Fluor 2008 Annual Report Download - page 115

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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The company’s obligations for minimum rentals under non-cancelable operating leases are as follows:
Year Ended December 31,
(in thousands)
2009 $ 57,100
2010 62,500
2011 48,400
2012 35,800
2013 23,200
Thereafter 101,300
Contingencies and Commitments
The company and certain of its subsidiaries are involved in litigation in the ordinary course of
business. Additionally, the company and certain of its subsidiaries are contingently liable for commitments
and performance guarantees arising in the ordinary course of business. The company and certain of its
clients have made claims arising from the performance under its contracts. The company recognizes
certain significant claims for recovery of incurred cost when it is probable that the claim will result in
additional contract revenue and when the amount of the claim can be reliably estimated. Recognized
claims against clients amounted to $202 million and $246 million at December 31, 2008 and 2007,
respectively, and are primarily included in contract work in progress in the accompanying Consolidated
Balance Sheet. Amounts ultimately realized from claims could differ materially from the balances included
in the financial statements. The company does not expect that claim recoveries will have a material adverse
effect on its consolidated financial position or results of operations.
As of December 31, 2008, several matters were in the litigation and dispute resolution process. The
following discussion provides a background and current status of these matters:
Infrastructure Joint Venture Project
The company participates in a 50/50 joint venture that is completing a fixed-price transportation
infrastructure project in California. The project continues to be subject to circumstances resulting in
additional cost including owner-directed scope changes leading to quantity growth, cost escalation,
additional labor and schedule delays. The company continues to evaluate the impact of these
circumstances on estimated total project cost, as well as claims for recoveries and other contingencies on
the project. During 2007 and 2006, provisions of $25 million and $30 million, respectively, were recognized
due to increases in estimated cost. The company continues to incur legal expenses associated with the
claims and dispute resolution process.
As of December 31, 2008, the company has recognized in cost and revenue its $52 million
proportionate share of $104 million of cost relating to claims recognized by the joint venture. Total claims-
related costs incurred, as well as claims submitted to the client by the joint venture, are in excess of the
$104 million of recognized cost. As of December 31, 2008, the client withheld liquidated damages totaling
$51 million from amounts otherwise due the joint venture and has asserted additional claims against the
joint venture. The company believes that the claims against the joint venture are without merit and that
amounts withheld will ultimately be recovered by the joint venture and has therefore not recognized any
reduction in project revenue for its $25.5 million proportionate share of the withheld liquidated damages.
In addition, the client has drawn down $14.8 million against letters of credit provided by the company and
its joint venture partner. The company believes that the amounts drawn down against the letters of credit
will ultimately be recovered by the joint venture and, as such, has not reserved for the possible
non-recovery of the company’s $7.4 million proportionate share.
F-27