KBR's Q1 Profit Edges Upward

KBR on Friday announced that income from continuing operations was $30 million, or $0.18 per diluted share, compared to income from continuing operations of $20 million, or $0.15 per diluted share, in the first quarter of 2006.

Net income was $28 million, or $0.17 per diluted share, in the first quarter of 2007, which included a loss from discontinued operations of $2 million, or $0.01 per diluted share, related to settlement of matters from the second quarter 2006 sale of Production Services Group. This compares to net income for the first quarter of 2006 of $26 million, or $0.19 per diluted share, which included income from discontinued operations of $6 million, or $0.04 per diluted share, related to the Production Services Group.

Consolidated revenue in the first quarter of 2007 was $2.3 billion and slightly higher than consolidated revenues of $2.2 billion in the first quarter of 2006.

Consolidated operating income was $62 million in the first quarter of 2007 compared to $60 million in the first quarter of 2006, a 3% increase. Operating income in the first quarter of 2007 included a $20 million charge related to the Brown & Root-Condor Spa (BRC) joint venture in Algeria, of which $18 million was an impairment on KBR's net investment of this joint venture. Operating income in the first quarter of 2006 included a $26 million impairment charge on the Alice Springs-Darwin railroad project.

"With the separation from Halliburton now complete, I look forward to KBR's future with great optimism as KBR is now able to devote its full focus toward delivering the highest quality engineering, construction, and services projects to our industrial, governmental, and military customers. I am particularly excited with our prospects in all our businesses as we drive towards improvement in our existing product and service offerings as well as seek to expand our legacy logistics, industrial services, domestic construction, and off-shore business pursuits," said Bill Utt, Chairman, President, and Chief Executive Officer of KBR.

2007 First Quarter Segment Results

During the first quarter of 2007, KBR redefined its reportable segments resulting in the Government and Infrastructure, Energy and Chemicals, and Ventures segments. The newly formed Ventures segment develops, finances, and manages assets in which KBR takes an equity position typically as part of special purpose project companies. These assets are the result of projects in which the Government and Infrastructure or Energy and Chemicals segment has a direct role in the engineering, construction, and/or operations and maintenance. Ventures' operations were previously reported as part of the Government and Infrastructure and Energy and Chemicals segment operations.

Energy and Chemicals operating income was $13 million in the first quarter of 2007 compared to operating income of $44 million in the first quarter of 2006. The decrease in operating income is largely due to a $20 million charge related to the BRC joint venture in Algeria in the first quarter of 2007 and a positive contribution to operating income in the first quarter of 2006 resulting from the financial close of an ammonia plant in Egypt. Partially offsetting the decrease were positive contributions from certain gas monetization projects including Pearl GTL, Tangguh LNG, and NLNGSevenPlus in the first quarter of 2007.

In regards to the 50%-owned GTL project in Escravos, Nigeria, no charges were taken in the first quarter of 2007, although an additional $63 million in projected cost and revenue increases for the project were identified. We, our joint venture partner, and the project owner continue to have an active and ongoing discussion to find an optimal way to execute the project, respecting the interests of all parties.

Government and Infrastructure operating income for the first quarter of 2007 was $55 million compared to operating income of $52 million in the first quarter of 2006. The increase was primarily due to an increase in Iraq-related income.

Ventures operating loss for the first quarter of 2007 was $6 million compared to operating loss of $36 million in the first quarter of 2006. The operating loss in the first quarter of 2006 was primarily driven by a $26 million impairment charge on the Alice Springs-Darwin railroad project in Australia.

Significant Achievements and Awards

  • On February 26, 2007, Halliburton's board of directors approved a plan under which Halliburton would dispose of its remaining interest in KBR through a tax-free exchange with Halliburton's stockholders pursuant to an exchange offer. On March 2, 2007, KBR filed with the Securities and Exchange Commission ("SEC") a registration statement on Form S-4 with respect to the terms and conditions of the exchange offer. On April 5, 2007, the separation was completed by exchanging the 135,627,000 shares of KBR owned by Halliburton for shares of Halliburton common stock tendered by Halliburton stockholders and accepted by Halliburton pursuant to the terms of the exchange offer commenced by Halliburton on March 2, 2007. The closing exchange offer resulted in KBR becoming an independent, publicly traded company.
  • The joint venture team of KBR, JGC, Technip, and Snamprogetti recently executed the contract with Nigeria LNG Limited (NLNG) for the preparation of project specification/front end engineering and design for the plant expansion plans by Nigeria LNG termed the "NLNGSevenPlus" Project. The project is to be constructed at Bonny Island, Nigeria. Upon completion, the NLNG Train Seven will be the largest LNG train in the world.

KBR is a global engineering, construction, and services company supporting the energy, petrochemicals, government services, and civil infrastructure sectors.

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