EXHIBIT 13
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SELECTED FINANCIAL DATA
In millions,
except per share amounts 1993 1992 1991 1990 1989 1988
OPERATING RESULTS
Revenues from continuing operations $ 7,850.2 $ 6,600.7 $ 6,572.0 $7,248.9 $6,127.2 $5,008.9
Earnings from continuing operations
before taxes 242.2 215.4 228.4 153.6 135.6 62.0
Earnings from continuing operations, net 166.8 135.3 153.1 119.4 84.1 38.6
Earnings (loss) from discontinued
operations, net -- (96.6) 11.0 35.2 28.6 21.6
Cumulative effect of change in accounting
principle, net -- (32.9) -- -- -- --
Net earnings 166.8 5.8 164.1 154.6 112.7 60.2
Earnings per share
Continuing operations 2.03 1.65 1.87 1.47 1.04 0.48
Discontinued operations -- (1.18) 0.14 0.43 0.36 0.27
Cumulative effect of change in
accounting principle -- (0.40) -- -- -- --
Net earnings per share $ 2.03 $ 0.07 $ 2.01 $ 1.90 $ 1.40 $ 0.75
Return on average shareholders' equity 17.4% 0.6% 20.2% 23.3% 21.5% 14.2%
Cash dividends per common share $ 0.48 $ 0.40 $ 0.32 $ 0.24 $ 0.14 $ 0.02
FINANCIAL POSITION
Current assets $ 1,309.1 $ 1,138.6 $ 1,159.5 $1,222.8 $1,036.4 $1,001.0
Current liabilities 930.9 845.4 848.2 984.0 797.7 786.1
Working capital 378.2 293.2 311.3 238.8 238.7 214.9
Property, plant and equipment, net 1,100.9 1,046.9 1,092.7 925.3 775.3 729.8
Total assets 2,588.9 2,365.5 2,421.4 2,475.8 2,154.3 2,075.7
Capitalization
Long-term debt 59.6 61.3 75.7 57.6 62.5 95.0
Shareholders' equity 1,044.1 880.8 900.6 741.3 589.9 467.1
Total capitalization $ 1,103.7 $ 942.1 $ 976.3 $ 798.9 $ 652.4 $ 562.1
Percent of total capitalization
Long-term debt 5.4 6.5 7.8 7.2 9.6 16.9
Shareholders' equity 94.6 93.5 92.2 92.8 90.4 83.1
Shareholders' equity per common share $ 12.72 $ 10.81 $ 11.10 $ 9.22 $ 7.39 $ 5.91
Common shares outstanding at October 31 82.1 81.5 81.1 80.4 79.8 79.1
OTHER DATA
New awards $ 8,000.9 $10,867.7 $ 8,531.6 $7,632.3 $7,135.3 $5,955.2
Backlog at year end 14,753.5 14,706.0 11,181.3 9,557.8 8,360.9 6,658.6
Capital expenditures 171.5 287.0 159.7 155.7 139.2 86.3
Cash provided by operating activities $ 192.0 $ 306.0 $ 219.0 $ 353.1 $ 265.1 $ 17.7
See Management's Discussion and Analysis on pages 23 to 25,
Consolidated Statement of Earnings on page 28, Notes to
Consolidated Financial Statements on pages 31 to 41 and
Quarterly Financial Data on page 43 for information relating to
significant items affecting the results of operations.
The quarterly dividend was increased from $.02 per share to
$.04 per share in the second quarter of 1989, to $.06 per share
in the first quarter of 1990, to $.08 per share in the first
quarter of 1991, to $.10 per share in the first quarter of
1992, to $.12 per share in the first quarter of 1993 and to
$.13 per share in the first quarter of 1994.
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis is provided to increase
understanding of, and should be read in conjunction with, the
consolidated financial statements and accompanying notes.
RESULTS OF OPERATIONS
Earnings from continuing operations were $167 million in 1993
compared with $135 million in 1992 and $153 million in 1991.
The related earnings per share were $2.03 in 1993 compared with
$1.65 in 1992 and $1.87 in 1991. Earnings from continuing
operations in 1993 and 1991 include net nonrecurring gains of
approximately $6 million and $22 million, respectively, while
there were no comparable items in 1992. Revenues increased 19
percent in 1993 following a slight increase in 1992.
ENGINEERING AND CONSTRUCTION
Due largely to weak economies and capital spending within
certain United States, European and Middle Eastern markets, the
Government, Process, Industrial and Power sectors experienced
declines in awards during 1993 that were only partially offset
by an increase in the Hydrocarbon sector. Total new awards
decreased 26 percent to $8.0 billion in 1993, compared with
$10.9 billion in 1992 and $8.5 billion in 1991. At the same
time, there continue to be a number of megaproject
opportunities, particularly outside the United States. These
projects develop slowly and, therefore could create variability
in the company's incoming order and backlog pattern.
Accordingly, it is difficult to predict future award trends
with any degree of certainty. Consistent with the company's
long-term goal of broad geographic diversity, over 50 percent
of 1993 new awards came from projects located outside the
United States, compared with approximately 30 percent in 1992
and 35 percent in 1991.
The following table sets forth new awards for each of the
company's business sectors:
$ in millions/Year
ended October 31, 1993 1992 1991
Hydrocarbon $ 4,540 57 % $ 3,534 33 % $ 3,216 38 %
Industrial 1,612 20 2,300 21 943 11
Government 123 2 2,278 21 535 6
Process 1,288 16 2,012 18 3,127 37
Power 438 5 744 7 711 8
Total new awards $ 8,001 100 % $10,868 100 % $ 8,532 100 %
United States $ 3,686 46 % $ 7,348 68 % $ 5,586 65 %
Outside United
States 4,315 54 3,520 32 2,946 35
Total new awards $ 8,001 100 % $10,868 100 % $ 8,532 100 %
Total backlog at October 31, 1993, 1992 and 1991 was $14.8
billion, $14.7 billion and $11.2 billion, respectively. The
ratio of work outside the United States at October 31, 1993
increased to 39 percent of total backlog, compared with 28
percent at October 31, 1992. This increase is largely
attributable to the company's selection by Shell Nederland
Rafinaderij B.V. to execute the first phase on the renovation
of one of Shell's European refineries and the award of a
lump-sum project to a joint venture, in which the company is a
50 percent owner, to build a new oil refinery in Thailand for
Rayong Refinery Company. These contracts added approximately
$3.0 billion to the company's backlog for the year ended
October 31, 1993. Together with a 1992 award from the
Department of Energy to manage the environmental cleanup of its
uranium production facilities in Fernald, Ohio, these three
contracts represent approximately $4.4 billion, or 30 percent
of total backlog at October 31, 1993.
Engineering and Construction operating profits increased 16
percent to $221 million in 1993 compared with $191 million in
1992 and $166 million in 1991 primarily as the result of the
increased volume of work performed. Overall margins in 1993 are
approximately level with the prior year. Margins are affected
by competitive market conditions and the mix of engineering and
construction projects, making it difficult to predict a trend
over time.
COAL
Revenues and operating profit from Coal operations in 1993 were
$717 million and $71 million, respectively, compared with
revenues of $697 million and operating profit of $80 million in
1992. Revenues and operating profit in 1991 were $758 million
and $61 million. The increase in revenues in 1993 is due
primarily to a 21 percent increase in sales volume of produced
coal that more than offset the effects of decreases in the
sales price per ton of produced coal and the sales volume of
purchased coal. Gross margin improved in 1993 due primarily to
overall increased sales volume and a continued emphasis on
produced coal sales, which generated a 20 percent margin in
1993, rather than sales of purchased coal which had a 6 percent
margin. Revenues and margin in 1993 also benefited from the
initial production from new coal reserves acquired during the
past two years. Operating profits declined in 1993 compared
with 1992 due primarily to a $10 million nonrecurring charge in
1993 related to the settlement of a dispute with the pension
and benefits funds of the United Mine Workers of
America/Bituminous Coal Operators of America. During 1993, a
major strike against many coal producers, other than Massey,
caused higher coal prices in the latter part of the year. The
long-term impact of the strike on coal prices is uncertain.
The decrease in revenues in 1992 compared with 1991 was due
primarily to lower sales volume of purchased coal that more
than offset a 2 percent increase in produced coal revenues.
Overall sales volume was down due to decreased demand resulting
from mild weather together with continued recessionary market
conditions. However, margins improved in 1992 compared with
1991 due to a greater emphasis on produced coal sales, which
had a 23 percent margin in 1992, compared with purchased coal
which had a 4 percent margin. The effect of emphasizing
produced coal sales from existing and newly acquired mines
resulted in an increase in overall gross margin percentage to
20 percent in 1992 from 17 percent in 1991, which accounted for
slightly more than half of the increase in total operating
profit in 1992. The remainder of the increase in operating
profit is due primarily to a gain on the sale of a coal
processing plant.
OTHER
Net interest income improved slightly in 1993 due largely to
the repayment during 1993 and 1992 of approximately $46 million
and $18 million, respectively, of long-term debt. The decrease
in interest expense resulting from the debt repayment was,
however, almost entirely offset by lower interest income as the
result of lower interest rates and lower interest earning
assets. The significant decline in 1992 compared with 1991 is
primarily attributable to the elimination of the company's
high-interest-earning bond portfolio in connection with the
repurchase of its Sugar Land facility in 1991, lower 1992
levels of short-term interest-earning assets resulting from
capital expenditures at Massey Coal, the prepayment of
long-term notes in the third quarter of 1992 and lower interest
rates.
Although corporate overhead expense remained level in 1993
compared with 1992, corporate administrative and general
expense increased in 1993 compared to 1992 primarily due to
higher net periodic pension income in 1992. Corporate
administrative and general expense decreased in 1992 compared
with 1991 due to lower stock price driven compensation plan
expenses, an increase in net periodic pension income and lower
corporate overhead costs.
Net earnings for the year ended October 31, 1993 benefited from
the reversal of $12.6 million of income tax liabilities. This
reversal was made in connection with the conclusion of a
federal income tax audit in the second quarter of 1993 for the
years 1984 through 1986. This reduction in liabilities did not
affect the company's cash flows. After excluding the 1993 and
1991 reversals of income tax liabilities, there is no
significant difference in 1993, 1992 or 1991 between the
effective federal income tax rate on earnings from continuing
operations and the statutory rate.
The Revenue Reconciliation Act of 1993 did not have a material
effect on the consolidated financial position or results of
operations of the company.
In November 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits" (SFAS No.
112). The statement requires accrual of the estimated cost of
benefits provided by the employer to former or inactive
employees after employment but before retirement. Adoption of
SFAS No. 112 by the company is not required until fiscal year
1995. Although the precise method and impact of implementation
is not known at this time, management believes the effect,
based on the company's current benefit programs, will not be
material.
The company's operations, including its discontinued Lead
operations, are subject to and affected by federal, state and
local laws and regulations regarding the protection of the
environment. The company maintains reserves for potential
future environmental costs where such obligations are either
known or considered probable and can be reasonably estimated.
St. Joe Minerals Corporation ("St. Joe"), a wholly owned
subsidiary of the company, is participating as a potentially
responsible party at several different sites pursuant to
proceedings under the Comprehensive Environmental Response,
Compensation and Liability Act ("Superfund"). Other parties
have also been identified as potentially responsible parties at
all but one of these sites, and many of these parties have
shared in the costs associated with the sites. Investigative
and/or remedial activities are ongoing at each site. The
company believes, based upon present information available to
it, that its reserves in respect to future environmental costs
are adequate, and that such future costs will not have a
material effect on the company's consolidated financial
position, results of operations or liquidity. However, the
imposition of more stringent requirements under environmental
laws or regulations, new developments or changes regarding site
cleanup costs or the allocation of such costs among potentially
responsible parties, or a determination that the company is
potentially responsible for the release of hazardous substances
at sites other than those currently identified, could result in
additional expenditures, or additional reserves in expectation
of such expenditures.
Effective November 1, 1992, the company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions." The company
elected immediate recognition of the transition obligation in
1992 which resulted in a one time net charge to earnings of $33
million, or $.40 per share.
In July 1991, the company purchased certain partnership
interests which owned the company's Sugar Land, Texas
engineering office buildings and leasehold on the land for
$64.3 million in cash and the assumption of $32.4 million of
notes. The company had previously acquired approximately $93
million of related notes that were effectively extinguished as
a result of the transaction. As a result of the partnership
interest purchase, lease cost reserves and other items were no
longer required and were reversed, thereby reducing the cost
basis of the property by $51.7 million and increasing pretax
earnings by $19.6 million, after a $5 million provision for
certain foreign lease reserves. The company also sold its
minority interest in Centre Reinsurance Holdings Ltd., a
Bermuda-based insurer, resulting in a 1991 pretax gain of $16.4
million.
DISCONTINUED OPERATIONS
In November 1992, the company announced its decision to exit
its Lead business. As of October 31, 1992 the Lead business was
classified as a discontinued operation and adjusted to
estimated net realizable value. The estimated after-tax loss
on disposal in 1992 of $78.9 million includes an after-tax
provision of $6 million for estimated losses through the date
of disposition. Largely as the result of historically low lead
prices, in addition to a temporary disruption due to flood
conditions at its smelter in Missouri, the Lead business's
after-tax loss for fiscal year 1993 was $30 million. The
smelter was returned to full production and lead prices began
to improve in late 1993. The company continues to believe that
its reserves for loss on disposal are adequate at October 31,
1993 in relation to its consolidated financial statements taken
as a whole. During 1993, the company made substantial progress
toward the disposition of its Lead business. While the
outcome of such disposition cannot be determined with certainty
at this time, management's intent to dispose of the Lead
business remains unaltered and management believes that a
disposal will be accomplished during fiscal 1994.
FINANCIAL POSITION AND LIQUIDITY
Working capital at October 31, 1993 was $378 million compared
with $293 million at October 31, 1992. Working capital
increased 29 percent primarily due to significant increases in
current receivables and contract work in process. Capital
expenditures for 1993 were $172 million compared with $287
million in 1992 and $160 million in 1991. Capital expenditures
at Massey Coal in 1993 and 1992 were $111 million and $214
million, respectively, which included approximately $13 million
and $115 million, respectively, related to new coal reserve and
facility acquisition costs, with the remainder attributable to
ongoing operations.
The long-term debt to capitalization ratio at October 31, 1993
was 5.4 percent compared with 6.5 percent and 7.8 percent at
October 31, 1992 and 1991, respectively. The 1993 ratio
decreased primarily due to the increase in shareholders' equity
from earnings, net of dividends. At October 31, 1993, all
long-term debt bears interest at fixed rates.
The company has on hand and access to sufficient sources of
funds to meet its anticipated operating, expansion and capital
needs. Significant short and long-term lines of credit are
maintained with banks which, along with cash on hand and
marketable securities, provide adequate operating liquidity.
Additional liquidity is provided by the company's commercial
paper program under which there was $30 million outstanding at
both October 31, 1993 and 1992.
Quarterly cash dividends of $.08 per share declared in December
1990 were raised to $.10 per share in December 1991, to $.12
per share in December 1992 and to $.13 per share in December
1993.
Although the company is affected by inflation and the cyclical
nature of the industry, its Engineering and Construction
operations are generally protected by the ability to recover
cost increases through price escalation provisions in most
contracts. Coal operations produce a commodity which is
internationally traded at prices established by market factors
outside the control of the company. However, commodity prices
generally tend over the long term to reflect a correlation to
inflationary trends and the company's substantial coal reserves
provide a hedge against the adverse long-term effects of
inflation. Although the company has taken actions to reduce its
dependence on external economic conditions, management is
unable to predict with certainty the amount and mix of future
business.
CONSOLIDATED BALANCE SHEET
$ in thousands/At October 31, 1993 1992
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 214,844 $ 195,346
Marketable securities 97,335 147,584
Accounts and notes receivable 392,577 312,354
Contract work in progress 306,251 219,108
Inventories 32,834 31,188
Net assets of discontinued operations 172,822 138,638
Deferred taxes 76,364 70,204
Other current assets 15,997 24,133
Total current assets 1,309,024 1,138,555
PROPERTY, PLANT AND EQUIPMENT
Land 58,867 61,581
Buildings and improvements 304,566 294,944
Machinery and equipment 643,818 569,349
Mining properties and mineral rights 499,459 449,966
Construction in progress 35,875 40,091
1,542,585 1,415,931
Less accumulated depreciation,
depletion and amortization 441,676 369,046
Net property, plant and equipment 1,100,909 1,046,885
OTHER ASSETS
Investments and goodwill, net of
accumulated amortization of $44,490
and $36,388, respectively 52,383 56,761
Other 126,568 123,295
Total other assets 178,951 180,056
$2,588,884 $2,365,496
1993 1992
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 289,721 $ 199,001
Note payable to affilate 30,000 --
Commercial paper 30,053 29,957
Advance billings on contracts 194,695 174,409
Accrued salaries, wages and benefit
plan liabilities 194,270 191,895
Other accrued liabilities 190,447 204,449
Current portion of long-term debt 1,687 45,693
Total current liabilities 930,873 845,404
LONG-TERM DEBT DUE AFTER ONE YEAR 59,637 61,262
NONCURRENT LIABILITIES
Deferred taxes 51,642 63,109
Other 502,610 514,919
Total noncurrent liabilities 554,252 578,028
CONTINGENCIES AND COMMITMENTS
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 in 1993 - 82,093,207
shares and in 1992 - 81,480,008
shares 51,308 50,925
Additional capital 478,204 436,063
Retained earnings (since October 31,
1987) 534,678 407,218
Unamortized executive stock plan
expense (16,828) (14,610)
Cumulative translation adjustment (3,240) 1,206
Total shareholders' equity 1,044,122 880,802
$2,588,884 $2,365,496
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF EARNINGS
In thousands, except per share amounts
Year ended October 31, 1993 1992 1991
REVENUES
Engineering and
construction services $7,133,578 $5,903,975 $5,813,477
Coal 716,591 696,721 758,481
Total revenues 7,850,169 6,600,696 6,571,958
COST OF REVENUES
Engineering and
construction services 6,918,464 5,729,148 5,655,793
Coal 645,911 616,671 697,985
Total cost of revenues 7,564,375 6,345,819 6,353,778
OTHER (INCOME) AND EXPENSE
Corporate administrative
and general expense 43,682 39,270 57,032
Reduction in accrued
lease cost, net -- -- (19,649)
Gain on sale of investment -- -- (16,426)
Interest expense 19,982 23,580 16,466
Interest income (20,070) (23,323) (47,644)
Total cost and expenses 7,607,969 6,385,346 6,343,557
EARNINGS FROM CONTINUING
OPERATIONS BEFORE TAXES 242,200 215,350 228,401
INCOME TAX EXPENSE 75,400 80,100 75,312
EARNINGS FROM CONTINUING
OPERATIONS 166,800 135,250 153,089
EARNINGS (LOSS) FROM
DISCONTINUED OPERATIONS, NET -- (96,566) 11,059
EARNINGS BEFORE CHANGE IN
ACCOUNTING PRINCIPLE 166,800 38,684 164,148
CUMULATIVE EFFECT OF CHANGE
IN ACCOUNTING PRINCIPLE, NET -- (32,866) --
NET EARNINGS $ 166,800 $ 5,818 $ 164,148
EARNINGS PER SHARE
Continuing operations $ 2.03 $ 1.65 $ 1.87
Discontinued operations -- (1.18) 0.14
Cumulative effect of change
in accounting principle -- (0.40) --
NET EARNINGS PER SHARE $ 2.03 $ 0.07 $ 2.01
SHARES USED TO CALCULATE
EARNINGS PER SHARE 82,282 81,558 81,807
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
In thousands
Year ended October 31, 1993 1992 1991
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 166,800 $ 5,818 $ 164,148
Adjustments to reconcile net
earnings to cash provided by
operating activities:
Depreciation, depletion
and amortization 111,793 135,259 121,482
Discontinued operations (34,184) 127,275 --
Change in accounting
principle -- 53,008 --
Deferred taxes (6,082) (55,674) (18,248)
Changes in operating
assets and liabilities (61,497) 37,021 (24,964)
Other, net 15,136 3,336 (23,468)
Cash provided by operating
activities 191,966 306,043 218,950
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (171,537) (287,046) (159,718)
Sale (purchase) of
marketable securities, net 50,249 38,458 (105,756)
Purchase of Sugar Land
real estate partnership
interests -- -- (64,311)
Proceeds from sale of
(additions to) investments (20,081) -- 31,426
Proceeds from sale of
property, plant and
equipment 9,841 11,493 14,699
Other, net 13,904 (1,169) 10,869
Cash utilized by investing
activities (117,624) (238,264) (272,791)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of
short-term debt to
affiliate 30,000 -- --
Payments on long-term debt (45,689) (17,969) (483)
Issuance of commercial
paper, net 96 29 29,928
Cash dividends paid (39,340) (32,486) (25,825)
Common stock issuance, net 8,709 2,540 10,758
Other, net (8,620) (8,569) (6,404)
Cash provided (utilized) by
financing activities (54,844) (56,455) 7,974
Increase (decrease) in
cash and cash equivalents 19,498 11,324 (45,867)
Cash and cash equivalents
at beginning of year 195,346 184,022 229,889
Cash and cash equivalents
at end of year $ 214,844 $ 195,346 $ 184,022
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
In thousands, Unamortized
except per share amounts Executive Cumulative
Year ended October 31, Common Stock Additional Retained Stock Plan Translation
1991, 1992 and 1993 Shares Amount Capital Earnings Expense Adjustment Total
BALANCE AT OCTOBER 31, 1990 80,390 $50,244 $ 398,844 $ 295,563 $ (6,805) $ 3,410 $ 741,256
Net earnings 164,148 164,148
Cash dividends ($.32 per share) (25,825) (25,825)
Exercise of stock options, net 631 394 10,364 10,758
Stock option tax benefit 8,463 8,463
Amortization of executive stock
plan expense 839 839
Issuance of restricted stock, net 91 57 4,646 (4,831) (128)
Tax benefit of net operating loss 2,299 2,299
Translation adjustment net of
deferred taxes of $600) (1,165) (1,165)
BALANCE AT OCTOBER 31, 1991 81,112 50,695 424,616 433,886 (10,797) 2,245 900,645
Net earnings 5,818 5,818
Cash dividends ($.40 per share) (32,486) (32,486)
Exercise of stock options, net 346 217 5,996 6,213
Stock option tax benefit 4,024 4,024
Amortization of executive stock
plan expense 1,425 1,425
Issuance of restricted stock, net 33 20 5,093 (5,238) (125)
Common stock repurchase (11) (7) (3,666) (3,673)
Translation adjustment (net of
deferred taxes of $535) (1,039) (1,039)
BALANCE AT OCTOBER 31, 1992 81,480 50,925 436,063 407,218 (14,610) 1,206 880,802
Net earnings 166,800 166,800
Cash dividends ($.48 per share) (39,340) (39,340)
Exercise of stock options, net 520 326 8,383 8,709
Stock option tax benefit 5,839 5,839
Amortization of executive stock
plan expense 1,889 1,889
Issuance of restricted stock, net 93 57 3,858 (4,107) (192)
Tax benefit from reduction of
valuation allowance for deferred
tax assets 24,061 24,061
Translation adjustment (net of
deferred taxes of $2,694) (4,446) (4,446)
BALANCE AT OCTOBER 31, 1993 82,093 $51,308 $ 478,204 $ 534,678 $ (16,828) $ (3,240) $1,044,122
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAJOR ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of the company
and its subsidiaries. The equity method of accounting is used
for investment ownership ranging from 20 percent to 50
percent. Investment ownership of less than 20 percent is
accounted for on the cost method. All significant
intercompany transactions of consolidated subsidiaries are
eliminated. Certain 1992 and 1991 amounts have been
reclassified to conform with the 1993 presentation. In
November 1992 the company announced its decision to exit its
Lead business and, accordingly, the assets and liabilities of
the Lead business as of October 31, 1993 and 1992 are shown as
net assets of discontinued operations. Discontinued
operations for fiscal years 1992 and 1991 include the
results of operations for the Lead business.
ENGINEERING AND CONSTRUCTION CONTRACTS
The company recognizes engineering and construction contract
revenues using the percentage-of-completion method,
primarily based on contract costs incurred to date compared
with total estimated contract costs. Customer furnished
materials, labor and equipment and in certain cases
subcontractor materials, labor and equipment are included in
revenue and cost of revenue when management believes that
the company is responsible for the ultimate acceptability of
the project. Contracts are generally segmented between types
of services, such as engineering and
construction, and, accordingly, gross margin related to each
activity is recognized as those separate services are
rendered. Changes to total estimated contract costs or
losses, if any, are recognized in the period they are
determined. Revenues recognized in excess of amounts billed
are classified as current assets under contract work in
progress. Amounts received from clients in excess of
revenues recognized to date are classified as current
liabilities under advance billings on contracts. The company
anticipates that substantially all of incurred costs
associated with contract work in progress at October 31, 1993
will be billed and collected in 1994.
DEPRECIATION, DEPLETION AND AMORTIZATION
Additions to property, plant and equipment are recorded at
cost. Assets other than mining properties and mineral
rights are depreciated principally using the straight-line
method over their estimated useful lives. Mining properties
and mineral rights are depleted on the units-of-production
method. Leasehold improvements are amortized over the lives
of the respective leases. Goodwill is amortized on the
straight-line method over periods not longer than 40 years.
EXPLORATION AND DEVELOPMENT
Coal exploration costs are expensed as incurred. Development
and acquisition costs of coal properties, when expected to be
significant, are capitalized in mining properties and depleted
over the expected economic life of the mine on the
units-of-production method.
The company accrues for post-mining reclamation costs as coal
is mined. Reclamation of disturbed acreage is performed as a
normal part of the mining process; such costs are expensed as
incurred.
INCOME TAXES
In 1992, the company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (SFAS No.
109) retroactive to the year ended October 31, 1987. SFAS No.
109 requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of events
that have been recognized in the company's financial
statements or tax returns.
EARNINGS PER SHARE
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,
primarily stock options, are included when the effect of
exercise would be dilutive.
INVENTORIES
Coal inventories are stated at the lower of cost, using the
last-in, first-out (LIFO) method, or net realizable
value. Supplies and other are valued on the average cost
method. Inventories comprise:
$ in thousands/At October 31, 1993 1992
Coal $ 15,375 $ 10,485
Supplies and other 17,459 20,703
$ 32,834 $ 31,188
FOREIGN CURRENCY
The company enters into forward exchange contracts to hedge
foreign currency transactions, and not to engage in currency
speculation. The company's forward exchange contracts do not
subject the company to risk from exchange rate movements
because gains and losses on such contracts offset losses and
gains, respectively, on the assets, liabilities or
transactions being hedged. At October 31, 1993, the company
had $75.6 million of foreign exchange contracts outstanding
relating to foreign currency denominated long-term debt and
interest, lease commitments and contract obligations. If the
counterparties to the exchange contracts (AA rated
international banks) do not fulfill their obligations to
deliver the contracted for foreign currencies, the company
could be at risk for fluctuations, if any, required to settle
the obligations. The forward exchange contracts generally
require the company to exchange U.S. dollars for foreign
currencies at maturity, at rates agreed to at inception of the
contracts.
CONCENTRATIONS OF CREDIT RISK
The company provides a variety of financing arrangements for
its Engineering and Construction clients. The majority of
accounts receivable and all contract work in process are from
Engineering and Construction clients in various industries and
locations throughout the world. Most contracts require
payments as the projects progress or in certain cases advance
payments. Accounts and notes receivable at October 31, 1993
include $47.5 million in notes receivable related to
engineering and construction contracts. The company generally
does not require collateral but, in most cases can place liens
against the property, plant or equipment constructed if a
default occurs. Accounts receivable from customers of the
company's Coal operations are primarily concentrated in the
steel and utility industries. The company maintains adequate
reserves for potential credit losses and such losses, which
have been minimal, have been within management's estimates.
CONSOLIDATED STATEMENT OF CASH FLOWS
The company invests in short-term, highly liquid investment
grade securities which are usually sold before their maturity.
Securities with maturities of ninety days or less at the date
of purchase are classified as cash equivalents. Securities
with maturities beyond ninety days are classified as marketable
securities and are carried at cost which approximates market.
Due to the high dollar volume and turnover of these securities,
the related cash flows are reported on a net basis.
The change in operating assets and liabilities as shown in
the Consolidated Statement of Cash Flows comprises:
$ in thousands
Year ended October 31, 1993 1992 1991
Decrease (increase) in:
Accounts and notes
receivable $ (80,223) $ 50,758 $ 107,880
Contract work in
progress (87,143) 37,456 72,264
Inventories (1,646) (9,222) 9,270
Other current assets 8,136 (1,241) (31,203)
Increase (decrease) in:
Accounts payable 90,720 (58,310) (118,595)
Advance billings on
contracts 20,286 18,783 (115,518)
Accrued liabilities (11,627) 31,533 50,938
Other noncurrent
liabilities -- (32,736) --
Changes in operating assets
and liabilities $ (61,497) $ 37,021 $ (24,964)
Cash paid during the year for:
Interest expense $ 20,152 $ 18,650 $ 9,988
Income tax payments, net $ 89,469 $ 53,713 $ 93,677
ACQUISITIONS AND DISPOSITIONS
From time to time the company enters into joint venture
arrangements with other engineering and construction
firms. During 1993, the company formed an exclusive
association with ICA Industrial of Mexico, and acquired a 49
percent interest in that entity, now known as ICA Fluor Daniel.
In 1992, the company entered into a joint venture agreement
with the Jaakko Poyry Group of Finland. Together, the company
invested approximately $20 million in these ventures.
In November 1992, the company announced its decision to exit
its Lead business. As of October 31, 1992 the Lead business
was classified as a discontinued operation and adjusted to
estimated net realizable value, including estimated operating
losses through the date of disposal. During 1993, the company
made substantial progress toward the disposition of its Lead
business. While the outcome of such disposition cannot be
determined with certainty at this time, the company's intent to
dispose of the Lead business remains unaltered and management
believes that a disposal will be accomplished during fiscal
1994. The company continues to believe that its reserves for
loss on disposal are adequate at October 31, 1993 in relation
to its consolidated financial statements taken as a whole.
Net assets of discontinued operations in the accompanying
Consolidated Balance Sheet is composed of $64 million and $63
million of net current assets and $109 million and $76 million
of net noncurrent assets as of October 31, 1993 and 1992,
respectively. These amounts consist primarily of accounts
receivable, inventories, plant and equipment, accounts payable
and accrued liabilities.
Revenues applicable to discontinued operations were $121
million, $143 million and $170 million in 1993, 1992 and 1991,
respectively. The 1992 estimated loss on disposal shown below
included an after-tax provision of approximately $6 million for
estimated operating losses through the date of disposition.
Largely as a result of historically low lead prices, in
addition to a temporary disruption due to flood conditions at
its smelter in Missouri, the Lead business's after tax loss for
fiscal year 1993 was $30 million. The smelter was returned to
full production and lead prices began to improve in late 1993.
Discontinued operations, net in the accompanying
Consolidated Statement of Earnings is composed of the
following:
$ in thousands
Year ended October 31, 1992 1991
Loss from operations, net
of income tax expense (benefit) of
$(10,795) in 1992 and $28 in 1991 $ (17,656) $ (617)
Gain (loss) from disposal, net of
income tax expense (benefit) of
$(48,635) in 1992 and $(5,198) in 1991 (78,910) 11,676
$ (96,566) $ 11,059
In September 1991, the company sold its minority interest in
Centre Reinsurance Holdings, Ltd., a Bermuda-based insurer,
resulting in a pretax gain of $16.4 million.
In July 1991, the company purchased certain partnership
interests which owned the company's Sugar Land, Texas,
engineering office, including the leasehold on the land as well
as the buildings, for $64.3 million in cash and the assumption
of $32.4 million of notes. The company had previously acquired
approximately $93 million of notes related to the property that
have been effectively extinguished. As a result of the
purchase certain lease cost reserves and other items, which
were no longer required, were reversed thereby reducing the cost
basis of the property by $51.7 million and increasing pretax
earnings by $19.6 million net of a $5 million provision for
foreign lease reserves.
INCOME TAXES
The income tax expense (benefit) included in the Consolidated
Statement of Earnings is as follows:
$ in thousands
Year ended October 31, 1993 1992 1991
Current:
Federal (includes a charge
in lieu of taxes of $2,299
for 1991) $ 58,489 $ 23,716 $ 60,482
Foreign 23,490 20,476 20,984
State and local 12,124 12,280 13,024
Total current 94,103 56,472 94,490
Tax liability reversal (12,621) -- (6,100)
Deferred:
Federal (1,634) (54,818) (13,126)
Foreign (3,939) 6,773 (198)
State and local (509) (7,629) (4,924)
Total deferred (6,082) (55,674) (18,248)
Total income tax expense $ 75,400 $ 798 $ 70,142
The income tax expense (benefit) applicable to continuing
operations, discontinued operations and the cumulative effect
of change in accounting principle is as follows:
$ in thousands
Year ended October 31, 1993 1992 1991
Provision for continuing operations:
Current $ 110,917 $ 64,920 $ 100,370
Tax liability reversal (12,621) -- (6,100)
Deferred (22,896) 15,180 (18,958)
Total provision for
continuing operations 75,400 80,100 75,312
Provision for discontinued operations:
Current (16,814) (8,448) (5,880)
Deferred 16,814 (50,712) 710
Total provision for
discontinued operations -- (59,160) (5,170)
Provision for cumulative effect
of change in accounting principle:
Deferred -- (20,142) --
Total income tax expense $ 75,400 $ 798 $ 70,142
A reconciliation of statutory federal income tax to the income
tax expense on the earnings from continuing operations
is as follows:
$ in thousands
Year ended October 31, 1993 1992 1991
Statutory federal income
tax expense $ 84,358 $ 73,219 $ 77,656
Increases (reductions) in
taxes resulting from:
Effect of foreign tax rates 6,173 5,959 7,080
State and local income
taxes 5,205 8,487 6,709
Items without tax
effect, net 2,137 3,741 (1,324)
Depletion (5,256) (7,488) (8,040)
Tax liability reversal (12,621) -- (6,100)
Other, net (4,596) (3,818) (669)
Total income tax expense -
continuing operations $ 75,400 $ 80,100 $ 75,312
Deferred taxes reflect the tax effects of differences between
the amounts recorded as assets and liabilities for financial
reporting purposes and the amounts recorded for income tax
purposes. The tax effects of significant temporary
differences giving rise to deferred tax assets and liabilities
are as follows:
$ in thousands/At October 31, 1993 1992
Deferred tax assets:
Accrued liabilities not currently
deductible $ 169,248 $ 134,402
Expected tax benefits on disposition
of Lead business 25,771 42,585
Building tax basis in excess of book
basis 25,980 27,160
Other 57,916 50,298
Total deferred tax assets 278,915 254,445
Valuation allowance for deferred tax
assets (55,452) (79,513)
Net deferred tax assets 223,463 174,932
Deferred tax liabilities:
Coal mining property book basis in
excess of tax basis (98,516) (98,369)
Tax on unremitted foreign earnings (36,324) (27,155)
Other (63,901) (42,313)
Total deferred tax liabilities (198,741) (167,837)
Net deferred tax assets $ 24,722 $ 7,095
The company established a valuation allowance to reduce
certain deferred tax assets to amounts that are more likely
than not to be realized. Substantially all of this allowance
relates to deferred tax assets existing at the date of the
company's 1987 quasi reorganization. Future reductions in
the valuation allowance relating to these 1987 deferred
tax assets will be credited to additional capital. In 1993,
reductions in the valuation allowance resulted in an increase
to additional capital of $24.1 million.
Residual income taxes of approximately $16 million have not
been provided on approximately $42 million of undistributed
earnings of certain foreign subsidiaries at October 31, 1993
because the company intends to keep those earnings reinvested
indefinitely.
United States and foreign earnings from continuing operations
before taxes are as follows:
$ in thousands
Year ended October 31, 1993 1992 1991
United States $ 162,201 $ 139,241 $ 163,643
Foreign 79,999 76,109 64,758
Total $ 242,200 $ 215,350 $ 228,401
Net earnings for 1993 include $12.6 million related to the
favorable conclusion in the second quarter of a federal income
tax audit for the years 1984 through 1986. As a result of the
conclusion of that audit, $12.6 million in income tax
liabilities were no longer deemed necessary and were reversed.
During 1991 the company received cash proceeds of $20 million
resulting from a settlement with the Internal Revenue Service
relating to St. Joe Minerals for the tax years 1975 through
1981. The tax refund and interest components of this amount
were $7.7 million and $12.3 million, respectively. The tax
refund and $4 million of interest, net of tax, were reported
as discontinued operations. The $5.8 million pretax balance
of interest income was reported in continuing operations. As
a result of the settlement with the IRS and the resolution of
other issues, certain income tax liabilities, no longer deemed
necessary, were reversed. This reduced the company's income
tax expense by $6.1 million in 1991.
The Internal Revenue Service is currently examining the
company's returns for fiscal years 1987 through
1989. Management does not expect the resolution of any tax
issues raised by the IRS for these years or subsequent
periods to have a material adverse effect on the company's
consolidated financial position or results of operations.
RETIREMENT BENEFITS
The company sponsors contributory and noncontributory defined
contribution retirement and defined benefit pension plans for
eligible employees. Contributions to defined contribution
retirement plans are based on a percentage of the employee's
compensation. Expense recognized for these plans is primarily
related to domestic engineering and construction operations and
totaled $67 million in 1993, $65 million in 1992, and $60
million in 1991. Contributions to defined benefit pension
plans are generally at the minimum annual amount required by
applicable regulations. Payments to retired employees under
these plans are generally based upon length of service and/or a
percentage of qualifying compensation. The plans are primarily
related to international engineering and construction
operations, U.S. craft employees and domestic coal operations.
Net periodic pension income for continuing operations defined
benefit pension plans includes the following components:
$ in thousands
Year ended October 31, 1993 1992 1991
Service costs incurred
during the period $ 11,528 $ 12,439 $ 10,550
Interest cost on projected
benefit obligation 18,494 17,556 16,317
Income and gains on assets
invested (74,228) (24,282) (61,491)
Net amortization and
deferral 39,295 (12,477) 31,650
Net periodic pension
income $ (4,911) $ (6,764) $ (2,974)
The following assumptions were used in the determination of
net periodic cost:
Year ended October 31, 1993 1992 1991
Discount rates 8.5-9.5% 8.5-9.5% 9.0-10.5%
Rates of increase in
compensation levels 5.0-6.0% 5.0-6.0% 5.0-8.0%
Expected long-term rates
of return on assets 7.5-10.0% 7.5-10.0% 9.0-10.5%
In recognition of the current interest and inflation rate
environment, as of October 31, 1993 the company adjusted
the discount rates used in the determination of
its benefit obligations to 7.0-8.0 percent, the expected
long-term rates of return to 7.5-9.0 percent and the rates of
salary increases to 3.5-5.0 percent.
The following table sets forth the funded status of the defined
benefit plans:
$ in thousands/At October 31, 1993 1992
Actuarial present value of benefit
obligations:
Vested benefit obligation $ 211,182 $ 158,058
Nonvested benefit obligation 10,774 12,541
Accumulated benefit obligation $ 221,956 $ 170,599
Plan assets at fair values
(primarily listed stocks and bonds) $ 373,421 $ 345,076
Projected benefit obligation (256,709) (211,834)
Plan assets in excess of projected
benefit obligation 116,712 133,242
Unrecognized net gain (14,048) (30,876)
Unrecognized net asset at
implementation (20,723) (25,084)
Pension asset recognized in the
Consolidated Balance Sheet $ 81,941 $ 77,282
Amounts shown above at October 31, 1993 and 1992 exclude the
projected benefit obligation of $166 million and $128 million,
respectively, and associated plan assets relating to present
and former employees of discontinued operations of $156 million
and $122 million, respectively.
Massey Coal Company (Massey) participates in multiemployer
defined benefit pension plans for its union employees. Pension
expense related to these plans approximated $.4 million, $.6
million and $.5 million in the years ended October 31, 1993,
1992 and 1991, respectively. Under the Coal Industry Retiree
Health Benefits Act of 1992, Massey is required to fund
medical and death benefits of certain beneficiaries. Massey's
obligation under the Act is estimated to aggregate $64 million
at October 31, 1993 which will be recognized as expense as
payments are assessed. For the year ended October 31, 1993 the
expense recorded for such benefits approximated $3.8 million.
In addition to the company's defined benefit pension plans,
the company and certain of its subsidiaries provide health
care and life insurance benefits for certain retired
employees. The health care and life insurance plans are
generally contributory, with retiree contributions adjusted
annually. Service costs are accrued currently. Cash basis
accounting was used prior to the November 1, 1991 adoption
of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other
Than Pensions" (SFAS No. 106).
The accumulated postretirement benefit obligation at October
31, 1993 was determined in accordance with the current terms of
the company's health care plans, together with relevant
actuarial assumptions and health care cost trend rates
projected at annual rates ranging from 12 percent in 1993 down
to 5 percent in 2002 and beyond. The effect of a one percent
annual increase in these assumed cost trend rates would
increase the accumulated postretirement benefit obligation and
the aggregate of the annual service and interest costs by
approximately 11 percent. At October 31, 1992 the health care
cost trend rates were projected at annual rates ranging from
9.5 to 12 percent in 1992 down to 6 to 9.5 percent in 2002 and
beyond. The discount rates used in determining the accumulated
postretirement benefit obligation were 7 percent and 9 percent
at October 31, 1993 and October 31, 1992, respectively.
The following table sets forth the plans' funded status and
accumulated postretirement benefit obligation for continuing
operations which has been fully accrued in the company's
Consolidated Balance Sheet:
$ in thousands/At October 31, 1993 1992
Accumulated postretirement benefit obligation:
Retirees $ 49,546 $ 46,875
Fully eligible active participants 2,550 1,730
Other active plan participants 9,150 6,866
Unrecognized loss (4,536) --
Accrued postretirement benefit
obligation $ 56,710 $ 55,471
Net periodic postretirement benefit cost for continuing
operations includes the following components:
$ in thousands/Year ended October 31, 1993 1992
Service cost incurred during the period $ 1,017 $ 1,056
Interest cost on accumulated
postretirement benefit obligation 4,633 4,821
Net periodic postretirement
benefit cost $ 5,650 $ 5,877
Prior to 1992 the company accounted for health care and life
insurance benefits on the cash basis. The cost of such
benefits for continuing operations approximated $6 million in
1991.
In November 1992, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits" (SFAS No.
112). The statement requires accrual of the estimated cost of
benefits provided by the employer to former or inactive
employees after employment but before retirement. Adoption of
SFAS No. 112 is not required by the company until fiscal year
1995. Although the precise method and impact of implementation
is not known at this time, management believes the effect
based on the company's current benefit programs, will not be
material.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The company adopted Statement of Financial Accounting Standards
No. 107, "Disclosures About Fair Value of Financial
Instruments" (SFAS No. 107) as of October 31, 1993. SFAS No.
107 requires that companies disclose the fair value of
financial instruments for which it is practicable to
estimate such value.
The estimated fair values of the company's financial
instruments are as follows:
Carrying Fair
$ in thousands/At October 31, 1993 Amount Value
Assets:
Cash and cash equivalents $ 214,844 $ 214,844
Marketable securities 97,335 102,366
Notes receivable including noncurrent
portion 65,417 65,995
Long-term investments 21,615 21,907
Liabilities:
Commercial paper and notes payable 60,053 60,053
Long-term debt including current portion 61,324 69,211
Other noncurrent financial liabilities 46,099 46,099
Off-balance sheet financial instruments:
Foreign currency contract obligations -- 2,381
Letters of credit -- 1,332
Methods and assumptions used to value financial instruments:
The carrying amounts of cash and cash equivalents, short-term
notes receivable, commercial paper and notes payable
approximates fair value because of the short-term maturity of
these instruments.
The fair value of marketable securities and long-term
investments are based on quoted market prices for these or
similar instruments.
The fair value of long-term notes receivable are estimated by
discounting future cash flows using the current rates at which
similar loans would be made to borrowers with similar credit
ratings.
The fair value of long-term debt, including current portion, is
estimated based on quoted market prices for the same or similar
issues or on the current rates offered to the company for debt
of the same maturities.
Other noncurrent liabilities consist primarily of deferred
compensation, for which cost approximates fair value.
The fair value of foreign currency contract obligations is
estimated by obtaining quotes from brokers.
The fair value of letters of credit is based on fees currently
charged for similar agreements or on the estimated cost to
terminate or settle the obligations.
LONG-TERM DEBT
Long-term debt comprises:
$ in thousands/At October 31, 1993 1992
Deutsche mark financing, with a
currency exchange agreement fixing the
repayments in U.S. dollars at an
effective interest rate of 9.5%, due
in 1996 $ 23,644 $ 23,644
13.50% first mortgage note, due in
2000, prepayable at par in 1995 35,000 35,000
Swiss franc financing, with a currency
exchange agreement fixing the
repayments in U.S. dollars at an
effective interest rate of 9.3%, paid
in 1993 -- 15,039
12.875% collateral trust notes, due in
2000, prepaid in December, 1992 -- 16,050
Notes at an effective interest rate of
9.7%, paid in 1993 -- 12,838
Other notes and mortgages 2,680 4,384
61,324 106,955
Less: Current portion 1,687 45,693
Long-term debt due after one year $ 59,637 $ 61,262
Long-term debt maturities are as follows: 1995, $.5 million;
1996, $24.1 million; 1997, no maturities; 1998, no maturities;
and $35 million thereafter. All long-term debt (including
current portion) outstanding at October 31, 1993, bears
interest at fixed rates.
The company assumed the 13.50 percent $35 million first
mortgage note in 1992 when it acquired an engineering building
located in Greenville, South Carolina.
The company has unsecured committed revolving long-term lines
of credit with banks from which it may borrow for general
corporate purposes up to a maximum of $250 million. Commitment
and facility fees are paid on these lines. In addition, the
company has $642 million in short-term uncommitted lines of
credit. Borrowings under lines of credit and revolving credit
agreements bear interest at prime or rates based on the London
Interbank Offered Rate (LIBOR), domestic certificates of
deposit or other rates which are mutually acceptable to the
banks and the company. At October 31, 1993, no amounts were
outstanding under the committed lines of credit. As of
that date, $126 million of the short-term uncommitted lines of
credit were used to support undrawn letters of credit issued in
the ordinary course of business.
The company has unsecured commercial paper outstanding in the
amount of $30 million at both October 31, 1993 and 1992. The
commercial paper was issued at a discount with an effective
interest rate of 3.2 percent and 3.3 percent in 1993 and 1992,
respectively. Maturities range from 18 to 90 days in 1993 and
26 to 37 days in 1992. The weighted average maturities at
October 31, 1993 and 1992 were 16 days and 18 days,
respectively. The maximum and average balances outstanding for
the years ended October 31, 1993 and 1992 were $92 million and
$44.9 million, respectively, and $84.5 million and $38.4
million, respectively, with weighted average interest rates of
3.2 percent and 4.1 percent, respectively.
OTHER NONCURRENT LIABILITIES
The company maintains appropriate levels of insurance for
business risks. Insurance coverages contain various
deductible amounts for which the company provides accruals
based on the aggregate of the liability for reported
claims and an actuarially determined estimated liability
for claims incurred but not reported. Other noncurrent
liabilities include $118.1 million and $116.5 million at
October 31, 1993 and 1992, respectively, relating to these
liabilities.
STOCK PLANS
The company's executive stock plans, approved by the
shareholders, provide for grants of nonqualified or incentive
stock options, restricted stock awards and stock appreciation
rights (SARs). All plans are administered by the Organization
and Compensation Committee of the Board of Directors
("Committee") comprised of outside directors, none of whom are
eligible to participate in the plans. Stock options may be
granted with or without SARs. Grant prices are determined by
the Committee and are established at the fair market
value of the company's common stock at the date of
grant. Options and SARs normally extend for 10 years and
under committee policy become exercisable in installments of 25
percent per year commencing one year from the date of grant or
over a vesting period determined by the Committee.
Restricted stock awards issued under the plans provide that
shares awarded may not be sold or otherwise transferred until
restrictions as established by the Committee have lapsed. Upon
termination of employment, shares upon which restrictions have
not lapsed must be returned to the company. Restricted stock
issued under the plans totaled 101,540 and 132,580 shares in
1993 and 1992, respectively.
The following table summarizes stock option activity for the
two years ended October 31, 1993:
Stock Price
Options Per Share
Outstanding at October 31, 1991 2,366,759 $12-44
Granted 438,410 44
Expired or cancelled (23,539) 20-44
Exercised (346,401) 12-44
Outstanding at October 31, 1992 2,435,229 12-44
Granted 601,820 41-44
Expired or cancelled (26,468) 17-44
Exercised (520,137) 12-44
Outstanding at October 31, 1993 2,490,444 $12-44
Exercisable at:
October 31, 1992 1,452,174 $12-44
October 31, 1993 1,271,330 $12-44
Available for grant at:
October 31, 1992 780,854 *
October 31, 1993 2,610,490 *
* Available for grant includes shares which may be granted
as either stock options or restricted stock, as determined by
the Committee under the 1988 Fluor Executive Stock Plan (the
Plan). In March 1993 the Plan was amended and restated to
include an additional 2.5 million shares available for grant.
LEASE OBLIGATIONS
Net rental expense for continuing operations amounted to $69
million, $80 million, and $92 million, in 1993, 1992, and
1991, respectively. The company's lease obligations relate
primarily to office facilities, equipment used in connection
with long-term construction contracts and other personal
property. The company's obligations for minimum rentals under
noncancellable leases are as follows:
$ in thousands/At October 31, 1993
1994 $ 29,593
1995 29,094
1996 21,809
1997 21,573
1998 20,806
Thereafter 47,452
At October 31, 1993 and 1992, obligations under capital leases
of approximately $7 million and $11 million, respectively, are
included in other noncurrent liabilities.
CONTINGENCIES AND COMMITMENTS
The company and certain of its subsidiaries are involved in
litigation in the ordinary course of business. The company and
certain of its engineering and construction subsidiaries are
contingently liable for commitments and performance guarantees
arising in the ordinary course of business. Claims arising
from engineering and construction contracts have been made
against the company by clients, and the company has made
certain claims against clients for costs incurred in excess of
the current contract provisions. The company does not expect
that the foregoing matters will have a material adverse effect
on its consolidated financial position or results of
operations.
The company's operations, including its discontinued Lead
operations, are subject to and affected by federal, state and
local laws and regulations regarding the protection of the
environment. The company maintains reserves for potential
future environmental costs where such obligations are either
known or considered probable and can be reasonable estimated.
St. Joe Minerals Corporation ("St. Joe"), a wholly owned
subsidiary of the company, is participating as a potentially
responsible party at several different sites pursuant to
proceedings under the Comprehensive Environmental Response,
Compensation and Liability Act ("Superfund"). Other parties
have also been identified as potentially responsible parties at
all but one of these sites, and many of these parties have
shared in the costs associated with the sites. Investigative
and/or remedial activities are ongoing at each site. In 1987,
St. Joe sold its zinc mining and smelting division to Zinc
Corporation of America ("ZCA"). As part of the agreement, St.
Joe and the company agreed to indemnify ZCA for certain
environmental liabilities arising from operations conducted
prior to the sale. During this fiscal year, ZCA has made
claims under this indemnity against St. Joe for anticipated
environmental expenditures at three of its major operating
facilities. These claims are the subject of ongoing
discussions between St. Joe, ZCA and other potentially
responsible parties, including parties who have given similar
contractual indemnities to St. Joe.
St. Joe has initiated a proceeding against certain of its
insurance carriers alleging that the investigative and
remediation costs incurred by St. Joe in connection with its
environmental proceedings are covered by insurance. This
proceedings is in its early stages and no credit or offset for
any such coverage has been taken into account by the company in
establishing its reserves for future environmental costs. The
company believes, based upon present information available to
it, that its reserves in respect to future environmental costs
are adequate, and that such future costs will not have a
material effect on the company's consolidated financial
condition, results of operations or liquidity. However, the
imposition of more stringent requirements under environmental
laws or regulations, new developments or changes regarding site
cleanup costs or the allocation of such costs among potentially
responsible parties, or a determination that the company is
potentially responsible for the release of hazardous substances
at sites other than those currently identified, could result
in additional expenditures, or additional reserves in
expectation of such expenditures.
Financial guarantees, made in the ordinary course of business
on behalf of clients and others in certain limited
circumstances, are entered into with financial institutions and
other credit grantors and generally obligate the company to
make payment in the event of a default by the borrower. Most
arrangements require the borrower to pledge collateral in the
form of property, plant and equipment which is deemed adequate
to recover amounts the company might be required to pay. As of
October 31, 1993, the company had extended financial guarantees
on behalf of certain clients and other unrelated third
parties totaling $126.3 million.
OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREA
The Engineering and Construction segment includes subsidiaries
engaged in the design, engineering, procurement, construction,
technical services and maintenance of facilities for
industrial, hydrocarbon, process, government and power clients.
Coal segment amounts include the operations of Massey Coal
Company.
Identifiable assets are those tangible and intangible assets
used in the operation of each of the business segments and
geographic areas, except for discontinued operations in 1993
and 1992 which is net of related liabilities. Corporate assets
are principally cash and cash equivalents, marketable
securities and nontrade receivables.
OPERATIONS BY BUSINESS SEGMENT
Revenues Operating Profit
$ in millions 1993 1992 1991 1993 1992 1991
Engineering and Construction $7,133.6 $5,904.0 $5,813.5 $ 220.6 $ 190.7 $ 166.2
Coal 716.6 696.7 758.5 70.7 80.2 60.7
Continuing Operations $7,850.2 $6,600.7 $6,572.0 $ 291.3 $ 270.9 $ 226.9
Identifiable Assets Capital Expenditures and Amortization
$ in millions 1993 1992 1991 1993 1992 1991 1993 1992 1991
Engineering &
Construction $1,144.7 $1,018.6 $1,003.9 $ 60.6 $ 58.7 $ 38.9 $ 52.5 $ 52.5 $ 48.0
Coal 926.3 864.0 696.7 110.9 214.0 67.6 58.8 54.0 49.5
Corporate 345.1 344.3 393.3 -- -- -- 0.5 0.5 0.7
Continuing
Operations 2,416.1 2,226.9 2,093.9 171.5 272.7 106.5 111.8 107.0 98.2
Discontinued
Operations 172.8 138.6 327.5 -- 14.3 53.2 -- 28.2 23.3
$2,588.9 $2,365.5 $2,421.4 $ 171.5 $ 287.0 $ 159.7 $ 111.8 $ 135.2 $ 121.5
OPERATIONS BY GEOGRAPHIC AREA
Revenues Operating Profit Identifiable Assets
$ in millions 1993 1992 1991 1993 1992 1991 1993 1992 1991
United States $5,628.1 $4,790.6 $5,102.7 $ 224.5 $ 221.6 $ 177.3 $2,262.2 $2,097.8 $2,131.0
Canada 225.8 391.3 555.8 9.2 11.4 11.9 65.5 46.6 71.9
Middle East 434.5 317.8 76.1 2.1 4.5 4.6 32.7 41.9 43.1
Europe 994.2 714.9 495.2 15.6 21.1 21.8 127.6 112.7 105.5
Other 567.6 386.1 342.2 39.9 12.3 11.3 100.9 66.5 69.9
$7,850.2 $6,600.7 $6,572.0 $ 291.3 $ 270.9 $ 226.9 $2,588.9 $2,365.5 $2,421.4
The following table reconciles business segment operating profit with the
earnings from continuing operations before taxes.
$ in millions/Year ended October 31, 1993 1992 1991
Operating profit from continuing operations $ 291.3 $ 270.9 $ 226.9
Interest income (expense), net 0.1 (0.2) 31.2
Corporate administrative and general expense (43.7) (39.3) (57.0)
Reduction in accrued lease cost, net - - 19.6
Gain on sale of investment - - 16.4
Other items, net (5.5) (16.0) (8.7)
Earnings from continuing operations before taxes $ 242.2 $ 215.4 $ 228.4
REPORTS OF MANAGEMENT AND INDEPENDENT AUDITORS
MANAGEMENT
The company is responsible for preparation of the accompanying
consolidated balance sheet and the related consolidated
statements of earnings, cash flows and shareholders' equity.
These statements have been prepared in conformity with
generally accepted accounting principles and management
believes that they present fairly the company's consolidated
financial position and results of operations. The integrity of
the information presented in the financial statements,
including estimates and judgments relating to matters not
concluded by fiscal year end, is the responsibility of
management. To fulfill this responsibility, an internal
control structure designed to protect the company's assets and
properly record transactions and events as they occur has been
developed, placed in operation and maintained. The internal
control structure is supported by an extensive program of
internal audits and is tested and evaluated by the independent
auditors in connection with their annual audit. The Board of
Directors pursues its responsibility for financial information
through an Audit Committee of Directors who are not employees.
The internal auditors and the independent auditors have full
and free access to the Committee. Periodically, the Committee
meets with the independent auditors without management present
to discuss the results of their audits, the adequacy of the
internal control structure and the quality of financial
reporting.
/s/ Leslie G. McCraw /s/ James O. Rollans
Leslie G. McCraw James O. Rollans
Chairman of the Board and Senior Vice President and
Chief Executive Officer Chief Financial Officer
INDEPENDENT AUDITORS
Board of Directors and Shareholders
Fluor Corporation
We have audited the accompanying consolidated balance sheet of
Fluor Corporation as of October 31, 1993 and 1992, and the
related consolidated statements of earnings, cash flows, and
shareholders' equity for each of the three years in the period
ended October 31, 1993. These financial statements are the
responsibility of the company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Fluor Corporation at October 31, 1993 and
1992, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended
October 31, 1993, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young
Orange County, California
December 6, 1993
QUARTERLY FINANCIAL DATA
(unaudited)
The following is a summary of the quarterly results of
operations:
$ in thousands,
except per share First Second Third Fourth
amounts Quarter Quarter (a) Quarter Quarter
1993
Revenues $1,806,939 $2,006,054 $1,844,112 $2,193,064
Gross margin 66,071 58,407 74,035 87,281
Earnings before
taxes 56,881 46,553 64,935 73,831
Net earnings 35,681 41,953 40,835 48,331
Earnings per
share $ 0.43 $ 0.51 $ 0.50 $ 0.59
1992
Revenues $1,560,835 $1,544,325 $1,662,748 $1,832,788
Gross margin 58,929 63,593 70,012 62,343
Earnings from
continuing
operations
before taxes 50,888 56,294 62,186 45,982 (b)
Loss from
discontinued
operations,
net (3,386) (3,170) (2,482) (87,528)
Cumulative
effect of change
in accounting
principle, net (32,866) -- -- --
Net earnings
(loss) (4,040) 32,381 36,823 (59,346)
Earnings per share
Continuing
operations 0.39 0.44 0.48 0.35
Discontinued
operations (0.04) (0.04) (0.03) (1.08)
Cumulative
effect of
change in
accounting
principle (0.40) -- -- --
Net earnings
(loss) $ (0.05) $ 0.40 $ 0.45 $ (0.73)
(a) Second quarter 1993 earnings includes a reversal of income
taxes no longer required of $12.6 million and an after tax
charge of $9.2 million to recognize possible settlement of
disputed obligations relating to pension funds associated with
the company's coal segment.
(b) Fourth quarter 1992 earnings from continuing operations
includes a pretax charge of $6.2 million related to the
cancellation of a lease.
STOCKHOLDERS' REFERENCE
FORM 10-K
A copy of the Form 10-K, which is filed with the Securities and
Exchange Commission, is available upon request.
Write to : Vice President - Corporate Law, Fluor Corporation,
3333 Michelson Drive, Irvine, California 92730, (714) 975-2000.
REGISTRAR AND TRANSFER AGENT
Chemical Trust Company of California, 300 S. Grand Avenue,
Los Angeles CA 90071 and Chemical Bank, 450 W. 33rd Street, New
York, NY 10001. For change of address, lost dividends, or lost
stock certificates, write or telephone: Chemical Bank, J.A.F.
Building, P.O. Box 3068, New York, NY 10116-3068,
Attn: Securityholder Relations (800) 356-2017
INDEPENDENT AUDITORS
Ernst & Young, 18400 Von Karman Avenue, Irvine, California
92715
ANNUAL STOCKHOLDERS' MEETING
Annual report and proxy statement are mailed in early February.
Fluor's annual meeting of stockholders will be held at 9:00
a.m. on March 8, 1994 at the Hyatt Regency Irvine, 17900
Jamboree Boulevard, Irvine, California.
STOCK TRADING
Fluor's stock is traded on the New York, Chicago, Pacific,
Amsterdam, London and Swiss Stock Exchanges. Common stock
domestic trading symbol: FLR.
COMPANY CONTACTS
Stockholders may call collect.
Stockholder information: Lawrence N. Fisher (714)975-6961
Investor Relations: Lila J. Churney (714) 975-3909
COMMON STOCK INFORMATION
At December 31, 1993, there were 82,105,564 shares outstanding
and approximately 15,600 stockholders of record of Fluor's
common stock.
The following table sets forth for the periods indicated the
cash dividends paid per share of common stock and the high and
low sales prices of such common stock as reported in the
Consolidated Transactions Reporting System.
COMMON STOCK AND DIVIDEND INFORMATION
Dividends Price Range
Per Share High Low
FISCAL 1993
First Quarter $ 0.12 $ 46 7/8 $ 39 1/2
Second Quarter 0.12 46 38
Third Quarter 0.12 43 7/8 38 1/8
Fourth Quarter 0.12 46 1/8 38 3/8
$ 0.48
FISCAL 1992
First Quarter $ 0.10 $ 48 1/8 $ 35 1/4
Second Quarter 0.10 46 1/8 36 7/8
Third Quarter 0.10 44 7/8 36 5/8
Fourth Quarter 0.10 47 1/4 37 7/8
$ 0.40
HISTORY OF STOCK DIVIDENDS AND
SPLITS SINCE GOING PUBLIC IN 1950
08/23/57 20% Stock Dividend
12/15/61 5% Stock Dividend
03/11/63 5% Stock Dividend
03/09/64 5% Stock Dividend
03/08/65 5% Stock Dividend
02/14/66 5% Stock Dividend
03/24/66 2 for 1 Stock Split
03/27/67 5% Stock Dividend
02/09/68 5% Stock Dividend
03/22/68 2 for 1 Stock Split
05/16/69 5% Stock Dividend
03/06/70 5% Stock Dividend
03/05/71 5% Stock Dividend
03/10/72 5% Stock Dividend
03/12/73 5% Stock Dividend
03/11/74 3 for 2 Stock Split
08/13/79 3 for 2 Stock Split
07/18/80 2 for 1 Stock Split