KBR, INC. [KBR] Filings

10-Q 1 kbr-20230630.htm 10-Q kbr-20230630

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 June 30, 2023


☐			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

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 registered
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 July 19, 2023, there were 134,916,277 shares of KBR, Inc. Common Stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS



			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)			5
Condensed Consolidated Statements of Operations			5
Condensed Consolidated Statements of Comprehensive Income (Loss)			6
Condensed Consolidated Balance Sheets			7
Condensed Consolidated Statements of Shareholders' Equity			8
Condensed Consolidated Statements of Cash Flows			10
Notes to Condensed Consolidated Financial Statements			11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			34
Item 3. Quantitative and Qualitative Disclosures About Market Risk			49
Item 4. Controls and Procedures			50
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			51
Item 1A. Risk Factors			51
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			51
Item 5. Other Information			51
Item 6. Exhibits			52
SIGNATURES			53

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 latest Form 10-K and any subsequent Forms 10-Q and 8-K.

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.

Glossary of Terms

The following frequently used terms, abbreviations or acronyms are commonly used in our Quarterly Reports on Form 10-Q as defined below:


Acronym						Definition

AOCL						Accumulated other comprehensive loss
ASC						Accounting Standards Codification
Aspire Defence						Aspire Defence Limited
ASU						Accounting Standards Update

C5ISR						Command, Control, Communications, Computers, Cyber, Intelligence, Surveillance and Reconnaissance
CAS						Cost Accounting Standards for U.S. government contracts
DCAA						Defense Contract Audit Agency
DCMA						Defense Contract Management Agency
DoD						Department of Defense
DOJ						U.S. Department of Justice






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





GS						Government Solutions




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
MFRs						Memorandums for Record
MoD						Ministry of Defence
NCI						Noncontrolling interests
OAW						Operation Allies Welcome
PFIs						Private financed initiatives and projects
PIC						Paid-in capital in excess of par

PPE						Property, Plant and Equipment


RPA						Master Accounts Receivable Purchase Agreement

SEC						U.S. Securities and Exchange Commission
SOFR						Secured Overnight Financing Rate
SONIA						Sterling Overnight Index Average
STS						Sustainable 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

PART I. FINANCIAL INFORMATION

Item 1. Financial Information

KBR, Inc.

Condensed Consolidated Statements of Operations

(In millions, except for per share data)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022

Revenues	$	1,753	$	1,616	$	3,456	$	3,330
Cost of revenues	(1,502)		(1,415)		(2,960)		(2,933)
Gross profit	251		201		496		397
Equity in earnings (losses) of unconsolidated affiliates	23		10		46		(108)
Selling, general and administrative expenses	(119)		(105)		(243)		(212)

Legal settlement of legacy matter	(144)		—		(144)		—
Gain on disposition of assets and investments	—		22		—		22

Other	(1)		(1)		(1)		(3)

Operating income	10		127		154		96
Interest expense	(29)		(21)		(55)		(41)
Unrealized gain on other investment	—		16		—		16
Charges associated with Convertible Notes	(314)		—		(314)		—
Other non-operating income (expense)	(1)		5		(3)		5
Income (loss) before income taxes	(334)		127		(218)		76
Provision for income taxes	(16)		(33)		(46)		(52)
Net income (loss)	(350)		94		(264)		24
Less: Net income attributable to noncontrolling interests	1		—		1		1
Net income (loss) attributable to KBR	$	(351)	$	94	$	(265)	$	23
Net income (loss) attributable to KBR per share
Basic	$	(2.60)	$	0.68	$	(1.95)	$	0.17
Diluted	$	(2.60)	$	0.61	$	(1.95)	$	0.17
Basic weighted average common shares outstanding	135		139		136		139
Diluted weighted average common shares outstanding	135		156		136		156
Cash dividends declared per share	$	0.135	$	0.120	$	0.270	$	0.240

See accompanying notes to condensed consolidated financial statements.

KBR, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In millions)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Net income (loss)	$	(350)	$	94	$	(264)	$	24
Other comprehensive income (loss):
Foreign currency translation adjustments	24		(34)		39		(53)
Pension and post-retirement benefits	(2)		6		(2)		12
Changes in fair value of derivatives	23		11		13		35
Other comprehensive income (loss)	45		(17)		50		(6)
Income tax expense:

Pension and post-retirement benefits	3		(1)		3		(2)
Changes in fair value of derivatives	(3)		(2)		(1)		(7)
Income tax expense	—		(3)		2		(9)
Other comprehensive income, net of tax	45		(20)		52		(15)
Comprehensive income (loss)	(305)		74		(212)		9
Less: Comprehensive income attributable to noncontrolling interests	1		—		1		1
Comprehensive income (loss) attributable to KBR	$	(306)	$	74	$	(213)	$	8

See accompanying notes to condensed consolidated financial statements.

KBR, Inc.

Condensed Consolidated Balance Sheets

(In millions, except share data)


	June 30,		December 31,
	2023		2022
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	539	$	389
Accounts receivable, net of allowance for credit losses of $8 and $9, respectively	1,022		942
Contract assets	229		252

Other current assets	584		164
Total current assets	2,374		1,747

Pension Assets	75		46
Property, plant, and equipment, net of accumulated depreciation of $432 and $417 (including net PPE of $32 and $22 owned by a variable interest entity), respectively	218		182
Operating lease right-of-use assets	143		164
Goodwill	2,107		2,087
Intangible assets, net of accumulated amortization of $359 and $332, respectively	639		645
Equity in and advances to unconsolidated affiliates	188		188
Deferred income taxes	196		213
Other assets	347		294
Total assets	$	6,287	$	5,566
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	726	$	637

Contract liabilities	325		275
Accrued salaries, wages and benefits	327		325
Current maturities of long-term debt	117		364

Operating lease liabilities	47		48
Other current liabilities	710		172
Total current liabilities	2,252		1,821

Employee compensation and benefits	106		105
Income tax payable	117		117
Deferred income taxes	95		92


Long-term debt	1,628		1,376
Operating lease liabilities	178		193

Other liabilities	282		230
Total liabilities	4,658		3,934
Commitments and Contingencies (Notes 6, 11 and 12)
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, 181,595,598 and 180,807,960 shares issued, and 134,915,400 and 136,505,145 shares outstanding, respectively	—		—
PIC	2,616		2,235
Retained earnings	1,109		1,410
Treasury stock, 46,680,198 shares and 44,302,815 shares, at cost, respectively	(1,280)		(1,143)
AOCL	(830)		(882)
Total KBR shareholders’ equity	1,615		1,620
Noncontrolling interests	14		12
Total shareholders’ equity	1,629		1,632
Total liabilities and shareholders’ equity	$	6,287	$	5,566

See accompanying notes to condensed consolidated financial statements.

KBR, Inc.

Condensed Consolidated Statements of Shareholders' Equity

(In millions, except for per share data)

(Unaudited)


Dollars in millions	Total		PIC		Retained Earnings		Treasury Stock		AOCL		NCI
Balance at March 31, 2023	$	1,657	$	2,244	$	1,478	$	(1,203)	$	(875)	13
Share-based compensation	5		5		—		—		—		—

Common stock issued upon exercise of stock options	2		2		—		—		—		—
Dividends declared to shareholders ($0.135/share)	(18)		—		(18)		—		—		—
Repurchases of common stock	(76)		—		—		(76)		—		—



Convertible Notes Transactions	365		365		—		—		—		—
Other	(1)		—		—		(1)		—		—
Net income (loss)	(350)		—		(351)		—		—		1
Other comprehensive loss, net of tax	45		—		—		—		45		—
Balance at June 30, 2023	$	1,629	$	2,616	$	1,109	$	(1,280)	$	(830)	$	14


Dollars in millions	Total		PIC		Retained Earnings		Treasury Stock		AOCL		NCI
Balance at December 31, 2022	$	1,632	$	2,235	$	1,410	$	(1,143)	$	(882)	$	12




Share-based compensation	11		11		—		—		—		—

Common stock issued upon exercise of stock options	4		4		—		—		—		—
Dividends declared to shareholders ($0.270/share)	(36)		—		(36)		—		—		—
Repurchases of common stock	(137)		—		—		(137)		—		—
Issuance of ESPP shares	2		1		—		1		—		—

Distributions to noncontrolling interests	(1)		—		—		—		—		(1)
Convertible Notes Transactions	365		365		—		—		—		—
Other	1		—		—		(1)		—		2
Net income (loss)	(264)		—		(265)		—		—		1
Other comprehensive income, net of tax	52		—		—		—		52		—
Balance at June 30, 2023	$	1,629	$	2,616	$	1,109	$	(1,280)	$	(830)	$	14


Dollars in millions	Total		PIC		Retained Earnings		Treasury Stock		AOCL		NCI


Balance at March 31, 2022	1,578		2,216		1,200		(976)		(876)		14
Share-based compensation	5		5		—		—		—		—

Common stock issued upon exercise of stock options	1		1		—		—		—		—
Dividends declared to shareholders ($0.120/share)	(17)		—		(17)		—		—		—
Repurchases of common stock	(41)		—		—		(41)		—		—


Distributions to noncontrolling interests	(2)		—		—		—		—		(2)
Other	(2)		—		(1)		1		—		(2)
Net income	94		—		94		—		—		—
Other comprehensive income, net of tax	(20)		—		—		—		(20)		—
Balance at June 30, 2022	$	1,596	$	2,222	$	1,276	$	(1,016)	$	(896)	$	10


Dollars in millions	Total		PIC		Retained Earnings		Treasury Stock		AOCL		NCI
Balance at December 31, 2021	$	1,683	$	2,206	$	1,287	$	(943)	$	(881)	$	14




Share-based compensation	10		10		—		—		—		—

Common stock issued upon exercise of stock options	5		5		—		—		—		—
Dividends declared to shareholders ($0.240/share)	(34)		—		(34)		—		—		—
Repurchases of common stock	(74)		—		—		(74)		—		—
Issuance of ESPP shares	1		1		—		—		—		—

Distributions to noncontrolling interests	(2)		—		—		—		—		(2)
Other	(2)		—		—		1		—		(3)
Net income	24		—		23		—		—		1
Other comprehensive loss, net of tax	(15)		—		—		—		(15)		—
Balance at June 30, 2022	$	1,596	$	2,222	$	1,276	$	(1,016)	$	(896)	$	10

See accompanying notes to condensed consolidated financial statements.

KBR, Inc.

Condensed Consolidated Statements of Cash Flows

(In millions)

(Unaudited)


	Six Months Ended June 30,
	2023		2022
Cash flows from operating activities:
Net income (loss)	$	(264)	$	24
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Charges associated with Convertible Notes	314		—
Legal Settlement of legacy matter	144		—
Depreciation and amortization	70		66
Equity in (earnings) losses of unconsolidated affiliates	(46)		108
Deferred income tax	19		33
Gain on disposition of assets	—		(22)


Unrealized gain on other investment	—		(16)
Other	13		15

Changes in operating assets and liabilities:
Accounts receivable, net of allowance for credit losses	(72)		361
Contract assets	22		15

Accounts payable	77		(366)
Contract liabilities	50		36
Accrued salaries, wages and benefits	6		(17)
Payments on operating lease obligation	(29)		(29)

Payments from unconsolidated affiliates, net	6		8
Distributions of earnings from unconsolidated affiliates	37		43

Pension funding	(9)		(22)




Other assets and liabilities	(50)		(23)

Total cash flows provided by operating activities	$	288	$	214
Cash flows from investing activities:
Purchases of property, plant and equipment	$	(38)	$	(19)
Proceeds from sale of assets or investments	—		60
Return of (investments in) equity method joint ventures, net	61		189

Funding in other investment	(39)		(61)

Other	(5)		—
Total cash flows (used in) provided by investing activities	$	(21)	$	169
Cash flows from financing activities:
Borrowings on long-term debt	330		—

Payments on short-term and long-term debt	(8)		(8)
Payments on settlement of warrants	(101)		—
Proceeds from the settlement of note hedge	150		—
Payments to settle Convertible Notes	(250)		—


Payments on revolving credit facility	(75)		(97)
Payments of dividends to shareholders	(35)		(32)
Net proceeds from issuance of common stock	4		5
Payments to reacquire common stock	(137)		(74)





Other	(4)		(9)
Total cash flows used in financing activities	$	(126)	$	(215)
Effect of exchange rate changes on cash	9		(22)
Increase in cash and cash equivalents	150		146
Cash and cash equivalents at beginning of period	389		370
Cash and cash equivalents at end of period	$	539	$	516





Supplemental disclosure of cash flows information:
Noncash investing activities
Leasehold improvements paid by landlord	$	7	$	—
Accrued but unpaid purchases of property, plant and equipment	$	8	$	—
Noncash financing activities
Dividends declared	$	18	$	17

See accompanying notes to condensed consolidated financial statements.

KBR, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Basis of Presentation

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 generally accepted accounting principles for annual financial statements and should be read together with our 2022 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 June 30, 2023, the results of our operations for the three and six months ended June 30, 2023 and 2022 and our cash flows for the six months ended June 30, 2023 and 2022. Certain amounts in prior periods have been reclassified to conform with current period presentation.

There are many factors that may affect the accuracy of our cost estimates and ultimately our future profitability. These include, but are not limited to, the availability and costs of resources (such as labor, materials and equipment), productivity and

weather. We generally realize both lower and higher than expected margins on projects in any given period. We recognize revisions of revenues and costs in the period in which the revisions are known. This may result in the recognition of costs before the recognition of related revenue recovery, if any. Our significant accounting policies are detailed in "Note 1. Significant Accounting Policies" of our 2022 Annual Report on Form 10-K.

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

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of KBR, Inc. and the subsidiaries it controls, including VIEs where it is the primary beneficiary (collectively, the "Company," "KBR", "we", "us" or "our"). We account for investments over which we have significant influence, but not a controlling financial interest, using the equity method of accounting. See Note 7 "Equity Method Investments and Variable Interest Entities" to our condensed consolidated financial statements for further discussion of our equity investments and VIEs. All material intercompany balances and transactions are eliminated in consolidation.

Basis of Presentation

On December 13, 2022, the Board of Directors approved a change in the fiscal year end from a calendar year ending on December 31 to a 52 – 53 week year ending on the Friday closest to December 31, effective as of the commencement of the Company's fiscal year on January 1, 2023. In a 52 week fiscal year, each of the Company’s quarterly periods will comprise 13 weeks. The additional week in a 53 week fiscal year is added to the fourth quarter, making such quarter consist of 14 weeks. The Company’s first 53 week fiscal year will occur in fiscal year 2024. The Company made the fiscal year change on a prospective basis and will not adjust operating results for prior periods. The change will impact the prior year comparability of each of the fiscal quarters and the annual period for the year ending December 31, 2023, however, the impact will not be material. The Company believes this change will improve comparability between periods by eliminating the year-over-year variability in calendar month productive days and provide a more consistent reporting cadence for operational leaders to aid in strategic decision making.

As a result of our change in a fiscal year end, goodwill will be tested annually for possible impairment as of the first day of our fourth quarter each fiscal year, and on an interim basis when indicators of possible impairment exist.

Impact of Adoption of New Accounting Standards

Effective January 1, 2023, we adopted ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The update will generally result in an entity recognizing contract assets and contract liabilities at amounts consistent with those recorded by the acquiree immediately before the acquisition date rather than at fair value. The adoption of this standard did not have an impact on our condensed consolidated financial statements. However, the ultimate impact is dependent upon the size and frequency of future acquisitions.

Additional Balance Sheet Information

Other Current Assets

The components of other current assets on our condensed consolidated balance sheets as of June 30, 2023, and December 31, 2022, are presented below:


	June 30,		December 31,
Dollars in millions	2023		2022
Note hedge derivative asset	$	398	$	—
Prepaid expenses	63		67
Value-added tax receivable	30		24

Advances to subcontractors	20		18





Other miscellaneous assets	73		55
Total other current assets	$	584	$	164

Other Current Liabilities

The components of other current liabilities on our condensed consolidated balance sheets as of June 30, 2023, and December 31, 2022, are presented below:


	June 30,		December 31,
Dollars in millions	2023		2022

Embedded derivative liability	$	398	$	—
Payable for legal settlement of legacy matter	144		—
Reserve for estimated losses on uncompleted contracts	20		17




Value-added tax payable	35		32

Dividend payable	18		17

Other miscellaneous liabilities	95		106
Total other current liabilities	$	710	$	172

Note 2. Business Segment Information

We provide a wide range of professional services and the management of our business is heavily focused on major projects or programs within each of our reportable segments. At any given time, government programs and joint ventures represent a substantial part of our operations. We are organized into two core business segments, Government Solutions and Sustainable Technology Solutions and one non-core business segment as described below:

Government Solutions. Our Government Solutions business segment provides full life-cycle support solutions to defense, intelligence, space, aviation and other programs and missions for military and other government agencies primarily in the U.S., U.K. and Australia. KBR's services cover the full spectrum spanning research and development, advanced prototyping, acquisition support, systems engineering, C5ISR, cyber analytics, space domain awareness, test and evaluation,

systems integration and program management, global supply chain management, operations readiness and support and professional advisory services across the defense, renewable energy and critical infrastructure sectors.

Sustainable Technology Solutions. Our Sustainable Technology Solutions business segment is anchored by our portfolio of over 75 innovative, proprietary, sustainability-focused process technologies that accelerate and enable energy transition across the industrial base in four primary verticals: ammonia/syngas, chemical/petrochemicals, clean refining and circular process/circular economy solutions. STS also provides highly synergistic services including advisory and consulting focused on broad-based energy transition and net-zero carbon emission solutions, high-end engineering, design and program management centered around decarbonization, energy efficiency, environmental impact and asset optimization, as well as our digitally-enabled operating and monitoring solutions. Through early planning and scope definition, advanced technologies and facility life-cycle optimization, our STS business segment works closely with customers to provide what we believe is the optimal approach to maximize their return on investment.

Other. Our non-core Other segment includes corporate expenses and selling, general and administrative expenses not allocated to the business segments above.

Operations by Reportable Segment


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Dollars in millions
Revenues:
Government Solutions	$	1,352	$	1,312	$	2,680	$	2,771
Sustainable Technology Solutions	401		304		776		559

Total revenues	$	1,753	$	1,616	$	3,456	$	3,330























Operating income (loss):
Government Solutions	$	(28)	$	131	$	74	$	247
Sustainable Technology Solutions	77		32		159		(74)
Other	(39)		(36)		(79)		(77)
Total operating income	$	10	$	127	$	154	$	96

Note 3. Revenue

Disaggregated Revenue

We disaggregate our revenue from customers by business unit, geographic destination and contract type for each of our segments as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

Revenue by business unit and reportable segment was as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
Dollars in millions	2023		2022		2023		2022

Government Solutions
Science & Space	$	287	$	257	$	566	$	510
Defense & Intel	383		388		746		766
Readiness & Sustainment	393		371		798		904
International	289		296		570		591
Total Government Solutions	1,352		1,312		2,680		2,771

Sustainable Technology Solutions	401		304		776		559




Total revenue	$	1,753	$	1,616	$	3,456	$	3,330

Government Solutions revenue earned from key U.S. government customers includes U.S. DoD agencies and NASA, and is reported as Science & Space, Defense & Intel and Readiness & Sustainment. Government Solutions revenue earned from non-U.S. government customers primarily includes the U.K. MoD and the Australian Defence Force and is reported as International.

Revenue by geographic destination was as follows:


	Three Months Ended June 30, 2023

Total by Countries/Regions Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total
United States	$	782	$	138	$	920
Europe	387		66		453
Middle East	40		91		131
Australia	106		23		129

Africa	16		22		38
Asia	5		35		40
Other countries	16		26		42
Total revenue	$	1,352	$	401	$	1,753

	Three Months Ended June 30, 2022

Total by Countries/Regions Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total
United States	$	770	$	128	$	898
Europe	342		54		396
Middle East	51		53		104
Australia	111		11		122

Africa	22		16		38
Asia	3		28		31
Other countries	13		14		27
Total revenue	$	1,312	$	304	$	1,616



	Six Months Ended June 30, 2023

Total by Countries/Regions Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total
United States	$	1,500	$	269	$	1,769
Europe	834		124		958
Middle East	66		178		244
Australia	207		41		248

Africa	35		40		75
Asia	8		73		81
Other countries	30		51		81
Total revenue	$	2,680	$	776	$	3,456

	Six Months Ended June 30, 2022

Total by Countries/Regions Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total
United States	$	1,781	$	237	$	2,018
Europe	625		86		711
Middle East	90		102		192
Australia	201		11		212

Africa	40		33		73
Asia	6		70		76
Other countries	28		20		48
Total revenue	$	2,771	$	559	$	3,330

Many of our contracts contain cost reimbursable, time-and-materials and fixed price components. We define contract type based on the component that represents the majority of the contract. Revenue by contract type was as follows:


	Three Months Ended June 30, 2023
Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total
Cost Reimbursable	$	831	$	—	$	831
Time-and-Materials	271		252		523
Fixed Price	250		149		399
Total revenue	$	1,352	$	401	$	1,753

	Three Months Ended June 30, 2022
Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total
Cost Reimbursable	$	788	$	—	$	788
Time-and-Materials	246		199		445
Fixed Price	278		105		383
Total revenue	$	1,312	$	304	$	1,616



	Six Months Ended June 30, 2023
Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total
Cost Reimbursable	$	1,646	$	—	$	1,646
Time-and-Materials	534		485		1,019
Fixed Price	500		291		791
Total revenue	$	2,680	$	776	$	3,456

	Six Months Ended June 30, 2022
Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total
Cost Reimbursable	$	1,743	$	—	$	1,743
Time-and-Materials	481		374		855
Fixed Price	547		185		732
Total revenue	$	2,771	$	559	$	3,330

Performance Obligations and Contract Liabilities

Changes in estimates are recognized on a cumulative catch-up basis in the current period associated with performance obligations satisfied in a prior period due to the release of a constrained milestone, modification in contract price or scope or a change in the likelihood of a contingency being resolved. We recognized revenue from performance obligations satisfied in previous periods for such matters of $3 million and $37 million for the three months ended June 30, 2023 and 2022, respectively, and $8 million and $42 million for the six months ended months ended June 30, 2023 and 2022, respectively.

On June 30, 2023, we had $11.5 billion of transaction price allocated to remaining performance obligations. We expect to recognize approximately 40% of our remaining performance obligations as revenue within one year, 32% in years two through five and 28% thereafter. Revenue associated with our remaining performance obligations to be recognized beyond one year includes performance obligations primarily related to the Aspire Defence project, which has contract terms extending through 2041. Remaining performance obligations do not include variable consideration that was determined to be constrained as of June 30, 2023.

We recognized revenue of $164 million and $142 million for the six months ended June 30, 2023 and 2022, respectively, which was previously included in the contract liability balance at the beginning of each period.

Accounts Receivable


	June 30,		December 31,
Dollars in millions	2023		2022
Unbilled	$	538	$	486
Trade & other	484		456
Accounts receivable	$	1,022	$	942

Note 4. Acquisitions

VIMA Group

On August 2, 2022, we acquired VIMA Group, a U.K.-based leading provider of digital transformation solutions to defense and other public sector clients. VIMA Group is reported within our GS business segment. We accounted for this transaction as an acquisition of a business using the acquisition method under Business Combinations (Topic 805).

The agreed-upon purchase price for the acquisition was $82 million. The purchase price consisted of cash paid at closing of $75 million, subject to certain working capital and other closing adjustments, $4 million of deferred consideration and contingent consideration with an estimated fair value of $3 million that was contingent upon the achievement of certain performance targets from closing through December 31, 2022. As the targets were not met, no consideration was paid and we recorded a benefit of $3 million in our consolidated statements of operations for the year ended December 31, 2022. We recognized $2 million as an intangible backlog asset, $11 million in customer relationships, $3 million in net working capital, $2 million in deferred income tax liability and $68 million of goodwill arising from the acquisition, which relates primarily to future growth opportunities. The purchase price allocation for the business combination is considered final. For U.S. tax purposes, the transaction is treated as a stock deal. As a result, there is no step-up in tax basis in the individual assets and liabilities acquired and the goodwill recognized is not deductible for tax purposes.

Note 5. Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents include cash balances held by our wholly owned subsidiaries as well as cash held by joint ventures that we consolidate. Joint venture and the Aspire project cash balances are limited to specific project activities and are not available for other projects, new acquisitions and joint ventures, general cash needs or distribution to us without approval of the board of directors of the respective entities. The cash and cash equivalents held in consolidated joint ventures and the Aspire project are expected to be used for their respective project costs and distributions of earnings.

The components of our cash and cash equivalents balance are as follows:


	June 30, 2023
Dollars in millions	International (a)		Domestic (b)		Total
Operating cash and cash equivalents	$	229	$	175	$	404
Short-term investments (c)	10		4		14
Cash and cash equivalents held in consolidated joint ventures and Aspire Defence subcontracting entities (d)	98		23		121
Total	$	337	$	202	$	539


	December 31, 2022
Dollars in millions	International (a)		Domestic (b)		Total
Operating cash and cash equivalents	$	251	$	25	$	276
Short-term investments (c)	4		2		6
Cash and cash equivalents held in consolidated joint ventures and Aspire Defence subcontracting entities (d)	99		8		107
Total	$	354	$	35	$	389