KBR Announces Fourth Quarter and Full Year 2012 Results

KBR Announces Fourth Quarter and Full Year 2012 Results

  • Full year 2012 earnings per diluted share of $2.16 on an adjusted, non-GAAP basis

  • Full year 2012 earnings per diluted share of $0.97 on a GAAP basis includes a third quarter 2012 non-cash goodwill impairment charge at the Minerals Business Unit, related to the Roberts & Schaefer acquisition in the amount of $1.19 per diluted share

  • Backlog book-to-bill of 1.1 for fourth quarter 2012

  • Cash and equivalents at $1.1 billion at December 31, 2012

  • 2013 earnings per diluted share guidance remains $2.45 to $2.90

HOUSTON, Texas--(BUSINESS WIRE)-- KBR (NYS: KBR) announced today that fourth quarter 2012 net income attributable to KBR was $30 million, or $0.20 per diluted share, compared to net income attributable to KBR of $90 million, or $0.60 per diluted share, in the fourth quarter of 2011.

Consolidated revenue in the fourth quarter 2012 was $1.9 billion compared to $2.1 billion in the fourth quarter of 2011. Operating income in the fourth quarter 2012 was $69 million compared to operating income of $136 million in the prior year fourth quarter.


"2012 was, overall, a disappointing year for KBR, where issues at our Minerals and US Construction Business Units offset strong operating performance across our Hydrocarbons Business Group," said Bill Utt, Chairman, President, and Chief Executive Officer of KBR. "As we begin 2013, we see a robust series of new opportunities across each of our Business Units. The potential opportunity set for KBR is tremendous and I am confident in KBR's ability to successfully win and execute this work."

Business Discussion (All comparisons are fourth quarter 2012 versus fourth quarter 2011, unless otherwise noted).

Hydrocarbons Results

Hydrocarbons revenue was $943 million, down $46 million, or 5%. Hydrocarbons job income was $210 million, up $81 million, or 63%.

  • Gas Monetization job income was $125 million, up $60 million, or 92%, primarily related to strong project execution, incremental progress on several LNG projects and lower estimated costs to complete one LNG project. Partially offsetting this increase was lower work volumes on a completed GTL project and on an LNG project nearing completion.

  • Oil and Gas job income was $25 million, up $2 million, or 9%, primarily related to higher work volumes on the Shah Deniz project and FEED work for an FPSO in Angola, as well as several new engineering services contracts. Partially offsetting the increase was the completion or near completion of several projects.

  • Downstream job income was $35 million, up $16 million, or 84%, primarily related to a $14 million gain on a favorable settlement for claims associated with the completion of the Fina Antwerp Olefins project in 2005 as well as increased profits from projects in the United States and the KBR-AMCDE entity in Saudi Arabia. Partially offsetting the increase was the completion of engineering on a refinery project in Africa.

  • Technology job income was $25 million, up $3 million, or 14%, primarily related to several new ammonia projects in the United States, Bolivia and India. Partially offsetting the increase was the completion of several ammonia projects in Indonesia, Brazil and Egypt.

Infrastructure, Government and Power (IGP) Results

IGP revenue was $462 million, down $245 million, or 35%. IGP job income was $17 million, down $77 million, or 82%.

  • North American Government and Logistics (NAGL) job income was $28 million, down $17 million, or 38%, primarily related to the completion of operations under the LogCAP III contract in Iraq. Partially offsetting the decrease was a favorable $8 million benefit associated with the dismissal of the False Claims Act case for the use of private security contractors during the LogCAP III program.

  • International Government, Defence and Support Services (IGDSS) job income was $26 million, down $24 million, or 48%, primarily related to favorable inception-to-date margin adjustments on the Allenby & Connaught project in the fourth quarter of 2011 as well as lower work volumes on the Allenby & Connaught and Afghanistan ISP projects. Partially offsetting the decrease was income associated with the NATO Support Agency (formerly the NATO Maintenance and Supply Agency) airbase projects in Kabul and Kandahar, Afghanistan.

  • Infrastructure job income was $13 million, up $1 million, or 8% primarily related to increased activity on the Doha Expressway project in Qatar.

  • Power and Industrial (P&I) job income was $7 million, up $1 million, or 17%, primarily related to work performed on the newly awarded emissions control EPC projects and increased activity on a cellulosic fiber project. Partially offsetting the increase is the near completion of engineering activity on a coal gasification project.

  • Minerals job loss was $57 million, down $38 million, or 200%, primarily related to $58 million in charges associated with higher estimated costs to complete two projects in Indonesia. Both projects are scheduled for completion during the third quarter of 2013.

Services Results

Services revenue was $441 million, up $63 million, or 17%. Services job loss was $30 million, down $60 million, or 200%, primarily related to a $62 million charge for higher estimated costs to complete three fixed price projects in U.S. Construction. Partially offsetting the decrease was increased activity in Canada, Industrial Services and KBR's MMM Mexican joint venture.

Ventures Results

Ventures job income was $8 million, down $5 million, or 38%, primarily related to refinancing costs at the EBIC ammonia plant in Egypt.

Corporate

Fourth quarter of 2012 corporate general and administrative expense was $59 million. 2012 corporate general and administrative expense of $222 million, which includes $20 million related to the company's ERP system, was lower than KBR's guidance due to continued focus on prudent cost management.

Fourth quarter of 2012 labor cost absorption expense was $22 million due to under absorption of KBR's centralized engineering resources.

Total cash provided by operating activities in the fourth quarter of 2012 was $153 million.

The effective tax rate for the fourth quarter of 2012 was approximately 20%.

During the fourth quarter of 2012, KBR had share repurchases of $4 million, capital expenditures of $22 million, pension contributions of $7 million, and quarterly dividend payments of $15 million for total cash deployment of $48 million.

Full Year 2013 Guidance

  • 2013 earnings per diluted share guidance is between $2.45 and $2.90.

Significant Achievements and Awards

  • KBR was awarded a contract by Kentucky Utilities, a subsidiary of PPL Corporation, to provide engineering, procurement and construction (EPC) services for the installation of air emissions control systems at its Ghent Generating Stations in Ghent, Ky. KBR's EPC contract is valued at approximately 80% of Kentucky Utilities' approximate $600 million investment for the addition of air emissions controls at its Ghent plant.

  • KBR, through a joint venture with Jubail-based AYTB signed a seven-year contract to provide refinery maintenance services for the Saudi Aramco Total Refining and Petrochemical Company (SATORP) at a new 400,000 bpd refinery in Jubail, Saudi Arabia. The contract value is in the approximate range between $140 million and $170 million, depending on services.

  • KBR was selected by GDF SUEZ Bonaparte Pty. Ltd., operator of the Bonaparte LNG project, to execute floating liquefied natural gas (FLNG) production vessel design work for its project offshore Darwin, Australia. The award also pre-qualifies KBR as a contender for the engineering, procurement and construction delivery phase of the project.

  • KBR was awarded a contract to execute front-end engineering and design (FEED) for an Integrated Gasification Combined Cycle (IGCC) project near Jazan Economic City, Saudi Arabia. The IGCC complex will convert vacuum residue to electricity and utilities for a local refinery and export 2.4 Gigawatts of electricity to the Jazan Economic City and the surrounding region.

  • KBR was awarded the Mansuriya Full Field Development contract to perform front end engineering and design studies and Quality Control Support Services (QCSS) for the Turkish Petroleum Overseas Company, a wholly owned subsidiary of Turkish Petroleum Corporation, in Diyala Province, Republic of Iraq.

  • KBR was awarded two contracts for Syncrude Canada Ltd. to execute module fabrication and field construction for its Fluid Fine Tailings - Centrifuging Full Scale Plant in Fort McMurray, Alberta, Canada. KBR Canada subsidiary, KBR Industrial Canada, Co., as the General Contractor, will provide constructability, module fabrication and construction services.

  • KBR Building Group has been awarded a contract to construct The Acadia at Metropolitan Park, a 411 unit mixed-use, residential building in Arlington, Va. The Acadia will be the third building to be constructed in the multi-phase Metropolitan Park development.

  • KBR was selected as one of the prime contractors on the Enhanced Army Global Logistics Enterprise (EAGLE) program issued by the U.S. Army Materiel Command. As a prime contractor, KBR will have the opportunity to submit bids on individual task orders issued by the U.S. Army.

  • KBR was awarded the Joint Operational Fuel System contract by the UK Ministry of Defence (MOD). KBR will supply the MOD with fuel-handling equipment which will be used on operations and in support of military exercises worldwide for an initial two-year period.

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 20, 2013, 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,

2012

2011

2012

Revenue:

Hydrocarbons

$

943

$

989

$

1,119

Infrastructure, Government and Power

462

707

433

Services

441

378

419

Ventures

14

17

18

Other

6

5

3

Total revenue

1,866

2,096

1,992

Business group income (loss):

Hydrocarbons

174

99

191

Infrastructure, Government and Power

(22

)

55

(149

)

Services

(44

)

15

-

Ventures

7

12

13

Other

35

3

(2

)

Total business group income

150

184

53

Unallocated costs:

Labor cost absorption

(22

)

3

(8

)

General and administrative

(59

)

(51

)

(56

)

Operating income (loss)

69

136

(11

)

Interest expense, net

(1

)

(5

)

(2

)

Foreign currency losses, net

(2

)

(1

)

(2

)

Other non-operating expense

(1

)

-

-

Income (loss) before income taxes and noncontrolling interests

65

130

(15

)

Provision for income taxes

(13

)

(25

)

(45

)

Net income (loss)

52

105

(60

)

Net income attributable to noncontrolling interests

(22

)

(15

)

(21

)

Net income (loss) attributable to KBR

$

30

$

90

$

(81

)

Net income (loss) attributable to KBR per share:

Basic

$

0.20

$

0.60

$

(0.55

)

Diluted

0.20

0.60

(0.55

)

Basic weighted average shares outstanding

147

149

147

Diluted weighted average shares outstanding

148

150

147

Cash dividends declared per share

$

0.13

$

0.05

$

0.05

KBR, Inc.: Condensed Consolidated Statements of Income

(Millions, except per share data) (Unaudited)

Twelve Months Ended

December 31,

2012

2011

Revenue:

Hydrocarbons

$

4,300

$

4,258

Infrastructure, Government and Power

1,904

3,328

Services

1,633

1,590

Ventures

61

65

Other

23

20

Total revenue

7,921

9,261

Business group income (loss):

Hydrocarbons

601

408

Infrastructure, Government and Power

(104

)

266

Services

(16

)

58

Ventures

37

42

Other

38

9

Total business group income

556

783

Unallocated costs:

Labor cost absorption

(35

)

18

General and administrative

(222

)

(214

)

Operating income

299

587

Interest expense, net

(7

)

(18

)

Foreign currency gains (losses), net

(2

)

3

Other non-operating expense

(2

)

-

Income before income taxes and noncontrolling interests

288

572

Provision for income taxes

(86

)

(32

)

Net income

202

540

Net income attributable to noncontrolling interests

(58

)

(60

)

Net income attributable to KBR

$

144

$

480

Net income attributable to KBR per share:

Basic

$

0.97

$

3.18

Diluted

0.97

3.16

Basic weighted average shares outstanding

148

150

Diluted weighted average shares outstanding

149

151

Cash dividends declared per share

$

0.28

$

0.20

KBR, Inc.: Condensed Consolidated Balance Sheets

(Millions) (Unaudited)

December 31,

December 31,

2012

2011

Assets

Current assets:

Cash and equivalents

$

1,053

$

966

Receivables:

Accounts receivable, net of allowance for bad debts of $15 and $24

1,196

1,200

Unbilled receivables on uncompleted contracts

704

454

Total receivables

1,900

1,654

Current Deferred income taxes

251

297

Other current assets

464

518

Total current assets

3,668

3,435

Property, plant and equipment, net of accumulated

depreciation of $356 and $364

390

384

Goodwill

779

951

Intangible assets, net

99

113

Equity in and advances to related companies

217

190

Noncurrent deferred tax asset

203

128

Noncurrent unbilled receivables on uncompleted contracts

294