KBR Announces Third Quarter 2017 Financial Results

HOUSTON, Oct. 31, 2017 /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 third quarter 2017 financial results.

Consolidated revenue in the third quarter of 2017 was $1.0 billion compared to $1.1 billion in the third quarter of 2016. Net income attributable to KBR was $45 million or $0.32 per diluted share ($0.35 per diluted share excluding $4 million in pre-tax U.S. Government legacy legal fees) in the third quarter of 2017 compared to net loss of $(63) million or $(0.44) per diluted share (($0.44) per diluted share excluding pre-tax U.S. Government legacy legal fees of less than $1 million) in the third quarter of 2016.

Revenue in the third quarter decreased slightly from the same period a year ago driven by lower activity on various projects in our Engineering and Construction segment. The revenue decreases were partially offset by the acquisitions and organic growth in our Government Services segment, and continued growth in our Technology and Consulting segment.

Net income attributable to KBR reflects good performance across all segments. Gross profit improved to $87 million from a loss of $(36) million in the prior year quarter. Program performance this quarter was at or above expectations for all segments, whereas the results in the third quarter of 2016 included $126 million in charges on two projects, the majority of which was for an electric power-generating facility within our Non-Strategic Business segment. These projects have been completed. Equity in earnings this quarter improved to $23 million from $19 million in the prior year quarter, driven by growth in our Affinity joint venture in the U.K. within our Government Services segment.

During the quarter, KBR was awarded several key contracts in its Government Services segment totaling more than $1 billion dollars. These awards provide support services to Navy bases in Diego Garcia, Djibouti, Bahrain and also to the US Army in Europe and the Arabian Peninsula. This business segment continues to strengthen and grow its core business area of providing base operations support to the military and coalition forces across the world.

"We are pleased to once again report strong earnings with continued good performance across all business segments. In particular, our Technology & Consulting segment delivered exceptional margins in the quarter," said Stuart Bradie, KBR President and CEO. "Our strategy to grow our Government Services business continues to be successful, including recently winning over a billion dollars in contracts to provide base operations support services at U.S. Naval bases."

"As we continue to experience improved and more consistent profit momentum and cash generation, KBR is positioned for strong long-term growth with less risk and increased financial flexibility," Bradie continued.

Segment Business Results (All comparisons are third quarter 2017 versus third quarter 2016 unless otherwise noted.)

Government Services (GS) Results

GS revenue was $582 million, an increase of $181 million compared to the third quarter of 2016. The increase was primarily due to the acquisition of HTSI in the third quarter of 2016, continued expansion of task orders on existing U.S. Government contracts including LogCAP IV and growth on existing program management projects in the U.K.

GS gross profit was $39 million (6.7% of revenues), an increase of $7 million from the third quarter of 2016, due to expansion of task orders on LogCAP IV and profits related to the HTSI acquisition that occurred in the third quarter of 2016. The increases were partially offset by non-recurring gains from the funding of previously expensed legal fees and an insurance reimbursement that occurred in the third quarter of 2016 and did not recur in 2017.

Equity in earnings of unconsolidated affiliates was $14 million, an increase of $6 million from the prior year, due to increased activity within our Affinity joint venture in the U.K.

Technology & Consulting (T&C) Results

T&C revenue was $78 million, an increase of $11 million compared to the third quarter of 2016, due primarily to new consulting contracts from upstream projects.

T&C gross profit was $20 million (25.6% of revenues), up $3 million from the third quarter of 2016, due to a favorable technology mix and stronger consulting performance.

Engineering & Construction (E&C) Results

E&C revenue was $370 million, a decrease of $225 million from the third quarter of 2016, primarily due to reduced activity on several projects across the sector. These decreases were partially offset by projects ramping up from new awards in the second half of 2016, including a construction project in Canada.

E&C gross profit was $25 million (6.8% of revenues), an increase of $24 million compared to the third quarter of 2016. The increase can be attributed to strong execution and commercial focus in the quarter, coupled with losses on an ammonia project during the third quarter of 2016 that did not recur in 2017. The increase was partially offset by reduced activity on several projects across the sector as mentioned above.

Equity in earnings of unconsolidated affiliates was $9 million, a decrease of $2 million from the prior year predominantly due to lower activity on the Ichthys joint venture partially offset by increased earnings on our industrial services joint ventures in the Americas as well as our joint ventures in Europe.

Non-strategic Business (NSB) Results

NSB revenue was $4 million, a decrease of $6 million from the prior year, primarily due to EPC power projects in final close-out phase as we exit this business.

NSB gross profit was $3 million, improved by $89 million compared to the third quarter of 2016, due to non-recurring cost increases and delays on a power project in the third quarter of 2016.

Cash Flow and Liquidity

Cash flow from operating activities was $28 million, an increase of $8 million compared to the third quarter of 2016. Cash and equivalents at September 30, 2017 totaled $511 million. As of September 30, 2017, our $1 billion revolving credit agreement had an outstanding balance of $470 million.

New Business Awards

Notable new awards:

Government Services

    --  We were awarded a $515 million fixed price with award fee contract by
        Naval Facilities Engineering Command (NAVFAC) Pacific to provide base
        operating support (BOS) services at Navy Support Facility Diego Garcia
        in the British Indian Ocean Territory. The work is expected to be
        performed over the next eight years if all option years are exercised.
    --  We were awarded a $441 million contract for BOS services by NAVFAC
        Atlantic to provide services primarily at Naval Support Facility Camp
        Lemonnier in Djibouti, Chabelley Air Field in Djibouti and Camp Simba in
        Manda Bay, Kenya. The work is expected to be performed over the next
        eight years if all option years are exercised.
    --  We were awarded a $91 million contract for BOS services contract by
        NAVFAC Atlantic to provide services at various locations within the
        Kingdom of Bahrain and the United Arab Emirates. The work is expected to
        be performed over the next eight years if all option years are
        exercised.
    --  We were awarded two task order modifications totaling $116 million to
        provide logistics support services to the U.S. Army in Europe and the
        Arabian Peninsula. The Army Contracting Command awarded these task order
        modifications under the Logistics Civil Augmentation Program IV
        contract.

Technology and Consulting

    --  We were awarded a contract by Dorogobuzh JSC (owned by JSC ACRON) to
        provide licensing and basic engineering design to revamp an ammonia
        plant - originally built by KBR - located in the Dorogobuzh, Smolensk
        region of Russia. Under the agreement KBR will supply its proprietary
        ammonia technology to increase plant capacity significantly to 2100 MTPD
        with improved efficiency.
    --  We were awarded a guidance study contract by the United States Bureau of
        Safety & Environmental Enforcement (BSEE) for the Integrity Management
        Process of Tension Leg Platforms in the U.S. Gulf of Mexico. We will
        work with BSEE to build the framework for their assessments of tendon
        performance and their expectations for tendon integrity management.

Engineering and Construction

    --  We were awarded an engineering and project management services contract
        by JVGAS - a joint venture of Sonatrach, Statoil and BP for the
        provision of engineering, procurement and construction management
        services in Algeria. KBR will provide detail design engineering,
        procurement services as well as construction management at the major gas
        developments at In Salah Gas and In Amenas. This work is expected to be
        performed over 48 months.
    --  We were awarded pre-front end engineering design (FEED) and project
        support services contracts by BP for the development of the Tortue /
        Ahmeyim field offshore Mauritania and Senegal. KBR will provide pre-FEED
        and project support covering design of the subsea, pre-treatment
        floating production storage and offloading facility, inshore
        hub/terminal, and interfaces for floating liquefied natural gas for the
        Tortue Project. This new work will build on the earlier concept phase
        work for the development of the field already completed by KBR's
        subsidiary Granherne for BP's partner, Kosmos.
    --  We were awarded a project management services contract by OMV Offshore
        Abu Dhabi GmbH on behalf of Abu Dhabi National Oil Company (ADNOC), for
        management of the FEED phase of the Hail & Ghasha Development project in
        Abu Dhabi, United Arab Emirates. The Hail & Ghasha Project, one of the
        largest sour gas field projects that ADNOC is developing, is forecast to
        produce about 1 billion cubic feet of sour gas per day.

KBR backlog remained flat at $10.3 billion as of September 30, 2017 compared to $10.3 billion as of June 30, 2017, with backlog growth of $292 million in the GS business segment offsetting declines primarily from our E&C segment.

Guidance

We are increasing the company's full year 2017 fully diluted adjusted earnings per share guidance to a range of $1.35 to $1.50 per share from the previous range of $1.25 to $1.45. Our guidance of earnings per share is on an adjusted EPS basis, which excludes legacy legal costs for U.S. Government contracts. These costs are estimated to be approximately $13 million or $0.09 per fully diluted share in 2017. The estimated legacy legal costs do not assume any cost reimbursement from the U.S. Government that could occur in the future. Our estimated effective tax rate for 2017 is estimated to range from 23% to 25%. Our expected EBITDA has increased to a range of $320 million to $350 million from the previous range of $300 million to $350 million. The operating cash flows are estimated to range from $120 million to $200 million for 2017.

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 over 34,000 people worldwide (including our joint ventures), with customers in more than 80 countries, and operations in 40 countries, across three synergistic global businesses:

    --  Government Services, 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 & Consulting, including proprietary technology focused on the
        monetization of hydrocarbons (especially natural gas and natural gas
        liquids) in ethylene and petrochemicals; ammonia, nitric acid and
        fertilizers; oil refining; gasification; oil and gas consulting;
        integrity management; naval architecture and proprietary hulls; and
        downstream consulting
    --  Engineering & Construction, 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) and
        program management

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.


                                                       KBR, Inc.: Consolidated Statements of Operations

                                                           (In millions, except for per share data)

                                                                         (Unaudited)


                                                                                                     Three Months Ended

                                                                                            September 30,            September 30,

                                                                                                     2017                      2016
                                                                                                     ----                      ----

    Revenues:

    Government Services                                                                                       $582                           $401

    Technology & Consulting                                                                            78                              67

    Engineering & Construction                                                                        370                             595
                                                                                                      ---                             ---

      Subtotal                                                                                      1,030                           1,063

    Non-strategic Business                                                                              4                              10
                                                                                                      ---

    Total revenues                                                                                  1,034                           1,073
                                                                                                    -----                           -----

    Gross profit (loss):

    Government Services                                                                                39                              32

    Technology & Consulting                                                                            20                              17

    Engineering & Construction                                                                         25                               1
                                                                                                      ---                             ---

      Subtotal                                                                                         84                              50

    Non-strategic Business                                                                              3                            (86)
                                                                                                      ---

    Total gross profit (loss)                                                                          87                            (36)
                                                                                                      ---                             ---

    Equity in earnings of unconsolidated affiliates:

    Government Services                                                                                14                               8

    Technology & Consulting                                                                             -                              -

    Engineering & Construction                                                                          9                              11
                                                                                                      ---                             ---

      Subtotal                                                                                         23                              19

    Non-strategic Business                                                                              -                              -
                                                                                                      ---

    Total equity in earnings of unconsolidated affiliates                                              23                              19
                                                                                                      ---                             ---

    General and administrative expenses                                                              (37)                           (43)

    Asset impairment and restructuring charges                                                          -                            (7)

    Gain on disposition of assets                                                                       -                              -
                                                                                                      ---

    Operating income (loss)                                                                            73                            (67)

    Interest expense                                                                                  (6)                            (3)

    Other non-operating income (expense)                                                              (4)                              2
                                                                                                      ---

    Income (loss) before income taxes and noncontrolling interests                                     63                            (68)

    Benefit (provision) for income taxes                                                             (16)                             11
                                                                                                      ---

    Net income (loss)                                                                                  47                            (57)

    Net income attributable to noncontrolling interests                                               (2)                            (6)
                                                                                                      ===                             ===

    Net income (loss) attributable to KBR                                                                      $45                          $(63)
                                                                                                               ===                           ====


    Net income (loss) attributable to KBR per share:

    Basic                                                                                                    $0.32                        $(0.44)

    Diluted                                                                                                  $0.32                        $(0.44)


    Basic weighted average common shares outstanding                                                  140                             142

    Diluted weighted average common shares outstanding                                                140                             142


    Cash dividends declared per share                                                                        $0.08                          $0.08


                                                            KBR, Inc.: Consolidated Statements of Operations

                                                                (In millions, except for per share data)

                                                                               (Unaudited)


                                                                                                                       Nine Months Ended

                                                                                                             September 30,             September 30,

                                                                                                                      2017                       2016
                                                                                                                      ----                       ----

    Revenues:

    Government Services                                                                                                       $1,640                          $840

    Technology & Consulting                                                                                            236                               262

    Engineering & Construction                                                                                       1,321                             1,822
                                                                                                                     -----                             -----

      Subtotal                                                                                                       3,197                             2,924

    Non-strategic Business                                                                                              37                               154

    Total revenues                                                                                                   3,234                             3,078
                                                                                                                     -----                             -----

    Gross profit (loss):

    Government Services                                                                                                113                                94

    Technology & Consulting                                                                                             51                                49

    Engineering & Construction                                                                                         113                                65
                                                                                                                       ---                               ---

      Subtotal                                                                                                         277                               208

    Non-strategic Business                                                                                               -                            (102)
                                                                                                                       ---                             ----

    Total gross profit                                                                                                 277                               106
                                                                                                                       ---                               ---

    Equity in earnings of unconsolidated affiliates:

    Government Services                                                                                                 41                                29

    Technology & Consulting                                                                                              -                                -

    Engineering & Construction                                                                                          23                                52
                                                                                                                       ---                               ---

      Subtotal                                                                                                          64                                81

    Non-strategic Business                                                                                               -                                -
                                                                                                                       ---                              ---

    Total equity in earnings of unconsolidated affiliates                                                               64                                81
                                                                                                                       ---                               ---

    General and administrative expenses                                                                              (107)                            (111)

    Asset impairment and restructuring charges                                                                           -                             (21)

    Gain on disposition of assets                                                                                        5                                 6
                                                                                                                       ---                               ---

    Operating income                                                                                                   239                                61

    Interest expense                                                                                                  (16)                              (7)

    Other non-operating income (expense)                                                                               (9)                                8
                                                                                                                       ---                               ---

    Income before income taxes and noncontrolling interests                                                            214                                62

    Provision for income taxes                                                                                        (50)                             (27)
                                                                                                                       ---                               ---

    Net income                                                                                                         164                                35

    Net income attributable to noncontrolling interests                                                                (5)                              (9)
                                                                                                                       ===                               ===

    Net income attributable to KBR                                                                                              $159                           $26
                                                                                                                                ====                           ===


    Net income attributable to KBR per share:

    Basic                                                                                                                      $1.12                         $0.18

    Diluted                                                                                                                    $1.12                         $0.18


    Basic weighted average common shares outstanding                                                                   141                               142

    Diluted weighted average common shares outstanding                                                                 141                               142


    Cash dividends declared per share                                                                                          $0.24                         $0.24


                                          KBR, Inc.: Consolidated Balance Sheets

                                                      (In millions)


                                                       September 30,             December 31,

                                                                2017                      2016
                                                                ----                      ----

                                                        (Unaudited)

                         Assets

    Current assets:

    Cash and equivalents                                                  $511                            $536

    Accounts receivable, net of
     allowance for doubtful accounts
     of $14 and $14                                              501                                592

    Costs and estimated earnings in
     excess of billings on
     uncompleted contracts                                       412                                416

    Claims receivable                                              -                               400

    Other current assets                                          94                                103
                                                                 ---                                ---

    Total current assets                                       1,518                              2,047

    Claims and accounts receivable                               100                                131

    Property, plant, and equipment,
     net of accumulated depreciation
     of $323 and $324 (including net
     PPE of $35 and $36 owned by a
     variable interest entity)                                   134                                145

    Goodwill                                                     965                                959

    Intangible assets, net of
     accumulated amortization of
     $119 and $100                                               237                                248

    Equity in and advances to
     unconsolidated affiliates                                   401                                369

    Deferred income taxes                                        122                                118

    Other assets                                                 124                                127
                                                                 ---                                ---

    Total assets                                                        $3,601                          $4,144
                                                                        ======                          ======


             Liabilities and Shareholders'
                         Equity

    Current liabilities:

    Accounts payable                                                      $398                            $535

    Billings in excess of costs and
     estimated earnings on
     uncompleted contracts                                       360                                552

    Accrued salaries, wages and
     benefits                                                    211                                171

    Nonrecourse project debt                                      10                                  9

    Other current liabilities                                    193                                292
                                                                 ---                                ---

    Total current liabilities                                  1,172                              1,559

    Pension obligations                                          520                                526

    Employee compensation and
     benefits                                                    116                                113

    Income tax payable                                            81                                 78

    Deferred income taxes                                         66                                149

    Nonrecourse project debt                                      32                                 34

    Revolving credit agreement                                   470                                650

    Deferred income from
     unconsolidated affiliates                                    98                                 90

    Other liabilities                                            188                                200
                                                                 ---                                ---

    Total liabilities                                          2,743                              3,399
                                                               =====                              =====

    KBR shareholders' equity:

    Preferred stock                                                -                                 -

    Common stock                                                   -                                 -

    Paid-in capital in excess of par                           2,095                              2,088

    Accumulated other comprehensive
     loss                                                    (1,024)                           (1,050)

    Retained earnings                                            613                                488

    Treasury stock                                             (817)                             (769)
                                                                ----                               ----

    Total KBR shareholders' equity                               867                                757

    Noncontrolling interests                                     (9)                              (12)
                                                                 ---                                ---

    Total shareholders' equity                                   858                                745
                                                                 ---                                ---

    Total liabilities and
     shareholders' equity                                               $3,601                          $4,144
                                                                        ======                          ======


                                KBR, Inc.: Consolidated Statements of Cash Flows

                                                 (In millions)

                                                  (Unaudited)


                                                          Three Months Ended
                                                          ------------------

                                                 September 30,            September 30,

                                                          2017                      2016
                                                          ----                      ----

    Cash flows provided by
     operating activities:

    Net income
     (loss)                                                         $47                         $(57)

    Adjustments to reconcile
     net income to net cash
     provided by (used in)
     operating activities:

      Depreciation
       and
       amortization                                         11                               12

      Equity in
       earnings of
       unconsolidated
       affiliates                                         (23)                            (19)

      Deferred
       income tax
       expense                                              10                                -

      Other                                                  9                                4

    Changes in operating assets
     and liabilities:

      Accounts
       receivable,
       net of
       allowance
       for doubtful
       accounts                                             30                             (16)

      Costs and
       estimated
       earnings in
       excess of
       billings on
       uncompleted
       contracts                                          (30)                              53

      Accounts
       payable                                            (18)                               7

      Billings in
       excess of
       costs and
       estimated
       earnings on
       uncompleted
       contracts                                          (40)                              16

      Accrued
       salaries,
       wages and
       benefits                                             37                              (8)

      Reserve for
       loss on
       uncompleted
       contracts                                           (8)                               8

      Payments from
       unconsolidated
       affiliates,
       net                                                   1                                5

      Distributions
       of earnings
       from
       unconsolidated
       affiliates                                           11                               15

      Income taxes
       payable                                             (2)                             (9)

      Pension
       funding                                            (10)                            (10)

      Net
       settlement
       of
       derivative
       contracts                                             3                              (5)

      Other assets
       and
       liabilities                                           -                              24
                                                           ---                             ---

    Total cash
     flows
     provided by
     operating
     activities                                             28                               20
                                                           ---                              ---

    Cash flows used in
     investing activities:

    Purchases of
     property,
     plant and
     equipment                                               -                             (2)

    Proceeds from
     sale of
     assets or
     investments                                             -                               1

    Payments for
     investments
     in equity
     method joint
     ventures                                                -                             (5)

    Acquisition
     of
     businesses,
     net of cash
     acquired                                                -                           (889)

    Other                                                  (1)                               -
                                                           ---                              ---

    Total cash
     flows used
     in investing
     activities                                            (1)                           (895)
                                                           ---                             ----

    Cash flows provided by
     (used in) financing
     activities:

    Payments of
     dividends to
     shareholders                                         (11)                            (11)

    Borrowings on
     revolving
     credit
     agreement                                               -                             700

    Payments on
     revolving
     credit
     agreement                                               -                            (50)

    Excess tax
     benefits
     from share-
     based
     compensation                                            -                             (1)

    Total cash
     flows
     provided by
     (used in)
     financing
     activities                                           (11)                             638
                                                           ---                              ---

    Effect of
     exchange
     rate changes
     on cash                                                 4                                2
                                                           ---                              ---

    Increase
     (decrease)
     in cash and
     equivalents                                            20                            (235)

    Cash and
     equivalents
     at beginning
     of period                                             491                              804

    Cash and
     equivalents
     at end of
     period                                                        $511                          $569
                                                                   ====                          ====


                                KBR, Inc.: Consolidated Statements of Cash Flows

                                                 (In millions)

                                                  (Unaudited)


                                                          Nine Months Ended

                                                 September 30,            September 30,

                                                          2017                      2016
                                                          ----                      ----

    Cash flows provided by
     operating activities:

    Net income                                                     $164                          $35

    Adjustments to reconcile
     net income to net cash
     provided by (used in)
     operating activities:

      Depreciation
       and
       amortization                                         38                               31

      Equity in
       earnings of
       unconsolidated
       affiliates                                         (64)                            (81)

      Deferred
       income tax
       (benefit)
       expense                                            (75)                               7

      Other                                                 20                                4

    Changes in operating assets
     and liabilities:

      Accounts
       receivable,
       net of
       allowance
       for doubtful
       accounts                                            100                                9

      Costs and
       estimated
       earnings in
       excess of
       billings on
       uncompleted
       contracts                                            11                               25

      Claims
       receivable                                          400                                -

      Accounts
       payable                                           (144)                              39

      Billings in
       excess of
       costs and
       estimated
       earnings on
       uncompleted
       contracts                                         (207)                              14

      Accrued
       salaries,
       wages and
       benefits                                             39                             (19)

      Reserve for
       loss on
       uncompleted
       contracts                                          (43)                            (15)

      Payments from
       (advances
       to)
       unconsolidated
       affiliates,
       net                                                   6                              (3)

      Distributions
       of earnings
       from
       unconsolidated
       affiliates                                           41                               43

      Income taxes
       payable                                             (7)                            (19)

      Pension
       funding                                            (28)                            (31)

      Net
       settlement
       of
       derivative
       contracts                                             4                              (8)

      Other assets
       and
       liabilities                                        (17)                            (23)

    Total cash
     flows
     provided by
     operating
     activities                                            238                                8
                                                           ---                              ---

    Cash flows used in
     investing activities:

    Purchases of
     property,
     plant and
     equipment                                             (6)                             (8)

    Proceeds from
     sale of
     assets or
     investments                                             2                                2

    Payments for
     investments
     in equity
     method joint
     ventures                                                -                             (5)

    Acquisition
     of
     businesses,
     net of cash
     acquired                                                2                            (911)

    Other                                                  (2)                               -

    Total cash
     flows used
     in investing
     activities                                            (4)                           (922)
                                                           ---                             ----

    Cash flows provided by
     (used in) financing
     activities:

    Payments to
     reacquire
     common stock                                         (52)                             (2)

    Distributions
     to
     noncontrolling
     interests                                             (1)                             (9)

    Payments of
     dividends to
     shareholders                                         (34)                            (34)

    Borrowings on
     revolving
     credit
     agreement                                               -                             700

    Payments on
     revolving
     credit
     agreement                                           (180)                            (50)

    Payments on
     short-term
     and long-
     term
     borrowings                                            (5)                             (5)

    Total cash
     flows
     provided by
     (used in)
     financing
     activities                                          (272)                             600
                                                          ----                              ---

    Effect of
     exchange
     rate changes
     on cash                                                13                                -
                                                           ---                              ---

    Decrease in
     cash and
     equivalents                                          (25)                           (314)

    Cash and
     equivalents
     at beginning
     of period                                             536                              883

    Cash and
     equivalents
     at end of
     period                                                        $511                         $569
                                                                   ====                         ====


                                KBR, Inc.: Backlog Information (a)

                                          (In millions)

                                           (Unaudited)


                  September 30,              June 30,             December 31,

                           2017                   2017                      2016
                           ----                   ----                      ----

    Government
     Services                       $8,183                                        $7,891         $7,821

    Technology &
     Consulting             278                              292                            313

    Engineering &
     Construction         1,874                            2,134                          2,769
                          -----                            -----                          -----

      Subtotal           10,335                           10,317                         10,903

    Non-strategic
     Business                 7                                7                             35

    Total backlog                  $10,342                                       $10,324        $10,938
                                   =======                                       =======        =======


               (a)     Backlog
                       generally
                       represents the
                       dollar amount
                       of revenues we
                       expect to
                       realize in the
                       future as a
                       result of
                       performing
                       work on
                       contracts and
                       our pro-rata
                       share of work
                       to be
                       performed by
                       unconsolidated
                       joint
                       ventures. We
                       generally
                       include total
                       expected
                       revenues in
                       backlog when a
                       contract is
                       awarded under
                       a legally
                       binding
                       agreement. In
                       many
                       instances,
                       arrangements
                       included in
                       backlog are
                       complex,
                       nonrepetitive
                       and may
                       fluctuate due
                       to the release
                       of contracted
                       work in phases
                       by the
                       customer.
                       Additionally,
                       nearly all
                       contracts
                       allow
                       customers to
                       terminate the
                       agreement at
                       any time for
                       convenience.
                       Where contract
                       duration is
                       indefinite and
                       clients can
                       terminate for
                       convenience
                       without having
                       to compensate
                       us for periods
                       beyond the
                       date of
                       termination,
                       projects
                       included in
                       backlog are
                       limited to the
                       estimated
                       amount of
                       expected
                       revenues
                       within the
                       following
                       twelve months.
                       Certain
                       contracts
                       provide
                       maximum dollar
                       limits, with
                       actual
                       authorization
                       to perform
                       work under the
                       contract
                       agreed upon on
                       a periodic
                       basis with the
                       customer. In
                       these
                       arrangements,
                       only the
                       amounts
                       authorized are
                       included in
                       backlog. For
                       projects where
                       we act solely
                       in a project
                       management
                       capacity, we
                       only include
                       the value of
                       our services
                       on each
                       project in
                       backlog.

                      Within our GS
                       business
                       segment, we
                       calculate
                       estimated
                       backlog for
                       long-term
                       contracts
                       associated
                       with the U.K.
                       government's
                       privately
                       financed
                       initiatives or
                       projects
                       ("PFIs") based
                       on the
                       aggregate
                       amount that
                       our client
                       would
                       contractually
                       be obligated
                       to pay us over
                       the life of
                       the project.
                       We update our
                       estimates of
                       the future
                       work to be
                       executed under
                       these
                       contracts on a
                       quarterly
                       basis and
                       adjust backlog
                       if necessary.

                      We have
                       included in
                       the table
                       above our
                       proportionate
                       share of
                       unconsolidated
                       joint
                       ventures'
                       estimated
                       revenues.
                       Since these
                       projects are
                       accounted for
                       under the
                       equity method,
                       only our share
                       of future
                       earnings from
                       these projects
                       will be
                       recorded in
                       our results of
                       operations.
                       Our
                       proportionate
                       share of
                       backlog for
                       projects
                       related to
                       unconsolidated
                       joint ventures
                       totaled $7.2
                       billion at
                       September 30,
                       2017 and $7.4
                       billion at
                       December 31,
                       2016. We
                       consolidate
                       joint ventures
                       which are
                       majority-
                       owned and
                       controlled or
                       are variable
                       interest
                       entities
                       ("VIEs") in
                       which we are
                       the primary
                       beneficiary.
                       Our backlog
                       included in
                       the table
                       above for
                       projects
                       related to
                       consolidated
                       joint ventures
                       with
                       noncontrolling
                       interest
                       includes 100%
                       of the backlog
                       associated
                       with those
                       joint ventures
                       and totaled
                       $130 million
                       at September
                       30, 2017 and
                       $151 million
                       at December
                       31, 2016.

                      We estimate
                       that as of
                       September 30,
                       2017, 34% of
                       our backlog
                       will be
                       executed
                       within one
                       year. Of this
                       amount, 61%
                       will be
                       recognized in
                       revenues on
                       our condensed
                       consolidated
                       statement of
                       operations and
                       39% will be
                       recorded by
                       our
                       unconsolidated
                       joint
                       ventures. As
                       of September
                       30, 2017, $112
                       million of our
                       backlog
                       relates to
                       active
                       contracts that
                       are in a loss
                       position.

                      As of September
                       30, 2017, 11%
                       of our backlog
                       was
                       attributable
                       to fixed-
                       price
                       contracts, 61%
                       was
                       attributable
                       to PFIs and
                       28% of our
                       backlog was
                       attributable
                       to cost-
                       reimbursable
                       contracts. For
                       contracts that
                       contain both
                       fixed-price
                       and cost-
                       reimbursable
                       components, we
                       classify the
                       individual
                       components as
                       either fixed-
                       price or cost-
                       reimbursable
                       according to
                       the
                       composition of
                       the contract;
                       however, for
                       smaller
                       contracts, we
                       characterize
                       the entire
                       contract based
                       on the
                       predominant
                       component.  As
                       of September
                       30, 2017, $7.6
                       billion of our
                       GS backlog was
                       currently
                       funded by our
                       customers.

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SOURCE KBR, Inc.