Business Segment Information

We provide a wide range of services and the management of our business is heavily focused on major projects within each of our reportable segments. At any given time, a relatively few number of projects and joint ventures represent a substantial part of our operations. Our reportable segments follow the same accounting policies as those described in Note 1 to our consolidated financial statements.

In 2014, we reorganized into three business segments to focus on core strengths in technology and consulting, engineering and construction, and government services. We also announced our intent to exit businesses that are no longer a part of our future strategic focus and organized those businesses into our Non-strategic Business segment. Each business segment reflects a reportable segment led by a separate business segment President who reports directly to our chief operating decision maker ("CODM"). Our business segments are described below.

Technology & Consulting ("T&C"). Our T&C business segment combines proprietary KBR technologies, knowledge-based services and our three specialist consulting brands, Granherne, Energo and GVA under a single customer-facing global business. This segment provides licensed technologies and consulting services to the oil and gas value chain, from wellhead to crude refining and through to specialty chemicals production. In addition to sharing many of the same customers, these brands share the approach of early and continuous customer involvement to deliver an optimal solution to meet the customer’s objectives through early planning and scope definition, advanced technologies, and project lifecycle support.

Engineering & Construction ("E&C"). Our E&C business segment leverages our operational and technical excellence as a global provider of engineering, procurement, construction ("EPC"), commissioning and maintenance services for oil and gas, refining, petrochemicals, and chemicals customers. E&C is managed on a geographic basis in order to facilitate close proximity to our customers and our people, while utilizing a consistent global execution strategy.

Government Services ("GS"). Our GS business segment focuses on long-term service contracts with annuity streams particularly for the governments of the United Kingdom, Australia and United States.

Non-strategic Business. Our Non-strategic Business segment represents the operations or activities which we intend to exit upon completion of existing contracts. This segment also included businesses we exited upon sale to third parties.

Other. Our Other business segment includes our corporate expenses and general and administrative expenses not allocated to the business segments above, and any future activities that do not individually meet the criteria for segment presentation.

Reportable segment performance is evaluated by our CODM using reportable segment gross profit (loss) which is defined as business segment revenues less the cost of revenues and includes business segment overhead directly attributable to the segment.

The following table presents revenues, gross profit (loss), equity in earnings of unconsolidated affiliates, impairment of goodwill, asset impairment and restructuring charges, capital expenditures, and depreciation and amortization by reporting segment.

Operations by Reportable Segment



	Years ended December 31,
Dollars in millions	2015			2014			2013
Revenues:
Technology & Consulting	$	324		$	353		$	330
Engineering & Construction	3,454			4,584			4,956
Government Services	663			638			931
Other	—			—			—
Subtotal	4,441			5,575			6,217
Non-strategic Business	655			791			997
Total	$	5,096		$	6,366		$	7,214
Gross profit (loss):
Technology & Consulting	$	77		$	53		$	69
Engineering & Construction	224			141			263
Government Services	(3		)	(32		)	90
Other	—			—			—
Subtotal	298			162			422
Non-strategic Business	27			(227		)	(5		)
Total	$	325		$	(65	)	$	417
Equity in earnings of unconsolidated affiliates:
Technology & Consulting	$	—		$	—		$	—
Engineering & Construction	104			90			76
Government Services	45			73			61
Other	—			—			—
Subtotal	149			163			137
Non-strategic Business	—			—			—
Total	$	149		$	163		$	137
Impairment of goodwill (Note 8):
Technology & Consulting	$	—		$	—		$	—
Engineering & Construction	—			(293		)	—
Government Services	—			—			—
Other	—			—			—
Subtotal	—			(293		)	—
Non-strategic Business	—			(153		)	—
Total	$	—		$	(446	)	$	—
Asset impairment and restructuring charges (Note 9):
Technology & Consulting	$	(10	)	$	(2	)	$	—
Engineering & Construction	(34		)	(24		)	—
Government Services	—			(5		)	—
Other	(22		)	(149		)	—
Subtotal	(66		)	(180		)	—
Non-strategic Business	(4		)	(34		)	—
Total	$	(70	)	$	(214	)	$	—
Segment operating income (loss):
Technology & Consulting	$	62		$	49		$	70
Engineering & Construction	295			(114		)	278
Government Services	37			25			145
Other	(140		)	(312		)	(181		)
Subtotal	254			(352		)	312
Non-strategic Business	56			(442		)	(4		)
Total	$	310		$	(794	)	$	308



	Years ended December 31,
Dollars in millions	2015		2014		2013
Capital expenditures:
Technology & Consulting	$	—	$	—	$	—
Engineering & Construction	6		19		10
Government Services	—		—		1
Other	4		34		67
Subtotal	10		53		78
Non-strategic Business	—		—		—
Total	$	10	$	53	$	78
Depreciation and amortization:
Technology & Consulting	$	2	$	2	$	2
Engineering & Construction	17		23		23
Government Services	6		8		9
Other	14		33		27
Subtotal	39		66		61
Non-strategic Business	—		6		7
Total	$	39	$	72	$	68

Prior Period Adjustment

During the second quarter of 2015, we corrected a cumulative error related to transactions between unconsolidated affiliates associated with our Mexican offshore maintenance joint venture within our E&C business segment. The cumulative error occurred throughout the period beginning in 2007 and through the first quarter of 2015 and resulted in a $15 million favorable impact to "equity in earnings of unconsolidated affiliates" on our consolidated statements of operations during the second quarter of 2015. We evaluated the cumulative error on both a quantitative and qualitative basis under the guidance of ASC 250 - Accounting Changes and Error Corrections. We determined that the cumulative impact of the error did not affect the trend of net income, cash flows or liquidity and therefore did not have a material impact to previously issued financial statements. Additionally, we determined that the cumulative impact of the error did not have a material impact to our consolidated financial statements for the current annual period.

Changes in Estimates

There are many factors, including, but not limited to, the availability and costs of resources, including labor, materials and equipment, productivity and weather, that can affect the accuracy of our cost estimates and ultimately our future profitability. In the past, we have realized both lower and higher than expected margins and have incurred losses as a result of unforeseen changes in our project costs. 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. However, historically, our estimates have been reasonably dependable regarding the recognition of revenues and profit on percentage-of-completion contracts.

Changes in estimates periodically result in the recognition of losses on a particular contract. We generally believe that the recognition of a contract as a loss contract is a significant change in estimate. Activity in our reserve for estimated losses on uncompleted contracts, which is a component of "other current liabilities" on our consolidated balance sheets, was as follows:



Dollars in millions	Reserve for Estimated Losses
Balance at December 31, 2013
Beginning Balance	$	56
Changes in estimates on loss projects	106
Change due to progress on loss projects	(53		)
Ending Balance	$	109
Balance at December 31, 2014
Changes in estimates on loss projects	177
Change due to progress on loss projects	(127		)
Ending Balance	$	159
Balance at December 31, 2015
Changes in estimates on loss projects	14
Change due to progress on loss projects	(113		)
Ending Balance	$	60

Included in the reserve for estimated losses on uncompleted contracts is $47 million as of December 31, 2015 primarily related to a power project in our Non-strategic Business segment. At December 31, 2014, the losses on uncompleted contracts included $80 million for two power projects. During 2015 and 2014, we recognized net unfavorable changes in estimates of losses on our power projects of $16 million and $80 million, respectively. Our estimates of revenues and costs at completion for the remaining power project has been, and may continue to be, impacted by our performance, the performance of our subcontractors, and the U.S. labor market. Our estimated loss at completion as of December 31, 2015 on this power project represents our best estimate based on current information. Actual results could differ from the estimates we have used to account for this power project as of December 31, 2015.

We have completed the seven Canadian pipe fabrication and module assembly projects in our E&C business segment and accordingly, have no remaining loss reserves for these projects as of December 31, 2015. Our reserve for estimated losses on uncompleted contracts as of December 31, 2014 included $53 million associated these seven projects. We recognized net favorable (net unfavorable) changes in our estimates of losses on these projects of $21 million, $(72) million, and $(132) million in 2015, 2014, and 2013, respectively.

Acquisitions, Dispositions and Other Transactions

In December 2015, we finalized the sale of our Infrastructure Americas business to Stantec Consulting Services Inc. for net cash proceeds, including working capital adjustments, of $18 million. The sale of this business within our Non-strategic Business segment is consistent with our restructuring plans announced in December 2014. The disposition resulted in a pretax gain of $7 million and is subject to future adjustments resulting from the finalization of the closing balance sheet. In addition, we sold our office facility located in Greenford, U.K, within our E&C business segment, for net cash proceeds of $33 million and our office facility located in Birmingham, Alabama, within our Non-strategic Business segment, for net cash proceeds of $6 million. See Note 7 to our consolidated financial statements for more information. The gain on these transactions is included under "gain on disposition of assets" on our consolidated statements of operations.

In September 2015, we executed agreements to establish two strategic relationships within our E&C business segment. See Note 10 to our consolidated financial statements for information related to the establishment of these new strategic relationships.

In June 2015, we sold our Building Group subsidiary to a subsidiary of Pernix Group, Inc., for net cash proceeds, including working capital adjustments, of $23 million. The sale of the Building Group within our Non-strategic Business segment is consistent with our restructuring plans announced in December 2014. The disposition resulted in a pre-tax gain of $28 million and is included under "gain on disposition of assets" on our consolidated statements of operations.

Subsequent Event

Subsequent to December 31, 2015, we acquired three technology companies from Chematur Technologies AB, a subsidiary of Connell Chemical Industry Co., Ltd. This acquisition will be reported within our T&C business segment in 2016.

Balance Sheet Information by Reportable Segment

Within KBR, not all assets are associated with specific business segments. Those assets specific to business segments include receivables, inventories, certain identified property, plant and equipment, equity in and advances to related companies and goodwill. The remaining assets, such as cash and the remaining property, plant and equipment, are considered to be shared among the business segments and are therefore reported in "Other."



	December 31,
Dollars in millions	2015		2014
Total assets:
Technology & Consulting	$	198	$	173
Engineering & Construction	1,656		2,008
Government Services	464		545
Other	1,060		1,182
Subtotal	3,378		3,908
Non-strategic Business	34		170
Total	$	3,412	$	4,078
Goodwill (Note 8):
Technology & Consulting	$	31	$	31
Engineering & Construction	233		233
Government Services	60		60
Other	—		—
Subtotal	324		324
Non-strategic Business	—		—
Total	$	324	$	324
Equity in and advances to related companies (Note 10):
Technology & Consulting	$	—	$	—
Engineering & Construction	255		119
Government Services	26		31
Other	—		—
Subtotal	281		150
Non-strategic Business	—		1
Total	$	281	$	151

Selected Geographic Information

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



	Years ended December 31,
Dollars in millions	2015		2014		2013
Revenues:
United States	$	2,212	$	2,324	$	2,470
Australia	836		1,380		1,768
Africa	164		251		593
Middle East	786		707		913
Europe	495		624		575
Canada	185		752		687
Latin America	131		111		74
Other	287		217		134
Total	$	5,096	$	6,366	$	7,214



	December 31,
Dollars in millions	2015		2014
Property, plant & equipment, net:
United States	$	73	$	115
United Kingdom	48		68
Other	48		64
Total	$	169	$	247