-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RX5gB/fd13/lcKEA5rKfbabrfUkZ91+okb6CG/UUk5w4W71tGudSJ1BFs6KCwVcK HtkpxZ2UIxN4xf8u31F3Tw== 0000950123-96-004213.txt : 19960812 0000950123-96-004213.hdr.sgml : 19960812 ACCESSION NUMBER: 0000950123-96-004213 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960628 FILED AS OF DATE: 19960809 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOSTER WHEELER CORP CENTRAL INDEX KEY: 0000038321 STANDARD INDUSTRIAL CLASSIFICATION: HEAVY CONSTRUCTION OTHER THAN BUILDING CONST - CONTRACTORS [1600] IRS NUMBER: 131855904 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00286 FILM NUMBER: 96607211 BUSINESS ADDRESS: STREET 1: PERRYVILLE CORPORATE PARK CITY: CLINTON STATE: NJ ZIP: 08809 BUSINESS PHONE: 9087304090 10-Q 1 FORM 10-Q FOR P/E 06/28/96 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE QUARTERLY PERIOD ENDED JUNE 28, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-286-2 FOSTER WHEELER CORPORATION (Exact name of registrant as specified in its charter) New York 13-1855904 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Perryville Corporate Park, Clinton, N. J. 08809-4000 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (908) 730-4000 (Not Applicable) Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes (X) No ( ) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of June 28, 1996 was 40,618,020 shares. 2 FOSTER WHEELER CORPORATION INDEX Page No. -------- Part I Financial Information: Item 1 - Financial Statements: Condensed Consolidated Balance Sheet at June 28, 1996 and December 29, 1995 2 Condensed Consolidated Statement of Earnings Three and Six Months Ended June 28, 1996 and June 30, 1995 3 Condensed Consolidated Statement of Cash Flows Six Months Ended June 28, 1996 and June 30, 1995 4 Notes to Condensed Consolidated Financial Statements 5 - 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 7 - 11 Part II Other Information: Item 6 - Exhibits and Reports on Form 8-K 11 - 1 - 3 PART I. FINANCIAL INFORMATION FOSTER WHEELER CORPORATION AND SUBSIDIARIES ITEM 1. - FINANCIAL STATEMENTS - ------- -------------------- CONDENSED CONSOLIDATED BALANCE SHEET ------------------------------------ (IN THOUSANDS OF DOLLARS) -------------------------
June 28, 1996 December 29, (Unaudited) 1995 ------------- ------------ ASSETS - ------ Current Assets: Cash and cash equivalents $ 265,196 $ 167,131 Short-term investments 137,839 112,853 Accounts and notes receivable 701,943 715,739 Contracts in process 357,500 340,526 Inventories 36,395 42,716 Prepaid and refundable income taxes 42,667 39,346 Prepaid expenses 20,462 20,662 ---------- ---------- Total Current Assets 1,562,002 1,438,973 ---------- ---------- Land, buildings and equipment 988,933 944,596 Less accumulated depreciation 320,411 299,784 ---------- ---------- Net book value 668,522 644,812 ---------- ---------- Notes and accounts receivable - long-term 69,199 63,632 Investments and advances 59,489 56,767 Intangible assets - net 257,233 260,070 Deferred charges and prepaid pension cost 319,228 308,369 Deferred income taxes -0- 3,186 ---------- ---------- Total Assets $2,935,673 $2,775,809 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current Liabilities: Current installments on long-term debt $ 35,202 $ 34,648 Bank loans 101,683 86,869 Accounts payable and accrued expenses 458,440 539,582 Estimated cost to complete long-term contracts 505,471 475,899 Advance payments by customers 106,928 74,821 Income taxes 38,399 28,457 ---------- ---------- Total Current Liabilities 1,246,123 1,240,276 Long-term debt, less current installments 673,793 554,404 Other long-term liabilities, deferred credits, postretirement benefits other than pensions and minority interest in subsidiary companies 330,879 333,421 Deferred income taxes 25,516 21,841 ---------- ---------- Total Liabilities 2,276,311 2,149,942 ---------- ---------- Stockholders' Equity: Common stock 40,628 40,498 Paid-in capital 196,945 192,721 Retained earnings 454,089 421,804 Accumulated translation adjustment (32,005) (28,861) ---------- ---------- 659,657 626,162 Less cost of treasury stock (295) (295) ---------- ---------- Total Stockholders' Equity 659,362 625,867 ---------- ---------- Total Liabilities and Stockholders' Equity $2,935,673 $2,775,809 ========== ==========
See notes to financial statements. - 2 - 4 FOSTER WHEELER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF EARNINGS -------------------------------------------- (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) --------------------------------------------------- (UNAUDITED) -----------
Three Months Ended Six Months Ended ------------------------------ ------------------------------- June 28, 1996 June 30, 1995 June 28, 1996 June 30, 1995 ------------- ------------- ------------- ------------- Revenues: Operating revenues $ 970,535 $ 678,733 $ 1,814,451 $ 1,314,726 Other income 7,069 7,497 17,576 15,149 ----------- ----------- ----------- ----------- Total revenues 977,604 686,230 1,832,027 1,329,875 ----------- ----------- ----------- ----------- Cost and expenses: Cost of operating revenues 853,040 587,829 1,579,682 1,134,056 Selling, general and administrative expenses 67,089 56,779 139,711 110,909 Other deductions 17,361 13,153 35,547 27,049 Minority interest 1,417 641 2,683 1,804 ----------- ----------- ----------- ----------- Total costs and expenses 938,907 658,402 1,757,623 1,273,818 ----------- ----------- ----------- ----------- Earnings before income taxes 38,697 27,828 74,404 56,057 Provision for income taxes: Federal and foreign 11,461 7,817 22,678 17,042 State 2,171 1,121 3,225 2,245 ----------- ----------- ----------- ----------- 13,632 8,938 25,903 19,287 ----------- ----------- ----------- ----------- Net earnings $ 25,065 $ 18,890 $ 48,501 $ 36,770 =========== =========== =========== =========== Weighted average number of common shares outstanding 40,596,135 35,846,274 40,554,405 35,832,661 =========== =========== =========== =========== Earnings per share $ .62 $ .53 $ 1.20 $ 1.03 =========== =========== =========== =========== Cash dividends paid per common share $ .205 $ .195 $ .40 $ .38 =========== =========== =========== ===========
See notes to financial statements. - 3 - 5 FOSTER WHEELER CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS ---------------------------------------------- (IN THOUSANDS OF DOLLARS) ------------------------- (UNAUDITED) -----------
Six Months Ended ------------------------------- June 28, 1996 June 30, 1995 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 48,501 $ 36,770 Adjustments to reconcile net earnings to cash flows from operating activities: Depreciation and amortization 32,655 24,372 Noncurrent deferred tax 6,909 3,656 Other (2,896) (2,938) Changes in assets and liabilities: Receivables 7,746 (83,493) Contracts in process and inventories (11,016) (77,598) Accounts payable and accrued expenses (80,530) (23,052) Estimated cost to complete long-term contracts 33,686 39,375 Advance payments by customers 31,204 (16,923) Income taxes 6,814 4,699 Other assets and liabilities (5,780) (6,421) -------- --------- NET CASH PROVIDED/(USED) BY OPERATING ACTIVITIES 67,293 (101,553) -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (61,536) (21,021) Proceeds from sale of properties 797 429 Increase in investments and advances (1,429) (9,219) (Increase)/decrease in short-term investments (21,590) 21,686 Partnership distributions (4,859) (4,883) -------- --------- NET CASH USED BY INVESTING ACTIVITIES (88,617) (13,008) -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Dividends to stockholders (16,216) (13,610) Proceeds from exercise of stock options 2,967 478 Increase in short-term debt 14,090 31,708 Proceeds from long-term debt 140,189 54,650 Repayment of long-term debt (19,925) (5,647) -------- --------- NET CASH PROVIDED BY FINANCING ACTIVITIES 121,105 67,579 -------- --------- Effect of exchange rate changes on cash and cash equivalents (1,716) 10,906 -------- --------- INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 98,065 (36,076) Cash and cash equivalents at beginning of year 167,131 235,801 -------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $265,196 $ 199,725 ======== ========= Cash paid during period: -Interest (net of amount capitalized) $ 21,069 $ 22,849 -Income taxes $ 6,144 $ 10,641
See notes to financial statements. - 4 - 6 FOSTER WHEELER CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------------- (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) --------------------------------------------------- (UNAUDITED) ----------- 1. The condensed consolidated balance sheet as of June 28, 1996, and the related condensed consolidated statements of earnings for the three and six month periods and cash flows for the six month periods ended June 28, 1996 and June 30, 1995 are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of such financial statements have been included. Such adjustments only consisted of normal recurring items. Interim results are not necessarily indicative of results for a full year. The financial statements and notes are presented in accordance with Form 10-Q and do not contain certain information included in the Corporation's Annual Report on Form 10-K for the fiscal year ended December 29, 1995 filed with the Securities and Exchange Commission March 19, 1996, which should be read in conjunction with this report. In conformity with generally accepted accounting principles, management must make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expense during the reporting period. Actual results could differ from those estimates. 2. In the ordinary course of business the Corporation and its subsidiaries enter into contracts providing for assessment of damages for nonperformance or delays in completion. Suits and claims have been or may be brought against the Corporation by customers alleging deficiencies in either equipment design or plant construction. Based on its knowledge of the facts and circumstances relating to the Corporation's liabilities, if any, and to its insurance coverage, management of the Corporation believes that the disposition of such suits will not result in charges against assets or earnings materially in excess of amounts previously provided in the accounts. The Corporation and its subsidiaries, along with many other companies, are codefendants in numerous lawsuits pending in the United States and Canada, in which plaintiffs claim damages for personal injury or property damage alleged to arise from exposure to or use of asbestos. At June 28, 1996, there were approximately 87,000 claims pending. Approximately 20,000 new claims were filed in the six-month period ended June 28, 1996 and approximately 10,800 were either settled or dismissed without payment. Any settlement costs not covered by the Corporation's insurance carriers were immaterial. The Corporation has agreements with insurance carriers covering a substantial portion of its potential costs relating to pending claims. Management of the Corporation has carefully considered the financial viability and legal obligations of its insurance carriers and has concluded that the insurers will continue to adequately fund claims and defense costs relating to asbestos litigation. The Company accrues as a liability any "probable" losses relating to litigation and records as an asset related "probable" insurance recoveries. 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. -5- 7 FOSTER WHEELER CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------------- (IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS) --------------------------------------------------- (UNAUDITED) ----------- (Continued) ----------- 3. The Corporation maintains two revolving credit facilities with a syndicate of banks. One is a short-term revolving credit facility of $100,000 with a maturity of 364 days and the second is a $300,000 revolving credit facility with a maturity of four years (collectively, the "Revolving Credit Facilities"). The Revolving Credit Facilities contain two financial covenants. The first covenant is that the Consolidated Fixed Charges Coverage Ratio (as defined in the Revolving Credit Facilities) shall be greater than 2.5:1 for each period of four consecutive fiscal quarters. The Consolidated Fixed Charges Coverage Ratio for the period ending June 28, 1996 was 2.75. The Revolving Credit Facilities also require the Consolidated Leverage Ratio, as defined therein, not exceed 0.5:1. As of June 28, 1996, the ratio was 0.43:1. 4. A total of 2,428,563 shares were reserved for issuance under the stock option plans; of this total 1,303,916 were not under option. 5. Foster Wheeler Corporation had a backlog of firm orders as of June 28, 1996 of $6,772,027 as compared to a backlog as of June 30, 1995 of $5,635,589. 6. Earnings per share data have been computed on the weighted average number of shares of common stock outstanding. Outstanding stock options have been disregarded because their effect on earnings per share would not be significant. 7. Interest income and cost for the following periods are:
Three Months Ended Six Months Ended ------------------------------- ------------------------------- June 28, 1996 June 30, 1995 June 28, 1996 June 30, 1995 ------------- ------------- ------------- ------------- Interest income $ 4,478 $ 5,639 $ 9,692 $11,535 ======= ======= ======= ======= Interest cost $16,547 $11,338 $30,349 $22,431 ======= ======= ======= =======
Included in interest cost is interest capitalized on self-constructed assets for the three and six months ended June 28, 1996 of $3,665 and $3,735, respectively, compared to $171 and $341 for the comparable periods in 1995. - 6 - 8 FOSTER WHEELER CORPORATION AND SUBSIDIARIES ITEM 2.- MANAGEMENT'S DISCUSSION AND ANALYSIS - ------- ------------------------------------ OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (UNAUDITED) ------------------------------------------------------------ The following is Management's Discussion and Analysis of certain significant factors that have affected the financial condition and results of operations of the Corporation for the periods indicated below. This discussion and analysis should be read in conjunction with the 1995 Annual Report on Form 10-K filed March 19, 1996. RESULTS OF OPERATIONS Six months ended June 28, 1996 compared to six months ended June 30,1995 - ------------------------------------------------------------------------ The Corporation's consolidated backlog at June 28, 1996 totaled $6,772.0 million, the highest in the history of the Corporation. This represented an increase of $1,136.4 million or 20% over the amount reported for the same period in 1995. The dollar amount of backlog is not necessarily indicative of the future earnings of the Corporation related to the performance of such work. Although backlog represents only business which is considered firm, cancellations or scope adjustments may occur. Due to factors outside the Corporation's control, such as changes in project schedules, the Corporation cannot predict with certainty the portion of backlog not to be performed. Backlog has been adjusted to reflect project cancellations, deferrals, and revised project scope and cost. The net reduction in backlog from project adjustments and cancellations for the six months ended June 28, 1996 was approximately $509 million, compared with $130 million for the six months ended June 30, 1995. Furthermore, the Corporation's future award prospects include several large scale international projects and, because the large size and uncertain timing can create variability in the Corporation's contract awards, future award trends are difficult to predict with certainty. The Engineering and Construction ( E & C) Group had backlog of $4,768.0 million at June 28, 1996, which represented a 17% increase from June 30,1995 due primarily to the growth of orders reported by the French and Italian subsidiaries. The Energy Equipment Group had backlog of $1,650.0 million at June 28, 1996, a 31% increase from backlog at June 30, 1995 due primarily to the purchase of the power generation business of A. Ahlstrom Corporation (Pyropower) in September of 1995, and the orders taken by the Spanish subsidiary. New orders awarded for the six months ended June 28, 1996 of $2,655.7 million were 44% higher than new orders awarded for the six months ended June 30, 1995 of $1,849.3 million. Approximately 65% of new orders in the six months ended June 28, 1996 were for projects awarded to the Corporation's subsidiaries located outside the United States. Key geographic regions contributing to new orders awarded for the six months ended June 28, 1996 were the United States, Europe, and the Middle East. The principal reasons for the increase in new orders awarded for the six months ended June 28, 1996 as compared to the same period in 1995 were the significant awards made to the U.S. subsidiaries of $570.1 million and the Italian subsidiary of $622.9 million in the E & C Group, as well as orders awarded to the Energy Equipment Group in North America of $322.4 million. -7- 9 FOSTER WHEELER CORPORATION AND SUBSIDIARIES Item 2.- MANAGEMENT'S DISCUSSION AND ANALYSIS - ------- ------------------------------------ OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) ------------------------------------------------------------ (CONTINUED) ----------- Operating revenues increased in the six months ended June 28, 1996 by $499.8 million compared to the six months ended June 30, 1995 to $1,814.5 million from $1,314.7 million. The Energy Equipment Group was primarily responsible for the increase in operating revenues, accounting for approximately 68% of this increase, or $340.0 million. Of the increase in the Energy Equipment Group's operating revenues, $283.8 million was related to the power generation business and was primarily attributable to the Pyropower acquisition. The balance of the increase is primarily related to the operations of the Italian affiliate of the E & C Group. Gross earnings increased $54.1 million to $234.8 million from $180.7 million or 30% in the six months ended June 28, 1996 as compared with the six months ended June 30, 1995. The E & C Group was responsible for approximately $10.3 million of the increase in gross earnings, while the Energy Equipment Group accounted for $43.6 million of the increase in gross earnings. The increase in the Energy Equipment Group was primarily due to the acquisition of Pyropower in September, 1995. Selling, general and administrative expenses increased 26% in the six months ended June 28, 1996 as compared with the same period in 1995, from $110.9 million to $139.7 million. The Energy Equipment Group accounted for approximately 89% of the increase in selling, general and administrative expenses, which was primarily due to the acquisition of Pyropower and Zack Power and Industrial Co. in September, 1995. Approximately $4.3 million of the increase in selling, general, and administrative expenses was attributable to the E & C Group. Other income in the six months ended June 28, 1996 as compared with June 30, 1995 increased to $17.6 million from $15.1 million. Approximately 55% of other income in the six months ended June 28, 1996 was interest income, compared to 76% for the six months ended June 1995. The increase in other income was primarily attributable to an increase in foreign exchange gains. Other deductions in the six months ended June 28, 1996 increased $8.5 million, primarily due to higher interest expense and the increase in amortization of intangible assets due to the Pyropower acquisition. Net earnings increased by $11.7 million or 32% to $48.5 million for the six months ended June 28, 1996 as compared to the same period in 1995. The Energy Equipment Group reported increased net earnings of $9.7 million primarily as a result of the Pyropower acquisition. The E & C Group also reported increased net earnings of $2.6 million, primarily due to the improved results of the Spanish subsidiary and the U.S. environmental subsidiary. Three months ended June 28, 1996 compared to three months ended June 30, 1995 - ----------------------------------------------------------------------------- New orders awarded for the three months ended June 28, 1996 of $1,238.2 million were 36% higher than new orders awarded for the three months ended June 30, 1995 of $912.0 million. Approximately 79% of new orders in the three months ended June 28, 1996 were for projects awarded to the Corporation's subsidiaries located outside the United States. -8- 10 FOSTER WHEELER CORPORATION AND SUBSIDIARIES Item 2.-MANAGEMENT'S DISCUSSION AND ANALYSIS - ------- ------------------------------------ OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) ------------------------------------------------------------ (CONTINUED) ----------- The principal reasons for the increase in new orders awarded for the three months ended June 28, 1996 as compared to the same period in 1995 were the significant amount of new orders awarded to the Italian subsidiary of $503.3 million and the Spanish subsidiary of $148.8 million in the E & C Group, as well as the new orders awarded to the North American subsidiary of $230 million and the Finnish subsidiary of $150 million in the Energy Equipment Group. Operating revenues increased in the three months ended June 28, 1996 by $291.8 million compared to the three months ended June 30, 1995 to $970.5 million from $678.7 million. The Energy Equipment Group was primarily responsible for the increase in operating revenues, accounting for 63% of this increase, or $183.7 million. Of the increase in the Energy Equipment Group's operating revenues, $158.2 million was related to the power generation business and was primarily due to the acquisition of Pyropower. The balance of the increase is primarily related to the operations of the Italian affiliate of the E & C Group. Gross earnings increased $26.6 million to $117.5 million from $90.9 million or 29% in the three months ended June 28, 1996 as compared with the three months ended June 30, 1995. The Energy Equipment Group accounted for approximately 82% of the increase. Selling, general and administrative expenses increased 18% in the three months ended June 28, 1996 as compared with the same period in 1995, from $56.8 million to $67.1 million. Approximately 91% of the increase was due to the power generation business in the Energy Equipment Group, largely as a result of the Pyropower acquisition. Net earnings increased by $6.2 million or 33% for the three months ended June 28, 1996 as compared to the same period in 1995, from $18.9 million to $25.1 million. The increase was primarily due to the increased earnings in the Energy Equipment Group's power generation business of $4.8 million or 77%, with the balance attributed to the E & C Group's environmental subsidiary of $1.2 million and the Spanish affiliate of $1.1 million. FINANCIAL CONDITION The Corporation's consolidated financial condition improved during the six months ended June 28, 1996 as compared to December 29, 1995. Stockholders' equity for the six months ended June 28, 1996 increased $33.5 million. During the six months ended June 28, 1996, the Corporation's long-term investments in land, buildings and equipment were $61.5 million as compared with $21.0 million for the comparable period in 1995. Approximately $39 million was invested by the Power Systems Group in build, own and operate projects during the first six months of 1996. During the next few years, capital expenditures will continue to be directed primarily toward strengthening and supporting the Corporation's core businesses. Since December 29, 1995, long-term debt, including current installments, and bank loans increased by $134.4 million, net of repayments of $19.9 million, primarily due to borrowings to fund the investments in build, own and operate projects and to fund current working capital requirements. -9- 11 FOSTER WHEELER CORPORATION AND SUBSIDIARIES ITEM 2.- MANAGEMENT'S DISCUSSION AND ANALYSIS ------------------------------------ OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) ------------------------------------------------------------ (CONTINUED) ----------- In the ordinary course of business, the Corporation and its subsidiaries enter into contracts providing for assessment of damages for nonperformance or delays in completion. Suits and claims have been or may be brought against the Corporation by customers alleging deficiencies in either equipment design or plant construction. Based on its knowledge of the facts and circumstances relating to the Corporation's liabilities, if any, and to its insurance coverage, management of the Corporation believes that the disposition of such suits will not result in charges against assets or earnings materially in excess of amounts previously provided in the accounts. In connection with the acquisition of Pyropower, the Corporation recorded a one-time pretax reorganization provision in the fourth quarter of 1995 of $50.1 million. This provision related to the reorganization of the operations of the Energy Equipment Group that existed before the acquisition of Pyropower. In general, the reorganization is proceeding in accordance with the overall plan. Management of the Corporation does not anticipate any significant variations from the initial estimates, including the cash impact. To date, the Corporation has incurred approximately 75% of the estimated expenses, and expects to be substantially complete with the plan by the end of 1996. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents totaled $265.2 million at June 28, 1996, an increase of $98.1 million from fiscal year end 1995. In addition, short-term investments increased by $25.0 million to $137.8 million. During the first six months of fiscal 1996, the Corporation paid $16.2 million in dividends to stockholders and repaid debt of $19.9 million. Cash flow provided by operating activities amounted to $67.3 million. New borrowings totaled $154.3 million, resulting from investments by the Power Systems Group in build, own and operate projects and requirements to fund current working capital needs. In total, the Power Systems Group invested approximately $39.0 million in the construction of waste-to-energy, cogeneration and hydrogen plants. Over the last several years working capital needs have increased as a result of the Corporation satisfying its customers' requests for more favorable payment terms under contracts. Such requests generally include reduced advance payments and more favorable payment schedules. Such terms, which require the Corporation to defer receipt of payments from its customers, have had a negative impact on the Corporation's available working capital. The management of the Corporation expects its customers' requests for more favorable payment terms under Energy Equipment contracts to continue as a result of the competitive markets in which the Corporation operates. The Corporation intends to satisfy its continuing working capital needs by borrowing under its Revolving Credit Facilities, through internal cash generation and third-party financings in the capital markets. The Corporation's pricing of contracts recognizes costs associated with the use of working capital. 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 have arisen from the exposure to or use of asbestos. -10- 12 FOSTER WHEELER CORPORATION AND SUBSIDIARIES ITEM 2.- MANAGEMENT'S DISCUSSION AND ANALYSIS - ------- ------------------------------------ OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) ------------------------------------------------------------ (CONTINUED) ----------- At June 28, 1996, there were approximately 87,000 claims pending. Approximately 20,000 new claims were filed in the six-month period ended June 28, 1996 and approximately 10,800 were either settled or dismissed without payment. Any settlement costs not covered by the Corporation's insurance carriers were immaterial. The Corporation has agreements with insurance carriers covering a substantial portion of its potential costs relating to pending claims. Management of the Corporation has carefully considered the financial viability and legal obligations of its insurance carriers and has concluded that the insurers will continue to adequately fund claims and defense costs relating to asbestos litigation. Management of the Corporation believes that cash and cash equivalents of $265.2 million and short-term investments of $137.8 million at June 28, 1996, combined with cash flow from operating activities, amounts available under its Revolving Credit Facilities and access to third-party financings in the capital markets will be adequate to meet its working capital and liquidity needs for the foreseeable future. PART II. OTHER INFORMATION -------------------------- FOSTER WHEELER CORPORATION AND SUBSIDIARIES ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K - ------- -------------------------------- a) Exhibits
Exhibit Number Exhibit ------- ------- 12-1 Statement of Computation of Consolidated Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Share Dividend Requirements 27 Financial Data Schedule (For the informational purposes of the Securities and Exchange Commission only.) b) Reports on Form 8-K ------------------- None
-11- 13 PART II. OTHER INFORMATION -------------------------- FOSTER WHEELER CORPORATION AND SUBSIDIARIES SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. FOSTER WHEELER CORPORATION -------------------------- (Registrant) Date: August 9, 1996 /S/ Richard J. Swift -------------- -------------------- Richard J. Swift (Chairman, President and Chief Executive Officer) Date: August 9, 1996 /S/ David J. Roberts -------------- -------------------- David J. Roberts (Vice Chairman and Chief Financial Officer) -12- 14 EXHIBIT INDEX EXHIBIT DESCRIPTION NO. 12-1 Statement of Computation of Consolidated Ratio of Earnings to Fixed Charges and Combined Fixed Charges and Preferred Share Dividend Requirements 27 Financial Data Schedule (For the informational purposes of the Securities and Exchange Commission only.) EX-12.1 2 STATEMENT OF COMPUTATION OF CONSOLIDATED RATIO 1 FOSTER WHEELER CORPORATION STATEMENT OF COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES AND COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDEND REQUIREMENTS ($000'S) UNAUDITED
6 months 1996 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- ---- Earnings: - --------- Net Earnings/(Loss) $ 48,501 $ 28,534 $ 65,410 $ 57,704 $(45,755) $43,268 Taxes on Income 25,903 41,129 41,457 39,114 22,321 18,017 Cumulative Effect of Change in Accounting Principle 91,259 Total Fixed Charges 35,923 59,392 45,412 43,371 46,365 41,631 Capitalized Interest (3,735) (106) (467) (213) (1,739) (7,824) Capitalized Interest Amortized 1,100 2,212 2,189 2,180 2,111 1,798 Equity Earnings of non-consolidated associated companies accounted for by the equity method, net of Dividends (432) (1,578) (623) (883) 771 (1,301) -------- -------- -------- -------- -------- ------- $107,260 $129,583 $153,378 $141,273 $115,333 $95,589 Fixed Charges: - -------------- Interest Expense $ 26,614 $ 49,011 $ 34,978 $ 33,558 $ 34,159 $24,540 Capitalized Interest 3,735 106 467 213 1,739 7,824 Imputed Interest on non-capitalized lease payments 5,574 10,275 9,967 9,600 10,467 9,267 -------- -------- -------- -------- -------- ------- $ 35,923 $ 59,392 $ 45,412 $ 43,371 $ 46,365 $41,631 RATIO OF EARNINGS TO FIXED CHARGES 2.99 2.18 3.38 3.26 2.49 2.30
- ------------------ *There were no preferred shares outstanding during any of the periods indicated and therefore the consolidated ratio of earnings to fixed charges and combined fixed charges and preferred share dividend requirements would have been the same as the consolidated ratio of earnings to fixed charges and combined fixed charges for each period indicated. -13- EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains summary of financial information extracted from the condensed consolidated balance sheet and statement of earnings for the 6 months ended June 28, 1996 and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-27-1996 DEC-30-1995 JUN-28-1996 265,196 137,839 701,943 0 393,895 1,562,002 988,933 320,411 2,935,673 1,246,123 673,793 0 0 40,628 618,734 2,935,673 1,814,451 1,832,027 1,579,682 1,579,682 0 0 26,614 74,404 25,903 48,501 0 0 0 48,501 1.20 1.20
-----END PRIVACY-ENHANCED MESSAGE-----