KBR, INC. [KBR] Filings

10-Q 1 kbr-20240628.htm 10-Q kbr-20240628

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 28, 2024


☐			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 17, 2024, there were 133,050,180 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			28
Item 3. Quantitative and Qualitative Disclosures About Market Risk			42
Item 4. Controls and Procedures			44
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			45
Item 1A. Risk Factors			45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			45
Item 5. Other Information			45
Item 6. Exhibits			46
SIGNATURES			47

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
AUKUS						The Trilateral Security Partnership between Australia, the U.K. and the U.S.

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







ESPP						Employee Stock Purchase Plan
Exchange Act						Securities Exchange Act of 1934, as amended
FAR						Federal Acquisition Regulation
FASB						Financial Accounting Standards Board


FKTC						First Kuwaiti Trading Company





GS						Government Solutions




IRS						Internal Revenue Service
JKC						JKC Australia LNG, an Australian joint venture executing the Ichthys LNG Project

LNG						Liquefied natural gas
MD&A						Management's Discussion and Analysis of Financial Condition and Results of Operations

MoD						Ministry of Defence
NASA						National Aeronautics and Space Administration
NCI						Noncontrolling interests

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 28,		June 30,		June 28,		June 30,
	2024		2023		2024		2023

Revenues	$	1,855	$	1,753	$	3,673	$	3,456
Cost of revenues	(1,584)		(1,502)		(3,154)		(2,960)
Gross profit	271		251		519		496
Equity in earnings of unconsolidated affiliates	40		23		70		46
Selling, general and administrative expenses	(129)		(119)		(250)		(243)

Legal settlement of legacy matter	—		(144)		—		(144)
Gain on disposition of assets and investments	—		—		6		—

Other	(1)		(1)		2		(1)

Operating income	181		10		347		154
Interest expense	(32)		(29)		(63)		(55)

Charges associated with Convertible Notes	—		(314)		—		(314)
Other non-operating expense	(2)		(1)		(8)		(3)
Income (loss) before income taxes	147		(334)		276		(218)
Provision for income taxes	(40)		(16)		(75)		(46)
Net income (loss)	107		(350)		201		(264)
Less: Net income attributable to noncontrolling interests	1		1		2		1
Net income (loss) attributable to KBR	$	106	$	(351)	$	199	$	(265)
Net income (loss) attributable to KBR per share
Basic	$	0.79	$	(2.60)	$	1.48	$	(1.95)
Diluted	$	0.79	$	(2.60)	$	1.47	$	(1.95)
Basic weighted average common shares outstanding	134		135		134		136
Diluted weighted average common shares outstanding	134		135		135		136
Cash dividends declared per share	$	0.150	$	0.135	$	0.300	$	0.270

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 28,		June 30,		June 28,		June 30,
	2024		2023		2024		2023
Net income (loss)	$	107	$	(350)	$	201	$	(264)
Other comprehensive income (loss):
Foreign currency translation adjustments	—		24		(8)		39
Pension and post-retirement benefits	1		(2)		3		(2)
Changes in fair value of derivatives	—		23		11		13
Other comprehensive income	1		45		6		50
Income tax (expense) benefit:

Pension and post-retirement benefits	—		3		—		3
Changes in fair value of derivatives	—		(3)		(2)		(1)
Income tax (expense) benefit	—		—		(2)		2
Other comprehensive income, net of tax	1		45		4		52
Comprehensive income (loss)	108		(305)		205		(212)
Less: Comprehensive income attributable to noncontrolling interests	1		1		2		1
Comprehensive income (loss) attributable to KBR	$	107	$	(306)	$	203	$	(213)

See accompanying notes to condensed consolidated financial statements.

KBR, Inc.

Condensed Consolidated Balance Sheets

(In millions, except share data)


	June 28,		December 29,
	2024		2023
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	414	$	304
Accounts receivable, net of allowance for credit losses of $8 and $8, respectively	992		981
Contract assets	217		177

Other current assets	202		189
Total current assets	1,825		1,651


Property, plant, and equipment, net of accumulated depreciation of $473 and $458 (including net PPE of $43 and $36 owned by a variable interest entity), respectively	252		239
Operating lease right-of-use assets	157		138
Goodwill	2,111		2,109
Intangible assets, net of accumulated amortization of $399 and $382, respectively	595		618
Equity in and advances to unconsolidated affiliates	185		206
Deferred income taxes	197		239
Other assets	442		365
Total assets	$	5,764	$	5,565
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	676	$	593

Contract liabilities	353		359
Accrued salaries, wages and benefits	359		340
Current maturities of long-term debt	22		31


Other current liabilities	243		249
Total current liabilities	1,653		1,572

Employee compensation and benefits	119		120
Income tax payable	107		106
Deferred income taxes	79		106


Long-term debt	1,900		1,801
Operating lease liabilities	188		176

Other liabilities	307		290
Total liabilities	4,353		4,171
Commitments and Contingencies (Notes 5, 10 and 11)
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, 182,261,966 and 181,713,586 shares issued, and 133,162,928 and 135,067,562 shares outstanding, respectively	—		—
PIC	2,519		2,505
Retained earnings	1,231		1,072
Treasury stock, 49,099,038 shares and 46,646,024 shares, at cost, respectively	(1,437)		(1,279)
AOCL	(911)		(915)
Total KBR shareholders’ equity	1,402		1,383
Noncontrolling interests	9		11
Total shareholders’ equity	1,411		1,394
Total liabilities and shareholders’ equity	$	5,764	$	5,565

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 29, 2024	$	1,419	$	2,514	$	1,145	$	(1,339)	$	(912)	11
Share-based compensation	5		5		—		—		—		—


Dividends declared to shareholders ($0.150/share)	(20)		—		(20)		—		—		—
Repurchases of common stock	(97)		—		—		(97)		—		—


Distributions to noncontrolling interests	(4)		—		—		—		—		(4)
Other	—		—		—		(1)		—		1
Net income	107		—		106		—		—		1
Other comprehensive income, net of tax	1		—		—		—		1		—
Balance at June 28, 2024	$	1,411	$	2,519	$	1,231	$	(1,437)	$	(911)	$	9


Dollars in millions	Total		PIC		Retained Earnings		Treasury Stock		AOCL		NCI
Balance at December 29, 2023	$	1,394	$	2,505	$	1,072	$	(1,279)	$	(915)	$	11
Share-based compensation	11		11		—		—		—		—

Common stock issued upon exercise of stock options	1		1		—		—		—		—
Dividends declared to shareholders ($0.300/share)	(40)		—		(40)		—		—		—
Repurchases of common stock	(158)		—		—		(158)		—		—
Issuance of ESPP shares	4		2		—		2		—		—

Distributions to noncontrolling interests	(4)		—		—		—		—		(4)

Other	(2)		—		—		(2)		—		—
Net income	201		—		199		—		—		2
Other comprehensive income, net of tax	4		—		—		—		4		—
Balance at June 28, 2024	$	1,411	$	2,519	$	1,231	$	(1,437)	$	(911)	$	9


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 income, 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

See accompanying notes to condensed consolidated financial statements.

KBR, Inc.

Condensed Consolidated Statements of Cash Flows

(In millions)

(Unaudited)


	Six Months Ended
	June 28,		June 30,
	2024		2023
Cash flows from operating activities:
Net income (loss)	$	201	$	(264)
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	71		70
Equity in earnings of unconsolidated affiliates	(70)		(46)
Deferred income tax	18		19
Gain on disposition of assets	(6)		—



Other	23		13

Changes in operating assets and liabilities:
Accounts receivable, net of allowance for credit losses	(15)		(72)
Contract assets	(41)		22

Accounts payable	77		77
Contract liabilities	(5)		50
Accrued salaries, wages and benefits	23		6
Payments on operating lease obligation	(32)		(29)

Payments from unconsolidated affiliates, net	5		6
Distributions of earnings from unconsolidated affiliates	99		37

Pension funding	(18)		(9)




Other assets and liabilities	(69)		(50)

Total cash flows provided by operating activities	$	261	$	288
Cash flows from investing activities:
Purchases of property, plant and equipment	$	(35)	$	(38)
Proceeds from sale of assets or investments	6		—
Return of (investments in) equity method joint ventures, net	36		61

Funding in other investment	—		(39)

Other	1		(5)
Total cash flows provided by (used in) investing activities	$	8	$	(21)
Cash flows from financing activities:
Borrowings on long-term debt	$	24	$	—
Borrowings on Revolver	168		330
Payments on short-term and long-term debt	(81)		(8)
Payments on Revolver	(13)		(75)
Payments on settlement of warrants	(33)		(101)
Proceeds from the settlement of note hedge	—		150
Payments to settle Convertible Notes	—		(250)
Debt issuance costs	(16)		—
Payments of dividends to shareholders	(39)		(35)

Payments to reacquire common stock	(158)		(137)





Other	(10)		—
Total cash flows used in financing activities	$	(158)	$	(126)
Effect of exchange rate changes on cash	(1)		9
Increase in cash and cash equivalents	110		150
Cash and cash equivalents at beginning of period	304		389
Cash and cash equivalents at end of period	$	414	$	539





Supplemental disclosure of cash flows information:



Noncash financing activities
Dividends declared	$	20	$	18

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 2023 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 28, 2024, the results of our operations for the three and six months ended June 28, 2024 and June 30, 2023, respectively, and our cash flows for the six months ended June 28, 2024 and June 30, 2023, respectively. Our significant accounting policies are detailed in "Note 1. Significant Accounting Policies" of our 2023 Annual Report on Form 10-K. The Company's fiscal year ends on the Friday closest to December 31. The three months ended June 28, 2024 and June 30, 2023 contained 91 days. The six months ended June 28, 2024 and June 30, 2023 contained 182 days and 181 days, respectively.

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 6 "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.

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 80 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 security, 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 28,		June 30,		June 28,		June 30,
	2024		2023		2024		2023
Dollars in millions
Revenues:
Government Solutions	$	1,397	$	1,352	$	2,783	$	2,680
Sustainable Technology Solutions	458		401		890		776

Total revenues	$	1,855	$	1,753	$	3,673	$	3,456

Operating income (loss):
Government Solutions	$	124	$	(28)	$	239	$	74
Sustainable Technology Solutions	96		77		182		159
Other	(39)		(39)		(74)		(79)
Total operating income	$	181	$	10	$	347	$	154

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 28,		June 30,		June 28,		June 30,
Dollars in millions	2024		2023		2024		2023

Government Solutions
Science & Space	$	291	$	287	$	589	$	566
Defense & Intel	403		383		814		746
Readiness & Sustainment	382		393		738		798
International	321		289		642		570
Total Government Solutions	1,397		1,352		2,783		2,680

Sustainable Technology Solutions	458		401		890		776




Total revenue	$	1,855	$	1,753	$	3,673	$	3,456

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 28, 2024						Six Months Ended June 28, 2024

Total by Countries/Regions Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total		Government Solutions		Sustainable Technology Solutions		Total
United States	$	829	$	129	$	958	$	1,647	$	256	$	1,903
Europe	387		71		458		783		143		926
Middle East	33		155		188		73		280		353
Australia	113		23		136		211		46		257
Africa	16		33		49		33		66		99
Asia	2		23		25		6		50		56
Other countries	17		24		41		30		49		79
Total revenue	$	1,397	$	458	$	1,855	$	2,783	$	890	$	3,673

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

Total by Countries/Regions Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total		Government Solutions		Sustainable Technology Solutions		Total
United States	$	782	$	138	$	920	$	1,500	$	269	$	1,769
Europe	387		66		453		834		124		958
Middle East	40		91		131		66		178		244
Australia	106		23		129		207		41		248
Africa	16		22		38		35		40		75
Asia	5		35		40		8		73		81
Other countries	16		26		42		30		51		81
Total revenue	$	1,352	$	401	$	1,753	$	2,680	$	776	$	3,456

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 28, 2024						Six Months Ended June 28, 2024
Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total		Government Solutions		Sustainable Technology Solutions		Total
Cost Reimbursable	$	839	$	—	$	839	$	1,683	$	—	$	1,683
Time-and-Materials	263		290		553		508		553		1,061
Fixed Price	295		168		463		592		337		929
Total revenue	$	1,397	$	458	$	1,855	$	2,783	$	890	$	3,673

	Three Months Ended June 30, 2023						Six Months Ended June 30, 2023
Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total		Government Solutions		Sustainable Technology Solutions		Total
Cost Reimbursable	$	831	$	—	$	831	$	1,646	$	—	$	1,646
Time-and-Materials	271		252		523		534		485		1,019
Fixed Price	250		149		399		500		291		791
Total revenue	$	1,352	$	401	$	1,753	$	2,680	$	776	$	3,456

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 $23 million and $3 million for the three months ended June 28, 2024 and June 30, 2023 and $31 million and $8 million for the six months ended June 28, 2024 and June 30, 2023, respectively.

On June 28, 2024, we had $12.8 billion of transaction price allocated to remaining performance obligations. We expect to recognize approximately 39% of our remaining performance obligations as revenue within one year, 36% in years two through five and 25% 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 28, 2024.

We recognized revenue of $225 million and $164 million for the six months ended June 28, 2024 and June 30, 2023, respectively, which was previously included in the contract liability balance at the beginning of each period.

Accounts Receivable


	June 28,		December 29,
Dollars in millions	2024		2023
Unbilled	$	513	$	519
Trade & other	479		462
Accounts receivable	$	992	$	981

Note 4. 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 28, 2024
Dollars in millions	International (a)		Domestic (b)		Total
Operating cash and cash equivalents	$	212	$	54	$	266
Short-term investments (c)	10		6		16
Cash and cash equivalents held in consolidated joint ventures and Aspire Defence subcontracting entities (d)	117		15		132
Total	$	339	$	75	$	414


	December 29, 2023
Dollars in millions	International (a)		Domestic (b)		Total
Operating cash and cash equivalents	$	122	$	36	$	158
Short-term investments (c)	6		8		14
Cash and cash equivalents held in consolidated joint ventures and Aspire Defence subcontracting entities (d)	111		21		132
Total	$	239	$	65	$	304

(a)Includes deposits held by non-U.S. entities with operating accounts that constitute offshore cash for tax purposes.

(b)Includes U.S. dollar and foreign currency deposits held in U.S. entities with operating accounts that constitute onshore cash for tax purposes but may reside either in the U.S. or in a foreign country.

(c)Includes time deposits, money market funds and other highly liquid short-term investments.

(d)Includes short-term investments held by Aspire Defence subcontracting entities for $85 million and $83 million as of June 28, 2024 and December 29, 2023, respectively.

Note 5. Unapproved Change Orders and Claims Against Clients and Estimated Recoveries of Claims Against Suppliers and Subcontractors

The amounts of unapproved change orders and claims against clients and estimated recoveries of claims against suppliers and subcontractors included in determining the profit or loss on contracts are as follows:



	Six Months Ended
	June 28,		June 30,
Dollars in millions	2024		2023
Amounts included in project estimates-at-completion at beginning of fiscal year	$	74	$	48
Net increase in project estimates	41		11


Ending balance of amounts included in project estimates-at-completion	$	115	$	59
Amounts recognized over time based on progress	$	91	$	59

The balance as of June 28, 2024 relates to projects in our Government Solutions segment.

Changes in Project-related Estimates

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, weather and ongoing resolution of legacy projects and legal matters, including any new or ongoing disputes with our business partners and others in our supply chain. 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.

Note 6. Equity Method Investments and Variable Interest Entities

We conduct some of our operations through joint ventures, which operate through partnerships, corporations and undivided interests and other business forms and are principally accounted for using the equity method of accounting. Additionally, the majority of our joint ventures are VIEs.

The following table presents a rollforward of our equity in and advances to unconsolidated affiliates:



	Six Months Ended		Year ended
	June 28,		December 29,
	2024		2023
Dollars in millions
Beginning balance	$	206	$	188
Equity in earnings of unconsolidated affiliates (a)	70		114
Distributions of earnings of unconsolidated affiliates (b)	(99)		(63)
Payments from unconsolidated affiliates, net	(5)		(18)
Return of investments in equity method investment, net (c)	(36)		(60)

Foreign currency translation adjustments	(1)		3
Other (d)	50		42
Ending balance	$	185	$	206

(a)The equity in earnings of unconsolidated affiliates in 2024 and 2023 is related to normal activities within our other joint ventures.

(b)In the normal course of business, our joint ventures will declare a distribution in the current quarter that is not paid until the subsequent quarter. As such, the distributions declared during the current quarter may not agree to the distributions of earnings from unconsolidated affiliates on our condensed consolidated statements of cash flows.

(c)For the six months ended June 28, 2024, we received a return of investment from JKC of approximately $36 million related to our proportionate share of a tax refund. During the year ended December 29, 2023, we received a return of investment from JKC of approximately $61 million related to the second payment received from the Subcontractor Settlement Agreement.

(d)During the six months ended June 28, 2024, Other included the reclassification of the net liability position of $50 million related to joint ventures within our STS business segment. During the year ended December 29, 2023, Other included the reclassification of the net liability position of $47 million related to a joint venture within our STS business segment.

Related Party Transactions

We often provide engineering, construction management and other subcontractor services to our unconsolidated joint ventures, and our revenues include amounts related to these services. For the three and six months ended June 28, 2024 our revenues included $171 million and $344 million and for the three and six months ended June 30, 2023 included $129 million and $253 million, respectively, related to the services we provided primarily to the Aspire Defence Limited joint venture within our GS business segment and a joint venture within our STS business segment.

Amounts included in our condensed consolidated balance sheets related to services we provided to our unconsolidated joint ventures as of June 28, 2024, and December 29, 2023 are as follows:


	June 28,		December 29,
Dollars in millions	2024		2023
Accounts receivable, net of allowance for credit losses	$	96	$	103


Contract liabilities	$	77	$	89

Note 7. Retirement Benefits

We have two frozen defined benefit pension plans in the U.S., one frozen and one active plan in the U.K. and one frozen plan in Germany. The components of net periodic pension benefit related to the frozen U.K. pension for the three and six months ended June 28, 2024 and June 30, 2023, respectively, were as follows:



	Three Months Ended				Six Months Ended
	June 28,		June 30,		June 28,		June 30,
Dollars in millions	2024		2023		2024		2023
Components of net periodic pension benefit

Interest cost	$	15	$	15	$	30	$	30
Expected return on plan assets	(28)		(25)		(56)		(50)

Recognized actuarial loss	1		—		2		—
Net periodic pension benefit	$	(12)	$	(10)	$	(24)	$	(20)

For the six months ended June 28, 2024, we have contributed approximately $18 million of the $39 million we expect to contribute to our U.K. pension plan in fiscal year 2024.

Note 8. Debt and Other Credit Facilities

Our outstanding debt consisted of the following at the dates indicated:


Dollars in millions	June 28, 2024		December 29, 2023
Term Loan A	$	496	$	595
Term Loan B	998		501
Senior Notes	250		250
Revolver	205		505
Unamortized debt issuance costs and discounts	(27)		(19)
Total debt	1,922		1,832
Less: current portion	22		31
Total long-term debt, net of current portion	$	1,900	$	1,801

Senior Credit Facility

Our existing Credit Agreement, dated as of April 25, 2018, as amended ("Credit Agreement"), consists of a $1 billion revolving credit facility (the "Revolver"), a Term Loan A ("Term Loan A") with debt tranches denominated in U.S. dollars and British pound sterling and a Term Loan B ("Term Loan B" and together with the Revolver and Term Loan A, the "Senior Credit Facility").

We entered into Amendment No. 11 to our Credit Agreement on January 19, 2024. This amendment provides for an incremental Term Loan B facility in an aggregate principal amount of $1 billion and extends the Term Loan B maturity date to January 2031. We borrowed the full $1 billion principal amount available under this loan. We received $24 million in cash

proceeds from this borrowing to pay accrued interest and financing fees, $501 million was applied to the outstanding principal under the Term Loan B facility and the remaining $475 million was applied to the outstanding principal under the Revolver. In addition, Amendment No.11 reduced the interest rate margin applicable to Term Loan B. During the three months ended June 28, 2024, $2 million in cash was paid on the outstanding Term Loan B principal.

We entered into Amendment No. 12 to our Credit Agreement on February 7, 2024. This amendment consolidated the USD denominated Term A-1, Term A-2 and Term A-4 loan facilities under our Credit Agreement into the amended USD denominated Term A-1 loan facility and continued the GBP denominated Term A-3 loan facility outstanding at December 29, 2023. During the six months ended June 28, 2024, $79 million in cash was paid on the outstanding Term Loan A principal and accrued interest and $20 million was applied to the Term Loan A principal using proceeds of a borrowing on our Revolver. Additionally, this amendment extended the maturity date of the $1 billion Revolver, amended Term A-1 loan facility and Term A-3 loan facility to February 2029.

We had cash borrowings of $168 million and cash repayments of $13 million on our Revolver that occurred during the six months ended June 28, 2024. The interest rates with respect to the Revolver, Term Loan A and Term Loan B are based on, at our option, the applicable adjusted reference rate plus an additional margin or base rate plus additional margin. Additionally, there is a commitment fee applicable to available amounts under the Revolver.

The details of the applicable margins and commitment fees under the amended Revolver and Term Loan A are based on our consolidated net leverage ratio as follows:


	Revolver and Term Loan A
Consolidated Net Leverage Ratio	Reference Rate (a)		Base Rate		Commitment Fee
Greater than or equal to 4.25 to 1.00	2.25	%	1.25	%	0.33	%
Less than 4.25 to 1.00 but greater than or equal to 3.25 to 1.00	2.00	%	1.00	%	0.30	%
Less than 3.25 to 1.00 but greater than or equal to 2.25 to 1.00	1.75	%	0.75	%	0.28	%
Less than 2.25 to 1.00 but greater than or equal to 1.25 to 1.00	1.50	%	0.50	%	0.25	%
Less than 1.25 to 1.00	1.25	%	0.25	%	0.23