KBR KBR Inc

KBR (NYSE:KBR) announced today that fourth quarter 2011 net income attributable to KBR was $90 million, or $0.60 per diluted share, compared to net income attributable to KBR of $78 million, or $0.51 per diluted share, in the fourth quarter of 2010.

Consolidated revenue in the fourth quarter was $2.1 billion compared to $2.3 billion in the fourth quarter of 2010. Operating income was $136 million compared to $148 million in the prior year fourth quarter. Fourth quarter operating income, when compared to the prior year fourth quarter, was negatively impacted by approximately $25 million in cost and schedule issues on three legacy projects at Roberts & Schaefer and lower profits in Downstream, Oil and Gas, and Services.

Hydrocarbons revenue and income was $989 million and $99 million, down 7% and 14%, respectively, compared to the fourth quarter of 2010. Infrastructure, Government, and Power (IGP) revenue in the fourth quarter was $707 million, down $138 million compared to the prior year fourth quarter. The fourth quarter of 2011 included an expected revenue reduction of $222 million, compared to the prior year fourth quarter, related to reduced activity on the LogCAP contracts. IGP income was $55 million in the fourth quarter, up $17 million or 45%, compared to the prior year fourth quarter. Services revenue and income in the fourth quarter was $378 million and $15 million, down 7% and 50%, respectively, compared to the fourth quarter of 2010.

“2011 was another solid year for KBR with consistent execution and operating performance across our businesses. This resulted in strong cash generation of $650 million from operations and a year-end cash balance of almost a billion dollars,” said Bill Utt, Chairman, President, and Chief Executive Officer of KBR. “The strong balance sheet, execution momentum, and a robust prospect portfolio aligns KBR for continued success in 2012 and beyond.”

Hydrocarbons Results

Gas Monetization job income was $65 million compared to job income of $57 million in the fourth quarter of 2010. The increase in job income was primarily related to increased profits on the Kitimat, Ichthys, and Browse LNG projects as well as the Statoil KEP engineering services project in Norway. Partially offsetting this increase was lower work volumes on the Escravos GTL and Skikda LNG projects as well as the Pearl GTL project as the project nears completion.

Oil and Gas job income was $23 million compared to job income of $37 million in the fourth quarter of 2010. The decrease in job income was primarily related to the completion, or near completion, of several projects including the CLOV floating production, storage, and offloading (FPSO), BP Quad 204 FEED, and Jack St. Malo. Partially offsetting this decrease was work on the BP Shah Deniz FEED and Quad 204 detailed design. The fourth quarter of 2010 included a $7 million gain from a project close-out settlement on an offshore FPSO project.

Downstream job income was $19 million compared to job income of $44 million in the fourth quarter of 2010. The decrease in job income was primarily related to the reduced work volumes on a number of international refinery projects and a fourth quarter of 2010 contingency release on the Saudi Kayan project.

Technology job income was $22 million compared to job income of $12 million in the fourth quarter of 2010. The increase in job income was primarily related to the sale of proprietary equipment for an ammonia plant in Brazil and several new ammonia and aniline projects in Indonesia, Egypt, China, and Saudi Arabia. The fourth quarter of 2010 included an unfavorable jury verdict on a project dispute.

Infrastructure, Government, and Power Results

North American Government and Logistics (NAGL) job income was $45 million compared to job income of $29 million in the fourth quarter of 2010. The increase in job income is primarily related to net favorable cost reserve adjustments.

International Government, Defence and Support Services (IGDSS) job income was $50 million compared to job income of $26 million in the fourth quarter of 2010. The increase in job income primarily related to improved margins on the Allenby & Connaught, Namsa Kabul, Namsa KAF, Afghanistan ISP, and CONLOG projects.

Infrastructure and Minerals (I&M) loss was $7 million compared to job income of $15 million in the fourth quarter of 2010. The decrease in job income was primarily related to approximately $25 million in cost and schedule issues on three legacy projects at Roberts & Schaefer. Partially offsetting this decrease was the ramp up of the Hope Downs 4 project in Australia.

Power and Industrial (P&I) job income was $6 million compared to job income of $2 million in the fourth quarter of 2010. The increase in job income was primarily related to the ramp up and increased activity on newly awarded waste-to-energy expansion and coal gasification projects, increased work volumes on forest products-related engineering contracts, and the close-out of an activated carbon project.

Services Results

Services job income was $30 million compared to job income of $47 million in the fourth quarter of 2010. The decrease in job income was primarily driven by lower margins and reduced activity in Industrial Services, the completion of several large U.S. construction projects, and the close-out of a large project in Canada in the prior year fourth quarter.

Ventures Results

Ventures job income was $13 million compared to job income of $9 million in the fourth quarter of 2010. The increase in job income was primarily related to higher ammonia prices related to the EBIC ammonia project in Egypt.

Corporate

Corporate general and administrative expense was $51 million compared to $55 million in the prior year fourth quarter. Cost controls and budgetary discipline are evident in all areas.

Total cash provided by operating activities in the fourth quarter of 2011 was $338 million and was $650 million for the twelve months of 2011, driven by overall earnings and improved working capital management.

The effective tax rate for the fourth quarter 2011 was approximately 19%.

During the fourth quarter of 2011, KBR had share repurchases of $22 million, capital expenditures of $17 million, pension contributions of $8 million, and quarterly dividend payments of $7 million.

Full Year 2012 Outlook

The KBR full year 2012 earnings per diluted share guidance is in the $2.45 to $2.80 range.

Significant Achievements and Awards

• KBR, JGC Corporation (JGC) and Chiyoda Corporation (Chiyoda) jointly announced that INPEX CORPORATION and Total S.A. (the Ichthys Owners) have notified the joint venture formed by JGC, KBR and Chiyoda, the JKC JV, that the Final Investment Decision for the Ichthys LNG project has been achieved. As part of this notification, the Ichthys Owners have issued a notification of award to the JKC JV for the engineering, procurement and construction for Ichthys LNG Project. The Ichthys Owners and the JKC JV have executed a formal letter of award for the initial engineering, procurement and construction activities for the project.
• KBR was awarded a contract to upgrade Rio Tinto’s fuel assets as part of the mining company’s investment in power and fuel supply projects to underpin existing and future expansion of iron ore production capacity in the Pilbara region of Western Australia. KBR’s minerals division will provide engineering, procurement and construction management services to install fuel assets and storage in five locations: port facilities at Cape Lambert and Dampier, mines at Brockman and West Angelas and a maintenance yard located near Dampier. The infrastructure will help provide certainty in meeting Rio Tinto’s fuel requirements.
• KBR was awarded a contract to provide construction services for ExxonMobil’s new synthetics lubricant base stock facility to be built at ExxonMobil’s refinery and chemical plant complex in Baytown, Texas. When completed in 2013, the facility will produce ExxonMobil Chemical’s high-viscosity SpectraSyn Elite™ metallocene PAO base stock. KBR’s scope of work for the Baytown plant includes site work, civil, structural, pipe, electrical, instrumentation and mechanical installation, test and checkout services.
• KBR was awarded a contract by the U.S. Army Corps of Engineers Philadelphia District to serve as a contingency electrical power generation contractor in Afghanistan. KBR will provide electrical power generation in support of U.S. military operations at forward operating bases in Afghanistan. KBR and the other two selected contractors will compete for task orders under the contract which has a ceiling value of $490 million over five years.
• KBR was awarded a hybrid Firm-Fixed-Priced /Cost-Plus-Fixed-Fee Single Award Task Order Contract for the United States Army Europe (USAREUR) Support Contract. The contract is for a one-year base and four one-year option periods for a total of five years. The maximum capacity of the contract is estimated at $245 million over the five-year lifespan of the contract. KBR will provide Base Operations and Support Services to USAREUR throughout their area of responsibility encompassing 51 countries. Work includes functions such as: Facility Maintenance & Utility, Troop, Operational and Construction Services. KBR is the incumbent on the existing USC contract and has operated continuously for this client in the Balkans since 1995.
• KBR was awarded a job order contract by The Cooperative Purchasing Network to provide construction management services for public entities throughout the entire state of Texas. The one year contract offers six option years for renewal. KBR will provide a full range of construction management services that will vary in size and scope and will include facilities repair, renovations and new construction for all public entities throughout the state.

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 22, 2012, 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, 2011 2010 2011 Revenue: Hydrocarbons $ 989 $ 1,069 $ 1,122 Infrastructure, Government and Power 707 845 876 Services 378 408 370 Ventures 17 14 14 Other     5       6       5   Total revenue     2,096       2,342       2,387   Business group income: Hydrocarbons 99 115 89 Infrastructure, Government and Power 55 38 78 Services 15 30 15 Ventures 12 12 8 Other     3       -       3   Total business group income     184       195       193   Unallocated costs: Labor cost absorption 3 8 6 General and administrative     (51 )     (55 )     (61 ) Operating income     136       148       138   Interest expense, net (5 ) (5 ) (3 ) Foreign currency gains (loss), net (1 ) - 1 Other non-operating gains (expense)     -       (1 )     1   Income before income taxes and noncontrolling interests 130 142 137 Benefit (provision) for income taxes     (25 )     (45 )     54   Net income 105 97 191 Net income attributable to noncontrolling interests     (15 )     (19 )     (6 ) Net income attributable to KBR   $ 90     $ 78     $ 185     Net income attributable to KBR per share: Basic $ 0.60 $ 0.52 $ 1.23 Diluted 0.60 0.51 1.22   Basic weighted average shares outstanding 149 151 150 Diluted weighted average shares outstanding 150 152 151   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, 2011 2010 Revenue: Hydrocarbons $ 4,258 $ 3,969 Infrastructure, Government and Power 3,328 4,299 Services 1,590 1,755 Ventures 65 55 Other     20       21   Total revenue     9,261       10,099   Business group income: Hydrocarbons 408 400 Infrastructure, Government and Power 266 272 Services 58 102 Ventures 42 33 Other     9       2   Total business group income     783       809   Unallocated costs: Labor cost absorption 18 12 General and administrative     (214 )     (212 ) Operating income     587       609   Interest expense, net (18 ) (17 ) Foreign currency gains (losses), net 3 (4 ) Other non-operating expenses     -       (2 ) Income before income taxes and noncontrolling interests 572 586 Provision for income taxes     (32 )     (191 ) Net income 540 395 Net income attributable to noncontrolling interests     (60 )     (68 ) Net income attributable to KBR   $ 480     $ 327     Net income attributable to KBR per share: Basic $ 3.18 $ 2.08 Diluted 3.16 2.07   Basic weighted average shares outstanding 150 156 Diluted weighted average shares outstanding 151 157   Cash dividends declared per share $ 0.20 $ 0.15    

KBR, Inc.: Condensed Consolidated Balance Sheets

(Millions) (Unaudited)

  December 31, December 31,     2011   2010 Assets Current assets: Cash and equivalents $ 966 $ 786 Receivables: Accounts receivable, net 1,227 1,455 Unbilled receivables on uncompleted contracts     435       428   Total receivables 1,662 1,883 Deferred income taxes 297 199 Other current assets     517       394   Total current assets 3,442 3,262 Property, plant and equipment, net of accumulated depreciation of $364 and $334 384 355

 

Goodwill 951 947 Intangible assets, net 113 127 Equity in and advances to related companies 190 219 Noncurrent deferred income taxes 128 103 Noncurrent unbilled receivables on uncompleted contracts 313 320 Other assets     152       84   Total assets   $ 5,673     $ 5,417     Liabilities and Shareholders' Equity         Current liabilities: Accounts payable $ 761 $ 921 Due to former parent, net 53 43 Obligation to former noncontrolling interest 1 172 Advanced billings on uncompleted contracts 626 498 Reserve from estimated losses on uncompleted contracts 22 26 Employee compensation and benefits 226 200 Current non-recourse project-finance debt of a variable interest entity 10 9 Other current liabilities     585       470   Total current liabilities 2,284 2,339 Noncurrent employee compensation and benefits 470 397 Noncurrent non-recourse project-finance debt of a variable interest entity 88 92 Noncurrent obligation to former noncontrolling interest 8 8 Other noncurrent liabilities 169 132 Noncurrent income tax payable 141 128 Noncurrent deferred tax liability     71       117   Total liabilities     3,231       3,213   KBR shareholders' equity Preferred stock - - Common stock - - Paid-in-capital in excess of par 2,005 1,981 Accumulated other comprehensive loss (548 ) (438 ) Retained earnings 1,607 1,157 Treasury stock     (569 )     (454 ) Total KBR shareholders' equity 2,495 2,246 Noncontrolling interests     (53 )     (42 ) Total shareholders' equity     2,442       2,204   Total liabilities and shareholders' equity   $ 5,673     $ 5,417      

KBR, Inc.: Condensed Consolidated Statements of Cash Flows

(Millions) (Unaudited)

  Twelve Months Ended December 31,     2011   2010 Cash flows from operating activities: Net income $ 540 $ 395 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 71 62 Equity earnings of unconsolidated affiliates (158 ) (137 ) Deferred income taxes (173 ) 14 Impairment of long-lived assets - 5 Other 14 30 Changes in operating assets and liabilities: Receivables 252 (182 ) Unbilled receivables on uncompleted contracts (26 ) 223 Accounts payable (110 ) (177 ) Advanced billings on uncompleted contracts 68 116 Accrued employee compensation and benefits 31 9 Reserve for loss on uncompleted contracts (4 ) (13 ) Collection (repayment) of advances from (to) unconsolidated affiliates, net 14 (16 ) Distribution of earnings from unconsolidated affiliates 182 93 Other assets (28 ) 33 Other liabilities     (23 )     94   Total cash flows provided by operating activities     650       549   Cash flows from investing activities: Acquisition of business, net of cash acquired - (299 ) Capital expenditures (83 ) (66 ) Investment in equity method joint ventures (11 ) (12 ) Investment in licensing arrangement - (20 ) Proceeds from sale of investments     6       -   Total cash flows used in investing activities     (88 )     (397 ) Cash flows from financing activities: Acquisition of noncontrolling interest (178 ) - Payments to reacquire common stock (118 ) (233 ) Distributions to noncontrolling interests, net (63 ) (91 ) Payments of dividends to shareholders (30 ) (32 ) Net proceeds from issuance of stock 7 5 Payments on short-term and long-term borrowings (15 ) (13 ) Excess tax benefits from stock-based compensation 3 - Return of cash collateral on letters of credit, net     17       28   Total cash flows used in financing activities     (377 )     (336 ) Effect of exchange rate changes on cash (5 ) 7 Increase (decrease) in cash and equivalents 180 (177 ) 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   $ 966     $ 786        

KBR, Inc.: Revenue and Operating Results by Business Unit

(Millions)(Unaudited)

  Three Months Ended December 31, December 31, September 30, Revenue:   2011   2010   2011 Hydrocarbons: Gas Monetization $ 687 $ 748 $ 831 Oil and Gas 116 131 117 Downstream 139 155 136 Technology     47       35       38   Total Hydrocarbons     989       1,069       1,122   Infrastructure, Government and Power North American Government and Logistics 409 618 586 International Government, Defence and Support Services 118 85 93 Infrastructure and Minerals 117 70 142 Power and Industrial     63       72       55   Total Infrastructure, Government and Power     707       845       876   Services 378 408 370 Ventures 17 14 14 Other     5       6       5   Total revenue   $ 2,096     $ 2,342     $ 2,387     Business group income (loss): Hydrocarbons: Gas Monetization $ 65 $ 57 $ 52 Oil and Gas 23 37 27 Downstream 19 44 18 Technology     22       12       17   Total job income 129 150 114 Impairment of long-lived assets - (4 ) - Gain (loss) on disposition of assets (1 ) (1 ) 1 Division overhead     (29 )     (30 )     (26 ) Total Hydrocarbons     99       115       89     Infrastructure, Government and Power: North American Government and Logistics 45 29 61 International Government, Defence and Support Services 50 26 28 Infrastructure and Minerals (7 ) 15 19 Power and Industrial     6       2       9   Total job income 94 72 117 Loss on disposition of assets - - (1 ) Division overhead     (39 )     (34 )     (38 ) Total Infrastructure, Government and Power     55       38       78     Services: Job income 30 47 31 Gain on disposition of assets 1 - - Division overhead     (16 )     (17 )     (16 ) Total Services     15       30       15     Ventures: Job income 13 9 9 Gain on disposition of assets - 3 - Division overhead     (1 )     -       (1 ) Total Ventures     12       12       8     Other: Job income 4 2 5 Impairment of long-lived assets - (1 ) - Gain on disposition of assets 1 1 - Division overhead     (2 )     (2 )     (2 ) Total Other     3       -       3   Total business group income   $ 184     $ 195     $ 193      

KBR, Inc.: Revenue and Operating Results by Business Unit

(Millions) (Unaudited)

  Twelve Months Ended December 31, Revenue:   2011   2010 Hydrocarbons: Gas Monetization $ 3,044 $ 2,829 Oil and Gas 488 426 Downstream 557 584 Technology     169       130   Total Hydrocarbons     4,258       3,969   Infrastructure, Government and Power North American Government and Logistics 2,198 3,307 International Government, Defence and Support Services 378 369 Infrastructure and Minerals 510 271 Power and Industrial     242       352   Total Infrastructure, Government and Power     3,328       4,299   Services 1,590 1,755 Ventures 65 55 Other     20       21   Total revenue   $ 9,261     $ 10,099     Business group income: Hydrocarbons: Gas Monetization $ 257 $ 252 Oil and Gas 104 90 Downstream 77 117 Technology     75       55   Total job income 513 514 Impairment of long-lived assets - (4 ) Gain on disposition of assets 1 - Division overhead     (106 )     (110 ) Total Hydrocarbons     408       400     Infrastructure, Government and Power: North American Government and Logistics 212 230 International Government, Defence and Support Services 128 88 Infrastructure and Minerals 60 62 Power and Industrial     29       37   Total job income 429 417 Loss on disposition of assets (1 ) - Division overhead     (162 )     (145 ) Total Infrastructure, Government and Power     266       272     Services: Job income 124 172 Gain (loss) on disposition of assets 1 (1 ) Division overhead     (67 )     (69 ) Total Services     58       102     Ventures: Job income 45 33 Gain on disposition of assets 1 3 Division overhead     (4 )     (3 ) Total Ventures     42       33     Other: Job income 16 12 Impairment of long-lived assets - (1 ) Gain (loss) on disposition of assets 1 (2 ) Division overhead     (8 )     (7 ) Total Other     9       2   Total business group income   $ 783     $ 809         KBR, Inc. Backlog Information (Millions) (Unaudited)     December 31, September 30, December 31,     2011   2011   2010 Hydrocarbons: Gas Monetization $ 3,880 $ 4,314 $ 5,509 Oil and Gas 289 285 325 Downstream 546 582 525 Technology     258     216     201 Total Hydrocarbons     4,973     5,397     6,560   Infrastructure, Government and Power: North American Government and Logistics 899 1,258 1,043 International Government, Defence and Support Services 1,086 1,139 1,223 Infrastructure and Minerals 502 559 446 Power and Industrial     777     743     177 Total Infrastructure, Government and Power     3,264     3,699     2,889   Services 1,766 1,642 1,771 Ventures     928     939     821 Total backlog(b)   $ 10,931   $ 11,677   $ 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. 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. For certain long-term service contracts with a defined contract term, such as those associated with privately financed projects, the amount included in backlog is limited to five years.

Backlog related to unconsolidated joint ventures is presented as KBR’s percentage ownership of the joint venture’s estimated 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, $1.7 billion and $1.7 billion at December 31, 2011, September 30, 2011, and December 31, 2010, respectively. Our backlog related to consolidated joint ventures with noncontrolling interest totaled $3.2 billion, $3.6 billion and $4.2 billion at December 31, 2011, September 30, 2011, and December 31, 2010, respectively.

As of December 31, 2011, 25% of our backlog was attributable to fixed-price contracts and 75% 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, 2011, September 30, 2011, and December, 31, 2010.

(b) Backlog attributable to unfunded government orders was $0.4 billion, $0.4 billion and $0.1 billion as of December 31, 2011, September 30, 2011, and December 31, 2010, respectively.