KBR Announces Fourth Quarter and Fiscal 2023 Financial Results; Issues Fiscal 2024 Guidance
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Insights
The disclosed fiscal results from KBR, Inc. show a robust financial performance with several key points of interest for stakeholders. The company's revenue growth of 6% (organic) year-over-year and an 11% increase in annual dividend reflect a strong operational year, which is likely to influence investor confidence positively. The settlement of convertible notes and related warrants in cash to avoid dilution is a strategic financial move that preserves shareholder value and indicates a solid liquidity position. Additionally, the extension of the maturity of term loans and revolving credit facilities suggests a proactive approach to capital management and may be viewed favorably by credit analysts and investors concerned with long-term financial stability.
However, the reported net loss of $265 million for the fiscal year, primarily due to non-cash and one-time charges, may raise questions about the company's expense management and the nature of these charges. While adjusted EBITDA increased by 12%, indicating operational profitability, the nuances of these non-recurring charges warrant a closer examination to understand their long-term impact. The book-to-bill ratio of 1.1x is indicative of a healthy order pipeline, which is critical for forecasting future revenue stability.
KBR's performance in the Sustainable Technology Solutions (STS) and Government Solutions (GS) sectors demonstrates a strategic focus on high-growth areas. The company's involvement in green and blue ammonia projects, carbon dioxide sequestration facilities and defense modernization initiatives aligns with global trends towards sustainability and increased defense spending. These projects not only diversify KBR's portfolio but also position the company at the forefront of emerging technologies, potentially driving long-term growth.
The backlog of $21.7 billion provides visibility into future revenues and suggests a strong competitive position within the industry. The awards from NASA and collaboration with military medicine research entities further underscore KBR's reputation and expertise in specialized sectors, which may lead to additional opportunities and partnerships.
From an economic perspective, KBR's fiscal 2023 results and the strategic financial decisions taken indicate a company that is effectively navigating macroeconomic challenges. The increase in dividend payouts signals a distribution of wealth back to shareholders, which is often a sign of a company's confidence in its financial health and future earnings potential. The authorization of a $500 million share repurchase program reflects a belief that the company's stock is undervalued or a desire to consolidate ownership, both of which can have implications for shareholder value.
The guidance for fiscal 2024, projecting higher revenues and adjusted EBITDA, suggests optimism about the company's growth trajectory. However, the lack of reconciliation for forward-looking Adjusted EBITDA due to potential legal and unusual gains/losses indicates some uncertainty and risk, which investors should monitor closely. The company's strategic investments and growth in government contracting may cushion against cyclical economic downturns, contributing to a more resilient business model.
Delivered Strong Fiscal 2023 Results
Settled Convertible Notes & Warrants without Dilution
Annual Dividend Increase of
"The KBR team has shown their unwavering commitment and exceptional skills, leading to a remarkable performance this fiscal year," said Stuart Bradie, KBR president and CEO. "We achieved an industry leading safety record, met or exceeded our key financial metrics and delivered a
"Furthermore, we successfully settled the remaining convertible notes and related warrants in cash, avoiding dilution. We more recently extended the maturity of our term loans and revolving credit facility, fortifying our balance sheet and fueling capital deployment optionality for 2024 and beyond."
"Lastly, we have a more defined path forward on HomeSafe and together with our customer remain unwavering in our commitment to harness our collective expertise and focus on innovation, with the aim of providing an unparalleled and more sustainable moving experience for military personnel and their families."
New Business Awards
Backlog and options as of December 29, 2023 totaled
Sustainable Technology Solutions (STS) delivered 1.1x TTM book-to-bill1 as of December 29, 2023, including awards and achievements in the quarter as follows:
- Awarded a Front-End Engineering Design contract by Fidelis New Energy for Project Fyrkat, one of the first onshore liquid carbon dioxide sequestration facilities, located at a receiving terminal at the Port of Aalborg,
Denmark . - KBR's Purifier™ ammonia technology selected by PT Pupuk Sriwidjaja Palembang, a subsidiary of PT Pupuk Indonesia, for a planned ammonia plant to be built in South Sumatera Province,
Indonesia . This will be KBR's 12th ammonia plant licensed to Pupuk Indonesia. - KBR's K-GreeN® technology selected by a consortium consisting of Lotte Chemical, Korea National Oil Corp and Samsung Engineering for Lotte Chemical's H2biscus green ammonia project that will produce 800 KTA of green ammonia from hydropower in
Sarawak, Malaysia . - KBR's market-leading low-carbon blue ammonia technology selected by
Tokyo -based INPEX Corporation andOklahoma City -based LSB Industries for a 1.1 million tonnes per annum ammonia production and export project in the US Gulf Coast. - Extended collaboration with ISU Chemical through a memorandum of understanding. Under the terms, KBR will provide licensing, proprietary engineering design, proprietary equipment and catalyst for the planned 10 MTPD hydrogen production unit, employing KBR's innovative technology, H2ACT℠, which has rapidly emerged as the industry's leading ammonia cracking technology.
Government Solutions (GS) delivered 1.2x TTM book-to-bill1 as of December 29, 2023, including awards and achievements in the quarter as follows:
- Awarded two additional DEM-Shorad vehicle prototypes, on top of the four delivered to the Army earlier this year, underscoring the growing significance of directed energy capabilities.
- Awarded additional scope to support the development of new energy technologies, systems, and processes as part of the
UK government's drive to net zero carbon emissions by 2050. Frazer-Nash Consultancy, a KBR company, supports the Department for Energy Security and Net Zero to develop its programs and to assess and monitor the projects being delivered within its net zero innovation portfolio. - Awarded all three one-year options on the Preservation of the Force and Family (POTFF) program for the continued support of the physical, mental, social and spiritual readiness of the Special Operations Forces and their families.
- Awarded a two-year contract extension with the Australian Defence Force to help modernize, integrate and optimize
Australia's military capability. KBR supports the modernization, integration and optimization ofAustralia's military capability through its unique expertise, particularly in Command and Control and bespoke information and communication technology systems. - Awarded 2023 Large Business Prime Contractor of the Year at both NASA Johnson Space Center and NASA Goddard Space Flight Center, marking a two-year winning streak at Goddard.
- Joined forces with The Henry M. Jackson Foundation for the Advancement of Military Medicine on an important contract to support neuroscience research for service members. This new award focuses on those affected by traumatic brain injuries, and research will be done in collaboration with the Uniformed Services University (nation's only federal health sciences university) and the University of California San Francisco.
Summarized Fourth Quarter and Fiscal 2023 Financial Results
Three Months Ended | Year Ended | ||||||
December 29, | December 31, | December 29, | December 31, | ||||
Dollars in millions, except share data | 2023 | 2022 | 2023 | 2022 | |||
Revenues | $ 1,730 | $ 1,608 | $ 6,956 | $ 6,564 | |||
Operating income | 147 | 122 | 448 | 343 | |||
Net income (loss) attributable to KBR | 21 | 93 | (265) | 190 | |||
Adjusted EBITDA2 | 188 | 157 | 747 | 668 | |||
Operating income margin % | 8.5 % | 7.6 % | 6.4 % | 5.2 % | |||
Adjusted EBITDA2 margin % | 10.9 % | 9.8 % | 10.7 % | 10.2 % | |||
Earnings per share: | |||||||
Diluted earnings per share | 0.15 | 0.62 | (1.96) | 1.26 | |||
Adjusted earnings per share2 | 0.69 | 0.69 | 2.91 | 2.71 | |||
Cash flows: | |||||||
Operating cash flows | 83 | 60 | 331 | 396 | |||
Adjusted operating cash flows2 | 83 | 88 | 463 | 424 | |||
Adjusted free cash flows2 | 63 | 56 | 383 | 353 | |||
Financial Highlights for the Three Months Ended December 29, 2023
- Revenue of
$1.7 billion 8% (organic) on a year-over-year-basis - Net income attributable to KBR of
$21 million $188 million 10.9% Adjusted EBITDA2 margin) - Diluted EPS of
$0.15 $0.69 - Operating cash flows of
$83 million - Bookings and options of
$1.7 billion
Financial Highlights for the Year Ended December 29, 2023
- Revenue of
$7.0 billion 6% (organic) on a year-over-year basis and11% on an (organic) ex-OAW2 year-over-year-basis - Net income attributable to KBR of
$(265) million $747 million 10.7% Adjusted EBITDA2 margin) - Diluted EPS of
$(1.96) $2.91 - Operating cash flows of
$331 million $463 million - Bookings and options of
$10.5 billion
Commentary on the Three Months Ended December 29, 2023
Revenues were
Net income attributable to KBR was
Net income attributable to KBR ex-Nonrecurring Charges2 was
Adjusted EBITDA2 was
Diluted earnings per share were in line with the decrease in Net income attributable to KBR. Adjusted earnings per share2 remained flat primarily because the decrease in Net income attributable to KBR ex-Nonrecurring Charges2 was offset by the reduction in Adjusted weighted average common shares outstanding due to repurchases and the cash settlement of warrants.
Operating cash flows were
Commentary on the Year Ended December 29, 2023
Revenues were
Net income attributable to KBR was
Net income attributable to KBR ex-Nonrecurring Charges2 was
Adjusted EBITDA2 was
Diluted earnings per share were in line with the decrease in Net income attributable to KBR and the reduction in Diluted weighted average common shares outstanding. Adjusted earnings per share2 increased in line with Net income attributable to KBR ex-Nonrecurring Charges2 and the reduction in Adjusted weighted average common shares outstanding due to repurchases and the cash settlement of warrants.
Operating cash flows were
Capital returned to shareholders totaled
On February 19, 2024, the Board of Directors approved an increase of our quarterly regular dividend from
Additionally, on February 19, 2024, the Board of Directors authorized replenishment of our share repurchase authorization to
Cash Settlement Method Election and Repurchase of Convertible Notes
During 4Q'23, KBR settled the remaining convertible notes in cash, settled the corresponding note hedge and also entered into agreements with the option counterparties to settle the remaining warrants in cash. These agreements resulted in the warrants no longer qualifying for the equity scope exception under ASC 815 Derivatives and Hedging, and as a result, the warrants required fair value measurement between the initial recognition date (agreement date) and settlement date for each counterparty.
Due to the cash settlement method election, the repurchase and settlement of the convertible notes, and the termination of the corresponding portions of the note hedge and warrants in FY23, we recorded a loss of
Refer to Note 22 "Cash Election and Repurchase of Convertible Notes and Warrant Unwind Agreements" in our Form 10-K for the year ended December 29, 2023 for further details.
Subsequent Event
In connection with the cash settlement of warrants in 4Q'23, the company remitted
Fiscal 2024 Guidance
The table below summarizes FY24 guidance and represents our views as of February 20, 2024.
Fiscal 2024 Guidance | |
Revenue | |
Adjusted EBITDA | |
Diluted EPS* | |
Adjusted EPS* | |
Operating cash flows |
* | Fiscal 2024 Diluted and Adjusted EPS guidance is calculated using a share count of approximately 135 million. |
The company does not provide a reconciliation of Adjusted EBITDA to the most comparable GAAP financial measure on a forward-looking basis because the company is unable to predict with reasonable certainty the ultimate outcome of legal proceedings, unusual gains and losses, and acquisition-related expenses without unreasonable effort, which could be material to the company's results computed in accordance with GAAP.
Conference Call Details
The company will host a conference call to discuss its fourth quarter financial results on Tuesday, February 20, 2024, at 7:30 a.m. Central Time. The conference call will be webcast simultaneously through the Investor Relations section of KBR's website at investors.kbr.com. A replay of the webcast will be available shortly after the call on KBR's website or by telephone at +1.866.813.9403, passcode: 497348.
About KBR
We deliver science, technology and engineering solutions to governments and companies around the world. KBR employs approximately 34,000 people worldwide with customers in more than 80 countries and operations in over 30 countries. KBR is proud to work with its customers across the globe to provide technology, value-added services, and long-term operations and maintenance services to ensure consistent delivery with predictable results. At KBR, We Deliver.
Visit www.kbr.com
Forward-Looking Statements
The statements in this press release that are not historical statements, including statements regarding our expectations for our future financial performance, effective tax rate, operating cash flows, contract revenues, award activity, our business strategy, interest expense, and our plans for raising and deploying capital and paying dividends, 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: uncertainty, delays or reductions in government funding, appropriations and payments, including as a result of continuing resolution funding mechanisms, government shutdowns or changing budget priorities; developments and changes in government laws, regulations and policies that may require us to pause, delay or abandon existing project; the ongoing conflict between
The company's most recently filed Annual Report on Form 10-K, any subsequent Form 10-Qs and 8-Ks, and other
1 | As used throughout this release and consistent with our practice, book-to-bill excludes long-term | |||||
2 | As used throughout this earnings release, Adjusted EBITDA, Adjusted EBITDA margin, Adjusted earnings per share, Adjusted operating cash flows, Adjusted free cash flows, Revenue excluding OAW, and Net income attributable to KBR ex-Nonrecurring Charges are non-GAAP financial measures. See additional information at the end of this release regarding non-GAAP financial information, including reconciliations to the nearest GAAP measures. | |||||
KBR, Inc. | |||||||
Three Months Ended | Year Ended | ||||||
December 29, | December 31, | December 29, | December 31, | ||||
2023 | 2022 | 2023 | 2022 | ||||
Revenues: | |||||||
Government Solutions | $ 1,328 | $ 1,256 | $ 5,353 | $ 5,320 | |||
Sustainable Technology Solutions | 402 | 352 | 1,603 | 1,244 | |||
Total revenues | 1,730 | 1,608 | 6,956 | 6,564 | |||
Gross profit | 237 | 206 | 977 | 828 | |||
Equity in earnings (losses) of unconsolidated affiliates | 36 | 23 | 114 | (80) | |||
Selling, general and administrative expenses | (118) | (105) | (488) | (420) | |||
Legal settlement of legacy matter | — | — | (144) | — | |||
Gain (loss) on disposition of assets and investments | (7) | (3) | (7) | 19 | |||
Other | (1) | 1 | (4) | (4) | |||
Operating income (loss): | |||||||
Government Solutions | 103 | 90 | 285 | 441 | |||
Sustainable Technology Solutions | 81 | 65 | 324 | 47 | |||
Other | (37) | (33) | (161) | (145) | |||
Total operating income (loss) | 147 | 122 | 448 | 343 | |||
Interest expense | (30) | (23) | (115) | (87) | |||
Unrealized gain on other investment | — | — | — | 16 | |||
Charges associated with Convertible Notes | (66) | — | (494) | — | |||
Other non-operating income (expense) | (4) | 9 | (5) | 12 | |||
Income (loss) before income taxes | 47 | 108 | (166) | 284 | |||
Provision for income taxes | (26) | (13) | (95) | (92) | |||
Net income (loss) | 21 | 95 | (261) | 192 | |||
Less: Net income attributable to noncontrolling interests | — | 2 | 4 | 2 | |||
Net income (loss) attributable to KBR | $ 21 | $ 93 | $ (265) | $ 190 | |||
Adjusted EBITDA1 | $ 188 | $ 157 | $ 747 | $ 668 | |||
Diluted EPS | $ 0.15 | $ 0.62 | $ (1.96) | $ 1.26 | |||
Adjusted EPS1 | $ 0.69 | $ 0.69 | $ 2.91 | $ 2.71 | |||
Diluted weighted average common shares outstanding | 137 | 154 | 135 | 156 | |||
1 See additional information at the end of this release regarding non-GAAP financial information, including a reconciliation to the nearest GAAP measure | |||||||
KBR, Inc. | ||||
December 29, | December 31, | |||
2023 | 2022 | |||
(Unaudited) | ||||
Assets | ||||
Current assets: | ||||
Cash and cash equivalents | $ 304 | $ 389 | ||
Accounts receivable, net of allowance for credit losses of | 981 | 942 | ||
Contract assets | 177 | 252 | ||
Other current assets | 189 | 164 | ||
Total current assets | 1,651 | 1,747 | ||
Pension Assets | — | 46 | ||
Property, plant, and equipment, net of accumulated depreciation of | 239 | 182 | ||
Operating lease right-of-use assets | 138 | 164 | ||
Goodwill | 2,109 | 2,087 | ||
Intangible assets, net of accumulated amortization of | 618 | 645 | ||
Equity in and advances to unconsolidated affiliates | 206 | 188 | ||
Deferred income taxes | 239 | 213 | ||
Other assets | 365 | 294 | ||
Total assets | $ 5,565 | $ 5,566 | ||
Liabilities and Shareholders' Equity | ||||
Current liabilities: | ||||
Accounts payable | $ 593 | $ 637 | ||
Contract liabilities | 359 | 275 | ||
Accrued salaries, wages and benefits | 340 | 325 | ||
Current maturities of long-term debt | 31 | 364 | ||
Other current liabilities | 249 | 220 | ||
Total current liabilities | 1,572 | 1,821 | ||
Employee compensation and benefits | 120 | 105 | ||
Income tax payable | 106 | 117 | ||
Deferred income taxes | 106 | 92 | ||
Long-term debt | 1,801 | 1,376 | ||
Operating lease liabilities | 176 | 193 | ||
Other liabilities | 290 | 230 | ||
Total liabilities | 4,171 | 3,934 | ||
Commitments and Contingencies | ||||
KBR shareholders' equity: | ||||
Preferred stock, | — | — | ||
Common stock, | — | — | ||
Paid-in capital in excess of par
| 2,505 | 2,235 | ||
Retained earnings | 1,072 | 1,410 | ||
Treasury stock, 46,646,024 shares and 44,302,815 shares, at cost, respectively | (1,279) | (1,143) | ||
Accumulated other comprehensive loss
| (915) | (882) | ||
Total KBR shareholders' equity | 1,383 | 1,620 | ||
Noncontrolling interests | 11 | 12 | ||
Total shareholders' equity | 1,394 | 1,632 | ||
Total liabilities and shareholders' equity | $ 5,565 | $ 5,566 | ||
KBR, Inc. | |||
Year Ended | |||
December 29, | December 31, | ||
2023 | 2022 | ||
Cash flows from operating activities: | |||
Net income (loss) | $ (261) | $ 192 | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||
Charges associated with Convertible Notes | 494 | — | |
Depreciation and amortization | 141 | 137 | |
Equity in (earnings) losses of unconsolidated affiliates | (114) | 80 | |
Deferred income tax (benefit) expense | 14 | 37 | |
Loss (gain) on disposition of assets | 7 | (19) | |
Unrealized gain on other investment | — | (16) | |
Other | 46 | 33 | |
Changes in operating assets and liabilities, net of acquired businesses: | |||
Accounts receivable, net of allowance for credit losses | (32) | 455 | |
Contract assets | 44 | (30) | |
Accounts payable | (49) | (376) | |
Contract liabilities | 82 | (25) | |
Accrued salaries, wages and benefits | 22 | 16 | |
Payments on operating lease liabilities | (65) | (63) | |
Payments from unconsolidated affiliates, net | 18 | 14 | |
Distributions of earnings from unconsolidated affiliates | 74 | 66 | |
Pension funding | (9) | (74) | |
Restructuring reserve | (9) | (13) | |
Other assets and liabilities | (72) | (18) | |
Total cash flows provided by operating activities | $ 331 | $ 396 | |
Cash flows from investing activities: | |||
Purchases of property, plant and equipment | $ (80) | $ (71) | |
Net proceeds from sale of assets or investments | — | 47 | |
Return of (investments in) equity method joint ventures, net | 60 | 198 | |
Acquisition of businesses, net of cash acquired | — | (73) | |
Funding in other investment | (39) | (61) | |
Other | (11) | (3) | |
Total cash flows (used in) provided by investing activities | $ (70) | $ 37 | |
Year Ended | |||
December 29, | December 31, | ||
2023 | 2022 | ||
Cash flows from financing activities: | |||
Borrowings on short-term and long-term debt | 785 | 58 | |
Payments on short-term and long-term debt | (17) | (16) | |
Payments on settlement of warrants | (217) | — | |
Proceeds from the settlement of note hedge | 493 | — | |
Payments to settle Convertible Notes | (843) | — | |
Payments on revolving credit facility | (340) | (158) | |
Debt issuance costs | — | (6) | |
Payments of dividends to shareholders | (72) | (66) | |
Net proceeds from issuance of common stock | 5 | 5 | |
Payments to reacquire common stock | (138) | (203) | |
Distributions to noncontrolling interests | (6) | (4) | |
Other | (9) | (9) | |
Total cash flows (used in) provided by financing activities | $ (359) | $ (399) | |
Effect of exchange rate changes on cash | 13 | (15) | |
(Decrease) increase in cash and cash equivalents | (85) | 19 | |
Cash and cash equivalents at beginning of period | 389 | 370 | |
Cash and cash equivalents at end of period | $ 304 | $ 389 | |
Supplemental disclosure of cash flows information: | |||
Cash paid for interest | 102 | 66 | |
Cash paid for income taxes (net of refunds) | 52 | 47 | |
Noncash investing activities | |||
Leasehold improvements paid by landlord | $ 9 | $ 6 | |
Accrued but unpaid purchases of property, plant and equipment | $ 3 | $ 5 | |
Noncash financing activities | |||
Dividends declared | $ 18 | $ 16 | |
KBR, Inc. | |||
December 29, | December 31, | ||
2023 | 2022 | ||
Government Solutions | $ 12,790 | $ 11,543 | |
Sustainable Technology Solutions | 4,545 | 4,012 | |
Total backlog | $ 17,335 | $ 15,555 | |
Award options | 4,397 | 4,203 | |
Total backlog and options | $ 21,732 | $ 19,758 | |
Total backlog and options at December 29, 2023 totaled
Non-GAAP Financial Information
The following information provides reconciliations of certain non-GAAP financial measures presented in the press release to which this reconciliation is attached to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles (GAAP). The company has provided the non-GAAP financial information presented in the press release as information supplemental and in addition to the financial measures presented in the press release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for or alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the press release. The non-GAAP financial measures in the press release may differ from similar measures used by other companies.
EBITDA and Adjusted EBITDA
We evaluate performance based on EBITDA and Adjusted EBITDA. EBITDA is defined as Net income (loss) attributable to KBR, plus interest expense; Accretion of Convertible Notes debt discounts; Other non-operating expense; Provision for income taxes; and Depreciation and amortization. Adjusted EBITDA excludes certain amounts included in EBITDA. EBITDA and Adjusted EBITDA for each of the three- and twelve-month periods ended December 29, 2023 and December 31, 2022 are considered non-GAAP financial measures under SEC rules because EBITDA and Adjusted EBITDA exclude certain amounts included in the calculation of net income (loss) attributable to KBR in accordance with GAAP for such periods. Management believes EBITDA and Adjusted EBITDA afford investors a view of what management considers KBR's core performance for each of the three- and twelve-month periods ended December 29, 2023 and December 31, 2022 and also affords investors the ability to make a more informed assessment of such core performance for the comparable periods.
Three Months Ended | Year Ended | ||||||
December 29, | December 31, | December 29, | December 31, | ||||
Dollars in millions | 2023 | 2022 | 2023 | 2022 | |||
Net income attributable to KBR | $ 21 | $ 93 | $ (265) | $ 190 | |||
Adjustments | |||||||
• Interest expense | 30 | 23 | 115 | 87 | |||
• Accretion of Convertible Notes debt discounts | 40 | — | 282 | — | |||
• Other non-operating expense (income) | 4 | (9) | 5 | (12) | |||
• Provision for income taxes | 26 | 13 | 95 | 92 | |||
• Depreciation and amortization | 37 | 38 | 141 | 137 | |||
EBITDA | $ 158 | $ 158 | $ 373 | $ 494 | |||
Adjustments | |||||||
• Acquisition, integration and restructuring | 4 | 2 | 10 | 7 | |||
• Ichthys commercial resolution | (5) | (4) | 1 | 143 | |||
• Legacy legal fees and settlements | 1 | 4 | 155 | 15 | |||
• Appreciation in fair value of investments | — | — | — | (16) | |||
• (Benefits) provisions related to exit from Russian commercial projects | 4 | (3) | (4) | 25 | |||
• Loss on derivative bifurcation | — | — | 104 | — | |||
• Loss on debt extinguishment | — | — | 70 | — | |||
• Loss on settlement of warrants | 26 | — | 38 | — | |||
Adjusted EBITDA | $ 188 | $ 157 | $ 747 | $ 668 | |||
Three Months Ended | Year Ended | ||||||
December 29, | December 31, | December 29, | December 31, | ||||
Dollars in millions | 2023 | 2022 | 2023 | 2022 | |||
Operating income | $ 147 | $ 122 | $ 448 | $ 343 | |||
Adjustments | |||||||
• Net income attributable to noncontrolling interests | — | (2) | (4) | (2) | |||
• Unrealized gain on other investment | — | — | — | 16 | |||
• Depreciation and amortization | 37 | 38 | 141 | 137 | |||
• Loss on derivative bifurcation | — | — | (104) | — | |||
• Loss on debt extinguishment | — | — | (70) | — | |||
• Loss on settlement of warrants | (26) | — | (38) | — | |||
EBITDA | $ 158 | $ 158 | $ 373 | $ 494 | |||
Adjustments | |||||||
• Acquisition, integration and restructuring | 4 | 2 | 10 | 7 | |||
• Ichthys commercial resolution | (5) | (4) | 1 | 143 | |||
• Legacy legal fees and settlements | 1 | 4 | 155 | 15 | |||
• Appreciation in fair value of investments | — | — | — | (16) | |||
• (Benefits) provisions related to exit from Russian commercial projects | 4 | (3) | (4) | 25 | |||
• Loss on derivative bifurcation | — | — | 104 | — | |||
• Loss on debt extinguishment | — | — | 70 | — | |||
• Loss on settlement of warrants | 26 | — | 38 | — | |||
Adjusted EBITDA | $ 188 | $ 157 | $ 747 | $ 668 | |||
Adjusted EPS
Adjusted earnings per share (Adjusted EPS) for each of the three- and twelve-month periods ended December 29, 2023 and December 31, 2022 is considered a non-GAAP financial measure under SEC rules because Adjusted EPS excludes certain amounts included in the Diluted EPS calculated in accordance with GAAP for such periods. The most directly comparable financial measure calculated in accordance with GAAP is Diluted EPS for the same periods. Management believes that Adjusted EPS affords investors a view of what management considers KBR's core earnings performance for each of the three- and twelve-month periods ended December 29, 2023 and December 31, 2022 and also affords investors the ability to make a more informed assessment of such core earnings performance for the comparable periods.
We have calculated Adjusted EPS for each of the three- and twelve-month periods ended December 29, 2023 and December 31, 2022 by adjusting Diluted EPS for the items included in the table below.
Three Months Ended | Year Ended | ||||||
December 29, | December 31, | December 29, | December 31, | ||||
2023 | 2022 | 2023 | 2022 | ||||
Diluted EPS | $ 0.15 | $ 0.62 | $ (1.96) | $ 1.26 | |||
Adjustments | |||||||
• Amortization related to acquisitions | 0.04 | 0.04 | 0.17 | 0.19 | |||
• Ichthys interest and commercial dispute costs | (0.03) | (0.03) | 0.01 | 1.02 | |||
• Acquisition, integration and restructuring | 0.02 | 0.01 | 0.06 | 0.04 | |||
• Impact of convert accounting and Diluted EPS share count1 | — | 0.05 | 0.01 | 0.07 | |||
• Legacy legal fees and settlements | — | 0.02 | 1.03 | 0.08 | |||
• (Benefits) provisions related to exit from Russian commercial projects | 0.02 | (0.02) | (0.03) | 0.14 | |||
• Charges associated with Convertible Notes | 0.49 | — | 3.62 | — | |||
• Appreciation of fair value of investments | — | — | — | (0.09) | |||
Adjusted EPS | $ 0.69 | $ 0.69 | $ 2.91 | $ 2.71 | |||
Diluted weighted average common shares outstanding | 137 | 154 | 135 | 156 | |||
Adjusted weighted average common shares outstanding | 135 | 140 | 136 | 142 | |||
1 | For the twelve month period ended December 29, 2023, adjusted share count includes anti-dilutive shares for warrants excluded from Diluted EPS share count. | |||||||
We have calculated the 2024 guidance for Adjusted EPS by adjusting Diluted EPS for the items included in the table below.
Fiscal 2024 Guidance | |||
Diluted EPS1 guidance | |||
Adjustments | |||
• Amortization related to acquisitions | 0.15 | ||
• Ichthys interest and commercial dispute costs | 0.02 | ||
• Acquisition, integration and restructuring | 0.03 | ||
• Legacy legal fees | 0.01 | ||
Adjusted EPS1 guidance | |||
1 | Diluted and Adjusted Fiscal 2024 EPS guidance are calculated using a share count of approximately 135 million. | ||||||
Adjusted Cash Flows Provided by Operating Activities and Adjusted Free Cash Flows
Adjusted operating cash flows and Adjusted free cash flows are considered non-GAAP financial measures under SEC rules. Adjusted operating cash flows exclude certain amounts included in the cash flows provided by operating activities calculated in accordance with GAAP. Adjusted free cash flows exclude capital expenditures from Adjusted operating cash flows. The most directly comparable financial measure calculated in accordance with GAAP is cash flows provided by operating activities. Management believes that Adjusted operating cash flows and Adjusted free cash flows afford investors a view of what management considers KBR's core operating cash flow performance and also afford investors the ability to make a more informed assessment of such core operating cash generation performance.
We have calculated Adjusted operating cash flows and Adjusted free cash flows for each of the three- and twelve-month periods ended December 29, 2023 and December 31, 2022 by adjusting operating cash flow provided by operating activities for items included in the table below.
Three Months Ended | Year Ended | ||||||
December 29, | December 31, | December 29, | December 31, | ||||
Dollars in millions | 2023 | 2022 | 2023 | 2022 | |||
Cash flows provided by operating activities | $ 83 | $ 60 | $ 331 | $ 396 | |||
Add: Legacy legal settlement (after tax) | — | — | 132 | — | |||
Adjust: CARES Act temporary tax repayment (relief) | — | 28 | — | 28 | |||
Adjusted operating cash flows | $ 83 | $ 88 | $ 463 | $ 424 | |||
Less: Capital expenditures | (20) | (32) | (80) | (71) | |||
Adjusted free cash flows | $ 63 | $ 56 | $ 383 | $ 353 | |||
Revenue ex-OAW and Net Income Attributable to KBR ex-Nonrecurring Charges
Revenue ex-OAW and Net income attributable to KBR ex-Nonrecurring Charges are considered non-GAAP financial measures under SEC rules. Revenue ex-OAW excludes amounts related to contingency work associated with the OAW program that was wound down and substantially completed in early FY22 from GAAP revenue. Net income attributable to KBR ex-Nonrecurring Charges excludes certain amounts related to charges that we believe are special (e.g., certain legacy legal settlements) or one-time in nature (e.g., relating to the settlement method of our Convertible Notes and the settlement of the related warrants) from GAAP Net income attributable to KBR. Management believes that Revenue ex-OAW affords investors a more consistent comparison of KBR's revenue year-over-year and, and that Net income attributable to KBR ex-Nonrecurring Charges affords investors a view of what management considers KBR's core Net income attributable to KBR and also affords investors the ability to make a more informed assessment of such core net income performance.
We have calculated Revenue ex-OAW and Net Income Attributable to KBR ex-Nonrecurring Charges for each of the three- and twelve-month periods ended December 29, 2023 and December 31, 2022 by adjusting revenue and net income, respectively, for items included in the table below.
Revenue ex-OAW | |||||||||||
Three Months Ended | Year Ended | ||||||||||
December 29, | December 31, | December 29, | December 31, | ||||||||
Dollars in millions | 2023 | 2022 | Growth | 2023 | 2022 | Growth | |||||
Revenue (as reported) | $ 1,730 | $ 1,608 | 7.6 % | $ 6,956 | $ 6,564 | 6.0 % | |||||
Revenue attributable to OAW | — | 4 | — | 313 | |||||||
Revenue ex-OAW | $ 1,730 | $ 1,604 | 7.9 % | $ 6,956 | $ 6,251 | 11.3 % | |||||
Net Income Attributable to KBR ex-Nonrecurring Charges | |||||||||||
Three Months Ended | Year Ended | ||||||||||
December 29, | December 31, | December 29, | December 31, | ||||||||
Dollars in millions | 2023 | 2022 | Growth | 2023 | 2022 | Growth | |||||
Net income (loss) attributable to KBR (as reported) | $ 21 | $ 93 | $ (72) | $ (265) | $ 190 | $ (455) | |||||
Subcontractor commercial dispute | — | — | — | 137 | |||||||
Loss on derivative bifurcation | — | — | 104 | — | |||||||
Loss on debt extinguishment | — | — | 70 | — | |||||||
Loss on settlement of warrants | 26 | — | 38 | — | |||||||
Accretion of Convertible Notes debt discount | 40 | — | 282 | — | |||||||
Legacy legal settlement (after tax) | — | — | 132 | — | |||||||
Net income attributable to KBR ex-Nonrecurring Charges | $ 87 | $ 93 | $ (6) | $ 361 | $ 327 | $ 34 | |||||
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SOURCE KBR, Inc.
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