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KBR Announces Solid Second Quarter 2016 Earnings


/EINPresswire.com/ -- HOUSTON, TX--(Marketwired - 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 GVA
  • Engineering & Construction, including Offshore Oil & Gas; Onshore Oil & Gas; LNG/GTL; Refining; Petrochemicals; Chemicals; differentiated EPC, and Industrial Services
  • Government 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.

                                                                            
                                                                            
                KBR, Inc.: Consolidated Statements of Income                
               (Millions, except per share data) (Unaudited)                
                                                                            
                                                                            
                                                   Three Months Ended       
                                            --------------------------------
                                             June 30,   June 30,   March 31 
                                               2016       2015       2016   
                                            ---------- ---------- ----------
                                                                            
Revenues:                                                                   
Technology & Consulting                     $      98  $      80  $      97 
Engineering & Construction                        621        953        606 
Government Services                               229        158        210 
                                            ---------- ---------- ----------
  Subtotal                                        948      1,191        913 
Non-strategic Business                             61        190         83 
----------------------------------------------------------------------------
Total revenues                                  1,009      1,381        996 
----------------------------------------------------------------------------
Gross profit (loss):                                                        
Technology & Consulting                            15         21         17 
Engineering & Construction                         35         52         29 
Government Services                                41         (1)        21 
                                            ---------- ---------- ----------
  Subtotal                                         91         72         67 
Non-strategic Business                            (17)         2          1 
----------------------------------------------------------------------------
Total gross profit                                 74         74         68 
----------------------------------------------------------------------------
Equity in earnings of unconsolidated                                        
 affiliates:                                                                
Technology & Consulting                             -          -          - 
Engineering & Construction                         23         40         18 
Government Services                                10         13         11 
                                            ---------- ---------- ----------
  Subtotal                                         33         53         29 
Non-strategic Business                              -          -          - 
----------------------------------------------------------------------------
Total equity in earnings of unconsolidated                                  
 affiliates                                        33         53         29 
----------------------------------------------------------------------------
General and administrative expenses               (34)       (42)       (34)
Asset impairment and restructuring charges        (12)       (17)        (2)
Gain on disposition of assets                       2         28          4 
----------------------------------------------------------------------------
Operating income                                   63         96         65 
Other non-operating income (expense)                7         (5)        (5)
----------------------------------------------------------------------------
Income before income taxes and                                              
 noncontrolling interests                          70         91         60 
Provision for income taxes                        (23)       (23)       (15)
----------------------------------------------------------------------------
Net income                                         47         68         45 
Net income attributable to noncontrolling                                   
 interests                                          -         (6)        (3)
----------------------------------------------------------------------------
Net income attributable to KBR              $      47  $      62  $      42 
----------------------------------------------------------------------------
                                                                            
Net income attributable to KBR per share:                                   
Basic                                       $    0.32  $    0.43  $    0.30 
Diluted                                     $    0.32  $    0.43  $    0.30 
                                                                            
Basic weighted average common shares                                        
 outstanding                                      142        144        142 
Diluted weighted average common shares                                      
 outstanding                                      142        144        142 
                                                                            
Cash dividends declared per share           $    0.08  $    0.08  $    0.08 
                                                                            
                                                                            
                KBR, Inc.: Consolidated Statements of Income                
               (Millions, except per share data) (Unaudited)                
                                                                            
                                                         Six Months Ended   
                                                       ---------------------
                                                        June 30,   June 30, 
                                                          2016       2015   
                                                       ---------- ----------
                                                                            
Revenues:                                                                   
Technology & Consulting                                $     195  $     152 
Engineering & Construction                                 1,227      1,930 
Government Services                                          439        313 
                                                       ---------- ----------
  Subtotal                                                 1,861      2,395 
Non-strategic Business                                       144        422 
----------------------------------------------------------------------------
Total revenues                                             2,005      2,817 
----------------------------------------------------------------------------
Gross profit (loss):                                                        
Technology & Consulting                                       32         40 
Engineering & Construction                                    64        107 
Government Services                                           62         (5)
                                                       ---------- ----------
  Subtotal                                                   158        142 
Non-strategic Business                                       (16)         2 
----------------------------------------------------------------------------
Total gross profit                                           142        144 
----------------------------------------------------------------------------
Equity in earnings of unconsolidated affiliates:                            
Technology & Consulting                                        -          - 
Engineering & Construction                                    41         61 
Government Services                                           21         27 
                                                       ---------- ----------
  Subtotal                                                    62         88 
Non-strategic Business                                         -          - 
----------------------------------------------------------------------------
Total equity in earnings of unconsolidated affiliates         62         88 
----------------------------------------------------------------------------
General and administrative expenses                          (68)       (81)
Asset impairment and restructuring charges                   (14)       (19)
Gain on disposition of assets                                  6         28 
----------------------------------------------------------------------------
Operating income                                             128        160 
Other non-operating income                                     2          1 
----------------------------------------------------------------------------
Income before income taxes and noncontrolling                               
 interests                                                   130        161 
Provision for income taxes                                   (38)       (42)
----------------------------------------------------------------------------
Net income                                                    92        119 
Net income attributable to noncontrolling interests           (3)       (13)
----------------------------------------------------------------------------
Net income attributable to KBR                         $      89  $     106 
----------------------------------------------------------------------------
                                                                            
Net income attributable to KBR per share:                                   
Basic                                                  $    0.62  $    0.73 
Diluted                                                $    0.62  $    0.73 
                                                                            
Basic weighted average common shares outstanding             142        144 
Diluted weighted average common shares outstanding           142        144 
                                                                            
Cash dividends declared per share                      $    0.16  $    0.16 
                                                                            
                                                                            
                   KBR, Inc.: Consolidated Balance Sheets                   
                                 (Millions)                                 
                                                                            
                                                   June 30,    December 31, 
                                                 ---------------------------
                                                     2016          2015     
----------------------------------------------------------------------------
                                                  (Unaudited)               
                                   Assets                                   
Current assets:                                                             
Cash and equivalents                             $        804  $        883 
Accounts receivable, net of allowance for                                   
 doubtful accounts of $14 and $17                         618           628 
Costs and estimated earnings in excess of                                   
 billings on uncompleted contracts ("CIE")                252           224 
Other current assets                                      127           109 
----------------------------------------------------------------------------
Total current assets                                    1,801         1,844 
Claims and accounts receivable                            532           526 
Property, plant, and equipment, net of                                      
 accumulated depreciation of $353 and $352                                  
 (including net PPE of $41 and $48 owned by a                               
 variable interest entity)                                153           169 
Goodwill                                                  345           324 
Intangible assets, net of accumulated                                       
 amortization of $92 and $91                               50            35 
Equity in and advances to unconsolidated                                    
 affiliates                                               316           281 
Deferred income taxes                                      95            99 
Other assets                                              140           134 
----------------------------------------------------------------------------
Total assets                                     $      3,432  $      3,412 
----------------------------------------------------------------------------
                                                                            
                    Liabilities and Shareholders' Equity                    
----------------------------------------------------------------------------
Current liabilities:                                                        
Accounts payable                                 $        479  $        438 
Billings in excess of costs and estimated                                   
 earnings on uncompleted contracts ("BIE")                508           509 
Accrued salaries, wages and benefits                      161           173 
Nonrecourse project debt                                    9            10 
Other current liabilities                                 217           263 
----------------------------------------------------------------------------
Total current liabilities                               1,374         1,393 
Pension obligations                                       274           333 
Employee compensation and benefits                         99           105 
Income tax payable                                         90            78 
Deferred income taxes                                     117            94 
Nonrecourse project debt                                   41            51 
Deferred income from unconsolidated affiliates             92           100 
Other liabilities                                         200           206 
----------------------------------------------------------------------------
Total liabilities                                       2,287         2,360 
----------------------------------------------------------------------------
KBR shareholders' equity:                                                   
Preferred stock                                             -             - 
Common stock                                                -             - 
Paid-in capital in excess of par                        2,080         2,070 
Accumulated other comprehensive loss                     (808)         (831)
Retained earnings                                         661           595 
Treasury stock                                           (769)         (769)
----------------------------------------------------------------------------
Total KBR shareholders' equity                          1,164         1,065 
Noncontrolling interests ("NCI")                          (19)          (13)
----------------------------------------------------------------------------
Total shareholders' equity                              1,145         1,052 
----------------------------------------------------------------------------
Total liabilities and shareholders' equity       $      3,432  $      3,412 
----------------------------------------------------------------------------
                                                                            
                                                                            
              KBR, Inc.: Consolidated Statements of Cash Flows              
                           (Millions) (Unaudited)                           
                                                                            
                                                   Three Months Ended       
                                            --------------------------------
                                             June 30,  March 31,   June 30, 
                                               2016       2016       2015   
----------------------------------------------------------------------------
                                                                            
Cash flows provided by (used in) operating                                  
 activities:                                                                
Net income                                  $      47  $      45  $      68 
Adjustments to reconcile net income to net                                  
 cash provided by (used in) operating                                       
 activities:                                                                
  Depreciation and amortization                    10          9          8 
  Equity in earnings of unconsolidated                                      
   affiliates                                     (33)       (29)       (53)
  Deferred income tax expense (benefit)             5          2         (3)
  Gain on disposition of assets                    (6)         -        (28)
  Other                                            (2)         8          9 
Changes in operating assets and                                             
 liabilities:                                                               
  Accounts receivable, net of allowance for                                 
   doubtful accounts                              (29)        54        (52)
  Costs and estimated earnings in excess of                                 
   billings on uncompleted contracts              (33)         5         94 
  Accounts payable                                 41         (9)       (33)
  Billings in excess of costs and estimated                                 
   earnings on uncompleted contracts               44        (46)       (35)
  Accrued salaries, wages and benefits              9        (20)         4 
  Reserve for loss on uncompleted contracts        (7)       (16)       (45)
  Advances to unconsolidated affiliates,                                    
   net                                              -         (8)        (2)
  Distributions of earnings from                                            
   unconsolidated affiliates                        8         20         35 
  Income taxes payable                            (11)         1         (4)
  Pension funding                                 (11)       (10)       (10)
  Net settlement of derivative contracts            1         (4)        (3)
  Other assets and liabilities                    (24)       (23)        19 
----------------------------------------------------------------------------
Total cash flows provided by (used in)                                      
 operating activities                               9        (21)       (31)
----------------------------------------------------------------------------
Cash flows (used in) provided by investing                                  
 activities:                                                                
Purchases of property, plant and equipment         (3)        (3)        (3)
Proceeds from sale of assets or investments         1          -         23 
Acquisition of technology businesses, net                                   
 of cash acquired                                   -        (22)         - 
----------------------------------------------------------------------------
Total cash flows (used in) provided by                                      
 investing activities                              (2)       (25)        20 
----------------------------------------------------------------------------
Cash flows used in financing activities:                                    
Payments to reacquire common stock                  -         (2)        (1)
Distributions to noncontrolling interests          (3)        (6)        (5)
Payments of dividends to shareholders             (12)       (11)       (11)
Excess tax benefits from share-based                                        
 compensation                                       -          1          - 
Payments on short-term and long-term                                        
 borrowings                                        (5)         -         (7)
Other                                               -          -          1 
----------------------------------------------------------------------------
Total cash flows used in financing                                          
 activities                                       (20)       (18)       (23)
----------------------------------------------------------------------------
Effect of exchange rate changes on cash            (7)         5          7 
Decrease in cash and equivalents                  (20)       (59)       (27)
----------------------------------------------------------------------------
Cash and equivalents at beginning of period       824        883        758 
----------------------------------------------------------------------------
Cash and equivalents at end of period       $     804  $     824  $     731 
----------------------------------------------------------------------------
                                                                            
                                                                            
              KBR, Inc.: Consolidated Statements of Cash Flows              
                           (Millions) (Unaudited)                           
                                                                            
                                                         Six Months Ended   
                                                       ---------------------
                                                        June 30,   June 30, 
                                                          2016       2015   
----------------------------------------------------------------------------
                                                                            
Cash flows used in operating activities:                                    
Net income                                             $      92  $     119 
Adjustments to reconcile net income to net cash used                        
 in operating activities:                                                   
  Depreciation and amortization                               19         19 
  Equity in earnings of unconsolidated affiliates            (62)       (88)
  Deferred income tax expense (benefit)                        7         (3)
  Gain on disposition of assets                               (6)       (28)
  Other                                                        6         10 
Changes in operating assets and liabilities:                                
  Accounts receivable, net of allowance for doubtful                        
   accounts                                                   25        (49)
  Costs and estimated earnings in excess of billings                        
   on uncompleted contracts                                  (28)       138 
  Accounts payable                                            32       (135)
  Billings in excess of costs and estimated earnings                        
   on uncompleted contracts                                   (2)       (43)
  Accrued salaries, wages and benefits                       (11)         4 
  Reserve for loss on uncompleted contracts                  (23)       (82)
  (Advances to) payments from unconsolidated                                
   affiliates, net                                            (8)         4 
  Distributions of earnings from unconsolidated                             
   affiliates                                                 28         72 
  Income taxes payable                                       (10)       (15)
  Pension funding                                            (21)       (21)
  Net settlement of derivative contracts                      (3)       (39)
  Other assets and liabilities                               (47)        (2)
----------------------------------------------------------------------------
Total cash flows used in operating activities                (12)      (139)
----------------------------------------------------------------------------
Cash flows (used in) provided by investing activities:                      
Purchases of property, plant and equipment                    (6)        (4)
Proceeds from sale of assets or investments                    1         23 
Acquisition of technology businesses, net of cash                           
 acquired                                                    (22)         - 
----------------------------------------------------------------------------
Total cash flows (used in) provided by investing                            
 activities                                                  (27)        19 
----------------------------------------------------------------------------
Cash flows used in financing activities:                                    
Payments to reacquire common stock                            (2)       (17)
Acquisition of noncontrolling interest                         -        (40)
Distributions to noncontrolling interests                     (9)       (12)
Payments of dividends to shareholders                        (23)       (23)
Net proceeds from issuance of common stock                     -          1 
Excess tax benefits from share-based compensation              1          - 
Payments on short-term and long-term borrowings               (5)        (7)
----------------------------------------------------------------------------
Total cash flows used in financing activities                (38)       (98)
----------------------------------------------------------------------------
Effect of exchange rate changes on cash                       (2)       (21)
Decrease in cash and equivalents                             (79)      (239)
----------------------------------------------------------------------------
Cash and equivalents at beginning of period                  883        970 
----------------------------------------------------------------------------
Cash and equivalents at end of period                  $     804  $     731 
----------------------------------------------------------------------------
                                                                            
                                                                            
                      KBR, Inc. Backlog Information (a)                     
                           (Millions) (Unaudited)                           
                                                                            
                                                                            
                                          June 30,   March 31,  December 31,
                                            2016        2016        2015    
----------------------------------------------------------------------------
                                                                            
Technology & Consulting                 $       360 $       394 $        430
Engineering & Construction                    4,180       4,557        5,148
Government Services                           6,392       6,903        6,516
                                        ----------- ----------- ------------
  Subtotal                                   10,932      11,854       12,094
Non-strategic Business                          100         165          239
----------------------------------------------------------------------------
Total backlog                           $    11,032 $    12,019 $     12,333
----------------------------------------------------------------------------
                                                                            
(a) Backlog is presented differently depending on whether the contract is   
    consolidated by KBR or is accounted for under the equity method of      
    accounting. Backlog related to consolidated projects is presented as    
    100% of the expected revenue from the project. Backlog generally        
    includes total expected revenues in backlog when a contract is awarded  
    under a legally binding commitment. In many instances, arrangements     
    included in backlog are complex, nonrepetitive and may fluctuate        
    depending on estimated revenues and contract duration. Where contract   
    duration is indefinite and clients can terminate for convenience at any 
    time without having to compensate us for periods beyond the date of     
    termination, projects included in backlog are limited to the estimated  
    amount of expected revenue within the following twelve months. Certain  
    contracts provide maximum dollar limits, with actual authorization to   
    perform work under the contract agreed upon on a periodic basis with the
    customer. In these arrangements, only the amounts authorized are        
    included in backlog. For projects where we act solely in a project      
    management capacity, we only include the value of our services on each  
    project in backlog. KBR calculates estimated backlog for long-term      
    contracts associated with the U.K. government's privately financed      
    initiatives or projects ("PFIs") based on the dollar equivalent value of
    work our client is contractually obligated to pay us over the term of   
    the contract. This amount includes the contractual minimum payments plus
    the value of work to be performed over the life of the contract. We     
    update our assessment of the future work to be executed under these     
    contracts on a quarterly basis and adjust backlog if necessary. As part 
    of the acquisition of Wyle, we are currently reviewing our backlog      
    policies to determine if any changes are needed commencing in the third 
    quarter of 2016 to reflect the high value engineering service contracts 
    common in that business.                                                
                                                                            
    Included in the backlog table above is our proportionate share of       
    unconsolidated joint ventures' estimated revenues. However, because     
    these projects are accounted for under the equity method, only our share
    of future earnings from these projects will be recorded in our results  
    of operations. Our backlog for projects related to unconsolidated joint 
    ventures totaled $7.7 billion at June 30, 2016 and $8.5 billion at      
    December 31, 2015. Our backlog included in the table above for projects 
    related to consolidated joint ventures with noncontrolling interest     
    totaled $175 million and $285 million at June 30, 2016 and December 31, 
    2015, respectively.                                                     
                                                                            
    KBR estimates that as of June 30, 2016, 38% of our backlog will be      
    executed within one year. Of this amount, 64% will be                   
    recognized in revenues on our condensed consolidated statement of       
    operations and 36% will be recorded by our unconsolidated               
    joint ventures.                                                         
                                                                            
    As of June 30, 2016, 23% of our backlog was attributable to fixed-price 
    contracts, 49% was attributable to PFI's, and 28% of our backlog was    
    attributable to cost-reimbursable contracts. For contracts that contain 
    both fixed-price and cost-reimbursable components, we classify the      
    individual components as either fixed-price or cost-reimbursable        
    according to the composition of the contract; however, for smaller      
    contracts, we characterize the entire contract based on the predominant 
    component.                                                              

For further information, please contact:
Investors
Lynn Nazareth
Vice President, Investor Relations
713-753-5082
Investors@kbr.com

Media

Marit Babin
Director, Global Communications & Government Relations
713-753-3800
Mediarelations@kbr.com