Q2 2011 Earnings Call
July 28, 2011 9:00 am ET
Susan Carter - Chief Financial Officer and Executive Vice President
William Utt - Chairman, Chief Executive Officer and President
Rob Kukla - Director of Investor Relations
Tahira Afzal - KeyBanc Capital Markets Inc.
Robert Connors - Stifel, Nicolaus & Co., Inc.
John Rogers - D.A. Davidson & Co.
Andy Kaplowitz - Barclays Capital
Robert Norfleet - BB&T Capital Markets
Sameer Rathod - Macquarie Research
Will Gabrielski - Gleacher & Company, Inc.
Joseph Ritchie - Goldman Sachs Group Inc.
Steven Fisher - UBS Investment Bank
Previous Statements by KBR
» KBR's CEO Discusses Q1 2011 Results - Earnings Call Transcript
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» KBR CEO Discusses Q4 2010 Results – Earnings Call Transcript
Good day, and welcome to the KBR's Second Quarter 2011 Earnings Conference, hosted by KBR. This call is being recorded. [Operator Instructions] For opening remarks and introductions, I'd like to turn the call over to Mr. Rob Kukla, Director of Investor Relations. Please go ahead, sir.
Thanks, Tom. Good morning, and welcome to KBR's second quarter 2011 earnings conference call. Today's call is also being webcast, and a replay will be available on KBR's website for 7 days. The press release announcing the second 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, KBR's quarterly reports on Form 10-Q and KBR's current reports on Form 8-K.
Now I'll turn the call over to Mr. Bill Utt. Bill?
Thanks, Rob, and good morning, everyone. Overall, I'm pleased with the KBR's continued strong financial performance this quarter. KBR's second quarter net revenue was in line with our expectations, and excluding the LogCAP project is up 5% year-over-year. KBR's business unit income this quarter was up approximately 20% from the prior quarter and each of our business groups showed increases in business unit income of 15% or more compared to the prior quarter. As a result of our strong performance and our outlook for the remainder of 2011, we are raising our full year 2011 earnings per diluted share guidance to a range of $2.60 to $2.85 per share from the range provided earlier this year of $2.05 to $2.30 per share. This represents a 25% increase from the initial 2011 guidance we provided in January. This new guidance reflects KBR's stronger operating performance and expected lower 2011 effective tax rate as well as continued control of our general and administrative expenses.
During the quarter, KBR's job income backlog increased 4% compared to the prior quarter while revenue backlog remained essentially flat. Compared to the prior year second quarter, job income backlog is up 12% despite our revenue backlog decline of 4%. KBR continues to work off the lower margin projects in our backlog, while successfully replacing this backlog with higher-margin projects.
Compared to the sequential quarter, Hydrocarbons backlog was down approximately $269 million, primarily related to the general project work-off in the Gas Monetization and Oil & Gas business units. With the addition of the Jazan refinery FEED, work scope additions for the Lobito refinery project and the award of the Molycorp EPC project, Downstream backlog increased by $160 million. Technology backlog was up 24% sequentially, primarily related to several new ammonia projects.
IGP's backlog was up $266 million led by the booking of the Solid Waste Authority project as well as work additions on the LogCAP III and IV projects. While services backlog declined $103 million from the first quarter, we believe we're announcing a turnaround emerging in this predominantly North American business. New award bookings this quarter are the highest since the end of 2009. And as of today, services has sold more new work year-to-date than was sold in all of 2010. We are very pleased with the positive evolutions we are seeing in new awards at services this year.
I would like to now comment on the status of several KBR projects at our business units. For the Inpex Ichthys LNG project, KBR and our partners remain actively engaged in post-FEED and pre-FID activities and the open-book tender discussions continue to proceed towards a fourth quarter 2011 FID.
For the Pluto LNG expansion project, KBR continues to receive post-FEED assignments and provide pre-FID services on the project. We note the continued increased cost and schedule delays on the Pluto 1 foundation project and continue to provide support to Woodside on this project on an as-needed basis.
For the Kitimat LNG project, FEED activities and pre-FID site construction management services are progressing as planned, with FEED completion expected by year end. We continue to be advised that the owner expects to take the FID for the project during the first half of 2012.
For the Browse LNG project, KBR expects to complete the bulk of the FEED work by the end of this year. The project currently remains on target for the 2012 FID.
The fourth train at Gorgon has been awarded to KBR for pre-FEED work, and this work is currently underway. Finally, I'm pleased to announce that Anadarko has awarded KBR pre-FEED work for their grassroots LNG project in Mozambique. Work on this project has already started and is scheduled for completion by the end of 2011.