Consolidated operating income was $144 million in the first quarter of 2009 compared to $154 million in the first quarter of 2008.
2009 First Quarter Business Unit Results:
Upstream business unit income was $73 million in the first quarter of 2009 compared to business unit income of $105 million in the first quarter of 2008. Business unit income in the first quarter of 2009 included a charge of $15 million for KBR’s share of an unfavorable arbitration decision related to the In Amenas project and a gain of $16 million, or around $0.03 per diluted share to KBR, on the reversal of accruals on completed EPC projects at KBR’s 55% owned MWKL company. Business unit income in the first quarter of 2009 had positive contributions from various gas monetization projects, including the Pearl GTL, Skikda LNG, Gorgon LNG, Tangguh LNG, and Escravos GTL projects, and several offshore related projects in Australia and the Caspian area. Business unit income in the first quarter of 2008 included a $51 million gain on a favorable arbitration award related to the EPC-28 project contracted with PEMEX.
Government and Infrastructure business unit income was $81 million in the first quarter of 2009 compared to business unit income of $80 million in the first quarter of 2008. Business unit income in the first quarter of 2009 had positive contributions from Iraq related activities, the Allenby & Connaught project, work on the CENTCOM project, and several water projects. Business unit income in the first quarter of 2008 included a $12 million charge related to the U.S. Embassy project in Macedonia.
Services business unit income was $24 million in the first quarter of 2009 compared to business unit income of $13 million in the first quarter of 2008. Business unit income in the first quarter of 2009 had positive contributions from BE&K, including continued work on power projects in Georgia and Texas, in addition to legacy construction and maintenance work in Texas and offshore service vessels in the Gulf of Mexico.
Downstream business unit income was $0 million in the first quarter of 2009 compared to business unit income of $8 million in the first quarter of 2008. Business unit income in the first quarter of 2009 included additional costs related to an equipment failure on the EBIC ammonia project in Egypt and positive contributions from the Yanbu export refinery project, program management services for the Ras Tanura project in Saudi Arabia, and several BE&K projects.
Technology business unit income was $3 million in the first quarter of 2009 compared to business unit income of $5 million in the first quarter of 2008. Business unit income in the first quarter of 2009 had positive contributions from several ammonia projects in South America and royalty payments for technology licenses in Europe and China.
Ventures business unit income was $10 million in the first quarter of 2009 compared to a business unit loss of $4 million in the first quarter of 2008. Business unit income in the first quarter of 2009 included $8 million in income on two road projects related to a favorable UK tax depreciation ruling and positive contributions from the investment in the Allenby & Connaught military accommodation and services project and an investment in a heavy equipment transport operator in the United Kingdom.
Corporate general and administrative expense in the first quarter of 2009 was $49 million compared to $56 million in the prior year first quarter. The year-over-year decrease was primarily due to lower spending related to the 2008 implementation of HR/Payroll systems, accrued sales and use taxes in the first quarter of 2008, as well as lower overall general and administrative spending, and the delay in hiring and salary administrative activities during the first quarter of 2009.
Total cash flows used in operating activities for the first three months ended March 31, 2009 was $172 million, which included a $143 million reduction in net committed cash from advanced payments related to consolidated joint ventures and a contract in progress. Also, working capital for Iraq-related work increased during the first quarter of 2009, further reducing cash by $110 million.
Fundamentally, this was a solid quarter for KBR, in terms of earnings and execution, and our backlog continues to remain solid in an increasingly tough environment. KBR’s project teams continue to work hard to deliver quality execution on projects for our customers, said Bill Utt, chairman, president, and chief executive officer of KBR. I’m also pleased with the progress over the quarter on the U.S. Embassy project, which received notice of substantial completion from our customer.
