KBR (NYSE:KBR) announced today that second quarter 2011 net
income attributable to KBR was $100 million, or $0.65 per diluted
share, compared to net income attributable to KBR of $106 million,
or $0.66 per diluted share, in the second quarter of 2010.
Consolidated revenue in the second quarter was $2.5 billion
compared to $2.7 billion in the second quarter of 2010. Operating
income was $169 million compared to $199 million in the prior year
second quarter.
Hydrocarbons business group revenue and business unit income was
$1.1 billion and $121 million, up 10% and 4%, respectively,
compared to the second quarter of 2010. Infrastructure, Government,
and Power (IGP) business group revenue in the second quarter was
$890 million, which included an expected revenue reduction of $300
million compared to the prior year second quarter related to
reduced activity on the LogCAP contract. IGP business unit income
was $72 million in the second quarter, down 31% compared to the
prior year second quarter, which included the receipt of $60
million in LogCAP III award fees in the second quarter of 2010.
Services revenue and business unit income in the second quarter was
$445 million and $15 million, down 2% and 40%, respectively,
compared to the second quarter of 2010.
“I am pleased with KBR’s operating performance with a 20%
increase in Business Unit income as well as increased backlog in
most of our Business Units over the prior quarter,” said Bill Utt,
Chairman, President, and Chief Executive Officer of KBR. “Based on
our stronger operating performance, lower effective tax rate, and
control of general and administrative expense, we are raising our
full year 2011 earnings guidance by approximately 25%.”
Hydrocarbons Business Group Results
Gas Monetization job income was $76 million in the second
quarter compared to job income of $83 million in the second quarter
of 2010. The decrease in job income primarily related to a second
quarter 2010 benefit of $36 million from change orders associated
with the completion of the Yemen LNG project. The decrease was
partially offset by higher activity on LNG and GTL projects.
Oil and Gas job income was $30 million in the second quarter
compared to job income of $13 million in the second quarter of
2010. The increase in job income was primarily related to several
new projects, including the CLOV floating production, storage, and
offloading unit, the South Arne project, and additional scopes of
work on the Bigfoot project. The second quarter of 2010 included $4
million in legal and other costs associated with the legacy
Barracuda-Caratinga project arbitration.
Downstream job income was $21 million in the second quarter
compared to job income of $28 million in the second quarter of
2010. The decrease in job income was primarily related to
completion of the Saudi Kayan ethylene project and the Lobito
refinery FEED. Partially offsetting this decrease was interim EPCm
work on the Lobito refinery and increased activity on several
projects in the United States. The second quarter of 2010 included
a charge of approximately $9 million related to a receivable
reserve adjustment.
Technology job income was $18 million in the second quarter
compared to job income of $17 million in the second quarter of
2010. The increase in job income was primarily related to progress
on an ammonia project in Brazil, partially offset by the completion
of an ammonia project in Turkmenistan.
Infrastructure, Government, and Power Business Group
Results
North America Government and Defense (NAGD) job income was $51
million in the second quarter compared to job income of $92 million
in the second quarter of 2010. The decrease in job income is
primarily related to a second quarter 2010 benefit of $60 million
in LogCAP III award fees. Partially offsetting this decrease was
the conversion of the LogCAP III contract to a fixed-fee
arrangement and increased activity under the LogCAP IV
contract.
International Government and Defense (IGD) job income was $33
million in the second quarter compared to job income of $22 million
in the second quarter of 2010. The increase in job income resulted
from increased construction margins on the Allenby and Connaught
project, as well as improved efficiencies on several contingency
logistics and construction management projects.
Infrastructure and Minerals (I&M) job income was $19 million
in the second quarter compared to job income of $15 million in the
second quarter of 2010. The increase in job income was primarily
related to the recently acquired Roberts & Schaefer and
increased activity on several engineering projects.
Power and Industrial (P&I) job income was $8 million in the
second quarter compared to job income of $15 million in the second
quarter of 2010. The decrease in job income was primarily related
to the completion of a power project and an environmental-related
industrial project. The decrease was partially offset by higher
work volume on a coal gasification project and the mobilization of
a recently awarded waste-to-energy project.
Services Results
Services job income was $31 million in the second quarter
compared to job income of $43 million in the second quarter of
2010. The decrease in job income was primarily driven by the
completion of several large U.S. construction projects and the
dry-docking of a vessel in the MMM joint venture. Partially
offsetting the decrease was higher work volumes in the Industrial
Services business led by the DuPont multi-site project and
increased activity on numerous hospital projects in the Building
Group.
Ventures Results
Ventures job income was $12 million in the second quarter
compared to job income of $8 million in the second quarter of 2010.
The increase in job income was primarily related to increased
volume and higher ammonia prices related to the EBIC ammonia
project in Egypt.
Corporate
Corporate general and administrative expense in the second
quarter of 2011 was $58 million compared to $55 million in the
prior year second quarter. The increase in general and
administrative expense primarily relates to increased real estate
and employee salary and benefits related expenses.
Total cash provided by operating activities for the first six
months of 2011 was $223 million. Total cash used by operating
activities in the second quarter of 2011 was $2 million, driven by
timing of collections related to the LogCAP contract.
The effective tax rate for the second quarter 2011 was
approximately 24% due to favorable tax rate differentials on
foreign earnings as well as discrete tax items including a tax
reserve release related to the expiration of a U.S. tax statute.
The operating tax rate of 28% represents a $0.04 earnings per
diluted share benefit compared to the previous guidance rate of
32%. In addition, discrete tax items provided a $0.05 benefit to
second quarter 2011 earnings per diluted share.
KBR returned cash to shareholders during the second quarter of
2011 through share repurchases of approximately $35 million as well
as a quarterly dividend of approximately $8 million.
Full Year 2011 Outlook
The KBR full year 2011 earnings per diluted share guidance given
in January was $2.05 to $2.30. The changes in the 2011 tax rate
related to reduced operating tax and discrete items total an
expected $0.37 per diluted share. Based on stronger operating
performance, general and administrative expense control, and the
reduced 2011 taxes, KBR now expects the full year 2011 earnings per
diluted share to be in the $2.60 to $2.85 range.
Significant Achievements and Awards
- KBR announced it was awarded a contract
by Chevron U.S.A. Inc. to execute detailed design engineering for
the Jack & St. Malo floating production unit located in the
Lower Tertiary trend in the deepwater Gulf of Mexico. KBR will
provide design and engineering support through fabrication for the
deep draft semi-submersible, including: hull, deck box,
accommodations, appurtenances, equipment foundations, mooring
system design, and anchor suction piles.
- KBR announced it was awarded an
engineering, procurement and construction (EPC) contract by KiOR,
Inc. (KiOR) to build a first-of-its-kind biomass-to-renewable crude
facility to be located in Columbus, Mississippi. KBR will provide
engineering and procurement services, as well as direct hire
construction for the commercialization of KiOR’s proprietary
technology, which is designed to convert biomass into drop-in
biofuels such as gasoline and diesel blendstocks.
- KBR announced it was named as
subcontractor by Dragados Offshore, S.A. for the detailed
engineering work on the South Arne Phase 3 Project, an expansion of
the existing South Arne field located offshore in the Danish sector
of the North Sea. KBR is the subcontractor for the detailed
engineering and procurement assistance, and will provide additional
engineering assistance throughout the construction and installation
phases.
- KBR announced it was notified by the UK
Ministry of Defence (MoD) Supplier Relations Team that the recently
issued MoD/KBR Performance Report for 2010 gives an overall score
which exceeds that achieved by any other Company in the MoD’s
latest published Consolidated Performance Report. This was the
third time in four years that the MoD has awarded the top score to
KBR’s International Government & Defence business unit based in
Leatherhead, UK.
- KBR announced it was awarded by the
U.S. Army Corps of Engineers Middle East District, the U.S. Central
Command’s (CENTCOM), Multiple Award Task Order Contract (MATOC).
This new MATOC program has an overall value of $3.8 billion, with a
period of performance currently at two base years, with one-year
options available for the following three years.
- KBR announced it was awarded a $65
million contract by Chevron Products Company to execute a Base Oil
expansion project at Chevron’s refinery in Pascagoula,
Mississippi. The construction project includes building a new
lubes hydrocracker and a lube dewaxing / hydrofinishing unit. Work
is expected to begin in May, and upon completion, the facility is
expected to be one of the largest premium base oil plants in the
world.
- KBR announced it was awarded a
three-year contract by BP Amoco Chemical Company (BP) to execute
maintenance and small capital construction projects at BP’s
Decatur, Alabama, and Cooper River, South Carolina, plants.
The original contract for these sites has been in place since
1998.
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 June 30, June 30, March 31, 2011 2010 2011
Revenue: Hydrocarbons $ 1,100 $ 1,004 $ 1,047
Infrastructure, Government and Power 890 1,197 855 Services 445 452
397 Ventures 17 13 17 Other 5
5 5
Total revenue
2,457 2,671
2,321
Business unit income (loss): Hydrocarbons 121
116 99 Infrastructure, Government and Power 72 105 61 Services 15
25 13 Ventures 12 7 10 Other 1
(3 ) 2
Total business unit
income 221 250
185
Unallocated costs: Labor cost
absorption 6 4 3 General and administrative
(58 ) (55 ) (44 )
Operating
income 169 199
144 Interest expense, net (5 ) (5 ) (5 )
Foreign currency gains (losses), net 2 (3 ) 1 Other non-operating
expense - -
(1 )
Income before income taxes and noncontrolling
interests 166 191 139 Provision for income taxes
(39 ) (69 ) (22 )
Net
income 127 122 117 Net income attributable to noncontrolling
interests (27 ) (16 )
(12 )
Net income attributable to KBR $
100 $ 106 $ 105
Net
income attributable to KBR per share: Basic $ 0.65 $ 0.66 $
0.69 Diluted 0.65 0.66 0.69 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
$ 0.05
KBR, Inc.: Condensed Consolidated
Statements of Income
(Millions, except per share data)
(Unaudited)
Six Months Ended June 30, 2011 2010
Revenue:
Hydrocarbons $ 2,147 $ 1,926 Infrastructure, Government and Power
1,745 2,471 Services 842 867 Ventures 34 28 Other
10 10
Total
revenue 4,778
5,302
Business unit income (loss): Hydrocarbons 220
192 Infrastructure, Government and Power 133 151 Services 28 46
Ventures 22 15 Other 3
(2 )
Total business unit income
406 402
Unallocated
costs: Labor cost absorption 9 - General and administrative
(102 ) (104 )
Operating income 313
298 Interest expense, net (10 ) (9 ) Foreign
currency gains (losses), net 3 (5 ) Other non-operating expenses
(1 ) -
Income
before income taxes and noncontrolling interests 305 284
Provision for income taxes (61 )
(103 )
Net income 244 181 Net income attributable to
noncontrolling interests (39 )
(29 )
Net income attributable to KBR $
205 $ 152
Net income
attributable to KBR per share: Basic $ 1.35 $ 0.94 Diluted 1.34
0.94 Basic weighted average shares outstanding 151 160
Diluted weighted average shares outstanding 152 161 Cash
dividends declared per share $ 0.10 $ 0.05
KBR, Inc.: Condensed Consolidated Balance
Sheets
(Millions)
(Unaudited)
June 30, December 31, 2011
2010
Assets Current assets: Cash and
equivalents $ 712 $ 786 Receivables: Accounts receivable, net 1,516
1,455 Unbilled receivables on uncompleted contracts
447 428 Total receivables
1,963 1,883 Deferred income taxes 194 199 Other current assets
380 394
Total current assets 3,249 3,262 Property, plant and
equipment, net of accumulated depreciation of $353 and $334 381 355
Goodwill 952 947 Intangible assets, net 121 127 Equity in and
advances to related companies 229 219 Noncurrent deferred income
taxes 100 103 Noncurrent unbilled receivables on uncompleted
contracts 316 320 Other assets 129
84
Total assets $
5,477 $ 5,417
Liabilities and
Shareholders' Equity Current liabilities: Accounts
payable $ 856 $ 921 Due to former parent, net 53 43 Obligation to
former noncontrolling interest 20 180 Advanced billings on
uncompleted contracts 608 498 Reserve from estimated losses on
uncompleted contracts 22 26 Employee compensation and benefits 236
200 Current non-recourse project-finance debt of a variable
interest entity 10 9 Other current liabilities
483 470
Total current
liabilities 2,288 2,347 Noncurrent employee compensation and
benefits 358 397 Noncurrent non-recourse project-finance debt of a
variable interest entity 92 92 Other noncurrent liabilities 151 132
Noncurrent income tax payable 114 128 Noncurrent deferred tax
liability 103 117
Total liabilities 3,106
3,213
KBR shareholders' equity
Preferred stock - - Common stock - - Paid-in-capital in excess of
par 1,998 1,981 Accumulated other comprehensive loss (436 ) (438 )
Retained earnings 1,347 1,157 Treasury stock
(489 ) (454 )
Total KBR shareholders'
equity 2,420 2,246 Noncontrolling interests
(49 ) (42 )
Total shareholders'
equity 2,371
2,204
Total liabilities and shareholders' equity
$ 5,477 $ 5,417
KBR, Inc.: Condensed Consolidated
Statements of Cash Flows
(Millions)
(Unaudited)
Six Months Ended June 30, 2011
2010
Cash flows from operating activities: Net income $ 244
$ 181 Adjustments to reconcile net income to net cash provided by
operations: Depreciation and amortization 35 29 Equity earnings of
unconsolidated affiliates (85 ) (76 ) Deferred income taxes (13 )
(20 ) Other 5 20 Changes in operating assets and liabilities:
Receivables (25 ) (183 ) Unbilled receivables on uncompleted
contracts (8 ) 95 Accounts payable (27 ) (65 ) Advanced billings on
uncompleted contracts (2 ) 261 Accrued employee compensation and
benefits 37 50 Reserve for loss on uncompleted contracts (4 ) (9 )
Collection (repayment) of advances from (to) unconsolidated
affiliates, net 22 (4 ) Distribution of earnings from
unconsolidated affiliates 61 29 Other assets 44 32 Other
liabilities (61 ) 92
Total cash flows provided by operating activities
223 432
Cash flows
from investing activities: Acquisition of business, net of cash
acquired - (10 ) Capital expenditures (47 ) (19 ) Investment in
equity method joint ventures (11 ) (7 ) Investment in licensing
arrangement - (20 )
Total cash flows used in investing activities
(58 ) (56 )
Cash flows from financing
activities: Acquisition of noncontrolling interest (164 ) -
Payments to reacquire common stock (37 ) (58 ) Distributions to
noncontrolling interests, net (46 ) (30 ) Payments of dividends to
shareholders (15 ) (16 ) Net proceeds from issuance of stock 5 1
Excess tax benefits from stock-based compensation 3 - Payments on
long-term borrowings (10 ) (4 ) Return of cash collateral on
letters of credit, net 16
24
Total cash flows used in financing activities
(248 ) (83 ) Effect of exchange
rate changes on cash 9 (21 ) Increase (decrease) in cash and
equivalents (74 ) 272 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 $ 712
$ 1,235
KBR, Inc.: Revenue and Operating Results
by Business Unit
(Millions)
(Unaudited)
Three Months Ended June 30, June 30, March 31,
Revenue:
2011 2010 2011 Hydrocarbons: Gas Monetization
$ 780 $ 708 $ 746 Oil and Gas 134 104 121 Downstream 146 157 136
Technology 40 35
44 Total Hydrocarbons 1,100
1,004 1,047
Infrastructure, Government and Power North America Government and
Defense 598 926 605 International Government and Defence 98 103 69
Infrastructure and Minerals 131 64 120 Power and Industrial
63 104 61
Total Infrastructure, Government and Power 890
1,197 855 Services 445
452 397 Ventures 17 13 17 Other 5
5 5
Total revenue
$ 2,457 $ 2,671 $ 2,321
Business unit income (loss): Hydrocarbons: Gas Monetization
$ 76 $ 83 $ 64 Oil and Gas 30 13 24 Downstream 21 28 19 Technology
18 17 18
Total job income 145 141 125 Gain on disposition of assets -
1 1 Division overhead (24 ) (26 )
(27 ) Total Hydrocarbons business group income
121 116 99
Infrastructure, Government and Power: North America
Government and Defense 51 92 55 International Government and
Defence 33 22 17 Infrastructure and Minerals 19 15 29 Power and
Industrial 8 15
6 Total job income 111 144 107 Division overhead
(39 ) (39 ) (46 ) Total
IGP business group income 72 105
61 Services: Job income 31 43 32
Loss on disposition of assets - (1 ) - Division overhead
(16 ) (17 ) (19 ) Total Services
business unit income 15 25
13 Ventures: Job income 12 8 11
Gain on disposition of assets 1 - - Division overhead
(1 ) (1 ) (1 ) Total Ventures business
unit income 12 7
10 Other: Job income 3 2 4 Loss on disposition
of assets - (2 ) - Division overhead (2 )
(3 ) (2 ) Total Other business unit income
(loss) 1 (3 ) 2
Total business unit income $ 221
$ 250 $ 185
KBR, Inc.: Revenue and Operating Results
by Business Unit
(Millions)
(Unaudited)
Six Months Ended June 30,
Revenue: 2011
2010 Hydrocarbons: Gas Monetization $ 1,526 $ 1,383
Oil and Gas 255 188 Downstream 282 290 Technology
84 65 Total Hydrocarbons
2,147 1,926
Infrastructure, Government and Power North America Government and
Defense 1,203 1,936 International Government and Defence 167 197
Infrastructure and Minerals 251 137 Power and Industrial
124 201 Total
Infrastructure, Government and Power 1,745
2,471 Services 842 867 Ventures
34 28 Other 10 10
Total revenue $ 4,778
$ 5,302
Business unit income (loss):
Hydrocarbons: Gas Monetization $ 140 $ 136 Oil and Gas 54 29
Downstream 40 50 Technology 36
29 Total job income 270 244 Gain on
disposition of assets 1 1 Division overhead
(51 ) (53 ) Total Hydrocarbons business group
income 220 192
Infrastructure, Government and Power: North America
Government and Defense 106 128 International Government and Defence
50 40 Infrastructure and Minerals 48 33 Power and Industrial
14 29 Total job
income 218 230 Division overhead (85 )
(79 ) Total IGP business group income
133 151 Services:
Job income 63 80 Loss on disposition of assets - (1 )
Division overhead
(35 ) (33 ) Total
Services business unit income 28
46 Ventures: Job income 23 17 Gain on
disposition of assets 1 - Division overhead (2
) (2 ) Total Ventures business unit income
22 15
Other: Job income 7 4 Loss on disposition of assets - (2 )
Division overhead (4 ) (4
) Total Other business unit income (loss) 3
(2 )
Total business unit income
$ 406 $ 402
KBR, Inc.: Backlog
Information (a)
(Millions)
(Unaudited)
June 30, March 31, December 31, 2011
2011 2010 Hydrocarbons: Gas
Monetization $ 4,839 $ 5,180 $ 5,509 Oil and Gas 370 503 325
Downstream 630 470 525 Technology 232
187 201 Total Hydrocarbons
6,071 6,340
6,560 Infrastructure, Government and Power: North
America Government and Defense 988 1,026 1,043 International
Government and Defence 1,244 1,335 1,223 Infrastructure and
Minerals 575 603 446 Power and Industrial 578
155 177 Total
Infrastructure, Government and Power 3,385
3,119 2,889
Services 1,622 1,725 1,771 Ventures 896
856 821
Total
backlog(b) $ 11,974 $ 12,040
$ 12,041 (a) Backlog is presented differently
depending on whether the contract is consolidated by KBR or is
accounted for under the equity method of accounting. Backlog
related to consolidated projects is presented as 100% of the
expected revenue from the project. Backlog generally includes total
expected revenue in backlog when a contract is awarded and/or the
scope is definitized. For long-term contracts with a defined
contract term, 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, $1.8 billion and $1.7 billion at
June 30, 2011, March 31, 2011, and December 31, 2010, respectively.
Our backlog related to consolidated joint ventures with
noncontrolling interest totaled $3.8 billion, $4.0 billion and $4.4
billion at June 30, 2011, March 31, 2011, and December 31, 2010,
respectively. As of June 30, 2011, 24% of our backlog was
attributable to fixed-price contracts and 76% 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
June 30, 2011, March 31, 2011, and December, 31, 2010. (b)
Backlog attributable to unfunded government orders was $0.1
billion, $0.2 billion and $0.1 billion as of June 30, 2011, March
31, 2011, and December 31, 2010, respectively.
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