Fluor 2003 Annual Report Download - page 4

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11.5
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8.6 10.0
FL UOR CORPORATION 2003 A N NUAL REPORT
cent increase in new business. In addition, we booked sev-
eral major new oil and gas projects, increasing new awards
by more than 80 percent, reflecting tangible evidence that
the anticipated cycle of substantial capital investment in
this global market has begun.
10.8 10.6
01 02 03 01 02 03
CONSOLIDATED฀NEW฀AWARDS CONSOLIDATED฀BACKLOG
dollars฀in฀billions dollars฀in฀billions
B U S I N E S S S T R AT E G Y A N D O U T L O O K
Fluor’s market diversity has long been a key strength in
reducing the impact of cyclicality in individual markets
and enhancing consistency in long-term performance. Our
broad geographic scope and experience across the breadth
of the markets that we serve, combined with our financial
strength, provides a competitive advantage that is virtually
unmatched within our industry.
Over the past few years, we have concentrated our
attention on executing our diversification strategy to
achieve more consistent growth, deliver solid returns
on capital and enhance shareholder value. Our portfolio
management approach allows us to quickly and efficiently
move resources between markets to take advantage of cycli-
cal upturns and reduce costs in the downturns. Combined
with our actions to increase our most stable businesses in
proportion to our overall business mix, we have achieved a
good balance across our entire business portfolio and are
extremely well positioned in each of our market areas.
We have continued our unrelenting focus on market
selectivity, execution excellence, financial discipline, risk
management and meeting our clients’ needs. We remain
absolutely committed to these principles and believe that
they provide the strong foundation for our current and
future success.
Looking ahead to 2004, we expect to build on the
growth achieved in new awards and backlog during 2003,
driven by anticipated increases in capital spending by a
number of major clients. We remain convinced that the
market for our services, particularly in the global oil and
gas industry, is in the early stages of a long-term cycle of
investment that will continue to unfold over the next three
to five years. We are actively tracking a number of large,
complex projects in geographically challenging locations,
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which plays to Fluor’s strengths, along with a growing list
of more moderate-sized prospects. In addition, a contin-
uation of the global economic recovery, which began to
strengthen late in the year, should add further momentum
to our positive outlook for new capital investment across
a majority of our markets.
Complementing our pursuit of organic growth
within each of our business segments, is our ongoing
search for niche acquisitions to further penetrate and
expand our share in targeted markets. During 2003, we
completed three acquisitions, two focused on expand-
ing our growth potential in the Government market, and
another directed at enhancing our turnaround services
offering in the O&M market.
In last year’s report, I outlined our goal to increase the
proportion of revenue and operating earnings from these
two less cyclical markets to approximately 40 percent of
Fluor’s total business mix. Significant progress was made
toward this objective in 2003, with the combined revenues
of these businesses increasing to 32 percent from 19 per-
cent a year ago, while operating earnings grew to 36 percent
of the total from 30 percent last year.
Additionally, in February 2004, we completed a fourth
acquisition, further strengthening our capabilities and
presence in the Government market. Fluor’s Del-JenSM unit
acquired Trend Western Technical Corporation, which
specializes in logistics services and base operations sup-
port. Trend Western has previously teamed with Del-Jen,
and will be fully integrated into the company, enabling the
combined entity to provide a full spectrum of support ser-
vices to the Department of Defense at military installations
worldwide. We intend to continue to pursue well-managed
and accretive acquisition candidates that complement and
enhance our long-term growth potential.
Overall, we believe significant progress was made
during the year in executing our business strategy and we
are cautiously optimistic about our prospects in the coming
year. We expect that 2004 will be a year of transition, as we
move from the completion of a cycle of power projects to a
new cycle of oil and gas projects.
This shift from the conclusion of a cycle to the begin-
ning of a new one has implications for the company’s near-
term earnings outlook. Because projects often take two to
three years or longer to complete, revenues and earnings
recognized in the early stages of project execution reflect
the lower volume of work performed during engineering
and project planning. As projects get closer to comple-
tion the volume of work performed is at a peak, resulting
in higher revenue and profit recognition. This means that