SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the transition period from to
Commission File No. 1-7775
FLUOR CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-0740960
(State or other jurisdiction of (I.R.S Employer I.D. No.)
incorporation or organization)
3333 Michelson Drive, Irvine, CA 92730
(Address of principal executive offices)
Registrant's telephone number including area code: (714)975-2000
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 last 90 days.
Yes ( X ) No ( )
As of August 31, 1994 there were 82,491,963 shares of common
stock outstanding.
FLUOR CORPORATION
FORM 10-Q
July 31, 1994
TABLE OF CONTENTS
PAGE
Part I: Financial Information
Condensed Consolidated Statement of Earnings for
the Three Months Ended July 31, 1994 and 1993..... 2
Condensed Consolidated Statement of Earnings for
the Nine Months Ended July 31, 1994 and 1993...... 3
Condensed Consolidated Balance Sheet at July 31,
1994 and October 31, 1993......................... 4
Condensed Consolidated Statement of Cash Flows for
the Nine Months Ended July 31, 1994 and 1993...... 6
Notes to Condensed Consolidated Financial
Statements........................................ 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 9
Condensed Consolidated Changes in Backlog.......... 13
Part II: Other Information........................ 14
Signatures........................................... 15
Part I: Financial Information
FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Three Months Ended July 31, 1994 and 1993
(In Thousands Except Per Share Amounts)
UNAUDITED
1994 1993
REVENUES.............................. $1,963,052 $1,844,112
COSTS AND EXPENSES
Cost of revenues.................... 1,873,675 1,770,077
Corporate administrative and
general expenses................... 14,726 8,845
Interest expense.................... 4,340 5,132
Interest income..................... (5,697) (4,877)
Total Costs and Expenses.............. 1,887,044 1,779,177
EARNINGS BEFORE INCOME TAXES.......... 76,008 64,935
INCOME TAX EXPENSE.................... 27,700 24,100
NET EARNINGS.......................... $ 48,308 $ 40,835
NET EARNINGS PER SHARE................ $ 0.58 $ 0.50
DIVIDENDS PER COMMON SHARE............ $ 0.13 $ 0.12
SHARES USED TO CALCULATE EARNINGS PER
SHARE............................... 83,001 82,268
See Accompanying Notes.
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FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Nine Months Ended July 31, 1994 and 1993
(In Thousands Except Per Share Amounts)
UNAUDITED
1994 1993
REVENUES.............................. $6,100,310 $5,657,105
COSTS AND EXPENSES
Cost of revenues.................... 5,841,624 5,458,592
Corporate administrative and
general expenses................... 38,738 30,101
Interest expense.................... 12,979 14,914
Interest income..................... (15,176) (14,871)
Total Costs and Expenses.............. 5,878,165 5,488,736
EARNINGS BEFORE INCOME TAXES.......... 222,145 168,369
INCOME TAX EXPENSE.................... 82,100 49,900
NET EARNINGS.......................... $ 140,045 $ 118,469
NET EARNINGS PER SHARE................ $ 1.69 $ 1.44
DIVIDENDS PER COMMON SHARE............ $ 0.39 $ 0.36
SHARES USED TO CALCULATE EARNINGS
PER SHARE........................... 82,744 82,257
See Accompanying Notes.
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FLUOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
July 31, 1994 and October 31, 1993
(Dollars in Thousands)
ASSETS
July 31, October 31,
1994 1993 *
(Unaudited)
Current Assets
Cash and cash equivalents........... $ 351,489 $ 214,844
Marketable securities............... 108,250 97,335
Accounts and notes receivable....... 328,174 392,577
Contract work in progress........... 289,184 306,251
Net assets of discontinued
operations......................... -- 172,822
Deferred taxes...................... 49,852 76,364
Inventory and other current assets.. 63,509 48,831
Total Current Assets............... 1,190,458 1,309,024
Property, plant and equipment (net
of accumulated depreciation,
depletion and amortization of
$496,142 and $441,676, respectively) 1,178,141 1,100,909
Investments and goodwill, net......... 63,090 52,383
Other................................. 208,068 126,568
$2,639,757 $2,588,884
(Continued On Next Page)
* Amounts at October 31, 1993 have been derived from audited
financial statements.
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FLUOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
July 31, 1994 and October 31, 1993
(Dollars in Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
July 31, October 31,
1994 1993 *
(Unaudited)
Current Liabilities
Accounts and notes payable.......... $ 277,406 $ 289,721
Note payable to affiliate........... -- 30,000
Commercial paper.................... 14,983 30,053
Advance billings on contracts....... 212,755 194,695
Accrued salaries, wages and
benefit plans...................... 174,158 194,270
Other accrued liabilities........... 206,084 190,447
Current portion of long-term debt... 2,404 1,687
Total Current Liabilities.......... 887,790 930,873
Long-term debt due after one year..... 58,513 59,637
Deferred taxes........................ 50,382 51,642
Other noncurrent liabilities.......... 476,882 502,610
Commitments and contingencies
Shareholders' Equity
Capital stock
Preferred - authorized 20,000,000
shares without par value; none
issued
Common - authorized 150,000,000
shares of $0.625 par value;
issued and outstanding -
82,485,470 shares and 82,093,207
shares, respectively............. 51,553 51,308
Additional capital.................. 489,636 478,204
Retained earnings (since October 31,
1987).............................. 642,620 534,678
Unamortized executive stock plan
expense............................ (15,573) (16,828)
Cumulative translation adjustments.. (2,046) (3,240)
Total Shareholders' Equity......... 1,166,190 1,044,122
$2,639,757 $2,588,884
See Accompanying Notes.
* Amounts at October 31, 1993 have been derived from audited
financial statements.
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FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended July 31, 1994 and 1993
(Dollars in Thousands)
UNAUDITED
1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings........................ $ 140,045 $ 118,469
Adjustments to reconcile net
earnings to cash provided by
operating activities:
Depreciation, depletion and
amortization................... 84,678 82,902
Discontinued operations.......... -- (30,412)
Deferred taxes................... (4,958) (34,311)
Change in operating assets and
liabilities.................... 99,123 (108,838)
Other, net....................... 3,679 34,621
Cash provided by operating activities. 322,567 62,431
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures................ (171,829) (126,514)
Sale (purchase) of marketable
securities......................... (10,915) 51,009
Initial cash proceeds from sale of
discontinued operations, excluding
tax benefits....................... 51,869 --
Proceeds from sale of property,
plant and equipment................ 11,443 8,304
Other, net.......................... 2,430 (11,299)
Cash utilized by investing activities. (117,002) (78,500)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in note payable
to affiliate....................... (30,000) 30,000
Stock options exercised............. 11,658 7,531
Cash dividends paid................. (32,103) (29,489)
Increase (decrease) in short-term
borrowings......................... (15,070) 5,583
Payments on long-term debt.......... (594) (16,539)
Other, net.......................... (2,811) (7,330)
Cash utilized by financing activities. (68,920) (10,244)
Increase (decrease) in cash and cash
equivalents......................... 136,645 (26,313)
Cash and cash equivalents at
beginning of period................. 214,844 195,346
Cash and cash equivalents at end of
period.............................. $ 351,489 $ 169,033
See Accompanying Notes.
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FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(1) The condensed consolidated financial statements do not
include footnotes and certain financial information
normally presented annually under generally accepted
accounting principles and, therefore, should be read in
conjunction with the company's October 31, 1993 annual
report on Form 10-K. Accounting measurements at interim
dates inherently involve greater reliance on estimates
than at year-end. The results of operations for the
three and nine months ended July 31, 1994 are not
necessarily indicative of results that can be expected for
the full year.
The condensed consolidated financial statements included
herein are unaudited; however, they contain all
adjustments (consisting of normal recurring accruals)
which, in the opinion of the company, are necessary to
present fairly its consolidated financial position at July
31, 1994 and the consolidated results of operations for
the three and nine months ended July 31, 1994 and 1993
and cash flows for the nine months ended July 31, 1994 and
1993.
(2) Earnings per share is based on the weighted average number
of common and, when appropriate, common equivalent shares
outstanding in each period. Common equivalent shares are
included when the effect of the potential exercise of
stock options is dilutive.
(3) Inventories comprise the following:
July 31, October 31,
1994 1993
($ in thousands)
Coal........................... $ 12,552 $ 15,375
Supplies and other............. 21,588 17,459
$ 34,140 $ 32,834
(4) Cash paid for interest was $9.2 million and $13.6 million
for the nine month periods ended July 31, 1994 and 1993,
respectively. Income tax payments, net of refunds, were
$49.2 million and $69.4 million during the nine month
periods ended July 31, 1994 and 1993, respectively.
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(5) Net earnings for the nine months ended July 31, 1993
included $12.6 million related to the favorable completion
of a federal income tax audit for the tax years 1984
through 1986. As a result of the conclusion of that audit
in the second quarter of 1993, $12.6 million in income tax
liabilities were no longer deemed necessary and were
reversed.
During the second quarter of 1993, A.T. Massey, the
company's coal investment, recorded an after-tax charge
to earnings of $9.2 million to provide for the
settlement of disputed obligations with the pension funds
of the United Mine Workers of America/Bituminous Coal
Operators of America.
(6) In November 1992, the company announced its decision to
exit its Lead business. As a consequence, the company's
Lead business segment was classified as a discontinued
operation as of October 31, 1992 and adjusted to net
realizable value. On April 7, 1994 the company completed
the sale of its Lead business to an affiliate of a
private investment company for consideration consisting
of both cash and deferred payments. The aggregate of the
amounts realized from the sale and operating results from
November 1992 until the date of the sale were within
previously established estimates used to determine net
realizable value. As a consequence, the closing of the
sale had no impact on the company's earnings beyond what
was originally recognized in fiscal 1992.
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FLUOR CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is provided to increase
understanding of, and should be read in conjunction with, the
condensed consolidated financial statements and accompanying
notes.
RESULTS OF OPERATIONS
Revenues increased 6 percent and 8 percent for the three and
nine month periods ended July 31, 1994, compared with the same
periods of 1993. Net earnings for the three and nine months
ended July 31, 1994 were $48.3 million and $140.0 million,
respectively, compared with net earnings of $40.8 million and
$118.5 million for the same periods of 1993. Net earnings for
the nine months ended July 31, 1993 included an after-tax
charge of $9.2 million established by A.T. Massey, the
company's coal investment, related to settlement of disputed
obligations with the pension funds of the United Mine Workers
of America/Bituminous Coal Operators of America. Also included
in 1993 net earnings was $12.6 million related to the favorable
conclusion in the second quarter of 1993 of a federal income
tax audit for the tax years 1984 through 1986. Excluding these
two nonrecurring items, net earnings increased 22 percent
for the nine months ended July 31, 1994, compared with the same
period of 1993.
ENGINEERING AND CONSTRUCTION
Revenues for the Engineering and Construction segment increased
7 percent for both the three and nine month periods ended July
31, 1994 compared with the same periods of 1993, due primarily
to an increase in work performed. Engineering and Construction
operating profits increased 17 percent and 19 percent, for the
three and nine month periods ended July 31, 1994, respectively,
compared with the same periods of 1993 due primarily to
increased margins, and the increased volume of work performed.
Reported margins may fluctuate from time to time as a result of
changes in the mix of engineering and design services and
construction related services. New awards for the three and
nine months ended July 31, 1994 increased 14 percent and 7
percent, respectively, compared with the same periods of 1993.
Approximately 69 percent and 54 percent of new awards for the
first nine months of 1994 and 1993, respectively, were from
projects located outside the United States.
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The following table sets forth backlog for each of the
company's business sectors:
July 31, October 31, July 31,
($ in millions) 1994 1993 1993
Hydrocarbon $ 6,283 $ 6,198 $ 5,712
Government 2,000 2,520 2,626
Process 3,225 2,441 2,978
Industrial 2,576 2,706 3,128
Power 823 889 963
Total $ 14,907 $ 14,754 $ 15,407
The ratio of international to total backlog was 50 percent, 39
percent and 39 percent at July 31, 1994, October 31, 1993 and
July 31, 1993, respectively.
COAL
Revenues for the Coal segment increased 5 percent and 12
percent, respectively, for the three and nine month periods
ended July 31, 1994 compared with the same periods of 1993,
due primarily to increased sales volume of produced coal.
Gross margins also increased in the three and nine month
periods of 1994 compared with 1993 due primarily to increased
sales volume of produced coal partially offset by increased
costs including start-up at certain new mines. During the
second quarter of 1993, a nonrecurring charge was recorded to
provide for settlement of disputed obligations with the pension
funds of the United Mine Workers of America/Bituminous Coal
Operators of America. Excluding the nonrecurring charge,
operating profit increased 33 percent for the nine months of
1994 compared with the same period of 1993.
OTHER
Corporate administrative and general expenses increased
approximately $5.9 million and $8.6 million, respectively, for
the three and nine months ended July 31, 1994 compared with the
same periods in 1993 due primarily to higher stock price and
performance driven compensation plans expense.
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Net interest income for the three and nine month periods ended
July 31, 1994 increased compared with the same periods of 1993
due to both an increase in interest income and a decrease in
interest expense. Interest income increased due to higher
average cash balances and interest rates whereas the lower
interest expense was attributable to the pay down of
short-term and long-term debt.
Net earnings for the nine months ended July 31, 1993
benefited from the reversal of $12.6 million of income
tax liabilities. That reversal was made in connection with the
completion of a Federal income tax audit in the second quarter
of 1993 for the years 1984 through 1986. The reduction in
liabilities did not affect the company's cash flow. The
effective tax rate for the nine month period ended July 31,
1994 was essentially unchanged compared with the same period of
1993, after excluding the 1993 favorable tax adjustment.
In November 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits" (SFAS
No. 112). The statement requires accrual of the estimated cost
of benefits provided by the employer to former or inactive
employees after employment but before retirement. Adoption of
SFAS No. 112 is not required by the company until fiscal
1995. Although the precise method and impact of implementation
is not known at this time, management believes the effect,
based on the company's current benefit programs, will not be
material.
In May 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS
No. 115). The statement addresses the accounting and reporting
for investments in equity securities that have readily
determinable fair values and for all investments in debt
securities. Adoption of SFAS No. 115 is not required by the
company until fiscal 1995. Based on the nature and composition
of the company's current investment portfolios, management
believes the impact of implementation will not be material.
FINANCIAL POSITION AND LIQUIDITY
The company expects to have adequate resources available from
cash and short-term investments currently on hand, plus
available revolving credit facilities, capital market sources,
and its commercial paper program to provide for its financing
needs in the foreseeable future.
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On April 7, 1994 the company completed the sale of its Lead
business to an affiliate of a private investment company for
consideration consisting of both cash and deferred payments.
For the nine months ended July 31, 1994, capital expenditures
were $171.8 million including $122.8 million related primarily
to mine development at A.T. Massey. Dividends paid in the nine
months ended July 31, 1994 were $32.1 million ($.39 per share)
compared with $29.5 million ($.36 per share) for the same
period of 1993.
The long-term debt to total capital ratio decreased to 4.8
percent at July 31, 1994 compared with 5.4 percent at October
31, 1993, due primarily to the increase in shareholders' equity
from earnings, net of dividends.
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FLUOR CORPORATION
CONDENSED CONSOLIDATED CHANGES IN BACKLOG
(Dollars in Millions)
UNAUDITED
For the Three Months Ended July 31, 1994 1993
Backlog - beginning of period....... $ 14,850.1 $ 15,340.6
New awards.......................... 2,287.4 1,999.1
Adjustments and cancellations, net.. (433.4) (269.4)
Work performed...................... (1,796.8) (1,663.2)
Backlog - end of period............. $ 14,907.3 $ 15,407.1
For the Nine Months Ended July 31, 1994 1993
Backlog - beginning of period....... $ 14,753.5 $ 14,706.0
New awards.......................... 6,793.9 6,352.4
Adjustments and cancellations, net.. (1,118.3) (524.6)
Work performed...................... (5,521.8) (5,126.7)
Backlog - end of period............. $ 14,907.3 $ 15,407.1
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FLUOR CORPORATION
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. None.
(b) Reports on Form 8-K. None.
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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 there unto duly authorized.
FLUOR CORPORATION
(Registrant)
Date: September 13, 1994 /s/ J. Michal Conaway
J. Michal Conaway, Vice President
and Chief Financial Officer
(Principal Accounting Officer)
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