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GuruFocus has detected 1 Warning Sign with KBR Inc $KBR.
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KBR Inc (NYSE:KBR)
Beneish M-Score
-1.97 (As of Today)

The zones of discrimination for M-Score is as such:

An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.

KBR Inc has a M-score of -1.97 signals that the company is a manipulator.

KBR' s Beneish M-Score Range Over the Past 10 Years
Min: -8.08   Max: -1.74
Current: -1.97

-8.08
-1.74

During the past 13 years, the highest Beneish M-Score of KBR Inc was -1.74. The lowest was -8.08. And the median was -2.57.


Definition

The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.

The M-Score Variables:

The M-score of KBR Inc for today is based on a combination of the following eight different indices:

M=-4.84+0.92 * DSRI+0.528 * GMI+0.404 * AQI+0.892 * SGI+0.115 * DEPI
=-4.84+0.92 * 1.1256+0.528 * 2.4303+0.404 * 1.1488+0.892 * 0.8375+0.115 * 0.7917
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1016+4.679 * -0.0306-0.327 * 1.2789
=-1.97

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $592 Mil.
Revenue was 1190 + 1073 + 1009 + 996 = $4,268 Mil.
Gross Profit was 6 + -36 + 74 + 68 = $112 Mil.
Total Current Assets was $2,047 Mil.
Total Assets was $4,144 Mil.
Property, Plant and Equipment(Net PPE) was $145 Mil.
Depreciation, Depletion and Amortization(DDA) was $45 Mil.
Selling, General & Admin. Expense(SGA) was $143 Mil.
Total Current Liabilities was $1,559 Mil.
Long-Term Debt was $684 Mil.
Net Income was -87 + -63 + 47 + 42 = $-61 Mil.
Non Operating Income was 4 + -1 + 7 + -5 = $5 Mil.
Cash Flow from Operations was 53 + 20 + 9 + -21 = $61 Mil.
Accounts Receivable was $628 Mil.
Revenue was 1080 + 1199 + 1381 + 1436 = $5,096 Mil.
Gross Profit was 94 + 87 + 74 + 70 = $325 Mil.
Total Current Assets was $1,844 Mil.
Total Assets was $3,412 Mil.
Property, Plant and Equipment(Net PPE) was $169 Mil.
Depreciation, Depletion and Amortization(DDA) was $39 Mil.
Selling, General & Admin. Expense(SGA) was $155 Mil.
Total Current Liabilities was $1,393 Mil.
Long-Term Debt was $51 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(592 / 4268) / (628 / 5096)
=0.13870665 / 0.12323391
=1.1256

2. GMI = Gross Margin Index

Measured as the ratio of gross margin in year t-1 to gross margin in year t.

Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(325 / 5096) / (112 / 4268)
=0.06377551 / 0.0262418
=2.4303

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (2047 + 145) / 4144) / (1 - (1844 + 169) / 3412)
=0.47104247 / 0.41002345
=1.1488

4. SGI = Sales Growth Index

Ratio of sales in year t to sales in year t-1.

Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=4268 / 5096
=0.8375

5. DEPI = Depreciation Index

Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.

DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.

DEPI=(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1)) / (Depreciation_t / (Depreciaton_t + PPE_t))
=(39 / (39 + 169)) / (45 / (45 + 145))
=0.1875 / 0.23684211
=0.7917

6. SGAI = Sales, General and Administrative expenses Index

The ratio of SGA expenses in year t relative to year t-1.

SGA expenses index > 1 means that the company is becoming less efficient in generate sales.

SGAI=(SGA_t / Sales_t) / (SGA_t-1 /Sales_t-1)
=(143 / 4268) / (155 / 5096)
=0.03350515 / 0.03041601
=1.1016

7. LVGI = Leverage Index

The ratio of total debt to total assets in year t relative to yeat t-1.

An LVGI > 1 indicates an increase$sgai= in leverage

LVGI=((LTD_t + CurrentLiabilities_t) / TotalAssets_t) / ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)
=((684 + 1559) / 4144) / ((51 + 1393) / 3412)
=0.54126448 / 0.42321219
=1.2789

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(-61 - 5 - 61) / 4144
=-0.0306

An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.

KBR Inc has a M-score of -1.97 signals that the company is likely to be a manipulator.


Related Terms

Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

KBR Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.49931.06870.90641.40310.9151.06121.04640.90890.92621.1256
GMI 0.60750.90491.05080.76461.16331.05461.1533-5.6613-0.16012.4303
AQI 0.9421.4281.05881.23350.9811.02821.1510.87521.21431.1488
SGI 0.90781.32431.04520.83430.90140.85360.92840.88250.80050.8375
DEPI 0.55510.94250.92731.20890.95281.09231.01470.62381.20380.7917
SGAI 2.30510.74510.9311.1711.11991.21541.20321.09210.81021.1016
LVGI 0.91441.02590.83161.00740.96340.90730.96391.37110.84561.2789
TATA 0.01310.03450.0618-0.0399-0.03050.0023-0.0394-0.35530.0451-0.0306
M-score -3.44-1.81-2.13-2.48-2.72-2.50-2.57-8.08-2.93-1.97

KBR Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.00780.90891.00351.0090.88470.92620.93860.99981.32351.1256
GMI 3.1391-5.6613-7.756113.71971.2353-0.1601-0.07940.0270.2642.4303
AQI 1.20570.87520.91520.93221.02161.21431.18711.14381.32021.1488
SGI 0.91450.88250.8790.87570.81960.80050.75470.72720.76530.8375
DEPI 0.91650.62380.6630.7630.8111.20381.18510.95340.94720.7917
SGAI 1.11631.09210.96880.90270.89640.81020.91170.97631.06711.1016
LVGI 1.07291.37111.36431.21171.17960.84560.83580.91091.22641.2789
TATA -0.0906-0.3553-0.3312-0.3009-0.27120.04510.02260.0026-0.0167-0.0306
M-score -1.81-8.08-8.942.62-3.95-2.93-3.05-3.14-2.82-1.97
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