Business Context and Reporting Period
KBR, Inc. filed this Form 8-K on December 6, 2011, reporting events occurring on December 2, 2011. The filing details the entry into a new material definitive agreement regarding corporate financing.
Key Financial Metrics and Liquidity
The filing focuses on liquidity and debt capacity rather than operational performance metrics like revenue or profit.
- New Credit Facility: $1.0 billion five-year unsecured revolving credit agreement.
- Usage: Available for cash advances and issuance of up to $1.0 billion in letters of credit.
- Interest Rates: Variable rates based on LIBOR plus 1.50% to 1.75%, or Base Rate plus 0.50% to 0.75%.
- Fees: Commitment fee of 0.25% per annum on unused commitments; letter of credit fees vary by type.
- Financial Covenants:
- Maximum consolidated debt to consolidated EBITDA ratio: 3.5 to 1.
- Minimum consolidated net worth: $2 billion plus 50% of consolidated net income (starting Q4 2011).
Material Changes Versus Prior Period
The new Credit Agreement replaces the Prior Credit Agreement dated November 3, 2009, which was a three-year unsecured revolving facility. The Prior Credit Agreement terminated upon the closing of the new agreement. The new agreement extends the maturity from three years to five years.
Outlook, Risks, and Management Commentary
The filing does not provide specific guidance, outlook, or management commentary regarding future business performance. The primary risk disclosed relates to compliance with the financial covenants, specifically the debt-to-EBITDA ratio and minimum net worth requirements. The applicable interest margins are contingent on the company's leverage ratio.
Key Facts for Investor Verification
- Verify the company's current consolidated debt to EBITDA ratio to ensure compliance with the 3.5 to 1 covenant.
- Confirm the company's consolidated net worth meets the $2 billion threshold plus the applicable percentage of net income.
- Review the specific terms of the attached Credit Agreement (Exhibit 10.1) for detailed definitions of EBITDA and net worth.
- Monitor the utilization of the $1.0 billion facility for cash advances versus letters of credit.