<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 APRIL 1, 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 April 1, 1994 was 35,788,125 shares.
<PAGE> 2
FOSTER WHEELER CORPORATION
INDEX
Page No.
Part I Financial Information:
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheet at
April 1, 1994 and December 31, 1993 2
Condensed Consolidated Statement of Earnings
Three Months Ended April 1, 1994 and
March 26, 1993 3
Condensed Consolidated Statement of Cash Flows
Three Months Ended April 1, 1994 and
March 26, 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 6 - Exhibits and Reports on Form 8-K 10
- 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>
April 1, 1994 December 31,
ASSETS (Unaudited) 1993
- - - ------ ------------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 255,792 $ 249,514
Short-term investments, at cost (which
approximates market value) 132,683 127,876
Accounts and notes receivable 455,746 442,499
Contracts in process 107,392 87,076
Inventories 26,113 24,500
Prepaid and refundable income taxes 41,361 39,000
Prepaid expenses 11,897 12,989
---------- ----------
Total Current Assets 1,030,984 983,454
Notes and accounts receivable - long-term 46,082 40,560
Investments and advances 41,066 34,758
Land, buildings and equipment - at cost less
accumulated depreciation: 1994 - $217,529;
1993 - $217,332 566,173 567,216
Cost in excess of net assets of subsidiaries acquired 4,057 4,098
Deferred charges and prepaid pension cost 164,829 160,967
Deferred income taxes 9,249 15,148
---------- ----------
Total Assets $1,862,440 $1,806,201
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- - - ------------------------------------
Current Liabilities:
Current installments on long-term debt $ 30,801 $ 32,523
Bank loans 99,087 59,725
Accounts payable and accrued expenses 269,796 292,738
Estimated cost to complete long-term contracts 304,216 287,508
Advance payments by customers 84,336 76,462
Income taxes 29,442 30,033
---------- ----------
Total Current Liabilities 817,678 778,989
Long-term debt, less current installments 398,031 396,741
Other long-term liabilities, deferred credits,
postretirement benefits other than pensions
and minority interest in subsidiary companies 210,310 211,604
Deferred income taxes 18,202 18,691
---------- ----------
Total Liabilities 1,444,221 1,406,025
---------- ----------
Stockholders' Equity:
Common stock 35,808 35,707
Paid-in capital 37,600 35,076
Retained earnings 390,717 381,205
Accumulated translation adjustment (45,355) (51,261)
---------- ----------
418,770 400,727
Less cost of treasury stock 551 551
---------- ----------
Total Stockholders' Equity 418,219 400,176
---------- ----------
Total Liabilities and Stockholders' Equity $1,862,440 $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
---------------------------------
April 1, 1994 March 26, 1993
------------- --------------
<S> <C> <C>
Revenues:
Operating revenues $ 469,645 $ 586,531
Other income 8,331 9,894
--------- ---------
Total revenues 477,976 596,425
--------- ---------
Costs and expenses:
Cost of operating revenues 392,526 517,858
Selling, general and administrative expenses 49,731 49,386
Other deductions 8,891 9,636
Minority interest 1,023 653
--------- ---------
Total costs and expenses 452,171 577,533
--------- ---------
Earnings before income taxes 25,805 18,892
--------- ---------
Provision for income taxes:
Federal and foreign 9,241 5,470
State 1,161 692
--------- ---------
10,402 6,162
--------- ---------
Net earnings $ 15,403 $ 12,730
========= =========
Weighted average number of common
shares outstanding 35,731,019 35,638,203
========== ==========
Earnings per share $ .43 $ .36
===== =====
Cash dividends paid per common share $ .165 $ .15
====== =====
</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>
Three Months Ended
---------------------------------
April 1, 1994 March 26, 1993
---------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 15,403 $ 12,730
Adjustments to reconcile net earnings
to cash flows from operating activities:
Depreciation and amortization 10,351 10,968
Noncurrent deferred tax 5,576 4,468
Equity (earnings)/loss, net of dividends (28) 265
Other (967) (672)
Changes in assets and liabilities:
Receivables (16,372) 75,760
Contracts in process and inventories (22,120) (16,100)
Accounts payable and accrued expenses (21,242) (32,822)
Estimated cost to complete long-
term contracts 13,710 32,983
Advance payments by customers 4,727 (520)
Income taxes (2,359) (1,353)
Other assets and liabilities (3,646) (5,915)
-------- --------
NET CASH (USED)/PROVIDED BY OPERATING ACTIVITIES (16,967) 79,792
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (11,632) (8,507)
Changes in short-term investments 873 (46,807)
Changes in investments and advances (4,512) (143)
Partnership distribution (3,053) (3,235)
Other 2,894 533
--------- ---------
NET CASH USED BY INVESTING ACTIVITIES (15,430) (58,159)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends to stockholders (5,891) (5,343)
Proceeds from the exercise of stock options 1,795 88
Proceeds from long-term debt 3,914 66
Repayment of long-term debt (4,040) (4,124)
Changes in short-term debt 36,797 30,856
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 32,575 21,543
--------- ---------
Effect of exchange rate changes
on cash and cash equivalents 6,100 148
--------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 6,278 43,324
Cash and cash equivalents at beginning of year 249,514 146,485
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 255,792 $ 189,809
========= =========
Cash paid during period:
- Interest (net of amount capitalized) $ 2,424 $ 2,287
- Income taxes $ 3,566 $ 1,714
</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 April 1, 1994, and the
related condensed consolidated statements of earnings and cash flows for
the three month periods ended April 1, 1994 and March 26, 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 April 1, 1994 and
March 26, 1993, the suits pending numbered approximately 43,900 and 36,500,
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
29,500 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 April 1, 1994, the consolidated Tangible
-5-
<PAGE> 7
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
(Continued)
Net Worth was $555,800. 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 April 1, 1994 this
ratio was .34 to 1.
4. A total of 1,110,450 shares were reserved for issuance under the stock
option plans; of this total 612,912 were not under option.
5. Foster Wheeler Corporation had a backlog of firm orders as of April 1, 1994
of $4,210,098 as compared to a backlog as of March 26, 1993 of $3,876,609.
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
----------------------------------
April 1, 1994 March 26, 1993
------------- --------------
<S> <C> <C>
Interest income $6,179 $6,339
====== ======
Interest cost $8,216 $8,361
====== ======
</TABLE>
Included in interest cost is interest capitalized on self-constructed
assets for the three months ended April 1, 1994 of $168 and $165 for the
three months ended March 26, 1993.
8. The total tax provision, which includes state taxes on income, equaled
40.3% of income before taxes for the three months ended April 1, 1994 and
32.6% for the three months ended March 26, 1993. The tax provision for the
quarter ended April 1, 1994 exceeded the 35% federal statutory rate
primarily as the result of state taxes.
-6-
<PAGE> 8
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
(Continued)
9. Changes in stockholders' equity for the three months ended April 1, 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 15,403 15,403
Dividends paid - common (5,891) (5,891)
Sold under stock options 101,272 101 1,694 1,795
Tax benefits related to incentive
plan and stock options 830 830
Current period translation
adjustment 5,906 5,906
---------- ------- ------- -------- -------- ------ ----- --------
Balance April 1, 1994 35,808,254 $35,808 $37,600 $390,717 $(45,355) 20,129 $(551) $418,219
========== ======= ======= ======== ======== ====== ===== ========
</TABLE>
- 7 -
<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 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 months ended April 1, 1994 vs.
three months ended March 26, 1993.
The backlog of unfilled orders as of April 1, 1994 totaled $4.2 billion,
the highest in the history of the Corporation. Among all business groups,
this represented an increase of approximately $330 million (9%) over the
amount reported for March 1993. Foster Wheeler Energy Corporation in the
United States (Energy Equipment Group) and Foster Wheeler Italiana, S.p.A.
(Engineering and Construction Group) were primarily responsible for the
increase in unfilled orders.
New orders booked for the first quarter of 1994 amounted to approximately
$840 million. This represented an increase of 22 percent over the first
quarter of 1993. The primary reason for this increase was the significant
amount of bookings reported by Foster Wheeler Energy Corporation and Foster
Wheeler Limited - U.K. (Engineering and Construction Group).
Operating revenues for the first quarter of 1994 decreased by 20 percent in
comparison to the first quarter of 1993. This decrease related to the
significant billings recorded by Foster Wheeler Limited - U.K. and Foster
Wheeler France, S.A. (Engineering and Construction Group) in 1993 for
material and other pass-through costs.
Other income decreased to $8.3 million in 1994 from $9.9 million in 1993,
or approximately $1.6 million. Approximately 75 percent of the other
income for the first quarter of 1994 was due to interest income.
Approximately 50 percent of the decrease related to foreign exchange gains
recorded in the first quarter of 1993. Selling, general and administrative
expenses have remained at approximately the same level as reported for the
first quarter of 1993. Other deductions decreased $745,000 to $8.9
million. This decrease was the result of losses recognized on the equity
basis during the first quarter of 1993 and higher amortization of goodwill
in 1993.
Net earnings rose by approximately 20 percent to $15.4 million or $.43 per
share, compared with $12.7 million or $.36 per share for the first quarter
of 1993. The $2.7 million increase in net earnings reported by the
Corporation was mainly due to the significant increase in net earnings
reported by the Energy Equipment Group.
- 8 -
<PAGE> 10
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED)
(Continued)
B. Consolidated Financial Condition
Stockholders' equity at the end of the first quarter of 1994 increased $18
million from year end. The increase from net earnings ($15.4 million) and
accumulated translation adjustment ($5.9 million) was partially offset by
dividends paid ($5.9 million).
Since December 31, 1993, cash and cash equivalents have increased by $6.3
million. Cash generated from earnings of $30.3 million reduced by an
increase in funding of working capital resulted in a use of cash from
operating activities of $17 million. Cash was used to pay dividends of
$5.9 million and long-term debt of $4.0 million. At the Board of Directors
meeting on April 25, 1994, the quarterly cash dividend was raised from 16.5
cents per share to 18.5 cents per share. Existing cash balances,
short-term investments and unused credit facilities with banks remain
adequate to support increased backlog, 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 6. - EXHIBITS AND REPORTS ON FORM 8-K
(b) Reports on Form 8-K
None.
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: May 10, 1994 /S/ Richard J. Swift
------------ --------------------------
Richard J. Swift
(Chairman, President and
Chief Executive Officer)
Date: May 10, 1994 /S/ David J. Roberts
------------ --------------------------
David J. Roberts
(Vice Chairman and
Chief Financial Officer)
- 10 -
