Kbr, Inc 10-Q for FY2022 Q3

Kbr, Inc. (KBR)

10-Q 2022-10-27 For: 2022-09-30

Added on April 11, 2026

About this 10-Q

Kbr, Inc filed this 10-Q on October 27, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).

Headline figures

Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $1.63B; down 11.8% from $1.84B a year earlier
Net income: $74M; up 29.8% from net income of $57M a year earlier
Diluted EPS: $0.49; up 28.9% from $0.38 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			10
Notes to Condensed Consolidated Financial Statements			11
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			39
Item 3. Quantitative and Qualitative Disclosures About Market Risk			54
Item 4. Controls and Procedures			55
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			56
Item 1A. Risk Factors			56
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			57
Item 6. Exhibits			58
SIGNATURES			59


Acronym						Definition

AOCL						Accumulated other comprehensive loss
ASC						Accounting Standards Codification
ASU						Accounting Standards Update
BBSY						Bank Bill Swap Bid Rate
C5ISR						Command, Control, Communications, Computers, Cyber, Intelligence, Surveillance and Reconnaissance
DCAA						Defense Contract Audit Agency
DCMA						Defense Contract Management Agency
DoD						Department of Defense
DOJ						U.S. Department of Justice


EBIC						Egypt Basic Industries Corporation

EPC						Engineering, procurement and construction

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

HETs						Heavy equipment transporters


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
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				Nine Months Ended
	September 30,				September 30,
	2022		2021 (1)		2022		2021 (1)

Revenues	$	1,626	$	1,843	$	4,956	$	4,840
Cost of revenues	(1,401)		(1,650)		(4,334)		(4,272)
Gross profit	225		193		622		568
Equity in earnings (losses) of unconsolidated affiliates	5		(1)		(103)		(175)
Selling, general and administrative expenses	(103)		(91)		(315)		(283)
Acquisition and integration related costs	(1)		(3)		(2)		(7)
Gain on disposition of assets and investments	—		3		22		1

Other	(1)		—		(3)		(2)

Operating income	125		101		221		102
Interest expense	(23)		(20)		(64)		(59)
Unrealized gain on cost method investment	—		—		16		—
Other non-operating income (expense)	(2)		(1)		3		(2)
Income before income taxes	100		80		176		41
Provision for income taxes	(27)		(20)		(79)		(77)
Net income (loss)	73		60		97		(36)
Less: Net income (loss) attributable to noncontrolling interests	(1)		3		—		7
Net income (loss) attributable to KBR	$	74	$	57	$	97	$	(43)
Net income (loss) attributable to KBR per share
Basic	$	0.53	$	0.41	$	0.69	$	(0.30)
Diluted	$	0.49	$	0.38	$	0.65	$	(0.30)
Basic weighted average common shares outstanding	139		140		139		141
Diluted weighted average common shares outstanding	156		154		156		141
Cash dividends declared per share	$	0.12	$	0.11	$	0.36	$	0.33


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021 (1)		2022		2021 (1)
Net income (loss)	$	73	$	60	$	97	$	(36)
Other comprehensive income (loss):
Foreign currency translation adjustments	(60)		(16)		(113)		(4)
Pension and post-retirement benefits	6		9		18		25
Changes in fair value of derivatives	22		4		57		23
Other comprehensive income (loss)	(32)		(3)		(38)		44
Income tax expense:
Foreign currency translation adjustments	—		1		—		—
Pension and post-retirement benefits	(1)		(2)		(3)		(5)
Changes in fair value of derivatives	(5)		—		(12)		(5)
Income tax expense	(6)		(1)		(15)		(10)
Other comprehensive income (loss), net of tax	(38)		(4)		(53)		34
Comprehensive income (loss)	35		56		44		(2)
Less: Comprehensive income (loss) attributable to noncontrolling interests	(1)		3		—		7
Comprehensive income (loss) attributable to KBR	$	36	$	53	$	44	$	(9)


☒			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


	September 30,		December 31, (1)
	2022		2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	461	$	370
Accounts receivable, net of allowance for credit losses of $8 and $13, respectively	909		1,411
Contract assets	230		224

Other current assets	119		147
Total current assets	1,719		2,152
Claims and accounts receivable	29		30
Property, plant, and equipment, net of accumulated depreciation of $409 and $431 (including net PPE of $14 and $19 owned by a variable interest entity), respectively	146		136
Operating lease right-of-use assets	167		158
Goodwill	2,056		2,060
Intangible assets, net of accumulated amortization of $313 and $291, respectively	633		708
Equity in and advances to unconsolidated affiliates	177		576
Deferred income taxes	184		231
Other assets	243		153
Total assets	$	5,354	$	6,204
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	557	$	1,026

Contract liabilities	289		313
Accrued salaries, wages and benefits	322		317

Operating lease liabilities	45		41
Other current liabilities	176		178
Total current liabilities	1,389		1,875
Pension obligations	15		88
Employee compensation and benefits	100		111
Income tax payable	90		95
Deferred income taxes	68		70


Long-term debt	1,722		1,875
Operating lease liabilities	196		188

Other liabilities	205		219
Total liabilities	3,785		4,521
Commitments and Contingencies (Notes 6, 12 and 13)
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, 180,737,832 and 179,983,586 shares issued, and 138,082,991 and 139,786,136 shares outstanding, respectively	—		—
PIC	2,228		2,206
Retained earnings	1,334		1,287
Treasury stock, 42,654,841 shares and 40,197,450 shares, at cost, respectively	(1,065)		(943)
AOCL	(934)		(881)
Total KBR shareholders’ equity	1,563		1,669
Noncontrolling interests	6		14
Total shareholders’ equity	1,569		1,683
Total liabilities and shareholders’ equity	$	5,354	$	6,204


Dollars in millions	Total		PIC		Retained Earnings		Treasury Stock		AOCL		NCI
Balance at June 30, 2022	$	1,596	$	2,222	$	1,276	$	(1,016)	$	(896)	10
Share-based compensation	5		5		—		—		—		—

Common stock issued upon exercise of stock options	—		—		—		—		—		—
Dividends declared to shareholders ($0.12/share)	(16)		—		(16)		—		—		—
Repurchases of common stock	(50)		—		—		(50)		—		—
Issuance of ESPP shares	5		2		—		3		—		—

Distributions to noncontrolling interests	(2)		—		—		—		—		(2)
Other	(4)		(1)		—		(2)		—		(1)
Net income	73		—		74		—		—		(1)
Other comprehensive loss, net of tax	(38)		—		—		—		(38)		—
Balance at September 30, 2022	$	1,569	$	2,228	$	1,334	$	(1,065)	$	(934)	$	6


Dollars in millions	Total		PIC		Retained Earnings		Treasury Stock		AOCL		NCI
Balance at December 31, 2021	$	1,701	$	2,251	$	1,260	$	(943)	$	(881)	$	14
Cumulative adjustment for the adoption of ASU 2020-06	(18)		(45)		27		—		—		—
Adjusted balance at January 1, 2022	1,683		2,206		1,287		(943)		(881)		14


Share-based compensation	15		15		—		—		—		—

Common stock issued upon exercise of stock options	5		5		—		—		—		—
Dividends declared to shareholders ($0.36/share)	(50)		—		(50)		—		—		—
Repurchases of common stock	(124)		—		—		(124)		—		—
Issuance of ESPP shares	6		3		—		3		—		—

Distributions to noncontrolling interests	(4)		—		—		—		—		(4)
Other	(6)		(1)		—		(1)		—		(4)
Net income	97		—		97		—		—		—
Other comprehensive income, net of tax	(53)		—		—		—		(53)		—
Balance at September 30, 2022	$	1,569	$	2,228	$	1,334	$	(1,065)	$	(934)	$	6


	Nine Months Ended September 30,
	2022		2021 (1)
Cash flows from operating activities:
Net income (loss)	$	97	$	(36)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	99		114
Equity in losses of unconsolidated affiliates	103		175
Deferred income tax	49		40
Gain on disposition of assets	(22)		(1)


Unrealized gain on cost method investment	(16)		—
Other	24		31

Changes in operating assets and liabilities:
Accounts receivable, net of allowance for credit losses	475		(341)
Contract assets	(11)		(50)

Accounts payable	(440)		397
Contract liabilities	(3)		(41)
Accrued salaries, wages and benefits	16		41
Payments on operating lease obligation	(44)		(46)

Payments from unconsolidated affiliates, net	14		18
Distributions of earnings from unconsolidated affiliates	57		37

Pension funding	(32)		(35)



Restructuring reserve	(9)		(20)
Other assets and liabilities	(21)		(7)

Total cash flows provided by operating activities	$	336	$	276
Cash flows from investing activities:
Purchases of property, plant and equipment	$	(39)	$	(22)
Proceeds from sale of assets or investments	60		44
Return of (investments in) equity method joint ventures, net	198		(13)
Acquisition of businesses, net of cash acquired	(73)		(14)
Investment in cost method investment	(61)		(7)
Acquisition of technology license	—		(7)
Other	1		(3)
Total cash flows provided by (used in) investing activities	$	86	$	(22)
Cash flows from financing activities:


Payments on short-term and long-term debt	(12)		(15)


Payments on revolving credit facility	(97)		—
Payments of dividends to shareholders	(49)		(45)
Net proceeds from issuance of common stock	5		11
Payments to reacquire common stock	(124)		(57)



Distributions to noncontrolling interests	(4)		(23)

Other	(9)		(11)
Total cash flows used in financing activities	$	(290)	$	(140)
Effect of exchange rate changes on cash	(41)		—
Increase in cash and cash equivalents	91		114
Cash and cash equivalents at beginning of period	370		436
Cash and cash equivalents at end of period	$	461	$	550





Noncash financing activities
Dividends declared	$	16	$	15


	December 31, 2021
Dollars in millions	As Previously Reported		Adjustments		As Adjusted
Assets:
Deferred income taxes	$	226	$	5	$	231

Liabilities:
Long-term debt	$	1,852	$	23	$	1,875

KBR Shareholders' Equity:
PIC	$	2,251	$	(45)	$	2,206
Retained earnings	1,260		27		1,287


	Three Months Ended September 30, 2021
Dollars in millions	As Previously Reported		Adjustments		As Adjusted
Interest Expense	$	(23)	$	3	$	(20)
Income before income taxes	$	77	$	3	$	80
Provision for income taxes	$	(19)	$	(1)	$	(20)
Net income	$	58	$	2	$	60
Net income attributable to KBR	$	55	$	2	$	57
Net income attributable to KBR per share:
Basic	$	0.39	$	0.02	$	0.41
Diluted	$	0.38	$	—	$	0.38
Basic weighted average common shares outstanding	$	140	$	—	$	140
Diluted weighted average common shares outstanding	$	145	$	9	$	154


	Nine Months Ended September 30, 2021
Dollars in millions	As Previously Reported		Adjustments		As Adjusted
Interest Expense	$	(68)	$	9	$	(59)
Income before income taxes	$	32	$	9	$	41
Provision for income taxes	$	(75)	$	(2)	$	(77)
Net loss	$	(43)	$	7	$	(36)
Net loss attributable to KBR	$	(50)	$	7	$	(43)
Net loss attributable to KBR per share:
Basic	$	(0.36)	$	0.06	$	(0.30)
Diluted	$	(0.36)	$	0.06	$	(0.30)
Basic weighted average common shares outstanding	$	141	$	—	$	141
Diluted weighted average common shares outstanding	$	141	$	—	$	141


	September 30,		December 31,
Dollars in millions	2022		2021
Value-added tax payable	$	32	$	34
Dividend payable	17		16
Current maturities of long-term debt	15		16
Reserve for estimated losses on uncompleted contracts	15		17
Restructuring reserve	14		17
Retainage payable	9		13




Other miscellaneous liabilities	74		65
Total other current liabilities	$	176	$	178


	Three Months Ended September 30, 2022

Total by Countries/Regions Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total
United States	$	785	$	120	$	905
Europe	334		67		401
Middle East	33		68		101
Australia	101		18		119

Africa	23		16		39
Asia	4		35		39
Other countries	13		9		22
Total revenue	$	1,293	$	333	$	1,626

	Three Months Ended September 30, 2021

Total by Countries/Regions Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total
United States	$	1,135	$	104	$	1,239
Europe	215		57		272
Middle East	72		50		122
Australia	93		4		97

Africa	23		23		46
Asia	4		43		47
Other countries	13		7		20
Total revenue	$	1,555	$	288	$	1,843




Dollars in millions	September 30, 2022		September 30, 2021
Amounts included in project estimates-at-completion at January 1,	$	426	$	1,048
Net decrease in project estimates	(121)		(228)
Approved change orders	(271)		(374)
Foreign currency impact	7		(19)
Amounts included in project estimates-at-completion at September 30,	$	41	$	427


	Nine Months Ended September 30, 2022

Total by Countries/Regions Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total
United States	$	2,566	$	357	$	2,923
Europe	959		153		1,112
Middle East	123		170		293
Australia	302		29		331

Africa	63		49		112
Asia	10		105		115
Other countries	41		29		70
Total revenue	$	4,064	$	892	$	4,956

	Nine Months Ended September 30, 2021

Total by Countries/Regions Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total
United States	$	2,688	$	326	$	3,014
Europe	549		162		711
Middle East	348		148		496
Australia	260		8		268

Africa	61		67		128
Asia	5		145		150
Other countries	39		34		73
Total revenue	$	3,950	$	890	$	4,840


	September 30, 2022
Dollars in millions	International (a)		Domestic (b)		Total
Operating cash and cash equivalents	$	207	$	79	$	286
Short-term investments (c)	3		82		85
Cash and cash equivalents held in consolidated joint ventures and Aspire Defence subcontracting entities	90		—		90
Total	$	300	$	161	$	461



	Nine Months Ended September 30,		Year Ended December 31,
	2022		2021
Dollars in millions
Beginning balance at January 1,	$	576	$	881


Equity in earnings (losses) of unconsolidated affiliates (a)	(103)		(170)
Distributions of earnings of unconsolidated affiliates (b)	(32)		(72)
Payments from unconsolidated affiliates, net	(14)		(17)
(Return of) investments in equity method investment, net (c)	(198)		29

Sale of equity method investment (d)	(41)		(39)
Foreign currency translation adjustments	(21)		(10)
Other (e)	10		(26)



Ending balance	$	177	$	576


	Three Months Ended September 30,
	2022				2021
Dollars in millions	United States		Int’l		United States		Int’l
Components of net periodic pension benefit
Service cost	$	—	$	—	$	—	$	1
Interest cost	$	—	$	8	$	—	$	8
Expected return on plan assets	—		(20)		—		(21)

Amortization of prior service cost	—		1		—		—
Recognized actuarial loss	—		5		—		8
Net periodic pension benefit	$	—	$	(6)	$	—	$	(4)

	Nine Months Ended September 30,
	2022				2021
Dollars in millions	United States		Int’l		United States		Int’l
Components of net periodic pension benefit
Service cost	$	—	$	1	$	—	$	1
Interest cost	$	1	$	26	$	1	$	24
Expected return on plan assets	(2)		(63)		(2)		(64)

Amortization of prior service cost	—		1		—		1
Recognized actuarial loss	1		17		1		24
Net periodic pension benefit	$	—	$	(18)	$	—	$	(14)


Dollars in millions	September 30, 2022		December 31, 2021 (1)
Term Loan A	$	390	$	441
Term Loan B	507		511
Convertible Senior Notes	350		350
Senior Notes	250		250
Senior Credit Facility	260		364
Unamortized debt issuance costs - Term Loan A	(3)		(4)
Unamortized debt issuance costs and discount - Term Loan B	(11)		(13)
Unamortized debt issuance costs and discount - Convertible Senior Notes	(2)		(4)
Unamortized debt issuance costs and discount - Senior Notes	(4)		(4)
Total debt	1,737		1,891
Less: current portion	15		16
Total long-term debt, net of current portion	$	1,722	$	1,875


	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	Accumulated foreign currency translation adjustments		Accumulated pension liability adjustments		Changes in fair value of derivatives		Total
Balance at December 31, 2021	$	(296)	$	(581)	$	(4)	$	(881)
Other comprehensive income adjustments before reclassifications	(120)		—		39		(81)
Amounts reclassified from AOCL	7		15		6		28
Net other comprehensive income (loss)	(113)		15		45		(53)
Balance at September 30, 2022	$	(409)	$	(566)	$	41	$	(934)


	Three Months Ended September 30,				Nine Months Ended September 30,
Shares in millions	2022		2021 (1)		2022		2021 (1)
Net income (loss) attributable to KBR:
Net Income (loss) attributable to KBR	$	74	$	57	$	97	$	(43)
Less earnings allocable to participating securities	$	—	$	—	$	(1)	$	—
Basic net income (loss) attributable to KBR	$	74	$	57	$	96	$	(43)
Reversal of Convertible Debt interest expense	2		2		$	5	—
Diluted net income (loss) attributable to KBR (a)	$	76	$	59	$	101	$	(43)

Weighted average common shares outstanding:
Basic weighted average common shares outstanding	139		140		139		141
Convertible debt	14		14		14		—
Warrants	3		—		3		—

Diluted weighted average common shares outstanding (a)	156		154		156		141

Net income (loss) attributable to KBR per share:
Basic	$0.53		$0.41		$0.69		$(0.30)
Diluted (a)	$0.49		$0.38		$0.65		$(0.30)


Consolidated Results	Three Months Ended September 30,
					2022 vs. 2021
Dollars in millions	2022		2021 (1)		$		%
Revenues	$	1,626	$	1,843	$	(217)	(12)	%
Cost of revenues	$	(1,401)	$	(1,650)	$	(249)	(15)	%
Gross profit	$	225	$	193	$	32	17	%
Equity in earnings (losses) of unconsolidated affiliates	$	5	$	(1)	$	6	n/m
Selling, general and administrative expenses	$	(103)	$	(91)	$	12	13	%
Acquisition and integration related costs	$	(1)	$	(3)	$	(2)	(67)	%
Gain on disposition of assets and investment	$	—	$	3	$	(3)	(100)	%

Other	$	(1)	$	—	$	1	n/m
Operating income	$	125	$	101	$	24	24	%
Interest expense	$	(23)	$	(20)	$	3	15	%

Other non-operating expense	$	(2)	$	(1)	$	1	100	%
Income before provision for income taxes and noncontrolling interests	$	100	$	80	$	20	25	%
Provision for income taxes	$	(27)	$	(20)	$	7	35	%
Net income	$	73	$	60	$	13	22	%
Net income (loss) attributable to noncontrolling interests	$	(1)	$	3	$	(4)	n/m
Net income attributable to KBR	$	74	$	57	$	17	30	%


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
July 1 - 31, 2022	—	$	—	—	$	160,337,466
August 1 - 31, 2022	—	$	—	—	$	160,337,466
September 1 - 30, 2022	1,056,140	$	47.43	1,053,840	$	110,358,733
Total	1,056,140	—		1,053,840	$	110,358,733


Exhibit Number						Description














*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 September 30, 2022 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




*			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