KBR, INC.

Previous wording

In December 2024, the National Defense Authorization Act ("NDAA") for fiscal year 2025 was signed into law. The NDAA authorizes programs, projects and policies to be carried out with funds appropriated by Congress as part of the annual budgetary process. The NDAA supports approximately $884 billion in fiscal year 2025 funding for national defense, $850 billion of which is for the DoD. The requested amount is an increase of $9 billion when compared to the authorized defense spending for fiscal year 2024.

Current wording

From October 1, 2025 through November 11, 2025 the U.S. government was shut down because Congress was unable to pass legislation providing appropriations authority for the government to continue to operate. Subsequent to the U.S. government shutdown starting on October 1, 2025, we experienced delays in project execution, collection of payments and contract awards. On November 12, 2025, a continuing resolution funding measure was enacted to finance all U.S. government activities through January 30, 2026. On February 3, 2026, the Consolidated Appropriations Act of 2026 was passed, which finalized defense appropriations for fiscal year 2026. This legislation provides for $839 billion in discretionary defense spending. In December 2025, the National Defense Authorization Act ("NDAA") was signed into law. The NDAA authorizes programs, projects and policies to be carried out with funds appropriated by Congress as part of the annual budgetary process. The NDAA supports up to approximately $901 billion in fiscal year 2026 funding for national defense. Additionally, the approved fiscal year 2026 budget for NASA is $24 billion.

Previous wording

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 Labour Party has commissioned a strategic defense review to determine future defense spending priorities. 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 June 2025, leaders of the North Atlantic Treaty Organization agreed to invest 5% of their countries' gross domestic product ("GDP") on defense and security-related spending by 2035. Additionally, in June 2025, the Strategic Defence Review was completed in the U.K. with plans to increase defense spending to 2.50% of GDP by 2027 and additional increases in following years to reach defense spending of 3.00% 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-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. 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.

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

The following tables set forth our results of operations for the periods presented, including by segment. A discussion regarding our financial condition and results of operations for the years ended December 29, 2023 and December 31, 2022 is included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 29, 2023 ("fiscal 2023"), as filed with the SEC on February 20, 2024.

Current wording

The following tables set forth our results of operations for the periods presented, including by segment. A discussion regarding our financial condition and results of operations for the years ended January 3, 2025 ("fiscal 2024") and December 29, 2023 ("fiscal 2023") is included in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended January 3, 2025, as filed with the SEC on February 25, 2025.

Previous wording

Gross profit. The increase in overall gross profit of $126 million, or 13%, was primarily driven by items increasing revenues discussed above and $32 million in gross profit associated with LinQuest. This was partially offset by favorable resolutions on various legacy matters in fiscal 2023 that did not recur in fiscal 2024.

Current wording

Gross profit. The increase in overall gross profit of $51 million, or 5%, was primarily driven by items increasing revenues discussed above.

Previous wording

Equity in earnings (losses) of unconsolidated affiliates. Equity in earnings (losses) of unconsolidated affiliates decreased by $7 million to $107 million in earnings in fiscal 2024 compared to $114 million in earnings in fiscal 2023, primarily due to decreased 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 $103 million, or 96%, to $210 million in earnings in fiscal 2025 compared to $107 million in earnings in fiscal 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 were $56 million higher in fiscal 2024 compared to fiscal 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 were $35 million higher, or 6%, in fiscal 2025 compared to fiscal 2024, which was primarily driven by additional expenses incurred to support the growth in both our MTS and STS business segments, expenses incurred related to the implementation of a new enterprise resource planning system and expenses incurred related to the Planned Spin-Off of MTS.

Previous 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 fiscal 2023 to fiscal 2024.

Current wording

Interest Expense. The increase in interest expense was primarily driven by increased outstanding average debt principal from fiscal 2024 to fiscal 2025.

Previous wording

Provision for income taxes. The provision for income taxes for fiscal 2024 reflects a 25% tax rate as compared to a (57)% tax rate for fiscal 2023. The effective tax rate of 25%, as compared to the U.S. statutory rate of 21%, for fiscal 2024 was primarily impacted 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 (57)%, as compared to the U.S. statutory rate of 21%, for fiscal 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 fiscal 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 12 "Income Taxes" to our consolidated financial statements for further discussion on income taxes, including our reconciliation of the U.S. statutory tax rate to our effective tax rate.

Current wording

Provision for income taxes. The provision for income taxes reflects a 25% tax rate for fiscal 2025 and 2024. The effective tax rate of 25%, as compared to the U.S. statutory rate of 21%, for fiscal 2025 was affected by the rate differential on our foreign earnings and the impact of state and local taxes in the U.S., partially offset by the resolution reached with tax authorities. The effective tax rate of 25%, as compared to the U.S. statutory rate of 21%, for fiscal 2024 was affected by the rate differential on our foreign earnings and the impact of state and local taxes in the U.S. See Note 12. "Income Taxes" to our consolidated financial statements for further discussion on income taxes, including our reconciliation of the U.S. statutory tax rate to our effective tax rate.

Previous wording

GS operating income increased by $168 million, or 59%, to $453 million in fiscal 2024 compared to $285 million in fiscal 2023. The increase in operating income was primarily driven by the $144 million charge recognized in fiscal 2023 related to the settlement of a legacy legal matter that did not recur in fiscal 2024, $16 million in operating income associated with LinQuest and growth in the areas discussed above. Additionally, in fiscal 2024, we recognized $6 million gain related to the sale of our investment interest in a joint venture. These increases were offset by the final resolution of an outstanding legacy claim associated with a U.S. government project, resulting in a $26 million decrease in fiscal 2024.

Current wording

MTS operating income increased by $48 million, or 12%, to $463 million in fiscal 2025 compared to $415 million in fiscal 2024. The increase in operating income was primarily driven by the growth associated with LinQuest. Additionally, operating income increased by $26 million in fiscal 2025 due to the final resolution of an outstanding legacy claim associated with a U.S. government project in fiscal 2024 that did not recur in fiscal 2025. The increase in operating income was offset by a $6 million gain related to the sale of our investment interest in a joint venture during fiscal 2024 that did not recur in fiscal 2025.

Previous wording

STS revenues increased by $268 million, or 17%, to $1,871 million in fiscal 2024 compared to $1,603 million in fiscal 2023. This increase is primarily driven by increased revenues from engineering and professional services.

Current wording

STS revenues increased by $50 million, or 2%, to $2,205 million in fiscal 2025 compared to $2,155 million in fiscal 2024. This increase was primarily driven by increased revenues from engineering and professional services.

Previous wording

STS operating income increased by $46 million, or 14%, to $370 million in fiscal 2024 compared to $324 million in fiscal 2023. The increase from fiscal 2023 to fiscal 2024 is primarily due to the items discussed above and a $7 million loss related to the sale of our operations in Russia in fiscal 2023 that did not recur in fiscal 2024, offset by decreased equity in earnings from services on an LNG project within our STS segment and a favorable resolution on a legacy matter in 2023 that did not recur in 2024.

Current wording

STS operating income increased by $72 million, or 18%, to $477 million in fiscal 2025 compared to $405 million in fiscal 2024. The increase from fiscal 2024 to fiscal 2025 is primarily due to increased equity in earnings from services on an LNG project and the item discussed above, offset by increased selling, general and administrative expenses related to growth in the business and expenses incurred related to the implementation of a new enterprise resource planning system.

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 $2.8 billion at January 3, 2025, 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 January 2, 2026 and January 3, 2025.

Previous wording

The following table summarizes our backlog by business segment as of January 3, 2025 and December 29, 2023, respectively:

Current wording

The following table summarizes our backlog by business segment as of January 2, 2026 and January 3, 2025, respectively. The disposal of HomeSafe met the requirements to be reported as discontinued operations. Backlog as of January 2, 2026 and January 3, 2025 does not include any amounts related to HomeSafe.

Previous wording

We estimate that as of January 3, 2025, 40% of our backlog will be executed within one year. Of this amount, we estimate that 89% will be recognized in revenues on our consolidated statement of operations and 11% will be recorded by our unconsolidated joint ventures. As of January 3, 2025, $193 million of our backlog relates to active contracts that are in a loss position.

Current wording

We estimate that as of January 2, 2026, 36% of our backlog will be executed within one year. Of this amount, we estimate that 83% will be recognized in revenues on our consolidated statement of operations and 17% will be recorded by our unconsolidated joint ventures. As of January 2, 2026, $112 million of our backlog relates to active contracts that are in a loss position.

Previous wording

As of January 3, 2025, 17% of our backlog was attributable to fixed-price contracts, 36% was attributable to PFIs, 30% 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 January 3, 2025, $9.1 billion of our GS backlog was currently funded by our customers.

Current wording

As of January 2, 2026, 17% of our backlog was attributable to fixed-price contracts, 39% was attributable to PFIs, 24% was attributable to cost-reimbursable contracts and 20% was attributable to time-and-materials contracts. PFI arrangements are predominantly fixed‑price in nature, and therefore the PFI portion of backlog primarily reflects fixed‑price contractual structures. 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

Previous wording

As of January 3, 2025, we had approximately $4.0 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

January 2, 2026, $9.0 billion of our MTS backlog was currently funded by our customers. Excluding PFIs, 40% of our MTS backlog is currently funded by our customers. As of January 2, 2026, we had approximately $6.3 billion of priced option periods not yet exercised by the customer for U.S. government contracts that are not included in the backlog amounts presented above.

Previous wording

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

Current wording

The difference between backlog of $16.9 billion and the remaining performance obligations as defined by ASC Topic 606, Revenue from Contracts with Customers ("ASC 606") of $13.3 billion is primarily due to our proportionate share of backlog related to unconsolidated joint ventures which is not included in our remaining performance obligations. See Note 3. "Revenue" to our consolidated financial statements for discussion of the remaining performance obligations.

Previous wording

Cash and cash equivalents totaled $350 million at January 3, 2025 and $304 million at December 29, 2023 and consisted of the following:

Current wording

Cash and cash equivalents totaled $500 million at January 2, 2026 and $342 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. Additionally, domestic cash and cash equivalents includes $12 million held by our wholly-owned captive insurance company as of January 3, 2025 which is generally not available to KBR to utilize to support its other operations.

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 $15 million and $12 million held by our wholly owned captive insurance company as of January 2, 2026 and January 3, 2025, respectively, which is generally not available to KBR 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

Joint venture cash and Aspire Defence project cash balances reflect the amounts held by joint venture entities that we consolidate for financial reporting purposes. These amounts are limited to those entities' activities and are not readily available for general corporate purposes; however, portions of such amounts may become available to us in the future should there be a distribution of dividends to the joint venture partners. We expect that the majority of the joint venture cash balances will be utilized for the corresponding joint venture purposes or for paying dividends.

Current wording

Joint venture cash and Aspire Defence project cash balances reflect the amounts held by joint venture entities that we consolidate for financial reporting purposes. These amounts are limited to those entities' activities and are not readily available for general corporate purposes; however, portions of such amounts may become available to us in the future should there be a distribution of dividends to the joint venture partners. We expect that the majority of the joint venture cash balances will be utilized for the corresponding joint venture purposes or for paying dividends. In fiscal 2025 a contractual repayment was made by the Aspire Defence subcontracting entities.

Previous wording

Operating Activities. Cash provided by operations totaled $462 million and $331 million in fiscal 2024 and fiscal 2023, respectively, as compared to net income of $381 million and net loss of $261 million in fiscal 2024 and fiscal 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 - continuing operations. Cash provided by operations totaled $557 million and $450 million in fiscal 2025 and fiscal 2024, respectively, as compared to net income from continuing operations of $458 million and $379 million in fiscal 2025 and fiscal 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 increase in operating cash flows in fiscal 2024 compared to fiscal 2023 is primarily related to the $144 million payment made in fiscal 2023 related to the settlement of a legacy legal matter that did not recur in fiscal 2024 and increased distributions of earnings from unconsolidated affiliates. In fiscal 2024, we received $163 million in distributions of earnings from unconsolidated affiliates compared to $74 million in fiscal 2023. The increase in operating cash flows was primarily offset by increased employer pension contributions in fiscal 2024. In fiscal 2024, we made an advance payment to our U.K. defined benefit pension plan for approximately £17 million ($21 million at the current exchange rate). Additionally, we made an advance payment to our U.K pension plan in fiscal 2022 that resulted in decreased employer pension contributions in fiscal 2023. Further, there were decreases in operating cash flows in fiscal 2024 from 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.

Current wording

The increase in operating cash flows in fiscal 2025 compared to fiscal 2024 is primarily due to the resolution of an outstanding unapproved change order within our Mission Technology Solutions segment. This increase was 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. In fiscal 2025, the accounts payable cash outflow included a contractual repayment made by the Aspire Defence subcontracting entities. The working capital components are also 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. Additionally, in fiscal 2025 there were decreases in pension funding that resulted in additional operating cash flows.

Previous wording

Investing Activities. Cash used in investing activities totaled $776 million in fiscal 2024 and was primarily related to the acquisition of LinQuest, net of cash acquired of $738 million, capital expenditures of $77 million and funding in other investment of $5 million. This was offset by a return of equity method investment from JKC in fiscal 2024 of approximately $36 million related to our proportionate share of a tax refund. Additionally, we received $7 million primarily from the sale of our investment interest in a joint venture within our GS segment. See Note 4. "Acquisition of LinQuest Corporation" to our consolidated financial statements for further discussion around the acquisition of LinQuest and Note 9. "Equity Method Investments and Variable Interest Entities" for further details around the return of investment from JKC.

Current wording

Cash used in investing activities totaled $751 million in fiscal 2024 and was primarily related to the acquisition of LinQuest, net of cash acquired of $738 million, capital expenditures of $52 million and funding in other investment of $5 million. This was offset by a return of equity method investment from JKC in fiscal 2024 of approximately $36 million related to our proportionate share of a tax refund. Additionally, we received $7 million primarily from the sale of our investment interest in a joint venture within our MTS segment.

Previous wording

Cash used in financing activities totaled $359 million in fiscal 2023 and was primarily due to a net cash outflow of $567 million for the settlement and maturity of our outstanding Convertible Notes, corresponding note hedge and warrants settled and paid during the year. Cash used in financing activities also included $72 million of dividend payments to common shareholders, $125 million for the repurchase of common stock under our share repurchase program, $13 million for the repurchase of common stock under our "withhold to cover" program, $340 million in payments on our revolving credit facility and $17 million of principal payments related to our Senior Credit Facility. These decreases were partially offset by $785 million in borrowings related to our Revolver. See Note 11 "Debt and Other Credit Facilities" for further discussion of our Senior Credit Facility.

Current wording

Financing Activities - continuing operations. Cash used in financing activities totaled $403 million for fiscal 2025. The primary uses of cash in financing activities were $505 million in payments on the Revolver, $26 million in payments on our Term Loan A, $10 million in payments on our Term Loan B, $323 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 and $84 million of dividend payments to common shareholders. These decreases were offset by $555 million in borrowings on our Revolver.

Previous wording

Financing Activities. Cash provided by financing activities totaled $374 million in fiscal 2024 and was primarily related to $393 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 $124 million of principal payments related to our Senior Credit Facility, $98 million in payments on the Revolver, $204 million for the repurchase of common stock under our share repurchase program and $14 million for the repurchase of common stock under our "withhold to cover" program. Cash used in financing activities also included a $33 million payment for the settlement of warrants in connection with our Convertible Notes, $79 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 11 "Debt and Other Credit Facilities" for further discussion of our Senior Credit Facility.

Current wording

Agreement. These increases were offset by $124 million of principal payments related to our Senior Credit Facility, $98 million in payments on the Revolver, $204 million for the repurchase of common stock under our share repurchase program and $14 million for the repurchase of common stock under our "withhold to cover" program. Cash used in financing activities also included a $33 million payment for the settlement of warrants, $79 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.

Previous wording

U.K. pension obligation. We have recognized on our consolidated balance sheets a funding surplus of approximately $82 million (calculated as the excess of the fair value of plan assets over projected benefit obligations) as of January 3, 2025 for our frozen U.K. defined benefit pension plan. The total amount of employer pension contributions paid for the year ended January 3, 2025 is $61 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. 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.

Current wording

U.K. pension obligation. We have recognized on our consolidated balance sheets a funding surplus of approximately $84 million (calculated as the difference between the fair value of plan assets and the projected benefit obligations) as of January 2, 2026 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 which was finalized in fiscal 2025. At this time, we do not anticipate contributing additional funding to this plan at least until the next triennial valuation occurs. 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 this 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 this Annual Report on Form 10-K for information regarding our fixed-price contracts and operations through joint ventures and partnerships.

Previous wording

In certain limited circumstances, we enter into financial guarantees in the ordinary course of business, with financial institutions and other credit grantors, which generally obligate us to make payment in the event of a default by the borrower. These arrangements generally require the borrower to pledge collateral to support the fulfillment of the borrower’s obligation. We account for both financial and performance guarantees at fair value at issuance in accordance with ASC 460-10 Guarantees and, as of January 3, 2025, we had no material guarantees of the work or obligations of third parties recorded.

Current wording

In certain limited circumstances, we enter into financial guarantees in the ordinary course of business, with financial institutions and other credit grantors, which generally obligate us to make payment in the event of a default by the borrower. These arrangements generally require the borrower to pledge collateral to support the fulfillment of the borrower’s obligation. We account for both financial and performance guarantees at fair value at issuance in accordance with ASC Subtopic 460-10, Guarantees, as of January 2, 2026, we had no material guarantees of the work or obligations of third parties recorded.

Previous wording

In connection with certain projects, we are required to provide letters of credit, surety bonds or guarantees to our customers in the ordinary course of business as credit support for contractual performance guarantees, advanced payments received from customers and future funding commitments. As of January 3, 2025, we had a $1 billion committed line of credit on the Revolver under our Senior Credit Facility and $466 million of bilateral and uncommitted lines of credit. As of January 3, 2025, with respect to our Revolver, we had $345 million of outstanding borrowings. We also have $14 million of outstanding letters of credit on our Senior Credit Facility. With respect to our $466 million of bilateral and uncommitted lines of credit, we utilized $284 million for letters of credit as of January 3, 2025. The total remaining capacity of these committed and uncommitted lines of credit was approximately $823 million as of January 3, 2025, all of which can be used toward issuing letters of credit. Information relating to our letters of credit is described in Note 11 "Debt and Other Credit Facilities" to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7. Other than as discussed in this report, we have not engaged in any material off-balance sheet financing arrangements through special purpose entities.

Current wording

In connection with certain projects, we are required to provide letters of credit, surety bonds or guarantees to our customers in the ordinary course of business as credit support for contractual performance guarantees, advanced payments received from customers and future funding commitments. As of January 2, 2026, we had a $1 billion committed line of credit on the Revolver under our Senior Credit Facility and $488 million of bilateral and uncommitted lines of credit. As of January 2, 2026, with respect to our Revolver, we had $395 million of outstanding borrowings. We also have $14 million of outstanding letters of credit on our Senior Credit Facility. With respect to our $488 million of bilateral and uncommitted lines of credit, we utilized $296 million for letters of credit as of January 2, 2026. The total remaining capacity of these committed and uncommitted lines of credit was approximately $783 million as of January 2, 2026, all of which can be used toward issuing letters of credit. Information relating to our letters of credit is described in Note 11. "Debt and Other Credit Facilities" to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7. Other than as discussed in this report, we have not engaged in any material off-balance sheet financing arrangements through special purpose entities.

Previous wording

(b)In the ordinary course of business, we enter into commitments to purchase software and related maintenance, materials, supplies and similar items. The purchase obligations disclosed above do not include purchase obligations that we enter into with vendors in the normal course of business that support direct project costs on existing contracting arrangements with our customers. We expect to recover such obligations from our customers. Fiscal 2025 and fiscal 2026 each include approximately $30 million related to contractual repayments associated with a joint venture in our GS segment.

Current wording

(b)In the ordinary course of business, we enter into commitments to purchase software and related maintenance, materials, supplies and similar items. The purchase obligations disclosed above do not include purchase obligations that we enter into with vendors in the normal course of business that support direct project costs on existing contracting arrangements with our customers. We expect to recover such obligations from our customers.

Previous wording

(c)We have excluded uncertain tax positions totaling $85 million as of January 3, 2025. The ultimate timing of settlement of these obligations cannot be determined with reasonable assurance. See Note 12. "Income Taxes" to our consolidated financial statements for further discussion on income taxes.

Current wording

(c)We have excluded uncertain tax positions totaling $76 million as of January 2, 2026. The ultimate timing of settlement of these obligations cannot be determined with reasonable assurance. See Note 12. "Income Taxes" to our consolidated financial statements for further discussion on income taxes.

Previous wording

Contract Revenue and Contract Estimates. Our policy on revenue recognition is provided in Note 1. "Significant Accounting Policies" to our consolidated financial statements for the year ended January 3, 2025 and is also applied to the revenues of our equity method investments included in equity in earnings of unconsolidated affiliates. We recognize revenue on substantially all of our contracts over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer. Our contracts are generally accounted for as a single performance obligation and are not segmented between types of services provided. We recognize revenue on those contracts over time using the cost-to-cost method, based primarily on contract costs incurred to date compared to total estimated contract costs at completion. Contract costs include all direct materials, labor and subcontractors costs and indirect costs related to contract performance. We believe this method is the most accurate measure of contract performance because it directly measures the value of the goods and services transferred to the customer. For all other contracts we recognize revenue when services are performed which generally coincides with our ability to bill.

Current wording

Contract Revenue and Contract Estimates. Our policy on revenue recognition is provided in Note 1. "Significant Accounting Policies" to our consolidated financial statements and is also applied to the revenues of our equity method investments included in equity in earnings of unconsolidated affiliates. We recognize revenue on substantially all of our contracts over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer. Our contracts are generally accounted for as a single performance obligation and are not segmented between types of services provided. We recognize revenue on those contracts over time using the cost-to-cost method, based primarily on contract costs incurred to date compared to total estimated contract costs at completion. Contract costs include all direct materials, labor and subcontractors costs and indirect costs related to contract performance. We believe this method is the most accurate measure of contract performance because it directly measures the value of the goods and services transferred to the customer. For all other contracts we recognize revenue when services are performed which generally coincides with our ability to bill.

Previous wording

The cost-to-cost method of revenue recognition requires us to prepare estimates of cost to complete for contracts in progress. Due to the nature of the work performed on many of our performance obligations, the estimates of total revenue and cost at completion is complex, subject to many variables and require significant judgment. In making such estimates, judgments are required to evaluate contingencies such as potential variances in schedule and the cost of materials, labor and productivity, the impact of change orders, liability claims, contract disputes and achievement of contractual performance standards. As a significant change in one or more of these estimates could affect the profitability of our contracts, we routinely review and update our significant contract estimates through a disciplined project review process in which management reviews the progress and execution of our performance obligations and estimates at completion. We have a long history of working with multiple types of projects and in preparing cost estimates. However, there are many factors that impact future cost as outlined in “Item 1A. Risk Factors” contained in Part I of this Annual Report on Form 10-K. These factors can affect the accuracy of our estimates and materially impact our future reported earnings. Changes in total estimated contract costs and losses, if any, are recognized on a cumulative catch-up basis in the period in which the changes are identified at the contract level. Such changes in contract estimates can result in the recognition of revenue in a current period for performance obligations which were satisfied or partially satisfied in a prior period. Changes in contract estimates may also result in the reversal of previously recognized revenue if the current estimate differs from the previous estimate.

Current wording

The cost-to-cost method of revenue recognition requires us to prepare estimates of cost to complete for contracts in progress. Due to the nature of the work performed on many of our performance obligations, the estimates of total revenue and cost at completion is complex, subject to many variables and require significant judgment. In making such estimates, judgments are required to evaluate contingencies such as potential variances in schedule and the cost of materials, labor and productivity, the impact of change orders, liability claims, contract disputes and achievement of contractual performance standards. As a significant change in one or more of these estimates could affect the profitability of our contracts, we routinely review and update our significant contract estimates through a disciplined project review process in which management reviews the progress and execution of our performance obligations and estimates at completion. We have a long history of working with multiple types of projects and in preparing cost estimates. However, there are many factors that impact future cost as outlined in “Item 1A. Risk Factors” contained in Part I of this Annual Report on Form 10-K. These factors can affect the accuracy of our estimates and materially impact our future reported earnings. Changes in total estimated contract costs and losses, if any, are recognized on a cumulative catch-up basis in the period in which the changes are identified at the contract level. Such changes in contract estimates can result in the recognition of revenue in a current period for performance obligations which were satisfied or partially satisfied in a prior period. Changes in contract estimates may also result in the reversal of previously recognized revenue. If the current estimate differs from the previous estimate, revenue is recognized through a cumulative catch up adjustment in the current period.

Previous wording

Purchase Price Allocation. We allocate the purchase price of an acquired business to the identifiable assets and liabilities of the acquiree based on estimated fair values. The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill. Fair value estimates are based on the assumptions management believes a market participant would use in pricing the asset and are developed using widely accepted valuation techniques such as discounted cash flows. When determining the fair value of the assets and liabilities of an acquired business, we make judgments and estimates using all available information to us including, but not limited to, quoted market prices, carrying values, expected future cash flows, which includes consideration of future growth rates and margins, attrition rates, future changes in technology and brand awareness, loyalty and position and discount rates. We engage third-party appraisal firms when appropriate to assist in the fair value determination of intangible assets. The purchase price allocation recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of acquisition, as additional information about conditions existing at the acquisition date becomes available. Our purchase price allocation is discussed in Note 4. "Acquisition of LinQuest Corporation" in the accompanying consolidated financial statements.

Current wording

Purchase Price Allocation. We allocate the purchase price of an acquired business to the identifiable assets and liabilities of the acquiree based on estimated fair values. The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill. Fair value estimates are based on the assumptions management believes a market participant would use in pricing the asset and are developed using widely accepted valuation techniques such as discounted cash flows. When determining the fair value of the assets and liabilities of an acquired business, we make judgments and estimates using all available information to us including, but not limited to, quoted market prices, carrying values, expected future cash flows, which includes consideration of future growth rates and margins, attrition rates, future changes in technology and brand awareness, loyalty and position and discount rates. We engage third-party appraisal firms when appropriate to assist in the fair value determination of intangible assets. The purchase price allocation recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of acquisition, as additional information about conditions existing at the acquisition date becomes available. Our purchase price allocation is discussed in Note 4. "Acquisitions" in the accompanying consolidated financial statements.

Previous wording

Deferred Taxes, Valuation Allowances and Tax Contingencies. As discussed in Note 12. "Income Taxes" to our consolidated financial statements, deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. We record a valuation allowance to reduce certain deferred tax assets to amounts that are more likely than not to be realized. We evaluate the realizability of our deferred tax assets by assessing the valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization include our forecast of the timing and character of future taxable income exclusive of reversing temporary differences and carryforwards, future reversals of existing taxable temporary differences, income available from carryback years and available tax planning strategies that could be implemented to realize the net deferred tax assets. To arrive at our forecast of the timing and character of future taxable income, we use estimates of economic and market assumptions, including growth rates in revenues, costs and estimates of future operating margins. These estimates can entail varying degrees of judgment based upon the amount of deferred tax assets assessed and length of the carryforward period.

Current wording

Deferred Taxes, Valuation Allowances and Tax Contingencies. Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. We record a valuation allowance to reduce certain deferred tax assets to amounts that are more likely than not to be realized. We evaluate the realizability of our deferred tax assets by assessing the valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization include our forecast of the timing and character of future taxable income exclusive of reversing temporary differences and carryforwards, future reversals of existing taxable temporary differences, income available from carryback years and available tax planning strategies that could be implemented to realize the net deferred tax assets. To arrive at our forecast of the timing and character of future taxable income, we use estimates of economic and market assumptions, including growth rates in revenues, costs and estimates of future operating margins. These estimates can entail varying degrees of judgment based upon the amount of deferred tax assets assessed and length of the carryforward period. Deferred tax assets and liabilities are discussed in Note 12. "Income Taxes" to our consolidated financial statements.