Will KBR Be Able to Countervail Restructuring Charges?

Pre-tax loss

KBR (KBR) is subject to income taxes in the United States and numerous foreign jurisdictions. Its pre-tax profit fell 89% to $33 million in fiscal 2016, from $312 million in fiscal 2015.

Will KBR Be Able to Countervail Restructuring Charges?

Net loss

As you can see in the above chart, KBR posted considerable losses in 2014, which was chiefly due to restructuring costs. Losses and charges related to projects within the E&C (Engineering & Construction) segment and non-strategic business segments were recognized during 2014. Also included in 2014 was $421 million worth of tax expenses, mainly related to the valuation allowance on US national, foreign, and state net operating loss carryforwards; foreign tax credit carryforwards; other deferred tax assets; and international tax expense.

KBR posted a net loss of $61 million in fiscal 2016 compared to a net profit of $203 million in fiscal 2015. On a per-share basis, its net loss was $0.43 in fiscal 2016 compared to net earnings of $1.40 in fiscal 2015.

In fiscal 2017, the company expects to report EPS (earnings per share) of $1.35–$1.50. Its peer (XLI) Fluor (FLR) is expected to report EPS of $1.50 in 2017, while Chicago Bridge & Iron (CBI) is expected to post a $2.30 loss per share for fiscal 2017. Jacobs Engineering (JEC) reported EPS of $3.24 in fiscal 2017.

Cash flows

KBR had $536 million in operating cash and equivalents compared to $883 million in 2015. Its operating cash flow is subject to significant variations from year to year and is affected by the mix, terms, timing, and percentage of completion of their engineering and construction projects.

KBR spent $11 million on capital expenditure in fiscal 2016 compared to $10 million in fiscal 2015. Activity levels of KBR’s businesses are significantly influenced by capital expenditures for refining and distribution plants by huge oil and gas companies.

In the subsequent parts of this series, we’ll look at KBR’s debt and liquidity profile.