KBR INC
For the period ended Sep 27, 2024. Filed Oct 23, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 27, 2024 · Filed Oct 23, 2024
KBR$37.17-2.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-28; filed 2024-07-24.
0001357615-24-000044
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-27; filed 2024-10-23.
0001357615-24-000059
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 128 previous paragraphs and 132 current paragraphs.
78 unchanged; 44 reworded; 8 added; 4 removed; 2 previous and 2 current paragraphs rearranged.
Tables are not compared: 7 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
On August 30, 2024, we acquired LinQuest, an engineering, data analytics and digital integration company that develops and integrates advanced technology solutions to meet the most challenging demands across space, air dominance and connected battlespace missions, including advanced AI and machine learning capabilities. LinQuest supports the U.S. Air Force and other U.S. Department of Defense and intelligence agencies. Additional information related to the LinQuest acquisition is described in Note 17 "Acquisitions" to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.
Current report
The U.S. government has not yet enacted an annual budget for fiscal year 2025; these proposed 2025 budgetary amounts are subject to change. To avert a government shutdown, a continuing resolution funding measure has been enacted to finance all U.S. government activities through December 20, 2024. Under the continuing resolution, partial-year funding at amounts consistent with appropriated levels for fiscal year 2024 are available, subject to certain restrictions, but new spending initiatives are not authorized. Uncertainty continues to exist regarding whether a divided Congress will be able to pass appropriation bills or additional continuing resolutions once the current continuing resolution expires on December 20, 2024. We believe our key programs will continue to be supported and funded in the continuing resolution financing mechanism. The effect of a potential government shutdown or the finalized fiscal year 2025 budget on KBR or our individual programs cannot be predicted at this time. However, if a government shutdown were to occur and were to continue for an extended period, we could be at risk of program cancellations, schedule delays and other disruptions and nonpayment, which could adversely affect our results of operations. 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.
Current report
n/m - not meaningful
Current report
GS revenues increased by $145 million, or 11%, to $1,490 million in the three months ended September 27, 2024 compared to $1,345 million in the three months ended September 29, 2023. The increase in revenue is primarily due to $41 million in revenue associated with the LinQuest acquisition, in addition to growth on high-end defense engineering, classified intelligence, readiness & sustainment and international programs.
Current report
Nine months ended September 27, 2024 compared to the nine months ended September 29, 2023
Current report
n/m - not meaningful
Current report
GS revenues increased by $248 million, or 6%, to $4,273 million for the nine months ended September 27, 2024, compared to $4,025 million for the nine months ended September 29, 2023. The increase in revenue is primarily due to growth on high-end defense engineering, classified intelligence and international programs. Additionally, we recognized $41 million in revenue associated with the LinQuest acquisition.
Current report
We entered into Amendment No. 13 to our Credit Agreement on August 14, 2024. This amendment allowed for an incremental delayed draw Term A-2 loan in an aggregate principal amount up to $550 million, which remained available for 180 days to fund the acquisition of LinQuest, maturing August 2027. On August 30, 2024, we borrowed the entire $550 million available under the delayed draw Term A-2 loan upon closing of the LinQuest acquisition. Additionally, under Amendment No. 13, we refinanced outstanding principal amounts under the Company's existing Term B loan facility via a cashless roll into a new Term B loan facility to reduce the interest rate margin applicable to Term Loan B. The applicable interest rate per annum of the new Term B loan facility is term SOFR plus 2.00% (or base rate plus 1.00%) and the maturity date is January 2031. See Note 17. "Acquisitions" to our condensed consolidated financial statements for further discussion around the acquisition of LinQuest.
Removed paragraphs (4)
Previous report
GS revenues increased by $45 million, or 3%, to $1,397 million in the three months ended June 28, 2024 compared to $1,352 million in the three 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 report
Six months ended June 28, 2024 compared to the six months ended June 30, 2023
Previous report
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 report
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.
Reworded paragraphs (44)
Previous wording
Key customers include U.S. DoD agencies such as the U.S. Army, U.S. Navy and U.S. Air Force, Missile Defense Agency, National Geospatial-Intelligence Agency, National Reconnaissance Office and other intelligence agencies; U.S. civilian agencies such as NASA, U.S. Geological Survey and National Oceanic and Atmospheric Administration; the U.K. MoD, London Metropolitan Police, and other U.K. Crown Services; the Royal Australian Air Force, Navy and Army; other national governments; and a wide range of commercial and industrial companies.
Current wording
Key customers include U.S. DoD agencies such as the U.S. Army, U.S. Navy and U.S. Air Force, Missile Defense Agency, National Geospatial-Intelligence Agency, National Reconnaissance Office and other intelligence agencies; U.S. civilian agencies such as NASA, U.S. Geological Survey and National Oceanic and Atmospheric Administration; the U.K. MoD, and other U.K. Crown Services; the Royal Australian Air Force, Navy and Army; other national governments; and a wide range of commercial and industrial companies.
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, 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.
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.
Previous wording
Revenues. The increase in overall revenue of $102 million, or 6%, to $1,855 million was 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.
Current wording
Revenues. The increase in overall revenue of $177 million, or 10%, to $1,947 million was primarily due to $41 million in revenue associated with the LinQuest acquisition, in addition to growth on high-end defense engineering, classified intelligence, readiness & sustainment 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 $20 million, or 8%, was primarily driven by items increasing revenues discussed above.
Current wording
Gross profit. The increase in overall gross profit of $47 million, or 19%, was primarily driven by items increasing revenues discussed above and favorable STS licensing mix.
Previous wording
Equity in earnings of unconsolidated affiliates. Equity in earnings of unconsolidated affiliates increased by $24 million to $70 million in earnings for the six months ended June 28, 2024, compared to $46 million in earnings for the six months ended June 30, 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. The decrease in equity in earnings of unconsolidated affiliates of $5 million to $27 million in earnings for the three months ended September 27, 2024, compared to $32 million in earnings for the three months ended September 29, 2023 is primarily attributed to a decrease in equity in earnings from services on an LNG project within our STS segment.
Previous wording
Selling, general and administrative expenses. Selling, general and administrative expenses in the three months ended June 28, 2024 were $10 million higher, an 8% increase compared to the three months ended June 30, 2023, which was primarily driven by additional expenses incurred to support the growth in both our GS and STS business segments.
Current wording
Selling, general and administrative expenses. Selling, general and administrative expenses in the three months ended September 27, 2024 were $13 million higher, a 10% increase compared to the three months ended September 29, 2023, which was primarily driven by additional expenses incurred to support the growth in both our GS and STS business segments.
Previous 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.
Current wording
Interest expense. The increase in interest expense was primarily driven by higher notional outstanding debt principal amounts as a result of the LinQuest acquisition from the three months ended September 29, 2023 to the three months ended September 27, 2024.
Previous wording
Charges associated with Convertible Notes. During the six months ended June 30, 2023, we recognized a loss of $314 million related to the election of cash as the settlement method for our Convertible Notes and the repurchase of a portion of our Convertible Notes that did not recur during the six months ended June 28, 2024.
Current wording
Charges associated with Convertible Notes. During the three months ended September 29, 2023, we recognized a loss of $114 million related to the election of cash as the settlement method for our Convertible Notes that did not recur during the three months ended September 27, 2024.
Previous 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.
Current wording
Provision for income taxes. The provision for income taxes for the three months ended September 27, 2024 reflects a 24% tax rate as compared to a 460% tax rate for the three months ended September 29, 2023. The effective tax rate of 24% for the three months ended September 27, 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 460% for the three months ended September 29, 2023 was primarily impacted by the non-deductible charge associated with the election of cash as the settlement method for our Convertible Notes in 2023. The impact of this non-deductible item was partially offset by the release of a previously reserved position based on developments associated with the ongoing IRS examination and appeals process for certain years. See Note 9 "Income Taxes" to our condensed consolidated financial statements for further discussion on income taxes.
Previous wording
GS operating income increased by $152 million to $124 million in the three months ended June 28, 2024 compared to $28 million in operating loss in the three months ended June 30, 2023. The increase was primarily driven by the $144 million charge recognized in the three months ended June 30, 2023 related to the settlement of a legacy legal matter that did not recur during the three months ended June 28, 2024.
Current wording
GS operating income increased by $15 million, or 14%, to $123 million in the three months ended September 27, 2024 compared to $108 million in operating income in the three months ended September 29, 2023. The increase was primarily driven by the items discussed above.
Previous wording
STS revenues increased by $57 million, or 14%, to $458 million in the three months ended June 28, 2024 compared to $401 million in the three months ended June 30, 2023. The increase in revenue is primarily from engineering and professional services and technology sales.
Current wording
STS revenues increased by $32 million, or 8%, to $457 million in the three months ended September 27, 2024 compared to $425 million in the three months ended September 29, 2023. The increase in revenue is primarily from engineering and professional services and technology sales.
Previous wording
STS operating income increased by $19 million, or 25%, to $96 million in the three months ended June 28, 2024 compared to $77 million in the three months ended June 30, 2023. The increase was primarily driven by items discussed above as well as increased equity in earnings resulting from services on an LNG project.
Current wording
STS operating income increased by $11 million, or 13%, to $95 million in the three months ended September 27, 2024 compared to $84 million in the three months ended September 29, 2023. The increase was primarily driven by items discussed above and favorable licensing mix, offset by decreased equity in earnings from services on an LNG project.
Previous wording
The information below is an analysis of our consolidated results for the six months ended June 28, 2024 compared to the six months ended June 30, 2023. See Results of Operations by Business Segment below for additional information describing the performance of each of our reportable segments.
Current wording
The information below is an analysis of our consolidated results for the nine months ended September 27, 2024 compared to the nine months ended September 29, 2023. See Results of Operations by Business Segment below for additional information describing the performance of each of our reportable segments.
Previous 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.
Current wording
Revenues. The increase in overall revenue of $394 million, or 8%, to $5,620 million for the nine months ended September 27, 2024 is primarily due to growth on high-end defense engineering, classified intelligence and international programs within our GS business, increased revenues from technology sales and engineering and professional services in our STS business and $41 million in revenue associated with the LinQuest acquisition.
Previous 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.
Current wording
Gross profit. The increase in overall gross profit of $70 million, or 9%, 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
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.
Current wording
Equity in earnings of unconsolidated affiliates. Equity in earnings of unconsolidated affiliates increased by $19 million to $97 million in earnings for the nine months ended September 27, 2024, compared to $78 million in earnings for the nine months ended September 29, 2023. The increase is primarily attributed to equity in earnings from services on an LNG project within our STS segment.
Previous wording
Legal settlement of Legacy Matter. During the three months ended June 30, 2023, we recorded a charge of $144 million related to the settlement of a legacy legal matter that did not recur during the three months ended June 28, 2024.
Current wording
Legal settlement of Legacy Matter. During the nine months ended September 29, 2023, we recorded a charge of $144 million related to the settlement of a legacy legal matter that did not recur during the nine months ended September 27, 2024.
Previous wording
Interest expense. The increase in interest expense was primarily driven by increases in the U.S. federal reserve funds rate from the six months ended June 30, 2023 to the six months ended June 28, 2024.
Current wording
Interest expense. The increase in interest expense was primarily driven by increases in the U.S. federal reserve funds rate and increased outstanding debt principal from the nine months ended September 29, 2023 to the nine months ended September 27, 2024.
Previous wording
Charges associated with Convertible Notes. During the three months ended June 30, 2023, we recognized a loss of $314 million related to the election of cash as the settlement method for our Convertible Notes and the repurchase of a portion of our Convertible Notes that did not recur during the three months ended June 28, 2024.
Current wording
Charges associated with Convertible Notes. During the nine months ended September 29, 2023, we recognized a loss of $428 million related to the election of cash as the settlement method for our Convertible Notes and the repurchase of a portion of our Convertible Notes that did not recur during the nine months ended September 27, 2024.
Previous wording
Provision for income taxes. The provision for income taxes for the six months ended June 28, 2024 reflects a 27% tax rate as compared to a (21)% tax rate for the six months ended June 30, 2023. The effective tax rate of 27%, as compared to the U.S. statutory rate of 21%, for the six months ended June 28, 2024 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 (21)% for the six 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.
Current wording
Provision for income taxes. The provision for income taxes for the nine months ended September 27, 2024 reflects a 26% tax rate as compared to a (32)% tax rate for the nine months ended September 29, 2023. The effective tax rate of 26%, as compared to the U.S. statutory rate of 21%, for the nine months ended September 27, 2024 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 (32)%, as compared to the U.S. statutory rate of 21%, for the nine months ended September 29, 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. The impacts of these non-deductible items were partially offset by the release of a previously reserved position based on developments associated with the ongoing IRS examination and appeals process for certain years. See Note 9 "Income Taxes" to our condensed consolidated financial statements for further discussion on income taxes.
Previous 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.
Current wording
GS operating income increased by $180 million to $362 million for the nine months ended September 27, 2024, compared to $182 million for the nine months ended September 29, 2023. The increase in operating income was primarily driven by the $144 million charge recognized in the nine months ended September 29, 2023 related to the settlement of a legacy legal matter that did not recur during the nine months ended September 27, 2024 and growth in the areas discussed above. 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 $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.
Current wording
STS revenues increased by $146 million, or 12%, to $1,347 million for the nine months ended September 27, 2024, compared to $1,201 million for the nine months ended September 29, 2023. This increase is primarily driven by increased revenues from technology sales and engineering and professional services.
Previous 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.
Current wording
STS operating income increased by $34 million, or 14%, to $277 million for the nine months ended September 27, 2024, compared to $243 million for the nine months ended September 29, 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
Other operating loss remained materially consistent for each of the six months ended June 28, 2024 and June 30, 2023, respectively.
Current wording
Other operating loss remained materially consistent for each of the nine months ended September 27, 2024 and September 29, 2023, respectively.
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 $3.4 billion at June 28, 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 $3.2 billion at September 27, 2024, and $4.1 billion at December 29, 2023.
Previous 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.
Current wording
We estimate that as of September 27, 2024, 36% of our backlog will be executed within one year. Of this amount, we estimate that 87% will be recognized in revenues on our condensed consolidated statement of operations and 13% will be recorded by our unconsolidated joint ventures. As of September 27, 2024, $101 millionof our backlog relates to active contracts that are in a loss position.
Previous 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.
Current wording
As of September 27, 2024, 12% of our backlog was attributable to fixed-price contracts, 38% was attributable to PFIs, 33% was attributable to cost-reimbursable contracts and 17% 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 September 27, 2024, $10.1 billionof our GS backlog was currently funded by our customers.
Previous 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.
Current wording
As of September 27, 2024, 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.
Previous 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.
Current wording
The difference between backlog of $17.9 billion and the remaining performance obligations as defined by ASC 606 of $14.0 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
We form incorporated and unincorporated joint ventures to execute certain projects. In addition to participating as a joint venture partner, we often provide engineering, procurement, construction, operations or maintenance services to the joint venture as a subcontractor. Where we provide services to a joint venture that we control and therefore consolidate for financial reporting purposes, we eliminate intercompany revenues and expenses on such transactions. In situations where we account for our interest in the joint venture under the equity method of accounting, we do not eliminate any portion of our subcontractor revenues or expenses, however, we recognize profit on our subcontractor scope of work only to the extent the joint venture's scope of work to the end customer is complete. 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 6 "Equity Method Investments and Variable Interest Entities" to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information. The information discussed therein is incorporated by reference into this Part I, Item 2.
Current wording
We form incorporated and unincorporated joint ventures to execute certain projects. In addition to participating as a joint venture partner, we often provide engineering, procurement, construction management, operations or maintenance services to the joint venture as a subcontractor. Where we provide services to a joint venture that we control and therefore consolidate for financial reporting purposes, we eliminate intercompany revenues and expenses on such transactions. In situations where we account for our interest in the joint venture under the equity method of accounting, we do not eliminate any portion of our subcontractor revenues or expenses, however, we recognize profit on our subcontractor scope of work up to but not in excess of the joint venture's percent complete on its scope of work. 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 6 "Equity Method Investments and Variable Interest Entities" to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information. The information discussed therein is incorporated by reference into this Part I, Item 2.
Previous wording
Information relating to various commitments and contingencies is described in Notes 5 "Unapproved Change Orders and Claims Against Clients and Estimated Recoveries of Claims Against Suppliers and Subcontractors", 10 "Commitments and Contingencies" and 11 "U.S. Government Matters" 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.
Current wording
Information relating to various commitments and contingencies is described in Notes 5 "Unapproved Change Orders and Claims Against Clients", 10 "Commitments and Contingencies" and 11 "U.S. Government Matters" 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.
Previous wording
Certain STS services projects may require us to provide credit support for our performance obligations to our customers in the form of letters of credit, surety bonds or guarantees. Our ability to obtain new project awards in the future may be dependent on our ability to maintain or increase our letter of credit and surety bonding capacity, which may be further dependent on the timely release of existing letters of credit and surety bonds. As the need for credit support arises, letters of credit may be issued under the Revolver (as defined below) or with lending counterparties on a bilateral, syndicated or other basis.
Current wording
Certain STS services projects may require us to provide credit support for our performance obligations to our customers in the form of letters of credit, surety bonds or guarantees. Our ability to obtain new project awards in the future may be dependent on our letter of credit and surety bonding capacity, which may be further dependent on the timely release of existing letters of credit and surety bonds. As the need for credit support arises, letters of credit may be issued under the Revolver (as defined below) or with lending counterparties on a bilateral, syndicated or other basis.
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. During the three months ended June 28, 2024, $2 million in cash was paid on the outstanding Term Loan B principal.
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 provided for an incremental Term Loan B facility in an aggregate principal amount of $1 billion and extended 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 nine months ended September 27, 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. 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.
Current wording
We entered into Amendment No. 12 to our Credit Agreement on February 7, 2024. This amendment consolidated all USD denominated Term Loans A including: Term A-1, Term A-2 and Term A-4 loan facilities under our Credit Agreement into the amended singular USD denominated Term A-1 loan facility and continued the GBP denominated Term A-3 loan facility outstanding at December 29, 2023. During the nine months ended September 27, 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 $414 million at June 28, 2024, and $304 million at December 29, 2023, and consisted of the following:
Current wording
Cash and cash equivalents totaled $462 million at September 27, 2024, and $304 million at December 29, 2023, and consisted of the following:
Previous 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.
Current wording
Operating Activities. Cash provided by operations totaled $422 million and $248 million for the nine months ended September 27, 2024 and September 29, 2023, respectively, as compared to net income of $303 million and net loss of $282 million for the nine months ended September 27, 2024 and September 29, 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 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.
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 increase in operating cash flows for the nine months ended September 27, 2024 compared to the nine months ended September 29, 2023 is primarily related to the payment made in the third quarter of 2023 related to the settlement of a legacy legal matter that did not recur during the nine months ended September 27, 2024. Additionally, for the nine months ended September 27, 2024, we received $123 million in distributions of earnings from unconsolidated affiliates compared to $58 million in distributions of earnings from unconsolidated affiliates for the nine months ended September 29, 2023. This increase was offset primarily by increased employer pension contributions and changes in the primary components of our working capital.
Previous 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.
Current wording
Investing Activities. Cash used in investing activities totaled $751 million for the nine months ended September 27, 2024 and was primarily related to the acquisition of LinQuest, net of cash acquired of $739 million, capital expenditures of $54 million and funding in other investment of 5 million. This was offset by 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. See Note 17. "Acquisitions" to our condensed consolidated financial statements for further discussion around the acquisition of LinQuest Corporation and Note 6. "Equity Method Investments and Variable Interest Entities" for further details around the return of investment from JKC.
Previous 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.
Current wording
Cash used in investing activities totaled $43 million for the nine months ended September 29, 2023 and was primarily related to the second payment for an additional investment of $39 million in Mura Technology and capital expenditures of $60 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 $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.
Current wording
Financing Activities. Cash provided by financing activities totaled $475 million for the nine months ended September 27, 2024 and was primarily related to $343 million in borrowings on our Revolver and $574 million in borrowings associated with Amendment No. 11 and No. 13 to our Credit Agreement. These increases were offset by $81 million of principal payments related to our Senior Credit Facility, $63 million in payments on the Revolver, $154 million for the repurchase of common stock under our share repurchase program and $13 million for the repurchase of common stock under our "withhold to cover" program. Cash used in financing activities also included $33 million payment for the settlement of warrants, $59 million of dividend payments to common shareholders, $18 million in debt issuance costs associated with Amendment No. 11, No. 12 and No. 13 to our Credit Agreement for our Senior Credit Facility and $10 million for the acquisition of a noncontrolling interest. See Note 8 "Debt and Other Credit Facilities" for further discussion of our Senior Credit Facility.
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Current report — wording carried from elsewhere
Selling, general and administrative expenses. Selling, general and administrative expenses in the nine months ended September 27, 2024 were $20 million higher, a 5% increase compared to the nine months ended September 29, 2023, which was primarily driven by additional expenses incurred to support the growth in both our GS and STS business segments.
Current report — wording carried from elsewhere
Cash used in financing activities totaled $250 million for the nine months ended September 29, 2023 and was primarily due to a net cash outflow of $201 million to repurchase a portion of our outstanding Convertible Notes, corresponding Note
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
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 report — wording carried elsewhere
Legal settlement of Legacy Matter. During the six months ended June 30, 2023, we recorded a charge of $144 million related to the settlement of a legacy legal matter that did not recur during the six months ended June 28, 2024.