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Energy

KBR to Restate 2013 Financials to Include Additional Losses

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By Trey Thoelcke Published
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Gas pipeline

Not surprisingly, shares of KBR Inc. (NYSE: KBR) took a hit in early trading Monday after the Houston-based engineering, construction, and services company announced its intention to restate its consolidated financial statements for the year 2013.

In the statement, KBR said:

In connection with the preparation of KBR’s Form 10-Q for the three months ending March 31, 2014, we determined that the estimated costs to complete seven Canadian pipe fabrication and module assembly contracts within our Services business segment that were awarded during 2012-2013 will result in pre-tax charges of $158 million, consisting of the reversal of $23 million in previously recognized pre-tax profits and the recognition of approximately $135 million in pre-tax estimated losses at completion. The negative cash impact associated with the work released to date under the seven contracts has largely been incurred and the forecast net negative cash flow to complete this work is expected to be less than $45 million. Our review of this matter is ongoing and therefore the amounts previously noted are subject to change. We believe that the majority of these losses should have been recognized in our consolidated financial statements for the year ended December 31, 2013.

Chairman Loren K. Carroll added:

The KBR Board of Directors and management team take the accuracy and integrity of KBR financial statements very seriously. We are committed to conducting a thorough investigation and implementing corrective measures. KBR’s management team remains focused on enhancing value for all of our stakeholders, including returning capital to shareholders. Between February 27, 2014, and April 30, 2014, KBR repurchased approximately 3.4 million shares of its common stock at an average price of $27.29 for a total of $94 million. We will continue to leverage the Company’s position as a global leader in engineering, procurement and construction in order to further strengthen our customer relationships, convert our significant backlog, support existing contracts and win and execute new work.

Still, shares retreated more than 6% to $24.22 in morning trading, a new 52-week low. The share price is about 16.4% lower than at the beginning of the year. The S&P 500 was down less than 1% Monday morning.

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Trey has been an editor and author at 24/7 Wall St. for more than a decade, where he has published thousands of articles analyzing corporate earnings, dividend stocks, short interest, insider buying, private equity, and market trends. His comprehensive coverage spans the full spectrum of financial markets, from blue-chip stalwarts to emerging growth companies.

Beyond 24/7 Wall St., Trey has created and edited financial content for Benzinga and AOL's BloggingStocks, contributing additional hundreds of articles to the investment community. He previously oversaw the 24/7 Climate Insights site, managing editorial operations and content strategy, and currently oversees and creates content for My Investing News.

Trey's editorial expertise extends across multiple publishing environments. He served as production editor at Dearborn Financial Publishing and development editor at Kaplan, where he helped shape financial education materials. Earlier in his career, he worked as a writer-producer at SVE. His freelance editing portfolio includes work for prestigious clients such as Sage Publications, Rand McNally, the Institute for Supply Management, the American Library Association, Eggplant Literary Productions, and Spiegel.

Outside of financial journalism, Trey writes fiction and has been an active member of the writing community for years, overseeing a long-running critique group and moderating workshop sessions at regional conventions. He lives with his family in an old house in the Midwest.

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