KBR Fined For Misleading Investors on Key Metric

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KBR a global engineering, construction, and services company based in Houston, Texas was fined by the SEC for misrepresenting its backlog to investors.  Backlog is a key metric for investors because it provides the dollar amount of revenues a company expects to recognize in the future from contracts awarded and in progress.  “Non-financial statement metrics such as backlog can provide additional insight to investors regarding a company’s performance,” said Shamoil T. Shipchandler, Director of the SEC’s Fort Worth Regional Office.  “To the extent that companies disclose these kinds of metrics, companies must ensure they are accurate and not misleading.”

But the SEC asserts that in the second quarter of 2012, KBR included $459 million in its disclosed backlog, despite the fact that KBR had yet to receive, and its customers was not obligated to provide, KBR any orders under the contract.  The backlog remained in place during the next six quarters, even after it became clear that KBR was receiving far fewer work authorizations under the contract than anticipated. SEC Administrative Order

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