Q4 2010 Earnings Call Transcript

Transcript Call Date 02/24/2011

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

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

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

Joining me today are Bill Utt, Chairman, President and Chief Executive Officer and Sue Carter, Executive 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, 2010 which was filed yesterday evening, KBR's quarterly reports on Forms 10-Q and KBR's current reports on Forms 8-K.

Now, I'll 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 very pleased with KBR's 2010 financial performance. KBR's 2010 net revenue was in line with our expectations which declined primarily as a result of lower LogCAP volumes. However, operating income for the quarter and the full year was up 19% and 14% respectively on a year-over-year basis. During 2010, we achieved record net income attributable to KBR of $327 million, up 13% compared to 2009. Earnings per diluted share of $2.07 was up 16% compared to the prior year.

KBR's job income backlog is also a positive story. During 2010, KBR's job income backlog was flat, resulting in a 140 basis point improvement in year-over-year margins. As KBR continues to work off the lower-margin projects in our portfolio, principally the Escravos, LogCAP and Skikda projects, we have been successful in replacing this backlog with the series of higher-margin projects.

So even though revenue backlog declined during 2010, KBR was successful in keeping our job income backlog flat year-over-year.

Now, let me move on to a discussion on KBR's discrete business units. For the Gas Monetization business unit the Gorgon LNG, the Skikda LNG, Escravos GTL and Pearl GTL projects were all positive contributors of the quarter's results. The INPEX Ichthys FEED and Pluto FEED as well as the Browse LNG basis of design projects are all essentially complete. KBR was recently awarded a FEED contract through its KLH Australia-Browse joint venture for the Browse LNG project and we continue to actively follow the Kitimat, Gorgon 4 and Arrow LNG projects, as well as expect final investment decisions for the impacts and Pluto LNG projects during the second half of 2011.

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