ITEM 1. BUSINESS.
Fluor Corporation ("Fluor" or the "Company") was incorporated in Delaware in 1978 as a successor in interest to a California corporation of the same name that was originally incorporated in 1924. Its executive offices are located at 3333 Michelson Drive, Irvine, California 92730, telephone number (714) 975- 2000.
Through Fluor Daniel, Inc. and other domestic and foreign subsidiaries, the Company provides engineering, procurement, construction, maintenance and related technical services on a worldwide basis to an extensive range of industrial, commercial, utility, natural resources, energy and governmental clients.
The Company maintains investments in coal-related businesses through its ownership of Massey Coal Company ("Massey"). In November of 1992, the Company announced its decision to exit its lead business and classified the business as a discontinued operation in the Company's consolidated financial statements.
A summary of the Company's operations and activities by business segment and geographic area is set forth below.
ENGINEERING AND CONSTRUCTION
The Fluor Daniel group of domestic and foreign companies ("Fluor Daniel") provides a full range of engineering, construction and related services on a worldwide basis to clients in five broad market sectors: Hydrocarbon, Industrial, Government, Process and Power. The types of services provided by Fluor Daniel, directly or through companies or partnerships jointly owned or affiliations with other companies, include: feasibility studies, conceptual design, engineering, procurement, project and construction management, construction, maintenance, plant operations, technical, project financing, quality assurance/quality control, start-up assistance, site evaluation, licensing, consulting and environmental services.
Fluor Constructors International, Inc. ("Fluor Constructors") is organized and operated separately from Fluor Daniel. Fluor Constructors provides construction management, construction and maintenance services in the United States and Canada. Fluor Constructors is the Company's union construction arm.
American Equipment Company, a wholly owned Fluor subsidiary, provides construction equipment, tools and related asset management services to Fluor Daniel, Fluor Constructors and the construction/maintenance industry at large through strategically located support centers.
The engineering and construction business is conducted under various types of contractual arrangements, including cost reimbursable (plus fixed or percentage fee), all-inclusive rate, unit price, fixed or maximum price and incentive fee contracts. Contracts are either competitively bid and awarded or individually negotiated. In terms of dollar amount, the majority of contracts are of the cost reimbursable type. In certain instances, the Company has guaranteed facility completion by a scheduled acceptance date and/or achievement of certain acceptance and performance testing levels. Failure to meet any such schedule or performance requirements could result in costs that exceed project profit margins.
The markets served by the business are highly competitive and for the most part require substantial resources, particularly highly skilled and experienced technical personnel. There are a large number of companies competing in the markets served by the business. Competition is primarily centered on performance and the ability to provide the engineering, planning and management skills required to complete complex projects in a timely and cost efficient manner. The business derives its competitive strength from its diversity, reputation for quality, worldwide procurement capability, project management expertise, geographic coverage, ability to meet client requirements by performing construction on either a union or non-
union basis, ability to execute projects of varying sizes, strong safety record and lengthy experience with a wide range of services and technologies.
Design and engineering services provided by the business involve the continual development of new and improved versions of existing processes, materials or techniques, some of which are patented. However, none of the existing or pending patents held or licensed by the business are considered essential to operations. Generally, the development and improvement of processes, materials and techniques are performed as part of design and engineering services in connection with the projects undertaken for various clients.
FLUOR DANIEL
Fluor Daniel serves five broad market sectors: Hydrocarbon, Industrial, Government, Process and Power. Services are provided through 12 global business units that focus on specific markets within each sector. The business units rely on a network of operations centers and regional offices to provide resources and expertise in support of project execution worldwide.
In the United States, services are provided primarily through Fluor Daniel, Inc. Principal offices are located in Irvine, California; Greenville, South Carolina; Houston (Sugar Land office), Texas; Chicago, Illinois; Anchorage, Alaska; Tulsa, Oklahoma; and Philadelphia, Pennsylvania (Marlton, New Jersey office). Additional North American operations are conducted through Fluor Daniel Canada, Inc. in Canada and Fluor Daniel Caribbean, Inc. in Puerto Rico.
The international operations of the group are divided into regional areas. The Asia Pacific region includes the following operating subsidiaries: Fluor Daniel Australia Limited; Fluor Daniel China, Inc.; Fluor Daniel Eastern, Inc. (Indonesia); Fluor Daniel Engineers & Constructors, Ltd. (Hong Kong); Fluor Daniel (Japan) Inc.; Fluor Daniel (Malaysia) Sdn. Bhd.; Fluor Daniel Pacific, Inc. (the Philippines); and Fluor Daniel Thailand, Ltd. Operating subsidiaries for the Europe region include: Fluor Daniel B.V. (the Netherlands); Fluor Daniel Espana, S.A. (Spain); Fluor Daniel GmbH (Germany); and Fluor Daniel Limited (England). Operating subsidiaries for the Middle East region include Fluor Daniel Arabia Limited. Latin American operations are conducted in Venezuela through Tecnofluor C.A. (a company which is jointly owned with Tecnoconsult S.A., a Venezuelan engineering company), in Mexico through ICA Fluor Daniel (a joint equity company with Grupo ICA) and through Fluor Daniel Chile S.A.
While the United States will remain an important market for Fluor Daniel's services, increasingly the largest share of opportunities are located outside the United States. Demand for higher living standards is driving strong economic growth in developing economies, particularly in the Asia Pacific and Latin American regions. Expansion of basic industries is increasing fundamental energy requirements and infrastructure needs. Globalization of markets and geopolitical change is also stimulating strategic investments in new production facilities in these emerging markets.
Due largely to weak economies and capital spending within certain United States, European and Middle Eastern markets, the Government, Process, Industrial and Power sectors experienced declines in new awards in fiscal 1993 that were only partially offset by an increase in the Hydrocarbon sector. There continue to be a number of megaproject opportunities, particularly outside the United States. These projects develop slowly and, therefore, could create variability in the Company's incoming order and backlog pattern.
The operations of Fluor Daniel are detailed below by market sector.
Hydrocarbon
Services provided to the Hydrocarbon sector include services for refining and processing plants, production facilities, oil and gas transmission systems and related facilities for petroleum, petrochemical and natural gas clients. These services are provided through the Petroleum and Petrochemicals, and Production and Pipelines business units.
During fiscal 1993, Hydrocarbon sector domestic contract awards included: pipeline inspection and right of way services in New York; engineering for an aromatics project for a refinery in Pennsylvania and pipeline and pump stations in Alaska; engineering and procurement for a reformulated fuels program in California and an inter-refinery pipeline in Pennsylvania; engineering, procurement and construction for an ethylene debottlenecking project for a refinery in Texas and fire rehabilitation of a refinery in Mississippi; and engineering, procurement and construction management for a reformulated gasoline and a clean fuels program, both in California, and a fluid catalytic cracking unit ("FCCU") revamp in Illinois.
International contract awards included: engineering for a debottlenecking project in Indonesia, a natural gas liquids recovery facility in Nigeria, fire rehabilitation of a gas plant in the United Arab Emirates and early production system equipment, oil field production facilities, pipeline development and oil field expansion, all in Colombia; engineering and procurement for a chlor- alkali/ethylene expansion of a petrochemical plant in Saudi Arabia, an effluent quality upgrade for a refinery in the United Kingdom and a liquid petroleum gas plant upgrade in the United Arab Emirates; and engineering, procurement and construction management for a refinery upgrading project in the Netherlands, a grass roots refinery in Thailand, a hydrotreater upgrade in Canada and a field gathering and oil production system in Gabon.
Ongoing projects include: engineering for a tertiary-amyl methyl ether ("TAME") unit in Texas; construction in Louisiana of gas reinjection modules for erection in Alaska; engineering and procurement for a hydrocracker revamp in California and oil production facilities in Gabon; engineering, procurement and construction for modifications to a refinery in California; engineering, procurement and construction assistance for a reformulated gasoline project in California; and engineering, procurement and construction management for a refinery upgrading project in the Netherlands, a refinery revamp in Belgium, a refinery expansion in the Philippines, a pipeline from Argentina to Chile, a delayed coker in Venezuela and expansion of crude oil production facilities in Saudi Arabia.
Projects completed in fiscal 1993 included: engineering studies for an oil pipeline in the Caspian Sea region and various refinery projects in Mexico; engineering for an alkylation plant revamp and propylene splitter, both in the United Kingdom, a butane upgrading project and a low sulfur diesel facility, both in Texas, and a gas injection project in the Netherlands; engineering and procurement for an offshore oil/gas production facility in the Netherlands and two naphtha hydrotreaters, one in Minnesota and one in Kentucky; engineering, procurement and construction for a vinyl acetate plant and a MTBE plant, both in Texas, a polystyrene plant in China and a diesel hydrotreater in Utah; engineering, procurement and construction assistance for fire rehabilitation of a refinery in California; and engineering, procurement and construction management for a continuous catalytic reformer ("CCR") in Kentucky and a hydrocracker and catalytic reformer in Texas.
Industrial
Services provided to the Industrial sector include facility maintenance and operations services as well as a broad range of services to the telecommunications, transportation, commercial and criminal justice, asbestos abatement, defense and aerospace, electronics, automotive, general manufacturing, mining, metals and pulp and paper industries. These services are provided through the Facility and Plant Services, Pulp and Paper, Mining and Metals and Industrial business units. As of January, 1993, Fluor Daniel established a partnership with the United States operations of Jaakko Poyry of Finland, a pulp and paper engineering and design firm, in an effort to improve the Pulp and Paper business unit's strategic position when this market recovers.
During fiscal 1993, Industrial sector domestic contract awards included: condition assessment for facilities at 12 military installations at various locations throughout the United States; maintenance for an automotive manufacturing facility in Tennessee; construction for the modernization of a pulp mill in Ohio; construction management for a correctional facility expansion in California, a county jail expansion in Texas and renovation of a turbine facility and a weave room addition, both in South Carolina; engineering and
procurement for a copper electrorefinery in Arizona; engineering and construction management for an automotive manufacturing plant expansion in Ohio; engineering, procurement and construction for a blast furnace coal injection facility in Indiana; and engineering, procurement and construction management for a grass roots paint shop in Kentucky.
International contract awards during fiscal 1993 included: engineering for a nickel reverts handling project in Canada; and engineering, procurement and construction management for a building and garage upgrade in Germany.
Ongoing projects include: construction for an automotive assembly plant in South Carolina and a newsprint mill in Tennessee; construction management for a newsprint recycling plant in Australia and airport expansions in Georgia and Japan; project management for rail transit for the Los Angeles County Metropolitan Transportation Authority, rail stations for the Federal Transportation Administration in New York City, a telecommunications upgrade project for the United States Agency for International Development in Egypt, a convention center in North Carolina and highway construction in Orange County, California; maintenance services for a refinery in Mississippi, a tire manufacturing facility in Tennessee, computer manufacturing plants in Florida, Texas and North Carolina and automotive facilities in Germany and Hungary; design and construction management for six embassies in Eastern Europe for the United States Department of State; engineering, procurement and construction for an emergency 911 response system for the City of Chicago, Illinois; and engineering, procurement and construction management for a paper products plant in Korea, a copper smelter modernization in Utah, a copper mine expansion in Indonesia and a copper concentrator expansion and solvent extraction electrowinning copper processing facility, both in Chile.
Projects completed in fiscal 1993 included: operations and maintenance for the National Aeronautics and Space Administration ("NASA") Johnson Space Center in Texas; facility maintenance and support services for Lawrence Livermore National Laboratory in California; project management for highway construction in California Department of Transportation District 12; engineering and construction management for a pulp and paper mill in the United Kingdom and a research and development facility in Arizona; engineering, procurement and construction for an automobile air bag propellant plant in Arizona; and engineering, procurement and construction management for a zinc plant and a copper smelter in Canada, an aluminum cold rolling mill expansion in Kentucky and an aluminum smelter in Australia (a joint venture with SNC Lavalin Inc. of Canada and Crooks, Mitchell, Peacock, Stewart, Pty Limited (CMPS) of Australia).
Government
Services provided to the Government sector include services for projects involving nuclear and other fuel cycles, nuclear waste disposal and hazardous waste cleanup, treatment, abatement and removal. Clients include federal, state and local agencies, quasi-governmental entities and organizations in private industry and other government prime contractors. These services are provided through the Advanced Technology and Environmental Services business units.
During fiscal 1993, Government sector contract awards included: environmental investigation at various military installations for the United States Army Corps of Engineers.
Ongoing projects include: environmental remediation management for the United States Department of Energy ("DOE") former uranium processing plant in Ohio (the "Fernald Project"); engineering for a DOE waste vitrification plant in Washington, the DOE nuclear waste repository program and the reconfiguration of the DOE nuclear weapons program; engineering and construction management for the DOE Strategic Petroleum Reserve in Louisiana and for various radar and weather stations located throughout the United States for the National Oceanic and Atmospheric Administration; environmental investigation and remediation plan services for a toxic waste site for a private client in New York; remedial investigation and feasibility studies for the United States Army Corps of Engineers Hazardous and Toxic Waste Agency's
environmental program; management and operation services for the Naval Petroleum and Oil Shale Reserves program for the DOE in Colorado, Utah and Wyoming; environmental investigation, remediation design and implementation services for a chemical waste site for a private client in Ohio; and engineering, procurement, construction management and program management for an environmental remediation program for a toxic waste site for a group of private clients in Indiana.
Process
Services provided to the Process sector include services to the food, beverages, consumer products, synthetic fiber, film, plastics, pharmaceutical, biotechnology and chemicals industries. These services are provided through the Chemicals and Plastics, Process and Delta business units. Delta provides work services worldwide to E.I. du Pont de Nemours and Company under an alliance agreement.
During fiscal 1993, Process sector domestic contract awards (excluding Delta) included: engineering for a process and enzyme system in Missouri; construction of a chemical plant in Louisiana; construction management for a polyester fiber facility in South Carolina; engineering and procurement for a ethoxylation project in Texas; engineering, procurement and construction of a hydrochlorofluorocarbon plant in Kentucky, a plastics stretch project in Alabama and a food processing plant in Georgia; and engineering, procurement and construction management of a plastics stretch project in Indiana, a dextrose expansion project in Illinois and a growth factor fermentation plant in California.
International contract awards included: construction of a grass roots wastewater facility in Puerto Rico; construction management for a dairy plant in Germany and a grass roots chemical facility in Puerto Rico; engineering, procurement and construction for a grass roots polyethylene facility in Mexico; and engineering, procurement and construction management for a sodium cromoglycate facility in the United Kingdom and a regional headquarters building in Venezuela.
Ongoing projects include: construction of a spherilene and ethylene purification facility in Texas and a chemical fibers plant in North Carolina; engineering and procurement for an ethylene glycol plant in Canada; construction management for a pilot plant for pharmaceutical manufacturing in New Jersey, a tobacco processing plant expansion in North Carolina and a biotechnology clinical manufacturing facility in Colorado; engineering and construction for several consumer products facilities in Ohio and a corn processing plant in Illinois; engineering, procurement and validation for a synthetic hemoglobin manufacturing facility in Colorado; engineering and construction management for two tobacco facilities, one in Turkey and one in the Netherlands; engineering, procurement and construction for an aspartame facility expansion in the Netherlands, a filter tow facility expansion in the United Kingdom, an edible food casing facility in South Carolina, personal care and laundry detergent manufacturing facilities in Ohio and food processing plants in Texas, Wisconsin, Florida and Georgia; and engineering, procurement, and construction management for a pharmaceutical plant in Canada and an MTBE chemical complex in Saudi Arabia.
Projects completed in fiscal 1993 included: engineering for two biotechnology fermentation facilities, one in Pennsylvania and one in Puerto Rico; construction of a grass roots additives facility in Alabama; construction management for a veterinary vaccines manufacturing facility in Nebraska; engineering and construction for a parenteral and solid dosage facility in Puerto Rico; engineering and construction management for laundry and dishwashing detergent manufacturing facilities in Ohio and a boiler in Illinois; engineering and construction management for a liquid chemical facility in Ohio; engineering, procurement and construction for the remodel of an existing acetone recovery facility in the United Kingdom, a cellulose acetate plant in Tennessee, a chemical plant expansion in the United Kingdom, a grass roots food additive facility in Iowa, a food processing plant in Kentucky and an ibuprofen plant in Texas; and engineering, procurement and construction management for a grass roots biochemical manufacturing facility in Washington and various cleaning solution manufacturing plants in the United States.
Delta contract awards for 1993 included: engineering and procurement for a fibers expansion plant in Holland; engineering, procurement and construction for a bi-component fibers facility in North Carolina and a turbine generator in South Carolina; and engineering, procurement and construction management for a fibers line plant in Luxembourg.
Delta ongoing projects include: evergreen construction and supplemental maintenance for various chemical and fibers facilities in the United States; technical services for various chemical and fibers plants in Canada; construction for a grass roots film facility in Ohio; engineering and construction management for a grass roots nylon facility in Spain, a bulk fibers facility expansion in Canada and a grass roots polymer facility in Singapore; and engineering, procurement and construction for expansion of a fibers facility in North Carolina.
Delta projects completed in fiscal 1993 included: technical services for several petrochemical plant expansions in Texas; engineering, procurement and construction management for a specialty chemicals facility in France; engineering, procurement and construction for an X-ray film line facility expansion in North Carolina; and engineering, procurement and construction management for a grass roots flame retardant fiber facility in Spain.
Power
Services provided to the Power sector include comprehensive services for utility and non-utility clients in the power generation industry utilizing nuclear, fossil, hydroelectric, geothermal, waste and bio-fuel generating technologies. These services are provided through the Power business unit which includes the Duke/Fluor Daniel partnership concentrating on coal-fired plants.
During fiscal year 1993, Power sector contract awards included: detailed engineering for a molten carbonate fuel cell demonstration project in California and a substation retrofit in Illinois; a five year general services agreement for an Ohio utility; and engineering, procurement and construction for a diesel power plant in the Philippines. In addition, a significant number of existing maintenance and plant modification contracts were renewed in fiscal 1993.
Ongoing projects include: maintenance and outage support at various plant sites for a southeastern power generator in Tennessee and Kentucky; maintenance for nuclear plants in Virginia, South Carolina and Kansas; maintenance for fossil and gas generation plants in Texas, Louisiana, South Carolina, Georgia and Australia; operation and maintenance for a 130 megawatt cogeneration facility in Virginia; engineering and procurement for a 600 megawatt fossil plant repowering in New Jersey; engineering for a laboratory facility upgrade and nuclear engineering services for a utility, both in Illinois; engineering for emission monitoring equipment for various power generating sites of utilities in Texas, Louisiana, Mississippi and Arkansas; engineering, design and procurement for a 385 megawatt pulverized coal plant in South Carolina; nuclear, substation and engineering support services contract for an Illinois utility; and engineering and construction management for a transmission and distribution system for an Ohio utility.
Projects completed in fiscal 1993 included: nuclear maintenance services for a utility in North Carolina; nuclear engineering services for a Minnesota utility; engineering for replacement of steam generators for a nuclear plant in Connecticut; and engineering, procurement and construction for a 105 megawatt diesel-powered facility in the Philippines.
FLUOR CONSTRUCTORS
Fluor Constructors is organized and operated separately from Fluor Daniel. Fluor Constructors provides unionized construction management, construction and maintenance services in the United States and Canada, both independently and as a subcontractor to Fluor Daniel.
During fiscal 1993, Fluor Constructors contract awards included: construction management for an aromatics project for a refinery and an inter- refinery pipeline, both in Pennsylvania, and a blast furnace coal
injection facility in Indiana; and construction and construction management for a reformulated gasoline project in California.
Ongoing projects include: maintenance and outage support at various plant sites for a southeastern power generator in Tennessee and Kentucky; maintenance for nuclear power plants in Missouri, Florida and Alabama; construction management for a potable water supply system facility in Nevada, an Emergency 911 response system in Illinois and a copper smelter in Canada; and construction and construction management for an ethylene glycol plant expansion in Canada and fossil power plants in Louisiana, Mississippi and Arkansas.
Projects completed in fiscal 1993 included: construction and construction management for replacement of steam generators for a nuclear plant in Connecticut and two naphtha hydrotreaters, one in Minnesota and one in Kentucky; construction management for a component test facility for the NASA Stennis Space Center in Mississippi and environmental improvements to a zinc plant in Canada; and maintenance for a nuclear power plant in Illinois.
BACKLOG
The following table sets forth the consolidated backlog of Fluor's engineering and construction segment at October 31, 1993 and 1992 (grouped by business sector):
The dollar amount of the backlog is not necessarily indicative of the future earnings of Fluor related to the performance of such work. Although backlog represents only business which is considered to be firm, there can be no assurance that cancellations or scope adjustments will not occur. Due to additional factors outside of Fluor's control, such as changes in project schedules, Fluor cannot predict with certainty the portion of backlog not to be performed in fiscal 1994.
Approximately $2.5 billion of the Hydrocarbon sector backlog is attributable to two projects for companies affiliated with Royal Dutch Shell (the Rayong Refinery project in Thailand and the Pernis Refinery in the Netherlands). Approximately $2 billion of the Government sector backlog is attributable to the DOE Fernald Project and subject to government funding determined on an annual basis.
During fiscal 1993, the backlog of certain business units was reclassified to reflect an internal realignment of these units between the five market sectors. This resulted in reclassifying approximately $1 billion of business in the food and beverage products area from the Industrial sector to the Process sector. Balances at October 31, 1992 and 1993 have been restated to conform with the current business unit alignment.
COAL INVESTMENT
A. T. Massey Coal Company, Inc., which is headquartered in Richmond, Virginia, and its subsidiaries conduct Massey's coal-related businesses and are collectively referred to herein as the "Massey Companies."
The Massey Companies produce, process and sell bituminous, low sulfur coal of steam and metallurgical grades from 15 mining complexes (11 of which include preparation plants) located in West Virginia,
Kentucky and Tennessee. At October 31, 1993, two of the mining complexes were still in development and not yet producing coal. A third mining complex is idle pending negotiation of a labor agreement.
Operations at certain of the facilities are conducted in part through the use of independent contract miners. The Massey Companies also purchase and resell coal produced by unrelated companies. Steam coal is used primarily by utilities as fuel for power plants. Metallurgical coal is used primarily to make coke for use in the manufacture of steel.
For each of the three years in the period ended October 31, 1993, the Massey Companies' (a) production (expressed in thousands of short tons) of steam coal and metallurgical coal, respectively, was 16,048 and 5,163 for fiscal 1993, 13,832 and 3,867 for fiscal 1992, and 13,472 and 3,421 for fiscal 1991, and (b) sales (expressed in thousands of short tons) of coal produced by it and others, respectively, were 21,192 and 2,302 for fiscal 1993, 17,538 and 4,402 for fiscal 1992, and 16,982 and 6,578 for fiscal 1991.
A large portion of the steam coal produced by the Massey Companies is sold to domestic utilities under long-term contracts. Metallurgical coal is sold to both foreign and domestic steel producers. Approximately 41% of the Massey Companies' fiscal 1993 coal production was sold under long-term contracts, 88% of which was steam coal and 12% of which was metallurgical coal. Approximately 11% of the coal tonnage sold by the Massey Companies in fiscal 1993 was sold on the export market.
Massey is among the five largest marketers of coal in the United States. The coal market is a mature market with many strong competitors. Competition is primarily dependent upon coal price, transportation cost, producer reliability and characteristics of coal available for sale. The management of Massey considers Massey to be generally well-positioned with respect to these factors in comparison to its principal competitors.
On February 22, 1993, the Massey Companies acquired certain assets in Pike County, Kentucky, from Pittston Coal Company, including an estimated 32 million tons of undeveloped coal reserves and three million tons of developed coal reserves with related preparation plant and mining facilities. Since the undeveloped coal reserves are strategically located near existing mining and coal processing facilities of the Massey Companies, development capital requirements will be modest. The economic life of the existing Massey operations in the vicinity will be significantly extended by this acquisition.
On November 15, 1993, the Massey Companies acquired the assets of W-P Coal Company located in Logan County, West Virginia. Major components of the W-P Coal acquisition include approximately 40 million tons of reserves and a modern preparation plant. Simultaneously with the acquisition, the Massey Companies entered into a long-term coal supply agreement with Wheeling Pittsburgh Steel Corporation, a W-P Coal Company affiliate.
Recently passed acid rain legislation is generally anticipated to benefit prices for low sulfur coal. Massey intends to continue to evaluate and pursue, in appropriate circumstances, the acquisition of additional low sulfur coal reserves.
The Coal Industry Retiree Health Benefits Act of 1992 (the "Act") provides that certain retired coal miners who were members of the United Mine Workers of America, along with their spouses, are guaranteed health care benefits. The Massey Companies' obligation under the Act is currently estimated to aggregate $64 million which will be recognized as expense as payments are assessed.
The management of the Massey Companies estimates that, as of October 31, 1993, the Massey Companies had total recoverable reserves (expressed in thousands of short tons) of 1,088,601; 456,810 of which are assigned recoverable reserves and 631,791 of which are unassigned recoverable reserves; and 799,287 of which are proven recoverable reserves and 289,314 of which are probable recoverable reserves.
The management of the Massey Companies estimates that approximately 29% of the total reserves listed above consist of reserves that would be considered primarily metallurgical grade coal. They also estimate
that approximately 63% of all reserves contain less than 1% sulfur. A portion of the steam coal reserves could be beneficiated to metallurgical grade by coal preparation plants, and a portion of the metallurgical coal reserves could be sold as high quality steam coal, if market conditions warrant.
"Reserves" means that part of a coal deposit which could be economically and legally extracted or produced at the time of the reserve determination. "Recoverable reserves" means coal which is recoverable by the use of existing equipment and methods under federal and state laws now in effect. "Assigned recoverable reserves" means reserves which can reasonably be expected to be mined from existing or planned mines and processed in existing or planned plants. "Unassigned recoverable reserves" means reserves for which there are no specific plans for mining and which will require for their recovery substantial capital expenditures for mining and processing facilities. "Proven recoverable reserves" refers to deposits of coal which are substantiated by adequate information, including that derived from exploration, current and previous mining operations, outcrop data and knowledge of mining conditions. "Probable recoverable reserves" refers to deposits of coal which are based on information of a more preliminary or limited extent or character, but which are considered likely.
DISCONTINUED LEAD OPERATION
In November 1992, the Company announced its decision to exit its lead business, conducted primarily through The Doe Run Company ("Doe Run"). As a result, the Company's lead segment has been classified as a discontinued operation in the Company's consolidated financial statements. During 1993, the Company made substantial progress toward the disposition of the lead business. While the outcome of such disposition cannot be determined with certainty at this time, management's intent to dispose of the lead business remains unaltered and management believes that a disposal will be accomplished during fiscal 1994.
OTHER MATTERS
ENVIRONMENTAL, SAFETY AND HEALTH MATTERS
The Company's natural resource operations are affected by federal, state and local laws and regulations regarding environmental protection and plant and mine safety and health. It is impossible to predict the full impact of future legislative or regulatory developments on such operations, because the standards to be met, as well as the technology and length of time available to meet those standards, continue to develop and change.
Under the federal Clean Air Act, as amended, which is applicable to Doe Run's lead smelters, the Environmental Protection Agency ("EPA") is authorized to promulgate ambient air quality standards for certain identified pollutants. Each state is required to develop an implementation plan that is designed to achieve such ambient air quality standards through emission limitations and related requirements. Upon approval by the EPA, these state implementation plans become federally enforceable. The State of Missouri is required to develop implementation plans to control lead emissions from the two Doe Run lead smelters. An implementation plan was approved by the State for the Buick smelter on June 24, 1993, and has been submitted to EPA for approval. The Buick plan requires installation of various projects, but only if the primary smelter portion of the facility is to be operated. A supplemental implementation plan was approved for the Herculaneum smelter on June 24, 1993, and has also been submitted to EPA for approval. The Herculaneum plan requires the installation of $2.5 million in additional capital projects, with a final completion date of October, 1994.
In September 1988, the EPA listed primary lead smelter surface impoundment solids as a hazardous waste under the federal Resource Conservation and Recovery Act. In anticipation of the final issuance of EPA regulations, the Company is in the process of eliminating surface impoundments (all of which are located at its Buick smelter). This corrective action was substantially completed by the end of fiscal 1993.
The Company believes that with completion of this corrective action, the Company will be in compliance with final EPA regulations when issued.
The Company is affected by and complies with other federal, state and local laws relating to environmental protection, safety and health applicable to all or part of its natural resource operations, including but not limited to the federal Surface Mining Control and Reclamation Act of 1977; Occupational Safety and Health Act; Mine Safety and Health Act of 1977; Water Pollution Control Act, as amended by the Clean Water Act of 1977; Toxic Substances Control Act; Black Lung Benefits Revenue Act of 1977; and Black Lung Benefits Reform Act of 1977.
In fiscal 1993, Fluor made approximately $5.4 million in expenditures to comply with environmental, health and safety laws and regulations in connection with its coal investment, none of which were capital expenditures. Fluor anticipates making $11.3 million and $8.9 million in such non-capital expenditures in fiscal 1994 and 1995, respectively. Of these expenditures, $3.7 million, $9.6 million and $7.2 million for fiscal 1993, 1994 and 1995, respectively, are (in the case of fiscal 1993) or are anticipated to be (in the case of fiscal 1994 and 1995) for surface reclamation. Existing reserves are believed to be adequate to cover actual and anticipated surface reclamation expenditures. Other expenditures will be expensed as incurred.
In fiscal 1993, Fluor made approximately $4.3 million in capital expenditures and $3.2 million in other expenditures to comply with environmental, health and safety laws and regulations in connection with its discontinued lead business.
Other
In 1986, the California North Coast Regional Water Quality Control Board for the State of California requested that the Company perform a site investigation of a property in Northern California designated as a hazardous waste site under the California Hazardous Waste Control Act. The Company formerly owned the property. The California Environmental Protection Agency has assumed lead agency status for any required remedial action at the site. The Company signed a Consent Order to perform a remedial investigation/feasibility study that will determine the extent of contamination for purposes of determining the remedial action required to remedy and/or remove the contamination.
St. Joe Minerals Corporation ("St. Joe"), a wholly owned subsidiary of Fluor, is participating as a potentially responsible party at several different sites pursuant to proceedings under the Comprehensive Environmental Response, Compensation and Liability Act ("Superfund"). Other parties have also been identified as potentially responsible parties at all but one of these sites, and many of these parties have shared in the costs associated with the sites. Investigative and/or remedial activities are ongoing at each site. In 1987, St. Joe sold its zinc mining and smelting division to Zinc Corporation of America ("ZCA"). As part of the agreement, St. Joe and Fluor agreed to indemnify ZCA for certain environmental liabilities arising from operations conducted prior to the sale. During the 1993 fiscal year, ZCA has made claims under this indemnity against St. Joe for anticipated environmental expenditures at three of its major operating facilities. These claims are the subject of ongoing discussions between St. Joe, ZCA and other potentially responsible parties, including parties who have given similar contractual indemnities to St. Joe. St. Joe has initiated a proceeding against certain of its insurance carriers alleging that the investigative and remediation costs incurred by St. Joe in connection with its environmental proceedings are covered by insurance. This proceeding is in its early stages and no credit or offset for any such coverage has been taken into account by Fluor in establishing its reserves for future environmental costs.
The Company does not believe that the claims or proceedings identified in the two preceding paragraphs, either individually or in the aggregate, will have a material adverse impact upon its operations or financial condition.
NUMBER OF EMPLOYEES
The following table sets forth the number of salaried and craft/hourly employees of Fluor and its subsidiaries engaged in Fluor's business segments as of October 31, 1993:
OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREA
The financial information for business segments and geographic areas is included in the Operations by Business Segment and Geographic Area section of the Notes to Consolidated Financial Statements in Fluor's 1993 Annual Report to stockholders, which section is incorporated herein by reference.
ITEM 2.
ITEM 2. PROPERTIES.
Major Facilities
Operations of Fluor and its subsidiaries are conducted in both owned and leased properties. In addition, certain owned or leased properties of Fluor and its subsidiaries are leased or subleased to third party tenants. The following table describes the general character of the major existing facilities, exclusive of mines, coal preparation plants and their adjoining offices:
Coal Properties
See Item 1, Business, of this report for additional information regarding the coal operations and properties of Fluor.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
Fluor and its subsidiaries, incident to their business activities, are parties to a number of legal proceedings in various stages of development, including but not limited to those described below. The majority of these proceedings, other than environmental proceedings, involve matters as to which liability, if any, of Fluor or its subsidiaries would be adequately covered by insurance. With respect to litigation outside the scope of applicable insurance coverage and to the extent insured claims may exceed liability limits, it is the opinion of the management of Fluor, based on reports of counsel, that these matters individually and in the aggregate will not have a material adverse effect upon the consolidated financial position or results of operations of Fluor.
In July 1987, four lawsuits were filed against R. T. Vanderbilt Company, Inc., Gouverneur Talc Company, Inc., St. Joe and Fluor for personal injury and wrongful death allegedly due to asbestos, talc and silicon exposure in certain New York mines. Subsequent to July 1987, 16 additional lawsuits have been filed. All of these suits (representing a total of 213 plaintiffs) have been filed with the New York Supreme Court, St. Lawrence County, New York. The total damages claimed in these cases, referred to as Bailey, Baker, Beane, et al. v. R. T. Vanderbilt Company, Inc., et al. (the claims have not been consolidated), are $287 million against all defendants. Plaintiffs also seek an unspecified amount of punitive damages against all defendants.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
Executive Officers of the Registrant(1)
Leslie G. McCraw, age 59
Director since 1984; Chairman of Executive Committee and member of Nominating Committee.
Chairman of the Board since 1991; Chief Executive Officer since 1990; formerly Vice Chairman of the Board from 1990; formerly President from 1988; joined the Company in 1975.
Vincent L. Kontny, age 56
Director since 1988; member of Executive Committee.
Chief Operating Officer since 1991; President since 1990; President of Fluor Daniel, Inc.(2) since 1988; joined the Company in 1965.
Charles J. Bradley, Jr., age 58
Vice President, Human Resources and Administration since 1986; joined the Company in 1958.
J. Michal Conaway, age 45
Vice President-Finance since January 4, 1993; formerly Vice President and Chief Financial Officer of National Gypsum Company and its parent, Aancor Holdings, Inc., from 1988.
James O. Rollans, age 51
Senior Vice President and Chief Financial Officer since June, 1992; formerly Vice President, Corporate Communications from 1982; joined the Company in 1982.
P. Joseph Trimble, age 63
Corporate Secretary since December, 1992; Senior Vice President-Law since 1984; joined the Company in 1972.
Executive Operating Officers(1)
Hugh K. Coble, age 59
Director since 1984; member of Executive Committee.
Group President of Fluor Daniel, Inc.(2) since 1986; joined the Company in 1966.
Gerald M. Glenn, age 51
Director since 1989; member of Executive Committee.
Group President of Fluor Daniel, Inc.(2) since 1986; joined the Company in 1964.
Don L. Blankenship, age 43
Chairman of the Board and Chief Executive Officer of A. T. Massey Coal Company, Inc.(3) since January, 1992; President of that subsidiary since 1990; formerly Chief Operating Officer of that subsidiary from 1990; formerly President of Massey Coal Services, Inc.(4) from 1989; formerly Executive Vice President of that subsidiary from 1988; joined Rawl Sales & Processing Co.(5) in 1982.
Richard A. Flinton, age 63
Chairman of the Board of Fluor Constructors, Inc.(6) since 1989; formerly President of that subsidiary from 1988; joined the Company in 1957.
Jeffrey L. Zelms, age 49
Chief Executive Officer of The Doe Run Company(7) since August, 1992; President of that company since 1986; joined St. Joe Minerals Corporation in 1970. - -------- (1) Except where otherwise indicated, all references are to positions held with Fluor.
(2) Fluor Daniel, Inc. is a wholly owned subsidiary of Fluor which provides design, engineering, procurement, construction management and technical services to a wide range of industrial, commercial, utility, natural resources, energy and governmental clients.
(3) A. T. Massey Coal Company, Inc. is an indirectly wholly-owned subsidiary of Fluor which, along with its subsidiaries, conducts Fluor's coal-related investment.
(4) Massey Coal Services, Inc. is a wholly owned subsidiary of A. T. Massey Coal Company, Inc.
(5) Rawl Sales & Processing Co. is a wholly owned subsidiary of A. T. Massey Coal Company, Inc.
(6) Fluor Constructors, Inc., a wholly owned subsidiary of Fluor, provides construction and maintenance services to a variety of clients.
(7) In November 1992, Fluor announced its decision to exit its lead business, conducted primarily through The Doe Run Company, and classified it as a discontinued operation in its consolidated financial statements.
PART II
Information for Items 5, 6 and 7 is contained in Fluor's 1993 Annual Report to stockholders, which information is incorporated herein by reference (and except for these sections, and sections incorporated herein by reference in Items 1 and 8 of this report, Fluor's 1993 Annual Report to stockholders is not to be deemed filed as part of this report):
Information for Item 8
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information concerning Fluor's executive officers is included under the caption "Executive Officers of the Registrant" following Part I, Item 4. Other information required by this item has been omitted because Fluor will file with the Securities and Exchange Commission (the "Commission") a definitive proxy statement pursuant to Regulation 14A, involving the election of directors, not later than 120 days after the close of Fluor's fiscal year ended October 31, 1993.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
Fluor maintains certain employee benefit plans and programs in which its executive officers and directors are participants. Copies of these plans and programs are set forth or incorporated by reference as Exhibits 10.1 through 10.18 inclusive to this report. Certain of these plans and programs provide for payment of benefits or for acceleration of vesting of benefits upon the occurrence of a change of control of Fluor as that term is defined in such plans and programs. The amounts payable thereunder would represent an increased cost to be paid by Fluor (and indirectly by its stockholders) in the event of a change in control of Fluor. This increased cost would be a factor to be taken into account by a prospective purchaser in determining whether, and at what price, it would seek control of the Company and whether it would seek the removal of then existing management.
If a change of control were to have occurred on October 31, 1993, the additional amounts payable by Fluor, either in cash or in stock, if each of the five most highly compensated executive officers and all executive officers as a group were thereupon involuntarily terminated without cause would be as follows:
-------- (1) Payable in cash. (2) Value at October 31, 1993 of previously awarded restricted stock which would vest upon change of control. (3) Lump sum entitlement of previously awarded benefits which would vest upon change of control.
Further disclosure regarding this item has been omitted because Fluor will file with the Commission a definitive proxy statement pursuant to Regulation 14A, involving the election of directors, not later than 120 days after the close of Fluor's fiscal year ended October 31, 1993.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
This item has been omitted because Fluor will file with the Commission a definitive proxy statement pursuant to Regulation 14A, involving the election of directors, not later than 120 days after the close of Fluor's fiscal year ended October 31, 1993.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
This item has been omitted because Fluor will file with the Commission a definitive proxy statement pursuant to Regulation 14A, involving the election of directors, not later than 120 days after the close of Fluor's fiscal year ended October 31, 1993.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
FLUOR CORPORATION
January 27, 1994 By J.O. Rollans ___________________________________ J.O. Rollans Senior Vice President and Chief Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
L. N. Fisher *By ___________________________ L. N. Fisher, Attorney-in-fact
Manually signed Powers of Attorney authorizing L. N. Fisher, A. M. Oldham and P. J. Trimble and each of them, to sign the annual report on Form 10-K for the fiscal year ended October 31, 1993 and any amendments thereto as attorneys-in- fact for certain directors and officers of the registrant are included herein as Exhibits 24.1 and 24.2.
FLUOR CORPORATION
AND FINANCIAL STATEMENT SCHEDULES
ITEM 14(A)
1.Financial Statements
The following financial statements are contained in Fluor's 1993 Annual Report to stockholders:
Consolidated Balance Sheet at October 31, 1993 and 1992
Consolidated Statement of Earnings for year ended October 31, 1993, 1992 and 1991
Consolidated Statement of Cash Flows for year ended October 31, 1993, 1992 and 1991
Consolidated Statement of Shareholders' Equity for year ended October 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
2.Financial Statement Schedules Form 10-K Page
II Consolidated amounts receivable from related parties and underwriters, promoters and employees other than related parties--year ended October 31, 1993 and 1992......................................
V Consolidated property, plant and equipment--year ended October 31, 1993, 1992 and 1991..............
VI Consolidated accumulated depreciation, depletion and amortization of property, plant and equipment--year ended October 31, 1993, 1992 and 1991...............................................
VII Consolidated guarantees of securities of other issuers as of October 31, 1993.....................
All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto.
FLUOR CORPORATION
SCHEDULE II--CONSOLIDATED AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS AND EMPLOYEES OTHER THAN RELATED PARTIES
YEAR ENDED OCTOBER 31, 1993 AND 1992
- -------- (1) As of October 31, 1993, Fluor held a non-interest bearing note, payable in five annual installments and secured by a second deed of trust on a residence. On January 11, 1994, the balance of the note was fully repaid.
FLUOR CORPORATION
SCHEDULE V--CONSOLIDATED PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED OCTOBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
- -------- (1) Amounts in 1992 primarily include the reclassification of the lead business to net assets of discontinued operations and the purchase of certain partnership interests which owned the Company's Greenville, South Carolina engineering office. Amounts in 1991 include the purchase of certain partnership interests which owned the the Company's Sugar Land, Texas engineering office. Transfers of construction in progress were: zero, zero and $.1 million to land; $2.5 million, $37.6 million and $3.1 million to buildings and improvements; $7.7 million, $33.7 million and $40.6 million to machinery and equipment; zero, zero and $.2 million to mining properties and mineral rights in 1993, 1992 and 1991, respectively.
Maintenance and repairs expense for continuing operations totaled $62.1 million in 1993, $51.7 million in 1992 and $52.9 million in 1991.
FLUOR CORPORATION
SCHEDULE VI--CONSOLIDATED ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED OCTOBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
- -------- (1) See footnote (1) on Schedule V, Consolidated Property, Plant and Equipment on page 22 of this Form 10-K for a discussion of items included in this caption.
Depreciation is provided principally using the straight line method over the following estimated useful lives: buildings and improvements 3 to 50 years; machinery and equipment 2 to 20 years.
Amortization is provided principally using the units of production method for mining properties and mineral rights.
FLUOR CORPORATION
SCHEDULE VII--CONSOLIDATED GUARANTEES OF SECURITIES OF OTHER ISSUERS
AS OF OCTOBER 31, 1993
(IN THOUSANDS)
EXHIBIT INDEX