<PAGE>   1
                                  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 MARCH 26, 1999

                                       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: 40,725,887 shares of the
Corporation's common stock ($1.00 par value) were outstanding as of March 26,
1999.
<PAGE>   2
                           FOSTER WHEELER CORPORATION


                                      INDEX

Part I            Financial Information:

         Item 1 - Financial Statements:

                  Condensed Consolidated Balance Sheet at March 26, 1999 and
                  December 25, 1998

                  Condensed Consolidated Statement of Earnings and
                  Comprehensive Income Three Months Ended
                  March 26, 1999 and March 27, 1998

                  Condensed Consolidated Statement of Cash Flows
                  Three Months Ended March 26, 1999 and March 27, 1998

                  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 4 - Submission of Matters to a Vote of Security Holders

         Item 6 - Exhibits and Reports on Form 8-K

Signatures


                                        1
<PAGE>   3
PART I    FINANCIAL INFORMATION
ITEM 1 -  FINANCIAL STATEMENTS

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

<TABLE>
<CAPTION>
                                                          March 26, 1999    December 25,
ASSETS                                                      (Unaudited)        1998*    
                                                            -----------     -----------
<S>                                                       <C>               <C>
CURRENT ASSETS:
Cash and cash equivalents ..............................    $   166,504     $   180,068
Short-term investments .................................         46,389          61,223
Accounts and notes receivable ..........................        908,967         857,005
Contracts in process and inventories ...................        431,698         478,481
Prepaid, deferred and refundable income taxes ..........         61,496          66,068
Prepaid expenses .......................................         31,535          29,997
                                                            -----------     -----------
         Total current assets ..........................      1,646,589       1,672,842
                                                            -----------     -----------
Land, buildings and equipment ..........................      1,026,724       1,015,795
Less accumulated depreciation ..........................        343,954         339,009
                                                            -----------     -----------
     Net book value ....................................        682,770         676,786
                                                            -----------     -----------
Notes and accounts receivable - long-term ..............        101,615         103,612
Investments and advances ...............................        100,421          95,827
Intangible assets, net .................................        280,849         285,245
Prepaid pension cost and benefits ......................        198,433         196,812
Other, including insurance recoveries ..................        289,150         286,886
Deferred income taxes ..................................          6,932           4,291
                                                            -----------     -----------
         TOTAL ASSETS ..................................    $ 3,306,759     $ 3,322,301
                                                            ===========     ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current installments on long-term debt .................    $    19,931     $    19,751
Bank loans .............................................         98,939         107,051
Accounts payable and accrued expenses ..................        673,323         718,337
Estimated costs to complete long-term contracts ........        576,739         563,271
Advance payments by customers ..........................         55,416          56,630
Income taxes ...........................................         24,072          26,626
                                                            -----------     -----------
         Total current liabilities .....................      1,448,420       1,491,666
Corporate and other debt less current installments .....        403,647         540,827
Special-purpose project debt less current installments .        293,417         294,898
Deferred income taxes ..................................         80,221          85,484
Postretirement and other employee benefits
     other than pensions ...............................        166,030         168,799
Other long-term liabilities and minority interest ......        175,739         168,509
Mandatorily Redeemable Preferred Securities of
     Subsidiary Trust Holding Solely Junior Subordinated
     Deferrable Interest Debentures ....................        175,000              -- 
                                                            -----------     -----------
         TOTAL LIABILITIES .............................      2,742,474       2,750,183
                                                            -----------     -----------

STOCKHOLDERS' EQUITY:
Common stock ...........................................         40,748          40,748
Paid-in capital ........................................        201,057         201,158
Retained earnings ......................................        384,002         377,147
Accumulated other comprehensive loss ...................        (61,212)        (46,349)
                                                            -----------     -----------
                                                                564,595         572,704
Less cost of treasury stock ............................            310             586
                                                            -----------     -----------
         TOTAL STOCKHOLDERS' EQUITY ....................        564,285         572,118
                                                            -----------     -----------
         TOTAL LIABILITIES AND
              STOCKHOLDERS' EQUITY .....................    $ 3,306,759     $ 3,322,301
                                                            ===========     ===========
</TABLE>

See notes to financial statements.

* Reclassified to conform to 1999 presentation, see Note 1.


                                        2
<PAGE>   4
                   FOSTER WHEELER CORPORATION AND SUBSIDIARIES
      CONDENSED CONSOLIDATED STATEMENT OF EARNINGS AND COMPREHENSIVE INCOME
               (In Thousands of Dollars, Except per Share Amounts)
                                   (Unaudited)

                                                       Three Months Ended

<TABLE>
<CAPTION>
                                                 March 26, 1999   March 27, 1998
                                                  ------------     ------------
<S>                                              <C>              <C>
Revenues:
  Operating revenues .........................    $    998,770     $  1,027,961
  Other income ...............................          19,208            9,793
                                                  ------------     ------------
  Total revenues .............................       1,017,978        1,037,754
                                                  ------------     ------------
Cost and expenses:
  Cost of operating revenues .................         913,229          941,834
  Selling, general and administrative expenses          55,212           56,414
  Other deductions/minority interest .........          24,722           18,282
  Dividend on preferred securities of
     subsidiary trust ........................           3,281               -- 
                                                  ------------     ------------
  Total costs and expenses ...................         996,444        1,016,530
                                                  ------------     ------------
Earnings before income taxes .................          21,534           21,224
Provision for income taxes ...................           6,131            7,939
                                                  ------------     ------------
Net earnings .................................          15,403           13,285
Other comprehensive loss:
  Foreign currency translation adjustment ....         (14,863)          (7,793)
                                                  ------------     ------------
Comprehensive income .........................    $        540     $      5,492
                                                  ============     ============
Earnings per share:
  Basic ......................................    $        .38     $        .33
                                                  ============     ============
  Diluted ....................................    $        .38     $        .33
                                                  ============     ============
Shares outstanding:
  Basic:
  Weighted average number of
    shares outstanding .......................      40,729,835       40,734,864
  Diluted:
  Effect of stock options ....................              50            7,238
                                                  ------------     ------------
       Total diluted .........................      40,729,885       40,742,102
                                                  ============     ============
Cash dividends paid per
  common share ...............................    $        .21     $        .21
                                                  ============     ============
</TABLE>

See notes to financial statements.


                                        3
<PAGE>   5
                   FOSTER WHEELER CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                            (In Thousands of Dollars)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                   Three Months Ended 
                                                              March 26, 1999  March 27, 1998
                                                                ---------       ---------
<S>                                                           <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES                                           
Net earnings ...............................................    $  15,403       $  13,285
Adjustments to reconcile net earnings                                          
     to cash flows from operating activities:                                  
Depreciation and amortization ..............................       18,234          14,709
Noncurrent deferred tax ....................................       (6,916)          2,844
Equity earnings, net of dividends ..........................       (4,594)         (1,172)
Other ......................................................       (5,329)         (1,848)
Changes in assets and liabilities:                                             
Receivables ................................................      (85,586)         11,204
Contracts in process and inventories .......................       37,951          11,026
Accounts payable and accrued expenses ......................      (13,803)        (16,339)
Estimated costs to complete long-term contracts ............       28,637         (34,352)
Advance payments by customers ..............................          392             137
Income taxes ...............................................          473           2,173
Other assets and liabilities ...............................      (13,798)         (6,188)
                                                                ---------       ---------
NET CASH USED BY OPERATING ACTIVITIES ......................      (28,936)         (4,521)
                                                                ---------       ---------
                                                                               
CASH FLOWS FROM INVESTING ACTIVITIES                                           
Capital expenditures .......................................      (32,735)        (13,190)
Proceeds from sale of properties ...........................          396           1,021
Decrease/(increase) in investments and advances ............       12,131          (2,124)
Decrease in short-term investments .........................       10,505           6,774
Partnership distributions ..................................       (4,385)         (4,256)
                                                                ---------       ---------
NET CASH USED BY INVESTING ACTIVITIES ......................      (14,088)        (11,775)
                                                                ---------       ---------
                                                                               
CASH FLOWS FROM FINANCING ACTIVITIES                                           
Dividends to stockholders ..................................       (8,548)         (8,562)
Repurchase of common stock .................................         (860)             --
Mandatorily Redeemable Preferred Securities of                                 
     Subsidiary Trust Holdings Solely Junior Subordinated                      
     Deferrable Interest Debentures ........................      169,178              --
(Decrease)/increase in short-term debt .....................       (2,707)          9,493
Proceeds from long-term debt ...............................       22,444             153
Repayment of long-term debt ................................     (145,893)        (19,985)
                                                                ---------       ---------
NET CASH PROVIDED/(USED) BY FINANCING ACTIVITIES ...........       33,614         (18,901)
                                                                ---------       ---------
                                                                               
Effect of exchange rate changes on cash and cash equivalents       (4,154)          9,256
                                                                ---------       ---------
                                                                               
DECREASE IN CASH AND CASH EQUIVALENTS ......................      (13,564)        (25,941)
Cash and cash equivalents at beginning of year .............      180,068         167,417
                                                                ---------       ---------
                                                                               
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................    $ 166,504       $ 141,476
                                                                =========       =========
                                                                               
Cash paid during period:                                                       
Interest (net of amount capitalized) .......................    $   4,505       $   2,376
Income taxes ...............................................    $   2,584       $   3,631
</TABLE>

See notes to financial statements.


                                        4
<PAGE>   6
                   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 March 26, 1999, and the
      related condensed consolidated statements of earnings and comprehensive
      income and cash flows for the three month period ended March 26, 1999 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 this
      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 25, 1998 filed with the Securities and Exchange Commission on
      March 18, 1999. The Condensed Consolidated Balance Sheet as of December
      25, 1998 has been derived from the audited Consolidated Balance Sheet
      included in the 1998 Annual Report on Form 10-K. A summary of Foster
      Wheeler Corporation's significant accounting policies is presented on
      pages 27, 28 and 29 (not shown) of its 1998 Annual Report on Form 10-K.
      Users of financial information produced for interim periods are encouraged
      to refer to the footnotes contained in the 1998 Annual Report on Form 10-K
      when reviewing interim financial results. There has been no material
      change in the accounting policies followed by the Foster Wheeler
      Corporation (hereinafter referred to as "Foster Wheeler" or "Corporation")
      during the first quarter of 1999.

      The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to 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 revenues and expenses during the period reported.
      Actual results could differ from those estimates. Significant estimates
      are used when accounting for long-term contracts including customer and
      vendor claims, depreciation, employee benefit plans, taxes, and
      contingencies, among others.

      In March of 1999, the Corporation reflected its investment in a joint
      venture in Chile on the equity method of accounting. The December 1998
      balance sheet has been reclassified to conform to the March 26, 1999
      presentation. This change had no impact on the March and the December 1998
      Consolidated Statements of Earnings and Comprehensive Income. The assets
      and liabilities of the joint venture included in the December balance
      sheet were as follows: total assets $242,662, total liabilities $182,225
      and net assets $60,437.


2.    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 previously provided in
      the accounts.

      The Corporation and its subsidiaries, along with many other companies, are
      codefendants in 


                                        5
<PAGE>   7
      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 1970s and prior. As of March 26, 1999, there were
      approximately 65,000 claims pending. In 1999, approximately 6,600 new
      claims were filed and approximately 3,900 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 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 County Waste-to-Energy Project (the "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 cover the operating expenses and to service the debt on outstanding
      bonds that were issued to construct the plant and to acquire a landfill
      for Camden County's use. The debt although reflected in the consolidated
      financial statements of the Corporation has been issued by the Pollution
      Control Financing Authority of Camden County. This debt is collateralized
      by a pledge of certain revenues and assets of the project but not the
      plant. The Corporation's obligation is to fund the debt to the extent the
      project generates a positive cash flows. The Corporation has filed suit
      against the involved parties, seeking among other things to void the
      applicable contracts and agreements governing the Project. Pending outcome
      of the litigation and the results of legislative initiatives in New Jersey
      to resolve the issue, management believes that the plant will continue to
      operate at full capacity while receiving market rates for waste disposal.
      At this time, management cannot determine the ultimate outcome and its
      effect on the Project.

      In 1994, the Corporation entered into a lease agreement for a
      1,600-ton-per-day recycling and waste-to-energy plant located in Robbins,
      Illinois, which went into commercial operation in January 1997. The terms
      of the agreement are to lease the facility under a long-term operating
      lease for 32 years. As a result of the partial repeal of the Retail Rate
      Law and increased operating costs, the facility is not generating cash
      flows sufficient to cover the required lease payments. Due to the limited
      liability project structure, annual lease expense will be the aggregate of
      1) the annual amortization of prepaid lease cost over the term of the
      lease, 2) amounts due in accordance with the terms of the lease agreement
      to the extent of cash flows generated from operations (before lease
      expense) and 3) the amounts funded under the Corporate guarantees up to
      the total of $79,600 of Corporate guarantees. These guarantees are
      estimated to be paid out as follows: $3,500 in 1999, $24,500 for 2000,
      $20,800 in 2001 and the balance in 2002 or thereafter. Such estimates
      depend upon the actual results of the project. It is highly unlikely the
      Robbins Facility will generate sufficient revenues to repay the Robbins
      Facility debt, which is funded by the lease payments to the Village of
      Robbins. It is also unlikely that the earnings will justify the recovery
      of the prepaid lease amount of $47,400. In 1996, the Corporation completed
      the construction of this project. A subsidiary of the Corporation, Robbins
      Resource Recovery Limited Partnership (the "Partnership"), operates this
      facility under a long-term operating lease. By virtue of the facility
      qualifying under the Illinois Retail Rate Law as a qualified solid
      waste-to-energy facility, it was to receive electricity revenues projected
      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 utility gross receipts and 


                                        6
<PAGE>   8
      invested capital. The State 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 repealed the Retail Rate Law insofar
      as it applied to this facility. The Partnership is contesting the Illinois
      legislature's partial repeal of the Retail Rate Law in Court.


      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.    The Corporation maintains two revolving credit agreements with a syndicate
      of banks. One is a short-term revolving credit agreement of $90,000 with a
      maturity of 364 days and the second is a $270,000 revolving credit
      agreement with a maturity of four years (collectively, the "Revolving
      Credit Agreements"). These Revolving Credit Agreements require, among
      other things, the maintenance of a maximum Consolidated Leverage Ratio and
      a minimum Consolidated Fixed Charges Coverage Ratio. As of March 26, 1999,
      the Corporation was in compliance with both of these provisions.

      On January 13, 1999, FW Preferred Capital Trust I, a Delaware business
      trust, issued $175,000 in Trust Preferred Securities. These Trust
      Preferred Securities are entitled to receive cumulative cash distributions
      at an annual rate of 9.0%. Distributions will be paid quarterly in arrears
      on April 15, July 15, October 15 and January 15 of each year, beginning
      April 15, 1999. The maturity date is January 15, 2029. Foster Wheeler can
      redeem these Trust Preferred Securities on or after January 15, 2004. The
      Corporation has a remaining balance of $125,000 under an existing shelf
      registration statement.


4.    A total of 2,555,528 shares of common stock were reserved for issuance
      under the stock option plans; of this total 362,916 were not under option.


5.    Basic per share data has been computed based on the weighted average
      number of shares of common stock outstanding. Diluted per share data has
      been computed on the basic plus the dilution of stock options.


                                        7
<PAGE>   9
6.    Interest income and cost for the following periods are:


<TABLE>
<CAPTION>
                                    Three Months Ended
                              March 26, 1999   March 27, 1998
                              --------------   --------------
<S>                           <C>              <C>    
      Interest Income             $ 3,298         $ 6,001
                                  =======         =======
      Interest Cost               $18,553         $16,869
                                  =======         =======
</TABLE>
                                               
      Included in interest cost is interest capitalized on self-constructed
      assets, which was $622 and $2,864 for the quarters ended March 26, 1999
      and March 27, 1998, respectively. Interest cost for 1999 also included
      $3,281 for dividends on Trust Preferred Securities.


7.    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 has adopted this
      Statement of Position in the first quarter of 1999 without a material
      impact on the financial results of the Corporation.


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 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 March 26, 1999, $43,700 in receivables
      were sold under the agreement and are therefore not reflected in the
      accounts receivable balance in the Condensed Consolidated Balance Sheet.


                                        8
<PAGE>   10
9.    Changes in equity for the three months ended March 26, 1999 were as
      follows:

                            (In Thousands of Dollars)

<TABLE>
<CAPTION>
                                                                                                                         
                                                                                Accumulated                           
                                   Common Stock                                    Other          Treasury Stock          Total
                                   ------------         Paid-in     Retained   Comprehensive      --------------      Stockholders'
                                Shares      Amount      Capital     Earnings        Loss        Shares      Amount        Equity
                              ----------  ----------  ----------   ---------     ----------   ---------    ---------     ---------
<S>                           <C>         <C>         <C>          <C>         <C>            <C>          <C>         <C>
Balance December 25, 1998     40,747,668  $   40,748  $  201,158   $ 377,147     $  (46,349)    (30,804)   $    (586)    $ 572,118
                                                                                                                      
Net income                                                            15,403                                                15,403
                                                                                                                      
Dividends paid - common                                               (8,548)                                               (8,548)
                                                                                                                      
Purchase of treasury stock                                                                      (71,000)        (860)         (860)
                                                                                                                      
Foreign currency translation                                                                                          
    adjustment                                                                      (14,863)                               (14,863)
                                                                                                                      
Issued under incentive plan                                 (101)                                80,023        1,136         1,035
                              ----------  ----------  ----------   ---------     ----------   ---------    ---------     ---------
                                                                                                                      
Balance March 26, 1999        40,747,668  $   40,748  $  201,057   $ 384,002     $  (61,212)    (21,781)   $    (310)    $ 564,285
                              ==========  ==========  ==========   =========     ==========   =========    =========     =========
</TABLE>


                                        9
<PAGE>   11
10.   Major Business Groups

<TABLE>
<CAPTION>
FOR THREE MONTHS                                          Engineering                                        Corporate and
                                                              and             Energy           Power           Financial
                                            Total         Construction      Equipment         Systems          Service(1)
                                          ----------       ----------       ----------       ----------        ----------
<S>                                       <C>             <C>               <C>              <C>             <C>
Ended
March 26, 1999
Revenues                                  $1,017,978       $  804,035       $  171,521       $   58,703        $  (16,281)
Interest expense(2)                           17,931            1,962            3,294            6,862             5,813
Earnings/(loss) before income taxes           21,534           24,777            6,904            2,416           (12,563)
Income taxes/(benefit)                         6,131            7,521            2,212              798            (4,400)
                                          ----------       ----------       ----------       ----------        ----------

Net earnings/(loss)                       $   15,403       $   17,256       $    4,692       $    1,618        $   (8,163)
                                          ==========       ==========       ==========       ==========        ==========

Ended
March 27, 1998
Revenues                                  $1,037,754       $  812,839       $  242,749       $   43,422        $  (61,256)
Interest expense                              14,005            2,005            2,116            5,516             4,368
Earnings/(loss) before income taxes           21,224           23,920            9,235             (781)          (11,150)
Income taxes/(benefit)                         7,939            8,385            3,461               19            (3,926)
                                          ----------       ----------       ----------       ----------        ----------

Net earnings/(loss)                       $   13,285       $   15,535       $    5,774       $     (800)       $   (7,224)
                                          ==========       ==========       ==========       ==========        ==========
</TABLE>

(1) Includes intersegment eliminations

(2) Includes dividend on trust preferred securities.


                                       10
<PAGE>   12
11.   Consolidating Financial Information

      Separate financial statements and other disclosures with respect to the
      subsidiary guarantees have not been made because Management has determined
      that such information is not material to holders of the Notes, (as defined
      below).

      The following represents summarized consolidating financial information as
      of March 26, 1999 and for the three months ended March 26, 1999, with
      respect to the financial position, results of operations and cash flows of
      the Corporation and its wholly-owned and majority-owned subsidiaries. In
      February 1999 Foster Wheeler USA Corporation, Foster Wheeler Energy
      Corporation and Foster Wheeler Energy International, Inc. issued
      guarantees in favor of the holders of the Corporation's 6-3/4% Notes due
      November 15, 2005 (the "Notes"). Each of the guarantees is full and
      unconditional, and joint and several. The summarized consolidating
      financial information is presented in lieu of separate financial
      statements and other related disclosures of the wholly-owned subsidiary
      guarantors. None of the subsidiary guarantors are restricted from making
      distributions to the Corporation.


                      CONDENSED CONSOLIDATING BALANCE SHEET
                                 March 26, 1999

<TABLE>
<CAPTION>
           Assets                                  FWC            Guarantor       Non-Guarantor      Eliminations       Consolidated
                                                                 Subsidiaries      Subsidiaries
<S>                                            <C>               <C>              <C>                <C>                <C>        
Current assets                                 $   523,379       $   426,793       $ 1,586,165        $  (889,748)       $ 1,646,589
Investment in subsidiaries                         898,954           308,340             9,596         (1,216,890)               -0-
Land, buildings & equipment (net)                   51,377            30,018           608,204             (6,829)           682,770
Notes and accounts receivable - long-
term                                                87,901            11,468           471,568           (469,322)           101,615
Intangible assets (net)                                -0-            90,803           190,046                -0-            280,849
Other non-current assets                           267,900                22           293,826             33,188            594,936
                                               -----------       -----------       -----------        -----------        -----------

TOTAL ASSETS                                   $ 1,829,511       $   867,444       $ 3,159,405        $(2,549,601)       $ 3,306,759
                                               ===========       ===========       ===========        ===========        ===========

Liabilities & Stockholders' Equity

Current liabilities                            $   403,884       $   404,363       $ 1,521,908        $  (881,735)       $ 1,448,420
Long-term debt                                     581,826            23,000           572,415           (480,177)           697,064
Other non-current liabilities                      279,516             6,140           220,065            (83,731)           421,990
Preferred trust securities                             -0-               -0-           175,000                -0-            175,000
                                               -----------       -----------       -----------        -----------        -----------

TOTAL LIABILITIES                                1,265,226           433,503         2,489,388         (1,445,643)         2,742,474
TOTAL STOCKHOLDERS'
    EQUITY                                         564,285           433,941           670,017         (1,103,958)           564,285
                                               -----------       -----------       -----------        -----------        -----------
TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY                        $ 1,829,511       $   867,444       $ 3,159,405        $(2,549,601)       $ 3,306,759
                                               ===========       ===========       ===========        ===========        ===========
</TABLE>


                                       11
<PAGE>   13
                         CONDENSED CONSOLIDATING STATEMENT OF EARNINGS DATA
                             For the Three Months Ended March 26, 1999
                           


<TABLE>
<CAPTION>
                                                FWC            Guarantor      Non-Guarantor     Eliminations      Consolidated
                                                              Subsidiaries     Subsidiaries
<S>                                          <C>              <C>             <C>               <C>               <C>       
Revenues                                     $    5,916        $  252,480       $  839,664       $  (80,082)       $1,017,978
Cost of operating revenues                          -0-           238,208          740,598          (65,577)          913,229
Selling, general and administrative,
  other deductions and minority
  interests                                      18,557            11,125           68,038          (14,505)           83,215


Equity in net earnings of subsidiaries           23,677             3,169              -0-          (26,846)              -0-
                                             ----------        ----------       ----------       ----------        ----------

Earnings before income taxes                     11,036             6,316           31,028          (26,846)           21,534
Provisions for income taxes                      (4,367)            1,139            9,359              -0-             6,131
                                             ----------        ----------       ----------       ----------        ----------

Net earnings                                 $   15,403        $    5,177       $   21,669       $  (26,846)       $   15,403
                                             ==========        ==========       ==========       ==========        ==========
</TABLE>


                                       12
<PAGE>   14
                           CONDENSED CONSOLIDATING STATEMENT OF CASH FLOW DATA
                                For the Three Months Ended March 26, 1999
                           


<TABLE>
<CAPTION>
                                               FWC           Guarantor       Non-Guarantor    Eliminations     Consolidated
                                                            Subsidiaries      Subsidiaries
<S>                                         <C>              <C>             <C>              <C>              <C>
NET CASH (USED)/PROVIDED BY
   OPERATING ACTIVITIES                      $  (4,726)      $  (36,613)       $    8,538       $   3,865        $ (28,936)
                                            ----------       ----------        ----------       ---------        ---------
CASH FLOWS FROM INVESTING
   ACTIVITIES
Capital expenditures                              (123)          (1,985)          (30,627)                         (32,735)
Proceeds from sale of properties                                                      396                              396
Decrease in investment and advances              1,629                             10,329             173           12,131
Decrease in short-term investments                                                 10,505                           10,505
Other                                                                              (4,385)                          (4,385)
                                            ----------       ----------        ----------       ---------        ---------
NET CASH (USED)/PROVIDED BY
   INVESTING ACTIVITIES                          1,506           (1,985)          (13,782)            173          (14,088)
                                            ----------       ----------        ----------       ---------        ---------

CASH FLOW FROM FINANCING
   ACTIVITIES
Dividends to Stockholders                       (8,548)                                                             (8,548)
Issuance of trust preferred securities                                            169,178                          169,178
Increase/(decrease) in short-term debt           4,300                             (7,007)                          (2,707)
Proceeds from long-term debt                    20,000                              2,444                           22,444
Repayment of long-term debt                   (140,000)                            (5,893)                        (145,893)
Other                                          120,830           34,988          (152,640)         (4,038)            (860)
                                            ----------       ----------        ----------       ---------        ---------
NET CASH (USED)/PROVIDED BY
   FINANCING ACTIVITIES                         (3,418)          34,988             6,082          (4,038)          33,614
                                            ----------       ----------        ----------       ---------        ---------
Effect of exchange rate changes on
   cash and cash equivalents                                                       (4,154)                          (4,154)
Decrease in cash and cash equivalents           (6,638)          (3,610)           (3,316)                         (13,564)
Cash and cash equivalents, beginning
   of period                                    13,720            6,552           159,796                          180,068
                                            ----------       ----------        ----------       ---------        ---------
Cash and cash equivalents, end of
   period                                   $    7,082       $    2,942        $  156,480       $     -0-        $ 166,504
                                            ==========       ==========        ==========       =========        =========
</TABLE>


                                       13
<PAGE>   15
12.   The Corporation owns a non-controlling equity interest in three
      cogeneration projects; two of which are located in Italy and one in Chile.
      In addition, the Corporation owns an equity interest in a hydrogen
      producing plant in Venezuela. Following is summarized financial
      information for the Corporation's equity affiliates combined, as well as
      the Corporation's interest in the affiliates.

<TABLE>
<CAPTION>
                                                    March 26, 1999   December 25, 1998
                                                    --------------   -----------------
<S>                                                 <C>              <C>
      Balance Sheet Data:
      Current assets                                   $ 80,326          $ 83,871
      Other assets (primarily buildings and                            
           equipment)                                   520,190           541,507
      Current liabilities                                36,220            35,126
      Other liabilities (primarily long-term                           
           debt)                                        431,575           461,972
      Net assets                                        132,721           128,280
                                                                      
      Income Statement Data:
      Total revenues                                   $ 28,777
      Income before income taxes                          8,375
      Net earnings                                        9,287
</TABLE>

      As of March 26, 1999, the Corporation's share of the net earnings and
      investment in the equity affiliates totaled $4,594 and $100,421,
      respectively. No dividends were received during the first quarter of 1999.
      The Corporation has guaranteed certain performance obligations of such
      projects. The Corporation's obligations under such guarantees are
      approximately $1,500 per year for the three projects. The Corporation has
      provided a $10,000 debt service reserve letter of credit providing
      liquidity for debt service payments. No amounts have been drawn under the
      letter of credit. The earning results for the first quarter of 1998 were
      immaterial for these operations.


                                       14
<PAGE>   16
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

               (In Millions of Dollars, except per Share Amounts)

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 1998 Annual Report on Form 10-K filed on
March 18, 1999.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 26, 1999 COMPARED TO THE THREE MONTHS ENDED MARCH 27,
1998

                                CONSOLIDATED DATA

<TABLE>
<CAPTION>
                                                      Three Months Ended
                                              March 26, 1999         March 27, 1998
                                              --------------         --------------
<S>                                           <C>                    <C>     
Backlog                                          $7,050.1               $7,451.6
                                                 ========               ========
New orders                                       $  910.5               $1,448.9
                                                 ========               ========
Revenues                                         $1,018.0               $1,037.7
                                                 ========               ========
Net earnings                                     $   15.4               $   13.3
                                                 ========               ========
</TABLE>

The Corporation's consolidated backlog at March 26, 1999 totaled $7,050.1, which
represented a decrease of 5% from the amount reported as of March 27, 1998. 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 three months ended March 26,
1999 was $96.1, compared with $133.5 for the three months ended March 27, 1998.
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 months ended March 26, 1999 were $910.5
compared to $1,448.9 for the period ended March 27, 1998. Approximately 67% of
new orders booked in the three months ended March 26, 1999 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 three
months ended March 26, 1999 were the United States, Europe and the Philippines.

Operating revenues decreased slightly in the three months ended March 26, 1999
compared to the three months ended March 27, 1998 to $998.8 from $1,028.0.

Gross earnings, which are equal to operating revenues minus the cost of
operating revenues, 


                                       15
<PAGE>   17
decreased by $0.6 in the three months ended March 26, 1999 as compared with the
three months ended March 27, 1998 to $85.5 from $86.1.

Selling, general and administrative expenses decreased by 2% in the three months
ended March 26, 1999 as compared with the same period in 1998, from $56.4 to
$55.2.

Other income in the three months ended March 26, 1999 as compared with March 27,
1998 increased to $19.2 from $9.8. Approximately, $3.4 of this increase can be
attributed to equity earnings of unconsolidated affiliates, primarily due to the
cogeneration facilities in Italy.

Other deductions and dividends on Trust Preferred for the three months ended
March 26, 1999 were $9.1 higher than that reported in the three months ended
March 27, 1998. Interest expense and dividends on Trust Preferred increased by
approximately $4.0 compared to 1998.

Net earnings for the three months ended March 26, 1999 were $15.4 or $.38 per
share-basic compared to a net income of $13.3 or $.33 per share-basic for the
three months ended March 27, 1998.

ENGINEERING AND CONSTRUCTION GROUP

<TABLE>
<CAPTION>
                                                      Three Months Ended
                                               March 26, 1999     March 27, 1998
                                               --------------     --------------
<S>                                            <C>                <C>     
Backlog                                           $5,631.1           $5,677.6
                                                  ========           ========
New orders                                        $  745.6           $1,259.7
                                                  ========           ========
Operating revenues                                $  790.5           $  806.6
                                                  ========           ========
Gross earnings from operations                    $   48.4           $   53.2
                                                  ========           ========
</TABLE>

The Engineering and Construction Group ("E&C Group"), had a backlog of $5,631.1
at March 26, 1999, which represented a decrease of $46.5 from March 27, 1998.
New orders booked for the three month period ended March 26, 1999 decreased by
41% compared with the period ended March 27, 1998. These decreases were
primarily the result of the significant orders taken by the Continental European
and United States operating subsidiaries in the first quarter of 1998, which
were not repeated in 1999. Operating revenues for the three month period ended
March 26, 1999 decreased 2% compared to the three month period ended March 27,
1998. Gross earnings from operations decreased by 9% for the three month period
ended March 26, 1999, compared with the corresponding period ended March 27,
1998. The gross earnings for the three month period were lower primarily due to
the decrease reported by the Italian subsidiary ($5.3), which were offset by an
increase in equity earnings of unconsolidated subsidiaries.

ENERGY EQUIPMENT GROUP

<TABLE>
<CAPTION>
                                                         Three Months Ended
                                                  March 26, 1999     March 27, 1998
                                                  --------------     --------------
<S>                                               <C>                <C>     
Backlog                                              $1,255.0           $1,541.0
                                                     ========           ========
New orders                                           $  121.7           $  140.1
                                                     ========           ========
Operating revenues                                   $  168.8           $  240.7
                                                     ========           ========
Gross earnings from operations                       $   26.0           $   29.3
                                                     ========           ========
</TABLE>


                                       16
<PAGE>   18
The Energy Equipment Group had a backlog of $1,255.0 at March 26, 1999, which
represented an 18% decrease from March 27, 1998 due primarily to lower orders
awarded during 1999 and 1998. Approximately 45% of the Energy Equipment Group's
backlog as of March 26, 1999 represents orders from Asia. 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 month period ended March 26, 1999
decreased by 13% from corresponding periods in 1998. Operating revenues for the
three month period ended March 26, 1999 decreased by 30% primarily due to low
bookings in 1998. Gross earnings from operations decreased by $3.3 for the three
month period ended March 26, 1999 compared with the period ended March 27, 1998.

POWER SYSTEMS GROUP

<TABLE>
<CAPTION>
                                                      Three Months Ended
                                                March 26, 1999    March 27, 1998
                                                --------------    --------------
<S>                                             <C>               <C>   
Backlog                                             $209.1            $275.1
                                                    ======            ======
New orders                                          $ 47.5            $ 60.4
                                                    ======            ======
Operating revenues                                  $ 51.8            $ 40.3
                                                    ======            ======
Gross earnings from operations                      $ 10.6            $  3.0
                                                    ======            ======
</TABLE>

The Power Systems Group's gross earnings from operations for the three month
period ended March 26, 1999 improved primarily due to losses reported in 1998
for the Robbins Facility of $5.7 as compared to $0.6 in 1999. The future
earnings of the Power Systems Group will be negatively impacted by the Robbins
Facility due to (1) funding of the Corporation's guarantees of $79.6 and (2) the
unamortized prepaid lease expense of $47.4. The future impact is expected to be
a reduction in pretax earnings as follows: 1999 by $6.1; 2000 by $27.1; 2001 by
$23.4 and the balance of $70.4, thereafter. The timing of the foregoing
estimates are subject to change based on numerous factors including the
operating results of the Robbins Facility. It is expected that the Robbins
Facility will continue to incur losses and will not fully recover lease costs
from operations.

FINANCIAL CONDITION

The Corporation's consolidated financial condition declined during the three
months ended March 26, 1999 as compared to December 25, 1998. Stockholders'
equity for the three months ended March 26, 1999 decreased by $7.8, due
primarily to changes in the foreign currency translation adjustment of $14.9 and
dividends paid of $8.5, offset by earnings of $15.4.

During the three months ended March 26, 1999, long-term investments in land,
buildings and equipment were $32.7 as compared with $13.2 for the comparable
period in 1998. Approximately $21.7 was invested in a waste-to-energy project in
Italy during the first three months of 1999.

Since December 25, 1998, long-term debt, including current installments and bank
loans, decreased by $126.2, primarily due to payment of debt from the proceeds
of Trust Preferred. On January 13, 1999, FW Preferred Capital Trust I, a
Delaware business trust, issued $175,000 in Preferred Trust Securities. These
Preferred Trust Securities are entitled to receive 


                                       17
<PAGE>   19
cumulative cash distributions at an annual rate of 9%.

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 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 March 26, 1999, $43.7 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 $166.5 at March 26, 1999, a decrease of $13.6
from fiscal year end 1998. Short-term investments decreased by $14.8 to $46.4.
During the first quarter of fiscal 1999, the Corporation paid $8.5 in dividends
to stockholders. Cash used by operating activities amounted to $28.9.

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.

The Corporation estimates payments under the Corporate guarantees for the
Robbins Facility to be $3.5 in 1999; $24.5 in 2000; $20.8 in 2001; and $30.8 in
2002 and thereafter. These foregoing estimates are subject to change based on
numerous factors including the operating results of the Robbins Facility.

Management of the Corporation believes that cash and cash equivalents of $166.5
and short-term investments of $46.4 at March 26, 1999, combined with cash flows
from operating activities, amounts available under its Revolving Credit
Agreements and access to third-party 


                                       18
<PAGE>   20
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 of debt, equity, and other securities, $175.0 of which have been
issued as of March 26, 1999.

The Corporation is reviewing various methods to monetize selected Power Systems
assets and will be concentrating on reducing both corporate and project debt,
and improving cash flow.

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 1970s and prior. As of March 26, 1999, there were
approximately 65,000 claims pending. During 1999, approximately 6,600 new claims
have been filed and approximately 3,900 have been 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 debt although
reflected in the consolidated financial statements of the Corporation has been
issued by the Pollution Control Financing Authority of Camden County. This debt
is collateralized by a pledging certain revenue and assets of the project but
not the plant. The Corporation's obligation is to fund the debt to the extent
the project generates a positive cash flow. The Corporation has filed suit
against certain involved parties 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 


                                       19
<PAGE>   21
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
misinterpretations 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
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 seventy percent
(70%) 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.


                                       20
<PAGE>   22
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 is currently
evaluating its legal obligations 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 was completed during November 1998, and the resulting report is
being acted on by Management. 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 has selected an outside attorney to
conduct a legal audit of contracting practices and other business activities.
The audit is underway and expected to be completed during the second quarter of
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. 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 March 26, 1999 was $4.5, of which
approximately $4.0 related to the cost to repair or replace software and related
hardware problems, and approximately $.5 related to the cost of identifying and
communicating with vendors and/or contractors. The estimated future cost of


                                       21
<PAGE>   23
completing implementation of the Business Continuation Plan is estimated to be
approximately $5.5. 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. The Corporation's Business
Continuation Plan assumes that parties which provide us goods or services
necessary for its operations will continue to do so, or that the contingency
features of the Corporation's Plan will respond to address its needs. Based upon
those assumptions the Corporation believes 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. The
Corporation does not believe that such circumstances will materially adversely
affect the 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."


                                       22
<PAGE>   24
SAFE HARBOR STATEMENT

This Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Report on 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 Corporation's Business Continuation
Plan. A delay in the implementation of the Business Continuation Plans of the
Corporation or of the Corporation's subsidiaries could also affect the
Corporation'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.


                                       23
<PAGE>   25
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 


                                       24
<PAGE>   26
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 dated April 28, 1998 alleging primarily state air act
violations at the Robbins Facility (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 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      (a)   Date of Meeting

            The Annual Meeting of Stockholders of Foster Wheeler Corporation was
            held on April 26, 1999, at the Hunterdon Hills Playhouse, 88 Route
            173 West, Hampton, New Jersey.

      (b)   Election of Directors

            Directors Elected                      For                  Withheld
            -----------------                      ---                  --------

            Louis E. Azzato                     34,282,341               468,361
            John P. Clancey                     34,269,098               481,604
            David J. Farris                     34,296,928               453,774
            Constance J. Horner                 34,279,995               470,707

            Other Directors continuing in office:

            Eugene D. Atkinson                          David J. Roberts
            E. James Ferland                            John E. Stuart
            Martha Clark Goss                           Richard J. Swift
            Joseph J. Melone


                                       25
<PAGE>   27
<TABLE>   
<CAPTION>
            <S>     <C>                         <C> 
      (c)   Additional Matters Voted Upon
       
            The Proposal to Amend the 1995 Stock Option Plan
                     For                        31,190,097
                     Against                     3,310,655
                     Abstain                       249,950
            Ratification of the appointment of PricewaterhouseCoopers LLP as Independent
            Accountants of the Corporation for 1999.
                     For                        34,518,460
                     Against                       105,338
                     Abstain                       126,904
</TABLE>

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

            Report on Form 8-K dated February 16, 1999, relating to the filing
            of a tax opinion.


                                       26
<PAGE>   28
                                   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: May 7, 1999                       /s/ RICHARD J. SWIFT
                                        ---------------------------------
                                        Richard J. Swift
                                        (Chairman, President and
                                        Chief Executive Officer)



Date: May 7, 1999                       /s/ DAVID J. ROBERTS
                                        ---------------------------------
                                        David J. Roberts
                                        (Vice Chairman and
                                        Chief Financial Officer)


                                       27