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KBR’s Fourth-Quarter Profits Drop 67 Percent

KBR reported a net income of $30 million for the fourth-quarter of 2012. Chief Executive Officer Bill Utt called it “a disappointing year” but later stated 2013 would bring “a robust series of new opportunities across each of our business units.”

For the same period a year earlier, KBR reported profits of $90 million. Utt accredited the sharp decline in profits to difficulties in the company’s minerals and US construction businesses. The sector of the company that did perform well was the hydrocarbons arm. Its profits increased 76 percent from the same period a year earlier resulting in a $174 million net income.

Interestingly, the released statement made no mention of the current litigation against KBR. In November, a jury awarded $85 million to twelve Oregon Army National Guard soldiers for negligence due to the contamination of a water treatment plant in Iraq. KBR, in turn, sued the US government to honor a secret indemnity agreement signed by the secretary of the Army in 2001. The agreement purports to shield KBR from financial costs associated with unusually hazardous risks including “sudden or non-sudden release of hydrocarbons or other toxic or hazardous substances or contaminants into the environment.”

They also did not mention the lawsuit filed by the United States in November. In that civil complaint, the government accuses KBR of inflating claims for the delivery and installation of trailers to house troops in Iraq.

The jury verdict for the twelve plaintiffs in Oregon is significant for the role it will play in the future trials for the more than 150 soldiers awaiting their day in court. The financial impact for KBR potentially could be more than $1.1 billion if the current individual case value trend of $7 million continues. The case is currently being reviewed by the Department of Justice and the Department of Defense. We will continue to blog updates as they develop.