Company Quick10K Filing
KBR
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 142 $3,489
10-Q 2019-10-31 Quarter: 2019-09-30
10-Q 2019-07-31 Quarter: 2019-06-30
10-Q 2019-05-03 Quarter: 2019-03-31
10-K 2019-02-26 Annual: 2018-12-31
10-Q 2018-10-30 Quarter: 2018-09-30
10-Q 2018-07-30 Quarter: 2018-06-30
10-Q 2018-04-27 Quarter: 2018-03-31
10-K 2018-02-23 Annual: 2017-12-31
10-Q 2017-10-31 Quarter: 2017-09-30
10-Q 2017-08-02 Quarter: 2017-06-30
10-Q 2017-04-28 Quarter: 2017-03-31
10-K 2017-02-24 Annual: 2016-12-31
10-Q 2016-11-01 Quarter: 2016-09-30
10-Q 2016-07-29 Quarter: 2016-06-30
10-Q 2016-04-29 Quarter: 2016-03-31
10-K 2016-02-26 Annual: 2015-12-31
10-Q 2015-11-02 Quarter: 2015-09-30
10-Q 2015-08-04 Quarter: 2015-06-30
10-Q 2015-04-29 Quarter: 2015-03-31
10-K 2015-02-27 Annual: 2014-12-31
10-Q 2014-11-04 Quarter: 2014-09-30
10-Q 2014-07-31 Quarter: 2014-06-30
10-Q 2014-06-19 Quarter: 2014-03-31
10-K 2014-02-27 Annual: 2013-12-31
10-Q 2013-10-24 Quarter: 2013-09-30
10-Q 2013-07-25 Quarter: 2013-06-30
10-Q 2013-04-25 Quarter: 2013-03-31
10-K 2013-02-20 Annual: 2012-12-31
10-Q 2012-10-24 Quarter: 2012-09-30
10-Q 2012-07-25 Quarter: 2012-06-30
10-Q 2012-04-25 Quarter: 2012-03-31
10-K 2012-02-22 Annual: 2011-12-31
10-Q 2011-10-26 Quarter: 2011-09-30
10-Q 2011-07-27 Quarter: 2011-06-30
10-Q 2011-04-27 Quarter: 2011-03-31
10-K 2011-02-23 Annual: 2010-12-31
10-Q 2010-10-28 Quarter: 2010-09-30
10-Q 2010-07-29 Quarter: 2010-06-30
10-Q 2010-04-29 Quarter: 2010-03-31
10-K 2010-02-25 Annual: 2009-12-31
8-K 2019-10-30 Earnings, Exhibits
8-K 2019-07-30 Earnings, Exhibits
8-K 2019-05-15 Shareholder Vote
8-K 2019-04-30 Earnings, Exhibits
8-K 2019-03-05 Officers
8-K 2019-02-25 Earnings, Exhibits
8-K 2018-11-12 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-11-12 Enter Agreement, Off-BS Arrangement, Sale of Shares, Exhibits
8-K 2018-10-30 Earnings, Exhibits
8-K 2018-10-30 Other Events, Exhibits
8-K 2018-07-27 Earnings, Exhibits
8-K 2018-05-16 Officers, Shareholder Vote, Exhibits
8-K 2018-04-25 Earnings, Exhibits
8-K 2018-04-25 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-03-19 Officers
8-K 2018-03-14 Regulation FD, Exhibits
8-K 2018-02-22 Enter Agreement, Earnings, Off-BS Arrangement, Exhibits
8-K 2018-02-08 Officers
KBR 2019-09-30
Part I. Financial Information
Item 1. Financial Information
Note 1. Description of Company and Significant Accounting Policies
Note 2. Business Segment Information
Note 3. Revenue
Note 4. Acquisitions, Dispositions and Other Transactions
Note 5. Cash and Equivalents
Note 6. Accounts Receivable
Note 7. Contract Assets and Contract Liabilities
Note 8. Claims and Accounts Receivable
Note 9. Unapproved Change Orders, and Claims, Against Clients and Estimated Recoveries of Claims Against Suppliers and Subcontractors
Note 10. Equity Method Investments and Variable Interest Entities
Note 11. Pension Plans
Note 12. Debt and Other Credit Facilities
Note 13. Income Taxes
Note 14. U.S. Government Matters
Note 15. Other Commitments and Contingencies
Note 16. Leases
Note 17. Shareholders' Equity
Note 18. Share Repurchases
Note 19. Income per Share
Note 20. Financial Instruments and Risk Management
Note 21. Impact on Previously Issued Financial Statements for The Correction of An Error
Note 22. Recent Accounting Pronouncements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-10.27 kbrelectivedeferralplanr.htm
EX-31.1 kbrex311-09302019.htm
EX-31.2 kbrex312-09302019.htm
EX-32.1 kbrex321-09302019.htm
EX-32.2 kbrex322-09302019.htm

KBR Earnings 2019-09-30

KBR 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
ACM 5,839 14,795 10,298 20,364 763 369 673 8,698 4% 12.9 2%
ESLT 4,917 6,451 4,596 0 0 0 0 5,179 0%
FLR 4,361 8,974 6,600 17,746 -148 -463 -313 4,161 -1% -13.3 -5%
TTEK 4,228 2,096 1,081 3,005 402 176 271 4,383 13% 16.2 8%
KBR 3,489 5,318 3,524 5,370 558 201 433 4,093 10% 9.5 4%
AJRD 3,448 2,549 2,028 1,913 383 171 337 3,570 20% 10.6 7%
KTOS 2,426 1,174 599 672 183 14 38 2,573 27% 67.4 1%
GRAM 2,217 7,430 4,940 0 0 0 0 2,217 0%
GVA 2,121 2,558 1,351 3,357 241 -59 118 2,385 7% 20.2 -2%
ATRO 1,378 767 292 813 192 176 259 1,483 24% 5.7 23%

Document
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kbr:transporter iso4217:GBP kbr:defendent


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2019
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from             to
Commission File Number: 001-33146
 
 
 
kbrlogofinal2019.jpg
KBR, Inc.
(Exact name of registrant as specified in its charter)
Delaware
 
20-4536774
(State of incorporation)
 
(I.R.S. Employer Identification No.)
 
 
 
 
 
601 Jefferson Street, Suite 3400
Houston
Texas
 
77002
(Address of principal executive offices)
 
(Zip Code)

(713) 753-2000
(Registrant's telephone number including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol
Name of each exchange on which listed
Common Stock, $0.001 par value
KBR
New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
 
Accelerated filer
 
Non-accelerated filer
 
 (Do not check if a smaller reporting company)
Smaller reporting company
 
 
 
 
Emerging growth company
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  

As of October 23, 2019, there were 141,714,130 shares of KBR, Inc. Common Stock, par value $0.001 per share, outstanding.
 





TABLE OF CONTENTS
 
 
 
 
Page
 
Condensed Consolidated Statements of Operations and Comprehensive Income
Condensed Consolidated Balance Sheets
 



2



Forward-Looking and Cautionary Statements

This Quarterly Report on Form 10-Q contains certain statements that are, or may be deemed to be, "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, as amended. The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward-looking information. Some of the statements contained in this Quarterly Report on Form 10-Q are forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. The words "believe," "may," "estimate," "continue," "anticipate," "intend," "plan," "expect" and similar expressions are intended to identify forward-looking statements. Forward-looking statements include information concerning our possible or assumed future financial performance and results of operations.

We have based these statements on our assumptions and analyses in light of our experience and perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate in the circumstances. Forward-looking statements by their nature involve substantial risks and uncertainties that could significantly affect expected results, and actual future results could differ materially from those described in such statements. While it is not possible to identify all factors, factors that could cause actual future results to differ materially include the risks and uncertainties disclosed in our 2018 Annual Report on Form 10-K contained in Part I under "Risk Factors" and the risk factors and other cautionary statements contained in our other filings with the SEC.
 
Many of these factors are beyond our ability to control or predict. Any of these factors, or a combination of these factors, could materially and adversely affect our future financial condition or results of operations and the ultimate accuracy of the forward-looking statements. These forward-looking statements are not guarantees of our future performance, and our actual results and future developments may differ materially and adversely from those projected in the forward-looking statements. We caution against putting undue reliance on forward-looking statements or projecting any future results based on such statements or on present or prior earnings levels. In addition, each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statement.


3



Glossary of Terms

The following frequently used terms, abbreviations or acronyms are used in this Quarterly Report on Form 10-Q as defined below:
Acronym
 
Definition
AFCAP
 
Air Force Contract Augmentation Program
Affinity
 
Affinity Flying Training Services Ltd.
AOCL
 
Accumulated other comprehensive loss
ASBCA
 
Armed Services Board of Contract Appeals
ASC
 
Accounting Standards Codification
ASU
 
Accounting Standards Update
Carillion
 
Carillion plc
CAS
 
Cost Accounting Standards for U.S. government contracts
COFC
 
U.S. Court of Federal Claims
DCAA
 
Defense Contract Audit Agency
DCMA
 
Defense Contract Management Agency
DoD
 
Department of Defense
DOJ
 
U.S. Department of Justice
EBIC
 
Egypt Basic Industries Corporation
EPC
 
Engineering, procurement and construction
ES
 
Energy Solutions
ESPP
 
Employee Stock Purchase Plan
Exchange Act
 
Securities Exchange Act of 1934, as amended
FAR
 
Federal Acquisition Regulation
FASB
 
Financial Accounting Standards Board
FCA
 
False Claims Act
FKTC
 
First Kuwaiti Trading Company
FLNG
 
Floating liquefied natural gas
FPSO
 
Floating production, storage and offshore
FPUs
 
Floating production units
FSRU
 
Floating storage and regasification unit
GS
 
Government Solutions
GTL
 
Gas to liquids
HETs
 
Heavy equipment transporters
IT
 
Information and Technology
JKC
 
JKC Australia LNG, an Australian joint venture executing the Ichthys LNG Project
LIBOR
 
London interbank offered rate
LNG
 
Liquefied natural gas
MD&A
 
Management's Discussion and Analysis of Financial Condition and Results of Operations (Part I, Item 2 of this Quarterly Report on Form 10-Q)
MFRs
 
Memorandums for Record
MoD
 
Ministry of Defence
NCI
 
Noncontrolling interests
PFIs
 
Private financed initiatives and projects
PIC
 
Paid-in capital in excess of par
PLOC
 
Performance Letter of Credit facility
PSC
 
Private Security Contractor

4



Acronym
 
Definition
SEC
 
U.S. Securities and Exchange Commission
SFO
 
U.K. Serious Fraud Office
SGT
 
Stinger Ghaffarian Technologies
SMS
 
Space and Mission Solutions
TS
 
Technology Solutions
U.K.
 
United Kingdom
U.S.
 
United States
U.S. GAAP
 
Accounting principles generally accepted in the United States
VIEs
 
Variable interest entities


5



PART I. FINANCIAL INFORMATION

Item 1. Financial Information

KBR, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income
(In millions, except for per share data)
(Unaudited)

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2019
 
2018
 
2019
 
2018
Revenues
$
1,425

 
$
1,278

 
$
4,187

 
$
3,583

Cost of revenues
(1,256
)
 
(1,129
)
 
(3,705
)
 
(3,156
)
Gross profit
169

 
149

 
482

 
427

Equity in earnings of unconsolidated affiliates
9

 
17

 
24

 
50

Selling, general and administrative expenses
(75
)
 
(64
)
 
(241
)
 
(207
)
Acquisition and integration related costs

 
(1
)
 
(2
)
 
(5
)
Gain on disposition of assets and investments
1

 

 
11

 

Gain on consolidation of Aspire subcontracting entities

 
(2
)
 

 
113

Operating income
104

 
99

 
274

 
378

Interest expense
(25
)
 
(20
)
 
(76
)
 
(43
)
Other non-operating income (loss)
3

 
(1
)
 
10

 
(4
)
Income before income taxes and noncontrolling interests
82

 
78

 
208

 
331

Provision for income taxes
(24
)
 
(22
)
 
(58
)
 
(74
)
Net income
58

 
56

 
150

 
257

Net income attributable to noncontrolling interests
(2
)
 
(2
)
 
(6
)
 
(23
)
Net income attributable to KBR
$
56

 
$
54

 
$
144

 
$
234

Net income attributable to KBR per share:
 
 
 
 
 
 
 
Basic
$
0.39

 
$
0.38

 
$
1.01

 
$
1.66

Diluted
$
0.39

 
$
0.38

 
$
1.01

 
$
1.66

Basic weighted average common shares outstanding
141

 
141

 
141

 
140

Diluted weighted average common shares outstanding
142

 
141

 
141

 
141

Cash dividends declared per share
$
0.08

 
$
0.08

 
$
0.24

 
$
0.24

 
 
 
 
 
 
 
 
Net income
$
58

 
$
56

 
$
150

 
$
257

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments, net of taxes of $(1), $0, $(1) and $(3)
(34
)
 
(9
)
 
(48
)
 
(29
)
Pension and post-retirement benefits, net of taxes of $(1), $(1), $(3) and $(3)
4

 
5

 
11

 
18

Changes in fair value of derivatives, net of taxes of $3, $0, $3 and $0
2

 

 
(7
)
 
(5
)
Total other comprehensive loss
(28
)
 
(4
)
 
(44
)
 
(16
)
Comprehensive income
30

 
52

 
106

 
241

Less: Comprehensive income attributable to noncontrolling interests
(2
)
 
(2
)
 
(6
)
 
(23
)
Comprehensive income attributable to KBR
$
28

 
$
50

 
$
100

 
$
218

See accompanying notes to condensed consolidated financial statements.

6



KBR, Inc.
Condensed Consolidated Balance Sheets
(In millions, except share data)
 
September 30,
 
December 31,
 
2019
 
2018
 
(Unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and equivalents
$
681

 
$
739

Accounts receivable, net of allowance for doubtful accounts of $12 and $9
1,038

 
927

Contract assets
235

 
185

Other current assets
153

 
108

Total current assets
2,107

 
1,959

Claims and accounts receivable
104

 
98

Property, plant, and equipment, net of accumulated depreciation of $375 and $355 (including net PPE of $29 and $35 owned by a variable interest entity)
109

 
121

Operating lease right-of-use assets
183

 

Goodwill
1,261

 
1,265

Intangible assets, net of accumulated amortization of $174 and $151
489

 
516

Equity in and advances to unconsolidated affiliates
793

 
724

Deferred income taxes
220

 
222

Other assets
136

 
147

Total assets
$
5,402

 
$
5,052

Liabilities and Shareholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
624

 
$
546

Contract liabilities
536

 
463

Accrued salaries, wages and benefits
249

 
221

Nonrecourse project debt
10

 
10

Operating lease liabilities
42

 

Other current liabilities
191

 
179

Total current liabilities
1,652

 
1,419

Pension obligations
192

 
250

Employee compensation and benefits
108

 
109

Income tax payable
85

 
84

Deferred income taxes
29

 
27

Nonrecourse project debt
11

 
17

Long-term debt
1,185

 
1,226

Operating lease liabilities
201

 

Other liabilities
122

 
202

Total liabilities
3,585

 
3,334

KBR shareholders’ equity:
 
 
 
Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued

 

Common stock, $0.001 par value 300,000,000 shares authorized, 178,244,609 and 177,383,302 shares issued, and 141,706,294 and 140,900,032 shares outstanding, respectively

 

PIC
2,202

 
2,190

Retained earnings
1,366

 
1,235

Treasury stock, 36,538,315 shares and 36,483,270 shares, at cost, respectively
(817
)
 
(817
)
AOCL
(954
)
 
(910
)
Total KBR shareholders’ equity
1,797

 
1,698

Noncontrolling interests
20

 
20

Total shareholders’ equity
1,817

 
1,718

Total liabilities and shareholders’ equity
$
5,402

 
$
5,052

See accompanying notes to condensed consolidated financial statements.

7



KBR, Inc.
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
 
Nine Months Ended September 30,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
150

 
$
257

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
 
 
 
Depreciation and amortization
76

 
47

Equity in earnings of unconsolidated affiliates
(24
)
 
(50
)
Deferred income tax expense

 
29

Gain on disposition of assets and investments
(11
)
 

Gain on consolidation of Aspire subcontracting entities

 
(113
)
Other
20

 
13

 
 
 
 
Changes in operating assets and liabilities:
 
 
 
Accounts receivable, net of allowance for doubtful accounts
(123
)
 
(144
)
Contract assets
(52
)
 
(4
)
Accounts payable
83

 
72

Contract liabilities
82

 
(63
)
Accrued salaries, wages and benefits
31

 
18

Payments from unconsolidated affiliates, net
9

 
7

Distributions of earnings from unconsolidated affiliates
64

 
16

Pension funding
(31
)
 
(30
)
Other assets and liabilities
(75
)
 
(19
)
Total cash flows provided by operating activities
$
199

 
$
36

Cash flows from investing activities:
 
 
 
Purchases of property, plant and equipment
$
(10
)
 
$
(15
)
Proceeds from disposition of assets and investments
8

 
1

Investments in equity method joint ventures
(146
)
 
(257
)
Acquisition of businesses, net of cash acquired

 
(354
)
Adjustments to cash due to consolidation of Aspire subcontracting entities

 
197

Total cash flows used in investing activities
$
(148
)
 
$
(428
)

8



KBR, Inc.
Condensed Consolidated Statements of Cash Flows
(In millions)
(Unaudited)
 
Nine Months Ended September 30,
 
2019
 
2018
Cash flows from financing activities:
 
 
 
Payments to reacquire common stock
$
(4
)
 
$
(3
)
Acquisition of remaining ownership interest in joint ventures

 
(56
)
Distributions to noncontrolling interests
(6
)
 

Payments of dividends to shareholders
(34
)
 
(34
)
Net proceeds from issuance of common stock
3

 
2

Borrowings on revolving credit agreements

 
250

Borrowings on long-term debt

 
1,052

Payments on revolving credit agreements

 
(605
)
Payments on short-term and long-term borrowings
(54
)
 
(7
)
Debt issuance costs

 
(47
)
Other
(2
)
 

Total cash flows (used in) provided by financing activities
$
(97
)
 
$
552

Effect of exchange rate changes on cash
(12
)
 
(18
)
(Decrease) increase in cash and equivalents
(58
)
 
142

Cash and equivalents at beginning of period
739

 
439

Cash and equivalents at end of period
$
681

 
$
581

Supplemental disclosure of cash flows information:
 
 
 
Cash paid for interest
$
54

 
$
34

Cash paid for income taxes (net of refunds)
$
47

 
$
20

Noncash financing activities
 
 
 
Dividends declared
$
11

 
$
11

See accompanying notes to condensed consolidated financial statements.

9



KBR, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)


Note 1. Description of Company and Significant Accounting Policies

KBR, Inc., a Delaware corporation, was formed on March 21, 2006, and is headquartered in Houston, Texas. KBR, Inc. and its wholly owned and majority-owned subsidiaries (collectively referred to herein as "KBR", the "Company", "we", "us" or "our") is a global provider of differentiated, professional services and technologies across the asset and program life-cycle within the government services and hydrocarbons industries. Our capabilities include research and development, feasibility and solutions development, specialized technical consulting, systems integration, engineering and design service, process technologies, program management, construction services, commissioning and startup services, highly specialized mission and logistics support solutions, and asset operations and maintenance services and other support services to a diverse customer base, including government and military organizations of the U.S., U.K. and Australia and a wide range of customers across the hydrocarbons value chain.

The accompanying unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Regulation S-X. Accordingly, these financial statements do not include all information or notes required by general accepted accounting principles for annual financial statements and should be read together with our 2018 Annual Report on Form 10-K.

The condensed consolidated financial statements include all normal and recurring adjustments necessary to present fairly our financial position as of September 30, 2019 and the results of our operations for the three and nine months ended September 30, 2019 and 2018, and our cash flows for the nine months ended September 30, 2019 and 2018.

Our significant accounting policies are detailed in "Note 1. Description of Company and Significant Accounting Policies" of our Annual Report on Form 10-K for the year ended December 31, 2018.

We have evaluated all events and transactions occurring after the balance sheet date but before the financial statements were issued and have included the appropriate disclosures.

Principles of Consolidation

Our condensed consolidated financial statements include the accounts of KBR and our wholly owned and majority-owned subsidiaries and VIEs of which we are the primary beneficiary. We account for investments over which we have significant influence but not a controlling financial interest using the equity method of accounting. See Note 10 to our condensed consolidated financial statements for further discussion on our equity investments and VIEs. The cost method is used when we do not have the ability to exert significant influence. All material intercompany transactions are eliminated in consolidation.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation in our condensed consolidated statements of operations. We have elected to classify certain indirect costs incurred as overhead (included in "Cost of revenues") or general administrative expenses for U.S. GAAP reporting purposes in the same manner as such costs are defined in our disclosure statements under CAS. Effective January 1, 2019, we established a new CAS structure and revised our disclosure statements accordingly to reflect the related cost accounting practice changes. Consequently, for the three and nine months ended September 30, 2018, $27 million and $94 million, respectively, was reclassified from "Cost of revenues" to "Selling, general and administrative expenses" on our condensed consolidated statement of operations.

 
Three Months Ended
 
Nine Months Ended
 
September 30, 2018
 
September 30, 2018
Dollars in millions
As Reported
 
As Previously Reported
 
As Reported
 
As Previously Reported
Statement of Operations
 
 
 
 
 
 
 
Cost of revenues
$
(1,129
)
 
$
(1,156
)
 
$
(3,156
)
 
$
(3,250
)
Selling, general and administrative expenses
(64
)
 
(37
)
 
(207
)
 
(113
)


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Business Reorganization

Effective January 1, 2019, we changed the name of our Government Services segment to "Government Solutions", our Technology segment to "Technology Solutions" and our Hydrocarbons Services segment to "Energy Solutions". The change did not have an impact on our reportable segments.

As of January 1, 2019, our segments consist of the following five reportable segments:

Government Solutions
Technology Solutions
Energy Solutions
Non-strategic Business
Other

See Note 2 to our condensed consolidated financial statements for further discussion on our segments. We have presented our segment results reflecting these changes for all periods presented. In conjunction with the change in segments, we evaluated goodwill associated with each of our reporting units using Level 3 fair value inputs, and no impairment indicators were identified.

Impact of Adoption of New Accounting Standards

Effective January 1, 2019, we adopted ASU No. 2016-02, Leases (Topic 842) and related ASUs using the modified retrospective transition approach. The modified retrospective transition approach provides for an “effective date” method for recording leases that existed or were entered into on or after January 1, 2019, without restating prior-period information. Our unconsolidated joint ventures anticipate adopting the new lease standard effective January 1, 2020.

ASC Topic 842 provided several optional practical expedients for use in transition. We elected to use the package of practical expedients which allowed us to not reassess our previous conclusions about lease identification, lease classification and the accounting treatment for initial direct costs. We did not elect the practical expedient pertaining to the use of hindsight.
    
The most significant effects of the new standard on our consolidated financial statements are the recognition of new operating lease right-of-use ("ROU") assets and operating lease liabilities on our consolidated balance sheet for operating leases as well as significant new disclosures about our leasing activities as further discussed in Note 16. On January 1, 2019, we recorded “Operating lease liabilities” of approximately $253 million based on the present value of the remaining lease payments over the lease term. Additionally, we reclassified current and noncurrent deferred rent of $68 million associated with straight-line accounting and tenant incentives related to existing real estate leases against the initial "Operating lease right-of-use assets" as of January 1, 2019. The adoption of the new standard did not have a material impact on our results of operations or cash flows.

As a result of the adoption, we recorded a cumulative-effect adjustment to retained earnings of $21 million, net of deferred taxes of $7 million, representing the unamortized portion of a deferred gain previously recorded in conjunction with the 2012 sale and leaseback of the office building in Houston, Texas where our corporate headquarters is located. We concluded the transaction resulted in the transfer of control of the office building to the buyer-lessor at market terms and therefore would have qualified as a sale under ASC Topic 842 with gain recognition in the period in which the sale was recognized.


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We recognized the cumulative effect of initially applying ASC Topic 842 as an adjustment to our assets and liabilities in our consolidated balance sheet as of January 1, 2019, as follows:
 
Balance at
 
Adjustments Due to
 
Balance at
Dollars in millions
December 31, 2018
 
ASC 842
 
January 1, 2019
Assets
 
 
 
 
 
Operating lease right-of-use asset
$

 
$
185

 
$
185

Other current assets
108

 
(1
)
 
107

Deferred income taxes
222

 
(7
)
 
215

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Operating lease liabilities

 
40

 
40

Other current liabilities
179

 
(5
)
 
174

Operating lease liabilities (noncurrent)

 
213

 
213

Other liabilities (noncurrent)
202

 
(92
)
 
110

 
 
 
 
 
 
Shareholders' equity
 
 
 
 
 
Retained Earnings
1,235

 
21

 
1,256


    
Effective January 1, 2019, we adopted ASU No. 2017-12, Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedge Activities, using the modified retrospective approach. This ASU is intended to improve and simplify accounting rules related to hedge accounting. The adoption of this ASU did not have a material impact to our financial statements.
                  
Effective January 1, 2019, we adopted ASU No. 2018-16, Inclusion of the Secured Overnight Financing Rate Overnight Index Swap Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. As a result, entities may designate changes in this rate as the hedged risk in hedges of interest rate risk for fixed-rate financial instruments. The adoption of ASU 2018-16 did not have any impact on our financial position, results of operations or cash flows.

Effective January 1, 2019, we adopted ASU No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220). Under the new standard, we did not elect to reclassify the income tax effects stranded in AOCL to retained earnings as a result of the enactment of comprehensive tax legislation, commonly referred to as the Tax Cuts and Jobs Act of 2017. Therefore, the adoption of this ASU had no impact on financial statements.

In August 2018, the SEC adopted the final rules under SEC Release No. 33-10532, Disclosure Update and Simplification. The final rules amend the interim financial statement requirements to require a reconciliation of changes in stockholders’ equity in the notes or as a separate statement. The analysis should reconcile the beginning and ending balances of each caption in stockholders’ equity for each period in which an income statement is presented. The final rules were effective on November 5, 2018. See Note 17 for the reconciliation of shareholders’ equity.

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Additional Balance Sheet Information

Other Current Liabilities
    
The components of "Other current liabilities" on our condensed consolidated balance sheets as of September 30, 2019, and December 31, 2018, are presented below:

 
September 30,
 
December 31,
Dollars in millions
2019
 
2018
Current maturities of long-term debt
$
27

 
$
22

Retainage payable
37

 
33

Income taxes payable
28

 
30

Value-added tax payable
47

 
33

Dividend payable
11

 
11

Other miscellaneous liabilities
41

 
50

Total other current liabilities
$
191

 
$
179



Other Liabilities

"Other liabilities" on our condensed consolidated balance sheet as of December 31, 2018 included deferred rent primarily related to real-estate leases as well as the unamortized portion of a deferred gain related to a 2012 sale-leaseback real-estate transaction totaling $92 million. See above under "Impact of Adoption of New Accounting Standards" for further discussion.


Note 2. Business Segment Information

We are organized into three core business segments Government Solutions, Technology Solutions, and Energy Solutions and two non-core business segments as described below:
Government Solutions. Our GS business segment provides full life-cycle support solutions to defense, space, aviation and other programs and missions for military and other government agencies in the U.S., U.K. and Australia. As program management integrator, KBR covers the full spectrum of defense, space, aviation and other government programs and missions from research and development; through systems engineering, test and evaluation, systems integration and program management; to operations support, maintenance and field logistics. Our acquisitions as described in Note 4 to our condensed consolidated financial statements have been combined with our existing operations within this business segment.

Technology Solutions. Our TS business segment combines KBR's proprietary technologies, equipment and catalyst supply and associated knowledge-based services into a global business for refining, petrochemicals, inorganic and specialty chemicals as well as gasification, syngas, ammonia, nitric acid and fertilizers. From early planning through scope definition, advanced technologies and project life-cycle support, our TS business segment works closely with customers to provide the optimal approach to maximize their return on investment.
Energy Solutions. Our ES business segment provides comprehensive project and program delivery capability globally. Our key capabilities leverage our operational and technical excellence as a global provider of EPC for onshore oil and gas; LNG/GTL; oil refining; petrochemicals; chemicals; fertilizers; offshore oil and gas (shallow-water, deep-water and subsea); floating solutions (FPUs, FPSO, FLNG & FSRU); maintenance services; and consulting services.
Non-strategic Business. Our Non-strategic Business segment represents the operations or activities we determine are no longer core to our business strategy and that we have exited or intend to exit upon completion of existing contracts. All Non-Strategic Business projects are substantially complete. Current activities in this business segment primarily relate to final project close-out, negotiation and settlement of claims, joint venture liquidation and various other matters associated with these projects.
Effective for the quarter ended September 30, 2019, we reported the results of joint venture operations related to a project in Latin America within our Non-strategic Business segment. The reclassification results from our decision during the quarter to

13



wind down the operating activities of the joint venture and exit the business. Equity in earnings of unconsolidated affiliates related to this joint venture were previously reported in our Energy Solutions business segment and were $0 million and a loss of $13 million for the three and nine months ended September 30, 2019, respectively, and income of $2 million and a loss of $4 million for the three and nine months ended September 30, 2018, respectively.
Other. Our Other segment includes corporate expenses and selling, general and administrative expenses not allocated to the business segments above.

The following table presents revenues, gross profit (loss), equity in earnings of unconsolidated affiliates, selling, general and administrative expenses, acquisition and integration related costs, gain on disposition of assets, gain of consolidation of Aspire entities, and operating income (loss) by reporting segment.

Operations by Reportable Segment
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2019
 
2018
 
2019
 
2018
Dollars in millions
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
Government Solutions
$
978

 
$
928

 
$
2,986

 
$
2,473

Technology Solutions
96

 
81

 
281

 
215

Energy Solutions
351

 
268

 
919

 
894

Subtotal
1,425

 
1,277

 
4,186

 
3,582

Non-strategic Business

 
1

 
1

 
1

Total revenues
$
1,425

 
$
1,278

 
$
4,187

 
$
3,583

Gross profit (loss):
 
 
 
 
 
 
 
Government Solutions
$
110

 
$
98

 
$
312

 
$
253

Technology Solutions
30

 
29

 
83

 
77

Energy Solutions
22

 
27

 
80

 
102

Subtotal
162

 
154

 
475

 
432

Non-strategic Business
7

 
(5
)
 
7

 
(5
)
Total gross profit
$
169