KBR Posts Solid Quarterly Results

KBR announced that third quarter 2008 income from continuing operations was $74 million, or $0.44 per diluted share, which included a negative impact of approximately $0.04 to $0.05 per diluted share, related to Hurricane Ike. This compares to income from continuing operations of $60 million, or $0.35 per diluted share, in the third quarter of 2007.

Net income for the third quarter of 2008 was $85 million, or $0.51 per diluted share, which included income from discontinued operations of $11 million, or $0.07 per diluted share, resulting from foreign tax credits related to DML. Net income for the third quarter of 2007 was $63 million, or $0.37 per diluted share, which included income from discontinued operations of $3 million, or $0.02 per diluted share, related to post-closing activities for previously disposed businesses.
 
Consolidated revenue in the third quarter of 2008 was $3.0 billion, an increase of 39% from $2.2 billion in the third quarter of 2007.
 
Consolidated operating income was $144 million in the third quarter of 2008 compared to $102 million in the third quarter of 2007. Operating income in the third quarter of 2008 included a $13 million reversal of a charge related to an unfavorable jury verdict of approximately $40 million from litigation with a subcontractor on the LogCAP III contract in the second quarter of 2008. Operating income in the third quarter of 2007 included an $18 million pre-tax gain on the sale of KBR's interest in the Brown & Root-Condor Spa (BRC) joint venture in Algeria.
 
"This was a solid quarter for KBR, in terms of revenue growth, operating income growth, and earnings per share growth from last year's third quarter. The integration of BE&K is going extremely well and BE&K is making strong contributions with new awards and financial performance," said Bill Utt, Chairman, President, and Chief Executive Officer of KBR. "KBR's long-term prospects across its end-markets remain positive and KBR is well-positioned to capture those opportunities."
 
2008 Third Quarter Business Unit Results
 
Upstream business unit income was $53 million in the third quarter of 2008 compared to business unit income of $57 million in the third quarter of 2007. Business unit income in the third quarter of 2008 had positive contributions from various gas monetization projects, including the Pearl GTL, Skikda LNG, and Gorgon LNG projects, several offshore related projects in Australia and the Caspian area, and an FPSO project. The third quarter of 2007 included an $18 million pre-tax gain on the sale of BRC.
 
Government and Infrastructure business unit income was $104 million in the third quarter of 2008 compared to business unit income of $98 million in the third quarter of 2007. Business unit income in the third quarter of 2008 included a $13 million reversal of a charge related to an unfavorable jury verdict of approximately $40 million from litigation with a subcontractor on the LogCAP III contract in the second quarter of 2008 and positive contributions from Iraq-related activities, the Allenby & Connaught project, work on the CENTCOM project, and several water projects. Business unit income in the third quarter of 2007 included a $6 million gain related to a favorable settlement on a road project.
 
Services business unit income was $27 million in the third quarter of 2008 compared to business unit income of $6 million in the third quarter of 2007. Business unit income in the third quarter of 2008 had positive contributions from BE&K, the Scotford Upgrader project in Canada, service and maintenance vessels in the Gulf of Mexico, and various industrial service projects.
 
Downstream business unit income was $15 million in the third quarter of 2008 compared to business unit income of $4 million in the third quarter of 2007. Business unit income in the third quarter of 2008 had positive contributions from the Yanbu export refinery project, program management services for the Ras Tanura project in Saudi Arabia, and several BE&K projects.
 
Technology business unit income was $4 million in the third quarter of 2008 compared to business unit income of $5 million in the third quarter of 2007. Business unit income in the third quarter of 2008 had positive contributions from an ammonia project in Venezuela and a refinery fluid catalytic cracking revamp project in Colombia.
 
Ventures business unit income was $0 million in the third quarter of 2008 compared to a business unit loss of $3 million in the third quarter of 2007. Business unit income in the third quarter of 2008 was primarily impacted by income from the investment in the Allenby & Connaught military accommodation and services project and offset by start-up costs related to the EBIC ammonia project in Egypt. Business unit loss for the third quarter of 2007 included continued operating losses generated on an investment in a railroad project in Australia.
Corporate general and administrative expense in the third quarter of 2008 was $55 million compared to $65 million in the prior year third quarter.
 
Total cash flows provided by operating activities for the first nine months ended September 30, 2008 was $1 million, which included a $158 million reduction in net committed cash from advanced payments related to consolidated joint ventures, other consolidated subsidiaries, and a contract in progress.
Significant Achievements and Awards
  • KBR announced on August 6, 2008 and completed on September 3, 2008, the company's first share repurchase program. The company repurchased a total of 8.4 million shares at an average price of $23.35 per share.
  • KBR announced that the Kellogg Joint Venture Group (KJVG) was awarded a Work Authorization by Chevron Australia Pty Ltd for approximately AUD$300 million to finalize front end engineering and design (FEED) for the Chevron-operated Gorgon project. Through KJVG, KBR is leading the design of the Liquefied Natural Gas facility on Barrow Island, which will consist of three, 5 million ton per annum LNG trains. The FEED also included a 300TJ/d domestic gas plant.
  • KBR announced a division of its Services business unit, BE&K, was awarded a $232 million contract by ADA-ES, Inc. for the construction of its Red River Activated Carbon Plant located in Red River Parish, Louisiana. BE&K will provide full engineering, procurement, and construction services.
  • KBR announced a division of its Services business unit, BE&K, was awarded a $64 million contract by EFACEC Power Transformers, Inc. for the construction of a power transformer manufacturing facility in Rincon, Georgia. BE&K will design and construct the new manufacturing facility that will be used by EFACEC to build power transformers, including core form, shell form, and mobile power substations for the U.S. market.
  • KBR announced a division of its Services business unit, BE&K, was awarded a contract for the rebuild of a large recovery boiler for Weyerhaeuser Company in Columbus, Mississippi. BE&K will reconstruct the lower furnace of the mill's recovery boiler, including: replacing furnace walls and existing sloped floor; upgrading the combustion air system; and replacing a smelt dissolving tank, as well as installing new agitators and soot blowers.
  • KBR announced on October 6, 2008, it had acquired Wabi Development Corporation (Wabi) for approximately US$19.5 million. Wabi services the energy, forestry, and mining industries in Canada and will be integrated into KBR's Services Business Unit. Wabi provides maintenance, fabrication, construction, and construction management services to a variety of clients in Canada and Mexico.
  • KBR announced a division of its Services business unit, BE&K, was awarded a multi-million dollar contract by Georgia Power for full engineering, procurement, and construction services of a new baghouse unit at Plant Scherer near Macon, Georgia. BE&K will provide full EPC services for the installation of a new baghouse unit, including major new ductwork and ancillary facilities.
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