Foster Wheeler Ltd - Quarterly Report (10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 28, 2008


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

For the transition period from to

Commission File Number 001-31305

FOSTER WHEELER LTD.

(Exact name of registrant as specified in its charter)


Bermuda		22-3802649
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Perryville Corporate Park
Clinton, New Jersey		08809-4000
(Address of principal executive offices)		(Zip Code)

(908) 730-4000
(Registrant’s telephone number, including area code)

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

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


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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 144,146,806 common shares ($0.01 par value) were outstanding as of April 25, 2008.

FOSTER WHEELER LTD.
INDEX


Part I FINANCIAL INFORMATION

Item 1 – Financial Statements (Unaudited):

Condensed Consolidated Statement of Operations for the Three Months Ended March 28, 2008 and March 30, 2007

Condensed Consolidated Balance Sheet as of March 28, 2008 and December 28, 2007

Condensed Consolidated Statement of Changes in Shareholders’ Equity for the Three Months Ended March 28, 2008 and March 30, 2007

Condensed Consolidated Statement of Comprehensive Income for the Three Months Ended March 28, 2008 and March 30, 2007

Condensed Consolidated Statement of Cash Flows for the Three Months Ended March 28, 2008 and March 30, 2007

Notes to Condensed Consolidated Financial Statements

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3 – Quantitative and Qualitative Disclosures about Market Risk

Item 4 – Controls and Procedures

Part II OTHER INFORMATION

Item 1 – Legal Proceedings

Item 1A – Risk Factors

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

Item 3 – Defaults Upon Senior Securities

Item 4 – Submission of Matters to a Vote of Security Holders

Item 5 – Other Information

Item 6 – Exhibits

Signatures
EX-10.3: EMPLOYMENT AGREEMENT
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32.1: CERTIFICATION
EX-32.2: CERTIFICATION

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

FOSTER WHEELER LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(in thousands of dollars, except per share amounts)

(unaudited)


	Three Months Ended
	March 28,			March 30,
	2008			2007
Operating revenues	$	1,795,724		$	1,152,122
Cost of operating revenues		(1,578,753	)		(944,610	)

Contract profit		216,971			207,512

Selling, general and administrative expenses		(64,896	)		(55,088	)
Other income		19,534			5,764
Other deductions		(11,891	)		(8,172	)
Interest income		10,531			5,752
Interest expense		(6,151	)		(4,725	)
Minority interest in income of consolidated affiliates		(473	)		(2,309	)
Net asbestos-related gain		14,188			—

Income before income taxes		177,813			148,734
Provision for income taxes		(39,750	)		(33,909	)

Net income	$	138,063		$	114,825


Earnings per common share (see Note 1):
Basic	$	0.96		$	0.82

Diluted	$	0.95		$	0.80

See notes to condensed consolidated financial statements.

FOSTER WHEELER LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

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

(unaudited)


	March 28,			December 28,
	2008			2007
ASSETS
Current Assets:
Cash and cash equivalents	$	1,160,191		$	1,048,544
Accounts and notes receivable, net:
Trade		575,171			580,883
Other		134,113			98,708
Contracts in process		239,918			239,737
Prepaid, deferred and refundable income taxes		39,162			36,532
Other current assets		44,798			39,979

Total current assets		2,193,353			2,044,383

Land, buildings and equipment, net		349,903			337,485
Restricted cash		36,183			20,937
Notes and accounts receivable — long-term		2,564			2,941
Investments in and advances to unconsolidated affiliates		220,748			198,346
Goodwill, net		62,672			53,345
Other intangible assets, net		64,869			61,190
Asbestos-related insurance recovery receivable		307,053			324,588
Other assets		94,781			93,737
Deferred income taxes		110,946			112,036

TOTAL ASSETS	$	3,443,072		$	3,248,988

LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Current installments on long-term debt	$	19,520		$	19,368
Accounts payable		327,591			372,531
Accrued expenses		308,153			331,814
Billings in excess of costs and estimated earnings on uncompleted contracts		835,542			744,236
Income taxes payable		79,655			55,824

Total current liabilities		1,570,461			1,523,773

Long-term debt		193,386			185,978
Deferred income taxes		81,998			81,008
Pension, postretirement and other employee benefits		285,915			290,741
Asbestos-related liability		359,429			376,803
Other long-term liabilities and minority interest		213,303			216,916
Commitments and contingencies

TOTAL LIABILITIES		2,704,492			2,675,219

Temporary Equity:
Non-vested restricted awards subject to redemption		2,425			2,728

TOTAL TEMPORARY EQUITY		2,425			2,728

Shareholders’ Equity:
Preferred shares:
$0.01 par value; authorized: March 28, 2008 - 901,564 shares and December 28, 2007 - 901,943 shares; issued and outstanding: March 28, 2008 - 1,508 shares and December 28, 2007 - 1,887 shares		—			—
Common shares:
$0.01 par value; authorized: March 28, 2008 - 296,007,390 shares and December 28, 2007 - 296,007,011 shares; issued and outstanding: March 28, 2008 - 144,135,031 shares and December 28, 2007 - 143,877,804 shares		1,441			1,439
Paid-in capital		1,389,952			1,385,311
Accumulated deficit		(416,532	)		(554,595	)
Accumulated other comprehensive loss		(238,706	)		(261,114	)

TOTAL SHAREHOLDERS’ EQUITY		736,155			571,041

TOTAL LIABILITIES, TEMPORARY EQUITY AND SHAREHOLDERS’ EQUITY	$	3,443,072		$	3,248,988

See notes to condensed consolidated financial statements.

FOSTER WHEELER LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF

CHANGES IN SHAREHOLDERS’ EQUITY

(in thousands of dollars, except share data)

(unaudited)


	Three Months Ended
	March 28, 2008						March 30, 2007
	Shares			Amount			Shares			Amount
Preferred Shares:
Balance at beginning of period		1,887		$	—			3,658		$	—
Preferred shares converted into common shares		(379	)		—			(189	)		—

Balance at end of period		1,508		$	—			3,469		$	—


Common Shares:
Balance at beginning of period		143,877,804		$	1,439			138,182,948		$	1,382
Issuance of common shares upon exercise of common share purchase warrants		63,465			1			22,004			—
Issuance of common shares upon exercise of stock options		82,446			1			1,744,752			18
Issuance of common shares upon vesting of restricted awards		62,046			—			679,600			7
Issuance of common shares upon conversion of preferred shares		49,270			—			24,570			—

Balance at end of period		144,135,031		$	1,441			140,653,874		$	1,407


Paid-in Capital:
Balance at beginning of period				$	1,385,311					$	1,348,800
Issuance of common shares upon exercise of common share purchase warrants					297						103
Issuance of common shares upon exercise of stock options					1,519						8,985
Share-based compensation expense-stock options and restricted awards					2,797						809
Excess tax benefit related to equity-based incentive program					29						1,712
Issuance of common shares upon vesting of restricted awards					(1	)					(7	)

Balance at end of period				$	1,389,952					$	1,360,402


Accumulated Deficit:
Balance at beginning of period				$	(554,595	)				$	(944,113	)
Cumulative effect of adoption of FIN 48					—						(4,356	)

Balance at beginning of period, as adjusted					(554,595	)					(948,469	)
Net income for the period					138,063						114,825

Balance at end of period				$	(416,532	)				$	(833,644	)


Accumulated Other Comprehensive Loss:
Balance at beginning of period				$	(261,114	)				$	(343,342	)
Foreign currency translation adjustments					21,062						5,064
Net (loss)/gain on derivative instruments designated as cash flow hedges, net of tax					(2,355	)					353
Pension and other postretirement benefits, net of tax					3,701						4,050

Balance at end of period				$	(238,706	)				$	(333,875	)


Total Shareholders’ Equity				$	736,155					$	194,290

See notes to condensed consolidated financial statements.

FOSTER WHEELER LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in thousands of dollars)

(unaudited)


	Three Months Ended
	March 28,			March 30,
	2008			2007
Net income	$	138,063		$	114,825
Foreign currency translation adjustments		21,062			5,064
Net (loss)/gain on derivative instruments designated as cash flow hedges, net of tax		(2,355	)		353
Pension and other postretirement benefits, net of tax		3,701			4,050

Comprehensive income	$	160,471		$	124,292

See notes to condensed consolidated financial statements.

FOSTER WHEELER LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands of dollars)

(unaudited)


	Three Months Ended
	March 28,			March 30,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	138,063		$	114,825
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization		11,356			8,838
Net asbestos-related gain		(14,188	)		—
Share-based compensation expense-stock options and restricted awards		2,494			1,647
Excess tax benefit related to equity-based incentive program		(29	)		(1,308	)
Deferred tax		2,528			5,640
Loss/(gain) on sale of assets		16			(49	)
Equity in the net earnings of partially-owned affiliates, net of dividends		(11,782	)		359
Other noncash items		452			2,360
Changes in assets and liabilities:
Decrease/(increase) in receivables		19,104			(31,372	)
Net change in contracts in process and billings in excess of costs and estimated earnings on uncompleted contracts		63,886			(71,955	)
Decrease in accounts payable and accrued expenses		(105,133	)		(30,134	)
Increase in income taxes payable		21,910			13,622
Net change in other assets and liabilities		(14,254	)		(38,875	)

Net cash provided by/(used in) operating activities		114,423			(26,402	)


CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired		(7,740	)		(1,473	)
Change in restricted cash		(13,424	)		(12	)
Capital expenditures		(14,536	)		(6,140	)
Proceeds from sale of assets		65			72
Investments in and advances to unconsolidated affiliates		(1,070	)		(461	)
Return of investment from unconsolidated affiliates		—			6,324

Net cash used in investing activities		(36,705	)		(1,690	)


CASH FLOWS FROM FINANCING ACTIVITIES
Partnership distributions to minority partners		(6,684	)		(2,063	)
Proceeds from common share purchase warrant exercises		298			103
Proceeds from stock option exercises		1,520			9,003
Excess tax benefit related to equity-based incentive program		29			1,308
Proceeds from issuance of long-term debt		3,107			—
Repayment of long-term debt and capital lease obligations		(420	)		(434	)

Net cash (used in)/provided by financing activities		(2,150	)		7,917


Effect of exchange rate changes on cash and cash equivalents		36,079			2,625


Increase/(decrease) in cash and cash equivalents		111,647			(17,550	)
Cash and cash equivalents at beginning of year		1,048,544			610,887

Cash and cash equivalents at end of period	$	1,160,191		$	593,337

See notes to condensed consolidated financial statements.

FOSTER WHEELER LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

1. Summary of Significant Accounting Policies

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

The financial statements and notes are presented in accordance with the requirements of Form 10-Q and do not contain certain information included in our annual report on Form 10-K for the fiscal year ended December 28, 2007 (“2007 Form 10-K”), filed with the Securities and Exchange Commission on February 26, 2008. The condensed consolidated balance sheet as of December 28, 2007 was derived from the audited financial statements included in our 2007 Form 10-K, but does not include all the disclosures required by accounting principles generally accepted in the United States of America for annual consolidated financial statements. A summary of our significant accounting policies is presented below.

Principles of Consolidation — The condensed consolidated financial statements include the accounts of Foster Wheeler Ltd. and all significant domestic and foreign subsidiaries as well as certain entities in which we have a controlling interest. Intercompany transactions and balances have been eliminated.

Our fiscal year is the 52- or 53-week annual accounting period ending the last Friday in December for domestic operations and December 31 for foreign operations. There were 13 weeks in the first quarter in both fiscal years 2008 and 2007.

Capital Alterations — On January 8, 2008, our shareholders approved an increase in our authorized share capital at a special general meeting of common shareholders. The increase in authorized share capital was necessary in order to effect a two-for-one stock split of our common shares which was approved by our Board of Directors on November 6, 2007. The stock split was effected on January 22, 2008 in the form of a stock dividend to common shareholders of record at the close of business on January 8, 2008 in the ratio of one additional Foster Wheeler Ltd. common share in respect of each common share outstanding. As a result, all references to share capital, the number of shares, stock options, restricted awards, per share amounts, cash dividends, and any other reference to shares in the condensed consolidated financial statements, unless otherwise noted, have been adjusted to reflect the stock split on a retroactive basis.

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

Revenue Recognition on Long-Term Contracts — Revenues and profits on long-term fixed-price contracts are recorded under the percentage-of-completion method. Progress towards completion is measured using physical completion of individual tasks for all contracts with a value of $5,000 or greater. Progress toward completion of fixed-priced contracts with a value less than $5,000 is measured using the cost-to-cost method.

Revenues and profits on cost-reimbursable contracts are recorded as the services are rendered based on the estimated revenue per man-hour, including any incentives assessed as probable. We include flow-through costs consisting of materials, equipment or subcontractor services as revenue on cost-reimbursable contracts when we have overall responsibility as the contractor for the engineering specifications and procurement or procurement services for such costs.

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

We have numerous contracts that are in various stages of completion. Such contracts require estimates to determine the extent of revenue and profit recognition. These estimates may be revised from time to time as additional information becomes available. In accordance with the accounting and disclosure requirements of the American Institute of Certified Public Accountants Statement of Position (“SOP”) 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts” and Statement of Financial Accounting Standards (“SFAS”) No. 154, “Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB Statement No. 3,” we review all of our material contracts monthly and revise our estimates as appropriate. These estimate revisions, which include both increases and decreases in estimated profit, result from events such as earning project incentive bonuses or the incurrence or forecasted incurrence of contractual liquidated damages for performance or schedule issues, providing services and purchasing third-party materials and equipment at costs differing from those previously estimated and testing of completed facilities which, in turn, eliminates or confirms completion and warranty-related costs. Project incentives are recognized when it is probable they will be earned. Project incentives are frequently tied to cost, schedule and/or safety targets and, therefore, tend to be earned late in a project’s life cycle. There were 6 and 16 separate projects that had final estimated profit revisions exceeding $1,000 during the first quarter of fiscal years 2008 and 2007, respectively. The changes in final estimated profits resulted in net increases to contract profit of $2,130 and $18,460 in the first quarter of fiscal years 2008 and 2007, respectively. Please see Note 11 for further information related to changes in final estimated profits.

Claims are amounts in excess of the agreed contract price (or amounts not included in the original contract price) that we seek to collect from customers or others for delays, errors in specifications and designs, contract terminations, disputed or unapproved change orders as to both scope and price or other causes of unanticipated additional costs. We record claims in accordance with paragraph 65 of SOP 81-1, which states that recognition of amounts as additional contract revenue related to claims is appropriate only if it is probable that the claims will result in additional contract revenue and if the amount can be reliably estimated. Under SOP 81-1, those two requirements are satisfied by the existence of all of the following conditions: the contract or other evidence provides a legal basis for the claim; additional costs are caused by circumstances that were unforeseen at the contract date and are not the result of deficiencies in our performance; costs associated with the claim are identifiable or otherwise determinable and are reasonable in view of the work performed; and the evidence supporting the claim is objective and verifiable. If such requirements are met, revenue from a claim may be recorded only to the extent that contract costs relating to the claim have been incurred. Costs attributable to claims are treated as costs of contract performance as incurred and are recorded in contracts in process. As of March 28, 2008, our condensed consolidated financial statements assumed recovery of commercial claims of $26,400, of which $1,700 was yet to be expended. Similarly, as of December 28, 2007, our condensed consolidated financial statements assumed recovery of commercial claims of $22,200, of which $3,700 was yet to be expended.

In certain circumstances, we may defer pre-contract costs when it is probable that these costs will be recovered under a future contract. Such deferred costs would then be included in contract costs upon execution of the anticipated contract. We had no deferred pre-contract costs as of March 28, 2008 or December 28, 2007.

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

Cash and Cash Equivalents — Cash and cash equivalents include highly liquid short-term investments with original maturities of three months or less. Cash and cash equivalents of $883,155 and $800,036 were maintained by our foreign subsidiaries as of March 28, 2008 and December 28, 2007, respectively. These subsidiaries require a portion of these funds to support their liquidity and working capital needs, as well as to comply with required minimum capitalization and contractual restrictions. Accordingly, a portion of these funds may not be readily available for repatriation to U.S. entities.

Trade Accounts Receivable — Trade accounts receivable represent amounts billed to customers. In accordance with terms under our long-term contracts, our customers may withhold certain percentages of such billings until completion and acceptance of the work performed. Final payments of all such amounts withheld might not be received within a one-year period. In conformity with industry practice, however, the full amount of accounts receivable, including such amounts withheld, are included in current assets on the condensed consolidated balance sheet.

Trade accounts receivable are continually evaluated for collectibility. Provisions are established on a project-specific basis when there is an issue associated with the client’s ability to make payments or there are circumstances where the client is not making payment due to contractual issues.

Contracts in Process and Billings in Excess of Costs and Estimated Earnings on Uncompleted Contracts — Under long-term contracts, amounts recorded in contracts in process and billings in excess of costs and estimated earnings on uncompleted contracts may not be realized or paid, respectively, within a one-year period. In conformity with industry practice, however, the full amount of contracts in process and billings in excess of costs and estimated earnings on uncompleted contracts is included in current assets and current liabilities on the condensed consolidated balance sheet, respectively.

Land, Buildings and Equipment — Depreciation is computed on a straight-line basis using estimated lives ranging from 10 to 50 years for buildings and from 3 to 35 years for equipment. Expenditures for maintenance and repairs are charged to expense as incurred. Renewals and betterments are capitalized. Upon retirement or other disposition of fixed assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gains or losses, if any, are reflected in earnings.

Investments in and Advances to Unconsolidated Affiliates — We use the equity method of accounting for affiliates in which our investment ownership ranges from 20% to 50% unless significant economic or governance considerations indicate that we are unable to exert significant influence in which case the cost method is used. The equity method is also used for affiliates in which our investment ownership is greater than 50% but we do not have a controlling interest. Currently, all of our investments in affiliates in which our investment ownership is 20% or greater and that are not consolidated are recorded using the equity method. Affiliates in which our investment ownership is less than 20% are carried at cost.

Intangible Assets — Intangible assets consist principally of goodwill, trademarks and patents. Goodwill is allocated to our reporting units on a relative fair value basis at the time of the original purchase price allocation. Patents and trademarks are amortized on a straight-line basis over periods of 11 to 40 years.

We test goodwill for impairment at the reporting unit level as defined in SFAS No. 142, “Goodwill and Other Intangible Assets.” This test is a two-step process. The first step of the goodwill impairment test, used to identify potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. If the fair value, which is estimated based on discounted future cash flows, exceeds the carrying amount, goodwill is not considered impaired. If the carrying amount exceeds the fair value, the second step must be performed to measure the amount of the impairment loss, if any. The second step compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. In the fourth quarter of each fiscal year, we evaluate goodwill at each reporting unit to assess recoverability, and impairments, if any, are recognized in earnings. An impairment loss would be recognized in an amount equal to the excess of the carrying amount of the goodwill over the implied fair value of the goodwill. SFAS No. 142 also requires that intangible assets with determinable useful lives be amortized over their respective estimated useful lives and reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

As described further in Note 2, in February 2008, we acquired a biopharmaceutical engineering company. In conjunction with the acquisition, we recorded $5,434 of goodwill and $3,600 of identifiable intangible assets. We are in the process of obtaining appraisals of the tangible and intangible assets acquired and we will evaluate and may adjust the initial purchase price allocation as additional information related to the fair values of the assets and liabilities become known.

We had total goodwill of $62,672 and $53,345 as of March 28, 2008 and December 28, 2007, respectively. Of the $62,672 of goodwill as of March 28, 2008, $57,238 is related to our global power business group and $5,434 is related to our global engineering and construction group. In fiscal year 2007, the fair value of all reporting units exceeded the carrying amounts except for a domestic reporting unit, where a goodwill impairment charge of $2,401 was recorded related to winding down of certain operations.

We had total unamortized identifiable intangible assets of $64,869 and $61,190 as of March 28, 2008 and December 28, 2007, respectively. Of the $64,869 of identifiable intangible assets as of March 28, 2008, $61,269 is related to our global power business group and $3,600 is related to our global engineering and construction group. The following table details amounts relating to our identifiable intangible assets:


	March 28, 2008							December 28, 2007
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Amount		Amortization			Amount		Amount		Amortization			Amount
Patents	$	39,905	$	(21,545	)	$	18,360	$	39,375	$	(21,026	)	$	18,349
Trademarks		64,270		(21,061	)		43,209		63,344		(20,503	)		42,841
Customer relationships and backlog		3,300		—			3,300		—		—			—

Total	$	107,475	$	(42,606	)	$	64,869	$	102,719	$	(41,529	)	$	61,190

Amortization expense related to patents and trademarks which is recorded within cost of operating revenues on the condensed consolidated statement of operations, totaled $1,077 and $900 for the fiscal quarters ended March 28, 2008 and March 30, 2007, respectively. Amortization expense is expected to approximate $4,000 each year in the next five years.

Income Taxes — Deferred tax assets/liabilities are established for the difference between the financial reporting and income tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

We do not make a provision for U.S. federal income taxes on foreign subsidiary earnings if we expect such earnings to be permanently reinvested outside the United States.

We recognize interest accrued on the unrecognized tax benefits in interest expense and penalties on the unrecognized tax benefits in other deductions on our consolidated statement of operations.

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

We maintain a foreign currency risk-management strategy that uses foreign currency forward contracts to protect us from unanticipated fluctuations in cash flows that may arise from volatility in currency exchange rates between the functional currencies of our subsidiaries and the foreign currencies in which some of our operating purchases and sales are denominated. We utilize these contracts solely to hedge specific foreign currency exposures, whether or not they qualify for hedge accounting under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” During the fiscal quarters ended March 28, 2008 and March 30, 2007, none of the contracts met the requirements for hedge accounting under SFAS No. 133. Accordingly, we recorded pretax foreign exchange losses of $636 and $447 for the fiscal quarters ended March 28, 2008 and March 30, 2007, respectively. These amounts were recorded in the following line items on the condensed consolidated statement of operations for the periods indicated:


	Three Months Ended
	March 28,			March 30,
	2008			2007
Cost of operating revenues	$	(772	)	$	(356	)
Other income/(deductions)		136			(91	)

Pretax loss	$	(636	)	$	(447	)

The mark-to-market adjustments on foreign exchange contracts for these unrealized gains or losses are recorded in either contracts in process or billings in excess of costs and estimated earnings on uncompleted contracts on the condensed consolidated balance sheet.

During the fiscal quarters ended March 28, 2008 and March 30, 2007, we included cash inflows/(outflows) on the settlement of derivatives of $975 and $1,152, respectively, within the “net change in contracts in process and billings in excess of costs and estimated earnings on uncompleted contracts,” a component of cash flows from operating activities in the condensed consolidated statement of cash flows.

Interest Rate Risk — We use interest rate swap contracts to manage interest rate risk associated with some of our variable rate special-purpose limited recourse project debt. Certain of our affiliates in which we have an equity interest also use interest rate swap contracts to manage interest rate risk associated with their limited recourse project debt. Upon entering into the swap contracts, we designate the interest rate swaps as cash flow hedges in accordance with SFAS No. 133. We assess at inception, and on an ongoing basis, whether the interest rate swaps are highly effective in offsetting changes in the cash flows of the project debt. Consequently, we record the fair value of our interest rate swap contracts in our condensed consolidated balance sheet at each balance sheet date. Changes in the fair value of the interest rate swap contracts are recorded as a component of comprehensive income on our condensed consolidated statement of comprehensive income. As of March 28, 2008 and December 28, 2007, we had a net (loss)/gain on the swap contracts of $(682) and $1,673, respectively, which net of a tax (benefit)/provision of $(259) and $635, respectively, was included in accumulated other comprehensive loss on the condensed consolidated balance sheet.

Earnings per Common Share — Basic earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the reporting period, excluding non-vested restricted shares of 165,960 and 248,940 as of March 28, 2008 and March 30, 2007, respectively. Restricted shares and restricted share units (collectively, “restricted awards”) are included in the weighted-average number of common shares outstanding when such restricted awards vest.

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

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

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


	Three Months Ended
	March 28,		March 30,
	2008		2007
Basic earnings per common share:
Net income	$	138,063	$	114,825
Weighted-average number of common shares outstanding for basic earnings per common share		143,917,790		139,507,752

Basic earnings per common share	$	0.96	$	0.82


Diluted earnings per common share:
Net income	$	138,063	$	114,825
Weighted-average number of common shares outstanding for basic earnings per common share		143,917,790		139,507,752
Effect of dilutive securities:
Options to purchase common shares		595,867		1,593,904
Warrants to purchase common shares		615,050		2,304,972
Non-vested portion of restricted awards		169,807		124,428

Weighted-average number of common shares outstanding for diluted earnings per common share		145,298,514		143,531,056


Diluted earnings per common share	$	0.95	$	0.80

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


	Three Months Ended
	March 28,		March 30,
	2008		2007
Common shares issuable under outstanding options not included in the computation of diluted earnings per common share because the assumed proceeds were greater than the average common share price for the period		472,955		1,353,652

Share-Based Compensation Plans — Our share-based compensation plans are accounted for in accordance with the provisions of SFAS No. 123R, “Share-Based Payment.” We estimate the fair value of each option award on the date of grant using the Black-Scholes option valuation model. We then recognize the grant date fair value of each option as compensation expense ratably using the straight-line attribution method over the service period (generally the vesting period). The Black-Scholes model incorporates the following assumptions:

	•		Expected volatility — we estimate the volatility of our common share price at the date of grant using historical volatility adjusted for periods of unusual stock price activity.

	•		Expected term — we estimate the expected term of options granted to our chief executive officer based on a combination of vesting schedules, contractual life of the option, past history and estimates of future exercise behavior patterns as outlined in SFAS No. 123R. For grants to other employees and the remaining directors, we estimate the expected term using the “simplified” method, as outlined in Staff Accounting Bulletin No. 107, “Share-Based Payment.”

	•		Risk-free interest rate — we estimate the risk-free interest rate using the U.S. Treasury yield curve for periods equal to the expected term of the options in effect at the time of grant.

	•		Dividends — we use an expected dividend yield of zero because we have not declared or paid a cash dividend since July 2001 and we do not have any plans to declare or pay any cash dividends.

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


	Three Months Ended
	March 28,			March 30,
	2008			2007
Expected volatility		45.91	%		42.23	%
Expected term	3.63 years			3.29 years
Risk-free interest rate		2.13	%		4.48	%
Expected dividend yield		0	%		0	%

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

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

Recent Accounting Developments — In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The standard is effective for financial assets and liabilities, as well as for any other assets and liabilities that are required to be measured at fair value on a recurring basis, in financial statements for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued a partial one-year deferral of SFAS No. 157 for nonfinancial assets and liabilities that are only subject to fair value measurement on a non-recurring basis. We have elected to defer the application of SFAS No. 157 for our nonfinancial assets and liabilities measured at fair value on a nonrecurring basis until the fiscal year beginning December 27, 2008, and are in the process of assessing its impact on our financial position and results of operations related to such assets and liabilities. Our financial assets and liabilities that are recorded at fair value consist primarily of the assets or liabilities arising from derivative financial instruments. The adoption of SFAS No. 157 did not have a material effect on our financial position or results of operations.

SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We utilize market data or assumptions that we believe market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable.

SFAS No. 157 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of the fair value hierarchy defined by SFAS No. 157 are as follows:

	•		Level 1: Quoted prices are available in active markets for identical assets or liabilities as of the reporting date.

	•		Level 2: Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies.

	•		Level 3: Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value from the perspective of a market participant.

We utilize foreign currency forward contracts to protect us from unanticipated fluctuations in cash flows that may arise from volatility in currency exchange rates. We also use interest rate swap contracts to manage interest rate risk associated with some of our variable rate debt. The foreign currency forward contracts and interest rate swap contracts are valued using broker quotations, or market transactions in either the listed or over-the-counter markets. As such, these derivative instruments are classified within level 2.

The following table sets forth our financial assets and liabilities that were accounted for at fair value on a recurring basis as of March 28, 2008:


	March 28,
	2008
Assets:
Foreign currency forward contracts	$	11,358
Interest rate swap contracts		1,625

Liabilities:
Foreign currency forward contracts		3,511
Interest rate swap contracts		2,566

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations.” SFAS No. 141R replaces SFAS No. 141, “Business Combinations” and changes the accounting treatment for business acquisitions. SFAS No. 141R requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction and establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed in a business combination. Certain provisions of this standard will, among other things, impact the determination of acquisition-date fair value of consideration paid in a business combination (including contingent consideration); exclude transaction costs from acquisition accounting; and change accounting practices for acquired contingencies, acquisition-related restructuring costs, in-process research and development, indemnification assets, and tax benefits. Most of the provisions of SFAS No. 141R apply prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption is not permitted. We are currently assessing the impact that SFAS No. 141R may have on our financial position, results of operations and cash flows.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51.” SFAS No. 160, amends the accounting and reporting standards for the noncontrolling interest in a subsidiary (often referred to as “minority interest”) and for the deconsolidation of a subsidiary. Under SFAS No. 160, the noncontrolling interest in a subsidiary is reported as equity in the parent company’s consolidated financial statements. SFAS No. 160 also requires that the parent company’s consolidated statement of operations include both the parent and noncontrolling interest share of the subsidiary’s statement of operations. Formerly, the noncontrolling interest share was shown as a reduction of income on the parent’s consolidated statement of operations. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. SFAS No. 160 is to be applied prospectively as of the beginning of the fiscal year in which this statement is initially applied; however, presentation and disclosure requirements shall be applied retrospectively for all periods presented. We are currently assessing the impact that SFAS No. 160 may have on our financial position, results of operations and cash flows.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities.” SFAS No. 161 requires enhanced disclosures to enable investors to better understand the effects of derivative instruments and hedging activities on an entity’s financial position, financial performance and cash flows. SFAS No. 161 changes the disclosure requirements about the location and amounts of derivative instruments in an entity’s financial statements, how derivative instruments and related hedged items are accounted for under SFAS No. 133, and how derivative instruments and related hedged items affect the company’s financial position, financial performance and cash flows. Additionally, SFAS No. 161 requires disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. SFAS No. 161 also provides more information about an entity’s liquidity by requiring disclosure of derivative features that are credit risk-related. Finally, SFAS No. 161 requires cross-referencing within the footnotes to enable financial statement users to locate important information about derivative instruments. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We are currently assessing the impact that SFAS No. 161 may have on our financial statement disclosures.

2. Business Combinations

In February 2008, we acquired all of the outstanding capital stock of a biopharmaceutical engineering company, based in Philadelphia, Pennsylvania, for $8,490 plus up to $3,638 to be paid over the following three years if certain conditions are met, plus up to an additional $8,700 to be paid if certain performance milestones are met over the following three years. This company provides design, engineering, manufacture, installation, validation and startup/commissioning services to the life sciences industry. The purchase price allocation and pro forma information for this acquisition was not material to our condensed consolidated financial statements. This company’s financial results are included within our global engineering and construction business segment.

In February 2007, we purchased the stock of a Finnish company that owns patented coal flow measuring technology. The purchase price, net of cash acquired was € 1,112 (approximately $1,473 at the exchange rate in effect at the time of the acquisition). The purchase price allocation and pro forma financial information for this acquisition was not material to our condensed consolidated financial statements. This company’s financial results are included within our global power business segment.

Equity Interests

We own a non-controlling equity interest in three electric power generation projects, one waste-to-energy project and one wind farm project in Italy and in a refinery/electric power generation project in Chile. Two electric power generation projects in Italy are each 42% owned by us and the third is 50% owned by us, the waste-to-energy project is 39% owned by us and the wind farm project is 50% owned by us. The project in Chile is 85% owned by us; however, we do not have a controlling interest in the Chilean project as a result of participating rights held by the minority shareholder. We account for these investments in Italy and Chile under the equity method. The following is summarized financial information for the entities (each as a whole) in which we have an equity interest:


	March 28, 2008				December 28, 2007
	Italian		Chilean		Italian		Chilean
	Projects		Project		Projects		Project
Balance Sheet Data:
Current assets	$	360,491	$	66,550	$	294,482	$	49,353
Other assets (primarily buildings and equipment)		702,095		144,218		656,796		146,665
Current liabilities		100,392		45,984		72,009		21,044
Other liabilities (primarily long-term debt)		627,383		76,436		576,545		81,696
Net assets		334,811		88,348		302,724		93,278


	Three Months Ended
	March 28, 2008				March 30, 2007
	Italian		Chilean		Italian		Chilean
	Projects		Project		Projects		Project
Income Statement Data:
Total revenues	$	109,733	$	26,585	$	74,573	$	10,969
Gross earnings		28,930		16,161		9,084		5,132
Income before income taxes		17,266		15,876		6,211		3,262
Net earnings		10,339		13,177		3,713		3,262

Our share of equity in the net earnings of these partially-owned affiliates, which is recorded within other income on the condensed consolidated statement of operations, totaled $11,563 and $3,451 for the fiscal quarters ended March 28, 2008 and March 30, 2007, respectively.

Our investment in the equity affiliates, which is recorded within investments in and advances to unconsolidated affiliates on the condensed consolidated balance sheet, totaled $211,337 and $190,887 as of March 28, 2008 and December 28, 2007, respectively. There were no distributions received in the fiscal quarter ended March 28, 2008 and distributions of $10,851 were received during the fiscal quarter ended March 30, 2007.

We have guaranteed certain performance obligations of the Chilean project. We have a contingent obligation, which is measured annually based on the operating results of the Chilean project for the preceding year. We did not have a current payment obligation under this guarantee as of December 28, 2007.

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

In addition, we have provided a $10,000 debt service reserve letter of credit to cover debt service payments in the event that the Chilean project does not generate sufficient cash flow to make such payments. We are required to maintain the debt service reserve letter of credit during the term of the Chilean project’s debt, which matures in 2014. As of March 28, 2008, no amounts have been drawn under this letter of credit.

Under the Chilean project’s operations and maintenance agreement, our subsidiary provides services for the management, operation and maintenance of the refinery/electric power generation facility. Our fees for these services were $2,333 and $2,069 for the fiscal quarters ended March 28, 2008 and March 30, 2007, respectively, and were recorded in operating revenues on our condensed consolidated statement of operations. We had a receivable from our partially-owned affiliate in Chile of $12,542 and $6,168 recorded in trade accounts and notes receivable on our condensed consolidated balance sheet as of March 28, 2008 and December 28, 2007, respectively.

4. Long-term Debt

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


	March 28, 2008						December 28, 2007
	Current		Long-term		Total		Current		Long-term		Total
Capital Lease Obligations	$	1,299	$	67,902	$	69,201	$	1,318	$	67,095	$	68,413
Special-Purpose Limited Recourse Project Debt:
Camden County Energy Recovery Associates		9,648		31,779		41,427		9,648		31,779		41,427
FW Power S.r.L.		—		51,670		51,670		—		45,041		45,041
Energia Holdings, LLC		4,144		21,101		25,245		4,144		21,101		25,245
Subordinated Robbins Facility Exit Funding Obligations:
1999C Bonds at 7.25% interest, due October 15, 2009		18		19		37		18		19		37
1999C Bonds at 7.25% interest, due October 15, 2024		—		20,491		20,491		—		20,491		20,491
1999D Accretion Bonds at 7% interest, due October 15, 2009		—		291		291		—		286		286
Intermediate Term Loans in China at 7.02% interest		4,278		—		4,278		4,107		—		4,107
Other		133		133		266		133		166		299

Total	$	19,520	$	193,386	$	212,906	$	19,368	$	185,978	$	205,346

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

We had $269,658 and $245,765 of letters of credit outstanding under this agreement as of March 28, 2008 and December 28, 2007, respectively. The letter of credit fees ranged from 1.50% to 1.60% of the outstanding amount, excluding a fronting fee of 0.125% per annum. There were no funded borrowings under this agreement as of March 28, 2008 or December 28, 2007.

5. Pensions and Other Postretirement Benefits

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

Pension Benefits — Our defined benefit pension plans cover certain full-time employees. Under the plans, retirement benefits are primarily a function of both years of service and level of compensation. The components of benefit cost for our pension plans are as follows:


	Three Months Ended March 28, 2008												Three Months Ended March 30, 2007
	United			United									United			United
	States			Kingdom			Other			Total			States			Kingdom			Other			Total
Net periodic benefit cost:
Service cost	$	—		$	2,715		$	176		$	2,891		$	—		$	3,426		$	147		$	3,573
Interest cost		4,971			12,669			494			18,134			4,644			11,061			385			16,090
Expected return on plan assets		(6,145	)		(12,444	)		(433	)		(19,022	)		(4,244	)		(11,753	)		(402	)		(16,399	)
Amortization of transition (asset)/obligation		—			(15	)		25			10			—			(15	)		21			6
Amortization of prior service cost		—			1,281			5			1,286			—			1,268			4			1,272
Amortization of net actuarial loss		678			4,266			115			5,059			779			4,280			149			5,208

Total net periodic benefit cost	$	(496	)	$	8,472		$	382		$	8,358		$	1,179		$	8,267		$	304		$	9,750


Changes recognized in other comprehensive income:
Amortization of transition asset/(obligation)	$	—		$	15		$	(25	)	$	(10	)	$	—		$	15		$	(21	)	$	(6	)
Amortization of prior service cost		—			(1,281	)		(5	)		(1,286	)		—			(1,268	)		(4	)		(1,272	)
Amortization of net actuarial loss		(678	)		(4,266	)		(115	)		(5,059	)		(779	)		(4,280	)		(149	)		(5,208	)

Total income recognized in other comprehensive income	$	(678	)	$	(5,532	)	$	(145	)	$	(6,355	)	$	(779	)	$	(5,533	)	$	(174	)	$	(6,486	)

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

Based on the funded status at fiscal year-end 2007 and upon our most recent annual valuation report, we do not expect to be required to make any mandatory contributions to our U.S. pension plans in fiscal year 2008. We made mandatory contributions of approximately $7,900 to our foreign pension plans during the fiscal quarter ended March 28, 2008. We expect to make total mandatory contributions of approximately $33,100 to our foreign plans in fiscal year 2008.

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

The components of benefit cost for our other postretirement plans, including the SIP, are as follows:


	Three Months Ended
	March 28,			March 30,
	2008			2007
Net periodic postretirement benefit cost:
Service cost	$	33		$	37
Interest cost		1,189			1,332
Amortization of prior service credit		(1,190	)		(1,190	)
Amortization of net actuarial loss		198			408
Other		—			87

Net periodic postretirement benefit cost	$	230		$	674


Changes recognized in other comprehensive income:
Amortization of prior service credit	$	1,190		$	1,190
Amortization of net actuarial loss		(198	)		(408	)

Total loss recognized in other comprehensive income	$	992		$	782

6. Guarantees and Warranties

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


	Maximum	Carrying Amount of Liability
	Potential	March 28,		December 28,
	Payment	2008		2007
Environmental indemnifications	No limit	$	8,100	$	6,900
Tax indemnifications	No limit	$	—	$	—

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


	Three Months Ended
	March 28,			March 30,
	2008			2007
Balance at beginning of year	$	87,800		$	69,900
Accruals		13,700			8,800
Settlements		(1,000	)		(3,700	)
Adjustments to provisions		(2,300	)		(3,900	)

Balance at end of period	$	98,200		$	71,100

We are contingently liable for performance under standby letters of credit, bank guarantees and surety bonds totaling $927,300 and $818,600 as of March 28, 2008 and December 28, 2007, respectively. These balances include the standby letters of credit issued under the domestic senior credit agreement discussed in Note 4 and from other facilities worldwide. No material claims have been made against these financial guarantees.

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

7. Preferred Shares

We issued 599,944 preferred shares in connection with our 2004 equity-for-debt exchange. There were approximately 1,508 preferred shares outstanding as of March 28, 2008. Each preferred share is convertible at the holder’s option into 130 common shares, or up to approximately 196,093 additional common shares if all outstanding preferred shares as of March 28, 2008 are converted.

The preferred shareholders have no voting rights except in certain limited circumstances. The preferred shares have the right to receive dividends and other distributions, including liquidating distributions, on an as-if-converted basis when and if declared and paid on the common shares. The preferred shares have a $0.01 liquidation preference per share.

8. Share-Based Compensation Plans

Our share-based compensation plans include both restricted awards and stock option awards. Compensation cost for our share-based plans of $2,494 and $1,647 was charged against income for the fiscal quarters ended March 28, 2008 and March 30, 2007, respectively. The related income tax benefit recognized in the condensed consolidated statement of operations was $120 and $22 for the first quarter of fiscal years 2008 and 2007, respectively. We received $1,520 and $9,003 in cash from option exercises under our share-based compensation plans for the fiscal quarters ended March 28, 2008 and March 30, 2007, respectively.

As of March 28, 2008, we had $12,389 and $13,931 of total unrecognized compensation cost related to stock options and restricted awards, respectively. Those costs are expected to be recognized as expense over a weighted-average period of approximately 32 months.

9. Common Share Purchase Warrants

In connection with the equity-for-debt exchange consummated in 2004, we issued 4,152,914 Class A common share purchase warrants and 40,771,560 Class B common share purchase warrants. Each Class A warrant entitles its owner to purchase 3.3682 common shares at an exercise price of $4.689 per common share thereunder, subject to the terms of the warrant agreement between the warrant agent and us. The Class A warrants are exercisable on or before September 24, 2009. Each Class B warrant entitled its owner to purchase 0.1446 common shares at an exercise price of $4.689 per common share thereunder, subject to the terms and conditions of the warrant agreement between the warrant agent and us. The Class B warrants were exercisable on or before September 24, 2007.

In January 2006, we completed transactions that increased the number of common shares to be delivered upon the exercise of our Class A and Class B common share purchase warrants during the offer period and raised $75,336 in net proceeds. The exercise price per warrant was not increased in the offers. Holders of approximately 95% of the Class A warrants and 57% of the Class B warrants participated in the offers resulting in the aggregate issuance of approximately 16,807,000 common shares.

Cumulatively through March 28, 2008, 3,964,429 Class A warrants and 38,730,407 Class B warrants have been exercised for 19,702,996 common shares. The number of common shares issuable upon the exercise of the remaining outstanding Class A warrants is approximately 634,855 as of March 28, 2008. The remaining outstanding Class B warrants expired on September 24, 2007.

The holders of the Class A warrants are not entitled to vote, to receive dividends or to exercise any of the rights of common shareholders for any purpose until such warrants have been duly exercised. We currently maintain and intend to continue to maintain at all times during which the warrants are exercisable, a “shelf” registration statement relating to the issuance of common shares underlying the warrants for the benefit of the warrant holders, subject to the terms of the registration rights agreement. The registration statement became effective on December 28, 2005.

Also in connection with the equity-for-debt exchange consummated in 2004, we entered into a registration rights agreement with certain selling security holders in which we agreed to file a registration statement to cover resales of our securities held by them immediately following the exchange offer. We filed a registration statement in accordance with this agreement on October 29, 2004. The registration statement, which became effective on December 23, 2004, must remain in effect until December 23, 2009 unless certain events occur to terminate our obligations under the registration rights agreement prior to that date. If we fail to maintain the registration statement as required or it becomes unavailable for more than two 45-day periods in any consecutive 12-month period, we are required to pay damages at a rate of $13.7 per day for each day that the registration statement is not effective. As of March 28, 2008, the maximum exposure under this provision is approximately $7,500. We have not, and do not, expect to incur any damages under the registration rights agreement.

10. Income Taxes

Our effective tax rate is dependent on the location and amount of our taxable earnings and the effects of changes in valuation allowances. Our effective tax rates for the fiscal quarters ended March 28, 2008 and March 30, 2007 were lower than the U.S. statutory rate of 35% due principally to:

	•		Income earned in tax jurisdictions with tax rates being lower than the U.S. statutory rate; and

	•		A valuation allowance decrease.

A decrease in our valuation allowance occurred because we recognized earnings in jurisdictions where we have previously recorded a full valuation allowance (primarily the United States and Finland). These variances were partially offset by losses subject to valuation allowance in certain other non-U.S. jurisdictions and other permanent differences.

As we currently have positive earnings in most jurisdictions, we evaluate on a quarterly basis the need for the valuation allowances against deferred tax assets in those jurisdictions. Such evaluation includes a review of all available evidence, both positive and negative, in determining whether a valuation allowance is necessary.

Our subsidiaries file income tax returns in numerous tax jurisdictions, including the United States, several U.S. states and numerous non-U.S. jurisdictions around the world. Tax returns are also filed in jurisdictions where our subsidiaries execute project-related work. The statute of limitations varies by the various jurisdictions in which we operate. Because of the number of jurisdictions in which we file tax returns, in any given year the statute of limitations in certain jurisdictions may expire without examination within the 12-month period from the balance sheet date. As a result, we expect recurring changes in unrecognized tax benefits due to the expiration of the statute of limitations, none of which are expected to be individually significant. With few exceptions, we are no longer subject to U.S. (including federal, state and local) or non-U.S. income tax examinations by tax authorities for years before fiscal year 2002.

A number of tax years are under audit by the relevant state and foreign tax authorities. We anticipate that several of these audits may be concluded in the foreseeable future, including in fiscal year 2008. Based on the status of these audits, it is reasonably possible that the conclusion of the audits may result in a reduction of unrecognized tax benefits. However, it is not possible to estimate the impact of this change at this time.

We recognize interest accrued on the unrecognized tax benefits in interest expense and penalties on the unrecognized tax benefits in other deductions on our condensed consolidated statement of operations. We recorded $2,005 and $246 in interest expense and penalties during the fiscal quarters ended March 28, 2008 and March 30, 2007, respectively.

11. Business Segments

We operate through two business groups: our Global Engineering and Construction Group (“Global E&C Group”) and our Global Power Group .

Global Engineering and Construction Group

Our Global E&C Group, which operates worldwide, designs, engineers and constructs onshore and offshore upstream oil and gas processing facilities, natural gas liquefaction facilities and receiving terminals, gas-to-liquids facilities, oil refining, chemical and petrochemical, pharmaceutical and biotechnology facilities and related infrastructure, including power generation and distribution facilities, and gasification facilities. Our Global E&C Group generates revenues from engineering and construction activities pursuant to contracts spanning up to approximately four years in duration and from returns on its equity investments in various power production facilities.

Our Global E&C Group provides the following services:

	•		Engineering, project management and construction management services, including the procurement of equipment, materials and services from third-party suppliers and contractors.

	•		Design of facilities in new or developing market sectors, including carbon capture and storage, solid fuel-fired integrated gasification combined-cycle power plants, coal-to-liquids and biofuels.

	•		Environmental remediation services, together with related technical, engineering, design and regulatory services.

	•		Development, engineering, construction, ownership and operation of power generation facilities, from conventional and renewable sources, and waste-to-energy facilities in Europe.

Our Global E&C Group owns one of the leading technologies used in refinery residue upgrading and a hydrogen production process used in oil refineries and petrochemical plants. Additionally, our Global E&C Group has experience with, and is able to work with, a wide range of processes owned by others.

Global Power Group

Our Global Power Group designs, manufactures and erects steam generating and auxiliary equipment for electric power generating stations and industrial facilities worldwide and owns and operates several cogeneration, independent power production and waste-to-energy facilities, as well as power generation facilities for the process and petrochemical industries. Our Global Power Group generates revenues from engineering activities, equipment supply, construction contracts, operating and maintenance agreements, royalties from licensing its technology, and from returns on its investments in various power production facilities.

Our Global Power Group’s steam generating equipment includes a full range of technologies, offering independent power producers, utilities and industrial clients high-value technology solutions for converting a wide range of fuels, such as coal, petroleum coke, oil, gas, biomass and municipal solid waste, into steam and power.

Our Global Power Group offers several other products and services related to steam generators:

	•		Design, manufacture and installation of auxiliary equipment, which includes feedwater heaters, steam condensers and heat-recovery equipment.

	•		A full line of new and retrofit nitrogen-oxide (“NO _x ”) reduction systems such as selective non-catalytic and catalytic NO _x reduction systems as well as complete low- NO _x combustion systems.

	•		A broad range of steam generator site services, including construction and erection services, maintenance engineering, plant upgrading and life extensions.

	•		Research, analysis and experimental work in fluid dynamics, heat transfer, combustion, fuel technology, materials engineering and solid mechanics.

Corporate and Finance Group

In addition to these two business groups, which also represent operating segments for financial reporting purposes, we report corporate center expenses and expenses related to certain legacy liabilities, such as asbestos, in the Corporate and Finance Group (“C&F Group”), which we also treat as an operating segment for financial reporting purposes.

EBITDA is the primary measure of operating performance used by our chief operating decision maker.


				Global		Global		C&F
	Total			E&C Group		Power Group		Group (1)
Three months ended March 28, 2008
Third-party revenues	$	1,795,724		$	1,391,001	$	404,723	$	—

EBITDA ⁽²⁾	$	195,320		$	134,460	$	64,416	$	(3,556	)

Less: Interest expense		(6,151	)
Less: Depreciation and amortization		(11,356	)

Income before income taxes		177,813
Provision for income taxes		(39,750	)

Net income	$	138,063


Three months ended March 30, 2007
Third-party revenues	$	1,152,122		$	824,169	$	327,953	$	—

EBITDA ⁽³⁾	$	162,297		$	141,133	$	37,024	$	(15,860	)

Less: Interest expense		(4,725	)
Less: Depreciation and amortization		(8,838	)

Income before income taxes		148,734
Provision for income taxes		(33,909	)

Net income	$	114,825


(1)		Includes general corporate income and expense, our captive insurance operation and eliminations.

(2)		Includes in the fiscal quarter ended March 28, 2008: increased/(decreased) contract profit of $2,130 from the regular re-evaluation of contract profit estimates: $5,350 in our Global E&C Group and $(3,220) in our Global Power Group; a gain of $15,913 in our C&F Group on the settlement of coverage litigation with an asbestos insurance carrier; and a charge of $1,725 in our C&F Group on the revaluation of our asbestos liability and related asset resulting from our rolling 15-year asbestos liability estimate.

(3)		Includes in the fiscal quarter ended March 30, 2007: increased/(decreased) contract profit of $18,460 from the regular re-evaluation of contract profit estimates: $18,580 in our Global E&C Group and $(120) in our Global Power Group.

Operating revenues by industry were as follows:


	Three Months Ended
	March 28, 2008		March 30, 2007
Power generation	$	387,735	$	322,815
Oil refining		406,970		294,288
Pharmaceutical		18,435		29,687
Oil and gas		574,773		224,814
Chemical/petrochemical		365,315		227,655
Power plant operation and maintenance		29,216		29,303
Environmental		10,537		11,957
Other, net of eliminations		2,743		11,603

Total third-party revenues	$	1,795,724	$	1,152,122

12. Litigation and Uncertainties

Asbestos

Some of our U.S. and U.K. subsidiaries are defendants in numerous asbestos-related lawsuits and out-of-court informal claims pending in the United States and United Kingdom. Plaintiffs claim damages for personal injury alleged to have arisen from exposure to or use of asbestos in connection with work allegedly performed by our subsidiaries during the 1970s and earlier.

United States

A summary of U.S. claim activity is as follows:


	Number of Claims
	For the Three Months Ended
	March 28,			March 30,
	2008			2007
Open claims at beginning of period		131,340			135,890
New claims		1,020			1,640
Claims resolved		(1,550	)		(2,270	)

Open claims at end of period		130,810			135,260

We had the following U.S. asbestos-related assets and liabilities recorded on our condensed consolidated balance sheet as of the dates set forth below. Total U.S. asbestos-related liabilities are estimated through the first quarter of fiscal year 2023. Although it is likely that claims will continue to be filed after that date, the uncertainties inherent in any long-term forecast prevent us from making reliable estimates of the indemnity and defense costs that might be incurred after that date.


	March 28,		December 28,
	2008		2007
Asbestos-related assets recorded within:
Accounts and notes receivable-other	$	66,300	$	47,100
Asbestos-related insurance recovery receivable		261,000		279,100

Total asbestos-related assets	$	327,300	$	326,200


Asbestos-related liabilities recorded within:
Accrued expenses	$	72,000	$	72,000
Asbestos-related liability		313,400		331,300

Total asbestos-related liabilities	$	385,400	$	403,300

Since fiscal year-end 2004, we have worked with Analysis Research Planning Corporation (“ARPC”), nationally recognized consultants in projecting asbestos liabilities, to estimate the amount of asbestos-related indemnity and defense costs at year-end for the next 15 years. Based on its review of fiscal year 2007 activity, ARPC recommended that the assumptions used to estimate our future asbestos liability be updated as of fiscal year-end 2007. Accordingly, we developed a revised estimate of our indemnity and defense costs through fiscal year-end 2022 considering the advice of ARPC. In the fourth quarter of fiscal year 2007, we increased our liability for asbestos indemnity and defense costs through fiscal year-end 2022 to $403,300, which brought our liability to a level consistent with ARPC’s reasonable best estimate. In connection with updating our estimated asbestos liability and related asset, we recorded a charge of $7,400 in the fourth quarter of fiscal year 2007. Our estimated fiscal year-end 2007 liability was increased during the fiscal first quarter of 2008 by $2,100, which represents the rolling 15-year asbestos-related liability estimate, and was reduced by payments amounting to approximately $20,000.

The amount paid on asbestos litigation, defense and case resolution was $20,000 and $23,600 for the fiscal quarters ended March 28, 2008 and March 30, 2007, respectively. We funded $4,900 of the payments made during the fiscal quarter ended March 28, 2008, while all remaining amounts were paid from insurance proceeds. Through March 28, 2008, total cumulative indemnity costs paid were approximately $635,400 and total cumulative defense costs paid were approximately $258,400.

As of March 28, 2008, total asbestos-related liabilities were comprised of an estimated liability of $ 152,200 relating to open (outstanding) claims being valued and an estimated liability of $233,200 relating to future unasserted claims through the first quarter of fiscal year 2023.

Our liability estimate is based upon the following information and/or assumptions: number of open claims, forecasted number of future claims, estimated average cost per claim by disease type - mesothelioma, lung cancer and non-malignancies — and the breakdown of known and future claims into disease type — mesothelioma, lung cancer or non-malignancies. The total estimated liability, which has not been discounted for the time value of money, includes both the estimate of forecasted indemnity amounts and forecasted defense costs. Total defense costs and indemnity liability payments are estimated to be incurred through the first quarter of fiscal year 2023, during which period the incidence of new claims is forecasted to decrease each year. We believe that it is likely that there will be new claims filed after the first quarter of fiscal year 2023, but in light of uncertainties inherent in long-term forecasts, we do not believe that we can reasonably estimate the indemnity and defense costs that might be incurred after the first quarter of fiscal year 2023. Historically, defense costs have represented approximately 29% of total defense and indemnity costs.

The overall historic average combined indemnity and defense cost per resolved claim through March 28, 2008 has been approximately $2.6. The average cost per resolved claim is increasing and we believe will continue to increase in the future.

The asbestos-related asset recorded within accounts and notes receivable-other as of March 28, 2008 reflects amounts due in the next 12 months under executed settlement agreements with insurers and does not include any estimate for future settlements. The recorded asbestos-related insurance recovery receivable includes an estimate of recoveries from insurers in the unsettled insurance coverage litigation referred to below based upon the application of New Jersey law to certain insurance coverage issues and assumptions relating to cost allocation and other factors as well as an estimate of the amount of recoveries under existing settlements with other insurers. Such amounts have not been discounted for the time value of money.

Since fiscal year-end 2005, we have worked with Peterson Risk Consulting, nationally recognized experts in the estimation of insurance recoveries, to review our estimate of the value of the settled insurance asset and assist in the estimation of our unsettled asbestos insurance asset. Based on insurance policy data, historical claim data, future liability estimates including the expected timing of payments and allocation methodology assumptions we provided them, Peterson Risk Consulting provided an analysis of the unsettled insurance asset as of March 28, 2008. We utilized that analysis to determine our estimate of the value of the unsettled insurance asset as of March 28, 2008.

As of March 28, 2008, we estimated the value of our unsettled asbestos insurance asset related to ongoing litigation in New York state court with our subsidiaries’ insurers at $23,100. The litigation relates to the amounts of insurance coverage available for asbestos-related claims and the proper allocation of the coverage among our subsidiaries’ various insurers and our subsidiaries as self-insurers. We believe that any amounts that our subsidiaries might be allocated as self-insurer would be immaterial.

An adverse outcome in the pending insurance litigation described above could limit our remaining insurance recoveries and result in a reduction in our insurance asset. However, a favorable outcome in all or part of the litigation could increase remaining insurance recoveries above our current estimate. If we prevail in whole or in part in the litigation, we will re-value our asset relating to remaining available insurance recoveries based on the asbestos liability estimated at that time.

Over the last several years, certain of our subsidiaries have entered into settlement agreements calling for insurers to make lump-sum payments, as well as payments over time, for use by our subsidiaries to fund asbestos-related indemnity and defense costs and, in certain cases, for reimbursement for portions of out-of-pocket costs previously incurred. In fiscal year 2007, our subsidiaries reached an agreement to settle their disputed asbestos-related insurance coverage with four additional insurers. As a result of these settlements, we increased our asbestos-related insurance asset and recorded a gain of $13,500 in fiscal year 2007.

In the first quarter of fiscal year 2008, our subsidiaries reached an agreement to settle their disputed asbestos-related insurance coverage with an additional insurer. As a result of this settlement, we increased our asbestos-related insurance asset and recorded a gain of $15,900 in the fiscal quarter ended March 28, 2008.

We intend to continue to attempt to negotiate additional settlements where achievable on a reasonable basis in order to minimize the amount of future costs that we would be required to fund out of the cash flow generated from our operations. Unless we settle with the remaining insurers at recovery amounts significantly in excess of our current estimate, it is likely that the amount of our insurance settlements will not cover all future asbestos-related costs and we will be required to fund a portion of such future costs, which will reduce our cash flows and working capital.

In fiscal year 2006, we were successful in our appeal of a New York state trial court decision that previously had held that New York, rather than New Jersey, law applies in the above coverage litigation with our subsidiaries’ insurers, and as a result, we increased our insurance asset and recorded a gain of $19,500. On February 13, 2007, our subsidiaries’ insurers were granted permission by the appellate court to appeal the decision to the New York Court of Appeals, the state’s highest court. On October 11, 2007, the New York Court of Appeals upheld the appellate court decision in our favor.

Even if the coverage litigation is resolved in a manner favorable to us, our insurance recoveries (both from the litigation and from settlements) may be limited by insolvencies among our insurers. We have not assumed recovery in the estimate of our asbestos insurance asset from any of our currently insolvent insurers. Other insurers may become insolvent in the future and our insurers may fail to reimburse amounts owed to us on a timely basis. Failure to realize the expected insurance recoveries, or delays in receiving material amounts from our insurers could have a material adverse effect on our financial condition and our cash flows.

Based on the fiscal year-end 2007 liability estimate, an increase of 25% in the average per claim indemnity settlement amount would increase the liability by $70,400 and the impact on expense would be dependent upon available insurance recoveries. Assuming no change to the assumptions currently used to estimate our insurance asset, this increase would result in a charge in the statement of operations in the range of approximately 70% to 80% of the increase in the liability. Long-term cash flows would ultimately change by the same amount. Should there be an increase in the estimated liability in excess of this 25%, the percentage of that increase that would be expected to be funded by additional insurance recoveries will decline.

We have funded $4,900 of the asbestos liability indemnity payments and defense costs from our cash flows in the first fiscal quarter of fiscal year 2008, net of the cash received from insurance settlements. We expect to fund $4,500 of the asbestos liability indemnity and defense costs from our cash flows in fiscal year 2008, net of the cash expected to be received from existing insurance settlements. As we continue to collect cash from insurance settlements and assuming no increase in our asbestos-related insurance liability or any future insurance settlements, the asbestos-related insurance receivable recorded on our condensed consolidated balance sheet will continue to decrease.

The estimate of the liabilities and assets related to asbestos claims and recoveries is subject to a number of uncertainties that may result in significant changes in the current estimates. Among these are uncertainties as to the ultimate number and type of claims filed, the amounts of claim costs, the impact of bankruptcies of other companies with asbestos claims, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, as well as potential legislative changes. Increases in the number of claims filed or costs to resolve those claims could cause us to increase further the estimates of the costs associated with asbestos claims and could have a material adverse effect on our financial condition, results of operations and cash flows.

United Kingdom

Some of our subsidiaries in the United Kingdom have also received claims alleging personal injury arising from exposure to asbestos. To date, 873 claims have been brought against our U.K. subsidiaries of which 346 remained open as of March 28, 2008. None of the settled claims has resulted in material costs to us.

As of March 28, 2008, we had recorded total liabilities of $49,000 comprised of an estimated liability relating to open (outstanding) claims of $8,900 and an estimated liability relating to future unasserted claims through the first quarter of fiscal year 2023 of $40,100. Of the total, $3,000 was recorded in accrued expenses and $46,000 was recorded in asbestos-related liability on the condensed consolidated balance sheet. An asset in an equal amount was recorded for the expected U.K. asbestos-related insurance recoveries, of which $3,000 was recorded in accounts and notes receivable-other and $46,000 was recorded as asbestos-related insurance recovery receivable on the condensed consolidated balance sheet. The liability estimates are based on a U.K. House of Lords judgment that pleural plaque claims do not amount to a compensable injury and accordingly, we have reduced our liability assessment. If this ruling is reversed by legislation, the asbestos liability and related asset recorded in the U.K. would be approximately $66,600.

Project Claims

In the ordinary course of business, we are parties to litigation involving clients and subcontractors arising out of project contracts. Such litigation includes claims and counterclaims by and against us for canceled contracts, for additional costs incurred in excess of current contract provisions, as well as for back charges for alleged breaches of warranty and other contract commitments. If we were found to be liable for any of the claims/counterclaims against us, we would incur a charge against earnings to the extent a reserve had not been established for the matter in our accounts or if the liability exceeds established reserves.

Power Plant Arbitration — Eastern Europe

In June 2006, we commenced arbitration against a client seeking final payment for our services in connection with two power plants that we designed and built in Eastern Europe. The dispute primarily concerns whether we are liable to the client for liquidated damages (“LDs”) under the contract for delayed completion of the projects. The client contends that it is owed LDs, limited under the contract at approximately €37,600 (approximately $59,400 at the exchange rate in effect as of March 28, 2008), and is retaining as security for these LDs approximately €22,000 (approximately $34,700 at the exchange rate in effect as of March 28, 2008) in contract payments otherwise due to us for work performed. The client contends that it is owed an additional €6,900 (approximately $10,900 at the exchange rate in effect as of March 28, 2008) for the cost of consumable materials it had to incur due to the extended commissioning period on both projects, the cost to relocate a piece of equipment on one of the projects and the cost of various warranty repairs and punch list work. We are seeking payment of the €22,000 (approximately $34,700 at the exchange rate in effect as of March 28, 2008 and which is recorded within contracts in process on the condensed consolidated balance sheet) in retention that is being held by the client for LDs, plus approximately €4,900 (approximately $7,700 at the exchange rate in effect as of March 28, 2008) in interest on the retained funds, as well as approximately €9,100 (approximately $14,400 at the exchange rate in effect as of March 28, 2008) in additional compensation for extra work performed beyond the original scope of the contracts and the client’s failure to procure the required property insurance for the project, which should have provided coverage for some of the damages we incurred on the project related to turbine repairs. The arbitration hearing on liability is currently underway. Accordingly, it is premature to predict the outcome of this matter.

Power Plant Dispute — Ireland

In 2006, a dispute arose with a client because of material corrosion that is occurring at two power plants we designed and built in Ireland, which began operation in December 2005 and June 2006. The boilers at both plants are designed to burn milled peat as the primary fuel, supplied from different local sources. The peat being supplied is out of the range specified by our contract and, while the matter is still under investigation, we believe this variation from the agreed specifications is the cause of alkali halides corrosion that is affecting the boiler tubes. We have identified a technical solution to ameliorate the boiler tube corrosion, and we and the client are in the process of evaluating the proposed solution for the boiler tube corrosion in light of continued investigation and data collection and analysis. Disavowing responsibility for the fuel specification, the client has refused to pay for the cost of the corrective work and has reserved its rights against us under the contract, which could include repairing or rejecting the plants and recovering consequential damages in the event we are determined to be grossly negligent. We have advised the client that we are not responsible for the cost of corrective work to address corrosion resulting from out-of-specification fuel and we have been engaging in discussions with the client regarding our respective claims.

There is also corrosion occurring to subcontractor-provided emissions control equipment and induction fans at the back-end of the power plants. The cause of this back-end corrosion, which we discovered during the second quarter of fiscal year 2007 to be more extensive than previously assessed, is under investigation. Based upon the information gathered to date, we believe the corrosion is due principally to the low set point temperature design of the emissions control equipment that was set by our subcontractor. If this proves to be the case, we believe the subcontractor would be responsible for the cost to remedy this problem under our agreement with them, although we may have direct responsibility for this cost to the client under our agreement with them. To date, the subcontractor has denied responsibility for the corrosion, contending it is the result of out-of-specification fuel supplied by the client. We have reserved our rights against the client if this proves to be the case. To the extent that we incur costs for correcting this problem, we intend to pursue claims against our subcontractor and/or our client, depending upon the cause of the corrosion. Due to the potential magnitude of the amounts involved, there can be no assurance that we will collect amounts for which our subcontractor may be determined to be liable. From a plant rejection standpoint, we do not believe that the back-end corrective work will materially impact our availability guaranty to the client described below.

The contract for these plants contains an availability guaranty requiring the plants to meet specified energy generation levels over a three year period. The availability guaranty is expressly conditioned upon the use of the contract-specified fuel. The availability guaranty provides for liquidated damages which could reach the contract cap for liquidated damages of €17,500 (approximately $27,600 at the exchange rate in effect as of March 28, 2008). In addition to liquidated damages, in the event that availability of either of the plants as an average of the best two out of the first three years of operation is 80% or below, the client may be entitled to certain remedies, the most significant of which would be the right to reject both plants and seek reimbursement of the €351,000 contract price paid for the plants (approximately $554,400 at the exchange rate in effect as of March 28, 2008) plus restoration costs at the sites. The client has alleged that at least one of the plants has failed to meet the availability guaranty which we have disputed. We have advised the client that we do not believe we are responsible under our availability guaranty (which is expressly subject to the client’s provision of specified fuel).

In the event that the parties are not able to resolve the dispute, the contract provides for arbitration conducted under The Institution of Engineers of Ireland Arbitration Procedure. Although the client has indicated that it intends to commence an arbitration, it has not done so at this point, and we continue to engage in discussions with the client at its request to resolve this dispute as referenced above. In such an arbitration proceeding, damages that the client may seek could include, but may not be limited to, the cost to correct the corrosion in the boiler tubes and emissions control equipment, liquidated damages under the availability guaranty, consequential damages, including but not limited to lost profits, in the event gross negligence is proven and, in the event of rejection, the total amount paid in respect of the plants, under the contract or otherwise, plus the cost to dismantle the plants. As such, the costs claimed could exceed the above-stated contract price paid for the plants and liquidated damages. We would vigorously oppose such claims in any such arbitration.

We have completed the necessary corrective actions for certain defects in the conveyor equipment at the plants. While we believe that the subcontractor that provided the equipment is responsible for the defects, our investigation is continuing.

During the fourth quarter of fiscal year 2006, we established a contingency of $25,000 in relation to this project. Primarily as a result of the second quarter of fiscal year 2007 discovery of the more extensive back-end corrosion, the contingency was increased by $30,000 during the second quarter of fiscal year 2007.

The performance of our subsidiary executing the foregoing contract in Ireland is guaranteed by Foster Wheeler Ltd. In addition, there are €16,700 (approximately $26,400 at the exchange rate in effect as of March 28, 2008) of outstanding retention bonds that have been issued in favor of the client.

Due to the inherent commercial, legal and technical uncertainties underlying the estimation of all of the project claims described above, the amounts ultimately realized or paid by us could differ materially from the balances, if any, included in our financial statements, which could result in additional material charges against earnings, and which could also materially adversely impact our financial condition and cash flows.

Camden County Waste-to-Energy Project

One of our project subsidiaries, Camden County Energy Recovery Associates, LP (“CCERA”) owns and operates a waste-to-energy facility in Camden County, New Jersey (the “Project”). The Pollution Control Finance Authority of Camden County (“PCFA”) issued bonds to finance the construction of the Project and to acquire a landfill for Camden County’s use. Pursuant to a loan agreement between the PCFA and CCERA, proceeds from the bonds were loaned by the PCFA to CCERA and used by CCERA to finance the construction of the facility. Accordingly, the proceeds of this loan were recorded as debt on CCERA’s balance sheet and, therefore, are included in our condensed consolidated balance sheet. CCERA’s obligation to service the debt incurred pursuant to the loan agreement is limited to depositing all tipping fees and electric revenues received with the trustee of the PCFA bonds. The trustee is required to pay CCERA its service fees prior to servicing the PCFA bonds. CCERA has no other debt repayment obligations under the loan agreement with the PCFA.

In 1997, the United States Supreme Court effectively invalidated New Jersey’s long-standing municipal solid waste flow rules and regulations, eliminating the guaranteed supply of municipal solid waste to the Project with its corresponding tipping fee revenue. As a result, tipping fees have been reduced to market rate in order to provide a steady supply of fuel to the Project. Since the ruling, those market-based revenues have not been, and are not expected to be, sufficient to service the debt on outstanding bonds issued by the PCFA to finance the construction of the Project.

In 1998, CCERA filed suit against the PCFA and other parties seeking, among other things, to void the applicable contracts and agreements governing the Project (Camden County Energy Recovery Assoc. v. N.J. Department of Environmental Protection, et al., Superior Court of New Jersey, Mercer County, L-268-98). Since 1999, the State of New Jersey has provided subsidies sufficient to ensure the payment of each of the PCFA’s debt service payments as they became due. The bonds outstanding in connection with the Project were issued by the PCFA, not by us or CCERA, and the bonds are not guaranteed by either us or CCERA. In the litigation, the defendants have asserted, among other things, that an equitable portion of the outstanding debt on the Project should be allocated to CCERA even though CCERA did not guarantee the bonds.

At this time, we cannot determine the ultimate outcome of the foregoing and the potential effects on CCERA and the Project. If the State of New Jersey were to fail to subsidize the debt service, and there were to be a default on a debt service payment, the bondholders might proceed to attempt to exercise their remedies, by among other things, seizing the collateral securing the bonds. We do not believe this collateral includes CCERA’s plant.

Environmental Matters

CERCLA and Other Remedial Matters

Under U.S. federal statutes, such as the Resource Conservation and Recovery Act, Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), the Clean Water Act and the Clean Air Act, and similar state laws, the current owner or operator of real property and the past owners or operators of real property (if disposal of toxic or hazardous substances took place during such past ownership or operation) may be jointly and severally liable for the costs of removal or remediation of toxic or hazardous substances on or under their property, regardless of whether such materials were released in violation of law or whether the owner or operator knew of, or was responsible for, the presence of such substances. Moreover, under CERCLA and similar state laws, persons who arrange for the disposal or treatment of hazardous or toxic substances may also be jointly and severally liable for the costs of the removal or remediation of such substances at a disposal or treatment site, whether or not such site was owned or operated by such person, which we refer to as an off-site facility. Liability at such off-site facilities is typically allocated among all of the financially viable responsible parties based on such factors as the relative amount of waste contributed to a site, toxicity of such waste, relationship of the waste contributed by a party to the remedy chosen for the site and other factors.

We currently own and operate industrial facilities and we have also transferred our interests in industrial facilities that we formerly owned or operated. It is likely that as a result of our current or former operations, hazardous substances have affected the facilities or the real property on which they are or were situated. We also have received and may continue to receive claims pursuant to indemnity obligations from the present owners of facilities we have transferred, which claims may require us to incur costs for investigation and/or remediation.

We are currently engaged in the investigation and/or remediation under the supervision of the applicable regulatory authorities at four of our or our subsidiaries’ former facilities. In addition, we sometimes engage in investigation and/or remediation without the supervision of a regulatory authority. Although we do not expect the environmental conditions at our present or former facilities to cause us to incur material costs in excess of those for which reserves have been established, it is possible that various events could cause us to incur costs materially in excess of our present reserves in order to fully resolve any issues surrounding those conditions. Further, no assurance can be provided that we will not discover additional environmental conditions at our currently or formerly owned or operated properties, or that additional claims will not be made with respect to formerly owned properties, requiring us to incur material expenditures to investigate and/or remediate such conditions.

We have been notified that we are a potentially responsible party (“PRP”) under CERCLA or similar state laws at three off-site facilities. At each of these sites, our liability should be substantially less than the total site remediation costs because the percentage of waste attributable to us compared to that attributable to all other PRPs is low. We do not believe that our share of cleanup obligations at any of the off-site facilities as to which we have received a notice of potential liability will exceed $500 in the aggregate. We have also received and responded to a request for information from the United States Environmental Protection Agency (“USEPA”) regarding a fourth off-site facility. We do not know what, if any, further actions USEPA may take regarding this fourth off-site facility.

Mountain Top

In February 1988, one of our subsidiaries, Foster Wheeler Energy Corporation (“FWEC”), entered into a Consent Agreement and Order with the USEPA and the Pennsylvania Department of Environmental Protection (“PADEP”) regarding its former manufacturing facility in Mountain Top, Pennsylvania. The order essentially required FWEC to investigate and remediate as necessary contaminants, including trichloroethylene (“TCE”), in the soil and groundwater at the facility. Pursuant to the order, in 1993 FWEC installed a “pump and treat” system to remove TCE from the groundwater. It is not possible at the present time to predict how long FWEC will be required to operate and maintain this system.

In the fall of 2004, FWEC sampled the private domestic water supply wells of certain residences in Mountain Top and identified approximately 30 residences whose water supply contained TCE at levels in excess of Safe Drinking Water Act standards. The subject residences are located approximately one mile to the southwest of where the TCE previously was discovered in the soils at the former FWEC facility.

Since that time, FWEC, USEPA and PADEP have cooperated in an investigation to, among other things, attempt to identify the source(s) of the TCE in the residential wells. Although FWEC believed the evidence available at that time was not sufficient to support a determination by a governmental entity that FWEC was a PRP as to the TCE in the residential wells, FWEC in October 2004 began providing the potentially affected residences with bottled water. It thereafter arranged for the installation, maintenance and testing of filters to remove the TCE from the water being drawn from the wells. In August 2005, FWEC entered into a settlement agreement with USEPA whereby FWEC agreed to arrange and pay for the hookup of public water to the affected residences, which involved the extension of a water main and the installation of laterals from the main to the affected residences. The foregoing hookups have been completed, but there may be a limited number of additional hookups in the future. As residences were hooked up, FWEC ceased providing bottled water and filters to them. FWEC is incurring costs related to public outreach and communications in the affected area. FWEC may be required to pay the agencies’ costs in overseeing and responding to the situation. There is also a possibility that FWEC would incur further costs if it were to conduct further investigation regarding the TCE and/or to continue to monitor the groundwater in the area of the affected residences. We have accrued our best estimate of the cost related to the foregoing and review this estimate on a quarterly basis.

Other costs to which FWEC could be exposed could include, among other things, FWEC’s counsel and consulting fees, further agency oversight and/or response costs, costs and/or exposure related to the litigation described below beyond those for which accruals have been made and other costs related to possible further investigation and/or remediation. At present, it is not possible to determine whether FWEC will be determined to be liable for some or all of the items described in this paragraph, nor is it possible to reliably estimate the potential liability associated with the items.

If one or more third-parties are determined to be a source of the TCE, FWEC will evaluate its options regarding the potential recovery of the costs FWEC has incurred, which options could include seeking to recover those costs from those determined to be a source.

In March 2006, a complaint was filed in an action entitled Sarah Martin and Jeffrey Martin v. Foster Wheeler Energy Corporation , Case No. 3376-06, Court of Common Pleas, Luzerne County, Pennsylvania (subsequently removed to the United States District Court, Middle District of Pennsylvania). The complaint alleged that it was filed on behalf of the Martins and more than 25 others similarly situated owning or residing on property impacted or threatened with impacts of the TCE released from the former FWEC facility. The complaint sought to recover costs of environmental remediation and continued environmental monitoring of alleged class members’ property, diminution in property value, costs associated with obtaining healthy water, the establishment of a medical monitoring trust fund, statutory, treble and punitive damages and interest and the costs of the suit.

In April 2007, the court in the Martin case preliminarily approved a class action settlement that had been jointly filed by the plaintiffs and FWEC. The preliminary settlement was subject to the class members’ opt-in/opt-out process and the holding of a fairness hearing before the court. A number of the class members opted-out of the preliminary settlement, and a number of them objected that the preliminary settlement was not fair. After the fairness hearing the court, in December 2007, entered an order finally approving the settlement.

Under the terms of the settlement, FWEC will pay the class and its counsel a total of approximately $1,600 in exchange for a release by class members of all claims with respect to the matters that are the subject of the litigation. The release will not extend to the claims of those who opt-out of the settlement. The class, which was agreed upon only for the purposes of the settlement, consists of three categories of persons who own or live on property in, or within approximately 150 feet of, the area in which TCE is inferred to exist in the groundwater. One of the three categories of the class includes those persons who live in residences at which TCE was detected in private wells in 2004. We have accrued a provision sufficient to cover the settlement.

In April 2006, a complaint was filed in an action entitled Donna Rose Cunningham and Michael A. Cunningham v. Foster Wheeler Energy Corporation , United States District Court, Middle District of Pennsylvania. The complaint’s allegations are generally similar to those in the Martin case, except that the complaint is on behalf of the Cunninghams only, not an alleged class, and except that the Cunninghams have included a claim for embarrassment, humiliation and emotional distress. During the second quarter of fiscal year 2008, we reached a settlement in principle of this claim for an amount that we do not believe will have a material impact on our financial position, results of operations or cash flows.

In May 2006, a complaint was filed in an action entitled Gary Prezkop, Personal Representative of the Estate of Mary Prezkop, Deceased, and Gary Prezkop, in his own right, v. Foster Wheeler Energy Corporation and Leonard M. Lulis. Case No. 000545 , Court of Common Pleas, Philadelphia County, Pennsylvania. The complaint’s allegations were generally similar to those in the Martin and Cunningham cases, but they also included claims for Mary Prezkop’s alleged wrongful death. During fiscal year 2007, the matter was settled for an amount that did not have a material impact on our financial position, results of operations or cash flows.

Other Environmental Matters

Our operations, especially our manufacturing and power plants, are subject to comprehensive laws adopted for the protection of the environment and to regulate land use. The laws of primary relevance to our operations regulate the discharge of emissions into the water and air, but can also include hazardous materials handling and disposal, waste disposal and other types of environmental regulation. These laws and regulations in many cases require a lengthy and complex process of obtaining licenses, permits and approvals from the applicable regulatory agencies. Noncompliance with these laws can result in the imposition of material civil or criminal fines or penalties. We believe that we are in substantial compliance with existing environmental laws. However, no assurance can be provided that we will not become the subject of enforcement proceedings that could cause us to incur material expenditures. Further, no assurance can be provided that we will not need to incur material expenditures beyond our existing reserves to make capital improvements or operational changes necessary to allow us to comply with future environmental laws.

With regard to the foregoing, the waste-to-energy facility operated by our CCERA project subsidiary is subject to certain revisions to New Jersey’s mercury air emission regulations. The revisions make CCERA’s mercury control requirements more stringent, especially when the last phase of the revisions becomes effective in 2012. CCERA’s management believes that the data generated during recent stack testing tends to indicate that the facility will be able to comply with even the most stringent of the regulatory revisions without installing additional control equipment. Even if the equipment had to be installed, CCERA believes that the project’s sponsor would be responsible to pay for the equipment. However, the sponsor may not have sufficient funds to do so or may assert that it is not so responsible. Budgetary estimates of the cost of installing the additional control equipment are approximately $30,000 based on our last assessment.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (amounts in thousands of dollars, except share data and per share amounts)

The following is management’s discussion and analysis of certain significant factors that have affected our financial condition and results of operations for the periods indicated below. This discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto included in this quarterly report on Form 10-Q and our annual report on Form 10-K for the year ended December 28, 2007, which we refer to as our 2007 Form 10-K.

Safe Harbor Statement

This management’s discussion and analysis of financial condition and results of operations, other sections of this quarterly report on Form 10-Q and other reports and oral statements made by our representatives from time to time may contain forward-looking statements that are based on our assumptions, expectations and projections about Foster Wheeler Ltd. and the various industries within which we operate. These include statements regarding our expectation about revenues (including as expressed by our backlog), our liquidity, the outcome of litigation and legal proceedings and recoveries from customers for claims and the costs of current and future asbestos claims and the amount and timing of related insurance recoveries. Such forward-looking statements by their nature involve a degree of risk and uncertainty. We caution that a variety of factors, including but not limited to the factors described under Part II, Item 1A, “Risk Factors” and the following, could cause business conditions and our results to differ materially from what is contained in forward-looking statements:

	•		changes in the rate of economic growth in the United States and other major international economies;

	•		changes in investment by the oil and gas, oil refining, chemical/petrochemical and power industries;

	•		changes in the financial condition of our customers;

	•		changes in regulatory environments;

	•		changes in project design or schedules;

	•		contract cancellations;

	•		changes in our estimates of costs to complete projects;

	•		changes in trade, monetary and fiscal policies worldwide;

	•		compliance with laws and regulations relating to our global operations;

	•		currency fluctuations;

	•		war and/or terrorist attacks on facilities either owned or where equipment or services are or may be provided;

	•		interruptions to shipping lanes or other methods of transit;

	•		outcomes of pending and future litigation, including litigation regarding our liability for damages and insurance coverage for asbestos exposure;

	•		protection and validity of our patents and other intellectual property rights;

	•		increasing competition by foreign and domestic companies;

	•		compliance with our debt covenants;

	•		recoverability of claims against our customers and others by us and claims by third parties against us; and

	•		changes in estimates used in our critical accounting policies.

Other factors and assumptions not identified above were also involved in the formation of these forward-looking statements and the failure of such other assumptions to be realized, as well as other factors, may also cause actual results to differ materially from those projected. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described above in connection with any forward-looking statements that may be made by us.

In addition, this management’s discussion and analysis of financial condition and results of operations contains several statements regarding current and future general global economic conditions. These statements are based on our compilation of economic data and analyses from a variety of external sources. While we believe these statements to be reasonably accurate, global economic conditions are difficult to analyze and predict and are subject to significant uncertainty and as a result, these statements may prove to be wrong.

We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any additional disclosures we make in proxy statements, quarterly reports on Form 10-Q, annual reports on Form 10-K and current reports on Form 8-K filed with the Securities and Exchange Commission.

Overview

We operate through two business groups — the Global Engineering & Construction Group, which we refer to as our Global E&C Group, and our Global Power Group. In addition to these two business groups, we also report corporate center expenses and expenses related to certain legacy liabilities, such as asbestos, in the Corporate and Finance Group, which we refer to as the C&F Group.

Since 2007, we have been exploring strategic acquisitions within the engineering and construction industry to complement or expand on our technical capabilities or access to new market segments. In February 2008, we acquired a U.S.-based biopharmaceutical engineering company as part of our strategy to enhance our positioning in the pharmaceutical marketplace, especially in the U.S. We are also exploring acquisitions within the power industry to complement our product offering. However, there is no assurance that we will consummate acquisitions in the future.

Fiscal First Quarter 2008 Results

We had net income of $138,100 in the first quarter of fiscal year 2008, compared to net income of $114,800 in the comparable period in fiscal year 2007. The improvement in the first quarter of fiscal year 2008, compared to the first quarter of fiscal year 2007, reflects the sharply improved operating performance by our Global Power Group and continued strong operating performance by our Global E&C Group. Additional highlights included the following:

	•		Our consolidated operating revenues increased 56% to $1,795,700 in the first quarter of fiscal year 2008, as compared to $1,152,100 in the first quarter of fiscal year 2007, reflecting increased flow-through revenues and greater business activity in both our Global E&C Group and our Global Power Group.

	•		Our consolidated new orders, measured in terms of future revenues, were $1,243,700 in the first quarter of fiscal year 2008, as compared to $4,604,500 in the fourth quarter of fiscal year 2007 and $1,416,500 in the first quarter of fiscal year 2007.

	•		Our consolidated backlog of unfilled orders, measured in future revenues, as of March 28, 2008 was $8,951,400, a decrease as compared to $9,420,400 as of December 28, 2007 and an increase as compared to $5,706,500 as of March 30, 2007.

	•		Our consolidated backlog, measured in terms of Foster Wheeler scope (as defined below), as of March 28, 2008, increased to $3,564,200, as compared to $3,294,600 as of December 28, 2007 and $2,740,000 as of March 30, 2007.

	•		E&C man-hours in backlog (in thousands) as of March 28, 2008 increased to 14,200, as compared to 13,400 as of December 28, 2007 and 12,300 as of March 30, 2007.

Challenges and Drivers

Our primary operating focus continues to be booking quality new business and executing our contracts well. The global markets in which we operate are largely dependent on overall economic growth and the resultant demand for oil and gas, electric power, petrochemicals and refined products.

In our Global E&C business, end product demand remains strong and continues to stimulate investment by our clients in new and expanded plants. Therefore, attracting and retaining qualified technical personnel to execute the existing backlog of unfilled orders and future bookings will continue to be a management priority. Equally important is ensuring that we maintain an appropriate management infrastructure to integrate and manage the technical personnel. We believe the primary drivers and constraints in our Global E&C market today are: end product demand, global economic outlook, oil and natural gas prices and scope and timing of client investments. See “—Results of Operations-Business Segments-Global E&C Group-Overview of Segment” below for a more detailed discussion of the challenges and drivers that impact our Global E&C Group, including the current global economic outlook.

In our Global Power Group business, we believe the primary drivers and constraints in the global steam generator market today are: economic growth, power plant price inflation, concern related to greenhouse gas emissions, entry into new geographic markets, impact of environmental regulation, and capacity constraints of electricity markets. These drivers differ across world regions, countries and provinces. See “—Results of Operations-Business Segments-Global Power Group-Overview of Segment” below for a more detailed discussion of the challenges and drivers that impact our Global Power Group, including the current global economic outlook.

New Orders

The Global E&C Group’s new orders, measured in future revenues, decreased to $707,300 in the first quarter of fiscal year 2008, as compared to $3,999,400 in the fourth quarter of fiscal year 2007 and $872,700 in the first quarter of fiscal year 2007. These new orders are inclusive of estimated flow-through revenues, as defined below, of $94,800, $3,395,900 and $339,400 for the first quarter of fiscal year 2008, fourth quarter of fiscal year 2007 and first quarter of fiscal year 2007, respectively. We expect capital investments in the markets served by our Global E&C Group, including the chemical, petrochemical, oil refining, liquefied natural gas, which we refer to as LNG, and upstream oil and gas industries, to be strong for the remainder of fiscal year 2008. As a result, we also expect the demand for the services and equipment supplied by engineering and construction contractors such as us to be strong throughout the remainder of fiscal year 2008.

The Global Power Group’s new orders decreased to $536,400 in the first quarter of fiscal year 2008, as compared to $605,100 in the fourth quarter of fiscal year 2007 and $543,800 in the first quarter of fiscal year 2007. However, we believe that there are solid opportunities throughout the remainder of fiscal year 2008 in the power markets we serve, such as solid fuel-fired steam generators, steam generator services, steam generator environmental products and steam generator-related construction services.

Results of Operations:

Operating Revenues:


Three Months Ended
March 28,	March 30,
2008	2007	$ Change	% Change
$1,795,724	$1,152,122	$643,602		55.9	%

The increase in operating revenues in the first quarter of fiscal year 2008, compared to the corresponding period of fiscal year 2007, reflects our success in addressing the strong market demand in both our Global E&C Group and our Global Power Group (please refer to the section entitled “—Business Segments” within this Item 2 and Note 11 to the condensed consolidated financial statements in this quarterly report on Form 10-Q for further information). However, $549,255 of the increase during the first quarter of fiscal year 2008 results from an increase versus the corresponding period of fiscal year 2007 in flow-through revenues and costs in our Global E&C Group on projects executed by our Asia-Pacific, Continental Europe and United Kingdom operations. Flow-through revenues and costs arise on projects where we purchase materials, equipment or subcontractor services on behalf of our customers on a reimbursable basis with no mark-up but for which we have overall responsibility as the contractor for the engineering specifications and procurement or procurement services for such costs. Flow-through revenues and costs do not impact contract profit or net earnings, but increased amounts of flow-through revenues and costs have the effect of reducing our reported profit margins as a percent of operating revenues. We expect flow-through revenues and costs in fiscal year 2008 to be greater than fiscal year 2007 on an absolute basis.

Contract Profit:


Three Months Ended
March 28,	March 30,
2008	2007	$ Change	% Change
$216,971	$207,512	$9,459		4.6	%

Contract profit is computed as operating revenues less cost of operating revenues. The increase in contract profit for the first quarter of fiscal year 2008, compared to the corresponding period of fiscal year 2007, includes a $7,500 commitment fee our Global Power Group received on a contract that we were not awarded. Contract profit also reflects an increase in revenues, excluding the flow-through revenues and their associated costs described above. Please refer to the section entitled “—Business Segments” within this Item 2 for further information.

Selling, General and Administrative (SG&A) Expenses:


Three Months Ended
March 28,	March 30,
2008	2007	$ Change	% Change
$64,896	$55,088	$9,808		17.8	%

SG&A expenses include the costs associated with general management, sales pursuit, including proposal expenses, and research and development costs. The increase in SG&A expenses in the first quarter of fiscal year 2008, compared to the same period in fiscal year 2007, results from increases in general overhead costs of $6,100 and sales pursuit costs of $3,800, and a decrease of $(100) from research and development costs. The increase in SG&A results primarily from the increased volume of business in fiscal year 2007 and the first quarter of fiscal year 2008, which drove an increase in the number of non-technical support staff and related costs.

Other Income:


Three Months Ended
March 28,	March 30,
2008	2007	$ Change	% Change
$19,534	$5,764	$13,770		238.9	%

Other income in the first quarter of fiscal year 2008 consists primarily of $11,800 in equity earnings generated from our ownership interests, in build, own and operate projects in Italy and Chile, and $5,500 of foreign exchange gains.

Other income in the first quarter of fiscal year 2007 consists primarily $4,200 in equity earnings generated from our interests, in build, own and operate projects in Italy and Chile, and $700 of investment income.

Other Deductions:


Three Months Ended
March 28,	March 30,
2008	2007	$ Change	% Change
$11,891	$8,172	$3,719		45.5	%

Other deductions in the first quarter of fiscal year 2008 consists primarily of $6,100 of legal fees, a $1,400 provision for environmental dispute resolution and remediation costs, $1,300 of bank fees, $900 of consulting fees, and a $800 charge for tax penalties.

Other deductions in the first quarter of fiscal year 2007 consists primarily of $600 of bank fees, $4,200 of legal fees, $1,300 of foreign exchange losses, a $500 provision for environmental dispute resolution and remediation costs and a $300 charge for tax penalties.

Interest Income:


Three Months Ended
March 28,	March 30,
2008	2007	$ Change	% Change
$10,531	$5,752	$4,779		83.1	%

The increase in interest income in the first quarter of fiscal year 2008, compared to the corresponding period of fiscal year 2007, resulted primarily from a higher average cash and cash equivalents balance.

Interest Expense:


Three Months Ended
March 28,	March 30,
2008	2007	$ Change	% Change
$6,151	$4,725	$1,426		30.2	%

The increase in interest expense in the first quarter of fiscal year 2008, compared to the corresponding period of fiscal year 2007, reflects the increased borrowings under our FW Power S.r.L. special-purpose limited recourse project debt as we continue construction of the electric power generating wind farm projects in Italy.

Minority Interest in Income of Consolidated Affiliates:


Three Months Ended
March 28,	March 30,
2008	2007	$ Change	% Change
$473	$2,309	$(1,836)		(79.5	)%

Minority interest in income of consolidated affiliates reflects third-party ownership interests in the results of our Global Power Group’s Martinez, California gas-fired cogeneration facility and our manufacturing facilities in Poland and the People’s Republic of China. The change in minority interest in income of consolidated affiliates is based upon changes in the underlying earnings of the subsidiaries. The decrease in minority interest in income of consolidated affiliates in the first quarter of fiscal year 2008 primarily reflects decreased earnings from the Martinez, California facility driven by decreased power production due to increased scheduled repair outages.

Net Asbestos-Related Gain:

Three Months Ended

March 28,

March 30,

2008

2007

$ Change

% Change

$14,188

$—

$14,188

N/M


N/M		- not meaningful.

In the first quarter of fiscal year 2008, our subsidiaries reached an agreement to settle their disputed asbestos-related insurance coverage with an insurer. As a result of this settlement, we recorded a gain of $15,900 in the fiscal quarter ended March 28, 2008, which is partially offset by a charge of $1,700 on the revaluation of our asbestos liability and related asset resulting from our rolling 15-year asbestos liability estimate. Please refer to Note 12 to the condensed consolidated financial statements in this quarterly report on Form 10-Q for further information.

Provision for Income Taxes:


Three Months Ended
March 28,	March 30,
2008	2007	$ Change	% Change
$39,750	$33,909	$5,841		17.2	%

The tax provision is calculated by multiplying pre-tax income by the estimated annual effective tax rate. Our effective tax rate can fluctuate significantly from period to period and may differ significantly from the U.S. federal statutory rate as a result of the fact that most of our operating units are profitable and are recording a provision for national and/or local income taxes, while others are unprofitable and are unable to recognize a tax benefit for losses. Statement of Financial Accounting Standard, or SFAS, No. 109, “Accounting for Income Taxes,” requires us to reduce our deferred tax benefits by a valuation allowance when, based upon available evidence, it is more likely than not that the tax benefit of losses (or other deferred tax assets) will not be realized in the future. In periods when operating units subject to a valuation allowance generate pretax earnings, the corresponding reduction in the valuation allowance favorably impacts our effective tax rate.

Our effective tax rate is, therefore, dependent on the location and amount of our taxable earnings and the effects of changes in valuation allowances. Our effective tax rates for the fiscal quarters ended March 28, 2008 and March 30, 2007 were lower than the U.S. statutory rate of 35% due principally to:

	•		Income earned in tax jurisdictions with tax rates being lower than the U.S. statutory rate; and

	•		A valuation allowance decrease.

We monitor the jurisdictions for which valuation allowances against deferred tax assets were established in previous years. As we currently have positive earnings in most jurisdictions, we evaluate on a quarterly basis the need for the valuation allowances against deferred tax assets in those jurisdictions. Such evaluation includes a review of all available evidence, both positive and negative, in determining whether a valuation allowance is necessary.

For statutory purposes, the majority of the U.S. federal tax benefits, against which valuation allowances have been established, do not expire until 2024 and beyond, based on current tax laws.

EBITDA:


Three Months Ended
March 28,	March 30,
2008	2007	$ Change	% Change
$195,320	$162,297	$33,023		20.3	%

EBITDA for the fiscal quarter ended March 28, 2008 reflects increased volumes of business, strong operating performance, and increased margins in our Global Power Group. EBITDA in the fiscal quarter ended March 28, 2008 includes $14,200 of net asbestos-related gains in the C&F Group and a $7,500 commitment fee received on a contract that we were not awarded in our Global Power Group. EBITDA was also positively impacted by an increase in equity earnings, from one of our Global Power Group’s equity interest investments, of approximately $4,900 during the first quarter of fiscal year 2008 due to an increase in electric tariff rates in Chile when compared to the fiscal year 2007 average electric tariff rates.

See the individual segment explanations below for additional details.

EBITDA is a supplemental financial measure not defined in generally accepted accounting principles, or GAAP. We define EBITDA as income before interest expense, income taxes, depreciation and amortization. We have presented EBITDA because we believe it is an important supplemental measure of operating performance. EBITDA, after adjustment for certain unusual and infrequent items specifically excluded in the terms of our current and prior senior credit agreements, is used for certain covenants under our current and prior senior credit agreements. We believe that the line item on the condensed consolidated statement of operations and comprehensive income entitled “net income” is the most directly comparable GAAP financial measure to EBITDA. Since EBITDA is not a measure of performance calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, net income as an indicator of operating performance or any other GAAP financial measure. EBITDA, as calculated by us, may not be comparable to similarly titled measures employed by other companies. In addition, this measure does not necessarily represent funds available for discretionary use and is not necessarily a measure of our ability to fund our cash needs. As EBITDA excludes certain financial information that is included in net income, users of this financial information should consider the type of events and transactions that are excluded. Our non-GAAP performance measure, EBITDA, has certain material limitations as follows:

	•		It does not include interest expense. Because we have borrowed money to finance some of our operations, interest is a necessary and ongoing part of our costs and has assisted us in generating revenue. Therefore, any measure that excludes interest expense has material limitations;

	•		It does not include taxes. Because the payment of taxes is a necessary and ongoing part of our operations, any measure that excludes taxes has material limitations; and

	•		It does not include depreciation and amortization. Because we must utilize property, plant and equipment and intangible assets in order to generate revenues in our operations, depreciation and amortization are necessary and ongoing costs of our operations. Therefore, any measure that excludes depreciation and amortization has material limitations.

A reconciliation of EBITDA to net income is shown below.


				Global	Global	C&F
	Total			E&C Group	Power Group	Group ⁽¹⁾
Three months ended March 28, 2008
EBITDA ⁽²⁾	$	195,320		$134,460	$64,416	$(3,556)

Less: Interest expense		(6,151	)
Less: Depreciation and amortization		(11,356	)

Income before income taxes		177,813
Provision for income taxes		(39,750	)

Net income	$	138,063


Three months ended March 30, 2007
EBITDA ⁽³⁾	$	162,297		$141,133	$37,024	$(15,860)

Less: Interest expense		(4,725	)
Less: Depreciation and amortization		(8,838	)

Income before income taxes		148,734
Provision for income taxes		(33,909	)

Net income	$	114,825


(1)		Includes general corporate income and expense, our captive insurance operation and eliminations.

(2)		Includes in the fiscal quarter ended March 28, 2008: increased/(decreased) contract profit of $2,100 from the regular re-evaluation of contract profit estimates: $5,300 in our Global E&C Group and $(3,200) in our Global Power Group; a gain of $15,900 in our C&F Group on the settlement of coverage litigation with an asbestos insurance carrier; and a charge of $1,700 in our C&F Group on the revaluation of our asbestos liability and related asset resulting from our rolling 15-year asbestos liability estimate.

(3)		Includes in the fiscal quarter ended March 30, 2007: increased/(decreased) contract profit of $18,460 from the regular re-evaluation of contract profit estimates: $18,580 in our Global E&C Group and $(120) in our Global Power Group.

Business Segments

EBITDA, as discussed and defined above, is the primary measure of operating performance used by our chief operating decision maker.

Global E&C Group


	Three Months Ended
	March 28,		March 30,
	2008		2007		$ Change			% Change
Operating revenues	$	1,391,001	$	824,169	$	566,832			68.8	%

EBITDA	$	134,460	$	141,133	$	(6,673	)		(4.7	)%

Results

The increase in operating revenues in the fiscal quarter ended March 28, 2008, as compared to the corresponding period of fiscal year 2007, reflects increased flow-through revenues and volumes of work in Asia, Australasia, Europe and the Middle East, partially offset by decreases in North America and South America. Major projects in Asia, Australasia, Europe and the Middle East in the oil and gas, refining, chemical/petrochemical and LNG industries led the increase in activities. Flow-through revenues increased $549,300 in the first quarter of fiscal year 2008 versus the corresponding period of fiscal year 2007 as a result of projects executed by our Asia-Pacific, Continental Europe and United Kingdom offices.

The decrease in EBITDA in the first quarter of fiscal year 2008, as compared to the corresponding period for fiscal year 2007, results primarily from a change in contract portfolio mix.

Our direct technical manpower, which includes agency workforce, was relatively unchanged during the first quarter of fiscal year 2008; however, we did increase our direct technical manpower at our low-cost engineering center in India as we continue to address growing market opportunities. We plan to continue to expand our operational capacity throughout the remainder of fiscal year 2008 through the combination of organic growth and selective acquisitions.

Overview of Segment

Below is an overview of the primary drivers and constraints applicable to our Global E&C Group.

Demand for Oil and Gas, Petrochemicals and Refined Products and Global Economic Outlook

We expect investment in new oil and gas, refining and petrochemicals/chemicals facilities, and modernization, expansion and upgrading of existing facilities in these sectors, to continue to be robust throughout the remainder of fiscal year 2008.

While our business has not been directly impacted to date by the U.S. credit crunch resulting from the sub-prime mortgage crisis, as our clients typically do not rely on financing for their capital investment programs, we believe that the full impact of the U.S. sub-prime mortgage crisis on the U.S. and global economies is becoming more significant and therefore the possibility exists that credit conditions, as well as a slowdown or recession in economic growth, could adversely affect the industries in which our clients operate and as a result, our Global E&C Group’s business. While the rate of global economic growth is expected to be lower in fiscal year 2008 relative to fiscal year 2007, the emerging markets currently show few or limited signs of any growth impact from recent financial and economic volatility and we believe that the downside risks in the emerging markets may be mitigated, at least in part, by the forecast for continued strong economic growth in key emerging markets, such as China and India.

We believe that the overall global refining system is still running at high utilization rates and that global demand for many refined products, particularly middle distillates (diesel, jet fuel, and heating oil), will continue to grow strongly. We believe that refining capacity will therefore continue to be added through the development of grassroots refineries, notably in the Middle East and Asia. Significant upgrades and expansions also continue to be planned or are underway at existing refineries in many regions. Clean fuel programs are also being implemented to meet tighter fuel specifications in refiners’ domestic and/or export markets. We are currently working on refinery projects in the Americas, Europe, Asia and the Middle East.

Some refiners are also investing in refinery/petrochemical integration. We believe that the drivers for this investment include: adding value to their refinery streams, diversification of their production, and margin enhancement. We are working on a number of integrated refinery/petrochemical projects in Asia and the Middle East.

The price differentials between heavier, higher-sulfur crude oil and lighter, sweeter crudes remain higher than the historic average. These differentials, and the expected growth in demand for transportation fuels, continue to stimulate refinery investment in facilities which enable refiners to process the cheaper, higher-sulfur crudes instead of the lighter, more expensive crudes, or to upgrade their lower-value refinery residues to higher-value transportation fuels. We expect to see continued investment in these projects.

We have considerable experience and expertise in this area, including our proprietary delayed coking technology, which enables refineries to upgrade lower quality crude oil or refinery residue to high value refined products such as transportation fuels. We are currently executing a significant number of delayed coking projects, including:

	•		Feasibility studies;

	•		Delayed coking technology license agreements and process design packages;

	•		Front-end engineering and design, or FEED, contracts;

	•		Engineering, procurement and construction supervision contracts; and

	•		Full engineering, procurement and construction contracts.

These projects are located in Asia, Europe, the Middle East, North America, and South America. The subsequent phases of some of these projects for which we are working on the early phases, offer us further opportunities. We believe further coking opportunities exist in regions such as Asia which are now looking at residue upgrading as an option, but where investment in residue upgrading has not previously been a prime focus for refiners.

Investment in Petrochemical Plants

Investment in petrochemical plants began to rise sharply in 2004 in response to strong growth in demand for petrochemicals. The majority of this investment has been centered in Asia and the Middle East. We are seeing:

	•		Continued strong demand supporting further new investment in these regions, which we expect to continue throughout the remainder of fiscal year 2008;

	•		Investment in specialty chemicals, particularly in the Middle East, stimulated by governmental desire to further diversify their economies to lessen their dependence on crude oil exports and to provide sustained employment for their growing young populations; and

	•		Increasing interest in developing new chemical facilities and expanding existing plants in North Africa, the Commonwealth of Independent States and South America.

Oil and Natural Gas Prices

We believe that high oil prices, together with longer-term projections for robust growth in global oil and gas demand, provide a strong stimulus to clients to invest in upstream oil and gas facilities, particularly in Africa, the Commonwealth of Independent States and the Middle East.

We believe that rising demand for natural gas in Europe, Asia and the United States, combined with a shortfall in indigenous production, will continue to act as a stimulant to the LNG business. Although LNG demand continues to grow strongly, the pace at which new liquefaction train construction projects have received approval to proceed has slowed over the last two or three years. We believe this indicates that significant additional liquefaction capacity over and above the approved projects will need to be developed.

Scope and Timing of Investments in Engineering and Construction Services, Equipment and Materials

While the outlook for oil and gas, refining and petrochemicals investment for the remainder of fiscal year 2008 remains positive, we are seeing that, as the demand for and cost of engineering and construction services, materials and equipment and commodities continues to rise, some companies are electing to commit to only partial or staged investments, to reduce the scope of their investments, or to postpone or cancel contemplated investments, until the market slows. As we work with our clients in the early study and front-end design phases of their projects, we are helping some of them develop a revised project that meets their investment parameters, develop a staged investment plan, or revise the scope of or configuration of their original project so that they are able to obtain approval to proceed with their investment. In addition, as discussed above, although the U.S. credit crisis has not directly impacted our business as yet, we believe that the impact on general economic conditions appears to be deepening and becoming more widespread and the full impact has yet to be realized. There are a number of substantial downside risks to the current global economic growth forecasts for the remainder of fiscal year 2008.

Pharmaceutical Facility Investment

Investment in new pharmaceutical production facilities has slowed since 2003. We believe this is attributable to a range of factors including industry cost pressure. Investment has focused on plant rationalization, upgrading and improvement projects rather than on major new greenfield production facilities and on biotechnology facilities. There are now indications of some renewed interest in more significant plant investment in the key pharmaceutical investment hubs — Singapore, the U.S., Ireland and Puerto Rico. In February 2008, we acquired a U.S.-based biopharmaceutical engineering company as part of our strategy to enhance our positioning in the pharmaceutical marketplace, especially in the U.S.

Global Power Group


	Three Months Ended
	March 28,		March 30,
	2008		2007		$ Change		% Change
Operating revenues	$	404,723	$	327,953	$	76,770		23.4	%

EBITDA	$	64,416	$	37,024	$	27,392		74.0	%

Results

The increase in operating revenues in the first quarter of fiscal year 2008, as compared to the corresponding period in fiscal year 2007, results from the volume of business in our operations in North America, Europe and Asia.

Our Global Power Group experienced higher levels of EBITDA in the first quarter of fiscal year 2008, as compared to the comparable period for fiscal year 2007, as a result of increased volumes of business and increased margins experienced by our contracts executed in Europe and Asia. EBITDA in fiscal year 2008 includes a $7,500 commitment fee received on a contract that we were not awarded. EBITDA was also positively impacted by approximately $4,900 during the first quarter of fiscal year 2008, by one of our Global Power Group’s equity interest investments, due to an increase in electric tariff rates in Chile during the first quarter of fiscal year 2008 compared to the average electric tariff rates experienced during fiscal year 2007.

Overview of Segment

Our Global Power Group designs, manufactures and erects steam generators for electric power generating stations and industrial facilities worldwide. The vast majority of the global steam generator market utilizes coal as the primary fuel for the steam generator. Therefore, the market drivers and constraints associated with coal use, strongly affect the steam generator market and our Global Power Group’s business. Additionally, our Global Power Group designs, manufactures and erects auxiliary equipment for electric power generating stations and industrial facilities worldwide and owns and operates several cogeneration, independent power production and waste-to-energy facilities, as well as power generation facilities for the process and petrochemical industries.

Below is an overview of the primary drivers and constraints applicable to the business areas within our Global Power Group.

Economic Growth

Historically, demand for our steam generators has been significantly affected by electricity demand, which in turn has been significantly affected by economic growth. While our business has not been directly impacted to date by the U.S. credit crunch resulting from the sub-prime mortgage crisis, we believe that the full impact of the U.S. sub-prime mortgage crisis on the U.S. and global economies is becoming more significant and therefore the possibility exists that credit conditions, as well as a slowdown or recession in economic growth, could adversely affect the industries in which our clients operate and as a result, our Global Power Group’s business. In particular, we believe that both the U.S. and Europe may experience a slowdown in economic growth that could cause a softening in demand for steam generators and, as a result, could adversely affect our Global Power Group’s business in these regions. However, we believe that economic growth in China, India, Vietnam, Indonesia, Philippines, Russia, South Africa, Turkey, and parts of South America and the Middle East will continue to drive strong demand for steam generators by electric power generating stations and industrial facilities in these countries.

Power Plant Price Inflation

We believe that substantial price inflation for new coal power plants may suppress future demand for steam generators, which in turn could adversely affect our Global Power Group’s business opportunities in both the U.S. and Europe.

Concern Related to Greenhouse Gases

Concern for emissions related to greenhouse gases, such as carbon dioxide, or CO _2, from coal power plants, could suppress future demand for utility steam generators and in turn adversely affect our Global Power Group’s business opportunities. We believe that this concern is currently strongest in the U.S. and Europe and could adversely affect our Global Power Group’s business opportunities in these regions. Most of the concern in the U.S. has been aimed at the large pulverized coal, which we refer to as PC, market and has not impacted the circulating fluidized-bed, which we refer to as CFB, market as significantly. However, we have recently experienced instances of delays in certain projects we view as prospects. We believe this is a result of a combination of these environmental pressures faced by our customers coupled with their concerns over the U.S. economic outlook and price inflation discussed above. We believe that concern related to greenhouse gases is not currently as strong in Asia, Latin America, or Africa, and is not significantly suppressing the demand for utility steam generators in these regions and that these regions continue to offer business opportunities to our Global Power Group.

We believe our Global Power Group is well positioned to serve the global utility steam generator market with its CFB steam generator technology, even with continued concern related to greenhouse gases. In addition to cleanly burning a wide spectrum of coal types, CFBs can also burn biomass and recycled fuels (such as tires, demolition wood, plastics, waste paper, waste and coal). These fuels, in many regions, are considered to be carbon neutral or low carbon fuels, allowing owners of CFB power plants to achieve substantially lower carbon emission as compared to conventional PC steam generator technology.

We believe that concern related to greenhouse gases is driving a strong preference for supercritical once-through-unit, which we refer to as OTU, steam generators, which produce steam at supercritical conditions, in nearly all world regions within the utility steam generator market. OTU steam generator technology offers higher efficiency and hence reduced CO ₂ emissions.

We believe our Global Power Group is well positioned to serve the supercritical OTU market as evidenced by our Global Power Group’s success in securing three projects based on supercritical OTU technology: (i) a project, awarded in fiscal year 2005 and planned to be commercially operational by fiscal year 2009, in Poland where we will be supplying the world’s first supercritical OTU CFB steam generator which will utilize advanced BENSON vertical tube technology; (ii) a project, awarded in fiscal year 2007 and planned to be commercially operational by fiscal year 2011, for the design and supply, or D&S, of a supercritical OTU PC steam generator for a coal-fired generating facility located in West Virginia; and (iii) a D&S project, awarded in 2008, for our second supercritical OTU CFB project which is located in Russia and is the first CFB in that country. A key component of our strategy is to leverage these key wins to further grow our position in the supercritical utility steam generator market for both PC and CFB steam generators.

We believe that supercritical CFB steam generator technology has the potential to penetrate the supercritical utility steam generator market, especially for non-premium solid fuels such as biomass, lignite, brown coals and waste coals. Since we expect to be the first steam generator supplier with an operational supercritical CFB reference plant (which is expected to be commissioned in Poland in fiscal year 2009), and have recently been awarded a contract in Russia for the second supercritical CFB ordered in the world, we believe we are well positioned to pursue this market opportunity.

Entry into New Geographic Markets

We believe that the world’s largest utility steam generator markets will continue to be in Asia, such as China and India, offering both opportunity and challenges to our Global Power Group’s business. Historically, we believe it has been difficult for foreign companies to significantly penetrate these markets due to entrenched low-cost domestic steam generator suppliers, government controlled and owned steam generator companies, and national trade policies favoring domestic suppliers. Our Global Power Group is participating in these markets only on a limited basis while growing its manufacturing and engineering operations in China to provide high quality products competitive in these regions as well as the rest of the world.

To maximize business opportunities, our Global Power Group is executing a licensing strategy for selling and manufacturing steam generators which allows our Global Power Group to indirectly penetrate otherwise inaccessible markets, while expanding our Global Power Group capacity through licensees.

Impact of Environmental Regulations

We believe that environmental regulations will continue to become more restrictive globally and that this will drive continued global demand for our Global Power Group’s environmental products and services, such as selective non-catalytic and catalytic NO _x reduction systems, low NOx burners, over-fire air systems, coal/air balancing systems and coal mill upgrade equipment.

Capacity Constraints in Electricity Markets

We believe that the amount of unused available electric generating capacity as a percentage of total electric capacity will remain tight globally over the next three years and that steam generator power plant owners and operators will continue to run these plants at historically high utilization rates. The high utilization rates are expected to increase the need for increased output and maintenance, which we believe will continue to spur overhaul and additional maintenance investment by owners and operators of these plants, especially in the U.S. and Europe, which have sizable older steam generator power plant fleets. In addition, we believe owners are making larger capital investments in these plants to extend their useful lives. We believe these factors are contributing to a strong demand for our Global Power Group’s steam generator aftermarket products and services.

Liquidity and Capital Resources

Fiscal First Quarter 2008 Activities

As of March 28, 2008, we had cash and cash equivalents on hand, short-term investments and restricted cash totaling $1,196,400, compared to $1,069,500 as of December 28, 2007. The increase was primarily driven by an increase in cash and cash equivalents of $111,600 which results primarily from net cash provided by operations of $114,400 and favorable exchange rate changes on cash and cash equivalents of $36,100, partially offset by net cash used in investing activities of $36,700 and net cash used in financing activities of $2,200. Restricted cash was $36,200 and $20,900 as of March 28, 2008 and December 28, 2007, respectively. Of the $1,196,400 total at March 28, 2008, $917,800 was held by our foreign subsidiaries. Please refer to Note 1 to the condensed consolidated financial statements in this quarterly report on Form 10-Q for additional details on cash balances.

Net cash provided by operations in the first quarter of fiscal year 2008 was $114,400, compared to net cash used in operations of $26,400 in the comparable period of fiscal year 2007. Net cash from operations in the first quarter of fiscal year 2008 was positively impacted by our strong operating performance with an insignificant increase in our working capital of $200. Net cash from operations in the corresponding period of fiscal year 2007 was also positively impacted by our strong operating performance, but was significantly offset by an increase in our working capital of $119,800. Our working capital varies from period to period depending on the mix, stage of completion and commercial terms and conditions of our contracts. Working capital in our Global E&C Group tends to rise as the workload of reimbursable contracts increases since services are rendered prior to billing clients while working capital tends to decrease in our Global Power Group when the workload increases as cash tends to be received prior to ordering materials and equipment. The change in working capital in the first quarter of fiscal year 2008, compared to the corresponding period of fiscal year 2007, reflects an increase in the workload experienced by our Global Power Group but a relatively consistent workload of reimbursable contracts in our Global E&C Group from period to period. The net cash from operations in the first quarter of fiscal year 2007 also includes $35,000 of mandatory and discretionary contributions to our domestic pension plan and funding of $10,600 related to asbestos liability indemnity payments and defense costs.

Net cash used in investing activities in the first quarter of fiscal year 2008 was $36,700, compared to net cash used in investing activities of $1,700 in the comparable period in fiscal year 2007. The net cash used in investing activities in the first quarter of fiscal year 2008 is attributable primarily to capital expenditures of $14,500 (which includes $5,000 of expenditures in FW Power S.r.L. as we continue construction of the electric power generating wind farm projects in Italy), an increase in restricted cash of $13,400 primarily driven by an increase in the balance required for collateralized letters of credit and bank guarantees, and the $7,700 purchase price, net of cash acquired, paid in February 2008 for the outstanding capital stock of a biopharmaceutical engineering company. Net cash used in investing activities in the first quarter of fiscal year 2007 was driven by capital expenditures of $6,100 and the $1,500 purchase of a Finnish company that owns patented coal flow measuring technology, partially offset by a $6,300 return of investment from our unconsolidated affiliates in the first quarter of fiscal year 2007. The capital expenditures in both fiscal quarters related primarily to project construction (including the FW Power S.r.L. electric power generating wind farm projects in Italy noted above), leasehold improvements, information technology equipment and office equipment. These expenditures reflect increased spending on project construction and the increased volumes of business in the first quarter of fiscal years 2008 and 2007. The increase in capital expenditures has been driven primarily by our Global E&C Group, with particular increases driven by operations in Asia, Continental Europe and the United Kingdom. Our Global Power Group capital expenditure increase was driven by our European operations.

Net cash used in financing activities in the first quarter of fiscal year 2008 was $2,200, compared to $7,900 of net cash provided by financing activities in the comparable period in fiscal year 2007. The net cash used in financing activities in the first quarter of fiscal year 2008 is attributable primarily to partnership distributions to minority partners of $6,700, partially offset by proceeds from the issuance of long-term project debt of $3,100 and cash provided from exercises of stock options of $1,500. The net cash provided by financing activities in the first quarter of fiscal year 2007, primarily reflects cash provided from exercises of stock options, offset in part by distributions to our minority partners.

Outlook

Our liquidity forecasts cover, among other analyses, existing cash balances, cash flows from operations, cash repatriations from non U.S. subsidiaries, working capital needs, unused credit line availability and claim recoveries and proceeds from asset sales, if any. These forecasts extend over a rolling 12-month period. Based on these forecasts, we believe our existing cash balances and forecasted net cash provided by operating activities will be sufficient to fund our operations throughout the next 12 months. Based on these forecasts, our primary cash needs for fiscal year 2008 will be to fund working capital, capital expenditures, asbestos liability indemnity and defense costs, and acquisitions. The majority of our cash balances are invested in short-term interest bearing accounts. We continue to consider investing some of our cash in longer-term investment opportunities, including the acquisition of other entities or operations in the engineering and construction industry or power industry and/or the reduction of certain liabilities such as unfunded pension liabilities.

It is customary in the industries in which we operate to provide standby letters of credit, bank guarantees or performance bonds in favor of clients to secure obligations under contracts. We believe that we will have sufficient letter of credit capacity from existing facilities throughout the next 12 months.

Our domestic operating entities do not generate sufficient cash flows to fund our obligations related to corporate overhead expenses and asbestos-related liabilities. Consequently, we require cash repatriations from our non-U.S. subsidiaries in the normal course of our operations to meet our domestic cash needs and have successfully repatriated cash for many years. We believe we can repatriate the required amount of cash from our foreign subsidiaries and we continue to have access to the revolving credit portion of our domestic senior credit facility, if needed.

We funded $4,900 of the asbestos liability indemnity payments and defense costs from our cash flows in the first quarter of fiscal year 2008, net of the cash received from insurance settlements. We expect to fund a total of $4,500 of the asbestos liability indemnity and defense costs from our cash flows in fiscal year 2008, net of the cash expected to be received from existing insurance settlements. This estimate assumes no additional settlements with insurance companies or elections by us to fund additional payments. As we continue to collect cash from insurance settlements and assuming no increase in our asbestos-related insurance liability or any future insurance settlements, the asbestos-related insurance receivable recorded on our balance sheet will continue to decrease.

We anticipate spending € 42,990 (approximately $67,900 at the exchange rate as of March 28, 2008) in FW Power S.r.L. in fiscal year 2008 as we continue construction of the electric power generating wind farm projects in Italy. We have secured total borrowing capacity under the FW Power S.r.L. credit facilities of € 75,350 (approximately $119,000 at the exchange rate as of March 28, 2008).

We had $269,700 and $245,800 of letters of credit outstanding under our domestic senior credit agreement as of March 28, 2008 and December 28, 2007, respectively. The letter of credit fees now range from 1.50% to 1.60%, excluding a fronting fee of 0.125% per annum. We do not intend to borrow under our domestic senior revolving credit facility during fiscal year 2008. A portion of the letters of credit issued under the domestic senior credit agreement have performance pricing that is decreased (or increased) as a result of improvements (or reductions) in the credit rating assigned to the domestic senior credit agreement by Moody’s Investors Service and/or Standard & Poor’s. However, this performance pricing is not expected to materially impact our liquidity or capital resources in fiscal year 2008.

Please refer to Note 4 to the condensed consolidated financial statements in this quarterly report on Form 10-Q for further information regarding our debt obligations.

We have not declared or paid a cash dividend since July 2001 and we do not have any plans to declare or pay any cash dividends. Our current credit agreement contains limitations on cash dividend payments as well as other restricted payments.

Off-Balance Sheet Arrangements

We own several non-controlling equity interests in power projects in Chile and Italy. Certain of the projects have third-party debt that is not consolidated in our balance sheet. We have also issued certain guarantees for the Chilean project. Please refer to Note 3 to the condensed consolidated financial statements in this quarterly report on Form 10-Q for further information related to these projects.

Backlog and New Orders

The backlog of unfilled orders includes amounts based on signed contracts as well as agreed letters of intent, which we have determined are legally binding and likely to proceed. Although backlog represents only business that is considered likely to be performed, cancellations or scope adjustments may and do occur. The elapsed time from the award of a contract to completion of performance may be up to approximately four years. The dollar amount of backlog is not necessarily indicative of our future earnings related to the performance of such work due to factors outside our control, such as changes in project schedules, scope adjustments or project cancellations. We cannot predict with certainty the portion of backlog to be performed in a given year. Backlog is adjusted quarterly to reflect project cancellations, deferrals, revised project scope and cost, and sales of subsidiaries, if any.

Backlog measured in Foster Wheeler scope reflects the dollar value of backlog excluding third-party costs incurred by us on a reimbursable basis as agent or principal, which we refer to as flow-through costs. Foster Wheeler scope measures the component of backlog with profit potential and corresponds to our services plus fees for reimbursable contracts and total selling price for fixed-price or lump-sum contracts.


	Three Months Ended March 28, 2008						Three Months Ended March 30, 2007
	Global		Global				Global		Global
	E&C		Power				E&C		Power
	Group		Group		Total		Group		Group		Total
NEW ORDERS (FUTURE REVENUES) BY PROJECT LOCATION :
North America	$	165,500	$	315,300	$	480,800	$	28,600	$	402,500	$	431,100
South America		1,000		11,700		12,700		4,300		5,300		9,600
Europe		267,500		191,000		458,500		224,900		60,100		285,000
Asia		182,200		18,200		200,400		337,300		70,800		408,100
Middle East		60,300		—		60,300		184,500		4,700		189,200
Australasia and other		30,800		200		31,000		93,100		400		93,500

Total	$	707,300	$	536,400	$	1,243,700	$	872,700	$	543,800	$	1,416,500


NEW ORDERS (FUTURE REVENUES) BY INDUSTRY:
Power generation	$	12,000	$	507,200	$	519,200	$	10,900	$	513,600	$	524,500
Oil refining		437,400		—		437,400		508,800		—		508,800
Pharmaceutical		18,400		—		18,400		42,800		—		42,800
Oil and gas		110,300		—		110,300		173,100		—		173,100
Chemical/petrochemical		113,800		—		113,800		119,300		—		119,300
Power plant operation and maintenance		—		29,200		29,200		—		30,200		30,200
Environmental		9,700		—		9,700		4,200		—		4,200
Other, net of eliminations		5,700		—		5,700		13,600		—		13,600

Total	$	707,300	$	536,400	$	1,243,700	$	872,700	$	543,800	$	1,416,500


	March 28, 2008									March 30, 2007
	Global			Global						Global			Global
	E&C			Power						E&C			Power
	Group			Group			Total			Group			Group			Total
BACKLOG (FUTURE REVENUES) BY CONTRACT TYPE:
Lump-sum turnkey	$	44,700		$	424,600		$	469,300		$	175,500		$	197,000		$	372,500
Other fixed-price		501,000			1,181,300			1,682,300			384,000			839,500			1,223,500
Reimbursable		6,635,100			179,800			6,814,900			4,026,300			121,400			4,147,700
Eliminations		(2,900	)		(12,200	)		(15,100	)		(31,100	)		(6,100	)		(37,200	)

Total	$	7,177,900		$	1,773,500		$	8,951,400		$	4,554,700		$	1,151,800		$	5,706,500


BACKLOG (FUTURE REVENUES) BY PROJECT LOCATION:
North America	$	271,900		$	879,200		$	1,151,100		$	186,400		$	662,200		$	848,600
South America		22,500			108,300			130,800			38,900			37,000			75,900
Europe		679,400			662,700			1,342,100			624,100			321,200			945,300
Asia		1,987,000			119,700			2,106,700			1,466,300			129,700			1,596,000
Middle East		770,300			600			770,900			1,568,500			600			1,569,100
Australasia and other		3,446,800			3,000			3,449,800			670,500			1,100			671,600

Total	$	7,177,900		$	1,773,500		$	8,951,400		$	4,554,700		$	1,151,800		$	5,706,500


BACKLOG (FUTURE REVENUES) BY INDUSTRY:
Power generation	$	59,800		$	1,651,700		$	1,711,500		$	49,300		$	1,033,300		$	1,082,600
Oil refining		1,705,500			—			1,705,500			1,926,200			—			1,926,200
Pharmaceutical		42,900			—			42,900			105,800			—			105,800
Oil and gas		3,599,300			—			3,599,300			831,200			—			831,200
Chemical/petrochemical		1,749,700			—			1,749,700			1,506,700			—			1,506,700
Power plant operation and maintenance		—			121,800			121,800			—			118,500			118,500
Environmental		12,700			—			12,700			58,500			—			58,500
Other, net of eliminations		8,000			—			8,000			77,000			—			77,000

Total	$	7,177,900		$	1,773,500		$	8,951,400		$	4,554,700		$	1,151,800		$	5,706,500


FOSTER WHEELER SCOPE IN BACKLOG	$	1,803,600		$	1,760,600		$	3,564,200		$	1,601,500		$	1,138,500		$	2,740,000


E&C MAN-HOURS IN BACKLOG (in thousands)		14,200						14,200			12,300						12,300

Inflation

The effect of inflation on our financial results is minimal. Although a majority of our revenues are realized under long-term contracts, the selling prices of such contracts, established for deliveries in the future, generally reflect estimated costs to complete the projects in these future periods. In addition, many of our projects are reimbursable at actual cost plus a fee, while some of the fixed-price contracts provide for price adjustments through escalation clauses.

Application of Critical Accounting Estimates

Our condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America. Management and the Audit Committee of our Board of Directors approve the critical accounting policies.

A full discussion of our critical accounting policies and estimates is included in our 2007 Form 10-K. We did not have a significant change to the application of our critical accounting policies and estimates during the first quarter of fiscal year 2008.

Accounting Developments

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The standard is effective for financial assets and liabilities, as well as for any other assets and liabilities that are required to be measured at fair value on a recurring basis, in financial statements for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued a partial one-year deferral of SFAS No. 157 for nonfinancial assets and liabilities that are only subject to fair value measurement on a non-recurring basis. We have elected to defer the application of SFAS No. 157 for our nonfinancial assets and liabilities measured at fair value on a nonrecurring basis until the fiscal year beginning December 27, 2008, and are in the process of assessing its impact on our financial position and results of operations related to such assets and liabilities. Our financial assets and liabilities that are recorded at fair value consist primarily of the assets or liabilities arising from derivative financial instruments. The adoption of SFAS No. 157 did not have a material effect on our financial position or results of operations.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51.” SFAS No. 160 amends the accounting and reporting standards for the noncontrolling interest in a subsidiary (often referred to as “minority interest”) and for the deconsolidation of a subsidiary. Under SFAS No. 160, the noncontrolling interest in a subsidiary is reported as equity in the parent company’s consolidated financial statements. SFAS No. 160 also requires that the parent company’s consolidated statement of operations include both the parent and noncontrolling interest share of the subsidiary’s statement of operations. Formerly, the noncontrolling interest share was shown as a reduction of income on the parent’s consolidated statement of operations. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. SFAS No. 160 is to be applied prospectively as of the beginning of the fiscal year in which this statement is initially applied; however, presentation and disclosure requirements shall be applied retrospectively for all periods presented. We are currently assessing the impact that SFAS No. 160 may have on our financial position, results of operations and cash flows.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities.” SFAS No. 161 requires enhanced disclosures to enable investors to better understand the effects of derivative instruments and hedging activities on an entity’s financial position, financial performance and cash flows. SFAS No. 161 changes the disclosure requirements about the location and amounts of derivative instruments in an entity’s financial statements, how derivative instruments and related hedged items are accounted for under SFAS No. 133, and how derivative instruments and related hedged items affect the company’s financial position, financial performance and cash flows. Additionally, SFAS No. 161 requires disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. SFAS No. 161 also provides more information about an entity’s liquidity by requiring disclosure of derivative features that are credit risk—related. Finally, SFAS No. 161 requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative instruments. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We are currently assessing the impact that SFAS No. 161 may have on our financial statement disclosures.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

During the first quarter of fiscal year 2008, there were no material changes in the market risks as described in our annual report on Form 10-K for the year ended December 28, 2007.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and we necessarily are required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of the end of the period covered by this report, our chief executive officer and our chief financial officer carried out an evaluation, with the participation of our Disclosure Committee and management, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) pursuant to Exchange Act Rule 13a-15. Based on this evaluation, our chief executive officer and our chief financial officer concluded, at the reasonable assurance level, that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting in the fiscal quarter ended March 28, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Please refer to Note 12 to the condensed consolidated financial statements in this quarterly report on Form 10-Q for a discussion of legal proceedings, which is incorporated by reference in this Part II.

ITEM 1A. RISK FACTORS

Information regarding our risk factors appears in Part I, Item 1A, “Risk Factors,” in our annual report on Form 10-K for the year ended December 28, 2007, which we filed with the SEC on February 26, 2008. There have been no material changes from those risk factors.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We reported the information required pursuant to this Item with respect to the Special General Meeting of Shareholders held on January 8, 2008 in Part I, Item 4 in our annual report on Form 10-K for the year ended December 28, 2007, which we filed with the SEC on February 26, 2008, and such information is incorporated by reference herein.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


Exhibit No.		Exhibits
3.1		Memorandum of Association of Foster Wheeler Ltd. (Filed as Annex II to Foster Wheeler Ltd.’s Form S-4/A (File No. 333-52468) filed on March 9, 2001, and incorporated herein by reference.)

3.2		Memoranda of Reduction of Share Capital and Memorandum of Increase in Share Capital each dated December 1, 2004. (Filed as Exhibit 99.2 to Foster Wheeler Ltd.’s Form 8-K, dated November 29, 2004 and filed on December 2, 2004, and incorporated herein by reference.)

3.3		Certificate of Designation relating to Foster Wheeler Ltd.’s Series B Convertible Preferred Shares, adopted on September 24, 2004. (Filed as Exhibit 3.1 to Foster Wheeler Ltd.’s Form 10-Q for the quarter ended September 24, 2004, and incorporated herein by reference.)

3.4		Bye-Laws of Foster Wheeler Ltd., amended May 9, 2006. (Filed as Exhibit 3.2 to Foster Wheeler Ltd.’s Form 8-K, dated May 9, 2006 and filed on May 12, 2006, and incorporated herein by reference.)

3.5		Memorandum of Increase of Share Capital dated February 7, 2008. (Filed as Exhibit 3.5 to Foster Wheeler Ltd.’s Form 10-K for the fiscal year ended December 28, 2007, and incorporated herein by reference.)

10.1		Unofficial English Translation of Fixed Term Employment Agreement, effective as of April 1, 2008, between Foster Wheeler Continental Europe S.r.L. and Umberto della Sala. (Filed as Exhibit 10.1 to Foster Wheeler Ltd.’s Form 8-K, dated February 22, 2008 and filed on February 28, 2008, and incorporated herein by reference.)

10.2		Employment Agreement, dated as of March 1, 2008, between Foster Wheeler Ltd. and Umberto della Sala. (Filed as Exhibit 10.2 to Foster Wheeler Ltd.’s Form 8-K, dated February 22, 2008 and filed on February 28, 2008, and incorporated herein by reference.)

10.3		Employment Agreement, dated as of April 7, 2008, between Foster Wheeler Ltd. and Beth Sexton.

31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Raymond J. Milchovich.

31.2		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 of Franco Baseotto.

32.1		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Raymond J. Milchovich.

32.2		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Franco Baseotto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


	FOSTER WHEELER LTD. (Registrant)
Date: May 7, 2008	/s/ Raymond J. Milchovich
	Raymond J. Milchovich
	Chairman and Chief Executive Officer


Date: May 7, 2008	/s/ Franco Baseotto
	Franco Baseotto
	Executive Vice President, Chief Financial Officer and Treasurer