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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(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, 1998
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
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)
(949) 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, 1998 there were 75,766,360 shares of common stock outstanding.
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FLUOR CORPORATION
FORM 10-Q
JULY 31, 1998
TABLE OF CONTENTS PAGE
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PART I: FINANCIAL INFORMATION
Condensed Consolidated Statement of Earnings for the Three Months
Ended July 31, 1998 and 1997. . . . . . . . . . . . . . . . . . . . . . 2
Condensed Consolidated Statement of Earnings for the Nine Months
Ended July 31, 1998 and 1997. . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheet at July 31, 1998 and
October 31, 1997. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Condensed Consolidated Statement of Cash Flows for the Nine Months
Ended July 31, 1998 and 1997 . . . . . . . . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial Statements. . . . . . . . . . . 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . . 9
Changes in Backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
PART II: OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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PART I: FINANCIAL INFORMATION
FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Three Months Ended July 31, 1998 and 1997
UNAUDITED
In thousands, except per share amounts 1998 1997
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REVENUES $ 3,528,852 $ 3,675,905
COSTS AND EXPENSES
Cost of revenues 3,421,976 3,567,314
Corporate administrative and general expense 3,774 4,654
Interest expense 12,284 7,520
Interest income (5,414) (5,627)
-------------- ---------------
Total Costs and Expenses 3,432,620 3,573,861
-------------- ---------------
EARNINGS BEFORE INCOME TAXES 96,232 102,044
INCOME TAX EXPENSE 33,795 35,802
-------------- ---------------
NET EARNINGS $ 62,437 $ 66,242
============== ===============
EARNINGS PER SHARE
BASIC $ .81 $ .80
============== ===============
DILUTED $ .81 $ .79
============== ===============
DIVIDENDS PER COMMON SHARE $ .20 $ .19
============== ===============
SHARES USED TO CALCULATE
BASIC EARNINGS PER SHARE 76,933 83,076
============== ===============
DILUTED EARNINGS PER SHARE 77,294 83,358
============== ===============
See Accompanying Notes.
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FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
Nine Months Ended July 31, 1998 and 1997
UNAUDITED
In thousands, except per share amounts 1998 1997
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REVENUES $ 10,209,950 $ 10,295,799
COSTS AND EXPENSES
Cost of revenues 9,916,146 10,154,270
Corporate administrative and general expense 14,337 18,721
Interest expense 31,033 20,044
Interest income (15,906) (16,498)
-------------- ---------------
Total Costs and Expenses 9,945,610 10,176,537
-------------- ---------------
EARNINGS BEFORE INCOME TAXES 264,340 119,262
INCOME TAX EXPENSE 92,801 61,119
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NET EARNINGS $ 171,539 $ 58,143
============== ===============
EARNINGS PER SHARE
BASIC $ 2.14 $ .70
============== ===============
DILUTED $ 2.14 $ .70
============== ===============
DIVIDENDS PER COMMON SHARE $ .60 $ .57
============== ===============
SHARES USED TO CALCULATE
BASIC EARNINGS PER SHARE 80,005 83,109
============== ===============
DILUTED EARNINGS PER SHARE 80,265 83,536
============== ===============
See Accompanying Notes.
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FLUOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
July 31, 1998 and October 31, 1997
UNAUDITED
July 31, October 31,
$ in thousands 1998 1997*
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ASSETS
Current Assets
Cash and cash equivalents $ 308,727 $ 299,324
Marketable securities -- 10,089
Accounts and notes receivable 923,270 930,104
Contract work in progress 612,301 691,395
Deferred taxes 86,507 58,039
Inventory and other current assets 228,777 236,935
------------ ------------
Total current assets 2,159,582 2,225,886
------------ ------------
Property, Plant and Equipment (net of accumulated
depreciation, depletion and amortization of
$1,092,420 and $1,001,315, respectively) 2,098,245 1,938,790
Investments and goodwill, net 269,389 254,948
Other 329,055 278,216
============ ============
$ 4,856,271 $ 4,697,840
============ ============
(Continued On Next Page)
* Amounts at October 31, 1997 have been derived from audited financial
statements.
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FLUOR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
July 31, 1998 and October 31, 1997
UNAUDITED
July 31, October 31,
$ in thousands 1998 1997*
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts and notes payable $ 864,143 $ 858,187
Commercial paper and loan notes 323,832 81,886
Advance billings on contracts 593,452 525,518
Accrued salaries, wages and benefit plans 306,004 303,490
Other accrued liabilities 255,676 221,487
Current portion of long-term debt 150 116
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Total current liabilities 2,343,257 1,990,684
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Long-term debt 300,405 300,508
Deferred taxes 81,317 66,739
Other noncurrent liabilities 612,759 598,859
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 $.625 par value; issued and outstanding -
76,549,662 shares and 83,748,111
shares, respectively 47,844 52,343
Additional capital 239,663 569,356
Retained earnings 1,283,168 1,159,996
Unamortized executive stock plan expense (26,148) (33,441)
Cumulative translation adjustment (25,994) (7,204)
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Total shareholders' equity 1,518,533 1,741,050
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$ 4,856,271 $ 4,697,840
=========== ===========
See Accompanying Notes.
* Amounts at October 31, 1997 have been derived from audited financial
statements.
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FLUOR CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months Ended July 31, 1998 and 1997
UNAUDITED
$ in thousands 1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 171,539 $ 58,143
Adjustments to reconcile net earnings to cash provided by
operating activities:
Depreciation, depletion and amortization 208,655 183,363
Deferred taxes (2,946) 11,440
Provisions for impairment/abandonment of joint
ventures and investments -- (15,642)
Change in operating assets and liabilities, excluding
effects of businesses acquired 172,328 (138,584)
Other, net (57,018) (4,059)
--------- ---------
Cash provided by operating activities 492,558 94,661
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CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (414,901) (350,940)
E & C businesses acquired -- (141,718)
Proceeds from sales/maturities of marketable securities 10,089 35,418
Proceeds from sale of property, plant and equipment 85,510 32,860
Investments, net (11,776) 1,793
Contribution to deferred compensation trust -- (21,513)
Other, net (10,418) (3,012)
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Cash utilized by investing activities (341,496) (447,112)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt -- 300,121
Increase in short-term borrowings 242,039 57,757
Cash dividends paid (48,367) (47,779)
Purchases of common stock (341,276) (18,973)
Stock options exercised 9,770 15,099
Other, net (3,825) (2,419)
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Cash (utilized by) provided by financing activities (141,659) 303,806
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Increase (decrease) in cash and cash equivalents 9,403 (48,645)
Cash and cash equivalents at beginning of period 299,324 246,964
========= =========
Cash and cash equivalents at end of period $ 308,727 $ 198,319
========= =========
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, 1997 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, 1998 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, 1998
and its consolidated results of operations and cash flows for the three
and nine months ended July 31, 1998 and 1997. As more fully described in
Management's Discussion and Analysis of Financial Condition and Results
of Operations ("MD&A"), the Company recorded provisions totaling $135.1
million during the nine months ended July 31, 1997. These included
provisions for estimated losses on certain contracts, adjustments to
project-related investments and accounts receivable, and implementation
of certain cost reduction initiatives.
Certain 1997 amounts have been reclassified to conform with the 1998
presentation.
(2) Inventories comprise the following:
July 31, October 31,
$ in thousands 1998 1997
---------------------------------------------------------
Coal $ 38,105 $ 54,419
Equipment for sale/rental 63,331 74,574
Supplies and other 47,248 46,455
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$148,684 $175,448
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FLUOR CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
UNAUDITED
(3) Effective November 1, 1997, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" which
specifies the method of computation, presentation and disclosure
for earnings per share ("EPS"). The new standard requires
presentation of two EPS amounts, basic and diluted. Basic EPS is
calculated by dividing net earnings by the weighted average number
of common shares outstanding for the period. Diluted EPS is
calculated by dividing net earnings by the weighted average number
of common shares and common share equivalents outstanding for the
period. Currently, the Company's common share equivalents consist
solely of stock options. EPS amounts for prior periods have been
adjusted to conform with the provisions of the new standard.
(4) Cash paid for interest was $26.0 million and $9.9 million for the
nine month periods ended July 31, 1998 and 1997, respectively.
Income tax payments, net of receipts, were $46.0 million and $51.0
million during the nine month periods ended July 31, 1998 and 1997,
respectively.
(5) During the third quarter of 1998, as part of its ongoing share
repurchase program, the Company entered into a series of equity
collar contracts with respect to 1,000,000 shares of its common
stock by selling put options (which entitle the holder of the
option to sell shares of common stock to the Company at a specified
price) and purchasing call options (which entitle the Company to
purchase shares of common stock from the seller of the option at a
specified price). There was no exchange of cash in placement of the
contracts. The put and call options, which expire during October
1998, give the Company a choice of settlement method.
During the quarter, the Company also entered into a series of
forward purchase contracts on an additional 1,000,000 shares of its
common stock. These contracts, which mature in November and
December 1998, also give the Company a choice of settlement method.
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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, 1997 annual
report on Form 10-K.
FORWARD-LOOKING INFORMATION
Any of the comments in this Form 10-Q that refer to the Company's estimated or
future results, including its statements concerning operating margins for the
fourth quarter of fiscal year 1998 and collectibility of a receivable on a
project in Indonesia, are forward-looking and reflect the Company's current
analysis of existing trends and information. Actual results may differ
materially from current expectations or projections based on a number of factors
affecting the Company's businesses. These factors include, but are not limited
to, cost overruns on fixed, maximum or unit-priced contracts, contract
performance risk, the uncertain timing of awards and revenues under contracts,
project financing risk, credit risk, risks associated with government funding,
permitting and approval of contracts, market conditions impacting realization of
investments, market conditions in the domestic and international coal market,
relatively mild weather conditions which may lower demand for steam coal and the
state of the economic and political conditions worldwide. These forward-looking
statements represent the Company's judgment only as of the date of this Form
10-Q. As a result, the reader is cautioned not to rely on these forward-looking
statements. The Company disclaims any intent or obligation to update these
forward-looking statements.
Additional information concerning these and other factors can be found in press
releases as well as the Company's public periodic filings with the Securities
and Exchange Commission, including the discussion under the heading "Certain
Factors and Trends Affecting Fluor and Its Businesses--Forward-Looking
Statements" in the Company's Form 8-K filed May 6, 1997, which is hereby
incorporated by reference and attached hereto as Exhibit 99.1.
RESULTS OF OPERATIONS
Revenues decreased slightly for the three and nine month periods ended July 31,
1998 compared with the same periods of 1997. A decrease in revenues from the
Engineering and Construction segment was partially offset by an increase in Coal
segment revenues. For the three and nine month periods ended July 31, 1998, the
Company reported net earnings of $62.4 million and $171.5 million, respectively,
compared with net earnings of $66.2 million and $58.1 million, respectively, for
the comparable periods in 1997. Results for the nine month period in 1997 were
adversely impacted by reduced operating profit from the Engineering and
Construction segment.
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ENGINEERING AND CONSTRUCTION
The Engineering and Construction segment revenues and operating profit for the
three and nine month periods ended July 31, 1998 and 1997 are as follows:
Three months ended Nine months ended
July 31, July 31,
--------------- --------------- --------------- ---------------
($ in thousands) 1998 1997 1998 1997
--------------- --------------- --------------- ---------------
Revenues $3,253,885 $3,417,425 $9,374,738 $9,519,052
Operating profit $ 65,361 $ 71,090 $ 176,615 $ 34,783
Revenues decreased 5 percent and 2 percent, respectively, for the three and nine
months ended July 31, 1998 compared with the same periods in 1997, due primarily
to a decrease in the volume of work performed. The operating margin for the
three month period ended July 31, 1998 increased slightly from that reported for
the three month period ended April 30, 1998, reflecting continued market
selectivity and cost management. Although the Company anticipates that the
operating margin for the fourth quarter of 1998 will remain at third quarter
levels or up slightly, it is anticipated to be below that reported for the
comparable period in 1997. The margins in 1998 reflect a lower content of work
performed on larger, more complex projects which generally carry higher margins.
As discussed below, results for the nine month period ended July 31, 1997 were
significantly affected by several items.
Provisions of $91.4 million for estimated losses on certain contracts were
recognized in the second quarter of 1997. Approximately 75 percent of the
contract provisions pertained to cost overruns on one fixed price project for
the construction of a power plant located outside the United States. Also
included in the second quarter provisions were certain other projects identified
to be loss contracts. None of these provisions individually exceeded $5 million.
No material additional provisions related to these projects have been recorded
subsequent to the second quarter of 1997. Additionally, during the second
quarter of 1997, the Company recorded $26.8 million in provisions for the
impairment, abandonment or sale of certain project-related investments and joint
ventures, and doubtful accounts receivable, none of which individually exceeded
$5 million. Provisions of $21.0 million for cost overruns on two fixed price
power projects, including the power project located outside the United States,
were recognized in the first quarter of 1997. The Company also recognized in the
first quarter a credit totaling $25.0 million related to certain actuarially
determined insurance accruals.
Results for the nine months ended July 31, 1997 also included charges totalling
$20.9 million related to implementation of certain cost reduction initiatives.
These charges consisted of personnel-related costs and lease costs for excess
facilities. As of July 31, 1998, the majority of these costs have been incurred.
New awards for the three and nine months ended July 31, 1998 were $2.7 billion
and $8.1 billion, respectively, compared with $2.7 billion and $9.4 billion for
the same periods of 1997. Forty-three percent and forty-seven percent of the new
awards for both the three and nine months ended July 31, 1998, respectively,
were for projects located outside of the United States. New awards in the third
quarter of 1998 consisted of several mid-sized projects primarily in the
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Process Group, the largest of which slightly exceeded $500 million in value. The
uncertain timing of prospects for new awards, some of which are large, can
create variability in the Company's awards pattern. Consequently, future award
trends are difficult to predict with certainty.
The following table sets forth backlog for each of the Company's Engineering and
Construction business groups:
July 31, October 31, July 31,
$ in millions 1998 1997 1997
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Process $ 6,339 $ 6,384 $ 6,994
Industrial 5,239 5,178 5,397
Power/Government 1,149 2,092 2,054
Diversified Services 1,012 716 896
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Total backlog $ 13,739 $ 14,370 $ 15,341
======== ======== ========
U.S. $ 5,870 $ 5,665 $ 6,373
Outside U.S. 7,869 8,705 8,968
======== ======== ========
Total backlog $ 13,739 $ 14,370 $ 15,341
======== ======== ========
The backlog in the Power and Government Group has decreased significantly from
year end due to work performed on the Paiton project and the timing of the
annual award for work on the Hanford project. Total backlog has decreased as
work performed on existing projects exceeded new awards, reflecting the
Company's increased market selectivity, the timing of release of work by
clients, and global market conditions. Although backlog reflects business which
is considered to be firm, cancellations or scope adjustments may occur. Backlog
is adjusted to reflect any known project cancellations, deferrals, and revised
project scope and cost, both upward and downward.
At July 31, 1998, approximately 20 percent of the Company's backlog is in the
Asia Pacific region, including $908 million in Australia. Due to the nature of
the projects the Company pursues and those included in backlog, the Company has
not experienced any significant disruption in ongoing project execution related
to the turmoil in the Asian financial markets. The recent turmoil in Indonesia
caused a temporary disruption in work progress at several project sites. These
projects are now essentially back to normal operations. Payments owed the
Company related to one project have been temporarily delayed. However, the
Company believes that all amounts due will ultimately be collected.
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COAL
Coal segment revenues and operating profit for the three and nine month periods
ended July 31, 1998 and 1997 are as follows:
Three months ended Nine months ended
July 31, July 31,
------------------------ ------------------------
($ in thousands) 1998 1997 1998 1997
-------- -------- -------- --------
Revenues $274,967 $258,480 $835,212 $776,747
Operating profit $ 43,672 $ 38,632 $120,661 $107,776
Revenues increased 6 percent and 8 percent, respectively, for the three and nine
month periods ended July 31, 1998 compared with the same periods of 1997. The
increase in revenues is due primarily to increased metallurgical coal sales
which increased 13 percent in the quarter and 18 percent for the nine months.
The growth in metallurgical coal sales continues to come from higher demand by
steel producers. Revenues from steam coal sales were down slightly over the
comparable periods in 1997. Although steam coal prices are lower compared with
the prior year, a strengthening U.S. steam coal market, due to warm weather,
increased steam coal sales volume partially offsetting the impact of lower
prices. Gross profit and operating profit increased for the three and nine
months ended July 31, 1998 compared with the same periods in 1997 due primarily
to reduced production costs and an increased proportion of higher margin
metallurgical coal sales, offset somewhat by lower steam coal prices.
OTHER
Interest expense for the three and nine months ended July 31, 1998 increased
compared with the same periods of 1997 due primarily to an increase in
short-term borrowings required to fund the Company's share repurchase program
and the $300 million in long-term debt issued in March 1997.
Corporate administrative and general expense during the three months ended July
31, 1998 was slightly lower than the same period in 1997 due primarily to a
decrease in stock-based compensation expense, resulting from fluctuations in the
stock price during the quarter as compared to 1997. Corporate administrative and
general expense for the nine months ended July 31, 1998 was also lower than the
comparable 1997 amount due primarily to a first quarter credit of approximately
$10 million related to a long-term incentive compensation plan, partially offset
by an increase in stock-based compensation expense, resulting from fluctuations
in the stock price for the nine months ended July 31, 1998 as compared to 1997.
The Company accrues for certain long-term incentive awards whose ultimate cost
is dependent on attainment of various performance targets set by the
Organization and Compensation Committee (the "Committee") of the Board of
Directors. Under the long-term incentive compensation plan referred to above,
the performance targets expired, without amendment or extension by the
Committee, on December 31, 1997.
The effective tax rate for the nine months ended July 31, 1997 was materially
impacted by foreign-based project losses, other project-related investment
losses and certain implementation
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costs for cost reduction initiatives incurred in the second quarter which are
not expected to receive full tax benefit. If these losses are excluded for tax
rate determination purposes, there is no significant difference between the
effective tax rate and the statutory rate for the nine-month period ended July
31, 1997.
FINANCIAL POSITION AND LIQUIDITY
At July 31, 1998, the Company had cash and cash equivalents of $308.7 million
and a long-term debt to total capital ratio of 16.5 percent. At July 31, 1997,
the Company had cash and cash equivalents (including marketable securities) of
$232.3 million and a long-term debt to total capital ratio of 15.2 percent.
The Company expects to have adequate resources available from operating cash
flows, cash and short-term investments, revolving credit and other banking
facilities, capital market sources and commercial paper to provide for its
capital needs for the foreseeable future. The Company recently expanded both its
revolving credit facility and its commercial paper program from $250 million to
$400 million. The Company is currently in a negative working capital position
due to significant short-term borrowings outstanding as a result of its ongoing
share repurchase program. The Company expects to use the after-tax proceeds from
its proposed sale of American Equipment Company (AEC) to repay commercial paper
and loan notes outstanding.
Operating activities generated $492.6 million in cash during the nine month
period ended July 31, 1998, compared with $94.7 million during the same period
in 1997. The increase in cash generated from operating activities is due
primarily to increased cash flow from projects which is affected from period to
period by the mix, stage of completion, and commercial terms of engineering and
construction projects. Cash was also positively impacted by the receipt of a $30
million tax refund on January 30, 1998.
On March 9, 1998, the Company announced that it intends to pursue options to
either divest or restructure its equipment sales and rental unit, AEC. A private
sale transaction is expected to be completed by calendar year end.
During the first nine months of 1998, the Company purchased 7,430,300 shares of
its common stock for a total of $341 million. Most of these shares were
purchased in anticipation of the receipt of proceeds from the proposed sale of
AEC. Funding for the repurchases has come from strong operating cash flow and
short-term borrowings during the first nine months of 1998.
For the nine months ended July 31, 1998, capital expenditures were $414.9
million, including $202.9 million related to Massey Coal. Dividends paid in the
nine months ended July 31, 1998 were $48.4 million ($.60 per share) compared
with $47.8 million ($.57 per share) for the same period of 1997.
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FINANCIAL INSTRUMENTS
During the third quarter of 1998, as part of its ongoing share repurchase
program, the Company entered into a series of equity collar contracts with
respect to 1,000,000 shares of its common stock by selling put options (which
entitle the holder of the option to sell shares of common stock to the Company
at a specified price) and purchasing call options (which entitle the Company to
purchase shares of common stock from the seller of the option at a specified
price). There was no exchange of cash in placement of the contracts. The put and
call options, which expire during October 1998, give the Company a choice of
settlement method.
During the quarter, the Company also entered into a series of forward purchase
contracts on an additional 1,000,000 shares of its common stock. These
contracts, which mature in November and December 1998, also give the Company a
choice of settlement method.
In addition to the above equity derivatives, the Company has utilized derivative
financial instruments for forward exchange contracts to hedge currency
transactions entered into in the ordinary course of business and not to engage
in currency speculation. At July 31, 1998 and October 31, 1997, the Company had
forward currency exchange contracts of less than eighteen months duration, to
exchange principally German marks, Canadian dollars, Australian dollars, Belgian
francs and Dutch guilders for U.S. dollars. In addition, the Company has a
forward currency contract to exchange U.S. dollars for British pounds sterling
to hedge annual lease commitments which expire in 1999. The total gross notional
amount of these contracts at July 31, 1998 and October 31, 1997 was $159 million
and $78 million, respectively. Forward contracts to purchase foreign currency
represented $154 million and $74 million and forward contracts to sell foreign
currency represented $5 million and $4 million, at July 31, 1998 and October 31,
1997, respectively.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS No. 131). SFAS No. 131 establishes new
standards for reporting information about operating segments in interim and
annual financial statements. This statement is effective for the Company's
fiscal year 1999.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133). SFAS No. 133 establishes new standards
for recording derivatives in interim and annual financial statements. This
statement is effective for the Company's fiscal year 2000. Because of the
Company's minimal use of derivatives, management does not anticipate that the
adoption of the new Statement will have a significant effect on earnings or the
financial position of the Company.
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FLUOR CORPORATION
CHANGES IN BACKLOG
Three and Nine Months Ended July 31, 1998 and 1997
($ in millions)
UNAUDITED
For the Three Months Ended July 31, 1998 1997
- -------------------------------------------------------------------------------------------
Backlog - beginning of period $13,914.0 $16,136.5
New awards 2,708.9 2,672.1
Adjustments and cancellations, net 137.9 (255.0)
Work performed (3,021.7) (3,212.2)
--------- ---------
Backlog - end of period $13,739.1 $15,341.4
========= =========
For the Nine months Ended July 31, 1998 1997
- -------------------------------------------------------------------------------------------
Backlog - beginning of period $14,370.0 $15,757.4
New awards 8,087.6 9,446.5
Adjustments and cancellations, net 67.1 (793.9)
Work performed (8,785.6) (9,068.6)
--------- ---------
Backlog - end of period $13,739.1 $15,341.4
========= =========
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PART II : OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3(ii) Restated Bylaws (as amended July 15, 1998) of
Fluor Corporation.
27 Financial Data Schedule.
99.1 Current Report on Form 8-K filed May 6, 1997.
(b) Reports on Form 8-K.
None.
16
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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 14, 1998 /s/ J. O. Rollans
--------------------------------------------
J. O. Rollans, Senior Vice President and
Chief Financial and Administrative Officer
/s/ V. L. Prechtl
--------------------------------------------
V. L. Prechtl, Vice President and Controller
17