UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1996
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: 1-7775
FLUOR CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 95-0740960
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(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
3333 Michelson Drive, Irvine, CA 92730
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(Address of principal executive offices)
(714)975-2000
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(Registrant's telephone number, including area code)
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 ( )
As of February 29, 1996 there were 83,492,242 shares of common
stock outstanding.
FLUOR CORPORATION
FORM 10-Q
January 31, 1996
TABLE OF CONTENTS PAGE
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Part I: Financial Information
Condensed Consolidated Statement of Earnings for
the Three Months Ended January 31, 1996 and 1995.. 2
Condensed Consolidated Balance Sheet at January 31,
1996 and October 31, 1995......................... 3
Condensed Consolidated Statement of Cash Flows for
the Three Months Ended January 31, 1996 and 1995.. 5
Notes to Condensed Consolidated Financial
Statements........................................ 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 8
Changes in Backlog................................. 12
Part II: Other Information........................ 13
Signatures........................................... 14
Part I: Financial Information
FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Three Months Ended January 31, 1996 and 1995
UNAUDITED
In thousands, except per share amounts 1996 1995
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REVENUES.............................. $2,402,414 $2,059,626
COSTS AND EXPENSES
Cost of revenues.................... 2,303,342 1,974,695
Corporate administrative and
general expenses................... 13,263 9,606
Interest expense.................... 3,441 3,320
Interest income..................... (7,395) (7,119)
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Total Costs and Expenses.............. 2,312,651 1,980,502
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EARNINGS BEFORE INCOME TAXES.......... 89,763 79,124
INCOME TAX EXPENSE.................... 32,315 28,801
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NET EARNINGS.......................... $ 57,448 $ 50,323
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NET EARNINGS PER SHARE................ $ 0.68 $ 0.61
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DIVIDENDS PER COMMON SHARE............ $ 0.17 $ 0.15
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SHARES USED TO CALCULATE EARNINGS PER
SHARE............................... 84,407 82,966
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See Accompanying Notes.
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FLUOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
January 31, 1996 and October 31, 1995
UNAUDITED
January 31, October 31,
$ in thousands 1996 1995*
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ASSETS
Current Assets
Cash and cash equivalents........... $ 193,972 $ 292,934
Marketable securities............... 149,873 137,758
Accounts and notes receivable....... 596,569 470,104
Contract work in progress........... 376,247 362,910
Deferred taxes...................... 45,817 55,088
Inventory and other current assets.. 110,654 92,877
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Total current assets............... 1,473,132 1,411,671
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Property, Plant and Equipment (net
of accumulated depreciation,
depletion and amortization of
$663,829 and $630,573, respectively) 1,494,751 1,435,811
Investments and goodwill, net......... 152,647 121,791
Other................................. 277,231 259,633
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$3,397,761 $3,228,906
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(Continued On Next Page)
* Amounts at October 31, 1995 have been derived from audited
financial statements.
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FLUOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
January 31, 1996 and October 31, 1995
UNAUDITED
January 31, October 31,
$ in thousands 1996 1995*
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts and notes payable.......... $ 333,852 $ 372,301
Commercial paper.................... 29,880 29,937
Advance billings on contracts....... 569,363 393,438
Accrued salaries, wages and
benefit plans...................... 223,871 269,812
Other accrued liabilities........... 170,694 148,782
Current portion of long-term debt... 24,113 24,375
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Total current liabilities.......... 1,351,773 1,238,645
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Long-term debt due after one year..... 2,815 2,873
Deferred taxes........................ 42,717 44,211
Other noncurrent liabilities.......... 516,546 512,363
Commitments and Contingencies
Shareholders' Equity
Capital stock
Preferred - authorized 20,000,000
shares without par value; none
issued
Common - authorized 150,000,000
shares of $0.625 par value;
issued and outstanding -
83,473,940 shares and 83,164,866
shares, respectively............. 52,171 51,978
Additional capital.................. 550,834 538,503
Retained earnings................... 909,577 866,305
Unamortized executive stock plan
expense............................ (27,145) (26,865)
Cumulative translation adjustments.. (1,527) 893
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Total shareholders' equity......... 1,483,910 1,430,814
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$3,397,761 $3,228,906
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See Accompanying Notes.
* Amounts at October 31, 1995 have been derived from audited
financial statements.
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FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months Ended January 31, 1996 and 1995
UNAUDITED
$ in thousands 1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings........................ $ 57,448 $ 50,323
Adjustments to reconcile net
earnings to cash provided by
operating activities:
Depreciation, depletion and
amortization................... 42,412 32,929
Deferred taxes................... 9,818 627
Change in operating assets and
liabilities.................... (45,930) (11,936)
Other, net....................... (15,439) (6,559)
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Cash provided by operating activities. 48,309 65,384
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures................ (107,910) (81,644)
(Purchase) sale of marketable
securities, net.................... (12,115) 5,725
Proceeds from sale of property,
plant and equipment................ 5,956 3,706
Investments......................... (27,168) (1,117)
Other, net.......................... (2,248) (5,289)
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Cash utilized by investing activities. (143,485) (78,619)
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CASH FLOWS FROM FINANCING ACTIVITIES
Payments on long-term debt.......... (320) (35,052)
Cash dividends paid................. (14,176) (12,409)
Stock options exercised............. 11,021 439
Other, net.......................... (311) (371)
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Cash utilized by financing activities. (3,786) (47,393)
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Decrease in cash and cash equivalents. (98,962) (60,628)
Cash and cash equivalents at
beginning of period................. 292,934 374,468
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Cash and cash equivalents at end of
period.............................. $ 193,972 $ 313,840
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See Accompanying Notes.
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FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(1) The condensed consolidated financial statements do not
include footnotes and certain financial information
normally presented annually under generally accepted
accounting principles and, therefore, should be read in
conjunction with the company's October 31, 1995 annual
report on Form 10-K. Accounting measurements at interim
dates inherently involve greater reliance on estimates
than at year-end. The results of operations for the
three months ended January 31, 1996 are not necessarily
indicative of results that can be expected for the full
year.
The condensed consolidated financial statements included
herein are unaudited; however, they contain all
adjustments (consisting of normal recurring accruals)
which, in the opinion of the company, are necessary to
present fairly its consolidated financial position at
January 31, 1996 and its consolidated results of
operations and cash flows for the three months ended
January 31, 1996 and 1995. Certain 1995 amounts have been
reclassified to conform with the 1996 presentation.
(2) Earnings per share is based on the weighted average number
of common and, when appropriate, common equivalent shares
outstanding in each period. Common equivalent shares are
included when the effect of the potential exercise of
stock options is dilutive.
(3) Inventories comprise the following:
January 31, October 31,
$ in thousands 1996 1995
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Coal........................... $ 35,010 $ 28,874
Supplies and other............. 35,945 34,410
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$ 70,955 $ 63,284
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(4) Cash paid for interest was $1.2 million and $1.8 million
for the three month periods ended January 31, 1996 and
1995, respectively. Income tax payments, net of refunds,
were $4 million and $15 million during the three month
periods ended January 31, 1996 and 1995, respectively.
(5) Effective November 1, 1995, the company adopted Statement
of Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets to be Disposed Of"
(SFAS No. 121). The adoption of SFAS No. 121 had no
impact on the company's consolidated results of operations
or financial position.
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FLUOR CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is provided to increase
understanding of, and should be read in conjunction with, the
condensed consolidated financial statements and accompanying
notes.
RESULTS OF OPERATIONS
Revenues for the three month period ended January 31, 1996 were
$2.4 billion compared with $2.1 billion for the same period of
1995. Net earnings for the three month period ended January 31,
1996 were $57.4 million compared with $50.3 million for the same
period of 1995. The increase in net earnings is primarily due to
higher earnings from both the Engineering and Construction and
Coal segments.
ENGINEERING AND CONSTRUCTION
Revenues and operating profit for the Engineering and
Construction segment increased 18 percent and 14 percent,
respectively, for the three month period ended January 31, 1996
compared with the same period of 1995, due to an increase in
work performed. Reported margins, which may fluctuate from time
to time as a result of changes in the mix of engineering and
design services and construction related services, declined
slightly in the first quarter of 1996 compared with the same
period of 1995. New awards for the three months ended January
31, 1996 were $3.0 billion compared with $2.3 billion for the
three months ended January 31, 1995. Approximately 60 percent of
first quarter 1996 new awards were for projects located outside
the United States. New awards in the Process group for the first
quarter of 1996 were $1.7 billion and included a $610 million
petroleum project to be constructed in Saudi Arabia and a $465
million award for work to be performed on an existing oil
refinery located in Indonesia. The large size and uncertain
timing of new awards can create variability in the company's
award pattern, consequently, future award trends are difficult
to predict with certainty.
-8-
The following table sets forth backlog for each of the company's
Engineering and Construction business groups:
January 31, October 31, January 31,
$ in millions 1996 1995 1995
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Process $ 7,316 $ 6,671 $ 7,568
Industrial 4,061 4,516 3,969
Power/Government 3,157 3,275 2,253
Diversified Services 574 263 326
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Total $ 15,108 $ 14,725 $ 14,116
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The increase in the Diversified Services group's backlog at
January 31, 1996 compared with October 31, 1995 was due
primarily to the award of new facility management services for
IBM at six facilities located throughout the Western United
States. Approximately 56 percent of backlog at January 31, 1996
relates to projects located outside of the United States
compared with 55 percent at October 31, 1995 and 51 percent at
January 31, 1995. Backlog is adjusted both upwards and downwards
as required to reflect project cancellations, deferrals and
revised project scope and cost.
COAL
Produced coal revenues increased 3 percent for the three month
period ended January 31, 1996 compared with the same period of
1995 due primarily to increased metallurgical coal sales. The
increase in metallurgical coal revenues is due both to increased
prices and higher sales volume as the result of strong demand by
steel producers and the capturing of a larger share of the
metallurgical coal market. However, both metallurgical and steam
coal sales were adversely impacted in the first quarter of 1996
by disruptions at shipping facilities caused by severe weather
conditions. Gross margin increased for the three months ended
January 31, 1996 compared with the same period of 1995 due
primarily to lower coal production costs and higher
metallurgical coal sales prices. Operating profit increased 23
percent for the three months ended January 31, 1996 compared
with the same period of 1995 due primarily to increased gross
margin.
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OTHER
Corporate administrative and general expenses increased $3.7
million for the three months ended January 31, 1996, compared
with the same period of 1995 due primarily to higher stock price
driven compensation plans expense, partially offset by lower
corporate overhead. Net interest income for the three months
ended January 31, 1996 was essentially unchanged from the same
period of 1995.
The effective income tax rate for the three month period ended
January 31, 1996 was essentially unchanged from the same period
of 1995.
The company does not have substantial net assets or liabilities
denominated in foreign currencies and, therefore, does not have
significant risk to currency fluctuations. Although the Mexican
peso has experienced continued volatility in recent months, the
company believes that its investment in ICA Fluor Daniel has not
been permanently impaired as prospects remain for long-term
engineering and construction work in Mexico.
Effective November 1, 1995, the company adopted Statement of
Financial Accounting Standards No. 121, "Accounting for
the Impairment of Long-Lived Assets to be Disposed Of" (SFAS
No. 121). The adoption of SFAS No. 121 had no impact on the
company's consolidated results of operations or financial
position.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" (SFAS No. 123). SFAS No. 123
establishes financial accounting and reporting standards for
stock-based compensation plans and applies to transactions in
which an entity issues its equity instruments to acquire goods
and services from nonemployees. Adoption of the new accounting
standards prescribed by SFAS No. 123 is optional. The company
does not expect to adopt the new accounting standards and will
continue to account for its plans under previous accounting
standards, consequently, SFAS No. 123 will not affect the
company's consolidated results of operations or financial
position. However, in accordance with the provisions of SFAS
No. 123, beginning in 1997 pro forma disclosures of net
earnings and earnings per share will be made in the footnotes
to the company's financial statements as if the SFAS No. 123
accounting standards had been adopted.
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In December 1995, the company announced an agreement with
Groundwater Technology, Inc. ("GTI") wherein the company will
acquire an approximate 55 percent ownership interest in GTI. The
acquisition, subject to approval by the shareholders of GTI and
other customary closing conditions, will broaden the
scope of the company's environmental services activities.
FINANCIAL POSITION AND LIQUIDITY
The change in operating assets and liabilities from period to
period is affected by the mix, stage of completion and
commercial terms of engineering and construction projects. The
decrease in the first quarter of 1996 compared with the same
period of 1995 is primarily due to the timing of cash receipts
from project receivables and the payment of current payables and
accrued liabilities.
For the three months ended January 31, 1996, capital
expenditures were $107.9 million including $76.0 million related
to coal mine development. Dividends paid in the three months
ended January 31, 1996 were $14.2 million ($.17 per share)
compared with $12.4 million ($.15 per share) for the same period
of 1995.
The long-term debt to total capital ratio was less than 1
percent at both January 31, 1996 and October 31, 1995.
The company expects to have adequate resources available from
cash and short-term investments currently on hand, plus
available revolving credit facilities, capital market sources,
and its commercial paper program to provide for its financing
needs for the foreseeable future.
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FLUOR CORPORATION
CHANGES IN BACKLOG
Three Months Ended January 31, 1996 and 1995
UNAUDITED
$ in millions 1996 1995
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Backlog - beginning of period....... $ 14,724.9 $ 14,021.9
New awards.......................... 2,988.5 2,251.9
Adjustments and cancellations, net.. (434.6) (317.8)
Work performed...................... (2,170.6) (1,840.3)
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Backlog - end of period............. $ 15,108.2 $ 14,115.7
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PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 Fluor Corporation and Subsidiaries
Executive Incentive Compensation Plan
(as amended and restated November 1,
1995).
(b) Reports on Form 8-K.
None.
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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.
FLUOR CORPORATION
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(Registrant)
Date: March 15, 1996 /s/ J. Michal Conaway
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J. Michal Conaway, Vice President
and Chief Financial Officer
/s/ V.L. Prechtl
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V.L. Prechtl, Vice President and
Controller
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