Fluor 2001 Annual Report Download - page 47

FLUOR CORPORATION 2001 ANNUAL REPORT
recommended by SFAS No.123, net earnings and diluted earnings per
share would have been reduced to the pro forma amounts as follows:
December 31, October 31, October 31,
Year Ended 2001 2000 1999
(in thousands)
Net earnings
As reported $19,410 $123,949 $104,187
Pro forma 8,896 115,098 95,297
Diluted net earnings per share
As reported $ 0.25 $ 1.62 $ 1.37
Pro forma 0.11 1.51 1.26
The fair value of each option grant is estimated on the date of
grant by using the Black-Scholes option-pricing model. The follow-
ing weighted-average assumptions were used for new grants:
December 31, October 31, October 31,
2001 2000 1999
Expected option lives (years) 6 6 6
Risk-free interest rates 4.74% 6.03% 4.51%
Expected dividend yield 1.75% 1.74% 1.38%
Expected volatility 48.30% 39.81% 33.76%
The weighted-average fair value of options granted during the
years ended December 31, 2001 and October 31, 2000 and 1999 was
$20, $18 and $15, respectively.
The following table summarizes stock option activity:
Weighted Average
Exercise Price
Stock Options Per Share
Outstanding at October 31, 1998 4,707,457 $47
Granted 1,079,810 43
Expired or canceled (256,145) 47
Exercised (303,736) 35
Outstanding at October 31, 1999 5,227,386 47
Granted 1,634,450 44
Expired or canceled (617,624) 47
Exercised (147,751) 39
Outstanding at October 31, 2000 6,096,461 46
Spin-off conversion adjustment 3,978,375 —
Expired or canceled due to spin-off (673,030) 46
Expired or canceled (45,582) 48
Exercised (1,100) 35
Outstanding at December 31, 2000 9,355,124 27
Granted 1,040,298 44
Expired or canceled (269,189) 34
Exercised (5,564,921) 26
Outstanding at December 31, 2001 4,561,312 $31
Exercisable at:
December 31, 2001 3,299,216 $27
December 31, 2000 7,493,971 27
October 31, 2000 3,352,234 49
October 31, 1999 3,407,398 49
In connection with the separation of Massey from Fluor, all out-
standing options were adjusted to preserve the value of such options
on the date of the distribution, including the conversion of options
held by Massey employees to options for shares of Massey.
At December 31, 2001, there are 4,227,708 shares available for
future grant. Available for grant includes shares which may be granted
as either stock options or restricted stock, as determined by the
Committee under the company’s various stock plans.
At December 31, 2001, there are 4,561,312 options outstanding
with exercise prices between $17 and $45, with a weighted-average
exercise price of $31 and a weighted-average remaining contractual
life of 4.1 years; 3,299,216 of these options are exercisable with a
weighted-average exercise price of $27. Of the options outstanding,
2,878,681 have exercise prices between $17 and $26, with a weighted-
average exercise price of $25 and a weighted-average remaining con-
tractual life of 6.2 years; 2,527,385 of these options are exercisable
with a weighted-average exercise price of $25. The remaining 1,682,631
outstanding options have exercise prices between $27 and $45, with
a weighted-average exercise price of $31 and a weighted-average
remaining contractual life of 5.0 years; 771,831 of these options are
exercisable with a weighted-average exercise price of $36.
LEASE OBLIGATIONS
Net rental expense for continuing operations amounted to approxi-
mately $76 million, $80 million and $77 million in the years ended
December 31, 2001 and October 31, 2000 and 1999, respectively. The
company’s lease obligations relate primarily to office facilities,
equipment used in connection with long-term construction contracts
and other personal property.
During 2001, the company entered into a sale/leaseback arrange-
ment for its engineering center in Sugar Land, Texas. The net pro-
ceeds from the sale were $127 million resulting in a $6 million gain on
sale that was deferred and will be amortized over the initial lease
term of 20 years. The lease contains four options to renew for five
years each at the then-applicable fair market rent and the right of
first offer to purchase the facility in the event the landlord desires
to sell its interests. The lease has been accounted for as an operat-
ing lease and the rent payments are included in the below schedule
of minimum rental obligations.
The company also has operating leases for its corporate head-
quarters and engineering center in California and an office in Calgary,
Canada. The leases contain options to purchase the properties dur-
ing the terms of the leases and contain aggregate residual value
guarantees of $110 million.
The company’s obligations for minimum rentals under non-
cancelable leases are as follows:
Year Ended December 31,
(in thousands)
2002 $ 47,133
2003 43,690
2004 30,076
2005 19,714
2006 16,105
Thereafter 183,464
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