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 other diversified 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 A. T. Massey Coal Company, Inc. ("Massey").
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, procurement, construction, maintenance and other diversified services to clients in a broad range of industrial and geographic markets on a worldwide basis. 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, detail engineering, procurement, project and construction management, construction, maintenance, plant operations, technical, project finance, quality assurance/quality control, start-up assistance, site evaluation, licensing, consulting, construction equipment sales and leasing, temporary technical and non-technical staffing 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.
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. While, in terms of dollar amount, the majority of contracts are of the cost reimbursable type, there has been an increase in the volume of cost-reimbursable contracts with incentive-fee arrangements and in the volume of fixed or unit price contracts. 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 additional costs and the amount of such additional costs could 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. A large number of companies are competing in the markets served by the business. Competition is primarily centered on performance and the ability to provide the engineering, planning, management and project execution skills required to complete complex projects in a safe, timely and cost efficient manner. The engineering and construction business derives its competitive strength from its diversity, reputation for quality, cost-effectiveness, worldwide procurement capability, project management expertise, geographic coverage, ability to meet client requirements by performing construction on either a union or open shop 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 engineering and construction 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's operations are organized into geographical, industry and specialized groups responsible for identifying and capitalizing on opportunities in their market segments. Geographical groups include Asia Pacific, the Americas, and Europe, Africa and the Middle East which provide geographic expertise and capability. Industry groups include Process, Industrial, and Power and Government. Specialized groups include Diversified Services and Sales and Marketing. The Sales and Marketing Group includes strategic planning and project finance and provides sales and marketing support and assistance to all of the other groups. The Industry and Diversified Services groups are described in further detail below.
Individual operating companies within the groups focus on specific clients, industries and markets. The operating companies rely on a network of globally located engineering offices to provide resources and expertise in support of project execution worldwide.
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.
The operations of Fluor Daniel are detailed below by industry group:
Process
Services provided by the Process Group support clients through the following operating companies: Petroleum and Petrochemicals; Production and Pipelines; and Chemicals, Plastic and Fibers.
During the fiscal year 1995, the Process Group contract awards included: engineering, procurement and construction management for a single point mooring and submarine pipeline in Korea, a 90 kilometer, contract crude oil import/export pipeline, tanks, pump stations and a single point mooring buoy in Lithuania, a hydrotreater unit in Canada, an increase in capacity of two hydro desulfurization units and associated pipeline in Venezuela, modifications of a gasoline reformulation refinery in California, a fatty acids plant in the Philippines, a vinyl acetate monomer plant in Singapore, a polymer plant in England, a new film machine at an existing plant in New York and a silanes plant in Germany; engineering, procurement and construction for a cat feed hydrotreater unit in Louisiana, a 354 kilometer pipeline [with laterals] from Mariquita to Cali in Colombia, a hydrogen peroxide plant in Canada, a polypropylene plant expansion in Pennsylvania, a hydrogen peroxide plant in Texas and a chemical plant debottlenecking project in North Carolina; engineering and construction management for China's first fully refrigerated propane terminal and modification of an existing offshore dock in China; engineering and procurement for revamping of two paraxylene units in Alabama, modifications of a petroleum loading marine terminal in Alaska, a propylene splitter unit in Pennsylvania, an upgrade and expansion of a parex unit in Puerto Rico and a polystyrene plant expansion in Louisiana; program management for a nylon tire cord plant in India; construction management for an expansion and renovation of a paint pigments plant in Delaware; engineering for a polyethylene plant in Texas, three geothermal power generation facilities in Indonesia, a metaxylene unit in Texas, a petroleum refinery expansion in Abu Dhabi, a receiving terminal, pump stations, meter stations, pipelines and export terminal in Azerbaijan, a revamp and modernization of a natural
gas plant in Hungary, numerous small capital projects at various locations in the USA, a phosphorus plant in Germany and several small capital projects at various locations in Europe; construction of a chemical processing line conversion and a waste water treatment plant, both in South Carolina; consulting for the evaluation of existing oil pipelines and the review for an early oil export line in Azerbaijan; project management for a 200,000 barrels per day production facility with infrastructure, power generation and an 800 mile pipeline and single point mooring loading terminal in Cameroon and Chad; and inspection services for an existing pipeline from Midland to Houston, Texas and existing pipelines in Oklahoma, Kansas and Missouri.
Ongoing projects include: engineering, procurement and construction management for a hydrochlorofluorocarbon plant in Kentucky, gas injection and underground gas storage in the Netherlands, a refinery in Thailand, a cogeneration project in Kansas, a gas oil hydrotreater in California, a methanol plant in Norway and a flue gas desulfurization, a synthetic oil abatement project in Canada, a polymer expansion facility in Virginia, a polymer plant in Mexico, a polymer plant capacity increase in Mexico, a chemical intermediates plant in Spain, a reformulated gasoline and a clean fuels program, both in California, a refinery upgrade in the Netherlands and a flue gas desulphurization, synthetic oil abatement project in Alberta, Canada; engineering, procurement and construction for a polymer plant in North Carolina, a fluid catalytic cracking unit in Korea; program management and procurement for a petrochemical complex in Kuwait; engineering and procurement for an oil production facility in Gabon, reformer unit revamp in Texas, filter products engineering in Tennessee, an expansion and renovation of a paint pigments plant in Delaware, a reformulated fuels project at a refinery in California and a chlor-alkali/ethylene expansion of a petrochemical plant in Saudi Arabia; construction and maintenance for evergreen small capital construction services in Tennessee and in South Carolina; evergreen capital construction and maintenance services for various chemical and fiber plants throughout the USA; engineering for a pipeline and pump stations in Alaska, an early production system equipment and an oil field production facility in Colombia, a refinery upgrade and expansion in Kansas, a cat feed hydrotreater in Louisiana, an organic acid plant expansion in Texas, a services alliance in Texas, a Kingston evergreen support in Canada, a debottlenecking project in Indonesia and a polyethylene plant in Singapore; procurement and construction management for a general facilities and utilities of a petrochemical complex in Kuwait; and construction for an oxo alcohol and a chemical plant, both in Louisiana.
Projects completed in fiscal year 1995 included: engineering, procurement and construction management for a herbacide plant in Louisiana, a pipeline from Argentina to Chile, a polymer plant in Singapore, a plastics stretch project in Indiana and a fibers line plant in Luxembourg; engineering, procurement and construction for a fibers facility in North Carolina; engineering and procurement for an inter-refinery pipeline in Pennsylvania, a sour gas plant and a sweetening and sulfur recovery facility, both in Canada; engineering for pipeline development and oil field expansion in Colombia, a liquid petroleum gas plant expansion in Saudi Arabia and oil terminals in Lithuania; construction of an ethoxylation plant in Texas, a restart of a methanol plant in Texas and a spherilene and ethylene purification facility in Texas; and inspection services for a gas pipeline and facilities in Florida and a refinery aromatics project in Pennsylvania. In addition, seven projects were cancelled during fiscal 1995; a fragrance plant in Georgia, an ethylene debottlenecking project for a refinery in Texas, a fluid catalytic cracking unit revamp in Illinois, a refinery upgrade in the Netherlands, a delayed coker in Venezuela and off-site engineering support for installation of a gas- turbine generator in Great Britain.
Industrial
Services provided by the Industrial Group include a broad range of services provided to support clients through the following operating companies: Mining and Metals; Automotive and General Manufacturing; Pharmaceuticals and Biotechnology; Food and Beverage; Commercial and Institutional Facilities; Electronics; Infrastructure; Telecommunications; Jaakko Poyry/Fluor Daniel which serves the pulp and paper industry and PACE, the operating company dedicated to serving Fluor Daniel's alliance with Procter & Gamble.
During fiscal year 1995, Industrial sector contract awards included: engineering, procurement and construction for gold mines in Chile and Papau, New Guinea, expansion of a dry conversion process facility in
North Carolina, rebuilding a carpet manufacturing facility in Georgia, a gelcaps facility in North Carolina, a contract manufacturing facility and corporate headquarters in North Carolina, a packaging and distribution center in Florida, expansion of various snack food plants in various locations through the United States, and a paper machine expansion in Georgia; engineering, procurement and construction management for an automotive assembly plant in Argentina, a beltway around Denver, Colorado, a copper and gold mine in Argentina, a metal aperture screen manufacturing facility expansion in New York, a silicon wafer facility in Texas and a utilities upgrade and building expansion in California; engineering and construction management for a hotel renovation in Indonesia, an expansion of a spice manufacturing facility in Australia; construction management for a nickel mine expansion in Indonesia, a train station terminal building in Kyoto, Japan and a sports facility in South Carolina; and engineering for a washing machine plant in China, an iron mine in Australia, a copper smelter and refinery in Indonesia, a paper machine rebuild in Georgia, and a paper machine addition in Wisconsin.
Ongoing projects include: engineering, procurement and construction for a blast furnace coal injection facility in Indiana and an emergency 911 response system for the City of Chicago, Illinois; engineering, procurement and construction management for an iron ore pelletizing processing facility in Brazil, a copper mine expansion in Indonesia, a copper concentrator expansion in Chile, a sodium cromoglycate facility in the United Kingdom, a paper products plant in Korea, two de-inking facilities and a paper recycle facility, all in the United Kingdom, a copper expansion and pipeline project in Chile, apparel distribution centers at various locations throughout the United States, a dextrose expansion project in Illinois and a fine chemicals manufacturing plant in Arkansas; engineering and construction for a corn processing plant in Illinois and several consumer products plants in Ohio; construction for a personal care product plant in Puerto Rico, a paper mill environmental upgrade in Florida and an engine plant expansion in Ohio; construction management for a multi-product personal care facility in the Philippines, a renovation of a turbine facility in South Carolina, prison projects in Texas and California, a tobacco processing plant expansion in North Carolina, and an automotive assembly plant in Alabama; engineering for a shampoo facility in China and a wafer fabrication facility in Utah; maintenance services for automotive facilities in Hungary, Tennessee and Germany; engineering and construction management for a tobacco facility in the Netherlands, an engine removal facility in New Jersey and a vaccine manufacturing plant in North Carolina; condition assessment for facilities at twelve military installations at various locations throughout the United States; an engineering study for an automobile manufacturer to determine the feasibility of disassembling and relocating two North American automobile manufacturing facilities to China; and project management for rail stations for the Federal Transportation Administration in New York City, rail transit for the Los Angeles County Metropolitan Transportation Authority in California, highway construction in Orange County, California, and a court/detention center in Texas.
Projects completed in fiscal year 1995 included: engineering, procurement and construction for a gold mine in Chile, a food processing plant in Utah, a personal care manufacturing facility in Ohio and a laundry detergent manufacturing facility in Ohio; engineering, procurement and construction management for a zinc, lead and silver mine in Australia, a silicon wafer manufacturing plant in Taiwan, a paint shop in Kentucky, a chocolate plant in China, a gold heap expansion in Peru, and a copper smelter modernization in Utah; construction management for a laundry detergent facility expansion in China, a chemical plant in Puerto Rico, a disk storage plant in Malaysia, an emergency prison program in Texas and a pilot plant for pharmaceutical manufacturing in New Jersey; engineering and construction management for a laundry detergent facility expansion in China; engineering for three products plant expansions in China and a synthetic growth hormone facility in Puerto Rico; construction for an automobile assembly plant in South Carolina and a pulp mill modernization in Ohio; and project management for a convention center in North Carolina.
Power and Government
The Power and Government Group provides services to clients through the Power Generation, Duke/Fluor Daniel, and Power Services operating companies which serve public utilities and private power companies throughout the world. The Government Services and FERMCO operating companies serve the United States government.
During the fiscal year 1995, Power and Government Group contract awards included: engineering, procurement, construction management and start up for a 2 x 600 megawatt coal fired power plant in Indonesia; operations and maintenance for a 175 megawatt diesel power plant in Indonesia; maintenance and support for a rebuild of a power plant in Texas; engineering, procurement, and construction management of a 650 megawatt combined cycle facility in Virginia; engineering and construction management for a 1200 megawatt phased combined cycle gas facility in Saudi Arabia; and engineering, procurement and construction of a 48 megawatt combined cycle plant in California, a 160 megawatt cogeneration plant in Indiana, a 240 megawatt combined cycle cogeneration plant in Louisiana and a 75 megawatt bottoming cycle and 69 kilovolt transmission line in Illinois.
On-going projects include: engineering, procurement, construction management and start-up assistance for coal switching modifications to a coal-fired facility in Indiana; engineering, procurement, construction and construction management for a waste to energy facility in New York; engineering, procurement and construction management for a fuel cell pilot plant in California; environmental remediation management for the United States Department of Energy ("DOE") former uranium processing plant in Ohio (the "Fernald Project"); engineering, design and procurement for a 385 megawatt pulverized coal plant in South Carolina; engineering and construction for emission monitoring equipment for various power generation sites of utilities in Arkansas, Louisiana, Mississippi, and Texas; engineering and construction management for various radar and weather stations located throughout the United States for the National Oceanic and Atmospheric Administration; engineering for a laboratory facility upgrade in Illinois, a nuclear utility in Illinois, a DOE waste vitrification plant in Washington, the DOE nuclear waste repository program, the reconfiguration of the DOE nuclear weapons program, the DOE National Engineering Laboratories in Idaho, and a waste handling facility for the DOE, in Washington; operations and maintenance for a new 130 megawatt cogeneration facility in Virginia; management and operation services for the Naval Petroleum and Oil Shale Reserves program for the DOE in Colorado, Utah and Wyoming; maintenance for a 3x1,270 megawatt nuclear plant in Arizona, fossil and gas generation plants in Texas, Georgia, Louisiana, Arkansas, Mississippi, Australia, Florida, and Tennessee, and nuclear plants in South Carolina, Kansas, Missouri, Virginia, Alabama, and Texas.
Projects completed in fiscal year 1995 included: a maintenance and outage support project at various sites for a southeastern power generator in Tennessee and Kentucky.
Diversified Services
The Diversified Services Group was created in fiscal 1994 to extend the offering of services representing the core competencies of Fluor Daniel. Typically these services have been provided within the boundaries of the traditional engineering and construction project cycle in support of Fluor Daniel. They are now offered on a stand alone basis into new and expanded areas of business outside of Fluor Daniel.
Established businesses in the group which have become more focused on external markets include the following operating companies: Facility & Plant Services, which provides plant maintenance and efficiency services; TRS Staffing Solutions, which provides temporary personnel; American Equipment Company, which sells, leases, and outsources equipment for construction and industrial needs; and Environmental Services, which provides environmental engineering and remediation services. Operating companies focused on creating new businesses by expanding core competencies include Consulting, which uses Fluor Daniel resources to provide solutions to client needs that do not typically fall under traditional engineering and construction services; Fluor Daniel Technologies, which uses Fluor Daniel's extensive technical expertise to evaluate new technologies for investment; and Acquion, a provider of procurement outsourcing services and electronic catalog and ordering services.
During fiscal year 1995, Diversified Services Group new awards included: a large equipment outsourcing contract at a petrochemical plant in Texas; management services for computer manufacturing plants in Arizona, Colorado and California; environmental investigation and evaluation at U.S. military facilities in Hawaii, Guam and Puerto Rico; and site remediation at a plant in Illinois.
Ongoing projects include: maintenance for a tire manufacturing facility in Tennessee, a petrochemical plant in Texas, computer manufacturing plants in Florida, Texas and North Carolina, and a refinery in Mississippi; environmental investigation and remediation plan services for a toxic waste site in New York; environmental investigation, remediation design, and implementation services for a chemical waste site in Ohio; environmental investigation, feasibility studies, and remediation for the United States Army Environmental Center, the United States Army Corps of Engineers, and the United States Environmental Protection Agency; and engineering, procurement and construction management for an environmental remediation program for a toxic waste site in Indiana.
Projects completed in fiscal year 1995 included: design and installation of a computerized maintenance system for a petroleum company in Indonesia; and training services for pre-start up of an automotive assembly plant in Alabama.
Shortly before the end of the fiscal year, the Company acquired Management Resources Group PLC, a London based permanent and temporary placement services company. In addition, on December 12, 1995, the Company announced plans to acquire a majority stake in Groundwater Technology, Inc. ("GTI"), a Massachusetts based environmental remediation company. The acquisition is subject to GTI's shareholders' approval as well as other customary conditions.
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, and global support to all Fluor Daniel industry and regional groups.
During fiscal year 1995, Fluor Constructors awards included: construction and construction management services for a steam turbine project in Indiana, a polypropylene plant expansion in Pennsylvania and a hydrogen peroxide project in Canada.
Ongoing projects include: construction and construction management for a reformulated gasoline project at a refinery in California, a blast furnace coal injection facility in Indiana, a hydrocracker revamp for a refinery in Delaware, a refrigerant production facility in Kentucky and a sulfur dioxide unit in Canada; construction management of a potable water supply system in Nevada, an Emergency 911 response system in Illinois and a waste to energy boiler replacement in New York; and maintenance and outage support at various plant sites for a nuclear power plant in Missouri and for fossil power plants in Louisiana, Mississippi and Arkansas.
Projects completed in fiscal 1995 included: construction and construction management for expansion of an ethylene glycol plant and a coker shutdown in Canada; construction management for an aromatics project for a refinery and an inter-refinery pipeline, both in Pennsylvania; and maintenance and outage support at various plant sites for a southeastern power generator in Tennessee and Kentucky and at a nuclear power plant in Alabama.
BACKLOG
Fluor Daniel's operating companies are organized into four major industry groups, Process, Industrial, Power and Government, and Diversified Services.
The following table sets forth the consolidated backlog of Fluor's engineering and construction segment at October 31, 1995 and 1994 by business group:
The following table sets forth the consolidated backlog of Fluor's engineering and construction segment at October 31, 1995 and 1994 by region:
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 its October 31, 1995, backlog to be performed subsequent to fiscal 1996.
Approximately $1.3 billion of the Power and Government backlog at October 31, 1995, is attributable to the DOE Fernald Project and subject to government funding on an annual basis, and another $1.2 billion of the Power and Government backlog is attributable to the Paiton private power project. At October 31, 1995, approximately $1.4 billion of the Process Group backlog is attributable to a project with a company affiliated with Union Carbide (the Kuwait Petrochemical Refinery).
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 17 mining complexes (14 of which include preparation plants) located in West Virginia, Kentucky and Tennessee. At October 31, 1995, two of the mining complexes were still in development and not yet producing coal. A third mining complex is idle.
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, 1995, the Massey Companies' production (expressed in thousands of short tons) of steam coal and metallurgical coal, respectively, was 15,756 and 11,607 for fiscal 1995, 17,120 and 7,333 for fiscal 1994, and 16,048 and 5,163 for fiscal 1993. Sales (expressed in thousands of short tons) of coal produced by the Massey Companies were 27,410 for fiscal year 1995, 23,835 for fiscal 1994 and 21,192 for fiscal 1993.
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 66% of the Massey Companies' fiscal 1995 coal production was sold under long-term contracts, 60% of which was steam coal and 40% of which was metallurgical coal. Approximately 9% of the coal tonnage sold by the Massey Companies in fiscal 1995 was sold outside of North America.
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.
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 $46.8 million which will be recognized as expense as payments are assessed. The amount expensed during fiscal 1995 approximated $2.3 million.
The management of the Massey Companies estimates that, as of October 31, 1995, the Massey Companies had total recoverable reserves (expressed in thousands of short tons) of 1,499,248; 580,886 of which are assigned recoverable reserves and 918,362 of which are unassigned recoverable reserves; and 1,105,793 of which are proven recoverable reserves and 393,455 of which are probable recoverable reserves.
The management of the Massey Companies estimates that approximately 37% of the total reserves listed above consist of reserves that would be considered primarily metallurgical grade coal. They also estimate that approximately 66% 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 substantially all 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.
OTHER MATTERS
ENVIRONMENTAL, SAFETY AND HEALTH MATTERS
The Massey Companies are affected by and comply with federal, state and local laws and regulations relating to environmental protection and plant and mine safety and health, 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; Black Lung Benefits Revenue Act of 1977; and Black Lung Benefits Reform Act of 1977. 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.
In fiscal 1995, Fluor expended approximately $8.9 million 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 $8.5 million and $5.3 million in such non-capital expenditures in fiscal 1996 and 1997, respectively. Of these expenditures, $8.1 million, $6.0 million and $2.9 million for fiscal 1995, 1996 and 1997, respectively, are (in the case of fiscal 1995) or are anticipated to be (in the case of fiscal 1996 and 1997) 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.
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.
The sale by Fluor of its lead business included St. Joe Minerals Corporation ("St. Joe") and its environmental liabilities for several different lead mining, smelting and other lead related environmental sites. As a condition of the St. Joe sale, however, Fluor retained responsibility for certain non-lead related environmental liabilities arising out of St. Joe's former zinc mining and smelting division, but only to the extent that such liabilities are not covered by St. Joe's comprehensive general liability insurance. These liabilities arise out of three zinc facilities located in Bartlesville, Oklahoma, Monaca, Pennsylvania and Balmat, New York (the " Zinc Facilities").
In 1987, St. Joe sold its zinc mining and smelting division to Zinc Corporation of America ("ZCA"). As part of the sale agreement, St. Joe and Fluor agreed to indemnify ZCA for certain environmental liabilities arising from operations conducted at the Zinc Facilities prior to the sale. During fiscal year 1993, ZCA made claims under this indemnity as well as under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") against St. Joe for past and future environmental expenditures at the Zinc Facilities. In fiscal year 1994, ZCA filed suit against St. Joe and Fluor, among others, seeking compensation for environmental expenditures at the Zinc Facilities. In fiscal year 1994, Fluor and St. Joe, among others, executed a settlement agreement with ZCA which, among other things, cancels the indemnity previously provided to ZCA and limits environmental expenditures at the Zinc Facilities for which St. Joe would be responsible to no more than approximately $10 million. Expenses incurred and payments made under the settlement agreement would be made over the span of at least five years, if not longer.
Fluor and St. Joe, among others, are currently prosecuting cost recovery actions under CERCLA against other potentially responsible parties for the Bartlesville facility. In addition, St. Joe has initiated legal proceedings against certain of its insurance carriers alleging that the investigative and remediation costs, for which St. Joe is or may be responsible, including costs incurred prior to the sale of St. Joe and costs related to the Zinc Facilities,
are covered by insurance. A portion of any recoveries received from the insurance carriers would be, pursuant to the St. Joe sale agreement, for the benefit of Fluor. In January 1995, St. Joe executed a settlement agreement with one of its primary insurance carriers that provided coverage for a minor portion of the applicable coverage periods. In May 1995, St. Joe received a favorable ruling from the Orange County Superior Court which ordered St. Joe's other insurer to defend St. Joe in certain environmental sites, including the Zinc Facilities. The insurer has appealed the court's order. St. Joe continues to pursue its other primary insurance carrier for additional payments. Because the insurance, as well as the cost recovery, proceedings remain in the early stages of litigation, no credit or offset (other than for amounts actually received in settlement), has been taken into account by Fluor in establishing its reserves for future environmental costs.
The Company believes, based upon present information available to it, that its reserves with respect to future environmental costs are adequate, and that such future costs will not have a material effect on the Company's consolidated financial condition, results of operations or liquidity. However, the imposition of more stringent requirements under environmental laws or regulations, new developments or changes regarding site cleanup costs or the allocation of such costs among potentially responsible parties, or a determination that the Company is potentially responsible for the release of hazardous substances at sites other than those currently identified, could result in additional expenditures, or the provision of additional reserves in expectation of such expenditures.
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, 1995:
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 1995 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 61
Director since 1984; Chairman of Executive Committee and member of Governance 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.
Dennis W. Benner, age 54
Vice President and Chief Information Officer since November, 1994; formerly Vice President and General Manager, Information, and Vice President and General Manager, Target Marketing Services, for TRW from 1992 and 1986, respectively.
Charles J. Bradley, Jr., age 60
Vice President, Human Resources and Administration since 1986; joined the Company in 1958.
J. Michal Conaway, age 47
Vice President and Chief Financial Officer since May, 1994; formerly Vice President, Finance, from 1993; formerly Vice President and Chief Financial Officer of National Gypsum Company and its parent, Aancor Holdings, Inc., from 1988.
James O. Rollans, age 53
Chief Administrative Officer since May, 1994; Senior Vice President since 1992; formerly Chief Financial Officer from 1992; formerly Vice President, Corporate Communications from 1982; joined the Company in 1982.
P. Joseph Trimble, age 65
Corporate Secretary since 1992; Senior Vice President, Law, since 1984; joined the Company in 1972.
EXECUTIVE OPERATING OFFICERS(1)
Hugh K. Coble, age 61
Director since 1984; Vice Chairman since April, 1994; formerly Group President of Fluor Daniel, Inc.(2) from 1986; joined the Company in 1966.
Dennis G. Bernhart, age 50
Group President, The Americas, of Fluor Daniel, Inc.(2) since May, 1994; formerly President, Latin America, Middle East and Africa, of that company from 1993; formerly Vice President, Sales, from 1982; joined the Company in 1968.
Don L. Blankenship, age 45
Chairman of the Board and Chief Executive Officer of A.T. Massey Coal Company, Inc.(3) since January, 1992; formerly President and Chief Operating Officer of that subsidiary from 1990; formerly President of Massey Coal Services, Inc.(4) from 1989; joined Rawl Sales & Processing Co.(5) in 1982.
Alan L. Boeckmann, age 47
Group President, Chemical Processes and Industrial, of Fluor Daniel, Inc.(2) since January, 1996; formerly Vice President of Chemicals, Plastics & Fibers of that company from June, 1994; formerly Vice President and General Manager of that company from 1992; formerly Vice President-Engineering Services, of that company from 1989; joined the Company in 1974.
Richard D. Carano, age 56
Group President, Asia/Pacific, of Fluor Daniel, Inc.(2) since May, 1994; formerly President, Asia/Pacific, of that company from 1993; formerly Vice President, Sales, of that company from 1987; joined the Company in 1970.
E. David Cole, Jr., age 58
Group President, Process, of Fluor Daniel, Inc.(2) since May, 1994; formerly Vice President, Petroleum and Petrochemicals, of that company from 1987; joined the Company in 1965.
Charles R. Cox, age 53
Group President, Industrial, of Fluor Daniel, Inc.(2) since May, 1994; formerly President, Operations Centers, of that company from 1989; joined the Company in 1969.
Richard A. Flinton, age 65
Chairman of the Board of Fluor Constructors International, Inc.(6) since 1989; joined the Company in 1960.
Thomas P. Merrick, age 58
Vice President, Strategic Planning, of Fluor Daniel, Inc.(2) since May, 1994; formerly Vice President, Technology, of that company from 1993; formerly Vice President, Government Sales, of that company from 1989; joined the Company in 1984.
Charles R. Oliver, Jr., age 52
Group President, Sales, Marketing and Strategic Planning of Fluor Daniel, Inc.(2) since May, 1994; formerly President, Business Units, of that company from 1993; formerly President, Hydrocarbon Sector, from 1986; joined the Company in 1970.
Carel J.C. Smeets, age 56
Group President, Europe, Africa and Middle East, of Fluor Daniel, Inc.(2) since May, 1994; formerly Vice President, European Operations, of that company from 1991; formerly Vice President and Managing Director, the Netherlands, from 1985; joined the Company in 1969.
James C. Stein, age 52
Group President, Diversified Services, of Fluor Daniel, Inc.(2) since May, 1994; formerly President, Business Units, of that company from 1993; formerly President, Industrial Sector, of that company from 1986; joined the Company in 1964.
Richard M. Teater, age 47
Group President, Power and Government, of Fluor Daniel, Inc.(2) since May, 1994; formerly President, Power, of that company from 1993; formerly Vice President, Power Marketing, of that company from 1990; formerly Vice President, Industrial Marketing, of that company from 1988; joined the Company in 1980. - -------- (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 International, Inc., a wholly owned subsidiary of Fluor, provides construction and maintenance services to a variety of clients.
PART II
Information for Items 5, 6 and 7 is contained in Fluor's 1995 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 1995 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 is included in the Biographical section of the Election of Directors portion of the definitive proxy statement pursuant to Regulation 14A, involving the election of directors, which is incorporated herein by reference and will be filed with the Securities and Exchange Commission (the "Commission") not later than 120 days after the close of Fluor's fiscal year ended October 31, 1995.
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 10.19 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, 1995, 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) Value at October 31, 1995 of previously awarded restricted stock which would vest upon change of control. (2) Lump sum entitlement of previously awarded benefits which would vest upon change of control.
Further disclosure required by this item is included in the Organization and Compensation Committee Report on Executive Compensation and Executive Compensation and Other Information sections of the definitive proxy statement pursuant to Regulation 14A, involving the election of directors, which is incorporated herein by reference and will be filed not later than 120 days after the close of Fluor's fiscal year ended October 31, 1995.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by this item is included in the Stock Ownership section of the Election of Directors portion of the definitive proxy statement pursuant to Regulation 14A, involving the election of directors, which is incorporated herein by reference and will be filed not later than 120 days after the close of Fluor's fiscal year ended October 31, 1995.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this item is included in the Other Matters section of the Election of Directors portion of the definitive proxy statement pursuant to Regulation 14A, involving the election of directors, which is incorporated herein by reference and will be filed not later than 120 days after the close of Fluor's fiscal year ended October 31, 1995.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(b) Reports on Form 8-K:
None were filed during the last quarter of the period covered by this report.
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
J. M. CONAWAY January 26, 1996 By __________________________________ J. M. Conaway, 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.
Manually signed Powers of Attorney authorizing L. N. Fisher, R. M. Bukaty and P. J. Trimble and each of them, to sign the annual report on Form 10-K for the fiscal year ended October 31, 1995 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 1995 Annual Report to stockholders:
Consolidated Balance Sheet at October 31, 1995 and 1994
Consolidated Statement of Earnings for the years ended October 31, 1995, 1994 and 1993
Consolidated Statement of Cash Flows for the years ended October 31, 1995, 1994 and 1993
Consolidated Statement of Shareholders' Equity for the years ended October 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
2. FINANCIAL STATEMENT SCHEDULES
All 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.
EXHIBIT INDEX