Fluor 2004 Annual Report Download - page 62

term debt is not material due to the low fixed interest rates on the obligations. However, commercial paper is issued
at current short-term interest rates, which could increase in the future.
The company does not currently use derivatives, such as swaps, to alter the interest characteristics of its short-
term securities or its debt instruments. The company generally utilizes currency options and forward exchange
contracts to hedge foreign currency transactions entered into in the ordinary course of business and does not engage
in currency speculation. At December 31, 2004, the company had forward foreign exchange contracts of less than
27 months duration, to exchange major world currencies for U.S. dollars. The total gross notional amount of these
contracts at December 31, 2004 was $54 million.
Beginning in 2003 and continuing through 2004, exchange rates for functional currencies for most of the
company’s international operations strengthened against the U.S. dollar, resulting in unrealized translation gains that
are reflected in the cumulative translation component of other comprehensive income. Most of these unrealized gains
relate to cash balances held in currencies other than the U.S. dollar. Because it is expected that most of this cash will
be used for project execution expenditures in the currency in which it is held, the risk of realized translation losses is
mitigated.
In 2001, the company issued a warrant for the purchase of 460,000 shares, at $36.06 per share, of the
company’s common stock to a partner in the company’s e-commerce procurement venture. Any compensation
realized by the holder through exercise of the warrant will offset any royalties otherwise payable under a five-year
cooperation and services agreement.
Item 8. Financial Statements and Supplementary Data
The information required by this Item is submitted as a separate section of this Form 10-K beginning on
page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There have been no changes in, or disagreements with, accountants on accounting and financial disclosure.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The term ‘‘disclosure controls and procedures’’ (defined in Rule 13a-15(e) under the Securities and Exchange
Act of 1934 (the ‘‘Exchange Act’’) refers to the controls and other procedures of a company that are designed to
ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is
recorded, processed, summarized and reported within the required time periods. Under the supervision and with the
participation of our management, including our chief executive officer and chief financial officer, we have conducted
an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as of
December 31, 2004. Based on this evaluation, our chief executive office and our chief financial officer concluded
that our disclosure controls and procedures were effective as of the Evaluation Date to ensure the timely disclosure
of required information in our Securities and Exchange Commission filings.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
In addition, the design of any system of control is based upon certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving its stated goals under all future
events, no matter how remote. Accordingly, even effective internal control over financial reporting can only provide
reasonable assurance of achieving their control objectives.
Management’s Report on Internal Control Over Financial Reporting
Management’s Report on Internal Control Over Financial Reporting, which appears on page F-2 of this report, is
incorporated herein by this reference.
Attestation Report of the Independent Registered Public Accounting Firm
Our management’s assessment of the effectiveness of our internal control over financial reporting as of
December 31, 2004 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as
stated in its report which appears on page F-3 of this report, and which is incorporated herein by this reference.
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