KBR US Equity☆

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

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.

HomeSafe, a joint venture with Tier One Relocation, informed us on June 18, 2025, that U.S. Transportation Command unexpectedly terminated HomeSafe's role in the Global Household Goods Contract. KBR owns a 72% interest in HomeSafe. As of January 2, 2026 all of HomeSafe operations, including run-off operations, have ceased. The financial results and financial position of HomeSafe are presented as discontinued operations in the consolidated statements of operations, consolidated balance sheets and consolidated statements of cash flows for all periods presented. See Note21. "Discontinued Operations" to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for more information. Unless otherwise indicated, any reference to statements of operations items in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" refers to results from continuing operations.

Company Overview

KBR Inc., a Delaware corporation ("KBR"), delivers science, technology, engineering and logistics support solutions to governments and companies around the world. Drawing from its culture of innovation and mission focus, KBR creates sustainable value by combining deep domain expertise with its full-life cycle capabilities to help clients meet their most pressing challenges.

Our Business Segments

KBR's business is organized into two core business segments and one non-core business segment as follows:

Core business segments

•Mission Technology Solutions

•Sustainable Technology Solutions

Non-core business segment

•Corporate

See additional information on our business segments in Note 2. "Business Segment Information" to our consolidated financial statements and under "Item 1. Business" in this Annual Report on Form 10-K.

Business Environment and Trends

Mission Technology Outlook

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

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On November 10, 2025, the DoW announced the Acquisition Transformation Strategy which aims to accelerate the delivery of operational capabilities by implementing organizational changes that enable acquisition speed, including greater flexibility and authority for trade-off decisions among speed, performance and cost and commercial-first preference to streamline solicitation approaches. The strategy validates the critical market need we seek to address for trusted vendors who can act as capability integrators independent of original equipment manufacturers (OEMs). It also reinforces our value to the DoW's priority for rapid delivery of warfighting capability.

Despite the Administration indicating its desire for a significant increase in defense spending for fiscal year 2027 to $1.5 trillion, we anticipate the federal budget will continue to be subject to debate and compromise shaped by, among other things, the Administration and Congress, efficiency initiatives, the global security environment, inflationary pressures including tariffs and macroeconomic conditions. Thus far, the Administration's directives and actions of the DOGE have resulted in federal government staff reductions and hiring freezes and may result in delays in contract awards.

Internationally, our government work is performed primarily for the U.K. MoD and the Australian Department of Defence. In June 2025, leaders of the North Atlantic Treaty Organization agreed to invest 5% of their countries' gross domestic product ("GDP") on defense and security-related spending by 2035. Additionally, in June 2025, the Strategic Defence Review was completed in the U.K. with plans to increase defense spending to 2.50% of GDP by 2027 and additional increases in following years to reach defense spending of 3.00% of GDP. Recognizing the importance of strong defense and the role the U.K. plays across the globe, the U.K. has prioritized investment in military research and investment in key areas to advance and develop capabilities around artificial intelligence, cyber security and space superiority. The Australian government continues to invest in defense spending, with particular focus on enhancing regional security, modernizing defense capabilities, strengthening cyber defenses and promoting broader economic stability. In March 2025, the Australian Minister for Defence announced that the Australian defense budget is expected to increase over the next four years.

A shift in funding priorities in the U.S. government or internationally could have material impacts on defense spending broadly and our programs. With defense and civil budgets driven in part by political instability, military conflicts, aging platforms and infrastructure and the need for technology advances, we expect continued opportunities to provide solutions and technologies to mission critical work aligned with our customers’ and our nation’s critical priorities.

Sustainable Technology Outlook

Long-range commercial market fundamentals are supported by global population growth, expanding global development and an acceleration of demand for energy transition, renewable energy sources and climate-related solutions. The globe is in search of the solution to the energy trilemma, the balance between energy affordability, ensuring energy security and achieving environmental sustainability. While we have not had any material impact to our cost structure or ability to operate, we are monitoring the evolving macroeconomic environment due to ongoing tariffs including how those tariffs and any inflationary pressure may impact investment decisions from our core client base. Clients are prioritizing their efforts to solve the energy trilemma by investing in digital solutions to optimize operations, increase end-product flexibility and energy efficiency, reduce unplanned downtime and minimize environmental footprint. As the global focus on energy security intensifies and companies continue to commit to near-term carbon neutrality and longer-range net-zero carbon emissions, we expect spending to continue in areas such as decarbonization; carbon capture, utilization and sequestration; biofuels; and circular economy. Further, leading companies across the world are proactively evaluating clean energy alternatives, including hydrogen and green ammonia, which complements KBR's proprietary process technologies, solutions and capabilities. We expect climate protection, energy security and energy transition to continue to be areas of priority and investment as many countries, including the U.S., look to boost their economies and invest in a cleaner, more secure future.

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Results of Operations

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

Year ended Change

Legal settlement of legacy matter — — (144) — — % (144) (100) %

Charges associated with Convertible Notes — — (494) — — % (494) (100) %

Other non-operating expense (6) (7) (5) (1) (14) % 2 40 %

n/m - not meaningful

Revenues. Revenues increased by $76 million, or 1%, to $7,786 million in fiscal 2025, compared to $7,710 million in fiscal 2024. The increase is due to increases in defense and intel programs associated with the acquisition of LinQuest (in August 2024) in our MTS segment and increased revenues from engineering and professional services in our STS segment, offset by reduced activity within the European command and science and space programs in our MTS segment. Additionally, revenues increased by $26 million in fiscal 2025 due to the final resolution of an outstanding legacy claim associated with a U.S. government project in fiscal 2024 that did not recur in fiscal 2025.

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

Equity in earnings of unconsolidated affiliates. Equity in earnings of unconsolidated affiliates increased by $103 million, or 96%, to $210 million in earnings in fiscal 2025 compared to $107 million in earnings in fiscal 2024. The increase is primarily attributed to equity in earnings from services on an LNG project within our STS segment.

Selling, general and administrative expenses. Selling, general and administrative expenses were $35 million higher, or 6%, in fiscal 2025 compared to fiscal 2024, which was primarily driven by additional expenses incurred to support the growth in both our MTS and STS business segments, expenses incurred related to the implementation of a new enterprise resource planning system and expenses incurred related to the Planned Spin-Off of MTS.

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

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

Net income (loss) from discontinued operations, net of tax. Net income (loss) from discontinued operations, net of tax, was $(55) million and $2 million during fiscal 2025 and fiscal 2024, respectively, due to the disposal of HomeSafe.

Net income (loss) attributable to noncontrolling interests included in discontinued operations. Net income (loss) attributable to noncontrolling interests included in discontinued operations was $(19) million and $1 million during fiscal 2025 and fiscal 2024, respectively, due to the disposal of HomeSafe.

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Results of Operations by Business Segment

We analyze the financial results of our two core business segments and one non-core business segment. The business segments presented are consistent with our reportable segments discussed in Note 2. "Business Segment Information" to our consolidated financial statements.

Year ended Change

Revenues:

Operating income (loss):

Mission Technology Solutions

MTS revenues increased by $26 million to $5,581 million in fiscal 2025 compared to $5,555 million in fiscal 2024. In fiscal 2025, we had revenue increases in defense and intel programs associated with the acquisition of LinQuest (in August 2024), offset by revenue decreases due to reduced activity within the European command and science and space programs. Additionally, revenues increased by $26 million in fiscal 2025 due to the final resolution of an outstanding legacy claim associated with a U.S. government project in fiscal 2024 that did not recur in fiscal 2025.

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

Sustainable Technology Solutions

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

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

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Backlog of Unfilled Orders

Backlog represents the estimated dollar amount of revenues we expect to realize in the future as a result of performing work on contracts and our pro-rata share of work to be performed by our unconsolidated joint ventures. We include total estimated revenues in backlog when a contract is awarded under a legally binding agreement. In many instances, arrangements included in backlog are complex, nonrepetitive and may fluctuate over the contract period due to the release of contracted work in phases by the customer. Additionally, nearly all contracts allow customers to terminate the agreement at any time for convenience, and from time to time customers may dispute or try to renegotiate existing contracts. These and other factors may result in delays or changes in our recognition of revenue from our backlog versus amounts we book as backlog. Certain contracts provide maximum dollar limits, with actual authorization to perform work under the contract agreed upon on a periodic basis with the customer. In these arrangements, only the amounts authorized and probable are included in backlog. For projects where we act solely in a project management capacity, we only include the expected value of our services in backlog.

We define backlog, as it relates to U.S. government contracts, as our estimate of the remaining future revenue from existing signed contracts over the remaining base contract performance period (including customer approved option periods) for which work scope and price have been agreed with the customer. We define funded backlog as the portion of backlog for which funding currently is appropriated, less the amount of revenue we have previously recognized. We define unfunded backlog as the total backlog less the funded backlog. Our MTS backlog does not include any estimate of future potential delivery orders that might be awarded under our government-wide acquisition contracts, agency-specific indefinite delivery/indefinite quantity contracts or other multiple-award contract vehicles, nor does it include option periods that have not been exercised by the customer.

Within our MTS business segment, we calculate estimated backlog for long-term contracts associated with the U.K. government's PFIs based on the aggregate amount that our client would contractually be obligated to pay us over the life of the project. We update our estimates of the future work to be executed under these contracts on a quarterly basis and adjust backlog if necessary.

Refer to "Item 1A. Risk Factors" contained in Part I of this Annual Report on Form 10-K for a discussion of other factors that may cause backlog to ultimately convert into revenues at different amounts.

We have included in the table below our proportionate share of unconsolidated joint ventures' estimated backlog. As these projects are accounted for under the equity method, only our share of future earnings from these projects will be recorded in our results of operations. Our proportionate share of backlog for projects related to unconsolidated joint ventures totaled $2.8 billion at January 2, 2026 and January 3, 2025.

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

Dollars in millions January 2, 2026 January 3, 2025

Sustainable Technology Solutions 4,152 3,963

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

As of January 2, 2026, 17% of our backlog was attributable to fixed-price contracts, 39% was attributable to PFIs, 24% was attributable to cost-reimbursable contracts and 20% was attributable to time-and-materials contracts. PFI arrangements are predominantly fixed‐price in nature, and therefore the PFI portion of backlog primarily reflects fixed‐price contractual structures. For contracts that contain fixed-price, cost-reimbursable and time-and-materials components, we classify the individual components as either fixed-price, cost-reimbursable or time-and materials according to the composition of the contract; however, for smaller contracts, we characterize the entire contract based on the predominant component. As of

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

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

Liquidity and Capital Resources

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

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

We believe that existing cash balances, internally generated cash flows, availability under our Senior Credit Facility and other lines of credit are sufficient to support our business operations for the next 12 months. As of January 2, 2026, we are in compliance with all financial covenants related to our debt agreements.

Cash and cash equivalents totaled $500 million at January 2, 2026 and $342 million at January 3, 2025 and consisted of the following:

January 2, January 3,

Domestic U.S. cash $ 210 $ 24

Joint venture and Aspire Defence project cash 52 111

Our cash balances are held in numerous accounts throughout the world to fund our global activities, including acquisitions, joint ventures and other business partnerships. Domestic cash relates to cash balances held by U.S. entities and is largely used to support project activities of those businesses as well as general corporate needs such as the payment of dividends to shareholders, repayment of debt and potential repurchases of our outstanding common stock. Additionally, domestic cash and cash equivalents includes $15 million and $12 million held by our wholly owned captive insurance company as of January 2, 2026 and January 3, 2025, respectively, which is generally not available to KBR to support its other operations.

Our international cash balances may be available for general corporate purposes but are subject to local restrictions, such as capital adequacy requirements and maintaining sufficient cash balances to support our U.K. pension plan and other obligations incurred in the normal course of business by those foreign entities. Repatriations of our undistributed foreign earnings are generally free of U.S. tax but may incur withholding and/or state taxes. We consider our future non-U.S. cash needs as 1) our anticipated foreign working capital requirements, including funding of our U.K. pension plan, 2) the expected growth opportunities across all geographical markets and 3) our plans to invest in strategic growth opportunities, which may include acquisitions, joint ventures and other business partnerships around the world, including whether foreign earnings are permanently reinvested. If management were to completely remove the indefinite investment assertion on all foreign subsidiaries, the exposure to local withholding taxes would be less than $10 million.

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

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distribution of dividends to the joint venture partners. We expect that the majority of the joint venture cash balances will be utilized for the corresponding joint venture purposes or for paying dividends. In fiscal 2025 a contractual repayment was made by the Aspire Defence subcontracting entities.

As of January 2, 2026, substantially all of our excess cash was held in interest bearing operating accounts or short-term investment accounts with the primary objectives of preserving capital and maintaining liquidity.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

Year ended

Total cash flows from discontinued operations (33) (13) 12

Effect of exchange rate changes on cash 18 (14) 13

Increase (decrease) in cash and cash equivalents $ 155 $ 46 $ (85)

Operating Activities - continuing operations. Cash provided by operations totaled $557 million and $450 million in fiscal 2025 and fiscal 2024, respectively, as compared to net income from continuing operations of $458 million and $379 million in fiscal 2025 and fiscal 2024, respectively. Cash flows from operating activities result primarily from earnings and are affected by changes in operating assets and liabilities, which consist primarily of working capital balances for projects. Working capital levels vary from year to year and are primarily affected by our volume of work. These levels are also impacted by the mix, stage of completion and commercial terms of projects. Working capital requirements also vary by project depending on the type of client and location throughout the world.

The increase in operating cash flows in fiscal 2025 compared to fiscal 2024 is primarily due to the resolution of an outstanding unapproved change order within our Mission Technology Solutions segment. This increase was offset primarily by changes in the primary components of our working capital. The primary components of our working capital accounts are accounts receivable, contract assets, accounts payable and contract liabilities. In fiscal 2025, the accounts payable cash outflow included a contractual repayment made by the Aspire Defence subcontracting entities. The working capital components are also impacted by the size and changes in the mix of our cost-reimbursable and time-and-materials projects versus fixed price projects, and as a result, fluctuations in these components are not uncommon in our business. Additionally, in fiscal 2025 there were decreases in pension funding that resulted in additional operating cash flows.

Investing Activities - continuing operations. Cash provided by investing activities totaled $16 million in fiscal 2025 and was primarily related to a return of equity method investment from BRIS of $82 million. This was offset by $42 million of capital expenditures, $14 million related to the acquisition of Infrastar Limited and funding in other investment of $10 million. See Note 9. "Equity Method Investments and Variable Interest Entities" to our consolidated financial statements for further discussion on the return of equity method investment from BRIS.

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

Financing Activities - continuing operations. Cash used in financing activities totaled $403 million for fiscal 2025. The primary uses of cash in financing activities were $505 million in payments on the Revolver, $26 million in payments on our Term Loan A, $10 million in payments on our Term Loan B, $323 million for the repurchase of common stock under our share repurchase program, $6 million for the repurchase of common stock under our "withhold to cover" program and $84 million of dividend payments to common shareholders. These decreases were offset by $555 million in borrowings on our Revolver.

Cash provided by financing activities totaled $374 million in fiscal 2024 and was primarily related to $393 million in borrowings on our Revolver and $574 million in borrowings associated with Amendment No. 11 and No. 13 to our Credit

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Agreement. These increases were offset by $124 million of principal payments related to our Senior Credit Facility, $98 million in payments on the Revolver, $204 million for the repurchase of common stock under our share repurchase program and $14 million for the repurchase of common stock under our "withhold to cover" program. Cash used in financing activities also included a $33 million payment for the settlement of warrants, $79 million of dividend payments to common shareholders, $18 million in debt issuance costs associated with Amendment No. 11, No. 12 and No. 13 to our Credit Agreement for our Senior Credit Facility and $10 million for the acquisition of a noncontrolling interest.

Cash flows from discontinued operations. Cash flows from discontinued operations are associated with the disposal of HomeSafe. Cash used in operations totaled $33 million for fiscal 2025 and cash provided by operations totaled $12 million for fiscal 2024. Changes in HomeSafe's working capital accounts were the primary components of operating cash flows for fiscal 2025 and fiscal 2024. Cash used in investing activities totaled $12 million and $25 million for fiscal 2025 and fiscal 2024, respectively, which is related to capital expenditures. Cash provided by financing activities totaled $12 million for fiscal 2025 due to investments from the noncontrolling interest partner. See Note 21. "Discontinued Operations" to our consolidated financial statements for additional information.

Future sources of cash. We believe that future sources of cash include cash flows from operations (including accounts receivable monetization arrangements), cash derived from working capital management and cash borrowings under the Senior Credit Facility.

Future uses of cash. We believe that future uses of cash include working capital requirements, joint venture capital calls, capital expenditures, dividends, pension funding obligations, repayments of borrowings, share repurchases, legal settlements of any currently outstanding legal matter or any future legal proceeding and strategic investments including acquisitions, joint ventures and other business partnerships. Our capital expenditures will be focused primarily on facilities and equipment to support our businesses. In addition, we will use cash to make payments under leases and various other obligations, including potential litigation payments, as they arise.

We anticipate that, in connection with and prior to the completion of the Planned Spin-Off, the Mission Technology Solutions business will make a cash distribution to KBR using proceeds received from its anticipated financing transactions to be undertaken as part of its transition to an independent, publicly traded company. We intend to use the cash distributed to KBR by the Mission Technology Solutions business to reduce our level of indebtedness.

Other factors potentially affecting liquidity

Ichthys LNG Project. As part of the settlement agreement between JKC and Ichthys LNG, Pty, Ltd (collectively, “the Parties”) in October 2021, KBR’s letters of credit were reduced to $82 million from $164 million. Additionally, as part of this settlement agreement, the Parties agreed to consult in good faith and to cooperate to seek maximum recovery from the insurance policies and paint manufacturer for the deterioration of paint and insulation on certain exterior areas of the plant. The Parties agreed to collectively pursue claims against the paint manufacturer, and JKC has assigned claims under the insurance policy regarding the paint and insulation matters to the client. The parties have agreed that if, at the date of final resolution of the above proceedings and claims with respect to the paint and insulation matters, the recovered amount from the paint manufacturer and insurance claim is less than the stipulated ceiling amount in the settlement agreement, JKC will pay the client the difference between the stipulated ceiling amount and the recovered amount. JKC has provided for and continues to maintain a provision for this contingent liability.

U.K. pension obligation. We have recognized on our consolidated balance sheets a funding surplus of approximately $84 million (calculated as the difference between the fair value of plan assets and the projected benefit obligations) as of January 2, 2026 for our frozen U.K. defined benefit pension plan. The funding requirements for our U.K. pension plan are determined based on the U.K. Pensions Act 1995. Annual minimum funding requirements are based on a binding agreement with the Trustee of the U.K. pension plan that is negotiated on a triennial basis. This schedule of contributions will be reviewed by the Trustee and KBR no later than 15 months after the effective date of each actuarial valuation, due every three years. In 2024, the Trustee of the U.K. defined benefit pension plan commenced the triennial actuarial valuation of the plan which was finalized in fiscal 2025. At this time, we do not anticipate contributing additional funding to this plan at least until the next triennial valuation occurs. In the future, pension funding may increase or decrease depending on changes in the levels of interest rates, pension plan asset return performance and other factors. A significant increase in our funding requirements for the U.K. pension plan could result in a material adverse impact on our financial position.

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Sales of Receivables. From time to time, we sell certain receivables to unrelated third-party financial institutions under various accounts receivable monetization programs. One such program is with MUFG Bank, Ltd. ("MUFG") under a Master Accounts Receivable Purchase Agreement, which provides the sale to MUFG of certain of our designated eligible receivables, with a significant portion of such receivables being owed by the U.S. government. We plan to continue to utilize these programs to ensure we have flexibility to meet our capital needs. Refer to Note 20. "Fair Value of Financial Instruments and Risk Management" to our consolidated financial statements for further discussion on our sales of receivables.

Credit Agreement and Senior Credit Facility

Information relating to our Senior Credit Facility is described in Note 11. "Debt and Other Credit Facilities" to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7.

Senior Notes

Information relating to our Senior Notes is described in Note 11. "Debt and Other Credit Facilities" to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7.

Off-Balance Sheet Arrangements

Letters of credit, surety bonds and guarantees. In the ordinary course of business, we may enter into various arrangements providing financial or performance assurance to customers on behalf of certain consolidated and unconsolidated subsidiaries, joint ventures and other jointly executed contracts. Such off-balance sheet arrangements include letters of credit, surety bonds and corporate guarantees to support the creditworthiness or project execution commitments of these entities and typically have various expiration dates ranging from mechanical completion of the project being constructed to a period beyond completion in certain circumstances such as for warranties. We may also guarantee that a project, once completed, will achieve specified performance standards. If the project subsequently fails to meet guaranteed performance standards, we may incur additional costs, pay liquidated damages or be held responsible for the costs incurred by the client to achieve the required performance standards. The potential amount of future payments that we could be required to make under an outstanding performance arrangement is typically the remaining estimated cost of work to be performed by or on behalf of third parties. For cost-reimbursable contracts, amounts that may become payable pursuant to guarantee provisions are normally recoverable from the client for work performed under the contract. For fixed-price contracts, the performance guarantee amount is the cost to complete the contracted work, less amounts remaining to be billed to the client under the contract. Remaining billable amounts could be greater or less than the cost to complete the project. If costs exceed the remaining amounts payable under the contract, we may have recourse to third parties, such as owners, subcontractors or vendors for claims.

In our joint venture arrangements, the liability of each partner is usually joint and several. This means that each joint venture partner may become liable for the entire risk of performance guarantees provided by each partner to the customer. Typically, each joint venture partner indemnifies the other partners for any liabilities incurred in excess of the liabilities the other party is obligated to bear under the respective joint venture agreement. We are unable to estimate the maximum potential amount of future payments that we could be required to make under outstanding performance guarantees related to joint venture projects due to a number of factors, including but not limited to, the nature and extent of any contractual defaults by our joint venture partners, resource availability, potential performance delays caused by the defaults, the location of the projects and the terms of the related contracts. See “Item 1A. Risk Factors” contained in Part I of this Annual Report on Form 10-K for information regarding our fixed-price contracts and operations through joint ventures and partnerships.

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

In connection with certain projects, we are required to provide letters of credit, surety bonds or guarantees to our customers in the ordinary course of business as credit support for contractual performance guarantees, advanced payments received from customers and future funding commitments. As of January 2, 2026, we had a $1 billion committed line of credit on the Revolver under our Senior Credit Facility and $488 million of bilateral and uncommitted lines of credit. As of January 2, 2026, with respect to our Revolver, we had $395 million of outstanding borrowings. We also have $14 million of outstanding letters of credit on our Senior Credit Facility. With respect to our $488 million of bilateral and uncommitted lines of credit, we

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utilized $296 million for letters of credit as of January 2, 2026. The total remaining capacity of these committed and uncommitted lines of credit was approximately $783 million as of January 2, 2026, all of which can be used toward issuing letters of credit. Information relating to our letters of credit is described in Note 11. "Debt and Other Credit Facilities" to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7. Other than as discussed in this report, we have not engaged in any material off-balance sheet financing arrangements through special purpose entities.

Contractual Obligations and Commitments

Significant contractual obligations and commercial commitments as of January 2, 2026 are as follows:

Payments Due

Finance leases 5 3 2 — — — 10

(a)Determined based on long-term debt borrowings outstanding at January 2, 2026 using the interest rates in effect for the individual borrowings as of January 2, 2026, including the effects of interest rate swaps. The payments due for interest reflect the cash interest that will be paid, which includes interest on outstanding borrowings and commitment fees. These amounts exclude the amortization of discounts or debt issuance costs.

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

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

Transactions with Joint Ventures

We form incorporated and unincorporated joint ventures to execute certain projects. In addition to participating as a joint venture partner, we often provide engineering, procurement, construction management, operations or maintenance services to the joint venture as a subcontractor. Where we provide services to a joint venture that we control and therefore consolidate for financial reporting purposes, we eliminate intercompany revenues and expenses on such transactions. In situations where we account for our interest in the joint venture under the equity method of accounting, we do not eliminate any portion of our subcontractor revenues or expenses, however, we recognize profit on our subcontractor scope of work up to but not in excess of the joint venture's percent complete on its scope of work. We recognize revenue over time on our services provided to joint ventures that we consolidate and our services provided to joint ventures that we record under the equity method of accounting. See Note 9. "Equity Method Investments and Variable Interest Entities" to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for more information. The information discussed therein is incorporated by reference into this Part II, Item 7.

Recent Accounting Pronouncements

Information relating to recent accounting pronouncements is described in Note 1. "Significant Accounting Policies" to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7.

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U.S. Government Matters

Information relating to U.S. government matters commitments and contingencies is described in Note 14. "U.S. Government Matters" to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7.

Legal Proceedings

Information relating to various commitments and contingencies is described in “Item 1A. Risk Factors” contained in Part I of this Annual Report on Form 10-K and in Notes 6, 13 and 14 to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements which have been prepared in conformity with U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the determination of financial positions, results of operations, cash flows and related disclosures. Our significant accounting policies are described in Note 1. "Significant Accounting Policies" to our consolidated financial statements. The following discussion is intended to highlight and describe those accounting policies that are especially critical to the preparation of our consolidated financial statements and to provide a better understanding of our significant accounting estimates and assumptions about future events that affect the amounts reported in our consolidated financial statements. Significant accounting estimates are important to the representation of our financial position and results of operations and involve our most difficult, subjective or complex judgments. We base our estimates on historical experience and various other assumptions we believe to be reasonable according to the current facts and circumstances through the date of the issuance of our financial statements.

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

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

It is common for our contracts to contain variable consideration in the form of incentive fees, performance bonuses, award fees, liquidated damages or penalties that may increase or decrease the transaction price. Variable consideration may be tied to our performance, cost targets, or achievement of milestones. Other contract provisions also give rise to variable consideration such as unapproved change orders and claims, and on certain contracts, index-based price adjustments. We estimate the amount of variable consideration at the most likely amount we expect to be entitled and include in the transaction

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price when it is probable that a significant reversal of cumulative revenue recognized will not occur. Variable consideration associated with claims and unapproved change orders is included in the transaction price only to the extent of costs incurred. We recognize claims against suppliers and subcontractors as a reduction in recognized costs when enforceability is established by the contract and the amounts are reasonably estimable and probable of recovery. Reductions in costs are recognized to the extent of the lesser of the amounts management expects to recover or actual costs incurred.

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. 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, including the types of costs that are allowable, for non-U.S. government agencies and commercial customers is based on specific negotiations with each customer. We recognize revenue on cost-reimbursable contracts to the extent it is not probable a significant reversal will occur.

Our estimates of variable consideration and determination of whether to include such amounts in the transaction price are based largely on our assessment of legal enforceability, anticipated performance and any other information (historical, current or forecasted) that is reasonably available to us.

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

Goodwill and Intangible Assets. Goodwill and intangible assets is tested annually for possible impairment as of the first day of the fourth fiscal quarter within our fiscal year, and on an interim basis when indicators of possible impairment exist. For purposes of impairment testing, goodwill is assigned to the applicable reporting units based on our current reporting structure. We have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Qualitative factors assessed for each of the applicable reporting units include, but are not limited to, changes in macroeconomic conditions, industry and market considerations, cost factors, discount rates, competitive environments and financial performance of the reporting units. If the qualitative assessment indicates that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, a quantitative test is required.

While we have the option to proceed directly to the quantitative test, for fiscal 2025, management performed a qualitative impairment assessment of our reporting units, of which there were no indications that it was more likely than not that the fair value of our reporting units were less than their respective carrying values. As such, a quantitative goodwill test was not required, and no goodwill impairment was recognized in fiscal 2025. Our goodwill and intangible assets are discussed in Note 8. "Goodwill and Intangible Assets"in the accompanying consolidated financial statements.

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

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We consider both positive and negative evidence when evaluating the need for a valuation allowance on our deferred tax assets in accordance with ASC Topic 740, Income Taxes. Available evidence includes historical financial information supplemented by currently available information about future years. Generally, historical financial information is more objectively verifiable than projections of future income and is therefore given more weight in our assessment. We consider cumulative losses in the most recent twelve quarters to be significant negative evidence that is difficult to overcome in considering whether a valuation allowance is required. Conversely, we consider a cumulative income position over the most recent twelve quarters to be significant positive evidence that a valuation allowance may not be required. Changes in the amount, timing and character of our forecasted taxable income could have a significant impact of our ability to utilize deferred tax assets and related valuation allowance.

Our ability to utilize the unreserved foreign tax credit carryforwards is based on our ability to generate future taxable income of at least $286 million prior to their expiration whereas our ability to utilize other net deferred tax assets exclusive of those associated with indefinite-lived intangible assets is based on our ability to generate future taxable income of at least $914 million. Changes in our forecasted taxable income in the applicable taxing jurisdictions within the carryforward periods could affect the ultimate realization of deferred tax assets and our valuation allowance.

We recognize the effect of income tax positions only if it is more likely than not that those positions will be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records potential interest and penalties related to unrecognized tax benefits in income tax expense.

Tax filings of our subsidiaries, unconsolidated affiliates and related entities are routinely examined by tax authorities in the normal course of business. These examinations may result in assessments of additional taxes, which we work to resolve with the tax authorities and through the judicial process. Predicting the outcome of disputed assessments involves some uncertainty. Factors such as the availability of settlement procedures, willingness of tax authorities to negotiate and the operation and impartiality of judicial systems vary across the different tax jurisdictions and may significantly influence the ultimate outcome. We review the facts for each assessment, and then utilize assumptions and estimates to determine the most likely outcome and provide taxes, interest and penalties as needed based on this outcome.

Legal, Investigation and Other Contingent Matters. We record liabilities for loss contingencies when it is probable that a liability has been incurred and the amount is reasonably estimable. We disclose matters when we believe a material loss is at least reasonably possible but not probable or if the loss is not reasonably estimable but probable and is expected to be material to our financial statements. Generally, our estimates related to these matters are developed in consultation with internal and external legal counsel. Our estimates are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. The precision of these estimates and the likelihood of future changes depend on a number of underlying assumptions and a range of possible outcomes. When possible, we attempt to resolve these matters through settlements, mediation and arbitration proceedings. If the actual settlement costs, final judgments or fines differ from our estimates, our future financial results may be materially and adversely affected. We record adjustments to our initial estimates of these types of contingencies in the periods when the change in estimate is identified. All legal expenses associated with these matters are expensed as incurred. See Notes 6, 13 and 14 to our consolidated financial statements for further discussion of our significant legal, investigation and other contingent matters.

Pensions. Our pension benefit obligations and expenses are calculated using actuarial models and methods. The most critical assumption and estimate used in the actuarial calculations is the discount rate for determining the current value of benefit obligations. Other assumptions and estimates used in determining benefit obligations and plan expenses include expected rate of return on plan assets, inflation rates and demographic factors such as retirement age, mortality and turnover. These assumptions and estimates are evaluated periodically and are updated accordingly to reflect our actual experience and expectations.

The discount rate used to determine the benefit obligations was computed using a yield curve approach that matches plan specific cash flows to a spot rate yield curve based on high quality corporate bonds. The expected long-term rate of return on assets was determined by a stochastic projection that takes into account asset allocation strategies, historical long-term performance of individual asset classes, an analysis of additional return (net of fees) generated by active management, risks using standard deviations and correlations of returns among the asset classes that comprise the plans' asset mix. Plan assets are comprised primarily of equity funds and securities, fixed income funds and securities, real estate and other funds. As we have both domestic and international plans, these assumptions differ based on varying factors specific to each particular country or economic environment.

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The discount rate used to calculate the projected benefit obligation at the measurement date for our U.S. pension plan decreased to 4.97% at January 2, 2026 from 5.32% at January 3, 2025. The discount rate used to determine the projected benefit obligation at the measurement date for our U.K. pension plan, which constitutes 94% of all pension plans, increased to 5.60% at January 2, 2026 from 5.54% at January 3, 2025. Our expected long-term rates of return on plan assets utilized at the measurement date of January 2, 2026 and January 3, 2025 was 6.24% and 6.64% for our U.S. pension plans, respectively, and 7.97% and 6.80% for our U.K. pension plans, respectively.

The following table illustrates the sensitivity to changes in certain assumptions, holding all other assumptions constant, for our pension plans:

Effect on

Pretax Pension Cost in Fiscal 2026 Pension Benefit Obligation at January 2, 2026

Dollars in millions U.S. U.K. U.S. U.K.

25-basis-point decrease in discount rate $ — $ — $ 1 $ 31

25-basis-point increase in discount rate $ — $ — $ (1) $ (30)

25-basis-point decrease in expected long-term rate of return $ — $ 4 N/A N/A

25-basis-point increase in expected long-term rate of return $ — $ (4) N/A N/A

Unrecognized actuarial gains and losses are recognized using the corridor method over a period of approximately 20 years, which represents a reasonable systematic method for amortizing gains and losses for the employee group. Our unrecognized actuarial gains and losses arise from several factors, including experience and assumption changes in the obligations and the difference between expected returns and actual returns on plan assets. The difference between actual and expected returns is deferred as an unrecognized actuarial gain or loss on our consolidated statement of comprehensive income (loss) and is recognized as a decrease or an increase in future pension expense. Our pretax unrecognized net actuarial loss in accumulated other comprehensive loss at January 2, 2026 was $932 million.

The actuarial assumptions used in determining our pension benefits may differ materially from actual results due to changing market and economic conditions, changes in the legislative or regulatory environment, higher or lower withdrawal rates and longer or shorter life spans of participants. While we believe that the assumptions used are appropriate, differences in actual experience, expectations or changes in assumptions may materially affect our financial position or results of operations. Our actuarial estimates of pension expense and expected return on plan assets are discussed in Note 10. "Retirement Benefits" in the accompanying consolidated financial statements.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

Financial Market Risk. Cash and cash equivalents are deposited with major banks throughout the world. We invest excess cash and cash equivalents in short-term securities, primarily money market funds, which carry a fixed rate of return. We have not incurred any credit risk losses related to deposits of our cash and cash equivalents.

Foreign Currency Risk. Because of the global nature of our business, we are exposed to market risk associated with changes in foreign currency exchange rates. We have historically attempted to limit exposure to foreign currency fluctuations through provisions requiring the client to pay us in currencies corresponding to the currency in which cost is incurred. In addition to this natural hedge, we may use foreign exchange forward contracts and options to hedge material exposures when forecasted foreign currency revenues and costs are not denominated in the same currency and when efficient markets exist. These derivatives are generally designated as cash flow hedges and are carried at fair value.

We use derivative instruments, such as foreign exchange forward contracts, to hedge foreign currency risk related to non-functional currency assets and liabilities on our consolidated balance sheets and to mitigate certain operational exposures. We do not enter into derivative financial instruments for trading purposes or make speculative investments in foreign currencies. Each period, these hedges are marked to market through earnings and the change in their fair value is largely offset by remeasurement of the underlying assets and liabilities. We recorded a net loss of $7 million for fiscal 2025, a net loss of $3 million for fiscal 2024 and a net loss of $6 million for fiscal 2023 within other non-operating expense on our consolidated statements of operations. The fair value of these derivatives was not material to our consolidated balance sheet for the periods presented. For more information, see Note 20. "Fair Value of Financial Instruments and Risk Management" to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K and the information discussed therein is incorporated by reference into this Part II, Item 7A.

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Interest Rate Risk. We are exposed to market risk for changes in interest rates for the Revolver and term loan borrowings under the Senior Credit Facility. We had $395 million of borrowings issued under the Revolver as of January 2, 2026. Additionally, we had $1,972 million outstanding under the term loan portions of the Senior Credit Facility as of January 2, 2026. Borrowings under the Senior Credit Facility bear interest at variable rates as described in Note 11. "Debt and Other Credit Facilities" to our consolidated financial statements.

We use interest rate swaps to reduce interest rate risk and to manage net interest expense by converting our variable rate debt under our Senior Credit Facility into fixed-rate debt. During fiscal 2025, we entered into additional interest rate swap agreements to term SOFR. The effective date of the April 2025 Forward Interest Rate Swaps is August 14, 2027. Information relating to our portfolio of interest rate swaps is described in Note 20. "Fair Value of Financial Instruments and Risk Management" to our consolidated financial statements, which is incorporated by reference into this Item 7A. Our portfolio of interest rate swaps consists of the following:

*Includes the April 2025 Forward Interest Rate Swaps that become effective August 14, 2027.

The swap agreements were designated as cash flow hedges at inception in accordance with ASC Topic 815, Derivative and Hedging ("ASC 815"). The fair value of the interest rate swaps at January 2, 2026 was a $10 million net asset, of which $11 million is included in other current assets and $1 million is included in each of other assets, other current liabilities and other liabilities. The unrealized net gain on these interest rate swaps was $10 million and is included in AOCL as of January 2, 2026.

At January 2, 2026, we had fixed rate debt aggregating $1,813 million and variable rate debt aggregating $804 million, after taking into account the effects of the interest rate swaps that were effective at January 2, 2026. Our weighted average interest rate net of the impact from our swap agreements for fiscal 2025 was 4.84%. If interest rates were to increase by 50 basis points, pre-tax interest expense would increase by approximately $4 million in the next twelve months net of the impact from our swap agreements, based on outstanding borrowings as of January 2, 2026.

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Item 8. Financial Statements and Supplementary Data

Page No.

Report of Independent Registered Public Accounting Firm 64

Consolidated Balance Sheets at January 2, 2026 and January 3, 2025 68

Notes to Consolidated Financial Statements 72

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Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

KBR, Inc.:

Opinion on the ConsolidatedFinancial Statements

We have audited the accompanying consolidated balance sheets of KBR, Inc. and subsidiaries (the Company) as of January 2, 2026 and January 3, 2025, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for each of the fiscal years in the three-year period ended January 2, 2026, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of January 2, 2026 and January 3, 2025, and the results of its operations and its cash flows for each of the fiscal years in the three-year period ended January 2, 2026, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of January 2, 2026, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 26, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Contract revenue and contract cost estimates

As described in Note 1 to the consolidated financial statements, a portion of the Company’s revenue and equity in earnings of unconsolidated affiliates is derived from contracts with revenue recognized over time using the cost-to-cost method to measure progress. Revenue recognition under this method requires judgments to prepare estimates of total contract costs at completion, including assumptions related to estimated labor costs, and total contract revenue, including assumptions related to contractually allowable costs.

We identified the evaluation of certain contract costs at completion and certain contract revenue as a critical audit matter. Evaluating the Company’s estimates of contract costs at completion for certain contracts involves auditor judgment given the variability and uncertainty associated with estimating costs, specifically labor costs, to be incurred over the contract period. Evaluating the Company’s estimates of contract revenue for a certain contract requires an evaluation of subjective assumptions, specifically those related to contractually allowable costs.

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The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process for estimating contract costs at completion, specifically assumptions related to estimated labor costs, and contract revenue, for a certain contract, specifically the contractual allowability of costs. We evaluated the Company’s ability to estimate these amounts by comparing the Company’s previous estimated project margins to actual results. To assess the reasonableness of these estimates, we performed audit procedures including:

•obtaining and reading contractual documents with customers;

•inquiring of financial and operational personnel of the Company to identify factors that should be considered within the estimated costs at completion or indications of potential management bias;

•analyzing underlying documentation for a selection of labor costs;

•performing sensitivity analyses on labor costs; and

•comparing allowable cost assumptions to contract terms and considering historical results and trends.

/s/ KPMG LLP

We have served as the Company’s auditor since 2005.

Houston, Texas

February 26, 2026

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KBR, Inc.

Consolidated Statements of Operations

(In millions, except for per share data)

Year ended

January 2, January 3, December 29,

Equity in earnings of unconsolidated affiliates 210 107 114

Selling, general and administrative expenses (578) (543) (487)

Legal settlement of legacy matter — — (144)

Charges associated with Convertible Notes — — (494)

Other non-operating expense (6) (7) (5)

Income (loss) from continuing operations before income taxes 614 508 (165)

Provision for income taxes (156) (129) (95)

Net income (loss) from continuing operations 458 379 (260)

Net income (loss) from discontinued operations, net of tax (55) 2 (1)

Net income (loss) attributable to KBR $ 415 $ 375 $ (265)

Net income (loss) attributable to KBR per share

Basic earnings (loss) per share from discontinued operations $ (0.28) $ 0.01 $ —

Basic earnings (loss) per share attributable to KBR $ 3.21 $ 2.79 $ (1.96)

Diluted earnings (loss) per share attributable to KBR $ 3.21 $ 2.79 $ (1.96)

Basic weighted average common shares outstanding 129 134 135

Diluted weighted average common shares outstanding 129 134 135

Cash dividends declared per share $ 0.66 $ 0.60 $ 0.54

See accompanying notes to consolidated financial statements.

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KBR, Inc.

Consolidated Statements of Comprehensive Income (Loss)

(In millions)

Year ended

Other comprehensive income (loss):

Foreign currency translation adjustments 72 (20) 52

Pension and post-retirement benefits (44) (15) (101)

Changes in fair value of derivatives (26) — (12)

Other comprehensive income (loss) 2 (35) (61)

Income tax (expense) benefit:

Pension and post-retirement benefits 11 4 25

Changes in fair value of derivatives 5 — 3

Income tax benefit 16 4 28

Other comprehensive income (loss), net of tax 18 (31) (33)

Comprehensive income (loss) attributable to KBR $ 433 $ 344 $ (298)

See accompanying notes to consolidated financial statements.

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KBR, Inc.

Consolidated Balance Sheets

(In millions, except share data)

Assets

Current assets:

Cash and cash equivalents $ 500 $ 342

Current assets of discontinued operations 19 21

Operating lease right-of-use assets 217 203

Equity in and advances to unconsolidated affiliates 107 192

Non-current assets of discontinued operations — 78

Liabilities and Shareholders' Equity

Current liabilities:

Accrued salaries, wages and benefits 342 351

Current maturities of long-term debt 49 36

Other current liabilities 235 280

Current liabilities of discontinued operations 19 15

Employee compensation and benefits 144 135

Deferred income taxes 95 83

Operating lease liabilities 236 228

Non-current liabilities of discontinued operations — 69

Commitments and Contingencies (Notes 6, 13 and 14)

KBR shareholders' equity:

Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued — —

Total KBR shareholders' equity 1,503 1,453

Noncontrolling interests 9 14

Total liabilities and shareholders’ equity $ 6,584 $ 6,663

See accompanying notes to consolidated financial statements.

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KBR, Inc.

Consolidated Statements of Shareholders’ Equity

(In millions, except for per share data)

Dollars in millions Total PIC Retained Earnings Treasury Stock AOCL NCI

Share-based compensation 20 20 — — — —

Common stock issued upon exercise of stock options 5 5 — — — —

Dividends declared to shareholders ($0.54/share) (73) — (73) — — —

Repurchases of common stock (138) — — (138) — —

Issuance of ESPP shares 6 3 — 3 — —

Distributions to noncontrolling interests (6) — — — — (6)

Convertible Notes Transactions 242 242 — — — —

Other — — — (1) — 1

Net income (loss) (261) — (265) — — 4

Other comprehensive loss, net of tax (33) — — — (33) —

Share-based compensation 22 22 — — — —

Common stock issued upon exercise of stock options 2 2 — — — —

Dividends declared to shareholders ($0.60/share) (80) — (80) — — —

Repurchases of common stock (218) — — (218) — —

Issuance of ESPP shares 9 5 — 4 — —

Acquisition of noncontrolling interests (10) (8) — — — (2)

Distributions to noncontrolling interests (4) — — — — (4)

Other 2 — — (1) — 3

Other comprehensive loss, net of tax (31) — — — (31) —

Share-based compensation 21 21 — — — —

Dividends declared to shareholders ($0.66/share) (85) — (85) — — —

Repurchases of common stock (329) — — (329) — —

Issuance of ESPP shares 13 5 — 8 — —

Investments by noncontrolling interest 12 — — — — 12

Distributions to noncontrolling interests (4) — — — — (4)

Other (4) — — (3) — (1)

Other comprehensive income, net of tax 18 — — — 18 —

See accompanying notes to consolidated financial statements.

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KBR, Inc.

Consolidated Statements of Cash Flows

(In millions)

Year ended

Cash flows from operating activities:

Net (income) loss from discontinued operations, net of tax 55 (2) 1

Net income (loss) from continuing operations 458 379 (260)

Charges associated with Convertible Notes — — 494

Equity in earnings of unconsolidated affiliates (210) (107) (114)

Deferred income tax 60 1 14

Changes in operating assets and liabilities, net of acquired businesses:

Accounts receivable, net of allowance for credit losses (2) 5 (32)

Contract assets (3) (93) 38

Contract liabilities (16) (29) 76

Accrued salaries, wages and benefits (2) (7) 21

Payments on operating lease liabilities (81) (71) (65)

Payments from unconsolidated affiliates, net 9 9 18

Distributions of earnings from unconsolidated affiliates 170 163 74

Pension funding (3) (62) (9)

Other assets and liabilities 79 (30) (54)

Cash flows from investing activities:

Purchases of property, plant and equipment $ (42) $ (52) $ (62)

Proceeds from sale of assets or investments 3 7 —

Return of equity method investments, net 82 36 60

Acquisitions of businesses, net of cash acquired (14) (738) —

Funding in other investment (10) (5) (39)

70

Year ended

Cash flows from financing activities:

Borrowings on short-term and long-term debt $ — $ 574 $ —

Payments on short-term and long-term debt (36) (124) (17)

Payments to repurchase common stock (329) (218) (138)

Payments on settlement of warrants — (33) (217)

Debt issuance costs — (18) —

Proceeds from the settlement of note hedge — — 493

Payments to settle Convertible Notes — — (843)

Acquisition of noncontrolling interest — (10) —

Payments of dividends to shareholders (84) (79) (72)

Total operating cash flows from discontinued operations (33) 12 30

Total investing cash flows from discontinued operations (12) (25) (18)

Total financing cash flows from discontinued operations 12 — —

Total cash flows from discontinued operations $ (33) $ (13) $ 12

Effect of exchange rate changes on cash 18 (14) 13

Increase (decrease) in cash and cash equivalents 155 46 (85)

Cash and cash equivalents at beginning of period 350 304 389

Cash and cash equivalents at end of period $ 505 $ 350 $ 304

Less: cash and cash equivalents of discontinued operations 5 8 21

Supplemental disclosure of cash flows information:

Cash paid for income taxes (net of refunds) $ 83 $ 82 $ 52

Noncash financing activities

Dividends declared $ 21 $ 20 $ 18

See accompanying notes to consolidated financial statements.

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KBR, Inc.

Notes to Consolidated Financial Statements

Note 1. Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP and include the accounts of KBR, Inc. and the subsidiaries it controls, including VIEs where it is the primary beneficiary. We account for investments over which we have significant influence, but not a controlling financial interest, using the equity method of accounting. See Note 9. "Equity Method Investments and Variable Interest Entities" to our consolidated financial statements for further discussion of our equity investments and VIEs. All material intercompany balances and transactions are eliminated in consolidation. Certain amounts in prior periods have been reclassified to conform with current period presentation. We have evaluated all events and transactions occurring after the balance sheet date but before the consolidated financial statements were issued and have included the appropriate disclosures.

As discussed further in Note 21. “Discontinued Operations” to our consolidated financial statements, HomeSafe informed us on June 18, 2025, that U.S. Transportation Command unexpectedly terminated HomeSafe’s role in the Global Household Goods Contract. We disposed of HomeSafe in the second quarter of fiscal 2025 and determined that this disposal met the requirements to be reported as discontinued operations. As such, the results of HomeSafe are presented as discontinued operations in the accompanying consolidated statements of operations, consolidated balance sheets and consolidated statements of cash flows and notes for all periods presented.

Reporting Periods

In 2022, the Board of Directors approved a change in the fiscal year end from a calendar year ending on December 31 to a 52 – 53 week year ending on the Friday closest to December 31, effective as of the commencement of the Company's fiscal year on January 1, 2023. Fiscal 2025 ended January 2, 2026, fiscal 2024 ended January 3, 2025 and fiscal 2023 ended December 29, 2023. Fiscal 2025 included 52 weeks, fiscal 2024 included 53 weeks and fiscal 2023 included 52 weeks.

Use of Estimates

The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of certain assets and liabilities, the reported amounts of revenues and expenses for the periods covered and certain amounts disclosed in the notes to our consolidated financial statements. These estimates are based on information available through the date of the issuance of the financial statements and actual results could differ from those estimates. Areas requiring estimates and assumptions by our management include the following:

•project revenues, costs and profits on our contracts;

•award fees, costs and profits on government contracts;

•client claims and recoveries of costs from subcontractors, vendors and others;

•provisions for income taxes and related valuation allowances and tax uncertainties;

•evaluation of goodwill for impairment;

•evaluation of intangibles and long-lived assets for impairment;

•evaluation of equity method investments for impairment;

•valuation of pension obligations and pension assets;

•accruals for estimated liabilities, including litigation accruals; and

•valuation of assets and liabilities acquired in business combinations.

Cash and Cash Equivalents

We consider highly liquid investments with an original maturity of three months or less to be cash equivalents.

Revenue Recognition

We, and our equity method investments, recognize revenue in accordance with ASC 606.Revenue is measured based on the amount of consideration specified in a contract with a customer. Revenue is recognized when and as our performance obligations under the terms of the contract are satisfied, which occurs with the transfer of control of the goods or services to the customer. We recognize revenue on substantially all of our contracts over time, as performance obligations are satisfied, due to

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the continuous transfer of control to the customer. We determine whether to recognize revenue on a gross or net basis by assessing if we control the goods or services provided by third parties before they reach the customer, acting as the principal when we do and as the agent when we only arrange for another party to provide them. Our contracts are generally accounted for as a single performance obligation and are not segmented between types of services provided. We recognize revenue on those contracts over time using the cost-to-cost method, based primarily on contract costs incurred to date compared to total estimated contract costs at completion. Contract costs include all direct materials, labor and subcontractors costs and indirect costs related to contract performance. We believe this method is the most accurate measure of contract performance because it directly measures the value of the goods and services transferred to the customer. For all other contracts we recognize revenue when services are performed which generally coincides with our ability to bill.

Contract Combination

To determine the proper revenue recognition method for contracts, we evaluate whether two or more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be accounted for as more than one performance obligation. This evaluation requires judgment and the decision to combine a group of contracts or separate a combined or single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period. Contracts are considered to have a single performance obligation if the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts primarily because we provide a significant service of integrating a complex set of tasks and components into a single project or capability. Contracts that cover multiple phases of the product lifecycle (development, construction and maintenance & support) are typically considered to have multiple performance obligations even when they are part of a single contract.

For a limited number of contracts with multiple performance obligations, we allocate the transaction price to each performance obligation using our best estimate of the relative standalone selling price of each distinct good or service in the contract. In cases where we do not provide the distinct good or service on a standalone basis, the primary method used to estimate standalone selling price is the expected cost plus a margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service.

Contract Types

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

Fixed-price contracts also include unit-rate contracts. Under fixed-price contracts, we perform a defined scope of work for a specified fee to cover all costs and any profit element. Fixed-price contracts entail 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-rate contracts are considered fixed-price contracts with the only variable being units of work to be performed. 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.

Time-and-materials contracts typically provide for negotiated fixed rates for specified cost categories. The rates are designed to cover the cost of direct labor, indirect expense and fee. These contracts can also allow for reimbursement of cost of material plus a fee, if applicable. In U.S. government contracting, this type of contract is generally used when there is uncertainty of the extent or duration of the work to be performed by the contractor at the time of contract award or it is not possible to anticipate costs with any reasonable degree of confidence. With respect to time-and-materials contracts, we assume the price risk because our costs of performance may exceed negotiated hourly rates. In commercial and non-U.S. government contracting, this contract type is generally used for defined and non-defined scope contracts where there is a higher degree of uncertainty and risks as to the scope of work. These types of contracts may also provide for a guaranteed maximum price where the total cost plus the fee cannot exceed an agreed upon guaranteed maximum price or not-to-exceed provisions.

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 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 requires us to use our best efforts to accomplish the scope of the work within a specified time and

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budget. Cost-reimbursable contracts with the U.S. government are 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, including the types of costs that are allowable, is based on specific negotiations with each customer.

See Note 3. "Revenue" to our consolidated financial statements for further discussion of our revenue by contract type.

Contract Costs

Contract costs include all direct materials, labor and subcontractor costs and an allocation of indirect costs related to contract performance. Customer-furnished materials are included in both contract revenue and cost of revenue when management concludes that the company is acting as a principal rather than as an agent. Project mobilization costs incurred are capitalized as deferred assets and amortized on a straight-line basis over the anticipated term of the contract or a specified period of performance consistent with the transfer of control of the performance obligation to the client. These costs incurred may be to transition the services, employees and equipment to or from the customer, a prior contract or prior contractor. Pre-contract costs are expensed as incurred unless they are expected to be recovered from the client.

Contract costs incurred for U.S. government contracts, including indirect costs, are subject to audit and adjustment by the DCAA. 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.

We provide limited warranties to customers for work performed under our contracts that typically extend for a limited duration following substantial completion of our work on a project. Such warranties are not sold separately and do not provide customers with a service in addition to assurance of compliance with agreed-upon specifications. Accordingly, these types of warranties are not considered to be separate performance obligations.

Variable Consideration

In addition to the variable contract price under cost-reimbursable contracts, it is common for our contracts to contain variable consideration in the form of award fees, incentive fees, performance bonuses, liquidated damages or penalties that may increase or decrease the transaction price. These variable amounts generally are awarded upon achievement of certain performance metrics, program milestones or targets and can be based on customer discretion. Other contract provisions also give rise to variable consideration such as unapproved change orders and claims, and on certain contracts, index-based price adjustments. We estimate the amount of variable consideration at the most likely amount to which we expect to be entitled. Variable consideration is included in the transaction price when it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include such amounts in the transaction price are based largely on our assessment of legal enforceability, anticipated performance and any other information (historical, current or forecasted) that is reasonably available to us.

Variable consideration associated with claims and unapproved change orders is included in the transaction price only to the extent of costs incurred. We recognize claims against vendors, subcontractors and others as a reduction in recognized costs when enforceability is established by the contract and the amounts are reasonably estimable and probable of recovery. Reductions in costs are recognized to the extent of the lesser of the amounts management expects to recover or actual costs incurred.

Contract Estimates and Modifications

Due to the nature of the work required to be performed on many of our performance obligations, the estimation of total revenue and cost at completion is complex and subject to many variables and requires significant judgment. As a significant change in estimated total revenue and cost could affect the profitability of our contracts, we routinely review and update our contract-related estimates through a disciplined project review process in which management reviews the progress and execution of our performance obligations and the EAC. As part of this process, management reviews information including, but not limited to, outstanding contract matters, progress towards completion, program schedule and the associated changes in estimates of revenues and costs. Management must make assumptions and estimates regarding the availability and productivity of labor, the complexity of the work to be performed, the availability and cost of materials, the performance of subcontractors

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and the availability and timing of funding from the customer, along with other risks inherent in performing services under all contracts where we recognize revenue over time using the cost-to-cost method.

We recognize changes in contract estimates on a cumulative catch-up basis in the period in which the changes are identified. Such changes in contract estimates can result in the recognition of revenue in a current period for performance obligations which were satisfied or partially satisfied in prior period. Changes in contract estimates may also result in the reversal of previously recognized revenue if the current estimate differs from the previous estimate. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, we recognize the total loss in the period it is identified. See Note 3. "Revenue" for changes in all other project-related estimates.

Contracts are often modified to account for changes in contract specifications and requirements. Most of our contract modifications are for goods or services that are not distinct from existing contracts due to the significant integration provided in the context of the contract and are accounted for as if they were part of the original contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. We account for contract modifications prospectively when the modification results in the promise to deliver additional goods or services that are distinct and the increase in price of the contract is for the same amount as the stand-alone selling price of the additional goods or services included in the modification.

Contract Assets and Liabilities

Billing practices are governed by the contract terms of each project based upon costs incurred, achievement of milestones or predetermined schedules. Billings do not necessarily correlate with revenue recognized over time using the percentage-of-completion method. Contract assets include unbilled amounts typically resulting from revenue under long-term contracts when the percentage-of-completion method of revenue recognition is used, and revenue recognized exceeds the amount billed to the customer. Contract liabilities consist of advance payments and billings in excess of revenue recognized as well as deferred revenue.

Retainage, included in contract assets, represent the amounts withheld from billings by our clients pursuant to provisions in the contracts and may not be paid to us until the completion of specific tasks or the completion of the project and, in some instances, for even longer periods. Retainage may also be subject to restrictive conditions such as performance guarantees.

Our contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period.

The payment terms of our contracts from time to time require the customer to make advance payments as well as interim payments as work progresses. Advance payments generally are not considered to contain a significant financing component as we expect to recognize those amounts in revenue within a year of receipt as work progresses on the related performance obligation.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include charges for such items as executive management, corporate business development, information technology, finance and accounting, human resources and various other functions. The Company classifies indirect costs incurred within or allocated to its U.S. government customers as overhead (included in cost of revenues) or selling, general and administrative expenses in the same manner as such costs are defined in the Company’s disclosure statements under CAS.

Accounts Receivable

Accounts receivable include amounts billed and currently due from customers, amounts billable where the right to consideration is unconditional and amounts unbilled. Amounts billed and unbilled are recognized at estimated realizable value and consist of costs and fees, substantially all of which are expected to be billed and collected within one year. Unbilled amounts also include rate variances that are billable upon negotiation of final indirect rates with the DCAA.

We establish an allowance for credit losses based on the assessment of our clients' ability to pay. In addition to such allowances, there are often items in dispute or being negotiated that may require us to make an estimate as to the ultimate outcome. Past due receivable balances are written off when our internal collection efforts have been unsuccessful in collecting the amounts due.

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Additionally, we sell certain receivables to unrelated third-party financial institutions under various accounts receivable monetization programs. The receivables sold under the agreements do not allow for recourse for any credit risk related to our customers if such receivables are not collected by the third-party financial institutions. The Company accounts for these receivable transfers as a sale under ASC Topic 860, Transfers and Servicing as the receivables have been legally isolated from the Company, the financial institution has the right to pledge or exchange the assets received and we do not maintain effective control over the transferred accounts receivable. Our only continuing involvement with the transferred financial assets is as the collection and servicing agent. As a result, the accounts receivable balance on the consolidated balance sheets is presented net of the transferred amount. See Note 20. "Fair Value of Financial Instruments and Risk Management" to our consolidated financial statements for further information on sales of receivables.

Property, Plant and Equipment

Property, plant and equipment are reported at cost less accumulated depreciation except for those assets that have been written down to their fair values due to impairment. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance and repairs are charged to expense as incurred. The cost of property, plant and equipment sold or otherwise disposed of and the related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in operating income for the respective period. Depreciation is generally provided on the straight-line method over the estimated useful lives of the related assets. Leasehold improvements are amortized using the straight-line method over the shorter of the useful life of the improvement or the lease term. See Note 7. “Property, Plant and Equipment” to our consolidated financial statements for our discussion on property, plant and equipment.

Business Combinations

We account for business combinations using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations ("ASC 805"). Under this method, the purchase consideration is measured at fair value, and the identifiable tangible and intangible assets acquired and liabilities assumed are recognized at their estimated acquisition‐date fair values, with any excess recognized as goodwill. We engage third-party appraisal firms when appropriate to assist in the fair value determination of intangible assets. Initial purchase price allocations are subject to revisions within the measurement period, not to exceed one year from the date of acquisition. Acquisition-related expenses and transaction costs associated with business combinations are expensed as incurred.

Goodwill and Intangible Assets

Goodwill is an asset representing the excess cost over the fair market value of net assets and identifiable intangibles acquired in business combinations. In accordance with ASC Topic 350, Intangibles - Goodwill and Other, goodwill is not amortized but is tested annually for impairment or on an interim basis when indicators of potential impairment exist. Goodwill is tested for impairment at the reporting unit level. Our reporting units are our operating segments or components of operating segments where discrete financial information is available and segment management regularly reviews the operating results. For purposes of impairment testing, goodwill is allocated to the applicable reporting units based on our reporting structure.

Goodwill is assessed annually for possible impairment as of the first day of our fourth quarter each fiscal year, and on an interim basis when indicators of possible impairment exist. We have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. Qualitative factors assessed for each of the applicable reporting units include, but are not limited to, changes in macroeconomic conditions, industry and market considerations, cost factors, discount rates, competitive environments and financial performance of the reporting units. If the qualitative assessment indicates that it is more likely than not that the carrying value of a reporting unit exceeds its estimated fair value, a quantitative test is required.

We also have the option to proceed directly to the quantitative test. Under the quantitative impairment test, the estimated fair value of each reporting unit is compared to its carrying value, including goodwill. If the carrying value of the reporting unit including goodwill exceeds its fair value, an impairment charge equal to the excess would be recognized, up to a maximum amount of goodwill allocated to that reporting unit. We can resume the qualitative assessment in any subsequent period for any reporting unit.

During fiscal 2025, 2024 and 2023, management performed a qualitative impairment assessment of our reporting units, of which there were no indications that it was more likely than not that the fair value of our reporting units were less than their respective carrying values. As such, a quantitative goodwill test was not required, and no goodwill impairment was recognized in fiscal 2025, 2024 and 2023. See Note 8. “Goodwill and Intangible Assets” to our consolidated financial statements for reported goodwill in each of our segments.

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We had intangible assets with net carrying values of $727 million and $763 million as of January 2, 2026 and January 3, 2025, respectively. Intangible assets with indefinite lives are not amortized but are subject to annual impairment tests or on an interim basis when indicators of potential impairment exist. An intangible asset with an indefinite life is impaired if its carrying value exceeds its fair value. During fiscal 2025, 2024 and 2023, there were no triggering events identified. Intangible assets with finite lives are amortized on a straight-line basis over the useful life of those assets, ranging from 1 year to 25 years. See Note 8. “Goodwill and Intangible Assets” to our consolidated financial statements for further discussion of our intangible assets.

Equity Method Investments

We account for non-marketable investments using the equity method of accounting if the investment gives us the ability to exercise significant influence over, but not control, of an investee. Significant influence generally exists if we have an ownership interest representing between 20% and 50% of the voting stock of the investee. Under the equity method of accounting, investments are stated at initial cost and are adjusted for subsequent additional investments and our proportionate share of earnings or losses and distributions.

Equity in earnings (losses) of unconsolidated affiliates, in the consolidated statements of operations, reflects our proportionate share of the investee's net income, including any associated taxes. Our proportionate share of the investee’s other comprehensive income (loss), net of income taxes, is recorded in the consolidated statements of shareholders’ equity and consolidated statements of comprehensive income (loss). In general, the equity investment in our unconsolidated affiliates is equal to our current equity investment plus those entities' undistributed earnings.

We evaluate our equity method investments for impairment at least annually or whenever events or changes in circumstances indicate, in management’s judgment, that the carrying value of an investment may have experienced an other-than-temporary decline in value. When evidence of loss in value has occurred, management compares the estimated fair value of the investment to the carrying value of the investment to determine whether an impairment has occurred. If the estimated fair value is less than the carrying value and management considers the decline in value to be other than temporary, the excess of the carrying value over the estimated fair value is recognized in the financial statements as an impairment. See Note 9. "Equity Method Investments and Variable Interest Entities" to our consolidated financial statements for our discussion on equity method investments.

We evaluate distributions received from our equity method investments using the nature of distribution approach. Under this approach, we evaluate the nature of activities of the investee that generated the distribution. The distributions received are either classified as a return on investment, which is presented as a component of operating activities on our consolidated statements of cash flows, or as a return of investment, which is presented as a component of investing activities on our consolidated statements of cash flows. For BRIS only, we apply the cumulative earnings approach for the cash flow classification of distributions as information is not available to evaluate the nature of the activities of the joint venture.

Other Investments

Other investments are investments in equity securities of privately held companies without readily determinable fair values and are included in other assets on our consolidated balance sheets. These investments are accounted for under the measurement alternative, provided that KBR does not have the ability to exercise significant influence or control over the investees. We measure the investments at cost, less any impairment, and adjust the carrying value to fair value resulting from observable transactions for identical or similar investments of the investee. If it is determined that impairment indicators exist and the carrying value is less than the fair value, we adjust the carrying value of the investment to its fair value and record the related impairment. The gains and losses on the investments are recognized in other non-operating expense on our consolidated statements of operations.

Joint Ventures and VIEs

The majority of our joint ventures are VIEs. We account for VIEs in accordance with ASC Topic 810, Consolidation ("ASC 810"), which requires the consolidation of VIEs in which a company has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive the benefits from the VIE that could potentially be significant to the VIE. If a reporting enterprise meets these conditions, then it has a controlling financial interest and is the primary beneficiary of the VIE. Our unconsolidated VIEs are accounted for under the equity method of accounting.

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We assess all newly created entities and those with which we become involved to determine whether such entities are VIEs and, if so, whether or not we are their primary beneficiary. Most of the entities we assess are incorporated or unincorporated joint ventures formed by us and our partner(s) for the purpose of executing a project or program for a customer and are generally dissolved upon completion of the project or program. Many of our long-term, commercial projects are executed through such joint ventures. Although the joint ventures in which we participate own and hold contracts with the customers, the services required by the contracts are typically performed by the joint venture partners, or by other subcontractors under subcontracts with the joint ventures. Typically, these joint ventures are funded by advances from the project owner, and accordingly, require little or no equity investment by the joint venture partners but may require subordinated financial support from the joint venture partners such as letters of credit, performance and financial guarantees or obligations to fund losses incurred by the joint venture. Other joint ventures, such as PFIs, generally require the partners to invest equity and take an ownership position in an entity that manages and operates an asset after construction is complete. The assets of joint ventures are restricted for use to the obligations of the particular joint venture and are not available for our general operations.

We perform a qualitative assessment to determine whether we are the primary beneficiary once an entity is identified as a VIE. Thereafter, we continue to re-evaluate whether we are the primary beneficiary of the VIE in accordance with ASC 810. A qualitative assessment begins with an understanding of the nature of the risks in the entity as well as the nature of the entity’s activities. These include the terms of the contracts entered into by the entity, ownership interests issued by the entity and how they were marketed and the parties involved in the design of the entity. We then identify all of the variable interests held by parties involved with the VIE including, among other things, equity investments, subordinated debt financing, letters of credit, financial and performance guarantees and contracted service providers. Once we identify the variable interests, we determine those activities which are most significant to the economic performance of the entity and which variable interest holder has the power to direct those activities. Though infrequent, some of our assessments reveal no primary beneficiary because the power to direct the most significant activities that impact the economic performance is held equally by two or more variable interest holders who are required to provide their consent prior to the execution of their decisions. Most of the VIEs with which we are involved have relatively few variable interests and are primarily related to our equity investment, significant service contracts and other subordinated financial support. See Note 9. "Equity Method Investments and Variable Interest Entities" to our consolidated financial statements for our discussion on variable interest entities.

We may determine that we are the primary beneficiary as a result of a reconsideration event associated with an existing unconsolidated VIE. We account for the change in control under the acquisition method of accounting for business combinations in accordance with ASC 805.

Pensions

We account for our defined benefit pension plans in accordance with ASC Topic 715, Compensation - Retirement Benefits, which requires an employer to:

•recognize on its balance sheet the funded status (measured as the difference between the fair value of plan assets and the benefit obligation) of the pension plan;

•recognize, through comprehensive income, certain changes in the funded status of a defined benefit plan in the year in which the changes occur;

•measure plan assets and benefit obligations as of the end of the employer’s fiscal year; and

•disclose additional information.

Our pension benefit obligations and expenses are calculated using actuarial models and methods. The more critical assumption and estimate used in the actuarial calculations is the discount rate for determining the current value of benefit obligations. Other assumptions and estimates used in determining benefit obligations and plan expenses include expected rate of return on plan assets, inflation rates and demographic factors such as retirement age, mortality and turnover. These assumptions and estimates are evaluated periodically (typically annually) and are updated accordingly to reflect our actual experience and expectations.

The discount rate used to determine the benefit obligations was computed using a yield curve approach that matches plan specific cash flows to a spot rate yield curve based on high quality corporate bonds. The expected long-term rate of return on assets was determined by a stochastic projection that takes into account asset allocation strategies, historical long-term performance of individual asset classes, an analysis of additional return (net of fees) generated by active management, risks using standard deviations and correlations of returns among the asset classes that comprise the plans' asset mix. Plan assets are comprised primarily of equity funds and securities, fixed income funds and securities, real estate and other funds. As we have

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both domestic and international plans, these assumptions differ based on varying factors specific to each particular country, participant demographics or economic environment.

Unrecognized actuarial gains and losses are recognized using the corridor method over a period of approximately 20 years, which represents a reasonable systematic method for amortizing gains and losses for the employee group. Our unrecognized actuarial gains and losses arise from several factors, including experience and assumption changes in the obligations and the difference between expected returns and actual returns on plan assets. The difference between actual and expected returns is deferred as an unrecognized actuarial gain or loss on our consolidated statement of comprehensive income (loss) and is recognized as a decrease or an increase in future pension expense.

Income Taxes

We recognize the amount of taxes payable or refundable for the year and deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or tax returns. We provide a valuation allowance for deferred tax assets if it is more likely than not that these items will not be realized. See Note 12. “Income Taxes” to our consolidated financial statements for our discussion on income taxes.

Income taxes are accounted for under the asset and liability method. We provide a valuation allowance for deferred tax assets if it is more likely than not that these items will not be realized. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. A current tax asset or liability is recognized for the estimated taxes refundable or payable on tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will not be realized. We consider the scheduled reversal of deferred tax liabilities, income available from carryback years, projected future taxable income and available tax planning strategies in making this assessment. Additionally, we use forecasts of certain tax elements such as taxable income and foreign tax credit utilization in making this assessment of realization. Given the inherent uncertainty involved with the use of such estimates and assumptions, there can be significant variation between estimated and actual results.

We have operations in numerous countries other than the United States. Consequently, we are subject to the jurisdiction of a significant number of taxing authorities. The income earned in these various jurisdictions is taxed on differing bases, including income actually earned, income deemed earned and revenue-based tax withholding. The final determination of our tax liabilities involves the interpretation of local tax laws, tax treaties and related authorities in each jurisdiction. Changes in the operating environment, including changes in tax law and currency/repatriation controls, could impact the determination of our tax liabilities for a tax year.

We recognize the effect of income tax positions only if it is more likely than not that those positions will be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records potential interest and penalties related to unrecognized tax benefits in income tax expense.

Tax filings of our subsidiaries, unconsolidated affiliates and related entities are routinely examined by tax authorities in the normal course of business. These examinations may result in assessments of additional taxes, which we work to resolve with the tax authorities and through the judicial process. Predicting the outcome of disputed assessments involves some uncertainty. Factors such as the availability of settlement procedures, willingness of tax authorities to negotiate and the operation and impartiality of judicial systems vary across the different tax jurisdictions and may significantly influence the ultimate outcome. We review the facts for each assessment, and then utilize assumptions and estimates to determine the most likely outcome and provide taxes, interest and penalties as needed based on this outcome.

Derivative Instruments

We enter into derivative financial transactions to hedge existing or forecasted risk to changing foreign currency exchange rates and interest rate risk on variable rate debt. We do not enter into derivative transactions for speculative or trading purposes.

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We recognize all derivatives at fair value on the balance sheet. Derivatives that are not designated as hedges in accordance with ASC 815, are adjusted to fair value and such changes are reflected in the results of operations. If the derivative is designated as a cash flow hedge, all changes in the fair value of derivatives are recognized in other comprehensive income (loss) and are subsequently reclassified into earnings in the period in which the hedged forecasted transaction affects earnings. See Note 20. "Fair Value of Financial Instruments and Risk Management" to our consolidated financial statements for our discussion on derivative instruments.

Recognized gains or losses on derivatives entered into to manage project related foreign exchange risk are included in gross profit. Foreign currency gains and losses for hedges of non-project related foreign exchange risk are reported within other non-operating income (expense) on our consolidated statements of operations. Realized gains or losses on derivatives used to manage interest rate risk are included in interest expense in our consolidated statements of operations.

Concentration of Credit Risk

Financial instruments which potentially subject our company to concentrations of credit risk consist principally of cash and cash equivalents and trade receivables. Our cash is primarily held with major banks and financial institutions throughout the world. We believe the risk of any potential loss on deposits held in these institutions is minimal.

Contracts with clients usually contain standard provisions allowing the client to curtail or terminate contracts for convenience. Upon such a termination, we are generally entitled to recover costs incurred, settlement expenses and profit on work completed prior to termination and demobilization cost.

We have revenues and receivables from transactions with an external customer that amounts to 10% or more of our revenues which are generally not collateralized. We generated significant revenues from transactions with the U.S. government and U.K. government within our MTS business segment. No other customers represented 10% or more of consolidated revenues in any of the periods presented.

The following table summarizes our revenues and accounts receivable for contracts with U.S. and U.K. government agencies for which we are the prime contractor, as well as for contracts in which we are a subcontractor and the ultimate customer is a U.S. or U.K. government agency, respectively.

Revenues and percentage of consolidated revenues from major customers:

Year ended

Dollars in millions January 2, 2026 January 3, 2025

U.K. government $ 76 7 % $ 67 6 %

Noncontrolling Interest

Noncontrolling interests represent the equity investments of partners in our joint ventures and other subsidiary entities that we consolidate in our financial statements.

Foreign Currency

Our reporting currency is the U.S. dollar. The functional currency of our non-U.S. subsidiaries is typically the currency of the primary environment in which they operate. Where the functional currency for a non-U.S. subsidiary is not the U.S. dollar, translation of all of the assets and liabilities (including long-term assets, such as goodwill) to U.S. dollars is based on exchange rates in effect at the balance sheet date. Translation of revenues and expenses to U.S. dollars is based on the average rate during the period and shareholders’ equity accounts are translated at historical rates. Translation gains or losses, net of income tax effects, are reported in accumulated other comprehensive loss on our consolidated balance sheets.

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Transaction gains and losses that arise from foreign currency exchange rate fluctuations on transactions denominated in a currency other than the functional currency are recognized in income each reporting period when these transactions are either settled or remeasured. Transaction gains and losses on intra-entity foreign currency transactions and balances including advances and demand notes payable, on which settlement is not planned or anticipated in the foreseeable future, are recorded in accumulated other comprehensive loss on our consolidated balance sheets.

Share-based Compensation

We account for share-based payments, including grants of employee stock options, restricted stock-based awards and performance cash units, in accordance with ASC Topic 718, Compensation-Stock Compensation ("ASC 718"), which requires that all share-based payments (to the extent that they are compensatory) be recognized as an expense in our consolidated statements of operations based on their fair values on the award date and the estimated number of shares of common stock we ultimately expect to vest. We recognize share-based compensation expense on a straight-line basis over the service period of the award, which is no greater than 3 years. If an award is modified after the grant date, incremental compensation cost is recognized immediately as of the modification. The benefits of tax deductions in excess of the compensation cost recognized for the options (excess tax benefits) are classified as additional paid-in-capital and cash retained as a result of these excess tax benefits is presented in the statements of cash flows as financing cash inflows. See Note 18. “Share-based Compensation and Incentive Plans” to our consolidated financial statements for our discussion on share-based compensation and incentive plans.

Commitments and Contingencies

We record liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred.

Recently Adopted Accounting Standards

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU requires that an entity disclose specific categories in the effective tax rate reconciliation as well as provide additional information for reconciling items that meet a quantitative threshold. Further, the ASU requires certain disclosures of state versus federal income tax expense and taxes paid. We adopted this standard effective for our 2025 fiscal year on a prospective basis. Refer to Note 12. "Income Taxes" for additional information.

Recent Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. ASU 2024-03 requires disclosure of additional information about certain income statement expense categories. ASU 2024-03 will be effective for our 2027 fiscal year ending December 31, 2027. Early adoption is permitted and the amendments can be applied on a prospective or retrospective basis. We expect this ASU to only impact our disclosures with no impacts to our results of operations, cash flows and financial condition.

In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This guidance removes all references to project stages throughout ASC 350-40 and clarifies the threshold entities apply to begin capitalizing costs. Under the new standard, cost capitalization should only commence when an entity has committed to funding a software project and it is probable the project will be completed and the software will be used for its intended function. The amendments are effective for annual reporting periods beginning after December 15, 2027 and interim reporting periods within those annual reporting periods. Entities may apply the guidance using a prospective, retrospective or modified transition approach. Early adoption is permitted as of the beginning of an annual reporting period. We are currently determining the preferred transition approach and assessing the impact of the ASU on our disclosures and financial statements, including the timing of its adoption.

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Additional Balance Sheet Information

Other Current Assets. The components of other current assets on our consolidated balance sheets as of January 2, 2026 and January 3, 2025 are presented below:

Dollars in millions January 2, 2026 January 3, 2025

Prepaid expenses $ 69 $ 76

Value-added tax receivable 43 36

Advances to subcontractors 14 6

Other miscellaneous assets 40 55

Total other current assets $ 166 $ 173

Other Current Liabilities. The components of other current liabilities on our consolidated balance sheets as of January 2, 2026 and January 3, 2025 are presented below:

Dollars in millions January 2, 2026 January 3, 2025

Operating lease liabilities $ 56 $ 58

Value-added tax payable 34 46

Dividend payable 21 20

Other miscellaneous liabilities 124 156

Total other current liabilities $ 235 $ 280

Note 2. Business Segment Information

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. To streamline and optimize our processes, we realigned our segments effective as of fiscal 2025. As part of this realignment, our Government Solutions reportable segment has been renamed Mission Technology Solutions while Sustainable Technology Solutions has retained its name. The international business contained within Government Solutions has been integrated into both Mission Technology Solutions and Sustainable Technology Solutions. All information in our Annual Report on Form 10-K for the fiscal year ended January 2, 2026is presented in accordance with the realigned reportable segments and all prior period information was recast to reflect the realigned reportable segments. Effective for fiscal 2026, a portion of a business unit within our Mission Technology Solutions segment will become part of our Sustainable Technology Solutions segment. We will begin reporting new segment information due to this change beginning the first fiscal quarter of 2026.

We are organized into two core business segments, Mission Technology Solutions and Sustainable Technology Solutions and one non-core business segment as described below:

Mission Technology Solutions. Our Mission Technology Solutions business segment provides full life-cycle support solutions to defense, intelligence, space, aviation and other programs and missions for military and other government agencies primarily in the U.S., U.K. and Australia. KBR's full-spectrum solutions span research and development, advanced prototyping, acquisition support, systems engineering, C5ISR, cyber analytics, space domain awareness, test and evaluation, data analytics and integration, systems integration and program management, global supply chain management, operations readiness and support and professional advisory services across the defense, energy security and transition and critical infrastructure sectors. Included in Mission Technology Solutions is the business of LinQuest Corporation ("LinQuest"), an engineering, data analytics and digital integration company acquired on August 30, 2024 and Infrastar Limited acquired on May 17, 2025. See Note 4. "Acquisitions" to our consolidated financial statements for additional information on these acquisitions. Additionally, the disposal of HomeSafe is reported as discontinued operations and HomeSafe's operations are excluded from Mission Technology Solutions results reflected within our tables below. See Note 21. “Discontinued Operations” for additional information regarding the HomeSafe disposal.

Sustainable Technology Solutions. Our Sustainable Technology Solutions business segment is anchored by our portfolio of over 85 innovative, proprietary, sustainability-focused process technologies that reduce emissions, increase efficiency and/or accelerate and enable energy transition across the industrial base in four primary verticals: ammonia/syngas, chemical/petrochemicals, clean refining and circular process/circular economy solutions. STS also provides highly synergistic services including advisory and consulting focused on energy security, broad-based emission solutions, high-end engineering,

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infrastructure, design and program management centered around decarbonization, energy efficiency, environmental impact and asset optimization, as well as our digitally-enabled operating and monitoring solutions. Through early planning and scope definition, advanced technologies and facility life-cycle optimization, our STS business segment works closely with customers to provide what we believe is the optimal approach to maximize their return on investment.

Corporate. Our non-core segment includes corporate expenses and selling, general and administrative expenses not allocated to the business segments above.

In its operation of our business, our management, including our chief operating decision maker ("CODM"), evaluates the performance of our business segments based on operating income. Our CODM, who is our chief executive officer, utilizes operating income to evaluate segment results and is a factor considered in determining capital allocation among the segments. Our CODM analyzes selected segment balance sheet information for our business segments and for the Company as a whole. Information on each of our business segments and reconciliation to net income (loss) attributable to KBR from continuing operations within our consolidated statements of operations is presented in the tables below.

Operations by Reportable Segment

Year ended January 2, 2026

Dollars in millions MTS STS Corporate Total

Equity in earnings of unconsolidated affiliates 33 177 — 210

Selling, general and administrative expenses (293) (127) (158) (578)

Interest expense — — (158) (158)

Other non-operating income (expense) (6) 2 (2) (6)

Income (loss) from continuing operations before income taxes 457 479 (322) 614

Provision for income taxes — — (156) (156)

Net income (loss) from continuing operations 457 479 (478) 458

Supplemental Disclosures:

Depreciation and amortization $ 115 $ 27 $ 27 $ 169

Purchases of property, plant, and equipment $ (28) $ (4) $ (10) $ (42)

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Year ended January 3, 2025

Dollars in millions MTS STS Corporate Total

Equity in earnings of unconsolidated affiliates 32 75 — 107

Selling, general and administrative expenses (285) (98) (160) (543)

Other — (3) (1) (4)

Interest expense — — (144) (144)

Other non-operating income (expense) — 1 (8) (7)

Income (loss) from continuing operations before income taxes 415 406 (313) 508

Provision for income taxes — — (129) (129)

Net income (loss) from continuing operations 415 406 (442) 379

Supplemental Disclosures:

Depreciation and amortization $ 99 $ 27 $ 30 $ 156

Purchases of property, plant, and equipment $ (33) $ (7) $ (12) $ (52)

Dollars in millions MTS STS Corporate Total

Equity in earnings of unconsolidated affiliates 33 81 — 114

Selling, general and administrative expenses (234) (98) (155) (487)

Legal settlement of legacy matter (144) — — (144)

Interest expense — — (115) (115)

Charges associated with Convertible Notes — — (494) (494)

Other non-operating income (expense) 2 2 (9) (5)

Income (loss) from continuing operations before income taxes 258 356 (779) (165)

Provision for income taxes — — (95) (95)

Net income (loss) from continuing operations 258 356 (874) (260)

Supplemental Disclosures:

Depreciation and amortization $ 90 $ 25 $ 26 $ 141

Purchases of property, plant, and equipment $ (25) $ (15) $ (22) $ (62)

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Selected Geographic Information

Long-lived assets by country are determined based on the location of tangible assets.

Dollars in millions January 2, 2026 January 3, 2025

Property, plant & equipment, net:

Note 3. Revenue

Disaggregated Revenue

We disaggregate our revenue from customers by business unit, customer type, geographic destination and contract type for each of our segments, as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

Revenue by business unit and reportable segment was as follows:

Year ended

Mission Technology Solutions

Revenue by customer type was as follows:

Year ended

Dollars in millions MTS STS Total MTS STS Total MTS STS Total

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Revenue by geographic destination was as follows:

Year ended

Total by Countries/Regions MTS STS Total MTS STS Total MTS STS Total

Many of our contracts contain cost reimbursable, time-and-materials and fixed price (including unit-rate) components. We define contract type based on the component that represents the majority of the contract. Revenue by contract type was as follows:

Dollars in millions MTS STS Total MTS STS Total MTS STS Total

Performance Obligations

Changes in estimates are recognized on a cumulative catch-up basis in the current period associated with performance obligations satisfied in a prior period due to the release of a constrained milestone, modification in contract price or scope or a change in the likelihood of a contingency or claim being resolved. We recognized revenue from performance obligations satisfied in previous periods for such matters of $48 million, $30 million and $15 million for the years ended January 2, 2026, January 3, 2025 and December 29, 2023, respectively.

On January 2, 2026, we had $13.3 billion of transaction price allocated to remaining performance obligations. We expect to recognize approximately 36% of our remaining performance obligations as revenue within one year, 41% in years two through five and 23% thereafter. Revenue associated with our remaining performance obligations to be recognized beyond one year includes performance obligations primarily related to the Aspire Defence project, which has contract terms extending through 2041. Remaining performance obligations do not include variable consideration that was determined to be constrained as of January 2, 2026.

Changes in Project-related Estimates

There are many factors that may affect the accuracy of our cost estimates and ultimately our future profitability. These include, but are not limited to, the availability and costs of resources (such as labor, materials and equipment), productivity, weather and ongoing resolution of commercial and legal matters, including any new or ongoing disputes with our business partners and others in our supply chain. We recognize revisions of revenues, costs and equity in earnings in the period in which the revisions are known. This may result in the recognition of costs before the recognition of related revenue recovery, if any. During fiscal 2025, we recognized a favorable change in operating income of $134 million as a result of changes in estimates on an LNG project.

Contract Assets and Contract Liabilities

Contract assets were $280 million and $271 million and contract liabilities were $331 million and $328 million, at January 2, 2026 and January 3, 2025, respectively. The increase in contract assets was primarily attributed to revenue recognized on certain contracts partially offset by the timing of billings. The increase in contract liabilities was due to the timing of advance payments and revenue recognized during the period. We recognized revenue of $233 million for the year ended January 2, 2026, which was previously included in the contract liability balance at January 3, 2025.

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Accounts Receivable

Dollars in millions January 2, 2026 January 3, 2025

Note 4. Acquisitions

Infrastar Limited

On May 17, 2025, we acquired Infrastar Limited for $35 million, which consisted of $15 million of cash and contingent consideration with an estimated fair value of $20 million that is contingent upon the achievement of certain performance targets through May 2027. The contingent consideration could result in cash payments aggregating up to approximately $24 million. Within our MTS segment, as of January 2, 2026, we recognized $2 million of cash, $11 million of intangible assets related to customer relationships and goodwill of $24 million primarily related to future growth opportunities. As of January 2, 2026, the estimated fair values of net assets acquired were preliminary. We recorded a measurement period adjustment to the preliminary fair values initially recorded on May 17, 2025 and reported within KBR's quarterly report on Form 10-Q for the period ended July 4, 2025. The measurement period adjustment was a decrease to cash of $2 million and an increase to goodwill of $2 million. For U.S. tax purposes, the transaction is treated as a stock deal. As a result, there is no step-up in tax basis and the goodwill recognized is not deductible for tax purposes.

LinQuest Corporation

On August 30, 2024, we acquired LinQuest for $739 million in cash net of cash acquired, subject to certain working capital, net debt and other post-closing adjustments. The purchase price allocation for the LinQuest business combination is final as of January 2, 2026. During the year ended January 2, 2026, we recorded a measurement period adjustment to the preliminary fair values reported within our Annual Report on Form 10-K for the year ended January 3, 2025. The measurement period adjustment was a decrease to deferred income taxes liability of $10 million and a decrease to goodwill of $10 million. We recognized goodwill within our MTS segment of $516 million primarily related to future growth opportunities, a highly skilled assembled workforce and other expected synergies from the combined operations. Intangible assets of $200 million were recognized and comprised of customer relationships and contract backlog, which will be amortized over a weighted-average period of 14 years. For U.S. tax purposes, the transaction is treated as a stock deal. As a result, there is no step-up in tax basis and the goodwill recognized is not deductible for tax purposes.

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Note 5. Cash and Cash Equivalents

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents include cash balances held by our wholly owned subsidiaries as well as cash held by joint ventures that we consolidate. Joint venture and the Aspire project cash balances are limited to specific project activities and are not available for other projects, new acquisitions and joint ventures, general cash needs or distribution to us without approval of the Board of Directors of the respective entities. The cash and cash equivalents held in consolidated joint ventures and the Aspire project are expected to be used for their respective project costs and distributions of earnings.

The components of our cash and cash equivalents balance are as follows: