KBR, INC.

Previous wording

KBR, Inc., a Delaware corporation ("KBR"), delivers science, technology, engineering and logistics support solutions to governments and companies around the world. Drawing from its rich 100-year history and culture of innovation and mission focus, KBR creates sustainable value by combining deep domain expertise with its full life cycle capabilities to help clients meet their most pressing challenges. Our capabilities and offerings include the following:

Current wording

KBR, Inc., a Delaware corporation ("KBR"), delivers science, technology, engineering and logistics support solutions to governments and companies around the world. Drawing from its culture of innovation and mission focus, KBR creates sustainable value by combining deep domain expertise with its full-life cycle capabilities to help clients meet their most pressing challenges. Our capabilities and offerings include the following:

Previous wording

•Defense systems engineering such as rapid prototyping; test and evaluation; aerospace acquisition support; systems and platform integration; and sustainment engineering;

Current wording

•Leading national security and defense systems engineering; rapid prototyping; test and evaluation; aerospace acquisition support; data analytics and systems and platform integration; and sustainment engineering;

Previous wording

•Operational support such as space domain awareness; C5ISR; human spaceflight and satellite operations; integrated supply chain and logistics; and military aviation support;

Current wording

•Operational expertise in areas such as space domain awareness; C5ISR; human spaceflight and satellite operations; integrated supply chain and logistics; and military aviation support;

Previous 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;

Current wording

•Advanced digital, artificial intelligence, machine learning and information operations solutions in areas such as cyber analytics and cybersecurity; space and air dominance; connected battlespace; national security intelligence; data analytics; mission planning systems; virtual/augmented reality and technical training; and artificial intelligence and machine learning;

Previous wording

•Sustainable decarbonization solutions that accelerate and enable energy transition and climate change solutions such as proprietary, sustainability-focused process licensing; advisory services focused on energy transition; high-end engineering, design and management program offerings; and digitally-enabled asset optimization solutions.

Current wording

•Engineering and project management solutions to advance energy security, sustainable decarbonization; energy transition and asset optimization; proprietary, sustainability-focused process licensing; energy transition and security advisory services; and digitally-enabled asset optimization solutions; and

Previous wording

•Professional advisory services across the defense, renewable energy and critical infrastructure sectors; and

Current wording

•Professional advisory services across the defense, renewable energy and critical infrastructure sectors;

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, 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, Navy, Air Force, Space 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, other U.K. Crown Services; the Royal Australian Air Force, Navy and Army; and other national governments; and a wide range of commercial and industrial companies.

Previous 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.

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 safer, more secure and more sustainable global future.

Previous wording

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 wording

A continuing resolution funding measure has been enacted to finance all U.S. government activities through September 30, 2025, the remainder of the U.S. government's 2025 fiscal year. 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 the 2026 fiscal year budget and the impacts that the new legislative and executive branch will have on the next fiscal year budget. We anticipate the federal budget will continue to be subject to debate and compromise shaped by, among other things, the new Administration and Congress, efficiency initiatives by the Department of Government Efficiency, the global security environment, inflationary pressures including tariffs and macroeconomic conditions. Thus far, the directives of the administration and actions of the DOGE have resulted in federal government staff reductions and hiring freezes and may result in delays in contract awards.

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. 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.

Current wording

Internationally, our government work is performed primarily for the U.K. MoD and the Australian Department of Defence. In March 2025, the Treasury Department in the U.K. reaffirmed its commitment to increase defense spending to 2.50% of GDP. Recognizing the importance of strong defense and the role the U.K. plays across the globe, the U.K. has prioritized investment in military research and investment in key areas to advance and develop capabilities around artificial intelligence, cyber security and space superiority. The Australian government continues to invest in defense spending, with particular focus on enhancing regional security, modernizing defense capabilities, strengthening cyber defenses and promoting broader economic stability. In March 2025, the Australian Minister for Defence announced that the Australian defense budget is expected to increase over the next four years.

Previous wording

With defense and civil budgets driven in part by political instability, military conflicts, aging platforms and infrastructure and the need for technology advances, we expect continued opportunities to provide solutions and technologies to mission critical work aligned with our customers’ and our nation’s critical priorities.

Current wording

A shift in funding priorities in the U.S. government or internationally could have material impacts on defense spending broadly and our programs. With defense and civil budgets driven in part by political instability, military conflicts, aging platforms and infrastructure and the need for technology advances, we expect continued opportunities to provide solutions and technologies to mission critical work aligned with our customers’ and our nation’s critical priorities.

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, 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.

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 related 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. While we have not had any material impact to our cost structure or ability to operate, we are monitoring the evolving macroeconomic environment due to ongoing tariffs including how those tariffs and any inflationary pressure may impact investment decisions from our core client base. 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 protection, 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

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 wording

See additional information on our business segments in Note 2 "Business Segment Information" to our condensed consolidated financial statements. In 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 artificial intelligence, machine learning capabilities and digital engineering. See Note 16 "Acquisitions" to our condensed consolidated financial statements for additional information on this acquisition.

Previous 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.

Current wording

Revenues. The increase in overall revenue of $237 million, or 13%, to $2,055 million for the three months ended April 4, 2025 is primarily due to the acquisition of LinQuest in our MTS business and increased revenues from engineering and professional services in our STS business. Additionally, revenue increased due to moves associated with Homesafe Alliance.

Previous 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.

Current wording

Gross profit. The increase in overall gross profit of $50 million, or 20%, was primarily driven by items increasing revenues discussed above.

Previous 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.

Current wording

Equity in earnings of unconsolidated affiliates. Equity in earnings of unconsolidated affiliates increased by $12 million to $42 million in earnings for the three months ended April 4, 2025, compared to $30 million in earnings for the three months ended March 29, 2024. The increase is primarily attributed to 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 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.

Current wording

Selling, general and administrative expenses. Selling, general and administrative expenses in the three months ended April 4, 2025 were $24 million higher, a 20% increase compared to the three months ended March 29, 2024, which was primarily driven by additional expenses incurred to support the growth in both our MTS and STS business segments.

Previous 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.

Current wording

Interest expense. The increase in interest expense was primarily driven by increased outstanding debt principal from the three months ended March 29, 2024 to the three months ended April 4, 2025.

Previous 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.

Current wording

Provision for income taxes. The provision for income taxes reflects a 27% tax rate for both the three months ended April 4, 2025 and March 29, 2024. The effective tax rate of 27%, as compared to the U.S. statutory rate of 21%, for the three months ended April 4, 2025 and March 29, 2024 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.

Previous 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.

Current wording

MTS operating income increased by $8 million to $114 million for the three months ended April 4, 2025, compared to $106 million for the three months ended March 29, 2024. The increase in operating income was primarily driven by the growth associated with LinQuest. This growth was offset by a $6 million gain related to the sale of our investment interest in a joint venture during the three months ended March 29, 2024 that did not recur during the three months ended April 4, 2025.

Previous 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.

Current wording

STS revenues increased by $57 million, or 12%, to $550 million for the three months ended April 4, 2025, compared to $493 million for the three months ended March 29, 2024. This increase is primarily driven by increased revenues from engineering and professional services.

Previous 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.

Current wording

STS operating income increased by $25 million, or 27%, to $119 million for the three months ended April 4, 2025, compared to $94 million for the three months ended March 29, 2024. The increase in operating income is primarily due to the items discussed above and increased equity in earnings from services on an LNG project.

Previous wording

We define backlog, as it relates to U.S. government contracts, as our estimate of the remaining future revenue from existing signed contracts over the remaining base contract performance period (including customer approved option periods) for which work scope and price have been agreed with the customer. We define funded backlog as the portion of backlog for which funding currently is appropriated, less the amount of revenue we have previously recognized. We define unfunded backlog as the total backlog less the funded backlog. Our GS backlog does not include any estimate of future potential delivery orders that might be awarded under our government-wide acquisition contracts, agency-specific indefinite delivery/indefinite quantity contracts or other multiple-award contract vehicles, nor does it include option periods that have not been exercised by the customer.

Current wording

We define backlog, as it relates to U.S. government contracts, as our estimate of the remaining future revenue from existing signed contracts over the remaining base contract performance period (including customer approved option periods) for which work scope and price have been agreed with the customer. We define funded backlog as the portion of backlog for which funding currently is appropriated, less the amount of revenue we have previously recognized. We define unfunded backlog as the total backlog less the funded backlog. Our MTS backlog does not include any estimate of future potential delivery orders that might be awarded under our government-wide acquisition contracts, agency-specific indefinite delivery/indefinite quantity contracts or other multiple-award contract vehicles, nor does it include option periods that have not been exercised by the customer.

Previous wording

Within our GS business segment, we calculate estimated backlog for long-term contracts associated with the U.K. government's PFIs based on the aggregate amount that our client would contractually be obligated to pay us over the life of the project. We update our estimates of the future work to be executed under these contracts on a quarterly basis and adjust backlog, if necessary.

Current wording

Within our MTS business segment, we calculate estimated backlog for long-term contracts associated with the U.K. government's PFIs based on the aggregate amount that our client would contractually be obligated to pay us over the life of the project. We update our estimates of the future work to be executed under these contracts on a quarterly basis and adjust backlog, if necessary.

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 $3.2 billion at September 27, 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 $2.8 billion at April 4, 2025 and January 3, 2025.

Previous 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.

Current wording

We estimate that as of April 4, 2025, 38% of our backlog will be executed within one year. Of this amount, we estimate that 89% will be recognized in revenues on our condensed consolidated statement of operations and 11% will be recorded by our unconsolidated joint ventures. As of April 4, 2025, $220 million of our backlog relates to active contracts that are in a loss position.

Previous 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.

Current wording

As of April 4, 2025, 17% of our backlog was attributable to fixed-price contracts, 37% was attributable to PFIs, 30% 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 April 4, 2025, $9.0 billionof our MTS backlog was currently funded by our customers.

Previous 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.

Current wording

As of April 4, 2025, 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 $17.9 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.

Current wording

The difference between backlog of $17.3 billion and the remaining performance obligations as defined by ASC 606 of$13.8 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

Cash and cash equivalents totaled $462 million at September 27, 2024, and $304 million at December 29, 2023, and consisted of the following:

Current wording

Cash and cash equivalents totaled $442 million at April 4, 2025, and $350 million at January 3, 2025, and consisted of the following:

Previous wording

Our cash balances are held in numerous accounts throughout the world to fund our global activities, including acquisitions, joint ventures and other business partnerships. Domestic cash relates to cash balances held by U.S. entities and is largely used to support project activities of those businesses as well as general corporate needs such as the payment of dividends to shareholders, repayment of debt and potential repurchases of our outstanding common stock.

Current wording

Our cash balances are held in numerous accounts throughout the world to fund our global activities, including acquisitions, joint ventures and other business partnerships. Domestic cash relates to cash balances held by U.S. entities and is largely used to support project activities of those businesses as well as general corporate needs such as the payment of dividends to shareholders, repayment of debt and potential repurchases of our outstanding common stock. Additionally, domestic cash and cash equivalents includes $12 million held by our wholly-owned captive insurance company as of April 4, 2025 and January 3, 2025 which is generally not available to KBR to utilize to support its other operations.

Previous wording

Our international cash balances may be available for general corporate purposes but are subject to local restrictions, such as capital adequacy requirements and maintaining sufficient cash balances to support our U.K. pension plan and other obligations incurred in the normal course of business by those foreign entities. Repatriations of our undistributed foreign earnings are generally free of U.S. tax but may incur withholding and/or state taxes. We consider our future non-U.S. cash needs as 1) our anticipated foreign working capital requirements, including funding of our U.K. pension plan, 2) the expected growth opportunities across all geographical markets and 3) our plans to invest in strategic growth opportunities, which may include acquisitions, joint ventures and other business partnerships around the world, including whether foreign earnings are permanently reinvested. If management were to completely remove the indefinite investment assertion on all foreign subsidiaries, the exposure to local withholding taxes would be less than $7 million.

Current wording

Our international cash balances may be available for general corporate purposes but are subject to local restrictions, such as capital adequacy requirements and maintaining sufficient cash balances to support our U.K. pension plan and other obligations incurred in the normal course of business by those foreign entities. Repatriations of our undistributed foreign earnings are generally free of U.S. tax but may incur withholding and/or state taxes. We consider our future non-U.S. cash needs as 1) our anticipated foreign working capital requirements, including funding of our U.K. pension plan, 2) the expected growth opportunities across all geographical markets and 3) our plans to invest in strategic growth opportunities, which may include acquisitions, joint ventures and other business partnerships around the world, including whether foreign earnings are permanently reinvested. If management were to completely remove the indefinite investment assertion on all foreign subsidiaries, the exposure to local withholding taxes would be less than $10 million.

Previous 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.

Current wording

Operating Activities. Cash provided by operations totaled $98 million and $91 million for the three months ended April 4, 2025 and March 29, 2024, respectively, as compared to net income of $115 million and $94 million for the three months ended April 4, 2025 and March 29, 2024, 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 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.

Current wording

The increase in operating cash flows for the three months ended April 4, 2025 compared to the three months ended March 29, 2024 is primarily related to increases in distributions of earnings from unconsolidated affiliates. Additionally, there were increases in operating cash flows due to changes in accrued salaries, wages and benefits. These increases were offset primarily by changes in the primary components of our working capital. 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.

Previous 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.

Current wording

Investing Activities. Cash used in investing activities totaled $9 million for the three months ended April 4, 2025, related to capital expenditures. 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 MTS segment. This was offset by $25 million in capital expenditures.

Previous wording

Hedge and outstanding warrants. Cash used in financing activities also included $53 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 "withhold to cover" program, $270 million in payments on our Revolver and $12 million of principal payments related to our Senior Credit Facility. These decreases were partially offset by 430 million in borrowings related to our Revolver. 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 $6 million for the three months ended April 4, 2025. The primary uses of cash in financing activities were $150 million for the repurchase of common stock under our share repurchase program, $6 million for the repurchase of common stock under our "withhold to cover" program, $95 million in payments on the Revolver and $20 million of dividend payments to common shareholders. These decreases were offset by $275 million in borrowings on our Revolver.

Previous 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.

Current wording

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 "withhold 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.

Previous wording

U.K. pension obligation. We have recognized on our condensed consolidated balance sheets a funding surplus of $64 million (measured as the difference between the fair value of plan assets and the projected benefit obligation as of September 27, 2024) for our frozen U.K. defined benefit pension plan. The total amount of employer pension contributions paid for the nine months ended September 27, 2024 was $28 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 ($44 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 $95 million (calculated as the difference between the fair value of plan assets and the projected benefit obligation as of April 4, 2025) for our frozen U.K. defined benefit pension plan. 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. 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 2024, the Trustee of the U.K. defined benefit pension plan commenced the triennial actuarial valuation of the plan. At this time, we do not anticipate contributing additional funding to this plan at least until the next triennial valuation. 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

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.

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. See “Item 1A. Risk Factors” contained in Part I of our 2024 Annual Report on Form 10-K for information regarding our fixed-price contracts and operations through joint ventures and partnerships.

Previous wording

As of September 27, 2024, we had a $1 billion committed line of credit on the Revolver under our Senior Credit Facility and $493 million of bilateral and uncommitted lines of credit. As of September 27, 2024, with respect to our Revolver, we had $330 million of outstanding borrowings. We also have $14 million of outstanding letters of credit on our Senior Credit Facility. With respect to our $493 million of bilateral and uncommitted lines of credit, we had utilized $293 million for letters of credit as of September 27, 2024. The total remaining capacity of these committed and uncommitted lines of credit was approximately $856 million as of September 27, 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.

Current wording

As of April 4, 2025, we had a $1 billion committed line of credit on the Revolver under our Senior Credit Facility and $490 million of bilateral and uncommitted lines of credit. As of April 4, 2025, with respect to our Revolver, we had $525 million of outstanding borrowings. We also have $14 million of outstanding letters of credit on our Senior Credit Facility. With respect to our $490 million of bilateral and uncommitted lines of credit, we had utilized $279 million for letters of credit as of April 4, 2025. The total remaining capacity of these committed and uncommitted lines of credit was approximately $672 million as of April 4, 2025, 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.