3Q 2017 Financial Results

Transcription

1 3Q 2017 Financial Results October 31, 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 33 months, KBR has achieved a 57% decrease in TRIR and a 42% increase in Zero Harm Days The data set above represents the KBR current portfolio excluding discontinued operations. IOGP = International Association of Oil & Gas Producers 3

4 3Q17 HIGHLIGHTS 3Q17: Highlights Strong results, solid project execution, robust bookings, better working capital management, raising guidance Solid Earnings, Realizing Synergies Progress against strategic objectives: Delivering predictable earnings Reducing uncertainty and risk Positioned for growth 4 Delivering growth in Government Services, over $1B awarded on key contracts, Book/Bill 1.5x Significant and strategic wins NAVFAC Diego Garcia BOS NAVFAC Djibouti BOS NAVFAC Bahrain and UAE BOS FAA security systems and equipment maintenance Seat on NASA REMIS contract U.K. MOD services supporting deployed operations Revamp of ammonia facility in Russia BP Tortue pull-through Pre-FEED/FEED JVGAS EPCM in Algeria Strategic acquisition of high end classified business, Sigma Bravo, in Australia 1 Year anniversary of Wyle & HTSI acquisitions

5 RESULTS Consolidated Results: 3Q17 vs 3Q16 Quarter Ending ($ in millions, except EPS) Sep 30, 2017 Sep 30, 2016 Bookings $ 1,075 $ 1,491 Backlog of Unfilled Orders $ 10,342 $ 11,431 Revenues $ 1,034 $ 1,073 3Q17 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 $ 87 ($36) Equity in Earnings $ 23 $ 19 Gross Profit & Equity in Earnings $ 110 ($17) General & Administrative Expenses ($37) ($43) Gain on Disposition of Assets/Restructuring $ 0 ($7) Operating Income $ 73 ($67) Benefit (Provision) for Income Taxes ($16) $ 11 Net Interest & Noncontrolling Interest, Other ($12) ($7) Net Income (Loss) Attributable to KBR $ 45 ($63) EBITDA* $ 82 ($61) EPS (diluted wtd avg) $ 0.32 ($0.44) Adjusted EPS (excl legacy legal fees)* $ 0.35 ($0.44) Diluted weighted average shares Q17 gross profit is up excluding nonrecurring items from 3Q16, due to GS revenue growth and strong project execution Non-recurring charges of $126M taken in 3Q16 on a power project in Non- Strategic Business and an ammonia project in E&C offset with reimbursements of $11M on Legacy GS matters Equity in earnings growth over 3Q16 due to activity in our Affinity joint venture offset with lower volume on Australian LNG joint venture Operating Cash Flow $ 28 $ 20 *Consolidated EBITDA and Adjusted EPS reconciliations provided in the Appendix 5

6 SEGMENT RESULTS Segment Results: 3Q17 vs 3Q16 Quarter Ending ($ in millions) Sep 30, 2017 Sep 30, 2016 Revenues Government Services Technology & Consulting Engineering & Construction Non-Strategic Business 4 10 Consolidated Revenues $1,034 $1,073 Gross Profit (Loss) & Equity in Earnings Government Services Technology & Consulting Engineering & Construction Non-Strategic Business 3 (86) Consolidated Gross Profit & Equity in Earnings $110 $(17) EBITDA Government Services Technology & Consulting Engineering & Construction 27 2 Non-Strategic Business 3 (85) Other (21) (26) Government Services Increases in revenue and gross profit & equity in earnings are driven by late 3Q16 acquisition, organic growth and strong project execution Technology & Consulting Revenue up in 3Q17 due to increase in consulting, catalyst and syngas offerings offset with lower proprietary equipment sales. Gross profit up due to favorable technology mix and stronger consulting performance Engineering & Construction Revenue down as expected due to projects nearing completion Increase in gross profit in 3Q17 due to strong execution in addition to non-recurring losses on an ammonia project in 3Q16 Equity in earnings is $2M lower compared to 3Q16 due to lower activity on an Australian LNG JV Non-Strategic Business Increase in gross profit due to non-recurring losses on a power project in 3Q16, aided by positive close-out adjustments Consolidated EBITDA* $82 $(61) *Consolidated EBITDA reconciliation provided in the Appendix 6

7 CASH Cash and Debt Position Quarter Ending Cash and Net Debt Position Mar 31, 2017 Jun 30, 2017 Sep 30, 2017 Cash: Balance $ 410 $ 491 $ 511 Debt: Revolver Borrowing ($650) ($470) ($470) Net Cash (Debt) Position ($240) $ 21 $ 41 Continued Cash Growth 7

8 2017 GUIDANCE 2017 Earnings Guidance Prior FY Guidance Updated FY Guidance Adjusted EPS, excluding legacy legal fees $1.25 $1.45 $1.35 $1.50 Includes PEMEX settlement recorded in 2Q17 Includes $22M or $0.15 EPS in amortization Estimated legacy legal fees is $13M or $0.09 EPS EBITDA range $300M $350M $320M $350M Effective Tax Rate 23% 25% 23% 25% Operating Cash Flow $120M $200M $120M $200M 8

9 MARKET OUTLOOK Guiding Principles Grow Profits Strengthen Business Acumen Build High Performance Culture 4Q17 Expectations Performance Expectations: Revenue o o Flat revenues for Government Services as new awards expected to contribute late December T&C growth expected to continue fueled by ammonia, petro-chem and refining markets o E&C expected to decline, impacted by capex projects worked off partially offset by opex projects Profitability o Stable & on track through 4Q Operating Cash Flow o Positive for 2017, $120M to $200M o As planned outflows for EPC contracts nearing completion Capital Structure/Liquidity Net operating outflows for project ramp down Markets Government Services: steady growth, good pipeline, capitalizing on capabilities T&C: steady growth, good pipeline, good win rate E&C: good bidding pipeline with core customers, FEEDs moving forward, market remains challenged 9

10 CONCLUSION 3Q17 Summary Delivering growth in Government Services, realizing synergies Strong margins in T&C, growth expected in 4Q Solid execution and repositioned reliance from large capex projects to multiple and smaller recurring opex projects in core E&C segment High-level of secured backlog; solid prospects in 4Q into early 2018 Executing on Strategy Improved, consistent and more predictable earnings momentum leading to raised guidance 10

11 APPENDIX

12 3Q17 BACKLOG Significantly Lower Risk Profile Cost Reimbursable, PFI & Services Contracts Backlog by Contract Type Total KBR Backlog At 9/30/17: $10.3B + $2.9B options Fixed Price Contracts (GS, T&C) Low Risk Fixed Price Contracts, E&C 95% 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 $2.9B in additional unrecognized backlog

13 NON-GAAP RECONCILIATION Consolidated EBITDA Reconciliation Quarter Ending ($ in millions) Sep 30, 2017 Sep 30, 2016 Net Income Attributable To KBR $ 45 ($63) Add Back: Interest Expense (Income) $ 6 $ 3 Provision for Income Taxes $ 16 ($11) Other Non-Operating Expense (Income) $ 4 ($2) Depreciation & Amortization $ 11 $ 12 Consolidated EBITDA $ 82 ($61) Note: EBITDA is defined as earnings before interest income / expense, income taxes, other non-operating income / expense (including FX), depreciation and amortization

14 NON-GAAP RECONCILIATION Adjusted EPS Reconciliation Quarter Ending Sep 30, 2017 Sep 30, 2016 EPS (diluted) $ 0.32 ($0.44) Add Back: Legacy Legal Fees $ 0.03 $ 0.00 Adjusted EPS $ 0.35 ($0.44)