HOUSTON, TX --(Marketwired - February 24, 2017) -
- Strategic transformation nears completion
- Pivoting to a higher margin global professional services company with positive outlook into 2017 and beyond
- Significant risk reduction through resolution of legacy legal and commercial matters
KBR, Inc. (NYSE: KBR), a global provider of differentiated, professional services
and technologies across the asset and program life cycle within the government services and hydrocarbons industries today
announced fourth quarter and fiscal 2016 financial results.
Consolidated revenue in the fourth quarter of 2016 was $1.2 billion compared to $1.1 billion in the fourth quarter of 2015.
Net loss attributable to KBR was $87 million or $(0.61) per diluted share and $(0.59) per diluted share on an adjusted basis
excluding U.S. Government legacy legal fees of $3 million. This compares to net income of $42 million or $0.29 per diluted share
and $0.33 per diluted share on an adjusted basis excluding $5 million in U.S. Government legacy legal fees in the fourth quarter
of 2015.
Revenue in the fourth quarter increased from the same period a year ago due to the recent acquisitions in the Government
Services segment and organic growth from contracts with the U.S. Military. The loss during the quarter was driven primarily by a
reduction in gross profit from a $94 million increase in the forecast costs to complete a downstream EPC project, a reduction in
the percentage of completion estimated on an LNG project joint venture in Australia which impacted timing of profit recognition,
and restructuring charges. These factors were offset in part by growth in the Government Services business and steady earnings
from the Technology & Consulting segment.
"While the overall financial results in 2016 were below expectations, we took actions during the year which have positioned
the Company to successfully execute our strategy and grow earnings in the long-term," said Stuart Bradie, President and Chief
Executive Officer of KBR, Inc. "Last year was pivotal for KBR with significant highlights such as the completion of several
strategic acquisitions: we acquired two well established and highly technical government services companies, a small portfolio of
complementary technologies, and a specialty welding and turnarounds company through our Brown & Root joint venture. These
acquisitions furthered our long-term strategy to position KBR as a global leader in differentiated professional services, and to
do so under an increasingly lower risk, reimbursable-type contract portfolio. These businesses have historically provided stable
earnings and cash flows, which should offset the volatility of our financial results associated with large EPC projects
traditionally executed by our Engineering & Construction segment. The steady earnings and cash flows also provide us with the
financial flexibility to be selective in determining which large EPC prospects we pursue in the future," said Bradie.
"During the fourth quarter, we also resolved a number of outstanding commercial issues and made significant progress in
resolving several legal matters including engaging in advanced discussions between Commisa and PEP to settle our legal claim
subject to final approval by the parties. Additionally, we resolved several legal matters from the legacy LogCAP III contract,
and made significant progress in resolving the SEC investigation and related class action lawsuits related to the restatement of
our 2013 financial statements," Bradie continued.
"In 2017, we forecast that over 70% of our revenue will come from work executed under services and reimbursable-type
contracts. We also expect to be more competitive in our markets after eliminating annualized costs in excess of $200 million over
the past two years. Finally, we made significant progress toward completion of our last domestic EPC power project, which is the
final step in exiting the fixed price EPC power business. All of these strategic actions, coupled with key new awards in the
Government Services segment during the year, have positioned the Company for stronger long-term earnings growth, and greater free
cash flow going forward," Bradie said.
Business Discussion (All comparisons are fourth quarter 2016 versus fourth quarter 2015 unless otherwise
noted.)
Government Services (GS) Results
Government Services revenue was $519 million, an increase of $345 million, and gross profit was $43 million, an increase of
$49 million from the prior year. These increases were primarily due to a full-quarter's impact of the acquisitions of Wyle and
Honeywell's Technical Services business, which both closed during the third quarter of 2016, as well as from expansion of
existing U.S. government contracts and task orders supporting the U.S. Military.
Equity in earnings of unconsolidated affiliates was $10 million, up slightly from the prior year. The majority of the equity
in earnings for the Government Services segment is related to support of the U.K. government through joint venture annuity-type
contracts. These earnings are expected to grow significantly in 2017 and beyond due to the start-up of two long-term major
contracts that were awarded in 2016: UKMFTS and Army 2020 which extend for 18 years and 23 years respectively, with a combined
award value of almost $1 billion.
The recent acquisitions along with the heritage KBR U.S. Government business now face the market under a single brand:
KBRwyle. This brand along with the support KBR provides to the governments in the U.K. and Australia delivers offerings and a
strong competitive position that span the full spectrum of government mission requirements including research and development,
program management and integration, testing, engineering, logistics, deployed operations, and life-cycle sustainment
globally.
Technology & Consulting (T&C) Results
Technology & Consulting's revenue decreased by $8 million to $85 million in the fourth quarter of 2016 while gross profit was
$24 million; $4 million greater than the prior year. Gross profit margin in the fourth quarter was 28% and 21% for the full-year
2016, which reflected a change in the mix of projects in the second half of 2016 with more execution of engineering and licensing
activities which tend to have higher margins than sales of proprietary equipment that were a significant driver of results in the
first half of 2016. We continue to expect the long-term margin percentages for this business to be in the low twenties but actual
results may fluctuate between quarters depending on the mix of higher margin licensing and/or engineering services versus the
supply of lower-margin proprietary equipment.
During 2016, the majority of the revenue and earnings in this segment was driven by the mainly downstream-focused technology
portfolio as the upstream oil consulting portion of the T&C business continued to be challenged by reduced business volume
resulting from low oil prices. The consulting sector appears to be gaining momentum through increased activity on smaller
upstream studies and projects which typically precede larger investment decisions by the major oil and gas companies.
Engineering & Construction (E&C) Results
In the fourth quarter of 2016, E&C's revenue was $530 million, a decrease of $166 million from the same period in the
prior year, mainly due to reduced activity on several projects and the near-completion of one of the major LNG projects in
Australia. The E&C segment had a gross loss of $58 million, down $127 million from the prior year. The reduction in gross
profit was predominantly due to a $94 million increase in the forecast costs to complete a downstream EPC project in the U.S. due
to significant weather delays and lower than previously forecast construction productivity. This is the final legacy lump sum
domestic EPC project remaining in the E&C portfolio.
Equity in earnings of unconsolidated affiliates was less than $1 million, down $17 million primarily due to a reduction in the
percentage of completion estimated on an LNG project joint venture in Australia where increased forecast reimbursable costs
delayed profit recognition to future periods. The results during the quarter also included transaction costs related to our Brown
& Root joint venture's acquisition and slower activity on our offshore maintenance joint venture in Mexico.
Looking forward, KBR's E&C business remains well placed to take advantage of the next cycle of modular and mid-scale LNG
opportunities in North America and elsewhere, to grow the Industrial Services business globally (operations and maintenance
services as well as small CapEx / turnaround projects) and to selectively pursue large hydrocarbons projects provided they meet
the appropriate risk/return profile.
Non-strategic Business (NSB) Results
Non-strategic Business' revenue was $56 million, down $61 million from the prior year, primarily due to the completion of two
power projects in 2015 and as the last power project in the portfolio nears completion. The segment had a gross loss of $3
million in the quarter. As previously announced, this is the last power project remaining before we completely exit the
fixed-priced EPC power business. This project is expected to be complete in the second quarter of 2017.
2017 Guidance
The company expects 2017 revenues to be comparable to 2016 as increases in activities within the Government Services segment
should offset E&C market challenges. The company initiates 2017 fully diluted earnings per share guidance with a range of
$1.10 to $1.40 per share. Guidance excludes legal costs associated with legacy U.S. Government contracts which are expected to be
approximately $9 million, or $0.07 per fully diluted share in 2017. The estimated legacy legal fees do not assume any cost
reimbursement from the U.S. Government that could occur in the future. The upper end of this guidance range includes the
estimated net benefit from a potential settlement with PEP. The expected EBITDA range for 2017, which is on the same basis as the
EPS guidance, is $300-$350 million. Over 70% of our projected earnings is expected from contracts already secured in our backlog
at year-end 2016. Our estimated annual effective tax rate for 2017 is projected to be approximately 27% given the mix of earnings
in the various tax jurisdictions in which KBR conducts business.
About KBR, Inc.
KBR is a global provider of differentiated professional services and technologies across the asset and program life cycle
within the Government Services and Hydrocarbons sectors. KBR employs almost 37,000 people worldwide, with customers in more than
80 countries, and operations in 40 countries, across three synergistic global businesses:
- Government Services, serving government customers globally, including capabilities that cover the full life-cycle of
defense, space, aviation and other government programs and missions from research and development, through systems engineering,
test and evaluation, program management, to operations, maintenance, and field logistics
- Technology & Consulting, including proprietary technology focused on the monetization of hydrocarbons (especially natural
gas and natural gas liquids) in ethylene and petrochemicals; ammonia, nitric acid and fertilizers; oil refining; gasification;
oil and gas consulting; integrity management; naval architecture and proprietary hulls; and downstream consulting
- Engineering & Construction, including onshore oil and gas; LNG (liquefaction and regasification)/GTL; oil refining;
petrochemicals; chemicals; fertilizers; differentiated EPC; maintenance services (Brown & Root Industrial Services); offshore
oil and gas (shallow-water, deep-water, subsea); floating solutions (FPU, FPSO, FLNG & FSRU) and program management
KBR is proud to work with its customers across the globe to provide technology, value-added services, integrated EPC delivery
and long term operations and maintenance services to ensure consistent delivery with predictable results. At KBR, We
Deliver.
Visit www.kbr.com
Forward Looking Statement
The statements in this press release that are not historical statements, including statements regarding future financial
performance, 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 its former parent; 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 most recently filed Annual Report on Form 10-K, any subsequent Form 10-Qs and 8-Ks, 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. Except as required by law, KBR undertakes no obligation to revise or update publicly any
forward-looking statements for any reason.
| |
|
| |
|
| KBR, Inc.: Consolidated Statements of Operations |
|
| (In millions, except for per share data) |
|
| (Unaudited) |
|
| |
|
| |
|
Three Months Ended |
|
| |
|
December 31, |
|
|
|
December 31, |
|
| |
|
2016 |
|
|
|
2015 |
|
| Revenues: |
|
|
|
|
|
|
|
|
|
| Government Services |
|
$ |
519 |
|
|
|
$ |
174 |
|
| Technology & Consulting |
|
|
85 |
|
|
|
|
93 |
|
| Engineering & Construction |
|
|
530 |
|
|
|
|
696 |
|
| |
Subtotal |
|
|
1,134 |
|
|
|
|
963 |
|
| Non-strategic Business |
|
|
56 |
|
|
|
|
117 |
|
| Total revenues |
|
$ |
1,190 |
|
|
|
$ |
1,080 |
|
| Gross profit (loss): |
|
|
|
|
|
|
|
|
|
| Government Services |
|
$ |
43 |
|
|
|
$ |
(6 |
) |
| Technology & Consulting |
|
|
24 |
|
|
|
|
20 |
|
| Engineering & Construction |
|
|
(58 |
) |
|
|
|
69 |
|
| |
Subtotal |
|
|
9 |
|
|
|
|
83 |
|
| Non-strategic Business |
|
|
(3 |
) |
|
|
|
11 |
|
| Total gross profit |
|
$ |
6 |
|
|
|
$ |
94 |
|
| Equity in earnings of unconsolidated affiliates: |
|
|
|
|
|
|
|
|
|
| Government Services |
|
$ |
10 |
|
|
|
$ |
9 |
|
| Technology & Consulting |
|
|
- |
|
|
|
|
- |
|
| Engineering & Construction |
|
|
- |
|
|
|
|
17 |
|
| |
Subtotal |
|
|
10 |
|
|
|
|
26 |
|
| Non-strategic Business |
|
|
- |
|
|
|
|
- |
|
| Total equity in earnings of unconsolidated affiliates |
|
$ |
10 |
|
|
|
$ |
26 |
|
| General and administrative expenses |
|
|
(32 |
) |
|
|
|
(36 |
) |
| Asset impairment and restructuring charges |
|
|
(18 |
) |
|
|
|
(36 |
) |
| Gain on disposition of assets |
|
|
1 |
|
|
|
|
27 |
|
| Operating income (loss) |
|
$ |
(33 |
) |
|
|
$ |
75 |
|
| Other non-operating income (expense) |
|
|
4 |
|
|
|
|
(2 |
) |
| Income (loss) before income taxes and noncontrolling interests |
|
$ |
(29 |
) |
|
|
$ |
73 |
|
| Provision for income taxes |
|
|
(57 |
) |
|
|
|
(25 |
) |
| Net income (loss) |
|
$ |
(86 |
) |
|
|
$ |
48 |
|
| Net income attributable to noncontrolling interests |
|
|
(1 |
) |
|
|
|
(6 |
) |
| Net income (loss) attributable to KBR |
|
$ |
(87 |
) |
|
|
$ |
42 |
|
| |
|
|
|
|
|
|
|
|
|
| Net income (loss) attributable to KBR per share: |
|
|
|
|
|
|
|
|
|
| Basic |
|
$ |
(0.61 |
) |
|
|
$ |
0.29 |
|
| Diluted |
|
$ |
(0.61 |
) |
|
|
$ |
0.29 |
|
| |
|
|
|
|
|
|
|
|
|
| Basic weighted average common shares outstanding |
|
|
142 |
|
|
|
|
144 |
|
| Diluted weighted average common shares outstanding |
|
|
142 |
|
|
|
|
144 |
|
| |
|
|
|
|
|
|
|
|
|
| Cash dividends declared per share |
|
$ |
0.08 |
|
|
|
$ |
0.08 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| |
|
| KBR, Inc.: Consolidated Statements of Operations |
|
| (In millions, except for per share data) |
|
| |
|
| |
|
|
Twelve Months Ended |
|
| |
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
| |
|
|
2016 |
|
|
2015 |
|
|
2014 |
|
| Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Government Services |
|
|
$ |
1,359 |
|
|
$ |
663 |
|
|
$ |
638 |
|
| Technology & Consulting |
|
|
|
347 |
|
|
|
324 |
|
|
|
353 |
|
| Engineering & Construction |
|
|
|
2,352 |
|
|
|
3,454 |
|
|
|
4,584 |
|
| |
Subtotal |
|
|
|
4,058 |
|
|
|
4,441 |
|
|
|
5,575 |
|
| Non-strategic Business |
|
|
|
210 |
|
|
|
655 |
|
|
|
791 |
|
| Total revenues |
|
|
$ |
4,268 |
|
|
$ |
5,096 |
|
|
$ |
6,366 |
|
| Gross profit (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Government Services |
|
|
$ |
137 |
|
|
$ |
(3 |
) |
|
$ |
(32 |
) |
| Technology & Consulting |
|
|
|
73 |
|
|
|
77 |
|
|
|
53 |
|
| Engineering & Construction |
|
|
|
7 |
|
|
|
224 |
|
|
|
141 |
|
| |
Subtotal |
|
|
|
217 |
|
|
|
298 |
|
|
|
162 |
|
| Non-strategic Business |
|
|
|
(105 |
) |
|
|
27 |
|
|
|
(227 |
) |
| Total gross profit (loss) |
|
|
$ |
112 |
|
|
$ |
325 |
|
|
$ |
(65 |
) |
| Equity in earnings of unconsolidated affiliates: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Government Services |
|
|
$ |
39 |
|
|
$ |
45 |
|
|
$ |
73 |
|
| Technology & Consulting |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Engineering & Construction |
|
|
|
52 |
|
|
|
104 |
|
|
|
90 |
|
| |
Subtotal |
|
|
|
91 |
|
|
|
149 |
|
|
|
163 |
|
| Non-strategic Business |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| Total equity in earnings of unconsolidated affiliates |
|
|
$ |
91 |
|
|
$ |
149 |
|
|
$ |
163 |
|
| General and administrative expenses |
|
|
|
(143 |
) |
|
|
(155 |
) |
|
|
(239 |
) |
| Impairment of goodwill |
|
|
|
- |
|
|
|
- |
|
|
|
(446 |
) |
| Asset impairment and restructuring charges |
|
|
|
(39 |
) |
|
|
(70 |
) |
|
|
(214 |
) |
| Gain on disposition of assets |
|
|
|
7 |
|
|
|
61 |
|
|
|
7 |
|
| Operating income (loss) |
|
|
$ |
28 |
|
|
$ |
310 |
|
|
$ |
(794 |
) |
| Other non-operating income |
|
|
|
5 |
|
|
|
2 |
|
|
|
17 |
|
| Income (loss) before income taxes and noncontrolling interests |
|
|
$ |
33 |
|
|
$ |
312 |
|
|
$ |
(777 |
) |
| Provision for income taxes |
|
|
|
(84 |
) |
|
|
(86 |
) |
|
|
(421 |
) |
| Net income (loss) |
|
|
$ |
(51 |
) |
|
$ |
226 |
|
|
$ |
(1,198 |
) |
| Net income attributable to noncontrolling interests |
|
|
|
(10 |
) |
|
|
(23 |
) |
|
|
(64 |
) |
| Net income (loss) attributable to KBR |
|
|
$ |
(61 |
) |
|
$ |
203 |
|
|
$ |
(1,262 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) attributable to KBR per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
|
$ |
(0.43 |
) |
|
$ |
1.40 |
|
|
$ |
(8.66 |
) |
| Diluted |
|
|
$ |
(0.43 |
) |
|
$ |
1.40 |
|
|
$ |
(8.66 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic weighted average common shares outstanding |
|
|
|
142 |
|
|
|
144 |
|
|
|
146 |
|
| Diluted weighted average common shares outstanding |
|
|
|
142 |
|
|
|
144 |
|
|
|
146 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash dividends declared per share |
|
|
$ |
0.32 |
|
|
$ |
0.32 |
|
|
$ |
0.32 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
| KBR, Inc.: Consolidated Balance Sheets |
|
| (In millions) |
|
| |
|
| |
|
December 31, |
|
|
|
December 31, |
|
| |
|
2016 |
|
|
|
2015 |
|
| Assets |
|
|
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
|
|
| Cash and equivalents |
|
$ |
536 |
|
|
|
$ |
883 |
|
| Accounts receivable, net of allowance for doubtful accounts of $14 and $17 |
|
|
592 |
|
|
|
|
628 |
|
| Costs and estimated earnings in excess of billings on uncompleted contracts ("CIE") |
|
|
416 |
|
|
|
|
224 |
|
| Claims receivable |
|
|
400 |
|
|
|
|
- |
|
| Other current assets |
|
|
103 |
|
|
|
|
109 |
|
| Total current assets |
|
|
2,047 |
|
|
|
|
1,844 |
|
| Claims and accounts receivable |
|
|
131 |
|
|
|
|
526 |
|
| Property, plant, and equipment, net of accumulated depreciation of $324 and $352 (including net PPE of $36
and $48 owned by a variable interest entity) |
|
|
145 |
|
|
|
|
169 |
|
| Goodwill |
|
|
959 |
|
|
|
|
324 |
|
| Intangible assets, net of accumulated amortization of $100 and $91 |
|
|
248 |
|
|
|
|
35 |
|
| Equity in and advances to unconsolidated affiliates |
|
|
369 |
|
|
|
|
281 |
|
| Deferred income taxes |
|
|
118 |
|
|
|
|
99 |
|
| Other assets |
|
|
127 |
|
|
|
|
134 |
|
| Total assets |
|
$ |
4,144 |
|
|
|
$ |
3,412 |
|
| |
|
|
|
|
|
|
|
|
|
| Liabilities and Shareholders' Equity |
|
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
|
| Accounts payable |
|
$ |
535 |
|
|
|
$ |
438 |
|
| Billings in excess of costs and estimated earnings on uncompleted contracts ("BIE") |
|
|
552 |
|
|
|
|
509 |
|
| Accrued salaries, wages and benefits |
|
|
171 |
|
|
|
|
173 |
|
| Nonrecourse project debt |
|
|
9 |
|
|
|
|
10 |
|
| Other current liabilities |
|
|
292 |
|
|
|
|
263 |
|
| Total current liabilities |
|
|
1,559 |
|
|
|
|
1,393 |
|
| Pension obligations |
|
|
526 |
|
|
|
|
333 |
|
| Employee compensation and benefits |
|
|
113 |
|
|
|
|
105 |
|
| Income tax payable |
|
|
78 |
|
|
|
|
78 |
|
| Deferred income taxes |
|
|
149 |
|
|
|
|
94 |
|
| Nonrecourse project debt |
|
|
34 |
|
|
|
|
51 |
|
| Revolving credit agreement |
|
|
650 |
|
|
|
|
- |
|
| Deferred income from unconsolidated affiliates |
|
|
90 |
|
|
|
|
100 |
|
| Other liabilities |
|
|
200 |
|
|
|
|
206 |
|
| Total liabilities |
|
|
3,399 |
|
|
|
|
2,360 |
|
| KBR shareholders' equity: |
|
|
|
|
|
|
|
|
|
| Preferred stock |
|
|
- |
|
|
|
|
- |
|
| Common stock |
|
|
- |
|
|
|
|
- |
|
| Paid-in capital in excess of par ("PIC") |
|
|
2,088 |
|
|
|
|
2,070 |
|
| Accumulated other comprehensive loss ("AOCL") |
|
|
(1,050 |
) |
|
|
|
(831 |
) |
| Retained earnings |
|
|
488 |
|
|
|
|
595 |
|
| Treasury stock |
|
|
(769 |
) |
|
|
|
(769 |
) |
| Total KBR shareholders' equity |
|
|
757 |
|
|
|
|
1,065 |
|
| Noncontrolling interests ("NCI") |
|
|
(12 |
) |
|
|
|
(13 |
) |
| Total shareholders' equity |
|
|
745 |
|
|
|
|
1,052 |
|
| Total liabilities and shareholders' equity |
|
$ |
4,144 |
|
|
|
$ |
3,412 |
|
| |
|
| |
|
| KBR, Inc.: Consolidated Statements of Cash Flows |
|
| (In millions) |
|
| |
|
| |
|
|
Twelve Months Ended |
|
| |
|
|
December 31, |
|
|
|
December 31, |
|
| |
|
|
2016 |
|
|
|
2015 |
|
| Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
|
$ |
(51 |
) |
|
|
$ |
226 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
| |
Depreciation and amortization |
|
|
|
45 |
|
|
|
|
39 |
|
| |
Equity in earnings of unconsolidated affiliates |
|
|
|
(91 |
) |
|
|
|
(149 |
) |
| |
Deferred income tax expense |
|
|
|
18 |
|
|
|
|
14 |
|
| |
Gain on disposition of assets |
|
|
|
(7 |
) |
|
|
|
(61 |
) |
| |
Asset impairment |
|
|
|
16 |
|
|
|
|
31 |
|
| |
Other |
|
|
|
3 |
|
|
|
|
21 |
|
| Changes in operating assets and liabilities, net of acquired businesses: |
|
|
|
|
|
|
|
|
|
|
| |
Accounts receivable, net of allowance for doubtful accounts |
|
|
|
121 |
|
|
|
|
41 |
|
| |
Costs and estimated earnings in excess of billings on uncompleted contracts |
|
|
|
8 |
|
|
|
|
224 |
|
| |
Accounts payable |
|
|
|
(6 |
) |
|
|
|
(274 |
) |
| |
Billings in excess of costs and estimated earnings on uncompleted contracts |
|
|
|
33 |
|
|
|
|
(2 |
) |
| |
Accrued salaries, wages and benefits |
|
|
|
(50 |
) |
|
|
|
(8 |
) |
| |
Reserve for loss on uncompleted contracts |
|
|
|
(5 |
) |
|
|
|
(94 |
) |
| |
(Advances to) payments from unconsolidated affiliates, net |
|
|
|
(1 |
) |
|
|
|
10 |
|
| |
Distributions of earnings from unconsolidated affiliates |
|
|
|
56 |
|
|
|
|
92 |
|
| |
Income taxes payable |
|
|
|
(52 |
) |
|
|
|
26 |
|
| |
Pension funding |
|
|
|
(41 |
) |
|
|
|
(48 |
) |
| |
Retainage payable |
|
|
|
(2 |
) |
|
|
|
(2 |
) |
| |
Subcontractor advances |
|
|
|
8 |
|
|
|
|
(12 |
) |
| |
Net settlement of derivative contracts |
|
|
|
(9 |
) |
|
|
|
(44 |
) |
| |
Other assets and liabilities |
|
|
|
68 |
|
|
|
|
17 |
|
| Total cash flows provided by operating activities |
|
|
|
61 |
|
|
|
|
47 |
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
| Purchases of property, plant and equipment |
|
|
|
(11 |
) |
|
|
|
(10 |
) |
| Payments for investments in equity method joint ventures |
|
|
|
(61 |
) |
|
|
|
(19 |
) |
| Proceeds from sale of assets or investments |
|
|
|
2 |
|
|
|
|
130 |
|
| Acquisition of businesses, net of cash acquired |
|
|
|
(911 |
) |
|
|
|
- |
|
| Total cash flows (used in) provided by investing activities |
|
|
|
(981 |
) |
|
|
|
101 |
|
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
| Payments to reacquire common stock |
|
|
|
(4 |
) |
|
|
|
(62 |
) |
| Acquisition of noncontrolling interest |
|
|
|
- |
|
|
|
|
(40 |
) |
| Distributions to noncontrolling interests |
|
|
|
(9 |
) |
|
|
|
(28 |
) |
| Payments of dividends to shareholders |
|
|
|
(46 |
) |
|
|
|
(47 |
) |
| Net proceeds from issuance of common stock |
|
|
|
- |
|
|
|
|
1 |
|
| Excess tax benefits from share-based compensation |
|
|
|
1 |
|
|
|
|
- |
|
| Borrowings on revolving credit agreement |
|
|
|
700 |
|
|
|
|
- |
|
| Payments on revolving credit agreement |
|
|
|
(50 |
) |
|
|
|
- |
|
| Payments on short-term and long-term borrowings |
|
|
|
(9 |
) |
|
|
|
(11 |
) |
| Other |
|
|
|
1 |
|
|
|
|
(5 |
) |
| Total cash flows provided by (used in) financing activities |
|
|
|
584 |
|
|
|
|
(192 |
) |
| Effect of exchange rate changes on cash |
|
|
|
(11 |
) |
|
|
|
(43 |
) |
| Decrease in cash and equivalents |
|
|
|
(347 |
) |
|
|
|
(87 |
) |
| Cash and equivalents at beginning of period |
|
|
|
883 |
|
|
|
|
970 |
|
| Cash and equivalents at end of period |
|
|
$ |
536 |
|
|
|
$ |
883 |
|
| |
|
| |
|
| KBR, Inc.: Consolidated Statements of Cash Flows |
|
| (In millions) |
|
| (Unaudited) |
|
| |
|
| |
|
|
Three Months Ended |
|
| |
|
|
December 31, |
|
|
|
December 31, |
|
| |
|
|
2016 |
|
|
|
2015 |
|
| Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
|
$ |
(86 |
) |
|
|
$ |
48 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
| |
Depreciation and amortization |
|
|
|
14 |
|
|
|
|
10 |
|
| |
Equity in earnings of unconsolidated affiliates |
|
|
|
(10 |
) |
|
|
|
(26 |
) |
| |
Deferred income tax expense |
|
|
|
11 |
|
|
|
|
- |
|
| |
Gain on disposition of assets |
|
|
|
(1 |
) |
|
|
|
(27 |
) |
| |
Asset impairment |
|
|
|
11 |
|
|
|
|
19 |
|
| |
Other |
|
|
|
(2 |
) |
|
|
|
4 |
|
| Changes in operating assets and liabilities, net of acquired businesses: |
|
|
|
|
|
|
|
|
|
|
| |
Accounts receivable, net of allowance for doubtful accounts |
|
|
|
112 |
|
|
|
|
60 |
|
| |
Costs and estimated earnings in excess of billings on uncompleted contracts |
|
|
|
(17 |
) |
|
|
|
56 |
|
| |
Accounts payable |
|
|
|
(45 |
) |
|
|
|
(35 |
) |
| |
Billings in excess of costs and estimated earnings on uncompleted contracts |
|
|
|
19 |
|
|
|
|
8 |
|
| |
Accrued salaries, wages and benefits |
|
|
|
(31 |
) |
|
|
|
(3 |
) |
| |
Reserve for loss on uncompleted contracts |
|
|
|
10 |
|
|
|
|
6 |
|
| |
Payments from unconsolidated affiliates, net |
|
|
|
2 |
|
|
|
|
- |
|
| |
Distributions of earnings from unconsolidated affiliates |
|
|
|
13 |
|
|
|
|
8 |
|
| |
Income taxes payable |
|
|
|
(33 |
) |
|
|
|
33 |
|
| |
Pension funding |
|
|
|
(10 |
) |
|
|
|
(11 |
) |
| |
Retainage payable |
|
|
|
1 |
|
|
|
|
(11 |
) |
| |
Subcontractor advances |
|
|
|
1 |
|
|
|
|
1 |
|
| |
Net settlement of derivative contracts |
|
|
|
(1 |
) |
|
|
|
(4 |
) |
| |
Other assets and liabilities |
|
|
|
95 |
|
|
|
|
(4 |
) |
| Total cash flows provided by operating activities |
|
|
|
53 |
|
|
|
|
132 |
|
| Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
| Purchases of property, plant and equipment |
|
|
|
(3 |
) |
|
|
|
(2 |
) |
| Payments for investments in equity method joint ventures |
|
|
|
(56 |
) |
|
|
|
(4 |
) |
| Proceeds from sale of assets or investments |
|
|
|
- |
|
|
|
|
59 |
|
| Total cash flows (used in) provided by investing activities |
|
|
|
(59 |
) |
|
|
|
53 |
|
| Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
| Payments to reacquire common stock |
|
|
|
(2 |
) |
|
|
|
(40 |
) |
| Distributions to noncontrolling interests |
|
|
|
- |
|
|
|
|
(7 |
) |
| Payments of dividends to shareholders |
|
|
|
(12 |
) |
|
|
|
(12 |
) |
| Excess tax benefits from share-based compensation |
|
|
|
1 |
|
|
|
|
- |
|
| Payments on short-term and long-term borrowings |
|
|
|
(4 |
) |
|
|
|
(4 |
) |
| Other |
|
|
|
1 |
|
|
|
|
(1 |
) |
| Total cash flows used in financing activities |
|
|
|
(16 |
) |
|
|
|
(64 |
) |
| Effect of exchange rate changes on cash |
|
|
|
(11 |
) |
|
|
|
(6 |
) |
| Increase (decrease) in cash and equivalents |
|
|
|
(33 |
) |
|
|
|
115 |
|
| Cash and equivalents at beginning of period |
|
|
|
569 |
|
|
|
|
768 |
|
| Cash and equivalents at end of period |
|
|
$ |
536 |
|
|
|
$ |
883 |
|
| |
| |
| KBR, Inc.: Backlog Information (a) |
| (In millions) |
| |
| |
|
December 31, |
|
|
September 30, |
|
|
December 31, |
| |
|
2016 |
|
|
2016 |
|
|
2015 |
| |
|
|
(Unaudited) |
| Government Services |
|
$ |
7,821 |
|
|
$ |
7,404 |
|
|
$ |
6,516 |
| Technology & Consulting |
|
|
313 |
|
|
|
340 |
|
|
|
430 |
| Engineering & Construction |
|
|
2,769 |
|
|
|
3,612 |
|
|
|
5,148 |
| |
Subtotal |
|
|
10,903 |
|
|
|
11,356 |
|
|
|
12,094 |
| Non-strategic Business |
|
|
35 |
|
|
|
75 |
|
|
|
239 |
| Total backlog |
|
$ |
10,938 |
|
|
$ |
11,431 |
|
|
$ |
12,333 |
| |
| (a) Backlog generally represents the dollar amount of revenues we expect to realize in the future as a
result of performing work on contracts and our pro-rata share of work to be performed by unconsolidated joint ventures. We
generally include total expected revenues in backlog when a contract is awarded under a legally binding agreement. In many
instances, arrangements included in backlog are complex, nonrepetitive and may fluctuate due to the release of contracted
work in phases by the customer. Additionally, nearly all contracts allow customers to terminate the agreement at any time
for convenience. Where contract duration is indefinite and clients can terminate for convenience without compensating us
for periods beyond the date of termination, backlog is limited to the estimated amount of expected revenues within the
following twelve months. Certain contracts provide maximum dollar limits, with actual authorization to perform work under
the contract agreed upon on a periodic basis with the customer. In these arrangements, only the amounts authorized are
included in backlog. For projects where we act solely in a project management capacity, we only include the expected value
of our services in backlog. |
| |
| In connection with our acquisitions of Wyle and HTSI, we determined that our then-existing backlog policy
differed from those utilized by Wyle and HTSI. We concluded that the methodology utilized by Wyle and HTSI provided a
better estimate of future revenues, and accordingly, we modified our backlog policy for U.S. government contracts in our GS
business segment to reflect both the funded and unfunded portions of future revenue from existing contracts for which the
customer has determined scope and price. We define backlog, as it relates to U.S. government contracts, as our estimate of
the remaining future revenue from existing signed contracts over the remaining base contract performance period (including
customer approved option periods) for which work scope and price have been agreed with the customer. We define funded
backlog as the portion of backlog for which funding currently is appropriated, less the amount of revenue we have
previously recognized. We define unfunded backlog as the total backlog less the funded backlog. Our previous backlog policy
for U.S. government contracts only included estimated future revenues for which funding had been appropriated by the
customer. Our GS backlog does not include any estimate of future potential delivery orders that might be awarded under our
government-wide acquisition contracts, agency-specific indefinite delivery/indefinite quantity contracts, or other
multiple-award contract vehicles nor does it include option periods that have not been exercised by the customer. The
modification to our backlog policy did not have a material impact to our historical GS backlog when implemented in the
period ended September 30, 2016. |
| |
| Within our GS business segment, we calculate estimated backlog for long-term contracts associated with the
U.K. government's privately financed initiatives or projects ("PFIs") based on the aggregate amount that our client would
contractually be obligated to pay us over the life of the project. We update our estimates of the future work to be
executed under these contracts on a quarterly basis and adjust backlog if necessary. |
| |
| We have included in the table above our proportionate share of unconsolidated joint ventures' estimated
revenues. Since these projects are accounted for under the equity method, only our share of future earnings from these
projects will be recorded in our results of operations. Our proportionate share of backlog for projects related to
unconsolidated joint ventures totaled $7.4 billion at December 31, 2016 and $8.5 billion at December 31, 2015. We
consolidate joint ventures which are majority-owned and controlled or are variable interest entities ("VIEs") in which we
are the primary beneficiary. Our backlog included in the table above for projects related to consolidated joint ventures
with noncontrolling interest includes 100% of the backlog associated with those joint ventures and totaled $151 million at
December 31, 2016 and $285 million at December 31, 2015. |
| |
| We estimate that as of December 31, 2016, 38% of our backlog will be executed within one year. Of this
amount, 62% will be recognized in revenues on our condensed consolidated statement of operations and 38% will be recorded
by our unconsolidated joint ventures. As of December 31, 2016, $248 million of our backlog relates to active contracts
that are in a loss position. |
| |
| As of December 31, 2016, 16% of our backlog was attributable to fixed-price contracts, 55% was
attributable to PFIs, and 29% of our backlog was attributable to cost-reimbursable contracts. For contracts that contain
both fixed-price and cost-reimbursable components, we classify the individual components as either fixed-price or
cost-reimbursable according to the composition of the contract; however, for smaller contracts, we characterize the entire
contract based on the predominant component. As of December 31, 2016, $7.1 billion of our GS backlog was currently
funded by our customers. |