-----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, BAJ3Gs+z7/tQHdEnGkWYYRilVrzaUFeNlUaHr2IWBBFTuQ1Lv2cTUoSdb+uMP3KD t/YU9fM5z1hdz1sR5a4M4w== 0000912057-01-007279.txt : 20010308 0000912057-01-007279.hdr.sgml : 20010308 ACCESSION NUMBER: 0000912057-01-007279 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20001229 FILED AS OF DATE: 20010306 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-K SEC ACT: SEC FILE NUMBER: 001-00286 FILM NUMBER: 1561973 BUSINESS ADDRESS: STREET 1: PERRYVILLE CORPORATE PARK STREET 2: SERVICE ROAD EST 173 CITY: CLINTON STATE: NJ ZIP: 08809 BUSINESS PHONE: 9087304090 10-K 1 a2039308z10-k.txt 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 29, 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 of incorporation) (I.R.S. Employer Identification No.) PERRYVILLE CORPORATE PARK, CLINTON, NEW JERSEY 08809-4000 (Address of Principal Executive Offices) (Zip Code) (908) 730-4000 (Registrant's telephone number, including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: FOSTER WHEELER CORPORATION NEW YORK STOCK EXCHANGE COMMON STOCK, $1.00 PAR VALUE FW PREFERRED CAPITAL TRUST I NEW YORK STOCK EXCHANGE 9.00% PREFERRED SECURITIES, SERIES I (Name of Each Exchange on Which (GUARANTEED BY FOSTER WHEELER CORPORATION) Registered) (Title of Class) Securities registered pursuant to Section 12(g) of the Act: NONE ---- Title of Class 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. /X/ Yes / / No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / As of February 23, 2001, 40,711,560 shares of the Registrant's Common Stock, excluding stock held in Treasury, were issued and outstanding, and the aggregate market value of such shares held by nonaffiliates of the Registrant on such date was approximately $490,574,298 (based on the last price on that date of $12.05 per share). List hereunder the following documents if incorporated by reference, and the Part of the Form 10-K into which the document is incorporated: DOCUMENTS INCORPORATED BY REFERENCE List hereunder the following documents if incorporated by reference, and the Part of the Form 10-K into which the document is incorporated: (1) Portions of the Registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on April 23, 2001 are incorporated by reference in Part III of this report. FOSTER WHEELER CORPORATION 2000 Form 10-K Annual Report Table of Contents PART I Item 1. Business 2. Properties 3. Legal Proceedings 4. Submission of Matters to a Vote of Security Holders Executive Officers of the Registrant PART II 5. Market for the Registrant's Common Equity and Related Stockholder Matters 6. Selected Financial Data 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 7A. Quantitative and Qualitative Disclosures about Market Risk 8. Financial Statements and Supplementary Data 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure PART III 10. Directors and Executive Officers of the Registrant 11. Executive Compensation 12. Security Ownership of Certain Beneficial Owners and Management 13. Certain Relationships and Related Transactions PART IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results could differ materially from those projected in the forward-looking statements as a result of the risk factors set forth in this report. 1 PART I ITEM 1. BUSINESS GENERAL DEVELOPMENT OF BUSINESS: Foster Wheeler Corporation was incorporated under the laws of the State of New York in 1900. Executive offices of Foster Wheeler Corporation are at Perryville Corporate Park, Clinton, New Jersey, 08809-4000 (Telephone (908) 730-4000). Foster Wheeler Corporation is essentially a holding company which owns the stock of various subsidiary companies. Except as the context otherwise requires, the terms "Foster Wheeler" or the "Corporation" as used herein include Foster Wheeler Corporation and its subsidiaries. RECENT DEVELOPMENTS On November 28, 2000, the Corporation's board of directors approved a reorganization that will effectively result in the Corporation becoming a Bermuda corporation rather than a New York corporation. The Corporation believes that a significant portion of its business is, and will be, generated from non-U.S. markets. This reorganization will provide financial and other business advantages that are not available under the current corporate structure. By aligning the structure with the business operations, it should promote operational efficiencies, including improvements in global cash management. The reorganization should provide a more favorable corporate and regulatory structure for expansion of current and future business opportunities. The reorganization may also facilitate access to financing sources outside of the United States and broaden the investor base by making the stock more attractive to non-U.S. investors. In addition, the reorganization should provide greater flexibility over the long-term in seeking to improve the worldwide effective tax rate. Pursuant to the plan of reorganization, Foster Wheeler Corporation shareholders will receive the equivalent number of shares in the newly formed company, Foster Wheeler Ltd., organized in Bermuda. The shares will be listed on the New York Stock Exchange under "FWC", the same symbol under which the Corporation's common stock is currently listed. The proposed reorganization is subject to certain conditions to closing, including two-thirds approval by the shareholders. Additional information relating to the reorganization can be obtained by referring to the Corporation's Form S-4/A Registration No. 333-52468. Commencing in fiscal 2000, the Power Systems Group has been combined with the Energy Equipment Group, where the rest of the Corporation's power expertise resides. All prior year's financial data have been adjusted to reflect this change. This unit will no longer develop waste-to-energy facilities in the United States. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS: See Note 20 to Financial Statements in this Form 10-K. NARRATIVE DESCRIPTION OF BUSINESS: The business of the Corporation and its subsidiaries falls within two business groups. The ENGINEERING AND CONSTRUCTION GROUP ("E&C Group") designs, engineers and constructs petroleum, chemical, petrochemical and alternative-fuels facilities and related infrastructure, including power generation and distribution facilities, production terminals, pollution control equipment and water treatment facilities and process plants for the production of fine chemicals, pharmaceuticals, dyestuffs, fragrances, flavors, food additives and vitamins. Also, the E&C Group provides a broad range of environmental remediation services, together with related technical, design and regulatory services. The ENERGY EQUIPMENT GROUP designs, manufactures and erects steam generating and auxiliary equipment for power stations and industrial markets worldwide. Steam generating equipment includes a full range of fluidized bed and conventional boilers firing coal, oil, gas, biomass and other municipal solid waste, waste wood and low-Btu gases. Auxiliary equipment includes feedwater heaters, steam condensers, heat-recovery equipment and low-NOx burners. Site services related to these products encompass plant erection, maintenance engineering, plant upgrading and life 2 extension, and plant repowering. This Group also provides research analysis and experimental work in fluid dynamics, heat transfer, combustion and fuel technology, materials engineering and solids mechanics. In addition, this Group builds, owns and operates cogeneration, independent power production and resource recovery facilities as well as facilities for the process and petrochemical industries. It generates revenues from construction and operating activities pursuant to long-term sale of project outputs (i.e., electricity and steam contracts), operating and maintenance agreements and from returns on its equity positions. This Group refinances its investment in selected projects from time to time when such refinancing will result in risk mitigation, a lower effective financing cost or a potential increased return on investment. Foster Wheeler markets its services and products through a staff of sales and marketing personnel and through a network of sales representatives. The Corporation's businesses are not seasonal nor are they dependent on a limited group of customers. No single customer accounted for 10 percent or more of Foster Wheeler's consolidated revenues in fiscal 2000 or 1999; however, in 1998 one customer, Oman LNG, accounted for approximately 11%. The materials used in Foster Wheeler's manufacturing and construction operations are obtained from both domestic and foreign sources. Materials, which consist mainly of steel products and manufactured items, are heavily dependent on foreign sources, particularly for overseas projects. Generally, lead-time for delivery of materials does not constitute a problem. Foster Wheeler owns and licenses patents, trademarks and know-how which are used in each of its industry groups. Such licenses, patents and trademarks are of varying durations. Neither business group is materially dependent upon any particular or related patents, trademarks or licenses. Foster Wheeler has licensed companies throughout the world to manufacture marine and stationary steam generators and related equipment and certain of its other products. Principal licensees are located in Finland, Japan, the Netherlands, Italy, Spain, Portugal, Norway and England. For the most part, Foster Wheeler's products are custom designed and manufactured and are not produced for inventory. Customers often make a down payment at the time a contract is executed and continue to make progress payments until the contract is completed and the work has been accepted as meeting contract guarantees. For the most part, contracts are usually awarded on the basis of price, delivery schedule, performance and service. Foster Wheeler had unfilled orders as of December 29, 2000 of $6,142,300,000 as compared to unfilled orders as of December 31, 1999 of $6,050,500,000. The elapsed time from the award of a contract to completion of performance may be up to four years. The dollar amount of unfilled orders is not necessarily indicative of the future earnings of the Corporation related to the performance of such work. Although unfilled orders represent only business which is considered firm, there can be no assurance that cancellations or scope adjustments will not occur. Due to additional factors outside of the Corporation's control, such as changes in project schedules, the Corporation cannot predict with certainty the portion of unfilled orders that will not be performed. The unfilled orders by business group as of December 29, 2000 and December 31, 1999 are as follows:
2000 1999 ---- ---- Engineering and Construction.................................... $ 4,534,600,000 $ 4,741,500,000 Energy Equipment................................................ 1,727,400,000 1,445,800,000 Corporate and Financial Services (including eliminations)....... (119,700,000) (136,800,000) ---------------- --------------- $ 6,142,300,000 $ 6,050,500,000 ================ ===============
3 Unfilled orders of projects at December 29, 2000 and December 31, 1999 consisted of:
2000 1999 ---- ---- Signed contracts................................................. $ 5,619,300,000 $ 5,644,600,000 Letters of intent and contracts awarded but not finalized........ 523,000,000 405,900,000 --------------- --------------- $ 6,142,300,000 $ 6,050,500,000 =============== ===============
Many companies compete in the Engineering and Construction segment of Foster Wheeler's business. Management of the Corporation estimates, based on industry publications, that Foster Wheeler is among the ten largest of the many large and small companies engaged in the design and construction of petroleum refineries and chemical plants. In the manufacture of refinery and chemical plant equipment, neither Foster Wheeler nor any other single company contributes a large percentage of the total volume of such business. On an international basis, many companies compete in the Energy Equipment segment of Foster Wheeler's business. Management of the Corporation estimates, based on industrial surveys and trade association materials, that it is among the ten largest suppliers of utility and industrial-sized steam generating and auxiliary equipment in the world and among the three largest in the United States. Foster Wheeler is continually engaged in research and development efforts both in performance and analytical services on current projects and in development of new products and processes. During 2000, 1999 and 1998, approximately $12,000,000, $12,500,000 and $14,100,000 respectively, was spent on Foster Wheeler sponsored research activities. During the same periods, approximately $27,600,000, $27,100,000 and $32,700,000, respectively, was spent on research activities that were paid for by customers of Foster Wheeler. Foster Wheeler and its domestic subsidiaries are subject to certain Federal, State and Local environmental, occupational health and product safety laws. Foster Wheeler believes all its operations are in material compliance with such laws and does not anticipate any material capital expenditures or adverse effect on earnings or cash flows in maintaining compliance with such laws. Foster Wheeler had 10,170 full-time employees on December 29, 2000. Following is a tabulation of the number of full-time employees of Foster Wheeler in each of its business groups on the dates indicated:
December 29, December 31, December 25, 2000 1999 1998 ------ ------ ------ Engineering and Construction ............ 7,007 7,160 7,515 Energy Equipment ........................ 3,141 3,035 3,575 Corporate and Financial Services ........ 22 25 30 ------ ------ ------ 10,170 10,220 11,120 ====== ====== ======
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES: See Note 20 to Financial Statements in this Form 10-K. 4 ITEM 2. PROPERTIES
COMPANY AND (BUSINESS SEGMENT*) BUILDING LEASE LOCATION USE LAND AREA SQUARE FEET EXPIRES - -------- --- --------- ----------- ------- FOSTER WHEELER CORPORATION (CF) New York City, New York Executive offices -- 2,270 2009 Livingston, New Jersey General office & engineering 31.0 acres 288,000(1) Union Township, New Jersey Undeveloped 203.8 acres -- General office & engineering 29.4 acres 294,000 General office & engineering 21.0 acres 292,000 2003 Storage and reproduction facilities 10.8 acres 30,400 Livingston, New Jersey Research center 6.7 acres 51,355 Bedminster, New Jersey Office 10.7 acres 135,000(1)(2) Bridgewater, New Jersey Undeveloped 21.9 acres --(3) FOSTER WHEELER ENERGY CORPORATION (EE) Dansville, New York Manufacturing & offices 82.4 acres 513,786 FOSTER WHEELER USA CORPORATION (EC) Houston, Texas General offices -- 143,192 2001/2003 FOSTER WHEELER IBERIA, S.A. Madrid, Spain (EC)/(EE) Office & engineering 5.5 acres 110,000 2015 Tarragona, Spain (EE) Manufacturing & office 12.0 acres 77,794 FOSTER WHEELER FRANCE, S.A. (EC) Paris, France Office & engineering -- 109,029 2006 Paris, France Archive storage space -- 12,985 2006 FOSTER WHEELER INTERNATIONAL CORP. (THAILAND BRANCH) (EC) Sriracha, Thailand Office & engineering -- 28,000 2003 FOSTER WHEELER CONSTRUCTORS, INC. (EC) McGregor, Texas Storage facilities 15.0 acres 24,000 Mobile (Chickasaw), Storage and 6.5 acres 125,000 2001 Alabama fabrication FOSTER WHEELER LIMITED (ENGLAND) (EC) Glasgow, Scotland Office & engineering 2.3 acres 28,798 Reading, England Office & engineering -- 84,123(1) 2002/2009 5 COMPANY AND (BUSINESS SEGMENT*) BUILDING LEASE LOCATION USE LAND AREA SQUARE FEET EXPIRES - -------- --- --------- ----------- ------- Reading, England Office & engineering 14.0 acres 365,521 2024 Reading, England Undeveloped 12.0 acres -- Teeside, England Office & engineering -- 18,100 2001/2014 FOSTER WHEELER LIMITED (CANADA) (EE) Niagara-On-The-Lake, Ontario Office & engineering -- 39,684 2003 FOSTER WHEELER ANDINA, S.A. (EC) Bogota, Colombia Office & engineering 2.3 acres 26,000 FOSTER WHEELER POWER MACHINERY COMPANY LIMITED (EE) Xinhui, Guangdong, China Manufacturing & office 29.2 acres 272,537(4) 2045 FOSTER WHEELER ITALIANA, S.P.A. (EC) Milan, Italy (via S. Caboto,1) Office & engineering -- 161,400 2007 Milan, Italy (via S. Caboto,7) Office & engineering -- 133,000 2002 BIRLESIK INSAAT VE MUHENDISLIK A.S. (BIMAS) (EC) Istanbul, Turkey Engineering & office -- 26,000 2002 FOSTER WHEELER EASTERN PRIVATE LIMITED (EC) Singapore Office & engineering -- 29,196 2002 FOSTER WHEELER ENVIRONMENTAL CORPORATION (EC) Atlanta, Georgia General offices -- 15,623 2004 Bothell, Washington General offices -- 29,650 2005 Boston, Massachusetts General offices -- 19,460 2005 Lakewood, Colorado General offices -- 19,140 2005 Langhorne, Pennsylvania General offices -- 18,202 2005 Morris Plains, New Jersey General offices -- 55,931 2005 Oak Ridge, Tennessee General offices -- 17,970 2004 Richland, Washington General offices -- 10,404 2002 Santa Ana, California General offices -- 12,660 2005 FOSTER WHEELER POWER SYSTEMS, INC. (EE) Martinez, California Cogeneration plant 6.4 acres -- 6 COMPANY AND (BUSINESS SEGMENT*) BUILDING LEASE LOCATION USE LAND AREA SQUARE FEET EXPIRES - -------- --- --------- ----------- ------- Mt. Carmel, Pennsylvania Cogeneration plant 105.0 acres -- 2010 Charleston, South Carolina Waste-to-energy plant 18.0 acres -- 2010 Hudson Falls, New York Waste-to-energy plant 11.2 acres -- Camden, New Jersey Waste-to-energy plant 18.0 acres -- 2011 Talcahuano, Chile Cogeneration plant-facility site 21.0 acres -- 2028 Hydrogen plant-facility site 1.4 acres 2013 Paraquana, Venezuela Hydrogen plant Facility site 3.9 acres -- 2013 FOSTER WHEELER ENERGIA OY (EE) Varkhaus, Finland Manufacturing & offices 22.0 acres 366,527 Karhula, Finland Research center 12.8 acres 15,100 2095 Office and laboratory 57,986 2095 Kaarina, Finland Office -- 24,762 2002 Helsinki, Finland Office -- 13,904 2005 Kouvola, Finland Undeveloped 1.9 acres -- -- Office 1.5 acres -- 2032 Norrkoping, Sweden Manufacturing & offices -- 26,000 2002 FOSTER WHEELER ENERGY FAKOP LTD. (EE) Sosnowiec, Poland Manufacturing & offices 31.7 acres 544,600(5)
*Designation of Business Segments: EC - Engineering and Construction EE - Energy Equipment CF - Corporate & Financial Services (1) Portion or entire facility leased or subleased. (2) 50% ownership interest. (3) 75% ownership interest. (4) 52% ownership interest. (5) 51% ownership interest. With the exception of the New York office of the Corporation, locations of less than 10,000 square feet are not listed. Except as noted above, the properties set forth are owned in fee. All or part of listed locations may be leased or subleased to other affiliates. All properties are in good condition and adequate for their intended use. 7 ITEM 3. LEGAL PROCEEDINGS The Corporation and its subsidiaries, along with many other companies, are codefendants in numerous asbestos related 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 1970's and prior. For additional information, see Note 16 to the Financial Statements in this Form 10-K. 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 material cost. The Corporation is aware of potential environmental liabilities at facilities that it acquired in Europe, but the Corporation has the benefit of an indemnity from the Seller of such facilities 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, that would require the Corporation to incur material expenditures to investigate and/or remediate such conditions. The Corporation has been notified that it was a potentially responsible party ("PRP") under CERCLA or similar state laws at three off-site facilities. 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 $1.0 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 act violations at the Robbins Facility (PEOPLE OF THE STATE OF ILLINOIS V. FOSTER WHEELER ROBBINS, INC. filed in the Circuit Court of Cook County, Illinois, County Department, Chancery Division). The United States Environmental Protection Agency commenced a related enforcement action at approximately the same time. (EPA-5-98-IL-12 and EPA-5-98-IL-13). Although the actions seek substantial civil penalties for numerous violations of up to $50,000 for each violation with additional penalty of $10,000 for each day of each violation, the maximum allowed under the statute, and an injunction against continuing violations, the former subsidiaries have a staff-level agreement in principle with the government on a Consent Decree that will resolve all violations. The Corporation's liability if any, is not expected to be material. 8 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS NOT APPLICABLE EXECUTIVE OFFICERS OF THE REGISTRANT In accordance with General Instruction G (3) of Form 10-K information regarding executive officers is included in PART I. The executive officers of Foster Wheeler, with the exception of Gilles A. Renaud, have each held executive positions with Foster Wheeler or its subsidiaries for more than the past five years.
NAME AGE POSITION ---- --- -------- Richard J. Swift 56 Chairman, President and Chief Executive Officer Henry E. Bartoli 54 Senior Vice President - Energy Equipment Group John C. Blythe 53 Senior Vice President - Engineering and Construction Group Gilles A. Renaud 54 Senior Vice President and Chief Financial Officer Thomas R. O'Brien 62 General Counsel and Senior Vice President - Corporate Affairs Lisa Fries Gardner 44 Vice President, Secretary and Chief Compliance Officer Robert D. Iseman 53 Vice President and Treasurer James E. Schessler 55 Vice President - Human Resources and Administration
Mr. Gilles A. Renaud was elected Senior Vice President and Chief Financial Officer of the Corporation effective March 27, 2000. Prior to assuming this position with the Corporation, Mr. Renaud was Vice President and Treasurer of United Technologies Corporation from July 1996 to March 2000. From September 1987 to June 1996, Mr. Renaud was Vice President and Chief Financial Officer of Carrier Corporation, a subsidiary of United Technologies Corporation. Each officer holds office for a term running until the Board of Directors meeting following the Annual Meeting of Stockholders and until his/her successor is elected and qualified. There are no family relationships between the officers listed above. There are no arrangements or understandings between any of the listed officers and any other person, pursuant to which he/she was elected as an officer. 9 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Corporation's common stock is traded on the New York Stock Exchange. The number of stockholders of record as of December 29, 2000 was 6,464.
THREE MONTHS ENDED ----------------------------------------------- 2000 MARCH 31 JUNE 30 SEPT. 29 DEC. 29 - ---- -------- ------- -------- ------- Cash dividends per share.................................. .06 .06 .06 .06 Stock prices: High................................................... 9.50 9.4375 8.8125 8.4375 Low.................................................... 5.1875 5.8125 6.25 3.9375 THREE MONTHS ENDED ----------------------------------------------- 1999 MARCH 26 JUNE 25 SEPT. 24 DEC. 31 - ---- -------- ------- -------- ------- Cash dividends per share.................................. .21 .21 .06 .06 Stock prices: High................................................... 14.625 16.0625 14.6875 12.1875 Low.................................................... 11.6875 12.0625 11.50 7.875
10 ITEM 6. SELECTED FINANCIAL DATA COMPARATIVE FINANCIAL STATISTICS (In Thousands, Except per Share Amounts)
2000 1999 1998** 1997** 1996** ---- ---- ------ ------ ------ Revenues .............................................. $3,969,355 $3,944,074 $4,596,992 $4,172,015 $4,040,611 Provision for special charges ......................... - - - - 24,000 Earnings/(loss) before income taxes ................... 56,023 (190,526) (1) 47,789 (2) 19,516 (3)(4) 126,866 (5) Provision/(benefit) for income taxes .................. 16,529 (46,891) (1) 79,295 (2) 13,892 (3)(4) 44,626 (5) Net earnings/(loss) ................................... 39,494 (143,635) (1) (31,506)(2) 5,624 (3)(4) 82,240 (5) Earnings/(loss) per share: Basic .............................................. $ .97 $ (3.53) $ (.77) $ .14 $ 2.03 Diluted ............................................ $ .97 $ (3.53) $ (.77) $ .14 $ 2.02 Shares outstanding: Basic: Weighted average number of shares outstanding ......... 40,798 40,742 40,729 40,677 40,592 Diluted: Effect of stock options ......................... 7 * * 127 167 ---------- ---------- ---------- ---------- ---------- Total diluted ...................................... 40,805 40,742 40,729 40,804 40,759 ========== ========== ========== ========== ========== Current assets......................................... $1,622,976 $1,615,096 $1,672,842 $1,545,271 $1,762,448 Current liabilities.................................... 1,454,603 1,471,552 1,491,666 1,412,302 1,441,894 Working capital........................................ 168,373 143,544 181,176 132,969 320,554 Land, buildings and equipment (net).................... 495,034 648,199 676,786 621,336 638,736 Total assets........................................... 3,477,528 3,438,109 3,322,301 3,186,731 3,403,587 Bank loans............................................. 103,479 63,378 107,051 53,748 52,278 Long-term borrowings (including current installments): Corporate and other debt ........................... 306,188 372,921 541,173 445,836 441,399 Project debt ....................................... 274,993 349,501 314,303 281,360 289,721 Cash dividends per share of common stock .............. $ .24 $ .54 $ .84 $.835 $.81 Other data: Unfilled orders, end of year .......................... $6,142,347 $6,050,525 $7,411,907 $7,184,628 $7,135,413 New orders booked ..................................... 4,480,000 3,623,202 5,269,398 5,063,940 5,570,333
(1) Includes in 1999 a provision of $37,600 ($27,600 after tax) for cost realignment and a charge totaling $244,600 ($173,900 after tax) of which $214,000 relates to the Robbins Facility write-down and $30,600 relates to the current year operations of the Robbins Facility. (2) Includes in 1998 a charge for the Robbins Facility of $72,800 ($47,300 after tax) of which $47,000 relates to the Robbins Facility write-down and $25,800 relates to the current year operations and a provision of $61,300 for an increase in the income tax valuation allowance for a total after-tax charge of $108,600. (3) Includes in 1997 a net charge of $50,900 ($37,400 after tax) consisting of the following pretax items: Gain on sale of Glitsch International, Inc.'s operations $56,400; provision for reorganization costs of the Energy Equipment Group $32,000; write-downs of long-lived assets $6,500; contract write-downs $24,000 (Engineering & Construction Group) and $30,000 (Energy Equipment Group); realignment of the Engineering & Construction Group's European operations $14,800. (4) Includes in 1997 an operating loss for the Robbins Facility of $38,900 ($25,300 after tax). (5) Includes in 1996 a provision of $24,000 ($15,600 after tax) for asbestos claims. * The effect of the stock options was not included in the calculation of diluted earnings per share as these options were antidilutive due to the 1999 and 1998 losses. ** Reclassified to conform to 1999 presentation. 11 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Millions of Dollars, Except per Share Amounts) This Management's Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Annual Report 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. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto. THREE YEARS ENDED DECEMBER 29, 2000 RESULTS OF OPERATIONS
CONSOLIDATED DATA 2000 1999 1998 ---- ---- ---- Unfilled orders............................... $6,142.3 $6,050.5 $7,411.9 New orders.................................... 4,480.0 3,623.2 5,269.4 Revenues...................................... 3,969.4 3,944.1 4,597.0 Net earnings/(loss)........................... 39.5 (143.6) (31.5) Earnings/(loss) per share: Basic and diluted........................ .97 (3.53) (.77)
The transactions related to the Robbins Facility had a significant adverse impact on the Corporation's results of operations in 1999 and 1998. The table below reflects the Corporation's results excluding the impact of losses related to the Robbins Facility and the 1999 cost realignment plans:
2000 1999 1998 ------- ------- ------- EARNINGS/(LOSS) BEFORE INCOME TAXES AS REPORTED ................ $ 56.0 $(190.5) $ 47.8 Adjusted for: Robbins .......................... -- 244.6 72.8 Cost realignment plan ............ -- 37.6 -- ------- ------- ------- As adjusted ........................... $ 56.0 $ 91.7 $ 120.6 ======= ======= ======= NET EARNINGS/(LOSS) AS REPORTED ....... $ 39.5 $(143.6) $ (31.5) Adjusted for: Robbins .......................... -- 173.9 * 108.6 * Cost realignment plan ............ -- 27.6 -- ------- ------- ------- As adjusted ........................... $ 39.5 $ 57.9 $ 77.1 ======= ======= =======
* Includes in 1999 and 1998 a tax valuation allowance of $15.0 and $61.3, respectively. 12 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, during 1999 and 2000 the Corporation reduced costs through staff reduction and closure of some smaller operating facilities. These changes included the reduction of approximately 1,600 permanent positions, including 500 overhead and other support positions from its worldwide workforce. In addition, approximately 800 agency personnel within the Engineering & Construction Group were eliminated during the course of fiscal 1999. 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 $37.6 ($27.6 after-tax). The pre-tax charge by group was as follows: $19.6 for Engineering & Construction, $2.5 for Energy Equipment and $15.5 for Corporate and Financial Services. Approximately $22.6 represented employee severance costs. The related benefits and the balance represented asset write-downs and provisions for closing some offices. The plan was completed prior to the end of the first quarter 2000, with no additional charges being recorded. On October 21, 1999, the Corporation announced it had reached an agreement (the "Robbins Agreement") with the holders of approximately 80% of the principal amount of bonds issued in connection with the financing of the Robbins Facility. Under the Robbins Agreement, the $320.0 aggregate principal amount of existing bonds were exchanged for $273.0 aggregate principal amount of new bonds on February 3, 2000, $113.0 of which (the "Corporation-supported Robbins Bonds") will be funded by payments from the Corporation and the balance of which (the "Non-recourse Robbins Bonds") will be non-recourse to the Corporation. In addition, pursuant to the Robbins Agreement the Corporation would exit from its operating role in respect to the Robbins Facility. Specific elements of the Robbins Agreement were as follows: - - The new Corporation-supported Robbins Bonds consist of (a) $95.0 aggregate principal amount of 7.25% amortizing terms bonds, $17.8 of which mature on October 15, 2009 and $77.2 of which mature on October 15, 2024 (see Note 9 for sinking fund requirements) and (b) $18.0 aggregate principal amount of 7% accretion bonds maturing on October 15, 2009 with all interest to be paid at maturity (the "1999D Bonds"); - - The Corporation agreed to operate the Robbins Facility for the benefit of the bondholders until the earlier of the sale of the Robbins Facility or October 15, 2001, on a full-cost reimbursable basis with no operational or performance guarantees; - - Any remaining obligations of the Corporation under a $55.0 additional credit support facility in respect of the existing bonds were terminated; - - The Corporation would continue to prosecute certain pending litigation (the "Retail Rate Litigation") against various officials of the State of Illinois; (See Note 16 to Financial Statements, "Litigation and Uncertainties," below) and - - The Corporation would cooperate with the bondholders in seeking a new owner/operator for the Robbins Facility. On December 1, 1999, three special purpose subsidiaries of the Corporation commenced reorganization proceedings under Chapter 11 of the Bankruptcy Code in order to effectuate the terms of the Robbins Agreement. On January 21, 2000, these subsidiaries' plan of reorganization was confirmed, and the plan was consummated on February 3, 2000. On August 8, 2000, the Corporation initiated the final phase of its exit from the Robbins Facility. As part of the Robbins Agreement, the Corporation had agreed to operate the Robbins Facility subject to being reimbursed for all costs of operation. Such reimbursement did not occur and, therefore, pursuant to the terms of the Robbins Agreement, the Corporation on October 10, 2000, completed the final phase of its exit from the project. The Corporation had been administering the project companies through a Delaware business trust, which owns the project on behalf of the bondholders. As a result of its exit from the project, the Corporation is no longer administering the project companies. 13 In the fourth quarter of 1999, the Corporation recorded a pre-tax charge of approximately $214.0. This charge fully recognized all existing obligations of the Corporation related to the Robbins Facility, including (a) pre-paid lease expense of $45.6, (b) $20.4 of outstanding bonds issued in conjunction with the equity financing of the Robbins Facility and (c) transaction expenses of $4.5. The liability for all of the Corporation-supported bonds were recorded at the net present value of $133.4 with $113.0 being subordinated obligations and $20.4 as senior Corporation obligations. The Corporation is considered to be the primary obligor on these bonds. The ongoing legal expenses relating to the Retail Rate Litigation (See Note 16 to Financial Statements, "Litigation and Uncertainties,") are expensed as incurred. In the third quarter of 1998 the Corporation recorded a charge of $47.0 for asset impairments relating to the Robbins Facility, which was included in the $72.8 losses for 1998. The Corporation's consolidated unfilled orders at the end of fiscal 2000 were $6,142.3, an increase of $91.8 over the amount reported for the end of fiscal 1999 of $6,050.5, which in turn represented a decrease of $1,361.4 from unfilled orders at the end of fiscal 1998 of $7,411.9. The dollar amount of unfilled orders is not necessarily indicative of the future earnings of the Corporation related to the performance of such work. Although unfilled orders represent only business which is considered firm, there can be no assurance that cancellations or scope adjustments will not occur. Due to additional factors outside of the Corporation's control, such as changes in project schedules, the Corporation cannot predict with certainty the portion of unfilled orders which may not be performed. Unfilled orders have been adjusted to reflect project cancellations, deferrals, and revised project scopes and costs. The net reduction in unfilled orders from project adjustments and cancellations for fiscal 2000 was $279.9, compared with $880.1 in fiscal 1999 and $638.1 in fiscal 1998. The large size and uncertain timing of projects can create variability in the Corporation's contract awards, and therefore, future award trends are difficult to predict. New orders awarded for fiscal 2000 ($4,480.0) were 24% higher than new orders awarded in fiscal 1999 ($3,623.2), which in turn were 31% lower than new orders awarded in fiscal 1998 ($5,269.4). A total of 63% of new orders in fiscal 2000 were for projects awarded to the Corporation's subsidiaries located outside of the United States as compared to 55% in fiscal 1999 and 52% in fiscal 1998. Key geographic regions outside of the United States contributing to new orders awarded in fiscal 2000 were Europe, Asia and the Middle East. Operating revenues of $3,891.4 in fiscal 2000 were approximately the same as 1999. The 1999 revenues of $3,867.0 were a decrease of $669.8 compared to fiscal 1998. Gross earnings from operations, which are equal to operating revenues minus the cost of operating revenues ("gross earnings") increased $28.4 or 9.5% in fiscal 2000 as compared to fiscal 1999, to $326.2 from $297.8, which was a decrease of approximately 20% from fiscal 1998. The gross earnings in 1999 were reduced by (1) Robbins operating loss of $23.5 and (2) cost realignment of $17.5. Excluding these two adjustments, gross earnings decreased by $12.6 (3.7%) in 2000 compared to 1999. Selling, general and administrative expenses decreased $16.2, or 6.9% in fiscal 2000 as compared to fiscal 1999 to $219.4 from $235.6, which in turn represented a decrease of $17.8 from expenses reported in fiscal 1998 of $253.4. The decrease for 2000 can be attributed primarily to the cost reduction plan of 1999 as well as lower proposal costs in both the Engineering and Construction and Energy Equipment Groups. The decrease in 1999 was mainly a result of lower proposal costs for the Energy Equipment Group. Other income in fiscal 2000 of $78.0 was approximately the same as fiscal 1999. Other income of $77.0 for fiscal 1999 was an increase of $16.8 from 1998. The increase in 1999 can be attributed to a gain on the sale of a building in San Diego, California offset by lower interest income. The increase in 2000 relates to various items including equity earnings from unconsolidated subsidiaries. Other deductions in fiscal 2000 increased by $11.5 from fiscal 1999. The primary reason for the increase was higher interest expense of $12.5; a provision for liability resulting from a decision by a French court on a legal matter regarding a former French subsidiary for which Foster Wheeler indemnified the purchaser of $6.0; write-off of notes receivables on previous sale of a subsidiary of $2.7 and additional goodwill amortization of $2.2. In 1999 there was a reserve for cost reduction included in other deductions of $15.0, which was non-recurring in 2000. 14 The tax provision for fiscal 2000 was $16.5 on earnings before tax of $56.0. The low effective tax rate of 29.5% was primarily due to non-recurring one time foreign tax benefits. The tax benefit for fiscal 1999 was $46.9 on losses before income taxes of $190.5. The low effective tax rate benefit of 24.6% was primarily due to an increase of $15.0 in the valuation allowance of which $10.0 related to federal income taxes and $5.0 to state income taxes. The high effective tax rate for fiscal 1998 of 165.9% was related to an increase in the valuation allowance of $61.3. Both the 1999 and 1998 valuation allowance adjustments were caused by losses related to the Robbins Facility and their impact on the realizability of tax benefits in the future. The net earnings for fiscal 2000 were $39.5 or $.97 diluted per share. The net loss for fiscal 1999 was $(143.6) or $(3.53) diluted per share, which included net losses for the Robbins Facility of $173.9 (write-down - $154.0 and operating losses - $19.9) and cost realignment of $27.6. The net loss for fiscal 1998 was $(31.5) or $(.77) diluted per share, which included net losses for Robbins Facility of $47.3 and the related increase in the tax valuation allowance of $61.3. ENGINEERING AND CONSTRUCTION GROUP
2000 1999 1998 ---- ---- ---- Unfilled orders..................... $4,534.6 $4,741.5 $5,867.8 New orders.......................... 3,094.6 2,752.2 4,329.1 Operating revenues.................. 2,933.1 2,975.5 3,422.3 Gross earnings from operations...... 184.7 189.6 206.3
The E&C Group's unfilled orders at the end of fiscal 2000 decreased 4% from the end of fiscal 1999, which in turn represented a 19% decrease from unfilled orders at the end of fiscal 1998. New orders awarded to the E&C Group in fiscal 2000 increased by 12.4% compared to fiscal 1999. The most significant increases were in the United Kingdom and Italy. The 1999 new orders were a decrease of 36% from 1998. The E&C Group reported a slight decrease in operating revenues in fiscal 2000 as compared to fiscal 1999, which in turn represented a 13% decrease from fiscal 1998. The decrease in 1999 operating revenues was due to decreased activities in the United States, United Kingdom and Italy offset by an increase in France. The Corporation includes pass-through costs on cost-plus contracts, which are customer-reimbursable materials, equipment and subcontractor costs when the Corporation determines that it is responsible for the engineering specification, procurement and management of such cost components on behalf of the customer. The percentage relationship between pass-through costs of contracts and revenues will fluctuate from year to year depending on a variety of factors including the mix of business in the years compared. The E&C Group's gross earnings decreased $4.9 in fiscal 2000 as compared with fiscal 1999 or 2.6%, which in turn represented a decrease of 8% from gross earnings in fiscal 1998. The decrease in 2000 is primarily due to activities in the United Kingdom and Continental Europe. The decrease in fiscal 1999 can be attributed to the cost realignment plan of $14.6. Without the cost realignment plan, gross earnings would have been $204.2, a decrease from fiscal 1998 of $2.1. ENERGY EQUIPMENT GROUP (EXCLUDING THE ROBBINS FACILITY) Commencing in fiscal 2000, the Power Systems Group has been combined with the Energy Equipment Group, where the rest of the Corporation's power expertise resides. The prior years financial data have been adjusted to reflect this change. This unit will no longer develop waste-to-energy facilities in the United States. As previously disclosed, the Corporation has reviewed various methods of monetizing selected power systems facilities. Based on current economic conditions, the Management concluded that it would continue to operate the facilities in the normal course of business. Management has reviewed these facilities for impairment on an undiscounted cash flow 15 basis and determined that no adjustment to the carrying amounts is required. However, if conditions were to change, monetization might again become a viable option. It is possible that the amounts realized could differ materially from the balances in the financial statements.
2000 1999 1998 ---- ---- ---- Unfilled orders..................... $1,727.4 $1,445.8 $1,572.6 New orders.......................... 1,468.7 1,045.9 1,024.2 Operating revenues.................. 1,057.4 982.5 1,240.8 Gross earnings from operations...... 139.7 129.7 183.5
The Energy Equipment Group's unfilled orders increased $281.6 at the end of fiscal 2000, representing a 19.5% increase from fiscal 1999, which in turn represented an 8% decrease from unfilled orders at the end of fiscal 1998. New orders for fiscal 2000 increased $422.8 or 40.4% from fiscal 1999. This increase can be attributed to demand for Heat Recovery Steam Generators (HRSG) and Selective Catalytic Reduction (SCR) units as well as its Circulating Fluidized Bed (CFB) boilers. The increase in new orders for fiscal 1999 represented a change of 2.1% from 1998. Operating revenues for fiscal 2000 increased $74.9 or 7.6% from fiscal 1999, which relates to the increase in new orders. The decrease of $258.3 in fiscal 1999 versus fiscal 1998 can be attributed to the lower number of contract awards in 1998. The gross earnings from operations increased $10.0 or 7.7% from fiscal 1999, which is in line with the increase in operating revenues. The decrease of $53.8 or 29.3% in fiscal 1999 as compared to fiscal 1998 was due primarily to (1) cost realignment plan of $2.5, (2) lower revenues resulting in reduced gross earnings in 1999 of approximately $30.0 and (3) a provision of approximately $10.0 relating to several projects. RESEARCH AND DEVELOPMENT The Corporation is continually engaged in research and development efforts, both in performance and analytical services on current projects and in development of new products and processes. During fiscal years 2000, 1999 and 1998, approximately $12.0, $12.5 and $14.1, respectively, were spent on Corporation-sponsored research activities. During the same periods, approximately $27.6, $27.1 and $32.7, respectively, were spent on customer-sponsored research activities that were paid for by customers of the Corporation. FINANCIAL CONDITION Stockholders' equity at the end of fiscal 2000 was $364.1 as compared to $375.9 at the end of fiscal 1999 and $572.1 at the end of fiscal 1998. The decrease for 2000 relates to a change in the accumulated translation adjustment of $20.0; a net minimum pension liability adjustment of $21.5 included in Other Comprehensive Loss and dividend payments of $9.8 which were offset by earnings for the year of $39.5. The decrease for 1999 of $196.2 was due to the net loss of $143.6 due primarily to losses in respect of the Robbins Facility and cost realignment, the payment of dividends of $22.0 and a change in the accumulated translation adjustment of $30.9. For fiscal 2000, 1999 and 1998, investments in land, buildings and equipment were $45.8, $128.1 and $133.8, respectively. The reduction in 2000 primarily relates to lower activity in build, own and operate plants, which is in line with the previously announced repositioning plan for these types of plants. Capital expenditures will continue to be directed primarily toward strengthening and supporting the Corporation's core businesses. Corporate and other debt, special purpose project debt and bank loans net of cash and short term investments decreased by $109 during the fiscal year. This was accomplished primarily by the sale of a 50 percent interest in a waste-to-energy facility in Italy. Also, the Corporation entered into a sale/leaseback of an office building in Spain; gross 16 proceeds were approximately $21.0. In 1999, the Corporation issued Preferred Trust Securities the proceeds of which were used to reduce the Corporation's indebtedness under its senior credit facilities. In 1999, the Corporation entered into a sale/leaseback of an office building in the United Kingdom; gross proceeds were $126.8. In 1998, the Corporation made the final payment of $22.0 on 8.58% unsecured promissory private placement notes. In the third quarter of 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. Under the terms of the agreement, new receivables are added to the pool as collections reduce previously sold accounts receivable. The credit risk of uncollectible accounts receivable has been transferred to the purchaser. The Corporation services, administers and collects the receivables on behalf of the purchaser. Fees payable to the purchaser under this agreement are equivalent to rates afforded high quality commercial paper issuers plus certain administrative expenses and are included in other deductions, in the Consolidated Statement of Earnings and Comprehensive Income. The agreement contains certain covenants and provides for various events of termination. As of December 29, 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. The Corporation anticipates that this agreement will be renewed at the end of its term. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents amounted to $191.9 at December 29, 2000, an increase of $21.6 from the prior fiscal year-end. Short-term investments decreased $15.2 to $1.8 at the end of 2000. During fiscal 2000, the Corporation paid $9.8 in stockholder dividends, repaid long-term debt by $88.2, off-set by proceeds of short and long-term debt of $88.0 and funded other operating requirements. During fiscal 2000, cash flows used for operating activities totaled $16.7 while in fiscal 1999, cash flows used by operating activities amounted to $5.6. The increase of $11.1 is primarily due to a higher use of cash by the Engineering and Construction Group-$60.0 and the Corporate and Financial Services Group-$90.9 offset by the change in the Energy Equipment Group of $139.8. During fiscal 1999, cash flows used for operating activities totaled $5.6, while in fiscal 1998, cash flows used by operating activities amounted to $59.1. This reduction of $53.5 was primarily due to increased cash provided or lower uses by the Energy Equipment Group-$125.0 and Corporate and Financial Services-$58.1 offset by higher uses of cash by the Engineering and Construction Group-$129.6. The Corporation's working capital varies from period to period depending on the mix, stage of completion and commercial terms and conditions of the Corporation's contracts. Working capital needs have increased during the past several years as a result of the Corporation's satisfying requests from its customers for more favorable payment terms under contracts. Such requests generally include reduced advance payments and less favorable payment schedules to the Corporation. The Corporation's contracts in process and inventories increased by $44.3 during 2000 from $420.0 at December 31, 1999, to $464.3 at December 29, 2000. This increase can be attributed to contract activity in the Engineering and Construction Group of $40.3 and $7.5 in the Energy Equipment Group. In addition, accounts receivable decreased by $29.7 in fiscal 2000 to $889.2 from $918.9 in fiscal 1999. As at December 29, 2000, the Corporation could issue up to $125.0 of securities under an existing shelf registration statement of borrowing authority. On January 13, 1999 FW Preferred Capital Trust I, a Delaware Business Trust issued $175.0 in Preferred Trust Securities. These Preferred Trust 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, beginning April 15, 1999. The maturity date is January 15, 2029. Foster Wheeler can redeem these Preferred Trust Securities on or after January 15, 2004. The proceeds were used to reduce borrowing under the Corporation's Revolving Credit Agreements. See Note 8 to this Form 10-K for further information regarding the Corporation's Revolving Credit Agreements. Management of the Corporation believes that cash and cash equivalents on hand and short-term investments of $193.7 at December 29, 2000 when combined with cash flows from operating activities, amounts available under its Revolving Credit Agreements and access to third-party financing in capital markets will be adequate to meet its working capital and liquidity needs for the foreseeable future. 17 The Corporation's liquidity has been negatively impacted by a number of claims to customers relating to projects that have been affected by a substantial scope of work changes and other adverse factors. The net exposure associated with these claims, which has accumulated over a period of time, approximates $175.0 at December 29, 2000. While the future collections of these claims will increase cash inflows, the timing of collection of such claims and recoverability is subject to uncertainty as described in Note 1 to the Financial Statements in this Form 10-K. In the fourth quarter, a subsidiary of the Corporation sold 50 percent of its interest in Lomellina Energia S.r.l., a waste-to-energy facility located in northern Italy. Including debt deconsolidation, the transaction reduced the Company's net debt by approximately $130.0. In the third quarter of 2000, a transaction was completed relating to the Petropower project in Chile, which was essentially a monetization of the projected future cash flows of the project. The transaction resulted in an increase of approximately $42.5 of limited recourse debt and a similar decrease of corporate debt. The Corporation is reviewing various methods of monetizing certain assets in order to concentrate on reducing both corporate and project debt and improving cash flow. OTHER MATTERS 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. 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 materially in excess of amounts provided in the accounts. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (MILLIONS OF DOLLARS) Management's strategy for managing transaction risks associated with currency fluctuations is for each operating unit to enter into derivative transactions, such as forward foreign exchange agreements, to hedge its exposure on contracts into the operating unit's functional currency. The Corporation utilizes all such financial instruments solely for hedging. Corporate policy prohibits the speculative use of such instruments. The Corporation is exposed to credit loss in the event of nonperformance by the counter parties to such financial instruments. To minimize this risk, the Corporation enters into these financial instruments with financial institutions that are primarily rated A or better by Standard & Poor's or A2 or better by Moody's. Management believes that the geographical diversity of the Corporation's operations mitigates the effects of the currency translation exposure. No significant unhedged assets or liabilities are maintained outside the functional currency of the operating subsidiaries. Accordingly, translation exposure is not hedged. Interest Rate Risk - The Corporation is exposed to changes in interest rates primarily as a result of its borrowings under its Revolving Credit Agreements and its variable rate project debt. If market rates average 1% more in 2001 than in 2000, the Corporation's interest expense would increase, and income before tax would decrease by approximately $3.8. This amount has been determined by considering the impact of the hypothetical interest rates on the Corporation's variable-rate balances as of December 29, 2000. In the event of a significant change in interest rates, management would likely take action to further mitigate its exposure to the change. However, due to uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in the Corporation's financial structure. 18 Foreign Currency Risk - The Corporation has significant overseas operations. Generally, all significant activities of the overseas affiliates are recorded in their functional currency, which is generally the currency of the country of domicile of the affiliate. This results in a mitigation of the potential impact of earnings fluctuations as a result of changes in foreign exchange rates. In addition in order to further mitigate risks associated with foreign currency fluctuations, the affiliates of the Corporation enter into foreign currency exchange contracts to hedge the exposed contract value back to their functional currency. As of year end 2000, the Corporation had $504.8 of foreign exchange contracts outstanding. These contracts mature between 2001 and 2003. Approximately 20% of these contracts require a domestic subsidiary to sell Japanese yen and receive U.S. dollars. The remaining contracts have been established by various international subsidiaries to sell a variety of currencies and either receive their respective functional currency or other currencies for which they have payment obligations to third parties. The Corporation does not enter into foreign currency contracts for speculative purposes. INFLATION The effect of inflation on the Corporation's revenues and earnings is minimal. Although a majority of the Corporation's revenues are made under long-term contracts, the selling prices of such contracts, established for deliveries in the future, generally reflect estimated costs to complete in these future periods. In addition, some contracts provide for price adjustments through escalation clauses. ACCOUNTING MATTERS The Financial Accounting Standards Board released in June 1998, Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities", and in June, 2000 SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment of FASB Statement No. 133". These statements address the accounting for derivative instruments including certain derivative instruments embedded in other contracts and for hedging activities. The Corporation has concluded that the adoption of new statements will not have a significant impact on the results of operations or the financial position of the Corporation. The effective date of SFAS No. 133 had been deferred by the issuance of SFAS 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 was deferred by SAB No. 101B until the fourth quarter of 2000. These statements related to the timing of revenue recognition and did not have an impact on the recording of revenue by the Corporation. The Financial Accounting Standards Board released in March 2000, FASB interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation, and Interpretation of APB Opinion No. 25". This interpretation relates to the application and diversity in practice of accounting for stock issued to employees. The Corporation does not anticipate an impact from the application of this interpretation. The Financial Accounting Standards Board released in September 2000, Statement of Financial Accounting Standards (SFAS) No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities". This Statement revises the standard for accounting for securities and other transfers of financial assets and collateral. The new accounting requirements are effective for transfers occurring after March 31, 2001. However, the extended disclosures about securitizations and collateral are effective for fiscal years ending after December 15, 2000. The Corporation does not anticipate an impact from the implementation of this standard. 19 SAFE HARBOR STATEMENT This Management's Discussion and Analysis of Financial Condition and Results of Operations and other sections of the Report on Form 10-K 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 intercontinental 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. For additional information about the Corporation, see the Corporation's reports on Forms 10-K, 10-Q and 8-K that were filed with the Securities and Exchange Commission from time to time. 20 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements PAGES ----- Report of Independent Accountants............................................. 22 Consolidated Statement of Earnings and Comprehensive Income for each of the three years in the period ended December 29, 2000................ 23 Consolidated Balance Sheet at December 29, 2000 and December 31, 1999....................................................... 24 Consolidated Statement of Changes in Stockholders' Equity for each of the three years in the period ended December 29, 2000................ 25 Consolidated Statement of Cash Flows for each of the three years in the period ended December 29, 2000...................................... 26 Notes to Consolidated Financial Statements.................................... 27-54
21 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Foster Wheeler Corporation: In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income and comprehensive earnings, of shareholders' equity and of cash flows present fairly, in all material respects, the financial position of Foster Wheeler Corporation and its subsidiaries at December 29, 2000 and December 31, 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 29, 2000 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Corporation's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Florham Park, New Jersey January 30, 2001, except for Note 8 for which the date is March 5, 2001 22 FOSTER WHEELER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS AND COMPREHENSIVE INCOME (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000 1999 1998 ----------- ----------- ----------- REVENUES: Operating revenues ..................................... $ 3,891,361 $ 3,867,030 $ 4,536,765 Other income (including interest: 2000-$15,737;1999-$13,576; 1998-$19,455) ........... 77,994 77,044 60,227 ----------- ----------- ----------- Total Revenues ..................................... 3,969,355 3,944,074 4,596,992 ----------- ----------- ----------- COSTS AND EXPENSES: Cost of operating revenues ............................. 3,565,147 3,569,196 4,166,257 Selling, general and administrative expenses ........... 219,353 235,549 253,401 Other deductions (including interest: 2000-$67,504;1999- $55,032;1998-$62,535) .............................. 109,225 97,686 79,969 Robbins Facility write-down ............................ -- 214,000 47,014 Minority interest ...................................... 3,857 2,988 2,562 Dividends on preferred security of subsidiary trust .... 15,750 15,181 -- ----------- ----------- ----------- Total Costs and Expenses ........................... 3,913,332 4,134,600 4,549,203 ----------- ----------- ----------- Earnings/(loss) before income taxes ......................... 56,023 (190,526) 47,789 Provision/(benefit) for income taxes ........................ 16,529 (46,891) 79,295 ----------- ----------- ----------- Net earnings/(loss) ......................................... 39,494 (143,635) (31,506) Other comprehensive (loss)/income Foreign currency translation adjustment ................ (19,988) (30,870) 2,538 Minimum pension liability adjustment net of $12,000 tax benefit ......................... (21,500) -- -- ----------- ----------- ----------- Comprehensive loss ..................................... $ (1,994) $ (174,505) $ (28,968) =========== =========== =========== Earnings/(loss) per share: Basic .................................................. $ .97 $ (3.53) $ (.77) =========== =========== =========== Diluted ................................................ $ .97 $ (3.53) $ (.77) =========== =========== =========== Shares outstanding: Basic: Weighted average number of shares outstanding ...... 40,798 40,742 40,729 Diluted: Effect of stock options ............................ 7 * * ----------- ----------- ----------- Total diluted .......................................... 40,805 40,742 40,729 =========== =========== ===========
* The effect of the stock options was not included in the calculation of diluted earnings per share as these options were antidilutive in 1999 and 1998. See notes to financial statements. 23 FOSTER WHEELER CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 29, 2000 DECEMBER 31, 1999 ----------------- ----------------- ASSETS CURRENT ASSETS: Cash and cash equivalents .................................. $ 191,893 $ 170,268 Short-term investments ..................................... 1,816 17,053 Accounts and notes receivable: Trade .................................................. 699,965 739,469 Other .................................................. 189,201 179,429 Contracts in process ....................................... 453,309 408,431 Inventories ................................................ 11,020 11,602 Prepaid, deferred and refundable income taxes .............. 50,316 61,531 Prepaid expenses ........................................... 25,456 27,313 ----------- ----------- Total current assets ................................... 1,622,976 1,615,096 ----------- ----------- Land, buildings and equipment ................................... 865,349 1,006,016 Less accumulated depreciation ................................... 370,315 357,817 ----------- ----------- Net book value ......................................... 495,034 648,199 ----------- ----------- Notes and accounts receivable - long-term ....................... 76,238 95,526 Investment and advances ......................................... 120,551 108,655 Intangible assets, net .......................................... 288,135 301,494 Prepaid pension cost and benefits ............................... 189,261 199,955 Other, including insurance recoveries ........................... 588,474 404,313 Deferred income taxes ........................................... 96,859 64,871 ----------- ----------- TOTAL ASSETS ........................................... $ 3,477,528 $ 3,438,109 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current installments on long-term debt ..................... $ 19,876 $ 19,668 Bank loans ................................................. 103,479 63,378 Accounts payable ........................................... 405,707 385,012 Accrued expenses ........................................... 302,808 296,584 Estimated costs to complete long-term contracts ............ 521,277 610,023 Advance payments by customers .............................. 62,602 42,801 Income taxes ............................................... 38,854 54,086 ----------- ----------- Total current liabilities .............................. 1,454,603 1,471,552 ----------- ----------- Corporate and other debt less current installments .............. 306,001 372,847 Special-purpose project debt less current installments .......... 255,304 329,907 Deferred income taxes ........................................... 15,334 12,874 Postretirement and other employee benefits other than pensions .. 159,667 163,536 Other long-term liabilities and minority interest ............... 637,190 424,815 Subordinated Robbins Facility exit funding obligations .......... 110,340 111,715 Mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable interest debentures ................................................. 175,000 175,000 ----------- ----------- TOTAL LIABILITIES ...................................... 3,113,439 3,062,246 ----------- ----------- STOCKHOLDERS' EQUITY: Preferred Stock Authorized 1,500,000 shares, no par value - none outstanding Common Stock $1.00 par value; authorized 160,000,000 shares; issued: 2000 and 1999-40,747,668 ............................... 40,748 40,748 Paid-in capital ................................................. 200,963 201,043 Retained earnings ............................................... 241,250 211,529 Accumulated other comprehensive loss ............................ (118,707) (77,219) ----------- ----------- 364,254 376,101 Less cost of treasury stock (shares: 2000-24,616; 1999-16,781) .. 165 238 ----------- ----------- TOTAL STOCKHOLDERS' EQUITY ................................. 364,089 375,863 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............................................ $ 3,477,528 $ 3,438,109 =========== ===========
See notes to financial statements. 24 FOSTER WHEELER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000 1999 1998 --------- --------- --------- COMMON STOCK Balance at beginning of year ........................ $ 40,748 $ 40,748 $ 40,746 Sold under stock options: (shares: 1998-2,000) ...... -- -- 2 --------- --------- --------- Balance at end of year .............................. 40,748 40,748 40,748 --------- --------- --------- PAID-IN CAPITAL Balance at beginning of year ........................ 201,043 201,158 201,105 Stock option exercise price less par value .......... -- -- 49 Excess of cost of treasury stock or common stock issued under incentive and other plans over market value (80) (115) -- Tax benefits related to stock options ............... -- -- 4 --------- --------- --------- Balance at end of year .............................. 200,963 201,043 201,158 --------- --------- --------- RETAINED EARNINGS Balance at beginning of year ........................ 211,529 377,147 442,848 Net earnings/(loss) for the year .................... 39,494 (143,635) (31,506) Cash dividends paid: Common (per share outstanding: 2000-$.24; 1999-$.54; 1998-$.84) (9,773) (21,983) (34,195) --------- --------- --------- Balance at end of year .............................. 241,250 211,529 377,147 --------- --------- --------- ACCUMULATED OTHER COMPREHENSIVE LOSS Balance at beginning of year ........................ (77,219) (46,349) (48,887) Change in accumulated translation adjustment during the year ............................ (19,988) (30,870) 2,538 Minimum pension liability, net of $12,000 tax benefit .................................... (21,500) -- -- --------- --------- --------- Balance at end of year .............................. (118,707) (77,219) (46,349) --------- --------- --------- TREASURY STOCK Balance at beginning of year ........................ 238 586 295 Common stock acquired for Treasury: (shares: 2000- 28,391; 1999-71,000; 1998-20,000) ........... 154 860 291 Shares issued under incentive and other plans (shares: 2000-20,556; 1999-85,023) ......... (227) (1,208) -- --------- --------- --------- Balance at end of year .............................. 165 238 586 --------- --------- --------- TOTAL STOCKHOLDERS' EQUITY ............................... $ 364,089 $ 375,863 $ 572,118 ========= ========= =========
See notes to financial statements. 25 FOSTER WHEELER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (IN THOUSANDS OF DOLLARS)
2000 1999 1998 * --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings/(loss) ........................................ $ 39,494 $(143,635) $ (31,506) Adjustments to reconcile net earnings/(loss) to cash flows from operating activities: Depreciation and amortization ........................... 57,716 60,448 59,994 Noncurrent deferred tax ................................. (2,666) (84,597) 59,424 Gain on sale of land, building and equipment ............ (14,843) (5,824) (1,525) Equity earnings, net of dividends ....................... (8,882) (11,002) (7,869) Robbins Resource Recovery Facility charge ............... -- 214,000 47,014 Other noncash items ..................................... (5,702) 6,382 (10,278) Changes in assets and liabilities: Receivables ............................................. (7,665) (132,264) (48,440) Sales of receivables .................................... -- 11,600 38,400 Contracts in process and inventories .................... (64,938) 44,251 (51,979) Accounts payable and accrued expenses ................... 35,841 (15,317) 9,281 Estimated costs to complete long-term contracts ......... (54,500) 77,402 (29,681) Advance payments by customers ........................... 19,082 (11,334) (45,413) Income taxes ............................................ (17,613) (18,890) (16,145) Other assets and liabilities ............................ 7,932 3,160 (30,366) --------- --------- --------- Net cash (used) by operating activities ................. (16,744) (5,620) (59,089) --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures .................................... (45,807) (128,086) (133,754) Proceeds from sale of properties ........................ 56,703 142,569 2,235 Decrease in investments and advances .................... 12,122 1,893 27,351 Decrease in short-term investments ...................... 15,230 43,923 34,267 Partnership distribution ................................ (2,599) (4,385) (4,256) --------- --------- --------- Net cash provided/(used) by investing activities ........ 35,649 55,914 (74,157) --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Dividends to common stockholders ........................ (9,773) (21,983) (34,195) Repurchase of common stock .............................. (154) (860) (291) Proceeds from the exercise of stock options ............. -- -- 51 Increase/(decrease) in short-term debt .................. 44,876 (37,254) 48,429 Mandatorily redeemable preferred securities of subsidiary trust holding solely junior subordinated deferrable interest debentures ................. -- 169,178 -- Proceeds from long-term debt ............................ 43,168 56,797 178,022 Repayment of long-term debt ............................. (88,151) (209,868) (48,677) --------- --------- --------- Net cash (used)/provided by financing activities ........ (10,034) (43,990) 143,339 --------- --------- --------- Effect of exchange rate changes on cash and cash equivalents 12,754 (16,104) 2,558 --------- --------- --------- INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ............................................. 21,625 (9,800) 12,651 Cash and cash equivalents at beginning of year ............. 170,268 180,068 167,417 --------- --------- --------- CASH AND CASH EQUIVALENTS AT END OF YEAR ................... $ 191,893 $ 170,268 $ 180,068 ========= ========= ========= Cash paid during the year for: Interest (net of amount capitalized) .................... $ 69,551 $ 58,799 $ 47,286 Income taxes ............................................ $ 33,551 $ 30,526 $ 27,694
See notes to financial statements. * Reclassified to conform to 1999 presentation, see Note 1. 26 FOSTER WHEELER CORPORATION NOTES TO FINANCIAL STATEMENTS (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include the accounts of Foster Wheeler Corporation and all significant domestic and foreign subsidiary companies. All significant intercompany transactions and balances have been eliminated. The Corporation's fiscal year is the 52- or 53-week annual accounting period ending the last Friday in December for domestic operations and December 31 for foreign operations. For domestic operations, the years 2000 and 1998 included 52 weeks while the year 1999 included 53 weeks. In 1999, the Corporation reflected its investment in a joint venture in Chile on the equity method of accounting. The December 1998 consolidated statement of cash flows has been reclassified to conform to the 1999 presentation. This change had no impact on the December 1998 consolidated statement of earnings and comprehensive income. In addition, the 1998 statement of earnings and comprehensive income has been reclassified to conform to the 1999 presentation of the Robbins Facility write-down. USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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. As of fiscal year end 2000 and 1999, costs of approximately $175,000 and $120,000, respectively, were included in assets, primarily in receivables and contracts in process, representing amounts expected to be realized from claims to customers. These claims have been recognized in accordance with the AICPA's Statement of Position 81-1, "Accounting for Performance of Construction - Type and Certain Production - Type Contracts". This Statement requires that it be probable that the claim will result in additional contract revenue and the amount can be reliably estimated. It is possible that the amounts realized could differ materially from the balances included in the financial statements. Management believes that claim recoveries will not have a material effect on the Corporation's financial position or result of operations. REVENUE RECOGNITION ON LONG-TERM CONTRACTS - The Engineering and Construction Group records profits on long-term contracts on a percentage-of-completion basis on the cost to cost method. Contracts in process are valued at cost plus accrued profits less earned revenues and progress payments on uncompleted contracts. Contracts of the Engineering and Construction Group are generally considered substantially complete when engineering is completed and/or field construction is completed. The Corporation includes pass-through revenue and costs on cost-plus contracts, which are customer-reimbursable materials, equipment and subcontractor costs when the Corporation determines that it is responsible for the engineering specification, procurement and management of such cost components on behalf of the customer. The Energy Equipment Group primarily records profits on long-term contracts on a percentage-of-completion basis determined on a variation of the efforts-expended and the cost-to-cost methods, which include multiyear contracts that require significant engineering efforts and multiple delivery units. These methods are periodically subject to physical verification of the actual progress towards completion. Contracts of the Energy Equipment Group are generally considered substantially complete when manufacturing and/or field erection is completed. 27 The Corporation has numerous contracts that are in various stages of completion. Such contracts require estimates to determine the appropriate cost and revenue recognition. The Corporation has a substantial history of making reasonably dependable estimates of the extent of progress towards completion, contract revenues and contract costs. However, current estimates may be revised as additional information becomes available. If estimates of costs to complete long-term contracts indicate a loss, provision is made currently for the total loss anticipated. The elapsed time from award of a contract to completion of performance may be up to four years. Certain special-purpose subsidiaries in the Energy Equipment Group are reimbursed by customers for their costs, including amounts related to principal repayments of non-recourse project debt, for building and operating certain facilities over the lives of the non-cancelable service contracts. The Corporation records revenues relating to debt repayment obligations on these contracts on a straight-line basis over the lives of the service contracts, and records depreciation of the facilities on a straight-line basis over the estimated useful lives of the facilities, after consideration of the estimated residual value. CASH AND CASH EQUIVALENTS - Cash and cash equivalents include highly liquid short-term investments purchased with original maturities of three months or less. SHORT-TERM INVESTMENTS - Short-term investments consist primarily of bonds of foreign governments and are classified as available for sale under Financial Accounting Standards Board Statement No. 115 "Accounting for Certain Investments in Debt and Equity Securities". Realized gains and losses from sales are based on the specific identification method. As of the year ended 2000 and 1999, unrealized gains and losses were immaterial. The proceeds from sales of short-term investments for 2000, 1999 and 1998 were $15,000, $15,000, and $40,000, respectively. The (loss)/gain on sales for the years ended 2000, 1999 and 1998 were $600, $(250) and $5,000, respectively. TRADE ACCOUNTS RECEIVABLE - In accordance with terms of long-term contracts, certain percentages of billings are withheld by customers until completion and acceptance of the contracts. Final payments of all such amounts withheld, which might not be received within a one-year period, are indicated in Note 3. In conformity with industry practice, however, the full amount of accounts receivable, including such amounts withheld, has been included in current assets. LAND, BUILDINGS AND EQUIPMENT - Depreciation is computed on a straight-line basis using composite estimated lives ranging from 10 to 50 years for buildings and from 3 to 35 years for equipment. Expenditures for maintenance and repairs are charged to operations. Renewals and betterments are capitalized. Upon retirement or other disposition of fixed assets, the cost and related accumulated depreciation are removed from the accounts and the resulting gains or losses are reflected in earnings. INVESTMENTS AND ADVANCES - The Corporation uses the equity method of accounting for investment ownership of between 20% and 50% in affiliates unless significant economic or political considerations indicate that the cost method is appropriate. Investment ownership of less than 20% in affiliates is carried at cost. Currently, all of the Corporation's significant investments in affiliates are recorded using the equity method. INCOME TAXES - Deferred income taxes are provided on a liability method whereby deferred tax assets/liabilities are established for the difference between the financial reporting and income tax basis of assets and liabilities, as well as operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Investment tax credits are accounted for by the flow-through method whereby they reduce income taxes currently payable and the provision for income taxes in the period the assets giving rise to such credits are placed in service. To the extent such credits are not currently utilized on the Corporation's tax return, deferred tax assets, subject to considerations about the need for a valuation allowance, are recognized for the carryforward amounts. 28 Provision is made for Federal income taxes which may be payable on foreign subsidiary earnings to the extent that the Corporation anticipates they will be remitted. Unremitted earnings of foreign subsidiaries, which have been, or are intended to be, permanently reinvested (and for which no Federal income tax has been provided) aggregated $324,400 at December 29, 2000. It is not practicable to estimate the additional tax that would be incurred, if any, if these amounts were repatriated. FOREIGN CURRENCY TRANSLATION - Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at year-end exchange rates and income and expenses and cash flows at monthly weighted average rates. Foreign currency transaction gains for 2000, 1999 and 1998 were approximately $6,100, $4,100 and $1,600, respectively ($4,000, $2,700 and $1,000 net of taxes). The Corporation enters into foreign exchange contracts in its management of foreign currency exposures. Realized and unrealized gains and losses on contracts that qualify as designated hedges are deferred. Amounts receivable or payable under foreign exchange hedges are recognized as deferred gains or losses, and are included in either contracts in process or estimated costs to complete long-term contracts. The Corporation utilizes foreign exchange contracts solely for hedging purposes. Corporate policy prohibits the speculative use of financial instruments. INVENTORIES - Inventories, principally materials and supplies, are stated at lower of cost or market, determined primarily on the average cost method. INTANGIBLE ASSETS - Intangible assets for 2000 and 1999 consist principally of the excess of cost over the fair value of net assets acquired (goodwill) ($208,892 and $218,010), trademarks ($52,158 and $54,349) and patents ($27,085 and $29,135), respectively. These assets are being amortized on a straight-line basis over periods of 10 to 40 years. The Corporation periodically evaluates goodwill on a separate operating unit basis to assess recoverability, and impairments, if any, are recognized in earnings. In the event facts and circumstances indicate that the carrying amount of goodwill associated with an investment is impaired, the Corporation reduces the carrying amount to an amount representing the estimated undiscounted future cash flows before interest to be generated by the operation. EARNINGS PER SHARE - 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. On April 26, 1999, the Corporation adopted a Directors Deferred 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. For the year ended December 29, 2000 and December 31, 1999, 53,443 and 34,832 share units, repectively, were credited in participants' accounts and are included in the calculation of basic earnings per share. 2. RESEARCH AND DEVELOPMENT For the years 2000, 1999 and 1998, approximately $12,000, $12,500 and $14,100, respectively, were spent on Corporation-sponsored research activities. During the same periods, approximately $27,600, $27,100 and $32,700, respectively, were spent on customer-sponsored research activities, which were paid by customers of the Corporation. 29 3. ACCOUNTS AND NOTES RECEIVABLE The following tabulation shows the components of trade accounts and notes receivable:
December 29, December 31, 2000 1999 -------- -------- From long-term contracts: Amounts billed due within one year . $418,285 $433,970 -------- -------- Retention: Billed: Estimated to be due in: 2000 ............................ -- 38,615 2001 ............................ 71,912 29,670 2002 ............................ 27,573 13,611 2003 ............................ 41,079 11,714 2004 ............................ 8,270 2,478 -------- -------- Total billed .................... 148,834 96,088 -------- -------- Unbilled: Estimated to be due in: 2000 ............................ -- 179,603 2001 ............................ 93,158 883 2002 ............................ 12,459 -- -------- -------- Total unbilled .................. 105,617 180,486 -------- -------- Total retentions ................ 254,451 276,574 -------- -------- Total receivables from long-term contracts .................... 672,736 710,544 Other trade accounts and notes receivable ......................... 30,608 30,338 -------- -------- 703,344 740,882 Less, allowance for doubtful accounts 3,379 1,413 -------- -------- $699,965 $739,469 ======== ========
In the third quarter of 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. Under the terms of the agreement, new receivables are added to the pool as collections reduce previously sold accounts receivable. The credit risk of uncollectible accounts receivable has been transferred to the purchaser. The Corporation services, administers and collects the receivables on behalf of the purchaser. Fees payable to the purchaser under this agreement are equivalent to rates afforded high quality commercial paper issuers plus certain administrative expenses and are included in other deductions, in the Consolidated Statement of Earnings and Comprehensive Income. The agreement contains certain covenants and provides for various events of termination. As of December 29, 2000 and December 31, 1999, $50,000 in receivables were sold under the agreement and are therefore not reflected in the accounts receivable - trade balance in the Consolidated Balance Sheet. The Corporation anticipates that this agreement will be renewed at the end of its term. 30 4. CONTRACTS IN PROCESS AND INVENTORIES Costs of contracts in process and inventories considered in the determination of cost of operating revenues are shown below:
2000 1999 1998 -------- -------- -------- INVENTORIES Materials and supplies ... $ 10,663 $ 11,255 $ 7,960 Finished goods ........... 357 347 1,472 -------- -------- -------- $ 11,020 $ 11,602 $ 9,432 ======== ======== ========
The following tabulation shows the elements included in contract in process as related to long-term contracts:
2000 1999 1998 -------- -------- -------- CONTRACTS IN PROCESS Costs plus accrued profits less earned revenues on contracts currently in process ................... $633,178 $813,939 $986,886 Less, progress payments ..... 179,869 405,508 517,837 -------- -------- -------- $453,309 $408,431 $469,049 ======== ======== ========
5. LAND, BUILDINGS AND EQUIPMENT Land, buildings and equipment are stated at cost and are set forth below:
2000 1999 ---------- ---------- Land and land improvements $ 16,057 $ 18,057 Buildings ................ 109,099 118,577 Equipment ................ 728,390 741,716 Construction in progress . 11,803 127,666 ---------- ---------- $ 865,349 $1,006,016 ========== ==========
Depreciation expense for the years 2000, 1999 and 1998 was $46,388, $51,282 and $50,859, respectively. 6. PENSIONS AND OTHER POSTRETIREMENT BENEFITS PENSION BENEFITS - The Corporation and its domestic and foreign subsidiaries have several pension plans covering substantially all full-time employees. Under the plans, retirement benefits are primarily a function of both years of service and level of compensation; the domestic plans are noncontributory. Effective January 1, 1999, a new cash balance program was established. The pension benefit under the previous formulas remain the same for current employees if so elected; however, new employees will be offered only the cash balance program. The cash balance plan resembles a savings account. Amounts are credited based on age and a percentage of earnings. At termination or retirement, the employee receives the balance in the account in a lump-sum. Under the cash balance program, future increases in employee earnings will not apply to prior service costs. It is the Corporation's policy to fund the plans on a current basis to the extent deductible under existing Federal tax regulations. Such contributions, when made, are intended to provide not only for benefits attributed to service to date, but also those expected to be earned in the future. In the fiscal year ended December 29, 2000, the Company recognized an additional minimum liability in its financial statements for a certain underfunded plan in the amount of $13,300. This minimum liability offset a prepaid pension cost of $20,200 in 1999 and resulted in a charge to Other Comprehensive Income of $33,500 ($21,500 net of deferred income taxes). The minimum pension liability will change from year to year as a result of revisions to actuarial assumptions, experience gains or losses and settlement rate changes. 31 The Corporation has a 401(k) plan for salaried employees. The Corporation, for the years 2000, 1999 and 1998, contributed a 50% match of the first 6% of base pay of employee contributions, subject to the annual IRS limit, which amounted to a cost of $5,599, $5,200 and $5,400, respectively. OTHER BENEFITS - In addition to providing pension benefits, the Corporation and some of its domestic subsidiaries provide certain health care and life insurance benefits for retired employees. Employees may become eligible for these benefits if they qualify for and commence normal or early retirement pension benefits as defined in the pension plan while working for the Corporation. Benefits are provided through insurance companies. 32 The following chart contains the disclosures for pension and other benefits for the years 2000, 1999 and 1998.
PENSION BENEFITS OTHER BENEFITS ------------------------ ------------------------ 2000 1999 2000 1999 --------- --------- --------- --------- PROJECTED BENEFIT OBLIGATION (PBO) PBO at beginning of period ........... $ 586,969 $ 597,997 $ 77,236 $ 89,861 Service cost ......................... 28,013 30,728 1,248 1,454 Interest cost ........................ 37,643 35,915 5,905 5,641 Plan participants contributions ...... 4,003 4,293 813 753 Plan amendments ...................... 175 (565) -- (400) Actuarial loss/(gain) ................ 8,578 (32,231) 2,111 (12,943) Benefits paid ........................ (35,470) (47,228) (7,664) (7,130) Special termination benefits/other ... 4,017 (1,940) -- -- Foreign currency exchange rate changes (32,109) -- -- -- --------- --------- --------- --------- PBO at end of period ................. 601,819 586,969 79,649 77,236 --------- --------- --------- --------- PLAN ASSETS Fair value of plan assets beginning of period .......................... 636,890 576,668 -- -- Actual return on plan assets ......... (7,452) 83,397 -- -- Employer contributions ............... 11,191 11,812 6,851 6,377 Plan participant contributions ....... 4,003 4,293 813 753 Benefits paid ........................ (34,544) (39,138) (7,664) (7,130) Other ................................ 1,186 (142) -- -- Foreign currency exchange rate changes (35,284) -- -- -- --------- --------- --------- --------- Fair value of plan assets at end of period ............................. 575,990 636,890 -- -- --------- --------- --------- --------- FUNDED STATUS Funded status ........................ (25,829) 49,921 (79,649) (77,236) Unrecognized net actuarial loss/(gain) ....................... 122,618 51,261 (6,236) (8,407) Unrecognized prior service cost ...... 12,052 13,193 (19,813) (21,978) Adjustment for the minimum liability . (33,500) -- -- -- --------- --------- --------- --------- Prepaid (accrued) benefit cost ....... $ 75,341 $ 114,375 $(105,698) $(107,621) ========= ========= ========= =========
PENSION BENEFITS OTHER BENEFITS ------------------------------------- ------------------------------------ 2000 1999 1998 2000 1999 1998 -------- -------- -------- -------- -------- -------- NET PERIODIC BENEFIT COST Service cost ..................... $ 28,013 $ 30,728 $ 29,581 $ 1,248 $ 1,454 $ 1,008 Interest cost .................... 37,642 35,915 35,972 5,905 5,641 6,092 Expected return on plan assets ... (57,022) (52,164) (52,534) -- -- -- Amortization of transition asset . (9) (2,969) (3,031) -- -- -- Amortization of prior service cost 2,215 2,805 2,625 (2,165) (2,164) (2,123) Recognized actuarial (gain)/ loss/other ..................... (326) 5,477 (275) (60) -- (46) -------- -------- -------- -------- -------- -------- SFAS #87 net periodic pension cost 10,513 19,792 12,338 4,928 4,931 4,931 SFAS #88 cost .................... -- 3,136* -- -- -- -- -------- -------- -------- -------- -------- -------- Total net periodic pension cost .. $ 10,513 $ 22,928 $ 12,338 $ 4,928 $ 4,931 $ 4,931 ======== ======== ======== ======== ======== ======== WEIGHTED AVERAGE ASSUMPTIONS Discount rate .................... 6.7% 6.9% 6.3% 7.8% 8.0% 7.0% Long term rate of return.......... 9.5% 9.5% 9.9% Salary scale...................... 4.2% 4.6% 4.5%
* Under the provision of SFAS No. 88 "Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," reduction of workforce under the Realignment Plan and early retirement resulted in a charge in $3,136 in 1999. 33 Assumed health care cost trend rates have a significant effect on the amounts reported for the other benefit plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:
1-Percentage 1-Percentage Point Increase Point Decrease -------------- -------------- Effect on total of service and interest cost components............................ $ 214 $ (201) Effect on postretirement benefit obligations. 2,870 (2,685) Health care cost trend: 2000......................................... 8.0% Decline to 2011.............................. 5.0%
7. BANK LOANS The approximate weighted average interest rates on borrowings outstanding (primarily foreign) at the end of 2000 and 1999 were 5.78% and 4%, respectively. Unused lines of credit for short-term bank borrowings aggregated $76,931 at year-end 2000, of which approximately 29% was available in the United States and Canada at interest rates not exceeding the prime commercial lending rate and the remainder was available overseas in various currencies at rates consistent with market conditions in the respective countries. Interest costs incurred (including dividends on preferred security) in 2000, 1999 and 1998 were $83,406, $74,856 and $72,284 of which $151, $4,643 and $9,749, respectively, were capitalized. 8. CORPORATE AND OTHER DEBT
2000 1999 -------- -------- Corporate and other debt consisted of the following: Revolving Credit Agreements (average interest rate 7.65%) $ 85,000 $150,000 6.75% Notes due November 15, 2005 ....................... 200,000 200,000 Other ................................................... 21,188 22,921 -------- -------- 306,188 372,921 Less, Current portion ....................................... 187 74 -------- -------- $306,001 $372,847 ======== ======== Principal payments are payable in annual installments of: 2002 .................................................... $ 20,629 2003 .................................................... 85,212 2004 .................................................... 62 2005 .................................................... 200,033 2006 .................................................... 33 Balance due in installments through 2009 ................ 32 -------- $306,001 ========
CORPORATE DEBT - The Corporation has $200,000 Notes in the public market which bear interest at a fixed rate of 6.75% per annum, payable semiannually, and mature November 15, 2005. The Notes are rated BB- and Baa3 by Standard & Poor's and Moody's, respectively, and were issued under an indenture between the Corporation and Harris Trust and Savings Banks. The Notes are not redeemable prior to maturity and are not subject to any sinking fund requirements. The Notes constitute senior unsecured indebtedness of the Corporation and rank on parity with the Corporation's other senior unsecured indebtedness. 34 The Corporation maintains two revolving credit agreements (the "Revolving Credit Agreements") consisting of a $270,000 multi-year facility dated December 1, 1999 that expires on February, 2003 and a 364 day facility in the amount of $76,250 dated May 31, 2000 that expires on May 30, 2001. Early in 2001, the Corporation and the banks that are party to the Revolving Credit Agreements consented to amend those agreements (the "Amendments"). These Amendments provide for the following: (i) provisions associated with the planned change of domicile to Bermuda, (ii) provisions associated with the potential monetization, as previously announced, of certain build, own and operated assets, and (iii) the modification of certain financial covenants. 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. The Corporation was in compliance with the covenants under the Revolving Credit Agreements as of December 29, 2000. Loans under the Revolving Credit Agreements bear interest at a floating rate and are used for general corporate purposes. At December 29, 2000, $85,000 was borrowed under the Long Term Revolving Credit Agreement and $76,250 was borrowed under the Short Term Revolving Credit Agreement. These amounts appear on the Consolidated Balance Sheet under the captions "Corporate and Other Debt" and "Bank Loans", respectively. The Corporation pays various fees to the lenders under these agreements. The Corporation is also permitted to allocate a portion of its available credit under the Long Term Revolving Credit Agreement for the issuance of standby letters of credit. Such amounts are not recorded as funded indebtedness, and at the end of 2000, $111,900 of such standby letters of credit were outstanding. 9. SUBORDINATED ROBBINS FACILITY EXIT FUNDING OBLIGATIONS Foster Wheeler's subordinated obligations entered into in connection with the restructuring of debt incurred to finance construction of a waste-to-energy facility in the Village of Robbins, Illinois (the "Exit Funding Agreement") will be limited to funding: (a) 1999C Bonds 7 1/4% interest, due October 15, 2009 ($16,560) and October 15, 2024 ($77,155) $ 93,715 (b) 1999D Bonds accrued at 7% due October 15, 2009 18,000 -------- Total $111,715 ========
1999C BONDS. The 1999C Bonds are subject to mandatory sinking fund reduction prior to maturity at a Redemption Price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date, by application by the Trustee of funds on deposit to the credit of the 1999C Sinking Fund Installment Subaccount on October 15 in the years and in the principal amounts as follows:
1999C BONDS DUE 2009 Year Amount Year Amount ---- ------ ---- ------ 2001 $ 1,375 2006 1,940 2002 1,475 2007 2,080 2003 1,580 2008 2,225 2004 1,690 2009 2,385 2005 1,810 ------- $16,560 -------
35
1999C BONDS DUE 2024 Year Amount ---- ------ 2023 $ 37,230 2024 39,925 --------- 77,155 --------- $ 93,715 ========= Current $ 1,375 Long-term 110,340 --------- $ 111,715 =========
See Note 22 for further information. 10. MANDATORILY REDEEMABLE PREFERRED SECURITIES On January 13, 1999, FW Preferred Capital Trust I, a Delaware Business Trust owned by the Corporation issued $175,000 in Preferred Trust Securities. These Preferred Trust 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 Preferred Trust Securities on or after January 15, 2004. 11. SPECIAL-PURPOSE PROJECT DEBT Special-purpose Subsidiary Project Debt represent debt incurred to finance the construction of cogeneration facilities or waste-to-energy projects. The notes and/or bonds are collateralized by certain assets of each project.
2000 1999 -------- -------- The Corporation's obligations with respect to this debt are limited to guaranteeing the operating performance of the projects: Collateralized note payable, interest varies based on one of several money market rates (2000-year-end rate 7.495%), due semiannually through July 30, 2006 ...................................... $ 38,313(1) $ 42,793 Floating/Fixed Rate Resource Recovery Revenue Bonds, interest varies based on tax-exempt money market rates (2000-year-end rate 5.10%), due semiannually February 1, 2001 through February 1, 2010 ........................................................ 32,848(2) 36,448 Senior Secured Notes, interest 11.443% due annually April 15, 2001 through 2015 ................................ 42,500(3) -- Solid Waste Disposal and Resource Recovery System Revenue Bonds, interest 7.125% to 7.5%, due annually December 1, 2001 through 2010 ............................................................ 105,746(4) 113,135 Resource Recovery Revenue Bonds, interest 7.9% to 10%, due annually December 15, 2001 through 2012 ................................. 55,586(5) 59,710 Collateralized note payable, interest varies based on LIBOR rates ........... -- 97,415 -------- -------- 274,993 349,501 Less, Current portion ....................................................... 19,689 19,594 -------- -------- $255,304 $329,907 ======== ========
36 1. The note payable for $38,313 represents a loan under a bank credit facility to a limited partnership whose general partner is a Special-purpose Subsidiary. 2. The Floating/Fixed Rate Resource Recovery Revenue Bonds in the amount of $32,848 were issued in a total amount of $45,450. The bonds are collateralized by an irrevocable standby letter of credit issued by a commercial bank. 3. The Senior Secured Notes were issued in a total amount of $42,500. The notes are collateralized by certain revenues and assets of a Special-purpose subsidiary which is the indirect owner of the project. 4. The Solid Waste Disposal and Resource Recovery System Revenue Bonds totaling $105,746 were issued in a total amount of $133,500. The bonds are collateralized by a pledge of certain revenues and assets of the project, but not the plant (see Note 16). 5. The Resource Recovery Revenue Bonds of $55,586 were issued in a total amount of $86,780. The bonds are collateralized by a pledge of certain revenues and assets of the project.
Principal payments are payable in annual installments of: 2002...................................... $ 23,316 2003...................................... 26,827 2004...................................... 25,796 2005...................................... 27,765 2006...................................... 29,672 Balance due in installments through 2015.. 121,928 -------- $255,304 ========
12. EQUITY INTEREST The Corporation owns a non-controlling equity interest in four cogeneration projects; three 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.
December 29, 2000 December 31, 1999 ----------------- ----------------- Balance Sheet Data: ------------------- Current assets................ $ 146,277 $ 104,084 Other assets (primarily buildings and equipment)... 603,665 506,620 Current liabilities........... 48,604 48,562 Other liabilities (primarily long-Term debt)............ 529,182 410,199 Net assets.................... 172,156 151,943 Income Statement Data for the Year: ----------------------------------- Total revenues................ $ 213,076 $ 130,077 Income before income taxes.... 46,757 34,546 Net earnings.................. 33,029 29,947
37 As of December 29, 2000, the Corporation's share of the net earnings and investment in the equity affiliates totaled $19,987 and $120,551, respectively. Dividends of $11,105 were received during the year 2000. The Corporation has guaranteed certain performance obligations of such projects. The Corporation's contingent obligations under such guarantees are approximately $2,000 per year for the four projects. The Corporation has provided a $10,000 debt service reserve letter of credit providing liquidity for debt service payments. No amounts have been drawn under the letter of credit. 13. INCOME TAXES The components of earnings/(loss) before income taxes for the years 2000, 1999 and 1998 were taxed under the following jurisdictions:
2000 1999 1998 --------- --------- --------- Domestic ....................................... $ (33,477) $(320,702) $ (39,858) Foreign ........................................ 89,500 130,176 87,647 --------- --------- --------- Total ....................................... $ 56,023 $(190,526) $ 47,789 ========= ========= =========
The provision/(benefit) for income taxes on those earnings was as follows:
2000 1999 1998 --------- --------- --------- Current tax expense: Domestic .................................... $ 2,116 $ 15,469 $ 1,550 Foreign ..................................... 15,094 66,687 41,816 --------- --------- --------- Total current ............................... 17,210 82,156 43,366 --------- --------- --------- Deferred tax (benefit)/expense: Domestic .................................... (12,729) (109,154) 47,600 Foreign ..................................... 12,048 (19,893) (11,671) --------- --------- --------- Total deferred .............................. (681) (129,047) 35,929 --------- --------- --------- Total provision/(benefit) for income taxes ..... $ 16,529 $ (46,891) $ 79,295 ========= ========= =========
Deferred tax liabilities (assets) consist of the following:
2000 1999 --------- --------- Difference between book and tax depreciation ................................ $ 72,195 $ 91,380 Pension assets ................................. 22,881 36,036 Capital lease transactions ..................... 9,733 10,748 Revenue recognition ............................ 16,736 25,744 Other .......................................... 740 1,392 --------- --------- Gross deferred tax liabilities ................. 122,285 165,300 --------- --------- Current taxability of estimated costs to complete long-term contracts ................ (5,750) (5,469) Income currently taxable deferred for financial reporting ......................... (5,491) (5,591) Expenses not currently deductible for tax purposes .................................... (132,898) (166,414) Investment tax credit carryforwards ............ (30,251) (30,251) Postretirement benefits other than pensions .... (51,070) (61,895) Asbestos claims ................................ (7,963) (6,370) Minimum tax credits ............................ (10,263) (11,371) Foreign tax credits ............................ (13,763) (38,197)
38
2000 1999 --------- --------- Other............................................. (58,615) (45,274) Valuation allowance............................... 71,816 96,250 --------- --------- Net deferred tax assets........................... (244,248) (274,582) --------- --------- $(121,963) $(109,282) ========= =========
The domestic investment tax credit carryforwards, if not used, will expire in the years 2002 through 2007. Foreign tax credit carryforwards are recognized based on their potential utilization and, if not used, will expire in the years 2001 through 2004. As reflected above, the Corporation has recorded various deferred tax assets. Realization is dependent on generating sufficient taxable income prior to the expiration of the various credits. Management believes that it is more likely than not that all of the deferred tax assets (after consideration of the valuation allowance) will be realized through future earnings and/or tax planning strategies. The amount of the deferred tax assets considered realizable, however, could change in the near future if estimates of future taxable income during the carryforward period are changed. The 2000 decrease in the valuation allowance of $24,400 is due to the expiration of foreign tax credits. The 1999 and 1998 increases in the valuation allowance of $15,000 and $61,300, respectively, were caused primarily by the losses of the Robbins Facility and their impact on the realizability of tax benefits in the future. The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory rate to earnings before income taxes, as a result of the following:
2000 1999 1998 ------ ----- ----- Tax provision/(benefit) at U.S. ....... statutory rate ..................... 35.0% (35.0)% 35.0% State income taxes, net of Federal income tax benefit ................. 6.7 (4.0) 3.1 Increase in valuation allowance ....... -- 5.2 128.2 Difference in estimated income taxes on foreign income and losses, net of previously provided amounts ........ (7.5) 7.9 (1.1) Other ................................. (4.7) 1.3 0.7 ------ ----- ----- 29.5% (24.6)% 165.9% ====== ===== =====
14. LEASES The Corporation entered into a sale/leaseback of the 600 ton-per-day waste-to-energy plant in Charleston, South Carolina, in 1989. The terms of the agreement are to lease back the plant under a long-term operating lease for 25 years. The minimum lease payments under the long-term noncancelable operating lease are as follows: 2001 - $8,400; 2002 - $8,000; 2003 - $8,100; 2004 - $10,100; 2005 - $9,100; and an aggregate of $61,600 thereafter. Lease expense recognized for 2000, 1999 and 1998 was $7,500 a year. Recourse under this agreement is primarily limited to the assets of the special-purpose entity. The Corporation and certain of its subsidiaries are obligated under other operating lease agreements primarily for office space. Rental expense for these leases subsequent to various sale leaseback transactions, amounted to $30,200 in 2000, $27,700 in 1999 and $26,300 in 1998. Future minimum rental commitments on noncancelable leases are as follows: 2001 - $29,700; 2002 - $26,000; 2003 - $21,600; 2004 - $19,500; 2005 - $15,800 and an aggregate of $169,400 thereafter. 39 15. QUARTERLY FINANCIAL DATA (UNAUDITED)
Three Months Ended --------------------------------------------------------- 2000 March 31 June 30 Sept. 29 Dec. 29 - ---- -------- ------- -------- ------- Operating revenues ..................................... $ 822,036 $ 1,004,979 $ 1,008,350 $ 1,055,996 Gross earnings from operations ......................... 80,478 81,856 81,776 82,104 Net earnings ........................................... 8,372 8,647 10,145 12,330 Earnings per share: Basic ............................................ $ .21 $ .21 $ .25 $ .30 Diluted .......................................... $ .21 $ .21 $ .25 $ .30 Shares outstanding: Basic: Weighted average number of shares outstanding 40,776 40,795 40,805 40,815 Diluted: Effect of stock options ..................... 1 13 10 0 ----------- ----------- ----------- ----------- Total diluted .................................... 40,777 40,808 40,815 40,815 =========== =========== =========== =========== 1999 March 26(a) June 25(a) Sept. 24(a)(b) Dec. 31(a)(c) - ---- ----------- ----------- -------------- ------------- Operating revenues ..................................... $ 998,770 $ 854,958 $ 940,062 $ 1,073,240 Gross earnings from operations ......................... 85,541 66,663 62,586 83,044 Net earnings/(loss) .................................... 15,403 5,385 (22,910) (141,513) Earnings/(loss) per share: Basic ............................................ $ .38 $ .13 $ (.56) $ (3.47) Diluted .......................................... $ .38 $ .13 $ (.56) $ (3.47) Shares outstanding: Basic: Weighted average number of shares outstanding 40,730 40,732 40,746 40,760 Diluted: Effect of stock options ..................... 0 11 * * ----------- ----------- ----------- ----------- Total diluted .................................... 40,730 40,743 40,746 40,760 =========== =========== =========== ===========
(a) Included in the first, second and third quarter of 1999 were pre-tax losses for the Robbins Facility of $1,913, $15,572 and $13,163 (after tax $1,244, $10,122 and $8,566), respectively. (b) Includes $37,600 ($27,600 after tax) for cost realignment. (c) Includes $214,000 ($154,000 after tax) related to the final settlement on the Robbins Facility (see Note 22). * The effect of the stock options was not included in the calculation of diluted earnings per share as these options were antidilutive due to the quarterly loss. 40 16. LITIGATION AND UNCERTAINTIES 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 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 asbestos related 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. A summary of claim activity for the three years ended December 29, 2000 is as follows:
CLAIMS 2000 1999 1998 ------ ------ ------ Balance, beginning of year 73,600 62,400 65,000 New claims 41,300 30,700 23,900 Claims resolved 22,800 19,500 26,500 ------ ------ ------ Balance, end of year 92,100 73,600 62,400 ------ ------ ------
The amount spent on asbestos litigation defense and case resolution, substantially all of which was reimbursed or will be reimbursed from insurance coverage was $56,200 in 2000, $40,400 in 1999 and $39,600 in 1998. The Corporation continues to actively manage the claims and to negotiate with certain insurance carriers concerning the limits of coverage provided during different time periods. The Corporation has recorded an asset relating to probable insurance recoveries and a liability related to probable losses. During 2000 there were a number of companies that petitioned courts for protection under Federal Bankruptcy Laws as a result of the burden of litigation relating to asbestos. Recently, lawsuits commenced among the Corporation and its insurers to determine their respective rights and responsibilities. Management of the Corporation after consultation with counsel, has considered the litigation, the financial viability and legal obligations of its insurance carriers and believes that except for those insurers that have become or may become insolvent, for which a reserve has been provided, the insurers or their guarantors will continue to adequately fund claims and defense costs relating to asbestos litigation. It should be noted that the estimate of the assets and liabilities related to asbestos claims and recovery is subject to a number of uncertainties that may result in significant changes in the current estimates. Among these are uncertainty as to the ultimate number of claims filed, the amounts of claim costs, the impact of bankruptcies of other companies currently involved in litigation, uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, as well as potential legislative changes. 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 $20,800 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 on appeal. 41 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 "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 the involved parties, including the State of New Jersey, seeking among other things to void the applicable contracts and agreements governing the Project. Pending outcome of the litigation and the results of legislative initiatives in New Jersey to solve 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 and its effect on the 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 of Illinois (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 holders of bonds issued by the Village of Robbins to finance the construction of the Robbins Facility (the "Bondholders"). As part of the Robbins Agreement, the Corporation agreed to continue to contest this repeal through litigation. Pursuant to the Robbins Agreement, the Corporation has also agreed that any proceeds of such 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 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. 42 17. STOCK OPTION PLANS The Corporation has two fixed option plans which reserve shares of common stock for issuance to executives, key employees and directors. The Corporation has adopted the disclosure-only provisions of Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the stock option plans. Had compensation cost for the Corporation's two stock option plans been determined based on the fair value at the grant date for awards in 2000, 1999 and 1998 consistent with the provisions of SFAS No. 123, the Corporation's net earnings and earnings per share would have been reduced to the pro forma amounts indicated below:
2000 1999 1998 ---------- --------- ---------- Net earnings/(loss) - as reported ... $ 39,494 $(143,635) $ (31,506) ========== ========= ========== Net earnings/(loss) - pro forma ..... $ 38,022 $(145,550) $ (33,656) ========== ========= ========== Earnings/(loss) per share as reported Basic ............................. $ .97 $ (3.53) $ (.77) Diluted ........................... $ .97 * * Earnings/(loss) per share - pro forma Basic ............................. $ .93 $ (3.57) $ (.83) Diluted ........................... $ .93 * *
*Stock options not included in diluted earnings per share due to losses in 1999 and 1998. The assumption regarding the stock options issued to executives in 2000, 1999 and 1998 was that 100% of such options vested in each year, rather than one-third as required by the Plan, since one-third of the previous two years would have vested in 2000, 1999 and 1998. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
2000 1999 1998 ---- ---- ---- Dividend yield.................. 3.18% 5.89% 3.04% Expected volatility............. 59.20% 48.70% 33.10% Risk free interest rate......... 6.46% 4.90% 5.64% Expected life (years)........... 5.0 5.0 5.0
Under the 1995 Stock Option Plan approved by the stockholders in April 1995 and amended in April 1999, the total number of shares of common stock that may be granted is 3,300,000. In April 1990, the stockholders approved a Stock Option Plan for Directors of the Corporation. On April 29, 1997, the stockholders approved an amendment of the Directors' Stock Option Plan, which authorizes the granting of options on 400,000 shares of common stock to directors who are not employees of the Corporation, who will automatically receive an option to acquire 3,000 shares each year. These plans provide that shares granted come from the Corporation's authorized but unissued or reacquired common stock. The price of the options granted pursuant to these plans will not be less than 100% of the fair market value of the shares on the date of grant. An option may not be exercised within one year from the date of grant and no option will be exercisable after ten years from the date granted. Under the Executive Compensation Plan, the long-term incentive segment provides for stock options to be issued. Participants may exercise approximately one-third of the stock option shares after the end of each year of the cycle. 43 Information regarding these option plans for the years 2000, 1999 and 1998 is as follows:
2000 1999 1998 ---- ---- ---- Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------ ----- ------ ----- ------ ----- Options outstanding, beginning of year ... 2,508,362 $27.66 1,816,802 $32.79 1,408,303 $34.32 Options exercised ........................ -- -- -- -- (2,000) 25.41 Options granted .......................... 671,486 8.76 698,500 14.17 414,000 27.62 Options cancelled or expired ............. (42,227) 18.96 (6,940) 14.84 (3,501) 37.92 --------- --------- --------- Options outstanding, end of year ......... 3,137,621 $23.73 2,508,362 $27.66 1,816,802 $32.79 ========= ========== ========= $ 6.34375 to $11.34375 to $ 14.50 to Option price range at end of year ........ $45.6875 $45.6875 $ 45.6875 $ 22.1250 to Option price range for exercised shares .. -- -- $ 28.6875 Options available for grant at end of year 1,192,180 1,847,166 741,416 ========= ========== ========= Weighted-average fair value of options, Granted during the year .................. $ 3.38 $ 4.20 $ 7.97 Options exercisable at end of year ....... 2,265,468 1,607,279 1,198,941 Weighted-average of exercisable options at end of year .............................. $ 28.63 $ 33.10 $ 33.56
The following table summarizes information about fixed-price stock options outstanding at December 29, 2000:
Options Outstanding Options Exercisable ---------------------------------------- ---------------------------- Weighted- Number Average Weighted- Number Weighted- Range of Outstanding Remaining Average Exercisable Average Exercise Prices At 12/29/00 Contractual Exercise Price At 12/29/00 Exercise Price --------------- ----------- ----------- -------------- ----------- -------------- Life ---- 22.0625 to 28.6875 39,500 1 year 23.24 39,500 23.24 26.9375 to 27.4375 76,833 2 years 27.33 76,833 27.33 27.4375 to 28.75 89,667 3 years 28.49 89,667 28.49 32.9375 to 40.0625 160,834 4 years 36.04 160,834 36.04 29.75 to 35.25 372,467 5 years 30.19 372,467 30.19 42.1875 to 45.6875 255,584 6 years 42.63 255,584 42.63 36.9375 to 37.25 379,500 7 years 36.96 379,500 36.96 27.50 to 27.625 414,000 8 years 27.62 343,667 27.62 11.34375 to 15.0625 679,750 9 years 14.16 547,416 14.32 6.34375 to 10.00 669,486 10 years 8.76 -- -- --------- --------- 6.34375 to 45.6875 3,137,621 2,265,468 ========= =========
44 18. PREFERRED SHARE PURCHASE RIGHTS On September 22, 1987, the Corporation's Board of Directors (the "Board") declared a dividend distribution of one Preferred Share Purchase Right on each share of the Corporation's common stock outstanding as of October 2, 1987 and adopted the Rights Agreement, dated as of September 22, 1987 (the "Rights Agreement"). On September 30, 1997, the Board amended and restated the Rights Agreement. Each Right allows the stockholder to purchase one one-hundredth of a share of a new series of preferred stock of the Corporation at an exercise price of $175. Rights are exercisable only if a person or group acquires 20% or more of the Corporation's common stock or announces a tender offer the consummation of which would result in ownership by a person or group of 20% or more of the Corporation's common stock. The Rights, which do not have the right to vote or receive dividends, expire on October 2, 2007, and may be redeemed, prior to becoming exercisable, by the Board at $.02 per Right or by stockholder action with an acquisition proposal. If any person or group acquires 20% or more of the Corporation's outstanding common stock, the "flip-in" provision of the Rights will be triggered and the Rights will entitle a holder (other than such person or any member of such group) to acquire a number of additional shares of the Corporation's common stock having a market value of twice the exercise price of each Right. In the event the Corporation is involved in a merger or other business combination transaction, each Right will entitle its holder to purchase, at the Right's then-current exercise price, a number of the acquiring Corporation's common stock having a market value at that time of twice the Right's exercise price. The Board of Directors may amend the Rights Agreement to prevent approved transactions from triggering the Rights. 45 19. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate values: CASH AND SHORT-TERM INVESTMENTS - All investments are considered available for sale and the carrying amount approximates fair value because of the short-term maturity of these instruments. LONG-TERM INVESTMENTS - The fair values of some investments are estimated based on quoted market prices for those or similar investments. LONG-TERM DEBT - The fair value of the Corporation's long-term debt (including current installments) is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Corporation for debt of the same remaining maturities. FOREIGN CURRENCY CONTRACTS - The fair values of these financial instruments (used for hedging purposes) are estimated by obtaining quotes from brokers. The Corporation is exposed to market risks from changes in interest rates and fluctuations in foreign exchange rates. Financial instruments are utilized by the Corporation to reduce these risks. The Corporation does not hold or issue financial instruments for trading purposes. The Corporation is exposed to credit loss in the event of nonperformance by the counterparties. All of these financial instruments are with significant financial institutions that are primarily rated A or better by Standard & Poor's or A2 or better by Moody's (see Notes 1, 8 and 11). CARRYING AMOUNTS AND FAIR VALUES - The estimated fair values of the Corporation's financial instruments are as follows:
2000 1999 ---- ---- Carrying Amount Fair Value Carrying Amount Fair Value --------------- ---------- --------------- ---------- Nonderivatives: Cash and short-term investments............. $193,709 $193,709 $187,321 $187,321 Long-term debt............ (581,181) (579,494) (722,422) (703,844) Derivatives: Foreign currency contracts 9,684 9,684 (717) (717) Interest rate swaps....... -- -- -- (10,218)
In the ordinary course of business, the Corporation is contingently liable for performance under standby letters of credit and bank guarantees totaling approximately $337,000 and $398,000 at December 29, 2000 and December 31, 1999, respectively. In the Corporation's past experience, no material claims have been made against these financial instruments. Management of the Corporation does not expect any material losses to result from these off-balance-sheet instruments and, therefore, is of the opinion that the fair value of these instruments is zero. As of December 29, 2000, the Corporation had $504,800 of forward exchange contracts outstanding. These forward exchange contracts mature between 2001 and 2003. Approximately 20% of these contracts require a domestic subsidiary to sell Japanese yen and receive U.S. dollars. The remaining contracts have been established by various international subsidiaries to sell a variety of currencies and either receive their respective functional currencies or other currencies for which they have payment obligations to third parties. Financial instruments, which potentially subject the Corporation to concentrations of credit risk, consist principally of cash equivalents and trade receivables. The Corporation places its cash equivalents with financial institutions and limits the amount of credit exposure to any one financial institution. Concentrations of credit risk with respect to trade receivables are limited due to the large number of customers comprising the Corporation's customer base and their dispersion across different business and geographic areas. As of December 29, 2000 and December 31, 1999, the Corporation had no significant concentrations of credit risk. The Corporation had issued third-party off-balance-sheet financial guarantees totaling approximately $2,750 at year-end 2000 and 1999. 46 20. BUSINESS SEGMENTS - DATA The business of the Corporation and its subsidiaries falls within two business groups. THE ENGINEERING AND CONSTRUCTION GROUP designs, engineers and constructs petroleum, chemical, petrochemical and alternative-fuels facilities and related infrastructure, including power generation and distribution facilities, production terminals, pollution control equipment, water treatment facilities and process plants for the production of fine chemicals, pharmaceuticals, dyestuffs, fragrances, flavors, food additives and vitamins. Also, the E&C Group provides a broad range of environmental remediation services, together with related technical, design and regulatory services. THE ENERGY EQUIPMENT GROUP designs, manufactures and erects steam generating and auxiliary equipment for power stations and industrial markets worldwide. Steam generating equipment includes a full range of fluidized-bed and conventional boilers firing coal, oil, gas, biomass and other municipal solid waste, waste wood and low-Btu gases. Auxiliary equipment includes feedwater heaters, steam condensers, heat-recovery equipment and low-NOX burners. Site services related to these products encompass plant erection, maintenance engineering, plant upgrading and life extension, and plant repowering. This Group provides research analysis and experimental work in fluid dynamics, heat transfer, combustion and fuel technology, materials engineering and solids mechanics. In addition, this group also builds, owns and operates cogeneration, independent power production and resource recovery facilities as well as facilities for the process and petrochemical industries. Commencing in fiscal 2000, the Power Systems Group has been combined with the Energy Equipment Group, where the rest of the Corporation's power expertise resides. The prior years amounts have been adjusted to reflect this change. This unit has a small project development team and will no longer develop waste-to-energy facilities in the United States. The Corporation conducts its business on a global basis. The E&C Group accounted for the largest portion of the Corporation's operating revenues and operating income over the last ten years. In 2000, the Group accounted for approximately 75% of the operating revenues. The geographic dispersion of these operating revenues was as follows: 37% North America, 27% Asia, 21% Europe, 10% Middle East and 5% other. The Energy Equipment Group accounted for 25% of the operating revenues of the Corporation. The geographic dispersion of these operating revenues was as follows: 50% North America, 28% Europe, 14% Asia and 8% other. Earnings of segments represent revenues less expenses attributable to that group or geographic area where the operating units are located. Revenues between business segments are immaterial and are eliminated in Corporate and Financial Services. Export revenues accounts for 10.4% of operating revenues. No single customer represented 10% or more of operating revenues for 2000 and 1999. In 1998, one customer (Oman LNG) accounted for approximately 11%. Identifiable assets by group are those assets that are directly related to and support the operations of each group. Corporate assets are principally cash, investments and real estate. 47 Summary financial information concerning the Corporation's reportable segments is shown in the following table:
(In Millions of Dollars) Corporate Engineering And and Energy Financial Total Construction Equipment Services(1) ----- ------------ --------- ----------- 2000 - ---- Revenues .......................... $ 3,969.4 $ 2,979.5 $ 1,094.2 $ (104.3) Interest income(2) ................ 15.7 16.7 9.6 (10.6) Interest expense(2) ............... 83.3 7.1 34.7 41.5(7) Earnings/(loss) before income taxes 56.0 87.9 45.1 (77.0) Income taxes/(benefits) ........... 16.5 27.7 18.0 (29.2) Net earnings/(loss) ............... 39.5 60.2 27.1 (47.8) Identifiable assets ............... 3,477.5 1,299.6 1,697.6 480.3 Capital expenditures .............. 45.8 33.7 10.6 1.5 Depreciation and amortization ..... 57.7 22.6 32.9 2.2 1999(a) - ------- Revenues .......................... $ 3,944.1 $ 3,015.9 $ 1,039.7 $ (111.5) Interest income(2) ................ 13.6 17.5 13.4 (17.3) Interest expense(2) ............... 70.2 6.8 46.5 16.9(7) (Loss)/earnings before income taxes (190.5) 92.0(3) (204.1)(3)(4) (78.4)(3) Income (benefits)/taxes ........... (46.9) 35.2 (56.1) (26.0) Net loss/(earnings) ............... (143.6) 56.8 (148.0) (52.4) Identifiable assets ............... 3,438.1 1,535.8 1,600.9 301.4 Capital expenditures .............. 128.1 118.9 7.6 1.6 Depreciation and amortization ..... 60.5 26.0 32.1 2.4 1998(a)* - -------- Revenues .......................... $ 4,597.0 $ 3,459.5 $ 1,295.5 $ (158.0) Interest income(2) ................ 19.5 21.0 9.2 (10.7) Interest expense(2) ............... 62.5 7.9 34.9 19.7 Earnings/(loss) before income taxes 47.8 97.4 (.5)(5) (49.1) Income taxes/(benefits) ........... 79.3 34.1 2.4 42.8(6) Net earnings/(loss) ............... (31.5) 63.3 (2.9) (91.9) Identifiable assets ............... 3,322.3 1,543.1 1,737.8 41.4 Capital expenditures .............. 133.8 112.3 20.7 0.8 Depreciation and amortization ..... 60.0 25.6 31.9 2.5
(1) Includes general corporate income and expense, the Corporation's captive insurance operation and eliminations. (2) Includes intercompany interest charged by Corporate to the business groups on outstanding borrowings. (3) Includes in 1999 cost realignment of $37.6 ($27.6 after tax), the pre-tax charge per group is: Engineering and Construction $19.6, Energy Equipment $2.5, and Corporate and Financial $15.5. (4) Includes in 1999, $214.0 ($154.0 after tax) related to final settlement of the Robbins Facility and $30.6 relates to the current year operation of the Robbins Facility. (5) Includes in 1998 a pretax loss for the Robbins Facility of $72.8 ($47.3 after tax). (6) Includes in 1998 a tax valuation allowance of $61.3. (7) Includes dividends on Preferred Security of $15.7 in 2000 and $15.2 in 1999. (a) Restated to reflect inclusion of Power System Group operations in the Energy Equipment Group. * Restated to conform to 1999 presentation (see Note 1). 48
2000 1999 1998 -------- -------- -------- EQUITY EARNINGS/(LOSS) IN UNCONSOLIDATED SUBSIDIARIES WERE AS FOLLOWS: Engineering and Construction ............................... $ 6.8 $ 9.0 $ 3.5 Energy Equipment ........................................... 13.2 6.8 5.1 Corporate and Financial Services ........................... -- (.7) -------- -------- -------- Total ...................................................... $ 20.0 $ 15.8 $ 7.9 ======== ======== ======== GEOGRAPHIC: REVENUES: United States .............................................. $1,897.0 $1,430.5 $1,877.9 Europe ..................................................... 2,099.5 2,533.7 2,806.2 Canada ..................................................... 77.2 91.4 70.9 Corporate and Financial Services, including eliminations .......................................... (104.3) (111.5) (158.0) -------- -------- -------- Total ...................................................... $3,969.4 $3,944.1 $4,597.0 ======== ======== ======== LONG-LIVED ASSETS: United States .............................................. $ 628.9 $ 652.6 $ 672.9 Europe ..................................................... 228.8 358.9 338.0 Canada ..................................................... 1.5 1.5 0.7 Corporate and Financial Services, including eliminations .......................................... 44.5 45.3 46.2 -------- -------- -------- Total ...................................................... $ 903.7 $1,058.3 $1,057.8 ======== ======== ========
Revenues and long-lived assets are based on the country in which the contracting subsidiary is located. 49 21. CONSOLIDATING FINANCIAL INFORMATION The following represents summarized consolidating financial information as of December 29, 2000 with respect to the financial position, and for the year ended December 29, 2000, 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 as of December 29, 2000 (In Thousands of Dollars)
Non- Guarantor Guarantor Assets FWC Subsidiaries Subsidiaries Eliminations Consolidated ------ ----------- ------------ ------------ ------------ ------------ Current assets ........................ $ 391,560 $ 497,486 $ 1,571,314 $ (837,384) $ 1,622,976 Investment in subsidiaries ............ 918,582 317,663 484,665 (1,720,910) Land, buildings & equipment (net) ..... 46,621 26,455 428,080 (6,122) 495,034 Notes and accounts receivable - long-term .......................... 48,203 5,245 155,867 (133,077) 76,238 Intangible assets (net) ............... -- 85,977 202,158 -- 288,135 Other non-current assets .............. 754,246 5,735 193,070 42,094 995,145 ----------- ----------- ----------- ----------- ----------- TOTAL ASSETS .......................... $ 2,159,212 $ 938,561 $ 3,035,154 $(2,655,399) $ 3,477,528 =========== =========== =========== =========== =========== Liabilities & Stockholders' Equity ---------------------------------- Current liabilities ................... $ 543,360 $ 470,835 $ 1,277,792 $ (837,384) $ 1,454,603 Long-term debt ........................ 309,190 -- 389,173 (137,058) 561,305 Other non-current liabilities ......... 767,573 9,081 263,435 (117,558) 922,531 Preferred trust securities ............ 175,000 -- -- -- 175,000 ----------- ----------- ----------- ----------- ----------- TOTAL LIABILITIES ..................... 1,795,123 479,916 1,930,400 (1,092,000) 3,113,439 TOTAL STOCKHOLDERS' EQUITY ............................ 364,089 458,645 1,104,754 (1,563,399) 364,089 ----------- ----------- ----------- ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............... $ 2,159,212 $ 938,561 $ 3,035,154 $(2,655,399) $ 3,477,528 =========== =========== =========== =========== ===========
50 CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA For the Year Ended December 29, 2000 (In Thousands of Dollars)
Guarantor Non-Guarantor FWC Subsidiaries Subsidiaries Eliminations Consolidated ----------- ------------ ------------ ------------ ------------ Revenues ....................... $ 107,063 $ 1,160,716 $ 3,121,831 $ (420,255) $ 3,969,355 Cost of operating revenues ..... -- 1,083,787 2,853,660 (372,300) 3,565,147 Selling, general and adminis- trative, other deductions and minority interests ..... 75,408 55,181 265,409 (47,813) 348,185 Equity in net (loss)/earnings of subsidiaries .............. (3,887) 6,520 -- (2,633) -- ----------- ----------- ----------- ----------- ----------- Earnings/(loss) before income Taxes ..................... 27,768 28,268 2,762 (2,775) 56,023 (Benefit)/provision for income taxes ..................... (11,726) 8,699 19,556 -- 16,529 ----------- ----------- ----------- ----------- ----------- Net earnings ................... 39,494 19,569 (16,794) (2,775) 39,494 Other comprehensive loss: Foreign currency translation adjustment adjustment ... -- -- (19,988) -- (19,988) Minimum pension liability adjustment net of $12,000 tax benefit .............. (21,500) -- -- -- (21,500) ----------- ----------- ----------- ----------- ----------- Comprehensive loss ............. $ 17,994 $ 19,569 $ (36,782) $ (2,775) $ (1,994) =========== =========== =========== =========== ===========
51 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW DATA For the Year Ended December 29, 2000 (In Thousands of Dollars)
Guarantor Non-Guarantor FWC Subsidiaries Subsidiaries Eliminations Consolidated --------- ------------ ------------ ------------ ------------ Cash Flows from Operating Activities Net cash (used)/provided by Operating Activities ............. $ (71,278) $ 79,743 $ 40,234 $ (65,443) $ (16,744) --------- --------- --------- --------- --------- Cash Flows from Investing Activities Capital expenditures ................ (6,000) (39,807) (45,807) Proceeds from sale of properties .... 56,703 56,703 (Increase)/decrease in investment and advances .......................... (27,705) 1,073 (42,832) 81,586 12,122 Decrease in short-term investments .. 15,230 15,230 Other ............................... 2,891 (5,490) (2,599) --------- --------- --------- --------- --------- Net cash (used)/provided by Investing Activities ............. (27,705) (2,036) (16,196) 81,586 35,649 Cash Flows from Financing Activities Dividends to Common Stockholders .... (9,773) (103,245) 103,245 (9,773) Increase/(decrease) in short- term debt ........................ 76,250 (31,374) 44,876 Proceeds from long-term debt ........ 43,168 43,168 Repayment of long-term debt ......... (65,000) (23,151) (88,151) Other ............................... 112,220 (78,600) 85,614 (119,388) (154) --------- --------- --------- --------- --------- Net cash provided/(used) by Financing Activities ............. 113,697 (78,600) (28,988) (16,143) (10,034) Effect of exchange rate changes on cash and cash equivalents ......... 12,754 12,754 Increase/(decrease) in cash and cash equivalents ....................... 14,714 (893) 7,804 21,625 Cash and cash equivalents, beginning of year ................. 16,262 3,080 150,926 170,268 --------- --------- --------- --------- --------- Cash and cash equivalents, end of year .............................. $ 30,976 $ 2,187 $ 158,730 $ -- $ 191,893 ========= ========= ========= ========= =========
52 22. ROBBINS SETTLEMENT On October 21, 1999, the Corporation announced it had reached an agreement (the "Robbins Agreement") with the holders of approximately 80% of the principal amount of bonds issued in connection with the financing of the Robbins Facility. Under the Robbins Agreement, the $320,000 aggregate principal amount of existing bonds were exchanged for $273,000 aggregate principal amount of new bonds on February 3, 2000, $113,000 of which (the "Corporation-supported Robbins Bonds") will be funded by payments from the Corporation and the balance of which (the "Non-recourse Robbins Bonds") will be non-recourse to the Corporation. In addition, pursuant to the Robbins Agreement the Corporation would exit from its operating role in respect to the Robbins Facility. Specific elements of the Robbins Agreement were as follows: - - The new Corporation-supported Robbins Bonds consist of (a) $95,000 aggregate principal amount of 7.25% amortizing terms bonds, $17,845 of which mature on October 15, 2009 and $77,155 of which mature on October 15, 2024 (see Note 9 for sinking fund requirements) and (b) $18,000 aggregate principal amount of 7% accretion bonds maturing on October 15, 2009 with all interest to be paid at maturity (the "1999D Bonds"); - - The Corporation agreed to operate the Robbins Facility for the benefit of the bondholders under the earlier of the sale of the Robbins Facility or October 15, 2001, on a full-cost reimbursable basis with no operational or performance guarantees; - - Any remaining obligations of the Corporation under the $55,000 additional credit support facility in respect of the existing bonds were terminated; - - The Corporation would continue to prosecute certain pending litigation (the "Retail Rate Litigation") against various officials of the State of Illinois; (See Note 16 to Financial Statements, "Litigation and Uncertainties," below) and - - The Corporation would cooperate with the bondholders in seeking a new owner/operator for the Robbins Facility. On December 1, 1999, three special purpose subsidiaries of the Corporation commenced reorganization proceedings under Chapter 11 of the Bankruptcy Code in order to effectuate the terms of the Robbins Agreement. On January 21, 2000, these subsidiaries' plan of reorganization was confirmed, and the plan was consummated on February 3, 2000. On August 8, 2000, the Corporation initiated the final phase of its exit from the Robbins Facility. As part of the Robbins Agreement, the Corporation had agreed to operate the Robbins Facility subject to being reimbursed for all costs of operation. Such reimbursement did not occur and, therefore, pursuant to the Robbins Agreement, the Corporation on October 10, 2000, completed the final phase of its exit from the project. The Corporation had been administering the project companies through a Delaware business trust, which owns the project on behalf of the bondholders. As a result of its exit from the project, the Corporation is no longer administering the project companies. In the fourth quarter of 1999, the Corporation recorded a pre-tax charge of approximately $214,000. This charge fully recognized all existing obligations of the Corporation related to the Robbins Facility, including (a) pre-paid lease expense of $45,600, (b) $20,400 of outstanding bonds issued in conjunction with the equity financing of the Robbins Facility and (c) transaction expenses of $4,500. The liability as of December 31, 1999 for all of the Corporation-supported bonds were recorded at the net present value of $133,400 with $113,000 being subordinated obligations and $20,400 as senior Corporation obligations. The Corporation is considered to be the primary obligor on these bonds. The ongoing legal expenses relating to the Retail Rate Litigation (See Note 16 to Financial Statements, "Litigation and Uncertainties,") will be expensed as incurred. In the third quarter of 1998 the Corporation recorded a charge of approximately $47,000 for asset impairments relating to the Robbins Facility, which was included in the $72,800 losses for 1998. 53 23. COST REALIGNMENT PLAN 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 reduced costs through staff reduction and closure of some smaller operating facilities. Beginning with the second quarter of 1999, these changes included the reduction of approximately 1,600 permanent positions, including 500 overhead and other support positions from its worldwide workforce. In addition, approximately 800 agency personnel within the Engineering & Construction Group were reduced during the course of 1999. The positions eliminated include 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 Group 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 charge of $37,600, was recorded in the following captions: cost of operating revenues-$17,500; selling, general and administrative expenses-$5,100; and other deductions-$15,000. The plan was completed during the first quarter of 2000 with no additional charges recorded. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE NONE PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated by reference to Foster Wheeler's Proxy Statement/Prospectus for the Annual Meeting of Shareholders to be held April 23, 2001. Certain information regarding executive officers is included in PART I hereof in accordance with General Instruction G (3) of Form 10-K. ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference to Foster Wheeler's Proxy Statement/Prospectus for the Annual Meeting of Shareholders to be held April 23, 2001. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference to Foster Wheeler's Proxy Statement/Prospectus for the Annual Meeting of Shareholders to be held April 23, 2001. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. 54 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Documents filed as part of this report: 1 Financial Statements - see Item 8 All schedules and financial statements other than those indicated above have been omitted because of the absence of conditions requiring them or because the required information is shown in the financial statements or the notes thereto. 3 The following Exhibits are required by Item 601 of Regulation S-K and by paragraph (c) of Item 14 of Form 10-K: 3.1 Copy of Restated Certificate of Incorporation of Foster Wheeler Corporation, dated August 12, 1996 (Incorporated by reference from Exhibit 3.1 to Foster Wheeler Corporation's Quarterly Report on Form 10-Q for the quarter ended September 27, 1996 and incorporated herein by reference). 3.2 By-Laws of Foster Wheeler Corporation, as amended January 30, 2001 (Exhibit 3.2) 4 Foster Wheeler hereby agrees to furnish copies of instruments defining the rights of holders of long-term debt of Foster Wheeler Corporation and its consolidated subsidiaries to the Commission upon its request. 4.1 Amended and Restated Rights Agreement dated as of September 30, 1997, between Foster Wheeler Corporation and Chase Mellon Shareholder Services, L.L.C., as Rights Agent (Incorporated by reference from Exhibit 1.2 to Foster Wheeler's Form 8-A dated October 1, 1997.) 10.1 Amended and Restated Revolving Credit Agreement among the Corporation, the Guarantors Signatory thereto, the Lenders Signatory thereto, and the Agents and Arrangers Signatory thereto, dated as of December 1, 1999 (Incorporated by reference from Exhibit 10.3 to Foster Wheeler's Annual Report on Form 10-K for the year ended December 31, 1999). 10.2 Amended and Restated Short-term Revolving Credit Agreement among the Corporation, the Guarantors Signatory thereto, the Lenders Signatory thereto, and the Agents and Arrangers Signatory thereto, dated as of December 1, 1999 (Incorporated by reference from Exhibit 10.4 to Foster Wheeler's Annual Report on Form 10-K for the year ended December 31, 1999). 10.3 Amendment and Consent to Amended and Restated Short-Term Revolving Credit Agreement among the Corporation, the Guarantors Signatory thereto, and the Agents and Arrangers Signatory thereto, dated as of May 31, 2000. 10.4 Form of Change in Control Agreement entered into by the Corporation and the following executive officers: H. E. Bartoli, J. Blythe, L. Fries Gardner , R. D. Iseman, T. R. O'Brien, G.A. Renaud, J. E. Schessler and R. J. Swift (Incorporated by reference from Exhibit 10.5 to Foster Wheeler's Quarterly Report Form 10-Q for the quarter ended June 26, 1998. 12 Statement of Computation of Consolidated Ratio of Earnings to Fixed Charges and Preferred Shares Dividend Requirements (Exhibit 12) 21 Subsidiaries of the registrant (Exhibit 21) 23 Consent of independent accountants (Exhibit 23) 55 27 Financial data schedule (for the informational purposes of the Commission only). (b) Current Reports on Form 8-K: November 29, 2000 (Change in Domicile) For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into registrant's Registration Statements on Form S-8 Nos. 333-77125 (filed April 27, 1999), 333-25945 (filed April 28, 1997), 33-59739 (filed June 1, 1995), 33-40878 (filed May 29, 1991) and 33-34694 (filed May 2, 1990): Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 56 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) 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) Dated: March 6, 2001 By: /s/ Lisa Fries Gardner -------------- ------------------------------ Lisa Fries Gardner Vice President and Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed, as of March 6, 2001, by the following persons on behalf of the registrant, in the capacities indicated.
Signature Title --------- ----- /s/ Richard J. Swift Director, Chairman, President and - ------------------------------ Chief Executive Officer Richard J. Swift (Principal Executive Officer) /s/ Gilles A. Renaud Senior Vice President and - ------------------------------ Chief Financial Officer Gilles A. Renaud (Principal Financial Officer) /s/ Robin A. Kornmeyer Controller - ------------------------------ Robin A. Kornmeyer (Principal Accounting Officer) /s/ Eugene D. Atkinson Director - ------------------------------ Eugene D. Atkinson /s/ Louis E. Azzato Director - ------------------------------ Louis E. Azzato /s/ John P. Clancey Director - ------------------------------ John P. Clancey /s/ David J. Farris Director - ------------------------------ David J. Farris /s/ E. James Ferland Director - ------------------------------ E. James Ferland /s/ Martha Clark Goss Director - ------------------------------ Martha Clark Goss /s/ Constance J. Horner Director - ------------------------------ Constance J. Horner /s/ Joseph J. Melone Director - ------------------------------ Joseph J. Melone /s/ John E. Stuart Director - ------------------------------ John E. Stuart
57 EX-3.2 2 a2039308zex-3_2.txt EXHIBIT 3.2 Exhibit 3.2 FOSTER WHEELER CORPORATION (A New York Corporation) BY-LAWS AS AMENDED TO JANUARY 30, 2001 FOSTER WHEELER CORPORATION BY-LAWS TABLE OF CONTENTS* ARTICLE I MEETINGS OF STOCKHOLDERS SECTION 1.1 Place of Meetings........................................1 SECTION 1.2 Annual Meeting...........................................1 SECTION 1.3 Special Meetings.........................................1 SECTION 1.4 Notice of Meetings.......................................1 SECTION 1.5 Quorum...................................................2 SECTION 1.6 Organization of Meetings.................................2 SECTION 1.7 Voting...................................................2 SECTION 1.8 List of Shareholders.....................................2 SECTION 1.9 Inspectors of Election...................................2 SECTION 1.10 Nomination of Directors..................................2 ARTICLE II BOARD OF DIRECTORS SECTION 2.1 Term and Qualification...................................3 SECTION 2.2 Vacancies................................................4 SECTION 2.3 Places of Directors' Meetings............................4 SECTION 2.4 Regular Meetings.........................................4 SECTION 2.5 Special Meetings.........................................4 SECTION 2.6 Notice of Special Meetings...............................4 SECTION 2.7 Organization of Meetings.................................4 SECTION 2.8 Quorum...................................................4 SECTION 2.9 Action Without Meeting...................................4 SECTION 2.10 Telephonic Meetings......................................4 SECTION 2.11 Compensation.............................................5 SECTION 2.12 Director Emeritus........................................5 ARTICLE III COMMITTEES SECTION 3.1 Executive Committee......................................5 SECTION 3.2 Powers of Executive Committee............................5 SECTION 3.3 Quorum of Executive Committee Procedure..................5 SECTION 3.4 Other Committees.........................................5 SECTION 3.5 Compensation and Expenses................................5 - --------- * This table of Contents is included for convenience of reference and is not part of the By-Laws as originally accepted or amended. i ARTICLE IV OFFICERS SECTION 4.1 General Provisions.......................................6 SECTION 4.2 Election of Officers.....................................6 SECTION 4.3 Chairman of the Board....................................6 SECTION 4.4 Vice Chairman............................................6 SECTION 4.5 President................................................6 SECTION 4.6 Vice Presidents..........................................6 SECTION 4.7 Secretary................................................6 SECTION 4.8 Assistant Secretaries....................................6 SECTION 4.9 Controller...............................................6 SECTION 4.10 Assistant Controllers....................................7 SECTION 4.11 Treasurer................................................7 SECTION 4.12 Assistant Treasurers.....................................7 SECTION 4.13 General Counsel..........................................7 SECTION 4.14 Salaries.................................................7 SECTION 4.15 Retirement; Vacancies....................................7 ARTICLE V CAPITAL STOCK SECTION 5.1 Certificates.............................................7 SECTION 5.2 Record...................................................7 SECTION 5.3 Fixing of Record Date....................................7 SECTION 5.4 Transfers................................................8 SECTION 5.5 Lost Stock Certificates..................................8 ARTICLE VI CAPITAL STOCK SECTION 6.1 Fiscal Year..............................................8 SECTION 6.2 Corporate Seal...........................................8 SECTION 6.3 Resignations.............................................8 SECTION 6.4 Checks, Drafts, Notes and Other Negotiable Instruments...8 SECTION 6.5 Waiver of Notice.........................................8 SECTION 6.6 Indemnification and Insurance............................8 SECTION 6.7 Amendments...............................................9 ii BY-LAWS of FOSTER WHEELER CORPORATION ARTICLE I MEETINGS OF SHAREHOLDERS SECTION 1.1. PLACE OF MEETINGS. All meetings of the shareholders of the Corporation shall be held at such place either within or without the State of New York as shall be fixed by the Board of Directors and specified in the notice or waiver of notice of meeting. SECTION 1.2. ANNUAL MEETING. (a) The annual meeting of shareholders for the election of directors and for the transaction of such other business as properly may be brought before the meeting shall be held during the month of April in each year on such date and at such time as the Board of Directors shall specify by resolution. (b) At any annual meeting of shareholders of the Corporation, only such business shall be conducted as shall have been brought before the meeting (i) by or at the direction of the Board of Directors or (ii) by any shareholder of the Corporation who complies with the procedures set forth in this Section 1.2. For business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a shareholder's notice must be received by the Secretary at the Corporation's principal executive offices not less than 120 calendar days in advance of the date of the Corporation's proxy statement released to shareholders in connection with the previous year's annual meeting of shareholders. To be timely for consideration at the annual meeting of shareholders, a shareholder's notice must be received by the Secretary at the Corporation's principal executive offices not less than 45 calendar days, or such greater length of time as permitted by appropriate rules of the U.S. Securities and Exchange Commission, in advance of the anniversary of the date of the Corporation's proxy statement released to shareholders in connection with the previous year's annual meeting of shareholders. To be in proper written form, a shareholder's notice to the Secretary shall set forth in writing as to each matter the shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the Corporation's books, of the shareholder proposing such business, (iii) the class and number of shares of the Corporation which are beneficially owned by the shareholder and (iv) any material interest of the shareholder in such business. Notwithstanding anything in the By-Laws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 1.2. The chairman of an annual meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 1.2, and, if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. SECTION 1.3. SPECIAL MEETINGS. Special meetings of shareholders may be held whenever called in the manner and with the notice specified in the Certificate of Incorporation. The business transacted at all special meetings shall be limited to the purposes stated in the notice thereof. SECTION 1.4. NOTICE OF MEETINGS. Written notice of every meeting of shareholders stating the purpose for which the meeting is called and the time and place thereof shall be mailed, postage prepaid, not less than ten nor more than 60 days prior to the date set for the meeting, to each shareholder entitled to vote at such meeting as of the record date established by the Board of Directors pursuant to Section 5.3. Such notice shall be directed to a shareholder at his address as it shall appear on the books of the Corporation unless he shall have filed with the Secretary of the Corporation a written request that notices 1 intended for him be mailed to some other address, in which case it shall be mailed to the address designated in such request. SECTION 1.5. QUORUM. At any meeting of shareholders, except as otherwise expressly required by statute, by the Certificate of Incorporation, or by these By-Laws, the holders of record of a majority of the shares of stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of any business. If, however, such quorum shall not be present at any meeting of the shareholders, the shareholders present in person or by proxy shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting of the time and place of the holding of the adjourned meeting, until a quorum shall be present. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally called. SECTION 1.6. ORGANIZATION OF MEETINGS. At all meetings of shareholders, unless otherwise determined by the Board of Directors, the Chairman of the Board or, in his absence, the Vice Chairman, if one is elected, and if not the President shall preside and the Secretary or an Assistant Secretary shall act as Secretary. SECTION 1.7. VOTING. At each meeting of shareholders each shareholder shall be entitled to one vote, in person or by proxy, for each share of stock registered in the name of such shareholder as of the record date fixed by the directors, unless otherwise provided in the Certificate of Incorporation. SECTION 1.8. LIST OF SHAREHOLDERS. A list of shareholders as of the record date, certified by the corporate officer responsible for its preparation or by the transfer agent of the Corporation, shall be produced at any meeting of shareholders upon the request thereat or prior thereto of any shareholder. SECTION 1.9. INSPECTORS OF ELECTION. One or more inspectors of election may be appointed by the Board of Directors to act at any meeting of shareholders, or, if the Board fails to act, the chairman of the meeting may appoint an inspector or inspectors. An inspector of election may or may not be a shareholder, but shall not be a candidate for the office of director. The inspector(s) shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all shareholders. Each inspector, before entering upon the discharge of his duties, shall be sworn faithfully to execute the duties of an inspector at such meeting with strict impartiality, and according to the best of such person's ability. SECTION 1.10. NOMINATION OF DIRECTORS. (a) Only persons who are nominated in accordance with the procedures set forth in this Section 1.10 shall be eligible for election as directors, and no person shall be elected as a director of the Corporation unless nominated in accordance with the procedures set forth in this Section 1.10. No nominations for directors other than those made by the nominating committee shall be voted upon at the annual meeting unless other nominations by shareholders are made in accordance with the provisions of this Section 1.10. (b) The Committee on Nominees for Directors and Officers shall recommend to the Board of Directors nominees for election as Directors. The Board of Directors shall thereafter by resolution adopted at least 20 days before the annual meeting select Corporation nominees for election as Directors. Such resolution shall be reflected in the minutes of the Corporation as of the date of its adoption. (c) Nominations of individuals for election to the Board of Directors of the Corporation at an annual meeting of shareholders may be made by any shareholder of the Corporation entitled to vote for the election of directors at that meeting who complies with the notice procedures set forth in this Section 2 1.10. A shareholder's notice shall be received by the Secretary at the Corporation's principal executive offices not less than 120 calendar days in advance of the date of the Corporation's proxy statement released to shareholders in connection with the previous year's annual meeting of shareholders. Such shareholder's notice shall set forth (1) as to each person whom the shareholder proposes to nominate for election or re-election as a director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Corporation's stock which are beneficially owned by such person and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies with respect to nominees for election as directors, pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such person's written consent to being named in the proxy statement as a nominee and to serving as a director, if elected); and (2) as to the shareholder giving the notice (i) the name and address, as they appear on the books of the Corporation, of such shareholder, (ii) the class and number of shares of the stock of the Corporation which are beneficially owned by such shareholder, and (iii) the period of time such shares have been owned. (d) At the request of the Board of Directors, any person nominated by the Board of Directors for election as a director shall furnish to the Secretary of the Corporation the information required to be set forth in a shareholder's notice of nomination which pertains to the nominee, together with the required written consents. (e) The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by these By-Laws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. (f) Ballots bearing the names of all the persons nominated by the Board of Directors and by shareholders shall be provided for use at the annual meeting. If the Board of Directors shall fail or refuse to act at least 20 days prior to the annual meeting, nominations for directors may be made at the annual meeting by any shareholder entitled to vote and shall be voted upon. ARTICLE II BOARD OF DIRECTORS SECTION 2.1. TERM AND QUALIFICATIONS. The business, property and affairs of the Corporation shall be overseen and controlled by the Board of Directors. Each director shall be the owner of at least 100 shares of common stock of the Corporation at the time of his election and at least 1,000 shares by the third anniversary of such election, provided shares of common stock of the Corporation are generally available for purchase. Directors holding office on June 27, 1995 shall not be required to own 1,000 shares of such stock until June 27, 1998. Directors elected to the Board of Directors after July 1, 1995 must retire from the Board before reaching age 70. Directors elected before such date shall not serve as a Director once attaining the age of 72. The directors shall be elected for the terms specified in the Certificate of Incorporation and shall hold office until their respective successors are duly elected and qualified. The number of directors may be increased or decreased from time to time by a majority of the entire Board of Directors within the limits specified in the Certificate of Incorporation but no decrease of the number of directors shall change the term of office of any director in office at the time thereof. If the number of directors is increased, the additional director or directors shall be elected and shall serve as specified in the Certificate of Incorporation. As used in these By-Laws, "entire Board of Directors" means the total number of directors which the Corporation would have if there were no vacancies in the Board of Directors. If the status of a director changes, the director shall submit his resignation from the Board of Directors to the Chairman of the Board who shall recommend to the Committee on Nominees for Directors and 3 Officers either to accept such resignation or to request the director to reconsider and continue to serve on the Board. The Committee shall then make its recommendation to the Board. For purposes of this SECTION of the By-Laws, change of status shall mean retirement, change of employer or occupation, or material change in responsibilities. SECTION 2.2. VACANCIES. If the office of any director becomes vacant for any reason, a successor shall be selected in the manner and for the term specified in the Certificate of Incorporation. SECTION 2.3. PLACES OF DIRECTORS' MEETINGS. The Board of Directors may hold meetings at such place or places within or without the State of New York as the Board of Directors may from time to time determine or as specified or fixed in the respective notices or waivers of notice thereof. SECTION 2.4. REGULAR MEETINGS. Regular meetings of the Board of Directors shall be held without notice on the last Tuesday of each month, except May, August and December, if not a legal holiday, or, if a legal holiday, then on the next succeeding day not a legal holiday, at ten thirty o'clock a.m., or on such other date or at such other time as may be determined by the Board of Directors, except that one meeting shall be held immediately following adjournment of each annual meeting of shareholders and such meeting shall be in lieu of the meeting to be held in the month of such annual meeting. Any business may be conducted at any regular meeting, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation or by Section 6.7 or other provisions of these By-Laws. SECTION 2.5. SPECIAL MEETINGS. Special meetings of the Board of Directors shall be called by the Secretary when directed to call such meetings by the Chairman of the Board or, if the Chairman is incapacitated, by the written request of a majority of directors. SECTION 2.6. NOTICE OF SPECIAL MEETINGS. Notice of the time, date, place and purpose of each special meeting of the Board of Directors shall be mailed to each director, addressed to him at his residence or usual place of business, at least two days before the day on which the meeting is to be held, or shall be given to him at such place personally or by telegraph or telephone not later than the day before the day on which the meeting is to be held. Notice of any meeting need not be given to any director if waived by him in writing either before or after such meeting. At any meeting at which every member of the Board of Directors shall be present, though held without notice, any business may be transacted which might have been transacted if the meeting had been duly called. SECTION 2.7. ORGANIZATION OF MEETINGS. At all meetings of the Board of Directors, the Chairman of the Board or, in his absence, the Vice Chairman, if one is elected, and if not the President shall preside and the Secretary shall act as secretary. In the absence of such officers, a chairman or secretary of the meeting, or both, as the case may be, shall be elected from those present. SECTION 2.8. QUORUM. At each meeting of the Board of Directors, the presence of at least a majority of the entire board shall constitute a quorum for the transaction of any business and any act of the directors present at a meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation or by these By-Laws. SECTION 2.9. ACTION WITHOUT MEETING. Unless otherwise restricted by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or such committee, as the case may be, consent in writing to the adoption of a resolution authorizing the action and such resolution and written consents thereto by the members of the Board of Directors or committee are filed with the minutes of the proceedings of the Board of Directors or committee. SECTION 2.10. TELEPHONIC MEETINGS. At the request of the Chairman any one or more members of the Board or any Committee thereof may participate in a special meeting, or for quorum purposes in any meeting, of such Board or Committee by means of conference telephone or similar communications 4 equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence at the meeting. SECTION 2.11. COMPENSATION. The Chairman of the Board and each director shall be entitled to receive such compensation and expense allowances as the Board of Directors may from time to time determine. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. SECTION 2.12. DIRECTORS EMERITUS. The Board of Directors may appoint any former director as a director emeritus for terms of one year to serve on an advisory committee to the Board of Directors consisting of all directors emeritus. Directors emeritus shall receive fees or other compensation fixed by the Board of Directors not to exceed fees and compensation paid to regular members of the Board of Directors. Directors emeritus shall be eligible to attend all meetings of the Board of Directors but shall not be eligible to vote or be counted in determining the presence of a quorum. ARTICLE III COMMITTEES SECTION 3.1. EXECUTIVE COMMITTEE. The Board of Directors, by resolution adopted by a majority of the entire Board of Directors, may designate an Executive Committee to serve at the pleasure of the Board of Directors, consisting of not less than three nor more than seven members of the Board of Directors, including the Chairman of the Board and the President. Any vacancy occurring in the Executive Committee, from whatever cause, may be filled by a majority of the entire Board of Directors. Each member of the Executive Committee shall hold office, so long as he shall remain a director, until his successor is duly appointed and qualified, or a majority of the Board of Directors designates a new Executive Committee. The Executive Committee shall keep full and accurate minutes of all its proceedings and report the same, together with a statement of all business transacted by it, to the Board of Directors at the next regular meeting thereof. SECTION 3.2. POWERS OF EXECUTIVE COMMITTEE. During the intervals between meetings of the Board of Directors, the Executive Committee shall have and may exercise all of the powers of the Board of Directors, except as restricted by law, in all cases in which specific directions have not been given by the Board of Directors. SECTION 3.3. QUORUM OF EXECUTIVE COMMITTEE; PROCEDURE. At all meetings of the Executive Committee, the presence of a majority of its members shall be necessary to constitute a quorum, and the concurrence or consent of a majority of the members present shall be necessary for action on any matter. The Executive Committee shall fix its own rules of procedure and meet at such times and places as the Chairman of the Board may direct. SECTION 3.4. OTHER COMMITTEES. The Board of Directors may from time to time, by resolution passed by a majority of the entire Board of Directors, designate one or more committees of the Board of Directors in addition to the Executive Committee and delegate to any of them such powers and duties, not inconsistent with statute or these By-Laws, as the Board of Directors may determine. SECTION 3.5. COMPENSATION AND EXPENSES. Each member of the Executive Committee and other committees shall be entitled to receive such compensation and expense allowance for attendance at meetings of their respective committees as the Board of Directors from time to time may fix and determine. 5 ARTICLE IV OFFICERS SECTION 4.1. GENERAL PROVISIONS. The principal officers of the Corporation shall be a Chairman of the Board, a Vice Chairman, a President, one or more Vice Presidents (the number thereof and variations in title to be determined by the Board of Directors), a Secretary, a Treasurer, a Controller, and such other officers as the Board of Directors may designate. Any two offices except those of Chairman of the Board and Vice Chairman or President and Secretary may be held by the same person. SECTION 4.2. ELECTION OF OFFICERS. The Board of Directors shall elect, at its first meeting after its election by the shareholders, a Chairman of the Board and a President from among its number and one or more Vice Presidents, a Secretary, a Treasurer and a Controller. The Board of Directors may elect a Vice Chairman from among its number and such other officers including one or more Assistant Secretaries, Assistant Controllers and Assistant Treasurers, as it shall deem necessary, who shall have such authority and perform such duties as may be prescribed by the Board of Directors. Each officer so elected shall hold office until the first meeting of the Board of Directors following the next annual meeting of shareholders for the election of directors and until his successor is elected, except in the event of his death, resignation or removal or the earlier termination of his term of office. SECTION 4.3. CHAIRMAN OF THE BOARD. Except as otherwise provided in these By-Laws, the Chairman of the Board shall preside at all meetings of the shareholders and of the Board of Directors. He shall be the chief executive officer of the Corporation and shall perform all functions and duties incidental to that position, and shall have such additional powers and duties as may from time to time be assigned to him by the Board of Directors. SECTION 4.4. VICE CHAIRMAN. In the event of the absence or incapacity of the Chairman of the Board, the Vice Chairman shall preside at meetings of the shareholders and the Board of Directors, and shall have such other duties as the Chairman of the Board or the Board of Directors may assign from time to time. SECTION 4.5. PRESIDENT. The President shall be the chief operating officer of the Corporation and shall perform all functions and duties incidental to that position and such other duties as may from time to time be assigned to him by the Chairman of the Board or the Board of Directors. SECTION 4.6. VICE PRESIDENTS. Vice Presidents shall have such powers and perform such duties as may be assigned by the President or the Chairman of the Board. The Board of Directors in its discretion may assign to the titles of individual vice presidents terms such as "executive", "senior", "special", or others indicative of levels or areas of responsibility. SECTION 4.7. SECRETARY. The Secretary shall record or cause to be recorded in books provided for that purpose the minutes of the meetings of the shareholders, the Board of Directors, and all committees of which a secretary shall have been appointed. He shall be responsible for keeping the list of shareholders, and shall give or cause to be given notice of all meetings of shareholders, directors and committees. He shall have custody of the seal of the Corporation and shall perform such other duties as may from time to time be assigned by the Chairman of the Board or the President. He shall perform in general all duties incident to the office of Secretary. SECTION 4.8. ASSISTANT SECRETARIES. The Board of Directors may from time to time appoint additional Assistant Secretaries. In the event of the absence or disability of the Secretary, his duties and powers shall be performed and exercised by an Assistant Secretary. SECTION 4.9. CONTROLLER. The Controller shall maintain adequate records of all assets, liabilities and transactions of the Corporation. He shall see that adequate audits thereof are regularly made, and shall be charged with the preparation and filing of tax returns and the supervision of all matters relating to taxes. 6 He shall render financial and accounting reports as required by the Chairman of the Board, the President or the Board of Directors or as necessary to the proper conduct of business. SECTION 4.10. ASSISTANT CONTROLLERS. The Board of Directors may from time to time appoint one or more Assistant Controllers, who shall perform the duties and exercise the powers of the Controller in his absence or disability. SECTION 4.11. TREASURER. The Treasurer shall have charge and custody of and be responsible for all funds and securities of the Corporation and shall deposit all such funds to the credit of the Corporation in such depositories as may be designated from time to time by the Board of Directors. He shall disburse the funds of the Corporation as may from time to time be ordered by the Chairman of the Board or the President. He shall render to the Chairman of the Board, the President, Board of Directors and shareholders upon request an account of all his transactions as Treasurer. SECTION 4.12. ASSISTANT TREASURERS. The Board of Directors may from time to time appoint one or more Assistant Treasurers, who shall perform the duties and exercise the powers of the Treasurer in his absence or disability. SECTION 4.13. GENERAL COUNSEL. The General Counsel shall be the chief legal officer of the Corporation and shall perform all functions and duties incidental to that position and such other duties as may from time to time be assigned to him by the Chairman of the Board or by the Board of Directors. SECTION 4.14. SALARIES. The salaries of the officers of the Corporation elected by the Board of Directors, except for those officers who are designated as assistant officers, shall be fixed from time to time by the Board of Directors. SECTION 4.15. RETIREMENT; VACANCIES. Each officer shall retire on the first day of the month following attainment of age 65; however at the request of the Board of Directors, an officer may continue in that capacity after age 65 for a defined period. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors at any regular or special meeting thereof. ARTICLE V CAPITAL STOCK SECTION 5.1. CERTIFICATES. Certificates for shares of capital stock of the Corporation shall be in such form as shall be approved by the Board of Directors. All such certificates shall be signed by the Chairman of the Board, President or a Vice President and by the Secretary or Treasurer or Assistant Secretary or Assistant Treasurer, and sealed with the seal of the Corporation. Such seal may be facsimile, engraved or printed. When any such certificate is signed by a transfer agent or transfer clerk and by a registrar, the signatures of any such officers upon such certificate may be facsimiles, engraved or printed. Any certificate bearing the signature or facsimile signature of any such officer may be issued by the Corporation, although he has ceased to be such officer at the date of such issuance. The Board of Directors may make such rules and regulations as it deems advisable to the issue, transfer and registration of such certificates, and may appoint a transfer agent or registrar or both, and require all such certificates to bear the signature of such transfer agent, or registrar, or both. SECTION 5.2. RECORD. A record shall be kept of the names of the person, firm or corporation owning the stock represented by each certificate for stock of the Corporation issued, the number of shares represented by each such certificate and the date thereof, and, in the event of cancellation, the date of cancellation. The person in whose name the shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. SECTION 5.3. FIXING OF RECORD DATE. The Board of Directors may fix a day not more than 60 days prior to the day of holding any meeting of shareholders as the time as of which shareholders entitled to notice of and to vote at such meeting shall be determined, and all persons who are holders of record at 7 such time and no others shall be entitled to notice of and to vote at such meeting. The Board of Directors may also fix a day not exceeding 40 days preceding the date fixed for the payment of any dividend or for the delivery of evidences of rights, as the time as of which shareholders entitled to receive any such dividend or rights shall be determined. SECTION 5.4. TRANSFERS. Stock certificates shall be transferable (so far as the Corporation is concerned) only on the books of the Corporation on surrender of the certificates properly endorsed and stamped, and accompanied by such waivers and certificates as may be legally required, whereupon the old certificates shall be canceled and new certificates issued to the transferees in lieu thereof. SECTION 5.5. LOST STOCK CERTIFICATES. Any person claiming a certificate of stock to be lost or destroyed shall make affidavit or affirmation of the fact to the Corporation. Unless otherwise determined by the Board of Directors, the proper officers of the Corporation shall issue a new certificate representing the same number of shares only after the person claiming to be the owner, or his legal representative, shall have given the Corporation a bond of indemnity, in form and with surety or sureties and in an amount approved by the Corporation's counsel. ARTICLE VI MISCELLANEOUS PROVISIONS SECTION 6.1. FISCAL YEAR. The Corporation's fiscal year is the 52 or 53-week annual accounting period ending the last Friday in December for domestic operations, and December 31 for foreign operations. SECTION 6.2. CORPORATE SEAL. The corporate seal of the Corporation shall be circular in form with the name of the Corporation in the circumference and "New York" in the center. SECTION 6.3. RESIGNATIONS. Any director or officer of the Corporation may resign his office at any time upon presenting his written resignation to the Board of Directors, and unless some time be fixed for the taking effect of such resignation, the same shall become effective immediately. The acceptance of a resignation shall not be required to make it effective. SECTION 6.4. CHECKS, DRAFTS, NOTES AND OTHER NEGOTIABLE INSTRUMENTS. All checks, drafts, notes and other negotiable instruments made by the Corporation shall be signed by such officer or officers or agents as the Chairman of the Board or the President from time to time may designate. SECTION 6.5. WAIVER OF NOTICE. Any shareholder, officer or director may waive any notice required to be given under these By-Laws. SECTION 6.6. INDEMNIFICATION AND INSURANCE. (a) Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, or appeal thereof, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the New York Business Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including, but not limited to, all attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent 8 and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in subsection (b) of this Section 6.6, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this subsection (a) shall be a contract right and shall include the right to be paid by the Corporation the expenses (including, without limitation, attorneys' fees) incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the New York Business Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section 6.6 or otherwise. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers, or on such other terms and conditions as the Board of Directors may deem necessary or desirable. (b) Right of Claimant to Bring Suit. If a claim under subsection (a) of this Section 6.6 is not paid in full by the Corporation within 30 days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense (including, without limitation, attorneys' fees) of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the New York Business Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, or any part thereof, independent legal counsel, or its shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the New York Business Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, or any part thereof, independent legal counsel, or its shareholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (c) Non-Exclusivity of Rights. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section 6.6 shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of shareholders or disinterested directors or otherwise. (d) Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, to the fullest extent allowed by law, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the New York Business Corporation Law. SECTION 6.7. AMENDMENTS. These By-Laws may be amended or repealed, or new By-Laws may be adopted at any time by the affirmative vote of the holders of a majority of the stock entitled to vote at any meeting of shareholders or by the affirmative vote of a majority of the entire Board of Directors at any meeting of the Board of Directors. No proposal to amend the By-Laws shall be acted upon at any meeting of the Board of Directors unless notice of such proposal, setting out the substance of the proposed 9 amendment, has been given to each director at least five business days prior to the meeting at which such proposal is to be acted upon or unless all directors unanimously waive giving of such notice. ------------------------------------------------------------ SECRETARY'S CERTIFICATE I, the undersigned, Secretary of Foster Wheeler Corporation, do hereby certify that the foregoing is a true copy of the By-Laws of said Corporation as amended to the date hereof, and that said By-Laws are now in full force and effect. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of said Corporation this _______day of _________, 20____. (CORPORATE SEAL) Secretary EX-10.3 3 a2039308zex-10_3.txt EXHIBIT 10.3 Exhibit 10.3 AMENDMENT AND CONSENT TO AMENDED AND RESTATED SHORT TERM REVOLVING CREDIT AGREEMENT AMENDMENT AND CONSENT TO AMENDED AND RESTATED SHORT TERM REVOLVING CREDIT AGREEMENT, dated as of May 31, 2000, among FOSTER WHEELER CORPORATION (herein referred to as the "BORROWER"), the guarantors party hereto (the "GUARANTORS"), the lenders party hereto (each a "LENDER" and collectively, the "LENDERS"), BANK OF AMERICA, N. A., in its capacity as administrative agent for the Lenders (in such capacity, the "ADMINISTRATIVE AGENT"), and FIRST UNION NATIONAL BANK, as Syndication Agent and ABN AMRO BANK N.V., as Documentation Agent. W I T N E S S E T H: WHEREAS, the Borrower, the Guarantors, the Lenders, the Administrative Agent, the Syndication Agent and the Documentation Agent are parties to that certain Amended and Restated Short Term Revolving Credit Agreement, dated as of December 1, 1999 (the "CREDIT AGREEMENT"); and WHEREAS, the Borrower and the Guarantors have requested that the Credit Agreement be amended in certain respects; and WHEREAS, the Borrower has also requested, as permitted under Section 2.18 of the Credit Agreement, that the Lenders consent to an extension of the Revolving Credit Maturity Date for an additional 364 day period after which the then effective Revolving Credit Maturity Date shall be May 30, 2001 (the "EXTENSION") and waive certain provisions applicable thereto; and WHEREAS, the undersigned Lenders and the Agents party hereto are willing to so amend the Credit Agreement and consent to the Extension, subject to the terms and conditions hereinafter set forth; NOW, THEREFORE, the parties hereto, in consideration of their mutual covenants and agreements hereinafter set forth and intending to be legally bound thereby, covenant and agree as follows: 1. GENERAL. All terms used herein which are not otherwise specifically defined herein shall have the same meaning herein as defined in the Credit Agreement as further amended hereby. 2. EXTENSION CONSENT. As permitted under Section 2.18 of the Credit Agreement, the undersigned Lenders do hereby consent to the Extension, and this consent shall constitute notice by the undersigned Lenders of their consent as required by Section 2.18 of the Credit Agreement. 3. WAIVER. The Borrower and the undersigned Lenders do hereby waive the 30 day and 27 day prior notice provisions in the fourth sentence of Section 2.18 with regard to the Extension. 4. PAYMENTS GENERALLY; INTEREST ON OVERDUE AMOUNTS. Section 2.15 of the Credit Agreement shall be and is hereby amended by adding in the appropriate alphabetical order a new subsection as follows: "(c) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Lenders hereunder that the Borrower will not make such payment in full, the Administrative Agent may assume that the Borrower has made such payment in full to the Administrative Agent on such date and the Administrative Agent may, in reliance upon such assumption, cause to be distributed to each Lender on such due date an amount equal to the amount then due such Lender. If and to the extent that the Borrower shall not have so made such payment, each Lender shall repay to the Administrative Agent forthwith on demand such amount distributed to such Lender together with interest thereon, for each day from the date such amount is distributed to such Lender until the date such Lender repays such amount to the Administrative Agent, at the Federal Funds Effective Rate." 5. ASSIGNMENTS. Section 10.14 of the Credit Agreement shall be and is hereby amended by deleting the language of subsection (c)(v) thereto and inserting the following language in its place: "to the extent the Other Credit Agreement is in effect, the assigning Lender, to the extent such Lender has a commitment under the Other Credit Agreement, shall assign the same percentage of its "Commitment" under the Other Credit Agreement concurrently with such assignment." 6. REPRESENTATIONS. In order to induce the Lenders to execute and deliver this Amendment, the Borrower hereby represents to the Lenders that as of the date hereof the representations and warranties set forth in Article III of the Credit Agreement are and shall be and remain true and correct (except that the representations contained in Section 3.06 shall be deemed to refer to the most recent financial statements of the Borrower delivered to the Lenders) and the Borrower is in compliance with the terms and conditions of the Credit Agreement and no Default or Event of Default has occurred and is continuing under the Credit Agreement or shall result after giving effect to this Amendment. 7. EFFECTIVENESS. This Amendment and Consent shall become effective (i) when it shall be executed by the Borrower and those Lenders with an aggregate Revolving Credit Commitment Amount equal to or exceeding 85% of the Total Revolving Credit Commitment in effect as of the 10th day prior to the current Revolving Credit Maturity Date, (ii) each Guarantor shall have executed and delivered to the Lenders their consent to this Amendment in the form set forth below and (iii) the Administrative Agent shall have received copies (executed or certified, as may be appropriate) of all legal documents or proceedings taken in connection with the -2- execution and delivery of this Amendment to the extent the Administrative Agent or its counsel may reasonably request. This Amendment and Consent may be executed in separate counterparts, all of which taken together shall constitute one and the same instrument. This agreement shall be construed and determined in accordance with the laws of the State of New York. Except as herein specifically amended, the Credit Agreement shall be and remain in full force and effect and wherever reference is made in any note, document, letter or other communication to the Credit Agreement, such reference shall, without more, be deemed to refer to the Credit Agreement as amended hereby. The consent and waiver provided in paragraphs 2 and 3 hereof shall be limited specifically as provided for therein and this Amendment and Consent shall not constitute a consent to any other transaction or waiver of the application of the Sections of the Credit Agreement referred to in paragraphs 2 and 3 hereof to any other transaction nor shall it be a waiver or modification of any other term, provision or condition of the Credit Agreement or waiver of any Default or Event of Default except as expressly set forth herein and shall not prejudice or be deemed to prejudice any right that the Agent or any Lender may now have or may have in the future under the Credit Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] -3- IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Agreement as of the date first above written. ATTEST: FOSTER WHEELER CORPORATION, as Borrower By By ---------------------------- ------------------------------------- Title: Title: FOSTER WHEELER USA Corporation, as Guarantor By Title: FOSTER WHEELER ENERGY INTERNATIONAL, INC., as Guarantor By Title: FOSTER WHEELER ENERGY CORPORATION, as Guarantor By Title: BANK OF AMERICA, N.A., individually and as Administrative Agent By Title: FIRST UNION NATIONAL BANK, individually and as Syndication Agent By Title: ABN AMRO BANK N.V., individually and as Documentation Agent By Title: By Title: TORONTO DOMINION (TEXAS), INC. By Title: NATIONAL WESTMINSTER BANK PLC, NEW YORK BRANCH By Title: NATIONAL WESTMINSTER BANK PLC, NASSAU BRANCH By Title: THE BANK OF NOVA SCOTIA By Title: BANK OF TOKYO-MITSUBISHI TRUST COMPANY By Title: CITIBANK, N.A. By Title: PARIBAS By Title: PNC BANK, NATIONAL ASSOCIATION By Title: SOCIETE GENERALE, NEW YORK BRANCH By Title: GUARANTORS' ACKNOWLEDGEMENT AND CONSENT The undersigned, Foster Wheeler USA Corporation, Foster Wheeler Energy International, Inc. and Foster Wheeler Energy Corporation, heretofore, under Article IX of the Credit Agreement, guaranteed any and all of the Guaranteed Obligations to the Creditors. The undersigned hereby consent to the Amendment to the Credit Agreement as set forth above and confirm that all of the undersigned obligations under the Credit Agreement remain in full force and effect. The undersigned further agree that the consent of the undersigned to any further amendments to the Credit Agreement shall not be required as a result of this consent having been obtained, except to the extent, if any, required by the Credit Agreement. FOSTER WHEELER USA Corporation, as Guarantor By Title: FOSTER WHEELER ENERGY INTERNATIONAL, INC., as Guarantor By Title: FOSTER WHEELER ENERGY CORPORATION, as Guarantor By Title: EX-12 4 a2039308zex-12.txt EXHIBIT 12 EXHIBIT 12 FOSTER WHEELER CORPORATION STATEMENT OF COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES AND COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDEND REQUIREMENTS ($000'S)
Fiscal Year ----------- 2000 1999 1998 1997 1996 --------- --------- --------- --------- --------- EARNINGS/(LOSS): Net Earnings\(Loss) ............... $ 39,494 $(143,635) $ (31,506) $ 5,624 $ 82,240 Taxes on Income ................... 16,529 (46,891) 79,295 13,892 44,626 Total Fixed Charges ............... 95,973 94,036 88,994 84,541 74,002 Capitalized Interest .............. (151) (4,643) (9,749) (10,379) (6,362) Capitalized Interest Amortized .... 2,416 2,184 2,265 2,184 2,528 Equity Earnings of non-consolidated affiliated companies accounted for by the equity method, net of dividends ................... (8,882) (11,002) (7,869) (9,796) (1,474) --------- --------- --------- --------- --------- $ 145,379 $(109,951) $ 121,430 $ 86,066 $ 195,560 ========= ========= ========= ========= ========= FIXED CHARGES: Interest Expense .................. $ 83,254(1) $ 70,213(1) $ 62,535 $ 54,675 $ 54,940 Capitalized Interest .............. 151 4,643 9,749 10,379 6,362 Imputed Interest on non-capitalized lease payment ........................ 12,568 19,180 16,710 19,487 12,700 --------- --------- --------- --------- --------- $ 95,973 $ 94,036 $ 88,994 $ 84,541 $ 74,002 ========= ========= ========= ========= ========= Ratio of Earnings to Fixed Charges ........................ 1.51 --(2) 1.36 1.02 2.64 ========= ========= ========= ========= =========
* There were no preferred shares outstanding during any of the periods 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 each period indicated. (1) Includes in 2000 and 1999, dividends on preferred security of $15,750 and $15,181, respectively. (2) Earnings are inadequate to cover fixed charges. The coverage deficiency is $203,987. EX-21 5 a2039308zex-21.txt EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT FOSTER WHEELER CORPORATION (PARENT) PRINCIPAL CONSOLIDATED, WHOLLY OWNED SUBSIDIARIES (DIRECTLY OR INDIRECTLY) Listed by Jurisdiction of Organization AUSTRALIA Foster Wheeler Australia Proprietary Limited, Melbourne BERMUDA Continental Finance Company, Ltd., Hamilton FW Management Operations, Ltd., Hamilton Foster Wheeler Trading Co. Ltd., Hamilton Perryville Service Company Ltd., Hamilton York Jersey Liability Ltd., Hamilton BRAZIL Foster Wheeler America Latina Ltda., Sao Paulo CANADA Foster Wheeler Limited, Ontario Foster Wheeler Canadian Resources Limited, Alberta Foster Wheeler Fired Heaters, Ltd., Calgary La Societe D'Energie Foster Wheeler Ltd., Quebec CHANNEL ISLANDS FW Channel Islands Limited, Jersey CHILE Foster Wheeler Chile, S.A., Santiago Foster Wheeler Talcahuano Operaciones y Mantenciones Ltda FINLAND Foster Wheeler Energia Oy, Helsinki FRANCE Foster Wheeler France, S.A., Paris GERMANY Foster Wheeler Energie GmbH, Dusseldorf GREECE Foster Wheeler Hellas Engineering and Construction AE, Athens HUNGARY FW Hungary Licensing Limited Liability Company, Hungary INDIA Foster Wheeler India Private Limited, Chennai INDONESIA Foster Wheeler (Indonesia) Ltd., Jakarta P.T. Foster Wheeler Services, Jakarta ITALY Foster Wheeler Continental Europe S.r.l., Milan Foster Wheeler Environmental Italia, S.r.l., Milan Foster Wheeler Italiana, S.p.A., Milan Lomellina Energia Operator S.r.l., Milan Steril, S.p.A., Milan World Services Italia S.p.A., Milan MALAYSIA Foster Wheeler (Malaysia) Sdn. Bhd., Kuala Lumpur MAURITIUS P.E. Consultants, Inc., Port Louis MEXICO Foster Wheeler Ingenieros y Constructores, S.A. de C.V., Quadalajara NETHERLANDS ANTILLES Foster Wheeler N.V., Curacao NETHERLANDS Foster Wheeler Continental B.V., Amsterdam Foster Wheeler Europe B.V., Amsterdam FW Energie B.V., Amsterdam FW Europe B.V., Amsterdam FW Netherlands C.V., Amsterdam NIGERIA Foster Wheeler (Nigeria) Ltd., Lagos PHILIPPINES Foster Wheeler (Philippines) Corporation, Makati City POLAND Foster Wheeler Energia Polska Sp. Zo.o., Warsaw PORTUGAL F.W.-Gestao E Servicos, S.A., Funchal SINGAPORE (REPUBLIC OF) Foster Wheeler Eastern Private, Ltd., Singapore Foster Wheeler Energy Pte. Ltd., Singapore Foster Wheeler Vietnam Private Ltd., Singapore SOUTH AFRICA Foster Wheeler South Africa (Pty.) Ltd., Midrand SPAIN Foster Wheeler Iberia, S.A., Madrid F.I. Controles, S.A., Madrid SWEDEN Foster Wheeler Energi AB, Norrkoping THAILAND Foster Wheeler Service (Thailand) Limited, Bankok TURKEY Foster Wheeler BIMAS Birlesik Insaat Ve Muhendislik, A. S., Istanbul UNITED KINGDOM Foster Wheeler Energy Limited, Reading Foster Wheeler Environmental (U.K.) Ltd., Reading Foster Wheeler Europe Limited, Reading EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT FOSTER WHEELER CORPORATION (PARENT) PRINCIPAL CONSOLIDATED, WHOLLY OWNED SUBSIDIARIES (DIRECTLY OR INDIRECTLY) Listed by Jurisdiction of Organization Foster Wheeler Limited, Reading Foster Wheeler (London) Limited, Reading Foster Wheeler (Pacific) Ltd., Reading Foster Wheeler (Indonesia) Ltd., Reading Foster Wheeler World Services, Limited, Reading FW Management Operations (U.K.) Ltd., Reading Foster Wheeler Petroleum Development Ltd., Reading Foster Wheeler (Process Plants) Limited, Reading Foster Wheeler G.B. Limited, Reading International Management Systems, Ltd., Reading Operations International Limited, Reading Process Industries Agency Limited, Reading Process Plants Suppliers Limited, Reading UNITED STATES A/C Power, Maryland Adirondack Resource Recovery Associates, L.P., Delaware Camden County Energy Recovery Associates L.P., Delaware Camden County Energy Recovery Corp., Delaware Equipment Consultants, Inc., Delaware Fosterfarms, Inc., Deleware Foster Wheeler Adirondack, Inc., Delaware Foster Wheeler Andes, Inc., Delaware Foster Wheeler Arabia Ltd., Delaware Foster Wheeler Asia Ltd., Delaware Foster Wheeler Avon, Inc., Delaware Foster Wheeler Bedminster, Inc., Delaware Foster Wheeler Bridgewater, Inc., Delaware Foster Wheeler Broome County, Inc., Delaware Foster Wheeler Camden Holdings, Inc., Delaware Foster Wheeler Camden, L.P., Delaware Foster Wheeler Canoas, Inc., Delaware Foster Wheeler Capital & Finance Corporation, Delaware Foster Wheeler Charleston Resource Recovery, Inc., Delaware Foster Wheeler China, Inc., Delaware Foster Wheeler Constructors, Inc., Delaware Foster Wheeler Continental U.S. Inc., Delaware Foster Wheeler Development Corporation, Delaware Foster Wheeler Energy China, Inc., Delaware Foster Wheeler Energy Corporation, Delaware Foster Wheeler Energy International, Inc., Delaware Foster Wheeler Energy Manufacturing, Inc., Delaware Foster Wheeler Energy Services, Inc., California Foster Wheeler Environmental Corporation, Texas Foster Wheeler Facilities Management, Inc., Delaware Foster Wheeler Funding Corporation, Delaware Foster Wheeler Greenhouses, L.P., Delaware Foster Wheeler Hudson Falls, Inc., Delaware Foster Wheeler Hydrobras, Inc., Delaware Foster Wheeler Hydroven, Inc., Delaware Foster Wheeler Hydrox, Inc., Delaware Foster Wheeler Intercontinental Corporation, Delaware Foster Wheeler International Corporation, Delaware Foster Wheeler Maintenance, Inc., Delaware Foster Wheeler Martinez, Inc., Delaware Foster Wheeler Middle East Corporation, Delaware Foster Wheeler Mt. Carmel, Inc., Delaware Foster Wheeler Operations, Inc., Delaware Foster Wheeler Penn Resources, Inc., Delaware Foster Wheeler Power Corporation, Delaware Foster Wheeler Power Systems, Inc., Delaware Foster Wheeler Pyropower, Inc., New York Foster Wheeler Real Estate Development Corporation, Delaware Foster Wheeler Rio Grande, L.P., Delaware Foster Wheeler Santiago, Inc., Delaware Foster Wheeler Twin Cities, Inc., Delaware Foster Wheeler USA Corporation, Delaware Foster Wheeler Virgin Islands, Inc., Delaware Foster Wheeler Wood Resources, Inc., Delaware Foster Wheeler World Services Corp., Delaware Foster Wheeler Zack, Inc., Delaware FW Licensing Services, GP, Delaware FW Technologies Holding, LLC, Delaware FWPS Specialty Products, Inc., Delaware GTC Technology Corporation, Delaware Hartman Consulting Corporation, Delaware Martinez Cogen Limited Partnership, Delaware Process Consultants, Inc., Delaware Pyropower Operating Services Company, Inc., California VENEZUELA Foster Wheeler Caribe Corporation, C.A., Caracas EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT FOSTER WHEELER CORPORATION (PARENT) PRINCIPAL CONSOLIDATED, OWNED SUBSIDIARIES (DIRECTLY OR INDIRECTLY) Listed by Jurisdiction of Organization BERMUDA The Hydrogen Company of Paraguana Ltd., Hamilton (50%) BRAZIL BOC/FW Canoas Hidrogenio Ltda., Rio de Janiero (50%) CHILE Compania de Hidrogeno de Talcahuano, Santiago (51%) Petropower Energia Limitada, Santiago (85%) CHINA, PEOPLES REPUBLIC OF Foster Wheeler Power Machinery Company Limited, Guangdong Province (52%) COLOMBIA Foster Wheeler Andina, S.A., Bogota (83.6%) FINLAND Oy Bioflow A.B., Helsinki (51%) IRELAND Project Management Holdings Limited (25%) ITALY Centro Energia Operator Teverola, S.r.l., Teverola (50%) Centro Energia Gas S.p.A., Milan (50%) Centro Energia Operator Ferrara S.r.l., Milan (50%) SEF S.r.l., Milan (50%) SET S.r.l., Milan (25%) S.T.A.I. S.p.A., Brescia (40%) Trieste Sviluppo S.r.l., Milan (60%) URBE Energia S.r.l., Rome (50%) Voghera Energia S.r.l., Pavia (40%) JAPAN Foster Wheeler K.K., Tokyo (85%) NIGERIA Foster Wheeler Environmental Company Nigeria Limited, Lagos (87%) NORWAY Sorco Holdings AS, Stavanger (11.1%) OMAN Chiyoda-Foster Wheeler and Company LLC, Muscat (32.5%) POLAND Foster Wheeler Energy FAKOP Ltd., Sosnowiec (51%) THAILAND Thai Maintenance Contracting Company Limited, Rayong (49%) UNITED STATES Foster Wheeler Coque Verde, L.P., Delaware (85%) ThermoEnergy Environmental Corporation, New Jersey (50.1%) VENEZUELA OTEPI FW, S.A., Caracas (50%) EX-23 6 a2039308zex-23.txt EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statements of Foster Wheeler Corporation on (1) Form S-3 (File Nos. 33-61809, 333-52369, 333-52369-01 and 333-52369-02) and (2) Form S-8 (File Nos. 33-40878, 33-34694, 33-59739, 333-25945 and 333-77125) of Foster Wheeler Corporation of our report, dated January 30, 2001 (except as to note 8 to the consolidated financial statements for which the date is March 5, 2001) relating to the consolidated financial statements included in this Form 10-K. PricewaterhouseCoopers LLP Florham Park, New Jersey March 5, 2001 EX-27 7 a2039308zex-27.txt EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF EARNINGS FOR THE YEAR ENDED DECEMBER 29, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-29-2000 DEC-31-1999 DEC-29-2000 191,893 1,816 889,166 0 464,329 1,622,976 865,349 370,315 3,477,528 1,454,603 561,305 175,000 0 40,748 323,341 3,477,528 3,891,361 3,969,355 3,784,500 3,784,500 0 0 83,254 56,023 16,529 39,494 0 0 0 39,494 .97 .97
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