KBR, INC.

Previous wording

HomeSafe, a joint venture with Tier One Relocation, informed us on June 18, 2025, that U.S. Transportation Command unexpectedly terminated HomeSafe's role in the Global Household Goods Contract. KBR owns a 72% interest in HomeSafe. As of July 3, 2026 all of HomeSafe operations, including run-off operations, have ceased. The financial results and financial position of HomeSafe are presented as discontinued operations in the condensed consolidated statements of operations, condensed consolidated balance sheets and condensed consolidated statements of cash flows for all periods presented. See Note 17. "Discontinued Operations" to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information. Unless otherwise indicated, any reference to statements of operations items in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" refers to results from continuing operations.

Current wording

HomeSafe, a joint venture with Tier One Relocation, informed us on June 18, 2025, that U.S. Transportation Command unexpectedly terminated HomeSafe's role in the Global Household Goods Contract. KBR owns a 72% interest in HomeSafe. As of October 2, 2026 all of HomeSafe's operations, including run-off operations, have ceased. The financial results and financial position of HomeSafe are presented as discontinued operations in the condensed consolidated statements of operations, condensed consolidated balance sheets and condensed consolidated statements of cash flows for all periods presented. See Note 17. "Discontinued Operations" to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information. Unless otherwise indicated, any reference to statements of operations items in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" refers to results from continuing operations.

Previous wording

On April 3, 2026, the Administration provided a proposed fiscal 2027 budget for the U.S. Government which includes approximately $2.2 trillion in base discretionary spending, $1.5 trillion related to defense spending and $0.7 trillion for non-defense spending. The proposed defense spending is 44% higher than the enacted fiscal 2026 defense spending when including mandatory funding. We anticipate the federal budget will continue to be subject to debate and compromise shaped by, among other things, the Administration and Congress, efficiency initiatives, the global security environment, inflationary pressures including tariffs and macroeconomic conditions. Thus far, the Administration's directives have resulted in federal government staff reductions and hiring freezes and may result in delays in contract awards.

Current wording

On April 3, 2026, the Administration provided a proposed fiscal 2027 budget for the U.S. government which includes approximately $2.2 trillion in base discretionary spending, $1.5 trillion related to defense spending and $0.7 trillion for non-defense spending. The proposed defense spending is 44% higher than the enacted fiscal 2026 defense spending when including mandatory funding. We anticipate the federal budget will continue to be subject to debate and compromise shaped by, among other things, the Administration and Congress, efficiency initiatives, the global security environment, inflationary pressures including tariffs and macroeconomic conditions. Thus far, the Administration's directives have resulted in federal government staff reductions and hiring freezes and may result in delays in contract awards. On April 30, 2026, the Administration issued an executive order directing comprehensive reviews of all private-sector contracts to monitor cost efficiency and ensure policy alignment. This order could affect future contract funding with our U.S. government customers. Thus far, we have not seen a material impact on our results of operations, financial condition or cash flows and continue to monitor the impact of the order.

Previous wording

In September 2025, we announced our intention to spin off our Mission Technology Solutions business into a separate, U.S. publicly-traded company. The Planned Spin-Off is intended to be tax-free to us and our shareholders for U.S. federal income tax purposes and targeting completion on January 4, 2027, which is the first business day of fiscal 2027. The spin-off will be subject to final approval by our Board of Directors and other customary conditions, including receipt of a favorable opinion of legal counsel and/or a private letter ruling from the U.S. Internal Revenue Service with respect to the tax treatment of the transaction for U.S. federal income tax purposes, the effectiveness of a registration statement on Form 10 filed with the SEC, satisfactory completion of financing and other regulatory approvals. Because the intended transaction is a spin-off, the Mission Technology Solutions business is not classified as held for sale and is reported as continuing operations.

Current wording

In September 2025, we announced our intention to spin off our Mission Technology Solutions business into a separate, U.S. publicly-traded company, which is expected to operate as Trinzic, Inc. and be traded on the New York Stock Exchange as TZIC. The Planned Spin-Off is intended to be tax-free to us and our shareholders for U.S. federal income tax purposes and targeting completion on January 4, 2027, which is the first business day of fiscal 2027. The spin-off will be subject to final approval by our Board of Directors and other customary conditions, including receipt of a favorable opinion of legal counsel and/or a private letter ruling from the U.S. Internal Revenue Service with respect to the tax treatment of the transaction for U.S. federal income tax purposes, the effectiveness of a registration statement on Form 10 filed with the SEC on September 30, 2026 (as may be amended), satisfactory completion of financing and other regulatory approvals. Because the intended transaction is a spin-off, the Mission Technology Solutions business is not classified as held for sale and is reported as continuing operations. See Note 18. "Spin-off" to our condensed consolidated financial statements for further discussion on the Planned Spin-Off.

Previous wording

Revenues. The increase in revenue of $32 million, or 2%, to $1,984 million for the three months ended July 3, 2026, compared to $1,952 million for the three months ended July 4, 2025 is primarily due to increases from engineering and professional services within our STS segment, offset by reduced contingent activity within the European command in our MTS segment.

Current wording

Revenues. The increase in revenue of $97 million, or 5%, to $2,028 million for the three months ended October 2, 2026, compared to $1,931 million for the three months ended October 3, 2025 is primarily due to increases from technology sales and engineering and professional services within our STS segment, offset by reductions in NASA-related science and space programs within our MTS segment.

Previous wording

Equity in earnings of unconsolidated affiliates. Equity in earnings of unconsolidated affiliates increased by $10 million, or 11%, to $103 million in earnings for the six months ended July 3, 2026, compared to $93 million in earnings for the six months ended July 4, 2025. 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 decreased by $6 million, or 9%, to $64 million in earnings for the three months ended October 2, 2026, compared to $70 million in earnings for the three months ended October 3, 2025. The decrease 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 materially consistent for each of the three months ended July 3, 2026 and July 4, 2025, decreasing by $3 million, or 2%, to $143 million for the three months ended July 3, 2026, compared to $146 million for the three months ended July 4, 2025.

Current wording

Selling, general and administrative expenses. Selling, general and administrative expenses were materially consistent for each of the three months ended October 2, 2026 and three months ended October 3, 2025, increasing by $9 million, or 6%, to $154 million for the three months ended October 2, 2026, compared to $145 million for the three months ended October 3, 2025.

Previous wording

Spin-off costs and other charges. Spin-off costs and other charges were $31 million for the three months ended July 3, 2026, due to costs associated with the Planned Spin-Off and lease right-of-use asset impairment charges associated with the Planned Spin-Off. See Note 18. "Spin-off" to our condensed consolidated financial statements for further discussion on the Planned Spin-Off.

Current wording

Spin-off costs and other charges. Spin-off costs and other charges were $24 million for the three months ended October 2, 2026, compared to $4 million for the three months ended October 3, 2025, due to costs associated with the Planned Spin-Off and lease right-of-use asset impairment charges associated with the Planned Spin-Off. See Note 18. "Spin-off" to our condensed consolidated financial statements for further discussion on the Planned Spin-Off.

Previous wording

Provision for income taxes. The provision for income taxes for income from continuing operations for the three months ended July 3, 2026 and July 4, 2025 reflects a 28% tax rate and 27% tax rate, respectively. The effective tax rate of 28% for the three months ended July 3, 2026, as compared to the U.S. statutory rate of 21%, was affected by the rate differential on our foreign earnings, the impact of state and local taxes in the U.S and discrete activity for the quarter. The effective tax rate of 27% for the three months ended July 4, 2025, 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. See Note 9. "Income Taxes" to our condensed consolidated financial statements for further discussion on income taxes.

Current wording

Provision for income taxes. The provision for income taxes for income from continuing operations for the three months ended October 2, 2026 and October 3, 2025 reflects a 12% tax rate and 22% tax rate, respectively. The effective tax rate of 12% for the three months ended October 2, 2026, as compared to the U.S. statutory rate of 21%, was affected by the rate differential on our foreign earnings and the impact of state and local taxes in the U.S., offset by a $15 million discrete tax benefit associated with the ongoing IRS examination and appeals process for certain tax years. The effective tax rate of 22% for the three months ended October 3, 2025, as compared to the U.S. statutory rate of 21%, was affected by the rate differential on our foreign earnings and the impact of state and local taxes in the U.S., offset by the resolution reached with tax authorities. See Note 9. "Income Taxes" to our condensed consolidated financial statements for further discussion on income taxes.

Previous wording

Net loss from discontinued operations, net of tax. Net loss from discontinued operations, net of tax, was $54 million during the six months ended July 4, 2025 due to the disposal of HomeSafe.

Current wording

Net income (loss) from discontinued operations, net of tax. Net income (loss) from discontinued operations, net of tax, was $4 million and $(1) million during the three months ended October 2, 2026 and October 3, 2025, respectively, due to the disposal of HomeSafe.

Previous wording

Net loss attributable to noncontrolling interests included in discontinued operations. Net loss attributable to noncontrolling interests included in discontinued operations was $18 million during the six months ended July 4, 2025 due to the disposal of HomeSafe.

Current wording

Net income attributable to noncontrolling interests included in discontinued operations. Net income attributable to noncontrolling interests included in discontinued operations was $1 million during the three months ended October 2, 2026 due to the disposal of HomeSafe.

Previous wording

MTS revenues decreased by $28 million, or 2%, to $1,308 million for the three months ended July 3, 2026 compared to $1,336 million for the three months ended July 4, 2025. The decrease in revenue is primarily due to reduced contingent activity within the European command.

Current wording

MTS revenues decreased by $60 million, or 5%, to $1,266 million for the three months ended October 2, 2026 compared to $1,326 million for the three months ended October 3, 2025. The decrease in revenue is primarily due to reductions in NASA-related science and space programs.

Previous wording

MTS operating income increased by $6 million, or 3%, to $227 million for the six months ended July 3, 2026, compared to $221 million for the six months ended July 4, 2025. The increase in operating income was primarily driven by changes in our services mix, offset by the item discussed above, costs associated with the Planned Spin-Off and lease right-of-use asset impairment charges associated with the Planned Spin-Off.

Current wording

MTS operating income increased by $2 million, or 2%, to $115 million for the three months ended October 2, 2026 compared to $113 million for the three months ended October 3, 2025. The increase in operating income was primarily driven by increased gross profit from changes in services mix, offset by increased selling, general and administrative expenses.

Previous wording

STS revenues increased by $60 million, or 10%, to $676 million in the three months ended July 3, 2026 compared to $616 million in the three months ended July 4, 2025. The increase in revenue is primarily driven by increased revenues from engineering and professional services.

Current wording

STS revenues increased by $157 million, or 26%, to $762 million in the three months ended October 2, 2026 compared to $605 million in the three months ended October 3, 2025. The increase in revenue is primarily driven by increased revenues from technology sales and engineering and professional services.

Previous wording

Corporate operating loss increased by $8 million, or 21%, to $47 million in the three months ended July 3, 2026 compared to $39 million in the three months ended July 4, 2025. The increase in operating loss was primarily driven by costs associated with the Planned Spin-Off and lease right-of-use asset impairment charges associated with the Planned Spin-Off.

Current wording

Corporate operating loss increased by $12 million, or 29%, to $53 million in the three months ended October 2, 2026 compared to $41 million in the three months ended October 3, 2025. The increase in operating loss was primarily driven by costs associated with the Planned Spin-Off and lease right-of-use asset impairment charges associated with the Planned Spin-Off.

Previous wording

The information below is an analysis of our consolidated results for the six months ended July 3, 2026 compared to the six months ended July 4, 2025. See Results of Operations by Business Segment below for additional information describing the performance of each of our reportable segments.

Current wording

The information below is an analysis of our consolidated results for the nine months ended October 2, 2026 compared to the nine months ended October 3, 2025. See Results of Operations by Business Segment below for additional information describing the performance of each of our reportable segments.

Previous wording

Revenues. The decrease in overall revenue of $63 million, or 2%, to $3,907 million for the six months ended July 3, 2026 from $3,970 million for the six months ended July 4, 2025 is primarily due to reduced contingent activity within the European command in our MTS segment, offset by increased revenues from engineering and professional services in our STS segment.

Current wording

Revenues. The increase in overall revenue of $34 million, or 1%, to $5,935 million for the nine months ended October 2, 2026 from $5,901 million for the nine months ended October 3, 2025 is primarily due to increased revenues from technology sales and engineering and professional services in our STS segment, offset by reductions in NASA-related science and space programsand reduced contingent activity within the European commandin our MTS segment.

Previous wording

Equity in earnings of unconsolidated affiliates. Equity in earnings of unconsolidated affiliates were materially consistent for each of the three months ended July 3, 2026 and July 4, 2025, increasing by $1 million, or 2%, to $52 million in earnings for the three months ended July 3, 2026, compared to $51 million in earnings for the three months ended July 4, 2025.

Current wording

Equity in earnings of unconsolidated affiliates. Equity in earnings of unconsolidated affiliates was materially consistent for each of the nine months ended October 2, 2026 and October 3, 2025, increasing by $4 million, or 2%, to $167 million in earnings for the nine months ended October 2, 2026, compared to $163 million in earnings for the nine months ended October 3, 2025.

Previous wording

Selling, general and administrative expenses. Selling, general and administrative expenses in the six months ended July 3, 2026 were $24 million lower, an 8% decrease compared to the six months ended July 4, 2025, which was primarily driven by a favorable closeout in the first quarter of 2026.

Current wording

Selling, general and administrative expenses. Selling, general and administrative expenses for the nine months ended October 2, 2026 were $15 million lower, a 3% decrease compared to the nine months ended October 3, 2025, which was primarily driven by a favorable closeout in the first quarter of 2026.

Previous wording

Spin-off costs and other charges. Spin-off costs and other charges were $46 million for the six months ended July 3, 2026, due to costs associated with the Planned Spin-Off and lease right-of-use asset impairment charges associated with the Planned Spin-Off. See Note 18. "Spin-off" to our condensed consolidated financial statements for further discussion on the Planned Spin-Off.

Current wording

Spin-off costs and other charges. Spin-off costs and other charges were $70 million for the nine months ended October 2, 2026, compared to $4 million for the nine months ended October 3, 2025, due to costs associated with the Planned Spin-Off and lease right-of-use asset impairment charges associated with the Planned Spin-Off. See Note 18. "Spin-off" to our condensed consolidated financial statements for further discussion on the Planned Spin-Off.

Previous wording

Interest expense. The decrease in interest expense was primarily driven by lower average outstanding debt principal from the six months ended July 4, 2025 to the six months ended July 3, 2026.

Current wording

Interest expense. The decrease in interest expense was primarily driven by lower average outstanding debt principal from the nine months ended October 3, 2025 to the nine months ended October 2, 2026.

Previous wording

Provision for income taxes. The provision for income taxes for income from continuing operations for the six months ended July 3, 2026 and July 4, 2025 reflects a 28% tax rate and a 27% tax rate, respectively. The effective tax rate of 28% for the six months ended July 3, 2026, as compared to the U.S. statutory rate of 21%, was affected by the rate differential on our foreign earnings, the impact of state and local taxes in the U.S. and discrete activity for the year. The effective tax rate of 27% for the six months ended July 4, 2025, 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. See Note 9. "Income Taxes" to our condensed consolidated financial statements for further discussion on income taxes.

Current wording

Provision for income taxes. The provision for income taxes for income from continuing operations for the nine months ended October 2, 2026 and October 3, 2025 reflects a 22% tax rate and a 25% tax rate, respectively. The effective tax rate of 22% for the nine months ended October 2, 2026, as compared to the U.S. statutory rate of 21%, was affected by the rate differential on our foreign earnings, the impact of state and local taxes in the U.S. and discrete activity for the year, offset by a $15 million discrete tax benefit associated with the ongoing IRS examination and appeals process for certain tax years. The effective tax rate of 25% for the nine months ended October 3, 2025, as compared to the U.S. statutory rate of 21%, was affected by the rate differential on our foreign earnings and the impact of state and local taxes in the U.S., offset by the resolution reached with tax authorities. See Note 9. "Income Taxes" to our condensed consolidated financial statements for further discussion on income taxes.

Previous wording

Net income (loss) from discontinued operations, net of tax. Net income (loss) from discontinued operations, net of tax, was $2 million and $(48) million during the three months ended July 3, 2026 and July 4, 2025, respectively, due to the disposal of HomeSafe during the three months ended July 4, 2025.

Current wording

Net income (loss) from discontinued operations, net of tax. Net income (loss) from discontinued operations, net of tax, was $4 million and $(55) million during the nine months ended October 2, 2026 and October 3, 2025, respectively, due to the disposal of HomeSafe during the nine months ended October 3, 2025.

Previous wording

Net income (loss) attributable to noncontrolling interests included in discontinued operations. Net income (loss) attributable to noncontrolling interests included in discontinued operations was $1 million and $(16) million during the three months ended July 3, 2026 and July 4, 2025, respectively, due to the disposal of HomeSafe during the three months ended July 4, 2025.

Current wording

Net income (loss) attributable to noncontrolling interests included in discontinued operations. Net income (loss) attributable to noncontrolling interests included in discontinued operations was $1 million and $(18) million during the nine months ended October 2, 2026 and October 3, 2025, respectively, due to the disposal of HomeSafe during the nine months ended October 3, 2025.

Previous wording

MTS revenues decreased by $113 million, or 4%, to $2,604 million for the six months ended July 3, 2026, compared to $2,717 million for the six months ended July 4, 2025. The decrease in revenue is primarily due to reduced contingent activity within the European command in our MTS segment.

Current wording

MTS revenues decreased by $173 million, or 4%, to $3,870 million for the nine months ended October 2, 2026, compared to $4,043 million for the nine months ended October 3, 2025. The decrease in revenue is primarily due to reductions in NASA-related science and space programs and reduced contingent activity within the European command in our MTS segment.

Previous wording

MTS operating income increased by $8 million, or 7%, to $116 million for the three months ended July 3, 2026 compared to $108 million for the three months ended July 4, 2025. The increase in operating income was primarily driven by changes in our services mix, offset by costs associated with the Planned Spin-Off and lease right-of-use asset impairment charges associated with the Planned Spin-Off.

Current wording

MTS operating income increased by $8 million, or 2%, to $342 million for the nine months ended October 2, 2026, compared to $334 million for the nine months ended October 3, 2025. The increase in operating income was primarily driven by increased gross profit from changes in services mix, offset by increased selling, general and administrative expenses, costs associated with the Planned Spin-Off and lease right-of-use asset impairment charges associated with the Planned Spin-Off.

Previous wording

STS revenues increased by $50 million, or 4%, to $1,303 million for the six months ended July 3, 2026, compared to $1,253 million for the six months ended July 4, 2025. The increase in revenue is primarily driven by increased revenues from engineering and professional services.

Current wording

STS revenues increased by $207 million, or 11%, to $2,065 million for the nine months ended October 2, 2026, compared to $1,858 million for the nine months ended October 3, 2025. The increase in revenue is primarily driven by increased revenues from technology sales and engineering and professional services.

Previous wording

STS operating income decreased by $36 million, or 14%, to $216 million for the six months ended July 3, 2026, compared to $252 million for the six months ended July 4, 2025. The decrease in operating income is primarily due to changes in licensing mix, offset by a favorable closeout in the six months ended July 3, 2026.

Current wording

STS operating income decreased by $31 million, or 8%, to $340 million for the nine months ended October 2, 2026, compared to $371 million for the nine months ended October 3, 2025. The decrease in operating income is primarily due to changes in licensing mix, offset by a favorable closeout in the nine months ended October 2, 2026.

Previous wording

Corporate operating loss increased by $14 million, or 18%, to $91 million for the six months ended July 3, 2026, compared to $77 million for the six months ended July 4, 2025. The increase in operating loss was primarily driven by costs associated with the Planned Spin-Off and lease right-of-use asset impairment charges associated with the Planned Spin-Off.

Current wording

Corporate operating loss increased by $26 million, or 22%, to $144 million for the nine months ended October 2, 2026, compared to $118 million for the nine months ended October 3, 2025. The increase in operating loss was primarily driven by costs associated with the Planned Spin-Off and lease right-of-use asset impairment charges associated with the Planned Spin-Off.

Previous wording

We estimate that as of July 3, 2026, 38% of our backlog will be executed within one year. Of this amount, we estimate that 81% will be recognized in revenues on our condensed consolidated statements of operations and 19% will be recorded by our unconsolidated joint ventures. As of July 3, 2026, $64 million of our backlog relates to active contracts that are in a loss position.

Current wording

We estimate that as of October 2, 2026, 38% of our backlog will be executed within one year. Of this amount, we estimate that 81% will be recognized in revenues on our condensed consolidated statements of operations and 19% will be recorded by our unconsolidated joint ventures. As of October 2, 2026, $218 million of our backlog relates to active contracts that are in a loss position.

Previous wording

As of July 3, 2026, 15% of our backlog was attributable to fixed-price contracts, 37% was attributable to PFIs, 22% was attributable to cost-reimbursable contracts and 26% 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 July 3, 2026, $8.8 billionof our MTS backlog was currently funded by our customers. Excluding PFIs, 39% of our MTS backlog is currently funded by our customers. As of July 3, 2026, we had approximately $5.2 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 October 2, 2026, 15% of our backlog was attributable to fixed-price contracts, 38% was attributable to PFIs, 19% was attributable to cost-reimbursable contracts and 28% 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 October 2, 2026, $9.0 billionof our MTS backlog was currently funded by our customers. Excluding PFIs, 45% of our MTS backlog is currently funded by our customers. As of October 2, 2026, we had approximately $5.4 billion of priced option periods not yet exercised by the customer for U.S. government contracts that are not included in the backlog amounts presented above.

Previous wording

The difference between backlog of $17.8 billion and the remaining performance obligations as defined by ASC Topic 606, Revenue from Contracts with Customers, of$13.7 billion is primarily due to our proportionate share of backlog related to unconsolidated joint ventures which is not included in our remaining performance obligations. See Note 3. "Revenue" to our condensed consolidated financial statements for discussion of the remaining performance obligations.

Current wording

The difference between backlog of $17.7 billion and the remaining performance obligations as defined by ASC Topic 606, Revenue from Contracts with Customers, of$13.6 billion is primarily due to our proportionate share of backlog related to unconsolidated joint ventures which is not included in our remaining performance obligations. See Note 3. "Revenue" to our condensed consolidated financial statements for discussion of the remaining performance obligations.

Previous wording

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

Current wording

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

Previous wording

Certain STS services projects may require us to provide credit support for our performance obligations to our customers in the form of letters of credit, surety bonds or guarantees. Our ability to obtain new project awards in the future may be dependent on our letter of credit and surety bonding capacity, which may be further dependent on the timely release of existing letters of credit and surety bonds. As the need for credit support arises, letters of credit may be issued under the Revolver (as defined below) or with lending counterparties on a bilateral, syndicated or other basis.

Current wording

Certain STS services projects may require us to provide credit support for our performance obligations to our customers in the form of letters of credit, surety bonds or guarantees. Our ability to obtain new project awards in the future may be dependent on our letter of credit and surety bonding capacity, which may be further dependent on the timely release of existing letters of credit and surety bonds. As the need for credit support arises, letters of credit may be issued under the Revolver or with lending counterparties on a bilateral, syndicated or other basis.

Previous wording

Cash and cash equivalents totaled $312 million at July 3, 2026, and $500 million at January 2, 2026, and consisted of the following:

Current wording

Cash and cash equivalents totaled $439 million at October 2, 2026, and $500 million at January 2, 2026, and consisted of the following:

Previous wording

Operating Activities - continuing operations. Cash provided by operations totaled $160 million and $308 million for the six months ended July 3, 2026 and July 4, 2025, respectively, as compared to net income from continuing operations of $200 million and $227 million for the six months ended July 3, 2026 and July 4, 2025, 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 $331 million and $506 million for the nine months ended October 2, 2026 and October 3, 2025, respectively, as compared to net income from continuing operations of $332 million and $345 million for the nine months ended October 2, 2026 and October 3, 2025, 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

During the six months ended July 3, 2026, cash flows decreased primarily due to the resolution of an outstanding unapproved change order within our Mission Technology Solutions segment in the six months ended July 4, 2025 that did not recur in the six months ended July 3, 2026 and decreases in distributions of earnings from unconsolidated affiliates. These decreases were offset 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.

Current wording

During the nine months ended October 2, 2026, cash flows decreased primarily due to the resolution of an outstanding unapproved change order within our Mission Technology Solutions segment in the nine months ended October 3, 2025 that did not recur in the nine months ended October 2, 2026, decreases from changes in accrued salaries, wages and benefits and decreases in distributions of earnings from unconsolidated affiliates. These decreases were offset 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 - continuing operations. Cash used in investing activities totaled $216 million for the six months ended July 3, 2026 primarily due to an investment within the BRIS joint venture for $115 million associated with BRIS closing on an agreement to acquire a welding and turnaround services provider. Additionally, we had purchases of available-for-sale debt securities of $49 million, purchases of other investments of $13 million and capital expenditures of $28 million. See Note 6. "Equity Method Investments and Variable Interest Entities" to our condensed consolidated financial statements for further discussion on the investment in equity method investment to BRIS and Note 15. "Fair Value of Financial Instruments and Risk Management" to our condensed consolidated financial statements for further discussion on the available-for-sale debt securities.

Current wording

Investing Activities - continuing operations. Cash used in investing activities totaled $223 million for the nine months ended October 2, 2026 primarily due to an investment within the BRIS joint venture for $115 million associated with BRIS closing on an agreement to acquire a welding and turnaround services provider. Additionally, we had purchases of available-for-sale debt securities of $49 million, purchases of other investments of $13 million and capital expenditures of $36 million. See Note 6. "Equity Method Investments and Variable Interest Entities" to our condensed consolidated financial statements for further discussion on the investment in BRIS and Note 15. "Fair Value of Financial Instruments and Risk Management" to our condensed consolidated financial statements for further discussion on the available-for-sale debt securities.

Previous wording

Cash used in investing activities totaled $24 million for the six months ended July 4, 2025, primarily due to $16 million of capital expenditures and $11 million related to the acquisition of Infrastar Limited. This was offset by a return of equity method investment of $3 million associated with a joint venture in our STS segment.

Current wording

Cash provided by investing activities totaled $47 million for the nine months ended October 3, 2025, primarily due to a return of equity method investment from BRIS of $82 million. This was offset by $24 million of capital expenditures and $13 million related to the acquisition of Infrastar Limited. See Note 6. "Equity Method Investments and Variable Interest Entities" to our condensed consolidated financial statements for further discussion on the return of equity method investment from BRIS.

Previous wording

Financing Activities - continuing operations. Cash used in financing activities totaled $128 million for the six months ended July 3, 2026. The primary uses of cash in financing activities were $161 million in payments on the Revolver, $20 million in payments on our Term Loan A, $5 million in payments on our Term Loan B, $42 million of dividend payments to common shareholders, $25 million for the repurchase of common stock under our share repurchase program and $4 million for the repurchase of common stock under our "withhold to cover" program. These decreases were offset by $141 million in borrowings on our Revolver.

Current wording

Financing Activities - continuing operations. Cash used in financing activities totaled $164 million for the nine months ended October 2, 2026. The primary uses of cash in financing activities were $301 million in payments on the Revolver, $29 million in payments on our Term Loan A, $8 million in payments on our Term Loan B, $63 million of dividend payments to common shareholders, $25 million for the repurchase of common stock under our share repurchase program and $4 million for the repurchase of common stock under our "withhold to cover" program. These decreases were offset by $281 million in borrowings on our Revolver.

Previous wording

Cash used in financing activities totaled $219 million for the six months ended July 4, 2025. The primary uses of cash in financing activities were $323 million in payments on the Revolver, $13 million in payments on our Term Loan A, $5 million in payments on our Term Loan B, $198 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 $41 million of dividend payments to common shareholders. These decreases were offset by $373 million in borrowings on our Revolver.

Current wording

Cash used in financing activities totaled $350 million for the nine months ended October 3, 2025. The primary uses of cash in financing activities were $505 million in payments on the Revolver, $20 million in payments on our Term Loan A, $7 million in payments on our Term Loan B, $298 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 $63 million of dividend payments to common shareholders. These decreases were offset by $555 million in borrowings on our Revolver.