<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
_____________________
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the fiscal year ended December 30, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from .......... to ..........
Commission file number 1-286-2
FOSTER WHEELER CORPORATION
(Exact Name of Registrant as specified in its charter)
_____________________
NEW YORK 13-1855904
(State of incorporation) (I.R.S. Employer Identification No.)
PERRYVILLE CORPORATE PARK, CLINTON, NEW JERSEY 08809-4000
(Address of Principal Executive Offices) (Zip Code)
(908) 730-4000
(Registrant's telephone number, including area code)
_____________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(b)
OF THE ACT:
FOSTER WHEELER CORPORATION NEW YORK STOCK EXCHANGE
COMMON STOCK, $1.00 PAR VALUE (Name of Each Exchange on Which
(Title of Class) Registered)
Securities registered pursuant to Section 12(g) of the Act:
NONE
________________
Title of Class
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X Yes No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of March 10, 1995, 35,810,519 shares of the Registrant's Common Stock,
excluding stock held in Treasury, were issued and outstanding, and the
aggregate market value of such shares held by nonaffiliates of the Registrant
on such date was approximately $1,128,031,000 (based on the last price on that
date of $31.50 per share).
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference, and
the Part of the Form 10-K into which the document is incorporated:
(1) Definitive Proxy Statement to be filed with the Commission pursuant
to Regulation 14A of the Securities Exchange Act on or about March
17, 1995
<TABLE>
<CAPTION>
Page Number of
Definitive Proxy
Form 10-K Item Number and Description Statement
------------------------------------- ----------------
<S> <C> <C>
10. Directors and Executive Officers 1 - 4
11. Executive Compensation 6 - 12
12. Security Ownership of Certain 2 - 4
Beneficial Owners and Management
</TABLE>
Except as specifically incorporated herein by reference, the above mentioned
Definitive Proxy Statement is not deemed filed as part of this report.
(2) The Financial Section of the Annual Report to Stockholders (pages
21-39) for the fiscal year ended December 30, 1994, is
incorporated by reference into Part I and Part II of this report.
<PAGE> 3
FOSTER WHEELER CORPORATION
1994 Form 10-K Annual Report
Table of Contents
<TABLE>
<CAPTION>
Page
----
Part I
<S> <C> <C>
Item 1. Business 4 - 7
2. Properties 8 - 11
3. Legal Proceedings 11
4. Submission of Matters to a Vote of Security Holders 12
4a. Executive Officers of the Registrant 12
Part II
5. Market for the Registrant's Common Equity and Related
Stockholder Matters 13
6. Selected Financial Data 13
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
8. Financial Statements and Supplementary Data 14
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 14
Part III
10. Directors and Executive Officers of the Registrant 15
11. Executive Compensation 15
12. Security Ownership of Certain Beneficial Owners and
Management 15
13. Certain Relationships and Related Transactions 15
Part IV
14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 15 - 24
</TABLE>
3
<PAGE> 4
PART I
ITEM 1. BUSINESS
GENERAL DEVELOPMENT OF BUSINESS:
Foster Wheeler Corporation was incorporated under the laws of the State of New
York in 1900. Executive offices of Foster Wheeler Corporation are at
Perryville Corporate Park, Clinton, New Jersey, 08809-4000 (Telephone (908)
730-4000). Except as the context otherwise requires, the term "Foster Wheeler"
as used herein includes Foster Wheeler Corporation and its subsidiaries.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS:
Incorporated by reference to Note 16 on page 39 in the Notes to Financial
Statements in Foster Wheeler's Annual Report to Stockholders for the year ended
December 30, 1994.
NARRATIVE DESCRIPTION OF BUSINESS:
In 1993, Foster Wheeler Enviresponse, Inc. became the Environmental Services
division of Foster Wheeler USA Corporation. In October 1994, Foster Wheeler
USA made an acquisition in the environmental field with the purchase of Enserch
Environmental Corporation (EEC). EEC is a full-service provider of hazardous
and mixed-waste investigation and remediation control services, wastewater
treatment, waste management, risk analysis and environmental permitting. The
former Foster Wheeler USA Environmental Services division was merged with EEC
to form Foster Wheeler Environmental Corporation. During 1994 Glitsch
International, Inc. acquired the assets of Optimized Process Designs, Inc.
(OPD), an engineering and construction contractor in Katy, Texas. OPD's
principal expertise is in the area of natural gas and natural gas liquids
conditioning, treating and processing.
The business of the Corporation and its subsidiaries falls within three
business groups: an Engineering and Construction Group that consists primarily
of the design, engineering and construction of process plants and fired heaters
for oil refineries, synthetic fuels, chemical producers, and environmental
services for hazardous and mixed waste investigation and remediation, pollution
control systems, wastewater treatment and other environmental services; an
Energy Equipment Group that consists mainly of the design and fabrication of
steam generators and condensers, suppliers of mass-transfer equipment, tower
packings, industrial wire mesh and natural gas processing engineering and
construction; and a Power Systems Group engaged in the owning/leasing to or
operation for third parties of solid waste-to-energy and cogeneration plants.
Foster Wheeler markets its services and products through a staff of sales and
marketing personnel and through a network of sales representatives. The
businesses of its industry groups are not seasonal nor are they dependent on a
single customer or a very few customers. No one customer accounts for 10
percent or more of Foster Wheeler's consolidated revenues, although in any
given year one customer could contribute significantly to such revenues.
4
<PAGE> 5
The materials used in Foster Wheeler's manufacturing and construction
operations are obtained from both domestic and foreign sources. Materials,
which consist mainly of steel products and manufactured items, are heavily
dependent on foreign sources, particularly for overseas projects. Generally,
lead time for delivery of materials does not presently constitute a problem.
Foster Wheeler owns and licenses patents, trademarks and know-how which are
used in each of its industry groups. Such licenses, patents and trademarks are
of varying durations. No industry group of the Corporation is materially
dependent upon any particular or related group of patents, trademarks or
licenses. Foster Wheeler has licensed companies throughout the world to
manufacture marine and stationary steam generators and related equipment and
certain of its other products. Principal licensees are in Japan, the
Netherlands, Italy, Spain, Portugal, Norway and England.
For the most part, Foster Wheeler products are custom designed and manufactured
and are not produced for inventory. As is the practice in the Engineering and
Construction Group and Energy Equipment Group, customers often make a down
payment at the time a contract is entered into, and continue to make progress
payments until the contract is completed and the work has been accepted as
meeting contract guarantees.
The Engineering and Construction Group backlog at the end of 1994 was $3.8
billion. Projects related to the refining, chemical and pharmaceutical
industries continue to be the major sources of new orders for the Group with
strong markets in the Pacific Rim and the Middle East. The Energy Equipment
Group backlog at the end of 1994 was $1.0 billion.
Foster Wheeler had a backlog of firm orders as of December 30, 1994 of
$5,135,500,000 as compared to a backlog as of December 31, 1993 of
$3,884,100,000. The elapsed time from the award of a contract to completion of
performance may be up to four years. The amount of backlog at December 30,
1994 should not necessarily be considered indicative of Foster Wheeler's total
revenues for 1995, since contracts may under certain circumstances be
accelerated or delayed and new orders booked in 1995 may be billed during that
year.
The backlog by major industry segments as of December 30, 1994 and December 31,
1993 is as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Engineering and
Construction $3,798,200,000 $2,724,300,000
Energy Equipment 1,037,900,000 890,500,000
Power Systems 257,900,000 210,500,000
Corporate and Financial
Services 41,500,000 58,800,000
--------------- ---------------
$5,135,500,000 $3,884,100,000
============== ==============
</TABLE>
5
<PAGE> 6
The Power Systems projects consist of the following:
<TABLE>
<CAPTION>
PLANT LOCATION TYPE AND SIZE UNIT STATUS
-------------- ------------------ ------
<S> <C> <C>
Martinez, California 99.9 MW Cogeneration In Operation 1987
Mt. Carmel, Pennsylvania 40 MW Cogeneration - anthracite In Operation 1990
culm-fired plant which also
provides hot water to a hydro-
ponic greenhouse
Charleston, South Carolina 600 Ton/Day Resource Recovery; In Operation 1989
designed output 10 MW (a sale/
leaseback of this project was
entered into in 1989)
Camden County, New Jersey 1050 Ton/Day Resource Recovery; In Operation 1991
designed output 21 MW
Hudson Falls, New York 400 Ton/Day Resource Recovery; In Operation 1992
designed output 10 MW
University of Minnesota Heating Plant operation and In Operation 1992
upgrade
Chapleau, Ontario, Canada 360 Ton/Day Wood Waste In Operation 1987
Wilmington, Delaware Facilities Management -
-------------------------------------------------------------------------------------------------------------
Robbins, Illinois 1600 Ton/Day Waste-to-Energy* In Construction
Montreal, Quebec, Canada 2200 Ton/Day Waste-to-Energy* In Final Permitting
Wilkes-Barre, Pennsylvania 40 MW Small Power In Permitting
-------------------------------------------------------------------------------------------------------------
Talcahuano, Chile 65 MW Cogeneration Plant Plus In Final Development
12,000 Barrels/Day Coker and
6,500 Barrels/Day Hydrotreater
-------------------------------------------------------------------------------------------------------------
* Includes Recycling.
-------------------------------------------------------------------------------------------------------------
</TABLE>
For waste-to-energy (resource recovery) projects, generally, it takes
approximately two to three years from award of a contract and the signing of a
service agreement with a community to the beginning of construction.
Many companies compete in the Engineering and Construction segment of Foster
Wheeler's business. Management estimates, based on industrial publications,
that it is among the ten largest of the many large and small companies engaged
in the design and construction of petroleum refineries and chemical plants. In
the manufacture of refinery and chemical plant equipment, neither Foster
Wheeler nor any other single company contributes a large percentage of the
total volume of such business.
6
<PAGE> 7
On an international basis many companies compete in the Energy Equipment
segment of Foster Wheeler's business. Based on a review of trade association
materials, management estimates that in the United States it is among the three
largest manufacturers of coal, oil, and gas-fired steam generating equipment.
Management also estimates that Foster Wheeler is one of the largest
manufacturers of condensers, feedwater heaters and heat transfer equipment in
the United States.
For the most part, contracts are awarded on the basis of price, delivery,
performance and service.
Foster Wheeler is continually engaged in research and development efforts both
in performance and analytical services on current projects and in development
of new products and processes. During 1994, approximately $9,800,000, and in
1993 and 1992, $8,350,000 and $6,900,000 respectively, was spent on Foster
Wheeler sponsored research activities. During the same periods, approximately
$38,200,000, $40,850,000 and $32,300,000, respectively, was spent on customer
sponsored research.
Foster Wheeler and its domestic subsidiaries are subject to certain Federal,
state and local environmental, occupation health and product safety laws.
Foster Wheeler believes all its operations are in compliance with such laws and
does not anticipate any material capital expenditures or adverse effect on
earnings or cash flows in maintaining compliance with such laws.
Foster Wheeler had approximately 11,685 full-time employees on December 30,
1994. Following is a tabulation of the number of full-time employees of Foster
Wheeler in each of its industry segments for the past three years:
<TABLE>
<CAPTION>
December 30, December 31, December 25,
1994 1993 1992
--------------- --------------- --------------
<S> <C> <C> <C>
Engineering and
Construction 7,940 5,630 5,975
Energy Equipment 3,200 3,110 3,030
Power Systems 360 270 275
Corporate and Financial
Services 185 340 700
--------- --------- ---------
11,685 9,350 9,980
======== ======== ========
</TABLE>
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES:
Incorporated by reference to Note 16 on page 39 in the Notes to Financial
Statements in Foster Wheeler's Annual Report to Stockholders for the year ended
December 30, 1994.
7
<PAGE> 8
ITEM 2. PROPERTIES
COMPANY AND
(INDUSTRY SEGMENT*)
<TABLE>
<CAPTION>
BUILDING LEASE
LOCATION USE LAND AREA SQUARE FEET EXPIRES
-------- --- --------- ----------- -------
<S> <C> <C> <C> <C>
Foster Wheeler Corporation (CF) Executive Offices -- 1,148 1998
New York City, New York
Livingston, New Jersey General Office
& Engineering 31.0 acres 288,000 (2) --
Lebanon, New Jersey General Offices -- 151,408 1996/1997
Clinton Township, General Office -- 23,753 1996
New Jersey
Union Township, Under construction 21.0 acres 292,000 --
New Jersey
Union Township, Undeveloped 203.8 acres -- --
New Jersey General Office
& Engineering 29.4 294,000 --
Storage and Reproduction
Facilities 10.8 30,400 --
Livingston, New Jersey Research Center 6.7 acres 51,355 --
Bedminster, New Jersey Office 10.72 acres 135,000 (1)(3)
Bridgewater, New Jersey Undeveloped 118 acres -- (3) --
Foster Wheeler Energy Corporation (EE) Manufacturing
Dansville, New York & Offices 82.4 acres 513,786 --
McGregor, Texas Storage
Facilities 15.0 acres 24,000 --
Foster Wheeler USA Corporation (EC) General Offices -- 53,131 2003
Houston, Texas
Foster Wheeler Iberia, S.A. (EC) Office & Engineering 4.2 acres 82,500 --
Madrid, Spain
Foster Wheeler France (EC) Office & Engineering -- 86,555 (1) --
Paris, France
Foster Wheeler (Thailand) Limited (EC) Office & Engineering -- 21,800 1998
Sriracha, Thailand
</TABLE>
8
<PAGE> 9
COMPANY AND
(INDUSTRY SEGMENT*)
<TABLE>
<CAPTION>
BUILDING LEASE
LOCATION USE LAND AREA SQUARE FEET EXPIRES
-------- --- --------- ----------- -------
<S> <C> <C> <C> <C>
Foster Wheeler Limited (England) (EC)
Glasgow, Scotland Office & Engineering -- 27,610 1997
Reading, England Office & Engineering -- 269,585 1996/2016
Tereside, England Office & Engineering -- 12,500 1995/2014
Foster Wheeler Limited (Canada) (EE)
Edmonton, Alberta Assembly -- 10,960 1995
Niagara-On-The-Lake,
Ontario Office Building 34.5 acres 100,000 (1) --
Port Robinson, Ontario Undeveloped Land 15.0 acres -- --
St. Catharines, Ontario Manufacturing
& Office 29.0 acres 233,500 --
Grimsby, Ontario Construction Tools
Depot -- 19,546 1997
Foster Wheeler Andina, S.A. (EC)
Bogota, Columbia Office & Engineering 2.5 acres 60,000 --
Foster Wheeler Energia, S.A. (EE)
Tarragona, Spain Manufacturing
& Office 11.96 acres 77,794 --
Madrid, Spain Office Building 1.26 acres 27,500 --
Foster Wheeler Italiana, S.p.A. (EC)
Milan, Italy Office & Engineering -- 180,000 2001
Milan, Italy Office & Engineering -- 30,000 2004
Birlesik Insaat ve Muhendislik A.S. (BIMAS) (EC)
Istanbul, Turkey Engineering & Office -- 15,000 1995
Ullrich Copper, Inc. (CF)
Kenilworth, New Jersey Manufacturing -- 90,000 1998
Greenwood,
South Carolina Warehouse -- 10,000 1998
</TABLE>
9
<PAGE> 10
COMPANY AND
(INDUSTRY SEGMENT*)
<TABLE>
<CAPTION>
BUILDING LEASE
LOCATION USE LAND AREA SQUARE FEET EXPIRES
-------- --- --------- ----------- -------
<S> <C> <C> <C>
Foster Wheeler Environmental Corporation (EC)
Arlington, Virginia General Offices 31,078 1997
Atlanta, Georgia General Offices 30,618 1999
Bellevue, Washington General Offices 62,719 1995
Boston, Massachusettes General Offices 26,326 1999
Bridgeport, New Jersey General Offices 18,000 1995
Dallas, Texas Storage 10,000 1995
Lakewood, Colorado General Offices 46,853 1995
Lyndhurst, New Jersey General Offices 34,753 1999
General Offices 23,540 1999
Oakridge, Tennessee General Offices 14,494 1999
Sacramento, California General Offices 10,384 1996
Santa Ana, California General Offices 18,886 Month-to-Month
Foster Wheeler Eastern Private Limited (EC)
Singapore Office & Engineering -- 25,000 1996
Foster Wheeler Power Systems, Inc. (PS)
Martinez, California Cogeneration Plant 6.4 acres -- --
Mt. Carmel, Cogeneration Plant 105 acres -- 2010
Pennsylvania
Charleston, Waste-to-Energy 18 acres -- 2010
South Carolina Plant
Hudson Falls, New York Waste-to-Energy 11.2 acres -- --
Plant
Camden, New Jersey Waste-to-Energy 18 acres -- 2011
Plant
Village of Robbins Waste-to-Energy
Cook County, Illinois Plant
Facility Site 16.1 acres -- 2029
Laydown Site 14.6 acres -- 2029
</TABLE>
10
<PAGE> 11
COMPANY AND
(INDUSTRY SEGMENT*)
<TABLE>
<CAPTION>
BUILDING LEASE
LOCATION USE LAND AREA SQUARE FEET EXPIRES
-------- --- --------- ----------- -------
<S> <C> <C> <C> <C>
Glitsch International, Inc. (EE)
Dallas, Texas Manufacturing
& Office 38.0 acres 505,644 --
Eldorado, Kansas Manufacturing
& Office -- 16,000 1995
Houston, Texas Warehouse & Office 2.83 acres 18,000 --
Uxbridge, Ontario Manufacturing 12.0 acres 84,500 --
Camrose, Alberta, Undeveloped Land 20.0 acres -- --
Canada
Aprilia, Italy Manufacturing 20.5 acres 72,000 --
Parsippany, New Jersey Manufacturing
& Office 8.3 acres 63,790 --
Kirkby Stephen, U.K. Manufacturing
& Office 2.4 acres 19,000 1995
Arles, France Manufacturing
& Office 5.1 acres 70,736 --
</TABLE>
---------------------------------
*Designation of Industry Groups: EC - Engineering and Construction
EE - Energy Equipment
PS - Power Systems
CF - Corporate & Financial Services
-------------------------------------
(1) Portion or entire facility leased or subleased to
responsible tenants.
(2) Entire facility leased to a responsible tenant, with a
portion being subleased back to Foster Wheeler
subsidiaries.
(3) 50% ownership interest.
With the exception of the New York Office of the Corporation, locations of less
than 10,000 square feet are not listed. Except as noted above, the properties
set forth are held in fee. All or part of listed locations may be leased or
subleased to other affiliates. All properties are in good condition and
adequate for their intended use.
ITEM 3. LEGAL PROCEEDINGS
Incorporated by reference to Note 12 on page 37 in the Notes to Financial
Statements in Foster Wheeler's Annual Report to Stockholders for the year ended
December 30, 1994.
11
<PAGE> 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
ITEM 4(A) EXECUTIVE OFFICERS OF THE REGISTRANT
In accordance with General Instruction G (3) of Form 10-K information regarding
executive officers is included in PART I.
The executive officers of Foster Wheeler, all of whom have held executive
positions with Foster Wheeler or its subsidiaries for more than the past five
years, except Messrs. Bartoli, O'Brien and Whittaker, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Richard J. Swift 50 Chairman, President and Chief Executive Officer
David J. Roberts 50 Vice Chairman and Chief Financial Officer
N. William Atwater 60 Executive Vice President - Engineering and
Construction Group
Henry E. Bartoli 48 Vice President - Power Systems Group
(Vice President and General Manager, 1987-1992, Burns and Roe Company.)
Jack E. Deones 63 Vice President - Secretary
Lisa Fries-Gardner 38 Vice President - Chief Compliance Officer
Robert D. Iseman 46 Vice President and Treasurer
Thomas R. O'Brien 56 Vice President and General Counsel
(Partner in the law firm of Wolff and Samson,
1986-1993.)
James E. Schessler 49 Vice President - Human Resources and Administration
George S. White 58 Vice President and Controller
Robert A. Whittaker 47 Vice President - Energy Equipment Group
(General Manager, Steam Turbine Business for General Electric Industries and Power
Systems, 1989-1992. Various engineering, manufacturing, marketing and service
positions for General Electric, 1969-1988.)
</TABLE>
Each officer holds office for a term running until the Board of Directors
meeting next following the Annual Meeting of Stockholders and until his/her
successor is elected and qualified. There are no family relationships between
the officers listed above. There are no arrangements or understandings between
any of the listed officers and any other person, pursuant to which he/she was
elected as an officer.
12
<PAGE> 13
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Incorporated by reference to Note 11 on page 37 in Foster Wheeler's Annual
Report to Stockholders for the year ended December 30, 1994. The Corporation's
common stock is traded on the New York Stock Exchange. The approximate number
of stockholders of record as of December 30, 1994 was 7,725.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(In Thousands of Dollars, Except Per Share Data)
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $2,271,123 $2,654,505 $2,529,464 $2,031,620 $1,691,023
Earnings before
accounting change 65,410 57,704 45,504 (1) 43,268 38,277
Earnings per share
before accounting
change 1.83 1.62 1.28 (1) 1.22 1.08
Total assets 2,063,334 1,806,201 1,763,264 1,638,874 1,445,494
Long-term borrowings
(including current
installments) 499,202 429,264 439,578 454,826 321,608
Cash dividends per
common share .72 .645 .585 .53 .485
</TABLE>
(1) As of the beginning of 1992, the Corporation adopted the provisions
of Statement of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions." The effect of the accounting change at the beginning of
1992 was a charge to earnings of $91.3 million after tax and
valuation allowance which amounted to $2.57 per share.
13
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated by reference to pages 22 to 26 in Foster Wheeler's Annual Report
to Stockholders for the year ended December 30, 1994.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference to the following sections of Foster Wheeler's Annual
Report to Stockholders for the year ended December 30, 1994:
A. Consolidated Balance Sheet, December 30, 1994 and December 31,
1993 (page 27)
B. Consolidated Statement of Earnings for the years ended December
30, 1994; December 31, 1993; and December 25, 1992 (page 28)
C. Consolidated Statement of Changes in Stockholders' Equity for the
years ended December 30, 1994; December 31, 1993; and December 25,
1992 (page 29)
D. Consolidated Statement of Cash Flows for the years ended December
30, 1994; December 31, 1993; and December 25, 1992 (page 30)
E. Notes to Financial Statements (pages 31-39)
F. Report of Independent Accountants (page 28)
Schedules Required by Regulations S-X
NONE
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
14
<PAGE> 15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to pages 1-4 of Foster Wheeler's Proxy Statement,
dated March 17, 1995, for the Annual Meeting of Stockholders to be held April
25, 1995. Certain information regarding executive officers is included in Part
I in accordance with General Instruction G (3) of Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference to pages 6-12 of Foster Wheeler's Proxy Statement,
dated March 17, 1995, for the Annual Meeting of Stockholders to be held April
25, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to pages 2-4 of Foster Wheeler's Proxy Statement,
dated March 17, 1995, for the Annual Meeting of Stockholders to be held April
25, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1 - Financial Statements
The index to Financial Statements is incorporated in this paragraph
by reference to Item 8, page 14
All other schedules and financial statements have been omitted
because of the absence of conditions requiring them or because the
required information is shown in the financial statements or the
notes thereto.
15
<PAGE> 16
(b) Reports on Form 8-K:
The following reports on Form 8-K have been filed during
the period October 1 through December 30, 1994:
None
3 - The following Exhibits are required by Item 601 of Regulation S-K and
by paragraph (c) of Item 14 of Form 10-K:
(2) Not applicable
(3) Not applicable
(4) Not applicable
(9) Not applicable
(10) Not applicable
(11) Not applicable
(12) Not applicable
(13) Except for those portions thereof which are expressly
incorporated by reference in this filing, the Financial
Section of the Annual Report to Stockholders of Foster
Wheeler Corporation (pages 21-39) for the fiscal year
ended December 30, 1994 is furnished for the information
of the Commission and is not deemed "filed" as part of
this filing.
(18) Not applicable
(21) Subsidiaries of the registrant (pages 18 - 20)
(22) Not applicable
(23) See consent of Independent Accountants (page 22)
(24) Not applicable
(27) Financial Data Schedule (for the informational purposes of
the Securities and Exchange Commission only)
(28) Not applicable
16
<PAGE> 17
For the purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into registrant's Registration Statements on Form S-8
Nos. 2-91384 (filed May 29, 1984), 33-34694 (filed May 2, 1990) and 33-40878
(filed May 29, 1991):
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
17
<PAGE> 18
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
FOSTER WHEELER CORPORATION (PARENT)
PRINCIPAL CONSOLIDATED, WHOLLY OWNED SUBSIDIARIES (DIRECTLY OR INDIRECTLY)
Listed by Jurisdiction of Organization
<TABLE>
<S> <C>
AUSTRALIA FRANCE
Foster Wheeler Australia Pty. Ltd., Melbourne Foster Wheeler France, S.A., Paris
Foster Wheeler Conception Etudes Entretien, Paris
BERMUDA Foster Wheeler World Services, France, S.A., Paris
FW Management Operations, Ltd., Hamilton Glitsch France, S.A., Arles
Foster Wheeler Trading Co. Ltd., Hamilton Societe Fonciere-Bourdonnais Rivoli, S.A., Paris
Power Systems International, Ltd., Hamilton
York Jersey Liability Ltd., Hamilton INDIA
Glitsch Process India, Ltd.
CANADA
Foster Wheeler Limited, St. Catharines ITALY
Les Chaudieres Foster Wheeler Inc., Quebec Foster Wheeler Italiana, S.p.A., Milan
Chapleau Co-generation Ltd., Chapleau Steril, S.p.A., Milan
Foster Wheeler Canadian Resources Limited, Alberta Foster Wheeler World Services, S.p.A., Rome
Foster Wheeler Fired Heaters, Ltd., Calgary Glitsch Italiana, S.p.A., Campoverde
Glitsch Canada, Ltd., Uxbridge Foster Wheeler Financial Services S.p.A., Milan
La Societe D'Energie Foster Wheeler Ltd., Quebec
MEXICO
CHILE Foster Wheeler Ingenienis y Constructors, S.A. de C.V.
Foster Wheeler Chile, S.A., Santiago de Chile Quadalojara
CHINA, PEOPLES REPUBLIC OF NETHERLANDS ANTILLES
Foster Wheeler Power Machinery Company Limited, Foster Wheeler N.V., Curacao
Guangdong Province
NETHERLANDS
ENGLAND Foster Wheeler Europe, B.V., Amsterdam
Foster Wheeler Limited, Reading Foster Wheeler Power Systems, B.V., Amsterdam
Foster Wheeler Energy Ltd., Reading
Foster Wheeler (India) Ltd., Reading SINGAPORE (REPUBLIC OF)
Foster Wheeler (Northern) Ltd., Reading Foster Wheeler Eastern Pte., Ltd., Singapore
Foster Wheeler (Pacific) Ltd., Reading
Foster Wheeler Petroleum Development Ltd., Reading SPAIN
Foster Wheeler World Services, Ltd., Reading Foster Wheeler Iberia, S.A., Madrid
FW Management Operations Ltd., Reading Foster Wheeler Energia, S.A., Madrid
Glitsch (U.K.) Ltd., Kirkby Stephen Cumbria Foster Wheeler Trading Co. A.G., S.A., Madrid
Glitsch Field Services, Ltd., Dorking F.I. Controles, S.A., Madrid
Foster Wheeler (Indonesia) Ltd., Reading Foster Wheeler Power Systems, S.A., Madrid
Foster Wheeler Petroleum Development (Norway) Ltd., Conequip, S.A., Madrid
Reading
</TABLE>
18
<PAGE> 19
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
FOSTER WHEELER CORPORATION (PARENT)
PRINCIPAL CONSOLIDATED, WHOLLY OWNED SUBSIDIARIES (DIRECTLY OR INDIRECTLY)
Listed by Jurisdiction of Organization
<TABLE>
<S> <C>
UNITED STATES Glitsch Field Services, Inc., Texas
Camden County Energy Recovery Associates, New Jersey Glitsch Inc., Delaware
Camden County Energy Recovery Corporation, Delaware Glitsch International, Inc., Delaware
Century Plastics, Inc., Kansas Glitsch Special Products, Inc., Texas
Foster Wheeler Arabia Ltd., Delaware Glitsch Technology Corporation, Delaware
Foster Wheeler Bedminster, Inc., Delaware Optimized Process Designs, Inc., Delaware
Foster Wheeler Bridgewater, Inc., Delaware Otto H. York Company, Delaware
Foster Wheeler Broome County, Inc., Delaware Ullrich Copper, Inc., Delaware
Foster Wheeler Charleston Resource Recovery, Inc., Delaware Yargo, Inc., Minnesota
Foster Wheeler China, Inc., Delaware
Foster Wheeler Constructors, Inc., Delaware THAILAND
Foster Wheeler Development Corporation, Delaware Foster Wheeler (Thailand) Limited, Sriracha
Foster Wheeler (Emirates) Corporation, Delaware
Foster Wheeler Energy Corporation, Delaware TURKEY
Foster Wheeler Energy International, Inc., Delaware Foster Wheeler BIMAS Birlesik Insaat Ve Muhendislik,
Foster Wheeler Energy Manufacturing, Inc., Delaware A. S., Istanbul
Foster Wheeler Environmental Corporation, Delaware
Foster Wheeler Facilities Management Delaware, Inc., Delaware U.S. VIRGIN ISLAND
Foster Wheeler Hudson Falls, Inc., Delaware Foster Wheeler F.S.C., Inc., St. Thomas
Foster Wheeler Illinois, Inc., Delaware
Foster Wheeler Intercontinental Corporation, Delaware VENEZUELA
Foster Wheeler International Corporation, Delaware Foster Wheeler Caribe Corporation, C.A., Caracas
Foster Wheeler Korea, Ltd., Delaware
Foster Wheeler Martinez, Inc., Delaware
Foster Wheeler Mt. Carmel, Inc., Delaware
Foster Wheeler Passaic, Inc., Delaware
Foster Wheeler Penn Resources, Inc., Delaware
Foster Wheeler Power Corporation, Delaware
Foster Wheeler Power Systems, Inc., Delaware
Foster Wheeler Real Estate Development Corporation, Delaware
Foster Wheeler Robbins, Inc., Delaware
Foster Wheeler Twin Cities, Inc., Delaware
Foster Wheeler USA Corporation, Delaware
Foster Wheeler Wood Resources, Inc., Delaware
Foster Wheeler World Services Corporation, Delaware
</TABLE>
19
<PAGE> 20
PRINCIPAL AFFILIATED COMPANIES
(PERCENT DIRECTLY OR INDIRECTLY OWNED BY FOSTER WHEELER CORPORATION)
COLOMBIA
Foster Wheeler Andina, S.A., Bogota (19%)
ITALY
F.FW Fiatavio Foster Wheeler Per L'Energia, S.p.A., Milan (40%)
Software Technology, S.p.A., Milan (90%)
NIGERIA
Foster Wheeler (Nigeria) Ltd., Lagos (60%)
20
<PAGE> 21
A copy of the By-Laws of the Corporation, as amended through February 22, 1994,
is available upon request to the Office of the Secretary, Foster Wheeler
Corporation, Perryville Corporate Park, Clinton, New Jersey 08809-4000.
21
<PAGE> 22
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Foster Wheeler Corporation on Form S-8 (File No.'s 2-91384,
33-34694 and 33-40878) of our report dated February 13, 1995, on our audits of
the consolidated financial statements of Foster Wheeler Corporation and
Subsidiaries as of December 30, 1994 and December 31, 1993, and for each of the
three years in the period ended December 30, 1994, which report is incorporated
by reference in this Annual Report on Form 10-K.
Coopers & Lybrand L.L.P.
New York, New York
March 24, 1995
22
<PAGE> 23
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FOSTER WHEELER CORPORATION
(Registrant)
Dated March 24, 1995 By /s/ Jack E. Deones
Jack E. Deones
Vice President and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed, as of March 24, 1995, by the following persons on
behalf of the registrant, in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Richard J. Swift
----------------------------- Director, Chairman, President and
Richard J. Swift Chief Executive Officer
(Principal Executive Officer)
/s/ David J. Roberts
----------------------------- Director, Vice Chairman and
David J. Roberts Chief Financial Officer
(Principal Financial Officer)
/s/ George S. White
---------------------------- Vice President and Controller
George S. White (Principal Accounting Officer)
/s/ Eugene D. Atkinson Director
---------------------------
Eugene D. Atkinson
/s/ Louis E. Azzato Director
-----------------------------
Louis E. Azzato
/s/ Leland E. Boren Director
-----------------------------
Leland E. Boren
/s/ Kenneth A. DeGhetto Director
---------------------------
Kenneth A. DeGhetto
</TABLE>
23
<PAGE> 24
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Martha Clark Goss Director
-----------------------------
Martha Clark Goss
/s/ E. James Ferland Director
---------------------------
E. James Ferland
/s/ John A. Hinds Director
---------------------------
John A. Hinds
/s/ Harold E. Kennedy Director
--------------------------
Harold E. Kennedy
/s/ Joseph J. Melone Director
----------------------------
Joseph J. Melone
/s/ Frank E. Perkins Director
----------------------------
Frank E. Perkins
/s/ John Timko, Jr. Director
----------------------------
John Timko, Jr.
/s/ Charles Y. C. Tse Director
----------------------------
Charles Y. C. Tse
/s/ Robert Van Buren Director
---------------------------
Robert Van Buren
</TABLE>
24
<PAGE> 25
EXHIBIT INDEX
(2) Not applicable
(3) Not applicable
(4) Not applicable
(9) Not applicable
(10) Not applicable
(11) Not applicable
(12) Not applicable
(13) Except for those portions thereof which are expressly
incorporated by reference in this filing, the Financial
Section of the Annual Report to Stockholders of Foster
Wheeler Corporation (pages 21-39) for the fiscal year
ended December 30, 1994 is furnished for the information
of the Commission and is not deemed "filed" as part of
this filing.
(18) Not applicable
(21) Subsidiaries of the registrant (pages 18 - 20)
(22) Not applicable
(23) See consent of Independent Accountants (page 22)
(24) Not applicable
(27) Financial Data Schedule (for the informational purposes of
the Securities and Exchange Commission only)
(28) Not applicable
<PAGE> 1
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
FINANCIAL SECTION EXHIBIT 13
----------
<S> <C>
Comparative Financial Statistics.................................21
Management's Discussion and Analysis.............................22-26
Consolidated Balance Sheet.......................................27
Consolidated Statement of Earnings...............................28
Report of Independent Accountants................................28
Consolidated Statement of Changes in Stockholders' Equity........29
Consolidated Statement of Cash Flows.............................30
Notes to Financial Statements....................................31-39
</TABLE>
COMPARATIVE FINANCIAL STATISTICS
________________________________________________________________________________
(In Thousands, Except per Share Amounts)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Unfilled orders, end of period........................ $5,135,452 $3,884,114 $3,806,757 $3,465,339 $2,763,517
Revenues.............................................. 2,271,123 2,654,505 2,529,464 2,031,620 1,691,023
Earnings before income taxes and
accounting change.................................... 106,867 96,818 67,825 61,285 48,393
Provision for income taxes............................ 41,457 39,114 22,321 18,017 10,116
Earnings before accounting change..................... 65,410 57,704 45,504 43,268 38,277
Effect of accounting change........................... - - (91,259)(1) - -
Net earnings/(loss)................................... 65,410 57,704 (45,755) 43,268 38,277
Earnings per share *
Earnings before accounting change.................... $1.83 $1.62 $1.28 $1.22 $1.08
Effect of change in accounting principle............. - - (2.57)(1) - -
----- ----- ------ ----- -----
Net earnings/(loss).................................. $1.83 $1.62 $(1.29) $1.22 $1.08
===== ===== ======= ===== =====
Weighted average number of shares of common
stock outstanding.................................... 35,788 35,656 35,596 35,522 35,418
Current assets........................................ $1,112,709 $983,454 $924,886 $842,747 $755,127
Current liabilities................................... 890,579 778,989 721,018 588,567 581,454
Working capital....................................... 222,130 204,465 203,868 254,180 173,673
Land, buildings and equipment (net)................... 566,156 567,216 595,946 613,778 533,172
Total assets.......................................... 2,063,334 1,806,201 1,763,264 1,638,874 1,445,494
Bank loans............................................ 77,350 59,725 54,929 45,605 38,176
Long-term borrowings (including current
installments)........................................ 499,202 429,264 439,578 454,826 321,608
Net assets owned...................................... 456,494 400,176 387,297 500,124 475,845
Net assets owned per common share of stock............ $12.75 $11.21 $10.87 $14.06 $13.42
Rate of return on net assets.......................... 16.3% 14.9% (9.1)% 9.1% 8.9%
Cash dividends per share of common stock.............. $.72 $.645 $.585 $.53 $.485
</TABLE>
* Computed on the weighted average number of shares of common stock
outstanding.
(1) Relates to effect of change in accounting principle for postretirement
benefits other than pensions (see Note 5).
21
<PAGE> 2
MANAGEMENT'S DISCUSSION
AND ANALYSIS
RESULTS OF OPERATIONS
BUSINESS GROUPS (See Note 16 to Financial Statements.)
________________________________________________________________________________
(In Millions of Dollars)
<TABLE>
<CAPTION>
Corporate
Engineering and
and Energy Power Financial
Total Construction Equipment Systems Services(1)
----- ------------ --------- ------- ----------
<S> <C> <C> <C> <C> <C>
1994
----
Unfilled orders.................... 5,135.5 3,798.2 1,037.9 257.9 41.5
New orders booked.................. 3,091.0 2,138.6 759.6 188.7 4.1
Revenues........................... 2,271.1 1,569.4 537.5 149.1 15.1
Interest expense (2)............... 35.0 0.8 2.8 24.0 7.4
Earnings before income taxes....... 106.9 73.7 55.2 18.1 (40.1)
Identifiable assets................ 2,063.3 878.4 454.1 537.7 193.1
Capital expenditures............... 38.5 14.5 10.1 9.1 4.8
Depreciation....................... 43.7 14.1 8.6 17.4 3.6
1993
----
Unfilled orders.................... 3,884.1 2,724.3 890.5 210.5 58.8
New orders booked.................. 2,982.8 1,921.2 670.4 273.8 117.4
Revenues........................... 2,654.5 1,833.5 569.8 159.5 91.7
Interest expense (2)............... 33.6 0.7 2.1 23.7 7.1
Earnings before income taxes....... 96.8 64.9 47.9 25.1 (41.1)
Identifiable assets................ 1,806.2 649.6 411.3 514.1 231.2
Capital expenditures............... 27.8 12.1 11.1 1.8 2.8
Depreciation....................... 43.7 14.2 8.0 17.3 4.2
1992
----
Unfilled orders.................... 3,806.8 2,827.2 831.4 68.6 79.6
New orders booked.................. 3,640.4 2,605.9 716.9 186.2 131.4
Revenues........................... 2,529.5 1,726.2 558.5 128.0 116.8
Interest expense (2)............... 34.2 1.4 1.8 21.0 10.0
Earnings before income taxes
and accounting change (3)....... 67.8 54.9 41.1 14.2 (42.4)
Identifiable assets................ 1,763.3 652.7 377.8 487.4 245.4
Capital expenditures............... 56.0 17.3 13.5 18.3 6.9
Depreciation....................... 43.3 14.2 7.6 17.2 4.3
</TABLE>
22
<PAGE> 3
GEOGRAPHIC AREAS (See Note 16 to Financial Statements.)
________________________________________________________________________________
(In Millions of Dollars)
<TABLE>
<CAPTION>
Corporate
and
United Financial
Total States Europe Canada Services(1)
----- ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C>
1994
----
Unfilled orders.................... 5,135.5 2,790.7 2,229.5 73.8 41.5
New orders booked.................. 3,091.0 1,101.0 1,870.3 115.6 4.1
Revenues........................... 2,271.1 1,114.1 1,053.4 88.5 15.1
Interest expense (2)............... 35.0 25.4 1.3 0.9 7.4
Earnings before income taxes....... 106.9 60.1 83.0 3.9 (40.1)
Identifiable assets................ 2,063.3 1,082.3 718.8 69.1 193.1
1993
----
Unfilled orders.................... 3,884.1 2,262.2 1,514.4 48.7 58.8
New orders booked.................. 2,982.8 1,407.0 1,373.2 85.2 117.4
Revenues........................... 2,654.5 948.1 1,539.0 75.7 91.7
Interest expense (2)............... 33.6 24.1 1.7 0.7 7.1
Earnings before income taxes....... 96.8 66.7 65.4 5.8 (41.1)
Identifiable assets................ 1,806.2 857.4 658.8 58.8 231.2
1992
----
Unfilled orders.................... 3,806.8 1,850.7 1,820.8 55.7 79.6
New orders booked.................. 3,640.4 1,688.7 1,757.5 62.8 131.4
Revenues........................... 2,529.5 691.9 1,617.0 103.8 116.8
Interest expense (2)............... 34.2 21.3 1.5 1.4 10.0
Earnings before income taxes
and accounting change (3)....... 67.8 37.3 69.7 3.2 (42.4)
Identifiable assets................ 1,763.3 775.0 686.5 56.4 245.4
</TABLE>
(1) Includes general corporate income and expense, the Corporation's insurance
operation, trading and real estate activities, asbestos abatement and
miscellaneous manufacturing.
(2) Includes intercompany interest charged by Corporate to the business groups
on outstanding borrowings.
(3) Effective as of the beginning of 1992, the Corporation adopted SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" and recorded the full amount of its transition obligation.
Unaudited as to unfilled orders and new orders booked.
23
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS
YEARS 1992 - 1994
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
In order to achieve its objectives, the Corporation has adopted a long-term
goal of making strategic acquisitions within our three core business groups.
The Corporation has made two investments in 1994 - the acquisition of a leading
environmental services company and a small natural gas processing engineering
and construction contractor.
In the fourth quarter of 1994, the Corporation completed the acquisition of
Enserch Environmental Corporation (EEC), formerly a division of Ebasco Services
Incorporated, a major participant in the environmental industry providing
full-service capabilities for hazardous and mixed-waste investigations and
remediation control services, employing about 1,200 people located in a number
of operating and marketing offices throughout the United States. EEC has a
long and successful record in government contracting and strong relationships
with numerous private sector enterprises. The existing Foster Wheeler
environmental unit was merged with the acquired company to form Foster Wheeler
Environmental Corporation. The company is headquartered in Lyndhurst, New
Jersey, will employ over 1,500 people dedicated to the environmental services
industry and will be supported by Foster Wheeler's diverse worldwide
engineering and construction resources.
At the start of the third quarter, the Corporation completed the purchase
of Optimized Process Designs, Inc. (OPD), a privately- owned company. OPD,
which was founded in 1980, provides consulting, engineering, design,
fabrication, and construction services to the hydrocarbon processing
industries. Its principal process design expertise is in the area of natural
gas and gas liquids conditioning, treating, and processing. OPD fabricates and
assembles process skids in its own shop as well as constructs new gas plants in
the field. In addition to new facilities, OPD relocates and revamps gas
processing plants. OPD was acquired by Glitsch International, Inc., a member
of the Energy Equipment business group.
In November 1994, the Power Systems business group completed the financing
arrangement for the construction of the $400-million Robbins recycling and
waste-to-energy project. Power Systems will build and operate this plant,
which will be owned by the Village of Robbins, Illinois. This will be the most
modern waste-to-energy installation in the world and the first to utilize CFB
technology in the United States when it begins operations in early 1997.
Following the Corporation's long-term strategy in 1993, the business
activities were consolidated into three major groups. Subsequently, Thermacote
Welco, a welding accessories company, was divested and the asbestos-abatement
business was discontinued.
As of the beginning of 1992, the Corporation adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." The effect of the
accounting change at the beginning of 1992 was a charge of $91.3 million after
tax and valuation allowance, or $2.57 per share.
(24 continued)
<PAGE> 5
Foster Wheeler's operating subsidiaries located outside the United States
constituted 59% in 1994, 52% in 1993 and 66% in 1992, of consolidated earnings
before income taxes excluding Corporate and Financial Services. Earnings
before income taxes of the United States geographic area decreased $6.6 million
in 1994 compared to 1993 and increased $29.4 million in 1993 compared to 1992.
In the United States, the aggregate increase in earnings can be attributed to
improvements in all segments of the business. Consolidated net earnings for
1994 amounted to $65.4 million, an increase of $7.7 million or 13% over 1993.
At the end of 1994, Foster Wheeler's backlog of unfilled orders was $5.1
billion, an increase of $1.3 billion over 1993. Since the end of 1991, there
has been an increase of $1.7 billion or 48%.
As stated in 1993, the strategy of the Engineering and Construction Group
in the coming years will be to continue to maintain leadership in the oil
refining and pharmaceutical industries worldwide, exploit its strong position
in emerging technologies, particularly with regard to gasification, and obtain
a significant market position in the environmental, LNG, and upstream
production areas. Part of this strategy has been achieved with the acquisition
of EEC. The Energy Equipment Group serves the power-generation and
chemical-separations industries with high-quality and highly engineered and
manufactured products. This combination of technology and cost
competitiveness, with strong marketing initiatives in a growth market,
positions the Group for continued success. The largest markets for this Group
continue to be China, central and southeast Asia, the Indian subcontinent, and
South and Central America. Foster Wheeler Power Systems has an established
position in building, owning, and operating waste- to-energy and cogeneration
plants. Continued growth will come from capitalizing on the leadership
positions held in both process and combustion technologies, combined with the
project development and operational expertise of Foster Wheeler Power Systems
to pursue "inside-the-fence" projects and independent power facilities in both
the domestic and international markets.
1994 COMPARED TO 1993
As stated previously, the backlog of the Corporation at the end of 1994 was
at a record high of $5.1 billion, an increase of $1.3 billion from the end of
1993. The Engineering and Construction Group's backlog was at $3.8 billion, an
increase of $1.1 billion over 1993. Part of this increase was due to the
acquisition of EEC and increased activities in Spain. The Energy Equipment
Group's back-
24
<PAGE> 6
log was at $1 billion. The increase over 1993 can be attributed to major power
generation contracts taken in India and Japan. Both these Groups are at an
all-time high for unfilled orders.
New orders booked for 1994 were slightly higher then 1993. The Engineering
and Construction and Energy Equipment Groups were higher by $217 million and
$89 million, respectively.
Operating revenues decreased by $349 million compared to 1993. The
Engineering and Construction Group reported a decrease of approximately $260
million, primarily due to reduced pass-through costs on long-term contracts.
Also, Corporate and Financial Services reported lower operating revenues of $70
million due to the sale of Thermacote Welco and closing of the
asbestos-abatement business.
Gross earnings from operations increased $32 million or 11%. The
Engineering and Construction Group increased $17 million or 13% which can be
attributed to the operations in the United States, the United Kingdom and
Italy, offset by a decrease in France. The Energy Equipment Group increased
$21 million or 21% due to improved contract performance of Foster Wheeler
Energy Corporation and Foster Wheeler Energia, S.A. Corporate and Financial
Services decreased by $7 million due to the sale of Thermacote Welco in 1993.
Selling, general and administrative expenses decreased approximately $.6
million. General and administrative expenses were up slightly offset by a
reduction in selling expenses.
Other income decreased $35 million. This decrease was due mainly to
transactions which occurred in 1993, particularly the sale of Thermacote Welco
and sale of a limited partnership interest in the Camden waste-to-energy plant.
Other deductions decreased $15 million primarily due to activities in 1993
increasing the accelerated amortization of the cost in excess of net assets of
a subsidiary acquired, and the establishment of a provision to cover potential
exposure for nonrecovery of development costs related to waste-to-energy
projects in the Power Systems Group.
The effective tax rate for 1994 was 38.8% compared to 40.4% in 1993. The
1993 effective rate differed from the U.S. statutory rate primarily as a result
of the accelerated amortization of cost in excess of net assets of a subsidiary
acquired, and the recapture of investment tax credits related to the sale of
the limited partnership interest.
Net earnings increased $7.7 million or 13%.
1993 COMPARED TO 1992
The Engineering and Construction Group accounted for approximately 70% of
the total December 1993 backlog of the Corporation. The 1993 backlog of the
Engineering and Construction Group was slightly lower than reported as of the
end of 1992. The reduction reported by the United Kingdom subsidiary was
partially offset by the increases in the United States and Italy. The Energy
Equipment Group accounted for approximately 23% of the December 1993 backlog.
The 7% increase reported by this Group was primarily due to orders taken by the
United States subsidiary in China. Foster Wheeler was selected for
negotiations for two 350-megawatt boilers for the Ezhou project in China at the
end of 1993.
(25 continued)
<PAGE> 7
New orders booked for 1993 decreased by 18% in comparison to 1992. This
was primarily due to the significant amount of orders taken by the Engineering
and Construction Group in 1992. New orders booked by the Engineering and
Construction Group decreased in the United States by approximately $300 million
and by approximately $400 million in the United Kingdom. However, the backlog
as of December 1993 has remained consistent with the 1992 level.
Operating revenues increased by $88 million (3.5%) over 1992. The three
operating groups all reported small increases over the 1992 levels. The
Engineering and Construction Group reported an increase of approximately $100
million primarily due to the operations of Foster Wheeler USA Corporation.
This increase was partially offset by the lower revenues reported by Corporate
and Financial Services.
Gross earnings from operations were at approximately the same level as
reported for 1992. The 5% increase reported by the Energy Equipment Group was
offset by the reduction in gross profit reported by Corporate and Financial
Services, related to the asbestos-abatement business.
Selling, general and administrative expenses decreased slightly. All
operating groups reported amounts consistent with prior year levels.
In comparing 1993 to 1992, other income increased by $36.8 million. This
increase was primarily due to the sale of Thermacote Welco in the third quarter
of 1993 and the sale of a 49.5% limited partnership interest in the Camden
waste-to-energy plant in the fourth quarter of 1993. In addition, interest
income increased by $5.6 million.
Other deductions increased by $12.5 million. This increase was due to the
accelerated amortization of the cost in excess of net assets of a subsidiary
acquired related to the asbestos- abatement business, which operations were
discontinued, and a provision to cover potential exposure for nonrecovery of
development costs related to waste-to-energy projects in the Power Systems
Group.
The effective tax rate increased from 32.9% in 1992 to 40.4% in 1993. The
1993 effective rate differed from the U.S. statutory rate primarily as a result
of the accelerated amortization of cost in excess of net assets of a subsidiary
acquired, and the recapture of investment tax credits related to the sale of
the limited partnership interest.
Earnings before accounting change increased by $12.2 million (27%). All
operating groups reported increased earnings. The Engineering and Construction
Group increased by over $7 million or 20%. This was primarily due to the
return to profitability of Foster
25
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS
Wheeler Iberia, S.A. in Spain and the improved earnings recorded by Foster
Wheeler USA Corporation. Both Foster Wheeler USA Corporation and Foster
Wheeler Italiana, S.p.A. reported record earnings. The Energy Equipment Group
also reported a 19% increase or $4.8 million from earnings reported in the
United States. The Power Systems Group increased by approximately 5% from 1992
to 1993.
FINANCIAL CONDITION
The Corporation's consolidated financial condition improved during the
three-year period 1992 to 1994. Since the beginning of 1992, net assets
increased by $104 million excluding the accumulated translation adjustment of
$56 million and the accounting charge of $91.3 million related to the adoption
of SFAS No. 106 in 1992. Working capital at December 30, 1994, was $222.1
million.
During 1992, 1993 and 1994, long-term investments in land, buildings and
equipment were $56 million, $28 million and $39 million, respectively. In
1994, the Corporation acquired EEC and OPD with net cash payments after cash
acquired of $51 million. In 1993, a 49.5% limited partnership interest in the
Camden waste-to-energy facility was sold to an institutional investor and a
subsidiary was sold; aggregate proceeds amounted to $50 million. During the
next few years, capital expenditures will continue to be directed primarily
toward strengthening and supporting the Corporation's core businesses.
Long-term debt, including current installments, and bank loans increased by
$76 million, net of repayments of $65 million, during the three-year period.
Payments in 1994 include $22 million for the first installment on private
placement unsecured notes. At the end of 1994, $95 million under the Corporate
Revolving Credit debt was classified as long-term. The Revolving Credit note
expires in April 1998 and it is the Corporation's intent to maintain the
principal amount outstanding during this period. The Corporation is reviewing
the possibility of refinancing this debt through the issuance of publicly or
privately placed debt securities.
In the ordinary course of business the Corporation and its subsidiaries
enter into contracts providing for assessment of damages for nonperformance or
delays in completion. Suits and claims have been or may be brought against the
Corporation by customers alleging deficiencies in either equipment design or
plant construction. The Corporation and its subsidiaries also routinely become
involved in litigation relating to patents and other intellectual property.
There are several actions of that nature presently pending. If the presently
pending suits described above were sustained in substantially the amounts
asserted, they would have a material adverse effect on the Corporation's
financial condition and results of operations. However, based on its
knowledge of the facts and circumstances relating to the Corporation's
liabilities, if any, and to its insurance coverage, management believes that
the disposition of such suits will not result in charges against assets or
earnings materially in excess of amounts provided in the accounts.
(26 continued)
<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
Cash and short-term investments at the end of 1994 amounted to $354.4
million, reflecting an increase of $121.6 million compared with the beginning
of 1992. Cash generated from earnings for 1994 of $116.2 million along with
increased funding of working capital resulted in a use of cash by operating
activities of approximately $14 million. Cash was used to pay dividends of
$25.8 million and to repay long-term debt of $30.5 million. The detailed
Statement of Cash Flows is presented on page 30.
The Corporation's own-and-operate projects are financed primarily with a
combination of project debt and equity investments by the Corporation.
Investments are expected to increase over the next several years. The
Corporation will continue to enter into financing transactions where the
transfer of tax benefits and refinancing of its equity investment in those
projects produces a lower effective financing cost and a potential increased
return on investment.
Existing cash balances, short-term investments and unused credit facilities
with banks remain adequate to support expected operating levels and anticipated
future investing and financing activities.
26
<PAGE> 10
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (In Thousands of Dollars)
<TABLE>
<CAPTION>
December 30, December 31,
1994 1993
------------ ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents..................................................................... $ 235,801 $ 249,514
Short-term investments........................................................................ 118,561 127,876
Accounts and notes receivable:
Trade....................................................................................... 442,127 396,828
Other....................................................................................... 54,854 45,671
Contracts in process.......................................................................... 171,144 87,076
Inventories................................................................................... 27,634 24,500
Prepaid and refundable income taxes........................................................... 47,543 39,000
Prepaid expenses.............................................................................. 15,045 12,989
---------- ----------
Total current assets...................................................................... 1,112,709 983,454
---------- ----------
Land, buildings and equipment................................................................... 815,746 784,548
Less accumulated depreciation................................................................... 249,590 217,332
---------- ----------
Net book value............................................................................ 566,156 567,216
---------- ----------
Notes and accounts receivable - long-term....................................................... 51,658 40,560
Investments and advances........................................................................ 42,665 34,758
Cost in excess of net assets of subsidiaries acquired........................................... 68,629 4,098
Deferred charges and prepaid pension cost....................................................... 215,616 160,967
Deferred income taxes........................................................................... 5,901 15,148
---------- ----------
TOTAL ASSETS............................................................................. $2,063,334 $1,806,201
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments on long-term debt........................................................ $ 32,565 $ 32,523
Bank loans.................................................................................... 77,350 59,725
Accounts payable.............................................................................. 211,627 161,484
Accrued expenses.............................................................................. 139,582 131,254
Estimated costs to complete long-term contracts............................................... 294,881 287,508
Advance payments by customers................................................................. 104,239 76,462
Income taxes.................................................................................. 30,335 30,033
---------- ----------
Total current liabilities................................................................. 890,579 778,989
Long-term debt, less current installments....................................................... 466,637 396,741
Minority interest in subsidiary companies....................................................... 10,344 8,235
Deferred income taxes........................................................................... 19,651 18,691
Other long-term liabilities, deferred credits and postretirement benefits other than pensions... 219,629 203,369
---------- ----------
TOTAL LIABILITIES......................................................................... 1,606,840 1,406,025
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock
Authorized 1,500,000 shares; no par value - none outstanding
Common stock
$1.00 par value; authorized 80,000,000 shares; issued: 1994-35,832,664; 1993-35,706,982..... 35,833 35,707
Paid-in capital............................................................................... 38,266 35,076
Retained earnings............................................................................. 420,861 381,205
Accumulated translation adjustment............................................................ (37,915) (51,261)
---------- ----------
457,045 400,727
Less cost of treasury stock (20,129 shares)................................................... 551 551
---------- ----------
TOTAL STOCKHOLDERS' EQUITY................................................................ 456,494 400,176
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................................ $2,063,334 $1,806,201
========== ==========
</TABLE>
See notes to financial statements.
27
<PAGE> 11
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
(In Thousands of Dollars, Except per Share Amounts)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Operating revenues...................................................... $2,234,441 $2,583,000 $2,494,789
Other income (including interest:
1994-$25,014; 1993-$26,627; 1992-$21,017)............................. 36,682 71,505 34,675
---------- ----------- ----------
Total Revenues........................................................ 2,271,123 2,654,505 2,529,464
---------- ----------- ----------
COSTS AND EXPENSES:
Cost of operating revenues.............................................. 1,909,893 2,290,395 2,202,196
Selling, general and administrative expenses............................ 203,445 204,049 208,676
Other deductions (including interest:
1994-$34,978; 1993-$33,558; 1992-$34,159)............................. 45,906 60,722 48,255
Minority interest....................................................... 5,012 2,521 2,512
---------- ----------- ----------
Total Costs and Expenses.............................................. 2,164,256 2,557,687 2,461,639
---------- ----------- ----------
Earnings before income taxes and accounting change........................ 106,867 96,818 67,825
Provision for income taxes................................................ 41,457 39,114 22,321
---------- ----------- ----------
Earnings before accounting change......................................... 65,410 57,704 45,504
Effect of change in accounting principle for postretirement benefits
other than pensions (net of income tax benefit of
$47,947 and a valuation allowance of $5,500)............................ - - (91,259)
---------- ----------- ----------
Net earnings/(loss)....................................................... $ 65,410 $ 57,704 $ (45,755)
========== =========== ==========
Earnings per share:
Earnings before the effect of accounting change......................... $1.83 $1.62 $1.28
Effect of change in accounting principle................................ - - (2.57)
----- ----- -----
Net earnings/(loss)..................................................... $1.83 $1.62 $(1.29)
===== ===== ======
</TABLE>
See notes to financial statements.
(28 continued)
<PAGE> 12
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of Foster Wheeler Corporation:
We have audited the accompanying consolidated balance sheet of Foster Wheeler
Corporation and Subsidiaries as of December 30, 1994 and December 31, 1993, and
the related consolidated statements of earnings, changes in stockholders'
equity, and cash flows for each of the three years in the period ended December
30, 1994. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Foster Wheeler
Corporation and Subsidiaries as of December 30, 1994 and December 31, 1993, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 30, 1994, in conformity with
generally accepted accounting principles.
As discussed in Note 5 to the consolidated financial statements, the
Corporation changed its method of accounting for postretirement benefit costs
other than pensions in 1992.
Coopers & Lybrand L.L.P.
New York, New York
February 13, 1995
28
<PAGE> 13
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands of Dollars, Except per Share Amounts)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year............................................ $ 35,707 $ 35,656 $ 35,588
Sold under stock options: (shares: 1994-125,682; 1993-50,786;
1992-68,092).......................................................... 126 51 68
-------- -------- --------
Balance at end of year................................................ 35,833 35,707 35,656
-------- -------- --------
PAID-IN CAPITAL
Balance at beginning of year............................................ 35,076 34,085 33,139
Stock option exercise price less par value.............................. 2,214 791 773
Tax benefits related to stock options................................... 976 200 173
-------- -------- --------
Balance at end of year................................................ 38,266 35,076 34,085
-------- -------- --------
RETAINED EARNINGS
Balance at beginning of year............................................ 381,205 346,487 413,056
Net earnings/(loss) for the year........................................ 65,410 57,704 (45,755)
Cash dividends paid:
Common (per share outstanding: 1994-$.72; 1993-$.645; 1992-$.585)..... (25,754) (22,986) (20,814)
-------- -------- --------
Balance at end of year................................................ 420,861 381,205 346,487
-------- -------- --------
ACCUMULATED TRANSLATION ADJUSTMENT
Balance at beginning of year............................................ (51,261) (28,380) 18,732
Change in accumulated translation adjustment during the year............ 13,346 (22,881) (47,112)
-------- -------- --------
Balance at end of year................................................ (37,915) (51,261) (28,380)
-------- -------- --------
TREASURY STOCK
Balance at beginning of year............................................ 551 551 391
Sold under stock options: (shares: 1992-14,500)......................... - - (341)
Common stock acquired for treasury: (shares:
1992-16,407).......................................................... - - 501
-------- -------- --------
Balance at end of year................................................ 551 551 551
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY.............................................. $456,494 $400,176 $387,297
======== ======== ========
</TABLE>
See notes to financial statements.
29
<PAGE> 14
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands of Dollars)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings/(loss)..................................................... $ 65,410 $ 57,704 $(45,755)
Adjustments to reconcile net earnings/(loss) to
cash flows from operating activities:
Depreciation and amortization..................................... 44,288 51,456 44,200
Noncurrent deferred tax........................................... 9,609 11,632 (2,093)
Gain on sale of investments....................................... - - (999)
Gain on sale of subsidiary and partnership interest............... - (36,175) -
Gain on sale of land, buildings and equipment..................... (915) (165) (2,587)
Equity (earnings)/losses, net of dividends........................ (623) (883) 771
Effect of change in accounting principle.......................... - - 91,259
Other noncash items............................................... (1,517) 1,356 (4,810)
Changes in assets and liabilities:
Receivables....................................................... (24,942) 27,987 (109,188)
Contracts in process and inventories.............................. (51,863) (11,376) (7,668)
Accounts payable and accrued expenses............................. (8,286) (22,632) 79,314
Estimated costs to complete long-term contracts................... (23,089) 90,196 67,898
Advance payments by customers..................................... 22,316 10,847 48,781
Income taxes...................................................... (8,198) (14,623) (1,269)
Other assets and liabilities...................................... (36,487) (18,599) (16,190)
-------- -------- --------
Net cash (used)/provided by operating activities.................. (14,297) 146,725 141,664
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures.................................................... (38,501) (27,849) (55,995)
Proceeds from sale of properties........................................ 4,671 1,476 4,043
Proceeds from sale of subsidiary and partnership interest............... - 50,288 -
Proceeds from sale of Power Systems assets.............................. - - 15,000
Proceeds from sale of long-term investments............................. - - 7,224
Payments for acquisition of businesses, net of cash acquired............ (50,946) - -
Decrease/(increase) in investments and advances......................... (5,002) (2,421) 65
Decrease/(increase) in short-term investments........................... 14,621 (17,541) (52,621)
Partnership distribution................................................ (3,000) (3,235) (3,199)
-------- -------- --------
Net cash (used)/provided by investing activities.................. (78,157) 718 (85,483)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends to stockholders............................................... (25,754) (22,986) (20,814)
Repurchase of common stock.............................................. - - (501)
Proceeds from the exercise of stock options............................. 2,340 842 1,182
Increase in short-term debt............................................. 14,583 9,246 3,305
Proceeds from long-term debt............................................ 100,848 265 8,464
Repayment of long-term debt............................................. (30,540) (12,439) (21,722)
-------- -------- --------
Net cash provided/(used) by financing activities.................. 61,477 (25,072) (30,086)
-------- -------- --------
Effect of exchange rate changes on cash and cash equivalents............ 17,264 (19,342) (19,995)
-------- -------- --------
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS........................... (13,713) 103,029 6,100
Cash and cash equivalents at beginning of year............................. 249,514 146,485 140,385
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR................................... $235,801 $249,514 $146,485
======== ======== ========
Cash paid during the year for:
Interest (net of amount capitalized).................................... $36,191 $32,167 $33,629
Income taxes............................................................ $26,115 $27,949 $14,474
</TABLE>
See notes to financial statements.
30
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
(In Thousands of Dollars, Except per Share Amounts)
1. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of Foster Wheeler Corporation and all significant domestic and
foreign subsidiary companies.
The Corporation's fiscal year is the 52- or 53-week annual accounting
period ending the last Friday in December for domestic operations and December
31 for foreign operations. For domestic operations, the year 1993 included 53
weeks while the years 1994 and 1992 included 52 weeks.
The Corporation acquired Optimized Process Designs, Inc. (OPD) for $6.1
million effective July 1994. OPD's principal process design expertise is in
the area of natural gas and gas liquids conditioning, treating and processing.
In October 1994, Enserch Environmental Corporation (EEC), a subsidiary of
ENSERCH Corporation, was acquired for $50 million, after the sale of $60
million of receivables under a Receivable Purchase Agreement guaranteed by
ENSERCH Corporation. The environmental company provides full- service
capabilities for hazardous and mixed-waste investigations and remediation,
pollution control systems, wastewater treatment, waste management, risk
analysis and impacts and environmental permitting. These acquisitions have
been accounted for as purchases, accordingly, the purchase prices were
allocated to the assets acquired and liabilities assumed based upon their
estimated fair market values at the dates of acquisitions. The results of
operations of OPD and EEC are included in the Corporation's financial
statements since the dates of acquisitions.
On the basis of a pro forma combination of the results of operations as if
the acquisitions had occurred at the beginning of 1993, combined pro forma
revenues, net earnings and earnings per share would not have been materially
different.
REVENUE RECOGNITION ON LONG-TERM CONTRACTS - The Corporation reports
profits on long-term contracts on a percentage-of-completion basis determined
on the ratio of earned billings to total contract price, after considering
accumulated costs and estimated costs to complete each contract. Contracts in
process are valued at cost plus accrued profits less earned billings and
progress payments on uncompleted contracts. If estimates of costs to complete
long-term contracts indicate a loss, provision is made currently for the total
loss anticipated. The elapsed time from award of a contract to completion of
performance may be up to four years. Contracts of the Engineering and
Construction Group are generally considered substantially complete when
engineering is completed and/or field construction is completed, while for the
Energy Equipment Group it is when manufacturing and/or field construction is
completed.
Certain special-purpose subsidiaries in the Power Systems Group are
reimbursed for their costs, including repayment of project debt, for building
and owning certain facilities over the lives of the service contracts. The
Corporation records revenues relating to debt repayment on
(31 continued)
<PAGE> 16
these contracts on a straight-line basis over the lives of the service
contracts and records depreciation of the facilities on a straight-line basis
over the estimated useful lives of the facilities, after consideration of the
estimated residual value.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include highly liquid
short-term investments purchased with original maturities of three months or
less.
TRADE ACCOUNTS RECEIVABLE - In accordance with terms of long-term
contracts, certain percentages of billings are withheld by customers until
completion and acceptance of the contracts. Final payments of all such amounts
withheld which might not be received within a one-year period are indicated in
Note 2. In conformity with trade practice, however, the full amount of
accounts receivable, including such amounts withheld, has been included in
current assets.
LAND, BUILDINGS AND EQUIPMENT - Upon retirement or other disposition of
fixed assets, the cost and related accumulated depreciation are removed from
the accounts and the resulting gains or losses are reflected in earnings.
Depreciation is computed on a straight-line basis for financial reporting
purposes using composite estimated lives ranging from 10 to 50 years for
buildings and from 3 to 30 years for equipment.
Expenditures for maintenance and repairs are charged to operations.
Renewals and betterments are capitalized.
INCOME TAXES - Deferred income taxes are provided for temporary
differences between financial and taxable income. For Federal income tax
purposes, accelerated methods of depreciation are used. Investment tax credits
are accounted for under the "flow-through" method, which recognizes the benefit
in the year qualified progress expenditures are incurred. Qualified property
for tax purposes is reduced by the investment tax credit claimed resulting in
recognition of deferred taxes.
Provision is made for Federal income taxes which may be payable on foreign
subsidiary earnings to the extent that the Corporation anticipates they will be
remitted. Unremitted earnings of foreign subsidiaries which have been, or are
intended to be, permanently reinvested (and for which no Federal income tax has
been provided) aggregated $233,000 at December 30, 1994. It is not practicable
to estimate the additional tax that would be incurred, if any, if these amounts
were repatriated.
FOREIGN CURRENCY TRANSLATION - Assets and liabilities of foreign
subsidiaries are translated into U.S. dollars at year-end exchange rates and
income and expenses at monthly weighted average rates. Foreign currency
transaction (losses)/gains for 1994, 1993 and 1992 were
31
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
(In Thousands of Dollars, Except per Share Amounts)
approximately $(120), $4,200 and $3,200, respectively ($(80), $2,700 and $2,000
net of taxes). The Corporation enters into foreign exchange contracts in its
management of foreign currency exposures. Realized and unrealized gains and
losses on contracts that qualify as designated hedges are deferred. Amounts
receivable or payable under foreign exchange hedges are recognized as deferred
gains or losses, which are included in either contracts in process or estimated
costs to complete long-term contracts. Those that do not qualify as hedges for
accounting purposes are marked to market and recognized currently.
INVENTORIES - Inventories, principally materials and supplies, are stated
at lower of cost or market determined primarily on the average cost method.
COST IN EXCESS - The cost in excess of net assets of subsidiaries
acquired is being amortized against income over periods ranging between ten and
forty years. The Corporation periodically evaluates goodwill to assess
recoverability and impairments would be recognized in earnings if a permanent
diminution in value were to occur.
EARNINGS PER SHARE - Per-share data has been computed on the weighted
average number of shares of common stock outstanding of 35,787,658; 35,655,886
and 35,595,728 for 1994, 1993 and 1992, respectively. Outstanding stock
options have been disregarded because their effect on earnings per share would
not be significant and would have been antidilutive in 1992.
2. ACCOUNTS AND NOTES RECEIVABLE
The following tabulation shows the components of trade accounts and notes
receivable:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
From long-term contracts:
Amounts billed due within one year....................... $277,530 $229,145
-------- --------
Retentions:
Billed:
Estimated to be due in:
1994............................................. - 15,772
1995............................................. 30,929 -
1996............................................. 7,288 -
1999............................................. 6,905 -
-------- --------
Total billed..................................... 45,122 15,772
-------- --------
Unbilled:
Estimated to be due in:
1994............................................. - 67,741
1995............................................. 38,074 5,108
1996............................................. 3,171 745
-------- --------
Total unbilled................................... 41,245 73,594
-------- --------
Total retentions................................. 86,367 89,366
-------- --------
Total receivables from long-term contracts....... 363,897 318,511
</TABLE>
(32 continued)
<PAGE> 18
<TABLE>
<S> <C> <C>
Other trade and notes receivable............................ 82,898 83,628
-------- --------
446,795 402,139
Less, Allowance for doubtful accounts....................... 4,668 5,311
-------- --------
$442,127 $396,828
======== ========
</TABLE>
3. CONTRACTS IN PROCESS AND INVENTORIES
Costs of contracts in process and inventories considered in the determination
of cost of operating revenues are shown below:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Contracts in process.................................... $171,144 $ 87,076 $ 78,195
======== ======== ========
Inventories:
Materials and supplies............................. $ 21,447 $ 18,700 $ 22,250
Work in process.................................... 1,894 1,810 1,397
Finished goods..................................... 4,293 3,990 10,628
-------- -------- --------
$ 27,634 $ 24,500 $ 34,275
======== ======== ========
</TABLE>
The following tabulation shows the elements included in contracts in process
as related to long-term contracts:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Costs plus accrued profits less earned billings on contracts
currently in process........................................ $350,897 $229,604 $209,800
Less, Progress payments........................................ 179,753 142,528 131,605
-------- -------- --------
$171,144 $ 87,076 $ 78,195
======== ======== ========
</TABLE>
4. LAND, BUILDINGS AND EQUIPMENT
Land, buildings and equipment are stated at cost and are set forth below:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Land and land improvements..................................... $ 16,412 $ 14,910
Buildings...................................................... 98,263 91,957
Equipment...................................................... 679,686 653,002
Construction in progress....................................... 21,385 24,679
-------- --------
$815,746 $784,548
======== ========
</TABLE>
Depreciation expense for the years 1994, 1993 and 1992 was $43,729, $43,732
and $43,286, respectively.
5. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
RETIREMENT BENEFITS - The Corporation and its domestic and foreign
subsidiaries have several pension plans covering substantially all full-time
employees. Under the plans, retirement benefits are primarily a function of
both years of service and level of compensation; the plans are noncontributory.
Effective with retirements after April 1, 1993, the Corporation changed the
benefit for domestic employees to 1.2% of the average of the highest five
consecutive years of salary in the last ten years of employment. Previous
benefits were 1.1% of the average of the highest seven consecutive years of
salary in the last ten years of employment.
32
<PAGE> 19
It is the Corporation's policy to fund the plans on a current basis to the
extent deductible under existing Federal tax regulations. Such contributions,
when made, are intended to provide not only for benefits attributed to service
to date, but also for those expected to be earned in the future.
The following table sets forth the plans' funded status as of the end of
December 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Actuarial present value of accumulated benefit obligations:
Vested............................................................. $ 271,579 $ 289,415
Nonvested.......................................................... 7,005 12,740
--------- ---------
Total................................................................. $ 278,584 $ 302,155
========= =========
Plan assets at fair value, primarily listed stocks and bonds............. $ 379,820 $ 388,090
Projected benefit obligations............................................ (308,382) (329,188)
--------- ---------
Excess of plan assets over projected benefit obligations................. 71,438 58,902
Unrecognized net loss due to past experience different from
assumptions made...................................................... 32,693 33,800
Unrecognized prior service cost.......................................... 14,888 20,670
Unrecognized net assets being amortized over 12 years.................... (23,011) (27,811)
--------- ---------
Prepaid pension cost..................................................... $ 96,008 $ 85,561
========= =========
</TABLE>
Net periodic pension credits included the following components:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Service cost........................................... $ 15,289 $ 11,024 $ 9,275
Interest cost on projected benefit obligation.......... 25,070 24,117 23,126
Actual return on plan assets........................... (38,081) (33,370) (33,768)
Net amortization and deferrals......................... (2,799) (2,929 ) (4,345)
--------- --------- ---------
Net periodic pension credits........................... $ 521 $ 1,158 $ 5,712
========= ========= =========
</TABLE>
In determining the actuarial present value of the projected benefit
obligations, discount rates ranging from 7.5% to 8.5% (1993 - 6.875% to 7.5%),
and rates of increase for future compensation levels ranging from 4.5% to 6.5%
were utilized. The expected long-term rate of return on assets was 10%.
The Corporation has a 401(k) plan for salaried employees. The Corporation
for the years 1994, 1993 and 1992 contributed a 50% match of the employees'
contributions which amounted to a cost of $3,400, $3,300 and $2,700,
respectively.
In addition to providing pension benefits, the Corporation and some of its
domestic subsidiaries provide certain health care and life insurance benefits
for retired employees. Employees may become eligible for these benefits if
they reach normal retirement age while working for the Corporation. Benefits
are provided through insurance companies.
Effective the beginning of 1992, the provisions of Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" were adopted. The Statement requires the
Corporation to use accrual accounting rather than pay-as-you-go (cash basis)
for postretirement benefits other than pensions for current and retired
employees and their families. In the first quarter of 1992, the Corporation
recorded the full amount of its transition obligation which represented the
accumulated postretirement benefit obligation as of the beginning of 1992. The
after tax and valuation allowance charge to 1992 earnings was $91,259, or $2.57
per share. This amount was reflected as the cumulative effect of a change in
accounting principle in the consolidated statement of earnings.
(33 continued)
<PAGE> 20
The following sets forth the plans' funded status reconciled with amounts
reported in the Corporation's consolidated balance sheet at the end of December
1994 and 1993:
<TABLE>
<CAPTION>
Accumulated postretirement benefit obligation: 1994 1993
---- ----
<S> <C> <C>
Retirees................................................ $ 71,792 $ 77,347
Fully-eligible active plan participants................. 10,458 10,750
Other active plan participants.......................... 35,380 35,677
--------- ---------
Accumulated postretirement benefit...................... 117,630 123,774
Unrecognized net gain/(loss)............................ 1,570 (7,129)
Unrecognized prior service cost.........................
33,205 35,309
--------- ---------
Accrued postretirement benefit liability................ $ 152,405 $ 151,954
========= =========
</TABLE>
Net periodic postretirement benefit costs for 1994, 1993 and 1992 included
the following components:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Service cost........................................... $ 1,244 $ 1,809 $ 3,257
Interest cost.......................................... 6,478 7,233 8,985
Net amortization and deferrals......................... (2,094) (1,578) -
-------- -------- --------
Net periodic postretirement benefit cost............... $ 5,628 $ 7,464 $ 12,242
======== ======== ========
</TABLE>
In 1993, the Corporation announced certain changes to its health care plan
that establish a premium based on length of service and a cap for future
medical costs of active employees.
A 9.5% annual rate of increase in the per capita costs of covered health
care benefits was assumed for 1995, gradually decreasing to 6% by the year
2022. Increasing the assumed health care cost trend rates by one percentage
point in each year would increase the accumulated postretirement benefit
obligation as of December 30, 1994, by $6,000 and increase the aggregate of the
service cost and interest cost components of net periodic postretirement
benefit cost for 1994 by $600. A discount rate of 8.5% (1993 - 7.5%) was used
to determine the accumulated postretirement benefit obligation.
33
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
(In Thousands of Dollars, Except per Share Amounts)
6. BANK BORROWINGS
The approximate weighted average interest rates on borrowings outstanding
at the end of 1994 and 1993 were 6% and 5%, respectively.
Unused lines of credit for short-term bank borrowings aggregated
$24,659 at year-end 1994, of which approximately 14% was available in the
United States and Canada at interest rates not exceeding the prime commercial
lending rate and the remainder was available overseas at rates up to 2% over
the base rate. Pursuant to agreements with its lending banks, the Corporation
pays fees for maintaining its existing lines of credit.
Interest costs incurred in 1994, 1993 and 1992 were $35,445, $33,771 and
$35,898 of which $467, $213 and $1,739, respectively, were capitalized.
7. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Corporate Debt
--------------
8.58% unsecured promissory notes due in
installments of $22,000 on October 1
in each of the years 1995 to 1998............................................................ $ 88,000 $110,000
Revolving Credit Agreement, interest 5.9%................................................... 95,000 -
Special-Purpose Project Debt
----------------------------
The Corporation's obligations with respect
to this debt are limited to guaranteeing
the operating performance of the projects.
Collateralized note payable, interest
varies based on one of several money
market rates (1994 year-end rate
6.4%), due semiannually through
July 30, 2006............................................................................... 59,640 62,113
Floating/Fixed Rate Resource Recovery
Revenue Bonds, interest varies based
on tax-exempt money market rates (1994
year-end rate 5.65%), due semiannually
August 1, 1997 through February 1, 2010..................................................... 45,448 45,448
</TABLE>
(34 continued)
<PAGE> 22
<TABLE>
<S> <C> <C>
Collateralized note payable, interest varies
based on one of several money market
rates (1994 year-end rate 7.25%), due
semiannually through February 1, 1996....................................................... 7,340 11,110
Solid Waste Disposal and Resource Recovery
System Revenue Bonds, interest 7.125% to
7.5%, due annually December 1, 1999
through December 1, 2010.................................................................... 120,150 120,150
Resource Recovery Revenue Bonds, interest
7.9% to 10%, due annually December 15,
1995 through 2012........................................................................... 75,805 71,482
Other
-----
Unsecured bank loans, interest 9.2%......................................................... 4,446 4,952
Other....................................................................................... 3,373 4,009
-------- --------
499,202 429,264
Less, Current portion....................................................................... 32,565 32,523
-------- --------
$466,637 $396,741
======== ========
</TABLE>
Principal payments are payable in annual installments of:
<TABLE>
<S> <C>
1996..................................................................................... $ 37,935
1997..................................................................................... 34,162
1998..................................................................................... 130,094
1999..................................................................................... 21,873
2000..................................................................................... 25,251
Balance due in installments
through 2012............................................................................. 217,322
--------
$466,637
========
</TABLE>
34
<PAGE> 23
CORPORATE DEBT - The Corporation entered into interest rate swap
agreements under which it pays to the counterparties interest at a variable
rate based on the London Interbank Offered Rate (LIBOR) on the current notional
principal of $88,000 and the counterparties pay the Corporation interest at
7.165% (average) on the notional principal. The notional principal of the swap
amortizes through September 30, 1998. Amounts receivable under the swap
agreements are accrued as a reduction of interest expense.
The Corporation has entered into a four-year revolving credit agreement
(the "Revolving Credit Agreement") with a group of banks whereby the banks
agree to advance loans from time to time in amounts up to $180,000. The loans
are for general corporate purposes. The Revolving Credit Agreement is renewed
each year subject to the approval of the Corporation and the banks. The
Corporation pays to the banks a facility fee on the total facility and a
commitment fee on the unused portion of the facility. At December 30, 1994,
loans outstanding under the Revolving Credit Agreement amounted to $95,000.
This amount has been classified as long-term. It is the Corporation's
intention to maintain the Revolving Credit Agreement as long-term or obtain
long-term financing to replace outstanding borrowings under the Agreement.
The Note Agreement pursuant to which the 8.58% unsecured promissory notes
were issued and the Revolving Credit Agreement require the maintenance of
certain levels of consolidated Tangible Net Worth, as defined, the most
restrictive of which is $400,000 plus 25% of earnings as defined from 1991
through 1994. At December 30, 1994, the consolidated Tangible Net Worth was
$522,000. The Note Agreement and the Revolving Credit Agreement also require
the maintenance of certain capitalization ratios. Both agreements require that
the ratio of Indebtedness to Tangible Net Worth, as those terms are defined in
the agreements, not exceed .65 to 1. At December 30, 1994, this ratio was .46
to 1.
SPECIAL-PURPOSE SUBSIDIARY PROJECT DEBT - Special-Purpose Subsidiary
Project Debt represents debt incurred to finance the construction of
cogeneration facilities or waste-to-energy projects. The notes and/or bonds
are collateralized by the assets of each project.
COGENERATION PROJECTS - The note payable for $59,640 represents a loan
under a bank credit facility to a limited partnership whose general partner is
a Special-Purpose Project Subsidiary. The limited partnership entered into an
interest rate swap agreement which fixed the interest rate on $62,000 of the
original principal amount of the debt. Under this agreement, the limited
partnership pays to the counterparties interest at 8.85% on the current
notional principal and the counterparties pay to the limited partnership
interest at a variable rate based on LIBOR on the notional principal. The
notional principal of the swap amortizes through July 30, 1999.
The Floating/Fixed Rate Resource Recovery Revenue Bonds in the amount of
$45,448 were issued in a total amount of $45,450 and the collateralized note in
the amount of $7,340 represents a loan under a bank credit facility. The bonds
are collateralized by an irrevocable standby letter of credit issued by a
commercial bank.
(35 continued)
<PAGE> 24
WASTE-TO-ENERGY PROJECTS - The Solid Waste Disposal and Resource Recovery
System Revenue Bonds totalling $120,150 were issued in a total amount of
$133,500. The bonds are collateralized by a pledge of certain revenues and
assets of the project.
The Resource Recovery Revenue Bonds of $75,805 were issued in a total
amount of $86,780. The bonds are collateralized by a pledge of certain
revenues and assets of the project.
8. RESEARCH AND DEVELOPMENT
Research and development expenses for the years 1994, 1993 and 1992 for
corporate- and customer-sponsored activities were $48,000, $49,200 and $39,200,
respectively.
35
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS
(In Thousands of Dollars, Except per Share Amounts)
9. INCOME TAXES
The components of earnings before income taxes and accounting change for
the years 1994, 1993 and 1992 were taxed under the following jurisdictions:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Domestic................................... $ 19,955 $ 25,602 $ (5,082)
Foreign.................................... 86,912 71,216 72,907
-------- -------- --------
Total...................................... $106,867 $ 96,818 $ 67,825
======== ======== ========
</TABLE>
The provision for income taxes on those earnings was as follows:
<TABLE>
<S> <C> <C> <C>
Current tax expense:
Domestic................................... $ 2,931 $ 10,735 $ 1,493
Foreign.................................... 36,739 27,047 29,737
--------- -------- --------
Total current.............................. 39,670 37,782 31,230
--------- -------- --------
Deferred tax (benefit)/expense:
Domestic................................... 5,423 (9,886) 7,074
Foreign.................................... (6,600) (4,966) (2,537)
--------- -------- --------
Total deferred............................. (1,177) (14,852) 4,537
--------- -------- --------
Investment tax credit recapture/(benefit).. - 2,009 (2,146)
Utilization/(benefit) of operating loss
carryforwards.......................... 2,964 14,175 (11,300)
--------- --------- --------
2,964 16,184 (13,446)
--------- --------- --------
Total provision for income taxes.............. $ 41,457 $ 39,114 $ 22,321
========= ========= =========
</TABLE>
Deferred tax liabilities (assets) consist of the following:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Difference between book and
tax depreciation........................... $ 71,907 $ 63,925
Pension assets................................ 30,685 28,845
Capital lease transactions.................... 12,652 12,975
Revenue recognition........................... 15,814 15,452
Other......................................... 4,933 6,226
-------- --------
Gross deferred tax liabilities................ 135,991 127,423
-------- --------
Current taxability of estimated
costs to complete long-term
contracts.................................. (23,768) (17,988)
</TABLE>
(36 continued)
<PAGE> 26
<TABLE>
<S> <C> <C>
Income currently taxable deferred
for financial reporting.................... (7,380) (14,795)
Expenses not currently deductible
for tax purposes........................... (22,104) (23,175)
Loss carryforwards............................ - (2,964 )
Investment tax credit carryforwards........... (28,600) (29,484)
Postretirement benefits other
than pensions.............................. (55,112) (54,783)
Minimum tax credits........................... (6,710) -
Other......................................... (24,366) (18,070)
Valuation allowance........................... 5,500 5,500
-------- ---------
Net deferred tax assets....................... (162,540) (155,759)
-------- ---------
$(26,549) $ (28,336)
========= =========
</TABLE>
The domestic investment tax credit carryforwards, if not used, will expire
in the years 2002 to 2007.
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory rate to earnings before
income taxes, as a result of the following:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Tax at U.S. statutory rate........................... 35.0% 35.0% 34.0%
State income taxes, net of
Federal income tax benefit........................ 1.2 1.3 -
Nondeductible goodwill write-off..................... - 2.5 -
Investment tax credit recapture/(benefit)............ - 2.1 (2.1)
Other................................................ 2.6 (.5) 1.0
----- ---- ----
38.8% 40.4% 32.9%
===== ===== ====
</TABLE>
10. LEASES
The Corporation entered into a sale/leaseback of the 600-ton-per-day
waste-to-energy plant in Charleston, South Carolina, in 1989. The terms of the
agreement are to lease back the plant under a long-term operating lease for 25
years. In 1994, the Corporation entered into a lease agreement 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 terms of the
agreement are to lease the facility under a long-term operating lease for 32
years. Recourse under these lease agreements is primarily limited to the
assets of the special-purpose entities. The lease expense for the years 1992
through 1994 totalled $9,300 annually.
(36 continued)
<PAGE> 27
The minimum lease payments under these long-term noncancelable operating
leases are as follows:
<TABLE>
<S> <C>
1995............................... $ 9,186
1996............................... 9,144
1997............................... 87,596
1998............................... 37,654
1999............................... 38,128
Thereafter........................ 742,660
--------
Total.............................. $924,368
========
</TABLE>
The Corporation and certain of its subsidiaries are obligated under
operating lease agreements primarily for office space. Rental expense for
these leases amounted to $20,600 in 1994, $19,500 in 1993 and $22,100 in 1992.
Future minimum rental commitments on noncancelable leases are as follows: 1995
- $21,640; 1996 - $19,725; 1997 - $14,540; 1998 - $12,210; 1999-$9,945; and an
aggregate of $29,770 thereafter.
36
<PAGE> 28
11. QUARTERLY FINANCIAL DATA (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------
1994 April 1 July 1 Sept. 30 Dec. 30
---- ------- ------ -------- -------
<S> <C> <C> <C> <C>
Operating revenues......................... $ 469,645 $ 571,247 $ 533,599 $ 659,950
Gross earnings from operations............. 77,119 77,247 75,033 95,149
Net earnings............................... 15,403 16,659 14,684 18,664
Earnings per share......................... .43 .47 .41 .52
Cash dividends per share................... .165 .185 .185 .185
Stock prices:
High.................................... 45.00 45.125 42.00 37.125
Low..................................... 32.50 35.00 33.875 26.625
</TABLE>
<TABLE>
<CAPTION>
1993 March 26 June 25 Sept. 24 Dec. 31
---- -------- ------- -------- -------
<S> <C> <C> <C> <C>
Operating revenues......................... $586,531 $646,503 $616,426 $733,540
Gross earnings from operations............. 68,673 74,658 71,264 78,010
Net earnings............................... 12,730 14,555 12,154 18,265
Earnings per share......................... .36 .41 .34 .51
Cash dividends per share................... .15 .165 .165 .165
Stock prices:
High.................................... 31.875 31.125 35.875 35.625
Low..................................... 27.25 25.875 29.00 30.50
</TABLE>
12. LITIGATION
In the ordinary course of business the Corporation and its subsidiaries
enter into contracts providing for assessment of damages for nonperformance or
delays in completion. Suits and claims have been or may be brought against the
Corporation by customers alleging deficiencies in either equipment design or
plant construction. The Corporation and its subsidiaries also routinely become
involved in litigation relating to patents and other intellectual property.
There are several actions of that nature presently pending. If the presently
pending suits described above were sustained in substantially the amounts
asserted, they would have a material adverse effect on the Corporation's
financial condition and results of operations. However, based on its knowledge
of the facts and circumstances relating to the Corporation's liabilities, if
any, and to its insurance coverage, management believes that the disposition of
such suits will not result in charges against assets or earnings materially in
excess of amounts provided in the accounts.
(37 continued)
<PAGE> 29
The Corporation and its subsidiaries, along with many other companies, are
codefendants in numerous lawsuits pending in the United States and Canada, in
which plaintiffs claim damages for personal injury or property damage alleged
to arise from exposure to or use of asbestos. At December 31, 1993 and
December 30, 1994, the suits pending numbered approximately 43,300 and 51,700,
respectively. It is anticipated that a substantial number of similar suits
will be filed in the future. Since the inception of asbestos-related
litigation against the Corporation and its subsidiaries, approximately 46,000
lawsuits have been terminated without any payment or with only nominal payments
by the insurers for the Corporation and its subsidiaries. Based on its
knowledge of relevant facts and circumstances, on its determination of the
availability and extent of insurance coverage, and on the advice of the
Corporation's special counsel, the management of the Corporation is of the
opinion that the ultimate disposition of pending and future asbestos-related
lawsuits will not result in material charges against assets or earnings. The
asbestos litigation herein described does not relate to any activities
currently being carried on by the Corporation or its subsidiaries.
13. STOCK OPTION PLANS
The Corporation has two stock option plans which reserve shares of common
stock for issuance to executives, key employees and directors.
Under the plan approved by the stockholders in April 1984, as amended in
1991, the total number of shares of common stock that may be granted is
1,700,000.
In April 1990, the stockholders approved a Stock Option Plan for Directors
of the Corporation. This plan authorizes the granting of options on 150,000
shares of common stock to directors who are not employees of the Corporation,
who shall automatically receive an option to acquire 2,000 shares each year.
These plans provide that shares granted should come from the Corporation's
authorized but unissued or reacquired common stock. The price of the options
granted pursuant to these plans shall not be less
37
<PAGE> 30
than 100 percent of the fair market value of the shares on the date of grant.
An option may not be exercised within one year from the date of grant and no
option shall be exercisable after ten years from the date granted. Under the
Executive Compensation Plan, the long-term incentive segment provides for stock
options to be issued. Participants may exercise approximately one-third of the
stock option shares after the end of each year of the cycle. At December 30,
1994, 272,776 shares were not exercisable.
Information regarding these option plans for 1994, 1993 and 1992 is as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
------ ------- ------
<S> <C> <C> <C>
Options outstanding,
beginning of year...................................... 493,810 417,596 394,705
Options exercised......................................... (125,682) (50,786) (82,592)
Options granted........................................... 178,334 127,000 119,500
Options expired........................................... - - (14,017)
--------- --------- --------
Options outstanding, end of year.......................... 546,462 493,810 417,596
========= ========= ========
Option price range at end of year......................... $12.25 to $12.25 to $12.25 to
$40.0625 $28.75 $28.6875
Option price range for
exercised shares....................................... $12.25 to $12.25 to $12.25 to
$28.75 $22.0625 $21.3125
Options available for grant
at end of year......................................... 539,578 717,912 844,912
======= ======= ========
</TABLE>
14. PREFERRED SHARE PURCHASE RIGHTS
On September 22, 1987, the Corporation's Board of Directors declared a
dividend distribution of one Preferred Share Purchase Right on each share of
the Corporation's common stock outstanding as of October 2, 1987. Each Right
allows the shareholder to purchase a one one-hundredth of a share of a new
series of preferred stock of the Corporation at an exercise price of $75.
Rights are exercisable only if a person or group acquires 20% or more of the
Corporation's common stock or announces a tender offer the consummation of
which would result in ownership by a person or group of 20% or more of the
Corporation's common stock. The Rights, which do not have the right to vote or
receive dividends, expire on October 2, 1997, and may be redeemed, prior to
becoming exercisable, by the Board of Directors at $.02 per Right or by
shareholder action with an acquisition proposal.
If any person or group acquires 20% or more of the Corporation's
outstanding common stock, the "flip-in" provision of the Rights will be
triggered and the Rights will entitle a holder (other than such person or any
member of such group) to acquire a number of additional shares of the
Corporation's common stock having a market value of twice the exercise price of
each Right.
In the event the Corporation is involved in a merger or other business
combination transaction, each Right will entitle its holder to purchase, at the
Right's then-current exercise price, a number of the acquiring company's common
stock having a market value at that time of twice the Right's exercise price.
15. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
values:
(38 continued)
<PAGE> 31
CASH AND SHORT-TERM INVESTMENTS - The carrying amount approximates fair
value because of the short maturity of these instruments.
LONG-TERM INVESTMENTS - The fair values of some investments are estimated
based on quoted market prices for those or similar investments. For other
investments for which there are no quoted market prices, a reasonable estimate
of fair market value could not be made without incurring excessive costs.
Additional information pertinent to the value of an unquoted investment is
provided below.
LONG-TERM DEBT - The fair value of the Corporation's long-term debt
(including current installments) is estimated based on the quoted market prices
for the same or similar issues or on the current rates offered to the
Corporation for debt of the same remaining maturities.
FOREIGN CURRENCY CONTRACTS AND INTEREST RATE SWAPS - The fair values of
these financial instruments (used for hedging purposes) are estimated by
obtaining quotes from brokers. The Corporation is exposed to market risks from
changes in interest rates and fluctuations in foreign exchange rates.
Financial instruments are utilized by the Corporation to reduce these risks.
The Corporation does not hold or issue financial instruments for trading
purposes. The Corporation is exposed to credit loss in the event of
nonperformance by the counterparties. All of these financial instruments are
with significant financial institutions that are primarily rated A (S&P) or
better (see Notes 1 and 7).
38
<PAGE> 32
CARRYING AMOUNTS AND FAIR VALUES - The estimated fair values of the
Corporation's financial instruments are as follows:
<TABLE>
<CAPTION>
1994 1993
------------------------ ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------- ----- ------- -----
<S> <C> <C> <C> <C>
Nonderivatives:
Cash and short-term
investments............................... $354,362 $354,362 $377,390 $377,390
Long-term investments
for which it is:
Practicable to
estimate fair value..................... 700 1,500 700 1,800
Not practicable........................... 4,500 4,500
Long-term debt.............................. (499,202) (495,000) (429,264) (445,000)
Derivatives:
Foreign currency contracts.................. (3,400) (3,400) (10,300) (10,300)
Interest rate swaps......................... - (2,000) - -
</TABLE>
It is not practicable to estimate the fair value of an investment
representing the preferred stock of a public company because this stock is not
traded; that investment is carried at its original cost of $4,500 in the
consolidated balance sheet. At the end of September 1994 (latest available
financial statements of this public company), the total assets reported were
$83,469 and the stockholders' equity was $41,835. Revenues were $103,319 and
net income was $22,313 for nine months.
As of December 30, 1994, the Corporation had $183,000 of forward exchange
contracts outstanding. These forward exchange contracts mature between 1995
and 1997. Primarily, these contracts require the Corporation to sell Japanese
yen and receive United States dollars.
Financial instruments which potentially subject the Corporation to
concentrations of credit risk consist principally of cash equivalents and trade
receivables. The Corporation places its cash equivalents with financial
institutions and limits the amount of credit exposure to any one financial
institution. Concentrations of credit risk with respect to trade receivables
are limited due to the large number of customers comprising the Corporation's
customer base, and their dispersion across different businesses and geographic
areas. As of December 30, 1994 and December 31, 1993, the Corporation had no
significant concentration of credit risk.
(39 continued)
<PAGE> 33
16. BUSINESS SEGMENTS - DATA
The business of the Corporation and its subsidiaries falls within three
business groups: an Engineering and Construction Group that consists primarily
of the design, engineering and construction of process plants and fired heaters
for oil refineries, synthetic fuels, chemical producers, and environmental
services for hazardous and mixed-waste investigation and remediation, pollution
control systems, wastewater treatment and all other environmental services; an
Energy Equipment Group that consists mainly of the design and fabrication of
steam generators and condensers, suppliers of mass-transfer equipment, tower
packings, industrial wire mesh, and natural gas processing engineering and
construction; and a Power Systems Group engaged in the owning/leasing to or
operation for third parties of solid waste-to-energy and cogeneration plants.
Earnings of segments represent revenues less expenses attributable to that
group or geographic area where the operating units are located. Revenues
between business segments are considered immaterial and are netted against the
revenues of the respective segments.
Export revenues and intercompany revenues are not significant. No single
customer represents 10% or more of total revenues.
Identifiable assets by group are those assets that are directly related to
and support the operations of each group. Corporate assets are principally
cash, investments and real estate.
Financial information with respect to business segments and geographic data
for the years 1994, 1993 and 1992 is on pages 22 and 23 (unaudited as to
unfilled orders and new orders booked).
39
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary of financial information extracted from the
consolidated balance sheet and statement of earnings for the year ended December
30, 1994 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-30-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-30-1994
<EXCHANGE-RATE> 1
<CASH> 235,801
<SECURITIES> 118,561
<RECEIVABLES> 501,649
<ALLOWANCES> 4,668
<INVENTORY> 198,778
<CURRENT-ASSETS> 1,112,709
<PP&E> 815,746
<DEPRECIATION> 249,590
<TOTAL-ASSETS> 2,063,334
<CURRENT-LIABILITIES> 890,579
<BONDS> 466,637
<COMMON> 0
0
35,833
<OTHER-SE> 420,661
<TOTAL-LIABILITY-AND-EQUITY> 2,063,334
<SALES> 2,234,441
<TOTAL-REVENUES> 2,234,441
<CGS> 1,909,893
<TOTAL-COSTS> 1,909,893
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,978
<INCOME-PRETAX> 106,876
<INCOME-TAX> 41,457
<INCOME-CONTINUING> 65,410
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,410
<EPS-PRIMARY> 1.83
<EPS-DILUTED> 1.83
</TABLE>
