D.A. Davidson Ninth Annual Engineering & …s2.q4cdn.com/910306481/files/doc_presentations/2010/D.A....
Transcript of D.A. Davidson Ninth Annual Engineering & …s2.q4cdn.com/910306481/files/doc_presentations/2010/D.A....
Bill Utt – Chairman, President and CEO
Sue Carter - Senior Vice President and CFO
September 28, 2010
D.A. Davidson Ninth AnnualEngineering & Construction Conference
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Forward Looking StatementsThis 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 KBR’s business strategies and KBR’s expectations concerning future operations, profitability, liquidity and capital resources. You can generally identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,”“forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should” or other similar words. These statements relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to differ materially from those in the future that are implied by these forward-looking statements. Many of these factors cannot be controlled or predicted. These risks and other factors include those described under “Risk Factors” in KBR’s Annual Report on Form 10-K dated February 25, 2010, Forms 10-Q, recent Current Reports on Forms 8-K, and other Securities and Exchange Commission filings. Those factors, among others, could cause KBR’s actual results and performance to differ materially from the results and performance projected in, or implied by, the forward-looking statements. As you read and consider this presentation, you should carefully understand that the forward-looking statements are not guarantees of performance or results. KBR cautions you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, KBR cannot assure you that actual results will not differ materially from those expressed or implied by forward-looking statements.
The forward-looking statements included in this presentation are made only as of the date of this document. New risks and uncertainties arise from time to time, and KBR cannot predict those events or their impact. KBR assumes no obligation to update any forward-looking statements after the date of this presentation as a result of new information, future events or developments, except as required by the federal securities laws.
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KBR – A Leading Global E&C Provider
* For contracts that contain both fixed-price and cost-reimbursable components, KBR classifies the components as either fixed-price or cost-reimbursable according to the composition of the contract, except for smaller contracts that are characterized on the predominate component.
» Revenue: Full Year 2009 - $12.1 Billion; 2009 Fortune 500 Company #193Full Year 2008 - $11.6 Billion; Fortune 500 Company #234
» Backlog: June 30, 2010 - $12.4 Billion (79% reimbursable / 21% fixed-price)*June 30, 2009 - $12.3 Billion (79% reimbursable / 21% fixed-price)*
» Headquarters in Houston, Texas
» 100+ years of operating history
» ~42,000 employees; 45+ countries
» Extensive service capabilities:
• Engineering, procurement, construction, commissioning, and start-up (EPC-CS) to global hydrocarbons, power, industrial, minerals, and infrastructure customers
• Defense, logistics, and contingency support for defense services
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KBR Operates in 45 Countries
Edmonton
Calgary
Houston
Monterrey
Arlington
MMM
GreenfordLeatherhead
Moscow
Atyrau
Baku
Dubai
CairoAlgiers
Angola
Lagos
Johannesburg
BaghdadKuwait City China
SingaporeJakarta
Perth
Brisbane
SydneyAdelaide Canberra
Melbourne
Gothenburg
Abu Dhabi
DhahranNew Delhi
BirminghamAtlanta
Wilmington
Raleigh / Charlotte
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Gas Monetization
LNG remains robust
Skikda LNG progressing well
Gorgon LNG execution is strong
Pluto 2 and 3 FID expected mid-2011
Inpex Ichthys FID expected 2nd half of 2011
Browse LNG Basis of Design
Improving Gas Monetization margins
Tangguh/Yemen LNG projects complete; negotiating final close out on Tangguh
Escravos GTL and Skikda LNG will have reducing impact over the next year
Double-digit margins not unrealistic over time
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Oil & Gas
Capturing opportunities
FEEDs being converted to detailed engineering, design, and implementation
Strong level of global offshore activity with several excellent opportunities in Caspian and West Africa over next 18 months
Expand service offerings from engineering to project execution
Energo Engineering acquisition
Expands KBR’s offshore capabilities in areas of integrity management and advanced structural engineering
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Downstream
Saudi Arabia projects progressing well
FEED activities continue on Ras Tanura Integrated project
Yanbu EPC packages awarded
KBR staffing up EPC project offices in support of Aramco GES Plus initiative
African refinery projects moving forward
Lobito project negotiations for first phases for EPCm continue
PetroSA FEED expected to commence later this year
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North America Government & DefenseLogCAP Updates and Outlook
Expect 2011 revenue at approximately second half of 2010 levels
Once troop level at 50,000 levels, expect our staffing to remain reasonable consistent through end of 2011
Received $60 million in prior period award fees during second quarter of 2010
Positive breakthroughs on DCAA and other legacy LogCAP issues
Life After LogCAP
Replacing LogCAP work by diversifying customer base, building on logistical expertise, and expanding geographically
New customers including NATO, Air Force Civil Engineering Agency, National Reconnaissance Office
Turkey and Spain base operations award by U.S. Air Force Page 8 of 16
Infrastructure, Government, and PowerInternational Government & Defense
Continued support for U.K. Ministry of Defence and NATO in Afghanistan; newly acquired NATO contract ramped up
Building on U.K. based logistics and life support and consultancy and training capabilities in Australia to expand services within the Asia-Pacific region
Infrastructure & MineralsSlow ramp up for infrastructure spending in the U.S., Australia, and the U.K.
Middle East infrastructure activity improving based on stabilized oil price
Minerals markets strengthening; recent Hope Downs 4 EPCm award
Power & IndustrialDemand for new electric generating capacity still lagging
Industrial markets experiencing strong volume of early stage prospects Page 9 of 16
ServicesU.S. construction markets
Continued moderate activity for small to mid-size capital projects
Only now seeing the beginnings of a return of larger construction projects
Increasing activity in Alberta oil sands region
Strong Building Group activity this year with sanctioned projects moving forward
Industrial Services
Large DuPont construction, maintenance and services project began mobilized earlier this year
Turnaround activity picking upPage 10 of 16
Creating a More Profitable Backlog
100
105
110
115
120
125
130
135
140
145
150
155
Perf
orm
ance
Inde
x
Job Income Backlog
Revenue Backlog
2006 2007 2008 2009
Less impact from legacy projects
Less impact from LogCAP project
Success from risk focus on new projects
Pursuit of selective projects
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Risk Profile of Backlog
43%
12/31/06
Fixed-price BacklogReimbursable Backlog
12/31/07 12/31/08 12/31/09 6/30/10Backlog as of Date Reported
72%80% 82% 79%
Future
Improved Risk Profile Over Time Page 13 of 16
Cash and Cash Equivalents $1,235
Joint Venture Cash $267
Operating / Discretionary Cash $968
Effective Cash Deployment
Operating Requirements
Dividends $32 M
Capex with ERP $70 - $80 M
Share Repurchase* Up to $220 M
Pension Contribution $30 - $40 M
Acquisitions $36 M - ??
June 30, 2010 ($ millions)
Full Year 2010 Outlook
Effective and Thoughtful Cash Deployment in 2010*Assumes 10 million shares repurchased pursuant to authorization at an average purchase share price of $22 per share Page 14 of 16
Working Capital Management
Focused on reducing general business accounts receivable
Managing accounts payable
Resolution of unbilled receivables on uncompleted contracts
Collecting on past disputes (EPC 1)
Government Business
As LogCAP work declines, less working capital requirements
Diligently working to resolve disputed withhold amounts
Award fees
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KBR Investment Thesis
• KBR is a growth company across a broad based and diverse series of businesses
• Optimism for acceleration in new orders around growth opportunities across markets
• Ample opportunities to replace declining LogCAP work
• Strong balance sheet with emphasis on cash management
• Patience, prudence, and thoughtfulness in managing KBR’s cash balances
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