Fluor 2008 Annual Report Download - page 69

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Fluor Corporation v. Citadel Equity Fund Ltd.
Citadel Equity Fund Ltd., a hedge fund and investor in the company’s 1.5 percent Convertible Senior
Notes (the ‘‘Notes’’), and the company are disputing the calculation of the number of shares of the
company’s common stock that were due to Citadel upon conversion of approximately $58 million of Notes.
Citadel argues that it is entitled to an additional $28 million in value under its proposed calculation
method. The company believes that the payout given to Citadel was proper and correct and that Citadel’s
claims are without merit. The company is vigorously defending its position.
Other
As of December 31, 2008, 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’’.
Financial Position and Liquidity
Cash provided by operating activities during 2008 was $951 million compared to $905 million in 2007
and $296 million in 2006. Cash provided by operating activities during 2008, 2007 and 2006 resulted
primarily from earning sources and increases in customer advance billings. Cash generated by operating
activities in 2007 also includes the billing and collection of fees on the Fernald project.
The levels of operating assets and liabilities vary from year to year and are affected by the mix, stage
of completion and commercial terms of engineering and construction projects. The increase in new awards
over the last three years will continue to result in periodic start-up activities where the use of cash is
greatest on projects for which cash is not provided by advances from clients. As work progresses on
individual projects and client payments on invoiced amounts increase, cash used in start-up activities is
recovered and project cash flows tend to stabilize through project completion. Liquidity is also provided by
substantial advance billings on contracts in progress. As customer advances are used in project execution
and if they are not replaced by advances on new projects, the company’s cash position will be reduced. In
the event there is net new investment in operating assets that exceeds available cash balances the company
maintains short-term borrowing facilities to satisfy any periodic net operating cash outflows.
Cash from operating activities is used to provide contributions to the company’s defined contribution
and defined benefit plans. Contributions into the defined contribution plans of $98 million during 2008
have increased compared to $74 million in 2007 and $59 million in 2006 as a result of increases in the
number of eligible employees. The company contributed $190 million into its defined benefit pension plans
during 2008, as a result of adverse conditions in the financial markets coupled with the business objective
to utilize available resources to maintain or achieve full funding of accumulated benefits. The company
contributed $62 million and $41 million into its defined benefits plans during 2007 and 2006, respectively.
As of December 31, 2008, 2007 and 2006 all plans were funded to the level of accumulated benefits.
Cash flows provided by investing activities during 2008 include proceeds of $79 million from the sale
of a joint venture interest in a wind power project in the United Kingdom. In addition, cash flows provided
by investing activities during 2008 include $48 million primarily related to the disposal of construction
equipment associated with the equipment operations in the Global Services segment compared with
$60 million and $39 million during 2007 and 2006, respectively.
Cash utilized by investing activities in 2008, 2007 and 2006 included capital expenditures of
$300 million, $284 million and $274 million, respectively. Expenditures during 2008 and 2007 included
significant amounts relating to equipment operations and investments in computer infrastructure
upgrades. Capital expenditures during 2006 included $36 million for construction of the new corporate
headquarters facility in Texas, but otherwise relate primarily to the equipment operations in the Global
Services segment that support engineering and construction projects. The increase in capital expenditures
over the past three years largely relates to the ongoing renewal and replacement of equipment in the
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