Fluor 2008 Annual Report Download - page 97

FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
various tax authorities. The final outcome of these audits by foreign jurisdictions, the Internal Revenue
Service and various state governments could differ materially from that which is reflected in the
Consolidated Financial Statements.
In June 2006, the FASB issued FASB No. 48, ‘‘Accounting for Uncertainty in Income Taxes’’
(‘‘FIN 48’’), an interpretation of FASB Statement of Financial Accounting Standards, No. 109 ‘‘Accounting
for Income Taxes’’ (‘‘SFAS 109’’). FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in enterprises’ financial statements in accordance with SFAS 109. The interpretation prescribes
a recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. Also, the interpretation
provides guidance on derecognition, classification, interest and penalties, accounting in interim periods,
disclosure and transition. This interpretation is effective for fiscal years beginning after December 15,
2006, and the company adopted this interpretation in the first quarter of 2007.
As a result of the adoption of FIN 48, the company recognized a cumulative-effect adjustment of
$45 million, increasing its liability for unrecognized tax benefits, interest and penalties and reducing the
January 1, 2007 balance of retained earnings.
The company recognizes potential interest and penalties related to unrecognized tax benefits within
its global operations in income tax expense.
Earnings Per Share
Basic earnings per share (‘‘EPS’’) is calculated by dividing net earnings by the weighted average
number of common shares outstanding during the period. Diluted EPS reflects the assumed exercise or
conversion of all dilutive securities, using the treasury stock method. Potentially dilutive securities include
employee stock options and restricted stock, a warrant for the purchase of 920,000 shares prior to its
exercise in September 2006 and the 1.5 percent Convertible Senior Notes (see Financing Arrangements
below for information about the Convertible Senior Notes).
As discussed above, the company effected a two-for-one stock split that was paid on July 16, 2008 in
the form of a stock dividend. Accordingly, the computations of basic and diluted earnings per share have
been adjusted retroactively for all periods presented to reflect the July 16, 2008 stock split.
At December 31, 2008, 1,560,856 stock options and 137,482 shares of unvested restricted stock units
were not included in the computation of diluted earnings per share because these securities were
anti-dilutive.
Dilutive securities included in the determination of shares used to compute diluted EPS are as
follows:
Year Ended December 31,
2008 2007 2006
(shares in thousands)
Employee stock options and restricted stock 1,160 1,552 1,402
Conversion equivalent of dilutive convertible debt 4,642 6,122 3,932
Warrant — — 384
Total 5,802 7,674 5,718
Derivatives and Hedging
The company mitigates certain financial exposures, including currency and commodity price risk by
utilizing derivative instruments. These instruments are designated as either as fair value or cash flow
hedges in accordance with SFAS No. 133, ‘‘Accounting for Derivative Instruments and Hedging Activities’’
(SFAS 133). The company formally documents its hedge relationships at the inception of the agreements,
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