Fluor Corporation (ticker: FLR, exchange: New York Stock Exchange (.N))
News Release -
1998 Earnings Perspective
IRVINE, Calif., November 3, 1997 -- Fluor Corporation Chairman and
CEO Les McCraw said today that Fluor Daniel, the company's
engineering, construction and diversified services unit, will meet
its previously announced second half profit goal of at least $140
million. In addition, the fourth quarter will include a $7 million
pre-tax gain from the recent sale of its ACQUION electronic
purchasing business. McCraw said that Fluor Daniel expects its
fourth quarter new awards to be between $2.5 and $3 billion. He
commented further that the cost reduction initiatives announced
earlier this year are in place.
McCraw said that operating profits from the company's A. T.
Massey coal unit will be approximately $155 million for the current
year, 15 percent above 1996. A. T. Massey, he said, is positioned to
continue its trend of double digit growth next year.
Even though our planning process for next year is not complete,
McCraw said that current projections for Fluor Daniel's 1998
operating profit are within the range of $225 to $250 million. This
operating profit projection is approximately $100 million below most
Wall Street estimates, which translates into a potential $0.75 to
$1.00 reduction in analysts' earnings per share estimates for Fluor
Corporation. Current Wall Street earnings estimates for the
company's fiscal 1998 are in the range of $3.30 to $3.75 per share.
McCraw said, "The competitive implications of the global market
place for our traditional clients continue to squeeze Fluor Daniel's
margins and transfer additional risk to the contractors." In
addition, he said that volatile business conditions in certain
international markets, coupled with the global effect of the Asian
financial market turmoil, are causing a number of clients to take a
more conservative "wait and see" approach on capital projects.
McCraw said that while the company is making solid strides in
improving its performance on incentive contracts in current backlog,
these improvements are not expected to offset either the near-term
effects of delays in project awards and/or competitive pressures on
margins. He said further that higher margin projects booked in the
latter part of 1997, as well as prospects for new awards during 1998,
will primarily impact earnings in 1999 and beyond. This, he said, is
due in large part to normal start up associated with the customary
"Despite these external short-term challenges," McCraw said,
"Fluor Daniel's projected profitability for 1998 is unacceptable to
this management team. We are committed to making fundamental changes
to improve our long-term profitability by adjusting our market focus,
streamlining our organizational format, lowering our cost structure
and further enhancing project execution." McCraw said that the
company will intensify the following strategic repositioning efforts.
-work process improvement to increase cost effectiveness.
-greater focus on high margin markets
-expansion of services to capitalize on client outsourcing trends
-investment in technologies to better compete in growth markets.
McCraw said, "Our overall global position, combined with an
impressive range of services, remains excellent. Demand for our
services long-term is robust and our financial condition is strong.
We must, however, take actions to achieve acceptable levels of
profitability in the changing business environment we face today."
Fluor Corporation is a global engineering, construction and
diversified services company with an investment in low-sulfur coal.
Any of the comments in this press release that refer to the company's
estimated or future results, including its statements concerning
expected new awards, projected operating profit and earnings per
share for fiscal 1998, margins on existing or future projects,
performance on incentive contracts, prospects for new awards during
fiscal 1998 and growth trends for A.T. Massey are forward-looking and
reflect the company's current analysis of existing trends and
information. Actual results may differ materially from current
expectations or projections based on a number of factors affecting
the company's businesses. The company's future award prospects
include several large-scale domestic and international projects. The
large size and uncertain timing of these projects can create
variability in the company's award pattern. Consequently, future
award trends are difficult to predict with certainty. The company's
estimates of future performance depend on, among other things, the
likelihood of receiving certain new awards. While these estimates
are based on the good faith judgment of management, these estimates
frequently change based on new facts which become available.
In addition, the timing of receipt of revenue by the company from
engineering and construction projects can be affected by a number
of factors outside the control of the company. The dollar amount of
the company's backlog as stated at any given time is not necessarily
indicative of the future earnings of the company related to the
performance of such work. Cancellations or scope adjustments related
to contracts reflected in the company's backlog can occur. The company's
businesses are also subject to fluctuations in demand and to changing
global economic and political conditions which are beyond the control
of the company and may cause actual results to differ from
forward-looking statements. Additionally, coal operations produce a
commodity which is internationally traded and the price of which is
established by market factors outside the control of the company.
Other risk factors affecting the company's estimated or future
results include, but are not limited to, cost overruns on fixed,
maximum or unit priced contracts, contract performance risk, project
financing risk, credit risk, risks associated with government funding
of contracts, market conditions impacting realization of investments,
market conditions in the domestic and international coal market and
relatively mild weather conditions which may lower demand for steam
coal. These forward-looking statements represent the company's
judgment only as of the date of this press release. As a result, the
reader is cautioned not to rely on these forward-looking statements.
The company disclaims any intent or obligation to update these
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 "Certain Factors and Trends Affecting
Fluor and its Businesses -- Forward-Looking Statements" in the
company's Form 8-K filed May 6, 1997. These filings are available
publicly and upon request from Fluor's Investor Relations Department: