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UPDATE: KBR Unveils Plan to Reorganize Into Three New Businesses

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Global engineering, construction and services
company KBR, Inc. (NYSE: KBR) today announced the results of a major Strategic
Review which will see the company become a more streamlined, empowered and
accountable global organization with three strategic focus areas:

o Growth through differentiated consulting services and technology targeting
oil and gas and chemicals to enhance the technical and financial returns
to our customers
o Enhanced returns through globalized project delivery and differentiated
engineering, procurement, construction, commissioning and maintenance
services
o Global government services focused on long-term contracts

KBR President and Chief Executive Officer Stuart Bradie, who implemented the
review upon his arrival in June 2014, said the new organization is designed to
simplify the structure, reduce overhead costs and create a more market-focused
business.

"The restructure we are announcing today will create a new KBR focused on its
core strengths structured along delivery lines that will enable us to meet the
expectations of our customers and other stakeholders. This, combined with
reduced complexity, will provide a more robust balance sheet and greater
accountability and empowerment for our people. KBR will be well placed to meet
the challenges of the future," Bradie said.

Effective December 31, 2014, KBR, Inc. will be reorganized into three new
businesses that will focus on core strengths in consulting, technology,
engineering and construction and government services:

o Technology & Consulting combines all proprietary KBR technologies,
knowledge-based services and KBR companies Granherne, Energo and GVA under
one customer-facing global business to provide licensed technologies and
consulting services to the oil and gas value chain, for wellhead to crude
refining and to specialty chemicals production. In addition to sharing
many of the same customers, these businesses share their approach of early
and continuous involvement to deliver the most optimal solution to meet
the customer's objectives through early planning and scope definition,
advanced technologies and project lifetime support. This focus allows
early customer engagement and continuity through to full project delivery.

o Engineering & Construction (E&C) is KBR's project delivery business. It
will leverage our operational and technical excellence as a global
provider of engineering, procurement, construction, commissioning and
maintenance for oil and gas, refining, petrochemicals, chemicals and
industrial customers. Through a regional structure, E&C has been designed
to be closer to its customers and capable to execute global project
delivery on a consistent basis throughout the world.

o Government Services will focus on long-term services contracts with
annuity streams particularly for the United Kingdom, Australian and United
States governments.

KBR functions at a corporate level will be streamlined. This will result in a
lean corporate office with responsibility for strategy and governance.

As a result of this Strategic Review, KBR will be divesting or exiting the
following non-strategic businesses as it works to streamline global operations
and drive efficiency with a goal of reducing annual operating costs of at
least $200 million by 2016:

o Fixed Price EPC Power
o Fixed Price EPC Infrastructure and U.S. Minerals
o Building Group
o Fixed Price, stand-alone Construction

In addition, options for Canadian module fabrication and U.S. military
deployed operations support businesses are still under consideration.

Financial impact of the changes

The above actions are expected to strengthen KBR's balance sheet by addressing
and exiting under-performing and non-strategic businesses. We expect to
realize annual operating cost savings of $200 million by 2016, but anticipate
taking a pre-tax charge ranging from $800 million to $1 billion, the majority
of which will be non-cash. The company currently has a cash balance of
approximately $1 billion and has received approval from its lenders to amend
its credit facility for the impact of the anticipated charge.

Posted-In: News Press Releases

 

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