Fluor 2006 Annual Report Download - page 4

2Letter to Shareholders
From our new global headquarters in Irving, Texas, I am delighted
to report that your company has delivered another extremely
successful year. The dedication and hard work of our 37,600
employees have resulted in strong financial performance, which has
created value for you — our shareholders. Moreover, we are well
positioned to capitalize on the wealth of business opportunities
before us across the wide spectrum of industries Fluor serves. In
fact, Fluor is experiencing the strongest industrial construction
market in three decades as global economic expansion stimulates
unprecedented increases in capital spending.
Fluor is indeed a company that delivers. In 2006 net earnings
advanced 16 percent over last year’s record performance to $264
million, or $2.95 per share. What’s more, records were set in three
other key areas: Revenue increased 7 percent to $14.1 billion, new
awards were up 54 percent to $19.3 billion and our backlog grew
significantly, up 47 percent to $21.9 billion.
Despite the difficulties on the embassy construction projects,
2006 was the best year in Fluor’s history, and 2007 should be
even better. Our business is robust, and the underlying earnings
potential of the company is substantial.
Our growing backlog demonstrates our strong position amid the
increasing demand for engineering, procurement, construction
and maintenance services globally, and it provides an encouraging
foundation for further growth in revenues and earnings. In addition,
unprecedented strength in new awards has been broad-based across
our diverse market sectors, allowing us to take advantage of upturns in
a variety of industries and regions, enhancing our growth potential and
moderating the impact of some of our more cyclical markets.
Turning to the various industry segments we serve, the size and
geographic spread of the Oil & Gas sector represents an especially
good opportunity since few competitors can match our capabilities
and global scope. e Oil & Gas backlog has grown to more than
50 percent of Fluor’s overall total, with approximately half of the
current $12 billion backlog located in the Middle East where
Fluor has decades of experience. Growing demand, the need to
replace diminishing reserves and higher prices have given Fluor
the opportunity to help develop major new oil and gas fields in the
Caspian region and Russia and participate in major new refinery
projects and multibillion-dollar upgrade programs in North
America.
Driven by demand for new coal-fired power generation, the
backlog of our Power business is showing strong improvement. Fluor
is a leader in the development of emissions-reduction programs
and has expedited work with clients to develop both pre- and post-
combustion carbon dioxide-removal systems for coal- and gas-fired
power plants. e company is also positioned for an expected upturn
in the nuclear power-generation market.
We are taking advantage of other growing markets as well.
Fluor’s mining business continues to book sizable copper and
iron ore processing projects, driven by higher commodity prices and
significant global demand. In the infrastructure business line, we
are leveraging the success of a business model that focuses primarily
on large, complex design/build and public/private partnership
opportunities. Based on our successful track record serving the U.S.
Department of Energy, we are participating in nuclear remediation
programs outside the United States, particularly in the United
Kingdom and Russia. Additionally, we continue to support
FEMA and other agencies through rapid-response contracts.
Finally, our integrated Global Services group is growing, serving
not only Fluor, but third-party oil and gas, power and industrial
clients as well.
Fluor’s solid financial position provides a valuable competitive
advantage over other contractors. We have the highest credit
rating of any publicly traded company in our industry, which helps
to ensure cost-effective access to both the letters of credit and
performance bonds that are critical to our success. Our cashflow
was positive for 2006 and we finished the year with $976 million
in cash. Keeping with our goal of providing long-term shareholder
value, the Board raised the quarterly cash dividend this past
year to 20 cents per share. This equates to about 27 percent of
earnings and represents the highest payout in our industry group.
As you can see, our future is bright. While this encouraging
outlook is due in large part to global capital growth, it is also the
result of Fluor’s many strengths and enterprising culture. For
example, the average tenure of a Fluor employee is more than a
decade, while the typical term of an employee in our industry is
just six years. Why? As one who has dedicated my professional
career to this company, I can identify two primary factors that
make Fluor special.
First, the opportunity to work with widely diverse industries
on the world’s most technically challenging and complex projects
DEAR VALUED
SHAREHOLDERS