Fluor 2001 Annual Report Download - page 27

FLUOR CORPORATION 2001 ANNUAL REPORT
allowance and by adjusting the amount of such allowance, if neces-
sary. The factors used to assess the likelihood of realization are the
company’s forecast of future taxable income and available tax plan-
ning strategies that could be implemented to realize the net deferred
tax assets. Failure to achieve forecasted taxable income in the applic-
able taxing jurisdictions could affect the ultimate realization of
deferred tax assets.
RESULTS OF OPERATIONS
At the end of 2001, the company implemented an internal realignment
of its operations. As a result, the company is now organized into
five business segments: Energy and Chemicals, Industrial and
Infrastructure, Power, Global Services and Government Services. The
Energy and Chemicals segment provides engineering and construction
professional services for the upstream oil and gas production, refin-
ing, petrochemical, and specialty and fine chemicals. The Industrial
and Infrastructure segment provides engineering and construction
professional services for manufacturing and life sciences facilities,
commercial and institutional buildings, mining, telecommunication
and transportation projects and other facilities. The Power segment
provides professional services to engineer and construct power gen-
eration facilities. Services provided by the Power segment are con-
ducted through two joint ventures; Duke/Fluor Daniel, a 50 percent
owned partnership with Duke Energy and ICA/Fluor, a 49 percent owned
joint venture with Grupo ICA, a Mexican company. The Global Services
segment includes operations and maintenance, equipment and tem-
porary staffing services and the company’s global sourcing and pro-
curement services business. The Government Services segment provides
project management services to the United States government.
The results of segment operations as reported herein have been
conformed to the organizational alignment discussed above and is pre-
sented below on the new basis for all periods.
ENERGY & CHEMICALS Energy and Chemicals had revenues of $2.5
billion for the year ended December 31, 2001 representing a decrease
of 22 percent over revenue for the year ended October 31, 2000.
Revenue for the 2000 period declined 20 percent over the revenue for
the year ended October 31, 1999. These revenue declines reflect the
impact of the deferral of capital spending in the chemical and petro-
chemical industry and the effects of project selectivity. Operating
profit margin in the Energy and Chemical segment showed significant
improvement in 2001 compared with 2000 and 1999. This improve-
ment to 4.3 percent compared with 2.6 percent in 2000 and 3.0 per-
cent in 1999 is a result of the selectivity of projects undertaken and
improved project execution.
New awards in the Energy and Chemicals segment were $2.6 bil-
lion in 2001, an improvement of 15 percent over 2000. New awards in
2000 were essentially flat compared with 1999. The 2001 improve-
ment is attributable to increased awards for upstream oil and gas
and clean-fuels projects for major oil companies. The large size and
uncertain timing of complex, international projects can create vari-
ability in the segment’s award pattern, consequently, future award
trends are difficult to predict with certainty.
Backlog for the Energy and Chemicals segment improved to $3.8
billion at December 31, 2001 compared with $3.0 billion and $3.2 bil-
lion as of October 31, 2000 and 1999, respectively. The 2001 improve-
ment in backlog reflects the increase in 2001 new awards and lower
level of work performed during 2001 due to several projects that are
in the early stages of project execution where activity is focused on
engineering and project planning.
INDUSTRIAL AND INFRASTRUCTURE The Industrial and Infra-
structure segment had revenues of $2.1 billion for the year ended
December 31, 2001 representing a decrease of 27 percent from the year
ended October 31, 2000. Revenue for the 2000 period declined 24
percent compared with revenue for the year ended October 31, 1999.
These declines in revenue reflect the impact of a slowdown in the
world economy and the effects of project selectivity. Although oper-
ating profit declined 16 percent in 2001, the operating profit margin
in the Industrial and Infrastructure segment showed an improvement
in 2001 compared with 2000 and 1999. This improvement to 4.6 per-
cent compared with 4.0 percent in 2000 and essentially break-even
in 1999 is a result of the selectivity of projects undertaken and
improved project execution. Contributing to the poor results in 1999
was a loss on a gold mine project in South America and an $84 mil-
lion provision for process design problems that arose on the Murrin
Murrin Nickel Cobalt project located in Western Australia. The
company anticipates recovering a substantial portion of this
amount and, accordingly, has recorded $64 million in expected
insurance recoveries.
New awards in the Industrial and Infrastructure segment were $2.6
billion in 2001, a decline of 21 percent over 2000. New awards in 2000
improved 59 percent over 1999. The 2001 decline is primarily attrib-
utable to decreased awards for telecommunications and mining pro-
jects reflecting over capacity and poor commodity pricing in these
industries, respectively, and an overall focus on project selectivity.
Backlog for the Industrial and Infrastructure segment declined to
$3.0 billion at December 31, 2001 compared with $3.3 billion and $3.2
billion as of October 31, 2000 and 1999, respectively. The 2001 decline
reflects the decrease in 2001 new awards, the lower level of work per-
formed during 2001 and the cancellation of a telecommunications
project that resulted in the removal of $400 million from backlog.
POWER The Power segment had revenues of $2.5 billion for the year
ended December 31, 2001 which amounts to an increase of 87 percent
over revenue for the year ended October 31, 2000. Revenue for the 2000
period increased 42 percent over revenue for the year ended October
31, 1999. These increases in revenue reflect the impact of a signifi-
cant increase in demand for power generation. Operating profit
margin in the Power segment showed a significant improvement in
2001 compared with 2000. The results for 2000 were significantly
impacted by the provision totaling $60 million on a Duke/Fluor Daniel
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