KBR (NYSE:KBR) announced today that third quarter 2008 income from
continuing operations was $74 million, or $0.44 per diluted share,
which included a negative impact of approximately $0.04 to $0.05
per diluted share, related to Hurricane Ike. This compares to
income from continuing operations of $60 million, or $0.35 per
diluted share, in the third quarter of 2007. Net income for the
third quarter of 2008 was $85 million, or $0.51 per diluted share,
which included income from discontinued operations of $11 million,
or $0.07 per diluted share, resulting from foreign tax credits
related to DML. Net income for the third quarter of 2007 was $63
million, or $0.37 per diluted share, which included income from
discontinued operations of $3 million, or $0.02 per diluted share,
related to post-closing activities for previously disposed
businesses. Consolidated revenue in the third quarter of 2008 was
$3.0 billion, an increase of 39% from $2.2 billion in the third
quarter of 2007. Consolidated operating income was $144 million in
the third quarter of 2008 compared to $102 million in the third
quarter of 2007. Operating income in the third quarter of 2008
included a $13 million reversal of a charge related to an
unfavorable jury verdict of approximately $40 million from
litigation with a subcontractor on the LogCAP III contract in the
second quarter of 2008. Operating income in the third quarter of
2007 included an $18 million pre-tax gain on the sale of KBR�s
interest in the Brown & Root-Condor Spa (BRC) joint venture in
Algeria. �This was a solid quarter for KBR, in terms of revenue
growth, operating income growth, and earnings per share growth from
last year�s third quarter. The integration of BE&K is going
extremely well and BE&K is making strong contributions with new
awards and financial performance,� said Bill Utt, Chairman,
President, and Chief Executive Officer of KBR. �KBR�s long-term
prospects across its end-markets remain positive and KBR is
well-positioned to capture those opportunities.� 2008 Third Quarter
Business Unit Results Upstream business unit income was $53 million
in the third quarter of 2008 compared to business unit income of
$57 million in the third quarter of 2007. Business unit income in
the third quarter of 2008 had positive contributions from various
gas monetization projects, including the Pearl GTL, Skikda LNG, and
Gorgon LNG projects, several offshore related projects in Australia
and the Caspian area, and an FPSO project. The third quarter of
2007 included an $18 million pre-tax gain on the sale of BRC.
Government and Infrastructure business unit income was $104 million
in the third quarter of 2008 compared to business unit income of
$98 million in the third quarter of 2007. Business unit income in
the third quarter of 2008 included a $13 million reversal of a
charge related to an unfavorable jury verdict of approximately $40
million from litigation with a subcontractor on the LogCAP III
contract in the second quarter of 2008 and positive contributions
from Iraq-related activities, the Allenby & Connaught project,
work on the CENTCOM project, and several water projects. Business
unit income in the third quarter of 2007 included a $6 million gain
related to a favorable settlement on a road project. Services
business unit income was $27 million in the third quarter of 2008
compared to business unit income of $6 million in the third quarter
of 2007. Business unit income in the third quarter of 2008 had
positive contributions from BE&K, the Scotford Upgrader project
in Canada, service and maintenance vessels in the Gulf of Mexico,
and various industrial service projects. Downstream business unit
income was $15 million in the third quarter of 2008 compared to
business unit income of $4 million in the third quarter of 2007.
Business unit income in the third quarter of 2008 had positive
contributions from the Yanbu export refinery project, program
management services for the Ras Tanura project in Saudi Arabia, and
several BE&K projects. Technology business unit income was $4
million in the third quarter of 2008 compared to business unit
income of $5 million in the third quarter of 2007. Business unit
income in the third quarter of 2008 had positive contributions from
an ammonia project in Venezuela and a refinery fluid catalytic
cracking revamp project in Colombia. Ventures business unit income
was $0 million in the third quarter of 2008 compared to a business
unit loss of $3 million in the third quarter of 2007. Business unit
income in the third quarter of 2008 was primarily impacted by
income from the investment in the Allenby & Connaught military
accommodation and services project and offset by start-up costs
related to the EBIC ammonia project in Egypt. Business unit loss
for the third quarter of 2007 included continued operating losses
generated on an investment in a railroad project in Australia.
Corporate general and administrative expense in the third quarter
of 2008 was $55 million compared to $65 million in the prior year
third quarter. Total cash flows provided by operating activities
for the first nine months ended September 30, 2008 was $1 million,
which included a $158 million reduction in net committed cash from
advanced payments related to consolidated joint ventures, other
consolidated subsidiaries, and a contract in progress. Significant
Achievements and Awards KBR announced on August 6, 2008 and
completed on September 3, 2008, the company�s first share
repurchase program. The company repurchased a total of 8.4 million
shares at an average price of $23.35 per share. KBR announced that
the Kellogg Joint Venture Group (KJVG) was awarded a Work
Authorization by Chevron Australia Pty Ltd for approximately
AUD$300 million to finalize front end engineering and design (FEED)
for the Chevron-operated Gorgon project. Through KJVG, KBR is
leading the design of the Liquefied Natural Gas facility on Barrow
Island, which will consist of three, 5 million ton per annum LNG
trains. The FEED also included a 300TJ/d domestic gas plant. KBR
announced a division of its Services business unit, BE&K, was
awarded a $232 million contract by ADA-ES, Inc. for the
construction of its Red River Activated Carbon Plant located in Red
River Parish, Louisiana. BE&K will provide full engineering,
procurement, and construction services. KBR announced a division of
its Services business unit, BE&K, was awarded a $64 million
contract by EFACEC Power Transformers, Inc. for the construction of
a power transformer manufacturing facility in Rincon, Georgia.
BE&K will design and construct the new manufacturing facility
that will be used by EFACEC to build power transformers, including
core form, shell form, and mobile power substations for the U.S.
market. KBR announced a division of its Services business unit,
BE&K, was awarded a contract for the rebuild of a large
recovery boiler for Weyerhaeuser Company in Columbus, Mississippi.
BE&K will reconstruct the lower furnace of the mill�s recovery
boiler, including: replacing furnace walls and existing sloped
floor; upgrading the combustion air system; and replacing a smelt
dissolving tank, as well as installing new agitators and soot
blowers. KBR announced on October 6, 2008, it had acquired Wabi
Development Corporation (Wabi) for approximately US$19.5 million.
Wabi services the energy, forestry, and mining industries in Canada
and will be integrated into KBR�s Services Business Unit. Wabi
provides maintenance, fabrication, construction, and construction
management services to a variety of clients in Canada and Mexico.
KBR announced a division of its Services business unit, BE&K,
was awarded a multi-million dollar contract by Georgia Power for
full engineering, procurement, and construction services of a new
baghouse unit at Plant Scherer near Macon, Georgia. BE&K will
provide full EPC services for the installation of a new baghouse
unit, including major new ductwork and ancillary facilities. KBR is
a global engineering, construction and services company supporting
the energy, petrochemicals, government services, and civil
infrastructure sectors. The company offers a wide range of services
through its Downstream, Government and Infrastructure, Services,
Technology, Upstream, and Ventures business units. 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 26, 2008, subsequent Forms 10-Q,
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 of dollars and shares except per
share data) (Unaudited) � Three Months Three Months Ended Ended
September 30, June 30, � 2008 2007 2008 Revenue: Government and
Infrastructure $ 1,759 $ 1,566 $ 1,707 Upstream 550 407 699
Services 539 77 129 Downstream 138 103 101 Technology 19 26 23
Ventures(a) 1 (2 ) (1 ) Other � � 12 � � � � � � � Total revenue �
$ 3,018 � $ 2,177 � $ 2,658 � Business unit income (loss):
Government and Infrastructure $ 104 $ 98 $ 63 Upstream 53 57 39
Services 27 6 17 Downstream 15 4 14 Technology 4 5 7 Ventures(a) �
(3 ) � Other � � 1 � � � � � � � Total business unit income � � 204
� � 167 � � 140 � Unallocated costs: Labor cost absorption (5 ) � 2
Corporate general and administrative � � (55 ) � (65 ) � (52 )
Total operating income � � 144 � � 102 � � 90 � Interest income,
net 7 17 9 Foreign currency gain (loss), net � (11 ) 1 Other
non-operating gain, net � � � � � � � � � � Income from continuing
operations before income taxes and minority interest 151 108 100
Provision for income taxes (55 ) (35 ) (36 ) Minority interest in
net earnings of subsidiaries � � (22 ) � (13 ) � (16 ) Income from
continuing operations 74 60 48 Income from discontinued operations,
net � � 11 � � 3 � � � � Net income � $ 85 � $ 63 � $ 48 � Basic
income per share(b): Continuing operations $ 0.45 $ 0.36 $ 0.28
Discontinued operations, net � � 0.07 � � 0.02 � � � � Net income
per share � $ 0.51 � $ 0.38 � $ 0.28 � Diluted income per share(b):
Continuing operations $ 0.44 $ 0.35 $ 0.28 Discontinued operations,
net � � 0.07 � � 0.02 � � � � Net income per share � $ 0.51 � $
0.37 � $ 0.28 � Basic weighted average shares outstanding 166 168
169 Diluted weighted average shares outstanding � � 167 � � 170 � �
171 � Cash dividends declared per share � $ 0.05 � $ � � $ 0.05 �
(a) � Ventures segment operations generally relate to investments
in less-than-50%-owned unconsolidated entities which are accounted
for using the equity method. Accordingly, our revenue equals our
share of the net income or loss of these entities. � (b) Due to the
effect of rounding, the sum of the individual per share amounts may
not equal the total shown. KBR, Inc.: Condensed Consolidated
Statements of Income (Millions of dollars and shares except per
share data) (Unaudited) � Nine Months Ended September 30, � 2008
2007 Revenue: Government and Infrastructure $ 5,150 $ 4,505
Upstream 1,860 1,284 Services 776 226 Downstream 339 276 Technology
61 72 Ventures(a) (3 ) (7 ) Other � � 12 � � � � Total revenue � $
8,195 � $ 6,356 � Business unit income (loss): Government and
Infrastructure $ 247 $ 226 Upstream 197 124 Services 57 33
Downstream 37 7 Technology 16 18 Ventures(a) (4 ) (9 ) Other � � 1
� � � � Total business unit income � � 551 � � 399 � Unallocated
costs: Labor cost absorption � (10 ) Corporate general and
administrative � � (163 ) � (177 ) Total operating income � � 388 �
� 212 � Interest income, net 32 44 Foreign currency losses, net (2
) (16 ) Other non-operating gain, net � � � � � 1 � Income from
continuing operations before income taxes and minority interest 418
241 Provision for income taxes (151 ) (93 ) Minority interest in
net earnings of subsidiaries � � (47 ) � (14 ) Income from
continuing operations 220 134 Income from discontinued operations,
net � � 11 � � 97 � Net income � $ 231 � $ 231 � Basic income per
share(b): Continuing operations $ 1.31 $ 0.80 Discontinued
operations, net � � 0.07 � � 0.58 � Net income per share � $ 1.38 �
$ 1.38 � Diluted income per share(b): Continuing operations $ 1.30
$ 0.79 Discontinued operations, net � � 0.07 � � 0.57 � Net income
per share � $ 1.37 � $ 1.37 � Basic weighted average shares
outstanding 168 168 Diluted weighted average shares outstanding � �
169 � � 169 � Cash dividends declared per share � $ 0.15 � $ � �
(a) � Ventures segment operations generally relate to investments
in less-than-50%-owned unconsolidated entities which are accounted
for using the equity method. Accordingly, our revenue equals our
share of the net income or loss of these entities. � (b) Due to the
effect of rounding, the sum of the individual per share amounts may
not equal the total shown. KBR, Inc.: Condensed Consolidated
Balance Sheets (In millions) (Unaudited) � September 30, December
31, � � 2008 2007 Assets Current assets: Cash and equivalents $
1,110 $ 1,861 Receivables: Notes and accounts receivable, net 1,333
927 Unbilled receivables on uncompleted contracts � � 760 � � 820 �
Total receivables 2,093 1,747 Deferred income taxes 167 165 Other
current assets 289 282 Current assets of discontinued operations �
� � � � 1 � Total current assets 3,659 4,056 Property, plant, and
equipment, net of accumulated depreciation of $240 and $227 262 220
Goodwill 679 251 Intangible assets, net 74 15 Equity in and
advances to unconsolidated affiliates 177 294 Noncurrent deferred
income taxes 92 139 Unbilled receivables on uncompleted contracts
133 196 Other assets � � 247 � � 32 � Total assets � $ 5,323 � $
5,203 � � Liabilities, Minority Interest and Shareholder�s Equity
Current liabilities: Accounts payable $ 1,140 $ 1,117 Due to
Halliburton, net 17 16 Advanced billings on uncompleted contracts
686 794 Reserve for estimated contract losses 92 117 Employee
compensation and benefits 362 316 Other current liabilities 327 262
Current liabilities of discontinued operations � � 6 � � 1 � Total
current liabilities 2,630 2,623 Noncurrent employee compensation
and benefits 109 79 Other noncurrent liabilities 184 151 Noncurrent
income tax payable 80 78 Noncurrent deferred tax liability � � 43 �
� 37 � Total liabilities � � 3,046 � � 2,968 � Minority interest in
consolidated subsidiaries � � � � � (32 ) Shareholders� equity and
accumulated other comprehensive loss: Common stock � � Paid-in
capital in excess of par value 2,086 2,070 Accumulated other
comprehensive loss (136 ) (122 ) Retained earnings � � 523 � � 319
� 2,473 2,267 Treasury Stock � � (196 ) � � � Total shareholders�
equity and accumulated other comprehensive loss � � 2,277 � � 2,267
� Total liabilities, minority interest, shareholders� equity and
accumulated other comprehensive loss � $ 5,323 � $ 5,203 � KBR,
Inc.: Condensed Consolidated Statements of Cash Flows (In millions)
(Unaudited) � � Nine Months Ended September 30, � � 2008 2007 Cash
flows from operating activities: Net income $ 231 $ 231 Adjustments
to reconcile net income to net cash provided by (used in)
operations: Depreciation and amortization 33 30 Equity earnings
from unconsolidated affiliates (34 ) (71 ) Deferred income taxes 52
8 Gain on sale of assets, net � (216 ) Other 10 52 Changes in
operating assets and liabilities: Receivables (119 ) (247 )
Unbilled receivables on uncompleted contracts 73 271 Accounts
payable (102 ) (91 ) Advanced billings on uncompleted contracts
(212 ) 87 Accrued employee compensation and benefits (2 ) 35
Reserve for loss on uncompleted contracts (25 ) (43 ) Collection
(repayment) of advances from (to) unconsolidated affiliates, net 69
(39 ) Distribution of earnings from unconsolidated affiliates 88 93
Other assets (89 ) (38 ) Other liabilities � � 28 � � 110 � Total
cash flows provided by operating activities � � 1 � � 172 � Cash
flows from investing activities: Capital expenditures (27 ) (32 )
Sales of property, plant and equipment 6 1 Acquisition of
businesses, net of cash acquired (498 ) � Disposition of
business/investments, net of cash disposed � � � � � 334 � Total
cash flows provided by (used in) investing activities � � (519 ) �
303 � Cash flows from financing activities: Payments to
Halliburton, net � (120 ) Payments on long-term borrowings � (7 )
Payments to reacquire common stock (196 ) � Net proceeds from
issuance of common stock 3 4 Excess tax benefits from stock-based
compensation 2 3 Payment of dividend to shareholders (17 ) �
Payments of dividends to minority shareholders � � (23 ) � (28 )
Total cash flows used in financing activities � � (231 ) � (148 )
Effect of exchange rate changes � � (2 ) � 7 � Increase (decrease)
in cash and equivalents (751 ) 334 Cash and equivalents at
beginning of period � � 1,861 � � 1,461 � Cash and equivalents at
end of period � $ 1,110 � $ 1,795 � Noncash financing activities
Dividends declared but not paid � $ 9 � $ � � KBR, Inc.: Revenue
and Operating Results by Business Unit (In millions) (Unaudited) �
� ��Three Months Ended September 30, � � June 30, Revenue: 2008 �
2007 2008 G&I: U.S. Government � Middle East Operations $ 1,364
$ 1,217 $ 1,340 U.S. Government � Americas Operations 183 192 156
International Operations � � � 212 � � � 157 � � � � 211 � Total
G&I � � � 1,759 � � � 1,566 � � � � 1,707 � Upstream: Gas
Monetization 434 265 575 Offshore 97 92 98 Other � � � 19 � � � 50
� � � � 26 � Total Upstream � � � 550 � � � 407 � � � � 699 �
Services 539 77 129 Downstream 138 103 101 Technology 19 26 23
Ventures 1 (2 ) (1 ) Other � � � 12 � � � � � � � � � � Total
revenue � � $ 3,018 � � $ 2,177 � � � $ 2,658 � Business unit
income (loss): G&I: U.S. Government � Middle East Operations $
78 $ 61 $ 36 U.S. Government � Americas Operations 13 31 13
International Operations � � � 42 � � � 36 � � � � 45 � Total job
income � � � 133 � � � 128 � � � � 94 � Divisional overhead � � �
(29 ) � � (30 ) � � � (31 ) Total G&I business unit income � �
� 104 � � � 98 � � � � 63 � Upstream: Gas Monetization 37 31 32
Offshore 20 15 17 Other � � � 6 � � � 26 � � � � 4 � Total job
income � � � 63 � � � 72 � � � � 53 � Divisional overhead � � � (10
) � � (15 ) � � � (14 ) Total Upstream business unit income � � �
53 � � � 57 � � � � 39 � Services: Job income 41 9 19 Gain on sale
of assets � � 1 Divisional overhead � � � (14 ) � � (3 ) � � � (3 )
Total Services business unit income � � � 27 � � � 6 � � � � 17 �
Downstream: Job income 20 7 20 Divisional overhead � � � (5 ) � �
(3 ) � � � (6 ) Total Downstream business unit income � � � 15 � �
� 4 � � � � 14 � Technology: Job income 10 10 12 Divisional
overhead � � � (6 ) � � (5 ) � � � (5 ) Total Technology business
unit income � � � 4 � � � 5 � � � � 7 � Ventures: Job income (loss)
1 (2 ) (1 ) Gain on sale of assets � � 1 Divisional overhead � � �
(1 ) � � (1 ) � � � � � Total Ventures business unit income (loss)
� � � � � � � (3 ) � � � � � Other: Job Income 4 � � Divisional
overhead � � � (3 ) � � � � � � � � � Total Other business unit
income � � � 1 � � � � � � � � � � Total business unit income � � $
204 � � $ 167 � � � $ 140 � KBR, Inc.: Revenue and Operating
Results by Business Unit (In millions) (Unaudited) � �Nine Months
Ended September 30, Revenue: 2008 � 2007 G&I: U.S. Government �
Middle East Operations $ 4,072 $ 3,529 U.S. Government � Americas
Operations 460 565 International Operations � � 618 � � � 411 �
Total G&I � � 5,150 � � � 4,505 � Upstream: Gas Monetization
1,454 907 Offshore 332 260 Other � � 74 � � � 117 � Total Upstream
� � 1,860 � � � 1,284 � Services 776 226 Downstream 339 276
Technology 61 72 Ventures (3 ) (7 ) Other � � 12 � � � � � Total
revenue � $ 8,195 � � $ 6,356 � Business unit income (loss):
G&I: U.S. Government � Middle East Operations $ 183 $ 193 U.S.
Government � Americas Operations 27 49 International Operations � �
126 � � � 82 � Total job income � � 336 � � � 324 � Divisional
overhead � � (89 ) � � (98 ) Total G&I business unit income � �
247 � � � 226 � Upstream: Gas Monetization 110 112 Offshore 104 38
Other � � 18 � � � 13 � Total job income � � 232 � � � 163 �
Divisional overhead � � (35 ) � � (39 ) Total Upstream business
unit income � � 197 � � � 124 � Services: Job income 76 41 Gain on
sale of assets 1 � Divisional overhead � � (20 ) � � (8 ) Total
Services business unit income � � 57 � � � 33 � Downstream: Job
income 52 18 Divisional overhead � � (15 ) � � (11 ) Total
Downstream business unit income � � 37 � � � 7 � Technology: Job
income 32 33 Divisional overhead � � (16 ) � � (15 ) Total
Technology business unit income � � 16 � � � 18 � Ventures: Job
income (loss) (3 ) (7 ) Gain on sale of assets 1 � Divisional
overhead � � (2 ) � � (2 ) Total Ventures business unit income
(loss) � � (4 ) � � (9 ) Other: Job Income 4 � Divisional overhead
� � (3 ) � � � � Total Other business unit income � � 1 � � � � �
Total Business unit income � $ 551 � � $ 399 � KBR, Inc.: Backlog
Information(a) (In Millions) (Unaudited) � � September 30, December
31, � 2008 2007 G&I: U.S. Government - Middle East Operations $
1,570 $ 1,361 U.S. Government - Americas Operations 705 548
International Operations � � 1,928 � � 2,339 Total G&I(b) � �
4,203 � � 4,248 Upstream: Gas Monetization 6,597 6,606 Offshore
Projects 239 173 Other � � 106 � � 118 Total Upstream � � 6,942 � �
6,897 Services � � 2,884 � � 765 Downstream � � 360 � � 313
Technology � � 95 � � 128 Ventures � � 766 � � 700 Total backlog
for continuing operations(c) � $ 15,250 � $ 13,051 (a) � Backlog is
presented differently depending on if 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 related to projects
accounted for under the equity method of accounting is presented as
KBR's share of the expected future revenue from the project. Our
backlog for projects related to unconsolidated joint ventures
totaled $2.8 billion and $3.1 billion at September 30, 2008 and
December 31, 2007, respectively. Our backlog related to
consolidated joint ventures with minority interest totaled $3.5
billion and $3.2 billion at September 30, 2008 and December 31,
2007, respectively. � As of September 30, 2008, 20% of our backlog
for continuing operations was attributable to fixed-price contracts
and 80% 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. � (b) The Government
and Infrastructure segment backlog from continuing operations
includes backlog attributable to firm orders in the amount of $4.0
billion and $4.0 billion as of September 30, 2008 and December 31,
2007, respectively. Government and Infrastructure backlog
attributable to unfunded orders was $0.2 billion as of September
30, 2008 and $0.2 billion as of December 31, 2007. � (c) As a
result of the acquisition of BE&K on July 1, 2008, backlog
increased approximately $2.0 billion.
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