Fluor 2001 Annual Report Download - page 46

FLUOR CORPORATION 2001 ANNUAL REPORT
FINANCING ARRANGEMENTS
The company has unsecured committed revolving short- and long-term
lines of credit with banks from which it may borrow for general cor-
porate purposes up to a maximum of $388 million. Commitment and
facility fees are paid on these lines. At December 31, 2001, amounts
outstanding under the committed and uncommitted lines of credit were
$38 million. Borrowings under these lines of credit bear interest at prime
or rates based on the London Interbank Offered Rate (“LIBOR”),
domestic certificates of deposit or other rates which are mutually
acceptable to the banks and the company.
The company has $930 million in short-term committed and
uncommitted lines of credit to support letters of credit. At December
31, 2001, $299 million of these lines of credit were used to support
undrawn letters of credit. In addition, the company had $121 million
in uncommitted lines for general cash management purposes.
Short-term debt comprises:
December 31, December 31,
2001 2000
(in thousands)
Commercial paper $ — $191,720
Bank borrowings 38,175 35,091
Trade notes payable 267 774
$38,442 $227,585
The company’s commercial paper was issued at a discount with
a weighted-average effective interest rate of 5.33 percent during
the first half of 2001. The company had no commercial paper out-
standing during the second half of 2001 and at December 31, 2001.
Long-term debt comprises:
December 31, December 31,
2001 2000
(in thousands)
5.625% Municipal bonds $17,594 $17,576
The municipal bonds are due June 1, 2019 with interest payable
semiannually on June 1 and December 1 of each year, commencing
December 1, 1999. The bonds are redeemable, in whole or in part, at
the option of the company at a redemption price ranging from 100 per-
cent to 102 percent of the principal amount of the bonds on or after
June 1, 2009. In addition, the bonds are subject to other redemption
clauses, at the option of the holder, should certain events occur, as
defined in the offering prospectus.
OTHER NONCURRENT LIABILITIES
The company maintains appropriate levels of insurance for business
risks. Insurance coverages contain various deductible amounts for
which the company provides accruals based on the aggregate of the
liability for reported claims and an actuarially determined estimated
liability for claims incurred but not reported. Other noncurrent lia-
bilities include $55 million and $62 million at December 31, 2001 and
2000, respectively, relating to these liabilities.
The company has deferred compensation and retirement arrange-
ments for certain key executives which generally provide for pay-
ments upon retirement, death or termination of employment. At
December 31, 2001 and 2000, $197 million and $184 million were
accrued under these plans and included in noncurrent liabilities.
STOCK PLANS
The company’s executive stock plans provide for grants of nonqual-
ified or incentive stock options, restricted stock awards and stock
appreciation rights (“SARS”). All executive stock plans are admin-
istered by the Organization and Compensation Committee of the Board
of Directors (“Committee”) comprised of outside directors, none of
whom are eligible to participate in the plans. Option grant prices are
determined by the Committee and are established at the fair value
of the company’s common stock at the date of grant. Options and SARS
normally extend for 10 years and become exercisable over a vesting
period determined by the Committee, which can include accelerated
vesting for achievement of performance or stock price objectives.
For the year ended December 31, 2001, the company issued 1,040,298
nonqualified stock options and 48,750 SARS with annual vesting of 25%.
During the year ended October 31, 2000, the company issued
1,581,790 nonqualified stock options and 58,880 SARS that vest 100
percent at the end of four years, with accelerated vesting based upon
the price of the company’s stock, and also issued 52,660 stock options
with annual vesting of 25%. During the year ended October 31,1999,
the company issued 1,021,810 nonqualified stock options and 122,900
SARS that vest over four years and 58,000 nonqualified stock options,
with 25 percent vesting upon issuance and the remaining awards vest-
ing in installments of 25 percent per year commencing one year from
the date of grant.
Restricted stock awards issued under the plans provide that
shares awarded may not be sold or otherwise transferred until restric-
tions have lapsed or performance objectives have been attained
as established by the Committee. Upon termination of employment,
shares upon which restrictions have not lapsed must be returned
to the company. Restricted stock granted under the plans totaled
17,504 shares, 351,630 shares and 197,257 shares in 2001, 2000 and
1999, respectively.
As permitted by Statement of Financial Accounting Standards
No.123,“Accounting for Stock-Based Compensation” (SFAS No.123),
the company has elected to continue following the guidance of APB
Opinion No.25,“Accounting for Stock Issued to Employees,” for mea-
surement and recognition of stock-based transactions with employ-
ees. Recorded compensation cost for these plans totaled $9 million,
$3 million and $8 million for the years ended December 31, 2001 and
October 31, 2000 and 1999, respectively, and $1 million for the two
months ended December 31, 2000. Under APB Opinion No.25, no com-
pensation cost is recognized for the option plans where vesting pro-
visions are based only on the passage of time. Had the company
recorded compensation expense using the accounting method
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