View All News

Fluor's Earnings From Continuing Operations Increase in Third Quarter 2002

November 6, 2002

Fluor Corporation (NYSE: FLR) today announced earnings from continuing operations increased 3 percent to $46.1 million, or 58 cents per share, in its third quarter ended September 30, 2002. This compares with $44.8 million, or 56 cents per share, in the third quarter last year. Revenues from continuing operations increased 12 percent to $2.5 billion, compared with $2.2 billion a year ago.

"Favorable results for our third quarter were driven by excellent performance by our project teams, as well as a strong focus on cost management," said Alan Boeckmann, Fluor's chairman and chief executive officer. "Our global market diversity, strategic focus on industry-leading clients, and increased discipline around bidding and commercial terms are all contributing to positive current results and future outlook."

"Despite uncertainty in the global economic environment, we remain optimistic about our new business prospects," Boeckmann continued. "While the engineering and construction industry is experiencing an expected market rotation away from electric power generation projects in the U.S., our portfolio management strategy takes advantage of our broad geographic and industry diversity. Fluor participates in more than a dozen global industries, and we are currently focused on markets where our near-term opportunities are greatest, including transportation, life sciences and federal services. We also continue to track a number of large, complex oil and gas projects in diverse and geographically challenging locations, although precise timing of contract awards remains difficult to predict. Fluor has completed the front-end engineering for several of these projects, and we are well positioned for when they move forward."

"We remain on track to achieve our previously announced earnings goal from continuing operations in 2002 of $2.10 per share," said Boeckmann. "Looking ahead to 2003, the general consensus for the global business climate is for modest improvement. Assuming this business scenario, we would expect to perform in-line with, or better than, the overall market. As a result, our 2003 earnings outlook is in the range of $2.20 to $2.35 per share. As business conditions improve, we would expect our growth to improve as well. More importantly, over the next several years there is anticipated need for significant capacity expansion in a number of the markets that we serve. We are confident that Fluor's industry-leading position, excellent financial strength and market diversity will enable us to capitalize on an increasing number of these world-class opportunities."

Third Quarter Operating Performance

Total new project awards for the third quarter were $2.5 billion, compared with $2.9 billion a year ago. As expected, new awards for power projects declined significantly to $30 million compared with $1.0 billion in the third quarter last year. New awards, excluding power projects, increased 29 percent. Consolidated backlog was $10.9 billion, level with the second quarter of this year, and down slightly from $11.0 billion at the end of the third quarter last year. Gross margin in backlog was $660 million, or 6.1 percent. This compares with $669 million, or 6.1 percent, in the second quarter of 2002, and with $744 million, or 6.8 percent, a year ago. The decline in backlog gross margin from a year ago is primarily attributable to the significant number of power project completions that were included in earnings in the second and third quarters of this year.

Consolidated operating profit in the third quarter increased 36 percent to $114.9 million, compared with $84.8 million last year. Operating margin for the quarter increased to 4.7 percent, compared with 3.9 percent in the third quarter a year ago. The principal segment contributors to the profit and margin improvement were Global Services and Power.

Corporate G&A expense for the quarter was $43.2 million, compared with $22.2 million in the third quarter last year that was well below the quarterly average for 2001. Included in the current quarter was an impairment charge of $9.4 million related to a 1994 investment in The Beacon Group Energy Investment Fund, L.P., which focused on energy-related projects. Excluding the impairment charge, corporate G&A expense in the third quarter was modestly below our forecasted run-rate of $35 to $40 million per quarter. Fluor's tax rate for the quarter increased to 37.5 percent, compared with its normalized rate of approximately 32.5 percent, primarily due to the non-deductibility of the impairment charge.

Fluor's financial condition remains strong. Cash and securities at the end of the third quarter were $833 million, essentially unchanged from the $836 million on hand at the end of the second quarter. While advances on power projects declined in the third quarter with project work-off, cash flow from operations and client advances from new awards on non-power projects largely offset this decline. The company continues to anticipate, however, that its cash balance will decline by year-end with the continuing work-off of power projects.

Business Segments

Operating profit in the third quarter for Fluor's Energy & Chemicals segment was $30.0 million, consistent with the prior two quarters of this year, and a significant increase compared with $17.1 million a year ago, which was well below the 2001 quarterly average. Revenues increased 38 percent to $918 million from $668 million last year.

Fluor's Industrial & Infrastructure segment reported operating profit of $17.4 million, down 30 percent from a strong $24.9 million in the third quarter last year. The third quarter of last year benefited from a performance incentive award associated with the completion of a major transportation project. Reduced earnings contribution from projects in economically sensitive markets, particularly mining and microelectronics also impacted the quarter. Revenues increased 14 percent to $558 million, compared with $490 million in the third quarter a year ago.

Operating profit for Fluor's Power segment was $30.2 million, an increase of 24 percent from a strong performance in the third quarter last year of $24.3 million. The improved performance is the result of the recognition of profits on the successful early completion of three projects in the quarter. Planned completion dates for power projects frequently occur in the second and third quarters of the year to meet peak summer demand. Following a strong second and third quarter this year, this seasonal pattern will result in lower operating profits for the Power segment in the fourth quarter. Revenues decreased 16 percent to $498 million, compared with $592 million a year ago.

Fluor's Global Services business segment reported a significant increase in quarterly operating profit to $25.5 million, compared with $13.2 million last year. The improvement is primarily due to Fluor's restructured procurement services activities, which incurred substantial development expense in the year-ago period. Also contributing to the improvement was a return to normal operating margins in Fluor's operations and maintenance services, compared with the third quarter a year ago. Revenues declined 14 percent to $203 million from $237 million a year ago.

Quarterly operating profit for Fluor's Government Services business more than doubled to $11.8 million compared with $5.3 million last year. Good performance on the company's Fernald contract led to a re-baselining of the project, which favorably impacted operating profit in the quarter. In addition, activity on the Mid-course Missile Defense test bed facilities in Alaska and increased logistical support activities in the Middle East contributed to the improved performance. Revenues increased 33 percent to $274 million from $206 million in the third quarter a year ago.

Discontinued Operations

The company continues to make progress in disposing of discontinued operations and anticipates completion by year-end. Results for discontinued operations in the third quarter include the impact of the recently completed sale of the company's U.S.-based staffing business. Based on results of the sale and the outlook for disposition of the last equipment dealership and the one remaining U.K.-based staffing business, the company recorded an impairment charge of $15.6 million. Discontinued operations in the third quarter in total were a loss of $14.8 million, or 19 cents per share, compared with a loss of $99.3 million, or a $1.24 per share, a year ago. Including the impact from discontinued operations, Fluor's reported net earnings in the third quarter were $31.3 million, or 39 cents per share, compared with a net loss of $54.5 million, or 68 cents per share in the third quarter last year.

Results for the Nine Months

Earnings from continuing operations for the first nine months were $125.2 million, or $1.57 per share, compared with $96.4 million, or $1.22 per share, for the same period in 2001. Earnings from continuing operations for the nine-month period last year included stock price-driven compensation expense of $15.2 million, or 19 cents per share. Revenues from continuing operations for the first nine months of 2002 increased 18 percent to $7.5 billion, compared with $6.3 billion a year ago.

Fluor Corporation (NYSE: FLR) provides services on a global basis in the fields of engineering, procurement, construction, operations, maintenance and project management. Headquartered in Aliso Viejo, Calif., Fluor is a Fortune 500 company with revenues of $9 billion in fiscal year 2001. For more information, visit www.fluor.com.

Note: This release contains forward-looking statements, including statements relating to the expected performance of the Company's business and growth in markets which the Company serves. The forward-looking statements are based on current management expectations. Actual results may differ materially as a result of several factors, including, among other things, failure to achieve projected earning levels, the timely and successful implementation of strategic initiatives, difficulties or delays incurred in the execution of contracts, decreased capital investment by the Company's clients including our oil, gas, life science, transportation and government clients, the Company's failure to receive anticipated new contract awards and changes in global business, economic, political and social conditions. Caution must be exercised in relying on these and other forward-looking statements. Due to known and unknown risks, the Company's results may differ materially from its expectations and projections.

Additional information concerning these and other factors can be found in press releases as well as the Company's public periodic filings with the Securities and Exchange Commission, including the discussion under the heading "Item 1. Business -- Company Risk Factors" in the Company's Form 10-K filed on March 21, 2002. Such filings are available either publicly or upon request from Fluor's Investor Relations Department: (949) 349-3909. The Company disclaims any intent or obligation to update its forward-looking statements.

For further information, please contact: Media Relations, Lisa Boyette, +1-949-349-3652, or Lori Serrato, +1-949-349-7420, or Investor Relations, Lila Churney, +1-949-349-3909, fax, +1-949-349-5375, all of Fluor Corporation.

FLUOR CORPORATION
CONSOLIDATED FINANCIAL RESULTS
(in millions, except per share amounts)
Unaudited
THREE MONTHS ENDED SEPTEMBER 30,   2002   2001
Revenues $ 2,451.2 $ 2,198.6
Costs and Expenses:
Cost of Revenues 2,336.3 2,113.8
Corporate G&A 43.2 22.2
Net Interest (Income) Expense (2.0 ) (3.4 )
Total Costs and Expenses 2,377.5 2,132.6
Earnings from Continuing Operations
before Income Taxes 73.7 66.0
Income Tax Expense 27.6 21.2
Earnings from Continuing Operations 46.1 44.8
Earnings (Loss) from Discontinued
Operations (14.8 ) (99.3 )
Net Earnings (Loss) $ 31.3 $ (54.5 )
Basic Earnings (Loss) per Share
Earnings from Continuing
Operations $ .58 $ .57
Earnings (Loss) from Discontinued
Operations (.19 ) (1.26 )
Net Earnings (Loss) .39 (.69 )
Weighted Average Shares 79.5 78.9
Diluted Earnings (Loss) per Share
Earnings from Continuing
Operations $ .58 $ .56
Earnings (Loss) from Discontinued
Operations (.19 ) (1.24 )
Net Earnings (Loss) .39 (.68 )
Weighted Average Shares 79.8 79.9
New Awards $ 2,486.2 $ 2,913.0
New Awards Gross Margin (%) 6.5 6.5
Backlog $ 10,852.0 $ 10,951.1
Backlog Gross Margin (%) 6.1 6.8
Work Performed $ 2,409.3 $ 2,162.1
 
 
NINE MONTHS ENDED SEPTEMBER 30, 2002 2001
Revenues $ 7,493.9 $ 6,337.2
Costs and Expenses:
Cost of Revenues 7,195.7 6,069.6
Corporate G&A 108.3 120.1
Net Interest (Income) Expense (4.3 ) 8.0
Total Costs and Expenses 7,299.7 6,197.7
Earnings from Continuing Operations
before Income Taxes 194.2 139.5
Income Tax Expense 69.0 43.1
Earnings from Continuing Operations 125.2 96.4
Earnings (Loss) from Discontinued
Operations (9.8 ) (105.5 )
Net Earnings (Loss) $ 115.4 $ (9.1 )
Basic Earnings (Loss) per Share
Earnings from Continuing
Operations $ 1.58 $ 1.24
Earnings (Loss) from Discontinued
Operations (.13 ) (1.36 )
Net Earnings (Loss) 1.45 (.12 )
Weighted Average Shares 79.4 77.4
Diluted Earnings (Loss) per Share
Earnings from Continuing
Operations $ 1.57 $ 1.22
Earnings (Loss) from Discontinued
Operations (.13 ) (1.34 )
Net Earnings (Loss) 1.44 (.12 )
Weighted Average Shares 80.0 78.9
New Awards $ 7,060.4 $ 7,938.7
New Awards Gross Margin (%) 6.8 7.4
Backlog $ 10,852.0 $ 10,951.1
Backlog Gross Margin (%) 6.1 6.8
Work Performed $ 7,371.3 $ 6,211.0
FLUOR CORPORATION
       
SELECTED BALANCE SHEET ITEMS (Unaudited)
($ in millions, except per share amounts)

 

September 30,

December 31,
2002 2001
Cash and Cash Equivalents $ 833.3 $ 572.7
Total Current Assets 2,044.1 1,851.3
Total Assets 3,112.2 3,142.5
Total Short-Term Debt 13.0 38.4
Total Current Liabilities 1,780.4 1,862.7
Long-term Debt 17.6 17.6
Shareholders' Equity 869.0 789.3
 
Total Debt to Capitalization % 3.4 6.6
Shareholders' Equity per Share 10.81 9.85
 
 
OTHER ITEMS (Unaudited)
($ in millions)
Three Months Ended Nine Months Ended
September 30 September 30
2002** 2001** 2002** 2001**
Depreciation and
Amortization* $ 19.0 17.4 $ 58.4 56.7
Capital
Expenditures 14.0 44.1 51.0 122.8

*Included in the three and nine months ended September 30, 2001 is amortization expense of $1.0 million and $2.8 million, respectively $0.01 and $0.03 per diluted share, respectively). Effective for 2002, under the requirements of SFAS No. 142, goodwill is no longer amortized but will be subject to annual impairment tests.

**Continuing operations only.

BUSINESS SEGMENT FINANCIAL REVIEW
(Unaudited)
($ in millions)
 
THREE MONTHS ENDED SEPTEMBER 30   2002     2001  
Revenues
Energy and Chemicals $ 918.4 $ 667.9
Industrial and
Infrastructure 557.8 490.2
Power 497.9 592.4
Global Services 202.7 236.8
Government Services 274.4 206.2
Corporate and other 0.0 5.1
Total revenues $ 2,451.2 $ 2,198.6
 
Operating Profit/
Margin % $ % $ %
Energy and
Chemicals 30.0 3.3 17.1 2.6
Industrial and
Infrastructure 17.4 3.1 24.9 5.1
Power 30.2 6.1 24.3 4.1
Global Services 25.5 12.6 13.2 5.6
Government Services 11.8 4.3 5.3 2.6
Total operating
profit/margin % $ 114.9 4.7 $ 84.8 3.9
 
NINE MONTHS ENDED SEPTEMBER 30 2002 2001
Revenues
Energy and Chemicals $ 2,596.7 $ 1,851.0
Industrial and
Infrastructure 1,643.8 1,575.0
Power 1,830.6 1,382.6
Global Services 725.0 899.8
Government Services 697.8 611.1
Corporate and other 0.0 17.7
Total revenues $ 7,493.9 $ 6,337.2
 
Operating Profit/Margin % $ % $ %
Energy and Chemicals 91.1 3.5 86.4 4.7
Industrial and
Infrastructure 26.3 1.6 65.1 4.1
Power 87.3 4.8 51.3 3.7
Global Services 70.5 9.7 49.1 5.5
Government Services 23.0 3.3 15.7 2.6
Total operating
profit/margin % $ 298.2 4.0 $ 267.6 4.2
FLUOR CORPORATION
SupplementalFact Sheet
         
NEW AWARDS
($ in millions)
Three Months Ended
September 30 2002 2001 % Chg
Energy and
Chemicals $ 439 18 % $ 257 9 % 71 %
Industrial
and
Infrastructure 1,088 44 % 626 21 % 74 %
Power 30 1 % 1,008 35 % -97 %
Global Services 83 3 % 250 9 % -67 %
Government Services 846 34 % 772 26 % 10 %
 
TOTAL NEW
AWARDS $ 2,486 100 % $ 2,913 100 % -15 %
 
 
Nine Months Ended
September 30 2002 2001 % Chg
 
Energy and
Chemicals $ 1,625 23 % $ 1,439 18 % 13 %
Industrial
and
Infrastructure 2,546 36 % 1,705 22 % 49 %
Power 946 13 % 2,889 36 % -67 %
Global
Services 918 13 % 1,107 14 % -17 %
Government
Services 1,025 15 % 799 10 % 28 %
 
TOTAL NEW
AWARDS $ 7,060 100 % $ 7,939 100 % -11 %
 
 
BACKLOG TRENDS
($ in millions)
 
As of September 30 2002 2001 % Chg
 
Energy and
Chemicals $ 2,929 27 % $ 3,043 28 % -4 %
Industrial
and
Infrastructure 3,955 36 % 2,440 22 % 62 %
Power 1,358 13 % 2,729 25 % -50 %
Global Services 1,637 15 % 1,943 18 % -16 %
Government Services 973 9 % 796 7 % 22 %
 
Total Backlog $ 10,852 100 % $ 10,951 100 % -1 %
 
United States $ 6,753 62 % $ 7,361 67 % -8 %
The Americas 2,028 19 % 2,266 21 % -11 %
Europe, Africa
and the Middle East 1,629 15 % 1,100 10 % 48 %
Asia Pacific 442 4 % 224 2 % 97 %
 
Total Backlog $ 10,852 100 % $ 10,951 100 % -1 %

Media Relations, Lisa Boyette, +1-949-349-3652, or Lori Serrato, +1-949-349-7420, or Investor Relations, Lila Churney, +1-949-349-3909, fax, +1-949-349-5375, all of Fluor Corporation/
View All News