Fluor’s Gains Falling Short; Change in Store for 2 Units

Fluor Corp. said Thursday that fiscal fourth-quarter earnings will miss forecasts, and it plans to sell or close its heavy-equipment unit’s dealership business.

The Aliso Viejo-based construction and engineering company plans to take a fourth-quarter pretax charge of about $25 million related to the spinoff of its A.T. Massey Coal operations, which is expected to occur before the end of the year, spokesman Keith Karpe said.

In June, Fluor said it was splitting into two companies, separating its coal business so it could focus on its construction operations.

Furthermore, the company said it plans to record a charge of $25 million related to shedding its heavy-equipment dealership business.

For the fourth quarter that will end Tuesday, Fluor plans to report profit of 45 cents to 50 cents a share, excluding the $50 million in spinoff expenses and adjustments for the dealership business. Analysts were expecting earnings of 64 cents a share, according to a survey by First Call/Thomson Financial. The shortfall is mainly due to weaker-than-expected results at its Massey coal business.

The company said it would sell or close the dealership operations of its Ameco heavy-equipment business.

Fluor has decided to split the Ameco business in two after failing to sell it about two years ago, said Ralph Hake, Fluor’s chief financial officer.

Management wants to sell the dealership operation, which generates about $450 million in sales, and keep the Site and Fleet operation, which does about $170 million in business and provides heavy equipment for engineering procurement construction work, according to Hake.

Hake said the dealership business carries a book value of $300 million. He said Fluor expects to generate “a substantial amount of cash” from the deal.

Fluor said it will sell or close the operation by the end of the first quarter. The company’s priority is to sell it.

Hake said the Site and Fleet operation is a growing business tied to the company’s existing customer base.

Fluor would have difficulty selling that business because a new owner would have to establish new customer relationships to increase the business, he said.

Fluor’s stock fell $1.56, or 4.8%, to $31.56, on the New York Stock Exchange. The shares have lost about 31% of their value this year.

After separating its coal and construction operations, Fluor will switch its reporting basis to a calendar year from a fiscal year, beginning in 2001, the company said. November and December results will be reported separately. Earnings for the two-month period are expected to be about 25 cents a share.

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Bloomberg News and Dow Jones Newswires were used in compiling this report.

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Engineering a Turnaround

Fluor intends to split itself in two, creating a separate publicly held company out of its lagging Massey Coal operation. Even so, its stock remains below its high of $48.50 in January and has lost 30% this year.

Fluor shares, monthly closes and latest on NYSE

Thursday: $32.56 down $1.56

Source: Bloomberg News