<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 27, 1996
[ ] 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 14, 1997, 40,624,646 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 $1,558,970,790 (based on the last price on that date of
$38.375 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 21, 1997 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
25-47) for the fiscal year ended December 27, 1996, is incorporated by
reference in Part I and Part II of this report.
<PAGE> 2
FOSTER WHEELER CORPORATION
1996 Form 10-K Annual Report
Table of Contents
Page
----
Part I
Item 1. Business 3 - 7
2. Properties 8 - 12
3. Legal Proceedings 12
4. Submission of Matters to a Vote of Security Holders 12
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
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21 E of the Securities Exchange
Act of 1934. Actual results could differ materially from those projected in the
forward-looking statements as a result of the risk factors set forth in this
report.
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 18 on page 47 in the Notes to Financial
Statements in Foster Wheeler's Annual Report to Stockholders for the year ended
December 27, 1996.
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 utilizes Foster Wheeler strengths in design,
engineering, manufacturing and construction to build, own or lease, and operate
cogeneration, independent power production and resource recovery facilities as
well as facilities for the process and petrochemical industries. 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
3
<PAGE> 4
manages that project from the permitting stage through plant construction and
operation. All of the special-purpose subsidiary project debt is
limited-recourse. This Group refinances its equity 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 $200,000,000
including acquisition costs. The preliminary purchase price allocation was
adjusted by $80.0 million in the fourth quarter of 1996, based upon a final
calculation of assets acquired and liabilities assumed. The quarterly earnings
previously reported were not significantly impacted by this change. 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
limited group of customers. No one customer accounted for 10 percent or more of
Foster Wheeler's consolidated revenues in fiscal 1996, 1995 and 1994, 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 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.
4
<PAGE> 5
For the most part, Foster Wheeler products are custom designed and manufactured
and are not produced for inventory. As is the practice in the Engineering and
Construction Group and Energy Equipment Group, customers often make a down
payment at the time a contract is entered into, and continue to make progress
payments until the contract is completed and the work has been accepted as
meeting contract guarantees.
Foster Wheeler had a backlog of firm orders as of December 27, 1996 of
$7,135,400,000 as compared to a backlog as of December 29, 1995 of
$6,474,000,000. 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 27, 1996 and December 29,
1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Engineering and
Construction $4,958,200,000 $4,566,600,000
Energy Equipment 1,763,400,000 1,651,600,000
Power Systems 384,900,000 227,000,000
Corporate and Financial
Services 28,900,000 28,800,000
---------------- ----------------
$7,135,400,000 $6,474,000,000
================ ================
</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
Concepcion, Chile 8 MM SCFD Hydrogen Plant -- 1996
Robbins, Illinois 1600 Ton/Day Waste-to-Energy* Refuse/RDF 1996
======================================================================================================================
Lisbon, Portugal 2200 Ton/Day Waste-to-Energy Refuse Construction
Lagoven, Venezuela 50 MM SCFD Hydrogen Plant -- Construction
Concepcion, Chile 65 MW Cogeneration Plant Plus Coke Construction
12,000 Barrels/Day Coker and
7014 Barrels/Day Hydrotreater
Comunanza, Italy 145 MW Cogeneration Natural Gas Construction
Teverola, Italy 145 MW Cogeneration Natural Gas Construction
University of Minnesota 15 MW Cogeneration Coal/Gas/Oil Construction
Wilkes-Barre, Pennsylvania 40 MW Small Power Wood Waste Permitting
======================================================================================================================
* 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 1996, approximately $16,900,000, and in 1995
and 1994, $11,100,000 and $9,800,000 respectively, was spent on Foster Wheeler
sponsored research activities. During the same periods, approximately
$29,600,000, $25,900,000 and $38,200,000, 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, occupational 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 12,085 full-time employees on December 27,
1996. 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 27, December 29, December 30,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Engineering and
Construction 7,130 7,560 7,940
Energy Equipment 4,350 4,540 3,200
Power Systems 410 390 360
Corporate and Financial
Services 195 160 185
--------- --------- ---------
12,085 12,650 11,685
======== ======== ========
</TABLE>
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES:
- - -----------------------------------------------------------------------------
Incorporated by reference to Note 18 on page 47 in the Notes to Financial
Statements in Foster Wheeler's Annual Report to Stockholders for the year ended
December 27, 1996.
7
<PAGE> 8
ITEM 2. PROPERTIES
- - -------------------
<TABLE>
<CAPTION>
COMPANY AND
(INDUSTRY SEGMENT*)
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)
Union Township, Undeveloped 203.8 acres --
New Jersey General Office
& Engineering 29.4 acres 294,000
General Office
& Engineering 21.0 acres 292,000 2003
Storage and Reproduction
Facilities 10.8 acres 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 100.4 acres -- (4)
Bridgewater, New Jersey Under construction 17.5 acres 238,000 (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
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 1997
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
COMPANY AND
(INDUSTRY SEGMENT*)
BUILDING LEASE
LOCATION USE LAND AREA SQUARE FEET EXPIRES
-------- --- --------- ----------- -------
<S> <C> <C> <C> <C>
Foster Wheeler Limited (England) (EC)
- - -------------------------------------
Glasgow, Scotland Office & Engineering -- 27,610 1997
Reading, England Office & Engineering -- 288,472 1997/2016
Teeside, England Office & Engineering -- 18,100 1997/2014
Foster Wheeler Limited (Canada) (EE)
- - ------------------------------------
Niagara-On-The-Lake,
Ontario Office Building 34.5 acres 86,000 (1)
Port Robinson, Ontario Undeveloped Land 17.0 acres --
Foster Wheeler Andina, S.A. (EC)
- - --------------------------------
Bogota, Colombia Office & Engineering 2.25 acres 75,000
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
(via S. Caboto,1) Office & Engineering -- 161,400 2001
Milan, Italy
(via S. Caboto,7) Office & Engineering -- 133,000 2002
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
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
COMPANY AND
(INDUSTRY SEGMENT*)
BUILDING LEASE
LOCATION USE LAND AREA SQUARE FEET EXPIRES
-------- --- --------- ----------- -------
<S> <C> <C> <C> <C>
Foster Wheeler Eastern Private Limited (EC)
- - -------------------------------------------
Singapore Office & Engineering -- 25,000 1999
Foster Wheeler Environmental Corporation (EC)
- - ---------------------------------------------
Atlanta, Georgia General Offices 31,238 1999
Bellevue, Washington General Offices 53,545 1999
Boston, Massachusetts General Offices 26,326 1999
Lakewood, Colorado General Offices 37,263 2000
Oak Ridge, Tennessee General Offices 14,494 1999
Sacramento, California General Offices 10,271 1997
Costa Mesa, California General Offices 14,754 2000
Foster Wheeler Power Systems, Inc. (PS)
- - ---------------------------------------
Martinez, California Cogeneration Plant 6.4 acres --
Mt. Carmel, Cogeneration Plant 105 acres -- 2010
Pennsylvania
Charleston, Waste-to-Energy 18 acres -- 2010
South Carolina Plant
Hudson Falls, New York Waste-to-Energy 11.2 acres --
Plant
Camden, New Jersey Waste-to-Energy 18 acres -- 2011
Plant
Robbins, Illinois Waste-to-Energy
Plant
Facility Site 16.1 acres -- 2029
Laydown Site 14.6 acres -- 2029
Talcahuano, Chile Cogeneration Plant 21 acres -- 2028
Foster Wheeler Pyropower, Inc. (EE)
- - -----------------------------------
San Diego, California General Offices 9.25 acres 86,000
San Diego, California General Offices 2.5 acres 38,000(1)
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
COMPANY AND
(INDUSTRY SEGMENT*)
BUILDING LEASE
LOCATION USE LAND AREA SQUARE FEET EXPIRES
- - --------- --- --------- ----------- -------
<S> <C> <C> <C> <C>
Foster Wheeler Energia OY (EE)
- - ------------------------------
Varkhaus, Finland Manufacturing & Offices 22 acres 366,527
Karhula, Finland Research Center 12.84 acres 15,100 2095
Office Laboratory 57,986
Kouvola, Finland Manufacturing & Offices 9.09 acres 79,903
Kaarina, Finland Office 24,762 1998
Helsinki, Finland Office 11,841 1999
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
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
Parsippany, Manufacturing
New Jersey & 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>
11
<PAGE> 12
__________________
*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 43 in the Notes to Financial
Statements in Foster Wheeler's Annual Report to Stockholders for the year ended
December 27, 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- - ------------------------------------------------------------
NONE
12
<PAGE> 13
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 and O'Brien are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Richard J. Swift 52 Chairman, President and Chief Executive Officer
David J. Roberts 52 Vice Chairman and Chief Financial Officer
N. William Atwater 62 Executive Vice President - Engineering and
Construction Group
Henry E. Bartoli 50 Senior Vice President - Energy Equipment Group
(Vice President and General Manager, 1987-1992,
Burns and Roe Company.)
Claudio Ferrari 60 Senior Vice President - Power Systems Group
Lisa Fries Gardner 40 Vice President, Secretary and Chief Compliance Officer
Robert D. Iseman 48 Vice President and Treasurer
Thomas R. O'Brien 58 Senior Vice President and General Counsel
(Partner in the law firm of Wolff & Samson,
1986-1993.)
James E. Schessler 51 Vice President - Human Resources and Administration
George S. White 60 Vice President and Controller
</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 43 in Foster Wheeler's Annual
Report to Stockholders for the year ended December 27, 1996. The Corporation's
common stock is traded on the New York Stock Exchange. The approximate number of
stockholders of record as of December 27, 1996 was 6,991.
ITEM 6. SELECTED FINANCIAL DATA
- - --------------------------------
(In Thousands of Dollars, Except Per Share Data)
<TABLE>
<CAPTION>
1996 1995* 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $4,040,611 $2,081,930 $2,271,123 $2,654,505 $2,529,464
Earnings before
accounting change 82,240(1) 28,534(2) 65,410 52,704 45,504(3)
Earnings per share
before accounting
change 2.03 .79 1.83 1.62 1.28(3)
Total assets 3,510,334 2,975,809 2,140,334 1,806,201 1,763,264
Long-term borrowings
(including current
installments) 829,043 589,052 499,202 429,264 439,578
Cash dividends per
common share .81 .77 .72 .645 .585
</TABLE>
(1) Includes a provision of $15,600 ($.38 per share) for asbestos claims.
(2) Includes a provision of $46,500 ($1.28 per share) for reorganization
costs.
(3) 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.
* During the fourth quarter of 1995, the Corporation acquired the
power-generation business of A. Ahlstrom Corporation, "Pyropower".
14
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- - ----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Incorporated by reference to pages 26 to 32 in Foster Wheeler's Annual Report to
Stockholders for the year ended December 27, 1996.
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 27, 1996:
A. Consolidated Balance Sheet, December 27, 1996 and December 29, 1995
(page 33)
B. Consolidated Statement of Earnings for the years ended December 27,
1996; December 29, 1995; and December 30, 1994 (page 34)
C. Consolidated Statement of Changes in Stockholders' Equity for the years
ended December 27, 1996; December 29, 1995; and December 30, 1994 (page
35)
D. Consolidated Statement of Cash Flows for the years ended December 27,
1996; December 29, 1995; and December 30, 1994 (page 36)
E. Notes to Consolidated Financial Statements (pages 37-47)
F. Report of Independent Accountants (page 34)
Schedules Required by Regulation S-X
- - ------------------------------------
NOTE: All schedules are omitted because they are either not applicable or not
required or the information is shown elsewhere in the financial statements or in
the notes thereto.
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 21, 1997, for the Annual Meeting of Stockholders to be held April
28, 1997. 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 21, 1997, for the Annual Meeting of Stockholders to be held April
28, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
- - -------------------------------------------------------------
MANAGEMENT
----------
Incorporated by reference to pages 2-5 of Foster Wheeler's Proxy Statement,
dated March 21, 1997, for the Annual Meeting of Stockholders to be held April
28, 1997.
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 August 12, 1996 (filed as Exhibit 3.1 to Foster
Wheeler Corporation's 1996 Quarterly Report on Form 10-Q for the
quarter ended September 27, 1996 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 Corporation's Quarterly Report on Form 10-Q for the
quarter ending September 29,
17
<PAGE> 18
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).
12 Statement of Computation of Consolidated Ratio of Earnings to Fixed
Charges and Preferred Shares Dividend Requirements (Page 26)
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 25-47) for the
fiscal year ended December 27, 1996 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 19-21)
23 Consent of independent accountants (page 23)
27 Financial data schedule (for the informational purposes of the
Commission only).
(b) Current Reports on Form 8-K:
NONE
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):
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.
18
<PAGE> 19
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
------------------------------
FOSTER WHEELER CORPORATION (PARENT)
PRINCIPAL CONSOLIDATED, WHOLLY OWNED SUBSIDIARIES (DIRECTLY OR INDIRECTLY)
Listed by Jurisdiction of Organization
AUSTRALIA
Foster Wheeler Australia Pty. Ltd., Melbourne
BELGIUM
Otto York, N.V., Merksem
BERMUDA
FW Management Operations, Ltd., Hamilton
Foster Wheeler Trading Co. Ltd., Hamilton
Power Systems International, Ltd., Hamilton
York Jersey Liability Ltd., Hamilton
BRAZIL
Foster Wheeler do Brasil Ltda., Rio De Janeiro
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
CHANNEL ISLANDS
FW Channel Islands Limited, Jersey
CHILE
Foster Wheeler Chile, S.A., Santiago de Chile
CHINA, PEOPLES REPUBLIC OF
Foster Wheeler Power Machinery Company Limited,
Guangdong Province
CZECH REPUBLIC
Glitsch A.S., Prikop
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 (U.K.) Ltd., Reading
Glitsch (U.K.) Ltd., Kirkby Stephen Cumbria
Glitsch Field Services, Ltd., Dorking
Foster Wheeler (Indonesia) Ltd., Reading
Foster Wheeler Petroleum Development & Associates Ltd., Reading
Foster Wheeler Petroleum Development (Norway) Ltd., Reading
FINLAND
Foster Wheeler Energia, OY, Helsinki
Foster Wheeler Service OY, Kouvola
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
GERMANY
Glitsch GmBH, Oberhausen
Foster Wheeler Energie GmbH, Dusseldorff
GREECE
Foster Wheeler Hellas Engineering and Construction AE, Athens
INDIA
Glitsch Process India, Ltd., Bombay
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
FW Financial Services S.p.A., Milan
Foster Wheeler Environmental Italia, Srl, Milan
Pesaro Energia S.r.l., Pesaro
World Services Italia S.p.A., Milan
JAPAN
Glitsch Japan Corporation, Kawasaki
MALAYSIA
Foster Wheeler (Malaysia) Sdn. Bhd., Kualau Lumper
MEXICO
Foster Wheeler Ingenieros y Constructores, S.A. de C.V.
Quadalajara
NETHERLANDS ANTILLES
Foster Wheeler N.V., Curacao
NETHERLANDS
FW Europe, B.V., Amsterdam
Foster Wheeler Europe, B.V., Amsterdam
Foster Wheeler Power Systems, B.V., Amsterdam
PHILLIPINES
Foster Wheeler (Phillipines) Corporation, Mankati City
SINGAPORE (REPUBLIC OF)
Foster Wheeler Eastern Private, Ltd., Singapore
Foster Wheeler Energy Pte. Ltd., Singapore
SOUTH AFRICA
Foster Wheeler South Africa (Pty.) Ltd., Midrand
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
SPAIN
Foster Wheeler Iberia, S.A., Madrid
Foster Wheeler Energia, S.A., Madrid
Foster Wheeler Power Systems, S.A., Madrid
SWEDEN
Foster Wheeler Energi AB, Norrkoping
UNITED STATES
Camden County Energy Recovery Associates, New Jersey
Camden County Energy Recovery Corporation, Delaware
Equipment Consultants, Inc., Delaware
Foster Wheeler Adirondack, Inc., Delaware
Foster Wheeler Andes, Inc., Delaware
Foster Wheeler Arabia Ltd., Delaware
Foster Wheeler Asia Ltd., Delaware
Foster Wheeler Avon, Inc., 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 Energy Services, Inc., California
Foster Wheeler Environmental Corporation, Texas
Foster Wheeler Facilities Management, Inc., Delaware
Foster Wheeler Hudson Falls, Inc., Delaware
Foster Wheeler Hydroven, Inc., Delaware
Foster Wheeler Hydrox, 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 Middle East Services, Inc., Delaware
Foster Wheeler Midwest, 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 Santiago, Inc., Delaware
Foster Wheeler Timokhovo, Inc., Delaware
Foster Wheeler Twin Cities, Inc., Delaware
Foster Wheeler USA Corporation, Delaware
Foster Wheeler Virgin Islands, Inc., Delaware
Foster Wheeler Wood Resources, Inc., Delaware
Foster Wheeler World Services Corp., Delaware
Foster Wheeler Zack, Inc., Delaware
FWPS Specialty Products, Inc., Delaware
Glitsch Field Services, Inc., Texas
Glitsch Inc., Delaware
Glitsch International, Inc., Delaware
Glitsch Process Systems, Inc., Delaware
Glitsch Special Products, Inc., Texas
Glitsch Technology Corporation, Delaware
Naicor, Inc., Delaware
Optimized Process Designs, Inc., Delaware
Otto H. York Company, Delaware
Precision Technical Services, Inc., Texas
Process Consultants, Inc., Delaware
POSCO Gilberton, Inc., California
Pyropower Operating Services Company, Inc., California
TPA, Inc., Delaware
Ullrich Copper, Inc., Delaware
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
20
<PAGE> 21
PRINCIPAL AFFILIATED COMPANIES
(PERCENT DIRECTLY OR INDIRECTLY OWNED BY FOSTER WHEELER CORPORATION)
BERMUDA
The Hydrogen Company of Paraguana Ltd. (50%)
COLOMBIA
Foster Wheeler Andina, S.A., Bogota (60%)
FINLAND
OY Bioflow AB, Varkhaus (51%)
ITALY
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%)
UNITED STATES
Cera Filter Systems, Inc., Delaware (50%)
Integration Partners, Inc., California (65%)
VENEZUELA
OTEPI FW S.A., Caracas (50%)
21
<PAGE> 22
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.
22
<PAGE> 23
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. 33-61809) and
(2) Form S-8 (File No.'s 33-34694, 33-40878 and 33-59739) of our report dated
February 13, 1997, on our audits of the consolidated financial statements of
Foster Wheeler Corporation and Subsidiaries as of December 27, 1996 and December
29, 1995, and for each of the three years in the period ended December 27, 1996,
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, 1997
23
<PAGE> 24
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 18, 1997 By /s/ Lisa Fries Gardner
--------------------- ----------------------
Lisa Fries Gardner
Vice President, Secretary and
Chief Compliance Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed, as of March 18, 1997, 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
Director
------------------------
Eugene D. Atkinson
Director
------------------------
Louis E. Azzato
/s/ David J. Farris Director
------------------------
David J. Farris
/s/ E. James Ferland Director
------------------------
E. James Ferland
24
<PAGE> 25
Signature Title
--------- -----
/s/ Martha Clark Goss Director
------------------------
Martha Clark Goss
/s/ John A. Hinds Director
------------------------
John A. Hinds
/s/ Constance J. Horner Director
------------------------
Constance J. Horner
/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
25
<PAGE> 26
<TABLE>
<CAPTION>
EXHIBIT 12
FOSTER WHEELER CORPORATION
STATEMENT OF COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES AND
COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDEND REQUIREMENTS
($000'S)
Fiscal Year
------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings:
- - --------
Net Earnings/(Loss) $ 82,240 $ 28,534 $ 65,410 $ 57,704 $ (45,755)
Taxes on Income 44,626 41,129 41,457 39,114 22,321
Cumulative Effect of Change in
Accounting Principle 91,259
Total Fixed Charges 74,002 60,920 45,412 43,371 46,365
Capitalized Interest (6,362) (1,634) (467) (213) (1,739)
Capitalized Interest Amortized 2,528 2,273 2,189 2,180 2,111
Equity Earnings of non-
consolidated associated companies
accounted for by the equity
method, net of Dividends (1,474) (1,578) (623) (883) 771
--------- --------- --------- --------- ---------
$ 195,560 $ 129,644 $ 153,378 $ 141,273 $ 115,333
Fixed Charges:
- - -------------
Interest Expense $ 54,940 $ 49,011 $ 34,978 $ 33,558 $ 34,159
Capitalized Interest 6,362 1,634 467 213 1,739
Imputed Interest on non-capitalized
lease payment 12,700 10,275 9,967 9,600 10,467
--------- --------- --------- --------- ---------
$ 74,002 $ 60,920 $ 45,412 $ 43,371 $ 46,365
Ratio of Earnings to Fixed Charges 2.64 2.13 3.38 3.26 2.49
</TABLE>
*There were no preferred shares outstanding during any of the periods indicated
and therefore the consolidated ratio of earnings to fixed charges and combined
fixed charges and preferred share dividend requirements would have been the same
as the consolidated ratio of earnings to fixed charges and combined fixed
charges for each period indicated.
26
<PAGE> 27
EXHIBIT INDEX
Exhibit
No. Description
------- -----------
3.1 Copy of Restated Certificate of Incorporation of Foster Wheeler
Corporation, dated August 12, 1996 (filed as Exhibit 3.1 to Foster
Wheeler Corporation's 1996 Quarterly Report on Form 10-Q for the
quarter ended September 27, 1996 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 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).
12 Statement of Computation of Consolidated Ratio of Earnings to Fixed
Charges and Preferred Share Dividend Requirements (Page 26)
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 25-47) for the
fiscal year ended December 27, 1996 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 19-21)
23 Consent of independent accountants (page 23)
27 Financial data schedule (for the informational purposes of the
Commission only).
27
<PAGE> 1
EXHIBIT 13
<TABLE>
<CAPTION>
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
FINANCIAL SECTION
<S> <C>
COMPARATIVE FINANCIAL STATISTICS..................................... 25
MANAGEMENT'S DISCUSSION AND ANALYSIS................................. 26-32
CONSOLIDATED BALANCE SHEET........................................... 33
CONSOLIDATED STATEMENT OF EARNINGS................................... 34
REPORT OF INDEPENDENT ACCOUNTANTS.................................... 34
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY............ 35
CONSOLIDATED STATEMENT OF CASH FLOWS................................. 36
NOTES TO FINANCIAL STATEMENTS........................................ 37-47
</TABLE>
<TABLE>
<CAPTION>
COMPARATIVE FINANCIAL STATISTICS
- - --------------------------------------------------------------------------------------------------------------------------------
(In Thousands, Except per Share Amounts)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Unfilled orders, end of period ................ $7,135,413 $6,473,990 $5,135,452 $3,884,114 $ 3,806,757
Revenues ...................................... 4,040,611 3,081,930 2,271,123 2,654,505 2,529,464
Provision for special charges ................. 24,000 50,120 -- -- --
Earnings before income taxes and
accounting change ........................ 126,866(3) 69,663(2) 106,867 96,818 67,825
Provision for income taxes .................... 44,626 41,129 41,457 39,114 22,321
Earnings before accounting change ............. 82,240 28,534 65,410 57,704 45,504
Effect of accounting change ................... -- -- -- -- (91,259)(1)
Net earnings/(loss) ........................... 82,240 28,534 65,410 57,704 (45,755)
Earnings per share *
Earnings before accounting change ........ $ 2.03 $ .79 $ 1.83 $ 1.62 $ 1.28
Effect of change in accounting principle . -- -- -- -- (2.57)(1)
---------- ---------- ---------- ---------- -----------
Net earnings/(loss) ...................... $ 2.03 $ .79 $ 1.83 $ 1.62 $ (1.29)
========== ========== ========== ========== ===========
Weighted average number of shares of common
stock outstanding ........................... 40,592 36,322 35,788 35,656 35,596
Current assets ................................ $1,762,448 $1,468,973 $1,112,709 $ 983,454 $ 924,886
Current liabilities ........................... 1,441,894 1,270,276 890,579 778,989 721,018
Working capital ............................... 320,554 198,697 222,130 204,465 203,868
Land, buildings and equipment (net) ........... 724,779 644,812 566,156 567,216 595,946
Total assets .................................. 3,510,334 2,975,809 2,140,334 1,806,201 1,763,264
Bank loans .................................... 52,278 86,869 77,350 59,725 54,929
Long-term borrowings (including current
installments):
Corporate and other debt ................. 441,399 289,958 190,819 118,961 123,141
Project debt ............................. 387,644 299,094 308,383 310,303 316,437
Net assets owned .............................. 688,958 625,867 456,494 400,176 387,297
Net assets owned per common share of stock .... $ 16.95 $ 15.46 $ 12.75 $ 11.21 $ 10.87
Rate of return on net assets .................. 13.1% 6.3% 16.3% 14.9% (9.1)%
Cash dividends per share of common stock ...... $ .81 $ .77 $ .72 $ .645 $ .585
</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.
(3) Includes in 1996 a provision of $24,000 for asbestos claims.
25
<PAGE> 2
MANAGEMENT'S DISCUSSION
AND ANALYSIS
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
BUSINESS GROUPS (See Note 18 to Financial Statements.)
(In Millions of Dollars)
Corporate
Engineering and
and Energy Power Financial
Total Construction Equipment Systems Services(1)
----- ------------ --------- ------- ------------
<S> <C> <C> <C> <C> <C>
1996
- - ----
Unfilled orders........................... 7,135.4 4,958.2 1,763.4 384.9 28.9
New orders booked......................... 5,570.3 3,568.4 1,787.7 209.3 4.9
Revenues.................................. 4,040.6 2,580.9 1,309.4 158.9 (8.6)
Interest expense (2)...................... 54.9 3.1 15.5 23.3 13.0
Earnings before provision for special
charges and income taxes.............. 150.9 92.0 79.2 27.3 (47.6)
Earnings before income taxes.............. 126.9 92.0 79.2 27.3 (71.6)(4)
Identifiable assets....................... 3,510.3 1,165.0 1,130.2 730.3 484.8
Capital expenditures...................... 158.5 36.7 18.1 96.8 6.9
Depreciation.............................. 54.3 19.2 19.0 12.4 3.7
1995
- - ----
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 special
charges 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....................... 2,975.8 1,022.3 923.6 583.1 446.8
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
</TABLE>
26
<PAGE> 3
<TABLE>
<CAPTION>
GEOGRAPHIC AREAS (See Note 18 to Financial Statements.)
(In Millions of Dollars)
Corporate
and
United Financial
Total States Europe Canada Services (1)
----- ------ ------ ------ ------------
<S> <C> <C> <C> <C> <C>
1996
- - ----
Unfilled orders.......................... 7,135.4 3,377.0 3,677.7 51.8 28.9
New orders booked........................ 5,570.3 2,468.2 2,998.2 99.0 4.9
Revenues................................. 4,040.6 1,671.9 2,301.7 75.6 (8.6)
Interest expense (2)..................... 54.9 36.2 4.3 1.4 13.0
Earnings before provision for special
charges and income taxes............. 150.9 60.4 128.8 9.3 (47.6)
Earnings before income taxes............. 126.9 60.4 128.8 9.3 (71.6)(4)
Identifiable assets...................... 3,510.3 1,730.0 1,247.7 47.8 484.8
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 special
charges 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...................... 2,975.8 1,444.5 1,032.6 51.9 446.8
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
</TABLE>
(1) Includes general corporate income and expense, and the Corporation's
captive insurance operation.
(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.
(4) Includes in 1996 a provision of $24.0 for asbestos claims.
Unaudited as to unfilled orders and new orders booked.
27
<PAGE> 4
MANAGEMENT'S DISCUSSION
AND ANALYSIS
This Management's Discussion and Analysis of Financial Condition and other
sections of this Annual Report contain forward-looking statements that are based
on management's assumptions, expectations and projections about the various
industries within which the Corporation operates. Such forward-looking
statements by their nature involve a degree of risk and uncertainty. The
Corporation cautions that a variety of factors, including but not limited to the
following, could cause business conditions and results to differ materially from
what is contained in forward-looking statements: changes in the rate of economic
growth in the United States and other major international economies, changes in
investment by the energy, power and environmental industries, changes in
regulatory environment, changes in project schedules, changes in trade, monetary
and fiscal policies worldwide, currency fluctuations, outcomes of pending and
future litigation, protection and validity of patents and other intellectual
property rights and increasing competition by foreign and domestic companies.
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
THREE YEARS ENDED DECEMBER 27, 1996
GENERAL
The Corporation's consolidated backlog at the end of fiscal 1996 was
$7,135.4 million, an increase of $661.4 million or 10% over the amount reported
for the end of fiscal 1995 of $6,474.0 million, which in turn represented an
increase of 26% from a backlog at the end of fiscal 1994 of $5,135.5 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 1996
was $966.2 million, compared with $249.3 million in fiscal 1995 and $385.2
million in fiscal 1994. 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 1996 ($5,570.3 million) were 37% higher than
new orders awarded in fiscal 1995 ($4,071.4 million), which were 32% higher than
new orders awarded in fiscal 1994 ($3,091.0 million). A total of 56% of new
orders in fiscal 1996 was for projects awarded to the Corporation's subsidiaries
located outside of the United States as compared to 55% in fiscal 1995 and 64%
in fiscal 1994. Key geographic regions outside of the United States contributing
to new orders awarded in fiscal 1996 were Europe, China, Southeast Asia and the
Middle East.
Operating revenues increased in fiscal 1996 by 32% or $963.3 million
compared to fiscal 1995, to $4,005.5 million from $3,042.2 million, which in
turn represented a 36% or $807.8 million increase as compared to fiscal 1994 of
$2,234.4 million.
Gross earnings from operations, which are equal to operating revenues minus
the cost of operating revenues ("gross earnings"), increased $94.6 million or
24% in fiscal 1996 as compared to fiscal 1995, to $494.5 million from $399.9
million, which was an increase of approximately 23% over gross earnings for
fiscal 1994.
(28 continued)
<PAGE> 5
Selling, general and administrative expenses increased $46.5 million in
fiscal 1996 as compared to fiscal 1995, to $296.9 million from $250.4 million,
which in turn represented an increase from expenses reported in fiscal 1994 of
$203.4 million. General and administrative expenses increased by $18.5 million
in fiscal 1996 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 1996 as compared to fiscal 1995 decreased $4.7
million or 12% to $35.1 million from $39.8 million. Approximately $1.7 million
was related to lower interest income. 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 deductions in fiscal 1996 increased $11.7 million primarily due to
increases in interest expense of $5.9 million and amortization of intangibles of
$6.3 million. In fiscal 1995, other deductions increased $19.1 million primarily
due to increases in interest expense of $14.0 million and amortization of
intangibles of $2.4 million.
In the fourth quarter of 1996, the Corporation recorded a special pretax
charge of $24 million with respect to estimated probable payments for asbestos
litigation that may not be covered by insurance due to insurers that have
become, or may in the future become insolvent. The Corporation and its
subsidiaries, along with many other companies, are codefendants in numerous
lawsuits pending in the United States. Plaintiffs claim damages for personal
injury alleged to have arisen from the exposure to or use of asbestos in
connection with work performed by the Corporation and its subsidiaries prior to
and during the 1970s for which the insolvent insurers provided coverage. In
conjunction with outside experts, the Corporation has carefully considered the
financial viability and legal obligations of its insurance carriers and has
concluded that after recognition of the special charge, insurers will continue
to adequately fund the balance of the claims and defense costs relating to
current and future asbestos litigation. The Corporation anticipates funding the
major portion of this charge over the next five to ten years.
In connection with the acquisition of Pyropower, the Corporation recorded a
pretax provision for reorganization costs in the fourth quarter of 1995 of $50.1
million. This provision
28
<PAGE> 6
relates to the reorganization of the operations of the Energy Equipment Group
that existed before the acquisition of Pyropower. This reorganization plan
included a rationalization of manufacturing capacity and the reduction of
approximately 630 salaried and hourly personnel. The provision for
reorganization costs included $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 a write-off of
accumulated translation adjustment for curtailed operations). A tax benefit
(after valuation allowance increase) of $3.6 million was recognized, resulting
in a net provision of $46.5 million. Approximately 50% of the above provision
had a cash impact, which was substantially completed at the end of 1996 in
accordance with the initial plan.
The effective tax rate for fiscal 1996 was 35.2% compared to 59.0% in
fiscal 1995 and 38.8% in fiscal 1994. 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%.
Net earnings for 1996 were at a record level of $82.2 million or $2.03 per
share, after recording a special after-tax charge for asbestos claims of $15.6
million ($.38 per share). Net earnings excluding the provision for asbestos
claims were $97.8 million or $2.41 per share. Net earnings for 1995 were $28.5
million or $.79 per share, which included an after-tax provision for
reorganization costs of $46.5 million ($1.28 per share).
ENGINEERING AND CONSTRUCTION GROUP
The E&C Group's backlog at the end of fiscal 1996 was $4,958.2 million, a
9% increase over backlog of $4,566.6 million at the end of fiscal 1995, which in
turn represented a 20% increase from backlog of $3,798.2 million at the end of
fiscal 1994. The increase in fiscal 1996 as compared to fiscal 1995 was due to
awards of a polysilicon plant in the United States and an LNG plant in Oman. The
increase in fiscal 1995 as compared with fiscal 1994 was attributable to major
awards received by Foster Wheeler Environmental Corporation and the French
subsidiary in 1995. These awards 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 22% in fiscal 1996 as
compared with fiscal 1995, from $2,927.7 million in fiscal 1995 to $3,568.4
million in fiscal 1996. New orders increased 37% in fiscal 1995 as compared to
fiscal 1994 levels of $2,138.6 million. The increase in new orders in fiscal
1995 can be attributed to awards to the environmental company and increased
awards in France. The 1996 increase was due primarily to the LNG and polysilicon
plants.
The E&C Group reported a 21% increase in operating revenues in fiscal 1996
as compared to fiscal 1995 from $2,120.2 million to $2,556.1 million, which in
turn represented a 37% increase from fiscal 1994 operating revenues of $1,543.3
million. The increase in fiscal 1996 operating revenues as compared to fiscal
1995 was primarily the result of increased activities of the Italian and Spanish
subsidiaries. The increase in fiscal 1995 operating revenues as compared to
fiscal 1994 was the result of increased activities in the environmental
subsidiary in the United States, acquired in late 1994, and the Italian and
Spanish subsidiaries.
The Corporation includes pass-through costs on cost-plus contracts which
are 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
(29 continued)
<PAGE> 7
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
1995 and fiscal 1996.
The E&C Group's gross earnings increased $12.9 million in fiscal 1996 as
compared with fiscal 1995 or 7%, to $207.7 million from $194.8 million, which in
turn represented an increase of 31% from gross earnings of $148.9 million in
fiscal 1994. An increase in fiscal 1996 of $2.4 million as compared to fiscal
1995 and a $29.1 million increase in fiscal 1995 as compared to fiscal 1994 was
attributable to the Corporation's environmental service activities. The
remaining increases in fiscal 1996 and fiscal 1995 were attributable to the
successful completion of several major contracts by subsidiaries in the United
Kingdom, Spain and Italy.
ENERGY EQUIPMENT GROUP
The Energy Equipment Group's backlog was $1,763.4 million at the end of
fiscal 1996, representing a 7% increase over backlog of $1,651.6 million at the
end of fiscal 1995, which in turn represented a 59% increase over backlog of
$1,037.9 million at the end of fiscal 1994. The increase in backlog in fiscal
1996 as compared to fiscal 1995 was mainly attributable to the award of major
contracts in China and the Middle East. 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 were awarded to the Spanish subsidiary amounting
to $200 million for two 350-MW boiler islands in China and a 130-MW boiler for
Chile.
29
<PAGE> 8
MANAGEMENT'S DISCUSSION
AND ANALYSIS
New orders awarded to the Energy Equipment Group were $1,787.7 million,
$1,000.5 million and $759.6 million in fiscal years 1996, 1995 and 1994,
respectively. Of such new orders, $260.7 million, $331.8 million and $202.0
million were related to chemical-separation activities and $1,527.0 million,
$668.7 million and $557.6 million were related to power generation for fiscal
years 1996, 1995 and 1994, respectively.
Operating revenues for the Energy Equipment Group increased 70% in fiscal
1996 as compared to fiscal 1995, to $1,294.9 million from $761.9 million, which
in turn represented an increase of 44% from fiscal 1994 of $529.5 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 $76.4 million or
52%, to $222.1 million in fiscal 1996 from $145.7 million in fiscal 1995, which
in turn represented a 17% increase from gross earnings in fiscal 1994 of $124.5
million. The increase in fiscal 1996 can be attributed to increased operating
revenues as a result of the acquisition of Pyropower in the fourth quarter of
1995. The increase in fiscal 1995 was due 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.
POWER SYSTEMS GROUP
The Power Systems Group's operating revenues decreased in fiscal 1996 as
compared to fiscal 1995, to $149.6 million from $150.8 million, which in turn
represented a 5% increase from fiscal 1994 operating revenues of $143.5 million.
The Power Systems Group's gross earnings increased $5.2 million in fiscal
1996 as compared with fiscal 1995 to $62.8 million from $57.6 million, which in
turn represented an increase of $9.7 million from gross earnings of $47.9
million in fiscal 1994.
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 years 1996, 1995 and
1994, approximately $16.9 million, $11.1 million and $9.8 million, respectively,
were spent on Corporation-sponsored research activities. During the same
periods, approximately $29.6 million, $25.9 million and $38.2 million,
respectively, were spent on customer-sponsored research activities that were
paid for by customers of the Corporation.
FINANCIAL CONDITION
The Corporation's consolidated financial condition improved during the
three-year period ended December 27, 1996. Stockholders' equity at the end of
fiscal 1996 was $689.0 million as compared to $625.9 million at the end of
fiscal 1995 and $456.5 million at the end of fiscal 1994. 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 1996, increases
from net earnings of $82.2 million and the change in the accumulated translation
adjustment of $8.3 million were partially offset by dividends to stockholders of
$32.9 million. From the beginning of fiscal 1994 to the end of fiscal 1996, net
assets have increased by $288.8 million.
(30 continued)
<PAGE> 9
For the fiscal years 1994, 1995 and 1996, long-term investments in land,
buildings and equipment were $38.5 million, $59.4 million and $158.5 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.
Effective September 30, 1995, the Corporation acquired Pyropower for
approximately $200.0 million, including acquisition costs. The preliminary
purchase price allocation was adjusted by $80.0 million in the fourth quarter of
1996, based upon a final valuation of assets acquired and liabilities assumed.
The quarterly earnings previously reported were not significantly impacted by
this change. 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.
Long-term debt, including current installments, and bank loans increased by
$392.3 million, net of repayments of $208.5 million, during the three-year
period. In 1996, the Corporation borrowed $171.5 million under the Revolving
Credit Agreements, the proceeds of which were used to fund domestic working
capital and other corporate requirements and make a scheduled $22.0 million debt
repayment under the Corporation's 8.58% unsecured promissory private placement
notes (the "Private Notes"). In November 1995, the Corporation sold $200 million
of 6.75% 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 materially in excess of amounts provided in the
accounts.
30
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents amounted to $267.1 million at December 27, 1996,
an increase of $100.0 million from the prior fiscal year-end, principally as a
result of the increase in cash generated by international operations. Short-term
investments increased $24.3 million to $137.2 million at the end of 1996. During
fiscal 1996, the Corporation paid $32.9 million in stockholder dividends, repaid
debt of $47.6 million including a scheduled $22.0 million repayment of the
Private Notes and funded other operating requirements. The Corporation incurred
incremental borrowings of $171.5 million under the Revolving Credit Agreements.
During fiscal 1996, cash flow provided by operating activities totaled
$111.0 million. This represented an increase of $216.3 million from 1995,
primarily due to advance payments by customers and current status of contracts
in process. The majority of the operating cash flow was generated by
international operations as domestic working capital needs were significant. The
Corporation's working capital varies 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.
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 $200.0 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 6.75% 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.
The Corporation's contracts in process and inventories increased by $20.3
million during 1996 from $383.2 million at December 29, 1995 to $403.5 million
at December 27, 1996. The increase in the contracts in process and inventories
in fiscal 1996 can be attributed to an increase in the Energy Equipment Group of
$43.2 million, offset by reductions in the E&C Group of $11.1 million and $17.4
million in the Power Systems Group. In addition, accounts and notes receivable
increased by $140.1 million in fiscal 1996 to $885.8 million from $745.7
million. The E&C Group increased by approximately $82.7 million, primarily due
to significant contracts under execution by the Spanish, French and U.K.
subsidiaries. The balance of the increase can be attributed principally to the
Energy Equipment Group primarily due to execution of significant contracts by
the Spanish subsidiary.
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 Agreements 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
Agreements with a syndicate of banks led by National Westminster Bank PLC and
Mellon Bank, N.A. One Agreement is a short-term Revolving Credit Agreement 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 Agreements"). 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
principal installments of $22.0 million on the Private Notes on September 30,
1997 and 1998. The Corporation expects to make such payments from internally
generated cash, borrowings under its Revolving Credit Agreements and/or
third-party financing in the capital markets.
(31 continued)
<PAGE> 11
The Corporation has lease payments due under two long-term operating leases
of $98.5 million in fiscal 1997, $33.7 million in fiscal 1998 and $33.6 million
in fiscal 1999 and other rental payments under leases for office space. The 1997
payments include an advance lease payment for a 1,600-ton-per-day recycling and
waste-to-energy plant located in Robbins, Illinois, which went into commercial
operation in January 1997. The Corporation expects to make these lease payments
from cash available from operations and borrowings under the Revolving Credit
Agreements. Leasing arrangements for equipment, which are short-term in nature,
are not expected to impact the Corporation's liquidity or capital resources.
Management of the Corporation believes that cash and cash equivalents on
hand of $267.1 million and short-term investments of $137.2 million at December
27, 1996, combined with cash flow from operating activities, available credit
under its Revolving Credit Agreements 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.
31
<PAGE> 12
MANAGEMENT'S DISCUSSION
AND ANALYSIS
In 1996, the Corporation completed the construction of a recycling and
waste-to-energy project for the Village of Robbins, Illinois. A subsidiary of
the Corporation, Robbins Resource Recovery Limited Partnership ("the
Partnership"), will operate this facility under a long-term operating lease. By
virtue of the facility qualifying under the Illinois Retail Rate Law as a
qualified solid waste-to-energy facility, it was to receive electricity revenues
projected to be substantially higher than the utility's "avoided cost." Under
the Retail Rate Law, the utility was entitled to a tax credit against a state
tax on utility gross receipts and invested capital. The State was to be
reimbursed by the facility for the tax credit beginning after the 20th year
following the initial sale of electricity to the utility. The State has repealed
the Retail Rate Law insofar as it applies to this facility. The Partnership is
contesting the Illinois legislature's partial repeal of the Retail Rate Law in
court. In the event this litigation is not successful and no other means are
available to generate revenue from the sale of electric power above that
provided by selling electricity at the "avoided cost," 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 the litigation not be successful, 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. Plaintiffs claim
damages for personal injury alleged to have arisen from the exposure to or use
of asbestos in connection with work performed by the Corporation and its
subsidiaries during the 1970s and prior. At December 27, 1996, there were
approximately 92,600 claims pending. Approximately 35,500 new claims were filed
in fiscal 1996 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 these exposures.
During the three-year period ended December 27, 1996, the Corporation tried,
settled or summarily disposed of approximately 60,000 (1996-20,600)
asbestos-related claims. Approximately $72 million, substantially all of which
was reimbursed or will be reimbursed, were spent on asbestos litigation defense
and case resolution during the three-year period (1994-$24 million; 1995-$21
million; 1996-$27 million). The Corporation has recorded, with respect to
asbestos litigation, an asset relating to probable insurance recoveries and a
liability relating to probable losses. 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
except for those insurers that have become or may become insolvent, the insurers
will continue to adequately fund claims and defense costs relating to asbestos
litigation.
INFLATION
The effect of inflation on the Corporation's revenues and earnings is
minimal. Although a majority of the Corporation's revenues are made under
long-term contracts, the selling prices of such contracts, established for
deliveries in the future, generally reflect estimated costs to complete in these
future periods. In addition, some contracts provide for price adjustments
through escalation clauses.
(32 continued)
<PAGE> 13
OTHER ACCOUNTING MATTERS
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." This Standard provides
consistent standards for distinguishing transfers of financial assets that are
sales from transfers that are secured borrowings. This Standard is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996. The adoption of this Standard is not expected
to impact the Corporation's consolidated results of operations, financial
position or cash flows.
32
<PAGE> 14
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET (In Thousands of Dollars, Except per Share
- - ---------------------------------------------------------------------
Amounts)
- - --------
December 27, December 29,
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ............................ $ 267,149 $ 167,131
Short-term investments ............................... 137,180 112,853
Accounts and notes receivable:
Trade ............................................. 769,494 630,751
Other ............................................. 116,291 114,988
Contracts in process ................................. 363,716 340,526
Inventories .......................................... 39,799 42,716
Prepaid and refundable income taxes .................. 38,627 39,346
Prepaid expenses ..................................... 30,192 20,662
----------- -----------
Total current assets .............................. 1,762,448 1,468,973
----------- -----------
Land, buildings and equipment ........................... 1,054,786 944,596
Less accumulated depreciation ........................... 330,007 299,784
----------- -----------
Net book value .................................... 724,779 644,812
----------- -----------
Notes and accounts receivable - long-term ............... 74,296 63,632
Investments and advances ................................ 73,725 56,767
Intangible assets, net .................................. 331,463 260,070
Prepaid pension cost and benefits ....................... 180,473 156,683
Other, including insurance recoveries ................... 359,362 321,686
Deferred income taxes ................................... 3,788 3,186
----------- -----------
TOTAL ASSETS ...................................... $ 3,510,334 $ 2,975,809
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments on long-term debt ............... $ 32,764 $ 34,648
Bank loans ........................................... 52,278 86,869
Accounts payable ..................................... 359,503 372,949
Accrued expenses ..................................... 275,527 196,633
Estimated costs to complete long-term
contracts ......................................... 562,984 475,899
Advance payments by customers ........................ 116,903 74,821
Income taxes ......................................... 41,935 28,457
----------- -----------
Total current liabilities ......................... 1,441,894 1,270,276
Long-term debt, less current installments ............... 796,279 554,404
Minority interest in subsidiary companies ............... 13,106 13,438
Deferred income taxes ................................... 30,095 21,841
Postretirement and other employee benefits
other than pensions .................................. 180,210 178,130
Other long-term liabilities and deferred
credits .............................................. 359,792 311,853
----------- -----------
TOTAL LIABILITIES ................................. 2,821,376 2,349,942
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred Stock
Authorized 1,500,000 shares; no par
value - none outstanding
Common Stock
$1.00 par value; authorized 160,000,000
shares; issued: 1996-40,651,241;
1995-40,498,481 ...................................... 40,651 40,498
Paid-in capital ......................................... 197,970 192,721
Retained earnings ....................................... 471,177 421,804
Accumulated translation adjustment ...................... (20,545) (28,861)
----------- -----------
689,253 626,162
Less cost of treasury stock (10,804
shares) .............................................. 295 295
----------- -----------
TOTAL STOCKHOLDERS' EQUITY ........................ 688,958 625,867
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........ $ 3,510,334 $ 2,975,809
=========== ===========
</TABLE>
See notes to financial statements.
33
<PAGE> 15
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF EARNINGS (In Thousands of Dollars, Except per Share
- - -----------------------------------------------------------------------------
Amounts)
- - --------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES:
Operating revenues ......................... $4,005,503 $3,042,177 $2,234,441
Other income (including interest:
1996-$21,714; 1995-$23,404; 1994-$25,014) 35,108 39,753 36,682
---------- ---------- ----------
Total Revenues .......................... 4,040,611 3,081,930 2,271,123
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of operating revenues ................. 3,510,970 2,642,290 1,909,893
Selling, general and administrative expenses 296,921 250,369 203,445
Other deductions (including interest:
1996-$54,940; 1995-$49,011; 1994-$34,978) 76,678 64,998 45,906
Provision for special charges .............. 24,000 50,120 --
Minority interest .......................... 5,176 4,490 5,012
---------- ---------- ----------
Total Costs and Expenses ................ 3,913,745 3,012,267 2,164,256
---------- ---------- ----------
Earnings before income taxes .................. 126,866 69,663 106,867
Provision for income taxes .................... 44,626 41,129 41,457
---------- ---------- ----------
Net earnings .................................. $ 82,240 $ 28,534 $ 65,410
========== ========== ==========
Earnings per share ............................ $ 2.03 $ .79 $ 1.83
========== ========== ==========
</TABLE>
See notes to financial statements.
(34 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 27, 1996 and December 29, 1995, 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
27, 1996. 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 27, 1996 and December 29, 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 27, 1996 in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
February 13, 1997
34
<PAGE> 17
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (In Thousands of
- - --------------------------------------------------------------------------
Dollars, Except per Share Amounts)
- - ----------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
COMMON STOCK
Balance at beginning of year ...................................... $ 40,498 $ 35,833 $ 35,707
Sold under stock options: (shares: 1996-128,199; 1995-45,817;
1994-125,682) ................................................... 128 45 126
Restricted stock issued under incentive plans (shares: 1996-24,561) 25 -- --
Issued in public offerings (shares: 1995-4,620,000) ............... -- 4,620 --
--------- --------- ---------
Balance at end of year .......................................... 40,651 40,498 35,833
--------- --------- ---------
PAID-IN CAPITAL
Balance at beginning of year ...................................... 192,721 38,266 35,076
Stock option exercise price less par value ........................ 3,417 573 2,214
Excess of market value over cost of treasury stock or common stock
issued under incentive plans .................................... 1,068 46 --
Tax benefits related to stock options ............................. 764 192 976
Excess of proceeds received on issuance of common stock in public
offerings less par value and costs .............................. -- 153,644 --
--------- --------- ---------
Balance at end of year .......................................... 197,970 192,721 38,266
--------- --------- ---------
RETAINED EARNINGS
Balance at beginning of year ...................................... 421,804 420,861 381,205
Net earnings for the year ......................................... 82,240 28,534 65,410
Cash dividends paid:
Common (per share outstanding: 1996-$.81; 1995-$.77; 1994-$.72) . (32,867) (27,591) (25,754)
--------- --------- ---------
Balance at end of year .......................................... 471,177 421,804 420,861
--------- --------- ---------
ACCUMULATED TRANSLATION ADJUSTMENT
Balance at beginning of year ...................................... (28,861) (37,915) (51,261)
Change in accumulated translation adjustment during the year ...... 8,316 9,054 13,346
--------- --------- ---------
Balance at end of year .......................................... (20,545) (28,861) (37,915)
--------- --------- ---------
TREASURY STOCK
Balance at beginning of year ...................................... 295 551 551
Issued under incentive plans (shares: 1995-9,325) ................. -- (256) --
--------- --------- ---------
Balance at end of year .......................................... 295 295 551
--------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY ........................................ $ 688,958 $ 625,867 $ 456,494
========= ========= =========
</TABLE>
See notes to financial statements.
35
<PAGE> 18
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
- - -------------------------------------
(In Thousands of Dollars)
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings ..................................... $ 82,240 $ 28,534 $ 65,410
Adjustments to reconcile net earnings to
cash flows from operating activities:
Depreciation and amortization ................... 63,605 54,625 44,288
Noncurrent deferred tax ......................... 5,338 5,049 9,609
Gain on sale of land, buildings and equipment ... (400) (1,283) (915)
Equity earnings, net of dividends ............... (1,474) (1,578) (623)
Provision for special charges ................... 24,000 50,120 --
Other noncash items ............................. (5,133) (4,891) (1,517)
Changes in assets and liabilities, net of effects
of acquisitions:
Receivables ..................................... (148,023) (143,023) (24,942)
Contracts in process and inventories ............ (19,983) (131,759) (51,863)
Accounts payable and accrued expenses ........... 64,219 29,566 (8,286)
Estimated costs to complete long-term contracts . 17,376 50,096 (23,089)
Advance payments by customers ................... 39,300 (34,237) 22,316
Income taxes .................................... 13,520 3,801 (8,198)
Other assets and liabilities .................... (23,629) (10,327) (36,487)
--------- --------- ---------
Net cash provided/(used) by operating
activities ................................... 110,956 (105,307) (14,297)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ............................. (158,526) (59,432) (38,501)
Proceeds from sale of properties ................. 16,278 2,918 4,671
Payments for acquisitions of businesses, net of
cash acquired ................................... (14,798) (133,451) (50,946)
Increase in investments and advances ............. (10,926) (13,596) (5,002)
(Increase)/decrease in short-term investments .... (19,713) 7,026 14,621
Partnership distribution ......................... (4,859) (4,883) (3,000)
--------- --------- ---------
Net cash used by investing activities ........... (192,544) (201,418) (78,157)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends to stockholders ........................ (32,867) (27,591) (25,754)
Proceeds from public offering of common stock,
net ............................................. -- 158,264 --
Proceeds from the exercise of stock options ...... 3,545 618 2,340
(Decrease)/increase in short-term debt ........... (35,258) 7,243 14,583
Proceeds from long-term debt ..................... 287,937 219,978 100,848
Repayment of long-term debt ...................... (47,646) (130,329) (30,540)
--------- --------- ---------
Net cash provided by financing activities ....... 175,711 228,183 61,477
--------- --------- ---------
Effect of exchange rate changes on cash and cash
equivalents .................................... 5,895 9,872 17,264
--------- --------- ---------
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ..... 100,018 (68,670) (13,713)
Cash and cash equivalents at beginning of year ....... 167,131 235,801 249,514
--------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR ............. $ 267,149 $ 167,131 $ 235,801
========= ========= =========
Cash paid during the year for:
Interest (net of amount capitalized) ............ $ 45,985 $ 45,434 $ 36,191
Income taxes .................................... $ 20,271 $ 18,162 $ 26,115
</TABLE>
See notes to financial statements.
36
<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 years 1994, 1995 and 1996
included 52 weeks. Certain amounts in the 1995 consolidated balance sheet have
been reclassified to conform with the 1996 presentations.
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires Management to 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 revenues and expenses during the period reported. Actual results
could differ from those estimates. Estimates are used when accounting for
long-term contracts, depreciation, employee benefit plans, taxes, and
contingencies (see Note 13), among others.
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 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.
(37 continued)
<PAGE> 20
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 35 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.
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 $305,000 at December 27, 1996. It is not practicable
to estimate the additional tax that would be incurred, if any, if these amounts
were repatriated.
37
<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) for 1996, 1995 and 1994 were approximately $(500),
$(1,600) and $(120), respectively [$(320), $(1,000) and $(80) 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 for 1996 and 1995 consist
principally of the excess of cost over the fair value of net assets acquired
(goodwill) ($232,213 and $156,370), trademarks ($62,970 and $65,000) and patents
($36,280 and $38,700), respectively. 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 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:
1996-40,592,494; 1995-36,321,626; and 1994-35,787,658. Outstanding stock options
have been disregarded because their effect on earnings per share would not be
significant.
2. ACQUISITIONS
In the fourth quarter of 1995, the Corporation acquired the
power-generation business of A. Ahlstrom Corporation ("Pyropower") for
approximately $200,000, including acquisition costs. The Pyropower agreement
provided for post-closing adjustments to the purchase price based upon the final
valuation of the acquired assets and assumed liabilities. This adjustment
included provisions for working capital and net worth deficiencies. In addition,
provision in the final adjustment was made for a minimum level of backlog and
gross margin in backlog. Since Pyropower was acquired late in 1995 and was a
complex worldwide operation, which required a comprehensive review of asset
values and liabilities and a significant part of the study had to take into
consideration the integration of Pyropower into the Energy Equipment Group, the
final assessment of the values of the assets and liabilities was not completed
until early in the fourth quarter of 1996. During 1996, the Corporation obtained
more comprehensive information that was not available during the preliminary
allocation period. The determination of the final fair values resulted in
adjustments consisting of changes from initially determined values as of the end
of 1995. The most significant adjustments included increases in the estimated
cost to complete long-term contracts ($68.3 million), decreases in land,
buildings and equipment ($4.4 million), and other changes including decreases in
long-term investments and increases in several allowance accounts ($7.3
million). These changes resulted in a corresponding increase in goodwill. The
quarterly earnings previously reported were not significantly impacted by these
changes.
The unaudited pro forma 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:
(38 continued)
<PAGE> 22
<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).
The unaudited 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 goodwill, and other intangible assets and the increased
interest expense on acquisition debt. The unaudited pro forma results 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.
Also in 1995, the Corporation finalized (i) the purchase of the assets of
Zack Power & Industrial Co., a construction company in Gary, Indiana, for
approximately $2,500, 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.
The acquisitions made in 1995 have all 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. Approximately
$175,000 were 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. In
connection with acquisitions, contracts in process have been valued at an
estimated contract price less estimated cost to complete and a reasonable profit
margin on the completion effort.
38
<PAGE> 23
3. ACCOUNTS AND NOTES RECEIVABLE
The following tabulation shows the components of trade accounts and notes
receivable:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
From long-term contracts:
Amounts billed due within one year................ $477,394 $299,594
-------- --------
Retentions:
Billed:
Estimated to be due in:
1996 .................................. -- 21,950
1997 .................................. 21,578 1,196
1998 .................................. 16,046 --
1999 .................................. 20,028 19,765
-------- --------
Total billed............................ 57,652 42,911
-------- --------
Unbilled:
Estimated to be due in:
1996 .................................. -- 178,357
1997 .................................. 135,241 --
1998 .................................. 824 724
-------- --------
Total unbilled.......................... 136,065 179,081
-------- --------
Total retentions........................ 193,717 221,992
-------- --------
Total receivables from
long-term contracts.................. 671,111 521,586
Other trade and notes receivable..................... 102,458 115,119
-------- --------
773,569 636,705
Less, allowance for doubtful accounts................ 4,075 5,954
-------- --------
$769,494 $630,751
======== ========
</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>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Contracts in process................................... $363,716 $340,526 $171,144
======== ======== ========
Inventories:
Materials and supplies.............................. $ 31,037 $ 31,633 $ 21,447
Work in process..................................... 2,445 6,072 1,894
Finished goods...................................... 6,317 5,011 4,293
-------- -------- --------
$ 39,799 $ 42,716 $ 27,634
======== ======== ========
</TABLE>
The following tabulation shows the elements included in contracts in process
as related to long-term contracts:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Costs plus accrued profits less earned revenues on contracts
currently in process..................................... $633,392 $694,877 $350,897
Less, Progress payments..................................... 269,676 354,351 179,753
-------- -------- --------
$363,716 $340,526 $171,144
======== ======== ========
</TABLE>
(39 continued)
<PAGE> 24
5. LAND, BUILDINGS AND EQUIPMENT
Land, buildings and equipment are stated at cost and are set forth below:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Land and land improvements.............................. $ 21,419 $ 21,599
Buildings............................................... 154,160 146,858
Equipment............................................... 743,434 737,624
Construction in progress................................ 135,773 38,515
---------- --------
$1,054,786 $944,596
========== ========
</TABLE>
Depreciation expense for the years 1996, 1995 and 1994 was $54,374,
$51,706 and $43,729, 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.
Retirement 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.
39
<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 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Actuarial present value of accumulated benefit obligations:
Vested ................................................ $ 375,765 $ 334,082
Nonvested ............................................. 9,135 10,382
--------- ---------
Total ............................................. $ 384,900 $ 344,464
========= =========
Plan assets at fair value, primarily
listed stocks and bonds ............................... $ 490,659 $ 446,519
Projected benefit obligations ............................. (424,285) (383,036)
--------- ---------
Excess of plan assets over projected benefit
obligations ........................................... 66,374 63,483
Unrecognized net loss due to past experience
different from assumptions made ....................... 37,047 34,672
Unrecognized prior service cost ........................... 16,638 15,923
Unrecognized net assets being amortized over
12 years .............................................. (12,179) (17,198)
--------- ---------
Prepaid pension cost ...................................... $ 107,880 $ 96,880
========= =========
</TABLE>
Net periodic pension expense/(credits) included the following components:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost ................................ $ 17,424 $ 13,602 $ 15,289
Interest cost on projected benefit
obligation ................................ 29,476 27,327 25,070
Actual return on plan assets ................ (43,600) (38,848) (38,081)
Net amortization and deferrals .............. (2,279) (637) (2,799)
-------- -------- --------
Net periodic pension expense/(credits) ...... $ 1,021 $ 1,444 $ (521)
======== ======== ========
</TABLE>
In determining the actuarial present value of the projected benefit
obligations, discount rates ranging from 7.0% to 8.5%, and rates of increase for
future compensation levels ranging from 3.0% to 6.5% were utilized. The expected
long-term rate of return on assets was 10%. In conjunction with the 1995
reorganization, the Corporation offered an enhanced retirement package to
employees. This resulted in additional service cost under the provisions of SFAS
No. 88 of approximately $1,900.
The Corporation has a 401(k) plan for salaried employees. The Corporation,
for the years 1996, 1995 and 1994, contributed a 50% match of the employees'
contributions which amounted to a cost of $4,300, $3,700 and $3,400,
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.
The following sets forth the plans' funded status reconciled with amounts
reported in the Corporation's consolidated balance sheet at the end of December
1996 and 1995.
(40 continued)
<PAGE> 26
Accumulated postretirement benefit obligation:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Retirees............................................. $ 70,095 $ 71,861
Fully-eligible active plan participants.............. 11,927 11,712
Other active plan participants....................... 36,895 38,409
-------- --------
Accumulated postretirement benefit................... 118,917 121,982
Unrecognized net gain/(loss)......................... 3,052 (669)
Unrecognized prior service cost...................... 28,976 31,077
-------- --------
Accrued postretirement benefit liability............. $150,945 $152,390
======== ========
</TABLE>
Net periodic postretirement benefit cost for 1996, 1995 and 1994
included the following components:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost.......................................... $ 1,623 $ 1,247 $ 1,244
Interest cost......................................... 6,010 6,186 6,478
Net amortization and deferrals........................ (2,101) (2,165) (2,094)
------- ------- -------
Net periodic postretirement benefit cost.............. $ 5,532 $ 5,268 $ 5,628
======= ======= =======
</TABLE>
An 8.5% annual rate of increase in the per capita costs of covered health
care benefits was assumed for 1997, 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 27, 1996, by $3,550 and increase the aggregate of the service cost and
interest cost components of net periodic postretirement benefit cost for 1996 by
$280. A discount rate of 7.75% (1995 - 7.25%) 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 1996 and 1995 were 5% and 9%, respectively.
Unused lines of credit for short-term bank borrowings aggregated $125,723
at year-end 1996, of which approximately 88% 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.
Interest costs incurred in 1996, 1995 and 1994 were $61,302, $49,117 and
$35,445 of which $6,362, $106 and $467, respectively, were capitalized.
40
<PAGE> 27
8. LONG-TERM DEBT
<TABLE>
<CAPTION>
Long-term debt consisted of the following: 1996 1995
---- ----
<S> <C> <C>
Corporate Debt
- - ---------------
8.58% unsecured promissory notes due in
installments of $22,000 on September 30
in each of the years 1997 and 1998 .................................... $ 44,000 $ 66,000
Revolving Credit Agreements (average interest rate 6%) ................... 171,500 --
6.75% Notes due November 15, 2005 ........................................ 200,000 200,000
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 (1996 year-end rate 6.4%), due semiannually through
July 30, 2006 ......................................................... 53,853 56,887
Floating/Fixed Rate Resource Recovery
Revenue Bonds, interest varies based on tax-exempt money market rates
(1996 year-end rate 4.2%), 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 ................................................................. -- 3,104
Fixed Rate Trust Certificates, interest at 7.36%,
due semiannually August 15, 1997 through
February 15, 2014 ..................................................... 97,923 --
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,
1997 through 2012 ..................................................... 70,270 73,505
Other .................................................................... 25,899 23,958
-------- --------
829,043 589,052
Less, Current portion .................................................... 32,764 34,648
-------- --------
$796,279 $554,404
======== ========
Principal payments are payable in annual installments of:
1998................................................................ $ 48,800
1999................................................................ 27,154
2000................................................................ 202,920
2001................................................................ 28,510
2002................................................................ 29,927
Balance due in installments
through 2014..................................................... 458,968
--------
$796,279
========
</TABLE>
(41 continued)
<PAGE> 28
CORPORATE DEBT - During 1995, the Corporation sold $200,000 Notes in the
public market which bear interest at a fixed rate of 6.75% 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 $44,000 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 1996,
the Corporation had $171,500 outstanding of the $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 Agreements 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 27, 1996, these ratios were .46
to 1 and 3.25 to 1, respectively.
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.
41
<PAGE> 29
NOTES TO FINANCIAL STATEMENTS
(In Thousands of Dollars, Except per Share Amounts)
COGENERATION PROJECTS - The note payable for $53,853 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 27, 1996 was
$23,806. Amounts receivable under the swap agreements are reflected as a
reduction of interest expense.
The Floating/Fixed Rate Resource Recovery Revenue Bonds in the amount of
$45,448 were issued in a total amount of $45,450. The bonds are collateralized
by an irrevocable standby letter of credit issued by a commercial bank.
The Fixed Rate Trust Certificates in the amount of $97,923 were issued in
a total amount of $162,000 by a Chilean limited liability company owned 85% by a
Special-Purpose Subsidiary and 15% by the Chilean national oil company and one
of its affiliates.
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 $70,270 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 1996, 1995 and 1994, approximately $16,900, $11,100 and
$9,800, respectively, were spent on Corporation-sponsored research activities.
During the same periods, approximately $29,600, $25,900 and $38,200,
respectively, were spent on customer-sponsored research activities which were
paid by customers of the Corporation.
10. INCOME TAXES
The components of earnings/(loss) before income taxes for the years
1996, 1995 and 1994 were taxed under the following jurisdictions:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Domestic .................................................... $(11,261) $ 2,775 $ 19,955
Foreign ..................................................... 138,127 66,888 86,912
-------- ------- --------
Total ....................................................... $126,866 $69,663 $106,867
======== ======= ========
The provision for income taxes on those earnings was as follows:
Current tax expense:
Domestic .................................................... $ 6,002 $ 6,306 $ 2,931
Foreign ..................................................... 31,197 17,883 36,739
-------- ------- --------
Total current ............................................... 37,199 24,189 39,670
-------- ------- --------
Deferred tax expense/(benefit):
Domestic .................................................... (5,434) 5,508 5,423
Foreign ..................................................... 12,861 11,432 (6,600)
-------- ------- --------
Total deferred .............................................. 7,427 16,940 (1,177)
-------- ------- --------
Utilization of operating loss
carryforwards ............................................. -- -- 2,964
-------- ------- --------
Total provision for income taxes ............................... $ 44,626 $41,129 $ 41,457
======== ======= ========
</TABLE>
(42 continued)
<PAGE> 30
Deferred tax liabilities (assets) consist of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Difference between book and
tax depreciation ....................................... $ 90,995 $ 85,739
Pension assets ............................................ 36,024 33,762
Capital lease transactions ................................ 12,201 12,451
Revenue recognition ....................................... 19,994 19,146
Other ..................................................... 6,416 4,397
--------- ---------
Gross deferred tax liabilities ............................ 165,630 155,495
--------- ---------
Current taxability of estimated
costs to complete long-term
contracts .............................................. (9,061) (12,989)
Reorganization costs ...................................... -- (18,120)
Income currently taxable deferred
for financial reporting ................................ (6,697) (7,059)
Expenses not currently deductible
for tax purposes ....................................... (37,104) (21,690)
Investment tax credit carryforwards ....................... (30,251) (30,251)
Postretirement benefits other
than pensions .......................................... (64,900) (65,919)
Asbestos claims ........................................... (8,400) --
Minimum tax credits ....................................... (6,832) (6,605)
Foreign tax credits ....................................... (21,400) (21,400)
Other ..................................................... (3,166) (1,071)
Valuation allowance ....................................... 20,000 20,000
--------- ---------
Net deferred tax assets ................................... (167,811) (165,104)
--------- ---------
$ (2,181) $ (9,609)
========= =========
</TABLE>
42
<PAGE> 31
The domestic investment tax credit carryforwards, if not used, will expire
in the years 2002 through 2007. Foreign tax credits carryforwards are recognized
based on their potential utilization and, if not used, will expire in the years
1997 through 2001. The Corporation has significant foreign tax credit
carryforwards for which deferred tax assets have not been recorded since their
utilization is deemed remote. 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 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>
1996 1995 1994
---- ---- ----
<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 . 2.0 4.4 1.2
Increase in valuation allowance -- 20.8 --
Other ......................... (1.8) (1.2) 2.6
---- ---- ----
35.2 % 59.0 % 38.8%
==== ==== ====
</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 went into commercial operation in January 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
1994 through 1996 totaled $9,300 annually.
The minimum lease payments under these long-term noncancelable operating
leases are as follows:
<TABLE>
<S> <C>
1997.................. $ 98,528
1998.................. 33,743
1999.................. 33,626
2000.................. 33,529
2001.................. 35,352
Thereafter............ 687,248
--------
Total................. $922,026
========
</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 $28,800 in 1996, $26,000 in 1995 and $20,600 in 1994. Future
minimum rental commitments on noncancelable leases are as follows: 1997 -
$25,800; 1998 - $23,900; 1999 - $21,000; 2000 - $18,300; 2001-$16,600; and an
aggregate of $25,800 thereafter.
(43 continued)
<PAGE> 32
12. QUARTERLY FINANCIAL DATA (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------------
1996 March 29 June 28 Sept. 27 Dec. 27
- - ---- -------- ------- -------- -------
<S> <C> <C> <C> <C>
Operating revenues........................ $843,916 $970,535 $960,912 $1,230,140
Gross earnings from operations............ 117,274 117,495 128,011 131,753
Net earnings.............................. 23,436 25,065 23,965 9,774(a)
Earnings per share(c)..................... .58 .62 .59 .24(a)
Cash dividends per share.................. .195 .205 .205 .205
Stock prices:
High.................................. 47.25 47.125 45.00 44.625
Low................................... 39.375 39.75 39.875 33.75
</TABLE>
<TABLE>
<CAPTION>
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)(b)
Earnings/(loss) per share(c).............. .50 .53 .48 (.67)(b)
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
</TABLE>
(a) Includes a provision for asbestos claims of $15,600, net of income taxes
($0.38 per share). See Note 17.
(b) Includes a provision for reorganization costs of $46,500, net of income
taxes ($1.28 per share) See Note 17.
(c) 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 materially in excess of amounts provided in the accounts.
The Corporation and its subsidiaries, along with many other companies, are
codefendants in numerous lawsuits pending in the United States. Plaintiffs claim
damages for personal injury alleged to have arisen from the exposure to or use
of asbestos in connection with work performed by the Corporation and its
subsidiaries during the 1970s and prior. At December 27, 1996, there were
approximately 92,600 (1995-77,700) claims pending. Approximately 35,500 new
claims were filed in fiscal 1996 and settlement costs not
43
<PAGE> 33
NOTES TO FINANCIAL STATEMENTS
(In Thousands of Dollars, Except per Share Amounts)
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 these exposures. During the three-year period ended
December 27, 1996, the Corporation tried, settled or summarily disposed of
approximately 60,000 (1996-20,600) asbestos-related claims. Approximately
$72,000, substantially all of which was reimbursed or will be reimbursed, were
spent on asbestos litigation defense and case resolution during the three-year
period (1994-$24,000; 1995-$21,000; 1996-$27,000). The Corporation has recorded,
with respect to asbestos litigation, an asset relating to probable insurance
recoveries and a liability relating to probable losses. 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 except for those insurers that have become or may become
insolvent, the insurers will continue to adequately fund claims and defense
costs relating to asbestos litigation (see Note 17).
In 1996, the Corporation completed the construction of a recycling and
waste-to-energy project for the Village of Robbins, Illinois. A subsidiary of
the Corporation, Robbins Resource Recovery Limited Partnership ("the
Partnership"), will operate this facility under a long-term operating lease. By
virtue of the facility qualifying under the Illinois Retail Rate Law as a
qualified solid waste-to-energy facility, it was to receive electricity revenues
projected to be substantially higher than the utility's "avoided cost." Under
the Retail Rate Law, the utility was entitled to a tax credit against a state
tax on utility gross receipts and invested capital. The State was to be
reimbursed by the facility for the tax credit beginning after the 20th year
following the initial sale of electricity to the utility. The State has repealed
the Retail Rate Law insofar as it applied to this facility. The Partnership is
contesting the Illinois legislature's partial repeal of the Retail Rate Law in
court. In the event this litigation is not successful and no other means are
available to generate revenue from the sale of electric power above that
provided by selling electricity at the "avoided cost," 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 the litigation not be successful, 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.
The ultimate legal and financial liability of the Corporation in respect to
all claims, lawsuits and proceedings cannot be estimated with certainty. As
additional information concerning the estimates used by the Corporation becomes
known, the Corporation reassesses its position both with respect to gain
contingencies and accrued liabilities and other potential exposures. Estimates
that are particularly sensitive to future change relate to legal matters, which
are subject to change as events evolve and as additional information becomes
available during the administration and litigation process.
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 (SFAS) 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 1996 and 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>
1996 1995
---- ----
<S> <C> <C>
Net earnings - as reported $ 82,240 $ 28,534
======== ========
Net earnings - pro forma $ 79,725 $ 24,434
======== ========
Earnings per share - as reported $ 2.03 $ 0.79
======== ========
Earnings per share - pro forma $ 1.96 $ 0.67
======== ========
</TABLE>
(44 continued)
<PAGE> 34
The assumption regarding the stock options issued to executives in 1996 and
1995 was that 100% of such options vested in each year, rather than one-third as
required by the Plan, since one-third of the previous two years would have
vested in 1996 and 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:
<TABLE>
1996 1995
---- ----
<S> <C> <C>
Dividend yield 1.83% 2.21%
Expected volatility 27.56% 37.20%
Risk-free interest rate 5.63% 7.68%
Expected life (years) 7.5 7.5
</TABLE>
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% 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.
44
<PAGE> 35
Information regarding these option plans for 1996, 1995 and 1994 is as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------- ------------------------ ----
Weighted- Weighted-
Average Average
Exercise Exercise
Shares Price Shares Price Shares
------ ----- ------ ----- ------
<S> <C> <C> <C> <C> <C>
Options outstanding,
beginning of year...................... 991,345 $29.78 546,462 $28.12 493,810
Options exercised.......................... (128,199) 27.65 (45,817) 13.49 (125,682)
Options granted............................ 260,084 42.63 490,700 30.10 178,334
---------- ---------- ---------
Options outstanding, end of year........... 1,123,230 $33.00 991,345 $29.78 546,462
========== ========== =========
Option price range at end of year.......... $ 14.50 to $ 14.50 to $ 12.25 to
$ 45.6875 $ 40.0625 $ 40.0625
Option price range for
excercised shares...................... $ 14.50 to $ 12.25 to $ 12.25 to
$ 32.9375 $ 13.6875 $ 28.75
Options available for grant
at end of year......................... 1,282,916 1,543,000 539,578
========== ========== =========
Weighted-average fair value of options,
granted during the year................ $ 14.90 $ 13.12
</TABLE>
The following table summarizes information about fixed-price stock options
outstanding at December 27, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------- --------------------------------
Weighted-
Number Average Weighted- Number Weighted-
Range of Outstanding Remaining Average Exercisable Average
Exercise Prices at 12/27/96 Contractual Life Exercise Price at 12/27/96 Exercise Price
--------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$14.50 2,691 3 years $14.50 2,691 $14.50
21.3125 to 22.125 28,387 4 years 21.51 28,387 21.51
22.0625 to 28.6875 48,000 5 years 23.17 48,000 23.17
26.9375 to 27.4375 88,000 6 years 27.34 88,000 27.34
27.4375 to 28.75 94,667 7 years 28.50 94,667 28.50
32.9375 to 40.0625 172,334 8 years 35.83 121,561 36.06
29.75 to 35.25 429,067 9 years 30.14 302,282 30.20
42.1875 to 45.6875 260,084 10 years 42.63 -- --
--------- -------
14.50 to 45.6875 1,123,230 685,588
========= =======
</TABLE>
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
(45 continued)
<PAGE> 36
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.
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
45
<PAGE> 37
NOTES TO FINANCIAL STATEMENTS
(In Thousands of Dollars, Except per Share Amounts)
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).
CARRYING AMOUNTS AND FAIR VALUES - The estimated fair values of the
Corporation's financial instruments are as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------- -------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Nonderivatives:
Cash and short-term
investments ........... $ 404,329 $ 404,329 $ 279,984 $ 279,984
Long-term investments .... 700 1,170 4,150 4,650
Long-term debt ........... (829,043) (828,287) (589,052) (595,000)
Derivatives:
Foreign currency contracts 1,430 1,430 (17,700) (17,700)
Interest rate swaps ...... -- 260 -- 200
</TABLE>
In the ordinary course of business, the Corporation is contingently liable
for performance under letters of credit totaling approximately $166,000 and
$139,000 at December 27, 1996 and December 29, 1995, 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 and,
therefore, is of the opinion that the fair value of these instruments is zero.
As of December 27, 1996, the Corporation had $144,000 of forward exchange
contracts outstanding. These forward exchange contracts mature between 1997 and
1998. Approximately 15% 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 27, 1996 and December 29, 1995, the Corporation had no
significant concentrations of credit risk. The Corporation had issued third
party off-balance-sheet financial guarantees totaling approximately $20,000 at
year end 1996 and 1995.
17. PROVISION FOR SPECIAL CHARGES
(a) ASBESTOS CLAIMS - In the fourth quarter of 1996, the Corporation
recorded a special pretax charge of $24,000 with respect to estimated probable
payments for asbestos litigation that may not be covered by insurance due to
insurers that have become, or may in the future become insolvent. The
Corporation and its subsidiaries, along with many other companies, are
codefendants in numerous lawsuits pending in the United States. Plaintiffs claim
damages for personal injury alleged to have arisen from the exposure to or use
of asbestos in connection with work performed by the Corporation and its
subsidiaries prior to and during the 1970s for which the insolvent insurers
provided coverage. In conjunction with outside experts, the Corporation has
carefully considered the financial viability and legal obligations of
(46 continued)
<PAGE> 38
its insurance carriers and has concluded that after recognition of the special
charge, insurers will continue to adequately fund the balance of the claims and
defense costs relating to current and future asbestos litigation. The
Corporation anticipates funding the major portion of this charge over the next
five to ten years.
(b) REORGANIZATION - In connection with the acquisition of Pyropower, the
Corporation recorded a 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 included 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>
The reorganization has been substantially completed as of the end of 1996
in accordance with the initial plan. Approximately 50% of the provision had a
cash impact.
46
<PAGE> 39
18. 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-NO(x) 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
utilizes Foster Wheeler's strengths in design, engineering, manufacturing and
construction to build, own or lease, and operate cogeneration, independent power
production and resource recovery facilities as well as facilities for the
process and petrochemical industries.
The 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 1996, the Group accounted for approximately
64% of the operating revenues. The geographic dispersion of these operating
revenues was as follows: 25% North America, 19% Asia, 35% Europe, 14% Middle
East and 7% other. The Energy Equipment Group accounted for 32% of the operating
revenues of the Corporation. The geographic dispersion of these operating
revenues was as follows: 34% North America, 34% Asia, 25% Europe and 7% other.
The Power Systems Group accounted for 4% of the Corporation's 1996 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 1996, 1995 and 1994 is on pages 26 and 27 (unaudited as to
unfilled orders and new orders booked).
47
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary of financial information extracted from the
consolidated balance sheet and statement of earnings for the year ended December
27, 1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-27-1996
<PERIOD-START> DEC-30-1995
<PERIOD-END> DEC-27-1996
<CASH> 267,149
<SECURITIES> 137,180
<RECEIVABLES> 885,785
<ALLOWANCES> 0
<INVENTORY> 403,515
<CURRENT-ASSETS> 1,762,448
<PP&E> 1,054,786
<DEPRECIATION> 330,007
<TOTAL-ASSETS> 3,510,334
<CURRENT-LIABILITIES> 1,441,894
<BONDS> 796,279
0
0
<COMMON> 40,651
<OTHER-SE> 648,307
<TOTAL-LIABILITY-AND-EQUITY> 3,510,334
<SALES> 4,005,503
<TOTAL-REVENUES> 4,040,611
<CGS> 3,807,891
<TOTAL-COSTS> 3,807,891
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54,940
<INCOME-PRETAX> 126,866
<INCOME-TAX> 44,626
<INCOME-CONTINUING> 82,240
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82,240
<EPS-PRIMARY> 2.03
<EPS-DILUTED> 2.03
</TABLE>
