Form 10-Q KBR, INC. For: Mar 31

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kbr-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended March 31, 2022


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

Commission File Number: 001-33146

KBR, Inc.

(Exact name of registrant as specified in its charter)

Delaware

20-4536774

(State of incorporation)

(I.R.S. Employer Identification No.)

601 Jefferson Street, Suite 3400

Houston

Texas

77002

(Address of principal executive offices)

(Zip Code)

(713) 753-2000

(Registrant's telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:


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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

☒

Accelerated filer

☐

Non-accelerated filer

☐ (Do not check if a smaller reporting company)

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 21, 2022, there were 139,560,024 shares of KBR, Inc. Common Stock, par value $0.001 per share, outstanding.

TABLE OF CONTENTS



			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)			5
Condensed Consolidated Statements of Operations			5
Condensed Consolidated Statements of Comprehensive Income (Loss)			6
Condensed Consolidated Balance Sheets			7
Condensed Consolidated Statements of Shareholders' Equity			8
Condensed Consolidated Statements of Cash Flows			9
Notes to Condensed Consolidated Financial Statements			10
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			35
Item 3. Quantitative and Qualitative Disclosures About Market Risk			47
Item 4. Controls and Procedures			48
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			49
Item 1A. Risk Factors			49
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			50
Item 6. Exhibits			51
SIGNATURES			52

Forward-Looking and Cautionary Statements

This Quarterly Report on Form 10-Q contains certain statements that are, or may be deemed to be, "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act, as amended. The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward-looking information. Some of the statements contained in this Quarterly Report on Form 10-Q are forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. The words "believe," "may," "estimate," "continue," "anticipate," "intend," "plan," "expect" and similar expressions are intended to identify forward-looking statements. Forward-looking statements include information concerning our possible or assumed future financial performance and results of operations.

We have based these statements on our assumptions and analyses in light of our experience and perception of historical trends, current conditions, expected future developments and other factors we believe are appropriate in the circumstances. Forward-looking statements by their nature involve substantial risks and uncertainties that could significantly affect expected results, and actual future results could differ materially from those described in such statements. While it is not possible to identify all factors, factors that could cause actual future results to differ materially include the risks and uncertainties disclosed in our latest Form 10-K and any subsequent Forms 10-Q and 8-K.

Many of these factors are beyond our ability to control or predict. Any of these factors, or a combination of these factors, could materially and adversely affect our future financial condition or results of operations and the ultimate accuracy of the forward-looking statements. These forward-looking statements are not guarantees of our future performance, and our actual results and future developments may differ materially and adversely from those projected in the forward-looking statements. We caution against putting undue reliance on forward-looking statements or projecting any future results based on such statements or on present or prior earnings levels. In addition, each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statement.

Glossary of Terms

The following frequently used terms, abbreviations or acronyms are commonly used in our Quarterly Reports on Form 10-Q as defined below:


Acronym						Definition

Affinity						Affinity Flying Training Services Ltd.
AOCL						Accumulated other comprehensive loss
ASBCA						Armed Services Board of Contract Appeals
ASC						Accounting Standards Codification
ASU						Accounting Standards Update
BBSY						Bank Bill Swap Bid Rate
C4ISR						Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance
COFC						U.S. Court of Federal Claims
DCAA						Defense Contract Audit Agency
DCMA						Defense Contract Management Agency
DoD						Department of Defense
DOJ						U.S. Department of Justice


EBIC						Egypt Basic Industries Corporation

EPC						Engineering, procurement and construction

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

FKTC						First Kuwaiti Trading Company





GS						Government Solutions

HETs						Heavy equipment transporters

ICC						International Chamber of Commerce

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

PPE						Property, Plant and Equipment


RPA						Master Accounts Receivable Purchase Agreement

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



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


VIEs						Variable interest entities

PART I. FINANCIAL INFORMATION

Item 1. Financial Information

KBR, Inc.

Condensed Consolidated Statements of Operations

(In millions, except for per share data)

(Unaudited)


	Three Months Ended
	March 31,
		2022		2021 (1)

Revenues		$	1,714	$	1,461
Cost of revenues		(1,518)		(1,293)
Gross profit		196		168
Equity in earnings (losses) of unconsolidated affiliates		(118)		12
Selling, general and administrative expenses		(107)		(89)
Acquisition and integration related costs		(1)		(1)

Restructuring charges and asset impairments		(1)		—
Loss on disposition of assets and investments		—		(1)

Operating income (loss)		(31)		89
Interest expense		(20)		(19)
Other non-operating expense		—		(3)
Income (loss) before income taxes		(51)		67
Provision for income taxes		(19)		(17)
Net income (loss)		(70)		50
Less: Net income attributable to noncontrolling interests		1		1
Net income (loss) attributable to KBR		$	(71)	$	49
Net income (loss) attributable to KBR per share
Basic		$	(0.51)	$	0.35
Diluted		$	(0.51)	$	0.33
Basic weighted average common shares outstanding		140		141
Diluted weighted average common shares outstanding		140		155
Cash dividends declared per share		$	0.12	$	0.11

(1) As adjusted for the adoption of ASU 2020-06 using the full retrospective method.

See accompanying notes to condensed consolidated financial statements.

KBR, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(In millions)

(Unaudited)


	Three Months Ended
	March 31,
		2022		2021 (1)
Net income (loss)		$	(70)	$	50
Other comprehensive income (loss):
Foreign currency translation adjustments		(19)		7
Pension and post-retirement benefits		6		9
Changes in fair value of derivatives		24		19
Other comprehensive income (loss)		11		35
Income tax (expense) benefit:
Foreign currency translation adjustments		—		—
Pension and post-retirement benefits		(1)		(2)
Changes in fair value of derivatives		(5)		(4)
Income tax (expense) benefit		(6)		(6)
Other comprehensive income (loss), net of tax		5		29
Comprehensive income (loss)		(65)		79
Less: Comprehensive income attributable to noncontrolling interests		1		1
Comprehensive income (loss) attributable to KBR		$	(66)	$	78

(1) As adjusted for the adoption of ASU 2020-06 using the full retrospective method.

See accompanying notes to condensed consolidated financial statements.

KBR, Inc.

Condensed Consolidated Balance Sheets

(In millions, except share data)


	March 31,		December 31, (1)
	2022		2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	412	$	370
Accounts receivable, net of allowance for credit losses of $13 and $13, respectively	1,035		1,411
Contract assets	211		224

Other current assets	116		147
Total current assets	1,774		2,152
Claims and accounts receivable	30		30
Property, plant, and equipment, net of accumulated depreciation of $435 and $431 (including net PPE of $18 and $19 owned by a variable interest entity), respectively	132		136
Operating lease right-of-use assets	151		158
Goodwill	2,051		2,060
Intangible assets, net of accumulated amortization of $302 and $291, respectively	688		708
Equity in and advances to unconsolidated affiliates	430		576
Deferred income taxes	212		231
Other assets	166		153
Total assets	$	5,634	$	6,204
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	630	$	1,026

Contract liabilities	334		313
Accrued salaries, wages and benefits	272		317

Operating lease liabilities	43		41
Other current liabilities	182		178
Total current liabilities	1,461		1,875
Pension obligations	64		88
Employee compensation and benefits	97		111
Income tax payable	93		95
Deferred income taxes	70		70
Nonrecourse project debt	2		2

Long-term debt	1,870		1,875
Operating lease liabilities	180		188

Other liabilities	219		217
Total liabilities	4,056		4,521
Commitments and Contingencies (Notes 6, 12 and 13)
KBR shareholders’ equity:
Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued	—		—
Common stock, $0.001 par value 300,000,000 shares authorized, 180,645,661 and 179,983,586 shares issued, and 139,821,173 and 139,786,136 shares outstanding, respectively	—		—
PIC	2,216		2,206
Retained earnings	1,200		1,287
Treasury stock, 40,824,488 shares and 40,197,450 shares, at cost, respectively	(976)		(943)
AOCL	(876)		(881)
Total KBR shareholders’ equity	1,564		1,669
Noncontrolling interests	14		14
Total shareholders’ equity	1,578		1,683
Total liabilities and shareholders’ equity	$	5,634	$	6,204

(1) As adjusted for the adoption of ASU 2020-06 using the full retrospective method.

See accompanying notes to condensed consolidated financial statements.

KBR, Inc.

Condensed Consolidated Statements of Shareholders' Equity

(In millions, except for per share data)

(Unaudited)


















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


Share-based compensation	5		5		—		—		—		—

Common stock issued upon exercise of stock options	4		4		—		—		—		—
Dividends declared to shareholders ($0.12/share)	(17)		—		(17)		—		—		—
Repurchases of common stock	(33)		—		—		(33)		—		—
Issuance of ESPP shares	1		1		—		—		—		—


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


















Dollars in millions	Total		PIC		Retained Earnings		Treasury Stock		AOCL		NCI
Balance at December 31, 2020	$	1,609	$	2,222	$	1,305	$	(864)	$	(1,083)	$	29
Cumulative adjustment for the adoption of ASU 2020-06	(27)		(45)		18		—		—		—

Adjusted balance at January 1, 2021	1,582		2,177		1,323		(864)		(1,083)		29

Share-based compensation	4		4		—		—		—		—

Common stock issued upon exercise of stock options	4		4		—		—		—		—
Dividends declared to shareholders ($0.11/share)	(16)		—		(16)		—		—		—
Repurchases of common stock	(4)		—		—		(4)		—		—
Issuance of ESPP shares	2		—		—		2		—		—


Other noncontrolling interests activity	(1)		—		—		—		—		(1)
Net income	50		—		49		—		—		1
Other comprehensive loss, net of tax	29		—		—		—		29		—
Balance at March 31, 2021	$	1,650	$	2,185	$	1,356	$	(866)	$	(1,054)	$	29

See accompanying notes to condensed consolidated financial statements.

KBR, Inc.

Condensed Consolidated Statements of Cash Flows

(In millions)

(Unaudited)


	Three Months Ended March 31,
	2022		2021 (1)
Cash flows from operating activities:
Net income (loss)	$	(70)	$	50
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	33		38
Equity in (earnings) losses of unconsolidated affiliates	118		(12)
Deferred income tax	16		8
Loss on disposition of assets	—		1



Other	12		8

Changes in operating assets and liabilities:
Accounts receivable, net of allowance for credit losses	370		24
Contract assets	14		(3)

Accounts payable	(400)		33
Contract liabilities	24		(62)
Accrued salaries, wages and benefits	(43)		9
Payments on operating lease obligation	(14)		(15)

Payments from unconsolidated affiliates, net	7		7
Distributions of earnings from unconsolidated affiliates	30		8

Pension funding	(11)		(11)



Restructuring reserve	(4)		(7)
Other assets and liabilities	7		(26)

Total cash flows provided by operating activities	$	89	$	50
Cash flows from investing activities:
Purchases of property, plant and equipment	$	(6)	$	(6)

Investments in equity method joint ventures	(1)		(3)

Proceeds from sale of assets or investments	18		—
Acquisition of technology license	—		(7)
Other	1		(6)
Total cash flows provided by (used in) investing activities	$	12	$	(22)
Cash flows from financing activities:


Payments on short-term and long-term borrowings	(7)		(7)



Payments of dividends to shareholders	(15)		(14)
Net proceeds from issuance of common stock	4		4
Payments to reacquire common stock	(33)		(4)





Other	(1)		(1)
Total cash flows used in financing activities	$	(52)	$	(22)
Effect of exchange rate changes on cash	(7)		3
Increase in cash and cash equivalents	42		9
Cash and cash equivalents at beginning of period	370		436
Cash and cash equivalents at end of period	$	412	$	445





Noncash financing activities
Dividends declared	$	17	$	16

(1) As adjusted for the adoption of ASU 2020-06 using the full retrospective method.

See accompanying notes to condensed consolidated financial statements.

KBR, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Regulation S-X. Accordingly, these financial statements do not include all information or notes required by generally accepted accounting principles for annual financial statements and should be read together with our 2021 Annual Report on Form 10-K.

The condensed consolidated financial statements include all normal and recurring adjustments necessary to present fairly our financial position as of March 31, 2022, and the results of our operations for the three months ended March 31, 2022 and 2021 and our cash flows for the three months ended March 31, 2022 and 2021. Certain amounts in prior periods have been reclassified to conform with current period presentation.

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 and

weather. We generally realize both lower and higher than expected margins on projects in any given period. We recognize revisions of revenues and costs 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. Our significant accounting policies are detailed in "Note 1. Significant Accounting Policies" of our 2021 Annual Report on Form 10-K.

We have evaluated all events and transactions occurring after the balance sheet date but before the financial statements were issued and have included the appropriate disclosures.

Principles of Consolidation

The accompanying condensed 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 (collectively, the "Company," "KBR", "we", "us" or "our"). We account for investments over which we have significant influence, but not a controlling financial interest, using the equity method of accounting. See Note 8 to our condensed consolidated financial statements for further discussion of our equity investments and VIEs. All material intercompany balances and transactions are eliminated in consolidation.

Adoption of ASU 2020-06

Effective January 1, 2022, we adopted ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06") using the full retrospective method. Accordingly, the Company is presenting the consolidated financial statements for the year ended December 31, 2021, and the condensed consolidated financial statements for the three months ended March 31, 2021, as if ASU 2020-06 had been effective for those periods. This guidance simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. As such, we no longer separate the Convertible Senior Notes into liability and equity components. The conversion option that was previously accounted for in equity under the cash conversion model was recombined into the Convertible Senior Notes outstanding, and as a result, PIC and the related unamortized debt discount on the Convertible Senior Notes were reduced. The removal of the remaining debt discount recorded for this previous separation has the effect of increasing our net debt balance. ASU 2020-06 also eliminates the treasury stock method to calculate diluted earnings per share for certain convertible instruments and requires the use of the if-converted method. As such, we are required to apply the if-converted method to our Convertible Senior Notes when calculating diluted income (loss) per share. Under the if-converted method, the principal amount and any conversion spread of the Convertible Senior Notes, to the extent dilutive, are assumed to be converted into common stock at the beginning of the period and net income (loss) attributable to KBR is adjusted to reverse the effect of any interest expense associated with the Convertible Senior Notes.

For the years ended December 31, 2021 and 2020, the adoption of this standard did not materially impact our financial performance, financial position or cash flow, but it did result in an increase in the number of diluted weighted average shares outstanding utilized in our diluted income (loss) per share calculation in periods of net income attributable to KBR. For the year ending December 31, 2022, the adoption of this standard will not materially impact our financial performance, financial position or cash flow, but it may result in an increase in the number of diluted weighted average shares outstanding utilized in our diluted income (loss) per share calculation.

Select unaudited condensed consolidated balance sheet line items, which reflect the adoption of ASU 2020-06 are as follows:


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

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

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

Select unaudited condensed consolidated statement of operations line items, which reflect the adoption of ASU 2020-06 are as follows:


	Three Months Ended March 31, 2021
Dollars in millions	As Previously Reported		Adjustments		As Adjusted
Interest Expense	$	(22)	$	3	$	(19)
Income before income taxes	$	64	$	3	$	67
Provision for income taxes	$	(16)	$	(1)	$	(17)
Net income	$	48	$	2	$	50
Net income attributable to KBR	$	47	$	2	$	49
Net income attributable to KBR per share:
Basic	$	0.33	$	0.02	$	0.35
Diluted	$	0.33	$	—	$	0.33
Basic weighted average common shares outstanding	$	141	$	—	$	141
Diluted weighted average common shares outstanding	$	144	$	11	$	155

Select unaudited condensed consolidated statement of cash flows line items, which reflect the adoption of ASU 2020-06 are as follows:


	Three Months Ended March 31, 2021
Dollars in millions	As Previously Reported		Adjustments		As Adjusted
Cash flows from operating activities:
Net Income	$	48	$	2	$	50
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income tax	7		1		8
Other	11		(3)		8
Total cash flows provided by operating activities	$	50	$	—	$	50

Impact of Adoption of Other New Accounting Standards

Effective January 1, 2022, we adopted ASU No. 2021-04. Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. This ASU provides guidance for a modification or an exchange of a freestanding equity-classified written call option that is not within the scope of another Topic. It specifically addresses measurement, treatment and recognition of a freestanding equity-classified written call option modification or exchange. The adoption of this standard did not have an impact on our financial statements.

Effective January 1, 2022, we adopted ASU 2021-10, Government Assistance (Topic 832), Disclosures by Business Entities About Government Assistance, which requires entities to provide disclosures on material government assistance transactions for annual reporting periods. The disclosures include information around the nature of the assistance, the related accounting policies used to account for government assistance, the effect of government assistance on the entity’s financial statements and any significant terms and conditions of the agreements, including commitments and contingencies. The new standard only impacts annual financial statement footnote disclosures. Therefore, the adoption did not have a material effect on our condensed consolidated financial statements.

Additional Balance Sheet Information

Other Current Liabilities

The components of other current liabilities on our condensed consolidated balance sheets as of March 31, 2022, and December 31, 2021, are presented below:


	March 31,		December 31,
Dollars in millions	2022		2021
Current maturities of long-term debt	$	16	$	16
Reserve for estimated losses on uncompleted contracts	18		17
Retainage payable	13		13

Restructuring reserve	15		17

Value-added tax payable	49		34

Dividend payable	17		16

Other miscellaneous liabilities	54		65
Total other current liabilities	$	182	$	178

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

Government Solutions. Our Government 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 services cover the full spectrum spanning research and development, advanced prototyping, acquisition support, systems engineering, C4ISR, cyber analytics, space domain awareness, test and evaluation, systems integration and program management, global supply chain management and operations readiness and support. With the acquisition of Frazer-Nash Consultancy Limited ("Frazer-Nash") on October 20, 2021 (described in Note 4 to the consolidated financial statements), our GS business segment also provides a broad range of professional advisory services to deliver high-end systems engineering, systems assurance and technology to customers across the defense, energy and critical infrastructure sectors primarily in the U.K. and Australia.

Sustainable Technology Solutions. Our Sustainable Technology Solutions business segment is anchored by our portfolio of over 70 innovative, proprietary, sustainability-focused process technologies that we license spanning four primary areas: ammonia/syngas/fertilizers, chemical/petrochemicals, clean refining and circular process/circular economy solutions. STS also includes our highly synergistic advisory and consulting practice focused on energy transition and net-zero carbon emission consulting, our high-end engineering, design and professional services offerings, as well as our technology-led industrial solutions build on our KBR INSITE® platform. KBR INSITE® is a proprietary, digital, cloud-based operations and maintenance platform that identifies opportunities for our clients to achieve sustainable improvements in production, reliability, environment impact, energy efficiency and ultimately profitability. From early planning through scope definition, advanced technologies and facility life-cycle support, our STS business segment works closely with customers to provide what we believe is the optimal approach to maximize their return on investment.

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

Operations by Reportable Segment


	Three Months Ended
	March 31,
		2022		2021 (1)
Dollars in millions
Revenues:
Government Solutions		$	1,459	$	1,164
Sustainable Technology Solutions		255		297

Total revenues		$	1,714	$	1,461

Gross profit:
Government Solutions		$	159	$	116
Sustainable Technology Solutions		37		52

Total gross profit		$	196	$	168

Equity in earnings (losses) of unconsolidated affiliates:
Government Solutions		$	10	$	7
Sustainable Technology Solutions		(128)		5

Total equity in earnings (losses) of unconsolidated affiliates		$	(118)	$	12

Selling, general and administrative expenses:
Government Solutions		$	(54)	$	(49)
Sustainable Technology Solutions		(15)		(14)
Other		(38)		(26)
Total selling, general and administrative expenses		$	(107)	$	(89)

Acquisition and integration related costs		(1)		(1)

Restructuring charges and asset impairments		(1)		—
Loss on disposition of assets and investments		—		(1)
Operating income (loss)		$	(31)	$	89
Interest expense		(20)		(19)
Other non-operating expense		—		(3)
Income (loss) before income taxes		$	(51)	$	67

(1) As adjusted for the adoption of ASU 2020-06 using the full retrospective method.

Note 3. Revenue

Disaggregated Revenue

We disaggregate our revenue from customers by business unit, 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:


	Three Months Ended
	March 31,
Dollars in millions		2022		2021

Government Solutions
Science & Space		$	253	$	247
Defense & Intel		378		351
Readiness & Sustainment		533		329
International		295		237
Total Government Solutions		1,459		1,164

Sustainable Technology Solutions		255		297




Total revenue		$	1,714	$	1,461

Government Solutions revenue earned from key U.S. government customers includes U.S. DoD agencies and NASA, and is reported as Science & Space, Defense & Intel and Readiness & Sustainment. Government Solutions revenue earned from non-U.S. government customers primarily includes the U.K. MoD and the Australian Defence Force and is reported as International.

Revenue by geographic destination was as follows:

Three Months Ended March 31, 2022




Total by Countries/Regions Dollars in millions	Government Solutions		Sustainable Technology Solutions		Total
United States	$	1,011	$	109	$	1,120
Middle East	39		49		88
Europe	283		32		315
Australia	90		—		90
Canada	—		2		2
Africa	18