<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1993
[ ] 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)
<TABLE>
<S> <C>
NEW YORK 13-1855904
(State of incorporation) (I.R.S. Employer Identification No.)
PERRYVILLE CORPORATE PARK, CLINTON, NEW JERSEY 08809-4000
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
(908) 730-4000
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b)
OF THE ACT:
<TABLE>
<S> <C>
FOSTER WHEELER CORPORATION NEW YORK STOCK EXCHANGE
COMMON STOCK, $1.00 PAR VALUE (Name of Each Exchange on Which
(Title of Class) Registered)
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
NONE
Title of Class
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. X Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 7, 1994, 35,753,324 shares of the Registrant's Common Stock,
excluding stock held in Treasury, were issued and outstanding, and the
aggregate market value of such shares held by nonaffiliates of the Registrant
on such date was approximately $1,591,022,918 (based on the last price on that
date of $44.50 per share).
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference, and
the Part of the Form 10-K into which the document is incorporated:
(1) Definitive Proxy Statement to be filed with the Commission pursuant
to Regulation 14A of the Securities Exchange Act on or about March
18, 1994
<TABLE>
<CAPTION>
Page Number of
Definitive Proxy
Form 10-K Item Number and Description Statement
- ------------------------------------- ----------------
<S> <C> <C>
10. Directors and Executive Officers 2 - 4
11. Executive Compensation 6 - 12
12. Security Ownership of Certain 2 - 4
Beneficial Owners and Management
</TABLE>
Except as specifically incorporated herein by reference, the above mentioned
Definitive Proxy Statement is not deemed filed as part of this report.
(2) The Financial Section of the Annual Report to Stockholders (pages
17-35) for the fiscal year ended December 31, 1993, is incorporated by
reference into Part I and Part II of this report.
<PAGE> 3
FOSTER WHEELER CORPORATION
1993 Form 10-K Annual Report
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I
Item 1. Business 4 - 7
2. Properties 8 - 11
3. Legal Proceedings 11
4. Submission of Matters to a Vote of Security Holders 11
4a. Executive Officers of the Registrant 11 - 12
Part II
5. Market for the Registrant's Common Equity and Related
Stockholder Matters 13
6. Selected Financial Data 13
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
8. Financial Statements and Supplementary Data 14
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 14
Part III
10. Directors and Executive Officers of the Registrant 15
11. Executive Compensation 15
12. Security Ownership of Certain Beneficial Owners and
Management 15
13. Certain Relationships and Related Transactions 15
Part IV
14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 15 - 26
</TABLE>
3
<PAGE> 4
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS:
Foster Wheeler Corporation was incorporated under the laws of the State of New
York in 1900. Executive offices of Foster Wheeler Corporation are at
Perryville Corporate Park, Clinton, New Jersey, 08809-4000 (Telephone (908)
730-4000). Except as the context otherwise requires, the term "Foster Wheeler"
as used herein includes Foster Wheeler Corporation and its subsidiaries.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS:
Incorporated by reference to Note 16 on page 35 in the Notes to Financial
Statements in Foster Wheeler's Annual Report to Stockholders for the year ended
December 31, 1993.
NARRATIVE DESCRIPTION OF BUSINESS:
Commencing in 1993, the activities of the Corporation have been redefined to
focus on three core business groups covering Engineering and Construction,
Energy Equipment and Power Systems. Prior to 1993, the Industrial and
Environmental Group was reported as a separate segment. Those companies
previously reported within the Industrial and Environmental Group have been
reclassified as follows: Glitsch International, Inc. is now considered part of
the Energy Equipment Group; Thermacote Welco Company, which was sold in
September 1993, Barsotti's Inc. and Ullrich Copper, Inc. are aggregated as part
of Corporate and Financial Services. Certain reclassifications have been made
to conform prior years' data to the current presentation. These
reclassifications had no impact on the previously reported consolidated
earnings of the Corporation.
The three business groups are: the Engineering and Construction Group that
consists primarily of the design, engineering and construction of process
plants and fired heaters for oil refineries, synthetic fuels, and chemical
producers; the Energy Equipment Group that consists mainly of the design and
fabrication of steam generators and condensers, and suppliers of mass-transfer
equipment, tower packings and industrial wire mesh; and the Power Systems Group
engaged in the owning, leasing to, or operation for third parties of solid
waste-to-energy and cogeneration plants. Foster Wheeler markets its services
and products through a staff of sales and marketing personnel and through a
network of sales representatives. The businesses of its industry groups are
not seasonal nor are they dependent on a single customer or a very few
customers. No one customer accounts for 10 percent or more of Foster Wheeler's
consolidated revenues, although in any given year one customer could contribute
significantly to such revenues.
The materials used in Foster Wheeler's manufacturing and construction
operations are obtained from both domestic and foreign sources. Materials,
which consist mainly of steel products and manufactured items, are heavily
dependent on foreign sources, particularly on overseas projects.
4
<PAGE> 5
Generally, lead time for delivery of materials does not presently constitute a
problem.
Foster Wheeler owns and licenses patents, trademarks and know-how which are
used in each of its industry groups. Such licenses, patents and trademarks are
of varying durations. No industry group of the Corporation is materially
dependent upon any particular or related group of patents, trademarks or
licenses. Foster Wheeler has licensed companies throughout the world to
manufacture marine and stationary steam generators and related equipment and
certain of its other products. Principal licensees are in Japan, the
Netherlands, Italy, Spain, Portugal, Norway and England.
For the most part, Foster Wheeler products are custom designed and manufactured
and are not produced for inventory. As is the practice in the Engineering and
Construction Group and Energy Equipment Group, customers often make a down
payment at the time a contract is entered into, and continue to make progress
payments until the contract is completed and the work has been accepted as
meeting contract guarantees.
The Engineering and Construction Group backlog at the end of 1993 was $2.7
billion. Refinery upgrading and reconfiguration projects continue to be the
major sources of new orders for the Group with strong markets in the Pacific
Rim and the Middle East. The Energy Equipment Group backlog at the end of 1993
was $890.5 million.
Foster Wheeler had a backlog of firm orders as of December 31, 1993 of
$3,884,100,000 as compared to a backlog as of December 25, 1992 of
$3,806,800,000. The elapsed time from the award of a contract to completion of
performance may be up to four years. The amount of backlog at December 31,
1993 should not necessarily be considered indicative of Foster Wheeler's total
revenues for 1994, since contracts may under certain circumstances be
accelerated or delayed and new orders booked in 1994 may be billed during that
year.
The backlog by major industry segments as of December 31, 1993 and December 25,
1992 is as follows:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Engineering and
Construction $2,724,300,000 $2,827,200,000
Energy Equipment 890,500,000 831,400,000
Power Systems 210,500,000 68,600,000
Corporate and Financial
Services 58,800,000 79,600,000
--------------- ---------------
$3,884,100,000 $3,806,800,000
--------------- ---------------
--------------- ---------------
</TABLE>
5
<PAGE> 6
The Power Systems projects consist of the following:
<TABLE>
<CAPTION>
PLANT LOCATION TYPE AND SIZE UNIT STATUS
-------------- ------------------ ------
<S> <C> <C>
Martinez, California 99.9 MW Cogeneration In Operation 1987
Mt. Carmel, Pennsylvania 40 MW Cogeneration - anthracite In Operation 1990
culm-fired plant which also
provides hot water to a hydro-
ponic greenhouse
Charleston, South Carolina 600 Ton/Day Resource Recovery; In Operation 1989
designed output 10 MW (a sale/
leaseback of this project was
entered into in 1989)
Camden County, New Jersey 1050 Ton/Day Resource Recovery; In Operation 1991
designed output 21 MW
Hudson Falls, New York 400 Ton/Day Resource Recovery; In Operation 1991
designed output 10 MW
University of Minnesota Heating Plant operation and In Operation 1992
upgrade
- -----------------------------------------------------------------------------------------------------------------------------
Montreal, Canada 2200 Ton/Day Waste-to-Energy* In Final Permitting
Wilkes Barre, Pennsylvania 40 MW Small Power In Permitting
- -----------------------------------------------------------------------------------------------------------------------------
Robbins, Illinois 1600 Ton/Day Waste-to-Energy* In Development
Talcahuano, Chile 65 MW Cogeneration Plant Plus In Development
12,000 Barrels/Day Coker and
6,500 Barrels/Day Hydrotreater
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Includes Recycling.
For waste-to-energy (resource recovery) projects, generally, it takes
approximately two to three years from award of a contract and the signing of a
service agreement with a community to the beginning of construction.
Many companies compete in the Engineering and Construction segment of Foster
Wheeler's business. Management estimates, based on industrial publications,
that it is among the ten largest of the many large and small companies engaged
in the design and construction of petroleum refineries and chemical plants. In
the manufacture of refinery and chemical plant equipment, neither Foster
Wheeler nor any other single company contributes a large percentage of the
total volume of such business.
6
<PAGE> 7
In the Energy Equipment Group, Foster Wheeler competes in the United States
with three major and a number of smaller manufacturers of coal, oil, and
gas-fired steam generating equipment, and, based on a review of trade
association materials, it is third largest in this area. Its two major
competitors are Combustion Engineering, Inc., a wholly owned subsidiary of ABB
Asea Brown Boveri, Ltd.; and Babcock and Wilcox Co., a wholly owned subsidiary
of J. Ray McDermott & Co., Inc. It competes in the United States with seven or
more manufacturers of condensers, feedwater heaters and heat transfer
equipment, and is among the largest of these manufacturers.
For the most part, contracts are awarded on the basis of price, delivery,
performance and service.
Foster Wheeler is continually engaged in research and development efforts both
in performance and analytical services on current projects and in development
of new products and processes. During 1993, approximately $8,350,000, and in
1992 and 1991, $6,900,000 and $7,500,000, respectively, was spent on Foster
Wheeler sponsored research activities. During the same periods, approximately
$40,850,000, $32,300,000, and $27,200,000, respectively, was spent on customer
sponsored research.
Foster Wheeler and its domestic subsidiaries are subject to certain Federal,
state and local environmental, occupation health and product safety laws.
Foster Wheeler believes all its operations are in compliance with such laws and
does not anticipate any material capital expenditures or adverse effect on
earnings in maintaining compliance with such laws.
Foster Wheeler had approximately 9,350 full-time employees on December 31,
1993. Following is a tabulation of the number of full-time employees of Foster
Wheeler in each of its industry segments for the past three years:
<TABLE>
<CAPTION>
December 31, December 25, December 27,
1993 1992 1991
--------------- --------------- --------------
<S> <C> <C> <C>
Engineering and
Construction 5,630 5,975 5,460
Energy Equipment 3,110 3,030 2,950
Power Systems 270 275 200
Corporate and Financial
Services 340 700 725
--------- --------- ---------
9,350 9,980 9,335
--------- --------- ---------
--------- --------- ---------
</TABLE>
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES:
Incorporated by reference to Note 16 on page 35 in the Notes to Financial
Statements in Foster Wheeler's Annual Report to Stockholders for the year ended
December 31, 1993.
7
<PAGE> 8
ITEM 2. PROPERTIES
COMPANY AND
(INDUSTRY SEGMENT*)
<TABLE>
<CAPTION>
BUILDING LEASE
LOCATION USE LAND AREA SQUARE FEET EXPIRES
-------- --- --------- ----------- -------
<S> <C> <C> <C> <C>
Foster Wheeler Corporation
(CF)
- --------------------------
New York City, New York Executive Offices -- 1,148 1998
Livingston, New Jersey General Office
& Engineering 31.0 acres 288,000 (2) --
Lebanon, New Jersey General Offices -- 151,408 1996/1997
Clinton Township, General Office -- 22,543 1996
New Jersey
Union Township, Undeveloped 225.2 acres -- --
New Jersey General Office
& Engineering 29.4 294,000 --
Storage and Reproduction
Facilities 8.0 34,000 --
Livingston, New Jersey Research Center 6.7 acres 51,355 --
Bedminster, New Jersey Office 10.72 acres 135,000 (1)(3)
Bridgewater, New Jersey Undeveloped 118 acres -- (3) --
Foster Wheeler Energy
Corporation (EE)
- ---------------------
Dansville, New York Manufacturing
& Offices 82.4 acres 513,786 --
McGregor, Texas Storage
Facilities 15.0 acres 24,000 --
Foster Wheeler Iberia,
S.A. (EC)
- ----------------------
Madrid, Spain Office & Engineering 4.2 acres 82,500 --
Foster Wheeler Limited
(England) (EC)
- ----------------------
Glasgow, Scotland Office & Engineering -- 27,610 1997
Reading, England Office & Engineering -- 301,367 1995/2016
Tereside, England Office & Engineering -- 24,000 1994/1996
</TABLE>
8
<PAGE> 9
COMPANY AND
(INDUSTRY SEGMENT*)
<TABLE>
<CAPTION>
BUILDING LEASE
LOCATION USE LAND AREA SQUARE FEET EXPIRES
-------- --- --------- ----------- -------
<S> <C> <C> <C> <C>
Foster Wheeler Limited
(Canada) (EE)
- ----------------------
Edmonton, Alberta Assembly -- 10,960 1994
Niagara-On-The-Lake,
Ontario Office Building 34.5 acres 100,000 (1) --
Port Robinson, Ontario Undeveloped Land 15.0 acres -- --
St. Catharines, Ontario Manufacturing
& Office 29.0 acres 233,500 --
Grimsby, Ontario Construction Tools
Depot -- 19,546 1997
Foster Wheeler Energia,
S.A. (EE)
- -----------------------
(formerly Generadores de
Vapor Foster Wheeler, S.A.)
- ---------------------------
Tarragona, Spain Manufacturing
& Office 11.96 acres 77,794 --
Madrid, Spain Office Building 1.26 acres 27,500 --
Foster Wheeler Italiana,
S.p.A. (EC)
- ------------------------
Milan, Italy Office & Engineering -- 180,000 2001
Milan, Italy Office & Engineering -- 30,000 2004
Foster Wheeler USA
Corporation (EC)
- -------------------
Houston, Texas General Offices -- 53,131 2003
Barsotti's Inc. (CF)
- --------------------
Santa Fe Springs Warehouse & Office -- 35,255 1994
California
San Leandeo, Warehouse & Office -- 12,455 1994
California
</TABLE>
9
<PAGE> 10
COMPANY AND
(INDUSTRY SEGMENT*)
<TABLE>
<CAPTION>
BUILDING LEASE
LOCATION USE LAND AREA SQUARE FEET EXPIRES
-------- --- --------- ----------- -------
<S> <C> <C> <C> <C>
Foster Wheeler Power Systems, Inc.
(PS)
- ----------------------------------
Martinez, California Cogeneration Plant 6.4 acres -- --
Mt. Carmel, Cogeneration Plant 105 acres -- 2010
Pennsylvania
Charleston, Waste-to-Energy 18 acres -- 2010
South Carolina Plant
Hudson Falls, New York Waste-to-Energy 11.2 acres -- 2010
Plant
Camden, New Jersey Waste-to-Energy 18 acres -- 2011
Plant
Glitsch International, Inc. (EE)
- --------------------------------
Dallas, Texas Manufacturing
& Office 38.0 acres 505,644 --
Eldorado, Kansas Manufacturing
& Office -- 16,000 1994
Houston, Texas Warehouse & Office 2.83 acres 18,000 --
Uxbridge, Ontario Manufacturing 12.0 acres 84,500 --
Camrose, Alberta, Undeveloped Land 20.0 acres -- --
Canada
Aprilia, Italy Manufacturing 20.5 acres 72,000 --
Parsippany, New Jersey Manufacturing
& Office 8.3 acres 63,790 --
Kirkby Stephen, U.K. Manufacturing
& Office 2.4 acres 19,000 1994
Arles, France Manufacturing
& Office 5.1 acres 70,736 --
Birlesik Insaat ve Muhendislik
A.S. (BIMAS) (EC)
- ------------------------------
Istanbul, Turkey Engineering & Office -- 15,000 1994
</TABLE>
10
<PAGE> 11
COMPANY AND
(INDUSTRY SEGMENT*)
<TABLE>
<CAPTION>
BUILDING LEASE
LOCATION USE LAND AREA SQUARE FEET EXPIRES
-------- --- --------- ----------- -------
<S> <C> <C> <C> <C> <C>
Foster Wheeler France (EC)
- --------------------------
Paris, France Office & Engineering -- 86,555 (1) --
Ullrich Copper, Inc. (CF)
- -------------------------
Kenilworth, New Jersey Manufacturing -- 90,000 1998
Greenwood,
South Carolina Warehouse -- 10,000 1998
</TABLE>
<TABLE>
<S> <C>
- ---------------------------------
*Designation of Industry Groups: EC - Engineering and Construction
EE - Energy Equipment
PS - Power Systems
CF - Corporate & Financial Services
-------------------------------------
</TABLE>
(1) Portion leased or subleased to a responsible tenant.
(2) Entire facility leased to a responsible tenant, with a
portion being subleased back to Foster Wheeler subsidiaries.
(3) 50% ownership interest.
With the exception of the New York Office of the Corporation, locations of
less than 10,000 square feet are not listed. Except as noted above, the
properties set forth are held in fee. All or part of listed locations may be
leased or subleased to other affiliates. All properties are in good condition
and adequate for their intended use.
ITEM 3. LEGAL PROCEEDINGS
Incorporated by reference to Note 12 on page 33 in the Notes to Financial
Statements in Foster Wheeler's Annual Report to Stockholders for the year ended
December 31, 1993.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 4(A) EXECUTIVE OFFICERS OF THE REGISTRANT
In accordance with General Instruction G (3) of Form 10-K information regarding
executive officers is included in PART I.
11
<PAGE> 12
The executive officers of Foster Wheeler, all of whom have held executive
positions with Foster Wheeler or its subsidiaries for more than the past five
years, except Messrs. Bartoli, O'Brien and Whittaker, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Louis E. Azzato 63 Chairman of the Board of Directors
and Chief Executive Officer
Richard J. Swift 49 President and Chief Operating Officer
Harold E. Kennedy 66 Vice Chairman
N. William Atwater 59 Executive Vice President - Engineering and
Construction Group
David J. Roberts 49 Executive Vice President - Chief Financial
Officer
Murray Wolsky 62 Senior Vice President - Administration and
Real Estate
Michele Acerra 56 Vice President - Corporate Planning and
Development
Henry E. Bartoli 47 Vice President - Power Systems Group
(Vice President and General Manager, 1987-1992, Burns and Roe Company.)
Jack E. Deones 62 Vice President - Secretary
Lisa Fries-Gardner 37 Vice President - Chief Compliance Officer
Robert D. Iseman 45 Vice President and Treasurer
Thomas R. O'Brien 55 Vice President and General Counsel
(Partner in the law firm of Wolff and Samson,
1986-1993.)
James E. Schessler 48 Vice President - Personnel & Industrial
Relations
George S. White 57 Vice President and Controller
Robert A. Whittaker 46 Vice President - Energy Equipment Group
(General Manager, Steam Turbine Business for General Electric Industries and Power
Systems, 1989-1992. Various engineering, manufacturing, marketing and service
positions for General Electric, 1969-1988.)
</TABLE>
Each officer holds office for a term running until the Board of Directors
meeting next following the Annual Meeting of Stockholders and until his/her
successor is elected and qualified. There are no family relationships between
the officers listed above. There are no arrangements or understandings between
any of the listed officers and any other person, pursuant to which he/she was
elected as an officer.
12
<PAGE> 13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Incorporated by reference to Note 11 on page 33 in Foster Wheeler's Annual
Report to Stockholders for the year ended December 31, 1993. The Corporation's
common stock is traded on the New York Stock Exchange. The approximate number
of stockholders of record as of December 31, 1993 was 8,008.
ITEM 6. SELECTED FINANCIAL DATA
(In Thousands of Dollars, Except Per Share Data)
<TABLE>
<CAPTION>
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $2,654,505 $2,529,464 $2,031,620 $1,691,023 $1,292,747
Earnings before
accounting change 57,704 45,504 (1) 43,268 38,277 31,637
Earnings per share
before accounting
change 1.62 1.28 (1) 1.22 1.08 .90
Total assets 1,806,201 1,763,264 1,638,874 1,445,494 1,185,246
Long-term borrowings
(including current
installments) 429,264 439,578 454,826 321,608 255,798
Cash dividends per
common share .645 .585 .53 .485 .44
</TABLE>
(1) As of the beginning of 1992, the Corporation adopted the provisions
of Statement of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions." The effect of the accounting change at the beginning of
1992 was a charge to earnings of $91.3 million after tax and
valuation allowance which amounted to $2.57 per share.
13
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated by reference to pages 18 to 22 in Foster Wheeler's Annual Report
to Stockholders for the year ended December 31, 1993.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference to the following sections of Foster Wheeler's Annual
Report to Stockholders for the year ended December 31, 1993:
A. Consolidated Balance Sheet, December 31, 1993 and December 25,
1992 (page 23)
B. Consolidated Statement of Earnings for the years ended December
31, 1993; December 25, 1992; and December 27, 1991 (page 24)
C. Consolidated Statement of Changes in Stockholders' Equity for the
years ended December 31, 1993; December 25, 1992; and December 27,
1991 (page 25)
D. Consolidated Statement of Cash Flows for the years ended December
31, 1993; December 25, 1992; and December 27, 1991 (page 26)
E. Notes to Financial Statements (pages 27-35)
F. Report of Independent Accountants (page 24)
Schedules Required by Regulations S-X
G. Schedule V, Land, Buildings and Equipment (page 23 of Form 10-K)
H. Schedule VI, Accumulated Depreciation of Buildings and Equipment
(page 24 of Form 10-K)
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
14
<PAGE> 15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to pages 2-4 of Foster Wheeler's Proxy Statement,
dated March 18, 1994, for the Annual Meeting of Stockholders to be held April
25, 1994. Certain information regarding executive officers is included in Part
I in accordance with General Instruction G (3) of Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to pages 6-12 of Foster Wheeler's Proxy Statement,
dated March 18, 1994, for the Annual Meeting of Stockholders to be held April
25, 1994.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to pages 2-4 of Foster Wheeler's Proxy Statement,
dated March 18, 1994, for the Annual Meeting of Stockholders to be held April
25, 1994.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1 - Financial Statements
The index to Financial Statements is incorporated in this paragraph
by reference to Item 8, page 14
2 - Financial Statement Schedules
Schedule V, Land, Buildings and Equipment, page 23
Schedule VI, Accumulated Depreciation of Buildings and Equipment,
page 24
15
<PAGE> 16
All other schedules and financial statements have been omitted
because of the absence of conditions requiring them or because the
required information is shown in the financial statements or the
notes thereto.
(b) Reports on Form 8-K:
The following reports on Form 8-K have been filed during
the period September 25 through December 31, 1993:
None
3 - The following Exhibits are required by Item 601 of Regulation S-K and
by paragraph (c) of Item 14 of Form 10-K:
(2) Not applicable
(3) By-Laws of Registrant as amended through February 22, 1994
and filed as part of this report.
(4) Not applicable
(9) Not applicable
(10) Not applicable
(11) Not applicable
(12) Not applicable
(13) Except for those portions thereof which are expressly
incorporated by reference in this filing, the Financial
Section of the Annual Report to Stockholders of Foster
Wheeler Corporation (pages 17-35) for the fiscal year
ended December 31, 1993 is furnished for the information
of the Commission and is not deemed "filed" as part of
this filing.
(18) Not applicable
(21) Subsidiaries of the registrant (pages 18 and 19)
(22) Not applicable
(23) See consent of Independent Accountants (page 21)
(24) Not applicable
(27) Not applicable
(28) Not applicable
16
<PAGE> 17
For the purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into registrant's Registration Statements on Form S-8
Nos. 2-91384 (filed May 29, 1984), 33-34694 (filed May 2, 1990) and 33-40878
(filed May 29, 1991):
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
17
<PAGE> 18
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
FOSTER WHEELER CORPORATION (PARENT)
PRINCIPAL CONSOLIDATED, WHOLLY OWNED SUBSIDIARIES (DIRECTLY OR INDIRECTLY)
Listed by Jurisdiction of Organization
<TABLE>
<CAPTION>
AUSTRALIA
<S> <C>
Foster Wheeler Australia Pty. Ltd., Melbourne Foster Wheeler China, Inc., Delaware
Foster Wheeler Constructors, Inc., Delaware
Foster Wheeler Development Corporation, Delaware
Foster Wheeler (Emirates) Corporation, Delaware
BERMUDA Foster Wheeler Energy Corporation, Delaware
FW Management Operations, Ltd., Hamilton Foster Wheeler Energy International, Inc., Delaware
Foster Wheeler Trading Co. Ltd., Hamilton Foster Wheeler Facilities Management Delaware, Inc., Delaware
Power Systems International, Ltd., Hamilton Foster Wheeler Hudson Falls, Inc., Delaware
York Jersey Liability Ltd., Hamilton Foster Wheeler Intercontinental Corporation, Delaware
Foster Wheeler International Corporation, Delaware
CANADA Foster Wheeler Korea, Ltd., Delaware
Foster Wheeler Limited, St. Catharines Foster Wheeler Martinez, Inc., Delaware
Les Chaudieres Foster Wheeler Inc., Quebec Foster Wheeler Mt. Carmel, Inc., Delaware
Chapleau Co-generation Ltd., Chapleau Foster Wheeler Passaic, Inc., Delaware
Foster Wheeler Canadian Resources Limited, Alberta Foster Wheeler Penn Resources, Inc., Delaware
Foster Wheeler Fired Heaters, Ltd., Calgary Foster Wheeler Power Corporation, Delaware
Glitsch Canada, Ltd., Uxbridge Foster Wheeler Power Systems, Inc., Delaware
La Societe D'Energie Foster Wheeler Ltd., Quebec Foster Wheeler Real Estate Development Corporation, Delaware
Foster Wheeler Twin Cities, Inc., Delaware
CHILE Foster Wheeler USA Corporation, Delaware
Foster Wheeler Chile, S.A., Santiago de Chile Foster Wheeler Wood Resources, Inc., Delaware
Foster Wheeler World Services Corporation, Delaware
ENGLAND Glitsch Field Services, Inc., Texas
Foster Wheeler Limited, Reading Glitsch Inc., Delaware
Foster Wheeler Energy Ltd., Reading Glitsch International, Inc., Delaware
Foster Wheeler (India) Ltd., Reading Glitsch Special Products, Inc., Texas
Foster Wheeler (Northern) Ltd., Reading Glitsch Technology Corporation, Delaware
Foster Wheeler (Pacific) Ltd., Reading Otto H. York Company, Delaware
Foster Wheeler Petroleum Development Ltd., Reading Ullrich Copper, Inc., Delaware
Foster Wheeler World Services, Ltd., Reading Yargo, Inc., Minnesota
FW Management Operations Ltd., Reading
Glitsch (U.K.) Ltd., Kirkby Stephen Cumbria THAILAND
Glitsch Field Services, Ltd., Dorking Foster Wheeler (Thailand) Limited, Sriracha
Foster Wheeler (Indonesia) Ltd., Reading
Foster Wheeler Petroleum Development (Norway) Ltd., U.S. VIRGIN ISLAND
Reading Foster Wheeler F.S.C., Inc., St. Thomas
FRANCE
Foster Wheeler France, S.A., Paris VENEZUELA
Foster Wheeler Conception Etudes Entretien, Paris Foster Wheeler Carbibe Corporation, C.A., Caracas
Foster Wheeler World Services, France, S.A., Paris
Glitsch France, S.A., Arles
Societe Fonciere-Bourdonnais Rivoli, S.A., Paris
ITALY
Foster Wheeler Italiana, S.p.A., Milan
Steril, S.p.A., Milan
Foster Wheeler World Services, S.p.A., Rome
Glitsch Italiana, S.p.A., Campoverde
Foster Wheeler Financial Services S.p.A., Milan
NETHERLANDS ANTILLES
Foster Wheeler N.V., Curacao
NETHERLANDS
Foster Wheeler Europe, B.V., Amsterdam
Foster Wheeler Power Systems, B.V., Amsterdam
SINGAPORE (REPUBLIC OF)
Foster Wheeler Eastern Pte., Ltd., Singapore
SPAIN
Foster Wheeler Iberia, S.A., Madrid
Foster Wheeler Energia, S.A., Madrid
Foster Wheeler Trading Co., S.A., Madrid
F.I. Controles, S.A., Madrid
Foster Wheeler Power Systems, S.A., Madrid
Conequip, S.A., Madrid
UNITED STATES
Camden County Energy Recovery Associates, New Jersey
Camden County Energy Recovery Corporation, Delaware
Century Plastics, Inc., Kansas
Foster Wheeler Arabia Ltd., Delaware
Foster Wheeler Bedminster, Inc., Delaware
Foster Wheeler Bridgewater, Inc., Delaware
Foster Wheeler Broome County, Inc., Delaware
Foster Wheeler Charleston Resource Recovery, Inc.,
Delaware
</TABLE>
18
<PAGE> 19
PRINCIPAL AFFILIATED COMPANIES
(PERCENT DIRECTLY OR INDIRECTLY OWNED BY FOSTER WHEELER CORPORATION)
COLUMBIA
Foster Wheeler Andina, S.A., Bogota (19%)
ITALY
F.FW Fiatavio Foster Wheeler Per L'Energia, S.p.A., Milan (40%)
Software Technology, S.p.A., Milan (90%)
NIGERIA
Foster Wheeler (Nigeria) Ltd., Lagos (60%)
TURKEY
Birlesik Insaat ve Muhendislik, A.S., Istanbul (51%)
19
<PAGE> 20
A copy of the By-Laws of the Corporation, as amended through February 22, 1994,
is available upon request to the Office of the Secretary, Foster Wheeler
Corporation, Perryville Corporate Park, Clinton, New Jersey 08809-4000.
20
<PAGE> 21
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Foster Wheeler Corporation on Form S-8 (File No.'s 2- 91384,
33-34694 and 33-40878) of our report dated February 14, 1994, on our audits of
the consolidated financial statements of Foster Wheeler Corporation and
Subsidiaries as of December 31, 1993 and December 25, 1992, and for each of the
three years in the period ended December 31, 1993, which report is incorporated
by reference in this Annual Report on Form 10-K.
Coopers & Lybrand
New York, New York
March 25, 1994
21
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
Our report on the consolidated financial statements of Foster Wheeler
Corporation and Subsidiaries has been incorporated by reference in this Form
10-K from page 24 of the 1993 Annual Report to Stockholders of Foster Wheeler
Corporation. In connection with our audits of such financial statements, we
have also audited the related financial statement schedules listed in the index
on page 15 of this Form 10-K.
In our opinion, the financial statement schedules referred to above,
when considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand
New York, New York
February 14, 1994
22
<PAGE> 23
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
SCHEDULE V
LAND, BUILDINGS AND EQUIPMENT
THREE YEARS ENDED DECEMBER 31, 1993
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Balance At Other Changes Balance at
Beginning Additions Retirements Debits and/or End
Classification of Year at Cost or Sale (Credits) (a) of Year
- -------------- ------- ------- ------- ---------- -------
<S> <C> <C> <C> <C> <C>
YEAR ENDED, DECEMBER 31, 1993:
- ------------------------------
Land and improvements $ 15,576 $ 23 $ 75 $ (614) $ 14,910
Buildings and improvements 88,695 5,810 2,445 (2,196) 89,864
Prefabricated buildings 59 (3) 56
Yards and improvements 2,027 62 1 (51) 2,037
Machinery and equipment 572,883 14,168 5,743 (3,036) 578,272
Furniture and fixtures 59,660 3,283 3,233 (3,229) 56,481
Vehicles 10,520 2,389 1,932 (501) 10,476
Laboratory experiment equipment 7,775 26 25 (3) 7,773
Construction in progress 26,841 2,088 18 (4,232) 24,679(b)
--------- -------- ------- --------- --------
$784,036 $ 27,849 $13,472 $ (13,865) $784,548
-------- ------- ------- --------- --------
-------- ------- ------- --------- --------
YEAR ENDED, DECEMBER 25, 1992:
- ------------------------------
Land and improvements $ 16,193 $ 298 $ 333 $ (582) $ 15,576
Buildings and improvements 92,775 3,708 2,188 (5,600) 88,695
Prefabricated buildings 62 (3) 59
Yards and improvements 2,683 102 677 (81) 2,027
Machinery and equipment 502,527 103,065 27,330 (5,379) 572,883
Furniture and fixtures 63,135 9,451 2,492 (10,434) 59,660
Vehicles 11,952 3,307 2,969 (1,770) 10,520
Laboratory experiment equipment 7,475 346 39 (7) 7,775
Construction in progress 92,247 (64,282) 629 (495) 26,841(b)
-------- -------- -------- --------- --------
$789,049 $ 55,995 $36,657 $(24,351) $784,036
-------- ------- ------- --------- --------
-------- ------- ------- --------- --------
YEAR ENDED, DECEMBER 27, 1991:
- ------------------------------
Land and improvements $ 16,437 $ 156 $ 364 $ (36) $ 16,193
Buildings and improvements 80,261 15,291 2,525 (252) 92,775
Prefabricated buildings 62 62
Yards and improvements 2,450 180 (44) 9 2,683
Machinery and equipment 339,039 168,047 4,546 (13) 502,527
Furniture and fixtures 50,132 14,498 1,519 24 63,135
Vehicles 10,680 3,359 1,986 (101) 11,952
Laboratory experiment equipment 7,131 342 2 7,475
Construction in progress 174,626 (82,422) 39 82 92,247(b)
-------- --------- -------- ------ --------
$680,818 $119,451 $10,935 $ (285) $789,049
-------- -------- ------- ------ --------
-------- -------- ------- ------ --------
</TABLE>
(a) Exchange translation adjustment.
(b) Primarily waste-to-energy and cogeneration facilities under construction
by the Power Systems Group.
23
<PAGE> 24
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
SCHEDULE VI
ACCUMULATED DEPRECIATION OF BUILDINGS AND EQUIPMENT
THREE YEARS ENDED DECEMBER 31, 1993
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Balance At Additions Other Changes Balance at
Beginning Charged to Retirements Debits and/or End
Classification of Year Costs & Expenses or Sale (Credits) (a) of Year
- -------------- ------- ---------------- ------- ---------- -------
<S> <C> <C> <C> <C> <C>
YEAR ENDED, DECEMBER 31, 1993:
- ------------------------------
Land improvements $ 461 $ 68 $ 1 $ (117) $ 411
Buildings and improvements 25,533 4,965 1,565 (629) 28,304
Prefabricated buildings 55 (2) 53
Yards and improvements 1,202 104 (10) 1,296
Machinery and equipment 117,234 29,166 4,322 (1,608) 140,470
Furniture and fixtures 33,838 6,736 3,087 (1,290) 36,197
Vehicles 6,008 2,027 1,332 (514) 6,189
Laboratory experiment equipment 3,759 666 11 (2) 4,412
-------- ------- ------- --------- --------
$188,090 $43,732 $ 10,318 $ (4,172) $217,332
-------- ------- ------- --------- --------
-------- ------- ------- --------- --------
YEAR ENDED, DECEMBER 25, 1992:
- ------------------------------
Land improvements $ 309 $ 181 $ (29) $ 461
Buildings and improvements 23,633 4,588 $ 1,261 (1,427) 25,533
Prefabricated buildings 57 (2) 55
Yards and improvements 1,441 124 327 (36) 1,202
Machinery and equipment 106,278 27,401 13,575 (2,870) 117,234
Furniture and fixtures 34,056 7,955 2,272 (5,901) 33,838
Vehicles 6,332 2,432 1,928 (828) 6,008
Laboratory experiment equipment 3,165 605 7 (4) 3,759
-------- ------- ------- --------- --------
$175,271 $43,286 $ 19,370 $(11,097) $188,090
-------- ------- ------- --------- --------
-------- ------- ------- --------- --------
YEAR ENDED, DECEMBER 27, 1991:
- ------------------------------
Land improvements $ 251 $ 58 $ 309
Buildings and improvements 20,247 4,075 $ 772 $ 83 23,633
Prefabricated buildings 56 1 57
Yards and improvements 1,309 131 1 1,441
Machinery and equipment 88,541 21,013 3,348 72 106,278
Furniture and fixtures 29,312 6,481 1,352 (385) 34,056
Vehicles 5,303 2,421 1,375 (17) 6,332
Laboratory experiment equipment 2,627 538 3,165
-------- -------- -------- ------ --------
$147,646 $34,718 $ 6,847 $ (246) $175,271
-------- -------- -------- ------ --------
-------- -------- -------- ------ --------
</TABLE>
(a) Exchange translation adjustment.
24
<PAGE> 25
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FOSTER WHEELER CORPORATION
(Registrant)
Dated March 25, 1994 By /s/ Jack E. Deones
-------------------- ------------------------------
Jack E. Deones
Vice President and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed, as of March 25, 1994, by the following persons on
behalf of the registrant, in the capacities indicated.
Signature Title
--------- -----
/s/ Louis E. Azzato Director and Chairman
---------------------------
Louis E. Azzato (Principal Executive Officer)
/s/ Richard J. Swift Director and President
---------------------------
Richard J. Swift (Principal Operating Officer)
/s/ David J. Roberts Executive Vice President - Finance
---------------------------
David J. Roberts (Principal Financial Officer)
/s/ George S. White Vice President and Controller
---------------------------
George S. White (Principal Accounting Officer)
/s/ Harold E. Kennedy Director and Vice Chairman
---------------------------
Harold E. Kennedy
/s/ Leland E. Boren Director
---------------------------
Leland E. Boren
Director
---------------------------
Martha J. Clark
/s/ Kenneth A. DeGhetto Director
---------------------------
Kenneth A. DeGhetto
25
<PAGE> 26
Signature Title
--------- -----
/s/ E. James Ferland Director
---------------------------
E. James Ferland
/s/ John A. Hinds Director
---------------------------
John A. Hinds
/s/ Joseph J. Melone Director
---------------------------
Joseph J. Melone
/s/ Frank E. Perkins Director
---------------------------
Frank E. Perkins
/s/ John Timko, Jr. Director
---------------------------
John Timko, Jr.
/s/ Charles Y. C. Tse Director
---------------------------
Charles Y. C. Tse
/s/ Robert Van Buren Director
--------------------------
Robert Van Buren
26
<PAGE> 27
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
(2) Not applicable
(3) By-Laws of Registrant as amended through February 22, 1994
and filed as part of this report.
(4) Not applicable
(9) Not applicable
(10) Not applicable
(11) Not applicable
(12) Not applicable
(13) Except for those portions thereof which are expressly
incorporated by reference in this filing, the Financial
Section of the Annual Report to Stockholders of Foster
Wheeler Corporation (pages 17-35) for the fiscal year
ended December 31, 1993 is furnished for the information
of the Commission and is not deemed "filed" as part of
this filing.
(18) Not applicable
(21) Subsidiaries of the registrant (pages 18 and 19)
(22) Not applicable
(23) See consent of Independent Accountants (page 21)
(24) Not applicable
(27) Not applicable
(28) Not applicable
<PAGE> 1
EXHIBIT NO. 3
FOSTER WHEELER CORPORATION
(A New York Corporation)
BY-LAWS
AS AMENDED TO FEBRUARY 22, 1994
<PAGE> 2
FOSTER WHEELER CORPORATION
BY-LAWS
TABLE OF CONTENTS*
ARTICLE I
MEETINGS OF STOCKHOLDERS
<TABLE>
<S> <C>
SECTION 1.1 Place of Meetings....................................... 1
SECTION 1.2 Annual Meetings......................................... 1
SECTION 1.3 Special Meetings........................................ 1
SECTION 1.4 Notice of Meetings...................................... 1
SECTION 1.5 Quorum.................................................. 1
SECTION 1.6 Organization of Meetings................................ 2
SECTION 1.7 Voting.................................................. 2
SECTION 1.8 List of Shareholders.................................... 2
SECTION 1.9 Inspectors of Election.................................. 2
SECTION 1.10 Nomination of Directors................................. 2
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.1 Term and Qualification.................................. 3
SECTION 2.2 Vacancies............................................... 3
SECTION 2.3 Places of Directors' Meetings........................... 3
SECTION 2.4 Regular Meetings........................................ 3
SECTION 2.5 Special Meetings........................................ 4
SECTION 2.6 Notice of Special Meetings.............................. 4
SECTION 2.7 Organization of Meetings................................ 4
SECTION 2.8 Quorum.................................................. 4
SECTION 2.9 Action Without Meeting.................................. 4
SECTION 2.10 Telephonic Meetings..................................... 4
SECTION 2.11 Compensation............................................ 4
SECTION 2.12 Directors Emeritus...................................... 4
ARTICLE III
COMMITTEES
SECTION 3.1 Executive Committee..................................... 5
SECTION 3.2 Powers of Executive Committee........................... 5
SECTION 3.3 Quorum of Executive Committee; Procedure................ 5
SECTION 3.4 Other Committees........................................ 5
SECTION 3.5 Compensation and Expenses............................... 5
</TABLE>
(i)
<PAGE> 3
ARTICLE IV
OFFICERS
<TABLE>
<S> <C> <C> <C>
SECTION 4.1 General Provisions..................................... 5
SECTION 4.2 Election of Officers................................... 5
SECTION 4.3 Chairman of the Board.................................. 6
SECTION 4.4 Vice Chairman.......................................... 6
SECTION 4.5 President.............................................. 6
SECTION 4.6 Vice Presidents........................................ 6
SECTION 4.7 Secretary.............................................. 6
SECTION 4.8 Assistant Secretaries.................................. 6
SECTION 4.9 Controller............................................. 6
SECTION 4.10 Assistant Controllers.................................. 6
SECTION 4.11 Treasurer.............................................. 6
SECTION 4.12 Assistant Treasurers................................... 6
SECTION 4.13 General Counsel........................................ 7
SECTION 4.14 Salaries............................................... 7
SECTION 4.15 Retirement; Vacancies.................................. 7
ARTICLE V
CAPITAL STOCK
SECTION 5.1 Certificates........................................... 7
SECTION 5.2 Record................................................. 7
SECTION 5.3 Fixing of Record Date.................................. 7
SECTION 5.4 Transfers.............................................. 7
SECTION 5.5 Lost Stock Certificates................................ 7
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1 Fiscal Year............................................ 8
SECTION 6.2 Corporate Seal......................................... 8
SECTION 6.3 Resignations........................................... 8
SECTION 6.4 Checks, Drafts, Notes and Other Negotiable Instruments. 8
SECTION 6.5 Waiver of Notice....................................... 8
SECTION 6.6 Indemnification and Insurance.......................... 8
SECTION 6.7 Amendments............................................. 9
</TABLE>
(ii)
<PAGE> 4
BY-LAWS
of
FOSTER WHEELER CORPORATION
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1.1. Place of Meetings. All meetings of the shareholders
of the Corporation shall be held at such place either within or without the
State of New York as shall be fixed by the Board of Directors and specified in
the notice or waiver of notice of meeting.
SECTION 1.2. Annual Meeting. (a) The annual meeting of
shareholders for the election of directors and for the transaction of such
other business as properly may be brought before the meeting shall be held
during the month of April in each year on such date and at such time as the
Board of Directors shall specify by resolution.
(b) At any annual meeting of shareholders of the Corporation, only
such business shall be conducted as shall have been brought before the meeting
(i) by or at the direction of the Board of Directors or (ii) by any
shareholder of the Corporation who complies with the procedures set forth in
this Section 1.2. For business to be properly brought before an annual meeting
by a shareholder, the shareholder must have given timely notice thereof in
proper written form to the Secretary of the Corporation. To be timely, a
shareholder's notice must be received by the Secretary at the Corporation's
principal executive offices not less than 120 calendar days in advance of the
date of the Corporation's proxy statement released to shareholders in
connection with the previous year's annual meeting of shareholders. To be in
proper written form, a shareholder's notice to the Secretary shall set forth
in writing as to each matter the shareholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and address, as they appear on the Corporation's
books, of the shareholder proposing such business, (iii) the class and number
of shares of the Corporation which are beneficially owned by the shareholder
and (iv) any material interest of the shareholder in such business.
Notwithstanding anything in the By-Laws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the procedures set
forth in this Section 1.2. The chairman of an annual meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Section 1.2, and, if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall
not be transacted.
SECTION 1.3. Special Meetings. Special meetings of shareholders
may be held whenever called in the manner and with the notice specified in the
Certificate of Incorporation. The business transacted at all special meetings
shall be limited to the purposes stated in the notice thereof.
SECTION 1.4. Notice of Meetings. Written notice of every meeting
of shareholders stating the purpose for which the meeting is called and the
time and place thereof shall be mailed, postage prepaid, not less than ten nor
more than 50 days prior to the date set for the meeting, to each shareholder
entitled to vote at such meeting as of the record date established by the
Board of Directors pursuant to Section 5.3. Such notice shall be directed to a
shareholder at his address as it shall appear on the books of the Corporation
unless he shall have filed with the Secretary of the Corporation a written
request that notices intended for him be mailed to some other address, in
which case it shall be mailed to the address designated in such request.
SECTION 1.5. Quorum. At any meeting of shareholders, except as
otherwise expressly required by statute, by the Certificate of Incorporation,
or by these By-Laws, the holders of record of a majority of the shares of
stock issued and outstanding and entitled to vote thereat, present in person
or represented by proxy, shall constitute a quorum for the transaction of any
business. If, however, such quorum shall not be present at any meeting of the
1
<PAGE> 5
shareholders, the shareholders present in person or by proxy shall have power
to adjourn the meeting from time to time, without notice other than
announcement at the meeting of the time and place of the holding of the
adjourned meeting, until a quorum shall be present. At such adjourned meeting
at which a quorum shall be present, any business may be transacted which might
have been transacted at the meeting as originally called.
SECTION 1.6. Organization of Meetings. At all meetings of
shareholders, unless otherwise determined by the Board of Directors, the
Chairman of the Board or, in his absence, the Vice Chairman, if one is
elected, and if not the President shall preside and the Secretary or an
Assistant Secretary shall act as Secretary.
SECTION 1.7. Voting. At each meeting of shareholders each
shareholder shall be entitled to one vote, in person or by proxy, for each
share of stock registered in the name of such shareholder as of the record
date fixed by the directors, unless otherwise provided in the Certificate of
Incorporation.
SECTION 1.8. List of Shareholders. A list of shareholders as of
the record date, certified by the corporate officer responsible for its
preparation or by the transfer agent of the Corporation, shall be produced at
any meeting of shareholders upon the request thereat or prior thereto of any
shareholder.
SECTION 1.9. Inspectors of Election. One or more inspectors of
election may be appointed by the Board of Directors to act at any meeting of
shareholders, or, if the Board fails to act, the chairman of the meeting may
appoint an inspector or inspectors. An inspector of election may or may not be
a shareholder, but shall not be a candidate for the office of director.
The inspector(s) shall determine the number of shares outstanding and
the voting power of each, the shares represented at the meeting, the existence
of a quorum, the validity and effect of proxies, and shall receive votes,
ballots or consents, hear and determine all challenges and questions arising
in connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders.
Each inspector, before entering upon the discharge of his duties,
shall be sworn faithfully to execute the duties of an inspector at such
meeting with strict impartiality, and according to the best of such person's
ability.
SECTION 1.10. Nomination of Directors. (a) Only persons who are
nominated in accordance with the procedures set forth in this Section 1.10
shall be eligible for election as directors, and no person shall be elected as
a director of the Corporation unless nominated in accordance with the
procedures set forth in this Section 1.10. No nominations for directors other
than those made by the nominating committee shall be voted upon at the annual
meeting unless other nominations by shareholders are made in accordance with
the provisions of this Section 1.10.
(b) The Committee on Nominees for Directors and Officers shall
recommend to the Board of Directors nominees for election as Directors. The
Board of Directors shall thereafter by resolution adopted at least 20 days
before the annual meeting select Corporation nominees for election as
Directors. Such resolution shall be reflected in the minutes of the
Corporation as of the date of its adoption.
(c) Nominations of individuals for election to the Board of Directors
of the Corporation at an annual meeting of shareholders may be made by any
shareholder of the Corporation entitled to vote for the election of directors
at that meeting who complies with the notice procedures set forth in this
Section 1.10. A shareholder's notice shall be received by the Secretary at the
Corporation's principal executive offices not less than 120 calendar days in
advance of the date of the Corporation's proxy statement released to
shareholders in connection with the previous year's annual meeting of
shareholders. Such shareholder's notice shall set forth (1) as to each person
whom the shareholder proposes to nominate for election or re-election as a
director, (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the Corporation's stock which are beneficially
owned by such person and (iv) any other information relating to such person
that is required to be disclosed in solicitations of proxies with respect to
nominees for election as directors, pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including without limitation such
person's written consent to being named in the proxy statement as a nominee
and to serving as a director, if elected); and (2) as to the shareholder giving
the notice (i) the name and address, as they appear on the
2
<PAGE> 6
books of the Corporation, of such shareholder, (ii) the class and number of
shares of the stock of the Corporation which are beneficially owned by such
shareholder, and (iii) the period of time such shares have been owned.
(d) At the request of the Board of Directors, any person nominated by
the Board of Directors for election as a director shall furnish to the
Secretary of the Corporation the information required to be set forth in a
shareholder's notice of nomination which pertains to the nominee, together
with the required written consents.
(e) The Chairman of the meeting shall, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with
the procedures prescribed by these By Laws, and if he should so determine, he
shall so declare to the meeting and the defective nomination shall be
disregarded.
(f) Ballots bearing the names of all the persons nominated by the
Board of Directors and by shareholders shall be provided for use at the annual
meeting. If the Board of Directors shall fail or refuse to act at least 20
days prior to the annual meeting, nominations for directors may be made at the
annual meeting by any shareholder entitled to vote and shall be voted upon.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.1. Term and Qualifications. The business, property and
affairs of the Corporation shall be overseen and controlled by the Board of
Directors. Each director shall be the owner of at least 100 shares of common
stock of the Corporation at the time of his election and so long as he remains
a director, provided shares of common stock of the Corporation are generally
available for purchase.
The directors shall be elected for the terms specified in the
Certificate of Incorporation and shall hold office until their respective
successors are duly elected and qualified. The number of directors may be
increased or decreased from time to time by a majority of the entire Board of
Directors within the limits specified in the Certificate of Incorporation but
no decrease of the number of directors shall change the term of office of any
director in office at the time thereof. If the number of directors is
increased, the additional director or directors shall be elected and shall
serve as specified in the Certificate of Incorporation.
As used in these By-Laws, "entire Board of Directors" means the total
number of directors which the Corporation would have if there were no
vacancies in the Board of Directors.
If the status of a director changes subsequent to July 27, 1993, the
director shall submit his resignation from the Board of Directors to the
Chairman of the Board who shall recommend to the Committee on Nominees for
Directors and Officers either to accept such resignation or to request the
director to reconsider and continue to serve on the Board. The Committee shall
then make its recommendation to the Board. For purposes of this SECTION of the
By-Laws, change of status shall mean retirement, change of employer or
occupation, or material change in responsibilities.
SECTION 2.2. Vacancies. If the office of any director becomes
vacant for any reason, a successor shall be selected in the manner and for
the term specified in the Certificate of Incorporation.
SECTION 2.3. Places of Directors' Meetings. The Board of
Directors may hold meetings at such place or places within or without the
State of New York as the Board of Directors may from time to time determine
or as specified or fixed in the respective notices or waivers of notice
thereof.
SECTION 2.4. Regular Meetings. Commencing in March, 1993, the
regular meetings of the Board of Directors shall be held without notice on the
last Tuesday of each month, except August and December, if not a legal holiday,
or, if a legal holiday, then on the next succeeding day not a legal holiday, at
ten thirty o'clock a.m., or on such other date or at such other time as may be
determined by the Board of Directors, except that one meeting shall be held
immediately following adjournment of each annual meeting of shareholders and
such meeting shall be in lieu of the meeting to be held in the month of such
annual meeting. Any business may be conducted at any regular meeting, except as
may be otherwise specifically provided by statute or by the Certificate of
Incorporation or by Section 6.7 or other provisions of these By-Laws.
3
<PAGE> 7
SECTION 2.5. Special Meetings. Special meetings of the Board of
Directors shall be called by the Secretary when directed to call such meetings
by the Chairman of the Board or, if the Chairman is incapacitated, by the
written request of a majority of directors.
SECTION 2.6. Notice of Special Meetings. Notice of the time,
date, place and purpose of each special meeting of the Board of Directors shall
be mailed to each director, addressed to him at his residence or usual place of
business, at least two days before the day on which the meeting is to be held,
or shall be given to him at such place personally or by telegraph or telephone
not later than the day before the day on which the meeting is to be held.
Notice of any meeting need not be given to any director if waived by him in
writing either before or after such meeting. At any meeting at which every
member of the Board of Directors shall be present, though held without notice,
any business may be transacted which might have been transacted if the meeting
had been duly called.
SECTION 2.7. Organization of Meetings. At all meetings of the
Board of Directors, the Chairman of the Board or, in his absence, the Vice
Chairman, if one is elected, and if not the President shall preside and the
Secretary shall act as secretary. In the absence of such officers, a chairman
or secretary of the meeting, or both, as the case may be, shall be elected from
those present.
SECTION 2.8. Quorum. At each meeting of the Board of Directors, the
presence of at least a majority of the entire board shall constitute a quorum
for the transaction of any business and any act of the directors present at a
meeting at which there is a quorum shall be the act of the Board of Directors,
except as may be otherwise specifically provided by statute or by the
Certificate of Incorporation or by these By-Laws.
SECTION 2.9. Action Without Meeting. Unless otherwise restricted
by the Certificate of Incorporation, any action required or permitted to be
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if all members of the Board of Directors or such
committee, as the case may be, consent in writing to the adoption of a
resolution authorizing the action and such resolution and written consents
thereto by the members of the Board of Directors or committee are filed with
the minutes of the proceedings of the Board of Directors or committee.
SECTION 2.10. Telephonic Meetings. At the request of the Chairman
any one or more members of the Board or any Committee thereof may participate
in a special meeting, or for quorum purposes in any meeting, of such Board or
Committee by means of conference telephone or similar communications equipment
allowing all persons participating in the meeting to hear each other at the
same time. Participation by such means shall constitute presence at the
meeting.
SECTION 2.11. Compensation. The Chairman of the Board and each
director shall be entitled to receive such compensation and expense allowances
as the Board of Directors may from time to time determine. Nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
SECTION 2.12. Directors Emeritus. The Board of Directors may
appoint any former director as a director emeritus for terms of one year to
serve on an advisory committee to the Board of Directors consisting of all
directors emeritus. Directors emeritus shall receive fees or other compensation
fixed by the Board of Directors not to exceed fees and compensation paid to
regular members of the Board of Directors. Directors emeritus shall be eligible
to attend all meetings of the Board of Directors but shall not be eligible to
vote or be counted in determining the presence of a quorum.
4
<PAGE> 8
ARTICLE III
COMMITTEES
SECTION 3.1. Executive Committee. The Board of Directors, by
resolution adopted by a majority of the entire Board of Directors, may
designate an Executive Committee to serve at the pleasure of the Board of
Directors, consisting of not less than three nor more than seven members of the
Board of Directors, including the Chairman of the Board and the President. Any
vacancy occurring in the Executive Committee, from whatever cause, may be
filled by a majority of the entire Board of Directors. Each member of the
Executive Committee shall hold office, so long as he shall remain a director,
until his successor is duly appointed and qualified, or a majority of the Board
of Directors designates a new Executive Committee.
The Executive Committee shall keep full and accurate minutes of all its
proceedings and report the same, together with a statement of all business
transacted by it, to the Board of Directors at the next regular meeting
thereof.
SECTION 3.2. Powers of Executive Committee. During the intervals
between meetings of the Board of Directors, the Executive Committee shall have
and may exercise all of the powers of the Board of Directors, except as
restricted by law, in all cases in which specific directions have not been
given by the Board of Directors.
SECTION 3.3. Quorum of Executive Committee; Procedure. At all
meetings of the Executive Committee, the presence of a majority of its members
shall be necessary to constitute a quorum, and the concurrence or consent of a
majority of the members present shall be necessary for action on any matter.
The Executive Committee shall fix its own rules of procedure and meet
at such times and places as the Chairman of the Board may direct.
SECTION 3.4. Other Committees. The Board of Directors may from
time to time, by resolution passed by a majority of the entire Board of
Directors, designate one or more committees of the Board of Directors in
addition to the Executive Committee and delegate to any of them such powers and
duties, not inconsistent with statute or these By Laws, as the Board of
Directors may determine.
SECTION 3.5. Compensation and Expenses. Each member of the
Executive Committee and other committees shall be entitled to receive such
compensation and expense allowance for attendance at meetings of their
respective committees as the Board of Directors from time to time may fix and
determine.
ARTICLE IV
OFFICERS
SECTION 4.1. General Provisions. The principal officers of the
Corporation shall be a Chairman of the Board, a Vice Chairman, a President, one
or more Vice Presidents (the number thereof and variations in title to be
determined by the Board of Directors), a Secretary, a Treasurer, a Controller,
and such other officers as the Board of Directors may designate. Any two
offices except those of Chairman of the Board and Vice Chairman or President
and Secretary may be held by the same person.
SECTION 4.2. Election of Officers. The Board of Directors shall
elect, at its first meeting after its election by the shareholders, a Chairman
of the Board and a President from among its number and one or more Vice
Presidents, a Secretary, a Treasurer and a Controller. The Board of Directors
may elect a Vice Chairman from among its number and such other officers
including one or more Assistant Secretaries, Assistant Controllers and
Assistant Treasurers, as it shall deem necessary, who shall have such authority
and perform such duties as may be prescribed by the Board of Directors. Each
officer so elected shall hold office until the first meeting of the Board of
Directors following the next annual meeting of shareholders for the election of
directors and until his successor is elected, except in the event of his death,
resignation or removal or the earlier termination of his term of office.
5
<PAGE> 9
SECTION 4.3. Chairman of the Board. Except as otherwise provided
in these By Laws, the Chairman of the Board shall preside at all meetings of
the shareholders and of the Board of Directors. He shall be the chief executive
officer of the Corporation and shall perform all functions and duties
incidental to that position, and shall have such additional powers and duties
as may from time to time be assigned to him by the Board of Directors.
SECTION 4.4. Vice Chairman. In the event of the absence or
incapacity of the Chairman of the Board, the Vice Chairman shall preside at
meetings of the shareholders and the Board of Directors, and shall have such
other duties as the Chairman of the Board or the Board of Directors may assign
from time to time.
SECTION 4.5. President. The President shall be the chief
operating officer of the Corporation and shall perform all functions and duties
incidental to that position and such other duties as may from time to time be
assigned to him by the Chairman of the Board or the Board of Directors.
SECTION 4.6. Vice Presidents. Vice Presidents shall have such
powers and perform such duties as may be assigned by the President or the
Chairman of the Board. The Board of Directors in its discretion may assign to
the titles of individual vice presidents terms such as "executive", "senior",
"special", or others indicative of levels or areas of responsibility.
SECTION 4.7. Secretary. The Secretary shall record or cause to be
recorded in books provided for that purpose the minutes of the meetings of the
shareholders, the Board of Directors, and all committees of which a secretary
shall have been appointed. He shall be responsible for keeping the list of
shareholders, and shall give or cause to be given notice of all meetings of
shareholders, directors and committees. He shall have custody of the seal of
the Corporation and shall perform such other duties as may from time to time be
assigned by the Chairman of the Board or the President. He shall perform in
general all duties incident to the office of Secretary.
SECTION 4.8. Assistant Secretaries. The Board of Directors may
from time to time appoint additional Assistant Secretaries. In the event of the
absence or disability of the Secretary, his duties and powers shall be
performed and exercised by an Assistant Secretary.
SECTION 4.9. Controller. The Controller shall maintain adequate
records of all assets, liabilities and transactions of the Corporation. He
shall see that adequate audits thereof are regularly made, and shall be charged
with the preparation and filing of tax returns and the supervision of all
matters relating to taxes. He shall render financial and accounting reports as
required by the Chairman of the Board, the President or the Board of Directors
or as necessary to the proper conduct of business.
SECTION 4.10. Assistant Controllers. The Board of Directors may
from time to time appoint one or more Assistant Controllers, who shall perform
the duties and exercise the powers of the Controller in his absence or
disability.
SECTION 4.11. Treasurer. The Treasurer shall have charge and
custody of and be responsible for all funds and securities of the Corporation
and shall deposit all such funds to the credit of the Corporation in such
depositories as may be designated from time to time by the Board of Directors.
He shall disburse the funds of the Corporation as may from time to time be
ordered by the Chairman of the Board or the President. He shall render to the
Chairman of the Board, the President, Board of Directors and shareholders upon
request an account of all his transactions as Treasurer.
SECTION 4.12. Assistant Treasurers. The Board of Directors may
from time to time appoint one or more Assistant Treasurers, who shall perform
the duties and exercise the powers of the Treasurer in his absence or
disability.
6
<PAGE> 10
SECTION 4.13. General Counsel. The General Counsel shall be the
chief legal officer of the Corporation and shall perform all functions and
duties incidental to that position and such other duties as may from time to
time be assigned to him by the Chairman of the Board or by the Board of
Directors.
SECTION 4.14. Salaries. The salaries of the officers of the
Corporation elected by the Board of Directors, except for those officers who
are designated as assistant officers, shall be fixed from time to time by the
Board of Directors.
SECTION 4.15. Retirement; Vacancies. Each officer shall retire on
the first day of the month following attainment of age 65; however at the
request of the Board of Directors, an officer may continue in that capacity
after age 65 for a defined period. If the office of any officer becomes vacant
for any reason, the vacancy may be filled by the Board of Directors at any
regular or special meeting thereof.
ARTICLE V
CAPITAL STOCK
SECTION 5.1. Certificates. Certificates for shares of capital stock
of the Corporation shall be in such form as shall be approved by the Board of
Directors. All such certificates shall be signed by the Chairman of the Board,
President or a Vice President and by the Secretary or Treasurer or Assistant
Secretary or Assistant Treasurer, and sealed with the seal of the Corporation.
Such seal may be facsimile, engraved or printed. When any such certificate is
signed by a transfer agent or transfer clerk and by a registrar, the signatures
of any such officers upon such certificate may be facsimiles, engraved or
printed. Any certificate bearing the signature or facsimile signature of any
such officer may be issued by the Corporation, although he has ceased to be
such officer at the date of such issuance.
The Board of Directors may make such rules and regulations as it deems
advisable to the issue, transfer and registration of such certificates, and may
appoint a transfer agent or registrar or both, and require all such
certificates to bear the signature of such transfer agent, or registrar, or
both.
SECTION 5.2. Record. A record shall be kept of the names of the
person, firm or corporation owning the stock represented by each certificate
for stock of the Corporation issued, the number of shares represented by each
such certificate and the date thereof, and, in the event of cancellation, the
date of cancellation. The person in whose name the shares of stock stand on the
books of the Corporation shall be deemed the owner thereof for all purposes as
regards the Corporation.
SECTION 5.3. Fixing of Record Date. The Board of Directors may
fix a day not more than 50 days prior to the day of holding any meeting of
shareholders as the time as of which shareholders entitled to notice of and to
vote at such meeting shall be determined, and all persons who are holders of
record at such time and no others shall be entitled to notice of and to vote at
such meeting. The Board of Directors may also fix a day not exceeding 40 days
preceding the date fixed for the payment of any dividend or for the delivery of
evidences of rights, as the time as of which shareholders entitled to receive
any such dividend or rights shall be determined.
SECTION 5.4. Transfers. Stock certificates shall be transferable
(so far as the Corporation is concerned) only on the books of the Corporation
on surrender of the certificates properly endorsed and stamped, and accompanied
by such waivers and certificates as may be legally required, whereupon the old
certificates shall be canceled and new certificates issued to the transferees
in lieu thereof.
SECTION 5.5. Lost Stock Certificates. Any person claiming a
certificate of stock to be lost or destroyed shall make affidavit or
affirmation of the fact to the Corporation. Unless otherwise determined by the
Board of Directors, the proper officers of the Corporation shall issue a new
certificate representing the same number of shares only after the person
claiming to be the owner, or his legal representative, shall have given the
Corporation a bond of indemnity, in form and with surety or sureties and in an
amount approved by the Corporation's counsel.
7
<PAGE> 11
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1. Fiscal Year. The Corporation's fiscal year is the 52 or
53-week annual accounting period ending the last Friday in December for
domestic operations, and December 31 for foreign operations.
SECTION 6.2. Corporate Seal. The corporate seal of the Corporation
shall be circular in form with the name of the Corporation in the circumference
and "New York" in the center.
SECTION 6.3. Resignations. Any director or officer of the
Corporation may resign his office at any time upon presenting his written
resignation to the Board of Directors, and unless some time be fixed for the
taking effect of such resignation, the same shall become effective immediately.
The acceptance of a resignation shall not be required to make it effective.
SECTION 6.4. Checks, Drafts, Notes and Other Negotiable Instruments.
All checks, drafts, notes and other negotiable instruments made by the
Corporation shall be signed by such officer or officers or agents as the
Chairman of the Board or the President from time to time may designate.
SECTION 6.5. Waiver of Notice. Any shareholder, officer or director
may waive any notice required to be given under these By-Laws.
SECTION 6.6. Indemnification and Insurance. (a) Right to
Indemnification. Each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, or appeal
thereof, whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the New York Business Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including, but not limited
to, all attorneys' fees, judgments, fines, ERISA excise taxes or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith and such indemnification shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his or her heirs, executors and administrators;
provided, however, that, except as provided in subsection (b) of this Section
6.6, the Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this subsection (a)
shall be a contract right and shall include the right to be paid by the
Corporation the expenses (including, without limitation, attorneys' fees)
incurred in defending any such proceeding in advance of its final disposition;
provided, however, that, if the New York Business Corporation Law requires, the
payment of such expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Section 6.6 or
otherwise. The Corporation may, by action of its Board of Directors, provide
indemnification to employees and agents of the Corporation with the same scope
and effect as the foregoing indemnification of directors and officers, or on
such other terms and conditions as the Board of Directors may deem necessary or
desirable.
8
<PAGE> 12
(b) Right of Claimant to Bring Suit. If a claim under subsection (a)
of this Section 6.6 is not paid in full by the Corporation within 30 days after
a written claim has been received by the Corporation, the claimant may at any
time thereafter bring suit against the Corporation to recover the unpaid amount
of the claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense (including, without limitation, attorneys'
fees) of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation) that the
claimant has not met the standards of conduct which make it permissible under
the New York Business Corporation Law for the Corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation (including its
Board of Directors, or any part thereof, independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
New York Business Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, or any part thereof, independent
legal counsel, or its shareholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
(c) Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section 6.6 shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, by-law, agreement, vote of
shareholders or disinterested directors or otherwise.
(d) Insurance. The Corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, to the fullest extent
allowed by law, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the New
York Business Corporation Law.
SECTION 6.7. Amendments. These By-Laws may be amended or repealed,
or new By-Laws may be adopted at any time by the affirmative vote of the
holders of a majority of the stock entitled to vote at any meeting of
shareholders or by the affirmative vote of a majority of the entire Board of
Directors at any meeting of the Board of Directors. No proposal to amend the
By- Laws shall be acted upon at any meeting of the Board of Directors unless
notice of such proposal, setting out the substance of the proposed amendment,
has been given to each director at least five business days prior to the
meeting at which such proposal is to be acted upon or unless all directors
unanimously waive giving of such notice.
-----------------------
SECRETARY'S CERTIFICATE
I, the undersigned, Secretary of Foster Wheeler Corporation,
do hereby certify that the foregoing is a true copy of the By-Laws
of said Corporation as amended to the date hereof, and that said By-Laws
are now in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
said Corporation this day of 19
(CORPORATE SEAL) Secretary
9
<PAGE> 1
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
FINANCIAL SECTION EXHIBIT NO. 13
Comparative Financial Statistics 17
Management's Discussion and Analysis 18-22
Consolidated Balance Sheet 23
Consolidated Statement of Earnings 24
Report of Independent Accountants 24
Consolidated Statement of Changes in Stockholders' Equity 25
Consolidated Statement of Cash Flows 26
Notes to Financial Statements 27-35
<TABLE>
<CAPTION>
COMPARATIVE FINANCIAL STATISTICS
(In Thousands, Except per Share Amounts)
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Unfilled orders, end of period $3,884,114 $3,806,757 $3,465,339 $2,763,517 $1,603,716
Revenues 2,654,505 2,529,464 2,031,620 1,691,023 1,292,747
Earnings before income taxes and
accounting change 96,818 67,825 61,285 48,393 42,381
Provision for income taxes 39,114 22,321 18,017 10,116 10,744
Earnings before accounting change 57,704 45,504 43,268 38,277 31,637
Effect of accounting change - (91,259)(1) - - -
Net earnings/(loss) 57,704 (45,755) 43,268 38,277 31,637
Earnings per share *
Earnings before accounting change $1.62 $ 1.28 $ 1.22 $ 1.08 $ 0.90
Effect of change in accounting principle - (2.57)(1) - - -
------- ------- ------ ------- -------
Net earnings/(loss) $1.62 $ (1.29) $ 1.22 $ 1.08 $ 0.90
----- ------ ----- ----- -------
----- ------ ----- ----- -------
Weighted average number of shares of common
stock outstanding 35,656 35,596 35,522 35,418 35,321
Current assets $ 983,454 $ 924,886 $ 842,747 $ 755,127 $ 676,046
Current liabilities 778,989 721,018 588,567 581,454 419,991
Working capital 204,465 203,868 254,180 173,673 256,055
Land, buildings and equipment (net) 567,216 595,946 613,778 533,172 401,187
Total assets 1,806,201 1,763,264 1,638,874 1,445,494 1,185,246
Bank loans 59,725 54,929 45,605 38,176 11,186
Long-term borrowings (including current
installments) 429,264 439,578 454,826 321,608 255,798
Net assets owned 400,176 387,297 500,124 475,845 429,197
Net assets owned per common share of stock $ 11.21 $ 10.87 $ 14.06 $ 13.42 $ 12.14
Rate of return on net assets 14.9% (9.1%) 9.1% 8.9% 7.6%
Cash dividends per share of common stock $ .645 $ .585 $ .53 $ .485 $ .44
</TABLE>
* Computed on the weighted average number of shares of common stock
outstanding.
(1) Relates to effect of change in accounting principle for
postretirement benefits other than pensions (see Note 5).
17
<PAGE> 2
MANAGEMENT'S DISCUSSION
AND ANALYSIS
RESULTS OF OPERATIONS (1)
<TABLE>
<CAPTION>
BUSINESS GROUPS (SEE NOTE 16 TO FINANCIAL STATEMENTS.)
- --------------------------------------------------------------------------------------------------------------------
(In Millions of Dollars)
Engineering Corporate and
and Energy Power Financial
Total Construction Equipment Systems Services (2)
----- ------------ --------- ------- ------------
<S> <C> <C> <C> <C> <C>
1993
- ----
Unfilled orders 3,884.1 2,724.3 890.5 210.5 58.8
New orders booked 2,982.8 1,921.2 670.4 273.8 117.4
Revenues 2,654.5 1,833.5 569.8 159.5 91.7
Interest expense (3) 33.6 0.7 2.1 23.7 7.1
Earnings before income taxes 96.8 64.9 47.9 25.1 (41.1)
Identifiable assets 1,806.2 649.6 411.3 514.1 231.2
Capital expenditures 27.8 12.1 11.1 1.8 2.8
Depreciation 43.7 14.2 8.0 17.3 4.2
1992
- ----
Unfilled orders 3,806.8 2,827.2 831.4 68.6 79.6
New orders booked 3,640.4 2,605.9 716.9 186.2 131.4
Revenues 2,529.5 1,726.2 558.5 128.0 116.8
Interest expense (3) 34.2 1.4 1.8 21.0 10.0
Earnings before income taxes
and accounting change (4) 67.8 54.9 41.1 14.2 (42.4)
Identifiable assets 1,763.3 652.7 377.8 487.4 245.4
Capital expenditures 56.0 17.3 13.5 18.3 6.9
Depreciation 43.3 14.2 7.6 17.2 4.3
1991
- ----
Unfilled orders 3,465.3 2,683.6 688.4 24.7 68.6
New orders booked 2,868.9 2,189.3 470.4 110.1 99.1
Revenues 2,031.6 1,303.9 511.7 94.0 122.0
Interest expense (3) 24.5 1.7 3.9 11.7 7.2
Earnings before income taxes 61.3 40.1 37.5 8.8 (25.1)
Identifiable assets 1,638.9 589.7 349.8 495.2 204.2
Capital expenditures 119.5 27.1 10.7 75.9 5.8
Depreciation 34.7 12.3 7.4 10.7 4.3
</TABLE>
18
<PAGE> 3
<TABLE>
<CAPTION>
GEOGRAPHIC AREAS (SEE NOTE 16 TO FINANCIAL STATEMENTS.)
- -----------------------------------------------------------------------------------------------------------------------
(In Millions of Dollars)
Corporate and
United Financial
Total States Europe Canada Services (2)
----- ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C>
1993
- ----
Unfilled orders 3,884.1 2,262.2 1,514.4 48.7 58.8
New orders booked 2,982.8 1,407.0 1,373.2 85.2 117.4
Revenues 2,654.5 948.1 1,539.0 75.7 91.7
Interest expense (3) 33.6 24.1 1.7 0.7 7.1
Earnings before income taxes 96.8 66.7 65.4 5.8 (41.1)
Identifiable assets 1,806.2 857.4 658.8 58.8 231.2
1992
- ----
Unfilled orders 3,806.8 1,850.7 1,820.8 55.7 79.6
New orders booked 3,640.4 1,688.7 1,757.5 62.8 131.4
Revenues 2,529.5 691.9 1,617.0 103.8 116.8
Interest expense (3) 34.2 21.3 1.5 1.4 10.0
Earnings before income taxes
and accounting change (4) 67.8 37.3 69.7 3.2 (42.4)
Identifiable assets 1,763.3 775.0 686.5 56.4 245.4
1991
- ----
Unfilled orders 3,465.3 1,061.0 2,248.8 86.9 68.6
New orders booked 2,868.9 920.7 1,785.8 63.3 99.1
Revenues 2,031.6 657.8 1,153.2 98.6 122.0
Interest expense (3) 24.5 13.3 3.3 0.7 7.2
Earnings before income taxes 61.3 31.9 50.2 4.3 (25.1)
Identifiable assets 1,638.9 725.8 654.5 54.4 204.2
</TABLE>
(1) Commencing in 1993, the business of the Corporation has been redefined to
focus on three core business groups. The 1992 and 1991 data have been
reclassified to this current presentation (see also Note 1).
(2) Includes general corporate income and expense, the Corporation's insurance
operation, trading and real estate activities, asbestos abatement and
miscellaneous manufacturing.
(3) Includes intercompany interest charged by Corporate to the business
groups on outstanding borrowings.
(4) Effective as of the beginning of 1992, the Corporation adopted SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" and recorded the full amount of its transition obligation.
Unaudited as to unfilled orders and new orders booked.
19
<PAGE> 4
MANAGEMENT'S DISCUSSION
AND ANALYSIS
YEARS 1991 - 1993
This following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
In 1993, the Corporation consolidated its activities into three basic
business groups, Engineering and Construction, Energy Equipment and Power
Systems, thereby eliminating the Industrial and Environmental Group. Glitsch
International was transferred to the Energy Equipment Group, while Foster
Wheeler Enviresponse became the Environmental Services division of Foster
Wheeler USA within the Engineering and Construction Group. At the same time,
Thermacote Welco, Barsotti's and Ullrich Copper were transferred to Corporate
and Financial Services. Subsequently, Thermacote Welco was divested in the
third quarter of 1993 and in the fourth quarter of 1993 a decision was made to
withdraw from the asbestos-abatement business. The above realignment did not
affect the previously reported consolidated financial results; however, the
historical business groups have been restated to conform with the current
presentation.
As of the beginning of 1992, the Corporation adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." The effect of the
accounting change at the beginning of 1992 was a charge of $91.3 million after
tax and valuation allowance, or $2.57 per share. All subsequent earnings
discussions for 1992 are prior to the impact of this one-time charge.
Foster Wheeler's operating subsidiaries located outside the United
States constituted 52% in 1993, 66% in 1992 and 63% in 1991, of consolidated
earnings before taxes excluding Corporate and Financial Services. Earnings
before income taxes of the United States geographic area increased $29.4
million in 1993 compared to 1992 and $5.4 million in 1992 compared to 1991. In
the United States, the increase in earnings during this period can be
attributed to all segments of the business. Consolidated net earnings for 1993
amount to $57.7 million, an increase of $12.2 million or 27% over 1992, before
the effect of an accounting change.
At the end of 1993, Foster Wheeler's backlog of unfilled orders was
$3.9 billion, slightly higher than at the end of 1992. Since the end of 1990,
this represents an increase of $1.1 billion or 40%.
The strategy of the Engineering and Construction Group in the coming
years will be to continue to maintain leadership in the oil refining and
pharmaceutical industries worldwide, exploit its strong position in emerging
technologies, particularly with regard to gasification, and obtain a
significant market position in the environmental, LNG, and upstream production
areas.
The Energy Equipment Group serves the power-generation and
chemical-separations industries with high-quality and highly engineered and
manufactured products. This combination of technology and cost
competitiveness, with strong marketing initiatives in a growth market,
positions the Group for continued success in the nineties. The largest market
for this Group continues to be China, central and southeast Asia, the Indian
subcontinent, and South and Central America. Foster Wheeler Power Systems has
an established position in building, owning, and operating plants. Continued
growth will come from capitalizing on the leadership positions held in both
process and combustion technologies, combined with the project development and
operational expertise of Foster Wheeler Power Systems to pursue
"inside-the-fence" projects and independent power facilities in both the
domestic and international markets.
1993 COMPARED TO 1992
As stated previously, the backlog of the Corporation was slightly
higher than at the end of 1992. The Engineering and Construction Group
accounted for approximately 70% of the total December 1993 backlog of the
Corporation. The 1993 backlog of the Engineering and Construction Group was
slightly lower than reported as of the end of 1992. The reduction reported by
the United Kingdom subsidiary was partially offset by the increases in the
United States and Italy. The Energy Equipment Group accounted for
approximately 23% of the December 1993 backlog. The 7% increase reported by
this Group was primarily due to orders taken by the United States subsidiary in
China. Foster Wheeler was selected for negotiations for two 350 megawatt
boilers for the Ezhou project in China at the end of 1993.
New orders booked for 1993 decreased by 18% in comparison to 1992.
This was primarily due to the significant amount of orders taken by the
Engineering and Construction Group in 1992. New orders booked in the
Engineering and Construction Group decreased in the United States by
approximately $300 million and by approximately $400 million in the United
Kingdom. However, the backlog as of December 1993 has remained consistent with
the 1992 level.
20
<PAGE> 5
Operating revenues increased by $88 million (3.5%) over 1992. The
three operating groups all reported slight increases over the 1992 levels. The
Engineering and Construction Group reported an increase of approximately $100
million primarily due to the operations of Foster Wheeler USA Corporation. This
increase was partially offset by the lower revenues reported by Corporate and
Financial Services.
Gross earnings from operations were at approximately the same level as
reported for 1992. The 5% increase reported by the Energy Equipment Group was
offset by the reduction in gross profit reported by Corporate and Financial
Services, related to the asbestos-abatement business.
Selling, general and administrative expenses decreased slightly. All
operating groups reported amounts consistent with prior year levels.
In comparing 1993 to 1992, other income increased by $36.8 million.
This increase was primarily due to the sale of Thermacote Welco in the third
quarter of 1993 and the sale of a 49.5% limited partnership interest in the
Camden waste-to-energy plant in the fourth quarter of 1993. In addition,
interest income increased by $5.6 million.
Other deductions increased by $12.5 million. This increase was due to
the accelerated amortization of the cost in excess of net assets of a
subsidiary acquired related to the asbestos- abatement business, and the
establishment of a provision to cover potential exposure for nonrecovery of
development costs related to waste-to-energy projects in the Power Systems
Group.
The effective tax rate increased from 32.9% in 1992 to 40.4% in 1993.
The 1993 effective rate differed from the U. S. statutory rate primarily as a
result of the accelerated amortization of cost in excess of net assets of a
subsidiary acquired, and the recapture of investment tax credits related to the
sale of the limited partnership interest.
Earnings before accounting change increased by $12.2 million (27%).
All operating groups reported increased earnings. The Engineering and
Construction Group increased by over $7 million or 20%. This was primarily due
to the return to profitability of Foster Wheeler Iberia, S.A. in Spain and the
improved earnings recorded by Foster Wheeler USA Corporation. Both Foster
Wheeler USA Corporation and Foster Wheeler Italiana, S.p.A. reported record
earnings. The Energy Equipment Group also reported a 19% increase or $4.8
million from earnings reported in the United States. The Power Systems Group
increased by approximately 5% from 1992 to 1993.
1992 COMPARED TO 1991
Operating revenues increased $503 million. The Engineering and
Construction Group increased $419 million, of which the preponderance was in
England and Italy. The Energy Equipment Group increased $51 million due
primarily to activities of Foster Wheeler Energy Corporation and Foster Wheeler
Energia, S.A. The Power Systems Group increased $31 million due to the first
full year's operation of the Camden County, New Jersey, waste-to-energy plant,
and the commencement of operations of the Hudson Falls, New York,
waste-to-energy plant early in 1992.
Gross earnings from operations increased $33.4 million or 13%. The
Engineering and Construction Group increased $18 million of which 45% was
attributed to Foster Wheeler USA Corporation. The Energy Equipment Group
increased $8 million or 9% due to improved contract performance and increased
activities of Foster Wheeler Energy Corporation and Foster Wheeler Energia,
S.A. The Power Systems Group increased $14 million or 49% due to the full
year's operation of the Camden County plant and the start-up of the Hudson
Falls and Twin Cities plants.
Selling, general and administrative expenses increased 3%, of which the
major portion of the increase was proposal activities of the Engineering and
Construction Group. Other income decreased by $5 million as a result of higher
gains on foreign currency transactions and equity earnings in 1991 offset
somewhat by the $2 million gain on sale of the Foster Wheeler Kauai plant in
1992. Other deductions increased $15 million due to higher interest expense
with $9 million attributed to the Power Systems' plants mentioned above.
The increase in the provision for income taxes of $4.3 million was
attributed to increased profits and reduction of investment tax credits
recognized during construction of Power Systems' projects.
Earnings before accounting change increased $2.2 million or 5%.
FINANCIAL CONDITION
The Corporation's consolidated financial condition improved during the
three-year period 1991 to 1993. Since the beginning of 1991, net assets
increased by $87 million excluding the accumulated translation adjustment of
$72
21
<PAGE> 6
MANAGEMENT'S DISCUSSION
AND ANALYSIS
million and the accounting charge of $91.3 million related to the adoption of
SFAS No. 106 in 1992. Working capital at December 31, 1993, was $204.5
million.
During 1991, 1992 and 1993, substantial long-term investments of $119
million, $56 million and $28 million, respectively, were made in land,
buildings and equipment. In 1991, waste-to-energy facilities in Camden County,
New Jersey, and Hudson Falls, New York, were completed. In 1993, a 49.5%
limited partnership interest in the Camden facility was sold to an
institutional investor.
Long-term debt, including current installments, and bank loans increased by
$129 million, net of repayments of $73 million, during the three-year period.
This included proceeds from build, own and operate project debt of
approximately $67 million (see Note 7). Bank loans increased $9 million in
1992 and $5 million in 1993. In 1991, the Corporation issued by private
placement unsecured notes for $110 million.
During the next few years, capital expenditures will continue to be
directed primarily toward strengthening and supporting the Corporation's core
businesses.
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.
LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments at the end of 1993 amounted to $377.4
million, reflecting an increase of $106.7 million compared with December 25,
1992. Cash generated from earnings of $84.9 million along with reduced funding
of working capital resulted in a source of cash from operating activities of
approximately $146.7 million. The sale of a subsidiary and of a partnership
interest in a waste-to-energy project resulted in additional proceeds of
approximately $50.3 million. Cash was used to pay dividends of $23.0 million
and long-term debt of $12.4 million. The detailed Statement of Cash Flows is
presented on page 26.
The Corporation's own-and-operate projects are financed primarily with a
combination of project debt and equity investments by the Corporation. These
equity investments amounted to approximately $6 million in 1992 and $20 million
in 1991. Such investments are expected to continue at increased levels over
the next several years. The Corporation will continue to enter into financing
transactions where the transfer of tax benefits and refinancing of its equity
investment in those projects produces a lower effective financing cost and a
potential increased return on investment.
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.
OTHER ACCOUNTING MATTERS
In November 1992, the Financial Accounting Standards Board issued Statement
No. 112, "Employers' Accounting for Postemployment Benefits." Adoption by the
Corporation is required by the beginning of the 1994 fiscal year. The
implementation of this Statement will not have a material impact on the results
of operations.
In May 1993, the Financial Accounting Standards Board issued Statement No.
115, "Accounting for Certain Investments in Debt and Equity Securities." This
Statement addresses accounting and reporting for investments in equity
securities that have readily determinable fair values and for all investments
in debt securities. The Statement requires classification of investments into
several categories which determines the accounting for unrealized gains and
losses. Adoption of this Statement by the Corporation is required no later
than its 1994 fiscal year. The adoption of Statement No. 115 will not have a
material impact on the Corporation's results of operations or financial
condition.
22
<PAGE> 7
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In Thousands of Dollars)
<TABLE>
<CAPTION>
December 31, December 25,
1993 1992
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 249,514 $ 146,485
Short-term investments, at cost (which approximates market value) 127,876 124,184
Accounts and notes receivable:
Trade 396,828 421,627
Other 45,671 75,844
Contracts in process 87,076 78,195
Inventories 24,500 34,275
Prepaid and refundable income taxes 39,000 28,808
Prepaid expenses 12,989 15,468
------------ ------------
Total current assets 983,454 924,886
------------ ------------
Land, buildings and equipment 784,548 784,036
Less accumulated depreciation 217,332 188,090
------------ ------------
Net book value 567,216 595,946
------------ ------------
Notes and accounts receivable - long-term 40,560 29,749
Investments and advances 34,758 31,960
Cost in excess of net assets of subsidiaries acquired 4,098 12,371
Deferred charges and prepaid pension cost 160,967 141,226
Deferred income taxes 15,148 27,126
------------ ------------
TOTAL ASSETS $ 1,806,201 $ 1,763,264
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments on long-term debt $ 32,523 $ 12,178
Bank loans 59,725 54,929
Accounts payable 161,484 216,789
Accrued expenses 131,254 116,956
Estimated cost to complete long-term contracts 287,508 210,028
Advance payments by customers 76,462 76,255
Income taxes 30,033 33,883
-------------- ------------
Total current liabilities 778,989 721,018
Long-term debt, less current installments 396,741 427,400
Minority interest in subsidiary companies 8,235 6,556
Deferred income taxes 18,691 19,853
Other long-term liabilities, deferred credits and
postretirement benefits other than pensions 203,369 201,140
-------------- ------------
TOTAL LIABILITIES 1,406,025 1,375,967
-------------- ------------
STOCKHOLDERS' EQUITY:
Preferred stock
Authorized 1,500,000 shares; no par value - none outstanding
Common stock
$1.00 par value; authorized 80,000,000 shares; issued: 1993-35,706,982;
1992-35,656,196 35,707 35,656
Paid-in capital 35,076 34,085
Retained earnings 381,205 346,487
Accumulated translation adjustment (51,261) (28,380)
------------ ------------
400,727 387,848
Less cost of treasury stock (20,129 shares) 551 551
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 400,176 387,297
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,806,201 $ 1,763,264
------------ ------------
------------ ------------
</TABLE>
See notes to financial statements.
23
<PAGE> 8
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(In Thousands of Dollars, Except per Share Amounts)
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Revenues:
Operating revenues $2,583,000 $2,494,789 $1,991,979
Other income (including interest:
1993-$26,627; 1992-$21,017; 1991-$21,039) 71,505 34,675 39,641
---------- ---------- ----------
Total Revenues 2,654,505 2,529,464 2,031,620
---------- ---------- ----------
Costs and Expenses:
Cost of operating revenues 2,290,395 2,202,196 1,732,819
Selling, general and administrative expenses 204,049 208,676 201,920
Other deductions (including interest:
1993-$33,558; 1992-$34,159; 1991-$24,540) 60,722 48,255 33,096
Minority interest 2,521 2,512 2,500
---------- ---------- ----------
Total Costs and Expenses 2,557,687 2,461,639 1,970,335
---------- ---------- ----------
Earnings before income taxes and accounting change 96,818 67,825 61,285
Provision for income taxes 39,114 22,321 18,017
---------- ---------- ----------
Earnings before accounting change 57,704 45,504 43,268
Effect of change in accounting principle for
postretirement benefits other than pensions
(net of income tax benefit of $47,947 and
a valuation allowance of $5,500) -- (91,259) --
---------- ---------- ----------
Net earnings/(loss) $ 57,704 $ (45,755) $ 43,268
---------- ---------- ----------
---------- ---------- ----------
Earnings per share:
Earnings before the effect of accounting change $ 1.62 $ 1.28 $ 1.22
Effect of change in accounting principle -- (2.57) --
---------- ---------- ----------
Net earnings/(loss) $ 1.62 $ (1.29) $ 1.22
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to financial statements.
24 (continued)
<PAGE> 9
Report of Independent Accountants
To the Stockholders of
Foster Wheeler Corporation:
We have audited the accompanying consolidated balance sheet of Foster Wheeler
Corporation and Subsidiaries as of December 31, 1993 and December 25, 1992, and
the related consolidated statements of earnings, changes in stockholders'
equity, and cash flows for each of the three years in the period ended December
31, 1993. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Foster Wheeler
Corporation and Subsidiaries as of December 31, 1993 and December 25, 1992, and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1993 in conformity with generally
accepted accounting principles.
As discussed in Note 5 to the consolidated financial statements, the
Corporation changed its method of accounting for postretirement benefit costs
other than pensions in 1992.
Coopers & Lybrand
New York, New York
February 14, 1994
24
<PAGE> 10
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands of Dollars, Except per Share Amounts)
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year $ 35,656 $ 35,588 $ 35,495
Sold under stock options: (shares: 1993-50,786; 1992-68,092; 1991-92,734) 51 68 93
-------- -------- --------
Balance at end of year 35,707 35,656 35,588
-------- -------- --------
PAID-IN CAPITAL
Balance at beginning of year 34,085 33,139 31,928
Excess of market value over value of stock issued under stock option plans 791 773 790
Excess of market value over cost of treasury stock issued under
incentive plans - - 26
Tax benefits related to incentive plans and stock options 200 173 395
-------- -------- --------
Balance at end of year 35,076 34,085 33,139
-------- -------- --------
RETAINED EARNINGS
Balance at beginning of year 346,487 413,056 388,603
Net earnings/(loss) for the year 57,704 (45,755) 43,268
Cash dividends paid:
Common (per share outstanding: 1993-$.645; 1992-$.585; 1991-$.53) (22,986) (20,814) (18,815)
-------- -------- --------
Balance at end of year 381,205 346,487 413,056
-------- -------- --------
ACCUMULATED TRANSLATION ADJUSTMENT
Balance at beginning of year (28,380) 18,732 20,771
Change in cumulative translation adjustment during the year (22,881) (47,112) (2,039)
-------- -------- --------
Balance at end of year (51,261) (28,380) 18,732
-------- -------- --------
TREASURY STOCK
Balance at beginning of year 551 391 952
Sold under stock options: (shares: 1992-14,500; 1991-42,859) - (341) (902)
Common stock acquired for treasury: (shares:
1992-16,407; 1991-12,831) - 501 388
Issued under incentive plans: (shares: 1991-2,382) - - (47)
-------- -------- --------
Balance at end of year 551 551 391
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY $400,176 $387,297 $500,124
-------- -------- --------
-------- -------- --------
</TABLE>
See notes to financial statements.
25
<PAGE> 11
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings/(loss) $ 57,704 $ (45,755) $ 43,268
Adjustments to reconcile net earnings/(loss) to
cash flows from operating activities:
Depreciation and amortization 51,456 44,200 35,368
Noncurrent deferred tax 11,632 (2,093) (688)
Gain on sale of investments - (999) (615)
Gain on sale of subsidiary and partnership interest (36,175) - -
(Gain)/loss on sale of land, buildings and equipment (165) (2,587) 1,280
Equity (earnings)/losses, net of dividends (883) 771 (1,301)
Effect of change in accounting principle - 91,259 -
Other noncash items 1,356 (4,810) (6,570)
Changes in assets and liabilities:
Receivables 27,987 (109,188) (87,710)
Contracts in process and inventories (11,376) (7,668) 26,167
Accounts payable and accrued expenses (22,632) 79,314 (13,775)
Estimated cost to complete long-term contracts 90,196 67,898 41,784
Advance payments by customers 10,847 48,781 (5,504)
Income taxes (14,623) (1,269) 20,237
Other assets and liabilities (18,599) (16,190) (13,391)
--------- --------- ---------
Net cash provided by operating activities 146,725 141,664 38,550
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (27,849) (55,995) (119,451)
Proceeds from sale of properties 1,476 4,043 4,658
Proceeds from sale of subsidiary and partnership interest 50,288 - -
Proceeds from sale of Power Systems assets - 15,000 -
Proceeds from sale of long-term investments - 7,224 726
(Increase)/decrease in investments and advances (2,421) 65 (2,716)
Increase in short-term investments (17,541) (52,621) (11,222)
Partnership distribution (3,235) (3,199) (3,014)
--------- --------- ---------
Net cash provided/(used) by investing activities 718 (85,483) (131,019)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends to stockholders (22,986) (20,814) (18,815)
Repurchase of common stock - (501) (388)
Proceeds from the exercise of stock options 842 1,182 1,785
Increase in short-term debt 9,246 3,305 5,696
Proceeds from long-term debt 265 8,464 172,330
Repayment of long-term debt (12,439) (21,722) (39,090)
--------- --------- ---------
Net cash (used)/provided by financing activities (25,072) (30,086) 121,518
--------- --------- ---------
Effect of exchange rate changes on cash and cash (19,342) (19,995) 1,239
equivalents --------- --------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 103,029 6,100 30,288
Cash and cash equivalents at beginning of year 146,485 140,385 110,097
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $249,514 $146,485 $140,385
--------- --------- ---------
--------- --------- ---------
Cash paid during the year for:
Interest (net of amount capitalized) $32,167 $33,629 $21,233
Income taxes $27,949 $14,474 $11,753
</TABLE>
See notes to financial statements.
26
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
(In Thousands of Dollars, Except per Share Amounts)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of Foster Wheeler Corporation and all significant domestic and
foreign subsidiary companies.
Commencing in 1993, the business of the Corporation falls within three
business groups: an Engineering and Construction Group, an Energy
Equipment Group and a Power Systems Group. Prior to 1993, the Industrial
and Environmental Group was reported as a separate segment. Those
companies previously reported within the Industrial and Environmental Group
have been reclassified as follows: Glitsch International, Inc. is now
considered part of the Energy Equipment Group; Thermacote Welco Company
(which was sold in September 1993), Barsotti's Inc. and Ullrich Copper,
Inc. are aggregated as part of Corporate and Financial Services. Certain
reclassifications have been made to conform prior years' data to the
current presentation. These reclassifications had no impact on the
previously reported earnings of the Corporation.
The Corporation's fiscal year is the 52- or 53-week annual accounting
period ending the last Friday in December for domestic operations and
December 31 for foreign operations. For domestic operations, the year
1993 included 53 weeks while the years 1992 and 1991 included 52 weeks.
REVENUE RECOGNITION ON LONG-TERM CONTRACTS - The Corporation reports
profits on long-term contracts on a percentage-of-completion basis
determined on the ratio of earned billings to total contract price, after
considering accumulated costs and estimated costs to complete each
contract. Contracts in process are valued at cost plus accrued profits
less earned billings and progress payments on uncompleted contracts. If
estimates of cost to complete long-term contracts indicate a loss,
provision is made currently for the total loss anticipated. The elapsed
time from award of a contract to completion of performance may be up to
four years. Contracts of the Engineering and Construction Group are
generally considered substantially complete when engineering is completed
and/or field construction is completed, while for the Energy Equipment
Group it is when manufacturing and/or field construction is completed.
Certain special-purpose subsidiaries in the Power Systems Group are
reimbursed for their costs, including repayment of project debt, for
building and owning certain facilities over the life of the service
contracts. The Corporation records revenues relating to debt repayment on
these contracts on a straight-line basis over the life of the service
contracts and records depreciation of the facilities on a straight-line
basis over the estimated useful life of the facility, after consideration
of the estimated residual value.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include highly liquid
short-term investments purchased with original maturities of three months or
less.
TRADE ACCOUNTS RECEIVABLE - In accordance with terms of long-term
contracts, certain percentages of billings are withheld by customers until
completion and acceptance of the contracts. Final payments of all such
amounts withheld which might not be received within a one-year period are
indicated in Note 2. In conformity with trade practice, however, the full
amount of accounts receivable, including such amounts withheld, has been
included in current assets.
LAND, BUILDINGS AND EQUIPMENT - Upon retirement or other disposition of
fixed assets, the cost and related accumulated depreciation are removed from
the accounts and the resulting gains or losses are reflected in earnings.
Depreciation is computed on a straight-line basis for financial reporting
purposes using composite estimated lives ranging from 10 to 50 years for
buildings and from 3 to 30 years for equipment.
Expenditures for maintenance and repairs are charged to operations.
Renewals and betterments are capitalized.
INCOME TAXES - Deferred income taxes are provided for temporary
differences between financial and taxable income. For Federal income tax
purposes, accelerated methods of depreciation are used. Investment tax
credits are accounted for under the "flow-through" method, which recognizes
the benefit in the year qualified progress expenditures are incurred.
Qualified property for tax purposes is reduced by the investment tax credit
claimed resulting in recognition of deferred taxes.
Provision is made for Federal income taxes which may be payable on foreign
subsidiary earnings to the extent that the Corporation anticipates they
will be remitted. Unremitted earnings of foreign subsidiaries which have
been, or are intended to be, permanently reinvested (and for which no
Federal income tax has been provided) aggregated $207,000 at December 31,
1993. It is not practical to estimate the additional tax, if any, if these
amounts were repatriated.
27
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
(In Thousands of Dollars, Except per Share Amounts)
FOREIGN CURRENCY TRANSLATION - Assets and liabilities of foreign
subsidiaries are translated into U.S. dollars at year-end exchange rates
and income and expenses at monthly weighted average rates. Foreign
currency transaction gains for 1993, 1992 and 1991 were approximately
$4,200, $3,200 and $6,635, respectively ($2,700, $2,000 and $4,000 net of
taxes). The Corporation enters into foreign exchange contracts in its
management of foreign currency exposures. Realized and unrealized gains
and losses on contracts that qualify as designated hedges are deferred.
Those that do not qualify as hedges for accounting purposes are marked to
market and recognized currently.
INVENTORIES - Inventories, principally materials and supplies, are stated
at lower of cost or market primarily on the average cost method.
EARNINGS PER SHARE - Per share data has been computed on the weighted
average number of shares of common stock outstanding of 35,655,886;
35,595,728 and 35,522,074 for 1993, 1992 and 1991, respectively.
Outstanding stock options have been disregarded because their effect on
earnings per share would not be significant and would have been
antidilutive in 1992.
2. ACCOUNTS AND NOTES RECEIVABLE
The following tabulation shows the components of trade accounts and notes
receivable:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
From long-term contracts:
Amounts billed due in one year $229,145 $239,585
-------- --------
Retentions:
Billed:
Estimated to be due in:
1993 -- 16,051
1994 15,772 1,009
-------- --------
Total billed 15,772 17,060
-------- --------
Unbilled:
Estimated to be due in:
1993 -- 56,689
1994 67,741 10,902
1995 5,108 5,974
1996 106 110
1997 555 --
1998 84 --
-------- --------
Total unbilled 73,594 73,675
-------- --------
Total retentions 89,366 90,735
-------- --------
Total receivables from long-term contracts 318,511 330,320
Other trade and notes receivable 83,628 95,084
--------- --------
402,139 425,404
Less, Allowance for doubtful accounts 5,311 3,777
--------- --------
$396,828 $421,627
--------- --------
--------- --------
</TABLE>
3. CONTRACTS IN PROCESS AND INVENTORIES
Costs of contracts in process and inventories considered in the
determination of cost of operating revenues are shown below:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Contracts in process $ 87,076 $ 78,195 $ 86,753
-------- -------- --------
-------- -------- --------
Inventories:
Materials and supplies $ 18,700 $ 22,250 $ 24,664
Work in process 1,810 1,397 671
Finished goods 3,990 10,628 10,751
-------- -------- --------
$ 24,500 $ 34,275 $ 36,086
--------- -------- --------
--------- -------- --------
</TABLE>
28 (continued)
<PAGE> 14
The following tabulation shows the elements included in contracts in process
as related to long-term contracts:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Costs plus accrued profits less earned billings on contracts
currently in process $229,604 $209,800 $183,870
Less, Progress payments 142,528 131,605 97,117
-------- -------- --------
$ 87,076 $ 78,195 $ 86,753
-------- -------- --------
-------- -------- --------
</TABLE>
4. LAND, BUILDINGS AND EQUIPMENT
Land, buildings and equipment are stated at cost and are set forth below:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Land and land improvements $ 14,910 $ 15,576
Buildings 91,957 90,781
Equipment 653,002 650,838
Construction in progress 24,679 26,841
-------- ---------
$784,548 $784,036
-------- --------
-------- --------
</TABLE>
Depreciation expense for the years 1993, 1992 and 1991 was $43,732, $43,286
and $34,718, respectively.
5. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
RETIREMENT BENEFITS - The Corporation and its domestic and foreign
subsidiaries have several pension plans covering substantially all full-time
employees. Pension credits for the years 1993, 1992 and 1991 were $1,158,
$5,712 and $6,470, respectively.
Under the plans, retirement benefits are primarily a function of both years
of service and level of compensation; the plans are noncontributory with no
provision for employee contributions. Effective with retirements after April
1, 1993, the Corporation changed the benefit for domestic employees to 1.2%
of the average
28
<PAGE> 15
of the highest five consecutive years of salary in the last ten years of
employment. Previous benefits were 1.1% of the average of the highest seven
consecutive years of salary in the last ten years of employment.
It is the Corporation's policy to fund the plans on a current basis to the
extent deductible under existing Federal tax regulations. Such contributions,
when made, are intended to provide not only for benefits attributed to service
to date, but also for those expected to be earned in the future.
The following table sets forth the plans' funded status as of the end of
December 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Actuarial present value of accumulated benefit obligations:
Vested $ 289,415 $ 231,039
Nonvested 12,740 5,814
--------- ----------
Total $ 302,155 $ 236,853
--------- ----------
--------- ----------
Plan assets at fair value, primarily listed stocks and bonds $ 388,090 $ 340,455
Projected benefit obligations (329,188) (266,018)
----------- -----------
Excess of plan assets over projected benefit obligations 58,902 74,437
Unrecognized net loss due to past experience different from
assumptions made 33,800 27,022
Unrecognized prior service cost 20,670 15,323
Unrecognized net assets being amortized over 12 years (27,811) (33,789)
---------- --------
Prepaid pension cost $ 85,561 $ 82,993
--------- --------
--------- --------
Net pension credits included the following components:
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Service cost $ 11,024 $ 9,275 $ 7,235
Interest cost on projected benefit obligation 24,117 23,126 20,160
Actual return on plan assets (33,370) (33,768) (29,234)
Net amortization and deferrals (2,929) (4,345) (4,631)
--------- -------- ---------
Net pension credits $ 1,158 $ 5,712 $ 6,470
--------- -------- ---------
--------- -------- ---------
</TABLE>
In determining the actuarial present value of the projected benefit
obligations, discount rates ranging from 6.875% to 7.5% (1992 - 7.5% to 10%),
and rates of increase for future compensation levels ranging from 4.5% to
6.5% (1992 - 5% to 6.5%) were utilized. The expected long-term rate of
return on assets was 10%.
The Corporation has a 401(k) plan for salaried employees. The Corporation
for the years 1993, 1992 and 1991 contributed a 50% match of the employee's
contribution which amounted to a cost of $3,300, $2,700 and $2,200,
respectively.
In addition to providing pension benefits, the Corporation and some of its
domestic subsidiaries provide certain health care and life insurance benefits
for retired employees. Employees may become eligible for these benefits if
they reach normal retirement age while working for the Corporation. Benefits
are provided through insurance companies.
Effective the beginning of 1992, the provisions of Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" were adopted. The Statement requires the
Corporation to use accrual accounting rather than pay-as-you-go (cash basis)
for postretirement benefits other than pensions for current and retired
employees and their families. In the first quarter of 1992, the Corporation
recorded the full amount of its transition obligation which represented the
accumulated postretirement benefit obligation as of the beginning of 1992.
The after tax and valuation allowance charge to 1992 earnings was $91,259, or
$2.57 per share. This amount was reflected as the effect of a change in
accounting principle in the consolidated statement of earnings.
In 1991, the Corporation recognized the cost of providing postretirement
benefits by expensing the benefits as incurred (cash basis). The amounts
included in expense for 1993, 1992 and 1991 were $7,464, $12,242 and $3,900,
respectively.
The following sets forth the plans' funded status reconciled with amounts
reported in the Corporation's consolidated balance sheet at the end of December
1993 and 1992:
29 (continued)
<PAGE> 16
<TABLE>
<CAPTION>
Accumulated postretirement benefit obligation: 1993 1992
---- ----
<S> <C> <C>
Retirees $ 77,347 $ 74,373
Fully-eligible active plan participants 10,750 27,257
Other active plan participants 35,677 49,564
--------- ---------
Accumulated postretirement benefit 123,774 151,194
Unrecognized net loss (7,129) -
Unrecognized prior service cost 35,309 -
--------- ---------
Accrued postretirement benefit liability $ 151,954 $ 151,194
--------- ---------
--------- ---------
</TABLE>
Net periodic postretirement benefit cost for 1993 and 1992 included the
following components:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Service cost $ 1,809 $ 3,257
Interest cost 7,233 8,985
Amortization of prior service cost (1,578) -
-------- --------
Net periodic postretirement benefit cost $ 7,464 $ 12,242
-------- --------
-------- --------
</TABLE>
In 1993, the Corporation announced certain changes to its health care plan
that establish a premium based on length of service and a cap for future
medical costs of active employees.
A 10% annual rate of increase in the per capita costs of covered health care
benefits was assumed for 1994,
29
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
(In Thousands of Dollars, Except per Share Amounts)
gradually decreasing to 6% by the year 2020. Increasing the assumed health
care cost trend rates by one percentage point in each year would increase the
accumulated postretirement benefit obligation as of December 31, 1993, by
$8,000 and increase the aggregate of the service cost and interest cost
components of net periodic postretirement benefit cost for 1993 by $1,000.
Primarily, a discount rate of 7.5% (1992 - 8.5%) was used to determine the
accumulated postretirement benefit obligation.
6. BANK BORROWINGS
The maximum amounts of aggregate month-end short-term bank borrowings during
1993, 1992 and 1991 were $93,644, $104,748 and $136,998, respectively. The
approximate average aggregate month-end balances for such borrowings during
1993, 1992 and 1991 were $65,682, $59,716 and $84,228, respectively. The
approximate weighted average interest rates for such aggregate borrowings
during 1993, 1992 and 1991 were 5%, 6% and 7%, respectively.
Unused lines of credit for short-term bank borrowings aggregated $207,391 and
$168,746 at year-end 1993 and 1992, respectively, of which approximately 91%
for 1993 and 95% for 1992 were available in the United States and Canada at
interest rates not exceeding the prime commercial lending rate and the
remainder was available overseas at rates up to 2% over the base rate.
Pursuant to agreements with its lending banks, the Corporation pays fees for
maintaining its existing lines of credit.
Interest cost incurred in 1993, 1992 and 1991 was $33,771, $35,898 and
$32,364 of which $213, $1,739 and $7,824, respectively, was capitalized.
7. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Corporate Debt
--------------
8.58% unsecured promissory notes due in
installments of $22,000 on October 1
in each of the years 1994 to 1998 $110,000 $110,000
Special Purpose Project Debt
----------------------------
The Corporation's obligations with respect
to this debt are limited to guaranteeing
the operating performance of the projects.
Collateralized note payable, interest
varies based on one of several money
market rates (1993 year-end rate
4%), due semiannually through
July 30, 2006 62,113 64,400
Floating/Fixed Rate Resource Recovery
Revenue Bonds, interest varies based
on tax-exempt money market rates (1993
year-end rate 3.25%), due semiannually
August 1, 1997 through February 1, 2010 45,448 45,448
Collateralized note payable, interest varies
based on one of several money market
rates (1993 year-end rate 4.75%), due
semiannually through February 1, 1996 11,110 14,465
Solid Waste Disposal and Resource Recovery
System Revenue Bonds, interest 7.125% to
7.5%, due annually December 1, 1999
through December 1, 2010 120,150 120,150
</TABLE>
30 (continued)
<PAGE> 18
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Resource Recovery Revenue Bonds, interest
7.9% to 10%, due annually December 15,
1994 through 2012 71,482 71,974
Other
-----
Unsecured bank loans, interest 9.2% 4,952 5,430
Other 4,009 7,711
-------- --------
429,264 439,578
Less, Current portion 32,523 12,178
-------- --------
$396,741 $427,400
-------- --------
-------- --------
Principal payments are payable in annual installments of:
1995.......... $ 33,761
1996.......... 37,176
1997.......... 34,156
1998.......... 35,086
1999.......... 21,843
Balance due in installments
through 2012............ 234,719
--------
$396,741
--------
--------
</TABLE>
CORPORATE DEBT
The Corporation entered into interest rate swap agreements under which it
pays to the counterparties interest at a variable rate based on the London
Interbank Offered Rate (LIBOR) on the current notional principal of $110,000
and the counterparties pay the Corporation interest at 7.165% (average) on
the notional principal. The notional principal of the swap amortizes through
September 30, 1998. In addition, the Corporation has
30
<PAGE> 19
entered into forward rate agreements for amounts up to $110,000 for six-month
periods corresponding to the interest periods on the $110,000 notes.
Pursuant to the forward rate agreements during 1993, the Corporation paid to
the counterparties fixed rates of interest ranging from 3.3% to 4.4% and the
counterparties paid to the Corporation interest at variable rates based on
LIBOR for such periods. The Corporation is exposed to credit loss in the
event of nonperformance by the counterparties to either agreement. However,
the Corporation does not anticipate nonperformance by the counterparties.
All of these contracts are with significant financial institutions that are
rated AA-(S&P) or better.
The Corporation has entered into a four-year revolving credit agreement (the
"Revolving Credit Agreement") with a group of banks whereby the banks agree
to advance loans from time to time in amounts up to $180,000. The loans are
for general corporate purposes. The Revolving Credit Agreement is renewed
each year subject to the approval of the Corporation and the banks. The
Corporation pays to the banks a facility fee on the total facility and a
commitment fee on the unused portion of the facility. At December 31, 1993,
no loans were outstanding under the Revolving Credit Agreement.
The Note Agreement pursuant to which 8.58% notes were issued and the
Revolving Credit Agreement require the maintenance of certain levels of
consolidated Tangible Net Worth, as defined, the most restrictive of which is
$400,000 plus 25% of earnings from 1991 through 1993. At December 31, 1993,
the consolidated Tangible Net Worth was $543,000. 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 December 31, 1993, this ratio was .28 to
1.
SPECIAL PURPOSE SUBSIDIARY PROJECT DEBT
Special Purpose Subsidiary Project Debt represents debt incurred to finance
the construction of cogeneration facilities or waste-to-energy projects. The
notes and/or bonds are collateralized pro rata by the assets of each project.
COGENERATION PROJECTS
The note payable for $62,113 represents a loan under a bank credit facility
to a limited partnership whose general partner is a Special Purpose Project
Subsidiary. The limited partnership entered into an interest rate swap
agreement which fixed the interest rate on $62,000 of the original principal
amount of the debt. Under this agreement, the limited partnership pays to
the counterparties interest at 8.85% on the current notional principal and
the counterparties pay to the limited partnership interest at a variable rate
based on LIBOR on the notional principal. The notional principal of the swap
amortizes through July 30, 1999. The limited partnership is exposed to
credit loss in the event of nonperformance by the counterparties to the
interest rate swap agreement. However, the Corporation does not anticipate
nonperformance by the counterparties.
The Floating/Fixed Rate Resource Recovery Revenue Bonds in the amount of
$45,448 were issued in a total amount of $45,450 and the collateralized note
in the amount of $11,110 represents a loan under a bank credit facility. The
bonds are collateralized by an irrevocable standby letter of credit issued by
a commercial bank.
WASTE-TO-ENERGY PROJECTS
The Solid Waste Disposal and Resource Recovery System Revenue Bonds totalling
$120,150 were issued in a total amount of $133,500. The bonds are
collateralized by an irrevocable standby letter of credit issued by a
commercial bank.
The Resource Recovery Revenue Bonds of $71,482 were issued in a total amount
of $86,780. Proceeds of the bond issue were drawn as construction of the
project progressed.
8. RESEARCH AND DEVELOPMENT
Research and development expenses for the years 1993, 1992 and 1991 for
corporate and customer sponsored activities were $49,200, $39,200 and $34,700,
respectively.
31
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
(In Thousands of Dollars, Except per Share Amounts)
9. INCOME TAXES
The components of earnings before income taxes and accounting change for the
years 1993, 1992 and 1991 were taxed under the following jurisdictions:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Domestic $ 25,602 $ (5,082) $ 6,755
Foreign 71,216 72,907 54,530
-------- -------- --------
Total $ 96,818 $ 67,825 $ 61,285
-------- -------- --------
-------- -------- --------
The provision for income taxes on those earnings was as follows:
Current tax expense:
Domestic $ 10,735 $ 1,493 $ 1,312
Foreign 27,047 29,737 14,409
-------- -------- ---------
Total current 37,782 31,230 15,721
-------- -------- ---------
Deferred tax (benefit)/expense:
Domestic (9,886) 7,074 11,041
Foreign (4,966) (2,537) 2,525
--------- --------- ---------
Total deferred (14,852) 4,537 13,566
---------- -------- ---------
Investment tax credit recapture/(benefit) 2,009 (2,146) (3,565)
Utilization/(benefit) of operating loss
carryforwards 14,175 (11,300) (7,705)
---------- -------- ---------
16,184 (13,446) (11,270)
--------- -------- ---------
Total provision for income taxes $ 39,114 $ 22,321 $ 18,017
---------- --------- ---------
---------- --------- ---------
Deferred tax liabilities (assets) are comprised of the following:
1993 1992
---- ----
Difference between book and
tax depreciation $ 63,925 $ 59,081
Pension asset 28,845 28,917
Capital lease transactions 12,975 12,841
Revenue recognition 15,452 8,039
Other 6,226 6,984
-------- --------
Gross deferred tax liabilities 127,423 115,862
-------- --------
Current taxability of estimated
cost to complete long-term
contracts (17,988) (13,053)
Income currently taxable deferred
for financial reporting (14,795) (7,713)
Expenses not currently deductible
for tax purposes (23,175) (10,097)
Loss carryforwards (2,964) (18,114)
Investment tax credit carryforwards (29,484) (32,336)
Postretirement benefits other
than pensions (54,783) (57,031)
Other (18,070) (12,710)
Valuation allowance 5,500 5,500
---------- ---------
Net deferred tax assets (155,759) (145,554)
---------- ---------
$ (28,336) $(29,692)
---------- ---------
---------- ---------
</TABLE>
32 (continued)
<PAGE> 21
The domestic net operating losses and the investment tax credit carryforwards
will expire in the years 2000 to 2007.
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory rate to pretax income, as
a result of the following differences:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Tax at U.S. statutory rate 35.0% 34.0% 34.0%
State income taxes, net of
Federal income tax benefit 1.3 - 1.2
Nondeductible goodwill write-off 2.5 - -
Investment tax credit recapture/(benefit) 2.1 (2.1) (3.8)
Other ( .5) 1.0 (2.0)
----- ----- -----
40 .4% 32.9% 29.4%
------ ------ ------
------ ------ ------
</TABLE>
10. LEASES
The Corporation entered into a sale/leaseback of the 600 ton-per-day
waste-to-energy plant in Charleston, South Carolina, in 1989. The terms of
the agreement are to leaseback the plant under a long-term operating lease
for 25 years. The lease payments for the years 1991 through 1993 totalled
$9,300 annually.
The minimum lease payments under the noncancelable operating long-term lease
are as follows:
<TABLE>
<S> <C>
1994 $ 9,300
1995 9,300
1996 9,300
1997 9,300
1998 9,300
Thereafter 146,900
-------
Total $193,400
--------
--------
</TABLE>
The Corporation and certain of its subsidiaries are obligated under operating
lease agreements primarily for office space. Rental expense for these leases
amounted to $19,500 in 1993, $22,100 in 1992 and $18,500 in 1991. Future
minimum rental commitments on noncancelable leases were as follows: 1994 -
$17,500; 1995 - $15,700; 1996 - $14,500; 1997 - $10,300; 1998-$9,100 and an
aggregate of $38,000 thereafter.
32
<PAGE> 22
11. QUARTERLY FINANCIAL DATA (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------
1993 March 26 June 25 Sept. 24 Dec. 31
---- -------- ------- -------- -------
<S> <C> <C> <C> <C>
Operating revenues $586,531 $646,503 $616,426 $733,540
Gross earnings from operations 68,673 74,658 71,264 78,010
Net earnings 12,730 14,555 12,154 18,265
Earnings per share .36 .41 .34 .51
Cash dividends per share .15 .165 .165 .165
Stock prices:
High 31.875 31.125 35.875 35.625
Low 27.25 25.875 29.00 30.50
<CAPTION>
1992 March 27 June 26 Sept. 25 Dec. 25
---- -------- ------- -------- -------
<S> <C> <C> <C> <C>
Operating revenues $487,204 $581,286 $658,257 $768,042
Gross earnings from operations 66,942 70,657 71,004 83,990
Earnings before accounting change 10,290 12,264 9,558 13,392
Effect of change in accounting
principle (a) (91,259) - - -
Net (loss)/earnings (80,969) 12,264 9,558 13,392
Earnings per share:
Earnings before the effect of
accounting change .29 .34 .27 .38
Effect of change in
accounting principle (a) (2.57) - - -
Net (loss)/earnings (2.28) .34 .27 .38
Cash dividends per share .135 .15 .15 .15
Stock prices:
High 30.875 27.75 31.375 32.75
Low 26.125 24.125 23.00 26.50
</TABLE>
(a) Effective as of the beginning of 1992, the Corporation adopted
SFAS No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" and recorded the full amount of its
transition obligation.
12. LITIGATION
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.
33 (continued)
<PAGE> 23
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 December 25, 1992 and December 31, 1993, the suits pending numbered
approximately 33,500 and 43,300, 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 28,000 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 and its subsidiaries.
13. STOCK OPTION PLANS
The Corporation has two stock option plans which reserve shares of
common stock for issuance to executives, key employees and directors.
Under the plan approved by the stockholders in April 1984, as amended
in 1991, the total number of shares of common stock that may be
granted is 1,700,000.
33
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
(In Thousands of Dollars, Except per Share Amounts)
In April 1990, the stockholders approved a Stock Option Plan for Directors
of the Corporation. This plan authorizes the granting of options on
150,000 shares of common stock to directors who are not employees of the
Corporation, who shall automatically receive an option to acquire 2,000
shares each year.
These plans provide that shares granted should come from the Corporation's
authorized but unissued or reacquired common stock. The price of the
options granted pursuant to these plans shall not be less than 100 percent
of the fair market value of the shares on the date of grant. An option may
not be exercised within one year from the date of grant and no option shall
be exercisable after ten years from the date granted. Under the Executive
Compensation Plan, the long-term incentive segment provides for stock
options to be issued. Participants may exercise approximately one-third of
the stock option shares after the end of each year of the cycle. At
December 31, 1993, 213,666 shares were not exercisable.
Information regarding these option plans for 1993, 1992 and 1991 is as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Options outstanding,
beginning of year 417,596 394,705 445,164
Options exercised (50,786) (82,592) (135,593)
Options granted 127,000 119,500 108,500
Options expired - (14,017) (23,366)
---------- --------- ---------
Options outstanding, end of year 493,810 417,596 394,705
---------- -------- ---------
---------- -------- ---------
Option price range at end of year $12.25 to $12.25 to $12.25 to
$28.75 $28.6875 $28.6875
Option price range for
exercised shares $12.25 to $12.25 to $12.25 to
$22.0625 $21.3125 $22.125
Options available for grant
at end of year 717,912 844,912 950,395
-------- -------- --------
-------- -------- --------
</TABLE>
14. PREFERRED SHARE PURCHASE RIGHTS
On September 22, 1987, the Corporation's Board of Directors declared a
dividend distribution of one Preferred Share Purchase Right on each share
of the Corporation's common stock outstanding as of October 2, 1987. Each
Right allows the shareholder to purchase a one one-hundredth of a share of
a new series of preferred stock of the Corporation at an exercise price of
$75. Rights are exercisable only if a person or group acquires 20% or more
of the Corporation's common stock or announces a tender offer the
consummation of which would result in ownership by a person or group of 20%
or more of the Corporation's common stock. The Rights, which do not have
the right to vote or receive dividends, expire on October 2, 1997, and may
be redeemed, prior to becoming exercisable, by the Board of Directors at
$.02 per Right or by shareholder action with an acquisition proposal.
If any person or group acquires 20% or more of the Corporation's
outstanding common stock, the "flip-in" provision of the Rights will be
triggered and the Rights will entitle a holder (other than such person or
any member of such group) to acquire a number of additional shares of the
Corporation's common stock having a market value of twice the exercise
price of each Right.
In the event the Corporation is involved in a merger or other business
combination transaction, each Right will entitle its holder to purchase, at
the Right's then-current exercise price, a number of the acquiring
company's common stock having a market value at that time of twice the
Right's exercise price.
15. FINANCIAL INSTRUMENTS AND FOREIGN EXCHANGE CONTRACTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value:
CASH AND SHORT-TERM INVESTMENTS
The carrying amount approximates fair value because of the short maturity of
those instruments.
34 (continued)
<PAGE> 25
LONG-TERM INVESTMENTS
The fair values of some investments are estimated based on quoted market
prices for those or similar investments. For other investments for which
there are no quoted market prices, a reasonable estimate of fair market
value could not be made without incurring excessive costs. Additional
information pertinent to the value of an unquoted investment is provided
below.
LONG-TERM DEBT
The fair value of the Corporation's long-term debt (including current
installments) is estimated based on the quoted market prices for the same or
similar issues or on the current rates offered to the Corporation for debt
of the same remaining maturities.
FOREIGN CURRENCY CONTRACTS
The fair value of foreign currency contracts (used for hedging purposes) is
estimated by obtaining quotes from brokers.
34
<PAGE> 26
CARRYING AMOUNTS AND FAIR VALUES
The estimated fair values of the Corporation's financial instruments are as
follows:
<TABLE>
<CAPTION>
1993 1992
-------------- --------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- --------- --------
<S> <C> <C> <C> <C>
Cash and short-term
investments $377,390 $377,390 $270,669 $270,669
Long-term investments
for which it is:
Practicable to
estimate fair value 700 1,800 800 950
Not practicable 4,500 - 4,500 -
Long-term debt (429,264) (445,000) (439,578) (448,500)
Foreign currency contracts (10,300) (10,300) (8,800) (8,800)
</TABLE>
It is not practicable to estimate the fair value of an investment
representing the preferred stock of a public company because this stock is
not traded; that investment is carried at its original cost of $4,500 in
the consolidated balance sheet. At the end of September 1993 (latest
available financial statement of this public company), the total assets
reported were $63,656 and the stockholders' equity was $20,345. Revenues
were $87,346, and net income was $8,502 for nine months.
As of December 31, 1993, the Corporation had $102,000 of forward exchange
contracts outstanding, approximately 60% of which were in European
currencies and 40% were in Canadian currency. These forward exchange
contracts mature between 1994 and 1996. Primarily, these contracts require
the Corporation's foreign subsidiaries to sell United States dollars and to
purchase local currencies.
Financial instruments which potentially subject the Corporation to
concentrations of credit risk consist principally of cash equivalents and
trade receivables.
The Corporation places its cash equivalents with financial institutions and
limits the amount of credit exposure to any one financial institution.
Concentrations of credit risk with respect to trade receivables are limited
due to the large number of customers comprising the Corporation's customer
base, and their dispersion across different businesses and geographic
areas. As of December 31, 1993 and December 25, 1992, the Corporation had
no significant concentration of credit risk.
16. BUSINESS SEGMENTS - DATA
As of December 31, 1993, the business of the Corporation and its
subsidiaries falls within three business groups: an Engineering and
Construction Group that consists primarily of the design, engineering and
construction of process plants and fired heaters for oil refineries,
synthetic fuels, and chemical producers; an Energy Equipment Group that
consists mainly of the design and fabrication of steam generators and
condensers, suppliers of mass-transfer equipment, tower packings and
industrial wire mesh; and a Power Systems Group engaged in the
owning/leasing to or operation for third parties of solid waste-to-energy
and cogeneration plants.
Earnings of segments represent revenues less expenses attributable to that
group or geographic area where the operating unit is located. Revenues
between business segments are considered immaterial and are netted against
the revenues of the respective segment.
Export revenues and intercompany revenues are not significant. No single
customer represents 10% or more of total revenues.
Identifiable assets by group are those assets that are directly related to
and support the operations of each group. Corporate assets are principally
cash, investments and real estate.
Financial information with respect to business segments and geographic data
for the years 1993, 1992 and 1991 is on pages 18 and 19 (unaudited as to
unfilled orders and new orders booked).
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