Business Context and Reporting Period
This Form 8-K Current Report was filed by KBR, Inc. on April 9, 2007, with the earliest event reported on that date. The filing addresses corporate actions taken immediately following the separation of KBR, Inc. from Halliburton Company. The primary focus is the conversion of outstanding equity awards and the adoption of new executive compensation plans to preserve benefits previously administered under Halliburton plans.
Key Financial Metrics
This filing does not contain standard financial performance metrics such as revenue, profit, cash flow, margins, debt, or liquidity. The document is limited to reporting on executive compensation arrangements and equity award conversions.
Material Changes and Compensation Conversions
On April 9, 2007, outstanding awards under Halliburton's 1993 Stock and Incentive Plan granted to KBR employees were converted into awards under KBR's Transitional Stock Adjustment Plan. This conversion affected options and restricted stock for several executive officers:
- William P. Utt (CEO): Received 38,774 shares of KBR restricted stock.
- Cedric W. Burgher (CFO): Received 16,156 shares of KBR restricted stock and options to purchase 8,078 shares (exercise price $18.31).
- John L. Rose (EVP, Energy and Chemicals): Received 25,049 shares of KBR restricted stock and options to purchase 13,477 shares across multiple grants.
- Bruce A. Stanski (EVP, Government and Infrastructure): Received 30,348 shares of KBR restricted stock and options to purchase 62,352 shares across multiple grants.
- John Gann, Jr. (VP and Chief Accounting Officer): Received 22,619 shares of KBR restricted stock and options to purchase 15,080 shares.
Additionally, units under the Halliburton Dresser Industries, Inc. Deferred Compensation Plan were converted to the KBR Dresser Deferred Compensation Plan. John L. Rose's converted units equaled approximately 38,934 shares of KBR common stock.
Adoption of New Compensation Plans
On April 13, 2007, the Board of Directors adopted four new plans effective April 5, 2007, to replace Halliburton-administered plans:
- KBR Dresser Plan: A "frozen" deferred compensation plan for three former Dresser Industries employees. Benefits are fully vested and payable in cash or stock upon termination, with installment options over 5 to 20 years.
- KBR Supplemental Executive Retirement Plan (SERP): Provides cash benefits to selected officers. Pre-2005 amounts are fully vested; 2005 or later amounts vest after five consecutive years. Interest is credited at 5% pre-termination and 10% post-termination. Payout is a single lump sum.
- KBR Benefit Restoration Plan (BRP): A nonqualified plan to restore benefits reduced by Internal Revenue Code limits or Section 162(m) caps. It earns interest at 10% per annum.
- KBR Elective Deferral Plan (EDP): A voluntary nonqualified plan allowing highly compensated employees to defer base salary and incentive compensation.
Investor Verification Checklist
- Verify the specific vesting schedules for the converted restricted stock (20% per year over 5 years for awards on/after Jan 1, 2003; 10% per year over 10 years for prior awards).
- Confirm the exercise prices and expiration dates for the converted stock options listed for each executive officer.
- Review the full text of the KBR SERP, BRP, and EDP (Exhibits 10.3, 10.4, and 10.5) to understand specific eligibility criteria and payout restrictions.
- Note that the KBR Dresser Plan is frozen, meaning no new participants or deferrals are allowed.