-----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, DNnjv6Q9XDDymmGwR+OoLGM60eejnhjio6h+fEbPS3Fmq+wkxSIjNXnYMIQ2yf36 XuD5os/eyoZ1tYCeH7z8OQ== 0000909012-00-000343.txt : 20000510 0000909012-00-000343.hdr.sgml : 20000510 ACCESSION NUMBER: 0000909012-00-000343 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOSTER WHEELER CORP CENTRAL INDEX KEY: 0000038321 STANDARD INDUSTRIAL CLASSIFICATION: HEAVY CONSTRUCTION OTHER THAN BUILDING CONST - CONTRACTORS [1600] IRS NUMBER: 131855904 STATE OF INCORPORATION: NY FISCAL YEAR END: 1225 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-00286 FILM NUMBER: 622884 BUSINESS ADDRESS: STREET 1: PERRYVILLE CORPORATE PARK STREET 2: SERVICE ROAD EST 173 CITY: CLINTON STATE: NJ ZIP: 08809 BUSINESS PHONE: 9087304090 10-Q 1 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 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 1-286-2 FOSTER WHEELER CORPORATION -------------------------- (Exact name of registrant as specified in its charter) NEW YORK 13-1855904 - ------------------------------------ ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) PERRYVILLE CORPORATE PARK, CLINTON, NJ 08809-4000 - -------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (908) 730-4000 ----------------- 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 ( ) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 40,738,243 shares of the Corporation's common stock ($1.00 par value) were outstanding as of March 31, 2000. FOSTER WHEELER CORPORATION INDEX Part I Financial Information: Item 1 - Financial Statements: Condensed Consolidated Balance Sheet at March 31, 2000 and December 31, 1999 Condensed Consolidated Statement of Earnings and Comprehensive Income Three Months Ended March 31, 2000 and March 26, 1999 Condensed Consolidated Statement of Cash Flows Three Months Ended March 31, 2000 and March 26, 1999 Notes to Condensed Consolidated Financial Statements Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Part II Other Information: Item 1 - Legal Proceedings Item 4 - Submission of Matters to a Vote of Security Holders Item 6 - Exhibits and Reports on Form 8-K Signatures 1 PART I FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS
FOSTER WHEELER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (In Thousands of Dollars) March 31, 2000 December 31, (UNAUDITED) 1999 ------------ ------ ASSETS CURRENT ASSETS: Cash and cash equivalents ................................ $ 187,715 $ 170,268 Short-term investments ................................... 15,071 17,053 Accounts and notes receivable ............................ 853,897 918,898 Contracts in process and inventories ..................... 441,646 420,033 Prepaid, deferred and refundable income taxes ............ 53,033 61,531 Prepaid expenses ......................................... 34,889 27,313 ----------- ----------- Total current assets ................................ 1,586,251 1,615,096 ----------- ----------- Land, buildings and equipment ............................ 998,220 1,006,016 Less accumulated depreciation ............................ 360,792 357,817 ----------- ----------- Net book value ...................................... 637,428 648,199 ----------- ----------- Notes and accounts receivable - long-term ................ 91,884 95,526 Investments and advances ................................. 113,212 108,655 Intangible assets, net ................................... 296,917 301,494 Prepaid pension cost and benefits ........................ 198,698 199,955 Other, including insurance recoveries .................... 400,147 404,313 Deferred income taxes .................................... 64,414 64,871 ----------- ----------- TOTAL ASSETS .................................. $ 3,388,951 $ 3,438,109 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current installments on long-term debt ................... $ 19,953 $ 19,668 Bank loans ............................................... 83,920 63,378 Accounts payable and accrued expenses .................... 621,221 681,596 Estimated costs to complete long-term contracts .......... 613,817 610,023 Advance payments by customers ............................ 61,694 42,801 Income taxes ............................................. 50,838 54,086 ----------- ----------- Total current liabilities ........................... 1,451,443 1,471,552 Corporate and other debt less current installments ....... 362,602 372,847 Special-purpose project debt less current installments ... 329,001 329,907 Deferred income taxes .................................... 13,197 12,874 Postretirement and other employee benefits other than Pensions ............................................ 159,986 163,536 Other long-term liabilities and minority interest ........ 416,265 424,815 Subordinated Robbins Facility exit funding obligations ... 111,715 111,715 Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holding Solely Junior Subordinated . Deferrable Interest Debentures ...................... 175,000 175,000 ----------- ----------- TOTAL LIABILITIES ............................. 3,019,209 3,062,246 ----------- ----------- STOCKHOLDERS' EQUITY: Common stock ............................................. 40,748 40,748 Paid-in capital .......................................... 200,963 201,043 Retained earnings ........................................ 217,458 211,529 Accumulated other comprehensive loss ..................... (89,334) (77,219) ----------- ----------- 369,835 376,101 Less cost of treasury stock .............................. 93 238 ----------- ----------- TOTAL STOCKHOLDERS' EQUITY .................... 369,742 375,863 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................... $ 3,388,951 $ 3,438,109 =========== ===========
See notes to condensed consolidated financial statements. 2
FOSTER WHEELER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF EARNINGS AND COMPREHENSIVE INCOME (In Thousands of Dollars, Except Per Share Amounts) (Unaudited) THREE MONTHS ENDED ------------------ MARCH 31, 2000 MARCH 26, 1999 -------------- -------------- Revenues: Operating revenues .................... $ 822,036 $ 998,770 Other income .......................... 14,260 19,208 ------------ ------------ Total revenues ................... 836,296 1,017,978 ------------ ------------ Cost and expenses: Cost of operating revenues ............ 741,558 913,229 Selling, general and adminis- trative expenses ................. 54,101 55,212 Other deductions/minority interest ......................... 23,011 24,722 Dividends on preferred security of subsidiary trust ............ 3,937 3,281 ------------ ------------ Total costs and expenses 822,607 996,444 ------------ ------------ Earnings before income taxes ............... 13,689 21,534 Provision for income taxes ................. 5,317 6,131 ------------ ------------ Net earnings ............................... 8,372 15,403 Other comprehensive (loss)/income: Foreign currency translation adjustment .................... (12,115) (14,863) ------------ ------------ Comprehensive (loss)/income ................ $ (3,743) $ 540 ============ ============ Earnings per share: Basic ................................. $ .21 $ .38 ============ ============ Diluted ............................... $ .21 $ .38 ============ ============ Shares outstanding: Basic ................................. 40,776,234 40,729,835 Diluted ............................... 338 50 ------------ ------------ Total diluted ......................... 40,776,572 40,729,885 ============ ============ Cash dividends paid per common share ......................... $ .06 $ .21 ============ ============
See notes to condensed consolidated financial statements. 3
FOSTER WHEELER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (In Thousands of Dollars) (Unaudited) THREE MONTHS ENDED ------------------ MARCH 31, 2000 MARCH 26, 1999 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings ............................................... $ 8,372 $ 15,403 Adjustments to reconcile net earnings to cash flows from operating activities: Depreciation and amortization .............................. 15,086 18,234 Deferred tax ............................................... 1,011 (6,916) Equity earnings, net of dividends .......................... (4,546) (4,594) Other noncash items ........................................ (3,869) (5,329) Changes in assets and liabilities: Receivables ................................................ 55,562 (85,586) Contracts in process and inventories ....................... (26,155) 37,951 Accounts payable and accrued expenses ...................... (59,528) (13,803) Estimated costs to complete long-term contracts ............ 14,637 28,637 Advance payments by customers .............................. 19,999 392 Income taxes ............................................... 3,798 473 Other assets and liabilities ............................... (5,726) (13,798) --------- -------- NET CASH PROVIDED/(USED) BY OPERATING ACTIVITIES ........... 18,641 (28,936) --------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures ....................................... (11,208) (32,735) Proceeds from sale of properties ........................... 798 396 Decrease in investments and advances ....................... 5,316 12,131 Decrease in short-term investments ......................... 1,982 10,505 Partnership distributions .................................. (2,599) (4,385) --------- -------- NET CASH USED BY INVESTING ACTIVITIES ...................... (5,711) (14,088) --------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Dividends to stockholders .................................. (2,443) (8,548) Repurchase of common stock ................................. (83) (860) Mandatorily Redeemable Preferred Securities of Subsidiary Trust Holdings Solely Junior Subordinated Deferrable Interest Debentures ....................... -- 169,178 Increase/(decrease) in short-term debt ..................... 22,569 (2,707) Proceeds from long-term debt ............................... 3,321 22,444 Repayment of long-term debt ................................ (14,067) (145,893) --------- -------- NET CASH PROVIDED BY FINANCING ACTIVITIES .................. 9,297 33,614 --------- -------- Effect of exchange rate changes on cash and cash equivalents (4,780) (4,154) --------- -------- INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ........... 17,447 (13,564) Cash and cash equivalents at beginning of year ............. 170,268 180,068 --------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ................. $ 187,715 $ 166,504 ========= ======== Cash paid during period: Interest (net of amount capitalized) ....................... $ 9,855 $ 4,505 Income taxes ............................................... $ 4,329 $ 2,584
See notes to condensed consolidated financial statements 4 FOSTER WHEELER CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) 1. The condensed consolidated balance sheet as of March 31, 2000, and the related condensed consolidated statements of earnings and comprehensive income and cash flows for the three month period ended March 31, 2000 and March 26, 1999 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 Foster Wheeler Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 filed with the Securities and Exchange Commission on March 1, 2000. The Condensed Consolidated Balance Sheet as of December 31, 1999 has been derived from the audited Consolidated Balance Sheet included in the 1999 Annual Report on Form 10-K. A summary of Foster Wheeler Corporation's significant accounting policies is presented on pages 29, 30, and 31 of its 1999 Annual Report on Form 10-K. Users of financial information produced for interim periods are encouraged to refer to the footnotes contained in the 1999 Annual Report on Form 10-K when reviewing interim financial results. There has been no material change in the accounting policies followed by Foster Wheeler Corporation (hereinafter referred to as "Foster Wheeler" or the "Corporation") during the first quarter of 2000. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the period reported. Actual results could differ from those estimates. Significant estimates are used when accounting for long-term contracts including customer and vendor claims, depreciation, employee benefit plans, taxes, and contingencies, among others. 2. In the ordinary course of business, the Corporation and its subsidiaries enter into contracts providing for assessment of damages for nonperformance or delays in completion. Suits and claims have been or may be brought against the Corporation by customers alleging deficiencies in either equipment design or plant construction. Based on its knowledge of the facts and circumstances relating to the Corporation's liabilities, if any, and to its insurance coverage, management of the Corporation believes that the disposition of such suits will not result in charges against assets or earnings materially in excess of amounts previously provided in the accounts. The Corporation and its subsidiaries, along with many other companies, are codefendants in numerous lawsuits pending in the United States. Plaintiffs claim damages for personal injury alleged to have arisen from exposure to or use of asbestos in connection with work performed by the Corporation and its subsidiaries during the 1970s and prior. As of March 31, 2000, there were approximately 83,800 claims pending. In the first quarter of 2000, approximately 13,400 new claims have been filed and approximately 3,200 were either settled or dismissed without payment. The Corporation has agreements with insurance carriers covering significantly more than a majority of the potential costs relating to these exposures. The Corporation has recorded an asset relating to probable insurance recoveries and a liability 5 relating to probable losses. These assets and liabilities were estimated based on historical data developed in conjunction with outside experts. Management of the Corporation has carefully considered the financial viability and legal obligations of its insurance carriers and has concluded that except for those insurers that have become or may become insolvent, the insurers will continue to adequately fund claims and defense costs relating to asbestos litigation. On November 30, 1999 the United States District Court for the Northern District of Texas handed down a final judgment in the case of KOCH ENGINEERING COMPANY, INC. ET AL VS. GLITSCH, INC., ET AL. Glitsch, Inc. (now known as Tray, Inc.) is an indirect subsidiary of the Corporation. This lawsuit, which claimed damages for patent infringement and trade secret misappropriations, has been pending for over 16 years. The judgment awarded compensatory damages of $20.8 million plus prejudgment interest in an amount yet to be calculated by the Court, and punitive damages equal to 50% of compensatory damages. Tray, Inc. has been advised by its counsel that the Court's decision contains numerous legal and factual errors subject to reversal by an appeal. Various motions for relief from the judgment are pending before the trial court. In 1997, the United States Supreme Court effectively invalidated New Jersey's long-standing municipal solid waste flow rules and regulations. The immediate effect was to eliminate the guaranteed supply of municipal solid waste to the Camden County Waste-to-Energy Project (the "Camden 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 plant. Those market-based revenues are not expected to be sufficient to service the debt on outstanding bonds, which were issued to construct the plant and to acquire a landfill for Camden County's use. These outstanding bonds are public debt, not debt of the Corporation. The Corporation has filed suit against certain involved parties, including the State of New Jersey, seeking among other things to void the applicable contracts and agreements governing the Camden Project. Pending outcome of the litigation and the results of initiatives by the state of New Jersey to resolve the crisis, management believes that the plant will continue to operate at full capacity while receiving market rates for waste disposal. At this time, management cannot determine the ultimate outcome or its effect on the Camden Project. In 1996, the Corporation completed the construction of a recycling and waste-to-energy project located in the Village of Robbins, Illinois (the "Robbins Facility"). By virtue of the Robbins Facility qualifying under the Illinois Retail Rate Law as a qualified solid waste-to-energy facility, it was to receive electricity revenues projected to be substantially higher than the utility's "avoided cost". Under the Retail Rate Law, the utility was entitled to a tax credit against a state tax on utility gross receipts and invested capital. The State was to be reimbursed by the Robbins Facility for the tax credit beginning after the 20th year following the initial sale of electricity to the utility. The State repealed the Retail Rate Law insofar as it applied to the Robbins Facility. In October 1999, the Corporation reached an agreement (the "Robbins Agreement") with the bondholders. Pursuant to the Robbins Agreement, the Corporation has agreed to continue to contest this repeal through the Retail Rate Litigation. Pursuant to the Robbins Agreement, the corporation has also agreed that any proceeds of the Retail Rate Litigation will be allocated in the following order of priority: (1) to redeem all of the outstanding 1999D Bonds, (2) to reimburse the Corporation for any amounts paid by it in respect of the 1999D Bonds (together with interest on the foregoing amounts at a rate of 10.6% per annum) and (3) to reimburse the Corporation for any costs incurred by it in connection with prosecuting the Retail Rate Litigation (together with interest on the foregoing amounts at a rate of 10.6% per annum). Then, to the extent there are further proceeds, an amount equal to the amount distributed pursuant to the preceding clause (2) shall fund payments in respect of the Non-Recourse Robbins Bonds. Thereafter, 80% of any further proceeds shall fund payments on the Non-Recourse Robbins Bonds until an amount sufficient to repay such Bonds in full has been paid over, with the remaining 20% being paid over to the Corporation. After the 6 foregoing payments shall have been made, any remaining proceeds shall be paid over to the Corporation. The ultimate legal and financial liability of the Corporation in respect to all claims, lawsuits and proceedings cannot be estimated with certainty. As additional information concerning the estimates used by the Corporation becomes known, the Corporation reassesses its position both with respect to gain contingencies and accrued liabilities and other potential exposures. Estimates that are particularly sensitive to future change relate to legal matters, which are subject to change as events evolve and as additional information becomes available during the administration and litigation process. 3. On February 12, 1999, the Corporation entered into revolving credit agreements (the "Revolving Credit Agreements"), consisting of a $270,000 revolving credit agreement with a four-year term and a $90,000 revolving credit agreement with a 364-day term, each bearing interest at a floating rate. Loans under the Revolving Credit Agreements were used to repay the outstanding indebtedness under previous revolving credit agreements and for general corporate purposes. At March 31, 2000, $140,000 was outstanding under the Revolving Credit Agreements. The Corporation also pays various fees to the lenders thereunder. The Revolving Credit Agreements require, among other things, that the Corporation maintain a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio. On December 1, 1999, the Revolving Credit Agreements were amended and restated (the "Amended and Restated Revolving Credit Agreements"). The Corporation was in compliance with covenants under the Amended and Restated Revolving Credit Agreements as of March 31, 2000. On January 13, 1999, FW Preferred Capital Trust I, a Delaware business trust owned by the Corporation, issued $175,000 in Trust Preferred Securities. These Trust Preferred Securities are entitled to receive cumulative cash distributions at an annual rate of 9.0%. Distributions are paid quarterly in arrears on April 15, July 15, October 15 and January 15 of each year. Such distributions may be deferred for periods up to five years. The maturity date is January 15, 2029. Foster Wheeler can redeem these Trust Preferred Securities on or after January 15, 2004. 4. Foster Wheeler's subordinated obligations under the Exit Funding Agreement entered into in connection with the restructuring of debt incurred to finance construction of the Robbins Facility will be limited to funding: (a) 1999C Bonds 7 1/4% interest, installments due October 15, 2000 to 2009 ($17,845) and October 15, 2023 and 2024 ($77,155) $ 95,000 (b) 1999D Bonds accrued at 7% due October 15, 2009 18,000 --------- Total $ 113,000 ========= 1999C BONDS. The 1999C Bonds are subject to mandatory sinking fund. 5. A total of 4,337,801 shares of common stock were reserved for issuance under the stock option plans; of this total 1,329,166 were not under option. 6. Basic per share data has been computed based on the weighted average number of shares of common stock outstanding. Diluted per share data has been computed based on the basic plus the dilution of stock options. In 1999, the Corporation adopted The Directors Deferred 7 Compensation and Stock Award Plan (the "Plan"). Under the Plan, each non-employee director is credited annually with share units of the Corporation's common stock. In addition, each non-employee director may elect to defer receipt of compensation for services rendered as a director, which deferred amount is credited to his or her account in the form of share units. The Corporation makes a supplemental contribution equal to 15% of the deferred amount. As of March 31, 2000, 51,038 share units were credited in participants' accounts and are included in the calculation of basic earnings per share. 7. Interest income and cost for the following periods are: THREE MONTHS ENDED ------------------ MARCH 31, 2000 MARCH 26, 1999 -------------- -------------- Interest Income $ 2,750 $ 3,298 ======= ======== Interest Cost $ 20,886 $ 18,553 ======== ======== Included in the interest cost is interest capitalized on self-constructed assets, which was $1,475 and $622 for the quarters ended March 31, 2000 and March 26, 1999, respectively. Interest cost for the three months ended March 31, 2000 and March 26, 1999, also included $3,937 and $3,281, respectively, for dividends on Trust Preferred Securities. 8. The Financial Accounting Standards Board released in June 1998, Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." This Statement addresses the accounting for derivative instruments including certain derivative instruments embedded in other contracts and for hedging activities. The Corporation is currently assessing the impact of adoption of this new Statement. The effective date of this Statement has been deferred by the issuance of Statement of Financial Accounting Standards No. 137 until the fiscal year beginning after June 15, 2000. The Securities and Exchange Commission released Staff Accounting Bulletin (SAB) No.101 Revenue Recognition in Financial Statements, on December 3, 1999. The effective date of SAB No.101 has been deferred by SAB No. 101A until the second quarter of 2000. These statements relate to the timing of revenue recognition. The Corporation is currently reviewing these SABS but does not expect that they will have an impact on its recording of revenue. 9. In the third quarter 1998, a subsidiary of the Corporation entered into a three-year agreement with a financial institution whereby the subsidiary would sell an undivided interest in a designated pool of qualified accounts receivable. The agreement contains certain covenants and provides for various events of termination. At March 31, 2000, $50,000 in receivables were sold under the agreement and are therefore not reflected in the accounts receivable - trade balance in the Condensed Consolidated Balance Sheet. 8 10. Changes in equity for the three months ended March 31, 2000 were as follows:
ACCUMULATED OTHER TOTAL COMMON STOCK PAID-IN RETAINED COMPREHENSIVE TREASURY STOCK STOCKHOLDERS' ------------ ------- -------- ------------- -------------- ------------- SHARES AMOUNT CAPITAL EARNINGS LOSS SHARES AMOUNT EQUITY ------ ------ ------- -------- ---- ------ ------ ------ Balance December 31, 1999 40,747,668 $40,748 $201,043 $211,529 $(77,219) (16,781) $ (238) $375,863 Net earnings 8,372 8,372 Dividends paid - common (2,443) (2,443) Purchase of treasury stock (13,200) (83) (83) Foreign currency translation adjustment (12,115) (12,115) Shares issued under incentive plan and other plans (80) 20,556 228 148 ---------- ------- -------- -------- - -------- -------- ------- ---------- Balance March 31, 2000 40,747,668 $40,748 $200,963 $217,458 $(89,334) (9,425) $ ( 93) $369,742 ========== ======= ======== ======== = ======== ======== ======== ==========
9 11. Major Business Groups
FOR THREE MONTHS - ---------------- ENGINEERING CORPORATE AND AND ENERGY FINANCIAL TOTAL CONSTRUCTION EQUIPMENT(3)(4) SERVICES (1) ----- ------------ -------------- ------------ ENDED MARCH 31, 2000 Revenues $ 836,296 $615,964 $232,823 $(12,491) Interest expense(2) 19,411 642 9,018 9,751 Earnings/(loss) before income taxes 13,689 20,004 9,364 (15,679) Income taxes/(benefit) 5,317 7,002 3,819 (5,504) ---------- -------- -------- -------- Net earnings/(loss) $ 8,372 $ 13,002 $ 5,545 $(10,175) ========== ======== ======== ======== ENDED MARCH 26, 1999 Revenues $1,017,978 $804,035 $230,224 $(16,281) Interest expense(2) 17,931 1,962 10,156 5,813 Earnings/(loss) before income taxes 21,534 24,777 9,320 (12,563) Income taxes/(benefit) 6,131 7,521 3,010 (4,400) ---------- -------- -------- -------- Net earnings/(loss) $ 15,403 $ 17,256 $ 6,310 $ (8,163) ========== ======== ======== ======== (1) Includes intersegment eliminations. (2) Includes dividend on Trust Preferred Securities. (3) Includes losses recorded for the Robbins Facility in 1999 of $1,913 pre-tax ($1,244 after tax). (4) Commencing in 2000, the Power Systems Group has been combined with the Energy Equipment Group. The 1999 results have been reclassified to conform to the 2000 presentation.
10 12. Consolidating Financial Information The following represents summarized consolidating financial information as of March 31, 2000 and December 31, 1999, with respect to the financial position, and for the three months ended March 31, 2000, and March 26, 1999, for results of operations and cash flows of the Corporation and its wholly-owned and majority-owned subsidiaries. In February 1999, Foster Wheeler USA Corporation, Foster Wheeler Energy Corporation and Foster Wheeler Energy International, Inc. issued guarantees in favor of the holders of the Corporation's 6 3/4% Notes due November 15, 2005 (the "Notes"). Each of the guarantees is full and unconditional, and joint and several. The summarized consolidating financial information is presented in lieu of separate financial statements and other related disclosures of the wholly-owned subsidiary guarantors, because management does not believe that such separate financial statements and related disclosures would be material to investors. None of the subsidiary guarantors are restricted from making distributions to the Corporation.
CONDENSED CONSOLIDATING BALANCE SHEET (In Thousands of Dollars) March 31, 2000 GUARANTOR NON-GUARANTOR ASSETS FWC SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------ --- ------------ ------------ ------------ ------------ Current assets $ 368,598 $ 443,102 $1,570,033 $ (795,482) $1,586,251 Investment in subsidiaries 922,548 304,485 63,252 (1,290,285) Land, buildings & equipment (net) 46,717 28,213 568,923 (6,425) 637,428 Notes and accounts receivable - long-term 68,829 8,342 358,744 (344,031) 91,884 Intangible assets (net) 87,832 209,085 296,917 Other non-current assets 544,182 22 175,980 56,287 776,471 -------------- ------------ ------------ ---------------- ------------ TOTAL ASSETS $ 1,950,874 $ 871,996 $2,946,017 $(2,379,936) $3,388,951 ============== ============== ============ ================= ============ LIABILITIES & STOCKHOLDERS' EQUITY ---------------------------------- Current liabilities $ 470,819 $ 411,148 $1,364,968 $ (795,492) $1,451,443 Long-term debt 548,251 491,045 (347,693) 691,603 Other non-current liabilities 562,062 8,257 244,830 (113,986) 701,163 Preferred trust securities 175,000 175,000 -------------- -------------- ------------ ---------------- ------------ TOTAL LIABILITIES 1,581,132 419,405 2,275,843 (1,257,171) 3,019,209 TOTAL STOCKHOLDERS' EQUITY 369,742 452,591 670,174 (1,122,765) 369,742 -------------- -------------- ------------ ---------------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,950,874 $ 871,996 $2,946,017 $(2,379,936) $3,388,951 ============== ============== ============ ================= ============
11 CONDENSED CONSOLIDATING BALANCE SHEET (In Thousands of Dollars) December 31,1999
GUARANTOR NON-GUARANTOR ASSETS FWC SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED ------ --- ------------ ------------ ------------ ------------ Current assets $ 391,364 $419,956 $ 1,558,601 $ (754,825) $1,615,096 Investment in subsidiaries 915,470 303,241 90,327 (1,309,038) Land, buildings & equipment (net) 47,461 27,709 579,555 (6,526) 648,199 Notes and accounts receivable - long-term 68,691 8,395 385,515 (367,075) 95,526 Intangible assets (net) 88,450 213,044 301,494 Other non-current assets 544,224 20 188,796 44,754 777,794 ---------- -------- ----------- ----------- ---------- TOTAL ASSETS $1,967,210 $847,771 $ 3,015,838 $(2,392,710) $3,438,109 ========== ======== =========== =========== ========== LIABILITIES & STOCKHOLDERS' EQUITY ---------------------------------- Current liabilities $ 469,832 $392,751 $ 1,365,793 $ (756,824) $1,471,552 Long-term debt 558,251 513,057 (368,554) 702,754 Other non-current liabiliies 563,264 8,256 253,058 (111,638) 712,940 Preferred trust securities 175,000 175,000 ---------- -------- ----------- ----------- ---------- TOTAL LIABILITIES 1,591,347 401,007 2,306,908 (1,237,016) 3,062,246 TOTAL STOCKHOLDERS' EQUITY 375,863 446,764 708,930 (1,155,694) 375,863 ---------- -------- ----------- ----------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,967,210 $847,771 $ 3,015,838 $(2,392,710) $3,438,109 ========== ======== =========== =========== ==========
12
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA (In Thousands of Dollars) Three Months Ended March 31, 2000 GUARANTOR NON-GUARANTOR FWC SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED --- ------------ ------------ ------------ ------------ Revenues $ 4,551 $ 260,415 $ 652,029 $ (80,699) $ 836,296 Cost of operating revenues 243,098 565,687 (67,227) 741,558 Selling, general and administrative, Other deductions and minority Interests 20,433 13,230 60,858 (13,472) 81,049 Equity in net earnings of subsidiaries 19,079 2,618 (21,697) --------- ----------- ----------- ----------- ----------- Earnings/ (loss) before income taxes 3,197 6,705 25,484 (21,697) 13,689 (Benefit)/provision for income taxes (5,175) 1,693 8,799 5,317 --------- ----------- ----------- ----------- ----------- Net earnings/(loss) $ 8,372 $ 5,012 $ 16,685 $ (21,697) $ 8,372 ========= =========== ========== =========== ===========
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA (In Thousands of Dollars) Three Months Ended March 26, 1999 GUARANTOR NON-GUARANTOR FWC SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED --- ------------ ------------ ------------ ------------ Revenues $ 5,916 $ 252,480 $ 839,664 $(80,082) $ 1,017,978 Cost of operating revenues 238,208 740,598 (65,577) 913,229 Selling, general and administrative, Other deductions and minority Interests 18,557 11,125 68,038 (14,505) 83,215 Equity in net earnings of subsidiaries 23,677 3,169 (26,846) --------- ----------- ----------- ----------- ----------- Earnings/(loss) before income taxes 11,036 6,316 31,028 (26,846) 21,534 (Benefit)/provision for income taxes (4,367) 1,139 9,359 6,131 --------- ----------- ----------- ----------- ----------- Net earnings/(loss) $ 15,403 $ 5,177 $ 21,669 $ (26,846) $ 15,403 ========= =========== ========== ========== ==========
13
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW DATA (In Thousands of Dollars) Three Months Ended March 31, 2000 GUARANTOR NON-GUARANTOR FWC SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED --- ------------ ------------ ------------ ------------ NET CASH PROVIDED/(USED) BY OPERATING ACTIVITIES $ (25,187) $ 30,396 $ 5,957 $ 7,475 $ 18,641 ----------- -------- ---------- ---------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (2,349) (8,859) (11,208) Proceeds from sale of properties 798 798 (Increase)/decrease in investment and advances (820) (5,889) 12,025 5,316 Decrease in short-term investments 1,982 1,982 Other (2,599) (2,599) ----------- -------- ---------- ---------- ----------- NET CASH (USED)/PROVIDED BY INVESTING ACTIVITIES (820) (2,349) (14,567) 12,025 (5,711) ----------- -------- ---------- ---------- ----------- CASH FLOW FROM FINANCING ACTIVITIES Dividends to Stockholders (2,443) (3,959) 3,959 (2,443) Increase in short-term debt 22,569 22,569 Proceeds from long-term debt 3,321 3,321 Repayment of long-term debt (10,000) (4,067) (14,067) Other 31,747 (28,491) 20,120 (23,459) (83) ----------- -------- ---------- ---------- ----------- NET CASH PROVIDED/(USED) BY FINANCING ACTIVITIES 19,304 (28,491) 37,984 (19,500) 9,297 ----------- -------- ---------- ---------- ----------- Effect of exchange rate changes on Cash and cash equivalents (4,780) (4,780) (Decrease)/increase in cash and cash equivalents (6,703) (444) 24,594 17,447 Cash and cash equivalents, beginning of period 16,262 3,080 150,926 170,268 ----------- -------- ---------- ---------- ----------- Cash and cash equivalents, end of Period $ 9,559 $ 2,636 $ 175,520 $ 0 $ 187,715 =========== ========= ========== ========== ===========
14
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW DATA (In Thousands of Dollars) Three Months Ended March 26,1999 GUARANTOR NON-GUARANTOR FWC SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED --- ------------ ------------ ------------ ------------ NET CASH (USED)/PROVIDED BY OPERATING ACTIVITIES $ (4,726) $ (36,613) $ 8,538 $ 3,865 $ (28,936) ------------- -------------- ------------ ------------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (123) (1,985) (30,627) (32,735) Proceeds from sale of properties 396 396 Decrease in investment and advances 1,629 10,329 173 12,131 Decrease in short-term investments 10,505 10,505 Other (4,385) (4,385) ------------- -------------- ------------ ------------- ----------- NET CASH PROVIDED/(USED) BY INVESTING ACTIVITIES 1,506 (1,985) (13,782) 173 (14,088) ------------- -------------- ------------ ------------- ----------- CASH FLOW FROM FINANCING ACTIVITIES Dividends to Stockholders (8,548) (8,548) Issuance of trust preferred securities 169,178 169,178 Increase/(decrease) in short-term debt 4,300 (7,007) (2,707) Proceeds from long-term debt 20,000 2,444 22,444 Repayment of long-term debt (140,000) (5,893) (145,893) Other 120,830 34,988 (152,640) (4,038) (860) ----------- ------------ ----------- ------------ ------------ NET CASH PROVIDED/(USED) BY FINANCING ACTIVITIES (3,418) 34,988 6,082 (4,038) 33,614 ----------- ------------ ----------- ------------ ------------ Effect of exchange rate changes on Cash and cash equivalents (4,154) (4,154) Decrease in cash and cash equivalents (6,638) (3,610) (3,316) (13,564) Cash and cash equivalents, beginning of period 13,720 6,552 159,796 180,068 ----------- ------------ --------- ------------- ------------ Cash and cash equivalents, end of Period $ 7,082 $ 2,942 $ 156,480 $ 0 $ 166,504 =========== ============ ========= ============= ============
15 13. The Corporation owns a non-controlling equity interest in three cogeneration projects; two of which are located in Italy and one in Chile. In addition, the Corporation owns an equity interest in a hydrogen producing plant in Venezuela. Following is summarized financial information for the Corporation's equity affiliates combined, as well as the Corporation's interest in the affiliates.
MARCH 31, 2000 DECEMBER 31, 1999 -------------- ----------------- BALANCE SHEET DATA: Current assets $ 101,389 $ 104,084 Other assets (primarily buildings and equipment) 480,882 506,620 Current liabilities 33,911 48,562 Other liabilities (primarily long- term debt) 390,082 410,199 Net assets 158,279 151,943 INCOME STATEMENT DATA FOR THREE MONTHS: Total revenues $ 52,213 Income before income taxes 14,163 Net earnings 9,367
As of March 31, 2000, the Corporation's share of the net earnings and investment in the equity affiliates totaled $5,446 and $113,212, respectively. Dividends of $900 were received during the first three months of 2000. The Corporation has guaranteed certain performance obligations of such projects. The Corporation's obligations under such guarantees are approximately $1,500 per year for the three projects. The Corporation has provided a $10,000 debt service reserve letter of credit providing liquidity for debt service payments. No amount has been drawn under the letter of credit. The earnings results for the three months of 1999 were $9,287 for these operations. 14. The Corporation's continuing business strategy is to maintain focus on its core business segments in Engineering and Construction and Energy Equipment. In order to remain competitive in these segments while improving margins, the Corporation has been reducing costs through staff reductions and closure of some smaller operating facilities. These changes include the reduction of approximately 1,600 permanent positions, including 500 overhead and other support positions from its worldwide workforce of 11,000. In addition, approximately 800 agency personnel within the Engineering & Construction Group have been reduced. The positions eliminated included engineering, clerical, support staff and manufacturing personnel. In connection with this cost realignment plan, the Corporation recorded charges in the third quarter of 1999 of approximately $37,600 ($27,600 after-tax). The pre-tax charge by group was as follows: $19,600 for Engineering and Construction, $2,500 for Energy Equipment and $15,500 for Corporate and Financial. Approximately $22,600 represents employee severance costs and related benefits and the balance represents asset write-downs and provisions for closing some offices. The cost realignment plan, when complete, should result in substantial cost savings. It is anticipated that the plan will be complete prior to the end of the second quarter 2000. The cash remaining to be spent is approximately $1,900. 16 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (IN MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) The following is Management's Discussion and Analysis of certain significant factors that have affected the financial condition and results of operations of the Corporation for the periods indicated below. This discussion and analysis should be read in conjunction with the 1999 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2000. RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTH ENDED MARCH 26, 1999 CONSOLIDATED DATA THREE MONTHS ENDED ------------------ MARCH 31, 2000 MARCH 26, 1999 -------------- -------------- Backlog $6,290.6 $7,050.1 ======== ======== New orders $1,191.9 $ 910.5 ======== ======== Revenues $ 836.3 $1,018.0 ======== ======== Net earnings $ 8.4 $ 15.4 ======== ======== The table below reflects the Corporation's results excluding the impact of losses related to the Robbins Facility. MARCH 31, 2000 MARCH 26, 1999 -------------- -------------- EARNINGS BEFORE INCOME TAXES - ---------------------------- AS REPORTED $ 13.7 $ 21.5 ----------- Adjustment for Robbins --- 1.9 ------ -------- As adjusted $ 13.7 $ 23.4 ====== ======== NET EARNINGS AS REPORTED $ 8.4 $ 15.4 - ------------------------ Adjustment for Robbins --- 1.2 ------ -------- As adjusted $ 8.4 $ 16.6 ====== ======== The Corporation's consolidated backlog at March 31, 2000 totaled $6,290.6, which represented a decrease of 11% from the amount reported as of March 26, 1999. The dollar amount of backlog is not necessarily indicative of the future earnings of the Corporation related to the performance of such work. The backlog of unfilled orders includes amounts based on signed contracts as well as agreed letters of intent which management has determined are likely to be performed. Although backlog represents only business which is considered firm, cancellations or scope adjustments may occur. Due to factors outside the Corporation's control, such as changes in project schedules, the Corporation cannot predict with certainty the portion of backlog to be performed. Backlog is adjusted to reflect project cancellations, deferrals, sale of subsidiaries and revised project scope and cost. This adjustment for the three months ended March 31, 2000 was $51.5, compared with $96.1 for the three months ended March 26, 1999. Furthermore, the Corporation's future award prospects include several large-scale international projects and, because the large size and uncertain timing of these projects can create variability in the Corporation's contract awards, future award trends are difficult to predict. 17 New orders awarded for the three months ended March 31, 2000 were $1,191.9 compared to $910.5 for the period ended March 26, 1999. Approximately 66% of new orders booked in the three months ended March 31, 2000 were for projects awarded to the Corporation's subsidiaries located outside the United States. Key countries and geographic areas contributing to new orders awarded for the three months ended March 31, 2000 were the United States, Europe and the Middle East. Operating revenues decreased 18% in the three months March 31, 2000 compared to the three months ended March 26, 1999 to $822.0 from $998.8. Gross earnings, which are equal to operating revenues minus the cost of operating revenues, decreased by $5.0 in the three months ended March 31, 2000 as compared with the three months ended March 26, 1999 to $80.5 from $85.5. Selling, general and administrative expenses decreased by 2% in the three months ended March 31, 2000 as compared with the same period in 1999, from $55.2 to $54.1. Other income in the three months ended March 31, 2000 as compared with March 26, 1999 decreased to $14.3 from $19.2. Approximately, $1.5 of this decrease can be attributed to equity earnings of unconsolidated affiliates. Other deductions and dividends on the Trust Preferred Securities for the three months ended March 31, 2000 were $0.9 lower than that reported in the three months ended March 26, 1999. Net earnings for the three months ended March 31, 2000 were $8.4 or $.21 per share diluted compared to a net earning of $15.4 or $.38 diluted per share for the three months ended March 26, 1999. ENGINEERING AND CONSTRUCTION GROUP THREE MONTHS ENDED ------------------ MARCH 31, 2000 MARCH 26, 1999 -------------- -------------- Backlog $4,836.1 $5,631.1 ========= ======== New orders $ 766.9 $ 745.6 ========= ======= Operating revenues $ 608.2 $ 790.5 ========= ======= Gross earnings from operations $ 46.4 $ 48.4 ========= ======= The Engineering and Construction Group ("E&C Group"), had a backlog of $4,836.1 at March 31, 2000, which represented a decrease of $795 from March 26, 1999. New orders booked for the three month period ended March 31, 2000 increased by 3% compared with the period ended March 26, 1999. Operating revenues for the three month period ended March 31, 2000 decreased 23% compared to the three month period ended March 26, 1999. Gross earnings from operations decreased by 4% for the three month period ended March 31, 2000, compared with the corresponding period ended March 26, 1999. The gross earnings for the three month period were lower primarily due to the decrease reported by the United Kingdom subsidiary ($9.3), which was partially offset by an increase in the U.S. subsidiaries. ENERGY EQUIPMENT GROUP THREE MONTHS ENDED ------------------ MARCH 31, 2000 MARCH 26, 1999 -------------- -------------- Backlog $1,581.2 $1,464.0 ======== ======== New orders $ 425.5 $ 169.2 ======== ======== Operating revenues $ 224.4 $ 220.6 ======== ======== Gross earnings from operations $ 33.5 $ 36.6 ======== ======== Commencing in 2000, the Power Systems Group was combined with the Energy Equipment Group. The 1999 data has been reclassified to conform to the 2000 presentation. The Energy Equipment Group had a backlog of $1,581.2 at March 31, 2000, which represented an 8% increase from March 26, 1999, due primarily to higher orders awarded in 2000. Approximately 18% of the Energy Equipment Group's backlog as of March 31, 2000 represents orders from Asia. These orders, which are supported by financing agreements guaranteed by United States and Finland, are for large utility size boilers. New orders booked for the three month period ended March 31, 2000 increased by 151% from corresponding periods in 1999. Operating revenues for the three month period ended March 31, 2000 increased by 2%. Gross earnings from operations decreased by $3.1 for the three month period ended March 31, 2000 compared with the period ended March 26, 1999. FINANCIAL CONDITION Stockholders' equity for the three months ended March 31, 2000 decreased by $6.1, due primarily to changes in the foreign currency translation adjustment of $12.1 and dividends paid of $2.4, offset by earnings of $8.4. During the three months ended March 31, 2000, long-term investments in land, buildings and equipment were $11.2 as compared with $32.7 for the comparable period in 1999. Approximately $5.5 was invested in a waste-to-energy project in Italy during the first three months of 2000. Since December 31, 1999, long-term debt, including current installments and bank loans, increased by $9.7. In the third quarter 1998, a subsidiary of the Corporation entered into a three year agreement with a financial institution whereby the subsidiary would sell an undivided interest in a designated pool of qualified accounts receivable. The agreement contains certain covenants and provides for various events of termination. At March 31, 2000, $50.0 in receivables were sold under the agreement and are therefore not reflected in the accounts receivable - trade balance in the Consolidated Balance Sheet. In the ordinary course of business, the Corporation and its subsidiaries enter into contracts providing for assessment of damages for nonperformance or delays in completion. Suits and claims have been or may be brought against the Corporation by customers alleging deficiencies in either equipment design or plant construction. Based on its knowledge of the facts and circumstances relating to the Corporation's liabilities, if any, and to its insurance coverage, management of the Corporation believes that the disposition of such suits will not result in charges against assets or earnings materially in excess of amounts provided in the accounts. 19 LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents totaled $187.7 at March 31, 2000, an increase of $17.4 from fiscal year end 1999. Short-term investments decreased by $2.0 to $15.1. During the first quarter of fiscal 2000, the Corporation paid $2.4 in dividends to stockholders. Cash provided by operating activities amounted to $18.6. Management of the Corporation believes that cash and cash equivalents of $187.7 and short-term investments of $15.1 at March 31, 2000, combined with cash flows from operating activities, amounts available under its Revolving Credit Agreements and access to third-party financings in the capital markets will be adequate to meet its working capital and liquidity needs for the foreseeable future. During the second quarter of 1998, the Corporation filed a Registration Statement on Form S-3 relating to up to $300.0 of debt, equity, and other securities, $175.0 of which has been issued as of March 31, 2000. The Corporation is reviewing various methods to monetize selected build, own and operate assets and will be concentrating on reducing both corporate and project debt, and improving cash flow. OTHER MATTERS The Corporation and its subsidiaries, along with many other companies, are codefendants in numerous lawsuits pending in the United States. Plaintiffs claim damages for personal injury alleged to have arisen from exposure to or use of asbestos in connection with work performed by the Corporation and its subsidiaries during the 1970s and prior. As of March 31, 2000, there were approximately 83,800 claims pending. In the first quarter of 2000, approximately 13,400 new claims have been filed and approximately 3,200 have been either settled or dismissed without payment. The Corporation has agreements with insurance carriers covering significantly more than a majority of the potential costs relating to these exposures. The Corporation has recorded, with respect to asbestos litigation, an asset relating to probable insurance recoveries and a liability relating to probable losses. These assets and liabilities were estimated based on historical data developed in conjunction with outside experts. Management of the Corporation has carefully considered the financial viability and legal obligations of its insurance carriers and has concluded that except for those insurers that have become or may become insolvent, the insurers will continue to adequately fund claims and defense costs relating to asbestos litigation. In 1997, the United States Supreme Court effectively invalidated New Jersey's long-standing municipal solid waste flow rules and regulations. The immediate effect was to eliminate the guaranteed supply of municipal solid waste to the Camden 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 plant. Those market-based revenues are not expected to be sufficient to service the debt on outstanding bonds, which were issued to construct the plant and to acquire a landfill for Camden County's use. The debt although reflected in the consolidated financial statements of the Corporation has been issued by the Pollution Control Financing Authority of Camden County. This debt is collateralized by pledging certain revenues and assets of the project but not the plant. The Corporation's obligation is to fund the debt to the extent the project generates a positive cash flow. The Corporation has filed suit against certain involved parties seeking among other things, to void the applicable contracts and agreements governing the Camden Project. Pending final outcome of the litigation and the results of legislative initiatives in New Jersey to resolve the issues relating to the debt obligations associated with the Camden Project, management believes that the plant will continue to operate at full capacity while earning sufficient revenues to cover its fees as operator of the plant. However, at this time, management cannot determine the effect of the foregoing on the Camden Project. 20 The ultimate legal and financial liability of the Corporation in respect to all claims, lawsuits and proceedings cannot be estimated with certainty. As additional information concerning the estimates used by the Corporation becomes known, the Corporation reassesses its position both with respect to gain contingencies and accrued liabilities and other potential exposures. Estimates that are particularly sensitive to future change relate to legal matters, which are subject to change as events evolve and as additional information becomes available during the administration and litigation processes. YEAR 2000 PLAN The failure to correct a Year 2000 Problem could have resulted in an interruption in, or a failure of, certain normal activities or operations. Such failures were not expected to have a material adverse affect on the Corporation's results of operations and financial condition. No such affect has been experienced thus far, and none is expected. However, it is possible that interruptions might occur later in the year 2000, so the Corporation remains vigilant and continues to enforce its Business Continuation Plan. Furthermore, although no claims have been asserted against the Corporation or its subsidiaries, it is possible that claims may yet be asserted. Therefore, the Corporation will continue to follow its liability management strategy until it concludes that changes are warranted. Readers are cautioned that forward-looking statements contained in the Year 2000 Statement should be read in conjunction with the Corporation's risk disclosures under the heading: "Safe Harbor Statement". SAFE HARBOR STATEMENT This Management's Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Form 10-Q contain forward-looking statements that are based on management's assumptions, expectations and projections about the various industries within which the Corporation operates. Such forward-looking statements by their nature involve a degree of risk and uncertainty. The Corporation cautions that a variety of factors, including but not limited to the following, could cause business conditions and 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 energy, power and environmental industries, changes in regulatory environment, changes in project schedules, changes in trade, monetary and fiscal policies worldwide, currency fluctuations, outcomes of pending and future litigation, protection and validity of patents and other intellectual property rights and increasing competition by foreign and domestic companies. 21 PART II OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS Under the federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and similar state laws, the current owner or operator of real property and the past owners or operators of real property (if disposal 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 ("off-site facility"). Liability at such off-site facilities is typically allocated among all of the 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. The Corporation currently owns and operates industrial facilities and has also transferred its interests in industrial facilities that it formerly owned or operated. It is likely that as a result of its current or former operations, such facilities have been impacted by hazardous substances. The Corporation is not aware of any conditions at its currently owned facilities in the United States that it expects will cause the Corporation to incur significant costs. The Corporation is aware of potential environmental liabilities at facilities that it acquired in 1995 in Europe, but the Corporation has the benefit of an indemnity from the seller with respect to any required remediation or other environmental violations that it believes will address the costs of any such remediation or other required environmental measures. The Corporation also may receive claims, pursuant to indemnity obligations from owners of recently sold facilities that may require the Corporation to incur costs for investigation and/or remediation. Based on the available information, the Corporation does not believe that such costs will be material. No assurance can be provided that the Corporation will not discover environmental conditions at its currently owned or operated properties, or that additional claims will not be made with respect to formerly owned properties, requiring the Corporation to incur material expenditures to investigate and/or remediate such conditions. The Corporation had been notified that it was a potentially responsible party ("PRP") under CERCLA or similar state laws at three off-site facilities, excluding sites as to which the Corporation has resolved its liability. At each of these sites, the Corporation's liability should be substantially less than the total site remediation costs because the percentage of waste attributable to the Corporation compared to that attributable to all other PRPs is low. The Corporation does not believe that its share of cleanup obligations at any of the three off-site facilities as to which it has received a notice of potential liability will individually exceed $1 million. Several of the Corporation's former subsidiaries associated with a waste-to-energy plant located in the Village of Robbins, Illinois (the "Robbins Facility") received a Complaint for Injunction and Civil Penalties from the State of Illinois, dated April 28, 1998 (amended in July 1998) alleging primarily state air violations at the Robbins Facility (PEOPLE OF THE STATE OF ILLINOIS V. FOSTER WHEELER ROBBINS, INC., filed in Circuit Court of Cook County, Illinois, County Department, Chancery Division). Although the complaint seeks substantial civil penalties for numerous violations of up to $50,000 for each violation, with an additional penalty of $10,000 for each day of each violation, the maximum allowed under the statute, and an injunction against continuing violations, the relevant subsidiaries have reached a staff-level agreement in 22 principle with the state on a Consent Decree that will resolve all violations. The resulting penalty is not expected to be material. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECRUITY HOLDERS (a) DATE OF MEETING --------------- The Annual Meeting of Stockholders of Foster Wheeler Corporation was held on April 28, 2000, at the Hunterdon Hills Playhouse, 88 Route 173 West, Hampton, New Jersey. (b) ELECTION OF DIRECTORS --------------------- DIRECTORS ELECTED FOR WITHHELD ----------------- --- -------- Martha Clark Goss 35,254,794 812,284 John E. Stuart 35,253,518 813,560 Other Directors continuing in office: Eugene D. Atkinson E. James Ferland Louis E. Azzato Constance J. Horner John P. Clancey Joseph J. Melone David J. Farris Richard J. Swift (c) ADDITIONAL MATTERS VOTED UPON ----------------------------- Ratification of the appointment of PricewaterhouseCoopers LLP as Independent Accountants of the Corporation for 2000. For 35,757,166 Against 200,487 Abstain 109,425 Broker non-votes -0- 23 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS -------- EXHIBIT NUMBER EXHIBIT ------ ------- 12-1 Statement of Computation of Consolidated Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Share Dividend Requirements 27 Financial Data Schedule (For the informational purposes of the Securities and Exchange Commission only.) (b) REPORTS ON FORM 8-K --- ------------------- None 24 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 CORPORATION -------------------------- (Registrant) Date: MAY 5, 2000 /S/ RICHARD J. SWIFT --------------- --------------------- Richard J. Swift (Chairman, President and Chief Executive Officer) Date: MAY 5, 2000 /S/ GILLES A. RENAUD --------------- --------------------- Gilles A. Renaud (Senior Vice President and Chief Financial Officer) 25 EX-12 2 COMPUTATION OF CONSOLIDATED RATIO EXHIBIT 12-1 FOSTER WHEELER CORPORATION STATEMENT OF COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES AND COMBINED FIXED CHARGES ($000'S) UNAUDITED 3 MONTHS 2000 ---- EARNINGS: - --------- Net earnings $8,372 Taxes on income 5,317 Total fixed charges 25,681 Capitalized interest (1,475) Capitalized interest amortized 546 Equity earnings of non-consolidated associated companies accounted for by the equity method, net of dividends (4,546) -------- $ 33,895 ======== FIXED CHARGES: - -------------- Interest expense (includes dividend on preferred security of $3,937) $ 19,411 Capitalized interest 1,475 Imputed Interest on non-capitalized lease payment 4,795 -------- $ 25,681 ======== Ratio of Earnings to Fixed Charges 1.32 ======== Note: There were no preferred shares outstanding during the period indicated and, therefore, the consolidated ratio of earnings to fixed charges and combined fixed charges and preferred share dividend requirements would have been the same as the consolidated ratio of earnings to fixed charges and combined fixed charges for the period indicated. EX-27 3 ARTICLE 5 FDS
5 This schedule contains summary of financial information extracted from the condensed consolidated balance sheet and statement of earnings for the three months ended March 31, 2000 and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS MAR-31-2000 JAN-01-2000 MAR-31-2000 187,715 15,071 853,897 0 441,646 1,586,251 998,220 360,792 3,388,951 1,451,443 691,603 175,000 0 40,748 328,994 369,742 822,036 836,296 795,659 795,659 0 0 19,411 13,689 5,317 8,372 0 0 0 8,372 .21 .21
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