KBR Revises Guidance for 2016

HOUSTON, TX--(Marketwired - September 30, 2016) - KBR, Inc. (NYSE: KBR) announced today that the Company has updated earnings guidance for 2016 to reflect expected increases in costs to complete engineering, procurement and construction ("EPC") projects.

The majority of the cost increases relate to an EPC project for an electric power-generating facility within our Non-strategic business segment. As previously announced, the Company intends to exit the fixed priced EPC business for new power projects and this project is the last within the Company's backlog of unfilled orders. The increased forecast costs are primarily driven by subcontractor cost increases due to recent poor productivity, schedule delay and changes in execution strategy. These costs stem from the impact of poor performance by the turbine supplier which continues to adversely impact construction progress. The project is approximately 86% complete as of September 30, 2016 with anticipated completion in the first half of 2017.

An EPC ammonia project in the Company's Engineering & Construction business segment has continued to experience unforeseen costs during startup and commissioning related to mechanical failures of a vendor-supplied compressor and pumps. These issues have further delayed expected completion of the project to October 2016 resulting in increased construction and repair costs and the recognition of contractual liquidated damages. This project is in the final stages of completion and start-up in anticipation of performance testing.

The amount of the expected cost increases is approximately $130 million on a pretax basis (EPS $0.91). We intend to seek compensation from vendors on both projects but, at this time, have not assumed any recovery in the financial results. As a result, KBR is revising full-year earnings guidance for 2016 EPS to a range of $0.30 to $0.50 per diluted share from the prior range of $1.20 to $1.45 per share excluding legal costs associated with legacy U.S. Government contracts. KBR expects the legacy legal costs to be approximately $15 million, or $0.11 per fully diluted share in 2016.