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Fair Value of Financial Instruments and Risk Management | 9 Months Ended
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Oct. 03, 2025
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.
|  |  | October 3, 2025 |  | January 3, 2025
Dollars in millions |  |  | Carrying Value |  | Fair Value |  | Carrying Value |  | Fair Value
Liabilities (including current maturities): |  |  |  |  |  |  |  |  |
Term Loan A | Level 2 |  | $ | 995 |  |  | $ | 995 |  |  | $ | 1,006 |  |  | $ | 1,006 |
Term Loan B | Level 2 |  | 985 |  |  | 987 |  |  | 993 |  |  | 996 |
Senior Notes | Level 2 |  | 250 |  |  | 247 |  |  | 250 |  |  | 240 |
Revolver | Level 2 |  | 395 |  |  | 395 |  |  | 345 |  |  | 345 |
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 October 3, 2025, the gross notional value of our foreign currency exchange forwards and option contracts used to hedge balance sheet and operational exposures was $81 million, all of which had durations of 54 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 October 3, 2025, and January 3, 2025. The fair values of these derivatives are considered Level 2 under ASC 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 (expense) on our condensed consolidated statements of operations.
| Three Months Ended |  | Nine Months Ended
| October 3, |  | September 27, |  | October 3, |  | September 27,
Dollars in millions | 2025 |  | 2024 |  | 2025 |  | 2024
Balance Sheet Hedges - Fair Value | $ | — |  |  | $ | (1) |  |  | $ | (2) |  |  | $ | (2) |
Balance Sheet Position - Remeasurement | 1 |  |  | (2) |  |  | (2) |  |  | (3) |
Net gain (loss) | $ | 1 |  |  | $ | (3) |  |  | $ | (4) |  |  | $ | (5) |
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. During the nine months ended October 3, 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. Our portfolio of interest rate swaps consists of the following:
Dollars in millions | Notional Amount at October 3, 2025* |  | Pay Fixed Rate (Weighted Average) |  | Receive Variable Rate |  | Settlement and Termination
March 2020 Interest Rate Swaps | $ | 400 |  |  | 0.89 | % |  | Term SOFR |  | Monthly through January 2027
September 2022 Interest Rate Swaps | $ | 350 |  |  | 3.43 | % |  | Term SOFR |  | Monthly through January 2027
March 2023 Interest Rate Swaps | $ | 205 |  |  | 3.61 | % |  | Term SOFR |  | Monthly through January 2027
March 2023 Amortizing Interest Rate Swaps | £ | 105 |  |  | 3.81 | % |  | Term SONIA |  | Monthly through November 2026
September 2024 Interest Rate Swaps | $ | 200 |  |  | 3.27 | % |  | Term SOFR |  | Monthly through August 2027
April 2025 Interest Rate Swaps | $ | 270 |  |  | 3.39 | % |  | Term SOFR |  | Monthly through August 2027
April 2025 Forward Interest Rate Swaps | $ | 150 |  |  | 3.38 | % |  | Term SOFR |  | Monthly 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 October 3, 2025 was a $13 million net asset, of which $13 million is included in other current assets, $3 million is included in other assets and $3 million is included in other liabilities. The unrealized net gain on these interest rate swaps was $13 million and is included in AOCL as of October 3, 2025. The fair value of the interest rate swaps at January 3, 2025 was a $37 million net asset, of which $19 million is included in other current assets and $18 million is included in other assets. The unrealized net gains on these interest rate swaps was $37 million and is included in AOCL as of January 3, 2025. 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 nine months ended October 3, 2025, we derecognized $1,937 million of accounts receivables from the balance sheet under these agreements, of which certain receivables totaling $1,897 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 (expense) on the condensed consolidated statements of operations. Activity for third-party financial institutions consisted of the following:
| Nine Months Ended
Dollars in millions | October 3, 2025 |  | September 27, 2024
Beginning balance | $ | 106 |  |  | $ | 135 |
Sale of receivables | 1,937 |  |  | 2,324 |
Settlement of receivables | (1,978) |  |  | (2,318) |
Cash collected, not yet remitted | — |  |  | (39) |
Outstanding balances sold to financial institutions | $ | 65 |  |  | $ | 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. KBR's aggregate investment in Mura Technology ("Mura") is approximately 17%. The carrying value of our investment in Mura was $135 million and $126 million at October 3, 2025 and January 3, 2025, respectively.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (bbb)(1) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 107 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-107 Reference 3: http://www.xbrl.org/2003/role/exampleRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 100 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482078/820-10-55-100 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2E -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2E Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 6A -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-6A Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org/1943274/2147482106/820-10-50-2 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 940 -SubTopic 820 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478119/940-820-50-1 + Details
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