Slide 1: 4Q 2017 & Fiscal Year 2017 Financial Results
4Q 2017 & Fiscal Year 2017 Financial Results February 23, 2018 Stuart Bradie – President and Chief Executive Officer Mark Sopp – Executive Vice President and Chief Financial Officer Nelson Rowe – Senior Vice President, Investor Relations
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements regarding our plans, objectives, goals, strategies, future events, future financial performance and backlog information and other information that is not historical. When used in this presentation, the words “estimates,
Slide 3: Stuart Bradie | Chief Executive Officer
Stuart Bradie | Chief Executive Officer
Slide 4: Safety: Moving Towards Zero Harm
SAFETY Safety: Moving Towards Zero Harm Total Recordable Incident Rate (TRIR) Performance: 2011 - 2017 0.50 0.43 0.42 0.38 0.40 0.36 0.31 0.30 0.35 0.35 0.28 0.32 0.24 0.20 0.20 0.24 KBR is focused on an 0.23 0.21 0.21 0.19 0.18 industry-leading commitment 0.16 0.16 0.10 to employee safety 0.00 2011
Slide 5: 2017 Highlights
2017 HIGHLIGHTS Revenue Adjusted EPS* ($MM) ($) $1.49 KBR excluding NSB NSB $210 $38 Predicted and improved results, solid project execution, strong cash flow generation $4,058 $4,133 Delivering growth; Government Services Book/Bill 1.2x and Technology & Consulting Book/Bill 1.3x $(0.33) Deliv
Slide 6: Market Outlook
MARKET OUTLOOK KBR OVERVIEW Strong outlook and favorable trends in all key end markets Increasing in government and defense spending Growth in key areas across our Space portfolio Civil, military and commercial Continued strong outlook for KBR Technologies in gas monetization, refining and
Slide 7: Mark Sopp | Executive Vice President
Mark Sopp | Executive Vice President
Slide 8: Consolidated Results
CONSOLIDATED RESULTS ($ in millions, except EPS) 4Q 2016 4Q 2017 FY 2017 Revenues $ 1,190 $ 937 $ 4,171 Gross Profit $6 $ 65 $ 342 Improved stability and generation of operating Equity in Earnings $ 10 $8 $ 72 profits GP + EE* $ 16 $ 73 $ 414 General & Administrative Expenses ($32) ($40) ($147)
Slide 9: 2017 Segment Profitability Results vs Targets
SEGMENT RESULTS 2017 Segment Profitability Results vs Targets Government Technology & Engineering & Services Consulting Construction Target Actual Target Actual Target Actual Upper Upper GP + EE Margins 9% Low 20s 24% 8% single digits % single digits % Operating Income Upper Mid to upper 8% High tee
Slide 10: 2017 Special Tax Items
TAXES 2017 Special Tax Items Benefit EPS ($ millions) Benefit Valuation Allowance Reduction $223 $1.58 KBR profitability restored; confidence in long-term profit generation 2017 U.S. Tax Reform $18 $0.13 Revalued deferred tax liabilities to 21% rate Repatriation tax offset with unused foreign tax cr
Slide 11: Cash, Debt, and Leverage Position
CASH Cash, Debt, and Leverage Position 2016 2017 Ending Cash Balance $ 536 $ 439 Balanced 2017 Capital Allocation: ‒ Annual Dividend payments of $45M Gross Debt $ 650 $ 470 ‒ Reduced debt by $180M Net Debt $ 114 $ 31 ‒ Repurchased 3.3M shares for $50M EBITDA $ 64 $ 320 Recapitalization planned f
Slide 12: Ichthys LNG, Status and Funding Timeline
ICHTHYS Ichthys LNG, Status and Funding Timeline Commercial Terms & Status Sources and Uses of Joint Venture Funding Re-measurable Sources of Funding Modular Fabrication (~12% of Project) Completed Expecting Client/Subcontractor Recoveries Cost Reimbursable (CR) $600M+ Major Site Construction (~46%
Slide 13: Recapitalization
RECAPITALIZATION Have been targeting long-term refinancing since early 2017 Long-term refinancing to extend tenor and accommodate SGT and Ichthys Commitment/underwriting in place; execution planned Q1/Q2 2018 Revolver, LOC facility, Term loan, dedicated Ichthys line Will consider modest eq
Slide 14: 2018 Guidance
2018 GUIDANCE Adjusted EPS range $1.35 - $1.45, excluding legacy legal fees – Estimate for legacy legal fees is $10M or $0.07 EPS Effective Tax Rate: 22% - 24% Operating Cash Flow range $125M - $175M Mid-point Adjusted EPS growth of 7% Note: 2018 guidance includes addition of former JV partner
Slide 15: 2018 Outlook
2018 Outlook a>. \ is ee WS , a ye \\ i <
Slide 16: Government Services Outlook: Strong Growth
GOVERNMENT SERVICES Outlook: Strong Growth Strong 2018 U.S. Government Budget ‒ Defense spending increase across multiple funding streams, including Base and OCO Budgets, solidifies LogCAP in 2018/19 ‒ Emphasis on technology innovation and Space Based capabilities across civil, military, and Natio
Slide 17: Technology & Consulting Outlook: Steady to Growing
TECHNOLOGY Government Services Outlook: Strong Growth & CONSULTING Outlook: Steady to Growing Increased demand for petrochemical technologies in feedstock advantaged territories (i.e. North America, Russia & Middle East) and in strong consumer markets (China & India) Increasing demand for niche
Slide 18: Engineering & Construction Outlook: Positioned for CapEx Recovery
Government ENGINEERING Services & Outlook: Strong Growth CONSTRUCTION Outlook: Positioned for CapEx Recovery Strong market fundamentals in petrochemicals in North America, Russia and Middle East producing increased opportunities in greenfield and brownfield projects Mid-term LNG supply / demand
Slide 19: SGT Acquisition: Overview
SGT ACQUISITION Overview Company Overview Key Platforms and Programs Provides award-winning, high value engineering, mission operations, Human Exploration and Operations Mission Directorate scientific, and IT service solutions to a wide array of federal government NASA Science Mission Director
Slide 20: SGT Acquisition: Transaction Rationale
SGT ACQUISITION Sapphire Overview Transaction Rationale Sapphire Overview Sapphire Delivers on Key KBRwyle Existing Strategy 1 Well-established, tightly integrated business with a strong Grow Space Franchise Grow Core Engineering brand and reputation Civil Army Command • Expand NASA franchise acros
Slide 21: SGT Acquisition: Financial Summary
SGT ACQUISITION Financial Summary Sapphire Overview Key Financial Metrics Deal Financials Annualized revenues of ~$500M Purchase price $355M Margins in line with GS norms EBITDA Multiple low 8’s after tax benefits Low capital intensity, strong free cash flow Cash and GAAP EPS accretive i
Slide 22: Aspire Defence JV: Assuming Full Operational Responsibility
ASPIRE DEFENCE JV Assuming Full Operational Responsibility Largest UK Government infrastructure PFI 35 year PFI contract with UK Ministry of Defence commenced in 2006 $1.5B contract expansion in 2017 in support of the UK Army Basing Programme Scope includes base construction, management, mai
Slide 23: KBR Pro Forma with SGT and Aspire
IMPROVING PORTFOLIO MIX KBR Pro Forma with SGT and Aspire Share of EBITDA Backlog + Option Years @ Dec. 31, 2017 E&C 36% 46% Govt 2017 KBR before acquisitions Services $22B $13B 18% T&C KBR excluding Acquisitions KBR including Aspire & SGT E&C 23% >75% of 2018 earnings from low risk/predictable GS
Slide 24: 2017 Summary & 2018 Priorities
2017 SUMMARY & 2018 PRIORITIES 2017 Summary: Met or exceeded guidance every quarter Margins expectation across all segments met Strong cash flow performance Revenue stabilized with backlog/options growth Excellent project execution Integration of both Wyle and HTSI 2018 Performance E
Slide 25: Appendix
APPENDIX
Slide 26: 2017 Backlog: Significantly Lower Risk Profile
2017 BACKLOG Significantly Lower Risk Profile Backlog by Contract Type 77% of earnings for 2018 secured in backlog Majority of KBR backlog is currently either long-term, Fixed Price reimbursable, PFI or service contracts with a lower risk Contracts (GS, profile and predictable cash flows Cost T&
Slide 27: Backlog: Aspire & SGT will add $9B+ to Backlog
BACKLOG $12,838 $12,790 $12,729 $13,277 $13,405 Total Backlog (including Option Years) Option Years (GS) $1,900 $2,195 $2,935 $2,835 $2,405 E&C $2,769 $1,874 $1,790 $2,537 $2,134 $419 $278 T&C $313 $333 $292 GS $8,355 $7,891 $8,183 $7,821 $7,711 4Q16 1Q17 2Q17 3Q17 4Q17 0.7x 0.7x 0.8x 1.0x 1.2x Aspi
Slide 28: Consolidated EBITDA Reconciliation
NON-GAAP RECONCILIATION Consolidated EBITDA Reconciliation ($ in millions) 4Q 2016 4Q 2017 FY 2017 Net Income Attributable To KBR ($87) $ 275 $ 434 Add Back: Interest Expense, Net $5 $4 $ 18 Provision (Benefit) for Income Taxes $ 57 ($243) ($193) Other Non-Operating Expense (Income) ($9) $2 $ 13 Dep
Slide 29: Adjusted EPS Reconciliation
NON-GAAP RECONCILIATION Adjusted EPS Reconciliation 4Q16 4Q 2017 FY 2017 EPS (diluted) ($0.61) $ 1.94 $ 3.06 Add Back: Legacy Legal Fees $ 0.02 $ 0.02 $ 0.10 Tax Reform Impact $ 0.00 ($0.13) ($0.13) Tax Valuation Allowance Reduction $ 0.00 ($1.59) ($1.58) Shareholder Loan Receivable Impairment $ 0.0