (benefit) for income taxes	$	4,532	$	4,173		$	6,684	$	5,966
Net (loss)/earnings	$	324	$	(342	)	$	7,964	$	6,632
(Loss)/Earnings per Share, Basic and Diluted	$	0.01	$	(0.01	)	$	0.19	$	0.16

69

FOSTER WHEELER LTD.
NOTES TO FINANCIAL STATEMENTS — (Continued)
(in thousands of dollars, except per share amounts)

26. Restatement of Quarterly Data (Unaudited) — (Continued)

Statement of Earnings and Comprehensive Income	9/28/01 Quarter As Reported			9/28/01 Quarter Restated			9/28/01 Year to Date As Reported		9/28/01 Year to Date As Restated
Other deductions	$	10,202		$	11,227		$	31,218	$	34,293
(Loss)/earnings before income taxes	$	(341	)	$	(1,366	)	$	14,307	$	11,232
Provision (benefit) for income taxes	$	(1,118	)	$	(1,477	)	$	5,565	$	4,489
Net (loss)/earnings	$	777		$	111		$	8,742	$	6,743
(Loss)/Earnings per Share, Basic and Diluted	$	0.02		$	0.00		$	0.21	$	0.16

Statement of Earnings and Comprehensive Income	12/28/01 Quarter As Reported			12/28/01 Quarter Restated			12/28/01 Year to Date As Reported			12/28/01 Year to Date As Restated
Other deductions	$	91,177		$	92,202		$	122,395		$	126,495
(Loss)/earnings before income taxes	$	(223,172	)	$	(224,197	)	$	(208,865	)	$	(212,965	)
Provision (benefit) for income taxes	$	112,650		$	118,906		$	118,215		$	123,395
Net (loss)/earnings	$	(335,822	)	$	(343,103	)	$	(327,080	)	$	(336,360	)
(Loss)/Earnings per Share, Basic and Diluted	$	(8.22	)	$	(8.39	)	$	(8.00	)	$	(8.23	)

27. Subsequent Events (Unaudited)

On March 7, 2003, the Company sold the assets of one of its wholly owned domestic E&C subsidiaries. The Company received net cash proceeds of approximately $80,000 consisting of $72,000 of sales proceeds and the balance from cash retained within the business. The Company also expects to receive an additional $57,000 before year-end 2003 under the subsidiary’s contract with a federal agency, which was not included in the sale. These cash proceeds will be available for general corporate purposes.

The proceeds are subject to adjustment based on a final net worth calculation to be finalized by the middle of the second quarter 2003.

70

28. Consolidating Financial Information — Proposed Preferred Share Exchange Offer of Foster Wheeler Holdings Ltd. (previously known as Foreign Holdings Ltd.)

Under the proposed terms of Foster Wheeler Holdings Ltd.’s preferred share exchange offer, Foster Wheeler Holdings Ltd. plans to issue preferred shares in exchange for 9.00% Preferred Securities, Series I issued by FW Preferred Capital Trust I, which are fully and unconditionally guaranteed by Foster Wheeler Ltd. and Foster Wheeler LLC. Foster Wheeler Ltd. along with Foster Wheeler Inc. and FWPI Ltd., both of which are indirectly 100% owned subsidiaries of Foster Wheeler Ltd., will fully and unconditionally, jointly and severally, guarantee the new preferred shares as to the payment of declared dividends, redemption payments, if any, and distributions upon liquidation or winding up. Foster Wheeler Holdings Ltd. is a Bermuda company and a 100% owned direct subsidiary of Foster Wheeler Ltd. Foster Wheeler Holdings Ltd., a holding company, does not conduct any business except through its indirect ownership of its subsidiaries. The consolidated financial statements of Foster Wheeler Holdings Ltd. are substantially the same as those of Foster Wheeler Ltd.

The following summarized consolidating financial information is presented in lieu of separate financial statements and other related disclosures of the wholly owned subsidiary guarantors and issuer because management does not believe that such separate financial statements and related disclosures would be material to investors. The following represents summarized condensed consolidating financial information as of December 27, 2002 and December 28, 2001 with respect to the financial position, and for the three years ended December 27, 2002 for results of operations and for cash flows of the Company and its 100% owned and majority owned subsidiaries.

The Foster Wheeler Ltd. column presents the parent company’s financial information. Foster Wheeler Ltd. is also a guarantor. The Foster Wheeler Holdings Ltd. column presents the issuer’s financial information. The Guarantor Subsidiaries column presents the financial information of all guarantors excluding that of Foster Wheeler Ltd. which is separately presented.

The consolidating financial statements have been prepared as if the proposed corporate structure for Foster Wheeler Holdings Ltd. and FWPI Ltd. was in place from the beginning of the time periods presented.

71

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING BALANCE SHEET
December 27, 2002
(In Thousands of Dollars)

Assets		Foster Wheeler Ltd.			Foster Wheeler Holdings Ltd.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash and cash equivalents	$	—		$	—		$	7,149		$	337,156		$	—		$	344,305
Accounts and notes receivable, net		—			—			316,573			1,130,863			(762,764	)		684,672
Contracts in process and inventories		—			—			—			289,933			—			289,933
Other current assets		—			—			384			77,113			—			77,497
Total current assets		—			—			324,106			1,835,065			(762,764	)		1,396,407
Investment in subsidiaries and others		(780,671	)		(780,617	)		41,200			(831,494	)		2,440,105			88,523
Land, buildings & equipment (net)		—			—			2,496			405,323			—			407,819
Notes and accounts receivable - long-term		210,000			—			90,552			52,407			(331,015	)		21,944
Intangible assets (net)		—			—			—			122,882			—			122,882
Asbestos-related insurance recovery receivable		—			—			—			534,045			—			534,045
Other non-current assets		—			—			105,099			232,118			—			337,217
TOTAL ASSETS	$	(570,671	)	$	(780,617	)	$	563,453		$	2,350,346		$	1,346,326		$	2,908,837
Liabilities & Shareholders’ Deficit
Accounts payable and accrued expenses	$	320		$	54		$	626,046		$	771,433		$	(762,764	)	$	635,089
Estimated costs to complete long-term contracts		—			—			—			707,323			—			707,323
Other current liabilities		(52	)		—			63,051			135,212			—			198,211
Total current liabilities		268			54			689,097			1,613,968			(762,764	)		1,540,623
Corporate and other debt		—			—			—			399,939			—			399,939
Special-purpose project debt		—			—			—			181,613			—			181,613
Pension, postretirement and other employee benefits		—			—			288,044			149,776			—			437,820
Asbestos-related liability		—			—						519,790			—			519,790
Other long-term liabilities and minority interest		—			—			357,844			90,877			(331,015	)		117,706
Subordinated Robbins obligations		—			—			107,285			—			—			107,285
Convertible subordinated notes		210,000			—			—			—			—			210,000
Preferred trust securities		—			—			—			175,000			—			175,000
TOTAL LIABILITIES		210,268			54			1,442,270			3,130,963			(1,093,779	)		3,689,776
Common stock and paid in capital		242,490			242,490			242,490			242,490			(727,470	)		242,490
Retained deficit		(653,991	)		(653,723	)		(751,869	)		(653,669	)		2,059,261			(653,991	)
Accumulated other comprehensive loss		(369,438	)		(369,438	)		(369,438	)		(369,438	)		1,108,314			(369,438	)
TOTAL SHAREHOLDERS’ DEFICIT		(780,939	)		(780,671	)		(878,817	)		(780,617	)		2,440,105			(780,939	)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT	$	(570,671)		$	(780,617)		$	563,453		$	2,350,346		$	1,346,326		$	2,908,837

72

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING BALANCE SHEET
 December 28, 2001
(In Thousands of Dollars)

Assets		Foster Wheeler Ltd.			Foster Wheeler Holdings Ltd.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash and cash equivalents	$	—		$	—		$	21,791		$	202,229		$	—		$	224,020
Accounts and notes receivable, net		—			—			404,740			1,297,310			(755,706	)		946,344
Contracts in process and inventories		—			—			—			504,128			—			504,128
Other current assets		—			—			(3,756	)		83,640			—			79,884
Total current assets		—			—			422,775			2,087,307			(755,706	)		1,754,376
Investment in subsidiaries and others		(48,348	)		(48,347	)		176,468			(247,161	)		251,902			84,514
Land, buildings & equipment (net)		—			—			5,357			393,841			—			399,198
Notes and accounts receivable - long-term		210,000			—			42,552			76,477			(263,656	)		65,373
Intangible assets (net)		—			—			—			274,543			—			274,543
Asbestos-related insurance recovery receivable		—			—			—			437,834			—			437,834
Other non-current assets		—			—			77,898			232,101			—			309,999
TOTAL ASSETS	$	161,652		$	(48,347	)	$	725,050		$	3,254,942		$	(767,460	)	$	3,325,837
Liabilities & Shareholders’ Deficit
Corporate and other debt	$	—		$	—		$	20,350		$	277,277		$	—		$	297,627
Special-purpose project debt		—			—			—			75,442			—			75,442
Subordinated Robbins obligations		—			—			110,340			—			—			110,340
Convertible Debt		210,000			—			—			—			—			210,000
Preferred Trust Securities		—			—			—			175,000			—			175,000
Accounts payable and accrued expenses		148			8			580,360			1,216,615			(1,019,362	)		777,769
Estimated costs to complete long-term contracts		—			—			—			580,766			—			580,766
Other current liabilities		(52	)		(7	)		(36,077	)		197,812			—			161,676
Total current liabilities		210,096			1			674,973			2,522,912			(1,019,362	)		2,388,620
Special-purpose project debt less current		—			—			—			137,855			—			137,855
Pension, postretirement and other employee benefits		—			—			169,010			88,966			—			257,976
Asbestos-related liability		—			—			—			445,370			—			445,370
Other non-current liabilities		—			—			36,274			108,186			—			144,460
TOTAL LIABILITIES		210,096			1			880,257			3,303,289			(1,019,362	)		3,374,281
Common stock and paid in capital		242,162			242,162			242,162			242,162			(726,486	)		242,162
Retained deficit		(128,772	)		(128,676	)		(235,535	)		(128,675	)		492,886			(128,772	)
Accumulated other comprehensive loss		(161,834	)		(161,834	)		(161,834	)		(161,834	)		485,502			(161,834	)
TOTAL SHAREHOLDERS’ DEFICIT	$	(48,444	)	$	(48,348	)	$	(155,207	)	$	(48,347	)	$	251,902		$	(48,444	)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT	$	161,652		$	(48,347	)	$	725,050		$	3,254,942		$	(767,460	)	$	3,325,837

73

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
Twelve Months Ended December 27, 2002
(In Thousands of Dollars)

		Foster Wheeler Ltd.			Foster Wheeler Holdings Ltd.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—		$	—		$	3,519,177		$	—		$	3,519,177
Other income		13,650			—			14,739			62,281			(35,310	)		55,360
Total revenues and other income		13,650			—			14,739			3,581,458			(35,310	)		3,574,537
Cost of operating revenues		—			—			—			3,426,910			—			3,426,910
Selling, general and administrative expenses		—			—			42,762			183,762			—			226,524
Other deductions and minority interest		73			40			67,198			130,826			—			198,137
Interest expense (*)		13,749			1			23,556			81,032			(35,310	)		83,028
Equity in net loss of subsidiaries		(374,547	)		(374,506	)		(130,749	)		(231,902	)		1,111,704			—
Loss before income taxes		(374,719	)		(374,547	)		(249,526	)		(472,974	)		1,111,704			(360,062	)
Provision/(benefit) for income taxes		—			—			113,125			(98,468	)		—			14,657
Net loss prior to cumulative effect of a change in accounting principle		(374,719	)		(374,547	)		(362,651	)		(374,506	)		1,111,704			(374,719	)
Cumulative effect of a change in accounting principle for goodwill, Net of $0 tax		(150,500	)		(150,500	)		(150,500	)		(150,500	)		451,500			(150,500	)
Net loss		(525,219	)		(525,047	)		(513,151	)		(525,006	)		1,563,204			(525,219	)
Other comprehensive (loss)/income: Foreign currency translation adjustment		22,241			22,241			22,241			22,241			(66,723	)		22,241
Net loss on derivative instruments		(3,834	)		(3,834	)		(3,834	)		(3,834	)		11,502			(3,834	)
Minimum pension liability adjustment net of $73,400 tax benefit		(226,011	)		(226,011	)		(226,011	)		(226,011	)		678,033			(226,011	)
Comprehensive loss	$	(732,823	)	$	(732,651	)	$	(720,755	)	$	(732,610	)	$	2,186,016		$	(732,823	)

(*) Includes dividends on preferred securities of $16,610.

74

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
Twelve Months Ended December 28, 2001
(In Thousands of Dollars)

		Foster Wheeler Ltd			Foster Wheeler Holdings Inc.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—		$	—		$	3,315,314		$	—		$	3,315,314
Other income		8,000			—			19,558			84,462			(34,860	)		77,160
Total revenues and other income		8,000			—			19,558			3,399,776			(34,860	)		3,392,474
Cost of operating revenues		—			—			—			3,164,025			—			3,164,025
Selling, general and administrative expenses		—			—			8,853			216,539			—			225,392
Other deductions and minority interest		130			20			76,343			55,045			—			131,538
Interest expense (*)		8,018			—			44,436			66,890			(34,860	)		84,484
Equity in net loss of subsidiaries		(336,264	)		(336,251	)		(78,453	)		(268,773	)		1,019,741			—
Loss before income taxes		(336,412	)		(336,271	)		(188,527	)		(371,496	)		1,019,741			(212,965	)
Provision (benefit) for income taxes		(52	)		(7	)		158,699			(35,245	)		—			123,395
Net loss		(336,360	)		(336,264	)		(347,226	)		(336,251	)		1,019,741			(336,360	)
Other comprehensive (loss)/income:
Foreign currency translation adjustment		(10,191)			(10,191	)		(10,191	)		(10,191	)		30,573			(10,191	)
Net gain on derivative instruments		3,834			3,834			3,834			3,834			(11,502	)		3,834
Minimum pension liability adjustment net of $0 tax		(36,770	)		(36,770	)		(36,770	)		(36,770	)		110,310			(36,770	)
Comprehensive loss	$	(379,487	)	$	(379,391	)	$	(390,353	)	$	(379,378	)	$	1,149,122		$	(379,487	)

(*) Includes dividends on preferred securities of $15,750.

75

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS
Twelve Months Ended December 29, 2000
(In Thousands of Dollars)

		Foster Wheeler Ltd			Foster Wheeler Holdings Ltd.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Operating revenues	$	—		$	—		$	—		$	3,891,361		$	—		$	3,891,361
Other income		—			—			—			77,994			—			77,994
Total revenues and other income		—			—			—			3,969,355			—			3,969,355
Cost of operating revenues		—			—			—			3,565,147			—			3,565,147
Selling, general and administrative expenses		—			—			—			222,110			—			222,110
Other deductions and minority interest		—			—			—			46,678			—			46,678
Interest expense (*)		—			—			—			83,254			—			83,254
Equity in net earnings of subsidiaries		36,987			36,987			33,376			—			(107,350	)		—
Income before income taxes		36,987			36,987			33,376			52,166			(107,350	)		52,166
Provision for income taxes		—			—			—			15,179			—			15,179
Net income		36,987			36,987			33,376			36,987			(107,350	)		36,987
Other comprehensive loss: Foreign currency translation adjustment		(19,988	)		(19,988	)		(19,988	)		(19,988	)		59,964			(19,988	)
Minimum pension liability adjustment net of $12,000 tax benefit		(21,500)			(21,500)			(21,500)			(21,500	)		64,500			(21,500	)
Comprehensive loss	$	(4,501	)	$	(4,501	)	$	(8,112	)	$	(4,501	)	$	17,114		$	(4,501	)

(*) Includes dividends on preferred securities of $15,750.

76

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
Twelve Months Ended December 27, 2002
(In Thousands of Dollars)

		Foster Wheeler Ltd.			Foster Wheeler Holdings Ltd.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities
Net cash (used)/provided by Operating Activities	$	(172	)	$	(41	)	$	(137,895	)	$	308,968		$	(10,495	)	$	160,365
Cash Flows from Investing Activities
Change in restricted cash		—			—			(15,900	)		(68,893	)		—			(84,793	)
Capital Expenditures		—			—			2,669			(56,064	)		—			(53,395	)
Proceeds from sale of assets		—			—			—			6,282			—			6,282
(Increase)/decrease in investment and advances		—			—			(127,375	)		136,482			—			9,107
Decrease in short-term investments		—			—			—			93			—			93
Net cash (used)/ provided by Investing Activities		—			—			(140,606	)		17,900			—			(122,706	)
Cash Flows from Financing Activities
Dividends to shareholders		—			—			—			(10,708	)		10,708			—
Decrease in short-term debt		—			—			—			(7,792	)		—			(7,792	)
Proceeds from long-term debt		—			—			—			115,446			—			115,446
Repayment of long-term debt		—			—			(21,825	)		(23,766	)		—			(45,591	)
Other		172			41			285,684			(287,745	)		(213	)		(2,061	)
Net cash provided/(used) by Financing Activities		172			41			263,859			(214,565	)		10,495			60,002
Effect of exchange rate changes on cash and cash equivalents		—			—			—			22,624			—			22,624
(Decrease)/increase in cash and cash equivalents		—			—			(14,642	)		134,927			—			120,285
Cash and cash equivalents, beginning of year		—			—			21,791			202,229			—			224,020
Cash and cash equivalents, end of year	$	—		$	—		$	7,149		$	337,156		$	—		$	344,305

77

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
Twelve Months Ended December 28, 2001
(In Thousands of Dollars)
(Restated)

		Foster Wheeler Ltd.			Foster Wheeler Holdings Ltd.			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash Flows from Operating Activities
Net cash (used)/provided by Operating Activities	$	(96	)	$	(20	)	$	290,344		$	(149,973	)	$	(228,936	)	$	(88,681	)
Cash Flows from Investing Activities
Capital expenditures		—			—			(291	)		(33,707	)		—			(33,998	)
Proceeds from sale of assets		—			—			—			59,672			—			59,672
(Increase)/decrease in investment and advances		—			—			388,644			(372,636	)		—			16,008
Decrease in short-term investments		—			—			—			1,530			—			1,530
Net cash (used)/provided by Investing Activities		—			—			388,353			(345,141	)		—			43,212
Cash Flows from Financing Activities
Dividends to shareholders		—			—			—			(233,824	)		228,936			(4,888	)
Decrease in short-term debt		—			—			(76,250	)		(5,782	)		—			(82,032	)
Proceeds from Convertible Bonds, net		202,912			—			—			—			—			202,912
Proceeds from long-term debt		—			—			(285,000	)		470,042			—			185,042
Repayment of long-term debt		—			—			—			(214,724	)		—			(214,724	)
Other		(202,816	)		20			(326,632	)		528,651			—			(777	)
Net cash provided/(used) by Financing Activities		96			20			(687,882	)		544,363			228,936			85,533
Effect of exchange rate changes on cash and cash equivalents		—			—			—			(7,937	)		—			(7,937	)
(Decrease)/increase in cash and cash equivalents		—			—			(9,185	)		41,312			—			32,127
Cash and cash equivalents, beginning of year		—			—			30,976			160,917			—			191,893
Cash and cash equivalents, end of year	$	—		$	—		$	21,791		$	202,229		$	—		$	224,020

78

FOSTER WHEELER LTD.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW
Twelve Months Ended December 29, 2000
(In Thousands of Dollars)
(Restated)

		Foster Wheeler Ltd.		Foster Wheeler Holdings Ltd.		Guarantor Subsidiaries		Non-Guarantor Subsidiaries			Eliminations		Consolidated
Cash Flows from Operating Activities
Net cash used by Operating Activities	$	—	$	—	$	—	$	(16,744	)	$	—	$	(16,744	)
Cash Flows from Investing Activities
Capital expenditures		—		—		—		(45,807	)		—		(45,807	)
Proceeds from sale of assets		—		—		—		56,703			—		56,703
Decrease in investment and advances		—		—		—		12,122			—		12,122
Decrease in short-term investments		—		—		—		15,230			—		15,230
Net cash provided by Investing Activities		—		—		—		38,248			—		38,248
Cash Flows from Financing Activities
Dividends to shareholders		—		—		—		(9,773	)		—		(9,773	)
Increase in short-term debt		—		—		—		44,876			—		44,876
Proceeds from Convertible Bonds, net		—		—		—		—			—		—
Proceeds from long-term debt		—		—		—		43,168			—		43,168
Repayment of long-term debt		—		—		—		(88,151	)		—		(88,151	)
Other		—		—		—		(2,753	)		—		(2,753	)
Net cash used by Financing Activities		—		—		—		(12,633	)		—		(12,633	)
Effect of exchange rate changes on cash and cash equivalents		—		—		—		12,754			—		12,754
Increase in cash and cash equivalents		—		—		—		21,625			—		21,625
Cash and cash equivalents, beginning of year		—		—		—		170,268			—		170,268
Cash and cash equivalents, end of year	$	—	$	—	$	—	$	191,893		$	—	$	191,893

79