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KBR Announces First Quarter 2013 Results

  KBR Announces First Quarter 2013 Results

  *Earnings per diluted share of $0.59
  *Operating income up 19% year-over-year
  *Operating income margin up 156 basis points year-over-year
  *Cash and equivalents of $904 million at March 31, 2013
  *2013 earnings per diluted share guidance remains $2.45 to $2.90

Business Wire

HOUSTON -- April 25, 2013

KBR (NYSE:KBR) announced today that first quarter 2013 net income attributable
to KBR was $88 million, or $0.59 per diluted share, compared to net income
attributable to KBR of $91 million, or $0.61 per diluted share, in the first
quarter of 2012.

Consolidated revenue in the first quarter 2013 was $1.9 billion compared to
$2.0 billion in the first quarter of 2012. Operating income in the first
quarter 2013 was $133 million compared to operating income of $112 million in
the prior year first quarter.

“KBR’s first quarter performance was consistent with our expectations. We
delivered $0.59 of EPS on strong project execution across all of KBR’s
businesses, including on the five problem projects we discussed in the fourth
quarter where no incremental provisions were taken in the first quarter,” said
Bill Utt, Chairman, President, and Chief Executive Officer of KBR. “We
continue to see strong prospects for growth across our businesses and remain
confident in our ability to successfully win and execute new work going
forward.”

Business Discussion (All comparisons are first quarter 2013 versus first
quarter 2012, unless otherwise noted).

Hydrocarbons Results

Hydrocarbons revenue was $947 million, down $169 million, or 15%. Hydrocarbons
job income was $180 million, up $44 million, or 32%.

  *Gas Monetization job income was $104 million, up $25 million, or 32%,
    primarily related to continued strong execution, increased volumes at
    several LNG projects, and the close out of projects nearing completion.
  *Oil and Gas job income was $25 million, up $2 million, or 9%, primarily
    related to higher work volumes on the Shah Deniz project, FEED work for an
    FPSO in Angola and engineering and design work for a semi-submersible unit
    and a drilling platform. Partially offsetting the increase was the
    completion or near completion of several projects.
  *Downstream job income was $26 million, up $12 million, or 86%, primarily
    related to increased profits from an ethylene project in Uzbekistan, a
    gasifier FEED in Saudi Arabia, and the KBR-AMCDE entity in Saudi Arabia.
    Partially offsetting the increase was the completion of engineering on a
    refinery project in Africa.
  *Technology job income was $25 million, up $5 million, or 25%, primarily
    related to several new ammonia projects in the United States, Bolivia,
    Nigeria, Indonesia, India and Hungary as well as an ethylene project in
    Uzbekistan and a VCC project in Russia. Partially offsetting the increase
    was the completion of ammonia projects in Brazil and Egypt and an aniline
    project in China.

Infrastructure, Government and Power (IGP) Results

IGP revenue was $407 million, down $111 million, or 21%. IGP job income was
$63 million, down $12 million, or 16%.

  *North American Government and Logistics (NAGL) job income was $20 million,
    up $5 million, or 33%, primarily related to award fee and base fee
    close-out items on the completed LogCAP III program in Iraq.
  *International Government, Defence and Support Services (IGDSS) job income
    was $22 million, down $14 million, or 39%, primarily related to lower work
    volumes on the Allenby & Connaught and Afghanistan ISP projects.
  *Infrastructure job income was $10 million, down $5 million, or 33%,
    primarily related to lower work volumes on water, transportation and
    facilities projects. The decrease was partially offset by higher activity
    on the Doha Expressway project in Qatar.
  *Power and Industrial (P&I) job income was $8 million, down $2 million, or
    20%. Higher activity on a waste-to-energy expansion project and work
    performed on an emissions control EPC project was more than offset by the
    substantial completion of engineering activity on a coal gasification
    project and the completion of an industrial project in Louisiana.
  *Minerals job income was $3 million, up $4 million, or 400%, primarily
    related to charges taken on a legacy EPC project in the first quarter of
    2012 that did not recur in the first quarter of 2013.

Services Results

Services revenue was $485 million, up $137 million, or 39%. Services job
income was $31 million, up $3 million, or 11%, primarily related to several
new module fabrication and turnaround projects ramping in Canada.

Ventures Results

Ventures job income was $8 million, flat with the prior year.

Corporate

First quarter of 2013 corporate general and administrative expense was $52
million.

First quarter of 2013 labor cost absorption expense was $15 million due to
expected under-absorption of KBR’s centralized engineering resources.

Total cash used in operating activities in the first quarter of 2013 was $93
million.

The effective tax rate for the first quarter of 2013 was approximately 23%
compared to 9% for the first quarter of 2012.

During the first quarter of 2013, KBR had share repurchases of $6 million,
capital expenditures of $20 million and pension contributions of $7 million
for total cash deployment of $33 million.

Full Year 2013 Guidance

  *2013 earnings per diluted share guidance remains $2.45 to $2.90.

Significant Achievements and Awards

  *KBR was awarded a three-year agreement to provide turnaround services for
    Suncor Energy’s refinery in Edmonton, AB, Canada. KBR will assist with
    turnaround planning review, maintenance, pipe fabrication and long-term
    execution plans for the Suncor Edmonton refinery.
  *KBR was selected by Shell Canada Energy to perform off-site modularization
    and pipe fabrication using Shell Quest Carbon Capture and Storage
    technologies to reduce CO2 emissions at Shell’s Upgrader. KBR will provide
    pipe spool fabrication and module assembly for pipe, process, equipment
    and building modules as well as the fabrication of several unique and
    innovative vertical modules.
  *KBR was selected by Subsea 7 to perform the topsides design for the
    Chevron Lianzi development project in a unitized offshore zone between the
    Republic of Congo and the Republic of Angola. KBR will provide laser
    scanning of the entire Benguela Belize Lobito Tomboco topsides, FEED
    verification, detailed engineering, procurement services, and assistance
    during fabrication, installation, pre-commissioning and commissioning
    phases of the project.
  *KBR was awarded a task order by the U.S. Army Rock Island Contracting
    Command under its current Logistics Civil Augmentation Program (LOGCAP) IV
    contract for U.S. forces in Sheik Isa Airbase and Riffa Army support and
    Raydome. The period of performance is one base year, plus four option
    years and is valued at $53.5 million. Under the task order KBR will
    provide support to the U.S. forces in the Kingdom of Bahrain. Services
    will include facilities maintenance, operations and maintenance, food
    service, billeting, power generation, and waste management.
  *KBR was selected by PT Panca Amara Utama (PAU) to provide licensing,
    engineering services and proprietary equipment for a new grassroots
    ammonia plant in Sulawesi, Indonesia. PAU’s plan for a world scale
    grassroots plant with Ammonia capacity of 2000 Metric tonnes per day, will
    be built by Toyo Engineering Corporation and will be designed using KBR’s
    Reforming Exchanger System and Purifier Technology.
  *KBR was selected by PT Pupuk Sriwidjaja Palembang, to provide licensing,
    engineering services and proprietary equipment for a new 2000 MTPD ammonia
    and 2750 MTPD urea plant located in Palembang, South Sumatra, Indonesia.
    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 contract by Samsung Engineering Company, Ltd. to provide
    a technology license, basic engineering design package, and supply of
    proprietary equipment for a 1,200 MTPD ammonia fertilizer plant in
    Carrasco, Bolivia. The fertilizer ammonia complex will be designed using
    KBR’s Purifier Technology.
  *KBR was awarded the Djibouti Base Operation Support Services contract for
    services at Camp Lemonnier in Djibouti, Africa and Manda Bay, Kenya, under
    a contract valued at $127 million. KBR will provide services to include
    public safety, air operations, facility support, vehicle maintenance,
    environmental services as well as supply operations, housing, utilities,
    and laundry, food and recreation services.

KBR is a global engineering, construction and services company supporting the
energy, hydrocarbons, power, industrial, civil infrastructure, minerals,
government services 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 20, 2013, 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
                                          March 31,   March 31,   December 31,
                                          2013        2012        2012
Revenue:
Hydrocarbons                              $ 947       $ 1,116     $  943
Infrastructure, Government and Power        407         518          462
Services                                    485         348          441
Ventures                                    14          14           14
Other                                     6        5         6      
Total revenue                             1,859    2,001     1,866  
Business group income (loss):
Hydrocarbons                                148         105          174
Infrastructure, Government and Power        27          39           (22    )
Services                                    18          12           (44    )
Ventures                                    7           7            7
Other                                     -        3         35     
Total business group income               200      166       150    
Unallocated costs:
Labor cost absorption                       (15   )     1            (22    )
General and administrative                (52   )   (55   )    (59    )
Operating income                          133      112       69     
Interest expense, net                       (1    )     (2    )      (1     )
Foreign currency losses, net                (4    )     (1    )      (2     )
Other non-operating expense               (1    )   (2    )    (1     )
Income before income taxes and              127         107          65
noncontrolling interests
Provision for income taxes                (30   )   (9    )    (13    )
Net income                                  97          98           52
Net income attributable to                (9    )   (7    )    (22    )
noncontrolling interests
Net income attributable to KBR           $ 88      $ 91      $  30     
                                                                  
Net income attributable to KBR per
share:
Basic                                     $ 0.59      $ 0.61      $  0.20
Diluted                                     0.59        0.61         0.20
                                                                  
Basic weighted average shares               147         148          147
outstanding
Diluted weighted average shares             148         149          148
outstanding
                                                                  
Cash dividends declared per share         $ -         $ 0.05      $  0.13

                                                             
KBR, Inc.: Condensed Consolidated Balance Sheets

(Millions) (Unaudited)
                                                                  
                                                    March 31,     December 31,
                                                 2013        2012
Assets
Current assets:
Cash and equivalents                                $ 904         $  1,053
Receivables:
Accounts receivable, net of allowance for bad         1,280          1,196
debts of $16 and $15
Unbilled receivables on uncompleted contracts      784        704    
Total receivables                                     2,064          1,900
Current deferred income taxes                         194            251
Other current assets                               333        464    
Total current assets                                  3,495          3,668
Property, plant and equipment, net of
accumulated
depreciation of $355 and $356                         390            390
Goodwill                                              778            779
Intangible assets, net                                94             99
Equity in and advances to related companies           202            217
Noncurrent deferred tax asset                         164            203
Noncurrent unbilled receivables on uncompleted        294            294
contracts
Other noncurrent assets                            130        117    
Total assets                                      $ 5,547    $  5,767  
                                                                  
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable                                    $ 766         $  756
Due to former parent, net                             49             49
Advance billings on uncompleted contracts             522            536
Reserve for estimated losses on uncompleted           47             56
contracts
Employee compensation and benefits                    226            242
Current non-recourse project-finance debt of a        9              10
variable interest entity
Other current liabilities                          404        628    
Total current liabilities                             2,023          2,277
Noncurrent employee compensation and benefits         471            511
Noncurrent non-recourse project-finance debt of       79             84
a variable interest entity
Other noncurrent liabilities                          211            217
Noncurrent income tax payable                         89             90
Noncurrent deferred tax liability                  75         77     
Total liabilities                                  2,948      3,256  
KBR shareholders' equity
Preferred stock                                       -              -
Common stock                                          -              -
Paid-in-capital in excess of par                      2,056          2,049
Accumulated other comprehensive loss                  (611  )        (610   )
Retained earnings                                     1,797          1,709
Treasury stock                                     (610  )     (606   )
Total KBR shareholders' equity                        2,632          2,542
Noncontrolling interests                           (33   )     (31    )
Total shareholders' equity                         2,599      2,511  
Total liabilities and shareholders' equity        $ 5,547    $  5,767  

                                                                   
KBR, Inc.: Condensed Consolidated Statements of Cash Flows

(Millions) (Unaudited)
                                                                      
                                                          Three Months Ended
                                                          March 31,
                                                        2013       2012
Cash flows from operating activities:
Net income                                                $ 97        $ 98
Adjustments to reconcile net income to net cash used in
operations:
Depreciation and amortization                               15          16
Equity earnings of unconsolidated affiliates                (30   )     (37  )
Deferred income tax expense                                 81          25
Other                                                       8           6
Changes in operating assets and liabilities:
Receivables                                                 (95   )     132
Unbilled receivables on uncompleted contracts               (88   )     (148 )
Accounts payable                                            17          (4   )
Advanced billings on uncompleted contracts                  (5    )     (181 )
Accrued employee compensation and benefits                  (28   )     (29  )
Reserve for loss on uncompleted contracts                   (10   )     (4   )
Repayment of advances to unconsolidated affiliates, net     -           (3   )
Distributions of earnings from unconsolidated               41          12
affiliates
Other, net                                                (96   )   10   
Total cash flows used in operating activities             (93   )   (107 )
Cash flows from investing activities:
Capital expenditures                                        (20   )     (16  )
Acquisition of business, net                                -           (2   )
Return of capital from equity method joint ventures       -        3    
Total cash flows used in investing activities             (20   )   (15  )
Cash flows from financing activities:
Payments to reacquire common stock                          (6    )     (7   )
Distributions to noncontrolling interests, net              (11   )     (5   )
Payments of dividends to shareholders                       -           (7   )
Net proceeds from issuance of stock                         2           2
Excess tax benefits from stock-based compensation         -        2    
Total cash flows used in financing activities             (15   )   (15  )
Effect of exchange rate changes on cash                     (21   )     8
Decrease in cash and equivalents                          (149  )   (129 )
Cash and equivalents at beginning of period               1,053    966  
Cash and equivalents at end of period                    $ 904     $ 837  

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

(Millions) (Unaudited)
                                                                  
                                      Three Months Ended
                                      March 31,     March 31,     December 31,
Revenue:                            2013        2012        2012
Hydrocarbons:
Gas Monetization                      $ 605         $ 805         $  618
Oil and Gas                             111           121            109
Downstream                              178           141            166
Technology                           53        49         50     
Total Hydrocarbons                   947       1,116      943    
Infrastructure, Government and
Power
North American Government and           159           209            187
Logistics
International Government, Defence       74            98             85
and Support Services
Infrastructure                          51            64             58
Minerals                                38            63             18
Power and Industrial                 85        84         114    
Total Infrastructure, Government     407       518        462    
and Power
Services                                485           348            441
Ventures                                14            14             14
Other                                6         5          6      
Total revenue                       $ 1,859    $ 2,001    $  1,866  
                                                                  
Business group income (loss):
Hydrocarbons:
Gas Monetization                      $ 104         $ 79          $  125
Oil and Gas                             25            23             25
Downstream                              26            14             35
Technology                           25        20         25     
Total job income                        180           136            210
Divisional overhead                  (32   )    (31   )     (36    )
Total Hydrocarbons                   148       105        174    
                                                                  
Infrastructure, Government and
Power:
North American Government and           20            15             28
Logistics
International Government, Defence       22            36             26
and Support Services
Infrastructure                          10            15             13
Minerals                                3             (1    )        (57    )
Power and Industrial                 8         10         7      
Total job income                        63            75             17
Gain (loss) on sales of assets          -             2              (3     )
Divisional overhead                  (36   )    (38   )     (36    )
Total Infrastructure, Government     27        39         (22    )
and Power
                                                                  
Services:
Job income                              31            28             (30    )
Divisional overhead                  (13   )    (16   )     (14    )
Total Services                       18        12         (44    )
                                                                  
Ventures:
Job income                              8             8              8
Divisional overhead                  (1    )    (1    )     (1     )
Total Ventures                       7         7          7      
                                                                  
Other:
Job income                              3             4              5
Gain (loss) on sales of assets          (1    )       2              33
Divisional overhead                  (2    )    (3    )     (3     )
Total Other                          -         3          35     
Total business group income         $ 200      $ 166      $  150    


KBR, Inc.: Backlog Information ^(a)
(Millions) (Unaudited)
                                                       
                             March 31,         December 31,         December
                                                                    31,
                        2013          2012             2011
Hydrocarbons:
Gas Monetization             $  7,425          $   7,745            $  3,880
Oil and Gas                     168                215                 289
Downstream                      691                740                 546
Technology                 392           399            258
Total Hydrocarbons         8,676         9,099          4,973
                                                                    
Infrastructure,
Government and
Power:
North American
Government and                  559                645                 899
Logistics
International
Government, Defence             891                975                 1,086
and Support Services
Infrastructure                  184                205                 265
Minerals                        107                131                 237
Power and Industrial       793           868            777
Total
Infrastructure,            2,534         2,824          3,264
Government and Power
                                                                    
Services                        2,068              2,025               1,766
Ventures                   937           983            928
Total backlog ^(b)       $  14,215     $   14,931       $  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 expected revenue within the following twelve
(a)       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 $5.5 billion, $5.8 billion and
          $1.7 billion at March 31, 2013, December 31, 2012, and December 31,
          2011, respectively. Our backlog related to consolidated joint
          ventures with noncontrolling interest totaled $2.3 billion, $2.1
          billion and $3.4 billion at March 31, 2013, December 31, 2012, and
          December 31, 2011, respectively.

          As of March 31, 2013, 43% of our backlog was attributable to
          fixed-price contracts and 57% 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 March 31, 2013,
          December 31, 2012, and December 31, 2011.

          Backlog attributable to unfunded government orders was $0.3 billion,
(b)       $0.2 billion and $0.4 billion as of March 31, 2013, December 31,
          2012, and December 31, 2011, respectively.
          

Contact:

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