Kbr, Inc. · NYSE:KBR
Kbr — Investor Day (June 2010)
76 slides from Kbr's investor day presentation, Jun 23, 2010
Slide 1: 2010 KBR Analyst and Investor Day: State of KBR
2010 KBR Analyst and Investor Day State of KBR Bill Utt – Chairman , President, and Chief Executive Officer June 23, 2010 Page 1 of 76
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains “forward-looking statements.” All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements include statements about the benefits of the split-off, the discussions of K
Slide 3: KBR Today
KBR Today ¾Organization Transformation Complete ¾Best-in-Class Risk Awareness and Project Execution ¾Delivering Improved Financial Management ¾Selectively Growing Through Acquisitions ¾The Growth Story at KBR Page 3 of 76
Slide 4: KBR Executive Leadership Team
KBR Executive Leadership Team Bill Utt Chairman, President, and CEO Klaudia Brace Dennis Calton Sue Carter Andrew Farley Senior VP; Administration Executive VP; Operations Senior VP and CFO Senior VP and General Counsel Tom Mumford John Rose Mark Williams David Zimmerman Senior VP; Commercial Group
Slide 5: Mission, Vision, and Values
Mission, Vision, and Values Mission We safely deliver any project, any time, in any environment for the benefit of our customers, shareholders, employees, and the communities we serve Vision To be the world’s premier contractor delivering projects and services to a global marketplace Values ¾ Uncomp
Slide 6: KBR's Market Facing Organization Structure
KBR’s Market Facing Organization Structure Hydrocarbons IGP Services Ventures Infrastructure & Downstream Building Group Minerals International Gas Monetization Government Canada Operations and Defense North America Oil & Gas Government Construction and Defense Technology Power & Industrial Industri
Slide 7: Risk Profile of Backlog
Risk Profile of Backlog 80% 82% 81% 72% 43% 12/31/06 12/31/07 12/31/08 12/31/09 3/31/10 Future Backlog as of Date Reported Reimbursable Backlog Fixed-price Backlog Improved Risk Profile Over Time Page 7 of 76
Slide 8: Risk Profile of Backlog – Peer Comparison
Risk Profile of Backlog – Peer Comparison Percentage of Fixed Price Backlog as of Last Reported Period 50% 45% 21% 18% 15% JEC KBR FLR SHAW CBI KBR has one of the lowest risk backlogs amongst peers *Source: Simmons & Company International; May 18, 2010; “Energy Infrastructure: Coverage Overview and
Slide 9: KBR's "Universe of Risk" – Cover Analysis
KBR’s “Universe of Risk” – Cover Analysis ¾ Our Universe of Risk is measured through Cover Analysis, which provides KBR Executive Management with an objective and transparent assessment of a transaction’s risk profile. ¾ Our Risk Premium is calculated based on the risks in each of the following segm
Slide 10: ERC Approved Awards Performance: 2007-1Q10
ERC Approved Awards Performance: 2007-1Q10 10.1% KBR 10.5% 9.0% 9.3% HYDROCARBONS 10.0% 8.9% 9.4% IGP 9.9% 7.9% 13.2% SERVICES 12.4% 11.3% 0% 5% 10% 15% 20% 25% As Sold Job Margin Current Forecast Job Margin 1Q10 As Sold Job Margin - Risk Adj. Page 10 of 76
Slide 11: KBR Project Economic Performance 2008 v. 2009
KBR Project Economic Performance 2008 v. 2009 Upside and Lost Opportunity Comparison KBR Projects: Cumulative Annual Gross Revenue vs. Job Income Margin % 100% 90% 80% 70% 60% 50% 40% 30% Job Income Margin % 20% 10% 0% -10% Gross Revenue $7,049 MM Gross Revenue $7,756 MM -20% -30% -40% -50% -60% -70
Slide 12: Delivering Improved Financial Management
Delivering Improved Financial Management ¾ Cleaned up and made profitable the Ventures portfolio ¾ Reduced and seek to maintain a competitive U.S. effective tax rate ¾ Effective G&A cost control ¾ Continue to maintain financial flexibility and a strong balance sheet ¾ Successfully resolving legacy a
Slide 13: Selective Growth Through Acquisitions
Selective Growth Through Acquisitions ¾ Catalyst Interactive - E-learning and training solutions provider specializing in defense, government, and industry training ¾ Sold a simulation training package on the Gorgon LNG project ¾ Turnaround Group of Texas, Inc - Specializes in planning and execution
Slide 14: Selective Growth Through Acquisitions
Selective Growth Through Acquisitions ¾ Jordan – BE&K Joint Venture – Purchase of partner’s interest in joint venture targeting small capital construction in federal services market ¾ Successfully sold and constructing several federal services projects ¾ Veba Combi Cracker Technology – Formed collab
Slide 15: The Growth Story at KBR: Hydrocarbons
The Growth Story at KBR Hydrocarbons ¾ Maintain Gas Monetization Scale and Increase Margins ¾ Expand Value Chain Presence in Oil & Gas and Downstream ¾ Continue to Grow Technology Through Intellectual Property Acquisitions and Joint Ventures Page 15 of 76
Slide 16: The Growth Story at KBR
The Growth Story at KBR Infrastructure, Government and Power ¾ Continue to Expand Government Services Offerings Outside of Iraq and Afghanistan ¾ Continue to Successfully Manage Litigation and Claims Backlog ¾ Continue to Drive Attractive Growth in the Infrastructure, Minerals, Power and Industrial
Slide 17: Infrastructure, Government, and Power
2010 KBR Analyst and Investor Day Infrastructure, Government, and Power Mark Williams – Group President June 23, 2010 Page 17 of 76
Slide 18: IGP Leadership Team
IGP Leadership Team Mark Williams President; Infrastructure, Government, and Power Colin Elliott Andrew Pringle Tom Vaughn Mark Williams President; Infrastructure President; International President; Interim President; and Minerals Government and Defence Power and Industrial North America Government
Slide 19: IGP - Introduction
IGP - Introduction Business Unit Infrastructure, Government, and Power Mark Williams KBR Delivers in six distinct markets: Infrastructure & Minerals, Government & Defense, and Power and Industrial Transportation U.S. Federal Government U.K. Ministry of Defence Power Sectors Market Water
Slide 20: IGP – Business Drivers
IGP – Business Drivers Business Drivers ¾U.S. Government and Defense spending stable ¾U.K. Ministry of Defence outsourcing ¾GDP growth drives infrastructure, minerals, power ¾Air quality standards and green energy will drive power opportunities ¾Industrial capital expenditure increases planned Page
Slide 21: IGP - Outlook
IGP - Outlook Business Aspirations ¾ Balanced and growing U.S. and International government services business ¾ Broad portfolio of projects that include facilities, transport, water, and minerals ¾ Fully integrated EPC domestic power capability Key Business Unit Messages ¾ Growing demand in Asia ¾ E
Slide 22: North America Government and Defense
North America Government and Defense Business Segments Operations, Maintenance, and Logistics Federal and Construction Services Logistics Rapid response construction Life support services Mid-to-Large capital construction Installation support services Facilities renovations and repair
Slide 23: North America Government and Defense
North America Government and Defense Fort Drum Commissary Value Proposition and Strategy Ft Drum, New York ¾Premiere leader in the contingency markets for logistics, facility management, base life support ¾Diversify and broaden our sustainment portfolio for U.S. federal clients ¾Identify and target
Slide 24: International Government and Defence
International Government and Defence Business Segments U.K. Operations Asia Pacific Operations Middle East Operations U.K. Ministry of Defence Australian Department of UAE/GCC Defence Support U.K. military operations Defence Logistics and integration in Afghanistan Support Australian for
Slide 25: International Government and Defence
International Government and Defence Value Proposition and Strategy Heavy Equipment Transporter Leatherhead, England ¾Continue to build on solid reputation for delivery ¾U.K. MoD relationship (Top Supplier) ¾Rebalance portfolio to support longer- term peacetime activities ¾Customer diversification ¾
Slide 26: Infrastructure and Minerals
Infrastructure and Minerals Business Segments Transport Water/Wastewater Facilities Minerals PM / CM Engineering Engineering consulting EPCM Engineering Water treatment PM / CM Engineering Australia, Texas, PM / CM Event management Studies Qatar Australia, Texas Australia
Slide 27: Infrastructure and Minerals
Infrastructure and Minerals Laying of world’s largest twin Value Proposition and Strategy pipes using lay barge Sydney, Australia ¾Local customer facing offices with global resource/knowledge reach ¾Technical excellence ¾Project management ¾Major project delivery ¾Mining and infrastructure acquisiti
Slide 28: Power and Industrial
Power and Industrial Business Segments Power Industrial Construction services provider EPC capability Expertise in gas-fired power plants and air Metals, mineral processing, industrial quality systems retrofits manufacturing, and forest products Currently Southeast United States focused
Slide 29: Power and Industrial
Power and Industrial International Paper Value Proposition and Strategy Kwidzyn, Poland ¾Build on resume of power construction and move to a fully integrated EPC offering ¾Pursue emerging technology markets, including biomass ¾Expand power and industrial businesses internationally ¾Enhance industria
Slide 30: Hydrocarbons
2010 KBR Analyst and Investor Day Hydrocarbons John Rose – Group President June 23, 2010 Page 30 of 76
Slide 31: Hydrocarbons Leadership Team
Hydrocarbons Leadership Team John Rose Group President; Hydrocarbons Tim Challand Mitch Dauzat Roy Oelking John Quinn President; Technology President; Gas President; Oil and Gas President; Downstream Monetization Khaled Abu-Nasrah Senior VP; Downstream 3 Page 31 of 76
Slide 32: Hydrocarbons - Introduction
Hydrocarbons - Introduction Hydrocarbons Business Group John Rose KBR Hydrocarbons Group delivers Licensing, Conceptual Study and Consulting, FEED/PMC, EPC/EPCM and Commissioning for the wide spectrum of Hydrocarbons Value Chain around the World: LNG Offshore Refining Refining Sectors Market
Slide 33: Hydrocarbons – Macro Drivers
Hydrocarbons – Macro Drivers Oil Price Gas Price 120 14 WTI Forward Price Forward Price Price Asia – Japan 12 100 Price Canadian Heavy Oil Project Investment 10 80 Gas Price, $/mmBtu Oil Price, $/bbl Ultra- Deepwater West Africa & GoM Project Investment 8 Most Australia LNG can be delivered to Asia
Slide 34: Hydrocarbons – Business Drivers
Hydrocarbons – Business Drivers Business Drivers ¾ LNG investment will continue in Asia ¾ Decline of existing oil fields and increasing oil demand continue to drive investment in oil & gas ¾ Emerging economies and production of higher value petroleum products will drive investment in refineries ¾ Po
Slide 35: Hydrocarbons - Outlook
Hydrocarbons - Outlook Strategic Aspirations ¾ Expand scope into more EPC elements of projects while maintaining strong risk awareness program ¾ Add to our current portfolio of offerings ¾ Local operations in key markets Key Business Unit Messages ¾ Differentiation – Large, Complex, Remote Location,
Slide 36: Gas Monetization
Gas Monetization Business Segments LNG FLNG Mid Scale LNG GTL Industry Leader in JV with Hoegh Leveraging KBR small Leader in GTL: Leading Liquefaction plants Complementary to mid projects 2 out of 3 projects – Currently working on business with LNG and capability with LNG Pearl GTL and
Slide 37: Gas Monetization – Capex & Major Prospects
Gas Monetization – Capex & Major Prospects 5 Years Addressable Market Capex • Snohvit Train 2 • Shtokman 2 • Yamal LNG • Kitimat LNG • Cheniere LNG $16B • Qatargas II, III, IV • Tangguh Train 3 Debottlenecking Europe & • Donggi Senoro Eurasia • Sunrise FLNG $12B North America • Marsa El Brega, Libya
Slide 38: Gas Monetization
Gas Monetization Value Proposition and Strategy ¾Maintain leadership in complex remote mega project delivery ¾Large base load revenue generation ¾Combined EPC experience of LNG and FPSO for Floating LNG ¾Leverage GTL experience for new gas developments such as U.S. shale gas conversion to motor fuel
Slide 39: Oil & Gas
Oil & Gas Business Segments KBR Oil & Gas Granherne Energo GVA Floating Production Systems Field development Integrity Management Semi-submersible Hull Conventional Fixed Platforms Concept Selection for Advance Structural Technology Current Projects - Chirag Oil Deepwater and Subsea
Slide 40: Oil & Gas – Capex & Major Prospects
Oil & Gas – Capex & Major Prospects 5 Years Addressable Market Capex • TCO Future Growth Project, Kazakhstan • Shah Deniz Phase 2 • Hebron, Canada • TNK-BP’s VP Field • Big Foot, GoM • Quad 204 Execute • Jack St. Malo, GoM • Kashagan FPD • Kaskida, GoM • Karachaganak Phase 3 Europe & $38B • Rosebank
Slide 41: Oil & Gas
Oil & Gas Value Proposition and Strategy ¾Strong global consulting business ¾Technical Centers of Excellence supported by strategically located High Value Engineering offices ¾Complete deepwater capability including topsides, hulls and subsea ¾GVA license technology – semi-submersible hulls and moor
Slide 42: Downstream
Downstream Business Segments Refining Petrochemicals Biofuels Fertilizers Two major grassroots Executing PMC/FEED for Completed FEL work on an Historically have refineries in progress largest ever petrochemical Ineos USA project provided over 50% of – Yanbu export complex, Dow/Aramco Have
Slide 43: Downstream – Capex & Major Prospects
Downstream – Capex & Major Prospects 5 Years Addressable Market Capex • Rosneft refinery • NKNK Ethylene Complex • Exxon/QP petrochemical • Lukoil Gas Separation/ $61B complex, Qatar Ethylene • Jizan Refinery, Saudi • Biofuels • Kuwait Clean Fuels • Refinery • Dow/Aramco Petchem Europe & Modernizati
Slide 44: Downstream
Downstream Value Proposition and Strategy ¾Focus efforts in high growth markets - Middle East, Africa, Latin America, CIS ¾Position KBR for mega and integrated complexes in Middle East, a key growth region of KBR ¾Use our Ventures Business Unit to help develop projects from opportunity into reality
Slide 45: Technology
Technology Business Segments Refining Petrochemicals Syngas Coal Gasification Bottom of barrel SUPERFLEX & Advanced Market leader in TRIG: aimed at high technology portfolio Catalytic Olefins (ACO): ammonia technology ash, low-rank coals of VCC & ROSE: tailored high propylene to ethylene
Slide 46: Technology – Expenditure & Prospects
Technology – Expenditure & Prospects North America China •Refining Revamps Middle East & Africa •Ammonia •Ammonia •Coal Gasification •Petrochemicals •Petrochemicals •Refining •Coal gasification Europe & Eurasia •Refining Revamps •Ammonia Revamps 9% 7% 24% $11B 19% 18% 5 Years Addressable Market Expe
Slide 47: Technology
Technology Strategy ¾ Expand business offerings ¾ Acquire technologies ¾ Additional technology alliances ¾ Proprietary equipment ¾ Technical services ¾ In-house technology development ¾ Create deal development capability to drive VCC, Superflex and ACO sales ¾ Improve operational effectiveness Strat
Slide 48: Technology – US Coal Gasification: Impact of U.S. Energy Policy
Technology – US Coal Gasification Impact of U.S. Energy Policy! Page 48 of 76
Slide 49: Services
2010 KBR Analyst and Investor Day Services David Zimmerman - President June 23, 2010 Page 49 of 76
Slide 50: Services Leadership Team
Services Leadership Team David Zimmerman President; Services Luther Cochrane Brian Cole Darrell Hargrave Randy Walker Senior Vice President; Vice President; Senior Vice President; Senior Vice President; Building Group Canada Operations Industrial Services U.S. Construction Page 50 of 76
Slide 51: Services - Introduction
Services - Introduction Business Unit Services Business Unit David Zimmerman KBR Services Business Unit delivers construction, construction management and maintenance services to clients across a variety of industries: Refining Power Oil Sands Life Sciences Healthcare Sectors Market Chem
Slide 52: Services - Business Drivers
Services - Business Drivers Business Drivers ¾ Alberta oil sand investments proceeding with forecasts predicting oil prices remaining above $65/bbl ¾ Multiple environmental bills under review / modification - revamp work upcoming at refineries, power and chemicals plants ¾ Many clients having deferr
Slide 53: Services - Outlook
Services - Outlook Business Aspirations Services aspires to be the recognized, preferred supplier of construction and maintenance services around the world Key Product Service Line Messages ¾ U.S. Construction will utilize direct hire strengths and a regional delivery model across its traditional ma
Slide 54: U.S. Construction
U.S. Construction Business Segments Boiler Group SW&B Houston / Birmingham Ops Construction Mgmt. $100k - $1m $100k - $15m Large complex projects CM resource 1 week - 2 month 1 - 8 month field Operate as the General Contractor Northeast focused field duration duration Direct Hire
Slide 55: U.S. Construction
U.S. Construction Eastman Chemicals Key Strategies Longview, Texas ¾Continue to move our construction resources closer to our hydrocarbons customers where decisions will be made ¾Maintain and grow our power market share ¾Continual improvement of our cost competitiveness ¾Further position our executi
Slide 56: Industrial Services
Industrial Services Business Segments ITI* Turnaround Services On Call Const. International U.S. Operations Control Systems Planning, Scheduling, State, Counties, EBIC DuPont Process Services Cost Analysis Cities Poland International Paper Turnarounds Turnaround Mgmt. Universit
Slide 57: Industrial Services
Industrial Services Shell Chemicals Key Strategies Supplemental maintenance, small capital construction ¾Target opportunities to expand the Deer Park, Texas business at existing client sites ¾Continue to develop the breadth of our services to establish single source contract offerings ¾Increase our
Slide 58: Canada Operations
Canada Operations Business Segments Construction Services Module Assembly Fabrication Maintenance General contractor Yard capacity of up to 5 Bay Spool fab – Small capital Direct hire 80 standing modules 12000 dia inch/week Turnarounds BTU and CLAC Throughput of 240 8 bay structura
Slide 59: Canada Operations
Canada Operations Shell Scotford Refinery Key Strategies A&V / SRC Field Works Fort Saskatchewan, Alberta ¾Expand our industrial market general contractor capabilities ¾Focus on strong project management teams and efficient construction execution delivery systems ¾Increase our maintenance presence a
Slide 60: Building Group
Building Group Business Segments Healthcare Manufacturing & Education Life Science Public Work / Industrial Hospitality / Entertainment Clients: Clients: Clients: Clients: Clients: Not-For-Profit Aerospace Higher Ed Research & Hotels For Profit Food & Beverage K - 12 Development Go
Slide 61: Building Group
Building Group Duke University Key Strategies School of Law Addition and Renovation ¾Continue to diversify into additional and Durham, North Carolina growing markets sectors ¾Geographic expansion utilizing KBR’s profile, relationships and footprint ¾Expand and further develop our green / sustainable
Slide 62: Financial Performance
2010 KBR Analyst and Investor Day Financial Performance Sue Carter – Chief Financial Officer June 23, 2010 Page 62 of 76
Slide 63: Indexed Performance Metrics
Indexed Performance Metrics 200 175 Job Income 150 Job Income Backlog Revenue Performance Index 125 Revenue Backlog 100 75 Corporate G&A (% of revenue) 50 Effective Tax Rate 25 0 2006 2007 2008 2009 Page 63 of 76
Slide 64: KBR's Improving Metrics
KBR’s Improving Metrics Revenue Job Income Operating Income 12.5 1,250 600 3 Year CAGR 12.1 11.2% 3 Year CAGR 11.6 20.1% 3 Year CAGR 541 536 1,094 52.2% 10.0 1,000 1,021 8.8 400 8.7 7.5 750 780 $ in M illio n s $ in M illio n s $ in B illio n s 631 294 5.0 500 200 2.5 250 152 0.0 0 0 2006 2007 2008
Slide 65: Strengthening Backlog
Strengthening Backlog 155 150 ¾Less impact from legacy projects Job Income Backlog 145 ¾Less impact from LogCAP project 140 ¾Success from risk focus on new Performance Index projects 135 ¾Pursuit of selective projects 130 125 120 115 Revenue Backlog 110 105 100 2006 2007 2008 2009 Page 65 of 76
Slide 66: Revenue and G&A Expense
G&A Expense 12.5 1250 12.1 11.6 10.0 1000 Revenue $ in Billions G&A $ in Millions 8.8 8.7 7.5 750 5.0 500 2.5 2.6% 2.6% 1.9% 1.8% 250 226 226 223 217 0.0 0 2006 2007 2008 2009 *Note: Percentages represent the G&A as a percentage of revue for each year specified G&A Flat Despite 38% Revenue Growth Pa
Slide 67: Effective Tax Rate
Effective Tax Rate 100% 75% 73% 50% 40% 37% 25% 32% 0% 2006 2007 2008 2009 Focused on Tax Reduction Opportunities Page 67 of 76
Slide 68: Creating Shareholder Value
Creating Shareholder Value Cash Management Earnings Growth Liquidity Shareholder Value Working Capital Risk Management Balance and Discipline in All We Do Page 68 of 76
Slide 69: Earnings Growth Drivers
Earnings Growth Drivers ¾ Pursue Selective Projects ¾ Risk Management ¾ Thoughtful review of new proposals ¾ Appropriate risk-based pricing on fixed price and cost reimbursable work ¾ G&A Reductions ¾ Use of Lower Cost Alternatives ¾ Transaction centers ¾ High Value Engineering Centers ¾ Completion
Slide 70: Revolving Credit Facility
Revolving Credit Facility Size $1.075 billion Tenor 3 years Maturity November 3, 2012 Security None Commitment Fee 0.625% p.a. Margin LIBOR + 3.0% p.a. or Base Rate + 2.0% p.a. Purpose • Working capital and general corporate purposes • Letters of credit/Performance Bonds Financial • Net Worth ≥ $2.0
Slide 71: Effective Cash Deployment
Effective Cash Deployment Full Year 2010 Outlook ¾ Operating Requirements March 31, 2010 ($ millions) ¾ Dividends $32 M Cash and Cash Equivalents $908 ¾ Capex with ERP $55 - $95 M Joint Venture Cash $264 ¾ Share Repurchase* Up to $220 M Operating / Discretionary Cash $644 ¾ Pension Contribution $30
Slide 72: Share Repurchase Underway
Share Repurchase Underway Share Repurchase Program initiated June 8, 2010 Repurchase Schedule Expectations: ¾ Approximately 20% of new share repurchase authorization executed in June 2010 ¾ Open market and Rule 10b5-1 ¾ Opportunistic purchases Average Share Count Walk: ¾ First Five months of 2010 -
Slide 73: KBR Cumulative Cash Deployment
KBR Cumulative Cash Deployment ($ in millions) ¾Acquisitions $619 ¾Dividends (through December 2010) $89 ¾Share Repurchases ¾ Separation through March 2010* $228 ¾ Initiated program in June 2010** $220 $1,156 Since the Separation, KBR Intends to Deploy Over $1B for Shareholder Value *Includes August
Slide 74: Current 2010 Guidance
Current 2010 Guidance Current Guidance as of February 25, 2010 ¾ EPS $1.50 - $1.80 Range ¾ LogCAP Revenue 50% below 2009 levels ¾ Effective Tax Rate 35% ¾ Capital Expenditures $55M ¾ G&A $230 million KBR intends to update on 2Q10 Earnings Call Page 74 of 76
Slide 75: Shareholder Returns
Shareholder Returns Year-to-Date 2010 2006 through 2009 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% KBR Peers* DJIA S&P500 KBR Peers* DJIA S&P500 *Peer Average includes Fluor, Jacobs Engineering, Foster Wheeler, McDermott, Chicago Bridge & Iron, Shaw Group, URS, and DynCorp Note: Year-to-Date 2010
Slide 76: KBR Today
KBR Today ¾Organization Transformation Complete ¾Best-in-Class Risk Awareness and Project Execution ¾Delivering Improved Financial Management ¾Selectively Growing Through Acquisitions ¾The Growth Story at KBR Page 76 of 76