Fluor 2001 Annual Report Download - page 5

FLUOR CORPORATION 2001 ANNUAL REPORT
Fluor’s market diversity has long been a key strength in reducing the impact from
the cyclical nature of individual markets and enhancing consistency of performance. We
are optimistic about our business prospects and believe that an expected market rotation
to a robust oil and gas market, continuing strength in life sciences, along with the begin-
ning of a recovery in certain economically sensitive markets as the year progresses, will
offset the softening outlook for power.
In fact, we remain convinced that the market for Fluor’s EPCM services is in the early
stages of a long-term capital investment cycle that will continue to unfold over the next
three to five years. These market opportunities will be characterized by large, complex
projects where few competitors can match Fluor’s capabilities and experience. No one is
better positioned to take full advantage of the expanding business opportunities that we
see over the next several years. As a result, we believe that we are better positioned than
ever before to deliver increasing shareholder value through strong earnings growth with
high returns on capital.
STRATEGIC DIRECTION
With the successful reverse spin-off of Massey Coal completed at the end of 2000,
we entered 2001 as a “new” Fluor. Building on our great heritage and strong brand repu-
tation, we began the process of realigning our organization as a single, highly focused
company to ensure that we were leveraging our resources to optimally capitalize on the
growing momentum in our markets. As the year progressed, we worked to further refine our
strategic plan and firmly establish the company’s direction for the next several years.
Based on the continued strength in the outlook for our core business, we took action
to reduce investments in higher-risk new ventures and exit non-strategic businesses.
These actions improved the outlook for future earnings growth and cash flow with an imma-
terial impact to revenues. Importantly, these actions allowed additional resources to be
refocused on the increasing growth opportunities within our core EPCM competencies.
As a result of this decision, Fluor recognized an after-tax loss in 2001 from dis-
continued operations of $108.6 million, or $1.36 per share, for disposal of non-strategic
businesses. Included in this provision, which reduces to current fair value the assets being
divested, were the AMECO
®
dealership operations and the non-EPCM portions of Fluor’s tem-
porary staffing business. Also included were provisions to exit certain AMECO markets in
South America, as well as GlobEquip, a web-based business established to sell surplus
heavy equipment.
Elimination of these non-core activities has now freed us to fully concentrate
on what we do best — engineering, procurement, construction and maintenance services.
With these final strategic actions behind us, our restructuring effort is now complete. As
2001 came to a close, we completed an internal realignment of our operations, consistent
with achievement of the company’s business objectives and financial performance goals.
As a result, Fluor is now organized as five operating business segments, each with clear
performance accountability. These segments are: Energy & Chemicals, Industrial &
Infrastructure, Power, Global Services and Government Services.
Having clearly established our strate-
gic direction, our corporate strategy going
forward has four key elements — focus, port-
folio management, selectivity and differen-
tiation, as follows:
• Fluor will focus its people and financial
resources on growing its differentiated
offering to increase margins and mar-
ket share within its core area of EPCM
competency.
• Fluor will employ a portfolio manage-
ment strategy within the EPCM market
to optimize growth, diversify risk and
minimize cyclicality.
• Fluor will selectively pursue only those
opportunities that meet specific profit,
risk and resource criteria.
• Fluor will differentiate its EPCM services
by being the best in the world at
dependability, expertise and safety.
We have extraordinary people and the
best tools and processes in the EPCM busi-
ness. Combined with sound strategies and
our strong balance sheet, they enable us
to leverage our strong position for new
business opportunities. As we move into
2002, we must build on this positive momen-
tum to grow Fluor in a disciplined manner to
benefit all of our stakeholders.
FINANCIAL CONDITION
Fluor’s financial condition continues to be
exceptionally strong, with minimal debt and
$573 million in cash and securities at year-end.
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