<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended July 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
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(Exact name of registrant as specified in its charter)
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<S> <C>
New York 13-1855904
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
<TABLE>
<S> <C>
Perryville Corporate Park, Clinton, N. J. 08809-4000
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(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (908) 730-4000
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(Not Applicable)
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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 July 1, 1994 was 35,803,435 shares.
<PAGE> 2
FOSTER WHEELER CORPORATION
INDEX
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<CAPTION>
Page No.
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<S> <C> <C>
Part I Financial Information:
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheet at
July 1, 1994 and December 31, 1993 2
Condensed Consolidated Statement of Earnings
Three and Six Months Ended July 1, 1994 and
June 25, 1993 3
Condensed Consolidated Statement of Cash Flows
Six Months Ended July 1, 1994 and
June 25, 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>
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<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>
July 1, 1994 December 31,
ASSETS (Unaudited) 1993
- - ------ ------------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 270,261 $ 249,514
Short-term investments 135,412 127,876
Accounts and notes receivable 459,492 442,499
Contracts in process 145,797 87,076
Inventories 27,602 24,500
Prepaid and refundable income taxes 43,774 39,000
Prepaid expenses 11,932 12,989
---------- ----------
Total Current Assets 1,094,270 983,454
Notes and accounts receivable - long-term 49,586 40,560
Investments and advances 41,836 34,758
Land, buildings and equipment - at cost less
accumulated depreciation: 1994 - $228,784;
1993 - $217,332 563,022 567,216
Cost in excess of net assets of subsidiaries acquired 4,026 4,098
Deferred charges and prepaid pension cost 172,139 160,967
Deferred income taxes 5,841 15,148
---------- ----------
Total Assets $1,930,720 $1,806,201
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
Current Liabilities:
Current installments on long-term debt $ 30,691 $ 32,523
Bank loans 104,381 59,725
Accounts payable and accrued expenses 311,205 292,738
Estimated cost to complete long-term contracts 272,948 287,508
Advance payments by customers 111,016 76,462
Income taxes 31,442 30,033
---------- ----------
Total Current Liabilities 861,683 778,989
Long-term debt, less current installments 399,096 396,741
Other long-term liabilities, deferred credits,
postretirement benefits other than pensions
and minority interest in subsidiary companies 213,086 211,604
Deferred income taxes 20,205 18,691
---------- ----------
Total Liabilities 1,494,070 1,406,025
---------- ----------
Stockholders' Equity:
Common stock 35,824 35,707
Paid-in capital 38,014 35,076
Retained earnings 400,756 381,205
Accumulated translation adjustment (37,393) (51,261)
---------- ----------
437,201 400,727
Less cost of treasury stock 551 551
---------- ----------
Total Stockholders' Equity 436,650 400,176
---------- ----------
Total Liabilities and Stockholders' Equity $1,930,720 $1,806,201
========== ==========
</TABLE>
See notes to financial statements.
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<PAGE> 4
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
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<CAPTION>
Three Months Ended Six Months Ended
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July 1, 1994 June 25, 1993 July 1, 1994 June 25, 1993
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenues:
Operating revenues $ 571,247 $ 646,503 $ 1,040,892 $ 1,233,034
Other income 8,377 7,856 16,708 17,750
----------- ----------- ----------- -----------
Total revenues 579,624 654,359 1,057,600 1,250,784
----------- ----------- ----------- -----------
Cost and expenses:
Cost of operating revenues 494,000 571,845 886,526 1,089,703
Selling, general and administrative expenses 49,411 49,108 99,142 98,494
Other deductions 9,554 9,725 18,445 19,361
Minority interest 1,034 666 2,057 1,319
----------- ----------- ----------- -----------
Total costs and expenses 553,999 631,344 1,006,170 1,208,877
----------- ----------- ----------- -----------
Earnings before income taxes 25,625 23,015 51,430 41,907
----------- ----------- ----------- -----------
Provision for income taxes:
Federal and foreign 7,921 7,598 17,162 13,068
State 1,045 862 2,206 1,554
----------- ----------- ----------- -----------
8,966 8,460 19,368 14,622
----------- ----------- ----------- -----------
Net earnings $ 16,659 $ 14,555 $ 32,062 $ 27,285
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 35,799,788 35,645,945 35,765,403 35,642,074
=========== =========== =========== ===========
Earnings per share $ .47 $ .41 $ .90 $ .77
=========== =========== =========== ===========
Cash dividends paid per common share $ .185 $ .165 $ .35 $ .315
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
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<PAGE> 5
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
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<CAPTION>
Six Months Ended
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July 1, 1994 June 25, 1993
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 32,062 $ 27,285
Adjustments to reconcile net earnings
to cash flows from operating activities:
Depreciation and amortization 21,069 21,876
Noncurrent deferred tax 11,019 8,505
Equity loss, net of dividends 47 107
Other (1,663) (671)
Changes in assets and liabilities:
Receivables (8,030) 52,751
Contracts in process and inventories (59,796) (34,615)
Accounts payable and accrued expenses 11,209 (56,743)
Estimated cost to complete long-term contracts (23,278) 62,556
Advance payments by customers 28,813 33,510
Income taxes (3,481) (15,159)
Other assets and liabilities (12,878) (3,897)
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NET CASH (USED)/PROVIDED BY OPERATING ACTIVITIES (4,907) 95,505
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (18,038) (14,330)
Changes in short-term investments 469 (37,407)
Changes in investments and advances (4,883) (395)
Partnership distribution (3,053) (3,235)
Other 5,342 722
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NET CASH USED BY INVESTING ACTIVITIES (20,163) (54,645)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends to stockholders (12,511) (11,221)
Proceeds from exercise of stock options 2,137 149
Proceeds from long-term debt 4,771 67
Repayment of long-term debt (4,095) (8,531)
Changes in short-term debt 40,615 23,160
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 30,917 3,624
---------- ----------
Effect of exchange rate changes on cash and
cash equivalents 14,900 (9,359)
---------- ----------
INCREASE IN CASH AND CASH EQUIVALENTS 20,747 35,125
Cash and cash equivalents at beginning of year 249,514 146,485
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 270,261 $ 181,610
========== ==========
Cash paid during period:
-Interest (net of amount capitalized) $ 17,518 $ 14,384
-Income taxes $ 7,563 $ 7,028
</TABLE>
See notes to financial statements.
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<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 July 1, 1994, and the
related condensed consolidated statements of earnings and cash flows for
the three and six month periods ended July 1, 1994 and June 25, 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 July 1, 1994 and
June 25, 1993, the suits pending numbered approximately 42,800 and 30,900,
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 34,700 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 July 1, 1994, the consolidated Tangible
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<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 $566,400. 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 July 1, 1994 this ratio
was .34 to 1.
4. A total of 1,095,140 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 July 1, 1994
of $4,264,214 as compared to a backlog as of June 25, 1993 of $3,834,681.
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:
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Three Months Ended Six Months Ended
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July 1, 1994 June 25, 1993 July 1, 1994 June 25, 1993
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<S> <C> <C> <C> <C>
Interest income $5,925 $6,250 $12,104 $12,589
====== ====== ======= =======
Interest cost $8,847 $8,633 $17,063 $16,994
====== ====== ======= =======
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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 six months ended July 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 32,062 32,062
Dividends paid - common (12,511) (12,511)
Sold under stock options 116,582 117 2,020 2,137
Tax benefits related to
incentive plan and
stock options 918 918
Current period translation
adjustment 13,868 13,868
---------- ------- ------- -------- -------- ------ ----- ---------
Balance July 1, 1994 35,823,564 $35,824 $38,014 $400,756 $(37,393) 20,129 $(551) $ 436,650
========== ======= ======= ======== ========= ====== ===== =========
</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 six months ended July 1,
1994 vs. three and six months ended June 25, 1993.
The backlog of unfilled orders as of July 1, 1994 totaled $4.3 billion,
the highest in the history of the Corporation. On a consolidated basis,
this represented an 11% increase over the amount reported for June 1993.
Unfilled orders of the Engineering and Construction Group increased by
approximately 9% 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 22% increase in unfilled orders due primarily to the
orders taken by Foster Wheeler Energy Corporation.
New orders booked for the three and six months ended July 1, 1994 amounted
to approximately $700 million and $1.5 billion, respectively. These
amounts represented increases of 10% for the three month period and 16%
for the six month period in comparison to 1993. These increases were
primarily the result of significant bookings by two European Engineering
and Construction subsidiaries and the bookings recorded by Foster Wheeler
Energy Corporation.
Operating revenues for the three and six months ended July 1, 1994
decreased approximately $75 million and $192 million in comparison to
1993. These decreases primarily resulted from two European affiliates of
the Engineering and Construction Group reporting lower revenues related to
flow-thru costs.
For the first six months of 1994 other income decreased slightly,
primarily due to the recognition of an exchange gain in 1993. Other
deductions for the three and six month periods decreased slightly in
comparison to 1993. Interest expense represented approximately 90% of
total other deductions for both the three and six month periods ended July
1, 1994. In comparing both the three and six month periods, selling
general and administrative expenses remained at approximately the same
levels as reported in 1993.
Net earnings increased by approximately $4.8 million (18%) for the six
month period and by $2.1 million (14%) for the three month period. The
year-to-date increase was primarily due to the increased earnings reported
by the Energy Equipment Group. Foster Wheeler Energy Corporation and
Foster Wheeler Energia, S.A. (in Spain) both reported increases in excess
of 50% in comparison to 1993. For the quarter all operating groups
reported earnings increases over the second quarter of 1993. The most
significant increases were reported by Foster Wheeler Energia, S.A. and
Foster Wheeler Italiana, S.p.A.
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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)
B. Consolidated Financial Position
Stockholder's equity for the six months ended July 1, 1994 increased
$36,474,000. The increases from net earnings $32,062,000 and the change
in the accumulative translation adjustment ($13,868,000) were partially
offset by dividends to stockholders of $12,511,000. Since December 31,
1993, cash and cash equivalents have increased by $20,747,000. Cash
generated from earnings of $62,534,000 reduced by an increase in funding
of working capital resulted in a use of cash from operating activities of
$4,907,000. Cash was used to pay dividends of $12,511,000 and long-term
debt of $4,095,000. 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.
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<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
(a) Date of Meeting The Annual Meeting of Stockholders of Foster
Wheeler Corporation was held on April 25, 1994 at the
Parsippany-Hilton Hotel, 1 Hilton Court, Rt. 10 (West), Parsippany,
New Jersey.
(b) Election of Directors
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<CAPTION>
Directors Elected For Withheld
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<S> <C> <C>
Martha J. Clark 28,481,737 139,837
John A. Hinds 28,490,720 130,854
David J. Roberts 28,491,078 130,496
John Timko, Jr. 28,320,514 301,060
Charles Y.C. Tse 28,480,993 140,581
Robert Van Buren 28,427,760 193,814
</TABLE>
Other Directors continuing in office:
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<S> <C> <C>
Louis E. Azzato E. James Ferland Frank E. Perkins
Leland E. Boren Harold. E. Kennedy Richard J. Swift
Kenneth A. DeGhetto Joseph J. Melone
</TABLE>
c) Matters Voted Upon
Ratification of the appointment of Coopers & Lybrand as auditors of the
Corporation for 1994:
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<S> <C>
FOR 28,542,964
AGAINST 33,516
ABSTAIN 45,094
</TABLE>
d) Terms of settlement between registrant and any other participant.
Not applicable.
ITEM 5. - OTHER INFORMATION
Subsequent to the quarter's end, the Corporation announced that a
Memorandum of Agreement had been signed with Enserch Corporation of
Dallas, Texas, to purchase its subsidiary, Enserch Environmental Company,
headquartered in Lyndhurst, N.J. The parties will enter a due diligence
period of approximately two months with the closing expected in the fourth
quarter of 1994.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
b) Reports on Form 8-K
None
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<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: August 10, 1994 /S/ David J. Roberts
--------------- --------------------------
David J. Roberts
(Vice Chairman and
Chief Financial Officer)
Date: August 10, 1994 /S/ Thomas R. O'Brien
--------------- --------------------------
Thomas R. O'Brien
(Vice President
and General Counsel)
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