Accelerated Earnings Growth and Value Creation Expected Following Strategic Steps Taken in 2020

4th Quarter 2020 Highlights

-- Completed strategic acquisition of Centauri, accelerating KBR into national security missions at scale in growing areas including space, intelligence, cyber solutions and emerging technologies such as directed energy and missile defense

-- Established a goal of net-zero carbon emissions by 2030, linked achievement of environmental, social and governance goals to executive compensation, and announced that KBR achieved carbon neutrality in 2019

Fiscal 2020 Highlights

-- Delivered $5.8 billion of revenue, $57 million of Operating Income, $478 million of Adjusted EBITDA, $367 million of Operating Cash Flow and $290 million of Adjusted Operating Cash Flow

-- Posted double-digit revenue growth in Defense & Intel and Science & Space businesses

-- Achieved book-to-bill, excluding PFIs, of 1.2x in Government Solutions and 1.4x in Sustainable Technology Solutions

-- Positioned Sustainable Technology Solutions for growth in attractive areas such as energy transition, digital operating solutions and circular economy technologies

HOUSTON, Feb. 22, 2021 /PRNewswire/ -- KBR, Inc. (NYSE: KBR) today announced its fourth quarter and fiscal 2020 financial results and provided 2021 guidance.

Stuart Bradie, President and CEO of KBR, said, "2020 was a year of significant achievement for KBR, as we successfully advanced our long-term vision. We accelerated growth into attractive markets with the Centauri acquisition, strategically focused our commercial portfolio toward clean, sustainable solutions, and significantly advanced our corporate ESG and sustainability strategy, committing to net-zero carbon emissions by 2030 and achieving carbon neutrality in 2019. Throughout the year, our team of teams delivered outstanding safety and operational performance, generated healthy profit and superb cash flow, drove innovation with technology advances and expanded our footprint through new program wins. Our progress is underscored by the strong book-to-bill achieved by our Government and Sustainable Tech businesses that underpins the 2021 guidance we are announcing today. Looking ahead, I am confident KBR is well-positioned to continue driving growth and value for our stakeholders, and I would like to thank our 29,000 people for their perseverance, agility and teamwork through an unusual year."

Summarized Fiscal 2020 and Fourth Quarter 2020 Financial Results 

In 2021, KBR updated the names of its businesses as follows:

• Government Solutions includes the following four business units: Defense & Intel, formerly the Defense Systems Engineering and Centauri businesses; Science & Space, formerly called Space & Mission Solutions; Readiness & Sustainment, formerly called Logistics; and International.
• Sustainable Technology Solutions, formerly called Technology Solutions, to better reflect our business portfolio of advanced technology and solutions that enable customers to achieve their important sustainability objectives.

Key Financial Highlights:

• Revenue of $5.8 billion increased $128 million from the prior year, as follows:
• New program wins, on-contract expansion and acquisitive growth, including approximately $100 million, or 12%, growth in Science & Space; approximately $175 million, or 23%, growth in Defense and Intel (7% organic); and approximately $50 million growth in sustaining programs in Readiness & Sustainment;
• Energy Solutions revenue volume increased $187 million primarily attributable to the completion of projects in backlog;
• These revenue increases were partially offset by approximately $150 million of revenue associated with Tyndall Air Force Base disaster recovery work performed in 2019 that did not recur in 2020, reduced volume in KBR's Middle East contingency work of approximately $150 million, reduced volume in the heritage Technology business of approximately $70 million primarily attributable to a higher mix of proprietary equipment deliveries in 2019 that did not recur in 2020, and reduced activity in the international government business of approximately $25 million.
• Selling, general and administrative expenses of $335 million declined $6 million compared to 2019, principally due to reductions associated with corporate cost control measures and travel restrictions related to COVID-19. These reductions were partially offset by increases in Government Solutions, including increased amortization attributable to our acquisition of Centauri, increased bid and proposal cost and favorable variances in 2019 that did not recur in 2020.
• Adjusted EBITDA of $478 million increased 2% from the prior year principally due to revenue growth.
• Interest expense of $83 million decreased $16 million compared to 2019 principally due to lower outstanding borrowings under KBR's Senior Credit Facility during the majority of 2020 as well as lower weighted-average interest rates resulting from the favorable refinancing of KBR's Senior Credit Facility in early 2020 and reduced market interest rates.
• Restructuring and impairment charges totaled $313 million and were primarily non-cash, were associated with KBR's exit from commoditized services in its Energy Solutions business, and were related to lease abandonment, goodwill and asset impairments, and overhead reductions.
• Effective tax rate was 25%.

Recent Developments and New Business

• FY 2020 book-to-bill for Government Solutions was 1.2x, excluding privately financed initiatives, and was 1.4x for Sustainable Technology Solutions.
• Expanded footprint through new project/program wins, including a five year $539 million ceiling contract to provide high-end technical services for rapid prototyping and fielding of systems for the U.S. Air Force; over $900 million in IDIQ tasking through our IAC-MAC contract balanced nicely across the Army, Air Force and Navy; and an eight-year $974 million ceiling contract to provide sustaining services to support U.S. Air Force operations in Europe.
• Delivered a 95% recompete win rate in the U.S. Government Solutions business that included a $400 million NASA award to provide intelligent systems research and a $300 millionU.S. Geological Survey award to perform satellite systems engineering, software development, cybersecurity, data storage, program management, network engineering, satellite data acquisition, and scientific research and application development for remote sensing data.
• Continued track record of innovation, bringing new technologies to market, including:
• Entered into an agreement with Mura Technology to be the exclusive licensor of Cat-HTR™, an innovative, disruptive mixed plastics recycling technology that processes all types of plastic including many that are currently considered unrecyclable; and
• Entered into an agreement with Johnson Matthey to license a groundbreaking ammonia-methanol co-production process that combines KBR and Johnson Matthey market-leading ammonia and methanol technologies to enable superior end-product flexibility for our clients.
• Numerous engagements to consult, advise and deliver technology and professional services in the area of energy transition, hydrogen future and circular economy, including multiple engagements with various governments and companies to advise on climate change and transition to a hydrogen future; a five-year master services contract to provide engineering services for a client's global carbon recycling technology projects; and a technology package, including license, basic engineering, proprietary equipment and catalyst, for a zero CO2 emissions, commercial-scale ammonia facility.

Capital DeploymentKBR continues to employ a balanced approach to capital allocation, which includes investments that facilitate sustainable, long-term growth and prudent return of capital to shareholders. KBR's financial strength positioned the company to complete the strategic acquisition of Centauri on October 1, 2020, repurchase approximately $50 million of its common stock in 2020, and increase its quarterly dividend to $0.10 per share, a 25% increase over 2019 levels.

FY 2021 GuidanceKBR expects its 2021 financial results to be as follows:

• Consolidated Revenue: $5.8 billion to $6.2 billion
• Adjusted EBITDA Margin: ~9%
• Effective Tax Rate: 25% to 26%
• Earnings per Share (EPS): $1.39 to $1.59
• Adjusted EPS: $2.00 to $2.20
• Operating Cash Flow (OCF): $250 million to $290 million
• Adjusted OCF: $280 million to $320 million

Conference Call DetailsThe company will host a conference call to discuss its fourth quarter and fiscal 2020 financial results on Monday, February 22, 2021 at 7:30 a.m. Central Time (8:30 a.m. Eastern Time). The conference call will be webcast simultaneously through the Investor Relations section of KBR's website at investors.kbr.com. A replay of the webcast will be available shortly after the call on KBR's website or by telephone at +1.719.457.0820, passcode: 3642827.

About KBRWe deliver science, technology and engineering solutions to governments and companies around the world. KBR employs approximately 29,000 people worldwide with customers in more than 80 countries and operations in 40 countries.

KBR is proud to work with its customers across the globe to provide technology, value-added services, and long-term operations and maintenance services to ensure consistent delivery with predictable results. At KBR, We Deliver.

Visit www.kbr.com

Forward Looking StatementsThis press release and related comments by KBR management contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Some examples include 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 press release, the words "estimates," "expects," "predicts," "continues," "looking ahead," "well-positioned," "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 press release. 

These risks and uncertainties include, but are not limited to:

• U.S. government regulatory changes or changes to funding related to our lines of business that could be less favorable. Because we generate a substantial portion of our revenues from contracts with U.S. government agencies, our operating results could be adversely affected by spending caps or changes in budgetary priorities, as well as by delays in the government budget process, program starts or the award of contracts or task orders under contracts. Changes in spending authorizations and budgetary priorities may occur as a result of the shifts in spending priorities from defense-related and other programs as a result of competing demands for federal funds and the number and intensity of military conflicts and other factors;
• operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts and supply chain disruptions;
• the COVID-19 pandemic has increased the severity and duration of world health events, including volatility in the capital markets, deteriorating financial conditions or bankruptcy, and related economic repercussions resulting from severe disruption in multiple industries, which may negatively impact our clients' ability to meet their payment obligations to us in a timely manner; and
• the level of capital spending and access to capital markets by industrial companies, including significant reductions and potential additional reductions in capital expenditures in response to commodity prices and dramatically reduced demand.

Additional information about potential risk factors that could affect our business and financial results is included in our latest Form 10-K and any subsequent Forms 10-Q and 8-K. We caution you not to place undue reliance on the forward-looking statements included in this press release, 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. We also disclaim any duty to comment on or correct information that may be contained in reports published by investment analysts or others.

Non-GAAP Financial InformationThe following information provides reconciliations of certain non-GAAP financial measures presented in the press release to which this reconciliation is attached to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles (GAAP). The company has provided the non-GAAP financial information presented in the press release as information supplemental and in addition to the financial measures presented in the press release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for or alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the press release. The non-GAAP financial measures in the press release may differ from similar measures used by other companies.

EBITDA and Adjusted EBITDAWe evaluate performance based on EBITDA and Adjusted EBITDA. EBITDA is defined as Net income attributable to KBR, plus interest expense, net; provision for income taxes; other non-operating expense (income); and depreciation and amortization. Adjusted EBITDA excludes certain amounts included in EBITDA. EBITDA and Adjusted EBITDA for each of the three- and twelve-month periods ended December 31, 2020 and 2019 considered non-GAAP financial measures under SEC rules because EBITDA and Adjusted EBITDA for each such period exclude certain amounts included in the calculation of net income attributable to KBR in accordance with GAAP for such periods. Management believes EBITDA and Adjusted EBITDA afford investors a view of what management considers KBR's core performance for each of the three- and twelve-month periods ended December 31, 2020 and 2019 and also affords investors the ability to make a more informed assessment of such core performance for the comparable periods.

Adjusted EPS Adjusted earnings per share (Adjusted EPS) for each of the three- and twelve-month periods ended December 31, 2020 and 2019 is considered a non-GAAP financial measure under SEC rules because the Adjusted EPS for each such period excludes certain amounts included in the diluted earnings per share calculated in accordance with GAAP for such periods. The most directly comparable financial measure calculated in accordance with GAAP is diluted EPS for the same periods. Management believes that Adjusted EPS affords investors a view of what management considers KBR's core earnings performance for each of the three- and twelve-month periods ended December 31, 2020 and 2019 and also affords investors the ability to make a more informed assessment of such core earnings performance for the comparable periods.

We have calculated Adjusted EPS for each of the three- and twelve-month periods ended December 31, 2020 and 2019 by adjusting diluted EPS for the items included in the table below.

We have calculated the Adjusted EPS for the 2021 guidance by adjusting diluted EPS for the items included in the table below.

Adjusted Cash Flows Provided by Operating Activities Adjusted operating cash flows for 2020 guidance is considered a non-GAAP financial measure under SEC rules because the Adjusted operating cash flows exclude certain amounts included in the cash flows provided by operating activities calculated in accordance with GAAP. The most directly comparable financial measure calculated in accordance with GAAP is cash flows provided by operating activities. Management believes that Adjusted operating cash flows afford investors a view of what management considers KBR's core operating cash flow performance for 2020 guidance and also afford investors the ability to make a more informed assessment of such core operating cash generation performance.

We have calculated Adjusted operating cash flow for each of the three- and twelve-month periods ended December 31, 2020 and 2019 by adjusting operating cash flow provided by operating activities for the item included in the table below.

We have calculated the Adjusted operating cash flows for the 2021 guidance by adjusting cash flows provided by operating activities for the item included in the table below.

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SOURCE KBR, Inc.