Barclays Capital Industrial Select Conference
Bill Utt – Chairman, President and CEO
Sue Carter - Executive Vice President and CFO
February 9, 2011
Page 1 of 18 Forward Looking Statements
This presentation contains “forward-looking statements.” All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements include statements about the benefits of the split-off, the discussions of KBR’s business strategies and KBR’s expectations concerning future operations, profitability, liquidity and capital resources. You can generally identify forward- looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should” or other similar words. These statements relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to differ materially from those in the future that are implied by these forward-looking statements. Many of these factors cannot be controlled or predicted. These risks and other factors include those described under “Risk Factors” in KBR’s Annual Report on Form 10-K dated February 25, 2010, Forms 10-Q, recent Current Reports on Forms 8-K, and other Securities and Exchange Commission filings. Those factors, among others, could cause KBR’s actual results and performance to differ materially from the results and performance projected in, or implied by, the forward-looking statements. As you read and consider this presentation, you should carefully understand that the forward-looking statements are not guarantees of performance or results. KBR cautions you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, KBR cannot assure you that actual results will not differ materially from those expressed or implied by forward-looking statements.
The forward-looking statements included in this presentation are made only as of the date of this document. New risks and uncertainties arise from time to time, and KBR cannot predict those events or their impact. KBR assumes no obligation to update any forward-looking statements after the date of this presentation as a result of new information, future events or developments, except as required by the federal securities laws.
Page 2 of 18 KBR – A Leading Global E&C Provider
» Revenue: Full Year 2009 - $12.1 Billion; 2009 Fortune 500 Company #193 Full Year 2008 - $11.6 Billion; Fortune 500 Company #234
» Backlog: September 30, 2010 - $12.3 Billion (79% reimbursable / 21% fixed-price)* September 30, 2009 - $13.5 Billion (82% reimbursable / 18% fixed-price)*
» Headquarters in Houston, Texas
» 100+ years of operating history
» ~42,000 employees; 45+ countries
» Extensive service capabilities:
• Engineering, procurement, construction, commissioning, and start-up (EPC-CS) to global hydrocarbons, power, industrial, minerals, and infrastructure customers
• Defense, logistics, and contingency support for defense services
* For contracts that contain both fixed-price and cost-reimbursable components, KBR classifies the components as either fixed-price or cost- reimbursable according to the composition of the contract, except for smaller contracts that are characterized on the predominate component. Page 3 of 18 KBR Operates in 45 Countries
Gothenburg
Edmonton Greenford Moscow Leatherhead Calgary Wilmington Atyrau Arlington Baku Raleigh / Charlotte Algiers Baghdad Houston Atlanta Cairo Kuwait City China Birmingham Monterrey Dhahran Dubai New Delhi MMM Abu Dhabi Lagos Singapore Jakarta Angola
Brisbane
Johannesburg Perth Sydney Adelaide Canberra Melbourne
Page 4 of 18 KBR’s Recent Acquisitions
Roberts & Schaefer Company
¾Roberts & Schaefer’s capabilities essentially focus on three distinct markets: mining, conveyance and handling, and power
¾Expands KBR’s existing EPCm capabilities in the minerals market to new geographies and customers, which were largely in the Australian market
¾Strengthens KBR’s existing port and marine bulk material handling capabilities through the acquisition of the Soros business
¾Adds to KBR’s power and industrial offering through bulk materials handling specialization for solid fuel-fired boiler and pollution control systems
Page 5 of 18 Roberts & Schaefer Principal Locations
¾ Roberts & Schaefer is headquartered in Chicago ¾ Two principal domestic engineering offices, Chicago, IL for its Power division and Salt Lake City, UT for Mining ¾ Red boxes designate major R&S project locations
Page 6 of 18 KBR’s Recent Acquisitions
M.W. Kellogg Limited (MWKL)
¾MWKL becomes a wholly-owned subsidiary of KBR
¾The acquisition allows KBR to build on the unique capabilities of MWKL along with our existing Leatherhead operations creating one of the largest engineering and construction offices in the U.K.
¾Creates a broader set up opportunities to KBR for alliances and partnerships with contractors, including JGC, Asian contractors in the Middle East, and large civil contractors in Australia
¾Allows KBR to drive efficiencies and cost synergies through the creation of one large London operating center for a more competitive services offering to our customers
Page 7 of 18 Hydrocarbons
¾LNG remains robust
¾ Skikda LNG progressing well
¾ Gorgon LNG execution is strong
¾ Pluto 2 and 3 FID expected 2nd half of 2011
¾ Inpex Ichthys FID expected 2nd half of 2011
¾ Browse LNG Basis of Design completed
¾Improving Gas Monetization margins
¾ Tangguh/Yemen LNG projects complete; Final close out on Tangguh completed in January 2011
¾ Escravos GTL and Skikda LNG will have reducing impact over the next year
¾ Double-digit margins not unrealistic over time Page 8 of 18 Hydrocarbons
¾Oil & Gas
¾ FEEDs being converted to detailed engineering, design, and implementation
¾ Strong level of global offshore activity with several excellent opportunities in Caspian and West Africa over next 18 months
¾ Opened new offices in Kazakhstan and Angola
¾ Expand service offerings from engineering to project execution
¾Recent Awards
¾ TOTAL’s CLOV FSPO topsides detailed design
¾ Chevron’s Big Foot topsides detailed design and procurement support Page 9 of 18 Downstream
¾Saudi Arabia projects progressing well
¾ FEED activities continue on Ras Tanura Integrated project
¾ Yanbu Export Refinery project ramping up
¾ Competition in the Middle East on EPC projects remains fierce
¾ KBR staffing EPC project offices in support of Aramco GES Plus initiative
¾African refinery project moving forward
¾ Lobito project negotiations for EPCm continue; expected first half of 2011
Page 10 of 18 North America Government & Defense
¾ LogCAP Updates and Outlook
¾ Expect 2011 revenue between $1.6 to $1.8 billion
¾ Assuming current 50,000 troop levels until the back half of 2011, with substantial ramp down by end of 2011
¾ Received $94 million in award fees during 2010
¾ Positive progression on DCAA and other legacy LogCAP issues
¾ Life After LogCAP
¾ Replacing LogCAP work by diversifying customer base, building on logistical expertise, and expanding geographically
¾ New customers including NATO, Air Force Civil Engineering Agency, National Reconnaissance Office
Page 11 of 18 Infrastructure, Government, and Power
¾ International Government & Defense
¾ Continued support for U.K. Ministry of Defence and NATO in Afghanistan; newly acquired NATO contract ramped up
¾ Building on U.K. based logistics and life support and consultancy and training capabilities in Australia to expand services within the Asia-Pacific region
¾ Infrastructure & Minerals
¾ Slow ramp up for infrastructure spending in the U.S. and U.K.
¾ Australian transportation market ramping up; recent flooding may provide further infrastructure related work later in 2011
¾ Middle East infrastructure activity improving based on stabilized oil price
¾ Minerals markets strengthening; Hope Downs 4 EPCm award and R&S acquisition ¾ Power & Industrial
¾ Demand for new electric generating capacity still lagging
¾ Industrial markets experiencing strong volume of early stage prospects Page 12 of 18 Services
¾U.S. construction markets
¾ Continued moderate activity for small to mid- size capital projects
¾ Only now seeing the beginnings of a return of larger construction projects
¾Increasing activity in Alberta oil sands region
¾Strong Building Group activity in 2010 with sanctioned projects moving forward
¾Industrial Services
¾ Large DuPont construction, maintenance and services project began mobilized earlier this year
¾ Turnaround activity picking up Page 13 of 18 KBR Financials and Backlog
Page 14 of 18 2011 Earnings Guidance Summary
¾Expected FY2011 earnings per diluted share is $2.05 to $2.30
¾Includes expected $0.17 contribution for R&S acquisition and MWKL acquisitions
¾FY2011 LogCAP revenue between $1.6 - $1.8 billion
¾Operating effective tax rate approximately 32 percent
¾Diluted shares outstanding approximately 150 to 151 million shares
Page 15 of 18 Effective Cash Deployment
December 31, 2009 ($ millions) Full Year 2010 Estimates ¾Operating Requirements Cash and Cash Equivalents $941 Joint Venture Cash $236 ¾Dividends $32 M
Operating / Discretionary Cash $705 ¾Capex with ERP $70 - $80 M
¾Share Repurchase $229 M First Nine Months of 2010 ($ millions) ¾Pension Contribution $30 - $40 M Cash Flow from Operations $541 ¾Acquisitions* $316 M
Anticipate Continued Strong Cash Flow in 2011
*Includes acquisitions and license agreements; does not include MWKL acquisition which closed on January 3, 2011 Page 16 of 18 Working Capital Management
¾Focused on reducing general business accounts receivable
¾Managing accounts payable
¾Resolution of unbilled receivables on uncompleted contracts
¾Collecting on past disputes (EPC 1)
¾Government Business
¾ As LogCAP work declines, less working capital requirements
¾ Diligently working to resolve disputed withhold amounts
¾ Award fees
Page 17 of 18 KBR Investment Thesis
• KBR is a growth company across a broad based and diverse series of businesses
• Optimism for acceleration in new orders around growth opportunities across markets
• Ample opportunities to replace declining LogCAP work
• Strong balance sheet with emphasis on cash management
• Patience, prudence, and thoughtfulness in managing KBR’s cash balances
Page 18 of 18 We Deliver