1Q 2017 Financial Results

Transcription

1 1Q 2017 Financial Results April 28, 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: Moving Towards Zero Harm SAFETY Total Recordable Incident Rate (TRIR) Performance: Q IOGP = International Association of Oil & Gas Producers Note: Final IOGP 2016 results will not be available until mid Q KBR IOGP Top Q IOGP Average The data set above represents the KBR current portfolio excluding discontinued operations. KBR is focused on an industry-leading commitment to employee safety Over the last 27 months, KBR has achieved a 48% decrease in TRIR and a 40% increase in Zero Harm Days 3

4 1Q17 HIGHLIGHTS 1Q17: Highlights Substantial completion final domestic EPC power project in Non-Strategic Business In April 2017, settled legal claim against Pemex. Received $435M and dismissal of all pending litigation (2Q event) Settlement of major legal matters Settlement reached on class action lawsuit related to 2013 restatement Appeals court upheld dismissal of claims related to sodium dichromate Growth in existing U.S. gov t contracts supporting U.S. Military and backlog growth in Technology Solid Earnings with Revenue Growth (11%) Progress against strategic objectives: Reducing risk Delivering more predictable earnings Strong project delivery performance Significant re-compete win for KBRwyle to provide ground systems and operations support for NASA s Goddard Space Flight Center (2Q event) Strategic win for Brown & Root in Indonesia for Chevron (2Q event) 4

5 1Q17 BACKLOG Significantly Lower Risk Profile Cost Reimbursable, PFI & Services Contracts Backlog by Contract Type Total KBR Backlog At 3/31/17: $10.6B + $2.2B options Fixed Price Contracts (GS, T&C) Low Risk Fixed Price Contracts, E&C ~75% of earnings for 2017 secured in backlog 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 $2.2B in additional unrecognized backlog 5

6 RESULTS Consolidated Results: 1Q17 vs 1Q16 Quarter Ending ($ in millions, except EPS) Mar 31, 2017 Mar 31, 2016 Bookings $ 772 $ 711 Backlog of Unfilled Orders $ 10,595 $ 12,019 Revenues $ 1,106 $ 996 Gross Profit $ 82 $ 68 Equity in Earnings $ 9 $ 29 Gross Profit & Equity in Earnings $ 91 $ 97 1Q17 revenues reflect the impact of the two GS acquisitions and organic growth in U.S gov t contracts Gross profit in 1Q17 compared favorably to 1Q16 as a result of revenue growth and strong project execution General & Administrative Expenses ($32) ($34) Gain on Disposition of Assets/Restructuring $ 4 $ 2 Operating Income $ 63 $ 65 Provision for Income Taxes ($13) ($15) Non-controlling Interest ($1) ($3) Net Income Attributable to KBR $ 37 $ 42 EBITDA* $ 68 $ 67 EPS (diluted) $ 0.26 $ 0.30 Adjusted EPS (excl legacy legal fees)* $ 0.28 $ 0.34 Equity in earnings lower due primarily to a reduction in the percentage of completion estimated on the Ichthys project joint venture in Australia; extends profit recognition into future periods Net operating cash outflows; funding late stage EPC contracts Operating Cash Flow ($115) ($21) *Consolidated EBITDA and Adjusted EPS reconciliations provided in the Appendix 6

7 SEGMENT RESULTS Segment Results: 1Q17 vs 1Q16 Quarter Ending ($ in millions) Mar 31, 2017 Mar 31, 2016 Revenues Government Services Technology & Consulting Engineering & Construction Government Services Increases in revenue and gross profit & equity in earnings are driven by acquisitions and organic growth. 1Q16 included a $15M change order for a program in the Middle East. Non-Strategic Business Consolidated Revenues $1,106 $996 Gross Profit (Loss) & Equity in Earnings Government Services Technology & Consulting Engineering & Construction Non-Strategic Business (2) 1 Consolidated Gross Profit & Equity in Earnings $91 $97 EBITDA Government Services Technology & Consulting Engineering & Construction Non-Strategic Business (2) 5 Other (26) (24) Consolidated EBITDA* $68 $67 Technology & Consulting Revenue and gross profit were down in 1Q17 due to lower proprietary equipment sales. Gross profit margin percent up slightly due to technology licenses. Engineering & Construction Revenue down due to reduced activity on several projects including LNG projects in Australia. Increase in gross profit in 1Q17 due primarily strong project execution; at normative level. Equity in earnings is $18M lower compared to 1Q16 due to a dilution of percentage of completion on the Ichthys project. Profit recognition will now be deferred into future periods. *Consolidated EBITDA reconciliation provided in the Appendix 7

8 MARKET OUTLOOK Guiding Principles 2017 Forward Expectations Foundation for 2017 Performance Expectations: Revenue o o Strong Gov t Services growth, both organic and acquisitive along with steady T&C revenue offsetting challenging E&C market conditions Continued expansion in global industrial services market o Strong backlog earnings coverage (~75%), low re-competes Profitability o Solid foundation for stable and predictable earnings growth Operating Cash Flow o Positive for 2017 o Heavy outflows for end of cycle EPC contracts Capital Structure/Liquidity Maintain dividend, working capital focus, strong balance sheet Beyond 2017 Strong cash conversion ratio More capital deployment options Capital allocation strategy to be updated at upcoming Investor Day 8

9 2017 GUIDANCE EPS, excluding legacy legal fees, now expected above mid-point of $ $1.40 range Reflects gain on Pemex settlement to be recorded in 2Q17 Reflects organic growth for GS, T&C and OpEx projects in E&C, contraction in CapEx projects in E&C, and target margins for all segments Includes $22M, or $0.15 EPS, in amortization Estimate for legacy legal fees is $9M or $0.07 EPS EBITDA range: $300M-$350M Effective Tax Rate: 25% - 27% Operating Cash Flow: $100M-$200M ~75% Of Earnings Already In Backlog 9

10 CONCLUSION 2017 is Starting off Strong Solid financials, growing revenue with strategic wins Well positioned for growth in both Gov t Services & Hydrocarbons sectors. Increasing project pursuit pipeline and consulting activity. More predictable earnings from highlevel of secured backlog. No major recompetes in Reduced uncertainty and risk as legacy projects complete and we successfully resolve legal and commercial disputes Executing on Strategy Cost structure that is efficient and scalable Stronger free cash flow beyond 2017 and attendant capital deployment options 10

11 Join Us For Investor Day Friday, May 12 at the New York Stock Exchange We Deliver Copyright KBR February 24, 2017

12 APPENDIX

13 NON-GAAP RECONCILIATION Consolidated EBITDA Reconciliation Quarter Ending ($ in millions) Mar 31, 2017 Mar 31, 2016 Net Income Attributable To KBR $ 37 $ 42 Add Back: Interest Expense (Income) $ 5 $ 1 Provision for Income Taxes $ 13 $ 15 Depreciation & Amortization $ 13 $ 9 Consolidated EBITDA $ 68 $ 67 Note: EBITDA is defined as earnings before interest income / expense, income taxes, depreciation and amortization

14 NON-GAAP RECONCILIATION Adjusted EPS Reconciliation Quarter Ending Mar 31, 2017 Mar 31, 2016 EPS (diluted) $ 0.26 $ 0.30 Add Back: Legacy Legal Fees $ 0.02 $ 0.04 Adjusted EPS $ 0.28 $ 0.34