Fluor 2007 Annual Report Download - page 66

Download and view the complete annual report

Please find page 66 of the 2007 Fluor annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 125

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125

planned to reinvest overseas indefinitely. During 2005, the company reviewed its intent with respect to
such foreign earnings and decided to forego this permanent reinvestment plan. Accordingly, the 2005 tax
rate reflects the U.S. tax effect on these earnings.
The AJCA created a one-time incentive for U.S. corporations to repatriate certain qualified foreign
earnings by providing an 85 percent dividends received deduction, subject to specific reinvestment
guidelines and certain limitations. In August 2005, the company’s Domestic Reinvestment Plan (the
‘‘Plan’’) prepared pursuant to the AJCA was approved by the company’s Chief Executive Officer. The Plan
was ratified by the Executive Committee of the company’s Board of Directors on August 29, 2005. In
September 2005, approximately $89 million was repatriated from certain foreign subsidiaries of the
company, including certain previously taxed income and the base year amount as provided under the
repatriation provision of the AJCA. The results of operations for 2005 included a tax benefit of
$3.8 million attributable to the dividends received deduction, net of the foreign tax credits given up in
exchange for such deduction.
Litigation and Matters in Dispute Resolution
Conex International v. Fluor Enterprises, Inc.
In November 2006, a Jefferson County, Texas, jury reached an unexpected verdict in the case of Conex
International (‘‘Conex’’) v. Fluor Enterprises Inc. (‘‘FEI’’), ruling in favor of Conex and awarding
$98.8 million in damages related to a 2001 construction project.
In 2001, Atofina (now part of Total Petrochemicals Inc.) hired Conex International to be the
mechanical contractor on a project at Atofina’s refinery in Port Arthur, Texas. FEI was also hired to
provide certain engineering advice to Atofina on the project. There was no contract between Conex and
FEI. Later in 2001 after the project was complete, Conex and Atofina negotiated a final settlement for
extra work on the project. Conex sued FEI in September 2003 alleging damages for interference and
misrepresentation and demanding that FEI should pay Conex the balance of the extra work charges that
Atofina did not pay in the settlement. Conex also asserted that FEI interfered with Conex’s contract and
business relationship with Atofina. The jury verdict awarded damages for the extra work and the alleged
interference.
The company has appealed the decision and believes, based on the advice of counsel, that it is
probable that any judgment based on this verdict would be overturned. The company strongly believes that
the judgment based on this verdict is supported neither by the facts nor the law, and will pursue all possible
avenues for reconsideration or appeal. Accordingly, the company did not recognize a charge reflecting the
verdict amount.
Fluor Daniel International and Fluor Arabia Ltd. v. General Electric Company, et al
In October 1998, Fluor Daniel International and Fluor Arabia Ltd. filed a complaint in the United
States District Court for the Southern District of New York against General Electric Company and certain
operating subsidiaries as well as Saudi American General Electric, a Saudi Arabian corporation. The
complaint seeks damages in connection with the procurement, engineering and construction of the Rabigh
Combined Cycle Power Plant in Saudi Arabia. Subsequent to a motion to compel arbitration of the matter,
the company initiated arbitration proceedings in New York under the American Arbitration Association
international rules. The evidentiary phase of the arbitration has been concluded. In January 2005 the
arbitration panel indicated that it would be rendering its decision in two phases; the first to be a decision
on entitlement and second, a decision on damages. On May 4, 2005 the arbitration panel issued a partial
award on entitlement issues which confirmed Fluor’s entitlement to recovery of certain of its claims for
cost incurred in construction of the plant. On April 10, 2007, the arbitration panel issued a partial final
award stipulating the amount of entitlement to recovery of certain claims and awarding interest on the net
amounts due Fluor. An award on the amount of interest due Fluor is expected in 2008. The company does
not expect that the final resolution of the arbitration will have a material effect on its consolidated
financial position or results of operations.
As of December 31, 2007, a number of matters relating to completed and in progress projects are in
the dispute resolution process. These include an Infrastructure Joint Venture Project and the London
Connect Project, which are discussed above under ‘‘— Industrial & Infrastructure’’ and certain Embassy
Projects, which are discussed above under ‘‘— Government’’.
33