<PAGE> 1
Pursuant to Rule 424(b)(2)
Registration No. 33-61809
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE FINAL PROSPECTUS
SUPPLEMENT IS DELIVERED. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING
PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE
IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED OCTOBER 31, 1995
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 31, 1995)
$200,000,000
LOGO
FOSTER WHEELER CORPORATION
% NOTES DUE , 2005
---------------------------
Interest on the % Notes due , 2005 (the "Notes") will be
payable semi-annually at a rate of % per annum on and ,
commencing , 1996. See "Description of Notes." The Notes will be
represented by one or more global certificates (the "Global Security"),
registered in the name of a nominee of The Depository Trust Company, as
Depositary (the "Depositary"). Ownership of interests in the Global Security
will be shown on, and the transfer thereof will be effected only through,
records maintained by the Depositary or its nominee for such Global Security and
on the records of participants. Except as otherwise described herein, owners of
beneficial interests in the Global Security will not be entitled to receive
Notes in definitive form and will not be considered the holders thereof.
Settlement for the Notes will be made in immediately available funds. The Notes
will trade in the Depositary's Same-Day Funds Settlement System until maturity,
and secondary market trading activity for the Notes will therefore settle in
immediately available funds. All payments of principal and interest will be made
in immediately available funds. See "Description of the Notes -- Same-Day
Settlement and Payment."
Concurrently with the offering of Notes made hereby, the Company is
publicly offering (the "Common Stock Offering") in the United States and
internationally 4,200,000 shares of the Company's common stock, par value $1.00
per share (the "Common Stock").
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Underwriting
Price to Discounts Proceeds to
Public(1) and Commissions(2) Company(1)(3)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note.......................... . % . % . %
- -------------------------------------------------------------------------------------------------
Total............................. $ $ $
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from , 1995 to date of delivery.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $675,000.
---------------------------
The Notes offered by this Prospectus Supplement are offered by the
Underwriters subject to prior sale, withdrawal, cancellation or modification of
the offer without notice, to delivery to and acceptance by the Underwriters and
to certain further conditions. It is expected that delivery of the Notes will be
made through the facilities of The Depositary, against payment therefor in
immediately available funds, on or about , 1995.
---------------------------
LEHMAN BROTHERS
NATWEST CAPITAL MARKETS LIMITED
UBS SECURITIES INC.
November , 1995
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES AT A
LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
MAP OF FOSTER WHEELER CORPORATION'S CURRENT MAJOR PROJECTS
(Selected projects currently in execution or in backlog as of October 15, 1995
with a contract price in excess of approximately $3 million.)
<PAGE> 3
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements appearing elsewhere in this Prospectus
Supplement and the accompanying Prospectus or incorporated by reference herein
and therein. As used in this Prospectus Supplement, "Foster Wheeler" and the
"Company" refer to Foster Wheeler Corporation and its subsidiaries, unless the
context requires otherwise. Unless otherwise indicated, all information in this
Prospectus Supplement assumes that the Underwriters' over-allotment option is
not exercised.
THE COMPANY
Foster Wheeler is a global company providing engineering services and
products to a broad range of industries through its Engineering and
Construction, Energy Equipment and Power Systems Groups. Primary industries
served by the Company include petroleum refining, petrochemicals, chemicals,
pharmaceuticals and power generation. The services provided include design,
engineering, construction, project development and management, research, plant
operations and environmental services. The products include pulverized coal
boilers and circulating fluidized bed ("CFB") steam generators, power generation
facilities, chemical separation equipment and fired heaters. The Company's
revenues for fiscal 1994 and for the first six months of fiscal 1995 were
$2,271.1 million and $1,329.9 million, respectively. As of June 30, 1995, the
Company had $5,635.6 million of outstanding and unfilled orders for goods and
services under firm contracts (referred to herein as "backlog").
Foster Wheeler is pursuing a strategy of growth through continued
development and expansion of its three core business groups and through targeted
acquisitions and joint ventures within its existing businesses. As a result of
this strategy, since 1990 the Company has achieved compound annual growth in
earnings before accounting change of over 14%. Management of the Company
believes that synergies among its three business groups enhance customer
satisfaction, expand the range of products and services and improve the ability
of the Company to compete successfully for contract awards. Since its inception,
the Power Systems Group has developed 12 projects using the Engineering and
Construction Group (the "E&C Group") as the turnkey contractor and the Energy
Equipment Group as the supplier of the steam generators for such projects.
Effective September 30, 1995, the Company completed the acquisition of the
power generation business of A. Ahlstrom Corporation ("Pyropower"), which had
revenues of $231.0 million for 1994 and backlog of approximately $550 million as
of August 31, 1995. See "The Company -- Energy Equipment Group -- Pyropower
Acquisition." The Pyropower acquisition enhances the Company's position as one
of the worldwide leaders in the design, engineering and manufacture of steam
generating equipment, particularly CFB steam generators. In October 1994, the
Company completed the acquisition of Enserch Environmental Corporation
("Enserch"), which had a backlog of approximately $608 million at the closing of
the acquisition. Approximately 54% of the increase in revenue of the E&C Group
for the first six months of fiscal 1995 compared to the first six months of
fiscal 1994 was generated by activities related to Enserch.
The E&C Group, which accounted for 69% of the Company's fiscal 1994
revenues, designs, engineers and constructs petroleum, chemical, petrochemical,
synthetic fuel, pharmaceutical, process and other industrial plants and provides
comprehensive environmental remediation and related technical, design and
consulting services to government and industry. The Company is a recognized
leader in engineering and construction based on revenues and new orders awarded,
according to Engineering News-Record. In the last five years, the E&C Group has
been involved in more than 200 major projects and has worked in more than 70
countries.
The Energy Equipment Group, which accounted for 24% of the Company's fiscal
1994 revenues, designs, engineers and manufactures steam generators and
auxiliary equipment for electric utilities, independent power producers and
industrial customers worldwide. Steam generating equipment produced by this
Group includes a full range of fluidized bed and conventional boilers firing
coal, oil, gas, municipal solid waste, biomass, wood waste and low-BTU gases.
This Group also designs and manufactures highly engineered chemical separation
components serving the chemical process industries worldwide. During the period
December 26, 1992 through December 30, 1994, management of the Company estimates
that Foster Wheeler and Pyropower together
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<PAGE> 4
accounted for approximately 15% of total solid fuel boiler sales, excluding
local Chinese manufacturers, and approximately 62% of CFB boiler sales
worldwide.
The Power Systems Group, which accounted for 7% of the Company's fiscal
1994 revenues, combines Foster Wheeler's strengths in design, engineering,
manufacturing and construction to build, own or lease and operate cogeneration,
independent power production and resource recovery facilities as well as
facilities for the process and petrochemical industries. The Power Systems Group
focuses on those opportunities that utilize the design, engineering and
construction capabilities of the E&C Group and the steam generation equipment
supplied by the Energy Equipment Group. The Group establishes a special-purpose
subsidiary for each new project to manage that project from the permitting stage
through plant construction and operation. All of the special-purpose subsidiary
project debt is limited-recourse.
PYROPOWER ACQUISITION
Effective September 30, 1995, the Company acquired Pyropower, the power
generation business of A. Ahlstrom Corporation. The cash purchase price of
approximately $200 million is subject to post-closing adjustments based on
Pyropower's financial performance for the remainder of 1995 and its financial
condition at closing. Pyropower is a leader in the design, supply and
manufacture of CFB systems (including steam generators that burn a wide variety
of solid fuels) to utility and industrial customers worldwide and also provides
a range of boiler services including plant operations and maintenance services.
Pyropower's products and services are delivered worldwide through its operations
in the United States, Europe and Asia. Management of the Company believes that
the acquisition of Pyropower and its technology positions the Company to compete
successfully for the opportunity to supply a significant portion of new
international power generation projects, particularly in Scandinavia, Eastern
Europe and certain parts of Asia, as well as the developing market for
repowering in the United States and Europe. For the 12 months ended December 31,
1994 and the six months ended June 30, 1995, Pyropower had revenues of $231.0
million and $136.2 million, respectively. As of August 31, 1995, Pyropower had
backlog of approximately $550 million and approximately $57 million in cash and
cash equivalents.
THE OFFERING
Securities Offered......... $200,000,000 aggregate principal amount of the
% Notes due , 2005.
Maturity................... , 2005.
Interest Payment Dates..... Semi-annually on and
, commencing , 1996.
Ranking.................... The Notes will constitute unsecured and
unsubordinated indebtedness of the Company and will
rank on a parity with the Company's other unsecured
and unsubordinated indebtedness.
Sinking Fund............... None.
Certain Covenants.......... The Indenture governing the Notes contains certain
covenants restricting the incurrence of Liens,
sales and leasebacks and the incurrence of Debt by
any Restricted Subsidiary. See "Description of Debt
Securities -- Certain Covenants of the Company" in
the accompanying Prospectus.
Use of Proceeds............ Repayment of a portion of borrowings under the
Revolving Credit Facilities (as defined in "Use of
Proceeds").
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<PAGE> 5
SUMMARY CONSOLIDATED FINANCIAL, SEGMENT AND OTHER DATA(1)
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEAR ENDED
----------------------- ------------------------------------------
JUNE 30, JULY 1, DECEMBER 30, DECEMBER 31, DECEMBER 25,
1995 1994 1994 1993 1992
---------- ---------- ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues................................... $1,329,875 $1,057,600 $2,271,123 $2,654,505 $2,529,464
Costs and expenses......................... 1,273,818 1,006,170 2,164,256 2,557,687 2,461,639
Earnings before accounting change(2)....... $ 36,770 $ 32,062 $ 65,410 $ 57,704 $ 45,504
Net earnings/(loss)........................ $ 36,770 $ 32,062 $ 65,410 $ 57,704 $ (45,755)
Earnings per share before accounting
change(2)................................ $ 1.03 $ .90 $ 1.83 $ 1.62 $ 1.28
Cash dividends per share................... $ .38 $ .35 $ .72 $ .65 $ .59
Weighted average number of shares of Common
Stock outstanding........................ 35,833 35,765 35,788 35,656 35,596
BALANCE SHEET DATA (AT END OF PERIOD):
Cash, cash equivalents and short-term
investments.............................. $ 295,882 $ 405,673 $ 354,362 $ 377,390 $ 270,669
Total assets............................... $2,191,549 $1,930,720 $2,063,334 $1,806,201 $1,763,264
Bank loans................................. 110,070 104,381 77,350 59,725 54,929
Special-purpose subsidiary project
debt(3).................................. 304,974 310,709 308,383 310,303 316,437
Corporate and other debt................... 243,313 119,078 190,819 118,961 123,141
---------- ---------- ---------- ---------- ----------
Total debt................................. $ 658,357 $ 534,168 $ 576,552 $ 488,989 $ 494,507
Total stockholders' equity................. $ 488,254 $ 436,650 $ 456,494 $ 400,176 $ 387,297
SEGMENT DATA:
REVENUES:
Engineering and Construction............. $ 984,464 $ 732,024 $1,569,341 $1,833,468 $1,726,221
Energy Equipment......................... 268,730 251,105 537,513 569,778 558,468
Power Systems............................ 77,278 75,470 149,135 159,519 128,018
Corporate and Financial Services......... (597) (999) 15,134 91,740 116,757
---------- ---------- ---------- ---------- ----------
Total Revenues............................. $1,329,875 $1,057,600 $2,271,123 $2,654,505 $2,529,464
========== ========== ========== ========== ==========
EARNINGS BEFORE INTEREST EXPENSE, TAXES AND
ACCOUNTING CHANGE:
Engineering and Construction............. $ 40,300 $ 35,900 $ 74,500 $ 65,600 $ 56,300
Energy Equipment......................... 27,900 28,800 58,000 50,000 42,900
Power Systems............................ 24,300 19,300 42,100 48,800 35,200
Corporate and Financial Services(4)...... (14,000) (15,900) (32,700) (34,000) (32,400)
---------- ---------- ---------- ---------- ----------
Total Earnings before Interest Expense,
Taxes and Accounting Change.............. $ 78,500 $ 68,100 $ 141,900 $ 130,400 $ 102,000
---------- ---------- ---------- ---------- ----------
</TABLE>
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<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEAR ENDED
JUNE 30, JULY 1, DECEMBER 30, DECEMBER 31, DECEMBER 25,
1995 1994 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
BACKLOG(5):
Engineering and Construction............. $4,089,631 $2,976,048 $3,798,200 $2,724,276 $2,827,226
Energy Equipment......................... 1,254,828 1,022,108 1,037,889 890,465 831,401
Power Systems............................ 246,734 210,532 257,870 210,518 68,604
Corporate and Financial Services......... 44,396 55,526 41,493 58,855 79,526
---------- ---------- ---------- ---------- ----------
Total Backlog.............................. $5,635,589 $4,264,214 $5,135,452 $3,884,114 $3,806,757
NEW ORDERS BOOKED:
Engineering and Construction............. $1,262,592 $1,006,647 $2,138,591 $1,921,177 $2,605,877
Energy Equipment......................... 511,850 460,893 759,601 670,368 716,934
Power Systems............................ 72,547 72,401 188,734 273,800 186,205
Corporate and Financial Services......... 2,335 2,471 4,051 117,465 131,395
---------- ---------- ---------- ---------- ----------
Total New Orders........................... $1,849,324 $1,542,412 $3,090,977 $2,982,810 $3,640,411
INTEREST EXPENSE:
Engineering & Construction............... $ 684 $ 320 $ 811 $ 721 $ 1,434
Energy Equipment......................... 3,197 1,427 2,784 2,122 1,825
Power Systems............................ 12,291 11,634 24,024 23,745 20,958
Corporate & Financial Services........... 6,259 3,345 7,359 6,970 9,942
---------- ---------- ---------- ---------- ----------
Total Interest Expense..................... $ 22,431 $ 16,726 $ 34,978 $ 33,558 $ 34,159
</TABLE>
- ---------------
(1) Other than Backlog and New Orders Booked, which data are unaudited, the data
set forth in this table for fiscal years 1992, 1993, and 1994 are derived
from audited financial statements. "Backlog" refers to the dollar amount of
outstanding and unfilled orders for goods and services under firm contracts.
(2) In 1992, the Company adopted Statement of Financial Accounting Standards No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions"
and, in connection therewith, recorded a non-cash charge of $91.3 million
($2.57 per share after taxes).
(3) Special-purpose subsidiary project debt is incurred to finance the
construction of cogeneration facilities or waste-to-energy projects. The
debt is collateralized by the assets of each project. The Company's
obligations with respect to this debt are limited to the payment of
liquidated damages for specified shortfalls in completion and/or operating
performance of the projects.
(4) Includes general corporate income and expense, the Company's insurance
operation, trading and real estate activities, asbestos abatement and
miscellaneous manufacturing activities.
(5) The Company's revenues are primarily generated pursuant to contracts that
provide for the delivery of products and services. The elapsed time from
award of a contract to completion of performance may be up to four years. As
work is performed, customers make payments, and revenues and earnings are
recognized on a percentage-of-completion basis.
S-6
<PAGE> 7
RECENT DEVELOPMENTS
On October 31, 1995, Foster Wheeler announced consolidated financial
results for the nine months ended September 29, 1995. Revenues for the period
were $2,117.5 million and net earnings for the period were $54.0 million or
$1.51 per share of Common Stock. Revenues for the first nine months of 1994 were
$1,600.2 million and net earnings for the period were $46.7 million, or $1.31
per share of Common Stock.
Backlog as of September 29, 1995 aggregated $5,849.6 million compared to
$4,471.5 million at the end of September 1994.
THE COMPANY
Foster Wheeler is a global company providing engineering services and
products to a broad range of industries through its E&C, Energy Equipment and
Power Systems Groups. Primary industries served by the Company include
petrochemicals, petroleum refining, chemicals, pharmaceuticals and power
generation. The services provided include design, engineering, construction,
project development and management, research, plant operations and environmental
services. The products include pulverized coal boilers and CFB steam generators,
power generation facilities, chemical separation equipment and fired heaters.
The Company's revenues for fiscal 1994 and for the first six months of fiscal
1995 were $2,271.1 million and $1,329.9 million, respectively. As of June 30,
1995, the Company had $5,635.6 million of backlog.
Foster Wheeler is pursuing a strategy of growth through continued
development and expansion of its three core business groups and through targeted
acquisitions and joint ventures within its existing businesses. As a result of
this strategy, since 1990 the Company has achieved compound annual growth in
earnings before accounting change of over 14%. Management of the Company
believes that synergies among its three business groups enhance customer
satisfaction, expand the range of products and services and improve the ability
of the Company to compete successfully for contract awards. Since its inception,
the Power Systems Group has developed 12 projects using the E&C Group as the
turnkey contractor and the Energy Equipment Group as the supplier of the steam
generators for such projects.
Effective September 30, 1995, the Company completed the acquisition of the
power generation business of A. Ahlstrom Corporation which had revenues of
$231.0 million for 1994 and backlog of approximately $550 million at August 31,
1995. The Pyropower acquisition enhances the Company's position as one of the
worldwide leaders in the design, engineering and manufacture of steam generating
equipment, particularly CFB steam generators. In October 1994, the Company
completed the acquisition of Enserch, which it has combined with its existing
environmental business. The acquisition of Enserch expanded the Company's lines
of products and services and increased the Company's access to public sector
customers. At the time of the acquisition, Enserch had backlog of $608 million,
approximately 75% of which was related to U.S. federal and state government
agencies, including the Departments of Defense and Energy and the Environmental
Protection Agency. Approximately 54% of the increase in revenue of the E&C Group
for the first six months of fiscal 1995 compared to the first six months of
fiscal 1994 was generated by activities related to Enserch.
As part of its expansion strategy, the Company enters into selected joint
ventures in targeted markets. In the first quarter of fiscal 1995, the Company
entered into an exclusive marketing joint venture with The BOC Group, a
British-owned supplier of industrial gases, to build, own and operate hydrogen
production facilities for refineries and other industrial installations in North
and South America (the "BOC Joint Venture"). The BOC Joint Venture was awarded
two contracts during its first six months of operations. The Company also has
entered into a joint venture in China with local partners to manufacture
pressure parts for fossil fuel fired boilers. The expected completion of its
manufacturing facility in China should improve the cost competitiveness of the
Energy Equipment Group in Asia. The E&C Group's Italian subsidiary has entered
into a joint venture with Total, S.A., the French oil and gas company, and
Merloni, S.p.A., a major Italian manufacturer of large household appliances, to
develop and invest in energy projects in Italy (the "Italian Joint Venture").
The Italian Joint Venture is developing two gas-fired cogeneration projects in
Italy, both of which are currently under development and have executed power
purchase agreements.
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<PAGE> 8
The Company has operations in the United States, Canada, Colombia, Finland,
France, Italy, Poland, Singapore, Spain, Thailand and the United Kingdom. The
relative contributions of the three business groups to the Company for fiscal
1994 are shown in the following charts:
PIE CHART
Total Revenues* Earnings Before Income Taxes*
Engineering and Engineering and
Construction 69% Construction 50%
Power Systems 7% Power Systems 12%
Energy Equipment 24% Energy Equipment 38%
Total $2,256.0 million Total $147.0 million
------------
*Excluding amounts associated with Corporate and Financial Services since
these activities are not assigned to a particular group.
ENGINEERING AND CONSTRUCTION GROUP
The Company is a recognized leader in engineering and construction based on
revenues and new orders awarded, according to Engineering News-Record. For more
than the last ten years, the E&C Group has accounted for the largest portion of
the Company's revenues and operating income. The Group was awarded $2,138.6
million and $1,262.6 million of new orders during fiscal 1994 and the first six
months of fiscal 1995, respectively, and had backlog of $3,798.2 million and
$4,089.6 million as of December 30, 1994 and June 30, 1995, respectively. The
Group operates on a global basis, with 68% of its revenues in fiscal 1994 being
derived from projects outside North America, which are administered through the
Company's regional offices.
The E&C Group designs, engineers and constructs petroleum, chemical,
petrochemical and alternative-fuels facilities and related infrastructure,
including power generation and distribution facilities, production terminals,
pollution control equipment and water treatment facilities throughout the world.
The E&C Group also designs, engineers and constructs process plants for the
production of fine chemicals, pharmaceuticals, dyestuffs, fragrances, flavors,
food additives and vitamins. The Group's services to its customers include
recruiting and training plant staff, plant commissioning, maintenance and
operating services, marketing and feasibility studies, conceptual design and
pilot-plant development, plant modernization and upgrading services. In
addition, the E&C Group provides a broad range of environmental remediation
services, together with
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<PAGE> 9
related technical, design and regulatory services. The following charts show the
percentages of new orders awarded to the E&C Group from fiscal 1992 through
fiscal 1994 in the industries and regions indicated:
PIE CHART
Industrial Analysis Geographic Analysis
Refining 55% North America 20%
Chemicals 27% Europe 36%
Oil & Gas 3% Asia 32%
Environmental/Other 8% South America 7%
Pharmaceuticals 7% Middle East 5%
The E&C Group provides engineering and construction services to "upstream"
and "downstream" customers in the petroleum industry. The "upstream" petroleum
market involves the basic production, treatment and transportation of oil and
gas. Projects in the "upstream" market include the engineering and construction
of platforms and modules for offshore oil and gas drilling and production,
onshore terminals, storage and shipping facilities and wellhead recovery and
piping systems. The "downstream" petroleum market involves the refining and
processing of oil and gas feedstock and projects include engineering and
construction of refinery and processing facilities and field development
services. The E&C Group has provided services to substantially all of the major
national and multinational oil companies.
Over the past 40 years, this Group has designed, engineered and built more
than 45 delayed coking plants worldwide. Over the past 50 years, the Group has
designed and constructed more than 200 lube oil facilities for approximately 50
refiners in 23 countries. As of year-end 1994, these lube oil units processed an
aggregate through-put of more than 1,000,000 barrels daily. The E&C Group also
provides refiners with specialized industrial and process equipment including
cracking and reforming furnaces, fired heaters, carbon-dioxide boilers and
similar equipment. The Group has also built or modernized more than 75 major
fluid catalytic cracking units for refineries in 21 countries on five
continents.
The Company believes that the primary opportunities for the E&C Group in
the "upstream" market are in emerging economies such as Singapore and Thailand
where the development of material resources to support economic growth is
expected to stimulate investment in production facilities and pipelines. The
"downstream" market is currently experiencing significant demand, particularly
in areas of rapid economic growth, such as Southeast Asia and the Indian
subcontinent. Management of the Company believes that growth in these and other
developing regions of the world will continue to increase demand in both the
public and private sectors for petroleum-based fuels and products, more
efficient refining and for the capability to refine the more abundant heavy and
sour crude oil feedstocks.
The E&C Group's Italian Joint Venture has two 150 MW gas-fired cogeneration
projects in Italy under development, both of which have executed power purchase
agreements. The Company will be the turnkey contractor, a one-third investor and
an operator for these projects.
S-9
<PAGE> 10
The E&C Group has also developed a strong position in the pharmaceuticals
business worldwide and currently provides to substantially all sectors of the
pharmaceutical industry a full range of engineering and construction services,
including research and development facilities, pilot plants, facilities for the
manufacture of bulk pharmaceuticals chemicals, finishing operations and
biotechnology facilities. The Company provides high containment design services
for highly active compounds and isolation technology. The E&C Group includes
among its pharmaceutical clients Glaxo Wellcome, Eli Lilly and Schering-Plough.
Two bulk pharmaceuticals chemicals facilities and a biotechnology facility
totaling $360 million have recently been completed by the E&C Group. The Group
has also recently been awarded an engineering services contract for
approximately $175 million for a biotechnology facility in Europe. Following a
period of reduced capital expenditures in the pharmaceutical sector, due to
consolidation and an uncertain political environment, management believes that
capital investment in this sector will increase in the near term.
The E&C Group furnishes a full range of design, engineering and
construction services to a geographically diverse group of clients in the
chemical industry. The Group offers bulk chemical production facilities for
various petrochemicals, aromatics, derivatives, monomers and polymers. Recently,
capital spending in the chemical industry has increased as consumer confidence
has improved and sales of durable goods and consumer products have grown in the
United States and Europe. A growing chemical market is also emerging in Asia,
particularly in China as a result of that region's continuing economic growth.
This Group has recently been awarded three contracts to provide $500 million of
engineering services for clients' chemical facilities in Europe and South Asia.
Current customers in the chemicals industry include, among others, ICI, General
Electric, and Eastman Chemical.
The Group also provides environmental engineering and consulting services,
such as remediation for United States federal and state government agencies,
including the Departments of Energy and Defense and the Environmental Protection
Agency. The Group cross-markets its environmental services to its private sector
customers, providing consulting, environmental studies, remedial design and
project management services, including the design and construction of waste
minimization programs. The E&C Group expects demand for environmental services
to grow because of increased environmental awareness and legislation regarding
the environmental obligations of private sector companies. In addition, the
United States Departments of Energy and Defense have 1996 budget allocations of
$5 billion each for environmental management programs. The Company expects to
benefit from similar trends in the international market toward stricter
environmental laws. The Group seeks to maintain a diverse customer base in both
the public and private sectors to minimize the effects of any potential decline
in governmental remediation expenditures. In 1994, the Group was awarded a
contract by an international oil company for remediation of a crude oil
contaminated site in Italy. The Group was also recently awarded a $250 million
remediation contract by the U.S. Department of Defense.
The E&C Group is awarded projects under cost-plus contracts and lump-sum
contracts. The Company's profit is dependent upon its ability to estimate and
price a job accurately and to execute it in accordance with that estimate. In a
cost-plus contract, the costs incurred are reimbursed by the customer and
profits are earned based upon a predetermined method. In a lump-sum contract,
the contract price is fixed and the Company's costs are estimated. In fiscal
1994, cost-plus contracts accounted for approximately 68% of the E&C Group's new
orders awarded and lump-sum contracts accounted for approximately 32% of new
orders awarded. The Company expects the dollar value of lump-sum contracts to
increase relative to the dollar value of cost-plus contracts.
For all of its business groups, including the E&C Group, the Company has a
global contract management system that utilizes extensive control systems prior
to and throughout bidding and during contract negotiation. This system requires
standardized management reviews of costs, profitability and risk allocation, and
continued tracking and review of the projects by management during execution.
Foster Wheeler has established guidelines for key terms and conditions for its
contracts that may not be varied without the approval of senior management.
The E&C Group pursues a strategy appropriate for each of the industries it
serves. In the petroleum sector, the Group intends to maintain its recognized
position by drawing upon its strong position in bottom-of-
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<PAGE> 11
the-barrel processing (including delayed coking, catalytic cracking, solvent
deasphalting and visbreaking). The Group also intends to pursue major projects
in the upstream oil and gas and liquified natural gas businesses. In addition,
the Group intends to expand its presence in the chemical and petrochemical
sectors by aligning itself with major clients to become the preferred or
exclusive provider of engineering services for selected technologies. In the
power generation business, the Group will seek to capitalize upon the Energy
Equipment Group's presence in that sector to develop an engineering, procurement
and construction capability. The E&C Group also plans to expand its existing
capability in the integrated gasification, combined-cycle power generation
business. The E&C Group also intends to use its existing global presence to
expand its environmental business by marketing its services outside the United
States.
ENERGY EQUIPMENT GROUP
The Energy Equipment Group serves the utility and industrial markets with
manufactured products, engineering services and site services. This Group
focuses on power generation and chemical separation equipment and competes
largely on the basis of technology, cost and new marketing initiatives in growth
markets such as China, Southern Asia, the Indian subcontinent and South and
Central America. The Energy Equipment Group received $759.6 million and $511.8
million of new orders during fiscal 1994 and in the first six months of fiscal
1995, respectively. This Group had backlog of $1,037.9 million at December 30,
1994 and $1,254.8 million as of June 30, 1995. This Group serves a global market
through full service offices in the United States, Canada, Spain, Finland, Japan
and Poland. The following charts show the percentages of fiscal 1994 total new
orders awarded for this Group in the indicated major product areas and regions
of the world:
PIE CHART
Industrial Analysis Geographic Analysis
Power Generation Equipment 77% Other 6%
Chemical Separation North America 46%
Equipment 23% Europe 9%
Asia 39%
The goal of the Energy Equipment Group is to be a global leader in the
supply of power-generation equipment and systems by offering superior technology
and customer service. Research and development, particularly in the area of low
emission and more efficient combustion technology, is used to differentiate the
Group's products and services from those of its competitors. Customer service
efforts include the development of a global capability that will enable Foster
Wheeler to respond to customers' needs with on-site representation within 24
hours of a request. In addition, the Energy Equipment Group will expand its
global presence by establishing offices in the countries that constituted the
former Soviet Union, Vietnam and expanding existing offices in India and
Southern Asia. The Group will also concentrate on cost competitive-
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<PAGE> 12
ness by developing lower cost designs and by establishing a global procurement
network to minimize vendor costs, which account for a significant portion of the
total costs of power plants.
Power Generation
The Energy Equipment Group designs, manufactures and erects steam
generating and auxiliary equipment for power stations and industrial markets
worldwide. Steam generating equipment includes a full range of fluidized bed and
conventional boilers firing coal, oil, gas, biomass and other municipal solid
waste, waste wood and low-BTU gases. This Group's auxiliary equipment includes
feedwater heaters, steam condensers, heat-recovery equipment and environmentally
friendly low-NOx burners. Site services related to these products encompass
plant erection, maintenance engineering, plant upgrading and life-extension and
plant repowering. In addition, this Group provides research analysis and
experimental work in fluid dynamics, heat transfer, combustion and fuel
technology, materials engineering and solids mechanics. Current research and
development programs focus on advanced power generation systems and clean coal
technology.
Pyropower Acquisition
Pyropower is a leader in the design, supply and manufacture of CFB systems
(including steam generators which burn a wide variety of solid fuels) to utility
and industrial customers worldwide and also provides a range of boiler services
including plant operations and maintenance services. Pyropower's products and
services are delivered worldwide through its operations in the United States,
Europe and Asia. During the period December 26, 1992 through December 30, 1994,
management of the Company estimates that Foster Wheeler and Pyropower together
accounted for approximately 15% of total solid fuel boiler sales, excluding
local Chinese manufacturers, and approximately 62% of CFB boiler sales
worldwide. By the end of 1995, management estimates that there will be 102 CFB
boilers supplied by Pyropower in operation and 28 CFB boilers under
construction. As of August 31, 1995, Pyropower had backlog of approximately $550
million and approximately 1,500 employees.
Management of the Company believes that the acquisition of Pyropower and
its proprietary technology positions the Company to compete successfully for the
opportunity to supply a significant portion of new international power
generation projects, particularly in Scandinavia, eastern Europe and certain
parts of Asia as well as the developing market for repowering in the United
States and Europe. Included in Pyropower's backlog of approximately $550 million
is a $173 million contract for repowering 470 MW of Electrownia Turow S.A.'s
2,000 MW facility in Poland, representing the Company's first major repowering
project in Eastern Europe.
Pyropower began development of fluidized bed boiler technology in 1968, and
the first commercial Pyropower CFB boiler began operation in 1979. Pyropower is
also continuing research on boiler technology, including the pressurized
circulating fluidized bed ("PCFB") boiler. Pyropower's research is partly funded
by the U.S. Department of Energy. A pilot PCFB plant has been developed and a
demonstration plant is currently being designed.
Pyropower is actively pursuing opportunities in the larger size baseload
generating station market (up to 400 MW). The Company believes that its
financial position and its experience with large, complex utility contracts
should enhance Pyropower's ability to compete successfully for these projects,
which often require performance guarantees and assistance in arranging
financing. By acquiring Pyropower, Foster Wheeler expects to increase its share
of all boiler sales.
The Company expects Pyropower activities to be accretive to 1996 earnings.
Pyropower's backlog of approximately $550 million as of August 31, 1995 is
expected to provide a substantial portion of Pyropower's anticipated revenues
for 1996. In connection with its due diligence review in the acquisition of
Pyropower, the Company examined Pyropower's backlog and level of accruals for
warranty obligations. As a result, the Company determined that a number of
adjustments were necessary in order to conform to the Company's risk assessment
policy with respect to costs of completion and warranty obligations under
long-term contracts. These contract adjustments had a negative effect on
Pyropower's historical financial results for the six months ended June 30, 1995
and the year ended December 31, 1994. Further, Pyropower's largest operation,
which is
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<PAGE> 13
located in Finland, has historically entered into contracts with customers
located in Scandinavia under which a large percentage of equipment and supplies
are delivered in the latter six months of the year. As a result, the Finnish
operation has historically recorded a disproportionate portion of its revenues
during that period. Pyropower's revenues for the first six months of fiscal 1995
were $136.2 million, and are expected to be approximately $350 million for the
full fiscal year 1995.
The Company will combine the operations of Pyropower with certain
operations of the Energy Equipment Group. Management of the Company is currently
evaluating cost savings associated with the elimination of expected redundancies
in manufacturing, operations, research and development, sales offices and
personnel. In connection with the combination of such operations, the Company
anticipates recording a one-time pre-tax charge of up to $46 million in the
fourth quarter of 1995. Management expects that approximately 50% of such charge
will be for cash expenditures. The Company also anticipates that the annual
expense reductions resulting from the reorganization will approximate $20
million.
As a result of the privatization of power generation in emerging markets,
repowering opportunities and replacement of aging baseload plants worldwide,
more than 360,000 MW of new power generation equipment using steam generator
technology is expected to be required over the next ten years. Sales for power
generation plant and equipment are expected to be approximately $30 billion per
year. Annual volume in the segment of this market covered by Foster Wheeler
products is projected by management to be in excess of $5 billion. Management of
the Company believes that the Energy Equipment Group's strength in pulverized
coal and fluidized bed technology, global market presence, full service
capabilities and competitive cost position will enable this Group to compete
effectively for expected worldwide growth in the power generation business.
Much of this growth is expected to occur in regions with access to
significant coal resources, such as the Pacific Rim market and the emerging
Eastern European market. The Energy Equipment Group was positioned to compete in
these markets using both CFB and pulverized coal technology prior to the
acquisition of Pyropower and its competitive position will be substantially
enhanced by Pyropower's market access and technology. Although pulverized coal
technology is currently the predominant technology utilized in the Asian market,
because of fuel flexibility, technological advancements, development of a
utility scale design capability, increasing environmental awareness and
cost-competitiveness, management expects CFB boilers to be used in a growing
percentage of future coal-fired projects. Foster Wheeler is now positioned as
one of the few vendors able to provide both pulverized coal and CFB-based
systems. In fiscal 1994, CFB boilers accounted for approximately 17% of all
boilers sold worldwide with a capacity exceeding 5 MW of electricity, according
to The McCoy Power Reports.
Chemical Separation Equipment
The Energy Equipment Group also provides proprietary solutions and systems
for many separation applications and manufactures highly-engineered chemical
separation equipment for the petroleum refining, petrochemical, chemical and gas
processing industries. The Company acquired Optimized Process Designs, Inc.
("OPD") in 1994 and TPA, Inc. ("TPA") in 1995, which have expanded this Group's
chemical separation business by adding new technologies and enabling it to offer
an expanded product line and additional engineered solutions to its customers.
OPD specializes in the processing of natural gas for industrial and commercial
uses, which management of the Company believes will grow as natural gas gains
wider use in the generation of electricity. TPA specializes in the processes for
the extraction of sulfur from fluids. Management of the Company believes that
sulfur processing opportunities at refineries will increase due to continuing
compliance with the Clean Air Act in the United States, increased environmental
awareness globally and the abundance of relatively low cost sour crude oil as
refinery feedstock. TPA's sulfur extraction processes as applied to natural gas
also complement the capabilities of OPD.
POWER SYSTEMS GROUP
The Power Systems Group, which accounted for 7% of the Company's fiscal
1994 revenues, combines Foster Wheeler's strengths in design, engineering,
manufacturing and construction to build, own or lease and operate cogeneration,
independent power production and resource recovery facilities and facilities for
the
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<PAGE> 14
process and petrochemical industries. This Group generates revenues from
construction and operating activities pursuant to long-term off-take and
operating and maintenance agreements and from returns on its equity positions. A
special-purpose subsidiary established for each new project manages that project
from the permitting stage through plant construction and operation. All of the
special-purpose subsidiary project debt is limited-recourse. This Group
refinances its equity interests in selected projects from time to time when such
refinancing will result in risk mitigation, a lower effective financing cost or
a potential increased return on investment.
Prior to the Pyropower acquisition, this Group owned or operated three
cogeneration plants with an aggregate generating capacity of approximately 155
MW. Cogeneration projects sell steam to an industrial user and power under
long-term contracts with the local public utility. The Power Systems Group has
consistently operated its cogeneration facilities in excess of 90% of each
plant's rated capacity since each was placed in service. This Group also
operates for third parties a steam generation facility and, as part of the
Pyropower acquisition, four additional cogeneration projects.
The Power Systems Group also owns or operates three municipal solid waste
facilities that convert an aggregate of 2,050 tons per day of municipal solid
waste to electricity or steam. County and municipal governments, authorities and
agencies have sponsored this Group's waste-to-energy projects currently in
operation, and have entered into operating and maintenance agreements that
provide for an annual fee for the operation of these facilities. Under these
agreements, the special-purpose subsidiary established for each project is
responsible for risks within its control related to operating the facility, and
the governmental sponsor assumes risks such as changes in law and other
uncontrollable circumstances. As is customary in the industry, Foster Wheeler
guarantees the performance obligations under these agreements, which could
require the payment of significant amounts for failure to perform. Since
commencing operation of its first project in 1989, this Group has operated all
of its projects in excess of levels required by its performance guarantees and
has not been required to make any deficiency payments under such guarantees,
thereby demonstrating its proven mass burn technology.
The Group began construction in 1994 of a 1,600 ton per day recycling and
waste-to-energy project to be owned by the Village of Robbins, Illinois (where
it is located) and operated by the Group under a long-term lease. The Group is
negotiating directly with private haulers and governmental entities for the
delivery of municipal solid waste. The project is expected to begin commercial
operation in 1997. In addition, the Group is in the process of developing a 40
MW waste wood-fired independent power project in Pennsylvania and a project in
Talcahuano, Chile which includes a 12,000 barrel per day coker, a 65 MW
petroleum coke-fired cogeneration facility and a 6,500 barrel per day
hydrotreater.
In 1995, the Power Systems Group began construction of two hydrogen
production facilities with a total capital cost of approximately $60 million.
The first is an 8 million standard cubic feet per day ("SCFD") production
facility to be located at the Petrox Refinery in Talcahuano, Chile. This project
is expected to begin commercial operation in 1996. The other project is a 50
million SCFD facility which will provide hydrogen to Lagoven's Amuay Refinery in
Venezuela. Commercial operation is expected in 1997. Both projects will be owned
by the BOC Joint Venture. The projects are being financed through construction
with 100% equity provided by the Company and its joint venture partners. The
Company intends to refinance the projects on a limited-recourse basis after
construction is completed.
The strategy of the Power Systems Group is to combine the strengths of the
E&C Group and the Energy Equipment Group to pursue projects with industrial
customers and independent power and resource recovery facilities in both the
domestic and international markets.
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<PAGE> 15
USE OF PROCEEDS
The net proceeds from the sale of the Notes offered hereby are estimated to
be approximately $198.0 million. The net proceeds to the Company from the Common
Stock Offering are estimated (at an assumed price of $37 1/2) to be
approximately $151.5 million (approximately $174.3 million if the underwriters'
over-allotment options with respect to the Common Stock are exercised in full).
The Company intends to apply the net proceeds from the sale of the Notes and the
Common Stock Offering to repay a portion of the borrowings under the $500
million revolving credit facilities established on September 20, 1995 with a
syndicate of banks led by National Westminster Bank PLC and Mellon Bank, N.A.
(the "Revolving Credit Facilities"). As of September 29, 1995, the Company had
$429.0 million outstanding under the Revolving Credit Facilities. Such
borrowings were incurred primarily to (i) fund a portion of the Pyropower
acquisition ($149 million), (ii) fund working capital needs and refinance bank
debt previously incurred in the acquisition of Enserch ($258 million in the
aggregate) and (iii) pay a scheduled $22 million principal installment of the
Company's 8.58% unsecured promissory private placement notes (the "Private
Notes"). Borrowings under the Revolving Credit Facilities bear interest, at the
Company's option, at rates based on the London Interbank Offered Rate, the CD
Rate, the Base Rate (each as defined therein) or competitively bid interest
rates. The weighted average interest rate for all borrowings under the Revolving
Credit Facilities at September 29, 1995 was 6.13%. Remaining net proceeds, if
any, from the offerings will be used for general corporate purposes as set forth
in the accompanying prospectus.
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered
hereby (referred to in the Prospectus as "Debt Securities") supplements, and to
the extent inconsistent therewith replaces, the description of the general terms
and provisions of the Debt Securities set forth in the Prospectus, to which
description reference is hereby made.
GENERAL
The Notes will be issued under an indenture between the Company and Harris
Trust and Savings Bank, as trustee (the "Trustee") (as supplemented by a
supplemental indenture with respect to the Notes, being referred to herein as
the "Indenture") and constitute a separate series under the Indenture. The Notes
will bear interest at the rate of % per annum and will mature on
, 2005. The Notes will be issued in fully registered form only
and in denominations of $1,000 and integral multiples thereof.
Interest on the Notes will be paid from , 1995 and will be
payable semiannually on each and , commencing
, 1996, to the persons in whose names the Notes are registered at
the close of business on the and , as the case may
be, prior to the payment date, at the annual rate set forth on the cover page of
this Prospectus Supplement. Interest on any Notes issued in definitive form (see
"Book-Entry System" below), will be payable at the office of the Trustee,
, or at such other place or places as may be designated
pursuant to the Indenture, provided that the Company, at its option, may pay
interest other than interest due at maturity by check mailed to the registered
holders. At the maturity of the Notes, the principal thereof, together with
accrued interest thereon, will be payable in immediately available funds upon
surrender thereof at the office of the Trustee or at such other place or places
as may be designated pursuant to the Indenture. See "Same-Day Settlement and
Payment" below.
The Notes will not be redeemable prior to maturity and will not be subject
to any sinking fund. The Notes will constitute unsecured and unsubordinated
indebtedness of the Company and will rank on a parity with the Company's other
unsecured and unsubordinated indebtedness.
BOOK-ENTRY SYSTEM
The Notes will be represented by one or more global certificates (the
"Global Security"). The Global Security will be deposited with, or on behalf of,
The Depository Trust Company (the "Depositary") and registered in the name of a
nominee of the Depositary. Except under circumstances described below, the Notes
will not be issuable in definitive form.
The Depositary has advised the Company and the Underwriters as follows: The
Depositary is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered under the Securities Exchange Act of 1934. The
Depositary was created to hold
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<PAGE> 16
securities of its participants and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates. The
Depositary's participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations, some of which
(and/or their representatives) own the Depositary. Access to the Depositary's
book-entry system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Upon the issuance of the Global Security, the Depositary will credit on its
book-entry registration and transfer system the accounts of persons designated
by the Underwriters with the respective principal amounts of the Notes
represented by the Global Security. Ownership of beneficial interests in the
Global Security will be limited to persons that have accounts with the
Depositary or its nominee ("participants") or persons that may hold interests
through participants. Ownership of beneficial interests in the Global Security
will be shown on, and the transfer of that ownership will be effected only
through, records maintained by the Depositary or its nominee (with respect to
interests of participants) and on the records of participants (with respect to
interests of persons other than participants). The laws of some states require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and such laws may impair the ability to transfer
beneficial interests in the Global Security.
So long as the Depositary or its nominee is the registered owner of the
Global Security, the Depositary or such nominee, as the case may be, will be
considered the sole owner or holder of the Notes represented by the Global
Security for all purposes under the Indenture. Except as provided below, owners
of beneficial interest in the Global Security will not be entitled to have Notes
represented by the Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Notes in definitive form and will
not be considered the owners or holders thereof under the Indenture.
Principal and interest payments on Notes registered in the name of the
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner of the Global Security. None of the
Company, the Trustee, any paying agent or the registrar for the Notes will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in the Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
interests.
The Company expects that the Depositary for the Notes or its nominee, upon
receipt of any payment of principal or interest, will credit participants'
accounts immediately with payments in amounts proportionate to their respective
beneficial interests in the principal amount of the Global Security as shown on
the records of the Depositary or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in the Global
Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participants.
If the Depositary is at any time unwilling or unable to continue as
Depositary and a successor Depositary is not appointed by the Company within 90
days, the Company will issue Notes in definitive form in exchange for the entire
Global Security. In addition, the Company may at any time and in its sole
discretion determine not to have the Notes represented by a Global Security and,
in such event, will issue Notes in definitive form in exchange for the entire
Global Security. In any such instance, an owner of a beneficial interest in the
Global Security will be entitled to physical delivery in definitive form of
Notes represented by the Global Security equal in principal amount to such
beneficial interest and to have such Notes registered in its name. Notes so
issued in definitive form will be issued as registered Notes, without coupons,
in denominations of $1000 and integral multiples thereof, unless otherwise
specified by the Company.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest on the Global Security
will be made by the Company in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing-house or next-day funds. In contrast, the Notes
will trade in the Depositary's Same-Day Funds Settlement System until maturity,
and secondary market trading activity in the Notes will therefore be required by
the Depositary to settle in immediately available funds. No assurance can be
given as to the effect, if any, of settlement in immediately available funds on
trading activity in the Notes.
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CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1995 and as adjusted to give effect to (i) the incurrence of additional
indebtedness under the Revolving Credit Facilities, including indebtedness
related to the acquisition of Pyropower, (ii) the issuance of 4,200,000 shares
of Common Stock pursuant to the Common Stock Offering, (iii) the sale by the
Company of the Notes offered hereby and the anticipated use of the net proceeds
from such offerings to repay indebtedness incurred under the Revolving Credit
Facilities. See "Use of Proceeds."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1995
--------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C>
INDEBTEDNESS (INCLUDING CURRENT INSTALLMENTS):
Revolving Credit Facilities............................... $ 148,732 $ 0
Private Notes(1).......................................... 88,000 88,000
Special-purpose subsidiary project debt................... 304,974 304,974
Bank loans and other...................................... 116,651 78,151
% Notes due 2005....................... -- 200,000
-------- --------
Total indebtedness................................ $ 658,357 $ 671,125
-------- --------
STOCKHOLDERS' EQUITY:
Preferred Stock: 1,500,000 shares authorized, no par
value; none outstanding................................ $ 0 $ 0
Common Stock: 80,000,000 shares authorized, $1.00 par
value; 35,868,231, shares issued, 40,068,231 shares as
adjusted............................................... 35,868 40,068
Paid-in capital........................................... 38,870 186,157
Retained earnings(2)...................................... 444,021 401,021
Accumulated translation adjustment........................ (30,210) (30,210)
Less cost of treasury stock (10,804 shares)............... 295 295
-------- --------
Total stockholders' equity........................ 488,254 596,741
-------- --------
TOTAL CAPITALIZATION......................... $1,146,611 $ 1,267,866
======== ========
</TABLE>
- ---------------
(1) A scheduled principal payment on the Private Notes of $22 million was made
on October 1, 1995.
(2) The adjusted June 30, 1995 balance reflects the effects of the estimated
reorganization charge of $43 million (after tax) to be recorded in the
fourth quarter of 1995.
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<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto included in the documents
incorporated by reference herein.
RESULTS OF OPERATIONS
Six Months Ended June 30, 1995 Compared to Six Months Ended July 1, 1994
The Company's consolidated backlog at June 30, 1995 was $5,635.6 million,
the highest in the history of the Company. This represented an increase of
$1,371.4 million or 32% over the amount reported for the same period in 1994.
The dollar amount of backlog is not necessarily indicative of the future
earnings of the Company related to the performance of such work. Although
backlog represents only business which is considered firm, there can be no
assurance that cancellations or scope adjustments will not occur. Due to
additional factors outside of the Company's control, such as changes in project
schedules, the Company cannot predict with certainty the portion of backlog not
to be performed. Backlog has been adjusted to reflect project cancellations,
deferrals, and revised project scope and cost. The net reductions in backlog
from project adjustments and cancellations for the six months ended June 30,
1995 was $129.9 million compared with $226.5 million for the six months ended
July 1, 1994. Furthermore, the Company's future award prospects include several
large scale international projects and, because the large size and uncertain
timing can create variability in the Company's contract awards, future award
trends are difficult to predict with certainty.
The environmental activities of the E&C Group, which includes Enserch,
accounted for approximately 77% of the increase in backlog of the Company at
June 30, 1995 as compared to July 1, 1994. The E&C Group had $930.8 million of
backlog relating to environmental activities at June 30, 1995. The Energy
Equipment Group recorded backlog of $1,254.8 million at June 30, 1995, a 23%
increase from the backlog at July 1, 1994 due primarily to the orders taken by
the Spanish subsidiary in the Energy Equipment Group.
New orders awarded for the six months ended June 30, 1995 of $1,849.3
million were 20% higher than new orders awarded for the six months ended July 1,
1994 of $1,542.4 million. Approximately 50% of new orders in the six months
ended June 30, 1995 were for projects awarded to the Company's subsidiaries
located outside of the United States as compared to approximately 58% for the
six months ended July 1, 1994. Key geographic regions contributing to new orders
awarded for the six months ended June 30, 1995 were China, the Middle East and
the United States.
The principal reasons for the increase in new orders awarded for the six
months ended June 30, 1995 as compared to the same period in 1994 was the
significant amount of new orders awarded to the U.S. environmental subsidiary in
the E&C Group of $443.1 million and the amount of new orders awarded to the
Spanish subsidiary in the Energy Equipment Group of $157.7 million. The increase
reported by these two entities was partially offset by a reduction in new orders
awarded to the U.K. subsidiary in the E&C Group of $448.8 million and a U.S.
subsidiary in the Energy Equipment Group of $156.5 million.
Operating revenues increased in the six months ended June 30, 1995 by
$273.8 million compared to the six months ended July 1, 1994, to $1,314.7
million from $1,040.9 million. The E&C Group was primarily responsible for the
increase in operating revenues, accounting for approximately 90% of this
increase, or $252.6 million. Of the increase in the E&C Group's operating
revenues, $124.2 million was related to U.S. environmental operations, with the
balance attributed to the activities of its European subsidiaries.
Gross earnings from operations, which is equal to operating revenues minus
the cost of operating revenues ("gross earnings") increased $26.3 million to
$180.7 million from $154.4 million or 17% in the six months ended June 30, 1995
as compared to the six months ended July 1, 1994.
Selling, general and administrative expenses increased 12% in the six
months ended June 30, 1995 as compared to the same period in 1994, from $99.1
million to $110.9 million. Selling, general and administrative expenses
increased by approximately $11.8 million in the six months ended June 30, 1995
principally as a result of the increased costs related to the acquisition of
Enserch.
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Other income in the six months ended June 30, 1995 as compared to July 1,
1994 decreased to $15.1 million from $16.7 million. Approximately 76% of other
income in the six months ended June 30, 1995 was interest income, amounting to
$11.5 million.
Other deductions in the six months ended June 30, 1995 increased $8.6
million and were primarily due to higher interest expense and increased
amortization of costs in excess of net assets of subsidiaries acquired due to
the Enserch acquisition.
Net earnings increased by $4.7 million or 15% for the six months ended June
30, 1995 as compared to the same period in 1994, from $32.1 million to $36.8
million. The increase was primarily due to the increased earnings in the E&C
Group's U.K. and Italian subsidiaries and the inclusion of its U.S.
environmental subsidiary for the 1995 period, offset by a $3.2 million decrease
in earnings of the U.S. subsidiary of the Energy Equipment Group serving the
power generation segment.
Three Years Ended December 30, 1994
General. The Company's consolidated backlog at the end of fiscal 1994 was
$5,135.5 million, a 32% increase from backlog of $3,884.1 million at the end of
fiscal 1993, which in turn represented a small increase from $3,806.8 million of
backlog at the end of fiscal 1992. The dollar amount of backlog is not
necessarily indicative of the future earnings of the Company related to the
performance of such work. Although backlog represents only business which is
considered firm, there can be no assurance that cancellations or scope
adjustments will not occur. Due to additional factors outside of the Company's
control, such as changes in project schedules, the Company cannot predict with
certainty the portion of backlog not to be performed. Backlog has been adjusted
to reflect project cancellations, deferrals, and revised project scope and cost.
The net reductions in backlog from project adjustments and cancellations for
fiscal 1994 was $385.2 million, compared with $184.9 million in fiscal 1993 and
$367.6 million in fiscal 1992. Furthermore, the Company's future award prospects
include several large scale international projects and, because the large size
and uncertain timing of these projects can create variability in the Company's
contract awards, future award trends are difficult to predict with certainty.
New orders awarded for fiscal 1994 ($3,091.0 million) were slightly higher
than new orders awarded in fiscal 1993 ($2,982.8 million), which in turn were
lower than new orders awarded in fiscal 1992 ($3,640.4 million). A total of 64%
of new orders in fiscal 1994 were for projects awarded to the Company's
subsidiaries located outside of the United States as compared to 49% in fiscal
1993 and 50% in fiscal 1992. Key geographic regions contributing to new orders
awarded in fiscal 1994 were China, Southeast Asia and the Indian subcontinent.
Operating revenues decreased in fiscal 1994 by 14% or $348.6 million
compared to fiscal 1993, to $2,234.4 million from $2,583.0 million, which in
turn represented a 4% increase or $88.2 million as compared with fiscal 1992 of
$2,494.8 million.
Gross earnings increased $31.9 million or 11% in fiscal 1994 as compared to
fiscal 1993, to $324.5 million from $292.6 million, which was approximately the
same level of gross earnings for fiscal 1992.
Selling, general and administrative expenses decreased $0.6 million in
fiscal 1994 as compared to fiscal 1993, to $203.4 million from $204.0 million,
which in turn represented a slight decrease from expenses reported in fiscal
1992 of $208.7 million. General and administrative expenses increased by
approximately $3.0 million in fiscal 1994 principally as a result of the
increased cost related to the acquisition of Enserch in September 1994. This
increase was partially offset by a 5% reduction in selling expenses, to $92.6
million in fiscal 1994 from $97.2 million in fiscal 1993.
Other income in fiscal 1994 as compared to fiscal 1993 decreased $34.8
million, to $36.7 million from $71.5 million. This decrease was primarily a
result of the gains in 1993 of $10.9 million from the sale of Thermacote Welco
and $25.3 million from the sale of a 49.5% limited partnership interest in a
waste-to-energy plant. Other income in fiscal 1993 increased over 100% as
compared to fiscal 1992, from $34.7 million, as a result of those events. In
addition, in fiscal 1993 as compared with fiscal 1992, interest income increased
by $5.6 million, from $21.0 million in fiscal 1992 to $26.6 million in fiscal
1993.
S-19
<PAGE> 20
Other deductions in fiscal 1994 decreased $14.8 million primarily due to
non-recurring events in fiscal 1993, including the acceleration of the
amortization of the cost in excess of net assets of a subsidiary acquired as a
result of the valuation of such subsidiary's future cash flows, 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. Other deductions in fiscal 1993 increased 26% compared to fiscal 1992,
from $48.3 million to $60.7 million as a result of those non-recurring events.
The effective tax rate for fiscal 1994 was 38.8% compared to 40.4% in
fiscal 1993 and 32.9% in fiscal 1992. The fiscal 1993 effective tax 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 limited partnership
interests.
Net earnings increased $7.7 million or 13% in fiscal 1994 as compared to
fiscal 1993, from $57.7 million to $65.4 million. Earnings before the effect of
accounting changes resulting from the adoption in fiscal 1992 of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," increased by $12.2 million or 27% in fiscal 1993 as
compared to fiscal 1992, from $45.5 million to $57.7 million.
Engineering and Construction Group. The E&C Group's backlog at the end of
fiscal 1994 was $3,798.2 million, a 39% increase over backlog of $2,724.3
million at the end of fiscal 1993, which in turn represented a 4% decrease from
backlog of $2,827.2 million at the end of fiscal 1992. The increase in fiscal
1994 as compared with fiscal 1993 was attributable to two primary factors.
First, approximately $608 million of this increase was attributable to the
acquisition of Enserch. Second, contracts awarded to the U.K. subsidiary in the
E&C Group amounted to $1,100 million at December 30, 1994. These contracts
included the engineering, procurement and construction supervision contract for
a major aromatics plant in Singapore.
New orders awarded to the E&C Group increased 11% in fiscal 1994 as
compared with fiscal 1993, from $1,921.2 million in fiscal 1993 to $2,138.6
million in fiscal 1994. New orders decreased 26% in fiscal 1993 as compared to
fiscal 1992 levels of $2,605.9 million. The fiscal 1994 increase was principally
a result of the contracts awarded to the U.K. subsidiary referred to above. The
decrease in new orders awarded in fiscal 1993 as compared to fiscal 1992 was
principally due to the significant amount of new orders taken in fiscal 1992,
which did not occur in fiscal 1993. In fiscal 1993, new orders awarded decreased
in the United States by approximately $300 million and by approximately $400
million in the United Kingdom as compared to fiscal 1992 levels.
The E&C Group reported a 14% decrease in operating revenues in fiscal 1994
as compared to fiscal 1993, from $1,803.1 million to $1,543.3 million, which in
turn represented a 6% increase from fiscal 1992 operating revenues of $1,702.8
million. The decrease in fiscal 1994 operating revenues as compared to fiscal
1993 was primarily a result of reduced pass-through costs and lower operating
levels on long-term contracts of the European affiliates of the E&C Group.
The Company includes pass-through costs on cost-plus contracts which are
generally customer reimbursable materials, equipment and subcontractor costs
when the Company determines that it is responsible for the engineering
specification, procurement and management of such cost components on behalf of
the customer. The percentage relationship between pass-through costs of
contracts and revenues will fluctuate from year to year depending on a variety
of factors including the mix of business in the years compared. Historically,
engineering services revenues have higher margins than either construction or
maintenance services. The British, French and Italian subsidiaries had a mix of
engineering and construction contracts in fiscal 1994 that required a lower
quantity of material cost to be reimbursed by the customer as compared to the
mix of contracts in fiscal 1993.
In addition, while backlog increased for the E&C Group in fiscal 1994, the
lower operating revenues were partially a result of lower levels of operating
activity. The increase in operating revenues in fiscal 1993 as compared to
fiscal 1992 was primarily due to increased levels of operating activities of one
of the E&C Group's U.S. subsidiaries.
S-20
<PAGE> 21
The E&C Group's gross earnings increased $16.8 million in fiscal 1994 as
compared with fiscal 1993 or 13%, to $148.9 million from $132.1 million, which
in turn represented a slight decrease from gross earnings of $132.8 million in
fiscal 1992. A total of $10.9 million of the increase in fiscal 1994 compared to
fiscal 1993 was attributable to the Company's environmental services activities.
The remaining increase was attributable to the successful completion by the
United Kingdom and Italian subsidiaries in the E&C Group of several major
contracts. This increase was slightly offset by a decrease in the operations of
the French subsidiary in the E&C Group, resulting from lower operating levels.
The increase in gross earnings of the E&C Group in fiscal 1993 as compared to
fiscal 1992 was primarily due to the return to profitability of the E&C Group's
Spanish subsidiary and the improved earnings achieved by one of its U.S.
subsidiaries.
Energy Equipment Group. The Energy Equipment Group's backlog was $1,037.9
million at the end of fiscal 1994, representing a 17% increase over backlog of
$890.5 million at the end of fiscal 1993, which in turn represented a 7%
increase over backlog of $831.4 million at the end of fiscal 1992. The increase
in backlog in fiscal 1994 as compared to fiscal 1993 was attributable to the
award of major power generation orders in India, accounting for $100 million of
backlog, and Japan, accounting for $158 million of backlog. The increase in
fiscal 1993 backlog as compared with fiscal 1992 was primarily due to new
contract awards in China to the Group's U.S. subsidiary.
New orders awarded to the Energy Equipment Group were $759.6 million,
$670.4 million and $716.9 million in fiscal 1994, fiscal 1993 and fiscal 1992,
respectively. Of such new orders, $202.0 million, $176.9 million and $169.6
million related to chemical separation activities and $557.6 million, $493.5
million and $547.3 million related to power generation for fiscal 1994, fiscal
1993 and fiscal 1992, respectively.
Operating revenues for the Energy Equipment Group decreased 5% in fiscal
1994 as compared to fiscal 1993, to $529.5 million from $558.6 million, which in
turn represented an increase from fiscal 1992 operating revenues of $550.2
million. These changes in operating revenues for the periods stated resulted
primarily from changes in operating revenues from power generation activities.
The Energy Equipment Group's gross earnings increased by $21.7 million or
21%, to $124.5 million in fiscal 1994 from $102.8 million in fiscal 1993, which
in turn represented a 5% increase from gross earnings in fiscal 1992 of $97.5
million. Approximately $13 million of the increase in fiscal 1994 as compared to
fiscal 1993 was due to improved contract execution of the Spanish subsidiary in
the Energy Equipment Group on a major contract for the supply of two coal-fired
steam generators. The increase was also attributable to increased margins on the
sale of mass transfer equipment.
Power Systems Group. The Power Systems Group's backlog at the end of
fiscal 1994 was $257.9 million, a 23% increase over backlog of $210.5 million at
the end of fiscal 1993, which in turn represented an over 200% increase from
backlog of $68.6 million at the end of fiscal 1992. The increase in backlog for
fiscal 1994 as compared to fiscal 1993 was as a result of the Power Systems
Group's construction of a recycling and waste-to-energy project to be owned by
the Village of Robbins, Illinois which has been financed and is under
construction. The increase in backlog in fiscal 1993 as compared with fiscal
1992 was principally due to the change in fiscal 1993 in the method of
recognizing backlog under long-term operating and maintenance agreements for the
Power Systems Group's operating plants. Since fiscal 1993, the Company has
recognized in backlog the ensuing 12 months' revenues of the operating
subsidiaries in the Power Systems Group. If such backlog had been included in
fiscal 1992 backlog, backlog for fiscal 1992 would have been $200.3 million and
backlog would have increased only 5% in fiscal 1993 as compared to fiscal 1992.
New orders awarded to the Power Systems Group decreased 31% in fiscal 1994
as compared with fiscal 1993, to $188.7 million in fiscal 1994 from $273.8
million in fiscal 1993, which in turn represented an increase of 47% in new
orders awarded as compared to the $186.2 million of new orders awarded in fiscal
1992. The increase in new orders awarded in fiscal 1993 as compared with fiscal
1992 was principally due to the foregoing changes in backlog and new order
recognition.
The Power Systems Group's operating revenues increased by 9% in fiscal 1994
as compared to fiscal 1993, to $143.5 million from $131.8 million, which in turn
represented an increase from fiscal 1992 operating revenues of $123.4 million.
The increase in operating revenues from fiscal 1993 to fiscal 1994 was as a
result of
S-21
<PAGE> 22
the transfer of a facilities management services unit from the Corporate and
Financial Services Group into the Power Systems Group.
The Power Systems Group's gross earnings increased $1.4 million in fiscal
1994 as compared with fiscal 1993 or 3%, to $47.9 million from $46.5 million,
which in turn represented a 6% increase from gross earnings of $43.8 million in
fiscal 1992.
Research and Development. The Company 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 fiscal 1994,
fiscal 1993 and fiscal 1992, approximately $9.8 million, $8.3 million and $6.9
million, respectively, was spent on company-sponsored research activities.
During the same periods, approximately $38.2 million, $40.9 million and $32.3
million, respectively, was spent on customer-sponsored research activities that
were paid for by customers of the Company.
FINANCIAL CONDITION
Six Months Ended June 30, 1995 Compared to Six Months Ended July 1, 1994
The Company's consolidated financial condition improved during the six
months ended June 30, 1995 as compared to the six months ended July 1, 1994.
Stockholders' equity for the six months ended June 30, 1995 increased $31.8
million.
During the six months ended June 30, 1995, the Company's long-term
investments in land, buildings and equipment were $21.0 million as compared to
$18.0 million for the comparable period in 1994.
As of June 30, 1995, the Company had entered into an agreement to acquire
Pyropower and memoranda of understanding for (i) the purchase for approximately
$2.5 million of the assets of Zack Power and Industrial Company, a construction
company in Gary, Indiana, the closing of which occurred in September 1995; and
(ii) the purchase for approximately $16.0 million of the assets of TPA, Inc., a
supplier of sulfur recovery equipment based in Dallas, Texas, the closing of
which also occurred in September 1995. During the next few years, capital
expenditures will continue to be directed primarily toward strengthening and
supporting the Company's core businesses.
Long-term debt, including current installments, and bank loans increased by
$49.0 million, net of repayments of $5.6 million at June 30, 1995 as compared to
December 30, 1994.
Three Years Ended December 30, 1994
The Company's consolidated financial condition improved during the three
year period ended December 30, 1994. Stockholders' equity at the end of fiscal
1994 was $456.5 million as compared to $400.2 million at the end of fiscal 1993
and $387.3 million at the end of fiscal 1992. For fiscal 1994, the increases
from net earnings of $65.4 million and the change in the accumulated translation
adjustment of $13.3 million were partially offset by dividends to stockholders
of $25.8 million. Since the beginning of 1992, net assets have increased by
$104.3 million through December 30, 1994 excluding the accumulated translation
adjustment of $56.6 million and the net after tax and valuation allowance
accounting charge of $91.3 million ($2.57 per share) related to the adoption of
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," in fiscal 1992.
For the fiscal years 1992, 1993 and 1994, long-term investments in land,
buildings and equipment were $56.0 million, $27.8 million and $38.5 million,
respectively. In fiscal 1994, the Company acquired Enserch and Optimized Process
Designs, Inc. with net cash payments after cash acquired of $50.9 million. In
1993, a 49.5% limited partnership interest in the Camden waste-to-energy
facility was sold to an institutional investor and Thermacote Welco was sold;
aggregate proceeds amounted to $50.3 million.
Long-term debt, including current installments, and bank loans increased by
$76.1 million, net of repayments of $64.7 million, during the three-year period.
Payments in fiscal 1994 included $22 million for the first principal installment
on the Company's 8.58% unsecured Private Notes.
S-22
<PAGE> 23
In the ordinary course of business, the Company 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 Company
by customers alleging deficiencies in either equipment design or plant
construction. Based on its knowledge of the facts and circumstances relating to
the Company's liabilities, if any, and to its insurance coverage, management of
the Company believes that the disposition of such suits will not result in
charges against assets or earnings materially in excess of amounts previously
provided in the accounts.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $199.7 million at June 30, 1995, a
decrease of $36.1 million from fiscal year end 1994. During the first six months
of fiscal 1995, the Company paid $13.6 million in stockholder dividends and
repaid debt of $5.6 million. New borrowings totaled $54.6 million resulting
primarily from increased working capital needs.
Cash and cash equivalents totaled $235.8 million at December 30, 1994.
During fiscal 1994, the Company paid $25.8 million in stockholder dividends and
repaid debt totaling $30.5 million, including the $22.0 million principal
repayment on the Private Notes. New borrowings amounted to $100.8 million
resulting primarily from increased working capital needs and the Enserch
acquisition.
During the first six months of fiscal 1995, cash flow used by operating
activities amounted to $101.6 million. This was funded by changes in short-term
investments and borrowings under long-term and short-term credit facilities.
These reductions in cash flow from operating activities during a period of
improving profitability resulted from an increase in the Company's working
capital needs which vary from period to period depending on the mix, stage of
completion and commercial terms and conditions of the Company's contracts.
Working capital needs have increased as a result of the Company satisfying
requests from its Energy Equipment Group customers for more favorable payment
terms under contracts. Such requests generally include reduced advance payments
and more favorable payment schedules. Such terms requiring the Company to defer
receipt of payments from its customers had a negative impact on the Company's
available working capital. The Company's contracts in process and inventories
increased by $79.4 million during the first six months of fiscal 1995 to $278.2
million at June 30, 1995, from $198.8 million at year end 1994. In addition, the
Company's balance of accounts and notes receivable increased by $88.8 million
during the first six months of fiscal 1995 to $585.8 million at June 30, 1995,
from $497.0 million at fiscal year end 1994.
During fiscal 1994, cash flow from operating activities decreased by $161.0
million to ($14.3 million) from $146.7 million in fiscal 1993 which represented
an increase of $5.0 million from $141.7 million in fiscal 1992. These reductions
in cash flow from operating activities during a period of improving
profitability resulted from an increase in the Company's working capital needs
which vary from period to period depending on the mix, stage of completion,
commercial terms and conditions of the Company's contracts. Working capital
needs have increased as a result of the Company satisfying requests from its
Energy Equipment Group customers for more favorable payment terms under
contracts. Such requests generally include reduced advance payments and more
favorable payment schedules. Such terms required the Company to defer receipt of
payments from its customers, which combined with the acquisition of Enserch had
a negative impact on the Company's working capital in fiscal 1994. The Company's
contracts in process and inventories increased by $87.2 million in fiscal 1994
to $198.8 million at year end 1994 from $111.6 million at year end 1993.
Approximately $24.7 million of the increase in contracts in process and
inventories in fiscal 1994 was attributable to a United States subsidiary of the
Energy Equipment Group (principally with regard to projects in China) and
approximately $27.4 million of such increase was attributable to Enserch. In
addition, the Company's balance of accounts and notes receivable increased by
$54.5 million in fiscal 1994 to $497.0 million at fiscal year end 1994 from
$442.5 million at fiscal year end 1993. The increase was due primarily to a
$26.9 million increase attributable to the Energy Equipment Group (primarily the
Chinese projects) and a $45.0 million increase related to the United States
operations of the E&C Group (a significant portion of which was due to the
acquisition of Enserch). These increases were partially offset by reduced
accounts receivable levels at the European affiliates of the E&C Group.
S-23
<PAGE> 24
Management of the Company expects its customers' requests for more
favorable terms under Energy Equipment Group contracts to continue as a result
of the competitive markets in which the Company operates, thereby maintaining
the existing demands on its working capital. The Company intends to satisfy its
continuing working capital needs by borrowing under its Revolving Credit
Facilities, through internal cash generation and third-party financings in the
capital markets. The Company's pricing of contracts recognizes costs associated
with the use of working capital.
On August 14, 1995, the Company filed a universal shelf registration
statement with the Securities and Exchange Commission to cover the issuances,
from time to time, of up to $500 million of debt and equity securities,
including securities convertible into debt and equity securities. The senior
unsecured debt and subordinated debt securities covered by the shelf
registration statement were rated BBB and BBB-, respectively, by Standard &
Poor's Corporation. The Company intends to access the capital markets to
refinance borrowings under its Revolving Credit Facilities referred to below.
On September 20, 1995, the Company established two revolving credit
facilities with a syndicate of banks led by National Westminster Bank PLC and
Mellon Bank, N.A. One facility is a short-term revolving credit facility of $200
million with a maturity of 364 days and the second is a $300 million revolving
credit facility with a maturity of four years (collectively, the "Revolving
Credit Facilities"). Borrowings under these facilities were incurred to fund a
portion of the Pyropower acquisition, to refinance bank debt previously incurred
to fund working capital and the acquisition of Enserch and to make a scheduled
principal installment payment on the Private Notes.
On October 1, 1995, the Company made a $22.0 million principal payment on
its Private Notes. The Company made such payment with proceeds from borrowings
under the Revolving Credit Facilities. In September 1995, the holders of the
Private Notes executed a waiver of certain financial covenants necessitated by
the Pyropower acquisition which waiver is effective until November 21, 1995. The
Company has requested that the holders of the Private Notes amend the covenants
of the Private Notes to reflect substantially similar covenants to those
contained in the Revolving Credit Facilities. If such amendment is not approved
by 66-2/3% of the holders of the Private Notes prior to November 21, 1995, the
Company intends to prepay the full principal amount of the Private Notes, plus a
premium to be determined on the date of such prepayment based on interest rates
as of that date. If the amendment is approved, the Company will be required to
pay scheduled principal installments of $22.0 million on the Private Notes on
October 1, 1996, 1997 and 1998. The Company expects to make such payments from
internally generated cash, borrowings under its Revolving Credit Facilities and
third-party financings in the capital markets.
The Company has lease payments due under two long-term operating leases
aggregating $9.2 million in fiscal 1995, $9.1 million in fiscal 1996 and $87.6
million in fiscal 1997 and other rental payments under leases for office space.
The primary reason for the increase in 1997 is the payment of the first lease
payment for a 1,600-ton-per-day recycling and waste-to-energy plant located in
Robbins, Illinois, which is scheduled to go into operation in 1997. The Company
expects to make these lease payments from cash available from operations and
borrowings under its Revolving Credit Facilities. Leasing arrangements for
equipment, which are short-term in nature, are not expected to impact the
Company's liquidity or capital resources.
The Company 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
have arisen from the exposure to or use of asbestos. At June 30, 1995, there
were approximately 63,000 suits pending. Approximately 17,300 new claims were
filed in the six month period ended June 30, 1995 and approximately 6,000 were
either settled or dismissed without payment. Any settlement costs not covered by
the Company's insurance carriers were immaterial. The Company has agreements
with insurance carriers covering a substantial portion of its potential costs
relating to pending claims. The management of the Company has carefully
considered the financial viability and legal obligations of its insurance
carriers and has concluded that the insurers will continue to adequately fund
claims and defense costs relating to asbestos litigation.
Management of the Company believes that cash and cash equivalents of $199.7
million and short-term investments of $96.2 million at June 30, 1995, combined
with cash flow from operating activities, amounts
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<PAGE> 25
available under its Revolving Credit Facilities and access to third-party
financings in the capital markets will be adequate to meet its working capital
and liquidity needs for the foreseeable future.
Management's strategy for managing risks associated with interest rate
fluctuations is to enter into financial instrument transactions, such as
interest rate swaps and forward rate agreements, to reduce such risks.
Management's strategy for managing transaction risks associated with currency
fluctuations is for each operating unit to enter into forward foreign exchange
agreements to hedge its exposure on contracts into the operating unit's
functional currency. The Company utilizes all such financial instruments solely
for hedging. Corporate policy prohibits the speculative use of such instruments.
As disclosed in Note 15 to the 1994 Financial Statements, the Company is exposed
to credit loss in the event of nonperformance by the counterparties to such
financial instruments. To minimize this risk, the Company enters into these
financial instruments with financial institutions that are primarily rated A or
better by Standard & Poor's or A2 or better by Moody's. Management believes that
the geographical diversity of the Company's operations mitigates the effects of
the currency translation exposure. No significant unhedged assets or liabilities
are maintained outside the functional currency of the operating subsidiaries.
Accordingly, translation exposure is not hedged.
The Company 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
have arisen from the exposure to or use of asbestos. At December 30, 1994, there
were approximately 51,700 suits pending. Approximately 26,400 new claims were
filed in fiscal 1994 and approximately 18,000 were either settled or dismissed
without payment in fiscal 1994. Any settlement costs not covered by the
Company's insurance carriers were immaterial. The Company has agreements with
insurance carriers covering a substantial portion of its potential costs
relating to pending claims. During the three year period ended December 30,
1994, the Company tried, settled or summarily disposed of approximately 32,000
asbestos-related claims. Approximately $53 million was spent on asbestos
litigation defense and case resolution during the three year period
(1992 -- $8.3 million; 1993 -- $20.9 million; 1994 -- $23.8 million). The
Company estimates that, in respect of its asbestos litigation for the years
1992, 1993 and 1994, the asset recorded relating to probable insurance
recoveries would have been approximately $46.5 million, $65 million and $77
million, respectively, and the liability accrued relating to probable losses
would have been approximately $50 million, $68 million and $78 million,
respectively. Management of the Company has carefully considered the financial
viability and legal obligations of its insurance carriers and has concluded that
the insurers will continue to adequately fund claims and defense costs relating
to asbestos litigation.
Management of the Company believes that cash on hand of $235.8 million and
short-term investments of $118.6 million at December. 30, 1994, combined with
cash flow from operating activities, available credit under its Revolving Credit
Facilities and access to third-party financings in the capital markets will be
adequate to meet its working capital and liquidity needs for the foreseeable
future.
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<PAGE> 26
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement
dated as of , 1995 (the "Underwriting Agreement"), the Company has
agreed to sell to each of Lehman Brothers Inc., NatWest Capital Markets Limited
and UBS Securities Inc. (the "Underwriters"), and each of the Underwriters has
severally agreed to purchase from the Company, the respective principal amounts
of the Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITERS OF NOTES
-------------------------------------------------------------------------- ---------
<S> <C>
Lehman Brothers Inc. ..................................................... $
NatWest Capital Markets Limited ..........................................
UBS Securities Inc. ......................................................
---------
Total........................................................... $
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Notes are subject to the
approval of certain legal matters by their counsel and to certain other
conditions contained therein.
The Underwriters propose to offer the Notes in part directly to the public
at the public offering price set forth on the cover page of this Prospectus
Supplement and in part to certain securities dealers at such public offering
price less a selling concession not in excess of % of the principal amount of
the Notes. The Underwriters may allow, and the selected dealers may reallow a
concession not in excess of % of the principal amounts of the Notes to certain
other brokers and dealers.
The Notes are a new issue of securities with no established trading market.
The Company does not intend to apply for listing of the Notes on a national
securities exchange. The Company has been advised by the several Underwriters
that they presently intend to make a market in the Notes but are not obligated
to do so and may discontinue market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for the Notes.
Lehman Brothers has acted as adviser to the Company in connection with the
Pyropower acquisition and received a fee of $1.375 million at the closing of the
acquisition. In addition, in the ordinary course of their respective businesses,
certain of the Underwriters named above and/or their affiliates have provided,
and may in the future provide, investment banking services to the Company.
Lehman Brothers is a representative of the U.S. underwriters and Lehman
Brothers, NatWest Securities Limited, an affiliate of NatWest Capital Markets
Limited, and UBS Limited, an affiliate of UBS Securities Inc., are international
managers of the Common Stock Offering.
National Westminster Bank PLC ("NWB"), an affiliate of NatWest Securities
Limited is the administrative agent and a member of the syndicate of seventeen
banks which are lenders to the Company under the Revolving Credit Facilities. In
addition, Union Bank of Switzerland, New York Branch ("UBS"), an affiliate of
UBS Securities Inc. is a member of the syndicate of banks. An aggregate of $500
million is available for borrowing from time to time under the Revolving Credit
Facilities, and NWB's aggregate participation is $45 million and UBS's aggregate
participation is $37.5 million. NWB and UBS will receive their pro rata share of
any net proceeds of the offering of Notes made hereby and the Common Stock
Offering used to repay amounts outstanding under the Revolving Credit
Facilities.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.
S-26
<PAGE> 27
INDEX TO PRO FORMA UNAUDITED
CONDENSED COMBINED FINANCIAL DATA
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction to Pro Forma Unaudited Condensed Combined Financial Data................. P-2
Pro Forma Unaudited Condensed Combined Balance Sheet as of June 30, 1995.............. P-3
Pro Forma Unaudited Condensed Combined Statements of Earnings for the Year Ended
December 30, 1994 and the Six Months Ended June 30, 1995............................ P-4
Notes to Pro Forma Unaudited Condensed Combined Financial Data........................ P-5
</TABLE>
P-1
<PAGE> 28
INTRODUCTION TO
PRO FORMA UNAUDITED CONDENSED COMBINED FINANCIAL DATA
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
AND AHLSTROM PYROPOWER
The following Pro Forma Unaudited Condensed Combined Balance Sheet as of
June 30, 1995 and the Pro Forma Unaudited Condensed Combined Statements of
Earnings for the year ended December 30, 1994 and the six months ended June 30,
1995 (collectively, the "Pro Forma Financial Data") combine (i) the historical
consolidated balance sheets of Foster Wheeler Corporation and Subsidiaries (the
"Company") and Ahlstrom Pyropower ("Pyropower") as if the acquisition had been
effected on June 30, 1995, and (ii) the historical statements of earnings as if
the acquisition had been effected on January 1, 1994.
The pro forma unaudited condensed combined financial data has been prepared
on the basis of the assumptions described in the notes to the pro forma
unaudited condensed combined financial data and includes assumptions relating to
the allocation of the consideration paid for Pyropower to the combined assets
and liabilities of Pyropower based on preliminary estimates of their respective
fair values. The actual allocation of such consideration may differ from that
reflected in the pro forma unaudited condensed combined financial data after an
appropriate review of the fair values of the combined assets and liabilities of
Pyropower has been completed. Amounts allocated will be based upon the estimated
fair values at the time of acquisition, which could vary significantly from the
amounts as of June 30, 1995. The acquisition will be accounted for using the
purchase method. Although certain items noted herein are subject to potential
adjustment, Management does not believe that the effect of any such adjustments
will be material to the Pro Forma Financial Data.
The pro forma unaudited condensed combined financial data presented is not
necessarily indicative of the actual results that would have been achieved had
the acquisition closed on the dates assumed herein.
The pro forma unaudited condensed combined financial data should be read in
conjunction with the financial statements and related notes thereto of the
Company appearing in its 1994 Form 10-K and its June 30, 1995 Form 10-Q and of
Pyropower appearing in the Company's Form 8-K filed on October 12, 1995, as
amended.
P-2
<PAGE> 29
PRO FORMA UNAUDITED CONDENSED COMBINED BALANCE SHEET
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
AND AHLSTROM PYROPOWER
AS OF JUNE 30, 1995 (IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOSTER WHEELER AHLSTROM PRO FORMA PRO FORMA
CORPORATION PYROPOWER ADJUSTMENTS COMBINED
-------------- --------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................. $ 199,725 $ 17,075 $ 45,000(C1) $ 191,800
(70,000)(C2)
Short-term investments.................... 96,157 (20,000)(C2) 76,157
Accounts and notes receivable............. 585,764 95,356 681,120
Contracts in process...................... 242,326 242,326
Inventories............................... 35,847 16,605 (2,800)(C6) 49,652
Prepaid and refundable income taxes....... 46,537 46,537
Prepaid expenses.......................... 15,608 5,134 20,742
---------- -------- -------- ----------
Total current assets................... 1,221,964 134,170 (47,800) 1,308,334
Land, buildings and equipment -- net...... 566,212 52,036 35,000(C4) 638,448
(14,800)(C6)
Notes and accounts receivable --
long-term.............................. 57,831 976 58,807
Investments and advances.................. 52,686 8,874 (6,500)(C1) 55,060
Cost in excess of net assets of
subsidiaries acquired.................. 67,563 147,129(C4) 214,692
Deferred charges and prepaid
pension cost........................... 221,335 16,968 (16,968)(C3) 215,335
(6,000)(C6)
Deferred income taxes..................... 3,958 3,958
---------- -------- -------- ----------
TOTAL ASSETS...................... $2,191,549 $ 213,024 $ 90,061 $2,494,634
========== ======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments on long-term debt.... $ 32,669 $ 22 $ 32,691
Bank loans................................ 110,070 7,196 117,266
Accounts payable and accrued expenses..... 333,528 56,239 $ 20,000(C4) 430,467
20,700(C6)
Estimated costs to complete long-term
contracts.............................. 339,252 111,610 450,862
Advance payments by customers............. 89,565 5,694 95,259
(3,000)(C5)
Income taxes.............................. 34,309 (3,000)(C6) 28,309
---------- -------- -------- ----------
Total current liabilities.............. 939,393 180,761 $ 34,700 1,154,854
Long-term debt, less current
installments........................... 515,618 2,836 120,000(C2) 638,454
Deferred income taxes..................... 21,733 21,733
Other long-term liabilities, deferred
credits and postretirement benefits
other than pensions and minority
interest in subsidiary companies....... 226,551 3,088 1,700(C6) 231,339
---------- -------- -------- ----------
TOTAL LIABILITIES................. 1,703,295 186,685 156,400 2,046,380
TOTAL STOCKHOLDERS' EQUITY 3,000(C5)
45,000(C1)
(71,339)(C1)
488,254 26,339 (43,000)(C6) 448,254
---------- -------- -------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY.................................... $2,191,549 $ 213,024 $ 90,061 $2,494,634
========== ======== ======== ==========
</TABLE>
The accompanying notes to the pro forma unaudited condensed combined financial
data
are an integral part of this data.
P-3
<PAGE> 30
PRO FORMA UNAUDITED CONDENSED COMBINED STATEMENTS OF EARNINGS
FOSTER WHEELER CORPORATION AND SUBSIDIARIES AND AHLSTROM PYROPOWER
FOR THE YEAR ENDED DECEMBER 30, 1994 AND THE SIX MONTHS ENDED JUNE 30, 1995
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR 1994 SIX MONTHS 1995
------------------------------------------------ ------------------------------------------------
FOSTER PRO FORMA FOSTER PRO FORMA
WHEELER AHLSTROM ADJUST- PRO FORMA WHEELER AHLSTROM ADJUST- PRO FORMA
CORPORATION PYROPOWER MENTS(C5) COMBINED CORPORATION PYROPOWER MENTS(C5) COMBINED
----------- --------- --------- ---------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Operating revenues....... $2,234,441 $226,334 $2,460,775 $1,314,726 $135,792 $1,450,518
Other income............. 36,682 4,647 $ (3,000 ) 38,329 15,149 436 $ (1,500 ) 14,085
---------- -------- -------- ---------- ---------- -------- -------- ----------
Total Revenues.... 2,271,123 230,981 (3,000 ) 2,499,104 1,329,875 136,228 (1,500 ) 1,464,603
---------- -------- -------- ---------- ---------- -------- -------- ----------
COSTS AND EXPENSES:
Cost of operating
revenues............... 1,909,893 225,913 (39,300 ) 2,096,506 1,134,056 148,590 (25,400 ) 1,257,246
Selling, general and
administrative
expenses............... 203,445 -- 38,900 242,345 110,909 -- 25,200 136,109
Other deductions......... 45,906 6,085 8,200 60,191 27,049 3,068 4,100 34,217
Minority interest........ 5,012 (923 ) 4,089 1,804 (342 ) 1,462
---------- -------- -------- ---------- ---------- -------- -------- ----------
Total Costs and
Expenses........ 2,164,256 231,075 7,800 2,403,131 1,273,818 151,316 3,900 1,429,034
---------- -------- -------- ---------- ---------- -------- -------- ----------
Earnings before income
taxes.................... 106,867 (94 ) (10,800 ) 95,973 56,057 (15,088 ) (5,400 ) 35,569
Provision/(benefit) for
income taxes............. 41,457 2,006 (3,780 ) 39,683 19,287 (556 ) (4,890 ) 13,841
---------- -------- -------- ---------- ---------- -------- -------- ----------
Net earnings/(loss)........ $ 65,410 $ (2,100 ) $ (7,020 ) $ 56,290 $ 36,770 $(14,532 ) $ (510 ) $ 21,728
========== ======== ======== ========== ========== ======== ======== ==========
Earnings per share......... $ 1.83 -- -- $ 1.57 $ 1.03 -- -- $ .61
</TABLE>
The accompanying notes to the pro forma unaudited condensed combined financial
data
are an integral part of this data.
P-4
<PAGE> 31
NOTES TO PRO FORMA UNAUDITED
CONDENSED COMBINED FINANCIAL DATA
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
AND AHLSTROM PYROPOWER
(IN THOUSANDS OF DOLLARS)
1. The acquisition of Pyropower by the Company will be accounted for as a
purchase. The resulting adjustments, which include the effects of
converting the Pyropower financial data to U.S. generally accepted
accounting principles, are based on the historical consolidated financial
statements of the Company and Pyropower as well as the financing of the
transaction. Final adjustments will be based upon the fair market value of
the assets and liabilities of Pyropower and a payment based upon bookings
of Pyropower in 1995, which payment the Company has estimated to be
approximately $20 million (the "Bookings Payment"). Management does not
expect the aggregate of such adjustments to exceed $2 million in either
direction. The pro forma statements of earnings were translated using
average exchange rates during the periods. The pro forma balance sheet was
translated using the exchange rate at June 30, 1995.
The pro forma unaudited condensed financial data is based on the following:
(a) The acquisition was assumed to have occurred as of June 30, 1995 for
balance sheet purposes and on January 1, 1994 for statements of
earnings purposes.
(b) The purchase price was funded initially by the long-term Revolving
Credit Facilities established on September 20, 1995 with a syndicate
of banks led by National Westminster Bank PLC and Mellon Bank, N.A.
One facility is a short-term revolving credit facility of $200 million
with a maturity of 364 days and the second is a $300 million revolving
credit facility with a maturity of four years.
(c) The pro forma adjustments to reflect the effects of the transaction
are as follows:
(1) To record the infusion of $45,000 of cash by A. Ahlstrom
Corporation to fund the working capital deficiency required by
Section 3.3 of the Purchase Agreement and to eliminate Pyropower's
equity accounts of $71,339 which include the revaluation of
investments of $6,500 made under International Accounting
Standards.
(2) To reflect the sources of the consideration paid for the estimated
purchase price of $200,000, plus estimated direct costs of $10,000
to be incurred in consummating the acquisition:
<TABLE>
<S> <C>
Cash................................................................. $ 30,000
Short-term investments............................................... 20,000
Cash acquired........................................................ 40,000
Long-term Revolving Credit Facilities................................ 120,000
--------
$210,000
========
</TABLE>
(3) To eliminate purchased negative goodwill and capitalized research
and development costs aggregating $16,968.
P-5
<PAGE> 32
(4) To reflect estimated net assets acquired:
<TABLE>
<S> <C>
Estimated purchase price including the estimated Bookings Payment of
$20 million (see 2 above).......................................... $210,000
Plus: Estimated amounts related to employee redundancy, relocation
and facilities closing costs incidental to the acquisition of
Pyropower............................................................ 20,000*
Less: net assets of Pyropower........................................ (71,339)
--------
Excess of purchase price over carrying value of net assets
acquired........................................................... $158,661
========
Allocated to:
Land, buildings and equipment................................... $ 35,000
Intangibles..................................................... 147,129
Purchased negative goodwill and capitalized research and
development costs............................................... (16,968)
Revaluation of investments...................................... (6,500)
--------
$158,661
========
</TABLE>
* Capitalized costs of $20 million referred to above reflect
Management's estimate of the costs related to severance for
and relocation of Pyropower employees and the costs
associated with the closing of certain Pyropower facilities.
In accordance with APB 16 and FTB 85-5, such estimate does
not include any costs related to existing Foster Wheeler
Corporation personnel or facilities, nor does it include any
indirect or general expenses related to the acquisition. An
approximation of expense categories is as follows:
<TABLE>
<S> <C>
Duplicate research and development facilities................... $12,000
Closure of excess manufacturing facilities...................... 5,000
Redundancy in sales, general and administrative
areas-severance............................................... 3,000
-------
Total................................................. $20,000
=======
</TABLE>
(5) To reflect the adjustments to the pro forma condensed combined
statements of earnings, as follows:
<TABLE>
<CAPTION>
SIX
YEAR MONTHS
1994 1995
-------- --------
<S> <C> <C>
Interest income(i)......................................... $ (3,000) $ (1,500)
======== ========
Cost of operating revenues:
Depreciation(ii)........................................... $ 1,400 $ 700
Research and development costs(iii)........................ (1,800) (900)
Selling, general, and administrative expenses(iv).......... (38,900) (25,200)
-------- --------
$(39,300) $(25,400)
======== ========
Other deductions:
Amortization of cost in excess of net assets acquired(v)... $ 4,000 $ 2,000
Interest expense (vi)...................................... 7,200 3,600
Interest expense (vii)..................................... (3,000) (1,500)
-------- --------
$ 8,200 $ 4,100
======== ========
</TABLE>
(i) The reduction of interest income relates to the use of
$50,000 of the Company's cash and short-term investments to
finance the acquisition and was calculated based on
historical returns for the periods presented.
P-6
<PAGE> 33
(ii) Estimated incremental depreciation expense resulting from
costs allocated to buildings and equipment based on
preliminary, third-party appraisals. The estimated economic
lives assigned to acquired building and equipment will be
approximately 25 to 40 years and 10 to 20 years,
respectively, unless appraisals indicate different useful
lives.
(iii) The amortization of capitalized research and development
costs was eliminated to reflect the fact that such costs
were written off at January 1, 1994 as required by U.S.
generally accepted accounting principles.
(iv) To reclassify Pyropower's selling, general and
administrative expenses from cost of operating revenues to
conform to the Company's presentation.
(v) Management has estimated that a composite useful life for
intangibles of approximately 35 years will be used based upon
the continued viability and application of the acquired
"circulating fluidized bed (CFB)" technology in the market
place, which technology is not subject to rapid obsolescence
.
(vi) Interest expense was calculated based on the current rate of
six percent available to the Company under each of the
Revolving Credit Facilities.
(vii) Interest expense on prior intercompany notes which were
capitalized under the Purchase Agreement.
(viii) Income tax benefit ($3 million) was calculated under SFAS
109 based upon the allowable losses incurred in the United
States only, since foreign losses would have resulted in a
full valuation allowance due primarily to uncertainty of
future foreign earnings. This is the only reconciling tax
adjustment between IAS and U.S. GAAP.
(6) To reflect the estimated effects of the reorganization charge to
be recorded in the fourth quarter of 1995. Such charge has not
been reflected in the pro forma statements of earnings as it is
considered to be nonrecurring. An estimated tax benefit of $3
million has been included. The components of the reorganization
charge which relate to the business of Foster Wheeler Corporation
are as follows:
<TABLE>
<S> <C>
Inventory............................................................. $ 2,800
Land, buildings and equipment......................................... 14,800
Deferred charges and prepaid pension costs............................ 6,000
Accounts payable and accrued expenses................................. 20,700
Other long-term liabilities........................................... 1,700
Total....................................................... 46,000
Less tax benefit...................................................... 3,000
Net reorganization charge................................... $43,000
</TABLE>
(7) Based on Management's review of accounting for pensions,
differences between International Accounting Standards and U.S.
generally accepted accounting principles are not considered
material.
- The income tax provision (benefit) was adjusted to reflect
income taxes on pro forma adjustments, assuming a 35 percent
tax rate.
P-7
<PAGE> 34
PROSPECTUS
$500,000,000
FOSTER WHEELER CORPORATION
SECURITIES
---------------------------
Foster Wheeler Corporation ("Foster Wheeler" or the "Company") may offer
from time to time, together or separately, up to $500,000,000 aggregate
principal amount, or its equivalent based on the applicable exchange rate at the
time of the offering, of its (i) debt securities consisting of debentures, notes
or other unsecured evidences of indebtedness (the "Debt Securities"), which may
be either senior debt securities (the "Senior Debt Securities") or subordinated
debt securities (the "Subordinated Debt Securities"); (ii) shares of preferred
stock (the "Preferred Stock"), which may be issued in the form of depositary
receipts (the "Depositary Shares") that will represent a fraction of a share of
Preferred Stock; (iii) shares of common stock (the "Common Stock"); and (iv)
warrants to purchase securities of the Company as shall be designated by the
Company at the time of the offering (the "Warrants"), in each case in amounts,
at prices and on terms to be determined at the time of the offering. The Debt
Securities, Preferred Stock, Depositary Shares, Common Stock and the Warrants
are collectively called the "Securities."
The form in which the Securities are to be issued, their specific
designation, aggregate principal amount or aggregate initial offering price,
maturity, if any, rate and times of payment of interest or dividends, if any,
redemption, conversion, and sinking fund terms, if any, voting or other rights,
if any, exercise price and detachability, if any, and other specific terms will
be set forth in a Prospectus Supplement (the "Prospectus Supplement"), together
with the terms of offering of such Securities.
If so specified in the applicable Prospectus Supplement, Debt Securities of
a series may be issued in whole or in part in the form of one or more temporary
or permanent global securities. The Prospectus Supplement will also contain
information, as applicable, about certain material United States Federal income
tax considerations relating to the particular Securities offered thereby.
The Common Stock is listed on the New York Stock Exchange under the symbol
"FWC." The Prospectus Supplement will also contain information, where
applicable, as to any other listing on a securities exchange of the Securities
covered by such Prospectus Supplement.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------------
The Securities may be sold directly to purchasers or through agents,
underwriters, including the underwriter listed below (the "Underwriters") or
dealers. The Prospectus Supplement applicable to each sale of Securities
hereunder will set forth the names of each such Underwriter, the proposed
amounts to be purchased by the Underwriters and the compensation of such
Underwriters. Pricing information and net proceeds to the Company from the sale
of such Securities will also be set forth in such Prospectus Supplement. See
"Plan of Distribution" herein.
---------------------------
LEHMAN BROTHERS
October 31, 1995
<PAGE> 35
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER OR AGENT. THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES
OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN
ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE HEREUNDER
OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF AND THEREOF.
<PAGE> 36
AVAILABLE INFORMATION
Foster Wheeler is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549 and the New York regional office
of the Commission, Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can be obtained at prescribed rates by writing to
the Commission, Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C. 20549. Such material can also be inspected at the offices of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005.
This Prospectus constitutes part of a Registration Statement filed by
Foster Wheeler with the Commission under the Securities Act of 1933, as amended
(the "Act"). This Prospectus omits certain of the information contained in the
Registration Statement, and reference is hereby made to the Registration
Statement and to the exhibits thereto for further information with respect to
the Company and the Securities offered hereby. Any statements contained herein
concerning the provisions of any document are not necessarily complete, and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference in this Prospectus:
(a) the Company's Annual Report on Form 10-K (Commission File No. 1-286-2)
for the fiscal year ended December 30, 1994, as amended on Form 10-K/A,
dated October 23, 1995;
(b) the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1995 and its Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995, as amended on Form 10-Q/A, dated October 23, 1995;
(c) the Company's Proxy Statement for the Annual Meeting of Stockholders on
April 25, 1995, filed with the Commission on March 17, 1995; and
(d) the Company's Current Report on Form 8-K, dated September 25, 1995 and
its Current Report on Form 8-K, dated October 12, 1995, as amended on
Form 8-K/A, dated October 31, 1995.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Securities offered hereby shall be deemed to
be incorporated by reference to this Prospectus and to be a part hereof from the
date any such document is filed. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other document subsequently filed with the
Commission which also is or is deemed to be incorporated by reference herein or
in any Prospectus Supplement modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Foster Wheeler will provide without charge to each person to whom this
Prospectus has been delivered, upon written or oral request of such person, a
copy of any or all of the documents that are incorporated by reference herein,
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Requests for such copies should
be directed to Thomas R. O'Brien, Esq., General Counsel, Foster Wheeler
Corporation, Perryville Corporate Park, Clinton, New Jersey 08809, telephone
number (908) 730-4000.
3
<PAGE> 37
THE COMPANY
Foster Wheeler is a global company providing engineering services and
products to a broad range of industries through its Engineering and
Construction, Energy Equipment and Power Systems Groups. Primary industries
served by the Company include petroleum refining, petrochemicals, chemicals,
pharmaceuticals and power generation. The services provided include design,
engineering, construction, project development and management, research, plant
operations and environmental services. The products include pulverized coal
boilers and circulating fluidized bed steam generators, power generation
facilities, chemical separation equipment and fired heaters.
The executive offices of Foster Wheeler, a New York corporation organized
in 1900, are located at Perryville Corporate Park, Clinton, New Jersey 08809,
and the general telephone number is (908) 730-4000.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED -----------------------------------------
JUNE 30, 1995 1994 1993 1992 1991 1990
- ---------------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
3.07 3.38 3.26 2.49 2.30 2.01
</TABLE>
The ratio of earnings to fixed charges was calculated based on information
from the Company's books and records. In computing the ratio of earnings to
fixed charges, earnings consist of net earnings/loss of the Company and its
consolidated subsidiaries, plus income taxes, plus, in 1992, the cumulative
effect of a change in accounting principle relating to the adoption of Statement
of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," plus fixed charges and capitalized
interest amortized, less capitalized interest and equity earnings of
non-consolidated associated companies accounted for by the equity method, net of
dividends. Fixed charges consist of interest costs on borrowed funds, including
capitalized interest, commitment fees, and a reasonable approximation of the
imputed interest on non-capitalized lease expense. There were no preferred
shares outstanding during any of the periods indicated and therefore the ratio
of earnings to combined fixed charges and preferred share dividend requirements
would have been the same as the ratio of earnings to fixed charges for each
period indicated.
USE OF PROCEEDS
Unless otherwise set forth in an accompanying Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities for
general corporate purposes, which may include repayment, reduction and/or
refinancing of existing indebtedness, including acquisition indebtedness,
working capital, capital expenditures and additional acquisitions.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities may be issued from time to time in one or more series
under an Indenture (the "Indenture"), between the Company and Harris Trust and
Savings Bank, as Trustee (the "Trustee"), a copy of the form of which is filed
as an exhibit to the Registration Statement. The following summaries of certain
provisions of the Debt Securities and the Indenture, as modified or superseded
by any applicable Prospectus Supplement, are brief summaries of certain
provisions thereof, do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all of the provisions of the
Indenture. Capitalized terms are defined in the Indenture unless otherwise
defined herein. Whenever any term defined therein is referred to, such
definition is incorporated herein by reference.
GENERAL
The Indenture does not limit the amount of Debt Securities that may be
issued thereunder and provides that additional Debt Securities may be issued in
one or more series thereunder up to the aggregate principal
4
<PAGE> 38
amount that may be authorized from time to time by the Company's Board of
Directors. The Debt Securities will be either unsecured senior obligations of
the Company and will rank equally and ratably with all other unsecured
unsubordinated indebtedness of the Company or subordinated to Senior Debt (as
defined in the Indenture). The Subordinated Debt Securities when issued will be
subordinated in right of payment to the prior payment in full of all Senior Debt
of the Company as described below under "Subordinated Debt" and in the
Prospectus Supplement applicable to an offering of Subordinated Debt Securities.
Reference is made to the Prospectus Supplement relating to the particular
Debt Securities offered thereby for the following terms, where applicable, of
the Debt Securities: (i) the specific designation of the Debt Securities; (ii)
the denominations in which such Debt Securities are authorized to be issued;
(iii) the aggregate principal amount of such Debt Securities; (iv) the date or
dates on which the principal of such Debt Securities will mature or the method
of determining such date or dates; (v) the price or prices (expressed as a
percentage of the aggregate principal amount thereof) at which the Debt
Securities will be issued; (vi) the rate or rates (which may be fixed or
variable) at which such Debt Securities will bear interest, if any, or the
method of calculating such rate or rates; (vii) the times and places where
principal of, premium, if any, and interest, if any, on such Debt Securities
will be payable; (viii) the date, if any, after which such Debt Securities may
be redeemed and the redemption prices; (ix) the date or dates on which interest,
if any, will be payable and the record date or dates therefor or the method by
which such date or dates will be determined; (x) the period or periods within
which, the price or prices at which, the currency or currencies (including
currency units) in which, and the terms and conditions upon which, such Debt
Securities may be redeemed, in whole or in part, at the option of the Company;
(xi) the obligation, if any, of the Company to redeem or purchase such Debt
Securities pursuant to any sinking fund or analogous provisions, upon the
happening of a specified event or at the option of a holder thereof and the
period or periods within which, the price or prices at which and the terms and
conditions upon which, such Debt Securities shall be redeemed or purchased, in
whole or in part, pursuant to such obligations; (xii) the terms and conditions,
if any, pursuant to which the Debt Securities are convertible or exchangeable
into Common Stock or Preferred Stock or other debt securities, including the
conversion or exchange price, the conversion or exchange period and other
conversion or exchange provisions; (xiii) the currency or currency units for
which such Debt Securities may be purchased or in which such Debt Securities may
be denominated and/or the currency or currency units in which principal of,
premium, if any, and/or interest, if any, on such Debt Securities will be
payable and whether the Company or the holders of any such Debt Securities may
elect to receive payments in respect of such Debt Securities in a currency or
currency units other than that in which such Debt Securities are stated to be
payable; (xiv) any index or formula used to determine the amount of payments of
principal of and premium, if any, and interest; (xv) if other than the principal
amount thereof, the portion of the principal amount of such Debt Securities that
will be payable upon declaration of the acceleration of the maturity thereof or
the method by which such portion shall be determined; (xvi) the person to whom
any interest on any such Debt Security shall be payable if other than the person
in whose name such Debt Security is registered on the applicable record date;
(xvii) any addition to, or modification or deletion of, any Event of Default or
any covenant of the Company specified in the Indenture with respect to such Debt
Securities; (xviii) the application, if any, of such means of defeasance or
covenant defeasance as may be specified for such Debt Securities; (xix) whether
such Debt Securities are to be issued in whole or in part in the form of one or
more temporary or permanent global securities and, if so, the identity of the
depositary for such global security or securities; and (xx) any other terms
pertaining to such Debt Securities not inconsistent with the provisions of the
Indenture. Debt Securities may also be issued under the Indenture upon the
exercise of Debt Warrants. See "Description of Warrants -- Debt Warrants."
Unless otherwise specified in the applicable Prospectus Supplement, the Debt
Securities will not be listed on any securities exchange.
Some of the Debt Securities may be issued at a discount (bearing no
interest or interest at below market rates) ("Discount Securities") to their
stated principal amount. United States Federal income tax consequences and other
special considerations applicable to any such Discount Securities or any Debt
Securities which are denominated in a currency or composite currency other than
United States dollars will be described in the applicable Prospectus Supplement.
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Since the Company is a holding company, the rights of the Company, and
hence the right of creditors of the Company (including the holders of Debt
Securities), to participate in any distribution of the assets of any subsidiary
upon its liquidation or reorganization otherwise is necessarily subject to the
prior claims of creditors of any such subsidiary except to the extent that
claims of the Company itself as a creditor of the subsidiary may be recognized.
Unless otherwise indicated in the applicable Prospectus Supplement, the
covenants contained in the Indenture and the Debt Securities would not provide
for redemption at the option of a Holder nor necessarily afford Holders thereof
protection in the event of a highly leveraged or other transaction that may
adversely affect such Holders, except to the extent described under
"-- Consolidation, Merger and Sale of Assets." Such covenants may not be waived
or modified by the Company or its Board of Directors, although holders of Debt
Securities could waive or modify such covenants as more fully described below
under "-- Modification and Waiver."
CONVERSION OR EXCHANGE OF DEBT SECURITIES
If so indicated in the applicable Prospectus Supplement with respect to a
particular series of Debt Securities, such series will be convertible or
exchangeable into Common Stock, Preferred Stock or other debt securities on the
terms and conditions set forth therein. Such terms will include provisions as to
whether conversion is mandatory, at the option of the holder or at the option of
the Company, and may include provisions pursuant to which the number of shares
of Common Stock, Preferred Stock or other securities of the Company to be
received by the holders of Debt Securities would be calculated according to the
market price of Common Stock, Preferred Stock or other securities of the Company
as of a time stated in the Prospectus Supplement. The applicable Prospectus
Supplement will indicate restrictions on ownership that may apply in the event
of a conversion or exchange.
FORM, EXCHANGE, REGISTRATION, TRANSFER AND PAYMENT
Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities will be issued in fully registered form without coupons in
denominations set forth in the Prospectus Supplement. No service charge will be
made for any transfer or exchange of such Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. Where Debt Securities of any series are
issued in bearer form, the special restrictions and considerations, including
special offering restrictions and special United States Federal income tax
considerations, applicable to any such Debt Securities and to payment on and
transfer and exchange of such Debt Securities will be described in the
Prospectus Supplement. Bearer Debt Securities will be transferrable by delivery.
Unless otherwise provided in the applicable Prospectus Supplement,
principal and premium, if any, or interest, if any, will be payable and the Debt
Securities may be surrendered for payment or transferred at the offices of the
Trustee as paying and authenticating agent, provided that payment of interest on
registered securities may be made at the option of the Company by check mailed
to the address of the person entitled thereto as it appears in the Security
Register. Payment of Debt Securities in bearer form will be made at such paying
agencies outside of the United States as the Company may appoint.
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a depositary (the "Global Depositary"), or its nominee, identified in the
Prospectus Supplement relating to such series. In such a case, one or more
Global Securities will be issued in a denomination or aggregate denomination
equal to the portion of the aggregate principal amount of Outstanding Debt
Securities of the series to be represented by such Global Security or
Securities. Unless and until it is exchanged in whole or in part for Debt
Securities in definitive registered form, a Global Security may not be
registered for transfer or exchange except as a whole by the Global Depositary
for such Global Security to a nominee for such Global Depositary and except in
the circumstances described in the applicable Prospectus Supplement.
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The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
and a description of the Global Depositary will be provided in the applicable
Prospectus Supplement.
CERTAIN COVENANTS OF THE COMPANY
Definitions
"Attributable Debt" is defined to mean as to any particular lease under
which any Person is at the time liable, at any date as of which the amount
thereof is to be determined, the total net amount of rent required to be paid by
such Person under such lease during the remaining primary term thereof,
discounted from the respective due dates thereof to such date at the rate of
interest per annum, compounded semi-annually, implicit in the terms of such
lease, as determined in good faith by the Company. The net amount of rent
required to be paid under any such lease for any such period shall be the amount
of the rent payable by the lessee with respect to such period, after excluding
amounts required to be paid on account of maintenance, repairs, insurance,
taxes, assessments, water rates and similar charges and contingent rents such as
those based on sales. In the case of any lease which is terminable by the lessee
upon the payment of a penalty, such net amount shall also include the amount of
such penalty, but shall not include any rent required to be paid under such
lease subsequent to the first date upon which it may be so terminated.
"Consolidated Net Tangible Assets" is defined to mean the aggregate amount
of assets after deducting (a) all current liabilities and (b) all goodwill,
trade names, trademarks, patents, unamortized debt discount and expense, and
other like intangibles, all as set forth on the most recently prepared balance
sheet of the Company and its consolidated Subsidiaries and computed in
accordance with United States generally accepted accounting principles.
"Debt" with respect to any Person is defined to mean (i) any debt (a) for
money borrowed, or (b) evidenced by a bond, note, debenture, or similar
instrument (including purchase money obligations) given in connection with the
acquisition of any business, property or assets, whether by purchase, merger,
consolidation or otherwise, but shall not include any account payable or other
obligation created or assumed by a Person in the ordinary course of business in
connection with the obtaining of materials or services, or (c) which is a direct
or indirect obligation which arises as a result of banker's acceptances; (ii)
any debt of others described in the preceding clause (i) which such Person has
guaranteed or for which it is otherwise directly liable; (iii) the obligation of
such Person as lessee under any lease of property which is reflected on such
Person's balance sheet as a capitalized lease; and (iv) any deferral, amendment,
renewal, extension, supplement or refunding of any liability of the kind
described in any of the preceding clauses (i), (ii) and (iii); provided,
however, that, in computing the Debt of any Person, there shall be excluded any
particular Debt if, upon or prior to the maturity thereof, there shall have been
deposited with a depository in trust money (or evidence of Debt if permitted by
the instrument creating such Debt) in the necessary amount to pay, redeem or
satisfy such Debt as it becomes due, and the amount so deposited shall not be
included in any computation of the assets of such Person.
"Existing Debt" is defined to mean all Debt outstanding on the date of
issuance of a particular series of Securities.
"Permitted Secured Debt" means all Debt (i) permitted under the covenant
described in "-- Limitation on Liens" and (ii) to which the covenant described
in "-- Limitation on Liens" is expressly inapplicable.
"Principal Property" is defined to mean any facility owned by the Company
or any Subsidiary, in each case, the gross book value of which on the date of
determination exceeds 1% of Consolidated Net Tangible Assets.
"Restricted Subsidiary" is defined to mean any Subsidiary of the Company
which owns, directly or indirectly, a Principal Property and any Subsidiary
which, in the opinion of the Board of Directors or any duly authorized committee
thereof, is of material importance to the Company.
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"Senior Debt" is defined to mean the principal, premium, if any, unpaid
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not a claim
for post-filing interest is allowed in such proceeding), fees, charges,
expenses, reimbursement and indemnification obligations, and all other amounts
payable under or in respect of Debt of the Company, whether any such Debt exists
as of the date of the Indenture or is created, incurred, assumed or guaranteed
after such date, other than (i) Debt that by its terms or by operation of law is
subordinated to or on a parity with the Debt Securities and (ii) Debt owed to a
subsidiary or partnership of the Company.
"Subsidiary" is defined to mean a corporation of which securities having
ordinary voting power, in the absence of contingencies, to elect a majority of
directors, are owned directly or indirectly by the Company.
"Working Debt" means Debt incurred by subsidiaries of the Company organized
outside the United States for (i) working capital in the ordinary course of
business that is repayable within three years or (ii) hedging currency risk
relating to contracts with customers for the delivery of products and services
with proceeds segregated and identified and limited to investments and uses
designed to accomplish such purpose.
Limitation on Liens
The Company will not, and will not permit any Subsidiary to, incur, issue,
assume or guarantee any Debt secured after the date of the Indenture by pledge
of, or mortgage or other lien on ("Lien"), any Principal Property of the Company
or any Subsidiary, or any shares of stock or Debt of any Subsidiary without
effectively providing that the Debt Securities of all series issued pursuant to
the Indenture (together with, if the Company shall so determine, any other Debt
of the Company or such Subsidiary then existing or thereafter created which is
not subordinate to the Debt Securities) shall be secured equally and ratably
with (or, at the option of the Company, prior to) such secured Debt, so long as
such secured Debt shall be so secured, unless after giving effect thereto, the
aggregate principal amount of all such secured Debt then outstanding which would
otherwise be prohibited, plus all Attributable Debt of the Company and its
Subsidiaries in respect of sale and leaseback transactions (as defined in
"-- Restrictions on Sales and Leasebacks") occurring after the date of the
Indenture and existing at such time which would otherwise be prohibited by the
covenant described in "-- Restrictions on Sales and Leasebacks", would not
exceed 5% of Consolidated Net Tangible Assets. This restriction does not apply
to, and there shall be excluded in computing secured Debt for the purpose of
such restriction, Debt secured by:
(1) Liens on property, capital stock or Debt existing at the time of
acquisition thereof (including acquisition through merger or consolidation)
or to secure the payment of all or any part of the purchase price or
construction cost or commencement of operation thereof or to secure any
Debt incurred prior to, at the time of, or within 180 days after, the later
of the acquisition of such property or shares or Debt, the completion of
any such construction and the commencement of operation for the purpose of
financing all or any part of the purchase price or construction cost or
commencement of operation thereof, provided that any such Liens shall only
extend to the above-described property or property on which the above-
described property is situated;
(2) Liens on property of, or on any shares of stock or Debt of, any
corporation or other Person existing at the time such corporation becomes a
Restricted Subsidiary;
(3) Liens on property of, or on any shares of capital stock or Debt of
any corporation or other Person existing at the time such corporation or
other Person is merged into or consolidated with the Company or a
Restricted Subsidiary or at the time of sale, lease or other disposition of
all or substantially all the properties of a corporation or other Person to
the Company;
(4) Liens (a)(i) in favor of the United States of America or any State
thereof, or any department, agency or instrumentality or political
subdivision of the United States of America or any State thereof, or (ii)
in favor any other country, or any political subdivision thereof, to secure
partial, progress, advance or other payments pursuant to any contract or
statute, or (b)(i) for taxes, assessments or governmental charges or levies
in each case not then due and delinquent or the validity of which is being
contested in
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good faith by appropriate proceedings, and (ii) for materialmen's,
mechanics', carriers', workmen's, repairmen's, landlord's or other like
Liens, or deposits to obtain the release of such Liens;
(5) Liens on any property or assets of any Restricted Subsidiary to
secure Debt owing by it to the Company or any other Restricted Subsidiary;
(6) Liens arising out of judgments or awards against the Company or
any subsidiary that the Company or such subsidiary is contesting in good
faith;
(7) Liens made in favor of any customer arising in the ordinary course
of business of the Company or any subsidiary in respect of payments made by
or on behalf of such customer for goods produced or services rendered to
such customer;
(8) Liens existing at the date of the Indenture;
(9) Liens created to secure the financing of cogeneration,
waste-to-energy or other operating or construction projects, but only to
the extent that the Debt associated with any such transaction is limited in
recourse to the assets, contractual rights and revenues of the particular
project being financed and any such Lien does not extend beyond the assets,
contractual rights and revenues of such project and the capital stock of
the corporation owning such project, and any extension, renewal, refunding,
replacement or refinancing (or successive extensions, renewals,
replacements, refundings or refinancings) as a whole or in part of any
Liens referred to in this clause (9); and
(10) Any extension, renewal, refunding or replacement (or successive
extensions, renewals, refundings or replacements), as a whole or in part,
of any Lien referred to in the foregoing clauses (1) through (3) and (8),
inclusive; provided, however, that (i) such extension, renewal, refunding
or replacement Lien shall be limited to all or a part of the same property,
shares of stock or Debt that secured the Lien extended, renewed, refunded
or replaced (plus improvements on such property) and (ii) the Debt secured
by such Lien at such time is not increased.
Restrictions on Sales and Leasebacks
The Company will not, and will not permit any Subsidiary to, enter into any
arrangement with any bank, insurance company or other lender or investor (not
including the Company or any Subsidiary) or to which any such lender or investor
is a party, providing for the leasing by the Company or any such Subsidiary of
any Principal Property which has been owned and operated by the Company or such
Subsidiary for more than 180 days and which has been sold or transferred by the
Company or such Subsidiary to such lender or investor or to any Person to whom
funds have been advanced by such lender or investor (each, a "sale and leaseback
transaction") unless, after giving effect thereto, the aggregate amount of all
Attributable Debt of the Company and its Subsidiaries in respect of such sale
and leaseback transactions occurring after the date of the Indenture and
existing at such time which would otherwise be prohibited under the covenant
described in "-- Restrictions on Sales and Leasebacks" plus all secured Debt
then outstanding of the Company and its Subsidiaries incurred after the date of
the Indenture which would otherwise be prohibited by the covenant described in
"-- Limitation on Liens", would not exceed 5% of Consolidated Net Tangible
Assets. This restriction does not apply to, and there shall be excluded from
Attributable Debt in any computation under such restriction, Attributable Debt
with respect to any sale and leaseback transaction under any of the following
circumstances:
(1) the lease in such sale and leaseback transaction is for a period,
including renewals, of not in excess of three years; or
(2) the property which is the subject of the sale and leaseback
transaction is property capable of being subject to a Lien described in
clauses (1), (2), (3), (8) or (9) in the covenant described in
"-- Limitation on Liens"; or
(3) the Company or a Subsidiary, within 180 days after the sale or
transfer shall have been made by the Company or by any such Subsidiary,
applies an amount equal to the lesser of (i) Attributable Debt or (ii) the
net proceeds of any such sale or transfer to (i) the acquisition of other
Principal Property of equal
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fair market value (as determined by the Board of Directors or any duly
authorized committee thereof) or (ii) the retirement of indebtedness for
pari passu borrowed money (including Securities of any Series).
Limitation on Debt Incurred by Restricted Subsidiaries
The Company will not permit any Restricted Subsidiary to directly or
indirectly, incur, assume or suffer to exist any Debt, unless, after giving
effect thereto, the aggregate amount of then outstanding Debt incurred by all
Restricted Subsidiaries, excluding all Secured Debt and Attributable Debt in
respect of sale and leaseback transactions, shall not exceed 10% of Consolidated
Net Tangible Assets. The immediately preceding sentence shall not apply to the
incurrence or issuance of (a) Existing Debt, (b) Working Debt, (c) Debt of a
Restricted Subsidiary which represents the assumption by such Restricted
Subsidiary of Debt of another Restricted Subsidiary as a result of the merger or
acquisition of such Restricted Subsidiary, (d) Debt of any corporation existing
at the time such corporation becomes a Restricted Subsidiary and (e) Permitted
Secured Debt.
EVENTS OF DEFAULT
The following are Events of Default with respect to Debt Securities of each
series:
(1) default in the payment of any installment of interest, if any,
upon any of the Debt Securities of such series as and when it shall become
due and payable, and continuance of such default for a period of 30 days;
or
(2) default in the payment of the principal of, or any premium on, any
of the Debt Securities of such series as and when the same shall become due
and payable either at Stated Maturity, upon redemption, by declaration or
otherwise; or
(3) default in the payment of any sinking fund payment, when and as
due and payable by the terms of the Debt Securities of such series; or
(4) default in the performance, or breach, of any covenant of the
Company in the Indenture or the Debt Securities of such series (other than
a covenant a default in the performance or a breach of which is otherwise
specified as an Event of Default or which has expressly been included in
the Indenture and designated as being solely for the benefit of such series
of Debt Securities other than such series), and continuance of such default
or breach for a period of 90 days after there has been given, by registered
or certified mail, to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in principal amount of the Debt
Securities of such series then outstanding, a written notice specifying
such default or breach and requiring it to be remedied and stating that
such notice is a "Notice of Default" under the Indenture; or
(5) default resulting in acceleration of or failure to pay at maturity
(i) other Debt of the Company or Debt that the Company has guaranteed where
the aggregate principal amount so accelerated exceeds $15 million or (ii)
Debt of any Subsidiary which the Company has directly assumed or on which
the Company has otherwise become directly liable as a result of the
exercise of remedies upon the occurrence of a default by such Subsidiary in
the performance of its obligations under any agreement guaranteed by the
Company in a principal amount of $15 million or more; without such
involuntary acceleration having been rescinded or annulled within a period
of 30 days after there shall have been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25% in aggregate principal amount of the Debt
Securities of such series then Outstanding a written notice specifying such
default and requiring the Company to cause such acceleration to be
rescinded or annulled and stating that such notice is a "Notice of Default"
under the Indenture; provided, however, that, if such default shall be
remedied or cured by the Company or waived by the holders of such
indebtedness before any judgement or decree for the payment of money due
shall have been obtained or entered, then the Event of Default under the
Indenture by reason thereof shall be deemed likewise to have been thereupon
remedied, cured or waived without any action on the part of the Trustee or
any of the holders; or
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(6) a court having jurisdiction in the premises shall enter a decree
or order for relief in respect of the Company in an involuntary case or
proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law then or thereafter in effect, or
appointing a receiver, liquidator, assignee, custodian, trustee or
sequestrator (or similar official) of the Company or for all or
substantially all of its property or ordering the winding up or liquidation
of its affairs, and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or
(7) the Company shall commence a voluntary case or proceeding under
any applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law then or thereafter in effect, or consent to the entry of
an order for relief in an involuntary case under any such law, or consent
to the appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee or sequestrator (or similar official) of the
Company or for all or substantially all of its property, or make any
general assignment for the benefit of creditors; or
(8) any other Event of Default provided with respect to Debt
Securities of such series.
If an Event of Default with respect to Debt Securities of any series at the
time Outstanding occurs and is continuing, then, and in each and every such
case, unless the principal of all of the Debt Securities of such series shall
have already become due and payable, either the Trustee or the holders of not
less than 25% in aggregate principal amount of the Debt Securities of such
series then outstanding, by notice in writing to the Company (and to the Trustee
if given by Holders), may declare the entire principal amount (or, if the Debt
Securities of such series are Discount Securities (as defined in the Indenture),
such portion of the principal as may be specified in the terms of such series)
of all of the Debt Securities of such series and any premium and interest
accrued thereon to be due and payable immediately, and upon any such declaration
such principal amount (or specified amount) and any premium and interest accrued
thereon shall become immediately due and payable.
However, at any time after a declaration of acceleration with respect to
Debt Securities of any series has been made, but before a judgment or decree
based on such acceleration has been obtained, the Holders of a majority in
principal amount of Outstanding Debt Securities of that series may, under
certain circumstances, rescind and annul such acceleration. See also
"-- Modification and Waiver."
Reference is made to the Prospectus Supplement relating to each series of
Debt Securities which are Discount Securities for the particular provisions
relating to acceleration of the Maturity of a portion of the principal amount of
such Discount Securities upon the occurrence of an Event of Default and the
continuation thereof.
The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity. Subject to such provisions for
indemnification of the Trustee, the Holders of a majority in principal amount of
the Outstanding Debt Securities of any series will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of that series.
The Company is required to furnish to the Trustee annually a statement as
to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in principal
amount of the Outstanding Debt Securities of each series affected thereby (each
such series voting as a single class); provided, however, that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Security affected thereby, (a) change the Stated Maturity of the
principal, or any installment of principal of or interest on, any Debt Security,
(b) reduce the principal amount thereof, or reduce any premium thereof or change
the time of payment of any premium thereon, (c) reduce the rate or change the
time of payment of interest thereon, if
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any, (d) reduce any amount payable on redemption of any such Security (if any),
(e) reduce the Overdue Rate thereof, (f) change the place or currency of payment
of principal of, or any premium or interest thereon, (g) reduce the amount of
principal of any Discount Security payable upon acceleration of the Maturity
thereof or the amount thereof provable in bankruptcy, (h) impair, if applicable,
any right of repayment at the option of the Holder, (i) impair the right to
institute suit for the enforcement of any payment on or with respect to any Debt
Security, or (j) reduce the percentage in principal amount of Outstanding Debt
Securities of any series, the consent of the Holders of which is required for
modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults, or (k)
alter or impair the right of any Holder to convert or exchange Securities of any
series, if applicable, at the rate and upon the terms established pursuant to
the Indenture.
The Holders of a majority in aggregate principal amount of the Outstanding
Securities of any series may on behalf of the Holders of all Debt Securities of
that series waive, insofar as that series is concerned, compliance by the
Company with certain restrictive provisions of the Indenture. The Holders of a
majority in principal amount of the Outstanding Securities of any series may, on
behalf of the Holders of all Debt Securities of that series, direct the Trustee
as to the time, method and place of pursuing any remedy available to it or
exercising any trust or power conferred on it and may waive any past default
under the Indenture with respect to Debt Securities of that series, except a
default not theretofore cured in the payment of the principal of (or premium, if
any) or interest on any Debt Securities of that series or in respect of any
provision which under the Indenture cannot be modified or amended without the
consent of the Holder of each Outstanding Security of that series affected.
The Indenture contains provisions permitting the Company and the Trustee to
enter into one or more supplemental indentures without the consent of the
Holders of any of the Debt Securities in order (i) to evidence the succession of
another corporation to the Company and the assumption of the covenants of the
Company by a successor to the Company; (ii) to add to the covenants of the
Company or surrender any right or power of the Company; (iii) to add additional
Events of Default with respect to any series of Debt Securities; (iv) to add to,
change or eliminate any provision affecting Debt Securities not yet issued; (v)
to secure the Debt Securities; (vi) to establish the form or terms of Debt
Securities; (vii) to evidence and provide for a successor Trustee; and (viii) to
cure any ambiguity or correct any mistake or to correct any defect or supplement
any inconsistent provisions or to make any other provisions with respect to
matters or questions arising under the Indenture, provided that such action does
not adversely affect the interests of any Holder of Debt Securities of any
series.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate or merge with or into, or transfer or lease
all or substantially all its assets to, any Person, and any other Person may not
consolidate or merge with or into, the Company, unless (i) the Person (if other
than the Company) formed by such consolidation or into which the Company is
merged or which acquires or leases all or substantially all the assets of the
Company is organized and existing under the laws of the United States, any state
thereof or the District of Columbia and expressly assumes all of the Company's
obligations under the Debt Securities and under the Indenture, (ii) immediately
after giving effect to such transaction no Event of Default, and no event which,
after notice or lapse of time or both, would become an Event of Default, shall
have happened and be continuing (provided that a transaction will only be deemed
to be in violation of this condition (ii) as to any series of Debt Securities as
to which such Event of Default or such event shall have occurred and be
continuing), and (iii) certain other conditions are met.
SATISFACTION, DISCHARGE, AND DEFEASANCE PRIOR TO MATURITY OR REDEMPTION
Covenant Defeasance of any Series
If the Company shall deposit with the Trustee, in trust, at or before
maturity or redemption of the Debt Securities of any series, money and/or
Government Obligations in such amounts and maturing at such times such that the
proceeds of such obligations to be received upon the respective maturities and
interest payment dates of such obligations will provide funds sufficient,
without reinvestment, in the opinion of a nationally
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<PAGE> 46
recognized firm of independent public accountants, to pay when due the principal
of (and premium, if any) and each installment of principal of (and premium, if
any) and interest on such series of Debt Securities at the Stated Maturity of
such principal or installment of principal or interest, as the case may be, then
the Company may omit to comply with certain of the terms of the Indenture with
respect to that series of Debt Securities, including any or all of the
restrictive covenants described above or in any Prospectus Supplement, and the
Events of Default described in clauses (4) and (5) under "Events of Default"
shall not apply. Defeasance of Debt Securities of any series is subject to the
satisfaction of certain conditions, including among others: (1) the absence of
an Event of Default or event which, with notice or lapse of time, would become
an Event of Default at the date of the deposit, (2) the delivery to the Trustee
by the Company of an Opinion of Counsel to the effect that Holders of the Debt
Securities of such series will not recognize income, gain or loss for United
States Federal income tax purposes as a result of such deposit and covenant
defeasance and will be subject to United States Federal income tax in the same
amounts and in the same manner and at the same times as would have been the case
if such deposit and covenant defeasance had not occurred, (3) such covenant
defeasance will not cause any Debt Securities of such series then listed on any
nationally recognized securities exchange to be delisted, (4) that such covenant
defeasance will not result in a breach of, or constitute a default under, any
instrument by which the Company is bound and (5) such covenant defeasance shall
not cause the Trustee for the Securities of such series to have a "conflicting
interest" for purposes of the Trust Indenture Act with respect to any securities
of the Company. If indicated in the Prospectus Supplement relating to a series
of Debt Securities, in addition to the obligations of the United States of
America or obligations guaranteed by the United States of America, Government
Obligations may include obligations of the government, and obligations
guaranteed by such government, issuing the currency or currency unit in which
Debt Securities of such series are payable.
Defeasance of any Series
Upon the deposit of money or securities as contemplated in the preceding
paragraph and the satisfaction of certain other conditions, the Company may also
omit to comply with its obligation duly and punctually to pay the principal of
(and premium, if any) and interest on a particular series of Debt Securities,
and any Events of Default with respect thereto shall not apply, and thereafter,
the Holders of Debt Securities of such series shall be entitled only to payment
out of the money or securities deposited with the Trustee. Such conditions
include among others: (1) the absence of an Event of Default or event which,
with notice or lapse of time, would become an Event of Default at the date of
the deposit, (2) the delivery to the Trustee by the Company of an Opinion of
Counsel, which refers to or is based on a ruling of the Internal Revenue Service
or a change in the applicable United States Federal income tax law occurring
after the date of the Indenture, to the effect that Holders of the Debt
Securities of such series will not recognize income, gain or loss for United
States Federal income tax purposes as a result of such deposit and the
satisfaction, discharge and defeasance, and will be subject to United States
Federal income tax in the same amounts and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred, (3) such defeasance will not cause any Debt Securities of such series
then listed on any nationally recognized securities exchange to be delisted, (4)
that such defeasance will not result in a breach of, or constitute a default
under, any instrument by which the Company is bound and (5) such defeasance
shall not cause the Trustee for the Securities of such series to have a
conflicting interest for the purpose of the Trust Indenture Act with respect to
any securities of the Company.
SENIOR DEBT
The Debt Securities that will be designated and will constitute part of the
Senior Debt of the Company, will rank pari passu with all other unsecured and
unsubordinated debt of the Company.
SUBORDINATED DEBT
The Debt Securities may be subordinated and junior in right of payment, to
the extent set forth in the applicable Prospectus Supplement, to all Senior
Debt.
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GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the laws of the State of New York.
REGARDING THE TRUSTEE
Harris Trust and Savings Bank is the Trustee under the Indenture and has
been appointed by the Company as initial Security Registrar and Paying Agent
with regard to the Debt Securities. The Company has customary banking
relationships with the Trustee and certain of its affiliates in the ordinary
course of business.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The following description of the Company's capital stock does not purport
to be complete and is subject to, and qualified in its entirety by reference to,
the more complete descriptions thereof set forth in the Company's Restated
Certificate of Incorporation, as amended (the "Certificate"), and By-laws, as
amended (the "By-laws") which documents are exhibits to this Registration
Statement.
The Company is authorized to issue up to 80,000,000 shares of Common Stock,
par value $1.00, and up to 1,500,000 shares of Preferred Stock, no par value. As
of June 30, 1995 there were 35,857,427 shares of Common Stock and no shares of
Preferred Stock outstanding. Of the 1,500,000 shares of authorized Preferred
Stock, 400,000 shares have been reserved and designated as "Series A Junior
Participating Preferred Stock."
PREFERRED STOCK
General. The following summary contains a description of certain general
terms of the Company's Preferred Stock. The particular terms of any series of
Preferred Stock that may be offered will be described in the applicable
Prospectus Supplement. If so indicated in a Prospectus Supplement, the terms of
any such series may differ from the terms set forth below. The summary of terms
of the Company's Preferred Stock does not purport to be complete and is subject
to and qualified in its entirety by reference to the provisions of the Company's
Certificate and the Certificate of Designation (the "Certificate of
Designation") relating to a particular series of offered Preferred Stock which
is or will be in the form filed or incorporated by reference as an exhibit to
the Registration Statement of which this Prospectus is a part at or prior to the
time of the issuance of such series of Preferred Stock.
The Board of Directors of the Company has the power, without further action
by the shareholders, to issue Preferred Stock in one or more series, with such
designations or titles, dividend rates, redemption provisions, special or
relative rights in the event of liquidation, dissolution, distribution or
winding up of the Company, sinking fund provisions, conversion provisions,
voting rights thereof and other preferences, privileges, powers, rights,
qualifications, limitations and restrictions, as shall be set forth as and when
established by the Board of Directors of the Company; provided that, the Board
of Directors shall fix such provisions as will, at a minimum, entitle the
holders of such Preferred Stock, voting as a class, to elect at least two
directors upon default of the equivalent of six quarterly dividends, such right
to continue until cumulative dividends have been paid in full, or until
non-cumulative dividends have been paid regularly for at least a year, and
require the affirmative approval of at least two-thirds of the outstanding
Preferred Stock as a prerequisite to any amendment to the Certificate or By-laws
altering materially any existing provision of such Preferred Stock. The shares
of any series of Preferred Stock will be, when issued, fully paid and
non-assessable and holders thereof will have no preemptive rights in connection
therewith.
Rank. Any series of Preferred Stock will, with respect to rights on
liquidation, winding up and dissolution, rank (i) senior to all classes of
Common Stock and to all equity securities issued by the Company, the terms of
which specifically provide that such equity securities will rank junior to such
series of Preferred Stock (the "Junior Liquidation Securities"); (ii) on a
parity with all equity securities issued by the Company, the terms of which
specifically provide that such equity securities will rank on a parity with such
series of Preferred Stock ("Parity Liquidation Securities"); and (iii) junior to
all equity securities issued by the Company, the terms of which specifically
provide that such equity securities will rank senior to such series of Preferred
Stock (the "Senior Liquidation Securities"). In addition, any series of
Preferred Stock will, with respect to dividend rights, rank (i) senior to all
equity securities issued by the Company, the terms of which specifically provide
that such equity securities will rank junior to such series of Preferred Stock
and, to the extent provided in the applicable Certificate of Designation, to
Common Stock; (ii) on a parity with all equity securities issued by the Company,
the terms of which specifically provide that such equity securities will rank on
a parity with such series of Preferred Stock and, to the extent provided in the
applicable Certificate of Designation, to Common Stock ("Parity Dividend
Securities"); and (iii) junior to all equity securities issued by the Company,
the terms of which specifically provide that such equity securities will rank
senior to such
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series of Preferred Stock. As used in any Certificate of Designation for these
purposes, the term "equity securities" will not include debt securities
convertible into or exchangeable for equity securities.
Dividends. Holders of each series of Preferred Stock will be entitled to
receive, when, as and if declared by the Board of Directors of the Company out
of funds legally available therefor, cash dividends at such rates and on such
dates as are set forth in the Prospectus Supplement relating to such series of
Preferred Stock. Dividends will be payable to holders of record of Preferred
Stock as they appear on the books of the Company (or, if applicable, the records
of the Depositary referred to below under "-- Depositary Shares") on such record
dates as shall be fixed by the Board of Directors. Dividends on any series of
Preferred Stock may be cumulative or non-cumulative.
No full dividends may be declared or paid out of funds set apart for the
payment of dividends on any series of Preferred Stock unless dividends shall
have been paid or set apart for such payment on the Parity Dividend Securities.
If full dividends are not so paid, such series of Preferred Stock shall share
dividends pro rata with the Parity Dividend Securities.
Conversion and Exchange. The Prospectus Supplement for any series of
Preferred Stock will state the terms, if any, on which shares of that series are
convertible into shares of another series of Preferred Stock or Common Stock or
exchangeable for another series of Preferred Stock, Common Stock or Debt
Securities of the Company.
Redemption. A series of Preferred Stock may be redeemable at any time, in
whole or in part, at the option of the Company or the holder thereof and may be
subject to mandatory redemption pursuant to a sinking fund or otherwise upon
terms and at the redemption prices set forth in the Prospectus Supplement
relating to such series.
In the event of partial redemptions of Preferred Stock, whether by
mandatory or optional redemption, the shares to be redeemed will be determined
by lot or pro rata, as may be determined by the Board of Directors of the
Company, or by any other method determined to be equitable by the Board of
Directors.
On and after a redemption date, unless the Company defaults in the payment
of the redemption price, dividends will cease to accrue on shares of Preferred
Stock called for redemption and all rights of holders of such shares will
terminate except for the right to receive the redemption price.
Liquidation Preference. Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company, holders of each series of Preferred
Stock that ranks senior to the Junior Liquidation Securities will be entitled to
receive out of assets of the Company available for distribution to shareholders,
before any distribution is made on any Junior Liquidation Securities, including
Common Stock, distributions upon liquidation in the amount set forth in the
Prospectus Supplement relating to such series of Preferred Stock. If the holders
of the Preferred Stock of any series and any other Parity Liquidation Securities
are not paid in full, the holders of the Preferred Stock of such series and the
Parity Liquidation Securities will share ratably in any such distribution of
assets of the Company in proportion to the full liquidation preferences to which
each is entitled. After payment of the full amount of the liquidation preference
to which they are entitled, the holders of such series of Preferred Stock will
not be entitled (unless the applicable Prospectus Supplement indicates
otherwise) to any further participation in any distribution of assets of the
Company. The liquidation preference of any series of Preferred Stock is not
necessarily indicative of the price at which shares of such series of Preferred
Stock will actually trade at or after the time of their issuance.
Voting Rights. Except as indicated in the Prospectus Supplement relating
to a particular series of Preferred Stock as specified in the third paragraph
under "-- General" above, or except as expressly required by applicable law or
the Certificate, the holders of shares of Preferred Stock will have no voting
rights.
Preferred Share Purchase Rights. On September 22, 1987, the Corporation's
Board of Directors declared a dividend distribution of one Preferred Share
Purchase Right (a "Right") on each share of the Company's Common Stock
outstanding as of October 2, 1987. Each Right allows the shareholder to purchase
1/100th of a share of a new series of preferred stock of the Company at an
exercise price of $75. Rights are exercisable only if a person or group acquires
20% or more of the Common Stock or announces a tender offer
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<PAGE> 50
the consummation of which would result in ownership by a person or group of 20%
or more of the 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. In connection with such
dividend, 400,000 shares of Preferred Stock reserved and designated as "Series A
Junior Participating Preferred Stock" were authorized for issuance.
If any person or group acquires 20% or more of the 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 Company 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 Rights' exercise price.
The existence of the Rights Plan and the Rights may, under certain
circumstances discourage, delay or prevent a change in control of the Company.
DEPOSITARY SHARES
The description set forth below of certain provisions of the Deposit
Agreement (as defined below) and of the Depositary Shares and Depositary
Receipts (as defined below) does not purport to be complete and is subject to
and qualified in its entirety by reference to the forms of Deposit Agreement and
Deposit Receipt, included as exhibits to the Registration Statement of which
this Prospectus is a part.
General. The Company may, at its option, elect to offer fractional shares
of Preferred Stock, rather than full shares of Preferred Stock. In the event the
Company so elects, the Depositary will issue receipts for Depositary Shares,
each of which will represent a fraction (to be set forth in the Prospectus
Supplement relating to a particular series of Preferred Stock) of a share of a
particular series of Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary
Shares will be deposited under a Deposit Agreement (the "Deposit Agreement")
between the Company and a depositary that is a bank or trust company having its
principal offices in the United States and having a combined capital surplus of
at least the amount set forth in the Deposit Agreement (the "Depositary").
Subject to the terms of the Deposit Agreement, each owner of a Depositary Share
will be entitled, in proportion to the applicable fraction of a share of
Preferred Stock represented by such Depositary Share, to all the rights and
preferences of the Preferred Stock represented thereby (including dividend,
voting, redemption, conversion and liquidation rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement (the "Depositary Receipts"). The Depositary
Receipts will be distributed to those persons purchasing the fractional shares
of Preferred Stock in accordance with the terms of the offering.
Pending the preparation of definitive Depositary Receipts, the Depositary
shall, upon the written order of the Company or any holder of deposited
Preferred Stock, execute and deliver temporary Depositary Receipts which are
substantially identical to, and entitle the holders thereof to all the rights
pertaining to, the definitive Depositary Receipts. Depositary Receipts will be
prepared thereafter without unreasonable delay, and temporary Depositary
Receipts will be exchangeable for definitive Depositary Receipts at the
Company's expense.
Dividends and Other Distributions. The Depositary will distribute all cash
dividends or other cash distributions received in respect of the deposited
Preferred Stock to the record holders of the Depositary Shares relating to such
Preferred Stock in proportion to the number of such Depositary Shares owned by
such holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto. If the Depositary determines that it is not feasible to
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make such distribution, it may, with the approval of the Company, sell such
property and distribute the net proceeds from such sale to such holders.
Redemption of Stock. If a series of Preferred Stock represented by
Depositary Shares is to be redeemed, the Depositary Shares will be redeemed from
the proceeds received by the Depositary resulting from the redemption, in whole
or in part, of such series of Preferred Stock held by the Depositary. The
Depositary Shares will be redeemed by the Depositary at a price per Depositary
Share equal to the applicable fraction of the redemption price per share payable
in respect of the shares of Preferred Stock so redeemed. If fewer than all the
Depositary Shares will be redeemed, the Depositary Shares to be redeemed will be
selected by the Depositary by lot or pro rata or by any other equitable method
as may be determined by the Depositary.
Voting Deposited Preferred Stock. Upon receipt of notice of any meeting at
which the holders of any series of deposited Preferred Stock are entitled to
vote, the Depositary will mail the information contained in such notice of
meeting to the record holders of the Depositary Shares relating to such series
of Preferred Stock. Each record holder of such Depositary Shares on the record
date (which will be the same date as the record date for the relevant series of
Preferred Stock) will be entitled to instruct the Depositary as to the exercise
of the voting rights pertaining to the amount of the Preferred Stock represented
by such holder's Depositary Shares. The Depositary will endeavor, insofar as
practicable, to vote the amount of such series of Preferred Stock represented by
such Depositary Shares in accordance with such instructions, and the Company
will agree to take all reasonable actions that may be deemed necessary by the
Depositary in order to enable the Depositary to do so. The Depositary will
abstain from voting shares of the Preferred Stock to the extent it does not
receive specific instructions from the holder of Depositary Shares representing
such Preferred Stock.
Amendment and Termination of the Deposit Agreement. The form of the
Depositary Receipt evidencing the Depositary Shares and any provision of the
Deposit Agreement may at any time be amended by agreement between the Company
and the Depositary. However, any amendment which materially prejudices any
substantial right of the holders of the Depositary Shares representing Preferred
Stock of any series will not be effective unless such amendment has been
approved by the record holders of a majority of the Depositary Shares then
outstanding. Every holder of an outstanding Depositary Receipt at the time any
such amendment becomes effective shall be deemed, by continuing to hold such
Depositary Receipt to consent and agree to such amendment and to be bound by the
Deposit Agreement as amended thereby. The Deposit Agreement may be terminated by
the Company or by the Depositary only after (i) all outstanding Depositary
Shares have been redeemed; or (ii) each share of Preferred Stock has been
converted into other Preferred Stock or Common Stock or has been exchanged for
Debt Securities; or (iii) there has been a final distribution in respect of the
Preferred Stock in connection with any liquidation, dissolution or winding up of
the Company and such distribution has been distributed to the holders of
Depositary Shares.
Charges of Depositary. The Company will pay all transfer and other taxes
and governmental charges arising solely from the existence of the depositary
arrangements. The Company will pay all charges of the Depositary in connection
with the initial deposit of the relevant series of Preferred Stock and any
redemption of such Preferred Stock. Holders of Depositary Receipts will pay
other transfer and other taxes and governmental charges and such other charges
or expenses as are expressly provided in the Deposit Agreement to be for their
accounts.
Resignation and Removal of Depositary. The Depositary may resign at any
time by delivering to the Company notice of its election to do so, and the
Company may at any time remove the Depositary, any such resignation or removal
to take effect upon the appointment of a successor Depositary and its acceptance
of such appointment. Such successor Depositary must be appointed within 60 days
after delivery of the notice of resignation or removal and must be a bank or
trust company having its principal office in the United States and having a
combined capital and surplus of at least the amount set forth in the Deposit
Agreement.
Miscellaneous. The Depositary will forward all reports and communications
from the Company that are delivered to the Depositary and that the Company is
required to furnish to the holders of the deposited Preferred Stock.
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Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstances beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Depositary under
the Deposit Agreement will be limited to performance in good faith of its duties
thereunder, and it will not be obligated to prosecute or defend any legal
proceeding in respect of any Depositary Shares, Depositary Receipts or shares of
Preferred Stock unless satisfactory indemnity is furnished. The Depositary may
rely upon written advice of counsel or accountants, or upon information provided
by holders of Depositary Receipts or other persons believed to be competent and
on documents believed to be genuine.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share owned of
record on all matters voted upon by shareholders, and a majority vote is
required for all action to be taken by shareholders except for certain
transactions described in the Company's Restated Certificate of Incorporation
and in the New York Business Corporation Law. See "Corporate Provisions." In the
event of a liquidation, dissolution or winding-up of the Company, the holders of
Common Stock are entitled to share equally and ratably in the assets of the
Company, if any, remaining after the payment of all debts and liabilities of the
Company and the liquidation preference of any outstanding Preferred Stock. The
holders of the Common Stock have no preemptive rights or cumulative voting
rights and there are no redemption, sinking fund or conversion provisions
applicable to the Common Stock.
Holders of Common Stock are entitled to receive dividends if, as and when
declared by the Board of Directors out of funds legally available for such
purpose, subject to the dividend and liquidation rights of any Preferred Stock
that may be issued and subject to restrictions and limitations that may be
contained in the Company's loan agreements. See "-- Preferred Stock -- Preferred
Share Purchase Rights."
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DESCRIPTION OF WARRANTS
GENERAL
The Company may issue together with other Securities or separately,
warrants for the purchase of (i) Debt Securities ("Debt Warrants"), (ii) Common
Stock ("Common Stock Warrants") or (iii) Preferred Stock ("Preferred Stock
Warrants"). The Company may also issue, together with Debt Securities or Debt
Warrants or separately, currency warrants ("Currency Warrants" and together with
Debt Warrants, Common Stock Warrants, the "Warrants") either in the form of
Currency Put Warrants or Currency Call Warrants (as defined below).
The Warrants are to be issued under Warrant Agreements to be entered into
between the Company and a bank or trust company, as agent, all to be set forth
in the applicable Prospectus Supplement relating to any or all Warrants in
respect of which this Prospectus is being delivered. Copies of the form of
agreement for each warrant, including the forms of certificates representing the
Warrants reflecting the provisions to be included in such agreements that will
be entered into with respect to particular offerings of each type of warrant are
filed as exhibits to the Registration Statement of which this Prospectus forms a
part.
The following summaries of certain provisions of the Warrant Agreements and
Warrant Certificates do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all the provisions of each Warrant
Agreement and Warrant Certificate, respectively, including the definitions
therein of certain capitalized terms not defined herein.
DEBT WARRANTS
General. Reference is made to the applicable Prospectus Supplement for the
terms of Debt Warrants in respect of which this Prospectus is being delivered,
the Debt Warrant Agreement relating to such Debt Warrants and the Debt Warrant
Certificates representing such Debt Warrants, including the following: (1) the
designation, aggregate principal amount and terms of the Debt Securities
purchasable upon exercise of such Debt Warrants and the procedures and
conditions relating to the exercise of such Debt Warrants; (2) the designation
and terms of any related Debt Securities with which such Debt Warrants are
issued and the number of such Debt Warrants issued with each such Debt Security;
(3) the date, if any, on and after which such Debt Warrants and the related Debt
Securities will be separately transferable; (4) the principal amount of Debt
Securities purchasable upon exercise of each Debt Warrant and the price at which
such principal amount of Debt Securities may be purchased upon such exercise;
(5) the date on which the right to exercise such Debt Warrants shall commence
and the date on which such right shall expire; (6) if the Debt Securities
purchasable upon exercise of such Debt Warrants are original issue discount Debt
Securities, a discussion of United States Federal income tax considerations
applicable thereto; and (7) whether the Debt Warrants represented by the Debt
Warrant Certificates will be issued in registered or bearer form, and, if
registered, where they may be transferred and registered.
Debt Warrant Certificates will be exchangeable for new Debt Warrant
Certificates of different denominations and Debt Warrants may be exercised at
the corporate trust office of the Debt Warrant Agent or any other office
indicated in the applicable Prospectus Supplement. Prior to the exercise of
their Debt Warrants, holders of Debt Warrants will not have any of the rights of
holders of the Debt Securities purchasable upon such exercise and will not be
entitled to payments of principal of (and premium, if any) or interest, if any,
on the Debt Securities purchasable upon such exercise.
Exercise of Debt Warrants. Each Debt Warrant will entitle the holder to
purchase for cash such principal amount of Debt Securities at such exercise
price as shall in each case be set forth in, or be determinable as set forth in,
the applicable Prospectus Supplement relating to the Debt Warrants offered
thereby. Debt Warrants may be exercised at any time up to 5:00 p.m. New York
City time on the expiration date set forth in the applicable Prospectus
Supplement. After 5:00 p.m. New York City time on the expiration date,
unexercised Debt Warrants will become void.
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Debt Warrants may be exercised as set forth in the applicable Prospectus
Supplement relating to the Debt Warrants. Upon receipt of payment and the Debt
Warrant Certificate properly completed and duly executed at the corporate trust
office of the Debt Warrant Agent or any other office indicated in the applicable
Prospectus Supplement, the Company will, as soon as practicable, forward the
Debt Securities purchasable upon such exercise. If less than all of the Debt
Warrants represented by such Debt Warrant Certificate are exercised, a new Debt
Warrant Certificate will be issued for the remaining amount of Debt Warrants.
COMMON STOCK WARRANTS
General. Reference is made to the applicable Prospectus Supplement for the
terms of Common Stock Warrants in respect of which this Prospectus is being
delivered, the Common Stock Warrant Agreement relating to such Common Stock
Warrants and the Common Stock Warrant Certificates representing such Common
Stock Warrants, including the following: (1) the offering price of such Common
Stock Warrants, if any; (2) the procedures and conditions relating to the
exercise of such Common Stock Warrants; (3) the number of shares of Common Stock
purchasable upon exercise of each Common Stock Warrant and the initial price at
which such shares may be purchased upon exercise; (4) the date on which the
right to exercise such Common Stock Warrants shall commence and the date on
which such right shall expire; (5) a discussion of United States Federal income
tax considerations applicable to the exercise of Common Stock Warrants; (6) call
provisions of such Common Stock Warrants, if any; and (7) any other terms of the
Common Stock Warrants.
Prior to the exercise of their Common Stock Warrants, holders of the Common
Stock Warrants will not have any of the rights of holders of Common Stock
purchasable upon such exercise, and will not be entitled to any dividend
payments on the Common Stock purchasable upon such exercise.
Exercise of Common Stock Warrants. Each Common Stock Warrant will entitle
the holder to purchase for cash such number of shares of Common Stock at such
exercise price as shall in each case be set forth in, or be determinable as set
forth in, the applicable Prospectus Supplement relating to the Common Stock
Warrants offered thereby. Unless otherwise specified in the applicable
Prospectus Supplement, Common Stock Warrants may be exercised at any time up to
5:00 p.m. New York City time on the expiration date set forth in the applicable
Prospectus Supplement. After 5:00 p.m. New York City time on the expiration
date, unexercised Common Stock Warrants will become void.
Common Stock Warrants may be exercised as to be set forth in the applicable
Prospectus Supplement relating to the Common Stock Warrants in respect of which
this Prospectus is being delivered. Upon receipt of payment and the Common Stock
Warrant Certificates properly completed and duly executed at the corporate trust
office of the Common Stock Warrant Agent or any other office indicated in the
applicable Prospectus Supplement, the Company will, as soon as practicable,
forward a certificate representing the number of shares of Common Stock
purchasable upon such exercise. If less than all of the Common Stock Warrants
represented by such Common Stock Warrant Certificate are exercised, a new Common
Stock Warrant Certificate will be issued for the remaining amount of Common
Stock Warrants.
Antidilution Provisions. Unless otherwise specified in the applicable
Prospectus Supplement, the exercise price payable and the number of shares
purchasable upon the exercise of each Common Stock Warrant will be subject to
adjustment in certain events, including (1) the issuance of a stock dividend to
holders of Common Stock or a combination, subdivision or reclassification of
Common Stock; (2) the issuance of rights, warrants or options to all holders of
Common Stock entitling the holders thereof to purchase Common Stock for an
aggregate consideration per share less than the then current market price per
share of the Common Stock; or (3) any distribution by the Company to the holders
of its Common Stock of evidences of indebtedness of the Company or of assets
(excluding cash dividends or distributions payable out of capital surplus and
dividends and distributions referred to in (1) above). No fractional shares will
be issued upon exercise of Common Stock Warrants, but the Company will pay the
cash value of any fractional shares otherwise issuable.
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<PAGE> 55
PREFERRED STOCK WARRANTS
General. Reference is made to the applicable Prospectus Supplement for the
terms of Preferred Stock Warrants in respect of which this Prospectus is being
delivered, the Preferred Stock Warrant Agreement relating to such Preferred
Stock Warrants and the Preferred Stock Warrant Certificates representing such
Preferred Stock Warrants, including the following: (1) the offering price of
such Preferred Stock Warrants, if any; (2) the procedures and conditions
relating to the exercise of such Preferred Stock Warrants; (3) the number of
shares of Preferred Stock purchasable upon exercise of such Preferred Stock
Warrants and the initial price at which such shares may be purchased upon
exercise; (4) the date on which the right to exercise such Preferred Stock
Warrants shall commence and the date on which such right shall expire; (5) a
discussion of the United States Federal income tax considerations applicable to
the exercise of Preferred Stock Warrants; (6) call provisions of such Preferred
Stock Warrants, if any; and (7) any other terms of the Preferred Stock Warrants.
Prior to the exercise of their Preferred Stock Warrants, holders of
Preferred Stock Warrants will not have any of the rights of holders of Preferred
Stock purchasable upon such exercise, and will not be entitled to any dividend
payments on the Preferred Stock purchasable upon such exercise.
Exercise of Stock Warrants. Each Preferred Stock Warrant will entitle the
holder to purchase for cash such number of shares of Preferred Stock at such
exercise price as shall in each case be set forth in, or be determinable as set
forth in, the applicable Prospectus Supplement relating to the Preferred Stock
Warrants offered thereby. Unless otherwise specified in the applicable
Prospectus Supplement, Preferred Stock Warrants may be exercised at any time up
to 5:00 p.m. New York City time on the expiration date set forth in the
applicable Prospectus Supplement. After 5:00 p.m. New York City time on the
expiration date, unexercised Preferred Stock Warrants will become void.
Preferred Stock Warrants may be exercised as to be set forth in the
applicable Prospectus Supplement relating to the Preferred Stock Warrants. Upon
receipt of payment and the Preferred Stock Warrant Certificates properly
completed and duly executed at the corporate trust office of the Preferred Stock
Warrant Agent or any other office indicated in the applicable Prospectus
Supplement, the Company will, as soon as practicable, forward a certificate
representing the number of shares of Preferred Stock purchasable upon such
exercise. If less than all of the Preferred Stock Warrants represented by such
Preferred Stock Warrant Certificate are exercised, a new Preferred Stock Warrant
Certificate will be issued for the remaining amount of Preferred Stock Warrants.
CURRENCY WARRANTS
The Company may issue, together with Debt Securities or Debt Warrants or
separately, Currency Warrants either in the form of Currency Put Warrants
entitling the holders thereof to receive from the Company the Cash Settlement
Value in U.S. dollars of the right to sell a specified amount of a specified
foreign currency or currency units for a specified amount of U.S. dollars, or in
the form of Currency Call Warrants entitling the holders thereof to receive from
the Company the Cash Settlement Value in U.S. dollars of the right to purchase a
specified amount of a specified foreign currency or currency units for a
specified amount of U.S. dollars. The spot exchange rate of the applicable Base
Currency, upon exercise, as compared to the U.S. dollar, will determine whether
the Currency Warrants have a Cash Settlement Value on any given day prior to
their expiration.
General. Reference is made to the applicable Prospectus Supplement for the
terms of Currency Warrants in respect of which this Prospectus is being
delivered, the Currency Warrant Agreement relating to such Currency Warrants and
the Currency Warrant Certificates representing such Currency Warrants, including
the following: (1) whether such Currency Warrants will be Currency Put Warrants,
Currency Call Warrants, or both; (2) the formula for determining the Cash
Settlement Value, if any, of each Currency Warrant; (3) the procedures and
conditions relating to the exercise of such Currency Warrants; (4) the
circumstances which will cause the Currency Warrants to be deemed to be
automatically exercised; (5) any minimum number of Currency Warrants which must
be exercised at any one time, other than upon automatic
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<PAGE> 56
exercise; and (6) the date on which the right to exercise such Currency Warrants
will commence and the date on which such right will expire.
Book-Entry Procedures and Settlement. Except as may otherwise be provided
in the applicable Prospectus Supplement, the Currency Warrants will be issued in
the form of Global Currency Warrant Certificates, registered in the name of a
depositary or its nominee. Holders will not be entitled to receive definitive
certificates representing Currency Warrants. A holder's ownership of a Currency
Warrant will be recorded on or through the records of the brokerage firm or
other entity that maintains such holder's account. In turn, the total number of
Currency Warrants held by an individual brokerage firm for its clients will be
maintained on the records of the depositary in the name of such brokerage firm
or its agent. Transfer of ownership of any Currency Warrant will be effected
only through the selling holder's brokerage firm.
Exercise of Currency Warrants. Each Currency Warrant will entitle the
holder to receive the Cash Settlement Value of such Currency Warrant on the
applicable Exercise Date, in each case as such terms will be defined in the
applicable Prospectus Supplement. If not exercised prior to 3:00 p.m., New York
City time, on the fifth New York Business Day preceding the expiration date,
Currency Warrants will be deemed automatically exercised on the expiration date.
CORPORATE PROVISIONS
CERTIFICATE OF INCORPORATION AND BYLAWS
The Company's Certificate and By-laws provide (i) for the classification of
the Company's Board of Directors into three classes to be elected to staggered
three-year terms (with the exception of Mr. David J. Roberts who is elected to a
two-year term); (ii) that special meetings of shareholders may only be called
pursuant to a resolution approved by a majority of the entire Board and (iii)
subject to the rights of any series of Preferred Stock then outstanding,
directors may be removed from office only for cause and only by the affirmative
vote of the holders of at least 66 2/3% of the voting power of all of the shares
of the Company entitled to vote for the election of directors.
The Company's Board of Directors believes that the provisions described
above and the Rights described under "Description of Capital Stock -- Preferred
Stock -- Preferred Share Purchase Rights" will help assure that all of the
Company's shareholders will be treated similarly if certain kinds of business
combinations are effected. However, these provisions also may have the effect of
deterring hostile takeovers or delaying or preventing changes in control or
management of the Company, and may make it more difficult to accomplish certain
transactions that are opposed by the incumbent Board of Directors.
NEW YORK BUSINESS CORPORATION LAW
The New York Business Corporation Law (the "BCL") requires the affirmative
vote of at least two-thirds of the voting power of the outstanding shares
entitled to vote thereon to approve mergers or consolidations in which the
Company would be merged or consolidated or the sale of all or substantially all
the assets of the Company. New York law provides that mergers, consolidations
and amendments of the Certificate must also be approved by a majority of each
class of outstanding shares, voting separately as a class, if the merger,
consolidation or amendment would (1) eliminate or limit the voting rights of the
class, (2) subordinate the rights of the class or (3) change such shares or
result in their conversion or in the modification of the terms on which they may
be converted, but only if any such actions would adversely affect the holders
thereof. Other amendments of the Certificate require the affirmative vote of a
majority of the voting power of the outstanding shares entitled to vote thereon.
In addition, Section 912 of the BCL provides that no "resident domestic
corporation" (or any subsidiary) shall engage in a "business combination" with
any "interested shareholder" (generally, a beneficial owner of 20% or more of
the outstanding voting stock) unless (1) the business combination or the
purchase of stock by the interested shareholder is approved by the board of
directors prior to such shareholder's "stock acquisition date," (2) the business
combination is approved by a majority of the voting power of the corporation's
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outstanding stock (excluding any stock owned by the interested shareholder) at a
meeting called no earlier than five years after the stock acquisition date or
(3) the consideration paid to shareholders in the business combination (which
may not occur until the expiration of five years from the stock acquisition
date) is at least equal to the highest of certain specified amounts. As defined,
a "resident domestic corporation" is a corporation incorporated in New York that
either has its principal executive offices and significant business operations
in New York, or that, alone or in combination with one or more subsidiaries of
which it owns 80% or more of the voting stock, has at least 250 employees or 25%
of the total number of employees of itself and such subsidiaries employed within
New York, and that has 10% of its voting stock beneficially owned by residents
of New York; a "business combination" includes a merger or consolidation, a sale
of assets representing 10% or more of the corporation's consolidated earning
power or market value, the issuance of stock amounting to 5% or more of the
corporation's outstanding stock and a liquidation proposal made by the
interested shareholder; and the "stock acquisition date" is the date on which a
shareholder first becomes an interested shareholder.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company has a By-law provision requiring it to indemnify its directors
and officers to the fullest extent permitted in certain circumstances, to
advance expenses, to maintain insurance and to follow certain other procedures.
Provisions of the Certificate eliminate the personal monetary liability of
directors and officers for breaches of duty, except for (i) breaches of such
person's duty of loyalty, (ii) those instances where such person is found not to
have acted in good faith or in knowing violation of law, (iii) those instances
where such person received an improper personal benefit as the result of such
breach and (iv) acts in violation of Section 719 of the BCL.
TRANSFER AGENT
The transfer agent for the Common Stock is Mellon Securities Trust Company.
PLAN OF DISTRIBUTION
GENERAL
The Company may sell the Securities directly to purchasers, through agents,
through underwriters, or through dealers.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
Offers to purchase Securities may be solicited directly by the Company or
by agents designated by the Company from time to time. Any such agent, who may
be deemed to be an underwriter as that term is defined in the Securities Act
involved in the offer or sale of the Securities in respect of which this
Prospectus is delivered will be named, and any commissions payable by the
Company to such agent will be set forth, in the Prospectus Supplement. Unless
otherwise indicated in the Prospectus Supplement, any such agent will be acting
on a best efforts basis for the period of its appointment. Agents may be
customers of, engage in transactions with or perform services for the Company in
the ordinary course of business.
If an underwriter or underwriters are utilized in the sale, the Company
will execute an underwriting agreement with such underwriters at the time of
sale to them, and the names of the underwriters and the terms of the transaction
will be set forth in the Prospectus Supplement, which will be used by the
underwriters to make resales of the Securities in respect of which this
Prospectus is delivered to the public.
If a dealer is utilized in the sale of the Securities in respect of which
this Prospectus is delivered, the Company will sell such Securities to such
dealer, as principal. The dealer may then resell such Securities to the public
at varying prices to be determined by such dealer at the time of resale.
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Agents, underwriters and dealers may be entitled under the relevant
agreements to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act.
If so indicated in the Prospectus Supplement, the Company will authorize
agents or underwriters to solicit offers by certain institutions to purchase
Securities from the Company at the public offering price set forth in the
Prospectus Supplement pursuant to delayed delivery contracts ("Contracts")
providing for payment and delivery on the date stated in the Prospectus
Supplement. Each Contract will be for an amount not less than, and unless the
Company otherwise agrees the aggregate principal amount of Securities sold
pursuant to Contracts shall be not more than, the respective amounts stated in
the Prospectus Supplement. Institutions with which Contracts, when authorized,
may be made include commercial and savings banks, insurance companies, pension
funds, investment companies, educational and charitable institutions and other
institutions, but shall in all cases be subject to the approval of the Company.
Contracts will not be subject to any condition except that the purchase by an
institution of the Securities covered by its Contract shall not at the time of
delivery be prohibited under the laws of any jurisdiction in the United States
to which such institution is subject. A commission indicated in the Prospectus
Supplement will be paid to underwriters or agents soliciting purchases of
Securities pursuant to Contracts accepted by the Company.
The place and time of delivery for the Securities in respect of which this
Prospectus is delivered will be set forth in the Prospectus Supplement.
EXPERTS
The consolidated balance sheets as of December 30, 1994 and December 31,
1993 and the consolidated statements of earnings, changes in stockholders'
equity and cash flows for each of the three years in the period ended December
30, 1994, incorporated by reference in the registration statement, have been
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing. The combined financial statements of Ahlstrom Pyropower
as of and for the year ended December 31, 1994 have been incorporated by
reference herein and in the registration statement in reliance upon the reports,
incorporated by reference herein, of KPMG Wideri OY AB, Coopers & Lybrand
L.L.P., independent accountants (with respect to the consolidated financial
statements of Ahlstrom Pyropower, Inc. and subsidiaries), and Deloitte & Touche
LLP (with respect to Pyro-Pacific Operating Company), independent accountants,
given upon the authority of said firms as experts in accounting and auditing.
LEGAL MATTERS
The validity of the issuance of the Securities offered hereby will be
passed upon for the Company by White & Case, New York, New York, and certain
legal matters will be passed upon by Thomas R. O'Brien, Esq., General Counsel of
the Company, and for the underwriters, if any, by Skadden, Arps, Slate, Meagher
& Flom, New York, New York.
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary........... S-3
Recent Developments..................... S-7
The Company............................. S-7
Use of Proceeds......................... S-15
Description of the Notes................ S-15
Capitalization.......................... S-17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ S-18
Underwriting............................ S-26
Index to Pro Forma Unaudited Condensed
Combined Financial Data............... P-1
PROSPECTUS
Available Information................... 3
Incorporation of Certain Documents by
Reference............................. 3
The Company............................. 4
Ratio of Earnings to Fixed Charges...... 4
Use of Proceeds......................... 4
Description of Debt Securities.......... 4
Description of Capital Stock............ 15
Description of Warrants................. 20
Corporate Provisions.................... 23
Plan of Distribution.................... 24
Experts................................. 25
Legal Matters........................... 25
</TABLE>
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$200,000,000
FOSTER WHEELER
CORPORATION
LOGO
% NOTES DUE , 2005
------------------------
PROSPECTUS SUPPLEMENT
, 1995
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LEHMAN BROTHERS
NATWEST CAPITAL MARKETS
LIMITED
UBS SECURITIES INC.
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