Is there anything about the credit crisis that keeps you up at night?
Trying to predict the implications tied to a lack of availability of credit for our clients. Many of our clients, at some level, depend upon the credit market returning so that larger projects can be funded. We are trying to understand when the credit market will come back, and to what degree. Then we can determine how we might help our clients position themselves for new projects. So we stay very, very close to our clients. But I think all CFOs are looking at predicting the severity and the length of the recession; it has been a daily process.
Do you worry about the financial condition of your vendors?
We have processes in place to evaluate their financial wherewithal. It’s important to be mindful of the financial condition of business partners in general. We evaluate our business partners and really try to develop fair terms and conditions.
As a private company that focuses on a project portfolio, is the debt on your books project debt?
No. The debt that you may see really is associated with lease obligations and such, for computers and things of that nature. It’s not really debt for projects. If you are looking at current liabilities, those items really have to do with projects, our payables due and what we call our billings in excess [on costs and estimated earnings for uncompleted contracts.] It represents billings that we’ve sent to our clients based on milestones, which is typical in our industry.
That’s part of the construction industry’s accounting methods, right?
Yes, so it is not debt in a traditional sense, but rather liabilities associated with the progress on our projects and payables. We don’t really carry much debt. With regard to our project finance, each project stands on its own. But none of the projects are off-balance sheet. As an engineering/construction firm, we have a steady stream of costs that we’re incurring that we owe and pay to people. Depending on the progress of our projects, you’re either [recording that] in the billings-in-excess or costs-in-excess.
Black & Veatch files its financial resulting using U.S. generally accepted accounting principles, but as a private company you are not required to do that.
Yes we are.
What do you mean?
We file in GAAP because we are an employee-owned company, because of our bankers, because our shareholders. I can’t imagine not using U.S. GAAP. Now if you’re segueing to the [international financial reporting standards], that’s a different story. But yes, we use generally accepted accounting principles because they best reflect where we are financially.
What about IFRS? Do your projects outside of the country make it necessary for you to use IFRS?
There are certain parts of the world where we file statutory statements that differ from U.S. GAAP, but our consolidated statements are filed in U.S. GAAP. In some way, IFRS will potentially close the gaps in reporting between some of our foreign statutory entities, but those are really on a case-by-case basis.