Delivered Strong Q3 and YTD
Results
Robust TTM BTB1 in Both
Segments
Retired Outstanding Convertible Notes
Principal on November 1st
HOUSTON, Nov. 2, 2023
/PRNewswire/ -- KBR, Inc. (NYSE: KBR) today announced its third
quarter 2023 financial results.
"Once again, the people of KBR have demonstrated their
dedication and talent, contributing to another strong performance
this quarter," said Stuart Bradie,
KBR president and CEO. "We delivered 9% organic revenue growth
and strong margins, operational outcomes that speak volumes about
our team's ability to deliver results. Our high-end services
continue to make valuable contributions to the knowledge economy,
playing a key role in KBR's overall performance. By leveraging our
collective expertise and maintaining a focus on innovation, we're
helping to shape the future while ensuring KBR's sustained
growth."
"Furthermore, as of November 1st,
we have retired the remaining convertible debt balance, a
significant step that reduces financial uncertainty. This move to
retire this maturity in cash is a testament to our strong financial
discipline and our focus on creating long-term shareholder
value."
New Business Awards
Backlog and options as of
September 29, 2023 totaled
$21.8 billion. Delivered 1.2x
trailing-twelve-months (TTM) book-to-bill1 as of
September 29, 2023. Awarded
$3.5 billion of bookings and options
in the quarter.
Sustainable Technology Solutions (STS) delivered 1.3x TTM
book-to-bill1 as of September 29,
2023, including awards and achievements in the quarter as
follows:
- Awarded a license and engineering design contract by Hanwha
Impact Corporation for the world's first commercial ammonia to
hydrogen cracking unit using KBR's leading H2ACTSM
technology in Daesan, Republic of Korea.
- Awarded a blue hydrogen process technology and front-end
engineering design contract by EET Hydrogen for its planned HPP2
low-carbon hydrogen facility at HyNet, the UK's leading industrial
decarbonization project.
- Awarded an engineering, procurement and construction management
contract by Woodside Energy for Train 1 of its Pluto LNG facility,
located near Karratha, Western
Australia.
- Selected by Deepak Fertilisers and Petrochemicals Corporation
Limited for a multi-year digital solutions contract for the
development of their enterprise-level Smart Factory project. This
transformative contract will cover the operations of their four
nitric acid plants located in Dahej and Taloja, India.
- Selected by Madoqua Power2X, a joint venture of Madoqua
Renewables, Power2X and Copenhagen Infrastructure Partners, for a
green ammonia project using KBR's K-GreeN® technology.
Government Solutions (GS) delivered 1.1x TTM
book-to-bill1 as of September 29,
2023, including awards and achievements in the quarter as
follows:
- Awarded a 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.
- KBR joint venture with Intuitive Machines awarded Omnibus
Multidiscipline Engineering Services III contract, worth up to
$719 million, to aid NASA's
development of space orbital systems in its Engineering and
Technology Directorate at Goddard Space Flight Center in
Maryland.
- Awarded a two-year option on the Human Health & Performance
Contract II for the continued biomedical, medical and health
services in support of human spaceflight programs at Johnson Space
Center in Houston.
- Defense & Intel backlog grew due to several awards in
classified areas.
- Vaault®, KBR's proprietary secured cloud and mission service
platform, has been prioritized for the Federal Risk and
Authorization Management Program Joint Authorization Board
authorization process.
- Awarded a $75 million recompete
task order to perform research and analysis to address the
Department of Defense critical technology areas of advanced
materials, trusted artificial intelligence and autonomy and
renewable energy generation and storage.
Summarized Third Quarter Fiscal 2023 Financial
Results
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
29,
|
|
September
30,
|
|
September
29,
|
|
September
30,
|
Dollars in millions,
except share data
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Revenues
|
$
1,770
|
|
$
1,626
|
|
$
5,226
|
|
$
4,956
|
Operating
income
|
147
|
|
125
|
|
301
|
|
221
|
Net income (loss)
attributable to KBR
|
(21)
|
|
74
|
|
(286)
|
|
97
|
Adjusted
EBITDA2
|
186
|
|
171
|
|
559
|
|
511
|
Operating income margin
%
|
8 %
|
|
8 %
|
|
6 %
|
|
4 %
|
Adjusted
EBITDA2 margin %
|
11 %
|
|
11 %
|
|
11 %
|
|
10 %
|
Earnings per
share:
|
|
|
|
|
|
|
|
Diluted earnings
per share
|
(0.16)
|
|
0.49
|
|
(2.10)
|
|
0.65
|
Adjusted
earnings per share2
|
0.75
|
|
0.65
|
|
2.18
|
|
2.03
|
Cash
flows:
|
|
|
|
|
|
|
|
Operating cash
flows
|
(40)
|
|
122
|
|
248
|
|
336
|
Adjusted
operating cash flows2
|
92
|
|
122
|
|
380
|
|
336
|
Adjusted free
cash flows2
|
70
|
|
102
|
|
320
|
|
297
|
Financial Highlights for the Three Months Ended September 29, 2023
- Revenue of $1.8 billion, up 9%
(organic) on a year-over-year-basis
- Net income attributable to KBR of $(21)
million; Adjusted EBITDA2 of $186 million (11% Adjusted EBITDA2
margin)
- Diluted EPS of $(0.16); Adjusted
EPS2 of $0.75
- Operating cash flows of $(40)
million; Adjusted operating cash flows2 of
$92 million
- Bookings and options of $3.5
billion during the quarter with 1.2x TTM
book-to-bill1
Financial Highlights for the Nine Months Ended September 29, 2023
- Revenue of $5.2 billion, up 5%
(organic) on a year-over-year basis and 12% on an
ex-OAW2 year-over-year-basis
- Net income attributable to KBR of $(286)
million; Adjusted EBITDA2 of $559 million (11% Adjusted EBITDA2
margin)
- Diluted EPS of $(2.10); Adjusted
EPS2 of $2.18
- Operating cash flows of $248
million; Adjusted operating cash flows2 of
$380 million
- Bookings and options of $8.8
billion during the year to date period with 1.2x TTM
book-to-bill1
Commentary on the Three Months Ended September 29, 2023
Revenues were
$1.8 billion, up 9% (organic)
compared to 3Q'22, primarily due to new and on-contract growth
across all Government Solutions business units and growing demand
across the Sustainable Technology Solutions portfolio.
Net income attributable to KBR was $(21)
million, down $95 million
compared to 3Q'22, primarily due to a non-cash charge of
$114 million recorded in connection
with the convertible notes settlement method election (discussed
below). Net income attributable to KBR ex-Nonrecurring
Charges2 was $93 million,
up $19 million compared to
3Q'22, primarily 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.
Adjusted EBITDA2 was $186
million, up 9% (organic) compared to 3Q'22, with Adjusted
EBITDA2 margins of 11%.
Diluted earnings per share decreased in line with the decrease
in net income attributable to KBR. Adjusted earnings per
share2 increased in line with Net income attributable to
KBR ex-Nonrecurring Charges2.
Operating cash flows were $(40)
million, down 133% compared to 3Q'22 primarily due to a
$132 million after-tax outflow in
connection with the settlement of a legacy legal matter in 2Q'23.
Excluding the legacy legal settlement outflow, Adjusted operating
cash flows2 were $92
million.
Commentary on the Nine Months Ended September 29, 2023
Revenues were
$5.2 billion, up 5% (organic)
compared to YTD 3Q'22. Revenue ex-OAW2 increased
$579 million, or 12%, due to growth
in Readiness & Sustainment and Science & Space divisions
and growing demand across the Sustainable Technology Solutions
portfolio.
Net income attributable to KBR was $(286)
million, down $383 million
compared to YTD 3Q'22, primarily due to a current year non-cash
charge of $428 million recorded in
connection with the convertible notes settlement method election
and partial repurchase and partial termination of the note hedge
and warrants (discussed below) and an after-tax cash charge of
$132 million in connection with the
settlement of a legacy legal matter, as well as a non-cash charge
of $137 million in equity in earnings related to the
resolution of a subcontractor dispute that did not recur in
2023.
Net income attributable to KBR ex-Nonrecurring
Charges2 was $274 million,
up $40 million compared to YTD 3Q'22,
primarily 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
and a gain on sale of non-core assets that did not recur in
2023.
Adjusted EBITDA2 was $559
million, up 9% (organic) compared to YTD 3Q'22, with
Adjusted EBITDA2 margins of 11%. Adjusted EBITDA
ex-Gains2 was up 14% compared to YTD 3Q'22.
Diluted earnings per share decreased in line with the decrease
in net income attributable to KBR. Adjusted earnings per
share2 increased in line with Net income attributable to
KBR ex-Nonrecurring Charges2.
Operating cash flows were $248
million, down 26% compared to YTD 3Q'22. Adjusted operating
cash flows2 were $380
million, up 13% compared to YTD 3Q'22.
Capital returned to shareholders totaled $190 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 $53 million in regular dividends.
Cash Settlement Method Election and Repurchase of Convertible
Notes
During 2Q'23, 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.
As a result of the above cash settlement method election and
partial repurchase and the partial termination of the corresponding
portions of the note hedge and warrants, we recorded a YTD 3Q'23
loss of $428 million, of which
$114 million was recorded in the
current quarter related to the accretion of convertible notes debt
discount. These amounts are not tax deductible and have been added
back to Adjusted EPS. Refer to Note 18 "Cash Election and
Repurchase of Convertible Notes" in our Form 10-Q for the quarter
ended September 29, 2023 for further
details.
Subsequent Event
On November 1,
2023, we retired the remaining principal amount of
convertible notes totaling $250
million. The warrants associated with the convertible notes
remain outstanding and mature in the first half of 2024.
Reaffirms Fiscal 2023 Guidance
The table below
summarizes fiscal 2023 guidance and represents our views as of
November 2, 2023.
|
Fiscal 2023
Guidance
|
Revenue
|
$6.9B -
$7.1B
|
Adjusted
EBITDA
|
$730M -
$750M
|
Diluted
EPS*
|
$(1.88) -
$(1.68)
|
Adjusted
EPS*
|
$2.76 -
$2.96
|
Effective tax
rate
|
24% - 25%
|
Adjusted operating cash
flows
|
$425M -
$460M
|
|
* Fiscal 2023 Diluted
and Adjusted EPS guidance is calculated using a share count of
approximately 135 million and 138 million, respectively.
|
The company does not provide reconciliations of Adjusted EBITDA
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 third quarter financial results on
Thursday, November 2, 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: 821350.
About KBR
We deliver science, technology and
engineering solutions to governments and companies around the
world. KBR employs approximately 34,000 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 excluding gains on sale of non-core assets and Net income
attributable to KBR ex-nonrecurring charges are non-GAAP
financial
|
KBR,
Inc.
|
Condensed
Consolidated Statements of Operations
|
(In millions, except
for per share data)
|
(Unaudited)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
29,
|
|
September
30,
|
|
September
29,
|
|
September
30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Revenues:
|
|
|
|
|
|
|
|
Government
Solutions
|
$
1,345
|
|
$
1,293
|
|
$
4,025
|
|
$
4,064
|
Sustainable Technology
Solutions
|
425
|
|
333
|
|
1,201
|
|
892
|
Total
revenues
|
1,770
|
|
1,626
|
|
5,226
|
|
4,956
|
Gross
profit
|
244
|
|
225
|
|
740
|
|
622
|
Equity in earnings
(losses) of unconsolidated affiliates
|
32
|
|
5
|
|
78
|
|
(103)
|
Selling, general and
administrative expenses
|
(127)
|
|
(103)
|
|
(370)
|
|
(315)
|
Legal settlement of
legacy matter
|
—
|
|
—
|
|
(144)
|
|
—
|
Gain on disposition of
assets and investments
|
—
|
|
—
|
|
—
|
|
22
|
Other
|
(2)
|
|
(2)
|
|
(3)
|
|
(5)
|
Operating income
(loss):
|
|
|
|
|
|
|
|
Government
Solutions
|
108
|
|
105
|
|
182
|
|
351
|
Sustainable Technology
Solutions
|
84
|
|
56
|
|
243
|
|
(18)
|
Other
|
(45)
|
|
(36)
|
|
(124)
|
|
(112)
|
Total operating
income (loss)
|
147
|
|
125
|
|
301
|
|
221
|
Interest
expense
|
(30)
|
|
(23)
|
|
(85)
|
|
(64)
|
Unrealized gain on
other investment
|
—
|
|
—
|
|
—
|
|
16
|
Charges associated with
Convertible Notes
|
(114)
|
|
—
|
|
(428)
|
|
—
|
Other non-operating
income (expense)
|
2
|
|
(2)
|
|
(1)
|
|
3
|
Income (loss) before
income taxes
|
5
|
|
100
|
|
(213)
|
|
176
|
Provision for income
taxes
|
(23)
|
|
(27)
|
|
(69)
|
|
(79)
|
Net income
(loss)
|
(18)
|
|
73
|
|
(282)
|
|
97
|
Less: Net income (loss)
attributable to noncontrolling interests
|
3
|
|
(1)
|
|
4
|
|
—
|
Net income (loss)
attributable to KBR
|
$
(21)
|
|
$
74
|
|
$
(286)
|
|
$
97
|
Adjusted
EBITDA1
|
$
186
|
|
$
171
|
|
$
559
|
|
$
511
|
Diluted EPS
|
$
(0.16)
|
|
$
0.49
|
|
$
(2.10)
|
|
$
0.65
|
Adjusted
EPS1
|
$
0.75
|
|
$
0.65
|
|
$
2.18
|
|
$
2.03
|
Diluted weighted
average common shares outstanding
|
135
|
|
156
|
|
136
|
|
156
|
Adjusted weighted
average common shares outstanding
|
139
|
|
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)
|
|
|
|
September
29,
|
|
December
31,
|
|
|
2023
|
|
2022
|
|
|
(Unaudited)
|
|
|
Assets
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
348
|
|
$
389
|
Accounts receivable,
net of allowance for credit losses of $10 and $9,
respectively
|
|
1,014
|
|
942
|
Contract
assets
|
|
207
|
|
252
|
Other current
assets
|
|
523
|
|
164
|
Total current
assets
|
|
2,092
|
|
1,747
|
Pension
Assets
|
|
83
|
|
46
|
Property, plant, and
equipment, net of accumulated depreciation of $438 and $417
(including
net PPE of $34 and $22 owned by a variable interest entity),
respectively
|
|
224
|
|
182
|
Operating lease
right-of-use assets
|
|
146
|
|
164
|
Goodwill
|
|
2,090
|
|
2,087
|
Intangible assets, net
of accumulated amortization of $366 and $332,
respectively
|
|
618
|
|
645
|
Equity in and advances
to unconsolidated affiliates
|
|
193
|
|
188
|
Deferred income
taxes
|
|
190
|
|
213
|
Other assets
|
|
337
|
|
294
|
Total
assets
|
|
$
5,973
|
|
$
5,566
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
687
|
|
$
637
|
Contract
liabilities
|
|
341
|
|
275
|
Accrued salaries, wages
and benefits
|
|
308
|
|
325
|
Current maturities of
long-term debt
|
|
239
|
|
364
|
Operating lease
liabilities
|
|
49
|
|
48
|
Other current
liabilities
|
|
503
|
|
172
|
Total current
liabilities
|
|
2,127
|
|
1,821
|
Employee compensation
and benefits
|
|
113
|
|
105
|
Income tax
payable
|
|
101
|
|
117
|
Deferred income
taxes
|
|
92
|
|
92
|
Long-term
debt
|
|
1,516
|
|
1,376
|
Operating lease
liabilities
|
|
178
|
|
193
|
Other
liabilities
|
|
281
|
|
230
|
Total
liabilities
|
|
4,408
|
|
3,934
|
Commitments and
Contingencies
|
|
|
|
|
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, 181,627,601 and
180,807,960 shares issued, and 135,002,833 and 136,505,145 shares
outstanding, respectively
|
|
—
|
|
—
|
Paid-in capital in
excess of par
|
|
2,624
|
|
2,235
|
Retained
earnings
|
|
1,069
|
|
1,410
|
Treasury stock,
46,624,768 shares and 44,302,815 shares, at cost,
respectively
|
|
(1,278)
|
|
(1,143)
|
Accumulated other
comprehensive loss
|
|
(861)
|
|
(882)
|
Total KBR
shareholders' equity
|
|
1,554
|
|
1,620
|
Noncontrolling
interests
|
|
11
|
|
12
|
Total shareholders'
equity
|
|
1,565
|
|
1,632
|
Total liabilities
and shareholders' equity
|
|
$
5,973
|
|
$
5,566
|
KBR,
Inc.
|
Condensed
Consolidated Statements of Cash Flows
|
(In
millions)
|
(Unaudited)
|
|
|
Nine Months
Ended
|
|
September
29,
|
|
September
30,
|
|
2023
|
|
2022
|
Cash flows from
operating activities:
|
|
|
|
Net income
(loss)
|
$
(282)
|
|
$
97
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
|
Charges associated
with Convertible Notes
|
428
|
|
—
|
Depreciation and
amortization
|
104
|
|
99
|
Equity in (earnings)
losses of unconsolidated affiliates
|
(78)
|
|
103
|
Deferred income
tax
|
24
|
|
49
|
Gain on disposition of
assets
|
—
|
|
(22)
|
Unrealized gain on
other investment
|
—
|
|
(16)
|
Other
|
31
|
|
24
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts receivable,
net of allowance for credit losses
|
(74)
|
|
475
|
Contract
assets
|
43
|
|
(11)
|
Accounts
payable
|
46
|
|
(440)
|
Contract
liabilities
|
67
|
|
(3)
|
Accrued salaries,
wages and benefits
|
(8)
|
|
16
|
Payments on operating
lease obligation
|
(50)
|
|
(44)
|
Payments from
unconsolidated affiliates, net
|
13
|
|
14
|
Distributions of
earnings from unconsolidated affiliates
|
58
|
|
57
|
Pension
funding
|
(9)
|
|
(32)
|
Other assets and
liabilities
|
(65)
|
|
(30)
|
Total cash flows
provided by operating activities
|
$
248
|
|
$
336
|
Cash flows from
investing activities:
|
|
|
|
Purchases of property,
plant and equipment
|
$
(60)
|
|
$
(39)
|
Proceeds from sale of
assets or investments
|
—
|
|
60
|
Return of (investments
in) equity method joint ventures, net
|
61
|
|
198
|
Acquisition of
businesses, net of cash acquired
|
—
|
|
(73)
|
Funding in other
investment
|
(39)
|
|
(61)
|
Other
|
(5)
|
|
1
|
Total cash flows
(used in) provided by investing activities
|
$
(43)
|
|
$
86
|
Cash flows from
financing activities:
|
|
|
|
Borrowings on long-term
debt
|
430
|
|
—
|
Payments on short-term
and long-term debt
|
(12)
|
|
(12)
|
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
|
(270)
|
|
(97)
|
Payments of dividends
to shareholders
|
(53)
|
|
(49)
|
Net proceeds from
issuance of common stock
|
5
|
|
5
|
Payments to reacquire
common stock
|
(137)
|
|
(124)
|
Other
|
(12)
|
|
(13)
|
Total cash flows
used in financing activities
|
$
(250)
|
|
$
(290)
|
Effect of exchange rate
changes on cash
|
4
|
|
(41)
|
(Decrease) increase in
cash and cash equivalents
|
(41)
|
|
91
|
Cash and cash
equivalents at beginning of period
|
389
|
|
370
|
Cash and cash
equivalents at end of period
|
$
348
|
|
$
461
|
Supplemental
disclosure of cash flows information:
|
|
|
|
Noncash investing
activities
|
|
|
|
Leasehold improvements
paid by landlord
|
$
9
|
|
$
—
|
Accrued but unpaid
purchases of property, plant and equipment
|
$
2
|
|
$
6
|
Noncash financing
activities
|
|
|
|
Dividends
declared
|
$
19
|
|
$
16
|
KBR,
Inc.
|
Backlog
Information
|
(In
millions)
|
(Unaudited)
|
|
|
September
29,
|
|
December
31,
|
|
2023
|
|
2022
|
Government
Solutions
|
$
12,282
|
|
$
11,543
|
Sustainable Technology
Solutions
|
4,975
|
|
4,012
|
Total
backlog
|
$
17,257
|
|
$
15,555
|
Award
options
|
4,528
|
|
4,203
|
Total backlog and
options
|
$
21,785
|
|
$
19,758
|
Government Solutions backlog and options at September 29, 2023 totaled $16.8 billion, up $1.1
billion compared to December 31,
2022. Sustainable Technology Solutions backlog at
September 29, 2023 totaled
$5.0 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 nine-month periods
ended September 29, 2023 and
September 30, 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 nine-month periods ended
September 29, 2023 and September 30, 2022 and also affords investors the
ability to make a more informed assessment of such core performance
for the comparable periods.
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
29,
|
|
September
30,
|
|
September
29,
|
|
September
30,
|
Dollars in
millions
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
Net income
attributable to KBR
|
$
(21)
|
|
$
74
|
|
$
(286)
|
|
$
97
|
Adjustments
|
|
|
|
|
|
|
|
•
Interest expense
|
30
|
|
23
|
|
85
|
|
64
|
•
Charges associated with Convertible
Notes
|
114
|
|
—
|
|
428
|
|
—
|
•
Other non-operating expense
(income)
|
(2)
|
|
2
|
|
1
|
|
(3)
|
•
Provision for income taxes
|
23
|
|
27
|
|
69
|
|
79
|
•
Depreciation and amortization
|
34
|
|
33
|
|
104
|
|
99
|
Consolidated
EBITDA
|
$
178
|
|
$
159
|
|
$
401
|
|
$
336
|
Adjustments
|
|
|
|
|
|
|
|
•
Acquisition, integration and
restructuring
|
3
|
|
2
|
|
6
|
|
5
|
•
Ichthys commercial resolution
|
4
|
|
7
|
|
6
|
|
147
|
•
Legacy legal fees and
settlements
|
1
|
|
3
|
|
154
|
|
11
|
•
Appreciation in fair value of
investments
|
—
|
|
—
|
|
—
|
|
(16)
|
•
(Benefits) provisions related to exit
from Russian
commercial projects
|
—
|
|
—
|
|
(8)
|
|
28
|
Adjusted
EBITDA
|
$
186
|
|
$
171
|
|
$
559
|
|
$
511
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
29,
|
|
September
30,
|
|
September
29,
|
|
September
30,
|
Dollars in
millions
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
$
147
|
|
$
125
|
|
$
301
|
|
$
221
|
Adjustments
|
|
|
|
|
|
|
|
•
Noncontrolling interest
|
(3)
|
|
1
|
|
(4)
|
|
—
|
•
Unrealized gain on other
investment
|
—
|
|
—
|
|
—
|
|
16
|
•
Depreciation and amortization
|
34
|
|
33
|
|
104
|
|
99
|
Consolidated
EBITDA
|
$
178
|
|
$
159
|
|
$
401
|
|
$
336
|
Adjustments
|
|
|
|
|
|
|
|
•
Acquisition, integration and
restructuring
|
3
|
|
2
|
|
6
|
|
5
|
•
Ichthys commercial resolution
|
4
|
|
7
|
|
6
|
|
147
|
•
Legacy legal fees and
settlements
|
1
|
|
3
|
|
154
|
|
11
|
•
Appreciation in fair value of
investments
|
—
|
|
—
|
|
—
|
|
(16)
|
•
(Benefits) provisions related to exit
from Russian
commercial projects
|
—
|
|
—
|
|
(8)
|
|
28
|
Adjusted
EBITDA
|
$
186
|
|
$
171
|
|
$
559
|
|
$
511
|
Adjusted EPS
Adjusted earnings per share (Adjusted
EPS) for each of the three- and nine-month periods ended
September 29, 2023 and September 30, 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 nine-month periods ended
September 29, 2023 and September 30, 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
nine-month periods ended September 29,
2023 and September 30, 2022 by
adjusting Diluted EPS for the items included in the table
below.
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
29,
|
|
September
30,
|
|
September
29,
|
|
September
30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
Diluted
EPS1
|
$
(0.16)
|
|
$
0.49
|
|
$
(2.10)
|
|
$
0.65
|
Adjustments
|
|
|
|
|
|
|
|
•
Amortization related to
acquisitions
|
0.04
|
|
0.05
|
|
0.12
|
|
0.15
|
•
Ichthys interest and commercial dispute
costs
|
0.03
|
|
0.05
|
|
0.04
|
|
1.05
|
•
Acquisition, integration and
restructuring
|
0.01
|
|
0.01
|
|
0.03
|
|
0.02
|
•
Impact of convert accounting and Diluted
EPS share count2
|
—
|
|
0.03
|
|
0.05
|
|
0.03
|
•
Legacy legal fees and
settlements
|
0.01
|
|
0.02
|
|
1.01
|
|
0.06
|
•
(Benefits) provisions related to exit
from Russian commercial projects
|
—
|
|
—
|
|
(0.05)
|
|
0.16
|
•
Charges associated with Convertible
Notes
|
0.82
|
|
—
|
|
3.08
|
|
—
|
•
Appreciation of fair value of
investments
|
—
|
|
—
|
|
—
|
|
(0.09)
|
Adjusted
EPS1
|
$
0.75
|
|
$
0.65
|
|
$
2.18
|
|
$
2.03
|
---------
|
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 nine-month
periods ended September 29, 2023, adjusted share count includes
anti-dilutive shares for warrants excluded from Diluted EPS share
count.
|
We have calculated the 2023 guidance for Adjusted EPS by
adjusting Diluted EPS for the items included in the table
below.
|
Fiscal 2023
Guidance
|
Diluted
EPS2 guidance
|
$(1.88)
|
|
$(1.68)
|
Adjustments
|
|
•
Amortization related to
acquisitions
|
0.17
|
•
Ichthys interest and commercial dispute
costs
|
0.04
|
•
Acquisition, integration and
restructuring
|
0.04
|
•
Impact of Diluted EPS share
count1
|
0.04
|
•
Legacy legal fees and
settlements
|
1.02
|
•
Benefits related to exit from Russian
commercial projects
|
(0.05)
|
•
Charges associated with Convertible
Notes
|
3.38
|
Adjusted
EPS2 guidance
|
$2.76
|
|
$2.96
|
---------
|
1 Adjusted
share count includes anti-dilutive shares excluded from Diluted EPS
share count.
|
2 Diluted
and Adjusted Fiscal 2023 EPS guidance is calculated using a share
count of approximately 135 million and 138 million,
respectively.
|
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 nine-month periods ended
September 29, 2023 and September 30, 2022 by adjusting operating cash
flow provided by operating activities for items included in the
table below.
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
29,
|
|
September
30,
|
|
September
29,
|
|
September
30,
|
Dollars in
millions
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Cash flows provided by
operating activities
|
$
(40)
|
|
$
122
|
|
$
248
|
|
$
336
|
Add: Legacy legal
settlement (after tax)
|
132
|
|
—
|
|
132
|
|
—
|
Adjusted operating
cash flows
|
$
92
|
|
$
122
|
|
$
380
|
|
$
336
|
Less: Capital
expenditures
|
(22)
|
|
(20)
|
|
(60)
|
|
(39)
|
Adjusted free cash
flows
|
$
70
|
|
$
102
|
|
$
320
|
|
$
297
|
Revenue ex-OAW
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
29,
|
|
September
30,
|
|
|
|
September
29,
|
|
September
30,
|
|
|
Dollars in
millions
|
2023
|
|
2022
|
|
Growth
|
|
2023
|
|
2022
|
|
Growth
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (as
reported)
|
$
1,770
|
|
$
1,626
|
|
9 %
|
|
$
5,226
|
|
$
4,956
|
|
5 %
|
Revenue attributable to
OAW
|
—
|
|
4
|
|
|
|
—
|
|
309
|
|
|
Revenue
ex-OAW
|
$
1,770
|
|
$
1,622
|
|
9 %
|
|
$
5,226
|
|
$
4,647
|
|
12 %
|
Adjusted EBITDA ex-Gains
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
29,
|
|
September
30,
|
|
|
|
September
29,
|
|
September
30,
|
|
|
Dollars in
millions
|
2023
|
|
2022
|
|
Growth
|
|
2023
|
|
2022
|
|
Growth
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (as
reported)
|
$
186
|
|
$
171
|
|
9 %
|
|
$
559
|
|
$
511
|
|
9 %
|
Gains on sale of
non-core assets
|
—
|
|
—
|
|
|
|
—
|
|
22
|
|
|
Adjusted EBITDA
ex-Gains
|
$
186
|
|
$
171
|
|
9 %
|
|
$
559
|
|
$
489
|
|
14 %
|
Net Income Attributable to KBR ex-Nonrecurring
Charges
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
29,
|
|
September
30,
|
|
|
|
September
29,
|
|
September
30,
|
|
|
Dollars in
millions
|
2023
|
|
2022
|
|
Growth
|
|
2023
|
|
2022
|
|
Growth
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to KBR
(as reported)
|
$
(21)
|
|
$
74
|
|
$
(95)
|
|
$
(286)
|
|
$
97
|
|
$
(383)
|
Subcontractor
commercial dispute
|
—
|
|
—
|
|
|
|
—
|
|
137
|
|
|
Charges associated with
Convertible
Notes
|
114
|
|
—
|
|
|
|
428
|
|
—
|
|
|
Legacy legal settlement
(after tax)
|
—
|
|
—
|
|
|
|
132
|
|
—
|
|
|
Net income
attributable to KBR ex-
Nonrecurring Charges
|
$
93
|
|
$
74
|
|
$
19
|
|
$
274
|
|
$
234
|
|
$
40
|
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SOURCE KBR, Inc.