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Fluor Posts $70.1-Million Quarterly Loss as Expected

Earnings: Company will abandon the profit focus that resulted in costs getting out of hand.

May 22, 1997|JOHN O'DELL | TIMES STAFF WRITER

IRVINE — As expected, Fluor Corp. on Wednesday reported a loss of $70.1 million, or 83 cents a share, for its fiscal 1997 second quarter, compared with a year-earlier profit of $63.7 million, or 75 cents a share.

The company announced May 6 that it expected to post the loss and said it stemmed from cost overruns on two large power plant projects and from the costs of a reorganization aimed at slashing $100 million from its operating budget this year.

Chairman Leslie McCraw reiterated those causes Wednesday and repeated an earlier promise to abandon the policy of pushing annual earnings growth "to a level approaching 20%." Instead of shooting for a specific rate of increase, which has caused the company to overreach, McCraw said that Fluor will focus on being in the top 25% of S&P 500 companies in terms of earnings and revenue performance.

Fluor's second-quarter performance included charges of $120 million for the project overruns and $20 million to implement the cost-cutting in its Fluor Daniel engineering and construction unit.

The company first broached its problems in mid-February, and McCraw and other officials have said several times since then that they let operating costs get out of hand during a three-year drive to increase earnings.

Revenue for the period ended April 30 rose 23% to $3.2 billion from $2.6 billion, and Fluor officials said that the quarter's loss was caused by one-time events. The company has said that it doesn't expect to take more than $15 million in additional charges this year for is cost-reduction program and that it expects to be profitable for the year.

The cost-cutting will involve layoffs of as many as 575 of the company's 27,500 salaried employees and the consolidation and closure of some Fluor offices and operating units around the globe.

Additionally, company executives have moved out of their wood-paneled suites on the top four floors of its leased headquarters in Irvine--a $3-million savings over the next two years--and Fluor has announced plans to build new headquarters in Aliso Viejo. The new offices will accommodate the same number of employees in 35% less space and save the company $10 million a year in rent and operating costs, McCraw says. Fluor intends to move to Aliso Viejo in two years.

McCraw said Wednesday that company officials are "disappointed" in the second-quarter results but confident that Fluor is on the mend.

For the first half, Fluor posted a loss of $8.1 million, or 10 cents a share, versus a profit of $121.1 million, or $1.43 a share, in the first six months of its fiscal 1996. Revenue for the six months rose 33% to $6.6 billion from $5 billion a year earlier.

McCraw has said he expects Fluor Daniel's performance to improve a bit in the second half with operating profits of more than $140 million. The unit, which accounts for 90% of Fluor's revenue, had a net operating loss of $36 million in the first half.

Fluor's coal mining subsidiary, A.T. Massey, increased its operating profit to $37 million in the second quarter, a 15% gain.

Fluor stock rose $1.125 in moderate New York Stock Exchange trading Wednesday to close at $52. The stock had climbed to a historic high of $75 on Feb. 18, but plunged to $62 the next day, when Fluor officials initially warned that some big problems were brewing.

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