KBR INC

Previous wording

•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;

Current wording

•Information operations such as cyber analytics and cybersecurity; data analytics; mission planning systems; virtual and augmented reality and technical training; and artificial intelligence and machine learning;

Previous wording

Our deployment priorities are to fund organic growth, maintain responsible leverage, maintain an attractive dividend, make strategic, accretive acquisitions and repurchase shares. 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. These technologies and engineering solutions enable clients to achieve a cleaner, greener, more energy efficient global future.

Current wording

Our deployment priorities are to fund organic growth, maintain responsible leverage, maintain an attractive dividend, make strategic, accretive acquisitions and repurchase shares. 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.

Previous wording

In March 2024, the U.S. government finalized the fiscal 2024 budget. The U.S. government's fiscal 2024 budget was operating under a continuing resolution funding measure from the start of the 2024 U.S. government fiscal year through the passage date of the spending bills in March 2024. Discretionary spending includes approximately $825 billion in defense spending and approximately $703 billion in non-defense discretionary spending. Additionally, the approved 2024 NASA budget is $25 billion. In April 2024, a $61 billion Ukraine Security Assistance supplemental funding bill was enacted to provide ongoing assistance and equipment to the military and national security forces of Ukraine and other forces or groups engaged in resisting Russian aggression against Ukraine.

Current wording

In March 2024, the U.S. government finalized the fiscal 2024 budget. The U.S. government was operating under a continuing resolution funding measure from the start of the 2024 U.S. government fiscal year through the passage date of the spending bills in March 2024. Discretionary spending includes approximately $825 billion in defense spending and approximately $703 billion in non-defense discretionary spending. Additionally, the approved 2024 NASA budget is $25 billion. In April 2024, a $61 billion Ukraine Security Assistance supplemental funding bill was enacted to provide ongoing assistance and equipment to the military and national security forces of Ukraine and other forces or groups engaged in resisting Russian aggression against Ukraine.

Previous wording

In March 2024, President Biden provided his proposed fiscal 2025 budget, which includes $1.6 trillion in discretionary spending, $895 billion related to defense spending and $734 billion for non-defense spending. The requested discretionary spending amounts are consistent with the fiscal 2024 budget. The Fiscal Responsibility Act of 2023 imposed statutory caps on discretionary funding in 2025 that restrict increases within the discretionary budget. This Fiscal Responsibility Act also enacted limits on discretionary funding for the years 2026 through 2029. The proposed fiscal 2025 budget continues to allocate funding to important initiatives from previous year fiscal budgets, including funding to deter aggression in the Indo-Pacific and funding for certain AUKUS-related items. The effect of President Biden's proposed fiscal 2025 budget on individual programs or KBR cannot be predicted at this time. We anticipate the federal budget will continue to be subject to debate and compromise shaped by, among other things, heightened political tensions, the global security environment, inflationary pressures and macroeconomic conditions. The result may be shifting funding priorities, which could have material impacts on defense spending broadly and our programs.

Current wording

In March 2024, President Biden provided his proposed fiscal 2025 budget, which includes $1.6 trillion in discretionary spending, $895 billion related to defense spending and $734 billion for non-defense spending. The requested discretionary spending amounts are consistent with the fiscal 2024 budget. The Fiscal Responsibility Act of 2023 imposed statutory caps on discretionary funding in 2025 that restrict increases within the discretionary budget. This Fiscal Responsibility Act also enacted limits on discretionary funding for the years 2026 through 2029. The proposed fiscal 2025 budget continues to allocate funding to important initiatives from previous year fiscal budgets, including funding to deter aggression in the Indo-Pacific and funding for certain AUKUS-related items. The effect of President Biden's proposed fiscal 2025 budget on individual programs or KBR cannot be predicted at this time. We anticipate the federal budget will continue to be subject to debate and compromise shaped by, among other things, the 2024 U.S. general elections, heightened political tensions, the global security environment, inflationary pressures and macroeconomic conditions. The result may be shifting funding priorities, which could have material impacts on defense spending broadly and our programs.

Previous wording

Internationally, our Government Solutions work is performed primarily for the U.K. MoD and the Australian Department of Defence. In March 2024, the U.K. government announced the defense budget, with the defense budget remaining consistent with the defense budget from the prior fiscal year. In March 2023, the U.K. government announced its intent to increase its defense budget by £11 billion over the next five years, increasing the defense budget to 2.25% of GDP by 2025. 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. It is expected the next general election in the United Kingdom will occur in 2024 (and no later than January 28, 2025). The effect of the next general election in the United Kingdom on KBR or our individual programs cannot be predicted at this time. 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 fiscal year budget for Australia for the 2023 - 2024 financial year was finalized, with the Australian government increasing defense spending by 5% to AUD 51.0 billion, or approximately 2.00% of GDP.

Current wording

Internationally, our Government Solutions work is performed primarily for the U.K. MoD and the Australian Department of Defence. In March 2024, the U.K. government announced the defense budget, with the defense budget remaining consistent with the defense budget from the prior fiscal year. A general election was held in the United Kingdom in July 2024, with the Labour Party becoming the primary governing party of the House of Commons. The Labour Party has committed to increasing defense spending to 2.5% of GDP in the future, which is an increase from the previous commitment to increase defense spending to 2.25%. The effect of this general election on KBR or our individual programs cannot be predicted at this time. 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 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 fiscal year budget for Australia for the 2024 - 2025 financial year was finalized, with the Australian government increasing defense spending to AUD 55.7 billion, or approximately 2.00% of GDP.

Previous wording

Long-range commercial market fundamentals are supported by global population growth, expanding global development and an acceleration of demand for energy transition, renewable energy sources and climate change solutions. The globe is in search of the solution to the energy trilemma, the balance between energy affordability, ensuring energy security and achieving environmental sustainability. Clients are prioritizing their efforts to solve the energy trilemma by investing in digital solutions to optimize operations, increase end-product flexibility and energy efficiency, reduce unplanned downtime and minimize environmental footprint. As the global focus on energy security intensifies and companies continue to commit to near-term carbon neutrality and longer-range net-zero carbon emissions, we expect spending to continue in areas such as decarbonization; carbon capture, utilization and sequestration; biofuels; and circular economy. Further, leading companies across the world are proactively evaluating clean energy alternatives, including hydrogen and green ammonia, which complements KBR's proprietary process technologies, solutions and capabilities. We expect climate change and energy transition to continue to be areas of priority and investment as many countries, including the U.S., look to boost their economies and invest in a cleaner future.

Current wording

Long-range commercial market fundamentals are supported by global population growth, expanding global development and an acceleration of demand for energy transition, renewable energy sources and climate change solutions. The globe is in search of the solution to the energy trilemma, the balance between energy affordability, ensuring energy security and achieving environmental sustainability. Clients are prioritizing their efforts to solve the energy trilemma by investing in digital solutions to optimize operations, increase end-product flexibility and energy efficiency, reduce unplanned downtime and minimize environmental footprint. As the global focus on energy security intensifies and companies continue to commit to near-term carbon neutrality and longer-range net-zero carbon emissions, we expect spending to continue in areas such as decarbonization; carbon capture, utilization and sequestration; biofuels; and circular economy. Further, leading companies across the world are proactively evaluating clean energy alternatives, including hydrogen and green ammonia, which complements KBR's proprietary process technologies, solutions and capabilities. We expect climate change, energy security and energy transition to continue to be areas of priority and investment as many countries, including the U.S., look to boost their economies and invest in a cleaner, more secure future.

Previous wording

Equity in earnings of unconsolidated affiliates. Equity in earnings of unconsolidated affiliates increased by $7 million to $30 million in earnings for the three months ended March 29, 2024, compared to $23 million in earnings for the three months ended March 31, 2023. The increase is primarily attributed to equity in earnings from services on an LNG project within our STS segment.

Current wording

Equity in earnings of unconsolidated affiliates. Equity in earnings of unconsolidated affiliates increased by $17 million to $40 million in earnings for the three months ended June 28, 2024, compared to $23 million in earnings for the three months ended June 30, 2023. The increase is primarily attributed to equity in earnings from services on an LNG project within our STS segment.

Previous wording

Interest expense. The increase in interest expense was primarily driven by increases in the U.S. federal reserve funds rate from the three months ended March 31, 2023 to the three months ended March 29, 2024.

Current wording

Interest expense. The increase in interest expense was primarily driven by an increase in the U.S. federal reserve funds rate from the three months ended June 30, 2023 to the three months ended June 28, 2024.

Previous wording

Provision for income taxes. The provision for income taxes for the three months ended March 29, 2024 reflects a 27% tax rate as compared to a 26% tax rate for the three months ended March 31, 2023. The effective tax rate of 27% and 26%, as compared to the U.S. statutory rate of 21%, for the three months ended March 29, 2024 and March 31, 2023 was primarily affected by the rate differential on our foreign earnings and the impact of state and local taxes in the U.S. See Note 9 "Income Taxes" to our condensed consolidated financial statements for further discussion on income taxes.

Current wording

Provision for income taxes. The provision for income taxes for the three months ended June 28, 2024 reflects a 27% tax rate as compared to a (5)% tax rate for the three months ended June 30, 2023. The effective tax rate of 27% for the three months ended June 28, 2024, as compared to the U.S. statutory rate of 21%, was primarily affected by the rate differential on our foreign earnings and the impact of state and local taxes in the U.S. The effective tax rate of (5)% for the three months ended June 30, 2023 was primarily impacted by the non-deductible portion of a legal settlement on a legacy matter and the non-deductible charge associated with the cash election and convertible notes repurchase in 2023. See Note 9 "Income Taxes" to our condensed consolidated financial statements for further discussion on income taxes.

Previous wording

Other operating loss remained materially consistent for each of the three months ended March 29, 2024 and March 31, 2023, respectively.

Current wording

Other operating loss remained materially consistent for each of the three months ended June 28, 2024 and June 30, 2023.

Previous wording

Revenues. The increase in overall revenue of $115 million, or 7%, to $1,818 million for the three months ended March 29, 2024 is primarily attributed to contract growth related to domestic and international operations within our GS business and increased revenues from technology sales and engineering and professional services in our STS business.

Current wording

Revenues. The increase in overall revenue of $217 million, or 6%, to $3,673 million for the six months ended June 28, 2024 is primarily due to growth on high-end defense engineering, classified intelligence and international programs within our GS business and increased revenues from technology sales and engineering and professional services in our STS business.

Previous wording

Gross profit. The increase in overall gross profit of $3 million, or 1%, was primarily driven by items increasing revenues discussed above, offset by resolutions on various legacy matters in 2023 that did not recur in 2024.

Current wording

Gross profit. The increase in overall gross profit of $23 million, or 5%, was primarily driven by items increasing revenues discussed above, offset by resolutions on various legacy matters in 2023 that did not recur in 2024.

Previous wording

Selling, general and administrative expenses. Selling, general and administrative expenses in the three months ended March 29, 2024 were materially consistent with the three months ended March 31, 2023.

Current wording

Selling, general and administrative expenses. Selling, general and administrative expenses in the six months ended June 28, 2024 were materially consistent with the six months ended June 30, 2023.

Previous wording

Gain on disposition of assets and investment. The increase in gain on disposition of assets and investments of $6 million was due to the sale of our investment interest in a joint venture within our GS segment. No similar gain on the disposition of assets and investments was recognized in the three months ended March 31, 2023.

Current wording

Gain on disposition of assets and investments. The increase in gain on disposition of assets and investments of $6 million was due to the sale of our investment interest in a joint venture within our GS segment. No similar gain on the disposition of assets and investments was recognized in the six months ended June 30, 2023.

Previous wording

GS revenues increased by $58 million, or 4%, to $1,386 million for the three months ended March 29, 2024, compared to $1,328 million for the three months ended March 31, 2023. The increase in revenues is due to contract growth related to our domestic and international operations.

Current wording

GS revenues increased by $103 million, or 4%, to $2,783 million for the six months ended June 28, 2024, compared to $2,680 million for the six months ended June 30, 2023. The increase in revenue is primarily due to growth on high-end defense engineering, classified intelligence and international programs.

Previous wording

GS operating income increased by $13 million, or 13%, to $115 million for the three months ended March 29, 2024, compared to $102 million for the three months ended March 31, 2023. The increase in operating income was primarily driven by the items discussed above and $6 million gain recognized related to the sale of our investment interest in a joint venture.

Current wording

GS operating income increased by $165 million to $239 million for the six months ended June 28, 2024, compared to $74 million for the six months ended June 30, 2023. The increase in operating income was primarily driven by the $144 million charge recognized in the six months ended June 30, 2023 related to the settlement of a legacy legal matter that did not recur during the six months ended June 28, 2024. Additionally, in 2024, we recognized $6 million gain related to the sale of our investment interest in a joint venture.

Previous wording

STS revenues increased by $57 million, or 15%, to $432 million for the three months ended March 29, 2024, compared to $375 million for the three months ended March 31, 2023. This increase is primarily driven by increased revenues from technology sales and engineering and professional services.

Current wording

STS revenues increased by $114 million, or 15%, to $890 million for the six months ended June 28, 2024, compared to $776 million for the six months ended June 30, 2023. This increase is primarily driven by increased revenues from technology sales and engineering and professional services.

Previous wording

STS operating income increased by $4 million, or 5%, to $86 million for the three months ended March 29, 2024, compared to $82 million for the three months ended March 31, 2023. The increase in operating income is primarily due to the items discussed above and increased equity in earnings from services on an LNG project, offset by a favorable resolution on a legacy matter in 2023 that did not recur in 2024.

Current wording

STS operating income increased by $23 million, or 14%, to $182 million for the six months ended June 28, 2024, compared to $159 million for the six months ended June 30, 2023. The increase in operating income is primarily due to the items discussed above and increased equity in earnings from services on an LNG project, offset by a favorable resolution on a legacy matter in 2023 that did not recur in 2024.

Previous wording

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. 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. Additionally, nearly all contracts allow customers to terminate the agreement at any time for convenience, and from time to time customers may dispute or try to renegotiate existing contracts. These and other factors may result in delays in our recognition of revenue from our backlog, and in differences between the amounts we book as backlog and the amounts we recognize as revenue. Certain contracts provide maximum dollar limits, with actual authorization to perform work under the contract agreed upon on a periodic basis with the customer. 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.

Current wording

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. 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. Additionally, nearly all contracts allow customers to terminate the agreement at any time for convenience, and from time to time customers may dispute or try to renegotiate existing contracts. These and other factors may result in delays or changes in our recognition of revenue from our backlog versus amounts we book as backlog. Certain contracts provide maximum dollar limits, with actual authorization to perform work under the contract agreed upon on a periodic basis with the customer. In these arrangements, only the amounts authorized and probable 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.

Previous wording

We have included in the table below our proportionate share of unconsolidated joint ventures' estimated backlog. As these projects are accounted for under the equity method, only our share of future earnings from these projects will be recorded in our results of operations. Our proportionate share of backlog for projects related to unconsolidated joint ventures totaled $3.8 billion at March 29, 2024, and $4.1 billion at December 29, 2023.

Current wording

We have included in the table below our proportionate share of unconsolidated joint ventures' estimated backlog. As these projects are accounted for under the equity method, only our share of future earnings from these projects will be recorded in our results of operations. Our proportionate share of backlog for projects related to unconsolidated joint ventures totaled $3.4 billion at June 28, 2024, and $4.1 billion at December 29, 2023.

Previous wording

We estimate that as of March 29, 2024, 39% of our backlog will be executed within one year. Of this amount, we estimate that 79% will be recognized in revenues on our condensed consolidated statement of operations and 21% will be recorded by our unconsolidated joint ventures. As of March 29, 2024, $95 million of our backlog relates to active contracts that are in a loss position.

Current wording

We estimate that as of June 28, 2024, 38% of our backlog will be executed within one year. Of this amount, we estimate that 85% will be recognized in revenues on our condensed consolidated statement of operations and 15% will be recorded by our unconsolidated joint ventures. As of June 28, 2024, $132 millionof our backlog relates to active contracts that are in a loss position.

Previous wording

As of March 29, 2024, 11% of our backlog was attributable to fixed-price contracts, 38% was attributable to PFIs, 35% was attributable to cost-reimbursable contracts and 16% was attributable to time-and-materials contracts. 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 March 29, 2024, $9.0 billion of our GS backlog was currently funded by our customers.

Current wording

As of June 28, 2024, 12% of our backlog was attributable to fixed-price contracts, 38% was attributable to PFIs, 32% was attributable to cost-reimbursable contracts and 18% was attributable to time-and-materials contracts. 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 June 28, 2024, $9.6 billion of our GS backlog was currently funded by our customers.

Previous wording

As of March 29, 2024, we had approximately $3.6 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.

Current wording

As of June 28, 2024, we had approximately $3.3 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.

Previous wording

The difference between backlog of $17.3 billion and the remaining performance obligations as defined by ASC 606 of $12.9 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 condensed consolidated financial statements for discussion of the remaining performance obligations.

Current wording

The difference between backlog of $16.8 billion and the remaining performance obligations as defined by ASC 606 of $12.8 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 condensed consolidated financial statements for discussion of the remaining performance obligations.

Previous wording

Liquidity is provided by available cash and cash equivalents, cash generated from operations, our Senior Credit Facility, (as defined below) and access to capital markets. Our operating cash flow can vary significantly from year to year and is affected by the mix, terms, timing and stage of completion of our projects. We often receive cash in advance on certain of our sustainable technology projects. On time-and-material and cost reimbursable contracts, we may utilize cash on hand or availability under our Senior Credit Facility to satisfy any periodic operating cash requirements for working capital, as we incur costs and subsequently invoice our customers.

Current wording

Liquidity is provided by available cash and cash equivalents, cash generated from operations, our Senior Credit Facility, (as defined below) sale or divestiture of assets and access to capital markets. Our operating cash flow can vary significantly from year to year and is affected by the mix, terms, timing and stage of completion of our projects. We often receive cash in advance on certain of our sustainable technology projects. On time-and-material and cost reimbursable contracts, we may utilize cash on hand or availability under our Senior Credit Facility to satisfy any periodic operating cash requirements for working capital, as we incur costs and subsequently invoice our customers.

Previous wording

As discussed in Note 8 "Debt and Other Credit Facilities" of our condensed consolidated financial statements, we entered into Amendment No.11 to our Credit Agreement on January 19, 2024. This amendment provides for an incremental Term Loan B facility in an aggregate principal amount of $1 billion and extends the Term Loan B maturity date to January 2031. We borrowed the full $1 billion principal amount available under this loan. We received $24 million in cash proceeds from this borrowing to pay accrued interest and financing fees, $501 million was applied to the outstanding principal under the Term Loan B facility and the remaining $475 million was applied to the outstanding principal under the Revolver. In addition, Amendment No.11 reduced the interest rate margin applicable to Term Loan B.

Current wording

As discussed in Note 8 "Debt and Other Credit Facilities" of our condensed consolidated financial statements, we entered into Amendment No. 11 to our Credit Agreement on January 19, 2024. This amendment provides for an incremental Term Loan B facility in an aggregate principal amount of $1 billion and extends the Term Loan B maturity date to January 2031. We borrowed the full $1 billion principal amount available under this loan. We received $24 million in cash proceeds from this borrowing to pay accrued interest and financing fees, $501 million was applied to the outstanding principal under the Term Loan B facility and the remaining $475 million was applied to the outstanding principal under the Revolver. In addition, Amendment No.11 reduced the interest rate margin applicable to Term Loan B. During the three months ended June 28, 2024, $2 million in cash was paid on the outstanding Term Loan B principal.

Previous wording

Additionally, we entered into Amendment No.12 to our Credit Agreement on February 7, 2024. This amendment consolidated the USD denominated Term A-1, Term A-2 and Term A-4 loan facilities under our Credit Agreement into the amended USD denominated Term A-1 loan facility and continued the GBP denominated Term A-3 loan facility outstanding at December 29, 2023. In 2024, $76 million in cash was paid on the outstanding Term Loan A principal and accrued interest and $20 million was applied to the Term Loan A principal through a borrowing on our Revolver. Additionally, this amendment extended the maturity date of the $1 billion Revolver, amended Term A-1 loan facility and Term A-3 loan facility to February 2029.

Current wording

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

Previous wording

Cash and cash equivalents totaled $314 million at March 29, 2024, and $304 million at December 29, 2023, and consisted of the following:

Current wording

Cash and cash equivalents totaled $414 million at June 28, 2024, and $304 million at December 29, 2023, and consisted of the following:

Previous wording

Operating Activities. Cash provided by operations totaled $91 million and $35 million for the three months ended March 29, 2024 and March 31, 2023, respectively, as compared to net income of $94 million and $86 million for the three months ended March 29, 2024 and March 31, 2023, 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. Working capital levels vary from year to year and are primarily affected by our 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.

Current wording

Operating Activities. Cash provided by operations totaled $261 million and $288 million for the six months ended June 28, 2024 and June 30, 2023, respectively, as compared to net income of $201 million and net loss of $264 million for the six months ended June 28, 2024 and June 30, 2023, 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. Working capital levels vary from year to year and are primarily affected by our 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.

Previous wording

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. The increase in operating cash flows for the three months ended March 29, 2024 compared to the three months ended March 31, 2023 is primarily due to changes in the primary components of our working capital. Additionally, for the three months ended March 29, 2024, we received $43 million in distributions of earnings from unconsolidated affiliates compared to $24 million in distributions of earnings from unconsolidated affiliates for the three months ended March 31, 2023.

Current wording

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. The decrease in operating cash flows for the six months ended June 28, 2024 compared to the six months ended June 30, 2023 is primarily due to changes in the primary components of our working capital and increased employer pension contributions. This decrease was offset primarily by the distribution of earnings received from our unconsolidated affiliates. For the six months ended June 28, 2024, we received $99 million in distributions of earnings from unconsolidated affiliates compared to $37 million in distributions of earnings from unconsolidated affiliates for the six months ended June 30, 2023.

Previous wording

Investing Activities. Cash provided by investing activities totaled $11 million for the three months ended March 29, 2024. In 2024, we received a return of investment from JKC of approximately $29 million related to our proportionate share of a tax refund. Additionally, we received $6 million from the sale of our investment interest in a joint venture within our GS segment. This was offset by $25 million in capital expenditures.

Current wording

Investing Activities. Cash provided by investing activities totaled $8 million for the six months ended June 28, 2024. In 2024, we received a return of investment from JKC of approximately $36 million related to our proportionate share of a tax refund. Additionally, we received $6 million from the sale of our investment interest in a joint venture within our GS segment. This was offset by $35 million in capital expenditures.

Previous wording

Cash provided by investing activities totaled $42 million for the three months ended March 31, 2023 and was primarily due to a return of investment of approximately $61 million from JKC resulting from the receipt of the second payment from the Subcontractor Settlement Agreement. This was offset by $19 million in capital expenditures.

Current wording

Cash used in investing activities totaled $21 million for the six months ended June 30, 2023 and was primarily related to the second payment for an additional investment of $39 million in Mura Technology and capital expenditures of $38 million. This was offset by a return of investment of approximately $61 million from JKC resulting from the receipt of the second payment from the Subcontractor Settlement Agreement. See Note 6. "Equity Method Investments and Variable Interest Entities" for further details.

Previous wording

Financing Activities. Cash used in financing activities totaled $91 million for the three months ended March 29, 2024. The primary uses of cash in financing activities were $75 million of principal payments related to our Senior Credit Facility, $50 million for the repurchase of common stock under our share repurchase program and $11 million for the repurchase of common stock under our "withheld to cover" program. Cash used in financing activities also included $33 million payment for the settlement of warrants, $18 million of dividend payments to common shareholders and $16 million in debt issuance costs associated with Amendment No.11 and No. 12 to our Credit Agreement for our Senior Credit Facility. These decreases were offset by $93 million in borrowings on our Revolver and $24 million in borrowings associated with Amendment No.11 to our Credit Agreement. See Note 8 "Debt and Other Credit Facilities" for further discussion of our Senior Credit Facility.

Current wording

Financing Activities. Cash used in financing activities totaled $158 million for the six months ended June 28, 2024. The primary uses of cash in financing activities were $81 million of principal payments related to our Senior Credit Facility, $13 million in payments on the Revolver, $146 million for the repurchase of common stock under our share repurchase program and $12 million for the repurchase of common stock under our "withheld to cover" program. Cash used in financing activities also included $33 million payment for the settlement of warrants, $39 million of dividend payments to common shareholders and $16 million in debt issuance costs associated with Amendment No. 11 and No. 12 to our Credit Agreement for our Senior Credit Facility. These decreases were offset by $168 million in borrowings on our Revolver and $24 million in borrowings associated with Amendment No. 11 to our Credit Agreement. See Note 8 "Debt and Other Credit Facilities" for further discussion of our Senior Credit Facility.

Previous wording

Cash used in financing activities totaled $54 million for the three months ended March 31, 2023 and was primarily due to approximately $16 million of dividend payments to common shareholders, $50 million for the repurchase of common stock under our share repurchase program, $11 million for the repurchase of common stock under our "withheld to cover" program and $4 million in payments on borrowings related to our Senior Credit Facility. These decreases were partially offset by a $28 million bank overdraft facility. See Note 8 "Debt and Other Credit Facilities" for further discussion of our Senior Credit Facility.

Current wording

Cash used in financing activities totaled $126 million for the six months ended June 30, 2023 and was primarily due to a net cash outflow of $201 million to repurchase a portion of our outstanding Convertible Notes, corresponding Note Hedge and outstanding warrants. Cash used in financing activities also included $35 million of dividend payments to common shareholders, $125 million for the repurchase of common stock under our share repurchase program, $12 million for the repurchase of common stock under our "withheld to cover" program, $75 million in payments on our Revolver and $8 million of principal payments related to our Senior Credit Facility. These decreases were partially offset by $330 million in borrowings related to our Revolver. See Note 8. "Debt and Other Credit Facilities" for further discussion of our Senior Credit Facility.

Previous wording

Future uses of cash. 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. 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.

Current wording

Future uses of cash. 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. 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. We also expect to use cash to fund a portion of the LinQuest Corporation acquisition discussed in Note 17. "Subsequent Event".

Previous wording

U.K. pension obligation. We have recognized on our condensed consolidated balance sheets a funding surplus of $14 million (measured as the difference between the fair value of plan assets and the projected benefit obligation as of March 29, 2024) for our frozen U.K. defined benefit pension plan. The total amount of employer pension contributions paid for the three months ended March 29, 2024 was $7 million for our defined benefit plan in the U.K. The funding requirements for our U.K. pension plan are determined based on the U.K. Pensions Act 1995. Annual minimum funding requirements are based on a binding agreement with the Trustee of the U.K. pension plan that is negotiated on a triennial basis. In June 2022, KBR and the Trustee executed an agreement requiring minimum annual contributions of approximately £33 million ($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. In the future, pension funding may increase or decrease depending on changes in the levels of interest rates, pension plan asset return performance and other factors. A significant increase in our funding requirements for the U.K. pension plan could result in a material adverse impact on our financial position.

Current wording

U.K. pension obligation. We have recognized on our condensed consolidated balance sheets a funding surplus of $37 million (measured as the difference between the fair value of plan assets and the projected benefit obligation as of June 28, 2024) for our frozen U.K. defined benefit pension plan. The total amount of employer pension contributions paid for the six months ended June 28, 2024 was $18 million for our defined benefit plan in the U.K. The funding requirements for our U.K. pension plan are determined based on the U.K. Pensions Act 1995. Annual minimum funding requirements are based on a binding agreement with the Trustee of the U.K. pension plan that is negotiated on a triennial basis. In June 2022, KBR and the Trustee executed an agreement requiring minimum annual contributions of approximately £33 million ($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. In the future, pension funding may increase or decrease depending on changes in the levels of interest rates, pension plan asset return performance and other factors. A significant increase in our funding requirements for the U.K. pension plan could result in a material adverse impact on our financial position.

Previous wording

Sales of Receivables. From time to time, we sell certain receivables to unrelated third-party financial institutions under various accounts receivable monetization programs. One such program is with MUFG Bank, Ltd. (“MUFG”) under a Master Accounts Receivable Purchase Agreement (the “RPA”), which provides the sale to MUFG of certain of our designated eligible receivables, with a significant portion of such receivables being owed by the U.S. government. We plan to continue to utilize these programs to ensure we have flexibility in regards to meeting our capital needs. Refer to Note 15 "Fair Value of Financial Instruments and Risk Management" to our condensed consolidated financial statements for further discussion on our sales of receivables.

Current wording

Sales of Receivables. From time to time, we sell certain receivables to unrelated third-party financial institutions under various accounts receivable monetization programs. One such program is with MUFG Bank, Ltd. (“MUFG”) under a Master Accounts Receivable Purchase Agreement, which provides the sale to MUFG of certain of our designated eligible receivables, with a significant portion of such receivables being owed by the U.S. government. We plan to continue to utilize these programs to ensure we have flexibility to meet our capital needs. Refer to Note 15 "Fair Value of Financial Instruments and Risk Management" to our condensed consolidated financial statements for further discussion on our sales of receivables.

Previous wording

Typically, each joint venture partner indemnifies the other partners for any liabilities incurred in excess of the liabilities the other party is obligated to bear under the respective joint venture agreement. We are unable to estimate the maximum potential amount of future payments that we could be required to make under outstanding performance guarantees related to joint venture projects due to a number of factors, including but not limited to, the nature and extent of any contractual defaults by our joint venture partners, resource availability, potential performance delays caused by the defaults, the location of the projects and the terms of the related contracts. See “Item 1A. Risk Factors” contained in Part I of our 2023 Annual Report on Form 10-K for information regarding our fixed-price contracts and operations through joint ventures and partnerships.

Current wording

In our joint venture arrangements, the liability of each partner is usually joint and several. This means that each joint venture partner may become liable for the entire risk of performance guarantees provided by each partner to the customer. Typically, each joint venture partner indemnifies the other partners for any liabilities incurred in excess of the liabilities the other party is obligated to bear under the respective joint venture agreement. We are unable to estimate the maximum potential amount of future payments that we could be required to make under outstanding performance guarantees related to joint venture projects due to a number of factors, including but not limited to, the nature and extent of any contractual defaults by our joint venture partners, resource availability, potential performance delays caused by the defaults, the location of the projects and the terms of the related contracts. In May 2024, a partner in one of our project-based joint ventures voluntarily filed for Chapter 11 bankruptcy reorganization. Our joint venture operations have not been materially impacted by these bankruptcy proceedings. See “Item 1A. Risk Factors” contained in Part I of our 2023 Annual Report on Form 10-K for information regarding our fixed-price contracts and operations through joint ventures and partnerships.

Previous wording

As of March 29, 2024, we had $1 billion in a committed line of credit on the Revolver under our Senior Credit Facility and $395 million of bilateral and uncommitted lines of credit. As of March 29, 2024, with respect to our Revolver, we had $143 million of outstanding borrowings. We also have $14 million of outstanding letters of credit on our Senior Credit Facility. With respect to our $395 million of bilateral and uncommitted lines of credit, we utilized $291 million for letters of credit as of March 29, 2024. The total remaining capacity of these committed and uncommitted lines of credit was approximately $947 million, of which up to approximately $791 million can be used toward issuing letters of credit. Information relating to our letters of credit is described in Note 8 "Debt and Other Credit Facilities" to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q and the information discussed therein is incorporated by reference into this Part I, Item 2. Other than discussed in this Quarterly Report on Form 10-Q, we have not engaged in any material off-balance sheet financing arrangements through special purpose entities.

Current wording

As of June 28, 2024, we had a $1 billion committed line of credit on the Revolver under our Senior Credit Facility and $423 million of bilateral and uncommitted lines of credit. As of June 28, 2024, with respect to our Revolver, we had $205 million of outstanding borrowings. We also have $14 million of outstanding letters of credit on our Senior Credit Facility. With respect to our $423 million of bilateral and uncommitted lines of credit, we had utilized $303 million for letters of credit as of June 28, 2024. The total remaining capacity of these committed and uncommitted lines of credit was approximately $901 million as of June 28, 2024, all of which can be used toward issuing letters of credit. Information relating to our letters of credit is described in Note 8 "Debt and Other Credit Facilities" to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q and the information discussed therein is incorporated by reference into this Part I, Item 2. Other than discussed in this Quarterly Report on Form 10-Q, we have not engaged in any material off-balance sheet financing arrangements through special purpose entities.