KBR, INC., 10-Q filed on 4/25/2012
Quarterly Report
Document And Entity Information
3 Months Ended
Mar. 31, 2012
Apr. 12, 2012
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Mar. 31, 2012 
 
Entity Registrant Name
KBR, INC. 
 
Entity Central Index Key
0001357615 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Large Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
148,406,000 
Document Fiscal Year Focus
2012 
 
Document Fiscal Period Focus
Q1 
 
Trading Symbol
KBR 
 
Condensed Consolidated Statements Of Income (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Revenue:
 
 
Services
$ 1,964 
$ 2,277 
Equity in earnings of unconsolidated affiliates, net
37 
44 
Total revenue
2,001 
2,321 
Operating costs and expenses:
 
 
Cost of services
1,838 
2,134 
General and administrative
55 
44 
Gain on disposition of assets, net
(4)
(1)
Total operating costs and expenses
1,889 
2,177 
Operating income
112 
144 
Interest expense, net
(2)
(5)
Foreign currency gains (losses), net
(1)
Other non-operating expense
(2)
(1)
Income before income taxes and noncontrolling interests
107 
139 
Provision for income taxes
(9)
(22)
Net income
98 
117 
Net income attributable to noncontrolling interests
(7)
(12)
Net income attributable to KBR
$ 91 
$ 105 
Net income attributable to KBR per share:
 
 
Basic
$ 0.61 
$ 0.69 
Diluted
$ 0.61 
$ 0.69 
Basic weighted average common shares outstanding
148 
151 
Diluted weighted average common shares outstanding
149 
152 
Cash dividends declared per share
$ 0.05 
$ 0.05 
Condensed Consolidated Statements Of Comprehensive Income (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Condensed Consolidated Statements Of Comprehensive Income [Abstract]
 
 
Net income
$ 98 
$ 117 
Other comprehensive income (loss), net of tax:
 
 
Cumulative translation adjustments
Reclassification adjustment for CTA included in net income
(3)
(1)
Net cumulative translation adjustment, net of tax
(1)
Pension liability adjustments, net of tax provision of $2 and $1
Unrealized gain (loss) on derivatives:
 
 
Unrealized holding gain (loss) on derivatives
(4)
Reclassification adjustments for losses included in net income
Net unrealized gain (loss) on derivatives, net of tax benefit of $1 and $2
(3)
Other comprehensive income, net of tax
Comprehensive income
105 
123 
Less: Comprehensive income attributable to noncontrolling interests
(8)
(12)
Comprehensive income attributable to KBR
$ 97 
$ 111 
Condensed Consolidated Statements Of Comprehensive Income (Parenthetical) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Condensed Consolidated Statements Of Comprehensive Income [Abstract]
 
 
Pension liability adjustments, taxes
$ 2 
$ 1 
Unrealized gains (losses) on derivatives, taxes
$ 1 
$ 2 
Condensed Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Mar. 31, 2012
Dec. 31, 2011
Current assets:
 
 
Cash and equivalents
$ 837 
$ 966 
Receivables:
 
 
Accounts receivable, net of allowance for bad debts of $12 and $24
1,101 
1,227 
Unbilled receivables on uncompleted contracts
587 
435 
Total receivables
1,688 
1,662 
Deferred income taxes
283 
297 
Other current assets
463 
517 
Total current assets
3,271 
3,442 
Property, plant, and equipment, net of accumulated depreciation of $376 and $364 (including $74 and $75, net, owned by a variable interest entity - see Note 13)
389 
384 
Goodwill
957 
951 
Intangible assets, net
109 
113 
Equity in and advances to related companies
223 
190 
Noncurrent deferred income taxes
121 
128 
Noncurrent unbilled receivables on uncompleted contracts
313 
313 
Other noncurrent assets
153 
152 
Total assets
5,536 
5,673 
Current liabilities:
 
 
Accounts payable
765 
761 
Due to former parent, net
53 
53 
Advance billings on uncompleted contracts
454 
626 
Reserve for estimated losses on uncompleted contracts
17 
22 
Employee compensation and benefits
197 
226 
Current non-recourse project-finance debt of a variable interest entity (Note 13)
10 
10 
Other current liabilities
590 
586 
Total current liabilities
2,086 
2,284 
Noncurrent employee compensation and benefits
454 
470 
Noncurrent non-recourse project-finance debt of a variable interest entity (Note 13)
90 
88 
Other noncurrent liabilities
161 
177 
Noncurrent income tax payable
133 
141 
Noncurrent deferred tax liability
74 
71 
Total liabilities
2,998 
3,231 
KBR Shareholders' equity:
 
 
Preferred stock, $0.001 par value, 50,000,000 shares authorized, 0 shares issued and outstanding
   
   
Common stock, $0.001 par value, 300,000,000 shares authorized, 172,745,439 and 172,367,045 shares issued, and 148,329,064 and 148,143,420 shares outstanding
   
   
Paid-in capital in excess of par
2,014 
2,005 
Accumulated other comprehensive loss
(541)
(548)
Retained earnings
1,691 
1,607 
Treasury stock, 24,416,375 shares and 24,223,625 shares, at cost
(576)
(569)
Total KBR shareholders' equity
2,588 
2,495 
Noncontrolling interests
(50)
(53)
Total shareholders' equity
2,538 
2,442 
Total liabilities and shareholders' equity
$ 5,536 
$ 5,673 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Millions, except Share data, unless otherwise specified
Mar. 31, 2012
Dec. 31, 2011
Receivables:
 
 
Allowance for bad debts
$ 12 
$ 24 
Property, plant, and equipment:
 
 
Accumulated depreciation
376 
364 
PP&E owned by a VIE, net
$ 74 
$ 75 
KBR Shareholders' equity:
 
 
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred stock, shares authorized
50,000,000 
50,000,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value
$ 0.001 
$ 0.001 
Common stock, shares authorized
300,000,000 
300,000,000 
Common stock, shares issued
172,745,439 
172,367,045 
Common stock, shares outstanding
148,329,064 
148,143,420 
Treasury stock, shares
24,416,375 
24,223,625 
Condensed Consolidated Statements Of Cash Flows (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Cash flows from operating activities:
 
 
Net income
$ 98 
$ 117 
Adjustments to reconcile net income to net cash provided by (used in) operations:
 
 
Depreciation and amortization
16 
17 
Equity in earnings of unconsolidated affiliates
(37)
(44)
Deferred income tax expense
25 
Other adjustments
Changes in operating assets and liabilities:
 
 
Receivables
130 
82 
Unbilled receivables on uncompleted contracts
(148)
(27)
Accounts payable
(4)
(29)
Advanced billings on uncompleted contracts
(179)
80 
Accrued employee compensation and benefits
(29)
38 
Reserve for loss on uncompleted contracts
(4)
 
Collection (repayment) of advances from (to) unconsolidated affiliates, net
(3)
23 
Distribution of earnings from unconsolidated affiliates
12 
Other, net
10 
(51)
Total cash flows provided by (used in) operating activities
(107)
225 
Cash flows from investing activities:
 
 
Capital expenditures
(16)
(26)
Acquisition of business, net
(2)
 
(Investment in) / return of capital from equity method joint ventures
(8)
Total cash flows used in investing activities
(15)
(34)
Cash flows from financing activities:
 
 
Acquisition of noncontrolling interest
 
(164)
Payments to reacquire common stock
(7)
(2)
Distributions to noncontrolling interests, net
(5)
(37)
Payments of dividends to shareholders
(7)
(8)
Net proceeds from issuance of stock
Excess tax benefits from stock-based compensation
Return of cash collateral on letters of credit, net
 
Total cash flows used in financing activities
(15)
(202)
Effect of exchange rate changes on cash
13 
Increase (decrease) in cash and equivalents
(129)
Cash and equivalents at beginning of period
966 
786 
Cash and equivalents at end of period
837 
788 
Noncash financing activities
 
 
Dividends declared
$ 7 
$ 8 
Description Of Business And Basis Of Presentation
Description Of Business And Basis Of Presentation

Note 1. Description of Business and Basis of Presentation

KBR, Inc., a Delaware corporation, was formed on March 21, 2006. KBR, Inc. and its subsidiaries (collectively, "KBR") is a global engineering, construction and services company supporting the energy, hydrocarbons, government services, minerals, civil infrastructure, power, industrial and commercial markets. Headquartered in Houston, Texas, we offer a wide range of services through our Hydrocarbons, Infrastructure, Government and Power ("IGP"), Services and Other business segments. See Note 5 for additional financial information about our business segments.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules of the United States Securities and Exchange Commission ("SEC") for interim financial statements and do not include all annual disclosures required by accounting principles generally accepted in the United States ("U.S. GAAP"). These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed with the SEC. We believe that the presentation and disclosures herein are adequate to make the information not misleading, and the condensed consolidated financial statements reflect all normal adjustments that management considers necessary for a fair presentation of our condensed consolidated results of operations, financial position and cash flows. Operating results for interim periods are not necessarily indicative of results to be expected for the full fiscal year 2012 or any other future periods.

The preparation of our condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenue and costs during the reporting periods. Actual results could differ materially from those estimates. On an ongoing basis, we review our estimates based on information currently available, and changes in facts and circumstances may cause us to revise these estimates.

Our condensed consolidated financial statements include the accounts of majority-owned, controlled subsidiaries and variable interest entities where we are the primary beneficiary. The equity method is used to account for investments in affiliates in which we have the ability to exert significant influence over the operating and financial policies of the entity. The cost method is used when we do not have the ability to exert significant influence. Intercompany accounts and transactions are eliminated.

Income Per Share
Income Per Share

Note 2. Income per Share

Basic income per share is based upon the weighted average number of common shares outstanding during the period. Dilutive income per share includes additional common shares that would have been outstanding if potential common shares with a dilutive effect had been issued, using the treasury stock method. A reconciliation of the number of shares used for the basic and diluted income per share calculations is as follows:

 

     Three Months Ended
March  31,
 

Millions of shares

   2012      2011  

Basic weighted average common shares outstanding

     148         151   

Stock options and restricted shares

     1         1   
  

 

 

    

 

 

 

Diluted weighted average common shares outstanding

     149         152   
  

 

 

    

 

 

 

For purposes of applying the two-class method in computing earnings per share, net earnings allocated to participating securities were approximately $0.4 million and $0.5 million for the three months ended March 31, 2012 and 2011, respectively. The diluted earnings per share calculation did not include approximately 0.6 million anti-dilutive weighted average shares for the three months ended March 31, 2012 and the number of anti-dilutive weighted average shares was immaterial for the three months ended March 31, 2011.

Business Combinations And Other Transactions
Business Combinations And Other Transactions

Note 3. Business Combinations and Other Transactions

Other Transactions

M.W. Kellogg Limited ("MWKL"). On December 31, 2010, we obtained control of the remaining 44.94% interest in our MWKL subsidiary located in the U.K for approximately £107 million subject to certain post-closing adjustments. The acquisition was recorded as an equity transaction that reduced noncontrolling interests, accumulated other comprehensive income ("AOCI") and additional paid-in capital by $180 million. We recognized direct transaction costs associated with the acquisition of approximately $1 million as a direct charge to additional paid in capital. The initial purchase price of $164 million was paid on January 5, 2011. During the third quarter of 2011, we settled various post-closing adjustments that resulted in a decrease to "Paid-in capital in excess of par" of approximately $5 million. We also agreed to pay the former noncontrolling interest 44.94% of future proceeds collected on certain receivables owed to MWKL. Additionally, the former noncontrolling interest agreed to indemnify us for 44.94% of certain MWKL liabilities to be settled and paid in the future. As of March 31, 2012, we have liability of approximately $8 million classified on our condensed consolidated balance sheet as "Other noncurrent liabilities" and $1 million classified on our balance sheet as "Other current liabilities" reflecting our estimate of 44.94% of future proceeds from certain receivables owed to MWKL.

LNG Joint Venture. On January 5, 2011, we sold our 50% interest in a joint venture to our joint venture partner for approximately $22 million. The joint venture was formed to execute an EPC contract for construction of an LNG plant in Indonesia. We recognized a gain on the sale of our interest of approximately $8 million which is included in "Equity in earnings of unconsolidated affiliates, net" in our condensed consolidated income statement for the three months ended March 31, 2011.

Percentage-Of-Completion Contracts
Percentage-Of-Completion Contracts

Note 4. Percentage-of-Completion Contracts

Unapproved claims

The amounts of unapproved claims and change orders included in determining the profit or loss on contracts and recorded in current and non-current unbilled receivables on uncompleted contracts are as follows:

 

     March 31,      December 31,  

Millions of dollars

   2012      2011  

Probable unapproved claims

   $ 89       $ 31   

Probable unapproved change orders

   $ 5       $ 6   
  

 

 

    

 

 

 

As of March 31, 2012, the probable unapproved claims related to several projects. Included in the table above are probable unapproved claims associated with the reimbursable portion of an EPC contract to construct an LNG facility for which we have recognized additional contract revenue totaling $59 million. The contract claims on this project represent incremental subcontractor costs incurred by us as a result of customer-caused delays and we believe we have legal entitlement to recover these costs under the terms of the EPC contract. Contracts with probable unapproved claims that will likely not be settled within one year totaled $19 million at both March 31, 2012 and at December 31, 2011, and are reflected as a non-current asset in "Noncurrent unbilled receivables on uncompleted contracts" in our condensed consolidated balance sheets. Other probable unapproved claims and change orders that we believe will be settled within one year, have been recorded as a current asset in "Unbilled receivables on uncompleted contracts" in our condensed consolidated balance sheets. See Note 7 for a discussion of U.S. government contract claims, which are not included in the table above.

Liquidated damages

Many of our engineering and construction contracts have milestone due dates that must be met or we may be subject to penalties for liquidated damages if claims are asserted and we were responsible for the delays. These generally relate to specified activities that must be met within a project by a set contractual date or achievement of a specified level of output or throughput of a plant we construct. Each contract defines the conditions under which a customer may make a claim for liquidated damages. However, in some instances, liquidated damages are not asserted by the customer, but the potential to do so is used in negotiating claims and closing out the contract.

Based upon our evaluation of our performance and other legal analysis, we have not accrued for possible liquidated damages related to several projects totaling $11 million at both March 31, 2012 and December 31, 2011 (including amounts related to our share of unconsolidated subsidiaries), that we could incur based upon completing the projects as currently forecasted.

 

Business Segment Information
Business Segment Information

Note 5. Business Segment Information

We provide a wide range of services, but the management of our business is heavily focused on major projects within each of our reportable segments. At any given time, a relatively few number of projects and joint ventures represent a substantial part of our operations. Our equity in earnings and losses of unconsolidated affiliates that are accounted for using the equity method of accounting is included in revenue of the applicable segment.

Reportable segment performance is evaluated by our chief operating decision maker using operating segment income which is defined as operating segment revenue less the cost of services and segment overhead directly attributable to the operating segment. Intersegment revenues are eliminated from operating segment revenues. Reportable segment income excludes certain cost of services and general and administrative expenses directly attributable to the operating segment that is managed and reported at the corporate level, and corporate general and administrative expenses. Labor cost absorption in the following table represents income or expense generated by our central service labor and resource groups for amounts charged to the operating segments.

The table below presents information on our reportable business segments.

 

     Three Months Ended
March  31,
 

Millions of dollars

   2012     2011  

Revenue:

    

Hydrocarbons

   $ 1,116      $ 1,047   

Infrastructure, Government and Power

     518        855   

Services

     348        397   

Other

     19        22   
  

 

 

   

 

 

 

Total revenue

   $ 2,001      $ 2,321   
  

 

 

   

 

 

 

Operating segment income:

    

Hydrocarbons

   $ 105      $ 99   

Infrastructure, Government and Power

     39        61   

Services

     12        13   

Other

     10        12   
  

 

 

   

 

 

 

Operating segment income

     166        185   

Unallocated amounts:

    

Labor cost absorption

     1        3   

Corporate general and administrative

     (55     (44
  

 

 

   

 

 

 

Total operating income

   $ 112      $ 144   
  

 

 

   

 

 

 
Committed And Restricted Cash
Committed And Restricted Cash

Note 6. Committed and Restricted Cash

Cash and equivalents include cash related to contracts in progress as well as cash held by our joint ventures that we consolidate for accounting purposes. Joint venture cash balances are limited to joint venture activities and are not available for general cash needs, use on other projects or distributions to us without proper approval by the respective joint venture. Cash held by our joint ventures that we consolidate for accounting purposes totaled approximately $194 million at March 31, 2012 and $244 million at December 31, 2011. We expect to use the cash on these projects to pay project costs.

United States Government Contract Work
United States Government Contract Work

Note 7. United States Government Contract Work

We provide substantial work under our government contracts to the United States Department of Defense ("DoD") and other governmental agencies. These contracts include our worldwide United States Army logistics contracts, known as LogCAP III and IV.

Given the demands of working in Iraq and elsewhere for the U.S. government, as discussed further below, we have disagreements and have experienced performance issues with the various government customers for which we work. When performance issues arise under any of our government contracts, the government retains the right to pursue remedies, which could include termination, under any affected contract. If any contract were so terminated, we may not receive award fees under the affected contract, and our ability to secure future contracts could be adversely affected, although we would receive payment for amounts owed for our allowable costs under cost-reimbursable contracts. Other remedies that could be sought by our government customers for any improper activities or performance issues include sanctions such as forfeiture of profits, suspension of payments, fines, and suspensions or debarment from doing business with the government. Further, the negative publicity that could arise from disagreements with our customers or sanctions as a result thereof could have an adverse effect on our reputation in the industry, reduce our ability to compete for new contracts, and may also have a material adverse effect on our business, financial condition, results of operations, and cash flow.

We have experienced and expect to be a party to various claims against us by employees, third parties, soldiers, subcontractors and others that have arisen out of our work in Iraq such as claims for wrongful termination, assaults against employees, personal injury claims by third parties and army personnel, and subcontractor claims. While we believe we conduct our operations safely, the environments in which we operate often lead to these types of claims. We believe the vast majority of these types of claims are governed by the Defense Base Act or precluded by other defenses. We have a dispute resolution program under which most employment claims are subject to binding arbitration. However, as a result of amendments to the Department of Defense Appropriations Act of 2010, certain types of employee claims cannot be compelled to binding arbitration. An unfavorable resolution or disposition of these matters could have a material adverse effect on our business, results of operations, financial condition and cash flow.

Award Fees

In accordance with the provisions of the LogCAP III contract, we recognize revenue on our services rendered on a task order basis based on either a cost-plus-fixed-fee or cost-plus-base-fee and award fee arrangement. The fees are determined as a percentage rate applied to a negotiated estimate of the total costs for each task order. Prior to the fourth quarter of 2009, we recognized award fees on the LogCAP III contract using an estimated accrual of the amounts to be awarded. Once task orders underlying the work were definitized and award fees were granted, we adjusted our estimate of award fees to the actual amounts earned. Commencing in the fourth quarter of 2009, we stopped accruing award fees and began recognizing them only upon receipt of the award fee letter due to the inability to reliably estimate the amount of fees to be awarded. During the first quarter of 2011, we were awarded and recognized revenue of $16 million for award fees for the periods of performance from March 2010 through August 2010 on task orders in Iraq. No award fee pools are available for the periods of performance subsequent to February 2011.

In August of 2010, we executed a contract modification to the LogCAP III contract on the base life support task order in Iraq that resulted in an increase to our base fee on costs incurred and an increase in the maximum award fee on negotiated costs for the period of performance from September 2010 through February 2011. During the first quarter of 2011, we finalized negotiations with our customer and converted the task order from cost-plus-base-fee and award fee to cost-plus-fixed-fee for the period of performance beginning in March 2011. We recognize revenues for the fixed-fee component on the basis of proportionate performance as services are performed.

Government Compliance Matters

The negotiation, administration, and settlement of our contracts with the U.S. Government, consisting primarily of DoD contracts, are subject to audit by the Defense Contract Audit Agency ("DCAA"), which serves in an advisory role to the Defense Contract Management Agency ("DCMA") which is responsible for the administration of our contracts. The scope of these audits include, among other things, the allowability, allocability, and reasonableness of incurred costs, approval of annual overhead rates, compliance with the Federal Acquisition Regulation ("FAR") and Cost Accounting Standards ("CAS"), compliance with certain unique contract clauses, and audits of certain aspects of our internal control systems. Issues identified during these audits are typically discussed and reviewed with us, and certain matters are included in audit reports issued by the DCAA, with its recommendations to or customer's administrative contracting officer ("ACO"). We attempt to resolve all issues identified in audit reports by working directly with the DCAA and the ACO. When agreement cannot be reached, DCAA may issue a Form 1, "Notice of Contract Costs Suspended and/or Disapproved," which recommends withholding the previously paid amounts or it may issue an advisory report to the ACO. KBR is permitted to respond to these documents and provide additional support. At March 31, 2012, we have open Form 1's from the DCAA recommending suspension of payments totaling approximately $352 million associated with our contract costs incurred in prior years, of which approximately $146 million has been withheld from our current billings. As a consequence, for certain of these matters, we have withheld approximately $64 million from our subcontractors under the payment terms of those contracts. In addition, we have outstanding demand letters received from our customer requesting that we remit a total of $98 million of disapproved costs for which we do not believe we have a legal obligation to pay. We continue to work with our ACO's, the DCAA and our subcontractors to resolve these issues. However, for certain of these matters, we have filed claims with the Armed Services Board of Contract Appeals ("ASBCA") or the United States Court of Federal Claims ("U.S. COFC").

KBR excludes from billings to the U.S. Government costs that are potentially unallowable, expressly unallowable, or mutually agreed to be unallowable, or not allocable to government contracts per applicable regulations. Revenue recorded for government contract work is reduced at the time we identify and estimate potentially refundable costs related to issues that may be categorized as disputed or unallowable as a result of cost overruns or the audit process. Our estimates of potentially unallowable costs are based upon, among other things, our internal analysis of the facts and circumstances, terms of the contracts and the applicable provisions of the FAR and CAS, quality of supporting documentation for costs incurred, and subcontract terms as applicable. From time to time, we engage outside counsel to advise us on certain matters in determining whether certain costs are allowable. We also review our analysis and findings with the ACO as appropriate. In some cases, we may not reach agreement with the DCAA or the ACO regarding potentially unallowable costs which may result in our filing of claims in various courts such as the ASBCA or the U.S. COFC. We only include amounts in revenue related to disputed and potentially unallowable costs when we determine it is probable that such costs will result in the collection of revenue. We generally do not recognize additional revenue for disputed or potentially unallowable costs for which revenue has been previously reduced until we reach agreement with the DCAA and/or the ACO that such costs are allowable.

Certain issues raised as a result of contract audits and other investigations are discussed below.

Private Security. In 2007, we received a Form 1 from the Department of the Army informing us of their intent to adjust payments under the LogCAP III contract associated with the cost incurred for the years 2003 through 2006 by certain of our subcontractors to provide security to their employees. Based on that notice, the Army withheld its initial assessment of $20 million. The Army based its initial assessment on one subcontract wherein, based on communications with the subcontractor, the Army estimated 6% of the total subcontract costs related to the private security. We subsequently received Form 1's from the DCAA disapproving an additional $83 million of costs incurred by us and our subcontractors to provide security during the same periods. Since that time, the Army withheld an additional $25 million in payments from us bringing the total payments withheld to approximately $45 million as of March 31, 2012, out of the Form 1's issued to date of $103 million.

The Army indicated that they believe our LogCAP III contract prohibits us and our subcontractors from billing costs of privately armed security. We believe that, while the LogCAP III contract anticipates that the Army will provide force protection to KBR employees, it does not prohibit us or any of our subcontractors from using private security services to provide force protection to KBR or subcontractor personnel. In addition, a significant portion of our subcontracts are competitively bid fixed price subcontracts. As a result, we do not receive details of the subcontractors' cost estimate nor are we legally entitled to it. Further, we have not paid our subcontractors any additional compensation for security services. Accordingly, we believe that we are entitled to reimbursement by the Army for the cost of services provided by us or our subcontractors, even if they incurred costs for private force protection services. Therefore, we do not agree with the Army's position that such costs are unallowable and that they are entitled to withhold amounts incurred for such costs.

We have provided at the Army's request information that addresses the use of armed security either directly or indirectly charged to LogCAP III. In 2007, we filed a complaint in the ASBCA to recover $44 million of the amounts withheld from us. In 2009, KBR and the Army agreed to stay the case pending further discussions with the DOJ as discussed further below. The ASBCA denied the Army's latest request to stay the proceedings. In April 2012, the ASBCA ruled, as requested by KBR, that our contract with the Army does not prohibit the use of private security contractors by either KBR or its subcontractors. However, our motion to dismiss was denied on grounds that potential fact issues remain related to the reasonableness of the private security costs charged to the contract. We believe these sums were properly billed under our contract with the Army. At this time, we believe the likelihood that a loss related to this matter has been incurred is remote. We have not adjusted our revenues or accrued any amounts related to this matter. This matter is also the subject of a separate claim filed by the DOJ for alleged violation of the False Claims Act as discussed further below under the heading "Investigations, Qui Tams and Litigation."

 

Containers. In June 2005, the DCAA recommended withholding certain costs associated with providing containerized housing for soldiers and supporting civilian personnel in Iraq. The DCMA agreed that the costs be withheld pending receipt of additional explanation or documentation to support the subcontract costs. During the first quarter of 2011, we received a Form 1 from the DCAA disapproving approximately $25 million in costs related to containerized housing that had previously been deemed allowable. As of March 31, 2012, approximately $51 million of costs have been suspended under Form 1's of which $26 million have been withheld from us by our customer. We have withheld $30 million from our subcontractor related to this matter. In April 2008, we filed a counterclaim in arbitration against our LogCAP III subcontractor, First Kuwaiti Trading Company, to recover the $51 million we paid to the subcontractor for containerized housing as further described under the caption First Kuwaiti Trading Company arbitration below. During the first quarter of 2011, we filed a complaint before the ASBCA to contest the Form 1's and recover the amounts withheld from us by our customer. We believe that the costs incurred associated with providing containerized housing are reasonable, and we intend to vigorously defend ourselves in this matter. We do not believe that we face a risk of significant loss from any disallowance of these costs in excess of the amounts we have withheld from subcontractors and the loss accruals we have recorded. At this time, we believe the likelihood that a loss in excess of the amount accrued for this matter is remote.

Dining facilities. In 2006, the DCAA raised questions regarding our billings and price reasonableness of costs related to dining facilities in Iraq. We responded to the DCMA that our costs are reasonable. As of March 31, 2012, we have outstanding Form 1's from the DCAA disapproving $124 million in costs related to these dining facilities until such time we provide documentation to support the price reasonableness of the rates negotiated with our subcontractor and demonstrate that the amounts billed were in accordance with the contract terms. We believe the prices obtained for these services were reasonable and intend to vigorously defend ourselves on this matter. We filed claims in the U.S. COFC or ASBCA to recover $55 million of the $66 million withheld from us by the customer. We believe it is probable that we will recover the amounts withheld from us by the customer. The U.S. COFC proceedings were held in the fourth quarter of 2011 and we expect a decision in the second quarter of 2012. With respect to questions raised regarding billing in accordance with contract terms, as of March 31, 2012, we believe it is reasonably possible that we could incur losses in excess of the amount accrued for possible subcontractor costs billed to the customer that were possibly not in accordance with contract terms. However, we do not believe we face a risk of significant loss from any disallowance of these costs in excess of amounts withheld from subcontractors. As of March 31, 2012, we had withheld $25 million in payments from our subcontractors pending the resolution of these matters with our customer.

In March 2011, the DOJ filed a counterclaim in the U.S. COFC alleging KBR employees accepted bribes from one of our subcontractors, Tamimi, in exchange for awarding a master agreement for DFAC services to Tamimi. The DOJ seeks disgorgement of all funds paid to KBR under the master agreement as well as all award fees paid to KBR under the related task orders. We have evaluated the DOJ's counterclaim and believe it to be without merit. Trial in the U.S. COFC took place during the fourth quarter of 2011 and post-trial briefs by KBR and the DOJ were filed. We expect a ruling from the court in the second quarter of 2012.

Transportation costs. In 2007, the DCAA, raised a question about our compliance with the provisions of the Fly America Act. During the first quarter of 2011, we received a Form 1 from the DCAA totaling $6 million for alleged violations of the Fly America Act in 2004. Subject to certain exceptions, the Fly America Act requires Federal employees and others performing U.S. Government-financed foreign air travel to travel by U.S. flag air carriers. There are times when we transported personnel in connection with our services for the U.S. military where we may not have been in compliance with the Fly America Act and its interpretations through the Federal Acquisition Regulations and the Comptroller General. Included in our March 31, 2012 and December 31, 2011 accompanying condensed balance sheets, is an accrued estimate of the cost incurred for these potentially non-compliant flights. The DCAA may consider additional flights to be noncompliant resulting in potential larger amounts of disallowed costs than the amount we have accrued. At this time, we cannot estimate a range of reasonably possible losses that may have been incurred, if any, in excess of the amount accrued. We will continue to work with our customer to resolve this matter.

In the first quarter of 2011, we received a Form 1 from the DCAA disapproving certain personnel replacement costs totaling approximately $27 million associated with replacing employees who were deployed in Iraq and Afghanistan for less than 179 days. The DCAA claims these replacement costs violate the terms of the LogCAP III contract which expressly disallow certain costs associated with the contractor rotation of employees who have deployed less than 179 days including costs for transportation, lodging, meals, orientation and various forms of per diem allowances. We disagree with the DCAA's interpretation and application of the contract terms as it was applied to circumstances outside of our control including sickness, death, termination for cause or resignation and that such costs should be allowable. We do not believe we face a risk of significant loss from any disallowance of these costs in excess of the loss of accruals we have recorded.

 

Construction services. From February 2009 through September 2010, we received Form 1's from the DCAA disapproving approximately $25 million in costs related to work performed under our CONCAP III contract with the U.S. Navy to provide emergency construction services primarily to Government facilities damaged by Hurricanes Katrina and Wilma. The DCAA claims the costs billed to the U.S. Navy primarily related to subcontract costs that were either inappropriately bid, included unallowable profit markup or were unreasonable. In February 2012, the Contracting Officer rendered a Contracting Officer Final Determination ("COFD") allowing approximately $10 million and disallowing $15 million of direct costs. We intend to file a claim with the contracting officer and, if necessary, file an appeal with the ASBCA. As of March 31, 2012, the U.S. Navy has withheld approximately $9 million from us. We believe we undertook adequate and reasonable steps to ensure that proper bidding procedures were followed and the amounts billed to the customer were reasonable and not in violation of the FAR. As of March 31, 2012, we have accrued our estimate of probable loss related to this matter; however, it is reasonably possible we could incur additional losses.

Investigations, Qui Tams and Litigation

The following matters relate to ongoing litigation or investigations involving U.S. government contracts.

McBride Qui Tam suit. In September 2006, we became aware of a qui tam action filed against us in the U.S. District Court in the District of Columbia by a former employee alleging various wrongdoings in the form of overbillings to our customer on the LogCAP III contract. This case was originally filed pending the government's decision whether or not to participate in the suit. In June 2006, the government formally declined to participate. The principal allegations are that our compensation for the provision of Morale, Welfare and Recreation ("MWR") facilities under LogCAP III is based on the volume of usage of those facilities and that we deliberately overstated that usage. In accordance with the contract, we charged our customer based on actual cost, not based on the number of users. It was also alleged that, during the period from November 2004 into mid-December 2004, we continued to bill the customer for lunches, although the dining facility was closed and not serving lunches. There are also allegations regarding housing containers and our provision of services to our employees and contractors. On July 5, 2007, the court granted our motion to dismiss the qui tam claims and to compel arbitration of employment claims including a claim that the plaintiff was unlawfully discharged. The majority of the plaintiff's claims were dismissed but the plaintiff was allowed to pursue limited claims pending discovery and future motions. Substantially all employment claims were sent to arbitration under the Company's dispute resolution program and were subsequently resolved in our favor. In January 2009, the relator filed an amended complaint which is pending a ruling on a discovery matter before further motions can be filed. Trial for this matter has not been scheduled. We believe the relator's claim is without merit and that the likelihood that a loss has been incurred is remote. As of March 31, 2012, no amounts have been accrued.

First Kuwaiti Trading Company arbitration. In April 2008, First Kuwaiti Trading Company, one of our LogCAP III subcontractors, filed for arbitration of a subcontract under which KBR had leased vehicles related to work performed on our LogCAP III contract. The FKTC arbitration is being conducted under the rules of the London Court on International Arbitration and the venue is in the District of Columbia. First Kuwaiti alleged that we did not return or pay rent for many of the vehicles and seeks damages in the amount of $134 million. We filed a counterclaim to recover amounts which may ultimately be determined due to the Government for the $51 million in suspended costs as discussed in the preceding section of this footnote titled "Containers." To date arbitration hearings for four subcontracts have taken place in Washington, D.C. primarily related to claims involving unpaid rents and damages on lost or unreturned vehicles. The arbitration panel has awarded approximately $16 million to FKTC for claims involving unpaid rents and damages on lost or unreturned vehicles, repair costs on certain vehicles, damages suffered as a result of late vehicle returns, and interest thereon, net of maintenance, storage and security costs awarded to KBR. No payments are expected to occur until all claims are arbitrated and awards finalized. Arbitration hearings for the remaining subcontracts are expected to resume in September 2012. We believe any damages ultimately awarded to First Kuwaiti will be billable under the LogCAP III contract. Accordingly, we have accrued amounts payable and a related unbilled receivable for the amounts awarded to First Kuwaiti pursuant to the terms of the contract.

Electrocution litigation. During 2008, a lawsuit was filed against KBR in Pittsburgh, Pennsylvania in the Allegheny County Common Pleas Court alleging that the Company was responsible for an electrical incident which resulted in the death of a soldier. This incident occurred at the Radwaniyah Palace Complex. It is alleged in the suit that the electrocution incident was caused by improper electrical maintenance or other electrical work. KBR denies that its conduct was the cause of the event and denies legal responsibility. The case was removed to Federal Court where motion to dismiss was filed. The court issued a stay in the discovery of the case, pending an appeal of certain pre-trial motions to dismiss that were previously denied. In August 2010, the Court of Appeals dismissed our appeal concluding it did not have jurisdiction. Discovery has been completed and our motions to dismiss were heard on March 30, 2012. We are not able to determine the likely outcome nor can we estimate a range of potential loss, if any, related to this matter at this time. As of March 31, 2012, no amounts have been accrued.

 

Burn Pit litigation. From November 2008 through February 2011, KBR was served with over 50 lawsuits in various states alleging exposure to toxic materials resulting from the operation of burn pits in Iraq or Afghanistan in connection with services provided by KBR under the LogCAP III contract. Each lawsuit has multiple named plaintiffs collectively representing approximately 250 individual plaintiffs. The lawsuits primarily allege negligence, willful and wanton conduct, battery, intentional infliction of emotional harm, personal injury and failure to warn of dangerous and toxic exposures which has resulted in alleged illnesses for contractors and soldiers living and working in the bases where the pits are operated. All of the pending cases were removed to Federal Court, the majority of which were consolidated for multi-district litigation treatment before the U.S. Federal District Court in Baltimore, Maryland. In December 2010, the Court stayed virtually all discovery proceedings pending a decision from the Fourth Circuit Court of Appeals on three other cases involving the Political Question Doctrine and other jurisdictional issues. Due to the inherent uncertainties of litigation and because the litigation is at a preliminary stage, we cannot at this time accurately predict the ultimate outcome nor can we reliably estimate a range of possible loss, if any, related to this matter at this time. Accordingly, as of March 31, 2012, no amounts have been accrued.

Sodium Dichromate litigation. From December 2008 through September 2009, five cases were filed in various federal district courts against KBR by national guardsman and other military personnel alleging exposure to potentially hazardous chemicals at the Qarmat Ali Water Treatment Plant in Iraq in 2003. The majority of the cases were re-filed and consolidated into two cases with one pending in Houston, Texas and one pending in the District of Oregon. Collectively, the suit represents approximately 170 individual plaintiffs all of which are current and former national guardsmen who claim they were exposed to sodium dichromate while escorting KBR employees who were working at the water treatment plant and that the defendants knew or should have known that the potentially toxic substance existed and negligently failed to protect the guardsmen from exposure. The U.S. Corps of Engineers ("USACE") was contractually obligated to provide a benign site free of war and environmental hazards before KBR's commencement of work on the site. KBR notified the USACE within two days after discovering the sodium dichromate and took effective measures to remediate the site. KBR services provided to the USACE were under the direction and control of the military and therefore, KBR believes it has adequate defenses to these claims. KBR will also assert Political Question Doctrine and Government Contractor defenses. Additionally, U.S. Government and other studies on the effects of exposure to the sodium dichromate contamination at the water treatment plant have found no long term harm to the soldiers. However, due to the inherent uncertainties of litigation and because the litigation is in the preliminary stages, we cannot accurately predict the ultimate outcome nor can we reliably estimate a range of possible loss, if any, related to this matter. Trials have been scheduled for September 2012 in Houston, Texas and October 2012 for the case in Oregon. As of March 31, 2012, no amounts have been accrued. During the period of time since the first litigation was filed against us, we have incurred legal defense costs that we believe are reimbursable under the related customer contract. We intend to bill for these costs, and if necessary, file claims with either the U.S. COFC or ASBCA to recover the associated revenues recognized to date.

Convoy Ambush Litigation. In April 2004, a fuel convoy in route from Camp Anaconda to Baghdad International Airport for the U.S. Army under our LogCAP III contract was ambushed resulting in deaths and severe injuries to truck drivers hired by KBR. In 2005, survivors of the drivers killed and those that were injured in the convoy, filed suit in state court in Houston, Texas against KBR and several of its affiliates, claiming KBR deliberately intended that the drivers in the convoy would be attacked and wounded or killed. The suit also alleges KBR committed fraud in its hiring practices by failing to disclose the dangers associated with working in the Iraq combat zone. The case was removed to U.S. Federal District Court in Houston, Texas. After numerous motions and rulings in the trial court and appeals to U.S. Fifth Circuit Court of Appeals, in January 2012, the appellate Court granted KBR's appeal on dispositive motions and dismissed the claims of all remaining plaintiffs on the grounds that their claims are banned by the exclusive remedy provisions of the Defense Base Act. Prior to the dismissal of the claims against KBR by the appellate Court, KBR settled the claims of one of the plaintiffs. The remaining plaintiffs sought a rehearing of the dismissal by the Fifth Circuit which was denied in April 2012. We believe the cost of settling with one of the plaintiffs is reimbursable under the related customer contract. We intend to bill for these costs, and if necessary, file claims with either the U.S. COFC or ASBCA to recover the associated revenues recognized to date.

DOJ False Claims Act complaint. In April 2010, the DOJ filed a complaint in the U.S. District Court in the District of Columbia alleging certain violations of the False Claims Act related to the use of private security firms. The complaint alleges, among other things, that we made false or fraudulent claims for payment under the LogCAP III contract because we allegedly knew that they contained costs of services for or that included improper use of private security. We believe these sums were properly billed under our contract with the Army and that the use of private security was not prohibited under the LogCAP III contract. In June 2010, we filed motions to dismiss the complaint and in October 2010, the DOJ filed a motion for partial summary judgment to which we responded before discovery occurred. In August 2011, the motions of both parties were dismissed and the judge ordered the case to proceed with discovery with trial scheduled for late 2012. We continue to believe this complaint is without merit. We have not adjusted our revenues or accrued any amounts related to this matter.

 

Other Matters

Claims. Included in receivables in our condensed consolidated balance sheets are unapproved claims for costs incurred under various government contracts totaling $192 million at March 31, 2012, of which $106 million is included in "Accounts receivable" and $86 million is included in "Unbilled receivables on uncompleted contracts." Unapproved claims relate to contracts where our costs have exceeded the customer's funded value of the task order. The $106 million of unapproved claims included in Accounts receivable results primarily from de-obligated funding on certain task orders that were also subject to Form 1's relating to certain DCAA audit issues discussed above. We believe such disputed costs will be resolved in our favor at which time the customer will be required to obligate funds from appropriations for the year in which resolution occurs. The remaining unapproved claims balance of approximately $86 million primarily represents costs for which incremental funding is pending in the normal course of business. The majority of costs in this category are normally funded within several months after the costs are incurred. The unapproved claims outstanding at March 31, 2012, are considered to be probable of collection and have been previously recognized as revenue.

Other Commitments And Contingencies
Other Commitments And Contingencies

Note 8. Other Commitments and Contingencies

Barracuda-Caratinga Project Arbitration

In June 2000, we entered into a contract with Barracuda & Caratinga Leasing Company B.V., the project owner and claimant, to develop the Barracuda and Caratinga crude oilfields, which are located off the coast of Brazil. Petrobras is a contractual representative that controls the project owner. In November 2007, we executed a settlement agreement with the project owner to settle all outstanding project issues except for the bolts arbitration discussed below.

At Petrobras' direction, we replaced certain bolts located on the subsea flowlines that failed through mid-November 2005, and we understand that additional bolts failed thereafter, which were replaced by Petrobras. These failed bolts were identified by Petrobras when it conducted inspections of the bolts. In March 2006, Petrobras notified us they submitted this matter to arbitration claiming $220 million plus interest for the cost of monitoring and replacing the defective stud bolts and, in addition, all of the costs and expenses of the arbitration including the cost of attorneys' fees. The arbitration was conducted in New York under the guidelines of the United Nations Commission on International Trade Law ("UNCITRAL").

In September 2011, the arbitration panel awarded the claimant approximately $193 million. The damages awarded were based on the panel's estimate to replace all subsea bolts, including those that did not manifest breaks, as well as legal and other costs incurred by the claimant in the arbitration and interest thereon since the date of the award. The panel rejected our argument, and the case law relied upon by us, that we were only liable for bolts that were discovered to be broken prior to the expiration of the warranty period that ended on June 30, 2006. As of March 31, 2012, we have a liability of $201 million, including interest, to Petrobras for the failed bolts which is included in "Other current liabilities." The liability incurred by us in connection with the arbitration is covered by an indemnity from our former parent, Halliburton. Accordingly, we have recorded an indemnification receivable from Halliburton of $201 million pursuant to the indemnification under the MSA which is included in "Other current assets" as of March 31, 2012. The arbitration award payable to Petrobras will be deductible for tax purposes when paid. The indemnification payment will be treated by KBR for tax purposes as a contribution to capital and accordingly is not taxable. Halliburton has directed us to challenge the arbitration award as being defective or outside the jurisdiction of the arbitration panel. This challenge was filed in the United States District Court for the Southern District of New York on December 16, 2011. We will continue to be responsible for all ongoing legal costs associated with this matter. If the challenge to the arbitration award is successful and the award payable to Petrobras is either reduced or reversed in a future period, we would reverse the related tax benefit previously recognized as a charge to income as tax expense in that period. As of March 31, 2012, we do not believe there are any legal limitations on our ability to recover the full amount of the cash arbitration award and we intend to assert our rights under the indemnity agreement with Halliburton.

PEMEX Arbitration

In 1997 and 1998 we entered into three contracts with PEMEX, the project owner, to build offshore platforms, pipelines and related structures in the Bay of Campeche offshore Mexico. The three contracts were known as Engineering, Procurement and Construction ("EPC") 1, EPC 22 and EPC 28. All three projects encountered significant schedule delays and increased costs due to problems with design work, late delivery and defects in equipment, increases in scope and other changes. PEMEX took possession of the offshore facilities of EPC 1 in March 2004 after having achieved oil production but prior to our completion of our scope of work pursuant to the contract.

 

We filed for arbitration with the International Chamber of Commerce ("ICC") in 2004 claiming recovery of damages of $323 million for the EPC 1 project. PEMEX subsequently filed counterclaims totaling $157 million. In December 2009, the ICC ruled in our favor, and we were awarded a total of approximately $351 million including legal and administrative recovery fees as well as interest. PEMEX was awarded approximately $6 million on counterclaims, plus interest on a portion of that sum. In connection with this award, we recognized a gain of $117 million net of tax in 2009. The arbitration award is legally binding and on November 2, 2010, we received a judgment in our favor in the U.S. District Court for the Southern District of New York to recognize the award in the U.S. of approximately $356 million plus Mexican value added tax and interest thereon until paid. PEMEX initiated an appeal to the U.S. Court of Appeals for the Second Circuit and asked for a stay of the enforcement of the judgment while on appeal. The stay was granted, but PEMEX was required to post collateral of $395 million with the court registry. Appellate briefs have been filed by both parties and oral arguments were heard by the Second Circuit Court on February 2, 2012. On February 16, 2012, the Second Circuit issued an order remanding the case to the District Court to consider if the decision of the Collegiate Court in Mexico, described below, would have affected the trial court's ruling. We believe the possibility of the trial court reversing its own ruling to be remote as U.S. courts have a strong record of recognizing and enforcing international arbitration awards. However, an unfavorable ruling by the trial court could have a material adverse impact to our results of operations.

PEMEX attempted to nullify the award in Mexico which was rejected by the Mexican trial court in June 2010. PEMEX then filed an "amparo" action on the basis that its constitutional rights had been violated which was denied by the Mexican court in October 2010. PEMEX subsequently appealed the adverse decision with the Collegiate Court in Mexico on the grounds that the arbitration tribunal did not have jurisdiction and that the award violated the public order of Mexico. Although these arguments were presented in the initial nullification and amparo actions and were rejected in both cases, in September 2011, the Collegiate Court in Mexico ruled in favor of PEMEX on the amparo action. The Collegiate Court ruled that PEMEX, by administratively rescinding the contract in 2004, deprived the arbitration panel of jurisdiction thereby nullifying the arbitration award. The Collegiate Court decision is contrary to the ruling received from the ICC as well as all other Mexican courts which have denied PEMEX's repeated attempts to nullify the arbitration award. We also believe the Collegiate Court decision is contrary to Mexican law governing contract arbitration. However, we do not expect the Collegiate Court decision to affect the outcome of the U.S. appeal discussed above or our ability to ultimately collect the ICC arbitration award in the U.S. due to the significant assets of PEMEX in the U.S. as well as the collateral posted by PEMEX with the court registry The circumstances of this matter are unique and in the unlikely event we are not able to collect the arbitration award in the U.S., we will pursue other remedies including filing a North American Free Trade Agreement ("NAFTA") arbitration to recover the award as an unlawful expropriation of assets by the government of Mexico.

We were successful in litigating and collecting on valid international arbitration awards against PEMEX on the EPC 22 and EPC 28 projects during 2008. Additionally, PEMEX has sufficient assets in the U.S. which we believe we will be able to attach as a result of the recognition of the ICC arbitration award in the U.S. Although it is possible we could resolve and collect the amounts due from PEMEX in the next 12 months, we believe the timing of the collection of the award is uncertain and therefore, we have continued to classify the amount due from PEMEX as a long term receivable included in "Noncurrent unbilled receivable on uncompleted contracts" as of March 31, 2012. No adjustments have been made to our receivable balance since recognition of the initial award in 2009. Depending on the timing and amount ultimately settled with PEMEX, including interest, we could recognize an additional gain upon collection of the award.

In connection with the EPC 1 project, we have approximately $80 million in outstanding performance bonds furnished to PEMEX when the project was awarded. The bonds were written by a Mexican bond company and backed by a U.S. insurance company which is indemnified by KBR. As a result of the ICC arbitration award in December 2009, the panel determined that KBR had performed on the project and recovery on the bonds by PEMEX was precluded. PEMEX filed an action in Mexico in June 2010 against the Mexican bond company to collect the bonds even though the arbitration award ruled that the bonds were to be returned to KBR. In May 2011, the Mexican trial court ruled PEMEX could collect the bonds even though PEMEX at the time was unsuccessful in its attempts to nullify the arbitration award. The decision was immediately appealed by the bonding company and PEMEX was not able to call the bonds while on appeal. In October 2011, we were officially notified that the appellate court ruled in favor of PEMEX, therefore allowing PEMEX to call the bonds. In December 2011, we and the Mexican bond company stayed payment of the bonds by filing direct amparos in the Mexican courts, and we filed a bond to cover interest accruing during the pendency of our amparo action. In the event our amparo is unsuccessful and the U.S. insurance company makes payment to the Mexican bonding company, we may be required to indemnify the U.S. insurance company. In this event, we will pursue other remedies including seeking relief in the U.S. District Court for the Southern District of New York or the filing of a NAFTA arbitration to recover the bonds as an unlawful expropriation of assets by the government of Mexico.

 

FAO Litigation

In April 2001, our subsidiary, MWKL, entered into lump-sum contracts with Fina Antwerp Olefins (FAO), a joint venture between ExxonMobil and Total, to perform EPC services for FAO's revamp and expansion of an existing olefins plant in Belgium. The contracts had an initial value of approximately €113 million. Upon execution of the contracts, MWKL was confronted with a multitude of changes and issues on the project resulting in significant cost overruns and schedule delays. The project was completed in October 2003. In 2005, after unsuccessful attempts to engage FAO in negotiations to settle MWKL's outstanding claims, MWKL filed suit against FAO in the Commercial Court of Antwerp, Belgium, seeking to recover amounts for rejected change requests, disruption, schedule delays and other items. MWKL sought the appointment of a court expert to determine the technical aspects of the disputes between the parties upon which the judge could rely for allocating liability and determining the final amount of MWKL's claim against FAO. FAO filed a counterclaim in 2006 claiming recovery of additional costs for various matters including, among others, project management, temporary offices, security, financing costs, deficient work items and disruption of activities some of which we believe is either barred by the language in the contract or has not been adequately supported. Although the court expert has issued several preliminary reports which support our claim receivable, a final report has yet to be issued that addresses the full value of KBR's claims. We currently expect the court expert to release a final report in June 2012. We do not believe we face a risk of significant loss associated with the value of the claim receivable recorded on our balance sheets or FAO's counterclaims. As of March 31, 2012, no amounts have been accrued related to the counterclaim.

Letters of credit

In connection with certain projects, we are required to provide letters of credit, surety bonds or guarantees to our customers. Letters of credit are provided to certain customers and counter-parties in the ordinary course of business as credit support for contractual performance guarantees, advanced payments received from customers and future funding commitments. We have approximately $2 billion in committed and uncommitted lines of credit to support the issuance of letters of credit and at March 31, 2012, and we had utilized $708 million of our credit capacity. Surety bonds are also posted under the terms of certain contracts primarily related to state and local government projects to guarantee our performance. The letters of credit outstanding included $219 million issued under our Credit Agreement and $489 million issued under uncommitted bank lines at March 31, 2012. Of the total letters of credit outstanding, $293 million relate to our joint venture operations and $10 million of the letters of credit have terms that could entitle a bank to require additional cash collateralization on demand. As the need arises, future projects will be supported by letters of credit issued under our Credit Agreement or other lines of credit arranged on a bilateral, syndicated or other basis. We believe we have adequate letter of credit capacity under our Credit Agreement and bilateral lines of credit to support our operations for the next twelve months.

Other

As of March 31, 2012, we had commitments to provide funds to our privately financed projects of $13 million, primarily related to future equity funding on our Allenby and Connaught project coming due within one year. Our commitments to fund our privately financed projects are supported by letters of credit as described above.

Transactions With Former Parent
Transactions With Former Parent

Note 9. Transactions with Former Parent

Pursuant to our master separation agreement, we agreed to indemnify Halliburton for, among other matters, all past, present and future liabilities related to our business and operations. We agreed to indemnify Halliburton for liabilities under various outstanding and certain additional credit support instruments relating to our businesses and for liabilities under litigation matters related to our business. Halliburton agreed to indemnify us for, among other things, liabilities unrelated to our business, for certain other agreed matters relating to the investigation of FCPA and related corruption allegations and the Barracuda-Caratinga project and for other litigation matters related to Halliburton's business. See Note 8. The tax sharing agreement provides for certain allocations of U.S. income tax liabilities and other agreements between us and Halliburton with respect to tax matters.

As of March 31, 2012, "Due to former parent, net" was approximately $53 million and was comprised primarily of estimated amounts owed to Halliburton under the tax sharing agreement for income taxes. Our estimate of amounts due to Halliburton under the tax sharing agreement was approximately $45 million at March 31, 2012 and relates to income tax adjustments paid by Halliburton subsequent to our separation that were directly attributable to us, primarily for the years from 2001 through 2006. The remaining balance of $8 million included in "Due to former parent, net" as of March 31, 2012 is associated with various other amounts payable to Halliburton arising under the other separation agreements.

 

During the fourth quarter of 2011, Halliburton provided notice and demanded payment for significantly greater amounts that it alleges are owed by us under the tax sharing agreement for various other tax-related transactions pertaining to periods prior to our separation from Halliburton. We believe that the amount in the demand is invalid based on our assessment of Halliburton's methodology for computing the claim. Based on advice from internal and external legal counsel, we do not believe that Halliburton has a legal entitlement to payment of the amount in the demand. However, although we believe we have appropriately accrued for amounts owed to Halliburton based on our interpretation of the tax sharing agreement, there may be changes to the amounts ultimately paid to or received from Halliburton under the tax sharing agreement upon final settlement.

As of March 31, 2012, included in "Other assets" is an income tax receivable of approximately $18 million related to a foreign tax credit generated as a result of a final settlement we paid to a foreign taxing authority in 2011 for a disputed tax matter that arose prior to our separation from Halliburton. In order to claim the tax credit, we requested, and Halliburton agreed to and did file an amended U.S. Federal tax return for the period in which the disputed tax liability arose. However, Halliburton notified us that it does not intend to remit to us the refund received or to be received by Halliburton as a result of the amended return. KBR disputes Halliburton's position on this matter and believes it has legal entitlement to the $18 million refund. We intend to vigorously pursue collection of this amount and certain other unrecorded counterclaims. The timing of ultimate resolution of these matters will depend in part on future discussion with Halliburton, which if not fruitful, could lead to arbitration under the terms of the separation agreements.

As discussed above under "Barracuda-Caratinga Project Arbitration," we have recorded an indemnification receivable due from Halliburton of approximately $201 million associated with our estimated liability in the bolts matter which is included in "Other current assets" as of March 31, 2012.

Income Taxes
Income Taxes

Note 10. Income Taxes

Our effective tax rate was approximately 9% for the three months ended March 31, 2012 and 16% for the three months ended March 31, 2011. The U.S. statutory tax rate for all periods was 35%. Excluding discrete items, our effective tax rate was approximately 27% for the three months ended March 31, 2012 and was lower than the U.S. statutory rate due to favorable tax rate differentials on foreign earnings and lower tax expense on foreign income from unincorporated joint ventures. In the first quarter of 2012, we recognized discrete net tax benefits of approximately $20 million including benefits primarily related to deductions arising from an unconsolidated joint venture in Australia as well as the recognition of previously unrecognized tax benefits related to tax positions taken in prior years based on progress in resolving transfer pricing matters with certain taxing jurisdictions.

Our effective tax rate for the three months ended March 31, 2011 was lower than the U.S. statutory rate of 35% due to favorable tax rate differentials on foreign earnings and lower tax expense on foreign income from unincorporated joint ventures. Our effective tax rate excluding discrete items was approximately 32% for the three months ended March 31, 2011. In addition, we recognized discrete tax benefits from the execution of tax planning strategies and from the reduction of deferred tax liabilities recorded in prior periods as a result of changes in estimates of the tax liability that will associated with the pending liquidation of an unconsolidated joint venture in Australia.

 

Shareholders' Equity
Shareholders' Equity

Note 11. Shareholders' Equity

The following table summarizes our shareholders' equity activities during the three months ended March 31, 2012 and 2011:

Accumulated other comprehensive loss consisted of the following balances:

 

     March 31,     December 31,  

Millions of dollars

   2012     2011  

Cumulative translation adjustments

   $ (71   $ (70

Pension liability adjustments

     (466     (471

Unrealized losses on derivatives

     (4     (7
  

 

 

   

 

 

 

Total accumulated other comprehensive loss

   $ (541   $ (548
  

 

 

   

 

 

Fair Value Measurements
Fair Value Measurements

Note 12. Fair Value Measurements

The financial assets and liabilities measured at fair value on a recurring basis at March 31, 2012 are included below:

 

     Fair Value Measurements at Reporting Date Using  

Millions of dollars

   Total Fair Value
at Reporting
Date
     Quoted Prices
in Active
Markets for
Identical Assets

(Level 1)
     Significant
Other
Observable
Inputs

(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
 

Marketable securities

   $ 17       $ 11       $ 6       $ —     

Derivative assets

   $ 4       $ —         $ 4       $ —     

Derivative liabilities

   $ 5       $ —         $ 5       $ —     

Derivative instruments. Currency derivative instruments are carried on the condensed consolidated balance sheet at fair value and are primarily based upon market observable inputs and significant other observable inputs. We manage our currency exposures through the use of foreign currency derivative instruments denominated in our major currencies, which are generally the currencies of the countries for which we do the majority of our international business. We utilize derivative instruments to manage the foreign currency exposures related to specific assets and liabilities that are denominated in foreign currencies, and to manage forecasted cash flows denominated in foreign currencies generally related to long-term engineering and construction projects. The purpose of our foreign currency risk management activities is to protect us from the risk that the eventual dollar cash flow resulting from the sale and purchase of products and services in foreign currencies will be adversely affected by changes in exchange rates.

Marketable securities. We use quoted market prices and other observable inputs to determine the fair value of our marketable securities. These financial instruments primarily consist of mutual funds, exchange-traded fixed income securities and money market accounts.

Equity Method Investments And Variable Interest Entities
Equity Method Investments And Variable Interest Entities

Note 13. Equity Method Investments and Variable Interest Entities

We conduct some of our operations through joint ventures which are in partnership, corporate, undivided interest and other business forms and are principally accounted for using the equity method of accounting. Additionally, the majority of our joint ventures are also variable interest entities which are further described below.

Variable Interest Entities

The majority of our joint ventures are variable interest entities. We account for variable interest entities ("VIEs") in accordance with FASB ASC 810 – Consolidation which requires the consolidation of VIEs in which a company has both the power to direct the activities of the VIE that most significantly impact the VIE's economic performance and the obligation to absorb losses or the right to receive the benefits from the VIE that could potentially be significant to the VIE. If a reporting enterprise meets these conditions then it has a controlling financial interest and is the primary beneficiary of the VIE.

We assess all newly created entities and those with which we become involved to determine whether such entities are VIEs and, if so, whether or not we are their primary beneficiary. Most of the entities we assess are incorporated or unincorporated joint ventures formed by us and our partner(s) for the purpose of executing a project or program for a customer, such as a governmental agency or a commercial enterprise, and are generally dissolved upon completion of the project or program. Many of our long-term energy-related construction projects in our Hydrocarbons business group are executed through such joint ventures. Typically, these joint ventures are funded by advances from the project owner, and accordingly, require little or no equity investment by the joint venture partners but may require subordinated financial support from the joint venture partners such as letters of credit, performance and financial guarantees or obligations to fund losses incurred by the joint venture. Other joint ventures, such as privately financed initiatives in our Ventures business unit, generally require the partners to invest equity and take an ownership position in an entity that manages and operates an asset post construction.

As required by ASC 810-10, we perform a qualitative assessment to determine whether we are the primary beneficiary once an entity is identified as a VIE. Thereafter, we continue to re-evaluate whether we are the primary beneficiary of the VIE in accordance with ASC 810-10. A qualitative assessment begins with an understanding of the nature of the risks in the entity as well as the nature of the entity's activities including terms of the contracts entered into by the entity, ownership interests issued by the entity and how they were marketed, and the parties involved in the design of the entity. We then identify all of the variable interests held by parties involved with the VIE including, among other things, equity investments, subordinated debt financing, letters of credit, and financial and performance guarantees, and significant, contracted service providers. Once we identify the variable interests, we determine those activities which are most significant to the economic performance of the entity and which variable interest holder has the power to direct those activities. Though infrequent, some of our assessments reveal no primary beneficiary because the power to direct the most significant activities that impact the economic performance is held equally by two or more variable interest holders who are required to provide their consent prior to the execution of their decisions. Most of the VIEs with which we are involved have relatively few variable interests and are primarily related to our equity investment, significant service contracts, and other subordinated financial support.

Unconsolidated VIEs

The following is a summary of the significant variable interest entities in which we have a significant variable interest, but we are not the primary beneficiary:

 

     As of March 31, 2012  

Unconsolidated VIEs

   Total assets      Total liabilities      Maximum exposure
to loss
 

(in millions, except for percentages)

        

U.K. Road projects

   $ 1,390       $ 1,522       $ 31   

Fermoy Road project

   $ 229       $ 254       $ 3   

Allenby & Connaught project

   $ 3,027       $ 2,955       $ 49   

EBIC Ammonia project

   $ 704       $ 518       $ 41   

Inpex LNG project

   $ 45       $ 41       $ 30   
  

 

 

    

 

 

    

 

 

 

 

     As of December 31, 2011  

Unconsolidated VIEs

   Total assets      Total liabilities  
(in millions, except for percentages)              

U.K. Road projects

   $ 1,393       $ 1,520   

Fermoy Road project

   $ 228       $ 249   

Allenby & Connaught project

   $ 2,954       $ 2,916   

EBIC Ammonia project

   $ 693       $ 389   
  

 

 

    

 

 

 

U.K. Road projects. We are involved in four privately financed projects, executed through joint ventures, to design, build, operate, and maintain roadways for certain government agencies in the United Kingdom. We have a 25% ownership interest in each of these joint ventures and account for them using the equity method of accounting. The joint ventures have obtained financing through third parties that is nonrecourse to the joint venture partners. These joint ventures are variable interest entities; however, we are not the primary beneficiary of these joint ventures. Our maximum exposure to loss represents our equity investments in these ventures.

Fermoy Road project. We participate in a privately financed project executed through certain joint ventures formed to design, build, operate, and maintain a toll road in southern Ireland. The joint ventures were funded through debt and were formed with minimal equity. These joint ventures are variable interest entities; however, we are not the primary beneficiary of the joint ventures. We have up to a 25% ownership interest in the project's joint ventures, and we are accounting for these interests using the equity method of accounting.

Allenby & Connaught project. In April 2006, Aspire Defence, a joint venture between us, Carillion Plc. and two financial investors, was awarded a privately financed project contract, the Allenby & Connaught project, by the U.K. MoD to upgrade and provide a range of services to the British Army's garrisons at Aldershot and around Salisbury Plain in the United Kingdom. In addition to a package of ongoing services to be delivered over 35 years, the project includes a nine-year construction program to improve soldiers' single living, technical and administrative accommodations, along with leisure and recreational facilities. Aspire Defence manages the existing properties and is responsible for design, refurbishment, construction and integration of new and modernized facilities. We indirectly own a 45% interest in Aspire Defence, the project company that is the holder of the 35-year concession contract. In addition, we own a 50% interest in each of two joint ventures that provide the construction and the related support services to Aspire Defence. As of March 31, 2012, our performance through the construction phase is supported by $43 million in letters of credit. Furthermore, our financial and performance guarantees are joint and several, subject to certain limitations, with our joint venture partners. The project is funded through equity and subordinated debt provided by the project sponsors and the issuance of publicly held senior bonds which are nonrecourse to us. The entities we hold an interest in are variable interest entities; however, we are not the primary beneficiary of these entities. We account for our interests in each of the entities using the equity method of accounting. Our maximum exposure to construction and operating joint venture losses is limited to the funding of any future losses incurred by those entities under their respective contracts with the project company. As of March 31, 2012, our assets and liabilities associated with our investment in this project, within our condensed consolidated balance sheet, were $38 million and $2 million, respectively. The $47 million difference between our recorded liabilities and aggregate maximum exposure to loss was primarily related to our equity investments and $13 million remaining commitment to fund subordinated debt to the project in the future.

 

EBIC Ammonia project. We have an investment in a development corporation that has an indirect interest in the Egypt Basic Industries Corporation ("EBIC") ammonia plant project located in Egypt. We performed the engineering, procurement and construction ("EPC") work for the project and continue to provide operations and maintenance services for the facility. We own 65% of this development corporation and consolidate it for financial reporting purposes. The development corporation owns a 25% ownership interest in a company that consolidates the ammonia plant which is considered a variable interest entity. The development corporation accounts for its investment in the company using the equity method of accounting. The variable interest entity is funded through debt and equity. Indebtedness of EBIC under its debt agreement is non-recourse to us. We are not the primary beneficiary of the variable interest entity. As of March 31, 2012, our assets and liabilities associated with our investment in this project, within our condensed consolidated balance sheet, were $64 million and $3 million, respectively. The $38 million difference between our recorded liabilities and aggregate maximum exposure to loss was related to our investment balance and other receivables in the project as of March 31, 2012.

Inpex LNG project. In January 2012, we signed an agreement to provide fixed-price and cost-reimbursable EPC services to construct the Inpex Ichthys Onshore LNG Export Facility in Darwin, Australia ("Inpex LNG project"). The project will be executed using an onshore and offshore joint venture in which we own a 30% equity interest. The project is accounted for using the equity method of accounting. At March 31, 2012, our assets and liabilities associated with our investment in this project recorded in our condensed consolidated balance were $40 million and $10 million, respectively. The $20 million difference between our recorded liabilities and aggregate maximum exposure to loss was related to our equity investment and other receivables due from the entity as of March 31, 2012.

Consolidated VIEs

The following is a summary of the significant VIEs where we are the primary beneficiary:

 

     As of March 31, 2012  

Consolidated VIEs

   Total assets      Total liabilities  
(in millions, except for percentages)              

Fasttrax Limited project

   $ 107       $ 112   

Escravos Gas-to-Liquids project

   $ 314       $ 369   

Pearl GTL project

   $ 146       $ 141   

Gorgon LNG project

   $ 403       $ 463   
  

 

 

    

 

 

 

 

     As of December 31, 2011  

Consolidated VIEs

   Total assets      Total liabilities  
(in millions, except for percentages)              

Fasttrax Limited project

   $ 103       $ 108   

Escravos Gas-to-Liquids project

   $ 326       $ 381   

Pearl GTL project

   $ 153       $ 146   

Gorgon LNG project

   $ 546       $ 607   
  

 

 

    

 

 

 

Fasttrax Limited project. In December 2001, the Fasttrax Joint Venture (the "JV") was created to provide to the United Kingdom Ministry of Defense ("MOD") a fleet of new heavy equipment transporters ("HETs") capable of carrying a Challenger II tank. The JV owns, operates and maintains the HET fleet and provides heavy equipment transportation services to the British Army. The JV's entity structure includes a parent entity and its 100%-owned subsidiary, Fasttrax Ltd (the "SPV"). KBR and its partner each own 50% of the parent entity.

The JV's purchase of the assets was funded through the issuance of several series guaranteed secured bonds. The bonds are guaranteed by Ambac Assurance U.K. Ltd under a policy that guarantees the schedule of principal and interest payments to the bond trustee in the event of non-payment by Fasttrax. The total amount of non-recourse project-finance debt of a VIE consolidated by KBR at March 31, 2012, is summarized in the following table and are also reflected on the face of our condensed consolidated balance sheet as "Non-recourse project-finance debt." The secured bonds are an obligation of Fasttrax Limited and will never be a debt obligation of KBR because they are non-recourse to the joint venture partners. Accordingly, in the event of a default on the term loan, the lenders may only look to the resources of Fasttrax Limited for repayment. Assets collateralizing the JV's senior bonds include cash and equivalents of $27 million and property, plant, and equipment of approximately $74 million, net of accumulated depreciation of $47 million as of March 31, 2012.

 

Consolidated amounts of non-recourse project-finance debt of a VIE

 

Millions of Dollars

   March 31, 2012  

Current non-recourse project-finance debt of a variable interest entity

   $ 10   

Noncurrent non-recourse project-finance debt of a variable interest entity

   $ 90   
  

 

 

 

Total non-recourse project-finance debt of a variable interest entity

   $ 100   
  

 

 

 

Escravos Gas-to-Liquids ("GTL") project. During 2005, we formed a joint venture to engineer and construct a gas monetization facility. We own 50% equity interest in the joint venture and determined that we are the primary beneficiary which is consolidated for financial reporting purposes. There are no consolidated assets that collateralize the joint venture's obligations. However, at March 31, 2012 and December 31, 2011, the joint venture had approximately $86 million and $119 million of cash, respectively, which mainly relate to advanced billings in connection with the joint venture's obligations under the EPC contract.

Pearl GTL project. In July 2006, we were awarded, through a 50%-owned joint venture, a contract with Qatar Shell GTL Limited to provide project management and cost-reimbursable engineering, procurement and construction management services for the Pearl GTL project in Ras Laffan, Qatar. The project, which was substantially complete as of December 31, 2011, consists of gas production facilities and a GTL plant. The joint venture is considered a VIE. We consolidate the joint venture for financial reporting purposes because we are the primary beneficiary.

Gorgon LNG project. We have a 30% ownership in an Australian joint venture which was awarded a contract by Chevron for cost-reimbursable FEED and EPCM services to construct a LNG plant. The joint venture is considered a VIE, and, as a result of our being the primary beneficiary, we consolidate this joint venture for financial reporting purposes.

Retirement Plans
Retirement Plans

Note 14. Retirement Plans

The components of net periodic benefit cost related to pension benefits for the three months ended March 31, 2012 and 2011 were as follows:

 

     Three Months Ended March 31,  
     2012     2011  

Millions of dollars

   United
States
    International     United
States
    International  

Components of net periodic benefit cost:

        

Service cost

   $ —        $ 1      $ —        $ —     

Interest cost

     1        20        1        21   

Expected return on plan assets

     (1     (23     (1     (24

Recognized actuarial loss

     1        6        —          5   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

   $ 1      $ 4      $ —        $ 2   
  

 

 

   

 

 

   

 

 

   

 

 

 

For the three months ended March 31, 2012, we contributed approximately $7 million of the $26 million we currently expect to contribute to our international plans in 2012, and approximately $1 million of the $4 million we currently expect to contribute to our domestic plans in 2012.

Recent Accounting Pronouncements
Recent Accounting Pronouncements

Note 15. Recent Adopted Accounting Pronouncements

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. This ASU allows an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments to the Codification in the ASU do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. ASU 2011-05 should be applied retrospectively and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this accounting standard did not to have a material impact on our financial position, results of operations, cash flows and disclosures.

 

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU represents the converged guidance of the FASB and the IASB (the Boards) on fair value measurement. The collective efforts of the Boards and their staffs, reflected in ASU 2011-04, have resulted in common requirements for measuring fair value and for disclosing information about fair value measurements, including a consistent meaning of the term "fair value." The Boards have concluded the common requirements will result in greater comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRSs. The amendments in this ASU are to be applied prospectively during interim and annual periods beginning after December 15, 2011. The adoption of this accounting standard did not to have a material impact on our financial position, results of operations, cash flows and disclosures.

Description Of Business And Basis Of Presentation (Policy)

The preparation of our condensed consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the balance sheet dates and the reported amounts of revenue and costs during the reporting periods. Actual results could differ materially from those estimates. On an ongoing basis, we review our estimates based on information currently available, and changes in facts and circumstances may cause us to revise these estimates.

Our condensed consolidated financial statements include the accounts of majority-owned, controlled subsidiaries and variable interest entities where we are the primary beneficiary. The equity method is used to account for investments in affiliates in which we have the ability to exert significant influence over the operating and financial policies of the entity. The cost method is used when we do not have the ability to exert significant influence. Intercompany accounts and transactions are eliminated.

Income Per Share (Tables)
Schedule Of Basic And Diluted Income Per Share
     Three Months Ended
March  31,
 

Millions of shares

   2012      2011  

Basic weighted average common shares outstanding

     148         151   

Stock options and restricted shares

     1         1   
  

 

 

    

 

 

 

Diluted weighted average common shares outstanding

     149         152   
  

 

 

    

 

 

 
Percentage-Of-Completion Contracts (Tables)
Schedule Of Unapproved Claims And Change Orders
     March 31,      December 31,  

Millions of dollars

   2012      2011  

Probable unapproved claims

   $ 89       $ 31   

Probable unapproved change orders

   $ 5       $ 6   
  

 

 

    

 

 

 
Business Segment Information (Tables)
Schedule Of Operations By Reportable Segment
     Three Months Ended
March  31,
 

Millions of dollars

   2012     2011  

Revenue:

    

Hydrocarbons

   $ 1,116      $ 1,047   

Infrastructure, Government and Power

     518        855   

Services

     348        397   

Other

     19        22   
  

 

 

   

 

 

 

Total revenue

   $ 2,001      $ 2,321   
  

 

 

   

 

 

 

Operating segment income:

    

Hydrocarbons

   $ 105      $ 99   

Infrastructure, Government and Power

     39        61   

Services

     12        13   

Other

     10        12   
  

 

 

   

 

 

 

Operating segment income

     166        185   

Unallocated amounts:

    

Labor cost absorption

     1        3   

Corporate general and administrative

     (55     (44
  

 

 

   

 

 

 

Total operating income

   $ 112      $ 144   
  

 

 

   

 

 

 
Shareholders' Equity (Tables)
     March 31,     December 31,  

Millions of dollars

   2012     2011  

Cumulative translation adjustments

   $ (71   $ (70

Pension liability adjustments

     (466     (471

Unrealized losses on derivatives

     (4     (7
  

 

 

   

 

 

 

Total accumulated other comprehensive loss

   $ (541   $ (548
  

 

 

   

 

 

Fair Value Measurements (Tables)
Schedule Of Financial Assets And Liabilities Measured At Fair Value
     Fair Value Measurements at Reporting Date Using  

Millions of dollars

   Total Fair Value
at Reporting
Date
     Quoted Prices
in Active
Markets for
Identical Assets

(Level 1)
     Significant
Other
Observable
Inputs

(Level 2)
     Significant
Unobservable
Inputs

(Level 3)
 

Marketable securities

   $ 17       $ 11       $ 6       $ —     

Derivative assets

   $ 4       $ —         $ 4       $ —     

Derivative liabilities

   $ 5       $ —         $ 5       $ —     
Equity Method Investments And Variable Interest Entities (Tables)

The following is a summary of the significant variable interest entities in which we have a significant variable interest, but we are not the primary beneficiary:

 

     As of March 31, 2012  

Unconsolidated VIEs

   Total assets      Total liabilities      Maximum exposure
to loss
 

(in millions, except for percentages)

        

U.K. Road projects

   $ 1,390       $ 1,522       $ 31   

Fermoy Road project

   $ 229       $ 254       $ 3   

Allenby & Connaught project

   $ 3,027       $ 2,955       $ 49   

EBIC Ammonia project

   $ 704       $ 518       $ 41   

Inpex LNG project

   $ 45       $ 41       $ 30   
  

 

 

    

 

 

    

 

 

 

 

     As of December 31, 2011  

Unconsolidated VIEs

   Total assets      Total liabilities  
(in millions, except for percentages)              

U.K. Road projects

   $ 1,393       $ 1,520   

Fermoy Road project

   $ 228       $ 249   

Allenby & Connaught project

   $ 2,954       $ 2,916   

EBIC Ammonia project

   $ 693       $ 389   
  

 

 

    

 

 

 
     As of March 31, 2012  

Consolidated VIEs

   Total assets      Total liabilities  
(in millions, except for percentages)              

Fasttrax Limited project

   $ 107       $ 112   

Escravos Gas-to-Liquids project

   $ 314       $ 369   

Pearl GTL project

   $ 146       $ 141   

Gorgon LNG project

   $ 403       $ 463   
  

 

 

    

 

 

 

 

     As of December 31, 2011  

Consolidated VIEs

   Total assets      Total liabilities  
(in millions, except for percentages)              

Fasttrax Limited project

   $ 103       $ 108   

Escravos Gas-to-Liquids project

   $ 326       $ 381   

Pearl GTL project

   $ 153       $ 146   

Gorgon LNG project

   $ 546       $ 607   
  

 

 

    

 

 

 

Millions of Dollars

   March 31, 2012  

Current non-recourse project-finance debt of a variable interest entity

   $ 10   

Noncurrent non-recourse project-finance debt of a variable interest entity

   $ 90   
  

 

 

 

Total non-recourse project-finance debt of a variable interest entity

   $ 100   
  

 

 

 
Retirement Plans (Tables)
Components Of Net Periodic Benefit Cost
     Three Months Ended March 31,  
     2012     2011  

Millions of dollars

   United
States
    International     United
States
    International  

Components of net periodic benefit cost:

        

Service cost

   $ —        $ 1      $ —        $ —     

Interest cost

     1        20        1        21   

Expected return on plan assets

     (1     (23     (1     (24

Recognized actuarial loss

     1        6        —          5   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net periodic benefit cost

   $ 1      $ 4      $ —        $ 2   
  

 

 

   

 

 

   

 

 

   

 

 

 
Income Per Share (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Income Per Share [Abstract]
 
 
Net earnings allocated to participating securities
$ 0.4 
$ 0.5 
Anti-dilutive weighted average shares
0.6 
 
Income Per Share (Schedule Of Basic And Diluted Weighted Average Common Shares Outstanding) (Details)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Income Per Share [Abstract]
 
 
Basic weighted average common shares outstanding
148 
151 
Stock options and restricted shares
Diluted weighted average common shares outstanding
149 
152 
Business Combinations And Other Transactions (Details)
In Millions, unless otherwise specified
3 Months Ended 1 Months Ended 3 Months Ended 0 Months Ended 3 Months Ended
Sep. 30, 2011
USD ($)
Dec. 31, 2010
MWKL [Member]
USD ($)
Dec. 31, 2010
MWKL [Member]
GBP (£)
Mar. 31, 2012
MWKL [Member]
USD ($)
Jan. 5, 2011
MWKL [Member]
USD ($)
Jan. 5, 2011
LNG Joint Venture [Member]
USD ($)
Mar. 31, 2011
LNG Joint Venture [Member]
USD ($)
Business Acquisition [Line Items]
 
 
 
 
 
 
 
Percentage of ownership acquired
 
44.94% 
44.94% 
 
 
 
 
Purchase price to acquire entity
 
 
 
 
$ 164 
 
 
Net cash paid related to settlement
 
 
107 
 
 
 
 
Decrease to paid-in capital in excess of par
 
 
 
 
 
 
Business acquisition, reduction in noncontrolling interests, accumulated other comprehensive income and additional paid-in capital
 
180 
 
 
 
 
 
Direct charge to additional paid in capital
 
 
 
 
 
 
Percentage payable to the former noncontrolling interest of future proceeds collected on certain receivables
 
44.94% 
44.94% 
 
 
 
 
Percentage of indemnification by the former noncontrolling interest of certain liabilities to be settled and paid in the future
 
44.94% 
44.94% 
 
 
 
 
Obligation to former noncontrolling interest, noncurrent
 
 
 
 
 
 
Obligation to former noncontrolling interest, current
 
 
 
 
 
 
Percentage of future proceeds owed to Noncontrolling Interest
 
 
 
44.94 
 
 
 
Percentage interest in unconsolidated joint venture sold
 
 
 
 
 
50.00% 
 
Sale of interest in joint venture
 
 
 
 
 
22 
 
Recognized gain on sale of interest in joint ventures
 
 
 
 
 
 
$ 8 
Percentage-Of-Completion Contracts (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Dec. 31, 2011
Percentage-Of-Completion Contracts [Abstract]
 
 
Additional contract revenue
$ 59 
 
Probable unapproved claims likely not to be settled within one year
19 
19 
Liquidated damages
$ 11 
$ 11 
Percentage-Of-Completion Contracts (Schedule Of Unapproved Claims And Change Orders) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Dec. 31, 2011
Percentage-Of-Completion Contracts [Abstract]
 
 
Additional contract revenue
$ 59 
 
Probable unapproved claims
89 
31 
Probable unapproved change orders
$ 5 
$ 6 
Business Segment Information (Schedule Of Operations By Reportable Segment) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Segment Reporting Information [Line Items]
 
 
Total revenue
$ 2,001 
$ 2,321 
Corporate general and administrative
(55)
(44)
Total operating income
112 
144 
Hydrocarbons [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Total revenue
1,116 
1,047 
Total operating income
105 
99 
Infrastructure, Government And Power [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Total revenue
518 
855 
Total operating income
39 
61 
Services [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Total revenue
348 
397 
Total operating income
12 
13 
Other [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Total revenue
19 
22 
Total operating income
10 
12 
Operating Segment Income [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Total operating income
166 
185 
Unallocated Amounts [Member]
 
 
Segment Reporting Information [Line Items]
 
 
Labor cost absorption
Corporate general and administrative
$ (55)
$ (44)
Committed And Restricted Cash (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2012
Dec. 31, 2011
Committed And Restricted Cash [Abstract]
 
 
Consolidated cash held by joint ventures
$ 194 
$ 244 
United States Government Contract Work (Details) (USD $)
3 Months Ended 1 Months Ended 3 Months Ended 1 Months Ended 1 Months Ended 28 Months Ended 3 Months Ended 10 Months Ended
Mar. 31, 2011
Apr. 30, 2008
Mar. 31, 2012
All DCAA Audit Issues [Member]
Mar. 31, 2012
Private Security [Member]
Dec. 31, 2007
Private Security [Member]
Apr. 30, 2008
Containers [Member]
Mar. 31, 2012
Containers [Member]
Mar. 31, 2011
Containers [Member]
Mar. 31, 2012
Dining Facilities [Member]
Mar. 31, 2011
Transportation Costs [Member]
Feb. 29, 2012
Construction Services [Member]
Mar. 31, 2012
Construction Services [Member]
Sep. 30, 2010
Construction Services [Member]
Apr. 30, 2008
First Kuwaiti Trading Company Arbitration [Member]
Feb. 28, 2011
Burn Pit Litigation [Member]
Mar. 31, 2012
Sodium Dichromate Litigation [Member]
Sep. 30, 2009
Sodium Dichromate Litigation [Member]
Mar. 31, 2012
Claims [Member]
Mar. 31, 2011
Fly America Act [Member]
Transportation Costs [Member]
Mar. 31, 2011
LogCAP III Contract [Member]
Transportation Costs [Member]
United States Government Contract Work [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Award fees
$ 16,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total amount of DCAA Form 1's - Notice of contract costs suspended and/or disapproved issued to the enterprise
 
 
352,000,000 
103,000,000 
 
 
51,000,000 
25,000,000 
124,000,000 
 
 
 
25,000,000 
51,000,000 
 
 
 
 
6,000,000 
27,000,000 
DCAA Form 1 total withholding(s) of payments from remittances on contract billings
 
 
146,000,000 
45,000,000 
 
 
26,000,000 
 
66,000,000 
 
 
9,000,000 
 
 
 
 
 
 
 
 
Total amount of payments withheld from subcontractors as a result of disapproved costs related to DCAA Form 1's issued to the enterprise
 
 
64,000,000 
 
 
 
30,000,000 
 
25,000,000 
 
 
 
 
 
 
 
 
 
 
 
Total amount of payment demanded by the DCAA in demand letters issued for disapproved costs related to DCAA Form 1's issued
 
 
98,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DCAA Form 1 initial assessment and withholding(s) from remittances on contract billings
 
 
 
 
20,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Estimated percentage of the total subcontract costs related to the private security costs
 
 
 
 
6.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DCAA Form 1 disapproval of contract costs in addition to the initial assessment
 
 
 
 
83,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DCAA Form 1 withholding(s) from remittances on contract billings in addition to the initially-withheld amount
 
 
 
25,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Appeal to recover the DCAA Form 1 withhold from remittances on contract billings
 
 
 
 
44,000,000 
 
 
 
55,000,000 
 
 
 
 
 
 
 
 
 
 
 
Amount of counterclaims filed by the enterprise against a subcontractor
 
 
 
 
 
51,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum number of deployment days in the contractor rotation terms under the LogCAP III contract
 
 
 
 
 
 
 
 
 
179 
 
 
 
 
 
 
 
 
 
 
Potentially unallowable costs agreed to allowable
 
 
 
 
 
 
 
 
 
 
10,000,000 
 
 
 
 
 
 
 
 
 
Potentially unallowable costs
 
 
 
 
 
 
 
 
 
 
15,000,000 
 
 
 
 
 
 
 
 
 
Total claim by subcontractor related to leased vehicles
 
 
 
 
 
 
 
 
 
 
 
 
 
134,000,000 
 
 
 
 
 
 
Amount of subcontractor claims that have been subject to arbitration hearings
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Partial arbitration award to subcontractor for damages
 
 
 
 
 
 
 
 
 
 
 
 
 
16,000,000 
 
 
 
 
 
 
Number of lawsuits the enterprise has been served, minimum
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50 
 
five 
 
 
 
Number of individual plaintiffs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
250 
170 
 
 
 
 
Costs incurred for unapproved claims under various government contracts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
192,000,000 
 
 
Amount of unapproved claims included in accounts receivable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
106,000,000 
 
 
Amount of unapproved claims included in unbilled receivables on uncompleted contracts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 86,000,000 
 
 
Other Commitments And Contingencies (Details)
3 Months Ended 1 Months Ended 0 Months Ended 1 Months Ended 12 Months Ended
Mar. 31, 2012
USD ($)
Sep. 30, 2011
Barracuda-Caratinga Project [Member]
USD ($)
Mar. 31, 2006
Barracuda-Caratinga Project [Member]
USD ($)
Mar. 31, 2012
Barracuda-Caratinga Project [Member]
USD ($)
Apr. 1, 2001
FAO Litigation [Member]
EUR (€)
Nov. 2, 2010
PEMEX [Member]
USD ($)
Dec. 31, 2009
PEMEX [Member]
USD ($)
Dec. 31, 2004
PEMEX [Member]
USD ($)
Mar. 31, 2012
PEMEX [Member]
USD ($)
Dec. 31, 1998
PEMEX [Member]
Mar. 31, 2012
Letters Of Credit, Surety Bonds And Bank Guarantees [Member]
USD ($)
Mar. 31, 2012
Letters Of Credit, Surety Bonds And Bank Guarantees [Member]
Credit Agreement Member
USD ($)
Mar. 31, 2012
Letters Of Credit, Surety Bonds And Bank Guarantees [Member]
Uncommitted Bank Lines [Member]
USD ($)
Loss Contingencies [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount awarded by arbitration panel including legal and administrative recovery fees and interest
 
$ 193,000,000 
 
 
 
 
 
 
 
 
 
 
 
Accrual for Barracuda-Caratinga Project arbitration award
 
 
 
201,000,000 
 
 
 
 
 
 
 
 
 
Indemnification receivable from former parent related to the Barracuda-Caratinga Project, included in other current assets
201,000,000 
 
 
201,000,000 
 
 
 
 
 
 
 
 
 
Number of contracts for offshore platforms, pipelines and related structures
 
 
 
 
 
 
 
 
 
 
 
 
Amount of arbitration claim filed by enterprise
 
 
 
 
 
 
 
323,000,000 
 
 
 
 
 
Loss Contingency, Damages Sought, Value
 
 
220,000,000 
 
 
 
 
157,000,000 
 
 
 
 
 
Amount awarded to enterprise in arbitration
 
 
 
 
 
 
351,000,000 
 
 
 
 
 
 
Amount of judgment in favor of enterprise
 
 
 
 
 
356,000,000 
 
 
 
 
 
 
 
Amount of counterclaims awarded to project owner in arbitration
 
 
 
 
 
 
6,000,000 
 
 
 
 
 
 
Amount of gain after income taxes recognized by enterprise as a result of arbitration award
 
 
 
 
 
 
117,000,000 
 
 
 
 
 
 
Amount required for collateral from project owner
 
 
 
 
 
395,000,000 
 
 
 
 
 
 
 
Performance bonds outstanding since inception of project
 
 
 
 
 
 
 
 
80,000,000 
 
 
 
 
Loss contingency settlement agreement terms
Although it is possible we could resolve and collect the amounts due from PEMEX in the next 12 months, we believe the timing of the collection of the award is uncertain and therefore, we have continued to classify the amount due from PEMEX as a long term receivable included in "Noncurrent unbilled receivable on uncompleted contracts" as of March 31, 2012. 
 
 
 
 
 
 
 
 
 
 
 
 
Initial value of contracts
 
 
 
 
113,000,000 
 
 
 
 
 
 
 
 
Committed and uncommitted lines of credit, total
 
 
 
 
 
 
 
 
 
 
2,000,000,000 
 
 
Letters of credit, outstanding amount
 
 
 
 
 
 
 
 
 
 
708,000,000 
219,000,000 
489,000,000 
Letters of credit additional cash collateralization
 
 
 
 
 
 
 
 
 
 
10,000,000 
 
 
Letters of credit outstanding relate to joint venture operations
 
 
 
 
 
 
 
 
 
 
293,000,000 
 
 
Committed funds for privately financed projects supported by letters of credit, current
 
 
 
 
 
 
 
 
 
 
$ 13,000,000 
 
 
Transactions With Former Parent (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2012
Transactions With Former Parent [Abstract]
 
Total amount due to former parent, net
$ 53 
Amount due to former parent under tax sharing agreement
45 
Amount due to former parent, other
Amount due from former parent related to foreign tax credit
18 
Disputed amount of foreign tax credit due from former parent
18 
Indemnification receivable from former parent related to the Barracuda-Caratinga Project, included in other current assets
$ 201 
Income Taxes (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Income Taxes [Abstract]
 
 
Effective income tax rate
9.00% 
16.00% 
Statutory income tax rate
35.00% 
35.00% 
Effective income tax rate, excluding discrete items
27.00% 
32.00% 
Other Tax Expense (Benefit)
$ (20)
 
Shareholders' Equity (Shareholders' Equity Activities) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
Shareholders Equity [Line Items]
 
 
Beginning Balance
$ 2,442 
$ 2,204 
Stock-based compensation
Common stock issued upon exercise of stock options
Tax benefit increase related to stock-based plans
Dividends declared to shareholders
(7)
(8)
Repurchases of common stock
(7)
(2)
Issuance of ESPP shares
 
Distributions to noncontrolling interests
(5)
(37)
Net income
98 
117 
Other comprehensive income, net of tax
Ending Balance
2,538 
2,289 
Paid-In Capital In Excess Of Par [Member]
 
 
Shareholders Equity [Line Items]
 
 
Beginning Balance
2,005 
1,981 
Stock-based compensation
Common stock issued upon exercise of stock options
Tax benefit increase related to stock-based plans
Ending Balance
2,014 
1,989 
Retained Earnings [Member]
 
 
Shareholders Equity [Line Items]
 
 
Beginning Balance
1,607 
1,157 
Tax benefit increase related to stock-based plans
   
 
Dividends declared to shareholders
(7)
(8)
Net income
91 
105 
Ending Balance
1,691 
1,254 
Treasury Stock [Member]
 
 
Shareholders Equity [Line Items]
 
 
Beginning Balance
(569)
(454)
Tax benefit increase related to stock-based plans
   
 
Repurchases of common stock
(7)
(2)
Issuance of ESPP shares
 
Ending Balance
(576)
(455)
Accumulated Other Comprehensive Loss [Member]
 
 
Shareholders Equity [Line Items]
 
 
Beginning Balance
(548)
(438)
Tax benefit increase related to stock-based plans
   
 
Other comprehensive income, net of tax
Ending Balance
(541)
(432)
Noncontrolling Interests [Member]
 
 
Shareholders Equity [Line Items]
 
 
Beginning Balance
(53)
(42)
Tax benefit increase related to stock-based plans
   
 
Distributions to noncontrolling interests
(5)
(37)
Net income
12 
Other comprehensive income, net of tax
 
Ending Balance
$ (50)
$ (67)
Shareholders' Equity (Accumulated Other Comprehensive Loss) (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2012
Dec. 31, 2011
Shareholders' Equity [Abstract]
 
 
Cumulative translation adjustments
$ (71)
$ (70)
Pension liability adjustments
(466)
(471)
Unrealized gains (losses) on derivatives
(4)
(7)
Total accumulated other comprehensive loss
$ (541)
$ (548)
Fair Value Measurements (Schedule Of Financial Assets And Liabilities Measured At Fair Value) (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2012
Total Fair Value At Reporting Date [Member]
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
Marketable securities
$ 17 
Derivative assets
Derivative liabilities
Quoted Prices In Active Markets For Identical Assets (Level 1) [Member]
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
Marketable securities
11 
Significant Other Observable Inputs (Level 2) [Member]
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
Marketable securities
Derivative assets
Derivative liabilities
Significant Unobservable Inputs (Level 3) [Member]
 
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
 
Marketable securities
   
Derivative assets
   
Derivative liabilities
   
Equity Method Investments And Variable Interest Entities (Narrative) (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 1 Months Ended 3 Months Ended 3 Months Ended 1 Months Ended 3 Months Ended
Mar. 31, 2012
Dec. 31, 2011
Mar. 31, 2012
Aspire Defence [Member]
Mar. 31, 2012
Fermoy Road Project [Member]
Mar. 31, 2012
U.K. Road Projects [Member]
Apr. 30, 2006
Allenby And Connaught Project [Member]
Mar. 31, 2012
Allenby And Connaught Project [Member]
Mar. 31, 2012
Construction And Related Support Services Joint Ventures [Member]
Mar. 31, 2012
EBIC Ammonia Project [Member]
Mar. 31, 2012
EBIC Ammonia Project [Member]
KBR [Member]
Mar. 31, 2012
EBIC Ammonia Project [Member]
Development Corporation [Member]
Mar. 31, 2012
Inpex LNG Project [Member]
Mar. 31, 2012
Inpex LNG Project [Member]
KBR [Member]
Mar. 31, 2012
Fasttrax Limited Project [Member]
Mar. 31, 2012
Escravos Gas-To-Liquids Project [Member]
Dec. 31, 2011
Escravos Gas-To-Liquids Project [Member]
Jul. 31, 2006
Pearl GTL Project [Member]
Mar. 31, 2012
Gorgon LNG Project [Member]
Schedule of Equity Method Investments [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage interest in unconsolidated joint venture sold
 
 
 
 
 
 
 
 
 
 
 
 
30.00% 
 
 
 
 
 
Variable interest entity, ownership percentage
 
 
45.00% 
25.00% 
25.00% 
 
 
50.00% 
 
 
 
 
 
 
50.00% 
 
50.00% 
30.00% 
Term of contracted services portion of project (in years)
 
 
 
 
 
35 
 
 
 
 
 
 
 
 
 
 
 
 
Term of construction portion of project (in years)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount of letters of credit supporting construction portion
 
 
 
 
 
 
$ 43 
 
 
 
 
 
 
 
 
 
 
 
Amount of assets associated with our investment in a project on a unconsolidated VIE that is reported within our condensed consolidated balance sheet
 
 
 
 
 
 
38 
 
64 
 
 
40 
 
 
 
 
 
 
Amount of liabilities associated with our investment in a project on a unconsolidated VIE that is reported within our condensed consolidated balance sheet
 
 
 
 
 
 
 
 
 
10 
 
 
 
 
 
 
Ownership percentage the enterprise has in a development company that has a minority interest in a VIE
 
 
 
 
 
 
 
 
 
65.00% 
 
 
 
 
 
 
 
 
Development company's ownership interest in a company that consolidates a VIE
 
 
 
 
 
 
 
 
 
 
25.00% 
 
 
 
 
 
 
 
Difference between our recorded liabilities and aggregate maximum exposure to loss
 
 
 
 
 
 
47 
 
38 
 
 
20 
 
 
 
 
 
 
Committed funds for privately financed projects supported by letters of credit, current
 
 
 
 
 
 
13 
 
 
 
 
 
 
 
 
 
 
 
Percentage of subsidiary owned by the parent entity
 
 
 
 
 
 
 
 
 
 
 
 
 
100.00% 
 
 
 
 
Assets collateralizing the Joint Venture's senior bonds, cash and equivalents
 
 
 
 
 
 
 
 
 
 
 
 
 
27 
 
 
 
 
Assets collateralizing the Joint Venture's senior bonds, property, plant and equipment
 
 
 
 
 
 
 
 
 
 
 
 
 
74 
 
 
 
 
Assets collateralizing the Joint Venture's senior bonds, accumulated depreciation of related property, plant and equipment
 
 
 
 
 
 
 
 
 
 
 
 
 
47 
 
 
 
 
Consolidated cash held by joint ventures
$ 194 
$ 244 
 
 
 
 
 
 
 
 
 
 
 
 
$ 86 
$ 119 
 
 
Equity Method Investments And Variable Interest Entities (Summary Of Unconsolidated Variable Interest Entities) (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2012
Dec. 31, 2011
U.K. Road Projects [Member]
 
 
Schedule of Equity Method Investments [Line Items]
 
 
Unconsolidated VIEs, Total assets
$ 1,390 
$ 1,393 
Unconsolidated VIEs, Total liabilities
1,522 
1,520 
Maximum exposure to loss
31 
 
Fermoy Road Project [Member]
 
 
Schedule of Equity Method Investments [Line Items]
 
 
Unconsolidated VIEs, Total assets
229 
228 
Unconsolidated VIEs, Total liabilities
254 
249 
Maximum exposure to loss
 
Allenby And Connaught Project [Member]
 
 
Schedule of Equity Method Investments [Line Items]
 
 
Unconsolidated VIEs, Total assets
3,027 
2,954 
Unconsolidated VIEs, Total liabilities
2,955 
2,916 
Maximum exposure to loss
49 
 
EBIC Ammonia Project [Member]
 
 
Schedule of Equity Method Investments [Line Items]
 
 
Unconsolidated VIEs, Total assets
704 
693 
Unconsolidated VIEs, Total liabilities
518 
389 
Maximum exposure to loss
41 
 
Inpex LNG Project [Member]
 
 
Schedule of Equity Method Investments [Line Items]
 
 
Unconsolidated VIEs, Total assets
45 
 
Unconsolidated VIEs, Total liabilities
41 
 
Maximum exposure to loss
$ 30 
 
Equity Method Investments And Variable Interest Entities (Schedule Of Consolidated Variable Interest Entities) (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2012
Dec. 31, 2011
Fasttrax Limited Project [Member]
 
 
Schedule of Equity Method Investments [Line Items]
 
 
Consolidated VIEs, Total assets
$ 107 
$ 103 
Consolidated VIEs, Total liabilities
112 
108 
Escravos Gas-To-Liquids Project [Member]
 
 
Schedule of Equity Method Investments [Line Items]
 
 
Consolidated VIEs, Total assets
314 
326 
Consolidated VIEs, Total liabilities
369 
381 
Pearl GTL Project [Member]
 
 
Schedule of Equity Method Investments [Line Items]
 
 
Consolidated VIEs, Total assets
146 
153 
Consolidated VIEs, Total liabilities
141 
146 
Gorgon LNG Project [Member]
 
 
Schedule of Equity Method Investments [Line Items]
 
 
Consolidated VIEs, Total assets
403 
546 
Consolidated VIEs, Total liabilities
$ 463 
$ 607 
Equity Method Investments And Variable Interest Entities (Consolidated Amounts Of Non-Recourse Project-Finance Debt Of A VIE) (Details) (USD $)
In Millions, unless otherwise specified
Mar. 31, 2012
Dec. 31, 2011
Equity Method Investments And Variable Interest Entities [Abstract]
 
 
Current non-recourse project-finance debt of a variable interest entity
$ 10 
$ 10 
Noncurrent non-recourse project-finance debt of a variable interest entity
90 
88 
Total non-recourse project-finance debt of a variable interest entity
$ 100 
 
Retirement Plans (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2012
Mar. 31, 2011
International Pension Benefits [Member]
 
 
Defined Benefit Plan Disclosure [Line Items]
 
 
Service cost
$ 1 
 
Interest cost
20 
21 
Expected return on plan assets
(23)
(24)
Recognized actuarial loss
Net periodic benefit cost
Defined Benefit Plan, contributions by employer
 
Defined benefit plan, estimated total employer contributions in current fiscal year
26 
 
United States Pension Benefits [Member]
 
 
Defined Benefit Plan Disclosure [Line Items]
 
 
Interest cost
Expected return on plan assets
(1)
(1)
Recognized actuarial loss
 
Net periodic benefit cost
 
Defined Benefit Plan, contributions by employer
 
Defined benefit plan, estimated total employer contributions in current fiscal year
$ 4