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We like to think that when we deposit a dollar at the bank, it goes into a big vault and we can pull out that same dollar at any time. But that¿s not how the U.S. banking system works. Banks take that money and invest it to make money themselves, so cash gets spread around. This, naturally, leads to a big risk: What happens if those investments go sour? Well, you¿d be out of luck. You can¿t get your dollar back.
The Federal Reserve doesn¿t like that scenario, so it prohibits banks from putting all the cash it has on deposit on the line. In fact, the Fed forces banks to keep a portion of their assets at the Federal Reserve itself, to make sure that some of your assets won¿t get squandered if the bank¿s bets go south. These are called ¿reserves,¿ (hence, Federal Reserve. Got it? Good), and usually amount to 10% of the total cash kept in checking accounts.
These reserves are never exactly 10%, and banks like to keep a little extra in reserve ¿ not, as you might think, to make you more comfortable that they¿re in good financial shape, but rather so they can take that excess and lend it to other banks and make money off it. (They¿re banks, they can¿t help themselves.) The rate at which they make these loans is called the Federal Funds rate, which is set by the Federal Reserve¿s Federal Open Market Committee.
When you hear people chattering about how the Fed cut or hiked interest rates, this is what they¿re talking about: the interest rate banks can charge for lending money from their reserves. This begs the question: If these are essentially loans between banks, why is the Fed Funds rate so important for the rest of the economy?
Well, simply put, because loans make the financial world go round. Bank A lends Bank B $10,000 at a Fed Funds rate of 5%. Bank B then lends out $10,000 to a small business at 7%. The small business then takes that money and expands the business and hires new workers. Now someone is employed, Bank B has made interest off the loan, and Bank A is the richer for making it all happen. It¿s perhaps overly simplistic, but you get the idea. When you want the economy to thrive, you make lending cheaper.
Of course, sometimes you don¿t want the economy to thrive. In fact, you might want it to cool down, mostly to avoid money flooding the system and causing inflation. In that case, the Fed raises interest rates, making it difficult to lend or borrow.
Home / Markets / Industries / Industrials
Wednesday, May 07, 2008
KBR Announces Plans to Acquire BE&K, Inc.
Comtex
HOUSTON, May 07, 2008 (BUSINESS WIRE) ----KBR (NYSE:KBR) today announced that it has signed a definitive agreement that allows the company to proceed with plans to acquire 100% ownership of BE&K, Inc., a privately held, Birmingham, Alabama-based engineering, construction and maintenance services company. The transaction, which is subject to regulatory approval, is valued at $550 million, subject to a post-closing adjustment.
With revenues for the year ended March 30, 2008, of approximately $2 billion, BE&K serves both domestic and international customers, and employs roughly 9,000 people. BE&K's international operations are located in Poland and Russia. According to Engineering News Record (ENR), in 2007, BE&K was the 39th largest design firm as well as the 48th largest contractor. BE&K also maintains Top 10 ENR positions in the areas of: pulp and paper contracting, pulp and paper design, chemical plant design, operations and maintenance design, chemical plant contracting, industrial process contracting, aerospace contracting and food processing plant contracting. In addition to these offerings, BE&K also provides services to commercial and industrial clients, including healthcare and education markets, through its Buildings Group, and provides premier construction and facility life-cycle services to the United States Government.
"Growing our Services business unit remains a key strategic objective for KBR. Acquiring BE&K is a significant step in re-establishing KBR as a leading North American contractor and maintenance services provider," said William P. Utt, KBR Chairman, President and CEO.
"BE&K brings new people, skills and access to new markets to KBR, giving us the opportunity to dramatically strengthen KBR's engineering, construction and maintenance activities, not only in North America, but internationally as well. We look forward to welcoming BE&K's employees to KBR and anticipate building a strong and successful future together."
"This sale is the logical next step in the company's growth," said Mike Goodrich, BE&K Chairman and CEO. "This will bring both companies into new markets while growing those which BE&K already serves. Equally important, our cultures, values and the way we treat our employees, clients and communities are very similar. We look forward to building on our common excellence in these foundation qualities."
"KBR was built on a rich legacy of construction, fabrication and maintenance that dates back over 100 years," added David Zimmerman, President, KBR Services. "That legacy has provided us the foundation on which we can continue to build our domestic engineering, construction and industrial services business. With a similar legacy, the added service offerings, geographic position and key client relationships that BE&K will bring to KBR positions the company for growth and future success in these markets."
KBR will host a conference call on Wednesday, May 7, 2008 at 7:30 a.m. Central Time (8:30 a.m. Eastern Time). Interested parties may participate by telephone at (913) 325-4824.
A passcode is not required. In addition, participants may listen to the presentation live over the Internet by accessing the link to the webcast at www.kbr.com. Please log-in to the webcast or dial-in approximately 15 minutes prior to the call's start time.
For your convenience, a copy of the conference call presentation will be available on KBR's website to download by 7:15 a.m. Central Time on the morning of the conference call. A replay will be available on the website for seven days. Also, a replay may be accessed by telephone at (888) 203-1112, passcode 6274831.
KBR is a global engineering, construction and services company supporting the energy, petrochemicals, government services and civil infrastructure sectors. The company offers a wide range of services through its Downstream, Government and Infrastructure, Services, Technology, Upstream and Ventures business segments. For more information, visit www.kbr.com.
NOTE: The statements in this press release that are not historical statements are forward-looking statements within the meaning of federal securities laws. These statements are subject to numerous risks and uncertainties, including those detailed in our most recent Annual Report on Form 10-K and Quarterly reports on Form 10-Q filed during this fiscal year, many of which are beyond the company's control that could cause actual results to differ materially from the results expressed or implied by the statements.
SOURCE: KBR
KBR Director, Communications Heather Browne, 713-753-3775 heather.browne@kbr.com or Director, Investor Relations Rob Kukla, Jr., 713-753-5082 investors@kbr.com
Copyright Business Wire 2008
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