v3.26.1
Fair Value of Financial Instruments and Risk Management
 3 Months Ended
Apr. 03, 2026
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments and Risk Management Fair Value of Financial Instruments and Risk Management
Fair value measurements. The fair value of an asset or liability is the price that would be received to sell an asset or transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. We utilize a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value and defines three levels of inputs that may be used to measure fair value. Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets, quoted prices in markets that are not active, inputs other than quoted prices that are observable for the asset or liability or inputs derived from observable market data. Level 3
inputs are unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.

The carrying amount of cash and cash equivalents, accounts receivable and accounts payable, as reflected in the condensed consolidated balance sheets, approximates fair value due to the short-term maturities of these financial instruments. The carrying values and estimated fair values of our financial instruments that are not required to be recorded at fair value in our condensed consolidated balance sheets are provided in the following table.

April 3, 2026January 2, 2026
Dollars in millionsCarrying ValueFair ValueCarrying ValueFair Value
Liabilities (including current maturities):
Term Loan ALevel 2$977 $977 $989 $989 
Term Loan BLevel 2980 981 983 989 
Senior NotesLevel 2250 245 250 246 
RevolverLevel 2395 395 395 395 

The carrying value of the debt instruments listed above exclude debt issuance costs for the respective instrument. See Note 8. "Debt and Other Credit Facilities" for the debt issuance costs of our debt instruments and further discussion of our term loans, Senior Notes and Revolver.

The following disclosures for foreign currency risk and interest rate risk includes the fair value hierarchy levels for our assets and liabilities that are measured at fair value on a recurring basis.

Foreign currency risk. We conduct business globally in numerous currencies and are therefore exposed to foreign currency fluctuations. We may use derivative instruments to reduce the volatility of earnings and cash flows associated with changes in foreign currency exchange rates. We do not use derivative instruments for speculative trading purposes. We generally utilize foreign currency exchange forwards and option contracts to hedge exposures associated with forecasted future cash flows, to hedge exposures present on our balance sheet and to mitigate certain operational exposures.

As of April 3, 2026, the gross notional value of our foreign currency exchange forwards and option contracts used to hedge balance sheet exposures was $224 million, all of which had durations of 28 days or less. The fair value of our balance sheet hedges are included in other current assets and other current liabilities on our condensed consolidated balance sheets at April 3, 2026 and January 2, 2026. The fair values of these derivatives are considered Level 2 under ASC Topic 820, Fair Value Measurement, as they are based on quoted prices directly observable in active markets.

The following table summarizes the recognized changes in fair value of our balance sheet hedges and remeasurement of balance sheet positions. These amounts are recognized in our condensed consolidated statements of operations for the periods presented. The net of our changes in fair value of hedges and the remeasurement of our assets and liabilities is included in other non-operating income on our condensed consolidated statements of operations.
Three months ended
Dollars in millionsApril 3, 2026April 4, 2025
Balance Sheet Hedges - Fair Value$— $(2)
Balance Sheet Position - Remeasurement2 (1)
Net gain (loss)$2 $(3)
Interest rate risk. We use interest rate swaps to reduce interest rate risk and to manage net interest expense by converting a portion of our variable rate debt under our Senior Credit Facility into fixed-rate debt.

Our portfolio of interest rate swaps consists of the following:
Dollars in millionsNotional Amount at April 3, 2026*Pay Fixed Rate (Weighted Average)Receive Variable RateSettlement and Termination
March 2020 Interest Rate Swaps$400 0.89 %Term SOFRMonthly through January 2027
September 2022 Interest Rate Swaps$350 3.43 %Term SOFRMonthly through January 2027
March 2023 Interest Rate Swaps$205 3.61 %Term SOFRMonthly through January 2027
March 2023 Amortizing Interest Rate Swaps£102 3.81 %Term SONIAMonthly through November 2026
September 2024 Interest Rate Swaps$200 3.27 %Term SOFRMonthly through August 2027
April 2025 Interest Rate Swaps$270 3.39 %Term SOFRMonthly through August 2027
April 2025 Forward Interest Rate Swaps$150 3.38 %Term SOFRMonthly from August 2027 through December 2030
*Includes the April 2025 Forward Interest Rate Swaps that become effective August 14, 2027.

Our interest rate swaps are reported at fair value using Level 2 inputs. The fair value of the interest rate swaps at April 3, 2026 was a $13 million asset, of which $12 million is included in other current assets and $1 million is included in other assets. 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.

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 (the “RPA”), 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. During the three months ended April 3, 2026, we derecognized $264 million of accounts receivables from the balance sheet under these agreements, of which certain receivables totaling $250 million were sold under the MUFG RPA. The fair value of the sold receivables approximated their book value due to their short-term nature. The fees incurred are presented in other non-operating income on the condensed consolidated statements of operations.

Activity for third-party financial institutions consisted of the following:
Three months ended
Dollars in millionsApril 3, 2026April 4, 2025
Beginning balance$65 $106 
Sale of receivables264 811 
Settlement of receivables(265)(812)
Cash collected, not yet remitted— (3)
Outstanding balances sold to financial institutions$64 $102 

Other Investments. Other investments include investments in equity securities of privately held companies without readily determinable fair values and are included in other assets on our condensed 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. During the three months ended April 3, 2026, we recorded a cash outflow of $49 million within investing activities, reflected as “purchases of available-for-sale debt securities” in our condensed consolidated statements of cash flows. Of this amount, $34 million relates to our investment in Mura, which is discussed in more detail below, and the remaining $15 million relates to aggregate purchases of available-for-sale debt securities in other privately held investments. Additionally, during the three months ended April 3, 2026, we recorded a cash outflow of $13 million within investing activities, reflected as “purchases of other investments” in our condensed consolidated statements of cash flows related to the aggregate funding for other investments.

Mura Technology. KBR's aggregate investment in Mura is approximately 17%. The carrying value of our investment in Mura was $133 million and $136 million at April 3, 2026 and January 2, 2026, respectively.
On March 23, 2026, we purchased a Convertible Note security ("Convertible Note") with a principal amount of $34 million. The Convertible Note accrues interest at a rate of 12.00% per year, with interest payable in March and September of each year, and matures in March 2029. The Convertible Note security included a conversion option and warrants that allows settlement in additional equity interests in Mura in lieu of cash settlement.

The Convertible Note is classified as an available-for-sale debt security in accordance with ASC Topic 320 Investments – Debt Securities and is included in other assets at fair value of $34 million on our condensed consolidated balance sheets as of April 3, 2026. The Convertible Note, including accrued interest, had an amortized cost basis of $20 million as of April 3, 2026. The detachable warrants were accounted for as an equity instrument, with a carrying value of $14 million as of April 3, 2026. As of April 3, 2026, the effective interest rate of the Convertible Note was 32.27%. Subsequent changes related to the fair value of the Convertible Note are recognized as an unrealized gain or loss recorded to accumulated other comprehensive loss on the condensed consolidated balance sheets. Debt securities classified as available-for-sale are measured using quoted market prices when quoted market prices are available. If quoted market prices for those debt securities are not available, the fair value is determined using an income valuation approach. As of April 3, 2026 the fair value of the available-for-sale debt security, valued using the income valuation approach, approximated the fair value on date of purchase due to no significant changes in market conditions or credit risk between the transaction date and quarter-end date of April 3, 2026. In future periods, the fair value of the Convertible Note will include significant unobservable inputs that are classified within Level 3 of the fair value hierarchy.