FOSTER WHEELER CORP, 10-K, 1996-03-19

FOSTER WHEELER CORP
10-K, 1996-03-19
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<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
----------------

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the fiscal year ended December 29, 1995

[ ] 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 15, 1996, 40,500,686 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 $1,857,968,970 (based on the last price on that date of
$45.875 per share).

List hereunder the following documents if incorporated by reference, and the
Part of the Form 10-K into which the document is incorporated:

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) Portions of the Registrant's Proxy Statement dated March 22, 1996
filed with the Commission are incorporated by reference in Part III of
this report.
(2) The Financial Section of the Annual Report to Stockholders (pages
21-43) for the fiscal year ended December 29, 1995, is incorporated by
reference in Part I and Part II of this report.
<PAGE> 2
FOSTER WHEELER CORPORATION

1995 Form 10-K Annual Report

Table of Contents

<TABLE>
<CAPTION>
Page
----
Part I

<S> <C> <C>
Item 1. Business 3 - 7
2. Properties 8 - 12
3. Legal Proceedings 12
4. Submission of Matters to a Vote of Security Holders 13
Executive Officers of the Registrant 13

Part II

5. Market for the Registrant's Common Equity and Related
Stockholder Matters 14
6. Selected Financial Data 14
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 15
8. Financial Statements and Supplementary Data 15
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 15

Part III

10. Directors and Executive Officers of the Registrant 16
11. Executive Compensation 16
12. Security Ownership of Certain Beneficial Owners and
Management 16
13. Certain Relationships and Related Transactions 16

Part IV

14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 17 - 26
</TABLE>

2
<PAGE> 3
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 terms "Foster Wheeler" or the
"Corporation" as used herein includes Foster Wheeler Corporation and its
subsidiaries.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS:

Incorporated by reference to Note 19 on page 43 in the Notes to Financial
Statements in Foster Wheeler's Annual Report to Stockholders for the year ended
December 29, 1995.

NARRATIVE DESCRIPTION OF BUSINESS:

The business of the Corporation and its subsidiaries falls within three business
groups. The ENGINEERING AND CONSTRUCTION GROUP designs, engineers and constructs
petroleum, chemical, petrochemical and alternative-fuels facilities and related
infrastructure, including power generation and distribution facilities,
production terminals, pollution control equipment and water treatment facilities
and process plants for the production of fine chemicals, pharmaceuticals,
dyestuffs, fragrances, flavors, food additives and vitamins. Also, the E&C Group
provides a broad range of environmental remediation services, together with
related technical, design and regulatory services. The ENERGY EQUIPMENT GROUP
designs, manufactures and erects steam generating and auxiliary equipment for
power stations and industrial markets worldwide. Steam generating equipment
includes a full range of fluidized bed and conventional boilers firing coal,
oil, gas, biomass and other municipal solid waste, waste wood and low-Btu gases.
Auxiliary equipment includes feedwater heaters, steam condensers, heat-recovery
equipment and low-NOx burners. Site services related to these products encompass
plant erection, maintenance engineering, plant upgrading and life extension, and
plant repowering. In addition, this Group provides research analysis and
experimental work in fluid dynamics, heat transfer, combustion and fuel
technology, materials engineering and solids mechanics. The Energy Equipment
Group also provides proprietary solutions and systems for many separation
applications and manufacturers highly-engineered chemical separation equipment
for the petroleum refining, petrochemical, chemical and gas processing
industries. The POWER SYSTEMS GROUP designs, engineers, manufactures and
constructs to build, own or lease, and operate cogeneration, independent power
production and resource recovery facilities and facilities for the process and
petrochemical industries. This Group generates revenues from construction and
operating activities pursuant to long-term off-take and operating and
maintenance agreements and from returns on its equity positions. A
special-purpose subsidiary established for each new project manages that project
from the permitting stage through

3
<PAGE> 4
plant construction and operation. All of the special-purpose subsidiary project
debt is limited-recourse. This Group refinances its equity interest in selected
projects from time to time when such refinancing will result in risk mitigation,
a lower effective financing cost or a potential increased return on investment.

In 1993, Foster Wheeler Enviresponse, Inc. was consolidated as the Environmental
Services division of Foster Wheeler USA Corporation which, in October 1994
expanded in the environmental field by purchasing Enserch Environmental
Corporation ("Enserch"), a full-service provider of hazardous and mixed-waste
investigation and remediation control services, wastewater treatment, waste
management, risk analysis and environmental permitting. The acquisition resulted
in the formation of 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.

Effective September 30, 1995, the Corporation acquired the power generation
business of A. Ahlstrom Corporation ("Pyropower") for approximately $207,500,000
including acquisition costs. Also, during September 1995, the Corporation
finalized (i) the purchase for approximately $2,500,000 of the assets of Zack
Power & Industrial Co., a construction company in Gary, Indiana, and (ii) the
purchase for approximately $16,000,000 of the assets of TPA, Inc., a supplier of
sulfur-recovery equipment based in Dallas, Texas.

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 accounted for 10
percent or more of Foster Wheeler's consolidated revenues in fiscal 1995, 1994
and 1993, although in any given year one customer could contribute significantly
to such revenues.

The materials used in Foster Wheeler's manufacturing and construction operations
are obtained from both domestic and foreign sources. Materials, which consist
mainly of steel products and manufactured items, are heavily dependent on
foreign sources, particularly 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 Group 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 Finland, 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

4
<PAGE> 5
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.

Foster Wheeler had a backlog of firm orders as of December 29, 1995 of
$6,474,000,000 as compared to a backlog as of December 30, 1994 of
$5,135,500,000. The elapsed time from the award of a contract to completion of
performance may be up to four years. The dollar amount of backlog is not
necessarily indicative of the future earnings of the Corporation related to the
performance of such work. Although backlog represents only business which is
considered firm, there can be no assurance that cancellations or scope
adjustments will not occur. Due to additional factors outside of the
Corporation's control, such as changes in project schedules, the Corporation
cannot predict with certainty the portion of backlog not to be performed.

The backlog by major industry segments as of December 29, 1995 and December 30,
1994 is as follows:

<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Engineering and
Construction $4,566,600,000 $3,798,200,000
Energy Equipment 1,651,600,000 1,037,900,000
Power Systems 227,000,000 257,900,000
Corporate and Financial
Services 28,800,000 41,500,000
-------------- --------------
$6,474,000,000 $5,135,500,000
============== ==============
</TABLE>

5
<PAGE> 6
The Power Systems Group projects consist of the following:

<TABLE>
<CAPTION>
PLANT LOCATION TYPE AND SIZE UNIT FUEL OPERATION
-------------- ------------------ ---- ---------
<S> <C> <C> <C>
Martinez, California 99.9 MW Cogeneration Refinery Gas/NG 1987
Chapleau, Ontario, Canada 360 Ton/Day Wood Waste Wood Waste 1987
Gilberton, Pennsylvania 80 MW Cogeneration Waste Coal 1988
Mt. Poso, California 49.5 MW Cogeneration Coal 1989
Charleston, South Carolina 600 Ton/Day Waste-to-Energy Refuse 1989
Mt. Carmel, Pennsylvania 40 MW Cogeneration Waste Coal 1990
ACE, California 96 MW Cogeneration Coal 1991
Camden County, New Jersey 1050 Ton/Day Waste-to-Energy Refuse 1991
Hudson Falls, New York 400 Ton/Day Waste-to-Energy Refuse 1992
University of Minnesota Heating Plant Operation and Upgrade Coal/Gas/Oil 1992
InterPower, Pennsylvania 102 MW Power Waste Coal 1995
Wilmington, Delaware Facilities Management -- --

- --------------------------------------------------------------------------------------------------------------

Robbins, Illinois 1600 Ton/Day Waste-to-Energy* RDF Construction
Lisbon, Portugal 2200 Ton/Day Waste-to-Energy Refuse Construction
Concepcion, Chile 8 MM SCFD Hydrogen Plant -- Construction
Lagoven, Venezuela 50 MM SCFD Hydrogen Plant -- Construction
Concepcion, Chile 65 MW Cogeneration Plant Plus Coke Financing
12,000 Barrels/Day Coker and
7014 Barrels/Day Hydrotreater
Montreal, Quebec, Canada 2200 Ton/Day Waste-to-Energy* Refuse Final Permitting
Wilkes-Barre, Pennsylvania 40 MW Small Power Wood Waste Permitting
Comunanza, Italy 145 MW Cogeneration Natural Gas Permitting
Teverola, Italy 145 MW Cogeneration Natural Gas Construction

- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
* 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 of the Corporation estimates, based on industrial
publications, that Foster Wheeler 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. Management of the Corporation estimates, based on
industrial surveys and trade association materials, that it is among the ten
largest suppliers of utility and industrial-sized steam generating and auxiliary
equipment in the world and among the three largest 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 1995, approximately $11,100,000, and in 1994
and 1993, $9,800,000 and $8,300,000 respectively, was spent on Foster Wheeler
sponsored research activities. During the same periods, approximately
$25,900,000, $38,200,000 and $40,900,000, respectively, was spent on research
activities that were paid for by customers of Foster Wheeler.

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 12,650 full-time employees on December 29,
1995. Following is a tabulation of the number of full-time employees of Foster
Wheeler in each of its industry segments on the dates indicated:

<TABLE>
<CAPTION>
December 29, December 30, December 31,
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Engineering and
Construction 7,560 7,940 5,630
Energy Equipment 4,540 3,200 3,110
Power Systems 390 360 270
Corporate and Financial
Services 160 185 340
------ ------ -----

12,650 11,685 9,350
====== ====== =====
</TABLE>

FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES:

Incorporated by reference to Note 19 on page 43 in the Notes to Financial
Statements in Foster Wheeler's Annual Report to Stockholders for the year ended
December 29, 1995.

7
<PAGE> 8
ITEM 2. PROPERTIES

COMPANY AND
(INDUSTRY SEGMENT*)

<TABLE>
<CAPTION>
BUILDING LEASE
LOCATION USE LAND AREA SQUARE FEET EXPIRES
-------- --- --------- ----------- -------
<S> <C> <C> <C> <C>
Foster Wheeler Corporation (CF)
New York City, New York Executive Offices -- 1,148 1998

Livingston, New Jersey General Office
& Engineering 31.0 acres 288,000 (2)

Lebanon, New Jersey General Offices -- 155,288 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 -- (4)

Foster Wheeler Energy Corporation (EE)
Dansville, New York Manufacturing
& Offices 82.4 acres 513,786

McGregor, Texas Storage
Facilities 15.0 acres 24,000

Foster Wheeler USA Corporation (EC)

Houston, Texas General Offices -- 71,058 2003
</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 Iberia, S.A. (EC)
Madrid, Spain Office & Engineering 4.2 acres 82,500

Foster Wheeler France (EC)
Paris, France Office & Engineering -- 86,555 (1)

Foster Wheeler (Thailand) Limited (EC)
Sriracha, Thailand Office & Engineering -- 26,400 1998

Foster Wheeler Limited (England) (EC)
Glasgow, Scotland Office & Engineering -- 27,610 1997

Reading, England Office & Engineering -- 279,061 1996/2016

Teeside, England Office & Engineering -- 18,100 1997/2014

Foster Wheeler Limited (Canada) (EE)
Edmonton, Alberta Assembly -- 10,960 1995

Niagara-On-The-Lake,
Ontario Office Building 34.5 acres 86,000 (1)

Port Robinson, Ontario Undeveloped Land 17.0 acres --

St. Catharines, Ontario Manufacturing
& Office 29.0 acres 233,500

Stoney Creek, Ontario Construction Tools
Depot -- 19,546 1997

Foster Wheeler Andina, S.A. (EC)
Bogota, Colombia Office & Engineering 2.25 acres 25,000

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 -- 161,400 2001

Milan, Italy Office & Engineering -- 12,900 2006

Milan, Italy Office & Engineering -- 25,800 2005
</TABLE>

9
<PAGE> 10
COMPANY AND
(INDUSTRY SEGMENT*)

<TABLE>
<CAPTION>
BUILDING LEASE
LOCATION USE LAND AREA SQUARE FEET EXPIRES
-------- --- --------- ----------- -------
<S> <C> <C> <C> <C>
Birlesik Insaat ve Muhendislik A.S. (BIMAS) (EC)

Istanbul, Turkey Engineering & Office -- 20,000 2000

Ullrich Copper, Inc. (CF)

Kenilworth, New Jersey Manufacturing -- 90,000 1998

Greenwood,

South Carolina Warehouse -- 10,000 1998

Foster Wheeler Environmental Corporation (EC)

Atlanta, Georgia General Offices 30,618 1999

Bellevue, Washington General Offices 50,798 1999

Boston, Massachusetts General Offices 26,326 1999

Lakewood, Colorado General Offices 44,743 2000

Lyndhurst, New Jersey General Offices 34,753 1999
General Offices 23,540 1996

Oak Ridge, Tennessee General Offices 14,494 1999
General Offices 29,551 1996

Sacramento, California General Offices 10,271 1996

Costa Mesa, California General Offices 11,183 2000

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
</TABLE>

10
<PAGE> 11
COMPANY AND
(INDUSTRY SEGMENT*)

<TABLE>
<CAPTION>
BUILDING LEASE
LOCATION USE LAND AREA SQUARE FEET EXPIRES
-------- --- --------- ----------- -------
<S> <C> <C> <C> <C>
Camden, New Jersey Waste-to-Energy 18 acres -- 2011
Plant

Robbins, Illinois Waste-to-Energy
Plant
Facility Site 16.1 acres -- 2029
Laydown Site 14.6 acres -- 2029

Foster Wheeler Pyropower, Inc. (EE)
San Diego, California General Offices 9.25 acres 86,000

San Diego, California Research Center 1.11 acres 17,410

San Diego, California General Offices 2.5 acres 38,000(1)

Foster Wheeler Energia OY (EE)
Varkhaus, Finland Manufacturing & Offices 22 acres 366,527

Karhula, Finland Research Center 12.84 acres 73,086

Kouvola, Finland Manufacturing & Offices 9.09 acres 73,903

Foster Wheeler Energia, FAKOP, Ltd. (EE)
Sosnowiec, Poland Manufacturing & Offices 15.57 acres 231,688

Glitsch International, Inc. (EE)
Dallas, Texas Manufacturing
& Office 38.0 acres 505,644

Eldorado, Kansas Manufacturing
& Office -- 16,000 1996

Houston, Texas Warehouse & Office 2.83 acres 18,000

Uxbridge, Ontario, Manufacturing 12.0 acres 84,500
Canada

Camrose, Alberta, Undeveloped Land 20.0 acres --
Canada

Aprilia, Italy Manufacturing 20.5 acres 72,000
</TABLE>

11
<PAGE> 12
COMPANY AND
(INDUSTRY SEGMENT*)

<TABLE>
<CAPTION>
BUILDING LEASE
LOCATION USE LAND AREA SQUARE FEET EXPIRES
-------- --- --------- ----------- -------
<S> <C> <C> <C> <C>
Parsippany, New Jersey Manufacturing
& Office 8.3 acres 63,790

Kirkby Stephen, U.K. Manufacturing
& Office 2.4 acres 42,000

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.
(4) 75% 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 13 on page 39 in the Notes to Financial
Statements in Foster Wheeler's Annual Report to Stockholders for the year ended
December 29, 1995.

On March 14, 1996, Illinois Governor Jim Edgar signed legislation repealing the
Illinois Retail Rate Law, as discussed in Note 13 of the Corporation's 1995
Annual Report. The repeal legislation did not expressly provide "grandfathered"
status to the Village of Robbins, Illinois Project. The Corporation intends to
pursue all appropriate legal and equitable remedies to protect the interests of
its shareholders and the project lenders. Management of the Corporation believes
the repeal of the Illinois Retail Rate Law will not result in a material,
adverse effect on the financial position of the Corporation.

12
<PAGE> 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NONE

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 51 Chairman, President and Chief Executive Officer
David J. Roberts 51 Vice Chairman and Chief Financial Officer
N. William Atwater 61 Executive Vice President - Engineering and
Construction Group
Henry E. Bartoli 49 Vice President - Power Systems Group
(Vice President and General Manager, 1987-1992,
Burns and Roe Company.)
Jack E. Deones 64 Vice President and Secretary
Lisa Fries-Gardner 39 Vice President and Chief Compliance Officer
Robert D. Iseman 47 Vice President and Treasurer
Thomas R. O'Brien 57 Vice President and General Counsel
(Partner in the law firm of
Wolff & Samson, 1986-1993.)
James E. Schessler 50 Vice President - Human Resources and Administration
George S. White 59 Vice President and Controller
Robert A. Whittaker 48 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.

13
<PAGE> 14
PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

Incorporated by reference to Note 12 on page 39 in Foster Wheeler's Annual
Report to Stockholders for the year ended December 29, 1995. The Corporation's
common stock is traded on the New York Stock Exchange. The approximate number of
stockholders of record as of December 29, 1995 was 7,414.

ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
(In Thousands of Dollars, Except Per Share Data)

1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues $3,081,930 $2,271,123 $2,654,505 $2,529,464 $2,031,620

Earnings before
accounting change 28,534(1) 65,410 57,704 45,504(2) 43,268

Earnings per share
before accounting
change .79 1.83 1.62 1.28(2) 1.22

Total assets 2,775,809 2,140,334 1,806,201 1,763,264 1,638,874

Long-term borrowings
(including current
installments) 589,052 499,202 429,264 439,578 454,826

Cash dividends per
common share .77 .72 .645 .585 .53
</TABLE>

(1) Includes a provision of $46,500 ($1.28 per share) for reorganization
costs.
(2) 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 $91,259 after tax and valuation
allowance, or $2.57 per share.

14
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Incorporated by reference to pages 22 to 28 in Foster Wheeler's Annual Report to
Stockholders for the year ended December 29, 1995.

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 29, 1995:

A. Consolidated Balance Sheet, December 29, 1995 and December 30, 1994
(page 29)

B. Consolidated Statement of Earnings for the years ended December 29,
1995; December 30, 1994; and December 31, 1993 (page 30)

C. Consolidated Statement of Changes in Stockholders' Equity for the
years ended December 29, 1995; December 30, 1994; and December 31,
1993 (page 31)

D. Consolidated Statement of Cash Flows for the years ended December 29,
1995; December 30, 1994; and December 31, 1993 (page 32)

E. Notes to Consolidated Financial Statements (pages 33-43)

F. Report of Independent Accountants (page 30)

Schedules Required by Regulation S-X

NONE

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

NONE

15
<PAGE> 16
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 22, 1996, for the Annual Meeting of Stockholders to be held April
30, 1996. Certain information regarding executive officers is included in Part I
hereof 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 22, 1996, for the Annual Meeting of Stockholders to be held April
30, 1996.

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 22, 1996, for the Annual Meeting of Stockholders to be held April
30, 1996.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.

16
<PAGE> 17
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 15

All schedules and financial statements other than those indicated
above 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.

3 The following Exhibits are required by Item 601 of Regulation S-K
and by paragraph (c) of Item 14 of Form 10-K:

3.1 Copy of Restated Certificate of Incorporation of Foster Wheeler
Corporation, dated June 5, 1989 (filed as Exhibit 2 to Foster
Wheeler Corporation's 1989 Annual Report on Form 10-K and
incorporated herein by reference).

3.2 By-Laws of Foster Wheeler Corporation, as amended June 27, 1995
(filed as Exhibit 3 to Foster Wheeler Corporation's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995 and
incorporated herein by reference).

4 Foster Wheeler Corporation hereby agrees to furnish copies of
instruments defining the rights of holders of long-term debt of
Foster Wheeler Corporation and its consolidated subsidiaries to
the Commission upon its request.

10.1 Purchase Agreement dated as of June 21, 1995 by and between
Foster Wheeler Corporation and A. Ahlstrom Corporation (filed as
Exhibit 10.1 to Foster Wheeler Corporation's Current Report on
Form 8-K dated October 12, 1995 and incorporated herein by
reference).

10.2 Supplement and Amendment Agreement dated as of September 30, 1995
between Foster Wheeler Corporation and A. Ahlstrom Corporation
(filed as Exhibit 10.2 to Foster Wheeler Corporation's Current
Report on Form 8-K dated October 12, 1995 and incorporated herein
by reference).

10.3 Revolving Credit Agreement among the Corporation and the Lenders
Signatory thereto, dated September 20, 1995 (filed as Exhibit
10.1 to Foster Wheeler

17
<PAGE> 18
Corporation's Quarterly Report on Form 10-Q for the quarter
ending September 29, 1995 and incorporated herein by reference).

10.4 Short-term Revolving Credit Agreement among the Corporation and
the Lenders Signatory thereto, dated September 20, 1995 (filed as
Exhibit 10.2 to Foster Wheeler Corporation's Quarterly Report on
Form 10-Q for the quarter ending September 29, 1995 and
incorporated herein by reference).

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 21-43) for the fiscal year ended December 29,
1995 is furnished for the informational purposes of the
Commission and is not deemed "filed" as part of this filing.

21 Subsidiaries of the registrant (pages 20-22)

23 Consent of independent accountants (page 24)

27 Financial data schedule (for the informational purposes of the
Commission only).

(b) Current Reports on Form 8-K:

The following Current Reports on Form 8-K have been filed during
the period September 30 through December 29, 1995:

1. Current Report on Form 8-K dated October 12, 1995 and filed
with the Commission on October 13, 1995, as amended by the
Current Report on Form 8-K/A dated October 31, 1995 and
filed with the Commission on October 31, 1995.

2. Current Report on Form 8-K dated October 27, 1995 and filed
with the Commission on November 1, 1995.

3. Current Report on Form 8-K dated November 17, 1995 and
filed with the Commission on November 17, 1995.

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. 33-59739
(filed June 1, 1995), 33-40878 (filed May 29, 1991) and 33-34694 (filed May 2,
1990):

18
<PAGE> 19
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.

19
<PAGE> 20
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT

FOSTER WHEELER CORPORATION (PARENT)
PRINCIPAL CONSOLIDATED, WHOLLY OWNED SUBSIDIARIES (DIRECTLY OR INDIRECTLY)

Listed by Jurisdiction of Organization

AUSTRALIA
Foster Wheeler Australia Pty. Ltd., Melbourne

BERMUDA
FW Management Operations, Ltd., Hamilton
Foster Wheeler Trading Co. Ltd., Hamilton
Power Systems International, Ltd., Hamilton
York Jersey Liability Ltd., Hamilton

CANADA
Foster Wheeler Limited, St. Catharines
Les Chaudieres Foster Wheeler Inc., Quebec
Chapleau Co-generation Ltd., Chapleau
Foster Wheeler Canadian Resources Limited, Alberta
Foster Wheeler Fired Heaters, Ltd., Calgary
Glitsch Canada, Ltd., Uxbridge, Ontario
La Societe D'Energie Foster Wheeler Ltd., Quebec

CHILE
Foster Wheeler Chile, S.A., Santiago de Chile

CHINA, PEOPLES REPUBLIC OF
Foster Wheeler Power Machinery Company Limited,
Guangdong Province

ENGLAND
Foster Wheeler Limited, Reading
Foster Wheeler Energy Ltd., Reading
Foster Wheeler (India) Ltd., Reading
Foster Wheeler (Northern) Ltd., Reading
Foster Wheeler (Pacific) Ltd., Reading
Foster Wheeler Petroleum Development Ltd., Reading
Foster Wheeler World Services, Ltd., Reading
FW Management Operations Ltd., Reading
Glitsch (U.K.) Ltd., Kirkby Stephen Cumbria
Glitsch Field Services, Ltd., Dorking
Foster Wheeler (Indonesia) Ltd., Reading
Foster Wheeler Petroleum Development (Norway) Ltd.,
Reading

FINLAND
Foster Wheeler Energia, OY, Helsinki

FRANCE
Foster Wheeler France, S.A., Paris
Foster Wheeler Conception Etudes Entretien, Paris
Foster Wheeler World Services, France, S.A., Paris
Glitsch France, S.A., Arles
Societe Fonciere-Bourdonnais Rivoli, S.A., Paris

INDIA
Glitsch Process India, Ltd.

ITALY
Foster Wheeler Italiana, S.p.A., Milan
Steril, S.p.A., Milan
Foster Wheeler World Services, S.p.A., Rome
Glitsch Italiana, S.p.A., Campoverde
Foster Wheeler Financial Services S.p.A., Milan
Foster Wheeler Environmental Italia, Srl, Milan

JAPAN
Glitsch Japan Corporation, Kawasaki

MEXICO
Foster Wheeler Ingenieros y Constructores, S.A. de C.V.
Quadalajara

NETHERLANDS ANTILLES
Foster Wheeler N.V., Curacao

NETHERLANDS
Foster Wheeler Europe, B.V., Amsterdam
Foster Wheeler Power Systems, B.V., Amsterdam

SINGAPORE (REPUBLIC OF)
Foster Wheeler Eastern Private, Ltd., Singapore

SPAIN
Foster Wheeler Iberia, S.A., Madrid
Foster Wheeler Energia, S.A., Madrid
Foster Wheeler Trading Co. A.G., S.A., Madrid
F.I. Controles, S.A., Madrid
Foster Wheeler Power Systems, S.A., Madrid
Conequip, S.A., Madrid

20
<PAGE> 21
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT

FOSTER WHEELER CORPORATION (PARENT)
PRINCIPAL CONSOLIDATED, WHOLLY OWNED SUBSIDIARIES (DIRECTLY OR INDIRECTLY)

Listed by Jurisdiction of Organization

UNITED STATES
Camden County Energy Recovery Associates, New Jersey
Camden County Energy Recovery Corporation, Delaware
Foster Wheeler Arabia Ltd., Delaware
Foster Wheeler Bedminster, Inc., Delaware
Foster Wheeler Bridgewater, Inc., Delaware
Foster Wheeler Broome County, Inc., Delaware
Foster Wheeler Charleston Resource Recovery, Inc., Delaware
Foster Wheeler China, Inc., Delaware
Foster Wheeler Constructors, Inc., Delaware
Foster Wheeler Development Corporation, Delaware
Foster Wheeler (Emirates) Corporation, Delaware
Foster Wheeler Energy Corporation, Delaware
Foster Wheeler Energy International, Inc., Delaware
Foster Wheeler Energy Manufacturing, Inc., Delaware
Foster Wheeler Environmental Corporation, Delaware
Foster Wheeler Facilities Management Delaware, Inc., Delaware
Foster Wheeler Hudson Falls, Inc., Delaware
Foster Wheeler Illinois, Inc., Delaware
Foster Wheeler Intercontinental Corporation, Delaware
Foster Wheeler International Corporation, Delaware
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 Pyropower, Inc., New York
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
Foster Wheeler Zack, Inc., Delaware
FWPS Specialty Products, Inc., Delaware
Glitsch Field Services, Inc., Texas
Glitsch Inc., Delaware
Glitsch International, Inc., Delaware
Glitsch Special Products, Inc., Texas
Glitsch Technology Corporation, Delaware
Optimized Process Designs, Inc., Delaware
Otto H. York Company, Delaware
POSCO Gilberton, Inc., California
Pyropower Operating Services Company, Inc., California
TPA, Inc., Delaware
Ullrich Copper, Inc., Delaware
Yargo, Inc., Minnesota

THAILAND
Foster Wheeler (Thailand) Limited, Sriracha

TURKEY
Foster Wheeler BIMAS Birlesik Insaat Ve Muhendislik,
A. S., Istanbul

U.S. VIRGIN ISLANDS
Foster Wheeler F.S.C., Inc., St. Thomas

VENEZUELA
Foster Wheeler Caribe Corporation, C.A., Caracas

21
<PAGE> 22
PRINCIPAL AFFILIATED COMPANIES
(PERCENT DIRECTLY OR INDIRECTLY OWNED BY FOSTER WHEELER CORPORATION)

COLOMBIA
Foster Wheeler Andina, S.A., Bogota (60%)

FINLAND
OY Bioflow AB, Varkhaus (51%)

ITALY
F.FW Fiatavio Foster Wheeler Per L'Energia, S.p.A., Milan (40%)
Software Technology, S.p.A., Milan (90%)

JAPAN
Foster Wheeler Pyropower KK (85%)

NIGERIA
Foster Wheeler (Nigeria) Ltd., Lagos (60%)

POLAND
Foster Wheeler Energy Fakop, Ltd. (51%)

22
<PAGE> 23
A copy of the By-Laws of the Corporation, as amended through June 27, 1995, is
available upon request to the Office of the Secretary, Foster Wheeler
Corporation, Perryville Corporate Park, Clinton, New Jersey 08809-4000.

23
<PAGE> 24
CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration
statements of Foster Wheeler Corporation on (1) Form S-3 (File No. 33-61089) and
(2) Form S-8 (File No.'s 33-34694, 33-40878 and 33-59739) of our report dated
February 12, 1996, on our audits of the consolidated financial statements of
Foster Wheeler Corporation and Subsidiaries as of December 29, 1995 and December
30, 1994, and for each of the three years in the period ended December 29, 1995,
which report is incorporated by reference in this Annual Report on Form 10-K.

Coopers & Lybrand L.L.P.

New York, New York
March 18, 1996

<PAGE> 25
SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

FOSTER WHEELER CORPORATION
(Registrant)

Dated March 19, 1996 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 19, 1996, by the following persons on
behalf of the registrant, in the capacities indicated.

Signature Title
--------- -----

/s/ Richard J. Swift Director, Chairman, President and
--------------------------- Chief Executive Officer
Richard J. Swift (Principal Executive Officer)

/s/ David J. Roberts Director, Vice Chairman and
--------------------------- Chief Financial Officer
David J. Roberts (Principal Financial Officer)

/s/ George S. White Vice President and Controller
--------------------------- (Principal Accounting Officer)
George S. White

/s/ Eugene D. Atkinson Director
---------------------------
Eugene D. Atkinson

Director
---------------------------
Louis E. Azzato

/s/ Kenneth A. DeGhetto Director
---------------------------
Kenneth A. DeGhetto

/s/ Martha Clark Goss Director
---------------------------
Martha Clark Goss

<PAGE> 26
Signature Title
--------- -----

/s/ E. James Ferland Director
---------------------------
E. James Ferland

/s/ John A. Hinds Director
---------------------------
John A. Hinds

/s/ Joseph J. Melone Director
---------------------------
Joseph J. Melone

/s/ Frank E. Perkins Director
---------------------------
Frank E. Perkins

/s/ Charles Y. C. Tse Director
---------------------------
Charles Y. C. Tse

/s/ Robert Van Buren Director
---------------------------
Robert Van Buren

26
<PAGE> 27
EXHIBIT INDEX

10.3 Revolving Credit Agreement among the Corporation and the Lenders
Signatory thereto, dated September 20, 1995 (filed as Exhibit
10.1 to Foster Wheeler Corporation's Quarterly Report on Form
10-Q for the quarter ending September 29, 1995 and incorporated
herein by reference).

21 Subsidiaries of the registrant (pages 20-22)

23 Consent of independent accountants (page 24)

27 Financial data schedule (for the informational purposes of the
Commission only).

<PAGE> 1
FOSTER WHEELER CORPORATION AND SUBSIDIARIES

EXHIBIT 13
FINANCIAL SECTION

<TABLE>
<S> <C>
Comparative Financial Statistics..................................... 21
Management's Discussion and Analysis................................. 22-28
Consolidated Balance Sheet........................................... 29
Consolidated Statement of Earnings................................... 30
Report of Independent Accountants.................................... 30
Consolidated Statement of Changes in Stockholders' Equity............ 31
Consolidated Statement of Cash Flows................................. 32
Notes to Financial Statements........................................ 33-43
</TABLE>

COMPARATIVE FINANCIAL STATISTICS
- --------------------------------------------------------------------------------
(In Thousands, Except per Share Amounts)

<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Unfilled orders, end of period............... $6,473,990 $5,135,452 $3,884,114 $3,806,757 $3,465,339
Revenues..................................... 3,081,930 2,271,123 2,654,505 2,529,464 2,031,620
Provision for reorganization costs........... 50,120 - - - -
Earnings before income taxes and
accounting change.......................... 69,663(2) 106,867 96,818 67,825 61,285
Provision for income taxes................... 41,129 41,457 39,114 22,321 18,017
Earnings before accounting change............ 28,534 65,410 57,704 45,504 43,268
Effect of accounting change.................. - - - (91,259)(1) -
Net earnings/(loss).......................... 28,534 65,410 57,704 (45,755) 43,268
Earnings per share *
Earnings before accounting change.......... $ .79 $1.83 $ 1.62 $ 1.28 $ 1.22
Effect of change in accounting principle... - - - (2.57)(1) -
---------- ---------- ---------- ---------- ----------
Net earnings/(loss)........................ $ .79 $ 1.83 $ 1.62 $ (1.29) $ 1.22
========== ========== ========== ========== ==========
Weighted average number of shares of common
stock outstanding.......................... 36,322 35,788 35,656 35,596 35,522
Current assets............................... $1,438,973 $1,112,709 $ 983,454 $ 924,886 $ 842,747
Current liabilities.......................... 1,240,276 890,579 778,989 721,018 588,567
Working capital.............................. 198,697 222,130 204,465 203,868 254,180
Land, buildings and equipment (net).......... 644,812 566,156 567,216 595,946 613,778
Total assets................................. 2,775,809 2,140,334 1,806,201 1,763,264 1,638,874
Bank loans................................... 86,869 77,350 59,725 54,929 45,605
Long-term borrowings (including current
installments).............................. 589,052 499,202 429,264 439,578 454,826
Net assets owned............................. 625,867 456,494 400,176 387,297 500,124
Net assets owned per common share of stock... $ 15.46 $ 12.75 $ 11.21 $ 10.87 $ 14.06
Rate of return on net assets................. 6.3% 16.3% 14.9% (9.1)% 9.1%
Cash dividends per share of common stock..... $ .77 $ .72 $ .645 $ .585 $ .53
</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.
(2) Includes in 1995 a provision of $50,120 for reorganization costs.

21
<PAGE> 2

MANAGEMENT'S DISCUSSION
AND ANALYSIS

RESULTS OF OPERATIONS

BUSINESS GROUPS (See Note 19 to Financial Statements.)
(In Millions of Dollars)

<TABLE>
<CAPTION>
Corporate
Engineering and
and Energy Power Financial
Total Construction Equipment Systems Services (1)
----- ------------ --------- ------- ------------
1995
- ----
<S> <C> <C> <C> <C> <C>
Unfilled orders................................. 6,474.0 4,566.6 1,651.6 227.0 28.8
New orders booked............................... 4,071.4 2,927.7 1,000.5 138.4 4.8
Revenues........................................ 3,081.9 2,146.2 774.5 157.2 4.0
Interest expense (2)............................ 49.0 2.8 8.1 24.5 13.6
Earnings before provision for reorganization
costs and income taxes...................... 119.8 84.4 51.2 29.3 (45.1)
Earnings before income taxes.................... 69.7 84.4 1.1 (3) 29.3 (45.1)
Identifiable assets............................. 2,775.8 1,022.3 923.6 583.1 246.8
Capital expenditures............................ 59.4 23.0 18.9 14.0 3.5
Depreciation.................................... 51.7 16.6 13.6 17.6 3.9

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............................. 2,140.3 878.4 454.1 537.7 270.1
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
</TABLE>

<PAGE> 3

GEOGRAPHIC AREAS (See Note 19 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>
1995
- ----

Unfilled orders................................. 6,474.0 3,098.3 3,318.3 28.6 28.8
New orders booked............................... 4,071.4 1,832.9 2,167.6 66.1 4.8
Revenues........................................ 3,081.9 1,520.9 1,491.2 65.8 4.0
Interest expense (2)............................ 49.0 31.3 2.5 1.6 13.6
Earnings before provision for reorganization
costs and income taxes...................... 119.8 72.6 92.9 (0.6) (45.1)
Earnings before income taxes.................... 69.7 47.9 (3) 92.9 (26.0) (3) (45.1)
Identifiable assets............................. 2,775.8 1,444.5 1,032.6 51.9 246.8

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............................. 2,140.3 1,082.3 718.8 69.1 270.1

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
</TABLE>

(1) Includes general corporate income and expense, and the Corporation's
insurance operation. In 1993, the business of the Corporation was
redefined to focus on the three business groups. Thermacote Welco
Company (sold in September 1993), Barsotti's Inc. (discontinued
operation at the end of 1993) and Ullrich Copper, Inc. were aggregated
as part of the Corporate and Financial Services Group.

(2) Includes intercompany interest charged by Corporate to the business
groups on outstanding borrowings.

(3) Includes in 1995 a provision of $50.1 for reorganization costs.
Geographic allocation - United States - $24.7; Canada - $25.4.

Unaudited as to unfilled orders and new orders booked.

<PAGE> 4

MANAGEMENT'S DISCUSSION
AND ANALYSIS

The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.

THREE YEARS ENDED DECEMBER 29, 1995

GENERAL

The Corporation's consolidated backlog at the end of fiscal 1995 was
$6,474.0 million, an increase of $1,338.5 million or 26% over the amount
reported for the end of fiscal 1994 of $5,135.5 million, which in turn
represented an increase of 32% from a backlog at the end of fiscal 1993 of
$3,884.1 million. The dollar amount of backlog is not necessarily indicative of
the future earnings of the Corporation related to the performance of such work.
Although backlog represents only business which is considered firm, there can be
no assurance that cancellations or scope adjustments will not occur. Due to
additional factors outside of the Corporation's control, such as changes in
project schedules, the Corporation cannot predict with certainty the portion of
backlog not to be performed. Backlog has been adjusted to reflect project
cancellations, deferrals, and revised project scopes and costs. The net
reduction in backlog from project adjustments and cancellations for fiscal 1995
was $249.3 million, compared with $385.2 million in fiscal 1994 and $184.9
million in fiscal 1993. Furthermore, the Corporation's future award prospects
include several large-scale international projects and, because the large size
and uncertain timing of these projects can create variability in the
Corporation's contract awards, future award trends are difficult to predict with
certainty.

New orders awarded for fiscal 1995 ($4,071.4 million) were 32% higher than
new orders awarded in fiscal 1994 ($3,091.0 million), which were slightly higher
than new orders awarded in fiscal 1993 ($2,982.8 million). A total of 55% of new
orders in fiscal 1995 was for projects awarded to the Corporation's subsidiaries
located outside of the United States as compared to 64% in fiscal 1994 and 49%
in fiscal 1993. Key geographic regions outside of the United States contributing
to new orders awarded in fiscal 1995 were Europe, China, Southeast Asia and the
Indian subcontinent.

Operating revenues increased in fiscal 1995 by 36% or $807.8 million
compared to fiscal 1994, to $3,042.2 million from $2,234.4 million, which in
turn represented a 14% or $348.6 million decrease as compared to fiscal 1993 of
$2,583.0 million.

Gross earnings from operations, which is equal to operating revenues minus
the cost of operating revenues ("gross earnings"), increased $75.4 million or
23% in fiscal 1995 as compared to fiscal 1994, to $399.9 million from $324.5
million, which was an increase of approximately 11% over gross earnings for
fiscal 1993.

Selling, general and administrative expenses increased $47.0 million in
fiscal 1995 as compared to fiscal 1994, to $250.4 million from $203.4 million,
which in turn represented a slight decrease from expenses reported in fiscal
1993 of $204.0 million. General and administrative expenses increased by $21.7
million in fiscal 1995 and selling expenses increased by $23.7 million,
principally as a result of increased costs related to the acquisitions of
Enserch Environmental Corporation ("Enserch") in September 1994 and the
power-generation business of A. Ahlstrom Corporation ("Pyropower") effective
September 30, 1995.

Other income in fiscal 1995 as compared to fiscal 1994 increased $3.1
million or 8% to $39.8 million from $36.7 million. Other income in fiscal 1994
as compared to fiscal 1993 decreased $34.8 million, to $36.7 million from $71.5
million. This decrease was primarily a result of the gains in 1993 of $10.9
million from the sale of Thermacote Welco and $25.3 million from the sale of
49.5% limited partnership interest in a waste-to-energy plant.

Other deductions in fiscal 1995 increased $19.1 million primarily due to
increases in interest expense of $14.0 million and amortization of intangibles
of $2.4 million. Other deductions in fiscal 1994 decreased $14.8 million
primarily due to nonrecurring events in fiscal 1993, including the acceleration
of the amortization of goodwill as a result of the valuation of such
subsidiary's future cash flows, and the establishment of a provision to cover
potential exposure for non-recovery of development costs related to
waste-to-energy projects in the Power Systems Group.

24 (continued)
<PAGE> 5

In connection with the acquisition of Pyropower, the Corporation recorded a
one-time pretax provision for reorganization costs in the fourth quarter of 1995
of $50.1 million. This provision relates to the reorganization of the operations
of the Energy Equipment Group that existed before the acquisition of Pyropower.
The reorganization plan, when fully completed, will result in substantial cost
savings and is expected to improve the competitive position of the Energy
Equipment Group. This reorganization plan includes a rationalization of
manufacturing capacity and the reduction of approximately 630 salaried and
hourly personnel. The provision for reorganization costs includes $10.2 million
for the write-off of excess buildings and equipment due to the rationalization
of production capacity, $16.9 million for employee severance cost and related
benefits, $19.3 million for asset write-downs (including stranded inventory) and
provisions related to discontinuance of certain product lines (including
incremental costs on certain completed contracts) and $3.7 million for other
costs (including

<PAGE> 6

write-off of accumulated translation adjustment for curtailed operations). A tax
benefit (after valuation allowance increase) of $3.6 million has been
recognized, resulting in a net provision of $46.5 million. Approximately 50% of
the above provision is expected to have a cash impact. As of year end, the
majority of the cash-related liability remains to be paid. The spending is
expected to be substantially completed by the end of 1996.

The effective tax rate for fiscal 1995 was 59.0% compared to 38.8% in
fiscal 1994 and 40.4% in fiscal 1993. The fiscal 1995 effective tax rate
differed from the U.S. statutory rate primarily as a result of increasing the
deferred tax asset valuation allowance by $14.5 million and an increase in state
income taxes. The increase in the valuation allowance resulted from the 1995
provision for reorganization costs. This provision will result in additional
deferred tax assets for financial reporting purposes, thereby making it less
likely that a portion of the tax credit carryforwards will be utilized. Without
the increase in the valuation allowance, the effective tax rate would have been
38.2%. The fiscal 1993 effective tax rate differed from the U.S. statutory rate
primarily as a result of the accelerated amortization of cost in excess of net
assets of a subsidiary acquired, and the recapture of investment tax credits
related to the sale of the limited partnership interest.

Net earnings were $28.5 million or $.79 per share. Net earnings excluding
the provision for reorganization costs of $46.5 million ($1.28 per share) were
$75.0 million or $2.07 per share, a 13% increase compared to 1994. Net earnings
increased $7.7 million or 13% in fiscal 1994 as compared to fiscal 1993, from
$57.7 million to $65.4 million.

ENGINEERING AND CONSTRUCTION GROUP

The E&C Group's backlog at the end of fiscal 1995 was $4,566.6 million, a
20% increase over backlog of $3,798.2 million at the end of fiscal 1994, which
in turn represented a 39% increase from backlog of $2,724.3 million at the end
of fiscal 1993. The increase in fiscal 1995 as compared with fiscal 1994 was
attributable to two primary factors. First, approximately $500 million of this
increase was attributable to the acquisition of Enserch in 1994. Second,
contracts awarded to the French subsidiary in the E&C Group amounted to $300
million in 1995. These contracts included the engineering, procurement and
construction supervision contract for a waste-to-energy plant in Portugal, and
two chemical projects in France.

New orders awarded to the E&C Group increased 37% in fiscal 1995 as
compared with fiscal 1994, from $2,138.6 million in fiscal 1994 to $2,927.7
million in fiscal 1995. New orders increased 11% in fiscal 1994 as compared to
fiscal 1993 levels of $1,921.2 million. The increase in new orders in fiscal
1995 and 1994 can be attributed to (1) the environmental company and (2)
increased awards in France in 1995 and the U.K. in 1994.

The E&C Group reported a 37% increase in operating revenues in fiscal 1995
as compared to fiscal 1994 from $1,543.3 million to $2,120.2 million, which in
turn represented a 14% decrease from fiscal 1993 operating revenues of $1,803.1
million. The increase in fiscal 1995 operating revenues as compared to fiscal
1994 was primarily the result of increased activities in the environmental
subsidiary in the United States, acquired in late 1994, and the Italian and
Spanish subsidiaries in Europe.

The decrease in fiscal 1994 operating revenues as compared to fiscal 1993
was the result of reduced pass-through costs and lower operating levels on
long-term contracts of the European subsidiaries.

The Corporation includes pass-through costs on cost-plus contracts which
are general-customer reimbursable materials, equipment and subcontractor costs
when the Corporation determines that it is responsible for the engineering
specification, procurement and management of such cost components on behalf of
the customer. The percentage relationship between pass-through costs of
contracts and revenues will fluctuate from year to year depending on a variety
of factors including the mix of business in the years compared. Historically,
engineering services revenues have higher margins than either construction or
maintenance services. The British, French and Italian subsidiaries had a mix of
engineering and construction contracts in fiscal 1994 that required a lower
value of material cost to be reimbursed by customers as compared to the mix of
contracts in fiscal 1993 and fiscal 1995.

In addition, while backlog increased for the E&C Group in fiscal 1994, the
lower operating revenues were partially a result of lower levels of operating
activity.

25 (continued)

<PAGE> 7

The E&C Group's gross earnings increased $45.9 million in fiscal 1995 as
compared with fiscal 1994 or 31%, to $194.8 million from $148.9 million, which
in turn represented an increase of 13% from gross earnings of $132.1 million in
fiscal 1993. An increase in fiscal 1995 of $29.1 million as compared to fiscal
1994 and a $10.9 million increase in fiscal 1994 as compared to fiscal 1993 was
attributable to the Corporation's environmental service activities. The
remaining increases in fiscal 1995 and fiscal 1994 were attributable to the
successful completion of several major contracts by the United Kingdom
subsidiary in fiscal 1995 and 1994, the Spanish subsidiary in fiscal 1995 and
the Italian subsidiary in fiscal 1994.

ENERGY EQUIPMENT GROUP

The Energy Equipment Group's backlog was $1,651.6 million at the end of
fiscal 1995, representing a 59% increase over backlog of $1,037.9 million at the
end of fiscal 1994, which in turn represented a 17% increase over backlog of
$890.5 million at the end of fiscal 1993.

<PAGE> 8

MANAGEMENT'S DISCUSSION AND ANALYSIS

The increase in backlog in fiscal 1995 as compared to fiscal 1994 was
attributable to two primary factors. First, approximately $475 million of this
increase was attributable to the acquisition of Pyropower. Second, contracts
awarded to the Spanish subsidiary for two 350-MW boiler islands in China and a
130-MW boiler for Chile accounted for $200 million of the increase. The increase
in backlog in fiscal 1994 as compared to fiscal 1993 was attributable to the
award to the United States subsidiary of major power-generation contracts
located in India ($100 million) and Japan ($158 million).

New orders awarded to the Energy Equipment Group were $1,000.5 million,
$759.6 million and $670.4 million in fiscal 1995, fiscal 1994 and fiscal 1993,
respectively. Of such new orders, $331.8 million, $202.0 million and $176.9
million related to chemical separation activities and $668.7 million, $557.6
million and $493.5 million related to power-generation for fiscal 1995, fiscal
1994 and fiscal 1993, respectively.

Operating revenues for the Energy Equipment Group increased 44% in fiscal
1995 as compared to fiscal 1994, to $761.9 million from $529.5 million, which in
turn represented a decrease of 5% from fiscal 1993 of $558.6 million. These
changes in operating revenues for the periods stated resulted primarily from
power-generation activities including the acquisition of Pyropower.

The Energy Equipment Group's gross earnings increased by $21.2 million or
17%, to $145.7 million in fiscal 1995 from $124.5 million in fiscal 1994, which
in turn represented a 21% increase from gross earnings in fiscal 1993 of $102.8
million. The increase in fiscal 1995 can be attributed to a higher level of
operating revenues partially offset by lower gross earnings of the Spanish
subsidiary due to completion of a major contract for the supply of two
coal-fired steam generators in Mexico. For fiscal 1994, approximately $13
million of the increase was due to improved execution of the contract in Mexico.
Also, for fiscal 1995 and fiscal 1994 the increases were attributed to increased
margins on the sale of chemical separations equipment.

POWER SYSTEMS GROUP

The Power Systems Group's backlog at the end of fiscal 1995 was $227.0
million, a 12% decrease from backlog of $257.9 million at the end of fiscal
1994, which in turn represented a 23% increase from backlog of $210.5 million at
the end of fiscal 1993. The decrease of backlog for fiscal 1995 is the result of
reduced awards during the period. The increase in backlog for fiscal 1994 as
compared to fiscal 1993 was the result of the financing and start of
construction of a recycling and waste-to-energy project to be operated under
contract with the Village of Robbins, Illinois.

The Power Systems Group's operating revenues increased by 5% in fiscal 1995
as compared to fiscal 1994, to $150.8 million from $143.5 million, which in turn
represented a 9% increase from fiscal 1993 operating revenues of $131.8 million.

The Power Systems Group's gross earnings increased $9.7 million in fiscal
1995 as compared with fiscal 1994 to $57.6 million from $47.9 million, which in
turn represented an increase of $1.4 million from gross earnings of $46.5
million in fiscal 1993.

RESEARCH AND DEVELOPMENT

The Corporation is continually engaged in research and development efforts
both in performance and analytical services on current projects and in
development of new products and processes. During fiscal 1995, fiscal 1994 and
fiscal 1993, approximately $11.1 million, $9.8 million and $8.3 million,
respectively, were spent on Corporation-sponsored research activities. During
the same periods, approximately $25.9 million, $38.2 million and $40.9 million,
respectively, were spent on customer-sponsored research activities that were
paid for by customers of the Corporation.

26 (continued)

<PAGE> 9

FINANCIAL CONDITION

The Corporation's consolidated financial condition improved during the
three-year period ended December 29, 1995. Stockholders' equity at the end of
fiscal 1995 was $625.9 million as compared to $456.5 million at the end of
fiscal 1994 and $400.2 million at the end of fiscal 1993. In November 1995, the
Corporation issued 4,620,000 shares of common stock in a public offering which
increased stockholders' equity by $158.3 million. For fiscal 1995, increases
from net earnings of $28.5 million, the change in the accumulated translation
adjustment of $9.1 million and the proceeds of the equity issuance of $158.3
million were partially offset by dividends to stockholders of $27.6 million.
From the beginning of fiscal 1993 to the end of fiscal 1995, net assets have
increased by $238.6 million.

For the fiscal years 1993, 1994 and 1995, long-term investments in land,
buildings and equipment were $27.8 million, $38.5 million and $59.4 million,
respectively. In fiscal 1994, the Corporation acquired Enserch and Optimized
Process Designs, Inc. with net cash payments after cash acquired of $50.9
million. In 1993, a 49.5% limited partnership interest in the Camden
waste-to-energy facility was sold to an institutional investor and Thermacote
Welco was sold; aggregate proceeds amounted to $50.3 million.

Effective September 30, 1995, the Corporation acquired Pyropower for
approximately $207.5 million, including acquisition costs. Also, in September
1995, the Corporation purchased, for approximately $2.5 million, the assets of
Zack Power & Industrial Co., a construction company in Gary, Indiana and for
approximately $16.0 million the assets of TPA, Inc., a supplier of
sulfur-recovery equipment based in Dallas, Texas. During the next few years,
capital expenditures will continue to be directed primarily toward strengthening
and supporting the Corporation's core businesses.

<PAGE> 10

Long-term debt, including current installments, and bank loans increased by
$181.4 million, net of repayments of $173.3 million, during the three-year
period. Payments in fiscal 1995 included $22 million for the second installment
on the Corporation's 8.58% unsecured promissory private placement notes (the
"Private Notes") and a net reduction of $95.0 million of borrowings under the
Corporation's revolving credit facilities. In November 1995, the Corporation
sold $200 million of 6 3/4% Notes, due 2005, in the public market, the net
proceeds of which were used to repay the revolving credit debt and fund
operating requirements.

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. Based on its knowledge of the facts and circumstances
relating to the Corporation's liabilities, if any, and to its insurance
coverage, management of the Corporation believes that the disposition of such
suits will not result in charges against assets or earnings materially in excess
of amounts provided in the accounts.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents amounted to $167.1 million at December 29, 1995,
a decrease of $68.7 million from the prior fiscal year-end, principally as a
result of using corporate cash to fund a portion of the Pyropower purchase.
During fiscal 1995, the Corporation paid $27.6 million in stockholder dividends,
repaid debt of $130.3 million including $95.0 million of borrowings under the
Corporation's revolving credit agreements and a scheduled $22.0 million
repayment on the Private Notes and paid approximately $207.5 million for the
purchase of Pyropower. The Corporation incurred new borrowings of $227.2 million
primarily through the issuance of $200.0 million aggregate principal amount of 6
3/4% Notes due November 15, 2005 and raised $158.3 million through the sale of
4,620,000 shares of the Corporation's Common Stock. The net proceeds of the debt
and equity offerings were used to repay borrowings under the Corporation's
revolving credit agreement which were incurred to (i) fund a portion of the
Pyropower acquisition, (ii) fund working capital needs, (iii) refinance bank
debt previously incurred in the acquisition of Enserch and (iv) pay a scheduled
principal installment on the Private Notes.

During fiscal 1994, the Corporation paid $25.8 million in stockholder
dividends and repaid debt totaling $30.5 million, including a $22.0 million
principal repayment on the Private Notes. New borrowings amounted to $115.4
million resulting primarily from increased working capital needs and the Enserch
acquisition.

During fiscal 1995, cash flow used by operating activities totaled $105.3
million. This represented an increase of $91.0 million from 1994. The reduction
in cash flow from operating activities during a period of improving operating
profitability resulted from an increase in the Corporation's working capital
needs which vary from period to period depending on the mix, stage of completion
and commercial terms and conditions of the Corporation's contracts. Working
capital needs have increased as a result of the Corporation satisfying requests
from its customers, primarily in the Energy Equipment Group, for more favorable
payment terms under contracts. Such requests generally include reduced advance
payments and more favorable payment schedules. Such terms required the
Corporation to defer receipt of payment from its customers which, combined with
the acquisitions of Pyropower, Zack and TPA, had a negative impact on the
Corporation's working capital in 1995.

The Corporation's contracts in process and inventories increased by $184.4
million during 1995 from $198.8 million at December 30, 1994 to $383.2 million
at December 29, 1995. Approximately $83.7 million of the increase in contracts
in process and inventories in fiscal 1995 was attributable to the E&C Group,
primarily due to United States subsidiaries ($50.2 million) and the Italian
subsidiary ($32.0 million). The balance of the increase can be attributed
primarily to Pyropower for $32.8 million and $64.1 million to the Power Systems
Group. In addition, accounts and notes receivable increased by $218.7 million in
fiscal 1995 to $715.7 million at fiscal year-end 1995 from $497.0 million. The
E&C Group increased by approximately $113.9 million, primarily due to the
significant contracts of the Spanish subsidiary in South America. The balance of
the increase can be attributed principally to the Energy Equipment Group as the
result of the acquisition of Pyropower ($65.0 million) and increased activities
of Glitsch International ($25.4 million).

27 (continued)

<PAGE> 11

Management of the Corporation expects its customers' requests for more
favorable payment terms under Energy Equipment Group contracts to continue as a
result of the competitive market in which the Corporation operates. The
Corporation's pricing of contracts recognizes additional costs associated with
the use of working capital. The Corporation intends to satisfy the increased
working capital needs through internal cash generation, borrowings under its
Revolving Credit Facilities and third-party financing in the capital markets.
Under the Corporation's existing shelf registration statement, there is
approximately $135 million available.

On September 20, 1995, the Corporation established two revolving credit
facilities with a syndicate of banks led by National Westminster Bank PLC and
Mellon Bank, N.A. One facility is a short-term revolving credit facility of $200
million with a maturity of 364-days and the second is a $300 million revolving
credit facility with a maturity of four years (collectively, the "Revolving
Credit Facilities"). On November 15, 1995, the short-term revolving credit
facility was permanently reduced to $100 million. Borrowings under these
facilities were incurred to (i) fund a portion of the Pyropower acquisition,
(ii) refinance bank debt previously incurred to fund working capital and the
acquisition of Enserch and (iii) make a $22 million scheduled principal payment
on the Private Notes. The Corporation will be required to pay scheduled

<PAGE> 12

MANAGEMENT'S DISCUSSION AND ANALYSIS

principal installments of $22.0 million on the Private Notes on September 30,
1996, 1997 and 1998. The Corporation expects to make such payments from
internally generated cash, borrowings under its Revolving Credit Facilities
and/or third-party financing in the capital markets.

The Corporation has lease payments due under two long-term operating leases
of $9.1 million in fiscal 1996, $87.6 million in fiscal 1997 and $37.7 million
in fiscal 1998 and other rental payments under leases for office space. The
primary reason for the increase in 1997 is the payment of a required advance
lease payment for a 1,600-ton-per-day recycling and waste-to-energy plant
located in Robbins, Illinois, which is scheduled to go into operation in 1997.
The Corporation expects to make these lease payments from cash available from
operations and borrowings under the Revolving Credit Facilities. Leasing
arrangements for equipment, which are short-term in nature, are not expected to
impact the Corporation's liquidity or capital resources.

The Corporation is in the process of constructing a recycling and
waste-to-energy project for the Village of Robbins, Illinois. The Corporation
will operate this facility under a long-term operating lease. By virtue of the
facility qualifying under the present Illinois Retail Rate Law as a qualified
solid waste-to-energy facility, it will receive electricity revenues projected
to be substantially higher than the utility's "avoided cost." The utility is
entitled to a tax credit against a state tax on utility gross receipts and
invested capital. The State will be reimbursed by the facility for the tax
credit beginning after the 20th year following initial sale of electricity to
the utility. The State is currently considering repealing the Retail Rate Law.
If the Law is repealed and the project is not granted "grandfathered" status,
there may be a significant adverse financial impact on the operating results of
the project. However, based on reasonable financial and economic assumptions
applied over the operating life of the facility, Management of the Corporation
believes that should such a repeal occur, the financial impact on the operating
results of the project will not result in a material, adverse effect on the
financial position of the Corporation.

Management's strategy for managing risks associated with interest rate
fluctuations is to enter into financial instrument transactions, such as
interest rate swaps and forward rate agreements, to reduce such risks.
Management's strategy for managing transaction risks associated with currency
fluctuations is for each operating unit to enter into forward foreign exchange
agreements to hedge its exposure on contracts into the operating unit's
functional currency. The Corporation utilizes all such financial instruments
solely for hedging. Corporate policy prohibits the speculative use of such
instruments. The Corporation is exposed to credit loss in the event of
nonperformance by the counterparties to such financial instruments. To minimize
this risk, the Corporation enters into these financial instruments with
financial institutions that are primarily rated A or better by Standard & Poor's
or A2 or better by Moody's. Management believes that the geographical diversity
of the Corporation's operations mitigates the effects of the currency
translation exposure. No significant unhedged assets or liabilities are
maintained outside the functional currency of the operating subsidiaries.
Accordingly, translation exposure is not hedged.

The 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
have arisen from the exposure to or use of asbestos. At December 29, 1995, there
were approximately 77,700 (1994-57,000) suits pending. Approximately 39,000 new
claims were filed in fiscal 1995 and settlement costs not covered by the
Corporation's insurance carriers were immaterial. The Corporation has agreements
with insurance carriers covering a substantial portion of potential costs
relating to pending claims. During the three-year period ended December 29,
1995, the Corporation tried, settled or summarily disposed of approximately
40,000 (1995-18,300) asbestos-related claims. Approximately $66 million,
substantially all of which was reimbursed or will be reimbursed, was spent on
asbestos litigation defense and case resolution during the three-year period
(1993-$21 million; 1994-$24 million; 1995-$21 million). The Corporation has
recorded, with respect to asbestos litigation for the years 1994 and 1995, an
asset relating to probable insurance recoveries of approximately $77 million and
$83 million, respectively, and a liability relating to probable losses of
approximately $78 million and $87 million, respectively. These assets and
liabilities were estimated based on historical data, developed in conjunction
with outside experts. Management of the Corporation has carefully considered the
financial viability and legal obligations of its insurance carriers and has
concluded that the insurers will continue to adequately fund claims and defense
costs relating to asbestos litigation.

28 (continued)

<PAGE> 13

Management of the Corporation believes that cash and cash equivalents on
hand of $167.1 million and short-term investments of $112.9 million at December
29, 1995, combined with cash flow from operating activities, available credit
under its Revolving Credit Facilities and access to third-party financings in
the capital markets will be adequate to meet its working capital and liquidity
needs for the foreseeable future.

OTHER ACCOUNTING MATTERS

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" (SFAS 121). SFAS
121 requires companies to review their long-lived assets and certain
identifiable intangibles for impairment whenever events or changes in
circumstances indicate that the carrying value of a long-lived asset may not be
recoverable. Impairment is measured using the lower of a long-lived asset's book
value or its fair market value. Management has not yet completed its review of
the potential impact this Standard may have on the consolidated financial
statements.

<PAGE> 14

FOSTER WHEELER CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET (In Thousands of Dollars, Except per Share Amounts)

<TABLE>
<CAPTION>
December 29, December 30,
1995 1994*
----------- -----------
<S> <C> <C>
ASSETS

CURRENT ASSETS:
Cash and cash equivalents ...................................... $ 167,131 $ 235,801
Short-term investments ......................................... 112,853 118,561
Accounts and notes receivable:
Trade ...................................................... 630,751 442,127
Other ...................................................... 84,988 54,854
Contracts in process ........................................... 340,526 171,144
Inventories .................................................... 42,716 27,634
Prepaid and refundable income taxes ............................ 39,346 47,543
Prepaid expenses ............................................... 20,662 15,045
----------- -----------
Total current assets ....................................... 1,438,973 1,112,709
----------- -----------
Land, buildings and equipment ....................................... 944,596 815,746
Less accumulated depreciation ....................................... 299,784 249,590
----------- -----------
Net book value ............................................. 644,812 566,156
----------- -----------

Notes and accounts receivable - long-term ........................... 63,632 51,658
Investments and advances ............................................ 56,767 42,665
Intangible assets, net .............................................. 260,070 72,128
Deferred charges and prepaid pension cost ........................... 308,369 289,117
Deferred income taxes ............................................... 3,186 5,901
----------- -----------

TOTAL ASSETS ............................................... $ 2,775,809 $ 2,140,334
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Current installments on long-term debt ......................... $ 34,648 $ 32,565
Bank loans ..................................................... 86,869 77,350
Accounts payable ............................................... 372,949 211,627
Accrued expenses ............................................... 166,633 139,582
Estimated costs to complete long-term contracts ................ 475,899 294,881
Advance payments by customers .................................. 74,821 104,239
Income taxes ................................................... 28,457 30,335
----------- -----------
Total current liabilities .................................. 1,240,276 890,579
Long-term debt, less current installments ........................... 554,404 466,637
Minority interest in subsidiary companies ........................... 13,438 10,344
Deferred income taxes ............................................... 21,841 19,651
Other long-term liabilities, deferred credits and postretirement
benefits other than pensions ................................... 319,983 296,629
----------- -----------

TOTAL LIABILITIES .......................................... 2,149,942 1,683,840
----------- -----------

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: 1995-40,498,481; 1994-35,832,664 ................... 40,498 35,833
Paid-in capital ................................................ 192,721 38,266
Retained earnings .............................................. 421,804 420,861
Accumulated translation adjustment ............................. (28,861) (37,915)
----------- -----------
626,162 457,045
Less cost of treasury stock
(shares: 1995-10,804; 1994-20,129) ......................... 295 551
----------- -----------

TOTAL STOCKHOLDERS' EQUITY ................................. 625,867 456,494
----------- -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................. $ 2,775,809 $ 2,140,334
=========== ===========
</TABLE>

See notes to financial statements.
* Reclassified to conform to 1995 presentation.

<PAGE> 15

FOSTER WHEELER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF EARNINGS
(In Thousands of Dollars, Except per Share Amounts)

<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Operating revenues .......................... $3,042,177 $2,234,441 $2,583,000
Other income (including interest:
1995-$23,404; 1994-$25,014; 1993-$26,627) 39,753 36,682 71,505
---------- ---------- ----------

Total Revenues .......................... 3,081,930 2,271,123 2,654,505
---------- ---------- ----------

COSTS AND EXPENSES:
Cost of operating revenues .................. 2,642,290 1,909,893 2,290,395
Selling, general and administrative expenses 250,369 203,445 204,049
Other deductions (including interest:
1995-$49,011; 1994-$34,978; 1993-$33,558) 64,998 45,906 60,722
Provision for reorganization costs .......... 50,120 -- --
Minority interest ........................... 4,490 5,012 2,521
---------- ---------- ----------

Total Costs and Expenses ................ 3,012,267 2,164,256 2,557,687
---------- ---------- ----------

Earnings before income taxes ..................... 69,663 106,867 96,818

Provision for income taxes ....................... 41,129 41,457 39,114
---------- ---------- ----------

Net earnings ..................................... $ 28,534 $ 65,410 $ 57,704
========== ========== ==========

Earnings per share ............................... $ .79 $ 1.83 $ 1.62
========== ========== ==========
</TABLE>

See notes to financial statements.

30 (continued)

<PAGE> 16

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 29, 1995 and December 30,
1994, 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 29, 1995. 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 29, 1995 and December 30, 1994, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 29, 1995, in conformity with
generally accepted accounting principles.

Coopers & Lybrand L.L.P.

New York, New York
February 12, 1996

<PAGE> 17

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (In Thousands of
Dollars, Except per Share Amounts)

<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year .................................................. $ 35,833 $ 35,707 $ 35,656
Sold under stock options: (shares: 1995-45,817; 1994-125,682; 1993-50,786) .... 45 126 51
Issued in public offerings (shares: 1995-4,620,000) ........................... 4,620 -- --
--------- --------- ---------

Balance at end of year ................................................... 40,498 35,833 35,707
--------- --------- ---------

PAID-IN CAPITAL
Balance at beginning of year .................................................. 38,266 35,076 34,085
Stock option exercise price less par value .................................... 573 2,214 791
Excess of market value over cost of treasury stock issued under incentive plans 46 -- --
Tax benefits related to stock options ......................................... 192 976 200
Excess of proceeds received on issuance of common stock in public offerings

less par value and costs .................................................... 153,644 -- --
--------- --------- ---------

Balance at end of year ................................................... 192,721 38,266 35,076
--------- --------- ---------

RETAINED EARNINGS
Balance at beginning of year .................................................. 420,861 381,205 346,487
Net earnings for the year ..................................................... 28,534 65,410 57,704
Cash dividends paid:
Common (per share outstanding: 1995-$.77; 1994-$.72; 1993-$.645) ............ (27,591) (25,754) (22,986)
--------- --------- ---------
Balance at end of year ................................................... 421,804 420,861 381,205
--------- --------- ---------

ACCUMULATED TRANSLATION ADJUSTMENT
Balance at beginning of year .................................................. (37,915) (51,261) (28,380)
Change in accumulated translation adjustment during the year .................. 9,054 13,346 (22,881)
--------- --------- ---------

Balance at end of year ................................................... (28,861) (37,915) (51,261)
--------- --------- ---------

TREASURY STOCK
Balance at beginning of year .................................................. 551 551 551
Issued under incentive plans (shares: 1995-9,325) ............................. (256) -- --
--------- --------- ---------

Balance at end of year ................................................... 295 551 551
--------- --------- ---------

TOTAL STOCKHOLDERS' EQUITY .................................................... $ 625,867 $ 456,494 $ 400,176
========= ========= =========
</TABLE>

See notes to financial statements.

<PAGE> 18

FOSTER WHEELER CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(In Thousands of Dollars)

<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings ........................................................ $ 28,534 $ 65,410 $ 57,704
Adjustments to reconcile net earnings to
cash flows from operating activities:
Depreciation and amortization .................................... 54,625 44,288 51,456
Noncurrent deferred tax .......................................... 5,049 9,609 11,632
Gain on sale of subsidiary and partnership interest .............. -- -- (36,175)
Gain on sale of land, buildings and equipment .................... (1,283) (915) (165)
Equity earnings, net of dividends ................................ (1,578) (623) (883)
Provision for reorganization costs ............................... 50,120 -- --
Other noncash items .............................................. (4,891) (1,517) 1,356
Changes in assets and liabilities, net of effects of acquisitions and
divestitures:
Receivables ...................................................... (143,023) (24,942) 27,987
Contracts in process and inventories ............................. (131,759) (51,863) (11,376)
Accounts payable and accrued expenses ............................ 29,566 (8,286) (22,632)
Estimated costs to complete long-term contracts .................. 50,096 (23,089) 90,196
Advance payments by customers .................................... (34,237) 22,316 10,847
Income taxes ..................................................... 3,801 (8,198) (14,623)
Other assets and liabilities ..................................... (10,327) (36,487) (18,599)
--------- --------- ---------

Net cash (used)/provided by operating activities ................. (105,307) (14,297) 146,725
--------- --------- ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ................................................ (59,432) (38,501) (27,849)
Proceeds from sale of properties .................................... 2,918 4,671 1,476
Proceeds from sale of subsidiary and partnership interest ........... -- -- 50,288
Payments for acquisitions of businesses, net of cash acquired ....... (133,451) (50,946) --
Increase in investments and advances ................................ (13,596) (5,002) (2,421)
Decrease/(increase) in short-term investments ....................... 7,026 14,621 (17,541)
Partnership distribution ............................................ (4,883) (3,000) (3,235)
--------- --------- ---------

Net cash (used)/provided by investing activities ................. (201,418) (78,157) 718
--------- --------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Dividends to stockholders ........................................... (27,591) (25,754) (22,986)
Proceeds from public offering of common stock, net .................. 158,264 -- --
Proceeds from the exercise of stock options ......................... 618 2,340 842
Increase in short-term debt ......................................... 7,243 14,583 9,246
Proceeds from long-term debt ........................................ 219,978 100,848 265
Repayment of long-term debt ......................................... (130,329) (30,540) (12,439)
--------- --------- ---------

Net cash provided/(used) by financing activities ................. 228,183 61,477 (25,072)
--------- --------- ---------

Effect of exchange rate changes on cash and cash equivalents ........ 9,872 17,264 (19,342)
--------- --------- ---------

(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS ......................... (68,670) (13,713) 103,029
Cash and cash equivalents at beginning of year ........................... 235,801 249,514 146,485
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR ................................. $ 167,131 $ 235,801 $ 249,514
========= ========= =========

Cash paid during the year for:
Interest (net of amount capitalized) ................................ $ 45,434 $ 36,191 $ 32,167
Income taxes ........................................................ $ 18,162 $ 26,115 $ 27,949
</TABLE>

See notes to financial statements.

<PAGE> 19

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 1995 included 52 weeks.

In conformity with generally accepted accounting principles, management
must make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

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 revenues 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 revenues 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. The Corporation includes pass-through costs on cost-plus contracts
which are general-customer reimbursable materials, equipment and subcontractor
costs when the Corporation determines that it is responsible for the engineering
specification, procurement and management of such cost components on behalf of
the customer.

The Corporation has numerous contracts that are in various stages of
completion. Such contracts require estimates to determine the appropriate cost
and revenue recognition. The Corporation has a substantial history of making
reasonably dependable estimates of the extent of progress towards completion,
contract revenues and contract costs. However, current estimates may be revised
as additional information becomes available.

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 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 3. 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 - Depreciation is computed on a straight-line
basis 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. 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.

33 (continued)

<PAGE> 20

INVESTMENTS AND ADVANCES - The Corporation uses the equity method of
accounting for investment ownership of between 20% and 50% in affiliates unless
significant economic or political considerations indicate that the cost method
is appropriate. Investment ownership of less than 20% in affiliates is carried
at cost. Currently, all of the Corporation's significant investments in
affiliates are recorded using the equity method.

INCOME TAXES - Deferred income taxes are provided on a liability method
whereby deferred tax assets are established for the difference between the
financial reporting and income tax basis of assets and liabilities as well as
operating loss and tax credit carryforwards. Deferred tax assets are reduced by
a valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.

Investment tax credits are accounted for by the flow-through method whereby
they reduce income taxes currently payable and the provision for income taxes in
the period the assets giving rise to such credits are placed in service. To the
extent such credits are not currently utilized on the Corporation's tax return,
deferred tax assets, subject to considerations about the need for a valuation
allowance, are recognized for the carryforward amount.

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 $236,000 at December 29, 1995. It is not practicable
to estimate the additional tax that would be incurred, if any, if these amounts
were repatriated.

<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
(In Thousands of Dollars, Except per Share Amounts)

FOREIGN CURRENCY TRANSLATION - Assets and liabilities of foreign
subsidiaries are translated into U.S. dollars at year-end exchange rates and
income and expenses and cash flows at monthly weighted average rates. Foreign
currency transaction (losses)/gains for 1995, 1994 and 1993 were approximately
$(1,600), $(120) and $4,200, respectively ($(1,000), $(80) and $2,700 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, and are included in either contracts in process or estimated costs to
complete long-term contracts. The Corporation utilizes foreign exchange
contracts solely for hedging purposes. Corporate policy prohibits the
speculative use of financial instruments.

INVENTORIES - Inventories, principally materials and supplies, are stated at
lower of cost or market, determined primarily on the average cost method.

INTANGIBLE ASSETS - Intangible assets consist principally of the excess of
cost over the fair value of net assets acquired (goodwill) ($156,370),
trademarks ($65,000) and patents ($38,700). These assets are being amortized on
a straight-line basis over periods of 10 to 40 years. The Corporation
periodically evaluates goodwill on a separate acquired operating unit basis to
assess recoverability and impairments, if any, are recognized in earnings. In
the event facts and circumstances indicate that the carrying amount of goodwill
associated with an investment is impaired, the Corporation reduces the carrying
amount to an amount representing the estimated undiscounted future cash flows
before interest to be generated by the operation.

EARNINGS PER SHARE - Per-share data has been computed based on the weighted
average number of shares of common stock outstanding of 1995-36,321,626,
1994-35,787,658 and 1993- 35,655,886. Outstanding stock options have been
disregarded because their effect on earnings per share would not be significant.

In the fourth quarter of 1995, the Corporation completed the sale of
4,620,000 shares of its common stock in a public offering. The net proceeds of
the sale were used to repay borrowings under the Corporation's revolving credit
agreement which were incurred to (i) fund a portion of the Pyropower acquisition
(see Note 2), (ii) fund wording capital needs, (iii) refinance bank debt
previously incurred in the acquisition of Enserch and (iv) pay a scheduled
principal installment on the Corporation's 8.58% unsecured private placement
notes. If the common stock offering had occurred as of the beginning of 1995,
the earnings per share would have been $.84 per share adjusted for interest
expense.

2. ACQUISITIONS

The Corporation acquired Optimized Process Designs, Inc. (OPD) for $6,100
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 ("Enserch"), a subsidiary of ENSERCH
Corporation, was acquired for $50,000, after the sale of $60,000 of receivables
under a Receivable Purchase Agreement guaranteed by ENSERCH Corporation. Enserch
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 Enserch are included in the Corporation's financial
statements since the dates of acquisition. On the basis of a pro forma
combination of the results of operations as if the acquisitions had occurred at
the beginning of 1993 and 1994, combined pro forma revenues, net earnings and
earnings per share would not have been materially different.

34 (continued)
<PAGE> 22
Effective September 30, 1995, the Corporation acquired the power-generation
business of A. Ahlstrom Corporation ("Pyropower") for approximately $207,500,
including acquisition costs. During September 1995, the Corporation finalized
(i) the purchase for approximately $2,500, of the assets of Zack Power &
Industrial Co., a construction company in Gary, Indiana, and (ii) the purchase
of the assets of TPA, Inc., a supplier of sulfur-recovery equipment based in
Dallas, Texas, for approximately $16,000. In addition, the Corporation increased
its ownership in Foster Wheeler Andina, S.A. (Bogota, Colombia), an engineering
company from 19% to 60% for $2,500.

These acquisitions have been accounted for as purchases and the results of
operations of these companies have been included in the consolidated financial
statements since the dates of acquisition. Total consideration for these
acquisitions was approximately $228,000, of which $94,500 was allocated to cost
in excess of net assets of subsidiaries acquired, $38,700 to patents and $65,000
to trademarks. The intangibles are being amortized on a straight-line basis over
an average life of 35 years. The assets acquired also included $73,000 in cash
and fixed assets of $79,000. At December 29, 1995, approximately $22,000 remains
to be paid.

The pro forma unaudited consolidated results of operations of the
Corporation and Pyropower for the years ended December 29, 1995 and December 30,
1994, which assume the acquisition had been made as of the beginning of each
fiscal year, are summarized below:

<TABLE>
<CAPTION>
1995 1994
---- ----

<S> <C> <C>
Revenues $3,331,602 $2,499,104
Net earnings 14,260 (1) 56,290
Net earnings per share $ .39 $ 1.57
</TABLE>

(1) Includes provision for reorganization costs of $46,500, net of income
taxes ($1.28 per share).

34
<PAGE> 23
The pro forma results have been prepared for comparative purposes only and
include certain adjustments such as additional depreciation expenses as the
result of a step-up in the basis of fixed assets, additional amortization
expense as a result of cost in excess of assets acquired, and other intangible
assets and the increased interest expense on acquisition debt. They do not
purport to be indicative of the results of operations which actually would have
resulted had the combination been in effect at the beginning of 1994 and 1995 or
of future results of operations of the consolidated entities. The other
acquisitions made in 1995 have not been included in the pro forma results
because revenues, net earnings and earnings per share would not have been
materially different.

3. ACCOUNTS AND NOTES RECEIVABLE

The following tabulation shows the components of trade accounts and notes
receivable:

<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
From long-term contracts:
Amounts billed due within one year ................ $299,594 $277,530
-------- --------
Retentions:
Billed:
Estimated to be due in:
1995 .................................... -- 30,929
1996 .................................... 21,950 7,288
1997 .................................... 1,196 --
1999 .................................... 19,765 6,905
-------- --------
Total billed ............................ 42,911 45,122
-------- --------

Unbilled:
Estimated to be due in:
1995 .................................... -- 38,074
1996 .................................... 178,357 3,171
1998 .................................... 724 --
-------- --------
Total unbilled .......................... 179,081 41,245
-------- --------
Total retentions ........................ 221,992 86,367
-------- --------
Total receivables from
long-term contracts ................ 521,586 363,897
Other trade and notes receivable ....................... 115,119 82,898
-------- --------

636,705 446,795

Less, allowance for doubtful accounts .................. 5,954 4,668
-------- --------
$630,751 $442,127
======== ========
</TABLE>

4. 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>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Contracts in process .................. $340,526 $171,144 $87,076
======== ======== =======
Inventories:
Materials and supplies ............. $ 31,633 $ 21,447 $18,700
Work in process .................... 6,072 1,894 1,810
Finished goods ..................... 5,011 4,293 3,990
-------- -------- -------
$ 42,716 $ 27,634 $24,500
======== ======== =======
</TABLE>

35 (continued)
<PAGE> 24
The following tabulation shows the elements included in contracts in process
as related to long-term contracts:

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Costs plus accrued profits less earned revenues on contracts
currently in process .................................... $694,877 $350,897 $229,604
Less, Progress payments .................................... 354,351 179,753 142,528
-------- -------- --------
$340,526 $171,144 $ 87,076
======== ======== ========
</TABLE>

5. LAND, BUILDINGS AND EQUIPMENT

Land, buildings and equipment are stated at cost and are set forth below:

<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Land and land improvements . . . . . . . . . . $ 21,599 $ 16,412
Buildings . . . . . . . . . . . . . . . . . . . 146,858 98,263
Equipment . . . . . . . . . . . . . . . . . . . 737,624 679,686
Construction in progress . . . . . . . . . . . 38,515 21,385
---------- ---------
$ 944,596 $ 815,746
========== =========
</TABLE>

Depreciation expense for the years 1995, 1994 and 1993 was $51,706, $43,729
and $43,732, respectively.

6. 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, benefits for
domestic employees are determined based on 1.2% of the average of the highest
five consecutive years of salary in the last ten years of employment.

It is the Corporation's policy to fund the plans on a current basis to the
extent deductible under existing Federal tax regulations. Such contributions,
when made, are intended to provide not only for benefits attributed to
service to date, but also for those expected to be earned in the future.

35
<PAGE> 25
NOTES TO FINANCIAL STATEMENTS
(In Thousands of Dollars, Except per Share Amounts)

The following table sets forth the plans' funded status as of the end of
December 1995 and 1994:

<TABLE>
<CAPTION>
1995 1994
--------- ---------

<S> <C> <C>
Actuarial present value of accumulated benefit obligations:
Vested .................................................... $ 334,082 $ 271,579
Nonvested ................................................. 10,382 7,005
--------- ---------
Total .................................................. $ 344,464 $ 278,584
========= =========
Plan assets at fair value, primarily
listed stocks and bonds ................................ $ 446,519 $ 379,820
Projected benefit obligations ............................. (383,036) (308,382)
--------- ---------

Excess of plan assets over projected benefit obligations .. 63,483 71,438
Unrecognized net loss due to past experience different from
assumptions made ....................................... 34,672 32,693
Unrecognized prior service cost ........................... 15,923 14,888
Unrecognized net assets being amortized over 12 years ..... (17,198) (23,011)
--------- ---------
Prepaid pension cost ...................................... $ 96,880 $ 96,008
========= =========
</TABLE>

Net periodic pension expense/(credits) included the following components:

<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Service cost ..................................... $ 13,602 $ 15,289 $ 11,024
Interest cost on projected benefit obligation .... 27,327 25,070 24,117
Actual return on plan assets ..................... (38,848) (38,081) (33,370)
Net amortization and deferrals ................... (637) (2,799) (2,929)
-------- -------- --------
Net periodic pension expense/(credits) ........... $ 1,444 $ (521) $ (1,158)
======== ======== ========
</TABLE>

In determining the actuarial present value of the projected benefit
obligations, discount rates ranging from 7.0% to 8.5% (1994 - 7.5% to 8.5%), and
rates of increase for future compensation levels ranging from 3.0% to 6.0% (1994
- - 4.5% to 6.5%) were utilized. The expected long-term rate of return on assets
was 10%. In conjunction with the reorganization, the Corporation offered an
enhanced retirement package to employees over the age of 65. This resulted in
additional service cost under the provisions of SFAS 88 of approximately $1,900.

The Corporation has a 401(k) plan for salaried employees. The Corporation,
for the years 1995, 1994 and 1993, contributed a 50% match of the employees'
contributions which amounted to a cost of $3,700, $3,400 and $3,300,
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.

36 (continued)
<PAGE> 26
The following sets forth the plans' funded status reconciled with
amounts reported in the Corporation's consolidated balance sheet at the end
of December 1995 and 1994:

<TABLE>
<CAPTION>
Accumulated postretirement benefit obligation: 1995 1994
--------- ---------
<S> <C> <C>
Retirees ........................................... $ 71,861 $ 71,792
Fully-eligible active plan participants ............ 11,712 10,458
Other active plan participants ..................... 38,409 35,380
--------- ---------
Accumulated postretirement benefit ................. 121,982 117,630
Unrecognized net (loss)/gain ....................... (669) 1,570
Unrecognized prior service cost .................... 31,077 33,205
--------- ---------
Accrued postretirement benefit liability ........... $ 152,390 $ 152,405
========= =========
</TABLE>

Net periodic postretirement benefit cost for 1995, 1994 and 1993 included the
following components:

<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Service cost ........................... $ 1,247 $ 1,244 $ 1,809
Interest cost .......................... 6,186 6,478 7,233
Net amortization and deferrals ......... (2,165) (2,094) (1,578)
------- ------- -------
Net periodic postretirement benefit cost $ 5,268 $ 5,628 $ 7,464
======= ======= =======
</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 9.0% annual rate of increase in the per capita costs of covered
health care benefits was assumed for 1996, gradually decreasing to 5% by
the year 2011. 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 29, 1995, by $3,850 and increase the
aggregate of the service cost and interest cost components of net periodic
postretirement benefit cost for 1995 by $308. A discount rate of 7.25%
(1994 - 8.5%) was used to determine the accumulated postretirement benefit
obligation.

7. BANK BORROWINGS

The approximate weighted average interest rates on borrowings
outstanding (primarily foreign) at the end of 1995 and 1994 were 9% and 6%,
respectively.

Unused lines of credit for short-term bank borrowings aggregated
$130,400 at year-end 1995, of which approximately 83% was available in the
United States and Canada at interest rates not exceeding the prime
commercial lending rate and the remainder was available overseas in various
currencies at rates consistent with market conditions in the respective
countries.

36
<PAGE> 27
Interest costs incurred in 1995, 1994 and 1993 were $49,117, $35,445 and
$33,771 of which $106, $467 and $213, respectively, were capitalized.

8. LONG-TERM DEBT

Long-term debt consisted of the following:

<TABLE>
<CAPTION>
1995 1994
-------- --------

<S> <C> <C>
Corporate Debt
--------------

8.58% unsecured promissory notes due in
installments of $22,000 on September 30
in each of the years 1996 to 1998 .................................. $ 66,000 $ 88,000

Revolving Credit Agreements .......................................... -- 95,000
6 3/4% Notes due November 15, 2005 ................................... 200 ,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 (1995 year-end rate
6.4%), due semiannually through
July 30, 2006 ...................................................... 56,887 59,640
Floating/Fixed Rate Resource Recovery
Revenue Bonds, interest varies based
on tax-exempt money market rates (1995
year-end rate 5.3%), due semiannually
August 1, 1997 through February 1, 2010 ............................ 45,448 45,448
Collateralized note payable, interest varies
based on one of several money market
rates (1995 year-end rate 7.47%), due
semiannually through February 1, 1996 .............................. 3,104 7,340
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,
1996 through 2012 .................................................. 73,505 75,805

Other
-----

Bank loans, interest 9.2% .......................................... 3,982 4,446
Other .............................................................. 19 ,976 3,373
-------- --------
589,052 499,202
Less, Current portion .............................................. 34 ,648 32,565
-------- --------
$554,404 $466,637
======== ========
</TABLE>

37 (continued)
<PAGE> 28
Principal payments are payable in annual installments of:

<TABLE>
<S> <C>
1997 .................................................... $ 38,867
1998 .................................................... 35,740
1999 .................................................... 34,522
2000 .................................................... 26,239
2001 .................................................... 25,351
Balance due in installments
through 2012 ......................................... 393,685
---------
$ 554,404
=========
</TABLE>

CORPORATE DEBT - During 1995, the Corporation sold $200,000 notes in the
public market which bear interest at a fixed rate of 6 3/4% per annum,
payable semiannually, and mature November 15, 2005. The Notes have been rated
BBB and Baa2 by Standard and Poor's and Moody's, respectively, and were
issued under an indenture between the Corporation and Harris Trust and
Savings Bank. The Notes are not redeemable prior to maturity and are not
subject to any sinking fund requirements. The Notes will constitute senior
unsecured indebtedness of the Corporation and will rank on a parity with the
Corporation's other senior unsecured indebtedness.

In conjunction with the 8.58% unsecured promissory notes, 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 $66,000 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
reflected as a reduction of interest expense.

The Corporation has entered into a four-year revolving credit agreement
($300,000) and a 364-day revolving credit agreement ($100,000) (the
"Revolving Credit Agreements") with a group of banks. The loans are for
general corporate purposes. The maturity dates of the Revolving Credit
Agreements are renewed each year subject to the approval of the Corporation
and the banks. At year-end 1995, the Corporation had $400,000 available
under the Revolving Credit Agreements. The Corporation pays to the banks a
facility fee on the total facility.

The Note Agreement, pursuant to which the 8.58% unsecured promissory notes
were issued, and the Revolving Credit Agreement require the maintenance of a
maximum Consolidated Leverage Ratio of .50 to 1 and a minimum Consolidated
Fixed Charge Coverage Ratio of 2.50 to 1. At December 29, 1995, these ratios
were .37 to 1 and 2.83 to 1, respectively.

37
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS
(In Thousands of Dollars, Except per Share Amounts)

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 $56,887 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 and at December 29, 1995 was
$30,326.

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 $3,104 represents a loan under a bank credit facility. The bonds
are collateralized by an irrevocable standby letter of credit issued by a
commercial bank.

WASTE-TO-ENERGY PROJECTS - The Solid Waste Disposal and Resource Recovery
System Revenue Bonds totaling $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 $73,505 were issued in a total amount
of $86,780. The bonds are collateralized by a pledge of certain revenues and
assets of the project.

9. RESEARCH AND DEVELOPMENT

For the years 1995, 1994 and 1993, approximately $11,100, $9,800 and
$8,300, respectively, were spent on Corporation-sponsored research activities.
During the same periods, approximately $25,900, $38,200 and $40,900,
respectively, were spent on customer-sponsored research activities which were
paid by customers of the Corporation.

10. INCOME TAXES

The components of earnings before income taxes for the years 1995, 1994
and 1993 were taxed under the following jurisdictions:

<TABLE>
<CAPTION>
1995 1994 1993
--------- ---------- ----------
<S> <C> <C> <C>
Domestic . . . . . . . . . . . . . . . $ 2,775 $ 19,955 $ 25,602
Foreign . . . . . . . . . . . . . . . . 66,888 86,912 71,216
--------- ---------- ----------
Total . . . . . . . . . . . . . . . . . $ 69,663 $ 106,867 $ 96 ,818
========= ========== ==========
The provision for income taxes on those
earnings was as follows:
Current tax expense:
Domestic . . . . . . . . . . . . . . . $ 6,306 $ 2,931 $ 10,735
Foreign . . . . . . . . . . . . . . . . 17,883 36,739 27,047
--------- ---------- ----------
Total current . . . . . . . . . . . . . 24,189 39,670 37,782
--------- ---------- ----------
Deferred tax expense/(benefit):
Domestic . . . . . . . . . . . . . . . 5,508 5,423 (9,886)
Foreign . . . . . . . . . . . . . . . . 11,432 (6,600) (4,966)
--------- ---------- ----------
Total deferred . . . . . . . . . . . . 16,940 (1,177) (14 ,852)
--------- ---------- ----------
Investment tax credit recapture . . . . - - 2 ,009
Utilization of operating loss
carryforwards . . . . . . . . . . . . . - 2 ,964 14,175
--------- ---------- ----------
- 2 ,964 16,184
--------- ---------- ----------
Total provision for income taxes . . . . . $ 41,129 $ 41,457 $ 39,114
========= ========== ==========
</TABLE>

38 (continued)
<PAGE> 30
<TABLE>
<CAPTION>
Deferred tax liabilities (assets) consist of the following:

1995 1994
---------- ---------
<S> <C> <C>
Difference between book and
tax depreciation . . . . . . . . . . . . . . . . $ 85,739 $ 71,907
Pension assets . . . . . . . . . . . . . . . . . . . 33,762 30,685
Capital lease transactions . . . . . . . . . . . . . 12,451 12,652
Revenue recognition . . . . . . . . . . . . . . . . . 19,146 15,814
Other . . . . . . . . . . . . . . . . . . . . . . 4,397 4,933
---------- ---------
Gross deferred tax liabilities . . . . . . . . . . . 155,495 135,991
---------- ---------
Current taxability of estimated
costs to complete long-term
contracts . . . . . . . . . . . . . . . . . . . . (12,989) (23,768)
Reorganization costs . . . . . . . . . . . . . . . . (18,120) -
Income currently taxable deferred
for financial reporting . . . . . . . . . . . . . (7,059) (7,380)
Expenses not currently deductible
for tax purposes . . . . . . . . . . . . . . . . (21,690) (22,104)
Investment tax credit carryforwards . . . . . . . . . (30,251) (28,600)
Postretirement benefits other
than pensions . . . . . . . . . . . . . . . . . . (65,919) (55,112)
Minimum tax credits . . . . . . . . . . . . . . . . . (6,605) (6,710)
Foreign tax credits . . . . . . . . . . . . . . . . . (21,400) (21,400)
Other . . . . . . . . . . . . . . . . . . . . . . (1,071) (2,966)
Valuation allowance . . . . . . . . . . . . . . . . . 20,000 5,500
---------- ---------
Net deferred tax assets . . . . . . . . . . . . . . . (165,104) (162,540)
---------- ---------
$ (9,609) $ (26,549)
========== =========
</TABLE>

The domestic investment tax credit carryforwards, if not used, will expire
in the years 2002 through 2007. Foreign tax credits carryforwards, if not used,
will expire in the years 1996 through 2000. As reflected above, the Corporation
has recorded various deferred tax assets. Realization is dependent on generating
sufficient taxable income prior to the expiration of the various credits. The
valuation allowance was

38
<PAGE> 31
increased by $14,500 as a result of the 1995 provision for reorganization costs.
Such provision has resulted in additional deferred tax assets for financial
reporting purposes, thereby making it less likely that a portion of the tax
credits will be utilized. Although realization is not assured, management
believes that it is more likely than not that all of the deferred tax assets
(after consideration of the valuation allowance) will be realized. The amount of
the deferred tax assets considered realizable, however, could change in the near
future if estimates of future taxable income during the carryforward period are
changed.

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>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Tax at U.S. statutory rate . . . . . . . . . . 35.0% 35.0% 35.0%
State income taxes, net of
Federal income tax benefit . . . . . . . . 4.4 1.2 1.3
Increase in valuation allowance . . . . . . . . 20.8 - -

Nondeductible goodwill write-off . . . . . . . - - 2.5
Investment tax credit recapture . . . . . . . . - - 2.1
Other . . . . . . . . . . . . . . . . . . . (1.2) 2.6 (.5)
---- --- ---
59.0% 38.8% 40.4%
==== ==== ====
</TABLE>

11. 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 (see Note 13). 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
1993 through 1995 totaled $9,300 annually.

The minimum lease payments under these long-term noncancelable operating
leases are as follows:

<TABLE>
<S> <C>
1996 . . . . . . . . . . . . . . . $ 9,144
1997 . . . . . . . . . . . . . . . 87,596
1998 . . . . . . . . . . . . . . . 37,654
1999 . . . . . . . . . . . . . . . 38,128
2000 . . . . . . . . . . . . . . . 38,563
Thereafter . . . . . . . . . . . . 704,097
---------
Total . . . . . . . . . . . . . . . $ 915,182
=========
</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 $26,000 in 1995, $20,600 in 1994 and $19,500 in 1993. Future
minimum rental commitments on noncancelable leases are as follows: 1996 -
$24,300; 1997 - $19,700; 1998 - $16,900; 1999 - $14,800; 2000 - $12,100; and an
aggregate of $27,100 thereafter.

39 (continued)
<PAGE> 32
12. QUARTERLY FINANCIAL DATA (Unaudited)

<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------------------------------
1995 March 31 June 30 Sept. 29 Dec. 29
---- -------- ------- -------- -------

<S> <C> <C> <C> <C>
Operating revenues .................. $ 635,993 $ 678,733 $ 779,938 $ 947,513
Gross earnings from operations ...... 89,766 90,904 96,870 122,347
Net earnings/(loss) ................. 17,880 18,890 17,210 (25,446)(a)
Earnings/(loss) per share (b) ....... .50 .53 .48 (.67)(a)
Cash dividends per share ............ .185 .195 .195 .195

Stock prices:
High ............................. 34.50 37.625 39.50 43.50
Low .............................. 29.375 31.625 33.375 34.625

1994 April 1 July 1 Sept. 30 Dec. 30
---- ------- ------ -------- -------

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 (b) .............. .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>

(a) Includes a provision for reorganization costs of $46,500, net of income
taxes ($1.28 per share) See Note 18.

(b) Based on weighted average number of shares outstanding in each quarter.

13. LITIGATION AND UNCERTAINTIES

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. 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.

39
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)

approximately 77,700 (1994-57,000) suits pending. Approximately 39,000 new
claims were filed in fiscal 1995 and settlement costs not covered by the
Corporation's insurance carriers were immaterial. The Corporation has agreements
with insurance carriers covering a substantial portion of potential costs
relating to pending claims. During the three-year period ended December 29,
1995, the Corporation tried, settled or summarily disposed of approximately
40,000 (1995-18,300) asbestos-related claims. Approximately $66,000,
substantially all of which was reimbursed or will be reimbursed, was spent on
asbestos litigation defense and case resolution during the three-year period
(1993-$21,000; 1994-$24,000; 1995-$21,000). The Corporation has recorded, with
respect to asbestos litigation for the years 1994 and 1995, an asset relating to
probable insurance recoveries of approximately $77,000 and $83,500,
respectively, and a liability relating to probable losses of approximately
$78,000 and $87,000, respectively. These assets and liabilities were estimated
based on historical data, developed in conjunction with outside experts.
Management of the Corporation has carefully considered the financial viability
and legal obligations of its insurance carriers and has concluded that the
insurers will continue to adequately fund claims and defense costs relating to
asbestos litigation.

14. STOCK OPTION PLANS

The Corporation has two fixed option plans which reserve shares of common
stock for issuance to executives, key employees and directors. The Corporation
has adopted the disclosure-only provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation." Accordingly, no
compensation cost has been recognized for the stock option plans. Had
compensation cost for the Corporation's two stock option plans been determined
based on the fair value at the grant date for awards in 1995 consistent with the
provisions of SFAS No. 123, the Corporation's net earnings and earnings per
share would have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
1995

<S> <C>
Net earnings - as reported $ 28,534
========
Net earnings - pro forma $ 24,434
========

Earnings per share - as reported $0.79
=====
Earnings per share - pro forma $0.67
=====
</TABLE>

The assumption regarding the stock options issued to executives in 1995 was
that 100% of such options vested in 1995, rather than 1/3 as required by the
Plan, since 1/3 of 1993 and 1994 would have vested in 1995.

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1995: dividend yield of 2.21%; expected
volatility of 0.3720%; risk-free interest rate of 7.68%; and expected lives of
7.5 years.

40 (continued)
<PAGE> 34
Under the plan approved by the stockholders in April 1995, the total number
of shares of common stock that may be granted is 1,500,000. 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 will automatically
receive an option to acquire 2,000 shares each year.

These plans provide that shares granted come from the Corporation's
authorized but unissued or reacquired common stock. The price of the options
granted pursuant to these plans will not be less than 100 percent of the fair
market value of the shares on the date of grant. An option may not be exercised
within one year from the date of grant and no option will 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.

40
<PAGE> 35
Information regarding these option plans for 1995, 1994 and 1993 is as
follows:

<TABLE>
<CAPTION>
1995 1994 1993
----------------------------- ---- ----
Weighted-
Average
Exercise
Shares Price Shares Shares
------ ----- ------ ------
<S> <C> <C> <C> <C>
Options outstanding,
beginning of year . . . . . . . . . . . 546,462 $28.12 493,810 417,596
Options exercised . . . . . . . . . . . . . (45,817) 13.49 (125,682) (50,786)
Options granted . . . . . . . . . . . . . . 490,700 30.10 178,334 127,000
Options outstanding, end of year . . . . . 991,345 $29.78 546,462 493,810
======= ========= ========
Option price range at end of year $14 .50 to $12.25 to $12.25 to
$40.0625 $40.0625 $28.75
Option price range for

exercised shares . . . . . . . . . . . . $12 .25 to $12.25 to $12.25 to
$13.6875 $28.75 $22.0625
Options available for grant

at end of year . . . . . . . . . . . . . 1,543,000 539,578 717,912
========= ========= ========
Weighted-average fair value of options,

granted during the year . . . . . . . . $13.12
</TABLE>

The following table summarizes information about fixed-price stock options
outstanding at December 29, 1995:

<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------- ----------------------------

Weighted-

Number Average Weighted- Number Weighted-
Range of Outstanding Remaining Average Exercisable Average
Exercise Prices at 12/29/95 Contractual Life Exercise Price at 12/29/95 Exercise Price
--------------- ----------- ---------------- -------------- ----------- --------------

<C> <C> <C> <C> <C> <C>
14.50 9,158 4 years 14.50 9,158 14.50
21.3125 to 22.125 33,986 5 years 21.50 33,986 21.50
22.0625 to 28.6875 61,500 6 years 23.03 61,500 23.03
26.9375 to 27.4375 98,000 7 years 27.35 98,000 27.35
27.4375 to 28.75 119,667 8 years 28.55 85,778 28.47
32.9375 to 40.0625 178,334 9 years 35.73 72,778 36.53
29.75 to 35.25 490,700 10 years 30.10 -- --
------- ------

14.50 to 40.0625 991,345 361,200
======= =======
</TABLE>

41 (continued)
<PAGE> 36
15. 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 Corporation's
common stock having a market value at that time of twice the Right's exercise
price.

16. 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:

CASH AND SHORT-TERM INVESTMENTS - All investments are considered available
for sale and 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 8).

41
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)

CARRYING AMOUNTS AND FAIR VALUES - The estimated fair values of the
Corporation's financial instruments are as follows:

<TABLE>
<CAPTION>
1995 1994
------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Nonderivatives:
Cash and short-term
investments . . . . . . . . . . . . $279,984 $279,984 $354,362 $354,362
Long-term investments for which it is:
Practicable to estimate fair value . 700 1,200 700 1,500
Not practicable . . . . . . . . . . 3,450 4,500
Long-term debt . . . . . . . . . . . . (589,052) (595,000) (499,202) (495,000)

Derivatives:
` Foreign currency contracts . . . . . . (17,700) (17,700) (3,400) (3,400)
Interest rate swaps . . . . . . . . . . -- 200 -- (2,000)
</TABLE>

It is not practicable to estimate the fair value of an investment
representing the preferred stock of a public Corporation because this stock is
not traded; that investment is carried at its original cost of $3,450 in the
consolidated balance sheet. At the end of September 1995 (latest available
financial statements of this public Corporation), the total assets reported were
$113,384 and the stockholders' equity was $59,986. Revenues were $107,198 and
net income was $18,054 for nine months.

In the ordinary course of business, the Corporation is contingently liable
for performance under letters of credit totaling approximately $139,000 and
$132,000 at December 29, 1995 and December 30, 1994, respectively. In the
Corporation's past experience, virtually no claims have been made against these
financial instruments. Management of the Corporation does not expect any
material losses to result from these off-balance-sheet instruments because
performance is not expected to be required, and therefore, is of the opinion
that the fair value of these instruments is zero. As of December 29, 1995, the
Corporation had $312,000 of forward exchange contracts outstanding. These
forward exchange contracts mature between 1996 and 1997. Approximately 36% of
these contracts require a domestic subsidiary to sell Japanese yen and receive
U.S. dollars. The remaining contracts have been established by various
international subsidiaries to sell a variety of currencies and either receive
their respective functional currencies or other currencies for which they have
payment obligations to third parties.

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 business and geographic
areas. As of December 29, 1995 and December 30, 1994, the Corporation had no
significant concentrations of credit risk. The Corporation has issued third
party off-balance sheet financial guarantees totaling approximately $20,000.

42 (continued)
<PAGE> 38
17. OTHER LONG-TERM ASSETS AND LIABILITIES

The long-term assets and liabilities consist of the following:

<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred charges and prepaid pension cost:
Prepaid pension cost $ 96,880 $ 96,008
Cash surrender value of life insurance 59,803 53,811
Prepaid rent 30,464 28,036
Insurance recovery - asbestos 83,500 77,000
Other 37,722 34,262
-------- --------
$308,369 $289,117
======== ========

Other long-term liabilities, deferred credits and
postretirement benefits other than pensions:
Postretirement benefit liability $152,390 $152,405
Accrued dismissal indemnity 25,740 22,438
Long-term deferred income 20,213 20,937
Accrued probable loss - asbestos 87,000 78,000
Other 34,640 22,849
-------- --------
$319,983 $296,629
======== ========
</TABLE>

18. PROVISION FOR REORGANIZATION COSTS

In connection with the acquisition of Pyropower, the Corporation recorded
a one-time pretax reorganization provision in the fourth quarter of 1995 of
$50,120. This provision related to the reorganization of the operations of the
Energy Equipment Group that existed before the acquisition of Pyropower. The
reorganization plan, when fully complete, will result in substantial cost
savings and is expected to improve the competitive position of the Energy
Equipment Group. This reorganization plan included a rationalization of
manufacturing capacity and the reduction of approximately 630 salaried and
hourly personnel. The provision for reorganization costs includes the following
items:

<TABLE>
<CAPTION>
Nature of Costs United States Canada Total
--------------- ------------- ------ -----
<S> <C> <C> <C>
Write-off of excess buildings and
equipment due to the rationalization of
production capacity $ 3,125 $ 7,077 $10,202

Employee severance cost and related benefits 6,950 9,977 16,927

Asset write-downs (including stranded
inventory) and provisions related to
discontinuance of certain product lines
(including incremental costs on certain
completed contracts) 13,164 6,176 19,340

Other, including the write-off of
accumulated translation adjustment
for curtailed operations 1,500 2,151 3,651
------- ------- -------

Total pretax provision $24,739 $25,381 $50,120
======= ======= =======
</TABLE>

42
<PAGE> 39
Approximately 50% of the above provision is expected to have a cash impact.
As of year-end, the majority of the liability remains to be paid. The spending
is expected to be substantially completed by the end of 1996.

19. BUSINESS SEGMENTS - DATA

The business of the Corporation and its subsidiaries falls within three
business groups. The ENGINEERING AND CONSTRUCTION GROUP that designs, engineers
and constructs petroleum, chemical, petrochemical and alternative-fuels
facilities and related infrastructure, including power generation and
distribution facilities, production terminals, pollution control equipment and
water treatment facilities and process plants for the production of fine
chemicals, pharmaceuticals, dyestuffs, fragrances, flavors, food additives and
vitamins. Also, the E&C Group provides a broad range of environmental
remediation services, together with related technical, design and regulatory
services. The ENERGY EQUIPMENT GROUP designs, manufactures and erects steam
generating and auxiliary equipment for power stations and industrial markets
worldwide. Steam generating equipment includes a full range of fluidized bed and
conventional boilers firing coal, oil, gas, biomass and other municipal solid
waste, waste wood and low-Btu gases. Auxiliary equipment includes feedwater
heaters, steam condensers, heat-recovery equipment and low-NOx burners. Site
services related to these products encompass plant erection, maintenance
engineering, plant upgrading and life extension, and plant repowering. In
addition, this Group provides research analysis and experimental work in fluid
dynamics, heat transfer, combustion and fuel technology, materials engineering
and solids mechanics. The Energy Equipment Group also provides proprietary
solutions and systems for many separation applications and manufactures
highly-engineered chemical separations equipment for the petroleum refining,
petrochemical, chemical and gas processing industries. The POWER SYSTEMS GROUP
designs, engineers, manufactures and constructs to build, own or lease, and
operate cogeneration, independent power production and resource recovery
facilities and facilities for the process and petrochemical industries.

The Corporation conducts its business on a global basis. The E&C Group
accounted for the largest portion of the Corporation's revenues and operating
income over the last ten years. In 1995, the Group accounted for approximately
70% of the operating revenues. The geographic dispersion of these operating
revenues was as follows: 34% North America, 23% Asia, 19% Europe, 15% Middle
East and 9% other. The Energy Equipment Group accounted for 25% of the operating
revenues of the Corporation. The geographic dispersion of these operating
revenues was as follows: 49% North America, 32% Asia, 15% Europe and 4% other.
The Power Systems Group accounted for 5% of the Corporation's 1995 operating
revenues.

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 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 1995, 1994 and 1993 is on pages 22 and 23 (unaudited as to
unfilled orders and new orders booked).

<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
29, 1995 and is qualified in its entirety by reference to such financial
statments.
</LEGEND>
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-29-1995
<PERIOD-START> DEC-31-1994
<PERIOD-END> DEC-29-1995
<CASH> 167131
<SECURITIES> 112853
<RECEIVABLES> 715739
<ALLOWANCES> (5934)
<INVENTORY> 383242
<CURRENT-ASSETS> 1438973
<PP&E> 944596
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