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GuruFocus has detected 2 Warning Signs with KBR Inc $KBR.
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KBR Inc (NYSE:KBR)
Beneish M-Score
-1.87 (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 -1.87 signals that the company is a manipulator.

KBR' s Beneish M-Score Range Over the Past 10 Years
Min: -8.94   Max: 2.62
Current: -1.87

-8.94
2.62

During the past 13 years, the highest Beneish M-Score of KBR Inc was 2.62. The lowest was -8.94. And the median was -2.51.


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 * 1.0252+0.528 * 2.4104+0.404 * 1.1267+0.892 * 0.9403+0.115 * 0.7285
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9997+4.679 * -0.0078-0.327 * 1.2656
=-1.87

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

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Accounts Receivable was $562 Mil.
Revenue was 1106 + 1190 + 1073 + 1009 = $4,378 Mil.
Gross Profit was 82 + 6 + -36 + 74 = $126 Mil.
Total Current Assets was $1,881 Mil.
Total Assets was $3,962 Mil.
Property, Plant and Equipment(Net PPE) was $143 Mil.
Depreciation, Depletion and Amortization(DDA) was $49 Mil.
Selling, General & Admin. Expense(SGA) was $141 Mil.
Total Current Liabilities was $1,343 Mil.
Long-Term Debt was $685 Mil.
Net Income was 37 + -87 + -63 + 47 = $-66 Mil.
Non Operating Income was -12 + 4 + -1 + 7 = $-2 Mil.
Cash Flow from Operations was -115 + 53 + 20 + 9 = $-33 Mil.
Accounts Receivable was $583 Mil.
Revenue was 996 + 1080 + 1199 + 1381 = $4,656 Mil.
Gross Profit was 68 + 94 + 87 + 74 = $323 Mil.
Total Current Assets was $1,745 Mil.
Total Assets was $3,370 Mil.
Property, Plant and Equipment(Net PPE) was $162 Mil.
Depreciation, Depletion and Amortization(DDA) was $37 Mil.
Selling, General & Admin. Expense(SGA) was $150 Mil.
Total Current Liabilities was $1,313 Mil.
Long-Term Debt was $50 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)
=(562 / 4378) / (583 / 4656)
=0.12836912 / 0.12521478
=1.0252

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)
=(323 / 4656) / (126 / 4378)
=0.06937285 / 0.02878026
=2.4104

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 - (1881 + 143) / 3962) / (1 - (1745 + 162) / 3370)
=0.4891469 / 0.43412463
=1.1267

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
=4378 / 4656
=0.9403

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))
=(37 / (37 + 162)) / (49 / (49 + 143))
=0.18592965 / 0.25520833
=0.7285

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)
=(141 / 4378) / (150 / 4656)
=0.03220649 / 0.03221649
=0.9997

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)
=((685 + 1343) / 3962) / ((50 + 1313) / 3370)
=0.5118627 / 0.40445104
=1.2656

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
=(-66 - -2 - -33) / 3962
=-0.0078

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 -1.87 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 0.50921.06870.90641.40310.9151.06121.04640.90890.92621.1256
GMI 0.56710.99711.05080.76461.16331.05461.1533-5.6613-0.16012.4303
AQI 0.9421.4281.05881.23350.9811.02821.1510.87521.21431.1488
SGI 0.89031.32431.04520.83430.90140.85360.92840.88250.80050.8375
DEPI 0.55510.94250.92731.20890.95281.09231.01470.62381.20380.7917
SGAI 2.90180.60360.9311.1711.11991.21541.20321.09210.81021.1016
LVGI 0.91441.02590.83161.00740.96340.90730.96391.37110.84561.2789
TATA 0.01310.03450.0618-0.0399-0.03050.0012-0.0399-0.35530.0451-0.0306
M-score -3.57-1.74-2.13-2.48-2.72-2.50-2.57-8.08-2.93-1.97

KBR Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.90891.00351.0090.88470.92620.93860.99981.32351.12561.0252
GMI -5.6613-7.756113.71971.2353-0.1601-0.07940.0270.2642.43032.4104
AQI 0.87520.91520.93221.02161.21431.18711.14381.32021.14881.1267
SGI 0.88250.8790.87570.81960.80050.75470.72720.76530.83750.9403
DEPI 0.62380.6630.7630.8111.20381.18510.95340.94720.79170.7285
SGAI 1.09210.96880.90270.89640.81020.91170.97631.06711.10160.9997
LVGI 1.37111.36431.21171.17960.84560.83580.91091.22641.27891.2656
TATA -0.3553-0.3312-0.3009-0.27120.04510.02260.0026-0.0167-0.0306-0.0078
M-score -8.08-8.942.62-3.95-2.93-3.05-3.14-2.82-1.97-1.87
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