- Strong growth, earnings performance and operating cash flow across all operating segments

- Diluted EPS $1.41; Adjusted EPS $1.69, 10% growth; Adjusted EBITDA $471 million, 14% growth

- Operating cash flow of $256 million, or 127% net income conversion

- High quality, enduring programs afford deployment flexibility; increasing 2020 quarterly dividend 25%

- 2020 guidance offers attractive growth and cash deployment optionality aligned with long-term targets

HOUSTON, Feb. 20, 2020 /PRNewswire/ -- KBR, Inc. (NYSE: KBR), a global provider of differentiated, professional services and technologies across the asset and program life cycle within the government services and hydrocarbons industries today announced fourth quarter and fiscal 2019 financial results.

Fiscal 2019 Highlights - Enduring portfolio generating earnings and cash growth throughout the year

• 15% consolidated revenue growth, with each operating segment contributing double digit growth
• Diluted EPS $1.41; Adjusted EPS $1.69, 10% growth; Adjusted EBITDA $471 million, 14% growth
• Operating cash flow of $256 million, or 127% net income conversion
• Winning quality work to secure the future; 95%+ recompete win rate

2020 Guidance Initiation - Attractive growth and cash conversion

• EPS guidance of $1.46-$1.58; Adjusted EPS guidance of $1.80-$1.92; 70%+ work secured
• Operating cash flow, adjusted for major advances, of $200-250 million; implied 90%-110% net income conversion
• Raising quarterly dividend 25%
• Replenishing share repurchase authorization to $350 million

"I am delighted to report an excellent year of growth, earnings, bookings and cash generation and another stellar year for safety," said Stuart Bradie, KBR President and CEO, as the company announced its fourth quarter and fiscal 2019 financial results. For the year ended December 31, 2019, KBR reported consolidated revenue of $5.6 billion, or 15% annual growth with all operating segments contributing double digit growth; operating cash flow of $256 million, or 127% net income conversion with all operating segments contributing at or above targeted levels; and consolidated book-to-bill of 1.3x, excluding the impact of privately financed initiatives or projects and foreign exchange, with all operating segments achieving book-to-bill of greater than 1.0x.  "Our portfolio of long-term, multi-year contracts and bookings momentum provide earnings and cash visibility, and we begin 2020 with over 70% of the year's work secured," Bradie continued. "I am also pleased to announce that our board has recently approved a 25% increase to our quarterly dividend and has restored the full capacity of our share repurchase authorization to $350 million." said Bradie. "The commitment, dedication and enthusiasm of our people, working together across the globe, is the foundation of our company, and I wish to thank them for their many contributions to another year of great results," said Bradie.

Fourth Quarter and Fiscal 2019 Financial Results 

Summary Results for Year Ended December 31, 2019

Revenue growth of 15%, Adjusted EBITDA growth of 14%, and Net Income reduction of (28)%  attributable to the following:

• 14% growth in Government Solutions attributable to the commencement of new programs, including holistic human and psychological performance services for the U.S. Special Operations Forces under the Preservation of the Force and Family program; networking, communications and training services for the U.K. Ministry of Defence; and launch range operations services at NASA's Wallops Flight Facility. Further, we completed disaster recovery work at Tyndall Air Force Base generating approximately $150 million of revenue in 2019.
• 26% growth in Technology Solutions attributable to strong execution across our chemical, petrochemical, refining and ammonia projects and expanded proprietary equipment and catalyst deliveries.
• 16% growth in Energy Solutions primarily attributable to ramp up of cost-reimbursable projects, including a brownfield revamp refinery project in the U.S. Gulf Coast, a crude terminal expansion project in the Permian Basin, and a greenfield methanol project in Louisiana.
• FY 2018 results were favorably impacted by the $108 million non-cash gain on consolidation of Aspire as well as recognition of variable consideration associated with the successful completion and performance testing of a major Energy Solutions project (recognized 100% within consolidated operating income, 30% in net income attributable to KBR).

Liquidity and Capital Structure

Highlights from the year include the following:

• Annual operating cash flow of $256 million, or 127% net income conversion.
• Gross and net debt leverage of 2.7x and 1.2x, respectively, as of December 31, 2019; continued gross debt de-leveraging attributable to Adjusted EBITDA growth and annual debt pay down of $70 million.
• An increase of KBR's credit rating by S&P to BB- and Moody's to Ba3, each with stable outlook.

On February 7, 2020, we successfully completed the amendment of our credit agreement.  This amendment is an important element in our capital structure and allocation strategy, as it enables greater capital deployment flexibility, provides attractively priced capacity to fuel growth (100 bps reduction in interest rate spread across term loan A and B facilities) and extends maturity by two years.  In connection with this transaction, we repaid $137 million of borrowings under the credit agreement. Consistent project execution, strong EBITDA growth, predictable cash generation and improved credit ratings allowed us to quickly tap the debt markets to achieve a very positive outcome for the company. Gross and net leverage upon completion of this refinancing were 2.4x and 1.2x, respectively.

In February 2020, our board approved an increase to our quarterly dividend of 25% to $0.10 per share and approved the restoration of our share repurchase authorization to an aggregate $350 million.

Notable New Business Awards/Developments:

Highlights from the year include the following:

• Consolidated FY 2019 book-to-bill was 1.3x, excluding the impact of our private finance initiatives and foreign exchange, with each business segment achieving book-to-bill of greater than 1.0x for the year.
• Expanded footprint through many new project program wins, including the U.S. DoD Preservation of the Force & Family program, the NASA Launch Range Operations Contract for Wallops Flight Facility, several cost-reimbursable EPC projects in our Energy Solutions business, and the EPC award of Freeport LNG, Train 4, awaiting FID.
• Continued innovation bringing new technologies to market, highlighted by the successful commissioning of the first commercial-scale K-SAATTM facility during the year as well as winning our first commercial contract for our innovative and environmentally friendly K-PROTM Propane Dehydrogenation Technology, first introduced to market in January 2019.
• Posted a recompete win rate above 95% in our U.S. Government Solutions business that included the 8-year Marine Corps preposition stock program, the 5-year NAVAIR Aircrew Services Contract, and three highly strategic and critical areas under the 10-year LOGCAP V program, currently under protest.

2020 Guidance

The company initiates 2020 GAAP EPS guidance with a range of $1.46 to $1.58 and adjusted EPS guidance with a range of $1.80 to $1.92 per share.  The company initiates 2020 operating cash flows guidance with a range of $200 million to $250 million, as adjusted for the impact of major project advances and workoff.  A reconciliation of adjusted EPS and adjusted operating cash flow guidance is included at the end of this release.  Our effective tax rate for 2020 is estimated to range from 25% to 27%.

Reporting Changes and Reclassifications

Changes in reporting, effective January 1, 2019:

• We changed the name of our Government Services segment to "Government Solutions", our Technology segment to "Technology Solutions", and our Hydrocarbons Services segment to "Energy Solutions".
• We elected to classify certain indirect costs incurred as overhead (included in "Cost of revenues") or general administrative expenses for U.S. GAAP reporting purposes in the same manner as such costs are defined in our disclosure statements under U.S. Government Cost Accounting Standards. We reclassified $34 million and $128 million from "Cost of revenues" to "Selling, general and administrative expenses" for the year ended December 31, 2019, respectively. There was no impact on consolidated or segment operating income or net income as previously reported.

About KBR, Inc.

KBR is a global provider of differentiated professional services and technologies across the asset and program life cycle within the Government Services and Hydrocarbons sectors. KBR employs approximately 38,000 people worldwide (including our joint ventures), with customers in more than 80 countries, and operations in 40 countries, across three synergistic global businesses:

• Government Solutions, serving government customers globally, including capabilities that cover the full life-cycle of defense, space, aviation and other government programs and missions from research and development, through systems engineering, test and evaluation, program management, to operations, maintenance, and field logistics;
• Technology Solutions, featuring proprietary technology, equipment, catalysts, digital solutions and related technical services for the monetization of hydrocarbons, including refining, petrochemicals, ammonia and specialty chemicals, as well as inorganics; and
• Energy Solutions, including onshore oil and gas; LNG (liquefaction and regasification)/GTL; oil refining; petrochemicals; chemicals; fertilizers; differentiated EPC; maintenance services (Brown & Root Industrial Services); offshore oil and gas (shallow-water, deep-water, subsea); floating solutions (FPU, FPSO, FLNG & FSRU); program management and consulting services.

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

Visit www.kbr.com

Forward Looking Statement

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 Annual Report on 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.

Non-GAAP Financial Information

The 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 EBITDA

We 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 fourth quarters and fiscal years ended December 31, 2019 and 2018 is considered a non-GAAP financial measure 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 fourth quarters and fiscal years ended December 31, 2019 and 2018 and also affords investors the ability to make a more informed assessment of such core performance for the comparable periods.

Adjusted EPS

Adjusted diluted earnings per share from net income attributable to KBR (Adjusted EPS) for each of the fourth quarters and fiscal years ended December 31, 2019 and 2018 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 from net income attributable to KBR calculated in accordance with GAAP (EPS) 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 fourth quarters and fiscal years ended December 31, 2019 and 2018 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 fourth quarters and fiscal years ended December 31, 2019 and 2018 by adjusting EPS for the items included in the table below.

We have calculated the Adjusted EPS for the 2020 guidance by adjusting EPS for the items included in the table below.

Adjusted Cash Flows Provided by Operating Activities

Adjusted cash flows provided by operating activities for 2020 guidance is considered a non-GAAP financial measure under SEC rules because the Adjusted cash flows provided by operating activities excludes 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 cash flows provided by operating activities affords investors a view of what management considers KBR's core operating cash flow performance for 2020 guidance and also affords investors the ability to make a more informed assessment of such core operating cash generation performance.

We have calculated the Adjusted cash flows provided by operating activities for the 2020 guidance by adjusting cash flows provided by operating activities for the item included in the table below.

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SOURCE KBR, Inc.