KBR Announces Third Quarter 2019 Financial Results

HOUSTON, Oct. 30, 2019 /PRNewswire/ -- 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 third quarter 2019 financial results.

"I am delighted to report another quarter of stellar performance across our key metrics - HSSE, revenue, cash and bookings," said Stuart Bradie, KBR President and CEO, as the company announced its September 30, 2019 quarterly results. KBR's 12% top line growth was led by Energy Solutions which achieved 31% growth as well as Technology Solutions and Government Solutions, which contributed 19% and 5%, respectively. "The resilience in our business model and OneKBR culture was again demonstrated as we delivered double digit growth with all segments contributing. Combined with a robust book-to-bill of 2.1x, again contributed from all areas of the business, we are tracking nicely with our long-term strategy and financial targets," Bradie said. Consolidated book-to-bill of 2.1x, excluding the work-off of our privately financed initiatives and other adjustments, is comprised of 1.5x from GS, 1.1x from TS and an impressive 3.2x from ES. "We are happy to report that our JKC joint venture has completed commissioning and handover of the Ichthys LNG onshore facilities and power station and did so within guided cash flow requirements. This world-class facility is now in full production and export mode," continued Bradie. "The results we report today demonstrate the laser-focused commitment and dedication of our 38,000 people, working together to ensure our clients achieve their missions and objectives. Again, I wish to thank the people of KBR for their contributions to our eleven straight quarters of meeting or exceeding expectations," said Bradie.

Third Quarter 2019 Financial Results

Summary Results for the Quarter Ended September 30, 2019

• Top line revenue growth of 12%, all organic, attributable to the following:
• 5% growth in Government Solutions underpinned by the commencement of new programs, including cybersecurity and risk management services for the Defense Health Agency, holistic human and psychological performance services for the U.S. Special Operations Forces under the Preservation of the Force and Family program, and networking, communications and training services for the U.K. Ministry of Defence. Additionally, we substantially completed disaster recovery work at Tyndall Air Force Base during the quarter.
• 19% growth in Technology Solutions attributable to strong execution across our chemical, petrochemical, refining and ammonia projects and expanded proprietary equipment sales.
• 31% growth in Energy Solutions primarily attributable to ramp up of cost-reimbursable projects, including a brownfield revamp refinery project in the U.S. Gulf Coast, a crude terminal expansion project in the Permian Basin, and a greenfield methanol project in Louisiana.
• Equity earnings, SG&A and interest expense were in line with expectations.
• Adjusted EBITDA growth of 9% attributable to overall revenue growth, benefits from the favorable close-out of a lump sum project in our Non-strategic Business during the quarter, partially offset by the non-recurrence of closeout benefits recognized on two projects in 2018 in our Energy Solutions business.

Handover of Ichthys LNG onshore facility

Our JKC joint venture recently completed commissioning, performance testing and handover of the onshore portion of the Ichthys LNG project in Australia. The onshore portion represents JKC's total scope on the project and includes two LNG liquefaction trains, cryogenic tanks and a combined cycle power generation facility.  The Ichthys LNG project, one of the most significant and complex oil and gas projects in the world, is delivering LNG to meet the world's growing demand for clean energy.

Liquidity and Capital Structure

• Year-to-date operating cash flow of $199 million, or 138% net income conversion.
• Gross and net debt leverage of 2.8x and 1.3x, respectively; continued gross debt de-leveraging attributable to pay down of debt during the year of $54 million, including $32 million of elective payments, and increasing EBITDA.
• The Ichthys LNG facility was completed within the previously disclosed funding expectations.
• An increase of KBR's credit rating by S&P to BB- with stable outlook.

Notable New Business Awards/Developments:

Quality bookings continue to support the Company's long-term outlook. Consolidated third quarter 2019 book-to-bill was 2.1x, excluding the workoff of our private finance initiatives and other adjustments. Each of our business segments achieved healthy book-to-bill in the quarter winning contracts aligned with our strategy that combines deep technical expertise, global presence and commercial discipline. Notable bookings in the quarter include the following:

• A reimbursable contract in our Energy Solutions business to provide EPC services to deliver a methanol operating plant for Methanex located adjacent to its two existing Geismar, Louisiana facilities.
• A Purifier™ license and basic engineering design contract in our Technology Solutions business for the largest grassroots ammonia plant ever designed by KBR. We believe this will be the largest true single-train plant in operation in the world. Our Purifier™ technology is highly attractive because of its energy efficiency, flexibility and lower capital costs.
• A new five-year, $200 million contract in our Government Solutions business to provide launch range operations at NASA's Wallops Flight Facility. Under this contract, we will perform a broad range of work, including radar, telemetry, logistics, tracking and communications services for flight vehicles. We will also test and maintain communications and electronic systems and will operate ground, spacecraft and launch vehicle processing systems.

Our backlog does not include our recent LOGCAP V and Freeport LNG Train 4 awards.

Raising Guidance

KBR raises 2019 GAAP EPS guidance with a range of $1.36 to $1.46 and Adjusted EPS guidance with a range of $1.64 to $1.74 per share. Our Adjusted EPS guidance excludes legacy legal costs for U.S. Government contracts, non-cash imputed interest on the conversion option of the convertible debt, acquisition and integration related costs, amortization related to the consolidation of Aspire and incremental 2019 interest expense associated with funding the Ichthys project. A reconciliation of GAAP EPS to Adjusted EPS guidance is included at the end of this release. Operating cash flows for 2019 are estimated to range from $200 million to $225 million.

Reporting Changes and Reclassifications

Changes in reporting, effective January 1, 2019:

• We changed the name of our Government Services segment to "Government Solutions", our Technology segment to "Technology Solutions", and our Hydrocarbons Services segment to "Energy Solutions".
• Effective January 1, 2019, we elected to classify certain indirect costs incurred as overhead (included in "Cost of revenues") or general administrative expenses for U.S. GAAP reporting purposes in the same manner as such costs are defined in our disclosure statements under U.S. Government Cost Accounting Standards. We reclassified $27 million and $94 million from "Cost of revenues" to "Selling, general and administrative expenses" for the three and nine months ended September 30, 2019, respectively. There was no impact on consolidated or segment operating income or net income as previously reported.

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 approximately 38,000 people worldwide (including our joint ventures), with customers in more than 80 countries, and operations in 40 countries, across three synergistic global businesses:

• Government Solutions, 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 Solutions, featuring proprietary technology, equipment, catalysts, digital solutions and related technical services for the monetization of hydrocarbons, including refining, petrochemicals, ammonia and specialty chemicals, as well as inorganics; and
• Energy Solutions, 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); program management and consulting services.

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 U.S. 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.

Non-GAAP Financial Information

The following information provides reconciliations of certain non-GAAP financial measures presented in the press release to which this reconciliation is attached to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles (GAAP). The company has provided the non-GAAP financial information presented in the press release, as information supplemental and in addition to the financial measures presented in the press release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for or alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the press release. The non-GAAP financial measures in the press release may differ from similar measures used by other companies.

EBITDA and Adjusted EBITDA

We evaluate performance based on EBITDA and Adjusted EBITDA. EBITDA is defined as Net income attributable to KBR, plus interest expense, net; provision for income taxes; other non-operating expense (income); and depreciation and amortization. Adjusted EBITDA excludes certain amounts included in EBITDA. EBITDA and Adjusted EBITDA for each of the three and nine months ended September 30, 2019 and 2018 is considered a non-GAAP financial measure under SEC rules because EBITDA and Adjusted EBITDA for each such period exclude certain amounts included in the calculation of net income attributable to KBR in accordance with GAAP for such periods. Management believes EBITDA and Adjusted EBITDA afford investors a view of what management considers KBR's core performance for each of the three and nine months ended September 30, 2019 and 2018 and also affords investors the ability to make a more informed assessment of such core performance for the comparable periods.

Adjusted EPS

Adjusted diluted earnings per share from net income attributable to KBR (Adjusted EPS) for each of the three and nine months ended September 30, 2019 and 2018 is considered a non-GAAP financial measure under SEC rules because the Adjusted EPS for each such period excludes certain amounts included in the diluted earnings per share from net income attributable to KBR calculated in accordance with GAAP (EPS) for such periods. The most directly comparable financial measure calculated in accordance with GAAP is Diluted EPS for the same periods. Management believes that Adjusted EPS affords investors a view of what management considers KBR's core earnings performance for each of the three and nine months ended September 30, 2019 and 2018 and also affords investors the ability to make a more informed assessment of such core earnings performance for the comparable periods.

We have calculated Adjusted EPS for each of the three and nine months ended September 30, 2019 and 2018 by adjusting EPS for the items included in the table below.

We have calculated the Adjusted EPS for the 2019 guidance by adjusting EPS for the items included in the table below.

SOURCE KBR, Inc.

Related Links

http://www.kbr.com