<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended April 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________to______________
Commission File Number: 1-7775
FLUOR CORPORATION
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-0740960
--------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
One Enterprise Drive, Aliso Viejo, CA 92698
--------------------------------------------------------------------------------
(Address of principal executive offices)
(949) 349-2000
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of May 31, 2000 there were 75,673,905 shares of common stock outstanding.
<PAGE> 2
FLUOR CORPORATION
FORM 10-Q
APRIL 30, 2000
TABLE OF CONTENTS PAGE
--------------------------------------------------------------------------------
Part I: Financial Information
Condensed Consolidated Statement of Operations for the Three Months
Ended April 30, 2000 and 1999 ....................................... 2
Condensed Consolidated Statement of Operations for the Six Months
Ended April 30, 2000 and 1999 ....................................... 3
Condensed Consolidated Balance Sheet at April 30, 2000 and
October 31, 1999 .................................................... 4
Condensed Consolidated Statement of Cash Flows for the Six Months
Ended April 30, 2000 and 1999 ....................................... 6
Notes to Condensed Consolidated Financial Statements ................ 7
Management's Discussion and Analysis of Financial Condition and Results
of Operations ...................................................... 12
Changes in Backlog ................................................. 22
Part II: Other Information .............................................. 23
Signatures .................................................................. 25
1
<PAGE> 3
PART I: FINANCIAL INFORMATION
FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended April 30, 2000 and 1999
UNAUDITED
<TABLE>
<CAPTION>
$ in thousands, except per share amounts 2000 1999
--------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES $ 2,557,763 $ 3,091,307
COSTS AND EXPENSES
Cost of revenues 2,479,976 3,001,212
Special provision (17,919) 136,500
Corporate administrative and general expense 11,073 10,222
Interest expense 14,814 13,008
Interest income (3,142) (5,112)
------------------------------
Total Costs and Expenses 2,484,802 3,155,830
------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES 72,961 (64,523)
INCOME TAX EXPENSE 21,919 8,372
------------------------------
NET EARNINGS (LOSS) $ 51,042 $ (72,895)
==============================
EARNINGS (LOSS) PER SHARE
BASIC $ .68 $ (.97)
==============================
DILUTED $ .66 $ (.97)
==============================
DIVIDENDS PER COMMON SHARE $ .25 $ .20
==============================
SHARES USED TO CALCULATE
BASIC EARNINGS (LOSS) PER SHARE 75,453 75,154
==============================
DILUTED EARNINGS (LOSS) PER SHARE 76,789 75,154
==============================
</TABLE>
See Accompanying Notes.
2
<PAGE> 4
FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Six Months Ended April 30, 2000 and 1999
UNAUDITED
<TABLE>
<CAPTION>
$ in thousands, except per share amounts 2000 1999
--------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES $ 5,556,282 $ 6,475,372
COSTS AND EXPENSES
Cost of revenues 5,377,734 6,292,416
Special provision (17,919) 136,500
Corporate administrative and general expense 27,901 19,780
Interest expense 27,922 26,012
Interest income (6,433) (9,712)
-------------------------------
Total Costs and Expenses 5,409,205 6,464,996
-------------------------------
EARNINGS BEFORE INCOME TAXES 147,077 10,376
INCOME TAX EXPENSE 43,783 32,190
-------------------------------
NET EARNINGS (LOSS) $ 103,294 $ (21,814)
===============================
EARNINGS (LOSS) PER SHARE
BASIC $ 1.37 $ (.29)
===============================
DILUTED $ 1.35 $ (.29)
===============================
DIVIDENDS PER COMMON SHARE $ .50 $ .40
===============================
SHARES USED TO CALCULATE
BASIC EARNINGS (LOSS) PER SHARE 75,528 75,136
===============================
DILUTED EARNINGS (LOSS) PER SHARE 76,470 75,136
===============================
</TABLE>
See Accompanying Notes.
3
<PAGE> 5
FLUOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
April 30, 2000 and October 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
April 30, October 31,
$ in thousands 2000 1999*
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 120,209 $ 209,614
Accounts and notes receivable 891,828 850,557
Contract work in progress 352,068 416,285
Deferred taxes 110,464 105,502
Inventory and other current assets 327,485 328,213
----------------------------
Total current assets 1,802,054 1,910,171
----------------------------
Property, plant and equipment (net of accumulated depreciation,
depletion and amortization of $1,325,233 and $1,245,644,
respectively) 2,317,338 2,222,953
Investments and goodwill, net 291,697 283,936
Other 477,862 469,057
----------------------------
$4,888,951 $4,886,117
============================
</TABLE>
(Continued On Next Page)
* Amounts at October 31, 1999 have been derived from audited financial
statements.
4
<PAGE> 6
FLUOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
April 30, 2000 and October 31, 1999
UNAUDITED
<TABLE>
<CAPTION>
April 30, October 31,
$ in thousands 2000 1999*
-----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Trade accounts payable $ 624,467 $ 793,465
Short-term debt 524,557 247,911
Advance billings on contracts 473,905 565,373
Accrued salaries, wages and benefit plans 270,070 321,148
Other accrued liabilities 238,323 276,413
-------------------------------
Total current liabilities 2,131,322 2,204,310
-------------------------------
Long-term debt due after one year 317,564 317,555
Deferred taxes 173,094 162,210
Other noncurrent liabilities 633,365 620,670
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 - 75,680,647 shares and 76,034,296 shares, respectively 47,300 47,521
Additional capital 210,721 217,844
Retained earnings 1,440,504 1,375,338
Unamortized executive stock plan expense (28,001) (21,579)
Accumulated other comprehensive income (36,918) (37,752)
-------------------------------
Total shareholders' equity 1,633,606 1,581,372
-------------------------------
$ 4,888,951 $ 4,886,117
===============================
</TABLE>
See Accompanying Notes.
* Amounts at October 31, 1999 have been derived from audited financial
statements.
5
<PAGE> 7
FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended April 30, 2000 and 1999
UNAUDITED
<TABLE>
<CAPTION>
$ in thousands 2000 1999
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings (loss) $ 103,294 $ (21,814)
Adjustments to reconcile net earnings (loss) to cash
(utilized) provided by operating activities:
Depreciation, depletion and amortization 153,558 153,629
Deferred taxes 9,976 5,216
Special provision, net of cash paid (24,719) 130,424
Asset write-off 17,762 --
Changes in operating assets and liabilities, exclud-
ing effects of business acquisitions/dispositions (302,854) (188,557)
Other, net (15,658) (21,342)
---------------------------
Cash (utilized) provided by operating activities (58,641) 57,556
---------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (283,136) (250,728)
Proceeds from sale of subsidiary -- 36,300
Proceeds from sale of property, plant and equipment 45,965 77,634
Investments, net (11,826) (6,863)
Other, net (4,604) (4,205)
---------------------------
Cash utilized by investing activities (253,601) (147,862)
---------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in short-term borrowings 258,504 (54,410)
Proceeds from issuance of note payable to affiliate 20,516 41,972
Cash dividends paid (38,128) (30,318)
Stock options exercised 5,829 1,852
Purchases of common stock (23,003) --
Other, net (881) (1,463)
---------------------------
Cash provided (utilized) by financing activities 222,837 (42,367)
---------------------------
Decrease in cash and cash equivalents (89,405) (132,673)
Cash and cash equivalents at beginning of period 209,614 340,544
---------------------------
Cash and cash equivalents at end of period $ 120,209 $ 207,871
===========================
</TABLE>
See Accompanying Notes.
6
<PAGE> 8
FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(1) The condensed consolidated financial statements do not include footnotes
and certain financial information normally presented annually under
generally accepted accounting principles and, therefore, should be read in
conjunction with the Company's October 31, 1999 annual report on Form 10-K.
Accounting measurements at interim dates inherently involve greater
reliance on estimates than at year-end. The results of operations for the
three and six months ended April 30, 2000 are not necessarily indicative of
results that can be expected for the full year.
The condensed consolidated financial statements included herein are
unaudited; however, they contain all adjustments (consisting of normal
recurring accruals) which, in the opinion of the Company, are necessary to
present fairly its consolidated financial position at April 30, 2000 and
its consolidated results of operations and cash flows for the three and six
months ended April 30, 2000 and 1999.
Certain 1999 amounts have been reclassified to conform with the 2000
presentation.
(2) Inventories comprise the following:
April 30, October 31,
$ in thousands 2000 1999
-----------------------------------------------------------
Equipment for sale/rental $ 86,024 $131,781
Coal 72,453 72,070
Supplies and other 51,626 44,267
------------------------
$210,103 $248,118
========================
(3) Short-term debt comprises the following:
April 30, October 31,
$ in thousands 2000 1999
----------------------------------------------------------
Commercial paper $359,917 $113,746
Note payable to affiliate 133,895 113,379
Notes payable to banks 27,833 15,500
Trade notes payable 2,912 5,286
------------------------
$524,557 $247,911
========================
7
<PAGE> 9
FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
UNAUDITED
(4) Total comprehensive income (loss) represents the net change in
shareholders' equity during a period from sources other than transactions
with shareholders and as such, includes net earnings (loss). For the
Company, the only other component of total comprehensive income (loss) is
the change in the cumulative foreign currency translation adjustments
recorded in shareholders' equity.
The components of comprehensive income (loss), net of related tax, are as
follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
--------------------------- -------------------------
($ in thousands) 2000 1999 2000 1999
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net earnings (loss) $ 51,042 $(72,895) $103,294 $(21,814)
Foreign currency translation
adjustment (4,031) 1,470 834 1,696
------------------------- ------------------------
Comprehensive income
(loss) $ 47,011 $(71,425) $104,128 $(20,118)
========================= ========================
</TABLE>
(5) Cash paid for interest was $30.2 million and $15.4 million for the
six-month periods ended April 30, 2000 and 1999, respectively. Income tax
payments, net of receipts, were $38.3 million and $42.9 million during the
six-month periods ended April 30, 2000 and 1999, respectively.
(6) The Company has a forward purchase contract for 1,850,000 shares of its
common stock. The contract matures in October 2000 and gives the Company
the ultimate choice of settlement option, either physical settlement or net
share settlement. As of April 30, 2000, the contract settlement cost per
share exceeded the current market price per share by $19.15.
Although the ultimate choice of settlement option resides with the Company,
if the price of the Company's common stock falls to certain levels, as
defined in the contract, the holder of the contract has the right to
require the Company to settle the contract.
8
<PAGE> 10
FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
UNAUDITED
(7) In March 1999, the Company announced a new strategic direction, including a
reorganization of the operating units and administrative functions of its
engineering and construction segment. In connection with this
reorganization, the Company recorded in the second quarter of fiscal year
1999 a special provision of $136.5 million pretax to cover direct and other
reorganization related costs, primarily for personnel, facilities and asset
impairment adjustments. In the second quarter of 2000, $17.9 million of the
special provision was reversed into earnings as a result of the Company's
decision to retain ownership and remain in its current office location in
Camberley, U.K.
To date, the Company has eliminated slightly more than 5,000 jobs with
additional separations to be completed by the end of the fiscal year. Two
offices were closed during the current quarter. These closures and the
decision to retain facilities in Camberley, bring total offices closed to
15 thus completing the office utilization initiatives under the
reorganization plan.
The following table summarizes the status of the Company's reorganization
plan as of April 30, 2000:
<TABLE>
<CAPTION>
Lease
Asset Termi-
Personnel Impair- nation
($ in millions) Costs ments Costs Other Total
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at
October 31, 1999 $ 25.2 $ 23.4 $ 9.7 $ 0.2 $ 58.5
Cash expenditures (5.3) -- (1.5) -- (6.8)
Non-cash activities (0.4) (1.0) -- (0.2) (1.6)
Provision reversal -- (17.9) -- -- (17.9)
-------------------------------------------------------------
Balance at
April 30, 2000 $ 19.5 $ 4.5 $ 8.2 $ -- $ 32.2
=============================================================
</TABLE>
The special provision liability as of April 30, 2000 is included in other
accrued liabilities. The liability for personnel costs and asset
impairments will be substantially utilized by year-end. The liability
associated with abandoned lease space will be amortized as an offset to
lease expense over the remaining life of the respective leases starting on
the date of abandonment.
9
<PAGE> 11
FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
UNAUDITED
(8) In the fourth quarter of 1999, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise
and Related Information" (SFAS No. 131). The statement establishes new
standards for the way that business enterprises report information about
operating segments as well as the related disclosures about products and
services, geographical areas and major customers. The adoption of SFAS No.
131 did not affect the consolidated results of operations or financial
position of the Company, but it did affect the business segments that are
disclosed. Prior year disclosures have been restated to conform to the new
basis of reporting.
Operating Information by Segment - For the three months ended April 30,
2000 and 1999:
<TABLE>
<CAPTION>
Fluor Fluor
Fluor Global Massey Signature
($ in millions) Daniel Services Coal Services Total
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2000
External revenues $ 1,608.5 $ 682.0 $ 262.1 $ 5.2 $ 2,557.8
Operating profit $ 42.0 $ 8.3 $ 30.3 $ 0.6 $ 81.2
1999
External revenues $ 2,084.9 $ 753.0 $ 253.4 $ -- $ 3,091.3
Operating profit $ 38.8 $ 20.8 $ 31.7 $ -- $ 91.3
</TABLE>
Reconciliation of Segment Information to Consolidated Amounts - For the three
months ended April 30, 2000 and 1999:
($ in millions) 2000 1999
---------------------------------------------------------------------------
Total segment operating profit $ 81.2 $ 91.3
Special provision 17.9 (136.5)
Corporate administrative and general expense (11.1) (10.2)
Interest (expense) income, net (11.7) (7.9)
Other items, net (3.3) (1.2)
----------------------
Earnings (loss) before taxes $ 73.0 $ (64.5)
======================
10
<PAGE> 12
FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
UNAUDITED
(8) (continued)
Operating Information by Segment - For the six months ended April 30, 2000
and 1999:
<TABLE>
<CAPTION>
Fluor Fluor
Fluor Global Massey Signature
($ in millions) Daniel Services Coal Services Total
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
2000
External revenues $ 3,578.0 $ 1,446.2 $ 522.2 $ 9.9 $ 5,556.3
Operating profit (loss) $ 82.8 $ 36.5 $ 61.9 $ (0.4) $ 180.8
1999
External revenues $ 4,530.0 $ 1,417.4 $ 528.0 $ -- $ 6,475.4
Operating profit $ 78.6 $ 38.1 $ 70.4 $ -- $ 187.1
</TABLE>
Reconciliation of Segment Information to Consolidated Amounts - For the six
months ended April 30, 2000 and 1999:
($ in millions) 2000 1999
----------------------------------------------------------------------------
Total segment operating profit $ 180.8 $ 187.1
Special provision 17.9 (136.5)
Corporate administrative and general expense (27.9) (19.8)
Interest (expense) income, net (21.5) (16.3)
Other items, net (2.2) (4.1)
-----------------------
Earnings before taxes $ 147.1 $ 10.4
=======================
(9) On June 7, 2000, the Company's Board of Directors approved a transaction
that will separate the Company into two independent entities - Fluor and
Massey Energy. This action will enable the management teams of Fluor and
Massey Energy to focus more closely on their respective businesses and will
provide each of the companies with the flexibility to grow in a way that is
best suited to its industry. The transaction will be structured as a
spin-off, resulting in the creation of two publicly held companies. At the
time of the spin-off Fluor shareholders will retain their existing Fluor
stock, which will become Massey Energy shares, and will be issued an equal
number of shares of "new" Fluor stock through a tax-free distribution. The
"old" Fluor's name will be changed to Massey Energy Company. The proposed
transaction, which is expected to be completed within six months, is
subject to shareholder approval, establishment of new capital structures,
and a favorable ruling by the Internal Revenue Service.
11
<PAGE> 13
FLUOR CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is provided to increase understanding of,
and should be read in conjunction with, the condensed consolidated financial
statements and accompanying notes and the Company's October 31, 1999 annual
report on Form 10-K. For purposes of reviewing this document "operating profit"
is calculated as revenues less cost of revenues excluding: special provision;
corporate administrative and general expense; interest expense; interest income;
domestic and foreign income taxes; gain or loss on discontinued operations; the
cumulative effect of a change in accounting principles; and certain other
miscellaneous non-operating income and expense items which are immaterial.
FORWARD-LOOKING INFORMATION
Statements regarding the Company's expectations for future performance or
results, including estimated and projected operating profits and earnings,
expectations regarding office closures and projected reductions in employment
levels and overhead expenses, are forward looking. Statements regarding industry
and competitive trends are also forward looking. Forward-looking statements
reflect current analysis of existing information. Caution must be exercised in
relying on forward-looking statements. Due to known and unknown risks, actual
results may differ materially from expected or projected results. Factors
potentially contributing to such differences include, among others:
o Changes in global business, economic, political and social conditions;
o The Company's failure to receive anticipated new contract awards;
o Customer cancellations of, or scope adjustments to, existing contracts;
o Difficulties or delays incurred in the execution of construction contracts
resulting in cost overruns or liabilities;
o Customer delays or defaults in making payments;
o Fluctuations in the demand for, and price of, coal and other natural
resource commodities;
o Difficulties and delays incurred in the implementation of strategic
initiatives; and
o Competition in the global engineering and construction industry.
There is also a risk that future results may be impacted by currently unforeseen
impediments to the realization of revenues or other payments that have been
recognized through accruals prior to actual receipt. Failure to realize such
accrued amounts may result in a charge against future earnings.
Statements regarding the implementation of a proposed transaction resulting in
the creation of two publicly-held companies, the benefits expected to be
realized by such a transaction, the anticipated impacts of such a transaction,
growth opportunities and potential share repurchases, are forward-looking in
nature. Such forward-looking statements reflect current analysis of existing
information.
12
<PAGE> 14
Caution must be exercised in relying on forward-looking statements. Due to known
and unknown risks, actual results may differ materially from expectations.
Factors potentially contributing to such differences include, among others:
o Inability to consummate the transaction for any reason, including, failure
to obtain adequate assurances as to favorable tax treatment, inability to
establish new capital structures or inability to obtain shareholder
approval;
o Consummation of the transaction and realization of the anticipated results
could take longer than expected;
o Each of the companies may fail to receive the credit rating anticipated;
o Credit and other sources of funding necessary for the consummation of the
transaction may be less available than expected;
o Implementation difficulties and market factors could alter the proposed
strategies and goals of each of the companies; and
o Each of the companies could face difficulties in locating and/or achieving
anticipated consolidation, growth, expansion and new business initiatives
and opportunities.
Additional information concerning these and other factors can be found in press
releases as well as the Company's public periodic filings with the Securities
and Exchange Commission, including the discussion under the heading "Item 1.
Business - Other Matters - Company Business Risks" in the Company's Form 10-K
for its fiscal year ended October 31, 1999. Such filings are available publicly
and upon request from Fluor's Investor Relations Department: (949) 349-3909. The
Company disclaims any intent or obligation to update its forward-looking
statements.
RECENT EVENTS
On June 7, 2000, the Company's Board of Directors approved a transaction that
will separate the Company into two independent entities - Fluor and Massey
Energy. This action will enable the management teams of Fluor and Massey Energy
to focus more closely on their respective businesses and will provide each of
the companies with the flexibility to grow in a way that is best suited to its
industry. The transaction will be structured as a spin-off, resulting in the
creation of two publicly held companies. At the time of the spin-off Fluor
shareholders will retain their existing Fluor stock, which will become Massey
Energy shares, and will be issued an equal number of shares of "new" Fluor stock
through a tax-free distribution. The "old" Fluor's name will be changed to
Massey Energy Company. The proposed transaction, which is expected to be
completed within six months, is subject to shareholder approval, establishment
of new capital structures, and a favorable ruling by the Internal Revenue
Service.
RESULTS OF OPERATIONS
Revenues for the three and six month periods ended April 30, 2000 decreased 17
percent and 14 percent, respectively, compared with the same periods of 1999.
Net earnings for the three and six month periods ended April 30, 2000 were $51.0
million and $103.3 million, compared with net losses of $72.9 and $21.8,
respectively, for the same periods of 1999. The 1999 net losses include the
effect of a $136.5 million pretax special provision ($119.8 million after tax,
or $1.59 per diluted share). The special provision is not allocated to the
Company's business segments.
13
<PAGE> 15
Operating results for the three and six months ended April 30, 2000 were
impacted by two non-recurring items. First, $17.9 million of the special
provision was reversed into earnings as a result of the Company's decision to
retain ownership and remain in its current office location in Camberley, U.K.
Additionally, the Fluor Global Services segment recorded a non-recurring charge
in the amount of $19.3 million relating to the write-off of certain assets and
the loss on the sale of a European-based consulting business.
FLUOR DANIEL
Revenues and operating profit for the Fluor Daniel segment for the three and six
month periods ended April 30, 2000 and 1999 are summarized as follows:
<TABLE>
<CAPTION>
Three months ended April 30, Six months ended April 30,
---------------------------- ---------------------------
($ in millions) 2000 1999 2000 1999
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 1,608.5 $ 2,084.9 $ 3,578.0 $ 4,530.0
Operating profit $ 42.0 $ 38.8 $ 82.8 $ 78.6
</TABLE>
Revenues declined by 23 percent and 21 percent for the three and six month
periods ended April 30, 2000 compared with the same periods of 1999, primarily
due to a reduction in work performed which is consistent with the downward trend
in new awards experienced during 1999 and 1998.
Operating profit for the three and six months ended April 30, 1999 included a
provision totaling $64 million for process design problems on the Murrin Murrin
nickel cobalt project in Western Australia. The Company anticipates recovering a
portion of that amount and, accordingly, recorded $44 million in potential
insurance recoveries during the second quarter of 1999. The result was a
negative $20 million impact for the two 1999 periods. Partially offsetting this
was the recognition of $10 million of earnings from a project in Indonesia.
Realization of these earnings had been in question primarily due to the
uncertainty of collection of certain progress billings. The collection of the
billings combined with the resolution of other normal project completion
contingencies during the second quarter of 1999, resulted in recognition of
project earnings in accordance with contract accounting principles. Expressed as
percentages of revenues, operating margins have increased to 2.6 percent and 2.3
percent for the three and six month periods of 2000, compared with 1.9 percent
and 1.7 percent for the comparable periods of 1999. These increases have
resulted from improvements in both overhead cost management and project margins
during 2000.
New awards for the three and six months ended April 30, 2000 were $1,525.5
million and $2,895.4 million, compared with $1,221.3 million and $2,681.5
million for the same periods of 1999. Approximately 65 percent and 58 percent,
respectively, of the new awards for the three and six months ended April 30,
2000 were for projects located outside of the United States. The increase in
2000 new awards compared with 1999 reflects substantial new awards in the Mining
business unit during the second quarter, partially offset by lower new awards
due to deferred capital spending in the chemicals industry.
14
<PAGE> 16
The following table sets forth backlog for each of the segment's business units:
April 30, October 31, April 30,
$ in millions 2000 1999 1999
---------------------------------------------------------------------
Chemicals & Life Sciences $1,424 $1,964 $2,813
Oil, Gas & Power 3,015 2,583 2,684
Mining 1,037 657 919
Manufacturing 979 1,170 1,339
Infrastructure 320 396 500
----------------------------------
Total backlog $6,775 $6,770 $8,255
==================================
United States $2,879 $2,870 $3,072
International 3,896 3,900 5,183
----------------------------------
Total backlog $6,775 $6,770 $8,255
==================================
The decrease in total backlog compared with April 30, 1999 is consistent with
the reduced levels of new awards in the prior two years, reflecting both the
lingering impact of deferred capital spending by clients and the Company's
continuing emphasis on greater project selectivity. Although backlog reflects
business which is considered to be firm, cancellations or scope adjustments may
occur. Backlog is adjusted to reflect any known project cancellations, deferrals
and revised project scope and cost, both upward and downward.
FLUOR GLOBAL SERVICES
Revenues and operating profit for the Fluor Global Services segment for the
three and six month periods ended April 30, 2000 and 1999 are summarized as
follows:
Three months ended April 30, Six months ended April 30,
--------------------------- --------------------------
($ in millions) 2000 1999 2000 1999
--------------------------------------------------------------------------------
Revenues $ 682.0 $ 753.0 $ 1,446.2 $ 1,417.4
Operating profit $ 8.3 $ 20.8 $ 36.5 $ 38.1
Revenues declined by 9 percent during the second quarter of 2000 compared with
the second quarter of 1999 but increased by 2 percent for the six month period
ended April 30, 2000 compared with the same period of 1999. Revenue gains by the
Telecommunications and Operations & Maintenance sectors during the first six
months of 2000 more than offset declines experienced by the other business
units.
Operating profit for the three and six months ended April 30, 2000 includes a
$19.3 million charge relating to the write-off of certain assets and the loss on
the sale of a European-based
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<PAGE> 17
consulting business. Excluding this 2000 impact, operating profit for the three
and six month periods ended April 30, 2000 increased to $27.6 million and $55.7
million, respectively, from $20.8 million and $38.1 in the comparable periods of
1999, reflecting improved operating results in several business units.
New awards for the three and six months ended April 30, 2000 were $253.3 million
and $1,247.4 million, compared with $399.8 million and $640.5 million for the
same periods of 1999. Approximately 11 percent and 43 percent, respectively, of
the new awards for the three and six months ended April 30, 2000 were for
projects located outside of the United States. The decrease in new awards for
the second quarter of 2000 compared with 1999 was largely due to lower
Telecommunications awards, which remain ahead of 1999 on a year-to-date basis.
The following table sets forth backlog for each of the segment's business units:
April 30, October 31, April 30,
$ in millions 2000 1999 1999
--------------------------------------------------------------------
Fluor Federal Services $ 325 $ 710 $ 465
Telecommunications 821 525 342
Operations & Maintenance 1,266 1,127 1,144
Other 1 10 17
----------------------------------
Total backlog $2,413 $2,372 $1,968
==================================
United States $1,767 $2,137 $1,723
International 646 235 245
----------------------------------
Total backlog $2,413 $2,372 $1,968
==================================
The increase in total backlog is consistent with the growth in new awards.
Although backlog reflects business which is considered to be firm, cancellations
or scope adjustments may occur. Backlog is adjusted to reflect any known project
cancellations, deferrals and revised project scope and cost, both upward and
downward.
COAL
Revenues and operating profit for the Coal segment for the three and six month
periods ended April 30, 2000 and 1999 are summarized as follows:
Three months ended April 30, Six months ended April 30,
---------------------------- --------------------------
($ in millions) 2000 1999 2000 1999
------------------------------------------------------------------------------
Revenues $ 262.1 $ 253.4 $ 522.2 $ 528.0
Operating profit $ 30.3 $ 31.7 $ 61.9 $ 70.4
16
<PAGE> 18
Revenues increased by 3 percent during the second quarter of 2000 compared with
the second quarter of 1999 but declined by 1 percent for the six month period
ended April 30, 2000 compared with the same period of 1999 as the net result of
three factors. First, the volume of steam coal sold has increased significantly
during the current year (26 percent for the second quarter and 20 percent for
the first six months of 2000 compared with 1999). Second, the volume of the
higher priced metallurgical coal has declined by 3 percent and 12 percent for
the second quarter and first six months of 2000 compared with the corresponding
periods of 1999. Third, the average realized prices for both steam and
metallurgical coal have declined during the current year, by 10 percent and 7
percent, respectively, for the second quarter, and by 7 percent and 6 percent
for the first six months of 2000 compared with those same periods in 1999. The
metallurgical coal market continues to be adversely affected by a weak coal
export market and the slow recovery of the domestic steel market. Demand is weak
for U.S. coal exported to foreign markets as the U.S. Dollar remains strong. The
market for steam coal, which is used to fire electric-generating plants,
continues to be adversely impacted by high customer inventory levels resulting
from recent mild winters and competition from western coals, which has begun to
penetrate the traditional eastern coal market areas.
Although the Coal segment has been successful in achieving cost reductions which
lowered the cost per ton of coal sold by approximately 2 percent during the
second quarter and approximately 3 percent during the first six months of 2000
compared with the corresponding periods of 1999, those gains have been more than
offset by the declines in average realized selling prices. As a result,
operating profit has declined. Partially offsetting those factors which have
placed downward pressure on operating profit has been an increase in gains from
the sale or exchange of coal reserves in place. As the Coal segment manages its
coal reserves, it regularly exchanges non-strategic reserves for reserves
located in more synergistic locations. During the second quarter and first half
of 2000 the Coal segment realized gains of $8.5 million and $15.9 million,
respectively, from such transactions, compared with gains of $1.3 million and
$10.2 million during the corresponding periods of 1999.
FLUOR SIGNATURE SERVICES
The Fluor Signature Services segment, which was created to provide business and
administrative support services to the operating units with distinct
profit-and-loss accountability, officially began operations at the start of
fiscal 2000. External revenues during the second quarter and first half of the
year totaled $5.2 million and $9.9 million and were primarily for safety-related
services. The segment reported a slight operating profit of $0.6 million during
the second quarter, which reduced the year-to-date operating loss to $0.4
million.
STRATEGIC REORGANIZATION COSTS
In March 1999, the Company announced a new strategic direction, including a
reorganization of the operating units and administrative functions of its
engineering and construction segment. In connection with this reorganization,
the Company recorded in the second quarter of fiscal year 1999 a special
provision of $136.5 million pretax to cover direct and other reorganization
related costs, primarily for personnel, facilities and asset impairment
adjustments. In the second quarter
17
<PAGE> 19
of 2000, $17.9 million of the special provision was reversed into earnings as a
result of the Company's decision to retain ownership and remain in its current
office location in Camberley, U.K.
The Company continues to implement this reorganization plan. To date, slightly
more than 5,000 jobs have been eliminated with additional separations to be
completed by the end of the fiscal year. Two offices were closed during the
current quarter. These closures and the decision to retain facilities in
Camberley, bring total offices closed to 15 thus completing the office
utilization initiatives under the reorganization plan.
The special provision liability as of April 30, 2000 totaled $32.2 million and
is comprised as follows: $19.5 million for personnel costs; $4.5 million for
asset impairments; and $8.2 million for lease termination costs. The remaining
liability for personnel costs and asset impairments will be substantially
utilized by year-end. The remaining liability associated with abandoned lease
space will be amortized as an offset to lease expense over the remaining life of
the respective leases starting on the date of abandonment.
OTHER
Net interest expense for the three and six month periods ended April 30, 2000
increased by $3.8 million and $5.2 million, respectively, compared with the
corresponding periods of 1999 as the combined result of a decline in interest
income resulting from lower average cash balances outstanding during the periods
and higher levels of short-term debt.
Corporate administrative and general expense for the second quarter and six
months ended April 30, 2000 was $0.9 million and $8.1 million higher compared
with those same periods in 1999 as the net result of several factors. First,
development costs associated with the Company's several knowledge management and
global sales development programs have increased current year expenses
significantly. Costs related to the Company's Enterprise Resource Management
system, Knowledge@Work, totaled $6.2 million during the second quarter of 2000
and $10.5 million for the first six months of the year. Expenditures for this
program started during the third quarter of 1999. The Global Business
Development organization had expenditures during the second quarter and six
months ended April 30, 2000 of $5.6 million and $9.2 million, respectively.
Higher expenses in these areas were largely offset during the second quarter of
2000 by the reversal of previously recorded long-term (stock-based) incentive
compensation expense as a result of the decline in trading prices of Fluor
Corporation stock during the quarter.
The Company's effective tax rate during 1999 was significantly impacted by the
special provision, because certain non-U.S. items included in it did not receive
full tax benefit. The reversal of a portion of the reserve during the second
quarter of 2000 had an offsetting positive impact on the effective tax rate;
however, that benefit was substantially offset by the absence of a tax benefit
on the non-recurring charge recorded by Fluor Global Services during the same
period. Excluding the impacts of the special provision and the non-recurring
charge, the effective tax rate in both the three and six month periods ended
April 30, 2000 was 29.5%, compared with 34.8% and 33.3% during the corresponding
periods of 1999. The current year decreases have resulted from the successful
implementation of a number of tax reduction initiatives.
18
<PAGE> 20
FINANCIAL POSITION AND LIQUIDITY
At April 30, 2000, the Company had cash and cash equivalents of $120.2 million
and a total debt to total capital ratio of 34 percent, compared with cash and
cash equivalents of $209.6 million and a total debt to total capital ratio of
26.3 percent at the end of fiscal year 1999.
Cash flow utilized by operating activities was $58.6 million during the six
month period ended April 30, 2000, compared with cash flow generated from
operations of $57.6 million during the same period in 1999. This change is
primarily due to an increase in net operating assets and liabilities associated
with engineering and construction activities. The level of operating assets and
liabilities is affected from period to period by the mix, stage of completion
and commercial terms of engineering, procurement and construction projects.
Cash utilized by investing activities totaled $253.6 million during the six
month period ended April 30, 2000 compared with $147.9 million during the same
period in 1999. Capital expenditures increased by $32.4 million, reflecting
increases in Fluor Global Services of $10.6 million (primarily for AMECO), $27.3
million higher expenditures by Fluor Daniel and Fluor Signature Services, and
$29.4 million of capitalized costs for Knowledge@Work during the first six
months of 2000, partially offset by a decrease of $34.9 million for Massey Coal.
Proceeds from the sale of property, plant and equipment were $31.7 million lower
in the first six months of 2000 compared with that same period in 1999,
reflecting the cyclical nature of the equipment sale/rental business. The
Company also completed the sale of its ownership interest in Fluor Daniel GTI,
Inc. during the first quarter of 1999 and received proceeds totaling $36.3
million.
Cash provided by financing activities totaled $222.8 million during the six
month period ended April 30, 2000 compared with cash utilized of $42.4 million
for the same period in 1999. During the first six months of fiscal year 2000,
the Company increased its short-term borrowings by $258.5 million, representing
increases in commercial paper of $246.2 million and notes payable to banks of
$12.3 million. In addition, the Company increased its note payable to affiliate
by $20.5 million during the first six months of fiscal year 2000. Dividends paid
during the first six months of 2000 were $38.1 million ($.50 per share) compared
with $30.3 million ($.40 per share) for the same period in 1999. In connection
with a stock buyback program approved by the Board of Directors on March 8,
2000, the Company purchased 747,000 shares of its outstanding common stock for
$23.0 million during the second quarter of 2000. Up to 7.5 million shares of
common stock may be repurchased under the program. The repurchase program will
be funded from operating cash flow and supplemented by short-term credit
facilities as repurchase opportunities arise.
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.
FINANCIAL INSTRUMENTS
The Company has a forward purchase contract for 1,850,000 shares of its common
stock. The contract matures in October 2000 and gives the Company the ultimate
choice of settlement
19
<PAGE> 21
option, either physical settlement or net share settlement. As of April 30,
2000, the contract settlement cost per share exceeded the current market price
per share by $19.15.
Although the ultimate choice of settlement option resides with the Company, if
the price of the Company's common stock falls to certain levels, as defined in
the contract, the holder of the contract has the right to require the Company to
settle the contract.
The Company utilizes forward exchange contracts to hedge foreign currency
transactions entered into in the ordinary course of business and not to engage
in currency speculation. At April 30, 2000 and October 31, 1999, the Company had
forward foreign exchange contracts of less than eighteen months duration, to
exchange principally Euros, British Pounds, Australian Dollars, Canadian
Dollars, Dutch Guilders and German Marks for U.S. Dollars. The total gross
notional amount of these contracts at April 30, 2000 and October 31, 1999 was
$66 million and $124 million, respectively. Forward contracts to purchase
foreign currency represented $66 million and $122 million at April 30, 2000 and
October 31, 1999, respectively. Forward contracts to sell foreign currency
represented $2 million at October 31, 1999.
EURO CONVERSION - UPDATE
Given the nature and size of the Company's European operations, the Company does
not perceive the conversion to the Euro as a significant risk area. The
Company's businesses operate under long-term contracts, typically denominated in
U.S. Dollars, compared with more traditional retail or manufacturing
environments. If required, the Company is currently able to bid, price and
negotiate contracts using the Euro. The Company's treasury function is also
capable of operating with the Euro. Specifically, the Company is able to:
establish bank accounts; obtain financing; obtain bank guarantees or letters of
credit; trade foreign currency; and hedge transactions. The Company's ongoing
Euro conversion effort will be primarily concentrated in the systems area.
Conversion to the Euro impacts the Company's subsidiaries in The Netherlands,
Germany, Belgium and Spain. All subsidiaries use a standard accounting system
and all reside in the same database. The Company's conversion plan is to
maintain the legacy database for historical reference and to create a new
database with the Euro as the base currency. The new database will permit
transactions to take place in both legacy currencies and the Euro as well as
perform prescribed rounding calculations. The new Euro-based database is
available and testing is in progress. Full conversion is anticipated to be
complete by the start of fiscal year 2001.
The Company has not incurred and it does not expect to incur any significant
costs from the continued conversion to the Euro, including any currency risk,
which could significantly affect the Company's business, financial condition and
results of operations.
The Company has not experienced any significant operational disruptions to date
and does not currently expect the continued conversion to the Euro to cause any
significant operational disruptions, including the impact of systems operated by
others.
20
<PAGE> 22
NEW ACCOUNTING PRONOUNCEMENTS
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, as amended, is effective for the Company's fiscal year 2001.
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.
21
<PAGE> 23
FLUOR CORPORATION
CHANGES IN CONSOLIDATED BACKLOG
Three and Six Months Ended April 30, 2000 and 1999
UNAUDITED
Three Months Ended April 30,
----------------------------
$ in millions 2000 1999
----------------------------------------------------------------------
Backlog - beginning of period $ 9,238.7 $ 11,064.5
New awards 1,778.9 1,621.1
Adjustments and cancellations, net 274.8 138.7
Work Performed (2,104.3) (2,601.8)
----------------------------
Backlog - end of period $ 9,188.1 $ 10,222.5
============================
Six Months Ended April 30,
----------------------------
$ in millions 2000 1999
----------------------------------------------------------------------
Backlog - beginning of period $ 9,142.0 $ 12,645.3
New awards 4,142.8 3,322.0
Adjustments and cancellations, net 565.5 (252.8)
Work Performed (4,662.2) (5,492.0)
----------------------------
Backlog - end of period $ 9,188.1 $ 10,222.5
============================
22
<PAGE> 24
PART II: OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
(a) Date of Meeting. The annual meeting of shareholders of Fluor
Corporation was held on March 8, 2000 at the Hyatt Regency
Greenville, Greenville, South Carolina
(b) Election of Directors - Voting Results
Directors elected -
Philip J. Carroll, Jr.
66,123,298 FOR
1,234,159 VOTED TO WITHHOLD AUTHORITY
David P. Gardner
66,348,183 FOR
1,009,274 VOTED TO WITHHOLD AUTHORITY
Thomas L. Gossage
66,402,586 FOR
954,871 VOTED TO WITHHOLD AUTHORITY
Vilma S. Martinez
63,991,735 FOR
3,365,722 VOTED TO WITHHOLD AUTHORITY
Dean R. O'Hare
66,413,074 FOR
944,383 VOTED TO WITHHOLD AUTHORITY
Other directors continuing in office -
Don. L. Blankenship
Carroll A. Campbell, Jr.
Peter J. Fluor
Bobby R. Inman
Robin W. Renwick
James O. Rollans
Martha R. Seger
James C. Stein
(c) Matters Voted Upon. Ratification of the appointment of Ernst &
Young LLP as independent auditors for 2000:
66,769,674 FOR
258,421 AGAINST
329,362 ABSTAIN
-0- BROKER NON-VOTE
(d) Terms of settlement between registrant and any other participant.
None
23
<PAGE> 25
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27.1 Financial Data Schedule as of and for the
six months ended April 30, 2000.
(b) Reports on Form 8-K.
None.
24
<PAGE> 26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FLUOR CORPORATION
------------------------------------------------
(Registrant)
Date: June 14, 2000 /s/ R. F. Hake
--------------- -----------------------------------------------
R. F. Hake, Executive Vice President and
Chief Financial Officer
/s/ V. L. Prechtl
-----------------------------------------------
V. L. Prechtl, Vice President and Controller
25
