-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CcUeatEi/oMf8yVs0zePJ/fkSJpeuoh18aof2/+1IQtVIsR+MpsQ83ZWtxVZQ+pK GoUjglSJkkxQtaK4izZ/JQ== 0000892569-97-002563.txt : 19970918 0000892569-97-002563.hdr.sgml : 19970918 ACCESSION NUMBER: 0000892569-97-002563 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970731 FILED AS OF DATE: 19970915 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLUOR CORP/DE/ CENTRAL INDEX KEY: 0000037748 STANDARD INDUSTRIAL CLASSIFICATION: HEAVY CONSTRUCTION OTHER THAN BUILDING CONST - CONTRACTORS [1600] IRS NUMBER: 950740960 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-07775 FILM NUMBER: 97680663 BUSINESS ADDRESS: STREET 1: 3353 MICHELSON DR CITY: IRVINE STATE: CA ZIP: 92730 BUSINESS PHONE: 7149752000 FORMER COMPANY: FORMER CONFORMED NAME: FLUOR CORP LTD DATE OF NAME CHANGE: 19710624 10-Q 1 FORM 10-Q FOR PERIOD ENDED JULY 31, 1997 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (MARK ONE) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 31, 1997 OR ( ) 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: 1-7775 FLUOR CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 95-0740960 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer I.D. No.) incorporation or organization) 3353 Michelson Drive, Irvine, CA 92698 - -------------------------------------------------------------------------------- (Address of principal executive offices) (714) 975-2000 - -------------------------------------------------------------------------------- (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 (X) No ( ) As of August 31, 1997 there were 83,832,685 shares of common stock outstanding. 2 FLUOR CORPORATION FORM 10-Q JULY 31, 1997
TABLE OF CONTENTS PAGE - ---------------------------------------------------------------------------------------------------- PART I: FINANCIAL INFORMATION Condensed Consolidated Statement of Earnings for the Three Months Ended July 31, 1997 and 1996.................................................... 2 Condensed Consolidated Statement of Earnings for the Nine Months Ended July 31, 1997 and 1996.................................................... 3 Condensed Consolidated Balance Sheet at July 31, 1997 and October 31, 1996................................................................ 4 Condensed Consolidated Statement of Cash Flows for the Nine Months Ended July 31, 1997 and 1996............................................. 6 Notes to Condensed Consolidated Financial Statements.............................. 7 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 9 Changes in Backlog................................................................ 15 PART II: OTHER INFORMATION............................................................. 16 SIGNATURES................................................................................. 17
3 PART I: FINANCIAL INFORMATION FLUOR CORPORATION CONDENSED CONSOLIDATED STATEMENT OF EARNINGS Three Months Ended July 31, 1997 and 1996 UNAUDITED
In thousands, except per share amounts 1997 1996 - -------------------------------------------------------------------------------------------- REVENUES $ 3,675,905 $ 2,702,821 COSTS AND EXPENSES Cost of revenues 3,567,314 2,589,959 Corporate administrative and general expenses 4,654 9,956 Interest expense 7,520 4,500 Interest income (5,627) (6,460) ---------------------------- Total Costs and Expenses 3,573,861 2,597,955 ---------------------------- EARNINGS BEFORE INCOME TAXES 102,044 104,866 INCOME TAX EXPENSE 35,802 36,789 ---------------------------- NET EARNINGS $ 66,242 $ 68,077 ============================ NET EARNINGS PER SHARE $ 0.79 $ 0.81 ============================ DIVIDENDS PER COMMON SHARE $ 0.19 $ 0.17 ============================ SHARES USED TO CALCULATE EARNINGS PER SHARE 84,345 84,558 ============================
See Accompanying Notes. 2 4 FLUOR CORPORATION CONDENSED CONSOLIDATED STATEMENT OF EARNINGS Nine Months Ended July 31, 1997 and 1996 UNAUDITED
In thousands, except per share amounts 1997 1996 - ------------------------------------------------------------------------------------- REVENUES $ 10,295,799 $ 7,687,464 COSTS AND EXPENSES Cost of revenues 10,154,270 7,370,476 Corporate administrative and general expenses 18,721 34,553 Interest expense 20,044 11,416 Interest income (16,498) (20,692) ------------------------------ Total Costs and Expenses 10,176,537 7,395,753 ------------------------------ EARNINGS BEFORE INCOME TAXES 119,262 291,711 INCOME TAX EXPENSE 61,119 102,486 ------------------------------ NET EARNINGS $ 58,143 $ 189,225 ============================== NET EARNINGS PER SHARE $ 0.69 $ 2.24 ============================== DIVIDENDS PER COMMON SHARE $ 0.57 $ 0.51 ============================== SHARES USED TO CALCULATE EARNINGS PER SHARE 84,572 84,543 ==============================
See Accompanying Notes. 3 5 FLUOR CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET July 31, 1997 and October 31, 1996 UNAUDITED
July 31, October 31, $ in thousands 1997 1996* - ---------------------------------------------------------------------------------- ASSETS Current Assets Cash and cash equivalents $ 198,319 $ 246,964 Marketable securities 33,960 69,378 Accounts and notes receivable 847,235 742,547 Contract work in progress 649,259 561,490 Deferred taxes 61,763 50,157 Inventory and other current assets 216,342 126,287 ------------------------- Total current assets 2,006,878 1,796,823 ------------------------- Property, Plant and Equipment (net of accumulated depreciation, depletion and amortization of $954,552 and $821,212, respectively) 1,861,307 1,677,662 Investments and goodwill, net 249,229 192,879 Other 299,713 284,362 ------------------------- $4,417,127 $3,951,726 =========================
(Continued On Next Page) * Amounts at October 31, 1996 have been derived from audited financial statements. 4 6 FLUOR CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET July 31, 1997 and October 31, 1996 UNAUDITED
July 31, October 31, $ in thousands 1997 1996* - ---------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts and notes payable $ 704,104 $ 704,186 Commercial paper 84,481 29,916 Advance billings on contracts 483,375 445,807 Accrued salaries, wages and benefit plans 292,900 290,426 Other accrued liabilities 241,291 175,026 Current portion of long-term debt 139 207 ---------------------------- Total current liabilities 1,806,290 1,645,568 ---------------------------- Long-term debt 300,524 2,967 Deferred taxes 62,458 42,632 Other noncurrent liabilities 567,975 590,833 Commitments and Contingencies Shareholders' Equity Capital stock Preferred - authorized 20,000,000 shares without par value; none issued Common - authorized 150,000,000 shares of $0.625 par value; issued and outstanding - 83,849,305 shares and 83,791,197 shares, respectively 52,406 52,369 Additional capital 574,835 573,037 Retained earnings 1,087,923 1,077,559 Unamortized executive stock plan expense (28,084) (32,538) Cumulative translation adjustment (7,200) (701) ---------------------------- Total shareholders' equity 1,679,880 1,669,726 ---------------------------- $ 4,417,127 $ 3,951,726 ============================
See Accompanying Notes. * Amounts at October 31, 1996 have been derived from audited financial statements. 5 7 FLUOR CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Nine Months Ended July 31, 1997 and 1996 UNAUDITED
$ in thousands 1997 1996 - ----------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings $ 58,143 $ 189,225 Adjustments to reconcile net earnings to cash provided by operating activities: Depreciation, depletion and amortization 183,363 139,929 Deferred taxes 11,440 11,564 Change in operating assets and liabilities (138,584) (21,288) Other, net (19,701) (15,005) ------------------------ Cash provided by operating activities 94,661 304,425 ------------------------ CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (350,940) (289,404) E & C businesses acquired (141,718) (80,216) Proceeds from sales/maturities of marketable securities 35,418 88,897 Purchase of marketable securities -- (64,052) Proceeds from sale of property, plant and equipment 32,860 20,317 Investments, net 1,793 (6,580) Trust fund contribution (21,513) -- Other, net (3,012) (9,775) ------------------------ Cash utilized by investing activities (447,112) (340,813) ------------------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of long-term debt 300,121 -- Increase in short-term borrowings 57,757 17,373 Payments on long-term debt (1,185) (18,801) Cash dividends paid (47,779) (42,590) Common stock repurchased (18,973) -- Stock options exercised 15,099 15,311 Other, net (1,234) 764 ------------------------ Cash provided (utilized) by financing activities 303,806 (27,943) ------------------------ Decrease in cash and cash equivalents (48,645) (64,331) Cash and cash equivalents at beginning of period 246,964 292,934 ------------------------ Cash and cash equivalents at end of period $ 198,319 $ 228,603 ========================
See Accompanying Notes. 6 8 FLUOR CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS UNAUDITED (1) The condensed consolidated financial statements do not include footnotes and certain financial information normally presented annually under generally accepted accounting principles and, therefore, should be read in conjunction with the Company's October 31, 1996 annual report on Form 10-K. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year-end. The results of operations for the three and nine months ended July 31, 1997 are not necessarily indicative of results that can be expected for the full year. The condensed consolidated financial statements included herein are unaudited; however, they contain all adjustments (consisting of normal recurring accruals) which, in the opinion of the Company, are necessary to present fairly its consolidated financial position at July 31, 1997 and its consolidated results of operations and cash flows for the three and nine months ended July 31, 1997 and 1996. As more fully described in Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A"), the Company recorded provisions totaling $118.2 million during the second quarter of 1997. These included provisions for estimated losses on certain contracts and adjustments to project-related investments and accounts receivable. Certain 1996 amounts have been reclassified to conform with the 1997 presentation. (2) Earnings per share is based on the weighted average number of common and, when appropriate, common equivalent shares outstanding in each period. Common equivalent shares are included when the effect of the potential exercise of stock options is dilutive. (3) Inventories comprise the following:
July 31, October 31, $ in thousands 1997 1996 -------------------------------------------------------------------------------- Coal $ 43,547 $ 28,809 Supplies and other 113,422 45,118 ----------------------------- $156,969 $ 73,927 =============================
The increase in inventories is primarily related to the Company's acquisition of two equipment rental and sales companies during the third quarter of 1997. See MD&A for further discussion. (4) Cash paid for interest was $9.9 million and $6.9 million for the nine month periods ended July 31, 1997 and 1996, respectively. Income tax payments, net of refunds, were $51.0 7 9 million and $82.2 million during the nine month periods ended July 31, 1997 and 1996, respectively. (5) During the second quarter of 1997, the Company recorded a $19.9 million charge related to the implementation of certain cost reduction initiatives. An additional charge of $1.0 million was recorded in the third quarter. These charges provide for personnel and facility related costs. As of July 31, 1997, approximately $3.2 million of these costs have been incurred. See MD&A for further discussion. (6) The Company's utilization of derivative financial instruments is substantially limited to the use of forward exchange contracts to hedge foreign currency transactions entered into in the ordinary course of business and not to engage in currency speculation. These contracts are entered into in order to hedge firm, identifiable, foreign currency commitments. Accordingly, the unrealized gains and losses are deferred and included in the measurement of contract work in progress. Upon maturity, any realized gains and losses are charged against project costs. 8 10 FLUOR CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis is provided to increase understanding of, and should be read in conjunction with, the condensed consolidated financial statements and accompanying notes included herein and the Company's October 31, 1996 annual report on Form 10-K. FORWARD-LOOKING INFORMATION Any of the comments in this Form 10-Q that refer to the Company's estimated or future results, including its estimates of the cost savings, and the timing of cost savings, from its previously announced cost reduction program and its statements concerning the adequacy of its provisions for estimated future losses on projects or investments, are forward-looking and reflect the Company's current analysis of existing trends and information. Actual results may differ materially from current expectations or projections based on a number of factors affecting the Company's businesses. These factors include, in the case of the cost savings estimates, the ability to achieve estimated staff reductions while maintaining workflow in the functional areas affected and to sublease vacated facilities within anticipated time frames at anticipated sublease rent levels. Other risk factors affecting the Company's estimated or future results include, but are not limited to, cost overruns on fixed, maximum or unit-priced contracts, contract performance risk, the uncertain timing of awards and revenues under contracts, project financing risk, credit risk, risks associated with government funding of contracts, market conditions impacting realization of investments, market conditions in the domestic and international coal market, relatively mild weather conditions which may lower demand for steam coal and the state of the economic and political conditions worldwide. These forward-looking statements represent the Company's judgment only as of the date of this Form 10-Q. As a result, the reader is cautioned not to rely on these forward-looking statements. The Company disclaims any intent or obligation to update these forward-looking statements. Additional information concerning these and other factors can be found in press releases as well as the Company's public periodic filings with the Securities and Exchange Commission, including the discussion under the heading "Certain Factors and Trends Affecting Fluor and Its Businesses--Forward-Looking Statements" in the Company's Form 8-K filed May 6, 1997, which is hereby incorporated by reference and attached hereto as Exhibit 99.1. RESULTS OF OPERATIONS Revenues increased 36 percent and 34 percent, respectively, for the three and nine month periods ended July 31, 1997 compared with the same periods of 1996. Net earnings were $66.2 million and $58.1 million, respectively, for the three and nine month periods ended July 31, 1997, compared with net earnings of $68.1 million and $189.2 million, respectively, for the comparable periods in 1996. Results for the three and nine month periods ended July 31, 1997 were adversely impacted by reduced earnings from the Engineering and Construction segment and higher net interest expense, partially offset by higher earnings from the Coal 9 11 segment and lower corporate administrative and general expenses, compared with the same periods of 1996. ENGINEERING AND CONSTRUCTION Revenues for the Engineering and Construction segment increased 39 percent and 36 percent, respectively, for the three and nine month periods ended July 31, 1997 compared with the same periods of 1996, due primarily to an increase in the volume of work performed. The increase in work performed is primarily a result of the increase in new awards in recent periods. Despite the increase in revenues, operating profits for the segment decreased 11 percent and 85 percent, respectively, for the three and nine month periods ended July 31, 1997 compared with the same periods of 1996. Operating margins for the three and nine month periods ended July 31, 1997 were adversely impacted by a variety of factors, including lower incentive fees earned, delays in the full release of certain projects, a reduction in recoveries for United States Government work, failure to achieve cost projections on certain contracts and competitive pricing within certain operating companies. In addition, benefits realized in the third quarter of 1997 from the Company's cost reduction initiatives were limited and are not expected to be fully realized until fiscal year 1998. As such, operating margins for the Engineering and Construction segment were impacted by ongoing costs for units identified for reduction or redirection as well as investment and infrastructure costs associated with market expansion in certain industries and regions. As discussed below, results for the nine month period ended July 31, 1997 were significantly affected by items from the Company's first and second quarters. Provisions of $91.4 million for estimated losses on certain contracts were recognized in the second quarter of 1997. Approximately 75 percent of the contract provisions pertained to cost overruns on one fixed price project for the construction of a power plant located outside the United States. During the second quarter, the Company experienced substantial unexpected difficulties on this project including significant ongoing design changes, long delays in approval of drawings and vendors and resulting low productivity in the field. By the end of the second quarter, these difficulties were substantially resolved as to the first phase of the project and rendered more predictable as to the second phase of the project. Accordingly, in the second quarter the Company recorded a provision to recognize the estimated total amount of the loss under the contract. No additional provision related to this project was recorded in the third quarter. Also included in the second quarter provisions were certain other projects identified to be loss contracts. None of these provisions individually exceeded $5 million. No material additional provisions related to these projects were recorded in the third quarter. Additionally, during the second quarter of 1997, the Company recorded $26.8 million in provisions for the impairment, abandonment or sale of certain project related investments and joint ventures, and doubtful accounts receivable, none of which individually exceeded $5 million. These included the anticipated sale of the Company's interest in a joint venture within the pulp and paper industry, a write down of an equity investment obtained in exchange for services rendered to an environmental technology company and certain other project joint 10 12 ventures where it was determined in the second quarter that the Company's investment was not expected to be realized due to poor market conditions or cancellation of the project concerned. Results for the nine months ended July 31, 1997 include a second quarter charge of $19.9 million and a third quarter charge of $1.0 million related to implementation of certain cost reduction initiatives. These charges consist of personnel-related costs and lease costs for excess facilities. As of July 31, 1997, approximately $3.2 million of these costs have been incurred. To date, the Company has initiated action to downsize, consolidate or close 17 of its more than 80 offices and has consolidated certain industry operating companies. Additional charges may be taken later in the year as further actions are initiated. Upon full implementation of the cost reduction initiatives, the Company believes that annualized savings of $100 million can be achieved. The Company believes that all action items in connection with the cost reduction initiatives will be completed by the end of the fiscal year. The Company anticipates that the cash flow impact of the costs to implement these savings initiatives will not have a material impact on current or future periods. Results for the nine months ended July 31, 1997 include first quarter contract-related provisions totaling $21.0 million for cost overruns on two fixed price power projects, including the power project located outside the United States. The loss in the first quarter on this project reflected additional costs then identified to be incurred on the first phase of the project arising primarily from bad weather, lack of timely site access, unexpected design changes and low labor productivity. The loss on the other project, which is located in the United States and was due primarily to startup problems, craft employee turnover and operation of the plant control system, is not expected to exceed the provision recorded in the first quarter. The Company also recognized in the first quarter a credit totaling $25.0 million related to certain actuarially determined insurance accruals. The insurance accrual adjustment was due primarily to improvement in loss experience resulting from the Company's safety program, resulting in an excess accrual position. The Company believes that the accrued liability at July 31, 1997 represents the best estimate of its insurance liability. New awards for the three and nine months ended July 31, 1997 were $2.7 billion and $9.4 billion, respectively, compared with $3.1 billion and $9.1 billion for the same periods of 1996. Approximately 38 percent and 53 percent, respectively, of new awards for the three and nine months ended July 31, 1997 were for projects located outside of the United States. New awards in the third quarter of 1997 consisted of smaller projects; there were no individual new awards above $200 million in value. The uncertain timing of prospects for new awards, some of which are large, can create variability in the Company's awards pattern. Consequently, future award trends are difficult to predict with certainty. 11 13 The following table sets forth backlog for each of the Company's Engineering and Construction groups:
July 31, October 31, July 31, $ in millions 1997 1996 1996 - -------------------------------------------------------------------------------- Process $ 6,994 $ 4,903 $ 6,125 Industrial 5,397 6,496 5,974 Power/Government 2,054 3,621 2,852 Diversified Services 896 737 648 --------------------------------------- Total backlog $15,341 $15,757 $15,599 ======================================= U.S $ 6,373 $ 7,326 $ 6,853 Outside U.S 8,968 8,431 8,746 --------------------------------------- Total backlog $15,341 $15,757 $15,599 =======================================
The increase in the Process Group's backlog at July 31, 1997 compared with October 31, 1996 was due primarily to the 1997 award of the $1.9 billion Yanpet project, a petrochemical complex to be constructed in Saudi Arabia. The reduction in backlog since October 31, 1996 in the Industrial Group reflects lower new awards in the first nine months of 1997 compared with the last nine months of 1996. Backlog in the Power/Government Group declined from October 31, 1996 compared with July 31, 1997 due primarily to the work performed on the Hanford and Fernald environmental cleanup projects and the Paiton power project. The increase in backlog from projects located outside the United States since October 31, 1996, is primarily due to the Yanpet Project. Backlog is adjusted both upward and downward as required to reflect project cancellations, deferrals and revised project scope and cost. These adjustments were not significant for the three and nine months ended July 31, 1997 and 1996, respectively. COAL Revenues increased 8 percent and 11 percent, respectively, for the three and nine month periods ended July 31, 1997 compared with the same periods of 1996. These increases were due primarily to increased sales volume of both metallurgical and steam coal, partially offset by lower steam coal prices. The increase in metallurgical coal revenues is due primarily to an increased market share of sales to steel producers, reflecting a stronger economy. There has been a general softening in prices within the entire steam coal market as overall demand is down due to both a mild winter and summer. Despite lower steam coal prices, revenues increased due primarily to the addition of a number of new electric utility customers. Gross profit and operating profit increased for the three and nine months ended July 31, 1997 compared with the same periods of 1996 due primarily to the increased sales volume of both metallurgical and 12 14 steam coal and lower costs of both steam and metallurgical coal. Operating profit increased 12 percent and 15 percent, respectively, for the three and nine months ended July 31, 1997 compared with the same periods of 1996. OTHER Net interest for the three and nine months ended July 31, 1997 decreased compared with the same periods of 1996 due primarily to higher long-term interest bearing liabilities in addition to lower interest earning assets. Corporate administrative and general expenses decreased $5.3 million and $15.8 million, respectively, for the three and nine month periods ended July 31, 1997 compared with the same periods of 1996. The reduction in expense is due primarily to lower accruals for stock-related and performance-based compensation plans and lower corporate overhead. The effective tax rate for the nine month period ended July 31, 1997 was materially impacted by foreign-based project losses, other project-related investment losses and certain implementation costs for cost reduction initiatives incurred in the second quarter which are not expected to receive full tax benefit. If these losses are excluded for tax rate determination purposes, there is no significant difference between the effective tax rate and the statutory rate for the nine month period ended July 31, 1997. FINANCIAL POSITION AND LIQUIDITY At July 31, 1997, the Company had cash, cash equivalents and marketable securities of $232.3 million and a long-term debt to total capital ratio of 15 percent. The Company expects to have adequate resources available from operating cash flows, cash and short-term investments, revolving credit and other banking facilities, capital market sources and commercial paper to provide for its capital needs for the foreseeable future. Operating activities generated $94.7 million in cash during the nine month period ended July 31, 1997, compared with $304.4 million during the same period in 1996. The decrease in cash generated from operating activities is due primarily to an increase in operating assets and liabilities as well as the Company's lower operating results. Operating working capital during 1996 was favorably impacted by a large customer advance. The change in operating assets and liabilities from period to period is affected by the mix, stage of completion, and commercial terms of engineering and construction projects. During the third quarter of 1997, the Company's equipment rental and sales subsidiary acquired two additional equipment rental and sales companies that will expand its operations throughout the eastern United States and California. These acquisitions have been accounted for under the purchase method of accounting and their results of operations have been included in the Company's condensed consolidated financial statements from the respective acquisition dates. 13 15 During December 1996, the Company filed a shelf registration statement with the Securities and Exchange Commission for the sale of up to $400 million of debt securities. In March 1997, $300 million of 6.95 percent notes due March 1, 2007 were issued under this filing. Proceeds were used primarily to reduce outstanding commercial paper issued to fund operating working capital, capital expenditures and the repurchase of Company shares. For the nine months ended July 31, 1997, capital expenditures were $350.9 million, including $210.9 million related to Massey Coal, comprised primarily of mining equipment and coal preparation plant and other mine development costs. Dividends paid in the nine months ended July 31, 1997 were $47.8 million ($.57 per share) compared with $42.6 million ($.51 per share) for the same period of 1996. NEW ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS No. 131). SFAS No. 131 establishes new standards for reporting information about operating segments in interim and annual financial statements. This statement is effective for the Company's fiscal year 1999. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128). SFAS No. 128 redefines the standards for computing earnings per share and is effective for the Company's fiscal year 1998. The Company believes adoption of the new standards will not have a material impact on future earnings per share calculations. 14 16 FLUOR CORPORATION CHANGES IN BACKLOG Three and Nine Months Ended July 31, 1997 and 1996 ($ in millions) UNAUDITED
For the Three Months Ended July 31, 1997 1996 - --------------------------------------------------------------------------------- Backlog - beginning of period $ 16,136.5 $ 15,362.0 New awards 2,672.1 3,107.5 Adjustments and cancellations, net (255.0) (476.1) Work performed (3,212.2) (2,394.2) ----------------------------- Backlog - end of period $ 15,341.4 $ 15,599.2 =============================
For the Nine months Ended July 31, 1997 1996 - --------------------------------------------------------------------------------- Backlog - beginning of period $ 15,757.4 $ 14,724.9 New awards 9,446.5 9,063.4 Adjustments and cancellations, net (793.9) (1,314.5) Work performed (9,068.6) (6,874.6) ----------------------------- Backlog - end of period $ 15,341.4 $ 15,599.2 =============================
15 17 PART II: OTHER INFORMATION Item 1. Legal Proceedings In July 1997, Fluor Daniel Fernald, Inc. (formerly known as FERMCO), reached a settlement in "U.S. ex rel William Watt v. Fluor Daniel, Inc., et al." Fluor Daniel Fernald's former employee, William T. Watt, had claimed damages for alleged violations of the False Claim Act. In the settlement, Fluor Daniel Fernald agreed to pay $8.4 million, a portion of which was paid to the U.S. government. The company will recoup a portion of this amount from its teaming partners. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 27 Financial Data Schedule. 99.1 Current Report on Form 8-K filed May 6, 1997. (b) Reports on Form 8-K. The Form 8-K filed on May 6, 1997, addresses certain disclosures in reports and statements released by the Company or statements made by its officers or directors that are forward-looking in nature, such as statements related to the Company's opinions about trends and factors that may impact future operating results. The Company filed this report in order to avail itself of the safe harbor provided in the Securities Act of 1933 and the Securities Exchange Act of 1934 with respect to any such forward-looking statements. 16 18 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. FLUOR CORPORATION ---------------------------------------- (Registrant) Date: September 15, 1997 /s/ J. Michal Conaway ---------------------------------------- J. Michal Conaway, Senior Vice President and Chief Financial Officer /s/ V.L. Prechtl ---------------------------------------- V. L. Prechtl, Vice President and Controller 17 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AT JULY 31, 1997 AND THE CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE NINE MONTHS ENDED JULY 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS OCT-31-1997 JUL-31-1997 198,319 33,960 847,235 0 156,969 2,006,878 2,815,859 954,552 4,417,127 1,806,290 300,524 0 0 52,406 1,627,474 4,417,127 0 10,295,799 0 10,154,270 0 0 20,044 119,262 61,119 58,143 0 0 0 58,143 0.69 0.69
EX-99.1 3 REPORT ON FORM 8-K FILED MAY 6, 1997 1 EXHIBIT 99.1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) May 6, 1997 ------------------ FLUOR CORPORATION - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Delaware 1-7775 95-0740960 - ------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 3353 Michelson Drive, Irvine, California 92698 - ------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code (714) 975-2000 ------------------ N/A - -------------------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) 2 ITEM 5. OTHER EVENTS. Certain Factors and Trends Affecting Fluor and its Businesses--Forward-Looking Statements. From time to time, certain disclosures in reports and statements released by Fluor Corporation (the "Company"), or statements made by its officers or directors, will be forward-looking in nature, such as statements related to the Company's opinions about trends and factors which may impact future operating results. The Company is filing this Current Report on Form 8-K to avail itself of the safe harbor provided in the Securities Act of 1933 and the Securities Exchange Act of 1934 with respect to any such forward-looking statements that may be contained in the Company's reports and other documents filed with the Securities and Exchange Commission under Sections 13 or 15(d) of the Securities Exchange Act of 1934 and written or oral forward-looking statements made by the Company's officers and directors on behalf of the Company to the press, potential investors, securities analysts and others. Such forward-looking statements could involve, among other things, statements regarding the Company's intent, belief or expectation with respect to (i) the Company's results of operations and financial condition, (ii) the Company's implementation of cost reductions, (iii) the consummation of acquisition and financing transactions and the effect thereof on the Company's business, and (iv) the Company's plans and objectives for future operations and expansion or consolidation. Any such forward-looking statements would be subject to the risks and uncertainties that could cause actual results of operations, financial condition, cost reductions, acquisitions, financing transactions, operations, expansion, consolidation and other events to differ materially from those expressed or implied in such forward-looking statements. Any such forward-looking statements would be subject to a number of assumptions regarding, among other things, future economic, competitive and market conditions generally. Such assumptions would be based on facts and conditions as they exist at the time such statements are made as well as predictions as to future facts and conditions, the accurate prediction of which may be difficult and involve the assessment of events beyond the Company's control. The Company wishes to caution readers that forward-looking statements, including disclosures which use words such as the Company "believes," "anticipates," "expects," "estimates" and similar statements, are subject to certain risks and uncertainties which could cause actual results of operations to differ materially from expectations. Any such forward-looking statements should be considered in context with the various disclosures made by the Company about its businesses, including the risk factors discussed below. Important risk factors which could cause actual results of operations to differ materially from those expressed in any forward-looking statements include, but are not limited to, the following: Fixed, Maximum or Unit Priced Contracts. An increasing number of the Company's contracts for the provision of engineering and construction services are fixed, maximum or unit price contracts and fixed price incentive contracts. Under fixed, maximum or unit price contracts, the Company agrees to perform the contract for a fixed price and as a result, benefits from costs savings, but is unable to recover for any cost overruns. Under fixed price incentive contracts, the Company shares with the customer any savings up to a negotiated ceiling price 2 3 and carries some or all of the burden of costs exceeding the negotiated ceiling price. Contract prices are established based in part on cost estimates which are subject to a number of assumptions, such as assumptions regarding future economic conditions. If in the future these estimates prove inaccurate, or circumstances change, cost overruns can occur. Contract Performance Risk. In certain instances, the Company guarantees facility completion by a scheduled acceptance date or achievement of certain acceptance and performance testing levels. Failure to meet any such schedule or performance requirements could result in additional costs and the amount of such additional costs could exceed project profit margins. Performance problems for existing and future contracts, whether of the fixed-price or other type, could cause actual results of operations to differ materially from those contained in forward-looking statements. Size and Uncertainty of Timing of Contracts. The Company's future award prospects include several large-scale domestic and international projects. The large size and uncertain timing of these projects can create variability in the Company's award pattern. Consequently, future award trends are difficult to predict with certainty. The Company's estimates of future performance depend on, among other things, the likelihood of receiving certain new awards. While these estimates are based on the good faith judgment of management, these estimates frequently change based on new facts which become available. In addition, the timing of receipt of revenue by the Company from engineering and construction projects can be affected by a number of factors outside the control of the Company. Frequently, the Company's services on a project take place over an extended period of time, and are subject to unavoidable delays from weather conditions, unavailability of equipment from vendors, changes in the scope of service requested by clients or labor disruptions affecting client job sites. Uncertainty of contract or award timing can also present difficulties in matching workforce size with contract needs. In some cases, the Company must maintain and bear the cost of a ready workforce larger than called for under existing contracts in anticipation of future workforce needs under expected awards, which can be delayed or not received. Government Contracts. Several of the Company's significant contracts are Government contracts. Generally, Government contracts are subject to oversight audits by Government representatives, to profit and cost controls and limitations, and to provisions permitting termination, in whole or in part, without prior notice at the Government's convenience upon payment of compensation only for work done and commitments made at the time of termination. In the event of termination, the Company generally will receive some allowance for profit on the work performed. In some cases, Government contracts are subject to the uncertainties surrounding Congressional appropriations or agency funding. Government business is subject to specific procurement regulations and a variety of socio-economic and other requirements. Failure to comply with such regulations and requirements could lead to suspension or debarment, for cause, from Government contracting or subcontracting for a period of time. Among the causes for debarment are violations of various statutes, including those related to employment practices, the protection of the environment, the accuracy of records and the recording of costs. Backlog. The dollar amount of the Company's backlog as stated at any given time is not necessarily indicative of the future earnings of the Company related to the performance of such 3 4 work. Cancellations or scope adjustments related to contracts reflected in the Company's backlog can occur. Environmental, Safety and Health. It is impossible to predict the full impact of future legislative or regulatory developments relating to environmental protection and coal mine and preparation plant safety and health on the Company's coal operations, because the standards to be met, as well as the technology and length of time available to meet those standards, continue to develop and change. Fluctuation in the Production of Coal. The Company's coal production and sales are subject to a variety of operational, geological, transportation and weather-related factors that routinely cause production to fluctuate. For example, sales may be adversely affected by fluctuations in production and by transportation delays arising from equipment unavailability and weather-related events, such as flooding. Labor disruptions also may occur at times or in a manner that causes current and projected results of operations to deviate from projections and expectations. Decreases in production from anticipated levels usually lead to increased mining costs and decreases in results of operations. Effects of Global Economic and Political Conditions. The Company's businesses are subject to fluctuations in demand and to changing economic and political conditions which are beyond the control of the Company and may cause actual results to differ from forward-looking statements. Coal operations produce a commodity which is internationally traded and the price of which is established by market factors outside the control of the Company. Although the Company has taken actions to reduce its dependence on external economic conditions, management is unable to predict with certainty the amount and mix of future business. Revenues and earnings from international operations are subject to domestic and foreign government policies and regulations, embargoes and international hostilities. Competition. The markets served by the engineering and construction businesses of the Company are highly competitive and for the most part require substantial resources and particularly highly skilled and experienced technical personnel. The markets served by the coal business of the Company are also highly competitive and require substantial capital investment as well as the ability to produce coal of consistent quality and meet demanding customer specifications. A large number of well financed, multi-national companies are competing in the markets served by the Company's businesses. Intense competition in the engineering and construction business is expected to continue, presenting the Company with significant challenges in its ability to maintain strong growth rates while maintaining acceptable profit margins. 4 5 Cost Reduction Program. In March of 1997, the Company announced a cost reduction program for its Fluor Daniel operations. The Company's estimates of the future cost savings from the cost reduction program are forward-looking statements. The Company may from time to time provide similar estimates with respect to this or other cost reduction efforts. The actual cost savings may differ materially from estimates based on a number of factors affecting the Company's business, including the ability to achieve estimated staff reductions while maintaining workflow in the functional areas affected and to sublease vacated facilities within anticipated time frames at anticipated sublease rent levels. 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 hereunto duly authorized. Date: May 6, 1997 FLUOR CORPORATION By: /s/ J. MICHAL CONAWAY --------------------------------- J. Michal Conaway, Senior Vice President and Chief Financial Officer 5 -----END PRIVACY-ENHANCED MESSAGE-----