Kbr, Inc 10-Q for FY2023 Q1

Kbr, Inc. (KBR)

10-Q 2023-05-01 For: 2023-03-31

Added on April 11, 2026

About this 10-Q

Kbr, Inc filed this 10-Q on May 1, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).

Headline figures

Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.7B; down 0.6% from $1.71B a year earlier
Net income: $86M; compared with a net loss of $71M a year earlier
Diluted EPS: $0.56; compared with -$0.51 a year earlier

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Title of each class	Trading symbol	Name of each exchange on which registered
Common Stock, $0.001 par value	KBR	New York Stock Exchange



			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)			5
Condensed Consolidated Statements of Operations			5
Condensed Consolidated Statements of Comprehensive Income (Loss)			6
Condensed Consolidated Balance Sheets			7
Condensed Consolidated Statements of Shareholders' Equity			8
Condensed Consolidated Statements of Cash Flows			9
Notes to Condensed Consolidated Financial Statements			10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			28
Item 3. Quantitative and Qualitative Disclosures About Market Risk			40
Item 4. Controls and Procedures			41
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			42
Item 1A. Risk Factors			42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			42
Item 6. Exhibits			43
SIGNATURES			44


Acronym						Definition

AOCL						Accumulated other comprehensive loss
ASC						Accounting Standards Codification
Aspire Defence						Aspire Defence Limited
ASU						Accounting Standards Update

C5ISR						Command, Control, Communications, Computers, Cyber, Intelligence, Surveillance and Reconnaissance
CAS						Cost Accounting Standards for U.S. government contracts
DCAA						Defense Contract Audit Agency
DCMA						Defense Contract Management Agency
DoD						Department of Defense
DOJ						U.S. Department of Justice






ESPP						Employee Stock Purchase Plan
Exchange Act						Securities Exchange Act of 1934, as amended
FAR						Federal Acquisition Regulation
FASB						Financial Accounting Standards Board
FCA						False Claims Act

FKTC						First Kuwaiti Trading Company





GS						Government Solutions




JKC						JKC Australia LNG, an Australian joint venture executing the Ichthys LNG Project
LIBOR						London interbank offered rate
LNG						Liquefied natural gas
MD&A						Management's Discussion and Analysis of Financial Condition and Results of Operations
MFRs						Memorandums for Record
MoD						Ministry of Defence
NCI						Noncontrolling interests
OAW						Operation Allies Welcome
PFIs						Private financed initiatives and projects
PIC						Paid-in capital in excess of par

PPE						Property, Plant and Equipment


RPA						Master Accounts Receivable Purchase Agreement

SEC						U.S. Securities and Exchange Commission
SOFR						Secured Overnight Financing Rate
SONIA						Sterling Overnight Index Average
STS						Sustainable Technology Solutions



U.K.						United Kingdom
U.S.						United States
U.S. GAAP						Accounting principles generally accepted in the United States


VIEs						Variable interest entities


	Three Months Ended
	March 31,
		2023		2022

Revenues		$	1,703	$	1,714
Cost of revenues		(1,458)		(1,518)
Gross profit		245		196
Equity in earnings (losses) of unconsolidated affiliates		23		(118)
Selling, general and administrative expenses		(124)		(107)



Other		—		(2)

Operating income (loss)		144		(31)
Interest expense		(26)		(20)

Other non-operating expense		(2)		—
Income (loss) before income taxes		116		(51)
Provision for income taxes		(30)		(19)
Net income (loss)		86		(70)
Less: Net income attributable to noncontrolling interests		—		1
Net income (loss) attributable to KBR		$	86	$	(71)
Net income (loss) attributable to KBR per share
Basic		$	0.62	$	(0.51)
Diluted		$	0.56	$	(0.51)
Basic weighted average common shares outstanding		137		140
Diluted weighted average common shares outstanding		154		140
Cash dividends declared per share		$	0.135	$	0.120


	Three Months Ended
	March 31,
		2023		2022
Net income (loss)		$	86	$	(70)
Other comprehensive income (loss):
Foreign currency translation adjustments		15		(19)
Pension and post-retirement benefits		—		6
Changes in fair value of derivatives		(10)		24
Other comprehensive income (loss)		5		11
Income tax expense:

Pension and post-retirement benefits		—		(1)
Changes in fair value of derivatives		2		(5)
Income tax expense		2		(6)
Other comprehensive income, net of tax		7		5
Comprehensive income (loss)		93		(65)
Less: Comprehensive income attributable to noncontrolling interests		—		1
Comprehensive income (loss) attributable to KBR		$	93	$	(66)


☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to


	March 31,		December 31,
	2023		2022
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	416	$	389
Accounts receivable, net of allowance for credit losses of $9 and $9, respectively	1,076		942
Contract assets	258		252

Other current assets	162		164
Total current assets	1,912		1,747

Pension Assets	62		46
Property, plant, and equipment, net of accumulated depreciation of $418 and $417 (including net PPE of $27 and $22 owned by a variable interest entity), respectively	206		182
Operating lease right-of-use assets	149		164
Goodwill	2,095		2,087
Intangible assets, net of accumulated amortization of $346 and $332, respectively	642		645
Equity in and advances to unconsolidated affiliates	172		188
Deferred income taxes	205		213
Other assets	293		294
Total assets	$	5,736	$	5,566
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	755	$	637

Contract liabilities	282		275
Accrued salaries, wages and benefits	285		325
Current maturities of long-term debt	367		364

Operating lease liabilities	47		48
Other current liabilities	192		172
Total current liabilities	1,928		1,821

Employee compensation and benefits	94		105
Income tax payable	118		117
Deferred income taxes	94		92


Long-term debt	1,374		1,376
Operating lease liabilities	185		193

Other liabilities	286		230
Total liabilities	4,079		3,934
Commitments and Contingencies (Notes 6, 11 and 12)
KBR shareholders’ equity:
Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued	—		—
Common stock, $0.001 par value 300,000,000 shares authorized, 181,420,685 and 180,807,960 shares issued, and 136,039,210 and 136,505,145 shares outstanding, respectively	—		—
PIC	2,244		2,235
Retained earnings	1,478		1,410
Treasury stock, 45,381,475 shares and 44,302,815 shares, at cost, respectively	(1,203)		(1,143)
AOCL	(875)		(882)
Total KBR shareholders’ equity	1,644		1,620
Noncontrolling interests	13		12
Total shareholders’ equity	1,657		1,632
Total liabilities and shareholders’ equity	$	5,736	$	5,566


















Dollars in millions	Total		PIC		Retained Earnings		Treasury Stock		AOCL		NCI
Balance at December 31, 2022	$	1,632	$	2,235	$	1,410	$	(1,143)	$	(882)	$	12




Share-based compensation	6		6		—		—		—		—

Common stock issued upon exercise of stock options	2		2		—		—		—		—
Dividends declared to shareholders ($0.135/share)	(18)		—		(18)		—		—		—
Repurchases of common stock	(61)		—		—		(61)		—		—
Issuance of ESPP shares	2		1		—		1		—		—

Distributions to noncontrolling interests	(1)		—		—		—		—		(1)
Other	2		—		—		—		—		2
Net income	86		—		86		—		—		—
Other comprehensive income, net of tax	7		—		—		—		7		—
Balance at March 31, 2023	$	1,657	$	2,244	$	1,478	$	(1,203)	$	(875)	$	13



















Dollars in millions	Total		PIC		Retained Earnings		Treasury Stock		AOCL		NCI
Balance at December 31, 2021	$	1,683	$	2,206	$	1,287	$	(943)	$	(881)	$	14




Share-based compensation	5		5		—		—		—		—

Common stock issued upon exercise of stock options	4		4		—		—		—		—
Dividends declared to shareholders ($0.120/share)	(17)		—		(17)		—		—		—
Repurchases of common stock	(33)		—		—		(33)		—		—
Issuance of ESPP shares	1		1		—		—		—		—


Other	—		—		1		—		—		(1)
Net income	(70)		—		(71)		—		—		1
Other comprehensive loss, net of tax	5		—		—		—		5		—
Balance at March 31, 2022	$	1,578	$	2,216	$	1,200	$	(976)	$	(876)	$	14


	Three Months Ended March 31,
	2023		2022
Cash flows from operating activities:
Net income (loss)	$	86	$	(70)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	36		33
Equity in (earnings) losses of unconsolidated affiliates	(23)		118
Deferred income tax	14		16




Other	10		12

Changes in operating assets and liabilities:
Accounts receivable, net of allowance for credit losses	(130)		370
Contract assets	(7)		14

Accounts payable	110		(400)
Contract liabilities	6		24
Accrued salaries, wages and benefits	(36)		(43)
Payments on operating lease obligation	(17)		(14)

Payments from unconsolidated affiliates, net	6		7
Distributions of earnings from unconsolidated affiliates	24		30

Pension funding	(4)		(11)




Other assets and liabilities	(40)		3

Total cash flows provided by operating activities	$	35	$	89
Cash flows from investing activities:
Purchases of property, plant and equipment	$	(19)	$	(6)
Proceeds from sale of assets or investments	—		18
Return of (investments in) equity method joint ventures, net	61		(1)



Other	—		1
Total cash flows provided by investing activities	$	42	$	12
Cash flows from financing activities:


Payments on short-term and long-term debt	(4)		(4)



Payments of dividends to shareholders	(16)		(15)
Net proceeds from issuance of common stock	2		4
Payments to reacquire common stock	(61)		(33)





Other	25		(4)
Total cash flows used in financing activities	$	(54)	$	(52)
Effect of exchange rate changes on cash	4		(7)
Increase in cash and cash equivalents	27		42
Cash and cash equivalents at beginning of period	389		370
Cash and cash equivalents at end of period	$	416	$	412





Supplemental disclosure of cash flows information:
Noncash investing activities
Leasehold improvements paid by landlord	$	7	$	—
Accrued but unpaid purchases of property, plant and equipment	$	11	$	—
Noncash financing activities
Dividends declared	$	18	$	17


	Three Months Ended March 31, 2023

Total by Countries/Regions Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total
United States	$	718	$	131	$	849
Europe	447		58		505
Middle East	26		87		113
Australia	101		18		119

Africa	19		18		37
Asia	3		38		41
Other countries	14		25		39
Total revenue	$	1,328	$	375	$	1,703

	Three Months Ended March 31, 2022

Total by Countries/Regions Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total
United States	$	1,011	$	109	$	1,120
Europe	283		32		315
Middle East	39		49		88
Australia	90		—		90

Africa	18		17		35
Asia	3		42		45
Other countries	15		6		21
Total revenue	$	1,459	$	255	$	1,714


	March 31, 2023
Dollars in millions	International (a)		Domestic (b)		Total
Operating cash and cash equivalents	$	255	$	38	$	293
Short-term investments (c)	7		2		9
Cash and cash equivalents held in consolidated joint ventures and Aspire Defence subcontracting entities	100		14		114
Total	$	362	$	54	$	416


	December 31, 2022
Dollars in millions	International (a)		Domestic (b)		Total
Operating cash and cash equivalents	$	251	$	25	$	276
Short-term investments (c)	4		2		6
Cash and cash equivalents held in consolidated joint ventures and Aspire Defence subcontracting entities	99		8		107
Total	$	354	$	35	$	389



	Three Months Ended March 31,		Year Ended December 31,
	2023		2022
Dollars in millions
Beginning balance at January 1,	$	188	$	576


Equity in earnings (losses) of unconsolidated affiliates (a)	23		(80)
Distributions of earnings of unconsolidated affiliates (b)	(15)		(53)
Payments from unconsolidated affiliates, net	(6)		(14)
(Return of) investments in equity method investment, net (c)	(61)		(198)

Sale of equity method investment (d)(a)	—		(31)
Foreign currency translation adjustments	1		(15)
Other (e)	42		3



Ending balance	$	172	$	188


	Revolver and Term Loan A
Consolidated Net Leverage Ratio	Reference Rate (a)		Base Rate		Commitment Fee
Greater than or equal to 4.25 to 1.00	2.25	%	1.25	%	0.33	%
Less than 4.25 to 1.00 but greater than or equal to 3.25 to 1.00	2.00	%	1.00	%	0.30	%
Less than 3.25 to 1.00 but greater than or equal to 2.25 to 1.00	1.75	%	0.75	%	0.28	%
Less than 2.25 to 1.00 but greater than or equal to 1.25 to 1.00	1.50	%	0.50	%	0.25	%
Less than 1.25 to 1.00	1.25	%	0.25	%	0.23	%




Dollars in millions	2023		2022
Amounts included in project estimates-at-completion at January 1,	$	48	$	426
Net increase (decrease) in project estimates	13		(117)
Approved change orders	—		(271)
Foreign currency impact	—		7
Amounts included in project estimates-at-completion at March 31,	$	61	$	45


Dollars in millions	Accumulated foreign currency translation adjustments		Accumulated pension liability adjustments		Changes in fair value of derivatives		Total
Balance at December 31, 2022	$	(352)	$	(568)	$	38	$	(882)
Other comprehensive income (loss) adjustments before reclassifications	29		—		(5)		24
Amounts reclassified from AOCL	(14)		—		(3)		(17)
Net other comprehensive income (loss)	15		—		(8)		7
Balance at March 31, 2023	$	(337)	$	(568)	$	30	$	(875)


	Three Months Ended
	March 31, 2023
		Number of Shares	Average Price per Share		Dollars in Millions
Repurchases under the $500 million authorized share repurchase program		934,935	$	53.46	$	50

Withhold to cover shares		203,233	$	53.62	$	11
Total		1,138,168	$	53.49	$	61

	Three Months Ended
	March 31, 2022
		Number of Shares	Average Price per Share		Dollars in Millions
Repurchases under the $350 million authorized share repurchase program		519,332	$	48.12	$	25

Withhold to cover shares		170,939	$	48.70	$	8
Total		690,271	$	48.26	$	33


	Three Months Ended March 31,
Shares in millions	2023		2022
Net income (loss) attributable to KBR:
Net Income (loss) attributable to KBR	$	86	$	(71)
Less earnings allocable to participating securities	$	(1)	$	—
Basic net income (loss) attributable to KBR	$	85	$	(71)
Reversal of Convertible Debt interest expense	2		—
Diluted net income (loss) attributable to KBR (a)	$	87	$	(71)

Weighted average common shares outstanding:
Basic weighted average common shares outstanding	137		140
Convertible debt	14		—
Warrants	3		—

Diluted weighted average common shares outstanding (a)	154		140

Net income (loss) attributable to KBR per share:
Basic	$0.62		$(0.51)
Diluted (a)	$0.56		$(0.51)


	Notional Amount at March 31, 2023		Pay Fixed Rate (Weighted Average)		Receive Variable Rate	Settlement and Termination
March 2020 Interest Rate Swaps	$	400	0.89	%	Term SOFR	Monthly through January 2027
September 2022 Interest Rate Swaps (a)	$	250	3.43	%	Term SOFR	Monthly through January 2027
March 2023 Interest Rate Swaps	$	205	3.61	%	Term SOFR	Monthly through January 2027
March 2023 Amortizing Interest Rate Swaps	£	118	3.81	%	Term SONIA	Monthly through November 2026


Consolidated Results	Three Months Ended March 31,
					2023 vs. 2022
Dollars in millions	2023		2022		$		%
Revenues	$	1,703	$	1,714	$	(11)	(1)	%
Cost of revenues	$	(1,458)	$	(1,518)	$	(60)	(4)	%
Gross profit	$	245	$	196	$	49	25	%
Equity in earnings (losses) of unconsolidated affiliates	$	23	$	(118)	$	141	119	%
Selling, general and administrative expenses	$	(124)	$	(107)	$	17	16	%



Other	$	—	$	(2)	$	(2)	n/m
Operating income	$	144	$	(31)	$	175	n/m
Interest expense	$	(26)	$	(20)	$	6	30	%

Other non-operating expense	$	(2)	$	—	$	2	n/m
Income before provision for income taxes and noncontrolling interests	$	116	$	(51)	$	167	n/m
Provision for income taxes	$	(30)	$	(19)	$	11	58	%
Net income (loss)	$	86	$	(70)	$	156	n/m
Net income attributable to noncontrolling interests	$	—	$	1	$	(1)	(100)	%
Net income (loss) attributable to KBR	$	86	$	(71)	$	157	n/m


Purchase Period	Total Shares Repurchased (1)	Average Price Paid per Share		Shares Repurchased as Part of Publicly Announced Plan	Dollar Value of Maximum Number of Shares that May Yet Be Purchased Under the Plan
January 1 - 31, 2023	—	$	—	—	$	451,171,009
February 1 - 28, 2023	334,216	$	54.34	162,183	$	442,189,014
March 1 - 31, 2023	803,952	$	53.14	772,752	$	401,189,712
Total	1,138,168	—		934,935	$	401,189,712


Exhibit Number						Description
3.1						Amended and Restated Bylaws of KBR, Inc., effective as of March 15, 2023 (incorporated by reference to Exhibit 3.1 to KBR’s current report on Form 8-K filed March 17, 2023; File No. 001-33146)

10.1						Amendment No. 8 to the Credit Agreement, dated as of February 6, 2023, with Bank of America, N.A., as administrative agent, swing line lender and a letter of credit issuer, the lenders party thereto and each of the subsidiaries of KBR party thereto (incorporated by reference to Exhibit 10.1 to KBR's current report on Form 8-K filed February 6, 2023; File No. 001-33146)


*10.2+						Second Amendment to KBR Senior Executive Performance Pay Plan, as restated effective January 1, 2020

*10.3+						Form of revised Restricted Stock Unit Agreement (US Employee) pursuant to Amended and Restated KBR, Inc. 2006 Stock and Incentive Plan

*10.4+						Form of revised Restricted Stock Unit Agreement (International Employee) pursuant to Amended and Restated KBR, Inc. 2006 Stock and Incentive Plan

*10.5+						Form of revised Performance Stock Unit Agreement (US Employee) pursuant to Amended and Restated KBR, Inc. 2006 Stock and Incentive Plan

*10.6+						Form of revised Performance Stock Unit Agreement (International Employee) pursuant to Amended and Restated KBR, Inc. 2006 Stock and Incentive Plan

*10.7+						Form of Performance Award Agreement (US/International Employee Cash Only) pursuant to Amended and Restated KBR, Inc. 2006 Stock and Incentive Plan

*10.8+						Form of Performance Award Agreement (US/International Employee Cash/Stock) pursuant to Amended and Restated KBR, Inc. 2006 Stock and Incentive Plan

*31.1						Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

*31.2						Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

**32.1						Certification Furnished Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

**32.2						Certification Furnished Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

















***101						The following financial information from this Quarterly Report on Form 10-Q of KBR, Inc. for the quarter ended March 31, 2023 formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Shareholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements, tagged as blocks of text

104						Cover Page Interactive Data File - formatted as Inline XBRL contained in Exhibit 101




+			Management contracts or compensatory plans or arrangements

*			Filed with this Form 10-Q

**			Furnished with this Form 10-Q

***			Interactive data files


KBR, INC.


/s/ Mark W. Sopp						/s/ Shad E. Evans
Mark W. Sopp						Shad E. Evans
Executive Vice President and Chief Financial Officer						Senior Vice President of Finance Operations and Chief Accounting Officer


/s/ Stuart J. B. Bradie
Stuart J. B. Bradie
Chief Executive Officer