Press Release

Wire Release

HOUSTON, Texas - July 29, 2016 - KBR, Inc. (NYSE: KBR), a global technology, engineering, procurement and construction company serving the hydrocarbons and government services industries, today announced solid second quarter 2016 financial results.

Net income attributable to KBR was $47 million or $0.32 per diluted share ($0.35 per diluted share excluding $4 million in pre-tax U.S. Government legacy legal fees) in the second quarter of 2016 compared to net income of $62 million or $0.43 per diluted share ($0.46 per diluted share excluding $5 million in legacy legal fees) in the second quarter of 2015. Results in the second quarter of 2015 included a $28 million pre-tax gain on the sale of a non-strategic business.

Consolidated revenue in the second quarter of 2016 was $1.0 billion compared to $1.4 billion in the second quarter of 2015 ($1.2 billion excluding 2Q15 revenues of businesses divested or deconsolidated during 2015).

"KBR's transformation and strategic discipline continues to result in strong financial performance supported by growing demand for our government services and despite challenges in the hydrocarbons sector. On July 1, we closed on the acquisition of Wyle, Inc. which will operate under the brand name "KBRwyle". This business combined with our existing government services franchise provides us with an increasing proportion of higher margin, long-term, annuity-type contracts which are seeing increased synergy with our E&C technical personnel. This quarter, KBR was awarded two contract extensions with the U.S. Department of Defense and a multi-year services contract for the Australian Defense Department. Our opportunity pipeline continues to grow and the Government Services and Technology businesses provide greater visibility into earnings in 2017 and beyond" said Stuart Bradie, President and Chief Executive Officer of KBR, Inc.

"Our second quarter 2016 results also reflect continued progress against our cost reduction targets. We are on track to exceed the year-end 2016 targets with at least $200 million in annual cost savings already identified and actioned to date. These are net savings and reflect the total overhead cost reductions that are partially offset by reduced volumes of costs chargeable to contracts. Directionally significant, we reached agreement with the U.S. government on reimbursement of previously incurred legal fees plus any potential further legal costs and plaintiff awards related to the legacy sodium dichromate legal disputes. We continued with a balanced capital allocation policy through the acquisition of Wyle and the payment of a competitive yielding dividend, and our Balance Sheet provides us with future optionality," Bradie said.

Business Discussion (All comparisons are second quarter 2016 versus second quarter 2015 unless otherwise noted.)

Technology & Consulting (T&C) Results
Technology & Consulting gross profit was $15 million, down $6 million from the prior year while revenue increased by $18 million to $98 million. The strong sales reflect a continuing trend from 4Q15 of an increase in the proportion of proprietary equipment sales which carry lower margins than technology license sales. Almost 60% of revenue in 2Q16 was derived from proprietary equipment sales compared to 25% in the same period last year. While this has reduced the segment's margin percentages below 20% in 2016, we believe this is more of a timing issue and continue to expect the long-term margin percentages for this business to be in the low twenties.

The integration of the technology acquisitions made earlier this year is substantially complete and we continue to seek opportunities to supplement our current technology portfolio. The smaller upstream consulting portion of the T&C business remains challenged from reduced volume of business caused by low oil prices.

Engineering & Construction (E&C) Results
Engineering & Construction gross profit was $35 million, down $17 million from the prior year. The reduction in gross profit was due primarily to increased costs during plant start-up of an EPC ammonia project in the U.S. related to equipment failure and to reduced project activity including a major LNG project in Australia. This reduction was partially offset by a gain on closeout activities of an LNG project in Africa.

Revenue was $621 million, a decrease of $332 million mainly due to the deconsolidation of KBR's Americas Industrial Services business which had revenues of $119 million in 2Q15, lower revenue on an LNG project in Australia as the project moves towards completion, and reduced activity on a number of other projects.
Equity in earnings of unconsolidated affiliates was $23 million, down $17 million, predominantly due to a favorable earnings adjustment in 2Q15 that did not reoccur in 2016 on our offshore maintenance joint venture in Mexico.

Government Services (GS) Results
Government Services gross profit was $41 million, an increase of $42 million, while revenue was $229 million, an increase of $71 million from the prior year. This increase was due to expansion of existing U.S. government contracts and task orders supporting the U.S. Military and from the successful agreement with the U.S. government regarding reimbursement of $33 million in legal fees related to the sodium dichromate legal disputes. The agreement also covers reimbursement of future legal fees and any potential future awards to plaintiffs under the Restore Iraqi Oil (RIO) contract. The company also incurred approximately $4 million in legal fees in 2Q16 relating to the legacy LogCap III and other matters from the RIO contract.

Equity in earnings of unconsolidated affiliates was $10 million, down $3 million, and primarily driven by higher earnings from a U.K Ministry of Defence construction project that was nearing completion in 2015 that did not reoccur in 2Q16. Equity in earnings reflects continued strong performance on joint venture annuity type contracts in the U.K.

Looking forward, KBR along with KBRwyle now has significant capabilities and service offerings that span the full spectrum of government mission requirements including research and development, testing, engineering, logistics, deployed operations, and life-cycle sustainment. The acquisition is expected to be accretive to KBR's earnings per share in 2016 and we continue to seek additional high-end government services acquisition targets. KBR also remains well placed in sole source negotiations on the U.K. MoD's large scale Army 2020 rebasing contract and expect a client decision later this year. Growth expectations also include expansion of the company's international base operating support services and task orders supporting the U.S. Military in 2016.

Non-Strategic Business (NSB) Results
Non-Strategic Business had a gross loss of $17 million in the quarter driven by higher subcontractor costs forecast to complete a power project as that project moves toward completion in early 2017. Revenue was $61 million, down $129 million, primarily related to the sale of the Building Group business unit in 2Q15 which had revenues of approximately $55 million in 2Q15 and from reduced activities on two recently completed power projects.

Strategic Actions Update
During the second quarter, the company incurred $12 million in pre-tax restructuring costs primarily related to severance costs and recorded a $2 million pre-tax gain mainly due to the disposition of certain Corporate real estate assets. The company continues to rebalance its business portfolio to focus on International Government Services and Global Hydrocarbons.

Guidance
The company reiterates its full year 2016 fully diluted earnings per share guidance of between $1.20 and $1.45 per share, excluding legal costs associated with legacy U.S. Government contracts and including results for KBRwyle for the second half of 2016 which are expected to add between $0.05 and $0.08 per share. KBR expects the legacy legal costs to be approximately $15 million, or $0.11 per fully diluted share in 2016. The estimated legacy legal fees do not assume any cost reimbursement from the U.S. Government that could occur in the future.

About KBR, Inc.
KBR, Inc. is a global technology, engineering, procurement and construction company serving the hydrocarbons and government services industries, employing approximately 25,800 people worldwide with customers in more than 80 countries and operations in 40 countries across three distinct global businesses:Technology & Consulting, including proprietary technology in refining, ethylene, ammonia and fertilizers, and gasification; and niche consulting and know-how through subsidiaries Granherne, Energo and GVAEngineering & Construction, including Offshore Oil & Gas; Onshore Oil & Gas; LNG/GTL; Refining; Petrochemicals; Chemicals; differentiated EPC, and Industrial ServicesGovernment Services, incorporating KBRwyle, includes capabilities that span the full spectrum of government mission requirements including research and development, testing, engineering, logistics, deployed operations, and life-cycle sustainment.

KBR is proud to work with its customers across the globe to provide technology, value-added consulting services, integrated EPC delivery and Long Term Industrial Services to ensure consistent project delivery with predictable results. At KBR, we deliver.

Visit www.kbr.com

Forward Looking Statements
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 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
Lynn Nazareth
Vice President, Investor Relations
713-753-5082
[email protected]

Media
Marit Babin
Director, Global Communications & Government Relations
713-753-3800

[email protected]

KBR, Inc.: Consolidated Statements of IncomeÊ(Millions, except per share data) (Unaudited)ÊÊÊÊÊÊÊThree Months EndedÊÊÊJune 30,ÊÊJune 30,ÊÊMarch 31ÊÊÊ2016ÊÊ2015ÊÊ2016ÊÊÊÊÊÊÊÊÊÊÊÊÊÊRevenues:ÊÊÊÊÊÊÊÊÊÊÊÊTechnology & ConsultingÊ$98ÊÊ$80ÊÊ$97ÊEngineering & ConstructionÊÊ621ÊÊÊ953ÊÊÊ606ÊGovernmentÊServicesÊÊ229ÊÊÊ158ÊÊÊ210ÊÊSubtotalÊÊ948ÊÊÊ1,191ÊÊÊ913ÊNon-strategicÊBusinessÊÊ61ÊÊÊ190ÊÊÊ83ÊTotalÊrevenuesÊÊ1,009ÊÊÊ1,381ÊÊÊ996ÊGrossÊprofit (loss):ÊÊÊÊÊÊÊÊÊÊÊÊTechnology & ConsultingÊÊ15ÊÊÊ21ÊÊÊ17ÊEngineering & ConstructionÊÊ35ÊÊÊ52ÊÊÊ29ÊGovernmentÊServicesÊÊ41ÊÊ