<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-----------------------
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1994
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 1-286-2
FOSTER WHEELER CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-1855904
- ----------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Perryville Corporate Park, Clinton, N. J. 08809-4000
- ----------------------------------------- ------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 730-4000
---------------------
(Not Applicable)
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed
since last report.
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 ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of September 30, 1994 was 35,788,125 shares.
<PAGE> 2
FOSTER WHEELER CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I Financial Information:
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheet at
September 30, 1994 and December 31, 1993 2
Condensed Consolidated Statement of Earnings
Three and Nine Months Ended September 30, 1994
and September 24, 1993 3
Condensed Consolidated Statement of Cash Flows
Nine Months Ended September 30, 1994 and
September 24, 1993 4
Notes to Condensed Consolidated Financial
Statements 5 - 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 9
Part II Other Information:
Item 2 - Changes in Securities 10
Item 4 - Submission of Matters to a Vote of Security Holders 10
Item 5 - Other Information 10
Item 6 - Exhibits and Reports on Form 8-K 10
</TABLE>
- 1 -
<PAGE> 3
PART I. FINANCIAL INFORMATION
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
ITEM 1. - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
ASSETS (Unaudited)
- ------ ------------ --------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 234,611 $ 249,514
Short-term investments 133,938 127,876
Accounts and notes receivable 454,356 442,499
Contracts in process 143,323 87,076
Inventories 25,187 24,500
Prepaid and refundable income taxes 43,695 39,000
Prepaid expenses 11,395 12,989
---------- ----------
Total Current Assets 1,046,505 983,454
Notes and accounts receivable - long-term 53,896 40,560
Investments and advances 43,769 34,758
Land, buildings and equipment - at cost less
accumulated depreciation: 1994 - $240,359;
1993 - $217,332 564,104 567,216
Cost in excess of net assets of subsidiaries acquired 8,168 4,098
Deferred charges and prepaid pension cost 175,174 160,967
Deferred income taxes 1,060 15,148
---------- ----------
Total Assets $1,892,676 $1,806,201
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Current installments on long-term debt $ 30,515 $ 32,523
Bank loans 112,558 59,725
Accounts payable and accrued expenses 277,234 292,738
Estimated cost to complete long-term contracts 270,796 287,508
Advance payments by customers 117,656 76,462
Income taxes 23,838 30,033
---------- ----------
Total Current Liabilities 832,597 778,989
Long-term debt, less current installments 373,873 396,741
Other long-term liabilities, deferred credits,
postretirement benefits other than pensions
and minority interest in subsidiary companies 215,254 211,604
Deferred income taxes 21,113 18,691
---------- ----------
Total Liabilities 1,442,837 1,406,025
---------- ----------
Stockholders' Equity:
Common stock 35,833 35,707
Paid-in capital 38,206 35,076
Retained earnings 408,819 381,205
Accumulated translation adjustment (32,468) (51,261)
---------- ----------
450,390 400,727
Less cost of treasury stock 551 551
---------- ----------
Total Stockholders' Equity 449,839 400,176
---------- ----------
Total Liabilities and Stockholders' Equity $1,892,676 $1,806,201
========== ==========
</TABLE>
See notes to financial statements.
- 2 -
<PAGE> 4
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------------- --------------------------------
September 30, September 24, September 30, September 24,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Operating revenues $ 533,599 $ 616,426 $ 1,574,491 $ 1,849,460
Other income 8,985 18,571 25,693 36,321
----------- ----------- ----------- -----------
Total revenues 542,584 634,997 1,600,184 1,885,781
----------- ----------- ----------- -----------
Cost and expenses:
Cost of operating revenues 458,566 545,162 1,345,092 1,634,865
Selling, general and administrative
expenses 47,023 47,288 146,165 145,782
Other deductions 11,651 18,866 30,096 38,227
Minority interest 1,097 495 3,154 1,814
----------- ----------- ----------- -----------
Total costs and expenses 518,337 611,811 1,524,507 1,820,688
----------- ----------- ----------- -----------
Earnings before income taxes 24,247 23,186 75,677 65,093
----------- ----------- ----------- -----------
Provision for income taxes:
Federal and foreign 8,040 10,163 25,202 23,231
State 1,523 869 3,729 2,423
----------- ----------- ----------- -----------
9,563 11,032 28,931 25,654
----------- ----------- ----------- -----------
Net earnings $ 14,684 $ 12,154 $ 46,746 $ 39,439
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 35,807,325 35,656,161 35,779,377 35,646,770
=========== =========== =========== ===========
Earnings per share $ .41 $ .34 $ 1.31 $ 1.11
========== ========== ========== ==========
Cash dividends paid per common share $ .185 $ .165 $ .535 $ .48
========== ========== ========== ==========
</TABLE>
See notes to financial statements.
- 3 -
<PAGE> 5
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------------
September 30, 1994 September 24, 1993
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 46,746 $ 39,439
Adjustments to reconcile net earnings
to cash flows from operating activities:
Depreciation and amortization 32,000 39,849
Noncurrent deferred tax 15,576 11,910
Equity loss, net of dividends 68 261
Gain on sale of subsidiary's assets/other (2,258) (11,775)
Changes in assets and liabilities:
Receivables 3,093 32,126
Contracts in process and inventories (53,370) (29,424)
Accounts payable and accrued expenses (28,605) (56,549)
Estimated cost to complete long-term contracts (28,584) 94,594
Advance payments by customers 33,948 26,511
Income taxes (10,294) (11,554)
Other assets and liabilities (15,459) (14,749)
--------- ---------
NET CASH (USED)/PROVIDED BY OPERATING ACTIVITIES (7,139) 120,639
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (28,662) (19,744)
Changes in short-term investments 3,048 (28,523)
Changes in investments and advances (6,547) (4,059)
Purchase of subsidiary (net of cash purchased) (4,188)
Partnership distribution (3,053) (3,235)
Proceeds from sale of subsidiary's assets/other 5,741 23,704
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (33,661) (31,857)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends to stockholders (19,132) (17,101)
Proceeds from exercise of stock options 2,338 598
Proceeds from long-term debt 5,893 45
Repayment of long-term debt (30,842) (12,051)
Changes in short-term debt 47,457 (5,011)
--------- ---------
NET CASH PROVIDED/(USED) BY FINANCING ACTIVITIES 5,714 (33,520)
--------- ---------
Effect of exchange rate changes on cash and
cash equivalents 20,183 (10,297)
--------- ---------
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (14,903) 44,965
Cash and cash equivalents at beginning of year 249,514 146,485
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 234,611 $ 191,450
========= =========
Cash paid during period:
-Interest (net of amount capitalized) $ 20,884 $ 17,121
-Income taxes $ 12,590 $ 10,438
</TABLE>
See notes to financial statements.
- 4 -
<PAGE> 6
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
1. The condensed consolidated balance sheet as of September 30, 1994, and
the related condensed consolidated statements of earnings for the three
and nine month periods and cash flows for the nine month periods ended
September 30, 1994 and September 24, 1993 are unaudited. In the opinion
of management, all adjustments necessary for a fair presentation of such
financial statements have been included. Such adjustments only
consisted of normal recurring items. Interim results are not
necessarily indicative of results for a full year.
The financial statements and notes are presented as permitted by Form
10-Q and do not contain certain information included in the
Corporation's 1993 Annual Report, Form 10-K filed March 25, 1994 which
should be read in conjunction with this report.
2. In the ordinary course of business the Corporation and its subsidiaries
enter into contracts providing for assessment of damages for
nonperformance or delays in completion. Suits and claims have been or
may be brought against the Corporation by customers alleging
deficiencies in either equipment design or plant construction. The
Corporation and its subsidiaries also routinely become involved in
litigation relating to patents and other intellectual property. There
are several actions of that nature presently pending. If the presently
pending suits described above were sustained in substantially the
amounts asserted, they would have a material adverse effect on the
Corporation's financial condition and results of operations. However,
based on its knowledge of the facts and circumstances relating to the
Corporation's liabilities, if any, and to its insurance coverage,
management believes that the disposition of such suits will not result
in charges against assets or earnings materially in excess of amounts
provided in the accounts.
The Corporation and its subsidiaries, along with many other companies,
are codefendants in numerous lawsuits pending in the United States and
Canada, in which plaintiffs claim damages for personal injury or
property damage alleged to arise from exposure to or use of asbestos.
At September 30, 1994 and September 24, 1993, the suits pending numbered
approximately 46,300 and 34,800, respectively. It is anticipated that a
substantial number of similar suits will be filed in the future. Since
the inception of asbestos-related litigation against the Corporation and
its subsidiaries, approximately 36,300 lawsuits have been terminated
without any payment or with only nominal payments by the insurers for
the Corporation and its subsidiaries. Based on its knowledge of
relevant facts and circumstances, on its determination of the
availability and extent of insurance coverage, and on the advice of the
Corporation's special counsel, the management of the Corporation is of
the opinion that the ultimate disposition of pending and future
asbestos-related lawsuits will not result in material charges against
assets or earnings. The asbestos litigation herein described does not
relate to any activities currently being carried on by the Corporation
or its subsidiaries.
3. The Corporation's unsecured debt contains the following restrictions:
The Note Agreement pursuant to which the 8.58% notes were issued and the
Revolving Credit Agreement require that consolidated Tangible Net Worth,
as defined in the agreements, be at least $400,000 plus 25% of earnings
from 1991 and thereafter. At September 30, 1994, the consolidated
- 5 -
<PAGE> 7
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
(Continued)
Tangible Net Worth was $570,466. The Note Agreement and the Revolving
Credit Agreement also require the maintenance of certain capitalization
ratios. Both agreements require that the ratio of Indebtedness to
Tangible Net Worth, as those terms are defined in the agreements, not
exceed .65 to 1. At September 30, 1994 this ratio was .32 to 1.
4. A total of 1,086,140 shares were reserved for issuance under the stock
option plans; of this total 539,578 were not under option.
5. Foster Wheeler Corporation had a backlog of firm orders as of September
30, 1994 of $4,471,469 as compared to a backlog as of September 24, 1993
of $3,758,035.
6. Earnings per share data have been computed on the weighted average
number of shares of common stock outstanding. Outstanding stock options
have been disregarded because their effect on earnings per share would
not be significant.
7. Interest income and cost for the following periods are:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------------- ----------------------------------
September 30, September 24, September 30, September 24,
------------- ------------- ------------- -------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income $6,509 $6,876 $18,613 $19,465
====== ====== ======= =======
Interest cost $8,456 $8,696 $25,519 $25,690
====== ====== ======= =======
</TABLE>
Included in interest cost is interest capitalized on self-constructed
assets which is insignificant for all periods noted.
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<PAGE> 8
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
(Continued)
8. Changes in stockholders' equity for the nine months ended September 30,
1994 were as follows:
<TABLE>
<CAPTION>
Common Stock Accumulated Treasury Stock Total
----------------- Paid-in Retained Translation ------------------- Stockholders'
Shares Amount Capital Earnings Adjustment Shares Amount Equity
------ ------ ------- -------- ---------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1993 35,706,982 $35,707 $35,076 $381,205 $(51,261) 20,129 $(551) $400,176
Net earnings 46,746 46,746
Dividends paid - common (19,132) (19,132)
Sold under stock options 125,582 126 2,212 2,338
Tax benefits related to incentive
plan and stock options 918 918
Current period translation
adjustment 18,793 18,793
---------- ------- ------- -------- -------- ------- ------ --------
Balance September 30, 1994 35,832,564 $35,833 $38,206 $408,819 $(32,468) 20,129 $(551) $449,839
========== ======= ======= ======== ======== ======= ====== ========
</TABLE>
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<PAGE> 9
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
ITEM 2.-MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED)
The following is Management's Discussion and Analysis of certain significant
factors which have affected the financial condition and results of operations
of the Corporation for the periods indicated below. This discussion and
analysis should be read in conjunction with the 1993 Annual Report, Form 10-K
filed March 25, 1994.
A. Consolidated results of operations for three and nine months ended
September 30, 1994 vs. three and nine months ended September 24, 1993.
The consolidated backlog of unfilled orders as of September 30, 1994
totaled $4.5 billion, the highest in the history of the Corporation. On
a consolidated basis, this represented a 19% increase over the amount
reported for September 1993. Unfilled orders of the Engineering and
Construction Group increased by approximately 17% due principally to the
orders taken by Foster Wheeler Italiana, S.p.A. and Foster Wheeler
Limited-U.K. The Energy Equipment Group recorded a 28% increase in
unfilled orders due primarily to the orders taken by Foster Wheeler
Energy Corporation.
New orders booked for the three and nine months ended September 30, 1994
amounted to approximately $770 million and $2.3 billion, respectively.
In comparison to 1993, these amounts represented increases of 9% for the
three month period and 14% for the nine month period. These increases
were primarily the result of significant bookings by two European
Engineering and Construction subsidiaries and bookings recorded by
Foster Wheeler Energy Corporation for projects located in the Asia-
Pacific region.
Operating revenues for the three and nine months ended September 30,
1994 decreased approximately $83 million and $275 million in comparison
to 1993. These decreases resulted primarily from the European
affiliates of the Engineering and Construction Group reporting lower
revenues related to flow-thru costs.
In comparison to 1993, other income decreased by $10.6 million for the
nine month period and by $9.6 million for the quarter. During September
1993, the Corporation sold Thermacote Welco Company. The resulting gain
was the primary reason for the decreases reported in other income for
the three and nine months ended September 1994. In comparing both the
three and nine month periods, selling general and administrative
expenses remained at approximately the same levels as reported in 1993.
In comparison to 1993, other deductions decreased by $8.1 million for
the nine month period and by $7.2 million for the third quarter. These
decreases were principally due to the acceleration in 1993 of the
amortization of the cost in excess of net assets acquired relating to
the asbestos abatement business.
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<PAGE> 10
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
ITEM 2.-MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED)
(CONTINUED)
Net earnings increased by approximately $7.3 million (19%) for the nine
month period and by $2.5 million (21%) for the three month period. The
year-to-date increase was primarily due to the increased earnings
reported within Energy Equipment Group by Foster Wheeler Energy
Corporation and Foster Wheeler Energia, S.A. (in Spain). During the
third quarter of 1993, the gain on the sale of Thermacote Welco Company
was partially offset by the acceleration of the amortization of cost in
excess of net assets acquired related to the asbestos abatement
business. The Corporate and Financial Services Group reported lower
losses of approximately $1.9 million for the third quarter of 1994 in
comparison to 1993, primarily due to the costs associated with the 1993
settlement of a dispute related to the sale of a subsidiary which took
place in 1988.
B. Consolidated Financial Position
Stockholders' equity for the nine months ended September 30, 1994
increased $49.7 million. The increases from net earnings $46.7 million
and the change in the accumulated translation adjustment $18.8 million
were partially offset by dividends to stockholders of $19.1 million.
Since December 31, 1993, cash and cash equivalents have increased by
$14.9 million. Cash generated from earnings of $92.1 million reduced by
an increase in funding of working capital resulted in a use of cash from
operating activities of $7.1 million. Cash was used to pay dividends of
$19.1 million, long-term debt of $30.8 million and capital expenditures
of $28.7. Existing cash balances, short term investments and unused
credit facilities with banks remain adequate to support expected
operating levels and anticipated future investing and financing
activities.
- 9 -
<PAGE> 11
PART II. OTHER INFORMATION
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
ITEM 2. - CHANGES IN SECURITIES
(b) Note 3 of the Notes to Condensed Consolidated Financial Statements
which appears on Page 5 of Part I of this Report is incorporated
herein by reference.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. - OTHER INFORMATION
Subsequent to September 30, 1994, the Corporation finalized the
acquisition of Enserch Environmental Corporation (EEC). EEC,
formerly a division of Ebasco Services, Inc., is a full-service
provider of hazardous and mixed waste investigation and
remediation control services, wastewater treatment, waste
management, risk analysis and environmental permitting. The
existing Foster Wheeler environmental unit will be merged with the
acquired company which will be named Foster Wheeler Environmental
Corporation.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit
Number Exhibit
------- -------
27 Financial Data Schedule
(As filed as part of this report)
b) Reports on Form 8-K
None
- 10 -
<PAGE> 12
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.
FOSTER WHEELER CORPORATION
--------------------------
(Registrant)
Date: November 1, 1994 /S/ Richard J. Swift
---------------- --------------------------
Richard J. Swift
(Chairman, President and
Chief Executive Officer)
Date: November 1, 1994 /S/ David J. Roberts
---------------- --------------------------
David J. Roberts
(Vice Chairman and
Chief Financial Officer)
- 11 -
<PAGE> 13
EXHIBIT INDEX
--------------
Exhibit
No. Description
------- -----------
27 Financial Data Schedule
(As filed as part of this Report)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary of financial information
extracted from the condensed consolidated balance sheet
and statement of earnings for the 9 months ended
September 30, 1994 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 234,611
<SECURITIES> 133,938
<RECEIVABLES> 454,356
<ALLOWANCES> 0
<INVENTORY> 168,510
<CURRENT-ASSETS> 1,046,505
<PP&E> 804,463
<DEPRECIATION> 240,354
<TOTAL-ASSETS> 1,892,676
<CURRENT-LIABILITIES> 832,597
<BONDS> 373,873
<COMMON> 35,833
0
0
<OTHER-SE> 414,006
<TOTAL-LIABILITY-AND-EQUITY> 1,892,676
<SALES> 1,574,491
<TOTAL-REVENUES> 1,600,184
<CGS> 1,345,092
<TOTAL-COSTS> 1,345,092
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,550
<INCOME-PRETAX> 75,677
<INCOME-TAX> 28,931
<INCOME-CONTINUING> 46,746
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,746
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.31
</TABLE>
