As evidenced in this annual report, the Fluor management team is committed to delivering improved financial performance to our shareholders. In 1999, we developed a business model process to clearly define goals for each strategic business unit. With this process, accountability resides throughout all levels of the organization, so that all members of the Fluor team understand — and are accountable for — pursuing higher margins and aggressively managing investment levels to achieve improved returns. We will continue to grow our organizational capability and financial expertise to deliver results that will benefit our shareholders. As we look to the future, the management team shares a clear view of what is required to create value:

• Earnings per share and revenue growth that consistently exceed our benchmark of at least 10 percent annual improvement.
• Improve returns to levels that exceed our risk-adjusted cost of capital for each business in which we choose to participate.
• Improved transparency and financial disclosure to better educate our investors about our businesses and to strengthen and reinforce management’s credibility.

Along with these goals, we realize that there are key disciplines and beliefs we must instill in our organization. Fluor Corporation will be successful only when we manage our businesses and their cost structures to create value in all economic environments. Further, we must objectively evaluate and scrutinize our investments on a risk/reward basis to ensure that our shareholders’ interests are paramount.

One of the strengths of our business portfolio is strong cash flow. We must, however, more aggressively manage our balance sheet and continue to improve our ability to identify investments that create value and justify management’s use of cash.

Fortunately, this change process is being initiated from a very solid platform. We generated $90 million in cash flow before financing activities in 1999, and cash generation is projected to be increasingly strong in the near term. Our debt-to-capital ratio was reduced to 26 percent at fiscal year-end, below our targeted range of 30 to 35 percent, with the pay down of $183 million in short-term debt. The strength of our balance sheet and coverage ratios enabled us to retain a solid “A” investment grade rating with the credit agencies during challenging environments in both our engineering and construction and coal businesses.

Thus, we look forward to the year 2000 as both one of continued change and increased opportunity. While we will only succeed as an enterprise by serving our customers and clients superbly well, our relentless focus on financial disciplines and clearly defined elements of value creation are essential to creating the company we all envision.

Ralph F. Hake