10-K 1 FOSTER WHEELER FORM 10-K 1 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 AND EXCHANGE ACT OF 1934 For the fiscal year ended December 30, 1994 [ ] 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 (Name of Each Exchange on Which (Title of Class) Registered) 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 March 10, 1995, 35,810,519 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 $1,128,031,000 (based on the last price on that date of $31.50 per share). 2 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) Definitive Proxy Statement to be filed with the Commission pursuant to Regulation 14A of the Securities Exchange Act on or about March 17, 1995
Page Number of Definitive Proxy Form 10-K Item Number and Description Statement ------------------------------------- ---------------- 10. Directors and Executive Officers 1 - 4 11. Executive Compensation 6 - 12 12. Security Ownership of Certain 2 - 4 Beneficial Owners and Management
Except as specifically incorporated herein by reference, the above mentioned Definitive Proxy Statement is not deemed filed as part of this report. (2) The Financial Section of the Annual Report to Stockholders (pages 21-39) for the fiscal year ended December 30, 1994, is incorporated by reference into Part I and Part II of this report. 3 FOSTER WHEELER CORPORATION 1994 Form 10-K Annual Report Table of Contents
Page ---- Part I Item 1. Business 4 - 7 2. Properties 8 - 11 3. Legal Proceedings 11 4. Submission of Matters to a Vote of Security Holders 12 4a. Executive Officers of the Registrant 12 Part II 5. Market for the Registrant's Common Equity and Related Stockholder Matters 13 6. Selected Financial Data 13 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 14 8. Financial Statements and Supplementary Data 14 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 14 Part III 10. Directors and Executive Officers of the Registrant 15 11. Executive Compensation 15 12. Security Ownership of Certain Beneficial Owners and Management 15 13. Certain Relationships and Related Transactions 15 Part IV 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 15 - 24
3 4 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). Except as the context otherwise requires, the term "Foster Wheeler" as used herein includes Foster Wheeler Corporation and its subsidiaries. FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS: Incorporated by reference to Note 16 on page 39 in the Notes to Financial Statements in Foster Wheeler's Annual Report to Stockholders for the year ended December 30, 1994. NARRATIVE DESCRIPTION OF BUSINESS: In 1993, Foster Wheeler Enviresponse, Inc. became the Environmental Services division of Foster Wheeler USA Corporation. In October 1994, Foster Wheeler USA made an acquisition in the environmental field with the purchase of Enserch Environmental Corporation (EEC). EEC is a full-service provider of hazardous and mixed-waste investigation and remediation control services, wastewater treatment, waste management, risk analysis and environmental permitting. The former Foster Wheeler USA Environmental Services division was merged with EEC to form Foster Wheeler Environmental Corporation. During 1994 Glitsch International, Inc. acquired the assets of Optimized Process Designs, Inc. (OPD), an engineering and construction contractor in Katy, Texas. OPD's principal expertise is in the area of natural gas and natural gas liquids conditioning, treating and processing. The business of the Corporation and its subsidiaries falls within three business groups: an Engineering and Construction Group that consists primarily of the design, engineering and construction of process plants and fired heaters for oil refineries, synthetic fuels, chemical producers, and environmental services for hazardous and mixed waste investigation and remediation, pollution control systems, wastewater treatment and other environmental services; an Energy Equipment Group that consists mainly of the design and fabrication of steam generators and condensers, suppliers of mass-transfer equipment, tower packings, industrial wire mesh and natural gas processing engineering and construction; and a Power Systems Group engaged in the owning/leasing to or operation for third parties of solid waste-to-energy and cogeneration plants. Foster Wheeler markets its services and products through a staff of sales and marketing personnel and through a network of sales representatives. The businesses of its industry groups are not seasonal nor are they dependent on a single customer or a very few customers. No one customer accounts for 10 percent or more of Foster Wheeler's consolidated revenues, although in any given year one customer could contribute significantly to such revenues. 4 5 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 presently 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. No industry group of the Corporation is materially dependent upon any particular or related group of 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 in Japan, the Netherlands, Italy, Spain, Portugal, Norway and England. For the most part, Foster Wheeler products are custom designed and manufactured and are not produced for inventory. As is the practice in the Engineering and Construction Group and Energy Equipment Group, customers often make a down payment at the time a contract is entered into, and continue to make progress payments until the contract is completed and the work has been accepted as meeting contract guarantees. The Engineering and Construction Group backlog at the end of 1994 was $3.8 billion. Projects related to the refining, chemical and pharmaceutical industries continue to be the major sources of new orders for the Group with strong markets in the Pacific Rim and the Middle East. The Energy Equipment Group backlog at the end of 1994 was $1.0 billion. Foster Wheeler had a backlog of firm orders as of December 30, 1994 of $5,135,500,000 as compared to a backlog as of December 31, 1993 of $3,884,100,000. The elapsed time from the award of a contract to completion of performance may be up to four years. The amount of backlog at December 30, 1994 should not necessarily be considered indicative of Foster Wheeler's total revenues for 1995, since contracts may under certain circumstances be accelerated or delayed and new orders booked in 1995 may be billed during that year. The backlog by major industry segments as of December 30, 1994 and December 31, 1993 is as follows:
1994 1993 ---- ---- Engineering and Construction $3,798,200,000 $2,724,300,000 Energy Equipment 1,037,900,000 890,500,000 Power Systems 257,900,000 210,500,000 Corporate and Financial Services 41,500,000 58,800,000 --------------- --------------- $5,135,500,000 $3,884,100,000 ============== ==============
5 6 The Power Systems projects consist of the following:
PLANT LOCATION TYPE AND SIZE UNIT STATUS -------------- ------------------ ------ Martinez, California 99.9 MW Cogeneration In Operation 1987 Mt. Carmel, Pennsylvania 40 MW Cogeneration - anthracite In Operation 1990 culm-fired plant which also provides hot water to a hydro- ponic greenhouse Charleston, South Carolina 600 Ton/Day Resource Recovery; In Operation 1989 designed output 10 MW (a sale/ leaseback of this project was entered into in 1989) Camden County, New Jersey 1050 Ton/Day Resource Recovery; In Operation 1991 designed output 21 MW Hudson Falls, New York 400 Ton/Day Resource Recovery; In Operation 1992 designed output 10 MW University of Minnesota Heating Plant operation and In Operation 1992 upgrade Chapleau, Ontario, Canada 360 Ton/Day Wood Waste In Operation 1987 Wilmington, Delaware Facilities Management - ------------------------------------------------------------------------------------------------------------- Robbins, Illinois 1600 Ton/Day Waste-to-Energy* In Construction Montreal, Quebec, Canada 2200 Ton/Day Waste-to-Energy* In Final Permitting Wilkes-Barre, Pennsylvania 40 MW Small Power In Permitting ------------------------------------------------------------------------------------------------------------- Talcahuano, Chile 65 MW Cogeneration Plant Plus In Final Development 12,000 Barrels/Day Coker and 6,500 Barrels/Day Hydrotreater ------------------------------------------------------------------------------------------------------------- * Includes Recycling. -------------------------------------------------------------------------------------------------------------
For waste-to-energy (resource recovery) projects, generally, it takes approximately two to three years from award of a contract and the signing of a service agreement with a community to the beginning of construction. Many companies compete in the Engineering and Construction segment of Foster Wheeler's business. Management estimates, based on industrial publications, that it 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. 6 7 On an international basis many companies compete in the Energy Equipment segment of Foster Wheeler's business. Based on a review of trade association materials, management estimates that in the United States it is among the three largest manufacturers of coal, oil, and gas-fired steam generating equipment. Management also estimates that Foster Wheeler is one of the largest manufacturers of condensers, feedwater heaters and heat transfer equipment in the United States. For the most part, contracts are awarded on the basis of price, delivery, performance and service. 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 1994, approximately $9,800,000, and in 1993 and 1992, $8,350,000 and $6,900,000 respectively, was spent on Foster Wheeler sponsored research activities. During the same periods, approximately $38,200,000, $40,850,000 and $32,300,000, respectively, was spent on customer sponsored research. Foster Wheeler and its domestic subsidiaries are subject to certain Federal, state and local environmental, occupation health and product safety laws. Foster Wheeler believes all its operations are in 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 approximately 11,685 full-time employees on December 30, 1994. Following is a tabulation of the number of full-time employees of Foster Wheeler in each of its industry segments for the past three years:
December 30, December 31, December 25, 1994 1993 1992 --------------- --------------- -------------- Engineering and Construction 7,940 5,630 5,975 Energy Equipment 3,200 3,110 3,030 Power Systems 360 270 275 Corporate and Financial Services 185 340 700 --------- --------- --------- 11,685 9,350 9,980 ======== ======== ========
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES: Incorporated by reference to Note 16 on page 39 in the Notes to Financial Statements in Foster Wheeler's Annual Report to Stockholders for the year ended December 30, 1994. 7 8 ITEM 2. PROPERTIES COMPANY AND (INDUSTRY SEGMENT*)
BUILDING LEASE LOCATION USE LAND AREA SQUARE FEET EXPIRES -------- --- --------- ----------- ------- Foster Wheeler Corporation (CF) Executive Offices -- 1,148 1998 New York City, New York Livingston, New Jersey General Office & Engineering 31.0 acres 288,000 (2) -- Lebanon, New Jersey General Offices -- 151,408 1996/1997 Clinton Township, General Office -- 23,753 1996 New Jersey Union Township, Under construction 21.0 acres 292,000 -- New Jersey Union Township, Undeveloped 203.8 acres -- -- New Jersey General Office & Engineering 29.4 294,000 -- Storage and Reproduction Facilities 10.8 30,400 -- Livingston, New Jersey Research Center 6.7 acres 51,355 -- Bedminster, New Jersey Office 10.72 acres 135,000 (1)(3) Bridgewater, New Jersey Undeveloped 118 acres -- (3) -- Foster Wheeler Energy Corporation (EE) Manufacturing Dansville, New York & Offices 82.4 acres 513,786 -- McGregor, Texas Storage Facilities 15.0 acres 24,000 -- Foster Wheeler USA Corporation (EC) General Offices -- 53,131 2003 Houston, Texas Foster Wheeler Iberia, S.A. (EC) Office & Engineering 4.2 acres 82,500 -- Madrid, Spain Foster Wheeler France (EC) Office & Engineering -- 86,555 (1) -- Paris, France Foster Wheeler (Thailand) Limited (EC) Office & Engineering -- 21,800 1998 Sriracha, Thailand
8 9 COMPANY AND (INDUSTRY SEGMENT*)
BUILDING LEASE LOCATION USE LAND AREA SQUARE FEET EXPIRES -------- --- --------- ----------- ------- Foster Wheeler Limited (England) (EC) Glasgow, Scotland Office & Engineering -- 27,610 1997 Reading, England Office & Engineering -- 269,585 1996/2016 Tereside, England Office & Engineering -- 12,500 1995/2014 Foster Wheeler Limited (Canada) (EE) Edmonton, Alberta Assembly -- 10,960 1995 Niagara-On-The-Lake, Ontario Office Building 34.5 acres 100,000 (1) -- Port Robinson, Ontario Undeveloped Land 15.0 acres -- -- St. Catharines, Ontario Manufacturing & Office 29.0 acres 233,500 -- Grimsby, Ontario Construction Tools Depot -- 19,546 1997 Foster Wheeler Andina, S.A. (EC) Bogota, Columbia Office & Engineering 2.5 acres 60,000 -- Foster Wheeler Energia, S.A. (EE) Tarragona, Spain Manufacturing & Office 11.96 acres 77,794 -- Madrid, Spain Office Building 1.26 acres 27,500 -- Foster Wheeler Italiana, S.p.A. (EC) Milan, Italy Office & Engineering -- 180,000 2001 Milan, Italy Office & Engineering -- 30,000 2004 Birlesik Insaat ve Muhendislik A.S. (BIMAS) (EC) Istanbul, Turkey Engineering & Office -- 15,000 1995 Ullrich Copper, Inc. (CF) Kenilworth, New Jersey Manufacturing -- 90,000 1998 Greenwood, South Carolina Warehouse -- 10,000 1998
9 10 COMPANY AND (INDUSTRY SEGMENT*)
BUILDING LEASE LOCATION USE LAND AREA SQUARE FEET EXPIRES -------- --- --------- ----------- ------- Foster Wheeler Environmental Corporation (EC) Arlington, Virginia General Offices 31,078 1997 Atlanta, Georgia General Offices 30,618 1999 Bellevue, Washington General Offices 62,719 1995 Boston, Massachusettes General Offices 26,326 1999 Bridgeport, New Jersey General Offices 18,000 1995 Dallas, Texas Storage 10,000 1995 Lakewood, Colorado General Offices 46,853 1995 Lyndhurst, New Jersey General Offices 34,753 1999 General Offices 23,540 1999 Oakridge, Tennessee General Offices 14,494 1999 Sacramento, California General Offices 10,384 1996 Santa Ana, California General Offices 18,886 Month-to-Month Foster Wheeler Eastern Private Limited (EC) Singapore Office & Engineering -- 25,000 1996 Foster Wheeler Power Systems, Inc. (PS) Martinez, California Cogeneration Plant 6.4 acres -- -- Mt. Carmel, Cogeneration Plant 105 acres -- 2010 Pennsylvania Charleston, Waste-to-Energy 18 acres -- 2010 South Carolina Plant Hudson Falls, New York Waste-to-Energy 11.2 acres -- -- Plant Camden, New Jersey Waste-to-Energy 18 acres -- 2011 Plant Village of Robbins Waste-to-Energy Cook County, Illinois Plant Facility Site 16.1 acres -- 2029 Laydown Site 14.6 acres -- 2029
10 11 COMPANY AND (INDUSTRY SEGMENT*)
BUILDING LEASE LOCATION USE LAND AREA SQUARE FEET EXPIRES -------- --- --------- ----------- ------- Glitsch International, Inc. (EE) Dallas, Texas Manufacturing & Office 38.0 acres 505,644 -- Eldorado, Kansas Manufacturing & Office -- 16,000 1995 Houston, Texas Warehouse & Office 2.83 acres 18,000 -- Uxbridge, Ontario Manufacturing 12.0 acres 84,500 -- Camrose, Alberta, Undeveloped Land 20.0 acres -- -- Canada Aprilia, Italy Manufacturing 20.5 acres 72,000 -- Parsippany, New Jersey Manufacturing & Office 8.3 acres 63,790 -- Kirkby Stephen, U.K. Manufacturing & Office 2.4 acres 19,000 1995 Arles, France Manufacturing & Office 5.1 acres 70,736 --
--------------------------------- *Designation of Industry Groups: EC - Engineering and Construction EE - Energy Equipment PS - Power Systems CF - Corporate & Financial Services ------------------------------------- (1) Portion or entire facility leased or subleased to responsible tenants. (2) Entire facility leased to a responsible tenant, with a portion being subleased back to Foster Wheeler subsidiaries. (3) 50% 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 held 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. ITEM 3. LEGAL PROCEEDINGS Incorporated by reference to Note 12 on page 37 in the Notes to Financial Statements in Foster Wheeler's Annual Report to Stockholders for the year ended December 30, 1994. 11 12 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS NONE ITEM 4(A) 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, all of whom have held executive positions with Foster Wheeler or its subsidiaries for more than the past five years, except Messrs. Bartoli, O'Brien and Whittaker, are as follows:
NAME AGE POSITION ---- --- -------- Richard J. Swift 50 Chairman, President and Chief Executive Officer David J. Roberts 50 Vice Chairman and Chief Financial Officer N. William Atwater 60 Executive Vice President - Engineering and Construction Group Henry E. Bartoli 48 Vice President - Power Systems Group (Vice President and General Manager, 1987-1992, Burns and Roe Company.) Jack E. Deones 63 Vice President - Secretary Lisa Fries-Gardner 38 Vice President - Chief Compliance Officer Robert D. Iseman 46 Vice President and Treasurer Thomas R. O'Brien 56 Vice President and General Counsel (Partner in the law firm of Wolff and Samson, 1986-1993.) James E. Schessler 49 Vice President - Human Resources and Administration George S. White 58 Vice President and Controller Robert A. Whittaker 47 Vice President - Energy Equipment Group (General Manager, Steam Turbine Business for General Electric Industries and Power Systems, 1989-1992. Various engineering, manufacturing, marketing and service positions for General Electric, 1969-1988.)
Each officer holds office for a term running until the Board of Directors meeting next 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. 12 13 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Incorporated by reference to Note 11 on page 37 in Foster Wheeler's Annual Report to Stockholders for the year ended December 30, 1994. The Corporation's common stock is traded on the New York Stock Exchange. The approximate number of stockholders of record as of December 30, 1994 was 7,725. ITEM 6. SELECTED FINANCIAL DATA
(In Thousands of Dollars, Except Per Share Data) 1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- Revenues $2,271,123 $2,654,505 $2,529,464 $2,031,620 $1,691,023 Earnings before accounting change 65,410 57,704 45,504 (1) 43,268 38,277 Earnings per share before accounting change 1.83 1.62 1.28 (1) 1.22 1.08 Total assets 2,063,334 1,806,201 1,763,264 1,638,874 1,445,494 Long-term borrowings (including current installments) 499,202 429,264 439,578 454,826 321,608 Cash dividends per common share .72 .645 .585 .53 .485
(1) As of the beginning of 1992, the Corporation adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The effect of the accounting change at the beginning of 1992 was a charge to earnings of $91.3 million after tax and valuation allowance which amounted to $2.57 per share. 13 14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Incorporated by reference to pages 22 to 26 in Foster Wheeler's Annual Report to Stockholders for the year ended December 30, 1994. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Incorporated by reference to the following sections of Foster Wheeler's Annual Report to Stockholders for the year ended December 30, 1994: A. Consolidated Balance Sheet, December 30, 1994 and December 31, 1993 (page 27) B. Consolidated Statement of Earnings for the years ended December 30, 1994; December 31, 1993; and December 25, 1992 (page 28) C. Consolidated Statement of Changes in Stockholders' Equity for the years ended December 30, 1994; December 31, 1993; and December 25, 1992 (page 29) D. Consolidated Statement of Cash Flows for the years ended December 30, 1994; December 31, 1993; and December 25, 1992 (page 30) E. Notes to Financial Statements (pages 31-39) F. Report of Independent Accountants (page 28) Schedules Required by Regulations S-X NONE ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE NONE 14 15 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Incorporated by reference to pages 1-4 of Foster Wheeler's Proxy Statement, dated March 17, 1995, for the Annual Meeting of Stockholders to be held April 25, 1995. Certain information regarding executive officers is included in Part I in accordance with General Instruction G (3) of Form 10-K. ITEM 11. EXECUTIVE COMPENSATION Incorporated by reference to pages 6-12 of Foster Wheeler's Proxy Statement, dated March 17, 1995, for the Annual Meeting of Stockholders to be held April 25, 1995. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Incorporated by reference to pages 2-4 of Foster Wheeler's Proxy Statement, dated March 17, 1995, for the Annual Meeting of Stockholders to be held April 25, 1995. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. 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 The index to Financial Statements is incorporated in this paragraph by reference to Item 8, page 14 All other schedules and financial statements 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. 15 16 (b) Reports on Form 8-K: The following reports on Form 8-K have been filed during the period October 1 through December 30, 1994: None 3 - The following Exhibits are required by Item 601 of Regulation S-K and by paragraph (c) of Item 14 of Form 10-K: (2) Not applicable (3) Not applicable (4) Not applicable (9) Not applicable (10) Not applicable (11) Not applicable (12) Not applicable (13) Except for those portions thereof which are expressly incorporated by reference in this filing, the Financial Section of the Annual Report to Stockholders of Foster Wheeler Corporation (pages 21-39) for the fiscal year ended December 30, 1994 is furnished for the information of the Commission and is not deemed "filed" as part of this filing. (18) Not applicable (21) Subsidiaries of the registrant (pages 18 - 20) (22) Not applicable (23) See consent of Independent Accountants (page 22) (24) Not applicable (27) Financial Data Schedule (for the informational purposes of the Securities and Exchange Commission only) (28) Not applicable 16 17 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. 2-91384 (filed May 29, 1984), 33-34694 (filed May 2, 1990) and 33-40878 (filed May 29, 1991): 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. 17 18 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT FOSTER WHEELER CORPORATION (PARENT) PRINCIPAL CONSOLIDATED, WHOLLY OWNED SUBSIDIARIES (DIRECTLY OR INDIRECTLY) Listed by Jurisdiction of Organization AUSTRALIA FRANCE Foster Wheeler Australia Pty. Ltd., Melbourne Foster Wheeler France, S.A., Paris Foster Wheeler Conception Etudes Entretien, Paris BERMUDA Foster Wheeler World Services, France, S.A., Paris FW Management Operations, Ltd., Hamilton Glitsch France, S.A., Arles Foster Wheeler Trading Co. Ltd., Hamilton Societe Fonciere-Bourdonnais Rivoli, S.A., Paris Power Systems International, Ltd., Hamilton York Jersey Liability Ltd., Hamilton INDIA Glitsch Process India, Ltd. CANADA Foster Wheeler Limited, St. Catharines ITALY Les Chaudieres Foster Wheeler Inc., Quebec Foster Wheeler Italiana, S.p.A., Milan Chapleau Co-generation Ltd., Chapleau Steril, S.p.A., Milan Foster Wheeler Canadian Resources Limited, Alberta Foster Wheeler World Services, S.p.A., Rome Foster Wheeler Fired Heaters, Ltd., Calgary Glitsch Italiana, S.p.A., Campoverde Glitsch Canada, Ltd., Uxbridge Foster Wheeler Financial Services S.p.A., Milan La Societe D'Energie Foster Wheeler Ltd., Quebec MEXICO CHILE Foster Wheeler Ingenienis y Constructors, S.A. de C.V. Foster Wheeler Chile, S.A., Santiago de Chile Quadalojara CHINA, PEOPLES REPUBLIC OF NETHERLANDS ANTILLES Foster Wheeler Power Machinery Company Limited, Foster Wheeler N.V., Curacao Guangdong Province NETHERLANDS ENGLAND Foster Wheeler Europe, B.V., Amsterdam Foster Wheeler Limited, Reading Foster Wheeler Power Systems, B.V., Amsterdam Foster Wheeler Energy Ltd., Reading Foster Wheeler (India) Ltd., Reading SINGAPORE (REPUBLIC OF) Foster Wheeler (Northern) Ltd., Reading Foster Wheeler Eastern Pte., Ltd., Singapore Foster Wheeler (Pacific) Ltd., Reading Foster Wheeler Petroleum Development Ltd., Reading SPAIN Foster Wheeler World Services, Ltd., Reading Foster Wheeler Iberia, S.A., Madrid FW Management Operations Ltd., Reading Foster Wheeler Energia, S.A., Madrid Glitsch (U.K.) Ltd., Kirkby Stephen Cumbria Foster Wheeler Trading Co. A.G., S.A., Madrid Glitsch Field Services, Ltd., Dorking F.I. Controles, S.A., Madrid Foster Wheeler (Indonesia) Ltd., Reading Foster Wheeler Power Systems, S.A., Madrid Foster Wheeler Petroleum Development (Norway) Ltd., Conequip, S.A., Madrid Reading
18 19 EXHIBIT 21 SUBSIDIARIES OF THE REGISTRANT FOSTER WHEELER CORPORATION (PARENT) PRINCIPAL CONSOLIDATED, WHOLLY OWNED SUBSIDIARIES (DIRECTLY OR INDIRECTLY) Listed by Jurisdiction of Organization UNITED STATES Glitsch Field Services, Inc., Texas Camden County Energy Recovery Associates, New Jersey Glitsch Inc., Delaware Camden County Energy Recovery Corporation, Delaware Glitsch International, Inc., Delaware Century Plastics, Inc., Kansas Glitsch Special Products, Inc., Texas Foster Wheeler Arabia Ltd., Delaware Glitsch Technology Corporation, Delaware Foster Wheeler Bedminster, Inc., Delaware Optimized Process Designs, Inc., Delaware Foster Wheeler Bridgewater, Inc., Delaware Otto H. York Company, Delaware Foster Wheeler Broome County, Inc., Delaware Ullrich Copper, Inc., Delaware Foster Wheeler Charleston Resource Recovery, Inc., Delaware Yargo, Inc., Minnesota Foster Wheeler China, Inc., Delaware Foster Wheeler Constructors, Inc., Delaware THAILAND Foster Wheeler Development Corporation, Delaware Foster Wheeler (Thailand) Limited, Sriracha Foster Wheeler (Emirates) Corporation, Delaware Foster Wheeler Energy Corporation, Delaware TURKEY Foster Wheeler Energy International, Inc., Delaware Foster Wheeler BIMAS Birlesik Insaat Ve Muhendislik, Foster Wheeler Energy Manufacturing, Inc., Delaware A. S., Istanbul Foster Wheeler Environmental Corporation, Delaware Foster Wheeler Facilities Management Delaware, Inc., Delaware U.S. VIRGIN ISLAND Foster Wheeler Hudson Falls, Inc., Delaware Foster Wheeler F.S.C., Inc., St. Thomas Foster Wheeler Illinois, Inc., Delaware Foster Wheeler Intercontinental Corporation, Delaware VENEZUELA Foster Wheeler International Corporation, Delaware Foster Wheeler Caribe Corporation, C.A., Caracas Foster Wheeler Korea, Ltd., Delaware Foster Wheeler Martinez, Inc., Delaware Foster Wheeler Mt. Carmel, Inc., Delaware Foster Wheeler Passaic, Inc., Delaware Foster Wheeler Penn Resources, Inc., Delaware Foster Wheeler Power Corporation, Delaware Foster Wheeler Power Systems, Inc., Delaware Foster Wheeler Real Estate Development Corporation, Delaware Foster Wheeler Robbins, Inc., Delaware Foster Wheeler Twin Cities, Inc., Delaware Foster Wheeler USA Corporation, Delaware Foster Wheeler Wood Resources, Inc., Delaware Foster Wheeler World Services Corporation, Delaware
19 20 PRINCIPAL AFFILIATED COMPANIES (PERCENT DIRECTLY OR INDIRECTLY OWNED BY FOSTER WHEELER CORPORATION) COLOMBIA Foster Wheeler Andina, S.A., Bogota (19%) ITALY F.FW Fiatavio Foster Wheeler Per L'Energia, S.p.A., Milan (40%) Software Technology, S.p.A., Milan (90%) NIGERIA Foster Wheeler (Nigeria) Ltd., Lagos (60%) 20 21 A copy of the By-Laws of the Corporation, as amended through February 22, 1994, is available upon request to the Office of the Secretary, Foster Wheeler Corporation, Perryville Corporate Park, Clinton, New Jersey 08809-4000. 21 22 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Foster Wheeler Corporation on Form S-8 (File No.'s 2-91384, 33-34694 and 33-40878) of our report dated February 13, 1995, on our audits of the consolidated financial statements of Foster Wheeler Corporation and Subsidiaries as of December 30, 1994 and December 31, 1993, and for each of the three years in the period ended December 30, 1994, which report is incorporated by reference in this Annual Report on Form 10-K. Coopers & Lybrand L.L.P. New York, New York March 24, 1995 22 23 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 24, 1995 By /s/ Jack E. Deones Jack E. Deones Vice President and Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed, as of March 24, 1995, by the following persons on behalf of the registrant, in the capacities indicated.
Signature Title --------- ----- /s/ Richard J. Swift ----------------------------- Director, Chairman, President and Richard J. Swift Chief Executive Officer (Principal Executive Officer) /s/ David J. Roberts ----------------------------- Director, Vice Chairman and David J. Roberts Chief Financial Officer (Principal Financial Officer) /s/ George S. White ---------------------------- Vice President and Controller George S. White (Principal Accounting Officer) /s/ Eugene D. Atkinson Director --------------------------- Eugene D. Atkinson /s/ Louis E. Azzato Director ----------------------------- Louis E. Azzato /s/ Leland E. Boren Director ----------------------------- Leland E. Boren /s/ Kenneth A. DeGhetto Director --------------------------- Kenneth A. DeGhetto
23 24
Signature Title --------- ----- /s/ Martha Clark Goss Director ----------------------------- Martha Clark Goss /s/ E. James Ferland Director --------------------------- E. James Ferland /s/ John A. Hinds Director --------------------------- John A. Hinds /s/ Harold E. Kennedy Director -------------------------- Harold E. Kennedy /s/ Joseph J. Melone Director ---------------------------- Joseph J. Melone /s/ Frank E. Perkins Director ---------------------------- Frank E. Perkins /s/ John Timko, Jr. Director ---------------------------- John Timko, Jr. /s/ Charles Y. C. Tse Director ---------------------------- Charles Y. C. Tse /s/ Robert Van Buren Director --------------------------- Robert Van Buren
24 25 EXHIBIT INDEX (2) Not applicable (3) Not applicable (4) Not applicable (9) Not applicable (10) Not applicable (11) Not applicable (12) Not applicable (13) Except for those portions thereof which are expressly incorporated by reference in this filing, the Financial Section of the Annual Report to Stockholders of Foster Wheeler Corporation (pages 21-39) for the fiscal year ended December 30, 1994 is furnished for the information of the Commission and is not deemed "filed" as part of this filing. (18) Not applicable (21) Subsidiaries of the registrant (pages 18 - 20) (22) Not applicable (23) See consent of Independent Accountants (page 22) (24) Not applicable (27) Financial Data Schedule (for the informational purposes of the Securities and Exchange Commission only) (28) Not applicable EX-13 2 PORTIONS OF ANNUAL REPORT 1 FOSTER WHEELER CORPORATION AND SUBSIDIARIES
FINANCIAL SECTION EXHIBIT 13 ---------- Comparative Financial Statistics.................................21 Management's Discussion and Analysis.............................22-26 Consolidated Balance Sheet.......................................27 Consolidated Statement of Earnings...............................28 Report of Independent Accountants................................28 Consolidated Statement of Changes in Stockholders' Equity........29 Consolidated Statement of Cash Flows.............................30 Notes to Financial Statements....................................31-39
COMPARATIVE FINANCIAL STATISTICS ________________________________________________________________________________ (In Thousands, Except per Share Amounts)
1994 1993 1992 1991 1990 ---- ---- ---- ---- ---- Unfilled orders, end of period........................ $5,135,452 $3,884,114 $3,806,757 $3,465,339 $2,763,517 Revenues.............................................. 2,271,123 2,654,505 2,529,464 2,031,620 1,691,023 Earnings before income taxes and accounting change.................................... 106,867 96,818 67,825 61,285 48,393 Provision for income taxes............................ 41,457 39,114 22,321 18,017 10,116 Earnings before accounting change..................... 65,410 57,704 45,504 43,268 38,277 Effect of accounting change........................... - - (91,259)(1) - - Net earnings/(loss)................................... 65,410 57,704 (45,755) 43,268 38,277 Earnings per share * Earnings before accounting change.................... $1.83 $1.62 $1.28 $1.22 $1.08 Effect of change in accounting principle............. - - (2.57)(1) - - ----- ----- ------ ----- ----- Net earnings/(loss).................................. $1.83 $1.62 $(1.29) $1.22 $1.08 ===== ===== ======= ===== ===== Weighted average number of shares of common stock outstanding.................................... 35,788 35,656 35,596 35,522 35,418 Current assets........................................ $1,112,709 $983,454 $924,886 $842,747 $755,127 Current liabilities................................... 890,579 778,989 721,018 588,567 581,454 Working capital....................................... 222,130 204,465 203,868 254,180 173,673 Land, buildings and equipment (net)................... 566,156 567,216 595,946 613,778 533,172 Total assets.......................................... 2,063,334 1,806,201 1,763,264 1,638,874 1,445,494 Bank loans............................................ 77,350 59,725 54,929 45,605 38,176 Long-term borrowings (including current installments)........................................ 499,202 429,264 439,578 454,826 321,608 Net assets owned...................................... 456,494 400,176 387,297 500,124 475,845 Net assets owned per common share of stock............ $12.75 $11.21 $10.87 $14.06 $13.42 Rate of return on net assets.......................... 16.3% 14.9% (9.1)% 9.1% 8.9% Cash dividends per share of common stock.............. $.72 $.645 $.585 $.53 $.485
* Computed on the weighted average number of shares of common stock outstanding. (1) Relates to effect of change in accounting principle for postretirement benefits other than pensions (see Note 5). 21 2 MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS BUSINESS GROUPS (See Note 16 to Financial Statements.) ________________________________________________________________________________ (In Millions of Dollars)
Corporate Engineering and and Energy Power Financial Total Construction Equipment Systems Services(1) ----- ------------ --------- ------- ---------- 1994 ---- Unfilled orders.................... 5,135.5 3,798.2 1,037.9 257.9 41.5 New orders booked.................. 3,091.0 2,138.6 759.6 188.7 4.1 Revenues........................... 2,271.1 1,569.4 537.5 149.1 15.1 Interest expense (2)............... 35.0 0.8 2.8 24.0 7.4 Earnings before income taxes....... 106.9 73.7 55.2 18.1 (40.1) Identifiable assets................ 2,063.3 878.4 454.1 537.7 193.1 Capital expenditures............... 38.5 14.5 10.1 9.1 4.8 Depreciation....................... 43.7 14.1 8.6 17.4 3.6 1993 ---- Unfilled orders.................... 3,884.1 2,724.3 890.5 210.5 58.8 New orders booked.................. 2,982.8 1,921.2 670.4 273.8 117.4 Revenues........................... 2,654.5 1,833.5 569.8 159.5 91.7 Interest expense (2)............... 33.6 0.7 2.1 23.7 7.1 Earnings before income taxes....... 96.8 64.9 47.9 25.1 (41.1) Identifiable assets................ 1,806.2 649.6 411.3 514.1 231.2 Capital expenditures............... 27.8 12.1 11.1 1.8 2.8 Depreciation....................... 43.7 14.2 8.0 17.3 4.2 1992 ---- Unfilled orders.................... 3,806.8 2,827.2 831.4 68.6 79.6 New orders booked.................. 3,640.4 2,605.9 716.9 186.2 131.4 Revenues........................... 2,529.5 1,726.2 558.5 128.0 116.8 Interest expense (2)............... 34.2 1.4 1.8 21.0 10.0 Earnings before income taxes and accounting change (3)....... 67.8 54.9 41.1 14.2 (42.4) Identifiable assets................ 1,763.3 652.7 377.8 487.4 245.4 Capital expenditures............... 56.0 17.3 13.5 18.3 6.9 Depreciation....................... 43.3 14.2 7.6 17.2 4.3
22 3 GEOGRAPHIC AREAS (See Note 16 to Financial Statements.) ________________________________________________________________________________ (In Millions of Dollars)
Corporate and United Financial Total States Europe Canada Services(1) ----- ------ ------ ------ ---------- 1994 ---- Unfilled orders.................... 5,135.5 2,790.7 2,229.5 73.8 41.5 New orders booked.................. 3,091.0 1,101.0 1,870.3 115.6 4.1 Revenues........................... 2,271.1 1,114.1 1,053.4 88.5 15.1 Interest expense (2)............... 35.0 25.4 1.3 0.9 7.4 Earnings before income taxes....... 106.9 60.1 83.0 3.9 (40.1) Identifiable assets................ 2,063.3 1,082.3 718.8 69.1 193.1 1993 ---- Unfilled orders.................... 3,884.1 2,262.2 1,514.4 48.7 58.8 New orders booked.................. 2,982.8 1,407.0 1,373.2 85.2 117.4 Revenues........................... 2,654.5 948.1 1,539.0 75.7 91.7 Interest expense (2)............... 33.6 24.1 1.7 0.7 7.1 Earnings before income taxes....... 96.8 66.7 65.4 5.8 (41.1) Identifiable assets................ 1,806.2 857.4 658.8 58.8 231.2 1992 ---- Unfilled orders.................... 3,806.8 1,850.7 1,820.8 55.7 79.6 New orders booked.................. 3,640.4 1,688.7 1,757.5 62.8 131.4 Revenues........................... 2,529.5 691.9 1,617.0 103.8 116.8 Interest expense (2)............... 34.2 21.3 1.5 1.4 10.0 Earnings before income taxes and accounting change (3)....... 67.8 37.3 69.7 3.2 (42.4) Identifiable assets................ 1,763.3 775.0 686.5 56.4 245.4
(1) Includes general corporate income and expense, the Corporation's insurance operation, trading and real estate activities, asbestos abatement and miscellaneous manufacturing. (2) Includes intercompany interest charged by Corporate to the business groups on outstanding borrowings. (3) Effective as of the beginning of 1992, the Corporation adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" and recorded the full amount of its transition obligation. Unaudited as to unfilled orders and new orders booked. 23 4 MANAGEMENT'S DISCUSSION AND ANALYSIS YEARS 1992 - 1994 The following discussion should be read in conjunction with the consolidated financial statements and notes thereto. In order to achieve its objectives, the Corporation has adopted a long-term goal of making strategic acquisitions within our three core business groups. The Corporation has made two investments in 1994 - the acquisition of a leading environmental services company and a small natural gas processing engineering and construction contractor. In the fourth quarter of 1994, the Corporation completed the acquisition of Enserch Environmental Corporation (EEC), formerly a division of Ebasco Services Incorporated, a major participant in the environmental industry providing full-service capabilities for hazardous and mixed-waste investigations and remediation control services, employing about 1,200 people located in a number of operating and marketing offices throughout the United States. EEC has a long and successful record in government contracting and strong relationships with numerous private sector enterprises. The existing Foster Wheeler environmental unit was merged with the acquired company to form Foster Wheeler Environmental Corporation. The company is headquartered in Lyndhurst, New Jersey, will employ over 1,500 people dedicated to the environmental services industry and will be supported by Foster Wheeler's diverse worldwide engineering and construction resources. At the start of the third quarter, the Corporation completed the purchase of Optimized Process Designs, Inc. (OPD), a privately- owned company. OPD, which was founded in 1980, provides consulting, engineering, design, fabrication, and construction services to the hydrocarbon processing industries. Its principal process design expertise is in the area of natural gas and gas liquids conditioning, treating, and processing. OPD fabricates and assembles process skids in its own shop as well as constructs new gas plants in the field. In addition to new facilities, OPD relocates and revamps gas processing plants. OPD was acquired by Glitsch International, Inc., a member of the Energy Equipment business group. In November 1994, the Power Systems business group completed the financing arrangement for the construction of the $400-million Robbins recycling and waste-to-energy project. Power Systems will build and operate this plant, which will be owned by the Village of Robbins, Illinois. This will be the most modern waste-to-energy installation in the world and the first to utilize CFB technology in the United States when it begins operations in early 1997. Following the Corporation's long-term strategy in 1993, the business activities were consolidated into three major groups. Subsequently, Thermacote Welco, a welding accessories company, was divested and the asbestos-abatement business was discontinued. As of the beginning of 1992, the Corporation adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The effect of the accounting change at the beginning of 1992 was a charge of $91.3 million after tax and valuation allowance, or $2.57 per share. (24 continued) 5 Foster Wheeler's operating subsidiaries located outside the United States constituted 59% in 1994, 52% in 1993 and 66% in 1992, of consolidated earnings before income taxes excluding Corporate and Financial Services. Earnings before income taxes of the United States geographic area decreased $6.6 million in 1994 compared to 1993 and increased $29.4 million in 1993 compared to 1992. In the United States, the aggregate increase in earnings can be attributed to improvements in all segments of the business. Consolidated net earnings for 1994 amounted to $65.4 million, an increase of $7.7 million or 13% over 1993. At the end of 1994, Foster Wheeler's backlog of unfilled orders was $5.1 billion, an increase of $1.3 billion over 1993. Since the end of 1991, there has been an increase of $1.7 billion or 48%. As stated in 1993, the strategy of the Engineering and Construction Group in the coming years will be to continue to maintain leadership in the oil refining and pharmaceutical industries worldwide, exploit its strong position in emerging technologies, particularly with regard to gasification, and obtain a significant market position in the environmental, LNG, and upstream production areas. Part of this strategy has been achieved with the acquisition of EEC. The Energy Equipment Group serves the power-generation and chemical-separations industries with high-quality and highly engineered and manufactured products. This combination of technology and cost competitiveness, with strong marketing initiatives in a growth market, positions the Group for continued success. The largest markets for this Group continue to be China, central and southeast Asia, the Indian subcontinent, and South and Central America. Foster Wheeler Power Systems has an established position in building, owning, and operating waste- to-energy and cogeneration plants. Continued growth will come from capitalizing on the leadership positions held in both process and combustion technologies, combined with the project development and operational expertise of Foster Wheeler Power Systems to pursue "inside-the-fence" projects and independent power facilities in both the domestic and international markets. 1994 COMPARED TO 1993 As stated previously, the backlog of the Corporation at the end of 1994 was at a record high of $5.1 billion, an increase of $1.3 billion from the end of 1993. The Engineering and Construction Group's backlog was at $3.8 billion, an increase of $1.1 billion over 1993. Part of this increase was due to the acquisition of EEC and increased activities in Spain. The Energy Equipment Group's back- 24 6 log was at $1 billion. The increase over 1993 can be attributed to major power generation contracts taken in India and Japan. Both these Groups are at an all-time high for unfilled orders. New orders booked for 1994 were slightly higher then 1993. The Engineering and Construction and Energy Equipment Groups were higher by $217 million and $89 million, respectively. Operating revenues decreased by $349 million compared to 1993. The Engineering and Construction Group reported a decrease of approximately $260 million, primarily due to reduced pass-through costs on long-term contracts. Also, Corporate and Financial Services reported lower operating revenues of $70 million due to the sale of Thermacote Welco and closing of the asbestos-abatement business. Gross earnings from operations increased $32 million or 11%. The Engineering and Construction Group increased $17 million or 13% which can be attributed to the operations in the United States, the United Kingdom and Italy, offset by a decrease in France. The Energy Equipment Group increased $21 million or 21% due to improved contract performance of Foster Wheeler Energy Corporation and Foster Wheeler Energia, S.A. Corporate and Financial Services decreased by $7 million due to the sale of Thermacote Welco in 1993. Selling, general and administrative expenses decreased approximately $.6 million. General and administrative expenses were up slightly offset by a reduction in selling expenses. Other income decreased $35 million. This decrease was due mainly to transactions which occurred in 1993, particularly the sale of Thermacote Welco and sale of a limited partnership interest in the Camden waste-to-energy plant. Other deductions decreased $15 million primarily due to activities in 1993 increasing the accelerated amortization of the cost in excess of net assets of a subsidiary acquired, and the establishment of a provision to cover potential exposure for nonrecovery of development costs related to waste-to-energy projects in the Power Systems Group. The effective tax rate for 1994 was 38.8% compared to 40.4% in 1993. The 1993 effective rate differed from the U.S. statutory rate primarily as a result of the accelerated amortization of cost in excess of net assets of a subsidiary acquired, and the recapture of investment tax credits related to the sale of the limited partnership interest. Net earnings increased $7.7 million or 13%. 1993 COMPARED TO 1992 The Engineering and Construction Group accounted for approximately 70% of the total December 1993 backlog of the Corporation. The 1993 backlog of the Engineering and Construction Group was slightly lower than reported as of the end of 1992. The reduction reported by the United Kingdom subsidiary was partially offset by the increases in the United States and Italy. The Energy Equipment Group accounted for approximately 23% of the December 1993 backlog. The 7% increase reported by this Group was primarily due to orders taken by the United States subsidiary in China. Foster Wheeler was selected for negotiations for two 350-megawatt boilers for the Ezhou project in China at the end of 1993. (25 continued) 7 New orders booked for 1993 decreased by 18% in comparison to 1992. This was primarily due to the significant amount of orders taken by the Engineering and Construction Group in 1992. New orders booked by the Engineering and Construction Group decreased in the United States by approximately $300 million and by approximately $400 million in the United Kingdom. However, the backlog as of December 1993 has remained consistent with the 1992 level. Operating revenues increased by $88 million (3.5%) over 1992. The three operating groups all reported small increases over the 1992 levels. The Engineering and Construction Group reported an increase of approximately $100 million primarily due to the operations of Foster Wheeler USA Corporation. This increase was partially offset by the lower revenues reported by Corporate and Financial Services. Gross earnings from operations were at approximately the same level as reported for 1992. The 5% increase reported by the Energy Equipment Group was offset by the reduction in gross profit reported by Corporate and Financial Services, related to the asbestos-abatement business. Selling, general and administrative expenses decreased slightly. All operating groups reported amounts consistent with prior year levels. In comparing 1993 to 1992, other income increased by $36.8 million. This increase was primarily due to the sale of Thermacote Welco in the third quarter of 1993 and the sale of a 49.5% limited partnership interest in the Camden waste-to-energy plant in the fourth quarter of 1993. In addition, interest income increased by $5.6 million. Other deductions increased by $12.5 million. This increase was due to the accelerated amortization of the cost in excess of net assets of a subsidiary acquired related to the asbestos- abatement business, which operations were discontinued, and a provision to cover potential exposure for nonrecovery of development costs related to waste-to-energy projects in the Power Systems Group. The effective tax rate increased from 32.9% in 1992 to 40.4% in 1993. The 1993 effective rate differed from the U.S. statutory rate primarily as a result of the accelerated amortization of cost in excess of net assets of a subsidiary acquired, and the recapture of investment tax credits related to the sale of the limited partnership interest. Earnings before accounting change increased by $12.2 million (27%). All operating groups reported increased earnings. The Engineering and Construction Group increased by over $7 million or 20%. This was primarily due to the return to profitability of Foster 25 8 MANAGEMENT'S DISCUSSION AND ANALYSIS Wheeler Iberia, S.A. in Spain and the improved earnings recorded by Foster Wheeler USA Corporation. Both Foster Wheeler USA Corporation and Foster Wheeler Italiana, S.p.A. reported record earnings. The Energy Equipment Group also reported a 19% increase or $4.8 million from earnings reported in the United States. The Power Systems Group increased by approximately 5% from 1992 to 1993. FINANCIAL CONDITION The Corporation's consolidated financial condition improved during the three-year period 1992 to 1994. Since the beginning of 1992, net assets increased by $104 million excluding the accumulated translation adjustment of $56 million and the accounting charge of $91.3 million related to the adoption of SFAS No. 106 in 1992. Working capital at December 30, 1994, was $222.1 million. During 1992, 1993 and 1994, long-term investments in land, buildings and equipment were $56 million, $28 million and $39 million, respectively. In 1994, the Corporation acquired EEC and OPD with net cash payments after cash acquired of $51 million. In 1993, a 49.5% limited partnership interest in the Camden waste-to-energy facility was sold to an institutional investor and a subsidiary was sold; aggregate proceeds amounted to $50 million. During the next few years, capital expenditures will continue to be directed primarily toward strengthening and supporting the Corporation's core businesses. Long-term debt, including current installments, and bank loans increased by $76 million, net of repayments of $65 million, during the three-year period. Payments in 1994 include $22 million for the first installment on private placement unsecured notes. At the end of 1994, $95 million under the Corporate Revolving Credit debt was classified as long-term. The Revolving Credit note expires in April 1998 and it is the Corporation's intent to maintain the principal amount outstanding during this period. The Corporation is reviewing the possibility of refinancing this debt through the issuance of publicly or privately placed debt securities. 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. The Corporation and its subsidiaries also routinely become involved in litigation relating to patents and other intellectual property. There are several actions of that nature presently pending. If the presently pending suits described above were sustained in substantially the amounts asserted, they would have a material adverse effect on the Corporation's financial condition and results of operations. However, based on its knowledge of the facts and circumstances relating to the Corporation's liabilities, if any, and to its insurance coverage, management believes that the disposition of such suits will not result in charges against assets or earnings materially in excess of amounts provided in the accounts. (26 continued) 9 LIQUIDITY AND CAPITAL RESOURCES Cash and short-term investments at the end of 1994 amounted to $354.4 million, reflecting an increase of $121.6 million compared with the beginning of 1992. Cash generated from earnings for 1994 of $116.2 million along with increased funding of working capital resulted in a use of cash by operating activities of approximately $14 million. Cash was used to pay dividends of $25.8 million and to repay long-term debt of $30.5 million. The detailed Statement of Cash Flows is presented on page 30. The Corporation's own-and-operate projects are financed primarily with a combination of project debt and equity investments by the Corporation. Investments are expected to increase over the next several years. The Corporation will continue to enter into financing transactions where the transfer of tax benefits and refinancing of its equity investment in those projects produces a lower effective financing cost and a potential increased return on investment. Existing cash balances, short-term investments and unused credit facilities with banks remain adequate to support expected operating levels and anticipated future investing and financing activities. 26 10 FOSTER WHEELER CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (In Thousands of Dollars)
December 30, December 31, 1994 1993 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents..................................................................... $ 235,801 $ 249,514 Short-term investments........................................................................ 118,561 127,876 Accounts and notes receivable: Trade....................................................................................... 442,127 396,828 Other....................................................................................... 54,854 45,671 Contracts in process.......................................................................... 171,144 87,076 Inventories................................................................................... 27,634 24,500 Prepaid and refundable income taxes........................................................... 47,543 39,000 Prepaid expenses.............................................................................. 15,045 12,989 ---------- ---------- Total current assets...................................................................... 1,112,709 983,454 ---------- ---------- Land, buildings and equipment................................................................... 815,746 784,548 Less accumulated depreciation................................................................... 249,590 217,332 ---------- ---------- Net book value............................................................................ 566,156 567,216 ---------- ---------- Notes and accounts receivable - long-term....................................................... 51,658 40,560 Investments and advances........................................................................ 42,665 34,758 Cost in excess of net assets of subsidiaries acquired........................................... 68,629 4,098 Deferred charges and prepaid pension cost....................................................... 215,616 160,967 Deferred income taxes........................................................................... 5,901 15,148 ---------- ---------- TOTAL ASSETS............................................................................. $2,063,334 $1,806,201 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current installments on long-term debt........................................................ $ 32,565 $ 32,523 Bank loans.................................................................................... 77,350 59,725 Accounts payable.............................................................................. 211,627 161,484 Accrued expenses.............................................................................. 139,582 131,254 Estimated costs to complete long-term contracts............................................... 294,881 287,508 Advance payments by customers................................................................. 104,239 76,462 Income taxes.................................................................................. 30,335 30,033 ---------- ---------- Total current liabilities................................................................. 890,579 778,989 Long-term debt, less current installments....................................................... 466,637 396,741 Minority interest in subsidiary companies....................................................... 10,344 8,235 Deferred income taxes........................................................................... 19,651 18,691 Other long-term liabilities, deferred credits and postretirement benefits other than pensions... 219,629 203,369 ---------- ---------- TOTAL LIABILITIES......................................................................... 1,606,840 1,406,025 ---------- ---------- STOCKHOLDERS' EQUITY: Preferred stock Authorized 1,500,000 shares; no par value - none outstanding Common stock $1.00 par value; authorized 80,000,000 shares; issued: 1994-35,832,664; 1993-35,706,982..... 35,833 35,707 Paid-in capital............................................................................... 38,266 35,076 Retained earnings............................................................................. 420,861 381,205 Accumulated translation adjustment............................................................ (37,915) (51,261) ---------- ---------- 457,045 400,727 Less cost of treasury stock (20,129 shares)................................................... 551 551 ---------- ---------- TOTAL STOCKHOLDERS' EQUITY................................................................ 456,494 400,176 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................................ $2,063,334 $1,806,201 ========== ==========
See notes to financial statements. 27 11 FOSTER WHEELER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF EARNINGS (In Thousands of Dollars, Except per Share Amounts)
1994 1993 1992 ---- ---- ---- REVENUES: Operating revenues...................................................... $2,234,441 $2,583,000 $2,494,789 Other income (including interest: 1994-$25,014; 1993-$26,627; 1992-$21,017)............................. 36,682 71,505 34,675 ---------- ----------- ---------- Total Revenues........................................................ 2,271,123 2,654,505 2,529,464 ---------- ----------- ---------- COSTS AND EXPENSES: Cost of operating revenues.............................................. 1,909,893 2,290,395 2,202,196 Selling, general and administrative expenses............................ 203,445 204,049 208,676 Other deductions (including interest: 1994-$34,978; 1993-$33,558; 1992-$34,159)............................. 45,906 60,722 48,255 Minority interest....................................................... 5,012 2,521 2,512 ---------- ----------- ---------- Total Costs and Expenses.............................................. 2,164,256 2,557,687 2,461,639 ---------- ----------- ---------- Earnings before income taxes and accounting change........................ 106,867 96,818 67,825 Provision for income taxes................................................ 41,457 39,114 22,321 ---------- ----------- ---------- Earnings before accounting change......................................... 65,410 57,704 45,504 Effect of change in accounting principle for postretirement benefits other than pensions (net of income tax benefit of $47,947 and a valuation allowance of $5,500)............................ - - (91,259) ---------- ----------- ---------- Net earnings/(loss)....................................................... $ 65,410 $ 57,704 $ (45,755) ========== =========== ========== Earnings per share: Earnings before the effect of accounting change......................... $1.83 $1.62 $1.28 Effect of change in accounting principle................................ - - (2.57) ----- ----- ----- Net earnings/(loss)..................................................... $1.83 $1.62 $(1.29) ===== ===== ======
See notes to financial statements. (28 continued) 12 REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders of Foster Wheeler Corporation: We have audited the accompanying consolidated balance sheet of Foster Wheeler Corporation and Subsidiaries as of December 30, 1994 and December 31, 1993, and the related consolidated statements of earnings, changes in stockholders' equity, and cash flows for each of the three years in the period ended December 30, 1994. 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 in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Foster Wheeler Corporation and Subsidiaries as of December 30, 1994 and December 31, 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 30, 1994, in conformity with generally accepted accounting principles. As discussed in Note 5 to the consolidated financial statements, the Corporation changed its method of accounting for postretirement benefit costs other than pensions in 1992. Coopers & Lybrand L.L.P. New York, New York February 13, 1995 28 13 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (In Thousands of Dollars, Except per Share Amounts)
1994 1993 1992 ---- ---- ---- COMMON STOCK Balance at beginning of year............................................ $ 35,707 $ 35,656 $ 35,588 Sold under stock options: (shares: 1994-125,682; 1993-50,786; 1992-68,092).......................................................... 126 51 68 -------- -------- -------- Balance at end of year................................................ 35,833 35,707 35,656 -------- -------- -------- PAID-IN CAPITAL Balance at beginning of year............................................ 35,076 34,085 33,139 Stock option exercise price less par value.............................. 2,214 791 773 Tax benefits related to stock options................................... 976 200 173 -------- -------- -------- Balance at end of year................................................ 38,266 35,076 34,085 -------- -------- -------- RETAINED EARNINGS Balance at beginning of year............................................ 381,205 346,487 413,056 Net earnings/(loss) for the year........................................ 65,410 57,704 (45,755) Cash dividends paid: Common (per share outstanding: 1994-$.72; 1993-$.645; 1992-$.585)..... (25,754) (22,986) (20,814) -------- -------- -------- Balance at end of year................................................ 420,861 381,205 346,487 -------- -------- -------- ACCUMULATED TRANSLATION ADJUSTMENT Balance at beginning of year............................................ (51,261) (28,380) 18,732 Change in accumulated translation adjustment during the year............ 13,346 (22,881) (47,112) -------- -------- -------- Balance at end of year................................................ (37,915) (51,261) (28,380) -------- -------- -------- TREASURY STOCK Balance at beginning of year............................................ 551 551 391 Sold under stock options: (shares: 1992-14,500)......................... - - (341) Common stock acquired for treasury: (shares: 1992-16,407).......................................................... - - 501 -------- -------- -------- Balance at end of year................................................ 551 551 551 -------- -------- -------- TOTAL STOCKHOLDERS' EQUITY.............................................. $456,494 $400,176 $387,297 ======== ======== ========
See notes to financial statements. 29 14 FOSTER WHEELER CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (In Thousands of Dollars)
1994 1993 1992 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net earnings/(loss)..................................................... $ 65,410 $ 57,704 $(45,755) Adjustments to reconcile net earnings/(loss) to cash flows from operating activities: Depreciation and amortization..................................... 44,288 51,456 44,200 Noncurrent deferred tax........................................... 9,609 11,632 (2,093) Gain on sale of investments....................................... - - (999) Gain on sale of subsidiary and partnership interest............... - (36,175) - Gain on sale of land, buildings and equipment..................... (915) (165) (2,587) Equity (earnings)/losses, net of dividends........................ (623) (883) 771 Effect of change in accounting principle.......................... - - 91,259 Other noncash items............................................... (1,517) 1,356 (4,810) Changes in assets and liabilities: Receivables....................................................... (24,942) 27,987 (109,188) Contracts in process and inventories.............................. (51,863) (11,376) (7,668) Accounts payable and accrued expenses............................. (8,286) (22,632) 79,314 Estimated costs to complete long-term contracts................... (23,089) 90,196 67,898 Advance payments by customers..................................... 22,316 10,847 48,781 Income taxes...................................................... (8,198) (14,623) (1,269) Other assets and liabilities...................................... (36,487) (18,599) (16,190) -------- -------- -------- Net cash (used)/provided by operating activities.................. (14,297) 146,725 141,664 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures.................................................... (38,501) (27,849) (55,995) Proceeds from sale of properties........................................ 4,671 1,476 4,043 Proceeds from sale of subsidiary and partnership interest............... - 50,288 - Proceeds from sale of Power Systems assets.............................. - - 15,000 Proceeds from sale of long-term investments............................. - - 7,224 Payments for acquisition of businesses, net of cash acquired............ (50,946) - - Decrease/(increase) in investments and advances......................... (5,002) (2,421) 65 Decrease/(increase) in short-term investments........................... 14,621 (17,541) (52,621) Partnership distribution................................................ (3,000) (3,235) (3,199) -------- -------- -------- Net cash (used)/provided by investing activities.................. (78,157) 718 (85,483) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Dividends to stockholders............................................... (25,754) (22,986) (20,814) Repurchase of common stock.............................................. - - (501) Proceeds from the exercise of stock options............................. 2,340 842 1,182 Increase in short-term debt............................................. 14,583 9,246 3,305 Proceeds from long-term debt............................................ 100,848 265 8,464 Repayment of long-term debt............................................. (30,540) (12,439) (21,722) -------- -------- -------- Net cash provided/(used) by financing activities.................. 61,477 (25,072) (30,086) -------- -------- -------- Effect of exchange rate changes on cash and cash equivalents............ 17,264 (19,342) (19,995) -------- -------- -------- (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS........................... (13,713) 103,029 6,100 Cash and cash equivalents at beginning of year............................. 249,514 146,485 140,385 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF YEAR................................... $235,801 $249,514 $146,485 ======== ======== ======== Cash paid during the year for: Interest (net of amount capitalized).................................... $36,191 $32,167 $33,629 Income taxes............................................................ $26,115 $27,949 $14,474
See notes to financial statements. 30 15 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. 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 year 1993 included 53 weeks while the years 1994 and 1992 included 52 weeks. The Corporation acquired Optimized Process Designs, Inc. (OPD) for $6.1 million effective July 1994. OPD's principal process design expertise is in the area of natural gas and gas liquids conditioning, treating and processing. In October 1994, Enserch Environmental Corporation (EEC), a subsidiary of ENSERCH Corporation, was acquired for $50 million, after the sale of $60 million of receivables under a Receivable Purchase Agreement guaranteed by ENSERCH Corporation. The environmental company provides full- service capabilities for hazardous and mixed-waste investigations and remediation, pollution control systems, wastewater treatment, waste management, risk analysis and impacts and environmental permitting. These acquisitions have been accounted for as purchases, accordingly, the purchase prices were allocated to the assets acquired and liabilities assumed based upon their estimated fair market values at the dates of acquisitions. The results of operations of OPD and EEC are included in the Corporation's financial statements since the dates of acquisitions. On the basis of a pro forma combination of the results of operations as if the acquisitions had occurred at the beginning of 1993, combined pro forma revenues, net earnings and earnings per share would not have been materially different. REVENUE RECOGNITION ON LONG-TERM CONTRACTS - The Corporation reports profits on long-term contracts on a percentage-of-completion basis determined on the ratio of earned billings to total contract price, after considering accumulated costs and estimated costs to complete each contract. Contracts in process are valued at cost plus accrued profits less earned billings and progress payments on uncompleted contracts. 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. Contracts of the Engineering and Construction Group are generally considered substantially complete when engineering is completed and/or field construction is completed, while for the Energy Equipment Group it is when manufacturing and/or field construction is completed. Certain special-purpose subsidiaries in the Power Systems Group are reimbursed for their costs, including repayment of project debt, for building and owning certain facilities over the lives of the service contracts. The Corporation records revenues relating to debt repayment on (31 continued) 16 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. 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 2. In conformity with trade practice, however, the full amount of accounts receivable, including such amounts withheld, has been included in current assets. LAND, BUILDINGS AND EQUIPMENT - 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. Depreciation is computed on a straight-line basis for financial reporting purposes using composite estimated lives ranging from 10 to 50 years for buildings and from 3 to 30 years for equipment. Expenditures for maintenance and repairs are charged to operations. Renewals and betterments are capitalized. INCOME TAXES - Deferred income taxes are provided for temporary differences between financial and taxable income. For Federal income tax purposes, accelerated methods of depreciation are used. Investment tax credits are accounted for under the "flow-through" method, which recognizes the benefit in the year qualified progress expenditures are incurred. Qualified property for tax purposes is reduced by the investment tax credit claimed resulting in recognition of deferred taxes. 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 $233,000 at December 30, 1994. 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 at monthly weighted average rates. Foreign currency transaction (losses)/gains for 1994, 1993 and 1992 were 31 17 NOTES TO FINANCIAL STATEMENTS (In Thousands of Dollars, Except per Share Amounts) approximately $(120), $4,200 and $3,200, respectively ($(80), $2,700 and $2,000 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, which are included in either contracts in process or estimated costs to complete long-term contracts. Those that do not qualify as hedges for accounting purposes are marked to market and recognized currently. INVENTORIES - Inventories, principally materials and supplies, are stated at lower of cost or market determined primarily on the average cost method. COST IN EXCESS - The cost in excess of net assets of subsidiaries acquired is being amortized against income over periods ranging between ten and forty years. The Corporation periodically evaluates goodwill to assess recoverability and impairments would be recognized in earnings if a permanent diminution in value were to occur. EARNINGS PER SHARE - Per-share data has been computed on the weighted average number of shares of common stock outstanding of 35,787,658; 35,655,886 and 35,595,728 for 1994, 1993 and 1992, respectively. Outstanding stock options have been disregarded because their effect on earnings per share would not be significant and would have been antidilutive in 1992. 2. ACCOUNTS AND NOTES RECEIVABLE The following tabulation shows the components of trade accounts and notes receivable:
1994 1993 ---- ---- From long-term contracts: Amounts billed due within one year....................... $277,530 $229,145 -------- -------- Retentions: Billed: Estimated to be due in: 1994............................................. - 15,772 1995............................................. 30,929 - 1996............................................. 7,288 - 1999............................................. 6,905 - -------- -------- Total billed..................................... 45,122 15,772 -------- -------- Unbilled: Estimated to be due in: 1994............................................. - 67,741 1995............................................. 38,074 5,108 1996............................................. 3,171 745 -------- -------- Total unbilled................................... 41,245 73,594 -------- -------- Total retentions................................. 86,367 89,366 -------- -------- Total receivables from long-term contracts....... 363,897 318,511
(32 continued) 18 Other trade and notes receivable............................ 82,898 83,628 -------- -------- 446,795 402,139 Less, Allowance for doubtful accounts....................... 4,668 5,311 -------- -------- $442,127 $396,828 ======== ========
3. CONTRACTS IN PROCESS AND INVENTORIES Costs of contracts in process and inventories considered in the determination of cost of operating revenues are shown below:
1994 1993 1992 ---- ---- ---- Contracts in process.................................... $171,144 $ 87,076 $ 78,195 ======== ======== ======== Inventories: Materials and supplies............................. $ 21,447 $ 18,700 $ 22,250 Work in process.................................... 1,894 1,810 1,397 Finished goods..................................... 4,293 3,990 10,628 -------- -------- -------- $ 27,634 $ 24,500 $ 34,275 ======== ======== ========
The following tabulation shows the elements included in contracts in process as related to long-term contracts:
1994 1993 1992 ---- ---- ---- Costs plus accrued profits less earned billings on contracts currently in process........................................ $350,897 $229,604 $209,800 Less, Progress payments........................................ 179,753 142,528 131,605 -------- -------- -------- $171,144 $ 87,076 $ 78,195 ======== ======== ========
4. LAND, BUILDINGS AND EQUIPMENT Land, buildings and equipment are stated at cost and are set forth below:
1994 1993 ---- ---- Land and land improvements..................................... $ 16,412 $ 14,910 Buildings...................................................... 98,263 91,957 Equipment...................................................... 679,686 653,002 Construction in progress....................................... 21,385 24,679 -------- -------- $815,746 $784,548 ======== ========
Depreciation expense for the years 1994, 1993 and 1992 was $43,729, $43,732 and $43,286, respectively. 5. PENSIONS AND OTHER POSTRETIREMENT BENEFITS RETIREMENT 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 plans are noncontributory. Effective with retirements after April 1, 1993, the Corporation changed the benefit for domestic employees to 1.2% of the average of the highest five consecutive years of salary in the last ten years of employment. Previous benefits were 1.1% of the average of the highest seven consecutive years of salary in the last ten years of employment. 32 19 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 for those expected to be earned in the future. The following table sets forth the plans' funded status as of the end of December 1994 and 1993:
1994 1993 ---- ---- Actuarial present value of accumulated benefit obligations: Vested............................................................. $ 271,579 $ 289,415 Nonvested.......................................................... 7,005 12,740 --------- --------- Total................................................................. $ 278,584 $ 302,155 ========= ========= Plan assets at fair value, primarily listed stocks and bonds............. $ 379,820 $ 388,090 Projected benefit obligations............................................ (308,382) (329,188) --------- --------- Excess of plan assets over projected benefit obligations................. 71,438 58,902 Unrecognized net loss due to past experience different from assumptions made...................................................... 32,693 33,800 Unrecognized prior service cost.......................................... 14,888 20,670 Unrecognized net assets being amortized over 12 years.................... (23,011) (27,811) --------- --------- Prepaid pension cost..................................................... $ 96,008 $ 85,561 ========= =========
Net periodic pension credits included the following components:
1994 1993 1992 ---- ---- ---- Service cost........................................... $ 15,289 $ 11,024 $ 9,275 Interest cost on projected benefit obligation.......... 25,070 24,117 23,126 Actual return on plan assets........................... (38,081) (33,370) (33,768) Net amortization and deferrals......................... (2,799) (2,929 ) (4,345) --------- --------- --------- Net periodic pension credits........................... $ 521 $ 1,158 $ 5,712 ========= ========= =========
In determining the actuarial present value of the projected benefit obligations, discount rates ranging from 7.5% to 8.5% (1993 - 6.875% to 7.5%), and rates of increase for future compensation levels ranging from 4.5% to 6.5% were utilized. The expected long-term rate of return on assets was 10%. The Corporation has a 401(k) plan for salaried employees. The Corporation for the years 1994, 1993 and 1992 contributed a 50% match of the employees' contributions which amounted to a cost of $3,400, $3,300 and $2,700, respectively. 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 reach normal retirement age while working for the Corporation. Benefits are provided through insurance companies. Effective the beginning of 1992, the provisions of Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" were adopted. The Statement requires the Corporation to use accrual accounting rather than pay-as-you-go (cash basis) for postretirement benefits other than pensions for current and retired employees and their families. In the first quarter of 1992, the Corporation recorded the full amount of its transition obligation which represented the accumulated postretirement benefit obligation as of the beginning of 1992. The after tax and valuation allowance charge to 1992 earnings was $91,259, or $2.57 per share. This amount was reflected as the cumulative effect of a change in accounting principle in the consolidated statement of earnings. (33 continued) 20 The following sets forth the plans' funded status reconciled with amounts reported in the Corporation's consolidated balance sheet at the end of December 1994 and 1993:
Accumulated postretirement benefit obligation: 1994 1993 ---- ---- Retirees................................................ $ 71,792 $ 77,347 Fully-eligible active plan participants................. 10,458 10,750 Other active plan participants.......................... 35,380 35,677 --------- --------- Accumulated postretirement benefit...................... 117,630 123,774 Unrecognized net gain/(loss)............................ 1,570 (7,129) Unrecognized prior service cost......................... 33,205 35,309 --------- --------- Accrued postretirement benefit liability................ $ 152,405 $ 151,954 ========= =========
Net periodic postretirement benefit costs for 1994, 1993 and 1992 included the following components:
1994 1993 1992 ---- ---- ---- Service cost........................................... $ 1,244 $ 1,809 $ 3,257 Interest cost.......................................... 6,478 7,233 8,985 Net amortization and deferrals......................... (2,094) (1,578) - -------- -------- -------- Net periodic postretirement benefit cost............... $ 5,628 $ 7,464 $ 12,242 ======== ======== ========
In 1993, the Corporation announced certain changes to its health care plan that establish a premium based on length of service and a cap for future medical costs of active employees. A 9.5% annual rate of increase in the per capita costs of covered health care benefits was assumed for 1995, gradually decreasing to 6% by the year 2022. Increasing the assumed health care cost trend rates by one percentage point in each year would increase the accumulated postretirement benefit obligation as of December 30, 1994, by $6,000 and increase the aggregate of the service cost and interest cost components of net periodic postretirement benefit cost for 1994 by $600. A discount rate of 8.5% (1993 - 7.5%) was used to determine the accumulated postretirement benefit obligation. 33 21 NOTES TO FINANCIAL STATEMENTS (In Thousands of Dollars, Except per Share Amounts) 6. BANK BORROWINGS The approximate weighted average interest rates on borrowings outstanding at the end of 1994 and 1993 were 6% and 5%, respectively. Unused lines of credit for short-term bank borrowings aggregated $24,659 at year-end 1994, of which approximately 14% was available in the United States and Canada at interest rates not exceeding the prime commercial lending rate and the remainder was available overseas at rates up to 2% over the base rate. Pursuant to agreements with its lending banks, the Corporation pays fees for maintaining its existing lines of credit. Interest costs incurred in 1994, 1993 and 1992 were $35,445, $33,771 and $35,898 of which $467, $213 and $1,739, respectively, were capitalized. 7. LONG-TERM DEBT Long-term debt consisted of the following:
1994 1993 ---- ---- Corporate Debt -------------- 8.58% unsecured promissory notes due in installments of $22,000 on October 1 in each of the years 1995 to 1998............................................................ $ 88,000 $110,000 Revolving Credit Agreement, interest 5.9%................................................... 95,000 - Special-Purpose Project Debt ---------------------------- 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 (1994 year-end rate 6.4%), due semiannually through July 30, 2006............................................................................... 59,640 62,113 Floating/Fixed Rate Resource Recovery Revenue Bonds, interest varies based on tax-exempt money market rates (1994 year-end rate 5.65%), due semiannually August 1, 1997 through February 1, 2010..................................................... 45,448 45,448
(34 continued) 22 Collateralized note payable, interest varies based on one of several money market rates (1994 year-end rate 7.25%), due semiannually through February 1, 1996....................................................... 7,340 11,110 Solid Waste Disposal and Resource Recovery System Revenue Bonds, interest 7.125% to 7.5%, due annually December 1, 1999 through December 1, 2010.................................................................... 120,150 120,150 Resource Recovery Revenue Bonds, interest 7.9% to 10%, due annually December 15, 1995 through 2012........................................................................... 75,805 71,482 Other ----- Unsecured bank loans, interest 9.2%......................................................... 4,446 4,952 Other....................................................................................... 3,373 4,009 -------- -------- 499,202 429,264 Less, Current portion....................................................................... 32,565 32,523 -------- -------- $466,637 $396,741 ======== ========
Principal payments are payable in annual installments of: 1996..................................................................................... $ 37,935 1997..................................................................................... 34,162 1998..................................................................................... 130,094 1999..................................................................................... 21,873 2000..................................................................................... 25,251 Balance due in installments through 2012............................................................................. 217,322 -------- $466,637 ========
34 23 CORPORATE DEBT - The Corporation entered into interest rate swap agreements under which it pays to the counterparties interest at a variable rate based on the London Interbank Offered Rate (LIBOR) on the current notional principal of $88,000 and the counterparties pay the Corporation interest at 7.165% (average) on the notional principal. The notional principal of the swap amortizes through September 30, 1998. Amounts receivable under the swap agreements are accrued as a reduction of interest expense. The Corporation has entered into a four-year revolving credit agreement (the "Revolving Credit Agreement") with a group of banks whereby the banks agree to advance loans from time to time in amounts up to $180,000. The loans are for general corporate purposes. The Revolving Credit Agreement is renewed each year subject to the approval of the Corporation and the banks. The Corporation pays to the banks a facility fee on the total facility and a commitment fee on the unused portion of the facility. At December 30, 1994, loans outstanding under the Revolving Credit Agreement amounted to $95,000. This amount has been classified as long-term. It is the Corporation's intention to maintain the Revolving Credit Agreement as long-term or obtain long-term financing to replace outstanding borrowings under the Agreement. The Note Agreement pursuant to which the 8.58% unsecured promissory notes were issued and the Revolving Credit Agreement require the maintenance of certain levels of consolidated Tangible Net Worth, as defined, the most restrictive of which is $400,000 plus 25% of earnings as defined from 1991 through 1994. At December 30, 1994, the consolidated Tangible Net Worth was $522,000. The Note Agreement and the Revolving Credit Agreement also require the maintenance of certain capitalization ratios. Both agreements require that the ratio of Indebtedness to Tangible Net Worth, as those terms are defined in the agreements, not exceed .65 to 1. At December 30, 1994, this ratio was .46 to 1. SPECIAL-PURPOSE SUBSIDIARY PROJECT DEBT - Special-Purpose Subsidiary Project Debt represents debt incurred to finance the construction of cogeneration facilities or waste-to-energy projects. The notes and/or bonds are collateralized by the assets of each project. COGENERATION PROJECTS - The note payable for $59,640 represents a loan under a bank credit facility to a limited partnership whose general partner is a Special-Purpose Project Subsidiary. The limited partnership entered into an interest rate swap agreement which fixed the interest rate on $62,000 of the original principal amount of the debt. Under this agreement, the limited partnership pays to the counterparties interest at 8.85% on the current notional principal and the counterparties pay to the limited partnership interest at a variable rate based on LIBOR on the notional principal. The notional principal of the swap amortizes through July 30, 1999. The Floating/Fixed Rate Resource Recovery Revenue Bonds in the amount of $45,448 were issued in a total amount of $45,450 and the collateralized note in the amount of $7,340 represents a loan under a bank credit facility. The bonds are collateralized by an irrevocable standby letter of credit issued by a commercial bank. (35 continued) 24 WASTE-TO-ENERGY PROJECTS - The Solid Waste Disposal and Resource Recovery System Revenue Bonds totalling $120,150 were issued in a total amount of $133,500. The bonds are collateralized by a pledge of certain revenues and assets of the project. The Resource Recovery Revenue Bonds of $75,805 were issued in a total amount of $86,780. The bonds are collateralized by a pledge of certain revenues and assets of the project. 8. RESEARCH AND DEVELOPMENT Research and development expenses for the years 1994, 1993 and 1992 for corporate- and customer-sponsored activities were $48,000, $49,200 and $39,200, respectively. 35 25 NOTES TO FINANCIAL STATEMENTS (In Thousands of Dollars, Except per Share Amounts) 9. INCOME TAXES The components of earnings before income taxes and accounting change for the years 1994, 1993 and 1992 were taxed under the following jurisdictions:
1994 1993 1992 ---- ---- ---- Domestic................................... $ 19,955 $ 25,602 $ (5,082) Foreign.................................... 86,912 71,216 72,907 -------- -------- -------- Total...................................... $106,867 $ 96,818 $ 67,825 ======== ======== ========
The provision for income taxes on those earnings was as follows: Current tax expense: Domestic................................... $ 2,931 $ 10,735 $ 1,493 Foreign.................................... 36,739 27,047 29,737 --------- -------- -------- Total current.............................. 39,670 37,782 31,230 --------- -------- -------- Deferred tax (benefit)/expense: Domestic................................... 5,423 (9,886) 7,074 Foreign.................................... (6,600) (4,966) (2,537) --------- -------- -------- Total deferred............................. (1,177) (14,852) 4,537 --------- -------- -------- Investment tax credit recapture/(benefit).. - 2,009 (2,146) Utilization/(benefit) of operating loss carryforwards.......................... 2,964 14,175 (11,300) --------- --------- -------- 2,964 16,184 (13,446) --------- --------- -------- Total provision for income taxes.............. $ 41,457 $ 39,114 $ 22,321 ========= ========= =========
Deferred tax liabilities (assets) consist of the following:
1994 1993 ---- ---- Difference between book and tax depreciation........................... $ 71,907 $ 63,925 Pension assets................................ 30,685 28,845 Capital lease transactions.................... 12,652 12,975 Revenue recognition........................... 15,814 15,452 Other......................................... 4,933 6,226 -------- -------- Gross deferred tax liabilities................ 135,991 127,423 -------- -------- Current taxability of estimated costs to complete long-term contracts.................................. (23,768) (17,988)
(36 continued) 26 Income currently taxable deferred for financial reporting.................... (7,380) (14,795) Expenses not currently deductible for tax purposes........................... (22,104) (23,175) Loss carryforwards............................ - (2,964 ) Investment tax credit carryforwards........... (28,600) (29,484) Postretirement benefits other than pensions.............................. (55,112) (54,783) Minimum tax credits........................... (6,710) - Other......................................... (24,366) (18,070) Valuation allowance........................... 5,500 5,500 -------- --------- Net deferred tax assets....................... (162,540) (155,759) -------- --------- $(26,549) $ (28,336) ========= =========
The domestic investment tax credit carryforwards, if not used, will expire in the years 2002 to 2007. 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:
1994 1993 1992 ---- ---- ---- Tax at U.S. statutory rate........................... 35.0% 35.0% 34.0% State income taxes, net of Federal income tax benefit........................ 1.2 1.3 - Nondeductible goodwill write-off..................... - 2.5 - Investment tax credit recapture/(benefit)............ - 2.1 (2.1) Other................................................ 2.6 (.5) 1.0 ----- ---- ---- 38.8% 40.4% 32.9% ===== ===== ====
10. 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. In 1994, the Corporation entered into a lease agreement for a 1,600-ton-per-day recycling and waste-to-energy plant located in Robbins, Illinois, which is scheduled to go into operation in 1997. The terms of the agreement are to lease the facility under a long-term operating lease for 32 years. Recourse under these lease agreements is primarily limited to the assets of the special-purpose entities. The lease expense for the years 1992 through 1994 totalled $9,300 annually. (36 continued) 27 The minimum lease payments under these long-term noncancelable operating leases are as follows: 1995............................... $ 9,186 1996............................... 9,144 1997............................... 87,596 1998............................... 37,654 1999............................... 38,128 Thereafter........................ 742,660 -------- Total.............................. $924,368 ========
The Corporation and certain of its subsidiaries are obligated under operating lease agreements primarily for office space. Rental expense for these leases amounted to $20,600 in 1994, $19,500 in 1993 and $22,100 in 1992. Future minimum rental commitments on noncancelable leases are as follows: 1995 - $21,640; 1996 - $19,725; 1997 - $14,540; 1998 - $12,210; 1999-$9,945; and an aggregate of $29,770 thereafter. 36 28 11. QUARTERLY FINANCIAL DATA (Unaudited)
Three Months Ended --------------------------------------------------------- 1994 April 1 July 1 Sept. 30 Dec. 30 ---- ------- ------ -------- ------- Operating revenues......................... $ 469,645 $ 571,247 $ 533,599 $ 659,950 Gross earnings from operations............. 77,119 77,247 75,033 95,149 Net earnings............................... 15,403 16,659 14,684 18,664 Earnings per share......................... .43 .47 .41 .52 Cash dividends per share................... .165 .185 .185 .185 Stock prices: High.................................... 45.00 45.125 42.00 37.125 Low..................................... 32.50 35.00 33.875 26.625
1993 March 26 June 25 Sept. 24 Dec. 31 ---- -------- ------- -------- ------- Operating revenues......................... $586,531 $646,503 $616,426 $733,540 Gross earnings from operations............. 68,673 74,658 71,264 78,010 Net earnings............................... 12,730 14,555 12,154 18,265 Earnings per share......................... .36 .41 .34 .51 Cash dividends per share................... .15 .165 .165 .165 Stock prices: High.................................... 31.875 31.125 35.875 35.625 Low..................................... 27.25 25.875 29.00 30.50
12. LITIGATION 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. The Corporation and its subsidiaries also routinely become involved in litigation relating to patents and other intellectual property. There are several actions of that nature presently pending. If the presently pending suits described above were sustained in substantially the amounts asserted, they would have a material adverse effect on the Corporation's financial condition and results of operations. However, based on its knowledge of the facts and circumstances relating to the Corporation's liabilities, if any, and to its insurance coverage, management believes that the disposition of such suits will not result in charges against assets or earnings materially in excess of amounts provided in the accounts. (37 continued) 29 The Corporation and its subsidiaries, along with many other companies, are codefendants in numerous lawsuits pending in the United States and Canada, in which plaintiffs claim damages for personal injury or property damage alleged to arise from exposure to or use of asbestos. At December 31, 1993 and December 30, 1994, the suits pending numbered approximately 43,300 and 51,700, respectively. It is anticipated that a substantial number of similar suits will be filed in the future. Since the inception of asbestos-related litigation against the Corporation and its subsidiaries, approximately 46,000 lawsuits have been terminated without any payment or with only nominal payments by the insurers for the Corporation and its subsidiaries. Based on its knowledge of relevant facts and circumstances, on its determination of the availability and extent of insurance coverage, and on the advice of the Corporation's special counsel, the management of the Corporation is of the opinion that the ultimate disposition of pending and future asbestos-related lawsuits will not result in material charges against assets or earnings. The asbestos litigation herein described does not relate to any activities currently being carried on by the Corporation or its subsidiaries. 13. STOCK OPTION PLANS The Corporation has two stock option plans which reserve shares of common stock for issuance to executives, key employees and directors. Under the plan approved by the stockholders in April 1984, as amended in 1991, the total number of shares of common stock that may be granted is 1,700,000. In April 1990, the stockholders approved a Stock Option Plan for Directors of the Corporation. This plan authorizes the granting of options on 150,000 shares of common stock to directors who are not employees of the Corporation, who shall automatically receive an option to acquire 2,000 shares each year. These plans provide that shares granted should come from the Corporation's authorized but unissued or reacquired common stock. The price of the options granted pursuant to these plans shall not be less 37 30 than 100 percent 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 shall 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. At December 30, 1994, 272,776 shares were not exercisable. Information regarding these option plans for 1994, 1993 and 1992 is as follows:
1994 1993 1992 ------ ------- ------ Options outstanding, beginning of year...................................... 493,810 417,596 394,705 Options exercised......................................... (125,682) (50,786) (82,592) Options granted........................................... 178,334 127,000 119,500 Options expired........................................... - - (14,017) --------- --------- -------- Options outstanding, end of year.......................... 546,462 493,810 417,596 ========= ========= ======== Option price range at end of year......................... $12.25 to $12.25 to $12.25 to $40.0625 $28.75 $28.6875 Option price range for exercised shares....................................... $12.25 to $12.25 to $12.25 to $28.75 $22.0625 $21.3125 Options available for grant at end of year......................................... 539,578 717,912 844,912 ======= ======= ========
14. PREFERRED SHARE PURCHASE RIGHTS On September 22, 1987, the Corporation's Board of Directors 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. Each Right allows the shareholder to purchase a one one-hundredth of a share of a new series of preferred stock of the Corporation at an exercise price of $75. 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, 1997, and may be redeemed, prior to becoming exercisable, by the Board of Directors at $.02 per Right or by shareholder 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 company's common stock having a market value at that time of twice the Right's exercise price. 15. 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: (38 continued) 31 CASH AND SHORT-TERM INVESTMENTS - The carrying amount approximates fair value because of the short 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. For other investments for which there are no quoted market prices, a reasonable estimate of fair market value could not be made without incurring excessive costs. Additional information pertinent to the value of an unquoted investment is provided below. 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 AND INTEREST RATE SWAPS - 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 (S&P) or better (see Notes 1 and 7). 38 32 CARRYING AMOUNTS AND FAIR VALUES - The estimated fair values of the Corporation's financial instruments are as follows:
1994 1993 ------------------------ ------------------------ Carrying Fair Carrying Fair Amount Value Amount Value ------- ----- ------- ----- Nonderivatives: Cash and short-term investments............................... $354,362 $354,362 $377,390 $377,390 Long-term investments for which it is: Practicable to estimate fair value..................... 700 1,500 700 1,800 Not practicable........................... 4,500 4,500 Long-term debt.............................. (499,202) (495,000) (429,264) (445,000) Derivatives: Foreign currency contracts.................. (3,400) (3,400) (10,300) (10,300) Interest rate swaps......................... - (2,000) - -
It is not practicable to estimate the fair value of an investment representing the preferred stock of a public company because this stock is not traded; that investment is carried at its original cost of $4,500 in the consolidated balance sheet. At the end of September 1994 (latest available financial statements of this public company), the total assets reported were $83,469 and the stockholders' equity was $41,835. Revenues were $103,319 and net income was $22,313 for nine months. As of December 30, 1994, the Corporation had $183,000 of forward exchange contracts outstanding. These forward exchange contracts mature between 1995 and 1997. Primarily, these contracts require the Corporation to sell Japanese yen and receive United States dollars. 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 businesses and geographic areas. As of December 30, 1994 and December 31, 1993, the Corporation had no significant concentration of credit risk. (39 continued) 33 16. BUSINESS SEGMENTS - DATA The business of the Corporation and its subsidiaries falls within three business groups: an Engineering and Construction Group that consists primarily of the design, engineering and construction of process plants and fired heaters for oil refineries, synthetic fuels, chemical producers, and environmental services for hazardous and mixed-waste investigation and remediation, pollution control systems, wastewater treatment and all other environmental services; an Energy Equipment Group that consists mainly of the design and fabrication of steam generators and condensers, suppliers of mass-transfer equipment, tower packings, industrial wire mesh, and natural gas processing engineering and construction; and a Power Systems Group engaged in the owning/leasing to or operation for third parties of solid waste-to-energy and cogeneration plants. 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 considered immaterial and are netted against the revenues of the respective segments. Export revenues and intercompany revenues are not significant. No single customer represents 10% or more of total revenues. 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. Financial information with respect to business segments and geographic data for the years 1994, 1993 and 1992 is on pages 22 and 23 (unaudited as to unfilled orders and new orders booked). 39 EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary of financial information extracted from the consolidated balance sheet and statement of earnings for the year ended December 30, 1994 and is qualified in its entirety by reference to such financial statements. 1,000 U.S.DOLLARS YEAR DEC-30-1994 JAN-01-1994 DEC-30-1994 1 235,801 118,561 501,649 4,668 198,778 1,112,709 815,746 249,590 2,063,334 890,579 466,637 0 0 35,833 420,661 2,063,334 2,234,441 2,234,441 1,909,893 1,909,893 0 0 34,978 106,876 41,457 65,410 0 0 0 65,410 1.83 1.83