JACOBS SOLUTIONS INC. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. General The purpose of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is to provide a narrative analysis explaining the reasons for material changes in the Company’s (i) financial condition from the most recent fiscal year-end to June 26, 2020 and (ii) results of operations during the current fiscal period(s) as compared to the corresponding period(s) of the preceding fiscal year. In order to better understand such changes, readers of this MD&A should also read: • The discussion of the critical and significant accounting policies used by the Company in preparing its consolidated financial statements. The most current discussion of our critical accounting policies appears in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2019 Form 10-K, and the most current discussion of our significant accounting policies appears in Note 2- Significant Accounting Polices in Notes to Consolidated Financial Statements of our 2019 Form 10-K. See also Note 13- Revenue Accounting for Contracts and Adoption of ASC 606 for a discussion of our updated policies related to revenue recognition; • The Company’s fiscal 2019 audited consolidated financial statements and notes thereto included in our 2019 Form 10-K; and • Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2019 Form 10-K. In addition to historical information, this MD&A and other parts of this Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that do not directly relate to any historical or current fact. When used herein, words such as “expects,” “anticipates,” “believes,” “seeks,” “estimates,” “plans,” “intends,” “future,” “will,” “would,” “could,” “can,” “may,” and similar words are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements we make concerning the potential continued effects of the COVID-19 pandemic on our business, financial condition and results of operations and our expectations as to our future growth, prospects, financial outlook and business strategy for fiscal 2020 or future fiscal years. You should not place undue reliance on these forward-looking statements. Although such statements are based on management’s current estimates and expectations, and/or currently available competitive, financial, and economic data, forward-looking statements are inherently uncertain, and you should not place undue reliance on such statements as actual results may differ materially. We caution the reader that there are a variety of risks, uncertainties and other factors that could cause actual results to differ materially from what is contained, projected or implied by our forward-looking statements. Such factors include the magnitude, timing, duration and ultimate impact of the COVID-19 pandemic and any resulting economic downturn on our results, prospects and opportunities; the timeline for easing or removing “shelter-in-place”, “stay-at-home”, social distancing, travel restrictions and similar orders, measures or restrictions imposed by governments and health officials in response to the pandemic, or if such orders, measures or restrictions are re-imposed after being lifted or eased, including as a result of increases in cases of COVID-19; and the development, effectiveness and distribution of vaccines or treatments for COVID-19. The impact of such matters includes, but is not limited to, the possible reduction in demand for certain of our services and the delay or abandonment of ongoing or anticipated projects due to the financial condition of our clients and suppliers or to governmental budget constraints; the inability of our clients to meet their payment obligations in a timely manner or at all; potential issues and risks related to a significant portion of our employees working remotely; illness, travel restrictions and other workforce disruptions that could negatively affect our supply chain and our ability to timely and satisfactorily complete our clients’ projects; difficulties associated with hiring additional employees or replacing any furloughed employees; increased volatility in the capital markets that may affect our ability to access sources of liquidity on acceptable pricing or borrowing terms or at all; and the inability of governments in certain of the countries in which we operate to effectively mitigate the financial or other impacts of the COVID-19 pandemic on their economies and workforces and our operations therein. The foregoing factors and potential future developments are inherently uncertain, unpredictable and, in many cases, beyond our control. For a description of these and additional factors that may occur that could cause actual results to differ from our forward-looking statements, see those listed and discussed in Item 1A, Risk Factors included in our 2019 Form 10-K and this Quarterly Report on Form 10-Q. We undertake no obligation to release publicly any revisions or updates to any forward-looking statements. We encourage you to read carefully the risk factors, as well as the financial and business disclosures contained in this Quarterly Report on Form 10-Q and in other documents we file from time to time with the United States Securities and Exchange Commission ("SEC"). Page 37 Impact of COVID-19 on Our Business On March 11, 2020, the World Health Organization characterized the outbreak of the novel coronavirus (“COVID-19”) as a global pandemic and recommended certain containment and mitigation measures. On March 13, 2020, the United States declared a national emergency concerning the outbreak, and the vast majority of states and many municipalities have declared public health emergencies or taken similar actions. Along with these declarations, there were extraordinary and wide-ranging actions taken by international, federal, state and local public health and governmental authorities to contain and combat outbreaks of COVID-19 in regions across the United States and around the world. These actions included quarantines and “stay-at-home” or “shelter-in-place” orders, social distancing measures, travel restrictions, school closures and similar mandates for many individuals in order to substantially restrict daily activities and orders for many businesses to curtail or cease normal operations unless their work is critical, essential or life-sustaining. A lthough certain jurisdictions have subsequently taken steps to lift or ease such restrictions to various degrees, some jurisdictions have subsequently reversed such lifting or easing in response to increased cases of COVID-19. In addition, governments and central banks in the United States and other countries in which we operate have enacted fiscal and monetary stimulus and assistance measures to counteract the economic impacts of COVID-19. We are a company operating in a critical infrastructure industry, as defined by the U.S. Department of Homeland Security. Consistent with international, federal, state and local requirements to date, we continue to materially operate. In addition, demand for certain of our services, including those supporting health care relief efforts relating to COVID-19, has increased, and could continue to increase, as a result of COVID-19. Notwithstanding our continued critical operations, COVID-19 has negatively impacted our business, and may have further adverse impacts, on our continued operations, including those listed and discussed in Item 1A, Risk Factors included in this Quarterly Report on Form 10-Q. Accordingly, we have reduced spending broadly across the Company, only proceeding with operating and capital spending that is critical. We have also ceased all non-essential hiring and reduced discretionary expenses, including certain employee benefits and compensation. Looking ahead, we have developed contingency plans to reduce costs further if the situation further deteriorates or lasts longer than current expectations. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be necessary or appropriate for the health and safety of employees, contractors, customers, suppliers or others or as required by international, federal, state or local authorities. Based on current estimates, we expect the impact of COVID-19 to continue in the fourth fiscal quarter of 2020, although to a lesser degree than what was seen in the third fiscal quarter of 2020. These impacts could also continue into fiscal 2021. Although this business disruption is expected to be temporary, significant uncertainty exists concerning the magnitude, duration and impacts of the COVID-19 pandemic, including with regard to the effects on our customers and customer demand for our services. Accordingly, actual results for the fourth fiscal quarter of 2020 and future fiscal periods could differ materially versus current expectations and current results and financial condition discussed herein may not be indicative of future operating results and trends. For a discussion of risks and uncertainties related to COVID-19, including the potential impacts on our business, financial condition and results of operations, see “Part II - Item 1A - Risk Factors”. Business Overview At Jacobs, we’re challenging today to reinvent tomorrow by solving the world’s most critical problems for thriving cities, resilient environments, mission-critical outcomes, operational advancement, scientific discovery and cutting-edge manufacturing, turning abstract ideas into realities that transform the world for good. Leveraging a talent force of nearly 55,000, Jacobs provides a full spectrum of professional services including consulting, technical, scientific and project delivery for the government and private sector. The Company’s deep global domain knowledge - applied together with the latest advances in technology - are why customers large and small choose to partner with Jacobs. We operate in two lines of business: Critical Mission Solutions (formerly Aerospace, Technology and Nuclear) and People & Places Solutions (formerly Buildings, Infrastructure and Advanced Facilities). These new names better reflect outcome-focused solutions for our customers and the changes have no impact on reported financial statements, line of business leadership or customer relationships. After spending three years transforming our portfolio and setting the foundation to get us where we are today, we launched a three-year accelerated profitable growth strategy at our Investor Day in February 2019, focused on innovation and continued transformation to build upon our position as the leading solutions provider for our clients. This transformation included the $3.2 billion acquisition of CH2M and the $3.4 billion divestiture of the Company's energy, chemicals and resources business. Our acquisitions of KeyW and John Wood Group’s nuclear business will further position us as a leader in high-value government services and technology-enabled solutions, enhancing our portfolio by adding Page 38 intellectual property-driven technology with unique proprietary C5ISR (command, control, communications, computer, combat systems, intelligence, surveillance and reconnaissance) rapid solutions, and amplifying Jacobs’ position as a Tier-1 global nuclear services provider. We have altered the course of Jacobs’ future and are now focused on broadening our leadership in high growth sectors. As part of our strategy, our new brand was created from an understanding of where we’ve been, what’s true to our culture and our strategy going forward. Central to it is our new tagline: Challenging today. Reinventing tomorrow. Signaling our transition from an engineering and construction company to a global technology-forward solutions company, we have a new look, and we plan to change our name to Jacobs Solutions Inc. Revenue by Type ( Q3 FY 2020 ) 1 1 Due to COVID-19 and the actions taken by governmental authorities and others related thereto, some of the information provided in this summary relating to sources of revenue could be substantially different in the fourth quarter of fiscal 2020 and subsequent periods. Lines of Business The Company's two operating segments and global lines of business ("LOBs") are as follows: (i) Critical Mission Solutions and (ii) People & Places Solutions; with the previous Energy, Chemicals and Resources ("ECR") line of business now reported as discontinued operations. Critical Mission Solutions (CMS) Our Critical Mission Solutions line of business provides a full spectrum of cybersecurity, data analytics, software application development, enterprise and mission IT, systems integration and other highly technical consulting solutions to government agencies as well as selective aerospace, automotive and telecom customers. Our representative clients include the U.S. Department of Defense (DoD), the U.S. Special Operations Command (USSOCOM), the U.S. Intelligence Community, NASA, the U.S. Department of Energy (DoE), Ministry of Defence in the U.K. Nuclear Decommissioning Authority (NDA), and the Australian Department of Defence, as well as private sector customers mainly in the automotive and telecom sectors. Serving mission-critical industry sectors Critical Mission Solutions serves broad sectors, including U.S. government services, cybersecurity, nuclear, commercial, and international sectors. The U.S. government is the world’s largest buyer of technical services, and in fiscal 2019, approximately 77% of CMS’s revenue was earned from serving the DoD, Intelligence Community and civil governmental entities. Page 39 Trends affecting our government clients include electronic and cyber warfare, IT modernization, space exploration and intelligence, defense systems and intelligent asset management, which are driving demand for our highly technical solutions. Attacks by foreign entities and insider threats highlight potential cyber defense vulnerabilities. Another trend we are witnessing is an increase in the capabilities of unmanned aircraft and hypersonic weapons, which is impacting both offensive and defensive spending priorities among our clients and is a driver for next generation solutions such as C5ISR (command, control, communications, computer, combat systems, intelligence, surveillance and reconnaissance) and advanced aeronautical testing, respectively. We are also seeing an increase in space exploration initiatives both from the U.S. government, such as NASA’s Artemis program to return to the moon in 2024, as well as the commercial sector. Within the Nuclear sector, our customers have decades-long initiatives to manage, upgrade, decommission and remediate existing nuclear weapons and energy infrastructure. Leveraging our base market of offering valued technical services to U.S. government customers, CMS also serves commercial and international mar kets. In fiscal 2019, approximately 12% of CMS’s r evenue was from various U.S. commercial sectors, including the telecommunications market, which anticipates a large cellular infrastructure build-out from 4G to 5G technology. And like our government facility-based clients, our commercial manufacturing clients are seeking ways to reduce maintenance costs and optimize their facilities with network connected facilities and equipment to optimize operational systems, which we refer to as Intelligent Asset Management. Our international customers, which accounted for 11% of fiscal 2019 revenue, have also increased demand for our IT and cybersecurity solutions and nuclear projects, and the U.K. Ministry of Defence continues to focus on accelerating its strategic innovative and technology focused initiatives. Leveraging strong domain expertise to deliver solutions CMS brings domain-specific capability and cross-market innovations in each of the above sectors by leveraging six core capability groups. • I nformation Technology Services . Across various business units in CMS, we provide a wide range of software development and enterprise IT solutions. We develop, modify and maintain software solutions and complex systems. This service includes a broad array of lifecycle services, including requirements analysis, design, integration, testing, maintenance, quality assurance and documentation management. Our software activities support all major methodologies, including Agile, DevSecOps and other hybrid methodologies. For our enterprise IT capability, we develop, implement and sustain enterprise information technology systems, with a focus on improving mission performance, increasing security and reducing cost for our customers. Solutions typically include IT service management, data center consolidation, network operations, enterprise architecture, mobile computing, cloud computing and migration, software, infrastructure and platform as a service (SaaS, IaaS and PaaS), and data collection and analytics. • Cybersecurity and Data Analytics . With our recent acquisition of KeyW, CMS offers a full suite of cyber services for its government and commercial clients, including defensive cyber operations and training, offensive cyber operations, cloud and data analytics, threat intelligence, intelligence analysis, incident response and forensics, software and infrastructure security engineering, computer forensics and exploitation and information technology-operational technology (IT-OT) convergence services. • C5ISR (Command, Control, Communications, Computers, Combat Systems, Intelligence, Surveillance and Reconnaissance) . CMS is a leader in the design, development, analysis, implementation and support of C5ISR systems and technology in any environment, including land, sea, air, space and cyber domains. We provide advanced solutions for collecting, processing, exploiting and disseminating geospatial intelligence for the U.S. and Allied Intelligence Communities and Special Forces organizations. Core capabilities include: imaging systems, radar systems, precision geo-location products, custom packaging and microelectronics and customizable tagging, tracking and locating devices. • Technical Services . We provide a broad range of technical consulting services to our government and commercial clients, including: systems integration, specialized propulsion, avionics, electrical, materials, aerodynamics, manufacturing processes modeling and simulation, testing and evaluation, scientific research, intelligent asset management, program management and consulting. NASA is one our major government customers in the U.S., where we provide a wide range of technology services. For our Page 40 telecommunications customers, we provide permitting, site planning and engineering to enable the development of wireline and wireless communications including the development of 5G small cell sites. • Facility Engineering and Operations . We provide services for advanced technical structures and systems, including flight/launch facilities, R&D facilities, test facilities and military range facilities. Customers also engage us to operate, maintain and provide technical services for these facilities and systems over their lives. We also provide sustainment and technical services for facility-oriented clients including for the automotive industry where we provide highly technical aerodynamic, climatic, altitude and acoustic solutions for our customer research and development operations. • Nuclear Solutions . We provide support across the nuclear energy life-cycle, including operational site management, program management and research and consulting, mainly to the U.S. Department of Energy (DoE) and the Office for Nuclear Regulation (“ONR”) and NDA with the U.K. government. Applying internally-developed technology Across multiple businesses within CMS we license internally developed technology such as: • KeyRadar® : The acquisition of KeyW brought numerous internally developed technologies, including KeyRadar, a scalable, software-defined synthetic aperture radar that can be configured to address a variety of missions, ranging from foliage penetration to long-range maritime domain awareness or long-range moving target detection. • Ginkgo : Ginkgo is the only virtual learning environment specifically created for cybersecurity training. Designed by experienced cybersecurity instructors at CMS’s Parrot Labs, Ginkgo offers a complete solution for implementing hands-on IT and cybersecurity training for both local and distance learning environments on desktops, tablets, and other mobile devices. • TITAN TM : With the exponential growth of information being harvested, deriving meaningful insights from data collecting can be challenging for organizations. TITAN is a suite of solutions (including Graph Database, Elastic Stack, and SocTraq) that leverages open-source technology to filter out noise to find the real needle in the haystack of threats, offering real-time detection and alerting capabilities for high-value asset and mission critical systems. • SOCTRAQ : SOCTRAQ is a next-generation component of the larger TITAN cyber data platform that aids our federal clients in the automation of cybersecurity found in a security operations center (SOC). The technology is a real-time threat detection and alerting heads-up display run on a client’s computer to provide incident detection, recommended response actions, and case management. Features include alert visualization, depiction of threat-chain, and adaptive machine learning. People & Places Solutions (P&PS) Jacobs' People & Places Solutions line of business provides end-to-end solutions for our clients’ most complex projects - whether connected mobility, water, smart cities, advanced manufacturing or the environment. In doing so, we employ data analytics, artificial intelligence and automation, and software development to enable technology and digitally-driven consulting, planning, architecture, engineering, and implementation, as well as long-term operation of advanced facilities and infrastructure. Solutions may be delivered as standalone engagements or through comprehensive program management solutions that integrate disparate workstreams to yield additional benefits not attainable through project-by-project implementation. Our clients include national, state and local government in the U.S., Europe, U.K., Middle East, Australia, New Zealand and Asia, as well as the private sector throughout the world. Serving broad industry sectors that support people and places Environmental and infrastructure resilience, urbanization, digital transformation and the convergence of information and operational technology (IT/OT) are driving new infrastructure requirements and opportunities for our clients. For example, an airport is no longer simply aviation infrastructure but is now a smart city with extensive operational, cybersecurity and autonomous mobility requirements. Master planning for a city now requires advanced analytics to plan for the adaptation of next-generation mobility as well as revenue generating fiber infrastructure. Page 41 Furthermore, the future of nearly all water infrastructure will be highly technology-enabled, leveraging solutions with digital twins, predictive analytics and smart metering technology. This increase in technology requirements is a key factor in our organic growth strategy as well as our recent acquisitions and divestitures. Moreover, our business model is evolving to now being a provider of digitally-enabled solutions to our infrastructure clients with less exposure to craft construction services. Our focus on five core sectors of Transportation, Water, Built Environment, Environmental and Advanced Facilities provides us with the unique opportunity to leverage expertise across all sectors to provide end-to-end connected solutions for our client’s most complex projects. We are executing complex city solutions that pull expertise from all markets, fused with digital expertise, for major developments in places like London, Dubai, Sydney, India and the United States. Leveraging global platform to deliver integrated solutions to our customers One of our key differentiators is our global integrated delivery model, which harnesses deep domain expertise from our global technology and solution organization that is leveraged with the benefits of scale when we focus the world’s best talent to deliver differentiated solutions and value to our clients. • Within transportation , we provide sustainable solutions to plan, develop, finance, design and engineer, construct, operate and maintain, next generation mobility across all modes, including highway, bridge, rail and transit, aviation, port and maritime infrastructure. For example, we do this by assessing the impact of autonomous vehicles on roadways and cities for transportation agencies, engineering and specifying vehicles for mass-transit, consulting services for digital fare payment systems, program management of the largest airport developments, designing cutting edge automated container terminals and ports infrastructure and utilizing digital data to develop cross modal mobility solutions. Our customers include the world’s largest transportation agencies as well as private shipping and logistics companies worldwide, including the multi-modal Port Authority of New York and New Jersey, Transport for London, and Etihad Rail. • Water is one of the most precious resources in the world, and extreme weather events are exacerbating supply and demand issues with drought, desertification and flooding at the same time population growth and industrialization are increasing demands. We provide solutions across water and wastewater treatment, water reuse, and water resources such as the deployment of next generation smart metering, digital twin technology and highly technical consulting, engineering, design-build and operation of complex water systems. We support our customers on some of the world’s largest water infrastructure projects such as Delta Conveyance Project, Thames Tideway, Houston Water and Singapore National Water Agency. • For the built environment , we deliver full-service solutions for cities, places and buildings, including smart-city and resiliency city solutions. This also includes consulting, engineering and design services for transportation hubs in Boston and London, urban developments, corporate, national government, healthcare, education, science facilities for public sector and industrial clients across diverse markets and services. Our solutions include multi-functional infrastructure that addresses economic, social and environmental issues spanning a range of sectors, technology and industries. We also provide consulting around technology-enabled asset management, economic development and scientific advancement that enables our clients to make intelligent data-driven investment decisions. • In our environmental business we provide all aspects of environmental planning, permitting, regulatory and compliance management, and consulting services related to remediation, revitalization and redevelopment. We also provide critical consulting and technology related services to clients responsible for disaster planning, mitigation and response as well as logistics, planning and implementation support for leading edge scientific and research endeavors. We recently provided a large confidential U.S. customer with data analytics and visualization solutions to deliver actionable intelligence to help them understand and prioritize their approach to polyfluoroalkyl substances (PFAS) remediation. • In our advanced facilities business, we provide fully integrated solutions for highly specialized facilities in the fields of medical research, sustainable manufacturing, nanoscience, biotechnology, semiconductor and data centers. Our services also include implementation of operational environments and providing cybersecurity assessments, network architecture development and construction management for their operational environments. Our clients include life sciences and pharmaceutical, specialty manufacturing, microelectronics and data intensive industries. Page 42 In addition to each of the industry sectors that we serve, we deploy solutions to the world’s most complex projects and major programs that span across all markets, such as the London 2012 Olympic and Paralympic Games, the Dubai Expo, and LaGuardia Airport Redevelopment. Applying internally developed technology A strong foundation of data-rich innovative solutions is woven into every project that we deliver. These solutions employ an array of technical expertise to enable the most efficient, effective and predictable solutions for our customers, such as our proprietary technology software. Examples of these technologies include: • TrackRecord is a workflow automation and compliance management platform for the delivery of major projects. • AquaDNA is a wastewater asset management platform that lowers operation and maintenance costs and facilitates a move from reactive to proactive maintenance. • Travel Service Optimisation (TSO) is Jacobs' travel sharing solution for Special Education needs children which centers on the children’s ability to travel together rather than focusing on their disability. • SafetyWeb is a site hazard management and compliance tool. • ProjectMapper is a web based geospatial mapping and project visualization software platform. • Flood Modeller provides proactive decision-making to help manage our environment and the challenges associated with flood risk. It is suitable for a wide range of engineering and environmental applications, from calculating simple backwater profiles to modeling entire catchments to mapping potential flood risk for entire countries. • Replica™ is Jacobs’ digital twin solution software platform and consists of the following capabilities: • Replica Parametric Design™ (formerly CPES™) provides outputs on construction quantities and costs, life cycle quantities and costs, and estimates of environmental impacts. Rapid process design in Replica Process and the resulting development of the Replica Parametric Designs allows for thorough alternatives analysis and enhanced team communication. • Replica Preview™ is used for early stage visualization of facility designs. This software rapidly creates scaled three-dimensional designs, which can be placed on Google Earth®. Rapid design development in Replica Parametric Design and visualization with Replica Preview allows for informed analysis of many alternatives and sound decision-making. • Replica Systems Analysis™ (formerly Voyage™) is a very flexible platform that can simulate resource systems dynamically, over time. Examples of modeled systems include water resources, energy, solid waste and traffic. The ability to connect complex systems together in a single interface that is visually intuitive leads to informed team collaboration and creative solutions. • Replica Process™ allows Jacobs' world-renowned expertise in water treatment to be simulated both statically and dynamically over time in Replica Process™ software. Much of the process predictive capabilities in Replica Process are founded on the Jacobs' Pro2D2™ and Source™ software. Informed decisions are founded on the ability of Replica Process to provide details on system performance among many alternatives, very quickly. • Replica Hydraulics™ was designed to simulate all pressurized and gravity flow hydraulics of a system, simultaneously. Replica’s hydraulic blocks were built on accepted engineering practice equations and have been successfully verified on hundreds of projects. The Replica Hydraulics library is the foundation for complete, dynamic water system analysis and can be used exclusively for hydraulic analysis of a system or in conjunction with Replica Process, Replica Controls and/or Replica Air. • Replica Controls™ allows for dynamic simulation of system instrumentation such as flow meters, indicator transmitters, limit switches and stream analyzers as well as the logic objects including PID controllers, sequencers, units controller and alarms. The software's controls capabilities and functionality align with industry design standards and its ability to predict full scale performance is unmatched due to the connectivity with Replica Hydraulics. • Replica Air™ simulates all aspects of compressible fluid (e.g. air) supply system including pipes, valves, diffusers and blowers. The ability to couple Replica Air with Replica Controls in a single simulation allows for the development of unique and robust designs that reduce energy use and life cycle costs. Page 43 Energy, Chemicals and Resources (ECR) ECR Disposition On April 26, 2019, Jacobs completed the sale of its Energy, Chemicals and Resources ("ECR") business to Worley Limited, a company incorporated in Australia ("Worley"), for a purchase price of $3.4 billion consisting of (i) $2.8 billion in cash plus (ii) 58.2 million ordinary shares of Worley, subject to adjustments for changes in working capital and certain other items (the “ECR sale”). As a result of the ECR sale, substantially all ECR-related assets and liabilities were sold (the "Disposal Group"). We determined that the disposal group should be reported as discontinued operations in accordance with ASC 210-05, Discontinued Operations because their disposal represented a strategic shift that had a major effect on our operations and financial results. As such, the assets and liabilities of the ECR business were reflected as held-for-sale in the Consolidated Balance Sheets through December 27, 2019. As of June 26, 2020, all of the ECR business to be sold under the terms of the sale has been conveyed to Worley and as such, no amounts remain held for sale. For further discussion see Note 7- Sale of Energy, Chemicals and Resources ("ECR") Business to the consolidated financial statements. Prior to the sale, we served the energy, chemicals and resources sectors, including upstream, midstream and downstream oil, gas, refining, chemicals and mining and minerals industries. We provided integrated delivery of complex projects for our Oil and Gas, Refining, and Petrochemicals clients. Bridging the upstream, midstream and downstream industries, our services encompassed consulting, engineering, procurement, construction, maintenance and project management. Page 44 Results of Operations for the three and nine months ended June 26, 2020 and June 28, 2019 (in thousands, except per share information) For the Three Months Ended For the Nine Months Ended June 26, 2020 June 28, 2019 June 26, 2020 June 28, 2019 Revenues $ 3,260,057 $ 3,169,622 $ 10,047,286 $ 9,345,005 Direct cost of contracts (2,631,031) (2,543,488) (8,125,554) (7,533,511) Gross profit 629,026 626,134 1,921,732 1,811,494 Selling, general and administrative expenses (434,650) (536,180) (1,408,232) (1,505,731) Operating Profit 194,376 89,954 513,500 305,763 Other Income (Expense): Interest income 1,249 3,398 3,180 7,172 Interest expense (18,193) (18,978) (48,163) (73,727) Miscellaneous income (expense), net 126,249 19,025 (87,470) 58,211 Total other income (expense), net 109,305 3,445 (132,453) (8,344) Earnings from Continuing Operations Before Taxes 303,681 93,399 381,047 297,419 Income Tax (Expense) Benefit from Continuing Operations (67,674) 1,981 (75,041) (12,829) Net Earnings of the Group from Continuing Operations 236,007 95,380 306,006 284,590 Net Earnings of the Group from Discontinued Operations 18,043 435,684 125,511 438,837 Net Earnings of the Group 254,050 531,064 431,517 723,427 Net Earnings Attributable to Noncontrolling Interests from Continuing Operations (9,121) (6,015) (21,662) (15,578) Net Earnings Attributable to Jacobs from Continuing Operations 226,886 89,365 284,344 269,012 Net Earnings Attributable to Noncontrolling Interests from Discontinued Operations — (607) — (2,195) Net Earnings Attributable to Jacobs from Discontinued Operations 18,043 435,077 125,511 436,642 Net Earnings Attributable to Jacobs $ 244,929 $ 524,442 $ 409,855 $ 705,654 Net Earnings Per Share: Basic Net Earnings from Continuing Operations Per Share $ 1.74 $ 0.65 $ 2.15 $ 1.93 Basic Net Earnings from Discontinued Operations Per Share $ 0.14 $ 3.18 $ 0.95 $ 3.14 Basic Earnings Per Share $ 1.88 $ 3.83 $ 3.11 $ 5.07 Diluted Net Earnings from Continuing Operations Per Share $ 1.73 $ 0.65 $ 2.13 $ 1.92 Diluted Net Earnings from Discontinued Operations Per Share $ 0.14 $ 3.15 $ 0.94 $ 3.11 Diluted Earnings Per Share $ 1.87 $ 3.80 $ 3.08 $ 5.02 Page 45 Overview – Three and Nine Months Ended June 26, 2020 COVID-19 Pandemic . There are many risks and uncertainties regarding the COVID-19 pandemic, including the anticipated duration of the pandemic and the extent of local and worldwide social, political, and economic disruption it may cause. The Company’s operations for the third fiscal quarter of 2020 were adversely impacted by COVID-19. While certain business units of both Critical Mission Solutions and People & Places Solutions have experienced, and may continue to experience, an increase in demand for certain of their services regarding new projects that may arise in response to the COVID-19 pandemic, it is still expected that COVID-19 is likely to continue to have an adverse impact on each of Critical Missions Solutions and People & Places Solutions in the fourth fiscal quarter of 2020, although to a lesser degree than what was seen in the third fiscal quarter of 2020. These may continue into fiscal 2021. For a discussion of risks and uncertainties related to COVID-19, including the potential impacts on the Company’s business, financial condition and results of operations, see “Part II - Item 1A - Risk Factors”. Net earnings attributable to the Company from continuing operations for the third fiscal quarter ended June 26, 2020 were $226.9 million (or $1.73 per diluted share), an increase of $137.5 million, or 153.9%, from earnings of $89.4 million (or $0.65 per diluted share) for the corresponding period last year. Included in the Compa ny’s operating results from continuing operations for the three months ended June 26, 2020 were $93.3 million in after-tax unrealized appreciation gains recorded in miscellaneous income (expense), net, associated with our investment in Worley stock and certain foreign currency revaluations relating to the ECR sale an d after-tax Restructuring and other charges and transaction costs of $14.1 million associated in part with the Company's acquisition of John Wood Groups' Nuclear consulting, remediation and program management business. Net earnings attributable to the Company from discontinued operations for the third fiscal quarter ended June 26, 2020 were $18.0 million (or $0.14 per diluted share), a decrease of $417.0 million, or 95.9%, from earnings of $435.1 million (or $3.15 per diluted share) for the corresponding period last year. The change year-over-year was primarily driven by the gain on the ECR sale recognized in the 2019 period and the absence in the current period of normal operating results of the ECR business as reported also in the prior period. For the nine months ended June 26, 2020, net earnings attributable to the Company from continuing operations were $284.3 million (or $2.13 per diluted share), an increase of $15.3 million, or 5.7%, from $269.0 million (or $1.92 per diluted share) for the corresponding period last year. Included in the Company’s operating results from continu ing operations for the nine months ended June 26, 2020 were $90.4 million in after-tax fair value losses recorded in miscellaneous income (expense), net, associated with our investment in Worley stock (net of Worley stock dividend) and certain foreign currency revaluations relating to the ECR sale, $87.2 million in after-tax Restructuring and other charges and transaction costs associated in part with the Company's acquisition of John Wood Groups' Nuclear consulting, remediation and program management business. For the nine months ended June 26, 2020, net earnings attributable to the Company from discontinued operations were $125.5 million (or $0.94 per diluted share), a decrease of $311.1 million, or 71.3%, from $436.6 million (or $3.11 per diluted share) for the corresponding period last year. Included in net earnings attributable to the Company from discontinued operations for the current year to date period was the settlement of the Nui Phao ("NPMC") legal matter described in Note 19- Commitments and Contingencies and Derivative Financial Instruments that was reimbursed by insurance, the recognition of the deferred gain for the delayed conveyance of the international entities and for the delivery of the ECR IT assets, as discussed in Note 7- Sale of Energy, Chemicals and Resources ("ECR") Business and adjustments for working capital and certain other items in connection with the ECR sale. Additionally, the year-over-year change was also driven by the gain on sale recognized in the 2019 period and the absence of normal operating results of the ECR business as reported also in the prior period. On March 6, 2020, Jacobs completed the acquisition of John Wood Group's Nuclear consulting, remediation and program management business. For further discussion, see Note 5- Business Combinations . Page 46 Consolidated Results of Operations Revenues for the third fiscal quarter of 2020 were $3.26 billion, an increase of $90.4 million, or 2.9% from $3.17 billion for the corresponding period last year. For the nine months ended June 26, 2020, revenues were $10.05 billion, an increase of $702.3 million or 7.5% from $9.35 billion for the corresponding period last year. The increase in revenues for the three month period year over year was due in part to fiscal 2020 incremental revenues from the June 2019 KeyW and the March 2020 John Wood Group Nuclear business acquisitions, in addition to overall growth in our Critical Mission Solutions (CMS) and People & Places Solutions (P&PS) businesses, largely offset by impacts from the COVID 19 pandemic. Pass-through costs included in revenues for the three and nine months ended June 26, 2020 amounted to $578.7 million and $1.92 billion, respectively, an increase of $44.8 million and $81.3 million, or 8.4% and 4.4%, fro m $533.9 million and $1.84 billion from the corresponding periods last year. Gross profit for the third quarter of 2020 was $629.0 million, an increase of $2.9 million, or 0.5% from $626.1 million fro m the corresponding period last year. Our gross profit margins were 19.3% and 19.8% for the three month periods ended June 26, 2020 and June 28, 2019, respectively, with these trend differences being mainly attributable to project mix impacts in our legacy portfolio year over year, as well as year over year impacts from lower overhead reimbursement rates resulting from our ongoing cost reduction programs partially offset by COVID-19 cost mitigation efforts. Gross profit for the nine months ended June 26, 2020 was $1.92 billion, an increase of $110.2 million, or 6.1% from $1.81 billion from the corresponding period to date last year. Our gross profit margins were 19.1% and 19.4% for the nine month periods ended June 26, 2020 and June 28, 2019, respectively. The increase in our gross profit was attributable to overall growth in both our P&PS and CMS businesses along with favorable impacts from the KeyW and John Wood Group Nuclear business acquisitions. The slight differences in year over year gross margin trends for th e three and nine month periods were attributable mainly to legacy portfolio mix and lower overhead rate impacts mentioned above, with partial offsets from favorable margin trends from our recent KeyW and Wood Group acquisitions. See Segment Financial Information discussion for further information on the Company’s results of operations at the operating segment. SG&A expenses for the three months ended June 26, 2020 were $434.7 million, a decrease of $101.5 million, or 18.9%, from $536.2 million fo r the corresponding period last year. SG&A expenses for the nine months ended June 26, 2020 were $1.41 billion , a decrease of $97.5 million, or 6.5%, from $1.51 billion for the corresponding period last year. The decrease in SG&A expenses as compared to the corresponding periods last year was due primarily to less expense relating to the Transition Services Agreement (the "TSA") with Worley which terminated in April 2020 and reductions in personnel related and other overhead costs resulting from our ongoing cost reduction programs as well as COVID-19 cost mitigation efforts, partially offset by incremental SG&A expenses from the KeyW and John Wood Group Nuclear business acquisitions. Favorable impacts on SG&A expenses from foreign exchange were $5.7 million and $12.4 million , respectively for th e three and nine months ended June 26, 2020, although impacts from foreign exchange were immaterial to the Company's operating profit as a whole. Net interest expense for the three and nine months ended June 26, 2020 was $16.9 million and $45.0 million, respectively, a decrease of $1.4 million and $21.6 million from $15.6 million and $66.6 million f or the corresponding periods last year. The decrease in net interest expense for the nine month period year over year is due to the paydown of debt subsequent to the ECR sale in the prior year third quarter. Miscellaneous income (expense), net for the three months ended June 26, 2020 was $126.2 million, an increase of $107.2 million, from $19.0 million fo r the corresponding period last year. The increase from the prior year was due primarily to $123.1 million in pre-tax unrealized gains associated with changes in the fair value of our investment in Worley stock and certain foreign currency revaluations relating to the ECR sale. Miscellaneous income (expense), net for the nine months ended June 26, 2020 was $(87.5) million, a decrease of $145.7 million, from $58.2 million for the corresponding periods last year. The decrease from prior year was due primarily to $118.8 million in pre-tax unrealized losses associated with changes in the fair value of our investment in Worley stock (net of Worley stock dividend) and certain foreign currency revaluations relating to the ECR sale. Also included in miscellaneous (expense) income during the three and nine months ended June 26, 2020 is $1.0 million and $15.2 million, respectively, in TSA related income associated with the ECR sale as discussed in Note 7- Sale of Energy, Chemicals and Resources ("ECR") Business. Page 47 The Company’s effective tax rates from continuing operations for the three months ended June 26, 2020 and June 28, 2019 were 22.3% and (2.1)%, respectively. The Company’s effective tax rates from continuing operations for the nine months ended June 26, 2020 and June 28, 2019 were 19.7% and 4.3%, respectively. The comparatively higher quarterly tax rate was primarily due to a $21.7 million tax benefit in the three months ended June 28, 2019, which related to the release of a valuation allowance on previously fully valued foreign tax credits. For the three months ended June 26, 2020, the effective tax rate was impacted by a $4.1 million benefit for the release of uncertain tax positions due to the statute of limitations expiring and a $12.6 million benefit for the release of a valuation allowance in the UK, with offsetting unfavorable impacts from other discrete items. The Company’s effective tax rate from continuing operations for the nine months ended June 26, 2020 was higher primarily due to $62.6 million in discrete benefits in the nine months ended June 28, 2019, predominantly comprised of $37.4 million for a remeasurement of the Company's deferred tax liability for unremitted earnings to account for the change in expected manner of recovery and an additional benefit of $21.7 million as a result of a valuation allowance release on foreign tax credits that were previously fully reserved. Comparatively, in the nine months ended June 26, 2020, the Company had a $12.6 million benefit for the release of a valuation allowance in the UK, a $6.9 million of benefit from the application of the Internal Revenue Code section 179D, a $3.7 million favorable settlement with the Indian Revenue Services, an amended tax return generating $5.8 million of foreign tax credits and research and development, and a $4.1 million benefit for an India tax rate change, with offsetting unfavorable impacts from other discrete items. See Note 7- Sale of Energy, Chemicals and Resources ("ECR") Business for further information on the Company's discontinued operations reporting for the sale of the ECR business. On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted in the United States and significantly revised the U.S. corporate income tax laws. Given the significance of the legislation, the SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118), which allowed registrants to record provisional amounts during a one year “measurement period” like that used when accounting for business combinations. As of December 22, 2018, we completed our accounting for the tax effects of the enactment of the Act. For the deferred tax balances, we remeasured the U.S. deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The Company’s revised remeasurement resulted in cumulative charges to income tax expense of $144.4 million for the measurement period. The Act called for a one-time tax on deemed repatriation of foreign earnings. This one-time transition tax was based on our total post-1986 earnings and profits (E&P) of certain of our foreign subsidiaries. We recorded $14.3 million in cumulative transition taxes during the measurement period, although the transition tax was expected to be offset by foreign tax credits in the future, resulting in no additional cash tax liability. In addition, the Company recorded $104.2 million in cumulative valuation expense charges during the measurement period with respect to certain foreign tax credit deferred tax assets as a result of the Act and CH2M integration. The amount of income taxes the Company pays is subject to ongoing audits by tax jurisdictions around the world. In the normal course of business, the Company is subject to examination by tax authorities throughout the world, including such major jurisdictions as Australia, Canada, India, the Netherlands, the United Kingdom and the United States. Our estimate of the potential outcome of any uncertain tax issue is subject to our assessment of the relevant risks, facts, and circumstances existing at the time. The Company believes that it has adequately provided for reasonably foreseeable outcomes related to these matters. However, future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, which may impact our effective tax rate. Page 48 Segment Financial Information The following table provides selected financial information for our operating segments and includes a reconciliation of segment operating profit to total U.S. GAAP operating profit from continuing operations by including certain corporate-level expenses, Restructuring and other charges and transaction and integration costs (in thousands). Three Months Ended Nine Months Ended June 26, 2020 June 28, 2019 June 26, 2020 June 28, 2019 Revenues from External Customers: Critical Mission Solutions $ 1,211,143 $ 1,156,488 $3,636,978 $3,251,024 People & Places Solutions 2,048,914 2,013,134 6,410,308 6,093,981 Total $ 3,260,057 $ 3,169,622 $10,047,286 $9,345,005 Three Months Ended Nine Months Ended June 26, 2020 June 28, 2019 June 26, 2020 June 28, 2019 Segment Operating Profit: Critical Mission Solutions $ 89,608 $ 76,306 $ 264,323 $ 222,289 People & Places Solutions 190,453 183,318 557,864 515,465 Total Segment Operating Profit 280,061 259,624 822,187 737,754 Other Corporate Expenses (1) (65,213) (64,525) (193,148) (185,674) Restructuring, Transaction and Other Charges (20,472) (105,145) (115,539) (246,317) Total U.S. GAAP Operating Profit 194,376 89,954 513,500 305,763 Total Other Income (Expense), net (2) 109,305 3,445 (132,453) (8,344) Earnings Before Taxes from Continuing Operations $ 303,681 $ 93,399 $ 381,047 $ 297,419 (1) Other corporate expenses include costs that were previously allocated to the ECR segment prior to discontinued operations presentation in connection with the ECR sale in the approximate amount of $2.0 million and $14.8 million for the three and nine month periods ended June 28, 2019, respectively. Other corporate expenses also include intangibles amortization of $23.1 million and $18.4 million for the three-month periods ended June 26, 2020 and June 28, 2019, respectively, and $67.1 million and $55.7 million for the nine months ended June 26, 2020 and June 28, 2019, respectively. (2) For the three and nine month periods ended June 26, 2020, includes revenues under the Company's TSA with Worley of $1.0 million and $15.2 million, respectively, $122.9 million and $(119.0) million in fair value adjustments related to our investment in Worley stock (net of Worley stock dividend) and certain foreign currency revaluations relating to the ECR sale, respectively, the amortization of deferred financing fees related to the acquisition of CH2M HILL Companies Ltd. ("CH2M") in December 2017 (the "CH2M acquisition") of $— million and $0.7 million, respectively, and the loss on settlement of the U.S. pension plan of $— million and $2.7 million respectively. For the three and nine month periods ended June 28, 2019, includes the amortization of deferred financing fees related to the CH2M acquisition of $0.5 million and $1.5 million, respectively, and the gain on settlement of the CH2M portion of the U.S. pension plan of $0.0 million and $34.6 million, respectively. Also includes revenues under the Company's TSA with Worley of $14.1 million for the three and nine month periods ended June 28, 2019, for which the related costs are included in SG&A. Critical Mission Solutions Three Months Ended Nine Months Ended June 26, 2020 June 28, 2019 June 26, 2020 June 28, 2019 Revenue $ 1,211,143 $ 1,156,488 $ 3,636,978 $ 3,251,024 Operating Profit $ 89,608 $ 76,306 $ 264,323 $ 222,289 Page 49 Critical Mission Solutions (CMS) segment revenues for the three and nine months ended June 26, 2020 were $1.21 billion and $3.64 billion, respectively, an increase of $54.7 million and $386.0 million, or 4.7% and 11.9% from $1.16 billion and $3.25 billion for the corresponding periods last year. Our increase in revenue was primarily attributable to incremental revenue from the KeyW and John Wood Group Nuclear business acquisitions, combined with areas of year over year revenue volume growth across our legacy portfolio, highlighted by increased spending by customers in the U.S. government business sector. These favorable performance trends more than offset unfavorable COVID-19 related revenue impacts mainly due to challenges from physical distancing requirements, client scheduling changes and other related factors. Impacts on revenues from unfavorable foreign currency translation were approximately $7.0 million and $13.4 million, r espectively, for the three and nine month periods ended June 26, 2020 compared to the corresponding prior year periods. Operating profit for the segment was $89.6 million and $264.3 million, respectively, for the three and nine months ended June 26, 2020, an increase of $13.3 million and $42.0 million, or 17.4% and 18.9%, from $76.3 million and $222.3 million for the corresponding periods last year. The increases from the prior year were primarily attributable to incremental operating profit from the KeyW and John Wood Group Nuclear business acquisitions, the continued growth in profits from our U.S. governmental business sector and the favorable close out of a large program management contract in the first fiscal quarter of 2020. Impacts on operating profit from unfavorable foreign currency translation were approximately $1.0 million and $1.9 million respectively, for t he three and nine months periods ended June 26, 2020, compared to the corresponding prior year periods. Unfavorable revenue impacts from COVID-19 mentioned above were largely offset by the Company’s mitigating actions in discretionary operating spend and benefits costs, government assistance programs and other areas of improved operating performance. People & Places Solutions Three Months Ended Nine Months Ended June 26, 2020 June 28, 2019 June 26, 2020 June 28, 2019 Revenue $ 2,048,914 $ 2,013,134 $ 6,410,308 $ 6,093,981 Operating Profit $ 190,453 $ 183,318 $ 557,864 $ 515,465 Revenues for the People & Places Solutions (P&PS) segment for the three and nine months ended June 26, 2020 were $2.05 billion and $6.41 billion, respectively, an increase of $35.8 million and $316.3 million, or 1.8%, and 5.2% from $2.01 billion and $6.09 billion for the corresponding periods last year. The increases in revenue were due in part to portfolio growth across our businesses, highlighted by strong investment in advanced facilities, water and transport infrastructure and project management/construction management ("PMCM") sectors. These favorable performance trends more than offset unfavorable COVID-19 related revenue impacts mainly due to challenges from physical distancing requirements, client scheduling changes and other related factors. Impacts on revenues from unfavorable foreign currency translation were approximately $20.3 million and $49.6 million, respectively, for the three an d nine month periods en ded June 26, 2020 compared to the corresponding prior year periods. Operating profit for the segment for the three and nine months ended June 26, 2020 were $190.5 million and $557.9 million, respectively, an increase of $7.1 million and $42.4 million, or 3.9%, and 8.2% from $183.3 million and $515.5 million for the corresponding periods last year. The year over year increase in operating profit was due primarily to positive impacts from the higher year over year revenues for the segment and reductions in costs related to COVID-19 impacts and mitigation efforts. Impacts on operating profit from unfavorable foreign currency translation were approximately $4.5 million and $8.9 million for the three and nine month periods ended June 26, 2020, compared to the corresponding prior year periods. Unfavorable revenue impacts from COVID-19 mentioned above were largely offset by the Company’s mitigating actions in discretionary operating spend and benefits costs, government assistance programs and other areas of improved operating performance. Other Corporate Expenses Other corporate expenses for the three and nine months ended June 26, 2020 were $65.2 million and $193.1 million, an increase of $0.7 million and $7.4 million from $64.5 million and $185.7 million for the corresponding periods last year. This increase was due primarily to higher intangible amortization expense from the KeyW and John Wood Group nuclear business acquisitions, as well as impacts from company benefit program enhancements. These increases were partly offset by employee related and other cost reductions across the Company's corporate functions. Included in other corporate expenses in the above table are costs and expenses which relate to general corporate activities as well as corporate-managed benefit and insurance programs. Such costs and expenses include: (i) those Page 50 elements of SG&A expenses relating to the business as a whole; (ii) those elements of our incentive compensation plans relating to corporate personnel whose other compensation costs are not allocated to the LOBs; (iii) the amortization of intangible assets acquired as part of purchased business combinations; (iv) the quarterly variances between the Company’s actual costs of certain of its self-insured integrated risk and employee benefit programs and amounts charged to the LOBs; and (v) certain adjustments relating to costs associated with the Company’s international defined benefit pension plans. In addition, other corporate expenses may also include from time to time certain adjustments to contract margins (both positive and negative) associated with projects where it has been determined, in the opinion of management, that such adjustments are not indicative of the performance of the related LOB. Discontinued Operations The results from our ECR business formerly reported as a stand-alone segment are reflected in our unaudited consolidated financial statements as discontinued operations for all periods presented. For further information, refer to Note 7- Sale of Energy, Chemicals and Resources ("ECR") Busine ss. For the three and nine months end ed June 26, 2020, net earnings attributable to Jacobs from discontinued operations after income taxes were $18.0 million and $125.5 million, respectively, and for the three and nine months ended June 28, 2019, net earnings attributable to discontinued operations after income taxes were $435.1 million and $436.6 million, respectively. While the ECR business sale closed in April 2019, the Company recognized additional pretax income from discontinued operations of $32.1 million and $161.9 million in the three and nine months ended June 26, 2020. Selling, general and administrative expenses includes an offsetting insuranc e recovery of $50.0 million for the nine months ended June 26, 2020 recorded in connection with the Nui Phao ("NPMC") legal matter described in Note 19- Commitments and Contingencies . Additionally, the nine month period ended June 28, 2019 includes a charge for the award and recovery of costs, estimated related interest and attorneys' fees related to the NPMC legal matter. For the nine months ended June 26, 2020, the gain on sale of $113.4 million relates mainly to the recognition of the deferred gain for the delayed transfer of the ECR-related assets and liabilities of the two international entities discussed above, adjustments for working capital and certain other items in connection with the sale and add itional income for the re lease of a deferred gain upon achievement of the IT Migration Date described above in connecti on with the delivery to Worley of certain IT application and hardware assets related to the ECR business. Restructuring and Other Charges See Note 11- Restructuring and Other Charges for information on the Company’s activity relating to restructuring and other charges. Backlog Information We include in backlog the total dollar amount of revenues we expect to record in the future as a result of performing work under contracts that have been awarded to us. Our policy with respect to O&M contracts, however, is to include in backlog the amount of revenues we expect to receive for one succeeding year, regardless of the remaining life of the contract. For national government programs (other than national government O&M contracts, which are subject to the same policy applicable to all other O&M contracts), our policy is to include in backlog the full contract award, whether funded or unfunded, excluding option periods. Because of variations in the nature, size, expected duration, funding commitments, and the scope of services required by our contracts, the timing of when backlog will be recognized as revenues can vary greatly between individual contracts. Consistent with industry practice, substantially all of our contracts are subject to cancellation or termination at the option of the client, including our U.S. government work. While management uses all information available to determine backlog, at any given time our backlog is subject to changes in the scope of services to be provided as well as increases or decreases in costs relating to the contracts included therein. Backlog is not necessarily an indicator of future revenues. Because certain contracts (e.g., contracts relating to large EPC projects as well as national government programs) can cause large increases to backlog in the fiscal period in which we recognize the award, and because many of our contracts require us to provide services that span over several fiscal quarters (and sometimes over fiscal years), we evaluate our backlog on a year-over-year basis, rather than on a sequential, quarter-over-quarter basis. Page 51 The following table summarizes our backlog at June 26, 2020 and June 28, 2019 (in millions): June 26, 2020 June 28, 2019 Critical Mission Solutions $ 9,066 $ 8,456 People & Places Solutions 14,608 14,011 Total $ 23,674 $ 22,467 The increase in backlog in Critical Mission Solutions (CMS) from June 28, 2019 was primarily the result of the acquisition of John Wood Group's Nuclear consulting, remediation and program management business. The increase in backlog in People & Places Solutions (P&PS) from June 28, 2019 was primarily the result of new awards in the U.K. and U.S. markets. Consolidated backlog differs from the Company’s remaining performance obligations as defined by ASC 606 primarily because of our national government contracts (other than national government O&M contracts). Our policy is to include in backlog the full contract award, whether funded or unfunded excluding the option periods while our remaining performance obligations represent a measure of the total dollar value of work to be performed on contracts awarded and in progress. Additionally, the Company includes our proportionate share of backlog related to unconsolidated joint ventures which is not included in our remaining performance obligations. Liquidity and Capital Resources At June 26, 2020, our principal sources of liquidity consisted of $1.02 billion in cash and cash equivalents and $1.63 billion of available borrowing capacity under our $2.25 billion r evolving credit agreement (the "Revolving Credit Facility"). The amount of cash and cash equivalents at June 26, 2020 represented an increase of $393.7 million from $631.1 million at September 27, 2019, the changes of which are described below. Our cash flow provided by operations of $374.5 million during the nine month period ended June 26, 2020 was favorable by $594.8 million in comparison to the cash flow used for operations of $220.3 million for the corresponding prior year period. This improvement was due primarily to favorable net earnings adjusted for noncash items compared to the previous period driven by improved operating profit performance. Partly offsetting this favorable impact were higher uses of cash in other working capital, due mainly to higher accounts receivable partially impacted by collection timing impacts from COVID-19 as well as higher cash used in accounts payable, offset by favorable cash flow impacts in accrued liabilities including the deferral of certain payments associated mainly with COVID-19 government assistance programs in the U.S. and Europe. Our cash used for investing activities for the nine months ended June 26, 2020 was $392.7 million, compared to cash provided by investing activities of $2.18 billion in the prior year, the change due primarily to the impact of the ECR sale in the third quarter of the prior fiscal year compared to the acquisition of John Wood Group's Nuclear business in the second quarter of fiscal year 2020. Our cash provided by financing activities of $372.5 million for the nine months ended June 26, 2020 resulted mainly from net proceeds from borrowings of $756.5 million, partly offset by cash used for share repurchases of $285.8 million, $97.5 million in dividends to shareholders and noncontrolling interest and approximately $1.1 million in stock-based compensation and benefit plan related activity. Cash used for financing activities in the prior period was $1.79 billion, due primarily to net debt repayments of $1.20 billion, share repurchases of $524.6 million $82.3 million in dividends to shareholders and noncontrolling interest and approximately $20.0 million in stock-based compensation and benefit plan related activity. At June 26, 2020, the Company had approximat ely $244.3 million in cash and cash equivalents held in the U.S. and $780.5 million held outside of the U.S. (primarily in the U.K., the Eurozone, Australia, India and the United Arab Emirates), which is used primarily for funding operations in those regions. Other than the tax cost of repatriating funds to the U.S. (see Note 15- Income Taxes of Notes to Consolidated Financial Statements included in our 2020 Form 10-K), there are no material impediments to repatriating these funds to the U.S. Page 52 In March 2020, the Company entered into a new unsecured term loan facility (the “2020 Term Loan Facility”) with a syndicate of financial institutions as lenders. The principal balance of the 2020 Term Loan Facility wa s $1.04 billion a s of June 26, 2020. The terms and other important details are summarized in Note 12- Borrowings . The 2020 Term Loan Facility was entered into as part of our strategy to increase the portion of our long-term debt that is represented by term loan facilities. In the second quarter of fiscal 2020, the Company used proceeds of the 2020 Term Loan Facility to repay $200.0 million in short-term debt a nd retained the remaining cash proceeds as a precautionary measure due to uncertainties resulting from the COVID-19 pandemic that was emerging at the time. In the third quarter of fiscal 2020, after gaining additional insight into the impact of the pandemic on the Company’s business and improved cash flow, the Company used the remaining cash proceeds and excess cas h to repay $954.9 million of outstanding amounts under the Revolving Credit Facility. The Company had $259.5 million in letters of credit outstanding at June 26, 2020. Of this amount, $2.3 million was issued under the Revolving Credit Facility and $257.3 million was issued under separate, committed and uncommitted letter-of-credit facilities. On March 6, 2020, a subsidiary of Jacobs completed the acquisition of John Wood Group's Nuclear consulting, remediation and program management business for an enterprise value of £246 million, or approximately $317.9 million, less cash acquired of $24.3 million. The Company has recorded its preliminary purchase accounting processes associated with the acquisitions, which are summarized in Note 5- Business Combinations . On June 12, 2019, Jacobs completed the acquisition of The KeyW Holding Corporation (“KeyW”), a U.S. based innovative national security solutions provider to the intelligence, cyber, and counterterrorism communities by acquiring 100% of the outstanding shares of KeyW common stock. The Company paid total consideration of $902.6 million which was comprised of approximately $604.2 million in cash to the former stockholders and certain equity award holders of KeyW and the assumption of KeyW’s debt of $298.4 million. The Company repaid all of KeyW's outstanding debt by the end of the fourth fiscal quarter of 2019. The Company has recorded its final purchase price allocation associated with the acquisition, which is summarized in Note 5- Business Combinations . On April 26, 2019, Jacobs completed the sale of its ECR business to Worley for a purchase price of $3.4 billion consisting of (i) $2.8 billion in cash plus (ii) 58.2 million ordinary shares of Worley, subject to adjustments for changes in working capital and certain other items. We believe we have adequate liquidity and capital resources to fund our projected cash requirements for the next twelve months based on the liquidity provided by our cash and cash equivalents on hand, our borrowing capacity and our continuing cash from operations. We further believe that our financial resources, discretionary spend controls as well as near term benefits from government assistance programs, will allow us to continue managing the negative impacts of the COVID-19 pandemic on our business operations for the foreseeable future, which is expected to include reduced revenue from operating activities, based on current assumptions and expectations regarding the pandemic. We have taken actions to reduce spending more broadly across the Company, only proceeding with operating and capital spending that is critical. We have also ceased all non-essential hiring and reduced discretionary expenses, including certain employee benefits and compensation. In addition, as a precautionary measure, we temporarily suspended purchases under the share repurchase plan in March 2020. Looking ahead, we have developed contingency plans to reduce costs further if the situation deteriorates beyond or lasts longer than current assumptions and expectations. We were in compliance with all of our debt covenants at June 26, 2020.