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 July 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)
3353 Michelson Drive, Irvine, CA 92698
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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 August 31, 1996 there were 83,617,164 shares of common
stock outstanding.
FLUOR CORPORATION
FORM 10-Q
July 31, 1996
TABLE OF CONTENTS PAGE
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Part I: Financial Information
Condensed Consolidated Statement of Earnings for
the Three Months Ended July 31, 1996 and 1995...... 2
Condensed Consolidated Statement of Earnings for
the Nine Months Ended July 31, 1996 and 1995....... 3
Condensed Consolidated Balance Sheet at July 31,
1996 and October 31, 1995.......................... 4
Condensed Consolidated Statement of Cash Flows for
the Nine Months Ended July 31, 1996 and 1995....... 6
Notes to Condensed Consolidated Financial
Statements......................................... 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 9
Changes in Backlog.................................. 13
Part II: Other Information......................... 14
Signatures............................................ 15
Part I: Financial Information
FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Three Months Ended July 31, 1996 and 1995
UNAUDITED
In thousands, except per share amounts 1996 1995
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REVENUES.............................. $2,702,821 $2,436,831
COSTS AND EXPENSES
Cost of revenues.................... 2,589,959 2,335,885
Corporate administrative and
general expenses................... 9,956 12,793
Interest expense.................... 4,500 3,449
Interest income..................... (6,460) (9,875)
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Total Costs and Expenses.............. 2,597,955 2,342,252
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EARNINGS BEFORE INCOME TAXES.......... 104,866 94,579
INCOME TAX EXPENSE.................... 36,789 34,427
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NET EARNINGS.......................... $ 68,077 $ 60,152
=========================
NET EARNINGS PER SHARE................ $ 0.81 $ 0.72
=========================
DIVIDENDS PER COMMON SHARE............ $ 0.17 $ 0.15
=========================
SHARES USED TO CALCULATE EARNINGS PER
SHARE............................... 84,558 83,542
=========================
See Accompanying Notes.
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FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Nine Months Ended July 31, 1996 and 1995
UNAUDITED
In thousands, except per share amounts 1996 1995
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REVENUES.............................. $7,687,464 $6,725,770
COSTS AND EXPENSES
Cost of revenues.................... 7,370,476 6,444,551
Corporate administrative and
general expenses................... 34,553 34,850
Interest expense.................... 11,416 10,010
Interest income..................... (20,692) (24,328)
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Total Costs and Expenses.............. 7,395,753 6,465,083
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EARNINGS BEFORE INCOME TAXES.......... 291,711 260,687
INCOME TAX EXPENSE.................... 102,486 94,890
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NET EARNINGS.......................... $ 189,225 $ 165,797
=========================
NET EARNINGS PER SHARE................ $ 2.24 $ 1.99
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DIVIDENDS PER COMMON SHARE............ $ 0.51 $ 0.45
=========================
SHARES USED TO CALCULATE EARNINGS PER
SHARE............................... 84,543 83,253
=========================
See Accompanying Notes.
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FLUOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
July 31, 1996 and October 31, 1995
UNAUDITED
July 31, October 31,
$ in thousands 1996 1995*
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ASSETS
Current Assets
Cash and cash equivalents........... $ 228,603 $ 292,934
Marketable securities............... 113,736 137,758
Accounts and notes receivable....... 572,016 470,104
Contract work in progress........... 465,736 362,910
Deferred taxes...................... 46,572 55,088
Inventories and other current assets 104,556 92,877
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Total current assets............... 1,531,219 1,411,671
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Property, Plant and Equipment, net
of accumulated depreciation,
depletion and amortization of
$787,462 and $630,573, respectively. 1,609,792 1,435,811
Goodwill, net of accumulated
amortization of $16,774 and $11,778,
respectively........................ 71,873 33,303
Investments........................... 101,364 88,488
Other................................. 284,170 259,633
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$3,598,418 $3,228,906
=========================
See Accompanying Notes.
* Amounts at October 31, 1995 have been derived from audited
financial statements.
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FLUOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
July 31, 1996 and October 31, 1995
UNAUDITED
July 31, October 31,
$ in thousands 1996 1995*
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts and notes payable.......... $ 386,666 $ 372,301
Commercial paper.................... 29,854 29,937
Advance billings on contracts....... 561,771 393,438
Accrued salaries, wages and
benefit plan liabilities........... 240,474 269,812
Other accrued liabilities........... 159,440 148,782
Current portion of long-term debt... 24,790 24,375
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Total current liabilities.......... 1,402,995 1,238,645
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Long-term debt due after one year..... 3,336 2,873
Deferred taxes........................ 38,875 44,211
Other noncurrent liabilities.......... 553,772 512,363
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 -
83,598,249 shares and 83,164,866
shares, respectively............. 52,249 51,978
Additional capital.................. 559,674 538,503
Retained earnings................... 1,012,940 866,305
Unamortized executive stock plan
expense............................ (24,787) (26,865)
Cumulative translation adjustments.. (636) 893
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Total shareholders' equity......... 1,599,440 1,430,814
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$3,598,418 $3,228,906
=========================
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
Nine Months Ended July 31, 1996 and 1995
UNAUDITED
$ in thousands 1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings........................ $ 189,225 $ 165,797
Adjustments to reconcile net
earnings to cash provided by
operating activities:
Depreciation, depletion and
amortization................... 139,929 106,177
Deferred taxes................... 11,564 8,056
Change in operating assets and
liabilities.................... (21,288) (29,718)
Other, net....................... (15,005) (29,231)
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Cash provided by operating activities. 304,425 221,081
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures................ (289,404) (225,588)
Acquisitions........................ (80,216) (5,342)
Investments......................... (6,580) (11,032)
Purchases of marketable securities.. (64,052) (84,919)
Proceeds from sales and maturities
of marketable securities........... 88,897 77,464
Proceeds from sale of property,
plant and equipment................ 20,317 11,462
Other, net.......................... (9,775) 2,655
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Cash utilized by investing activities. (340,813) (235,300)
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CASH FLOWS FROM FINANCING ACTIVITIES
Cash dividends paid................. (42,590) (37,238)
Payments on debt.................... (18,801) (35,604)
Stock options exercised............. 15,311 6,808
Increase in short-term borrowings... 17,373 12,677
Other, net.......................... 764 (1,162)
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Cash utilized by financing activities. (27,943) (54,519)
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Decrease in cash and cash equivalents. (64,331) (68,738)
Cash and cash equivalents at
beginning of period................. 292,934 374,468
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Cash and cash equivalents at end of
period.............................. $ 228,603 $ 305,730
=========================
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 and nine months ended July 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
July 31, 1996 and its consolidated results of
operations for the three and nine months ended July
31, 1996 and 1995 and cash flows for the nine months
ended July 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:
July 31, October 31,
$ in thousands 1996 1995
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Coal........................... $ 22,831 $ 28,874
Supplies and other............. 37,393 34,410
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$ 60,224 $ 63,284
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(4) Cash paid for interest was $6.9 million and $5.1 million
for the nine month periods ended July 31, 1996 and 1995,
respectively. Income tax payments, net of refunds, were
$82.2 million and $71.0 million during the nine month
periods ended July 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 and for 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 and the company's October 31, 1995 annual report on Form
10-K.
RESULTS OF OPERATIONS
Revenues increased 11 percent and 14 percent, respectively, for
the three and nine month periods ended July 31, 1996 compared
with the same periods of 1995. Net earnings for the three and
nine months ended July 31, 1996 were $68.1 million and $189.2
million, respectively, compared with net earnings of $60.2
million and $165.8 million, respectively, for the same periods
of 1995. The increases in net earnings are due primarily to
higher earnings for both the Engineering and Construction and
Coal segments.
ENGINEERING AND CONSTRUCTION
Revenues for the Engineering and Construction segment increased
11 percent and 15 percent, respectively, for the three and nine
month periods ended July 31, 1996 compared with the same
periods of 1995, due primarily to an increase in work
performed. Engineering and Construction operating profits
increased 9 percent and 10 percent, respectively, for the three
and nine months ended July 31, 1996 compared with the same
periods of 1995 due primarily to the increase in the volume of
work performed which was partially offset by an increase in
investment spending for expansion and strategic business
development. These expenditures, which are expensed as they
are incurred, reflect the company's pursuit of business
opportunities across numerous global markets. Operating
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, continue to be affected by the
increased investment spending. Although operating margins
improved from those reported in the second quarter of 1996,
they declined slightly for both the three and nine month
periods ended July 31, 1996 compared with the same periods of
1995.
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New awards for the three and nine month periods ended July 31,
1996 were $3.1 billion and $9.1 billion, respectively, compared
with $2.6 billion and $7.6 billion for the same periods of
1995. Approximately 59 percent and 57 percent, respectively,
of new awards for the three and nine months ended July 31, 1996
were for projects located outside the United States. New
awards in the third quarter of 1996 were concentrated in the
Process and Industrial groups and consisted of a mix of smaller
to medium sized projects located primarily in the U.S., South
America and Asia Pacific regions. The large size and uncertain
timing of significant new awards can create variability in the
company's awards pattern, consequently, future award trends are
difficult to predict with certainty.
In August 1996, the company was selected to manage the
environmental cleanup of the Department of Energy's Hanford
site, a former plutonium production facility located in
southeastern Washington state. The initial five-year contract
is valued at $5 billion with potential contract extensions
totaling five years and $5 billion. This work is expected to
be added to backlog on an annual basis as congressional
authority to expend the funds is received. The initial
authorized phase will be recognized as a new award in the
fourth quarter of 1996.
The following table sets forth backlog for each of the company's
Engineering and Construction groups:
July 31, October 31, July 31,
$ in millions 1996 1995 1995
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Process $ 6,125 $ 6,671 $ 6,861
Industrial 5,974 4,516 4,090
Power/Government 2,852 3,275 3,282
Diversified Services 648 263 317
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Total $ 15,599 $ 14,725 $ 14,550
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Approximately 56 percent of backlog at July 31, 1996 relates to
projects located outside of the United States compared with 55
percent at October 31, 1995 and 56 percent at July 31, 1995,
consistent with the company's long-term goal of broad
geographic diversity. Backlog is adjusted both upwards and
downwards as required to reflect project cancellations,
deferrals and revised project scope and cost.
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COAL
Revenues increased 13 percent and 12 percent, respectively, for
the three and nine month periods ended July 31, 1996
compared with the same periods of 1995. These increases were
due primarily to increased sales of both metallurgical and
steam coal. Metallurgical coal revenues increased due
primarily to the continued strong demand by steel producers and
to Massey's increased market share. Steam coal sales continued
to benefit from the severe winter in 1996 as electric utilities
replenished their depleted inventory levels. Gross income
increased for the three months ended July 31, 1996 compared
with the same period of 1995 due primarily to the increased
sales volume of both metallurgical and steam coal. Gross
income increased for the nine months ended July 31, 1996
compared with the same period of 1995 due primarily to the
increased sales volume of both metallurgical and steam coal
combined with improved pricing and lower costs of metallurgical
coal. Operating profit increased 14 percent and 18 percent,
respectively, for the three and nine months ended July 31, 1996
compared with the same periods of 1995 due primarily to
increased gross income.
OTHER
Corporate administrative and general expenses decreased $2.8
million for the three months ended July 31, 1996 and were level
for the nine months ended July 31, 1996 compared with the same
periods of 1995. The decrease for the three months ended July
31, 1996 compared with the same period of 1995 is due primarily
to lower expenses for stock price driven compensation plans and
lower corporate overhead, partially offset by higher expenses
for performance driven compensation plans.
Net interest income for the three and nine months ended July 31,
1996 decreased $4.5 million and $5.0 million, respectively,
compared with the same periods of 1995 due primarily to lower
interest earning assets in addition to higher short-term interest
bearing liabilities.
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. Adoption of the new accounting
standards prescribed by SFAS No. 123 is optional. The company
does not expect to apply the new accounting standards in its
consolidated financial statements 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
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the reporting provisions of SFAS No. 123, beginning in 1997 pro
forma disclosures of net 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.
In May 1996, the company consummated a merger between one of its
subsidiaries, Fluor Daniel Environmental Services, Inc. (FDESI),
and Groundwater Technology, Inc. (GTI) wherein the company
acquired an approximate 55 percent interest in the newly named
company, Fluor Daniel GTI. The company contributed $33.4 million
in cash and ownership of FDESI to Fluor Daniel GTI. GTI
shareholders received $60 million in cash and an approximate 45
percent ownership of Fluor Daniel GTI.
In March 1996, American Equipment, Inc., the company's equipment
rental and sales subsidiary acquired S&R Equipment Company,
Inc. (S&R), a high-lift equipment dealer. S&R was acquired for a
cash purchase price of $44.4 million, for which the company
received $29.1 million of property, plant and equipment, $4.4
million of working capital and other assets. In addition, the
company assumed $17.4 million of debt which was repaid by the
company subsequent to the purchase. Goodwill of $28.3 million
will be amortized over 15 years.
These acquisitions have been accounted for under the purchase
method of accounting and their results of operations have been
included in the company's condensed consolidated financial
statements from the respective acquisition dates.
FINANCIAL POSITION AND LIQUIDITY
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, a
commercial paper program and banking arrangements to provide for
its financing needs for the foreseeable future.
Changes in operating assets and liabilities are affected by the
mix, stage of completion and commercial terms of engineering and
construction projects. The decrease in operating assets and
liabilities in the first nine months of 1996 is due primarily to
increased project receivables and contract work in progress
resulting from increased project volume partially offset by
increases in advanced billings on contracts.
For the nine months ended July 31, 1996, capital expenditures
were $289.4 million including $171.6 million related primarily
to mine development for the Coal segment. Dividends paid in
the nine months ended July 31, 1996 were $42.6 million ($.51
per share) compared with $37.2 million ($.45 per share) for the
same period of 1995.
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FLUOR CORPORATION
CHANGES IN BACKLOG
($ in Millions)
UNAUDITED
For the Three Months Ended July 31, 1996 1995
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Backlog - beginning of period....... $ 15,362.0 $ 14,404.2
New awards.......................... 3,107.5 2,611.9
Adjustments and cancellations, net.. (476.1) (266.5)
Work performed...................... (2,394.2) (2,200.0)
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Backlog - end of period............. $ 15,599.2 $ 14,549.6
=========================
For the Nine Months Ended July 31, 1996 1995
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Backlog - beginning of period....... $ 14,724.9 $ 14,021.9
New awards.......................... 9,063.4 7,583.1
Adjustments and cancellations, net.. (1,314.5) (1,007.2)
Work performed...................... (6,874.6) (6,048.2)
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Backlog - end of period............. $ 15,599.2 $ 14,549.6
=========================
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FLUOR CORPORATION
PART II - Other Information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1 1996 Executive Stock Plan.
10.2 Fluor Corporation Executive Incentive
Compensation Plan (Amended and Restated
Effective 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
(Registrant)
Date: September 13, 1996 /s/ J. Michal Conaway
J. Michal Conaway, Vice President
and Chief Financial Officer
/s/ V.L. Prechtl
V.L. Prechtl, Vice President and
Controller
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