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TRANSCRIPT
Investor
Presentation
September 2015
Stuart Bradie – President and Chief Executive Officer Brian Ferraioli – EVP and Chief Financial Officer Zac Nagle – VP, Finance - Investor Relations
Forward-Looking Statements
2
This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These forward-looking statements include statements regarding our plans, objectives, goals, strategies, future events,
future financial performance and backlog information and other information that is not historical information. 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. All forward-looking statements are based
upon our current expectations and various assumptions. Our expectations, beliefs, and projections are expressed in good faith, and we believe there is
a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs, and projections will be achieved.
There are numerous risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from the forward-
looking statements contained in this presentation. These risks and uncertainties include, but are not limited to: current or future economic conditions; our
ability to obtain and perform under contracts from existing and new customers, including the U.S. Government; exposure to cost overruns, operating
cost inflation and potential liability claims and contract disputes; access to trained engineers and other skilled workers; risks relating to operating through
joint ventures and partnerships; risks inherent in doing business internationally; potential tax liabilities; maritime risks; changes in the demand for our
services and increased competition; protection of intellectual property rights; risks associated with possible future acquisitions; risks related to our
information technology systems; impairment of goodwill and/or intangible assets; reduction or reversal of previously recorded revenues; risks relating to
audits and investigations, including by governments; compliance with laws and regulations, and changes thereto, including those relating to the
environment, trade, exports and bribery; our creditworthiness and ability to comply with the financial covenants in our credit agreement; and other risk
factors discussed in our most recently filed Form 10-K, any subsequent Form 10-Qs and 8-Ks, and other Securities and Exchange Commission filings.
All forward-looking statements attributable to us, or persons acting on our behalf, apply only as of the date made and are expressly qualified in their
entirety by the cautionary statements in this presentation. Except as required by law, we undertake no obligation to revise or update forward-looking
statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.
This presentation contains the financial measure “EBITDA,” which is not calculated in accordance with generally accepted accounting principles in the
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.
KBR’s Zero Harm 24/7
0.39 0.37
0.35
0.39
0.30
0.22
0.26 0.23
0.21 0.19 0.18
0.34 0.35 0.35 0.32
0.31
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
2010 2011 2012 2013 2014 2015
KBR TRIR IOGP Top Q IOGP Average
5-Year TRIR Performance
3
Agenda
• Introduction
• Overview & Strategy
• Market Outlook
• Financial Results
• Q&A
4
• KBR, Inc. is a global technology, engineering,
procurement and construction company serving the
hydrocarbons and government services industries.
• More than 100 year proud history.
• #424 in Fortune 500 rankings.
• 25,000 employees in more than 45 countries.
• Customers in more than 70 countries.
KBR Overview
5
Old KBR operating segment structure (16 business units)
New streamlined operating segment structure (5 business units)
Structure – Streamlined / Focused
6
KBR
Gas Monetization
Hydrocarbons Infrastructure, Government &
Power Services Operations
KBR
Technology & Consulting
Engineering &
Construction
Government
Services
KBR’s Business Groups
Technology & Consulting
Proprietary Technologies
Upstream
• Semi-submersible hull
design
• Monohull vessels
Downstream
• Refining
• Olefins
• Ammonia
• Chemicals
• Coal Gasification
Consulting and Services
Upstream
• Field development
planning
• Project assurance
• Integrity management
• Structural analysis
Downstream
• Downstream consulting
• Feasibility and revamp
studies
• Technical services
• Automation consulting and
project management
Engineering & Construction
Offshore
Fixed Platforms
Floating Facilities
Hulls, Moorings & Risers
SURF
LNG / GTL
Liquefaction
Regasification
FLNG
FSRU
Onshore
Oil & Gas
Refining
Petrochemicals
Chemicals
Ammonia & Fertilizers
Gasification
Asset Services
Maintenance
Modifications
Small Capex Projects
Asset Integrity
Government Services
EMEA
Home Base Operational
Support
Overseas Operational Support
Programme Management
Services
Resilience Planning &
Execution
Training
APAC
Asset Management
Systems Engineering
Integrated Logistics Support
Capability Risk Management
Training
Americas
International Base Operations
Support
Remote Life Support Services
Logistics
7
KBR Global Operations
Mexico City
Houston
Gothenburg
London
Moscow
Delhi
Dubai Pune
Jakarta
Tokyo
Seoul
Singapore
Beijing
Shanghai
Caracas
Perth Rio de Janeiro
Kuala Lumpur Monterrey
Wilmington
Birmingham
Edmonton
Luanda
Atyrau
Baku
Saudi Arabia
Bahrain
Chennai
Melbourne
Arlington
Canberra
Baghdad
Kabul
Freetown
Sydney
25,000 Employees in more than 45 Countries
Customers in more than 70 Countries 8
Leadership Team
Engineering & Construction John Derbyshire
Technology & Consulting
37 Years of Industry
Experience
Engineering & Construction Andrew Pringle
Government Services
14 Years of Industry
Experience (37 Years
Military Experience)
Graham Hill
Global Sales & Strategy
37 Years of Industry
Experience
Roy Oelking
E&C Americas
40 Years of Industry
Experience
Jan Egil Braendeland
E&C EMEA
22 Years of Industry
Experience
Ivor Harrington
E&C APAC
30 Years of Industry
Experience
David Zelinski
E&C Americas (Onshore)
30 Years of Industry
Experience
Stuart Bradie
President and CEO
E&C Group President
27 Years of Industry
Experience
Brian Ferraioli
CFO
37 Years of Industry
Experience
Jay Ibrahim
E&C MENA
21 Years of Industry
Experience
Farhan Mujib
Commercial
27 Years of Industry
Experience
Eileen Akerson
Legal
25 Years of Industry
Experience
Nick Anagnostou
HSSE
19 Years of Industry
Experience
9
Strategic Priorities
Priority Markets
Global Hydrocarbons (Gas) &
International Government
Services
Early project involvement
via differentiated technology
(gas monetization) &
specialized consultancy
services
Pursue Fixed Price EPC
when differentiated by: - KBR Technology
- Related experience
- Ability to self-perform
construction
(predominantly gas monetization)
Global project delivery focus
organized with regional
accountability
Re-focus
Growth
Strategy
1 2
3 4
10
Framework to Support Core Focus
Exit non-strategic businesses:
- Stand-alone Fixed Price EPC Power
- Fixed Price U.S. Infrastructure &
U.S. Minerals
- Building Group
- Fixed Priced Stand-alone Construction
One KBR: Consistent use & application of
standard policies, processes, systems,
tools & procedures to deliver
consistency and efficiency
Allocate capital
in an efficient
and balanced
manner
Efficiencies: Be cost competitive;
$200 million reduction in annual
operating costs by 2016; > $125 million
in savings already identified / actioned
Streamline
Operations
1 2
3 4
Note: All statements current as of KBR’s 2Q15 earnings call on 08/04/2015
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Strategic Objective Progress to date
Exit non-strategic businesses Stand-Alone EPC Power The first of three power plants is now operational. The second will be completed in 1Q 2016. The third is targeted for 1Q 2017 completion. U.S. Minerals & U.S. Infrastructure Closed U.S. Minerals office Selling Infrastructure by year-end 2015 Building Group Sale closed 2Q 2015 realizing cash of $23 million and a gain of $28 million. Fixed Priced Stand Alone Construction Completed existing contracts and team is integrated into E&C Americas
Businesses under review Canadian Module Fabrication Business is pending transfer to announced JV with BCP
Cost reduction initiatives of $200 million by 2016 More than $125 million in savings identified to date
Resolve outstanding disputes Significant progress in closing legacy U.S. Military audits; efforts continue on remaining third party cases
Balanced capital allocation policy $17 million and $35 million in share repurchases and dividends paid, respectively, in 2015
Progress Report on Strategic Objectives
Note: All statements current as of KBR’s 2Q15 earnings call on 08/04/2015 12
Market Outlook: Technology & Consulting
Technology market opportunities led by ammonia, refining and olefins, particularly
revamps.
Opportunities in China and elsewhere for VCC (Veba Combi-Cracker) technology and
converting heavy Hydrocarbons into lighter fuels, esp. diesel.
Consulting opportunities in upstream E&P more challenging but onshore and offshore,
midstream (gas processing, transmission pipelines, terminals) and downstream (LNG,
refining, petrochemicals, fertilizers) opportunities continue to exist.
Looking for additional opportunities to expand T&C technology portfolio.
Note: All statements current as of KBR’s 2Q15 earnings call on 08/04/2015
13
Market Outlook: Engineering & Construction
Q2 developments supporting strategic focus areas:
Statoil award for topsides for phase 1 of multi-staged development of Johan Sverdrup oil & gas field with long-
term follow on opportunities.
Moving to grow industrial services / maintenance business with Brown & Root Industrial Services joint venture.
Forming strategic alliance for pipe fabrication will support EPC in key Gulf Coast / North American markets.
Continued strong base of large projects in backlog through 2015 & 2016:
Executing two mega-LNG projects – Gorgon and Ichthys.
Existing LNG projects expected to remain significant components of earnings in 2015 & 2016; continue to see the
favorable resolution of pending change orders resulting in 2016 LNG income being comparable to 2015.
Significant backlog of ammonia / urea, refining and oil & gas projects.
Shipped final modules on Canadian pipe fabrication/module assembly contracts in July.
Note: All statements current as of KBR’s 2Q15 earnings call on 08/04/2015
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Market Outlook: E&C (Continued)
Good pipeline of near-term and long-term prospects:
Increased focus on Middle East opportunities (refining and petrochemicals).
• Key hire – President, Middle East – J. Ibrahim.
Onshore upstream opportunities in Middle East & Caspian remain positive due to low cost to develop. JV with
National Oil Company of Azerbaijan (SOCAR) announced in 1Q15 also positions us well for offshore brownfield.
Key offshore developments continue in Middle East, North Sea, GoM and West Africa. Additional offshore project
opportunities for North Sea: Maersk Culzean, UK, additional phases of Johan Sverdrup, Norway North Sea;
Thailand, & Qatar.
Early work awarded (Offshore Oil & Gas) under the BG Global Alliance Agreement.
Approximately $2B ammonia / urea complex in the Midwest (confidential client).
Major LNG developments in process support backlog growth in 2016 and beyond:
• Continue to work on Shell Global LNG Agreement, with assignments underway.
• KBR/JGC/Rekayasa JV continue FEED and EPC bid opportunity for Tangguh Train 3. Award expected 2016.
• KBR/SK JV services work underway for Magnolia LNG sole-source 4 train (8mtpa) LNG facility; EPC pricing
by year end.
• Pre-FEEDs and FEED’s underway for projects in Canada and USA.
• Pre-FEED work and tendering ongoing for two major FLNG projects.
Note: All statements current as of KBR’s 2Q15 earnings call on 08/04/2015
15
Market Outlook: Government Services
Confirmed preferred bidder for U.K. MoD Fixed Wing Training (MFTS) contract – another
long-term annuity type project. Award expected this year.
U.K. Army re-basing – discussions continue on a sole source basis with decisions
expected by year-end.
Strong operational performance continues for U.K. PFI contracts – primarily MoD long-
term facilities maintenance.
• Backlog now ~$5.4 billion higher with all years of existing O&M contract in backlog.
A number of U.S. overseas base operations support opportunities in process; e.g.,
Kuwait.
Services in Iraq under LogCap IV contract grew in the period with further growth
possible. Significant progress in successfully closing U.S. Gov’t audits of legacy LogCap
III and RIO billings.
Note: All statements current as of KBR’s 2Q15 earnings call on 08/04/2015
16
Significantly improved earnings versus 2014 driven by strong operating performance.
Two mega LNG projects continue to perform well.
Won strategically important Johan Sverdrup contract from Statoil – topsides for stage 1 of multi-staged
development with longer-term opportunities for significant follow-on work.
Gov’t Services backlog now reflects value for full contract term vs. previous 5 year limit for U.K. PFI contracts
($5.4 billion increase).
Backlog from ongoing businesses relatively unchanged Q1 to Q2, excluding PFI adjustment.
Sold non-strategic Building Group subsidiary
Formed key strategic partnerships for industrial services, pipe fabrication to accelerate earnings growth:
• 50/50 JV via Brown and Root Industrial Services – will expand our customer base and geographic reach
for maintenance / small construction.
• Pipe fabrication alliance will provide access to facilities on strategic gulf coast.
• Both transactions are expected to close by year-end.
Maintained strong balance sheet and cash position providing flexibility in challenging market.
Q2 Financial Summary
Note: All statements current as of KBR’s 2Q15 earnings call on 08/04/2015 17
Consolidated Results: Q2 2015 vs Q2 2014
Commentary
Backlog increase reflects GS long-term contract adjustment.
Revenues declined from completion or near completion of
Canadian pipe fabrication and N.A. construction projects and
reduced activity on an LNG project.
Gross profit and equity in earnings reflects improved
underlying business performance, reduced operational costs
and project charges in 2Q14 that did not reoccur in 2Q15.
G&A lower from cost reduction initiatives.
Restructuring charges and impairment of long-lived assets
also related to cost reduction initiatives.
Gain on sale of Building Group subsidiary - $28M.
Net Income reflects improved operational performance and
cost reduction initiatives.
Quarter Ending
($ in millions, except EPS) Jun 30, 2015 Jun 30, 2014
Bookings $ 1,087 $ 1,186
Backlog of Unfilled Orders $ 15,298 $ 12,491
Revenues $ 1,381 $ 1,659
Gross profit $ 74 $ 28
Equity in earnings $ 53 $ 49
General & administrative expenses ($42) ($60)
Asset impairment and restructuring charges ($17) $ 0
Gain on disposition of assets $ 28 $ 8
Provision for income taxes ($23) ($10)
Net income (loss) attributable to KBR $ 62 ($8)
EPS (diluted) $ 0.43 ($0.06)
EBITDA $ 95 $ 22
Note: All statements current as of KBR’s 2Q15 earnings call on 08/04/2015 18
Segment Reporting: Q2 2015 vs Q2 2014 Revenue
T&C reflects mix shift to technology services and less proprietary
equipment and reduced upstream oil & gas consulting activity;
E&C reflects completion or near completion of Canadian pipe
fabrication and N.A. construction projects and reduced activity on
an LNG project.
Gross Profit and Equity in Earnings
T&C reflects earnings and margins from shift in mix of work
previously noted on olefins, syngas and refining projects and
reduced overhead.
E&C reflects improved underlying business performance / lower
overheads, a $15 million favorable correction of a cumulative error
for an unconsolidated offshore maintenance JV that occurred
throughout the period 2007 to 1Q 2015 and increased progress on
an ongoing LNG project. 2014 included $41 million in losses on
Canadian module assembly projects compared to profit in 2015 as
a result of negotiated settlements. All Canadian modules now
delivered.
GS reflects solid operational performance and reduced
overheads, offset by 2Q15 legacy-related legal fees of $5M. 2014
includes $15 million in reduced project costs and insurance
proceeds received in 2014 that did not reoccur.
Non-Strategic Business reflects solid operational performance,
lower overheads and charges taken on certain power projects in
2Q14 that did not reoccur and sale of Building Group subsidiary.
Quarter Ending ($ in millions) Jun 30, 2015 Jun 30, 2014
Revenues
Technology & Consulting 80 100
Engineering & Construction 953 1,213
Government Services 158 163
Non-Strategic Business 190 183
Consolidated Revenues 1,381 1,659
Gross profit (Loss) and equity in
earnings
Technology & Consulting 21 15
Engineering & Construction 92 53
Government Services 12 28
Non-Strategic Business 2 (19)
Consolidated Gross profit & equity in
earnings 127 77
EBITDA
Technology & Consulting 20 15
Engineering & Construction 70 27
Government Services 11 29
Non-Strategic Business 28 (17)
Other (34) (32)
Consolidated EBITDA 95 22
Note: All statements current as of KBR’s 2Q15 earnings call on 08/04/2015 19
Cash / Capital Allocation
KBR Cash Balance Return of Cash to Shareholders
YTD 2015 Since Jan-07
Share Repurchases 17 748
Dividends 35 273
Total Returned to SHs 52 1,021
Q2 2015 Q1 2015
Domestic 289 181
International 381 499
JV 61 78
Total 731 758
Key Impacts to Cash in 2Q15
Settlement payment to former parent (12)
Dividends (11)
Pension (10)
Previously announced loss projects cash exp. (45)
Cash from sale of Building Group 23
Subtotal (55)
*
* One more payment of 12 remaining in 2015
$ in millions
20
Financial Summary
Significantly improved earnings vs 2014 driven by strong operational performance.
KBR’s restructuring remains on track to deliver $200 million in annual cost savings by 2016
and gross profit and equity in earnings margin percentages:
• T&C – low 20s.
• E&C – upper single digits.
• GS – low teens range (excluding legacy U.S. Gov’t costs).
Continued success in strategically important areas – topsides for Johan Sverdrup; formed
two strategic alliances for industrial services and pipe fabrication, sold Building Group
subsidiary, Strong balance sheet and cash position, providing flexibility given challenging
market conditions.
Good bookings results with backlog relatively unchanged from Q1 for ongoing business.
Significant progress in closing legacy U.S. Military audits.
Expect two major LNG projects to contribute significantly to 2015 and 2016 earnings;
resolution of pending change orders could result in 2016 LNG income being comparable to
2015.
Post closing, shipped final Canadian modules and first of three power plants now
operational.
Note: All statements current as of KBR’s 2Q15 earnings call on 08/04/2015
21
Appendix
Consolidated EBITDA Reconciliation 2Q 2015
Note: EBITDA is defined as earnings before interest, income tax, depreciation and amortization
Quarter Ending
($ in millions) Jun 30, 2015 Jun 30, 2014
Net Income Attributable to KBR $62 ($8)
Add Back:
Interest Income (Expense) ($2) ($2)
Provision for Income Taxes ($23) ($10)
Depreciation & Amortization ($8) ($18)
Consolidated EBITDA $95 $22
23