Press Release

Wire Release

Revenue growth of 16% overall, with 11% organic growth in Government Services Solid earnings, with Net Income of $42 million, GAAP EPS of $0.30; Adjusted EPS of $0.34 Strong operating cash flow performance of $94 million Book-to-bill of 1.2x overall KBR, with 2.6x Hydrocarbons Services EPS guidance raised
HOUSTON, Texas - July 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 second quarter 2018 financial results.

"I'm pleased to report that KBR had a solid second quarter with positive performances from all three of our business segments," said Stuart Bradie, KBR President and CEO.

"We experienced continued year over year organic growth in our Government Services business, increased profitability in Technology and stabilized sequential revenues with a very healthy book-to-bill in our Hydrocarbons business," Bradie continued. "The signals we are getting from customers on the capital projects outlook in Hydrocarbons has improved measurably in recent months. In addition, on the operations side we maintained our targeted margins in all segments and produced a healthy cash flow result. Improving fundamentals in our government and hydrocarbons end markets coupled with our strategic positioning and performance of our recent acquisitions enable us to raise our outlook for the year," said Bradie. "Our people continue to be the foundation of this company and its success, consistently delivering the best execution and one of the strongest safety performances in the business."
Second Quarter Financial Results


Three Months Ended June 30,

% Change

Six Months Ended June 30,

% Change
Dollars in millions
2018

2017


2018

2017

Revenue
$
1,267


$
1,094


16
%

$
2,305


$
2,200


5
%
Gross Profit
$
130


$
108


20
%

$
211


$
190


11
%
Equity in earnings of unconsolidated affiliates
$
10


$
32


(69)
%

$
33


$
41


(20)
%
Gain on consolidation of Aspire entities
$
-


$
-


N/A


$
115


$
-


N/A

Net income attributable to KBR
$
42



$
77


(45)
%

$
180


$
114


58
%
Adjusted EBITDA(1)
$
99


$
119


(17)
%

$
182


$
197


(8)
%
Diluted EPS
$
0.30


$
0.54


(44)
%

$
1.27


$
0.80


59
%
Adjusted EPS(1)
$
0.34


$
0.57


(40)
%

$
0.69


$
0.85


(19)
%
Operating cash flows
$
94


$
325


(71)
%

$
(36)


$
210


(117)
%



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




Three Months Ended, June 30, 2018:

Revenue: The increase in revenues was driven by strong organic growth of 11% in our GS business segment, the consolidation of acquired entities in the Aspire Defence program and our acquisition of SGT. The increase was partially offset by completion or substantial completion of several projects within our HS business segment, and the non-recurrence of $35 million in revenues associated with the PEMEX settlement in second quarter of 2017.

Gross Profit: The increase in gross profits were driven by the consolidation of the Aspire Defence project entities, the inclusion of SGT, coupled with strong organic growth in our GS business segment.Ê Included in gross profit for the quarter was the favorable close out of an LNG project in Australia offset by the non-recurring gain associated with the PEMEX settlement in the second quarter of 2017.

Equity in earnings: The decrease in equity in earnings was driven by the consolidation of the Aspire Defence entities in our GS business segment, now reported in gross profit, and reduced activity on the Ichthys project in our HS segment as we near completion.

Operating cash flow: The cash provided by operations totaled $94 million in the three months ended June 30, 2018 compared to cash provided by operations of $325 million in the three months ended June 30, 2017.Ê Operating cash flows in the three months ended June 30, 2017 included collection of a $344 million payment (net of tax) associated with the PEMEX settlement.

Six Months Ended, June 30, 2018:

Revenue: The increase in revenues was driven by strong organic growth in our GS business segment, the consolidation of acquired entities in the Aspire Defence program and our acquisition of SGT. The increase was partially offset by completion or substantial completion of several projects within our HS business segment and the non-recurrence of $35 million in revenue from the PEMEX settlement in second quarter of 2017.

Gross Profit: The increase in gross profits were driven by the consolidation of the Aspire Defence project entities, inclusion of SGT, organic growth in our GS business segment, and increased profit in our Technology business segment.Ê These increases were partially offset by decreased profit in our HS business segment due to reduced activity and the non-recurring PEMEX settlement.

Equity in earnings: The decrease in equity in earnings was driven by the consolidation of the Aspire Defence project entities in our GS business segment, now reported in gross profit and decreased activity on a JV in Mexico. These decreases were partially offset by an increase in earnings provided by the Ichthys LNG project, partially resulting from increased cost estimates in the first quarter of 2017 that did not recur in 2018.

Gain on consolidation of Aspire entities: The gain was recognized upon consolidation of the Aspire Defence entities as a result of adjusting our investment to fair value as required by U.S. generally accepted accounting principles.

Operating cash flow: The cash used in operations totaled $36 million in the six months ended June 30, 2018 compared to cash provided by operations of $210 million in the six months ended June 30, 2017. Operating cash flows in the six months ended June 30, 2017 included collection of a $344 million payment (net of tax) associated with the PEMEX settlement.

New Business:

Government Services

We were awarded a $133 million task order by the U.S. Army to provide technical and engineering services to the PATRIOT missile system.We were awarded a cost-plus-fixed-fee contract modification to provide base life support services to the U.S. Army under the LOGCAP IV contract.We were awarded a contract modification by the U.S. Marine Corps to provide prepositioning and logistic support services for the USMC Blount Island Command.We secured a seat on a $900 million indefinite-delivery / indefinite-quantity contract to provide rapid solutions to fix problems identified through the Department of Defense's Joint Test and Evaluation Program.

Technology

We were awarded an ammonia plant revamp contract by Krishak Bharati Cooperative Ltd to provide licensing and basic engineering design services for their ammonia plant in Hazira, India.We were awarded a license, engineering and proprietary equipment supply contract by China Pingmei Shenma Group for two new polycarbonate plants in the Henan Province in ChinaWe were awarded a license and engineering contract by GS Caltex Corporation to supply SCORE Ethylene technology at their mixed feed cracker project in Yeosu, South Korea.We were awarded a nitric acid plant revamp contract by Haifa Chemicals Ltd for its plant in Mishor-Rotem, Israel.

Hydrocarbons Services

We were awarded a multi-year contract to provide engineering, procurement and construction management services to a fortune 100 chemicals manufacturer for their facilities in the U.S. and Mexico.We were awarded a FEED leading to reimbursable construction EPC by Arkema Chemicals to increase sulfur derivatives production at their Beaumont, Texas site.We were awarded a contract to provide project management, engineering, procurement and construction management services for DuPont Safety & Construction at its facility in Contern, Luxembourg.We were awarded a project management consultancy services contract by Oman LNG, to assist in the selection and management of the EPC contractor for its 120 MW gas engine power plant.

KBR backlog increased from $13.2 billion as of March 31, 2018 to $13.5 billion as of June 30, 2018.Ê Backlog increases in Hydrocarbons Services of $544 million and $86 million in Technology were partially offset by decreases in Government Services of $291 million, which includes unfavorable foreign exchange rate differences primarily due to strengthening of the U.S. dollar against the British pound.

Guidance
We are increasing the company's full year 2018 fully diluted adjusted earnings per share guidance range to $1.40 to $1.50 per share from the previous range of $1.35 to $1.45.Ê Our guidance of earnings per share is on an adjusted EPS basis, which excludes legacy legal fees for U.S. Government contracts, acquisition & integration-related expenses associated with the Aspire and SGT acquisitions, new amortization associated with the Aspire acquisitions and the gain on the Aspire consolidation.Ê The estimated legacy legal fees do not assume any cost reimbursement from the U.S. Government that could occur in the future.Ê A reconciliation of GAAP EPS to adjusted EPS guidance is located at the end of this release.

Our estimated effective tax rate for 2018 is unchanged and estimated to range from 22% to 24%.Ê The operating cash flows are also unchanged and estimated to range from $125 million to $175 million for 2018.

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 logisticsTechnology, including proprietary technology focused on the monetization of hydrocarbons (especially natural gas and natu