HOUSTON, Feb. 23, 2018 /PRNewswire/ -- KBR, Inc. (NYSE:
KBR) today announced strong fourth quarter and fiscal 2017
financial results. KBR, a global provider of differentiated,
professional services and technologies across the asset and program
life cycle within the government services and hydrocarbons
industries, has posted positive earnings results in every quarter
of 2017, continuing to build on consistent profit momentum and
positioning the company for stable and predictable long-term
growth.
"We continue to make progress on our strategy to establish KBR
as a global leader in differentiated professional services and
technologies and to position the company for strong long-term
growth with reduced risk and increased financial flexibility," said
Stuart Bradie, KBR President and
CEO. "We delivered consistently positive results throughout
this year in terms of earnings and improved cash flow, meeting or
exceeding what we set out to achieve at the beginning of the year
for all our key metrics."
KBR trended positively in bookings in the second half of 2017,
with an overall book-to-bill of 1.2 in Q4 which also was a record
quarter of bookings and margins in our Technology and Consulting
(T&C) business. T&C achieved a 2.6 book-to-bill in
the quarter, and our Government Services (GS) business delivered
1.3.
"These results signal improving fundamentals in our core markets
and fuel positive momentum as we enter 2018," said Bradie.
KBR also announced that it has entered into a definitive
agreement to acquire SGT, a leading provider of technology
solutions, engineering services, mission operations and scientific
and IT software solutions. Upon completion of the
transaction, KBR's global Government Services business, KBRwyle,
will be positioned as one of the top tier service providers at
NASA, across multiple space centers and delivers enhanced
life-cycle capabilities to support our customers' needs in current
and evolving markets for NASA, military, and commercial
space. KBR has also assumed operational management of the
Aspire Defence project joint venture in the U.K., which will
further add to its government services base with a long term,
predictable profit and cash flow stream. This joint venture
has been performing services for the Ministry of Defence since
2006.
"Acquiring SGT and our greater role on Aspire will enhance our
growth in the Government Services business segment," said
Bradie.
Summary Fourth Quarter Results:
Consolidated revenue in the fourth quarter of 2017 was
$937 million compared to $1.2 billion in the fourth quarter of 2016.
The 6% organic revenue growth in both our GS and T&C
segments was offset by completion or substantial completion on
various projects in our Engineering and Construction (E&C)
segment and the completion of the execution phase of our last
domestic EPC power project in the Non-strategic Business (NSB)
segment.
Gross profit improved to $65
million compared to gross profit of $6 million in the prior year quarter.
Consistent project delivery across all segments and strong margin
performance in our T&C segment were key contributors in the
quarter. Equity in earnings were $8
million compared to $10
million in the prior year. The write down related to a
shareholder loan receivable from our joint venture partner,
Carillion plc, in our GS segment was partially offset by increased
earnings on our industrial services joint venture in the E&C
segment.
Net income attributable to KBR was $275
million, or $1.94 per diluted
share in the fourth quarter of 2017 compared to net loss of
$(87) million, or $(0.61) per diluted share in the fourth quarter
of 2016. Net income for 2017 includes a net tax benefit of
$241 million, which reflects a
reduction in our tax valuation allowance of $223 million as well as net benefits from new tax
reform legislation. The reduction in the tax valuation
allowance was triggered by the restoration of profitability at KBR,
including coming out of a three year cumulative loss position and
having a more predictable and stable long-term profit outlook
resulting from portfolio improvements and de-risking actions taken
over the past three years. The $18
million tax benefit attributed to the "Tax Act" of 2017
resulted from revaluation of deferred tax liabilities to the new
lower Federal tax rate. There was no effect from the new
repatriation tax as the Company was able to use available foreign
tax credits to mitigate its impact. Net income attributable to KBR
excluding these tax benefits was $34
million in the fourth quarter, compared to the $87 million loss in the prior year quarter.
This increase was due to organic growth, solid project execution
and strong margins in our GS and T&C segments.
Q4 Fiscal 2017 Segment Business Results (All comparisons
are fourth quarter 2017 versus fourth quarter 2016 unless otherwise
noted.)
Government Services (GS) Results
GS revenue was $553 million, an
increase of $34 million, or 7%,
compared to the fourth quarter of 2016. The revenue increase was
driven by organic growth and expansion of task orders on existing
U.S. Government contracts and growth on existing program management
projects in the U.K.
GS gross profit was $42 million
(7.6% of revenues), a decrease of $1
million from fourth quarter 2016. The fourth quarter
of 2016 benefited from a non-recurring gain from an Iraqi tax
benefit.
Equity in earnings of unconsolidated affiliates was $2 million, a decrease of $8 million from the prior year, with the variance
attributed to a write down of a shareholder loan receivable from
our joint venture partner, Carillion plc, in our Aspire joint
venture in the U.K.
Technology & Consulting (T&C) Results
T&C's revenue was $90 million,
an increase of $5 million, or 6%,
compared to the fourth quarter of 2016. The increase was due
primarily to continued demand for our technologies and organic
growth in consulting services for upstream projects.
T&C's gross profit was $28
million (31% of revenues), up $4
million from the fourth quarter of 2016, due to a favorable
mix of technology fees and stronger consulting performance plus
overall benefits of efficiency.
Engineering & Construction (E&C) Results
E&C's revenue was $293
million, a decrease of $237
million from the fourth quarter of 2016, primarily due to
completion or near completion of several projects across the
segment.
E&C's gross loss was $5
million (-1.7% of revenues), an improvement of $53 million compared to the fourth quarter of
2016. The improvement from prior year can be attributed to
solid project execution and losses associated with a downstream
legacy lump-sum EPC project during the fourth quarter of 2016 that
did not recur in 2017. The gross loss in the quarter was
driven by labor and overhead utilization inefficiencies associated
with the completion of several projects while new projects have not
yet materialized.
Equity in earnings of unconsolidated affiliates was $6 million, an increase of $6 million from the prior year due to improved
earnings on our industrial services joint venture in the Americas
as well as our joint ventures in Europe. These increases were
partially offset by dilution on the Ichthys LNG joint venture,
driven by increased estimates to complete resulting in lower
progress for the quarter. We expect the dilution in
percentage completion will be recovered during 2018 and early
2019.
Non-strategic Business (NSB) Results
NSB revenue was $1 million, a
decrease of $55 million from the
prior year, primarily due to the completion of the execution phases
of our EPC power projects as we exit this business.
NSB gross profit was $0 million,
compared to a gross loss of $3
million in the fourth quarter of 2016, due to non-recurring
cost increases on a power project in the fourth quarter of
2016.
Summary Fiscal 2017 Results (All comparisons fiscal 2017
versus fiscal 2016)
Revenues were $4.2 billion for
2017 compared to $4.3 billion for
2016. Excluding our NSB, revenues increased by $75 million to $4.1
billion. The revenue increases were driven by
full-year impact of acquisitions and growth within our GS segment,
partially offset by completion or substantial completion on several
projects in our E&C segment. We have completed our last
remaining EPC power project in the NSB segment.
Gross profit for 2017 improved to $342
million compared gross profit of $112
million in 2016. The increase in gross profit was
driven by growth within our GS and T&C segments, favorable
settlement of PEMEX litigation and non-recurrence of unfavorable
changes in project estimates and loss provisions in our E&C
segment and in our NSB segment. Equity in earnings were
$72 million compared to $91 million in the prior year. Increased
earnings in our U.K. joint ventures within our GS segment were
offset with dilution on the Ichthys LNG joint venture due to
increases in estimate at completion. We expect the dilution
in percentage completion will be recovered during 2018 and early
2019.
Net income attributable to KBR for 2017 was $434 million or $3.06 per diluted share compared to net loss of
$(61) million or $(0.43) per diluted share in 2016. Net
income for 2017 includes a net tax benefit of $241 million, which reflects a reduction in our
tax valuation allowance of $223
million and a revaluation of deferred tax liabilities to the
new lower Federal tax rate.
Summary 2017 Segment Business Results (All comparisons
are fiscal 2017 versus fiscal 2016)
Government Services (GS) Results
GS revenue was $2.2 billion in
2017, an increase of $834 million, or
61% compared to 2016. This increase was primarily driven by
the Wyle and HTSI acquisitions being included for the full year in
2017, and continued expansion under existing U.S. government
services contracts. Partially offsetting the increase was a
favorable settlement with the U.S. government regarding
reimbursement of expensed legal fees related to the sodium
dichromate case in 2016.
GS gross profit was $155 million
(7.1% of revenues), an increase of $18
million compared to 2016. This increase was primarily
attributable to the same factors affecting revenues per
above. Partially offsetting the increase was a favorable
settlement with the U.S. government regarding reimbursement of
expensed legal fees related to the sodium dichromate case in 2016.
Equity in earnings of unconsolidated affiliates was $43 million, an increase of $4 million, or 10% compared to 2016. The
increased activity in our Aspire U.K. joint venture and ramp up of
the contract within our Affinity joint venture associated with the
U.K. Military Flight Training School project was partially offset
with a write down of a shareholder loan receivable from our joint
venture partner, Carillion plc.
Technology & Consulting (T&C) Results
T&C's revenue was $326
million, a decrease of $21
million, or 6%, compared to 2016. Increases in
catalyst project revenues and consulting revenues were offset by
decreases in proprietary equipment sales due to timing of project
activity.
T&C's gross profit was $79
million (24.2% of revenues), up $6
million compared to 2016, driven by a favorable mix of
license fees on new awards, stronger consulting performance and
overall benefits of efficiency.
Engineering & Construction (E&C) Results
E&C's revenue was $1.6
billion, a decrease of $738
million, or 31%, compared to 2016, primarily due to
completion or near completion of several projects across the
segment.
E&C's gross profit was $108
million (6.7% of revenues), an improvement of $101 million compared to 2016. The
improvement from the prior year can be attributed to better project
execution, a favorable settlement with PEMEX as well as the
non-recurrence of unfavorable changes in estimates on two legacy
lump-sum EPC projects that occurred in 2016.
Equity in earnings of unconsolidated affiliates was $29 million, a decrease of $23 million compared to 2016. Increased
earnings on our industrial services joint venture in the Americas
as well as our joint ventures in Europe were offset by dilution on the Ichthys
LNG joint venture. The dilution was driven by increased estimates
to complete resulting in lower progress and is expected to be
recovered during 2018 and early 2019.
Non-strategic Business (NSB) Results
NSB revenue was $38 million, a
decrease of $172 million from 2016,
primarily due to the completion of our EPC power projects as we
exited this business.
NSB gross profit was $0 million,
compared to a gross loss of $105
million in 2016, due to completion of projects as well as
non-recurring cost increases on a power project in 2016.
Cash Flow and Liquidity
Cash flows generated from operating activities totaled
$193 million for fiscal 2017,
compared to $61 million in
2016. Operating cash flows were favorably impacted by
significantly improved overall profitability during the 2017.
Fiscal 2017 cash flows also benefited from the collection from the
PEMEX settlement in Q2, which was offset by cash costs to complete
several large projects which had benefited from advance payments
from customers in earlier years.
Cash flows used in investing activities totaled $12 million for fiscal 2017, representing modest
capital expenditures and minor M&A follow-on activity.
Cash flows used in financing activities totaled $290 million for fiscal 2017, reflecting
$189 million used to reduce debt,
$53 million used to buy back stock,
and $45 million used for regular
dividends.
Cash and equivalents at December 31,
2017 totaled $439
million. As of December 31,
2017, our $1 billion revolving
credit agreement had an outstanding balance of $470 million.
New Business Awards
Notable new awards:
Government Services
- We were awarded task orders of $120
million to provide biomedical, medical and health services
to NASA. These task orders were awarded by NASA under the
Human Health and Performance contract, under which we support all
human spaceflight programs at the agency's Johnson Space Center in
Houston, Texas.
- We were awarded a task order modification totaling $115 million to provide logistics support
services to the U.S. Army. The Army Contracting Command
awarded this task order modification under the LogCap IV
contract.
Technology and Consulting
- We were awarded both a license and engineering and a
proprietary equipment supply contract by Cangzhou Dahua New
Materials Co., Ltd. to build a new polycarbonate plant in Cangzhou
City China. Under the terms of the two contracts, KBR will
provide its proprietary PCMAX technology, basic engineering design
package and proprietary equipment supply for a 100,000 metric
tonnes per annum single train plant in Cangzhou.
- We were awarded a contract from Indorama Eleme Fertilizer &
Chemicals Limited and Toyo Engineering Corporation for the Train 2
ammonia plant at Indorama's Port Harcourt site in Nigeria.
Under the terms of the contract, KBR will provide technology
licensing, basic engineering design, proprietary equipment and
catalyst for Indorama's planned second ammonia plant in Port
Harcourt.
- We were awarded an ammonia plant revamp contract by Rashtriya
Chemicals & Fertilizers Ltd (RCF). KBR will provide a
technology license and basic engineering design for the RCF ammonia
plant at Trombay, Maharashtra, India. The existing plant will be revamped for
energy savings to meet the new energy requirements in India.
Engineering and Construction
- We were selected to carryout Pre-Notice to Proceed (Pre-NTP)
services for the Woodfibre liquefied natural gas (LNG) Project. The
selection of KBR for Pre-NTP services follows the successful
completion of a competitive Front End Engineering Design process
for the Woodfibre LNG Project. Woodfibre LNG expects to commence
the EPC phase of the Project in 2018.
- We were awarded the Concept and FEED (front-end engineering
design) contract by Statoil for their ground breaking Northern
Lights Project, to develop an onshore carbon dioxide (CO2) - a
known greenhouse gas - storage terminal in Norway. The
terminal is a key component of the Carbon Capture and Storage
demonstration project being undertaken by Gassnova, where Statoil,
in partnership with Shell and Total are responsible for transport
and storage.
- Our joint venture, SOCAR-KBR Limited Liability Company has been
awarded a FEED contract for the topsides of the Absheron Early
Production Project. The platform will be located at SOCAR's Oil
Rocks facility and will deliver gas and condensate into the SOCAR
network.
- Our joint venture, SOCAR-KBR LLC has been awarded two separate
FEED contracts for a new Production, Drilling, Quarters platform -
the Azeri Central East platform - to be located in the
Azeri-Chirag-Gunashli (ACG) field in the Azerbaijan sector of the Caspian Sea. The
joint venture will provide FEED services for the new platform in
addition to brownfield tie-ins to other existing platforms in the
ACG field.
KBR backlog increased by $0.3
billion to $10.6 billion as of
December 31, 2017 compared to $10.3
billion as of September 30,
2017, with backlog growth of $141
million in the T&C business segment and $172 million in the GS business segment more than
offsetting declines from our E&C segment.
**2018 Guidance
Initial guidance for 2018 reflects 100% of the estimated profits
from our Aspire Defence Joint Venture in the U.K. starting
January 15, 2018, when we assumed
operational management of the joint venture, as a result of the
January 2018 insolvency of our
partner, Carillion plc. Guidance does not include effects
from the acquisition of SGT, since that transaction has not yet
closed.
The company initiates 2018 fully diluted adjusted earnings per
share guidance with a range of $1.35
to $1.45 per share. Our
guidance of earnings per share is on an adjusted EPS basis, which
excludes legacy legal costs for U.S. Government contracts. A
reconciliation of GAAP EPS to adjusted EPS guidance is included at
the end of this release. The legacy legal costs are estimated to be
approximately $10 million or
$0.07 per fully diluted share in
2018. The estimated legacy legal costs do not assume any cost
reimbursement from the U.S. Government that could occur in the
future.
Operating cash flows for 2018 is estimated to range from
$125 to $175
million. Our estimated effective tax rate for 2018 is
estimated to range from 22% to 24%. The passage of the new
tax legislation had minimal impact on our effective tax rate.
KBR has commenced actions to complete a recapitalization plan to
extend the tenor of our borrowing capacity, finance the SGT
acquisition, and provide for a limited amount of future loans
to the Ichthys project joint venture. KBR has secured a
financing commitment of roughly $2
billion for this recapitalization from a major financial
institution and expects to execute the financing components in the
first half of 2018. The components are expected to include an
unfunded revolver, a letter of credit facility, a term loan, a
dedicated line for Ichthys, and potentially a modest amount of
equity. The estimated debt rates and relevant costs of this
recapitalization have been incorporated into our 2018 guidance.
(1) See additional information at the end of this
release regarding non-GAAP financial measures.
About KBR, Inc.
KBR is a global provider of differentiated professional services
and technologies across the asset and program life cycle within the
Government Services and Hydrocarbons industries. KBR employs
approximately 34,000 people worldwide (including our joint
ventures), with customers in more than 75 countries, and operations
in 40 countries, across three synergistic global businesses:
- Government Services, serving government customers globally,
including capabilities that cover the full life-cycle of defense,
space, aviation and other government programs and missions from
research and development, through systems engineering, test and
evaluation, program management, to operations, maintenance, and
field logistics
- Technology & Consulting, including proprietary technology
focused on the monetization of hydrocarbons (especially natural gas
and natural gas liquids) in ethylene and petrochemicals; ammonia,
nitric acid and fertilizers; oil refining; gasification; oil and
gas consulting; integrity management; naval architecture and
proprietary hulls; and downstream consulting
- Engineering & Construction, including onshore oil and gas;
LNG (liquefaction and regasification)/GTL; oil refining;
petrochemicals; chemicals; fertilizers; differentiated EPC;
maintenance services (Brown & Root Industrial Services);
offshore oil and gas (shallow-water, deep-water, subsea); floating
solutions (FPU, FPSO, FLNG & FSRU) and program management
KBR is proud to work with its customers across the globe to
provide technology, value-added services, integrated EPC delivery
and long term operations and maintenance services to ensure
consistent delivery with predictable results. At KBR, We
Deliver.
Visit www.kbr.com
Forward Looking Statement
The statements in this press release that are not historical
statements, including statements regarding future financial
performance, are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. 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 its former parent; 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.
These forward-looking statements represent KBR's expectations or
beliefs concerning future events, and it is possible that the
results described in this news release will not be achieved. KBR's
most recently filed Annual Report on Form 10-K, any subsequent Form
10-Qs and 8-Ks, 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. Any forward looking statement speaks only as
of the date on which it is made, and, except as required by law,
KBR undertakes no obligation to revise or update publicly any
forward-looking statements for any reason.
KBR, Inc.:
Consolidated Statements of Operations
|
(In millions, except
for per share data)
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2017
|
|
2016
|
Revenues:
|
|
|
|
Government
Services
|
$
|
553
|
|
|
$
|
519
|
|
Technology &
Consulting
|
90
|
|
|
85
|
|
Engineering &
Construction
|
293
|
|
|
530
|
|
Subtotal
|
936
|
|
|
1,134
|
|
Non-strategic
Business
|
1
|
|
|
56
|
|
Total revenues
|
$
|
937
|
|
|
$
|
1,190
|
|
Gross profit
(loss):
|
|
|
|
Government
Services
|
$
|
42
|
|
|
$
|
43
|
|
Technology &
Consulting
|
28
|
|
|
24
|
|
Engineering &
Construction
|
(5)
|
|
|
(58)
|
|
Subtotal
|
65
|
|
|
9
|
|
Non-strategic
Business
|
—
|
|
|
(3)
|
|
Total gross
profit
|
$
|
65
|
|
|
$
|
6
|
|
Equity in earnings
of unconsolidated affiliates:
|
|
|
|
Government
Services
|
$
|
2
|
|
|
$
|
10
|
|
Technology &
Consulting
|
—
|
|
|
—
|
|
Engineering &
Construction
|
6
|
|
|
—
|
|
Subtotal
|
8
|
|
|
10
|
|
Non-strategic
Business
|
—
|
|
|
—
|
|
Total equity in
earnings of unconsolidated affiliates
|
$
|
8
|
|
|
$
|
10
|
|
General and
administrative expenses
|
(40)
|
|
|
(32)
|
|
Asset impairment and
restructuring charges
|
(6)
|
|
|
(18)
|
|
Gain on disposition
of assets
|
—
|
|
|
1
|
|
Operating income
(loss)
|
$
|
27
|
|
|
$
|
(33)
|
|
Interest
expense
|
(5)
|
|
|
(6)
|
|
Other non-operating
income
|
13
|
|
|
10
|
|
Income (loss)
before income taxes and noncontrolling interests
|
$
|
35
|
|
|
$
|
(29)
|
|
Benefit (provision)
for income taxes
|
243
|
|
|
(57)
|
|
Net income
(loss)
|
$
|
278
|
|
|
$
|
(86)
|
|
Net income attributable to noncontrolling interests
|
(3)
|
|
|
(1)
|
|
Net income (loss)
attributable to KBR
|
$
|
275
|
|
|
$
|
(87)
|
|
|
|
|
|
Net income (loss)
attributable to KBR per share:
|
|
|
|
Basic
|
$
|
1.94
|
|
|
$
|
(0.61)
|
|
Diluted
|
$
|
1.94
|
|
|
$
|
(0.61)
|
|
|
|
|
|
Basic weighted average common
shares outstanding
|
140
|
|
|
142
|
|
Diluted weighted average common
shares outstanding
|
140
|
|
|
142
|
|
|
|
|
|
Cash dividends
declared per share
|
$
|
0.08
|
|
|
$
|
0.08
|
|
KBR, Inc.:
Consolidated Statements of Operations
|
(In millions, except
for per share data)
|
|
|
Twelve Months
Ended
|
|
December
31,
|
|
December
31,
|
|
December
31,
|
|
2017
|
|
2016
|
|
2015
|
Revenues:
|
|
|
|
|
|
Government
Services
|
$
|
2,193
|
|
|
$
|
1,359
|
|
|
$
|
663
|
|
Technology &
Consulting
|
326
|
|
|
347
|
|
|
324
|
|
Engineering &
Construction
|
1,614
|
|
|
2,352
|
|
|
3,454
|
|
Subtotal
|
4,133
|
|
|
4,058
|
|
|
4,441
|
|
Non-strategic
Business
|
38
|
|
|
210
|
|
|
655
|
|
Total revenues
|
$
|
4,171
|
|
|
$
|
4,268
|
|
|
$
|
5,096
|
|
Gross profit
(loss):
|
|
|
|
|
|
Government
Services
|
$
|
155
|
|
|
$
|
137
|
|
|
$
|
(3)
|
|
Technology &
Consulting
|
79
|
|
|
73
|
|
|
77
|
|
Engineering &
Construction
|
108
|
|
|
7
|
|
|
224
|
|
Subtotal
|
342
|
|
|
217
|
|
|
298
|
|
Non-strategic
Business
|
—
|
|
|
(105)
|
|
|
27
|
|
Total gross
profit
|
$
|
342
|
|
|
$
|
112
|
|
|
$
|
325
|
|
Equity in earnings
of unconsolidated affiliates:
|
|
|
|
|
|
Government
Services
|
$
|
43
|
|
|
$
|
39
|
|
|
$
|
45
|
|
Technology &
Consulting
|
—
|
|
|
—
|
|
|
—
|
|
Engineering &
Construction
|
29
|
|
|
52
|
|
|
104
|
|
Subtotal
|
72
|
|
|
91
|
|
|
149
|
|
Non-strategic
Business
|
—
|
|
|
—
|
|
|
—
|
|
Total equity in
earnings of unconsolidated affiliates
|
$
|
72
|
|
|
$
|
91
|
|
|
$
|
149
|
|
General and
administrative expenses
|
(147)
|
|
|
(143)
|
|
|
(155)
|
|
Asset impairment and
restructuring charges
|
(6)
|
|
|
(39)
|
|
|
(70)
|
|
Gain on disposition
of assets
|
5
|
|
|
7
|
|
|
61
|
|
Operating
income
|
$
|
266
|
|
|
$
|
28
|
|
|
$
|
310
|
|
Interest
expense
|
(21)
|
|
|
(13)
|
|
|
(11)
|
|
Other non-operating
income
|
4
|
|
|
18
|
|
|
13
|
|
Income before
income taxes and noncontrolling interests
|
$
|
249
|
|
|
$
|
33
|
|
|
$
|
312
|
|
Benefit (provision)
for income taxes
|
193
|
|
|
(84)
|
|
|
(86)
|
|
Net income
(loss)
|
$
|
442
|
|
|
$
|
(51)
|
|
|
$
|
226
|
|
Net income attributable to noncontrolling interests
|
(8)
|
|
|
(10)
|
|
|
(23)
|
|
Net income (loss)
attributable to KBR
|
$
|
434
|
|
|
$
|
(61)
|
|
|
$
|
203
|
|
|
|
|
|
|
|
Net income (loss)
attributable to KBR per share:
|
|
|
|
|
|
Basic
|
$
|
3.06
|
|
|
$
|
(0.43)
|
|
|
$
|
1.40
|
|
Diluted
|
$
|
3.06
|
|
|
$
|
(0.43)
|
|
|
$
|
1.40
|
|
|
|
|
|
|
|
Basic weighted average common
shares outstanding
|
141
|
|
|
142
|
|
|
144
|
|
Diluted weighted average common
shares outstanding
|
141
|
|
|
142
|
|
|
144
|
|
|
|
|
|
|
|
Cash dividends
declared per share
|
$
|
0.32
|
|
|
$
|
0.32
|
|
|
$
|
0.32
|
|
KBR, Inc.:
Consolidated Balance Sheets
|
(In
millions)
|
|
|
|
December
31,
|
|
December
31,
|
|
|
2017
|
|
2016
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and
equivalents
|
|
$
|
439
|
|
|
$
|
536
|
|
Accounts receivable,
net of allowance for doubtful accounts of $12 and $14
|
|
510
|
|
|
592
|
|
Costs and estimated
earnings in excess of billings on uncompleted contracts
("CIE")
|
|
383
|
|
|
416
|
|
Claims
receivable
|
|
—
|
|
|
400
|
|
Other current
assets
|
|
93
|
|
|
103
|
|
Total current
assets
|
|
1,425
|
|
|
2,047
|
|
Claims and accounts
receivable
|
|
101
|
|
|
131
|
|
Property, plant, and
equipment, net of accumulated depreciation of $329 and $324
(including net PPE of $34 and $36 owned by a variable interest
entity)
|
|
130
|
|
|
145
|
|
Goodwill
|
|
968
|
|
|
959
|
|
Intangible assets,
net of accumulated amortization of $122 and $100
|
|
239
|
|
|
248
|
|
Equity in and
advances to unconsolidated affiliates
|
|
387
|
|
|
369
|
|
Deferred income
taxes
|
|
300
|
|
|
118
|
|
Other
assets
|
|
124
|
|
|
127
|
|
Total
assets
|
|
$
|
3,674
|
|
|
$
|
4,144
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
|
350
|
|
|
$
|
535
|
|
Billings in excess of
costs and estimated earnings on uncompleted contracts
("BIE")
|
|
368
|
|
|
552
|
|
Accrued salaries,
wages and benefits
|
|
186
|
|
|
171
|
|
Nonrecourse project
debt
|
|
10
|
|
|
9
|
|
Other current
liabilities
|
|
157
|
|
|
292
|
|
Total current
liabilities
|
|
1,071
|
|
|
1,559
|
|
Pension
obligations
|
|
391
|
|
|
526
|
|
Employee compensation
and benefits
|
|
118
|
|
|
113
|
|
Income tax
payable
|
|
85
|
|
|
78
|
|
Deferred income
taxes
|
|
18
|
|
|
149
|
|
Nonrecourse project
debt
|
|
28
|
|
|
34
|
|
Revolving credit
agreement
|
|
470
|
|
|
650
|
|
Deferred income from
unconsolidated affiliates
|
|
101
|
|
|
90
|
|
Other
liabilities
|
|
171
|
|
|
200
|
|
Total
liabilities
|
|
2,453
|
|
|
3,399
|
|
KBR shareholders'
equity:
|
|
|
|
|
Preferred
stock
|
|
—
|
|
|
—
|
|
Common
stock
|
|
—
|
|
|
—
|
|
Paid-in capital in
excess of par ("PIC")
|
|
2,091
|
|
|
2,088
|
|
Accumulated other
comprehensive loss ("AOCL")
|
|
(921)
|
|
|
(1,050)
|
|
Retained
earnings
|
|
877
|
|
|
488
|
|
Treasury
stock
|
|
(818)
|
|
|
(769)
|
|
Total KBR
shareholders' equity
|
|
1,229
|
|
|
757
|
|
Noncontrolling
interests ("NCI")
|
|
(8)
|
|
|
(12)
|
|
Total
shareholders' equity
|
|
1,221
|
|
|
745
|
|
Total liabilities
and shareholders' equity
|
|
$
|
3,674
|
|
|
$
|
4,144
|
|
KBR, Inc.:
Consolidated Statements of Cash Flows
|
(In
millions)
|
|
|
Twelve Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2017
|
|
2016
|
Cash flows from
operating activities:
|
|
|
|
Net income
(loss)
|
$
|
442
|
|
|
$
|
(51)
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
48
|
|
|
45
|
|
Equity in earnings of
unconsolidated affiliates
|
(72)
|
|
|
(91)
|
|
Deferred income tax
(benefit) expense
|
(322)
|
|
|
18
|
|
Gain on disposition
of assets
|
(5)
|
|
|
(7)
|
|
Asset
impairment
|
—
|
|
|
16
|
|
Other
|
29
|
|
|
3
|
|
Changes in operating
assets and liabilities, net of acquired businesses:
|
|
|
|
Accounts receivable,
net of allowance for doubtful accounts
|
92
|
|
|
121
|
|
Costs and estimated
earnings in excess of billings on uncompleted contracts
|
40
|
|
|
8
|
|
Claims
receivable
|
400
|
|
|
—
|
|
Accounts
payable
|
(193)
|
|
|
(6)
|
|
Billings in excess of
costs and estimated earnings on uncompleted contracts
|
(198)
|
|
|
33
|
|
Accrued salaries,
wages and benefits
|
14
|
|
|
(50)
|
|
Reserve for loss on
uncompleted contracts
|
(48)
|
|
|
(5)
|
|
Payments from
(advances to) unconsolidated affiliates, net
|
11
|
|
|
(1)
|
|
Distributions of
earnings from unconsolidated affiliates
|
62
|
|
|
56
|
|
Income taxes
payable
|
—
|
|
|
(52)
|
|
Pension
funding
|
(37)
|
|
|
(41)
|
|
Retainage
payable
|
(16)
|
|
|
(2)
|
|
Subcontractor
advances
|
—
|
|
|
8
|
|
Net settlement of
derivative contracts
|
3
|
|
|
(9)
|
|
Other assets and
liabilities
|
(57)
|
|
|
68
|
|
Total cash flows
provided by operating activities
|
193
|
|
|
61
|
|
Cash flows from
investing activities:
|
|
|
|
Purchases of
property, plant and equipment
|
(8)
|
|
|
(11)
|
|
Payments for
investments in equity method joint ventures
|
—
|
|
|
(61)
|
|
Proceeds from sale of
assets or investments
|
2
|
|
|
2
|
|
Acquisition of
businesses, net of cash acquired
|
(4)
|
|
|
(911)
|
|
Other
|
(2)
|
|
|
—
|
|
Total cash flows
used in investing activities
|
(12)
|
|
|
(981)
|
|
Cash flows from
financing activities:
|
|
|
|
Payments to reacquire
common stock
|
(53)
|
|
|
(4)
|
|
Investments from
noncontrolling interests
|
1
|
|
|
—
|
|
Distributions to
noncontrolling interests
|
(4)
|
|
|
(9)
|
|
Payments of dividends
to shareholders
|
(45)
|
|
|
(46)
|
|
Excess tax benefits
from share-based compensation
|
—
|
|
|
1
|
|
Borrowings on
revolving credit agreement
|
—
|
|
|
700
|
|
Payments on revolving
credit agreement
|
(180)
|
|
|
(50)
|
|
Payments on
short-term and long-term borrowings
|
(9)
|
|
|
(9)
|
|
Other
|
—
|
|
|
1
|
|
Total cash flows
(used in) provided by financing activities
|
(290)
|
|
|
584
|
|
Effect of exchange
rate changes on cash
|
12
|
|
|
(11)
|
|
Decrease in cash and
equivalents
|
(97)
|
|
|
(347)
|
|
Cash and equivalents
at beginning of period
|
536
|
|
|
883
|
|
Cash and
equivalents at end of period
|
$
|
439
|
|
|
$
|
536
|
|
KBR, Inc.:
Consolidated Statements of Cash Flows
|
(In
millions)
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2017
|
|
2016
|
Cash flows from
operating activities:
|
|
|
|
Net income
(loss)
|
$
|
278
|
|
|
$
|
(86)
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
10
|
|
|
14
|
|
Equity in earnings of
unconsolidated affiliates
|
(8)
|
|
|
(10)
|
|
Deferred income tax
(benefit) expense
|
(247)
|
|
|
11
|
|
Gain on disposition
of assets
|
—
|
|
|
(1)
|
|
Asset
impairment
|
—
|
|
|
11
|
|
Other
|
4
|
|
|
(2)
|
|
Changes in operating
assets and liabilities, net of acquired businesses:
|
|
|
|
Accounts receivable,
net of allowance for doubtful accounts
|
(8)
|
|
|
112
|
|
Costs and estimated
earnings in excess of billings on uncompleted contracts
|
29
|
|
|
(17)
|
|
Accounts
payable
|
(49)
|
|
|
(45)
|
|
Billings in excess of
costs and estimated earnings on uncompleted contracts
|
9
|
|
|
19
|
|
Accrued salaries,
wages and benefits
|
(25)
|
|
|
(31)
|
|
Reserve for loss on
uncompleted contracts
|
(5)
|
|
|
10
|
|
Payments from
unconsolidated affiliates, net
|
5
|
|
|
2
|
|
Distributions of
earnings from unconsolidated affiliates
|
21
|
|
|
13
|
|
Income taxes
payable
|
7
|
|
|
(33)
|
|
Pension
funding
|
(9)
|
|
|
(10)
|
|
Retainage
payable
|
(6)
|
|
|
1
|
|
Subcontractor
advances
|
1
|
|
|
1
|
|
Net settlement of
derivative contracts
|
(1)
|
|
|
(1)
|
|
Other assets and
liabilities
|
(51)
|
|
|
95
|
|
Total cash flows
(used in) provided by operating activities
|
(45)
|
|
|
53
|
|
Cash flows from
investing activities:
|
|
|
|
Purchases of
property, plant and equipment
|
(2)
|
|
|
(3)
|
|
Payments for
investments in equity method joint ventures
|
—
|
|
|
(56)
|
|
Acquisition of
businesses, net of cash acquired
|
(6)
|
|
|
—
|
|
Total cash flows
used in investing activities
|
(8)
|
|
|
(59)
|
|
Cash flows from
financing activities:
|
|
|
|
Payments to reacquire
common stock
|
(1)
|
|
|
(2)
|
|
Investments from
noncontrolling interests
|
1
|
|
|
—
|
|
Distributions to
noncontrolling interests
|
(3)
|
|
|
—
|
|
Payments of dividends
to shareholders
|
(11)
|
|
|
(12)
|
|
Excess tax benefits
from share-based compensation
|
—
|
|
|
1
|
|
Payments on
short-term and long-term borrowings
|
(4)
|
|
|
(4)
|
|
Other
|
—
|
|
|
1
|
|
Total cash flows
used in financing activities
|
(18)
|
|
|
(16)
|
|
Effect of exchange
rate changes on cash
|
(1)
|
|
|
(11)
|
|
Decrease in cash and
equivalents
|
(72)
|
|
|
(33)
|
|
Cash and equivalents
at beginning of period
|
511
|
|
|
569
|
|
Cash and
equivalents at end of period
|
$
|
439
|
|
|
$
|
536
|
|
KBR, Inc.: Backlog
Information (a)
|
(In
millions)
|
|
|
December
31,
|
|
September
30,
|
|
December
31,
|
|
2017
|
|
2017
|
|
2016
|
|
|
|
(Unaudited)
|
|
|
Government
Services
|
$
|
8,355
|
|
|
$
|
8,183
|
|
|
$
|
7,821
|
|
Technology &
Consulting
|
419
|
|
|
278
|
|
|
313
|
|
Engineering &
Construction
|
1,790
|
|
|
1,874
|
|
|
2,769
|
|
Subtotal
|
10,564
|
|
|
10,335
|
|
|
10,903
|
|
Non-strategic
Business
|
6
|
|
|
7
|
|
|
35
|
|
Total
backlog
|
$
|
10,570
|
|
|
$
|
10,342
|
|
|
$
|
10,938
|
|
|
|
(a)
|
Backlog generally
represents the dollar amount of revenues we expect to realize in
the future as a result of performing work on contracts and our
pro-rata share of work to be performed by unconsolidated joint
ventures. We generally include total expected revenues in backlog
when a contract is awarded under a legally binding agreement. In
many instances, arrangements included in backlog are complex,
nonrepetitive and may fluctuate due to the release of contracted
work in phases by the customer or due to movements in foreign
exchange rates. Additionally, nearly all contracts allow customers
to terminate the agreement at any time for convenience. Where
contract duration is indefinite and clients can terminate for
convenience without compensating us for periods beyond the date of
termination, backlog is limited to the estimated amount of expected
revenues within the following twelve months. Certain contracts
provide maximum dollar limits, with actual authorization to perform
work under the contract agreed upon on a periodic basis with the
customer. In these arrangements, only the amounts authorized are
included in backlog. For projects where we act solely in a project
management capacity, we only include the expected value of our
services in backlog.
|
|
|
|
We define backlog, as
it relates to U.S. government contracts, as our estimate of the
remaining future revenue from existing signed contracts over the
remaining base contract performance period (including customer
approved option periods) for which work scope and price have been
agreed with the customer. We define funded backlog as the portion
of backlog for which funding currently is appropriated, less the
amount of revenue we have previously recognized. We define unfunded
backlog as the total backlog less the funded backlog. Our GS
backlog does not include any estimate of future potential delivery
orders that might be awarded under our government-wide acquisition
contracts, agency-specific indefinite delivery/indefinite quantity
contracts, or other multiple-award contract vehicles nor does it
include option periods that have not been exercised by the
customer.
|
|
|
|
Within our GS
business segment, we calculate estimated backlog for long-term
contracts associated with the U.K. government's privately financed
initiatives or projects ("PFIs") based on the aggregate amount that
our client would contractually be obligated to pay us over the life
of the project. We update our estimates of the future work to be
executed under these contracts on a quarterly basis and adjust
backlog if necessary.
|
|
|
|
We have included in
the table above our proportionate share of unconsolidated joint
ventures' estimated revenues. Since these projects are accounted
for under the equity method, only our share of future earnings from
these projects will be recorded in our results of operations. Our
proportionate share of backlog for projects related to
unconsolidated joint ventures totaled $7.2 billion at
December 31, 2017 and $7.4 billion at December 31, 2016.
We consolidate joint ventures which are majority-owned and
controlled or are variable interest entities ("VIEs") in which we
are the primary beneficiary. Our backlog included in the
table above for projects related to consolidated joint ventures
with noncontrolling interest includes 100% of the backlog
associated with those joint ventures and totaled $125 million at
December 31, 2017 and $151 million at December 31,
2016.
|
|
|
|
We estimate that as
of December 31, 2017, 34% of our backlog will be executed
within one year. Of this amount, 60% will be recognized in revenues
on our condensed consolidated statement of operations and 40% will
be recorded by our unconsolidated joint ventures. As of
December 31, 2017, $92 million of our backlog relates to
active contracts that are in a loss position.
|
|
|
|
As of
December 31, 2017, 10% of our backlog was attributable to
fixed-price contracts, 60% was attributable to PFIs, and 30% of our
backlog was attributable to cost-reimbursable contracts. For
contracts that contain both fixed-price and cost-reimbursable
components, we classify the individual components as either
fixed-price or cost-reimbursable according to the composition of
the contract; however, for smaller contracts, we characterize the
entire contract based on the predominant component. As of
December 31, 2017, $7.6 billion of our GS backlog was
currently funded by our customers.
|
Non-GAAP Financial Information
The following information provides reconciliations of certain
non-GAAP financial measures presented in the press release to which
this reconciliation is attached to the most directly comparable
financial measures calculated and presented in accordance with
generally accepted accounting principles (GAAP). The company has
provided the non-GAAP financial information presented in the press
release, which is not calculated or presented in accordance with
GAAP, as information supplemental and in addition to the financial
measures presented in the press release that are calculated and
presented in accordance with GAAP. Such non-GAAP financial measures
should not be considered superior to, as a substitute for or
alternative to, and should be considered in conjunction with, the
GAAP financial measures presented in the press release. The
non-GAAP financial measures in the press release may differ from
similar measures used by other companies.
Adjusted EPS
Adjusted diluted earnings per share from net income attributable
to KBR (Adjusted EPS) for each of the three months and fiscal years
ended December 31, 2017 and 2016 is
considered a non-GAAP financial measure under the SEC's rules
because the Adjusted EPS for each such period excludes certain
amounts not excluded in the diluted earnings per share from net
income attributable to KBR calculated in accordance with GAAP (EPS)
for such periods. Management believes that the Adjusted EPS for
each of the three months and fiscal years ended December 31, 2017 and 2016 is a meaningful
measure to share with investors because each measure, which adjusts
EPS for such periods for certain items recorded in such periods, is
the measure that best allows comparison of the performance for the
comparable period. In addition, Adjusted EPS affords investors a
view of what management considers KBR's core earnings performance
for each of the three months and fiscal years ended December 31, 2017 and 2016 and also affords
investors the ability to make a more informed assessment of such
core earnings performance for the comparable periods.
We have calculated Adjusted EPS for the three months and fiscal
year ended December 31, 2017 by
adjusting EPS for the following: (1) legacy legal costs, (2)
shareholder loan receivable impairment, and (3) the net tax benefit
due to tax reform. Adjusted EPS for the three months and fiscal
year ended December 31, 2017 is a
non-GAAP financial measure. The most directly comparable financial
measure calculated in accordance with GAAP is Diluted EPS for the
same periods.
Adjusted EPS -
Fiscal 2017
|
|
Three Months Ended
December 31, 2017
|
Diluted earnings
per share:
|
|
Reported
EPS
|
$
|
1.94
|
|
|
|
Adjustments:
|
|
Legacy Legal Costs
|
$
|
0.02
|
|
Shareholder loan receivable impairment
|
0.04
|
|
Net
Tax Benefit
|
(1.72)
|
|
Net Adjustments
|
$
|
(1.66)
|
|
|
|
Adjusted EPS
|
$
|
0.28
|
|
|
|
|
Fiscal Year Ended
Ended December 31, 2017
|
Diluted earnings
per share:
|
|
Reported
EPS
|
$
|
3.06
|
|
|
|
Adjustments:
|
|
Legacy Legal Costs
|
$
|
0.10
|
|
Shareholder loan receivable impairment
|
0.04
|
|
Net
Tax Benefit
|
(1.71)
|
|
Net Adjustments
|
$
|
(1.57)
|
|
|
|
Adjusted EPS
|
$
|
1.49
|
|
As previously disclosed in our fiscal year ended December 31, 2016 press release, we have
calculated the Adjusted EPS for the three months and the fiscal
year ended December 31, 2016 by
adjusting the EPS for each period for the amount of the impact of
legacy legal costs. Adjusted EPS for the three months and fiscal
year ended December 31, 2016 is a
non-GAAP financial measure. The most directly comparable financial
measure calculated in accordance with GAAP is Diluted EPS for the
same periods.
Adjusted EPS -
Fiscal 2016
|
|
Three Months Ended
December 31, 2016
|
Diluted earnings
per share:
|
|
Reported
EPS
|
$
|
(0.61)
|
|
|
|
Adjustment:
|
|
Legacy Legal Costs
|
$
|
0.02
|
|
|
|
Adjusted EPS
|
$
|
(0.59)
|
|
|
|
|
Fiscal Year Ended
Ended December 31, 2016
|
Diluted earnings
per share:
|
|
Reported
EPS
|
$
|
(0.43)
|
|
|
|
Adjustment:
|
|
Legacy Legal Costs
|
$
|
0.10
|
|
|
|
Adjusted EPS
|
$
|
(0.33)
|
|
We have calculated the Adjusted EPS for the 2018 guidance by
adjusting the EPS for the amount of the impact of legacy legal
costs. The most directly comparable financial measure calculated in
accordance with GAAP is Diluted EPS for the same periods.
Adjusted EPS -
2018 Guidance
|
|
Low
|
|
High
|
Diluted earnings
per share:
|
|
|
|
EPS -
Guidance
|
$
|
1.28
|
|
|
$
|
1.38
|
|
|
|
|
|
Adjustment:
|
|
|
|
Legacy Legal Costs
|
$
|
0.07
|
|
|
$
|
0.07
|
|
|
|
|
|
Adjusted EPS
|
$
|
1.35
|
|
|
$
|
1.45
|
|
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SOURCE KBR, Inc.