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Glossary of Terms

The following frequently used abbreviations or acronyms are used in this Annual Report on Form 10-K as defined below:

Forward-Looking and Cautionary Statements

Summary Risk Factors

PART I

Our people leverage dynamic teams that combine deep mission understanding, market-leading technical expertise and an unwavering operational focus to deliver solutions to solve our clients’ most complex issues. In 2021,2023, KBR’s operating model continued to shift toward agile, technology-driven, solutions-oriented delivery and was streamlined to increase strategic focus to move upmarket into differentiated areas that we believe will provide attractive returns and consistent growth with favorable cash conversion. The Company has also transitioned away from higher risk, volatile and increasingly commoditized markets.

Our key areas of strategic focus are as follows:

We provide a wide range of professional services and the management of our business is heavily focused on major projects or programs within each of our reportable segments. At any given time, government programs and joint ventures represent a substantial part of our operations. Our business is organized into two core business segments and one non-core business segment as follows:

Our business segments are described below.

We generate significant revenues within our GS business segment from key U.S. government customers including U.S. DoD and NASA, and from the U.K government. No other customers represented 10% or more of consolidated revenues in any of the periods presented. The following table summarizes our revenues from contracts with U.S. and U.K. government agencies.agencies for which we are the prime contractor, as well as for those contracts in which we are a subcontractor and the ultimate customer is a U.S. or U.K. government agency, respectively.

Information relating to our customer concentration is described in “Item 1A. Risk Factors” contained in Part I of this Annual Report on Form 10-K. Also, see further explanations in "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations" contained in Part II of this Annual Report on Form 10-K and Note 31 to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

We enter into joint ventures and alliances with other reputable industry participants to capitalize on the strengths of each party, and provide greater flexibility in delivering our services based on expertise, cost and geographical efficiency, increase the number of opportunities that can be pursued, and reduce exposure and diversify risk. Our significant joint ventures and alliances are described below. All joint venture ownership percentages presented are stated as of December 31, 2021.29, 2023.

Aspire Defence Limited, a joint venture owned by KBR and two financial investors, provides a range of facilities life cycle management services at the British Army’s garrisons at Aldershot and across the Salisbury Plain in the U.K. KBR owns 45% of Aspire Defence Limited that is reported within our GS business segment using the equity method of accounting.

Brown & Root Industrial Services is a joint venture with Bernhard Capital Partners and offers maintenance services, turnarounds and small capital projects, primarily in North America, in which we own 50% equity interest. The investment is accounted for within our STS business segment using the equity method of accounting.

JKC Australia LNG is a joint venture contracted to perform the engineering, procurement, supply, construction and commissioning of onshore LNG facilities for a client in Darwin, Australia. The project is being executed through two entities (collectively, "JKC"), which are VIEs, in which we own a 30% equity interest. The investment is accounted for within our STS business segment using the equity method of accounting.

Backlog is our estimate of the U.S. dollar amount of future revenues we expect to realize as a result of performing work on awarded contracts. For projects within our unconsolidated joint ventures, we have included our percentage ownership of the joint venture’s estimated revenues in backlog to provide an indication of future work to be performed. The future revenues we expect to realize as a result of backlog was $15.0were $17.3 billion and $15.1$15.6 billion as of December 29, 2023 and December 31, 2021 and 2020,2022, respectively, with approximately 17%24% and 16%25%, respectively, related to work being executed by joint ventures accounted for using the equity method of accounting. We estimate as of December 31, 2021,29, 2023, 30% of our backlog will be recognized as revenues or equity in earnings of unconsolidated affiliates within fiscal year 2022.2024. For additional information regarding backlog, see our discussion within “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Part II of this Annual Report on Form 10-K.

Our business is heavily regulated. We contract with numerous U.S. government agencies and entities, principally the U.S. DoD and NASA. When working with these and other U.S. government agencies and entities, we must comply with various laws and regulations relating to the formation, administration and performance of contracts. U.S. government contracts are generally subject to the FAR, which sets forth policies, procedures and requirements for the acquisition of goods and services by the U.S. government, other agency-specific regulations that implement or supplement the FAR, such as the DoD FAR Supplement ("DFARS"), and other applicable laws and regulations. These regulations impose a broad range of requirements, many of which are unique to government contracting, including various procurement, import and export, security, contract pricing and cost, contract termination and adjustment and audit requirements. Among other things, these laws and regulations:

Our GS business segment primarily performs work under cost-reimbursable contracts in the U.S. with the DoD and other U.S. governmental agencies. If the U.S. government concludes costs charged to a contract are not reimbursable under the terms of the contract or applicable procurement regulations, these costs are disallowed or, if already reimbursed, we may be required to refund the reimbursed amounts to the customer. Such conditions may also include interest and other financial penalties. If performance issues arise under any of our government contracts, the customer retains the right to pursue remedies, which could include termination under any affected contract. Generally, our customers have the contractual right to terminate or reduce the amount of work under our contracts at any time. For more information, see “Item 1A. Risk Factors” contained in Part I of this Annual Report on Form 10-K.

Our GS business segment also participates in PFI contracts, such as the Aspire Defence and UKMFTS projects. PFIs are long-term contracts that outsource the responsibility for the construction, procurement, financing, operation and maintenance of government-owned assets to the private sector. These contracts may contain both fixed-price and cost-reimbursable elements. The PFI projects in which KBR participates are all located in the U.K. with contractual terms ranging from 15 to 35 years and involve the provision of services to various types of assets ranging from acquisition and maintenance of major military equipment and housing to transportation infrastructure. Under most of these PFI contracts, the primary deliverables of the contracting entity are the initial construction or procurement of assets for the customer and the subsequent provision of lifecycle management services for the life of such assets. The amount of renumeration from the customer to the contracting entity is negotiated on each contract and varies depending on the specific terms for each PFI.

The Company performs work under contracts that broadly consist of fixed-price, cost-reimbursable, time-and-materials or a combination of the three.

Fixed-price contracts include both lump-sum and unit-rate contracts. Under lump-sumfixed-price contracts, we perform a defined scope of work for a specified fee to cover all costs and any profit element. Lump-sumFixed-price contracts entail significant risk to us because they require us to predetermine the work to be performed, the project execution schedule and all the costs associated with the scope of work. Unit-rateAdditionally, unit-rate contracts are essentially fixed-price contracts with the only variable being units of work to be performed. Further, our fixed-price contracts may include cost escalation and other features that allow for increases in price should certain events occur or conditions change. Fixed-price contracts are typically subject to change orders if the scope of work changes or unforeseen conditions arise resulting in adjustments to the fixed price. Although fixed-price contracts involve greater risk than cost-reimbursable contracts, they also are potentially more profitable because the owner/customer pays a premium to transfer project risks to us.

Under cost-reimbursable contracts, the price is generally variable based upon our actual allowable costs incurred for materials, equipment, reimbursable labor hours, overhead and G&A expenses. Profit on cost-reimbursable contracts may be in the form of a fixed fee or a mark-up applied to costs incurred, or a combination of the two. The fee may also be an incentive fee based on performance indicators, milestones or targets and can be based on customer discretion or in the form of an award fee determined based on customer evaluation of the Company's performance against contractual criteria. Cost-reimbursable contracts may also provide for a guaranteed maximum price where the total fee plus the total cost cannot exceed an agreed upon guaranteed maximum price. Cost-reimbursable contracts are generally less risky because the owner/customer retains many of the project risks, however it generally requires us to use our best efforts to accomplish the scope of the work within a specified time and budget. Cost-reimbursable contracts with the U.S. government are generally subject to the FAR and are competitively priced based on estimated or actual costs of providing the contractual goods or services. The FAR provides guidance on types of costs that are allowable in establishing prices for goods and services provided to the U.S. government and its agencies. Pricing for non-U.S. government agencies and commercial customers is based on specific negotiations with each customer.

Equipment and materials essential to our business are obtained from a variety of global sources. The principal equipment and materials we use in our business are subject to availability and price fluctuations due to customer demand, producer capacity and market conditions. We monitor the availability and price of equipment and materials on a regular basis. Our procurement function seeks to leverage our size and buying power to ensure that we have access to key equipment and materials at low prices and ideal delivery schedules. While the ongoing COVID-19 pandemic haspolitical and economic conditions and regional conflict and war have resulted in significant supply chain disruptions and inflation globally and within the United States that are still ongoing, we have not experienced, and do not anticipate experiencing, any significant procurement difficulties, as we purchase our required materials and equipment from a variety of sources. However, a number of factors that we may not be able to predict or control could result in increased costs for these materials including the continued impact of the ongoing COVID-19 pandemic, as well as global trade relationships, regional conflict and wars and other general market and political conditions. These potential increased costs could reduce profitability on our contracts, particularly those that are fixed price. See “Item 1A. Risk Factors” contained in Part I of this Annual Report on Form 10-K for more information.

Our rights to make use of technologies licensed to us are governed by written agreements of varying durations, including some with fixed terms that are subject to renewal based on mutual agreement. Generally, each agreement may be further extended and we have historically been able to renew existing agreements before they expire. We expect these and other similar agreements to be extended so long as it is mutually advantageous to both parties at the time of renewal. For technologies we own, we protect our rights, know-how and trade secrets through patents and confidentiality agreements.

Our operations are not generally affected by seasonality. However, various factors can affect the distribution of our sales between accounting periods, including the timing of government awards, the availability of government funding, product deliveries and customer acceptance. Additionally, weather and natural phenomena can temporarily affect the performance of our services.

Our business involves planning, design, program management, construction and construction management and operations and maintenance at various project sites throughout the world, including oil field and related energy infrastructure construction services,which may be in and around sensitive environmental areas, such as rivers, lakes and wetlands. Our operations may require us to manage, handle, remove, treat, transport and dispose of toxic or hazardous substances, which are subject to stringent and complex laws relating to the protection of the environment and prevention of pollution.environmental protection.

Significant fines, penalties and other sanctions may be imposed for non-compliance with environmental and worker health and safety laws and regulations, and some laws provide for joint and several strict liabilities for remediation of releases of hazardous substances, rendering a person liable for environmental damage, without regard to negligence or fault on the part of such person. These laws and regulations may expose us to liability arising out of the conduct of operations or conditions caused by others, or for our acts that were in compliance with all applicable laws at the time these acts were performed. For example, there are a number of governmental laws that strictly regulate the handling, removal, treatment, transportation and disposal of toxic and hazardous substances, such as the Comprehensive Environmental Response Compensation and Liability Act of 1980, and comparable national and state laws that impose strict, joint and several liabilities for the entire cost of cleanup, without regard to whether a company knew of or caused the release of hazardous substances. In addition, some environmental regulations can impose liability for the entire clean-up costs on owners, operators, transporters and other persons arranging for the treatment or disposal of such hazardous substances costs related to contaminated facilities or project sites. Other environmental laws applicable to our and customers' operations affecting us include, but are not limited to, the Resource Conservation and Recovery Act, the National Environmental Policy Act, the Clean Air Act, the Clean Water Act, the Occupational Safety and Health Act and the Toxic Substances Control Act as well as other comparable foreign and state laws. Liabilities related to environmental contamination or human exposure to hazardous substances or a failure to comply with any applicable environmental and worker health and safety laws and regulations could result in substantial costs to us, including cleanup costs, fines, civil or criminal sanctions, third-party claims for property damage, personal injury or cessation of remediation activities.

Additional information relating to environmental regulations is described in "Item 1A. Risk Factors” contained in Part I of this Annual Report on Form 10-K and in Note 1413 to our consolidated financial statements.

AcrossEvery day, the people of KBR 2021 has been known as ‘the yearhelp solve some of the world’s most challenging scientific, technological and engineering problems. From our promising new interns to world-renowned experts, this diverse Team of Teams delivers for our customers, so in turn, we put them first. At the end of 2023, we employed approximately 34,000 people performing diverse, complex and mission critical roles in over 30 countries. In addition, our unconsolidated joint ventures employ approximately 9,000 employees.

At the center of our people’. We enteredEVP is Purpose, because at KBR, we do work that matters, helping to solve the year with ambitious plans to build on our empowering culture, enhance our employee experience and ensure that we deserve our reputation as an employer of choice. Through the combined effortsgreat challenges of our employees and leadership team, this bold initiative has already resulted in tangible benefits for our people and the business, helping us realize ourtime while striving to create a better, safer, more sustainable world. Our vision is to bring together the best and brightest employees to deliver technology and solutions that help our customers accomplish their most critical missions and objectives.objectives, and this important work enables us to attract and retain some of the world’s best talent, who thrive in this purposeful environment.

CultureOur Values unite us across our diverse global cultures, guiding our behavior and Valuesdecision making throughout KBR. We have embedded our values in our business processes, established them as a foundation for our learning and development activities and regularly celebrate employees who epitomize our values-led behavior. Our employees have told us that their experience is aligned to our values even in the ‘new normal’ of a hybrid and flexible working environment.

We refreshedWhile our One KBR Values unite us, as a global business operating in late 2020, as follows:distinct markets and environments, we recognize and respect that our cultures are different. Acknowledging this diversity, our sustainability culture weaves a golden thread through KBR. Our employees take enormous pride in being part of an organization with a philosophical, practical and proven commitment to Zero Harm.

The leadership team atsix core processes that comprise our Transactional Health, Safety, Security, Environmental ("HSSE") Management that lead to Transformational Leadership are non-negotiable KBR fundamentally believessafety standards that Inclusion & Diversity ("I&D") is good for business. It helps us innovate, helps our teams performare required to be observed and creates an environment where everyone can belong. Diversity is embedded in KBR, with employees from over 120 countries. In 2021, we increased our data capture to encompass race/ethnicity in all markets, with 94% of all employee records now updated. As of December 31, 2021, our employees had the following gender and race/ethnicity demographics:

Additionally,We believe that KBR has provided the tools and processes our Boardpeople need to achieve the mindset of Directors24/7 Zero Harm. One process known as the Courage to Care Conversation is 30% womeninstrumental in developing a continual awareness of unsafe acts through observation, intervention and 30% Black, Indigenous orconversation. A web-application to log conversations was created in-house and is available to all KBR employees. The goal of the Courage to Care Conversation is to continuously evaluate the work environment and to focus on people and their actions.

Thanks to our people's commitment to our Zero Harm culture, we recorded another consecutive year of color. Our particular attention on gender increasingly shows in our demographicsindustry-leading HSSE performance, with the percentagea total recordable incident rate of women in KBR increasing from 23.4% to 24.8% in 2020 and 2021, respectively.0.067.

Our I&D Council helps shape our strategic priorities. In 2021, it provided recommendations relatedJourney to working practices, target setting, supporting racial and ethnic diversity and sustainability in the supply chain. Furthermore, itZero Harm has committed to identifying best practicesallowed us to create an inclusive organizationa company culture where safe execution is non-negotiable and people take responsibility and accountability. When it comes to safety, we strive for employees with disabilities, increase the number of women in operational and business leadership roles and improve retention of diverse talent.one number: Zero.

As well as providing meaningful work from Day 1, our employees and job applicants are attracted to KBR because of the candidate pipelineopportunity to pay equity,develop personally and reach their full potential. Providing the opportunity to ‘Grow’ at KBR is a key component in 2022 we are extending our data captureEVP. We have a good reputation among our employees for providing growth opportunities and have continued to focus on enhancing these growth prospects in a number of veteran status and sexual orientation. With enhancements to our benefits, such asways throughout 2023 with the introduction of supplementary childcare/elder-care benefitsinternal career fairs and expansion of floating holidays,global career opportunities. In addition, we invest in training our employees across a range of topics that align with and persistentenhance our values, including programs that focus on leadership, I&D, among our Team of Teams, we are confident that KBR will continue to see improvements within our genderethics and race/ethnicity demographics. In 2021, KBR's President and Chief Executive Officer signed the CEO Action Pledge, making a public commitment to diversity, equality and inclusion, and KBR has been recognized externally for our progress to date with our ranking in the top 100 of Forbes’ list of The World’s Top Female-Friendly Companies.technical development.

Our other areaflagship leadership program, the Global Leadership Development Program, is designed to expand the capabilities of focusfuture executives. As well as developing strategic thinking through research projects ranging from sustainability investments to digital supply chain solutions, these leaders attended intense learning events focused on executive skills and leading courageously and with integrity. We also strengthen our future leadership by running regular Manager Excellence Programs, and in 2023, we launched our Front Line Leaders Program globally, to support employees newly transitioning into these critical roles.

2023 also saw the expansion of our new agile approach to performance management, focused on forward-looking discussions on performance and priorities between managers and their team members. Our employee survey showed that this modern, real-time performance management approach was on technical talent. In 2021,welcomed by a majority of participants, helping us retain critical talent, so in 2023 we welcomed 12 distinguished technical leadersadopted Agile Performance & Development across KBR.

At KBR, we aim to the inaugural One KBR Technical Fellows program. This important program fosters ourbecome a magnet for diverse talent, known for a culture of innovation, fuels collaboration across diverse disciplinesbelonging and equality. Our commitment to Inclusion & Diversity (“I&D”) helps us innovate, helps our global Team of Teams perform and helps create an environment where everyone can belong. We believe we have made significant progress over many years and our progress is acknowledged by our employees. Their continued efforts help us attract, mentorto further build our reputation as a leader in this space, as exemplified by our maintaining a ranking on Forbes’s World’s Top Companies for Women list in 2023.

To help us continue our progress in I&D, we review trends and inspirepatterns using anonymized employee demographics to ensure we are providing equality of opportunity for all. We expanded our data capture further in 2023, encompassing veteran status and sexual orientation in relevant markets. Having this data helps us monitor our I&D progress, however, we respect our employees’ right to privacy. We maintain strict confidentiality for all those who voluntarily disclose and provide opt-out options for those who prefer not to disclose their personal information.

Our Board of talent.Directors is 33% female and 22% ethnic or racial minority. Our Executive Leadership Team ("ELT") is 22% female and 11% ethnic or racial minority.

With over 16,000 employee feedbackresponses, the data from theour survey identified opportunities to improvewas reviewed in detail by different team leaders and weacross different business areas, resulting in tailored action plans that are developing plans to increase employees' engagementalready being executed across KBR.

Our employees are encouraged to create and join multiple employee resource groups (“ERGs”) where they can continue to develop cultural competence across various categories of diversity, enhance their personal networks, develop leadership skills and actively contribute to workplace culture. In 2023, we continued to modernizeprovide technical and professional development, networking and community outreach opportunities through IMPACT, our long-standing ERG for early career professionals. We also have OK NoW, focused on Mental Health & Fitness, and a range of I&D-focused ERGs, which come together to collaborate in the All-In Community. With events ranging from book clubs and picnics to discussions on pay equity and mindfulness, the ERGs create a vibrant community for networking, advocacy and education across KBR. We also support and partner with charitable organizations through our ERGs.

Competition for talent continued to be fierce in 2023, compounded by high levels of inflation in the introductiongeneral economy. Recognizing the impact of the KBR podcast ‘In Orbit’,fluid economic environment on our employees, at the continued developmentbeginning of the year, we committed to carrying out an additional mid-year salary review. By staying current with pay trends and partnering with our Communities of Interest and our ‘People First’ video seriescustomers, we applied an additional increase in which leaders discussed how our people strategy is supporting KBRcompensation mid-year for select employees across the world. Our employees’ high level of engagement is deep-rooted with a majority of respondents feeling proud of what they accomplish and is a credit to their managers who scored highlyvarious levels in the survey’s Manager Effectiveness Index. Each business area has developed a plan to build on this positive responseorganization. Throughout 2023, we introduced improved benefits packages for many employees as described above, and address any local areas of concern as we continue to putbenchmark benefits in local markets and expand our people atofferings to help us attract and retain the heart of KBR.best and brightest talent.

While the different components of our EVP outlined above help us attract and retain some of the best talent in KBR, we recognize that the ‘war for talent’ demands continued innovation and improvement in Talent Acquisition. In 2023, we continued to raise KBR’s brand awareness while providing an attractive and streamlined candidate journey to ensure we have the right people in the right place at the right time. We prioritize conductingappointed a global leader for talent acquisition, helping bring together our business with ethicscommunity of recruiters to identify and integrity. We are subjectinstitute best practices from sourcing to numerous compliance-related laws and regulations, including the FCPA, the U.K. Bribery Act, other applicable anti-bribery legislation and laws and regulations regarding trade and exports. The servicesonboarding.

During 2023, we provide to the U.S. federal government are subject to the FAR, the Truth in Negotiations Act, CAS, the Services Contract Act, DoD security regulations and many other laws and regulations. These laws and regulations affect how we transact businessalso embedded our Candidate Relationship Management platform that is integrated with our clientsHR system. This platform uses artificial intelligence to promote suitable career opportunities to candidates, helps implement ongoing marketing campaigns and in some instances, impose additional costsenables recruiters to focus on our business operations. We are also governed by our own Code of Business Conduct (our "Code")attracting and other compliance-related corporate policiessecuring talent rather than dedicating time and procedures that mandate compliance with these laws. Our Code is a guide for every employee in applying legal and ethical practicesresources to our everyday work. In particular, our Code describes our standards of integrity and relevant principles and areas of law most likely to affect our business. We regularly train our employees regarding our Code and other specific areas including anti-bribery compliance and international trade compliance.administrative matters.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are made available free of charge on our website at www.kbr.com as soon as reasonably practicable after we have electronically filed the material with, or furnished it to, the SEC. The SEC maintains a website that contains reports, proxy and information statements and other information regarding issuers like us that file electronically with the SEC at www.sec.gov.

A considerable percentage of an infectious disease, such as COVID-19, has materially impacted how we and our customers operaterevenues, particularly in our GS business segment, is generated from transactions with certain significant customers. Revenues from the U.S. government represented 58% of our total consolidated revenues for the year ended December 29, 2023. Budget uncertainty, the potential for U.S. government shutdowns, the use of continuing resolutions and the duration and extent to which they may materiallyfederal debt ceiling can adversely affect our future results of operations and financial performance remains uncertain.

Our revenues are directly orand indirectly derived from contract awards. Reductions in the number and amounts of new awards, delays in the timing of anticipated awards or potential cancellations of such prospects as a result of economic conditions, material and equipment pricing and availability or other factors could adversely impact our long-term projected results. It is particularly difficult to predict whether or when we will receive large-scale international and domestic projects as these contracts usually involve a lengthy and complex bidding and selection process. This process can be affected by a number of factors, including market conditions and governmental and environmental approvals.approvals, and in some cases, the customer's ability to secure the necessary financing for a project to proceed. As a portion of our revenues is generated from such projects, our results of operations and cash flows can fluctuate significantly from quarter to quarter depending on the timing of our contract awards and the commencement or progress of work under awarded contracts. In addition, many of these contracts are subject to financing and similar contingencies and, as a result, we are subject to the risk that the customer will not be able to secure the necessary financing for a project to proceed.

APolitical, economic and other conditions in foreign countries and regions, including geopolitical risks, such as the current conflict between Russia and Ukraine and political and economic instability and conflict in the Middle East, may adversely affect our business and operations as a portion of our revenuesrevenue is generated by large, recurringderived from foreign operations. Additionally, the full scope, duration and broader implications of international conflicts, which may include additional international sanctions, embargoes, regional instability and geopolitical shifts; increased tensions between the United States and countries in which we operate; and the extent of the conflicts’ effects on our business from certain significant customers. A loss, cancellationand results of operations as well as the global economy, cannot be predicted. Any alleged or delayactual failure to comply with any sanctions and trade control measures implemented in projects byresponse to international conflicts may subject us to government scrutiny, civil and/or criminal proceedings, sanctions and other liabilities, which may have an adverse effect on our significant customersinternational operations, financial condition and results of operations.

A considerable percentageThe spread of COVID-19 and other pandemics, epidemics, outbreaks of infectious diseases or public health crises across the globe have disrupted, and may in the future disrupt our revenues, particularly in our GS business, segment, is generated from transactions with certain significant customers. Revenues from the U.S. government represented 70% of our total consolidated revenues for the year ended December 31, 2021. The loss of one or more of our significant customers, or the cancellation or delay in their projects,which could materially and adversely affect our revenues andfinancial condition, results of operations.operations, cash flows and/or future expectations. Our business, operations and financial performance have been, and may continue to be affected by the still ongoing macroeconomic impacts resulting from the COVID-19 pandemic. As a result, our financial performance and growth rates may differ from pre-pandemic historical periods, and our future results may fall below expectations. Any health crisis may negatively affect worldwide economic and commercial activity, disrupt global supply chains and the labor market and create significant volatility and disruption of financial and commodity markets. The extent to which our business will continue to be affected and may in the future be affected by pandemics, infectious disease outbreaks and other public health crises depends on a number of factors outside of our control, including but not limited to the extent and duration of labor disruptions, business operations disruptions from quarantines, travel restrictions and other requirements imposed by regulators and health authorities, delays, modifications and terminations of contracts, supply chain disruptions, increased cybersecurity and data protection risks, increased costs of doing business and other macroeconomic disruptions.

We utilize a variety of intellectual property rights in providing services to our customers. We view our portfolio of process and design technologies as one of our competitive strengths and we use it as part of our efforts to differentiate our service offerings. We may not be able to successfully preserve these intellectual property rights in the future, and these rights could be invalidated, circumvented, challenged or infringed upon. In addition, the laws of some foreign countries in which our services may be sold do not protect intellectual property rights to the same extent as the laws of the U.S. We also license technologies from third parties and there is a risk that our relationships with licensors may terminate, expire or be interrupted or harmed. If we are unable to protect and maintain our intellectual property rights, or if there are any successful intellectual property challenges or infringement proceedings against us, our ability to differentiate our service offerings could diminish. In addition, if our intellectual property rights or work processes become obsolete, we may not be able to differentiate our service offerings and some of our competitors may be able to offer more attractive services to our customers. As a result,We will also need to continue to respond to and anticipate changes resulting from disruptive technologies, including in areas of artificial intelligence and machine learning. If we are not successful in protecting and preserving our intellectual property rights and licenses, or in staying ahead of developing artificial intelligence and machine learning technologies and strategically incorporating them into our business, our business and financial performance could be materially and adversely affected.

Our business is dependent on information technology as we operate in global markets with customers who demand innovation, technical and domain expertise and digitally-enabled, technology-led solutions. Robust information technology systems, platforms and products are integral in our efforts to differentiate our service offerings and maintain our competitive advantages. Disruptive technologies, including in areas of artificial intelligence and machine learning, are rapidly changing the environment in which we, our customers, and our competitors operate and could affect the nature of how we generate revenue. We will need to continue to respond to and anticipate these changes by enhancing our product and service offerings to maintain our competitive position.

It is strategically important that we lead the digital transformation occurring in our industry. WeHowever, we may not be successful in structuring our technology or developing, acquiring or implementing technology systems whichin ways that are competitive and responsive to the needs of our customers. We may lack sufficient resources to continue to make the significant technology investments to effectively compete with our competitors. Certain technology initiatives that management considers important to our long-term success will require capital investment, have significant risks associated with their execution and could take several years to implement. If we are unable to develop and implement these initiatives in a cost-effective, timely manner or at all, it could damage our relationships with our customers and negatively impact our financial condition and results of operations. There can be no assurance that others will not acquire similar or superior technologies sooner than we do or that we will acquire technologies on an exclusive basis or at a significant price advantage. If we do not accurately predict, prepare and respond to new technology innovations, market developments and changing customer needs, our revenues, profitability and long-term competitiveness could be materially adversely affected.

The reimagined KBR and itsKBR's forward-looking solutions strategy requires talent with dynamic and elite skills as KBR moves upmarket. Our rate of growth and the success of our business depend upon our ability to attract, develop, retain and replace key qualified technical and management professionals, either through direct hire, subcontracts or acquisition of other firms, who possess the elite skills to successfully deliver the solutions strategy. The market for these professionals is competitive in the sectors in which we compete, and we rely heavily upon the expertise and leadership of our professionals to perform, execute and complete projects as required by our clients.

If we are unable to attract and retain a sufficient number of elite skilled professionals with appropriate government qualifications, our ability to pursue projects may be adversely affected, our operating income may decline, and our reputation may be damaged.

We engage in activities for large facilities where design, construction or systems failures can result in substantial injury or damage to employees or other third parties or delays in completion or commencement of commercial operations, exposing us to legal proceedings, investigations and disputes. The nature of our business results in clients, subcontractors and vendors occasionally presenting claims against us for recovery of costs they incurred in excess of what they expected to incur or for which they believe they are not contractually liable. If it is determined that we have liability, we may not be covered by insurance or, if covered, the dollar amount of these liabilities may exceed our policy limits. Our professional liability coverage is on a “claims-made” basis covering only claims actually made during the policy period currently in effect. In addition, even where insurance is maintained for such exposures, the policies have deductibles, which result in our assumption of exposure for a layer of coverage with respect to any such claims. Any liability not covered by our insurance, in excess of our insurance limits or if covered by insurance but subject to a high deductible, could result in a significant loss for us, which may reduce our profits and cash available for operations. Furthermore, there is risk of mass casualty or environmentally damaging events that may involve our and third-party personnel and property, which could lead to future claims and litigation, impact our reputation and investor confidence and ultimately result in reduced share price.

We occasionally bring claims against project owners for additional costs exceeding the contract price or for amounts not included in the original contract price. These types of claims occur due to matters such as owner-caused delays or changes from the initial project scope that may result in additional direct and indirect costs. Often these claims can be the subject of lengthy negotiations, arbitration or litigation proceedings, and it is difficult to accurately predict when these claims will be fully resolved. When these types of events occur and unresolved claims are pending, we may invest significant working capital in projects to cover cost overruns pending the resolution of the relevant claims. A failure to recover on these types of claims fully or promptly could have a material adverse impact on our liquidity and financial results.

We rely on third-party subcontractors and equipment manufacturers in order to complete many of our projects. Certain subcontractors and suppliers, such as those used on our U.S. government contracts, are subject to the same rigorous government requirements that we are and if they are unable to comply with these requirements, in many cases, there may beare limited alternative subcontractors and suppliers available in the market.market, particularly those with the requisite security clearances. We sometimes have disputes with our contracting parties, including disputes regarding the cost, quality and timeliness of work performed or customer concerns about the other party’s performance. We also have been and in the future could be adversely affected by actions or issues experienced by our contracting parties that are outside of our control, such as misconduct and reputational issues involving our contracting parties, which has and could in the future subject us to liability and reputational harm or adversely affect our ability to compete for contract awards. In addition, if any subcontractor or a manufacturer is unable to deliver its services, equipment or materials according to the negotiated terms for any reason including, but not limited to, the deterioration of its financial condition, we may be required to purchase the services, equipment or materials from another source at a higher price. This may reduce the profit we expect to realize or result in a loss on a project for which the services, equipment or materials were needed. Furthermore, if the amount we are required to pay for these goods and services exceeds the amount we have estimated in bidding for fixed-price contracts, we could experience losses in the performance of these contracts.

A significant portion of our revenues and profits are measured and recognized over time using the cost-to-cost method of revenue recognition. Our use of this accounting method results in recognition of revenues and profits over the life of a contract, based generally on the proportion of costs incurred to date to total costs expected to be incurred for the entire project. The effects of revisions to estimated revenues and costs are recorded when the amounts are known or can be reasonably estimated. In addition, we record unapproved change orders and claims against clients as well as estimated recoveries of claims against suppliers and subcontractors that have been included in the estimated profit at completion for certain projects. Revisions to these estimates could occur in any period and their effects could be material. The uncertainties inherent in estimating the progress towards completion or the recoverability of claims of long-term contracts make it possible for actual revenues and costs to vary materially from our estimates, including reductions or reversals of previously recorded revenues and profits.

Operating through joint ventures in which we have a minority interest could result in us having limited control over many decisions made with respect to projects and internal controls relating to projects. These joint ventures may not be subject to the same requirements regarding internal controls that are applicable to us. As a result, internal control issues may arise, which could have a material adverse effect on our financial condition and results of operations.

We conduct our business under various types of contracts where costs must be estimated in advance of our performance. A portion of the value of our current backlog is attributable to fixed-price contracts where we bear a significant portion of the risk of cost overruns. These types of contracts are priced, in part, on cost and scheduling estimates that are based on assumptions including pricing and availability of experienced labor, equipment and materials as well as productivity, performance and future economic conditions. If these estimates prove inaccurate, if there are errors or ambiguities as to contract specifications or if circumstances change due to, among other things, the recent rise in interest rates, continued inflation, supply-chain disruptions, unanticipated technical problems, poor project execution, difficulties in obtaining permits or approvals, changes in local laws or labor conditions, weather delays, changes in theincreased costs of equipment and materials from inflation or other factors or our suppliers’ or subcontractors’ inability to perform, then cost overruns may occur. We may not be able to obtain compensation for additional work performed or expenses incurred. Additionally, we have in the past and may in the future be required to pay liquidated damages upon our failure to meet schedule or performance requirements of our contracts. Our failure to accurately estimate the resources and time required for fixed-price contracts or our failure to complete our contractual obligations within a specified time frame or cost estimate could result in reduced profits or, in certain cases, a loss for that contract. If the contract is significant, or we encounter issues that impact multiple contracts, cost overruns could have a material adverse effect on our business, financial condition and results of operations.

The purpose of the MD&A is to provide our stockholders and other interested parties with information necessary to gain an understanding of our financial condition and disclose changes in our financial condition since the most recent fiscal year-end and results of operations during the current fiscal period as compared to the corresponding period of the preceding fiscal year. The MD&A should be read in conjunction with Part I of this Annual Report on Form 10-K as well as the consolidated financial statements and related notes included in Part II, Item 8 of this Annual Report on Form 10-K.

Company Overview

KBR's strategic growth vectors include:

Key customers include U.S. DoD agencies such as the U.S. Army, U.S. Navy and U.S. Air Force, Missile Defense Agency, National Geospatial-Intelligence Agency, National Reconnaissance Office and other intelligence agencies; U.S. civilian agencies such as NASA, U.S. Geological Survey and National Oceanic and Atmospheric Administration; the U.K. Ministry of Defence,MoD, London Metropolitan Police, and other U.K. Crown Services; the Royal Australian Air Force, Navy and Army; other national governments; and a wide range of commercial and industrial companies.

Our deployment priorities are to fund organic growth, maintain responsible leverage, maintain an attractive dividend, make strategic, accretive acquisitions and repurchase shares. OurAs demonstrated by our acquisitions of Frazer Nash Consultancy Limited, VIMA Group and others in the past few years, our acquisition thesis is centered around moving upmarket, expanding capabilities and broadening customer sets across strategic growth vectors. KBR also develops and prioritizes investment in technologies that are disruptive, innovative and sustainability- and safety-focused. These technologies and engineering solutions enable clients to achieve a cleaner, greener, more energy efficient global future.

KBR's business is organized into two core business segments and development solutions for critical, well-funded, national security missions associated with space, intelligence, cyber and emerging technologies suchone non-core business segment as directed energy and missile defense. Additionalfollows:

See additional information relating to the Centauri acquisition is describedon our business segments in Note 42 to our consolidated financial statements.

Business Environment and Trends

In December 2023, President Biden signed into law the DoD’s cybersecurity strategy and cyber warfare capabilities, increases the priority of military space superiority, directs innovation to meet long-range emerging threats and continues the restoration of military readiness. The budget includes a number of measures to strengthen emerging technologies including cyber-science and technologies, artificial intelligence, directed energy, hypersonics and biotechnologies. The National Defense Authorization Act ("NDAA") for fiscal year 2022 reflects a 5%2024. 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 $874 billion in fiscal year 2024 funding for national defense, $841 billion of which is for the DoD. The requested amount is an increase inof $27 billion when compared to the authorized defense spending over last year's enacted budget and represents an increase from the president's requested amount. for fiscal year 2023.

The unapproved fiscal 2022 non-defense discretionary spending proposal includes a 16% increase in funding, including a 6.5% increase in funding for NASA to support the continuation of scientific research and exploration as well as increased funding across all agencies to tackle climate change. However, as the U.S. Governmentgovernment has not yet enacted an annual budget for fiscal year 2022,2024; these proposed 2024 budgetary amounts are subject to change. To avert a government shutdown, a series ofthree continuing resolution funding measures have been enacted to finance all U.S. Government activitiesgovernment activities. The most recent "laddered" continuing resolution passed in January 2024 funds the government through March 11, 2022.2024, depending on the appropriation bill. Under the continuing resolution, partial-year funding at amounts consistent with appropriated levels for fiscal year 20212023 are available, subject to certain restrictions, but new spending initiatives are not authorized. Importantly,Uncertainty continues to exist regarding whether a divided Congress will be able to pass appropriation bills or additional continuing resolutions once the current continuing resolutions expire in March 2024. We believe our key programs will continue to be supported and funded despitein the continuing resolution financing mechanism. InThe effect of a potential government shutdown or the coming months, Congress will need to approve or revise President Biden’sfinalized fiscal year 20222024 budget proposal through enactmenton KBR or our individual programs cannot be predicted at this time. However, if a government shutdown were to occur and were to continue for an extended period, we could be at risk of appropriations billsprogram cancellations, schedule delays and other policy legislation,disruptions and nonpayment, which would then require final approval from President Biden to become law and complete the budget process. Additionally, on December 16, 2021, President Biden signed legislation increasingcould adversely affect our results of operations. We anticipate the federal debt limit by $2.5 trillion. The measure increases the debt limit to $31.4 trillion from the previous level of $28.9 trillion and is estimated to provide sufficient government borrowing capacity to last until early 2023.

Internationally, our Government Solutions work is performed primarily for the U.K. Ministry of DefenceMoD and the Australian Department of Defence. TheIn March 2023, the U.K. government has committed a 14%announced its intent to increase inits defense spendingbudget by £11 billion over the coming four years.next five years, increasing the defense budget to 2.25% of GDP by 2025. 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. It is expected the next general election in the United Kingdom will occur in 2024 (and no later than January 28, 2025). The effect of the next general election in the United Kingdom on KBR or our individual programs cannot be predicted at this time. 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

In November 2021, we announced that HomeSafe Alliance LLC (“HomeSafe”), a KBR led joint venture with Tier One Relocation, was awarded the global household goods contract by U.S. Transportation Command. The contract ceiling value is $20 billion with a potential 9-year term, inclusive of all options periods. HomeSafe is expected to be the exclusive household goods move management service provider for the U.S. Armed Forces, Department, U.K. and Australia announced AUKUS, a security pact that will promote a free and open Indo-Pacific through a shared long-term investment to strengthen their combined capabilities and enhance their ability to deter aggression. AUKUS’ first major initiative (Pillar 1) is a joint effort to provide Australia with conventionally armed, nuclear powered submarine ("NPS") capability and strengthen the capacity of Defense civiliansthe submarine workforce and their families. Underindustrial base. In 2023, these countries announced an arrangement for Australia to acquire a NPS through the AUKUS security pact. This arrangement outlines an approach that will provide Australia with the capability to operate and maintain a NPS before the expected sale of these submarines from the United States to Australia in the early 2030s (subject to Congressional approval). Pillar 2 of this contract, HomeSafe planssecurity pact will focus on enabling technologies to modernizemaintain a secure and infuse technology to improvestable trade through the domesticregion including undersea technologies, quantum technologies, advanced cyber, artificial intelligence and international relocation experience for all military personnelautonomy, hypersonic research and their families. The contract award is currently under protest.development, electronic warfare and innovation.

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.

Long-range commercial market fundamentals are supported by global population growth, expanding global development and an acceleration of demand for energy transition, and renewable energy sources for which momentum continuesand climate change solutions. The globe is in search of the solution to build.the energy trilemma, the balance between energy affordability, ensuring energy security and achieving environmental sustainability. Clients continueare prioritizing their efforts to prioritize investmentsolve the energy trilemma by investing in digital solutions to optimize operations, increase end-product flexibility and energy efficiency, reduce unplanned downtime and to reduce theirminimize 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 technologytechnologies, solutions and capabilities.

We expect climate change 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 future. In advance ofSpecifically, on August 16, 2022, the Conference of the Parties 26 meeting in Scotland, the White House released details on its strategy to achieve greenhouse gas emission reduction targets as part of their agenda. On November 15, 2021, President Biden signed the bi-partisan Infrastructure Investment and JobsInflation Reduction Act bill into law which includes climate provisions focused on transportationintended to, among other things, incentivize domestic clean energy, manufacturing and resiliency.production. Additionally, in March 2023, the Canadian government announced its federal budget which includes billions of dollars for investment in the transition to a low-carbon economy.

20212023 was a year of significant achievement for KBR as we continued to execute toward our long-term vision. The Company benefits from a significant base of long-term enduring contracts in our government business, a diverse portfolio of high quality proprietary process technologies, market tailwinds that benefit our capabilities and technologies in areas such as defense modernization, and energy transition, energy security and high-end engineering and a truly global client base. Together, these attributes distinguish KBR and have contributed directly to the company’sCompany’s growth in revenue and profitearnings during the year. While

In 2023, revenues and operating income increased for KBR when compared to 2022. These increases were driven by both our GS and STS business segments. Our GS business segment increased revenues in 2023 with contract growth and increased activity to support exercises, training and other activities within the historic humanitarian efforts in connection with OAW amplified revenue and profit, the core business in GS delivered strong organic growthEuropean Command during the year, despite being partially offset by revenue recognized in the previous year related to the OAW program. Our STS business segment increased revenues in 2023 due to increases in technology sales and STS delivered significantly increased 2021 earnings growth.engineering and professional services. Our teams continued to deliver operational performance, healthy profitability and strong cash flow. Importantly, we drove innovation and extended our footprint through new program wins and technology advances, developments and development. We continuedinvestments, such as our track recordadditional investment in Mura Technology in 2023. 2023 was also an important year for KBR with multiple obligations resolved during the year including the settlement of innovation, bringing new technologies to marketa legacy legal matter and advising, consultingthe maturity and delivering expertisesettlement of our Convertible Notes. Our outstanding warrants were also terminated in 2023, with final payment for the vital area of energy transition, hydrogen future and plastics circular economy. We progressedwarrant terminations being made in our strategic journey to advance upmarket to deliver innovative, digitally-enabled solutions by completing the Frazer-Nash acquisition. We also obtained a full and final resolution with the client on the Ichthys LNG project regarding material outstanding claims and disputes and we intend to pursue recovery from the consortium of subcontractors of the Combined Cycle Power Plant.January 2024.

    

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 31, 20202022 and 20192021 is included in Item 7. of Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Current Report on Form 8-K, which was filed with the SEC on July 29, 2021. This Current Report on Form 8-K was filed to reflect changes to the presentation of our financial information as set forth in our Annual Report on Form 10-K for the year ended December 31, 2020,2022, as filed with the SEC on February 25, 2021, effective January 1, 2021, in order to give effect to a change in our segment reporting.17, 2023.