UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q


              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934.

                For the quarterly period ended September 25, 1998

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934.


                        For the transition period from to


                         Commission File Number 1-286-2


                           FOSTER WHEELER CORPORATION
             (Exact name of registrant as specified in its charter)


           New York                                       13-1855904
  (State or other jurisdiction of                      (I.R.S. Employer
  incorporation or organization)                       Identification No.)


   Perryville Corporate Park, Clinton, N. J.                  08809-4000
    (Address of principal executive offices)                  (Zip Code)


   Registrant's telephone number, including area code:    (908)-730-4000


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes (X) No ( )

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common  stock,  as of the  latest  practicable  date:  40,716,864  shares of the
Corporation's  common stock ($1.00 par value) were  outstanding  as of September
25, 1998.




<PAGE>

                           FOSTER WHEELER CORPORATION


                                      INDEX

Part I         Financial Information:

      Item 1 - Financial Statements:

               Condensed  Consolidated  Balance  Sheet at September 25, 1998 and
               December 26, 1997

               Condensed  Consolidated  Statement of Earnings and  Comprehensive
               Income  Three  and  Nine  Months  Ended  September  25,  1998 and
               September 26, 1997

               Condensed  Consolidated Statement of Cash Flows Nine Months Ended
               September 25, 1998 and September 26, 1997

               Notes to Condensed Consolidated Financial Statements


      Item 2 - Management's Discussion and Analysis of Financial Condition
               and Results of Operations

Part II        Other Information:

      Item 1 - Legal Proceedings

      Item 6 - Exhibits and Reports on Form 8-K

Signatures



<PAGE>


PART I    FINANCIAL INFORMATION
ITEM 1 -  FINANCIAL STATEMENTS

<TABLE>

                   FOSTER WHEELER CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET
                            (In Thousands of Dollars)

<CAPTION>
                                                    September 25, 1998           December 26,
ASSETS                                                 (Unaudited)                    1997
<S>                                                 <C>                          <C>

Current Assets:
Cash and cash equivalents                             $   125,360              $  167,417
Short-term investments                                     66,083                  91,888
Accounts and notes receivable                             813,159                 799,375
Contracts in process and inventories                      478,246                 415,186
Prepaid and refundable income taxes                        63,585                  46,175
Prepaid expenses                                           30,117                  25,230
                                                      -----------              -----------
     Total Current Assets                               1,576,550               1,545,271
                                                      -----------              -----------
Land, buildings and equipment                           1,202,222               1,138,098
Less accumulated depreciation                             338,405                 313,646
                                                      -----------              -----------
         Net book value                                   863,817                 824,452
                                                      -----------              -----------

Notes and accounts receivable - long-term                  99,954                  86,353
Investments and advances                                  134,179                 127,629
Intangible assets - net                                   287,507                 298,217
Prepaid pension costs and benefits                        175,896                 187,200
Other, including insurance recoveries                     218,904                 275,582
Deferred income taxes                                      15,673                  21,659
                                                      -----------              -----------
    Total Assets                                      $ 3,372,480              $3,366,363
                                                      ===========              ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current installments on long-term debt                $    34,619              $   33,528
Bank loans                                                401,141                  53,748
Accounts payable and accrued expenses                     646,754                 626,160
Estimated costs to complete long-term contracts           538,179                 603,224
Advance payments by customers                              74,238                  98,865
Income taxes                                               41,731                  21,527
                                                      -----------              -----------
    Total Current Liabilities                           1,736,662               1,437,052
Special-purpose project debt                              425,112                 432,772
Other long-term debt                                      208,902                 422,896
Postretirement and other employee benefits
     other than pensions                                  166,147                 169,212
Other long-term liabilities, deferred credits and
     minority interest in subsidiary companies            312,677                 250,853
Deferred income taxes                                      35,860                  34,148
                                                      -----------              -----------
    Total Liabilities                                   2,885,360               2,746,933
                                                      -----------              -----------
Stockholders' Equity:
Common stock                                               40,748                  40,746
Paid-in capital                                           201,154                 201,105
Retained earnings                                         284,270                 426,761
Accumulated other comprehensive income                    (38,466)                (48,887)
                                                      ------------             -----------
                                                          487,706                 619,725
Less cost of treasury stock                                  (586)                   (295)
                                                      ------------             -----------
    Total Stockholders' Equity                            487,120                 619,430
                                                      ------------             -----------
    Total Liabilities and Stockholders' Equity        $ 3,372,480              $3,366,363
                                                      ============             ===========

See notes to financial statements.
</TABLE>


<PAGE>


                   FOSTER WHEELER CORPORATION AND SUBSIDIARIES
      CONDENSED CONSOLIDATED STATEMENT OF EARNINGS AND COMPREHENSIVE INCOME
               (In Thousands of Dollars, Except Per Share Amounts)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                              Three Months Ended                       Nine Months Ended
                                         Sept. 25, 1998(a)     Sept. 26, 1997     Sept. 25, 1998(a)   Sept. 26, 1997(b)
<S>                                      <C>                   <C>                <C>                 <C>

Revenues:
  Operating revenues                       $1,081,149          $1,029,994         $3,142,935          $3,025,742
  Other income                                 20,370              19,795             50,492              99,648
                                          -----------          ----------         ----------          -----------
  Total revenues                            1,101,519           1,049,789          3,193,427           3,125,390
                                           ----------          ----------         ----------          -----------

Cost and expenses:
  Cost of operating revenues                  989,668           1,010,507          2,863,339           2,864,708
  Selling, general and adminis-
     trative expenses                          62,094              63,368            178,993             207,352
  Other deductions/minority
     interest                                 192,388              17,186            233,125              64,713
                                           ----------          ----------        -----------          -----------
  Total costs and expenses                  1,244,150           1,091,061          3,275,457           3,136,773
                                           ----------          ----------         ----------          -----------

Loss before income taxes                     (142,631)            (41,272)           (82,030)            (11,383)
Provision for income taxes                     11,936             (11,924)            34,813               1,374
                                          -----------         ------------        ----------          -----------
Net loss                                     (154,567)            (29,348)          (116,843)            (12,757)
Other comprehensive income:
  Foreign currency translation
     adjustment                                26,289              (3,520)            10,421             (28,147)
                                           ----------          -----------        ----------          -----------

Comprehensive loss                         $ (128,278)         $  (32,868)        $ (106,422)         $  (40,904)
                                           ===========         ===========        ===========         ===========

Loss per share:
  Basic                                       $(3.80)            $ (.72)             $(2.87)            $ (.31)
                                              =======            =======             =======            =======
  Diluted                                     $(3.80)            $ (.72)             $(2.87)            $ (.31)
                                              =======            =======             =======            =======

Shares outstanding:
  Basic:
  Weighted average number of
    shares outstanding                     40,726,754          40,687,568         40,732,791         40,657,417
  Diluted:
  Effect of stock options                       *                  *                   *                  *
                                           ----------          ----------         -----------        -----------

  Total diluted                            40,726,754          40,687,568         40,732,791         40,657,417
                                           ==========          ==========         ==========         ===========

Cash dividends paid per
  Common share                             $   .21              $   .21            $   .63           $   .625
                                           =======              =======            =======            ========
</TABLE>

(a)  In the third quarter of 1998, the  Corporation  recorded a $175,000  ($4.30
     per share - basic)  charge  included  in other  deductions  related  to the
     Robbins Resource Recovery Facility.

(b)  In the second  quarter of 1997, the  Corporation  recorded a pretax gain of
     $56,400  ($36,600 after tax) in other income related to the sale of Glitsch
     International,  Inc.'s  assets.  Also,  in the  second  quarter of 1997 the
     Corporation  recorded provisions reflected in cost of operating revenues of
     $60,000 ($39,000 after tax) against the Power Systems Group with respect to
     the Robbins  Resource  Recovery  Facility and $32,000  ($20,800  after tax)
     against the Energy  Equipment Group for  reorganization  costs. A charge of
     $6,500 ($4,200 after tax) for the write-down of long-lived  assets was also
     included in other deductions.

*    The effect of the stock  options  was not  included in the  calculation  of
     diluted  earnings per share as these options were  antidilutive  due to the
     losses in 1998 and 1997. See notes to financial statements.


<PAGE>


                   FOSTER WHEELER CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                            (In Thousands of Dollars)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                Nine Months Ended
                                                      Sept. 25, 1998        Sept. 26, 1997
<S>                                                   <C>                   <C>

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                               $(116,843)           $  (12,757)
Adjustments to reconcile net earnings
to cash flows from operating activities:
Depreciation and amortization                             49,305                46,173
Noncurrent deferred tax                                    6,374                (4,903)
Net gain on sale of subsidiary                             -                   (49,900)
Equity earnings, net of dividends                         (4,289)              (11,894)
Robbins Resource Recovery charge                         175,000                  -
Other                                                     (6,695)               (5,955)
Changes in assets and liabilities, net of effects
  of acquisitions and divestitures:
Receivables                                               27,167              (109,555)
Contracts in process and inventories                     (59,576)               13,923
Accounts payable and accrued expenses                    (38,136)               16,839
Estimated costs to complete long-term contracts          (81,393)              158,622
Advance payments by customers                            (28,130)              (17,391)
Income taxes                                                 902               (46,566)
Other assets and liabilities                              (7,073)              (80,344)
                                                      -----------            ----------
NET CASH USED BY OPERATING ACTIVITIES                    (83,387)             (103,708)
                                                      -----------            ----------

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures                                    (100,858)             (135,794)
Proceeds from sale of subsidiary                           -                   195,283
Proceeds from sale of properties                           2,052                 5,038
Decrease/(increase) in investments and advances            7,462               (46,712)
Decrease in short-term investments                        29,552                14,099
Partnership distributions                                 (4,256)               (4,800)
                                                       ----------            ----------
NET CASH (USED)/PROVIDED BY INVESTING ACTIVITIES         (66,048)               27,114
                                                        ---------            ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Dividends to stockholders                                (25,648)              (25,403)
Repurchase of common stock                                  (291)                 -
Proceeds from the exercise of stock options                   51                 2,671
Increase in short-term debt                               29,911                 7,229
Proceeds from long-term debt                             108,134                64,915
Repayment of long-term debt                              (14,587)              (77,311)
                                                       ----------            ----------
NET CASH PROVIDED/(USED) BY FINANCING ACTIVITIES          97,570               (27,899)

Effect of exchange rate changes on cash and cash
  equivalents                                              9,808               (20,244)
                                                      ----------             ----------

DECREASE IN CASH AND CASH EQUIVALENTS                    (42,057)             (124,737)
Cash and cash equivalents at beginning of year           167,417               267,149
                                                      ----------             ----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD             $ 125,360             $ 142,412
                                                       =========             ==========

Cash paid during period:
Interest (net of amount capitalized)                  $   25,305             $  22,681
Income taxes                                          $   22,908             $  20,161

See notes to financial statements.
</TABLE>



<PAGE>


                   FOSTER WHEELER CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               (In Thousands of Dollars, Except Per Share Amounts)
                                   (Unaudited)

1.   The condensed  consolidated balance sheet as of September 25, 1998, and the
     related  condensed  consolidated  statements of earnings and  comprehensive
     income and cash flows for the three and nine-month  periods ended September
     25,  1998  and  September  26,  1997  are  unaudited.  In  the  opinion  of
     management,  all  adjustments  necessary  for a fair  presentation  of such
     financial statements have been included. Such adjustments only consisted of
     normal recurring items.  Interim results are not necessarily  indicative of
     results for a full year.

     The financial  statements  and notes are presented in accordance  with Form
     10-Q and do not contain  certain  information  included  in Foster  Wheeler
     Corporation's Annual Report on Form 10-K for the fiscal year ended December
     26, 1997 filed with the  Securities  and Exchange  Commission  on March 19,
     1998. The Condensed  Consolidated Balance Sheet as of December 26, 1997 has
     been derived from the audited  Consolidated  Balance Sheet  included in the
     1997 Annual Report. A summary of the Corporation's  significant  accounting
     policies  is  presented  on pages 36 and 37 (not  shown) of its 1997 Annual
     Report to Stockholders. Users of financial information produced for interim
     periods are  encouraged to refer to the  footnotes  contained in the Annual
     Report to Stockholders when reviewing interim financial results.  There has
     been  no  material  change  in  the  accounting  policies  followed  by the
     Corporation  during 1998,  except as described in Note 7 of these Condensed
     Consolidated Financial Statements.

     In conformity with generally  accepted  accounting  principles,  management
     must make  estimates and  assumptions  that affect the reported  amounts of
     assets and liabilities and disclosure of contingent  assets and liabilities
     at the  date of the  financial  statements  and  the  reported  amounts  of
     revenues and expense  during the  reporting  period.  Actual  results could
     differ from those estimates.

2.   In the  ordinary  course  of  business,  Foster  Wheeler  Corporation  (the
     "Corporation")  and its  subsidiaries  enter into  contracts  providing for
     assessment of damages for nonperformance or delays in completion. Suits and
     claims have been or may be brought  against the  Corporation  by  customers
     alleging  deficiencies in either  equipment  design or plant  construction.
     Based on its  knowledge  of the facts  and  circumstances  relating  to the
     Corporation's   liabilities,   if  any,  and  to  its  insurance  coverage,
     management of the  Corporation  believes that the disposition of such suits
     will not result in charges against assets or earnings  materially in excess
     of amounts previously provided in the accounts.

     The Corporation and its subsidiaries,  along with many other companies, are
     codefendants in numerous lawsuits pending in the United States.  Plaintiffs
     claim damages for personal  injury  alleged to have arisen from exposure to
     or use of asbestos in connection with work performed by the Corporation and
     its  subsidiaries  during the 1970's and prior.  As of September  25, 1998,
     there were  approximately  63,000 claims  pending.  In 1998,  approximately
     19,000 new claims were filed and  approximately  21,000 were either settled
     or dismissed without payment. The Corporation has agreements with insurance
     carriers covering significantly more than a majority of the potential costs
     relating to these exposures.  The Corporation has recorded, with respect to
     asbestos litigation, an asset relating to the probable insurance recoveries
     and a liability  relating to probable losses.  These assets and liabilities
     were  estimated  based on historical  data  developed in  conjunction  with
     outside experts. Management of the Corporation has carefully considered the
     financial viability and legal obligations of its insurance carriers and has
     concluded  that  except for those  insurers  that have become or may become
     insolvent, the insurers will continue to adequately fund claims and defense
     costs relating to asbestos litigation.

     In the third quarter 1998,  the  Corporation  recorded a pre- and after-tax
     charge of  $175,000  relating  to a  waste-to-energy  plant  located in the
     Village of Robbins,  Illinois (the "Robbins Project"). This charge reserves
     for all asset impairments as well as all financial guarantees.

     In 1996, the Corporation completed the construction of the Robbins Project.
     A subsidiary of the Corporation,  Robbins Resource Recovery Partners,  L.P.
     (the "Partnership"), is operating this facility under a long-term operating
     lease with the  Village of  Robbins  as lessor.  By virtue of the  facility
     qualifying  under the Illinois Retail Rate Law (the "Retail Rate Law") as a
     qualified  solid  waste-to-energy  facility,  it was to earn  revenues from
     sales of  electricity  to a utility at rates that were to be  substantially
     higher than the  utility's  "avoided  cost." Under the Retail Rate Law, the
     utility  was  entitled  to a tax  credit  against  a state tax on its gross
     receipts and invested  capital.  The State of Illinois was to be reimbursed
     by the facility for the tax credit  beginning after the 20th year following
     the initial sale of electricity to the utility.  The State has repealed the
     Retail Rate Law insofar as it applied to this facility.  Consequently,  the
     Partnership's  sales to the utility are being made at the utility's avoided
     cost,  which  is not  sufficient  to  recover  the  cost of  operating  the
     facility.

     In the second  quarter of 1997, the  Corporation  made an assessment of the
     factors having significant bearing on the Robbins Project situation.  These
     included consideration of the noncancelable contracts to receive waste from
     the  surrounding  towns,  operate  the  waste-to-energy   plant,  including
     maintenance,  and deliver  electricity under an agreement with Commonwealth
     Edison.

     At the time, the Corporation  believed that the unprecedented action of the
     Illinois  legislature  to repeal  the  Retail  Rate Law would be  corrected
     within a two-year  timeframe  either through judicial relief or legislative
     action by giving "grandfathered" status to this project.  Furthermore,  the
     Corporation  believed  that if  those  initiatives  were  unsuccessful,  an
     alternative  purchaser of electricity could be secured that would allow the
     Robbins  Project to at least  break even after  1999.  Accordingly,  in the
     second  quarter of 1997 the  Corporation  recorded a charge of $60,000  for
     probable losses to be incurred until 1999. This period represented the time
     during which these issues were anticipated to be satisfactorily resolved.

     Recent  events  have  led  the  Corporation  to  reevaluate  the  long-term
     profitability of the Robbins Project. These include the following:

1.   No alternative  purchaser for the Robbins  Project's  electricity  has been
     identified.

2.   Due  to  deregulation  of  the  power  industry,  there  has  been  greater
     competition from independent power producers resulting in lower electricity
     rates.

3.   The  Robbins  Project has been  experiencing  higher  operating  costs than
     originally anticipated, particularly labor costs.

4.   The Robbins  Project has received  lower  tipping  fees from trash  haulers
     under waste disposal contracts than originally projected.

5.   It  appears   unlikely  that  the  Corporation  will  have  any  successful
     resolution  of its  claims  in the  courts  or any  relief  from the  state
     legislature in the near term.

     As a result of this assessment,  the Corporation has concluded that it will
     not be able to recover the assets  currently  recorded  which relate to the
     Robbins  Project.  Moreover,  it is highly  unlikely  that the Project will
     generate  sufficient  revenues to repay the Robbins Project debt,  which is
     funded by the lease  payments to the Village of Robbins.  Accordingly,  the
     Corporation  recorded  a charge  of  approximately  $175,000  in the  third
     quarter of fiscal  1998  comprised  of $95,400  for asset  impairments  and
     $79,600 under guarantees for which the Corporation is liable.

The  charges against assets comprise the following:

1.   $15,600 - Unamortized  portion of the buyout of the original partner in the
     Robbins Project.

2.   $48,300 - Prepaid lease cost and other miscellaneous costs.

3.   $22,900 - Boiler modifications made in 1997 and 1998.

4.   $8,600 - (a) Cost of transfer  station that  processes  waste for the plant
     and (b) Equity investment by Foster Wheeler Robbins,  Inc., a subsidiary of
     the Corporation,  in Skyline Disposal Co. Inc., which delivers waste to the
     Robbins Project.

The charges under guarantees for which the Corporation is liable are as follows:

1.   $55,300 - required  contribution  to fund debt  service  reserves  which is
     expected  to be made  beginning  in 1999 and  exhausted  by the end of year
     2001.

2.   $24,300 - Corporate guarantees.

     Because the  Corporation's  financial  exposure has been limited to certain
     guarantees  and  funding  commitments,  the  provision  for losses has been
     limited to the amount of these guarantees and commitments.  The Corporation
     currently  intends to continue to operate the Robbins Project in accordance
     with the terms of its  contractual  obligations,  although  it  expects  to
     continue to generate operating losses in the short term. In connection with
     the Corporation's filing of a shelf registration  statement,  it is engaged
     in  discussion  with the staff of the  Securities  and Exchange  Commission
     regarding the above charges.

     In 1997,  the United  States  Supreme  Court  effectively  invalidated  New
     Jersey's  long-standing  municipal solid waste flow rules and  regulations.
     The immediate  effect was to eliminate the  guaranteed  supply of municipal
     solid  waste to the Camden  County  Waste-to-Energy  Project  (the  "Camden
     Project") with its corresponding tipping fee revenue. As a result,  tipping
     fees have been  reduced to market rate in order to provide a steady  supply
     of fuel to the plant.  Those  market-based  revenues are not expected to be
     sufficient to service the debt on outstanding  bonds,  which were issued to
     construct the plant and to acquire a landfill for Camden  County's use. The
     Corporation has filed suit against certain involved parties,  including the
     State of New Jersey,  seeking  among other things,  to void the  applicable
     contracts  and  agreements  governing  the Camden  Project.  Pending  final
     outcome of the litigation and the results of legislative initiatives in New
     Jersey to resolve the issues  relating to the debt  obligations  associated
     with the Camden Project,  management  believes that the plant will continue
     to operate at full capacity while earning sufficient  revenues to cover its
     fees as operator of the plant.  However,  at this time,  management  cannot
     determine the effect of the foregoing on the Camden Project.

     The ultimate legal and financial  liability of the Corporation with respect
     to all claims, lawsuits and proceedings cannot be estimated with certainty.
     As additional  information concerning the estimates used by the Corporation
     becomes known, the Corporation reassesses its position both with respect to
     gain contingencies and accrued  liabilities and other potential  exposures.
     Estimates that are particularly  sensitive to future change relate to legal
     matters,  which are  subject to change as events  evolve and as  additional
     information  becomes  available  during the  administration  and litigation
     process.

3.   As a result of the Robbin's  Project  charge,  the  Corporation  was not in
     compliance  with  its  financial   covenants  under  its  Revolving  Credit
     Agreements.  The Corporation  received a 60-day waiver of these  covenants,
     which expires on November 24, 1998.  The  Corporation  expects to receive a
     commitment from a group of financial  institutions  for the entire $400,000
     that may be drawn under the Revolving  Credit  Agreements prior to November
     24,  1998,  and expects the new  facility to be  available  by December 31,
     1998.  The  Corporation  expects to receive an extension of the waiver from
     its existing bank group until the new facility is  available.  Accordingly,
     $300,000 under the Revolving Credit  Agreements that had been classified as
     long-term debt has been reclassified as short-term.

4.   A total of 2,559,718  shares were  reserved  for  issuance  under the stock
     option plans; of this total 739,416 were not under option.

5.   Basic per share data has been computed based on the weighted average number
     of shares of common stock outstanding.  The effect of the stock options was
     not  included in the  calculation  of diluted  earnings  per share as these
     options were antidilutive due to the losses in 1998 and 1997.

6.   Interest income and cost for the following periods are:

<TABLE>
<CAPTION>
                               Three Months Ended                  Nine Months Ended
                         Sept. 25, 1998     Sept. 26, 1997     Sept. 25, 1998       Sept. 26, 1997
<S>                      <C>                <C>                <C>                  <C>

      Interest Income       $ 3,558          $ 4,038             $ 14,927              $15,205
      Interest Cost         $18,273          $16,106              $53,584              $49,414
</TABLE>

     Included  in  interest  cost is interest  capitalized  on  self-constructed
     assets,  for the three and nine months ended  September  25, 1998 of $2,965
     and $8,755, respectively,  compared to $2,772 and $7,498 for the comparable
     periods in 1997.

7.   In the first quarter of 1998,  the  Corporation  adopted the  provisions of
     Statements  of  Financial  Accounting  Standards  No.  129,  Disclosure  of
     Information  about  Capital  Structure,  No. 130,  Reporting  Comprehensive
     Income, and No. 131, Disclosure about Segments of an Enterprise and Related
     Information.  Where applicable,  prior data has been restated to conform to
     the 1998 presentation.

     The Financial  Accounting  Standards Board released in June 1998, Statement
     of Financial  Accounting  Standards  No. 133,  "Accounting  for  Derivative
     Instruments  and Hedging  Activities."  This statement is effective for all
     fiscal  quarters of all fiscal years  beginning  after June 15, 1999.  This
     statement  addresses the accounting for  derivative  instruments  including
     certain derivative  instruments embedded in other contracts and for hedging
     activities.  The Corporation is currently  assessing the impact of adoption
     of this new Statement.

     In the second quarter of 1998, the Accounting  Standard Executive Committee
     of the AICPA issued Statement of Position 98-5,  "Reporting on the Costs of
     Start-up   Activities."  This  statement  provides  guidance  on  financial
     reporting of start-up  costs and  organizational  costs.  This Statement of
     Position is effective for financial  statements for fiscal years  beginning
     after December 15, 1998. This Statement of Position requires start-up costs
     to be expensed as incurred.  The  Corporation  is currently  assessing  the
     financial statement impact of adoption of this Statement of Position.

8.   In the third quarter 1998, a subsidiary of the  Corporation  entered into a
     three year  agreement with a financial  institution  whereby the subsidiary
     would  sell an  undivided  interest  of  $41,900  in a  designated  pool of
     qualified  accounts  receivable.  Under  the  terms of the  agreement,  new
     receivables  are added to the pool as collections  reduce  previously  sold
     accounts receivable.  The credit risk of uncollectible  accounts receivable
     has  been   transferred  to  the  purchaser.   The  Corporation   services,
     administers and collects the  receivables on behalf of the purchaser.  Fees
     payable to the  purchaser  under this  agreement  are  equivalent  to rates
     afforded high quality commercial paper issuers plus certain  administrative
     expenses  and  are  included  in  other  deductions,  in  the  Consolidated
     Statement  of  Earnings.  The  agreement  contains  certain  covenants  and
     provides for various events of termination.  At September 25, 1998, $41,900
     in  receivables  were  sold  under  the  agreement  and are  therefore  not
     reflected in the accounts  receivable - trade  balance in the  Consolidated
     Balance Sheet.

9.   Changes in equity for the nine  months  ended  September  25,  1998 were as
     follows:

<TABLE>
<CAPTION>
                                                                      Accumulated
                                                                      Other                                      Total
                           Common Stock       Paid-in     Retained    Comprehensive     Treasury Stock           Stockholders'
                        Shares      Amount    Capital     Earnings    Loss             Shares     Amount         Equity
<S>                     <C>         <C>       <C>         <C>         <C>              <C>        <C>

Balance December 26,
  1997                 40,745,668   $40,746   $201,105    $426,761    $(48,887)        (10,804)   $(295)         $619,430

Net Loss                                                  (116,843)                                              (116,843)

Dividends paid -
  common                                                   (25,648)                                               (25,648)

Comprehensive loss                                                      10,421                                     10,421
Purchase of treasury
  stock                                                                                (20,000)    (291)             (291)

Sold under stock
  options                   2,000         2         49                                                                 51
                       ----------   -------   --------     --------   --------         --------   ------         ---------

Balance September 25,
  1998                 40,747,668   $40,748   $201,154     $284,270   $(38,466)        (30,804)   $(586)         $487,120
                       ==========   =======   ========     ========   =========        ========   ======         =========
</TABLE>


<PAGE>

10.  Major Business Groups
<TABLE>
<CAPTION>

FOR NINE MONTHS                            Engineering                                     Corporate and
                                               and            Energy        Power          Financial
                            Total          Construction       Equipment     Systems        Service *
<S>                         <C>            <C>                <C>           <C>            <C>

Ended
September 25, 1998
Revenues                   $3,193,427      $2,364,736         $808,868      $140,701       $(120,878)
Interest Expense               44,829           6,867            6,004        16,857          15,101
(Loss)/Earnings Before
  Income Taxes                (82,030)         72,007           36,644      (158,082)        (32,599)
Provision/(Benefit) for
  Income Taxes                 34,813          25,541           13,811         6,801         (11,340)
                           -----------     ----------         --------      --------       ----------

Net (Loss)/Earnings        $ (116,843)     $   46,466         $ 22,833     $(164,883)      $ (21,259)
                           ===========     ==========         ========     ==========      ==========

                                           Engineering                                     Corporate and
                                               and            Energy        Power          Financial
                            Total          Construction       Equipment     Systems        Service *

Ended
September 26, 1997
Revenues                   $3,125,390      $2,207,622         $926,434     $115,532        $(124,198)
Interest Expense               41,920           3,814            9,770       17,262           11,074
(Loss)/Earnings Before
  Income Taxes                (11,383)         48,975           36,060      (54,467)         (41,951)
Provision/(Benefit) for
  Income Taxes                  1,374          20,962           12,864      (18,090)         (14,362)
                           -----------     ----------         --------     ---------       ----------

Net(Loss)/Earnings         $  (12,757)     $   28,013         $ 23,196    $ (36,377)       $ (27,589)
                           ===========     ==========         ========    ==========       ==========
</TABLE>

*    Includes intersegment eliminations


<PAGE>


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                   FOSTER WHEELER CORPORATION AND SUBSIDIARIES
                                   (Unaudited)

The following is  Management's  Discussion  and Analysis of certain  significant
factors that have affected the financial  condition and results of operations of
the Corporation for the periods  indicated  below.  This discussion and analysis
should be read in  conjunction  with the 1997  Annual  Report on Form 10-K filed
March 19, 1998.

Results of Operations

                                CONSOLIDATED DATA
               (In Millions of Dollars, except Per Share Amounts)
<TABLE>
<CAPTION>

                    Three Months Ended                     Nine Months Ended
              Sept. 25, 1998    Sept. 26, 1997     Sept. 25, 1998     Sept. 26, 1997
<S>           <C>               <C>                <C>                <C>

Backlog        $7,871.8         $7,222.6           $7,871.8           $7,222.6
New orders     $1,312.8         $1,164.7           $4,131.4           $3,832.1
Revenues       $1,101.5         $1,049.8           $3,193.4           $3,125.4
Net losses     $ (154.6)        $  (29.3)          $ (116.8)          $  (12.8)
</TABLE>

The Corporation's  consolidated  backlog at September 25, 1998 totaled $7,871.8,
the highest in the history of the Corporation,  which represented an increase of
9% over the amount as of September 26, 1997. The dollar amount of backlog is not
necessarily  indicative of the future earnings of the Corporation related to the
performance of such work. The backlog of unfilled orders includes  amounts based
on signed  contracts as well as agreed  letters of intent which  management  has
determined are likely to be performed. Although backlog represents only business
which is considered firm,  cancellations or scope  adjustments may occur. Due to
factors outside the Corporation's control, such as changes in project schedules,
the  Corporation  cannot predict with certainty the portion of backlog not to be
performed. Backlog is adjusted to reflect project cancellations, deferrals, sale
of subsidiaries and revised project scope and cost. This adjustment for the nine
months ended  September  25, 1998 was $467.2,  compared with $377.0 for the nine
months ended September 26, 1997.  Furthermore,  the  Corporation's  future award
prospects include several  large-scale  international  projects and, because the
large size and uncertain timing of these projects can create  variability in the
Corporation's contract awards, future award trends are difficult to predict.

New orders  awarded for the three and nine months ended  September 25, 1998 were
$1,312.8  and $4,131.4  respectively,  compared to $1,164.7 and $3,832.1 for the
periods ended September 26, 1997.  Approximately 57% of new orders booked in the
nine  months  ended  September  25,  1998  were  for  projects  awarded  to  the
Corporation's  subsidiaries located outside the United States. Key countries and
geographic  areas  contributing  to new orders awarded for the nine months ended
September  25,  1998 were the United  States,  Singapore,  Europe and the Middle
East.

In the second quarter of 1997 the Corporation recorded provisions totaling $98.5
and a $56.4  pretax  gain on the sale of a  subsidiary.  The net amount of $42.1
($27.4 after tax or $.67 per share) included the following:

(a)  $60.0 provision recorded in cost of operating revenues in the Power Systems
     Group with respect to the Robbins Resource Recovery Facility,

(b)  $32.0  provision  recorded  in cost of  operating  revenues  in the  Energy
     Equipment Group for the last phase of the Group's reorganization started in
     1995 following the Ahlstrom Pyropower acquisition,

(c)  $6.5  provision  included in other  deductions  in Corporate  and Financial
     Services for the write-downs of long-lived assets, and

(d)  $56.4 gain included in other income in the Energy  Equipment  Group for the
     sale of Glitsch International, Inc.'s assets.

Operating  revenues  increased  slightly in the three months ended September 25,
1998  compared to the three months  ended  September  26, 1997 to $1,081.1  from
$1,030.0.  The most recent nine month  period  reflects an increase in operating
revenues of $117.2 from  $3,025.7 in 1997 to $3,142.9 in 1998.  Included in 1997
operating   revenues  were  $143.4  for  the   nine-month   period  for  Glitsch
International Inc., which was sold in June 1997.

Gross  earnings,  which  are  equal  to  operating  revenues  minus  the cost of
operating  revenues,  increased by $118.6 in the nine months ended September 25,
1998 as compared  with the nine months ended  September  26, 1997 to $279.6 from
$161.0.  Gross earnings  increased by $72.0 in the three months ended  September
25, 1998 as compared  with the three  months ended  September  26, 1997 to $91.5
from $19.5.  These increases were primarily the result of the negative impact of
provisions  taken in the second  quarter of 1997,  which were  discussed  above,
offset by the  reduction  in gross  earnings  in 1998 due to the sale of Glitsch
International, Inc.

Selling, general and administrative expenses decreased by 14% in the nine months
ended  September 25, 1998 as compared with the same period in 1997,  from $207.4
to $179.0.  Selling,  general and administrative expenses decreased by 2% in the
three months ended  September 25, 1998 as compared with the same period in 1997,
from $63.4 to $62.1.  The  nine-month  decrease is primarily  due to the sale of
Glitsch International, Inc. in June 1997.

Other  income in the nine months  ended  September  25,  1998 as  compared  with
September  26, 1997  decreased  to $50.5 from $99.6.  Other  income in the three
months ended  September 25, 1998 as compared with  September 26, 1997  increased
slightly  to $20.4 from $19.8.  Approximately  $56.4 of the  difference  for the
nine-month  period  was  due  to  the  gain  recorded  on the  sale  of  Glitsch
International, Inc.'s assets.

Other  deductions in the nine months ended  September 25, 1998, of $233.1,  were
significantly  higher than that reported in the nine months ended  September 26,
1997 primarily due to the $175.0 charge  relating to the Robbins  Project in the
third quarter of 1998.  Interest expense increased by approximately $2.9 for the
nine months ended  September  25, 1998.  Interest  expense for the quarter ended
September 25, 1998 increased by $2.0 compared to the third quarter of 1997.

The  effective  tax rate of 36.9% and 37.4%  (prior to the $175.0  charge on the
Robbins  Project)  for the three  and nine  months  ended  September  25,  1998,
respectively,  exceed the U.S.  statutory  rate primarily due to state taxes and
the impact of foreign source earnings.  The valuation allowance was increased by
approximately  $60.0 as a result of the Robbins Project charge.  Such charge has
resulted in  additional  deferred tax assets for financial  reporting  purposes,
thereby  making it less  likely  that a portion of the other tax assets  will be
utilized.  Although  realization is not assured,  management believes that it is
more likely than not that all of the deferred tax assets (after consideration of
the valuation allowance) will be realized. The amount of the deferred tax assets
considered realizable,  however, could change in the near future if estimates of
future taxable income during the carryforward period are changed.

Net losses for the nine months ended September 25, 1998 were $116.8 or $2.87 per
share-basic  compared to a loss of $12.8 for the nine months ended September 26,
1997.  Net losses for the three months ended  September  25, 1998 were $154.6 or
$3.80 per  share-basic  compared to a loss of $29.3 for the three  months  ended
September 26, 1997.


                       ENGINEERING AND CONSTRUCTION GROUP
                            (In Millions of Dollars)
<TABLE>
<CAPTION>
                                 Three Months Ended                        Nine Months Ended
                          Sept. 25, 1998     Sept. 26, 1997         Sept. 25, 1998    Sept. 26, 1997
<S>                       <C>                <C>                    <C>               <C>

Backlog                   $6,212.8           $5,209.7               $6,212.8          $5,209.7
New orders                $1,069.2           $  876.0               $3,477.2          $2,643.2
Operating Revenues        $  807.4           $  772.4               $2,337.6          $2,177.2
Gross earnings from
  operations              $   48.9           $   13.3               $  152.8          $  128.6
</TABLE>

The Engineering and  Construction  Group ("E&C Group"),  had a record backlog of
$6,212.8 at September 25, 1998, which  represented a 19% increase from September
26, 1997 due primarily to orders awarded to the Continental  European and United
States  subsidiaries.  Approximately  19.2%  of the E&C  Group's  backlog  as of
September  25, 1998 was based on awards for  projects  in  Southeast  Asia.  The
majority of the Southeast  Asian backlog  represents  orders for export oriented
projects from national oil companies or multinational  corporations.  New orders
booked for the three and nine month periods ended  September 25, 1998  increased
by 22% and 32%,  respectively,  compared  with the periods  ended  September 26,
1997. These increases were primarily the result of the significant  orders taken
by the Continental European and United States operating subsidiaries.  Operating
revenues for the three month period ended September 25, 1998 increased  slightly
compared to the three-month  period ended September 26, 1997 and increased by 7%
for the  nine-month  period in 1998 compared  with the same period in 1997.  The
United States and United Kingdom subsidiaries were primarily responsible for the
nine-month  increases.  Gross earnings from operations increased by 268% and 19%
for the three and  nine-month  periods ended  September 25, 1998,  respectively,
compared  with the  corresponding  periods ended  September 26, 1997.  The gross
earnings for the  three-month  period were higher  primarily due to the increase
reported by the United  Kingdom  ($27.9) and French  ($12.3)  subsidiaries.  The
nine-month gross earnings were higher due to the increase reported by the United
Kingdom  subsidiary of $35.9 which was offset by the decrease of $14.2  reported
by the Environmental subsidiary.


<PAGE>


                             ENERGY EQUIPMENT GROUP
                            (In Millions of Dollars)
<TABLE>
<CAPTION>
                               Three Months Ended                      Nine Months Ended
                        Sept. 25, 1998    Sept. 26, 1997       Sept. 25, 1998     Sept. 26, 1997
<S>                     <C>               <C>                  <C>                <C>

Backlog                 $1,425.8          $1,729.0             $1,425.8           $1,729.0
New orders              $  240.1          $  258.3             $  582.6           $1,107.2
Operating Revenues      $  267.2          $  250.8             $  802.5           $  855.9
Gross earnings from
  operations            $   34.0          $    0.0             $   95.2           $   58.3
                        ========          ========             ========           ========
</TABLE>


The Energy  Equipment  Group had a backlog of $1,425.8 at  September  25,  1998,
which represented an 18% decrease from September 26, 1997 due primarily to lower
orders awarded during 1998.  Approximately  40% of the Energy Equipment  Group's
backlog as of September 25, 1998 represents orders from China.  These orders are
for large utility size boilers,  payments under which are supported by financing
agreements  guaranteed  by United  States,  European or Japanese  export  credit
agencies. New orders booked for the three and nine-month periods ended September
25, 1998 decreased by 7% and 47%,  respectively,  from corresponding  periods in
1997. The sale of Glitsch International, Inc. accounted for approximately $130.0
of the nine-month  decrease.  Operating revenues for the nine-month period ended
September 25, 1998 decreased primarily due to the sale of Glitsch International,
Inc. Gross earnings from  operations  increased by $34.0 and $36.9 for the three
and nine-month  periods ended September 25, 1998 compared with the periods ended
September 26, 1997.  The gross  earnings for the  nine-month  period were higher
primarily due to the $32.0  provision taken for  reorganization  costs offset by
the effect of selling Glitsch International, Inc. in 1997.


                               POWER SYSTEMS GROUP
                            (In Millions of Dollars)
<TABLE>
<CAPTION>
                               Three Months Ended                     Nine Months Ended
                            Sept. 25, 1998    Sept. 26, 1997       Sept. 25, 1998    Sept. 26, 1997
<S>                         <C>               <C>                  <C>               <C>

Backlog                     $268.4            $387.8               $268.4            $387.8
New orders                  $ 37.3            $ 34.8               $131.3            $111.7
Operating Revenues          $ 40.7            $ 32.0               $117.9            $109.4
Gross earnings/(loss)
  from operations           $  8.4            $  5.9               $ 30.2           $ (27.7)
                            ======            ======               ======           =======
</TABLE>

The Power Systems  Group's gross  earnings from  operations  for the  nine-month
period ended  September  25, 1998  improved  primarily  due to the impact of the
$60.0  provision  taken in the second  quarter of 1997 for the Robbins  Project.
This  improvement  was offset by lower  revenues at the Camden  Municipal  Solid
Waste  Facility  of $4.7  for the  nine  months  primarily  due to  flow-control
legislation  introduced  in 1997 (see Footnote 2). In the third quarter of 1998,
the Corporation recorded a $175.0 charge included in other deductions related to
the Robbins Project (see Footnote 2).

Financial Condition

The  Corporation's  consolidated  financial  condition  declined during the nine
months ended  September  25, 1998 as compared to December 26, 1997  primarily as
the result of the charge for the Robbins Project.  Stockholders'  equity for the
nine months ended  September 25, 1998  decreased by $132.3  million,  due to net
losses  of  $116.8  million,  dividends  paid  and the  accumulated  translation
adjustment.

During the nine months ended  September 25, 1998,  the  Corporation's  long-term
investments  in land,  buildings and equipment  were $100.9  million as compared
with  $135.8  million for the  comparable  period in 1997.  Approximately  $29.6
million  was  invested  by the Power  Systems  Group in build,  own and  operate
projects during the first nine months of 1998.

Since December 26, 1997,  long-term debt,  including current  installments,  and
bank loans increased by $123.5 million.

In the third quarter 1998, a subsidiary of the Corporation  entered into a three
year agreement with a financial institution whereby the subsidiary would sell an
undivided  interest of $41.9 million in a designated pool of qualified  accounts
receivable.  Under the terms of the agreement,  new receivables are added to the
pool as collections reduce previously sold accounts receivable.  The credit risk
of uncollectible accounts receivable has been transferred to the purchaser.  The
Corporation services,  administers and collects the receivables on behalf of the
purchaser.  Fees payable to the purchaser under this agreement are equivalent to
rates afforded high quality commercial paper issuers plus certain administrative
expenses and are included in other deductions,  in the Consolidated Statement of
Earnings.  The  agreement  contains  certain  covenants and provides for various
events of termination.  At September 25, 1998, $41.9 million in receivables were
sold  under the  agreement  and are  therefore  not  reflected  in the  accounts
receivable - trade balance in the Consolidated Balance Sheet.

In the ordinary course of business,  the Corporation and its subsidiaries  enter
into contracts  providing for assessment of damages for nonperformance or delays
in  completion.  Suits  and  claims  have  been or may be  brought  against  the
Corporation by customers  alleging  deficiencies in either  equipment  design or
plant  construction.  Based on its  knowledge  of the  facts  and  circumstances
relating  to the  Corporation's  liabilities,  if  any,  and  to  its  insurance
coverage,  management of the  Corporation  believes that the disposition of such
suits will not result in charges against assets or earnings materially in excess
of amounts provided in the accounts.

Liquidity and Capital Resources

Cash and cash  equivalents  totaled  $125.4  million at  September  25,  1998, a
decrease of $42.1  million  from fiscal  year end 1997.  Short-term  investments
decreased by $29.6  million to $66.1  million.  During the nine months of fiscal
1998, the Corporation paid $25.6 million in dividends to stockholders. Cash used
by operating  activities  amounted to $83.4  million.  The Power  Systems  Group
invested  approximately  $29.6  million in the  construction  of a  cogeneration
plant.

Over the last several years working  capital needs have increased as a result of
the Corporation  satisfying its customers'  requests for more favorable  payment
terms under contracts.  Such requests generally include reduced advance payments
and more favorable payment schedules.  Such terms, which require the Corporation
to defer receipt of payments from its customers,  have had a negative  impact on
the Corporation's  available working capital. The Corporation intends to satisfy
its continuing  working  capital needs by borrowing  under its Revolving  Credit
Agreements,  through  internal cash generation and third party financings in the
capital  markets.  The  Corporation's  pricing  of  contracts  recognizes  costs
associated with the use of working capital.

As a  result  of  the  Robbin's  Project  charge,  the  Corporation  was  not in
compliance with its financial  covenants under its Revolving Credit  Agreements.
The Corporation  received a 60-day waiver of these  covenants,  which expires on
November 24, 1998. The Corporation  expects to receive a commitment from a group
of financial  institutions for the entire $400.0 million that may be drawn under
the Revolving Credit  Agreements prior to November 24, 1998, and expects the new
facility to be  available  by December  31,  1998.  The  Corporation  expects to
receive an extension  of the waiver from its  existing  bank group until the new
facility is  available.  However,  as of the date of this filing,  the financing
agreement was not  completed.  Accordingly,  $300.0  million under the Revolving
Credit   Agreements  that  had  been  classified  as  long-term  debt  has  been
reclassified as short term.

Management of the Corporation  believes that cash and cash equivalents of $125.4
million and  short-term  investments  of $66.1  million at  September  25, 1998,
combined with cash flows from operating activities,  amounts available under its
Revolving Credit Agreements and access to third-party  financings in the capital
markets will be adequate to meet its working capital and liquidity needs for the
foreseeable  future.  During the second quarter of 1998, the Corporation filed a
Registration  Statement  on Form S-3  relating to up to $300.0  million of debt,
equity and other securities.

Other Matters

The  Corporation  and its  subsidiaries,  along with many other  companies,  are
codefendants in numerous lawsuits pending in the United States. Plaintiffs claim
damages for personal  injury  alleged to have arisen from  exposure to or use of
asbestos  in  connection   with  work  performed  by  the  Corporation  and  its
subsidiaries  during the 1970's and prior. As of September 25, 1998,  there were
approximately  63,000 claims pending. In 1998,  approximately  19,000 new claims
were filed and  approximately  21,000 were either  settled or dismissed  without
payment.  The  Corporation  has  agreements  with  insurance  carriers  covering
significantly  more than a majority  of the  potential  costs  relating to these
exposures. The Corporation has recorded, with respect to asbestos litigation, an
asset relating to the probable insurance  recoveries and a liability relating to
probable losses. These assets and liabilities were estimated based on historical
data  developed  in  conjunction  with  outside   experts.   Management  of  the
Corporation  has  carefully   considered  the  financial   viability  and  legal
obligations  of its insurance  carriers and has concluded  that except for those
insurers that have become or may become insolvent, the insurers will continue to
adequately fund claims and defense costs relating to asbestos litigation.

In 1997, the United States Supreme Court  effectively  invalidated  New Jersey's
long-standing  municipal solid waste flow rules and  regulations.  The immediate
effect was to eliminate the  guaranteed  supply of municipal  solid waste to the
Camden Project with its corresponding tipping fee revenue. As a result,  tipping
fees have been  reduced to market  rate in order to  provide a steady  supply of
fuel to the plant. Those market-based revenues are not expected to be sufficient
to service the debt on  outstanding  bonds,  which were issued to construct  the
plant and to acquire a landfill for Camden  County's  use. The  Corporation  has
filed suit against certain involved parties,  including the State of New Jersey,
seeking  among other things,  to void the  applicable  contracts and  agreements
governing the Camden  Project.  Pending final outcome of the  litigation and the
results of legislative  initiatives in New Jersey to resolve the issues relating
to the debt obligations associated with the Camden Project,  management believes
that  the  plant  will  continue  to  operate  at full  capacity  while  earning
sufficient revenues to cover its fees as operator of the plant. However, at this
time,  management  cannot  determine  the effect of the  foregoing on the Camden
Project.

The ultimate legal and financial  liability of the Corporation in respect to all
claims,  lawsuits  and  proceedings  cannot  be  estimated  with  certainty.  As
additional  information concerning the estimates used by the Corporation becomes
known,  the  Corporation  reassesses  its  position  both with  respect  to gain
contingencies and accrued liabilities and other potential  exposures.  Estimates
that are particularly  sensitive to future change relate to legal matters, which
are subject to change as events  evolve and as  additional  information  becomes
available during the administration and litigation process.

Year 2000

General

For purposes of this  statement  the "Year 2000  Problem" is defined to mean the
inability of a computer or other device to perform  properly because it does not
interpret   date   information   correctly.   It  is  believed   that  cases  of
misinterpretation  might  result from  computer  hardware,  firmware or software
using only two digits to identify year information, and therefore not being able
to distinguish  the year 1900 from the year 2000.  However,  other  date-related
misinter-pretations  may also occur,  including  one, which could occur when the
date February 29, 2000 is processed.  Also for purposes of this statement  "Year
2000  Compliant"  means  that  the  performance  or  functionality  of a  device
(including software) is not affected by dates prior to, during or after the Year
2000.

State of Readiness/Business Continuation Plan

The Corporation and its subsidiaries  initiated Year 2000 activities in 1996. In
1997 a formal Year 2000 Problem management  strategy was prepared.  At that time
the Corporation formed a company-wide committee (the "Y2K Committee") to develop
a  Business  Continuation  Plan  focused on the Year 2000  Problem.  Each of the
Corporation's  subsidiaries  formed  similar  committees and  coordinated  their
efforts through Chairmen selected for each Committee.  Each subsidiary committee
also prepared a Business Continuation Plan. Each Committee Chairman reports on a
quarterly basis to the Corporation's Y2K Committee Chairman, who then reports to
the Corporation's Executive Committee.

In 1997, the Y2K Committee prepared a plan to safeguard against  interruption of
the Corporation's  (and its  subsidiaries')  business  activities as a result of
Year 2000  Problems.  The plan  included an  Assessment  Step, a Testing Step, a
Remediation Step and a Confirmation  Step. Since 1996 the Corporation and/or its
subsidiaries have been  investigating the IT and non-IT equipment,  software and
services they will use to identify,  evaluate,  modify  and/or  replace goods or
services which are not Year 2000 Compliant.

The Corporation and its subsidiaries  have all completed the Assessment Step and
many  subsidiaries  are  substantially  advanced in the Testing and  Remediation
Steps. Some  subsidiaries,  such as Foster Wheeler Power Systems,  Inc., and its
subsidiaries,  must  wait for  scheduled  outage  periods  in order to  complete
Testing  and/or  Remediation  activities,  but  all  are  expected  to  do so by
mid-1999. All subsidiaries have reported that they have completed at least fifty
percent  (50%)  of their  Testing  Step  activities.  The  primary  computerized
reporting  and  control  system  used  by  the   Corporation  and  most  of  its
subsidiaries,  which was provided by J.D. Edwards, has been confirmed to be Year
2000 Compliant.

Liability Exposure Management

In 1997 the  Corporation  formed a group to  develop  a  strategy  for  managing
liability  exposures  which  could  result from the Year 2000  Problem  (the Y2K
Liaison  Group).  Since then the Y2K Liaison Group has developed  guidelines for
the  Corporation's  subsidiaries  that  address  future,  current and  completed
contract  activities,   and  has  also  conducted  global  conferences  for  the
Corporation's   subsidiaries   to  discuss  how  those   guidelines   should  be
implemented.   The  Corporation's   Executive   Committee  adopted  the  Group's
guidelines as business policies in 1998.

Over the past  twenty  years,  the  Corporation  has owned the stock of  various
companies  which are no longer  operating  or whose stock or assets were sold to
others.  When it sold the  stock or  assets of such  companies  the  Corporation
transferred the company's records to the purchaser. The Corporation continues to
evaluate  the  specific  steps it  intends  to take in regard to  equipment  and
software that was created and sold by those  companies  during the time that the
Corporation  owned them. In a given case the Corporation might be unable to find
records that would allow it to identify the nature of the equipment and software
or the identities of the owners of the equipment and software.

Third Party Review

In 1998 the  Corporation  engaged a third  party to  conduct a review of certain
aspects of the Corporation's and its subsidiaries'  Business Continuation Plans.
This review should be completed before the end of November 1998. The Corporation
also engaged several law firms to prepare reports  regarding  liabilities  which
the Corporation and its subsidiaries may face, and recommendations for liability
exposure  management.  This work was completed in August 1998.  The  Corporation
plans to have outside  counsel  conduct a legal audit of contract  activities in
early 1999.

Coordination with Outside Parties

The Corporation and its subsidiaries coordinate with insurers, clients, vendors,
contractors and trade  organizations  to keep abreast of Year 2000 matters.  The
Corporation  also has  participated  and plans to  participate  in  conferences,
seminars and other  gatherings to improve its Year 2000  readiness  condition as
the Year 2000 approaches.

Costs

The total  cost  associated  with  required  modifications  to become  Year 2000
Compliant  is  not  expected  to be  material  to  the  Corporation's  financial
position.  The  estimated  total cost of the Year 2000 Project is  approximately
$10.0 million.  Items of a capital  nature will be  capitalized  while all other
costs will be expensed as incurred.  This  estimate  does not include a share of
Year 2000 costs that may be incurred by partnerships and joint ventures in which
the Corporation or its  subsidiaries  participate.  The total amount expended on
the Business  Continuation Plan through September 25, 1998 was $4.0 million,  of
which  approximately  $2.0  million  related  to the cost to repair  or  replace
software and related hardware problems, and approximately $.5 million related to
the cost of identifying and communicating with vendors and/or  contractors.  The
estimated future cost of completing  implementation of the Business Continuation
Plan is estimated to be approximately $6.0 million.  All Year 2000 expenses will
be funded from operations.

Contingency Plans

Although the  Corporation  and its  subsidiaries  expect to be ready to continue
their business  activities  without  interruption  by a Year 2000 Problem,  they
recognize  that they depend on outsiders  (such as  suppliers,  contractors  and
utility  companies) to provide  various  goods and services  necessary for doing
business.  The Corporation is now developing a contingency plan for itself,  and
has required  each of its  subsidiaries  to do likewise.  Each plan will address
alternative  arrangements to cope with Year 2000 Problems caused by others,  and
back-up  strategies to follow if a  subsidiary's  software or equipment does not
perform  properly,  even  though  it  appears  now to be  Year  2000  Compliant.
Contingency Plans are expected to be finalized by mid 1999.

Risks

The failure to correct a Year 2000 Problem could result in an  interruption  in,
or a failure of, certain normal business activities or operations. Such failures
are not expected to materially  adversely  affect the  Corporation's  results of
operations  and financial  condition.  However,  due to the general  uncertainty
inherent in the Year 2000 Problem,  resulting in part from the uncertainty about
the Year 2000 readiness of vendors,  contractors and customers,  the Corporation
is unable  to  determine  at this time  whether  the  consequences  of Year 2000
Problems will have a material impact on the Corporation's  results of operations
or financial  condition.  The  completion of the Business  Continuation  Plan is
expected to significantly  reduce the  Corporation's  level of uncertainty about
the Year 2000  Problem  and,  in  particular,  about  Year 2000  Compliance  and
readiness of vendors,  contractors and customers.  The Corporation believes that
the  implementation  of new business systems and the complete  implementation of
the Business  Continuation  Plan should reduce the  possibility  of  significant
interruptions of normal operation.

It is not  possible to describe a "most  reasonably  likely worst case Year 2000
scenario"  without making a variety of  assumptions.  Our Business  Continuation
Plan assumes that parties which  provide us goods or services  necessary for our
operations will continue to do so, or that the Contingency  features of our Plan
will respond to address our needs.  Based upon those assumptions we believe that
a most likely  worst case Year 2000  scenario  may make it  necessary to replace
some suppliers or contractors,  rearrange some work plans or even interrupt some
field  activities.  We do not believe that such  circumstances  will  materially
adversely affect our financial condition or results of operations, even if it is
necessary to incur costs to do so.

Readers are cautioned that forward-looking statements contained in the Year 2000
Statement should be read in conjunction with the Corporation's  risk disclosures
under the heading: "Safe Harbor Statement."

Conversion to the Euro

On January 1, 1999,  several of our European  affiliates will be converting over
to a  common  currency  - the  Euro.  At this  time,  the  Corporation  does not
anticipate any material negative impact related to the conversion to the Euro.


Safe Harbor Statement

This Management's  Discussion and Analysis of Financial Condition and Results of
Operations  and other  sections of the Report Form 10-Q contain  forward-looking
statements  that  are  based  on  management's  assumptions,   expectations  and
projections about the various industries within which the Corporation  operates.
Such  forward-looking  statements  by their nature  involve a degree of risk and
uncertainty.  The Corporation cautions that a variety of factors,  including but
not limited to the  following,  could cause  business  conditions and results to
differ materially from what is contained in forward-looking statements:  changes
in  the  rate  of  economic   growth  in  the  United  States  and  other  major
international  economies,  changes  in  investment  by  the  energy,  power  and
environmental industries, changes in regulatory environment,  changes in project
schedules,  changes in trade,  monetary and fiscal policies worldwide,  currency
fluctuations, outcomes of pending and future litigation, protection and validity
of patents and other intellectual property rights and increasing  competition by
foreign and domestic companies.

The Corporation's  management continues to evaluate the Corporation's  condition
of readiness  relating to the Year 2000 Problem and the costs and risks  arising
from the Year 2000 Problem,  and is designing and developing  the  Corporation's
contingency  plan,  based  on its  best  estimates  of  certain  factors,  which
estimates were derived by relying on numerous  assumptions  about future events.
However, there can be no guarantee that these assumptions or estimates have been
correctly  made,  or that  there  will not be a delay  in,  or  increased  costs
associated with, the implementation of the Company's Business Continuation Plan.
A delay in the implementation of the Business  Continuation Plans of the Company
or of the Company's  subsidiaries could also affect the Company's  readiness for
the Year 2000.  Specific  factors that might cause actual outcome to differ from
the projected outcome include,  without limitation,  the continued  availability
and  cost of  consulting  services  and of  personnel  trained  in the  computer
programming  necessary for  remediation  of the Year 2000 issue,  the ability to
locate and correct all relevant computer code, timely responses by third parties
and suppliers,  the ability to implement  interfaces between the new systems and
the systems not being replaced.

<PAGE>

PART II   OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS

Under  the  federal  Comprehensive  Environmental  Response,   Compensation  and
Liability Act  ("CERCLA")  and similar state laws, the current owner or operator
of real  property and the past owners or operators of real property (if disposal
took place during such past ownership or operation) may be jointly and severally
liable for the costs of removal or Remediation of toxic or hazardous  substances
on or under their  property,  regardless of whether such materials were released
in violation of law or whether the owner or operator knew of, or was responsible
for, the presence of such substances.  Moreover,  under CERCLA and similar state
laws,  persons who arrange for the  disposal or  treatment of hazardous or toxic
substances may also be jointly and severally liable for the costs of the removal
or remediation of such  substances at a disposal or treatment  site,  whether or
not such  site was  owned or  operated  by such  person  ("off-site  facility").
Liability at such off-site  facilities is typically  allocated  among all of the
viable responsible parties based on such factors as the relative amount of waste
contributed  to a  site,  toxicity  of such  waste,  relationship  of the  waste
contributed by a party to the remedy chosen for the site, and other factors.

The Corporation  currently owns and operates industrial  facilities and has also
transferred  its interests in industrial  facilities  that it formerly  owned or
operated.  It is likely  that as a result of its  current or former  operations,
such facilities have been impacted by hazardous  substances.  The Corporation is
not aware of any  conditions  at its  currently  owned  facilities in the United
States that it expects will cause the  Corporation to incur  significant  costs.
The  Corporation is aware of potential  environmental  liabilities at facilities
that it recently  acquired in Europe,  but the Corporation has the benefit of an
indemnity  from the Seller with  respect to any  required  remediation  or other
environmental  violations  that it believes  will  address the costs of any such
remediation or other required  environmental  measures. The Corporation also may
receive claims,  pursuant to indemnity  obligations from owners of recently sold
facilities  that may require the  Corporation  to incur costs for  investigation
and/or remediation. Based on the available information, the Corporation does not
believe that such costs will be material.  No assurance can be provided that the
Corporation will not discover environmental conditions at its currently owned or
operated  properties,  or that  additional  claims will be made with  respect to
formerly owned properties,  that would require the Corporation to incur material
expenditures to investigate and/or remediate such conditions.

The  Corporation had been notified that it was a potentially  responsible  party
("PRP")  under  CERCLA  or  similar  state  laws at three  off-site  facilities,
excluding sites as to which the Corporation has resolved its liability.  At each
of these sites, the  Corporation's  liability should be substantially  less than
the total site remediation costs because the percentage of waste attributable to
the  Corporation  compared to that  attributable  to all other PRPs is low.  The
Corporation does not believe that its share of cleanup obligations at any of the
three  off-site  facilities  as to which it has  received a notice of  potential
liability will individually exceed $1.0 million.

The  Corporation   received  an   Administrative   Order  and  Notice  of  Civil
Administrative  Penalty Assessment (the  "Administrative  Order") dated April 1,
1997 alleging state air act violations at the Camden Project in New Jersey.  The
Administrative   Order  seeks  a  penalty  of  $32,000  and  revocation  of  the
Certificate to Operate. The Corporation  requested an administrative  hearing to
challenge  the  Administrative  Order,  which request  automatically  stayed any
permit  revocation.  The  Corporation  expects an additional  penalty  demand to
increase  to more  than  $100,000  as a result  of other  violations  which  the
Corporation  expects the state to allege. The Corporation  believes that it will
be able to address  all  issues of  concern to the state and that the  resulting
civil penalty will not be material to the Corporation.

The Corporation received a Complaint for Injunction and Civil Penalties from the
State  of  Illinois  date  April  28,  1998  alleging  primarily  state  air act
violations  at the  Robbins  Project  (People of the State of Illinois v. Foster
Wheeler  Robbins,  Inc.,  filed in the Circuit  Court of Cook County,  Illinois,
County Department,  Chancery Division). Although the complaint seeks substantial
civil  penalties for numerous  violations  of up to $50,000 for each  violation,
with an  additional  penalty  of  $10,000  for each day of each  violation,  the
maximum  allowed  under  the  statute,  and  an  injunction  against  continuing
violations,  the  Corporation  has  submitted  a plan to the state  designed  to
correct  all  violations  and expects  that the  resulting  penalty  will not be
material to the Corporation.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits

              Exhibit
              Number       Exhibit

              12-1         Statement of Computation of Consolidated Ratio of
                           Earnings to Fixed Charges and Combined Fixed
                           Charges and Preferred Share Dividend Requirements

              27           Financial Data Schedule (For the informational
                           purposes of the Securities and Exchange Commission
                           only.)

         (b)  Reports on Form 8-K
              
              The  Corporation  filed  a current report on Form 8-K dated August
              27, 1998,  which  described  the $175.0 million charge relating to
              the Robbins Project.


                                   SIGNATURES

Pursuant  to the  requirements  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.

                                               FOSTER WHEELER CORPORATION
                                                       (Registrant)


Date:  November 9, 1998                        /s/ Richard J. Swift
                                                   Richard J. Swift
                                                   Chairman, President and
                                                   Chief Executive Officer


Date:  November 9, 1998                        /s/ David J. Roberts
                                                   David J. Roberts
                                                   Vice Chairman and
                                                   Chief Financial Officer