Fluor 2011 Annual Report Download - page 137

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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
ended December 31, 2011, 2010 and 2009, respectively. Capital contributions by noncontrolling interests
were $23 million and $1 million for the years ended December 31, 2011 and 2010, respectively. There were
no capital contributions by noncontrolling interests during 2009.
13. Contingencies and Commitments
The company and certain of its subsidiaries are involved in various litigation matters. 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 revenue, but not profit,
for certain significant claims when it is determined that recovery of incurred costs is probable and the
amounts can be reliably estimated. Under ASC 605-35-25, these requirements are satisfied when the
contract or other evidence provides a legal basis for the claim, additional costs were caused by
circumstances that were unforeseen at the contract date and not the result of deficiencies in the company’s
performance, claim-related costs are identifiable and considered reasonable in view of the work
performed, and evidence supporting the claim is objective and verifiable. Recognized claims against clients
amounted to $298 million and $209 million as of December 31, 2011 and December 31, 2010, respectively,
and are primarily included in contract work in progress in the accompanying Consolidated Balance Sheet.
The company periodically evaluates its position and the amounts recognized in revenue with respect to all
its claims. Amounts ultimately realized from claims could differ materially from the balances included in
the financial statements. The company does not expect that the ultimate resolution of these matters will
have a material adverse effect on its consolidated financial position or results of operations.
As of December 31, 2011, several matters were in the litigation and dispute resolution process. The
following discussion provides a background and current status of these matters:
Greater Gabbard Offshore Wind Farm Project
The company is involved in a dispute in connection with the Greater Gabbard Project, a $1.8 billion
lump-sum project to provide engineering, procurement and construction services for the client’s offshore
wind farm project in the United Kingdom. The dispute relates to the company’s claim for additional
compensation for schedule and cost impacts arising from delays in the fabrication of monopiles and
transition pieces, along with certain disruption and productivity issues associated with construction
activities and weather-related delays. The company believes these schedule and cost impacts are
attributable to the client and other third parties.
As of December 31, 2011, the company had recorded $265 million of claim revenue related to this
issue for costs incurred to date. Additional project costs related to the claim are expected to be incurred in
future quarters and, as a result, claim revenue will increase during the life of the project. The company
believes the ultimate recovery of incurred and future costs related to the claim is probable under
ASC 605-35-25. The company will continue to periodically evaluate its position and the amount recognized
in revenue with respect to this claim. As of December 31, 2011, the client had also previously withheld the
contractual maximum for liquidated damages related to the dispute of approximately $150 million. The
company will also seek to recover in arbitration a significant portion of the withheld liquidated damages.
Should the company not be successful in its pursuit of schedule relief related to certain delays covered by
the claim, the liquidated damages not recovered from the client could result in a charge to earnings, as
would any unrecovered claim amounts. The project is expected to be substantially complete by the second
quarter of 2012. However, the resolution of the claims is expected to extend beyond the completion date of
the project.
F-36