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Equity Method Investments and Variable Interest Entities | 12 Months Ended
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Dec. 31, 2021
Equity Method Investments and Joint Ventures [Abstract] |
Equity Method Investments and Variable Interest Entities | Equity Method Investments and Variable Interest Entities We conduct some of our operations through joint ventures, which operate through partnerships, corporations and undivided interests and other business forms and are principally accounted for using the equity method of accounting. Additionally, the majority of our joint ventures are VIEs. The following table presents a rollforward of our equity in and advances to unconsolidated affiliates:
Dollars in millions | 2021 |  | 2020
Beginning balance at January 1, | $ | 881 |  |  | $ | 846 |
Equity in earnings (losses) of unconsolidated affiliates | (170) |  |  | 30 |
Distributions of earnings of unconsolidated affiliates (a) | (72) |  |  | (38) |
Advances to (payments from) unconsolidated affiliates, net | (17) |  |  | (15) |
Investments (b) | 29 |  |  | 26 |
Impairment of equity method investments (c) | — |  |  | (19) |
Sale of equity method investment (d) | (39) |  |  | — |
Foreign currency translation adjustments | (10) |  |  | 50 |
Other (e) | (26) |  |  | 1 |
Balance at December 31, | $ | 576 |  |  | $ | 881 |
(a)The Brown & Root Industrial Services joint venture declared a distribution in the fourth quarter of 2021 that was not paid to KBR until January 2022. (b)Investments include $26 million and $24 million in funding contributions to JKC for years ended December 31, 2021, and 2020, respectively. (c)During the year ended December 31, 2020, as a result of the significant adverse economic and market conditions associated with the dislocation of the global energy market and COVID-19 pandemic, we recognized an impairment of $13 million related to our investment in a joint venture project located in the Middle East and a $6 million impairment related to other equity method investments. (d)During the third quarter of 2021, we sold our investment interest in the Middle East Petroleum Corporation (EBIC Ammonia project). The carrying value of our investment was $39 million. We received $43 million in cash proceeds and recorded a gain of $4 million, of which $1 million was attributable to our non-controlling interests. Subsequent to the receipt of the cash proceeds, we distributed the non-controlling interests' proportionate share of $15 million. (e)During year ended December 31, 2021, Other included unearned income related to the Ichthys LNG project, which was previously recorded outside of the equity method investment balance and will not be realized as a result of the settlement proceedings. See Note 6 "Unapproved Change Orders and Claims Against Clients and Estimated Recoveries of Claims Against Suppliers and Subcontractors" for additional information. Equity Method Investments Brown & Root Industrial Services Joint Venture. On September 30, 2015, we executed an agreement with Bernhard Capital Partners ("BCP"), a private equity firm, to establish the Brown & Root Industrial Services joint venture in North America. In connection with the formation of the joint venture, we contributed our Industrial Services Americas business and received cash consideration of $48 million and a 50% interest in the joint venture. As a result of the transaction, we no longer had a controlling interest in this Industrial Services business and deconsolidated it effective September 30, 2015. The Brown & Root Industrial Services joint venture offers engineering, construction and reliability-driven maintenance services for the refinery, petrochemical, chemical, specialty chemicals and fertilizer markets. Our interest in this venture is accounted for using the equity method and we have determined that the Brown & Root Industrial Services joint venture is not a VIE. Results from this joint venture are included in our STS business segment. Summarized financial information Summarized financial information for all jointly owned operations including VIEs that are accounted for using the equity method of accounting is as follows: Balance Sheet
| December 31,
Dollars in millions | 2021 |  | 2020
Current assets | $ | 2,382 |  |  | $ | 3,216 |
Noncurrent assets | 2,996 |  |  | 3,227 |
Total assets | $ | 5,378 |  |  | $ | 6,443 |
Current liabilities | $ | 955 |  |  | $ | 1,018 |
Noncurrent liabilities | 2,652 |  |  | 2,831 |
Total liabilities | $ | 3,607 |  |  | $ | 3,849 |
Statements of Operations
| Years ended December 31,
Dollars in millions | 2021 |  | 2020 |  | 2019
Revenues | $ | 1,294 |  |  | $ | 2,032 |  |  | $ | 2,592 |
Operating income | $ | (650) |  |  | $ | 54 |  |  | $ | 92 |
Net income | $ | (698) |  |  | $ | 28 |  |  | $ | 48 |
Unconsolidated Variable Interest Entities For the VIEs in which we participate, our maximum exposure to loss consists of our equity investment in the VIE and any amounts owed to us for services we may have provided to the VIE, reduced by any unearned revenues on the project. Our maximum exposure to loss may also include our obligation to fund our proportionate share of any future losses incurred. Where our performance and financial obligations are joint and several to the client with our joint venture partners, we may be further exposed to losses above our ownership interest in the joint venture. The following summarizes the total assets and total liabilities related to our unconsolidated VIEs in which we have a significant variable interest but are not the primary beneficiary.
| December 31, 2021
Dollars in millions | Total Assets |  | Total Liabilities |  |
Affinity joint venture (U.K. MFTS project) | $ | 10 |  |  | $ | 7 |  |  |
Aspire Defence Limited | $ | 65 |  |  | $ | 5 |  |  |
JKC joint venture (Ichthys LNG project) | $ | 354 |  |  | $ | 1 |  |  |
U.K. Road project joint ventures | $ | 42 |  |  | $ | — |  |  |
Middle East Petroleum Corporation (EBIC Ammonia project) | $ | — |  |  | $ | — |  |  |
Dollars in millions | December 31, 2020
Total Assets |  | Total Liabilities |  |
Affinity joint venture (U.K. MFTS project) | $ | 11 |  |  | $ | 9 |  |  |
Aspire Defence Limited | $ | 68 |  |  | $ | 5 |  |  |
JKC joint venture (Ichthys LNG project) | $ | 606 |  |  | $ | 44 |  |  |
U.K. Road project joint ventures | $ | 59 |  |  | $ | — |  |  |
Middle East Petroleum Corporation (EBIC Ammonia project) | $ | 31 |  |  | $ | 1 |  |  |
Affinity. In February 2016, Affinity, a joint venture between KBR and Elbit Systems, was awarded a service contract by a third party to procure, operate and maintain aircraft and aircraft-related assets over an 18-year contract period, in support of the UKMFTS project. The contract has been determined to contain a leasing arrangement and various other services between the joint venture and the customer. KBR owns a 50% interest in Affinity. In addition, KBR owns a 50% interest in the two joint ventures, Affinity Capital Works and Affinity Flying Services, which provide procurement, operations and management support services under subcontracts with Affinity. The remaining 50% interest in these entities is held by Elbit Systems. KBR has provided its proportionate share of certain limited financial and performance guarantees in support of the partners' contractual obligations. The three project-related entities are VIEs; however, KBR is not the primary beneficiary of any of these entities. We account for KBR's interests in each entity using the equity method of accounting within our GS business segment. The project is funded through KBR and Elbit Systems provided equity, subordinated debt and non-recourse third party commercial bank debt. Our maximum exposure to loss includes our equity investments in the project entities as of December 31, 2021. Aspire Defence project. In April 2006, Aspire Defence Limited, a joint venture between KBR and two other project sponsors, was awarded a privately financed project contract by the U.K. MoD to upgrade and provide a range of services to the British Army’s garrisons at Aldershot and around Salisbury Plain in the U.K. In addition to a package of ongoing services to be delivered over 35 years, the project included a nine-year construction program to improve soldiers’ single living, technical and administrative accommodations, along with leisure and recreational facilities. The initial construction program was completed in 2014. In late 2016, Aspire Defence Limited was awarded a significant contract variation, expanding services to be provided under the existing contract including new construction, program management services and facilities maintenance across the garrisons. Aspire Defence Limited manages the existing properties and is responsible for design, refurbishment, construction and integration of new and modernized facilities. We indirectly own a 45% interest in Aspire Defence Limited, the contracting company that is the holder of the 35-year concession contract. The project is funded through equity and subordinated debt provided by the project sponsors and the issuance of publicly-held senior bonds which are nonrecourse to KBR and the other project sponsors. The contracting company is a VIE; however, we are not the primary beneficiary of this entity as of December 31, 2018. We account for our interest in Aspire Defence Limited using the equity method of accounting. As of December 31, 2021, included in our GS segment, our assets and liabilities associated with our investment in this project, within our consolidated balance sheets, were $65 million and $5 million, respectively. Our maximum exposure to loss includes our equity investments in the project entities and amounts payable to us for services provided to these entities as of December 31, 2021. Prior to January 15, 2018, we also owned a 50% interest in the joint ventures that provide the construction and the related support services under subcontract arrangements with Aspire Defence Limited. On January 15, 2018, Carillion plc, our U.K. partner in these joint ventures, entered into compulsory liquidation. As a result, KBR began consolidating the subcontracting entities in its financial statements effective January 15, 2018. Ichthys LNG project. In January 2012, we formed a joint venture to provide EPC services to construct the Ichthys Onshore LNG Export Facility in Darwin, Australia ("Ichthys LNG project"). The project is being executed through two entities (collectively, "JKC"), which are VIEs, in which we own a 30% equity interest. We account for our investments using the equity method of accounting. At December 31, 2021, our assets and liabilities associated with our investment in JKC recorded in our consolidated balance sheets under our STS business segment were $354 million and $1 million, respectively. These assets include expected cost recoveries from unapproved change orders and claims as well as estimated recoveries of claims against suppliers and subcontractors arising from issues related to changes to the work scope, delays and lower than planned subcontractor activity. See Note 6 to our consolidated financial statements for further discussion on the significant contingencies as well as unapproved change orders and claims related to this project. U.K. Road projects. We are involved in four privately financed projects, executed through joint ventures, to design, build, operate and maintain roadways for certain government agencies in the U.K. We have a 25% ownership interest in each of these joint ventures and account for them using the equity method of accounting. The joint ventures have obtained financing through third parties that is nonrecourse to the joint venture partners. These joint ventures are VIEs; however, we are not the primary beneficiary. At December 31, 2021, included in our GS business segment, our assets and liabilities associated with our investment in this project recorded in our consolidated balance sheets were $42 million and none, respectively. Our maximum exposure to loss includes our equity investments in these ventures. During the fourth quarter of 2021, we entered into an agreement to sell our interest in three of the U.K. Road projects. The settlement date of this transaction is expected to occur in the first quarter of 2022. EBIC Ammonia project. Prior to the third quarter of 2021, we had an investment in a development corporation that has an indirect interest in the Egypt Basic Industries Corporation ("EBIC") ammonia plant project located in Egypt. We performed the EPC work for the project and completed our operations and maintenance services for the facility in the first half of 2012. Historically, we owned 65% of this development corporation and consolidated it for financial reporting purposes. The development corporation owns a 25% ownership interest in a company that consolidates the ammonia plant which is considered a VIE. The development corporation accounts for its investment in the company using the equity method of accounting. The VIE is funded through debt and equity. Indebtedness of EBIC under its debt agreement was nonrecourse to us. We were not the primary beneficiary of the VIE. During the third quarter of 2021, we sold our investment interest in the EBIC Ammonia project. Related Party Transactions We often provide engineering, construction management and other subcontractor services to our unconsolidated joint ventures and our revenues include amounts related to these services. For the years ended December 31, 2021, 2020 and 2019, our revenues included $361 million, $511 million and $684 million, respectively, related to services we provided to our joint ventures, primarily the Aspire Defence Limited joint venture within our GS business segment. Amounts included in our consolidated balance sheets related to services we provided to our unconsolidated joint ventures and undistributed earnings for the years ended December 31, 2021 and 2020 are as follows:
| December 31,
Dollars in millions | 2021 |  | 2020
Accounts receivable, net of allowance for doubtful accounts | $ | 35 |  |  | $ | 83 |
Contract assets (a) | $ | 2 |  |  | $ | 2 |
Other current assets | $ | 25 |  |  | $ | — |
Contract liabilities (a) | $ | 5 |  |  | $ | 53 |
(a)Reflects contract assets and contract liabilities primarily related to joint ventures within our STS business segment. Consolidated Variable Interest Entities We consolidate VIEs if we determine we are the primary beneficiary of the project entity because we control the activities that most significantly impact the economic performance of the entity. The following is a summary of the significant VIEs where we are the primary beneficiary:
Dollars in millions | December 31, 2021
Total Assets |  | Total Liabilities
Fasttrax Limited (Fasttrax project) | $ | 23 |  |  | $ | 8 |
Aspire Defence subcontracting entities (Aspire Defence project) | $ | 439 |  |  | $ | 245 |
Dollars in millions | December 31, 2020
Total Assets |  | Total Liabilities
Fasttrax Limited (Fasttrax project) | $ | 45 |  |  | $ | 18 |
Aspire Defence subcontracting entities (Aspire Defence project) | $ | 448 |  |  | $ | 205 |
Fasttrax Limited project. In December 2001, the Fasttrax joint venture ("Fasttrax") was created to provide to the U.K. MoD a fleet of 91 new HETs capable of carrying a 72-ton Challenger II tank. Fasttrax owns, operates and maintains the HET fleet and provides heavy equipment transportation services to the British Army. The purchase of the assets was completed in 2004, and the operating and service contracts related to the assets extend through 2023. Fasttrax's entity structure includes a parent entity and its 100% owned subsidiary, Fasttrax Limited. KBR and its partner each own a 50% interest in the parent entity, which is considered a VIE. We determined that we are the primary beneficiary of this project entity because we control the activities that most significantly impact economic performance of the entity. Therefore, we consolidate this VIE. The purchase of the HETs by the joint venture was financed through two series of bonds secured by the assets of Fasttrax Limited and a bridge loan. Assets collateralizing Fasttrax’s senior bonds include cash and equivalents of $6 million and net property, plant and equipment of approximately $13 million as of December 31, 2021. See Note 12 to our consolidated financial statements for further details regarding our nonrecourse project-finance debt of this VIE consolidated by KBR, including the total amount of debt outstanding at December 31, 2021. Aspire Defence project (subcontracting entities). As discussed above, we assumed operational management of the Aspire Defence subcontracting entities in January 2018. These subcontracting entities exclusively provide the construction and the related support services under subcontract arrangements with Aspire Defence Limited. These entities are considered VIEs, and, because we are the primary beneficiary, they are consolidated for financial reporting purposes.

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- Definition Disclosure of variable interest entities (VIE), including, but not limited to the nature, purpose, size, and activities of the VIE, the carrying amount and classification of consolidated assets that are collateral for the VIE's obligations, lack of recourse if creditors (or beneficial interest holders) of a consolidated VIE have no recourse to the general credit of the primary beneficiary. An enterprise that holds a significant variable interest in a VIE but is not the primary beneficiary may disclose the nature of its involvement with the VIE and when that involvement began, the nature, purpose, size, and activities of the VIE and the enterprise's maximum exposure to loss as a result of its involvement with the VIE. Equity Method Investment represents disclosure of information related to equity method investments in common stock. The information which should be considered for disclosure includes: (a) the name of each investee or group of investments for which combined disclosure is appropriate, (2) the percentage ownership of common stock, (3) the difference, if any, between the carrying amount of an investment and the value of the underlying equity in the net assets and the accounting treatment of difference, if any, and (4) the aggregate value of each identified investment based on its quoted market price, if available. + References No definition available. + Details
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