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, 1995
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, 1995 there were 83,023,593 shares of common
stock outstanding.
FLUOR CORPORATION
FORM 10-Q
July 31, 1995
TABLE OF CONTENTS
PAGE
Part I: Financial Information
Condensed Consolidated Statement of Earnings for
the Three Months Ended July 31, 1995 and 1994..... 2
Condensed Consolidated Statement of Earnings for
the Nine Months Ended July 31, 1995 and 1994...... 3
Condensed Consolidated Balance Sheet at July 31,
1995 and October 31, 1994......................... 4
Condensed Consolidated Statement of Cash Flows for
the Nine Months Ended July 31, 1995 and 1994...... 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, 1995 and 1994
(In Thousands Except Per Share Amounts)
UNAUDITED
1995 1994
REVENUES.............................. $2,436,831 $1,963,052
COSTS AND EXPENSES
Cost of revenues.................... 2,335,885 1,873,675
Corporate administrative and
general expenses................... 12,793 14,726
Interest expense.................... 3,449 4,340
Interest income..................... (9,875) (5,697)
Total Costs and Expenses.............. 2,342,252 1,887,044
EARNINGS BEFORE INCOME TAXES.......... 94,579 76,008
INCOME TAX EXPENSE.................... 34,427 27,700
NET EARNINGS.......................... $ 60,152 $ 48,308
NET EARNINGS PER SHARE................ $ 0.72 $ 0.58
DIVIDENDS PER COMMON SHARE............ $ 0.15 $ 0.13
SHARES USED TO CALCULATE EARNINGS PER
SHARE............................... 83,542 83,001
See Accompanying Notes.
-2-
FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Nine Months Ended July 31, 1995 and 1994
(In Thousands Except Per Share Amounts)
UNAUDITED
1995 1994
REVENUES.............................. $6,725,770 $6,100,310
COSTS AND EXPENSES
Cost of revenues.................... 6,444,551 5,841,624
Corporate administrative and
general expenses................... 34,850 38,738
Interest expense.................... 10,010 12,979
Interest income..................... (24,328) (15,176)
Total Costs and Expenses.............. 6,465,083 5,878,165
EARNINGS BEFORE INCOME TAXES.......... 260,687 222,145
INCOME TAX EXPENSE.................... 94,890 82,100
NET EARNINGS.......................... $ 165,797 $ 140,045
NET EARNINGS PER SHARE................ $ 1.99 $ 1.69
DIVIDENDS PER COMMON SHARE............ $ 0.45 $ 0.39
SHARES USED TO CALCULATE EARNINGS PER
SHARE............................... 83,253 82,744
See Accompanying Notes.
-3-
FLUOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
July 31, 1995 and October 31, 1994
(Dollars in Thousands)
ASSETS
July 31, October 31,
1995 1994 *
(Unaudited)
Current Assets
Cash and cash equivalents........... $ 305,730 $ 374,468
Marketable securities............... 127,273 117,618
Accounts and notes receivable....... 400,431 318,672
Contract work in progress........... 328,234 308,877
Deferred taxes...................... 42,624 56,967
Inventory and other current assets.. 88,252 81,861
Total Current Assets............... 1,292,544 1,258,463
Property, plant and equipment (net
of accumulated depreciation,
depletion and amortization of
$598,990 and $514,145, respectively) 1,388,135 1,274,437
Investments and goodwill, net......... 109,965 71,596
Other................................. 229,691 220,272
$3,020,335 $2,824,768
(Continued On Next Page)
* Amounts at October 31, 1994 have been derived from audited
financial statements.
-4-
FLUOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
July 31, 1995 and October 31, 1994
(Dollars in Thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
July 31, October 31,
1995 1994 *
(Unaudited)
Current Liabilities
Accounts and notes payable.......... $ 308,028 $ 333,244
Commercial paper.................... 24,918 19,957
Advance billings on contracts....... 365,793 220,101
Accrued salaries, wages and
benefit plans...................... 187,379 199,506
Other accrued liabilities........... 185,105 210,511
Current portion of long-term debt... 462 38,001
Total Current Liabilities.......... 1,071,685 1,021,320
Long-term debt due after one year..... 26,516 24,366
Deferred taxes........................ 41,773 45,199
Other noncurrent liabilities.......... 514,408 513,427
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 -
82,970,584 shares and 82,507,568
shares, respectively............. 51,857 51,567
Additional capital.................. 519,734 498,804
Retained earnings................... 812,808 684,249
Unamortized executive stock plan
expense............................ (20,831) (14,472)
Cumulative translation adjustments.. 2,385 308
Total Shareholders' Equity......... 1,365,953 1,220,456
$3,020,335 $2,824,768
See Accompanying Notes.
* Amounts at October 31, 1994 have been derived from audited
financial statements.
-5-
FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended July 31, 1995 and 1994
(Dollars in Thousands)
UNAUDITED
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings........................ $ 165,797 $ 140,045
Adjustments to reconcile net
earnings to cash provided by
operating activities:
Depreciation, depletion and
amortization................... 106,177 84,678
Deferred taxes................... 8,056 (4,958)
Equity earnings in construction
joint ventures, net of
distributions................... (16,438) (11,367)
Change in operating assets and
liabilities.................... (22,002) 99,123
Other, net....................... (10,593) 14,723
Cash provided by operating activities. 230,997 322,244
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures................ (225,588) (171,829)
Investments......................... (11,032) 1,444
Purchase of marketable securities... (9,655) (10,915)
Initial cash proceeds from sale of
discontinued operations, excluding
tax benefits....................... -- 51,869
Acquisition of ADP.................. (5,342) --
Proceeds from sale of property,
plant and equipment................ 11,462 11,443
Other, net.......................... 2,655 1,309
Cash utilized by investing activities. (237,500) (116,679)
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid................. (37,238) (32,103)
Payments on long-term debt.......... (35,604) (594)
Decrease in note payable to
affiliate.......................... -- (30,000)
Increase (decrease) in short-term
borrowings......................... 4,961 (15,070)
Stock options exercised............. 6,808 11,658
Other, net.......................... (1,162) (2,811)
Cash utilized by financing activities. (62,235) (68,920)
Increase (decrease) in cash and cash
equivalents......................... (68,738) 136,645
Cash and cash equivalents at
beginning of period................. 374,468 214,844
Cash and cash equivalents at end of
period.............................. $ 305,730 $ 351,489
See Accompanying Notes.
-6-
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, 1994 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, 1995 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, 1995 and its consolidated results of operations
for the three and nine months ended July 31, 1995 and 1994
and cash flows for the nine months ended July 31, 1995 and
1994.
(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,
1995 1994
($ in thousands)
Coal........................... $ 18,383 $ 24,289
Supplies and other............. 29,500 28,414
$ 47,883 $ 52,703
(4) Cash paid for interest was $5.1 million and $9.2 million
for the nine month periods ended July 31, 1995 and
1994, respectively. Income tax payments, net of refunds,
were $71.0 million and $49.2 million during the nine month
periods ended July 31, 1995 and 1994, respectively.
-7-
(5) Effective November 1, 1994, the company adopted Statement
of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (SFAS
No. 115), which requires that the carrying value of debt
and equity securities be adjusted according to guidelines
based on their classification as held-to-maturity,
available-for-sale or trading. Management determines
classification at the time of purchase and reevaluates
its appropriateness at each balance sheet date. The
company's investments primarily include short-term, highly
liquid investment grade securities which are usually sold
before their maturity. Accordingly, all investment
securities are considered to be available-for-sale and
carried at fair value. As of July 31, 1995 and November
1, 1994 there were no material gross unrealized gains or
losses as the carrying value of the security portfolio
approximated fair value. Gross realized gains and losses
on sales of securities for the three and nine months ended
July 31, 1995 were not material. The cost of securities
sold is based on the specific identification method. As
of July 31, 1995 approximately $71.1 million of securities
mature within the next year, approximately $51.6 million
mature in the next one to three years and approximately
$4.6 million mature after three years.
(6) In July 1995, the company acquired Anderson Debartolo Pan,
Inc. ("ADP"), a privately held company providing
professional services in engineering, architectural and
construction management. ADP was acquired for a purchase
price of $9.2 million consisting of $5.3 million in cash
and 68,299 shares of the company's common stock. The
acquisition has been accounted for as a purchase;
accordingly, ADP's results of operations have been
included in the company's consolidated financial
statements from the July 28, 1995 acquisition date.
-8-
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 24 percent and 10 percent, respectively, for
the three and nine month periods ended July 31, 1995, compared
with the same periods of 1994. Net earnings for the three
and nine months ended July 31, 1995 were $60.2 million and
$165.8 million, respectively, compared with net earnings of
$48.3 million and $140.0 million for the same periods of 1994.
The increases in net earnings are due primarily to higher
earnings for both the Engineering and Construction and Coal
segments together with higher net interest income.
ENGINEERING AND CONSTRUCTION
Revenues for the Engineering and Construction segment increased
25 percent and 10 percent, respectively, for the three and nine
month periods ended July 31, 1995 compared with the same periods
of 1994, primarily due to an increase in work performed.
Engineering and Construction operating profits increased 10
percent and 7 percent, respectively, for the three and nine
months ended July 31, 1995 compared to the same periods of 1994
primarily due to the increased volume of work performed,
partially offset by higher levels of investment spending for
strategic business development. 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 month periods
ended July 31, 1995 were $2.6 billion and $7.6 billion,
respectively, compared with $2.3 billion and $6.8 billion
for the same periods of 1994. Approximately 58 percent and 60
percent, respectively, of new awards for the three and nine
months ended July 31, 1995 were for projects located outside
the United States. New awards for the three months ended July
31, 1995 included approximately $700 million relating to work
to be performed on a copper concentrator at the Alumbrera
copper/gold mine in Argentina, and for the nine months ended
-9-
July 31, 1995 also included over $1.0 billion relating to a
power plant to be constructed in Paiton, Indonesia. The large
size and uncertain timing of new awards can create variability
in the company's award pattern, consequently, future award
trends are difficult to predict with certainty.
The following table sets forth backlog for each of the
company's Engineering and Construction business groups:
July 31, October 31, July 31,
($ in millions) 1995 1994 1994
Process $ 6,861 $ 7,668 $ 8,471
Industrial 4,090 3,564 3,336
Power/Government 3,282 2,369 2,654
Diversified Services 317 421 446
Total $ 14,550 $ 14,022 $ 14,907
Approximately 56 percent of backlog at July 31, 1995 relates to
projects located outside of the United States compared with 51
percent at October 31, 1994 and 50 percent at July 31, 1994.
The Process group has experienced a reduction in backlog due
primarily to high levels of work performed on international
projects awarded in prior years. Backlog is adjusted
as required to reflect project cancellations, deferrals, and
revised project scope and cost, both upwards and downwards.
COAL
Produced coal revenues increased 22 percent and 16 percent,
respectively, for the three and nine month periods ended July
31, 1995 compared with the same periods of 1994. The increases
were primarily due to increased sales volume of metallurgical
coal, which more than offset lower demand for steam coal stemming
from the continuing effects of relatively mild weather during
the past nine months. Metallurgical coal sales have
increased largely due to the capturing of a larger market share
as the Coal segment continues to establish itself as the low
cost producer in the industry. The Coal segment also provides
a higher quality metallurgical coal that is more attractive to
steel producers. Brokered coal sales and margins in the three
and nine month periods ended July 31, 1995 and 1994 were
immaterial as brokered coal volume has been replaced with
produced coal from reserves acquired in recent years.
Accordingly, brokered coal sales are netted with related cost
-10-
of revenues in 1995. Prior periods have not been restated.
Operating profit increased 28 percent and 17 percent,
respectively, for the three and nine month periods ended July
31, 1995 compared with the same periods of 1994. The increases
were primarily due to increased sales volume of metallurgical
coal which has a higher gross margin than steam coal.
OTHER
Corporate administrative and general expenses decreased
approximately $1.9 million and $3.9 million, respectively, for
the three and nine months ended July 31, 1995 compared with the
same periods in 1994, due primarily to lower corporate overhead
partially offset by higher performance driven compensation
plan expense. Net interest income for the three and nine
months ended July 31, 1995 increased $5.1 million and $12.1
million, respectively, due largely to higher returns on short-term
investments and the prepayment of a 13.5 percent $34.7 million
note in the first quarter of 1995.
The effective income tax rates for the three and nine month
periods ended July 31, 1995 were essentially unchanged from the
same periods of 1994.
The company does not have substantial net assets or liabilities
denominated in foreign currencies and, therefore, does not have
significant risk to currency fluctuations. Since the official
government devaluation of the Mexican peso on December 20,
1994, the peso has experienced lower volatility in recent
months. The company believes that its investment in ICA Fluor
Daniel has not been permanently impaired as prospects remain
for long-term engineering and construction work in Mexico.
Effective November 1, 1994, the company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS No. 115). The
adoption of SFAS No. 115 had no material impact on the results
of operations or financial position.
In July 1995, the company acquired Anderson Debartolo Pan,
Inc. ("ADP"), a privately held company providing professional
services in engineering, architectural and construction
management. ADP was acquired for a purchase price of $9.2
million consisting of $5.3 million in cash and 68,299 shares of
the company's common stock. The acquisition has been accounted
for as a purchase; accordingly, ADP's results of operations
have been included in the company's consolidated financial
statements from the July 28, 1995 acquisition date.
-11-
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 for the foreseeable future.
In late August of 1995 the company's long-term debt rating was
upgraded by Standard and Poors from "A" to "A+." The ratings
assigned by the other major credit rating agencies remained
unchanged.
For the nine months ended July 31, 1995, capital expenditures
were $225.6 million including $123.4 million related primarily
to mine development at Massey. Dividends paid in the nine
months ended July 31, 1995 were $37.2 million ($.45 per share)
compared with $32.1 million ($.39 per share) for the same
period of 1994.
-12-
FLUOR CORPORATION
CONDENSED CONSOLIDATED CHANGES IN BACKLOG
(Dollars in Millions)
UNAUDITED
For the Three Months Ended July 31, 1995 1994
Backlog - beginning of period....... $ 14,404.2 $ 14,850.1
New awards.......................... 2,611.9 2,287.4
Adjustments and cancellations, net.. (266.5) (433.4)
Work performed...................... (2,200.0) (1,796.8)
Backlog - end of period............. $ 14,549.6 $ 14,907.3
For the Nine Months Ended July 31, 1995 1994
Backlog - beginning of period....... $ 14,021.9 $ 14,753.5
New awards.......................... 7,583.1 6,793.9
Adjustments and cancellations, net.. (1,007.2) (1,118.3)
Work performed...................... (6,048.2) (5,521.8)
Backlog - end of period............. $ 14,549.6 $ 14,907.3
-13-
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.
-14-
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.
FLUOR CORPORATION
(Registrant)
Date: September 14, 1995 /s/ J. Michal Conaway
J. Michal Conaway, Vice President
and Chief Financial Officer
Date: September 14, 1995 /s/ V.L. Prechtl
V.L. Prechtl, Vice President and
Controller
-15-
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
Condensed Consolidated Balance Sheet at July 31, 1995 and the Condensed
Consolidated Statement of Earnings for the nine months ended July 31,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
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<PERIOD-END> JUL-31-1995
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<SECURITIES> 127,273
<RECEIVABLES> 400,431
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<INVENTORY> 47,883
<CURRENT-ASSETS> 1,292,544
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