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What changed in KBR, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of KBR, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+405 added−431 removedSource: 10-K (2024-02-20) vs 10-K (2023-02-17)

Top changes in KBR, INC.'s 2024 10-K

405 paragraphs added · 431 removed · 287 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

70 edited+14 added−40 removed50 unchanged
Biggest changeThe following table summarizes our revenues from contracts with U.S. and U.K. government agencies for which we are the prime contractor, as well as for those contracts in which we are a subcontractor and the ultimate customer is a U.S. or U.K. government agency, respectively. 10 Revenues and percent of consolidated revenues attributable to major customers by year: Years ended December 31, Dollars in millions, except percentage amounts 2022 2021 2020 U.S. government (all agencies) $ 4,034 61 % $ 5,122 70 % $ 3,079 53 % U.K. government (all agencies) $ 584 9 % $ 508 7 % $ 573 10 % Information relating to our customer concentration is described in “Item 1A.
Biggest changeRevenues and percentage of consolidated revenues from major customers: Years ended, December 29, December 31, December 31, Dollars in millions 2023 2022 2021 U.S. government $ 4,000 58 % $ 4,034 61 % $ 5,122 70 % U.K. government $ 634 9 % $ 584 9 % $ 508 7 % 10 Information relating to our customer concentration is described in “Item 1A.
Areas of long-term strategic focus include sustainable technology solutions, energy transition, energy security and technology-led asset optimization. 8 Competitive Advantages We operate in global markets with customers who demand innovation, technical and domain expertise and digitally-enabled, technology-led sustainable solutions.
Areas of long-term 8 strategic focus include sustainable technology solutions, energy transition, energy security and technology-led asset optimization. Competitive Advantages We operate in global markets with customers who demand innovation, technical and domain expertise and digitally-enabled, technology-led sustainable 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 core business segments above.
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.
Among other things, these laws and regulations: • require certification and disclosure of all cost and pricing data in connection with certain contract negotiations; • define allowable and unallowable costs and otherwise govern our right to reimbursement under various cost-type U.S. government contracts; • require compliance with CAS; 12 • require reviews by the DCAA, DCMA and other regulatory agencies for compliance with a contractor’s business systems; • restrict the use and dissemination of and require the protection of unclassified contract-related information and information classified for national security purposes and the export of certain products and technical data; and • prohibit competing for work if an actual or potential organizational conflict of interest, as defined by these laws and regulations, related to such work exists and/or cannot be appropriately mitigated, neutralized or avoided.
Among other things, these laws and regulations: • require certification and disclosure of all cost and pricing data in connection with certain contract negotiations; • define allowable and unallowable costs and otherwise govern our right to reimbursement under various cost-type U.S. government contracts; • require compliance with CAS; • require reviews by the DCAA, DCMA and other regulatory agencies for compliance with a contractor’s business systems; • restrict the use and dissemination of and require the protection of unclassified contract-related information and information classified for national security purposes and the export of certain products and technical data; and • prohibit competing for work if an actual or potential organizational conflict of interest, as defined by these laws and regulations, related to such work exists and/or cannot be appropriately mitigated, neutralized or avoided.
These targets include a 25% reduction in business travel, renewable energy agreements and certifications and increasing our green fleets. ◦ We have a dedicated Net Zero Roadmap project team working with each section of the business to measure and monitor GHG emissions for developing discrete and tailored reduction programs, alongside the corporate level reduction plans and targets. ◦ As an industry leader, we have and will continue to invest in the development of disruptive, innovative clean energy solutions that promote a cleaner, greener future and a sustainable world. ◦ World leader in ammonia technology, a leading hydrogen energy enabler, with a fully developed, proprietary, end-to-end green ammonia solution K-GreeN TM . ◦ Exclusive licensor of Hydro-PRT TM , a cutting-edge, scalable technology that utilizes supercritical steam to convert a wide range of single-use and other plastics into virgin-grade feedstocks used to produce new plastics, delivering a truly circular economy. ◦ Safe and responsible operations are essential, and our Zero Harm culture prioritizes the safety and security of our people as well as the active management of our environmental impact. • Technical Excellence and Digital Solutions ◦ Innovative, sustainable, proprietary process technology, expertise and solutions. ◦ Innovative digital solutions and advanced capabilities to improve operations, reliability and environmental impact, including machine learning and artificial intelligence. ◦ Virtual and augmented reality visualizations to provide greater perspectives, insights and training in a controlled environment. • Customer Relationships ◦ Customer missions and objectives are placed at the center of our planning and delivery model. ◦ Decades of enduring relationships with government and commercial client base. • Financial Strength ◦ Diverse portfolio of multi-year, mission critical programs creating stability and resilience. ◦ Low capital intensity business model generating favorable operating cash flows. ◦ Strong liquidity with ample capacity for growth. 9 Our Business Segments 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.
These targets include a 25% reduction in business travel, renewable energy agreements and certifications and increasing our green fleets. ◦ We have a dedicated Net Zero Roadmap project team working with each section of the business to measure and monitor GHG emissions for developing discrete and tailored reduction programs, alongside the corporate level reduction plans and targets. ◦ As an industry leader, we have and will continue to invest in the development of disruptive, innovative clean energy solutions that promote a cleaner, greener future and a sustainable world. ◦ World leader in ammonia technology, a leading hydrogen energy enabler, with a fully developed, proprietary, end-to-end green ammonia solution K-GreeNTM. ◦ Exclusive licensor of Hydro-PRTTM, a cutting-edge, scalable technology that utilizes supercritical steam to convert a wide range of single-use and other plastics into virgin-grade feedstocks used to produce new plastics, delivering a truly circular economy. ◦ Safe and responsible operations are essential, and our Zero Harm culture prioritizes the safety and security of our people as well as the active management of our environmental impact. • Technical Excellence and Digital Solutions ◦ Innovative, sustainable, proprietary process technology, expertise and solutions. ◦ Innovative digital solutions and advanced capabilities to improve operations, reliability and environmental impact, including machine learning and artificial intelligence. ◦ Virtual and augmented reality visualizations to provide greater perspectives, insights and training in a controlled environment. • Customer Relationships ◦ Customer missions and objectives are placed at the center of our planning and delivery model. ◦ Decades of enduring relationships with government and commercial client base. • Financial Strength ◦ Diverse portfolio of multi-year, mission critical programs creating stability and resilience. ◦ Low capital intensity business model generating favorable operating cash flows. ◦ Strong liquidity with ample capacity for growth. 9 Our Business Segments 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.
JKC Australia LNG is a joint venture contracted to perform the engineering, procurement, supply, construction and commissioning of onshore LNG facilities for a client in Darwin, Australia. The project was being executed through two entities (collectively, "JKC"), which are VIEs, in which we own a 30% equity interest.
JKC Australia LNG is a joint venture contracted to perform the engineering, procurement, supply, construction and commissioning of onshore LNG facilities for a client in Darwin, Australia. The project is being executed through two entities (collectively, "JKC"), which are VIEs, in which we own a 30% equity interest.
Unit-rate contracts are essentially fixed-price contracts with the only variable being units of work to be performed. Further, our fixed-price contracts may include cost escalation and other features that allow for increases in price should certain events occur or conditions change.
Additionally, unit-rate contracts are essentially fixed-price contracts with the only variable being units of work to be performed. Further, our fixed-price contracts may include cost escalation and other features that allow for increases in price should certain events occur or conditions change.
The joint venture is a VIE that is consolidated for financial reporting purposes and is accounted for within our GS business segment. Additional information relating to our joint ventures is described in Part II of this Annual Report on Form 10-K in Note 10 to our consolidated financial statements.
The joint venture is a VIE that is consolidated for financial reporting purposes and is accounted for within our GS business segment. Additional information relating to our joint ventures is described in Part II of this Annual Report on Form 10-K in Note 9 to our consolidated financial statements.
In U.S. government contracting, this type of contract is generally used when there is uncertainty of the extent or duration of the work to be performed by the contractor at the time of contract award or it is not possible to anticipate costs with any reasonable degree of confidence.
In U.S. government contracting, this type of contract is generally used when there is 12 uncertainty of the extent or duration of the work to be performed by the contractor at the time of contract award or it is not possible to anticipate costs with any reasonable degree of confidence.
The six core processes that comprise our Transactional Health, Safety, Security, Environmental ("HSSE") Management that lead to Transformational Leadership are non-negotiable KBR safety standards that are required to be observed and followed by employees and contractors at all locations and projects.
The six core processes that comprise our Transactional Health, Safety, Security, Environmental ("HSSE") Management that lead to Transformational Leadership are non-negotiable KBR safety standards that are required to be observed and 15 followed by employees and contractors at all locations and projects.
Cost-reimbursable contracts are generally less risky because the owner/customer retains many of the project risks, however it generally requires us to use our best efforts to accomplish the scope of the work within a specified 13 time and budget.
Cost-reimbursable contracts are generally less risky because the owner/customer retains many of the project risks, however it generally requires us to use our best efforts to accomplish the scope of the work within a specified time and budget.
These laws and regulations may expose us to liability arising out of the conduct of operations or conditions 14 caused by others, or for our acts that were in compliance with all applicable laws at the time these acts were performed.
These laws and regulations may expose us to liability arising out of the conduct of operations or conditions caused by others, or for our acts that were in compliance with all applicable laws at the time these acts were performed.
Additional information relating to environmental regulations is described in "Item 1A. Risk Factors” contained in Part I of this Annual Report on Form 10-K and in Note 14 to our consolidated financial statements. 15 Human Capital Management Every day, the people of KBR help solve some of the world’s most challenging scientific, technological and engineering problems.
Additional information relating to environmental regulations is described in "Item 1A. Risk Factors” contained in Part I of this Annual Report on Form 10-K and in Note 13 to our consolidated financial statements. 14 Human Capital Management Every day, the people of KBR help solve some of the world’s most challenging scientific, technological and engineering problems.
The Board Nominations & Corporate Governance Committee received regular updates on this process throughout the year, culminating in detailed discussions on updated succession plans for the CEO and Executive Leadership Team. Performance Management 2022 also saw the expansion of our new agile approach to performance management, focused on forward-looking discussions on performance and priorities between managers and their team members.
The Board Nominations & Corporate Governance Committee received regular updates on this process throughout the year, culminating in detailed discussions on updated succession plans for the CEO and Executive Leadership Team. Performance Management 2023 also saw the expansion of our new agile approach to performance management, focused on forward-looking discussions on performance and priorities between managers and their team members.
In 2022, KBR’s operating model continued to shift toward agile, technology-driven, solutions-oriented delivery and was streamlined to increase strategic focus to move upmarket into differentiated areas that we believe will provide attractive returns and consistent growth with favorable cash conversion. Our key areas of strategic focus are as follows: • Government.
In 2023, KBR’s operating model continued to shift toward agile, technology-driven, solutions-oriented delivery and was streamlined to increase strategic focus to move upmarket into differentiated areas that we believe will provide attractive returns and consistent growth with favorable cash conversion. Our key areas of strategic focus are as follows: • Government.
The goal of the Courage to Care Conversation is to continuously evaluate the work environment and to focus on people and their actions. Thanks to our people's commitment to our Zero Harm culture, we recorded another consecutive year of industry-leading HSSE performance, with a total recordable incident rate of 0.079.
The goal of the Courage to Care Conversation is to continuously evaluate the work environment and to focus on people and their actions. Thanks to our people's commitment to our Zero Harm culture, we recorded another consecutive year of industry-leading HSSE performance, with a total recordable incident rate of 0.067.
Our Sustainable Technology Solutions business segment is anchored by our portfolio of over 70 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.
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.
From our promising new interns to world-renowned experts, this diverse Team of Teams delivers for our customers, so in turn, we put them first. At the end of 2022, we employed approximately 30,000 people performing diverse, complex and mission critical roles in 34 countries. In addition, our unconsolidated joint ventures employ approximately 9,000 employees.
From our promising new interns to world-renowned experts, this diverse Team of Teams delivers for our customers, so in turn, we put them first. At the end of 2023, we employed approximately 34,000 people performing diverse, complex and mission critical roles in over 30 countries. In addition, our unconsolidated joint ventures employ approximately 9,000 employees.
Our capabilities and offerings include the following: • Scientific research such as quantum science and computing; health and human performance; materials science; life science research; and earth sciences; • Defense systems engineering such as rapid prototyping; test and evaluation; aerospace acquisition support; systems and platform integration; and sustainment engineering; • Operational support such as space domain awareness; C5ISR; human spaceflight and satellite operations; integrated supply chain and logistics; and military aviation support; • Information operations such as cyber analytics and cybersecurity; data analytics; mission planning systems; virtual/augmented reality and technical training; artificial intelligence and machine learning; and • Sustainable decarbonization solutions that accelerate and enable energy transition and climate change solutions such as proprietary, sustainability-focused process licensing; advisory services focused on energy transition; high-end engineering, design and program management offerings; and digitally-enabled asset optimization solutions.
Our capabilities and offerings include the following: • Scientific research such as quantum science and computing; health and human performance; materials science; life science research; and earth sciences; • Defense systems engineering such as rapid prototyping; test and evaluation; aerospace acquisition support; systems and platform integration; and sustainment engineering; • Operational support such as space domain awareness; C5ISR; human spaceflight and satellite operations; integrated supply chain and logistics; and military aviation support; • Information operations such as cyber analytics and cybersecurity; data analytics; mission planning systems; virtual/augmented reality and technical training; and artificial intelligence and machine learning; • Professional advisory services across the defense, renewable energy and critical infrastructure sectors; and • Sustainable decarbonization solutions that accelerate and enable energy transition and climate change solutions such as proprietary, sustainability-focused process licensing; advisory services focused on energy transition; high-end engineering, design and management program offerings; and digitally-enabled asset optimization solutions.
The SEC maintains a website that contains reports, proxy and information statements and other information regarding issuers like us that file electronically with the SEC at www.sec.gov. 21
The SEC maintains a website that contains reports, proxy and information statements and other information regarding issuers like us that file electronically with the SEC at www.sec.gov. 19
Our significant joint ventures and alliances are described below. All joint venture ownership percentages presented are stated as of December 31, 2022. 11 Aspire Defence Limited, a joint venture owned by KBR and two financial investors, provides a range of facilities life cycle management services at the British Army’s garrisons at Aldershot and across the Salisbury Plain in the U.K.
Our significant joint ventures and alliances are described below. All joint venture ownership percentages presented are stated as of December 29, 2023. Aspire Defence Limited, a joint venture owned by KBR and two financial investors, provides a range of facilities life cycle management services at the British Army’s garrisons at Aldershot and across the Salisbury Plain in the U.K.
See “Item 1A. Risk Factors” contained in Part I of this Annual Report on Form 10-K for more information. Intellectual Property The use of intellectual property generally benefits our STS business segment.
Risk Factors” contained in Part I of this Annual Report on Form 10-K for more information. Intellectual Property The use of intellectual property generally benefits our STS business segment.
Under lump-sum contracts, we perform a defined scope of work for a specified fee to cover all costs and any profit element. Lump-sum contracts entail risk to us because they require us to predetermine the work to be performed, the project execution schedule and all the costs associated with the scope of work.
Under fixed-price contracts, we perform a defined scope of work for a specified fee to cover all costs and any profit element. Fixed-price contracts entail risk to us because they require us to predetermine the work to be performed, the project execution schedule and all the costs associated with the scope of work.
Our Employee Value Proposition ("EVP") is the unique set of experiences and offerings that help differentiate KBR from other competitors for our employees’ time and talents and describes in practical terms how we put our people first. Purpose & Values At the tip of our EVP is Purpose and Values.
Our Employee Value Proposition ("EVP") is the unique set of experiences and offerings that help differentiate KBR from other competitors for our employees’ time and talents and describes in practical terms how we put our people first.
We seek to differentiate ourselves in areas in which we believe we have a competitive advantage, including: • People ◦ Distinctive, mission-focused and inclusive team ethos and culture, which we refer to as “One KBR”. ◦ Deep domain expertise resident across nationally recognized subject matter experts. ◦ Highly-cleared employee base. • Sustainability Leadership ◦ Our Zero Harm philosophy includes ten key areas of sustainability focus across our company and correspond with the United Nations’ (U.N.) Sustainable Development Goals (SDGs). ◦ As signatories to the U.N.
We seek to differentiate ourselves in areas in which we believe we have a competitive advantage, including: • People ◦ Distinctive, mission-focused and inclusive team ethos and culture, which we refer to as “One KBR”. ◦ Deep domain expertise resident across nationally recognized subject matter experts. ◦ Employee base that includes individuals with high-level security clearance. • Sustainability Leadership ◦ Our Zero Harm philosophy includes ten key areas of sustainability focus across our company and correspond with the United Nations’ (U.N.) Sustainable Development Goals (SDGs). ◦ As signatories to the U.N.
The amount of renumeration from the customer to the contracting entity is negotiated on each contract and varies depending on the specific terms for each PFI. Contract Types The Company performs work under contracts that broadly consist of fixed-price, cost-reimbursable, time-and-materials or a combination of the three. Fixed-price contracts include both lump-sum and unit-rate contracts.
The amount of renumeration from the customer to the contracting entity is negotiated on each contract and varies depending on the specific terms for each PFI. Contract Types The Company performs work under contracts that broadly consist of fixed-price, cost-reimbursable, time-and-materials or a combination of the three.
The future revenues we expect to realize as a result of backlog were $15.6 billion and $15.0 billion as of December 31, 2022 and 2021, respectively, with approximately 25% and 17%, respectively, related to work being executed by joint ventures accounted for using the equity method of accounting.
The future revenues we expect to realize as a result of backlog were $17.3 billion and $15.6 billion as of December 29, 2023 and December 31, 2022, respectively, with approximately 24% and 25%, respectively, related to work being executed by joint ventures accounted for using the equity method of accounting.
During 2022, we also invested in a new Candidate Relationship Management platform that is integrated with our HR system. This platform uses artificial intelligence to promote suitable career opportunities to candidates, helps implement ongoing marketing campaigns and enables recruiters to focus on attracting and securing talent rather than dedicating time and resources to administrative matters.
During 2023, we also embedded our Candidate Relationship Management platform that is integrated with our HR system. This platform uses artificial intelligence to promote suitable career opportunities to candidates, helps implement ongoing marketing campaigns and enables recruiters to focus on attracting and securing talent rather than dedicating time and resources to administrative matters.
Career As well as providing meaningful work from Day 1, our employees and job applicants are attracted to KBR because of the opportunity to develop personally and reach their full potential. Therefore, Career Development is a valuable component in our EVP.
Career As well as providing meaningful work from Day 1, our employees and job applicants are attracted to KBR because of the opportunity to develop personally and reach their full potential. Providing the opportunity to ‘Grow’ at KBR is a key component in our EVP.
As a result of this innovation and team effort, we hired over 7,000 employees in 2022, supporting our ability to deliver excellent solutions for our customers and meet our strategic growth targets. Of the new hires, 27% are female and 47% are an ethnic or racial minority.
As a result of this innovation and team effort, we hired over 7,900 employees in 2023, supporting our ability to deliver excellent solutions for our customers and meet our strategic growth targets. Of the new hires, 25% are female and 54% are an ethnic or racial minority.
However, a number of factors that we may not be able to predict or control could result in increased costs for materials, including the continued impact of the COVID-19 pandemic, as well as global trade relationships and other general market and political conditions. These potential increased costs could reduce profitability on our contracts, particularly those that are fixed price.
However, a number of factors that we may not be able to predict or control could result in increased costs for materials as well as global trade relationships, regional conflict and wars and other general market and political conditions. These potential increased costs could reduce profitability on our contracts, particularly those that are fixed price. See “Item 1A.
While the COVID-19 pandemic and other political and economic conditions have resulted in significant supply chain disruptions and inflation globally and within the United States, we have not experienced, and do not anticipate experiencing, any significant procurement difficulties, as we purchase our required materials and equipment from a variety of sources.
While political and economic conditions and regional conflict and war have resulted in significant supply chain disruptions and inflation globally and within the United States that are still ongoing, we have not experienced, and do not anticipate experiencing, any significant procurement difficulties, as we purchase our required materials and equipment from a variety of sources.
Our employees take enormous pride in being part of an organization with a philosophical, practical and proven commitment to Zero Harm. 16 Health and Safety We are subject to numerous worker health and safety laws and regulations.
Acknowledging this diversity, our sustainability culture weaves a golden thread through KBR. Our employees take enormous pride in being part of an organization with a philosophical, practical and proven commitment to Zero Harm. Health and Safety We are subject to numerous worker health and safety laws and regulations.
Succession Planning In 2022, we significantly expanded the scope of our Talent Calibration conversations, covering almost 3,000 KBR employees in this rigorous assessment of performance and potential. As well as providing organization-wide talent trends and data, these conversations lead to individual career plans and added rigor to our succession plans.
Talent Development & Succession Planning In 2023, we continued to expand the scope of our Talent Calibration conversations, covering over 4,100 KBR employees in this rigorous assessment of performance and potential. As well as providing organization-wide talent trends and data, these conversations lead to individual career plans and added rigor to our succession plans.
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 and operations readiness and support.
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 Journey to Zero Harm has allowed us to create a company culture where safe execution is non-negotiable and people take responsibility and accountability.
Our Journey to Zero Harm has allowed us to create a company culture where safe execution is non-negotiable and people take responsibility and accountability. When it comes to safety, we strive for one number: Zero.
Government Contracts and Regulations Our business is heavily regulated. We contract with numerous U.S. government agencies and entities, principally the U.S. DoD and NASA. When working with these and other U.S. government agencies and entities, we must comply with various laws and regulations relating to the formation, administration and performance of contracts.
When working with these and other U.S. government agencies and entities, we must comply with various laws and regulations relating to the formation, administration and performance of contracts.
Competition for talent continued to be fierce in 2022, compounded by high levels of inflation in the general economy. Recognizing the impact of the fluid economic environment on our employees, at the beginning of the year, we committed to carry out an additional mid-year salary review.
We also support and partner with charitable organizations through our ERGs. 18 Total Reward Competition for talent continued to be fierce in 2023, compounded by high levels of inflation in the general economy. Recognizing the impact of the fluid economic environment on our employees, at the beginning of the year, we committed to carrying out an additional mid-year salary review.
We believe KBR has provided the tools and processes our people need to achieve the mindset of 24/7 Zero Harm. One process known as the Courage to Care Conversation, is instrumental in developing a continual awareness of unsafe acts through observation, intervention and conversation. A web-application to log a conversation was created in-house and is available to all KBR employees.
One process known as the Courage to Care Conversation is instrumental in developing a continual awareness of unsafe acts through observation, intervention and conversation. A web-application to log conversations was created in-house and is available to all KBR employees.
Our employee survey showed that this modern, real-time performance management approach was welcomed by a majority of participants, helping us retain critical talent, so in 2023 we plan to adopt Agile Performance & Development across KBR.
Our employee survey showed that this modern, real-time performance management approach was welcomed by a majority of participants, helping us retain critical talent, so in 2023 we adopted Agile Performance & Development across KBR. Inclusion & Diversity At KBR, we aim to become a magnet for diverse talent, known for a culture of belonging and equality.
We know that our employee’s willingness to implement each commitment into their daily work tasks is vital to our operations and has contributed to our strong safety performance among our customers, partners and peers.
Our commitment to the health and safety of each employee as well as anyone we work with is the foundation of our Zero Harm culture. We know that our employees’ willingness to implement each commitment into their daily work tasks is vital to our operations and has contributed to our strong safety performance among our customers, partners and peers.
Leadership In 2022, another cohort graduated from our Global Leadership Development Program designed to expand the capabilities of future C-suite leaders. As well as developing strategic thinking through research projects ranging from sustainability investments to digital supply chain solutions, these leaders attended intense learning events focused on executive skills and 18 leading courageously and with integrity.
As well as developing strategic thinking through research projects ranging from sustainability investments to digital supply chain solutions, these leaders attended intense learning events focused on executive skills and leading courageously and with integrity.
By requiring all of our employees to personally internalize and adhere to these standards, we aim to safeguard our individual health and safety and the well-being of all those around us.
By requiring all of our employees to personally internalize and adhere to these standards, we aim to safeguard our individual health and safety and the well-being of all those around us. We believe that KBR has provided the tools and processes our people need to achieve the mindset of 24/7 Zero Harm.
We are the exclusive licensor of Hydro-PRT TM , a cutting-edge, scalable technology that utilizes supercritical steam to convert a wide range of single-use and other plastics into commercial raw materials used to produce new plastics. We also offer technologies for crystallization and evaporation, concentration and purification of strong inorganic acids.
We are the exclusive licensor of Hydro-PRT TM , a cutting-edge, scalable technology that utilizes supercritical steam to convert a wide range of single-use and other plastics into commercial raw materials used to produce new plastics. In 2023, we launched our Sustainable Aviation Fuel technology to extend our decarbonization efforts into the aviation sector.
In addition to the 12,000 employee comments, the data from our survey was reviewed in detail by different team leaders and across different business areas, resulting in tailored action plans that are already being executed across KBR.
In 2024, this team will travel around the world with KBR, further building connections across business and geographic boundaries. With over 16,000 employee responses, the data from our survey was reviewed in detail by different team leaders and across different business areas, resulting in tailored action plans that are already being executed across KBR.
KBR Communities of Interest ("COIs") are collaborative, virtual forums for subject matter experts and those who support them. Our COIs continue to evolve, ensuring that subject matter experts across the globe can connect and collaborate on Data Science & Analytics, Digital Engineering, Cloud, Cyber and other technical specialties that inform our customers’ and society’s greatest challenges today.
Our COIs continue to evolve, ensuring that subject matter experts across the globe can connect and collaborate on Data Science & Analytics, Digital Engineering, Cloud, Cyber and other technical specialties that inform our customers’ and society’s greatest challenges today. 16 Leadership Our flagship leadership program, the Global Leadership Development Program, is designed to expand the capabilities of future executives.
Backlog of Unfulfilled Orders Backlog is our estimate of the U.S. dollar amount of future revenues we expect to realize as a result of performing work on awarded contracts.
Backlog of Unfulfilled Orders Backlog is our estimate of the U.S. dollar amount of future revenues we expect to realize as a result of performing work on awarded contracts. For projects within our unconsolidated joint ventures, we have included our percentage ownership of the joint venture’s estimated revenues in backlog to provide an indication of future work to be performed.
Our vision is to bring together the best and brightest employees to deliver technology and solutions that help our customers accomplish their most critical missions and objectives.
Our vision is to bring together the best and brightest employees to deliver technology and solutions that help our customers accomplish their most critical missions and objectives, and this important work enables us to attract and retain some of the world’s best talent, who thrive in this purposeful environment.
By staying current with pay trends and partnering with our customers, we applied an additional increase in compensation mid-year for select employees across various levels in the organization. We simultaneously embedded a systematic approach to pay equity and are increasing our focus on pay transparency, both of which support our I&D strategy.
By staying current with pay trends and partnering with our customers, we applied an additional increase in compensation mid-year for select employees across various levels in the organization.
With events ranging from book clubs and picnics to discussions on pay equity and mindfulness, the ERGs create a vibrant community for networking, advocacy and education across KBR. Compensation & Benefits The final piece of the EVP puzzle relates to our remuneration strategy and how we provide a good total reward package to our people.
With events ranging from book clubs and picnics to discussions on pay equity and mindfulness, the ERGs create a vibrant community for networking, advocacy and education across KBR.
Since refreshing our values in 2020, we have embedded them in our business processes, celebrated employees who epitomize our values-led behavior and established them as a foundation for our learning and development activities.
Our Values unite us across our diverse global cultures, guiding our behavior and decision making throughout KBR. We have embedded our values in our business processes, established them as a foundation for our learning and development activities and regularly celebrate employees who epitomize our values-led behavior.
We estimate as of December 31, 2022, 36% of our backlog will be recognized as revenues or equity in earnings of unconsolidated affiliates within fiscal year 2023. For additional information regarding backlog, see our discussion within “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Part II of this Annual Report on Form 10-K.
We estimate as of December 29, 2023, 30% of our backlog will be recognized as revenues or equity in earnings of unconsolidated affiliates within fiscal year 2024. For additional information regarding backlog, see our discussion within “Item 7.
Our Executive Leadership Team ("ELT") is 25% female and 8% ethnic or racial minority. In 2022, our I&D Council researched best practices for inclusion of people with disabilities, advancement of women into operational and business leadership roles and retention of diverse talent. We plan to incorporate their recommendations into our I&D Improvement Plans in 2023 for every business and function.
Our Executive Leadership Team ("ELT") is 22% female and 11% ethnic or racial minority. In 2023, our I&D Council researched best practices for STEM outreach, communications, manager support, and inclusion for all. In 2024, we plan to incorporate their recommendations into our global plans as well as the local I&D Improvement Plans for every business and function.
Additionally, weather and natural phenomena can temporarily affect the performance of our services. Environmental Regulation Our business involves design, management, operations and maintenance at various project sites throughout the world, which may be in and around sensitive environmental areas, such as rivers, lakes and wetlands.
Environmental Regulation Our business involves design, management, operations and maintenance at various project sites throughout the world, which may be in and around sensitive environmental areas, such as rivers, lakes and wetlands. Our operations may require us to manage, handle, transport and dispose of toxic or hazardous substances, which are subject to stringent and complex laws relating to environmental protection.
We plan to expand our data capture further in 2023, encompassing veteran status and sexual preference. Having this data helps us monitor our I&D progress, however, we respect our employees’ right to privacy.
We expanded our data capture further in 2023, encompassing veteran status and sexual orientation in relevant markets. Having this data helps us monitor our I&D progress, however, we respect our employees’ right to privacy. We maintain strict confidentiality for all those who voluntarily disclose and provide opt-out options for those who prefer not to disclose their personal information.
The recent People Perspective Survey indicates that a significant majority of our employees feel safe to report misconduct and reflects our dedication to an ethical culture. Retaliation is not tolerated and undermines a speak-up culture. Our Code sets forth our anti-retaliation commitment, which is reinforced in our communications and our annual Ethics training.
Retaliation undermines a speak-up culture and is not tolerated. Our Code sets forth our anti-retaliation commitment, which is reinforced in our communications and our annual Ethics training. To further convey to the workforce that reports of unethical behavior are investigated and remediated, the Ethics training incorporates examples of past misconduct incidents.
The Business Integrity Team has implemented a Question Manager as part of our Ethics Hotline for employees to receive advice, confidentially or anonymously, for ethical or other inquiries. Employees speaking-up and reporting issues enables us to address and remediate these issues early and effectively while instilling confidence that employee concerns are heard and addressed.
We promote a speak-up culture where employees are comfortable with making reports of possible unethical behavior and workplace issues. The Business Integrity Team has implemented a Question Manager as part of our Ethics Hotline for employees to receive advice, confidentially or anonymously, on ethical or other inquiries.
We appointed one of our senior People function leaders as a global leader for talent acquisition, helping bring together our community of recruiters to identify and institute best practices from sourcing to onboarding.
In 2023, we continued to raise KBR’s brand awareness while providing an attractive and streamlined candidate journey to ensure we have the right people in the right place at the right time. We appointed a global leader for talent acquisition, helping bring together our community of recruiters to identify and institute best practices from sourcing to onboarding.
As well as IMPACT’s work described above, we have OK NoW, focused on Mental Health & Fitness, and a range of I&D focused ERGs, 20 which come together to collaborate in the All-In Community.
In 2023, we continued to provide technical and professional development, networking and community outreach opportunities through IMPACT, our long-standing ERG for early career professionals. We also have OK NoW, focused on Mental Health & Fitness, and a range of I&D-focused ERGs, which come together to collaborate in the All-In Community.
While our One KBR Values unite us, as a global business operating in distinct markets and environments, we recognize and respect that our cultures are different. Acknowledging this diversity, our sustainability culture weaves a golden thread through KBR.
Our employees have told us that their experience is aligned to our values even in the ‘new normal’ of a hybrid and flexible working environment. While our One KBR Values unite us, as a global business operating in distinct markets and environments, we recognize and respect that our cultures are different.
We believe our technology portfolio and experience in the commercial application of these technologies and our related know-how differentiates us, enables our sustainability strategy and enhances our margins. Our rights to make use of technologies licensed to us are governed by written agreements of varying durations, including some with fixed terms that are subject to renewal based on mutual agreement.
Our rights to make use of technologies licensed to us are governed by written agreements of varying durations, including some with fixed terms that are subject to renewal based on mutual agreement. Generally, each agreement may be further extended and we have historically been able to renew existing agreements before they expire.
We believe an ethical culture, where employees are treated fairly, respectfully, and without favoritism, is key to employee satisfaction and retention. We promote a speak-up culture where employees are comfortable with making reports of possible unethical behavior and workplace issues.
Additionally, our Code is essential to how we as a Team of Teams interact with the world around us and to our success. We believe that an ethical culture, where employees are treated fairly, respectfully and without favoritism, is key to employee satisfaction and retention.
As well as facilitating a dramatic increase in participation levels, this partnership resulted in KBR being certified as a Great Place to Work in several countries, including the U.S., U.K., Australia and India.
A significant majority of our employees who responded to the survey reported that they believe KBR is a Great Place to Work, resulting in KBR being certified as a Great Place to Work in several countries, including the U.S., U.K., Australia and India.
For technologies we own, we protect our rights, know-how and trade secrets through patents and confidentiality agreements. Seasonality Our operations are not generally affected by seasonality. However, various factors can affect the distribution of our sales between accounting periods, including the timing of government awards, the availability of government funding, product deliveries and customer acceptance.
However, various factors can affect the distribution of our sales between accounting periods, including the timing of government awards, the availability of government funding, product deliveries and customer acceptance. Additionally, weather and natural phenomena can temporarily affect the performance of our services.
Having completed our first global survey in 2021, in 2022 we went a step further by partnering with Great Place to Work to conduct the survey on our behalf, enabling us to expand the languages in which the survey was conducted and benchmark how we perform compared to other similar organizations.
Employee Engagement Our annual employee survey measures our progress through the eyes of our people. We partner with Great Place to Work to conduct the survey on our behalf, enabling us to provide the survey in multiple languages and benchmark how we perform compared to other similar organizations.
We believe we have made significant progress over many years and our progress is acknowledged by our employees. To help us continue our progress in I&D, we review trends and patterns using anonymized employee demographics to ensure we are providing equality of opportunity for all.
Their continued efforts help us to further build our reputation as a leader in this space, as exemplified by our maintaining a ranking on Forbes’s World’s Top Companies for Women list in 2023. To help us continue our progress in I&D, we review trends and patterns using anonymized employee demographics to ensure we are providing equality of opportunity for all.
We have a good reputation for providing growth opportunities and continue to focus on enhancing these growth prospects in a number of ways throughout 2022. Early Career Professionals In 2022, we continued to provide technical and professional development, networking and community outreach opportunities through IMPACT, our long-standing Employee Resource Group (“ERG”) for early career professionals.
We have a good reputation among our employees for providing growth opportunities and have continued to focus on enhancing these growth prospects in a number of ways throughout 2023 with the introduction of internal career fairs and expansion of global career opportunities.
Generally, each agreement may be further extended and we have historically been able to renew existing agreements before they expire. We expect these and other similar agreements to be extended so long as it is mutually advantageous to both parties at the time of renewal.
We expect these and other similar agreements to be extended so long as it is mutually advantageous to both parties at the time of renewal. For technologies we own, we protect our rights, know-how and trade secrets through patents and confidentiality agreements. 13 Seasonality Our operations are not generally affected by seasonality.
Our employees appreciate this approach as evidenced by our survey results. Inclusion & Diversity At KBR, we aim to become a magnet for diverse talent, known for a culture of belonging and equality. Our commitment to I&D helps us innovate, helps our global Team of Teams perform and helps create an environment where everyone can belong.
Our commitment to Inclusion & Diversity (“I&D”) helps us innovate, helps our global Team of Teams perform and helps create an environment where everyone can belong. We believe we have made significant progress over many years and our progress is acknowledged by our employees.
At the other end of the leadership career ladder, we completed the pilot of our new Front Line Leaders program, designed to support employees newly transitioning into these critical roles. Following the success of this pilot, we plan to roll the program out globally, starting in 2023.
We also strengthen our future leadership by running regular Manager Excellence Programs, and in 2023, we launched our Front Line Leaders Program globally, to support employees newly transitioning into these critical roles.
Removed
With the acquisition of Frazer-Nash Consultancy Limited ("Frazer-Nash") on October 20, 2021, we have expanded our broad range of professional advisory services that deliver high-end systems engineering, systems assurance and technology to customers across the defense, renewable energy and critical infrastructure sectors in the U.K.
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The following table summarizes our revenues from contracts with U.S. and U.K. government agencies for which we are the prime contractor, as well as for those contracts in which we are a subcontractor and the ultimate customer is a U.S. or U.K. government agency, respectively.
Removed
Additionally, with the acquisition of VIMA Group ("VIMA") on August 2, 2022, we deliver solutions across a number of large-scale, high priority digital transformation programs to support our clients in ensuring availability of effective digital and information technology as guided by the U.K.'s Digital Strategy for Defence.
Added
Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Part II of this Annual Report on Form 10-K. 11 Government Contracts and Regulations Our business is heavily regulated. We contract with numerous U.S. government agencies and entities, principally the U.S. DoD and NASA.
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Additional information relating to the Frazer-Nash and VIMA acquisitions is described in Part II of this Annual Report on Form 10-K in Note 4 to our consolidated financial statements. Sustainable Technology Solutions.
Added
We also offer technologies for crystallization and evaporation, concentration and purification of strong inorganic acids. We believe our technology portfolio and experience in the commercial application of these technologies and our related know-how differentiates us, enables our sustainability strategy and enhances our margins.
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Recent Developments VIMA Acquisition On August 2, 2022, we acquired VIMA, a U.K. based leading provider of digital transformation solutions to defense and other public sector clients.
Added
Purpose & Values At the center of our EVP is Purpose, because at KBR, we do work that matters, helping to solve the great challenges of our time while striving to create a better, safer, more sustainable world.
Removed
VIMA Group delivers solutions across a number of large-scale, high priority digital transformation programs to support its clients in ensuring availability of effective digital and information technology as guided by the U.K.'s Digital Strategy for Defence.
Added
Ethics and Compliance KBR's ethics and our Code of Business Conduct (the “Code”) are rooted in our values and provide the standards and support to help us successfully navigate issues, make the right decisions, and conduct our business with the integrity that reflects our heritage and ethical reputation.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWith respect to any particular country, these risks may include, but not be limited to: • expropriation and nationalization of our assets in that country; • changes in government regimes and other developments that may cause, directly or indirectly, political and economic instability; • changes in trade policies affecting the markets for our services (including but not limited to retaliatory tariffs between the United States and other countries); • civil unrest, acts of terrorism, war or other armed conflict (including but not limited to potential U.S. sanctions on other countries); • currency fluctuations, devaluations and conversion restrictions; • confiscatory taxation or other adverse tax policies; • uncertainties related to any geopolitical, economic and regulatory effects or changes due to recent or upcoming domestic and international elections; • governmental activities or judicial actions that limit or disrupt markets, restrict payments, limit the movement of funds, result in the deprivation of contract rights or result in the inability for us to obtain or retain licenses required for operation; or • increased polarization of political parties, in the U.S. and abroad, which may lead to more volatility in government spending or other developments such as trade wars or changes in military priorities. 27 Due to the unsettled political conditions in countries where we provide governmental logistical support, our financial performance is subject to the adverse consequences of war, the effects of terrorism, civil unrest, strikes, currency controls and governmental actions.
Biggest changeWith respect to any particular country, these risks may include, but not be limited to: • expropriation and nationalization of our assets in that country; • changes in government regimes and other developments that may cause, directly or indirectly, political and economic instability; • costs to maintain the safety of our personnel and clients in high-risk locations, including but not limited to, certain parts of Africa and the Middle East, where the country or surrounding area is suffering from political, social or economic issues, war or civil unrest; • changes in trade policies affecting the markets for our services (including but not limited to retaliatory tariffs between the United States and other countries); • civil unrest, acts of terrorism, war or other armed conflict (including but not limited to potential U.S. sanctions on other countries); • currency fluctuations, devaluations and conversion restrictions; • confiscatory taxation or other adverse tax policies; • uncertainties related to any geopolitical, economic and regulatory effects or changes due to recent or upcoming domestic and international elections; 25 • governmental activities or judicial actions that limit or disrupt markets, restrict payments, limit the movement of funds, result in the deprivation of contract rights or result in the inability for us to obtain or retain licenses required for operation; or • increased polarization of political parties, in the U.S. and abroad, which may lead to more volatility in government spending or other developments such as trade wars or changes in military priorities.
Our revenues are directly or indirectly derived from contract awards. Reductions in the number and amounts of new awards, delays in the timing of anticipated awards or potential cancellations of such prospects as a result of economic conditions, material and equipment pricing and availability or other factors could adversely impact our long-term projected results.
Our revenues are directly and indirectly derived from contract awards. Reductions in the number and amounts of new awards, delays in the timing of anticipated awards or potential cancellations of such prospects as a result of economic conditions, material and equipment pricing and availability or other factors could adversely impact our long-term projected results.
Government has (and has exercised in the past) the ability to unilaterally definitize contracts, which, absent a successful appeal, obligates us to perform under terms and conditions imposed by the U.S. Government.
The U.S. government has (and has exercised in the past) the ability to unilaterally definitize contracts, which, absent a successful appeal, obligates us to perform under terms and conditions imposed by the U.S. government.
Historically, we have had adequate letters of credit capacity but such capacity beyond our Senior Credit Facility is generally at the provider’s sole discretion. Due to events that affect the banking and insurance markets generally, letters of credit or surety bonds may be difficult to obtain or may only be available at significant cost.
Historically, we have had adequate letters of credit capacity but such capacity beyond our Senior Credit Facility is generally at the provider’s sole discretion. Due to events that affect the banking and insurance markets, letters of credit or surety bonds may be difficult to obtain or may only be available at significant cost.
However, the warrant transactions could separately have a dilutive effect to the extent that the market value per share of our common stock exceeds the strike price of the warrants at the time of exercise.
However, warrant transactions could separately have a dilutive effect to the extent that the market value per share of our common stock exceeds the strike price of the warrants at the time of exercise.
Historically, omnibus contract vehicles have been used for work that is done on a contingency or as-needed basis. In more predictable “sustainment” environments, contracts may include fixed-price, cost-reimbursable and time-and-materials elements. The U.S. government also favors multiple award task order contracts in which several contractors are selected as eligible bidders for future work.
Historically, omnibus contract vehicles have been used for work that is done on a contingency or as-needed basis. In more predictable “sustainment” environments, contracts may include fixed-price, 27 cost-reimbursable and time-and-materials elements. The U.S. government also favors multiple award task order contracts in which several contractors are selected as eligible bidders for future work.
If any contract were so terminated, our ability to secure future contracts could be adversely affected. Other remedies that could be sought by our U.S. government customers for any improper activities or performance issues include sanctions such as forfeiture of profits, suspension of payments, fines and suspensions or debarment from doing business with the U.S. government.
If any contract were so terminated, our ability to secure future contracts could be adversely affected. Other remedies that could be sought by our U.S. government customers for any 29 improper activities or performance issues include sanctions such as forfeiture of profits, suspension of payments, fines and suspensions or debarment from doing business with the U.S. government.
As a result, internal control issues may arise, which could have a material adverse effect on our financial condition and results of operations. 25 The nature of our contracts, particularly those that are fixed-price, subjects us to risks associated with cost overruns, operating cost inflation and potential claims for liquidated damages.
As a result, internal control issues may arise, which could have a material adverse effect on our financial condition and results of operations. The nature of our contracts, particularly those that are fixed-price, subjects us to risks associated with cost overruns, operating cost inflation and potential claims for liquidated damages.
A change in our regular cash dividend program could have an adverse effect on the market price of our common stock. 35 Risks Related to Regulations and Compliance We could be adversely impacted if we fail to comply with international export and domestic laws, which are rigorously enforced by the U.S. government.
A change in our regular cash dividend program could have an adverse effect on the market price of our common stock. Risks Related to Regulations and Compliance We could be adversely impacted if we fail to comply with international export and domestic laws, which are rigorously enforced by the U.S. government.
As a result of these competitive pricing pressures, our profit margins on future U.S. government contracts may be reduced and may require us to make sustained efforts to reduce costs to remain competitive. 29 We face rigorous competition and pricing pressures for any additional contract awards from the U.S. government.
As a result of these competitive pricing pressures, our profit margins on future U.S. government contracts may be reduced and may require us to make sustained efforts to reduce costs to remain competitive. We face rigorous competition and pricing pressures for any additional contract awards from the U.S. government.
As with any joint venture arrangement, differences in views among the joint venture partners may result in delayed decisions or in failures to agree on major issues. We also cannot control the actions of our joint venture partners, including failure to comply with applicable laws or regulations, nonperformance and default or bankruptcy of our joint venture partners.
As with any joint venture arrangement, differences in views among the joint venture partners may result in delayed decisions or in failures to agree on 23 major issues. We also cannot control the actions of our joint venture partners, including failure to comply with applicable laws or regulations, nonperformance and default or bankruptcy of our joint venture partners.
These disruptions could materially impact our backlog and financial performance. 32 In addition, we are subject to the risk that the lending counterparties to our Revolver may be unable to meet their contractual obligations to us if they suffer catastrophic demands on their liquidity.
These disruptions could materially impact our backlog and financial performance. In addition, we are subject to the risk that the lending counterparties to our Revolver may be unable to meet their contractual obligations to us if they suffer catastrophic demands on their liquidity.
Additionally, our programs for the U.S. Government often operate for periods of time under Undefinitized Contract Actions (UCAs), which means that we begin performing our obligations before the terms, specifications or price are finally agreed to between the parties. The U.S.
Our programs for the U.S. government often operate for periods of time under Undefinitized Contract Actions (UCAs), which means that we begin performing our obligations before the terms, specifications or price are finally agreed to between the parties.
However, any future payment of dividends, including the timing and amount of any such dividends, is at the discretion of our Board of Directors and may depend upon our earnings, liquidity, financial condition, alternate capital deployment opportunities or any other factors that our Board of Directors considers relevant.
However, any future payment of dividends, including the timing and amount of any such dividends, is at the 33 discretion of our Board of Directors and may depend upon our earnings, liquidity, financial condition, alternate capital deployment opportunities or any other factors that our Board of Directors considers relevant.
Such risks include, but are not limited to, the following: 22 • adverse effects on macroeconomic conditions, including inflation, demand for our products and potential recessionary economic conditions; • increased cyber security threats; • adverse changes in trade policies, taxes, government regulations and tariffs; • our ability to obtain compensation for increased costs incurred related to rising costs of equipment, materials and labor on fixed-price contracts; • our ability to implement and execute our business strategy; • disruptions in global supply chains; • our exposure to foreign currency fluctuations; and • constraints, volatility or disruption in the capital markets.
Such risks include, but are not limited to, the following: 20 • adverse effects on macroeconomic conditions, including inflation, demand for our products and potential recessionary economic conditions; • increased cyber security threats; • adverse changes in trade policies, taxes, government regulations and tariffs; • our ability to obtain compensation for increased costs incurred related to rising costs of equipment, materials and labor on fixed-price contracts; • our ability to implement and execute our business strategy; • disruptions in global supply chains; • our exposure to foreign currency fluctuations; and • constraints, volatility or disruption in the capital markets.
We are also subject to certain financial covenants, including but not limited to maintenance of a maximum consolidated net leverage ratio and a consolidated interest coverage ratio as defined in the Senior Credit Facility agreement.
We are also subject to certain financial covenants, 31 including but not limited to maintenance of a maximum consolidated net leverage ratio and a consolidated interest coverage ratio as defined in the Senior Credit Facility agreement.
In addition, more stringent regulation of our customers' operations with respect to the protection of the environment could also adversely affect their operations and reduce demand for our services. 36 Various U.S. federal, state and local as well as foreign environmental laws and regulations may impose liability for property damage and costs of investigation and cleanup of hazardous or toxic substances on property currently or previously owned by us or arising out of our waste management or environmental remediation activities.
In addition, more stringent regulation of our customers' operations with respect to the protection of the environment could also adversely affect their operations and reduce demand for our services. 34 Various U.S. federal, state and local as well as foreign environmental laws and regulations may impose liability for property damage and costs of investigation and cleanup of hazardous or toxic substances on property currently or previously owned by us or arising out of our waste management or environmental remediation activities.
If we are unable to meet our commitments and targets and appropriately address sustainability enhancement, we may lose investors, customers or partners, our stock price may be negatively impacted, our reputation may be negatively affected and it may be more difficult for us to compete effectively, all of which could have an adverse effect on our business, results of operations and financial condition, as well as on the price of our common stock. 38 Item 1B.
If we are unable to meet our commitments and targets and appropriately address sustainability enhancement, we may lose investors, customers or partners, our stock price may be negatively impacted, our reputation may be negatively affected and it may be more difficult for us to compete effectively, all of which could have an adverse effect on our business, results of operations and financial condition, as well as on the price of our common stock. 36 Item 1B.
Additionally, our Senior Credit Facility contains a default provision that is triggered upon a change in control of at least 25%, which would impede a takeover and/or make a takeover more costly. We may change our dividend policy in the future. We have maintained a regular cash dividend program since 2007. We anticipate continuing to pay quarterly dividends during 2023.
Additionally, our Senior Credit Facility contains a default provision that is triggered upon a change in control of at least 25%, which would impede a takeover and/or make a takeover more costly. We may change our dividend policy in the future. We have maintained a regular cash dividend program since 2007. We anticipate continuing to pay quarterly dividends during 2024.
These suits may remain under seal (and hence, be unknown to us) for some time while the U.S. government decides whether to intervene on behalf of the qui tam plaintiff. For more information, see Note 15 to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
These suits may remain under seal (and hence, be unknown to us) for some time while the U.S. government decides whether to intervene on behalf of the qui tam plaintiff. For more information, see Note 14 to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
Shifting funding priorities or federal budget compromises, also could result in reductions in overall defense spending on an absolute or inflation-adjusted basis, which could adversely impact our business. Our results of operations and cash flows depend on the award of new contracts and the timing of the performance of these contracts.
Shifting funding priorities or federal budget compromises, also could result in reductions in overall defense spending on an absolute or inflation-adjusted basis, which could adversely impact our business. Our results of operations and cash flows depend on the award of new contracts and the timing of the performance of existing contracts.
We had approximately $1.7 billion of indebtedness outstanding as of December 31, 2022 which could have negative consequences to us, including, but not limited to: • requiring us to dedicate cash flow from operations to the repayment of debt, interest and other related amounts, which reduces the funds we have available for other purposes, such as working capital, capital expenditures, acquisitions, payment of dividends and share repurchase programs; • making it more difficult or expensive for us to obtain any necessary future financing for working capital, capital expenditures, debt service requirements, debt refinancing, acquisitions or other purposes; • reducing our flexibility in planning for or reacting to changes in our industry and market conditions; • causing us to be more vulnerable in the event of a downturn in our business; • exposing us to increased interest rate risk given that a portion of our debt obligations are at variable interest rates; and • increasing our risk of a covenant violation under our Senior Credit Facility.
We had approximately $1.8 billion of indebtedness outstanding as of December 29, 2023 which could have negative consequences to us, including, but not limited to: • requiring us to dedicate cash flow from operations to the repayment of debt, interest and other related amounts, which reduces the funds we have available for other purposes, such as working capital, capital expenditures, acquisitions, payment of dividends and share repurchase programs; • making it more difficult or expensive for us to obtain any necessary future financing for working capital, capital expenditures, debt service requirements, debt refinancing, acquisitions or other purposes; • reducing our flexibility in planning for or reacting to changes in our industry and market conditions; • causing us to be more vulnerable in the event of a downturn in our business; • exposing us to increased interest rate risk given that a portion of our debt obligations are at variable interest rates; and • increasing our risk of a covenant violation under our Senior Credit Facility.
Methodologies for reporting ESG data may be updated and previously reported ESG data may be adjusted to reflect improvement in availability and quality of internal and third-party data, changing assumptions, changes in the nature and scope of our 37 operations and other changes in circumstances.
Methodologies 35 for reporting ESG data may be updated and previously reported ESG data may be adjusted to reflect improvement in availability and quality of internal and third-party data, changing assumptions, changes in the nature and scope of our operations and other changes in circumstances.
Demand for many of our services in our commodity-based markets depends on capital spending by oil and natural gas companies, including national and international oil companies, and by industrial companies, which is directly affected by trends in oil, natural gas and commodities prices.
Demand for many of our services in our commodity-based markets depends on capital spending by oil and natural gas companies, including national and international oil companies, and by industrial companies, which is directly affected by trends in the prices of oil, natural gas and other commodities.
Many of our existing contracts must be recompeted when their original period of performance ends. Recompetitions represent opportunities for competitors to take market share away from us or for our customers to obtain more favorable terms. We may be required to qualify or continue to qualify under the various multiple award task order contract criteria.
Many of our existing contracts must be recompeted when their original period of performance ends, representing opportunities for competitors to take market share away from us or for our customers to obtain more favorable terms. We may be required to qualify or continue to qualify under the various multiple award task order contract criteria.
International agreements, national, regional and state legislation and regulatory measures or other restrictions on emissions of greenhouse gases could affect our clients, including those who are involved in the exploration, production or refining of fossil fuels and those who emit greenhouse gases through the combustion of fossil fuels, or through mining, manufacturing or the utilization or production of materials or goods.
International agreements, national, regional and state legislation and regulatory measures, including LNG exports, or other policies and restrictions on emissions of greenhouse gases could affect our clients, including those who are involved in the exploration, production or refining of fossil fuels and those who emit greenhouse gases through the combustion of fossil fuels, or through mining, manufacturing or the utilization or production of materials or goods.
Item 1A. Risk Factors Risks Related to Operations of Our Business A significant portion of our revenues is generated by large, recurring business from certain significant customers, including the U.S. government. A loss, cancellation or delay in projects by our significant customers in the future could negatively affect our financial performance.
Item 1A. Risk Factors Risks Related to Operations of Our Business A significant portion of our revenues is generated by large, recurring business from certain significant customers, including the U.S. government. Any loss, cancellation or delay in one or more projects by our significant customers in the future could negatively affect our financial performance.
With respect to COVID-19, our business, operations and financial performance have been, and may continue to be affected by the still ongoing macroeconomic impacts resulting from the COVID-19 pandemic. As a result, our financial performance and growth rates may differ significantly from pre-pandemic historical periods, and our future results may fall below expectations.
Our business, operations and financial performance have been, and may continue to be affected by the still ongoing macroeconomic impacts resulting from the COVID-19 pandemic. As a result, our financial performance and growth rates may differ from pre-pandemic historical periods, and our future results may fall below expectations.
If we are unable to attract and retain senior management and key technical professionals with elite skills, our ability to pursue and compete for projects to grow our business may be adversely affected, our operating income may decrease and our reputation may be negatively impacted.
If we are unable to attract and retain senior management and key technical professionals with elite skills and appropriate government qualifications, our ability to pursue and compete for projects to grow our business may be adversely affected, our operating income may decrease and our reputation may be negatively impacted.
Fluctuations in oil, natural gas and commodities prices can have a direct effect on the profitability and cash flow of such companies, which may impact their willingness to continue pursuing their current investments or make new capital investments. Additionally, commodity prices can also significantly affect the costs of projects.
Fluctuations in commodity prices can have a direct effect on the profitability and cash flow of such companies, which may impact their willingness to continue pursuing their current investments or make new capital investments. Additionally, commodity prices can also significantly affect the costs of projects.
To the extent the current conflict between Russia and Ukraine or other geopolitical conflicts adversely affect our business, they may also have the effect of heightening many of our other risks identified in this Annual Report on Form 10-K, any of which could materially and adversely affect our business and results of operations.
To the extent current conflicts or other geopolitical conflicts adversely affect our business, they may also have the effect of heightening many of our other risks identified in this Annual Report on Form 10-K, any of which could materially and adversely affect our business and results of operations.
Additionally, the full scope, duration and broader implications of this conflict, which may include additional international sanctions, embargoes, regional instability and geopolitical shifts; increased tensions between the United States and countries in which we operate; and the extent of the conflict's effects on our business and results of operations as well as the global economy, cannot be predicted.
Additionally, the full scope, duration and broader implications of international conflicts, which may include additional international sanctions, embargoes, regional instability and geopolitical shifts; increased tensions between the United States and countries in which we operate; and the extent of the conflicts’ effects on our business and results of operations as well as the global economy, cannot be predicted.
We conduct a portion of our operations through joint ventures and partnerships, exposing us to risks and uncertainties, many of which are outside of our control. We conduct a portion of our operations through project-specific joint ventures where control may be shared with unaffiliated third parties.
We conduct a portion of our operations through joint ventures and partnerships, exposing us to risks and uncertainties, many of which are outside of our control. We conduct a portion of our operations through project-specific joint ventures where control may be shared with unaffiliated third parties or control may be held by the unaffiliated third parties.
Any unauthorized electronic or physical intrusion or other security threat may jeopardize the protection of sensitive or other information stored or transmitted through our IT systems and networks and those of our business partners.
Any unauthorized electronic or physical intrusion or other security threat may jeopardize the protection of sensitive or other information stored or transmitted through our IT systems and networks and those of our business partners and third-party software providers.
The ongoing conflict between Russia and Ukraine, and other geopolitical conditions, may adversely affect our business and results of operations. Political, economic and other conditions in foreign countries and regions, including geopolitical risks such as the current conflict between Russia and Ukraine, may adversely affect our business and operations as a portion of our revenue is derived from foreign operations.
Political, economic and other conditions in foreign countries and regions, including geopolitical risks, such as the current conflict between Russia and Ukraine and political and economic instability and conflict in the Middle East, may adversely affect our business and operations as a portion of our revenue is derived from foreign operations.
If these estimates prove inaccurate, if there are errors or ambiguities as to contract specifications or if circumstances change due to, among other things, unanticipated technical problems, poor project execution, difficulties in obtaining permits or approvals, changes in local laws or labor conditions, weather delays, increased costs of equipment and materials from inflation or other factors or our suppliers’ or subcontractors’ inability to perform, then cost overruns may occur.
If these estimates prove inaccurate, if there are errors or ambiguities as to contract specifications or if circumstances change due to, among other things, the recent rise in interest rates, continued inflation, supply-chain disruptions, unanticipated technical problems, poor project execution, difficulties in obtaining permits or approvals, changes in local laws or labor conditions, weather delays, increased costs of equipment and materials from inflation or other factors or our suppliers’ or subcontractors’ inability to perform, then cost overruns may occur.
A portion of our consolidated revenues and consolidated operating expenses are in foreign currencies. As a result, we are subject to foreign currency risks, including risks resulting from changes in currency exchange rates and limitations on our ability to reinvest earnings from operations in one country to fund the financing requirements of our operations in other countries.
As a result, we are subject to foreign currency risks, including risks resulting from changes in currency exchange rates and limitations on our ability to reinvest earnings from operations in one country to fund the financing requirements of our operations in other countries.
An impairment of all or part of our goodwill or our intangible assets could have a material adverse impact on our net earnings and net worth. As of December 31, 2022, we had $2.1 billion of goodwill and $645 million of intangible assets recorded on our consolidated balance sheets.
An impairment of all or part of our goodwill or our intangible assets could have a material adverse impact on our net earnings and net worth. As of December 29, 2023, we had $2.1 billion of goodwill and $618 million of intangible assets recorded on our consolidated balance sheets.
We derive a significant portion of our revenues from contracts with agencies and departments of the U.S., the U.K. and Australia governments, which is directly affected by changes in government spending and availability of adequate funding.
Demand for our services provided under government contracts is directly affected by spending by our customers. We derive a significant portion of our revenues from contracts with agencies and departments of the U.S., the U.K. and Australia governments, which is directly affected by changes in government spending and availability of adequate funding.
U.S. government contracts are subject to specific regulations such as the FAR, the Truth in Negotiations Act, CAS, the Service Contract Act and DoD security regulations. Failure to comply with any of these regulations, requirements or statutes may result in contract price adjustments, financial penalties or contract termination.
U.S. government contracts are subject to specific regulations such as the FAR, the Truthful Cost or Pricing Data Statute, CAS, the Service Contract Act and DoD security regulations. Failure to comply with any of these regulations, requirements or statutes may result in contract price adjustments, financial penalties or contract termination.
A considerable percentage of our revenues, particularly in our GS business segment, is generated from transactions with certain significant customers. Revenues from the U.S. government represented 61% of our total consolidated revenues for the year ended December 31, 2022.
A considerable percentage of our revenues, particularly in our GS business segment, is generated from transactions with certain significant customers. Revenues from the U.S. government represented 58% of our total consolidated revenues for the year ended December 29, 2023.
It contains a number of covenants restricting, among other things, our ability to incur liens and indebtedness, sell assets, repurchase our equity shares and make certain types of investments.
The Senior Credit Facility contains a number of covenants restricting, among other things, our ability to incur liens and indebtedness, sell assets, repurchase our equity shares and make certain types of investments.
Continued attention to issues concerning climate change or other environmental matters may result in the imposition of additional environmental regulations that seek to restrict, or otherwise impose limitations or costs upon, the emission of greenhouse gases.
Continued attention to issues concerning climate change or other environmental matters may result in the imposition of additional environmental regulations, rules, standards and policies that seek to restrict, or otherwise impose limitations or costs upon our operations and the emission of greenhouse gases.
Any alleged or actual failure to comply with these measures may subject us to government scrutiny, civil and/or criminal proceedings, sanctions and other liabilities, which may have an adverse effect on our international operations, financial condition and results of operations.
Any alleged or actual failure to comply with any sanctions and trade control measures implemented in response to international conflicts may subject us to government scrutiny, civil and/or criminal proceedings, sanctions and other liabilities, which may have an adverse effect on our international operations, financial condition and results of operations.
Therefore, it may be more difficult for us to win future awards from the U.S. government and we may have other contractors sharing in U.S. government awards that we win. Once a contract is awarded, it may be subject to a lengthy protest process that could result in contract delays, or ultimately, the loss of the contract.
Therefore, it may be more difficult for us to win future awards from the U.S. government and we may have other contractors sharing in U.S. government awards that we win. Once a contract is awarded, it may be subject to a lengthy protest process.
The largest potential source of deficit is related to our defined benefit pension plan in the U.K that is in a funding surplus position at December 31, 2022.
The largest potential source of deficit is related to our defined benefit pension plan in the U.K that is in a funding deficit position at December 29, 2023.
We also entered into warrant transactions with the option counterparties. The convertible note hedge transactions are generally expected to reduce potential dilution to our common stock upon any conversion of the Convertible Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted Convertible Notes, as the case may be.
Convertible note hedge transactions are expected to reduce potential dilution to our common stock upon any conversion of any convertible notes and/or offset any cash payments we are required to make in excess of the principal amount of converted convertible notes, as the case may be.
If an anticipated contract award is delayed or not received, we may incur additional costs resulting from reductions in staff or redundancy of facilities that could have a material adverse effect on our business, financial condition, results of operations and cash flows.
If an anticipated contract award is delayed or not received, we may incur additional costs resulting from reductions in staff or redundancy of facilities that could have a material adverse effect on our business, financial condition, results of operations and cash flows. Following contract award, we may also encounter significant expense, delay, contract modifications or even contract loss.
The COVID-19 pandemic and other pandemics, epidemics, outbreaks of infectious diseases or public health crises have disrupted our business and could have a material adverse effect on our future results of operations and financial performance.
Global pandemics, epidemics, outbreaks of infectious diseases or public health crises have disrupted our business and could have a material adverse effect on our future results of operations and financial performance.
As we are limited in our ability to provide information about these contracts and services, such as the scope of work, associated risks and any disputes or claims, our investors may have limited insight into a substantial portion of our business which may hinder their ability to fully evaluate the risks related to that portion of our business. 31 Demand for our services provided under government contracts are directly affected by spending by our customers.
As we are limited in our ability to provide information about these contracts and services, such as the scope of work, associated risks and any disputes or claims, our investors may have limited insight into a substantial portion of our business which may hinder their ability to fully evaluate the risks related to that portion of our business.
Our Senior Credit Facility imposes restrictions that limit our operating flexibility and may result in additional expenses, and such facility may not be available if financial covenants are violated or if an event of default occurs. Our Senior Credit Facility includes a $1 billion revolving credit facility which matures in November 2026.
Our Senior Credit Facility imposes restrictions that limit our operating flexibility and may result in additional expenses, and such facility may not be available if financial covenants are violated or if an event of default occurs.
At December 31, 2022, our defined benefit pension plans had an aggregate funding surplus (calculated as the excess of fair value of plan assets over the projected benefit obligations) of approximately $35 million.
At December 29, 2023, our defined benefit pension plans had an aggregate funding deficit (calculated as the excess of the projected benefit obligations over the fair value of plan assets) of approximately $15 million.
Our use of this accounting method results in recognition of revenues and profits over the life of a contract, based generally on the proportion of costs incurred to date to total costs expected to be incurred for the entire project.
A significant portion of our revenues and profits are measured and recognized over time using the cost-to-cost method of revenue recognition. Our use of this accounting method results in recognition of revenues and profits over the life of a contract, based on the proportion of costs incurred to date to total costs expected to be incurred for the entire project.
Systems implementation disruption and any other information technology disruption, if not anticipated and appropriately mitigated, could have a material adverse effect on our business. 28 In addition, laws and regulations governing data privacy and the unauthorized disclosure of personal data, including the European Union General Data Protection Regulation ("GDPR"), the United Kingdom Data Protection Act, the California Consumer Privacy Act, the California Privacy Rights Act and other emerging U.S. state and global privacy laws pose increasingly complex compliance challenges and potentially elevate costs and may require changes to our business practices resulting from the variation of regulatory requirements and increased enforcement frequency.
In addition, laws and regulations governing data privacy and the unauthorized disclosure of personal data, including the European Union General Data Protection Regulation ("GDPR"), the United Kingdom Data Protection Act, the California Consumer Privacy Act, the California Privacy Rights Act and other emerging U.S. state and global privacy laws pose increasingly complex compliance challenges and potentially elevate costs and may require changes to our business practices resulting from the variation of regulatory requirements and increased enforcement frequency.
We cannot predict the impact that future economic conditions may have on our backlog, which could include a diminished ability to replace backlog once projects are completed or could result in the termination, modification or suspension of projects currently in our backlog. Such developments could have a material adverse effect on our financial condition, results of operations and cash flows.
We cannot predict the impact that future economic conditions may have on our backlog, which could include a diminished ability to replace backlog once projects are completed or could result in the termination, modification or suspension of projects currently in our backlog.
The reimagined KBR and its forward-looking solutions strategy requires talent with dynamic and elite skills as KBR moves upmarket.
KBR's forward-looking strategy requires talent with dynamic and elite skills as KBR moves upmarket.
In some cases, we maintain and bear the cost of a ready workforce that is larger than necessary under existing contracts in expectation of future workforce needs for anticipated contract awards.
The uncertainty of our contract award timing can also present difficulties in matching workforce size with contract needs. In some cases, we maintain and bear the cost of a ready workforce that is larger than necessary under existing contracts in expectation of future workforce needs for anticipated contract awards.
We may lack sufficient resources to continue to make the significant technology investments to effectively compete with our competitors. Certain technology initiatives that management considers important to our long-term success will require capital investment, have significant risks associated with their execution and could take several years to implement.
Certain technology initiatives that management considers important to our long-term success will require capital investment, have significant risks associated with their execution and could take several years to implement.
If any future indebtedness under our Senior Credit Facility is accelerated, we can provide no assurance that our assets would be sufficient to repay such indebtedness in full. On February 6, 2023, we amended our Senior Credit Facility (Amendment No. 8 to our Senior Credit Facility) to transition from LIBOR to SOFR.
If any future indebtedness under our Senior Credit Facility is accelerated, we can provide no assurance that our assets would be sufficient to repay such indebtedness in full.
Furthermore, there is risk of mass casualty or environmentally damaging events that may involve our and third-party personnel and property, which could lead to future claims and litigation, impact our reputation and investor confidence and ultimately result in reduced share price.
Furthermore, there is risk of mass casualty or environmentally damaging events that may involve our and third-party personnel and property, which could lead to future claims and litigation, impact our reputation and investor confidence and ultimately result in reduced share price. 22 We occasionally bring claims against project owners for additional costs exceeding the contract price or for amounts not included in the original contract price.
It is particularly difficult to predict whether or when we will receive large-scale international and domestic projects as these contracts usually involve a lengthy and complex bidding and selection process. This process can be affected by a number of factors including market conditions and governmental and environmental approvals.
It is particularly difficult to predict whether or when we will receive large-scale international and domestic projects as these contracts usually involve a lengthy and complex bidding and selection process.
Certain work sites often expose our employees and others to chemical and manufacturing processes, large pieces of mechanized equipment and moving vehicles. Additionally, our employees and others at certain project sites may be exposed to severe weather events or high security risks. Failure to implement effective safety procedures may result in injury, disability or loss of life to these parties.
Certain work sites often expose our employees and others to chemical and manufacturing processes, highly-regulated materials, large pieces of mechanized equipment and moving vehicles. Additionally, our employees and others at certain project sites may be exposed to severe weather events or high security risks.
We cannot guarantee that the revenues projected in our backlog will be realized or that the projects will be profitable. Many of our contracts are subject to cancellation, termination or suspension at the discretion of the customer.
As of December 29, 2023, the future revenues we expect to realize as a result of backlog was approximately $17.3 billion. We cannot guarantee that the revenues projected in our backlog will be realized or that the projects will be profitable. Many of our contracts are subject to cancellation, termination or suspension at the discretion of the customer.
If we are required or elect to make up all or a significant portion of the deficit for any underfunded benefit plans, our financial position could be materially and adversely affected. Our U.K. defined benefit pension plan has had in the past, and may have in the future, an aggregate funding deficit.
If we are required or elect to make up all or a significant portion of the deficit for any underfunded benefit plans, our financial position could be materially and adversely affected.
If the contract is significant, or we encounter issues that impact multiple contracts, cost overruns could have a material adverse effect on our business, financial condition and results of operations.
If the contract is significant, or we encounter issues that impact multiple contracts, cost overruns could have a material adverse effect on our business, financial condition and results of operations. Our backlog of unfilled orders is subject to unexpected adjustments and cancellations and, therefore, may not be a reliable indicator of our future revenues or earnings.
A failure to recover on these types of claims fully or promptly could have a material adverse impact on our liquidity and financial results. 24 For example, we have a 30% ownership interest in JKC, which was contracted to perform the engineering, procurement, supply, construction and commissioning of onshore LNG facilities for a client in Darwin, Australia (the "Ichthys LNG Project").
For example, we have a 30% ownership interest in JKC, which was contracted to perform the engineering, procurement, supply, construction and commissioning of onshore LNG facilities for a client in Darwin, Australia (the "Ichthys LNG Project").
To successfully fund and complete such potential acquisitions, or to refinance our existing debt, we may issue additional equity securities that may result in dilution of our existing shareholder ownership's earnings per share. In addition, in connection with the pricing of the Convertible Notes, we entered into convertible note hedge transactions with certain option counterparties.
To successfully fund and complete such potential acquisitions, or to refinance our existing debt, we may issue additional equity securities that may result in dilution of our existing shareholder ownership's earnings per share. For example, we have previously issued convertible notes and may again in the future issue additional convertible notes.
Adverse changes in the equity markets, interest rates or actuarial assumptions and legislative or other regulatory actions could increase the risk that the funding requirements increase following the next triennial negotiation.
Adverse changes in the equity markets, interest rates or actuarial 32 assumptions and legislative or other regulatory actions could increase the risk that the funding requirements increase following the next triennial negotiation. A significant increase in our funding requirements for our U.K. pension plan could result in a material adverse effect on our cash flows and financial position.
Our ability to mitigate our foreign exchange risk through hedging transactions may be limited. We generally attempt to denominate our contracts in U.S. dollars or in the currencies of our costs. However, we enter into contracts that subject us to currency risk exposure, primarily when our contract revenues are denominated in a currency different from the contract costs.
We are subject to foreign currency exchange risks that could adversely affect our results of operations and our ability to reinvest earnings from operations. Our ability to mitigate our foreign exchange risk through hedging transactions may be limited. We generally attempt to denominate our contracts in U.S. dollars or in the currencies of our costs.
If we are unable to attract and retain a sufficient number of elite skilled professionals, our ability to pursue projects may be adversely affected, our operating income may decline, and our reputation may be damaged. Our future success depends on the continued services of our executive officers as well as our ability to effectively transition to their successors.
If we are unable to attract and retain a sufficient number of elite skilled professionals with appropriate government qualifications, our ability to pursue projects may be adversely affected, our operating income may decline, and our reputation may be damaged.
Internal or external cybersecurity or privacy breaches, or systems and information technology interruption or failure could adversely impact our ability to operate or expose us to significant financial losses and reputational harm.
In addition, despite safety precautions, military action or unrest could disrupt our operations in such locations and elsewhere and increase our costs related to security worldwide. Internal or external cybersecurity or privacy breaches, or systems and information technology interruption or failure could adversely impact our ability to operate or expose us to significant financial losses and reputational harm.
We continuously evaluate the need to upgrade and/or replace our systems and network infrastructure to protect our computing environment, to stay current on vendor supported products and to improve the efficiency of our systems and for other business reasons.
Any of these events could damage our reputation, cause us to incur significant liability and have a material adverse effect on our business, financial condition and results of operations. 26 We continuously evaluate the need to upgrade and/or replace our systems and network infrastructure to protect our computing environment, to stay current on vendor supported products and to improve the efficiency of our systems and for other business reasons.
To the extent commodity prices decline or fluctuate, or the perceived risk thereof, and our customers defer new investments or cancel or delay existing projects, the demand for our services may decrease, which could have a material adverse impact on our business, financial condition and results of operations.
To the extent commodity prices decline or fluctuate, or the perceived risk thereof, and our customers defer new investments or cancel or delay existing projects, the demand for our services may decrease, which could have a material adverse impact on our business, financial condition and results of operations. 30 Risks Related to Financial Conditions and Markets Current or future economic conditions, including recession or inflation, in the credit markets may negatively affect the ability to operate our or our customers’ businesses, finance working capital, implement our acquisition strategy and access our cash and short-term investments.
These competitive pressures in our market or our failure to compete effectively may result in fewer orders, reduced revenue and margins and loss of market share. Some of our U.S. government work requires KBR and certain of its employees to qualify for and retain a government-issued security clearance.
These competitive pressures in our market or our failure to compete effectively may result in fewer orders, reduced revenue and margins and loss of market share.
These projects typically include the facilitation of nonrecourse financing, the design and construction of facilities, the provision of operation and maintenance services and warranty obligations for an agreed-upon period after the facilities have been completed. We may incur contractually reimbursable costs and typically make investments prior to an entity achieving operational status or receiving project financing.
These projects include the facilitation of nonrecourse financing, the design and construction of facilities, the provision of operation and maintenance services and warranty obligations for an agreed-upon period after the facilities have been completed. If a project is unable to obtain financing, we could incur losses on our investments and any related contractual receivables.
Our inability to attract, develop and retain qualified employees that can succeed our executive officers could have a material adverse effect on our operating income and reputation. The nature of our business exposes us to potential liability claims and contract disputes that may exceed or be excluded from existing insurance coverage.
The nature of our business exposes us to potential liability claims and contract disputes that may exceed or be excluded from existing insurance coverage.
It is strategically important that we lead the digital transformation occurring in our industry. We may not be successful in structuring our technology or developing, acquiring or implementing technology systems in ways that are competitive and responsive to the needs of our customers.
However, we may not be successful in structuring our technology or developing, acquiring or implementing technology systems in ways that are competitive and responsive to the needs of our customers. We may lack sufficient resources to continue to make the significant technology investments to effectively compete with our competitors.
An inability to obtain or retain our facility security clearances or engage employees with the required security clearances for a particular contract could disqualify us from bidding for and winning new contracts with security requirements as well as result in the termination of any existing contracts requiring such clearances. 30 Our U.S. government contract work is regularly reviewed and audited by the U.S. government, U.S. government auditors and others, and these reviews can lead to withholding or delay of payments to us, non-receipt of award fees, legal actions, fines, penalties and liabilities and other remedies against us.
Our U.S. government contract work is regularly reviewed and audited by the U.S. government, U.S. government auditors and others, and these reviews can lead to withholding or delay of payments to us, non-receipt of award fees, legal actions, fines, penalties and liabilities and other remedies against us.
If we are unable to hire or retain employees with adequate security clearances, we may be unable to perform our obligations to customers. We currently hold U.S. government-issued facility security clearances and a large number of our employees have qualified for and hold U.S. government-issued personal security clearances necessary to qualify for and ultimately perform certain U.S. government contracts.
We currently hold U.S. government-issued facility security clearances and a large number of our employees have qualified for and hold U.S. government-issued personal security clearances necessary to ultimately perform certain U.S. government contracts. Obtaining and maintaining security clearances for employees involves lengthy processes, and it is difficult to identify, recruit and retain employees who already hold security clearances.
As a result, our business and financial performance could be materially and adversely affected. 23 We may not properly leverage or appropriately invest in technology advancements, which could diminish any sustainable competitive advantage in our service offerings resulting in the potential loss of market share and profits.
We may not properly leverage or appropriately invest in technology advancements, which could diminish any sustainable competitive advantage in our service offerings resulting in the potential loss of market share and profits. Our business is dependent on information technology as we operate in global markets with customers who demand innovation, technical and domain expertise and digitally-enabled, technology-led solutions.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWhile we have operations worldwide, the following table describes the locations of our more significant existing office facilities: Location Owned/Leased Business Segment North America: Houston, Texas Leased All Fulton, Maryland Leased Government Solutions Columbia, Maryland Leased Government Solutions Lexington Park, Maryland Leased Government Solutions Chantilly, Virginia Leased Government Solutions Vienna, Virginia Leased Government Solutions Fairfax, Virginia Leased Government Solutions Dayton/Beavercreek, Ohio Leased Government Solutions Huntsville, Alabama Leased Government Solutions Phoenix, Arizona Leased Government Solutions Europe, Middle East and Africa: Leatherhead, United Kingdom Owned All Glasgow, United Kingdom Leased Government Solutions Wiltshire, United Kingdom Leased / Owned Government Solutions Al Khobar, Saudi Arabia Leased Sustainable Technology Solutions Asia-Pacific: Chennai, India Leased All Majura Park, Australia Leased Government Solutions Delhi (Gurgaon), India Leased Sustainable Technology Solutions Brisbane, Australia Leased Government Solutions Sydney, Australia Leased Government Solutions Melbourne, Australia Leased Government Solutions We also own or lease numerous small facilities that include sales, administrative and offices as well as warehouses and equipment yards located throughout the world.
Biggest changeWhile we have operations worldwide, the following table describes the locations of our more significant existing office facilities: Location Owned/Leased Business Segment North America: Houston, Texas Leased All Fulton, Maryland Leased Government Solutions Columbia, Maryland Leased Government Solutions Lexington Park, Maryland Leased Government Solutions Chantilly, Virginia Leased Government Solutions Vienna, Virginia Leased Government Solutions Fairfax, Virginia Leased Government Solutions Dayton/Beavercreek, Ohio Leased Government Solutions Huntsville, Alabama Leased Government Solutions Phoenix, Arizona Leased Government Solutions El Segundo, California Leased Government Solutions Newark, Delaware Leased Sustainable Technology Solutions Europe, Middle East and Africa: Leatherhead, United Kingdom Owned All Glasgow, United Kingdom Leased Government Solutions Wiltshire, United Kingdom Leased / Owned Government Solutions Al Khobar, Saudi Arabia Leased Sustainable Technology Solutions Asia-Pacific: Chennai, India Leased All Majura Park, Australia Leased Government Solutions Delhi (Gurgaon), India Leased Sustainable Technology Solutions Brisbane, Australia Leased Government Solutions Sydney, Australia Leased Government Solutions Melbourne, Australia Leased Government Solutions We also own or lease numerous small facilities that include sales, administrative and offices as well as warehouses and equipment yards located throughout the world.
Our owned Leatherhead property is pledged to secure certain pension obligations in the U.K. and we believe all properties that we currently occupy are suitable for their intended use. 39
Our owned Leatherhead property is pledged to secure certain pension obligations in the U.K., and we believe all properties that we currently occupy are suitable for their intended use. 40

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeRisk Factors” contained in Part I of this Annual Report on Form 10-K and in Notes 6, 14 and 15 to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part I, Item 3. Item 4.
Biggest changeRisk Factors” contained in Part I of this Annual Report on Form 10-K and in Notes 6, 13 and 14 to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part I, Item 3. Item 4.
Mine Safety Disclosures Not applicable. 40 PART II
Mine Safety Disclosures Not applicable. 41 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOn October 18, 2022, the Board of Directors authorized an increase of approximately $420 million to our share repurchase program, increasing the authorization level to $500 million. As of December 31, 2022, $451 million remains available for repurchase under this authorization.
Biggest changeAs of December 29, 2023, $326 million remains available for repurchase under this authorization. On February 19, 2024, the Board of Directors authorized $174 million of share repurchases to be added to the prior authorizations. After the authorization on February 19, 2024, $500 million remains authorized and available for repurchase under this program.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the NYSE and trades under the symbol “KBR.” We have declared a dividend in each quarter during the years ended December 31, 2022 and 2021, and we currently expect that comparable quarterly cash dividends will continue to be paid for the foreseeable future.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the NYSE and trades under the symbol “KBR.” We have declared a dividend in each quarter during the years ended December 29, 2023 and December 31, 2022, and we currently expect that comparable quarterly cash dividends will continue to be paid for the foreseeable future.
The following performance graph compares the cumulative total shareholder return on shares of our common stock for the five-year period ended December 31, 2022, with the cumulative total return on the S&P 1500 IT Consulting & Other Services Index, the Russell 1000 Index, the Russell 2000 Index, the S&P MidCap 400 Index and the Dow Jones Heavy Construction Industry Index for the same period.
The following performance graph compares the cumulative total shareholder return on shares of our common stock for the five-year period ended December 29, 2023, with the cumulative total return on the S&P 1500 IT Consulting & Other Services Index, the Russell 1000 Index, the S&P MidCap 400 Index and the Dow Jones Heavy Construction Industry Index for the same period.
The declaration, payment and amount of future cash dividends will be at the discretion of our Board of Directors. On February 10, 2023, the Board of Directors declared a dividend of $0.135 per share, which will be paid on April 14, 2023. At January 31, 2023, there were 64 shareholders of record.
The declaration, payment and amount of future cash dividends will be at the discretion of our Board of Directors. On February 19, 2024, the Board of Directors declared a dividend of $0.15 per share, which will be paid on April 15, 2024. At January 31, 2024, there were 59 shareholders of record.
The following is a summary of share repurchases of our common stock settled during the three months ended December 31, 2022, and the amount available to be repurchased under the authorized share repurchase program: Purchase Period Total Shares Repurchased (1) Average Price Paid per Share Shares Repurchased as Part of Publicly Announced Plan Dollar Value of Maximum Number of Shares that May Yet Be Purchased Under the Plan October 1 - 31, 2022 1,160,197 $ 46.82 1,160,197 $ 475,074,729 November 1 - 30, 2022 457,660 $ 50.48 451,938 $ 452,257,517 December 1 - 31, 2022 30,143 $ 51.48 21,046 $ 451,171,009 Total 1,648,000 $ — 1,633,181 $ 451,171,009 (1) Included within the shares repurchased herein are 14,819 shares acquired from employees in connection with the settlement of income tax and related benefit withholding obligations arising from issuance of share-based equity awards under the KBR Stock and Incentive Plan at an average price of $50.51 per share. 41 Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall the information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference into such filing.
The following is a summary of share repurchases of our common stock settled during the three months ended December 29, 2023, and the amount available to be repurchased under the authorized share repurchase program: Purchase Period Total Shares Repurchased (1) Average Price Paid per Share Shares Repurchased as Part of Publicly Announced Plan Dollar Value of Maximum Number of Shares that May Yet Be Purchased Under the Plan September 30, 2023 — $ — — $ 326,215,513 October 1 - 31, 2023 72 $ 58.15 — $ 326,215,513 November 1 - 30, 2023 10,088 $ 58.24 — $ 326,215,513 December 1 - 29, 2023 11,096 $ 53.30 — $ 326,215,513 Total 21,256 $ — — $ 326,215,513 (1) Included within the shares repurchased herein are 21,256 shares acquired from employees in connection with the settlement of income tax and related benefit withholding obligations arising from issuance of share-based equity awards under the KBR Stock and Incentive Plan at an average price of $55.66 per share. 42 Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall the information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that the Company specifically incorporates it by reference into such filing.
In calculating the number of shareholders, we consider clearing agencies and security position listings as one shareholder for each agency or listing. Share Repurchases On February 25, 2014, the Board of Directors authorized a plan to repurchase up to $350 million of our outstanding shares of common stock, which replaced and terminated the August 26, 2011 share repurchase program.
In calculating the number of shareholders, we consider clearing agencies and security position listings as one shareholder for each agency or listing. Share Repurchases On February 25, 2014, the Board of Directors authorized a $350 million share repurchase program. On October 18, 2022, the Board of Directors authorized an increase to the total authorization level to $500 million.
The comparisons assume the investment of $100 on December 31, 2017 and reinvestment of all dividends. The shareholder return is not necessarily indicative of future performance.
The comparisons assume the investment of $100 on December 31, 2018 and reinvestment of all dividends.
Removed
As of December 31, 2019, $160 million remained available under this authorization. On February 19, 2020, the Board of Directors authorized an increase of approximately $190 million to our share repurchase program, returning the authorization level to $350 million. As of December 31, 2021, $225 million remained available for repurchase under this authorization.
Added
The shareholder return is not necessarily indicative of future performance. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/29/2023 KBR $ 100.00 $ 203.62 $ 210.06 $ 327.00 $ 366.03 $ 387.71 S&P 1500 IT Consulting & Other Services $ 100.00 $ 130.23 $ 147.73 $ 203.78 $ 155.69 $ 197.65 Russell 1000 $ 100.00 $ 131.43 $ 158.98 $ 201.03 $ 162.58 $ 205.72 S&P MidCap 400 $ 100.00 $ 126.20 $ 143.44 $ 178.95 $ 155.58 $ 181.15 Dow Jones Heavy Construction $ 100.00 $ 134.15 $ 162.88 $ 243.89 $ 280.60 $ 337.69 43 Item 6. [Reserved] 44
Removed
As KBR is no longer a constituent of the Russell 2000 index and is now a constituent of the Russell 1000 index, the Russell 2000 index will be removed from this performance graph and will be replaced by the Russell 1000 index going forward. 12/31/2017 12/31/2018 12/31/2019 12/30/2020 12/31/2021 12/31/2022 KBR $ 100.00 $ 77.96 $ 158.74 $ 163.76 $ 254.92 $ 285.35 S&P 1500 IT Consulting & Other Services $ 100.00 $ 85.45 $ 111.27 $ 126.23 $ 174.12 $ 133.03 Russell 1000 $ 100.00 $ 95.22 $ 125.14 $ 151.37 $ 191.42 $ 154.80 Russell 2000 $ 100.00 $ 88.99 $ 111.70 $ 134.00 $ 153.85 $ 122.41 S&P MidCap 400 $ 100.00 $ 88.92 $ 112.21 $ 127.54 $ 159.12 $ 138.34 Dow Jones Heavy Construction $ 100.00 $ 73.89 $ 99.12 $ 120.35 $ 180.21 $ 207.33 42 Item 6. [Reserved] 43

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeFinancial Statements and Supplementary Data 63 Report of Independent Registered Public Accounting Firm 64 FINANCIAL STATEMENTS Consolidated Statements of Operations 66 Consolidated Statement of Comprehensive Income (Loss) 67 Consolidated Balance Sheets 68 Consolidated Statements of Shareholders’ Equity 69 Consolidated Statements of Cash Flows 70 Notes to Consolidated Financial Statements 72
Biggest changeFinancial Statements and Supplementary Data 64 Report of Independent Registered Public Accounting Firm 65 FINANCIAL STATEMENTS Consolidated Statements of Operations 67 Consolidated Statement of Comprehensive Income (Loss) 68 Consolidated Balance Sheets 69 Consolidated Statements of Shareholders’ Equity 70 Consolidated Statements of Cash Flows 71 Notes to Consolidated Financial Statements 73
Item 6. [Reserved] 43 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 44 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 62 Item 8.
Item 6. [Reserved] 44 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 45 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 62 Item 8.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeConsolidated Results Years Ended December 31, Change 2022 vs. 2021 2021 vs. 2020 Dollars in millions 2022 2021 (1) 2020 (1) $ % $ % Revenues $ 6,564 $ 7,339 $ 5,767 $ (775) (11) % $ 1,572 27 % Cost of revenues $ (5,736) $ (6,533) $ (5,101) $ (797) (12) % $ 1,432 28 % Gross profit $ 828 $ 806 $ 666 $ 22 3 % $ 140 21 % Equity in earnings (losses) of unconsolidated affiliates $ (80) $ (170) $ 30 $ 90 53 % $ (200) n/m Selling, general and administrative expenses $ (420) $ (393) $ (335) $ 27 7 % $ 58 17 % Acquisition and integration related costs $ (2) $ (12) $ (9) $ (10) (83) % $ 3 33 % Gain on disposition of assets and investments $ 19 $ 2 $ 18 $ 17 n/m $ (16) 89 % Goodwill impairment $ — $ — $ (99) $ — n/m $ (99) (100) % Restructuring charges, asset impairments and other $ (2) $ (2) $ (214) $ — — % $ (212) (99) % Operating income $ 343 $ 231 $ 57 $ 112 48 % $ 174 305 % Interest expense $ (87) $ (80) $ (72) $ 7 9 % $ 8 11 % Unrealized gain on other investment $ 16 $ 4 $ — $ 12 300 % $ 4 n/m Other non-operating income (expense) $ 12 $ (9) $ 1 $ 21 n/m $ (10) n/m Income (loss) before income taxes $ 284 $ 146 $ (14) $ 138 95 % $ 160 n/m Provision for income taxes $ (92) $ (111) $ (28) $ (19) (17) % $ 83 296 % Net income (loss) $ 192 $ 35 $ (42) $ 157 449 % $ 77 183 % Net income attributable to noncontrolling interests $ 2 $ 8 $ 21 $ (6) (75) % $ (13) (62) % Net income (loss) attributable to KBR $ 190 $ 27 $ (63) $ 163 604 % $ 90 143 % (1) As adjusted for the adoption of ASU 2020-06 using the full retrospective method. n/m - not meaningful Revenues.
Biggest changeConsolidated Results Year Ended Change December 29, December 31, December 31, 2023 vs. 2022 2022 vs. 2021 Dollars in millions 2023 2022 2021 $ % $ % Revenues $ 6,956 $ 6,564 $ 7,339 $ 392 6 % $ (775) (11) % Cost of revenues $ (5,979) $ (5,736) $ (6,533) $ 243 4 % $ (797) (12) % Gross profit $ 977 $ 828 $ 806 $ 149 18 % $ 22 3 % Equity in earnings (losses) of unconsolidated affiliates $ 114 $ (80) $ (170) $ 194 n/m $ 90 53 % Selling, general and administrative expenses $ (488) $ (420) $ (393) $ 68 16 % $ 27 7 % Legal settlement of legacy matter $ (144) $ — $ — $ 144 n/m $ — — % Gain (loss) on disposition of assets and investments $ (7) $ 19 $ 2 $ (26) n/m $ 17 n/m Other $ (4) $ (4) $ (14) $ — — % $ (10) (71) % Operating income $ 448 $ 343 $ 231 $ 105 31 % $ 112 48 % Interest expense $ (115) $ (87) $ (80) $ 28 32 % $ 7 9 % Unrealized gain on other investment $ — $ 16 $ 4 $ (16) n/m $ 12 300 % Charges associated with Convertible Notes $ (494) $ — $ — $ 494 n/m $ — — % Other non-operating income (expense) $ (5) $ 12 $ (9) $ (17) n/m $ 21 n/m Income (loss) before income taxes $ (166) $ 284 $ 146 $ (450) n/m $ 138 95 % Provision for income taxes $ (95) $ (92) $ (111) $ 3 3 % $ (19) (17) % Net income (loss) $ (261) $ 192 $ 35 $ (453) n/m $ 157 449 % Less: Net income attributable to noncontrolling interests $ 4 $ 2 $ 8 $ 2 100 % $ (6) (75) % Net income (loss) attributable to KBR $ (265) $ 190 $ 27 $ (455) n/m $ 163 604 % n/m - not meaningful Revenues.
Our international cash balances may be available for general corporate purposes but are subject to local restrictions, such 52 as capital adequacy requirements and maintaining sufficient cash balances to support our U.K. pension plan and other obligations incurred in the normal course of business by those foreign entities.
Our international cash balances may be available for general corporate purposes but are subject to local restrictions, such as capital adequacy requirements and maintaining sufficient cash balances to support our U.K. pension plan and other obligations incurred in the normal course of business by those foreign entities.
This was partially offset by our first payment related to an additional investment of $61 million in Mura Technology, $71 million in 53 capital expenditures, $13 million net cash paid upon divestiture of a joint venture acquired as part of a historical GS acquisition and $73 million net cash used for the acquisition of VIMA.
This was partially offset by our first payment related to an additional investment of $61 million in Mura Technology, $71 million in capital expenditures, $13 million net cash paid upon divestiture of a joint venture acquired as part of a historical GS acquisition and $73 million net cash used for the acquisition of VIMA.
We recognize revenue over time on our services provided to joint ventures that we consolidate and our services provided to joint ventures that we record under the equity method of accounting. See Note 10 to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for more information.
We recognize revenue over time on our services provided to joint ventures that we consolidate and our services provided to joint ventures that we record under the equity method of accounting. See Note 9 to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for more information.
The cost-to-cost method of revenue recognition requires us to prepare estimates of cost to complete for contracts in progress. Due to the nature of the work performed on many of our performance obligations, the estimates of total revenue and 58 cost at completion is complex, subject to many variables and require significant judgment.
The cost-to-cost method of revenue recognition requires us to prepare estimates of cost to complete for contracts in progress. Due to the nature of the work performed on many of our performance obligations, the estimates of total revenue and cost at completion is complex, subject to many variables and require significant judgment.
In June 2022, KBR and the Trustee executed an agreement requiring minimum annual contributions of approximately £33 million ($39 million at current exchange rates) for the period through March 2028. This schedule of contributions will be reviewed by the Trustee and KBR no later than 15 months after the effective date of each actuarial valuation, due every three years.
In June 2022, KBR and the Trustee executed an agreement requiring minimum annual contributions of approximately £33 million (approximately $42 million at current exchange rates) for the period through March 2028. This schedule of contributions will be reviewed by the Trustee and KBR no later than 15 months after the effective date of each actuarial valuation, due every three years.
While we have the option to proceed directly to the quantitative test, for 2022, management performed a qualitative impairment assessment of our reporting units, of which there were no indications that it was more likely than not that the fair value of our reporting units were less than their respective carrying values.
While we have the option to proceed directly to the quantitative test, for 2023, management performed a qualitative impairment assessment of our reporting units, of which there were no indications that it was more likely than not that the fair value of our reporting units were less than their respective carrying values.
Legal Proceedings Information relating to various commitments and contingencies is described in Notes 6, 14 and 15 to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7.
Legal Proceedings Information relating to various commitments and contingencies is described in Notes 6, 13 and 14 to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7.
U.S. Government Matters Information relating to U.S. government matters commitments and contingencies is described in Note 15 to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7.
Government Matters Information relating to U.S. government matters commitments and contingencies is described in Note 14 to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7.
Information relating to our letters of credit is described in Note 12 "Debt and Other Credit Facilities" to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7.
Information relating to our letters of credit is described in Note 11 "Debt and Other Credit Facilities" to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7.
Our capabilities and offerings include the following: • Scientific research such as quantum science and computing; health and human performance; materials science; life science research; and earth sciences; • Defense systems engineering such as rapid prototyping; test and evaluation; aerospace acquisition support; systems and platform integration; and sustainment engineering; • Operational support such as space domain awareness; C5ISR; human spaceflight and satellite operations; integrated supply chain and logistics; and military aviation support; • Information operations such as cyber analytics and cybersecurity; data analytics; mission planning systems; virtual/augmented reality and technical training; artificial intelligence and machine learning; and • Sustainable decarbonization solutions that accelerate and enable energy transition and climate change solutions such as proprietary, sustainability-focused process licensing; advisory services focused on energy transition; high-end engineering, design and management program offerings; and digitally-enabled asset optimization solutions.
Our capabilities and offerings include the following: • Scientific research such as quantum science and computing; health and human performance; materials science; life science research; and earth sciences; • Defense systems engineering such as rapid prototyping; test and evaluation; aerospace acquisition support; systems and platform integration; and sustainment engineering; • Operational support such as space domain awareness; C5ISR; human spaceflight and satellite operations; integrated supply chain and logistics; and military aviation support; • Information operations such as cyber analytics and cybersecurity; data analytics; mission planning systems; virtual/augmented reality and technical training; and artificial intelligence and machine learning; • Professional advisory services across the defense, renewable energy and critical infrastructure sectors; and • Sustainable decarbonization solutions that accelerate and enable energy transition and climate change solutions such as proprietary, sustainability-focused process licensing; advisory services focused on energy transition; high-end engineering, design and management program offerings; and digitally-enabled asset optimization solutions.
U.K. 25-basis-point decrease in discount rate $ — $ (1) $ 1 $ 37 25-basis-point increase in discount rate $ — $ 1 $ (1) $ (35) 25-basis-point decrease in expected long-term rate of return $ — $ 4 N/A N/A 25-basis-point increase in expected long-term rate of return $ — $ (4) N/A N/A Unrecognized actuarial gains and losses are generally recognized using the corridor method over a period of approximately 22 years, which represents a reasonable systematic method for amortizing gains and losses for the employee group.
U.K. 25-basis-point decrease in discount rate $ — $ — $ 1 $ 38 25-basis-point increase in discount rate $ — $ — $ (1) $ (37) 25-basis-point decrease in expected long-term rate of return $ — $ 4 N/A N/A 25-basis-point increase in expected long-term rate of return $ — $ (4) N/A N/A Unrecognized actuarial gains and losses are recognized using the corridor method over a period of approximately 22 years, which represents a reasonable systematic method for amortizing gains and losses for the employee group.
The ultimate timing of settlement of these obligations cannot be determined with reasonable assurance. See Note 13 to our consolidated financial statements for further discussion on income taxes. 57 Transactions with Joint Ventures In the normal course of business, we form incorporated and unincorporated joint ventures to execute projects.
The ultimate timing of settlement of these obligations cannot be determined with reasonable assurance. See Note 12 to our consolidated financial statements for further discussion on income taxes. Transactions with Joint Ventures In the normal course of business, we form incorporated and unincorporated joint ventures to execute projects.
While we believe that the assumptions used are appropriate, differences in actual experience, expectations or changes in assumptions may materially affect our financial position or results of operations. Our actuarial estimates of pension expense and expected return on plan assets are discussed in Note 11 in the accompanying consolidated financial statements. 61
While we believe that the assumptions used are appropriate, differences in actual experience, expectations or changes in assumptions may materially affect our financial position or results of operations. Our actuarial estimates of pension expense and expected return on plan assets are discussed in Note 10 in the accompanying consolidated financial statements.
Senior Credit Facility Information relating to our Senior Credit Facility is described in Note 12 "Debt and Other Credit Facilities" to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7.
Credit Agreement and Senior Credit Facility Information relating to our Senior Credit Facility is described in Note 11 "Debt and Other Credit Facilities" to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7.
We generally include total expected revenues in backlog when a contract is awarded under a legally binding agreement. In many instances, arrangements included in backlog are complex, nonrepetitive and may fluctuate over the contract period due to the release of contracted work in phases by the customer.
We include total estimated revenues in backlog when a contract is awarded under a legally binding agreement. In many instances, arrangements included in backlog are complex, nonrepetitive and may fluctuate over the contract period due to the release of contracted work in phases by the customer.
We expect that the majority of the joint venture cash balances will be utilized for the corresponding joint venture purposes or for paying dividends. As of December 31, 2022, substantially all of our excess cash was held in interest bearing operating accounts or short-term investment accounts with the primary objectives of preserving capital and maintaining liquidity.
We expect that the majority of the joint venture cash balances will be utilized for the corresponding joint venture purposes or for paying dividends. As of December 29, 2023, substantially all of our excess cash was held in interest bearing operating accounts or short-term investment accounts with the primary objectives of preserving capital and maintaining liquidity.
We consider our future U.S. and non-U.S. cash needs as 1) our anticipated foreign working capital requirements, including funding of our U.K. pension plan, 2) the expected growth opportunities across all geographical markets and 3) our plans to invest in strategic growth opportunities, which may include acquisitions around the world, including whether foreign earnings are permanently reinvested.
We consider our future non-U.S. cash needs as 1) our anticipated foreign working capital requirements, including funding of our U.K. pension plan, 2) the expected growth opportunities across all geographical markets and 3) our plans to invest in strategic growth opportunities, which may include acquisitions, joint ventures and other business partnerships around the world, including whether foreign earnings are permanently reinvested.
A discussion regarding our financial condition and results of operations for the years ended December 31, 2021 and 2020 is included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 22, 2022.
A discussion regarding our financial condition and results of operations for the years ended December 31, 2022 and 2021 is included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC on February 17, 2023.
The primary components of our working capital accounts are accounts receivable, contract assets, accounts payable and contract liabilities. These components are impacted by the size and changes in the mix of our cost-reimbursable and time-and-material projects versus fixed price projects, and as a result, fluctuations in these components are not uncommon in our business.
The primary components of our working capital accounts are accounts receivable, contract assets, accounts payable and contract liabilities. These components are impacted by the size and changes in the mix of our cost-reimbursable and time-and-materials projects versus fixed price projects, and as a result, fluctuations in these components are not uncommon in our business. Investing Activities .
Contract Revenue and Contract Estimates . Our policy on revenue recognition is provided in Note 1 to our consolidated financial statements for the year ended December 31, 2022 and is also applied to the revenues of our equity method investments included in equity in earnings of unconsolidated affiliates.
Contract Revenue and Contract Estimates . Our policy on revenue recognition is provided in Note 1 to our consolidated financial statements for the year ended December 29, 2023 and is also applied to the revenues of our equity method investments included in equity in earnings of unconsolidated affiliates.
These decreases were partially offset by $5 million in net proceeds received from the issuance of common stock and $3 million in investments from NCI shareholders.
These decreases were partially offset by $5 million in net proceeds received from the issuance of common stock and $3 million in investments from NCI shareholders. Future sources of cash.
The increase in interest expense was primarily driven by increases in the U.S. federal reserve funds rate in 2022. Unrealized Gain on Other Investment.
The increase in interest expense was primarily driven by increases in the U.S. federal reserve funds rate from 2022 to 2023. Unrealized gain on other investment.
Road Projects. See Note 10 "Equity Method Investments and Variable Interest Entities" for further details.
Road Projects. See Note 9 "Equity Method Investments and Variable Interest Entities" for further details.
The information discussed therein is incorporated by reference into this Part II, Item 7. Recent Accounting Pronouncements Information relating to recent accounting pronouncements is described in Note 23 to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7.
Recent Accounting Pronouncements Information relating to recent accounting pronouncements is described in Note 21 to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7. 58 U.S.
The difference between actual and expected returns is deferred as an unrecognized actuarial gain or loss on our consolidated statement of comprehensive income (loss) and is recognized as a decrease or an increase in future pension expense. Our pretax unrecognized net actuarial loss in accumulated other comprehensive loss at December 31, 2022 was $771 million.
The difference between actual and expected returns is deferred as an unrecognized actuarial gain or loss on our consolidated statement of comprehensive income (loss) and is recognized as a decrease or an increase in future pension expense. Our pretax unrecognized net actuarial loss in accumulated other comprehensive loss at December 29, 2023 was $872 million.
In 2022, we recorded approximately $8 million in net foreign exchanges gains primarily related to foreign exchange impacts from the Australian dollar tranche of Term Loan A that has since been redenominated into U.S. dollars following the execution of an amendment to our existing Credit Agreement in the fourth quarter of 2022.
In 2022, we recorded approximately $8 million in net foreign exchanges gains primarily related to foreign exchange impacts from the Australian dollar tranche of Term Loan A that was redenominated into U.S. dollars following the execution of an amendment to our existing Credit Agreement in the fourth quarter of 2022. Provision for income taxes.
The difference between backlog of $15.6 billion and the remaining performance obligations as defined by ASC 606 of $11.2 billion is primarily due to our proportionate share of backlog related to unconsolidated joint ventures which is not included in our remaining performance obligations. See Note 3 to our consolidated financial statements for discussion of the remaining performance obligations.
The difference between backlog of $17.3 billion and the remaining performance obligations as defined by ASC 606 of $12.7 billion is primarily due to our proportionate share of backlog related to unconsolidated joint ventures which is not included in our remaining performance obligations. See Note 3 "Revenue" to our consolidated financial statements for discussion of the remaining performance obligations.
Remaining billable amounts could be greater or less than the cost to complete the project. If costs exceed the remaining amounts payable under the contract, we may have recourse to third parties, such as owners, subcontractors or vendors for claims. In our joint venture arrangements, the liability of each partner is usually joint and several.
If costs exceed the remaining amounts payable under the contract, we may have recourse to third parties, such as owners, subcontractors or vendors for claims. In our joint venture arrangements, the liability of each partner is usually joint and several.
Change in Fiscal Year End 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 beginning with fiscal year 2023.
Change in Fiscal Year End 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.
Transportation Command lifting the stop work order on the HomeSafe contract in November 2022, we have booked $39 million in backlog as of December 31, 2022 for our transition work.
Transportation Command lifting the stop work order on the HomeSafe contract in November 2022, we have recognized $54 million and $39 million in backlog as of December 29, 2023 and December 31, 2022, respectively, for our transition work.
The total amount of employer pension contributions paid for the year ended December 31, 2022 is $73 million for our defined benefit plan in the U.K. This amount includes an advance payment disbursed in October 2022 to our U.K. pension plan for approximately £29 million of the £33 million required minimum annual contributions for the year ending December 31, 2023.
The total amount of employer pension contributions paid for the year ended December 29, 2023 is $9 million for our defined benefit plan in the U.K. On October 17, 2022, we made an advance payment to our U.K. pension plan for approximately £29 million of the £33 million required minimum annual contributions for the year ending December 29, 2023.
Working capital levels vary from year to year and are primarily affected by the Company's volume of work. These levels are also impacted by the mix, stage of completion and commercial terms of projects. Working capital requirements also vary by project depending on the type of client and location throughout the world.
These levels are also impacted by the mix, stage of completion and commercial terms of projects. Working capital requirements also vary by project depending on the type of client and location throughout the world.
For projects where we act solely in a project management capacity, we only include the expected value of our services in backlog.
In these arrangements, only the amounts authorized are included in backlog. For projects where we act solely in a project management capacity, we only include the expected value of our services in backlog.
Cash Flows The following table summarizes our cash flows for the periods indicated: Years ended December 31, Dollars in millions 2022 2021 2020 Cash flows provided by operating activities $ 396 $ 278 $ 367 Cash flows used in investing activities 37 (428) (877) Cash flows provided by (used in) financing activities (399) 87 225 Effect of exchange rate changes on cash (15) (3) 9 Increase (decrease) in cash and cash equivalents $ 19 $ (66) $ (276) Operating activities .
Cash Flows The following table summarizes our cash flows for the periods indicated: Years ended, December 29, December 31, December 31, Dollars in millions 2023 2022 2021 Cash flows provided by operating activities $ 331 $ 396 $ 278 Cash flows provided by (used in) investing activities (70) 37 (428) Cash flows provided by (used in) financing activities (359) (399) 87 Effect of exchange rate changes on cash 13 (15) (3) Increase (decrease) in cash and cash equivalents $ (85) $ 19 $ (66) 54 Operating Activities .
For more information relating to our Convertible Notes, Note Hedge Transactions and Warrant Transactions, refer to Note 12 "Debt and Other Credit Facilities" to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7.
Senior Notes Information relating to our Senior Notes is described in Note 11 "Debt and Other Credit Facilities" to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7.
Goodwill is tested annually for possible impairment as of October 1 of each fiscal year, and on an interim basis when indicators of possible impairment exist. For purposes of impairment testing, goodwill is assigned to the applicable reporting units based on our current reporting structure.
Goodwill and Intangible Assets . Goodwill is tested annually for possible impairment as of the first day of the fourth fiscal quarter within our fiscal year, and on an interim basis when indicators of possible impairment exist. For purposes of impairment testing, goodwill is assigned to the applicable reporting units based on our current reporting structure.
The following table summarizes our backlog by business segment for the years ended December 31, 2022 and December 31, 2021, respectively: Dollars in millions December 31, 2022 December 31, 2021 Government Solutions $ 11,543 $ 12,628 Sustainable Technology Solutions 4,012 2,345 Total backlog $ 15,555 $ 14,973 We estimate that as of December 31, 2022, 36% of our backlog will be executed within one year.
The following table summarizes our backlog by business segment for the years ended December 29, 2023 and December 31, 2022, respectively: Dollars in millions December 29, 2023 December 31, 2022 Government Solutions $ 12,790 $ 11,543 Sustainable Technology Solutions 4,545 4,012 Total backlog $ 17,335 $ 15,555 We estimate that as of December 29, 2023, 30% of our backlog will be executed within one year.
We estimate the amount of variable consideration at the most likely amount we expect to be entitled and include in the transaction price when it is probable that a significant reversal of cumulative revenue recognized will not occur. Variable consideration associated with claims and unapproved change orders is included in the transaction price only to the extent of costs incurred.
We estimate the amount of variable consideration at the most likely amount we expect to be entitled and include in the transaction price when it is probable that a significant reversal of cumulative revenue recognized will not occur.
In November 2022, the U.K. government announced its intent to maintain its budget to at least 2% of GDP. Recognizing the importance of strong defense and the role the U.K. plays across the globe, the U.K. has prioritized investment in military research and investment in key areas to advance and develop capabilities around artificial intelligence, cyber security and space superiority.
Recognizing the importance of strong defense and the role the U.K. plays across the globe, the U.K. has prioritized investment in military research and investment in key areas to advance and develop capabilities around artificial intelligence, cyber security and space superiority.
The purchase obligations disclosed above do not include purchase obligations that we enter into with vendors in the normal course of business that support direct project costs on existing contracting arrangements with our customers. We expect to recover such obligations from our customers.
The purchase obligations disclosed above do not include purchase obligations that we enter into with vendors in the normal course of business that support direct project costs on existing contracting arrangements with our customers. We expect to recover such obligations from our customers. (e) We have excluded uncertain tax positions totaling $74 million as of December 29, 2023.
Our ability to utilize the unreserved foreign tax credit carryforwards is based on our ability to generate income from foreign sources of approximately $557 million prior to their expiration whereas our ability to utilize other net deferred tax assets exclusive of those associated with indefinite-lived intangible assets is based on our ability to generate U.S. forecasted taxable income of approximately $676 million.
Our ability to utilize the unreserved foreign tax credit carryforwards is based on our ability to generate future taxable income of at least $333 million prior to their expiration whereas our ability to utilize other net deferred tax assets exclusive of those associated with indefinite-lived intangible assets is based on our ability to generate future taxable income of at least $933 million.
Cash and cash equivalents totaled $389 million at December 31, 2022 and $370 million at December 31, 2021 and consisted of the following: December 31, Dollars in millions 2022 2021 Domestic U.S. cash $ 27 $ 34 International cash 255 220 Joint venture and Aspire Defence project cash 107 116 Total $ 389 $ 370 Our cash balances are held in numerous accounts throughout the world to fund our global activities.
Cash and cash equivalents totaled $304 million at December 29, 2023 and $389 million at December 31, 2022 and consisted of the following: December 29, December 31, Dollars in millions 2023 2022 Domestic U.S. cash $ 44 $ 27 International cash 128 255 Joint venture and Aspire Defence project cash 132 107 Total $ 304 $ 389 Our cash balances are held in numerous accounts throughout the world to fund our global activities, including acquisitions, joint ventures and other business partnerships.
In addition, we will use cash to make payments under leases and various other obligations, including potential litigation payments, as they arise. Other factors potentially affecting liquidity Ichthys LNG Project.
Our capital expenditures will be focused primarily on facilities and equipment to support our businesses. In addition, we will use cash to make payments under leases and various other obligations, including potential litigation payments, as they arise. 55 Other factors potentially affecting liquidity Ichthys LNG Project.
The discount rate utilized to calculate the projected benefit obligation at the measurement date for our U.S. pension plan increased to 4.91% at December 31, 2022 from 2.45% at December 31, 2021.
The discount rate used to calculate the projected benefit obligation at the measurement date for our U.S. pension plan decreased to 4.70% at December 29, 2023 from 4.91% at December 31, 2022.
For contracts that contain fixed-price, cost-reimbursable and time-and-materials components, we classify the individual components as either fixed-price, cost-reimbursable or time-and materials according to the composition of the contract; however, for smaller contracts, we characterize the entire contract based on the predominant component.
For contracts that contain fixed-price, cost-reimbursable and time-and-materials components, we classify the individual components as either fixed-price, cost-reimbursable or time-and materials according to the composition of the contract; however, for smaller contracts, we characterize the entire contract based on the predominant component. As of December 29, 2023, $9.2 billion of our GS backlog was currently funded by our customers.
Our Business Segments KBR's business is organized into two core business segments and one non-core business segment as follows: Core business segments • Government Solutions • Sustainable Technology Solutions Non-core business segment • Other See additional information on our business segments in Note 2 to our consolidated financial statements and under "Item 1.
These technologies and engineering solutions enable clients to achieve a cleaner, greener, more energy efficient global future. 45 Our Business Segments KBR's business is organized into two core business segments and one non-core business segment as follows: Core business segments • Government Solutions • Sustainable Technology Solutions Non-core business segment • Other See additional information on our business segments in Note 2 to our consolidated financial statements and under "Item 1.
As of December 31, 2022, $8.3 billion of our GS backlog was currently funded by our customers. 51 As of December 31, 2022, we had approximately $4.2 billion of priced option periods not yet exercised by the customer for U.S. government contracts that are not included in the backlog amounts presented above.
As of December 29, 2023, we had approximately $4.4 billion of priced option periods not yet exercised by the customer for U.S. government contracts that are not included in the backlog amounts presented above.
Our estimates of variable consideration and determination of whether to include such amounts in the transaction price are based largely on our assessment of legal enforceability, anticipated performance and any other information (historical, current or forecasted) that is reasonably available to us. Goodwill and Intangible Assets .
We recognize revenue on cost-reimbursable contracts to the extent it is not probable a significant reversal will occur. Our estimates of variable consideration and determination of whether to include such amounts in the transaction price are based largely on our assessment of legal enforceability, anticipated performance and any other information (historical, current or forecasted) that is reasonably available to us.
These assumptions and estimates are evaluated periodically and are updated accordingly to reflect our actual experience and expectations. The discount rate used to determine the benefit obligations was computed using a yield curve approach that matches plan specific cash flows to a spot rate yield curve based on high quality corporate bonds.
The discount rate used to determine the benefit obligations was computed using a yield curve approach that matches plan specific cash flows to a spot rate yield curve based on high quality corporate bonds.
The discount rate utilized to determine the projected benefit obligation at the measurement date for our U.K. pension plan, which constitutes 98% of all international plans, increased to 5.00% at December 31, 2022 from 1.80% at December 31, 2021.
The discount rate used to determine the projected benefit obligation at the measurement date for our U.K. pension plan, which constitutes 96% of all pension plans, decreased to 4.79% at December 29, 2023 from 5.00% at December 31, 2022.
The potential amount of future payments that we could be required to make under an outstanding performance arrangement is typically the remaining estimated cost of work to be performed by or on behalf of third parties.
The potential amount of future payments that we could be required to make under an outstanding performance arrangement is typically the remaining estimated cost of work to be performed by or on behalf of third parties. For cost-reimbursable contracts, amounts that may become payable pursuant to guarantee provisions are normally recoverable from the client for work performed under the contract.
See Notes 6, 14 and 15 to our consolidated financial statements for further discussion of our significant legal, investigation and other contingent matters. 60 Pensions. Our pension benefit obligations and expenses are calculated using actuarial models and methods.
See Notes 6, 13 and 14 to our consolidated financial statements for further discussion of our significant legal, investigation and other contingent matters. Pensions. Our pension benefit obligations and expenses are calculated using actuarial models and methods. The most critical assumption and estimate used in the actuarial calculations is the discount rate for determining the current value of benefit obligations.
As discussed in Note 12 "Debt and Other Credit Facilities" of our consolidated financial statements, on December 30, 2022, we entered into Amendment No. 7 under our existing Credit Agreement, dated as of April 25, 2018, consisting of a $1 billion revolving credit facility (the "Revolver"), a $442 million Term Loan A, ("Term Loan A") with debt tranches denominated in US dollars, Australian dollars and British pound sterling and a $512 million Term Loan B ("Term Loan B"), with an aggregate capacity of $1.954 billion ("Senior Credit Facility").
As discussed in Note 11 "Debt and Other Credit Facilities" of our consolidated financial statements, we entered into Amendment No. 8 on February 6, 2023, to our existing Credit Agreement, dated as of April 25, 2018, as amended ("Credit Agreement"), consisting 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 recognize claims against suppliers and subcontractors as a reduction in recognized costs when enforceability is established by the contract and the amounts are reasonably estimable and probable of recovery. Reductions in costs are recognized to the extent of the lesser of the amounts management expects to recover or actual costs incurred.
Variable consideration 59 associated with claims and unapproved change orders is included in the transaction price only to the extent of costs incurred. We recognize claims against suppliers and subcontractors as a reduction in recognized costs when enforceability is established by the contract and the amounts are reasonably estimable and probable of recovery.
The decrease in the provision for incomes taxes in 2022 compared to 2021 was primarily driven by the non-deductibility of losses incurred with respect to the settlement of outstanding matters related to the Ichthys LNG project to which KBR is a joint venture partner.
The effective tax rate of 32% for the year ended December 31, 2022 was primarily driven by the non-deductibility of losses incurred with respect to the settlement of outstanding matters related to the Ichthys LNG project to which KBR is a JV partner.
We have recognized on our consolidated balance sheets a funding surplus of $46 million (measured as the difference between the fair value of plan assets and the projected benefit obligation as of December 31, 2022) for our frozen U.K. defined benefit pension plan.
We have recognized on our consolidated balance sheets a funding deficit of approximately $15 million (calculated as the excess of the projected benefit obligations over the fair value of plan assets) as of December 29, 2023) for our frozen U.K. defined benefit pension plan.
We account for both financial and performance guarantees at fair value at issuance in accordance with ASC 460-10 Guarantees and, as of December 31, 2022, we had no material guarantees of the work or obligations of third parties recorded. 56 As of December 31, 2022, we had $1 billion in a committed line of credit under the Senior Credit Facility and $449 million of uncommitted lines of credit to support the issuance of letters of credit.
We account for both financial and performance guarantees at fair value at issuance in accordance with ASC 460-10 Guarantees and, as of December 29, 2023, we had no material guarantees of the work or obligations of third parties recorded.
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. 46 Overview of 2022 Financial Results and Significant Bookings 2022 was a year of significant achievement for KBR as we continued to execute toward our long-term vision.
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. Due to this change in fiscal year, our fiscal year ended on December 29 in 2023 as compared to December 31 in 2022.
Years Ended December 31, Change 2022 vs. 2021 2021 vs. 2020 Dollars in millions 2022 2021 2020 $ % $ % Revenues Government Solutions $ 5,320 $ 6,149 $ 4,055 $ (829) (13) % $ 2,094 52 % Sustainable Technology Solutions 1,244 1,190 1,712 54 5 % (522) (30) % Total revenues $ 6,564 $ 7,339 $ 5,767 $ (775) (11) % $ 1,572 27 % Operating income Government Solutions $ 441 $ 414 $ 355 $ 27 7 % $ 59 17 % Sustainable Technology Solutions 47 (30) (77) 77 n/m 47 61 % Other (145) (153) (221) 8 5 % 68 31 % Operating income $ 343 $ 231 $ 57 $ 112 48 % $ 174 305 % n/m - not meaningful Government Solutions GS revenues decreased by $829 million, or 13%, to $5.3 billion in 2022 compared to $6.1 billion in 2021.
Years Ended Change December 29, December 31, December 31, 2023 vs. 2022 2022 vs. 2021 Dollars in millions 2023 2022 2021 $ % $ % Revenues Government Solutions $ 5,353 $ 5,320 $ 6,149 $ 33 1 % $ (829) (13) % Sustainable Technology Solutions 1,603 1,244 1,190 359 29 % 54 5 % Total revenues $ 6,956 $ 6,564 $ 7,339 $ 392 6 % $ (775) (11) % Operating income Government Solutions $ 285 $ 441 $ 414 $ (156) (35) % $ 27 7 % Sustainable Technology Solutions 324 47 (30) 277 n/m 77 n/m Other (161) (145) (153) (16) (11) % 8 5 % Operating income $ 448 $ 343 $ 231 $ 105 31 % $ 112 48 % n/m - not meaningful Government Solutions GS revenues increased by $33 million, or 1%, to $5,353 million in 2023 compared to $5,320 million in 2022.
We believe this method is the most accurate measure of contract performance because it directly measures the value of the goods and services transferred to the customer.
We believe this method is the most accurate measure of contract performance because it directly measures the value of the goods and services transferred to the customer. For all other contracts we recognize revenue when services are performed which generally coincides with our ability to bill.
The decrease in operating loss is primarily attributed to decreased acquisition and integration costs. 50 Backlog of Unfilled Orders Backlog generally represents the dollar amount of revenues we expect to realize in the future as a result of performing work on contracts and our pro-rata share of work to be performed by our consolidated and unconsolidated joint ventures.
Other Other operating loss remained materially consistent between the years ended December 29, 2023 and December 31, 2022. 51 Backlog of Unfilled Orders Backlog represents the estimated dollar amount of revenues we expect to realize in the future as a result of performing work on contracts and our pro-rata share of work to be performed by our unconsolidated joint ventures.
The following table illustrates the sensitivity to changes in certain assumptions, holding all other assumptions constant, for our pension plans: Effect on Pretax Pension Cost in 2023 Pension Benefit Obligation at December 31, 2022 Dollars in millions U.S. U.K. U.S.
Our expected long-term rates of return on plan assets utilized at the measurement date increased to 6.64% from 6.63% for our U.S. pension plans and increased to 6.79% from 6.00% for our U.K. pension plans, for the years ended December 29, 2023 and December 31, 2022, respectively. 61 The following table illustrates the sensitivity to changes in certain assumptions, holding all other assumptions constant, for our pension plans: Effect on Pretax Pension Cost in 2024 Pension Benefit Obligation at December 29, 2023 Dollars in millions U.S.
We record a valuation allowance to reduce certain deferred tax assets to amounts that are more likely than not to be realized. We evaluate the realizability of our deferred tax assets by assessing the valuation allowance and by adjusting the amount of such allowance, if necessary.
We evaluate the realizability of our deferred tax assets by assessing the valuation allowance and by adjusting the amount of such allowance, if necessary.
Additionally, we made an advance payment in October 2022 to our U.K. pension plan for approximately £29 million of the £33 million required minimum annual contributions for the year ending December 31, 2023. Investing activities .
In 2022, we made an advance payment in October 2022 to our U.K. pension plan for approximately £29 million of the £33 million required minimum annual contributions. No similar advance payments were made in 2023. Additionally, there were increases in operating cash flows from changes in the primary components of our working capital.
We believe that future uses of cash include working capital requirements, joint venture capital calls, capital expenditures, dividends, pension funding obligations, repayments of borrowings, share repurchases and strategic investments including acquisitions. Our capital expenditures will be focused primarily on facilities and equipment to support our businesses.
We believe that future uses of cash include working capital requirements, joint venture capital calls, capital expenditures, dividends, pension funding obligations, repayments of borrowings, share repurchases, legal settlements of any currently outstanding legal matter or any future legal proceeding and strategic investments including acquisitions, joint ventures and other business partnerships.
The 2022 gain on disposition of assets and investments was primarily driven by a gain of $16 million from the sale of our investment interest in three U.K.
This loss was primarily due to $10 million in accumulated foreign currency adjustments that were reclassified from AOCL. In 2022, we recognized a gain on disposition of assets and investments of $16 million primarily from the sale of our investment interest in three U.K. Road investments. Interest Expense.
For cost reimbursable contracts, amounts that may become payable pursuant to guarantee provisions are normally recoverable from the client for work performed under the contract. For lump-sum or fixed-price contracts, the performance guarantee amount is the cost to complete the contracted work, less amounts remaining to be billed to the client under the contract.
For fixed-price contracts, the performance guarantee amount is the cost to complete the contracted work, less amounts remaining to be billed to the client under the contract. Remaining billable amounts could be greater or less than the cost to complete the project.
Under cost-reimbursable contracts, the price is generally variable based upon our actual allowable costs incurred for materials, equipment, reimbursable labor hours, overhead and G&A expenses. The FAR provides guidance on types of costs that are allowable in establishing prices for goods and services provided to the U.S. government and its agencies.
Reductions in costs are recognized to the extent of the lesser of the amounts management expects to recover or actual costs incurred. Under cost-reimbursable contracts, the price is generally variable based upon our actual allowable costs incurred for materials, equipment, reimbursable labor hours, overhead and G&A expenses.
The Australian government continues to invest in defense spending, with particular focus on enhancing regional security, modernizing defense capabilities, strengthening cyber defenses and promoting broader economic stability. In October 2022, the Australian government announced that Australia's defense spending for the 2022 - 2023 financial year will increase by 7.8% to AUD 48.7 billion, or 1.96% of GDP.
The Australian government continues to invest in defense spending, with particular focus on enhancing regional security, modernizing defense capabilities, strengthening cyber defenses and promoting broader economic stability.
The more critical assumption and estimate used in the actuarial calculations is the discount rate for determining the current value of benefit obligations. Other assumptions and estimates used in determining benefit obligations and plan expenses include expected rate of return on plan assets, inflation rates and demographic factors such as retirement age, mortality and turnover.
Other assumptions and estimates used in determining benefit obligations and plan expenses include expected rate of return on plan assets, inflation rates and demographic factors such as retirement age, mortality and turnover. These assumptions and estimates are evaluated periodically and are updated accordingly to reflect our actual experience and expectations.
We can resume the qualitative assessment in any subsequent period for any reporting unit. Deferred Taxes, Valuation Allowances and Tax Contingencies. As discussed in Note 13 to our consolidated financial statements, deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been recognized in our consolidated financial statements or tax returns.
As discussed in Note 12 to our consolidated financial statements, deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. We record a valuation allowance to reduce certain deferred tax assets to amounts that are more likely than not to be realized.
Cash provided by operations totaled $396 million and $278 million in 2022 and 2021, respectively as compared to net income of $192 million and $35 million in 2022 and 2021, respectively. Cash flows from operating activities result primarily from earnings and are affected by changes in operating assets and liabilities, which consist primarily of working capital balances for projects.
Cash flows from operating activities result primarily from earnings and are affected by changes in operating assets and liabilities, which consist primarily of working capital balances for projects. Working capital levels vary from year to year and are primarily affected by the Company's volume of work.
Our proportionate share of backlog for projects related to unconsolidated joint ventures totaled $3.9 billion and $2.6 billion at December 31, 2022 and 2021, respectively. As a result of our continued efforts to wind down operations in Russia, ending STS backlog was reduced by $47 million as of December 31, 2022. Additionally, as a result of U.S.
Our proportionate share of backlog for projects related to unconsolidated joint ventures totaled $4.1 billion at December 29, 2023, and $3.9 billion at December 31, 2022. As a result of U.S.
(b) Determined based on long-term debt borrowings outstanding at the end of 2022 using the interest rates in effect for the individual borrowings as of December 31, 2022, including the effects of interest rate swaps. The payments due for interest reflect the cash interest that will be paid, which includes interest on outstanding borrowings and commitment fees.
See Note 11 "Debt and Other Credit Facilities" for additional information. (b) Determined based on long-term debt borrowings outstanding at the end of 2023 using the interest rates in effect for the individual borrowings as of December 29, 2023, including the effects of interest rate swaps.
Our STS business landed $4.1 billion in bookings, including our proportionate share of Phase 1 of the Plaquemines LNG project and numerous projects across the ammonia landscape, including traditional, blue and green ammonia, multiple Hydro-PRT licenses and studies and other projects spanning carbon capture, utilization and storage, hydrogen, biofuels and renewables. 47 Results of Operations The following tables set forth our results of operations for the periods presented, including by segment.
Our STS business landed various awards during the year, including an award for modifications to the Pluto LNG facility in Australia and numerous projects across the ammonia landscape and various projects spanning carbon capture, utilization and storage, hydrogen, biofuels and renewables. 48 Results of Operations The following tables set forth our results of operations for the periods presented, including by segment.
During 2021, a non-cash charge of $203 million was recorded for the settlement agreement between JKC and its client, Ichthys LNG Pty, Ltd, compared to a $137 million non-cash charge recorded during 2022 for the settlement agreement with the consortium of subcontractors of the Combined Cycle Power Plant.
In 2022, a non-cash charge in the amount of $137 million was recorded associated with the settlement agreement with the consortium of subcontractors of the Combined Cycle Power Plant for the Ichthys LNG Project that did not recur in 2023.
Pricing, including the types of costs that are allowable, for non-U.S. government agencies and commercial customers is based on specific negotiations with each customer. We recognize revenue on cost-reimbursable contracts to the extent it is not probable a significant reversal will occur.
The FAR provides guidance on types of costs that are allowable in establishing prices for goods and services provided to the U.S. government and its agencies. Pricing, including the types of costs that are allowable, for non-U.S. government agencies and commercial customers is based on specific negotiations with each customer.
We recognize potential interest and penalties related to unrecognized tax benefits in income tax expense. Legal, Investigation and Other Contingent Matters. We record liabilities for loss contingencies when it is probable that a liability has been incurred and the amount is reasonably estimable.
We review the facts for each assessment, and then utilize assumptions and estimates to determine the most likely outcome and provide taxes, interest and penalties as needed based on this outcome. Legal, Investigation and Other Contingent Matters. We record liabilities for loss contingencies when it is probable that a liability has been incurred and the amount is reasonably estimable.
Our acquisition thesis is centered around moving upmarket, expanding capabilities and broadening customer sets across strategic growth vectors. KBR also develops and prioritizes investment in technologies that are disruptive, innovative and sustainability- and safety-focused. These technologies and engineering solutions enable clients to achieve a cleaner, greener, more energy efficient global future.
As demonstrated by our acquisitions of Frazer Nash Consultancy Limited, VIMA Group and others in the past few years, our acquisition thesis is centered around moving upmarket, expanding capabilities and broadening customer sets across strategic growth vectors. KBR also develops and prioritizes investment in technologies that are disruptive, innovative and sustainability- and safety-focused.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

10 edited+2 added−1 removed6 unchanged
Biggest changeIn October 2018, we entered into interest rate swap agreements with a notional value of $500 million, where we received one-month LIBOR and paid a monthly fixed rate of 3.055% for the term of the swaps which expired in September 2022.
Biggest changeWe will receive SONIA and pay a fixed rate of 3.81% for the term of the swaps. Additionally, in November 2023, the notional value of our September 2022 interest rate swap agreement expiring January 2027 increased to $350 million. We will receive SOFR and pay a fixed rate of 3.43%.
The fair value of these derivatives was not material to our consolidated balance sheet for the periods presented. For more information, see Note 22 to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7A. Interest Rate Risk.
The fair value of these derivatives was not material to our consolidated balance sheet for the periods presented. For more information, see Note 20 to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7A. Interest Rate Risk.
If interest rates were to increase by 50 basis points, pre-tax interest expense would increase by approximately $3 million in the next twelve months net of the impact from our swap agreements, based on outstanding borrowings as of December 31, 2022. 62
If interest rates were to increase by 50 basis points, pre-tax interest expense would increase by approximately $2 million in the next twelve months net of the impact from our swap agreements, based on outstanding borrowings as of December 29, 2023. 63
We recorded a net gain of $4 million for the years ended December 31, 2022 and December 31, 2020 and a net loss of $8 million for the year ended December 31, 2021 in other non-operating income (expense) on our consolidated statements of operations.
Within other non-operating income (expense) on our consolidated statements of operations, we recorded a net loss of $6 million for the year ended December 29, 2023, a net gain of $4 million for the year ended December 31, 2022 and a net loss of $8 million for the year ended December 31, 2021 .
At December 31, 2022, we had fixed rate debt aggregating $1.3 billion and variable rate debt aggregating $514 million, after taking into account the effects of the interest rate swaps that were effective at December 31, 2022. Our weighted average interest rate for the year ended December 31, 2022 was 4.05%.
At December 29, 2023, we had fixed rate debt aggregating $1,353 million and variable rate debt aggregating $498 million, after taking into account the effects of the interest rate swaps that were effective at December 29, 2023. Our weighted average interest rate for the year ended December 29, 2023 was 5.81%.
We are exposed to market risk for changes in interest rates for the Revolver and term loan borrowings under the Senior Credit Facility. We had $260 million of borrowings outstanding under the Revolver to partially fund the acquisition of Centauri and $904 million outstanding under the term loan portions of the Senior Credit Facility as of December 31, 2022.
We are exposed to market risk for changes in interest rates for the Revolver and term loan borrowings under the Senior Credit Facility. We had $505 million of borrowings issued under the Revolver as of December 29, 2023. Additionally, we had $1,096 million outstanding under the term loan portions of the Senior Credit Facility as of December 29, 2023.
The total fair value of these derivative instruments was a net asset of approximately $48 million as of December 31, 2022, of which $19 million is included in other current assets and $29 million is included in other assets.
The fair value of the interest rate swaps at December 29, 2023 was a $36 million net asset, of which $24 million is included in other current assets, $18 million is included in other assets and $6 million is included in other liabilities.
We will receive one-month LIBOR and pay a monthly fixed rate of 3.507% for the term of the swaps. The swap agreements were designated as cash flow hedges at inception in accordance with ASC Topic 815 Accounting for Derivative and Hedging Transactions .
The swap agreements were designated as cash flow hedges at inception in accordance with ASC Topic 815 Derivative and Hedgi ng .
Borrowings under the Senior Credit Facility bear interest at variable rates as described in Note 12 to our consolidated financial statements. We manage interest rate exposure by entering into interest rate swap agreements pursuant to which we agree to exchange, at specified intervals, the difference between fixed and variable interest amounts calculated on an agreed-upon notional principal amount.
Borrowings under the Senior Credit Facility bear interest at variable rates as described in Note 11 "Debt and Other Credit Facilities" to our consolidated financial statements. 62 We use interest rate swaps to reduce interest rate risk and to manage net interest expense by converting our variable rate debt under our Senior Credit Facility into fixed-rate debt.
In late September 2022 and early October 2022, we entered into additional interest rate swap agreements with an initial notional value of $250 million from the effective date of October 2022 to October 2023. Effective November 2023, the notional value will increase to $350 million through maturity in January 2027.
During the year ended December 29, 2023, we amended all of our existing interest rate swap agreements to term SOFR effective March 2023. In March 2023, we entered into additional USD denominated interest rate swap agreements with a notional value of $205 million effective April 2023 and expiring January 2027.
Removed
In March 2020, we entered into additional swap agreements with a notional value of $400 million, which were effective beginning October 2022 and mature in January 2027. Under the March 2020 swap agreements, we receive one-month LIBOR and pay a monthly fixed rate of 0.965% for the term of the swaps.
Added
We will receive SOFR and pay a fixed rate of 3.61%. We also entered into GBP denominated amortizing swaps with an initial notional value of £118 million that are effective April 2023 and expire in November 2026. As of December 29, 2023, the notional value of the GBP denominated amortizing swaps was £116 million.
Added
Information relating to our portfolio of interest rate swaps is described in Note 20 "Fair Value of Financial Instruments and Risk Management" to our consolidated financial statements, which is incorporated by reference into this Item 7A.

Other KBR 10-K year-over-year comparisons