Document NGk7qN5Mwd8X2KexQ5VmL4468

Mission Statement Missio n As Fluor Daniel employees, our mission is to assist clients in attaining a competitive advantage by delivering quality services of unmatched value. Services and Markets We provide a complete range of engineering, construc tion, maintenance and related services to virtually all industries and government. - We service our clients through a network of offices strate gically located around the world. We globally link technology, experience, human resources and services in meeting client needs. Rrin cipIes 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. Philo s o p h y Our philosophy is based upon ethical conduct, mutual trust and teamwork. To ensure continuous improve ment, we challenge, test, reevaluate and continually raise our standards of 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. Abo u t Th Tlie Doswell power plant in Virginia pictured on this years annual report cover typifies Fluor Daniel's commitment to excellence and value added. As the result of a broad range of quality services, the project achieved outstanding safety records and was able to meet or exceed all performance criteria established by the client. hen operational in early 1992 the plant will generate enough power to serve 166,000 homes while meeting `dl applicable environmental standards. * 'c * Co n t e n t s Highlights Letter to Stockholders Budding Shareholder Value Operations Report Eii|: intering and Construction D'j di'Oe'arbf/n SeCtoV Government Sector Process Sector Industrial Sector Poll er Sector Fliior Constructors International Natural Resource Investments Coal Lead Operating Statistics Financials Management's Discussion and Analysis Consolidated Financial Statements Reports of Management and Independent Auditors Reference Information Quarterly Financial Data Directors Officers " Principal Subsidiaries and Divisions Stockholders' Reference DR 2801357 Backlog dollars in billions Company Description Fluor Corporation is one of the world's largest international engineering, construc tion, maintenance and related services companies, and has important invest ments in coal and lead. 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. Organized to meet client needs, the company is structured into five business sectors: Hydrocarbon, Government, Process, Indus trial and Power. Services include feasibility studies, conceptual design, project management, engineering, construction, procurement, technical services, pro ject financing, maintenance and plant operations. Fluor Daniel provides global capability from over 50 offices located around the world. A.T. Massey Coal Company, Fluor's investment in coal, produces both high-quality, low-sulfur steam coal and metallurgical coal and ranks among the 10 largest coal companies in the United States. In addition to sales of produced coal, Massey also markets coal for independent producers. Fluors investment in lead is conducted through The Doe Run Company, which produces approximately 50 percent of all U.S. primary lead metal, and operates one of the worlds environmentally cleanest secondary lead recycling plants. Highlights F I uor $ in thousands, except per share amounts 1991 1990 Percent Change Fiscal Year Revenues Net earnings Net earnings per share Return on average shareholders' equity Capital expenditures New awards Cash dividends per common share $ 6,741,698 160,788 $ 1-97 17.2% $ 159,718 8,531,600 $ 0.32 $7,446,280 146,886 $ 1.81 18.6% $ 155,686 7,632,300 $ 0.24 -9 9 9 -- 3 12 33 A t Year-End Working capital Total assets Backlog Capitalization 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 $ 311,312 2,421,435 11,181,300 75,682 1,019,994 $ 1,095,676 6.9 93-i $ 455/s $ 12.58 19,625 $ 238,822 2,475,796 9,557,800 57,662 863,965 $ 921,627 6-3 93.7 $ 5 2 Vs $ 10.75 22,188 30 -2 17 3i 18 19 __ -- 41 17 -12 The quarterly dividend was increased from $.06 per share to $.08 per share in the first quarter of 1991 and to S.io per share in the first quarter of 1992. DR 2801358 1 L et t a r to Stockholders Leslie G, McCraw, Chairman of the Board and Chief Executive Officer (left) and Vincent L. Kontny, President and Chief Operating Officer (right). Dear Fallow Stockholders: We are pleased to report that 1991 was a record-setting year for Fluor. Five years ago management set perfor mance goals as part of the company's overall restruc turing. The foundation of this restructuring was to become broadly diversified within the engineering and construction (E&C) industry. The goals we set included regaining the No. 1 position in our industry through leveraging our diversification of more serv ices, to more clients, in more industries and more geographic markets than any global competitor. That goal has been reached. In fact, for the past four years, Fluor Daniel, Fluors E&C business, has been ranked No. 1 by Engineering News-Record among all U.S.-based E&C companies and is widely recognized as not only the most diversified but also the safest. A second goal was to exceed the company's previous net earnings peak of $159 million set in 1981 by being more client focused and market driven as set forth in our Mission Statement (inside front cover). In 1991, net earnings totaled $161 million, surpassing the previous peak. More importantly, the earning power and growth potential of Fluor continue to expand. Highlights of the Year Consolidated net earnings for the company advanced 9 percent in 1991 compared with the prior year. " Fluor Daniel, our core E&C unit, generated operat ing profit growth of 23 percent and backlog growth of 17 percent. HP oon-i TKO * A. T. Massey, our coal investment, showed strong profits, about in line with 1990. Doe Run, our lead investment, suffered a small loss versus $36 million in operating profits in 1990, due to weak, industry-wide lead prices. Nonrecurring gains resulting from a tax refund, the sale of an investment in a reinsurance company and reversal of lease cost reserves in connection with the purchase of our Sugar Land, Texas E&C facility, more chan offset the operating profit decline at Doe Run. The company ended the year with an exceptionally strong balance sheer--$370 million in cash and securities and only $76 million in long-term debt or 7 percent of coral capitalization. * Quarterly cash dividends to shareholders were increased 25 percent to 10 cents per share. Among the biggest challenges we overcame this past year was rapid and fundamental change in the global markets we serve. Thinking back just 12 months ago, who could have imagined the events that would take place, the geopolitical dislocations that would occur, and the problems and opportunities that would be presented? Capitalizing on change continues to be a repeated theme within our company as well as a basic assumption in our forward planning. Engineering and Construction Fluors core business continues to be engineering and construction including maintenance and technical services. Diversification of services, industries and geographic areas within E&C remains our strategic emphasis. We firmly believe that diversification will enable us to weather the economic storms that indi vidual industries and economies we serve periodically experience. This past year was a strong case in point. Given the enormous size and virtually limitless oppor tunities within our global markets, the challenges in delivering E&C profitability growth require that we excel in the following four areas: First, Continuous Performance Improvement--recognizing that we must constantly improve the quality of everything we do no matter how well it is currently being done. Second, selectivity--pursuing project opportunities where we can add meaningful value as defined by the client. Third, alignment and Excellence in Project- Execution--ensuring that our project goals match those of the client while performing our work in a safe and superior fashion, thereby earning improved margins, incentives and repeat business. And fourth, leveraging--continuing to refine our ability to net work our multiple global offices in a way that maxi mizes both the experience and capabilities of our people and that utilizes our global computer-aided design anA --- ' 1 ft 9 t u r a 1 Resources A. T Massey, our coal investment, performed quite well this past year due to excellent management, well run, cost-efficient operations and high-quality, lowsulfur coal reserves. Another notable achievement occurred shortly after the close of the fiscal year. In November, Rawl Sales & Processing, Masseys largest operating subsidiary, reached agreement on a new, five-year labor contract with the United Mine Workers of America (UMWA). The terms of the accord were equitable to both the UMWA members involved and to Rawl. A major milestone was also reached in management suc cession as Morgan Massey became Chairman Emer itus and Don Blankenship, who had been President and Chief Operating Officer, assumed the position of Chairman and Chief Executive Officer. Mr. Massey, who has provided visionary leadership through the years, will remain on Fluor Corporation's Board of Directors. The strategy for Massey Coal, against a backdrop of posi tive clean air legislation, calls for capitalizing on their leading market position in Central Appalachia and expanding their low-sulfur reserves as appropri ate. Massey is challenged to continue to improve their safety performance, operations effectiveness and environmental sensitivities. Action plans at Doe Run this past year involved contend ing with deteriorating lead prices due to oversupply and soft end-market demand, particularly in the automobile battery sector. Cost reduction actions included manpower and production cuts of 25 per cent resulting in lower unit costs. Operational effec tiveness programs are continuing. Doe Run, with project assistance from Fluor Daniel, com pleted construction and start-up of a new, environ mentally state-of-the-art, lead recycling plant. This new 60,000 tons per year unit, a world-class facility, significantly increases both production flexibility and cost efficiency of the lead operations. In addition, it underscores the commitment to being an environ mentally sensitive company. The frustration with our lead investment is that it is a much improved opera tion today compared with just a year ago. In fact, from a variety of perspectives including safety, envi ronmental response, innovation and basic operations, Doe Run is at a level of performance unprecedented in its 100-year history. Unfortunately, due to weak global pricing, it is currently operating at no better than break-even. Management continues to explore ways to increase the value of this investment from the shareholders' perspective. Board of Directors C h a n g a Dr. Allen Puckett, former Chairman of Hughes Aircraft, retired as a director of the company effective Decem ber 10, 1991. Dr. Puckett has served our company with great distinction since 1987, adding a wealth of technical experience and business acumen. His wise counsel will be missed. We are grateful for the strong contributions by our Board of Directors and have included a special section on pages 44 and 45 highlighting the unique capabilities each director brings to the company. Building Shareholder Value Our Letter to Stockholders normally includes a brief sec tion covering financial matters. This year we have devoted an expanded section describing how manage ment views the building of shareholder value through superior financial performance. This information, which immediately follows this letter, will assist shareholders in evaluating the company's investment profile, goals and potential. Without hesitation, 1991 was one of the most challenging and rewarding years in our history. Most gratifying was the dedication, creativity and flexibility of our employees worldwide. They responded to rapidly changing situations, always mindful of our obliga tions to clients and shareholders. Special thanks also go to those same clients and shareholders for their trust and support. Many of our clients refer to us as partners and that in itself says so much about the kind of company they view us to be. As we look out into the decade of the 90s, we remain convinced that capital expansion, the primary stim ulus of our core business, will continue in an upward trend worldwide. As a company, Fluor and Fluor Daniel could not be better positioned to capitalize on the opportunities that will result. Les McCraw Chairman and Chief Executive Officer President and Chief Operating Officer January 17, 1992 DR 2801360 B u i I d i n g Shareholder Value Shareholder Value -- What is I t ? Building shareholder value. Is it the latest corporate cliche or a value-based framework for making corporate decisions and judging managements success? At Fluor, our dedication is to establish a corporate culture where success is measured by both client and employee satisfaction, the foundation for the creation of shareholder value. Defined as total return to stock holders over time, shareholder value is the stock price appreciation plus dividends that result from a well managed and financially strong business. Superior Performance Generates Shareholder Value External studies of companies across all industries have found a clear relationship between superior stock price appreciation, dividend growth and superior financial performance. The four most important financial measures contributing to shareholder value are earnings growth, high returns on shareholders' equity, positive cash flow and balance sheet strength. As a result, Fluor is emphasizing these financial measurements as important elements in shaping our strategic plans and guiding our decision process. In addition to specific operational goals designed to create value for our clients, it is our objective to deliver performance levels that would rank us in the top 25 percent of the 500 largest U.S.-based corporations in the decade of the 90s. While we are already exceeding the return on equity, cash flow and balance sheet goals, improved performance is necessary to meet the earnings growth target. Focus on Business Offering Growth and Superior Returns An essential element in creating shareholder value is to operate within a business or industry which offers strong opportunities for superior financial perfor mance. As reflected in our Letter to Stockholders, Fluor's corporate restructuring in 1987 refocused the company on engineering and construction (E&C) as our single core business which we are convinced offers such opportunities. By reconfiguring our core E&C business to be broadly diversified, we've signifi cantly expanded the long-term growth potential of our company. Given the broad market spectrum for E&C services, our strategy is to target those segments where we can emphasize high-quality, value-added services and in turn generate superior growth and profitability. Our approach is to be selective by pursuing projects where our range of services, global E&C capabilities and superior project execution skills can add unmis takable value for clients and allow us to be paid accordingly. Backlog by Business Sector-- 1991 Industrial 26% Government 12% Consistency in Perform a n c a Financial Another important element in creating shareholder value is consistency in financial performance. Again, our broad E&C diversification of services, industries and geographic areas, coupled with a flexible operating style, is designed to mitigate the cyclical nature of individual business segments. The global market for E&C services is very large, estimated to be more DR 2801361 than $1.5 trillion a year. Given our diversity and t global presence, the opportunities to gain market share are significant. We believe our diversifica tion strategy, coupled with the size of the market, should enhance the consistency of Fluors financial performance. Net Earnings and E&C Operating Profit dollars in millions reserves adjacent to existing facilities of A.T. Massey, Fluors coal investment. The other areas of potential cash use include increased dividends and share repur chases while retaining sufficient cash to provide for financial flexibility. Return on Equity percent XX X 89 Net Earnings 26.6 56.4 108.5 E&C Operating Profit (Loss) (49.5) 50.8 117.4 90 146.9 13 5 1 91 160.8 166.2 Return on 1 n v e stment -- A Kay Focus A third key element to enhancing the shareholder value of Fluor stock is to concentrate our capital dollars in areas which maximize return on investment. The E&C business tends to be a strong cash generator. The challenge is to identify and pursue attractive reinvestment opportunities which benefit the core business and/or the shareholder. Consequently, Fluor capital investments are prioritized as follows. First, capital investment is only directed into areas which provide superior returns or which provide our busi ness with a strategic advantage. Our priority is to reinvest in our core E&C business. For example, we have invested aggressively in the tools of our trade such as electronic engineering and linking our net work of global offices through telecommunications to improve the productivity of our people. Use of cash for project purposes, including interim funding or financing, is receiving careful consideration. Either full acquisitions or partial ownership of E&C com panies which would enhance our participation in attractive markets are also a focus for reinvestment. Additionally, we continue to see opportunities for excellent return on investment in new low-sulfur coal 87 88 89 90 91 3.3 lo.o 16.5 18.6 1-.2 Fluor's Business Depends on People As a service business, it is important to realize that what Fluors core business sells is not a product, but is simply and entirely the skills and capability of its people. Recognizing this fact, we believe that the most effective approach for focusing and motivating management toward enhancement of shareholder value is to directly link their objectives with those of the shareholder. Fluor has a variety of compensation programs geared to attract, retain and motivate management, with incentives linked to superior financial performance and enhanced shareholder value. The fundamental philosophy is to relate the amount of an executives compensation at risk to his or her contribution in achieving financial performance objectives. Executive compensation programs, for example, include three primary components: 1) base salary; 2) potential for an annual cash bonus award based on overall com pany performance as well as individual performance; and 3) the opportunity to earn long-term cash and stock incentives which are designed to achieve supe rior results over time and to align management and shareholder interests. For 1991, more than 80 percent of compensation for the Executive Officers listed on page 46 was at risk. The nature of the long-term programs as well as the extended vesting period for stock options mean that executives may realize rewards several years after shareholders benefit from stock price appreciation. DR 2801362 D i v i d e n d Growth Tied to Company Performance Our current dividend payout guideline is approximately 20 percent of the previous year's earnings. By estab lishing a payout guideline tied to a percentage of annual earnings, dividends will grow as company performance improves. Fluor Stock Price vs. S&P 500, October 31 cumulative percentage change 86-87 86-88 * Fluor Corporation 19.6 27.2 S&P 500 3.2 6.9 86-89 33-4 11.7 86-90 27.8 5-7 86-91 3-4 IO.O s in Shareho 1 d e r Strong Board of Directors Average Over 30 P e r c e n t Provides Oversight Finally, acting on behalf of shareholders, the Board of Directors provides oversight to ensure that the com pany's business strategy and financial policies are aligned with the best interests of shareholders. Fluor is committed to having a strong Board, a majority of whom are nonemployee directors who can add insightful global perspective to business issues. We are fortunate to have such an outstanding Board. Fluor Stock Price, October 31 dollars Now that we know how Fluor defines shareholder value and is positioned to enhance it, what have been the results so far? A stockholder at the beginning of fiscal 1987, the year our corporate restructuring was completed, could have purchased shares of Fluor for $12.13. At the end of fiscal 1991, five years later, those shares were worth $45.62. Including dividend growth, this represents annual growth of 31 percent on the original investment. This compares to annual growth of 10 percent for the S&P 500 over the same time period. While we are reasonably pleased with our performance so far, in many ways we have only begun to scratch the surface of our potential. We firmly believe our focus on shareholder value is consistent with delivering the I 87 88 l4'/i 19V8 89 90 28*4 32V8 91 45% objectives of our Mission Statement (inside front cover) while building the kind of company in which employees can contribute, achieve personal growth and be proud of their accomplishments. Through hard work, dedication and innovation, we believe our strategy will support our goal of enhancing shareholder value. We are focused on engineering and construction, a business that we believe is in a long-term growth cycle. We are convinced that Fluor has the right organization and strategic plan for success. We are dedicated to delivering the financial DR 2801363 performance that will prove enhancing shareholder <it* T-< 11 mr tc no r~\ i n 2 i n e e r i n g___8t Construction Fluor Daniel, the company's core engineering and con struction (E&C) business, generated operating profits of $166 million in 1991, a 23 percent advance over the prior year. E&C earnings growth was due to improved profit margins from operations. Fluor Daniels geographic and market diversity, combined with a broad array of services and flexible operating approach has proven to be an effective strategy for expanding the company's position in the global marketplace. New E&C awards grew 12 percent in 1991 to $8.5 billion, while backlog advanced ly per cent to $11.2 billion. All five E&C business sectors We remain firmly convinced that the decade of the 90s achieved backlog growth from a year ago. Approx will be a period of worldwide capital expansion for imately 30 percent of backlog is for projects outside which we are particularly well positioned. Our the U.S. diversity and flexibility, coupled with superior proj Our marketing approach is to be selective, targeting ect execution, should allow us to capitalize on this primarily those project opportunities where we can long-term growth cycle. add special value and earn a premium price. Benefits are beginning to be realized on our investment in H y d r o c a r b o n Sector electronic engineering and telecommunications to network our technical resources worldwide. As many The Hydrocarbon Sector posted healthy gains in 1991, Fluor Daniel clients globalize their operations, they benefitting from a strong capital investment cycle in are recognizing the value of our global resources and its markets. New awards increased 44 percent to experience. A strong emphasis on Excellence in Proj $3.4 billion, bringing the Hydrocarbon backlog to ect Execution and Continuous Performance Improve ment is allowing us to add value for clients and improve profitability. Superior performance is essen tial to winning incentive bonuses on contracts linked $3.5 billion, or 31 percent of the company's total. The factors driving the hydrocarbon market include fundamental growth in global energy demand; stra tegic market positioning by producers to capture mar to key project objectives important to each client. ket share and by users to diversify sources of supply; Finally, the value advantage is the foundation of and continuing investment to address environmental continued growth in strategic alliances with clients that account for approximately 20 percent of our work. concerns and process heavier feedstock. Fluor Daniel's Hydrocarbon Sector is organized to serve two primary markets: the "upstream" market, includ ing basic production, treatment and transportation of oil and gas; and the "downstream" market, includ ing petroleum and petrochemical projects that refine and process feedstocks. Project activity in the U.S. hydrocarbon market has focused primarily on downstream processing facili ties, largely driven by environmental legislation. Remediation of existing problems and new pollution prevention projects, along with modernization and upgrading of facilities, dominate market activity. Outside the U.S., significant opportunities, both upstream and downstream, span the global hydrocarbon mar ket. Included are several large opportunities where DR 2801364 Fluor Daniel can capitalize on its global presence and project management strengths. Few competitors Operations Report Hydrocarbon Sector Backlog dollars in millions have the capability of handling such complex, multi year programs. Selectively targeting such opportuni ties where Fluor Daniel can differentiate itself and provide added value to the client is a key strategy in continuing profitability growth. During 1991, work continued on the large Saudi Aramco Crude Expansion Program awarded in June 1990. Backlog at year-end 1991 included approximately $1 billion for this multi-year contract. As home to a major portion of the worlds crude oil reserves, the Middle East is an attractive fundamental market for the Hydrocarbon Sector. Venezuela is also moving aggressively to expand its econ omy by capitalizing on geographic independence from the Middle East as a long-term supplier of crude production and refined product. In addition to a stable political environment, Venezuela has made significant changes in its economic policies to attract foreign investment to support its expansion programs. Fluor Daniel has a longtime market presence in Vene zuela with excellent client relationships. Recently, the company acquired approximately 20 percent equity interest in Tecnoconsult, our local Venezuelan partner of 20 years, further enhancing our position in this market. Oil reserves in Venezuela tend to be heavier crudes that require extensive processing and upgrading facilities, a key Fluor Daniel strength. Strong economic growth accompanied by increasing energy demand has made Asia/Pacific another attrac tive long-term market for the Hydrocarbon Sector. Opportunities to capitalize on existing natural DR 2801365 940 1,932 1.951 2.922 3,493 resources through expansion of value-added refined products have stimulated a significant array of antici pated projects. Investment is coming from both the national oil companies in Asia/Pacific as well as from the international oil companies that are diversifying and globalizing their sources of crude and finished products. Government Sector New awards for the Government Sector in 1991 were $635 million, somewhat below last year's record $887 million. Backlog currently stands at $1.4 billion, or 12 percent of the company's total. The Government Sector made important strides during the year to position itself on the front-end of several potential large, long-term projects. Additionally, the relatively high proportion of engineering and tech nical services makes the sector a strong contributor to earnings. The Government Sector serves a broad range of clients in both government and private industry through five business units: Advanced Technology; Environmental Services; Telecommunications; Infrastructure; and FD Services/SOS. Increased spending by the Department of Energy (DOE) to address the long-term issues of environmental cleanup at its sites and reconfiguration of the nuclear weapons program should create significant oppor tunities throughout the decade for the Advanced Technology unit. Ongoing DOE contracts to handle long-term storage of spent nuclear fuel include the Hanford Waste Vitri fication project and the 1991 award for work on a nuclear waste repository. Fluor Daniel was also successful in winning the key contract to provide nmnt.e- tnrvur1 u_ caruI_u__n__o_c_l_l_u__i _ii1_iL__u_u'TgVn. iCaL_ii_u_u__u_u_i, a,,.1-1 ^a.2>:><jc_ii_A;iiuii .uri nrmi__u_i Daniel and Tecnoconsult, is providing engineering, procurement and construction management services to build a delayed coker unit at Lagoven's Amuay refinery in Venezuela. Fluor Daniel has a longtime relationship with Lagoven, an affiliate of Petroleos de Venezuela. Previous projects include a major upgrading project at this same refinery. DR 2801366 The Environmental Services business unit of Fluor Daniels Govern ment Sector is at work on one of its first major remediation projects. The unit is providing engineering, procurement, construction management and program management for the private cleanup of a Superfund site in Gar}7, Indiana, sponsored by the Ninth Avenue Respondents, a group of more than 30 companies. DR 2801367 Op*'* + ion port enginger,ing s,ew tm nuclear weapons recon- figuf^wn study pr.,/ ^ winch will sFpan me decade an6d represent ub.iri;^. - `A dollars in .capital exFpendi- cures b, y th. e DOfc, -/"j wfiditionai si6gnifi.cance is Fluor Danitl's selection t* 'A TM ""P"S contractors for the construct,or> -element of a new nuclear prod,, ucti,on reacted- ,fr- uof Daniel is prov,id,ing. plaunrning suppor_t ser/#<^%> to7r the newer modular, hig*h temGperature gnnaes--./ re,actor (MHTGR) th, at is. widely recognized S>* ' lnherent satety ^ env1TM- mental soundness m-4 TM' be a ma>" lo"<erm factor in new basel^i power production T_he secondi mmnaijonrr aarreeaa < long-term potential for the Goveminent Sc ector is ttVr>M- market for our Environmental Servi,ces unit. tL0,mN*joen, publgic pressufre an. d a growi,ng commit/r' f'" by/ industri..a. l companies to be * -rive in their .>H'"'adl " ttmed,a" environmen tal problems is raPd rowth- Capitaliz ing on a leading-edge base of technology resident in Fluor Daniel and l be "-'sources to address large proj ects the EnvironnieMOil unit was successful in win ning a number of. o"'"s in W- Environmental work is underway a' *val sites as part of our strate gic alliance with < >b Chemicals. Additionally, Fluor Daniel is performing rcmcd.ation at two Superfund Sia-S and was sell-, ("'I the US' **">* environ- meutal cleanup pri'/l""n throughout the Pacific. Existing client n'ladomh'P5 across Fluor Daniels diversified client has'' "-present "tractive oppor tunities for our |.,,vm"ental services. While the Telecomniuu",olls unlc offered in 1991 from a lugging U.S. an*1 we have established a niche in integrated data networks for the banking indus try and emergen,....... svsrcms for municipalities. Mergers and the need lor greater operational efficien cies within the Iwokm* industry should stimulate investment in. this area. Our successful completion of the emergency 911 system in Los Angeles could lead to similar opportunities in other cities. At year-end, operations serving the space anti defense, transportation and commercial building markets were consolidated under the Government Sector as the Infrastructure business unit. Complimentary skills and an overlapping client base allowed for more effective performance and streamlining of costs. Recent allocation of funds by the U.S. Government for transportation projects should enhance Fluor Daniel's opportunities in that market. FD Services/SOS provides facilities operations, mainte nance and asbestos abatement services to a broad range of government and private sector clients. A continuing trend towards outsourcing for flexibility and cost-effective services is stimulating demand for this unit. Several new contracts were received in 1991, including renewal of our contract at the Charleston Naval Station in South Carolina. Process Sector The Process Sector performed admirably in 1991 against a backdrop of sluggish demand coupled with near term overcapacity in several of its key markets. New awards were $i.y billion, slightly below $1.8 billion last year. Backlog grew 11 percent, however, to $2.6 billion, representing 23 percent of the company's total. Significant advances were achieved during the year to consolidate and streamline the Process Sector's busi ness operations, improve the focus of marketing efforts and enhance strategic geographic positioning. The Process Sector serves two primary markets: pharma ceutical and biotechnology; and chemicals and plastics. A third business unit is aligned specifically to pro vide services to our long-term alliance with Du Pont. DR 2801368 HepOperations t tt Process Sector Backlog A.O,srs in millions Industry consolidation in 1991 caused us to refocus our market activity on larger, global companies located in three geographic regions: the United States, West ern Europe and the Far East. The pharmaceutical and biotechnology market continues its relatively stable long-term growth pattern which is driven by advances in technology and medical research. Our Philadelphia office, established in 1988, has grown steadily and is the nucleus of our U.S. activities for this market. Responding to the increased global ori entation of the client base, we have further strength ened our global sales team to increase penetration of the pharmaceutical and biotech market. Our offices in Camberley, England and Wiesbaden, Germany are leading our European efforts. Plans to expand Fluor Daniel's business activities in the Far East pharmaceutical and biotech market are currently being developed. During the year, business operations for the chemicals and plastics units were consolidated to capitalize on market similarities and operational strengths. The commodity-based market for chemicals and plastics tends to be cyclical and currently is digesting new capacity that was brought on over the past few years. A strengthening U.S. economy and increased con sumer confidence should stimulate a cyclical recovery. Bright spots of activity have centered on specialty chemi cal areas and expansion to meet long-term strategic plans. For example, Fluor Daniel was successful in winning a large, world-scale project in Saudi Arabia to produce MTBE, a gasoline additive that has envi ronmental benefits. Strategic issues also are stimulat ing activity as integration of the European Economic Community continues. Clients are centralizing their production to achieve economies of scale while remain ing responsive to individual geographic markets. In most cases, these new plants are expected to replace DR 2801369 smaller, less efficient facilities. Strong client relation ships and our global capability positions us well as the chemical and plastics industries continue to con solidate and globalize. . Environmental remediation and cleanup is increasingly representing significant capital investment by Process Sector clients. Existing relationships with many of these clients and the ability not only to remediate problems of the past but to design new processes to minimize waste have made this an attractive market. The Delta Division, which is dedicated to serving our long-term strategic alliance with Du Pont, experi enced its first year of reduced activity following sev eral years of strong growth. Strengthening industry conditions expected in 1992 should stimulate renewed opportunities for the Delta Division. During 1991, activity continued on Du Ponts large-scale grass roots plants in Spain and Canada. Opportunities ro help Du Pont address its environmental concerns are expected to add to future growth. Industrial S a c t o r Broad diversity, client alliances and continuing expansion of services and geographic markets helped the Indus trial Sector offset recessionary weakness in the U.S. New awards in 1991 were $2.1 billion compared with $1.7 billion last year. Backlog grew 24 percent to $2.9 billion, representing 26 percent of the company's total. The Industrial Sector is organized to address a broad range of markets: pulp and paper; mining and metals; foods, beverages and consumer products; and automotive and electronics. Sufficient capacity in the U.S. pulp and paper market has caused new capital investment to be focused primar ily on recycling and environmentally driven projects. The Process Sector's Delta Division executed the largest project performed to date under the Du Pont alliance with the engineering and construction of this hydrogen peroxide plant for Du Pont Canada in Gibbons, Alberta. Strong commitments to quality and safety goals resulted in achievement of full incentive awards and zero lost-time injuries. DR 2801370 In a global expansion of Fluor Daniel's nearly four-year alliance with Alcan, the Industrial Sector provided total responsibility serv ices to British Alcan Aluminum to construct a used beverage can recycling plant in the U.K. Modeled after a sister facility also built by Fluor Daniel in Berea, Kentucky, the plant is the first in the European Economic Community fully dedicated to aluminum can recycling and is capable of processing 9 million cans per day. DR 2801371 Operations Report 1,661 2,338 2,935 2,354 2,930 During 1991, Fluor Daniel took steps to expand and enhance its ability to respond to increased globaliza tion by clients in this market. Demand for higher quality paper products has stimulated activity in Europe and other industrialized economies. The mining unit, which was previously reported under the Hydrocarbon Sector, was consolidated with the metals business during the year to capitalize on mar ket synergies. Activity in 1991 focused on a variety of markets with particular emphasis on aluminum. New awards include projects for a new aluminum smelter, expansion of an aluminum sheet production facility and recycling plants. Although recycling of alumi num beverage cans is well established in the U.S., this trend is just beginning in the United Kingdom and throughout Europe. Building on a base of strong client relationships, Fluor Daniel continues to expand its geographic participa tion in the global market for foods, beverages and consumer products. Organizational changes were made during 1991 to better serve and capitalize on an increased geographic diversity of clients and projects. Greater use of technology such as aseptic processing and packaging is stimulating long-term market growth, particularly in developing countries. Continued gains in market share were made in 1991 in the global automotive and electronics markets. Eco nomic stimulus from the market integration process in Europe is expected to create strong growth. Euro pean, U.S. and Japanese manufacturers have been establishing new production facilities, particularly in southern Europe where labor costs are attractive. Reflecting a new trend toward outsourcing of mainte nance services by the European auto industry, Fluor Daniel recently won its first maintenance contracts in Europe. In the U.S., pressures on auto manufacturers to remain competitive through model changes and plant reno vations have kept capital spending at high levels. The trend toward free trade and privatization has made Mexico not only an attractive location for new auto production facilities, but also should stimulate an expanded market as well. Additional opportunities are emerging in Asia/Pacific in both the auto and electronics markets as those economies expand. Fluor Daniel formed a new joint venture with Posco Engineering, a subsidiary of Korea's largest steel company, to expand our E&C market potential across a broad range of industries in Asia/Pacific. The new company, AEC International, has already been contracted to build a silicon wafer facility in Korea. Power Sector The Power Sector, which concentrates primarily on North America, achieved notable successes during 1991 in a market that continues to defer capacity additions. New awards for the Power Sector were $711 million compared with $900 million in 1990. Backlog grew 5 percent to $855 million, or 8 percent of the com pany's total. Reluctance by U.S. electric utilities to add new baseload generating capacity stems from a variety of politi cal, legislative and economic factors. Over the past decade, many utilities suffered unfavorable judg ments by public utility commissions to recover costs of constructing large new generating plants. More recently, pending changes in utility regulations and far-reaching environmental legislation have created an atmosphere of uncertainty, making long-range planning difficult. As a result, capital investment by util ities has concentrated on programs to stretch existing is ~ dr 2801372 Ope rat ions Report generating capacity through greater efficiency and optimization strategies, Fluor Daniels Power Sector provides services to support these programs. To fur ther offset the need for new plants, many utilities have instituted demand-side management programs to achieve significant gains through energy conserva tion. The sluggish U.S. economy also has impacted near-term growth in electricity demand. Despite these factors, however, non-utility generators (NUGs) continue to build new plants, and industry experts recognize that significant additions to new baseload capacity cannot be postponed indefinitely. Fluor Daniel is following a strategy of serving the needs of the current power market, while positioning to respond when the full potential of this market is realized. The Power Sector is organized in three business units to best serve the needs of its market. The Power Serv ices unit provides a broad range of services to exist ing power plants and is responsible for building and maintaining strong client relationships with North American utilities. The Gas Turbines unit specializes in new gas-fired, combined-cycle facilities that have been developed most frequently by NUGs. Duke/ Fluor Daniel, our joint venture with Duke Power, is focused on delivering new coal-fired power plants and flue-gas desulfurization. Steady progress in developing closer relationships with target clients and gaining market share was achieved by the Power Services unit. Growth continued in partnering programs to provide ongoing system maintenance and capital improvements. The unit is completing its third steam generator replacement project for a nuclear plant, a market that is growing with the aging of U.S. nuclear facilities. Also, at yearend the company was awarded a maintenance agree ment with Tennessee Valley Authority, the largest utility system in the U.S. NUGs continue to offer opportunities for the Gas Turbine unit to capitalize on Fluors expertise in leading edge applications of combined-cycle technology. Addi tionally, because these projects must secure outside financing, Fluors excellent financial condition and engmeenng/construction reputation provide a competitive advantage. The 663 megawatt gas-fired, combined-cycle plant in Virginia for Diamond Energy, which will be completed next spring, is rep resentative of the opportunities in the independent power producer market. While few utilities have committed to new baseload plants, Duke/Fluor Daniel was successful in winning the only utility-owned, coal-fired plant to be ordered this past year--a 385 megawatt generating facility for South Carolina Electric and Gas. Near-term focus has centered on the developing market driven by clean air legislation. While natural gas prices and availability remain attrac tive, future conditions could shift the economics toward the environmental benefits of coal gasifica tion. As a leader in coal gasification technology, Duke/Fluor Daniel is working with several clients in the development of integrated gasification combinedcycle projects for electric power generation. This will position us to capitalize on this emerging market. Fluor Constructors International _ DR 2801373 Fluor Constructors International, Inc. (FCII) provides rcnsrrucrion services for Fluor Daniel projects world wide. and performs anion iiree t -hirt work in North Amrnea FCIJs union eon strut riori and maintenance capabilities make Fluor the largest double breasted company in the U.S. FCII 1: iligned to provide global support to all five Fluor Darnel business actors. Working under a very aggressive schedule, Fluor Daniels Power Sector provided full scope and start-up testing services for Doswell Limited Partnership, a subsidiary of Diamond Energy, Inc., in the construction of a 663 megawatt power plant in Hanover County, Virginia. The facility is the largest independent power plant ever built in the U.S. and is expected to begin commercial operation in early 1992. DR 2801374 Massey Coal subsidiary Elk Run Coal Company, located in Boone Councy, West Virginia, is a full-service supplier of steam and metallurgical coal products to more than 30 customers. More than 15 million clean tons of coal have been shipped over the past ten years without a single rejection. DR 2801375 Doe Run's lead recycling plant in Boss, Missouri achieved success ful start-up in October establishing Doe Run as the only signifi cant U.S. supplier of both primary and secondary lead products. The facility recovers lead from scrap, including 20,000 used auto motive batteries per day, while producing two-thirds less waste than conventional secondary plants. VB- il1l i Oparatior.* ft a p o rjt N * t u r a 1 Resource Investments Coal A. T. Massey, Fluors coal investment, produces highquality, low-sulfur steam coal for the electric generat ing industry and metallurgical coal for the steel industry through its operating subsidiaries. The com pany also markets coal for independent producers. Massey reported strong earnings of $61 million in 1991, level with last year's performance. Soft demand in the first half of the year due to the general eco nomic slowdown and a mild winter, coupled with temporarily higher operating costs from a spike in oil prices, presented a challenging year. Emphasis was placed on cost reduction. Additionally, Massey was able to increase its steam coal sales, although sales of metallurgical and purchased coal ran significantly below the prior year. Masseys strategy is to focus on its strong low-sulfur coal position in Central Appalachia, providing utility cus tomers with high quality "compliance" coal to meet new clean air standards that go into effect in 1995. Continuing capital investment is being made to ensure Massey's mines and facilities are the most modern and productive, including acquisitions of attractively priced low-sulfur reserves. Emphasis is placed on properties that are contiguous to existing Massey facilities, minimizing new capital require ments and ensuring continued supply for key long term contracts. significant accomplishment in 1991 was the settlement with the United Mine Workers of America at Rawl Sales Sc Processing Company. The new agreement promises five years of uninterrupted work at Rawl, which is A.T. Masseys largest subsidiary. Lead Fiscal 1991 was a difficult year for The Doe Run Company, Fluor's lead investment. Earnings dropped from $36 million in 1990 to an operating loss of $4 million in 1991. The market is in a cyclical trough with rising global lead supplies driving prices to low levels. Inventory on the London Metals Exchange, which sets prices, rose steadily throughout the year due to slow end-market demand and unusually high lead exports from the former Soviet republics. Approximately 60 percent of lead consumed in the U.S. is for automobile batteries. New car production accounts for roughly 20 percent of battery sales, with replace ment battery sales accounting for the balance. Faced with rising industry-wide inventories, slow auto sales, a mild winter and falling prices, Doe Run moved swiftly in April to cut production and employment by 25 percent and aggressively continues to reduce costs. To position Doe Run as the only significant U.S. producer of both primary and secondary lead, the company successfully completed a new state-of-the-art lead recycling facility at year-end. In addition to lowering overall costs of production, the facility will produce approximately 60,000 tons per year of recycled lead utilizing an environmentally safe technology sig nificantly superior to other existing U.S. secondary plants. Due to the positive environmental aspects of the plant, Doe Run has received unsolicited offers for various sources of lead-bearing scrap, including those willing to pay a fee for recycling in an environmen tally sound manner. This advantage is available because the plant has a favorable hazardous waste regulatory status which allows it to process certain lead-bearing feedstock that many other secondary producers cannot accept. Finally, Doe Run's modest exploration and development efforts successfully added 2 million tons of additional ore reserves during the year. -- T9 DR 2801376 Operating Statistics Fiua $ in thousands/Year ended October 31, Engineering and Construction Work Performed Revenues Operating Profit (Loss) New Awards Backlog Salaried Employees $ in millions/Ac October 31, Backlog by Sector and Location Hydrocarbon Government Process Industrial Power Total Backlog United States Outside U.S. Total Backlog 1991 1990 1989 1988 1987 $ 5,791,800 5,8*3,477 166,212 8,531,600 $11,181,300 17,602 $6,352,832 6,383.059 135,124 7,632,300 $9>557,8oo 19,829 $5 >2^0,82^ 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 $3,370,957 3,251,304 (49,473) 4,059,700 $4,667,300 11,993 $ 1991 % $ 1990 % $ 1989 % $ 1988 % $ 1987 % 3,493 U350 2,553 2,930 855 11,181 7,9i5 3,266 11,181 31 12 23 26 100 71 29 IOO 00 00 2,922 1,168 2,297 2,354 9,558 6,724 2,834 9,558 31 12 24 25 8 IOO 70 30 IOO 1,951 780 2,038 2,935 657 8,361 6,404 1,957 8,361 23 9 25 35 8 IOO 77 23 IOO 1,932 409 1,224 2,338 756 6,659 5,298 1,361 6,659 29 6 19 35 11 IOO 80 20 IOO 940 303 836 1,661 927 4,667 4,039 628 4,667 20 6 18 36 20 IOO 87 13 IOO $ in thousands/in thousands of short tons Year ended Occober 31, Coal 1991 1990 1989 1988 1987 Revenues Operating Profit Salaried Employees Steam Coal Produced Metallurgical Coal Produced Produced Coal Sold Purchased Coal Sold $758,481 $ 60,709 1,133 13,472 3,421 16,982 6,578 $865,809 $ 60,241 1,214 I3U5I 5,569 18,596 7,989 $815,558 $ 51,007 U435 12,303 4,191 16,582 9,300 $783,719 $ 50,375 1,232 11,078 3,980 15,025 10,038 $580,123 $ 28,326 1,372 9,258 2,825 12,531 5,306 Amounts through June 1987 represent 50 percent of Massey's operations, except the number of employees which is 100 percent. Commencing July 1987, amounts include 100 percent of the operations of Massey after reflecting partitioning of a partnership. $ in thousands/in short tons Year ended Occober 31, 1991 1990 1989 1988 1987 Revenues Operating Profit (Loss) Salaried Employees Lead Content of Concentrates Produced Lead Metal Sold $169,740 $ (3,75) 890 227,420 222,752 $197,412 $ 36,112 1,145 188,009 201,330 $150,396 $ 38,895 1,105 144,205 155,433 $123,526 $ 29,022 1,068 139,809 146,879 $ 93,053 $ (5,511) 986 123,888 130,753 Amounts from 1987 through May 1990 represent Fluor's 57.5 percent interest in the operations of The Doe Run Company (Doe Run) except the number of employees which is 100 percent. Thereafter, amounts include 100 percent of the operations of Doe Run after reflecting Fluor's acquisition of the remaining 42.5 percent ownership interest. DR 2801377 New Awards dollars in billions I 87 4-1 International Backlog dollars in billions 11 87 88 0.6 1.4 Work Performed dollars in billions I 87 88 3-4 4-3 89 90 91 5-2 6.4 5.8 Coal Revenues* dollars in millions Total Coal Sold* millions of short tons 8? 88 89 90 91 580 784 816 866 758 * Produced Coal Operating Profit* dollars in millions I 87 28.3 88 50.4 89 51.0 90 60.2 91 60.7 21 Lead Revenues* dollars in millions Lead Metal Sold* thousands of short tons Lead Operating Profit (Loss)* dollars in millions I 88 89 I24 150 90 91 197 17 87 88 '3i '47 89 '55 201 223 87 (5-5) 88 29-0 89 38-9 90 36-' 91 (3-8) * A mounts reflect Fluor s proportionate share for all periods. DR 2801378 Financial* Co nt e nt a 23 Management's Discussion and Analysis 2 6 Selected Financial Data 27 Consolidated Statement of Earnings 28 Consolidated Balance Sheet 3o Consolidated Statement of Cash Flows 31 Consolidated Statement of Shareholders' Equity 32 Notes to Consolidated Financial Statements 4i Segment Information 42 Reports of Management and Independent Auditors 43 Quarterly Financial Data Net Interest Income ^Expense) dollars in millions Long-Term Debt dollars in millions iiI 89 90 91 63 58 76 Long-Term Debt to Total Capitalization percent Capital Expenditures by Segment dollars in millions m i 87 67.5 Lead Coal E&C 88 86.3 89 139.2 90 155.7 91 159.7 DR 2801379 Mana nt D tscuasi and A n a I y a i a Results of Operations Earnings from continuing operations were $149 million in 1991 compared with $139 million in 1990 and $108 million in 1989. The related earnings per share were Si.83 for 1991 compared with $1.71 in 1990 and $1.35 in 1989. Reve nues decreased 9 percent m 1991 following a 19 percent increase in 1990. Eng inaerinq and Construction Durisnegrvi1c9e9s1d,,ethsepiteensgiignneie-frircinagntapndo,lictiocnasl,trauncd,tioencoinnodmu.isctreyvecnotnstidnuueridngtotheeexxpoveeerr^iieernnTcreeha,, TMworldwidae increase. i.n d,emand for ireS th, e majority orf thue global mark1 ets i t serves which resulted in nTM6 tne year, lhe compan1y saw continued ggrroowwtthn iinn lvioncfor 1991, compared, wit,h $7.,6, b.i.l.l.ion .in 1990 aenSdU$ite7drlnbiallnioinncirnease in new T a, wards of 12 percent F to $8 # s 5 bDil1 to approximate,ly 35 percent orf new awardas in 1991 comparebdlilJwOitnh1a0 ir9ne8r9c-enInr falndddiotiof n, work o utside the U S Sgrew respectively. New awards in the Hydrocarbon Sector were $z a billin ' Percent in *99 and 1989, wi th, new award,s in 199r0. HHyd,rocarb, on new awards iWncerreea*se3d-4ioulkionfiivi.n 1 991, an increase of $1.0 billion ccoommopaarreedd the Hydrocarbon Sector increased to $3.5 biilion compared with $2 s'billion Md $TbU W'th I989' respectively. New awards ,n the Industna, Sector were ,2. , bilhon i. r99r, a,, JL, Industrial new awards were $1.7 billion in 1990 and $2 a billion in n. r i . , F om 199. 24 percent to $2.9 ,bi.l.l.i.on compared, to $. 2.1 ,billion in ro4nn 10nini989-The Indu^strial Sector backlog iinnccrreeaasseedd d,ecreased, srlig,htl,y in 1991 in thne oProcess,' Po3wer and fm"vpmmndne$c2'9 blIll0,n m. x989- Although new awardUis> remained relatively stable in r99t compared with t99o and i989 BackT' ' " P""ntageS fwal backlo have was $11.2 billion, Sy.6 billion and S8.4 billion, tespecriveiy " " 3'' "d 1989 23 Engineering and Construction operating profits increased 23 percent to $,66 million in i99I compared with |i,, million in i99o and $n7 million m 1989. Operating results improved in 1991 compared with l99o primarily due to improved margins on work performed which more than offset the effect of lower revenues. Revenues were down in i99r compared with i99o primarily due to longer lead times on larger contracts beginning to enter the business mix. In ,989, earnings were favorably impacted by a $43 million cash settlement of an outstanding claim received from the National Iranian 0,1 Company. The impact of the settlement was partially offset by certain growth related costs and a one-time charge tor costs associated with a previously established performance incentive plan. Improved results in ,99l also reflect realization of increased margins on work performed that include more full service contracts providing engineering, procurement, technical services and maintenance as well as project and construc tion management. International work represents approximately 30 percent of total backlog compared with ,0 per cent in ,990 and 2 , percent ,n ,989. Approximately 64 percent of the backlog at October 31, ,99, is expected to be performed in fiscal 1992. 'F Coal Revenues and operating profit from Coal operations in 1991 were $738 million and $61 million, respectively, compared with revenues of $866 million and operating profit of $60 million in 1990. Revenues and operating profit in 1989 were $816 million and S31 million, respectively. Lower volume in 1991 accounted for over 93 percent of the decrease in revenues compared with 1990. Coal revenues declined due co recessionary market conditions and a mild winter creating soft demand in the first half of the year. Operating profit remained level with the prior year primarily due to improved margins on produced coal which accounts for the majority of revenues. This margin improvement resulted from reduced production at higher cost facilities due to the lower sales volume demand. Coal operations DR 2801380 improved significantly in 1990 from 1989 due primarily to higher realized pn e-c and increased sales volume of produced coal which more than offset higher costs and lower contributions from l .oDred coal -airs due to iowrr volume. Higher prices in 1990 comprised approximately 68 percent of the increase in revenues compared with 1089 Lead Lead operations represent the company's interest in The Doe Run Company (Doe Run). The company increased its ownership in Doe Run from 57.5 percent to 100 percent in May 1990 for $125 million in cash. Prior to the increase in ownership the company proportionally consolidated its interest in Doe Run; subsequently, the results of Doe Run are fully consolidated. Revenues and operating loss from Lead operations in 1991 were $170 million and $4 million, respectively, compared with revenues of $197 million and operating profit of S36 million in 1990. Revenues and operating profit m 1989 were $150 million and $39 million, respectively. The decrease in 1991 revenues resulted from significant declines in lead prices and volume of $35 million and $25 million, respectively. This was partially offset by an increase in reve nues as the result of the change in ownership. Lower revenues and the 1991 loss are primarily attributed to rising global lead supplies resulting in significant price declines throughout the year. Additionally, a depressed automobile industry contributed to the price slide due to a lower demand for lead used in automobile batteries. Operating results in 1991 also include one-time charges of $2.5 million associated with cost-cutting measures and production curtailments implemented during the year. Higher prices were 28 percent of the increase in 1990 revenues over 1989 with the remainder primarily due to the increase in ownership. Operating results in 1990 declined compared with 1989 as lower by-product credits (copper and zinc) and increased costs more than offset the benefit of higher realized prices and increased volume. Other In 1991 the company had net interest income of $34 million compared with $22 million in 1990 and $16 million in 1989. Net interest income increased significantly in 1991 compared with 1990 and 1989 due primarily to higher balances of interest-earning assets and $5.8 million of interest related to the favorable settlement of certain income tax issues. Increased net interest income in 1990 compared with 1989 is primarily due to higher balances of interest-earning assets and lower interest expense due to decreased average debt outstanding. Corporate administrative and general expense increased in 1991 compared to 1990 primarily due to higher stock price driven compensation plan expense in the first half of fiscal 1991. Corporate administrative and general expense decreased in 1990 compared with 1989 as increased earnings from certain pension plan assets more than offset higher stock price driven compensation plan expense and general cost increases. 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 S32.4 million of notes. The company had previously acquired approximately S93 million of notes related to the property and to the extent that the company is now both the holder and issuer of such notes, these notes have been 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 S51.7 million and increased pretax earnings by $19.6 million net of a $5.0 million provision for foreign lease reserves. The company also sold its minority interest in Centre Reinsurance Holdings Ltd., a Bermuda-based insurer for a pretax gain of $16.4 million. There is no significant difference between the effective federal income tax rate on earnings from continuing operations and the statutory rate in 1991, 1990 and 1989 after excluding the 1990 reversal of $19 million of income tax lia bilities relating to A. T. Massey Coal Company, Inc. The Financial Accounting Standards Board has issued State ment of Financial Accounting Standards No. 96 `Accounting for Income Taxes" and In early 1992 is expected to Issue another statement on this subject which will supersede Statement No. 96. Implementation of changes in income tax accounting due to the new standard(s) is not required until 1994 although earlier implementation is permitted. If the company elects to restate prior years with the adoption of the new income tax accounting require ments, additional deferred income tax liabilities will be established, resulting in a reduction In shareholders' equity of approximately 10 percent as of October 31, 1991. In connection with this accounting change, net earnings in np oummi ' Future years are expected to increase, as the additional liabilities reverse, by a cumulative amount which is substan tially equal to the equity reduction. This accounting change will not have any impact on the company's liquidity or future cash flows. In December 1990, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The statement requires accrual of the expected cost of providing postretirement benefits during the years that employees render service. The precise impact of implementation, which is not required until fiscal 1994, is not known at this time; however, manage ment believes the impact of adopting this statement, based on the company's current benefit programs, will not be material. Discontinued Operations 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 Mineral's subsidiary for the years 1975 through 1981. The tax refund and after-tax interest components of this balance were $7.7 million and $4 million, respectively. During 1990 the company completed the sale of the Pea Ridge Iron Ore Company resulting in net cash proceeds of approximately S12 million and an after-tax gain of $8 million ($.10 per share). Pea Ridge was the last operating entity in the discontinued Metals segment. Financial Position and Liquidity Working capital at October 31, 1991 was $311 million compared with $239 million at October 31, 1990. Working cap ital increased 30 percent primarily through cash provided from operations of approximately $230 million and the reclassification to current assets of approximately $38 million of investments previously held in the company's long term bond portfolio. Capital expenditures for 1991 were $160 million compared with $156 million in 1990 and $139 million in 1989. In 1991, capital expenditures included $27 million to complete the construction of the stateof-the-art secondary lead facility at Doe Run. In both 1991 and 1990, capital expenditures include approximately $12 million related to coal reserve acquisitions and mine start-up at Massey Coal. Additionally, in 1990, $18 million was spent on the secondary lead recovery facility at Doe Run. In 1989, capital expenditures included approximately $30 million related to coal reserve acquisitions and mine start-up at Massey Coal Company and $17 million for additional engineering office facilities primarily in Greenville, South Carolina. The engineering and construction segment made a significant commitment of capital in 1991, 1990 and 1989 for additions to computer aided design (CAD) engineering equipment. This concentration of investment in CAD equipment is expected to continue in order to enhance productivity and satisfy workload demand. The long-term debt to capitalization ratio at October 31, 1991 was 6.9 percent compared with 6.3 percent and 8.0 per cent at October 31, 1990 and 1989, respectively. The increased 1991 ratio is primarily attributable to the company's assumption of approximately $32 million of debt when it acquired its Sugar Land, Texas facilities. At October 31, 1991, 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 was provided by the company's commercial paper program which was initiated in April 1991. As of October 31, 1991, there was $29.9 million outstanding. Quarterly cash dividends of $.04 per share as of the second quarter of 1989 were raised to $.06 per share in December 1989, to $.08 per share in December 1990 and to $.10 per share in December 1991. Although the company is affected by inflation, its Engineering and Construction operations are generally protected by the ability to recover cost increases through price escalation provisions in most contracts. Coal and Lead operations produce commodities which are internationally traded at prices established by factors outside the control of the company. However, commodity prices generally tend to reflect a close correlation to inflationary trends and the company's substantial coal and lead reserves provide a hedge against the adverse long-term effects of inflation. DR 2801382 25 Selected Financial Data In millions, except per share amounts 1991 1990 1989 1988 1987 Operating Results Revenues Earnings (loss) from continuing operations before income taxes Earnings (loss) from continuing operations Net earnings Earnings (loss) per share Continuing operations Net earnings Return on average shareholders' equity Cash dividends per common share $ 6,741-7 $7,446.3 $6,227.6 $5,132.5 $3,924.5 227.8 149.1 160.8 189.9 138.9 146.9 174.7 108.5 108.5 90.9 56.4 56.4 (126.1) (75-3) 26.6 1.83 1.71 !-35 0.71 (0.95) $ 1.97 $ 1.81 $ 1.35 $ 0.71 $ 0.33 17.2% 18.6% 16.5% 10.0% 3.3% $ 0.32 $ 0.24 $ 0.14 $ 0.02 $ 0.10 Financial Position Current assets Current liabilities Working capital Bond portfolio 26 Property, plant and equipment, net Total assets Capitalization Long-term debt Shareholders' equity Total capitalization Percent of total capitalization Long-term debt Shareholders' equity Shareholders' equity per common share Common shares outstanding at October 31 $ CI59-5 848.2 311-3 -- 1,092.7 2,421.4 $1,222.8 984.0 238.8 150.1 925.3 2,475.8 $1,036.4 797-7 238.7 151.6 775-3 2,154.3 $1,001.0 786.1 214.9 154.8 729.8 2,075.7 $1,213.5 698.0 5I5-5 4.0 735-2 2,061.2 75-7 1,020.0 $ 1,095.7 57.6 864.0 $ 921.6 62.5 720.4 $ 782.9 95.0 601.7 $ 696.7 217.8 531-7 $ 749-5 6.9 6.3 8.0 13.6 29.1 93-1 93-7 92.0 86.4 70.9 $ 12.58 $ 10.75 $ 9.03 $ 7.61 $ 6.74 81.1 80.4 79-8 79.1 78.9 Other Data New awards Backlog at year end Capital expenditures Cash provided by operating activities Salaried employees $ 8,531-6 11,181.3 159-7 $ 229.7 19,625 $7,632.3 9,557-8 155-7 $ 353.1 22,188 $7,135-3 8,360.9 139.2 $ 265.1 20,059 $5,955-2 6,658.6 86.3 $ 17.7 17,876 $4,059.7 4,667.3 99.8 $ 57-3 14,351 See Management's Discussion and Analysis on pages 23 to 25, Consolidated Statement of Earnings on page 27 and Notes to Consolidated Financial Statements and Quarterly Financial Data for information relating to significant items affecting operating results. Dividends were resumed in the fourth quarter of 1988 following a suspension which began in the second quarter of 1987. 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 and to $.10 per share in the first quarter of 1992. . C o n s o 1 d atari Statement of Earnings Fluor In thousands, except per share amounts/Year ended October 31, Revenues Engineering and construction services Natural resources Total revenues Cost of Revenues Engineering and construction services Natural resources Total cost of revenues Other Income and Expense Corporate administrative and general expense Reduction in accrued lease cost, net Gain on sale of investment Interest expense Interest income Total cost and expenses Earnings From Continuing Operations Before Taxes income Tax Expense Earnings From Continuing Operations Discontinued Operations, Net Net Earnings Earnings Per Share Continuing operations Discontinued operations Net Earnings Per Share Shares Used to Calculate Earnings Per S h a r e See Notes to Consolidated Financial Statements. 1991 1990 1989 $5,813,477 928,221 6,741,698 $6,383,059 1,063,221 7,446,280 $5,311,653 965,954 6,277,607 5*655,793 871*475 6,527,268 57,032 (19,649) (16,426) 13,350 (47,689) 6,513,886 6,260,265 966,868 7,227,133 51,274 -- -- 15,068 (37,076) 7,256,399 5,190,343 876,052 6,066,395 52,660 -- -- 20,239 (36,371) 6,102,923 227,812 78,700 I49, I 12 11,676 $ 160,788 189,881 51,000 138,881 8,005 $ 146,886 174,684 66,200 108,484 -- $ 108,484 $ I.83 $ 1.71 $ i-35 .14 . IO -- $ 1-97 $ 1.8l $ 1.35 81,807 81,313 80,459 DR 2801384 C o naolidatad Balance Sheet $ in thousands/At October 31, Assets Current Assets Cash and cash equivalents Marketable securities Accounts and notes receivable Contract work in progress Inventories Other current assets Total current assets Investment in Bond Portfolio Property, Plant and Equipment Land Buildings and improvements Machinery and equipment Mining properties and mineral rights Construction in progress Less accumulated depreciation, depletion and amortization Net property, plant and equipment Other Assets Investments and goodwill, net of accumulated amortization of $28,215 and $20,374, respectively _ Other Total other assets 1991 1990 $ 184,022 186,042 385,838 256,564 82,612 64,447 1,159,525 -- $ 229,889 4T34I 493.833 328,828 91,882 37,029 1,222,802 150,131 67,873 273,840 554.584 488,732 89,720 1,474,749 382,020 1,092,729 66,101 130,030 472,770 485,407 53.634 1,207,942 282,612 925.330 69,852 99,329 169,181 $2,421,435 81,520 96,013 177,533 $2,475,796 DR 2801385 Fluor Liabilities and Shareholders' Equity 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 debt Income taxes currently payable Total current liabilities Long-Term Debt Due After One Year Noncurrent Liabilities Deferred income taxes Accrued lease costs Other Total noncurrent liabilities Contingencies and Commitments Shareholders' Equity Capital Stock Preferred -- authorized 20,000,000 shares without par value, none issued Common -- authorized 150,000,000 shares of $.625 par value; issued and out- standing in 1991 -- 81,111,731 shares and in 1990 -- 80,389,657 shares Additional capital Retained earnings (since October 31, 1987) Unamortized executive stock plan expense Cumulative translation adjustment Total shareholders' equity See Notes to Consolidated Financial Statements. 1991 1990 $ 272,090 29,928 155,626 I25>793 229,419 17,726 17,631 848,213 75,682 110,494 10,831 356,221 477,546 $ 385,992 -- 271,144 93,276 211,092 246 22,230 983,980 57,662 104,640 95,969 369,580 570,189 50,695 563,057 414,794 (10,797) 2,245 1,019,994 $2,421,435 50,244 537,285 279,831 (6,805) 3,410 863,965 $2,475,796 DR 2801386 C onsolidated Statement of Cash Flows S in thousands/Year ended October 31, Cash Flows From Operating Activities Net earnings Depreciation, depletion and amortization Deferred income taxes Reduction in accrued lease cost, net Gain on sale of investment Amortization of accrued lease costs and deferred gains Change in operating assets and liabilities Other, net Cash provided by operating activities Cash Flows From Investing Activities Capital expenditures Coal reserve acquisitions and mine start-up Purchase of marketable securities, net Purchase of Sugar Land real estate partnership interests Proceeds from sale of investment Proceeds from sale of property, plant and equipment Acquisition of remaining 42.5 percent of Doe Run Proceeds from sale of discontinued operations, net Other, net Cash utilized by investing activities Cash Flows From Financing Payments of long-term debt Issuance of commercial paper Cash dividends paid Other, net ' Activities 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. 1991 1990 1989 $ 160,788 121,482 (14,888) (19,649) (16,426) (14,138) (24,964) 37003 229,708 $ 146,886 109,775 21,092 -- -- (26,116) 94,664 6,841 353,142 $ 108,484 87,398 (H,473) -- -- (31,013) 69,342 42,386 265,124 (147,229) (12,489) (105,756) (64,311) 31,426 14,699 -- -- 10,869 (272,791) (144,057) (i 1,629) (4C34I) -- -- 6,066 (125,000) 11,783 5,182 (298,996) (108,675) (30,499) -- -- -- 11,675 -- -- (7,184) (134,683) (483) 29,928 (25,825) (6,404) (2,784) (45,867) 229,889 $ 184,022 (44,953) -- (19,227) 5,046 (59A34) (4,988) 234,877 $ 229,889 (62,382) -- (l 1,126) 13,364 (60,144) 70,297 164,580 $ 234,877 DB 280A37 rtmnsolidated Statement of S h a r e h 0 1 d a r s ' E q u i t y Fluor $ in thousands, except per share amounts Year ended October 31, 1989, 1990 and 1991 Common Stock Additional Capital Retained Earnings Unamortized Executive Stock Plan Expense Cumulative Translation Adjustment Total Balances a t October 31, 1988 Net earnings Cash dividends ($.14 per share) Exercise of stock options, net Amortization of executive stock plan expense Issuance of restricted stock, net Tax benefit of net operating loss Translation adjustment Balances a t October 31, 1989 Net earnings Cash dividends ($.24 per share) Exercise of stock options, net Amortization of executive stock plan expense Issuance of restricted stock, net Tax benefit of net operating loss Translation adjustment Balances at October 3 1 , 1990 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 Balances at October 3 1 , 19 9 1 See Noces to Consolidated Financial Statements. $49,407 371 $497,907 7,896 S 54,814 108,484 (ll,126) $ (3.H7) 93 12,244 V/l Cn 00 3,407 (4,729) 49,871 299 522,615 7,452 152,172 146,886 (19,227) 74 4,3i8 2,9OO (4,439) 2,070 (4,436) 50,244 394 537,285 10,364 8,463 279,831 160,788 (25,825) (6,805) 57 4,646 2,299 839 (4,831) $50,695 $563,057 $414,794 $(10,797) $ 2,736 $ 601,747 108,484 (i 1,126) 8,267 (2,592) 3,407 (68) 12,244 (2,592) I44 3,266 720,363 146,886 (19,227) 7,75! 2,070 (44) 2,900 3,266 3,410 (1,165) 863,965 160,788 (25,825) 10,758 8,463 839 (128) 2,299 (1,165) $ 2,245 $1,019,994 31 DR 2801388 Major Accounting Policies Principles of Consolidation The financial statements include the accounts of the company and its subsidiaries. The equity method of accounting is used for investment ownership ranging from 20 percent to 50 percent. Investment ownership of less than 20 percent is accounted for on the cost method. The company does not consolidate entities for which control is deemed temporary. The company proportionally consolidated its 57.5 percent interest in The Doe Run Company partnership (Doe Run) prior to the May 24, 1990 purchase of the minority ownership; subsequently. Doe Runs operations have been fully consolidated. All significant intercompany transactions of consolidated subsidiaries are eliminated. Certain 1990 and 1989 amounts have been reclassified to conform with the 1991 presentation. Engineering and Construction Contracts The company recognizes engineering and construction contract revenues using the percentage-of-completion method, primarily based on contract costs incurred to date compared with total estimated contract costs. Customer furnished materials, labor and equipment and in certain cases subcontractor materials, labor and equipment are included in revenue and cost of revenue when management believes that the company is responsible for the ultimate acceptability of the project. Contracts are segmented between engineering and construction efforts and, accordingly, gross margin related to each activity is recognized as those separate services are rendered. Changes to total estimated contract costs or losses, if any, are recognized in the period they are determined. Revenues recognized in excess of amounts billed are classified as current assets under contract work in progress. It is anticipated that the incurred costs associated with contract work in progress at October 31, 1991, will be billed and collected in 1992. Amounts received from clients in excess of revenues recognized to date are classified as current liabilities under advance billings on contracts. Depreciation and Amortization Additions to property, plant and equipment are recorded at cost. Assets other than mining properties and mineral rights are depreciated principally using the straight-line method over their estimated useful lives. Leasehold improve ments are amortized over the lives of the respective leases. Goodwill is amortized on the straight-line method over periods not longer than 40 years. Exploration and Development Coal -- Development costs of specific coal properties, when expected to be significant, are capitalized in mining proper ties and depleted over the expected economic life of the mine on the units-of-production method . Lead -- Costs incurred for exploration of minerals are generally expensed as incurred. Development expenditures to bring new mineral properties into production, comprising substantially all surface mine development and initial under ground installations, are capitalized in mining properties and amortized using the straight-line method over periods approximating the economic life of the mine. Subsequent maintenance and underground development expenditures are generally expensed as incurred. DR 2001389 I n c o m e Taxes Deferred income taxes are provided for items recognized in different periods for financial and tax reporting purposes. Such timing differences include the use of the completed-contract method of accounting for certain contracts, accelerated depreciation, various expenses and accruals. 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. Inventories Coal, metals and processed minerals inventories are stated at the lower of cost using the last-in, first-out (LIFO) method or net realizable value. Supplies and other are valued on the average cost method. Inventories comprise: $ in thousands/Ac October 31, Coal, metals and processed minerals Supplies and other 1991 $48,959 33-653 $82,612 1990 $57,548 34-334 $91,882 Foreign Currency The effects of translating foreign subsidiaries' financial statements are recorded as a separate component of shareholders' equity. Changes in the cumulative translation adjustment are as follows: S in thousands/Year ended October 31, Balance at beginning of year Translation adjustment Deferred income taxes Balance at end of year 1991 $ 3,410 (1,765) 600 $ 2,245 1990 $ 144 4,948 (1,682) $ 3,410 The company enters into forward exchange contracts to hedge foreign currency transactions. It does not 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, 1991, the company had $124 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 (AAA 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 foreign currencies for U.S. dollars at maturity, at rates agreed to at inception of the contracts. Concentrations of Credit Risk The company provides a variety of financing arrangements for its Engineering and Construction clients. The majority of accounts receivable and all contract work in progress are from Engineering and Construction clients in various industries and locations throughout the world. Most contracts require payments as the projects progress or in certain cases advance payments. The company generally does not require collateral but, in most cases can place liens against the property, plant or equipment constructed if a default occurs. Accounts receivable from customers of Lead and Coal operations are primarily concentrated in the automotive, steel and utility industries. The company maintains adequate reserves for potential credit losses and such losses, which have been minimal, have been within manage ment's estimates. DR 2801390 C o nsoli dated Statement of Cash Flow s The company invests in short-term highly liquid securities with maturities of up to two years from the date of purchase. These investments are of investment grade quality and are usually sold before their maturity. Securities with maturities of ninety days or less at the date of purchase are classified as cash equivalents. Securities with maturities beyond ninety days are classified as marketable securities and are carried at cost which approximates market. Due to the high dollar volume and turnover of these securities, the related cash flows are reported on a net basis. The change in operating assets and liabilities as shown in the Consolidated Statement of Cash Flows comprises: $ in thousands/Year ended October 31, 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 Income taxes currently payable Cash paid during the year for: Interest expense Income tax payments, net 1991 1990 1989 $ 107,880 72,264 9,270 (31,203) (113,902) (115,518) 50,844 (4,599) $ (24,964) $(126,393) 4,436 (2,751) 10,254 59,826 151,694 (i,527) (875) $ 94,664 $ 47,855 4,083 (1,024) (16,078) (35,799) 698 66,340 3,267 $ 69,342 $ 9,988 $ 93,677 $ 10,613 $ 50,221 $ 17,744 $ 46,038 Acquisitions and Investments In September 1991, the company sold its minority interest in Centre Reinsurance Holdings Ltd., a Bermuda-based insurer, resulting in a pretax gain of $16.4 million. In July 1991, the company purchased certain partnership interests which owned the company's Sugar Land, Texas, engineering office, including the leasehold on the land as well as the buildings, for $64.3 million in cash and the assumption of $32.4 million of notes. The company had previously acquired approximately $93 million of notes related to the property and to the extent that the company is now both the holder and issuer of such notes, these notes have been 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. In May 1990, the company purchased Homestake Mining Company's 42.5 percent interest in Doe Run for $125 million in cash, which was allocated to the assets acquired and liabilities assumed based on their respective fair market values at the date of acquisition. The purchase gave the company 100 percent ownership. In February 1990, the company purchased Tulsa, Oklahoma based Williams Brothers Engineering Company (WBEC), a world-recognized leader in engineering of pipelines and production facilities, for approximately 38 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 1990 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 was reported in discontinued operations. DR 2801391 I ncome Taxes The income tax expense (benefit) included in the Consolidated Statement of Earnings is as follows: $ in thousands/Year ended October 31, Current: Federal (includes a charge in lieu of taxes of $2,299, $2,900 and $11,267 for 1991, 1990 and 1989, respectively) Foreign (includes a charge in lieu of taxes of $977 in 1989) State and local Total current Tax liability reversal Deferred: Federal Foreign State and local Total deferred Total income tax expense 1991 1990 1989 $ 60,482 20,984 13,024 94,490 (6,100) $ 23,524 18,392 10,831 52,747 (19,000) $ 58,820 7,976 10,877 77,673 -- (10,037) (198) (4,653) (14,888) $ 73,502 19,625 485 982 21,092 $ 54,839 (12,017) 1,540 (996) (n,473) $ 66,200 Total income tax expense (benefit) applicable to continuing and discontinued operations is as follows: $ in thousands/Year ended October 31, Provision for continuing operations: Current Tax liability reversal Deferred Total provision--continuing operations Provision for discontinued operations: Current Deferred Total provision--discontinued operations Total income tax expense 1991 1990 1989 $ 100,127 (6,100) (i5,327) 78,700 $ 60,921 (19,000) 9,079 51,000 $ 77,673 -- (n,473) 66,200 (5,637) 439 (5,198) $ 73,502 (8,174) 12,013 3,839 $ 54,839 -- -- -- $ 66,200 A reconciliation of statutory federal income tax to the income tax expense on the earnings from continuing operations follows: $ in thousands/Year ended October 31, Statutory federal income tax expense Increases (reductions) in taxes resulting from: Effect of foreign tax rates State and local income taxes Items without tax effect, net Depletion Tax liability reversal Other, net Total income tax expense --continuing operations 1991 $ 77,456 7,080 7,007 3,39 (9,384) (6,too) (668) $ 78,700 1990 $ 64,560 3,489 7,001 11,175 (12,068) (19,000) (4,i57) $ 51: ,000 1989 $ 59,393 3,835 5,744 7,709 (10,038) -- (443) $ 66,200 DR 2801392 The deferred income tax expense (benefit) applicable to timing differences from continuing operations is as follows: $ in thousands/Year ended October 31, Use of different methods of accounting for construction contracts Expenses not currently deductible for tax purposes Deferred income Other, net Total 991 $(11,993) (4.599) (35) 1,300 $ (15,327) 1990 $ (3,125) U453 8,006 2,745 $ 9,079 5989 $ (8,037) 7,170 (7,782) (2,824) $(ii,473) United States and foreign earnings from continuing operations before taxes are as follows: $ in thousands/Year ended October 31, United States Foreign Total 1991 $163,054 64,758 $227,8x2 1990 $145,756 44,125 $189,881 1989 $ 96,785 77,899 $174,684 Residual income taxes have not been provided on approximately $42 million of undistributed earnings of certain foreign subsidiaries at October 31, 1991 because the company intends to reinvest these earnings indefinitely. Other current assets includes $38.5 million and $9.4 million in 1991 and 1990, respectively, of deferred tax assets. During 1991 the company received cash proceeds of $20 million regarding a settlement with the Internal Revenue Service relating to St. Joe Minerals for the tax years 1975 through 1981. The tax refund and interest components of this amount were $7.7 million and $12.3 million, respectively. The tax refund and $4 million of interest, net of tax, were reported as discontinued operations. The $5.8 million pretax balance of interest income was reported in continuing operations. As a result of the settlement with the IRS and resolution of other issues, certain income tax liabilities, no longer deemed necessary, were reversed reducing the company's income tax expense by $6.1 million and $19 million in 1991 and 1990, respectively. The company has resolved all issues raised in connection with an examination of the company's Federal income tax returns for fiscal years through 1983. The resolution of these issues did not have a material adverse effect on the company's consolidated financial position or results of operations. The IRS is currently examining the company's returns for fiscal years 1984 through 1986. Management does not expect the resolution of tax issues raised by the IRS for the period under examination or subsequent periods to have a material effect on the company's consolidated financial position or results of operations. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 96 `Accounting for Income Taxes" and in early 1992 is expected to issue another statement on this subject which will supersede Statement No. 96. Implementation of changes in income tax accounting due to the new standard(s) is not required until 1994 although earlier implementation is permitted. If the company elects to restate prior years with the adop tion of the new income tax accounting requirements, additional deferred income tax liabilities will be established, resulting in a reduction in shareholders' equity of approximately 10 percent as of October 31, 1991, In connection with this accounting change, net earnings in future years are expected to increase, as the additional liabilities reverse, by a cumulative amount which is substantially equal to the equity reduction. This accounting change will not have any impact on the company's liquidity or future cash flows. R e t t re merit Benefits The company sponsors defined contribution retirement and contributory and noncontributory 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 $56 million in 1991, $52 million in 1990, and $47 million in 1989. Contributions to defined benefit pension plans are generally at the minimum annual amount required by applicable regulations. Payments to retired employees under these plans, which are primarily related to international DR 2801393 * Engineering and Construction and natural resource operations, are generally based upon length of service and/or a percentage of qualifying compensation. During 1990, the company adopted Statement of Financial Accounting Standards No. 87 "Employers' Accounting for Pensions" for its international defined benefit pension plans, resulting in a pretax benefit of approximately $5 million. Net periodic pension income for continuing operations defined benefit pension plans includes the following components: $ in thousands/Year ended October 31, Service costs -- benefits earned during the period Interest cost on projected benefit obligation Income and gains on assets invested Net amortization and deferral Net periodic pension income 1991 $ 11,806 18,725 (64,902) 33.521 $ (850) 1990 $ 9,561 15,849 (8,062) (23,575) $ (6,227) 1989 $ 3,236 6,225 (16,168) 5,807 $ (900) The following assumptions were used in the determination of net periodic cost: Year ended October 31, Discount rates Rates of increase in compensation levels Expected long-term rates of return on assets The following table sets forth the status of the defined benefit plans: 1991 9.0-10.5% 5.0-8.0% 9.0-10.5% 1990 9.0-10.5% 5.0--8.0% 8.0-10.5% 1989 9.0% 5.0-7.5% 8.0-9.0% $ in thousands /At October 31, 1991 1990 Actuarial present value of benefit obligations: Vested benefit obligation Nonvested benefit obligation 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 $ 151,156 IU779 $ 162,935 $ 349,316 (218,101) 131,215 (43,265) (27,589) $ 60,361 $ 146,623 5,708 $ 152,331 $ 301,308 (208,123) 93,185 (4,834) (33,165) $ 55,x 86 Excludes the projected benefit obligation and an equal amount of associated plan assets relating to present and former employees of discontinued operations of $99 million and $103 million at October 31, 1991 and 1990, respectively. Massey Coal Company participates in multiemployer defined benefit pension plans for its union employees. Pension expense related to these plans approximated $.5 million, $1 million and $.6 million in the years ended October 31, 1991, 1990 and 1989, respectively. The company and certain of its subsidiaries provide health care and life insurance benefits for certain retired employees. The cost of such benefits for continuing operations approximated $6 million, $5 million and $5 million in 1991, 1990 and 1989, respectively, and is expensed when paid. In December 1990, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions.'' The statement requires accrual of the expected cost of providing postretirement benefits during the years that employees render service. The precise impact of implementation, which is not required until fiscal 1994, is not known at this time; however, manage ment believes the impact of adopting this statement, based on the company's current benefit programs, will not be material. DR 2801394 L o n g - Ta r m O a b t 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 an 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 1993 Notes at an effective interest rate of 9.7%, due in 1993 12.375% collateral trust notes, due in 1995, prepayable at par in 1992 12.875% collateral trust notes, due in 1997, prepayable at par in 1995 Other notes and mortgages Less: Current portion Long-term debt due after one year 1991 $23,644 15,039 12,838 16,359 16,050 9,478 93,408 17,726 $75,682 1990 $23,644 15,039 12,888 -- -- 6,337 57,908 246 $57,662 Maturities relating to long-term debt are as follows for the years ending: 1993, $30 million; 1994, $1.9 million; 1995, $.8 million; 1996, $25.6 million; and $17.4 million thereafter. All long-term debt (including current portion) out standing at October 31, 1991, bears interest at fixed rates. 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 $340 million, which can be converted to two-year term loans. A facility fee is paid on these lines. In addition, the company has S433 million in short-term lines of credit. Borrow ings under lines of credit and revolving credit agreements bear interest at prime, rates based on the London Inter bank Offered Rate (LIBOR), domestic certificates of deposit, or other rates which are mutually acceptable to the banks and the company. At October 31, 1991, no amounts were outstanding under any of these lines. The company has unsecured commercial paper outstanding at October 31, 1991 in the amount of $29.9 million. The commercial paper was issued at a discount with an effective interest rate of 5.3 percent and maturities ranging from 27 to 38 days. The weighted average maturity at October 31, 1991 was 18 days. The maximum and average balances outstanding since the inception of the program in April 1991 were $34.9 million and $28.5 million, respectively, with a weighted average interest rate of 5.8 percent. Stock Plans The company's executive stock plans, approved by the shareholders, provide for grants of nonqualified or incentive stock options, restricted stock awards and stock appreciation rights (SARs). All plans are administered by the Organiza tion and Compensation Committee of the Board of Directors ("Committee"), no member of which is eligible to participate in the plans. Stock options may be granted with or without SARs. Grant prices are determined by the Committee and generally are established at the fair market value of the company's common stock at the date of grant. Options and SARs normally extend for 10 years and 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. Restricted stock awards issued under the plans provide that shares awarded may not be sold or otherwise transferred until restrictions as established by the Committee have lapsed. Upon termination of employment, shares upon which restrictions have not lapsed must be returned to the company. Restricted stock issued under the plans totaled 121,660 shares and 123,870 shares in 1991 and 1990, respectively. DR 2801395 Upon exercise of an SAR, the holder receives a cash amount equal to the excess of the market value of a share of the company's common stock on the exercise date over the market value of the stock on the grant date. Changes in market value are accounted for currently as compensation expense. following table summarizes stock option and SAR activity for the two years ended October 3U I99i: Stock Options Price Per Share SARs Value Per Right Outstanding at October 31, 1989 Granted Expired or cancelled Exercised Outstanding at October 31, 1990 Granted Expired or cancelled Exercised Outstanding at October 31, 1991 Exercisable at: October 31, 1990 October 31, 1991 Available for grant at: October 31, 1990 October 31, 1991. 2,891,788 432,070 (12,364) (488,881) 2,822,613 442,540 (267,456) (630,938) 2,366,759 $12-35 34-42 12-35 12-35 $12--42 39-44 1:2-36 12-41 $12-44 r,745,708 1,458,451 $12-35 $12-42 1,362,716 946,323* 606,938 304,354 (10,062) (146,416) 754,814 44,070 (18,050) (391,845) 388,989 548,009 242,382 74,199 -- $12-22 35-36 12-22 12-22 $12-36 44 13-36 12-36 $12-44 $12-35 $12-36 *Available for grant at October 31, 1991, includes 915,786 shares which may be granted as either stock options, SARs or restricted stock, as determined by the Committee under the 1988 Fluor Executive Stock Plan. The company adopted a preferred shares 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 exercisable, each Right entitles its holders to buy i/iooth 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 so 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 involved in a merger or other business combination 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. DR 2801396 Lease Obligations Rental expense for continuing operations amounted to $94 million, $88 million, and $102 million, in 1991, n\ ^*4 1989, respectively. The company's lease obligations relate primarily to office facilities, data processing equipment, equipment used in connection with long-term construction contracts and other personal property. The company ^ obligations for minimum rentals under noncanceilable leases are as follows: 'I $ in thousands/At October 31, 1991 1992 1993 1994 1995 1996 Thereafter $48,641 46,291 39>322 27,205 22,658 $86,409 At October 31, 1991 and 1990, obligations under capital leases of approximately $12 million and $14 million, rexpty tively, are included in other noncurrent liabilities. In July, 1991, the company purchased certain partnership interests which owned the company's leased facilities in bugur Land, Texas. The purchase eliminated approximately $366 million of lease commitments. Contingencies and Com i t m a n t s The company is contingently liable for commitments and performance guarantees arising in the ordinary course uf 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 com* an provisions. The company's natural resource operations are affected by federal, state and local laws and regulations regarding environmental protection. In the opinion of management, currently identified matters will not have t| 40 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 cu nun stances, 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 pledgy 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, 1991, the company had financial guarantees for clients and certain other unrelated third parties totaling $69 million. DR 280 Opera! I o n s by Business Segment and Geographic Area The Engineering and Construction segment includes subsidiaries engaged in the design, engineering, procurement, construction, technical services and maintenance of facilities for oil and gas, chemical, industrial, commercial, utility, nat uni 1 resource, energy and government clients. Coal segment amounts include the operations of Massey Coal Company. Lead segment amounts represent the company's 57.5 percent interest in the operations of Doe Run through May 24, 1990 and 100 percent thereafter. Identifiable assets are those tangible and intangible assets used in the operation of each of the business segments and geographu areas. Corporate assets are principally cash and cash equivalents, marketable securities and nontrade receivables, Q P 9_T * < 1 ,, ns b y Business Segment $ in millions Engineering and Construction1'' Coal Lead Concmmuu, ^ ^pcrcitions 1991 $5,813.5 758.5 169.7 $6,741.7 1990 $6,383.1 865.8 197.4 $7,446.3 Revenues 1989 $5>3II-7 815.5 150.4 $6,277.6 Operating Profit (Loss) 1991 1990 1989 $166.2 60.7 (3-7) $223.2 $135.1 60.3 36.1 $231.5 $117.4 51.O 38.9 $207.3 $ in millions 1991 Identifiable Assets 1990 1989 Engineering and Construction Coal Lead Corporate $1,003.9 $ 696.7 327-5 393-3 985.3 $ 828.4 704.O 748.1 3H-3 475-2 158.4 419.4 $2,421.4 $2,475.8 $2,154-3 Capital Expenditures 1991 1990 1989 $ 38.9 $ 64.8 $ 58.4 67.6 61.0 72.0 53-2 29.2 8.7 -- 0.7 O.I $159.7 $155-7 $139.2 Depreciation, Depletion and Amortization 1991 1990 1989 $ 48.0 $ 45-7 $ 49.5 46.9 23-3 0.7 16.2 1.0 $ 121.5 $ 109.8 $ 33-7 42.0 10.9 0.8 87.4 * t '-.ns by G e 0 cj r a p h i c Are a $ in millions 1991 1990 Revenues 1989 Operating Profit (Loss) 1991 1990 1989 1991 Identifiable Assets 1990 1989 United Stales'" Canada Middle East Europe Other Revenues tar ' mc|ucje a $5,272.4 $6,243.7 $5,310.2 555-8 76.1 388.2 24.4 326.O 25.2 495.2 594-6 407.2 342.2 195-4 209.O $173.6 $208.5 $195.3 II.9 6.4 2.2 4.6 0.7 0.5 21.8 14-3 9-8 n-3 1.6 (0.5) $6,741.7 $7,446.3 $6,277.6 $223.2 $231.5 $207.3 million settlement from the National Iranian Oil Company. $2,131.0 $2 133-2 $1 ,880.0 71.9 82.1 55.8 43-i 105.5 34-o 108.5 33-0 79.8 69.9 118.0 105.7 $2,421.4 $2 475.8 $2 U54-3 The following uh|, reconciles business segment operating profit with the earnings from continuing operations before taxes. $ in millions V.,, ,.nded October 31, Operating piniu |'rom continuing operations Interest, nei Corporate administrative and general expense Reduction m at erued iease cost, net Gain on sale ,>1 investment Other items, n,.( Earnings train , untinuing operations before taxes 1991 1990 1989 $ 223.2 $ 231.5 $ 207.3 34-3 22.0 16.1 (57-o) (5i-3) (52.7) 19.6 -- -- 16.4 -- -- (8.7) (12.3) 4.0 $ 227.8 $ 189.9 $ 174.7 41 _ morvA 39B R e p o r t s of Management and Independent Auditors # -t Management The company is responsible for preparation of the accompanying consolidated balance sheet and the related consolidated statements of earnings, cash flows and shareholders' equity. They have been prepared in conformity with generally accepted accounting principles, which have been applied on a consistent basis, and management believes that they present fairly the company's consolidated financial position and results of operations. The integrity of the informa tion presented in the financial statements, including estimates and judgments relating to matters not concluded by fiscal year end, is the responsibility of management. To fulfill this responsibility, an internal control structure designed to protect the company's assets and properly record transactions and events as they take place 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 and review through an Audit Committee of Directors who are not employees. The internal auditors and the independent auditors have full and free access to the Committee. Periodically, the Committee meets with the independent auditors without management present to discuss the results of their audits, the adequacy of the internal control structure and the quality of financial reporting. Independent Auditors Board of Directors and Shareholders Fluor Corporation We have audited the accompanying consolidated balance sheet of Fluor Corporation as of October 31, 1991 and 1990, and the related consolidated statements of earnings, cash flows, and shareholders' equity for each of the three years in the period ended October 31, 1991. These financial statements are the responsibility of the company's manage- 42 ment. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Fluor Corporation at October 31, 1991 and 1990, and the consolidated results of its operations and its cash flows for each of the three years in the period ended October 31, 1991, in conformity with generally accepted accounting principles. Orange County, California December 3, 1991 DR 2801399 qu a r t a r 1 y F i n a n c i a I Data unaudited The following is a summary of the quarterly results of operations: $ in thousands, except per share amounts 1991 Revenues Gross margin Earnings from continuing operations before taxes Earnings from discontinued operations Net earnings Earnings per share Continuing operations Discontinued operations Net earnings 1990 Revenues Gross margin Earnings from continuing operations before taxes Earnings from discontinued operations Net earnings Earnings per share Continuing operations Discontinued operations Net earnings First Quarter $1,758,195 49,019 39,980 -- 25,790 .32 -- S .32 $1,876,172 52,424 45.520 -- 28,220 35 -- $ -35 a'"f cT) 00 6=0= Seam,) Quarter Third Quarter Fourth Quarter $1,701,4(18 51,036 49,757 11,67(1 41,64 i .37 $ .11 $1,613,026 55,602 70,072u) -- 47,472 .58 $ .58 $1,669,009 58,773 68,00.3" -- 45,903 .56 -- $ .56 38,434 3, 697 37,9<'5" ' 47 $ .47 $1,767,947 60,951 49,469 8,005 40,006 39 . 10 $ .49 $1,970,938 67,540 64,195 -- 40,695 .50 -- $ -50 "'Third quarter 1991 earnings includes the reversal of certain lease cost reserves of $19.6 million, net of other lease cost provisions totaling $5 million. <wFourth quarter 1991 earnings includes a gain of $16.4 million related to the company's sale of its minora y interest in a Bermuda-based insurer. "'Second quarter 1990 earnings include the benefit of a S19 million reduction of income tax expense from a reversal of tax liabilities no longer required. 43 DR 2801400 Directors *e * Left to right: David S. Tappan, Jr., Buck Mickei, General Louis H. Wilson. Left to right: Peter J. Fluor, Robert V. Lindsay, William R. Grant, Hugh K. Coble. David S. Tappan, Jr.--Retired, Chairman of the Board and Chief Robert V. Lindsay--Retired, President of Morgan Guaranty Trust Executive Officer. Mr. Tappan brings over 40 years of industry Company of Mew York. Mr. Lindsays extensive banking expe experience, leadership and global perspective. He is a leader rience both in the U.S. and abroad brings a wealth of knowl 44 who commands universal respect in our industry and around edge in many of the markets we serve and he provides unique the world. When called upon, he is always ready to help with perspective. (1982)<3> <4) either action or valuable insight. (1965) William R. Grant--Chairman of the Board of Galen Associates. Buck Mickei -- Retired, Vice Chairman of the Board. A former Mr. Grants current position, as well as his former role as officer of Fluor, Mr. Mickei has broad business connections Chairman of MacKay Shields Financial Corporation, adds and strong regional associations. His enormous creativity gen extensive financial community perspective to Fluor's Board. erates a steady scream of new business ideas and suggestions, His depth of financial knowledge is invaluable to his role as while his client contact follow-ups are invaluable. (1977) Chairman of the Audit Committee. (1982) <4) <4> General Louis H. Wilson--General, U.S. Marine Corps (Retired) and former Commandant of the Marine Corps. General Wilson is a true leader. He has been instrumental in helping improve and focus Fluors Washington D.C. office. As Chairman of the Organization and Compensation Committee, he played a key role in the management succession and transition over the past several years. (1979)<21 <4> Hugh K. Coble--Group President, Fluor Daniel, Inc. During Mr. Coble's 25 years with the company, his willingness to be mobile, represented by 19 moves during his career, has con tributed to an unequaled knowledge and understanding of the vastness and potential of our world markets. Mr. Coble was part of the original team that conceptualized the new com pany, Fluor Daniel. (1984) Peter J. Fluor--President of Texas Crude, Inc. Mr. Fluor provides not only continuity from the Fluor family heritage, but much more. A leader in the oil and gas induscry, an important Fluor Daniel market, Mr. Fluor is always looking for opportunities to support the company. (1984) t4> Years in parentheses indicate the year each Director was elected to the Board. Except as otherwise indicated, all 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 DR 2801401 * Qua rterly Financial Data unaudited The following is a summary of the quarterly results of operations: $ in thousands, except per share amounts First Quarter Second Quarter Third Quarter Fourth Quarter 1991 Revenues Gross margin Earnings from continuing operations before taxes Earnings from discontinued operations Net earnings Earnings per share Continuing operations Discontinued operations Net earnings 1990 Revenues Gross margin Earnings from continuing operations before taxes Earnings from discontinued operations Net earnings Earnings per share Continuing operations Discontinued operations Net earnings $1,758,195 49,019 39,980 -- 25,79 32 -- $ . 32 $1,876,172 52,424 45,520 -- 28,220 35 -- $ .35 $1.,701,468 51,036 49,757 11,676 41,623 37 .14 $ 5i $1,613,026 55,602 70,072la> -- 47,472 .58 -- $ .58 $1,669,009 58,773 68,003' __ 45,903 56 -- $ .56 $1,831,223 38,232 30,697 -- 37,965<c> $1,767,947 60,951 49,469 8,005 40,006 47 39 -- . 10 $ 47 $ .49 $1,970,938 67,540 64,195 -- 40,695 .50 -- I .50 "Third quarter 1991 earnings includes the reversal of certain lease cost reserves of $19.6 million, net of other lease cost provisions totaling $5 million. "''Fourth quarter 1991 earnings includes a gain of $16.4 million related to the company's sale of its minority interest in a Bermuda-based insurer. "'Second quarter 1990 earnings include the benefit of a $19 million reduction of income tax expense from a reversal of tax liabilities no longer required. 43 DR 2801400 Left to right: Leslie G. McCraw, Admiral Bobby R. Inman, E. Morgan Massey, Dr. Allen E. Puckett (retired December 1991). Left to right: Dr. Martha R. Seger, Vincent L. Kontny, Dr. David R Gardner, Gerald M. Glenn. Officer. Mr. McCraw brings extensive experience from the cli ent's perspective as a plant operator and purchaser of engineer ing and construction services from positions at Gulf Oil and Du Pont early in his career. Drawing from insights both as a client and as a provider of services, Mr. McCraw led the original team that conceptualized Fluor Daniel and served as its first President and CEO. He serves as the Chairman of the Executive Committee. (1984)l,) <3> Admiral Bobby R. Inman--Admiral U.S. Navy (Retired). Admiral Inman was the first Naval intelligence specialist to attain the ranking of 4-Star Admiral. He served as Director of the National Security Agency and Deputy Director of the CIA. He also headed a consortium of U.S. businesses designed to ensure technology leadership in the next century. Admiral Inman brings to the Board a wealth of political insight and a perspective on technological implications. He serves as the Chairman of the Nominating Committee. (1985)<2> Dr. Alien E. Puckett--Chairman Emeritus of Hughes Aircraft Company. Dr. Pucketts career spanned the growth of Hughes from a small company to a world leader in aerospace and defense. Retiring from the Fluor Board, his knowledge of the high technology industry and business acumen will be missed. (1987-1991) E. Morgan Massey -- Chairman Emeritus, A.T. Massey Coal Company, Inc. With retirement from active management, Mr. Massey remains on Fluor's Board as an outside director. He is fourth generation Massey Coal and is nationally recognized as a leader in the coal industry. (1987) Kontny also serves as President of Fluor Daniel and was part of the original team that conceptualized the new company. Having lived and worked on seven continents, Mr. Kontny brings global experience, energy and a strong affinity for our employees. He serves as a model of ethical conduct and dedication. (1988)<0 Dr. David P. Gardner--President, University of California. Dr. Gardner contributes valuable insight on the condition of American education and its implications for a professional services company like Fluor. Because of both the global stature of Dr. Gardner and the extent of the U.C. system, he also provides excellent international perspectives. (1988)<2> <3> Gerald M. Glenn--Group President. Fluor Daniel, Inc. Con stantly on the firing line, Mr. Glenn interfaces with clients around the clock and around the globe as head of the premier sales and marketing organization in the industry. He was part of the original team that conceptualized the new company, Fluor Daniel. (1988) Dr. Martha R. Seger--John M. Olin Distinguished Fellow, University of Arizona and former member, Board of Governors of the Federal Reserve System. Dr. Seger brings a strong back ground in finance and economics and extensive experience with the domestic and international banking community, Her perspective on both business and government are offered with candor and forthrightness. (1991) 45 DP, 8801402 Officers *m Corporate Executive Officers Leslie G. McCraw Chairman of the Board and Chief Executive Officer (1975) Vincent L. Kontny President and Chief Operating Officer (1965) Charles J. Bradley Vice President-Human Resources and Administration (1958) Nad A. Peterson Senior Vice President and Secretary (1967) James O. Rollans Vice President and Acting Chief Financial Officer (1982) P. Joseph Trimble Senior Vice President-Law (1972) Corporate Officers Wiv H. Bowers Vice Presi<itnr-(1>vernmenr Reja? 10ns V9741 John F. Combs Vice President and Treasurer (1989) Lawrence N. Fisher Vice President-Corporate Law (1974) J. Robert Fluor II Vice President-Corporate Relations (1967) Thomas H. Morrow Vice President-Tax (1984) David J. H. Nicoll . Vice President-Project Finance (1989) Senior International Advisors Ur. William A. Cochrane Fluor Daniel Canada, Inc. Canada Sir Francis Kennedy Fluor Daniel Limited United Kingdom Sir John Mason Fluor Daniel Australia Limited Australia Cor Van Rijn Fluor Daniel B.V. The Netherlands Fluor Daniel Executive Officers Vincent L. Kontny President (1965) Hugh K. Coble Group President (1966) Gerald M. Glenn Group President (1964) Key Fluor Daniel Executives Dennis G. Bernhart Vice President-Marketing, Hydrocarbon (1968) Richard D. Carano Vice President-Marketing, Asia/Pacific (1970) Charles R. Cox President, Operations Centers (1969) Richard Fenny V.i :''C. ; Europe/ A in< Middle Hast il.j-p Larry M. Hart President, Power Operations (1967) Thomas P. Merrick Vice President-Marketing, Government (1984) Charles R. Oliver President, Hydrocarbon Operations (1970) Joseph P. Panichi Vice President, Financial Operations (1976) Emil J. Parente President, Government Operations (1978) Charles P. Pringle Vice President-Marketing, Industrial (1970) James C. Stein President, Industrial Operations (1964) Steven G. Tappan Vice President-Marketing, Process (1977) Richard M. Teater Vice President-Marketing, Power (1980) Years in parentheses indicate the year each officer or executive joined the company. Other Key Executives A.T. Massey Coal Company, Inc. Don L. Blankenship Chairman and Chief Executive Officer (1982) Wvnston 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) Fluor Constructors International, Inc. G. William Gilfillan President (1989) James E. Pittman, Jr. Vice President-Project Development (1971) Larry Vondra Controller (1971) The Doe Run Company Jeffrey L. Zelms President (1969) Richard L. Amistadi Vice President-Sales and Marketing (1968) Gary E. Boyer Vice President-Smelting and General Manager (1977) John . FitzSimmons Vice President-Mining and General Manager (1966) Kenneth R. Buckley General Manager-Resource Recycling Division (1977) Roger E. Burch, Jr. Controller (1983) DR 2801403 Principal Subsidiaries and Divisions Engineering and Construction Fluor Daniel, Inc. Industrial Sector Irvine, California Ftsacess Sector Irvine. California Power Sector Irvine, California Hydrocarbon Sector Irvine, California Government Sector Irvine, California North American Operations Centers A; horage fU.g,iry (Lit igo Greenville Hum ton Irvim PfiibJelphia fardvu'od City Fluor Daniel GmbH Dusseidorf and Wiesbaden, Germany Fluor Daniel (Japan) Inc. Tokyo,Japan Fluor Daniel Limited Camber ley, England Fluor Daniel (Malaysia) Sdn. Bhd. Kuala Lumpur, Malaysia Fluor Daniel Pacific, Inc, Manila, The Philippines Fluor Daniel Thailand Ltd. Bangkok, Thailand Tecnofluot C. A. Caracas, Venezuela American Equipment Company, Inc. Greenville, South Carolina Duke/Fluor Daniel Charlotte, North Carolina International Operations Fluor Daniel Arabia Limited Al-Khobar, Saudi Arabia Fluor Daniel Australia Limited Melbourne, Victoria, Australia Fluor Daniel B.V. Haarlem, The Netherlands Fluor Daniel Canada, Inc. Calgary, Alberta, Canada Fluor Daniel Chile, S.A. Santiago, Chile Fluor Daniel China, Inc. Beijing, Peoples Republic of China Fluor Daniel Eastern, Inc. Jakarta, Indonesia Fluor Daniel Engineers & Constructors, Ltd. Hong Kong Fluor Daniel Espana, S.A. Madrid, Spain Fluor Constructors International, Inc. Irvine, California Natural Resource Investments A. T. Massey Coal Company, Inc. Richmond, Virginia The Doe Run Company St. Louis, Missouri 47 DR POO Iy04 S t ockholdera* Reference * m *c Form io-K A copy of the Form io-K, which is filed with the Securities and Exchange Commission, is available upon request. Write to: Vice President-Corporate Law, Fluor Corporation, 3333 Michelson Drive, Irvine, California 92730, (714) 975-2000. Registrar and Transfer Agent Security Pacific National Bank, Corporate Services Division, 701 South Western Avenue, Glendale, California 91201, and Security Pacific National Bank, 61 Broadway, 14th Floor, Suite 1412, New York, New York 10006. For change of address, lost dividends, or lost stock certificates, write or telephone: Security Pacific National Bank, Stock Transfer Division, Box 1152, Cranford, New Jersey, Attn: Investor Relations (800) 866-2301. Independent Auditors Ernst & Young, 18400 Von Karman Avenue, Irvine, California 92715 Common Stock Information At December 31, 1991 there were 81,042,997 shares outstanding and approximately 16,500 stockholders of record of Fluors common stock. The following table sets forth far the periods indicated the cash dividends paid per share of common stock and the high and low sales prices of such common stock as reported in the Consolidated Transactions Reporting System. Common Stock and Dividend Information Fiscal 1991 First Quarter Second Quarter Third Quarter Fourth Quarter Dividends Per Share $0.08 0.08 0.08 0.08 $0.32 Price Range High Low $42 Ms 544 5014 4654 $31 Ms 41/3 434 374 Fiscal 1990 First Quarter Second Quarter Third Quarter Fourth Quarter $0.06 0.06 0.06 0.06 $4 444 49`4 454 04 00 $2 8 A 41 29 meeting of stockholders will be held at 9:00 a.m. on March 10, 1992 at 48 Le Meridien Hotel, 4500 MacArthur Boulevard, Newport Beach, California 92660-2010. VJV,115 x 08/23/57 12/15/61 03/11/63 03/09/64 03/08/65 1 111 20% Stock Dividend 5% Stock Dividend 5 % Stock Dividend 5 % Stock Dividend 5 % Stock Dividend Stock Trading Fluor's stock is traded on the New York, Midwest, Pacific, Amsterdam, London and Swiss Stock Exchanges. Common stock domestic trading symbol: FLR. 02/14/66 03/24/66 03/27/67 02/09/68 03/22/68 05/16/69 5% Stock Dividend 2 for 1 Stock Split 5% Stock Dividend 5 % Stock Dividend 2 for 1 Stock Split 5 % Stock Dividend Company Contacts Stockholders may call collect. Stockholder information: Lawrence N. Fisher (714) 975-6961 Investor Relations: LilaJ. Churney 03/06/70 03/05/71 03/10/72 03/12/73 03/11/74 08/13/79 07/18/80 5 % Stock Dividend 5% Stock Dividend 5 % Stock Dividend 5% Stock Dividend 3 for 2 Stock Split 3 for 2 Stock Split 2 for 1 Stock Split (714) 975-3909 DR 2801405