Document 3NeR9kpbexEMvMQ3addgEVonJ

Con t e n f s 1 Highlights 2 Letter to Stockholders. 4 Strategy for Sustaining Superior Performance 7 Operations Report ; 7 Engineering and Construction 7 Hydrocarbon Sector 9 Government Sector 11 Process Sector 13 Industrial Sector 15 Power Sector 19 Fluor Constructors International 19 Coal 20 Operating Statistics 22 Directors 23 Officers ' 24 Financials 25 Management's Discussion and Analysis 29 Consolidated Financial Statements 46 Worldwide Offices 48 Stockholders' Reference About The Cover As a service company, Fluor Daniel adds value for its clients through the skills, innovation and creativity of its people. A broad diversity of quality technical services--from engineering and construction to maintenance and environmental remediation--equips Fluor Daniel to meet client needs through an organizational culture that ensures added value, excellence in execution and continuous performance improvement. DR 2801407 ^A ) Highlights Fluor Revenues by Segment From Continuing Operations E&C 89% Coal 11% $ in thousands, except per share amounts 1992 | 1991 J Percent Change J Fiscal Year Revenues Earnings from continuing operations Earnings (Joss) from discontinued operations Cumulative effect of change in accounting principle Net earnings Net earnings per share Return on average shareholders' equity Capital expenditures New awards Cash dividends per common share A t Year-End Working capital $ 6,600,696 135,250 (96,566) (32,866) 5,818 $ ,07 .6% $ 287,046 10,867,700 $ .40 293.151 $ 6,571,958 153,089 11,059 -- 164,148 $ 2.01 20.2% $ 159,718 8,531,600 $ .32 $ 4,706,000 11,181,300 -- -12 -- -96 -97 -- 80 27 c-% j -2 32 Long-term debt Shareholders' equity Total capitalization Percent of total capitalization Long-term debt Shareholders' equity Closing stock price Shareholders' equity per common share Salaried employees Craft/hourly employees Total employees 61,262 880,802 $ 942,064 6.5 93.5 $ 44s/b $ 10.81 17,939 25,666 43,605 75,682 900,645 $ 976,327 7.8 92.2 $ 45s/e $ 11.10 18,091 21,546 39,637 -19 -2 -4 __ -- -2 -3 -1 19 10 The quarterfy dividend was increased from $.08 per share to $.10 per share in the first quarter of 1992 and to $.12 per share in the first quarter of 1993. Results for 1992 include the effects of, and certain 1991 amounts have been restated to reflect, the reclassification of the Lead Segment as a discontinued operation, including an estimated reserve for loss on disposition and operating tosses expected to be incurred during the period prior to disposition, and the new methods of accounting for income taxes (SFAS 109) and postretirement benefits (SFAS 106). ' Company Description Fluor Corporation is one of the world's largest international engineering, construction, mainte nance and related technical services companies, with an important investment in low-sulfur coal. Fluor Daniel, the company's principal operating business, provides a broader range of technical services to more clients in more industries and geographic locations than any global competitor. Serving five broad market sectors --Hydrocarbon, Government, Process, Industrial and Power -- Fluor Daniel provides global capability from more than 50 offices worldwide. A. T. Massey Coal Company, Fluor's investment in coal, produces both high-quality, low-sulfur steam coal for use in generating electricity and metallurgical coal which is used by the steel industry. Massey ranks among the five largest U.S. coal producers. Letter to Stockholders Dear Fellow Stockholders: In forming Fluor Daniel in 1986, one of our under lying premises was to create a full service engi neering and construction (E&C) company which, through both its philosophy and structure, could be successful independent of external market conditions. While much work remains, we are Leslie G. McCraw Vincent L. Kontny pleased to report that despite a generally weak global economy in 1992, Fluor Daniel, our core E&C business, delivered excellent operating profit growth compared with a strong performance last year. Additionally, A. T. Massey, our low-sulfur coal investment, had outstanding performance and showed very positive growth compared with the previous year. Our other natural resource investment, The Doe Run Company, did not enjoy the same level of success. Doe Run has made many excellent operational improvements, but unfortunately was crippled by lead prices which are at historic low levels. We have now made the strategic decision to exit that business due to its extreme cyclicality and have accounted 'a; a a ., a discontinued operation. We also elected to adopt new financial accounting stand-- ' - qy 1994. Although these actions clear the decks for fuk rn ;: ^ : :a U - . " : : of earnings growth, generating an operating profit of $191 million, up 15 year. Fluor Daniel enjoyed yet another year of improved safety performance, achieving results which rank it as the safest global contractor. New E&C awards were an all-time record $10.9 billion, exceeding our previous annual high of $9.3 billion set in 1980. Fluor Daniel was ranked No. 1 by Engineering News-Record (ENR) among all U.S.-based E&C companies for an unprece dented fifth consecutive year. E&C backlog grew 32 percent to $14.7 billion. The U.S. Department of Energy awarded Fluor Daniel program management responsibility for the $4 billion environmental cleanup of uranium production facilities in Fernald, Ohio; $2.2 billion was included in 1992 new awards and backlog. The contract is the first of its kind and is the most significant environmental assignment ever undertaken. Meaningful progress was made in positioning Fluor Daniel in key industries and emerging growth markets. A joint venture was established with Jaakko Poyry of Finland, a globally renowned pulp and paper engineering and design firm. An exclusive association is being formed with ICA Industrial, Mexico's largest construction firm, to capitalize on the exciting growth opportunities in the Latin American market. A. T. Massey, our low-sulfur coal investment, posted strong earnings growth, up 32 percent from a year ago to $80 million. New high-quality, low-sulfur coal reserves were acquired increasing Massey's total reserves to nearly 1 billion tons. The company elected early implementation of Financial Accounting Standards 106 (postretirement benefits) and 109 (accounting for income taxes) required for ail public companies by 1994. Charges, including operating losses, relating to the decision to exit the lead business and to adopt Accounting Standard 106 reduced 1992 net earnings by $129 million to $6 million. The company ended the year with an exceptionally strong balance sheet---more than $340 million in cash and securities and only $61 million in debt or 6.5 percent of total capitalization. The Board of Directors declared a quarterly cash dividend increase of 20 percent to 12 cents per share in light of excellent operating performance in 1992, a strong balance sheet, and the positive outlook for Fluor's business activities. Engineering and Construction Fluor Daniel's major accomplishments this past year, beyond meeting or exceeding our plan for operating profit, new awards and backlog growth, included a host of strategic successes. International backlog increased 24 percent to more than $4 billion. Eleven new or expanded client alliances were formed bringing the total to more than 30. These arrangements allow us to serve as an extension of the client's organization and to participate in their capital planning process. We will continue to give special emphasis to increasing the value we bring to clients' projects. This effort involves more efficient application of our highly skilled technical labor force through greater use of our computer-aided design capabilities and global electronic communications network. Efforts to continuously improve our performance in everything we do, along with excel lence in project execution and safety, are bearing fruit, ensuring that our project goals match those of the client. Our goal remains to be the lowest cost provider of the highest quality services. Coal A.T. Massey, our low-sulfur coal investment, achieved excellent profit growth, particularly given the soft market conditions that existed throughout the year. Massey's strong performance is a direct result of its leadership position in central Appalachia, an outstanding management team, cost-effective operations, and high-quality, low-sulfur coal reserves. During 1992, Massey acquired approximately 320 million tons of additional low-sulfur coal reserves, an increase of 42 percent. These new properties are adjacent to existing Massey facilities in central Appalachia and will allow production expansion in a cost-effective manner. Expansion of coal reserves enhances the company's longer term profit potential and asset value. It also fits well with Massey's strategic focus to provide utility customers with compliance coal to meet the more stringent dean air standards. Lead The decision to divest The Doe Run Company, our lead investment, has not been an easy one. Doe Run has made excellent progress towards improving its operating efficiency and becoming the industry leader in environmental responsiveness. Divesting lead, however, is necessary if we are to achieve our strategic vision for Fluor and enhance shareholder value. Man agement can now focus on Fluor Daniel and A.T. Massey which have been delivering consistent, rapid earnings growth. Doe Run is the largest integrated lead producer in North America. In 1992, the company reached full design capacity at its state-of-the-art lead recycling and environmental services facility in Missouri. It is now the or1- lead producer in the U.S. In the past, Doe Run has-1" - a strer>C! ; ' . ; . ' ........ .... : , > ju an tnde- Management Changes In June, James O. Rollans was promoted to Senior Vice President and Chief Financial Officer. Jim had been Acting Chief Financial Officer since September 1991. He joined the company in 1982 as Vice President, Corporate Communications, and will continue to have responsibility for that area. In January 1993, J. Michal Conaway joined Fluor's senior management team in the newly created position of Vice President of Finance. He most recently served as Vice President and Chief Financial Officer of National Gypsum, a major industrial company headquartered in Dallas, Texas. In December, General Louis H. Wilson, former Commandant of the Marine Corps, retired from Fluor's Board of Directors. General Wilson's 13 years of service on the Board was instrumental in guiding the company through some of its most difficult and challenging years. His wisdom, counsel and special leadership skills will be greatly missed. Building Shareholder Value As discussed in last year's annual report, we are dedicated to achieving a level of superior financial performance that will build shareholder value. In a special section following this letter, we examine the steps taken to restructure the company, our long-term vision and strategic and financial goals. Our objective is to deliver financial results that consistently rank us in the top quartile of the 500 largest U.S.-based corporations. In today's rapidly changing business environment, the most potent competitive weapon any company can have is skilled, dedicated people working hard to ensure its success. We are blessed with a talented organization and a Board of Directors who unselfishly commit their time and valuable experience to our efforts. Special thanks go to our employees and directors for their many contributions. Shareholders and clients also deserve special credit for the trust and support they provide--for they are who we endeavor to serve. Sincerely, DR 2801410 January 18, 1993 Les McCraw Chairman and Chief Executive Officer Vince Kontny President and Chief Operating Officer Strategy for Sustaining Superior Performance E&C Operating Margin Per Salaried Employee dollars in thousands Safety Performance Lost Workday Incidence Rates smmmm Fluor Daniel . * * National Average rates are per 200,000 <rs IIOO worker years). Five years ago, Fluor emerged from a massive financial restructuring effort, one designed to provide a fresh start. In recreating the company, a vision was developed of what we were striv ing to become along with a new organizational concept. Strategic and financial goals were also established to measure progress and provide management with a gauge for redirecting efforts and resources as conditions change. In the broadest of terms, that vision was to return the company to preeminence in the global engineering, construction and maintenance industry and to build a base for superior perfor mance in the decade of the 1990s. In more specific terms, the objectives include the following: Return the company to an E&C focus, but on a widely diversified basis, in order to expand long-term growth potential and reduce cyclicality. Today, Fluor Daniel provides more services to more clients, in more industries and geographic locations than any global competitor Place the client at the center of our universe F`-:~ ' . ing a competitive advantage . .. . - . -' - -- u they globalize. Fluor Daniel has alliances with serving as an extension of the client's organization. Increase profitability through productivity improvements and greater client recognition of the special value our employees add to projects. Operating margin per E&C salaried employee has more than tripled since 1988. Evaluate the long-term strategic fit of The Doe Run Company, our lead investment, and A.T. Massey, our coal investment. At year-end 1992, the decision was made to exit the lead business. Investment in additional low-sulfur coal reserves has been increased to enhance Massey's asset value and earnings potential. Deliver rapid earnings growth from operations on a consistent basis. Fluor Daniel's operating profits have grown at least 15 percent for each of the past five years. A.T. Massey, our coal investment, has also shown meaningful, predictable earnings growth. Restore the company's financial strength to a level which provides a competitive advantage. With our strong balance sheet and investment grade credit rating, we are expanding our project finance services--a key need of many clients. Establish a culture which thrives on rapid, external change and recognizes that low cost, high quality services come from teamwork, trust and ethical behavior. 1992 marked our fifth consecu tive year of operating profit growth despite dramatic global upheaval. Maintain a relentless dedication to employee safety, recognizing that people are our most important asset. Fluor Daniel's safety record is almost 36 times better than the national average. Revitalize the company's community involvement efforts, educational support and political and public affairs. Today, Fluor is viewed as a proactive citizen in its host communities primarily through the contributions of employee involvement teams, in educational support, Fluor execu tives interact directly with more than 40 universities and colleges. Over 140 minority/women and engineering scholarships are granted annually. In terms of public and political affairs, Fluor's employees now fund one of the most active, bipartisan, pro-business programs in the U.S. Align management and shareholder objectives through pensation programs. More than 70 intended value cm - -" \ 2801411 Corporate Staff (LEFT TO RIGHT): James O. Roulans P. Joseph Trimble Charles J. Bradley Hugh K. Coble LESUE G. McCraw Nad A. Peterson (Retired December 1992) Gerald M. Glenn Vincent L. Kontny Stock Price dollars Dividends dollars O"T Enhance shareholder value--stock price appreciation and dividend growth--by delivering superior results. Over the past five years, Fluor's stock price has more than doubled and cash dividends per share have been substantially increased. These accomplishments, set against the original objectives, provide a clear measure of the com pany's progress, current status and long-term direction. Without question, Fluor Daniei has established itself as a leader in the global E&C industry. The company's financial health and earning power have been restored and a business strategy ' .. ! " : ';}< We have set a target to consistently rank , percent of the 500 largest U.S.-based corporations in net earnings growth, cash flow and return on shareholders' equity, while maintaining a strong, conservative balance sheet. Here are the primary business concepts we will use to achieve these performance goals: Strategically, we will remain committed to engineering, construction, maintenance and techni cal services as our core business activity with the client as our primary focus. Growth and greater diversity within the E&C industry will be achieved through partnerships, alliances, strate gic acquisitions and internal investments. The company's global network of talented people, years of international experience, management systems and financial strength will be used to further differentiate Fluor Daniel from competitors in the value we provide clients. Acquisitions of low-sulfur coal reserves will be considered to increase the competitive position, profit contribution and asset value of A.T. Massey, our coat investment. The foundation of our planning will antici pate dramatic and rapid global economic, political and social change. Organizationally, we will continue to provide a work environment which challenges, enriches and rewards each individual in order to attract and retain the most talented and dedicated people in our industry. To increase operating margin per employee, we will heighten our emphasis on productivity, value-added services and project selectivity. Culturally, we will follow our philosophy of continuous performance improvement and excel lence in execution, recognizing that we must constantly improve the quality and cost effective ness of everything we do. Community involvement, participation in public and political affairs and educational support will be the centerpieces of our corporate outreach program, Financially, we will strive to provide shareholders with a superior return on their investment. To achieve this objective, the company expects to continue to maintain a strong balance sheet; rein vest cash flow into E&C or coal opportunities which offer superior returns or a strategic advan tage; and pay cash dividends of approximately 20 percent of the previous year's earnings. Given our leading market position, organizational talent, quality and safety philosophies and financial strength we are confident that Fluor is positioned for superior performance. OMI*II ON S nmu Fluor Daniel's Hydro carbon Sector is provid ing FULL SCOPE SERVICES FOR THE TABANGAO REFIN ERY EXPANSION FOR PIL IPINAS Shell Petroleum Corporation. This major WHILE TYING IN WITH EXIST ING INFRASTRUCTURE. Strong economic growth in Asia/Pacific is STIMULATING SIGNIFICANT INTEREST AND CAPITAL INVESTMENT IN THE REGION. E&C OPERATING Profit dollars in milfions G) CD 0> O t- CM co co cn o> Engineering & Construction Fluor Daniel, our core engi neering and construction (E&C) business, posted its fifth consecutive year of operat ing profit growth, advancing 15 percent to $191 million. A strong commitment to diversification of services, industries, clients and geographic markets expands Fluor Daniel's growth potential, while organizational flexibility mitigates the cyclical nature of individual markets and allows more consistent earnings growth. New E&C awards in 1992, which included a number of sizable contracts, were a record $10.9 billion, up 27 percent from a year ago. Backlog grew a strong 32 per cent to $14.7 billion. Fluor Daniel's operating strategy emphasizes a strong focus on selectivity. We identify and pursue specific projects where Fluor Daniel can add value for clients through its global experience and capabilities and gain a competitive advantage. Continuous improvement in all that we do and excellence in project exe cution remain fundamental cornerstones in delivering that value advantage. Our pro ject finance capabilities leverage our financial strength into an additional value-added service for clients, further differentiating us from our competitors. Strong client relationships and alliances not only generate repeat business, but also expand our geographic diversification. As clients globalize, v~. r , - new areas. In addition. Fluor r' ` " " - - ;u strategic asso- _ .; .as k& leaders. These associations include teaming with traditional competitors on individual project opportunities as well as joint venture relationships targeting specific industry or geographic markets. Through strong investments in computer-aided engineering and telecommunications, Fluor Daniel has established a global network of offices with the capability to instan taneously respond to market opportunities anywhere in the world. The flexibility to shift work electronically allows us to balance workloads among our offices while improving productivity, reducing costs and maintaining high quality standards. Additionally, we continue to emphasize investment in our most important assets -- our people. Extensive training and professional development programs for both craftworkers and salaried employees are important elements in our emphasis on continuous improvement -- a key determinant in our future success. ' Fluor Daniel is dedicated to creating a culture that encourages continuous improve ments so we can achieve our mission to assist clients in attaining a competitive advantage in their markets by delivering quality services of unmatched value. Under standing client needs and responding to them in an innovative and quality-driven manner is our greatest competitive strength. Hydrocarbon Sector Fluor Daniel's Hydrocarbon Sector continued its steady growth during 1992. New awards for the year were a strong $3.5 billion, slightly ahead of last year's exceptional rate of $3.4 billion. Backlog grew 19 percent to $4.2 billion, representing 28 percent of the company's total. i ft A T I O N $ POUT tn billions OtJf icno 0) oi 001 co 0> <J> O) The Hydrocarbon Sector serves two primary markets. The "upstream" market includes basic production, treatment and transportation of oil and gas, while the "downstream" market involves petroleum and petrochemical refining and processing. A variety of factors are generating significant capital investment in the hydrocarbon market worldwide. Investment to address environmental concerns and process heavier feedstocks continues to stimulate significant downstream project activity, particularly in North America and Western Europe. The market for these projects is primarily driven by legislation and tends to proceed independently of the general economy. Recent awards include projects to produce reformulated gasoline in Cali fornia for both Chevron and Unocal, and projects to desulfurize diesel fuel at refin eries in California, Texas and Canada. A major facility was completed in Canada during the year for Alberta Envirofuels to produce MTBE, a gasoline additive with environmental benefits. In Europe, Fluor Daniel received a contract for a major fuel oil upgrading program in Belgium for Fina and a refinery project in the Netherlands to increase the production of lighter-end petroleum products for Esso. A key focus for Fluor Daniel is to be awarded certain large hydrocarbon projects located outside the U.S. where our global presence. ':. , : v ment skills provide added ` rs . - . . *.-.on size, geographic .. year duration. Due to the long lead times frequently ^oouciated with these huge capital projects, a key strategy is to be highly selective in targeting those that are most likely to proceed and where Fluor Daniel can enjoy a competitive advantage. Fundamental growth in global energy demand is generating opportunities to expand downstream processing capacity, particularly in the Asia/Pacific region. The region's demand for petroleum products is increasing to support its rapid economic growth. Fluor Daniel was awarded a major refinery expansion project during the year for Shell in the Philippines and is closely monitoring several additional opportunities for major refinery and petrochemical projects throughout the region. International oil companies are developing long-term strategic plans to diversify their sources of supply, including development of new reserves in areas such as South America, Africa and the Commonwealth of Independent States. Fluor Daniel is pro viding field development support services for production and pipeline facilities to develop new reserves in Colombia for BP and is providing services to Arco to expand gas handling facilities on Alaska's North Slope. At the same time, several oil producing countries are moving to expand their capac ity to capture market share and further develop their economies. In Saudi Arabia, Fluor Daniel is continuing to perform work on the large, multi-year Saudi Ararnco Crude Expansion Program. An additional project for a gas treatment plant was released in 1992. Additional projects are anticipated periodically over the life of the contract. Political turmoil in Venezuela as well as global capital constraints have Government Backlog dollars In billions co slowed the pace of that country's strategic expansion plans. However, Fluor Daniel remains in a very strong position to capitalize on the long-term growth still antici pated in Venezuela. Government Sector The Government Sector achieved exceptional growth in 1992, strengthening its long-term position in key markets. The single most significant achievement of the year was Fluor Daniel's selection to manage the envi ronmental cleanup of the Department of Energy's (DOE) uranium production facilities in Fernald, Ohio. The initial five-year contract is valued at $2.2 billion, with an option for an additional three years valued at $1.8 billion. The huge cleanup program is the most significant environmental assignment ever undertaken and clearly establishes a major position for Fluor Daniel in the market for environmental services. It will estab lish a blueprint and standard of excellence for future DOE and private sector cleanup programs. New awards for the year increased substantially to $2.6 billion, compared with a year ago. Backlog grew to S3.7 billion, representing 25 percent of the company's total. The Government Sector serves a variety of markets and clients. Environmental services are provided to both government and private sector clients. Advanced tech nology services, primarily relating to the nuclear fuel f-- ` installations. ' : tor government A variety of political and economic factors continue to expand the long-term market potential for our environmental services. Government spending on cleanup, primarily through the DOE and Department of Defense, is growing at a vigorous pace. Clari fication of U.S. environmental regulations and enforcement policies will accelerate capital expenditure commitments by private industry. Additionally, growing global environmental sensitivity should generate opportunities outside the U.S. New facilities are emphasizing process designs that reduce the production of waste and prevent pollution in the future. As the first of several planned DOE environmental cleanup programs, Fluor Daniel's experience on the Fernald project will provide an important competitive advantage in the growth market for environmental services. During the year, we also established a core environmental capability in our Haarlem, Netherlands office to begin providing services to European clients in what is anticipated to be a significant future market. The Government Sector's advanced technology unit is providing engineering serv ices on a number of DOE projects that handle processing and long-term storage of spent nuclear fuels. Also, dynamic geopolitical change is driving extensive reorganiz ation of the U.S. defense production complex. Fluor Daniel is providing technical services for DOE's weapons reconfiguration program. Our early involvement on this huge, long-term project and our demonstrated technological leadership should create significant continued opportunities on this and other future DOE projects. DR 2801416 OriiATI ON S RIPORT Fluor Daniel is leading THE ENVIRONMENTAL CLEANUP OF AN INACTIVE URANIUM PRODUCTION FACILITY AT FERNALD, OHIO FOR THE DEPARTMENT OF Energy, the most signifi- TAKEN. AS THE FIRST OF 13 SIMILAR PROJECTS, THE $4 BILLION, EIGHT-YEAR FERNALD PROGRAM WILL BE A MODEL FOR FUTURE DOE AND PRIVATE SECTOR CLEANUPS NATIONWIDE ANO AROUND THE WORLD. Process Backlog dollars In billions (o0i 1c0\i In the telecommunications market, Fluor Daniel was awarded the contract to design and build an Emergency 911 system in Chicago--our second major project of this type. Strong interest in similar systems across the U.S. makes this a strategic win in solidifying our position in this niche market. ii Fluor Daniel's participation in the infrastructure market is narrowly focused on selected opportunities where our extensive technical skills, global experience or client relationships provide a unique competitive advantage. One significant project awarded during the year was the contract to upgrade six embassies for the U.S. State Department in former Soviet republics. Our operations and maintenance activities increased significantly during the year with the award of our largest contract to date, of this type with the U.S. Government. We were selected for a five-year contract to operate and manage oil field and oil shale properties in Colorado, Utah and Wyoming. process Sector Strong growth in key markets and the beginning of a cyclical upturn helped Fluor Daniel's Process Sector deliver improved performance for 1992. New awards grew to SI .9 billion from $1.7 billion in 1991. Year-end backlog rose slightly to $2.6 billion, representing 18 percent of the company's total. tha pnmgry ma^Kefs server? by 'he Process Sector differ o= thee capital investment trends. The pharmaceutical and biotechnology markets tend to generate steady growth, while the chemicals and plastics markets are more cyclical. The sector also provides services to Du Pont through our long-term global alliance. Growth in the biotechnology market has increased dramatically in recent years as the industry transitions from research to commercial production. Fluor Daniel's early alignment with the biotechnology industry, more than a decade ago, positioned us as the industry's premier supplier of technical services, allowing us to capture an increasing share of this growth market. Significant new biotechnology projects received in 1992 include a commercial manu facturing facility in Colorado for Somatogen to produce synthetic hemoglobin; and a bulk biological manufacturing facility in Nebraska for SmithKIine Beecham. Major contracts completed during the year include a facility in Washington to produce a therapeutic protein for Immunex; and an amino acids production plant in Iowa for Ajinomoto. Our ability to provide full scope services from basic design through start up adds value for biotechnology clients who are concentrating on research and development to speed new products to the market. The more mature pharmaceutical market is characterized by larger companies with significant internal engineering capabilities and an increased number of competitors. However, the stable nature and size of the pharmaceutical market, driven by advances in technology and medical research, continues to offer significant oppor tunities for our services. A new research and development facility for Merck is among the new pharmaceutical awards in 1992. DR 280U18 OPfBATIONS KipO*r The Process Sector's Delta Division provided FULL SCOPE SERVICES TO BUILD A NOMEX PRODUC TION FACILITY FOR Du PONT UNDERWAY FOR DU PONT INCLUDE LARGE-SCALE, GRASS ROOTS FACILITIES FOR THF production in Spain AND NYLON PRODUCTION IN Asia/Pacific. Industrial Backlog dollars in billions Soft market conditions continue for chemicals and plastics due to overcapacity and slow economic growth globally. However, increased product demand and improving capacity utilization levels are moving the industry closer to a cyclical upturn. Fluor Daniel's focus on strong client relationships continues to improve our position to cap italize both on existing opportunities and a market upswing. Our worldwide capability and long-standing experience provide a competitive advantage as chemical and plastics clients focus on global expansion. 13 Industry consolidations to streamline costs and improve efficiency have provided some opportunities. Strategic plans to expand participation in developing global trad ing blocs such as the newly unified European Community are also generating activity. Additionally, significant opportunities are anticipated in the Asia/Pacific region where dynamic economic growth is stimulating plans for new facilities. Major projects currently underway include an ethylene glycol plant in Canada for Union Carbide; and a grass roots plant in Saudi Arabia for National Methanol to pro duce MTBE. Several new projects were begun for Eastman Chemical in 1992 includ ing a cellulose acetate plant in Tennessee for Eastman's joint venture with Rhone- Poulenc. . Opportunities with Process Sector clients for environmental ---------- 1 ------- c projects nave# aevoioped slowly uncertainty regarding trie specifics of environmental _: ___ The Delta Division, created to serve our strategic alliance with Du Pont, grew rapidly in 1992. A number of projects were started during the year to support Du Pont's aggressive globalization strategy. The Delta Division is currently working for Du Pont in North America, Europe and Asia/Pacific. Plans for further geographic expansion are contemplated. As a leader in their industry, Du Pont tends to signal developing trends, offering encouragement for a broader cyclical upturn in the chemicals and plastics markets. Industrial Sector Broad industry and geographic diversity and a selective focus on building and maintaining strong client relationships kept Fluor Daniel's Industrial Sector growing, despite a sluggish global economy. While certain markets served by the Industrial Sector are currently weak, others have remained strong or are growing. New awards in 1992 were $2.1 billion, equaling last year's performance. Backlog, however, grew 7 percent to $3.1 billion, compared to $2.9 billion a year ago. DR 2801420 The Industrial Sector serves four broad market areas: automotive and electronics; mining and metals; pulp and paper; and foods, beverages and consumer products. A geographically diverse range of opportunities is developing in the automotive mar ket. Global competition for new markets and a sharp emphasis on cost reductions are stimulating plans for new capital investment by automotive manufacturers. The proposed North American Free Trade Agreement has enhanced opportunities in Mexico, where consumer demand is growing and labor costs are attractive. O M It A T I O N S *I P O 8T AEC INTERNATIONAL, LTD., A KOREAN JOINT VENTURE COMPANY FORMED BY Fluor Daniel and Posco Engineering Co. (PEC), RECENTLY COMPLETED THEIR FIRST CONTRACT TO BUILD A SILICON WAFER MANUFAC- Posco-Huls Co., Ltd. Increasing project expe rience FOR AEC AND THE VALUE OF OPERATING WITH A LOCAL PARTNER SHOULD EXPAND FLUOR DANIEL'S MARKET POTENTIAL THROUGHOUT ASIA/PACIFIC. POWER Backlog dollars in millions "T CO A key automotive award during the year was the setection of Fluor Daniel to be the general contractor on BMW's grass roots facility in South Carolina. The award is sig nificant not only because the client is universally recognized for the highest quality, but also because it will be the first plant ever built by BMW outside Germany. Auto motive manufacturers are also looking at the Asia/Pacific region where strong eco nomic growth is creating significant consumer demand. Like Mexico, favorable labor costs in Asia/Pacific also make it an attractive production base for export into the world market as the global economy improves. Fluor Daniel has a long history of operating throughout the Asia/Pacific region. Our market position was strengthened with the creation of a Korean joint venture com pany which successfully completed its first major project in 1992. We anticipate addi tional project opportunities, particularly for electronics manufacturers focusing on the strong growth in consumer demand within the region. Strong demand for copper in the electronics and telecommunications industries generated significant project opportunities during 1992. Fluor Daniel was awarded several new projects, including a major copper smelter modernization project in Utah for Kennecott; new copper processing facilities in Chile for Compania Minera Que- brada Blanca; a modification program to expand the Escondida copper concentrator In Cf"'a~------ :----- ' "* ' " -- mineral processing operations m Canada for Hudson Bay. Market activity for aluminum projects slowed somewhat during the year due to current industry overcapacity. However, the long-term trend to recycle in the U.S. and Europe will continue to generate opportunities. Renewed economic growth should speed recovery of the aluminum market. Continued emphasis on recycling also generated project activity in pulp and paper. However, the overall market is at a cyclical low due to recent capacity additions. To improve our strategic position, Fluor Daniel has established a partnership with Jaakko Poyry of Finland, one of the pulp and paper industry's premier olohal engineering and design firms. pp 2801422 The large market for technical services for the foods, beverages and consumer products industries operates somewhat independently from the general economy. Increased use of technology in processing and packaging to improve competitiveness and a continued trend to globalize operations is generating significant opportunities. Our global capability and knowledge of emerging technologies are key strengths in this growth market. Additionally, increased recognition by clients of the value-added benefits of alliance relationships has enhanced our market competitiveness. Power Sector While the current level of new plant orders is low, the power industry represents a major market for Fluor Daniel with substantial capital investment being made on existing power facilities. There also continue to be signifi cant periodic opportunities for large projects. For example, we successfully targeted and won the large baseload coal-fired plant for South Carolina Electric and Gas a year ago, one of the few major contracts awarded by a utility in recent years. OPIRATIONS REPORT The Power Sector is per forming MODIFICATIONS AND SUPPLEMENTAL MAINTE NANCE SERVICES FOR SIX FOSSIL-FUELED POWER PLANTS IN KENTUCKY AND Tennessee under a PARTNERING AGREEMENT By focusing on near-term opportunities, Fluor Daniel's Power Sector has been quite successful relative to overall market conditions and is recognized as a major provider of technical services to the power industry. At the same time, we are strengthening our client relationships and building our market reputation to capitalize on the even tual market recovery. i7 Backlog for Fluor Daniel's Power Sector grew 33 percent in 1992 to $1.1 billion, repre senting 8 percent of the company's total. New awards for the year were $744 million, up from $711 million in 1991. Long lead times and changing technologies make early positioning on developing projects important. Fluor Daniel maintains an active position in emerging technolo gies. Our focus is to target projects with good operating economics and to position ourselves on opportunities that have the most potential to move forward. Although we continue to anticipate additions to U.S. electric generating capacity, changing market dynamics and recessionary conditions have stretched out the tim ing when new plants will be required. Investment by utilities in demand-side manage ment programs and increased operating efficiency has further delayed capacity additions. Opportunities for independent power producers to supply incremental power to meet demand growth continue. SIVE EXPERIENCE IN PART NERING AGREEMENTS, AN EXCELLENT REPUTATION FOR FACILITIES MANAGEMENT AND A BROAD RANGE OF SERVICES MAKE THE COM PANY A LEADER IN THE MAR KET FOR POWER SERVICES. power projects, clue to tne generally lower capital cost and shorter construction schedules, as well as the clean burning environmental characteristics. A developing trend for natural gas producers to offer long-term supply contracts is further stimu lating investment in gas-fired power plants. Fluor Daniel is a leader in integrated gasification combined cycle (IGCC), a leading technology for new power plants. Because most independent producers must secure third-party financing for their projects, Fluor Daniel's experience, financial strength and industry reputation provide a competitive advantage. Additionally, opportunities are developing for privatized power facilities outside the U.S. We are closely evaluating these opportunities with ' selective clients to expand our geographic scope. ' Systems maintenance remains a growing market for Fluor Daniel's power services, regardless of the extent or timing of new capacity additions. Current partnerships give us the largest backlog in the industry for this segment. The long-term nature of these projects builds strong client relationships and positions us for future oppor tunities. Repowering of aging generating plants represents a second near-term focus. During 1992, we completed a project to repower a coal-fired plant in New York for Salt City Energy Venture. A third area, generated by clean air legislation, is the market for continuous emissions monitoring projects. Major new contracts during 1992 include awards from Commonwealth Edison, TU Electric and Entergy. DR 2801424 The Power Sector's joint venture with Duke Power, Duke/Fluor Daniel, continues to focus on the market for new coal-fired facilities. Engineering work is proceeding on the 385-megawatt plant for South Carolina Electric and Gas, awarded late last year. OMiATIONS ft I l O R T State-of-the-art prepa ration FACILITIES ENABLE Massey Coal to closely MONITOR AND BLEND COAL TO MEET EACH CUSTOMER'S SPECIFIC NEEDS. MASSEY'S WORLDWIDE CUSTOMERS WITH BOTH LOW-SULFUR STEAM COAL, USED TO GEN ERATE ELECTRICITY, AND METALLURGICAL COAL, USED IN STEEL PRODUCTION. COAL OPERATING PROFIT dollars in millions We are closely following the development of additional large project opportunities. Most significantly, Indianapolis Power & Light signed a letter of intent with Duke/Fluor Daniel for a major coal-fired generating station, should the utility receive approval to construct a new baseload facility. Fluor Constructors International Fluor Construc tors International, Inc. (FCII) provides construction services for certain Fluor Daniel projects worldwide, and performs union direct-hi re work in North America. FCII's union construction and maintenance capabilities make Fluor the largest double breasted company in the U.S. FCII is aligned to provide global support to all five Fluor Daniel business sectors. Coal A.T. Massey, Fluor's coal investment, produces high-quality, low-sulfur steam coal for the electric generating industry and metallurgical coal for the steel industry through its operating subsidiaries. Ranked among the five largest U.S. coal companies, Massey also markets coal for independent producers. Operating profits for Massey were $80 million, 32 percent ahead of last year. Massey's strategy is to focus on providing its U.S. utility customers with high-quality, low-sulfur "compliance" coal to meet more stringent clean air standards that go into effect in 1995. Although market conditions for steam coal during 1992 remained soft due to conditions would also stimulate demand. During the year, Massey acquired additional high-quality, low-sulfur coal reserves totaling more than 320 million tons at very attractive prices. The new properties are located adjacent to existing Massey facilities and will allow production to expand in a cost-effective manner. As a result of one of its acquisitions, Massey can now provide freight advantaged coal to customers in the southeastern U.S. Massey's coal reserves now total nearly 1 billion tons of high-quality, low-sulfur coal, close to the level held prior to the partitioning of the company between its 50/50 joint venture partners in 1987. At that time, Fluor retained the Massey name, management and certain operating subsidiaries. More importantly, Massey's profitability has exceeded the level achieved five years ago, due to strong cost reductions and pro ductivity gains. Massey is also a major supplier of metallurgical coal to the steel industry. The reserves acquired during the year include high-grade metallurgical quality coal which enhances Massey's ability to penetrate the higher profit coking coal market. An ongoing focus for Massey has been continuous improvement in its safety record which was nearly 40 percent better in 1992 than the national average. DR 2801426 2 O Operating Statistics FLUOR | $ in thousands/Year ended October 31, Engineering and Construction Work performed Revenues Operating profit New awards Backlog | Salaried employees 1992 | 1991 | 1990 | 1989 j 1988 | $ 5,888,908 5,903,975 190,656 10,867,700 $14,706,000 17,443 $ 5,791,800 5,813,477 166,212 8,531,600 $11,181,300 17,602 $6,352,832 6,383,059 135,124 7,632,300 $9,557,800 19,829 $5,240,827 5,311,653 117,439 7,135,300 $8,360,900 17,519 $4,267,892 4,225,212 50,819 5,955,200 $6,658,600 15,576 $ in mlllions/At October 31, 1992 1991 1990 1989 1988 Hydrocarbon Government Process Industrial Power Total backlog United States Outside United States Total backlog $ 4,166 3,680 2,582 3,144 1,134 $14,706 $10,649 4,057 $14,706 28% 25 18 21 8 100% 72% 28 100% $ 3,493 1,350 2,553 2,930 855 $11,181 $ 7,915 3.266 $11,181 31% 12 23 26 8 100% 71% 29 100% $2,922 1,168 2,297 2,354 817 $9,558 $6,724 2,834 $9,558 31% 12 24 25 8 100% 70% 30 100% $1,951 780 2,038 2,935 657 $8,361 $6,404 1,957 $8,361 23% 9 25 35 8 100% 77% 23 100% $1,932 409 1,224 2,338 756 $6,659 $5,298 1,361 $6,659 29% 6 19 35 11 100% 80% 20 100% $ in thousands/in thousands of short tons _Year ended October 31, Coal Revenues Operating profit Steam coal produced Metallurgical coal produced Produced coal sold Purchased coal sold | Employees 1992 | 1991 j. 1990 | 1989 | 1988 | $696,721 $ 80,281 13,832 3,867 17,538 4,402 1,252 $758,481 $ 60,709 13,472 3,421 16,982 6,578 1,133 $865,809 $ 60,241 13,151 5,569 18,596 7,989 1,214 $815,558 $ 51,007 12,303 4,191 16,582 9,300 1,435 $783,719 $ 50,375 11,078 3,980 15,025 10,038 1,232 E&C revenues dollars in billions New Award dollars in billions E&C Salaried Employees in thousands C0O) International Backlog dollars in billions Backlog by Sector O T~ G) a) CM cn Coal Reserves millions of short tons Coal Revenues dollars in millions Coal Sold millions of short tons _____ Produced ..*. Purchased Coal Employees CO Gi o tCO 00 & G% cv 0> co o> o t~ oj CO CO G) G> G> DR 2801428 Directors Class H Directors (left to right): Robert V. Lindsay, Hugh K. Coble, Leslie G. McCraw, Dr. David R Gardner, and Dr. Martha R. Seger. Class III Directors (left to right): Peter J. Fluor, Buck Mickel, David S. Tappan, Jr., and Admiral Bobby R. Inman. ISSUE 6 . MCCRAW (1)*(3) Chairman of the Board and Chief Executive Officer (1384) VlNCIHt L . KONTNT(I) President and Chief Operating Officer (1988) HUSH K. COBIS(I) Group President, Fluor Daniel, Inc. (1984) Pith i. Fluor(2X4) President of Texas Crude, Inc. (1984) davib p. Gardner(3X4) President of the William and Flora Hewlett Foundation and former President, University of California (1988) Gerald m . Glenn (i) Group President, Fluor Daniel, Inc. (1988) W'ltlllii it.. G S A N T ,20::* Ohsirrrtars the Board of Gaien Associates (1939'.! Bobby r . inman (2X3)* Admiral U.S. Navy (Retired) (1985) Robert v. Lindsay <2)*(4> Retired, President of Morgan Guaranty Trust Company of New York (1982) E . MORGAN MASSEY Chairman Emeritus, A.T. Massey Coal Company, Inc. (1987) Buck mickel Retired, Vice Chairman of the Board (1977) MARTHA R . SEGER (2X3) John M. Olin Distinguished Fellow, University of Arizona and former Member, Board of Governors of the Federal Reserve System (1991) ' David S. Tappan, Jr. Retired, Chairman of the Board and Chief Executive Officer (1965) Louis N. Wilson General, U.S. Marine Corps (Retired) and former Commandant of the Marine Corps (1979) (Retired December 1992) Years in parentheses indicate the year each Director was elected to the Board. Except as otheiwise indicated, ail offices are of the company. (1) Member of the Executive Committee (2) Member of the Audit Committee (3) Member of the Nominating Committee (4) Member of the Organization and Compensation Committee *Committee Chairman DR 2801429 I OFFICERS FLUOR 23 Corporate ExtciiTivt Officers LESLIE G . M C C R AW Chairman of the Board and Chief Executive Officer (1975) VINCENT L . KONIN V President and Chief Operating Officer (1965) NAD A . PETERSON Senior Vice President and Secretary (1967) (Retired December 1992) JAMES O . ROLLARS Senior Vice President and Chief Financial Officer (1982) P. Joseph Trimble Senior Vice President-Law and Secretary (1972) Charles J. Bradley Vice President-Human Resources and Senior International Advisors Dr. William a. Cochrane Fluor Daniel Canada, Inc. Canada Frederick Esser Fluor Daniei GmbH Germany S i r Francis Kennedy Fluor Daniei Limited United Kingdom Sir John Mason Fluor Daniei Australia Limited Australia Cor Van Rijn Fluor Daniei B.V. The Netherlands Vice President-Finance (1993) Corporate Officers Betty H. Bowers Vice President-Government Relations (1974) Lawrence N. Fisher Vice President-Corporate Law (1974) J. Robert Fluor it Vice President-Corporate Relations (1967) Thomas H. morrow Vice President-Tax (1984) David j. h . Nicole Vice President-Project Finance (1989) V'lNunl L. RONTNY President (1965) HUGH K. COBLE Group President (1966) Gerald M. Glenn Group Presicent (1964) Fluor Daniel Group executives Dennis G. Bernhart (1968) Richard D. Carano (1970) Charles R. Cox (1969) Charles R. Oliver (1970) Emil j . parents (1978) Charles p. Pringle (1970) James C. Stein (1964) Steven G. T a p p a n (1977) Richard M. Teater (1980) Joseph P. p a n i c h i Vice President, Financial Operations (1976) Fluor Constructors International, Inc. Richard a. Flinton Chairman (1960) Larry vondra Controller (1971) A . T. Massey Coal Company, Inc. Don L. Blankenship Chairman and Chief Executive Officer (1982) Wynston D. Holbrook Executive Vice President-Sales (1972) Bennett k . Hatfield Chief Coordinating Officer for CSX Operations (1983) H . drexel Short Chief Coordinating Officer for Norfolk Southern Operations (1981) David H . Few Vice President and Chief Financial Officer and Treasurer (1981) Years in parentheses indicate the year each officer or executive joined the company. DR 2801430 FINANCIALS Return on Equity percent CO Reflects impact of non recurring charges in 1992 for discontinuation of the Lead segment and adoption of SFAS No. 106 Long-Term Debt To Capitalization Contents 25 Management's Discussion and Analysis 28 Selected Financial Data 29 Consolidated Statement of Earnings 30 Consolidated Balance Sheet 32 Consolidated Statement of Cash Flows 33 Consolidated Statement of Shareholders' Equity 34 Notes to Consolidated Financial Statements 43 Segment Information 44 Reports of Management and Independent Auditors 45 Quarterly Financial Data Earnings From Continuing Operations dollars tn millions DR 2801431 Management's Discussion and A N A L Y S S Fluor 2 5 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. .- | - . . . - R S u-t TT S O f O PER A- T. I ON S . ' V. ;' '. ' '-- - -' - :. Earnings from continuing operations were $135 million in 1992 compared:with $153 million in 1991 and $119. million in 1990. The related earnings per share were $1:65 in 1992 compared with $1.87 in 1991 and $1.47 in 1990./Earnings from.continuing '; operations in 1991 and 1990 include nonrecurring gains of approximately $22 million and $19 million, respectively, while there , were no comparable items in. 1992: Revenues increased slightly in 1992 following a 9 percent decrease in 1991. ~\ E I N E E R I N G, A N D C O N S t' R U C T.I O N . \ . - ' ' . : ' -% 1 - ..\ . The company experienced growth in each of the market sectors it serves whicri resulted in an increase in new awards of 27 percent to $10.9 billiorun 1992, compared with $8.5 billion in 1991 and $7.6 billion in ;199CL /- * '; , . The following table sets forth new award's for each of the company's business sectors: r . .: ' *--t , J $ in millions/Yeat ended October 31, - ' Hydrocarbon^ ,v, ' . ' - .- . ': . . 1992 ] 3,547 - \ 32% $3,424 , ~ 1991 J - - -.1990\ | '. 40% "< $2,379 , '31% Power . . . Total new awards. '; . United States . ^Outside United States Total new awards ~ ' ' f V " ' r 744 7 .' 711. ' .8 V. $10|868>' 100% $8,532 , , 100% ' ..' ' " $ 7,348.. , -' -68% 7 3,520 32 ' ..$5,586 .: 65% 2,946 i 35 , $10,868 100%' $8,532 ., ' '100% . 1, I.UUU - 900 i <44 12 ' $7,632 r 100% - $5 268 2 364 " 69% 31 ' - $7,632 ... '"100% Effective at the beginning of fiscal 1992, the Hydrocarbon sector's Mining and Metallurgy business unit'was combined with the . V , Industrial sector's Metals business unit. The combined new unit, Mining and Metals, was reported.as part of the Industrial,sector ; in the above, table for.1992. New. awards for 1991 and; 1990 were not restated for this change. Total backlog at October 31, 1992,. 1991, and 1990 was $14.7 billion, $11.2 billion and $9.6 billion,, respectively. The ratio of y work outside the.U.S. at October 31, 1992 and 1991 remained approximately the same, despite, a sharp increase in US, new, awards in 1992. This increase' was due primarily to the company being selected to manage the environmental'Cleanup of the Department of Energy's uranium production facilities in Fernald, Ohio. The initial five-year contract is valued at $2:2 billion which has been included in backlog, with an option for an additional three years valued at $1.8 billion. Consistent with the company's long-term goals, backlog for work outside the United States.at October 31, 1992 grew by $791 million, a 24% increase from the October 31, 1991 level. . , 1' , ... ' Engineering and Construction operating profits increased 15 percent to $191 million in 1992 compared with $166 million in 1991 and $135 million in 199Q reflecting continuing improved margins on work performed. The improvement in margins in 1992from the prior two years was due both to increased profit levels on incentive based contracts, consistent with the company's operating strategy, and the long lead times on new, larger contracts which have resulted ima change in mix to higher levels of engineering and design services and lower levels of construction related services on work performed during the period. Coal Revenues and operating profit from Coal operations in 1992 were $697 million and $80 million, respectively, compared with revenues of $758 million and operating profit of $61 million in 1991. Revenues and operating profit in 1990 were $866 million and $60 million, respectively. The decrease in revenues in 1992 is due primarily to lower sales volume of brokered coal that more than offset a 2 percent increase in produced coal revenues. Overall sales volume is down due to decreased demand resulting DR 2801432 2 fr M.> N A G E M E N T ` S DISCUSSION AND ANALYSIS :' DR 2801433 7 from mild weather together with continued recessionary market conditions. However, margins improved in 1992 due to a greater emphasis on produced coal sales, which had a 23 percent margin in 1992,'compared with brokered coat which had a 4 per- , cent 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. T 7 ' i. , " ' , ' . ~ : Lower volume in 1991 accounted for over 93 percent of the decrease in revenues compared with 1990. Coal revenues declined in 1991 due to recessionary1 market conditions and a mild winter creating weak demand in the first half of the year. Operating profitfor 1991 remained level with 1990, despite a 12:percent decline in revenues, primarily due-to.improved; margins on - .. produced coal which accounted for the majority of-revenues.' : ... 1 , Under the Coat,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 $27 million which will be recognized as expense as 7 " payments are assessed. Annual payments are estimated to be>approximately $2 million to $3 million. . , : i* x. ' : . A j ' "1.- V'7 \r'' '7 ' I. v' ' ' ` ~ r .. ` ' Oti - he r !r innn .- ---------------- 1------ - - * v' - ------------ ' f, - ... - ' 1 ' "' - -nmon ,n 1990. 1 his significant decline =n 1992 ?s partiaMy aftnbutaD.e to tne elimination oi tne company's high-interest- ' '/ earning assets resulting from capital expenditures at Massey Coal and the prepayment of; long-term,noteshn the third quarter, of - 1992. Also contributing to the reduction in net interest income was-an overall drop in.-interest rates which resulted inf,declining ' -- yields oh the company's short-term interest-earning assets. Net interest income increased in 1991 compared with 1990 due pm - ; marily to higher balances: of interest-earning assets and $5.8 million of interest related to. the favorable settlement of -certain - - income'tax issues. 7-../ i . , 1 - ; . - - . . '= . - .' \ ,- Corporate administrative and general expense decreased in 1992 compared to 1991 primarily due to lower stock; price driven. - compensation, plan expense, an increase in net periodic pehsion income and lower corporate overhead costs.;Corporate 77- ,? .. ' . administrative and general expense increased in 1991 compared1 to 1990 primarily, due to. higher stack price driven corhpensa- 7 ..7 - tion plan expense in the first half of 1991. 7 x . - . ,' u ; -4 , a ' Effective November 1, 1991, the company adopted Statement of Financial Accounting Standards No. 106/"Employers' Account- ing for Postretirement Benefits Other Than Pensions.". The statement requires accrual of the expected cqst of providing post- ^ retirement benefits during the years that employees render service. 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. . : The company also adopted Statement of Financial Accounting Standards No. 109, "Accounting for income Taxes" (SFAS No. 109) in 1992. 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. The company's financial statements have been restated from the year ended .October 31, 1987 to give retroactive effect to the adoption of SFAS No. 109. The restatement resulted in an increase in earnings from continuing operations of $3.6 million and $6.5, million in 1991 and 1990, respectively. The restatement also resulted in a $138 million reduction of additional capital at October 31, 1987. This charge, was made to additional capital because the company's quasi reorganization in 1987 eliminated the retained earnings balance. There is no significant difference between the effective federal income tax rate on earnings from continuing operations and the statu tory rate in 1992, 1991 and 1990 after excluding the 1990 reversal of $19 million of income tax liabilities relating to A. T. Massey Coal Company, Inc. '. , , 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 were effectively extinguished as a result of the transaction. As a result of the purchase certain lease cost reserves and other items, which were no longer required, were reversed and reduced the cost basis of the property by $51.7 million and increased pretax earnings . ,,by,$19.6 million net of a $5: million provision for 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. . D I S CONTINUED .O MIAT ! O NS- ;' '' - : In November 1992, the company announced its decision, to exit its Lead business, resulting in; an estimated after-tax loss of approximately $79 million. This estimated loss includes an after-tax provision for estimated operating losses through the date of disposition. Lead operations incurred a net loss from operations in* 1992 of $17 million compared-with a net loss of $1 million in 1991 and. earnings of $27 million in 1990. Revenues applicable to Lead operations were $143 million, $170 million and $197 million in 1992, 1991,, and 1990, respectively. The losses in 1992 and 1991 are attributable to both lower sales volume and lead prices. Additionally, operations were adversely impacted by a strike at the Herculaneum, Missouri, smelter in 1992. A new work force has been hired at the smelter. - _ . /,. , ' ,- - During 1991 the company recognized net earnings from discontinued operations of $11.7. million ($.14 per share) relating to a settlement of certain income tax issues regarding the company's St. Joe Minerals subsidiary; for the years 1975 through 1981. , The tax refund and after-tax interest components were $7.7 million and-$4 million, respectively. 7 . ; ( During 1990 the company.sold the Pea Ridge Iron Ore Company resulting in net cash proceeds of approximately $12 million Working capital at October 31, 1992 was $293 million compared with $311 million at October 31, 1991. Working capital* r ", decreased 6, percent primarily due to signficant additional investments in the; company's: coal operations and the prepayment of certain long-term debt, partially, offset by the reclassification of net concurrent assets relating to. the company's "Lead business. Capital expenditures for 1992 were $287 million compared with,$160 million in 1991 and $156 million in .1990. Capital ekpendi- tures at Massey Coal in 1992 were $214 million, which included approximately: $115'millibn related to new. coal reserve and facil ity acquisition costs, with the remainder attributable to on-going "mining operations. In 1991 total, capital expenditures at Massey were approximately $68 million, including $12 million related to coal reserve acquisitions and mine start-up. The company antic ipates that this substantial investment in its coal operations in 1992 will ensure continued'supply for key long-term contracts and provide increased future earnings growth at Massey. ' \. ... \ ^ - r ,1 The long-term debt to capitalization "ratio at October 3T, 1992 was 6.5 percent compared with 7.8 percent and 7.2 percent ah . October 31, 1991 and 1990, respectively. The 1992 ratio decreased primarily due to the prepayment of $16 million'of long-term , debt in 1992 and'the reclassification of certain other notes from long-term to current. This more than offset the addition to long-term debt resulting from the assumption of a $35 million note associated with the purchase of an engineering building in Greenville, South Carolina. At October 31, 1992, 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, and $29.9 million outstanding as of October 31, 1992 and 1991, respectively. Quarterly cash dividends of $.06 per share in December 1989 were raised to $.08 per share in December 1990, to $.10 per share in December 1991 and to $.12 per share in December 1992. Although the company is affected by inflation and the cyclical nature of the industry, its Engineering and Construction operations are generally protected by the ability to recover cost increases through price escalation provisions in most contracts. Goal operations produce a commodity which is internationally traded at prices established by market factors outside the control of the company. However, commodity prices generally tend to reflect a correlation to inflationary trends over the long term and the company's substantial coal reserves provide a hedge against the adverse long-term effects of inflation. Although the company has taken actions to reduce its dependence on external economic conditions, management is unable to predict with certainty the amount and mix of future business. - - DR 2801434 Selected Financial Data Fluor j .$ in millions, except per share amounts- -' ; . ,1992 j 1991 j 1990 ! __________________ 1___ 1989 | . 1988 | Operating Results - Revenues from continuing operations $ 6,600.7 $ 6,572.0-. Earnings from continuing operations before taxes 215.4 ' 228.4 Earnings from continuing operations,. net 135.3 . 153.1 Earnings (loss) from discontinued operations, net ' ' ' (96.6) 11.0 Cumulative effect of chahge-lh accounting .' '. principle, net | Net earnings , Earnings per share .. . - * , , " . . "' , 3\-3 3. (32.9) ' , 5.8 -. . 'i. --- 164.1 1 Continuing operations . Discontinued operations _ ' ;, i.65 1 - 1 .87 _ '' . (1-18) 0.14 : Cumulative effect of change in accounting ,.y . - ' '. .. - . principle , (0.40) - . -- Net earnings '....... % . ., < , n rvy ^ ~- $7,248,9 153.6 119.4 35.2 . $6,127.2 . 135.6 84.1 28.6 ' . -- , -- .. 154.6 3 112.7 , 3 - . > ; . ' 1.47 , , : 0.43 V . .' `" 3 304 , 0.36 '. '-- 23.3% $5,008.9 62:0 38.6 21.6 ; - 3 -- , 60.2- - 'v__ . 3 0.48 , . 0.27 ,-- 7 ^ 77 Financial Current assets Current liabilities Position ., . . $ 1,138.6 845.4 \ $ 1,159.5 , ( ,..$1,222.8 848.2 - ~ 984.0. ..$... Q:02. J , $1,036.4 " $1,001.0' . ' 797.7 , 786.1 Working'capital , %,.- Property, plant and equipment, net Total, assets \ . 1 Capitalization . ' Long-term debt .. Shareholders' equity ... % . , % /,. / ( .; >. '"""% . . -- 293.2 ' ; .311.3 1,046.9 % 1,092.7 ,2,365.5 1 2,421,4 61.3 3 880.8 75.7 900.6 " 238.8 238.7 . . ,214.9 - 925.3' ' ; 775.3 V 729.8 ' 2,475.8 '2,154.3 . 2,075.7 .,, % .. ' 57.6 , ' '' 62.5 , . 95.0 * 741.3-3 589.9 467.1 Total capitalization . >3 Percent of total capitalization ;. Long-term debt . .. Shareholders'equity , ' : -- , Shareholders' equity per common share. j Qomrnon shares outstanding at October 31' . ' 942.1 $ 976.3 \- 6.5 , . 3 93.5 : 7.8 92.2 $ 10.81 81.5 $ 11,10 81.1 $ 798.9 ' $ 652.4 - $ 562.13 i ' / . 7.2 92.8 $. 9.22,, 80.4 9.6 90.4 $ 7.39 .79.8 .16.9 ' . 83.1 $ 5.91 79.1' | Other Data New awards - 1 Backlog at year end Capital expenditures J Cash provided by operating activities $10,867.7 14,706.0 287.0 $ 318.3 " $ 8,531.6 11,181.3 159.7 . $ 229.7 $7,632.3 .. 9,557.8 ' 155.7 $ 353.1 $7,135.3 8,360.9 ... 139.2 $ 265.1 $5,955.2 6,658.6 86.3 $ . 17.7 See Management's Discussion and Analysis on pages 25 to 27, Consolidated Statement of Earnings on page 29 and Notes to Consolidated Financial Statements and Quarterly Financial Data 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 and to $.12 per share in the first quarter of 1993. Certain prior year amounts have been restated to reflect the new method of accounting for income taxes and to reflect the Lead segment as a discontinued operation. . DR 2801435 C O N S O L i- D A T I D 'S T A T E M- 8- H T. .OF, EARNINGS Fluor 29 | In thousands, except per share amounts/Year ended October 31, - 1992 j)_ 1991' | : 1990 Revenues. Engineering and construction1 services Coal V: , Total revenues ;5 . Cost O'-f R e v e n u e s '. ...Engineering .and construction services , Coal , : v, Total cost of revenues ,; .. ; ' O- r'H f-R .( 1 N C O M E ) A--N D "1 X, P E N 5 Corporate administrative and general expense, - Reduction in accrued, lease cost, net '\ " Gain on sale of investment ~~ : Interest flvnpn^fl. - , $5,903,975 . $5,813,477 $6,383,059 - - 696,721 758,481 865,809 . 6,600,696 6,571,958 | 7,248,868- ' ' ' ... L 5,729,148 : C 5,655,793 , - 616,671. , 697,985:. ' ' 6,345,819 [ 6,353,778 , _ .. " - 39,270 23.580" ; . 57,032 , (19,649) CIS,426) 1 5 4Rfi 6,260,265 - 805,568 7,065,833 -51,274 15 035 E A R N IN G S F ROM C O N T 1 N U 1 N G OPERATIONS B e f ore Tax e,\sI n c o m e\ T a x I x p e n s e > /. -- 1 '. Earnings From Continuing 6 p e r a t i aw s E A R N 1 N G S ( L O S S ) FROM DISCONTINUED Operations, Net C . '' T 215,350 80,100 228,401 , ..75,312 ' .135,250 . 153,089 v . ' : (96,566)- 11,059 '153,580 - 34,192 * 119,388 35,238 I A R Ml N G S B. EFORE'. CHANGE IN ACCOUNTING Principle Cumulative Effect of Change in Accounting P r i n c i p i i , Net '. | Net Earn i; n g s - * - _ ' - 1 38,684 ..... 164,148, . ' - - (32,866) $ 5,818 1 $ 164,148 , 154,626 ' ' , $ 154,626- SEarnings P s r hare Continuing operations . Discontinued operations Cumulative effect of change in accounting principle Net Earnings Per Share .. . . $ 1.65' ..... (1.18) . ' . (-40) .$ .07 | Shares Used to Calculate Earnings Per Share 81,558 See Notes to Consolidated Financial Statements. $ ' $ 1,87 .14 2.01 81,807' $ - 1.47 .43 $ 1.90 81,313 DR 2801436 0 C ONSOLIDATED B A t A N C E Sheet | . $;in thousanas/At October 31, ' - - . ........ ' Assets ' C U.U R i N-..T A. S S E T S ' / , . - . .. Cash and cash equivalents , Marketable securities . ; Accounts and notes receivable . Contract work in progress Inventories . Net assets of'discontinued operations ~ Deferred taxes , ;; . - V" Other current assets , ! 1 u . , 1 Totaf current assets - . ... O '. -" / '. -: 4. ' " ,7 Property, Land ; Plant anp Equ i p m i nt -: ' . ' , 1992 1 " ..1991 $: 195,346 147,584 312.354 219,108. " 31,788 .. 138,638 70,204 . .. ', 24,133 $ 184,022 186,042 \ 385,838 4 - 256,564' 74 82,612; 38,464 .25,983 7,138,555 1,159,525 61 58i' 'C-7 070 ............ j--' W|MWI iiCWw <--41 l*--4 1 1 IM fLdt Cll i 1^1 f LO ' Constructiomin progress -- 1- \- :' Less accumulated depreciation, depletion and amortization f~ Net property, plant and equipment /. ; !._ ' '- ^ v' 449,966 40,091 ' 488,732 X 1 89,720 - 1,415,931 ' 1 1,474,749 , 369,046; . 4 382,020 .: 4,046,885 1,092,729 Other A s s e r. s " V : 7. ' v, . -; . . Investments and goodwill, net of accumulated amortization of $36,388 and $28,215, respectively \ ,, 56,761 : Other ' -` . ' - .. ' 123.295 . 69,852 99,329 ; Total other assets .. r l . -- . , L "' ,/ . -. / 180,056 , 169,181 i- ' ' . f' ' $2,365,496 ' | ; $2,421,435 dr 2801437 F lUO* 31 'V Liabilities- and Shareholders' Current Liabilities - Accounts payable Commercial paper - Advance billings on contracts . Accrued salaries, wages and benefit plan liabilities Other accrued liabilities . . Current portion of long-term debt1 \ . , Equity , . ,- . ,' 'v | Total current liabilities ' " | Long- -T'i r m- Debt D, u e.\ k r t e R One Year ' N O N. C U R E N r L l-A B 1 L l T I E S Deferred taxes Other1 ; . . ' .. : , , ;< ' :7 , 1992 I ' 'I' , 1991 ~ $ 199 001 . 29,957 , 174,409 y 191*895 ! . 7 204,449 ! \ C! ' 45,693 7 $ 267,397 29,928 155,626 ; 188,071 ,, u. 189,465 7 -17,726 7! ,- 845,404 n 848,213 l " ` 61,262 ' ; 7 `. . v\63,109 - 514,919 75,682 i., ' 7 79,627 ` 577,268 - .. S H A R t H O L O E R S ' ' 1 ;Q U 1 T Y, _ , -' ' ." Capital stock , 77 - ,- Preferred--authorized 20,000,000 shares without parvalue, none issued Common --authorized 150,000,000'shares of $.625 par value;-issued and , outstanding in; 1992 -- 81,480,008-shares and in 1991 --81,111,731 shares , Additional capital . . .. ' Retained earnings (since October 31,1987) "" ' :,, Unamortized executive stock plan expense * . Cumulative translation adjustment . 1 : -r-- ' - i1 * , 50,925 - '-436,063 , ` ,407(218 7 7 ; ,(14,610) -7 1,206; ' ' 50,695 424,616433,886 (10,797); 2,245 | Total'shareholders' equity 1' ~ - 7 . '< 7- TJ. ', 880i802 C , '900,645 , '. .'$2,365,4961 $2,421,435 j See Notes to Consolidated-Financial Statements. -- ' . . . - ' 1* ' .. . '' " " j ' DR 2801438 32 Con so l i d a t e d Statement o f Cask Flows j. in thousands/Year ended October 31, , - ' 1992 | - ' 1991 j _ 1990 1 Cash Flows From Operating Activities . Net earnings . ", , Adjustments to reconcile net earnings to cash provided by operating activities: Depreciation, depletion and amortization - Discontinued operations . . Change in accounting principle - .' Deferred-taxes - , ; ., - ; Reduction in accrued lease cost, net , .. ... .... . 'Gain on sale of investment 1. . Change in operating assets-and liabilities ( .. . '- ' Other; net , ._ ~ '- - , - - J' $ 5,818 $ 164,148 $ 154,626 " '- 135,259 127,275 121,482 .-- 109,775 -_ 53,008 , ; : \ (55,674) r- (18,248) _ / 13,352 - , .. , -- (19,649) x ' " ; -- . . - ., 37,021 ., (16,426) (24,964) Y94.664 ' A 15,580 ; ...23,365 : ..(19,275) ~ j Cash provided by operating activities .f . ,/ 318,287 j.. 229,708 f 353,142 Cash Flow s F ro m 1 n v e sting A c r i v i t i e s _ Capital expenditures . ' . ....... Proceeds from sale of investment , \ ,: Proceeds from sale of-property, plant and equipment Increase ownership, in Doe Run to 100 percent Proceeds from sale of discontinued operations, net . 'Other, net; - '. 1 , .i y . | Cash utilized by investing activities `! .. Cash Flows F r o m Fin a n c i n g A c t i v i t i r s Payments of long-term debt - .v Issuance of commercial paper, net . .' .- Cash dividends paid - ;. -. . ,, Stock repurchase Y. " -Y Other, net v j Cash utilized by financing activities , Increase (decrease) in cash and cash equivalents Cash .and cash equivalents at beginning of year | Cash and cash equivalents at end of year See Notes to Consolidated Financial Statements.- . r. -- /; y y.::.( 31,426 . ' . 11,493 14,699- J -6,066. - . ; . '-- - , - _- . (i,i69) - . . -- , (125,000). ; ' ---; : - , y 11,783 : to,869 - . 5,182' ' . (238,264) |. "(272,791) J (298,996). [ ;,, ' ." .1 (17,969) V (483) , - . (44,953) - 29' 29,928 ; " . '-- , . 7 (32,486) (25,825) \ (19,227) ; ! / ' ` (3,673) ' ,/ -- ' ' (14,600)' ... ! v (6,404) ` 5.046 .. . . (68,699) . (2,784) | - (59,134) 11,324 - (45,867) (4,988) . 184 022 ' 229,889 .' - 234,877 $-195,346 j $ 184,022 j $229,889 ( DR 2801439 Consolidated Statement or S . it a. r i h 'a l d i: rR Ss ' - E- q u. i i y f tu o * 3a In thousands, except per share amounts Year ended October 31, 1990,1991 and 1992 ' , Common Stock | Unamortized ' Executive Cumu.ative Additional Retained , Stock. Plan Translation ; - Capital j ' Earnings | , Expense [ Adjustment j . - ', Total | -! Balances a t OCTOBER' 31, 1 9 3 9 As Previously Reported ~ Adoption of new income tax . accounting standard ' B A LA N c; E s" A T October 37 I , A. s Restated 1 989 ' Net earnings - . Cash dividends ($.24 per share) . Exercise of stock options, net Amortization of executive stock plan exoense ~ Translation adjustment (net or deferred taxes of $1,682) -- B A L AN C E 5 AT | O C T O B E R 3 l , "1 9 9 0 T Net: earnings - ... \ - Cash dividends. ($.32 per share) ,. ,` Exercise of stock options, net " . Stock option, tax benefit Amortization of executive stock plan '.expense . Issuance of restricted stock, net Tax benefit of net operating loss Translation adjustment (net of . deferred taxes of $600) - -. ; ' $49,871 . .. $522,615 $152,172 | $ (4,439) J $ 144 ' $720,363. (138,441) 7,992 (130,449) 49,871 299 - 74 384,174 I 160,164 | . 'T ' . -- (4,439) f 144- I ' - .... ..' 589,914 j '- 7,452 -- ' ... ~154,626 (19,227). .. ' ' '' , , - -- i' 2,070 . 154,626 T (19,227) '7,751 ' - 't 7 2,070 Y.TUU , .;. '` ... ' ---- ,' :'3,266 x 3,266 50,244 | " 398,844 .[ . i 295,563 f . 394 . '164,148(25,825) 10,364 1 8,463 ... '.... , 57 4,646 ~ -V- - , 2,299 ~. (6,805) j ; , 7, ' 839 , (4,831,)'' ' 3,410 | . 741,256 j x. "7 ','7 '' ~ 164,148 ; (25,825) ; '10,758 8.463 r7 . ... 839 1 - (128) /' 2,299 (1,165). (1,165) Balances a t | October 31, 1 99l Net earnings Cash dividends ($.40 per share) Exercise of stock options, net Stock option tax benefit Amortization of executive stock plan expense Issuance of restricted stock, net Common stock repurchase Translation adjustment (net of deferred taxes of $535) ' i ou,oyo i 217 20 424,616 | 5,996 4,024 ' 5,093 (3,666) 433,886 | 5,818 (32,486) (10,797) j 1,425 (5,238) 2,245 [' x 7 900,64-5 | 5,818 (32,486) 6,213 4,024 .- 1,425 (125) . (3,673) (1,039) (1,039) Balances at [October 3 1, 1992 See Notes to Consolidated Financial Statements; $50,925 j $436,063 j $407,218 $(14,610) $ 1,206 j ` . $ 880,802 DR 2801440 34 Notes to Consoled a ted Financial Statements - Major Accounting Policies ', P R I N'CIHES .OF c O <N $ O l I 0 ArT I 0- N .. ' . ^. .... . ' 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. The company does not consolidate entities for which control is-deemed temporary. In November, 1992 the' company announced its decision to exit its Lead business and, accordingly, the assets and liabilities of the Lead segment as of October 31, 1992 are shown as net assets of discontinued operations. The results of operations for the. Lead business are shown, separately, under discontinued operations, with prior years Consolidated Statement of Earnings restated for comparative . ' purposesf All significant intercompany transactions of consolidated subsidiaries are. eliminated. Certain 1991 and 1990 amounts have been reclassified to conform with the 1992 presentation. . .. ' , ... . E N G i N E E R I N G A N 0 C O N ST R U C T I O N ON TRACTS The company, recognizes engineering and construction contract revenues using the percentage-of-compietion method, primarily " based on contract costs incurred to date compared with total estimated contract costs. iCustornerfumished 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 * iitir''-*--*----------' " - .. they are,deterrniued. Revenues-recognizeddn excess of amounts billed, are classified as current assets under contract,work in progress. The company anticipates that a significant portion of incurred costs associated with contracttwork in''progress, at . October 31, 1992 will be billed and collected in 1993. Amounts received from clients'in excess of revenues recognized to date are classified as current liabilities under advance billings on contracts. , ,y _ ._ ' D I P RE C I AT ION AND AMORTIZATION ^ V1 ' I ...' 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. 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 an d Developme n- r . Goal exploration costs are expensed as incurred. Development costs of specific 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. . ^" INCOMI 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 recognitiqn 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. This accounting change will not affect the company's liquidity or cash flows. ' Earnings Per Share Earnings per share is based on the weighted average number of common and common equivalent shares outstanding in each period. Common equivalent shares include the dilution from the potential exercise of stock options when the effect is dilutive. DR 2801441 I MV I NT O It 1 .$- S . , ' . " - ; - '' / .. /' P , 7 ' -. Coal., metals and processed minerals inventories are stated at the lower of cost, using the fast-in, first-out (LIFO) method: or net realizable value. Supplies and-other are valued on'the1 average cost method. Inventories comprise: . ; ,- - / 3 .5 - | S in thousands/At October 31 _ Coal ' ' , ... ' Metals and processed minerals Supplies and other 1993 $10,485 20,703: $31,188 1931 B-r9.370; 39,589 33,653 ' $82,612 F O 8 r I G H U R R f. N C Y , ' ,- 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, 1992, the company had $91 'million of forward exchange contracts outstanding relating to foreign currency denominated long-term debt and interest, lease commitments and contract receipts. 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, in the amounts of U.S. dollars 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. ' - ( '. ' ,: T -/ 1s C O N Cl N T R A T I O N S O f C R I D I T R I S K S ...The company provides a variety of financing arrangements for its Engineering and Construction clients. The majority of 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. I p ... ) -" ' . .. C'o Nsail DA T 1-0 S r A WE-.M I N T OF CASH" F l O W S . L j` ' ' I. '", . , f, , The company invests in short-term highly liquid investment grade securities; which are usually sold before their maturity. -Securi ties 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 i dollar volume and turnover of these securities, the related cash flows are reported on a net basis. / / , ; ' p , The change in operating assets and liabilities as shown in-the Consolidated Statement of Cash Flows comprises: .. , ' J ; $ in thousands/Year ended October 31, ' Decrease (increase) in: . -. Accounts and notes receivable Contract work in progress inventories . Other current assets Increase (decrease) in: ; , Accounts payable Advance billings on contracts Accrued liabilities Other noncurrent liabilities 1" i____ ' _. Cash paid during the year for: interest expense Income tax payments, net .... . .. ' _ - - 1992 j . 1991 j , 1990 .$50,758 ' - 37,456 ' (9,222) (1,241) $ 107,880 72,264 9,270 " ' (31,203) $(126,393) 4,436 ' (2,751) -10,254 . . (58,310) (118,595) 59,826 u, 18,783 (115,518) " '151,694 31,533 ' 50,938 (2,402) (32,736) -- -- - $37,021 j' , $ (24,964) | $ 94,664 $ 18,650 $ 53,713 $ 9,988 $ 93,677 $ 10,613 $ 50,221 DR 2801442 3& Acquisitions amd Dispositions.; .- '- -, " " . . , .' .. In November 1992, the company announced, its decision to exit its Lead business, which has been' Classified as a discontinued ... operation in the accompanying consolidated statement of earnings: Although the company's intent is- to sell its Lead business, management continues to evaluate forms of divestiture with the-goal of maximizing benefit to Fluor shareholders. . ': Net assets of discontinued operations in. the accompanying consolidated balance' sheet is composed, of $63 million of net current assets and $76 million of net noncurrent assets as of October 31, 1992. These amounts consist primarily of accounts 7 receivable, inventories, plant and equipment and related liabilities. ,, : . ' . . 7, Revenues applicable to discontinued operations were $143 million, $170-million and $197 million in 1992, 1991 and 1990, respec tively. Discontinued operations, net in the accompanying consolidated statement of earnings is composed of the following: 1 $ in thousands/Year ended October 31, .. , : __________ Earnings (loss) from operations, net of income tax expense (benefit) of $(10,795) in 1992, $28 in 1991 and $9,068 in 1990 ,. Gam (loss) from disposal, net of income tax.expense (benefit) of $(48,365) in 1992, $(5,198),.in 1991 and $3,839 in 1990 .. ! 7\ / ` .\ <: , f. T. _______ 1992 j 1991 j - 1990 .'j ' .. $(17,656) .. $ (617) , (78,910) $(96,566) . 11,676 , ; $11,059 ! ,$27,233 . 8,005 ' $35,238 J The estimated loss oh disposition in 1992 ,includes a net provision of approximately $6 million for estimated operating losses through the date of disposition. ", .\ - .. .. : 1 In September 1991, the company sold, its minority,interest in Centre Reinsurance Holdings, Ltdi, a Bermuda-based insurer, resulting- in a pretax gain of $16.4 million. , .. , - ,., . of notes. The company had previously acquired approximately $93 million of notes related to the property that have been v effectively extinguished. As a result of the purchase certain lease cost reserves and other- items, which were no longer required, were reversed' and reduced the cost basis of the property by $51.7 million and increased pretax earnings by $19.6 million, net ~ of,a $5 million provision for. foreign lease reserves. 1 . , .v 1LJ . In May 1990, the company purchased Homestake Mining Company's 42.5 percent interest in the Doe Run Company for $125 ' million in cash, which was allocated to the assets acquired- and liabilities assumed based'on their relative fair'market values at the date of acquisition. The purchase gave the company 100 percent ownership. The operations of Doe Run are included in the . ' company's discontinued Lead segment described above. . I , ^ \. , In February 1990, the company.,purchased Tulsa, Oklahoma based Williams-Brothers Engineering-Company (WBEC), a worldrecognized leader in engineering of pipelines and production facilities, for approximately $8 million. The company's consolidated financial statements include the results of WBEC from the acquisition date. The acquisition was accounted for as a purchase. During 1,990 the company completed the sale of Pea Ridge Iron Ore Company resulting in net cash proceeds of $11.8 million and an after-tax gain of $8 million which is reported in discontinued operations. , .... dB 2801^43 Income Taxes The company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 1G9) retroactive to the year ended October 31, 1987. The effect of adopting SFAS No. i09 was to increase (decrease) earnings as'follows: 7 - ' 7 . . ' / r "v . $ in thousands, except per share amounts/Year- ended October 31, - Earnings: ' .. t. . . Continuing operations . . Discontinued operations Net earnings , .; , ,' , , .. Earnings per share: Continuing operations ... Discontinued operations Net earnings :' . -, . ,, .. ' . ` --- - , ' , . 1992' - . - 1991 j ' 1990 $1,779 - 844 $2,623 """ $3,631 ' ' . $6,536 ' - (271), 1,204. $3,360 ']- ' $7,740 $ .02 - .01 $ .03 $ .04 $ .04 j ~$ .08 .01 $ .09 The restatement also resulted in a $138 million reduction of additional capital at October 31,. 1987. This charge was made to additional capital because the company's quasi reorganization in 1987, eliminated the retained earnings balance., - The income tax expense (benefit) included in the Consolidated Statement of Earnings is as follows:,, -, $ iri thousands/Year ended.October 31, 7 '- Current: . ' . - , ;' ' - Federal (includes a charge in lieu of taxes of $2,299 and $2,900 for 1991 and 1990, y,v 1992 1991 ', ' .- . .. 1990 | '8,397 .\ Total current '. : 'x Tax liability reversal . ! -" ' :: -: 1 ... rr ./ ' ' ' '' C :j : .9 . .. 56,472 ' 94,490 ' 52,747:j -- ' . .,(6,100) - . - ' (19,000) .Deferred: ' - Federal .. Foreign- .. ; State and local 7 - Total deferred - ' , , . '; .. . ' ' - 7- , ~ . -. ... - , . , '' . " ' ' . '. .. . '' -- ,/ , \,, 7 ' ' ' r- . - (54,818) 6.773 (7,629) 1 ' (55,674) - (13,126) , (198) , ' (4,924) " ' .. (18,248) 12,326. 485 541 13,352 ., Total, income tax expense >. ` ' . ' . '_ , ' ' 1 $ 798 $ 70,142 $47,099 - The income tax expense (benefit) applicable to continuing operations, discontinued'operations and the cumulative, effect of change in accounting principle is as follows:. - ' 1 $ in thousands/Year ended October 31, . Provision for continuing operations: Current ` . Tax liability reversal Deferred Total provision for continuing operations Provision for discontinued operations: Current Deferred Total provision for discontinued operations Provision for cumulative effect of change in accounting principle: Deferred | Total income tax expense . 1992 1991 ' 1990 $ 64,920 . $100,370' $ 50,649 (6,100) (19,000) ,. 1 5(180 (18,958) 2,543 80,100 75,312 34,192 -; * ` (8,448) , (50,712) . (59,160) (5,880) 710 (5,170) 2.098 10,809 12,907 . (20,142) $ 798 J $ 70,142 $ 47,099 DR 2801444 38 A reconciliation of statutory federal income tax to the income tax expense on earnings frcm continuing operations is as follows | $ in thousands/Year ended October 31. ' - .! Statutory federal income tax expense - . ..'Increases (reductions) m taxes resuiting from: " State and local income taxes i- - Effect of foreign tax rates . .. ; Items without tax effect, net- .- Depletion .- : x -, ' Tax liability reversal ", - Other; net ' | Total income tax expense--continuing operations- . . - - 1992 . | . .-''1991 j .,0990 [ - f ' '$73,219' ,,t $ 77,656 ' ' . $ 52,21a ' - ' '.... - ' - -- 8,487 A- ' 6,7C*9- . 6 686 t: ' ' ' - 5,959 7,080 7- 489 '. '. - : 3,741'- ... (7,488) (1,324) (8,040) - 3,306" , ri (8,351) (6,100V,. ^ ... (19,000) i\ ^ 4 (3,818)- (669) (4,156) $80,100 | - $ 75,312 j $34,192 Deferred taxes reflect the tax effects ohdifferences 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 taxi assets and liabilities are ias follows: . . .. , .- ,. ' .X $ in thousands/At October 31, . '7: ,. ', ~ XX. -' - ' ) " . ' .. p 1992 ,| , ' , ' 199f'; j\ , Deferred tax assets: - y , 4 j " 7, - Accrued liabilities not currently deductible X. Expected tax benefits" on disposition-of Lead business Building tax basis in excess of book basis ^- - Other - ' ... " - : :" ' " ' '' . f' ,, ,. " 4. -' ' '1 $134,402 $143,068 -: : : : \ . ' ' " ... . ;- 42;585 - , ;. 7 . ' ' - " . ~ 27,160 . 31,082 '" - >, ' , '/ 50.298 . 54,233 .4 i CXBi uStSf's'B-O tax BB7X77 Valuation allowance tor Ueterred tax assetx ... , . ,.. - A' : Deferred tax liabilities: ... - ' -s ; . " '1 . 1, . Goal mining property book basis in excess of tax basis -' - - " Tax on unremitted foreign earnings ' v ,,- - --.. , " , Lead" mining property book basis in excess of tax basis , Other - - ' - . ' - ` '.1.7. x - '-" m Total deferred tax liabilities . 7. - 174,932 vf 148,870 f , _ , (98,369)s. . (100,985) (27,-155). . 7(22,630) ' ; (29,335) _ (42.313) -4.(37,083) ' - " (167,837) ( . (190,033) |, ! Net deferred tax assets (liabilities) . ,, - - ;7 .- , ;:v ; , 7' $. 7,095 {. " $.(41,163) j' . ' The company established a valuation allowance to reduce certain deferred tax assets to amounts that are more likely than ~ mot to be realized.1 Substantially all of this allowance relates to deferred tax assets existing at the. date of the company's 19877 quasi reorganization; Future reductions in the valuation allowance relating to these 1987 deferred tax assets will1 be credited to additional capital., 7X /" '' A. 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, 1992 because the company intends to keep those earnings reinvested indefinitely. ; : `. ' United States and foreign earnings from continuing operations before taxes are as follows: DR 2801445 S in thousands/Year ended October 31 United States Foreign f Total - I .. - " . ... ' 1992 j 1991 I 1990 j ________ j________________________j________________________I $139,241 $163,643 $109,455 76,109 64,758 44,125. $215,350 | $228,401 j $153,580 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,settle- merit 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 and $19 million'in 1991 and 1990, respectively The'company has resolved ail issues raised in connection with an examination of the company's; Federal income tax returns for fiscal years through 1983. The-resolution oflhese issues did pot have a material adverse'effect on the company's consolidated ... financial position or results of operations. A " ' . '> ... . 1 ( * -. : "The Internal Revenue Service-is currently examining the company's returns for.fiscal years-1984 through 1989. Management ' does not expect the resolution of any tax issues raised, by thedRS for these years to have a material adverse effect on the /' company's consolidated financial position or results of operations. .-- - . .' R T ! R E rn l M T B E N E F 1 T S . .- . ' ;' - 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 $65 million in 1992, $60 million in 1991, and $55 million in 1990. 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, 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, ' Service cost incurred during the period . , '/ --- /. s , 1992 ; ' ., : i99i | . 1990 j ' ." . ' $42,439 ' - - $ 10,550 :'C $ 8,692' | 'Net periodic pension expense (income) , ' - - - - "- $ (6,764) | ' ' '$ (2,974).'f\ $' (7,702) | The following; assumptions were used in the determination of: net periodic pension income:. '' ~ . ' -v. | Year ended October 31, i - \: - -- . - 1 -- ' - Discount rates /- " ' ' Rates of increase in compensation levels ' ' ; ` . _ ' - -' Expected long-term rates of return on assets ' ' 1992 j- . 8.5--9(5%' ' ..5.0--6.0% 7.5-10.0% 1991 f - 1990 | 9.0-10.5% . - 9.0-10.5% , 5.0-810% ;. ' . 5.0,--8.0% . 9.0-10.5% 8.0-10.5%. The following table ..sets forth the funded status, of the defined benefit plans:. - v.'^ '' ' V | $ in thousands/At October 31, - Actuarial present value of benefit obligations: - Vested benefit obligation l -, Nonvested benefit obligation ' . j Accumulated benefit obligation Plan assets at fair values (primarily listed stocks and bonds) Projected benefit obligation ' . Plan assets in excess of projected benefit obligation Unrecognized net gain Unrecognized net asset at implementation | Pension asset recognized in the Consolidated Balance Sheet ' _' ' , - -' '- . , - ./ . - 1992 "'f-. ' - 1991 J $ 158,058 $ 151,156' \ 12,541 - T T779 1 i$ 70,599 $ 162,935 j ' " '$ 345,-076 $349,316 ; '(211,834) (218,101) DR 2801446 133,242 -. (30,876) (25,084) $ i77,282 131,215 (43,265) (27,589) $ 60,361 | Excludes the projected benefit obligation and an equal amount of associated plan assets-relating to present and former employees of discontinued operations (including the Lead segment in 1992) of $128 million and $99 million at October 31, 1992 and 1991; respectively. 1. ' Massey Coal Company (Massey) participates in multiemployer defined benefit pension plans for its union employees. Pension expense related to these plans approximated $.6 million, $.5 million and $1 million in the years ended October 31, 1992, 1991 and 1990, 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 $27 million which will be recognized as expense as payments are assessed. 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 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 rang ing from 9.5 to 12 percent.in 1992 down to 6 to-9.5 percent in 2002 and beyond. The transition obligation of $53,008, less . income tax benefit of $20,142, reduced earnings* by $.40 per share and was recognized as of November 1, 1991. The effect of a one percent annual increase in these assumed cost trend rates would increase the accumulated postretirement benefit obliga tion and the aggregate of the annual service and interest costs by approximately ten percent..,,The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 9 percent. The following table sets forth the plans' funded.status and accumulated postretirement benefit obligation for continuing opera tions which has been fully accrued in the company's Consolidated Balance Sheet: . ~ ; . - . , $ in thousands/At October 31, ; ' Accumulated postretirement benefit obligation: Retirees ,. p -' - Fully eligible active participants . ... . ' .'' Other active plan participants , I Accrued postretirement benefit obligation . , -r' X - 1992 | $ 46,875 ; 1,730 . 6,866 "$55,471 [ np-oPic oostnht'-n-em benefit -'r-sf Pv 'pnppp-p, ojpsppppp, .fp/mips dtp Ph/pppsC; components: So .3o . , . Service cost incurred'during the period " Interest cost on accumulated postretirement benefit obligation Net periodic postretirement benefit cost p > ... 1992 $ 1,056 4,821 ------------r* ?$ 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 and $5 million in,-1991and 1990, respectively. 'p I Long-Term Debt* Long-term debt comprises: $ in thousands/At October 31, Deutsche mark financing, with a currency exchange agreement fixing the repayments in U.S. dollars at aa effective interest rate of 9.5%, due in 1996 , ' - Swiss franc financing, with a currency exchange agreement fixing the repayments in U.S. dollars, at an effective interest rate of 9.3%, due in 1S93 '- > 12.375% collateral trust notes, due in 1995, prepaid at par in June, 1992 12.875% collateral trust notes, due in 2000, prepaid in December, 1992 ,; . 13.50% first mortgage note, due in 2000, prepayable at par in 1995 - Notes at an effective interest rate of 9.7%, due in 1993 , Other notes and mortgages - Less: Current portion Long-term debt due after one year 1992 | 1991 23,644 $23,644 15,039 . -- 16,050 35,000 12,838 4,384 106,955 45,693 61,262 V 15,039 16,359 16,050 -- 12,838 9,478 93,408 17,726 $75,682 Maturities relating to long-term debt are as follows for the years ending: 1994, $1.7 million; 1995, $.5 million; 1996, $24.1 million; 1997, no maturities; and $35 million thereafter. All long-term debt (including current portion) outstanding at October 31, 1992, bears interest at fixed rates. DR 2801447 The company assumed a $35 million first mortgage note in 1992 when it acquired an engineering building iocated in Greenville. South Carolina.. - . ; g ... . .... i .7 ......... 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 fines. In addition, the company has S550 million in short-term lines of credit. Borrowings under lines of credit and revolving credit agreements bear interest at prime, 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 31,1992,' no amounts were-outstanding under any of these lines. >- ' .~ ''. . . ,` -- The company had unsecured commercial paper outstanding at October 31, 1992 and 1991 in the amounts of $30 million and $29.9 million, respectively. The commercial pacer was issued at a discount with an effective, interest rate of 3.3 percent and , 5.3 percent in 1992 and 1991, respectively. Maturities-range from 26 to 37 days in 1992 and 27 to 35 days.in 1991. The .weighted average maturities at October 31, 1992 and 1991 were both 18 days. The maximum and average balances outstanding for the years ended October 31, 1992 and 1991 were $84.5 million and $38.4 million, respectively, and $34.9 million and $28.5. million, respectively, with weighted average interest rates.of 4.1-percent and 5.8 percent, respectively. . . . O-'T HER NONCURRINT L I A B I L I T ! E S ,, . -' A- ' ' - -'A -1 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 concurrent liabilities include $117.2 million and $81.7 ' million at October .31, 1992 and 1991, respectively, relating to these liabilities. >-' ... _ ' .vA` _ x >7" t " Stock options may be granted with or without SARs. Grant, prices are determined, by the Committee and- generally ere estab- ; lished at the fair market value of the company's common stock at the date of-grant. Qptions and SARs. normally extend for , - 10 years and generally 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.- ' ' " t vx-- - ,- . = ; . , Restricted stock awards issued under the plans provide that shares-awarded may not be sold; or otherwise transferred until'V ; 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 plansdotaled 132,580 and '121.660 shares in 1992 and .1991, respectively. V - -A I.-'-mt-d - The following table summarizes stock option activity for the two years ended October 31, 1992: - _- .. - Stock) . - Price 4. - _ . ' . , , Options' ' J Per Share j Outstanding at October 31, 1990 Granted. Expired'or cancelled Exercised' '. ' .. - ,, iV '' ' t " ' - `, / . 4 2,822,6,13 -'442,540 -" ^ (267,456) ..... - (630,938) SI 2-42 i39-44 12-36 12--41 Outstanding at October 31, 1991 Granted Expired or cancelled Exercised . '' ' /' - . ' .5 ... . DR 2801448 - 2,366,759 - ... 12-44 438,410. (23.539)' (346,401) V ' 44 20-44 12-44 Outstanding at October 31, 1992 2435,229 $12-44 Exercisable at: October 31, 1991 | October 31, 1992 , . / - . -, , 1-458451 1,452,174 $12-42 $12-44 Available for grant at: October 31, 1991 October 31, 1992 - 946.323* ' ' 780.854* 'Available for grant includes 780.854 and 915,786 shares at Octooer 31, 1992 and 1991, respectively, which may be granted as either stock options or restricted stock, as determined by the Committee under the 1988 Fluor Executive Stock Plan. -- 4 2 The-company adopted a preferred snares purchase rights plan and, pursuant thereto issued one preferred share purchase / . right ("Right") on each outstanding share of common stock. The Rights are exercisable only if a person or group acquires, or - makes a tender offer for, 20 percent or more of the company's common stock. When exercisaole,. each* Right entitles its holders ' to buy f /100th share of a newly issued preferred stock., at an exercise price of $40, subject to certain antidilution adjustments. , . The Board of Directors/ at.its option, may lower the exercisability threshold from 20 percent to as' low as 10 percent as long.as - no person or group then owns more than the lowered amount and. may, at any time after the Rights have become exercisable,. , ' but before there has been an acquisition of 50 percent or more of the company's ,common stock by any person .or group, ' . ' exchange each then valid Right for one new share of common stock. - / - / * ~ . -. ' Also, if at any time after the Rights become exercisable, the company is either invoiveddn a merger or other business combina tion transaction, or 50 percent or more of its consolidated assets or earning power is sold, or a person or group acquires 20 ' . . percent or. more.of the company's, stock, then each Right will entitle its holder to purchase either common or preferred stock of the company or the acquiring company having a market value of twice the exercise price of the Right. , " The Rights, which do not have voting privileges, may be redeemed by the company-at a price of $.02 per Right at any time prior to public announcement that a-person or group has acquired beneficially 20 percent or more of the company's common shares. The Rights expire on November 30, 1997. -,' / ... * . .- L E A S E .O b l I A T 1 O H S * '' ' ' - ,, - . ' "' / , "/' ' . ' Rental expense for continuing operations amounted to $100 million, $92 million; and $87'million, in 1992, 1991/ and 1990> 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 noncancelfable leases are as follows: ' . -/ "" t I S in thousands/At Ortohn*- ht iqq? , '' - '' 1995 '. 1.996 _ < 1997 . Thereafter . ; ' ' 1 ... ' . - v . / ' ' - ' . " .-A-- \ - _ ... ; ; - \ 29.801 ' 24,241 22,974 ' 70,414 - . . / * A ' .. ' . . ' /' .// ,, ' At October 31, .1992 and 1991/ obligations under capital leases of approximately,$11 million and $12 million, respectively, are included in other noncurrent liabilities. ;. , ,, . .. m - , ;/ , ' " . Conti ngencie s and Commitments , ' 1 ... ' - >: / The company is 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's natural resource operations are affected by federal, state and,local laws and regulations regarding environmental protection. In the ppinion of management, currently identified matters will not have a material adverse effect on the. company's consolidated financial position or results of operations. . / 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. At October 31, 1992, the company had financial guarantees for clients and certain other third parties totaling $120 million. DR 2801449 r *" Operationsby Business S e g m e n t and Geographic, Area ' x- ' ' ; . The Engineering and Construction segment includes subsidiaries engaged in the. design, engineering,' procurement, con- : struction, technical services and maintenance of facilities for oil and gas, chemical, industrial, commercial, utility, natural.' , .'resource, energy and government clients-. .Coal segment amounts include the operations of Massey Goal-Company,. - - 43 .. - Identifiable assets are those tangible and intangible assets used in the operation of each of the business segments and geo- , - .graphic areas, except for discontinued operations in.1992, which is net of related liabilities. Corporate assets are principally - ; ' cash and cash equivalents, marketable securities and nontrade receivables. /' - -' . .. - : Operations by Business Segment ' .... ' _ " - $ in millions " Engineering and Construction Coal .- . | Continuing Operations - " Revenues ) ' 1992. . 1991 . 1990 | 1992 Operating Profit 1991 1990 $5,904.0 $5,813.5' 696.7 - 758.5 $6,600.7 $6,572.0 $6,383.1 865.8. $7,248.9 ' $190.7 $166.2 $135.1 80.2 ' -.60.7' ' 60.3 $270.9 . $226.9-. $195.4 | . " .) '' | $ in millions . . .~~ ' ' -?- Identifiable Assets 1992 1991 1990. j ' Capital Expenditures 1992 1991/ '/ 1990. . Depreciation, Depletion and- Amortization 1992 11991; -V 1990 j Engineering and Construction Coal T Corporate - , $1,018.6 864.0 ' ' - '344.3 $1,003.9 . 696.7 393.3 $ 985.3 704.0 475.2 $ 58.7 ' $ 38.9 214.0 ' -- 67.6 ' _ $ 64.8 $ .$ 52.5 61.0 - 54.0 0.7 ' 0.5 $ 48.0 49.5 07 $ 45.7 ' ,4 &3.9': 1.0 Continuing Operations -.-'SC : ' 2,226.9 2,093.9 2,164.5 ' '/ 8/"'' t ' $2,365.5 S2A21 4 $2,475.8 272.7 ' ;4 ' 1065 , ''126.5 44 / 8 $287.Q . $159.1 V 107.0 28 98.2 , . 93,6 . x? 5- 8 $12.1 5 O P E R a t I o n s b y G e a g r a p h i c A r- e a $ in millions- " United States Canada , - Middle East Europe ' Other . 1 Revenues Operating Profit \. 1992 - .1991 ; ' , 1990 ` | .1992. .1991? -1990 . , Identifiable Assets 1992 1 1991 G 1990 '' * $4,790.6 ' 391.3 "317.8 - 714.9 -.386.1 $6,600.7 $5,102.7 555.8 76.1 495.2 342.2 . $6,046.3 388.2 24.4 59.4.0 195.4 $221.6 11.4 ' ' 4.5 ' 21.1 '12.3 $6,572.0 $7,248.9 | $270.9 $177.3. $172.4 $2,097.8 . 11.9 " '.6.4 46.6 4.6 0:7 41.9 21.8 14.3 112.7 11.3 1.6 x - 5. 66.5 ,$2,131.071.9 43.1 '105.5 ' ' 69:9 $2,133.2 82.1 ' 34.0 108.5 , 118.0 $226.9 $195.4 $2,365.5 $2,424.4 $2,475.8 The following table reconciles business segment operating profit with earnings from continuing operations before taxes: $ in millions/Year ended October 31, Operating profit from continuing- operations Interest income (expense), net Corporate administrative and general expense Reduction- in accrued lease cost, net Gain on sale of investment Other items, net Earnings from continuing operations before taxes - '- - " ' .. ' 1992 j 1991 1990 $270.9 ' (0.2) (39.3) (16.0) $226.9 31.2 (57.0) 19.6 - 16.4 (8.7) $195.4 21.8 (51.3) -- (12.3) $215.4 $228.4 $153.6' DR 2801450 4 Reports of 'Management a m- o Independent- .A u d - s t o r .s ' "` - '. - ., -t Management -' "" - , "" ' , : ' 1, ' . 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 have1 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 'judg ments relating to matters not concluded by fiscal year end. is the responsibility of management. To fulfilf 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 ; 1 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, - , \' - - . ' ' - 1 - ,r - . I N... D E P E N D E N T'\A-,U D f~T -O R S ' , , '.. ''..`W ' .- . - Board of Directors and hharohnidorc - - - 1 - -1 ' - ' ' ' ' ~ ''' . v, v i iovsJ auailea the accompanying.-consoiiCiateo Ucuai sheet oi Huoi Corporation as of October 3T, 1992 and 1991, and the ; related consolidated statements of earnings,,cash flows, "and shareholders' equity for each of the three years in"the period ended October 3.1,',1992. 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. -, -, . - / v1 ' s' - 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 statementsCAln 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.'" v i -..' . -- In our opinion, the ffhanciai-statements referred to. above present fairly, in alf material, respects, the consolidated financial position of Fluor Corporation at October 31, 1992 and 1991, and the consolidated results of its operations and its cash flows for 'each of the-three years in the period ended October 31, 1992, in conformity with, generally accepted accounting principles. - As discussed in notes to consolidated financial statements, in 1992 the company changed its methods of accounting for: income taxes and postretirement benefits other than pensions. ;" '' , Orange County, California December 2, 1992 dr 2801451 Quarterly F r n a n c f a t. . D at a unaudited - ' - : _' . Fluor The following is a summary of .the quarterly results of operations: | $ in thousands, except per share amounts(a) - _ 4.99:2 ". _ : , Revenues ' ' . '" 1 . '- -9 . Gross margin . . - ' Earnings from continuing operations before taxes 3 , Loss, from discontinued operations, net > Cumulative effect 6f change in accounting principle, net ' ,-p '/ Net earnings Goss) ' 9. . : '' Earnings perfsharei. i t . , _3 - . .Continuing operations.- .: : Discontinued operations , , > , Cumulative effect of change in accounting principle ' ] .. Net earnings (loss) T- . ' -1 . .... First - Quarter j O' Second Quarter [ Third. Quarter j Fourth : Quarter j l y ' $1,560,835 $1,544,325 . $1;662,748', ' $1,832,788 .- 58,929- ' -63,593 ' ' 70,012 '' 62,343 50,688 56,294. - 62,186 - - 45,982(0 ' - (3,386) . - (3,170) ' (2,482) , . (87,528) 3 -. _ ,,J32,866) . i. . ~ . v - L-' V--' V - " . ... " '' (4,040)(b) ' ' 32,381 .. 36,823 ... - (59,346) '1 ... 3 ' , .39- - . ,44 ' .48 f ' ' .35 - (.04) . . (03) ' ' (-40) . . . _ , ....' ; -- . (1.08)"' `" ~V '$ (-05) j..' $ O .40 , .45 j - . S :: (.73) . _ Earnings from continuing operations-before taxes ' , Earnings (loss) from discontinued operations, net 1 , NeLearnings o ' - - -. ^ Earnings per share. -' \1 , Continuing operations : o; -- Discontinued operations ., | Net earnings- - - v ' /' .9 $9/02,489 3 9069223 $0530,99? 46,963 92,055 58,709 :. 37,006 ' 50,212 _ 73,110(e) ' , 68.073(f) "- -'1.6791 11,341 {1,923)'' ' 08) . ' 26.630(d) : 42.463(d) ' 48.312(d) \ 46.743(d) -1 * : - - * i -, ' / - .31 38 .61 . 34-- .... - .57 / - \ .02 . ' . .14 " (-02) - 99 O- -- . . $ .33 .52 " $ '259 |, $ - '.57 ( (a) Air periods have been restated to present the .Lead business as a discontinued operation. ' ... . y v _ ' . ,' = (b) First quarter 1992 earnings Have been restated to reflect the cumulative effect of change in accounting principle for postretirement benefits. 3. ,^ 0 (c) Fourth quarter 1992 earnings from continuing operations includes a pretax charge-pf $6.2'million related to the cancellation of a lease-.;" ,9 . (d) Net earnings for each of the four quarters of 1991 have been restated to reflect the impact of the adoption of Statement of. Financial Accounting Standards . Noi 109, "Accounting for Income.Taxes." The accounting change increased net earnings by $.6 milliop ($.01 per share) in the first quarter*. $.8 million f -f ` ' ($.01 per share) in-the second quarter,. $1 million'($.01 penshare) in the third quarter, and $1 million ($.01 per,share) in the fourth quarter. .' . (e) Third quarter 1991 earnings from continuing operations includes the reversal of certain tease-cost reserves of $19.6 million, net of other lease cost provisions totaling $5 million. ... -- . ' :(f) Fourth quarter 1991 earnings from continuing operations, includes a gain of $16.4 million related to the company's sale of its minority interest in. a . ( . Bermuda-based insurer. : , . . '' : ..v-, DR 2801452 ENGINEERING AND CONSTRUCTION THE AMERICAS 'Anchorage, Alaska '1 ' Bakersfield; California ! Calgary, Alberta, Canada \ Caracas, Venezuela , '. Charlotte, North Carolina Chicago, Illinois - ' Cincinnati, Ohio ' - \ Corpus Christi, Texas - Dallas, Texas , Denver, Colorado Greenville, South Carolina Houston, Texas Irvine, California - Kansas City, Missouri Mexico City, Mexico > Philadelphia, Pennsylvania Redwood City; California Richmond; Virginia San Juan, Puerto Rico Santiago, Chile - Tulsa, Oklahoma Vancouver, British Columbia, Canada Washington, D.C, . ' Asia/Pa c i e i c Bangkok, Thailand Beijing, People's Republic of China Brisbane, Australia Hong Kong Jakarta, Indonesia Kuala Lumpur, Malaysia Manila, Philippines Melbourne, Australia Perth, Australia Seoul, Korea Singapore Sydney, Australia Tokyo, Japan -- Europe/Africa/Mioole East , ' Asturias, Spain ` Bergen op Zoom, Netherlands - Camberfey, England Dhahran, Saudi-Arabia ' Dusseldorf, Germany Haarlem, Netherlands Jeddah, Saudi Arabia - Leipzig, Germany London, England Madrid,' Spain Manchester. England Wiesbaden; Germany ' Coal Richmond, Virginia DR 2001453 F i li O R 4 7 DR 2801454 4 S STOCKHOLDERS' REFERENCE .0 0 Fluor F. O, R M 1" o - K ' , / : . . ' . COMMON STOCK INFORMATION'. .............* ' . '` A copy of the Form 10-K, which is filed with \ At December 31, 1992 there were 81,897,062 shares outstanding, and approximately 15,600 the Securities and Exchange Commission, 7 7, stockholders of record of Fluor's common stock. - " "; - -, is available.upon request. . Write to- Vice President-Corporate Law Fluor Corporation 3333 Michelson Drive Irvine, California 92730. (714) 975-2000. ... >- 'I,', : , . . . 1 :. .... ',, 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. ' REGISTRAR AND , 7,T r a N- s F e r Agent '; Chemical Trust Company of California, 300 S: Grand^Avenue 2nd Floor, Los Angeles, CA 90071 and Chemical Bank,1450 W. 33rd Street; New. York, NY 10001 ..Far change of address, lost dividends, or lost stock certifi cates; write or telephone: Chemical Trust, ; Company of California; RCL Box 24935, , Church Street Station, New York, NY 10249, 4 Attn: Securityholder Relations (800) 356-2017. cCommon & r o k a n- d D i v;i d e n d I n f o r mat ion 1 /. ' A 7- : : - 7 .1 Dividends per share . _ Price Range . High ' Low | - f t s, c a- l 1992' - ' '. ' First Quarter ; ,' Second Quarter ' 1 ' , . Third. Quarter - , Fourth Quarter 7 ' -\ .- ' .4 \ . 7 \- ' $0,10 y. 0.10 7 . 0.10 `0.10 ' $ .40 ' $4814 ': $3514 - 4614 v 367/a 4"47/b 36% 4714 3774' " Third Quarter: ; AN N UAL STOCKHOLDERS' Fourth Quarter v. r 'M' E; E-T1 1 N Ob -' Annual report and Droxy statement are . - . .-... '' -- mailed about'February 1: Fluor'fe annual meeting of stockholders.will be. held at 9:00 a.m, on March .9, 1993 at the Fluor Daniel H t s t o r y of Stock , . .Houston Complex, One Fluor Daniel Drive, \' Sugar Land, Texas. . """ . . Dividends an d Splits S l n c e G o r n g ;1 Public In 195 0 Stock Trading Fluor's stock is traded on the New York, 7 : 08/23/57 ~ ' 12/15/61 20% Stock Dividend - 5% Stock Dividend Midwest, Pacific, Amsterdam; London and ' 03/11/63.' 5%, Stock' Dividend ;Swiss Stock Exchanges. Common stock. - 03/09/64 - 5% Stock Dividend 7 domestic trading symbol: FLR. / 03/08/65 5% Stock Dividend . 02/14/66i 5% Stock Dividend Co mp: a. n-y. Contacts ' 03/24/66 ,, 2 for T Stock Split Stockholders may call collect. . 03/27/67 ' . 5% Stock Dividend Stockholder information: ... ., 1 - 02/09/6S.. ' 5% Stock Dividend Lawrence N, Fisher '! ,03/22/68 2 for 1 Stock Split (714) 975-6961 Investor Relations: ' 05/16/69 5% Stock Dividend ' 03/06/70 7' 5% Stock Dividend Lila J. Churney . 03/05/71 ` 5% Stock Dividend (714) 975-3909 .- 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 ' . ' ' " . ' sJ'-f 74 _ 0.08 ; T 505/8 0.08 ,v $0.32 } 46% . ' V H 1 /8 ' 43%. 37% DR 2801455 C* Printed on recycled paper. Designed Dy: The Jefferies Association / Photo Illustrations: Yves Courbet / Lithography: George Rice & Sons / Typography: CAPCO / Printed in USA Mission Statement Mission As Fluor Daniel employees, our mission is to assist clients in attaining a competitive advantage toy delivering quality services of unmatched value. Services and Markets We provide a complete range of engineering, construction, maintenance and related services to virtually all industries and government. We service our clients through a network of offices strategically located around the world. We globally link technology, experience, human resources and services in meeting client needs. Principles To add value to our services, these principles are emphasized: We are client focused. * We are innovative and flexible in meeting client needs. * We deliver quality, And above all, we do every task safely. uous improvement, we challenge, test, reevaluate a excellence. As a service organization, our success depends upon the combined capability and contribution of all employees. Fluor Daniel is dedicated to fostering a work environment which challenges, enriches and rewards each individual. DR 2801456