KBR (NYSE:KBR) announced today that third quarter 2010 net
income attributable to KBR was $97 million, or $0.62 per diluted
share, compared to net income attributable to KBR of $73 million,
or $0.45 per diluted share, in the third quarter of 2009.
Consolidated revenue in the third quarter of 2010 was $2.5
billion compared to $2.8 billion in the third quarter of 2009.
Revenue for the third quarter of 2010 included an expected decrease
of $440 million for North America Government & Defense compared
to prior year third quarter, substantially related to LogCAP III.
Consolidated operating income was $163 million in the third quarter
of 2010 compared to $131 million in the third quarter of 2009.
Hydrocarbons business group revenue and job income in the third
quarter of 2010 was $974 million and $120 million, up $90 million
and $30 million, respectively, compared to the prior year third
quarter. The Infrastructure, Government, and Power (IGP) business
group revenue in the third quarter of 2010 was $983 million, down
$496 million compared to the prior year third quarter, primarily
related to reduced activity on LogCAP III. The IGP job income was
$115 million in the third quarter of 2010, down $30 million
compared to the prior year third quarter. Services revenue and job
income in the third quarter of 2010 was $480 million and $45
million, up $16 million and $6 million, respectively, compared to
the third quarter of 2009.
“I am pleased with KBR’s third quarter results, with earnings
per diluted share up 38% from last year’s third quarter. The
businesses continue to execute well on projects, with Hydrocarbons’
business group income up 43 percent and Services’ business unit
income up 24 percent,” said Bill Utt, Chairman, President, and
Chief Executive Officer of KBR. “The Services, I&M, and P&I
businesses continued to experience a slower recovery in their
respective markets; however, we are beginning to see activity
slowly picking up in these markets.”
Hydrocarbons Business Group Results
Gas Monetization job income was $59 million in the third quarter
of 2010 compared to job income of $40 million in the third quarter
of 2009. The increase in job income was related to increased work
on the Gorgon LNG project, partially offset by lower activity on
the Pearl GTL and Escravos GTL projects. During the third quarter
of 2010, KBR negotiated a final settlement agreement with one of
its commercial agents who provided services to various Gas
Monetization and Oil & Gas projects which resulted in a
non-cash gain in the third quarter of 2010. Also during the third
quarter of 2010, KBR identified increases in the forecast cost to
complete an LNG project primarily due to actions and inactions on
the part of the customer which resulted in a non-cash charge to job
income in the third quarter of 2010. KBR will pursue all available
remedies and mitigation actions which may reduce its exposure to
the estimated project cost increases in future periods. The net
impact of these two items to Hydrocarbons’ job income in the third
quarter of 2010 was negligible. The third quarter of 2009 included
approximately a $30 million charge on two LNG projects, which are
now commercially operational, related to equipment failures,
subcontractor claims, and schedule delays.
Oil and Gas job income was $24 million in the third quarter of
2010 compared to job income of $20 million in the third quarter of
2009. The increase in job income is primarily related to several
new projects and higher progress on existing projects, including
the CLOV FPSO, Bigfoot, Jack/St. Malo, and West Nile Delta
projects. Partially offsetting the increase was lower activity on
the North Rankin offshore platform project which is nearing
completion.
Downstream job income was $23 million in the third quarter of
2010 compared to job income of $16 million in the third quarter of
2009. The increase in job income was primarily related to increased
activity on the Lobito refinery in Angola and several projects in
the Middle East, including the Shaybah NGL and Yanbu export
refinery projects.
Technology job income was $14 million in the third quarter of
2010, flat compared to the third quarter of 2009.
Infrastructure, Government, and Power Business Group
Results
North America Government and Defense (NAGD) job income was $73
million in the third quarter of 2010 compared to job income of $82
million in the third quarter of 2009. The third quarter of 2010
included approximately $34 million in LogCAP III award fees for
work performed during the period of September 2009 through February
2010 for Iraq and from September 2009 through May 2010 for
Afghanistan. The decrease in job income was primarily related to
the overall lower volume on LogCAP III projects in Iraq, partially
offset by increased activities on the LogCAP IV contract. In
addition, the third quarter of 2009 included approximately $15
million in accrued LogCAP III award fees compared to no award fees
accrued for work performed during the third quarter of 2010, as
well as $17 million in income related to the reduction of a
previous charge related to the ASCO litigation.
International Government and Defense (IGD) job income was $22
million in the third quarter of 2010 compared to job income of $17
million in the third quarter of 2009. The increase in job income
was primarily related to warranty expirations on the Tier 3 Basra
project in Iraq and higher margins on the Allenby and Connaught
project.
Infrastructure and Minerals (I&M) job income was $14 million
in the third quarter of 2010 compared to job income of $24 million
in the third quarter of 2009. The decrease in job income was
related to the overall decrease on several Australian engineering
projects. Partially offsetting this decrease was higher volume on
the Hope Downs 4 mining project and a water project in
Australia.
Power and Industrial (P&I) job income was $6 million in the
third quarter of 2010 compared to job income of $22 million in the
third quarter of 2009. The decrease in job income was primarily
related to the completion of the Georgia Power and Proctor &
Gamble projects, lower volumes on the Red River project that is
nearing completion, as well as a gain in the third quarter of 2009
from the collection of a fully-reserved receivable on a completed
project.
Services Results
Services job income was $45 million in the third quarter of 2010
compared to job income of $39 million in the third quarter of 2009.
The increase in job income was driven by increased activity on the
multi-site DuPont maintenance project, growing contribution from
on-call construction projects, and the Hunt refining project in
Alabama, as well as favorable change orders on a power project in
the Southeast.
Ventures Results
Ventures job income was $7 million in the third quarter of 2010
compared to job income of $5 million in the third quarter of 2009.
The increase in job income was primarily related to improved
financial performance at the EBIC ammonia project as a result of
higher sales volume and increased ammonia prices, and the
consolidation of a heavy equipment transport project for the U.K.
military effective from January 1, 2010.
Corporate
Corporate general and administrative expense in the third
quarter of 2010 was $53 million compared to $54 million the prior
year third quarter.
Total cash provided by operating activities for the first nine
months of 2010 was $541 million, driven by overall earnings,
improvements in cash receipts in the Gas Monetization business
unit, a decline in LogCAP working capital requirements, as well as
the receipt of $94 million in award fees during the first nine
months of 2010.
Full Year 2010 Outlook
The KBR full-year 2010 earnings per diluted share guidance given
in July is $1.75 to $2.00. KBR now expects earnings per diluted
share to be in the upper half of that range.
Significant Achievements and Awards
- KBR announced that it was awarded a
contract to provide engineering, procurement management and
construction management (EPCM) for the Hope Downs 4 iron ore mine
in remote Western Australia. The scope of the project is valued at
$1.285 billion USD. KBR will provide design, engineering,
procurement management, project and construction management for the
15 million dry tonnes per annum (Mtpa) mine, which is located 620
miles (1000km) north of Perth, the capital city of Western
Australia. Construction is scheduled to begin in February 2011,
subject to regulatory approvals and be completed in early
2013.
- KBR announced it was awarded a contract
to execute the topsides detailed design for TOTAL’s CLOV floating
production, storage and offloading (FPSO) unit. This project is the
fourth development pole in Angola’s deep offshore Block 17 and lead
to four fields - Cravo, Lirio, Orquidea and Violeta – coming on
stream. In collaboration with Daewoo Shipbuilding & Marine Eng.
Co. Ltd. (DSME) – the engineering, procurement, installation and
construction contractor for the project – KBR will execute the
detailed engineering of topsides for the project, which is
estimated to produce reserves of approximately 500 million barrels
of oil. The facility will be designed to process approximately
160,000 barrels per day (BPD) of oil, 230 million standard cubic
feet per day (MMSCFD) of natural gas, and have a 1.8 million
barrels of oil (MMBBL) storage capacity.
- KBR announced that its affiliate,
Kellogg Brown and Root South Africa (Proprietary) Limited has
entered into a Broad-Based Black Economic Empowerment (BBBEE)
transaction that is another step in KBR’s continuing commitment to
the transformation of South Africa’s economy. This transaction
makes KBR the leading engineering and construction contractor in
South Africa in this regard, with an anticipated BBBEE rating at
Level 4 or better.
- KBR announced that it was awarded a $62
million contract to provide engineering and construction management
services for the construction of a new ceramic proppant
manufacturing line at the CARBO Ceramics Inc. plant in Toomsboro,
Georgia. The proppant manufacturing line is designed to produce
250-million pounds-per-year of product at completion. Construction
is expected to be completed before the end of 2011.
KBR is a global engineering, construction and services company
supporting the energy, hydrocarbon, government services, minerals,
civil infrastructure, power, and industrial 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 25, 2010, 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 September 30, September 30, June 30, 2010
2009 2010
Revenue: Hydrocarbons $ 974 $ 884 $ 1,004
Infrastructure, Government and Power 983 1,479 1,197 Services 480
464 452 Ventures 13 5 13 Other 5
8 5
Total revenue
2,455 2,840 2,671
Business unit income (loss): Hydrocarbons 93 65 116
Infrastructure, Government and Power 83 104 105 Services 26 21 25
Ventures 6 4 7 Other 5 (5 )
(1 )
Total business unit income
213 189 252
Unallocated costs: Loss on disposition of assets - corporate
(1 ) (1 ) (2 ) Labor cost absorption 4 (3 ) 4 Corporate general and
administrative (53 ) (54 )
(55 )
Operating income 163
131 199 Interest expense,
net (3 ) - (5 ) Foreign currency gains (losses), net 1 - (3 ) Other
non-operating expenses (1 ) (1 )
-
Income before income taxes and noncontrolling
interests 160 130 191 Provision for income taxes
(43 ) (33 ) (69 )
Net income 117
97 122 Net income attributable to noncontrolling interests
(20 ) (24 ) (16 )
Net income
attributable to KBR $ 97 $ 73
$ 106
Net income attributable to KBR per
share (a): Basic $ 0.62 $ 0.46 $ 0.66 Diluted $ 0.62 0.45 0.66
Basic weighted average shares outstanding 155 160 160
Diluted weighted average shares outstanding 156 161 161 Cash
dividends declared per share (b) $ 0.05 $ 0.05 $ 0.05
(a)
Due to the effect of rounding, the sum of
the individual per share amounts may not equal the total shown.
(b)
The dividend in the third quarter of 2010
was declared in July 2010 for shareholders of record as of
September 15, 2010.
KBR, Inc.: Condensed Consolidated
Statements of Income
(Millions, except per share data)
(Unaudited)
Nine Months Ended September 30, 2010 2009
Revenue:
Hydrocarbons $ 2,900 $ 2,701 Infrastructure, Government and Power
3,454 4,960 Services 1,347 1,437 Ventures 41 16 Other
15 27
Total
revenue 7,757
9,141
Business unit income (loss):
Hydrocarbons 285 225 Infrastructure, Government and Power 234 275
Services 72 64 Ventures 21 15 Other 5
(4 )
Total business unit income
617 575
Unallocated costs: Loss on disposition of assets -
corporate (3 ) (1 ) Labor cost absorption 4 (5 ) Corporate general
and administrative (157 )
(157 )
Operating income
461 412 Interest income
(expense), net (12 ) 1 Foreign currency gains (losses), net (4 ) 1
Other non-operating expenses (1 )
(2 )
Income before income taxes and
noncontrolling interests 444 412 Provision for income taxes
(146 ) (137 )
Net income 298 275 Net income attributable to noncontrolling
interests (49 )
(58 )
Net income attributable to KBR $
249 $ 217
Net income
attributable to KBR per share (a): Basic $ 1.57 $ 1.35 Diluted
1.56 1.35 Basic weighted average shares outstanding 158 160
Diluted weighted average shares outstanding 159 161 Cash
dividends declared per share (b) $ 0.10 $ 0.10
(a)
Due to the effect of rounding, the sum of
the individual per share amounts may not equal the total shown.
(b)
The dividend in the third quarter of 2010
was declared in July 2010 for shareholders of record as of
September 15, 2010.
KBR, Inc.: Condensed Consolidated Balance
Sheets
(Millions)
(Unaudited)
September 30, December 31, 2010 2009
Assets Current assets: Cash and equivalents $ 1,175 $
941 Receivables: Accounts receivable, net 1,383 1,243 Unbilled
receivables on uncompleted contracts 478
657 Total receivables 1,861 1,900 Deferred
income taxes 194 192 Other current assets 377
608
Total current assets 3,607 3,641
Property, plant and equipment, net of accumulated depreciation of
$326 and $264 348 251 Goodwill 697 691 Intangible assets, net 75 58
Equity in and advances to related companies 217 164 Noncurrent
deferred income taxes 117 120 Noncurrent unbilled receivables on
uncompleted contracts 321 321 Other assets 84
81
Total assets $ 5,466
$ 5,327
Liabilities and Shareholders'
Equity Current liabilities: Accounts payable $ 938 $
1,045 Due to former parent, net 49 53 Advanced billings on
uncompleted contracts 526 407 Reserve from estimated losses on
uncompleted contracts 29 40 Employee compensation and benefits 248
191 Current non-recourse project-finance debt of a variable
interest entity 9 - Other current liabilities 432 552 Current
liabilities related to discontinued operations, net -
3
Total current liabilities
2,231 2,291 Noncurrent employee compensation and benefits 451 469
Noncurrent non-recourse project-finance debt of a variable interest
entity 98 - Other noncurrent liabilities 106 106 Noncurrent income
taxes payable 113 43 Noncurrent deferred tax liability
119 122
Total liabilities
3,118 3,031
KBR
shareholders' equity Preferred stock - - Common stock - -
Paid-in-capital in excess of par value 2,111 2,103 Accumulated
other comprehensive loss (428 ) (444 ) Retained earnings 1,087 854
Treasury stock (439 ) (225 )
Total
KBR shareholders' equity 2,331 2,288 Noncontrolling interests
17 8
Total
shareholders' equity 2,348
2,296
Total liabilities and shareholders' equity
$ 5,466 $ 5,327
KBR, Inc.: Condensed Consolidated
Statements of Cash Flows
(Millions)
(Unaudited)
Nine Months Ended September 30, 2010
2009
Cash flows from operating activities: Net income
$ 298 $ 275 Adjustments to reconcile net income to net cash
provided by (used in) operations: Depreciation and amortization 45
41 Equity earnings of unconsolidated affiliates (99 ) (46 )
Deferred income taxes (9 ) (14 ) Impairment of goodwill - 6 Other
31 10 Changes in operating assets and liabilities: Receivables (151
) (191 ) Unbilled receivables on uncompleted contracts 168 94
Accounts payable (125 ) (233 ) Advanced billings on uncompleted
contracts 137 (68 )
Accrued employee compensation and
benefits
59 (24 )
Reserve for loss on uncompleted
contracts
(11 ) (23 ) Repayment of advances to unconsolidated affiliates, net
(5 ) (1 ) Distribution of earnings from unconsolidated affiliates
45 35 Other assets 61 25 Other liabilities 97
87
Total cash flows provided by
(used in) operating activities 541
(27 )
Cash flows from investing activities:
Capital expenditures (39 ) (22 ) Investment in equity method joint
ventures (14 ) - Investment in licensing arrangement (20 ) -
Acquisition of business, net of cash acquired (10 ) - Other
investing activities - 2
Total cash flows used in investing activities
(83 ) (20 )
Cash flows from
financing activities: Payments to reacquire common stock (217 )
(27 ) Payments of dividends to shareholders (24 ) (24 )
Distributions to noncontrolling shareholders, net (37 ) (30 ) Net
proceeds from issuance of stock 3 1 Excess tax benefits from
stock-based compensation - (1 ) Payments on short-term and
long-term borrowings (9 ) - Return (funding) of cash collateral on
letters of credit, net 26
(11 )
Total cash flows used in financing activities
(258 ) (92 ) Effect of exchange rate
changes on cash 12 14 Increase (decrease) in cash and equivalents
212 (125 ) Cash increase due to consolidation of a variable
interest entity 22 -
Cash and equivalents at beginning of period
941 1,145
Cash and
equivalents at end of period $ 1,175
$ 1,020
KBR, Inc.: Revenue and Operating Results
by Business Unit
(Millions)
(Unaudited)
Three Months Ended September 30, September 30, June 30,
Revenue: 2010 2009 2010
Hydrocarbons: Gas Monetization $ 698 $ 641 $ 708 Oil and Gas 107 95
104 Downstream 139 121 157 Technology 30
27 35 Total
Hydrocarbons 974 884
1,004 Infrastructure, Government
and Power North America Government and Defense 753 1,193 926
International Government and Defense 87 71 103 Infrastructure and
Minerals 64 86 64 Power and Industrial 79
129 104
Total Infrastructure, Government and Power 983
1,479 1,197
Services 480 464 452 Ventures 13 5 13 Other 5
8 5
Total revenue $ 2,455 $ 2,840
$ 2,671
Business unit income
(loss): Hydrocarbons: Gas Monetization $ 59 $ 40 $ 83 Oil and
Gas 24 20 13 Downstream 23 16 28 Technology 14
14 17 Total
job income 120 90 141 Gain on disposition of assets - - 1 Division
overhead (27 ) (25 )
(26 ) Total Hydrocarbons business group income
93 65
116 Infrastructure, Government and Power:
North America Government and Defense 73 82 92 International
Government and Defense 22 17 22 Infrastructure and Minerals 14 24
15 Power and Industrial 6
22 15 Total job income 115 145
144 Division overhead (32 ) (41
) (39 ) Total IGP business group income
83 104
105 Services: Job income 45 39 43 Loss on
disposition of assets - - (1 ) Division overhead (19
) (18 ) (17 ) Total
Services business unit income 26
21 25 Ventures:
Job income 7 5 8 Division overhead (1 )
(1 ) (1 ) Total Ventures business unit
income 6 4
7 Other: Job income 6 2 2 Impairment of
goodwill - (6 ) - Division overhead (1 )
(1 ) (3 ) Total Other business
unit income 5 (5 )
(1 )
Total business unit income $ 213
$ 189 $ 252
KBR, Inc.: Revenue and Operating Results
by Business Unit
(Millions)
(Unaudited)
Nine Months Ended September 30,
Revenue: 2010
2009 Hydrocarbons: Gas Monetization $ 2,081 $
1,976 Oil and Gas 295 297 Downstream 429 358 Technology
95 70 Total
Hydrocarbons 2,900
2,701 Infrastructure, Government and Power North America
Government and Defense 2,689 4,150 International Government and
Defense 284 208 Infrastructure and Minerals 201 258 Power and
Industrial 280 344
Total Infrastructure, Government and Power
3,454 4,960 Services
1,347 1,437 Ventures 41 16 Other 15
27
Total revenue $ 7,757
$ 9,141
Business unit
income (loss): Hydrocarbons: Gas Monetization $ 195 $ 155 Oil
and Gas 53 64 Downstream 73 42 Technology 43
34 Total job income 364 295 Gain
on disposition of assets 1 - Division overhead (80 )
(70 ) Total Hydrocarbons business group
income 285 225
Infrastructure, Government and Power: North America
Government and Defense 201 225 International Government and Defense
62 52 Infrastructure and Minerals 47 68 Power and Industrial
35 42 Total job
income 345 387 Division overhead (111 )
(112 ) Total IGP business group income
234 275 Services:
Job income 125 116 Loss on disposition of assets (1 ) - Division
overhead (52 ) (52 )
Total Services business unit income 72
64 Ventures: Job income 24 15
Gain on sale of assets - 2 Division overhead (3 )
(2 ) Total Ventures business unit
income 21 15
Other: Job income 10 7 Impairment of goodwill - (6 )
Division overhead (5 ) (5
) Total Other business unit income 5
(4 )
Total business unit income
$ 617 $ 575
KBR, Inc. Backlog Information(a)
(Millions)
(Unaudited)
September 30, June 30, December 31, 2010
2010 2009 Hydrocarbons: Gas Monetization $ 5,858 $
5,899 $ 6,976 Oil and Gas 246 228 109 Downstream 470 425 535
Technology 185 194 154
Total Hydrocarbons 6,759 6,746
7,774 Infrastructure, Government and Power: North
America Government and Defense 1,115 987 1,341 International
Government and Defense 1,229 1,231 1,427 Infrastructure and
Minerals 139 133 167 Power and Industrial 215
239 338 Total Infrastructure, Government and
Power 2,698 2,590 3,273
Services 2,051 2,307 2,302 Ventures 820
780 749
Total backlog(b)
$ 12,328 $ 12,423 $ 14,098 (a) Backlog
is presented differently depending on if 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 related
to unconsolidated joint ventures is presented as KBR’s percentage
ownership of the joint venture’s revenue. However, because these
projects are accounted for under the equity method, only KBR’s
share of future earnings from these projects will be recorded in
revenue. Our backlog for projects related to unconsolidated joint
ventures totaled $1.9 billion, $1.9 billion and $2.1 billion at
September 30, 2010, June 30, 2010 and December 31, 2009,
respectively. Our backlog related to consolidated joint ventures
with noncontrolling interest totaled $4.3 billion, $4.1 billion and
$4.6 billion at September 30, 2010, June 30, 2010 and December 31,
2009, respectively.
As of September 30, 2010, 21% of our
backlog was attributable to fixed-price contracts and 79% 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 September
30, 2010, June 30, 2010, and December 31, 2009. (b)
Backlog attributable to unfunded
government orders was $0.1 billion, $0.2 billion and $0.3 billion
as of September 30, 2010, June 30, 2010 and December 31, 2009,
respectively.
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