Q3 2010 Earnings Call Transcript

Transcript Call Date 10/28/2010

Operator: Good day, and welcome to the KBR Third Quarter 2010 Earnings Call hosted by KBR. This call is being recorded. As a reminder, your lines will be in a listen-only mode for the duration of the call. There will be a question-and-answer session immediately following the prepared remarks. You'll receive instructions at that time.

For opening remarks and introductions, I would like to turn the call over to Mr. Rob Kukla, Director of Investor Relations. Please go ahead, sir.

Rob Kukla, Jr. - Director, IR: Thank you, William. Good morning, and welcome to KBR's third quarter 2010 earnings conference call. Today's call is also being webcast and a replay will be available on KBR's website of seven days. The press release announcing the third quarter results is also available on KBR's website.

Joining me today are Bill Utt, Chairman, President and Chief Executive Officer; and Sue Carter, Senior Vice President and Chief Financial Officer.

In today's call, Bill will provide opening remarks and business outlook. Sue will address KBR's operating performance, financial position, backlog, and other financial items. We will welcome questions after we complete our prepared remarks.

Before turning the call over to Bill, I would like to remind our audience that today's comments may include forward-looking statements reflecting KBR's views about future events and their potential impact on performance. These matters involve risks and uncertainties that could impact operations and financial results, and cause our actual results to differ from our forward-looking statements. These risks are discussed in KBR's Form 10-K for the year ended December 31, 2009, KBR's quarterly reports on Form 10-Q and KBR's current reports on Form 8-K.

Now I will turn the call over to Mr. Bill Utt. Bill?

William P. Utt - Chairman, President and CEO: Thanks, Rob, and good morning, everyone. Overall, I am pleased with KBR's performance this quarter. As we have been discussing over the past year, we are seeing KBR's consolidated revenue decline primarily associated with the lowering volumes on the LogCAP project. However, KBR's consolidated business unit income is up 13%, and operating income is up 24%, both figures compare to the third quarter of last year. The earnings per diluted share of $0.62 for the third quarter is up 38% compared to the prior year third quarter.

Before making comments on KBR's discrete business units, I would like to discuss KBR's backlog. As we've discussed over the past several quarters and as highlighted during our Analyst and Investor Day at the end of June, we have been focused on creating a more profitable backlog. Compared to third quarter of 2009, job income backlog was up 1% relative to a 9% decrease in revenue backlog. Sequentially, KBR's job income backlog was up 1% despite a less than 1% decline in revenue backlog.

During the third quarter, a final settlement agreement was negotiated with one of our commercial agents, who provided services to various gas monetization and oil and gas projects. The agent had confirmed that understanding of and compliance with KBR's monitor approved policies on business conduct and represented that they had complied with anti-corruption laws as they relate to prior services provided to KBR. We executed a final settlement agreement with the agent in September 2010, which resulted in a non-cash gain in the third quarter.

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