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
KBR Announces First Quarter 2013 Results
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