KBR 4Q boosted on tax benefit

KBR Inc. reported Tuesday its fourth-quarter profit rose 65 percent on the sale of one of its businesses, but its top executive said a growing backlog suggests 2008 will be a good year.

While the former Halliburton subsidiary remains the Pentagon's biggest private contractor in Iraq, the company has focused intently in the past year on expanding its engineering and industrial construction operations — its bread and butter before the Iraqi war.

KBR's total backlog for continuing operations grew to $13 billion in the fourth quarter, up nearly 9 percent from the prior quarter and 5 percent from a year ago.

"We continued to execute well on our current projects, ramped up work on several of our new awards and delivered solid operating results," said Bill Utt, KBR's chairman and chief executive, noting 2007 brought in record profits.

KBR said its profit for the October-December period was $71 million, or 42 cents a share, up from $43 million, or 28 cents a share, in the prior-year period.

The quarter included $23 million, or 14 cents a share, from discontinued operations due to tax benefits from the 2006 sale of its production services group.

Wall Street expected KBR to earn 32 cents in the quarter, according to Thomson Financial, but that forecast typically excludes one-time items. Revenue for the final three months of 2007 amounted to $2.4 billion, topping the Wall Street forecast of $2.27 billion. Revenue in the year-ago quarter was $2.3 billion.

KBR shares shot up $1.79, or 5.3 percent, to close at $35.84 after reaching as high as $36.82 Tuesday. They've traded in a range of $19.66 to $45.24 in the past year.

The Houston-based company, which split from Halliburton last spring, said operating income in the fourth quarter of 2007 was partially offset by $22 million in charges from potentially disallowable costs incurred under U.S. government contracts in the Middle East in 2003.

Still, Tudor Pickering Holt & Co. Securities said operating income topped its forecast and noted the company's "solid backlog performance."

KBR is probably best known for providing food and shelter to U.S. troops in Iraq, thought Utt has said the company is likely to do less work there as troop levels decrease.

Last month, the Army said it would revisit its decision to award three $5 billion contracts to KBR, DynCorp International Inc. and Fluor Corp. for services in Iraq.

The bundled contracts, which could be worth up to $150 billion if extended over a 10-year span, have been on hold since July, after two private companies filed separate protests with the Government Accountability Office questioning the award. The Army has said it's reevaluating new bids from the companies but has not specified when it would make an announcement.

Utt told investors on a conference call he expected word from the Army in the first quarter. For now, KBR continues to work under a previous, multibillion-dollar government contract.

Congressional Democrats and others have criticized KBR's war-generated profits because of its former association with Halliburton, which was once was led by Vice President Dick Cheney. Halliburton is now focused solely on its lucrative oilfield services businesses.

KBR in the past year announced several new contracts, including a pact to manage construction of a chemicals and plastics production complex in Ras Tanura, Saudi Arabia — a plant that's expected to be among the world's largest petrochemical facilities.

It also will provide engineering services for an ammonia plant in Venezuela.