Market Overview

KBR Announces Third Quarter 2012 Results

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HOUSTON--(BUSINESS WIRE)--

KBR (NYSE: KBR) announced today that third quarter 2012 net income attributable to KBR was $97 million on an adjusted, non-GAAP basis, or $0.65 per diluted share, compared to net income attributable to KBR of $93 million on an adjusted, non-GAAP basis, or $0.62 per diluted share, in the third quarter of 2011.

On a GAAP basis, third quarter 2012 net loss attributable to KBR of $81 million, or $0.55 per diluted share, includes a non-cash goodwill impairment charge of $178 million, or $1.20 per diluted share, related to a market assessment of the Minerals Business Unit. Third quarter 2011 net income attributable to KBR of $185 million, or $1.22 per diluted share, includes discrete tax benefits of $92 million, or $0.60 per diluted share, related to an arbitration award in favor of Barracuda & Caratinga Leasing Company B.V. as well as a deferred tax liability release for KBR's share of an Australian rail investment.

Tables reconciling net income, EPS, and effective tax rates excluding the goodwill impairment charge to generally accepted accounting principles (“GAAP”) results are attached to this release. This release and accompanying reconciliation tables are available on the investor relations section of KBR's website at www.kbr.com.

Consolidated revenue in the third quarter 2012 was $2.0 billion compared to $2.4 billion in the third quarter of 2011. Operating loss in the third quarter 2012 was $11 million compared to operating income of $138 million in the prior year third quarter.

“The emergence of North American shale gas resources is a net positive development for KBR; however, over the past several quarters we have witnessed a severe reduction in solid fuel materials handling prospects in North America that has triggered KBR writing down goodwill from our 2010 acquisition of Roberts & Schaefer. If we look beyond the goodwill impairment, and despite some headwinds at our U.S. Construction Business Unit and a legacy Roberts & Schaefer project, I am extremely pleased with KBR's continued strong financial and operating performance this quarter,” said Bill Utt, Chairman, President, and Chief Executive Officer of KBR. “We continue to see significant new project opportunities across all of our Business Units and remain confident in KBR's ability to continue to execute our projects successfully going forward.”

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

Hydrocarbons Results

Hydrocarbons revenue was $1.1 billion, flat with the prior year. Hydrocarbons job income was $219 million, up $105 million, or 92%.

  • Gas Monetization job income was $147 million, up $95 million, or 183%, primarily related to strong project execution and incremental progress on a number of LNG projects as well as the resolution of several outstanding issues on an LNG project nearing completion. Partially offsetting this increase was lower work volumes on a GTL project which is essentially complete.
  • Oil and Gas job income was $29 million, up $2 million, or 7%, primarily related to higher work volumes on the Shah Deniz FEED and Quad 204 detailed design projects as well as work on the recently awarded FPSO project in Angola. Partially offsetting the increase was the completion or near completion of several projects.
  • Downstream job income was $13 million, down $5 million, or 28%, primarily related to the completion of engineering on a refinery project in Africa. Partially offsetting the decrease was increased profits from projects in the United States and the KBR-AMCDE entity in Saudi Arabia.
  • Technology job income was $30 million, up $13 million, or 76%, primarily related to several license and engineering projects in Russia, Uzbekistan and the United States and the completion of an ammonia license and basic engineering contract in Venezuela. Partially offsetting the increase was the completion of ammonia projects in Indonesia and India.

Infrastructure, Government and Power (IGP) Results

IGP revenue was $433 million, down $443 million, or 51%. IGP job income was $62 million, down $55 million, or 47%.

  • North American Government and Logistics (NAGL) job income was $19 million, down $42 million, or 69%, primarily related to the completion of operations under the LogCAP III contract in Iraq and the $22 million award fees received in the third quarter of 2011 which did not reoccur in the third quarter of 2012. Partially offsetting the decrease was increased income related to the LogCAP IV contract, including the U.S. Department of State project.
  • International Government, Defence and Support Services (IGDSS) job income was $25 million, down $3 million, or 11%, primarily related to lower activity on the Afghanistan ISP project. Partially offsetting the decrease was increased income related to mining field camp work in Africa and the Allenby & Connaught project.
  • Infrastructure job income was $15 million, flat with the prior year.
  • Power and Industrial (P&I) job income was $7 million, down $2 million, or 22%, primarily related to lower work volume from the completion of a waste-to-energy refurbishment project and lower engineering activity on a coal gasification project. Partially offsetting the decrease was increased activity on a waste-to-energy expansion project and a cellulosic fiber project.
  • Minerals job loss was $4 million, down $8 million, or 200%, primarily related to lower volume and an $8 million charge as a result of updated cost and schedule estimates on a legacy EPC project scheduled for completion in March 2013.

Services Results

Services revenue was $419 million, up $49 million, or 13%. Services job income was $15 million, down $16 million, or 52%, primarily related to approximately $21 million in charges due to increased cost estimates to complete two projects in U.S. Construction. Partially offsetting the decrease was increased activity on several projects in Canada and KBR's MMM Mexican joint venture.

Ventures Results

Ventures job income was $14 million, up $5 million, or 56%, primarily related to higher ammonia prices at the EBIC ammonia plant in Egypt.

Corporate

Corporate general and administrative expense was $56 million, down $5 million, or 8%, primarily related to the company's continued focus on prudent cost management.

Total cash provided by operating activities in the third quarter of 2012 was $44 million.

The effective tax rate for the third quarter 2012 was approximately 28% excluding the non-cash goodwill impairment charge.

During the third quarter of 2012, KBR had share repurchases of $11 million, capital expenditures of $20 million, pension contributions of $8 million, and quarterly dividend payments of $7 million for total cash deployment of $46 million.

Full Year 2012 Guidance

  • Earnings per diluted share guidance unchanged at $2.60 to $2.80, excluding the goodwill impairment.

Significant Achievements and Awards

  • KBR was awarded a contract by Statoil Tanzania AS (Statoil) to perform pre-front end engineering and design (pre-FEED) studies for a prospective LNG facility in Tanzania, East Africa. The pre-FEED study is designed to help Statoil further assess the viability of developing an LNG facility to export natural gas from this East African region. The project is expected to be completed during 2013.
  • KBR was awarded a General Works Contract for phase two construction at a raw gas processing and compression facility near Dawson Creek, British Columbia. KBR's Canadian subsidiary, KBR Wabi, will execute construction and related site support for the expansion of the facility, increasing the existing capacity to 100 million standard cubic feet per day.
  • KBR was awarded a FEED contract to perform work for the topsides and hull associated with a new-build, double-sided, single-bottom hull Floating Production Storage and Offloading (FPSO) vessel. The FPSO will be located offshore Angola and FEED is scheduled to start immediately, with a duration of 12 months. The topsides will utilize a single train designed to process 80,000 barrels of oil per day and 90 million standard cubic feet per day at an export pressure of 3,500 psi. Services for the project will be based out of KBR's offices in Houston, Gothenburg and Luanda.
  • KBR was awarded a contract by Iowa Fertilizer Company, a wholly-owned subsidiary of Orascom Construction Industries, to provide licensing, engineering services and proprietary equipment for its grassroots fertilizer plant in Southeastern Iowa. The plant will be the first world-scale ammonia plant built in the United States in nearly 25 years. The plant will be designed using KBR's Purifier technology, which has demonstrated higher reliability than conventional designs and offers the lowest proven energy consumption in the industry.
  • KBR was awarded a license and engineering contract by Ohio Valley Resources LLC to execute a front-end engineering design (FEED) package to develop an EPC proposal for a fertilizer complex in Spencer County, Indiana. Other potential sites are also being evaluated. This project will include design of the main ammonia process units by KBR featuring KBR's proprietary Purifier™ ammonia process technology which has demonstrated higher reliability than conventional designs and offers the lowest proven energy consumption in the industry. KBR will also design the plant utilities and other supporting units for the facility.
  • KBR's subsidiary GVA has signed a license agreement with Daewoo Shipbuilding & Marine Engineering Co Ltd in Korea for the fabrication of its GVA 4000NCS, CatD Drilling Unit. The concept for the unit is tailor-made by the industry for Statoil primarily for drilling production and well completion in mature fields.
  • KBR's wholly-owned subsidiary KBR Federal Services was awarded the U.S. Naval Facilities (NAVFAC) Engineering Command construction contract for the aircraft logistics apron, taxiway enhancement and parking pads upgrade at Camp Lemonnier, Djibouti, in the Horn of Africa. The contract will expand the enduring apron and allow parking for two aircraft, as well as connect overhead mast lighting, connect fire protection hydrants and water distribution, and extend and widen three taxiways in order to reconfigure the Camp Lemonnier aircraft parking arrangement.

KBR is a global engineering, construction and services company supporting the energy, hydrocarbons, government services, minerals, civil infrastructure, power, industrial, and commercial markets. For more information, visit www.kbr.com.

NOTE: The statements in this press release that are not historical statements, including statements regarding future financial performance and backlog information, are forward-looking statements within the meaning of the federal securities laws. These statements are subject to numerous risks and uncertainties, many of which are beyond the company's control, that could cause actual results to differ materially from the results expressed or implied by the statements. These risks and uncertainties include, but are not limited to: the outcome of and the publicity surrounding audits and investigations by domestic and foreign government agencies and legislative bodies; potential adverse proceedings by such agencies and potential adverse results and consequences from such proceedings; the scope and enforceability of the company's indemnities from Halliburton Company; changes in capital spending by the company's customers; the company's ability to obtain contracts from existing and new customers and perform under those contracts; structural changes in the industries in which the company operates, escalating costs associated with and the performance of fixed-fee projects and the company's ability to control its cost under its contracts; claims negotiations and contract disputes with the company's customers; changes in the demand for or price of oil and/or natural gas; protection of intellectual property rights; compliance with environmental laws; changes in government regulations and regulatory requirements; compliance with laws related to income taxes; unsettled political conditions, war and the effects of terrorism; foreign operations and foreign exchange rates and controls; the development and installation of financial systems; increased competition for employees; the ability to successfully complete and integrate acquisitions; and operations of joint ventures, including joint ventures that are not controlled by the company.

KBR's Annual Report on Form 10-K dated February 22, 2012, 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,
2012 2011 2012
Revenue:
Hydrocarbons $ 1,119 $ 1,122 $ 1,122
Infrastructure, Government and Power 433 876 491
Services 419 370 425
Ventures 18 14 15
Other     3       5       9  
Total revenue     1,992       2,387       2,062  
Business group income (loss):
Hydrocarbons 191 89 131
Infrastructure, Government and Power (149 ) 78 28
Services - 15 16
Ventures 13 8 10
Other     (2 )     3       2  
Total business group income     53       193       187  
Unallocated costs:
Labor cost absorption (8 ) 6 (6 )
General and administrative     (56 )     (61 )     (52 )
Operating income (loss)     (11 )     138       129  
Interest expense, net (2 ) (3 ) (2 )
Foreign currency gains (losses), net (2 ) 1 3
Other non-operating income     -       1       1  
Income (loss) before income taxes and noncontrolling interests (15 ) 137 131
Benefit (provision) for income taxes     (45 )     54       (19 )
Net income (loss) (60 ) 191 112
Net income attributable to noncontrolling interests     (21 )     (6 )     (8 )
Net income (loss) attributable to KBR   $ (81 )   $ 185     $ 104  
 
Net income (loss) attributable to KBR per share:
Basic $ (0.55 ) $ 1.23 $ 0.70
Diluted (0.55 ) 1.22 0.70
 
Basic weighted average shares outstanding 147 150 148
Diluted weighted average shares outstanding 147 151 149
 
Cash dividends declared per share $ 0.05 $ 0.05 $ 0.05

 

           

KBR, Inc.: Condensed Consolidated Statements of Income

(Millions, except per share data) (Unaudited)

 
Nine Months Ended
September 30,
2012 2011
Revenue:
Hydrocarbons $ 3,357 $ 3,269
Infrastructure, Government and Power 1,442 2,621
Services 1,192 1,212
Ventures 47 48
Other         17           15  
Total revenue         6,055           7,165  
Business group income (loss):
Hydrocarbons 427 309
Infrastructure, Government and Power (82 ) 211
Services 28 43
Ventures 30 30
Other         3           6  
Total business group income         406           599  
Unallocated costs:
Labor cost absorption (13 ) 15
General and administrative         (163 )         (163 )
Operating income         230           451  
Interest expense, net (6 ) (13 )
Foreign currency gains, net - 4
Other non-operating expense         (1 )         -  
Income before income taxes and noncontrolling interests 223 442
Provision for income taxes         (73 )         (7 )
Net income 150 435
Net income attributable to noncontrolling interests         (36 )         (45 )
Net income attributable to KBR       $ 114         $ 390  
 
Net income attributable to KBR per share:
Basic $ 0.77 $ 2.57
Diluted 0.76 2.55
 
Basic weighted average shares outstanding 148 151
Diluted weighted average shares outstanding 149 152
 
Cash dividends declared per share $ 0.15 $ 0.15
   

KBR, Inc.: Condensed Consolidated Balance Sheets

(Millions) (Unaudited)

 
September 30, December 31,
    2012   2011
Assets
Current assets:
Cash and equivalents $ 846 $ 966
Receivables:
Accounts receivable, net of allowance for bad debts of $14 and $24 1,287 1,227
Unbilled receivables on uncompleted contracts     763       435  
Total receivables 2,050 1,662
Deferred income taxes 256 297
Other current assets     460       517  
Total current assets 3,612 3,442
Property, plant and equipment, net of accumulated
depreciation of $352 and $364 380 384
Goodwill 779 951
Intangible assets, net 102 113
Equity in and advances to related companies 250 190
Noncurrent deferred income taxes 146 128
Noncurrent unbilled receivables on uncompleted contracts 312 313
Other noncurrent assets     137       152  
Total assets   $ 5,718     $ 5,673  
 
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 878 $ 761
Due to former parent, net 57 53
Advanced billings on uncompleted contracts 492 626
Reserve from estimated losses on uncompleted contracts 19 22
Employee compensation and benefits 202 226
Current non-recourse project-finance debt of a variable interest entity 11 10
Other current liabilities     625       586  
Total current liabilities 2,284 2,284
Noncurrent employee compensation and benefits 446 470
Noncurrent non-recourse project-finance debt of a variable interest entity 87 88
Other noncurrent liabilities 160 177
Noncurrent income tax payable 80 141
Noncurrent deferred tax liability     89       71  
Total liabilities     3,146       3,231  
KBR shareholders' equity
Preferred stock - -
Common stock - -
Paid-in-capital in excess of par 2,043 2,005
Accumulated other comprehensive loss (541 ) (548 )
Retained earnings 1,699 1,607
Treasury stock     (603 )     (569 )
Total KBR shareholders' equity 2,598 2,495
Noncontrolling interests     (26 )     (53 )
Total shareholders' equity     2,572       2,442  
Total liabilities and shareholders' equity   $ 5,718     $ 5,673  

 

   

KBR, Inc.: Condensed Consolidated Statements of Cash Flows

(Millions) (Unaudited)

 
Nine Months Ended
September 30,
    2012   2011
Cash flows from operating activities:
Net income $ 150 $ 435
Adjustments to reconcile net income to net cash provided by (used in) operations:
Depreciation and amortization 48 54
Equity earnings of unconsolidated affiliates (113 ) (108 )
Deferred income tax expense (benefit) 61 (136 )
Impairment of long-lived assets 2 -
Impairment of goodwill 178 -
Other adjustments 22 8
Changes in operating assets and liabilities:
Receivables (83 ) 124
Unbilled receivables on uncompleted contracts (303 ) (165 )
Accounts payable 117 (27 )
Advanced billings on uncompleted contracts (144 ) 11
Accrued employee compensation and benefits (49 ) (10 )
Reserve for loss on uncompleted contracts (3 ) (7 )
Collection (repayment) of advances from (to) unconsolidated affiliates, net (2 ) 15
Distribution of earnings from unconsolidated affiliates 60 107
Other, net     48       11  
Total cash flows provided by (used in) operating activities     (11 )     312  
Cash flows from investing activities:
Capital expenditures (53 ) (66 )
Acquisition of business, net (1 ) -
(Investment in) / return of capital from equity method joint ventures     4       (11 )
Total cash flows used in investing activities     (50 )     (77 )
Cash flows from financing activities:
Acquisition of noncontrolling interest - (164 )
Payments to reacquire common stock (36 ) (96 )
Distributions to noncontrolling interests, net (9 ) (57 )
Payments of dividends to shareholders (22 ) (23 )
Net proceeds from issuance of stock 5 7
Payments on long-term borrowings (10 ) (10 )
Excess tax benefits from stock-based compensation 3 3
Return of cash collateral on letters of credit, net - 16
Other financing activities     1       -  
Total cash flows used in financing activities     (68 )     (324 )
Effect of exchange rate changes on cash 9 (7 )
Decrease in cash and equivalents     (120 )     (96 )
Cash and equivalents at beginning of period     966       786  
Cash and equivalents at end of period   $ 846     $ 690  

 

     

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

(Millions)(Unaudited)

 
Three Months Ended
September 30, September 30, June 30,
Revenue:   2012   2011   2012
Hydrocarbons:
Gas Monetization $ 808 $ 831 $ 809
Oil and Gas 118 117 135
Downstream 137 136 131
Technology     56       38       47  
Total Hydrocarbons     1,119       1,122       1,122  
Infrastructure, Government and Power
North American Government and Logistics 156 586 173
International Government, Defence and Support Services 84 93 93
Infrastructure 65 63 68
Minerals 49 79 62
Power and Industrial     79       55       95  
Total Infrastructure, Government and Power     433       876       491  
Services 419 370 425
Ventures 18 14 15
Other     3       5       9  
Total revenue   $ 1,992     $ 2,387     $ 2,062  
 
Business group income (loss):
Hydrocarbons:
Gas Monetization $ 147 $ 52 $ 94
Oil and Gas 29 27 38
Downstream 13 18 13
Technology     30       17       19  
Total job income 219 114 164
Gain on sales of assets - 1 -
Divisional overhead     (28 )     (26 )     (33 )
Total Hydrocarbons     191       89       131  
 
Infrastructure, Government and Power:
North American Government and Logistics 19 61 5
International Government, Defence and Support Services 25 28 26
Infrastructure 15 15 16
Minerals (4 ) 4 6
Power and Industrial     7       9       10  
Total job income 62 117 63
Impairment of goodwill (178 ) - -
Loss on sales of assets - (1 ) -
Divisional overhead     (33 )     (38 )     (35 )
Total Infrastructure, Government and Power     (149 )     78       28  
 
Services:
Job income 15 31 29
Divisional overhead     (15 )     (16 )     (13 )
Total Services     -       15       16  
 
Ventures:
Job income 14 9 10
Divisional overhead     (1 )     (1 )     -  
Total Ventures     13       8       10  
 
Other:
Job income 1 5 5
Loss on sales of assets - - (2 )
Impairment of long-lived assets (2 ) - -
Divisional overhead     (1 )     (2 )     (1 )
Total Other     (2 )     3       2  
Total business group income   $ 53     $ 193     $ 187  
   

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

(Millions)(Unaudited)

 
Nine Months Ended
September 30,
Revenue:   2012   2011
Hydrocarbons:
Gas Monetization $ 2,422 $ 2,357
Oil and Gas 374 372
Downstream 409 418
Technology     152       122  
Total Hydrocarbons     3,357       3,269  
Infrastructure, Government and Power
North America Government and Logistics 538 1,789
International Government, Defence and Support Services 275 260
Infrastructure 197 188
Minerals 174 205
Power and Industrial     258       179  
Total Infrastructure, Government and Power     1,442       2,621  
Services 1,192 1,212
Ventures 47 48
Other     17       15  
Total revenue   $ 6,055     $ 7,165  
 
Business group income (loss):
Hydrocarbons:
Gas Monetization $ 320 $ 192
Oil and Gas 90 81
Downstream 40 58
Technology     69       53  
Total job income 519 384
Gain on sales of assets - 2
Division overhead     (92 )     (77 )
Total Hydrocarbons     427       309  
 
Infrastructure, Government and Power:
North America Government and Logistics 39 167
International Government, Defence and Support Services 87 78
Infrastructure 46 50
Minerals 1 17
Power and Industrial     27       23  
Total job income 200 335
Impairment of goodwill (178 ) -
Gain (loss) on sales of assets 2 (1 )
Division overhead     (106 )     (123 )
Total Infrastructure, Government and Power     (82 )     211  
 
Services:
Job income 72 94
Division overhead     (44 )     (51 )
Total Services     28       43  
 
Ventures:
Job income 32 32
Gain on sales of assets - 1
Division overhead     (2 )     (3 )
Total Ventures     30       30  
 
Other:
Job income 10 12
Impairment of long-lived assets (2 ) -
Division overhead     (5 )     (6 )
Total Other     3       6  
Total business group income   $ 406     $ 599  
       

 KBR, Inc.:  Backlog Information (a)

(Millions)(Unaudited)

 
September 30, June 30, December 31,
    2012     2012   2011
Hydrocarbons:
Gas Monetization $ 8,333 $ 8,282 $ 3,880
Oil and Gas 193 219 289
Downstream 832 704 546
Technology     235       236     258
Total Hydrocarbons     9,593       9,441     4,973
 
Infrastructure, Government and Power:
North American Government and Logistics 458 552 899
International Government, Defence and Support Services 915 941 1,086
Infrastructure 228 233 265
Minerals 103 142 237
Power and Industrial     510       710     777
Total Infrastructure, Government and Power     2,214       2,578     3,264
 
Services 2,033 2,296 1,766
Ventures     982       923     928
Total backlog(b)   $ 14,822     $ 15,238   $ 10,931
 
(a) Backlog is presented differently depending on whether 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 generally includes total expected revenue in backlog when a contract is awarded and/or the scope is definitized. Where contract duration is indefinite, projects included in backlog are limited to the estimated amount of expected revenue within the following twelve months. Certain contracts provide maximum dollar limits, with actual authorization to perform work under the contract being agreed upon on a periodic basis with the customer. In these arrangements, only the amounts authorized are included in backlog. For projects where KBR acts solely in a project management capacity, KBR only includes the management fee revenue of each project in backlog. For certain long-term service contracts with a defined contract term, such as those associated with privately financed projects, the amount included in backlog is limited to five years.
 
Backlog related to unconsolidated joint ventures is presented as KBR's percentage ownership of the joint venture's estimated 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 $5.7 billion, $5.6 billion and $1.7 billion at September 30, 2012, June 30, 2012, and December 31, 2011, respectively. Our backlog related to consolidated joint ventures with noncontrolling interest totaled $2.7 billion, $2.9 billion and $3.4 billion at September 30, 2012, June 30, 2012, and December 31, 2011, respectively.
 
As of September 30, 2012, 40% of our backlog was attributable to fixed-price contracts and 60% 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, 2012, June 30, 2012, and December 31, 2011.
 
(b) Backlog attributable to unfunded government orders was $0.1 billion, $0.1 billion and $0.4 billion as of September 30, 2012, June 30, 2012, and December 31, 2011, respectively.
 
KBR, Inc.: Reconciliation of EPS Adjusted for Non-cash Goodwill Impairment in 2012 and Discrete Tax Benefits in 2011
(GAAP Reported to Adjusted Non-GAAP)
(Millions, except per share data) (Unaudited)
 

The presentation of non-GAAP measures is intended to enhance the usefulness of financial information by providing measures
which KBR management uses internally to evaluate our performance on a comparable basis.  Presented below are reconciliations
of the reported GAAP results to the non-GAAP measures.

                 
Three Months Ended
September 30,
2012         2011
Adjusted net income attributable to KBR reconciliation:
Net income attributable to KBR as reported $ (81 ) $ 185
Impairment of goodwill - excluded from income 178 -
Less: Discrete tax benefits associated with Barracuda-Caratinga project
and reduction of deferred tax liabilities associated with an unconsolidated
joint venture in Australia - excluded from income             -             (92 )
Adjusted net income attributable to KBR             97             93  
 
Adjusted diluted weighted average common shares outstanding reconciliation:
Reported diluted weighted average common shares outstanding 147 151
Adjustment for dilutive stock options and shares             1             -  
Adjusted diluted weighted average common shares outstanding             148             151  
 
Adjusted diluted earnings per common shares reconciliation:
Diluted EPS as reported $ (0.55 ) $ 1.22

EPS impact of impairment of goodwill - excluded from income

1.20 -
Less: Discrete tax benefits associated with Barracuda-Caratinga project
and reduction of deferred tax liabilities associated with an unconsolidated
joint venture in Australia - excluded from income             -             (0.60

)

Adjusted diluted EPS             0.65             0.62  
                          Nine Months Ended
September 30,
2012                 2011
Adjusted net income attributable to KBR reconciliation:                
Net income attributable to KBR as reported $ 114 $ 390
Impairment of goodwill - excluded from income 178 -
Less: Discrete tax benefits associated with Barracuda-Caratinga project
and reduction of deferred tax liabilities associated with an unconsolidated
joint venture in Australia - excluded from income                             -                   (92 )
Adjusted net income attributable to KBR                             292                   298  
 
Adjusted diluted weighted average common shares outstanding reconciliation:
Reported diluted weighted average common shares outstanding 149 152
Adjustment for dilutive stock options and shares                             -                   -  
Adjusted diluted weighted average common shares outstanding                             149                   152  
 
Adjusted diluted earnings per common shares reconciliation:
Diluted EPS as reported $ 0.76 $ 2.55
EPS impact of impairment of goodwill - excluded from income 1.19 -
Less: Discrete tax benefits associated with Barracuda-Caratinga project
and reduction of deferred tax liabilities associated with an unconsolidated
joint venture in Australia - excluded from income                             -                   (0.60 )
Adjusted diluted EPS                             1.95                   1.95  
         
KBR, Inc.: Reconciliation of Effective Tax Rate as Calculated to Adjusted Effective Tax Rate
Excluding Non-cash Goodwill Impairment
(GAAP Reported to Adjusted Non-GAAP)
(Millions, except per share data) (Unaudited)
 
Three Months Ended
September 30,
2012
Numerator for effective tax rate for GAAP and adjusted effective tax rate:
Provision for income taxes as reported $ 45
 
Adjusted income (loss) before income taxes and noncontrolling interests
reconciliation (denominator for effective tax rate reconciliation):
Income (loss) before income taxes and noncontrolling interests as reported $ (15 )
Impairment of goodwill excluded from income before income taxes and
noncontrolling interests             178  
Adjusted income before income taxes and noncontrolling interests             163  
 
Effective tax rate calculation:
Provision for income taxes as reported $ 45
Income (loss) before income taxes and noncontrolling interests as reported             (15 )
Calculated effective income tax rate             -300 %
 
Adjusted effective tax rate calculation:
Provision for income taxes as reported $ 45
Adjusted income before income taxes and noncontrolling interest - excluding
impairment of goodwill             163  
Calculated adjusted effective income tax rate             28 %
 
Calculated difference between effective tax rate and adjusted effective tax rate:            
Effective tax rate impact of excluding impairment of goodwill from income before
income taxes and noncontrolling interests             328 %

KBR
Zac Nagle, 713-753-5082
Vice President,
Investor Relations and Communications
or
Rob Kukla, Jr., 713-753-5082
Director, Investor Relations

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