UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 24, 1999
OR
[ ] 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 or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
PERRYVILLE CORPORATE PARK, CLINTON, N. J. 08809-4000
----------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908)-730-4000
--------------
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. Yes (X) No ( )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
40,725,887 shares of the Corporation's common stock ($1.00 par value)
were outstanding as of September 24, 1999.
<PAGE>
FOSTER WHEELER CORPORATION
INDEX
Part I Financial Information:
Item 1 - Financial Statements:
Condensed Consolidated Balance Sheet at
September 24, 1999 and December 25, 1998
Condensed Consolidated Statement of Earnings and
Comprehensive Income Three and Nine Months Ended
September 24, 1999 and September 25, 1998
Condensed Consolidated Statement of Cash Flows
Nine Months Ended September 24, 1999 and
September 25, 1998
Notes to Condensed Consolidated Financial Statements
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II Other Information:
Item 1 - Legal Proceedings
Item 6 - Exhibits and Reports on Form 8-K
Signatures
1
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(In Thousands of Dollars)
SEPT. 24, 1999 DECEMBER 25,
(UNAUDITED) 1998 *
----------- ------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents .............................. $ 185,484 $ 180,068
Short-term investments ................................. 26,216 61,223
Accounts and notes receivable .......................... 945,134 857,005
Contracts in process and inventories ................... 450,088 478,481
Prepaid, deferred and refundable income taxes .......... 99,911 66,068
Prepaid expenses ....................................... 19,701 29,997
----------- -----------
Total current assets .............................. 1,726,534 1,672,842
----------- -----------
Land, buildings and equipment .......................... 999,993 1,015,795
Less accumulated depreciation .......................... 356,065 339,009
----------- -----------
Net book value .................................... 643,928 676,786
----------- -----------
Notes and accounts receivable - long-term .............. 107,165 103,612
Investments and advances ............................... 108,223 95,827
Intangible assets, net ................................. 275,375 285,245
Prepaid pension cost and benefits ...................... 199,756 196,812
Other, including insurance recoveries .................. 260,490 286,886
Deferred income taxes .................................. 4,792 4,291
----------- -----------
TOTAL ASSETS ................................ $ 3,326,263 $ 3,322,301
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments on long-term debt ................. $ 20,079 $ 19,751
Bank loans ............................................. 53,576 107,051
Accounts payable and accrued expenses .................. 642,799 718,337
Estimated costs to complete long-term contracts ........ 636,261 563,271
Advance payments by customers .......................... 49,411 56,630
Income taxes ........................................... 49,345 26,626
----------- -----------
Total current liabilities ......................... 1,451,471 1,491,666
Corporate and other debt less current installments ..... 374,819 540,827
Special-purpose project debt less current installments . 329,749 294,898
Deferred income taxes .................................. 63,757 85,484
Postretirement and other employee benefits other than
pensions .......................................... 166,514 168,799
Other long-term liabilities and minority interest ...... 233,653 168,509
Mandatorily Redeemable Preferred Securities of
Subsidiary Trust Holding Solely Junior Subordinated
Deferrable Interest Debentures .................... 175,000 --
----------- -----------
TOTAL LIABILITIES ........................... 2,794,963 2,750,183
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock ........................................... 40,748 40,748
Paid-in capital ........................................ 201,057 201,158
Retained earnings ...................................... 355,486 377,147
Accumulated other comprehensive loss ................... (65,681) (46,349)
----------- -----------
531,610 572,704
Less cost of treasury stock ............................ 310 586
----------- -----------
TOTAL STOCKHOLDERS' EQUITY .................. 531,300 572,118
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ................... $ 3,326,263 $ 3,322,301
=========== ===========
See notes to financial statements.
<FN>
* Reclassified to conform to 1999 presentation, see Note 1.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS AND COMPREHENSIVE INCOME
(In Thousands of Dollars, Except Per Share Amounts)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPT. 24, 1999 SEPT. 25, 1998 SEPT. 24, 1999 SEPT. 25, 1998
(A,B) (C) (A,B) (C)
-------------- -------------- -------------- --------------
Revenues:
<S> <C> <C> <C> <C>
Operating revenues ........... $ 940,062 $ 1,081,149 $ 2,793,790 $ 3,142,935
Other income ................. 16,132 23,905 54,145 50,492
------------ ------------ ------------ ------------
Total revenues ............... 956,194 1,105,054 2,847,935 3,193,427
------------ ------------ ------------ ------------
Cost and expenses:
Cost of operating revenues ... 877,476 994,091 2,579,000 2,885,599
Selling, general and adminis-
trative expenses .......... 60,886 62,094 175,141 178,993
Other deductions/minority
interest .................. 43,514 67,937 79,691 105,139
Dividend on preferred security
of subsidiary trust ....... 3,938 -- 11,244 --
------------ ------------ ------------ ------------
Total costs and expenses ..... 985,814 1,124,122 2,845,076 3,169,731
------------ ------------ ------------ ------------
(Loss)/earnings before income taxes (29,620) (19,068) 2,859 23,696
(Benefit)/provision for income taxes (6,710) 55,183 4,981 71,817
------------ ------------ ------------ ------------
Net loss ........................... (22,910) (74,251) (2,122) (48,121)
Other comprehensive income/(loss):
Foreign currency translation
adjustment ................. 8,243 26,289 (19,332) 10,421
------------ ------------ ------------ ------------
Comprehensive loss ................. $ (14,667) $ (47,962) $ (21,454) $ (37,700)
============ ============ ============ ============
Loss per share:
Basic ........................ $ (.56) $ (1.82) $ (.05) $ (1.18)
============ ============ ============ ============
Dilution: .................... $ (.56) $ (1.82) $ (.05) $ (1.18)
============ ============ ============ ============
Shares outstanding:
Basic ........................ 40,745,578 40,726,754 40,735,849 40,732,791
Dilution ..................... * * * *
------------ ------------ ------------ ------------
Total diluted ................ 40,745,578 40,726,754 40,735,849 40,732,791
============ ============ ============ ============
Cash dividends paid per
common share ................. $ .06 $ .21 $ .48 $ .63
============ ============ ============ ============
<FN>
a) Includes in the three and nine months ended September 1999, a pre-tax loss
for the Robbins Facility (as defined) of $13,200 and $30,600 ($8,600 and
$19,900 after tax), respectively.
b) Includes in the three and nine months ended September 1999, a pre-tax
charge of $37,600 ($27,600 after tax) for cost realignment.
c) Includes in the three and nine months ended September 1998, a pre-tax loss
for the Robbins Facility of $51,400 and $69,300 ($33,400 and $45,000 after
tax), respectively, and a provision of $61,300 for an increase in the
income tax valuation allowance in the three and nine months ended
September 1998.
* The effect of the stock options was not included in the calculation of
diluted earnings per share as these options were antidilutive due to the
losses in 1999 and 1998.
</FN>
</TABLE>
See notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
NINE MONTHS ENDED
-----------------
SEPT. 24, 1999 SEPT. 25, 1998
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss ................................................... $ (2,122) $(48,121)
Adjustments to reconcile net earnings
to cash flows from operating activities:
Depreciation and amortization .............................. 45,136 45,030
Noncurrent deferred tax .................................... (1,698) 43,378
Equity earnings, net of dividends .......................... (7,099) (4,289)
Other ...................................................... 5,659 (2,420)
Robbins Resource Recovery charge ........................... -- 47,014
Changes in assets and liabilities:
Receivables ................................................ (119,239) 27,167
Contracts in process and inventories ....................... 19,989 (59,576)
Accounts payable and accrued expenses ...................... (38,617) (38,136)
Estimated costs to complete long-term contracts ............ 86,510 (59,133)
Advance payments by customers .............................. (5,043) (28,130)
Income taxes ............................................... (35,314) 902
Other assets and liabilities ............................... 7,231 (7,073)
--------- --------
NET CASH USED BY OPERATING ACTIVITIES ...................... (44,607) (83,387)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ....................................... (103,033) (100,858)
Proceeds from sale of properties ........................... 140,422 2,052
Decrease investments and advances .......................... 26,009 7,462
Decrease in short-term investments ......................... 34,760 29,552
Partnership distributions .................................. (4,385) (4,256)
-------- --------
NET CASH PROVIDED/(USED) BY INVESTING ACTIVITIES ........... 93,773 (66,048)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends to stockholders .................................. (19,539) (25,648)
Proceeds from the exercise of stock options ................ -- 51
Repurchase of common stock ................................. (860) (291)
Mandatorily Redeemable Preferred Securities of
Subsidiary Trust Holdings Solely Junior Subordinated
Deferrable Interest Debentures ........................ 169,178 --
(Decrease)/increase in short-term debt ..................... (48,103) 29,911
Proceeds from long-term debt ............................... 45,377 108,134
Repayment of long-term debt ................................ (176,267) (14,587)
-------- --------
NET CASH (USED)/PROVIDED BY FINANCING ACTIVITIES ........... (30,214) 97,570
-------- --------
Effect of exchange rate changes on cash and cash equivalents (13,536) 9,808
-------- --------
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ........... 5,416 (42,057)
Cash and cash equivalents at beginning of year ............. 180,068 167,417
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................. $ 185,484 $ 125,360
========= ========
Cash paid during period:
Interest (net of amount capitalized) ....................... $ 38,501 $ 25,305
Income taxes ............................................... $ 22,865 $ 22,908
</TABLE>
See notes to financial statements.
4
<PAGE>
FOSTER WHEELER CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
1. The condensed consolidated balance sheet as of September 24, 1999,
and the related condensed consolidated statements of earnings and
comprehensive income and cash flows for the three and nine month
periods ended September 24, 1999 and September 25, 1998 are
unaudited. In the opinion of management, all adjustments necessary
for a fair presentation of such financial statements have been
included. Such adjustments only consisted of normal recurring items.
Interim results are not necessarily indicative of results for a full
year.
The financial statements and notes are presented in accordance with
this Form 10-Q and do not contain certain information included in
Foster Wheeler Corporation's Annual Report on Form 10-K for the
fiscal year ended December 25, 1998 filed with the Securities and
Exchange Commission on March 18, 1999. The Condensed Consolidated
Balance Sheet as of December 25, 1998 has been derived from the
audited Consolidated Balance Sheet included in the 1998 Annual Report
on Form 10-K. A summary of Foster Wheeler Corporation's significant
accounting policies is presented on pages 27, 28 and 29 of its 1998
Annual Report on Form 10-K. Users of financial information produced
for interim periods are encouraged to refer to the footnotes
contained in the 1998 Annual Report on Form 10-K when reviewing
interim financial results. There has been no material change in the
accounting policies followed by Foster Wheeler Corporation
(hereinafter referred to as "Foster Wheeler" or the "Corporation")
during the first nine months of 1999.
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. Significant estimates are used when accounting for
long-term contracts including customer and vendor claims,
depreciation, employee benefit plans, taxes, and contingencies, among
others.
In 1999, the Corporation reflected its investment in a joint venture
in Chile on the equity method of accounting. The December 1998
balance sheet has been reclassified to conform to the 1999
presentation. This change had no impact on the September and the
December 1998 Consolidated Statements of Earnings and Comprehensive
Income. The assets and liabilities of the joint venture included in
the December balance sheet were as follows: total assets $242,662,
total liabilities $182,225 and net assets $60,437.
2. In the ordinary course of business, the Corporation and its
subsidiaries enter into contracts providing for assessment of damages
for nonperformance or delays in completion. Suits and claims have
been or may be brought against the Corporation by customers alleging
deficiencies in either equipment design or plant construction. Based
on its knowledge of the facts and circumstances relating to the
Corporation's liabilities, if any, and to its insurance coverage,
management of the Corporation believes that the disposition of such
suits will not result in charges against assets or earnings
materially in excess of amounts previously 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 exposure to or use of asbestos in connection with
5
<PAGE>
work performed by the Corporation and its subsidiaries during the
1970s and prior. As of September 24, 1999, there were approximately
72,700 claims pending. During 1999, approximately 25,000 new claims
were filed and approximately 14,700 were either settled or dismissed
without payment. The Corporation has agreements with insurance
carriers covering significantly more than a majority of the potential
costs relating to these exposures. The Corporation has recorded an
asset relating to the 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.
In 1997, the United States Supreme Court effectively invalidated New
Jersey's long-standing municipal solid waste flow rules and
regulations. The immediate effect was to eliminate the guaranteed
supply of municipal solid waste to the Camden County Waste-to-Energy
Project (the "Camden Project") with its corresponding tipping fee
revenue. As a result, tipping fees have been reduced to market rate
in order to provide a steady supply of fuel to the plant. Those
market-based revenues are not expected to be sufficient to service
the debt on outstanding bonds, which were issued to construct the
plant and to acquire a landfill for Camden County's use. The debt,
although reflected in the consolidated financial statements of the
Corporation, has been issued by the Pollution Control Financing
Authority of Camden County. This debt is collateralized by pledging
certain revenue and assets of the Camden Project but not the plant.
The Corporation's obligation is to fund the debt to the extent the
Camden Project generates a positive cash flow. The Corporation has
filed suit against certain involved parties seeking, among other
things, to void the applicable contracts and agreements governing the
Camden Project. Pending final outcome of the litigation and the
results of legislative initiatives in New Jersey to resolve the
issues relating to the debt obligations associated with the Camden
Project, management believes that the plant will continue to operate
at full capacity while earning sufficient revenues to cover its fees
as operator of the plant. However, at this time, management cannot
determine the effect of the foregoing on the Camden Project. The
equity partner's interest in the Camden Project will be purchased by
the Corporation in December 1999 for approximately $26,000.
3. The Corporation maintains two revolving credit agreements with a
syndicate of banks. One is a short-term revolving credit agreement of
$90,000 with a maturity of 364 days and the second is a $270,000
revolving credit agreement with a maturity of four years
(collectively, the "Revolving Credit Agreements"). These Revolving
Credit Agreements require, among other things, the maintenance of a
maximum Consolidated Leverage Ratio and a minimum Consolidated Fixed
Charges Coverage Ratio. The Corporation requested and received an
amendment to the Consolidated Fixed Charges Coverage Ratio so that
the Corporation would not be in default of the covenant at September
24, 1999 as a result of the charges related to cost realignment taken
in the third quarter. The Corporation has also requested an amendment
to the Consolidated Fixed Charges Coverage Ratio so that Corporation
will not be in default of the covenant in future periods as a result
of the charges related to the Robbins Facility.
6
<PAGE>
On January 13, 1999, FW Preferred Capital Trust I, a Delaware
business trust owned by the Corporation, issued $175,000 in Trust
Preferred Securities. These Trust Preferred Securities are entitled
to receive cumulative cash distributions at an annual rate of 9.0%.
Distributions are paid quarterly in arrears on April 15, July 15,
October 15 and January 15 of each year. The maturity date is January
15, 2029. Foster Wheeler can redeem these Trust Preferred Securities
on or after January 15, 2004. The Corporation has a total of $125,000
that has not been issued under its existing shelf registration
statement.
4. A total of 4,355,528 shares of common stock were reserved for
issuance under the stock option plans; of this total 1,848,916 were
not under option.
5. Basic per share data has been computed based on the weighted average
number of shares of common stock outstanding. Diluted per share data
has been computed based on the basic plus the dilution of stock
options. In the second quarter of 1999, the Corporation adopted a
Directors Deferred Compensation and Stock Award Plan (the "Plan").
Under the Plan, each non-employee director is credited annually with
share units of the Corporation's common stock. In addition, each
non-employee director may elect to defer receipt of compensation for
services rendered as a director, which deferred amount is credited to
his or her account in the form of share units. The Corporation makes
a supplemental contribution equal to 15% of the deferred amount. For
the three and the nine months ended September 24, 1999, 15,232 and
24,862 share units, respectively, were credited in participants'
accounts and are included in the calculation of basic earnings per
share.
6. Interest income and cost for the following periods are:
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPT. 24, SEPT. 25, SEPT. 24, SEPT. 25,
1999 1998 1999 1998
--------- -------- -------- ---------
Interest Income $ 2,413 $ 3,558 $ 7,804 $14,927
======= ======= ======= =======
Interest Cost $19,022 $18,273 $55,868 $53,584
======= ======= ======= =======
Included in interest cost is interest capitalized on self-constructed
assets for the three and the nine months ended September 24, 1999 of
$1,106 and $3,167, respectively, compared to $2,965 and $8,755 for
the comparable periods in 1998. Included in interest cost is
dividends on Trust Preferred Securities which for the three and nine
months ended September 24, 1999, amounted to $3,938 and $11,244,
respectively.
7. The Financial Accounting Standards Board released in June 1998,
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This Statement
addresses the accounting for derivative instruments including certain
derivative instruments embedded in other contracts and for hedging
activities. The Corporation is currently assessing the impact of
adoption of this new Statement. The effective date of this Statement
has been deferred by the issuance of Statement of Financial
Accounting Standards No. 137 until the fiscal year beginning after
June 15, 2000.
7
<PAGE>
In the second quarter of 1998, the Accounting Standard Executive
Committee of the AICPA issued Statement of Position 98-5, "Reporting
on the Costs of Start-up Activities." This statement provides
guidance on financial reporting of start-up costs and organizational
costs. This Statement of Position is effective for financial
statements for fiscal years beginning after December 15, 1998. This
Statement of Position requires start-up costs to be expensed as
incurred. The Corporation has adopted this Statement of Position in
the first quarter of 1999 without a material impact on the financial
results of the Corporation.
8. In the third quarter 1998, a subsidiary of the Corporation entered
into a three-year agreement with a financial institution whereby the
subsidiary would sell an undivided interest in a designated pool of
qualified accounts receivable. Under the terms of the agreement, new
receivables are added to the pool as collections reduce previously
sold accounts receivable. The credit risk of uncollectible accounts
receivable has been transferred to the purchaser. The Corporation
services, administers and collects the receivables on behalf of the
purchaser. Fees payable to the purchaser under this agreement are
equivalent to rates afforded high quality commercial paper issuers
plus certain administrative expenses and are included in other
deductions in the Consolidated Statement of Earnings. The agreement
contains certain covenants and provides for various events of
termination. At September 24, 1999, $41,000 in receivables were sold
under the agreement and are therefore not reflected in the accounts
receivable balance in the Condensed Consolidated Balance Sheet.
8
<PAGE>
9. Changes in equity for the nine months ended September 24, 1999 were as
follows:
(In Thousands of Dollars)
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
COMMON STOCK PAID-IN RETAINED COMPREHENSIVE TREASURY STOCK STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS LOSS SHARES AMOUNT EQUITY
------ ------ ------- -------- ---- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 25, 1998 40,747,668 $40,748 $ 201,158 $ 377,147 $(46,349) (30,804) $(586) $ 572,118
Net loss -- -- -- (2,122) -- -- -- (2,122)
Dividends paid - common -- -- -- (19,539) -- -- -- (19,539)
Purchase of treasury stock -- -- -- -- -- (71,000) (860) (860)
Foreign currency translation
adjustment (19,332) -- -- (19,332)
Shares issued under incentive
plan -- -- (101) -- -- 80,023 1,136 1,035
----------- ------- --------- --------- -------- ------- ----- ---------
Balance September 24, 1999 40,747,668 $40,748 $ 201,057 $ 355,486 $(65,681) (21,781) $(310) $ 531,300
=========== ======= ========= ========= ======== ======= ===== =========
</TABLE>
9
<PAGE>
10. Major Business Groups
<TABLE>
<CAPTION>
FOR NINE MONTHS
- --------------- ENGINEERING CORPORATE AND
AND ENERGY POWER FINANCIAL
TOTAL CONSTRUCTION EQUIPMENT SYSTEMS(3) SERVICES (1)
----- ------------ --------- ---------- ------------
ENDED
- -----
SEPTEMBER 24, 1999
- ------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 2,847,935 $2,167,453 $600,926 $ 144,332 $ (64,776)
Interest expense(2) 52,700 4,815 10,129 24,306 13,450
Earnings/(loss) before income taxes 2,859 60,645 14,413 (14,156) (58,043)
Income taxes/(benefit) 4,981 23,367 4,278 (4,043) (18,621)
----------- ---------- -------- --------- ---------
Net (loss)/earnings(4) $ (2,122) $ 37,278 $ 10,135 $ (10,113) $ (39,422)
=========== ========== ======== ========= =========
ENDED
- -----
SEPTEMBER 25, 1998
- ------------------
Revenues $ 3,193,427 $2,364,736 $808,868 $ 140,701 $(120,878)
Interest expense 44,829 6,867 6,004 16,857 15,101
Earnings/(loss) before income taxes 23,696 72,007 36,644 (52,356) (32,599)
Income taxes/(benefit) 71,817 25,541 13,811 43,805 (11,340)
----------- ---------- -------- --------- ---------
Net (loss)/earnings $ (48,121) $ 46,466 $ 22,833 $ (96,161) $ (21,259)
=========== ========== ======== ========= =========
<FN>
(1) Includes intersegment eliminations
(2) Includes dividend on Trust Preferred Securities.
(3) Includes losses recorded for the Robbins Facility in 1999 of $30,600
pre-tax ($19,900 after tax) and in 1998 of $69,300 pre-tax ($45,000 after
tax) and an increase in the income tax valuation allowance of $61,300.
(4) Includes in 1999 cost realignment charges of $37,600 pre-tax ($27,600
after tax), the pre-tax charge per group is: Engineering and Construction
$19,600 Energy Equipment $2,500, and Corporate & Financial $15,500.
</FN>
</TABLE>
10
<PAGE>
11. Consolidating Financial Information
The following represents summarized consolidating financial
information as of September 24, 1999 with respect to the financial
position, and for the nine months ended September 24, 1999, for
results of operations and cash flows of the Corporation and its
wholly-owned and majority-owned subsidiaries. In February 1999 Foster
Wheeler USA Corporation, Foster Wheeler Energy Corporation and Foster
Wheeler Energy International, Inc. issued guarantees in favor of the
holders of the Corporation's 6 3/4% Notes due November 15, 2005 (the
"Notes"). Each of the guarantees is full and unconditional, and joint
and several. The summarized consolidating financial information is
presented in lieu of separate financial statements and other related
disclosures of the wholly-owned subsidiary guarantors. None of the
subsidiary guarantors are restricted from making distributions to the
Corporation.
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING BALANCE SHEET
September 24, 1999
GUARANTOR NON-GUARANTOR
ASSETS FWC SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------ --- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Current assets $ 459,937 $331,535 $1,804,300 $ (869,238) $1,726,534
Investment in subsidiaries 864,262 320,136 75,901 (1,260,299)
Land, buildings & equipment (net) 49,008 29,215 572,332 (6,627) 643,928
Notes and accounts receivable - long-term 91,568 9,917 483,315 (477,635) 107,165
Intangible assets (net) 89,069 186,306 275,375
Other non-current assets 267,365 52,793 172,231 80,872 573,261
---------- -------- ---------- ----------- ----------
TOTAL ASSETS $1,732,140 $832,665 $3,294,385 $(2,532,927) $3,326,263
========== ======== ========== =========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities $ 374,449 $365,157 $1,583,097 $ (871,232) $1,451,471
Long-term debt 559,901 23,000 600,341 (478,674) 704,568
Other non-current liabilities 266,490 6,140 273,974 (82,680) 463,924
Preferred trust securities 175,000 175,000
---------- -------- ---------- ----------- ----------
TOTAL LIABILITIES 1,200,840 394,297 2,632,412 (1,432,586) 2,794,963
TOTAL STOCKHOLDERS'
EQUITY 531,300 438,368 661,973 (1,100,341) 531,300
---------- -------- ---------- ----------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $1,732,140 $832,665 $3,294,385 $(2,532,927) $3,326,263
========== ======== ========== =========== ==========
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
For the Nine Months Ended September 24, 1999
GUARANTOR NON-GUARANTOR
FWC SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 58,140 $ 526,876 $ 2,543,953 $ (281,034) $ 2,847,935
Cost of operating revenues 495,989 2,316,837 (233,826) 2,579,000
Selling, general and administrative,
Other deductions and minority
interests 79,612 36,872 196,800 (47,208) 266,076
Equity in net earnings of subsidiaries 1,896 12,341 (14,237)
--------- ----------- ----------- ----------- -----------
(Loss)/earnings before income taxes (19,576) 6,356 30,316 (14,237) 2,859
(Benefit)/provision for income taxes (17,454) (2,647) 25,082 4,981
--------- ----------- ----------- ----------- -----------
Net (loss)/earnings $ (2,122) $ 9,003 $ 5,234 $ (14,237) $ (2,122)
========= =========== =========== =========== ===========
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW DATA
For the Nine Months Ended September 24, 1999
GUARANTOR NON-GUARANTOR
FWC SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
NET CASH (USED)/PROVIDED BY
OPERATING ACTIVITIES $ (26,862) $ 25,812 $ (53,190) $ 9,633 $ (44,607)
----------- ----------- ----------- ------------ ----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures (4,738) (98,295) (103,033)
Proceeds from sale of properties 140,422 140,422
Decrease in investment and advances 10,462 15,184 363 26,009
Decrease in short-term investments 34,760 34,760
Other 500 (4,885) (4,385)
----------- ----------- ----------- ------------ ----------
NET CASH PROVIDED/(USED) BY
INVESTING ACTIVITIES 10,462 (4,238) 87,186 363 93,773
----------- ----------- ----------- ------------ ----------
CASH FLOW FROM FINANCING
ACTIVITIES
Dividends to Stockholders (19,539) (19,539)
Issuance of trust preferred securities 169,178 169,178
Decrease/increase in short-term debt (20,000) (28,103) (48,103)
Proceeds from long-term debt 45,377 45,377
Repayment of long-term debt (168,000) (8,267) (176,267)
Other 220,455 (24,710) (186,609) (9,996) (860)
----------- ----------- ----------- ------------ ----------
NET CASH PROVIDED/(USED) BY
FINANCING ACTIVITIES 12,916 (24,710) (8,424) (9,996) (30,214)
----------- ----------- ----------- ------------ ----------
Effect of exchange rate changes on
Cash and cash equivalents (13,536) (13,536)
(Decrease)/Increase in cash and cash
equivalents (3,484) (3,136) 12,036 5,416
Cash and cash equivalents, beginning of period
13,720 6,552 159,796 180,068
----------- ----------- ----------- ------------ ----------
Cash and cash equivalents, end of
period $ 10,236 $ 3,416 $ 171,832 $ 0 $ 185,484
=========== ============ ========== ============= =========
</TABLE>
13
<PAGE>
12. The Corporation owns a non-controlling equity interest in three
cogeneration projects; two of which are located in Italy and one in
Chile. In addition, the Corporation owns an equity interest in a
hydrogen producing plant in Venezuela. Following is summarized
financial information for the Corporation's equity affiliates
combined, as well as the Corporation's interest in the affiliates.
<TABLE>
<CAPTION>
SEPTEMBER 24, 1999 DECEMBER 25, 1998
------------------ -----------------
BALANCE SHEET DATA:
<S> <C> <C>
Current assets $ 90,289 $ 83,871
Other assets (primarily buildings
and equipment) 516,701 541,507
Current liabilities 34,964 35,126
Other liabilities (primarily long-
term debt) 436,942 461,972
Net assets 135,084 128,280
INCOME STATEMENT DATA FOR NINE MONTHS:
Total revenues $ 84,016
Income before income taxes 18,184
Net earnings 19,174
</TABLE>
As of September 24, 1999, the Corporation's share of the net earnings
and investment in the equity affiliates totaled $10,349 and $108,223,
respectively. Dividends of $3,250 were received during the first nine
months of 1999. The Corporation has guaranteed certain performance
obligations of such projects. The Corporation's obligations under
such guarantees are approximately $1,500 per year for the three
projects. The Corporation has provided a $10,000 debt service reserve
letter of credit providing liquidity for debt service payments. No
amounts have been drawn under the letter of credit. The earnings
results for the nine months of 1998 were $1,901 for these operations.
13. On October 21, 1999, the Corporation announced it had reached an
agreement with the holders of approximately 80% of the principal
amount of bonds issued in connection with the financing of a
waste-to-energy plant located in the Village of Robbins, Illinois
(the "Robbins Facility"). Under the agreement, the $320,000 aggregate
principal amount of existing bonds will be exchanged for $273,000
aggregate principal amount of new bonds, $113,000 of which will be
funded by payments from the Corporation, and the Corporation will
exit from its operating role.
Specific elements of the agreement are as follows:
- - The new Corporation-supported bonds will consist of (a) $95,000
aggregate principal amount of 7.25% amortizing terms bonds,
$17,845 of which mature of October 15, 2009 and $77,155 of which
mature on October 15, 2024 and (b) $18,000 aggregate principal
amount of 7% accretion bonds maturing on October 15, 2009 with all
interest to be paid at maturity;
14
<PAGE>
- - The Corporation will continue to operate the Robbins Facility
until the earlier of the sale of the Robbins Facility or October
15, 2001, on a full-cost reimbursable basis with no operational or
performance guarantees;
- - Any remaining obligations of the Corporation under the $55,000
additional credit support facility in respect of the existing
bonds will be terminated.
- - The Corporation will continue to prosecute certain pending
litigation (the "Retail Rate Litigation") against various
officials of the State of Illinois; and
- - The Corporation will cooperate with the bondholders in seeking a
new owner/operator for the Robbins Facility.
The Corporation does not expect to incur any further operating losses
from the Robbins Facility since it will be operating the Robbins Facility
for the limited term described above only as custodian for the
bondholders and will be reimbursed all of its costs.
In the fourth quarter of 1999, the Corporation will take a pretax charge
of approximately $214,000. The charge will fully write off all existing
obligations of the Corporation related to the Robbins Facility, including
the (a) prepaid lease expense, (b) $20,350 of outstanding bonds issued in
conjunction with the equity financing of the Robbins Facility and (c)
transaction expenses. The liability for all of the Corporation-supported
bonds will be recorded at the net present value of $133,350. The
Corporation is considered to be the primary obligor on these bonds. The
ongoing legal expenses relating to the Retail Rate Litigation will be
expensed as incurred.
14. The Corporation's continuing business strategy is to maintain focus on
its core business segments in engineering and construction, and energy
equipment. In order to remain competitive in these segments while
improving margins, the Corporation is reducing costs through staff
reduction and closure of some smaller operating facilities. These changes
include the reduction of approximately 1,600 permanent positions,
including 500 overhead and other support positions from its worldwide
workforce of 11,000. In addition, approximately 800 agency personnel
within the Engineering & Construction Group will be reduced during the
course of this year. The positions eliminated will include engineering,
clerical, support staff and manufacturing personnel.
In connection with this cost realignment plan, the Corporation recorded
charges in the third quarter of 1999 of approximately $37,600 ($27,600
after-tax). The pre-tax charge by group was as follows: $19,600 for
Engineering and Construction, $2,500 for Energy Equipment and $15,500 for
Corporate and Financial. Approximately $22,600 represents employee
severance costs and related benefits and the balance represents asset
write-downs and provisions for closing some offices. The cost realignment
plan, when complete, should result in substantial cost savings. It is
anticipated that the plan will be complete prior to the end of the first
quarter 2000. The cash remaining to be spent is approximately $17,500.
15
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(In Millions of Dollars, except per Share Amounts)
The following is Management's Discussion and Analysis of certain
significant factors that have affected the financial condition and
results of operations of the Corporation for the periods indicated
below. This discussion and analysis should be read in conjunction
with the 1998 Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 18, 1999.
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 24, 1999 COMPARED TO THE THREE
AND NINE MONTHS ENDED SEPTEMBER 25, 1998
<TABLE>
<CAPTION>
CONSOLIDATED DATA
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPT. 24, 1999 SEPT.25, 1998 SEPT. 24, 1999 SEPT. 25, 1998
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Backlog $ 6,590.9 $7,871.8 $ 6,590.9 $7,871.8
======== ========== ========= ==========
New orders $ 710.1 $1,312.8 $ 2,680.0 $4,131.4
======== ========== ========= ==========
Revenues $ 956.2 $1,105.0 $ 2,847.9 $3,193.4
======== ========== ========= ==========
Net loss $ (22.9) $ (74.3) $ (2.1) $ (48.1)
======== ========== ========= ==========
</TABLE>
On October 21, 1999, the Corporation announced that it had reached an
agreement with the holders of approximately 80% in aggregate amount
of the bond issued in connection with the Robbins Facility, which
will allow it to exit from its operating role. The table below
reflects the Corporation's results excluding the impact of the
Robbins Facility losses and the 1999 cost realignment plan.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPT. 24, 1999 SEPT. 25, 1998 SEPT. 24, 1999 SEPT. 25, 1998
-------------- -------------- -------------- --------------
(LOSS)/EARNINGS BEFORE INCOME TAXES
AS REPORTED $ (29.6) $ (19.1) $ 2.9 $ 23.7
-----------
<S> <C> <C> <C> <C>
Adjustment for:
Robbins 13.2 51.4 30.6 69.3
Cost realignment plan 37.6 - 37.6 -
---------- ------- ---------- --------
As adjusted $ 21.2 $ 32.3 $ 71.1 $ 93.0
========== ======== ========= ========
NET (LOSS)/EARNINGS AS REPORTED $ (22.9) $ (74.3) $ (2.1) $ (48.1)
-------------------------------
Adjusted for:
Robbins 8.6 94.7 19.9 106.3
Cost realignment plan 27.6 - 27.6 -
---------- ------- ---------- --------
As adjusted $ 13.3 $ 20.4 $ 45.4 $ 58.2
========== ======== ========== =========
</TABLE>
The Corporation's consolidated backlog at September 24, 1999 totaled $6,590.9,
which represented a decrease of 16% from the amount reported as of September 25,
1998. This decrease was due primarily to a lower amount of new orders recorded
16
<PAGE>
in 1999 by the Engineering and Construction Group compared to the relevant
periods in 1998. The dollar amount of backlog is not necessarily indicative of
the future earnings of the Corporation related to the performance of such work.
The backlog of unfilled orders includes amounts based on signed contracts as
well as agreed letters of intent which management has determined are likely to
be performed. Although backlog represents only business which is considered
firm, cancellations or scope adjustments may occur. Due to factors outside 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 is adjusted to reflect project cancellations, deferrals, sale of
subsidiaries and revised project scope and cost. This reduction for the nine
months ended September 24, 1999 was $555.8, compared with $467.2 for the nine
months ended September 25, 1998. 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.
New orders awarded for the three and nine months ended September 24, 1999 were
$710.1 and $2,680.0 compared to $1,312.8 and $4,131.4 for the periods ended
September 25, 1998. Approximately 60% of new orders booked in the nine months
ended September 24, 1999 were for projects awarded to the Corporation's
subsidiaries located outside of the United States. Key countries and geographic
areas contributing to new orders awarded for the nine months ended September 24,
1999 were the United States, Europe, the Philippines, Malaysia and Eastern
Europe.
Operating revenues decreased in the three months ended September 24, 1999
compared to the three months ended September 25, 1998 to $940.1 from $1,081.1.
The most recent nine month period reflects a decrease in operating revenue of
$349.1 from $3,142.9 in 1998 to $2,793.8. The decrease in the Engineering and
Construction Group for the three and nine months of 1999 compared to the same
periods for 1998 was $103.7 and $200.6, respectively. The Energy Equipment
Group's revenues decreased for the three and nine months of 1999 compared to
1998 by $36.6 and $211.7, respectively.
Gross earnings, which are equal to operating revenues minus the cost of
operating revenues, decreased by $42.5 in the nine months ended September 24,
1999 as compared with the nine months ended September 25, 1998 to $214.8 from
$257.3. Approximately $4.6 of the decrease for nine months is related to the
Robbins Facility and $17.5 is related to the cost realignment plan. The balance
is attributed to lower revenues in the Energy Equipment Group. Gross earnings
decreased by $24.5 in the three months ended September 24, 1999 as compared with
the three months ended September 25, 1998 to $62.6 from $87.1 primarily due to
the cost realignment plan charge of $17.5.
Selling, general and administrative decreased slightly for the three and nine
month periods ended September 24, 1999 as compared with the same periods in
1998.
Other income in the nine months ended September 24, 1999 as compared with
September 25, 1998 increased to $54.1 from $50.5. The increase for the nine
months of 1999 compared to 1998 can be attributed to equity earnings in 1999
higher than 1998 offset by lower interest income and gain on the sale of
investments in 1998. Other income in the three months ended September 24, 1999
as compared with September 25, 1998 decreased to $16.1 from $23.9. The decrease
for three months of 1999 compared to 1998 was due to lower interest income and
gain on sale of investments offset by higher equity earnings in 1999.
Other deductions and dividends on Trust Preferred Securities for the nine months
ended September 24, 1999 were $14.5 lower than that reported in the nine months
ended September 25, 1998. The decrease in other deductions can be attributed to
the $47.0 of charges related to the Robbins Facility in 1998 offset by higher
interest expense for 1999 and the cost realignment plan charge of $15.0.
Interest expense for the nine months of 1999 was $52.7 compared to $44.8 for the
same period in 1998. Other deductions and dividends on Trust Preferred
17
<PAGE>
Securities for the three month period ended September 1999 decreased by $19.9 in
comparison to 1998. The decrease is primarily due to the $47.0 Robbins
write-down in 1998 offset by the cost realignment plan charge of $15.0, higher
interest expense of $2.6, and Robbins Facility transaction charges of $2.5.
During the third quarter of 1998, the valuation allowance was increased by
$61.3, which caused a corresponding increase in the tax provisions for both the
three and nine months ended September 25, 1998. 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 effective tax rate for the three and nine months ended September 24, 1999
was 22.7% and 174.2%, respectively. The primary cause for these rates were lower
foreign tax rates and certain realignment costs disallowed in foreign countries.
Net loss for the nine months ended September 24, 1999 was $2.1, or $.05 per
share, compared to $48.1, or $1.18 per share, for the nine months ended
September 25, 1998. Net loss for the three months ended September 24, 1999 were
$22.9, or $.56 per share, compared to $74.3, or $1.82 per share, for the three
months ended September 25, 1998.
Without the Robbins Facility losses for 1999 and 1998 and the cost realignment
charge in 1999, net earnings and earnings per share for the nine months and
three months of 1999 would have been $45.4 (per share $1.12) and $13.3 (per
share $.33) respectively, compared to 1998 nine and three months of $58.2 (per
share $1.43) and $20.4 (per share $.50) respectively.
<TABLE>
<CAPTION>
ENGINEERING AND CONSTRUCTION GROUP
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPT. 24, 1999 SEPT. 25, 1998 SEPT. 24, 1999 SEPT. 25, 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Backlog $5,191.4 $6,212.8 $5,191.4 $6,212.8
======== ======== ======== ========
New orders $ 559.4 $1,069.2 $2,050.1 $3,477.2
======== ======== ======== ========
Operating revenues $ 703.7 $ 807.4 $2,137.0 $2,337.6
======== ======== ======== ========
Gross earnings
From operations $ 55.2 $ 48.9 $ 155.3 $ 152.8
======== ======== ======== ========
</TABLE>
The Engineering and Construction Group ("E&C Group"), had a backlog of $5,191.4
at September 24, 1999, which represented a decrease of $1,021.4 from September
25, 1998. New orders booked for the nine-month period ended September 24, 1999
decreased by 41% compared with the period ended September 25, 1998. These
decreases were primarily the result of the significant orders taken by the
Continental European and United States operating subsidiaries in the first nine
months of 1998, which were not repeated in 1999. Operating revenues for the
nine-month period ended September 24, 1999 decreased 8.6% compared to the
nine-month period ended September 25, 1998. The gross earnings above excluded
the charge in September 1999 for the cost realignment of $14.6. Gross earnings
from operations increased slightly for the nine months ended September 1999
compared to September 1998. The gross earnings from operations from the
three-month period ending September 1999 compared to September 1998 increased
$6.3 primarily due to the operations of Continental Europe.
18
<PAGE>
<TABLE>
<CAPTION>
ENERGY EQUIPMENT GROUP
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPT. 24, 1999 SEPT. 25, 1998 SEPT. 24, 1999 SEPT. 25, 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Backlog $1,408.9 $1,425.8 $ 1,408.9 $1,425.8
======== ======== ========= ========
New orders $ 120.8 $ 240.1 $ 694.7 $ 582.6
======== ======== ========= ========
Operating revenues $ 230.6 $ 267.2 $ 590.8 $ 802.5
======== ======== ========= ========
Gross earnings from
Operations $ 23.2 $ 34.0 $ 74.4 $ 95.2
======== ======== ========= ========
</TABLE>
The Energy Equipment Group had a backlog of $1,408.9 at September 24, 1999,
which represented a slight decrease from September 25, 1998. Approximately 32%
of the Energy Equipment Group's backlog as of September 24, 1999 represents
orders from Asia. These orders are for large utility-size boilers, payments
under which are supported by financing agreements guaranteed by United States,
European or Japanese export credit agencies. New orders booked for the
nine-month period ended September 24, 1999 increased by 19% from the
corresponding period in 1998. This is due to an order taken in the second
quarter of 1999 for boilers in Eastern Europe. Operating revenues for the
nine-month period ended September 24, 1999 decreased by 26% from the
corresponding period in 1998 primarily due to the low level of new orders booked
during 1998.
<TABLE>
<CAPTION>
POWER SYSTEMS GROUP
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPT. 24, 1999 SEPT. 25, 1998 SEPT. 24, 1999 SEPT. 25, 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Backlog $ 174.1 $ 268.4 $ 174.1 $ 268.4
========== ======== ========= ========
New orders $ 38.2 $ 37.3 $ 120.7 $ 131.3
========== ======== ========= ========
Operating revenues $ 37.7 $ 40.7 $ 120.9 $ 117.9
========== ======== ========= ========
Gross (loss)/
Earnings from
Operations $ 1.1 $ 4.0 $ .8 $ 7.9
========== ======== ========= ========
</TABLE>
The Power Systems Group's gross earnings from operations for the nine-month
period ended September 24, 1999 decreased by $7.1 of which $4.6 was due to
Robbins Facility. The third quarter decrease of $2.9 was primarily due to
Robbins Facility.
On October 21, 1999, the Corporation announced it had reached an agreement with
the holders of approximately 80% of the principal amount of bonds issued in
connection with the financing of a waste-to-energy plant located in the Village
of Robbins, Illinois (the "Robbins Facility"). Under the agreement, the $320.0
aggregate principal amount of existing bonds will be exchanged for $273.0
aggregate principal amount of new bonds, $113.0 of which will be funded by
payments from the Corporation, and the Corporation will exit from its operating
role.
19
<PAGE>
Specific elements of the agreement are as follows:
- - The new Corporation-supported bonds will consist of (a) $95.0 aggregate
principal amount of 7.25% amortizing terms bonds, $17.8 of which mature
of October 15, 2009 and $77.2 of which mature on October 15, 2024 and
(b) $18.0 aggregate principal amount of 7% accretion bonds maturing on
October 15, 2009 with all interest to be paid at maturity;
- - The Corporation will continue to operate the Robbins Facility until the
earlier of the sale of the Robbins Facility or October 15, 2001, on a
full-cost reimbursable basis with no operational or performance
guarantees;
- - Any remaining obligations of the Corporation under the $55.0 additional
credit support facility in respect of the existing bonds will be
terminated.
- - The Corporation will continue to prosecute certain pending litigation
(the "Retail Rate Litigation") against various officials of the State
of Illinois; and
- - The Corporation will cooperate with the bondholders in seeking a new
owner/operator for the Robbins Facility.
The Corporation does not expect to incur any further operating losses from the
Robbins Facility since it will be operating the Robbins Facility for the limited
term described above only as custodian for the bondholders and will be
reimbursed all of its costs.
In the fourth quarter of 1999, the Corporation will take a pretax charge of
approximately $214.0. The charge will fully write off all existing obligations
of the Corporation related to the Robbins Facility, including the (a) prepaid
lease expense, (b) $20.4 of outstanding bonds issued in conjunction with the
equity financing of the Robbins Facility and (c) transaction expenses. The
liability for all of the Corporation-supported bonds will be recorded at the net
present value of $133.4. The Corporation is considered to be the primary obligor
on these bonds. The ongoing legal expenses relating to the Retail Rate
Litigation will be expensed as incurred.
FINANCIAL CONDITION
The Corporation's consolidated financial condition declined during the nine
months ended September 24, 1999 as compared to December 25, 1998. Stockholders'
equity for the nine months ended September 24, 1999 decreased by $40.8, due
primarily to changes in the foreign currency translation adjustment of $19.3,
dividends paid of $19.5, and a net loss of $2.1.
During the nine months ended September 24, 1999, long-term investments in land,
buildings and equipment were $103.0 as compared with $100.9 for the comparable
period in 1998. Approximately $57.0 was invested in a waste-to-energy project in
Italy during the first nine months of 1999.
Since December 25, 1998, long-term debt, including current installments and bank
loans, decreased by $179.0, primarily due to payment of debt from the proceeds
of the issuance of Trust Preferred Securities (as described below) and from
$129.4 in the sale/leaseback of an office building in the United Kingdom. On
January 13, 1999, FW Preferred Capital Trust I, a Delaware business trust owned
by the Corporation, issued $175.0 in Preferred Trust Securities. These Preferred
Trust Securities are entitled to receive cumulative cash distributions at an
annual rate of 9%.
20
<PAGE>
In the ordinary course of business, the Corporation and its subsidiaries enter
into contracts providing for assessment of damages for nonperformance or delays
in completion. Suits and claims have been or may be brought against the
Corporation by customers alleging deficiencies in either equipment design or
plant construction. Based on its knowledge of the facts and circumstances
relating to the Corporation's liabilities, if any, and to its insurance
coverage, management of the Corporation believes that the disposition of such
suits will not result in charges against assets or earnings materially in excess
of amounts provided in the accounts.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $185.5 at September 24, 1999, an increase of
$5.4 from fiscal year end 1998. Short-term investments decreased by $34.8 to
$26.2. During the nine months of fiscal 1999, the Corporation paid $19.5 in
dividends to stockholders. Cash used by operating activities amounted to $44.6.
Over the last several years, working capital needs have increased as a result of
the Corporation satisfying its customers' requests for more favorable payment
terms under contracts. Such requests generally include reduced advance payments
and more favorable payment schedules. Such terms, which require the Corporation
to defer receipt of payments from its customers, have had a negative impact on
the Corporation's available working capital. The Corporation intends to satisfy
its continuing working capital needs by borrowing under its Revolving Credit
Agreements, through internal cash generation and third party financings in the
capital markets. The Corporation's pricing of contracts recognizes costs
associated with the use of working capital.
The Revolving Credit Agreements require, among other things, the maintenance of
a maximum Consolidated Leverage Ratio and a minimum Consolidated Fixed Charges
Coverage Ratio. The Corporation requested and received an amendment to the fixed
charges Coverage Ratio so that the Corporation would not be in default of the
covenant at September 24, 1999 as a result of the charges related to cost
realignment taken in the third quarter. The Corporation has also requested an
amendment to the Fixed Charges Coverage Ratio so that Corporation will not be in
default of the covenant in future periods as a result of the charges related to
the Robbins Facility.
The Corporation expects the banks that are party to the Revolving Credit
Agreements to approve the amendment.
Management of the Corporation believes that cash and cash equivalents of $185.5
and short-term investments of $26.2 at September 24, 1999, combined with cash
flows from operating activities, amounts available 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. During the second quarter of 1998, the Corporation filed a Registration
Statement on Form S-3 relating to up to $300.0 of debt, equity, and other
securities, $175.0 of which have been issued as of September 24, 1999.
The Corporation's Board of Directors reduced the quarterly common stock dividend
in the third quarter of fiscal 1999 from $0.21 per share paid in the third
quarter of fiscal 1998 to $0.06 per share.
21
<PAGE>
OTHER MATTERS
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 exposure to or use of
asbestos in connection with work performed by the Corporation and its
subsidiaries during the 1970s and prior. As of September 24, 1999, there were
approximately 72,700 claims pending. During 1999, approximately 25,000 new
claims have been filed and approximately 14,700 have been either settled or
dismissed without payment. The Corporation has agreements with insurance
carriers covering significantly more than a majority of the potential costs
relating to these exposures. The Corporation has recorded, with respect to
asbestos litigation, an asset relating to the 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.
In 1997, the United States Supreme Court effectively invalidated New Jersey's
long-standing municipal solid waste flow rules and regulations. The immediate
effect was to eliminate the guaranteed supply of municipal solid waste to the
Camden Project with its corresponding tipping fee revenue. As a result, tipping
fees have been reduced to market rate in order to provide a steady supply of
fuel to the plant. Those market-based revenues are not expected to be sufficient
to service the debt on outstanding bonds, which were issued to construct the
plant and to acquire a landfill for Camden County's use. The debt, although
reflected in the consolidated financial statements of the Corporation, has been
issued by the Pollution Control Financing Authority of Camden County. This debt
is collateralized by pledging certain revenue and assets of the Camden Project
but not the plant. The Corporation's obligation is to fund the debt to the
extent the Camden Project generates a positive cash flow. The Corporation has
filed suit against certain involved parties seeking, among other things, to void
the applicable contracts and agreements governing the Camden Project. Pending
final outcome of the litigation and the results of legislative initiatives in
New Jersey to resolve the issues relating to the debt obligations associated
with the Camden Project, management believes that the plant will continue to
operate at full capacity while earning sufficient revenues to cover its fees as
operator of the plant. However, at this time, management cannot determine the
effect of the foregoing on the Camden Project. The equity partner's interest in
the Camden Project will be purchased by the Corporation in December 1999 for
approximately $26.0.
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.
COST REALIGNMENT
The Corporation's continuing business strategy is to maintain focus on its core
business segments in engineering and construction, and energy equipment. In
order to remain competitive in these segments while improving margins, the
Corporation is reducing costs through staff reduction and closure of some
22
<PAGE>
smaller operating facilities. These changes include the reduction of
approximately 1,600 permanent positions, including 500 overhead and other
support positions from its worldwide workforce of 11,000. In addition,
approximately 800 agency personnel within the Engineering & Construction Group
will be reduced during the course of fiscal 1999. The positions eliminated will
include engineering, clerical, support staff and manufacturing personnel.
In connection with this cost realignment plan, the Corporation recorded charges
in the third quarter of 1999 of approximately $37.6 ($27.6 after-tax). The
pre-tax charge by group was as follows: $19.6 for Engineering and Construction,
$2.5 for Energy Equipment and $15.5 for Corporate and Financial. Approximately
$22.6 represents employee severance costs and the related benefits and the
balance represents asset write-downs and provisions for closing some offices.
The cost realignment plan when complete, should result in substantial cost
savings. It is anticipated that the plan will be complete prior to the end of
the first quarter 2000. The cash remaining to be spent is approximately $17.5.
YEAR 2000
GENERAL
For purposes of this statement the "Year 2000 Problem" is defined to mean the
inability of a computer or other device to perform properly because it does not
interpret date information correctly. It is believed that cases of
misinterpretation might result from computer hardware, firmware or software
using only two digits to identify year information, and therefore not being able
to distinguish the year 1900 from the year 2000. However, other date-related
misinterpretations may also occur, including one, which could occur when the
date February 29, 2000 is processed. Also for purposes of this statement "Year
2000 Compliant" means that the performance or functionality of a device
(including software) is not affected by dates prior to, during or after the Year
2000.
STATE OF READINESS/BUSINESS CONTINUATION PLAN
The Corporation and its subsidiaries initiated Year 2000 activities in 1996. In
1997 a formal Year 2000 Problem management strategy was prepared. At that time
the Corporation formed a company-wide committee (the "Y2K Committee") to develop
a Business Continuation Plan focused on the Year 2000 Problem. Each of the
Corporation's subsidiaries formed similar committees and coordinated their
efforts through chairmen selected for each Committee. Each subsidiary committee
also prepared a Business Continuation Plan. Each Committee Chairman reports on a
quarterly basis to the Corporation's Y2K Committee Chairman, who then reports to
the Corporation's Executive Committee.
In 1997, the Y2K Committee prepared a plan to safeguard against interruption of
the Corporation's (and its subsidiaries') business activities as a result of
Year 2000 Problems. The plan included an Assessment Step, a Testing Step, a
Remediation Step and a Confirmation Step. Since 1996 the Corporation and/or its
subsidiaries have been investigating the IT and non-IT equipment, software and
services they use to identify, evaluate, modify and/or replace goods or services
which are not Year 2000 Compliant.
The Corporation and its subsidiaries have all completed the Assessment Step and
are substantially advanced in the Testing and Remediation Steps. Some
subsidiaries, such as Foster Wheeler Power Systems, Inc., and its subsidiaries,
must wait for scheduled outage periods in order to complete Testing and/or
Remediation activities, but all are expected to do so by the end of November
1999. All subsidiaries have reported that they have completed at least
23
<PAGE>
eighty-four percent (84%) of their Testing Step activities. The primary
computerized reporting and control system used by the Corporation and most of
its subsidiaries, which was provided by J.D. Edwards, has been confirmed by the
vendor to be Year 2000 Compliant.
LIABILITY EXPOSURE MANAGEMENT
In 1997 the Corporation formed a group to develop a strategy for managing
liability exposures which could result from the Year 2000 Problem (the "Y2K
Liaison Group"). Since then the Y2K Liaison Group has developed guidelines for
the Corporation's subsidiaries that address future, current and completed
contract activities, and has also conducted global conferences for the
Corporation's subsidiaries to discuss how those guidelines should be
implemented. The latest conference took place in September 1999. The
Corporation's Executive Committee adopted the Y2K Liaison Group's original
contracting activities guidelines as business policies in 1998.
Additional contracting guidelines relating to contracts awarded after January 1,
2000 are being developed. The Corporation has owned the stock of various
companies which are no longer operating or whose stock or assets were sold to
others. When the Corporation sold the stock or assets of such companies, it
transferred the company's records to the purchaser. To the extent possible, the
Corporation has evaluated its legal obligations in regard to equipment and
software that was created and sold by those companies during the time that the
Corporation owned them and has taken steps to manage liability exposures which
those companies' activities may present. In some cases, the Corporation was not
able to find records that would allow it to identify the nature of the equipment
and software or the identities of the owners of the equipment and software.
THIRD PARTY REVIEW
In 1998 the Corporation engaged a third party to conduct a review of certain
aspects of the Corporation's and its subsidiaries' Business Continuation Plans.
This review was completed during November 1998, and the resulting report is
being acted on by management. The Corporation also engaged several law firms to
prepare reports regarding liabilities which the Corporation and its subsidiaries
may face, and recommendations for liability exposure management. This work was
completed in August 1998. The Corporation formed a team of in-house lawyers and
others to conduct a Y2K legal liability audit of the Corporation. The
Corporation engaged an outside law firm to review and report on the adequacy of
the audit to identify potential Y2K liability. The audit was completed during
the third quarter of 1999. A report of the outside law firm is now being
reviewed to determine if further action is necessary.
COORDINATION WITH OUTSIDE PARTIES
The Corporation and its subsidiaries coordinate with insurers, clients, vendors,
contractors and trade organizations to keep abreast of Year 2000 matters. The
Corporation also has participated and plans to participate in conferences,
seminars and other gatherings to improve its Year 2000 readiness condition as
the Year 2000 approaches.
24
<PAGE>
COSTS
The total cost associated with required modifications to become Year 2000
Compliant is not expected to be material to the Corporation's financial
position. The estimated total cost of the Year 2000 Project is approximately
$10.0. Items of a capital nature will be capitalized while all other costs will
be expensed as incurred. This estimate does not include a share of Year 2000
costs that may be incurred by partnerships and joint ventures in which the
Corporation or its subsidiaries participate. The total amount expended on the
Business Continuation Plan through September 24, 1999 was $5.5, of which
approximately $5.0 related to the cost to repair or replace software and related
hardware problems, and approximately $0.5 related to the cost of identifying and
communicating with vendors and/or contractors. The estimated future cost of
completing implementation of the Business Continuation Plan is estimated to be
approximately $4.5. All Year 2000 expenses will be funded from operations.
CONTINGENCY PLANS
Although the Corporation and its subsidiaries expect to be ready to continue
their business activities without interruption by a Year 2000 Problem, they
recognize that they depend on outsiders (such as suppliers, contractors and
utility companies) to provide various goods and services necessary for doing
business. The Corporation has developed a contingency plan for itself, and has
required each of its subsidiaries to do likewise. Each plan describes
alternative arrangements to cope with Year 2000 Problems caused by others, and
back-up strategies to follow if a company's software or equipment does not
perform properly, even though it appears now to be Year 2000 Compliant. Most
subsidiaries completed their contingency plans by September 24, 1999. The few
subsidiaries that did not are expected to complete their plans by November 30,
1999.
RISKS
The failure to correct a Year 2000 Problem could result in an interruption in,
or a failure of, certain normal business activities or operations. Such failures
are not expected to materially adversely affect the Corporation's results of
operations and financial condition. However, due to the general uncertainty
inherent in the Year 2000 Problem, resulting in part from the uncertainty about
the Year 2000 readiness of vendors, contractors and customers, the Corporation
is unable to determine at this time whether the consequences of Year 2000
Problems will have a material impact on the Corporation's results of operations
or financial condition. The completion of the Business Continuation Plan is
expected to significantly reduce the Corporation's level of uncertainty about
the Year 2000 Problem and, in particular, about Year 2000 Compliance and
readiness of vendors, contractors and customers. The Corporation believes that
the implementation of new business systems and the complete implementation of
the Business Continuation Plan should reduce the possibility of significant
interruptions of normal operation.
It is not possible to describe a "most reasonably likely worst case Year 2000
scenario" without making a variety of assumptions. The Corporation's Business
Continuation Plan assumes that parties which provide us goods or services
necessary for its operations will continue to do so, or that the contingency
features of the Corporation's Plan will respond to address its needs. Based upon
those assumptions the Corporation believes that a most likely worst case Year
2000 scenario may make it necessary to replace some suppliers or contractors,
rearrange some work plans or even interrupt some field activities. The
Corporation does not believe that such circumstances will materially adversely
affect the financial condition or results of operations, even if it is necessary
to incur costs to do so.
25
<PAGE>
Readers are cautioned that forward-looking statements contained in the Year 2000
Statement should be read in conjunction with the Corporation's risk disclosures
under the heading: "Safe Harbor Statement."
SAFE HARBOR STATEMENT
This Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Report on Form 10-Q 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 Corporation's management continues to evaluate the Corporation's condition
of readiness relating to the Year 2000 Problem and the costs and risks arising
from the Year 2000 Problem, and is designing and developing the Corporation's
contingency plan, based on its best estimates of certain factors, which
estimates were derived by relying on numerous assumptions about future events.
However, there can be no guarantee that these assumptions or estimates have been
correctly made, or that there will not be a delay in, or increased costs
associated with, the implementation of the Corporation's Business Continuation
Plan. A delay in the implementation of the Business Continuation Plans of the
Corporation or of the Corporation's subsidiaries could also affect the
Corporation's readiness for the Year 2000. Specific factors that might cause
actual outcome to differ from the projected outcome include, without limitation,
the continued availability and cost of consulting services and of personnel
trained in the computer programming necessary for remediation of the Year 2000
issue, the ability to locate and correct all relevant computer code, timely
responses by third parties and suppliers, and the ability to implement
interfaces between the new systems and the systems not being replaced.
26
<PAGE>
PART II OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS (IN DOLLARS)
Under the federal Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA") and similar state laws, the current owner or operator
of real property and the past owners or operators of real property (if disposal
took place during such past ownership or operation) may be jointly and severally
liable for the costs of removal or remediation of toxic or hazardous substances
on or under their property, regardless of whether such materials were released
in violation of law or whether the owner or operator knew of, or was responsible
for, the presence of such substances. Moreover, under CERCLA and similar state
laws, persons who arrange for the disposal or treatment of hazardous or toxic
substances may also be jointly and severally liable for the costs of the removal
or remediation of such substances at a disposal or treatment site, whether or
not such site was owned or operated by such person ("off-site facility").
Liability at such off-site facilities is typically allocated among all of the
viable responsible parties based on such factors as the relative amount of waste
contributed to a site, toxicity of such waste, relationship of the waste
contributed by a party to the remedy chosen for the site, and other factors.
The Corporation currently owns and operates industrial facilities and has also
transferred its interests in industrial facilities that it formerly owned or
operated. It is likely that as a result of its current or former operations,
such facilities have been impacted by hazardous substances. The Corporation is
not aware of any conditions at its currently owned facilities in the United
States that it expects will cause the Corporation to incur significant costs.
The Corporation is aware of potential environmental liabilities at facilities
that it recently acquired in Europe, but the Corporation has the benefit of an
indemnity from the Seller with respect to any required remediation or other
environmental violations that it believes will address the costs of any such
remediation or other required environmental measures. The Corporation also may
receive claims, pursuant to indemnity obligations from owners of recently sold
facilities that may require the Corporation to incur costs for investigation
and/or remediation. Based on the available information, the Corporation does not
believe that such costs will be material. No assurance can be provided that the
Corporation will not discover environmental conditions at its currently owned or
operated properties, or that additional claims will be made with respect to
formerly owned properties, that would require the Corporation to incur material
expenditures to investigate and/or remediate such conditions.
The Corporation had been notified that it was a potentially responsible party
("PRP") under CERCLA or similar state laws at three off-site facilities,
excluding sites as to which the Corporation has resolved its liability. At each
of these sites, the Corporation's liability should be substantially less than
the total site remediation costs because the percentage of waste attributable to
the Corporation compared to that attributable to all other PRPs is low. The
Corporation does not believe that its share of cleanup obligations at any of the
three off-site facilities as to which it has received a notice of potential
liability will individually exceed $1.0 million.
In October 1999, one of the Corporation's subsidiaries, Camden County Energy
Recovery Associates, L.P. ("CCERA") agreed to a settlement with the New Jersey
Department of Environmental Protection ("NJDEP") regarding a number of alleged
violations of the air permit and regulations regarding CCERA's Project. The
violations allegedly occurred between 1993 and 1998. The settlement is expected
to resolve all of CCERA's air exposure for this period and will require CCERA to
pay $186,800 to NJDEP.
27
<PAGE>
Several of the Corporation's subsidiaries associated with the Robbins Facility
received a Complaint for Injunction and Civil Penalties from the State of
Illinois dated April 28, 1998 (amended in July 1998) alleging primarily state
air act violations at that Facility (PEOPLE OF THE STATE OF ILLINOIS V. FOSTER
WHEELER ROBBINS, INC., filed in the Circuit Court of Cook County, Illinois,
County Department, Chancery Division). Although the complaint seeks substantial
civil penalties for numerous violations of up to $50,000 for each violation,
with an additional penalty of $10,000 for each day of each violation, the
maximum allowed under the statute, and an injunction against continuing
violations, the relevant subsidiaries have reached a staff-level agreement in
principle with the state on a Consent Decree that will resolve all violations.
The resulting penalty is not expected to be material.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
--- --------
EXHIBIT
NUMBER EXHIBIT
------ -------
12-1 Statement of Computation of Consolidated Ratio
of Earnings to Fixed Charges and Combined Fixed
Charges
27 Financial Data Schedule (For the
informational purposes of the
Securities and Exchange Commission
only.)
(b) REPORTS ON FORM 8-K
--- -------------------
None
28
<PAGE>
SIGNATURES
----------
Pursuant to the requirements 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)
Date: NOVEMBER 4, 1999 /S/ RICHARD J. SWIFT
-------------------------- ------------------------------
Richard J. Swift
(Chairman, President and
Chief Executive Officer)
Date: NOVEMBER 4, 1999 /S/ THOMAS J. MAZZA
-------------------------- ------------------------------
Thomas J. Mazza
(Assistant Controller and
Chief Accounting Officer)
29
EXHIBIT 12-1
FOSTER WHEELER CORPORATION
STATEMENT OF COMPUTATION OF CONSOLIDATED RATIO OF
EARNINGS TO FIXED CHARGES AND COMBINED FIXED CHARGES
($000'S)
UNAUDITED
9 MONTHS
1999
----
EARNINGS:
- ---------
Net Loss $ (2,122)
Taxes on Income 4,981
Total Fixed Charges 70,208
Capitalized Interest (3,167)
Capitalized Interest Amortized 1,638
Equity Earnings of non-consolidated associated companies
accounted for by the equity method,
net of dividends (7,099)
--------
$ 64,439
========
FIXED CHARGES:
- --------------
Interest Expense $ 52,701
Capitalized Interest 3,167
Imputed Interest on non-capitalized lease payments 14,340
--------
$ 70,208
========
Ratio of Earnings to Fixed Charges $ 0.92
========
* 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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary of financial information extracted
from the condensed consolidated balance sheet and statement of
earnings for the nine months ended September 24, 1999 and is
qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-24-1999
<PERIOD-START> DEC-26-1998
<PERIOD-END> SEP-24-1999
<CASH> 185,484
<SECURITIES> 26,216
<RECEIVABLES> 945,134
<ALLOWANCES> 0
<INVENTORY> 450,088
<CURRENT-ASSETS> 1,726,534
<PP&E> 999,993
<DEPRECIATION> 356,065
<TOTAL-ASSETS> 3,326,263
<CURRENT-LIABILITIES> 1,451,471
<BONDS> 704,568
175,000
0
<COMMON> 40,748
<OTHER-SE> 490,552
<TOTAL-LIABILITY-AND-EQUITY> 3,326,263
<SALES> 2,793,790
<TOTAL-REVENUES> 2,847,935
<CGS> 2,754,141
<TOTAL-COSTS> 2,754,141
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,701
<INCOME-PRETAX> 2,859
<INCOME-TAX> 4,981
<INCOME-CONTINUING> (2,122)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,122)
<EPS-BASIC> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
