KBR KBR Inc

KBR (NYSE:KBR) announced today that fourth quarter 2010 net income attributable to KBR was $78 million, or $0.51 per diluted share, compared to net income attributable to KBR of $73 million, or $0.45 per diluted share, in the fourth quarter of 2009.

Consolidated revenue in the fourth quarter was $2.3 billion compared to $3.0 billion in the fourth quarter of 2009; however, operating income was $148 million compared to $124 million in the prior year fourth quarter. Hydrocarbons business group revenue and job income of $1.1 billion and $150 million, declined $136 million and $115 million, from the fourth quarter of 2009, which included a $183 million gain from an arbitration award on the EPC-1 project. Infrastructure, Government, and Power (IGP) business group revenue in the fourth quarter was $845 million, which included an expected reduction of $483 million compared to the prior year fourth quarter related to reduced activity on the LogCAP project. IGP job income was $72 million in the fourth quarter, up $120 million compared to the prior year fourth quarter primarily related to a charge of $132 million related to an adverse award fee determination on the LogCAP project in the fourth quarter of 2009. Services revenue and job income in the fourth quarter was $408 million and $47 million, down $18 million and $4 million, respectively, compared to the fourth quarter of 2009.

“I am very pleased with KBR’s 2010 results, strong operating income and cash generation from operations, and solid execution across our businesses,” said Bill Utt, Chairman, President, and Chief Executive Officer of KBR. “In 2011, KBR expects to continue to successfully execute work and capture the excellent growth opportunities we see in an improving market environment, particularly in Hydrocarbons and Infrastructure and Minerals markets.”

Hydrocarbons Business Group Results

Gas Monetization job income was $57 million in the fourth quarter compared to job income of $23 million in the fourth quarter of 2009. The increase in job income was primarily related to increased work on the Gorgon LNG project and $24 million in costs and schedule delays in the fourth quarter of 2009 on two now completed LNG projects. Partially offsetting this increase was lower activity on the Escravos GTL project as well as substantial completion of several front-end engineering and design projects.

Oil and Gas job income was $37 million in the fourth quarter compared to job income of $210 million in the fourth quarter of 2009, which included a gain of $183 million related to a favorable arbitration award on the EPC-1 project. The fourth quarter of 2010 included an increase in job income on the newly awarded CLOV floating production, storage, and offloading (FPSO), Big Foot, and Jack St. Malo projects, as well as a gain from a project close-out settlement on an offshore FPSO project.

Downstream job income was $44 million in the fourth quarter compared to job income of $17 million in the fourth quarter of 2009. The increase in job income was primarily related to increased work on the Sonangol refinery project, increased work on the Yanbu export refinery project, and a contingency release on the Saudi Kayan project.

Technology job income was $12 million in the fourth quarter, which included an unfavorable jury verdict on a project dispute in the fourth quarter. Job income in the fourth quarter of 2009 was $15 million. Also during the fourth quarter of 2010, Technology had a $4 million asset impairment related to the closing of an operations center.

Infrastructure, Government, and Power Business Group Results

North America Government and Defense (NAGD) job income was $29 million in the fourth quarter compared to a loss of $112 million in the fourth quarter of 2009. The fourth quarter included lower overall volumes on the LogCAP project, while the fourth quarter of 2009 results included a charge of $132 million related to an adverse award fee determination on the LogCAP project. In addition, the fourth quarter of 2009 also included a charge of $19 million for an unfavorable court ruling and a $17 million loss for the reversal of previously recognized revenue associated with certain legal costs.

International Government and Defense (IGD) job income was $26 million in the fourth quarter compared to job income of $19 million in the fourth quarter of 2009. The increase in job income was primarily related to increased activity and efficiencies on the Allenby and Connaught project. Partially offsetting this increase was lower activity on the CONLOG project and the completion of the Tier 3 Basra project.

Infrastructure and Minerals (I&M) job income was $15 million in the fourth quarter compared to job income of $19 million in the fourth quarter of 2009. The decrease in job income was primarily related to the lower volume on the Qatar-Bahrain Causeway project.

Power and Industrial (P&I) job income was $2 million in the fourth quarter compared to job income of $26 million in the fourth quarter of 2009. The decrease in job income was primarily related to the completion of several power projects prior to the fourth quarter of 2010 as well as lower overall activity coupled with increased costs related to rework and repairs at a nearly-completed activated carbon project. Also contributing to the decrease in job income was a gain in the fourth quarter of 2009 related to the collection of a fully-reserved receivable on a completed project.

Services Results

Services job income was $47 million in the fourth quarter compared to job income of $51 million in the fourth quarter of 2009. The decrease in job income was driven by overall lower activity on the Shell Scotford Upgrader project in Canada and the completion of several construction projects in the U.S. The decline in job income was partially offset by increased levels of activity in the Industrial Services business, led by the multi-site DuPont project and turnaround projects in Canada.

Ventures Results

Ventures job income was $9 million in the fourth quarter compared to job income of $4 million in the fourth quarter of 2009. The increase in job income was primarily related to higher ammonia prices and increased shipments at the EBIC ammonia project in Egypt, as well as the consolidation of a heavy equipment transport project for the U.K. military effective January 1, 2010.

Corporate

Corporate general and administrative expense in the fourth quarter of 2010 was $55 million compared to $60 million in the prior year fourth quarter. The fourth quarter of 2009 included a $4 million write-off related to the Westside campus.

Total cash provided by operating activities for the twelve months of 2010 was $549 million, driven by overall earnings, improved working capital management on certain projects primarily in our Gas Monetization business unit, as well as the receipt of award fees on the LogCAP project in 2010.

Full Year 2011 Outlook

The KBR full year 2011 earnings per diluted share guidance is $2.05 to $2.30.

Significant Achievements and Awards

• KBR announced that it acquired Chicago-based Roberts & Schaefer Company. Roberts & Schaefer is a global leader in engineering, procurement and construction (EPC) services for bulk material handling and processing systems. The company provides services and associated processing infrastructure to customers in the mining and minerals, power, industrial, refining, aggregates, precious and base metals industries.
• KBR announced it completed the acquisition of the 44.94 percent share interest in M.W. Kellogg Limited (MWKL). With the completion of the transaction, MWKL is now a wholly-owned KBR subsidiary. The Agreement to enter into the transaction was previously announced on December 20, 2010.
• KBR announced that it was awarded a contract by Scottish and Southern Energy Plc (SSE) to provide Project Management Services for its capital investment program over the next five years. SSE has appointed KBR as Project Management Partner to help maintain the processes, systems and skills needed to deliver large capital projects. KBR will supplement and complement the work performed by SSE’s in-house major projects team.
• During the fourth quarter of 2010 and in January of 2011, KBR announced it was awarded contracts to execute the topsides detailed design for TOTAL’s CLOV FPSO unit and Chevron’s Big Foot integrated drilling and production platform.

KBR is a global engineering, construction and services company supporting the energy, hydrocarbons, government services, minerals, civil infrastructure, power, and industrial 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 23, 2011, 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 December 31,   December 31, September 30, 2010 2009 2010 Revenue: Hydrocarbons $ 1,069 $ 1,205 $ 974 Infrastructure, Government and Power 845 1,328 983 Services 408 426 480 Ventures 14 5 13 Other     6       -       5   Total revenue     2,342       2,964       2,455   Business unit income (loss): Hydrocarbons 115 239 93 Infrastructure, Government and Power 38 (87 ) 83 Services 30 32 26 Ventures 12 4 6 Other     -       2       4   Total business unit income     195       190       212   Unallocated costs: Labor cost absorption 8 (6 ) 4 General and administrative     (55 )     (60 )     (53 ) Operating income     148       124       163   Interest expense, net (5 ) (2 ) (3 ) Foreign currency gains (losses), net - (1 ) 1 Other non-operating expense     (1 )     (1 )     (1 ) Income before income taxes and noncontrolling interests 142 120 160 Provision for income taxes     (45 )     (31 )     (43 ) Net income 97 89 117 Net income attributable to noncontrolling interests     (19 )     (16 )     (20 ) Net income attributable to KBR   $ 78     $ 73     $ 97     Net income attributable to KBR per share: Basic $ 0.52 $ 0.46 $ 0.62 Diluted $ 0.51

$

0.45 $ 0.62   Basic weighted average shares outstanding 151 160 155 Diluted weighted average shares outstanding 152 161 156   Cash dividends declared per share $ - $ 0.05 $ 0.05  

KBR, Inc.: Condensed Consolidated Statements of Income

(Millions, except per share data)

(Unaudited)

  Twelve Months Ended December 31, 2010   2009 Revenue: Hydrocarbons $ 3,969 $ 3,906 Infrastructure, Government and Power 4,299 6,288 Services 1,755 1,863 Ventures 55 21 Other     21       27   Total revenue     10,099       12,105   Business unit income (loss): Hydrocarbons 400 464 Infrastructure, Government and Power 272 188 Services 102 96 Ventures 33 19 Other     2       (3 ) Total business unit income     809       764   Unallocated costs: Labor cost absorption 12 (11 ) General and administrative     (212 )     (217 ) Operating income     609       536   Interest expense, net (17 ) (1 ) Foreign currency gains (losses), net (4 ) - Other non-operating expense     (2 )     (3 ) Income before income taxes and noncontrolling interests 586 532 Provision for income taxes     (191 )     (168 ) Net income 395 364 Net income attributable to noncontrolling interests     (68 )     (74 ) Net income attributable to KBR   $ 327     $ 290     Net income attributable to KBR per share: Basic $ 2.08 $ 1.80 Diluted

$

2.07

$

1.79   Basic weighted average shares outstanding 156 160 Diluted weighted average shares outstanding 157 161   Cash dividends declared per share $ 0.15 $ 0.20    

KBR, Inc.: Condensed Consolidated Balance Sheets

(Millions)

(Unaudited)

  December 31, December 31,     2010   2009 Assets Current assets: Cash and equivalents $ 786 $ 941 Receivables: Accounts receivable, net 1,455 1,243 Unbilled receivables on uncompleted contracts     428       657   Total receivables 1,883 1,900 Deferred income taxes 199 192 Other current assets     394       608   Total current assets 3,262 3,641

Property, plant and equipment, net of accumulated depreciation of $334 and $264

355 251 Goodwill 947 691 Intangible assets, net 127 58 Equity in and advances to related companies 219 164 Noncurrent deferred income taxes 103 120 Noncurrent unbilled receivables on uncompleted contracts 320 321 Other assets     84       81   Total assets   $ 5,417     $ 5,327     Liabilities and Shareholders' Equity         Current liabilities: Accounts payable $ 921 $ 1,045 Due to former parent, net 43 53 Obligation to former noncontrolling interest 180 - Advanced billings on uncompleted contracts 498 407 Reserve from estimated losses on uncompleted contracts 26 40 Employee compensation and benefits 200 191 Current non-recourse project-finance debt of a variable interest entity 9 - Other current liabilities 470 552 Current liabilities related to discontinued operations, net     -       3   Total current liabilities 2,347 2,291 Noncurrent employee compensation and benefits 397 469 Noncurrent non-recourse project-finance debt of a variable interest entity 92 - Other noncurrent liabilities 132 106 Noncurrent income tax payable 128 43 Noncurrent deferred tax liability     117       122   Total liabilities     3,213       3,031   KBR shareholders' equity Preferred stock - - Common stock - - Paid-in-capital in excess of par 1,981 2,103 Accumulated other comprehensive loss (438 ) (444 ) Retained earnings 1,157 854 Treasury stock     (454 )     (225 ) Total KBR shareholders' equity 2,246 2,288 Noncontrolling interests     (42 )     8   Total shareholders' equity     2,204       2,296   Total liabilities and shareholders' equity   $ 5,417     $ 5,327      

KBR, Inc.: Condensed Consolidated Statements of Cash Flows

(Millions)

(Unaudited)

  Twelve Months Ended December 31,     2010   2009 Cash flows from operating activities: Net income $ 395 $ 364 Adjustments to reconcile net income to net cash provided by (used in) operations: Depreciation and amortization 62 55 Equity earnings of unconsolidated affiliates (137 ) (45 ) Deferred income taxes 14 65 Impairment of long-lived assets 5 - Impairment of goodwill - 6 Other 30 14 Changes in operating assets and liabilities: Receivables (182 ) 107 Unbilled receivables on uncompleted contracts 223 156 Accounts payable (177 ) (355 ) Advanced billings on uncompleted contracts 116 (98 ) Accrued employee compensation and benefits 9 (129 ) Reserve for loss on uncompleted contracts (13 ) (37 ) Repayment of advances to unconsolidated affiliates, net (16 ) (18 ) Distributions of earnings from unconsolidated affiliates 93 54 Other assets 6 (264 ) Other liabilities     121       89   Total cash flows provided by (used in) operating activities     549       (36 ) Cash flows from investing activities: Acquisition of business, net of cash acquired (299 ) - Capital expenditures (66 ) (41 ) Investment in equity method joint ventures (12 ) - Investment in licensing arrangement (20 ) - Proceeds from sale of investments     -       32   Total cash flows used in investing activities     (397 )     (9 ) Cash flows from financing activities: Payments to reacquire common stock (233 ) (31 ) Payments of dividends to shareholders (32 ) (32 ) Distributions to noncontrolling interests, net (91 ) (54 ) Net proceeds from issuance of stock 5 2 Excess tax benefits from stock-based compensation - (7 ) Payments on short-term and long-term borrowings (13 ) - Return (funding) of cash collateral on letters of credit, net     28       (44 ) Total cash flows used in financing activities     (336 )     (166 ) Effect of exchange rate changes on cash 7 7 Decrease in cash and equivalents (177 ) (204 ) Cash increase due to consolidation of a variable interest entity     22       -   Cash and equivalents at beginning of period     941       1,145   Cash and equivalents at end of period   $ 786     $ 941     KBR, Inc.: Revenue and Operating Results by Business Unit (Millions) (Unaudited)       Three Months Ended December 31, December 31, September 30, Revenue:     2010       2009       2010   Hydrocarbons: Gas Monetization $ 748 $ 779 $ 698 Oil and Gas 131 279 107 Downstream 155 120 139 Technology     35       27       30   Total Hydrocarbons     1,069       1,205       974   Infrastructure, Government and Power North America Government and Defense 618 1,039 753 International Government and Defense 85 80 87 Infrastructure and Minerals 70 79 64 Power and Industrial     72       130       79   Total Infrastructure, Government and Power     845       1,328       983   Services 408 426 480 Ventures 14 5 13 Other     6       -       5   Total revenue   $ 2,342     $ 2,964     $ 2,455     Business unit income (loss): Hydrocarbons: Gas Monetization $ 57 $ 23 $ 59 Oil and Gas 37 210 24 Downstream 44 17 23 Technology     12       15       14   Total job income 150 265 120 Impairment of long-lived assets (4 ) - - Loss on sale of assets (1 ) - - Division overhead     (30 )     (26 )     (27 ) Total Hydrocarbons business group income     115       239       93     Infrastructure, Government and Power: North America Government and Defense 29 (112 ) 73 International Government and Defense 26 19 22 Infrastructure and Minerals 15 19 14 Power and Industrial     2       26       6   Total job income 72 (48 ) 115 Division overhead     (34 )     (39 )     (32 ) Total IGP business group income     38       (87 )     83     Services: Job income 47 51 45 Division overhead     (17 )     (19 )     (19 ) Total Services business unit income     30       32       26     Ventures: Job income 9 4 7 Gain on sale of assets 3 - - Division overhead     -       -       (1 ) Total Ventures business unit income     12       4       6     Other: Job income 2 2 6 Impairment of long-lived assets (1 ) - - Gain on sale of assets 1 1 (1 ) Division overhead     (2 )     (1 )     (1 ) Total Other business unit income     -       2       4   Total business unit income   $ 195     $ 190     $ 212       KBR, Inc.: Revenue and Operating Results by Business Unit (Millions) (Unaudited)     Twelve Months Ended December 31, Revenue:     2010       2009   Hydrocarbons: Gas Monetization $ 2,829 $ 2,755 Oil and Gas 426 576 Downstream 584 478 Technology     130       97   Total Hydrocarbons     3,969       3,906   Infrastructure, Government and Power North America Government and Defense 3,307 5,189 International Government and Defense 369 288 Infrastructure and Minerals 271 337 Power and Industrial     352       474   Total Infrastructure, Government and Power     4,299       6,288   Services 1,755 1,863 Ventures 55 21 Other     21       27   Total revenue   $ 10,099     $ 12,105     Business unit income: Hydrocarbons: Gas Monetization $ 252 $ 178 Oil and Gas 90 274 Downstream 117 59 Technology     55       49   Total job income 514 560 Impairment of long-lived assets (4 ) - Division overhead     (110 )     (96 ) Total Hydrocarbons business group income     400       464     Infrastructure, Government and Power: North America Government and Defense 230 113 International Government and Defense 88 71 Infrastructure and Minerals 62 87 Power and Industrial     37       68   Total job income 417 339 Division overhead     (145 )     (151 ) Total IGP business group income     272       188     Services: Job income 172 167 Loss on disposition of assets (1 ) - Division overhead     (69 )     (71 ) Total Services business unit income     102       96     Ventures: Job income 33 19 Gain on sale of assets 3 2 Division overhead     (3 )     (2 ) Total Ventures business unit income     33       19     Other: Job income 12 9 Impairment of long-lived assets (1 ) - Impairment of goodwill - (6 ) Loss on sale of assets (2 ) - Division overhead     (7 )     (6 ) Total Other business unit income     2       (3 ) Total business unit income   $ 809     $ 764       KBR, Inc. Backlog Information (Millions) (Unaudited)         December 31, September 30, December 31,     2010   2010   2009 Hydrocarbons: Gas Monetization $ 5,509 $ 5,858 $ 6,976 Oil and Gas 325 246 109 Downstream 525 470 535 Technology     201     185     154 Total Hydrocarbons     6,560     6,759     7,774   Infrastructure, Government and Power: North America Government and Defense 1,043 1,115 1,341 International Government and Defense 1,223 1,229 1,427 Infrastructure and Minerals 446 139 167 Power and Industrial     177     215     338 Total Infrastructure, Government and Power     2,889     2,698     3,273   Services 1,771 2,051 2,302 Ventures     821     820     749 Total backlog(b)   $ 12,041   $ 12,328   $ 14,098  

(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 unconsolidated joint ventures is presented as KBR’s percentage ownership of the joint venture’s 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 $1.7 billion, $1.9 billion and $2.1 billion at December 31, 2010, September 30, 2010, and December 31, 2009, respectively. Our backlog related to consolidated joint ventures with noncontrolling interest totaled $4.4 billion, $4.3 billion and $4.6 billion at December 31, 2010, September 30, 2010, and December 31, 2009, respectively.

 

 

As of December 31, 2010, 21% of our backlog was attributable to fixed-price contracts and 79% 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 December, 31, 2010, September 30, 2010, December 31, 2009.

 

(b)

Backlog attributable to unfunded government orders was $0.1 billion, $0.1 billion and $0.3 billion as of December 31, 2010, September 30, 2010, and December 31, 2009, respectively.