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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1998
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 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
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
3353 MICHELSON DRIVE, IRVINE, CALIFORNIA 92698
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (949) 975-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS
-------------------
COMMON STOCK, $0.625 PAR VALUE
NAME OF EACH EXCHANGE ON WHICH REGISTERED
NEW YORK STOCK EXCHANGE
CHICAGO STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
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, AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES [X] NO [ ]
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. [X]
THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S VOTING STOCK HELD BY
NON-AFFILIATES WAS $3,171,531,322 ON JANUARY 12, 1999, BASED UPON THE AVERAGE
BETWEEN THE HIGHEST AND LOWEST SALES PRICES OF THE REGISTRANT'S COMMON STOCK AS
REPORTED IN THE CONSOLIDATED TRANSACTIONS REPORTING SYSTEM.
COMMON STOCK, $0.625 PAR VALUE, OUTSTANDING AS OF JANUARY 12, 1999 -
76,625,188 SHARES.
DOCUMENTS INCORPORATED BY REFERENCE
PARTS I, II AND IV INCORPORATE CERTAIN INFORMATION BY REFERENCE FROM THE
REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS FOR THE FISCAL YEAR ENDED OCTOBER 31,
1998.
PART III INCORPORATES CERTAIN INFORMATION BY REFERENCE FROM THE
REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 9, 1999, WHICH PROXY STATEMENT WILL BE FILED NO LATER THAN
120 DAYS AFTER THE CLOSE OF THE REGISTRANT'S FISCAL YEAR ENDED OCTOBER 31, 1998.
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From time to time, certain comments and disclosures in reports and
statements, including this report, released by Fluor Corporation ("Fluor" or the
"Company"), or statements made by its officers or directors may be
forward-looking in nature, such as statements related to growth in the Company's
Diversified Services Group, the ability to appropriately handle a slowdown in
the demand for metallurgical coal, the adequacy of funds to service debt and the
Company's opinions about trends and factors which may impact future operating
results. Such forward-looking statements could also involve, among other things,
statements regarding the Company's intent, belief or expectation with respect to
(i) the Company's results of operations and financial condition, (ii) the
consummation of acquisition, disposition or financing transactions and the
effect thereof on the Company's business, and (iii) the Company's plans and
objectives for future operations and expansion or consolidation.
Any such forward-looking statements would be subject to the risks and
uncertainties that could cause actual results of operations, financial
condition, cost reductions, acquisitions, dispositions, financing transactions,
operations, expansion, consolidation and other events to differ materially from
those expressed or implied in such forward-looking statements. Any such
forward-looking statements would be subject to a number of assumptions
regarding, among other things, future economic, competitive and market
conditions generally. Such assumptions would be based on facts and conditions as
they exist at the time such statements are made as well as predictions as to
future facts and conditions, the accurate prediction of which may be difficult
and involve the assessment of events beyond the Company's control. As a result,
the reader is cautioned not to rely on these forward-looking statements.
The Company wishes to caution readers that forward-looking statements,
including disclosures which use words such as the Company "believes,"
"anticipates," "expects," "estimates" and similar statements, are subject to
certain risks and uncertainties which could cause actual results of operations
to differ materially from expectations. Any such forward-looking statements
should be considered in context with the various disclosures made by the Company
about its businesses, including without limitation the risk factors more
specifically described below in Item 1, Business, under the heading "Business
Risks."
PART I
ITEM 1. BUSINESS
Fluor was incorporated in Delaware in 1978 as a successor in interest to a
California corporation of the same name that was originally incorporated in
1924. Its executive offices are located at 3353 Michelson Drive, Irvine,
California 92698, telephone number (949) 975-2000.
Through Fluor Daniel, Inc. and other domestic and foreign subsidiaries, the
Company provides design, engineering, procurement, construction, maintenance and
other diversified services on a worldwide basis to an extensive range of
industrial, commercial, utility, natural resources, energy and governmental
clients.
The Company maintains investments in coal-related businesses through its
ownership of A. T. Massey Coal Company, Inc. ("Massey").
A summary of the Company's operations and activities by business segment
and geographic area is set forth below.
ENGINEERING AND CONSTRUCTION
The Fluor Daniel group of domestic and foreign companies ("Fluor Daniel")
provides a full range of design, engineering, procurement, construction,
maintenance and other diversified services to clients in a broad range of
industrial and geographic markets on a worldwide basis. The types of services
provided by Fluor Daniel, directly or through companies or partnerships jointly
owned or affiliations with other companies, include: feasibility studies,
conceptual design, detail engineering, procurement, project and construction
management, construction, maintenance, plant operations, technical support,
project finance, quality assurance/quality control, start-up assistance, site
evaluation, licensing, consulting, equipment sales and leasing, temporary
technical and non-technical staffing and environmental services.
Fluor Constructors International, Inc. ("Fluor Constructors") is organized
and operated separately from Fluor Daniel. Fluor Constructors provides
construction management, construction and maintenance services in the United
States and Canada. Fluor Constructors is the Company's union construction arm.
The engineering and construction business is conducted under various types
of contractual arrangements, including cost reimbursable (plus fixed or
percentage fee), all-inclusive rate, unit price, fixed or maximum price and
incentive fee contracts. Contracts are either competitively bid and awarded or
individually negotiated. While, in terms of dollar amount, the majority of
contracts are of the cost reimbursable type, there has been an increase in the
volume of cost-reimbursable contracts with incentive-fee arrangements and in the
volume of fixed or unit price contracts. In certain instances, the Company
guarantees facility completion by a scheduled acceptance date and/or achievement
of certain acceptance and performance testing. Failure to meet any such schedule
and/or performance guarantees will result in non-recoverable costs which could
exceed revenues realized from the project.
The markets served by the business are highly competitive and for the most
part require substantial resources, particularly highly skilled and experienced
technical personnel. A large number of companies are competing in the markets
served by the business. Competition is primarily centered on performance and the
ability to provide the design, engineering, planning, management and project
execution skills required to complete complex projects in a safe, timely and
cost-efficient manner. The Company's engineering and construction business
derives its competitive strength from its diversity, reputation for quality,
cost-effectiveness, worldwide procurement capability, project management
expertise, geographic coverage, ability to meet client requirements by
performing construction on either a union or an open shop basis, ability to
execute projects of varying sizes, strong safety record and lengthy experience
with a wide range of services and technologies.
Design and engineering services provided by the engineering and
construction business involve the continual development of new and improved
versions of existing processes, materials or techniques, some of
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which are patented. However, none of the existing or pending patents held or
licensed by the business are considered essential to operations. Generally, the
development and improvement of processes, materials and techniques are performed
as part of design and engineering services in connection with the projects
undertaken for various clients.
FLUOR DANIEL
Fluor Daniel's operations are organized into industry groups responsible
for identifying and capitalizing on opportunities in their market segments on a
global basis. Individual operating companies within the groups focus on specific
clients, industries and markets. The operating companies rely on a network of
globally located engineering offices to provide resources and expertise in
support of project execution worldwide. In addition to industry groups, Fluor
Daniel's operations also include the Global Sales and Marketing Group which is
responsible for sales and marketing support and assistance to all of the other
industry groups and the Project Execution Group which provides construction,
risk management and project management assistance and resources to all of the
industry groups. As part of the Project Execution Group, the Global Automation
Group is responsible for delivering automation tools for project execution with
a focus on reducing project cost and schedule.
The operations of Fluor Daniel are detailed below by industry group:
Process
The Process Group supports clients in the following basic industries:
petroleum, petrochemicals, production, pipelines, chemicals, plastics and
fibers.
During fiscal 1998, Process Group contract awards included: engineering for
a hydrocracker unit in Australia, a clean fuels project in England, an MC Doel
Expansion in Belgium, services to improve utility requirements for oil
production in Kazakhstan and an offshore gas platform and pipeline in Trinidad;
engineering and procurement for an aromatics upgrading project in Belgium, a
vacuum unit and hydrotreater revamp project in Canada and an olefin complex in
Venezuela; engineering, procurement and construction for a refinery expansion in
Canada, a polyethylene facility in Canada, an acrylonitrile expansion project in
Texas, a specialty polymers resin project in Alabama, a toluene-isocyanate
upgrade in Louisiana and a mono-ethlyene glycol unit as part of a joint venture
in Canada; construction for a utilities rebuild in South Africa; engineering,
procurement and construction management for a lubes plant expansion in Texas, a
cationic monomers project in Arkansas, an LHC-2 ethane cracker in Argentina,
pipelines and tanks in Minnesota, North Dakota and Wisconsin and an ethylene
facility as part of a joint venture in Canada; and engineering and construction
management for an LPG storage facility in Florida.
Ongoing projects in fiscal 1998 include: engineering, procurement and
project management for a pipeline, pump stations and marine facilities in Russia
and Kazakhstan; engineering, procurement and construction management for a
floating production storage offloading vessel in Scotland, a pipeline and
production facility in Ecuador, an ethylene facility in Argentina, crude oil
import/export pipeline, tanks, oil pump stations and terminal in Lithuania, a
gas turbine generator in the Philippines, a LNG upstream facility, offshore gas
platform, subsea and onshore pipelines in Trinidad, an acrylate monomer plant
and a maleic anhydrite facility in Germany, paper and film finishing plants, a
color line plant and utilities, siting and infrastructure for plants in China,
an alliance with Witco for specialty chemical plants worldwide, a petrochemical
complex in Saudi Arabia and a refinery upgrade in Ohio; engineering and
procurement for a gas field development including low temperature separation
unit compression and control facilities in the Netherlands, an expansion project
in Saudi Arabia, a pipeline between Argentina and Chile, a crude stabilization
project in Kazakhstan, a natural gas pipeline in New York, a joint venture
performing work on an ethylene facility in Canada and an ethylene and
polyethylene project in Texas; engineering for various chemical fiber plants
throughout the United States, numerous maintenance shutdowns at various
locations in the United States, a metaxylene unit in Texas, evergreen
engineering support for Du Pont in Canada and Europe, a carbon black expansion
in China, a heavy oil upgrader in Venezuela, a nitrogen generation complex in
Mexico and a gas gathering and injection project in Abu Dhabi; engineering,
procurement and construction for debottlenecking of existing facilities and an
expanded lube oil plant in Indonesia, an upgrade of a residue hydrocracker in
the Slovak Republic, a new PET
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facility in Mississippi, an upgrade of a polypropylene plant in Texas, expansion
of a DNT/SAC plant in Texas, a PBT plant in South Carolina and a polypropylene
project in Texas; capital construction and maintenance services on an evergreen
basis for various chemical and fiber plants throughout the United States and
small capital construction services in Tennessee and South Carolina; engineering
and construction management for a refinery modernization in Poland and a CCR
reformer project in Texas; construction management for a paraxylene decoupling
and revamp in Alabama; construction for an oxo alcohol plant and a chemical
plant, both in Louisiana; a services alliance in Texas and for numerous small
capital projects at various locations in the United States; and capital
management for various chemical and fiber plants throughout the United States.
Projects completed in fiscal 1998 include: engineering, procurement and
construction management for a hydrotreater in Canada, a hydrodesulfurization
unit in Korea, a methanol plant in Norway, a polystyrene plant expansion in
Louisiana, an ethylene plant expansion in Saudi Arabia, a fluid catalytic
cracker unit in Texas, a L.S.D. hydrofiner in Canada, an export terminal
expansion project in Scotland, a pipeline and export terminal in Azerbaijan, a
refrigerated storage tank in New Hampshire, a carbon graphite expansion in South
Carolina, a nylon BCF expansion in Canada and a resin coating plant in Great
Britain; engineering, procurement and construction for a new film machine in an
existing plant in New York, a polymer extrusion expansion in Louisiana and a PTA
plant in the Netherlands; engineering and procurement for a chlor-alkali plant
in Texas, a polypropylene complex in Canada, a CDU unit revamp in Poland and a
gas plant modification in England; construction management for a lube oil revamp
in Germany, an ethylene unit revamp in Louisiana and a paraxylene unit in Korea;
engineering for a derivatives plant in Malaysia, an FCC expansion project in
Utah, a benzene and paraxylene project in Thailand, a receiving terminal, pump
stations, meter stations, pipelines and export terminal in Azerbaijan, a
debottlenecking project in Indonesia, three geothermal power generation
facilities in Indonesia, a polyethylene plant in Texas, a petroleum refinery
expansion in Abu Dhabi, a propylene recovery project in Pennsylvania, an
ethoxics and ethanol amines plant in Louisiana, an organic acids plant in
Louisiana, a nylon facility in China, a polylactide facility in Nebraska and a
latex relocation in Thailand; construction for a chemical line conversion and
waste water treatment plant both in South Carolina; and project management for a
nylon tire cord plant in India.
Industrial
The Industrial Group provides a broad range of services by supporting
clients in the following industries: mining and metals, general manufacturing,
electronics, pharmbio, fine chemicals, food, beverage and consumer products,
commercial and institutional facilities, infrastructure, telecommunications and
forest products. The Industrial Group also supports clients through ADP Marshall
which provides professional services in architecture, engineering and
construction management in the electronics industry and other industries, and
through PACE, the operating company dedicated to serving Fluor Daniel's alliance
with Procter & Gamble.
During fiscal 1998, Industrial Group contract awards included: construction
for a wood fiber board production facility in Illinois; construction management
for a wood fiber board production facility in Ohio, highway expansion in
California, an apartment complex in Florida, a grassroots assembly cleanroom
facility in Ireland, office complex construction in California and
Massachusetts, garage construction in Nevada, a cogeneration facility in Rhode
Island, a global distribution facility in Connecticut, an office renovation in
Massachusetts, a cleanroom facility in Georgia and a waste treatment facility in
Pennsylvania; design-build services for a multi-lane highway in South Carolina
and a toll road in Virginia; engineering for various aircraft facility upgrades
in the United States, a magnesium plant addition in Utah, an aluminum
smelter-electrical upgrade in South Carolina, a grassroots aluminum rolling mill
in Brazil and an Emergency 911 communications center in California; engineering
and procurement for a wheat refinery extension in the Netherlands and a steel
cold rolling mill expansion in Maryland; engineering, procurement and
construction for a smelting complex in Peru; engineering, procurement and
construction management for a plant addition in Indiana, a paper machine
expansion in Missouri, a paperboard mill expansion in Oklahoma, a gold mine in
Chile, a process plant for a mine in Australia, a plant upgrade for a mine in
Australia, a city renovation in Arizona, a cleanroom fit-up in New Jersey, hotel
and casino construction in Nevada, retail facility construction in Nevada,
various fit-up work for IBM throughout the United States, a new Mask house in
Vermont, a grassroots animal growth hormone biologics facility in Georgia and a
grassroots bulk pharmaceutical manufacturing facility in Ireland; a feasibility
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study for a solvent extraction project for recovery of bitumen in Canada; and
project management for a mini-steel mill in Alabama.
Ongoing projects include: construction management for an auto assembly
plant in Brazil, a multi-product personal care facility in the Philippines, a
nickel mine expansion in Indonesia, a convention center, a passenger terminal, a
prison, an office park, multiple clean room renovations, a tobacco processing
plant, the extension of an existing UTD facility and a hotel renovation, all in
the United States, major infrastructure for a university in Saudi Arabia, an
airport in South Korea and a test/assembly plant in Ireland; engineering,
procurement and construction of a copper and gold mine in Indonesia, a food
processing plant expansion in Tennessee, a nickel/cobalt mine and integrated
processing facility in Australia and a copper mine in Peru; engineering,
procurement and construction management for a beltway around Denver, Colorado, a
copper mine addition in Chile, a grassroots copper mine in Chile, a bulk
pharmaceuticals manufacturing facility in Ireland, expansion and rebuild of
various snack food plants in the United States, continuing work in an ongoing
alliance with Alcoa, Inc., an underground conveyor and crushing facility in the
United States, and a grassroots gold mine in Chile; engineering for an iron mine
in Australia, an aluminum recycle mill, an outsourcing contract for outside
plant engineering services, a grassroots solid dosage pharmaceutical plant and a
bovine somatotrophin manufacturing facility, all in the United States;
engineering and construction of pet foods facilities in the United States;
engineering and construction management for a sports facility in South Carolina,
a tobacco facility in the Netherlands, a court/detention center in Texas and a
propylated starch facility in Indianapolis; project management for rail stations
for the Federal Transportation Administration in New York City, highway
construction in Orange County, California and a rail transit recompetition in
Los Angeles, California.
Projects completed in fiscal 1998 included: engineering, procurement and
construction for a production facility and a snack food facility in the United
States, a paper machine expansion in Georgia, an ethanol facility in Canada, a
vaccine manufacturing facility in Maryland and an Emergency 911 response system
for Chicago, Illinois; engineering, procurement and construction management for
a grassroots micromill, a beta carotene production facility, a botulinum toxin
facility, a salt manufacturing facility, two snack food facilities and a
beverage production facility, all in the United States, a grassroots copper and
gold mine in Argentina, a conveyor/crusher refurbishment in Chile, expansion of
an iron ore pelletizing processing facility in Brazil, a copper mine expansion
in Indonesia, a potassium chloride plant expansion in Chile, a battery acid
plant in Saudi Arabia, a wafer facility in Washington, a vitamin manufacturing
facility in New Jersey, a multi-product personal care facility in China and a
cellular site buildout for eight cities in the United States; engineering and
procurement for a food additive processing plant in Ohio; engineering and
construction management for an export facility in China and a hotel renovation
in Indonesia; construction management for a wafer processing facility, an office
facility, an image masking operation facility, a prison, fit ups and expansions,
a film manufacturing facility and a wafer fabrication facility, all in the
United States, a concrete facility in Taiwan, a tobacco facility in Malaysia, a
specialty steel mill in Pennsylvania, an HVAC upgrade to a distribution facility
in Mississippi and a conferencing center in Florida; engineering for billet
conditioning in the United Sates, a pilot plant production facility in the
United States, certain capital projects in Chile, a grassroots micro mill in
Nevada, a grassroots gold mine in Venezuela, a melt shop facility in Indiana, a
grassroots copper mine in Canada, a vitamin manufacturing facility in Texas and
an engineering alliance for a multi-product facility in California; construction
of a snack food facility in the United States, a distribution warehouse in South
Carolina and a camcorder/laptop battery facility in Florida.
Power and Government
The Power and Government Group provides services to public electric
utilities, private power companies and the United States government. The
Duke/Fluor Daniel partnership provides services to the fossil fuel power
industry.
During fiscal 1998, Power and Government Group contract awards included:
engineering, procurement and construction for a new processing facility
producing diagnostic medical isotopes in Canada, a 215 megawatt simple cycle
plant in Trinidad, a 135 megawatt congeneration facility in Great Britain, a 500
megawatt gas facility in Texas, a 440 megawatt cogeneration facility in Texas
and a 500 megawatt plant in Maine; operations
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and maintenance for a gas turbine combined cycle facility in Connecticut; and
engineering, procurement and construction management for an 18 megawatt facility
in Great Britain.
Ongoing projects include: engineering, procurement and construction for a
300 megawatt combined cycle plant in Saudi Arabia, a combined heat recovery coke
plant and a 95 megawatt power block plus flue gas de-sulfurization unit in
Indiana and a 111 megawatt combined cycle cogeneration facility in Thailand;
engineering, procurement, construction and program management for a national
laboratory in New Mexico; engineering, procurement, construction management and
start-up for a 2X600 megawatt coal fired power plant in Indonesia; operations
and maintenance for a 175 megawatt diesel system in Indonesia, a 130 megawatt
cogeneration facility in Virginia, a 151 megawatt facility in Delaware and a
2X50 megawatt cogeneration plant in China; operations and/or maintenance and
support services for a 764 megawatt nuclear plant in Nebraska; engineering for
Federal Emergency Management Agency infrastructure support services throughout
the United States; renewals of contracts for maintenance services for nuclear
power plants in Arizona, Texas and South Carolina; maintenance for fossil and
gas plants in North Carolina, Texas, Georgia, Arkansas, Australia, South Africa,
California, Louisiana and Mississippi; management and integration contractor for
a major United States Department of Energy ("DOE") facility in Washington
("Hanford"); additional DOE funding for engineering and design for a nuclear
materials storage plant under a reconfiguration project in Nevada; engineering
and construction management for various radar and weather stations located
throughout the United States for the National Oceanic and Atmospheric
Administration; engineering for the reconfiguration of the DOE weapons program,
the DOE National Engineering Laboratories in Idaho and a waste handling facility
for the DOE at Hanford; environmental remediation management for the DOE former
uranium processing plant in Ohio (the "Fernald Project"); and management and
operation services for the Naval Petroleum and Oil Shale Reserves program for
the DOE in Colorado, Utah and Wyoming.
Projects completed in fiscal 1998 included: engineering, procurement and
construction for a 3X65 megawatt coal plant in Indonesia; engineering,
procurement and construction management for a cogeneration plant in Great
Britain; maintenance for fossil and gas plants in South Carolina; engineering
and construction management of a 115 kilovolt transmission facility in
Washington; assistance in operations assessment for a coal plant in China;
engineering for a laboratory facility upgrade in Illinois; and renewal and
maintenance for nuclear plants in Maryland, Kansas, Missouri, Virginia.
Diversified Services
The Diversified Services Group provides a variety of services to clients in
a wide range of industries. The companies within this group operate globally and
include TRS Staffing Solutions, which provides temporary and permanent placement
services specializing in technical, professional and administrative personnel;
American Equipment Company, which sells, rents, services and outsources
equipment for construction and industrial needs; Maintenance Services Company,
which furnishes repair, renovation, replacement, predictive and preventative
services to commercial and industrial facilities; Technology Services Company,
which provides productivity consulting services and maintenance management
software to the manufacturing and process industries; and, during fiscal 1998,
Fluor Daniel GTI, Inc. (55% owned by Fluor Daniel) which provides environmental
remediation services.
During fiscal 1998, Diversified Services Group acquisitions and
dispositions included: the acquisition by TRS Staffing Solutions of Qualtech, a
United States-based temporary placement firm that specializes in nuclear
engineers; shortly after fiscal year 1998, effective November 30, 1998, American
Equipment Company's purchase of the remaining 35% interest of Maquinaria
Panamericana, S.A. de C.V. (an equipment rental company in Mexico) to bring
ownership interest of that company to 100%; and shortly after fiscal year 1998,
effective December 3, 1998, Fluor Daniel's sale of its 55% interest in Fluor
Daniel GTI, Inc.
During fiscal 1998, Diversified Services Group new awards included:
Maintenance for nuclear power plants in Florida, California and Australia;
start-up support and maintenance consulting for a facility in Indiana;
maintenance consulting for theme parks in California and Florida; equipment
services agreements in
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Canada, Peru, Texas, Ohio, Alabama, Oklahoma, Chile, Louisiana and Texas;
and an equipment outsourcing agreement in Indiana.
Ongoing projects include: an equipment services agreement to provide all
support equipment, operator training and operators to mining sites in Chile,
Indonesia and Peru and engineering for a United States Air Force Center in
Texas; an equipment outsourcing contract at a petrochemical plant in Texas;
maintenance for a tire manufacturing facility in Tennessee, a petrochemical
plant in Texas, a refinery in Mississippi, an automobile manufacturing facility
in Tennessee, and computer manufacturing facilities in Florida, Texas, North
Carolina, Arizona, Colorado and California; environmental investigation,
feasibility studies and remediation for the United States Army Environmental
Center, the United States Army Corps of Engineers and the United States
Environmental Protection Agency; engineering, procurement and construction
management for an environmental remediation program for a toxic waste site in
Indiana, the closure of a former ore processing site in Colorado and for a
former zinc smelter and refinery in the United States; engineering for an
alliance with Witco; environmental investigation and evaluation at U.S. military
facilities in Hawaii, Guam and Puerto Rico; and site remediation at a plant in
Illinois.
Projects completed in fiscal 1998 included: an equipment outsourcing
contract at a vehicle manufacturing facility in Argentina.
FLUOR CONSTRUCTORS
Fluor Constructors is organized and operated separately from Fluor Daniel.
Fluor Constructors provides unionized construction management, construction and
maintenance services in the United States and Canada, both independently and as
a subcontractor to Fluor Daniel and global support to all Fluor Daniel industry
and regional groups.
During fiscal 1998, Fluor Constructors contract awards included:
construction and construction management services for a sheet rock facility in
Illinois.
Ongoing projects include: construction and construction management for a
refinery upgrade in Ohio; and maintenance and outage support for fossil fuel
power plants in Louisiana, Mississippi and Arkansas.
Projects completed in fiscal 1998 included: construction and construction
management for gas plant and pipeline expansion in California, a cogeneration
plant in Indiana, a steam turbine project in Indiana and a wafer fabrication
facility located in Camas, Washington; and maintenance and outage support for a
nuclear power plant in Maryland and at various plant sites for a nuclear power
plant in Missouri.
BACKLOG
The following table sets forth the consolidated backlog of Fluor's
engineering and construction segment at October 31, 1998 and 1997 by industry
group:
<TABLE>
<CAPTION>
1998 1997
---- ----
(IN MILLIONS OF DOLLARS)
<S> <C> <C>
Process................................. $ 5,345 $ 6,384
Industrial.............................. 4,761 5,178
Power and Government.................... 1,272 2,092
Diversified Services.................... 1,267 716
------- -------
$12,645 $14,370
======= =======
</TABLE>
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The following table sets forth the consolidated backlog of Fluor's
engineering and construction segment at October 31, 1998 and 1997 by region:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
(IN MILLIONS OF DOLLARS)
United States.......................... $ 5,911 $ 5,665
Asia Pacific (including Australia)..... 2,260 3,959
Europe, Africa and Middle East......... 2,023 3,828
The Americas........................... 2,451 918
------- -------
$12,645 $14,370
======= =======
</TABLE>
Estimated portion not to be performed during fiscal 1999: 28%
The dollar amount of the backlog is not necessarily indicative of the
future earnings of Fluor related to the performance of such work. Although
backlog represents only business which is considered to be firm, there can be no
assurance that cancellations or scope adjustments will not occur. Due to
additional factors outside of Fluor's control, such as changes in project
schedules, Fluor cannot predict with certainty the portion of its October 31,
1998 backlog estimated to be performed subsequent to fiscal 1999.
For additional information with respect to the Company's backlog, please
see Management's Discussion and Analysis contained in Fluor's 1998 Annual Report
to shareholders, which information is incorporated herein by this reference (and
except for this section and other sections specifically incorporated herein by
this reference in Items 1 through 8 of this report, Fluor's 1998 Annual Report
to shareholders is not deemed to be filed as part of this report).
COAL INVESTMENT
A. T. Massey Coal Company, Inc. ("Massey"), which is headquartered in
Richmond, Virginia and its subsidiaries conduct Massey's coal-related businesses
and are collectively referred to herein as the "Massey Companies."
The Massey Companies produce, process and sell bituminous, low sulfur coal
of steam and metallurgical grades from 20 mining complexes (19 of which include
preparation plants) located in West Virginia, Kentucky, Virginia and Tennessee.
At October 31, 1998, one of the mining complexes was still in development and
not yet producing coal.
Operations at certain of the facilities are conducted in part through the
use of independent contract miners. Steam coal is used primarily by utilities as
fuel for power plants. Metallurgical coal is used primarily to make coke for use
in the manufacture of steel.
For each of the three years in the period ended October 31, 1998, the
Massey Companies' production (expressed in thousands of short tons) of steam
coal and metallurgical coal, respectively, was 19,611 and 18,410 for fiscal year
1998, 19,798 and 16,757 for fiscal year 1997 and 17,578 and 13,616 for fiscal
year 1996. Sales (expressed in thousands of short tons) of coal produced by the
Massey Companies were 37,608 for fiscal year 1998, 35,643 for fiscal year 1997
and 31,091 for fiscal year 1996.
A large portion of the steam coal produced by the Massey Companies is sold
to domestic utilities. Metallurgical coal is sold to both foreign and domestic
steel producers. Approximately 59% of the Massey Companies' fiscal year 1998
coal production was sold under long-term contracts, 57% of which was steam coal
and 43% of which was metallurgical coal. Approximately 14% of the coal tonnage
sold by the Massey Companies in fiscal year 1998 was sold outside of North
America.
Massey is among the five largest marketers of coal in the United States.
The coal market is a mature market with many strong competitors. Competition is
primarily dependent upon coal price, transportation cost, producer reliability
and characteristics of coal available for sale. The management of Massey
considers Massey to be generally well-positioned with respect to these factors
in comparison to its principal competitors.
7
<PAGE> 9
Recently passed acid rain legislation is generally anticipated to benefit
prices for low sulfur coal. Massey intends to continue to evaluate and pursue,
in appropriate circumstances, the acquisition of additional low sulfur coal
reserves.
The Coal Industry Retiree Health Benefits Act of 1992 (the "Act") provides
that certain retired coal miners who were members of the United Mine Workers of
America, along with their spouses, are guaranteed health care benefits. The
Massey Companies' obligation under the Act is currently estimated to aggregate
approximately $47 million which will be recognized as expensed as payments are
made. The amount expensed during fiscal year 1998 approximated $4.1 million.
The management of the Massey Companies estimates that, as of October 31,
1998, the Massey Companies had total recoverable reserves (expressed in
thousands of short tons) of 1,827,703; 709,476 of which are assigned recoverable
reserves and 1,118,227 of which are unassigned recoverable reserves; and
1,324,827 of which are proven recoverable reserves and 502,876 of which are
probable recoverable reserves.
The management of the Massey Companies estimates that approximately
one-third of the total reserves listed above consist of reserves that would be
considered primarily metallurgical grade coal. They also estimate that
approximately 68% of all reserves contain less than 1% sulfur. A portion of the
steam coal reserves could be beneficiated to metallurgical grade by coal
preparation plants and substantially all of the metallurgical coal reserves
could be sold as high quality steam coal, if market conditions warrant.
"Reserves" means that part of a coal deposit which could be economically
and legally extracted or produced at the time of the reserve determination.
"Recoverable reserves" means coal which is recoverable by the use of existing
equipment and methods under federal and state laws now in effect. "Assigned
recoverable reserves" means reserves which can reasonably be expected to be
mined from existing or planned mines and processed in existing or planned
plants. "Unassigned recoverable reserves" means reserves for which there are no
specific plans for mining and which will require for their recovery substantial
capital expenditures for mining and processing facilities. "Proven recoverable
reserves" refers to deposits of coal which are substantiated by adequate
information, including that derived from exploration, current and previous
mining operations, outcrop data and knowledge of mining conditions. "Probable
recoverable reserves" refers to deposits of coal which are based on information
of a more preliminary or limited extent or character, but which are considered
likely.
OTHER MATTERS
ENVIRONMENTAL, SAFETY AND HEALTH MATTERS
The Massey Companies are affected by and comply with federal, state and
local laws and regulations relating to environmental protection and plant and
mine safety and health, including but not limited to the federal Surface Mining
Control and Reclamation Act of 1977; Occupational Safety and Health Act; Mine
Safety and Health Act of 1977; Water Pollution Control Act, as amended by the
Clean Water Act of 1977; Black Lung Benefits Revenue Act of 1977; and Black Lung
Benefits Reform Act of 1977. It is impossible to predict the full impact of
future legislative or regulatory developments on such operations, because the
standards to be met, as well as the technology and length of time available to
meet those standards, continue to develop and change.
In fiscal year 1998, Massey expended approximately $8.1 million to comply
with environmental, health and safety laws and regulations, none of which
expenditures were capitalized. Massey anticipates making $7.0 million and $7.3
million in such non-capital expenditures in fiscal 1999 and 2000, respectively.
Of these expenditures, $6.0 million, $5.0 million and $5.3 million for fiscal
1998, 1999 and 2000, respectively, were or are anticipated to be for surface
reclamation. Existing financial reserves are believed to be adequate to cover
actual and anticipated reclamation expenditures.
Other
In 1986, the California North Coast Regional Water Quality Control Board
for the State of California requested that the Company perform a site
investigation of a property in Northern California designated as a hazardous
waste site under the California Hazardous Waste Control Act. The Company
formerly owned the
8
<PAGE> 10
property. The California Environmental Protection Agency has assumed lead agency
status for any required remedial action at the site. The Company signed a
Consent Order to perform a remedial investigation/feasibility study that will
determine the extent of contamination for purposes of determining the remedial
action required to remedy and/or remove the contamination.
In 1994, Fluor completed the sale of its lead business. The sale by Fluor
of its lead business included St. Joe Minerals Corporation ("St. Joe") and its
environmental liabilities for several different lead mining, smelting and other
lead related environmental sites. As a condition of the St. Joe sale, however,
Fluor retained responsibility for certain non-lead related environmental
liabilities arising out of St. Joe's former zinc mining and smelting division,
but only to the extent that such liabilities are not covered by St. Joe's
comprehensive general liability insurance. These liabilities arise out of three
zinc facilities located in Bartlesville, Oklahoma, Monaca, Pennsylvania and
Balmat, New York.
The Company believes, based upon present information available to it, that
its accruals with respect to future environmental costs are adequate and such
future costs will not have a material effect on the Company's consolidated
financial position, results of operations or liquidity. However, the imposition
of more stringent requirements under environmental laws or regulations, new
developments or changes regarding site cleanup costs or the allocation of such
costs among potentially responsible parties, or a determination that the Company
is potentially responsible for the release of hazardous substances at sites
other than those currently identified, could result in additional expenditures
or the provision of additional accruals in expectation of such expenditures.
NUMBER OF EMPLOYEES
The following table sets forth the number of salaried and craft/hourly
employees of Fluor and its subsidiaries engaged in Fluor's business segments as
of October 31, 1998:
<TABLE>
<CAPTION>
SALARIED CRAFT/HOURLY TOTAL
-------- ------------ -----
<S> <C> <C> <C>
Engineering and Construction...... 29,699 24,093 53,792
Coal.............................. 1,052 2,042 3,094
------ ------ ------
30,751 26,135 56,886
====== ====== ======
</TABLE>
OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREA
The financial information for business segments and geographic areas is
included in the Operations by Business Segment and Geographic Area section of
the Notes to Consolidated Financial Statements in Fluor's 1998 Annual Report to
shareholders, which section is incorporated herein by reference.
Business Risks
Cost Overrun Risks Associated with Fixed, Maximum or Unit Priced
Contracts. A number of our contracts for engineering and construction services
are fixed, maximum or unit price contracts and fixed price incentive contracts.
Under fixed, maximum or unit price contracts, we agree to perform the contract
for a fixed price, and, as a result, benefit from potential cost savings. At the
same time, however, we bear the risk for most cost overruns. Under fixed price
incentive contracts, we share with our customer any cost savings up to a
negotiated ceiling price and bear some or all of the risk of costs exceeding the
negotiated ceiling price. Contract prices are established in part on cost
estimates which are subject to a number of assumptions, such as assumptions
regarding future economic conditions, price and availability of labor, equipment
and materials, applicable law, weather delays or civil unrest labor disruptions.
If, in the future, these estimates prove inaccurate, or circumstances change,
cost overruns may occur. Significant cost overruns would have a material adverse
effect on our results of operations and financial condition.
Risk of Additional Costs Incurred by Project Performance Problems. In
certain instances, we guarantee to a customer that we will complete a project by
a scheduled date or that our facility will achieve certain performance
standards. If the project or facility subsequently fails to meet the schedule or
performance standards, we could incur additional costs. Depending on the nature
of the project performance problem, the additional costs incurred may be
non-recoverable which could exceed revenues realized from a project. Therefore,
if we experience a project performance problem, there could be a material
adverse effect on our results of operations and financial condition.
Uncertainty of Future Contract Awards. Our estimates of future
performance depend on, among other matters, our estimates as to whether and when
we will receive certain new contract awards. While these estimates are based
upon our good faith judgment, these estimates can be unreliable and may
frequently change based on new facts as they become available. In the case of
large-scale domestic and international projects where timing is often uncertain,
it is particularly difficult to predict whether and when we will receive a
contract award. The uncertainty of our contract award timing can present
difficulties in matching workforce size with contract needs. In some cases, we
maintain and bear the cost of a ready workforce that is larger than called for
under existing contracts in anticipation of future workforce needs under
expected contract awards. If an expected contract award is delayed or not
received, we would incur costs that could have a material adverse effect on our
results of operations and financial condition.
Intense Competition Poses Challenges to Profitability. We serve markets
that are highly competitive and in which a large number of multinational and
regional companies compete. In particular, the engineering and construction,
coal and equipment distribution markets are highly competitive and require
substantial resources and capital investment in inventory, equipment, technology
and skilled personnel. Competition also negatively impacts our contract prices
and profit margins. Intense competition is expected to continue in these
markets, presenting us with significant challenges in our ability to maintain
strong growth rates and acceptable profit margins. In the event that we are
unable to meet these competitive challenges, there could be a material adverse
effect on our results of operations and financial condition.
Uncertainty of When We Might Receive Project Revenues. The time at which
we receive revenue from our engineering and construction projects can be
effected by a number of factors outside of our control. Depending upon external
conditions, a client may either cancel a project, put it on hold or extend the
schedule. Also, the realization of revenues may be impacted by future economic
conditions, price and availability of labor, equipment and materials, applicable
law, weather delays, civil unrest or labor disruptions. If revenue that we
expect to receive from a project is either delayed or not received, there could
be a material adverse effect on our results of operations and financial
condition.
Uncertainties Associated with Global Economic and Political Conditions.
Our businesses are subject to fluctuations in demand and to changing economic
and political conditions -- not only domestically, but internationally -- which
are beyond our control. In particular, our engineering and construction and coal
businesses are global and are effected by market conditions outside of the
United States. These businesses are often subject to, among other matters,
foreign government policies and regulations, embargoes, United States government
policies, nationalization by foreign governments and international hostilities.
Although we try to reduce our exposure to uncertain international market
conditions, we are unable to completely predict or control the amount and mix of
our business and sales. To the extent that our international businesses are
effected by unexpected international market conditions, there could be a
material adverse effect on our results of operations and financial condition.
Uncertainties Associated with Government Contracts. A number of our
contracts are government contracts. Typically, government contracts are subject
to various restrictions and uncertainties such as oversight audits by government
representatives and profit and cost controls. In some cases, government
contracts are exposed to the uncertainties associated with Congressional
funding. In addition, government contracts are subject to specific procurement
regulations and a variety of other socio-economic requirements. We must comply
with these government regulations and requirements, as well as, various statutes
related to employment practices, environmental protection, recordkeeping and
accounting. Our failure to comply with any of these regulations, requirements
and statutes could lead to our suspension from government contracting or
subcontracting for a period of time. In the event one of our government
contracts is terminated for any reason, or if we are suspended from government
contract work, there could be a material adverse effect on our results of
operations and financial condition.
Backlog Not Indicative of Future Earnings. The dollar amount of our
backlog, as stated at any given time, is not necessarily indicative of our
future earnings. Cancellations or scope adjustments may occur with respect to
contracts reflected in our backlog. In the event that there we experience
significant cancellations or scope adjustments in our backlog contracts, there
would be a material adverse effect on our results of operations and financial
condition.
Future Environmental, Safety and Health Requirements Could effect
Financial Condition. It is impossible to reliably predict the full nature and
impact of future legislative or regulatory developments relating to the
environmental protection, safety and health requirements applicable to our
operations (particularly with respect to our coal operations). The requirements
to be met, as well as the technology and length of time available to meet those
requirements, continue to develop and change. To the extent that the costs
associated with meeting those requirements are substantial, there would be a
material adverse effect on our results of operations and financial condition.
Fluctuation in the Production and Sale of Coal. Our coal production and
sales are subject to a variety of factors relating to operations, geology,
transportation, environmental laws and weather. These factors routinely cause
our coal production and sales to fluctuate -- sometimes negatively. For example,
labor disruptions may adversely effect our coal production. Similarly,
transportation delays may adversely effect our coal sales. Such disruptions and
delays lead to increased production costs and, therefore, could have a material
adverse effect on our results of operations and financial condition.
Risks Associated with Equipment Distribution Business. A large
percentage of our equipment distribution company's revenues come from customers
which are in industries and businesses that are cyclical in nature and subject
to changes in general economic conditions. Because the equipment distribution
business requires large inventories of equipment to be maintained at dealer
locations in order to facilitate immediate sales to customers on demand, if a
significant economic downturn occurs, our equipment distribution company is at
risk of holding expensive inventory without the ability to recoup its costs
through rentals, sales or other means. In addition, our equipment distribution
business obtains most of its equipment through dealership agreements with
manufacturers. Each of these dealership agreements is terminable at the option
of the manufacturer with little or, in some cases, no notice. In the event that
we are holding excess equipment inventory or if one or more manufacturers elects
to terminate our dealership agreements, there could be a material adverse effect
on our results of operations and financial condition.
Foreign Exchange Risks. Because our functional currency is the U.S.
dollar, our non-U.S. operations sometimes face the additional risk of
fluctuating currency values and exchange rates, hard currency shortages and
controls on currency exchange. We attempt to limit our exposure to foreign
currency fluctuations in our contracts by requiring client payments in U.S.
dollars or other currencies that correspond to the currency in which project
costs are incurred. Changes in the value of foreign currencies could have a
material adverse effect on our results of operations and financial condition.
ITEM 2. PROPERTIES.
Major Facilities
Operations of Fluor and its subsidiaries are conducted in both owned and
leased properties totaling approximately 7.2 million square feet. In addition,
certain owned or leased properties of Fluor and its subsidiaries are leased or
subleased to third party tenants. The following table describes the location and
general character of the major existing facilities, exclusive of mines, coal
preparation plants and their adjoining offices:
<TABLE>
<CAPTION>
LOCATION INTEREST PURPOSE
- -------- -------- -------
<S> <C> <C>
UNITED STATES AND CANADA:
Irvine, California Leased Fluor Corporate Headquarters and Fluor Daniel Operations
Aliso Viejo, California Leased Fluor Corporate Headquarters and Fluor Daniel Operations
(under construction)
Calgary, Canada Leased Fluor Daniel Canada Operations
Charlotte, North Carolina Leased Duke/Fluor Daniel Operations
</TABLE>
9
<PAGE> 11
<TABLE>
<CAPTION>
LOCATION INTEREST PURPOSE
- -------- -------- -------
<S> <C> <C>
Cincinnati, Ohio Leased Fluor Daniel Operations and Procter & Gamble Alliance
(PACE)
Denver, Colorado Leased Fluor Daniel Operations
Greenville, South Carolina Owned and Leased Fluor Daniel and American Equipment Operations
Houston (Sugar Land office), Texas Owned Fluor Daniel Operations
Pasadena, Texas Owned American Equipment Offices and Yard
Philadelphia, Pennsylvania Leased Fluor Daniel Operations
(Marlton, New Jersey office)
Phoenix, Arizona Leased ADP Marshall Operations
Richland, Washington Leased Fluor Daniel Hanford Operations
Riverdale, Illinois Owned American Equipment Offices and Yard
Riverside, California Owned American Equipment Offices and Yard
Rumford, Rhode Island Leased ADP Marshall Operations
San Juan, Puerto Rico Leased Fluor Daniel Operations
Tucson, Arizona Leased ADP Marshall Operations
Tulsa, Oklahoma Leased Williams Brothers Operations
Vancouver, Canada Leased Fluor Daniel Wright Operations
Washington, D.C. Leased Fluor Daniel Operations
THE AMERICAS:
Caracas, Venezuela Leased Tecnofluor Operations
Mexico City, Mexico Leased ICA Fluor Daniel Operations
Monterey, Mexico Owned American Equipment Offices and Yard
Santiago, Chile Owned and Leased Fluor Daniel Chile SA and American Equipment Operations
EUROPE, AFRICA AND MIDDLE EAST:
Al Khobar, Saudi Arabia (Dhahran Owned Fluor Daniel Arabia Operations
area)
Asturias, Spain Leased Fluor Daniel Espana SA Operations
Camberley, England Leased Fluor Daniel Limited Operations
Haarlem, Netherlands Owned and Leased Fluor Daniel B.V. Operations
Sandton, South Africa Leased Fluor Daniel Southern Africa Operations
ASIA AND ASIA PACIFIC:
Jakarta, Indonesia Leased Fluor Daniel Eastern, Inc. Operations
Manila, Philippines Leased Fluor Daniel Inc. Philippines Operations
Melbourne, Australia Leased Fluor Daniel Pty. Ltd. Operations
New Dehli, India Leased Fluor Daniel India Private Ltd. Operations
COAL OFFICES:
Richmond, Virginia Owned A. T. Massey Operations
Charleston, West Virginia Leased A. T. Massey Operations
</TABLE>
Coal Properties
See Item 1, Business, of this report for additional information regarding
the coal operations and properties of Fluor.
ITEM 3. LEGAL PROCEEDINGS.
Fluor and its subsidiaries, incident to their business activities, are
parties to a number of legal proceedings in various stages of development. The
majority of these proceedings, other than environmental proceedings,
10
<PAGE> 12
involve matters as to which liability, if any, of Fluor or its subsidiaries
would be adequately covered by insurance. With respect to litigation outside the
scope of applicable insurance coverage and to the extent insured claims may
exceed liability limits, it is the opinion of the management of Fluor, based on
reports of counsel, that these matters individually and in the aggregate will
not have a material adverse effect upon the consolidated financial position or
results of operations of Fluor.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT(1)
PHILIP J. CARROLL, Jr., age 61
Director since July 1998; Chairman of the Board and Chief Executive Officer
since July 1998; formerly President and Chief Executive Officer of Shell Oil
Company since 1993.
DENNIS W. BENNER, age 57
Vice President and Chief Information Officer since 1994; formerly Vice
President and General Manager, Information and Vice President and General
Manager, Target Marketing Services, for TRW from 1992 and 1986, respectively.
DON L. BLANKENSHIP, age 48
Director since 1996; Chairman of the Board and Chief Executive Officer of
A.T. Massey Coal Company, Inc.(3) since 1992; formerly President and Chief
Operating Officer of that subsidiary from 1990; formerly President of Massey
Coal Services, Inc.(4) from 1989; joined Rawl Sales & Processing Co.(5) in 1982.
LILA J. CHURNEY, age 46
Vice President, Investor Relations, since 1994; joined the Company in 1980.
LAWRENCE N. FISHER, age 54
Senior Vice President, Law and Secretary, since 1996; formerly Vice
President, Corporate Law and Assistant Secretary from 1984; joined the Company
in 1974.
FREDERICK J. GRIGSBY, age 51
Senior Vice President, Human Resources and Administration, since January 9,
1999; formerly Vice President of Human Resources, Thermo King Corporation since
1995; formerly Director of HR WorkSource, Westinghouse Electric Corporation,
since 1993.
11
<PAGE> 13
GEORGE K. PALMER, age 55
Vice President, Corporate Relations, since November 1998; formerly
Principal, Palmer Communications Management, since 1997; formerly Vice
President, Corporate Communications, Rhone-Poulenc Inc., since 1992.
JAMES O. ROLLANS, age 56
Director since 1997; Chief Financial Officer since September 1998; Senior
Vice President since 1992; formerly Chief Administrative Officer from 1994;
formerly Chief Financial Officer from 1992; formerly Vice President, Corporate
Communications from 1982; joined the Company in 1982.
JAMES C. STEIN, age 55
Director since 1997; President and Chief Operating Officer, Fluor Daniel,
Inc.(2) since 1997; formerly Group President, Diversified Services, of Fluor
Daniel, Inc. since 1994; formerly President, Business Units, of that company
from 1993; formerly President, Industrial Sector, of that company from 1986;
joined the Company in 1964.
- ----------
(1) Except where otherwise indicated, all references are to positions held with
Fluor.
(2) Fluor Daniel, Inc., which provides design, engineering, procurement,
construction management, maintenance and other diversified services to a
wide range of industrial, commercial, utility, natural resources, energy
and governmental clients, is an indirectly wholly-owned subsidiary of
Fluor.
(3) A. T. Massey Coal Company, Inc. ("A. T. Massey"), is an indirectly
wholly-owned subsidiary of Fluor which, along with Massey's subsidiaries,
conducts A. T. Massey's coal-related businesses.
(4) Massey Coal Services, Inc. is a wholly-owned subsidiary of Massey.
(5) Rawl Sales & Processing Co. is a wholly-owned subsidiary of Massey.
PART II
Information for Items 5, 6, 7, 7A is contained in Fluor's 1998 Annual
Report to shareholders, which information is incorporated herein by reference:
<TABLE>
<CAPTION>
ITEM NO. TITLE ANNUAL REPORT TO SHAREHOLDERS SECTION
- -------- ----- -------------------------------------
<C> <S> <C>
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... Shareholders' Reference
ITEM 6. Selected Financial Data..................................... Selected Financial Data
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... Management's Discussion and Analysis
ITEM 7A. Quantitative and Qualitative Discussions about Market Risk.. Management's Discussion and Analysis
</TABLE>
12
<PAGE> 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information for Item 8 is included in Fluor's consolidated financial
statements as of October 31, 1998 and 1997 and for each of the three years in
the period ended October 31, 1998 and Fluor's unaudited quarterly financial data
for the two year period ended October 31, 1998, in the Consolidated Financial
Statements (including the Consolidated Balance Sheet, Consolidated Statement of
Earnings, Consolidated Statement of Cash Flows, Consolidated Statement of
Shareholders' Equity and Notes to Consolidated Financial Statements) and
unaudited Quarterly Financial Data sections of Fluor's 1998 Annual Report to
shareholders, which are incorporated herein by reference. The report of
independent auditors on Fluor's consolidated financial statements is in the
Management's and Independent Auditors' Reports section of Fluor's 1998 Annual
Report to shareholders and is also incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information concerning Fluor's executive officers is included under the
caption "Executive Officers of the Registrant" in Part I, following Item 4.
Other information required by this item is included in the Biographical section
of the Election of Directors portion of the definitive proxy statement pursuant
to Regulation 14A, involving the election of directors, which is incorporated
herein by reference and will be filed with the Securities and Exchange
Commission (the "Commission") not later than 120 days after the close of Fluor's
fiscal year ended October 31, 1998.
ITEM 11. EXECUTIVE COMPENSATION.
Fluor maintains certain employee benefit plans and programs in which its
executive officers and directors are participants. Copies of these plans and
programs are set forth or incorporated by reference as Exhibits 10.1 through
10.22 inclusive to this report. Certain of these plans and programs provide for
payment of benefits or for acceleration of vesting of benefits upon the
occurrence of a change of control of Fluor as that term is defined in such plans
and programs. The amounts payable thereunder would represent an increased cost
to be paid by Fluor (and indirectly by its shareholders) in the event of a
change in control of Fluor. This increased cost would be a factor to be taken
into account by a prospective purchaser of the Company in determining whether
and at what price, it would seek control of the Company and whether it would
seek the removal of then existing management.
If a change of control were to have occurred on October 31, 1998, the
additional amounts payable by Fluor, either in cash or in stock, if each of the
five most highly compensated executive officers and all executive officers as a
group were thereupon involuntarily terminated without cause would be as follows:
<TABLE>
<CAPTION>
RESTRICTED SUPPLEMENTAL
INDIVIDUAL OR GROUP STOCK PLANS(1) BENEFIT PLAN(2)
- ------------------- -------------- ---------------
<S> <C> <C>
Philip J. Carroll, Jr............................... $0 $1,315,502
Don L. Blankenship.................................. 963,137 454,982
James C. Stein...................................... 780,121 454,982
James O. Rollans.................................... 1,090,417 523,229
Lawrence N. Fisher.................................. 417,320 170,618
All Executive Officers (9) including the above...... $3,569,553 $2,994,527
</TABLE>
- ----------
(1) Value at October 31, 1998 of previously awarded restricted stock which
would vest upon change of control.
(2) Lump sum entitlement of previously awarded benefits which would vest upon
change of control.
13
<PAGE> 15
Further disclosure required by this item is included in the Organization
and Compensation Committee Report on Executive Compensation and Executive
Compensation and Other Information sections of the definitive proxy statement
pursuant to Regulation 14A, involving the election of directors, which is
incorporated herein by reference and will be filed not later than 120 days after
the close of Fluor's fiscal year ended October 31, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by this item is included in the Stock Ownership
section of the Election of Directors portion of the definitive proxy statement
pursuant to Regulation 14A, involving the election of directors, which is
incorporated herein by reference and will be filed not later than 120 days after
the close of Fluor's fiscal year ended October 31, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this item is included in the Other Matters section
of the Election of Directors portion of the definitive proxy statement pursuant
to Regulation 14A, involving the election of directors, which is incorporated
herein by reference and will be filed not later than 120 days after the close of
Fluor's fiscal year ended October 31, 1998.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report:
<TABLE>
<CAPTION>
1. Financial Statements:
The following financial statements are contained in Fluor's 1998
Annual Report to shareholders:
Consolidated Balance Sheet at October 31, 1998 and 1997
Consolidated Statement of Earnings for the years ended October 31,
1998, 1997 and 1996
Consolidated Statement of Cash Flows for the years ended October 31,
1998, 1997 and 1996
Consolidated Statement of Shareholders' Equity for the years ended
October 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements.
See Part II, Item 8 of this report for information regarding the
incorporation by reference herein of such financial statements.
2. Financial Statement Schedules: All schedules have been omitted since
the required information is not present or not present in amounts
sufficient to require submission of the schedule, or because the
information required is included in the consolidated financial
statements and notes thereto.
3. Exhibits:
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
3.1 Restated Certificate of Incorporation of Fluor Corporation [filed as
Exhibit 3.1 to Fluor's annual report on Form 10-K for the fiscal year
ended October 31, 1987 and incorporated herein by reference]
3.2 Restated Bylaws (as amended effective December 9, 1998) of Fluor
Corporation [filed as Exhibit 3.2 to Form 8-K on December 11, 1998
and incorporated herein by this reference]
4.1 Indenture dated July 1, 1986 between Fluor Corporation and Irving
Trust Company, trustee [filed as Exhibit 4 to Registration No. 33-6960
for the issuance of up to $250 million of debt securities and
incorporated herein by reference]
4.2 Fluor Corporation Dividend Reinvestment Plan (as amended and restated
June 30, 1995) [filed as Exhibit 4.2 to Fluor's annual report on Form
10-K for the fiscal year ended October 31, 1995 and incorporated
herein by reference]
4.3 Indenture dated as of February 18, 1997 between Fluor Corporation and
Banker's Trust Company, trustee [filed as Exhibit 4 to Form S-3,
Registration No. 333-18315 for the issuance of up to $350 million of
debt securities and incorporated herein by this reference].
10.1 Fluor Corporation and Subsidiaries Executive Incentive Compensation
Plan (as amended and restated through September 15, 1988) [filed as
Exhibit 10.2 to Fluor's quarterly report on Form 10-Q for the
quarterly period ended July 31, 1996 and incorporated herein by
reference]
</TABLE>
14
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.2 Fluor Executive Deferred Compensation Program (as amended and restated effective May 1, 1995) [filed as
Exhibit 10.2 to Fluor's annual report on Form 10-K for the fiscal year ended October 31,1995 and
incorporated herein by this reference]
10.3 1982 Fluor Executive Stock Option Plan (as amended by Amendment No. 2 effective December 9, 1986) [filed
as Exhibit 10.10 to Fluor's annual report on Form 10-K for the fiscal year ended October 31, 1986 and
incorporated herein by reference]
10.4 Fluor Executives' Health Plan Summary [filed as Exhibit 10.11 to Fluor's annual report on Form 10-K for
the fiscal year ended October 31, 1985 and incorporated herein by reference]
10.5 Directors' Life Insurance Summary [filed as Exhibit 10(i) to Fluor's annual report on Form 10-K for the
fiscal year ended October 31, 1980 and incorporated herein by reference]
10.6 Executive Tax Services Plan (as amended and effective as of November 1, 1993) [filed as Exhibit 10.10 to
Fluor's annual report on Form 10-K for the fiscal year ended October 31, 1993 and incorporated herein by
reference]
10.7 Executive Personal Financial Counseling Plan (as amended and effective as of November 1, 1993) [filed as
Exhibit 10.11 to Fluor's annual report on Form 10-K for the fiscal year ended October 31, 1993 and
incorporated herein by reference]
10.8 Company Automobile Policy Summary [filed as Exhibit 10.15 to Fluor's annual report on Form 10-K for the
fiscal year ended October 31, 1989 and incorporated herein by reference]
10.9 Fluor Executives' Supplemental Benefit Plan (as amended by First Amendment effective November 15, 1983)
[filed as Exhibit 10.16 to Fluor's annual report on Form 10-K for the fiscal year ended October 31, 1983
and incorporated herein by reference]
10.10 1988 Fluor Executive Stock Plan (as amended and restated effective December 6, 1994) [filed as Exhibit
10.13 to Fluor's annual report on Form 10-K for the fiscal year ended October 31, 1995 and incorporated
herein by reference]
10.11 Fluor Corporation Change of Control Compensation Plan (as amended and restated by Second Amendment
effective October 1, 1989) [filed as Exhibit 10.19 to Fluor's annual report on Form 10-K for the fiscal
year ended October 31, 1989 and incorporated herein by reference]
10.12 Fluor Special Executive Incentive Plan (as amended effective December 6, 1994) [filed as Exhibit 10.15 to
Fluor's annual report on Form 10-K for the fiscal year ended October 31, 1995 and incorporated herein by
reference]
10.13 Retirement Plan for Outside Directors (effective as of May 1, 1992) [filed as Exhibit 10.18 to Fluor's
annual report on Form 10-K for the fiscal year ended October 31, 1992 and incorporated herein by
reference]
10.14 Executive Severance Plan (effective as of April 14, 1997) [filed as Exhibit 10.17 to Fluor's annual report
on Form 10-K for the fiscal year ended October 31, 1997 and incorporated herein by this reference]
10.15 Directors' Achievement Award Program (effective as of December 6, 1994) [filed as Exhibit 10.18 to Fluor's
annual report on Form 10-K for the fiscal year ended October 31, 1995 and incorporated herein by
reference]
10.16 Fluor Corporation Stock Plan for Non-Employee Directors (adopted effective March 14, 1995) [filed as
Exhibit 10.21 to Fluor's quarterly report on Form 10-Q for the quarterly period ended April 30, 1995 and
incorporated herein by reference]
</TABLE>
15
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.17 1996 Fluor Executive Stock Plan (effective March 12, 1996 as amended December 10, 1996) [filed as Exhibit
10.20 to Fluor's annual report on Form 10-K for the fiscal year ended October 31, 1996 and incorporated
herein by this reference]
10.18 Fluor Corporation Restricted Stock Plan for Non-Employee Directors [filed as Exhibit 10.1 to Fluor's
quarterly report as Form 10-Q for the quarterly period ended April 30, 1997 and incorporated herein by
this reference]
10.19 Employment Agreement between Fluor Corporation and Philip J. Carroll, Jr. dated as of July 1, 1998
10.20 Employment Agreement between Fluor Corporation, A.T. Massey Coal Company, Inc. and Don L. Blankenship
dated as of October 1, 1998 reference
10.21 Special Successor and Development Retention Program between Fluor Corporation and Don L. Blankenship
dated as of September 1998
10.22 Settlement and Release Agreement between Fluor Corporation and Leslie G. McGraw dated January 22, 1998
OTHER CONTRACTS
10.23 Concourse Lease dated as of July 26, 1985 between Fluor Corporation and Fluor Engineers, Inc. (an entity
now having the corporate name of Fluor Daniel, Inc.) with respect to a portion of the International
Headquarters facility located in Irvine, California, formerly owned by Fluor (the "Irvine facility");
Schedule of substantially identical Building Pod Lease and Corporate Tower Lease; and Assignment of Master
Leases dated July 26, 1985, assigning Fluor's lessor interest to Crow Winthrop Operating Partnership
("CWOP") [filed as Exhibit 10.21 to Fluor's annual report on Form 10-K for the fiscal year ended October
31, 1985 and incorporated herein by reference]
10.24 Amendment to Master Leases by and between CWOP, Fluor Daniel, Inc. and Fluor Corporation dated as of
November 1, 1989 with respect to the Irvine facility [filed as Exhibit 10.19 to Fluor's annual report on
Form 10-K for the fiscal year ended October 31, 1991 and incorporated herein by reference]
13 Certain provisions of 1998 Annual Report to shareholders (with the exception of the information
incorporated by reference into Items 1, 5, 6, 7, 7A and 8 of this report, Fluor's 1998 Annual Report to
shareholders is not deemed to be filed as part of this report)
21 Fluor Corporation Subsidiaries
23 Consent of Independent Auditors -- Ernst & Young LLP
24 Manually signed Powers of Attorney executed by certain Fluor directors
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K: None were filed during the last quarter of the period
covered by this report.
16
<PAGE> 18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
January 22, 1999 FLUOR CORPORATION
By: /s/ J. O. Rollans
------------------------------------
J. O. Rollans, Senior Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
PRINCIPAL EXECUTIVE OFFICER AND DIRECTOR:
/s/ P. J. Carroll, Jr. Chief Executive Officer January 22, 1999
- --------------------------------------------------
P. J. Carroll, Jr.
PRINCIPAL FINANCIAL OFFICER AND DIRECTOR:
Senior Vice President and Chief
/s/ J. O. Rollans Financial Officer January 22, 1999
- --------------------------------------------------
J. O. Rollans
PRINCIPAL ACCOUNTING OFFICER
/s/ V. L. Prechtl Vice President and Controller January 22, 1999
- --------------------------------------------------
V. L. Prechtl
OTHER DIRECTORS:
* Director January 22, 1999
- --------------------------------------------------
D. L. Blankenship
* Director January 22, 1999
- --------------------------------------------------
C. A. Campbell, Jr.
* Director January 22, 1999
- --------------------------------------------------
P. J. Fluor
* Director January 22, 1999
- --------------------------------------------------
D. P. Gardner
* Director January 22, 1999
- --------------------------------------------------
T. L. Gossage
* Director January 22, 1999
- --------------------------------------------------
B. R. Inman
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director January 22, 1999
- --------------------------------------------------
V. S. Martinez
* Director January 22, 1999
- --------------------------------------------------
D. R. O'Hare
* Director January 22, 1999
- --------------------------------------------------
Lord Renwick, K.C.M.G.
* Director January 22, 1999
- --------------------------------------------------
M. R. Seger
* Director January 22, 1999
- --------------------------------------------------
J.C. Stein
By: /s/ L. N. FISHER January 22, 1999
------------------------------------------
L. N. Fisher
Attorney-in-fact
</TABLE>
Manually signed Powers of Attorney authorizing L. N. Fisher, R. M. Bukaty
and R. R. Dryden and each of them, to sign the annual report on Form 10-K for
the fiscal year ended October 31, 1998 and any amendments thereto as
attorneys-in-fact for certain directors and officers of the registrant are
included herein as Exhibits 24.
18
<PAGE> 20
<PAGE> 21
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------------ -------------------------------------------------------------------
3.1 Restated Certificate of Incorporation of Fluor Corporation [filed
as Exhibit 3.1 to Fluor's annual report on Form 10-K for the
fiscal year ended October 31, 1987 and incorporated herein by
reference]
3.2 Restated Bylaws (as amended effective December 9, 1998) of Fluor
Corporation [filed as Exhibit 3.2 to Form 8-K on December 11, 1998
and incorporated herein by this reference]
4.1 Indenture dated July 1, 1986 between Fluor Corporation and Irving
Trust Company, trustee [filed as Exhibit 4 to Registration No.
33-6960 for the issuance of up to $250 million of debt securities
and incorporated herein by reference]
4.2 Fluor Corporation Dividend Reinvestment Plan (as amended and
restated June 30, 1995) [filed as Exhibit 4.2 to Fluor's annual
report on Form 10-K for the fiscal year ended October 31, 1995 and
incorporated herein by reference.]
4.3 Indenture dated as of February 18, 1997 between Fluor Corporation
and Banker's Trust Company, trustee [filed as Exhibit 4 to Form
S-3, Registration No. 333-18315 for the issuance of up to $350
million of debt securities and incorporated herein by this
reference].
10.1 Fluor Corporation and Subsidiaries Executive Incentive
Compensation Plan (as amended and restated through September 15,
1988) [filed as Exhibit 10.2 to Fluor's quarterly report on Form
10-Q for the quarterly period ended July 31, 1996 and incorporated
herein by reference]
10.2 Fluor Executive Deferred Compensation Program (as amended and
restated effective May 1, 1995) [filed as Exhibit 10.2 to Fluor's
annual report on Form 10-K for the fiscal year ended October 31,
1995 and incorporated herein by this reference]
10.3 Fluor Corporation Deferred Directors' Fees Program (as amended
through November 15, 1983) [filed as Exhibit 10.4 to Fluor's
quarterly report on Form 10-Q for the quarterly period ended April
30, 1995 and incorporated herein by reference]
10.4 Fluor Executives' Health Plan Summary [filed as Exhibit 10.11 to
Fluor's annual report on Form 10-K for the fiscal year ended
October 31, 1985 and incorporated herein by reference]
10.5 Directors' Life Insurance Summary [filed as Exhibit 10(i) to
Fluor's annual report on Form 10-K for the fiscal year ended
October 31, 1980 and incorporated herein by reference]
10.6 Executive Tax Services Plan (as amended and effective as of
November 1, 1993) [filed as Exhibit 10.10 to Fluor's annual report
on Form 10-K for the fiscal year ended October 31,1993 and
incorporated herein by reference]
<PAGE> 22
EXHIBIT DESCRIPTION
- ------------ -------------------------------------------------------------------
10.7 Executive Personal Financial Counseling Plan (as amended and
effective as of November 1, 1993) [filed as Exhibit 10.11 to
Fluor's annual report on Form 10-K for the fiscal year ended
October 31, 1993 and incorporated herein by reference]
10.8 Company Automobile Policy Summary [filed as Exhibit 10.15 to
Fluor's annual report on Form 10-K for the fiscal year ended
October 31, 1989 and incorporated herein by reference]
10.9 Fluor Executives' Supplemental Benefit Plan (as amended by First
Amendment effective November 15, 1983) [filed as Exhibit 10.16 to
Fluor's annual report on Form 10-K for the fiscal year ended
October 31, 1983 and incorporated herein by reference]
10.10 1988 Fluor Executive Stock Plan (as amended and restated effective
December 6, 1994) [filed as Exhibit 10.13 to Fluor's annual report
on Form 10-K for the fiscal year ended October 31, 1995 and
incorporated herein by reference]
10.11 Fluor Corporation Change of Control Compensation Plan (as amended
and restated by Second Amendment effective October 1, 1989) [filed
as Exhibit 10.19 to Fluor's annual report on Form 10-K for the
fiscal year ended October 31, 1989 and incorporated herein by
reference]
10.12 Fluor Special Executive Incentive Plan (as amended effective
December 6, 1994) [filed as Exhibit 10.15 to Fluor's annual report
on Form 10-K for the fiscal year ended October 31,1995 and
incorporated herein by reference]
10.13 Retirement Plan for Outside Directors (effective as of May 1,
1992) [filed as Exhibit 10.18 to Fluor's annual report on Form
10-K for the fiscal year ended October 31, 1992 and incorporated
herein by reference]
10.14 Executive Severance Plan (effective as of April 14, 1997) [filed
as Exhibit 10.17 to Fluor's annual report on Form 10-K for the
fiscal year ended October 31, 1997 and incorporated herein by
this reference]
10.15 Directors' Achievement Award Program (effective as of December 6,
1994) [filed as Exhibit 10.18 to Fluor's annual report on Form
10-K for the fiscal year ended October 31, 1995 and incorporated
herein by reference]
10.16 Fluor Corporation Stock Plan for Non-Employee Directors (adopted
effective March 14, 1995) [filed as Exhibit 10.21 to Fluor's
quarterly report on Form 10-Q for the quarterly period ended April
30, 1995 and incorporated herein by reference]
10.17 1996 Fluor Executive Stock Plan (effective March 12, 1996 as
amended December 10, 1996) [filed as Exhibit 10.20 to Fluor's
annual report on Form 10-K for the fiscal year ended October 31,
1996 and incorporated herein by this reference]
10.18 Fluor Corporation Restricted Stock Plan for Non-Employee Directors
[filed as Exhibit 10.1 to Fluor's quarterly report as Form 10-Q
for the quarterly period ended April 30, 1997 and incorporated
herein by this reference]
10.19 Employment Agreement between Fluor Corporation and Philip J.
Carroll, Jr. dated as of July 1, 1998
<PAGE> 23
EXHIBIT DESCRIPTION
- ------------ ------------------------------------------------------------------
10.20 Employment Agreement between Fluor Corporation, A.T. Massey Coal
Company, Inc. and Don L. Blankenship dated as of October 1, 1998
10.21 Special Successor and Development Retention Program between Fluor
Corporation and Don L. Blankenship dated as of September 1998
10.22 Settlement and Release Agreement between Fluor Corporation and
Leslie G. McGraw dated January 22, 1998
OTHER CONTRACTS
10.23 Concourse Lease dated as of July 26, 1985 between Fluor
Corporation and Fluor Engineers, Inc. (an entity now having the
corporate name of Fluor Daniel, Inc.) with respect to a portion of
the International Headquarters facility located in Irvine,
California, formerly owned by Fluor (the "Irvine facility");
Schedule of substantially identical Building Pod Lease and
Corporate Tower Lease; and Assignment of Master Leases dated July
26, 1985, assigning Fluor's lessor interest to Crow Winthrop
Operating Partnership ("CWOP") [filed as Exhibit 10.21 to Fluor's
annual report on Form 10-K for the fiscal year ended October 31,
1985 and incorporated herein by reference]
10.24 Amendment to Master Leases by and between CWOP, Fluor Daniel, Inc.
and Fluor Corporation dated as of November 1, 1989 with respect to
the Irvine facility [filed as Exhibit 10.19 to Fluor's annual
report on Form 10-K for the fiscal year ended October 31,1991 and
incorporated herein by reference]
13 Certain provisions of 1998 Annual Report to shareholders (with the
exception of the information incorporated by reference into Items
1, 5, 6, 7, 7A and 8 of this report, Fluor's 1998 Annual Report to
shareholders is not deemed to be filed as part of this report)
21 Fluor Corporation Subsidiaries
23 Consent of Independent Auditors--Ernst & Young LLP
24 Manually signed Powers of Attorney executed by certain Fluor
directors
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.19
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), entered into on
July 21, 1998, but effective as of July 1, 1998, by and between FLUOR
CORPORATION (the "Company"), and PHILIP J. CARROLL, JR. (the "Executive"),
W I T N E S S E T H :
WHEREAS, the Company desires to secure the experience,
abilities and service of the Executive by employing the Executive upon the terms
and conditions specified herein; and
WHEREAS, the Executive is willing to enter into this Agreement
upon the terms and conditions specified herein;
NOW, THEREFORE, in consideration of the premises, the terms
and provisions set forth herein, the mutual benefits to be gained by the
performance thereof and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Employment. The Company hereby employs the
Executive, and the Executive hereby accepts such employment, all upon the terms
and conditions set forth herein.
SECTION 2. Term. Subject to the terms and conditions of this
Agreement, the Executive shall be employed by the Company commencing on July I5,
1998 (the "Effective Date") and terminating on July 14, 2003 (the "Primary
Term") unless sooner terminated pursuant to Section 5 of this Agreement.
SECTION 3. Duties and Responsibilities.
A. Capacity. The Executive shall serve in the capacity of
Chairman of the Board of Directors and Chief Executive Officer of the Company.
The Executive shall perform the duties ordinarily expected of a Chairman and
Chief Executive Officer and shall also perform such other duties consistent
therewith as the Board of Directors of the Company (the "Board") shall, from
time to time, reasonably determine. As of the Effective Date, the Board of
Directors of the Company shall appoint Executive to the Board of Directors of
the Company as a Class I Director.
B. Full-Time Duties. The Executive shall devote his full
business time, attention and energies to the business of the Company.
Notwithstanding anything herein to the contrary, the Executive shall be allowed
to (a) manage the Executive's personal investments and affairs, and (b) (i)
serve on boards or committees of civic or charitable organizations or trade
associations, and (ii) with the permission of the Board of Directors of the
Company, serve on the board of directors of any corporation or as an advisory
director of any corporation; provided that such activities do not materially
interfere with the proper performance of his duties and responsibilities
specified in Section 3(A).
- 1 -
<PAGE> 2
SECTION 4. Compensation.
A. Base Salary. During the term of this Agreement, the
Executive shall receive a salary (the "Base Salary") of at least $900,000 per
annum, prorated for partial years of employment. The Base Salary shall be
payable by the Company in accordance with the general payroll practices of the
Company in effect from time to time. During the term of this Agreement, the Base
Salary shall be reviewed prior to or just following the beginning of each fiscal
year of the Company for increase at the discretion of the Board provided,
however, that such annual increase shall be not less than the percentage
budgeted for increases for the Management Group.
B. Signing Bonus. On July 1, 1998, the Company shall pay to
the Executive a lump sum cash payment of $750,000 as a signing bonus in
consideration for the Executive's decision to accept employment with the
Company. The parties agree that the payment under this Section 4(B) is in the
nature of a signing bonus payable to the Executive, a Texas resident, prior to
the performance of any services in the State of California, and that the payment
is not subject to California state income tax and shall be reported accordingly
for tax purposes by the Company.
C. Annual Incentive Bonus. The Executive shall be eligible for
an annual bonus at a target level of at least $825,000, payable in the January
following the completion of each fiscal year, commencing in January 1999
prorated for partial years of Employment. The Executive's bonus may range up to
2 times the target level as determined by the Board in a manner consistent with
the Company's established annual bonus program based on Company and individual
performance. In addition, the Executive shall receive a non-discretionary annual
incentive bonus of $100,000, prorated for partial years of employment, which
shall be deferred under the Company's Executive Deferred Compensation Program.
D. Long-Term Incentive Award. The Executive shall be eligible
for a cash long-term incentive award at a target level of at least $240,000,
payable in January 2002 following the completion of a 3-year performance cycle
ending on October 31, 2001. The Executive's cash award may range up to 2 times
the target level as determined by the Board in a manner consistent with the
Company's established long-term incentive program based on Company performance
over the performance cycle.
E. Equity Compensation.
(1) Initial Option Award. As of the Effective Date,
the Executive shall be granted options (the "Initial Option")
to purchase 200,000 shares of the common stock of the Company
("Common Stock") at an exercise price equal to the fair market
value per share of Common Stock on the Effective Date
($45.75). The Initial Option shall be immediately exercisable
with respect to 20% of the shares of Common Stock subject
thereto, and, unless accelerated pursuant to another provision
of this Agreement, the remainder will become exercisable in
20% increments on each successive anniversary of the Effective
Date, such that the Initial
- 2 -
<PAGE> 3
Option will become 100% exercisable on the fourth anniversary
of the Effective Date. The Initial Option shall be granted
pursuant to the 1996 Fluor Executive Stock Plan (the "ESP")
and for purposes of determining the Executive's rights with
respect to the Initial Option upon termination of employment
due to retirement, any termination of the Executive's
employment by the Company without "Cause" (as hereinafter
defined) or termination by the Executive for "Good Reason" (as
hereinafter defined) would be deemed to constitute an approved
retirement. The Initial Option shall be composed of two types
of options, with 189,075 shares of Common Stock subject to a
non-qualified stock option ("Initial NQSO") and 10,925 shares
subject to an incentive stock option ("ISO"'). The ISO is
intended to be an "incentive stock option" within Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"),
to the maximum extent possible. The Initial NQSO will be
evidenced by a Non-Qualified Stock Option Agreement and the
ISO will be evidenced by an Incentive Stock Option Agreement
between the Company and the Executive.
(2) 1998 Additional Award. Within 180 days of the
Effective Date, pursuant to the Company's ESP, the Executive
will be granted a non-qualified option ("NQSO") to purchase
additional shares of Common Stock at an exercise price equal
to the fair market value on the date of grant. The number of
shares of Common Stock subject to the NQSO will be determined
by the Organization and Compensation Committee of the Board,
but is expected to be approximately 100,000 shares or an
equivalent value of restricted share and tandem units. Unless
accelerated pursuant to another provision of this Agreement,
the NQSOs will become exercisable in 25% annual increments
beginning on the first anniversary of the date of grant, such
that the NQSOs will be 100% exercisable on the fourth
anniversary of the date of grant. The terms of the NQSO will
be evidenced by a Non-Qualified Stock Option Agreement between
the Company and the Executive.
(3) Awards During Term. During the term of this
Agreement, the Executive shall be eligible for grants of stock
options, restricted stock, stock appreciation rights and other
incentive awards under and in accordance with the Company's
ESP or any comparable or successor plans that may be adopted
by the Company. All such incentive awards shall take into
account the Executive's positions, duties and responsibilities
at the Company.
(4) Shadow Stock. As of the Effective Date, the
Executive shall be granted units of shadow stock ("Units")
pursuant to the 1982 Fluor Shadow Stock Plan (the "Shadow
Plan"). The number of units awarded shall be equal to (a) 6.8
- 3 -
<PAGE> 4
million dollars, divided by (b) the fair market value of the
Common Stock on the Effective Date ($45.75), rounded up to the
next whole Unit (148,634 units). All restrictions on the Units
will expire and the Units will become exercisable in full in
the event (x) the Executive remains continuously employed
through the expiration of the Primary Term, or (y) the
Executive's employment terminates prior to the expiration of
the Primary Term due to death, "Disability," termination by
the Company without "Cause," termination by the Executive for
"Good Reason," or following a "Change of Control" (as such
terms are hereinafter defined). In the event the Executive's
employment terminates prior to the expiration of the Primary
Term for any reason other than those set forth in the
preceding sentence, then the restrictions on the Units shall
lapse as of the date of termination as to a portion of the
Units which equals (i) the number of Units originally awarded
multiplied by (ii) a fraction, the numerator of which is the
number of days that have elapsed from the Effective Date to
the date of termination and the denominator of which is 1,825
(the number of days in the Primary Term). For purposes of
determining the Executive's rights with respect to the Units
under the Shadow Plan upon termination of employment due to
retirement, any termination of the Executive's employment by
the Company without Cause or termination by the Executive for
Good Reason would be deemed to constitute a retirement. The
Units shall have a ten-year term from the Effective Date,
subject to earlier expiration in accordance with the Shadow
Plan, in the event of voluntary resignation prior to
retirement without Good Reason or termination by the Company
for Cause. The Units will be evidenced by a Shadow Stock
Agreement between the Company and the Executive.
F. Secured Loan. The Company will provide the Executive with a
loan with a principal amount of $5,000,000, to facilitate the purchase of a
residence in the Southern California area. The loan is to be secured by a First
Trust Deed on the residence and will be structured as an interest-only loan with
a balloon payment of the entire principal amount and all interest accrued during
the term of the loan due on January 15, 2004. The loan shall accrue interest at
the rate of 5.68%, compounded annually. The loan shall be evidenced by a
promissory note and deed of trust containing the foregoing terms and such other
terms as are customarily used by the Company for relocation loans and are not
inconsistent with the foregoing terms. The loan shall be subject to acceleration
in the event of the Executive's termination of employment prior to expiration of
the Primary Term.
G. Automobile. The Company will provide the Executive with the
use of an automobile of the Executive's choice, in accordance with the Company's
inside director automobile directives. The automobile may have a value of up to
$75,000. The Company may own the automobile and will pay the costs of all
maintenance, repair and insurance, including any applicable deductibles.
- 4 -
<PAGE> 5
H. Traveling, Moving and Relocation. The Company shall
reimburse the Executive for expenses relating to traveling, moving and
relocating from Houston, Texas, to Irvine, California, according to the
Company's Personnel Policy (HR-121), including the expenses of packing,
unpacking, shipping and storage of personal belongings, normal fees associated
with the buying and/or selling of the Executive's personal residence, and a
payment to cover any additional federal tax liability associated with the
payment of buy/sell expenses.
I. Executive Deferred Compensation. The Executive will be
eligible to participate in all aspects of the Company's Executive Deferred
Compensation Program, including both the deferred salary and deferred incentive
award provisions, on terms at least as favorable as other top executives of the
Company.
J. Retirement Plans. The Executive will be eligible to
participate in the Company's Salaried Employees' Savings Investment Plan and
Employee's Retirement Plan or any similar plan, subject to satisfying the
eligibility requirements of such plans.
K. Health, Life and Disability Coverage.
(1) Group Insurance. The Executive will be covered
under the Company's group health, group life insurance,
accidental death and dismemberment, travel accident, long-term
disability and short-term disability plans under terms
generally applicable to other similarly situated employees of
the Company.
(2) Executive Health Insurance. The Executive will
participate in the Company's executive health care plan, which
will provide reimbursement for health care expenses incurred
by the Executive and his dependents in excess of covered
charges under the Company's group health insurance policy.
Reimbursement under this plan will include deductibles and
co-insurance payable under the group plan, reasonable and
customary charges not covered under the group plan, and
charges for private rooms. The Executive will be provided, and
the Company requires him to obtain, an annual physical
examination at Company expense.
(3) Supplemental Death Benefit. Upon the Executive's
death while in employment, the Company will provide a
$2,000,000 death benefit to the Executive's designated
beneficiary under the Fluor Executive's Supplemental Benefit
Plan (the "SBP") as in effect on the Effective Date. Upon
termination of employment at or after age 65, the Executive
may request his choice of one of the following forms of
payment, subject to the approval of the Organization and
Compensation Committee of the Board: (a) a continuation of
this death benefit, (b) a lump sum cash payment within 30 days
of retirement equal to $920,328, or (c) monthly installment
payments of $14,155.82 beginning with the month in which the
Executive retires and continuing for a period of 10 years. In
the event of an approved early retirement,
- 5 -
<PAGE> 6
the Executive shall be entitled to a continuation of the death
benefit or to a lump sum or salary continuation benefit
calculated under the terms of the SBP. For purposes of the
SBP, any termination of the Executive's employment by the
Company without Cause or by the Executive for Good Reason
shall constitute an approved early retirement.
L. Time Off With Pay. The Executive shall be immediately
credited with 20 days of accrued paid time off as of the Effective Date. In
addition, the Executive will accrue at least 3.54 hours of paid time off per
week of service, or 23 days of paid time off per year of service. Accrued time
off may be used or exchanged for a cash payment equal to an equivalent amount of
Base Salary by the Executive at any time, and upon termination of employment the
Executive shall be paid the accrued paid time off based upon his then-current
Base Salary.
M. Legal and Accounting Services. Beginning in 1998, the
Executive shall be entitled to reimbursement for up to $25,000 per calendar year
for personal legal and accounting services, including, but not limited to, tax
preparation and estate planning, such services to be provided by the
professional of the Executive's choice.
N. Club Memberships. The Company will pay all dues necessary
to maintain the Executive's memberships at the River Oaks Country Club and the
Coronado Club in Houston, Texas, and will pay all business-related expenses
incurred by the Executive at such clubs. In addition, the Company will pay the
membership initiation fees, monthly dues and business-related expenses incurred
by the Executive at country and dining clubs of the Executive's choice in the
Southern California area; provided that no more than three such clubs may be
selected by the Executive without prior Company approval.
O. Other Benefits.
(1) The Executive shall be entitled to receive prompt
reimbursement by the Company for all reasonable, out-of-pocket
expenses incurred by him in performing services under this
Agreement upon the submission by the Executive of such
accounts and records as may be required under Company policy.
(2) In addition to any other benefits in this Section
4, the Executive shall be entitled to participate in all
employee benefit plans and programs made available to the
Company's senior executives, as such plans or programs may be
in effect from time to time, whether funded or unfunded.
SECTION 5. Termination of Employment.
Notwithstanding the provisions of Section 2, the Executive's
employment hereunder may terminate under any of the following conditions:
A. Death. The Executive's employment under this Agreement
shall terminate automatically upon his death.
- 6 -
<PAGE> 7
B. Disability. The Executive's employment under this Agreement
may be terminated due to his Disability. "Disability" shall mean the Executive's
complete inability to substantially perform his duties for any period of at
least 120 consecutive days due to physical or mental incapacity. The date of
termination due to Disability shall be the date the Executive elects to
terminate service due to Disability or, if earlier, the date the Board
determines that the Executive has met the definition of Disability.
C. Termination by Company Without Cause. The Company may
terminate the Executive's employment hereunder without Cause (as hereinafter
defined) on 30 days' prior written notice to the Executive.
D. Termination by Company for Cause. The Executive's
employment hereunder may be terminated for Cause by the Company. For purposes of
this Agreement, "Cause" means:
(1) the Executive is charged with commission of a
felony involving moral turpitude excluding any felony
relating, to the operation of a motor vehicle or is convicted
or enters a no contest plea to a felony relating to the
operation of a motor vehicle which, at the time of commission,
the Executive knew had a reasonable probability of causing a
material adverse effect on, the Company; or
(2) the Executive's serious, willful gross misconduct
or gross neglect of duties (which shall include, without
limitation 90 days' absence) which, in either case, has
resulted, or could reasonably be expected to result, in
material economic damage to the Company;
provided, however, that no action or failure to act by the Executive will
constitute "Cause" if the Executive reasonably believed in good faith that such
action or failure to act was in the best interest of the Company.
Any termination of the Executive's employment by the Company
for Cause under this Section 5(D) shall be authorized by a vote of at least a
majority of the non-employee members of the Board. The Executive shall be given
notice by the Board specifying in detail the particular act or failure to act on
which the Board is relying in proposing to terminate him for Cause and offering
the Executive an opportunity, on a date at least 14 days after receipt of such
notice, to have a hearing, with counsel, before a majority of the non-employee
members of the Board, including each of the members of the Board who authorized
the termination for Cause.
E. Termination by Executive for Good Reason. The Executive may
terminate his employment hereunder for "Good Reason." For purposes of this
Section 5(E), "Good Reason" for termination shall exist if, without the consent
of the Executive, any of the following events occur:
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<PAGE> 8
(1) a reduction in the Executive's Base Salary or the
termination or reduction of a benefit under any employee
benefit plan or program of the Company or any subsidiary in
which he participates unless, in the case of a benefit, (x)
there is substituted a comparable benefit that is economically
equivalent to such benefit prior to its termination or
reduction, as the case may be or (y) such termination or
reduction affects the members of the Senior Management of the
Company generally and occurs prior to a Change of Control;
(2) either (A) the failure by the Company to continue
in effect any incentive or other compensation plan or program
in which the Executive is to participate under the terms of
this Agreement or (B) the taking of any action by the Company
that would have a material adverse affect on the Executive's
participation in, or materially reduce his benefits under, any
such plan or program, unless (x), in the case, of either
clause (A) or (B) above, there is substituted a comparable
plan or program that is economically equivalent, in terms of
the benefit offered to the Executive, to the plan or program
being altered, reduced, affected or ended or (y) such failure,
or in the case of clause (B) above, such taking of any action,
affects the members of the senior management of the Company
generally and occurs prior to a Change of Control;
(3) the loss of any of the Executive's titles or
positions as described in Section 3 except where such loss is
due to the Executive's death or disability, or termination of
Executive's Employment;
(4) a significant diminution in the Executive's
duties and responsibilities or the assignment to the Executive
of duties and responsibilities inconsistent with his
positions;
(5) the relocation of the Company's principal office,
or the Executive's own office location as assigned to him by
the Company, to a location more than 50 miles from the present
location of the Company's principal office;
(6) the failure of the Company to obtain the
unconditional assumption in writing or by operation of law of
the Company's obligations to the Executive under this
Agreement by any successor prior to or at the time of a
reorganization, merger, consolidation, disposition of all or
substantially all of the assets of the Company or similar
transaction; or
(7) a material breach by the Company of this
Agreement, which breach continues for more than 30 days
following written notice given by the Executive to the
Company.
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<PAGE> 9
F. Termination by Executive Without Good Reason. The Executive
may terminate his employment hereunder at any time on 30 days' written notice to
the Company.
SECTION 6. Change of Control.
A. Upon the Executive's termination of employment for any
reason following a Change of Control, as defined below, any restrictions on any
stock option, restricted stock, stock appreciation right, Unit or other
equity-based incentive provided under the ESP, the Shadow Plan or any other plan
of the Company (a "Stock Plan") shall lapse immediately
B. A Change of Control shall have the meaning set forth in the
ESP as of the Effective Date, or any definition that is more favorable to the
Executive that is set forth in any subsequent Stock Plan or that is approved by
the Board for the benefit of the Company's senior executives.
SECTION 7. Payments Upon Termination.
A. Upon termination of the Executive's employment for any
reason prior to the expiration of the Primary Term, the Company shall be
obligated to pay, and the Executive shall be entitled to receive:
(1) all accrued and unpaid Base Salary under Section
4 to the date of termination;
(2) any unpaid bonus under Section 4(C) or long-term
incentive award under Section 4(D) for the fiscal year or
performance cycle ending prior to the date of termination;
(3) title to the automobile provided under Section
4(G), provided that the Executive was employed for at least 2
years prior to termination of employment;
(4) all accrued but unused or unpaid time off with
pay under Section 4(L);
(5) all incurred but unreimbursed expenses for which
the Executive is entitled to reimbursement under Section 4;
and
(6) any benefits to which he is entitled under the
terms of the Executive Deferred Compensation Program, the
Employee's Retirement Plan, the Salaried Employees Savings
Investment Plan, the Long-Term Incentive Award Program, and
any other applicable employee pension or benefit plan or
program, or applicable law.
B. Upon termination of the Executive's employment upon the
death of Executive pursuant to Section 5(A), the Company shall be obligated to
pay, and the Executive shall be entitled to receive:
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<PAGE> 10
(1) all of the amounts and benefits described in
Section 7(A); and
(2) the death benefit payable under Section 4(K)(3)
and any other death benefit payable under a plan or policy
provided by the Company.
C. Upon termination of the Executive's employment upon the
Disability of the Executive pursuant to Section 5(B), the Company shall be
obligated to pay, and the Executive shall be entitled to receive:
(1) all of the amounts and benefits described in
7(A);
(2) the Base Salary, at the rate in effect
immediately prior to the date of his termination of employment
due to Disability, for a period of one year following such
termination, offset by any payments the Executive receives
under the Company's long-term disability plan and any
supplements thereto, whether funded or unfunded, which is
adopted by the Company for the Executive's benefit;
(3) a bonus award for the fiscal year in which his
termination due to Disability occurs, in an amount equal to
the target bonus for the fiscal year in which termination
occurs, prorated for the number of days of the year that
elapsed prior to his termination of employment;
(4) a long-term incentive award for each performance
cycle in which termination of employment due to Disability
occurs, in an amount equal to the Target long-term incentive
award for the particular performance cycle, prorated for the
number of days of the particular performance cycle that
elapsed prior to his termination of employment;
(5) the medical benefits payable under Section
4(K)(1), which shall be provided to the Executive and his
spouse for life; and
(6) long-term disability payments, payable at least
monthly, beginning one year after the Executive's termination
of employment due to Disability and continuing until the
earliest to occur of the termination of his Disability, his
death or his attainment of age 65, or Two years from the date
their payment commenced in an amount equal to 60% of his Base
Salary, at the rate in effect immediately prior to the date of
his termination of employment due to Disability, reduced by
(b) any long-term disability payments he receives from any
disability plan or programs contributed to by the Company (but
not by any
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<PAGE> 11
retirement benefits that commence due to his termination of
employment); and
(7) commencing with the first month following the
month in which the Executive is terminated, payments to which
the Executive is entitled under any plans or programs of the
Company providing long-term disability or retirement benefits.
In the event a Change of Control occurs within two years after
the Executive's termination of employment due to Disability, the Executive shall
be entitled to a lump-sum payment of the aggregate amounts specified under
clauses (1), (2), (3), (4) and (6) of this Section 7(C) that have not been paid
to the Executive, payable within 5 days after the Change of Control, and all
other benefits payable pursuant to this Section 7(C) shall continue to be paid
in accordance with the terms hereof.
D. Upon termination of the Executive's employment: (i) by the
Company without Cause pursuant to Section 5(C); or (ii) by the Executive for
Good Reason pursuant to Section 5(E), the Company shall be obligated to pay and
the Executive shall be entitled to receive:
(1) all of the amounts and benefits described in
Section 7(A);
(2) Base Salary for the lesser of (x) three years or
(y) the remaining Primary Term, as if there had been no
termination;
(3) annual bonuses for the lesser of (x) three years
or (y) remainder of the Primary Term (including a pro rated
bonus for any partial year), equal to the target bonus for the
fiscal year in which termination of Employment occurs, such
bonuses to be paid at the same time annual bonuses are
regularly paid by the Company to him;
(4) long-term incentive awards for the lesser of (x)
three years or (y) remainder of the Primary Term (including a
pro rated award for any performance cycle ending after the
Primary Term), for each performance cycle in which termination
of Employment occurs, in an amount equal to the target
long-term incentive award for the particular performance
cycle, such awards to be paid at the same time long-term
incentive awards are regularly paid by the Company to him;
(5) An immediate lump-sum cash payment equal to the
excess (if any) of the "Pro-Rata Loan Amount" over the "Unit
Value," where:
the "Pro-Rata Loan Amount" means the portion of the
residence loan under Section 4(F) that the Executive
earned to the date of termination, which
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<PAGE> 12
is an amount equal to $5,000,000 multiplied by a
fraction, the numerator of which is the number of
days that have elapsed from the Effective Date to the
date of termination of employment, and the
denominator of which is 1,825 (the number of days in
the Primary Term), and
"Unit Value" means the value of the Units awarded
under Section 4(E)(4) as of the date of termination;
and
(6) the medical benefits described in Section
4(K)(1), which shall be provided to the Executive and his
spouse for life.
In addition to the benefits mentioned above, a termination by
the Company without Cause or by the Executive with Good Reason shall be deemed
an approved early retirement for purposes of any Stock Plan, the Shadow Plan and
the SBP. The Executive shall also be entitled to full vesting of his interest
under the Company's Retirement Plans described in section 4(J). Any benefit due
to the Executive as a result of the previous sentence which may not be paid
under the Company's qualified retirement plans is to be paid by the Company.
In the event a Change of Control occurs within two years after
the Executive's termination of employment by the Company without Cause or by the
Executive with Good Reason, the Executive shall be entitled to a lump-sum
payment of the aggregate amounts specified under clauses (1), (2), (3), (4) and
(5) of this Section 7(D) that have not been paid to the Executive, payable
within 5 days after the Change of Control, and all other benefits payable
pursuant to this Section 7(D) shall continue to be paid in accordance with the
terms hereof.
E. In the event of any termination of employment under this
Section 7, the Executive shall be under no obligation to seek other employment,
and there shall be no offset against amounts due the Executive under this
Agreement on account of any remuneration attributable to any subsequent
employment that he may obtain.
SECTION 8. Indemnification.
(a) The Company agrees to indemnify the Executive to the
fullest extent permitted by applicable law consistent with the Company's
Certificate of Incorporation and By-Laws in effect as of the date hereof with
respect to any acts or non-acts he may have committed during the period during
which he was an officer, director and/or employee of the Company or any
subsidiary thereof, or of any other entity of which he served as an officer,
director or employee at the request of the Company.
(b) The Company agrees to obtain a directors' and officers'
liability insurance policy covering the Executive and to continue and maintain
such policy. The amount of coverage shall be reasonable in relation to the
Executive's position and responsibilities during the Primary Term.
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<PAGE> 13
SECTION 9. Amendment; Waiver. The terms and provisions of this
Agreement may be modified or amended only by a written instrument executed by
each of the parties hereto, and compliance with the terms and provisions hereof
may be waived only by a written instrument executed by each Party entitled to
the benefits thereof. No failure or delay on the part of any party in exercising
any right, power or privilege granted hereunder shall constitute a waiver
thereof, nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, power or privilege granted hereunder.
SECTION 10. Entire Agreement. Except as contemplated herein,
this Agreement constitutes the entire agreement between the parties with respect
to the subject matter hereof and supersedes any and all prior written or oral
agreements, arrangements or understandings between the Company and the
Executive.
SECTION 11. Notices. All notices or communications hereunder
shall be in writing, addressed as follows or to any address subsequently
provided to the other party:
To the Company:
Fluor Corporation
Attention: Chief Legal Officer
3353 Michelson Drive
Irvine, CA 92698
To the Executive:
Philip J. Carroll, Jr.
5000 Montrose Blvd., #17H
Houston, TX 77006
All such notices shall be conclusively deemed to be received and shall be
effective, (i) if sent by hand delivery or overnight courier, upon receipt, (ii)
if sent by telecopy or facsimile transmission, upon confirmation of receipt by
the sender of such transmission or (iii) if sent by registered or certified
mail, on the fifth day after the day on which such notice is mailed.
SECTION 12. Severability. In the event that any term or
provision of this Agreement is found to be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining terms and provisions
hereof shall not be in any way affected or impaired thereby, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained therein.
SECTION 13. Binding Effect; Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties and their respective
successors and assigns (it being understood and agreed that, except as expressly
provided herein, nothing contained in this Agreement is intended to confer upon
any other person or entity any rights, benefits or remedies of any kind or
character whatsoever). No rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company except that such rights
or obligations may be assigned or transferred pursuant to a merger or
consolidation in which the Company is not the continuing entity, or the sale or
liquidation as described of all or
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<PAGE> 14
substantially all of the assets of the Company, provided that the assignee or
transferee is the successor to all or substantially all of the assets of the
Company and such assignee or transferee assumes the liabilities, obligations and
duties of the Company, as contained in this Agreement, either contractually or
as a matter of law. The Company further agrees that, in the event of a sale of
assets or liquidation as described the preceding sentence, it shall take
whatever action it legally can in order to cause such assignee or transferee to
expressly assume the liabilities, obligations and duties of the Company
hereunder.
SECTION 14. Governing Law; Dispute Resolution. This Agreement
shall be governed by and construed in accordance with the laws of the State of
California (except that no effect shall be given to any conflicts of law
principles thereof that would require the application of the laws of another
jurisdiction). Any dispute or misunderstanding arising out of or in connection
with this Agreement shall first be settled, if possible, by the parties
themselves through negotiation and, failing success at negotiation through
mediation and, failing success at mediation, shall be arbitrated at Irvine,
California. Unless otherwise agreed upon by the Company and the Executive, the
arbitration shall be had before three arbitrators, each party designating an
arbitrator and the two designees naming a third arbitrator experienced in
employment related controversies. The procedure shall he in accordance with the
rules and regulations of the American Arbitration Association.
SECTION 15. Headings. The headings of the sections contained
in this Agreement are for convenience only and shall not be deemed to control or
affect the meaning or construction of any provision of this Agreement.
SECTION 16. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement effective as of the date set forth above.
FLUOR CORPORATION
By: /s/ Bobby R. Inman
---------------------------------------
Admiral Bobby R. Inman
EXECUTIVE
/s/ Philip J. Carroll, Jr.
------------------------------------------
Philip J. Carroll, Jr.
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<PAGE> 1
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), entered into as of October
1, 1998, by and between FLUOR CORPORATION ("Fluor"), A.T. MASSEY COAL COMPANY,
INC., ("Massey"), and DON L. BLANKENSHIP (the "Executive").
W I T N E S S E T H :
WHEREAS, Massey and its parent corporation Fluor desire to retain the
experience, abilities and service of the Executive upon the terms and conditions
specified herein; and
WHEREAS, the Executive is willing to enter into this Agreement upon the
terms and conditions specified herein;
NOW, THEREFORE, in consideration of the premises, the terms and
provisions set forth herein, the mutual benefits to be gained by the performance
thereof and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Employment. Massey hereby offers and the Executive hereby
accepts such offer, all upon the terms and conditions set forth herein.
SECTION 2. Term. Subject to the terms and conditions of this Agreement,
the Executive shall be employed by Massey commencing on October 1, 1998, (the
"Effective Date") and terminating on October 31, 2001, (the "Primary Term")
unless sooner terminated pursuant to Section 5 of this Agreement.
SECTION 3. Duties and Responsibilities.
A. Capacity. The Executive shall serve in the capacity of Chairman and
Chief Executive Officer of Massey. The Executive shall perform the duties
ordinarily expected of a Chairman and Chief Executive Officer and shall also
perform such other duties consistent therewith as the Chief Executive Officer of
Fluor shall, from time to time, reasonably determine.
B. Full-Time Duties. The Executive shall devote his full business time,
attention and energies to the business of Massey. Notwithstanding anything
herein to the contrary, the Executive shall be allowed to (a) manage the
Executive's personal investments and affairs, and (b) (i) serve on boards or
committees of civic or charitable organizations or trade associations, and (ii)
with the permission of the Chief Executive Officer of Fluor, serve on the board
of directors of any corporation or as an advisory director of any corporation;
provided that such activities do not interfere with the proper performance of
his duties and responsibilities specified in Section 3(A).
SECTION 4. Compensation.
A. Base Salary. During the term of this Agreement, the Executive shall
receive a salary
<PAGE> 2
(the "Base Salary") of $650,000 per annum effective October 1, 1998. The Base
Salary shall be payable by Massey in accordance with the general payroll
practices of Massey in effect from time to time. During the term of this
Agreement, the Base Salary shall be increased to $700,000 per annum on January
1, 1999, to $800,000, per annum on January 1, 2000, and to $900,000 per annum on
January 1, 2001.
B. Annual Incentive Bonus. The Executive shall be eligible for an
annual bonus with a target amount of at least $540,000, $625,000, $650,000, and
$700,000, based upon company performance for fiscal years 1998, 1999, 2000, and
2001, respectively. The bonus amounts will be paid in installments at mid year
and year end consistent with past payment practices. The following table shows
the target payment amounts for each fiscal year's performance:
FY YEAR END TOTAL
-------------------------------------------------
1998 $190,000 $350,000 $540,000
1999 $275,000 $350,000 $625,000
2000 $300,000 $350,000 $650,000
2001 $350,000 $350,000 $700,000
The bonus payments will be based on the financial performance of Massey
for each of the stated fiscal years. There will be predetermined performance
goals and objectives established and mutually agreed to by the Chairman and CEO
of Fluor and the Executive. The award payments will be made in accordance with
standard company practices.
C. Long Term Incentive Award. The Executive shall participate in
Fluor's Long Term Incentive program. The Executive's award under the Long Term
Incentive Program will have a target value of $450,000 for each three-year
performance cycle that commences during the Primary Term. The Executive will
participate in fiscal year 1999, 2000 and 2001 performance cycle.
The Long Term Incentive Award for each cycle shall consist of a cash
award of $67,350 which may range up to 2 times the target level as determined by
the Chief Executive Officer of Fluor in a manner consistent with Massey's
established Long Term Incentive program based on predetermined Massey
performance over the performance cycle. Each of the cash awards will be
evidenced by an Award Agreement between Fluor and the Executive pursuant to the
Fluor Special Executive Incentive Plan ("SEIP").
The program will also consist of annual grants of 16,260 non-qualified
stock options, 3,170 shares of restricted stock, and 1,820 restricted units.
Each of the stock options and restricted stock grants will be evidenced by an
Award Agreement between Fluor and the Executive pursuant to the 1996 Fluor
Executive Stock Plan (the "ESP") and each of the restricted unit grants will be
evidenced by an Award Agreement between Fluor and the Executive pursuant to the
Fluor Special Executive Incentive Plan.
2
<PAGE> 3
D. Shadow Stock. Subject to the following terms and conditions, the
Executive shall be granted units of shadow stock ("Units") pursuant to the 1982
Fluor Shadow Stock Plan (the "Shadow Plan") at the times and in the amounts set
forth in the following table:
Date of Grant Amount of Grant
------------- ---------------
October 1, 1998 60,000 Units
October 1, 1999 60,000 Units
October 1, 2000 60,000 Units
October 1, 2001 60,000 Units
In the event the Executive remains continuously employed by Massey
through the expiration of the Primary Term, then all restrictions on the Units
will expire and the then value of the Units will thereupon be credited to the
Executive's account in the Fluor Executive Deferred Compensation Program. In the
event the Executive's employment with Massey terminates prior to the expiration
of the Primary Term following a "Change of Control" (as such terms are
hereinafter defined) or the Executive's employment is terminated by Massey for
reasons which do not constitute "Cause" as defined herein then the date of any
grants referred to the foregoing table which have not been made as of the
Executive's termination date shall be accelerated to such termination date and
all restrictions on the Units will expire and the then value of the Units will
thereupon be credited to the Executive's account in the Fluor Executive Deferred
Compensation Program. In the event that the Executive's employment with Massey
terminates prior to the expiration of the Primary Term due to death or permanent
and total disability as defined by Massey personnel policy, then the
restrictions shall lapse as to the Units which had been granted prior to the
Executive's termination date and the then value of such Units will thereupon be
credited to the Executive's account in the Fluor Executive Deferred Compensation
Program and Executive's right to a grant of the remaining Units shall thereupon
terminate. In the event the Executive's employment with Massey terminates prior
to the expiration of the Primary Term for any reason other than those set forth
in the three preceding sentences, then all of the Executive's rights in the
Units which have previously been granted and in those which have yet to be
granted shall terminate as of the date of termination, and all rights thereunder
shall cease. The Units will be evidenced by a Shadow Stock Agreement between
Fluor and the Executive.
E. Stock Appreciation Rights (SARs). As of the Effective Date, the
Executive shall be granted units of Stock Appreciation Rights (SARs) pursuant to
the 1997 Fluor Stock Appreciation Rights Plan (the "SAR Plan"). The number of
shares awarded shall be 300,000. All restrictions on the SARs will expire and
the then value of the SARs will thereupon be credited to Executive's account in
the Fluor Executive Deferred Compensation Program in the event (x) the Executive
remains continuously employed by Massey through the expiration of the Primary
Term, (y) the Executive's employment with Massey terminates prior to the
expiration of the Primary Term following a "Change of Control" (as such terms
are hereinafter defined), or (z) the Executive's employment is terminated by
Massey for reasons which do not constitute "Cause" as defined herein. In the
event that the Executive's employment with Massey terminates prior to the
expiration of the Primary Term due to death or permanent and total disability as
defined by Massey personnel policy, then the restrictions shall lapse as to a
pro rata portion of the SARs, the then value of such pro rata portion of the
SARs will thereupon be credited to the Executive's account in the Fluor
Executive Deferred Compensation Program and
3
<PAGE> 4
the pro rata portion to become exercisable shall be determined in accordance
with the following table and the portion which does not become exercisable shall
terminate and all rights thereunder shall cease:
DATE OF DEATH PRO RATA PORTION
OR DISABILITY TO BE CREDITED
------------- --------------
October 1, 1998, through 25%
September 30, 1999
October 1, 1999, through 50%
September 30, 2000
October 1, 2000, through 75%
September 30, 2001
On or after October 1, 2001 100%
In the event the Executive's employment with Massey terminates prior to
the expiration of the Primary Term for any reason other than those set forth in
the two preceding sentences, then all of the Executive's rights in the SARs
shall terminate as of the date of termination, and all rights thereunder shall
cease. The SARs shall have a ten-year term from the Effective Date, subject to
earlier expiration in accordance with the plan documents. The SARs will be
evidenced by an SAR Agreement between Fluor and the Executive.
F. Housing Assistance. In the event (x) the Executive remains continuously
employed by Massey through the expiration of the Primary Term, (y) the
Executive's employment with Massey terminates prior to the expiration
of the Primary Term following a "Change of Control" (as such terms are
herein defined, or (z) the Executive's employment is terminated by
Massey for reasons which do not constitute "Cause" as defined herein,
then Massey and/or Fluor shall reimburse Executive for up to $360,000
in actual costs incurred by Executive for the purchase or construction
of a first or second home, including without limitation the cost of the
lot and furnishings for such home the ("Maximum Amount") together with
an appropriate "make whole" gross up for income taxes arising from such
reimbursement. In that the Executive's employment with Massey
terminates prior to the expiration of the Primary Term due to death or
permanent and total disability as defined by Massey personnel policy,
then Massey and or Fluor shall reimburse Executive for a pro-rata
portion of the Maximum Amount, together with an appropriate "make
whole" gross up for income taxes arising from such reimbursement. The
pro-rata portion to be reimbursed shall be determined in accordance
with the following table:
4
<PAGE> 5
DATE OF DEATH PRO RATA PORTION
OR DISABILITY TO BE REIMBURSED
------------- ----------------
October 1, 1998, through 25%
September 30, 1999
October 1, 1999, through 50%
September 30, 2000
October 1, 2000, through 75%
September 30, 2001
SECTION 5. Termination of Employment.
Notwithstanding the provisions of Section 2, the Executive's employment
hereunder may terminate under any of the following conditions:
A. Death. The Executive's employment under this Agreement shall
terminate automatically upon this death.
B. Disability. The Executive's employment under this Agreement may be
terminated due to his Disability. "Disability" shall mean permanent and total
disability as defined by Massey personnel policy.
C. Termination by Company for Cause. The Executive's employment
hereunder may be terminated for Cause by Massey. For purposes of this Agreement,
"Cause" means:
(1) willful and persistent failure by Executive to reasonably
perform his duties:
(2) conviction of a misdemeanor involving moral turpitude
which materially affects Executive's ability to perform his duties
hereunder or materially adversely affects Executive's or Employer's
reputation or conviction of a felony;
(3) material dishonesty, defalcation, or embezzlement or
misappropriation of corporate assets or opportunities: or
(4) any material default by Executive in the performance of
any covenants or agreements of Executive set forth in this Agreement.
Any termination of the Executive's employment for Cause under this
Section 5(C) shall be authorized by the Chief Executive Officer of Fluor. The
Executive shall be given notice by the CEO specifying in detail the particular
act or failure to act on which the CEO is relying in proposing to terminate him
for Cause and offering the Executive an opportunity, on a date at least 1 day
after the receipt of such notice, to have a hearing, with counsel, before the
Chief Executive Officer.
5
<PAGE> 6
SECTION 6. Change of Control.
A. Upon the Executive's termination of employment for any reason
within two years following a Change of Control, as defined below, any
restrictions on any stock option, restricted stock, stock appreciation right,
Unit or other equity-based incentive provided under the ESP, the SAR Plan, the
Shadow Plan or any other plan of Fluor (a "Stock Plan") shall lapse immediately.
B. A Change of Control shall have the meaning set forth in the ESP as
of the Effective date, or any definition that is more favorable to the Executive
that is set forth in any subsequent Stock Plan or that is approved by the Board
for the benefit of Massey's senior executives.
SECTION 7. Payments Upon Termination.
A. Upon termination of the Executive's employment for any reason prior
to the expiration of the Primary Term, Massey and/or Fluor shall be obligated to
pay, and the Executive shall be entitled to receive:
(1) all accrued and unpaid Base Salary under Section 4 to the
date of termination;
(2) any unpaid bonus under Section 4(B) or long-term incentive
award under Section 4(C) for the fiscal year or performance cycle
ending prior to the date of termination;
(3) any benefits to which he is entitled under the terms of
the Executive Deferred Compensation Program, the Long-Term Incentive
Award Program, and any other applicable employee pension or benefit
plan or program, or applicable law.
B. Upon termination of the Executive's employment by Massey without
Cause pursuant to Section 5 (C), Massey and/or Fluor shall be obligated to pay
and the Executive shall be entitled to receive:
(1) all of the amounts and benefits described in Section 7
(A);
(2) Base Salary for the remaining Primary Term, as if there
had been no termination;
(3) annual bonuses for the remainder of the Primary Term
(including a pro rated bonus for any partial year), equal to the target
bonus for each such fiscal year, such bonuses to be paid at the same
time annual bonuses are regularly paid by Massey to him;
(4) the "Maximum Amount" together with tax "make whole"
gross-up described in Section 4(F).
6
<PAGE> 7
C. In the event of any termination of employment under this Section 7,
the Executive shall be under no obligation to seek other employment, and there
shall be no offset against amounts due the Executive under this Agreement on
account of any remuneration attributable to any subsequent employment that he
may obtain.
SECTION 8. Amendment; Waiver. The terms and provisions of this
Agreement may be modified or amended only by a written instrument executed by
each of the parties hereto, and compliance with the terms and provisions hereof
may be waived only by a written instrument executed by each Party entitled to
the benefits thereof. No failure or delay on the part of any party in exercising
any right, power or privilege granted hereunder shall constitute a waiver
thereof, nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, power or privilege granted hereunder.
SECTION 9. Entire Agreement. Except as contemplated herein, this
Agreement constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes any and all prior written or oral
agreements, arrangements of understandings between Fluor, Massey and the
Executive with respect thereto; provided, however, that this Agreement shall not
affect or impair in any way the rights and obligations of Fluor and Executive
under the Special Successor Development and Retention Program established in
August, 1998.
SECTION 10. Notices. All notices or communications hereunder shall be
in writing, addressed as follows or to any address subsequently provided to the
other party:
To Fluor:
Fluor Corporation
Attention: Chief Legal Officer
3353 Michelson Drive
Irvine, CA 92698
To Massey:
A. T. Massey Coal Company, Inc.
Attention: Chief Legal Officer
4 North 4th Street
Richmond, VA 23219
To the Executive:
Don Blankenship
P.O. Box 895
Matewan, WV 25678
7
<PAGE> 8
All such notices shall be conclusively deemed to be received and shall be
effective, (i) if sent by hand delivery or overnight courier, upon receipt, (ii)
if sent by telecopy or facsimile transmission, upon confirmation of receipt by
the sender of such transmission or (iii) if sent by registered or certified
mail, on the fifth day after the day on which such notice is mailed.
SECTION 11. Severability. In the event that any term or provision of
this Agreement is found to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining terms and provisions hereof shall
not be in any way affected or impaired thereby, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained therein.
SECTION 12. Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns (it being understood and agreed that, except as expressly provided
herein, nothing contained in this Agreement is intended to confer upon any other
person or entity any rights, benefits or remedies of any kind or character
whatsoever). No rights or obligations of Fluor or Massey under this Agreement
may be assigned or transferred by Fluor or Massey except that such rights or
obligations may be assigned or transferred pursuant to a merger or consolidation
in which Fluor or Massey is not the continuing entity, or the sale or
liquidation as described of all or substantially all of the assets of Fluor or
Massey, provided that the assignee or transferee is the successor to all or
substantially all of the assets of Fluor or Massey and such assignee or
transferee assumes the liabilities, obligations and duties of Fluor or Massey,
as contained in this Agreement, either contractually or as a matter of law.
Fluor or Massey further agrees that, in the event of a sale of assets or
liquidation as described in the preceding sentence, it shall take whatever
action it legally can in order to cause such assignee or transferee to expressly
assume the liabilities, obligations and duties of Fluor or Massey hereunder. In
the event of the sale, liquidation, consolidation, or merger of Massey or
substantially all the assets of Massey in which Fluor does not retain an
ownership interest of more than 50%, Fluor agrees to guarantee payment to
Executive of all amounts due under this or related agreements referenced herein.
SECTION 13. Governing Law; Dispute Resolution. This Agreement shall be
governed by and construed in accordance with the laws of the State of California
(except that no effect shall be given to any conflicts of law principles thereof
that would require the application of the laws of another jurisdiction). Any
dispute or misunderstanding arising out of or in connection with this Agreement
shall first be settled, if possible, by the parties themselves through
negotiation and, failing success at negotiation through mediation, and failing
success at mediation, shall be arbitrated at Irvine, California. Unless
otherwise agreed upon by Massey and the Executive, the arbitration shall be had
before three arbitrators, each party designating an arbitrator and the two
designees naming a third arbitrator experienced in employment related
controversies. The procedure shall be in accordance with the rules and
regulations of the American Arbitration Association.
SECTION 14. Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.
SECTION 15. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8
<PAGE> 9
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date set forth above.
FLUOR CORPORATION
By: /s/ Philip J. Carroll
--------------------------------
Philip J. Carroll
A. T. MASSEY COAL COMPANY, INC.
By: /s/ James L. Gardner
--------------------------------
James L. Gardner
Executive:
/s/ Donald L. Blankenship
-----------------------------------
Donald L. Blankenship
9
<PAGE> 1
EXHIBIT 10.21
Special Successor Development and Retention Program
<TABLE>
<S> <C>
Total Projected Value: $2.75MM
Amount: $1MM cash based on achieving three years of acceptable financial performance as agreed
to by you and the CEO of Fluor Corporation and developing a "Board" acceptable
successor and Senior Executive Management Team
Payout: $333,333 will be deposited into a deferred account on 7/1/98, 7/1/99, and 7/1/00 for a
total deferral of $1,000,000. Of the 333,333, 50% is related to the accomplishment of
the financial objective, 25% for a board acceptable successor plus 25% for a board
acceptable Senior Executive Management Team. The monies deferred will 100% clift vest
on 7/1/01, plus any investment returns if Don is employed on 7/1/01. Don may select the
investment fund from any of those offered.
Restricted Stock/Units Award
Estimated value: $1.35MM in a combination of Restricted Stock/Restricted Units granted at Fair Market
Value upon approval by the Organization & Compensation Committee. Restricted
shares/units will vest 33-1/3% in December 1999, 2000, and 2001.
House: The Company will provide to Don, free from income taxes, title to the house, garages &
storage building and property associated with the house to the right of the driveway
and easement to use the driveway in Sprigg, West Virginia, upon his retirement from the
Company. Or, upon recommendation by the Chief Executive Officer of Fluor Corporation
and at the discretion of the Organization and Compensation Committee of the Board of
Directors, provide title to the residence, free from taxes, anytime after July 1, 2001.
Current estimated house value $150,000 - $300,000 plus tax gross up of $140,000 -
$275,000. Potential value $290,000 - $575,000.
Total Retention Period: Through July 1, 2001. However, in the event of death, total and permanent disability,
or change of control, the above payout, restricted stock/unit award and house items
will vest immediately.
Also, the Organization & Compensation Committee agrees to approve your early retirement
at age 55 for the purposes of the Supplemental Benefit Plan and the payment options
available under this program.
</TABLE>
Agreed by: Agreed by:
/s/ Peter J. Fluor /s/ Donald L. Blankenship
- ---------------------------------- -------------------------------------
Peter J. Fluor Donald L. Blankenship
Agreed by:
/s/ Philip J. Carroll
- ----------------------------------
Philip J. Carroll
2
<PAGE> 1
EXHIBIT 10.22
SETTLEMENT AND RELEASE AGREEMENT
Leslie G. McCraw and Fluor Corporation have reached the following
Agreement in connection with Employee's separation from Fluor Corporation. In
this Agreement, "Employee" refers to Leslie G. McCraw. "Company" refers to Fluor
Corporation.
1. PAYMENTS. The Company agrees to make the payments and accommodations
described on Exhibit A (attached), which is part of this Agreement to the
Employee. Employee understands that the Company will deduct from these amounts
federal withholding taxes and other deductions the Company is required by law to
make from wage payments to employees. Employee further understands that these
amounts are all Employee is entitled to receive from the Company except for
those amounts described in Paragraph 5 to which Employee may be entitled.
Employee will receive no further wage, vacation or other similar payments from
the Company.
2. NO OBLIGATION TO MAKE PAYMENT UNDER NORMAL POLICIES. Employee agrees
that the payments and accommodations described on Exhibit A are more than the
Company is required to pay under its normal policies and procedures and that
Employee is not entitled to them unless and until the Agreement becomes
effective.
3. COMPLETE RELEASE. Employee agrees to release the Company, any
related companies, and the employees and directors of any of them from all
claims or demands Employee may have, of every kind and nature, known or unknown
to the Employee and in particular any claims or demands based on Employee's
employment with the Company or the termination of that employment. This includes
a release of any rights or claims Employee may have under the Age Discrimination
in Employment Act, which prohibits age discrimination in employment; Title VII
of the Civil Rights Act of 1964, which prohibits discrimination in employment
based on race, color, national origin, religion or sex; the Americans With
Disabilities Act, which prohibits discrimination in employment based on an
individual's physical or mental disabilities; the Equal Pay act, which prohibits
paying men and women unequal pay for equal work; or any other federal, state or
local laws or regulations prohibiting employment discrimination. This also
includes a release by Employee of any claims for wrongful discharge.
4. ADDITIONAL FACTS. Employee agrees and acknowledges that he may
hereafter discover facts different from, or in addition to, those he now
believes to be true with respect to any or all of the claims or demands herein
released. Nevertheless, the Company and Employee agree that the release set
forth above shall be and remain effective in all respects, notwithstanding the
discovery of such different or additional facts.
5. RELEASE INAPPLICABLE TO RETIREMENT BENEFITS. This release does not
include a release of Employee's right, if any, to retirement benefits under the
Company's standard retirement programs.
<PAGE> 2
6. NO FUTURE LAWSUITS. Employee promises never to file a lawsuit
asserting any claims that are released in Paragraphs 3 and 4. Similarly, Company
promises never to file a lawsuit asserting any claims that are released in this
Agreement.
7. NON-ADMISSION OF WRONGDOING. By making this Agreement, neither the
Company nor the Employee admits that they have done anything wrong.
8. NON-RELEASE OF FUTURE CLAIMS. This Agreement does not waive or
release any rights or claims that Employee may have under the Age Discrimination
in Employment Act, Title VII of the Civil Rights Act of 1964 or the Americans
With Disabilities Act which arise after the date the Employee signs this
Agreement.
9. CONSEQUENCES OF EMPLOYEE VIOLATION OF PROMISES. If Employee breaks
Employee's promise in Paragraph 6 of this Agreement and files a lawsuit based on
legal claims that Employee has released, Employee will pay for all costs
incurred by the Company, any related companies or the directors or employees of
any of them, including reasonable attorneys' fees if employer is successful, in
defending against the Employee's claim.
10. PERIOD FOR REVIEW AND CONSIDERATION OF AGREEMENT. Employee
acknowledges that Employee has been given a period of at least 21 days to review
and consider this Agreement before signing it. Employee further understands that
Employee may use as much of this 21 day period as Employee wishes prior to
signing.
11. CONSULT WITH ATTORNEY. Employee is advised to consult with an
attorney before signing this Agreement. Employee understands that whether or not
to do so is Employee's decision.
12. EMPLOYEE'S RIGHT TO REVOKE AGREEMENT. Employee may revoke this
Agreement within seven days after the date Employee signs it by delivering
written notice to Bobby Inman Fluor Daniel, Inc., 3353 Michelson Drive, Irvine,
California 92698. Such written notice must be received no later than the close
of business on the seventh day after Employee signs this Agreement. If Employee
revokes this Agreement it shall not be effective or enforceable and Employee
will not receive the payments and accommodations described in Paragraph 1. This
Agreement will not be effective or enforceable until the seven day period has
expired.
13. APPLICABLE LAW. This Agreement shall be governed by and construed
and enforced under South Carolina law, excluding the provisions thereof which
refer to the laws of another jurisdiction.
<PAGE> 3
14. CONFIDENTIAL INFORMATION. Employee promises that Employee will keep
the terms, amounts and fact of this Agreement completely confidential, and
promises not to disclose any information about this Agreement to anyone other
than Employee's spouse, attorney, financial or tax advisor, or senior members of
the Company's Tax or Human Resources Department. Before Employee tells his
spouse or attorney, financial or tax advisor anything about this Agreement, he
will inform them of this confidentiality clause and have them agree to follow
it. If this Agreement is sought by court order or otherwise compulsion of law,
Employee will promptly provide Company and its counsel with sufficient notice in
advance of such proposed disclosure to enable the Company to be heard with
respect to any such disclosure.
15. CONFIDENTIAL INFORMATION; NO SOLICITATION. Employee understands and
agrees that in the course of Employee's employment with the Company, Employee
has acquired confidential information and trade secrets concerning the Company's
operations, its future plans and its methods of doing business. Employee
understands and agrees it would be extremely damaging to the Company if Employee
disclosed such information to a competitor or made it available to any other
person or company. Employee understands and agrees that such information has
been divulged to Employee in confidence and Employee understands and agrees that
Employee will keep such information secret and confidential unless disclosure is
required by court order or otherwise by compulsion of law. Employee further
agrees that Employee will not solicit or participate in or assist in any way in
the solicitation of any other employees of the Company or of any of its
affiliates. In view of the nature of Employee's employment and the information
and trade secrets which Employee has received during the course of Employee's
employment, Employee also agrees that the Company would be irreparably harmed by
any violation, or threatened violation of the agreements in this paragraph and
that, therefore, the Company shall be entitled to an injunction prohibiting
Employee from any violation or threatened violation of such agreements.
16. SEVERABILITY. If any provision or part of this Agreement is held or
determined to be invalid or unenforceable for any reason, each such provision or
part shall be severed from the remaining provisions of the Agreement or the
Agreement shall be read and interpreted as if it did not contain such provision
or part. The validity and enforceability of remaining provisions shall not be
affected by any such invalid or unenforceable part or provision.
17. INDEMNIFICATION: If Employee is subjected to any claim or demand
involving any action or inaction allegedly taken by him during the course of his
employment or directorship with the Company, Employee will be entitled to all
rights of indemnification which may then be available to other executive
officers or directors of the Company, including, without limitation, insurance
protection under any director and/or officer liability insurance coverage
maintained by the Company or any subsidiary and any rights to indemnification
provided by applicable law or the By-laws of the Company or any subsidiary, and
the Company will, and shall cause any subsidiary to, cooperate fully with the
Employee in responding to or defending against any such claim or demand.
<PAGE> 4
18. COOPERATION: Employee agrees to make himself available to respond
to inquiries by the Company regarding management, regulatory, and legal
activities which he acquired knowledge while employed by the Company. Employee
agrees to make available, without the requirement of being subpoenaed, to confer
with counsel at reasonable times and locations and upon reasonable notice
concerning any knowledge he has or may have with respect to actual and/or
potential disputes arising out of the activities of the Company during his
period of employment. Employee further agrees to submit to deposition and/or
testimony in accordance with the laws of the forum involved concerning any
knowledge he has or may have with respect to actual and/or potential disputes
arising out of the activities of the Company during his period of employment.
19. NON-COMPETITION: During the terms of this Agreement, the Employee
agrees that it will not in any manner directly or indirectly provide services,
advice or other assistance to any firm or business which is similar to or
competitive with the business of the Company or any of its affiliates without
prior written approval.
20. ENTIRE AGREEMENT. This Agreement, which includes Exhibit A, is the
entire Agreement between Employee and Company. The Company has made no promises
to Employee other than those in this Agreement.
EMPLOYEE ACKNOWLEDGES THAT HE HAS READ THIS AGREEMENT, UNDERSTANDS IT
AND IS VOLUNTARILY ENTERING INTO IT.
PLEASE READ THIS AGREEMENT CAREFULLY. IT CONTAINS A RELEASE OF ALL
KNOWN AND UNKNOWN CLAIMS.
FLUOR CORPORATION
January 22, 1998
- --------------------------- BY: /s/ Bobby R. Inman
DATE SIGNED --------------------------------
Bobby R. Inman
January 22, 1998 /s/ Leslie G. McGraw
- --------------------------- -----------------------------------
DATE SIGNED EMPLOYEE SIGNATURE
/s/ Janet L. Donovan
- ---------------------------
WITNESS SIGNATURE
<PAGE> 5
EXHIBIT A TO
SETTLEMENT AND RELEASE AGREEMENT
BETWEEN LESLIE G. MCCRAW AND FLUOR CORPORATION
SEVERANCE BENEFITS
------------------
For entering into this agreement, the Company will make the following
payments, accommodations, or provide these benefits which are more than the
Company is required to do under normal policy.
1. The Organization and Compensation Committee of the Board of Directors
has accepted your request for early retirement, which accords you the
following benefits:
a. 100% vesting on all stock options, and you will
have three years from the date of your early
retirement to exercise these vested options.
b. Restricted stock/restricted units currently
awarded will vest 100% on the date your employment
ends. Restricted units are intended to cover the
required deductions for state and federal taxes as
well as other required payroll taxes such as
Social Security, Medicare, etc. With the recent
change in tax laws, the awarded restricted units
are not adequate to cover these required taxes and
a payment on your part will be required to cover
these.
c. Supplemental Life Insurance provides a death
benefit of $5.0 MM while employed. After your
employment ends, and provided that you fulfill all
other obligations under the S & R agreement, you
have requested the continuation of the death
benefit until age 65 and then to begin installment
payments of $35,389.55 per month for 10 years.
The Organization and Compensation Committee has
approved your request.
If you should pass away before the installment
payments have been completely paid, your
beneficiary may request to continue the
installment payments or receive a lump-sum amount
equal to the remaining installments, discounted to
current value at the time payment is made.
d. You will be given, as a taxable gift, your
assigned company-owned vehicle. Insurance and
maintenance on this vehicle will become your
responsibility on transfer of ownership upon your
separation.
<PAGE> 6
e. We will continue your normal Employee Health Care
coverage (provided you pay the employee portion of
the premiums) and your Executive Health Care
(Company paid) for two years following your
separation. COBRA provisions for Executive Health
Care is available for 18 months following the end
of this 2-year continuation period at your
expense.
If you should pass away, your spouse may continue
coverage at the employee-only rate or for the
employee and family rate if there are covered
dependents.
f. Tax services and personal financial planning will
be reimbursed per the Management Directive in an
amount up to $10,000 ($8,000 and $2,000
respectively).
4. Your incentive compensation (management bonus) for FY'97
was zero as determined by the Organization and
Compensation Committee.
5. Receipt of cash awards under the LTI Program requires the
executive be actively employed (not on leave of absence)
at the time payment is made and there is no proration of
cash awards. It was determined by the Organization and
Compensation Committee that you had completed the fiscal
year and will pay the amount of $138,336 for Plan Year
1995-97. The Cash Awards for Plan Years 1996-98 and
1997-99 will be forfeited.
6. Club membership fees and related business expenses will be
reimbursed during the period of active employment. Upon
termination of employment, club memberships and tickets
owned or purchased by the company will be reassigned to
another executive. the Company Membership in the
Greenville Country Club will be transferred to you as a
taxable gift. Until The Vintage membership in your name is
reassigned, you may use these club privileges.
7. While a director, you will continue to participate in the
Directors Supplemental Life Insurance Plan which provides
$75,000 to your beneficiary.
8. We will pay you in a lump sum or installment
payment/payments (your choice) two year's base salary.
9. We will pay for you and your spouse to have a physical
exam at the Cooper Clinic.
10. The Company will provide office space, secretarial support
and other office services.
11. The Company will reimburse you for actual, reasonable
out-of-pocket expenses related to services provided by you
at the Company's request and in accordance with the
Company's reimbursement policies through January 1, 2000.
<PAGE> 1
FLUOR CORPORATION
OPERATING STATISTICS
<TABLE>
<CAPTION>
Year ended October 31, 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ENGINEERING AND CONSTRUCTION
Work performed $11,593 $12,795 $ 9,870 $ 8,379 $ 7,673 $ 7,110 $ 5,889 $ 5,792 $ 6,353 $ 5,241 $ 4,268
Revenues 12,378 13,218 10,054 8,452 7,718 7,134 5,904 5,813 6,383 5,312 4,225
Operating profit 242 122 320 286 259 221 191 166 135 117 51
New awards 9,992 12,122 12,488 10,257 8,072 8,001 10,868 8,532 7,632 7,135 5,955
Backlog $12,645 $14,370 $15,757 $14,725 $14,022 $14,754 $14,706 $11,181 $ 9,558 $ 8,361 $ 6,659
Salaried employees 29,699 30,347 26,568 18,090 16,433 17,215 17,443 17,602 19,829 17,519 15,576
-------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
At October 31, 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BACKLOG BY GROUP AND
LOCATION
Process $ 5,345 $ 6,384 $ 4,903 $ 6,671 $ 7,668 $ 7,430 $ 6,305 $ 5,043 $ 4,434 $ 3,144 $ 2,612
42% 44% 31% 45% 55% 50% 43% 45% 46% 38% 39%
Industrial 4,761 5,178 6,496 4,516 3,564 3,449 3,737 4,127 3,592 4,136 3,100
38% 36% 41% 31% 25% 23% 25% 37% 38% 49% 47%
Power/Government 1,272 2,092 3,621 3,275 2,369 3,212 3,804 1,445 1,058 777 847
10% 15% 23% 22% 17% 22% 26% 13% 11% 9% 13%
Diversified Services 1,267 716 737 263 421 663 860 566 474 304 100
10% 5% 5% 2% 3% 5% 6% 5% 5% 4% 1%
-----------------------------------------------------------------------------------------------------------
Total backlog $12,645 $14,370 $15,757 $14,725 $14,022 $14,754 $14,706 $11,181 $ 9,558 $ 8,361 $ 6,659
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
===========================================================================================================
United States $ 5,911 $ 5,665 $ 7,326 $ 6,666 $ 6,802 $ 9,045 $10,649 $ 7,915 $ 6,724 $ 6,404 $ 5,298
47% 39% 46% 45% 49% 61% 72% 71% 70% 77% 80%
Asia Pacific
(includes Australia) 2,260 3,959 4,402 3,303 1,662 1,679 608 377 812 287 251
18% 28% 28% 23% 12% 11% 4% 3% 9% 3% 4%
EAME* 2,023 3,828 2,677 3,088 4,387 3,178 2,389 2,174 1,345 634 494
16% 27% 17% 21% 31% 22% 17% 20% 14% 8% 7%
Americas 2,451 918 1,352 1,668 1,171 852 1,060 715 677 1,036 616
19% 6% 9% 11% 8% 6% 7% 6% 7% 12% 9%
-----------------------------------------------------------------------------------------------------------
Total backlog $12,645 $14,370 $15,757 $14,725 $14,022 $14,754 $14,706 $11,181 $ 9,558 $ 8,361 $ 6,659
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
===========================================================================================================
</TABLE>
* EAME represents Europe, Africa and the Middle East.
<TABLE>
<CAPTION>
Year ended October 31, 1998 1997 1996 1995 1994 1993
(IN THOUSANDS/IN THOUSANDS OF SHORT TONS)
<S> <C> <C> <C> <C> <C> <C>
COAL
Revenues $1,127,297 $1,081,026 $ 960,827 $ 849,758 $ 767,725 $ 716,591
Operating profit $ 172,762 $ 154,766 $ 134,526 $ 111,033 $ 95,198 $ 70,680
Produced coal sold
Steam coal 19,398 19,300 17,520 15,777 16,702 16,036
Metallurgical coal 18,210 16,343 13,571 11,633 7,133 5,156
--------------------------------------------------------------------------------
Total produced coal sold 37,608 35,643 31,091 27,410 23,835 21,192
Purchased coal sold * * * * 1,284 2,302
Total employees 3,094 2,968 2,809 2,479 1,954 1,431
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year ended October 31, 1992 1991 1990 1989 1988
(IN THOUSANDS/IN THOUSANDS OF SHORT TONS)
<S> <C> <C> <C> <C> <C>
COAL
Revenues $ 696,721 $ 758,481 $ 865,809 $ 815,558 $ 783,719
Operating profit $ 80,281 $ 60,709 $ 60,241 $ 51,007 $ 50,375
Produced coal sold
Steam coal 13,711 13,536 13,058 11,942 11,057
Metallurgical coal 3,827 3,446 5,538 4,640 3,968
------------------------------------------------------------------
Total produced coal sold 17,538 16,982 18,596 16,582 15,025
Purchased coal sold 4,402 6,578 7,989 9,300 10,038
Total employees 1,252 1,133 1,214 1,435 1,232
------------------------------------------------------------------
</TABLE>
* Amounts are immaterial.
p. 20
<PAGE> 2
FLUOR CORPORATION
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATING RESULTS
Revenues $ 13,504.8 $ 14,298.5 $ 11,015.2 $ 9,301.4 $ 8,485.3 $ 7,850.2
Earnings from continuing
operations before taxes 362.6 255.3 413.2 362.2 303.3 242.2
Earnings from continuing
operations, net 235.3 146.2 268.1 231.8 192.4 166.8
Earnings (loss) from discontinued
operations, net -- -- -- -- -- --
Cumulative effect of change in
accounting principle, net -- -- -- -- -- --
Net earnings 235.3 146.2 268.1 231.8 192.4 166.8
Basic earnings per share
Continuing operations 2.99 1.76 3.24 2.82 2.35 2.05
Discontinued operations -- -- -- -- -- --
Cumulative effect of change
in accounting principle -- -- -- -- -- --
--------------------------------------------------------------------------------------
Basic earnings per share 2.99 1.76 3.24 2.82 2.35 2.05
Diluted earnings per share
Continuing operations 2.97 1.75 3.21 2.81 2.34 2.04
Discontinued operations -- -- -- -- -- --
Cumulative effect of change
in accounting principle -- -- -- -- -- --
--------------------------------------------------------------------------------------
Diluted earnings per share $ 2.97 $ 1.75 $ 3.21 $ 2.81 $ 2.34 $ 2.04
Return on average shareholders' equity 14.5% 8.7% 17.4% 17.6% 17.1% 17.4%
Cash dividends per common share $ .80 $ .76 $ .68 $ .60 $ .52 $ .48
CONSOLIDATED FINANCIAL POSITION
Current assets $ 2,277.2 $ 2,213.4 $ 1,796.8 $ 1,411.6 $ 1,258.4 $ 1,309.1
Current liabilities 2,495.6 1,978.2 1,645.5 1,238.6 1,021.3 930.9
--------------------------------------------------------------------------------------
Working capital (218.4) 235.2 151.3 173.0 237.1 378.2
Property, plant and equipment, net 2,147.3 1,938.8 1,677.7 1,435.8 1,274.4 1,100.9
Total assets 5,019.2 4,685.3 3,951.7 3,228.9 2,824.8 2,588.9
Capitalization
Long-term debt 300.4 300.5 3.0 2.9 24.4 59.6
Shareholders' equity 1,525.6 1,741.1 1,669.7 1,430.8 1,220.5 1,044.1
--------------------------------------------------------------------------------------
Total capitalization $ 1,826.0 $ 2,041.6 $ 1,672.7 $ 1,433.7 $ 1,244.9 $ 1,103.7
Percent of total capitalization
Long-term debt 16.5% 14.7% .2% .2% 2.0% 5.4%
Shareholders' equity 83.5% 85.3% 99.8% 99.8% 98.0% 94.6%
Shareholders' equity per common share $ 20.19 $ 20.79 $ 19.93 $ 17.20 $ 14.79 $ 12.72
Common shares outstanding at October 31 75.6 83.7 83.8 83.2 82.5 82.1
OTHER DATA
New awards $ 9,991.9 $ 12,122.1 $ 12,487.8 $ 10,257.1 $ 8,071.5 $ 8,000.9
Backlog at year end 12,645.3 14,370.0 15,757.4 14,724.9 14,021.9 14,753.5
Capital expenditures and acquisitions * 612.9 647.4 484.5 335.1 274.8 171.5
Cash provided by operating activities $ 702.5 $ 328.6 $ 406.9 $ 366.4 $ 458.6 $ 188.7
</TABLE>
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED OPERATING RESULTS
Revenues $ 6,600.7 $ 6,572.0 $ 7,248.9 $ 6,127.2 $ 5,008.9
Earnings from continuing
operations before taxes 215.4 228.4 153.6 135.6 62.0
Earnings from continuing
operations, net 135.3 153.1 119.4 84.1 38.6
Earnings (loss) from discontinued
operations, net (96.6) 11.0 35.2 28.6 21.6
Cumulative effect of change in
accounting principle, net (32.9) -- -- -- --
Net earnings 5.8 164.1 154.6 112.7 60.2
Basic earnings per share
Continuing operations 1.67 1.91 1.50 1.07 .49
Discontinued operations (1.19) .14 .44 .36 .28
Cumulative effect of change
in accounting principle (.41) -- -- -- --
-----------------------------------------------------------------------
Basic earnings per share .07 2.05 1.94 1.43 .77
Diluted earnings per share
Continuing operations 1.66 1.89 1.48 1.05 .48
Discontinued operations (1.19) .14 .44 .36 .27
Cumulative effect of change
in accounting principle (.40) -- -- -- --
-----------------------------------------------------------------------
Diluted earnings per share $ .07 $ 2.03 $ 1.92 $ 1.41 $ .75
Return on average shareholders' equity .6% 20.2% 23.3% 21.5% 14.2%
Cash dividends per common share $ .40 $ .32 $ .24 $ .14 $ .02
CONSOLIDATED FINANCIAL POSITION
Current assets $ 1,138.6 $ 1,159.5 $ 1,222.8 $ 1,036.4 $ 1,001.0
Current liabilities 845.4 848.2 984.0 797.7 786.1
-----------------------------------------------------------------------
Working capital 293.2 311.3 238.8 238.7 214.9
Property, plant and equipment, net 1,046.9 1,092.7 925.3 775.3 729.8
Total assets 2,365.5 2,421.4 2,475.8 2,154.3 2,075.7
Capitalization
Long-term debt 61.3 75.7 57.6 62.5 95.0
Shareholders' equity 880.8 900.6 741.3 589.9 467.1
-----------------------------------------------------------------------
Total capitalization $ 942.1 $ 976.3 $ 798.9 $ 652.4 $ 562.1
Percent of total capitalization
Long-term debt 6.5% 7.8% 7.2% 9.6% 16.9%
Shareholders' equity 93.5% 92.2% 92.8% 90.4% 83.1%
Shareholders' equity per common share $ 10.81 $ 11.10 $ 9.22 $ 7.39 $ 5.91
Common shares outstanding at October 31 81.5 81.1 80.4 79.8 79.1
OTHER DATA
New awards $ 10,867.7 $ 8,531.6 $ 7,632.3 $ 7,135.3 $ 5,955.2
Backlog at year end 14,706.0 11,181.3 9,557.8 8,360.9 6,658.6
Capital expenditures and acquisitions * 272.7 106.5 126.4 130.4 77.4
Cash provided by operating activities $ 306.1 $ 219.0 $ 353.1 $ 265.1 $ 17.7
</TABLE>
* Excludes discontinued operations.
See Management's Discussion and Analysis on pages 23 to 28 and Notes to
Consolidated Financial Statements on pages 33 to 42 for information relating to
significant items affecting the results of operations.
p. 22
<PAGE> 3
FLUOR CORPORATION
Management's Discussion and Analysis
M D & A
The following discussion and analysis is provided to increase understanding of,
and should be read in conjunction with, the consolidated financial statements
and accompanying notes.
RESULTS OF OPERATIONS
The company currently operates in two business segments: Engineering and
Construction and Coal. The Engineering and Construction segment provides design,
engineering, procurement, construction, maintenance and other diversified
services to clients in a broad range of industries and geographic markets on a
worldwide basis. The Coal segment produces, processes and sells high-quality,
low-sulfur steam coal for the electric generating industry as well as industrial
customers, and metallurgical coal for the steel industry.
ENGINEERING AND CONSTRUCTION SEGMENT
Total 1998 new awards were $10.0 billion compared with $12.1 billion in 1997 and
$12.5 billion in 1996. The following table sets forth new awards for each of the
segment's business groups:
<TABLE>
<CAPTION>
Year ended October 31, 1998 1997 1996
(IN MILLIONS)
<S> <C> <C> <C>
Process $4,477 $ 6,090 $ 4,061
45% 50% 33%
Industrial 3,447 4,057 6,182
34% 34% 49%
Power/Government 812 1,150 1,428
8% 9% 11%
Diversified Services 1,256 825 817
13% 7% 7%
--------------------------------------
Total new awards $9,992 $12,122 $12,488
100% 100% 100%
======================================
U.S $5,636 $ 5,443 $ 5,749
56% 45% 46%
International 4,356 6,679 6,739
44% 55% 54%
--------------------------------------
Total new awards $9,992 $12,122 $12,488
100% 100% 100%
======================================
</TABLE>
New awards in 1998 were lower compared with 1997, reflecting both the
slowdown of the global economy, as certain clients deferred final decisions to
proceed on major new capital projects, and the company's increased emphasis on
improving margins through selectivity in new projects. The large size and
uncertain timing of complex, international projects can create variability in
the company's award pattern; consequently, future award trends are difficult to
predict with certainty. Furthermore, given the current weakening global economic
conditions and volatility in capital markets the company is facing a potential
slowdown in new business across a variety of geographic regions and industries
in 1999 and 2000.
The Process Group's new awards in 1997 were higher than in 1998 and 1996
primarily due to the award of the $1.9 billion Yanpet project, a petrochemical
complex being constructed in Saudi Arabia. The decrease in the Industrial
Group's new awards in 1998 was primarily in mining and metals, partially offset
by an increase in infrastructure projects. New awards in the Power/Government
Group in 1998 reflect a decrease in the power sector. New awards in this Group
in 1996 included the large-scale project to manage the environmental cleanup of
the Department of Energy's Hanford site, a former plutonium production facility
located in southeastern Washington state. The contract is for an initial
five-year term with potential contract extensions for an additional five years.
The work is being added to backlog annually as congressional authority to expend
the funds is received. The initial authorized phase of $1 billion was recognized
as a new award in 1996, representing the estimated total value of work to be
performed for the entire project during 1997. In 1998 and 1997, based on the
experience gained during 1997 regarding the Department of Energy's fee
determination procedures for the Hanford project, the company recognized new
awards of $267 million and $220 million, respectively. Such amounts represent
only the company's estimated proportionate share of the total work to be
performed at the Hanford site. Diversified Services new awards in 1998 increased
over 1997 primarily due to the renewal of facility management service contracts
for IBM at various facilities located throughout the United States. Because of
the nature of the services performed by Diversified Services, the majority of
this group's activities are not includable in backlog.
Backlog at October 31, 1998, 1997 and 1996 was $12.6 billion, $14.4 billion
and $15.8 billion, respectively. (See page 20 in this annual report for
information relating to backlog by business group.) The decrease in total
backlog is consistent with the slowing trend in new awards. Work performed on
existing projects has exceeded new awards in both 1998 and 1997. The decrease in
backlog from projects located outside the United States at October 31, 1998, was
primarily due to work performed on international projects such as the Paiton
power project in Indonesia, the Murrin Murrin mining project in Australia and
the Yanpet project in Saudi Arabia. Approximately 18 percent of the company's
backlog is in the Asia Pacific region, including $698 million in Australia. 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 the turmoil in Asian financial markets. During 1998,
turmoil in Indonesia caused a temporary disruption to work progress at several
project sites. These projects are now essentially back to normal operations.
Payments owed the company related to one project have been temporarily delayed.
However,
p. 23
<PAGE> 4
FLUOR CORPORATION
Management's Discussion and Analysis
M D & A
the company believes that all amounts due will be ultimately collected. Although
backlog reflects business which is considered to be 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.
Engineering and Construction revenues decreased to $12.4 billion in 1998
compared with $13.2 billion in 1997, primarily due to a decrease in the volume
of work performed. Revenues in 1996 were $10.1 billion. U.S. revenues decreased
in 1998, reflecting the overall reduction in work performed partially offset by
continued growth within the Diversified Services Group. Revenues for the
Diversified Services Group were $1.8 billion for 1998. Engineering and
Construction operating profits were $242 million in 1998, $122 million in 1997
and $320 million in 1996. Operating margins for the year ended October 31, 1998,
reflect a lower content of work performed on larger, more complex projects which
generally carry higher margins. As discussed below, operating results for the
year ended October 31, 1997, were significantly affected by several items.
Provisions of $91.4 million for estimated losses on certain contracts were
recognized in the second quarter of 1997. Approximately 75 percent of the
contract provisions pertained to cost overruns on one fixed price contract for
the construction of a power plant located outside the United States. Also
included in the second quarter provisions were certain other projects identified
to be loss contracts. None of these provisions individually exceeded $5 million.
No material additional provisions related to these projects have been recorded
subsequent to the second quarter of 1997. Additionally, during the second
quarter of 1997, the company recorded $26.8 million in provisions for the
impairment, abandonment or sale of certain project-related investments and joint
ventures, and doubtful accounts receivable, none of which individually exceeded
$5 million. Provisions of $21.0 million for cost overruns on two fixed price
power projects, including the power project that is referenced above, were
recognized in the first quarter of 1997. The company also recognized in the
first quarter a credit totaling $25.0 million related to certain actuarially
determined insurance accruals.
Results for the year ended October 31, 1997, also included charges totaling
$25.4 million related to implementation of certain cost reduction initiatives.
These charges consisted of personnel-related costs and lease costs for excess
facilities. As of October 31, 1998, substantially all of these costs have been
incurred.
The majority of the company's Engineering and Construction contracts
provide for reimbursement of costs plus a fixed or percentage fee. In the highly
competitive markets served by this segment, there is an increasing trend for
cost-reimbursable contracts with incentive-fee arrangements and fixed or unit
price contracts. In certain instances, the company has provided guaranteed
completion dates and/or achievement of other performance criteria. Failure to
meet schedule or performance guarantees or increases in contract costs can
result in non-recoverable costs which could exceed revenues realized from the
project. The company continues to focus on improving operating margins by
enhancing selectivity in the projects it pursues, lowering overhead costs and
improving project execution.
The Diversified Services Group continues to contribute significantly to the
Engineering and Construction segment's operating results. This Group, which
includes the company's equipment sales and rental, temporary staffing,
maintenance and technology services units, had operating profit of $81 million
in 1998. The company is optimistic for further growth in this Group in 1999 as
it capitalizes on the continued trend towards increased outsourcing, which will
help balance the impact of the global economic slowdown on other Engineering and
Construction business units.
In March 1998, the company formally announced its intention to pursue
options to transact its equipment sales and rental unit, American Equipment
Company (AMECO). In October 1998, because market conditions for the sale
deteriorated rapidly, the company decided to retain ownership of AMECO and
continue with efforts to expand its market position.
The Engineering and Construction segment made no significant acquisitions
during 1998. In December 1996, TRS Staffing Solutions, Inc., the company's
temporary personnel services subsidiary, acquired the ConSol Group; in May 1997,
AMECO acquired the SMA Companies; and, in June 1997, AMECO acquired J.W.
Burress, Inc. These businesses, in addition to other smaller acquisitions, were
purchased for a total of $142 million.
All acquisitions have been accounted for under the purchase method of
accounting and their results of operations have been included in the company's
consolidated financial statements from the respective acquisition dates. If
these acquisitions had been made at the beginning of 1997, pro forma results of
operations would not have differed materially from actual results.
In October 1998, Fluor Daniel, Inc. ("Fluor Daniel"), the company's primary
engineering and construction subsidiary, entered into an agreement to sell its
ownership interest in Fluor Daniel GTI, Inc. ("FD/GTI"). Under terms of the
agreement, the company sold its 4,400,000 shares in FD/GTI for $8.25 per share,
or $36.3 million in cash, on December 3, 1998. This transaction did not have a
material impact on the company's results of operations or financial position.
In August 1997, Fluor Daniel completed the sale of ACQUION, a global
provider of supply chain management services, for $12 million in cash, resulting
in a pretax gain of $7 million.
p. 24
<PAGE> 5
FLUOR CORPORATION
COAL SEGMENT
Revenues and operating profit from Coal operations in 1998 were $1.1 billion and
$173 million, respectively, compared with $1.1 billion and $155 million in 1997.
Revenues and operating profit in 1996 were $961 million and $135 million,
respectively.
Revenues increased $46 million in 1998 primarily due to increased sales
volume of metallurgical coal, partially offset by lower steam coal prices.
Metallurgical coal revenues increased 11 percent primarily due to continued
higher demand by steel producers. Steam coal revenues were flat on steady volume
in 1998 as compared with 1997, while steam coal prices declined approximately 3
percent as overall demand was down due to both a mild winter and summer in 1998.
Gross profit increased by 15 percent and operating profit increased by 12
percent in 1998 compared with 1997, primarily due to reduced production costs
and an increased proportion of higher margin metallurgical coal sales, partially
offset by lower steam coal prices. The market for metallurgical coal in 1999
could be adversely affected by the impact of the global economic situation on
U.S. steel producers. The company believes it is positioned to handle a market
slowdown as it continues to reduce mining production costs through expansion of
its surface mining capabilities and utilization of longwall mining.
Revenues increased in 1997 compared with 1996 primarily due to increased
sales volume of both metallurgical and steam coal, partially offset by lower
steam coal prices. The increase in metallurgical coal revenues is primarily due
to an increased market share of sales to steel producers. Steam coal market
prices declined approximately 4 percent in 1997 as overall demand was down due
to both a mild winter and summer in 1997. Despite lower steam coal prices, steam
coal revenues increased primarily due to the addition of a number of new
electric utility customers. Gross profit and operating profit both increased 15
percent in 1997 compared with 1996, primarily due to the increased sales volume
of both metallurgical and steam coal and lower costs of producing both steam and
metallurgical coal.
Coal segment acquisitions in the three years ended in 1998 have been
primarily focused on the purchase of additional low-sulphur coal reserves in
areas adjacent to existing mine and mill operations. All acquisitions have been
accounted for under the purchase method of accounting and their results of
operations have been included in the company's consolidated financial statements
from the respective acquisition dates. If these acquisitions had been made at
the beginning of the respective year acquired, pro forma results of operations
would not have differed materially from actual results.
OTHER
Net interest expense for 1998 increased compared to 1997 primarily due to an
increase in short-term borrowings required to fund the company's share
repurchase program and a full year of interest related to the $300 million in
long-term debt issued in March 1997. The company had net interest expense in
1997 compared with net interest income in 1996 due primarily to the $300 million
in long-term debt, an increase in other interest bearing liabilities and lower
interest bearing assets.
Corporate administrative and general expense for the year ended October 31,
1998, increased compared with the same period of 1997 primarily due to costs
associated with the company's ongoing strategic business planning effort,
executive severance and recruiting costs. These costs were partially offset by a
first quarter 1998 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. Corporate administrative and general expense
for the year ended October 31, 1997, decreased compared with 1996 due primarily
to lower accruals for stock-related and performance-based compensation plans and
lower corporate overhead.
The effective tax rate for the year ended October 31, 1998, is essentially
the same as the U.S. federal statutory rate. In 1997, the effective tax rate was
materially impacted by foreign-based project losses, other project-related
investment losses and certain implementation costs for cost reduction
initiatives incurred during the year which are not expected to receive full tax
benefit. If these items are excluded for tax rate determination purposes, there
is no significant difference between the effective tax rate and the U.S. federal
statutory rate for the year ended October 31, 1997.
DISCONTINUED OPERATIONS
In October 1997, the company received $60 million representing a negotiated
prepayment of the remaining amounts outstanding stemming from the 1994 sale of
its Lead business. The amount received slightly exceeded the recorded discounted
value of the receivable.
The company has responsibility for certain environmental liabilities
arising out of certain zinc mining and smelting operations formerly conducted by
St. Joe Minerals Corporation ("St. Joe"), but only to the extent that such
liabilities are not
p. 25
<PAGE> 6
FLUOR CORPORATION
Management's Discussion and Analysis
M D & A
covered by St. Joe's comprehensive general liability insurance. The company does
not expect that any matter currently identified will have a material effect on
its results of operations, financial position or cash flows.
FINANCIAL POSITION AND LIQUIDITY
The increase in cash provided by operating activities in 1998, compared with
1997 and 1996, is primarily due to a net decrease in operating assets and
liabilities (excluding the effects of business acquisitions and dispositions),
primarily related to a decrease in the volume of work performed on engineering
and construction contracts. Changes in operating assets and liabilities vary
from year to year and are affected by the mix, stage of completion and
commercial terms of engineering and construction projects. Operating cash flow
was also positively impacted by the receipt of a $30 million tax refund on
January 30, 1998. The increase in cash utilized by investing activities in 1998
compared with 1997, is primarily attributable to monies received in 1997 from
notes receivable related to the ongoing collection of deferred amounts
associated with the company's 1994 sale of its Lead business. Capital
expenditures increased in 1998 as compared to 1997 and 1996. Capital
expenditures in the Engineering and Construction segment were primarily for
AMECO and directed toward expanding the machinery and equipment rental business.
Capital expenditures by the Coal operations have been directed primarily toward
developing existing reserves and acquiring additional coal reserves. In 1998 and
1997, financing activities included cash generated from short-term and long-term
borrowings, respectively, which was used to fund operating working capital,
capital expenditures and the company's share repurchase program.
The long-term debt to capitalization ratio at October 31, 1998, was 16.5
percent compared with 14.7 percent at October 31, 1997.
The company has on hand and access to sufficient sources of funds to meet
its anticipated operating needs. 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 program under which there was $245 million outstanding at
October 31, 1998, compared with $62 million at October 31, 1997. During 1998,
the company expanded both its revolving credit facility and its commercial paper
program from $250 million to $400 million. In December 1998, the company further
increased this facility to $600 million. The company is currently in a negative
working capital position due to the significant short-term borrowings
outstanding as a result of its share repurchase program. The company anticipated
using the after-tax proceeds from its proposed sale of AMECO to repay such
borrowings. Despite the decision to terminate the sale of AMECO, the company
believes it will have adequate funds from operations or other sources to service
its debt as well as support its operating needs.
During December 1996, the company filed a shelf registration statement with
the Securities and Exchange Commission for the sale of up to $400 million of
debt securities. In March 1997, $300 million of 6.95 percent senior notes due
March 1, 2007, were issued under this filing. Proceeds were used primarily to
fund operating working capital and capital expenditures. In addition, the
company utilized proceeds from the debt offering to continue its share
repurchase program initiated in February 1997.
During 1998, the company purchased 8.3 million shares of its common stock
for a total of $379 million. In 1997, the company repurchased .6 million shares
of its common stock for a total of $34 million.
Cash dividends decreased to $63.5 million ($.80 per share) in 1998 from
$63.8 million ($.76 per share) in 1997 as a result of lower shares outstanding
resulting from the company's share repurchase program. Cash dividends in 1996
were $56.8 million ($.68 per share).
Although the company is affected by inflation and the cyclical nature of
the industry, its engineering and construction operations are generally
protected by the ability to fix costs at the time of bidding or to recover cost
increases in most contracts. Coal operations produce a commodity which is
internationally traded at prices established by market factors outside the
control of the company. However, commodity prices generally tend over the long
term to correlate with inflationary trends, and the company's substantial coal
reserves provide a hedge against the long-term effects of inflation. Although
the company has taken actions to reduce its dependence on external economic
conditions, management is unable to predict with certainty the amount and mix of
future business.
FINANCIAL INSTRUMENTS
During the fourth quarter of 1998, 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 1999 and gives the company a choice of
settlement method. This contract effectively incorporates and extends a number
of prior contracts originally entered into during the third quarter of 1998 as
part of the company's then ongoing share repurchase program.
The company's investment securities and substantially all of its debt
instruments carry fixed rates of interest over their respective maturity terms.
The company does not currently use derivatives, such as swaps, to alter the
interest characteristics of
P. 26
<PAGE> 7
FLUOR CORPORATION
its investment securities or its debt instruments. The company's exposure to
interest rate risk on its $300 million senior notes, due in 2007, is not
material given the company's strong balance sheet and creditworthiness which
provides the ability to refinance.
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 October 31, 1998 and 1997, the company had forward
foreign exchange contracts of less than eighteen months duration, to exchange
principally Australian Dollars, Korean Won, Dutch Guilders and German Marks for
U.S. Dollars. In addition, the company has a forward foreign 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 October 31, 1998 and 1997 was $106 million and $78 million,
respectively. Forward contracts to purchase foreign currency represented $102
million and $74 million and forward contracts to sell foreign currency
represented $4 million and $4 million, at October 31, 1998 and 1997,
respectively.
THE YEAR 2000 ISSUE -- READINESS DISCLOSURE
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 building
security equipment. 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 Y2K Program is coordinated at the corporate
level and is implemented by teams in the company's operating units throughout
the world. The Y2K Program has been implemented in the following phases: (1)
identification and assessment of all critical computer systems and equipment
requiring modification or replacement; (2) remediation or replacement and
testing of modifications to critical items; and (3) development of contingency
and business continuity plans to mitigate the effect of any system or equipment
failure to the company's operations and systems and equipment provided to its
clients arising from the Year 2000 issue. The company is monitoring the Year
2000 efforts of its equity affiliates and joint venture partners. 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 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 services,
proprietary engineering and procurement systems and technical reference
databases. With respect to business systems, such as general ledgers, human
resources and payroll and field accounting software, phases (1) and (2) of the
Y2K Program are expected to be completed by March 1999. Operating software,
network capabilities and hardware are being addressed via upgrades.
Approximately 40% of the company's current systems will be retired. Completion
of the upgrade process is expected by June 1999. A standard compliance process
is being used to certify Year 2000 compliance with vendors of purchased
software. The majority of the company's engineering software has been remediated
and tested, and is believed to be Year 2000 ready.
Remediation/replacement and testing of (1) the company's mission critical
systems and equipment in use at the company's project sites is expected to be
completed by June 1999; (2) mission critical systems and equipment in use at the
company's coal preparation plants are expected to be Year 2000 ready by June
1999 and (3) mission critical site specific systems and equipment located at the
company's Department of Energy projects are expected to be completed in March
1999. Mission critical items are 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.
With respect to systems and equipment 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.
Regarding current projects, the company is currently evaluating those
projects for Year 2000 readiness and determining whether or not any additional
action is required. 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. The company has established
a procedure for reviewing Year 2000 compliance by each of its suppliers. As part
of that process, the company has identified critical suppliers and is currently
assessing the level of compliance for each. Actions include the review of
p.27
<PAGE> 8
FLUOR CORPORATION
Management's Discussion and Analysis
M D & A
remediation and testing of specific equipment and suppliers' corporate Year 2000
progress, and confirmation of electronic exchange formats. The company requires
its suppliers to certify and guarantee Year 2000 compliance of their systems and
equipment provided. 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 with their systems and equipment in a timely
manner.
The company uses both internal and external resources in its Y2K Program.
The company has estimated that to date it has spent approximately $7.5 million
to $8.5 million on the Year 2000 issue. It anticipates spending an additional
$6.1 million to $7.4 million. This estimate 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.
These costs are the company's best estimate given other ongoing systems
initiatives (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 will 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 attempt to develop responses
in a timely manner. However, 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.
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, availability of qualified
computer personnel, the Year 2000 readiness of third parties and the Year 2000
compliance of systems and equipment provided by suppliers. 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 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
The Euro was introduced on January 1, 1999, at which time the conversion rates
between legacy currencies and the Euro were set for 11 participating EMU member
countries. However, the legacy currencies in those countries will continue to be
used as legal tender through January 1, 2002. Thereafter, the legacy currencies
will be canceled and Euro bills and coins will be used in the 11 participating
countries.
Transition to the Euro creates a number of issues for the company. Business
issues that must be addressed include pricing policies and ensuring the
continuity of business and financial contracts. Finance and accounting issues
include the conversion of accounting systems, statutory records, tax books and
payroll systems to the Euro, as well as conversion of bank accounts and other
treasury and cash management activities.
The company has addressed, and is continuing to address, these transition
issues. The company does not anticipate that the transition to the Euro will
have a significant impact on its results of operations, financial position or
cash flows.
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 new
standards for reporting information about operating segments in interim and
annual financial statements. This statement is effective for the company's
fiscal year 1999.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial 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. This
statement is effective for the Company's fiscal year 2000. 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.
p.28
<PAGE> 9
FLUOR CORPORATION
Consolidated
BALANCE SHEET
<TABLE>
<CAPTION>
At October 31, 1998 1997
(IN THOUSANDS)
<S> <C> <C>
ASSETS
- ------
CURRENT ASSETS
Cash and cash equivalents $ 340,544 $ 299,324
Marketable securities -- 10,089
Accounts and notes receivable 959,416 917,604
Contract work in progress 596,983 691,395
Inventories 198,645 175,448
Deferred taxes 81,155 58,039
Other current assets 64,108 61,487
Net assets held for sale 36,300 --
--------------------------
Total current assets 2,277,151 2,213,386
--------------------------
PROPERTY, PLANT AND EQUIPMENT
Land 69,779 70,571
Buildings and improvements 352,653 341,260
Machinery and equipment 2,012,539 1,761,275
Mining properties and mineral rights 788,978 729,458
Construction in progress 56,282 37,541
--------------------------
3,280,231 2,940,105
Less accumulated depreciation, depletion and amortization 1,132,923 1,001,315
--------------------------
Net property, plant and equipment 2,147,308 1,938,790
--------------------------
OTHER ASSETS
Goodwill, net of accumulated amortization of $33,766
and $28,399, respectively 139,091 158,399
Investments 137,562 96,549
Other 318,096 278,216
--------------------------
Total other assets 594,749 533,164
--------------------------
$ 5,019,208 $ 4,685,340
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Trade accounts and notes payable $ 972,096 $ 858,187
Commercial paper and loan notes 428,458 81,886
Advance billings on contracts 546,816 525,518
Accrued salaries, wages and benefit plan liabilities 324,412 303,490
Other accrued liabilities 223,596 208,987
Current portion of long-term debt 176 116
--------------------------
Total current liabilities 2,495,554 1,978,184
--------------------------
LONG-TERM DEBT DUE AFTER ONE YEAR 300,428 300,508
NONCURRENT LIABILITIES
Deferred taxes 105,515 66,739
Other 592,102 598,859
--------------------------
Total noncurrent liabilities 697,617 665,598
--------------------------
CONTINGENCIES AND COMMITMENTS
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 in 1998-- 75,572,537 shares and in 1997-- 83,748,111 shares 47,233 52,343
Additional capital 199,077 569,356
Retained earnings 1,331,843 1,159,996
Unamortized executive stock plan expense (22,633) (33,441)
Cumulative translation adjustment (29,911) (7,204)
--------------------------
Total shareholders' equity 1,525,609 1,741,050
--------------------------
$ 5,019,208 $ 4,685,340
==========================
</TABLE>
See Notes to Consolidated Financial Statements.
p.29
<PAGE> 10
FLUOR CORPORATION
Consolidated Statement of
EARNINGS
<TABLE>
<CAPTION>
Year ended October 31, 1998 1997 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
REVENUES
Engineering and construction services $ 12,377,476 $ 13,217,515 $ 10,054,365
Coal 1,127,297 1,081,026 960,827
--------------------------------------------
Total revenues 13,504,773 14,298,541 11,015,192
--------------------------------------------
COST OF REVENUES
Engineering and construction services 12,140,901 13,096,310 9,739,148
Coal 954,535 926,260 826,301
--------------------------------------------
Total cost of revenues 13,095,436 14,022,570 10,565,449
OTHER (INCOME) AND EXPENSES
Corporate administrative and general expense 22,598 13,230 48,120
Interest expense 45,277 30,758 16,051
Interest income (21,164) (23,286) (27,646)
--------------------------------------------
Total cost and expenses 13,142,147 14,043,272 10,601,974
--------------------------------------------
EARNINGS BEFORE TAXES 362,626 255,269 413,218
INCOME TAX EXPENSE 127,282 109,082 145,134
--------------------------------------------
NET EARNINGS $ 235,344 $ 146,187 $ 268,084
============================================
EARNINGS PER SHARE
Basic $ 2.99 $ 1.76 $ 3.24
Diluted $ 2.97 $ 1.75 $ 3.21
============================================
SHARES USED TO CALCULATE EARNINGS PER SHARE
Basic 78,801 83,091 82,755
Diluted 79,135 83,478 83,398
============================================
</TABLE>
See Notes to Consolidated Financial Statements.
p.30
<PAGE> 11
FLUOR CORPORATION
Consolidated Statement of
CASH FLOWS
<TABLE>
<CAPTION>
Year ended October 31, 1998 1997 1996
(in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 235,344 $ 146,187 $ 268,084
Adjustments to reconcile net earnings to cash provided
by operating activities:
Depreciation, depletion and amortization 288,870 248,353 194,129
Deferred taxes 28,780 25,428 12,631
Provisions for impairment/abandonment of joint
ventures and investments -- 22,962 --
Gain on sale of business -- (7,222) --
Changes in operating assets and liabilities, excluding
effects of business acquisitions/dispositions 168,576 (67,224) (60,353)
Other, net (19,051) (39,860) (7,632)
-----------------------------------
Cash provided by operating activities 702,519 328,624 406,859
-----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (600,933) (466,202) (392,436)
E&C businesses acquired -- (141,718) (87,085)
Coal businesses and reserves acquired (12,004) (39,482) (5,010)
Purchase of marketable securities -- -- (67,069)
Proceeds from sales and maturities of marketable securities 10,089 59,289 134,496
Investments, net (20,745) (9,275) 3,991
Proceeds from sale of property, plant and equipment 125,493 50,996 29,486
Collection of notes receivable -- 77,496 11,072
Contributions to deferred compensation trust (21,365) (43,026) --
Net assets held for sale, including cash (26,375) -- --
Proceeds from sale of business -- 11,992 --
Other, net (17,477) (12,041) (23,771)
-----------------------------------
Cash utilized by investing activities (563,317) (511,971) (396,326)
-----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid (63,497) (63,750) (56,830)
Payments on long-term debt (285) (8,378) (42,456)
Increase in short-term borrowings, net 341,809 21,692 26,109
Increase in long-term borrowings -- 304,097 --
Stock options exercised 9,935 16,007 17,351
Purchases of common stock (378,979) (33,924) --
Other, net (6,965) (37) (677)
-----------------------------------
Cash (utilized) provided by financing activities (97,982) 235,707 (56,503)
-----------------------------------
Increase (decrease) in cash and cash equivalents 41,220 52,360 (45,970)
Cash and cash equivalents at beginning of year 299,324 246,964 292,934
-----------------------------------
Cash and cash equivalents at end of year $ 340,544 $ 299,324 $ 246,964
===================================
</TABLE>
See Notes to Consolidated Financial Statements.
p. 31
<PAGE> 12
FLUOR CORPORATION
Consolidated Statement of
SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unamortized
Executive
Common Stock Additional Retained Stock Plan
Shares Amount Capital Earnings Expense
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE AT OCTOBER 31, 1995 83,165 $ 51,978 $ 538,503 $ 866,305 $ (26,865)
============================================================================
Net earnings -- -- -- 268,084 --
Cash dividends ($.68 per share) -- -- -- (56,830) --
Exercise of stock options, net 466 291 17,060 -- --
Stock option tax benefit -- -- 3,977 -- --
Amortization of executive stock plan expense -- -- -- -- 5,723
Issuance of restricted stock, net 160 100 11,084 -- (11,396)
Tax benefit from reduction of valuation
allowance for deferred tax assets -- -- 2,413 -- --
Translation adjustment
(net of deferred taxes of $1,019) -- -- -- -- --
----------------------------------------------------------------------------
BALANCE AT OCTOBER 31, 1996 83,791 52,369 573,037 1,077,559 (32,538)
============================================================================
Net earnings -- -- -- 146,187 --
Cash dividends ($.76 per share) -- -- -- (63,750) --
Exercise of stock options, net 415 260 15,747 -- --
Stock option tax benefit -- -- 3,528 -- --
Amortization of executive stock plan expense -- -- -- -- 8,183
Issuance of restricted stock, net 161 101 9,006 -- (9,086)
Purchases of common stock (619) (387) (33,537) -- --
Tax benefit from reduction of valuation
allowance for deferred tax assets -- -- 1,575 -- --
Translation adjustment
(net of deferred taxes of $3,867) -- -- -- -- --
----------------------------------------------------------------------------
BALANCE AT OCTOBER 31, 1997 83,748 52,343 569,356 1,159,996 (33,441)
============================================================================
Net earnings -- -- -- 235,344 --
Cash dividends ($.80 per share) -- -- -- (63,497) --
Exercise of stock options, net 268 167 9,768 -- --
Stock option tax benefit -- -- 2,425 -- --
Amortization of executive stock plan expense -- -- -- -- 7,343
Issuance of restricted stock, net (144) (90) (8,680) -- 3,465
Purchases of common stock (8,299) (5,187) (373,792) -- --
Translation adjustment
(net of deferred taxes of $14,439) -- -- -- -- --
----------------------------------------------------------------------------
BALANCE AT OCTOBER 31, 1998 75,573 $ 47,233 $ 199,077 $ 1,331,843 $ (22,633)
============================================================================
</TABLE>
<TABLE>
<CAPTION>
Cumulative
Translation
Adjustment Total
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
BALANCE AT OCTOBER 31, 1995 $ 893 $ 1,430,814
===========================
Net earnings -- 268,084
Cash dividends ($.68 per share) -- (56,830)
Exercise of stock options, net -- 17,351
Stock option tax benefit -- 3,977
Amortization of executive stock plan expense -- 5,723
Issuance of restricted stock, net -- (212)
Tax benefit from reduction of valuation
allowance for deferred tax assets -- 2,413
Translation adjustment
(net of deferred taxes of $1,019) (1,594) (1,594)
---------------------------
BALANCE AT OCTOBER 31, 1996 (701) 1,669,726
===========================
Net earnings -- 146,187
Cash dividends ($.76 per share) -- (63,750)
Exercise of stock options, net -- 16,007
Stock option tax benefit -- 3,528
Amortization of executive stock plan expense -- 8,183
Issuance of restricted stock, net -- 21
Purchases of common stock -- (33,924)
Tax benefit from reduction of valuation
allowance for deferred tax assets -- 1,575
Translation adjustment
(net of deferred taxes of $3,867) (6,503) (6,503)
---------------------------
BALANCE AT OCTOBER 31, 1997 (7,204) 1,741,050
===========================
Net earnings -- 235,344
Cash dividends ($.80 per share) -- (63,497)
Exercise of stock options, net -- 9,935
Stock option tax benefit -- 2,425
Amortization of executive stock plan expense -- 7,343
Issuance of restricted stock, net -- (5,305)
Purchases of common stock -- (378,979)
Translation adjustment
(net of deferred taxes of $14,439) (22,707) (22,707)
---------------------------
BALANCE AT OCTOBER 31, 1998 $ (29,911) $ 1,525,609
===========================
</TABLE>
See Notes to Consolidated Financial Statements.
p. 32
<PAGE> 13
FLUOR CORPORATION
NOTES
to Consolidated Financial Statements
MAJOR ACCOUNTING POLICIES
Principles of Consolidation
The financial statements include the accounts of the company and its
subsidiaries. The equity method of accounting is used for investment ownership
ranging from 20 percent to 50 percent. Investment ownership of less than 20
percent is accounted for on the cost method. All significant intercompany
transactions of consolidated subsidiaries are eliminated. Certain 1997 and 1996
amounts have been reclassified to conform with the 1998 presentation.
Use of Estimates
The preparation of the financial statements of the company requires management
to make estimates and assumptions that affect reported amounts. These estimates
are based on information available as of the date of the financial statements.
Therefore, actual results could differ from those estimates.
Engineering and Construction Contracts
The company recognizes engineering and construction contract revenues using the
percentage-of-completion method, based primarily on contract costs incurred to
date compared with total estimated contract costs. Customer-furnished materials,
labor and equipment, and in certain cases subcontractor materials, labor and
equipment, are included in revenues and cost of revenues when management
believes that the company is responsible for the ultimate acceptability of the
project. Contracts are segmented between types of services, such as engineering
and construction, and accordingly, gross margin related to each activity is
recognized as those separate services are rendered. Changes to total estimated
contract costs or losses, if any, are recognized in the period in which they are
determined. Revenues recognized in excess of amounts billed are classified as
current assets under contract work in progress. Amounts billed to clients in
excess of revenues recognized to date are classified as current liabilities
under advance billings on contracts. The company anticipates that substantially
all incurred costs associated with contract work in progress at October 31, 1998
will be billed and collected in 1999.
Depreciation, Depletion and Amortization
Additions to property, plant and equipment are recorded at cost. Assets other
than mining properties and mineral rights are depreciated principally using the
straight-line method over the following estimated useful lives: buildings and
improvements -- three to 50 years and machinery and equipment -- two to 30
years. Mining properties and mineral rights are depleted on the
units-of-production method. Leasehold improvements are amortized over the lives
of the respective leases. Goodwill is amortized on the straight-line method over
periods not longer than 40 years.
Exploration, Development and Reclamation
Coal exploration costs are expensed as incurred. Development and acquisition
costs of coal properties, when significant, are capitalized in mining properties
and depleted. The company accrues for post-mining reclamation costs as coal is
mined. Reclamation of disturbed surface acreage is performed as a normal part of
the mining process.
Income Taxes
Deferred tax assets and liabilities are recognized for the expected future tax
consequences of events that have been recognized in the company's financial
statements or tax returns.
Earnings per Share
Effective November 1, 1997, the company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share," which specifies the method
of computation, presentation and disclosure for earnings per share ("EPS"). The
new standard requires presentation of two EPS amounts, basic and diluted. Basic
EPS is calculated by dividing net earnings by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the assumed
conversion of all dilutive securities, consisting of employee stock options and
restricted stock, and equity forward contracts. EPS amounts for prior periods
have been adjusted to conform with the provisions of the new standard.
The impact of dilutive securities in 1998 totaled 334,000 shares, 231,000 of
which related to employee stock options and restricted stock. The impact of
dilutive securities in 1997 and 1996 related solely to employee stock options
and restricted stock.
Marketable Securities
All investment securities are considered to be available-for-sale and carried at
fair value. 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 debt
securities. During 1998, the company liquidated its marketable securities
portfolio. Gross realized gains and losses on sales of securities for the years
ended October 31, 1998 and 1997 were not material. As of October 31, 1997, there
were no material gross unrealized gains or losses as the carrying value of the
security portfolio approximated fair value. The cost of securities sold is based
on the specific identification method.
p. 33
<PAGE> 14
FLUOR CORPORATION
NOTES
to Consolidated Financial Statements
Inventories
Inventories are stated at the lower of cost or market using the average cost
method. Inventories comprise:
<TABLE>
<CAPTION>
At October 31, 1998 1997
(IN THOUSANDS)
<S> <C> <C>
Equipment for sale/rental $ 94,179 $ 74,574
Coal 52,628 54,419
Supplies and other 51,838 46,455
-------------------------
$198,645 $175,448
=========================
</TABLE>
Foreign Currency
The company uses forward exchange contracts to hedge certain foreign currency
transactions entered into in the ordinary course of business. The company does
not engage in currency speculation. The company's forward exchange contracts do
not subject the company to risk from exchange rate movements because gains and
losses on such contracts offset losses and gains, respectively, on the assets,
liabilities or transactions being hedged. Accordingly, the unrealized gains and
losses are deferred and included in the measurement of the related foreign
currency transaction. At October 31, 1998, the company had approximately $106
million of foreign exchange contracts outstanding relating to lease commitments
and contract obligations. The forward exchange contracts generally require the
company to exchange U.S. dollars for foreign currencies at maturity, at rates
agreed to at inception of the contracts. If the counterparties to the exchange
contracts (AA rated banks) do not fulfill their obligations to deliver the
contracted currencies, the company could be at risk for any currency related
fluctuations. The amount of any gain or loss on these contracts in 1998 and 1997
was immaterial. The contracts are of varying duration, none of which extend
beyond December 2000. The company limits exposure to foreign currency
fluctuations in most of its engineering and construction contracts through
provisions that require client payments in U.S. dollars or other currencies
corresponding to the currency in which costs are incurred. As a result, the
company generally does not need to hedge foreign currency cash flows for
contract work performed. The functional currency of all significant foreign
operations is the local currency.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial 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. This
statement is effective for the company's fiscal year 2000. 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.
Concentrations of Credit Risk
The majority of accounts receivable and all contract work in progress are from
engineering and construction clients in various industries and locations
throughout the world. Most contracts require payments as the projects progress
or in certain cases advance payments. The company generally does not require
collateral, but in most cases can place liens against the property, plant or
equipment constructed or terminate the contract if a material default occurs.
Accounts receivable from customers of the company's Coal operations are
primarily concentrated in the steel and utility industries. The company
maintains adequate reserves for potential credit losses and such losses have
been minimal and within management's estimates.
Stock Plans
The company accounts for stock-based compensation using the intrinsic value
method prescribed by Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations.
Accordingly, compensation cost for stock options is measured as the excess, if
any, of the quoted market price of the company's stock at the date of the grant
over the amount an employee must pay to acquire the stock. Compensation cost for
stock appreciation rights and performance equity units is recorded based on the
quoted market price of the company's stock at the end of the period.
CONSOLIDATED STATEMENT OF CASH FLOWS
Securities with maturities of 90 days or less at the date of purchase are
classified as cash equivalents. Securities with maturities beyond 90 days are
classified as marketable securities and are carried at fair value. The changes
in operating assets and liabilities as shown in the Consolidated Statement of
Cash Flows comprise:
<TABLE>
<CAPTION>
Year ended October 31, 1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
(Increase) decrease in:
Accounts and notes receivable $ (84,394) $(113,454) $ (78,632)
Contract work in progress 73,575 (130,257) (176,137)
Inventories (23,197) (40,303) (8,743)
Other current assets (192) (17,028) (18,465)
Increase in:
Accounts payable 127,229 130,992 167,350
Advance billings on contracts 21,298 79,510 43,382
Accrued liabilities 54,257 23,316 10,892
-----------------------------------
Decrease (increase) in operating
assets and liabilities $ 168,576 $ (67,224) $ (60,353)
===================================
Cash paid during the year for:
Interest expense $ 44,057 $ 25,491 $ 11,832
Income tax payments, net $ 52,346 $ 75,967 $ 120,570
</TABLE>
p. 34
<PAGE> 15
FLUOR CORPORATION
BUSINESS ACQUISITIONS
The following summarizes major Engineering and Construction acquisitions
completed during 1997 and 1996. These acquisitions were concentrated primarily
in the Diversified Services Group. There were no major Engineering and
Construction acquisitions in 1998.
1997:
- - ConSol Group, a privately held U.S. company headquartered in New Hampshire,
that provides staffing personnel in the fields of information technology and
allied health.
- - J.W. Burress, Inc., a privately held U.S. company headquartered in Virginia,
that provides product support services and sells, rents and services new and
used construction and industrial machinery.
- - SMA Companies, privately held U.S. companies headquartered in California and
Georgia. These companies sell, rent and service heavy construction and
industrial equipment and provide proprietary software to other equipment
distributors throughout the U.S.
These businesses and other smaller acquisitions were purchased for a total
of $142 million. The fair value of assets acquired, including working capital of
$42 million and goodwill of $67 million, was $196 million, and liabilities
assumed totaled $54 million.
1996:
- - Groundwater Technology, Inc. ("GTI"), a publicly traded company
headquartered in Massachusetts, that provides detailed, scientific
environmental assessment and remediation programs, as well as other
environmental support services. Under the terms of the transaction, the
company consummated a merger between one of its subsidiaries, Fluor Daniel
Environmental Services, Inc., and GTI wherein the company acquired an
approximate 55 percent interest in the newly named company, Fluor Daniel
GTI, Inc. ("FD/GTI").
- - S&R Equipment Company, Inc., a privately held U.S. company based in Ohio,
that specializes in high-lift equipment rentals.
- - Marshall Contractors, Inc., a privately held U.S. company based in Rhode
Island, that provides specialized construction services to the
microelectronics, pharmaceuticals, biotechnology, foods and related
industries.
These businesses and other smaller acquisitions were purchased for a total
of $87 million. The fair value of assets acquired, including working capital of
$26 million and goodwill of $50 million, was $329 million, and liabilities
assumed totaled $242 million.
In 1998, Massey Coal Company ("Massey") acquired coal reserves for an
aggregate cost of $12 million. Massey purchased four coal mining companies
during 1997 and 1996. The aggregate purchase price was $44 million and included
the fair value of assets acquired, consisting of $79 million of property, plant
and equipment, and mining rights, $14 million of working capital and other
assets, net of other liabilities assumed of $49 million. These acquisitions,
along with capital expenditures, have been directed primarily towards acquiring
additional coal reserves.
All of the above acquisitions have been accounted for under the purchase
method of accounting and their results of operations have been included in the
company's consolidated financial statements from the respective acquisition
dates. If these acquisitions had been made at the beginning of the respective
year acquired, pro forma results of operations would not have differed
materially from actual results.
From time to time, the company enters into investment arrangements,
including joint ventures, that are related to its Engineering and Construction
business. During 1996 through 1998, the majority of these expenditures related
to ongoing investments in an equity fund that focuses on energy related projects
and a number of smaller, diversified ventures.
BUSINESS DISPOSITIONS
On October 28, 1998, the company entered into an agreement to sell its ownership
interest in FD/GTI. Under terms of the agreement, the company sold its 4,400,000
shares in FD/GTI for $8.25 per share, or $36.3 million in cash, on December 3,
1998. The net assets of FD/GTI have been reflected on the consolidated balance
sheet at net realizable value and include $26.4 million in cash and cash
equivalents. This transaction did not have a material impact on the company's
results of operations or financial position.
During 1997, the company completed the sale of ACQUION, a global provider
of supply chain management services, for $12 million in cash, resulting in a
pretax gain of $7 million.
p. 35
<PAGE> 16
FLUOR CORPORATION
NOTES
to Consolidated Financial Statements
COST REDUCTION INITIATIVES
During 1997, the company recorded $25.4 million in charges related to the
implementation of certain cost reduction initiatives. These charges provided for
personnel and facility related costs. As of October 31, 1998, substantially all
of these costs have been incurred.
INCOME TAXES
The income tax expense (benefit) included in the Consolidated Statement of
Earnings is as follows:
<TABLE>
<CAPTION>
Year ended October 31, 1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal $ 38,700 $ 50,906 $ 94,864
Foreign 52,021 25,801 25,872
State and local 7,781 6,947 11,767
---------------------------------------
Total current 98,502 83,654 132,503
=======================================
Deferred:
Federal 43,369 19,972 13,081
Foreign (19,295) 3,908 1,974
State and local 4,706 1,548 (2,424)
---------------------------------------
Total deferred 28,780 25,428 12,631
---------------------------------------
Total income tax expense $ 127,282 $109,082 $ 145,134
=======================================
</TABLE>
A reconciliation of U.S. statutory federal income tax expense to the
company's income tax expense on earnings is as follows:
<TABLE>
<CAPTION>
Year ended October 31, 1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
U.S. statutory federal
income tax expense $ 126,919 $ 89,344 $ 144,626
Increase (decrease) in taxes resulting from:
State and local income taxes 7,868 5,337 9,542
Items without tax effect, net 6,480 17,623 (1,566)
Effect of non-U.S. tax rates 3,433 10,620 6,057
Depletion (12,273) (10,051) (11,054)
Other, net (5,145) (3,791) (2,471)
-----------------------------------
Total income tax expense $ 127,282 $ 109,082 $ 145,134
===================================
</TABLE>
Deferred taxes reflect the tax effects of differences between the amounts
recorded as assets and liabilities for financial reporting purposes and the
amounts recorded for income tax purposes. The tax effects of significant
temporary differences giving rise to deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
At October 31, 1998 1997
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accrued liabilities not
currently deductible $ 224,319 $ 224,225
Alternative minimum tax
credit carryforwards 32,505 33,419
Translation adjustments 19,045 4,606
Tax basis of building in excess
of book basis 16,187 16,896
Net operating loss carryforwards
of acquired companies 7,177 16,070
Other 67,379 53,996
-------------------------
Total deferred tax assets 366,612 349,212
Valuation allowance for deferred tax assets (71,346) (70,840)
-------------------------
Deferred tax assets, net 295,266 278,372
-------------------------
Deferred tax liabilities:
Book basis of property, equipment and
other capital costs in excess of tax basis (254,008) (191,846)
Tax on unremitted non-U.S. earnings (15,806) (13,484)
Other (49,812) (81,742)
-------------------------
Total deferred tax liabilities (319,626) (287,072)
-------------------------
Net deferred tax liabilities $ (24,360) $ (8,700)
=========================
</TABLE>
In 1997, the company acquired the SMA Companies which had net operating
loss carryforwards of approximately $47 million. In 1998, the company utilized
approximately $2 million of the loss carryforwards, and made an election in its
consolidated federal tax return to waive approximately $23 million of losses
which otherwise would have expired without future tax benefit. The remaining
loss carryforwards of approximately $22 million expire in years 2004 through
2008. The utilization of such loss carryforwards is subject to stringent
limitations under the Internal Revenue Code.
The company also has alternative minimum tax credits associated with the
coal business operated by Massey. These credits can be carried forward
indefinitely until fully utilized.
p. 36
<PAGE> 17
FLUOR CORPORATION
The company maintains a valuation allowance to reduce certain deferred tax
assets to amounts that are more likely than not to be realized. This allowance
primarily relates to the deferred tax assets established for loss carryforwards
and alternative minimum tax credits. Any reductions in the allowance resulting
from realization of the loss carryforwards for acquired companies will result in
a reduction of goodwill.
Residual income taxes of approximately $8 million have not been provided on
approximately $20 million of undistributed earnings of certain foreign
subsidiaries at October 31, 1998, because the company intends to keep those
earnings reinvested indefinitely.
United States and foreign earnings before taxes are as follows:
<TABLE>
<CAPTION>
Year ended October 31, 1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
United States $240,645 $231,921 $363,687
Foreign 121,981 23,348 49,531
------------------------------------------
Total $362,626 $255,269 $413,218
==========================================
</TABLE>
RETIREMENT BENEFITS
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits" (SFAS No. 132). SFAS No. 132 does not change
the measurement or recognition provisions of previously issued standards, but
revises disclosures about pensions and other postretirement benefit plans. The
company adopted SFAS No. 132 in fiscal 1998. Restatement of disclosures for the
prior years has been made for comparative purposes.
The company sponsors contributory and non-contributory defined contribution
retirement and defined benefit pension plans for eligible employees.
Contributions to defined contribution retirement plans are based on a percentage
of the employee's compensation. Expense recognized for these plans of
approximately $79 million in 1998, $84 million in 1997, and $75 million in 1996,
is primarily related to domestic engineering and construction operations.
Contributions to defined benefit pension plans are generally at the minimum
annual amount required by applicable regulations. Payments to retired employees
under these plans are generally based upon length of service and/or a percentage
of qualifying compensation. The defined benefit pension plans are primarily
related to international engineering and construction operations, U.S. craft
employees and coal operations.
Net periodic pension income for defined benefit pension plans includes the
following components:
<TABLE>
<CAPTION>
Year ended October 31, 1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost $ 15,792 $ 15,301 $ 14,284
Interest cost 24,220 23,743 22,248
Expected return on assets (48,236) (44,334) (39,712)
Amortization of transition asset (2,196) (2,296) (2,453)
Amortization of prior
service cost 355 347 376
Recognized net actuarial gain (1,444) (1,288) (204)
-------- -------- --------
Net periodic pension income $(11,509) $ (8,527) $ (5,461)
======== ======== ========
</TABLE>
The ranges of assumptions indicated below cover defined benefit pension
plans in Australia, Germany, the United Kingdom, The Netherlands and the United
States. These assumptions are as of each respective fiscal year-end based on the
then current economic environment in each host country.
<TABLE>
<CAPTION>
At October 31, 1998 1997
<S> <C> <C>
Discount rates 5.0 - 6.75% 6.5 - 8.25%
Rates of increase in compensation levels 2.5 - 4.0% 3.0 - 5.25%
Expected long-term rates of return on assets 5.0 - 9.5% 5.5 - 9.5%
</TABLE>
The following table sets forth the change in benefit obligation, plan
assets and funded status of the company's defined benefit pension plans:
<TABLE>
<CAPTION>
At October 31, 1998 1997
(IN THOUSANDS)
<S> <C> <C>
Change in pension benefit obligation
Benefit obligation at beginning of year $ 358,539 $ 319,066
Service cost 15,792 15,301
Interest cost 24,220 23,743
Employee contributions 1,775 1,731
Currency translation 12,454 (14,647)
Actuarial loss 52,498 38,470
Benefits paid (26,412) (25,125)
-------------------------
Benefit obligation at end of year $ 438,866 $ 358,539
=========================
Change in plan assets
Fair value at beginning of year $ 539,814 $ 488,458
Actual return on plan assets 42,324 87,981
Company contributions 4,711 5,540
Employee contributions 1,775 1,731
Currency translation 13,807 (18,771)
Benefits paid (26,412) (25,125)
-------------------------
Fair value at end of year $ 576,019 $ 539,814
=========================
Funded status $ 137,153 $ 181,275
Unrecognized net actuarial loss (gain) 16,579 (45,054)
Unrecognized prior service cost 601 789
Unrecognized net asset (11,737) (11,941)
-------------------------
Pension assets $ 142,596 $ 125,069
=========================
</TABLE>
Amounts shown above at October 31, 1998 and 1997 exclude the projected benefit
obligation of approximately $113 million and $109 million, respectively, and an
equal amount of associated plan assets relating to discontinued operations.
p. 37
<PAGE> 18
FLUOR CORPORATION
NOTES
to Consolidated Financial Statements
Massey participates in multiemployer defined benefit pension plans for its
union employees. Pension expense was less than $1 million in each of the years
ended October 31, 1998, 1997 and 1996. Under the Coal Industry Retiree Health
Benefits Act of 1992, Massey is required to fund medical and death benefits of
certain beneficiaries. Massey's obligation under the Act is estimated to
aggregate approximately $47 million at October 31, 1998, which will be
recognized as expense as payments are assessed. The expense recorded for such
benefits was $4 million in 1998, $7 million in 1997 and $2 million in 1996.
In addition to the company's defined benefit pension plans, the company and
certain of its subsidiaries provide health care and life insurance benefits for
certain retired employees. The health care and life insurance plans are
generally contributory, with retiree contributions adjusted annually. Service
costs are accrued currently. The accumulated postretirement benefit obligation
at October 31, 1998 and 1997 was determined in accordance with the current terms
of the company's health care plans, together with relevant actuarial assumptions
and health care cost trend rates projected at annual rates ranging from 8.5
percent in 1999 down to 5 percent in 2004 and beyond. The effect of a one
percent annual increase in these assumed cost trend rates would increase the
accumulated postretirement benefit obligation and the aggregate of the annual
service and interest costs by approximately $14.2 million and $1.7 million,
respectively. The effect of a one percent annual decrease in these assumed cost
trend rates would decrease the accumulated postretirement benefit obligation and
the aggregate of the annual service and interest costs by approximately $11.9
million and $1.4 million, respectively.
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
Year ended October 31, 1998 1997 1996
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost $ 3,506 $ 3,107 $ 1,672
Interest cost 5,820 6,338 5,325
Expected return on assets -- -- --
Amortization of prior
service cost 124 -- --
Recognized net actuarial
(gain) loss (595) 142 430
----------------------------------
Net periodic postretirement
benefit cost $ 8,855 $ 9,587 $ 7,427
==================================
</TABLE>
The following table sets forth the change in benefit obligation of the
company's postretirement benefit plans:
<TABLE>
<CAPTION>
At October 31, 1998 1997
(IN THOUSANDS)
<S> <C> <C>
Change in postretirement benefit obligation
Benefit obligation at beginning of year $ 86,187 $ 84,318
Service cost 3,506 3,107
Interest cost 5,820 6,338
Employee contributions 269 246
Actuarial loss (gain) 2,473 (2,921)
Benefits paid (4,280) (4,901)
-------------------------
Benefit obligation at end of year $ 93,975 $ 86,187
=========================
Funded status $(93,975) $(86,187)
Unrecognized net actuarial loss 3,195 921
Unrecognized prior service cost 1,916 2,056
-------------------------
Accrued postretirement benefit obligation $(88,864) $(83,210)
=========================
</TABLE>
The discount rate used in determining the postretirement benefit obligation
was 6.75 percent and 7.25 percent at October 31, 1998 and 1997, respectively.
The preceding information does not include amounts related to benefit plans
applicable to employees associated with certain contracts with the U.S.
Department of Energy because the company is not responsible for the current or
future funded status of these plans.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of the company's financial instruments are as
follows:
<TABLE>
<CAPTION>
At October 31, 1998 1997
Carrying Fair Carrying Fair
Amount Value Amount Value
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents $ 340,544 $ 340,544 $ 299,324 $ 299,324
Marketable securities -- -- 10,089 10,089
Notes receivable including
noncurrent portion 41,854 48,953 39,570 45,207
Long-term investments 57,739 60,972 52,115 53,619
Liabilities:
Commercial paper, loan
notes and notes payable 430,508 430,508 88,699 88,699
Long-term debt including
current portion 300,604 319,654 300,624 316,024
Other noncurrent
financial liabilities 8,486 8,486 5,240 5,240
Off-balance sheet financial instruments:
Forward contracts to
purchase common stock -- (18,793) -- --
Foreign currency contract
obligations -- 1,964 -- (1,225)
Letters of credit -- 720 -- 841
Lines of credit -- 1,077 -- 497
</TABLE>
p. 38
<PAGE> 19
FLUOR CORPORATION
Fair values were determined as follows:
The carrying amounts of cash and cash equivalents, short-term notes
receivable, commercial paper, loan notes and notes payable approximate fair
value because of the short-term maturity of these instruments.
Marketable securities and long-term investments are based on quoted market
prices for these or similar instruments. Long-term notes receivable are
estimated by discounting future cash flows using the current rates at which
similar loans would be made to borrowers with similar credit ratings.
The fair value of long-term debt, including current portion, is estimated
based on quoted market prices for the same or similar issues or on the current
rates offered to the company for debt of the same maturities.
Other noncurrent financial liabilities consist primarily of deferred
payments, for which cost approximates fair value.
Forward contracts to purchase common stock are based on the estimated cost
to terminate or settle the obligation.
Foreign currency contract obligations are estimated by obtaining quotes
from brokers.
Letters of credit and lines of credit amounts are based on fees currently
charged for similar agreements or on the estimated cost to terminate or settle
the obligations.
LONG-TERM DEBT
Long-term debt comprises:
<TABLE>
<CAPTION>
At October 31, 1998 1997
(IN THOUSANDS)
<S> <C> <C>
6.95% Senior Notes due March 1, 2007 $300,000 $300,000
Other notes 604 624
-------- --------
300,604 300,624
Less: Current portion 176 116
-------- --------
Long-term debt due after one year $300,428 $300,508
======== ========
</TABLE>
In March 1997, the company issued $300 million of 6.95% Senior Notes (the
Notes) due March 1, 2007 with interest payable semiannually on March 1 and
September 1 of each year, commencing September 1, 1997. The Notes were sold at a
discount for an aggregate price of $296.7 million. The Notes are redeemable, in
whole or in part, at the option of the company at any time at a redemption price
equal to the greater of (i) 100 percent of the principal amount of the Notes or
(ii) as determined by a Quotation Agent as defined in the offering prospectus.
The company has unsecured committed revolving short-and long-term lines of
credit with banks from which it may borrow for general corporate purposes up to
a maximum of $400 million. Commitment and facility fees are paid on these lines.
In addition, the company has $1.3 billion in short-term uncommitted lines of
credit to support letters of credit, foreign currency contracts and loan notes.
Borrowings under both committed and uncommitted lines of credit bear interest at
prime or rates based on the London Interbank Offered Rate ("LIBOR"), domestic
certificates of deposit or other rates which are mutually acceptable to the
banks and the company. At October 31, 1998, no amounts were outstanding under
the committed lines of credit. As of that date, $292 million of the short-term
uncommitted lines of credit were used to support undrawn letters of credit and
foreign exchange contracts issued in the ordinary course of business and $183
million were used for outstanding loan notes.
The company had $245 million and $62 million in unsecured commercial paper
outstanding at October 31, 1998 and 1997, respectively. The commercial paper was
issued at a discount with a weighted-average effective interest rate of 5.3
percent in 1998 and 5.6 percent in 1997. Maturities of commercial paper ranged
from 10 to 49 days in 1998 and 22 to 35 days in 1997. The weighted-average
maturities were 16 and 12 days at October 31, 1998 and 1997, respectively. The
maximum and average balances outstanding for the years ended October 31, 1998
and 1997 were $297 million and $183 million, respectively, and $212 million and
$111 million, respectively, with a weighted-average interest rate of 5.6 percent
in 1998 and 5.5 percent in 1997.
OTHER NONCURRENT LIABILITIES
The company maintains appropriate levels of insurance for business risks.
Insurance coverages contain various deductible amounts for which the company
provides accruals based on the aggregate of the liability for reported claims
and an actuarially determined estimated liability for claims incurred but not
reported. Other noncurrent liabilities include $64 million and $70 million at
October 31, 1998 and 1997, respectively, relating to these liabilities.
STOCK PLANS
The company's executive stock plans, approved by the shareholders, provide for
grants of nonqualified or incentive stock options, restricted stock awards and
stock appreciation rights ("SARS"). All executive stock plans are administered
by the Organization and Compensation Committee of the Board of Directors
("Committee") comprised of outside directors, none of whom are eligible to
participate in the plans. Option grant prices are determined by the Committee
and are established at the fair value of the company's common stock at the date
of grant. Options and SARS normally extend for 10 years and become exercisable
over a vesting period determined by the Committee, which is generally in
installments of 25 percent per year commencing one year from the date of grant.
During 1998, the company issued 1,696,420 options and 1,502,910 SARS that vest
over three to four year periods and expire in five years. The majority of these
awards have accelerated vesting
p. 39
<PAGE> 20
FLOUR CORPORATION
NOTES
to Consolidated Financial Statements
provisions based on the price of the company's stock. Additionally, 189,075
nonqualified stock options and 10,925 incentive stock options were issued, with
20 percent vesting upon issuance and the remaining awards vesting in
installments of 20 percent per year commencing one year from the date of grant.
The company issued 44,120 options in 1997 in which vesting was based on certain
performance related conditions. These options expired unexercised on December
31, 1997.
Restricted stock awards issued under the plans provide that shares awarded
may not be sold or otherwise transferred until restrictions as established by
the Committee have lapsed. Upon termination of employment, shares upon which
restrictions have not lapsed must be returned to the company. Restricted stock
issued under the plans totaled 4,500 shares and 186,390 shares in 1998 and 1997,
respectively.
Effective November 1, 1996, the company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS
No. 123). As permitted by the standard, the company has elected to continue
following the guidance of APB Opinion No. 25, "Accounting for Stock Issued to
Employees," for measurement and recognition of stock-based transactions with
employees. During 1998, the company recognized a net credit of $9 million for
performance-based stock plans. This amount includes $10 million of expenses
accrued in prior years which were reversed in 1998 as a result of not achieving
prescribed performance targets. Compensation cost recognized for such plans
totaled less than $1 million in 1997 and $19 million in 1996. Under APB Opinion
No. 25, no compensation cost is recognized for the option plans where vesting
provisions are based only on the passage of time. Had the company recorded
compensation expense using the accounting method recommended by SFAS No. 123,
net earnings and diluted earnings per share would have been reduced to the pro
forma amounts as follows:
<TABLE>
<CAPTION>
Year ended October 31, 1998 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Net earnings: As Reported $ 235,344 $ 146,187
Pro Forma 218,958 143,663
Diluted earnings per share: As Reported $ 2.97 $ 1.75
Pro Forma 2.77 1.72
</TABLE>
Because SFAS No. 123 is applicable only to options granted subsequent to
October 31, 1995, its pro forma effect will not be fully reflected until 1999.
The results above are not likely to be representative of the effects of applying
SFAS No. 123 on reported net earnings or loss for future years as these amounts
reflect the expense for only one or two years vesting.
The fair value of each option grant is estimated on the date of grant by
using the Black-Scholes option-pricing model. The following weighted-average
assumptions were used for grants in 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Expected option lives (years) 5 6
Risk-free interest rates 5.83% 6.30%
Expected dividend yield 1.19% 1.15%
Expected volatility 29.85% 24.58%
</TABLE>
The weighted-average fair value of options granted during 1998 and 1997 was
$12 and $17, respectively.
The following table summarizes stock option activity:
<TABLE>
<CAPTION>
Weighted Average
Stock Exercise Price
Options Per Share
<S> <C> <C>
Outstanding at October 31, 1995 3,815,606 $ 45
--------- ----
Granted 1,046,700 64
Expired or canceled (56,010) 49
Exercised (466,918) 37
--------- ----
Outstanding at October 31, 1996 4,339,378 50
Granted 114,060 61
Expired or canceled (117,404) 53
Exercised (414,731) 39
--------- ----
Outstanding at October 31, 1997 3,921,303 51
Granted 1,898,420 36
Expired or canceled (844,664) 47
Exercised (267,602) 37
--------- ----
Outstanding at October 31, 1998 4,707,457 $ 47
========= ====
Exercisable at:
October 31, 1998 3,210,580
October 31, 1997 1,964,137
October 31, 1996 1,536,063
</TABLE>
At October 31, 1998, there were 2,072,380 shares available for future grant.
Available for grant includes shares which may be granted as either stock options
or restricted stock, as determined by the Committee under the 1996 and 1988
Fluor Executive Stock Plans.
At October 31, 1998, there are 4,707,457 options outstanding with exercise
prices between $35 and $68, with a weighted-average exercise price of $47 and a
weighted-average remaining contractual life of 5.6 years; 3,210,580 of these
options are exercisable with a weighted-average exercise price of $47.
LEASE OBLIGATIONS
Net rental expense amounted to approximately $94 million, $92 million, and
$77 million in 1998, 1997, and 1996, respectively. The company's lease
obligations relate primarily to office facilities, equipment used in connection
with long-term construction contracts and other personal property.
P. 40
<PAGE> 21
FLUOR CORPORATION
The company's obligations for minimum rentals under noncancelable leases
are as follows:
<TABLE>
<CAPTION>
At October 31,
(IN THOUSANDS)
<S> <C>
1999 $29,280
2000 28,955
2001 26,103
2002 21,176
2003 17,850
Thereafter $58,127
</TABLE>
Obligations under capital leases totaled approximately $3 million at both
October 31, 1998 and 1997 and are included in other noncurrent liabilities.
CONTINGENCIES AND COMMITMENTS
The company and certain of its subsidiaries are involved in litigation in the
ordinary course of business. The company and certain of its engineering and
construction subsidiaries are contingently liable for commitments and
performance guarantees arising in the ordinary course of business. Claims
arising from engineering and construction contracts have been made against the
company by clients, and the company has made certain claims against clients for
costs incurred in excess of the current contract provisions. The company does
not expect that the foregoing matters will have a material adverse effect on its
consolidated financial position or results of operations.
Financial guarantees, made in the ordinary course of business on behalf of
clients and others in certain limited circumstances, are entered into with
financial institutions and other credit grantors and generally obligate the
company to make payment in the event of a default by the borrower. Most
arrangements require the borrower to pledge collateral in the form of property,
plant and equipment which is deemed adequate to recover amounts the company
might be required to pay. As of October 31, 1998, the company had extended
financial guarantees on behalf of certain clients and other unrelated third
parties totaling approximately $28 million.
During the fourth quarter of 1998, 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 1999 and gives the company a choice of
settlement method. This contract effectively incorporates and extends a number
of prior contracts originally entered into during the third quarter of 1998 as
part of the company's then ongoing share repurchase program.
The company's operations are subject to and affected by federal, state and
local laws and regulations regarding the protection of the environment. The
company maintains reserves for potential future environmental costs where such
obligations are either known or considered probable, and can be reasonably
estimated.
The sale by the company of its Lead business included St. Joe Minerals
Corporation ("St. Joe") and its environmental liabilities for several different
lead mining, smelting and other lead-related environmental sites. As a condition
of the St. Joe sale, however, the company retained responsibility for certain
non-lead-related environmental liabilities arising out of St. Joe's former zinc
mining and smelting division, but only to the extent that such liabilities are
not covered by St. Joe's comprehensive general liability insurance. These
liabilities arise out of three zinc facilities located in Bartlesville,
Oklahoma; Monaca, Pennsylvania; and Balmat, New York.
The company believes, based upon present information available to it, that
its reserves with respect to future environmental costs are adequate and such
future costs will not have a material effect on the company's consolidated
financial position, results of operations or liquidity. However, the imposition
of more stringent requirements under environmental laws or regulations, new
developments or changes regarding site cleanup costs or the allocation of such
costs among potentially responsible parties, or a determination that the company
is potentially responsible for the release of hazardous substances at sites
other than those currently identified, could result in additional expenditures,
or the provision of additional reserves in expectation of such expenditures.
OPERATIONS BY BUSINESS SEGMENT AND
GEOGRAPHICAL AREA
The Engineering and Construction segment, the company's principal operating
business, includes subsidiaries that provide the design, engineering,
procurement, construction, maintenance and other diversified services on a
worldwide basis to an extensive range of industrial, commercial, utility,
natural resources, energy and governmental clients. The Coal segment, which
includes the operations of Massey, produces, processes and sells high-quality,
low-sulfur steam coal for the utility industry as well as industrial customers,
and metallurgical coal for the steel industry.
Identifiable assets are those tangible and intangible assets used in the
operation of each of the business segments and geographic areas. Corporate
assets are principally cash and cash equivalents, marketable securities and
nontrade receivables.
Engineering services for international projects are often performed within
the United States or a country other than where the project is located. Revenues
associated with these services have been classified within the geographic area
where the work was performed.
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 new
standards for reporting information about operating segments in interim and
annual financial statements. This statement is effective for the company's
fiscal year 1999.
p. 41
<PAGE> 22
FLUOR CORPORATION
NOTES
to Consolidated Financial Statements
OPERATIONS BY BUSINESS SEGMENT
<TABLE>
<CAPTION>
Revenues Operating Profit
1998 1997 1996 1998 1997 1996
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Engineering and Construction $12,377.5 $13,217.5 $10,054.4 $ 242.3 $ 122.2 $ 320.0
Coal 1,127.3 1,081.0 960.8 172.8 154.8 134.5
-------------------------------- ----------------------------
$13,504.8 $14,298.5 $11,015.2 $ 415.1 $ 277.0 $ 454.5
================================ ============================
</TABLE>
<TABLE>
<CAPTION>
Depreciation, Depletion
Identifiable Assets Capital Expenditures and Amortization
1998 1997 1996 1998 1997 1996 1998 1997 1996
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Engineering and Construction $ 2,891.8 $ 2,823.7 $ 2,213.4 $ 304.5 $ 199.1 $ 171.6 $ 138.8 $ 117.0 $ 88.7
Coal 1,790.7 1,619.4 1,384.0 296.4 267.1 220.8 150.1 131.3 105.4
Corporate 336.7 242.2 354.3 -- -- -- -- -- --
------------------------------- -------------------------------- ----------------------------
$ 5,019.2 $ 4,685.3 $ 3,951.7 $ 600.9 $ 466.2 $ 392.4 $ 288.9 $ 248.3 $ 194.1
=============================== ================================ ============================
</TABLE>
OPERATIONS BY GEOGRAPHIC AREA
<TABLE>
<CAPTION>
Revenues Operating Profit Identifiable Assets
1998 1997 1996 1998 1997 1996 1998 1997 1996
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $ 8,323.6 $ 9,347.2 $ 6,783.5 $ 302.6 $ 255.7 $ 396.5 $4,081.9 $3,789.2 $3,392.3
Europe 1,196.2 1,420.0 1,426.6 15.3 2.3 23.6 254.7 225.1 158.4
Central and South America 1,242.2 1,109.3 1,210.0 31.7 12.2 (13.9) 256.6 210.4 145.6
Asia Pacific (includes Australia) 1,434.4 1,544.5 1,042.8 38.3 16.3 36.5 251.8 314.7 165.0
Middle East and Africa 993.0 549.3 287.6 8.7 (22.9) 4.7 77.0 78.4 30.8
Canada 315.4 328.2 264.7 18.5 13.4 7.1 97.2 67.5 59.6
------------------------------- -------------------------------- ----------------------------
$13,504.8 $14,298.5 $11,015.2 $ 415.1 $ 277.0 $ 454.5 $5,019.2 $4,685.3 $3,951.7
=============================== ================================ ============================
</TABLE>
Included in United States revenues are export sales to unaffiliated customers of
$1.5 billion in 1998, $1.8 billion in 1997 and $1 billion in 1996.
The following table reconciles business segment operating profit with the
earnings before taxes:
<TABLE>
<CAPTION>
1998 1997 1996
(IN MILLIONS)
<S> <C> <C> <C>
Operating profit $ 415.1 $ 277.0 $ 454.5
Interest (expense) income, net (24.1) (7.5) 11.6
Corporate administrative and general expense (22.6) (13.2) (48.1)
Other items, net (5.8) (1.0) (4.8)
-----------------------------------
Earnings before taxes $ 362.6 $ 255.3 $ 413.2
===================================
</TABLE>
p. 42
<PAGE> 23
FLUOR CORPORATION
Management's and Independent Auditors'
REPORTS
MANAGEMENT
The company is responsible for preparation of the accompanying consolidated
balance sheet and the related consolidated statements of earnings, cash flows
and shareholders' equity. These statements have been prepared in conformity with
generally accepted accounting principles and management believes that they
present fairly the company's consolidated financial position and results of
operations. The integrity of the information presented in the financial
statements, including estimates and judgments relating to matters not concluded
by fiscal year end, is the responsibility of management. To fulfill this
responsibility, an internal control structure designed to protect the company's
assets and properly record transactions and events as they occur has been
developed, placed in operation and maintained. The internal control structure is
supported by an extensive program of internal audits and is tested and evaluated
by the independent auditors in connection with their annual audit. The Board of
Directors pursues its responsibility for financial information through an Audit
Committee of Directors who are not employees. The internal auditors and the
independent auditors have full and free access to the Committee. Periodically,
the Committee meets with the independent auditors without management present to
discuss the results of their audits, the adequacy of the internal control
structure and the quality of financial reporting.
/s/ PHILIP J. CARROLL, JR. /s/ JAMES O. ROLLANS
- ------------------------- -------------------------
PHILIP J. CARROLL, JR. JAMES O. ROLLANS
Chairman of the Board and Senior Vice President and
Chief Executive Officer Chief Financial Officer
INDEPENDENT AUDITORS
Board of Directors and Shareholders
Fluor Corporation
We have audited the accompanying consolidated balance sheet of Fluor Corporation
as of October 31, 1998 and 1997, and the related consolidated statements of
earnings, cash flows, and shareholders' equity for each of the three years in
the period ended October 31, 1998. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Fluor Corporation
at October 31, 1998 and 1997, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended October 31, 1998,
in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
- -------------------------
ORANGE COUNTY, CALIFORNIA
November 17, 1998
p. 43
<PAGE> 24
FLUOR CORPORATION
QUARTERLY FINANCIAL DATA (unaudited)
The following is a summary of the quarterly results of operations:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1998
Revenues $ 3,399,019 $ 3,282,079 $ 3,528,852 $ 3,294,823
Gross margin 89,740 97,188 106,876 115,533
Earnings before taxes 84,458 83,650 96,232 98,286
Net earnings 54,813 54,289 62,437 63,805
Earnings per share
Basic .66 .67 .81 .85
Diluted $ .66 $ .67 $ .81 $ .84
===============================================================
1997
Revenues $ 3,434,061 $ 3,185,833 $ 3,675,905 $ 4,002,742
Gross margin 106,774 (73,836) 108,591 134,442
Earnings (loss) before taxes 95,625 (78,407) 102,044 136,007
Net earnings (loss) 62,035 (70,134) 66,242 88,044
Earnings (loss) per share
Basic .75 (.84) .80 1.06
Diluted $ .74 $ (.84) $ .79 $ 1.06
===============================================================
</TABLE>
p. 44
<PAGE> 25
FLUOR CORPORATION
Shareholders'
REFERENCE
COMMON STOCK INFORMATION
At December 31, 1998, there were 75,793,796 shares outstanding and approximately
12,640 shareholders of record of Fluor's common stock.
The following table sets forth for the periods indicated the cash dividends paid
per share of common stock, and the high and low sales prices of such common
stock as reported in the Consolidated Transactions Reporting System.
COMMON STOCK AND DIVIDEND INFORMATION
<TABLE>
<CAPTION>
Price Range
Dividends ---------------------
Per Share High Low
<S> <C> <C> <C>
Fiscal 1998
First Quarter $ .20 39 3/4 33 15/16
Second Quarter .20 52 1/4 37 13/16
Third Quarter .20 51 1/2 40 11/16
Fourth Quarter .20 46 7/8 34 5/8
========
$ .80
Fiscal 1997
First Quarter $ .19 71 3/4 61 5/8
Second Quarter .19 75 7/8 49 3/4
Third Quarter .19 61 1/2 46 1/2
Fourth Quarter .19 62 1/2 40 1/4
========
$ .76
</TABLE>
FORM 10-K
A copy of the Form 10-K, which is filed with the Securities and Exchange
Commission, is available at no charge upon request.
Write to:
Senior Vice President - Law and Secretary
Fluor Corporation
3353 Michelson Drive
Irvine, California 92698
(949) 975-2000
REGISTRAR AND TRANSFER AGENT
ChaseMellon Shareholder Services, L.L.C.
400 South Hope Street, Fourth Floor
Los Angeles, California 90071
and
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Ridgefield Park, New Jersey 07660
For change of address, lost dividends, or lost stock certificates, write or
telephone:
ChaseMellon Shareholder Services, L.L.C.
P.O. Box 3315
South Hackensack, New Jersey 07606-1915
Attn: Securityholder Relations
(800) 813-2847
Requests may also be submitted via e-mail by visiting their web page at
www.chasemellon.com
INDEPENDENT AUDITORS
Ernst & Young LLP
18400 Von Karman Avenue
Irvine, California 92612
ANNUAL SHAREHOLDERS' MEETING
Annual report and proxy statement are mailed on or about January 30. Fluor's
annual meeting of shareholders will be held at 9:00 a.m. on March 9, 1999 at:
Hyatt Regency
17900 Jamboree Road
Irvine, California
STOCK TRADING
Fluor's stock is traded on the New York, Chicago, Pacific, Amsterdam, London and
Swiss Stock Exchanges. Common stock domestic trading symbol: FLR
DIVIDEND REINVESTMENT PLAN
Fluor's Dividend Reinvestment Plan provides shareholders of record with the
opportunity to conveniently and economically increase their ownership in Fluor.
Through the plan, shareholders can automatically reinvest their cash dividends
in shares of Fluor common stock. A minimum balance of 50 shares is required for
enrollment. Optional cash investments may also be made in additional Fluor
shares ranging from a minimum of $100 per month to a maximum of $10,000 per
quarter. For details on the plan, contact Fluor's agent, ChaseMellon Shareholder
Services at (800) 813-2847.
DUPLICATE MAILINGS
Shares owned by one person but held in different forms of the same name result
in duplicate mailing of shareholder information at added expense to the company.
Such duplication can be eliminated only at the direction of the shareholder.
Please notify ChaseMellon Shareholder Services in order to eliminate
duplication.
HISTORY OF STOCK DIVIDENDS AND SPLITS SINCE GOING PUBLIC IN 1950
<TABLE>
<S> <C> <C> <C>
08/23/57 20% Stock Dividend 03/22/68 2 for 1 Stock Split
12/15/61 5% Stock Dividend 05/16/69 5% Stock Dividend
03/11/63 5% Stock Dividend 03/06/70 5% Stock Dividend
03/09/64 5% Stock Dividend 03/05/71 5% Stock Dividend
03/08/65 5% Stock Dividend 03/10/72 5% Stock Dividend
02/14/66 5% Stock Dividend 03/12/73 5% Stock Dividend
03/24/66 2 for 1 Stock Split 03/11/74 3 for 2 Stock Split
03/27/67 5% Stock Dividend 08/13/79 3 for 2 Stock Split
02/09/68 5% Stock Dividend 07/18/80 2 for 1 Stock Split
</TABLE>
p. 45
<PAGE> 1
EXHIBIT 21
FLUOR CORPORATION SUBSIDIARIES
<TABLE>
<CAPTION>
Name of Company Organized Under Laws of
- --------------- -----------------------
<S> <C>
FLUOR CORPORATION Subsidiaries (1) Delaware
American Construction Equipment Company, Inc. California
American Equipamentos do Brasil Ltda. (22) Brazil
AMECO Contractors Rentals, Inc. (17) Philippines
AMECO Holdings, Inc. California
AMECO Caribbean, Inc. California
Ameco Mining Services S.R.L. (22) Argentina
Ameco Peru S.A.C. (22) Peru
AMECO Project Services, Inc. Philippines
Ameco Pty Ltd. Australia
Ameco Services S.R.L. (22) Argentina
Ameco Services, S. de R.L. de C.V. (23) Mexico
American Equipamentos do Brasil Ltda. (23) Brazil
Grand Greenville Land, Inc. Philippines
Maquinaria Panamericana, S.A. de C.V. (23) Mexico
PT Ameco Indonesia Indonesia
Ameco Mining S.R.L. (23) Argentina
Ameco Services S.R.L. (23) Argentina
Maquinaria Panamericana, S.A. de C.V. (22) Mexico
Mapsa-Casteka Ltda. (18) Colombia
Ameco Peru S.A.C. (23) Peru
Shanghai GE Construction Equipment Engineering Co. Ltd.(27) China
American Equipment Company, Inc. S. Carolina
AMECO Services Inc. Delaware
AMEC Equipment Leasing SARL France
J. W. Burress, Incorporated Virginia
S & R Equipment Co., Inc. Ohio
SMA Equipment Co., Inc. Delaware
Stith Equipment Co., Inc. Delaware
SMA Information Systems Inc. Delaware
Apex Coal Company Virginia
Claiborne Fuels, Inc. California
Coral Drilling, C.A. Venezuela
Daniel International Corporation S. Carolina
Daniel Navarra, S.A. Spain
Fluor Daniel Engineering, Inc. Ohio
Materiales y Equipos Auxiliares para la Construccion, S.A. Spain
FD Engineers & Constructors, Inc. California
Fluor Constructors International, Inc. California
Fluor Constructors Canada Ltd. New Brunswick
Fluor Constructors Indonesia, Inc. California
Fluor Management and Technical Services, Inc. California
Fluor Daniel America, Ltda. California
Fluor Daniel Engineers & Consultants Ltd. Mauritius
Fluor Daniel India Private Limited (19) India
Fluor Daniel, Inc. California
ADP Marshall, Inc. Arizona
ADP/FD of Nevada, Inc. Nevada
ADP Marshall Contractors, Inc. Delaware
ADP Marshall International, Inc. Delaware
ADP Marshall Limited Ireland
ADPM, L.L.C. (2) Delaware
Appalachian Synfuel, LLC W. Virginia
A.R.C. Construction Consultants International, Inc. Texas
DAX Industries, Inc. (8) Texas
Duke/Fluor Daniel (25) N. Carolina
Efdee Connecticut Architects, Inc. Connecticut
</TABLE>
1
<PAGE> 2
<TABLE>
<CAPTION>
Name of Company Organized Under Laws of
- --------------- -----------------------
<S> <C>
Fluor Corporation
FD Engineers & Constructors, Inc.
Fluor Daniel, Inc. (continued)
Efdee Engineering Corporation N. Carolina
Efdee Mississippi Architects, A Professional Association Mississippi
Efdee New York Engineers & Architects P.C. New York
Encee Architecture Services, P.C. N. Carolina
Evergreen Equipment and Personnel Leasing, Inc. Rhode Island
FD Architects & Engineers Corporation New Jersey
FD Mexico, Inc. Delaware
FDCM of Mississippi, Inc. Mississippi
FDEE Consulting, Inc. California
FDHM, Inc. California
FD/MK Limited Liability Company (3) Delaware
Fluor Chile, Inc. California
Fluor Daniel Chile Ingenieria y Construccion S.A. Chile
Ingenieria y Construcciones Fluor Daniel Chile Limitada Chile
Fluor Colombia Limited Delaware
Fluor Cyprus Limited Cyprus
Fluor Daniel, a Professional Architectural Corporation Louisiana
Fluor Daniel A&E Services, Inc. California
Fluor Daniel Alaska, Inc. Alaska
Fluor Daniel Alumatech, Inc Delaware
Fluor Daniel Asia, Inc. California
Duke/Fluor Daniel International Services(25) Nevada
D/FD Foreign Sales Corporation (12) Barbados
PT Duke/Fluor Daniel (25) Indonesia
P.T. Fluor Daniel Indonesia (20) Indonesia
PT. AMECO Servicindo (20) Indonesia
P.T. Nusantara Power Services (2) Indonesia
Fluor Daniel Brasil Engenharia e Servicos Ltda. Brazil
Fluor Daniel Canada, Inc. New Brunswick
Fluor Daniel International Services Inc.(15) Barbados
Fluor Daniel Wright Ltd. New Brunswick
Compania Minera Explowel Ecuador
Lynx Geosystems Inc. Canada
Saskwright Engineers Limited Canada
Wright Engineers (Chile) Limitada Chile
Wright Engineers Limitada Peru Peru
TRS Staffing Solutions (Canada) Inc. Canada
Fluor Daniel Caribbean, Inc. Delaware
DMIS, Inc. S. Carolina
Facility & Plant Services, Inc. S. Carolina
Fluor Daniel Export Services, Inc. Delaware
Fluor Daniel International (Malaysia) Sdn. Bhd. Malaysia
Fluor Daniel Maintenance Services, Inc. Delaware
Fluor Daniel Services Corporation Delaware
Fluor Daniel China, Inc. California
Fluor Daniel China Services, Inc. California
Fluor Daniel China Technology, Inc. California
Fluor Daniel Coal Services International, Inc. Delaware
Duke/Fluor Daniel International (25) Nevada
D/FD Foreign Sales Corporation (26) Barbados
Duke/Fluor Daniel LLC (25) Nevada
Duke/Fluor Daniel Pty Ltd. (25) Australia
Fluor Daniel Construction Company California
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
Name of Company Organized Under Laws of
- --------------- -----------------------
<S> <C>
Fluor Corporation
FD Engineers & Constructors, Inc.
Fluor Daniel, Inc. (continued)
Fluor Daniel Development Corporation California
Crown Energy Company New Jersey
Fluor Daniel Modesto, Inc. California
Wilmore/Fluor Modesto LLC (5) California
Fluor Daniel Temecula, Inc. California
Fluor Daniel Tempe, Inc. California
Fluor Daniel Ada, Inc.(5) Idaho
Gloucester Limited, Inc. California
Gloucester Limited II, Inc. California
Tarrant Energy, Inc. California
Fluor Daniel Eastern, Inc. California
P.T. Fluor Daniel Indonesia (19) Indonesia
PT. AMECO Servicindo (19) Indonesia
Fluor Daniel Energy Investments, Inc. Delaware
Fluor Daniel Engineers & Constructors, Inc. Delaware
Fluor Daniel Project Consultants (Shenzhen) Co., Ltd. P.R.C.
Davy Kinhill Fluor Daniel (PNG) Pty Ltd.(29) New Guinea
Fluor Daniel Engineers & Constructors, Ltd. California
Fluor Daniel Korea Ltd. Korea
Fluor Daniel Environmental Strategies, Inc. Delaware
Fluor Daniel Espana, S.A. California
Daniel International (Saudi Arabia) Ltd. Saudi Arabia
Fluor Arabia Limited (5) Saudi Arabia
Fluor Daniel Eurasia, Inc. California
Fluor Daniel Europe B.V. Netherlands
Assystems Services International BV (28) Netherlands
Chemgineering Holding Company GmbH (28) Switzerland
Bertrams Chemgineering AG Switzerland
Fluor Daniel Chemgineering Germany
Chemgineering Planung GmbH Austria
ASI Polskani Poland
Fluor Daniel Kft. Hungary
ASI Industrieanlagen Service GmbH Netherlands
Fluor Daniel Belgium, N.V. Belgium
Fluor Daniel B.V. Netherlands
Acquion B.V. Netherlands
Fluor Daniel Consultants B.V. Netherlands
Fluor Daniel Engineering and Construction Services
Limited Turkey
International Refinery Contractors C.V.(4) Netherlands
International Refinery Contractors B.V.(5) Netherlands
Prochem S.A.(6) Poland
Prosynchem Sp.z o.o. Poland
TRS Staffing Solutions B.V. Netherlands
Fluor Daniel Eastern Services B.V. Netherlands
Fluor Daniel Fernald, Inc. California
Fluor Environmental Resources Management Services, Inc. Delaware
Fluor Daniel Florida Rail, Inc. Delaware
Fluor Daniel Global Contracting Limited Guernsey
Fluor Daniel Global Limited Guernsey
Fluor Daniel Global Placement Limited Guernsey
Fluor Daniel Global Placement Services Limited Guernsey
Fluor Daniel Global Services Limited Guernsey
Fluor Daniel Global Support Services Limited Guernsey
Fluor Daniel Global TRS Limited Guernsey
Fluor Daniel Global TRS Services Limited Guernsey
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
Name of Company Organized Under Laws of
- --------------- -----------------------
<S> <C>
Fluor Corporation
FD Engineers & Constructors, Inc.
Fluor Daniel, Inc. (continued)
Fluor Daniel GmbH Germany
Fluor Daniel Group, Inc. Delaware
Fluor Daniel Hanford, Inc. Washington
Fluor Daniel, Inc. - Philippines Philippines
Fluor Daniel India, Inc. California
Fluor Daniel International Limited U.K.
Assystems Services International BV (7) Netherlands
Chemgineering Holding Company GmbH (7) Switzerland
Bertrams Chemgineering AG Switzerland
Fluor Daniel Chemgineering Germany
Chemgineering Planung GmbH Austria
ASI Polskani Poland
Fluor Daniel Kft. Hungary
ASI Industrieanlagen Service GmbH Netherlands
First Legal Recruitment Limited U.K.
First Accountancy Limited U.K.
First Recruitment Limited U.K.
Fluor Daniel Limited U.K.
Fluor Daniel Caspian Services Limited U.K.
Fluor Ocean Services Limited U.K.
K Home Engineering Limited (21) U.K.
Mathos Services Limited U.K.
TA Group Limited U.K.
RTP Software Ltd. U.K.
TA Consultancy Services Ltd. U.K.
TA Group Trustees Ltd. U.K.
Team-Sel International Ltd. U.K.
Spel Manpower Services Ltd. U.K.
TA Engineering Services Ltd. U.K.
TA Engineering Services (Tunisia) Ltd. U.K.
Team-Sel Engineering Ltd. U.K.
Team-Sel Technology Ltd. U.K.
Technical Audit Ltd. U.K.
TRS Management Resources PLC U.K.
Antony Dunlop Associates Limited U.K.
(The) Management Resources Group(Services) Limited U.K.
David Chorley Associates Limited U.K.
Hotel Accounts Resources Limited U.K.
Times Group Limited U.K.
MRG Human Resources Limited U.K.
SAP Services Limited U.K.
Times Computer Group Limited U.K.
Times Computer Services Limited U.K.
TRS Staffing Solutions (U.K.) Limited U.K.
Fluor Daniel International Services Inc. (16) Barbados
Fluor Daniel Ireland Limited Ireland
Fluor Daniel (Japan) Inc. Japan
Fluor Daniel Latin America, Inc. California
Fluor-Daniel (Malaysia) Sdn. Bhd. Malaysia
Fluor Daniel Mexico S.A. California
ICA-Fluor Daniel, S. de R.L. de C.V. (10) Mexico
Fluor Daniel Mining & Metals, Ltd. California
Fluor Daniel New Zealand Limited California
Fluor Daniel Northwest, Inc. Washington
Fluor Daniel Northwest Services, Inc. Washington
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
Name of Company Organized Under Laws of
- --------------- -----------------------
<S> <C>
Fluor Corporation
FD Engineers & Constructors, Inc.
Fluor Daniel, Inc. (continued)
Fluor Daniel (NPOSR), Inc. Delaware
Fluor Daniel Overland Express, Inc. Delaware
Fluor Daniel Overseas, Inc. California
Fluor Daniel Pacific, Inc. California
Fluor Daniel Power B.V. Netherlands
Duke/Fluor Daniel B.V. (5) Netherlands
Fluor Daniel P.R.C., Ltd. California
Fluor Daniel Properties Limited U.K.
Fluor Daniel Pty Ltd Australia
Civil and Mechanical Maintenance Pty. Ltd. Australia
Fluor Daniel Constructors Pty. Ltd. Australia
Fluor Daniel Diversified Plant Services Pty Ltd Australia
Fluor Daniel Gas Services Pty Ltd Australia
Fluor Daniel Process Plant Services Pty Ltd Australia
Maritime Maintenance Services Pty Ltd Australia
Fluor Daniel (Qld) Pty. Ltd. Australia
Karratha Engineering Services Pty Ltd Australia
Signet Holdings Pty Ltd Australia
Independent Metallurgical Laboratories Pty Ltd Australia
PT Signet Indonesia (16) Indonesia
Signet Engineering Pty Ltd Australia
Signet Ingenieria S.A. Chile
Constructora Lequena S.A. Chile
Signet International Holdings Pty. Ltd. Australia
Tengis Design Services Pty Ltd Australia
Westquip Australia Pty Ltd Australia
TRS Staffing Solutions (Australia) Pty Ltd Australia
AmBit Technology Pty Ltd. Australia
Fluor Daniel Pulp & Paper, Inc. California
Fluor Daniel Real Estate Services, Inc. S. Carolina
Fluor Daniel Rocky Mountain, Inc. Colorado
Fluor Daniel, S.A. Spain
Fluor Daniel Sales Corporation West Indies
Fluor Daniel South America Limited California
Fluor Daniel South East Asia, Ltd. California
Fluor Daniel Southeast, Inc. California
Fluor Daniel Technical Services, Inc. Texas
Fluor Daniel Thailand Holdings Corporation California
Fluor Daniel Telecom (Thai) Co., Ltd. Thailand
Fluor Daniel Thailand, Ltd. California
Fluor Egypt Egypt
Fluor Engineering Corporation Michigan
Fluor Engineers, Inc. Delaware
Tecnofluor, C.A. (11) Venezuela
Tecnoconsult Ingenieros Consultores, S.A.(11) Venezuela
Fluor Indonesia, Inc. California
P.T. Panca Perintis Indonesia (6) Indonesia
Fluor International, Inc. California
Fluor International Limited Bermuda
Fluor Iran Iran
Fluor Italia S.r.l. Italy
Fluor Mideast Limited Bermuda
Fluor Plant Services International, Inc. California
Fluor Plant Services International Ltd. Bermuda
Fluor International Nigeria Limited Nigeria
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
Name of Company Organized Under Laws of
- --------------- -----------------------
<S> <C>
Fluor Corporation
FD Engineers & Constructors, Inc.
Fluor Daniel, Inc. (continued)
Fluor Technical Services Limited California
Fluor Texas, Inc. Texas
Fluor Venezuela, S.A. Venezuela
Marshall Development Corporation Rhode Island
Nutmeg Valley Resources, Inc. California
Platte River Constructors, Ltd. (10) Ohio
Signet Technology Inc. Colorado
SolioFlo, LLC (12) Delaware
SolioFlo, Inc. California
SolioFlo Partners, L.P. California
SolioFlo Material Transfer, L.P. California
Stanhope Management Services Limited U.K.
TDF, Inc. California
Barringford Ltd. B. Virgin Isles
Bishopsford Engineering AG Switzerland
Buckleford Corp. N.V. Antilles
Buckleshell Engineering Services Ltd. Jersey
Fluor Daniel SA (PTY) Ltd. Liechtenstein
Rhus Investments (PTY) Ltd. R. South Africa
Fluor Daniel Engineers SA (PTY) Ltd. Liechtenstein
Trans-Africa Projects Ltd. (5) Mauritius
Trans-Africa Projects (Pty) Ltd. (5) R. South Africa
Fluor South Africa (Pty) Ltd. R. South Africa
Northern Project Services Ltd. B. Virgin Isles
Rama Engineering Services B.V. Netherlands
Ramasa (PTY) Ltd. R. South Africa
TRS Staffing Solutions SA Ltd. B. Virgin Isles
Fluor Properties (PTY) Ltd. R. South Africa
TRS Contract Solutions, Inc. Delaware
Venezco, Inc. California
Whidbey Services Co. Nevada
Williams Brothers Engineering Company Delaware
Fluor Daniel Argentina, Inc. Delaware
Williams Brothers Engineering Limited U.K.
Williams Brothers Engineering Pty Ltd Australia
Williams Brothers International Limited Guernsey
Williams Brothers Process Services, Inc. Delaware
Wireless Engineering Services Group, LLC (5) Delaware
Wright Engineers, Inc. Nevada
Fluor Daniel Telecommunications Corporation California
Fluor Nuclear Services, Inc. Ohio
Fluor Gulf Communications, Inc. California
Indo-Mauritian Affiliates Limited Mauritius
Fluor Daniel India Private Limited (20) India
Power Maintenance Services, Inc. Delaware
D/FD Bridgeport Operations, LLC (25) Delaware
D/FD Cokenergy Operations, LLC (25) Delaware
D/FD Operating Services, LLC (25) Delaware
D/FD St. Francis Operations, LLC (25) Delaware
Strategic Organizational Systems Enterprises, Inc. California
Strategic Organizational Systems Construction
Division, Inc. California
Strategic Organizational Systems Environmental
Division, Inc. Oklahoma
Strategic Organizational Systems Environmental
Division, Inc. Louisiana
Strategic Organizational Systems Environmental Engineering
Division, Inc. Texas
SOS International, Inc. Alabama
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
Name of Company Organized Under Laws of
- --------------- -----------------------
<S> <C>
Fluor Corporation
FD Engineers & Constructors, Inc.
Strategic Organizational Systems Enterprises, Inc.(continued)
Strategic Organizational Systems Environmental
Engineering California Division, Inc. California
Strategic Organizational Systems Southern California
Division Inc. California
TRS International Payroll Co. Texas
TRS Staffing Solutions, Inc. S. Carolina
Ambit Technology, Inc. N. Hampshire
The Consol Group, Inc. (24) N. Hampshire
Corico Office Professionals, Inc. N. Hampshire
The Consol Group, Inc. (14) N. Hampshire
Qual-Tech, Inc. N. Hampshire
TRS International Group, Inc. Delaware
TRS International Group, S. de R.L. de C.V. Mexico
TRS International Group Asia Pacific, Inc. California
TRS Management Resources Pte Ltd. Singapore
TRS Management Resources, Inc. S. Carolina
FD Services, Inc. California
Norfolk Maintenance Corporation California
Fluor Abadan Limited Bermuda
Fluor Atlantic Limited Bermuda
Fluor Continental Limited Bermuda
Fluor Daniel Illinois, Inc. Delaware
Duke/Fluor Daniel (25) N. Carolina
Fluor Daniel Intercontinental, Inc. California
Fluor Daniel Nigeria Limited (13) Nigeria
Fluor Daniel Venture Group, Inc. California
Micogen Inc. California
Micogen Limited I, Inc. California
Micogen Limited II, Inc. California
Soli/Flo LLC (12) Delaware
Springfield Resource Recovery, Inc. Mass.
Fluor Distribution Companies, Inc. California
Fluor Mideast Limited California
Fluor (Nigeria) Limited Nigeria
Fluor Oil and Gas Corporation California
Fluor Real Estate Services, Inc. Delaware
Fluor Reinsurance Investments, Inc. Delaware
FRES, Inc. Delaware
Maintenance and Industrial Services, Inc. Delaware
Micogen Limited III, Inc. California
Middle East Fluor California
Pinnacle Insurance Co., Inc. Hawaii
St. Joe Carbon Fuels Corporation Delaware
SJM Holding Corporation Delaware
Allegheny Coal Corporation Delaware
Massey Coal Company (partnership) Delaware
A. T. Massey Coal Company, Inc. Virginia
Aracoma Coal Company, Inc. W. Virginia
Bandmill Coal Corporation W. Virginia
Barnabus Land Company W. Virginia
Ben Creek Coal Company W. Virginia
Big Bear Mining Company W. Virginia
Black Knight Mine Development Co. W. Virginia
Boone East Development Co. W. Virginia
Raven Resources, Inc. Florida
Boone West Development Co. W. Virginia
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
Name of Company Organized Under Laws of
- --------------- -----------------------
<S> <C>
Fluor Corporation
SJM Holding Corporation
Allegheny Coal Corporation
Massey Coal Company (partnership)
A. T. Massey Coal Company, Inc (continued)
Cabinawa Mining Company W. Virginia
Central Penn Energy Company, Inc. Pennsylvania
Central West Virginia Energy Company W. Virginia
Ceres Land Company W. Virginia
Clear Fork Coal Company W. Virginia
Cline & Chambers Coal Company, Inc. Kentucky
Dehue Coal Company W. Virginia
Delbarton Mining Company W. Virginia
Demeter Land Company W. Virginia
Douglas Pocahontas Coal Corporation W. Virginia
DRIH Corporation Delaware
Duchess Coal Company W. Virginia
Duncan Fork Coal Company Pennsylvania
Mine Maintenance, Inc. Pennsylvania
Elk Run Coal Company, Inc. W. Virginia
Appalachian Capital Management Corp. W. Virginia
Bishop Mine Development Co. W. Virginia
Black Castle Mine Development Co. W. Virginia
Black King Mine Development Co. W. Virginia
Chess Processing Company W. Virginia
Marfork Coal Company, Inc. W. Virginia
Continuity Venture Capital Corp. W. Virginia
Progressive Venture Capital Corp. W. Virginia
Monongahela Venture Capital Corp. W. Virginia
Marshall Venture Capital Corp. W. Virginia
Massey Capital Management Corp. W. Virginia
Massey New Era Capital Corp. W. Virginia
New Massey Capital Corp. W. Virginia
Preferred Management Capital Corp. W. Virginia
Rawl Sales Venture Capital Corp. W. Virginia
Sprouse Creek Venture Capital Corp. W. Virginia
Support Mining Company W. Virginia
Federal Development Corporation W. Virginia
Foothills Coal Company W. Virginia
Goals Coal Company W. Virginia
Green Valley Coal Company W. Virginia
Big Sandy Venture Capital Corp. W. Virginia
Haden Farms, Inc. Virginia
Hazy Ridge Coal Company W. Virginia
Highland Mining Company W. Virginia
Hopkins Creek Coal Company Kentucky
Imec, Inc. Kentucky
Independence Coal Company, Inc. W. Virginia
Shenandoah Capital Management Corp. W. Virginia
Jacks Branch Coal Company W. Virginia
Joboner Coal Company Kentucky
Knox Creek Coal Corporation Virginia
Belfry Coal Corporation W. Virginia
Lauren Land Company Kentucky
Lewco Development Company W. Virginia
Lick Branch Coal Company W. Virginia
Logan Mining Company Pennsylvania
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
Name of Company Organized Under Laws of
- --------------- -----------------------
<S> <C>
Fluor Corporation
SJM Holding Corporation
Allegheny Coal Corporation
Massey Coal Company (partnership)
A. T. Massey Coal Company, Inc. (continued)
Long Fork Coal Company Kentucky
Bandytown Coal Company W. Virginia
Eagle Energy, Inc. W. Virginia
Blue Ridge Venture Capital Corp. W. Virginia
Bluestone Venture Capital Corp. W. Virginia
Martin County Coal Corporation Kentucky
Pilgrim Mining Company, Inc. Kentucky
Massey Coal Sales Company, Inc. Virginia
Massey Coal Services, Inc. W. Virginia
Massey Consulting Services, Inc. Virginia
Massey Fuels Corporation Virginia
Menefee Land Company, Inc. Colorado
New Market Land Company W. Virginia
New Ridge Mining Company Kentucky
Nicco Corporation W. Virginia
Majestic Mining, Inc. Texas
Nicholas Energy Company W. Virginia
Alex Energy, Inc. W. Virginia
Power Mountain Coal Company W. Virginia
Omar Mining Company W. Virginia
Peerless Eagle Coal Co. W. Virginia
Performance Coal Company W. Virginia
Continuity Venture Capital Corp. W. Virginia
New River Capital Corp. W. Virginia
SPM Capital Management Corp. W. Virginia
Rawl Sales & Processing Co. W. Virginia
Capstan Mining Company Colorado
Feats Venture Capital Corp. W. Virginia
Lynn Branch Coal Company, Inc. W. Virginia
Massey Coal Capital Corp. W. Virginia
Massey New Era Capital Corp. W. Virginia
New Massey Capital Corp. W. Virginia
Preferred Management Capital Corp. W. Virginia
Rawl Sales Venture Capital Corp. W. Virginia
Sprouse Creek Venture Capital Corp. W. Virginia
St. Alban's Capital Management Corp. W. Virginia
Sun Coal Company, Inc. Colorado
Sycamore Fuels, Inc. W. Virginia
Crystal Fuels Company W. Virginia
Road Fork Development Company, Inc. Kentucky
Robinson-Phillips Coal Company W. Virginia
Rockridge Coal Company W. Virginia
Rum Creek Coal Sales, Inc. W. Virginia
Vantage Mining Company Kentucky
Russell Fork Coal Company W. Virginia
SC Coal Corporation Delaware
Scarlet Land Company Pennsylvania
Shannon-Pocahontas Coal Corporation W. Virginia
Sidney Coal Company, Inc. Kentucky
Spartan Mining Company W. Virginia
Stirrat Coal Company W. Virginia
Stone Mining Company Kentucky
T.C.H. Coal Co. Kentucky
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
Name of Company Organized Under Laws of
- --------------- -----------------------
<S> <C>
Fluor Corporation
SJM Holding Corporation
Allegheny Coal Corporation
Massey Coal Company (partnership)
A. T. Massey Coal Company, Inc. (continued)
Tennessee Consolidated Coal Company Tennessee
Chestnut Coal Company, Inc. Tennessee
Tennessee Energy Corp. Tennessee
Thunder Mining Company W. Virginia
Town Creek Coal Company W. Virginia
White Buck Coal Company W. Virginia
Williams Mountain Coal Company W. Virginia
Wyomac Coal Company, Inc. W. Virginia
Compania Minera San Jose del Peru S.A. Peru
Mineral Resource Development Corporation Delaware
Robil International Corporation Delaware
St. Joe Erzbergbaugesellschaft m.b.H. Austria
St. Joe Exploracion Minera Inc. Delaware
St. Joe Exploracion Minera Inc. y Cia., S.R.C. Spain
St. Joe Luisito de Oro Inc. Delaware
St. Joe Luisito de Oro Inc. y Cia. S.R.C. Spain
St. Joe Minera de Espana, S.A. Spain
St. Joe International Petroleum Corporation Delaware
St. Joe Egypt Exploration Corporation Delaware
St. Joe Minerals Corporation & Cia. Brazil
Coral Empreendimentos e Participacoes Ltda. Brazil
Comercial de Minerios do Sul do Para Ltda. - COMIPA Brazil
Mineracao Alabastro Ltda. Brazil
Mineracao Sao Felix Ltda. Brazil
WODECO Nigeria Limited Nigeria
Zenith Coal Company, Inc. S. Carolina
</TABLE>
- --------------------------------------------------------------------------------
(1) Does not include certain subsidiaries which if considered in the
aggregate as a single subsidiary, would not constitute a significant
subsidiary
(2) 40% ownership
(3) 51% ownership
(4) 49.5% ownership
(5) 50% ownership
(6) 35% ownership
(7) 45% ownership
(8) 27.8% ownership
(9) 55% ownership
(10) 49% ownership
(11) 19.99% ownership
(12) 25% ownership
(13) 60% ownership
(14) 33 1/3% ownership
(15) 10% ownership
(16) 90% ownership
(17) 70% ownership
(18) 65% ownership
(19) 80% ownership
(20) 20% ownership
(21) 30% ownership
(22) 99% ownership
(23) 1% ownership
(24) 66 2/3% ownership
(25) 49.9999% ownership
(26) 75% ownership
(27) 29% ownership
(28) 5% ownership
(29) 38% ownership
10
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report on Form
10-K of Fluor Corporation of our report dated November 17, 1998, included in the
1998 Annual Report to shareholders of Fluor Corporation.
We also consent to the incorporation by reference of our report dated
November 17, 1998, with respect to the consolidated financial statements of
Fluor Corporation incorporated by reference in the Annual Report on Form 10-K
for the year ended October 31, 1998, in the Registration Statements and related
Prospectuses pertaining to: Form S-3 No. 333-18315 for the issuance of senior
debt securities; Form S-8 No. 333-22157 for the 1998 Fluor Executive Stock Plan;
Form S-8 No. 333-31293 for the DMIS, Inc. Nissan Maintenance Project Retirement
& Savings Plan; Form S-8 No. 333-30979 for the TRS 401(k) Retirement Plan; Form
S-8 No. 333-30987 for the Fluor Daniel Craft Employees 401(k) Retirement Plan;
Form S-8 No. 333-30983 for the TRS Salaried Employees' 401(k) Retirement Plan;
Form S-8 No. 333-23809 for the 1997 Fluor Restricted Stock Plan for Non-Employee
Directors; Form S-8 No. 333-37153 for the Fluor Executive Deferred Compensation
Program; Form S-8 No. 333-18151 for the 1996 Fluor Executive Stock Plan; Form
S-8 No. 33-58557 for the Fluor Corporation Stock Plan for Non-Employee
Directors; Form S-8 No. 33-31440 for the 1988 Fluor Executive Stock Plan; Form
S-8 No. 2-77532 for the 1982 Fluor Incentive Stock Option Plan, 1981 Fluor
Executive Stock Plan, 1977 Fluor Executive Stock Plan and 1971 Fluor Stock
Option Plan; and Form S-8 No. 2-72712 for the Fluor Corporation Salaried
Employees' Savings Investment Plan.
/s/ ERNST & YOUNG LLP
Orange County, California
January 20, 1999
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and/or officers of FLUOR CORPORATION, a Delaware corporation ("Fluor"), does
hereby constitute and appoint L. N. FISHER, R. M. BUKATY, and R. R. DRYDEN and
each of them, with full power to act without the other, as his true and lawful
attorneys-in-fact and agents, for him and in his name, place and stead, in any
and all capacities, to sign the annual report on Form 10-K for the fiscal year
ended October 31, 1998, and any and all amendments thereto, to be filed by Fluor
with the Securities and Exchange Commission and to file such annual report and
any amendments, with any and all exhibits thereto, and any and all other
information and documents in connection therewith, with the Securities and
Exchange Commission; and each of the undersigned does hereby ratify and confirm
as his own act and deed all that such attorneys-in-fact and agents, and each of
them shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
as of the 15th day of January, 1999.
/s/ P. J. CARROLL, JR.
----------------------
P. J. Carroll, Jr.
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and/or officers of FLUOR CORPORATION, a Delaware corporation ("Fluor"), does
hereby constitute and appoint L. N. FISHER, R. M. BUKATY, and R. R. DRYDEN and
each of them, with full power to act without the other, as his true and lawful
attorneys-in-fact and agents, for him and in his name, place and stead, in any
and all capacities, to sign the annual report on Form 10-K for the fiscal year
ended October 31, 1998, and any and all amendments thereto, to be filed by Fluor
with the Securities and Exchange Commission and to file such annual report and
any amendments, with any and all exhibits thereto, and any and all other
information and documents in connection therewith, with the Securities and
Exchange Commission; and each of the undersigned does hereby ratify and confirm
as his own act and deed all that such attorneys-in-fact and agents, and each of
them shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
as of the 18th day of January, 1999.
/s/ D. L. Blankenship
------------------------
D. L. Blankenship
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and/or officers of FLUOR CORPORATION, a Delaware corporation ("Fluor"), does
hereby constitute and appoint L. N. FISHER, R. M. BUKATY, and R. R. DRYDEN and
each of them, with full power to act without the other, as his true and lawful
attorneys-in-fact and agents, for him and in his name, place and stead, in any
and all capacities, to sign the annual report on Form 10-K for the fiscal year
ended October 31, 1998, and any and all amendments thereto, to be filed by Fluor
with the Securities and Exchange Commission and to file such annual report and
any amendments, with any and all exhibits thereto, and any and all other
information and documents in connection therewith, with the Securities and
Exchange Commission; and each of the undersigned does hereby ratify and confirm
as his own act and deed all that such attorneys-in-fact and agents, and each of
them shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
as of the 18th day of January, 1999.
/s/ C. A. Campbell, Jr.
--------------------------
C. A. Campbell, Jr.
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and/or officers of FLUOR CORPORATION, a Delaware corporation ("Fluor"), does
hereby constitute and appoint L. N. FISHER, R. M. BUKATY, and R. R. DRYDEN and
each of them, with full power to act without the other, as his true and lawful
attorneys-in-fact and agents, for him and in his name, place and stead, in any
and all capacities, to sign the annual report on Form 10-K for the fiscal year
ended October 31, 1998, and any and all amendments thereto, to be filed by Fluor
with the Securities and Exchange Commission and to file such annual report and
any amendments, with any and all exhibits thereto, and any and all other
information and documents in connection therewith, with the Securities and
Exchange Commission; and each of the undersigned does hereby ratify and confirm
as his own act and deed all that such attorneys-in-fact and agents, and each of
them shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
as of the 13th day of January, 1999.
/s/ P. J. Fluor
------------------
P. J. Fluor
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and/or officers of FLUOR CORPORATION, a Delaware corporation ("Fluor"), does
hereby constitute and appoint L. N. FISHER, R. M. BUKATY, and R. R. DRYDEN and
each of them, with full power to act without the other, as his true and lawful
attorneys-in-fact and agents, for him and in his name, place and stead, in any
and all capacities, to sign the annual report on Form 10-K for the fiscal year
ended October 31, 1998, and any and all amendments thereto, to be filed by Fluor
with the Securities and Exchange Commission and to file such annual report and
any amendments, with any and all exhibits thereto, and any and all other
information and documents in connection therewith, with the Securities and
Exchange Commission; and each of the undersigned does hereby ratify and confirm
as his own act and deed all that such attorneys-in-fact and agents, and each of
them shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
as of the 14th day of January, 1999.
/s/ D. P. Gardner
--------------------
D. P. Gardner
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and/or officers of FLUOR CORPORATION, a Delaware corporation ("Fluor"), does
hereby constitute and appoint L. N. FISHER, R. M. BUKATY, and R. R. DRYDEN and
each of them, with full power to act without the other, as his true and lawful
attorneys-in-fact and agents, for him and in his name, place and stead, in any
and all capacities, to sign the annual report on Form 10-K for the fiscal year
ended October 31, 1998, and any and all amendments thereto, to be filed by Fluor
with the Securities and Exchange Commission and to file such annual report and
any amendments, with any and all exhibits thereto, and any and all other
information and documents in connection therewith, with the Securities and
Exchange Commission; and each of the undersigned does hereby ratify and confirm
as his own act and deed all that such attorneys-in-fact and agents, and each of
them shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
as of the 13th day of January, 1999.
/s/ T. L. Gossage
--------------------
T. L. Gossage
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and/or officers of FLUOR CORPORATION, a Delaware corporation ("Fluor"), does
hereby constitute and appoint L. N. FISHER, R. M. BUKATY, and R. R. DRYDEN and
each of them, with full power to act without the other, as his true and lawful
attorneys-in-fact and agents, for him and in his name, place and stead, in any
and all capacities, to sign the annual report on Form 10-K for the fiscal year
ended October 31, 1998, and any and all amendments thereto, to be filed by Fluor
with the Securities and Exchange Commission and to file such annual report and
any amendments, with any and all exhibits thereto, and any and all other
information and documents in connection therewith, with the Securities and
Exchange Commission; and each of the undersigned does hereby ratify and confirm
as his own act and deed all that such attorneys-in-fact and agents, and each of
them shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
as of the 17th day of January, 1999.
/s/ B. R. Inman
-------------------
B. R. Inman
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and/or officers of FLUOR CORPORATION, a Delaware corporation ("Fluor"), does
hereby constitute and appoint L. N. FISHER, R. M. BUKATY, and R. R. DRYDEN and
each of them, with full power to act without the other, as her true and lawful
attorneys-in-fact and agents, for her and in her name, place and stead, in any
and all capacities, to sign the annual report on Form 10-K for the fiscal year
ended October 31, 1998, and any and all amendments thereto, to be filed by Fluor
with the Securities and Exchange Commission and to file such annual report and
any amendments, with any and all exhibits thereto, and any and all other
information and documents in connection therewith, with the Securities and
Exchange Commission; and each of the undersigned does hereby ratify and confirm
as his own act and deed all that such attorneys-in-fact and agents, and each of
them shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed her signature
as of the 13th day of January, 1999.
/s/ V. S. Martinez
---------------------
V. S. Martinez
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and/or officers of FLUOR CORPORATION, a Delaware corporation ("Fluor"), does
hereby constitute and appoint L. N. FISHER, R. M. BUKATY, and R. R. DRYDEN and
each of them, with full power to act without the other, as his true and lawful
attorneys-in-fact and agents, for him and in his name, place and stead, in any
and all capacities, to sign the annual report on Form 10-K for the fiscal year
ended October 31, 1998, and any and all amendments thereto, to be filed by Fluor
with the Securities and Exchange Commission and to file such annual report and
any amendments, with any and all exhibits thereto, and any and all other
information and documents in connection therewith, with the Securities and
Exchange Commission; and each of the undersigned does hereby ratify and confirm
as his own act and deed all that such attorneys-in-fact and agents, and each of
them shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
as of the 15th day of January, 1999.
/s/ D. R. O'Hare
--------------------
D. R. O'Hare
<PAGE> 10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and/or officers of FLUOR CORPORATION, a Delaware corporation ("Fluor"), does
hereby constitute and appoint L. N. FISHER, R. M. BUKATY, and R. R. DRYDEN and
each of them, with full power to act without the other, as his true and lawful
attorneys-in-fact and agents, for him and in his name, place and stead, in any
and all capacities, to sign the annual report on Form 10-K for the fiscal year
ended October 31, 1998, and any and all amendments thereto, to be filed by Fluor
with the Securities and Exchange Commission and to file such annual report and
any amendments, with any and all exhibits thereto, and any and all other
information and documents in connection therewith, with the Securities and
Exchange Commission; and each of the undersigned does hereby ratify and confirm
as his own act and deed all that such attorneys-in-fact and agents, and each of
them shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
as of the 12th day of January, 1999.
/s/ R. Renwick
------------------------------------
Lord Robin Renwick, K. C. M. G
<PAGE> 11
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and/or officers of FLUOR CORPORATION, a Delaware corporation ("Fluor"), does
hereby constitute and appoint L. N. FISHER, R. M. BUKATY, and R. R. DRYDEN and
each of them, with full power to act without the other, as his true and lawful
attorneys-in-fact and agents, for him and in his name, place and stead, in any
and all capacities, to sign the annual report on Form 10-K for the fiscal year
ended October 31, 1998, and any and all amendments thereto, to be filed by Fluor
with the Securities and Exchange Commission and to file such annual report and
any amendments, with any and all exhibits thereto, and any and all other
information and documents in connection therewith, with the Securities and
Exchange Commission; and each of the undersigned does hereby ratify and confirm
as his own act and deed all that such attorneys-in-fact and agents, and each of
them shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
as of the 13th day of January, 1999.
/s/ J. O. Rollans
--------------------
J. O. Rollans
<PAGE> 12
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and/or officers of FLUOR CORPORATION, a Delaware corporation ("Fluor"), does
hereby constitute and appoint L. N. FISHER, R. M. BUKATY, and R. R. DRYDEN and
each of them, with full power to act without the other, as his true and lawful
attorneys-in-fact and agents, for him and in his name, place and stead, in any
and all capacities, to sign the annual report on Form 10-K for the fiscal year
ended October 31, 1998, and any and all amendments thereto, to be filed by Fluor
with the Securities and Exchange Commission and to file such annual report and
any amendments, with any and all exhibits thereto, and any and all other
information and documents in connection therewith, with the Securities and
Exchange Commission; and each of the undersigned does hereby ratify and confirm
as his own act and deed all that such attorneys-in-fact and agents, and each of
them shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed her signature
as of the 13th day of January, 1999.
/s/ M. R. Seger
-------------------
M. R. Seger
<PAGE> 13
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and/or officers of FLUOR CORPORATION, a Delaware corporation ("Fluor"), does
hereby constitute and appoint L. N. FISHER, R. M. BUKATY, and R. R. DRYDEN and
each of them, with full power to act without the other, as her true and lawful
attorneys-in-fact and agents, for her and in her name, place and stead, in any
and all capacities, to sign the annual report on Form 10-K for the fiscal year
ended October 31, 1998, and any and all amendments thereto, to be filed by Fluor
with the Securities and Exchange Commission and to file such annual report and
any amendments, with any and all exhibits thereto, and any and all other
information and documents in connection therewith, with the Securities and
Exchange Commission; and each of the undersigned does hereby ratify and confirm
as his own act and deed all that such attorneys-in-fact and agents, and each of
them shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his signature
as of the 14th day of January, 1999.
/s/ J. C. Stein
-------------------
J. C. Stein
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> OCT-31-1998
<CASH> 340,544
<SECURITIES> 0
<RECEIVABLES> 959,416
<ALLOWANCES> 0
<INVENTORY> 198,645
<CURRENT-ASSETS> 2,277,151
<PP&E> 3,280,231
<DEPRECIATION> 1,132,923
<TOTAL-ASSETS> 5,019,208
<CURRENT-LIABILITIES> 2,495,554
<BONDS> 0
0
0
<COMMON> 47,233
<OTHER-SE> 1,478,376
<TOTAL-LIABILITY-AND-EQUITY> 5,019,208
<SALES> 0
<TOTAL-REVENUES> 13,504,773
<CGS> 0
<TOTAL-COSTS> 13,095,436
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,277
<INCOME-PRETAX> 362,626
<INCOME-TAX> 127,282
<INCOME-CONTINUING> 235,344
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 235,344
<EPS-PRIMARY> 2.99
<EPS-DILUTED> 2.97
</TABLE>
