UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-31305

FOSTER WHEELER AG

(Exact name of registrant as specified in its charter)

Switzerland (State or other jurisdiction of incorporation or organization)		98-0607469 (I.R.S. Employer Identification No.)
80 Rue de Lausanne CH 1202 Geneva, Switzerland (Address of principal executive offices)		6340 (Zip Code)

41 22 741 8000
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 127,519,110 registered shares (CHF 3.00 par value) were outstanding as of April 23, 2010.

 

 

FOSTER WHEELER AG

INDEX

Part I				FINANCIAL INFORMATION
		Item 1 -				Financial Statements (Unaudited):
						Consolidated Statement of Operations for the Fiscal Three Months Ended March 31, 2010 and 2009			3
						Consolidated Balance Sheet as of March 31, 2010 and December 31, 2009			4
						Consolidated Statement of Changes in Equity for the Fiscal Three Months Ended March 31, 2010 and 2009			5
						Consolidated Statement of Cash Flows for the Fiscal Three Months Ended March 31, 2010 and 2009			6
						Notes to Consolidated Financial Statements			7
		Item 2 -				Management’s Discussion and Analysis of Financial Condition and Results of Operations			36
		Item 3 -				Quantitative and Qualitative Disclosures about Market Risk			56
		Item 4 -				Controls and Procedures			56
Part II				OTHER INFORMATION
		Item 1 -				Legal Proceedings			57
		Item 1A-				Risk Factors			57
		Item 2 -				Unregistered Sales of Equity Securities and Use of Proceeds			57
		Item 3 -				Defaults Upon Senior Securities			57
		Item 5 -				Other Information			57
		Item 6 -				Exhibits			58
Signatures									60
EX-10.14
EX-10.16
EX-10.17
EX-23.1
EX-23.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FOSTER WHEELER AG AND SUBSIDIARIES

(in thousands of dollars, except per share amounts)
(unaudited)

		Fiscal Three Months Ended
		March 31,				March 31,
		2010				2009
Operating revenues		$	945,573			$	1,264,523
Cost of operating revenues			773,491				1,101,771
Contract profit			172,082				162,752
Selling, general and administrative expenses			70,305				69,248
Other income, net			(8,332	)			(8,203	)
Other deductions, net			11,688				6,087
Interest income			(2,359	)			(2,672	)
Interest expense			4,551				4,167
Net asbestos-related (gain)/provision			(747	)			1,750
Income before income taxes			96,976				92,375
Provision for income taxes			21,610				18,003
Net income			75,366				74,372
Less: Net income attributable to noncontrolling interests			3,306				1,509
Net income attributable to Foster Wheeler AG		$	72,060			$	72,863
Earnings per share (see Note 1):
Basic		$	0.57			$	0.58
Diluted		$	0.56			$	0.57

See notes to consolidated financial statements.

FOSTER WHEELER AG AND SUBSIDIARIES

(in thousands of dollars, except share data and per share amounts)
(unaudited)

		March 31,				December 31,
		2010				2009
ASSETS
Current Assets:
Cash and cash equivalents		$	953,688			$	997,158
Accounts and notes receivable, net:
Trade			500,023				526,525
Other			108,477				117,718
Contracts in process			254,014				219,774
Prepaid, deferred and refundable income taxes			41,719				46,478
Other current assets			43,389				33,902
Total current assets			1,901,310				1,941,555
Land, buildings and equipment, net			377,589				398,132
Restricted cash			30,759				34,905
Notes and accounts receivable — long-term			1,381				1,571
Investments in and advances to unconsolidated affiliates			223,488				228,030
Goodwill			86,625				88,702
Other intangible assets, net			70,491				73,029
Asbestos-related insurance recovery receivable			236,159				244,265
Other assets			84,437				87,781
Deferred tax assets			82,363				89,768
TOTAL ASSETS		$	3,094,602			$	3,187,738
LIABILITIES, TEMPORARY EQUITY AND EQUITY
Current Liabilities:
Current installments on long-term debt		$	35,672			$	36,930
Accounts payable			251,403				303,436
Accrued expenses			236,986				280,861
Billings in excess of costs and estimated earnings on uncompleted contracts			631,079				600,725
Income taxes payable			49,068				60,052
Total current liabilities			1,204,208				1,282,004
Long-term debt			164,197				175,510
Deferred tax liabilities			60,679				62,956
Pension, postretirement and other employee benefits			251,236				270,269
Asbestos-related liability			338,273				352,537
Other long-term liabilities			170,199				171,405
Commitments and contingencies
TOTAL LIABILITIES			2,188,792				2,314,681
Temporary Equity:
Non-vested share-based compensation awards subject to redemption			4,829				2,570
TOTAL TEMPORARY EQUITY			4,829				2,570
Equity:
Registered shares:
CHF 3.00 par value; authorized: March 31, 2010 - 190,696,806 shares and December 31, 2009 - 190,649,900 shares; conditionally authorized: March 31, 2010 - 62,135,022 shares and December 31, 2009 - 62,181,928 shares; issued and outstanding: March 31, 2010 - 127,488,849 shares and December 31, 2009 - 127,441,943 shares			329,538				329,402
Paid-in capital			621,216				617,938
Retained earnings			394,241				322,181
Accumulated other comprehensive loss			(482,022	)			(438,004	)
TOTAL FOSTER WHEELER AG SHAREHOLDERS’ EQUITY			862,973				831,517
Noncontrolling interests			38,008				38,970
TOTAL EQUITY			900,981				870,487
TOTAL LIABILITIES, TEMPORARY EQUITY AND EQUITY		$	3,094,602			$	3,187,738

See notes to consolidated financial statements.

FOSTER WHEELER AG AND SUBSIDIARIES

(in thousands of dollars)
(unaudited)

																										Total Foster
																		Retained Earnings/								Wheeler AG
		Preferred				Common				Registered				Paid-in				(Accumulated				Accumulated Other				Shareholders'				Noncontrolling
		Shares				Shares				Shares				Capital				Deficit)				Comprehensive Loss				Equity				Interests				Total Equity
Fiscal Three Months Ended March 31, 2010:
Balance at December 31, 2009		$	—			$	—			$	329,402			$	617,938			$	322,181			$	(438,004	)		$	831,517			$	38,970			$	870,487
Net income			—				—				—				—				72,060				—				72,060				3,306				75,366
Other comprehensive income, net of tax:
Foreign currency translation			—				—				—				—				—				(36,452	)			(36,452	)			552				(35,900	)
Cash flow hedges			—				—				—				—				—				(2,453	)			(2,453	)			—				(2,453	)
Pension and other postretirement benefits			—				—				—				—				—				(5,113	)			(5,113	)			(2	)			(5,115	)
Comprehensive Income																											28,042				3,856				31,898
Issuance of registered shares upon exercise of stock options			—				—				134				935				—				—				1,069				—				1,069
Issuance of registered shares upon vesting of restricted awards			—				—				2				(2	)			—				—				—				—				—
Distributions to noncontrolling interests			—				—				—				—				—				—				—				(4,818	)			(4,818	)
Share-based compensation expense -stock options and restricted awards			—				—				—				2,343				—				—				2,343				—				2,343
Excess tax benefit related to share-based compensation			—				—				—				2				—				—				2				—				2
Balance at March 31, 2010		$	—			$	—			$	329,538			$	621,216			$	394,241			$	(482,022	)		$	862,973			$	38,008			$	900,981
Fiscal Three Months Ended March 31, 2009:
Balance at December 26, 2008		$	—			$	1,262			$	—			$	914,063			$	(27,975	)		$	(494,788	)		$	392,562			$	28,718			$	421,280
Net income			—				—				—				—				72,863				—				72,863				1,509				74,372
Other comprehensive income, net of tax:
Foreign currency translation			—				—				—				—				—				(11,701	)			(11,701	)			(169	)			(11,870	)
Cash flow hedges			—				—				—				—				—				(2,768	)			(2,768	)			—				(2,768	)
Pension and other postretirement benefits			—				—				—				—				—				4,598				4,598				(2	)			4,596
Comprehensive Income																											62,992				1,338				64,330
Issuance of common shares upon exercise of share purchase warrants			—				—				—				9				—				—				9				—				9
Issuance of common shares upon vesting of restricted awards			—				1				—				(1	)			—				—				—				—				—
Cancellation of common shares and issuance of registered shares			—				(1,263	)			326,070				(324,807	)			—				—				—				—				—
Repurchase and retirement of shares			—				—				—				(28	)			—				—				(28	)			—				(28	)
Issuance of registered shares upon conversion of preferred shares			—				—				361				(361	)			—				—				—				—				—
Issuance of registered shares upon vesting of restricted awards			—				—				1				(1	)			—				—				—				—				—
Distributions to noncontrolling interests			—				—				—				—				—				—				—				(21	)			(21	)
Share-based compensation expense -stock options and restricted awards			—				—				—				7,172				—				—				7,172				—				7,172
Balance at March 31, 2009		$	—			$	—			$	326,432			$	596,046			$	44,888			$	(504,659	)		$	462,707			$	30,035			$	492,742

See notes to consolidated financial statements.

FOSTER WHEELER AG AND SUBSIDIARIES

(in thousands of dollars)
(unaudited)

		Fiscal Three Months Ended
		March 31,				March 31,
		2010				2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	75,366			$	74,372
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization			13,059				10,551
Curtailment gain on U.K. defined benefit pension plan			(20,086	)			—
Net asbestos-related (gain)/provision			(747	)			1,750
Share-based compensation expense-stock options and restricted awards			4,602				5,354
Excess tax benefit related to share-based compensation			(2	)			—
Deferred income taxes/(credits)			8,605				(149	)
Loss on sale of assets			76				10
Equity in the net earnings of partially-owned affiliates, net of dividends			(6,403	)			(6,754	)
Other noncash items			—				(46	)
Changes in assets and liabilities:
Decrease in receivables			8,492				28,662
Net change in contracts in process and billings in excess of costs and estimated earnings on uncompleted contracts			6,794				(24,855	)
Decrease in accounts payable and accrued expenses			(76,294	)			(43,674	)
Net change in other assets and liabilities			(17,679	)			(3,082	)
Net cash (used in)/provided by operating activities			(4,217	)			42,139
CASH FLOWS FROM INVESTING ACTIVITIES
Payment related to acquisition of business			(1,221	)			—
Change in restricted cash			2,630				(307	)
Capital expenditures			(6,238	)			(14,643	)
Proceeds from sale of assets			41				77
Increase in short-term investments			—				(27	)
Net cash used in investing activities			(4,788	)			(14,900	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase and retirement of shares			—				(28	)
Distributions to noncontrolling interests			(4,818	)			(21	)
Proceeds from share purchase warrants exercised			—				9
Proceeds from stock options exercised			2,034				—
Excess tax benefit related to share-based compensation			2				—
Proceeds from issuance of short-term debt			2,197				2,925
Proceeds from issuance of long-term debt			—				37
Repayment of debt and capital lease obligations			(3,348	)			(3,933	)
Net cash used in financing activities			(3,933	)			(1,011	)
Effect of exchange rate changes on cash and cash equivalents			(30,532	)			(21,616	)
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS			(43,470	)			4,612
Cash and cash equivalents at beginning of year			997,158				773,163
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	953,688			$	777,775

See notes to consolidated financial statements.

FOSTER WHEELER AG AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands of dollars, except share data and per share amounts)
(unaudited)

1. Summary of Significant Accounting Policies

     Basis of Presentation — The fiscal year of Foster Wheeler AG ends on December 31 of each calendar year. Foster Wheeler AG’s fiscal quarters end on the last day of March, June and September.

     Foster Wheeler AG’s consolidated financial results for the first fiscal three months represent the period from January 1, 2010 through March 31, 2010 and December 27, 2008 through March 31, 2009 in fiscal years 2010 and 2009, respectively. Please refer to Note 1 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 (“2009 Form 10-K”), filed with the Securities and Exchange Commission on February 25, 2010, for further information on our fiscal year end and related change of country of domicile from Bermuda to Switzerland in February 2009. As part of our change of country of domicile, we cancelled our common shares and issued registered shares. In January 2010, we relocated our principal executive offices to Geneva, Switzerland.

     The consolidated financial results include our U.S. operations, which have a fiscal year that is the 52- or 53- week annual accounting period ending the last Friday in December, and our non-U.S. operations, which have a fiscal year ending December 31.

     We have evaluated all subsequent events for adjustment to or disclosure in these consolidated financial statements through the date of issuance of these consolidated financial statements.

     The accompanying consolidated financial statements are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments only consisted of normal recurring items. Interim results are not necessarily indicative of results for a full year.

     The financial statements and notes are presented in accordance with the requirements of Form 10-Q and do not contain certain information included in our 2009 Form 10-K. The consolidated balance sheet as of December 31, 2009 was derived from the audited financial statements included in our 2009 Form 10-K, but does not include all disclosures required by accounting principles generally accepted in the United States of America for annual consolidated financial statements.

     Certain prior period amounts have been reclassified to conform to the current period presentation.

     Principles of Consolidation — The consolidated financial statements include the accounts of Foster Wheeler AG and all significant U.S. and non-U.S. subsidiaries as well as certain entities in which we have a controlling interest. Intercompany transactions and balances have been eliminated.

     In June 2009, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance to amend the manner in which entities evaluate whether consolidation is required for variable interest entities (“VIE”). The model for determining which enterprise has a controlling financial interest and is the primary beneficiary of a VIE has changed under the new guidance. Furthermore, the new guidance requires an ongoing reconsideration of the primary beneficiary and also amends the events that trigger a reassessment of whether an entity is a VIE. This revised guidance also requires enhanced disclosures about how a company’s involvement with a VIE affects its financial statements and exposure to risks. This guidance, which became effective for us on January 1, 2010, did not result in any change to the entities previously included in our consolidated financial statements.

     Variable Interest Entities — We sometimes form separate legal entities such as corporations, partnerships and limited liability companies in connection with the execution of a single contract or project. Upon inception of each separate legal entity, we perform an evaluation to determine whether the new entity is a VIE, and whether we are the primary beneficiary of the new entity, which would require us to consolidate the new entity in our financial results. We reassess our initial determination on whether the entity is a VIE and whether we are the primary beneficiary upon the occurrence of certain events as outlined in current accounting guidelines. If the entity is not a VIE, we determine the accounting for the entity under the voting interest accounting guidelines.

     An entity is determined to be a VIE if either (a) the total equity investment is not sufficient for the entity to finance its own activities without additional subordinated financial support, (b) characteristics of a controlling financial interest are missing (such as the ability to make decisions through voting or other rights or the obligation to absorb losses or the right to receive benefits), or (c) the voting rights of the equity holders are not proportional to their obligations to absorb losses of the entity and/or their rights to receive benefits of the entity, and substantially all of the entity’s activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights.

     As of March 31, 2010, we participate in certain entities determined to be VIEs, including a gas-fired cogeneration facility in Martinez, California, a waste-to-energy facility in Camden, New Jersey and a refinery/electric power generation project in Chile. We consolidate the operations of both the Martinez and Camden projects while we record our participation in the Chile based project on the equity method of accounting. There has been no change in our accounting for these entities during the quarter.

     Please see Note 3 for further information on our participation in these projects.

     Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. Changes in estimates are reflected in the periods in which they become known. Significant estimates are used in accounting for long-term contracts including estimates of total costs, progress toward completion and customer and vendor claims, employee benefit plan obligations and share-based compensation plans. In addition, we also use estimates when accounting for uncertain tax positions and deferred taxes, asbestos liabilities and expected recoveries and when assessing goodwill for impairment, among others.

     Revenue Recognition on Long-Term Contracts — Revenues and profits on long-term contracts are recorded under the percentage-of-completion method.

     Progress towards completion on fixed-price contracts is measured based on physical completion of individual tasks for all contracts with a value of $5,000 or greater. For contracts with a value less than $5,000, progress toward completion is measured based on the ratio of costs incurred to total estimated contract costs (the cost-to-cost method).

     Progress towards completion on cost-reimbursable contracts is measured based on the ratio of quantities expended to total forecasted quantities, typically man-hours. Incentives are also recognized on a percentage-of-completion basis when the realization of an incentive is assessed as probable. We include flow-through costs consisting of materials, equipment or subcontractor services as both operating revenues and cost of operating revenues on cost-reimbursable contracts when we have overall responsibility as the contractor for the engineering specifications and procurement or procurement services for such costs. There is no contract profit impact of flow-through costs as they are included in both operating revenues and cost of operating revenues.

     Contracts in process are stated at cost, increased for profits recorded on the completed effort or decreased for estimated losses, less billings to the customer and progress payments on uncompleted contracts.

     At any point, we have numerous contracts in progress, all of which are at various stages of completion. Accounting for revenues and profits on long-term contracts requires estimates of total estimated contract costs and estimates of progress toward completion to determine the extent of revenue and profit recognition. These estimates may be revised as additional information becomes available or as specific project circumstances change. We review all of our material contracts on a monthly basis and revise our estimates as appropriate for developments such as earning project incentive bonuses, incurring or expecting to incur contractual liquidated damages for performance or schedule issues, providing services and purchasing third-party materials and equipment at costs differing from those previously estimated and testing completed facilities, which, in turn, eliminates or confirms completion and warranty-related costs. Project incentives are recognized when it is probable they will be earned. Project incentives are frequently tied to cost, schedule and/or safety targets and, therefore, tend to be earned late in a project’s life cycle.

     Changes in estimated final contract revenues and costs can either increase or decrease the final estimated contract profit. In the period in which a change in estimate is recognized, the cumulative impact of that change is recorded based on progress achieved through the period of change. There were 11 and 8 separate projects that had final estimated contract profit revisions whose impact on contract profit exceeded $1,000 during the fiscal three months ended March 31, 2010 and 2009, respectively. The changes in final estimated contract profit resulted in net increases of $13,100 and $3,260 to reported contract profit in the fiscal three months ended March 31, 2010 and 2009, respectively, relating to the revaluation of work performed on contracts in prior periods. Please see Note 11 for further information related to changes in final estimated contract profit.

     Claims are amounts in excess of the agreed contract price (or amounts not included in the original contract price) that we seek to collect from customers or others for delays, errors in specifications and designs, contract terminations, disputed or unapproved change orders as to both scope and price or other causes of unanticipated additional costs. We record claims as additional contract revenue if it is probable that the claims will result in additional contract revenue and if the amount can be reliably estimated. These two requirements are satisfied by the existence of all of the following conditions: the contract or other evidence provides a legal basis for the claim; additional costs are caused by circumstances that were unforeseen at the contract date and are not the result of deficiencies in our performance; costs associated with the claim are identifiable or otherwise determinable and are reasonable in view of the work performed; and the evidence supporting the claim is objective and verifiable. If such requirements are met, revenue from a claim may be recorded only to the extent that contract costs relating to the claim have been incurred. Costs attributable to claims are treated as costs of contract performance as incurred and are recorded in contracts in process. As of March 31, 2010, our consolidated financial statements assumed recovery of commercial claims of approximately $13,200, of which $500 had yet to be expended. As of December 31, 2009, our consolidated financial statements assumed recovery of commercial claims of approximately $18,700, of which $1,200 had yet to be expended.

     In certain circumstances, we may defer pre-contract costs when it is probable that these costs will be recovered under a future contract. Such deferred costs would then be included in contract costs upon execution of the anticipated contract. We had approximately $3,000 and $1,200 of deferred pre-contract costs as of March 31, 2010 and December 31, 2009, respectively.

     Certain special-purpose subsidiaries in our global power business group are reimbursed by customers for their costs, including amounts related to repayments of non-recourse project debt, for building and operating certain facilities over the lives of the corresponding service contracts.

     Cash and Cash Equivalents — Cash and cash equivalents include highly liquid short-term investments with original maturities of three months or less at the date of acquisition. Cash and cash equivalents of $744,327 and $772,565 were maintained by our non-U.S. entities as of March 31, 2010 and December 31, 2009, respectively. These entities require a portion of these funds to support their liquidity and working capital needs, as well as to comply with required minimum capitalization and contractual restrictions. Accordingly, a portion of these funds may not be readily available for repatriation to U.S. entities.

     Intangible Assets — Intangible assets consist principally of goodwill, trademarks and patents. Goodwill is allocated to our reporting units on a relative fair value basis at the time of the original purchase price allocation. Patents and trademarks are amortized on a straight-line basis over periods of 3 to 40 years. Customer relationships, pipeline and backlog are amortized on a straight-line basis over periods of 1 to 13 years.

     We test goodwill for impairment at the reporting unit level, which is defined as the components one level below our operating segments, because these components constitute businesses for which discrete financial information is available and segment management regularly reviews the operating results of those components. Presently, goodwill exists in two of our reporting units —one within our Global Power Group business segment and one within our Global Engineering and Construction Group, which we refer to as our Global E&C Group, business segment.

     The goodwill impairment test is a two-step process. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value exceeds the carrying amount, goodwill is not considered impaired. If the carrying amount exceeds the fair value, the second step must be performed to measure the amount of the impairment loss, if any. The second step compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. In the fourth quarter of each fiscal year, we evaluate goodwill at each reporting unit to assess recoverability, and impairments, if any, are recognized in earnings. An impairment loss would be recognized in an

amount equal to the excess of the carrying amount of the goodwill over the implied fair value of the goodwill. As of December 31, 2009, the estimated fair value of each of the reporting units was sufficiently in excess of its carrying values even after conducting various sensitivity analyses on key assumptions, such that no adjustment to the carrying values of goodwill was required.

     Please see Note 4 for further information related to our goodwill and other identifiable intangible assets.

     Income Taxes — Deferred tax assets/liabilities are established for the difference between the financial reporting and income tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

     Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. In evaluating our ability to realize our deferred tax assets within the various tax jurisdictions in which they arise, we consider all available positive and negative evidence, including scheduled reversals of taxable temporary differences, projected future taxable income, tax planning strategies and recent financial performance. Projecting future taxable income requires significant assumptions about future operating results, as well as the timing and character of taxable income in numerous jurisdictions.

     We do not make a provision for incremental income taxes on subsidiary earnings, which have been retained in the subsidiary’s country of domicile, if we expect such earnings to be indefinitely reinvested in that jurisdiction.

     We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.

     We recognize interest accrued on the potential tax liability related to unrecognized tax benefits in interest expense, and we recognize any potential penalties in other deductions, net on our consolidated statement of operations.

     Foreign Currency — The functional currency of our non-U.S. operations is typically the local currency of their country of domicile. Assets and liabilities of our non-U.S. subsidiaries are translated into U.S. dollars at period-end exchange rates with the resulting translation adjustment recorded as a separate component within accumulated other comprehensive loss. Income and expense accounts and cash flows are translated at weighted-average exchange rates for the period. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in other deductions, net on our consolidated statement of operations.

     Fair Value Measurements — Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial Accounting Standards Board Accounting Standards Codification, or FASB ASC, 820-10 defines fair value, establishes a fair value hierarchy that prioritizes the inputs used to measure fair value and provides guidance on required disclosures about fair value measurements. The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.

     Our financial assets and liabilities that are recorded at fair value on a recurring basis consist primarily of the assets or liabilities arising from derivative financial instruments and defined benefit pension plan assets. We value our derivative financial instruments using broker quotations, or market transactions in either the listed or over-the-counter markets, resulting in fair value measurements using level 2 inputs as defined under the fair value hierarchy. See Note 8 for further information regarding our derivative financial instruments.

     The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate fair value:

     Financial instruments valued independent of the fair value hierarchy:

•

Cash, Cash Equivalents and Restricted Cash — The carrying value of our cash, cash equivalents and restricted cash approximates fair value because of the demand nature of many of our deposits or short-term maturity of these instruments.

     Financial instruments valued within the fair value hierarchy:

	•		Long-term Debt — We estimate the fair value of our long-term debt (including current installments) based on the quoted market prices for the same or similar issues or on the current rates offered for debt of the same remaining maturities using level 2 inputs.
	•		Foreign Currency Forward Contracts — We estimate the fair value of foreign currency forward contracts by obtaining quotes from financial institutions or market transactions in either the listed or over-the-counter markets, which we further corroborate with observable market data using level 2 inputs.
	•		Interest Rate Swaps — We estimate the fair value of our interest rate swaps based on quotes obtained from financial institutions, which we further corroborate with observable market data using level 2 inputs.
	•		Defined Benefit Pension Plan Assets — We estimate the fair value of our defined benefit pension plan assets at each fiscal year end based on quotes obtained from financial institutions, which we further corroborate with observable market data using level 1 and 2 inputs.

     Retirement of Shares under Share Repurchase Program — On September 12, 2008, we announced a share repurchase program pursuant to which our Board of Directors authorized the repurchase of up to $750,000 of our outstanding shares and the designation of the repurchased shares for cancellation. Based on the aggregate share repurchases under our program through March 31, 2010, we are authorized to repurchase up to $264,773 of our outstanding shares. Any repurchases will be made at our discretion in the open market or in privately negotiated transactions in compliance with applicable securities laws and other legal requirements and will depend on a variety of factors, including market conditions, share price and other factors. The program does not obligate us to acquire any particular number of shares. The program has no expiration date and may be suspended or discontinued at any time.

     All shares acquired under our share repurchase program have been retired upon purchase. The share value, on the consolidated balance sheet, was reduced for the par value of the retired shares. Paid-in capital, on the consolidated balance sheet, was reduced for the excess of fair value and related fees paid above par value for the shares acquired.

     Shares retired under the share repurchase program reduce the weighted-average number of shares outstanding during the reporting period when calculating earnings per share, as described below.

     Earnings per Share — Basic earnings per share is computed by dividing net income attributable to Foster Wheeler AG by the weighted-average number of shares outstanding during the reporting period, excluding non-vested restricted shares. There were no non-vested restricted shares as of March 31, 2010 and 82,980 non-vested restricted shares as of March 31, 2009. Restricted shares and restricted share units (collectively, “restricted awards”) are included in the weighted-average number of shares outstanding when such restricted awards vest.

     Diluted earnings per share is computed by dividing net income attributable to Foster Wheeler AG by the combination of the weighted-average number of shares outstanding during the reporting period and the impact of dilutive securities, if any, such as outstanding stock options, warrants to purchase shares and the non-vested portion of restricted awards to the extent such securities are dilutive.

     In profitable periods, outstanding stock options and warrants have a dilutive effect under the treasury stock method when the average share price for the period exceeds the assumed proceeds from the exercise of the warrant or option. The assumed proceeds include the exercise price, compensation cost, if any, for future service that has not yet been recognized in the consolidated statement of operations, and any tax benefits that would be recorded in paid-in capital when the option or warrant is exercised. Under the treasury stock method, the assumed proceeds are assumed to be used to repurchase shares in the current period. The dilutive impact of the non-vested portion of restricted awards is determined using the treasury stock method, but the proceeds include only the unrecognized compensation cost and tax benefits as assumed proceeds.

     The computations of basic and diluted earnings per share were as follows:

		Fiscal Three Months Ended
		March 31,				March 31,
		2010				2009
Basic earnings per share:
Net income attributable to Foster Wheeler AG		$	72,060			$	72,863
Weighted-average number of shares outstanding for basic earnings per share			127,474,887				126,265,903
Basic earnings per share		$	0.57			$	0.58
Diluted earnings per share:
Net income attributable to Foster Wheeler AG		$	72,060			$	72,863
Weighted-average number of shares outstanding for basic earnings per share			127,474,887				126,265,903
Effect of dilutive securities:
Options to purchase shares			296,254				13,610
Warrants to purchase shares			—				467,882
Non-vested portion of restricted awards			122,035				—
Weighted-average number of shares outstanding for diluted earnings per share			127,893,176				126,747,395
Diluted earnings per share		$	0.56			$	0.57

     The following table summarizes the share equivalent of potentially dilutive securities that have been excluded from the denominator used in the calculation of diluted earnings per share due to their antidilutive effect:

		Fiscal Three Months Ended
		March 31,				March 31,
		2010				2009
Shares issuable under outstanding options not included in the computation of diluted earnings per share because the assumed proceeds were greater than the average share price for the period			1,369,135				3,011,039
Non-vested portion of restricted awards not included in the computation of diluted earnings per share due to their antidilutive effect			—				939,073

     Share-Based Compensation Plans — We estimate the fair value of each option award on the date of grant using the Black-Scholes option valuation model. We then recognize the grant date fair value of each option as compensation expense ratably using the straight-line attribution method over the service period (generally the vesting period). The Black-Scholes model incorporates the following assumptions:

	•		Expected volatility — we estimate the volatility of our share price at the date of grant using historical volatility adjusted for periods of unusual stock price activity.
	•		Expected term — we estimate the expected term using the “simplified” method, as outlined in Staff Accounting Bulletin No. 107, “Share-Based Payment.”
	•		Risk-free interest rate — we estimate the risk-free interest rate using the U.S. Treasury yield curve for periods equal to the expected term of the options in effect at the time of grant.
	•		Dividends — we use an expected dividend yield of zero because we have not declared or paid a cash dividend since July 2001 and we do not have any plans to declare or pay any cash dividends.

     We used the following weighted-average assumptions to estimate the fair value of the options granted for the periods indicated:

		Fiscal Three Months Ended
		March 31,				March 31,
		2010				2009
Expected volatility			67.43	%			68.27	%
Expected term		4.1 years				3.33 years
Risk-free interest rate			1.92	%			1.50	%
Expected dividend yield			0	%			0	%

     We estimate the fair value of restricted awards using the market price of our shares on the date of grant. We then recognize the fair value of each restricted award as compensation cost ratably using the straight-line attribution method over the service period (generally the vesting period).

     We estimate pre-vesting forfeitures at the time of grant using a combination of historical data and demographic characteristics, and we revise those estimates in subsequent periods if actual forfeitures differ from those estimates. We record share-based compensation expense only for those awards that are expected to vest.

2. Business Combinations

     In October 2009, we acquired substantially all of the assets of the Houston operations of Atlas Engineering, Inc., a privately held company, for a purchase price of approximately $21,000. The purchase price may be increased by an estimated $12,000 for contingent consideration depending on the acquired company’s EBITDA, as defined in the purchase agreement for this transaction, over the first three years after the closing date. We have recorded a liability of $9,318 on the consolidated balance sheet for the estimated fair value of the contingent consideration. The acquired company is active in upstream oil and gas engineering services. The purchase price allocation and pro forma information for this acquisition were not material to our consolidated financial statements. This company’s financial results are included within our Global E&C Group business segment.

     In April 2009, we acquired substantially all of the assets of the offshore engineering division of OPE Holdings Ltd., a Canadian company that is listed on the TSX Venture Exchange and which we refer to as OPE, for a purchase price of approximately $8,900. The purchase price may be increased by $500 if the acquired company meets certain performance targets during the first year after the closing date. The acquired company is active in upstream oil and gas engineering services. The purchase price allocation and pro forma information for this acquisition were not material to our consolidated financial statements. This company’s financial results are included within our Global E&C Group business segment.

3. Investments

Investment in Unconsolidated Affiliates

     We own a noncontrolling interest in two electric power generation projects, one waste-to-energy project and one wind farm project in Italy and in a refinery/electric power generation project in Chile. We also own a noncontrolling interest in a project based in Italy which generates earnings from royalty payments linked to the price of natural gas. Based on the outstanding equity interests of these entities, we own 42% of each of the two electric power generation projects in Italy, 39% of the waste-to-energy project and 50% of the wind farm project. We have a notional 85% equity interest in the project in Chile; however, we are not the primary beneficiary as a result of participating rights held by the minority shareholder. In determining that we are not the primary beneficiary, we considered the activities of the project that most significantly impact the project’s economic performance.

     We account for these investments in Italy and Chile under the equity method. The following is summarized financial information for these entities (each as a whole) in which we have an equity interest:

		March 31, 2010								December 31, 2009
		Italy Based				Chile Based				Italy Based				Chile Based
		Projects				Project				Projects				Project
Balance Sheet Data :
Current assets		$	289,451			$	46,766			$	325,688			$	46,311
Other assets (primarily buildings and equipment)			601,464				124,990				644,344				127,393
Current liabilities			65,587				41,828				99,111				34,982
Other liabilities (primarily long-term debt)			489,367				56,214				515,424				63,109
Net assets			335,961				73,714				355,497				75,613

		Fiscal Three Months Ended
		March 31, 2010								March 31, 2009
		Italy Based				Chile Based				Italy Based				Chile Based
		Projects				Project				Projects				Project
Income Statement Data:
Total revenues		$	99,638			$	10,623			$	104,074			$	17,812
Gross profit			18,977				4,487				13,154				10,414
Income before income taxes			13,903				4,171				9,983				8,316
Net earnings			7,912				3,462				5,221				6,902

     Our equity in the net earnings of these unconsolidated affiliates, which is recorded within other income, net on the consolidated statement of operations, totaled $6,289 and $6,252 for the fiscal three months ended March 31, 2010 and 2009, respectively.

     Our investment in these unconsolidated affiliates, which is recorded within investments in and advances to unconsolidated affiliates on the consolidated balance sheet, totaled $210,616 and $215,280 as of March 31, 2010 and December 31, 2009, respectively. There were no distributions received in the fiscal three months ended March 31, 2010 and 2009.

     We have guaranteed certain performance obligations of the Chile based project. We have a contingent obligation, which is measured annually based on the operating results of the Chile based project for the preceding year and is shared 50/50 with our minority interest partner. We did not have a current payment obligation under this guarantee as of December 31, 2009.

          In addition, we have provided a $10,000 debt service reserve letter of credit to cover debt service payments in the event that the Chile based project does not generate sufficient cash flows to make such payments. We are required to maintain the debt service reserve letter of credit during the term of the Chile based project’s debt, which matures in 2014. As of March 31, 2010, no amounts have been drawn under this letter of credit and, based on our current assessment of the situation following the earthquake in Chile (described below), we do not anticipate any amounts being drawn under this letter of credit.

          We also have a wholly owned subsidiary that provides operations and maintenance services to the Chile based project. Our fees for the services provided under our operations and maintenance agreement to the Chile based project were $2,461 and $2,136 for the fiscal three months ended March 31, 2010 and 2009, respectively, and were recorded in operating revenues on our consolidated statement of operations. We had a receivable from our unconsolidated affiliate in Chile of $5,942 and $4,916 recorded in trade accounts and notes receivable on our consolidated balance sheet as of March 31, 2010 and December 31, 2009, respectively.

          We also have guaranteed the performance obligations of our wholly-owned subsidiary under the Chile based project’s operations and maintenance agreement. The guarantee is limited to $20,000 over the life of the operations and maintenance agreement, which extends through 2016. No amounts have ever been paid under the guarantee.

          On February 27, 2010, an earthquake occurred off the coast of Chile, which caused significant damage to our unconsolidated affiliate’s Chile based project. The plant has not operated since that date. We do not yet have a complete assessment of the extent of the damage or an estimate of the required cost of repairs. However, we believe the insurance coverages in effect are sufficient to cover the estimated costs of repairing the facility and to substantially compensate us for the business interruption until normal activities can resume.

Other Investments

          We are the majority equity partner and general partner of a gas-fired cogeneration facility in Martinez, California, and we own 100% of the equity in a waste-to-energy facility in Camden, New Jersey. We have determined that these entities are VIEs and that we are the primary beneficiary of these VIEs since we have the power to direct the activities that most significantly impact the VIE’s performance. These activities include the operations and maintenance of the facility. Accordingly, we consolidate these entities. The aggregate net assets of these two entities are presented below.

		March 31,				December 31,
		2010				2009
Balance Sheet Data :
Current assets		$	8,978			$	14,722
Other assets (primarily buildings and equipment)			103,387				104,552
Current liabilities			30,293				31,014
Other liabilities			844				876
Net assets			81,228				87,384

          Please see Note 12 for further information on the waste-to-energy facility.

4. Intangible Assets

          We have tracked accumulated goodwill impairments since December 29, 2001, the first day of fiscal year 2002 and our date of adoption of the accounting guidelines within FASB ASC 350-20. Net carrying amount of goodwill by geographic region for our reporting units in our Global E&C Group and Global Power Group were as follows:

		Global E&C Group								Global Power Group
		March 31,				December 31,				March 31,				December 31,
		2010				2009				2010				2009
U.S.		$	36,656			$	35,436			$	—			$	—
Asia			1,049				1,012				—				—
Europe			—				—				48,920				52,254
Total		$	37,705			$	36,448			$	48,920			$	52,254

          The following table details amounts relating to our identifiable intangible assets:

		March 31, 2010												December 31, 2009
		Gross								Net				Gross								Net
		Carrying				Accumulated				Carrying				Carrying				Accumulated				Carrying
		Amount				Amortization				Amount				Amount				Amortization				Amount
Patents		$	39,002			$	(25,472	)		$	13,530			$	39,304			$	(24,983	)		$	14,321
Trademarks			63,215				(24,981	)			38,234				63,676				(24,487	)			39,189
Customer relationships, pipeline and backlog			21,937				(3,210	)			18,727				21,934				(2,415	)			19,519
Total		$	124,154			$	(53,663	)		$	70,491			$	124,914			$	(51,885	)		$	73,029

          As of March 31, 2010, the net carrying amounts of our identifiable intangible assets were $51,556 for our Global Power Group and $18,935 for our Global E&C Group.

          Amortization expense related to identifiable intangible assets is recorded within cost of operating revenues on the consolidated statement of operations and totaled $1,778 and $1,229 for the fiscal three months ended March 31, 2010 and 2009, respectively. The following table shows the approximate full year amortization expense in each of the fiscal years 2010 through 2014.

		Approximate
		Amortization
Fiscal Years:		Expense
2010		$	6,700
2011			6,500
2012			6,300
2013			5,600
2014			5,300

5. Long-term Debt

          The following table shows the components of our long-term debt:

		March 31, 2010												December 31, 2009
		Current				Long-term				Total				Current				Long-term				Total
Capital Lease Obligations		$	1,471			$	60,162			$	61,633			$	1,492			$	65,327			$	66,819
Special-Purpose Limited Recourse Project Debt:
Camden County Energy Recovery Associates			21,865				—				21,865				21,865				—				21,865
FW Power S.r.l.			6,951				89,513				96,464				7,428				95,661				103,089
Energia Holdings, LLC			3,187				13,239				16,426				3,187				13,239				16,426
Subordinated Robbins Facility Exit Funding Obligations:
1999C Bonds at 7.25% interest, due October 15, 2024			—				1,283				1,283				—				1,283				1,283
Term Loan in China at 4.78% interest, due February 25, 2011			2,198				—				2,198				—				—				—
Term Loan in China at 4.374% interest, due January 8, 2010			—				—				—				2,930				—				2,930
Other			—				—				—				28				—				28
Total		$	35,672			$	164,197			$	199,869			$	36,930			$	175,510			$	212,440

          U.S. Senior Credit Agreement — In October 2006, we executed a five-year U.S. senior credit agreement to be used for our U.S. and non-U.S. operations. The senior credit agreement, as amended in May 2007, provides for a facility of $450,000, and includes a provision which permits future incremental increases of up to $100,000 in total availability under the facility. We can issue up to $450,000 under the letter of credit facility. A portion of the letters of credit issued under the U.S. senior credit agreement have performance pricing that is decreased (or increased) as a result of improvements (or reductions) in the credit rating of the U.S. senior credit agreement as reported by Moody’s Investors Service and/or Standard & Poor’s (“S&P”). We also have the option to use up to $100,000 of the $450,000 for revolving borrowings at a rate equal to adjusted LIBOR plus 1.50%, subject also to the performance pricing noted above. As a result of the improvement in our S&P credit rating in March 2007, we achieved, and continue to maintain, the lowest possible pricing under the performance pricing provisions of our U.S. senior credit agreement.

          The assets and/or stock of certain of our U.S. and non-U.S. subsidiaries collateralize our obligations under our U.S. senior credit agreement. Our U.S. senior credit agreement contains various customary restrictive covenants that generally limit our ability to, among other things, incur additional indebtedness or guarantees, create liens or other encumbrances on property, sell or transfer certain property and thereafter rent or lease such property for substantially the same purposes as the property sold or transferred, enter into a merger or similar transaction, make investments, declare dividends or make other restricted payments, enter into agreements with affiliates that are not on an arms’ length basis, enter into any agreement that limits our ability to create liens or the ability of a subsidiary to pay dividends, engage in any new lines of business, with respect to Foster Wheeler AG, change Foster Wheeler AG’s fiscal year or, with respect to Foster Wheeler Ltd. and one of our holding company subsidiaries, directly acquire ownership of the operating assets used to conduct any business.

          In addition, our U.S. senior credit agreement contains financial covenants requiring us not to exceed a total leverage ratio, which compares total indebtedness to EBITDA, as defined in our U.S. senior credit agreement, and to maintain a minimum interest coverage ratio, which compares EBITDA to interest expense. All such terms are defined in our U.S. senior credit agreement. We must be in compliance with the total leverage ratio at all times, while the interest coverage ratio is measured quarterly. We are in compliance with all financial covenants and other provisions of our U.S. senior credit agreement.

          We had approximately $288,200 and $308,000 of letters of credit outstanding under this agreement as of March 31, 2010 and December 31, 2009, respectively. The letter of credit fees ranged from 1.50% to 1.60% of the outstanding amount, excluding a fronting fee of 0.125% per annum. There were no funded borrowings under this agreement as of March 31, 2010 or December 31, 2009.

          During the fiscal three months ended March 31, 2010, one of our subsidiaries based in China, which is 52% owned by us and which we consolidate into our financial statements, repaid its outstanding term loan at the scheduled maturity date. Also during the fiscal three months ended March 31, 2010, the same China based subsidiary entered into a new term loan for 15 million Chinese Yuan (approximately $2,196 at the exchange rate in effect at the inception of the term loan) with an interest rate of 4.78% and maturity date of February 25, 2011.

          The estimated fair values of our long-term debt were $211,600 and $222,165 as of March 31, 2010 and December 31, 2009, respectively. We estimate the fair value of our long-term debt (including current installments) based on the quoted market prices for the same or similar issues or on the current rates offered for debt of the same remaining maturities.

6. Pensions and Other Postretirement Benefits

          We have defined benefit pension plans in the United States, the United Kingdom, France, Canada and Finland, and we have other postretirement benefit plans for health care and life insurance benefits in the United States and Canada.

Defined Benefit Pension Plans — Our defined benefit pension plans cover certain full-time employees. Under the plans, retirement benefits are primarily a function of both years of service and level of compensation.

          The U.S. pension plans, which are frozen to new entrants and additional benefit accruals, and the Canadian, Finnish and French plans are non-contributory. The U.K. plan, which is closed to new entrants, is contributory.

          During the fiscal first three months of 2010, we capped pensionable salary growth in the U.K. plan to a maximum of 5% and, effective March 31, 2010, we closed the plan for future defined benefit accrual. As a result of the U.K. plan closure, we recognized a curtailment gain in our statement of operations for the fiscal three months ended March 31, 2010 of approximately £13,300 (approximately $20,100 at the exchange rate in effect for the fiscal three months ended March 31, 2010).

          Based on the minimum statutory funding requirements for fiscal year 2010, we are not required to make mandatory contributions to our U.S. pension plans. We made mandatory and discretionary contributions totaling approximately $13,700 to our non-U.S. pension plans, which included discretionary contributions of approximately $7,800, during the fiscal three months ended March 31, 2010. Based on the minimum statutory funding requirements for fiscal year 2010, we expect to make mandatory and discretionary contributions totaling approximately $41,500 to our U.S. and non-U.S. pension plans in fiscal year 2010.

Other Postretirement Benefit Plans — Certain employees in the United States and Canada may become eligible for health care and life insurance benefits (“other postretirement benefits”) if they qualify for and commence normal or early retirement pension benefits as defined in the U.S. and Canadian pension plans while working for us. Additionally, one of our subsidiaries in the United States also has a benefit plan, referred to as the Survivor Income Plan (“SIP”), which provides coverage for an employee’s beneficiary upon the death of the employee. This plan has been closed to new entrants since 1988.

          The components of net periodic benefit cost/(credit) for our defined benefit pension plans and other postretirement benefit plans were as follows:

		Fiscal Three Months Ended
		March 31, 2010																				March 31, 2009
																		Other																				Other
		Defined Benefit Pension Plans																Postre-				Defined Benefit Pension Plans																Postre-
		United				United												tirement				United				United												tirement
		States				Kingdom				Other				Total				Benefits				States				Kingdom				Other				Total				Benefits
Net periodic benefit cost/(credit):
Service cost		$	—			$	1,712			$	165			$	1,877			$	34			$	—			$	1,258			$	152			$	1,410			$	35
Interest cost			4,744				10,230				401				15,375				1,207				4,926				9,541				424				14,891				1,154
Expected return on plan assets			(5,012	)			(9,833	)			(335	)			(15,180	)			—				(4,268	)			(7,760	)			(275	)			(12,303	)			—
Amortization of transition (asset)/obligation			—				—				24				24				—				—				(11	)			20				9				—
Amortization of prior service cost/(credit)			—				(430	)			5				(425	)			(996	)			—				1,802				4				1,806				(1,157	)
Amortization of net actuarial loss			1,735				4,055				138				5,928				52				1,877				3,057				115				5,049				245
Net periodic benefit cost/(credit)			1,467				5,734				398				7,599				297				2,535				7,887				440				10,862				277
Curtailment gain*			—				(20,086	)			—				(20,086	)			—				—				—				—				—				—
Total net periodic benefit cost/(credit)		$	1,467			$	(14,352	)		$	398			$	(12,487	)		$	297			$	2,535			$	7,887			$	440			$	10,862			$	277
Changes recognized in comprehensive income:
Net actuarial loss		$	—			$	21,130			$	—			$	21,130			$	—			$	—			$	—			$	—			$	—			$	—
Prior service credit			—				(9,054	)			—				(9,054	)			—				—				—				—				—				—
Amortization of transition asset/(obligation)			—				—				(24	)			(24	)			—				—				11				(20	)			(9	)			—
Amortization of prior service (cost)/credit			—				430				(5	)			425				996				—				(1,802	)			(4	)			(1,806	)			1,157
Amortization of net actuarial loss			(1,735	)			(4,055	)			(138	)			(5,928	)			(52	)			(1,877	)			(3,057	)			(115	)			(5,049	)			(245	)
Total recognized in comprehensive income		$	(1,735	)		$	8,451			$	(167	)		$	6,549			$	944			$	(1,877	)		$	(4,848	)		$	(139	)		$	(6,864	)		$	912

7. Guarantees and Warranties

          We have agreed to indemnify certain third parties relating to businesses and/or assets that we previously owned and sold to such third parties. Such indemnifications relate primarily to potential environmental and tax exposures for activities conducted by us prior to the sale of such businesses and/or assets. It is not possible to predict the maximum potential amount of future payments under these or similar indemnifications due to the conditional nature of the obligations and the unique facts and circumstances involved in each particular indemnification.

		Maximum				Carrying Amount of Liability
		Potential				March 31,				December 31,
		Payment				2010				2009
Environmental indemnifications		No limit				$	8,700			$	8,800
Tax indemnifications		No limit				$	—			$	—

          We also maintain contingencies for warranty expenses on certain of our long-term contracts. Generally, warranty contingencies are accrued over the life of the contract so that a sufficient balance is maintained to cover our aggregate exposure at the conclusion of the project.

		Fiscal Three Months Ended
		March 31,				March 31,
Warranty Liability:		2010				2009
Balance at beginning of year		$	110,800			$	99,400
Accruals			6,800				7,300
Settlements			(3,600	)			(500	)
Adjustments to provisions			(11,500	)			(11,300	)
Balance at end of period		$	102,500			$	94,900

          We are contingently liable under standby letters of credit, bank guarantees and surety bonds, totaling $960,000 and $943,100 as of March 31, 2010 and December 31, 2009, respectively, primarily for performance guarantees. These balances include the standby letters of credit issued under the U.S. senior credit agreement discussed in Note 5 and from other facilities worldwide. No material claims have been made against these guarantees, and based on our experience and current expectations, we do not anticipate any material claims.

          We have also guaranteed certain performance obligations in a refinery/electric power generation project based in Chile in which we hold a noncontrolling interest. See Note 3 for further information.

8. Derivative Financial Instruments

          We are exposed to certain risks relating to our ongoing business operations. The risks managed by using derivative financial instruments relate primarily to foreign currency exchange rate risk and, to a significantly lesser extent, interest rate risk. Derivative financial instruments are recognized as assets or liabilities at fair value in our consolidated balance sheet.

		Fair Values of Derivative Financial Instruments
						Asset Derivatives												Liability Derivatives
		Location within												Location within
		Consolidated				March 31,				December 31,				Consolidated				March 31,				December 31,
		Balance Sheet				2010				2009				Balance Sheet				2010				2009
Derivatives designated as hedging instruments
Interest rate swap contracts		Other assets				$	—			$	—			Other long-term liabilities				$	8,368			$	6,554
Derivatives not designated as hedging instruments
Foreign currency forward contracts		Contracts in process or billings in excess of costs and estimated earnings on uncompleted contracts					1,774				1,174			Contracts in process or billings in excess of costs and estimated earnings on uncompleted contracts					4,765				4,934
Foreign currency forward contracts		Other accounts receivable					385				470			Accounts payable					345				246
Total derivatives						$	2,159			$	1,644							$	13,478			$	11,734

          Foreign Currency Exchange Rate Risk

          We operate on a worldwide basis with substantial operations in Europe that subject us to U.S. dollar translation risk mainly relative to the Euro and British pound. Under our risk management policies we do not hedge translation risk exposure. All activities of our non-U.S. affiliates are recorded in their functional currency, which is typically the local currency in the country of domicile of the affiliate. In the ordinary course of business, our affiliates do enter into transactions in currencies other than their respective functional currencies. We seek to minimize the resulting foreign currency transaction risk by contracting for the procurement of goods and services in the same currency as the sales value of the related long-term contract. We further mitigate the risk through the use of foreign currency forward contracts.

				Currency		Hedged Foreign				Notional Amount of				Notional Amount of
				Hedged		Currency Exposure				Forward Buy Contracts				Forward Sell Contracts
Functional				(bought or sold		(in equivalent				(in equivalent				(in equivalent
Currency				forward)		U.S. dollars)				U.S. dollars)				U.S. dollars)
British pound				Euro		$	4,797			$	—			$	4,797
				Australian dollar			11,024				4,497				6,527
				Thai baht			1,860				1,860				—
				U.S. dollar			41,123				4,062				37,061
				South African rand			2,342				—				2,342
Australian dollar				British pound			536				—				536
Chilean peso				Euro			134				—				134
Chinese yuan				Euro			1,029				—				1,029
				U.S. dollar			17,329				10,460				6,869
Euro				U.S. dollar			34,773				4,110				30,663
Polish zloty				Euro			13,887				—				13,887
South African rand				British pound			11,480				11,480				—
				Singapore dollar			12,942				12,942				—
U.S. dollar				Canadian dollar			1,159				1,159				—
				Euro			296				296				—
				British pound			206				206				—
				Singapore dollar			46				46				—
				Total		$	154,963			$	51,118			$	103,845