FOSTER WHEELER REPORTS 2001 YEAR-END RESULTS AND
ANNOUNCES COMPREHENSIVE PERFORMANCE IMPROVEMENT PLAN
-- $101.5 Million Charge for Restructuring and Contract Costs
-- $155.8 Million Reserve for Deferred Tax Assets
-- Focus on Cash Flow Improvement
-- Rigorous Review of Operations
-- Sound Financial Plan for 2002
-- Aggressive Cost-Reduction Plan
HAMILTON, BERMUDA, January 29, 2002 -- Foster Wheeler Ltd. (NYSE: FWC)
today reported 2001 year-end results and announced that its board of directors
has approved a comprehensive plan to make significant improvements to the
company's operating performance.
The plan resulted from a rigorous management review of project backlog,
critical business processes at the project level, and all spending categories.
In addition to identifying significant performance improvement opportunities,
the plan includes an after-tax charge of $101.5 million in the fourth quarter to
cover restructuring costs, a reduction of the current value of claims, a reserve
for overdue receivables, and cost overruns on seven specific projects. The
company has also recorded a reserve of $155.8 million for domestic deferred tax
assets.
"Since joining the company in late October, I have had the opportunity to
visit all major offices and several large project construction sites," said
Raymond J. Milchovich, chairman, president and CEO. "My time has been spent
evaluating the quality and quantity of our backlog and the operating practices
being used at the project level.
"The steps taken as a result of this review are yielding improvements in
our financial performance, and I am highly confident that we will meet or exceed
our 2002 financial goals.
"Foster Wheeler enjoys an excellent reputation with our customers for
product quality and technological superiority. I believe we can further enhance
our performance
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and deliver even greater customer value by concentrating on the core components
that make this business profitable--the estimating, bidding, and execution of
projects.
"We have launched a project performance intervention to rapidly effect
necessary improvements. I have used this approach and methodology on a number of
occasions over the last five years with consistent, breakthrough-level results
in the business units where the intervention was applied. I believe that the
execution of this improvement plan will lead to a fundamental culture change at
Foster Wheeler and we are already seeing encouraging results from these efforts.
"We are creating a leaner, more flexible, faster moving, more fiscally
responsible company, capable of exceeding our customers' expectations and
building value for all of our stakeholders," he emphasized.
Phase One: Comprehensive Performance Improvement Plan
o Management has established cash as the key factor in the decision-making
process, and is now intensely focused on all aspects of cash management.
At the end of 2001, the company had cash and cash equivalents of $224.0
million.
o Management has conducted a thorough review of the quality and quantity
of projects in the company's current backlog, including customer
commitment, profit, schedule and risk. As a result, management is highly
confident that the existing backlog supports the 2002 financial plan.
o Management has performed a detailed analysis of historical project
performance to understand the root causes of execution variability. The
project performance intervention will accelerate process improvements
and produce consistent results across operating companies.
o All remaining areas of cost and spending are being reviewed with a zero
base budget approach. On January 15, 2002, corporate center overhead was
reduced by 25 percent. Worldwide overhead is currently being evaluated,
and management expects to reduce this by 15 percent by the middle of
2003.
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o A disciplined process has been established for capital spending approvals
which has already resulted in significant savings. The 2002 capital budget
has been reduced by 68 percent from the average of 1998 to 2001.
Phase Two: Building Competitive Strength
Once management is satisfied with the progress being made in Phase One, it
will institute a careful strategic-portfolio review to validate and refine its
current business mix. Foster Wheeler enjoys a number of differentiating
strengths upon which it can build and grow, and the review is designed to ensure
that each business has the resources, structure and strategic focus to realize
its true business potential.
Fourth-Quarter Charge and Reserve
In fourth quarter 2001, the company recognized an after-tax charge and
reserve of $257.3 million. The future net cash effect of these items is expected
to be slightly positive in the aggregate.
The restructuring and contract costs of $101.5 million consisted of:
o an after-tax charge of $74.5 million (pretax, $114.6 million) for the
write-off of seven project overruns ($34.7 million), disputed claims
($24.1 million), and overdue receivables ($15.7 million); and,
o a restructuring charge of $27 million (pretax, $41.6 million), which
included workforce reductions in the United States, subsidiary
closures, and the cancellation of a company-owned life insurance
program.
The company also recorded a book reserve of $155.8 million for domestic
deferred tax assets under Financial Accounting Standards Board (FASB) Statement
No. 109 "Accounting For Income Taxes".
Bank Waivers
The company has obtained a waiver under its revolving credit facility
through April 15, 2002, subject to the satisfaction of certain ongoing
conditions, including an extension or refinancing of its lease financing and
replacement of its receivables sale arrangement. Having secured such waiver, it
is not currently in breach of the financial
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covenants under its revolving credit facility. The company has also received a
waiver of the financial covenants under its lease financing through its maturity
on February 28, 2002. Management is in discussions with its lenders regarding a
long-term extension of the company's credit facility and a replacement for its
lease financing and receivables sale arrangement.
Fourth-Quarter and Year-End 2001 Results
With the after-tax charge and reserve of $257.3 million, as well as the
$22.9 million net loss on the previously announced sale of the company's power
plant in Mt. Carmel, PA, the net loss in the fourth quarter 2001 was $273.3
million, or $6.68 per share diluted (ps-d) on revenues of $1,039.2 million. In
the year-ago fourth quarter, net earnings were $12.3 million or $0.30 ps-d on
revenues of $1,088.8 million.
For the full year ended December 28, 2001, the company had a net loss of
$263.1 million or $6.44 ps-d, compared to net earnings of $39.5 million or $.97
ps-d for the year ended December 29, 2000. Revenues for 2001 were $3.4 billion
versus $4.0 billion in 2000.
New orders booked for the quarter ended December 28, 2001 amounted to $1.1
billion compared to $1.0 billion in 2000. New orders booked for the full year
were $4.1 billion compared to $4.5 billion in 2000. The backlog of orders
totaled $6.0 billion versus $6.1 billion at the end of December 2000.
At the close of the fourth quarter 2001, the company had cash and cash
equivalents of $224.0 million compared to $167.6 million in third quarter 2001,
a 34 percent increase. Also, net debt decreased 13 percent from the end of the
third quarter to $813.5 million from $932.8 million, although it increased from
$776.3 million at year-end 2000.
Engineering and Construction Group Results
New orders in the Engineering and Construction (E&C) Group during the
fourth quarter were $932.1 million compared to $693.5 million in the fourth
quarter of 2000,
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making the Group's backlog $4.6 billion versus $4.5 billion at the end of 2000.
The Group had fourth-quarter revenues of $655.5 million, down from $778.1
million in the fourth quarter of 2000.
For the year, E&C bookings decreased 9.0 percent to $2.8 billion from $3.1
billion in 2000. Revenues were $2.2 billion, compared to $3.0 billion in the
same period of last year.
Energy Equipment Group Results
During the fourth quarter 2001, the Energy Equipment Group's new orders
decreased to $184.8 million from $377.2 million for the fourth quarter of 2000.
Backlog at the end of the quarter and year was $1.5 billion compared to $1.7
billion in 2000.
For the year, bookings were $1.3 billion from $1.5 billion in 2000.
Revenues for 2001 grew 16 percent to $1.3 billion from $1.1 billion in the same
period of last year.
# # #
Notes to Editors:
1. Financial statements attached.
2. The company will hold a conference call on this announcement on Wednesday,
January 30, 2002, at 9 a.m. Eastern Standard Time (U.S.). The call will be
accessible to the public by telephone or Webcast. To listen to the call by
telephone in the United States, dial 877-692-2588 approximately ten minutes
before the call. International access is available by dialing (country
code) 973-321-1040. The conference call will also be available over the
Internet at www.fwc.com or through StreetEvents at www.streetevents.com.
3. Foster Wheeler Ltd. is a global company offering, through its subsidiaries,
a broad range of design, engineering, construction, manufacturing and
project development, as well as management, research, plant operations, and
environmental services. The Corporation's operational headquarters are in
Clinton, N.J. For more information about Foster Wheeler, visit our
worldwide Web site at www.fwc.com.
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4. Safe Harbor Statement
This news release contains forward-looking statements that are based on
management's assumptions, expectations and projections about the various
industries within which the corporation operates. Such forward-looking
statements, by their nature, involve a degree of risk and uncertainty. The
corporation cautions that a variety of factors, including but not limited
to the following, could cause business conditions and results to differ
materially from what is contained in forward-looking statements: changes in
the rate of economic growth in the United States and other major
international economies, changes in investment by the energy, power and
environmental industries, changes in regulatory environment, changes in
project schedules, changes in trade, monetary and fiscal policies
worldwide, currency fluctuations, outcomes of pending and future
litigation, our ability to successfully negotiate a long-term extension of
our existing credit facilities, protection and validity of patents and
other intellectual property rights, and increasing competition by foreign
and domestic companies.
# # #
Attachments
MEDIA CONTACT ONLY: Alastair Davie 908-730-4444
OTHER INQUIRIES: 908-730-4000
FOSTER WHEELER LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS - SUMMARY
(In Thousands of Dollars, Except per Share Amounts)
Three Months Ended Twelve Months Ended
December 2001 December 2000 December 2001 December 2000
Unfilled orders $ 6,016,190 $ 6,142,347 $6,016,190 $ 6,142,347
New orders booked 1,112,829 999,826 4,120,392 4,480,000
========== ============ ========== =========
Revenues:
Operating revenues 996,292 1,055,996 3,314,615 3,891,361
Other income 42,943 32,764 82,190 77,994
---------- ----------- ---------- ---------
Total revenues 1,039,235 1,088,760 3,396,805 3,969,355
---------- ----------- ---------- ---------
Cost and Expenses:
Cost of operating revenues 1,028,136 973,892 3,118,690 3,565,147
Selling, general & administrative 65,980 57,063 222,532 219,353
expenses
Other deductions/minority interest 118,118 37,768 200,318 113,082
Dividends on preferred security of
subsidiary trust 3,938 3,938 15,750 15,750
---------- ----------- ---------- ---------
Total costs and expenses 1,216,172 1,072,661 3,557,290 3,913,332
---------- ----------- ---------- ---------
(Loss)/earnings before income taxes (176,937) 16,099 (160,485) 56,023
Provision for income taxes 96,342 3,769 102,658 16,529
---------- ----------- ---------- ---------
Net (loss)/earnings $ (273,279) $ 12,330 $ (263,143) $ 39,494
============ =========== ============ ============
(Loss)/earnings per share:
Basic and diluted (*) $(6.68) $ 0.30 $ (6.44) $ 0.97
======= ========= ======== ========
Cash dividends paid per share $ 0.00 $ 0.06 $ 0.12 $ 0.24
======= ========= ======== ========
Shares outstanding:
Basic: Weighted average number
of shares outstanding (in
thousands) 40,896 40,815 40,876 40,798
Diluted:
Effect of stock options and * * 7
Convertible Debt * *
---------- ----------- ---------- ---------
Total diluted 40,896 40,815 40,876 40,805
============ =========== ============ ============
Notes:
- - Includes in the three months and year ended December 2001, contract
write-downs of $74,500 after tax ($114,600 pre-tax); restructuring cost of
$27,000 after tax ($41,600 pre-tax) and a reserve for deferred tax assets
of $155,800.
- - Includes in the three months and year ended December 2001, loss on sale of
cogeneration plants of $22,900 and $27,900 after tax ($35,300 and $40,300
pre-tax) and increased pension costs of $1,000 and $3,300 after tax ($1,500
and $5,000 pre-tax), respectively.
- - Includes in the year ended December 2001, a provision for CEO retirement of
$1,800 after tax ($2,700 pre-tax).
* The effect of the stock options and convertible debt were not included in
the calculation of diluted earnings per share as they were antidilutive due
to the loss.
Foster Wheeler Ltd. and Subsidiaries
Major Business Groups
(In Millions of Dollars)
Three Months Ended Twelve Months Ended
December 2001 December 2000 December 2001 December 2000
Engineering and Construction (E&C)
Unfilled orders $ 4,551.1 $ 4,534.6 $ 4,551.1 $ 4,534.6
New orders booked 932.1 693.5 2,819.7 3,094.6
Revenues 655.5 778.1 2,196.7 2,979.5
Interest expense (0.8) 2.5 0.7 7.1
(Loss)/earnings before income taxes(1) (53.8) 24.5 (10.8) 87.9
Energy Equipment (EE)
Unfilled orders 1,493.1 1,727.4 1,493.1 1,727.4
New orders booked 184.8 377.2 1,314.5 1,468.7
Revenues 387.8 334.2 1,274.3 1,094.2
Interest expense 7.1 9.0 25.8 34.7
(Loss)/earnings before income taxes(1,2) (54.0) 14.0 (16.8) 45.1
Corporate and Financial Services (C&F)(5)
Unfilled orders (28.0) (119.7) (28.0) (119.7)
New orders booked (4.1) (70.9) (13.8) (83.3)
Revenues (4.1) (23.5) (74.2) (104.3)
Interest expense (4) 15.2 12.3 57.8 41.5
(Loss)/earnings before income taxes(1,2,3) (69.1) (22.4) (132.9) (77.0)
Total
Unfilled orders 6,016.2 6,142.3 6,016.2 6,142.3
New orders booked 1,112.8 999.8 4,120.4 4,480.0
Revenues 1,039.2 1,088.8 3,396.8 3,969.4
Interest expense (4) 21.5 23.8 84.3 83.3
(Loss)/earnings before income taxes (176.9) 16.1 (160.5) 56.0
Provision for income taxes 96.3 3.8 102.6 16.5
---------- ------- --------- ---------
Net (loss)/earnings $ (273.2) $ 12.3 $ (263.1) $ 39.5
(1) Includes in the three months and year ended December 2001, contract
write-downs of $114.6 (E&C $67.2; EE $42.4; C&F $5.0), restructuring cost
of $41.6 (E&C $1.3; EE $6.1; C&F $34.2) and a reserve for deferred tax
assets in C&F $155.8.
(2) Includes in the three months and year ended December 2001, loss on sale of
cogeneration plants in EE of $35.3 and $40.3 and increased pension costs in
C&F of $1.5 and $5.0 respectively.
(3) Includes in the year ended December 2001, a provision for CEO retirement in
C&F of $2.7.
(4) Includes dividends on preferred security of subsidiary trust.
(5) Includes intersegment eliminations.