Delivered Outstanding 1H23 Revenue and Cash
Flow Results
Raises FY23 Adj. EBITDA2
Guidance
Resolved Legacy Litigation and Partially
Retired Outstanding Convertible Notes
HOUSTON, July 27,
2023 /PRNewswire/ -- KBR, Inc. (NYSE: KBR) today
announced its second quarter 2023 financial results and raised its
FY 2023 financial guidance for Adjusted EBITDA2.
![KBR, Inc. (PRNewsfoto/KBR, Inc.) KBR, Inc. (PRNewsfoto/KBR, Inc.)](https://mma.prnewswire.com/media/1772715/KBR_Registered_Logo.jpg)
"Once again, the people of KBR have delivered a strong quarter
of financial and ESG performance, underpinned by our mission focus
and exemplary operational discipline," said Stuart Bradie, KBR president and CEO. "Revenue
and cash flow were strong in the first half of 2023. Net income was
negatively impacted due to recorded losses in the second quarter
associated with our convertible notes and the settlement of a
legacy legal matter. First half Adjusted EBITDA2 and
Adjusted EPS2 were outstanding, and as a result of
strong, core business performance, we are pleased to announce an
increase in our FY 2023 Adjusted EBITDA2 guidance. In
response to our ongoing ESG progress, we received a AAA designation
in MSCI's 2023 ESG Ratings, we were named one of America's Climate
Leaders 2023 by USA Today, and we
received a gold medal rating from EcoVadis in recognition of our
sustainability achievements, ranking KBR among the top 5% of
assessed companies."
"Furthermore, we were pleased to announce the resolution of a
legacy legal matter and the repurchase of $100 million in convertible notes and associated
warrants. We anticipate these developments will help us reduce
uncertainty and liquidity risk and open the door for opportunities
for shareholder value appreciation as we continue to build on our
strong momentum this year and the years to come."
New Business Awards
Backlog and options as of
June 30, 2023 totaled $21.1 billion. Delivered 1.1x
trailing-twelve-months (TTM) book-to-bill1 as of
June 30, 2023. Awarded $2.2 billion of bookings and options in the
quarter.
Sustainable Technology Solutions (STS) delivered 1.4x TTM
book-to-bill1 as of June 30,
2023, including awards and achievements in the quarter as
follows:
- Selected by Avina Clean Hydrogen to use KBR's K-GreeN®
technology for its green ammonia project in the U.S.
- Signed a memorandum of understanding with Atlas Agro AG to
license KBR's innovative K-GreeN® technology for Atlas' planned
investment in a series of green nitrate plants.
- Signed a joint development agreement with ISU Chemical Co. Ltd.
for the design of a commercial scale lithium sulfide unit for next
generation battery technology.
- Awarded an engineering and design services contract from The
Chemours Company to increase capacity and advance technology for
its industry-leading Nafion™ exchange materials platform.
- Awarded a contract by Hindustan Petroleum Corporation Limited
to implement KBR's market-leading supercritical solvent
deasphalting technology, ROSE®, at a refinery in Mumbai.
- Signed a feasibility study contract by Southern Rock Energy
Partners to support the development of a first-of-its-kind refinery
in Cushing, Oklahoma.
- Announced a new fully integrated and flexible Autothermal
Reforming (ATR) technology solution for the production of low
carbon ammonia at mega scale.
Government Solutions (GS) delivered 0.9x TTM
book-to-bill1 as of June 30,
2023, including awards and achievements in the quarter as
follows:
- Awarded a significant contract, Integrated Missions Operations
Contract III, worth up to $1.9
billion for the continued support of NASA's human
spaceflight programs, including the International Space Station,
Artemis and Low Earth Orbit Commercialization. This has not yet
been booked into backlog.
- Awarded a contract up to $69
million to provide mission-critical labor at three locations
in the U.S. Central Command area of operations through the Air
Force Contract Augmentation Program.
- U.S. Small Business Administration awarded KBR's Science and
Space division the Dwight D.
Eisenhower Award for Excellence in research and
development.
- Expanded base operations support services in the Indo-Pacific
region with a $24 million task award
contract by the 94th Army Air and Missile Defense Command for
support of two key communications sites in Japan.
- Announced that it is a subcontractor to McCallie Associates,
Inc., a certified small business selected to provide mission and
instrument systems engineering services at NASA's Goddard Space
Flight Center in Maryland and
Wallops Flight Facility in Virginia.
- Awarded several other contracts in Science & Space and
Defense & Intel that have not been booked into backlog due to
ongoing protest.
KBR recently published its 2022 Sustainability Report and
received the following awards and achievements in the quarter:
- Received a AAA designation in MSCI's 2023 ESG (environmental,
social and governance) Ratings. The AAA rating is MSCI's highest
and is given to companies that are leading their industries in
managing the most significant ESG risks and opportunities.
- Recognized by USA Today as one
of America's Climate Leaders for 2023. This data-driven recognition
ranks U.S.-based companies that have cut their carbon footprint in
recent years.
- Earned a Gold Rating from EcoVadis, one of the world's largest
and most trusted providers of business sustainability ratings for
global supply chains. The Gold Rating places KBR in the top 5% of
assessed companies.
Summarized Second Quarter Fiscal 2023 Financial
Results
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
Dollars in millions,
except share data
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Revenues
|
$
1,753
|
|
$
1,616
|
|
$
3,456
|
|
$
3,330
|
Operating
income
|
$
10
|
|
$
127
|
|
$
154
|
|
$
96
|
Net income (loss)
attributable to KBR
|
$
(351)
|
|
$
94
|
|
$
(265)
|
|
$
23
|
Adjusted
EBITDA2
|
$
191
|
|
$
186
|
|
$
373
|
|
$
340
|
Operating income margin
%
|
1 %
|
|
8 %
|
|
4 %
|
|
3 %
|
Adjusted
EBITDA2 margin %
|
11 %
|
|
12 %
|
|
11 %
|
|
10 %
|
Earnings per
share:
|
|
|
|
|
|
|
|
Diluted earnings
per share
|
$
(2.60)
|
|
$
0.61
|
|
$
(1.95)
|
|
$
0.17
|
Adjusted
earnings per share2
|
$
0.74
|
|
$
0.76
|
|
$
1.41
|
|
$
1.38
|
Cash flows:
|
|
|
|
|
|
|
|
Operating cash
flows
|
$
253
|
|
$
125
|
|
$
288
|
|
$
214
|
Adjusted
operating cash flows2
|
$
253
|
|
$
125
|
|
$
288
|
|
$
214
|
Adjusted free
cash flows2
|
$
234
|
|
$
112
|
|
$
250
|
|
$
195
|
Financial Highlights for the Three Months Ended June 30, 2023
- Revenue of $1.8 billion, up 11%
on an ex-OAW2 year-over-year-basis
- Net income attributable to KBR of $(351)
million; Adjusted EBITDA2 of $191 million (11% Adjusted EBITDA2
margin)
- Diluted EPS of $(2.60); Adjusted
EPS2 of $0.74
- Operating cash flows of $253
million
- Bookings and options of $2.2
billion during the quarter with 1.1x TTM
book-to-bill1
Financial Highlights for the Six Months Ended June 30, 2023
- Revenue of $3.5 billion, up 14%
on an ex-OAW2 year-over-year-basis
- Net income attributable to KBR of $(265)
million; Adjusted EBITDA2 of $373 million (11% Adjusted EBITDA2
margin)
- Diluted EPS of $(1.95); Adjusted
EPS2 of $1.41
- Operating cash flows of $288
million
- Bookings and options of $5.3
billion during the year to date period with 1.1x TTM
book-to-bill1
Commentary on the Three Months Ended June 30, 2023
Revenues were $1.8 billion, up 8% compared to 2Q'22. Revenue
ex-OAW2 increased $173
million, or 11%, primarily attributable to increased
activity to support exercises, training and other activities in the
European Command, on-contract growth in Science & Space and
Defense, and growing demand in Sustainable Technology Solutions
primarily from engineering and professional services and technology
licensing.
Net income attributable to KBR was $(351)
million, down $445 million
compared to 2Q'22, primarily due to a cash charge of $144 million in connection with the settlement of
a legacy legal matter and a non-cash charge of $314 million recorded in connection with the
accounting treatment resulting from an election to settle our
convertible notes in cash upon maturity, the repurchase of a
portion of our convertible notes and the termination of
corresponding portions of the note hedge and warrants (discussed
below) in the current quarter.
Adjusted EBITDA2 was $191
million, up 3% compared to 2Q'22, with Adjusted
EBITDA2 margins of 11%. Adjusted EBITDA
ex-Gains2 was up 16% compared to 2Q'22.
Diluted earnings per share decreased in line with the decrease
in net income attributable to KBR. Adjusted earnings per
share2 increased due to increases in gross profit and
equity in earnings from unconsolidated affiliates partially offset
by increases in selling, general and administrative expenses and
interest expense.
Operating cash flows were $253
million, up 102% compared to 2Q'22, due to revenue growth
and recovery of timing items from prior quarter.
Capital returned to shareholders totaled $95 million during
the quarter, consisting of $76
million in share repurchases, inclusive of $75 million of open market repurchases and
$1 million of repurchases to satisfy
requirements of equity compensation plans, and $19 million in regular dividends.
Commentary on the Six Months Ended June 30, 2023
Revenues were $3.5 billion, up 4% compared to YTD 2Q'22.
Revenue ex-OAW2 increased $431
million, or 14%, primarily attributable to increased
activity to support exercises, training and other activities in the
European Command, on-contract growth in Science & Space and
Defense, and growing demand in Sustainable Technology Solutions
primarily from engineering and professional services and technology
licensing.
Net income attributable to KBR was $(265)
million, down $288 million
compared to YTD 2Q'22. Excluding the non-cash charge of
$314 million related to the
convertible notes settlement method election and partial repurchase
and partial unwind agreements in the current quarter (discussed
below), Adjusted net income attributable to KBR2 was
$49 million, up $26 million, due to higher gross profit partially
offset by higher selling, general and administrative expenses and
interest expense, as well as prior year gains on sale of non-core
assets and unrealized gain on investments that did not recur in the
current year.
Adjusted EBITDA2 was $373
million, up 10% compared to YTD 2Q'22, with Adjusted
EBITDA2 margins of 11%. Adjusted EBITDA
ex-Gains2 was up 17% compared to YTD 2Q'22.
Diluted earnings per share decreased in line with the decrease
in net income attributable to KBR. Adjusted earnings per
share2 increased due to increases in gross profit and
equity in earnings from unconsolidated affiliates partially offset
by increases in selling, general and administrative expenses and
interest expense.
Operating cash flows were $288
million, up 35% compared to YTD 2Q'22.
Capital returned to shareholders totaled $172 million during the year to date period,
consisting of $137 million in share
repurchases, inclusive of $125
million of open market repurchases and $12 million of repurchases to satisfy
requirements of equity compensation plans, and $35 million in regular dividends.
Cash Settlement Method Election and Repurchase of
Convertible Notes
During the quarter, KBR made an
irrevocable election to use cash as the settlement method (as
opposed to shares or a combination of cash and shares) to settle
the principal and any excess value upon early conversion or
maturity of the $350 million principal amount of convertible
notes due November 2023. This
election triggered a change in accounting treatment for both the
convertible notes and the related note hedge. Previously these
instruments qualified for an equity exemption under ASC 815
Derivatives and Hedging because share settlement was an
available option. However, as of the date of the cash settlement
election, the convertible notes and the related hedge no longer
qualified for this exemption, and as a result, the conversion
option of the convertible notes and the note hedge required fair
value measurement on the date of such election.
Additionally, during the quarter, we entered into
privately-negotiated transactions to repurchase $100 million
in principal amount of the outstanding convertible notes, as well
as the partial unwind agreements to terminate the corresponding
portions of the note hedge and warrants.
As a result of the above cash settlement method election and
partial repurchase, we recorded a $302
million loss composed of a $104
million loss on derivative bifurcation, a $70 million loss on debt extinguishment, and a
$128 million charge related to the
accretion of convertible notes debt discount. Additionally, as a
result of the partial unwind agreements, we recorded a $12 million loss on settlement of warrants. These
amounts, totaling $314 million, are
recorded within "Charges associated with Convertible Notes" on our
Condensed Consolidated Statement of Operations. Refer to Note 18
"Cash Election and Repurchase of Convertible Notes" in our Form
10-Q for the quarter ended June 30,
2023 for further details.
The impact of the accounting treatment does not change the
economics or expected cash outflows or inflows associated with the
convertible notes, note hedge or warrants.
Other Deployment Matters
During the quarter, KBR
settled a legacy legal matter pending in federal court. Under the
terms of the settlement, KBR denies any liability or wrongful
conduct. As a result of the settlement, a charge of $144 million was recorded in operating income in
the current quarter. Payment of the settlement amount occurred in
July 2023.
Updated Fiscal 2023 Guidance
The table below
summarizes updated fiscal 2023 guidance and represents our views as
of July 27, 2023.
|
Updated Fiscal
2023
Guidance
|
Prior
Fiscal 2023
Guidance
|
Revenue
|
$6.9B -
$7.1B
|
$6.9B -
$7.1B
|
Adjusted
EBITDA
|
$730M -
$750M
|
$715M -
$745M
|
Adjusted
EPS*
|
$2.76 -
$2.96
|
$2.76 -
$2.96
|
Effective tax
rate
|
24% - 25%
|
24% -
25%
|
Adjusted operating cash
flows
|
$425M -
$460M
|
$425M -
$460M
|
|
* Fiscal 2023 Adjusted
EPS guidance is calculated using a share count of approximately 138
million.
|
The company does not provide reconciliations of Adjusted
EBITDA, Adjusted EPS, or Adjusted operating cash flows to the most
comparable GAAP financial measures on a forward-looking basis
because the company is unable to predict with reasonable certainty
the ultimate outcome of legal proceedings, unusual gains and
losses, and acquisition-related expenses without unreasonable
effort, which could be material to the company's results computed
in accordance with GAAP.
Conference Call Details
The company will host a
conference call to discuss its second quarter financial results on
Thursday, July 27, 2023, at
7:30 a.m. Central Time. The
conference call will be webcast simultaneously through the Investor
Relations section of KBR's website at investors.kbr.com. A replay
of the webcast will be available shortly after the call on KBR's
website or by telephone at +1.866.813.9403, passcode: 437878.
About KBR
We deliver science, technology and
engineering solutions to governments and companies around the
world. KBR employs approximately 33,000 people worldwide with
customers in more than 80 countries and operations in 33 countries.
KBR is proud to work with its customers across the globe to provide
technology, value-added services, and long-term operations and
maintenance services to ensure consistent delivery with predictable
results. At KBR, We Deliver.
Visit www.kbr.com
Forward-Looking Statements
The statements in this
press release that are not historical statements, including
statements regarding our expectations for our future financial
performance, effective tax rate, operating cash flows, contract
revenues, award activity, our business strategy, interest expense,
and our plans for raising and deploying capital, paying dividends
and settling our convertible notes at maturity, 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: uncertainty, delays or reductions in government
funding, appropriations and payments, including as a result of
continuing resolution funding mechanisms, government shutdowns or
changing budget priorities; the ongoing conflict between
Russia and Ukraine and the related impacts on our
business as we continue to carry out efforts to wind down
operations in Russia; potential
adverse economic and market conditions, such as interest rate and
currency exchange rate fluctuations, the company's ability to
manage its liquidity; 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; 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;
the possibility of cyber and malware attacks; 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.
The company's most recently filed Annual Report on Form 10-K,
any subsequent Form 10-Qs and 8-Ks, and other U.S. Securities and
Exchange Commission filings discuss some of the important risk
factors that the company has identified that may affect its
business, results of operations and financial condition. Except as
required by law, the company undertakes no obligation to revise or
update publicly any forward-looking statements for any reason.
____________________
|
1 As used
throughout this release and consistent with our practice,
book-to-bill excludes long-term UK PFIs
|
2 As used
throughout this earnings release, Adjusted EBITDA, Adjusted EBITDA
margin, Adjusted earnings per share, Adjusted operating cash flows,
Adjusted free cash flows, Revenue excluding OAW, Adjusted
EBITDA/EPS excluding gains on sale of non-core assets and Adjusted
net income attributable to KBR are non-GAAP financial
measures. See additional information at the end of this
release regarding non-GAAP financial information, including
reconciliations to the nearest GAAP measures.
|
KBR,
Inc.
|
Condensed
Consolidated Statements of Operations
|
(In millions, except
for per share data)
|
(Unaudited)
|
|
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
2023
|
|
2022
|
Revenues:
|
|
|
|
|
|
|
Government
Solutions
|
$
1,352
|
|
$
1,312
|
$
2,680
|
|
$
2,771
|
Sustainable Technology
Solutions
|
401
|
|
304
|
776
|
|
559
|
Total
revenues
|
1,753
|
|
1,616
|
3,456
|
|
3,330
|
Gross
profit
|
251
|
|
201
|
496
|
|
397
|
Equity in earnings
(losses) of unconsolidated affiliates
|
23
|
|
10
|
46
|
|
(108)
|
Selling, general and
administrative expenses
|
(119)
|
|
(105)
|
(243)
|
|
(212)
|
Legal settlement of
legacy matter
|
(144)
|
|
|
(144)
|
|
|
Gain on disposition of
assets and investments
|
—
|
|
22
|
—
|
|
22
|
Other
|
(1)
|
|
(1)
|
(1)
|
|
(3)
|
Operating income
(loss):
|
|
|
|
|
|
|
Government
Solutions
|
(28)
|
|
131
|
74
|
|
247
|
Sustainable Technology
Solutions
|
77
|
|
32
|
159
|
|
(74)
|
Other
|
(39)
|
|
(36)
|
(79)
|
|
(77)
|
Total operating
income (loss)
|
10
|
|
127
|
154
|
|
96
|
Interest
expense
|
(29)
|
|
(21)
|
(55)
|
|
(41)
|
Unrealized gain on
other investment
|
—
|
|
16
|
—
|
|
16
|
Charges associated with
Convertible Notes
|
(314)
|
|
—
|
(314)
|
|
—
|
Other non-operating
income (expense)
|
(1)
|
|
5
|
(3)
|
|
5
|
Income (loss) before
income taxes
|
(334)
|
|
127
|
(218)
|
|
76
|
Provision for income
taxes
|
(16)
|
|
(33)
|
(46)
|
|
(52)
|
Net income
(loss)
|
(350)
|
|
94
|
(264)
|
|
24
|
Less: Net income
attributable to noncontrolling interests
|
1
|
|
—
|
1
|
|
1
|
Net income (loss)
attributable to KBR
|
$
(351)
|
|
$
94
|
$
(265)
|
|
$
23
|
Adjusted
EBITDA1
|
$
191
|
|
$
186
|
$
373
|
|
$
340
|
Diluted EPS
|
$
(2.60)
|
|
$
0.61
|
$
(1.95)
|
|
$
0.17
|
Adjusted
EPS1
|
$
0.74
|
|
$
0.76
|
$
1.41
|
|
$
1.38
|
Diluted weighted
average common shares outstanding
|
135
|
|
156
|
136
|
|
156
|
Adjusted weighted
average common shares outstanding
|
138
|
|
142
|
139
|
|
142
|
|
1 See
additional information at the end of this release regarding
non-GAAP financial information, including a reconciliation to the
nearest GAAP measure
|
KBR,
Inc.
|
Condensed
Consolidated Balance Sheets
|
(In millions, except
share data)
|
|
|
|
June
30,
|
|
December
31,
|
|
|
2023
|
|
2022
|
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
539
|
|
$
389
|
Accounts receivable,
net of allowance for credit losses of $8 and $9,
respectively
|
|
1,022
|
|
942
|
Contract
assets
|
|
229
|
|
252
|
Other current
assets
|
|
584
|
|
164
|
Total current
assets
|
|
2,374
|
|
1,747
|
Pension
Assets
|
|
75
|
|
46
|
Property, plant, and
equipment, net of accumulated depreciation of $432 and $417
(including
net PPE of $32 and $22 owned by a variable interest entity),
respectively
|
|
218
|
|
182
|
Operating lease
right-of-use assets
|
|
143
|
|
164
|
Goodwill
|
|
2,107
|
|
2,087
|
Intangible assets, net
of accumulated amortization of $359 and $332,
respectively
|
|
639
|
|
645
|
Equity in and advances
to unconsolidated affiliates
|
|
188
|
|
188
|
Deferred income
taxes
|
|
196
|
|
213
|
Other assets
|
|
347
|
|
294
|
Total
assets
|
|
$
6,287
|
|
$
5,566
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
726
|
|
$
637
|
Contract
liabilities
|
|
325
|
|
275
|
Accrued salaries, wages
and benefits
|
|
327
|
|
325
|
Current maturities of
long-term debt
|
|
117
|
|
364
|
Operating lease
liabilities
|
|
47
|
|
48
|
Other current
liabilities
|
|
710
|
|
172
|
Total current
liabilities
|
|
2,252
|
|
1,821
|
Employee compensation
and benefits
|
|
106
|
|
105
|
Income tax
payable
|
|
117
|
|
117
|
Deferred income
taxes
|
|
95
|
|
92
|
Long-term
debt
|
|
1,628
|
|
1,376
|
Operating lease
liabilities
|
|
178
|
|
193
|
Other
liabilities
|
|
282
|
|
230
|
Total
liabilities
|
|
4,658
|
|
3,934
|
Commitments and
Contingencies (Notes 6, 11 and 12)
|
|
|
|
|
KBR shareholders'
equity:
|
|
|
|
|
Preferred stock, $0.001
par value, 50,000,000 shares authorized, none issued
|
|
—
|
|
—
|
Common stock, $0.001
par value 300,000,000 shares authorized, 181,595,598 and
180,807,960 shares issued, and 134,915,400 and 136,505,145 shares
outstanding, respectively
|
|
—
|
|
—
|
PIC
|
|
2,616
|
|
2,235
|
Retained
earnings
|
|
1,109
|
|
1,410
|
Treasury stock,
46,680,198 shares and 44,302,815 shares, at cost,
respectively
|
|
(1,280)
|
|
(1,143)
|
AOCL
|
|
(830)
|
|
(882)
|
Total KBR
shareholders' equity
|
|
1,615
|
|
1,620
|
Noncontrolling
interests
|
|
14
|
|
12
|
Total shareholders'
equity
|
|
1,629
|
|
1,632
|
Total liabilities
and shareholders' equity
|
|
$
6,287
|
|
$
5,566
|
KBR,
Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(In
millions)
|
(Unaudited)
|
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
Cash flows from
operating activities:
|
|
|
|
Net income
(loss)
|
$
(264)
|
|
$
24
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
Charges associated
with Convertible Notes
|
314
|
|
—
|
Legal Settlement of
legacy matter
|
144
|
|
—
|
Depreciation and
amortization
|
70
|
|
66
|
Equity in (earnings)
losses of unconsolidated affiliates
|
(46)
|
|
108
|
Deferred income
tax
|
19
|
|
33
|
Gain on disposition of
assets
|
—
|
|
(22)
|
Unrealized gain on
other investment
|
—
|
|
(16)
|
Other
|
13
|
|
15
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts receivable,
net of allowance for credit losses
|
(72)
|
|
361
|
Contract
assets
|
22
|
|
15
|
Accounts
payable
|
77
|
|
(366)
|
Contract
liabilities
|
50
|
|
36
|
Accrued salaries,
wages and benefits
|
6
|
|
(17)
|
Payments on operating
lease obligation
|
(29)
|
|
(29)
|
Payments from
unconsolidated affiliates, net
|
6
|
|
8
|
Distributions of
earnings from unconsolidated affiliates
|
37
|
|
43
|
Pension
funding
|
(9)
|
|
(22)
|
Other assets and
liabilities
|
(50)
|
|
(23)
|
Total cash flows
provided by operating activities
|
$
288
|
|
$
214
|
Cash flows from
investing activities:
|
|
|
|
Purchases of property,
plant and equipment
|
$
(38)
|
|
$
(19)
|
Proceeds from sale of
assets or investments
|
—
|
|
60
|
Return of (investments
in) equity method joint ventures, net
|
61
|
|
189
|
Funding in other
investment
|
(39)
|
|
(61)
|
Other
|
(5)
|
|
—
|
Total cash flows
(used in) provided by investing activities
|
$
(21)
|
|
$
169
|
Cash flows from
financing activities:
|
|
|
|
Borrowings on long-term
debt
|
330
|
|
—
|
Payments on short-term
and long-term debt
|
(8)
|
|
(8)
|
Payments on settlement
of warrants
|
(101)
|
|
—
|
Proceeds from the
settlement of note hedge
|
150
|
|
—
|
Payments to settle
convertible notes
|
(250)
|
|
—
|
Payments on revolving
credit facility
|
(75)
|
|
(97)
|
Payments of dividends
to shareholders
|
(35)
|
|
(32)
|
Net proceeds from
issuance of common stock
|
4
|
|
5
|
Payments to reacquire
common stock
|
(137)
|
|
(74)
|
Other
|
(4)
|
|
(9)
|
Total cash flows
used in financing activities
|
$
(126)
|
|
$
(215)
|
Effect of exchange rate
changes on cash
|
9
|
|
(22)
|
Increase in cash and
cash equivalents
|
150
|
|
146
|
Cash and cash
equivalents at beginning of period
|
389
|
|
370
|
Cash and cash
equivalents at end of period
|
$
539
|
|
$
516
|
Supplemental
disclosure of cash flows information:
|
|
|
|
Noncash investing
activities
|
|
|
|
Leasehold improvements
paid by landlord
|
$
7
|
|
$
—
|
Accrued but unpaid
purchases of property, plant and equipment
|
$
8
|
|
$
—
|
Noncash financing
activities
|
|
|
|
Dividends
declared
|
$
18
|
|
$
17
|
KBR,
Inc.
|
Backlog
Information
|
(In
millions)
|
(Unaudited)
|
|
|
June
30,
|
|
December
31,
|
|
2023
|
|
2022
|
Government
Solutions
|
$
11,823
|
|
$
11,543
|
Sustainable Technology
Solutions
|
5,060
|
|
4,012
|
Total
backlog
|
$
16,883
|
|
$
15,555
|
Award
options
|
4,179
|
|
4,203
|
Total backlog and
options
|
$
21,062
|
|
$
19,758
|
Government Solutions backlog and options for the quarter ended
June 30, 2023 totaled $16.0 billion, up $0.3
billion compared to December 31,
2022. Sustainable Technology Solutions backlog for the
quarter ended June 30, 2023 totaled
$5.1 billion, up $1.0 billion compared to December 31, 2022.
Non-GAAP Financial Information
The following
information provides reconciliations of certain non-GAAP financial
measures presented in the press release to which this
reconciliation is attached to the most directly comparable
financial measures calculated and presented in accordance with
generally accepted accounting principles (GAAP). The company has
provided the non-GAAP financial information presented in the press
release as information supplemental and in addition to the
financial measures presented in the press release that are
calculated and presented in accordance with GAAP. Such non-GAAP
financial measures should not be considered superior to, as a
substitute for or alternative to, and should be considered in
conjunction with, the GAAP financial measures presented in the
press release. The non-GAAP financial measures in the press release
may differ from similar measures used by other companies.
EBITDA and Adjusted EBITDA
We evaluate performance
based on EBITDA and Adjusted EBITDA. EBITDA is defined as Net
income (loss) attributable to KBR, plus interest expense; charges
associated with Convertible Notes; other non-operating expense;
provision for income taxes; and depreciation and amortization.
Adjusted EBITDA excludes certain amounts included in EBITDA. EBITDA
and Adjusted EBITDA for each of the three- and six-month periods
ended June 30, 2023 and 2022 are
considered non-GAAP financial measures under SEC rules because
EBITDA and Adjusted EBITDA exclude certain amounts included in the
calculation of net income (loss) attributable to KBR in accordance
with GAAP for such periods. Management believes EBITDA and Adjusted
EBITDA afford investors a view of what management considers KBR's
core performance for each of the three- and six-month periods ended
June 30, 2023 and 2022 and also
affords investors the ability to make a more informed assessment of
such core performance for the comparable periods.
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
Dollars in
millions
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
Net income
attributable to KBR
|
$
(351)
|
|
$
94
|
|
$
(265)
|
|
$
23
|
Adjustments
|
|
|
|
|
|
|
|
•
Interest expense
|
29
|
|
21
|
|
55
|
|
41
|
•
Charges associated with Convertible
Notes
|
314
|
|
—
|
|
314
|
|
—
|
•
Other non-operating expense
|
1
|
|
(5)
|
|
3
|
|
(5)
|
•
Provision for income taxes
|
16
|
|
33
|
|
46
|
|
52
|
•
Depreciation and amortization
|
34
|
|
33
|
|
70
|
|
66
|
Consolidated
EBITDA
|
$
43
|
|
$
176
|
|
$
223
|
|
$
177
|
Adjustments
|
|
|
|
|
|
|
|
•
Acquisition, integration and
restructuring
|
2
|
|
2
|
|
3
|
|
3
|
•
Ichthys commercial resolution
|
—
|
|
8
|
|
2
|
|
140
|
•
Legacy legal fees and
settlements
|
148
|
|
4
|
|
153
|
|
8
|
•
Appreciation in fair value of
investments
|
—
|
|
(16)
|
|
—
|
|
(16)
|
•
(Benefits) provisions related to exit
from Russian
commercial projects
|
(2)
|
|
12
|
|
(8)
|
|
28
|
Adjusted
EBITDA
|
$
191
|
|
$
186
|
|
$
373
|
|
$
340
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
Dollars in
millions
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
$
10
|
|
$
127
|
|
$
154
|
|
$
96
|
Adjustments
|
|
|
|
|
|
|
|
•
Noncontrolling interest
|
(1)
|
|
—
|
|
(1)
|
|
(1)
|
•
Unrealized gain on cost method
investment
|
—
|
|
16
|
|
—
|
|
16
|
•
Depreciation and amortization
|
34
|
|
33
|
|
70
|
|
66
|
Consolidated
EBITDA
|
$
43
|
|
$
176
|
|
$
223
|
|
$
177
|
Adjustments
|
|
|
|
|
|
|
|
•
Acquisition, integration and
restructuring
|
2
|
|
2
|
|
3
|
|
3
|
•
Ichthys commercial resolution
|
—
|
|
8
|
|
2
|
|
140
|
•
Legacy legal fees and
settlements
|
148
|
|
4
|
|
153
|
|
8
|
•
Appreciation in fair value of
investments
|
—
|
|
(16)
|
|
—
|
|
(16)
|
•
(Benefits) provisions related to exit
from Russian
commercial
projects
|
(2)
|
|
12
|
|
(8)
|
|
28
|
Adjusted
EBITDA
|
$
191
|
|
$
186
|
|
$
373
|
|
$
340
|
Adjusted EPS
Adjusted earnings per share (Adjusted
EPS) for each of the three- and six-month periods ended
June 30, 2023 and 2022 is considered
a non-GAAP financial measure under SEC rules because Adjusted EPS
excludes certain amounts included in the Diluted EPS calculated in
accordance with GAAP for such periods. The most directly comparable
financial measure calculated in accordance with GAAP is Diluted EPS
for the same periods. Management believes that Adjusted EPS affords
investors a view of what management considers KBR's core earnings
performance for each of the three- and six-month periods ended
June 30, 2023 and 2022 and also
affords investors the ability to make a more informed assessment of
such core earnings performance for the comparable periods.
We have calculated Adjusted EPS for each of the three- and
six-month periods ended June 30,
2023 and 2022 by adjusting Diluted EPS for the items
included in the table below.
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
Diluted
EPS1
|
$
(2.60)
|
|
$
0.61
|
|
$
(1.95)
|
|
$
0.17
|
Adjustments
|
|
|
|
|
|
|
|
•
Amortization related to
acquisitions
|
0.03
|
|
0.05
|
|
0.08
|
|
0.09
|
•
Ichthys interest and commercial dispute
costs
|
—
|
|
0.04
|
|
0.01
|
|
1.00
|
•
Acquisition, integration and
restructuring
|
0.01
|
|
0.01
|
|
0.02
|
|
0.01
|
•
Impact of convert accounting and Diluted
EPS share count2
|
0.06
|
|
0.05
|
|
0.04
|
|
—
|
•
Legacy legal fees and
settlements
|
0.98
|
|
0.02
|
|
1.00
|
|
0.04
|
•
(Benefits) provisions related to exit
from Russian
commercial projects
|
(0.02)
|
|
0.07
|
|
(0.05)
|
|
0.16
|
•
Charges associated with Convertible
Notes
|
2.28
|
|
—
|
|
2.26
|
|
—
|
•
Appreciation of fair value of
investments
|
—
|
|
(0.09)
|
|
—
|
|
(0.09)
|
Adjusted
EPS1
|
$
0.74
|
|
$
0.76
|
|
$
1.41
|
|
$
1.38
|
---------
|
1 Refer to the Condensed
Consolidated Statement of Operations above for the applicable share
counts used in Diluted EPS and Adjusted EPS
calculations.
|
2 For the three- and six-months
ended June 30, 2023, adjusted share count includes anti-dilutive
shares for warrants excluded from Diluted EPS share
count.
|
Adjusted Cash Flows Provided by Operating Activities and
Adjusted Free Cash Flows
Adjusted operating cash flows and Adjusted free cash flows are
considered non-GAAP financial measures under SEC rules.
Adjusted operating cash flows exclude certain amounts included in
the cash flows provided by operating activities calculated in
accordance with GAAP. Adjusted free cash flows exclude capital
expenditures from Adjusted operating cash flows. The most directly
comparable financial measure calculated in accordance with GAAP is
cash flows provided by operating activities. Management believes
that Adjusted operating cash flows and Adjusted free cash flows
afford investors a view of what management considers KBR's core
operating cash flow performance and also afford investors the
ability to make a more informed assessment of such core operating
cash generation performance.
We have calculated Adjusted operating cash flows and Adjusted
free cash flows for each of the three- and six-month periods ended
June 30, 2023 and 2022 by adjusting
operating cash flow provided by operating activities for items
included in the table below.
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
Dollars in
millions
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Cash flows provided by
operating activities
|
$
253
|
|
$
125
|
|
$
288
|
|
$
214
|
Add: Legacy legal
settlement
|
—
|
|
—
|
|
—
|
|
—
|
Adjusted operating
cash flows
|
$
253
|
|
$
125
|
|
$
288
|
|
$
214
|
Less: Capital
expenditures
|
(19)
|
|
(13)
|
|
(38)
|
|
(19)
|
Adjusted free cash
flows
|
$
234
|
|
$
112
|
|
$
250
|
|
$
195
|
Revenue ex-OAW
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
Dollars in
millions
|
2023
|
|
2022
|
|
Growth
|
|
2023
|
|
2022
|
|
Growth
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (as
reported)
|
$
1,753
|
|
$
1,616
|
|
|
|
$
3,456
|
|
$
3,330
|
|
|
Revenue attributable to
OAW
|
—
|
|
36
|
|
|
|
—
|
|
305
|
|
|
Revenue
ex-OAW
|
$
1,753
|
|
$
1,580
|
|
11 %
|
|
$
3,456
|
|
$
3,025
|
|
14 %
|
Adjusted EBITDA and Adjusted EPS ex-Gains
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
Dollars in
millions
|
2023
|
|
2022
|
|
Growth
|
|
2023
|
|
2022
|
|
Growth
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (as
reported)
|
$
191
|
|
$
186
|
|
|
|
$
373
|
|
$
340
|
|
|
Gains on sale of
non-core assets
|
—
|
|
22
|
|
|
|
—
|
|
22
|
|
|
Adjusted EBITDA
ex-Gains
|
$
191
|
|
$
164
|
|
16 %
|
|
$
373
|
|
$
318
|
|
17 %
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
Growth
|
|
2023
|
|
2022
|
|
Growth
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EPS1 (as reported)
|
$
0.74
|
|
$
0.76
|
|
|
|
$
1.41
|
|
$
1.38
|
|
|
Gains on sale of
non-core assets
|
—
|
|
0.12
|
|
|
|
—
|
|
0.12
|
|
|
Adjusted
EPS1 ex-Gains
|
$
0.74
|
|
$
0.64
|
|
16 %
|
|
$
1.41
|
|
$
1.26
|
|
12 %
|
---------
|
1 Refer to
the Condensed Consolidated Statement of Operations above for the
applicable share counts used in Adjusted EPS
calculations.
|
Adjusted Net Income Attributable to KBR
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
Dollars in
millions
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to KBR (as reported)
|
$
(351)
|
|
$
94
|
|
$
(265)
|
|
$
23
|
Charges associated with
Convertible Notes
|
314
|
|
—
|
|
314
|
|
—
|
Adjusted net income
(loss) attributable to KBR
|
$
(37)
|
|
$
94
|
|
$
49
|
|
$
23
|
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SOURCE KBR, Inc.