KBR Announces Third Quarter 2012 Results

  KBR Announces Third Quarter 2012 Results

  *Earnings per diluted share of $0.65 on an adjusted, non-GAAP basis
  *Loss per diluted share of $0.55 on a GAAP basis includes a non-cash
    goodwill impairment charge at the Minerals Business Unit, related to the
    Roberts & Schaefer acquisition in the amount of $1.20 per diluted share
  *Job income up 13%, a 410 basis point margin improvement year-over-year
  *Strong backlog of $14.8 billion, up 27% year-over-year
  *2012 earnings per diluted share guidance unchanged at $2.60 to $2.80,
    excluding the impairment charge

Business Wire

HOUSTON -- October 24, 2012

KBR (NYSE:KBR) announced today that third quarter 2012 net income attributable
to KBR was $97 million on an adjusted, non-GAAP basis, or $0.65 per diluted
share, compared to net income attributable to KBR of $93 million on an
adjusted, non-GAAP basis, or $0.62 per diluted share, in the third quarter of
2011.

On a GAAP basis, third quarter 2012 net loss attributable to KBR of $81
million, or $0.55 per diluted share, includes a non-cash goodwill impairment
charge of $178 million, or $1.20 per diluted share, related to a market
assessment of the Minerals Business Unit. Third quarter 2011 net income
attributable to KBR of $185 million, or $1.22 per diluted share, includes
discrete tax benefits of $92 million, or $0.60 per diluted share, related to
an arbitration award in favor of Barracuda & Caratinga Leasing Company B.V. as
well as a deferred tax liability release for KBR’s share of an Australian rail
investment.

Tables reconciling net income, EPS, and effective tax rates excluding the
goodwill impairment charge to generally accepted accounting principles
(“GAAP”) results are attached to this release. This release and accompanying
reconciliation tables are available on the investor relations section of KBR’s
website at www.kbr.com.

Consolidated revenue in the third quarter 2012 was $2.0 billion compared to
$2.4 billion in the third quarter of 2011. Operating loss in the third quarter
2012 was $11 million compared to operating income of $138 million in the prior
year third quarter.

“The emergence of North American shale gas resources is a net positive
development for KBR; however, over the past several quarters we have witnessed
a severe reduction in solid fuel materials handling prospects in North America
that has triggered KBR writing down goodwill from our 2010 acquisition of
Roberts & Schaefer. If we look beyond the goodwill impairment, and despite
some headwinds at our U.S. Construction Business Unit and a legacy Roberts &
Schaefer project, I am extremely pleased with KBR’s continued strong financial
and operating performance this quarter,” said Bill Utt, Chairman, President,
and Chief Executive Officer of KBR. “We continue to see significant new
project opportunities across all of our Business Units and remain confident in
KBR’s ability to continue to execute our projects successfully going forward.”

Business Discussion (All comparisons are third quarter 2012 versus third
quarter 2011, unless otherwise noted).

Hydrocarbons Results

Hydrocarbons revenue was $1.1 billion, flat with the prior year. Hydrocarbons
job income was $219 million, up $105 million, or 92%.

  *Gas Monetization job income was $147 million, up $95 million, or 183%,
    primarily related to strong project execution and incremental progress on
    a number of LNG projects as well as the resolution of several outstanding
    issues on an LNG project nearing completion. Partially offsetting this
    increase was lower work volumes on a GTL project which is essentially
    complete.
  *Oil and Gas job income was $29 million, up $2 million, or 7%, primarily
    related to higher work volumes on the Shah Deniz FEED and Quad 204
    detailed design projects as well as work on the recently awarded FPSO
    project in Angola. Partially offsetting the increase was the completion or
    near completion of several projects.
  *Downstream job income was $13 million, down $5 million, or 28%, primarily
    related to the completion of engineering on a refinery project in Africa.
    Partially offsetting the decrease was increased profits from projects in
    the United States and the KBR-AMCDE entity in Saudi Arabia.
  *Technology job income was $30 million, up $13 million, or 76%, primarily
    related to several license and engineering projects in Russia, Uzbekistan
    and the United States and the completion of an ammonia license and basic
    engineering contract in Venezuela. Partially offsetting the increase was
    the completion of ammonia projects in Indonesia and India.

Infrastructure, Government and Power (IGP) Results

IGP revenue was $433 million, down $443 million, or 51%. IGP job income was
$62 million, down $55 million, or 47%.

  *North American Government and Logistics (NAGL) job income was $19 million,
    down $42 million, or 69%, primarily related to the completion of
    operations under the LogCAP III contract in Iraq and the $22 million award
    fees received in the third quarter of 2011 which did not reoccur in the
    third quarter of 2012. Partially offsetting the decrease was increased
    income related to the LogCAP IV contract, including the U.S. Department of
    State project.
  *International Government, Defence and Support Services (IGDSS) job income
    was $25 million, down $3 million, or 11%, primarily related to lower
    activity on the Afghanistan ISP project. Partially offsetting the decrease
    was increased income related to mining field camp work in Africa and the
    Allenby & Connaught project.
  *Infrastructure job income was $15 million, flat with the prior year.
  *Power and Industrial (P&I) job income was $7 million, down $2 million, or
    22%, primarily related to lower work volume from the completion of a
    waste-to-energy refurbishment project and lower engineering activity on a
    coal gasification project. Partially offsetting the decrease was increased
    activity on a waste-to-energy expansion project and a cellulosic fiber
    project.
  *Minerals job loss was $4 million, down $8 million, or 200%, primarily
    related to lower volume and an $8 million charge as a result of updated
    cost and schedule estimates on a legacy EPC project scheduled for
    completion in March 2013.

Services Results

Services revenue was $419 million, up $49 million, or 13%. Services job income
was $15 million, down $16 million, or 52%, primarily related to approximately
$21 million in charges due to increased cost estimates to complete two
projects in U.S. Construction. Partially offsetting the decrease was increased
activity on several projects in Canada and KBR’s MMM Mexican joint venture.

Ventures Results

Ventures job income was $14 million, up $5 million, or 56%, primarily related
to higher ammonia prices at the EBIC ammonia plant in Egypt.

Corporate

Corporate general and administrative expense was $56 million, down $5 million,
or 8%, primarily related to the company’s continued focus on prudent cost
management.

Total cash provided by operating activities in the third quarter of 2012 was
$44 million.

The effective tax rate for the third quarter 2012 was approximately 28%
excluding the non-cash goodwill impairment charge.

During the third quarter of 2012, KBR had share repurchases of $11 million,
capital expenditures of $20 million, pension contributions of $8 million, and
quarterly dividend payments of $7 million for total cash deployment of $46
million.

Full Year 2012 Guidance

  *Earnings per diluted share guidance unchanged at $2.60 to $2.80, excluding
    the goodwill impairment.

Significant Achievements and Awards

  *KBR was awarded a contract by Statoil Tanzania AS (Statoil) to perform
    pre-front end engineering and design (pre-FEED) studies for a prospective
    LNG facility in Tanzania, East Africa. The pre-FEED study is designed to
    help Statoil further assess the viability of developing an LNG facility to
    export natural gas from this East African region. The project is expected
    to be completed during 2013.
  *KBR was awarded a General Works Contract for phase two construction at a
    raw gas processing and compression facility near Dawson Creek, British
    Columbia. KBR’s Canadian subsidiary, KBR Wabi, will execute construction
    and related site support for the expansion of the facility, increasing the
    existing capacity to 100 million standard cubic feet per day.
  *KBR was awarded a FEED contract to perform work for the topsides and hull
    associated with a new-build, double-sided, single-bottom hull Floating
    Production Storage and Offloading (FPSO) vessel. The FPSO will be located
    offshore Angola and FEED is scheduled to start immediately, with a
    duration of 12 months. The topsides will utilize a single train designed
    to process 80,000 barrels of oil per day and 90 million standard cubic
    feet per day at an export pressure of 3,500 psi. Services for the project
    will be based out of KBR’s offices in Houston, Gothenburg and Luanda.
  *KBR was awarded a contract by Iowa Fertilizer Company, a wholly-owned
    subsidiary of Orascom Construction Industries, to provide licensing,
    engineering services and proprietary equipment for its grassroots
    fertilizer plant in Southeastern Iowa. The plant will be the first
    world-scale ammonia plant built in the United States in nearly 25 years.
    The plant will be designed using KBR’s Purifier technology, which has
    demonstrated higher reliability than conventional designs and offers the
    lowest proven energy consumption in the industry.
  *KBR was awarded a license and engineering contract by Ohio Valley
    Resources LLC to execute a front-end engineering design (FEED) package to
    develop an EPC proposal for a fertilizer complex in Spencer County,
    Indiana. Other potential sites are also being evaluated. This project will
    include design of the main ammonia process units by KBR featuring KBR’s
    proprietary Purifier™ ammonia process technology which has demonstrated
    higher reliability than conventional designs and offers the lowest proven
    energy consumption in the industry. KBR will also design the plant
    utilities and other supporting units for the facility.
  *KBR’s subsidiary GVA has signed a license agreement with Daewoo
    Shipbuilding & Marine Engineering Co Ltd in Korea for the fabrication of
    its GVA 4000NCS, CatD Drilling Unit. The concept for the unit is
    tailor-made by the industry for Statoil primarily for drilling production
    and well completion in mature fields.
  *KBR’s wholly-owned subsidiary KBR Federal Services was awarded the U.S.
    Naval Facilities (NAVFAC) Engineering Command construction contract for
    the aircraft logistics apron, taxiway enhancement and parking pads upgrade
    at Camp Lemonnier, Djibouti, in the Horn of Africa. The contract will
    expand the enduring apron and allow parking for two aircraft, as well as
    connect overhead mast lighting, connect fire protection hydrants and water
    distribution, and extend and widen three taxiways in order to reconfigure
    the Camp Lemonnier aircraft parking arrangement.

KBR is a global engineering, construction and services company supporting the
energy, hydrocarbons, government services, minerals, civil infrastructure,
power, industrial, and commercial markets. For more information, visit
www.kbr.com.

NOTE: The statements in this press release that are not historical statements,
including statements regarding future financial performance and backlog
information, are forward-looking statements within the meaning of the federal
securities laws. These statements are subject to numerous risks and
uncertainties, many of which are beyond the company’s control, that could
cause actual results to differ materially from the results expressed or
implied by the statements. These risks and uncertainties include, but are not
limited to: the outcome of and the publicity surrounding audits and
investigations by domestic and foreign government agencies and legislative
bodies; potential adverse proceedings by such agencies and potential adverse
results and consequences from such proceedings; the scope and enforceability
of the company’s indemnities from Halliburton Company; changes in capital
spending by the company’s customers; the company’s ability to obtain contracts
from existing and new customers and perform under those contracts; structural
changes in the industries in which the company operates, escalating costs
associated with and the performance of fixed-fee projects and the company’s
ability to control its cost under its contracts; claims negotiations and
contract disputes with the company’s customers; changes in the demand for or
price of oil and/or natural gas; protection of intellectual property rights;
compliance with environmental laws; changes in government regulations and
regulatory requirements; compliance with laws related to income taxes;
unsettled political conditions, war and the effects of terrorism; foreign
operations and foreign exchange rates and controls; the development and
installation of financial systems; increased competition for employees; the
ability to successfully complete and integrate acquisitions; and operations of
joint ventures, including joint ventures that are not controlled by the
company.

KBR’s Annual Report on Form 10-K dated February 22, 2012, recent Current
Reports on Forms 8-K, and other Securities and Exchange Commission filings
discuss some of the important risk factors that KBR has identified that may
affect the business, results of operations and financial condition. KBR
undertakes no obligation to revise or update publicly any forward-looking
statements for any reason.

                                                                 
KBR, Inc.: Condensed Consolidated Statements of Income

(Millions, except per share data) (Unaudited)
                                                                     
                                     Three Months Ended
                                     September 30,   September 30,   June 30,
                                     2012            2011            2012
Revenue:
Hydrocarbons                         $   1,119       $   1,122       $ 1,122
Infrastructure, Government and           433             876           491
Power
Services                                 419             370           425
Ventures                                 18              14            15
Other                                  3            5          9     
Total revenue                          1,992        2,387      2,062 
Business group income (loss):
Hydrocarbons                             191             89            131
Infrastructure, Government and           (149   )        78            28
Power
Services                                 -               15            16
Ventures                                 13              8             10
Other                                  (2     )      3          2     
Total business group income            53           193        187   
Unallocated costs:
Labor cost absorption                    (8     )        6             (6    )
General and administrative             (56    )      (61    )    (52   )
Operating income (loss)                (11    )      138        129   
Interest expense, net                    (2     )        (3     )      (2    )
Foreign currency gains (losses),         (2     )        1             3
net
Other non-operating income             -            1          1     
Income (loss) before income taxes        (15    )        137           131
and noncontrolling interests
Benefit (provision) for income         (45    )      54         (19   )
taxes
Net income (loss)                        (60    )        191           112
Net income attributable to             (21    )      (6     )    (8    )
noncontrolling interests
Net income (loss) attributable to   $   (81    )   $   185       $ 104   
KBR
                                                                     
Net income (loss) attributable to
KBR per share:
Basic                                $   (0.55  )    $   1.23        $ 0.70
Diluted                                  (0.55  )        1.22          0.70
                                                                     
Basic weighted average shares            147             150           148
outstanding
Diluted weighted average shares          147             151           149
outstanding
                                                                     
Cash dividends declared per share    $   0.05        $   0.05        $ 0.05

                                                             
KBR, Inc.: Condensed Consolidated Statements of Income

(Millions, except per share data) (Unaudited)
                                                                     
                                                     Nine Months Ended
                                                     September 30,
                                                     2012            2011
Revenue:
Hydrocarbons                                         $ 3,357         $ 3,269
Infrastructure, Government and Power                   1,442           2,621
Services                                               1,192           1,212
Ventures                                               47              48
Other                                              17         15    
Total revenue                                      6,055      7,165 
Business group income (loss):
Hydrocarbons                                           427             309
Infrastructure, Government and Power                   (82   )         211
Services                                               28              43
Ventures                                               30              30
Other                                              3          6     
Total business group income                        406        599   
Unallocated costs:
Labor cost absorption                                  (13   )         15
General and administrative                         (163  )     (163  )
Operating income                                   230        451   
Interest expense, net                                  (6    )         (13   )
Foreign currency gains, net                            -               4
Other non-operating expense                        (1    )     -     
Income before income taxes and noncontrolling          223             442
interests
Provision for income taxes                         (73   )     (7    )
Net income                                             150             435
Net income attributable to noncontrolling          (36   )     (45   )
interests
Net income attributable to KBR                    $ 114       $ 390   
                                                                     
Net income attributable to KBR per share:
Basic                                                $ 0.77          $ 2.57
Diluted                                                0.76            2.55
                                                                     
Basic weighted average shares outstanding              148             151
Diluted weighted average shares outstanding            149             152
                                                                     
Cash dividends declared per share                    $ 0.15          $ 0.15

                                                               
KBR, Inc.: Condensed Consolidated Balance Sheets

(Millions) (Unaudited)
                                                                  
                                                  September 30,   December 31,
                                                2012           2011
Assets
Current assets:
Cash and equivalents                              $   846         $  966
Receivables:
Accounts receivable, net of allowance for bad         1,287          1,227
debts of $14 and $24
Unbilled receivables on uncompleted contracts       763         435    
Total receivables                                     2,050          1,662
Deferred income taxes                                 256            297
Other current assets                                460         517    
Total current assets                                  3,612          3,442
Property, plant and equipment, net of
accumulated
depreciation of $352 and $364                         380            384
Goodwill                                              779            951
Intangible assets, net                                102            113
Equity in and advances to related companies           250            190
Noncurrent deferred income taxes                      146            128
Noncurrent unbilled receivables on uncompleted        312            313
contracts
Other noncurrent assets                             137         152    
Total assets                                     $   5,718     $  5,673  
                                                                  
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable                                  $   878         $  761
Due to former parent, net                             57             53
Advanced billings on uncompleted contracts            492            626
Reserve from estimated losses on uncompleted          19             22
contracts
Employee compensation and benefits                    202            226
Current non-recourse project-finance debt of a        11             10
variable interest entity
Other current liabilities                           625         586    
Total current liabilities                             2,284          2,284
Noncurrent employee compensation and benefits         446            470
Noncurrent non-recourse project-finance debt of       87             88
a variable interest entity
Other noncurrent liabilities                          160            177
Noncurrent income tax payable                         80             141
Noncurrent deferred tax liability                   89          71     
Total liabilities                                   3,146       3,231  
KBR shareholders' equity
Preferred stock                                       -              -
Common stock                                          -              -
Paid-in-capital in excess of par                      2,043          2,005
Accumulated other comprehensive loss                  (541   )       (548   )
Retained earnings                                     1,699          1,607
Treasury stock                                      (603   )     (569   )
Total KBR shareholders' equity                        2,598          2,495
Noncontrolling interests                            (26    )     (53    )
Total shareholders' equity                          2,572       2,442  
Total liabilities and shareholders' equity       $   5,718     $  5,673  

                                                                  
KBR, Inc.: Condensed Consolidated Statements of Cash Flows

(Millions) (Unaudited)
                                                                      
                                                           Nine Months Ended
                                                           September 30,
                                                         2012      2011
Cash flows from operating activities:
Net income                                                 $ 150      $ 435
Adjustments to reconcile net income to net cash provided
by (used in) operations:
Depreciation and amortization                                48         54
Equity earnings of unconsolidated affiliates                 (113 )     (108 )
Deferred income tax expense (benefit)                        61         (136 )
Impairment of long-lived assets                              2          -
Impairment of goodwill                                       178        -
Other adjustments                                            22         8
Changes in operating assets and liabilities:
Receivables                                                  (83  )     124
Unbilled receivables on uncompleted contracts                (303 )     (165 )
Accounts payable                                             117        (27  )
Advanced billings on uncompleted contracts                   (144 )     11
Accrued employee compensation and benefits                   (49  )     (10  )
Reserve for loss on uncompleted contracts                    (3   )     (7   )
Collection (repayment) of advances from (to)                 (2   )     15
unconsolidated affiliates, net
Distribution of earnings from unconsolidated affiliates      60         107
Other, net                                                 48      11   
Total cash flows provided by (used in) operating           (11  )   312  
activities
Cash flows from investing activities:
Capital expenditures                                         (53  )     (66  )
Acquisition of business, net                                 (1   )     -
(Investment in) / return of capital from equity method     4       (11  )
joint ventures
Total cash flows used in investing activities              (50  )   (77  )
Cash flows from financing activities:
Acquisition of noncontrolling interest                       -          (164 )
Payments to reacquire common stock                           (36  )     (96  )
Distributions to noncontrolling interests, net               (9   )     (57  )
Payments of dividends to shareholders                        (22  )     (23  )
Net proceeds from issuance of stock                          5          7
Payments on long-term borrowings                             (10  )     (10  )
Excess tax benefits from stock-based compensation            3          3
Return of cash collateral on letters of credit, net          -          16
Other financing activities                                 1       -    
Total cash flows used in financing activities              (68  )   (324 )
Effect of exchange rate changes on cash                      9          (7   )
Decrease in cash and equivalents                           (120 )   (96  )
Cash and equivalents at beginning of period                966     786  
Cash and equivalents at end of period                     $ 846    $ 690  

                                                                
KBR, Inc.: Revenue and Operating Results by Business Unit

(Millions)(Unaudited)
                                                                     
                                     Three Months Ended
                                     September 30,   September 30,   June 30,
Revenue:                            2012           2011           2012
Hydrocarbons:
Gas Monetization                     $   808         $   831         $ 809
Oil and Gas                              118             117           135
Downstream                               137             136           131
Technology                             56           38         47    
Total Hydrocarbons                     1,119        1,122      1,122 
Infrastructure, Government and
Power
North American Government and            156             586           173
Logistics
International Government, Defence        84              93            93
and Support Services
Infrastructure                           65              63            68
Minerals                                 49              79            62
Power and Industrial                   79           55         95    
Total Infrastructure, Government       433          876        491   
and Power
Services                                 419             370           425
Ventures                                 18              14            15
Other                                  3            5          9     
Total revenue                       $   1,992     $   2,387     $ 2,062 
                                                                     
Business group income (loss):
Hydrocarbons:
Gas Monetization                     $   147         $   52          $ 94
Oil and Gas                              29              27            38
Downstream                               13              18            13
Technology                             30           17         19    
Total job income                         219             114           164
Gain on sales of assets                  -               1             -
Divisional overhead                    (28    )      (26    )    (33   )
Total Hydrocarbons                     191          89         131   
                                                                     
Infrastructure, Government and
Power:
North American Government and            19              61            5
Logistics
International Government, Defence        25              28            26
and Support Services
Infrastructure                           15              15            16
Minerals                                 (4     )        4             6
Power and Industrial                   7            9          10    
Total job income                         62              117           63
Impairment of goodwill                   (178   )        -             -
Loss on sales of assets                  -               (1     )      -
Divisional overhead                    (33    )      (38    )    (35   )
Total Infrastructure, Government       (149   )      78         28    
and Power
                                                                     
Services:
Job income                               15              31            29
Divisional overhead                    (15    )      (16    )    (13   )
Total Services                         -            15         16    
                                                                     
Ventures:
Job income                               14              9             10
Divisional overhead                    (1     )      (1     )    -     
Total Ventures                         13           8          10    
                                                                     
Other:
Job income                               1               5             5
Loss on sales of assets                  -               -             (2    )
Impairment of long-lived assets          (2     )        -             -
Divisional overhead                    (1     )      (2     )    (1    )
Total Other                            (2     )      3          2     
Total business group income         $   53        $   193       $ 187   

                                                                  
KBR, Inc.: Revenue and Operating Results by Business Unit

(Millions)(Unaudited)
                                                                     
                                                         Nine Months Ended
                                                         September 30,
Revenue:                                                2012       2011
Hydrocarbons:
Gas Monetization                                         $ 2,422     $ 2,357
Oil and Gas                                                374         372
Downstream                                                 409         418
Technology                                               152      122   
Total Hydrocarbons                                       3,357    3,269 
Infrastructure, Government and Power
North America Government and Logistics                     538         1,789
International Government, Defence and Support Services     275         260
Infrastructure                                             197         188
Minerals                                                   174         205
Power and Industrial                                     258      179   
Total Infrastructure, Government and Power               1,442    2,621 
Services                                                   1,192       1,212
Ventures                                                   47          48
Other                                                    17       15    
Total revenue                                           $ 6,055   $ 7,165 
                                                                     
Business group income (loss):
Hydrocarbons:
Gas Monetization                                         $ 320       $ 192
Oil and Gas                                                90          81
Downstream                                                 40          58
Technology                                               69       53    
Total job income                                           519         384
Gain on sales of assets                                    -           2
Division overhead                                        (92   )   (77   )
Total Hydrocarbons                                       427      309   
                                                                     
Infrastructure, Government and Power:
North America Government and Logistics                     39          167
International Government, Defence and Support Services     87          78
Infrastructure                                             46          50
Minerals                                                   1           17
Power and Industrial                                     27       23    
Total job income                                           200         335
Impairment of goodwill                                     (178  )     -
Gain (loss) on sales of assets                             2           (1    )
Division overhead                                        (106  )   (123  )
Total Infrastructure, Government and Power               (82   )   211   
                                                                     
Services:
Job income                                                 72          94
Division overhead                                        (44   )   (51   )
Total Services                                           28       43    
                                                                     
Ventures:
Job income                                                 32          32
Gain on sales of assets                                    -           1
Division overhead                                        (2    )   (3    )
Total Ventures                                           30       30    
                                                                     
Other:
Job income                                                 10          12
Impairment of long-lived assets                            (2    )     -
Division overhead                                        (5    )   (6    )
Total Other                                              3        6     
Total business group income                             $ 406     $ 599   

                                                             
KBR, Inc.:Backlog Information ^ (a)

(Millions)(Unaudited)
                                                                  
                                     September 30,     June 30,   December 31,
                                   2012            2012      2011
Hydrocarbons:
Gas Monetization                     $    8,333        $ 8,282    $   3,880
Oil and Gas                               193            219          289
Downstream                                832            704          546
Technology                              235         236        258
Total Hydrocarbons                      9,593       9,441      4,973
                                                                  
Infrastructure, Government and
Power:
North American Government and             458            552          899
Logistics
International Government, Defence         915            941          1,086
and Support Services
Infrastructure                            228            233          265
Minerals                                  103            142          237
Power and Industrial                    510         710        777
Total Infrastructure, Government        2,214       2,578      3,264
and Power
                                                                  
Services                                  2,033          2,296        1,766
Ventures                                982         923        928
Total backlog^(b)                   $    14,822     $ 15,238  $   10,931

    
      Backlog is presented differently depending on whether the contract is
      consolidated by KBR or is accounted for under the equity method of
      accounting. Backlog related to consolidated projects is presented as
      100% of the expected revenue from the project. Backlog generally
      includes total expected revenue in backlog when a contract is awarded
      and/or the scope is definitized. Where contract duration is indefinite,
      projects included in backlog are limited to the estimated amount of
(a)   expected revenue within the following twelve months. Certain contracts
      provide maximum dollar limits, with actual authorization to perform work
      under the contract being agreed upon on a periodic basis with the
      customer. In these arrangements, only the amounts authorized are
      included in backlog. For projects where KBR acts solely in a project
      management capacity, KBR only includes the management fee revenue of
      each project in backlog. For certain long-term service contracts with a
      defined contract term, such as those associated with privately financed
      projects, the amount included in backlog is limited to five years.
      
      Backlog related to unconsolidated joint ventures is presented as KBR’s
      percentage ownership of the joint venture’s estimated revenue. However,
      because these projects are accounted for under the equity method, only
      KBR’s share of future earnings from these projects will be recorded in
      revenue. Our backlog for projects related to unconsolidated joint
      ventures totaled $5.7 billion, $5.6 billion and $1.7 billion at
      September 30, 2012, June 30, 2012, and December 31, 2011, respectively.
      Our backlog related to consolidated joint ventures with noncontrolling
      interest totaled $2.7 billion, $2.9 billion and $3.4 billion at
      September 30, 2012, June 30, 2012, and December 31, 2011, respectively.
      
      As of September 30, 2012, 40% of our backlog was attributable to
      fixed-price contracts and 60% was attributable to cost-reimbursable
      contracts. For contracts that contain both fixed-price and
      cost-reimbursable components, we classify the components as either
      fixed-price or cost-reimbursable according to the composition of the
      contract except for smaller contracts where we characterize the entire
      contract based on the predominate component.
      
      All backlog is attributable to firm orders as of September 30, 2012,
      June 30, 2012, and December 31, 2011.
      
      Backlog attributable to unfunded government orders was $0.1 billion,
(b)   $0.1 billion and $0.4 billion as of September 30, 2012, June 30, 2012,
      and December 31, 2011, respectively.


KBR, Inc.: Reconciliation of EPS Adjusted for Non-cash Goodwill Impairment in
2012 and Discrete Tax Benefits in 2011
(GAAP Reported to Adjusted Non-GAAP)
(Millions, except per share data) (Unaudited)

The presentation of non-GAAP measures is intended to enhance the usefulness of
financial information by providing measures
which KBR management uses internally to evaluate our performance on a
comparable basis.Presented below are reconciliations
of the reported GAAP results to the non-GAAP measures.
                                                           
                                                 Three Months Ended
                                                 September 30,
                                                 2012            2011
Adjusted net income attributable
to KBR reconciliation:
Net income attributable to KBR as                $  (81    )         $ 185
reported
Impairment of goodwill - excluded                   178                -
from income
Less: Discrete tax benefits
associated with
Barracuda-Caratinga project
and reduction of deferred tax
liabilities associated with an
unconsolidated
joint venture in Australia -                  -            (92   )
excluded from income
Adjusted net income attributable              97           93    
to KBR
                                                                     
Adjusted diluted weighted average
common shares outstanding
reconciliation:
Reported diluted weighted average                   147                151
common shares outstanding
Adjustment for dilutive stock                 1            -     
options and shares
Adjusted diluted weighted average             148          151   
common shares outstanding
                                                                     
Adjusted diluted earnings per
common shares reconciliation:
Diluted EPS as reported                          $  (0.55  )         $ 1.22
EPS impact of impairment of                         1.20               -
goodwill - excluded from income
Less: Discrete tax benefits
associated with
Barracuda-Caratinga project
and reduction of deferred tax
liabilities associated with an
unconsolidated
joint venture in Australia -                  -            (0.60 )
excluded from income
Adjusted diluted EPS                          0.65         0.62  

                                 Nine Months Ended
                                              September 30,
                                              2012           2011
Adjusted net income
attributable to KBR                                         
reconciliation:
Net income
attributable to KBR                           $ 114                  $ 390
as reported
Impairment of
goodwill - excluded                             178                    -
from income
Less: Discrete tax
benefits associated
with
Barracuda-Caratinga
project
and reduction of
deferred tax
liabilities
associated with an
unconsolidated
joint venture in
Australia -                       -             (92   )
excluded from
income
Adjusted net income               292           298   
attributable to KBR
                                                                     
Adjusted diluted
weighted average
common shares
outstanding
reconciliation:
Reported diluted
weighted average                                149                    152
common shares
outstanding
Adjustment for
dilutive stock                    -             -     
options and shares
Adjusted diluted
weighted average                  149           152   
common shares
outstanding
                                                                     
Adjusted diluted
earnings per common
shares
reconciliation:
Diluted EPS as                                $ 0.76                 $ 2.55
reported
EPS impact of
impairment of                                   1.19                   -
goodwill - excluded
from income
Less: Discrete tax
benefits associated
with
Barracuda-Caratinga
project
and reduction of
deferred tax
liabilities
associated with an
unconsolidated
joint venture in
Australia -                       -             (0.60 )
excluded from
income
Adjusted diluted                  1.95          1.95  
EPS

                                                      
KBR, Inc.: Reconciliation of Effective Tax Rate as Calculated to Adjusted
Effective Tax Rate
Excluding Non-cash Goodwill Impairment
(GAAP Reported to Adjusted Non-GAAP)
(Millions, except per share data) (Unaudited)
                                                            
                                                            Three Months Ended
                                                            September 30,
                                                            2012
Numerator for effective tax rate for GAAP and
adjusted effective tax rate:
Provision for income taxes as reported                      $     45
                                                            
Adjusted income (loss) before income taxes and
noncontrolling interests
reconciliation (denominator for effective tax
rate reconciliation):
Income (loss) before income taxes and                       $     (15     )
noncontrolling interests as reported
Impairment of goodwill excluded from income
before income taxes and
noncontrolling interests                                    178     
Adjusted income before income taxes and                     163     
noncontrolling interests
                                                            
Effective tax rate calculation:
Provision for income taxes as reported                      $     45
Income (loss) before income taxes and                       (15     )
noncontrolling interests as reported
Calculated effective income tax rate                        -300    %
                                                            
Adjusted effective tax rate calculation:
Provision for income taxes as reported                      $     45
Adjusted income before income taxes and
noncontrolling interest - excluding
impairment of goodwill                                      163     
Calculated adjusted effective income tax rate               28      %
                                                            
Calculated difference between effective tax rate       
and adjusted effective tax rate:
Effective tax rate impact of excluding impairment
of goodwill from income before
income taxes and noncontrolling interests                   328     %

Contact:

KBR
Zac Nagle, 713-753-5082
Vice President,
Investor Relations and Communications
or
Rob Kukla, Jr., 713-753-5082
Director, Investor Relations