Press Release

Wire Release

KBR Revenue growth of 24% to $1.3 billion and Net Income Attributable to KBR of $58 million 59% Government Services revenue growth, 12% organic; 35% for Technology, all organic EPS of $0.41 and Adjusted EPS of $0.46 Increasing 2018 EPS guidance to $1.93 to $2.03 and Adjusted EPS guidance to $1.45 to $1.55

HOUSTON, Texas

- October 30, 2018 -

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 2018 financial results.

I am delighted to report another strong quarter of growth, in which KBR delivered healthy revenues, earnings and operating cash flows," said Stuart Bradie, KBR President and CEO.

KBR's top line revenue momentum is underpinned by industry leading organic growth from its Government Services and Technology businesses, strong execution across all segments, accretive growth from Aspire and SGT and buoyant government contracting and hydrocarbons end markets. "The markets are as healthy as we've seen in many years, and we are strategically positioned where demand is growing," Bradie said. "Our pipeline of opportunities has increased considerably from just six months ago, and we are encouraged by active levels of client engagement and project award momentum. Operationally, each of our segments is delivering strong performance and results, and we have restored operating cash flows to normative levels. Given our solid market fundamentals and consistent execution, we are pleased to increase our 2018 Adjusted EPS guidance for the second consecutive quarter," continued Bradie. "Our success - safety, operational, financial - is directly attributable to the outstanding commitment of our people, and I wish to thank each of them for their contributions in strengthening KBR today as we position our company for tomorrow."

Third Quarter Financial Results

Three Months Ended September 30,

Nine Months Ended September 30, Dollars in millions 2018 2017 2018 2017

Revenue $1,278 $1,034 $3,583 $3,234

Gross Profit $122 $87 $333 $277

Equity in earnings of unconsolidated affiliates $21 $23 $54 $64

Gain on consolidation of Aspire entities $(2) $- $113 $-

Net income attributable to KBR $58 $45 $238 $159

Adjusted EBITDA (1)$124 $86 $306 $283

Diluted EPS$0.41 $0.32 $1.68 $1.12

Adjusted EPS (1)$0.46 $0.35 $1.15 $1.17

Operating cash flows$72 $28 $36 $238

(1) See additional information at the end of this release regarding non-GAAP financial measures

Summary of Financial Results: Overall, our quarterly and year to date increases in revenue, gross profit, net income and earnings per share were driven by strong organic growth in our Government Services and Technology businesses, the consolidation of acquired entities in the Aspire Defence program and our acquisition of SGT. These increases were partially offset by the completion or substantial completion of several projects within our Hydrocarbons Services business as well as the non-recurrence of the $35 million PEMEX settlement in the second quarter of 2017.

Our joint ventures continue to produce quality earnings from solid execution. Our Brown & Root Industrial Services joint venture grew significantly year over year, and we achieved a significant construction milestone on a lump sum EPC project executed from one of our joint ventures in Europe. The quarterly and year to date decrease in equity in earnings is attributable to the consolidation of the Aspire Defence subcontracting entities, now reported in revenue and gross profit, and reduced earnings from the Ichthys LNG project.

Liquidity: We ended the quarter with $581 million of cash and $1,169 million of gross debt (or $588 million of net debt). During the quarter, cash provided by operations totaled $72 million, a 1.2x operating cash conversion rate, with DSO and DPO remaining consistent from the second quarter 2018.

New Business
KBR achieved an overall book-to-bill of 1.1x during the quarter with ending backlog of $13.5 billion as of September 30, 2018. Bid volume across the business remains high with $26 billion of bids submitted and awaiting award[1] and another $12 billion in proposal preparation at the end of September.

Government Services
Third quarter bookings for Government Services were strong with book-to-bill of 1.3x. Domestically, each of the GS service lines scored wins highlighting our ability to apply solutions to high impact, mission critical work that drives customer confidence across the value chain. Internationally, our portfolio of PFI contracts continues to deliver expansion opportunities, and we continue to seek diversification into other government sectors and non-PFI defense projects. The following summarizes selected awards during the quarter:Defense Health Agency award to provide cybersecurity services to secure healthcare information of the U.S. Air Force, Army and Navy and their families; U.S. Air Force Institute of Technology Graduate School award to provide defense-focused graduate and professional continuing education;A seat on the Department of Defense Information Analysis Center R&D contract; LIG Nex1 award to support the upgrade of the Korean military's Identify Friend or Foe capabilities; and NASA award to study the future of commercial enterprise in low Earth orbit.

Technology
Our Technology business delivered a healthy book-to-bill of 1.4x, once again achieving record backlog at the end of the quarter. We continue to experience strong demand for petrochemical, refining and agricultural technologies driven by availability of competitively priced feedstock combined with increasing global development, expanding consumer demand and increasingly stringent environmental policies. The following summarizes selected awards during the quarter:K-COTª and SCOREª technology award by Lihuayi Lijin Refining & Chemical Co., Ltd.; PCMAXª polycarbonate technology awards Pingmei Shenma Group; andNitric acid technology award by Kemerovo Azot JSC.

Hydrocarbons Services
Market conditions are showing improvement for LNG and downstream opportunities given the abundance of low-priced natural gas and the increasing demand for clean LNG, chemicals and petrochemicals. We were awarded a number of strategic concept, pre-FEED and FEED projects to deliver solutions to advance our clients' core objectives to launch new capital projects that represent future delivery-stage opportunities for KBR. To strengthen our competitive advantage, we also announced a joint development alliance with ConocoPhillips LNG Licensing LLC to provide low-cost and expedited mid-scale LNG solutions to the marketplace utilizing Optimized Cascade¨ process technology and the KBR SmartSPENDSM methodology.

Guidance
We are increasing the company's full year 2018 EPS guidance range to $1.93 to $2.03 and Adjusted EPS guidance range to $1.45 to $1.55. Our guidance of earnings per share is on an Adjusted EPS basis, which excludes legacy legal costs for U.S. Government contracts, acquisition & integration-related expenses associated with our acquisitions and the gain and amortization associated the Aspire consolidation. The estimated legacy legal costs do not assume any cost reimbursement from the U.S. Government that could occur in the future. A reconciliation of GAAP EPS to Adjusted EPS guidance is located at the end of this release. We also reaffirm guidance for operating cash flows estimated to range from $125 million to $175 million for 2018.

Our effective tax rate, excluding discrete items, for 2018 is estimated to range from 23% to 25%, an increase from the previous range of 22% to 24%. The increase is primarily related to new guidance published during the quarter on taxes associated with international operations stemming from the U.S. Tax Cuts and Jobs Act of 2017.

1 For Hydrocarbons Services ""bids submitted and awaiting award"" includes proposals formally submitted as well as EPC/EPCm projects awarded but that have not achieved FID (e.g. Magnolia and Methanex). ""FID"" is not applicable for our GS and Technology prospects.

 

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 over 34,000 people worldwide (including our joint ventures), with customers in more than 80 countries, and operations in 40 countries, across three synergistic global businesses:Government Services, 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, including proprietary technology focused on the monetization of hydrocarbons (especially natural gas and natural gas liquids) in ethylene and petrochemicals; ammonia, nitric acid and fertilizers; oil refining and gasification; andHydrocarbons Services, 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.

For further information, please contact:

Investors
Alison Vasquez
Vice President, Investor Relations
713-753-5082
[email protected]

Media
Brenna Hapes
External Global Communications
713-753-3800
[email protected]

 

KBR, Inc.: Consolidated Statements of Operations
(In millions, except for per share data)

(Unaudited)Ê Three Months EndedÊ September 30,Ê September 30,Ê 2018Ê 2017 Revenues:ÊÊÊGovernment Services$928ÊÊ$582ÊTechnology81ÊÊ60ÊHydrocarbons Services268ÊÊ388ÊSubtotal1,277ÊÊ1,030ÊNon-strategic Business1ÊÊ4Ê TotalÊrevenues1,278ÊÊ1,034Ê Gross profit (loss):ÊÊÊGovernment Services81ÊÊ39ÊTechnology23ÊÊ19ÊHydrocarbons Services23ÊÊ26ÊSubtotal127ÊÊ84ÊNon-strategic Business(5)ÊÊ3Ê Total gross profit122ÊÊ87Ê Equity in earnings of unconsolidated affiliates:ÊÊÊGovernment Services8ÊÊ14ÊHydrocarbons Services13ÊÊ9ÊSubtotal21ÊÊ23ÊNon-strategic Business-ÊÊ-Ê Total equity in earnings of unconsolidated affiliates21ÊÊ23ÊGeneral and administrative expenses(37)ÊÊ(37)ÊAcquisition and integration related costs(1)ÊÊ-ÊGain on consolidation of Aspire entities(2)ÊÊ-Ê Operating income103ÊÊ73ÊInterest expense(20)ÊÊ(6)ÊOther non-operating loss(1)ÊÊ(4)Ê Income before income taxes and noncontrolling interests82ÊÊ63ÊProvision for income taxes(22)ÊÊ(16)Ê Net income60ÊÊ47ÊNet income attributabl to noncontrolling interests(2)ÊÊ(2)Ê Net income attributable to KBR$58ÊÊ$45ÊÊÊÊÊ Net income attributable to KBR per share:ÊÊÊBasic$0.41ÊÊ$0.32ÊDiluted$0.41ÊÊ$0.32ÊÊÊÊÊBasic weighted average common shares outstanding141ÊÊ140ÊDiluted weighted average common shares outstanding141ÊÊ140ÊÊÊÊÊCash dividends declared per share$0.08ÊÊ$0.08Ê
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KBR, Inc.: Consolidated Statements of Operations
(In millions, except for per share data)
(Unaudited)Ê Nine Months EndedÊ September 30,Ê September 30,Ê 2018Ê 2017 Revenues:ÊÊÊGovernment Services$2,473ÊÊ$1,640ÊTechnology215ÊÊ196ÊHydrocarbons Services894ÊÊ1,361ÊSubtotal3,582ÊÊ3,197ÊNon-strategic Business1ÊÊ37Ê TotalÊrevenues3,583ÊÊ3,234Ê Gross profit (loss):ÊÊÊGovernment Services204ÊÊ113ÊTechnology61ÊÊ50ÊHydrocarbons Services75ÊÊ114ÊSubtotal340ÊÊ277ÊNon-strategic Business(7)ÊÊ-Ê Total gross profit333ÊÊ277Ê Equity in earnings of unconsolidated affiliates:ÊÊÊGovernment Services22ÊÊ41ÊHydrocarbons Services32ÊÊ23ÊSubtotal54ÊÊ64ÊNon-strategic Business-ÊÊ-Ê Total equity in earnings of unconsolidated affiliates54ÊÊ64ÊGeneral and administrative expenses(113)ÊÊ(107)ÊAcquisition and integration related costs(5)ÊÊ-ÊGain on disposition of assets-ÊÊ5ÊGain on consolidation of Aspire entities113ÊÊ-Ê Operating income382ÊÊ239ÊInterest expense(43)ÊÊ(16)ÊOther non-operating loss(4)ÊÊ(9)Ê Income before income taxes and noncontrolling interests335ÊÊ214ÊProvision for income taxes(74)ÊÊ(50)Ê Net income261ÊÊ164ÊNet income attributable to noncontrolling interests(23)ÊÊ(5)Ê Net income attributable to KBR$238ÊÊ$159ÊÊÊÊÊ Net income attributable to KBR per share:ÊÊÊBasic$1.68ÊÊ$1.12ÊDiluted$1.68ÊÊ$1.12ÊÊÊÊÊBasic weighted average common shares outstanding140ÊÊ141ÊDiluted weighted average common shares outstanding141ÊÊ141ÊÊÊÊÊCash dividends declared per share$0.24ÊÊ$0.24Ê
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KBR, Inc.: Consolidated Balance Sheets
(In millions)ÊÊ September 30,Ê December 31,ÊÊ 2018Ê 2017ÊÊ(Unaudited)ÊÊ AssetsÊÊÊÊ Current assets:ÊÊÊÊCash and equivalentsÊ$581ÊÊ"