<PAGE> 1
UNITED STATES
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, 1999
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: 1-7775
FLUOR CORPORATION
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-0740960
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(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
One Enterprise Drive, Aliso Viejo, CA 92656-2606
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(Address of principal executive offices)
(949) 349-2000
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 ( )
As of August 31, 1999 there were 75,964,241 shares of common stock outstanding.
<PAGE> 2
FLUOR CORPORATION
FORM 10-Q
JULY 31, 1999
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
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<S> <C>
PART I: FINANCIAL INFORMATION
Condensed Consolidated Statement of Operations for the Three Months Ended July 31, 1999
and 1998..................................................................................... 2
Condensed Consolidated Statement of Operations for the Nine Months Ended July 31, 1999
and 1998..................................................................................... 3
Condensed Consolidated Balance Sheet at July 31, 1999 and October 31, 1998................... 4
Condensed Consolidated Statement of Cash Flows for the Nine Months Ended
July 31, 1999 and 1998....................................................................... 6
Notes to Condensed Consolidated Financial Statements........................................ 7
Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................................... 11
Changes in Backlog.......................................................................... 25
PART II: OTHER INFORMATION ...................................................................... 26
SIGNATURES ........................................................................................... 27
</TABLE>
<PAGE> 3
PART I: FINANCIAL INFORMATION
FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended July 31, 1999 and 1998
<TABLE>
<CAPTION>
UNAUDITED
In thousands, except per share amounts 1999 1998
- ----------------------------------------------------------------------------------
<S> <C> <C>
REVENUES $ 3,069,444 $ 3,528,852
COSTS AND EXPENSES
Cost of revenues 2,967,562 3,421,976
Corporate administrative and general expense 20,724 3,774
Interest expense 12,439 12,284
Interest income (4,818) (5,414)
----------- -----------
Total Costs and Expenses 2,995,907 3,432,620
----------- -----------
EARNINGS BEFORE INCOME TAXES 73,537 96,232
INCOME TAX EXPENSE 23,385 33,795
----------- -----------
NET EARNINGS $ 50,152 $ 62,437
=========== ===========
EARNINGS PER SHARE
BASIC $ .67 $ .81
=========== ===========
DILUTED $ .66 $ .81
=========== ===========
DIVIDENDS PER COMMON SHARE $ .20 $ .20
=========== ===========
SHARES USED TO CALCULATE
BASIC EARNINGS PER SHARE 75,200 76,933
=========== ===========
DILUTED EARNINGS PER SHARE 75,847 77,294
=========== ===========
</TABLE>
See Accompanying Notes.
2
<PAGE> 4
FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ended July 31, 1999 and 1998
<TABLE>
<CAPTION>
UNAUDITED
In thousands, except per share amounts 1999 1998
- -----------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES $ 9,544,816 $ 10,209,950
COSTS AND EXPENSES
Cost of revenues 9,259,978 9,916,146
Special provision 136,500 --
Corporate administrative and general expense 40,504 14,337
Interest expense 38,451 31,033
Interest income (14,530) (15,906)
------------ ------------
Total Costs and Expenses 9,460,903 9,945,610
------------ ------------
EARNINGS BEFORE INCOME TAXES 83,913 264,340
INCOME TAX EXPENSE 55,575 92,801
------------ ------------
NET EARNINGS $ 28,338 $ 171,539
============ ============
EARNINGS PER SHARE
BASIC $ .38 $ 2.14
============ ============
DILUTED $ .37 $ 2.14
============ ============
DIVIDENDS PER COMMON SHARE $ .60 $ .60
============ ============
SHARES USED TO CALCULATE
BASIC EARNINGS PER SHARE 75,158 80,005
============ ============
DILUTED EARNINGS PER SHARE 75,884 80,265
============ ============
</TABLE>
See Accompanying Notes.
3
<PAGE> 5
FLUOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
July 31, 1999 and October 31, 1998
<TABLE>
<CAPTION>
UNAUDITED
July 31, October 31,
$ in thousands 1999 1998*
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 219,886 $ 340,544
Accounts and notes receivable 941,838 959,416
Contract work in progress 442,395 596,983
Deferred taxes 95,079 81,155
Inventory and other current assets 334,767 262,753
Net assets held for sale -- 36,300
---------- ----------
Total current assets 2,033,965 2,277,151
---------- ----------
Property, plant and equipment (net of accumulated
depreciation, depletion and amortization of $1,230,980 and
$1,132,923, respectively) 2,191,252 2,147,308
Investments and goodwill, net 294,489 276,653
Other 378,137 318,096
========== ==========
$4,897,843 $5,019,208
========== ==========
</TABLE>
(continued on next page)
* Amounts at October 31, 1998 have been derived from audited financial
statements.
4
<PAGE> 6
FLUOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
July 31, 1999 and October 31, 1998
<TABLE>
<CAPTION>
UNAUDITED
July 31, October 31,
$ in thousands 1999 1998*
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts and notes payable $ 840,216 $ 972,096
Commercial paper and loan notes 243,302 428,458
Advance billings on contracts 575,335 546,816
Accrued salaries, wages and benefit plans 305,844 324,412
Other accrued liabilities 339,652 223,596
Current portion of long-term debt -- 176
----------- -----------
Total current liabilities 2,304,349 2,495,554
----------- -----------
Long term debt due after one year 317,550 300,428
Deferred taxes 130,596 105,515
Other noncurrent liabilities 631,098 592,102
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 $.625 par value; issued and
outstanding - 75,857,377 shares and 75,572,537 shares, respectively 47,411 47,233
Additional capital 210,242 199,077
Retained earnings 1,314,697 1,331,843
Unamortized executive stock plan expense (23,647) (22,633)
Accumulated other comprehensive income:
Cumulative translation adjustment (34,453) (29,911)
----------- -----------
Total shareholders' equity 1,514,250 1,525,609
=========== ===========
$ 4,897,843 $ 5,019,208
=========== ===========
</TABLE>
See Accompanying Notes.
* Amounts at October 31, 1998 have been derived from audited financial
statements.
5
<PAGE> 7
FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended July 31, 1999 and 1998
UNAUDITED
<TABLE>
<CAPTION>
$ in thousands 1999 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 28,338 $ 171,539
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation, depletion and amortization 236,712 208,655
Deferred taxes 13,497 (2,946)
Special provision, net of cash paid 118,261 --
Change in operating assets and liabilities, excluding
effects of business acquisitions/dispositions (47,478) 172,328
Other, net (44,815) (57,018)
--------- ---------
Cash provided by operating activities 304,515 492,558
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (362,437) (414,901)
Proceeds from sale of subsidiary 36,300 --
Proceeds from sale of property, plant and equipment 92,295 85,510
Proceeds from sales/maturities of marketable securities -- 10,089
Investments, net (13,441) (11,776)
Other, net (17,360) (10,418)
--------- ---------
Cash utilized by investing activities (264,643) (341,496)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in short-term borrowings (185,156) 242,039
Proceeds from issuance of notes payable to affiliate 50,479 --
Proceeds from issuance of long-term debt 17,550 --
Cash dividends paid (45,484) (48,367)
Stock options exercised 4,161 9,770
Purchases of common stock -- (341,276)
Other, net (2,080) (3,825)
--------- ---------
Cash utilized by financing activities (160,530) (141,659)
--------- ---------
(Decrease) increase in cash and cash equivalents (120,658) 9,403
Cash and cash equivalents at beginning of period 340,544 299,324
--------- ---------
Cash and cash equivalents at end of period $ 219,886 $ 308,727
========= =========
</TABLE>
See Accompanying Notes.
6
<PAGE> 8
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, 1998 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, 1999
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, 1999
and its consolidated results of operations and cash flows for the three
and nine months ended July 31, 1999 and 1998. In addition, the 1999
nine-month results for the Engineering and Construction segment include
a one-time, special provision of $136.5 million. See Note 6 below and
Management's Discussion and Analysis of Financial Condition and Results
of Operations for further information on this item.
Certain 1998 amounts have been reclassified to conform with the 1999
presentation.
(2) Inventories comprise the following:
<TABLE>
<CAPTION>
July 31, October 31,
$ in thousands 1999 1998
--------------------------------------------------------------------------------
<S> <C> <C>
Equipment for sale/rental $ 116,064 $ 94,179
Coal 66,633 52,628
Supplies and other 54,817 51,838
========= =========
$ 237,514 $ 198,645
========= =========
</TABLE>
7
<PAGE> 9
FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
UNAUDITED
(3) Effective November 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
No. 130). SFAS No. 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the
adoption of this Statement has no impact on the Company's net earnings
or shareholders' equity. SFAS No. 130 requires foreign currency
translation adjustments, which prior to adoption were reported
separately in shareholders' equity, to be included in other
comprehensive income. Prior year financial statements have been
reclassified to conform to the requirements of SFAS No. 130.
The components of comprehensive income, net of related tax, are as
follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
July 31, July 31,
---------------------------------------------------------
($ in thousands) 1999 1998 1999 1998
---------------------------------------------------------
<S> <C> <C> <C> <C>
Net earnings $ 50,152 $ 62,437 $ 28,338 $ 171,539
Foreign currency translation
adjustment (6,238) (11,371) (4,542) (18,790)
========= ========= ========= =========
Comprehensive income $ 43,914 $ 51,066 $ 23,796 $ 152,749
========= ========= ========= =========
</TABLE>
(4) Cash paid for interest was $33.6 million and $26.0 million for the nine
month periods ended July 31, 1999 and 1998, respectively. Income tax
payments, net of receipts, were $46.4 million and $46.0 million during
the nine month periods ended July 31, 1999 and 1998, respectively.
(5) In connection with its 1997/1998 share repurchase program, the Company
entered into a forward purchase contract for 1,850,000 shares of its
common stock at a price of $49 per share. The contract matures in
October 2000 and gives the Company the ultimate choice of settlement
option, either physical settlement or net share settlement. As of July
31, 1999, the contract settlement cost per share exceeded the current
market price per share by $10.61.
8
<PAGE> 10
FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
UNAUDITED
Although the ultimate choice of settlement option resides with the
Company, if the price of the Company's common stock falls to certain
levels, as defined in the contract, the holder of the contract has
the right to require the Company to settle the contract.
(6) On March 9, 1999, the Company announced a new strategic direction,
including a reorganization of the operating units and administrative
functions of its Engineering and Construction segment. A one-time,
special provision of $136.5 million ($119.8 million after-tax) was
recorded in the Company's second quarter for the implementation of
the reorganization. The provision is primarily for personnel,
facilities and asset impairment costs.
Approximately 5,000 jobs are expected to be eliminated by these
actions within the next year. Some affected employees are entitled to
receive severance benefits under established severance policies or by
governmental regulations. Additionally, outplacement services may be
provided on a limited basis to some affected employees. The provision
also reflects amounts for asset impairment, primarily for property,
plant and equipment; intangible assets (goodwill); and certain
investments. The asset impairments were recorded primarily because of
the Company's decision to exit certain non-strategic geographic
locations and businesses. The carrying values of impaired assets were
adjusted to their current market values based on estimated sale
proceeds, using either discounted cash flows or contractual amounts.
Lease termination costs were also included in the reorganization
charge. The Company anticipates closing 15 non-strategic offices
worldwide as well as consolidating and downsizing other office
locations. The closure or rationalization of these facilities is
expected to be substantially completed by the end of fiscal year
2000.
To date the Company has closed 11 offices and reduced headcount by
approximately 3,300 employees.
9
<PAGE> 11
FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
UNAUDITED
The following table summarizes the status of the Company's reorganization plan:
<TABLE>
<CAPTION>
Lease
($ in millions) Personnel Asset Termination
Costs Impairments Costs Other Total
--------- ----------- ----------- ------ --------
<S> <C> <C> <C> <C> <C>
Special provision $ 72.2 $ 48.8 $ 14.5 $ 1.0 $ 136.5
Cash expenditures (16.1) (0.2) (1.6) (0.3) (18.2)
Asset write-offs -- (14.1) -- -- (14.1)
------- ------- ------- ------ --------
Balance at July 31, 1999 $ 56.1 $ 34.5 $ 12.9 $ 0.7 $ 104.2
======= ======= ======= ====== ========
</TABLE>
10
<PAGE> 12
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 and the Company's October 31, 1998 annual
report on Form 10-K. For purposes of reviewing this document "operating profit"
is calculated as revenues less cost of revenues excluding: corporate
administrative and general expense; interest expense; interest income; domestic
and foreign income taxes; gain or loss on discontinued operations; the
cumulative effect of a change in accounting principles; and certain other
miscellaneous non-operating income and expense items which are immaterial.
FORWARD-LOOKING INFORMATION
Statements regarding the Company's expectations for future performance or
results, including estimated and projected operating profits and earnings,
expectations regarding office closures and projected reductions in employment
levels and overhead expenses, expectations regarding its resolution of any "Year
2000" issues, expectations regarding continued weakness in new contract awards
and expectations regarding the issuance of long-term debt are forward-looking.
Forward looking statements reflect current analysis of existing information.
Caution must be exercised in relying on forward-looking statements. Due to known
and unknown risks, actual results may differ materially from expected or
projected results. Factors potentially contributing to such differences include,
among others:
o Cost overruns on contracts and other contract performance risk
o The uncertain timing of awards and revenues under contracts
o Conditions affecting the domestic and international coal market, including
competition in the global market for steel and weather conditions
o Global economic and political conditions
o Unforeseen impediments to the Company's access to capital markets
o Year 2000 readiness
o Unforeseen impediments to the realization of the Company's strategic
initiatives
There is also a risk that future results may be impacted by currently unforeseen
impediments to the realization of revenues or other payments that have been
recognized through accruals prior to actual receipt. Failure to realize such
accrued amounts may result in a charge against future earnings.
Additional information concerning these and other factors can be found in press
releases as well as the Company's public periodic filings with the Securities
and Exchange Commission, including the discussion under the heading "Item 1.
Business - Other Matters - Fluor Business Risks" in the Company's Form 10-K
filed January 22, 1999. These filings are available publicly and upon request
from Fluor's Investor Relations Department: (949) 349-3909. The Company
disclaims any intent or obligation to update its forward-looking statements.
11
<PAGE> 13
RESULTS OF OPERATIONS
Revenues for the three and nine month periods ended July 31, 1999 decreased by
13 percent and 7 percent, respectively, compared with the same periods of 1998.
Net earnings for the three and nine month periods ended July 31, 1999 were $50.2
million and $28.3 million, respectively, compared with net earnings of $62.4
million and $171.5 million, respectively, for the same periods of 1998. Results
for the nine months ended July 31, 1999 include a one-time, special provision of
$136.5 million ($119.8 million after-tax) for personnel, facilities and asset
impairment costs required to implement the Company's new strategic direction and
reorganization of its Engineering and Construction segment. Also contributing to
the lower results for the three and nine months ended July 31, 1999, as compared
with the same periods in 1998, was a decrease in operating profit from the
Company's Coal segment as well as higher net interest and corporate
administrative and general expenses.
ENGINEERING AND CONSTRUCTION
The Engineering and Construction segment revenues and operating profit for the
three and nine month periods ended July 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
July 31, July 31,
------------------------------ -------------------------------
($ in thousands) 1999 1998 1999 1998
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 2,803,174 $3,253,885 $ 8,750,561 $ 9,374,738
Operating profit $ 67,953 $ 65,361 $ 48,121 $ 176,615
</TABLE>
Revenues for the three and nine month periods ended July 31, 1999 for the
Engineering and Construction segment decreased by 14 percent and 7 percent,
respectively, compared with the same periods in 1998, primarily due to a
reduction in work performed in the core engineering, procurement and
construction business. This reduction is consistent with the global slow down in
the development of mining and petrochemical plants and facilities, which has
been adversely impacted by low petroleum and commodity prices. Excluding the
impact of the $136.5 million special provision, the segment generated operating
profits of $184.6 million for the nine month period ended July 31, 1999, an
increase of 5 percent over the same period in 1998. Operating margins improved
slightly during 1999 as compared with 1998, primarily due to the Company's
continuing emphasis on improving margins through selectivity in new projects.
In addition to the $136.5 million special provision, results for the nine month
period ended July 31, 1999 for the Engineering and Construction segment include
a provision totaling $64 million for process design problems which arose on its
Murrin Murrin nickel cobalt project in Western Australia. The Company
anticipates recovering a portion of this amount and, accordingly, recorded $44
million in potential insurance recoveries. The result was a negative $20 million
impact in the second quarter from this project. Partially offsetting this was
recognition of $10 million of earnings from a project in Indonesia. Realization
of these earnings had been in question primarily due to the previously reported
uncertainty of collection of certain progress billings. The collection of these
billings combined with resolution of other normal project
12
<PAGE> 14
completion contingencies during the second quarter resulted in recognition of
project earnings in accordance with contract accounting principles.
As a result of the strategic reorganization, the Engineering and Construction
segment has been separated into two strategic business enterprises: Fluor Daniel
and Fluor Global Services. Fluor Daniel, which will concentrate on the Company's
engineering, procurement and construction business, reported operating profit
for the quarter of $50 million. Fluor Global Services, which includes American
Equipment Company, TRS Staffing Solutions, Fluor Federal Services,
Telecommunications, Operations and Maintenance, and a new company, Consulting,
posted operating profit of $18 million for the quarter.
New awards for the three and nine months ended July 31, 1999 were $1.6 billion
and $4.9 billion, respectively, compared with $2.7 billion and $8.1 billion for
the same periods of 1998. Approximately 28 percent and 44 percent, respectively,
of the new awards for the three and nine months ended July 31, 1999 were for
projects located outside of the United States. There were no individual project
awards in excess of $325 million in the third quarter of 1999. The decrease in
1999 new awards as compared with 1998 reflects a deferral of capital spending by
clients as well as greater project selectivity by the Company.
The following table sets forth backlog for each of the Company's Engineering and
Construction business groups:
<TABLE>
<CAPTION>
July 31, October 31, July 31,
$ in millions 1999 1998 1998
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Process $ 3,393 $ 5,345 $ 6,339
Industrial 3,638 4,761 5,239
Power/Government 1,118 1,272 1,149
Diversified Services 976 1,267 1,012
------- -------- --------
Total backlog $ 9,125 $ 12,645 $ 13,739
======= ======== ========
U.S. $ 4,690 $ 5,911 $ 5,870
Outside U.S. 4,435 6,734 7,869
------- -------- --------
Total backlog $ 9,125 $ 12,645 $ 13,739
======= ======== ========
</TABLE>
13
<PAGE> 15
The overall decrease in backlog is consistent with the slowing trends in new
awards. Approximately 49 percent of the Company's backlog as of July 31, 1999 is
for projects located outside the United States. Due to the nature of the
projects the Company pursues and those included in backlog, the Company has not
experienced any significant disruption in ongoing project execution related to
turmoil in the global financial markets. Although backlog reflects business
which is considered firm, cancellations or scope adjustments may occur. Backlog
is adjusted to reflect any known project cancellations, deferrals, and revised
project scope and cost, both upward and downward.
REORGANIZATION COSTS
During the second quarter of 1999, the Company adopted a plan to reorganize its
operations to respond to deteriorating business conditions in its Engineering
and Construction segment. The anticipated benefits to be derived from the
reorganization will be a $160 million annual reduction in gross overhead
expense.
The Company recorded a one-time, special provision of $136.5 million ($119.8
million after-tax) to recognize the costs associated with the reorganization.
Approximately 5,000 jobs are expected to be eliminated by these actions within
the next year. Some affected employees are entitled to receive severance
benefits under established severance policies or by governmental regulations.
Additionally, outplacement services may be provided on a limited basis to some
affected employees. The provision also reflects amounts for asset impairment,
primarily for property, plant and equipment; intangible assets (goodwill); and
certain investments. The asset impairments were recorded primarily because of
the Company's decision to exit certain non-strategic geographic locations and
businesses. The carrying values of impaired assets were adjusted to their
current market values based on estimated sale proceeds, using either discounted
cash flows or contractual amounts. Lease termination costs were also included in
the reorganization charge. The Company anticipates closing 15 non-strategic
offices worldwide as well as consolidating and downsizing other office
locations. The closure or rationalization of these facilities is expected to be
substantially completed by the end of fiscal year 2000.
To date the Company has closed 11 offices and reduced headcount by approximately
3,300 employees.
The following table summarizes the status of the Company's reorganization plan:
<TABLE>
<CAPTION>
Lease
($ in million s) Personnel Asset Termination
Costs Impairments Costs Other Total
--------- ----------- ------------ ----- -----
<S> <C> <C> <C> <C> <C>
Special provision $72.2 $ 48.8 $14.5 $ 1.0 $136.5
Cash expenditures (16.1) (0.2) (1.6) (0.3) (18.2)
Asset write-offs -- (14.1) -- -- (14.1)
----- ------ ----- ----- ------
Balance at July 31, 1999 $56.1 $ 34.5 $12.9 $ 0.7 $104.2
===== ====== ===== ===== ======
</TABLE>
14
<PAGE> 16
COAL
Coal segment revenues and operating profit for the three and nine month periods
ended July 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
July 31, July 31,
--------------------------- ---------------------------
($ in thousands) 1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 266,270 $ 274,967 $ 794,255 $ 835,212
Operating profit $ 33,656 $ 43,672 $ 104,104 $ 120,661
</TABLE>
Revenues decreased 3 percent and 5 percent, respectively, for the three and nine
month periods ended July 31, 1999 compared with the same periods in 1998. The
decrease during the three month period is due primarily to lower prices for both
metallurgical and steam coal as compared with 1998. Volume for metallurgical
coal decreased 19 percent during the three month period but was more than offset
by an increase in steam coal volume of 24 percent. The decrease in revenues
during the nine month period is due to the combination of lower prices and a
reduction in the higher priced metallurgical coal volume. Volume for
metallurgical coal decreased 19 percent during the nine month period while
volume for steam coal increased only 17 percent. The metallurgical coal market
continues to be adversely affected by steel imports from outside the United
States and a weak U.S. coal export market. The imports have reduced demand for
steel produced in the U.S. and thereby reduced U.S. demand for metallurgical
coal, which is used in steel production. Demand is weak for U.S. coal exported
to foreign markets as the U.S. Dollar remains strong and the Asian economies
slowly recover from their financial crises. Additionally, the market for steam
coal, which is used to fire electric generating plants, continues to be impacted
by high customer inventory levels resulting from last year's mild winter and the
recent low price of oil, which offers a lower cost alternative to steam coal.
These market conditions have placed pressure on both the sales volume and
pricing outlook for 1999. Gross profit decreased 3 percent during the three
months ended July 31, 1999 as compared with 1998, primarily due to the decrease
in higher margin metallurgical coal sales partially offset by lower production
costs for both metallurgical and steam coal. Gross profit for the nine month
period is flat as compared with 1998 as reduced metallurgical coal sales and
lower prices for both metallurgical and steam coal were offset by lower
production costs for both metallurgical and steam coal. Operating profit during
both periods was impacted by higher fixed costs, primarily depreciation,
depletion and amortization, as volume levels remain flat.
OTHER
Net interest expense for the three and nine months ended July 31, 1999 increased
compared with the same periods of 1998 due primarily to lower interest income
resulting from lower average cash balances in addition to an increase in
interest expense from higher commercial paper and loan notes used to fund the
Company's share repurchase program, which was completed in October 1998.
Corporate administrative and general expense for the three and nine months ended
July 31, 1999 was $20.7 million and $40.5 million, respectively, compared with
$3.8 million and $14.3 million, respectively, for the same periods in 1998. The
increase in corporate administrative and general expense for the three month
period is primarily due to higher stock-based compensation plan expense and an
increase in consulting costs related to the development and implementation of
the
15
<PAGE> 17
Company's new strategic direction. The three months ended July 31, 1999 also
included $5.1 million for the development of the Company's ERM system, Knowledge
@ Work. The increase in expense for the nine month period is due primarily to
higher consulting costs and Knowledge @ Work development costs. In addition, the
nine month period ended July 31, 1998 included a credit of approximately $10
million related to a long-term incentive compensation plan. The Company accrues
for certain long-term incentive awards whose ultimate cost is dependent on
attainment of various performance targets set by the Organization and
Compensation Committee (the "Committee") of the Board of Directors. Under the
long-term incentive compensation plan referred to above, the performance target
expired, without amendment or extension by the Committee, on December 31, 1997.
The Company's effective tax rate decreased approximately 3 percentage points for
the three month period ended July 31, 1999 as compared with the same period of
1998. The tax rate for the third quarter of 1998 reflects a higher level of
expense items which did not receive full tax benefit. The effective tax rate for
the nine month period ended July 31, 1999 is significantly higher than the
amount reported for the same period in 1998. This is primarily because certain
non-U.S. items included in the special provision did not receive full tax
benefit.
FINANCIAL POSITION AND LIQUIDITY
At July 31, 1999, the Company had cash and cash equivalents of $219.9 million
and a total debt to total capital ratio of 28.8 percent. At July 31, 1998, the
Company had cash and cash equivalents of $308.7 million and a total debt to
total capital ratio of 29.1 percent.
Cash flow generated from operating activities was $304.5 million during the nine
month period ended July 31, 1999, compared with $492.6 million during the same
period in 1998. The decrease in cash generated from operating activities is
primarily due to an increase in project-related working capital which is
affected from period to period by the mix, stage of completion and commercial
terms of engineering, procurement and construction projects. In addition,
operating cash flow was adversely impacted by an increase in inventories, both
for equipment for sale/rental and coal. The increase in inventories is a result
of slowing markets. Cash flow in 1998 was positively impacted by the receipt of
a $30 million tax refund in the first quarter.
Financing activities during the nine months ended July 31, 1999 included capital
expenditures of $362.4 million, including $166.4 million for the Coal segment.
Capital expenditures, net of proceeds from the sale of property, plant and
equipment, were lower in 1999 than the comparable period in 1998, primarily in
the Coal segment. Coal segment capital expenditures for the three months ended
July 31, 1999 were $22.4 million, a decrease of $72.1 million from the
comparable period in 1998. The Company also completed the sale of its ownership
interest in Fluor Daniel GTI, Inc. during the first nine months of 1999 and
received proceeds totaling $36.3 million.
Investing activities during the nine months ended July 31, 1999 included a
reduction in commercial paper and loan notes of $185.2 million partially offset
by the issuance of $50.5 million in notes payable to an affiliate. In addition,
the Company became obligated with respect to $17.6 million in long-term
municipal bonds. Dividends during the first nine months of 1999 were $45.5
million ($.60 per share) as compared with $48.4 million ($.60 per share) in
1998. The decrease in the dividends
16
<PAGE> 18
paid is due to a lower number of shares outstanding as a result of the Company's
1997/1998 share repurchase program. Under this program, during the nine months
ended July 31, 1998 the Company repurchased 7,430,300 shares of its common stock
for a total of $341.3 million.
The Company has on hand and access to sufficient sources of funds to meet its
anticipated operating needs, including cash required to implement the Company's
reorganization plan. Significant short- and long-term lines of credit are
maintained with banks which, along with cash on hand, provide adequate operating
liquidity. Liquidity is also provided by the Company's commercial paper and loan
note program. During January 1999, the Company filed a shelf registration
statement with the Securities and Exchange Commission for the sale of up to $500
million in debt securities.
FINANCIAL INSTRUMENTS
In connection with its 1997/1998 share repurchase program, the Company entered
into a forward purchase contract for 1,850,000 shares of its common stock at a
price of $49 per share. The contract matures in October 2000 and gives the
Company the ultimate choice of settlement option, either physical settlement or
net share settlement. As of July 31, 1999, the contract settlement cost per
share exceeded the current market price per share by $10.61.
Although the ultimate choice of settlement option resides with the Company, if
the price of the Company's common stock falls to certain levels, as defined in
the contract, the holder of the contract has the right to require the Company to
settle the contract.
The Company utilizes forward exchange contracts to hedge foreign currency
transactions entered into in the ordinary course of business and not to engage
in currency speculation. At July 31, 1999 and October 31, 1998, the Company had
forward foreign exchange contracts of less than two years in duration, to
exchange principally Australian Dollars, Canadian Dollars, Korean Won, Dutch
Guilders and German Marks for U.S. dollars. In addition, the Company has a
forward currency contract to exchange U.S. dollars for British pounds sterling
to hedge annual lease commitments which expire in 1999. The total gross notional
amount of these contracts at July 31, 1999 and October 31, 1998 was $63 million
and $106 million, respectively. Forward contracts to purchase foreign currency
represented $61 million and $102 million and forward contracts to sell foreign
currency represented $2 million and $4 million, at July 31, 1999 and October 31,
1998, respectively.
THE YEAR 2000 ISSUE - READINESS DISCLOSURE - UPDATE
The Year 2000 issue is the result of computer systems and other equipment with
processors that use only two digits to identify a year rather than four. If not
corrected, many computer applications and date sensitive equipment could fail or
create erroneous results before, during and after the Year 2000. The Company
utilizes information technology ("IT") systems, such as computer networking
systems and non-IT devices, which may contain embedded circuits, such as those
which may be found in building security equipment. The Year 2000 issue could
affect the systems, transaction processing, computer applications and devices
used by the Company to operate and monitor all major aspects of its business,
including financial systems, marketing
17
<PAGE> 19
services, proprietary engineering and procurement systems, technical reference
databases and facilities operating systems. Both IT systems and non-IT devices
are subject to potential failure due to the Year 2000 issue.
The Company has developed and implemented a plan to achieve Year 2000 readiness
(the "Y2K Program"). The Company has implemented its Y2K Program through teams
located at the Company's operating units throughout the world. Senior corporate
staff oversee and coordinate such implementation efforts. Progress reports on
the Y2K Program are presented regularly to the Company's senior management and
periodically to the Audit Committee of the Company's Board of Directors. The
Audit Committee reviews the Company's Year 2000 processes and procedures to
assess the appropriateness of its risk analysis process and results.
The Company has divided systems potentially affected by the Year 2000 issue into
the following broad categories:
o Business Systems, including general ledger, accounting, human resources and
other ancillary business systems software that runs on mainframe computers
and various servers and is used throughout the Company's facilities;
o Hardware, Network and Operating Systems, including mainframe computers
running Business Systems and other applications software, servers for local
area networks and wide area networks, hubs, routers, switches, and various
operating systems located on servers and personal computers;
o Engineering Systems, including engineering applications running primarily
on personal computers and local area networks;
o Major Site Specific Systems, including software and hardware which is not
shared throughout the Company's facilities but is used at the Department of
Energy's Hanford and Fernald Project Sites and at specific coal facilities
and processing plants of the Company;
o Other Site Specific Systems, including hardware and software used by the
Company at other project sites;
o Customer Systems, including equipment and software provided by the Company
to its customers; and
o Other Non-Mission Critical Systems, including, for the most part,
applications software for specific disciplines or projects.
In each category (excluding Other Non-Mission Critical Systems), the Company has
identified and assigned priority to certain mission critical systems. The
Company defines mission critical systems as those that might have a significant
adverse effect in one or more of the following areas: safety, environmental,
legal or financial exposure and Company credibility and image.
In relation to existing systems, the Company's Y2K Program has been implemented
in the following three phases: (1) identification and assessment of Year 2000
problems requiring systems modifications or replacements; (2) the remediation or
replacement and testing of systems having Year 2000 problems; and (3)
development of contingency and business continuity plans to mitigate the effect
of any system or equipment failure. The timeframe for each phase of the Y2K
18
<PAGE> 20
Program, without respect to distinctions between mission critical systems and
non-mission critical systems, are represented in the following table:
<TABLE>
<CAPTION>
PHASES OF THE PROJECT START DATE END DATE
--------------------- ---------- --------
<S> <C> <C>
Identification and assessment of IT and non-
IT systems Early 1996 December 31, 1998
Remediation or replacement and testing Late 1996 October 31, 1999
Contingency planning Late 1998 Ongoing into 2000
</TABLE>
With respect to systems that are being acquired by the Company for its own
account or the account of customers, the Company uses standard compliance
processes to certify Year 2000 compliance. The Company maintains relationships
with thousands of suppliers, some of which supply software, hardware and systems
that must be assessed for Year 2000 compliance. The Company has identified
approximately 2,000 critical suppliers. The Company requires that all suppliers
certify and, where appropriate, guarantee that the systems and equipment they
provide to the Company for its own account and the account of its customers are
Year 2000 compliant. In addition to requiring such certifications, the Company
has also established a procedure for reviewing Year 2000 compliance of critical
suppliers. Actions include the review of remediation and testing of specific
equipment, review of suppliers' corporate Year 2000 progress and confirmation of
electronic exchange formats. Where appropriate, the Company may follow up its
review of supplier information with on-site visits. Where a supplier does not,
or cannot, satisfy the Company's Year 2000 requirements, the Company seeks
alternate suppliers, subject to customer requirements and contract
specifications. Given the number of suppliers utilized by the Company,
compliance assessment is ongoing. Although initial reviews indicate that Year
2000 compliance by the Company's suppliers should not have a material adverse
affect on the Company's operations, there can be no assurance that suppliers
will resolve all Year 2000 issues in their systems and equipment in a timely
manner.
Generally, the Company has substantially completed phase 1 (identification and
assessment) and phase 2 (remediation or replacement and testing) with respect to
most of its Business Systems. The upgrading or remediation of the balance of the
Business Systems is scheduled to be complete by the end of October 1999.
At this time, the Company believes its mainframe system is Year 2000 ready. The
Company is using an automated tool to test servers and approximately 17,000
personal computers with standard connections to servers. Approximately 77
percent of those computers have been tested, and approximately 85 percent of the
personal computers tested (or approximately 65 percent of the total) have been
found to be Year 2000 compliant. Approximately 15 percent of the computers
tested require upgrading and are being upgraded. Remaining hardware, including
personal computers that are not connected to servers, is predominately located
at project sites or smaller offices. Such hardware is not likely to be mission
critical and is being assessed through manual procedures. The Company is
migrating its personal computers to new operating systems (Windows 95 and
Windows NT), and migration is expected to address Year 2000 problems in various
operating systems that are being replaced. All equipment upgrades and
remediation are expected to be complete by September 1999.
19
<PAGE> 21
With respect to Engineering Systems, the Company plans to retire approximately
31 percent of its engineering applications software to streamline its
operations, reduce support costs and avoid costs of Year 2000 remediation. The
cost of such software, to the extent originally capitalized, has been fully
amortized and the Company does not expect any significant write off as the
result of such retirement. The remediation of remaining applications software is
largely being addressed via upgrades. At this time, approximately 88 percent of
the engineering applications software that will remain in use have been
upgraded. With respect to the Engineering Systems, remediation and testing are
proceeding in accordance with the schedule, and the implementation of compliant
versions is expected to be complete by the end of October 1999.
The assessment of mission critical Major Site Specific Systems is substantially
completed. Remediation or replacement and testing of all the systems and
equipment the Company has identified at the Department of Energy's projects has
been completed. The assessment of site specific control systems used at the
Company's coal plants is substantially complete. Approximately 84% of those
systems are Year 2000 ready. Remediation of the remaining systems is expected to
be complete by October 1999.
Other Site Specific Systems have been assessed. The Company has identified
approximately 350 applications in this category. Approximately 140 will be
retired. Approximately 180 of those systems are Year 2000 ready. The
implementation of compliant versions of the remaining 30 applications is
expected to be complete by the end of October 1999.
With respect to Customer Systems and current customer projects generally, the
Company is making evaluations to determine whether or not any action is required
to ensure Year 2000 readiness. At any time, the Company may have approximately
2,000 ongoing customer projects. The Company is reviewing those projects where
it has ongoing warranty or performance obligations for Year 2000 issues. It has
targeted approximately 1,300 projects for additional Year 2000 assessment, all
of which have been reviewed. At those projects where Year 2000 issues may exist,
the Company has evaluated what further action is required. Any required
remediation and contingency planning is expected to be complete by the end of
October 1999. In many cases, the Company does not provide its own warranties but
has passed through to its customers the warranties provided by its suppliers.
Accordingly, the Company is contacting suppliers of the systems affected by Year
2000 issues and monitoring their remediation efforts. The Company relies
directly and indirectly on external systems utilized by its suppliers and on
equipment and materials provided by those suppliers and used for the Company's
business. As discussed above, the Company has implemented a procedure for
reviewing Year 2000 compliance by its suppliers.
With respect to systems and equipment previously provided to clients, the
Company does not control the upgrades, additions and/or changes made by its
clients, or by others for its clients, to those systems and equipment.
Accordingly, the Company does not provide any assurances, nor current
information about Year 2000 capabilities, nor potential Year 2000 problems, with
respect to past projects. Each project is performed under an agreement with the
Company's client. Those agreements specifically outline the extent of the
Company's obligations and warranties and the limitations that may apply.
20
<PAGE> 22
Other Non-Mission Critical Systems are comprised, for the most part, of
approximately 600 specific applications software programs. Such software is not
critical to the Company's operations and is being reviewed and remediated in
accordance with the schedule.
The Company has investments in various joint ventures and is monitoring the Year
2000 efforts of such joint ventures. Based on available information, the Company
believes business systems used in such joint ventures are Year 2000 ready.
The Company uses both internal and external resources in its Y2K Program. The
Company estimates that, from 1996 to date, it has spent approximately $19.1
million on the Year 2000 issue. It anticipates spending an additional $7 to $10
million during the remainder of this year and running into the first quarter of
2000. The additional spending estimate is less than reported in the second
quarter because some projected costs in this category have been re-estimated.
The estimate of additional spending was derived utilizing numerous assumptions,
including the assumption that the Company has already identified its most
significant Year 2000 issues and that plans of its third party suppliers will be
fulfilled in a timely manner without cost to the Company. The Company estimates
that 37 percent of the total costs incurred in the Y2K Program have been and
will be incurred to remediate systems (including software upgrades); the
remaining 63 percent will be incurred to replace problem systems and equipment.
In addition to the direct costs of the Y2K Program, the Company has accelerated
its program of replacing out-of-date personal computers and operating systems,
regardless of whether or not such computers and systems are Year 2000 compliant.
The Company estimates it has spent $10.8 million to date and will spend an
additional $5 to $7 million in connection with such replacement program. The
additional spending estimate is less than reported in the second quarter because
some projected costs in this category have been re-estimated. This replacement
program will continue into October 1999. Overall, the Company's Year 2000
Specific costs are on track for a total of approximately $16 million, with the
total costs for the Y2K Program expected to be in the range of $25 to $30
million.
The Y2K Program has been funded under the Company's general IT and operating
budgets. In 1999, Y2K Program costs are estimated to be 10 percent of the IT
budget. The Year 2000 expenditures have been and will continue to be expensed
and deducted from income when incurred, except for costs incurred to acquire new
software developed or obtained to replace old software which may be capitalized
and amortized under generally accepted accounting principles. No significant
internal systems projects are being deferred due to the Y2K Program efforts. The
above amounts are the Company's best estimate given other systems initiatives
that were ongoing irrespective of the Y2K Program (such as the migration to
Windows NT and related hardware upgrades). However, there can be no guarantee
that these assumptions are accurate, and actual results could differ materially
from those anticipated.
The Company is developing contingency plans to address the Year 2000 issues that
may pose a significant risk to its ongoing operations and existing projects.
Such plans include the implementation of alternate procedures to compensate for
any system and equipment malfunctions or deficiencies with the Company's
internal systems and equipment, with systems and equipment utilized at the
Company's project sites and with systems and equipment provided to clients.
During the remediation phase of the internal business systems, the Company has
been and will be evaluating potential failures and will attempt to develop
responses in a timely manner. However,
21
<PAGE> 23
there can be no assurance that any contingency plans implemented by the Company
would be adequate to meet the Company's needs without materially impacting its
operations, that any such plan would be successful or that the Company's results
of operations would not be materially and adversely affected by the delays and
inefficiencies inherent in conducting operations in an alternative manner.
Further contingency plans are being developed to address issues related to third
parties that are not considered to be making sufficient progress in becoming
Year 2000 ready in a timely manner. Due to the large number of variables
involved with estimating resultant lost revenues should there be a third party
failure, the Company cannot provide an estimate of damage if any of the
scenarios were to occur.
The Company's Y2K Program is subject to a variety of risks and uncertainties,
some of which are beyond the Company's control. Those risks and uncertainties
include, but are not limited to, the availability of qualified computer
personnel, the Year 2000 readiness of third parties and the Year 2000 compliance
of systems and equipment provided by suppliers.
The Company believes that its most reasonably likely worst case Year 2000
scenarios would relate to problems with the systems of third parties, rather
than with the Company's internal systems. In this regard, the Company believes
that risks are greatest in the area of utilities. Each of the Company's
locations relies on local private and governmental suppliers for electricity,
water, sewer, telecommunication and other basic utility services. If the supply
of such necessary utilities were to fail at any location, the Company's
operations at that location, whether consisting of engineering, design or
construction activities, maintenance services or coal mining and processing,
would essentially be shut down or disrupted until such utilities were restored.
Depending on the location, the Company could suffer delays in performing
contracts and in otherwise fulfilling its commitments. Such delays could
materially adversely impact the Company's receipt of payments due from customers
upon its tender of contract deliverables or upon achievement of contract
milestones. At facilities located in developing countries, the risk of sustained
infrastructure failures is accentuated by the lack of transparency in government
and private enterprises and general constraints on infrastructure spending. The
Company is working to assess its exposure to utility providers and other
infrastructure risks. The Company believes that the geographical dispersion of
the Company's facilities mitigates the risk that infrastructure failures in any
locale will result in the simultaneous closure of, or sustained suspension of
operations at, multiple Company facilities. Consequently, to the extent
practical, the Company expects to mitigate any interruption in its business
operations in one locale by shifting the performance of the constrained activity
to a functioning office or facility. There may be instances, however, where the
activity cannot be performed elsewhere or on a timely basis given the disruption
caused by the Year 2000 problems in any locale. In such instances, the Company
will assess the relevant provisions of its contracts and, where it deems
appropriate, work with its customers to resolve performance and schedule delays
and any resulting financial consequences on a mutually satisfactory basis to the
extent possible under then prevailing circumstances.
No assurance can be given that the Company will achieve Year 2000 readiness.
Further, there is the possibility that significant litigation may occur due to
business and equipment failures caused by the Year 2000 issue. It is uncertain
whether, or to what extent, the Company may be affected
22
<PAGE> 24
by such litigation. The failure of the Company, its clients (including
governmental agencies), suppliers of computer systems and equipment, joint
venture partners and other third parties upon whom the Company relies, to
achieve Year 2000 readiness could materially and adversely affect the Company's
results from operations.
EURO CONVERSION - UPDATE
Given the nature and size of the Company's European operations, the Company does
not perceive the conversion to the Euro as a significant risk area. The
Company's businesses operate under long-term contracts, typically denominated in
U.S. Dollars, as compared with more traditional retail or manufacturing
environments. If required, the Company is currently able to bid, price and
negotiate contracts using the Euro. The Company's treasury function is also
capable of operating with the Euro. Specifically, the Company is able to:
establish bank accounts; obtain financing; obtain bank guarantees or letters of
credit; trade foreign currency; and hedge transactions. The Company's ongoing
Euro conversion effort will be primarily concentrated in the systems area.
Conversion to the Euro impacts the Company's subsidiaries in The Netherlands,
Germany, Belgium, and Spain. All subsidiaries use a standard accounting system
and all reside in the same database. The Company's conversion plan is to
maintain the legacy database for historical reference and to create a new
database with the Euro as the base currency. The new database will permit
transactions to take place in both legacy currencies and the Euro as well as
perform prescribed rounding calculations. The new Euro-based database is
available and testing is in progress. Full conversion is anticipated to be
completed by the start of fiscal year 2001.
The Company has not incurred and it does not expect to incur any significant
costs from the continued conversion to the Euro, including any currency risk,
which could significantly affect the Company's business, financial condition and
results of operations.
The Company has not experienced any significant operational disruptions to date
and does not currently expect the continued conversion to the Euro to cause any
significant operational disruptions, including the impact of systems operated by
others.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131). SFAS No. 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. SFAS No. 131 will
be adopted by the Company in 1999. As discussed elsewhere in this Form 10-Q, the
Company is undertaking a complete reorganization of its current operating units
and administrative functions. Although management has not
23
<PAGE> 25
completed its review of SFAS No. 131 in light of the new organizational
structure, management anticipates that under the new standard the number of its
identifiable segments will increase over that currently being reported.
In June 1998, the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities (SFAS No. 133). SFAS No. 133 establishes new standards for recording
derivatives in interim and annual financial statements. On May 19, 1999, the
Financial Accounting Standards Board voted to defer the implementation date of
this statement, thereby making it effective for the Company's fiscal year 2001.
Because of the Company's minimal use of derivatives, management does not
anticipate that the adoption of the new statement will have a significant impact
on the results of operations or the financial position of the Company.
24
<PAGE> 26
FLUOR CORPORATION
CHANGES IN BACKLOG
Three and Nine Months Ended July 31, 1999 and 1998
UNAUDITED
<TABLE>
<CAPTION>
For the Three Months Ended July 31, 1999 1998
- ---------------------------------------------------------------------------
<S> <C> <C>
Backlog - beginning of period $ 10,222.5 $ 13,914.0
New awards 1,601.7 2,708.9
Adjustments and cancellations, net (103.9) 137.9
Work performed (2,595.4) (3,021.7)
--------- ----------
Backlog - end of period $ 9,124.9 $ 13,739.1
========= ==========
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended July 31, 1999 1998
- --------------------------------------------------------------------------
<S> <C> <C>
Backlog - beginning of period $ 12,645.3 $ 14,370.0
New awards 4,923.7 8,087.6
Adjustments and cancellations, net (356.6) 67.1
Work performed (8,087.5) (8,785.6)
--------- ----------
Backlog - end of period $ 9,124.9 $ 13,739.1
========= ==========
</TABLE>
25
<PAGE> 27
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27.1 Financial Data Schedule as of and for the
nine months ended July 31, 1999.
(b) Reports on Form 8-K.
None.
26
<PAGE> 28
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, 1999 /s/R. F. Hake
--------------------------------------------
R.F. Hake, Executive Vice President and
Chief Financial Officer
/s/V. L. Prechtl
--------------------------------------------
V. L. Prechtl, Vice President and Controller
27
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------ ------------
<S> <C>
(a) Exhibits.
27.1 Financial Data Schedule as of and for the
nine months ended July 31, 1999.
</TABLE>
28
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AT JULY 31, 1999 AND THE CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED JULY 31,
1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> JUL-31-1999
<CASH> 219,886
<SECURITIES> 0
<RECEIVABLES> 941,838
<ALLOWANCES> 0
<INVENTORY> 237,514
<CURRENT-ASSETS> 2,033,965
<PP&E> 3,422,232
<DEPRECIATION> 1,230,980
<TOTAL-ASSETS> 4,897,843
<CURRENT-LIABILITIES> 2,304,349
<BONDS> 317,550
0
0
<COMMON> 47,411
<OTHER-SE> 1,466,839
<TOTAL-LIABILITY-AND-EQUITY> 4,897,843
<SALES> 0
<TOTAL-REVENUES> 9,544,816
<CGS> 0
<TOTAL-COSTS> 9,259,978
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 136,500
<INTEREST-EXPENSE> 38,451
<INCOME-PRETAX> 83,913
<INCOME-TAX> 55,575
<INCOME-CONTINUING> 28,338
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,338
<EPS-BASIC> 0.38
<EPS-DILUTED> 0.37
</TABLE>
