KBR announced that both income from continuing operations and net income in the fourth quarter of 2006 were $43 million, or $0.28 per diluted share. This compares to income from continuing operations of $48 million, or $0.35 per diluted share, in the fourth quarter of 2005. Net income for the fourth quarter of 2005 of $56 million, or $0.41 per diluted share, included income from discontinued operations of $8 million, or $0.06 per diluted share, related to the Production Services Group, which was sold in the second quarter of 2006.
Consolidated revenue in the fourth quarter of 2006 was $2.5 billion, down 8% from the fourth quarter of 2005. This decrease was largely attributable to lower activity on the LogCAP III contract as the customer continued to scale back the construction and procurement activities related to military sites in Iraq.
Consolidated operating income was $121 million in the fourth quarter of 2006 compared to $107 million in the fourth quarter of 2005, a 13% increase. Both segments posted increased operating income driven by improved results in gas monetization projects and the DML shipyard.
“I am pleased to begin a new era for KBR as we expect to complete the separation from Halliburton in the next few months. I look forward to heading the transition of KBR to a public company and am focused on execution of our strategies to enable KBR to build on its leadership position in the engineering and construction business,” said Bill Utt, president and chief executive officer of KBR.
Income from continuing operations for the full year of 2006 was $81 million, or $0.58 per diluted share, which represents a $129 million, or $0.96 per diluted share, decline from the prior year. Net income in 2006 was $168 million, or $1.20 per diluted share, compared to the 2005 net income of $240 million, or $1.76 per diluted share. Net income in 2006 included $87 million after tax, or $0.62 per diluted share, of income from discontinued operations related to the Production Services Group.
2006 Fourth Quarter Segment Results
Energy and Chemicals operating income was $59 million in the fourth quarter of 2006 compared to operating income of $52 million in the fourth quarter of 2005. Significant contributors to fourth quarter 2006 results were a gas-to-liquids (GTL) project in Qatar, liquefied natural gas projects in Nigeria, Indonesia, and Yemen, and an ammonia plant in Egypt. These increases were partially offset in the fourth quarter 2006 by a $9 million loss for non-billable KBR engineering hours to the Escravos GTL joint venture in Nigeria.
Government and Infrastructure operating income for the fourth quarter of 2006 was $62 million compared to operating income of $55 million in the fourth quarter of 2005. The increase was partially attributable to higher income related to the DML shipyard for progress made on the refueling of a nuclear submarine and an agreement reached regarding contractual terms of another submarine, which was offset partially by a $12 million project loss on an embassy project for the U.S. State Department in Macedonia.
KBR’s Iraq-related work contributed approximately $1.2 billion in revenue in the fourth quarter of 2006 and $47 million of operating income, or a 4.0% margin, before non-operating expenses and taxes.
Management restructuring and corporate organization changes designed to enhance risk awareness and transparency as well as improve future financial performance have resulted in a charge of $5 million in the fourth quarter 2006. This charge covers a reduction in force which was necessary in some areas as the KBR structure is optimized around the workload.
Significant Achievements and Awards
KBR announced that it has closed its initial public offering of 32,016,000 shares of common stock at a price of $17.00 per share. The number of shares of common stock issued at closing included 4,176,000 shares for the underwriters’ over-allotment option. KBR received approximately $508 million of proceeds from the offering, net of underwriting fees and estimated expenses.
Saudi Kayan has awarded KBR a contract for engineering, procurement and construction management of a 1,350,000 tons per annum Olefins Plant. The plant will be erected at the Saudi Kayan Cracker complex in the Jubail Industrial City, Kingdom of Saudi Arabia.
KBR is an 81% owned subsidiary of Halliburton Company and a global engineering, construction and services company supporting the energy, petrochemicals, government services and civil infrastructure sectors. We offer our wide range of services through our Energy and Chemicals (E&C) and Government and Infrastructure (G&I) business segments.