ex99_1.htm

EX-99.1 2 ex99_1.htm EXHIBIT 99.1 ex99_1.htm

Exhibit 99.1

KBR

601 Jefferson St. • Houston, Texas 77002

Phone 713.753.3011 • Fax 713.753.5353

FOR IMMEDIATE RELEASE	Contact:	Rob Kukla, Jr.
July 29, 2010		Director, Investor Relations
		713-753-5082

		Heather Browne
		Director, Media Relations
		713-753-3775

KBR ANNOUNCES SECOND QUARTER 2010 RESULTS: REVENUE OF $2.7 BILLION; $0.66 EARNINGS PER DILUTED SHARE; CASH OF $1.2 BILLION

Full year 2010 guidance for earnings per diluted share raised to $1.75 to $2.00

Cash flows from operating activities of $432 million for the first six months of 2010

Revenue of $2.7 billion, which included an expected decrease of $468 million for North America Government & Defense compared to prior year second quarter, substantially related to LogCAP III

In the second quarter of 2010, KBR repurchased approximately 2.8 million shares for approximately $62 million

HOUSTON, Texas – KBR (NYSE:KBR) announced today that second quarter 2010 net income attributable to KBR was $106 million, or $0.66 per diluted share, compared to net income attributable to KBR of $67 million, or $0.42 per diluted share, in the second quarter of 2009.

Consolidated revenue in the second quarter of 2010 was $2.7 billion compared to $3.1 billion in the second quarter of 2009. Consolidated operating income was $199 million in the second quarter of 2010 compared to $137 million in the second quarter of 2009.

Hydrocarbons business group revenue and job income in the second quarter of 2010 was $1.0 billion and $141 million, up 8% and 32%, respectively, compared to the prior year second quarter. The Infrastructure, Government, and Power (IGP) business group revenue was $1.2 billion in the second quarter of 2010, down $461 million compared to the prior year second quarter, primarily related to reduced activity on LogCAP III. The IGP job income was $144 million in the second quarter of 2010, up $23 million compared to the prior year second quarter. Services revenue and job income in the second quarter of 2010 was $452 million and $43 million, down $46 million and up $2 million, respectively, compared to the second quarter of 2009.

“Overall, I am pleased with the quarter’s results in what continues to be a challenging global business environment. In our North American engineering and construction markets as well as in our international infrastructure and minerals markets, we are seeing economic recovery coming at slower rates than we had envisioned at the beginning of the year. We expect these markets to continue to recover over time, but at perhaps a slower, more measured pace,” said Bill Utt, Chairman, President, and Chief Executive Officer of KBR. “Looking forward, I am pleased with the execution in all KBR’s operating businesses and the ability for these businesses to capture the opportunities we are seeing in the marketplace.”

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Hydrocarbons Business Group Results

Gas Monetization job income was $83 million in the second quarter of 2010 compared to job income of $50 million in the second quarter of 2009. The second quarter of 2010 included a positive net contribution of $36 million related to change orders received, net of additional subcontractor claims costs on the Yemen LNG project. The increase in job income was also related to increased work on the Gorgon LNG project, partially offset by lower activity on the Escravos GTL and Skikda LNG projects.

Oil and Gas job income was $13 million in the second quarter of 2010 compared to job income of $26 million in the second quarter of 2009. The decrease is primarily due to various projects that were either completed in 2009 or nearing completion at the end of the second quarter of 2010. Partially offsetting these decreases were progress on new project awards, including Chirag Oil project, Big Foot, and other projects, as well as higher chargeability at Granherne. Job income in the second quarter of 2010 included approximately $4 million in legal and other costs associated with the legacy Barracuda-Caratinga project arbitration.

Downstream job income was $28 million in the second quarter of 2010 compared to job income of $20 million in the second quarter of 2009. The increase in job income was primarily related to increased activity on the Lobito refinery in Angola and the Ras Tanura and Shaybah NGL projects in Saudi Arabia, partially offset by a charge of approximately $9 million related to a receivables reserve adjustment. Job income in the second quarter of 2009 was impacted by $7 million in additional costs related to the commissioning and start-up of the EBIC ammonia project.

Technology job income was $17 million in the second quarter of 2010 compared to job income of $11 million in the second quarter of 2009. The increase in job income was primarily due to a new grassroots ammonia and urea project in Turkmenistan, a new olefins project in China, and two new ammonia projects in India.

Infrastructure, Government, and Power Business Group Results

North America Government and Defense (NAGD) job income was $92 million in the second quarter of 2010 compared to job income of $69 million in the second quarter of 2009. The increase in job income was primarily related to $60 million in LogCAP III award fees recognized in the second quarter of 2010 for work performed during the period of May 2008 through August 2009. The increase in job income was partially offset by lower overall volume on LogCAP III projects in Iraq and Afghanistan and approximately $10 million in legal fees and unallowable costs related to activity from earlier years of LogCAP III in the second quarter of 2010. In addition, the second quarter of 2009 included approximately $18 million in accrued LogCAP III award fees compared to no award fees accrued for work performed during the second quarter of 2010.

International Government and Defense (IGD) job income was $22 million in the second quarter of 2010 compared to job income of $21 million in the second quarter of 2009. The increase in job income was primarily related to increased construction margins on the Allenby and Connaught project and higher volumes on the CONLOG and other U.K. Ministry of Defence projects. Partially offsetting this increase was the completion of the Tier 3 Basra project in Iraq.

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Infrastructure and Minerals (I&M) job income was $15 million in the second quarter of 2010 compared to job income of $20 million in the second quarter of 2009. The decrease in job income was related to lower overall activity on several water projects and a minerals project in Australia.

Power and Industrial (P&I) job income was $15 million in the second quarter of 2010 compared to job income of $11 million in the second quarter of 2009. The increase in job income was primarily related to a new waste-to-energy project in Florida and change orders on a completed power project in Georgia.

Services Results

Services job income was $43 million in the second quarter of 2010 compared to job income of $41 million in the second quarter of 2009. The increase in job income was driven by increased activity on the Scotford Upgrader project in Canada, the Hunt refining project in Alabama, a bio energy project in Virginia, and the DuPont maintenance project, which was largely offset by completed projects in 2009.

Ventures Results

Ventures job income was $8 million in the second quarter of 2010 compared to job income of $2 million in the second quarter of 2009. The increase in job income was related to improved financial performance at the EBIC ammonia project, which in the second quarter of 2009 was still in the testing and commissioning phase, 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 second quarter of 2010 was $55 million compared to $54 million the prior year second quarter.

Total cash provided by operating activities for the first six months of 2010 was $432 million, primarily related to collections in the Gas Monetization and the North America Government and Defense businesses.

Full Year 2010 Outlook

Full year 2010 guidance for earnings per diluted share is $1.75 to $2.00

KBR anticipates that the 2010 LogCAP revenues will now be approximately 60% of the 2009 levels, an increase from the approximate 50% reflected in the previous guidance

Significant Achievements and Awards

KBR announced that it acquired Houston-based Energo Engineering. Energo provides Integrity Management and advanced structural engineering services to the offshore oil and gas industry. Energo will be integrated into KBR's Granherne subsidiary, which will enable that business to expand its capabilities worldwide as well as support FEED and detailed design projects.

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KBR announced that it formed a new joint venture, SK-KBR Technologies Pte. Ltd. (SK-KBR), with Korean-based SK Energy Co., Ltd. (SK Energy). Under the Shareholders' Agreement, SK-KBR is granted exclusive world-wide rights to market and license SK Energy's petrochemical and related process technologies on a global scale.

During the second quarter of 2010, the Technology business unit announced approximately $90 million in new awards for various licensing, engineering and process design services projects in China, Argentina, and Brazil.

During the second quarter of 2010, the Services business unit announced approximately $277 million in new awards for various construction and maintenance services, including preconstruction, construction, renovation and repair, and construction management. These services will be provided in North Carolina, Missouri, Georgia, Delaware, and Ohio.

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.

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KBR, Inc.: Condensed Consolidated Statements of Income

(Millions, except per share data)

(Unaudited)

	Three Months Ended
	June 30,			June 30,			March 31,
	2010			2009			2010
Revenue:
Hydrocarbons	$	1,004		$	933		$	922
Infrastructure, Government and Power		1,197			1,658			1,274
Services		452			498			415
Ventures		13			3			15
Other		5			9			5
Total revenue		2,671			3,101			2,631
Business unit income (loss):
Hydrocarbons		116			83			76
Infrastructure, Government and Power		105			86			46
Services		25			24			21
Ventures		7			1			8
Other		(1	)		-			1
Total business unit income		252			194			152
Unallocated costs:
Loss on disposition of assets - corporate		(2	)		-			-
Labor cost absorption		4			(3	)		(4	)
Corporate general and administrative		(55	)		(54	)		(49	)
Operating income		199			137			99
Interest expense, net		(5	)		-			(4	)
Foreign currency losses, net		(3	)		(4	)		(2	)
Other non-operating expenses		-			(1	)		-
Income before income taxes and noncontrolling interests		191			132			93
Provision for income taxes		(69	)		(49	)		(34	)
Net income		122			83			59
Net income attributable to noncontrolling interests		(16	)		(16	)		(13	)
Net income attributable to KBR	$	106		$	67		$	46

Net income attributable to KBR per share (a):
Basic	$	0.66		$	0.42		$	0.29
Diluted		0.66			0.42			0.29

Basic weighted average shares outstanding		160			160			160
Diluted weighted average shares outstanding		161			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 second quarter of 2010 was declared in May 2010 for shareholders of recordas of June 15, 2010.

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KBR, Inc.: Condensed Consolidated Statements of Income

(Millions, except per share data)

(Unaudited)

	Six Months Ended
	June 30,
	2010			2009
Revenue:
Hydrocarbons	$	1,926		$	1,817
Infrastructure, Government and Power		2,471			3,481
Services		867			973
Ventures		28			11
Other		10			19
Total revenue		5,302			6,301
Business unit income:
Hydrocarbons		192			160
Infrastructure, Government and Power		151			171
Services		46			43
Ventures		15			11
Other		-			1
Total business unit income		404			386
Unallocated costs:
Loss on disposition of assets - corporate		(2	)		-
Labor cost absorption		-			(2	)
Corporate general and administrative		(104	)		(103	)
Operating income		298			281
Interest income (expense), net		(9	)		1
Foreign currency gains (losses), net		(5	)		1
Other non-operating expenses		-			(1	)
Income before income taxes and noncontrolling interests		284			282
Provision for income taxes		(103	)		(104	)
Net income		181			178
Net income attributable to noncontrolling interests		(29	)		(34	)
Net income attributable to KBR	$	152		$	144

Net income attributable to KBR per share (a):
Basic	$	0.94		$	0.90
Diluted		0.94			0.89

Basic weighted average shares outstanding		160			160
Diluted weighted average shares outstanding		161			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 second quarter of 2010 was declared in May 2010 for shareholders of record as of June 15, 2010.

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KBR, Inc.: Condensed Consolidated Balance Sheets

(Millions)

(Unaudited)

	June 30,			December 31,
	2010			2009
Assets
Current assets:
Cash and equivalents	$	1,235		$	941
Receivables:
Accounts receivable, net		1,419			1,243
Unbilled receivables on uncompleted contracts		529			657
Total receivables		1,948			1,900
Deferred income taxes		216			192
Other current assets		404			608
Total current assets		3,803			3,641
Property, plant and equipment, net of accumulated
depreciation of $299 and $264		335			251
Goodwill		696			691
Intangible assets, net		77			58
Equity in and advances to related companies		226			164
Noncurrent deferred income taxes		103			120
Noncurrent unbilled receivables on uncompleted contracts		320			321
Other assets		87			81
Total assets	$	5,647		$	5,327

Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	977		$	1,045
Due to former parent, net		49			53
Advanced billings on uncompleted contracts		621			407
Reserve from estimated losses on uncompleted contracts		31			40
Employee compensation and benefits		239			191
Current non-recourse project-finance debt of a variable interest entity		8			-
Other current liabilities		492			552
Current liabilities related to discontinued operations, net		2			3
Total current liabilities		2,419			2,291
Noncurrent employee compensation and benefits		431			469
Noncurrent non-recourse project-finance debt of a variable interest entity		93			-
Other noncurrent liabilities		126			106
Noncurrent income taxes payable		78			43
Noncurrent deferred tax liability		116			122
Total liabilities		3,263			3,031
KBR shareholders' equity
Preferred stock		-			-
Common stock		-			-
Paid-in-capital in excess of par value		2,104			2,103
Accumulated other comprehensive loss		(439	)		(444	)
Retained earnings		998			854
Treasury stock		(281	)		(225	)
Total KBR shareholders' equity		2,382			2,288
Noncontrolling interests		2			8
Total shareholders' equity		2,384			2,296
Total liabilities and shareholders' equity	$	5,647		$	5,327

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KBR, Inc.: Condensed Consolidated Statements of Cash Flows

(Millions)

(Unaudited)

	Six Months Ended June 30,
	2010			2009
Cash flows from operating activities:
Net income	$	181		$	178
Adjustments to reconcile net income to net cash provided by (used in) operations:
Depreciation and amortization		29			28
Equity earnings of unconsolidated affiliates		(76	)		(47	)
Deferred income taxes		(20	)		(33	)
Other		20			2
Changes in operating assets and liabilities:
Receivables		(183	)		(65	)
Unbilled receivables on uncompleted contracts		95			70
Accounts payable		(65	)		(125	)
Advanced billings on uncompleted contracts		261			(79	)
Accrued employee compensation and benefits		50			4
Reserve for loss on uncompleted contracts		(9	)		(16	)
Collection (repayment) of advances from (to) unconsolidated affiliates, net		(4	)		3
Distribution of earnings from unconsolidated affiliates		29			17
Other assets		32			(1	)
Other liabilities		92			56
Total cash flows provided by (used in) operating activities		432			(8	)
Cash flows from investing activities:
Capital expenditures		(19	)		(16	)
Investment in equity method joint venture		(7	)		-
Investment in licensing arrangement		(20	)		-
Acquisition of business, net of cash acquired		(10	)		-
Other investing activities		-			3
Total cash flows used in investing activities		(56	)		(13	)
Cash flows from financing activities:
Payments to reacquire common stock		(58	)		(21	)
Payments of dividends to shareholders		(16	)		(16	)
Distribution to noncontrolling shareholders, net		(30	)		(9	)
Net proceeds from issuance of stock		1			-
Payments on long-term borrowings		(4	)		-
Return (funding) of cash collateral on letters of credit, net		24			(13	)
Total cash flows used in financing activities		(83	)		(59	)
Effect of exchange rate changes on cash		(21	)		12
Increase (decrease) in cash and equivalents		272			(68	)
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	$	1,235		$	1,077

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KBR, Inc.: Revenue and Operating Results by Business Unit

(Millions)

(Unaudited)

	Three Months Ended
	June 30,			June 30,			March 31,
Revenue:	2010			2009			2010
Hydrocarbons:
Gas Monetization	$	708		$	679		$	675
Oil and Gas		104			107			84
Downstream		157			124			133
Technology		35			23			30
Total Hydrocarbons		1,004			933			922
Infrastructure, Government and Power
North America Government and Defense		926			1,394			1,010
International Government and Defense		103			67			94
Infrastructure and Minerals		64			86			73
Power and Industrial		104			111			97
Total Infrastructure, Government and Power		1,197			1,658			1,274
Services		452			498			415
Ventures		13			3			15
Other		5			9			5
Total revenue	$	2,671		$	3,101		$	2,631

Business unit income (loss):
Hydrocarbons:
Gas Monetization	$	83		$	50		$	53
Oil and Gas		13			26			16
Downstream		28			20			22
Technology		17			11			12
Total job income		141			107			103
Gain on disposition of assets		1			-			-
Division overhead		(26	)		(24	)		(27	)
Total Hydrocarbons business group income		116			83			76

Infrastructure, Government and Power:
North America Government and Defense		92			69			36
International Government and Defense		22			21			18
Infrastructure and Minerals		15			20			18
Power and Industrial		15			11			14
Total job income		144			121			86
Division overhead		(39	)		(35	)		(40	)
Total IGP business group income		105			86			46

Services:
Job income		43			41			37
Loss on disposition of assets		(1	)		-			-
Division overhead		(17	)		(17	)		(16	)
Total Services business unit income		25			24			21

Ventures:
Job income		8			2			9
Division overhead		(1	)		(1	)		(1	)
Total Ventures business unit income		7			1			8

Other:
Job income		2			2			2
Division overhead		(3	)		(2	)		(1	)
Total Other business unit income		(1	)		-			1
Total business unit income	$	252		$	194		$	152

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KBR, Inc.: Revenue and Operating Results by Business Unit

(Millions)

(Unaudited)

	Six Months Ended
	June 30,
Revenue:	2010			2009
Hydrocarbons:
Gas Monetization	$	1,383		$	1,335
Oil and Gas		188			202
Downstream		290			237
Technology		65			43
Total Hydrocarbons		1,926			1,817
Infrastructure, Government and Power
North America Government and Defense		1,936			2,957
International Government and Defense		197			137
Infrastructure and Minerals		137			172
Power and Industrial		201			215
Total Infrastructure, Government and Power		2,471			3,481
Services		867			973
Ventures		28			11
Other		10			19
Total revenue	$	5,302		$	6,301

Business unit income (loss):
Hydrocarbons:
Gas Monetization	$	136		$	115
Oil and Gas		29			44
Downstream		50			26
Technology		29			20
Total job income		244			205
Gain on disposition of assets		1			-
Division overhead		(53	)		(45	)
Total Hydrocarbons business group income		192			160

Infrastructure, Government and Power:
North America Government and Defense		128			143
International Government and Defense		40			35
Infrastructure and Minerals		33			44
Power and Industrial		29			20
Total job income		230			242
Division overhead		(79	)		(71	)
Total IGP business group income		151			171

Services:
Job income		80			77
Loss on disposition of assets		(1	)		-
Division overhead		(33	)		(34	)
Total Services business unit income		46			43

Ventures:
Job income		17			10
Gain on sale of assets		-			2
Division overhead		(2	)		(1	)
Total Ventures business unit income		15			11

Other:
Job income		4			5
Division overhead		(4	)		(4	)
Total Other business unit income		-			1
Total business unit income	$	404		$	386

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KBR, Inc.: Backlog Information (a)

(Millions)

(Unaudited)

	June 30,		March 31,		December 31,
	2010		2010		2009
Hydrocarbons:
Gas Monetization	$	5,899	$	6,491	$	6,976
Oil and Gas		228		117		109
Downstream		425		482		535
Technology		194		131		154
Total Hydrocarbons		6,746		7,221		7,774

Infrastructure, Government and Power:
North America Government and Defense		987		1,293		1,341
International Government and Defense		1,231		1,280		1,427
Infrastructure and Minerals		133		145		167
Power and Industrial		239		285		338
Total Infrastructure, Government and Power(b)		2,590		3,003		3,273

Services		2,307		2,338		2,302
Ventures		780		780		749
Total backlog	$	12,423	$	13,342	$	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 projects accounted for under the equity method of accounting is presented as KBR’s share of the expected future revenue from the project. Our backlog for projects related to unconsolidated joint ventures totaled $1.9 billion, $1.9 billion and $2.1 billion at June 30, 2010, March 31, 2010 and December 31, 2009, respectively. Our backlog related to consolidated joint ventures with noncontrolling interest totaled $4.1 billion, $4.5 billion and $4.6 billion at June 30, 2010, March 31, 2010 and December 31, 2009, respectively.

As of June 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 June 30, 2010, March 31, 2010, and December 31, 2009.

(b)	Backlog attributable to unfunded government orders was $0.2 billion, $0.1 billion and $0.3 billion as of June 30, 2010, March 31, 2010 and December 31, 2009, respectively.

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