KBR (NYSE:KBR) announced today that first quarter 2011 net
income attributable to KBR was $105 million, or $0.69 per diluted
share, compared to net income attributable to KBR of $46 million,
or $0.29 per diluted share, in the first quarter of 2010.
Consolidated revenue in the first quarter was $2.3 billion
compared to $2.6 billion in the first quarter of 2010; however,
operating income was $144 million compared to $99 million in the
prior year first quarter.
Hydrocarbons business group revenue and business unit income was
$1.0 billion and $99 million, up 14% and 30%, respectively,
compared to the first quarter of 2010. Infrastructure, Government,
and Power (IGP) business group revenue in the first quarter was
$855 million, which included an expected reduction of $422 million
compared to the prior year first quarter related to reduced
activity on the LogCAP contract. IGP business unit income was $61
million in the first quarter, up 33% compared to the prior year
first quarter. Services revenue and business unit income in the
first quarter was $397 million and $13 million, down 4% and 38%,
respectively, compared to the first quarter of 2010.
“I continue to be very pleased with KBR’s execution across our
businesses this quarter, resulting in solid earnings per share,
strong cash generation from operations, and an increase of 4% in
the profitability of our backlog from the sequential quarter,” said
Bill Utt, Chairman, President, and Chief Executive Officer of KBR.
“KBR also recently announced several strategic awards reinforcing
our view that KBR’s end markets, particularly those in North
America, continue to strengthen.”
Hydrocarbons Business Group Results
Gas Monetization job income was $64 million in the first quarter
compared to job income of $53 million in the first quarter of 2010.
The increase in job income was primarily related to an $8 million
gain from the Tangguh LNG exit settlement with KBR’s former project
partner, higher activity on the Gorgon LNG project, and increased
incentive fee estimate on the Pearl GTL project. Partially
offsetting the increase in job income was lower activity on the
Skikda LNG project.
Oil and Gas job income was $24 million in the first quarter
compared to job income of $16 million in the first quarter of 2010.
The increase in job income was primarily related to the start of
several new projects, including the CLOV floating production,
storage, and offloading vessel project, as well as increased work
scope on the Big Foot topsides and Jack St. Malo semi-submersible
hull projects.
Downstream job income was $19 million in the first quarter
compared to job income of $22 million in the first quarter of 2010.
The decrease in job income was primarily related to the completion
or near completion of several projects in the Middle East, which
was partially offset by increased activity on several projects in
the United States.
Technology job income was $18 million in the first quarter
compared to job income of $12 million in the first quarter of 2010.
The increase in job income was primarily related to progress on a
new grassroots ammonia, urea, and granulation complex project in
Brazil, as well as ammonia projects in Argentina and China.
Partially offsetting the job income increase was the completion of
engineering services on several projects located in Turkmenistan,
Korea, and Angola.
Infrastructure, Government, and Power Business Group
Results
North America Government and Defense (NAGD) job income was $55
million in the first quarter compared to job income of $36 million
in the first quarter of 2010. The first quarter of 2011 included a
$16 million award fee on the LogCAP III contract, which was
essentially offset by overall volume reductions compared to the
prior year first quarter. Also contributing to the increase in job
income was increased activity on the LogCAP IV contract and the
conversion of the LogCAP III base life support task order in Iraq
to a fixed-fee arrangement.
International Government and Defense (IGD) job income was $17
million in the first quarter compared to job income of $18 million
in the first quarter of 2010. The decrease in job income was
primarily related to lower activities on the Temporary Deployable
Accommodations project, which were partially offset by increases
related to several new projects in the first quarter of 2011.
Infrastructure and Minerals (I&M) job income was $29 million
in the first quarter compared to job income of $18 million in the
first quarter of 2010. The increase in job income was primarily
related to incentives earned on a transportation project, the
inclusion of Roberts & Schaefer Company projects, and activity
related to the newly awarded Doha Expressway and Hope Downs 4
projects, which were partially offset by the completion or near
completion of several projects and impacts related to the recent
flooding in Australia.
Power and Industrial (P&I) job income was $6 million in the
first quarter compared to job income of $14 million in the first
quarter of 2010. The decrease in job income was primarily related
to a reduced workload and cost overruns on an environmental-related
industrial project as the project approached completion. The
decrease in job income was partially offset by change orders and an
increase in volume on a waste-to-energy refurbishment project in
Florida.
Services Results
Services job income was $32 million in the first quarter
compared to job income of $37 million in the first quarter of 2010.
The decrease in job income was primarily driven by the completion
or near completion of several projects in U.S. construction and the
Shell Scotford Upgrader project in Canada. The decrease in job
income was partially offset by increased activity on several large
hospital projects in the Building Group and the multi-site DuPont
project.
Ventures Results
Ventures job income was $11 million in the first quarter
compared to job income of $9 million in the first quarter of 2010.
The increase in job income was primarily related to increased sales
volume and higher ammonia prices related to the EBIC ammonia
project in Egypt.
Corporate
Corporate general and administrative expense in the first
quarter of 2011 was $44 million compared to $49 million in the
prior year first quarter. The decrease in general and
administrative expense primarily relates to timing issues giving
rise to lower facilities and IT systems support costs, as well as
lower costs associated with incentive compensation programs.
Total cash provided by operating activities for the first three
months of 2011 was $225 million, driven by overall earnings and
active management of working capital to support project execution
activities. Cash provided by operations also was positively
impacted by collections of accounts receivable, advanced payments
received from customers, and collections of advances and
distributions of earnings from unconsolidated joint ventures. Also
during the first quarter of 2011, KBR contributed approximately $45
million to its pension plans.
The effective tax rate for the first quarter 2011 was
approximately 16%, lower than the statutory rate of 35%, primarily
related to the implementation of discrete tax planning strategies
as well as the release of a tax reserve resulting from the current
ongoing liquidation of an Australian rail investment that is in
receivership. The effective tax rate excluding discrete items was
approximately 32% for the first quarter of 2011.
Significant Achievements and Awards
- KBR announced two new LNG front-end
engineering and design (FEED) contracts. The first award was for
Woodside’s Browse LNG development in Western Australia, which will
include three four-million tons per annum trains, associated
infrastructure, accommodation and marine facilities. The second
award, Kitimat LNG development, was awarded by subsidiaries of
Apache Corporation and EOG Resources for design services for the
LNG processing facility (anticipated to be fully electric-driven),
associated infrastructure, administration, and marine
facilities.
- KBR announced a contract award by the
Public Works Authority of Qatar to provide program management
services and engineering support to deliver a package of thirty
major roads that comprise the Doha Expressway Program. The contract
is part of Qatar’s US$20 billion roads building program, designed
to improve traffic flow, reduce congestion, travel times and
environmental impacts.
- KBR announced that it was selected by
Chevron USA Inc. to execute the detailed design for the Chevron Big
Foot Topsides project. KBR will provide engineering and procurement
support during the detailed design phase of the project. Big Foot’s
topsides facilities will include inlet oil and gas separation, gas
compression, dehydration and export, oil treatment and export
pumping, produced water treatment, water injection and all required
utility systems.
- KBR announced a contract award by the
Saudi Arabian Oil Company (Saudi Aramco) to provide front-end
engineering and design and Project Management Services (PMS) for
its anticipated 400,000 barrels per day grassroots Jazan refinery.
KBR will provide FEED and PMS services to develop the process
design, layout, integration and optimization of the facility,
develop equipment and material specifications, prepare EPC bid
packages and develop an estimate for the construction of the
refinery.
- KBR announced that its
newly-established Middle East-based Engineering Company was awarded
an engineering and project management services contract by the
Saudi Arabian Oil Company as part of its General Engineering
Services Plus (GES+) initiative. The partners in this new
Engineering Company, including Abdulhadi and Al-Moaibed Consulting
Engineering Co. (AMCDE) and Kellogg, Brown and Root were selected
following a competitive bidding process. The GES+ contract period
is for five years with options available for extensions.
- KBR announced that a consortium
consisting of its subsidiary, BE&K Construction Company LLC
(BE&K) and a subsidiary of The Babcock & Wilcox Company
(B&W) has been awarded a contract by the Palm Beach County
Solid Waste Authority (SWA) to provide engineering, procurement and
construction services for the County’s new state-of-the-art
waste-to-energy facility. The contract for the EPC phase of the
project – for which BE&K and B&W will share the work scope
– is valued at $668 million with a large portion of the work
to be performed by BE&K.
KBR is a global engineering, construction and services company
supporting the energy, hydrocarbons, government services, minerals,
civil infrastructure, power, industrial, and commercial markets.
For more information, visit www.kbr.com.
NOTE: The statements in this press release that are not
historical statements, including statements regarding future
financial performance and backlog information, are forward-looking
statements within the meaning of the federal securities laws. These
statements are subject to numerous risks and uncertainties, many of
which are beyond the company’s control, that could cause actual
results to differ materially from the results expressed or implied
by the statements. These risks and uncertainties include, but are
not limited to: the outcome of and the publicity surrounding audits
and investigations by domestic and foreign government agencies and
legislative bodies; potential adverse proceedings by such agencies
and potential adverse results and consequences from such
proceedings; the scope and enforceability of the company’s
indemnities from Halliburton Company; changes in capital spending
by the company’s customers; the company’s ability to obtain
contracts from existing and new customers and perform under those
contracts; structural changes in the industries in which the
company operates, escalating costs associated with and the
performance of fixed-fee projects and the company’s ability to
control its cost under its contracts; claims negotiations and
contract disputes with the company’s customers; changes in the
demand for or price of oil and/or natural gas; protection of
intellectual property rights; compliance with environmental laws;
changes in government regulations and regulatory requirements;
compliance with laws related to income taxes; unsettled political
conditions, war and the effects of terrorism; foreign operations
and foreign exchange rates and controls; the development and
installation of financial systems; increased competition for
employees; the ability to successfully complete and integrate
acquisitions; and operations of joint ventures, including joint
ventures that are not controlled by the company.
KBR’s Annual Report on Form 10-K dated February 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 March 31, March 31, December 31, 2011
2010 2010
Revenue: Hydrocarbons $ 1,047 $ 922 $ 1,069
Infrastructure, Government and Power 855 1,274 845 Services 397 415
408 Ventures 17 15 14 Other 5 5
6
Total revenue
2,321 2,631 2,342
Business unit income: Hydrocarbons 99 76 115 Infrastructure,
Government and Power 61 46 38 Services 13 21 30 Ventures 10 8 12
Other 2 1 -
Total business unit income 185
152 195
Unallocated
costs: Labor cost absorption 3 (4 ) 8 General and
administrative (44 ) (49 )
(55 )
Operating income 144
99 148 Interest expense,
net (5 ) (4 ) (5 ) Foreign currency gains (losses), net 1 (2 ) -
Other non-operating expense (1 ) -
(1 )
Income before income taxes and
noncontrolling interests 139 93 142 Provision for income taxes
(22 ) (34 ) (45 )
Net
income 117 59 97 Net income attributable to noncontrolling
interests (12 ) (13 ) (19
)
Net income attributable to KBR $ 105
$ 46 $ 78
Net income attributable to
KBR per share: Basic $ 0.69 $ 0.29 $ 0.52 Diluted $ 0.69 $ 0.29
$ 0.51 Basic weighted average shares outstanding 151 160 151
Diluted weighted average shares outstanding 152 161 152 Cash
dividends declared per share $ 0.05 $ - $ 0.05
KBR, Inc.: Condensed Consolidated Balance
Sheets
(Millions)
(Unaudited)
March 31, December 31, 2011 2010
Assets Current assets: Cash and equivalents $ 788 $
786 Receivables: Accounts receivable, net 1,398 1,455 Unbilled
receivables on uncompleted contracts 468
428 Total receivables 1,866 1,883 Deferred
income taxes 190 199 Other current assets 385
394
Total current assets 3,229 3,262
Property, plant and equipment, net of accumulated depreciation of
$343 and $334 374 355 Goodwill 951 947 Intangible assets, net 125
127 Equity in and advances to related companies 241 219 Noncurrent
deferred income taxes 101 103 Noncurrent unbilled receivables on
uncompleted contracts 322 320 Other assets 124
84
Total assets $ 5,467
$ 5,417
Liabilities and Shareholders'
Equity
Current liabilities: Accounts payable $ 905 $ 921 Due to
former parent, net 43 43 Obligation to former noncontrolling
interest 20 180 Advanced billings on uncompleted contracts 593 498
Reserve from estimated losses on uncompleted contracts 26 26
Employee compensation and benefits 237 200 Current non-recourse
project-finance debt of a variable interest entity 9 9 Other
current liabilities 513 470
Total current liabilities 2,346 2,347 Noncurrent
employee compensation and benefits 360 397 Noncurrent non-recourse
project-finance debt of a variable interest entity 97 92 Other
noncurrent liabilities 148 132 Noncurrent income tax payable 108
128 Noncurrent deferred tax liability 119
117
Total liabilities
3,178 3,213
KBR shareholders'
equity Preferred stock - - Common stock - - Paid-in-capital in
excess of par 1,989 1,981 Accumulated other comprehensive loss (432
) (438 ) Retained earnings 1,254 1,157 Treasury stock
(455 ) (454 )
Total KBR shareholders' equity
2,356 2,246 Noncontrolling interests (67 )
(42 )
Total shareholders' equity 2,289
2,204
Total liabilities and
shareholders' equity $ 5,467 $ 5,417
KBR, Inc.: Condensed Consolidated
Statements of Cash Flows
(Millions)
(Unaudited)
Three Months Ended March 31, 2011 2010
Cash flows from operating activities: Net income $ 117 $ 59
Adjustments to reconcile net income to net cash provided by (used
in) operations: Depreciation and amortization 17 15 Equity earnings
of unconsolidated affiliates (44 ) (15 ) Deferred income taxes 9
(17 ) Other 1 8 Changes in operating assets and liabilities:
Receivables 82 (438 ) Unbilled receivables on uncompleted contracts
(27 ) 155 Accounts payable (29 ) (28 ) Advanced billings on
uncompleted contracts 80 169 Accrued employee compensation and
benefits 38 74 Reserve for loss on uncompleted contracts - (4 )
Collection (repayment) of advances from (to) unconsolidated
affiliates, net 23 (1 ) Distributions of earnings from
unconsolidated affiliates 9 9 Other assets (17 ) (3 ) Other
liabilities (34 ) 12
Total
cash flows provided by (used in) operating activities
225 (5 )
Cash flows from investing
activities: Capital expenditures (26 ) (14 ) Investment in
equity method joint ventures (8 ) (4 ) Investment in licensing
arrangement - (20 )
Total
cash flows used in investing activities (34 )
(38 )
Cash flows from financing activities:
Acquisition of noncontrolling interest (164 ) - Payments to
reacquire common stock (2 ) (1 ) Distributions to noncontrolling
interests, net (37 ) (7 ) Payments of dividends to shareholders (8
) (8 ) Net proceeds from issuance of stock 3 - Excess tax benefits
from stock-based compensation 1 - Return of cash collateral on
letters of credit, net 5 17
Total cash flows provided by (used in) financing
activities (202 ) 1 Effect
of exchange rate changes on cash 13 (13 ) Increase (decrease) in
cash and equivalents 2 (55 ) Cash increase due to consolidation of
a variable interest entity - 22
Cash and equivalents at beginning of period
786 941
Cash and equivalents at end
of period $ 788 $ 908
KBR, Inc.: Revenue and Operating Results
by Business Unit
(Millions)
(Unaudited)
Three Months Ended March 31, March 31, December 31,
Revenue: 2011 2010 2010 Hydrocarbons:
Gas Monetization $ 746 $ 675 $ 748 Oil and Gas 121 84 131
Downstream 136 133 155 Technology 44
30 35 Total Hydrocarbons
1,047 922 1,069
Infrastructure, Government and Power North America
Government and Defense 605 1,010 618 International Government and
Defense 69 94 85 Infrastructure and Minerals 120 73 70 Power and
Industrial 61 97
72 Total Infrastructure, Government and Power
855 1,274 845
Services 397 415 408 Ventures 17 15 14 Other 5
5 6
Total
revenue $ 2,321 $ 2,631 $
2,342
Business unit income:
Hydrocarbons: Gas Monetization $ 64 $ 53 $ 57 Oil and Gas 24 16 37
Downstream 19 22 44 Technology 18
12 12 Total job income 125 103
150 Impairment of long-lived assets - - (4 ) Gain (loss) on sale of
assets 1 - (1 ) Division overhead (27 )
(27 ) (30 ) Total Hydrocarbons business group income
99 76 115
Infrastructure, Government and Power: North America
Government and Defense 55 36 29 International Government and
Defense 17 18 26 Infrastructure and Minerals 29 18 15 Power and
Industrial 6 14
2 Total job income 107 86 72 Division overhead
(46 ) (40 ) (34 ) Total IGP
business group income 61 46
38 Services: Job income 32 37 47
Division overhead (19 ) (16 )
(17 ) Total Services business unit income 13
21 30
Ventures: Job income 11 9 9 Gain on sale of assets - - 3 Division
overhead (1 ) (1 ) -
Total Ventures business unit income 10
8 12 Other: Job
income 4 2 2 Impairment of long-lived assets - - (1 ) Gain on sale
of assets - - 1 Division overhead (2 )
(1 ) (2 ) Total Other business unit income
2 1 -
Total business unit income $ 185 $ 152
$ 195
KBR, Inc.: Backlog
Information (a)
(Millions)
(Unaudited)
March 31, December 31, December 31, 2011
2010 2009 Hydrocarbons: Gas Monetization $ 5,180 $
5,509 $ 6,976 Oil and Gas 503 325 109 Downstream 470 525 535
Technology 187 201 154
Total Hydrocarbons 6,340 6,560
7,774 Infrastructure, Government and Power: North
America Government and Defense 1,026 1,043 1,341 International
Government and Defense 1,335 1,223 1,427 Infrastructure and
Minerals 603 446 167 Power and Industrial 155
177 338 Total Infrastructure, Government and
Power 3,119 2,889 3,273
Services 1,725 1,771 2,302 Ventures 856
821 749
Total backlog(b)
$ 12,040 $ 12,041 $ 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 generally includes
total expected revenue in backlog when a contract is awarded and/or
the scope is definitized. For long-term contracts, the amount
included in backlog is limited to five years. Where contract
duration is indefinite, projects included in backlog are limited to
the estimated amount of expected revenue within the following
twelve months. Certain contracts provide maximum dollar limits,
with actual authorization to perform work under the contract being
agreed upon on a periodic basis with the customer. In these
arrangements, only the amounts authorized are included in backlog.
For projects where KBR acts solely in a project management
capacity, KBR only includes the management fee revenue of each
project in backlog. 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 $1.8
billion, $1.7 billion and $2.1 billion at March 31, 2011, December
31, 2010, and December 31, 2009, respectively. Our backlog related
to consolidated joint ventures with noncontrolling interest totaled
$4.0 billion, $4.4 billion and $4.6 billion at March 31, 2011,
December 31, 2010, and December 31, 2009, respectively. As
of March 31, 2011, 20% of our backlog 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. All
backlog is attributable to firm orders as of March 31, 2011,
December, 31, 2010, and December 31, 2009. (b) Backlog
attributable to unfunded government orders was $0.2 billion, $0.1
billion and $0.3 billion as of March 31, 2011, December 31, 2010,
and December 31, 2009, respectively.
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