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Fluor Corporation Annual Report -- 1983 America's Corporate Foundation; 1983; ProQuest Historical Annual Reports pg. o_ Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. v - .r mm J1 i 'V? x:A',}:{.<^*\t'ev'\A; - * ,j *. ! ul 4 - ; j ;vy.; ^ ' ??' '' 1 ---f-{ V'' | j fmri Ck)U|iMln9 pwfidwia:. 1%Othar \< -,-V- 1% Oil* Oar, 3%DrMJry e9%.e&d. i :.j 1 " - - I, _* **- / ... xktf?*?)? ".'V^i;',Vr'V.:'V ; ii'tttv.N) i< vji J;i'.'t* 'v; i'- V.iM *y. ' v - t > r;*i r HIGHLIGHTS $ in thousands, except per share amounts Periods ended October 31, Fiscal Year Revenues from continuing operations Earnings from continuing operations Net earnings Earnings per share Continuing operations Net earnings Working capital provided from operation*? Capital expenditures Cash dividends per common share At Year End - Totalassets Capitalization Long-term debt ' Total capitalization Percent of total capitalization Long-term debt Shareholders' equity Shareholders' equity per common share Number of employees 1983 1982 1981 $5,300,452 80,700 27,700 1.02 .35 332,485 301,835 $ .80 $6,740,551 160,976 152,799 2.05 1.94 377,121 525,932 $ .80 $5,357,593 143,983 158,906 2.56 2.82 274,437 448,143 $ .80 $4,084,920 720,007 1,747,249 $2,467,256 29.2 70.8 $ 22.19 34,123 $4,700,990 1,009,858 1,776,419 $2,786,277 36.2 63.8 $ 22.68 43,111 $4,491,328 1,104,840 1,683,199 $2,788,039 39.6 60.4 $ 21.55 44,170 During the fourth quarter of 1983 the company adopted a plan to dispose of the Distribution Group; accordingly, prior periods have been restated to exclude the Group from continuing oper* ations. St. Joe Minerals Corporation is included on an equity basis for the period May 1,1981, through August 2, 1981, and on a consolidated basis thereafter. HJIGdS -STOW s .vi.-ttS< *>>'. J-'t-^; V, .COMPANY DESCRIPTION ABOUT THE COVER .& fe'ri-] igigs^^$ignHpa Fluor Corporation is an engineering and construction company and a major producer of natural resources. 1 re company provides worldwide engineering, construction, pro curement, and project-management services to energy, natural resource, industrial, commercial, utility, arid government clients. Natural resources produced are principally gold, silver, lead, zinc, iron ore, coal, oil, and gas. The company also provides contract drilling services. The 1983 Fluor Corporation Annual Report cover symbolizes the company's two main businesses--Engineering and Construction and Natural Resources--and economic factors that influence those businesses. The left panel depicts process and mechani cal flow diagrams and modules from a scale model of an offshore drilling and production platform being built by Fluor. The right pane! shows maps used by Fluor in the exploration for natural resources and various minerals, core samples, and tools used by geologists in evaluating potential discoveries. In the center panel, an economic chart of domestic gross national product and capital expenditure trends is shown. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. LETTER TO SHAREHOLDERS his past year was un questionably a difficult Tone in terms of net earn 'm ings due to weak condi tions throughout the industry and some non-recurring charges. Superior performance by ItaKtelw Share , ; our employees and substantial cash proceeds from the sale of non-strate- gic businesses, however, made pos sible the following business and financial accomplishments: bb Generated earnings of $1.02 per share from continuing operations. b Divested non-strategic businesses to concentrate resources in high potential operations. .jVwwsrj."' ' - f - 79 - ;eq` si ; ssr 83* b Maintained strong capital invest ment and exploration programs. a Improved the corporation's debt ihwiipm Share.lrem position, reducing ongoing interest mm.T-Ctmtimriftg Op*ratt< expense. a Paid cash dividends of 80 cents per share.. ,-7 ; , . . a Implemented management succession moves. CONTINUING OPERATIONS PERFORM WELL Excluding effects of Floor's Distri bution Group, a discontinued opera tion, net earnings from continuing operations totaled $80.7 million, or $1,02 per share, on revenues of $5.3 billion. This compares with $161 mil lion, or $2.05 per share, on revenues of $6.7 billion in 1982. (Charts A, B, C, D) Included in 1983 earnings from continuing operations were net write-downs of $23 million for cer tain unsuccessful oil and gas explo ration activities overseas and $6 million for the retirement of three obsolete offshore drilling rigs. 80 81 '82; 83] wWfrlnif Capital from $ In millions Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The anticipated divestiture of the Distribution Group, combined with the group's operating loss, reduced fiscal 1983 net earnings by $53 million or 67 cents per share. As a discontin ued operation, the Distribution Group will not be included in 1984 earnings. This divestiture, which allows management to concentrate financial resources on engineering and con struction and natural resources, contributed to reduced net earnings for the year of $27.7 million or 35 cents per share. In 1982, net earn ings were $152.8 million or $1.94 per share. DIVESTITURES ESSENTIALLY COMPLETE In addition to the pending sales of the Distribution Group and oil and gas investments in the United King dom, the North Sea, and Egypt, Fluor completed the Coquina Oil Corpora tion divestiture, and sold Goldston trucking and Fluor's interest in Peabody Holding Company. A total of $490 million will have been realized from these sales with proceeds used to reduce debt. While management plans to re view the strategic fit of all businesses on a recurring basis, the program to streamline operations initiated after the acquisition of St. Joe is essen tially complete, DEBT RETIREMENT NEARS TARGET Long-term debt was reduced by nearly $300 million in 1983, lowering the company's long-term debt-tocapitalization ratio to 29 percent, compared to 36 percent a year ago. As the company stated when it acquired St. Joe in 1981, this ratio is targeted to reach 25 percent by yearend 1984. Proceeds from the pend ing sale of the Distribution Group and oil and gas properties, plus cash from operations, will be major con tributors toward this goal. The reduc tion in debt will lower ongoing interest expense, improve profit ability, and increase the company's flexibility to take advantage of business opportunities. (Charts E, F) In recognition of Fluor's strong balance sheet, the credit rating agencies maintained a high invest ment-grade rating on the company's long-term debt and commercial paper. Following a review in late 1983, Standard & Poor's and Moody's awarded or reaffirmed ratings on Fluor's long-term debt of AA- and A-2, respectively. Standard & Poor's and Moody's reaffirmed ratings of A1 + and PI on Fluor's commercial paper --their highest ratings. Duff and Phelps, which only rates Fluor's long term debt, maintained their rating of 4, which is in the AA category. CAPITAL INVESTMENT CONTINUES STRONG Capital expenditures for the year were just over $300 million. Major projects included $97 million to com plete new engineering facilities, $74 million for mining operations, and $111 million for investment in oil and gas properties. Over the past three years, the company has invested nearly $1.1 billion to expand or modernize Engi neering and Construction complexes; mines, mills, and smelters; and to acquire interests in oil, gas, and min eral properties. The benefit of these investments should be fully realized as Fluor's businesses improve. (Ch.irt G) ^ E&C, INTERNATIONAL MINERALS SHOW GOOD EARNINGS The company's Engineering and Construction (E&C) and Interna tional Minerals operations were the major contributors to 1983 earnings. E&C, largest of Fluor's two core businesses, reported operating profits just eight percent under the record high set in 1982. Revenues, however, declined 24 percent, and new orders dropped 57 percent. Be cause of recession-induced weakness in new orders, backlog at year-end stood at $5,6 billion compared with $10.7 billion a year ago. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 3 In one of the most severe down turns in new awards for the industry since the 1930s, Fluor won approxi mately 40 percent of the major con tracts it pursued. Fluor's E&C Group also far exceeded its historical shareof-market average for manhours booked. This marketing success, under harsh competitive conditions, al lowed Fluor to retain a greater per centage of its manpower in relation to the engineering and construction industry as a whole. Retention of manpower is a management priority that allows Fluor to respond quickly to client needs as business recovers. E&C INDUSTRY TORIES GAm MOMENTUM Cyclical in nature, the engineering and construction industry has tended to lag general economic recoveries. Key factors that signal an impending recovery are increases in plant ca pacity utilization, corporate cash flows, and profits. All were trending positive at year-end 1983 and should result in higher capital expenditures by clients in the coming months. (cfMitn a, i) Senior E&C operating executives have been temporarily assigned mar keting responsibilities in their areas of expertise to enhance the com pany's prospects during the upturn. Capital expenditures in the indus trial sector are already showing recov ery, and Fluor's Daniel International subsidiary is experiencing increased new business activity. Daniel builds plants for a wide variety of industries, including: pharmaceutical, electron ics, automotive, food, chemical, pulp and paper, biotechnology, metal, nuclear and non-nuclear power, and many others. Historically, the engineering and construction industry has shown superior growth compared to overall U.S. industry. Current projections for relatively low inflation and rela tively high industrial production in the 1980s indicate a continuation of superior growth for the E&C industry. (Churl J) In addition to improving economic conditions, several other factors in dicate strong long-term growth for engineering and construction in energy and non-energy markets. Investment by oil companies in offshore oil and gas leases, averag ing over $5 billion per year since 1979, is a precursor to future E&C activity. Offshore California, work has started on platforms that will lead to pipelines, storage facilities, and processing plants. Similar activ ity is under way in Alaska and Canada. (Clwtrt K) Demand for oil and gas production projects on-and offshore, throughout the world, is expected to represent the largest energy-related market for engineering and construction for the rest of the decade. Fluor is operating in every major area where production activity is planned or is under way. In other energy-related areas, expenditures are planned for the reconfiguration of petroleum refiner ies in the U.S. and some grassroots facilities overseas. Substantial op portunities exist longer term in chem icals, petrochemicals, gas processing, and power, despite current overcapac ity in some of these industries. The Middle East> for example, will con tinue to be an important market for gas processing projects, while cogen eration in the U.S. offers a growing amount of work in the power field. Petrochemical projects are emerging in third world countries that have access to low-cost resources. The synfuels industry is an important target market for Fluor. The Synthetic Fuels Corporation's announced intention to provide loan guarantees and product subsidies assures that some large synfuels Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ojects will be built in the United tJtes. Interest in synfuels continues i nations where the development f alternate energy resources is tgarded as a national security issue. In addition to Floor's traditional non-energy markets, the company has selected transportation and telecommunications for special emphasis. The U.S. Transportation Assistance Act of 1982 has led to a renewal of interest in mass transit rail systems and highway renovation. The growing telecommunications industry also offers opportunities to Fluor for its project management, systems integration, and overall engineering talents. Government work in nuclear fuel enrichment, reprocessing, and waste disposal is of growing importance to Fluor, as well. (Charts L, M) NATURAL RESOURCES OUTLOOK IMPROVES The International Minerals segment of Floor's Natural Resources oper ations reported a 12 percent increase in operating profit over the previous year, due primarily to higher gold prices and strong production levels. Domestic Metals activities experi enced an operating loss as a result of lead metal prices that fell to their lowest level since the 1930s. At yearend, however, lead prices were 35 percent above their low for the year. St. Joe's lead metal sales were seven percent above 1982, and the company improved its market share. Average price for zinc was un changed in 1983, although by yearend the trend was up. Sales increased 34 percent compared to the previous year. As industrial activity gains momentum, zinc consumption and prices should continue to strengthen, while lead prices are expected to move up gradually. (Charts N, Oj St. Joe maintained its long-stand ing program to improve return on investment and to minimize the cyclicality of the minerals business. This program entails considerable exploration, which amounted to $20 million in 1983. The strategy is to balance the already strong position in base metals with greater activity in precious metals and to develop other new, high-margin mineral product lines. The company will also continue to diversify geographically. Coal operations reported a loss for the year, although production was up slightly. The worldwide recession and a strong dollar reduced demand for U.S. coal. However, gains in in dustrial activity should lead to higher demand in 1984. This coupled with improved productivity in Fluor's coal mines should lead to gradual improvement in coal operations. (Chart P) Operatirig profits from Fluor's oil and gas investments were down due primarily to lower oil and gas prices and a write-down for unsuccessful exploration efforts overseas. The planned sale of certain foreign oil and gas properties for approximately $66 million is consistent with the company's strategy to emphasize domestic oil and gas investments. Fluor Drilling Services also reported a decrease in earnings. Principal rea son was low utilization rates stem ming from an oversupply of offshore drilling rigs, which caused a severe cut in day-rates, plus a write-off for the retirement of three obsolete rigs. The drilling market bottomed out in the second half of '83, and improved utilization rates are expected in 1984. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. MANAGEMENTAND DIRECTOR CHANGES During the past four years, Fluor has been engaged in a comprehensive management succession program to prepare for the retirement of senior executives. Significant management changes in 1983 were Dean K. Allen to President of Fluor Engineers, Inc. and Hugh K. Coble to Group Vice President - Marketing for the E&C Group. Both executives were elected to the Fluor Board in January 1984. In Natural Resources, Roy K. Wheelock was named President and Chief Operating Officer of St. Joe Minerals Corporation. William I. McKay and Arthur C, Sheffield, Group Vice Presidents and members of the Board, were named to the E&C Group's Executive Council. Charles W. Cox, Vice Chairman of Floor 's Daniel International Corpo ration, and Richard B. Humbert, Senior Vice President-Law and Tax and Secretary, retired from the Board. John K. Pike, Vice President and Chairman of Fluor Distribution Companies, Inc , resigned to pursue other interests J. Robert Fluor Chairman of the Board and Chief Executive Officer ai.%'Laati/Xlnc Cwimtpthio; I&9. ttt&ratHa) PiwSucttert HfWIlllJWWTI.'iWWlWMI thousand short tons 1000 j*H\'' \4jtf MOO rsi fndf-1876, w.-f mtwntMaUnanii U'OO H)00 ft00 000 400 POO V.'"' ;,,>>*. pTTy^ ` 73 'c vr^^S % tiwid' (, IS Ztxtit ^ 8| V,$, tfYddstd^ <tf W^e,C0*snmes ^rt-'(^ '<({] ||1 INDICATORS TURN POSITIVE FOR 1984 In 1983, Fluor improved its competi tive position, streamlined operations, strengthened its balance sheet, and prepared its organization for the business upturn. We extend our gratitude to Fluor employees and shareholders for their support. As the fiscal year came to a close, economic indicators most relevant to the industries we serve were turn ing positive. The result should be improved business conditions for Fluor in 1984. David S. Tappan, Jr. President and Chief Operating Officer January 14,1984 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner, burther reproduction prohibited without permission. ngineering and CONSTRUCTION EOperating profit from the Engineering and Construction Group reached record levels at mid-year and then began to weaken due to a decline in new orders during the industry-wide recession. Revenues and operating profit amounted to $4.1 billion and $210.7 million, respectively, in 1983 compared to $5.4 billion and $228.6 million in fiscal 1982. New orders and backlog also declined, from $2.9 billion and $10.7 billion, respectively, in 1982 to $1.2 billion and $5.6 billion in 1983. (Chorls Q, R| Approximately $550 million in new orders booked for 1983 are phased-release awards with consid erable potential value. Several of the contracts--which involve offshore oil and gas production, process plants, mining, and non-power nuclear work--are expected to progress to full-scale in 1984. (Chart S) Faced with soft markets and increased competition, the Engi neering and Construction Group intensified its marketing efforts worldwide and was successful in in creasing its share of reduced mar kets. Of 17 major projects targeted by Fluor Engineers, Inc. during the year, the company received seven, or 41 percent of the total. The E&C Group--comprised of Fluor Engineers, Flupr Constructors, and Daniel International Corpora tion--reduced operating Costs in 1983 and increased productivity. Manpower levels were brought down by 22 percent to cope with the decreased workload. In terms of major projects com pleted, fiscal 1983 was a banner year. More than a dozen large-scale jobs were completed around the world, including refinery modernization programs in the United States, Venezuela, Canada, Europe, and South Africa. ; Particularly significant were four projects performed jointly by Fluor Engineers and Daniel. Joint efforts covered such diverse industries as petroleum refining, gas processing, chemicals, and synthetic fuels. Typi cally, Fluor performed engineering and design, and Daniel was respon sible for construction. At Borger, Texas, the two com panies combined on a $300 million refinery modernization program to allow for processing of a \yide range of crude oils. In Evanston, Wyoming, Fluor and Daniel teamed efforts on a $230 million gas process ing plant. At Pensacola, Florida, the two companies built the largest chemical plant of its kind. And in western Colorado, Fluor and Daniel completed major first-phase facilities for a $600 million shale-oil project. The acquisition of Daniel in 1977 added an open-shop construction capability to match Fluor's traditional union-shop mode. OIL & GAS PRODUCTION Energy companies continue to allocate a high percentage of their capital budgets to oil and gas produc tion. Fluor is tracking 30 such projects worth almost $40 billion. The majority are in the North Sea, offshore Califor nia, the Arctic, and off the Maritime Provinces of Canada. At Point Arguello, California, Fluor is designing and engineering a major offshore platform complex. Oil and gas will be transported from a production platform via subsea pipelines to onshore processing and distribution facilities. Project com pletion is set for 1985. In Canada, Fluor is part of a joint venture for the country's first major offshore project, a multibillion-dollar program to produce and process gas from the Venture Field off Nova Scotia. Fluor is providing project management services. In the Norwegian sector of the North Sea, Fluor is serving as projectservices contractor for the world's largest gas production network and an onshore gas treatment plant and terminal. Jackets for two riser plat forms were installed during the year as well as 352 miles of offshore pipe line. Project completion is scheduled for early 1986. Fluor is providing detailed design and procurement assistance for de velopment work in the Highlander Oil Field in the United Kingdom sec tor of the North Sea. The work in volves a subsea template, connecting pipelines and controls, and modifi cations to the platform topsides. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Early in the year, Fluor was selected to assist in development of the Ras Fanar Gas Field in the Gulf of Suez, Egypt. Fluor is providing design and procurement assistance for the $100 million project, which will involve two offshore platforms, subsea pipelines, onshore power plants, and crude oil processing and export facilities. In the Gulf of Mexico, Fluor served as construction manager for an oil-recovery program offshore Venice, Louisiana. The project in volved modifications to six oil-andgas production platforms in approximately 200 feet of water. Three other developments in 1983 relate to the potential in offshore production markets. In May, Fluor announced the formation of a joint venture with C.G. Doris of Paris. The company, Fluor-Doris, Inc., based in Houston, provides engi neering, design, and construction services for offshore areas of North and South America. Emphasis will be placed on Doris' experience with deepwater production platforms made of concrete, steel, or compos ite for ice-laden waters. Earlier in the year, Fluor acquired a Dutch engineering company, Marcon, that specializes in design and engineering of offshore structures and semi-submersibles. Fluor Engineers signed a long term agreement with Bethlehem Steel Corporation to combine talents in design and construction of tension-imoored platforms for deep water exploration and production. REFINING Despite excess petroleum refining capacity, opportunities exist for modernization work. Modifications will be required to process heavier crudes and to upgrade older units. Jointly owned processing facilities are also under study by some U.S. energy firms. In addition, Fluor is tracking grassroots refinery projects and ex pects continued revamping activity in the United States and abroad. PETROCHEMICALS In the chemical-petrochemical sector, which also faces excess capacity, clients have reported recoveries in third- and fourth-quarter profits. This should lead to additional plant investment. Meanwhile, a number of new-technology opportunities exist in polymers. In Saudi Arabia, Fluor is completing two petro chemical projects in A1 Jubail, SYNFUELS While development of synthetic fuels in the United States lost momentum as oil prices declined, encouraging developments have occurred. Late in 1983, the U.S. Synthetic Fuels Corporation (SFC) granted a favorable price guarantee to one developer to convert shale rock into oil in Colorado. The SFC is looking at other programs and is committed to production of new domestic fuels to replace foreign imports. The government has earmarked $10 billion for this effort in 1984. Fluor recently completed engi neering and construction on firstphase facilities for an oil-shale project at Parachute Creek, Colorado. There is continued interest in synfuels overseas as well, primarily in South Africa, Australia, and South America. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. iVUMIMG Fluor was awarded three significant mining projects during the year. Work commenced on the initial phase of an engineering, design, procurement, and construction man agement contract to develop coal reserves in the Book Cliffs Field in Utah. In China, Fluor was awarded a contract by the China National Coal Development Corporation for basic engineering of a major multi-seam lignite mine and preparation of a master development plan. During 1983, Fluor formally estab lished Fluor-Chile, S.A. in Santiago to perform design, engineering, pro curement, and construction for min ing and metallurgical industries in South America. Late in the year, the unit was awarded preliminary engi neering on a mining project outside Santiago. AMC3 COMMCRCIAL. Fluor's activity in general industrial and commercial projects included re cent awards for biotechnology facili ties in California, corn milling plants in Minnesota and South Africa, and pharmaceutical projects in North Carolina and West Germany. Accelerated by a recovery in car sales, the automotive industry has planned major capital programs for assembly, components, and parts. Daniel, for instance, completed a highly automated assembly plant in Tennessee for a Japanese manufacturer. .'Woo?to gonera!A\ :irfoortng consultant for a: .v' mmt!' '3.3 systam iimilsr to afcov| Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Pulp and paper represents a strong market for revamp and co generation work. Ongoing projects include a pulp plant in Alabama, a newspaper mill in Georgia, a bleached pulp and paper mill in South Carolina, and a pulp and paper renovation in the same state. In other industrial and commercial areas, Daniel is working on a can manufacturing plant in West Ger many, an aluminum rolling mill in Kentucky, and infrastructure for Tanajib, an industrial complex in eastern Saudi Arabia. POVV6R Fluor was awarded total responsibil ity for a 300-megawatt cogeneration plant near Bakersfield, California. The plant, one of the world's largest, will produce electricity for utility power and steam for oil recovery. Fluor also obtained engineering and construction responsibility for the world's largest photovoltaic power plant, a six-megawatt unit in central California that converts sun light into electricity. Photovoltaic cells promise to become a practical method of energy production, espe cially in remote areas where power grids are not available. Large power reserves--combined with slower economic growth and conservation--have dampened prospects for new plant construction in the next several years. Available work will consist largely of modifi cations, retrofits, and maintenance and upgrading of older plants to improve efficiency. MAStirLMANC.E ' Historically a strong market for Daniel in the U.S. and Puerto Rico, plant maintenance has been extended through Fluor Mechanical Services and Fluor Plant Services. The com pany was awarded a variety of sig nificant maintenance contracts in the Mideast, South Africa, Canada, and Europe. i\LW iVLSUICO S ` As part of its long-term strategy, Fluor has established a foothold in non-traditional markets that promise growth. A number of contracts reflect this emphasis. Through its Advanced Technology Division, Fluor was awarded 15 con tracts for studies and development work in a broad range of emerging industries. These include: synfuels, biotechnology, fuel cells, landfill gas processing, methanol, coke utiliza tion, and nuclear fuel processing and disposal. Among major government proj ects awarded were three by the U.S. Department of Energy and one by the Army Corps of Engineers. In March, Fluor was chosen to provide engineering services for conceptual design of a nuclear waste repository. It will be designed to isolate com mercially generated spent fuel and high-level waste. Initial design work could lead to additional contract increments in a 12- to 15-year program. The Department of Energy selected Fluor to provide advanced conceptual design for a nuclear processing facility near Richland, Washington. Full contract release is expected in early 1984. The company also won an archi tect/engineering services contract for the Department of Energy at its Idaho Falls National Laboratory. Fluor has been retained to provide engineering services for a variety of nuclear and non-nuclear programs. For the Corps of Engineers, Fluor designed a wash-down system for the space shuttle launch complex at California's Vandenberg Air Force Base. The contract calls for facilities to remove corrosive exhaust wastes that collect on the Iaunchpad during liftoff. Work continued for the U.S. gov ernment at its uranium enrichment plant in Portsmouth, Ohio. Enriched uranium is used to generate electric ity in nuclear power plants. Fluor's design work on the massive project has been under way since 1978. To pursue two other market areas, Fluor has organized a Transportation and Infrastructure Division. The division focuses on major domestic and international projects in mass transit, airports, public ports, high ways and bridges, water resources, defense, and infrastructure. The new division's first contract came early in fiscal 1983 when Fluor was named general engineering con sultant for the $3 billion Los Angeles to San Diego high-speed rail project. The 131-mile, privately funded sys tem will be the first high-speed rail road in the Americas. In addition, the division has formed joint-venture associations for projects with a potential value in excess of $13.5 billion. Fluor also is involved, through Daniel, in a $134 million peoplemover in downtown Miami. The system features a train of electrically powered vehicles that will transport travelers along a two-mile elevated rail loop in the heart of the city. Daniel is providing construction management for the project. 12 ,. . Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. fas'-'" ,j SJ3S23S^'^?: jv';:r. V/| Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. To service still another market, Fluor Telecommunications Services was created. The group offers a full range of services based on its tele communications experience from major process-plant projects. Tele communications technology, for ex ample, was involved in such major programs as the Alyeska pipeline terminal and pump stations, the Louisiana Offshore Oil Port, the ARAMCO Central Dispatch commu nications system that covers 50,000 square miles in Saudi Arabia, and the Petroleum Authority of Thailand Gas Pipeline project. atural resources The Natural Resources Nsection includes St. Joe's Domestic and Interna tional Minerals, 50 per cent ownership of Massey Coal Company; the Oil and Gas Group; and Fluor Drilling Services. .i St. Joe's operations recorded rev enues of $866.5 million and operat ing profit of $25.8 million in fiscal 1983, down from $886.9 million in revenues and $48.8 million in oper ating profit for the prior year. The decline is due to depressed commod ity markets worldwide, especially in lead and coal. This was partially offset, however, by favorable gold and silver prices that on average were higher than the previous year. St. Joe continued to reduce operat ing expenses and improve produc tivity during the year. Additionally, manpower levels were reduced by seven percent. St. Joe successfully maintained, and in some cases in creased, market share while keeping inventories low. Lead production costs were reduced by nearly 10 percent. During the year, St. Joe completed relocation of its corporate office from New York City to Clayton, Missouri. The move saves approximately $10 million annually in administrative and overhead cost|. Offices of St, Joe International remain in New York. With an improving economy, St. Joe anticipates gradual strengthen ing of its base-metals markets. Lead and zinc prices finished the year on an upward trend. Producer price of lead in 1983 Was the worst since the Great Depression, bill it moved up from a mid-year low of 20 cents to 27 cents per pound by October. The price of zinc declined from 42 cents at the start of the year to 38 cents per pound in March, then rebounded to 49 cents by fiscal year-end. Contin ued recovery in automobile and housing markets should contribute to further advances. DOMESTIC METALS' J ' ; The Domestic Metals Group is the largest fully integrated producer of lead and zinc in the United States and operates the qnly domestic un derground iron bre ihine. The group also produces gold and silver. Lead and iron ore operations are located in southeastern Missouri; zinc min ing in northern New York State and smelting in southwestern Pennsylva nia. Gold recovery is in central Cali fornia, while silver is a by-product of St. Joe's lead production. (Charts U, V) Despite a severe recession in the metals industry during 1983, St. Joe maintained a relatively high level of lead production and sales. St, Joe sold 221,000 tons of refined lead, a slight increase over 1982. The com pany accounted for approximately 41 percent of U.S. lead ore mined in fiscal 1983, and approximately 20 percent of total domestic lead-metal production. (Chart W) Development of the new Bixby lead mine in Missouri continued during the year, and it is expected to commence production early in 1984. The nearby Viburnum mill was expanded and modernized to accom modate the increased production, 4.000 tons per day. St. Joe places emphasis on by product recovery. During the year, the company continued develop ment work on a new process to sep arate cobalt from lead and copper concentrates. Efforts continued as well to capital ize on higher-margin, value-added products. Marketability of St. Joe's iron ore pellets, used in steel produc tion, was enhanced by chemical addi tions to the pellets. This modification gives St. Joe a product that is attrac tive to a broader customer base. Sales of iron pellets at St. Joe's Pea Ridge Mine in 1983 amounted to 672.000 gross tons, down from 786.000 gross tons in 1982. In 1984, production of iron pellets is expected to rebound to more than one million gross tons as a result of improved business conditions in the steel industry. f Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. St. Joe's domestic zinc mines accounted for 28 percent of U.S. production in fiscal 1983. Installation of a new furnace at the company's Monaca smelter increased capacity from 85,000 to 100,000 tons per year. More than 100,000 tons of zinc metal equivalent were sold by St. Joe's domestic operations in 1983, up 34 percent. (Chart X| The Domestic Metals Group made process improvements at Monaca that resulted in an annual savings of more than a half-million dollars. This partially offset increased raw mate rial costs. The group has two-thirds interest in a 2,000-acre gold mining venture along the Yuba River in California. Domestic gold production amounted to approximately 11,000 troy ounces in 1983. Production is expected to increase to an annual rate of 15,000 troy ounces in 1984. On the exploration front, Domes tic Metals is evaluating several baseand precious-metals prospects, in cluding lead and zinc in the Midwest and East and gold in California. In early 1983, the company filed an ap plication to mine on 2,200 acres of leased property along the San Juan Ridge in Nevada County, California. A U.S, Geological Survey has esti mated that the property contains one of the largest remaining placer gold concentrations in the United States. INTERNATIONAL MINERALS Foreign operations are conducted through St. Joe International Cor poration, which mines gold, silver, and copper in Chile, and lead, zinc, silver, and copper in Argentina, Peru, and Australia. Increased earnings were recorded by this unit in 1983 primarily as a result of higher predous-metals prices. Chilean operations are centered around the El Indio gold mine, of which the company owns 82 percent. The particularly profitable DSO, or Direct Shipping Ore, which requires no on-site processing, has been in production since 1979. A mill and roaster were inaugurated at the mine site in December 1981 to pro cess lower grades of ore. Since that time capacity has been increased from 1,400 tons to 1,550 tons of ore per day. Additional modifications in 1984 will increase capacity to 1,700 tons per day. (Chart YJ During 1983, Ellndio sold 362,000 troy ounces of gold and 926,000 troy ounces of silver, compared to 368.000 troy ounces of gold and 536.000 troy ounces of silver in 1982. El Indio's milling ore reserves are estimated at 5 million tons that aver age .3 troy ounces of gold per ton. DSO contains about 6.8 troy ounces of gold per ton, and proven and probable reserves are estimated at about 66,000 tons. Properties around El Indio are undergoing extensive exploration. Gold discoveries are sought in four areas along a 160-kilometer belt in the Andes north and south of El Indio. The most promising of these is Tambo, where St. Joe holds 82 percent ownership. In Argentina, St, Joe's Aguilar mine is operating at a rate of 668,000 tons of ore annually. Proven and probable reserves total 6.2 million tons that consist of 5.8 percent lead, 6.9 percent zinc, and 3.5 troy ounces of silver per ton. A new tunnel com pleted at the mine will allow more efficient and economical movement of ore to the mill and will give access to lower-level reserves. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. In 1983, Aguilar produced con centrates containing approximately 32,000 tons of lead, 37,000 tons of zinc, and 1.6 million troy ounces of silver. To maintain sales, part of the concentrates normally sold to smelt ers and refiners in Argentina have been exported for the past three years. St. Joe holds 50 percent ownership in Sulfacid, the principal active zinc refinery in Argentina. Zinc capacity at Sulfacid has been increased from 25,800 to 31,700 tons annually in the past two years. Active exploration programs are being conducted in Argentina where two precious-metals prospects con tiguous to St, Joe's Chilean proper ties are being evaluated. Financial results from the com pany's one-third ownership of the Woodlawn venture, primarily a zinc, lead, and copper mine in New South Wales, Australia, were disappointing because of technical problems and low metal prices. Major improve ments made during the year, how ever, permit more efficient recovery. This, plus a stronger zinc market, is expected to lead to a turnaround in 1984. St. Joe's principal operation in Peru is the Santander zinc mine in the Andes. About 35,000 tons of zinc concentrate were produced in 1983. During the year, St. Joe acquired a modern mine, known as Madrigal, in Southern Peru. Madrigal's esti mated concentrate production per year is 1,400 tons of copper, 7,000 tons of lead, 16,000 tons of zinc, and 430,000 troy ounces of silver. In Brazil, the Mocambo tin project is in development. High-grade re serves have been proven. This is an alluvial deposit requiring a relatively low capital investment. Tests to determine plant design were com pleted in 1983. St. Joe has ascertained diamond grades at Araguaia. An investment partner is under consideration for exploration dredging. St. Joe's exploration strategy is to search for selected minerals in politi cally stable countries to locate highgrade and low-cost orebodies. In recent years, a major effort has been directed toward precious metals, particularly gold. Secondary empha sis has been placed on base metals such as lead and zinc to enhance on going operations. A third effort has been on metals critical to the United States but not available domestically in significant amounts. Exploration programs are under way in North and Sduth America and Europe. COAL . ;. ; St. Joe coal operations are managed through Massey Coal Company a 50/50 joint venture with Scallop Coal Corporation, a member of the Royal/ Dutch Shell Group of companies. Massey's coal resources consist of approximately one billion tons of recoverable lovv-sulfur reserves primarily in the Appalachian fields close to transportation lines. Over the last two years, Massey has suffered from an industry-wide cost-price squeeze; Since federal legislation deregulated rail freight pricing in 1980, transport rates have risen some 58 percent. Coal prices declined an almost equal amount owing to the recession and a strong dollar, which made American coal less competitive on world markets. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Despite these pressures, Massey managed to maintain its volume dur ing the period through increased sales to domestic electric utilities. Total sales of produced coal in 1983 amounted to more than 18 million tons, and coal purchased for resale totaled three million tons, about equal to levels in each of the last two years. (CS.art Z) OJL a GAS Fluor Oil and Gas Corporation and St. Joe Petroleum Corporation were combined during the year to form a new Oil and Gas Group. This group recorded $15.7 million in operating profit on revenues of $135.8 million in 1983, compared to $69.7 million and $225.8 million, respectively, in 1982. Included in 1983 results were write-downs of development costs in certain foreign countries where the company has discontinued its explo ration efforts. During the year, Fluor completed the sale of Coquina properties for $209 million that were acquired in 1981 as part of the St. Joe merger. Fluor retained six tracts in the Santa Maria Basin offshore California and has begun exploration. Industry sources estimate 500 million to one billion barrels of recoverable oil in this basin. Foreign production continued at planned levels. In Greece, produc tion in the Prinos Field (14 percent ownership) averaged 25,000 barrels per day during 1983. In Indonesia, where a 10 percent interest is held, production averaged 33,000 barrels per day. Buchan Field in the North Sea, where Fluor holds 13 percent interest, averaged 30,000 barrels per day. Agreement to sell this interest was reached shortly after the close of the fiscal year. In Argentina, fluor Oil and Gas and its partner successfully renegoti ated with the government a contract that increased the price received for crude oil from the Centenario Field. Since then/ production has more than doubled to about 3,500 barrels per day. Domestically, Fluor continued to participate with Shell Oil and others in offshore Gulf of Mexico leasing ac tivities. The company acquired inter ests ranging from 8 to 11 percent in 76 offshore blocks. A number of exploratory successes were realized during the year and will be developed in 1984. Produc tion should start by year-end. DRILLING Fluor Drilling Services (FDS) pro vides contract drilling services to the offshore petroleum industry. This unit recorded decreased earnings in 1983 as the industry absorbed the combined effects of reduced drilling and an oversupply of rigs. Following six years of unprecedented earnings, FDS recorded operating profit of $4.1 million in 1983, compared to $60.4 million in 1982. Also affecting results in 1983 was a write-off of $6 million after taxes for three obsolete rigs that were re moved from service. Retirement of these 20-year-old rigs, which were no longer competitive, reduces the group's operating costs. FDS' fleet consists of 11 offshore drilling rigs, seven of which operate domestically in the Gulf of Mexico and four in foreign waters. Exclud ing the three obsolete rigs, FDS' uti lization rate in 1983 was 71 percent, about equal to worldwide averages. 500 <; (i 3/ , 300 2?-, i or 7; 0 6 00 5.25 4 50 3 75 3.00 2 25 1 50 0.75 0 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 19 OPERATIONS STATISTICS Engineering and Construction $ in thousands Years ended October 31, Work Performed Revenues Operating Profit New Orders Backlog Manpower 1983 $6,335,741 4,105,172 210,676 1,244,553 $5,610,687 18,998 1982 $ 7,526,128 5,384,723 228,587 2,908,822 $10,711,815 24,498 1981 $ 7,295,853 4,812,191 227,980 7,100,552 $16,166,292 25,858 1980 $ 6,557,957 4,129,766 184,382 9,113,746 $15,917,558 23,601 1979 $ 4,803,000 3,112,311 154,750 5,876,721 $12,135,512 20,402 1978 $ 4,275,892 2,538,953 141,829 3,278,248 $11,517,919 18,945 Backlog by Industry and Location $ in millions Power Petroleum ^ Chemical /Petrochemical Gas Processing Mining/Metals Paper General Industrial Syn fuels Oil and Gas Production Other Ratal Engineering and Construction Drilling Ratal $1983 % $ 1982 ; % $1981 1,310 1,254 1,011 738 279 238 145 48 37 551 23.1 22.1 17.8 13,0 4.9 4.2 2.6 0.9 0.7 9.7 1,760 2,217 2,413 1,634 761 479 371 215 124 738 16.3 20.5 22.3 15.1 7.0 4,4 3.4 2.0 1.1 6.8 2,728 3,287 4,199 1,945 1,406 235 636 831 95 804 5,611 59 99.0 10,712 1.0 114 98.9 16,166 1.1 220 5,67<L 100.0 10,826 100.0 16,386 % $1980 16.6 20.1 25.6 11.9 8.6 1.4 3.9 5.1 .6 4.9 2,744 2,431 3,459 2,979 1,062 216 358 1,922 331 415 98.7 1.3 mo 15,917 177 16,094 % $1979 17.1 15.1 21.5 18.5 6.6 1.3 2.2 11.9 2.1 2.6 3,128 635 592 2,795 582 179 240 2,935 740 310 98.9 12,136 1.1 56 100.0 12,192 % $1978 25.7 5.2 4.9 22.9 4.8 1.5 2.0 24.1 6.1 2.4 3,623 864 731 3,884 310 224 108 1,055 379 340 99.6 11,518 .4 45 100.0 11,563 % 31.3 7.5 6.3 33.6 2.7 1.9 .9 9.1 3.3 3.0 99.6 .4 100.0 United States Outside U.S. tbtal 2,579 3,091 45.5 54.5 5,670.. 100.0 4,695 6,131 10,826 43,4 56.6 100.0 7,075 9,311 16,386 43.2 56.8 100.0 6,423 9,671 16,094 39.9 60.1 mo 4,375 7,817 12,192 35.9 64.1 W0.0 5,017 6,546 U.,563 43.4 56.6 100.0 Backlog includes owners' cost of approximately 34% 35% 33% 28% 45% 40% Fluor earns a fee on this portion of backlog which will not ultimately be recorded as revenues. Metals $ in thousands; in short tons except as noted Years ended October 31, Revenues Operating Profit Manpower 1983 $429,000 $ 32,664 8,000 1982 $440,019 $ 46,203 8,232 1981 $108,839 $ 19,716 8,045 1980 7,462 1979 * 7,269 1978 * * 8,032 International Operations Lead Content of Concentrates Sold Zinc Content of Concentrates Sold Copper Content of Products Sold Gold Content of Products Sold (Troy Ounces) Silver Content of Products Sold (Troy Ounces) 35,576 52,140 27,104 361,588 2,732,631 40,184 62,819 12,509 368,081 2,677,057 32,933 52,554 2,503 171,023 1,819,314 32,570 66,369 2,171 130,586 2,014,737 32,527 48,951 __ 14,028 1,649,539 27,355 25,839 -- -- 1,416,707 Domestic Operations Lead Content of Concentrates Produced Lead Metal Sold Zinc Content of Concentrates Produced Zinc Metal Equivalent Sold Iron Pellets Sold (Gross Tons) Silver Content of Products Sold (Troy Ounces) Gold Content of Products Sold (TVoy Ounces)" 215,984 220,823 87,315 100,459 672,341 609,658 7,199 207,776 205,573 77,947 75,207 786,354 702,359 -- 168,317 170,638 59,592 46,212 970,682 751,459 __ 239,171 199,573 58,162 50,172 780,041 930,992 __ 244,923 237,299 22,386 173,970 230,135 441,908 -- 249,480 250,642 59,406 190,288 206,956 589,628 -- Financial data for St. Joe Minerals Corporation are included from the date of acquisition, August 3,1981. Other information for St. Joe for periods prior to August 3,1981 is shown for comparative purposes only. 10 "Represents 66%% ownership. i Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Coa! $ in thousands; in thousands of short tons Years ended October 31, Revenues Operating Profit (loss) Manpower Steam Coal Produced Metallurgical Coal Produced Produced Coal Sold Purchased Coal Sold 1983 $437,455 $ (6,824) 5,145 7,102 2,084 9,192 1,461 1982 $446,883 $ 2,624 5,959 6,873 2,155 8,837 1,741 1981 $130,974 $ 9,155 5,432 5,269 1,787 7,054 3,869 1980 * 4,880 5,163 1,826 7,010 3,945 1979 * * 4,386 4,447 1,918 6,330 2,616 1978 * * 4,527 2,408 1,424 3,772 1,972 Represents 50% of Massey's operations for all periods presented, except manpower which is 100%. `Financial data for St, joe Minerals Corporation are included from the date of acquisition, August 3,1981. Other information for St, Joe for periods prior to August 3, 1981 is shown for comparative purposes only. Oil and Qas in thousands, except manpower Years ended October 31, Revenues Operating Profit Manpower Oil Sold, Barrets Gas Sold, Mcf Net Proved Reserves of Oil, Barrels Net Proved Reserves of Gas, Mcf 1983 $135,785 $ 15,659 92 4,347 12,013 26,984 158,040 1982 $225,816 $ 69,651 274 4,932 26,451 30,669 163,879 1981 $99,379 $34,342 263 3,586 23,625 34,295 197,790 1980 $67,483 $34,483 190 2,357 23,605 28,171 164,575 1979 $37,335 $20,186 159 2,053 19,329 28,623 169,338 1978 $34,077 $17,190 147 2,082 17,791 21,080 118,180 Drilllng$ in thousands Years ended October 31, Revenues" Operating Profit New Orders Backlog Average Rig Utilization Rate Manpower 1983 $ 85,682 4,132 35,571 $ 59,015 56% 581 1982 $127,499 60,400 7,986 $114,073 89% 756 1981 $109,203 39,687 147,185 $219,456 96% 731 1980 $ 85,374 5,197 2x3,602 $176,791 98% 670 1979 $73,161 11,991 83,454 $56,187 89% 650 1978 $49,247 4,003 78,592 $44,937 79% 639 dther* $ in thousands Years ended October 31, Revenues Operating Profit Manpower `Includes all intercompany eliminations 1983 $107,358 $ 17,422 1,307 1982 $115,611 $ 20,788 1,285 . 1981 $ 97,007 $ 1,903 1,514 1980 $ 64,343 $ 7,618 1,029 1979 $50,792 $10,068 1,212 1978 $52,940 $10,518 1,235 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. AAt Return on Shareholders'______________ Equity percent 78 79 80 81 82 83 BBs Thtal Assets $ in billions FINANCIAL CONTENTS Management's Discussion and Analysis Selected Financial Data Management's Report Auditors' Opinion Consolidated Statement of Earnings Consolidated Balance Sheet Consolidated Statement of Changes in Financial Position Consolidated Statement of Shareholders' Equity Notes to Consolidated Financial Statements Segment Information Oil and Gas Information Inflation Measurement Data Mineral Reserves and Operating Statistics Quarterly Financial Data 23 25 26 26 27 28 30 31 32 36 38 42 44 45 78 79 80 81 82 83 CC: Shareholders' Equity per Share dollars 78 79 80 81 82 83 V*) Reproduced with permission of the copyright owner. Further reproduction prohibited without permission I luor C urporation MANAGEMENT'S DISCUSSION AND ANALYSIS ESULTS OF OPERATIONS Consolidated net earnings in 1983 were $28 million compared to $153 million in 1982 and $159 million in 1981. Earnings per share were $.35/ $1.94 and $2.82, respectively. These amounts reflect the continuing im pact of the worldwide slowdown in the engineering and natural resource related industries and the impact of strategic divestitures in 1983. During the fourth quarter of 1983, the company adopted a plan to dis pose of the Distribution Group. The results of operations of this Group have been reflected as discontinued operations in the earnings statements for all periods presented. Earnings for the Distribution Group declined from $15 million in 1981 to losses of $8 million and $27 million in 1982 and 1983, respectively. This was caused principally by severely de pressed prices due to an oversupply of tubular goods as well as the general effects of reduced economic activity on energy, industrial and agricultural markets. Consolidated net earnings for 1983 reflects a reserve of $26 million for expected losses from disposal of the Group. Revenues from continuing oper ations declined 21 percent in 1983 compared to 1982 after an increase of 26 percent over 1981. Both earn ings and earnings per share from continuing operations declined by 50 percent in 1983 compared to 1982. Revenues and earnings in 1983 were adversely affected by the worldwide recession. The increase in 1982 revenues reflects the contri bution of St. Joe Minerals Corpora tion acquired in August 1981 and a record year for the Engineering and Construction Group. Earnings in 1982 had increased 12 percent over 1981, while earnings per share declined for the period because of the dilutive impact of the 30 million additional shares issued in August 1981 for the acquisition of St. Joe as well as increased interest expense on higher levels of debt assumed and issued in the acquisition. St. Joe's operations were included on a 45 percent equity basis for the third quarter of 1981 and consolidated thereafter. Included in 1983 earnings from continuing operations before income taxes are several significant items including a $33 million write-down of certain foreign oil and gas proper ties, foreign exchange gains of $24 million, a $10 million gain on settle ment of a terminated sales contract and an $11 million write-off of three obsolete offshore contract drilling rigs. Equity in earnings and a gain on the sale of the company's 10 percent interest in Peabody Holding Company totalling $18 million was also included. Total interest expense for 1983, in cluding interest capitalized, declined from $178 million in 1982 to $130 mil lion in 1983 reflecting a net decrease in outstanding debt and lower inter est rates. Decreased interest rates also contributed to lower interest income and capitalized interest. Reduced qualifying capital expenditures also affected capitalized interest, which decreased $15 million in 1983 compared to 1982. Corporate administrative and general expenses were reduced 12 percent in 1983 compared to a 27 percent increase in 1982 over 1981. The decrease in 1983 is due primarily to a reduction in manpower, lower consulting fees and reduced travel related expenses. The company's effective income tax rate increased ffbm 47 percent in 1982 to 53 percent in 1983 primarily due to the increase in non-deductible foreign oil and gas property write downs offset in part by increased foreign earnings on which residual U.S. taxes are not provided. Due to the loss from discontinued operations and reduced earnings from continuing operations, return on shareholders' equity was only 1.6 percent in 1983 compared to 8.8 percent in 1982. ENGINEERING AND CONSTRUCTION Over the last three years, low oil and gas demand and resultant prices, high interest rates and a worldwide recession have caused a major down turn in engineering and construction industry contract awards. New awards declined from $2.9 billion in 1982 to $1.2 billion in 1983 while backlog decreased from $10.7 billion to $5.6 billion. This trend is reflected in the decline in revenues in 1983 of 24 percent from 1982 after an in crease of 12 percent from 1981, while 1983 operating profit declined only 8 percent from 1982. These results of operations generally reflect a change in the mix of contracts and their stages of completion. ST. JOE MINERALS CORPORATION In comparing St. Joe's first two full years as a Fluor subsidiary, revenues from coal and metals operations remained level while operating profit declined 47 percent as a result of se verely depressed commodity prices. Metals operations accounted for $429 million in revenues and $33 million in operating profit in 1983 compared to revenues and operating profit in 1982 of $440 million and $46 million, Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. I Umr Corporation MANAGEMENT'S DISCUSSION AND ANALYSIS continued respectively. Tighter control of costs did not fully offset the continued de pressed market prices for lead, zinc and iron pellets. Higher gold prices, increased sales volumes and foreign exchange gains, resulting primarily from retirement of debt at preferen tial exchange rates, partially offset the effect of lower prices on other commodities. Revenues and operat ing losses from coal operations in 1983 were $438 million and $7 mil lion, respectively, compared to $447 million in revenues and an operating profit of $3 million in 1982. Slightly higher sales volumes in 1983 did not offset the continued weakness in coal prices. Expenditures for exploration activities totalled $20 million in 1983 compared to St. Joe's record level of $32 million in 1982. OIL AND GAS The decline in revenues for the Oil and Gas Group from $226 million in 1982 to $136 million in 1983 and the decline in operating profit for this period from $70 million to $16 mil lion reflect lower sales volumes and prices of both oil and gas. The decline in revenues in 1983 also reflects the result of the sale of the producing oil and gas properties of Coquina Oil Corporation in Novem ber 1982 and the remaining Coquina properties later in 1983. Operating profit in 1983 reflects a $33 million write-down of certain foreign oil and gas properties. Increases in revenues and operat ing profit of 127 percent and 103 per cent, respectively, in 1982 over 1981 reflects inclusion of St. Joe Petroleum and Coquina for a full year in 1982 compared to only three months in 1981. The Prinos Oil Field offshore Greece, in which the company owns a 14 percent interest, became oper ational in January 1982 and reached its planned production of 25,000 barrels per day by mid-year. The company has announced that several foreign oil and gas properties of St. Joe Petroleum will be sold early in 1984 for approximately $66 million. DRILLING SERVICES Revenues from contract drilling serv ices decreased to $86 million in 1983 from $128 million and $109 million in 1982 and 1981, respectively. Operat ing profit was $4 million, $60 million and $40 million in 1983, 1982 and 1981, respectively. The decrease in operating profit reflects an $11 million write-off of three obsolete drilling rigs, severely depressed day rates and lower rig utilization. The decline in utilization rates to 71 percent in 1983, excluding the three obsolete rigs, from 89 per cent in 1982 and 96 percent in 1981, resulted from an oversupply of off shore rigs and a worldwide reduction in drilling activity. FINANCIAL POSITION AND LIQUIDITY Working capital increased $3 million during 1983 while the current ratio increased to 1.1 from 1.0 at October 31, 1982. Included in current assets at October 31,1983 is the net realizable value of the assetsof the Distribution Group, which will be disposed of early in 1984. Major sources of working capital include $332 million from opera tions, $221 million from various asset dispositions, proceeds from issuance of long-term debt of $82 million and collection of notes receivable of $48 million. Working capital was used to reduce long-term debt by $375 million, for capital expenditures of $302 million and to pay cash divi dends of $63 million. The most significant reductions in long-term debt include repayments of debt secured by the El Indio min ing complex in Chile and amounts outstanding under the company's commercial paper program. The net reduction of $293 million in long-term debt during 1983 resulted in a year-end long-term debt to total capitalization ratio of 29.2 percent compared to 36.2 percent at October 31,1982 and 39.6 percent at October 31,1981 following the acquisition of St. Joe. Capital expenditures totalled $302 million in 1983 compared to $526 million in 1982, including $31 million and $46 million in interest capital ized in 1983 and 1982, respectively. Projects completed during 1983 include two coal export facilities, in Newport News and Charleston, and office facilities in Greenville, South Carolina. Other projects include development of the Bixby lead mining operation, expansion of the Viburnum mill to handle ore from the Bixby mining complex, develop ment of mining projects in Brazil and office facilities in Houston, Tex as. Included in capital expenditures of the Oil and Gas Group are pur chases of partial interests in 76 offshore blocks offered in three Gulf Coast offshore lease sales. Fiscal 1983 capital expenditures were funded through internal cash resources, receipt of $25 million from notes receivable and specific project financings. For a discussion of the effects of inflation, see pages 42 and 43. 24 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. I Imir ((irpur.ttutn SELECTED FINANCIAL DATA $ in millions, except per share amounts Operating Results Revenues from continuing operations Earnings from continuing operations before income taxes Earnings from continuing operations Net earnings Earnings per share Continuing operations Net earnings Dividends per share Series B preferred Common Financial Position Current assets Current liabilities : Working capital 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 Other Data New orders received during year Backlog at end of year Capital expenditures Depredation, depletion and amortization for continuing operations Working capital provided from operations Number of employees 1983 1982 1981 1980 1979 1978 $5,300.5 $ 6,740.6 171.8 80.7 27.7 301.4 . 161.0 152.8 1.02 2.05 .35 1.94 . -- ': $ .80 $ __ .80 $ 5,357.6 265.1 144.0 158.9 2.56 2.82 .$ .80 $ 4,347.0 231.8 124.2 133.6 2.57 2.76 .75 $ .65 $ 3,273.6 171.2 92.5 100.3 1.88 2.04 3.00 $ .49 $ 2,675.2 136.5 70.9 79.2 1.40 1.56 3.00 $ .40 $1,146.0 1,090.2 55.8 2,379.8 4,084.9 $ 1,541.4 1,488.4 53.0 2,493.9 4,701.0 $ 1,460.9 1,296.1 164.8 2,527.0 4,491.3 $ 956.2 775.2 181.0 622.7 1,726.6 $ 674.9 538.6 136.3 476.4 1,283.8 $ 546.3 507.0 39.3 427.6 1,107.7 720.0 1,747.2 $2,467.2 1,009.9 1,776.4 $ 2,786.3 1,104.8 1,683.2 $ 2,788.0 79.3 567.5 $ 646.8 59.1 460.8 $ 519.9 16.6 430.2 $ 446.8 29.2 70.8 $ 22.19 78,746,717 36.2 63.8 i$ 22.68 78,327,685 39.6 60.4 $ 21.55 78,092,814 12.3 87.7 $ 11.89 47,718,300 11.4 88.6 $ 9.70 46,597,646 3.7 96.3 $ 8.12 47,065,464 $1,280.1 5,669.7 301.8 233.7 $ 332.5 34,123 $ 2,916.8 10,825.9 525.9 215.0 $ 377.1 43,111 $ 7,247.7 16,385.7 448.1 94.0 $ 274.4 44,170 $ 9,317.3 16,094.3 225.3 49.4 $ 258.5 27,304 $ 5,960.2 12,191.7 99.7 45.3 $ 222.0 23,506 $ 3,356.8 11,562.9 101.1 35.8 $ 151.8 21,693 During the fourth quarter of 1983 the company adopted a plan to dispose of the Distribution Group; accordingly, prior periods have been restated to exclude the Group from continuing operations. St. Joe Minerals Corporation is included on an equity basis for the period May 1,1981, through August 2,1981, and on a consolidated basis thereafter. Reproduced with permission of the copyright owner,. Further reproduction prohibited without permission. 25 Fluor Corporation MANAGEMENT'S REPORT AND AUDITORS' OPINION Management's Report Auditors' Opinion Board of Directors and Shareholders Fluor Corporation The accompanying consolidated balance sheet and the We have examined the accompanying consolidated bal related consolidated statements of earnings, shareholders' ance sheet of Fluor Corporation at October 31, 1983 and equity and changes in financial position have been pre 1982, and the related consolidated statements of earnings, pared in conformity with generally accepted accounting shareholders' equity and changes in financial position for principles, and we believe that they present fairly the each of the three years in the period ended October 31, company's financial position and results of operations. 1983. Our examinations were made in accordance with The integrity of the information presented in the financial generally accepted auditing standards and, accordingly, statements, including estimates and judgments relating included such tests of the accounting records and such to matters not concluded by fiscal year end, is the respon other auditing procedures as we considered necessary in sibility of management. To fulfill this responsibility, a the circumstances. In 1983 the accounts of Massey Coal system of internal controls, designed to protect the Company, a 50% owned joint venture, and in 1982 and company's assets and properly record transactions and 1981 certain assets and operations of St. Joe Minerals events as they take place, has been developed and main Corporation, a consolidated subsidiary, were examined by tained. The system of internal controls is supported by other independent auditors; insofar as our opinion on the an extensive program of internal audits. consolidated financial statements relates to such assets The Board of Directors pursues its responsibility for and operations, which constituted 13% and 8% in 1983, financial information through its Audit Committee, which 34% and 14% in 1982 and 34% and 4% in 1981 of consoli is composed of Directors who are not employees. Both dated assets and revenues, respectively, it is based solely the internal auditors and the independent auditors have on their reports. free access to the Audit Committee and periodically the In our opinion, based on our examinations and the Committee meets with them and with management in reports of other independent auditors, the accompanying order to monitor the accounting affairs of the company. consolidated financial statements present fairly the At the recommendation of the Audit Committee, consolidated financial position of Fluor Corporation at Arthur Young & Company has been selected by the Board October 31, 1983 and 1982, and the consolidated results of of Directors, and approved by the shareholders, to serve operations and changes in financial position for each of as independent certified public accountants for the com the three years in the period ended October 31, 1983, in pany. Arthur Young & Company provides expert advice conformity with generally accepted accounting principles on the application of generally accepted accounting prin applied on a consistent basis during the period. ciples and has the responsibility of examining and render ing an objective, independent opinion on management's financial statements. George W. Mefferd Group Vice President and Chief Financial Officer Richard D. Paul Vice President and Controller Orange County, California December 9, 1983 i 26 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. I Uutr Corporation CONSOLIDATED STATEMENT OF EARNINGS In thousands, except per share amounts Years ended October 31, Revenues Engineering and construction services Natural resources Drilling and other : \ : Total revenues Cost of Revenues Engineering and construction services Natural resources Drilling and other , ,' Total cost of revenues Other Income and Expense Corporate administrative and general expense Interest expense (net of capitalized interest of $30,877, $45,808 and $35,904, respectively) Interest income Total costs and expenses Earnings from Continuing Operations Before Income Taxes Income Taxes Earnings from Continuing Operations Discontinued Operations Earnings (loss) from operations of discontinued Distribution Group (net of income tax benefit (expense) of $22,952, $8,067, and $(10,457), respectively) Loss on disposal of Distribution Group, including provision for estimated operating losses during phase-out period (net of income tax benefit of $15,538) Earnings (Loss) from Discontinued Operations Net Earnings Earnings Per Share Continuing operations Net earnings Shares Used to Calculate Earnings per Share See Notes to Consolidated Financial Statements. 1983 . $4,104,454 1,002,240 193,758 5,300,452 , 3,890,531 955,652 171,594 5,017,777 47,200 98,718 , (35,043) 5,128,652 171,800 91,100 80,700 1982 $5,383,755 1,116,541 240,255 6,740,551 5,158,087 1,000,788 146,391 6,305,266 53,738 131,829 (51,705) 6,439,128 301,423 140,447 160,976 1981 $4,805,741 339,192 212,660 5,357,593 4,576,389 275,966 166,662 5,019,017 42,464 73,715 (42,691) 5,092,505 265,088 121,105 143,983 (27,000) (8,177) 14,923 (26,000) (53,000) $ 27,700 -- (8,177) $ 152,799 -- 14,923 $ 158,906 $ 1.02 $ .35 78,956 $ 2.05 $ 1.94 78,589 $ 2.56 $ 2.82 56,272 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Fluor Corporation CONSOLIDATED BALANCE SHEET Sin thousands October 31, Assets Current Assets ' Cash and short-term investments Accounts and notes receivable Contract work in progress Inventories Net assets held for sale Other current assets Total current assets ' \ . Property, Plant and Equipment--at cost Land Buildings and improvements Machinery and equipment Drilling and marine equipment Mining properties and mineral rights Oil and gas properties Construction in progress . \ : : Less accumulated depreciation, depletion and amortization Net property, plant and equipment Other Assets Excess of cost over net assets of acquired companies, net of accumulated amortization of $38,649 and $26,809, respectively Other Total other assets , See Notes to Consolidated Financial Statements. 1983 ' '^ $ 145,713 421,642 238,436 159,052 127,103 54,057 1,146,003 1982 $ 80,932 584,014 309,960 331,074 167,900 67,520 1,541,400 64,382 341,584 788,330 217,575 789,027 615,469 136,635 2,953,002 573,169 2,379,833 90,059 332,816 763,882 239,704 781,775 578,223 165,741 2,952,200 458,316 2,493,884 '. 434,337 124,747 559,084 $4,084,920 446,736 218,970 665,706 $4,700,990 28 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 1983 Liabilities and ; Shareholders' Equity .: Current Liabilities Notes payable Accounts payable Advance billings on contracts Accrued salaries and wages Accrued benefit plan liabilities Other accrued liabilities Current portion of long-term debt Commercial paper Income taxes currently payable Deferred income taxes ^ ': 1 . > ' ; . : 'V v\ ' ' $ 63,560 291,958 143,449 -v- 74,277 73,024 143,692 \ 55,610 101,384 143,201 Total current liabilities 1,090,155 Long-Term Debt Due After One Year V: 720,007 Other Noncurrent Liabilities Deferred income taxes Other 307,276 220,233 Total other noncurrent liabilities 527,509 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 par value; issued and outstanding in 1983--78,746,717 shares and in 1982--78,327,685 shares Additional capital Retained earnings Unamortized executive stock plan expense 49,217 1,065,431 645,117 (12,516) Total shareholders' equity ,:v. ' : 1,747,249 ' $4,084,920 1982 $ 56,281 356,365 225,907 96,516 97,816 156,559 49,074 161,533 106,324 182,061 1,488,436 1,009,858 262,061 164,216 426,277 48,955 1,059,480 680,285 (12,301) 1,776,419 $4,700,990 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 29 l luor Corporation CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION $ in thousands Years ended October 31, Sources off Working Capital ' Earnings from continuing operations Charges (credits) to earnings from continuing operations not affecting working capital Depreciation, depletion and amortization Increase (decrease) in noncurrent deferred income taxes Other, net Working capital provided from continuing operations Earnings (loss) from discontinued operations Charges (credits) to earnings from discontinued operations not affecting working capital Depreciation and amortization Increase (decrease) in noncurrent deferred income taxes Working capital provided (used) by discontinued operations Working capital provided from operations Issuance of long-term debt Net book value of property, plant and equipment sold or retired Reclassification to net assets held for sale Sale of investment in Peabody Holding Company Decrease in noncurrent notes receivable ' Issuance of stock-acquisition of St. Joe Minerals Corporation Other, net -, Applications off Working Capital Reduction of long-term debt Additions to property, plant and equipment Cash dividends paid Acquisition of St. Joe Minerals Corporation , . Increase (Decrease) in Working Capital Changes in Components off Working Capital Cash and short-term investments Accounts and notes receivable Contract work in progress Inventories Net assets held for sale Other current assets Notes payable Accounts payable Advance billings on contracts Accrued liabilities Current portion of long-term debt Commercial paper Income taxes currently payable Deferred income taxes Increase (Decrease) in Working Capital : See Notes to Consolidated Financial Statements. : ' : 1983 p $ 80,700 1982 ' $ 160,976 1981 $ 143,983 233,714 52,647 18,280 385,341 (53,000) 214,988 5,776 (7,871) 373,869 (8,177) 93,970 (5,311) 14,719 247,361 14,923 5,676 (5,532) (52,856) 332,485 82,167 151,770 29,825 44,787 47,527 -- 54,148 742,709 10,154 1,275 3,252 377,121 838,026 51,161 150,917 -- 53,407 -- (19,027) 1,451,605 9,196 2,957 27,076 274,437 1,225,705 55,320 -- -- 5,528 996,923 (37,867) 2,520,046 375,122 301,835 62,868 -- 739,825 $ 2,884 932,902 525,932 62,581 42,051 1,563,466 $ (111,861) 446,914 448,143 44,313 1,596,842 2,536,212 $ (16,166) $ 64,781 (162,372) (71,524) (172,023) (40,797) (13,462) (7,279) 64,407 82,458 59,898 (6,536) 161,533 4,940 38,860 $ 2,884 $ (105,658) 45,725 (55,639) 24,743 167,900 3,404 (24,283) 76,989 (2,450) (49,314) 3,540 (161,533) 8,735 (44,020) $ (111,861) $ (30,036) 296,499 28,664 177,760 -- 31,879 (24,331) (178,551) 5,702 (105,520) (18,982) -- (95,973) (103,277) $ (16,166) Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. I liiur C orporatmn CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY $ in thousands, except per share amounts Years ended October 31, 1981,1982 and 1983 Balances at November 1, 1980 Net earnings Cash dividends ($.80 per share) Exercise of stock options--net Amortization of executive stock plan expense Issuance of restricted stock--net Issuance of stock--acquisition of St. Joe Minerals Corporation Balances at October 31,1981 Net earnings Cash dividends ($.80 per share) Exercise of stock options--net Amortization of executive stock plan expense Issuance of restricted stock--net Balances at October 31,1982 Net earnings Cash dividends ($.80 per share) Exercise of stock options--net Amortization of executive stock plan expense Issuance of restricted stock--net Balances at October 31,1983 See Notes to Consolidated Financial Statements. Common Additional Stock Capital $29,824 $ 72,007 96 2,305 78 4,443 Unamortized Executive Retained Stock Plan Earnings Expense Total $475,474 $ (9,848) $ 567,457 158,906 (44,313) 1,821 (4,517) 158,906 (44,313) 2,401 1,821 4 18,810 978,113 48,808 1,056,868 84 862 63 1,750 48,955 1,059,480 173 2,980 89 2,971 $49,217 $1,065,431 590,067 152,799 (62,581) 680,285 27,700 (62,868) $645,117 996,923 (12,544) 1,683,199 2,058 (1,815) 152,799 (62,581) 946 2,058 (2) (12,301) 1,776,419 3,021 (3,236) 27,700 (62,868) 3,153 3,021 (176) $(12,516) $1,747,249 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. 31 Fluor Corporation NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MAJOR ACCOUNTING POLICIES Other Depreciation and Amortisation Depredation is provided using prindpally the straight Principles of Consolidation line method to amortize the cost of the assets over their The financial statemenfs include the accounts of the com estimated useful lives. Leasehold improvements are am pany and its subsidiaries. The equity method of account ortized over the lives of respective leases. The excess of ing is used for investments where ownership ranges from cost over net assets of acquired companies is being amor 20 percent to 50 percent and for corporate joint ventures. tized on the straight-line method, primarily over 40 years. The company consolidates its 50 percent proportionate share of the accounts of Massey Coal Company. All sig nificant intercompany transactions are eliminated. Certain 1982 and 1981 amounts have been reclassified to conform with the 1983 presentation. Income Taxes Deferred income taxes are provided for items taken into account in different periods for financial and tax reporting purposes. Such taxes relate primarily to the use of the completed-contract method of accounting for U.S. income Engineering and Construction Contracts tax reporting, whereas the percentage-of-completion The company recognizes revenues on engineering and method is used for finandal reporting purposes, and to construction contracts on the percentage-of-completion capitalized interest and depreciation, depletion and amor method, primarily based on contract costs incurred to tization. That portion of deferred income taxes relating to date compared with total estimated contract costs, and on engineering and construction contracts estimated to be manhours incurred to date compared with total estimated completed after one year from the date of the balance manhours for the construction of certain power plants. sheet is classified as long-term. Changes to total estimated contract costs or manhours The Tax Equity and Fiscal Responsibility Act of 1982 and losses, if any, are recognized in the period they are ("TEFRA") contains provisions modifying completed con determined. Revenues recognized in excess of amounts tract tax accounting. TEFRAwill require deferral of em billed are classified as current assets under contract work ployee benefit and certain administrative costs associated in progress. It is anticipated that incurred costs associated with contracts which will not be completed within three with contract work in progress at October 31,1983, will be years. These provisions will be phased in through fiscal billed and collected in 1984. Amounts received from cli year 1986. ents in excess of revenues recognized to date are classified Investment tax credits are applied as a reduction of the as current liabilities under advance billings on contracts. provision for federal income taxes under the flow-through method of accounting. Exploration and Development Oil and Gas--The company accounts for its oil and gas Earnings Per Share operations under the full cost method of accounting. Earnings per share are based on the weighted average Depreciation, depletion and amortization of oil and gas number of common and common equivalent shares properties are provided on the unit-of-production method outstanding in each period. Common equivalent shares based upon proved reserves. include the potential dilution from the exercise of stock Metals--Costs incurred for exploration of minerals options. are generally expensed as incurred. Development expen ditures to bring new mineral properties into production, comprising substantially all surface mine development and initial underground installations, are capitalized and charged to expense on the straight-line method over periods approximating the life of the mine. Subsequent maintenance and underground development expenditures are charged to expense. Coal--Development costs of specific coal properties, when expected to be significant, are capitalized in mining properties and depleted on the unit-of-production method. Foreign Currency Translation The accounts of foreign subsidiaries are translated into U.S. dollars in accordance with Statement of Finandal Accounting Standards No. 8. Therefore, foreign currency translation gains or losses are included in earnings in the period in which they occur. Foreign currency exchange gains approximated $24,000,000 in 1983 and $7,000,000 in ,1982, Commendng in 1984, the company will change its method of accounting for foreign currency translation to be in conformity with Statement of Financial Accounting Standards No. 52. While the effects of this accounting change on the company's financial position and results of operations would not have been material in 1983, the future effects are not determinable. 32 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. DISCONTINUED OPERATIONS INVENTORIES During the fourth quarter of 1983, the company adopted a plan to dispose of the Distribution Group through sale or liquidation. Negotiations for the sale of two of the com panies are currently being conducted with the respective management groups. At October 31,1983, the net assets of discontinued operations, consisting primarily of inven tories, trade receivables and warehouse facilities have been reclassified as current assets at estimated net realiz able value. Revenues from discontinued operations, including the Goldston Transportation Group which was sold in 1983, were $368,551,000, $604,573,000 and $721,596,000 for 1983,1982 and 1981, respectively. Included in the loss on disposal is a pretax provision of $2,115,000 for estimated operating losses during the phase-out period. ACQUISITION OF ST. JOE MINERALS CORPORATION Inventories comprise the following: $ in thousands October 31, Coal, metals and processed minerals Supplies and other Distribution Group inventories 1983 $ 67,787 91,265 -- $159,052 1982 $ 67,609 95,180 168,285 $331,074 Inventories are stated at the lower of cost (using the last in, first out (LIFO) method for inventories other than sup plies and other which are on the average cost method) or net realizable value. The current replacement cost of LIFO inventories at October 31, 1983 and 1982 exceeded the related LIFO value by $2,530,000 and $28,136,000, respectively. Inventories of the Distribution Group have been included in net assets held for sale at October 31,1983. During 1981 the company acquired all outstanding shares of St. Joe Minerals Corporation (St. Joe) common stock for an aggregate purchase price of $2,230,208,000. The company's 45 percent investment in St. Joe for the threemonth period preceding consummation of the merger on August 3, 1981 was accounted for using the equity method. The allocation of the purchase price to assets acquired and liabilities assumed was completed in 1982 and is sum marized (net of acquired working capital) as follows: $ in thousands Assets acquired: Property, plant and equipment Other noncurrent assets Excess of cost over net assets acquired Liabilities assumed: Long-term debt . Other noncurrent liabilities $1,465,989 135,546 377,956 (249,136) (91,462) $1,638,893 RETIREMENT PLANS The company and certain of its subsidiaries have con tributory and noncontributory profit-sharing and pension plans covering substantially all of their employees. Expense for these plans, including amortization of prior service costs over 10 to 40 years, was $78,869,000 in 1983, $102,338,000 in 1982 and $73,828,000 in 1981. As of the dates indicated below, accumulated plan benefits and plan net assets for the retirement plans of certain subsidiaries of the company and the proportionate share of a corporate joint venture are as follows: $ in thousands November 1, 1982 1981 Actuarial present value of accumulated plan benefits: Vested Nonvested $103,479 10,208 $ 91,632 8,874 $113,687 $100,506 The company's unaudited pro forma results of oper ations for 1981 assuming St. Joe had been acquired at the beginning of 1981, after giving effect to acquisition related adjustments, are as follows: revenues, $5,973,117,000; net earnings, $147,946,000; and earnings per share, $1.88. Pro forma earnings, prepared as required by generally accepted accounting principles, are provided for compara tive purposes and are not necessarily indicative of actual results that would have been achieved had the merger been consummated at the beginning of 1981. Net assets available for benefits $123,364 $100,300 The actuarial present value of accumulated plan benefits was determined using assumed rates of return ranging from 5 to 9 percent. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. ! luor Corporation NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued LONG-TERM DEBT Maturities relating to long-term debt are as follows for the years ending October 31:1985, $83,778,000; 1986, Long-term debt at October 31 consisted of the following: $84,526,000; 1987, $97,761,000; and 1988, $73,376,000. $ in thousands 1983 1982 Maturities of commercial paper are based on maximum Pollution control and industrial revenue bonds, 7% to 8.9%, due in varying amounts from 1988 through 2013 (net of unamortized discount of $8,601 and $8,970, respectively) Promissory note, effective interest rate 15.6%, due in installments from 1985 through 1987 Eurodollar notes, 14% coupon rate, effective interest rate 13.5%, due in 1989 Secured credit agreement, 114% above LIBOR, due in installments through 1986 Serial zero coupon notes, effective interest rate 14.3%, due in installments through 1989 (net of unamortized discount of $38,768 and $46,139, respectively) $112,159 100,000 100,000 63,750 53,732 $ 108,217 100,000 100,000 85,000 53,861 terms of committed credit lines. The company has committed long-term lines of credit with banks from which it may borrow up to a maximum of $315,000,000 under three- and four-year revolving lines of credit which convert to four-year term loans. The com pany may use these lines of credit to support commercial paper borrowings and unsecured promissory notes. Com mitment fees of lA percent are paid on unused portions of the company's long-term lines of credit. At October 31, 1983, no amounts were outstanding under these lines. Borrowings under lines of credit and revolving credit agreements bear interest at prime, rates based on the Term loan, effective interest rate 11.7%, due in 1988 (net of unamortized discount of $3,157 in 1982) Eurodollar notes, 135/4% coupon rate, effective interest rate 13%, due in 1984 (net of unamor tized discount of $54 and $100, respectively) Notes, effective interest rate 12%%, due in installments from 1987 through 1998 (net of unamortized discount of $11,282 and $11,975, respectively) 50,000 49,946 1 48,718 46,843 49,900 48,025 London Interbank Offered Rate (LIBOR), domestic certifi cates of deposit, or other rates which are mutually acceptable to the banks and the company. At October 31, 1983, the company has $161,000,000 in unused short-term uncommitted lines of credit. Pollution control bonds of $36,814,000 are subject to optional redemption with mandatory redemption in 1989. $72,245,000 of the industrial revenue bonds represent the Commercial paper and promissory notes, average interest rate 9.0% at October 31, 1983 Term loans, 10%, due in installments through 1987 Notes, Vj% to l'/2% above LIBOR, due in installments through 1986 41,974 : 28,527 28,524 134,067 30,802 65,187 company's portion of such bonds issued for facilities of Massey Coal Company. All of the industrial revenue bonds are subject to mandatory redemption if certain tax exemption features of the bonds are disallowed. Approximately $20,524,000 of LIBOR notes are out Revolving credit agreements, due in 1987 Export credit agreement, 10%%, due in installments through 1990 Revolving credit agreements Other notes and mortgages Less: Current portion 20,000 14,608 -- 63,679 775,617 55,610 100,000 16,695 50,000 70,335 1,058,932 49,074 standing under an agreement entered into for the pur pose of financing a majority of capital costs of an oil and gas field development project offshore Greece. An addi tional $23,263,000 of the loan is secured solely by the revenues from the project and has become nonrecourse to the company as a result of certain completion and production criteria being met during 1983. Accordingly, $720,007 $1,009,858 $15,949,000 has been included in other noncurrent liabili ties and $7,314,000 in other accrued liabilities at October 31,1983. The 1314 percent Eurodollar notes were issued during 1982 together with warrants for the purchase of zero coupon debentures with a face value of $150,000,000 which mature March 31, 1990. Such warrants are exercisable at any time through September 30,1984 at a price which provides an effective yield of 14 percent. The net book value of assets securing long-term debt of $158,000,000 was approximately $347,000,000 at October 31,1983. 34 . Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. INCOME TAXES The provision for income taxes on earnings from continu ing operations in the consolidated statement of earnings is composed of: $ in thousands 1983 1982 1981 Current Federal Foreign State and local Total current Deferred Federal Foreign State and local Total deferred $(4,586) 63,654 6,326 65,394 10,258 14,152 1,296 25,706 $ 48,493 36,822 4,479 89,794 43,069 5,003 2,581 50,653 $ (9,004) 27,509 4,961 23,466 91,316 5,118 1,205 97,639 $91,100 $140,447 $121,105 Deferred income taxes have been provided for timing differences as follows: $ in thousands 1983 1982 1981 Use of different methods of accounting for construction contracts Deferred gains and losses from metal sales contracts Depreciation, depletion and amortization of natural resource properties Capitalized interest Accelerated depreciation Other--net $(22,517) (5,253) $ 16,194 8,094 $ 64,831 (1,110) 23,451 14,203 8,104 7,718 $ 25,706 14,228 16,367 7,981 (12,211) $ 50,653 9,247 11,682 4,500 8,489 $ 97,639 United States and foreign earnings from continuing oper ations before income taxes are as follows: $ in thousands 1983 1982 1981 A reconciliation of income tax expense on earnings from continuing operations to the statutory federal income tax rate follows: Domestic Foreign $ 10,400 161,400 $171,800 $157,848 143,575 $301,423 $197,373 67,715 $265,088 $ in thousands Statutory federal income tax expense Increases (reductions) in taxes resulting from: Losses without tax benefit Amortization of property, plant and equipment bases differences Amortization of excess of cost over net assets of acquired companies Investment tax credit Indefinitely reinvested foreign earnings Other--net 1983 % $79,028 46.0 18,064 10.4 10,170 5.9 6,651 3.9 (9,667) (5.6) (9,469) (5.5) (3,677) (2.1) 1982 % $138,655 46.0 8,507 2.8 7,779 2.6 5,976 2.0 (9,375) (3.1) (1,748) (.6) (9,347) (3.1) 1981 % $121,940 46.0 7,385 2.8 3,789 1.4 2,265 .8 (8,008) (3.0) (1,141) (.4) (5,125) (1.9) Residual income taxes have not been provided on approximately $46,000,000 of undistributed earnings of foreign subsidiaries at October 31, 1983 because the com pany intends to reinvest these earnings indefinitely. LEASE OBLIGATIONS Total rental expense amounted to $66,518,000 in 1983, $70,171,000 in 1982 and $50,603,000 in 1981. The company's lease obligations relate primarily to office and warehouse space, land underlying engineering facilities, data process ing equipment, equipment used in connection with long term construction contracts and other personal property. Also included in lease obligations are amounts due under a 50 year lease entered into in 1983 for land underlying the company's new engineering facility in Houston, Texas. At October 31, 1983, noncancellable lease commitments for the Distribution Group amounted to $12,664,000. The company was obligated at October 31,1983 under other noncancellable leases for minimum rentals subse quent to 1983 as follows: $91,100 53.0 $140,447 46.6 $121,105 45.7 The difference between the statutory federal income tax rate and the actual tax rates applicable to discontinued operations is primarily attributable to capital gains rates in 1983 and investment tax credits in 1982 and 1981. $ in thousands . 1984 1985 1986 1987 1988 Thereafter $ 32,648 28,370 21,181 16,996 12,750 154,397 <` $266,342 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Fluor Corporation NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued STOCK PLANS The following table summarizes stock option and stock appreciation rights ("SAR") activity for the two years The company has four executive stock option plans, the ended October 31,1983: 1971 Fluor Stock Option Plan, the 1977 and 1981 Fluor Executive Stock Plans and the 1982 Fluor Incentive Stock Shares Price Per Share Value SAR Per Right Option Plan. These plans provide for grants of nonquali fied or incentive options at prices equal to the fair market value of the company's common stock at date of grant. The 1977 and 1981 Plans also provide for rights to acquire shares under restricted stock agreements at $.62y2 October 31,1981 Outstanding Granted* Expired or cancelled* Exercised 2,628,221 621,289 (458,026) (191,454) $5-64 17-18 14-64 5-18 235,750 351,825 (211,800) -- $18-37 18 18-37 -- per share under the 1977 Plan and at no charge under the 1981 Plan. Upon termination other than for reason of retirement, death or permanent disability of the recipient, the stock must be returned to the company for the amount originally paid, if any. At October 31,1983, a total of 1,117,235 restricted shares had been awarded and a total of 168,015 shares were available for award as restricted October 31,1982 Outstanding Granted* Expired or cancelled* Exercised October 31,1983 Outstanding 2,600,030 209,313 (78,273) (437,728) 2,293,342 6-37 10-22 6-37 6-18 375,775 138,740 (34,817) (5,021) 18-37 18-22 18-37 18 6-37 474,677 18-37 stock. Exercisable at: In addition, the company has 1979 and 1980 Fluor Stock Appreciation Rights Plans. On exercise, the holder of the rights receives the excess of market value of the rights on exercise date over the market value of the rights on grant date. Such market values are equal to the market value of the company's common stock. Changes in market value are accounted for currently as compensation expense. Options and stock appreciation rights granted prior to October 31,1982 October 31,1983 Available for grant at: October 31,1982 October 31,1983 1,893,363 1,713,943 2,298,478 1,823,581 6-37 6-37 15,652 92,895 669,925 566,002 18-37 18-37 Includes 12,782 and 415,664 shares and 7,450 and 202,950 SARs cancelled in 1983 and 1982, respectively, at prices ranging from $26 to $64 per share and $26 to $36 per SAR, all of which were regranted at $18. June 7,1981 are generally exercisable one year after the date of grant and options granted on or after that date OPERATIONS BY BUSINESS SEGMENT AND become exercisable in installments of twenty-five percent GEOGRAPHIC AREA per year commencing one year from date of grant and expire ten years after date of grant. The company's engineering and construction business In connection with the acquisition of St. Joe, the com segment includes the subsidiaries engaged in process- pany assumed outstanding stock options granted under plant, mining and metals, power-plant, and offshore engi two St. Joe Plans. The assumed nonqualified and incen neering and construction and commercial construction. tive options become exercisable in installments of twenty- The company's metals business segment includes the sub five percent per year commencing one year from the date sidiaries engaged in the mining and processing of lead, of grant at a price equal to the fair market value at the * zinc, gold and other metals. Grouped in other are those date of grant. With respect to grants under St. Joe's 1972 business segments of the company that comprise less Plan, the optionee can elect to receive, in lieu of any or* all than 10% of the revenues, operating profits and identifi shares, any combination of cash and shares having an able assets of all business segments combined. aggregate value equal to the excess of market value of the Intersegment and interarea revenues are accounted for underlying shares over the option price thereof. Assumed on a cost-plus-fee basis. options granted under St. Joe's 1967 Plan expired on Identifiable assets are those tangible and intangible November 23, 1981 and assumed options granted under assets used in operations in each of the business segments St. Joe's 1972 Plan expire ten years after date of,grant. and geographic areas. Corporate assets are principally cash, short-term investments and property, plant and equipment. 36 ; : Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Sales to customers in foreign countries from domestic operations comprise less than 10% of total revenues. Contracts with major customers accounted for $668,140,000 in 1983 and $632,224,000 in 1981 of the rev enues of the engineering and construction segment. During 1982 no single customer accounted for more than 10 percent of revenues. The distribution segment, which is being discontinued, included the subsidiaries engaged in the warehousing and distribution of specialty tubing and pipe, industrial and oil-field supplies, and truck leasing and sales. Rev enues, operating profit and depreciation, depletion and amortization have been restated to exclude the amounts related to the distribution segment. See Discontinued Operations on page 33. The following table reconciles operating profit with earnings from continuing operations before income tax: $ in millions Years ended October 31, 1983 1982 1981 Operating profit from continuing operations Minority interests Interest--net Equity in earnings and gain on sale of Peabody Holding Company Corporate items Earnings from continuing operations before income tax $273.7 (17.0) (63.7) 18.0 (39.2) $171.8 $428.2 (9.6) (80.1) 12.4 (49.5) $301.4 $332.9 (4.8) (31.0) 7.8 (39.8) $265.1 Operations by Business Segment $ in millions Engineering and Construction Coal Metals Oil and Gas Drilling Services Other Eliminations Continuing Operations 1983 $4,105.2 437.5 429.0 135.8 85.7 108.0 (-7) $5,300.5 1982 $5,384.7 446.9 440.0 225.8 127,5 116.6 (.9) $6,740.6 $ in millions Engineering and Construction Coal Metals Oil and Gas Drilling Services Corporate and Other Continuing Operations Distribution 1983 $ 894.4 991.6 1,195.8 509.5 181.5 185.0 3,957.8 127.1 $4,084.9 Identifiable Assets 1982 1981 $1,023.1 997.5 1,238.9 714.6 206.3 211.9 4,392.3 308.7 $4,701.0 $ 981.6 933.3 1,060.5 633.0 155.7 378.6 4,142.7 348.6 $4,491.3 Operations by Geographic Area $ in millions 1983 United States Middie East South America Africa Europe Other Interarea eliminations $3,467.1 721.5 256.9 192.4 181.8 498.8 (18.0) $5,300.5 Revenues 1982 1981 $4,773.2 584.8 395.7 398.9 192.6 422.7 (27.3) $3,467.9 255.0 386.8 677.7 273.9 323.7 (27.4) $6,740.6 $5,357.6 Revenues / 1981 $4,812,2 131.0 108.8 99.4 109.2 103.5 (6.5y $5,357.6 Capital Expenditures 1983 1982 1981 Operating Profit 1983 $210.7 (6.8) 32.6 15.7 4.1 17.0 .4 1982 $228.6 2.6 46.2 69.7 60.4 20.5 .2 1981 $228.0 9.2 19.7 34.3 39.7 3.3 (1.3) $273.7 $428.2 $332,9 Depreciation, Depletion and Amortization 1983 1982 1981 $ 97.1 41.5 32.3 111.2 5.3 12-9 , 300.3 1.5 $301.8 $ 77.8 123.6 65.2 184.9 ' 45.8 19.7 517.0 8.9 $525.9 $138.0 18.8 34.3 167.9 25.7 31.6 416.3 31.8 $448.1 . * , Operating Profit 1983 1982 1981 $103.1 26.9 84.1 17.1 , 13.2"'- 29.3 >_ $270.8 26.0 86.9 21.3 (0.5) 23.7 -- $231.3 10.1 19.0 37.8 11.8 22.9 -- $273.7 $428.2 $332.9 $ 28.2 42.3 55.4 84.0 12.9 10.9 233.7 5.7 $239.4 $ 28.7 33.2 48.8 83.3 9.6 11.4 215.0 10.2 $225.2 $ 21.6 8.4 13.8 28.6 8.5 13.1 94.0 9.2 $103.2 1983 $3,183.3 112.3 375.4 57.2 239.4 117.3 -- $4,084.9 Identifiable Assets 1982 1981 $3,691.6 90.7 461.0 69.4 273.4 114.9 -- $3,579.4 92.7 429.2 19.0 242.1 128.9 -- $4,701.0 $4,491.3 SI. Joe Minerals is included from date of acquisition, August 3,1981. The Distribution Group's identifiable assets by geographic area are included in the United States. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. I luor Corporation NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued OIL AND GAS OPERATIONS The oil and gas operations of the company are accounted for under the full cost method of accounting. ($ in millions, except per equivalent barrel amounts) Total Selected financial information relating to oil and gas operations for 1983,1982 and 1981 follows: United States United Kingdom Argentina Greece Other Foreign 1983 Capitalized costs at October 31 Proved properties Unproved properties Accumulated depletion, depreciation and amortization at October 31 Property acquisition costs*3) Exploration costs**) Development costs**) Depletion, depreciation and amortization per equivalent barrel of oil produced $600.6 14.9 (183.5) 52.5 40.4 ' 16.9 $ 7.78 $326.2(b) -- (64.6) 51.3 19.3 6.8 $ 6.34 $ 67.7 -- (26.4) 0.1 1.0 1.0 $15,89 $44.3 -- (14.5) __ -- 0,4 $3.01 $ 93.4 -- (16,5) __ 1.4 2.6 $10.14 $69,0 14.9 (61.5) 1.1 18.7 6.1 N/A 1982 Capitalized costs at October 31 Proved properties Unproved properties Accumulated depletion, depreciation and amortization at October 31 Property acquisition costs**) Exploration costs*) Development costs*) Depletion, depreciation and amortization per equivalent barrel of oil produced $551.8 26.4 (140.3) 52.0 64.3 66.0 $ 7.81 $303.8 -- (62.6) 47.8 43.7 53.3 $ 8.50 $ 65.6 -- (14.8) -- 1.2 1.9 $10.06 $43,9 -- (10.5) -- -- 0,5 $2.42 $ 89.4 -- (5.8) .-- 1.9 6.4 $ 6.59 $49.1 26.4 (46.6) 4.2 17.5 3.9 N/A 1981 Capitalized costs at October 31 Proved properties Unproved properties Accumulated depletion, depreciation and amortization at October 31 Property acquisition costs*) Exploration costs*) Development costs*) Depletion, depreciation and amortization per equivalent barrel of oil produced $608.3 18.1 > $408.3 __ (101.4) 51.1 33.5 68.4 $ 4.58 (49.1) 40.6 25.7 19.0 "` ;$ 5.57 $ 34.3 __ (2.3) . -- 1.7 0.6 $ 5.96 $43.3 _ (6.9) 8.3 -- 11,8 $2.43 $ 77.6 -- '-- -- 33.9 $-- $44.8 18.1 (43.1) 2.2 6.1 3.1 N/A (a) Capitalized. (b) Exploratory drilling will extend over several years on certain projects whose costs are not being amortized as of October 31,1983. Costs excluded from amortization are as follows: Costs incurred in the year ended October 31 Property Acquisition Exploration Capitalized Interest Total 1983 1982 1981 Through 1980 $35,3 7,3 28.1 21.4 $92.1 $5.7 2.9 0.9 --. $9.5 $12.3 7,7 4.9 $24.9 $ 53.3 17.9 33.9 21.4 $126.5 38 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Estimated Proved Reserves of Oil and Has unaudited The following tables present the company's estimates of its proved oil and gas reserves. The company emphasizes that reserve estimates are inherently imprecise and that estimates of new discoveries are more imprecise than those of producing oil and gas properties. Accordingly, Total United States the Estimates are expected to change as future information becomes available. Oil reserves, which include condensate and natural gas liquids, are stated in millions of barrels, and gas reserves are stated in billions of cubic feet. See Sale of Coquina and Sale of Foreign Oil and Gas Properties on page 43. United Kingdom Argentina Greece Other Foreign Balance, October 31, 1980 St. Joe reserves at date of acquisition Revisions of previous estimates Purchases of reserves-in-place Extensions, discoveries and other additions Production Balance, October 31,1981 Revisions of previous estimates Extensions, discoveries and other additions Sales of reserves-in-place Production Balance, October 31,1982 Revisions of previous estimates Extensions, discoveries and other additions Sales of reserves-in-place Production Balance, October 31,1983 Oil Gas 19.8 95.0 8.5 74.7 1.7 17.0 5.2 -- 1.7 (2.6) 34.3 3.1 27.3 (16.2) 197.8 31.2 0.9 (2.7) (4.9) 30.7 (1.1) 33.3 (72.0) (26.4) 163.9 13.7 2.3 (0.6) (4.3) 27.0 4.3 (11.8) (12.0) 158.1 Oil Gas 6.5 58.4 3.2 __ --. 72.2 (0.1) ; , ------ 0.8 (1.0) 9.5 2.2 17.9 (11.4) 137.0 4.1 0.9 (2.7) (1.5) 8.4 0.6 33.3 (72.0) (21.6) : 80.8 2.2 0.2 (0.6) (0.9) 7.7 3.6 (11.8) (7.0) 67.8 Oil '_ 5.3 -- -- 0.9 (0.4) 5.8 0.9 (1.2) '^'55 (0.1) -- (1.3) 4.1 Oil 6,0 u 5.2 __, (0.7) 11.6 (4.1) Gas 32.2 __ 18.4 -- _ (4-8) 45.8 25.4 (0.7) 6.8 (1.6) -- (0.5) 4.7 (4.7) 66.5 10.0 -- (4.9) 71.6 Oil 6.1 _ (0.1) -- __ -- 6.0 2.9 Gas Oil 2.4 1.2 -- ~ -- ' __ -- 2.4 (0.1) -- 0.7 -- __ (0.5) 1.4 1.2 Gas 2.0 2.5 (1.3) -- 9.4 -- 12.6 1,8 (0.9) 8.0 (0.3) -- (1.0) 6.7 --. 2.3 1.2 -- (0.1) 3.4 (0.6) 2.0 0.3 2.1 (0.6) 3.8 (0.1) 14.3 0.3 0.7 __ 15.3 Net proved developed oil and gas reserves Balance, October 31,1980 Balance, October 31,1981 Balance, October 31,1982 Balance, October 31,1983 13.6 32.2 28.8 22.5 ' 65.7 151.3 135.1 138.0 6.4 57.6 9.0 129.4 7.9 64.8 7.3 58.9 -- 6.0 7.2 5.0 10.8 18.7 4,2 6.8 66.5 2.3 4.4 61.5 -- -- 6.0 2.4 8,0 2.3 6.7 3.4 1.2 0.9 1.4 0.8 1.9 1.5 1.8 14.2 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Fluor Corporation NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued Results of Operations for Oil and Gas Producing Activities The following summarizes the operating results of oil and gas producing activities for the years ended October 31, 1983, 1982 and 1981: $ in millions Total United States United Kingdom Argentina Greece Other Foreign 1983 Revenues from the sale of oil, gas and natural gas liquids Less: Production (lifting) costs Depletion, depreciation and amortization and valuation provisions $135.8 (33.7) (82.2) $ 43.8 (12.1) (11.8) $37.8 (7.2) (20.9) $6.2 (1.9) (4.0) $30.7 (6.9) (10.8) $17.3 (5.6) (34.7) Income taxes 19.9 19.9 9.7 0.3 13.0 (23.0) (12.2) (7.3) (3.9) (3.8) 2.8 Results of operations from oil and gas producing activities, excluding corporate overhead and interest costs $ 7.7 $ 12.6 $ 5.8 $0.3 $ 9.2 $(20.2) 1982 Revenues from the sale of oil, gas and natural gas liquids Less: Production (lifting) costs Depletion, depreciation and amortization and valuation provisions $225.8 (52.3) (79.0) $129.8 (30.2) (43.7) $43.4 (7.3) (12.9) $6.5 (3.0) (3.6) $25.8 (6.1) (5.9) $20.3 (5.7) (12.9) Income taxes 94.5 (39.5) 55.9 (22.7) 23.2 (9.5) (0.1) --- 13.8 (3.1) 1.7 (4.2) Results of operations from oil and gas producing activities, excluding corporate overhead and interest costs $ 55.0 $ 33.2 $13.7 $(0.1) $10.7 $ (2.5) 1981 Revenues from the sale of oil, gas and natural gas liquids Less: Production (lifting) costs Depletion, depreciation and amortization and valuation provisions $ 99.4 (30.4) (27.7) $ 56.6 (16.7) (16.2) $ 13.1 (2.8) (2.0) $9.1 (6.0) (3.5) $-- -- $20.6 (4.9) (6.0) Income taxes 41.3 (18.9) 23.7 (9.2) 8.3 (3-6) (0.4) -- -- 9.7 (6.1) Results of operations from oil and gas producing activities, excluding corporate overhead and interest costs $ 22.4 $14.5 $ 4.7 $(0.4) $-- $ 3.6 Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Reserves unaudited The following standardized measure of discounted future net cash flows and changes therein are presented in compliance with Statement of Financial Accounting Standards No. 69. The information is computed by applying current prices of oil and gas (with consideration of price changes only to the extent provided by contractual arrangements) to esti mated future production of proved oil and gas reserves as of October 31,1983, less estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves, and assuming continu ation of existing economic conditions. Income taxes are based on year-end statutory rates adjusted for permanent differences. Amounts are discounted by ten percent per annum. It is management's view that the standardized measure data does not present an appropriate measure of the results of the company's oil and gas producing activities. As such, the following factors should be considered in interpreting the results: The estimated discounted future net cash flows will not be realized in cash until, if and when, production and sales occur. Thus, they do not currently provide addi tional funds for use in the company's business. 40 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reported results can fluctuate significantly since actual prices and costs can change erratically. For example, increases due to sharply rising prices are included entirely in the year in which they occur. Furthermore, estimates of reserves are inherently imprecise, as are projections of future production. While the disclosures required by Statement No. 69 attempt to show the results of exploration and develop ment activities as they occur, exploration programs require many years to evaluate. Costs incurred in one year may lead to significant discoveries in the future. Therefore, a single year is not necessarily indicative of the long-term results of exploration and development activities. Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Reserves unaudited $ in millions Total United States United Kingdom Argentina As of October 31,1983 Future cash inflows based on year-end prices Future production and development costs based on year-end costs $ 998.5 273.6 $400.2 80.8 $108.7 40.6 $ 73.7 22.4 Future income tax expenses based on year-end effective tax rates 724.9 319.4 68.1 51.3 194.5 68.5 19.8 8.5 Future net cash flows 530.4 250.9 48.3 42.8 Ten percent annual discount for estimated timing of cash flows 184.9 99.0 11.4 14.7 Standardized measure of discounted future net cash flows relating to proved reserves $ 345.5 $151.9 $ 36.9 $ 28.1 As of October 31,1982 Future cash inflows based on year-end prices Future production and development costs based on year-end costs $1,119:6 313.7 $467.3 5 132.2 $174.5 57.2 $101.4 13.5 Future income tax expenses based on year-end effective tax rates 805.9 222.5 1 335.1 74.1 117.3 39.8 87.9 19.0 Future net cash flows 583.4 261.0 77.5 68.9 Ten percent annual discount for estimated timing of cash flows 175.2 79.2 10.9 25.0 Standardized measure of discounted future net cash flows relating to proved reserves $ 408.2 $181.8 $ 66.6 $ 43.9 As of October 31,1981 Future cash inflows based on year-end prices Future production and development costs based on year-end costs $1,399.4 423.1 $780.7 200.1 $174.7 46.1 $139.8 84.9 Future income tax expenses based on year-end effective tax rates 976.3 273.7 580.6 157.5 128.6 40.0 54.9 10.3 Future net cash flows 702.6 423.1 88.6 44.6 Ten percent annual discount for estimated timing of cash flows 203.5 141.4 10.9 12.4 Standardized measure of discounted future net cash flows relating to proved reserves $ 499.1 $281.7 $ 77.7 $ 32.2 Greece $236.2 66.9 169.3 48.5 120.8 30.3 $ 90.5 $247.7 58.9 188.8 56.0 132.8 43.1 $ 89.7 $237.6 57.0 180.6 53,2 127.4 27.8 $ 99.6 Other Foreign $179.7 62.9 116.8 49.2 67.6 29.5 $ 38.1 $128.7 51.9 76.8 33.6 43.2 17.0 $ 26.2 $ 66.6 35.0 31.6 12.7 18.9 11.0 $ 7.9 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Huor Coiporation NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued Summary of Changes In Standardised Measure of Discounted prices for those products are established by factors which Future Net Cash Flows Relating to Proved Reserves unaudited are beyond the control of management. However, man $ in millions agement believes the company's substantial position in Years ended October 31, 1983 1982 1981 natural resources provides a significant hedge against Discounted future net cash any adverse long-term effects of inflation. Inflation also flows at beginning of year Discoveries, extensions and other additions, and improved recovery, net of future produc tion and development costs $408.2 22.3 $499.1 111.4 $188.7 51.7 affects the company in other ways, particularly through increases in the cost of acquiring inventory and property, plant and equipment. Constant dollar and current cost estimates are necessar Sales and transfers of oil and gas produced, net of produc tion costs Net changes in prices and development and production (102.3) (173.5) ily based upon numerous assumptions and subjective (69.0) judgments. Although management believes that the esti mates have been developed in a reasonable manner and are in compliance with the requirements of Statement costs 1.5 (50.6) 15.5 No. 33, it should be recognized that the data should be Development costs incurred during the period Revision of previous quantity 5.7 28.5 viewed as experimental and partial and may be of only 61.9 limited value because of the high degree of imprecision estimates 12.6 68.6 (4.5) inherent in the estimation process. It also does not Net change resulting from purchases and sales of minerals-in-place Increase in present value due to passage of one year Net change in income taxes (25.8) 55.8 21.3 (167.3) 71.0 65.4 353.2 35.2 (132.1) include all of the effects of inflation or other economic, competitive, social or regulatory factors that influence the decisions and operations of a worldwide company. Both the constant dollar method and current cost method assume that existing assets can be replaced in kind, which Other, including the effect is not necessarily true with respect to the company's of changes in estimated rates of production (53.8) (44.4) mining assets. Management cautions against the use of (3L5) this information for estimating the total inflationary Balance at end of year $345.5 $408.2 $499.1 effect on future costs. SUPPLEMENTAL FINANCIAL INFORMATION ON CHANGING PRICES unaudited The company's financial statements are prepared in accordance with generally accepted accounting principles, which include the concept of historical cost. Under this concept, inventories and property, plant and equipment generally are recorded and reported at the amounts originally paid and do not reflect subsequent changes in (1) the general purchasing power of the dollar, (2) the current cost of replacing the asset, or (3) the amount for which the asset could be sold--its market value. In conformity with the Statement of Financial Account ing Standards No. 33, the company is presenting selected supplemental information adjusted for both general infla tion (constant dollar) and for changes in specific prices (current cost). The company is affected by inflation but certain factors serve to mitigate its impact. The company's position is protected within its engineering and construction and contract drilling operations due to its ability to recover cost increases as a result of price escalation provisions in its contracts. Most of the company's natural resource products are internationally traded commodities and Statement of Earnings from Continuing Operations Adjusted for Changing Prices unaudited Adjusted for Adjusted for $ in millions General Changes in As Inflation Specific Reported (1983 Prices Year ended in Primary average (October 31, October 31,1983 Statements dollars) 1983 dollars) Revenues Depreciation, depletion and amortization Other costs of revenues, net Earnings before income taxes Income taxes Earnings from continuing operations $5,300.5 221.8 4,906.9 171.8 91.1 $ 80.7 $5,300.5 283.7 4,907.4 109.4 91.1 $ 18.3 $5,300.5 260,4 4,907.4 132.7 91.1 $ 41.6 Gain from decline in purchasing power of net amounts owed $ 42.8 $ 42.8 Inventories and property. plant & equipment $3,026.7 Increase in general inflation of inventories and property, plant & equipment held during the year Effect of decrease in specific prices Excess of increase in general inflation over decrease in specific prices $ 89.8 107.1 $ 196.9 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. The supplementary information on a constant dollar basis is expressed in average constant dollars for the year and reflects changes that have occurred in the purchasing power of the dollar as measured by the Consumer Price Index for AH Urban Consumers. Current cost information reflects assets and expenses associated with the use or sale of assets at their current cost at the balance sheet date or at the date of use or sale. Information on a current cost basis was determined for each class of goods being meas ured using a combination of externally generated indices and direct pricing. The statement of earnings adjusted for changing prices compares the results of operations as reported in the fi nancial statements with the results restated on a constant dollar basis and on a current cost basis. Only cost of sales and depletion, depreciation and amortization have been adjusted. Sales and all other operating expenses are con sidered to reflect the average price levels for the year and, accordingly, have not been adjusted. The provisions for income taxes remain unchanged because present tax laws do not allow deductions related to inflation adjustments. The gain from decline in the purchasing power of net amounts owed measures the gain from holding monetary liabilities in excess of monetary assets. Since a gain in pur chasing power does not represent the receipt of cash, it should not be considered as providing funds for reinvest ment or dividend distribution. Selected Data Adjusted for Effect of Inflation (in average 1983 dollars) unaudited $ in millions, except per share amounts Years ended October 31, 1983 1982 Revenues from continuing operations Earnings from continuing operations: Adjusted for general inflation Adjusted for changes in specific prices Earnings per share from continuing operations: Adjusted for general inflation Adjusted for changes in specific prices Net assets at end of year: Adjusted for general inflation Adjusted for changes in specific prices Excess of (decrease) increase in specific prices over increase in general inflation Gain from decline in purchasing power of net amounts owed Cash dividends declared per share Market price per share at end of year Average consumer price index $5,300.5 18.3 41.6 .23 .53 2,161.9 2,212.8 (196.9) 42.81 $ .80 16<y16 296.7 $6,966.0 127.8 106.2 1.62 1.35 2,265.7 2,470.7 11.8 82.3 $ .83 2F/16 287.1 Prior periods have been restated to reflect continuing operations only. 1981 $5,922.5 158.4 142.9 2.82 2.54 2,207.9 2,391.6 17.2 60.6 $ .89 30'/a 268.4 1980 $5,327.4 143.1 115.7 2.97 2.39 986.9 1,159.8 59.8 38.8 $ .80 73>yI6 242.1 1979 $4,557.8 $ .68 29716 213.1 SALE OF COQUINA SALE OF FOREIGN OIL AND OAS PROPERTIES In November 1982, the company completed the sale of certain domestic oil and gas producing properties to Petro-Lewis Corporation and others for $167.9 million in cash. The properties were owned by Coquina Oil Corpo ration and Coquina Petroleum Inc., both subsidiaries of St joe. The sale included proved reserves of approxi mately 14.7 million equivalent barrels of oil. The proper ties were classified as current assets held for sale at October 31, 1982. Included in the current portion of long term debt at October 31, 1982, was $161.5 million of com mercial paper which was retired with the proceeds from the sale. The remaining oil and gas properties owned by Coquina Oil Corporation and Coquina Petroleum Inc. were sold later in 1983. In December 1983, the company announced the sale of several foreign oil and gas properties to Charterhouse Petroleum of the United Kingdom, for approximately $66 million, subject to the approval of the shareholders of Charterhouse Petroleum and the government of the United Kingdom. Properties to be sold include the company's interests in the United Kingdom, the Netherlands and part of its Egyptian properties. The financial statements and footnotes do not reflect the pending sale of these properties. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. I'liinr Corporation NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued MINERAL RESERVES AND OPERATING STATISTICS unaudited Information relating to the company's mineral reserves as of October 31,1983,1982 and 1981, and milling, production and realized product prices during the years ended October 31, 1983 and 1982 and the three months ended October 31, 1981 follows: 1983 1982 Short tons and troy ounces in thousands Reserves (tons) Lead Zinc Iron Ore Metallurgical Coal Steam Coal Foreign Milling Ore Direct Shipping Ore Average Grade of Ore Reserves**) Lead Zinc Iron Ore Copper Direct Shipping Ore--Silver Direct Shipping Ore--Gold Foreign Milling Ore--Silver Foreign Milling Ore--Gold Ore Milled (tons) Lead Zinc Iron Ore Foreign Milling Ore Metal Content of Concentrates Produced (tons)**) Lead Zinc Iron Ore Copper Direct Shipping Ore--Silver Direct Shipping Ore--Gold Foreign Milling Ore--Silver Foreign Milling Ore--Gold Coal Produced (tons) Metallurgical Steam Average Realized Prices (per ton) Lead Metal Zinc Metal Zinc Concentrates Iron Ore Pellets Lead Concentrates Copper Concentrates Metallurgical Coal Steam Coal Gold/Silver Bearing Copper Concentrates Dearsenified Gold/Silver Bearing Copper Concentrates Dor6 Bullion (per kilogram) Direct Shipping Ore United States Argentina Australia Chile United States Argentina Australia Chile 62,056**) 62,294**) 8,378(b) 10,063(b) 187,888**) 196,484**) 99,083*b'<0 142,836*b/c) : 420,253*b'c) 386,188(b)*) 6,221(b) l,296*b'd) 5,048(b) 6,494(b) 2,094*b'd> 4,694<w 66(b) 69(b) 5.0 5.8 2.9 5.0 6.0 3.2 11.3 6.9 8.8 10.9 6.9 9.5 55.5 56.0 1.8 5.0 1.9 5.1 3.8 3.3 6.8 7.3 3.5 1.2 3.6 3.6 1.4 3.6 0.3 0.3 4,599 765 1,230 i. ` ' 668 344 4,590 684 1,487 544 668 392 423 216 88 530 2,084 7,102 $391 772 357*8) 25 43 $ 39 32 37 1,564 6 22 4 16 60 206 342 855 170 $197 $580(8) $142 36 $185 $1,096 1,939 2,905 $2,930 208 78 643 2,155 6,873 $520 746 3130s) 32 48 $ 40 34 37 1,695 8 26 48 61 236 464 455 145 $232 $50Ks) $171 81 $184 $1,427 2,607 3,668 $2,546 (a) Proven. (b) Proven and Probable. (c) Represents proportionate share of reserves and production of Massey Coal Company, Does not include proportionate share of reserves related to the company's 10 percent interest in Peabody Holding Company, which was sold in 1983. (d) Represents proportionate share of reserves of joint venture. (e) Stated as % except silver and gold which are stated in troy ounce/ ton, (f) Stated in tons except silver and gold which are stated in troy ounces. (g) Price reflects silver content in concentrates. 44 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. United States 1981 Argentina Australia Chile 64,067(9) 10,678(bi 100,182(9) 146,321^) 341,41SO5'') 6,558(b) 2,494<b'd> 3,433C 77(b) 5.1 6.2 3.1 10.8 7.6 9.0 56.1 1.9 3.5 3.4 8.2 3.7 1.4 4.3 0.4 1,205 Jgg 167 88 57 8 2 16 9 6 195 1 24 42 458 149 602 1,697 $764 909 366(8) 35 48 $ 37 $192 $562(8) $195 186 $224 $3,356 CONTINGENCIES, COMMITMENTS AND RESTRICTIONS The company is contingently liable for commitments and performance guarantees arising in the ordinary course of business. Claims arising from engineering and construc tion contracts have been made against the company by clients, and the company has made certain claims against clients for costs incurred in excess of contract coverage. In the opinion of management, finalization of these matters will not have a material adverse effect on the company's consolidated financial position or results of operations. At October 31,1983, approximately $739 million of net assets of subsidiaries have restrictions which affect the ability to transfer them to the parent company in the form of loans, advances, or dividends. Substantially all of these restricted net assets relate to the requirement of the Massey Coal Company joint venture agreement to obtain approval of both parties prior to the transfer of joint venture assets. QUARTERLY FINANCIAL DATA unaudited The following is a summary of the quarterly results of operations for the years ended October 31, 1983 and 1982. $ in thousands, except per share amounts First Second 1983 Quarter Quarter Third Quarter Fourth Quarter Revenues from continuing operations Gross margin Earnings (loss) from continuing operations Earnings (loss) from discontinued operations Operations Disposal Net earnings (loss) Earnings (loss) per share Continuing operations Net earnings (loss) $1,399,172 $1,377,315 $1,265,700 $1,258,265 103,401 91,629 64,147 23,498 38,854 31,144 18,463 (7,761)* (6,775) -- 32,079 (3,411) -- 27,733 (9,604) -- 8,859 (7,210) (26,000) (40,971)* .49 .39 .23 (.09)* $ .41 $ .35 $ .11 $ (.52)* \ ; 1 !' ' 1982 First Second Third Fourth Quarter Quarter Quarter Quarter Revenues from continuing operations Gross margin Earnings from continuing operations Earnings (loss) from discontinued operations Net earnings Earnings per share Continuing operations Net earnings $1,566,237 $1,753,415 $1,773,948 $1,646,951 90,341 116,532 110,648 117,764 36,854 41,867 41,965 40,290 2,960 39,814 275 42,142 (3,451) 38,514 (7,961) 32,329 .47 .53 .53 .52 $ .51 $ .53 $ .49 $ .41 `Includes a $21 million ($.27 per share) net write-down of certain foreign oil and gas properties. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Fluor Corporation DIRECTORS J. ROBERT FLUOR 62, is Chairman and Chief Executive Officer of Fluor Corporation. Fluor joined the company in 1946 and has served on the Board since that time.(,x4> CHARLES N. CANMON 61, is Group Vice Presi dent of Fluor Corporation and Chairman of Fluor Engineers, Inc, Cannon joined the company in 1961 and has served on the Board since 1977.W CHARLES W. COX 65, is Vice Chairman of Daniel International Cor poration and Chairman of Daniel Construction Company. Cox joined Daniel in 1957 and became a member of the Fluor Board in 1977.<5> JOHN C. DUNCAN 63, is the retired former Chairman and Chief Executive Officer of St. Joe Minerals Corporation. Duncan joined St. Joe in 1970 and became a mem ber of the Fluor Board in 1981. DAVID S. TAPPAN, JR. 61, is President and Chief Operating Officer of Fluor Corporation. Tappan joined Fluor in 1952 and became a member of the Board in 1965.<1! JOSEPH V. McKEE, JR. 63, is the retired former Chairman of National Union Electric. McKee was elected to the Board in 1982, having previously served as a director of St, Joe Minerals Corporation. GEORGE W. MEFFERD 57, is Group Vice Presi dent and Chief Financial Officer of Fluor Corpora tion. Mefferd joined Fluor in 1974 and has served on the Board since that time.(,) BUCK MECKEL 58, is Chairman-Engi neering and Construction Group of Fluor Corpora tion, and Chairman and President of Daniel Inter national Corporation. Mickel joined Daniel in 1948 and became a mem ber of the Fluor Board in 1977.(1> 46 ' . /, ;' * ' Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. WILLIAM R. GRANT 59, is Chairman of MacKay-Shields Financial Corporation. Grant was elected to the Fluor Board in 1982 having previously served as a director of St. Joe Minerals Corporation.*13#421 SIBRAND JURRIAANS 66, is a retired partner of Pierson, Heldring & Pier son, investment and com mercial bankers. Jurnaans became a member of the Board in 1964.!2i,3K4> ROBERT V. LINDSAY 58, is President and a Director of J. P. Morgan and Co. Incorporated and Morgan Guaranty Trust Company of New York. Lindsay was elected to the Fluor Board in 1982 having previously served as a director of St. joe Minerals Corporation.<W4) ROSS A. McCLINTOCK 62, is Senior Vice Presi dent of Fluor Corporation and Chairman of Fluor Drilling Services, Inc. McClintock joined Fluor in 1969 and has served on the Board since that time. WILLIAM I. McKAY 63, is Group Vice Presi dent of Fluor Corporation. McKay joined the com pany in 1954 and has served on the Board since 1977. LOREN K. OLSEN 69, is Counsel, Morgan, Lewis & Bockius, attor neys. Olsen has been a member of the Board since 1962.(2,t3) ARTHUR C. SHEFFIELD 63, is Group Vice Presi dent of Fluor Corporation. Sheffield joined the com pany in 1942 and has served on the Board since 1971. CHARLES WEINER 60, is Chairman of Texas Crude, Inc., Oil and gas production. Weiner has s19e6r9vJe2Xd3o){4n) the Board since LOUIS H. WILSON 63, is General, U.S. Marine Corps (Retired) and former Commandant of the Marine Corps. Wil son became a member of the Board in 1979.<2><3>(4> 5 JOHN A. WRIGHT 41, is Chairman-Natural Resources Group of Fluor Corporation, and Chair man and Chief Executive Officer of St. Joe Minerals Corporation. Wright joined St. Joe in 1971 and became a member of the Fluor Board in 1981.<l> (1) Member of Executive Committee (2) Member of Audit Committee (3) Member of Compensation Committee (4) Member of Nominating Committee (5) Retired January 2,1984 , 47 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. lluor Corpotation PRINCIPAL SUBSIDIARIES AND DIVISIONS OFFICERS KEY OPERATING EXECUTIVES > ENGINEERING AND CONSTRUCTION Fluor Engineering and Construction Group, Inc. Irvine, California Fluor Engineers, Inc. Irvine, California Advanced Technology Division Irvine, California Houston Division Houston, Texas Mining & Metals Division Redwood City, California Ocean Services Division Houston, Texas Power Division Chicago, Illinois and Irvine, California Southern California Division Irvine, California Fluor Arabia Limited Al-Khobar, Saudi Arabia Fluor Australia Pty. Limited Melbourne, Victoria, Australia Fluor Canada Ltd. Calgary, Alberta, Canada Fluor Europe Limited London, England Fluor (Great Britain) Limited London, England Fluor GmbH Dusseldorf, West Germany Fluor Nederland B.V. Haarlem, The Netherlands Fluor South Africa (Pty) Limited Johannesburg, South Africa Fluor Constructors, Inc. Irvine, California Fluor Canada Constructors, Inc. Calgary, Alberta, Canada Fluor Mechanical Services, Inc. Irvine, California Daniel International Corporation Greenville, South Carolina METALS AND COAL St Joe Minerals Corporation Clayton, Missouri A.T. Massey Coal Company, Inc. Richmond, Virginia Si. Joe International Corporation New York, New York St. Joe Lead Company Clayton, Missouri St. Joe Resources Company Clayton, Missouri OIL AND GAS Fluor Oil and Gas Corporation Denver, Colorado St. Joe Petroleum Corporation Denver, Colorado DRILLING SERVICES Fluor Drilling Services, Inc. Irvine, California Coral Drilling Division New Orleans, Louisiana Western Offshore Drilling and Exploration Co. Irvine, California 48 EXECUTIVE OFFICERS EXECUTIVE J. Robert Fluor Chairman of the Board and Chief Executive Officer (1946) David S. Tappan, Jr. President and Chief Operating Officer (1952) Charles N. Cannon Group Vice President and Chairman of the Board of Fluor Engineers, Inc. (1961) Ross A. McCIfntock Senior Vice President and Chairman of the Board of Fluor Drilling Services, Inc. (1969) William I. McKay Group Vice President (1954) Buck Mickef Chairman-Engineering and Construction Group and Chairman of the Board and President of Daniel International Corporation (1977) Arthur C. Sheffield Group Vice President (1942) John A. Wright Chairman-Natural Resources Group and Chairman of the Board and Chief Executive Officer of St, Joe Minerals Corporation (1981) FINANCIAL George W. Mefferd Group Vice President and Chief Financial Officer (1974) James M. Markert Treasurer (1970) Richard D. Paul Vice President and Controller (1968) " LAW ' f' Nad A. Peterson Senior Vice PresidentLaw and Tax and Secretary (1967) OTHER OFFICERS Charles J. Bradley Vice President-Human Resources(1958) Thomas C. Eilick Vice President - Corporate Relations (1971) Gunther E. Herlng Vice President-Corporate Development and Strategic Planning (1975) Wilbur J. Holloman Vice President-Tax (1975) William E. Nelson Vice President-Security and Administration (1977) Howard E. Owens Vice President-Corporate Law (1968) James O. Rollans Vice President - Corporate Communications (1982) Gerald B. Sinykln Vice President-Medical Services (1979) ft Joseph Trimble Senior Vice PresidentLaw, Engineering and Construction Group (1972) William R. Warren Vice PresidentInformation Systems (1975) Doan K. Allen President, Fluor Engineers, Inc. (1962) C. Patrick Bedford President, Fluor Constructors, Inc. (1978) Joseph S. Bowman President, Fluor Oil and Gas Corporation (1973) Hugh K. Coble Group Vice President Marketing, Fluor Engineering and Construction Group, Inc. (1966) Peter DeMay Group Vice President, Fluor Engineers, Inc. (1980) J. Robert Fluor II President, Fluor Drilling Services, Inc. (1967) Robert E. Harrigan Group Vice President Marketing, Fluor Engineers, Inc. (1956) Vincont L. Kontny Group Vice President, Fluor Engineers, Inc. (1965) Leslie Q. McCraw President, Daniel Construction Company (1977) Peter J. Neff Vice President, St. Joe Minerals Corporation and President, St. Joe International Corporation (1981) Ronald Olivier Group Vice President, Fluor Engineers, Inc. and Chairman, Fluor Europe Limited (1961) Currie B. Spivey, Jr. Group Vice President, Fluor Engineers, Inc. (1977) LeRoy K. Wheelock President and Chief Operating Officer, St, Joe Minerals Corporation (1981) L. Edward Welbla Vice President, St. Joe Minerals Corporation and President, St. Joe Lead Company (1981) (1) Years in parentheses indicate the year each officer or executive joined the company. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Vned hr. T t Ie - s *-*oc - ion a Phc : ' ^ V Lonnie Duka and - 3n Johr- m n Cover Phc : - -aphy W ill - m Jr nes V&rren o Lithe raphy: Anderson U tho o T ypo-aphy: CAPCO a Pruned in U S.A. M