2Q 2017 Financial Results

Transcription

1 2Q 2017 Financial Results August 2, 2017 Stuart Bradie President and Chief Executive Officer Mark Sopp Executive Vice President and Chief Financial Officer Nelson Rowe Senior Vice President, Investor Relations

2 Forward-Looking Statements This presentation contains forward-looking statements regarding our plans, objectives, goals, strategies, future events, future financial performance and backlog information and other information that is not historical. When used in this presentation, the words estimates, expects, anticipates, projects, plans, intends, believes, forecasts or future or conditional verbs such as will, should, could, or may, and variations of such words or similar expressions are intended to identify forward-looking statements. Such statements are based upon our current expectations and various assumptions, which are made in good faith, and we believe there is a reasonable basis for them. However, because forward-looking statements relate to the future, they are subject to inherent risks, uncertainties and other factors that are difficult to predict and which could cause actual results to differ materially from the forward-looking statements contained in this presentation. Additional information about potential risk factors that could affect our business and financial results is included in our Form 10-K filed on February 24, We caution you not to place undue reliance on the forward-looking statements included in this presentation, which speak only as of the date hereof. We disclaim any intent or obligation, except as required by law, to revise or update this information to reflect new information or future events or circumstances. This presentation contains the financial measure EBITDA, which is not calculated in accordance with U.S. GAAP. A reconciliation of the non-gaap financial measure EBITDA to the most directly comparable GAAP financial measure has been provided in the Appendix to this presentation.

3 SAFETY Safety: Moving Towards Zero Harm Total Recordable Incident Rate (TRIR) Performance: Q KBR is focused on an industry-leading commitment to employee safety Q KBR IOGP Top Q IOGP Average Over the last 30 months, KBR has achieved a 60% decrease in TRIR and a 46% increase in Zero Harm Days The data set below represents the KBR current portfolio excluding discontinued operations. IOGP = International Association of Oil & Gas Producers Note: Final IOGP 2016 results will not be available until mid

4 2Q17 HIGHLIGHTS 2Q17: Highlights Strong results, solid project execution, raising guidance Solid Earnings with Revenue Growth (8%) Progress against strategic objectives: Delivering predictable earnings Deploying capital to maximize value Reducing uncertainty and risk 4 Continued progress resolving legacy and legal matters Settled legal claim against PEMEX. Received $435M and dismissal of all pending litigation Received summary judgment for recovery of claims in the Private Security litigation Received summary judgment to dismiss Burn Pit lawsuits Delivering growth in Government Services, capturing wins in differentiated and higher technology pursuits Significant wins for KBRwyle NASA s Goddard Space Flight Center (protest withdrawn) NAVFAC s Diego Garcia BOS (under protest) DoD missile defense systems task order Seat on NOAA s Professional and Technical Satellite contract Cash deployment and capital allocation Reduced debt by $180M Repurchased 3.3M shares

5 RESULTS Consolidated Results: 2Q17 vs 2Q16 Quarter Ending ($ in millions, except EPS) Jun 30, 2017 Jun 30, 2016 Bookings $ 855 $ 55 Backlog of Unfilled Orders $ 10,324 $ 11,032 Revenues $ 1,094 $ 1,009 Gross Profit $ 108 $ 74 Equity in Earnings $ 32 $ 33 Gross Profit & Equity in Earnings $ 140 $ 107 General & Administrative Expenses ($38) ($34) Gain on Disposition of Assets/Restructuring $ 1 ($10) 2Q17 revenues reflect the impact of the two GS acquisitions and organic growth in U.S gov t contracts offset with E&C projects nearing completion Gross profit in 2Q17 compared favorably to 2Q16 as a result of the PEMEX settlement along with GS revenue growth and strong project execution Operating Income $ 103 $ 63 Provision for Income Taxes ($21) ($23) Non-controlling Interest & Other ($5) $ 7 Net Income Attributable to KBR $ 77 $ 47 EBITDA* $ 117 $ 80 EPS (diluted wtd avg) $ 0.54 $ 0.32 Adjusted EPS (excl legacy legal fees)* $ 0.57 $ 0.35 Diluted weighted average shares Equity in earnings flat; lower volume on Australian LNG joint venture offset with favorable adjustments to U.K. joint ventures Net operating cash inflows reflect the cash receipt from the PEMEX settlement and strong working capital management Operating Cash Flow $ 325 $ 9 *Consolidated EBITDA and Adjusted EPS reconciliations provided in the Appendix 5

6 SEGMENT RESULTS Segment Results: 2Q17 vs 2Q16 Quarter Ending ($ in millions) Jun 30, 2017 Jun 30, 2016 Revenues Government Services Technology & Consulting Engineering & Construction Non-Strategic Business 7 61 Consolidated Revenues $1,094 $1,009 Gross Profit (Loss) & Equity in Earnings Government Services Technology & Consulting Engineering & Construction Government Services Increases in revenue and gross profit & equity in earnings are driven by acquisitions and organic growth, offsetting 2Q16 settlement of $33M in reimbursable legal fees related to the sodium dichromate matter Technology & Consulting Revenue was down in 2Q17 due to lower proprietary equipment sales. Gross profit and margin percent up slightly due to technology licenses and cost reductions. Non-Strategic Business (1) (17) Consolidated Gross Profit & Equity in Earnings $140 $107 EBITDA Government Services Technology & Consulting Engineering & Construction Non-Strategic Business (1) (17) Engineering & Construction Revenue down as planned due to projects nearing completion Increase in gross profit in 2Q17 due primarily to PEMEX settlement Equity in earnings is $9M lower compared to 2Q16 due to lower activity on an Australian LNG JV Other (23) (12) Consolidated EBITDA* $117 $80 *Consolidated EBITDA reconciliation provided in the Appendix 6

7 CASH/ CAPTIAL DEPLOYMENT Cash Flow, Cash Position and Capital Allocation Quarter Ending Operating and Free Cash Flow Jun 30, 2017 Operating Cash Flow $ 325 Capital Expenditures ($3) Strong cash flow PEMEX receipt of $344M, net of tax Good cash receipts Free Cash Flow $ 322 Quarter Ending Cash and Net Debt Position Mar 31, 2017 Jun 30, 2017 Cash: Balance $ 410 $ 491 Debt: Revolver Borrowing ($650) ($470) Maximizing Shareholder value by staying true to capital allocation strategy Reduced debt by $180M Repurchased 3.3M shares for $50M Quarterly Dividend payments of $11M Net Cash (Debt) Position ($240) $ 21 7

8 2017 GUIDANCE 2017 Earnings Guidance Prior FY Guidance Adjusted EPS, excluding legacy legal fees $ $1.40 (above mid-point) Updated FY Guidance $ $1.45 Includes PEMEX settlement recorded in 2Q17 Includes $22M or $0.15 EPS in amortization Estimated legacy legal fees is $9M or $0.07 EPS EBITDA range $300M - $350M $300M - $350M Effective Tax Rate 25% - 27% 23% - 25% Operating Cash Flow $100M - $200M $120M - $200M >80% Of Earnings In Backlog 8

9 MARKET OUTLOOK Guiding Principles Grow Profits Strengthen Business Acumen Build High Performance Culture 2 nd Half Expectations Performance Expectations: Revenue o o o Growth in Government Services continues as planned T&C growth expected to continue fueled by ammonia, petro-chem and refining markets E&C expected to decline, impacted by capex projects worked off partially offset by opex projects Profitability o o Improving and more predictable earnings growth Potential Australian LNG JV dilution due to additional scope Operating Cash Flow o Positive for 2017, $120M to $200M o As planned outflows for EPC contracts nearing completion Capital Structure/Liquidity Operating cash flow conversion improving Markets Government Services: steady growth, good pipeline, capitalizing on capabilities T&C: buoyant, good pipeline, good win rate E&C: good bidding pipeline with core customers, FEEDs moving forward, market remains challenged 9

10 CONCLUSION 2Q17 Summary Improved, consistent and more predictable earnings momentum leading to raised guidance Delivering growth in Government Services, capturing high technical and professional services wins Strong margins in T&C, growth expected in 2 nd half Solid execution and repositioned reliance from large capex projects to multiple and smaller recurring opex projects in core E&C segment Executing on Strategy High-level of secured backlog; solid prospects with awards expected 4Q into early 2018 Continued success in resolving legacy legal and commercial disputes Strong operating cash flow facilitated debt reduction and buy backs 10

11 APPENDIX

12 2Q17 BACKLOG Significantly Lower Risk Profile Backlog by Contract Type >80% of earnings for 2017 secured in backlog Cost Reimbursable, PFI & Services Contracts Fixed Price Contracts (GS, T&C) Low Risk Fixed Price Contracts, E&C Majority of KBR backlog is currently either long-term, reimbursable, PFI or service contracts with a lower risk profile and predictable cash flows GS backlog excludes unexercised options and ID/IQ and MATOC contract values not yet under task order; work ultimately realized may be significantly higher Current estimate $2.4B in additional unrecognized backlog Total KBR Backlog At 6/30/17: $10.3B + $2.4B options

13 NON-GAAP RECONCILIATION Consolidated EBITDA Reconciliation Quarter Ending ($ in millions) Jun 30, 2017 Jun 30, 2016 Net Income Attributable To KBR $ 77 $ 47 Add Back: Interest Expense (Income) $ 5 $ 0 Provision for Income Taxes $ 22 $ 23 Depreciation & Amortization $ 13 $ 10 Consolidated EBITDA $ 117 $ 80 Note: EBITDA is defined as earnings before interest income / expense, income taxes, depreciation and amortization

14 NON-GAAP RECONCILIATION Adjusted EPS Reconciliation Quarter Ending Jun 30, 2017 Jun 30, 2016 EPS (diluted) $ 0.54 $ 0.32 Add Back: Legacy Legal Fees $ 0.03 $ 0.03 Adjusted EPS $ 0.57 $ 0.35