JACOBS SOLUTIONS INC. 10-Q

Item 1. Financial Statements. Page 3 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share information) (Unaudited) January 1, 2021 October 2, 2020 ASSETS Current Assets: Cash and cash equivalents $ 837,012 $ 862,424 Receivables and contract assets 3,265,260 3,167,310 Prepaid expenses and other 144,224 162,355 Investment in equity securities 540,357 347,510 Total current assets 4,786,853 4,539,599 Property, Equipment and Improvements, net 318,042 319,371 Other Noncurrent Assets: Goodwill 5,808,484 5,639,091 Intangibles, net 715,641 658,340 Deferred income tax assets 158,491 211,047 Operating lease right-of-use assets 582,985 576,915 Miscellaneous 397,129 409,990 Total other noncurrent assets 7,662,730 7,495,383 $ 12,767,625 $ 12,354,353 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable $ 999,483 $ 1,061,754 Accrued liabilities 1,193,818 1,249,883 Operating lease liability 164,639 164,312 Contract liabilities 530,757 465,648 Total current liabilities 2,888,697 2,941,597 Long-term Debt 1,797,069 1,676,941 Liabilities relating to defined benefit pension and retirement plans 578,417 568,176 Deferred income tax liabilities 9,286 3,366 Long-term operating lease liability 735,337 735,202 Other deferred liabilities 615,452 573,404 Commitments and Contingencies Stockholders’ Equity: Capital stock: Preferred stock, $ 1 par value, authorized - 1,000,000 shares; issued and outstanding - none — — Common stock, $ 1 par value, authorized - 240,000,000 shares; issued and outstanding 130,035,258 shares and 129,747,783 shares as of January 1, 2021 and October 2, 2020, respectively 130,035 129,748 Additional paid-in capital 2,597,586 2,598,446 Retained earnings 4,249,408 4,020,575 Accumulated other comprehensive loss ( 877,539 ) ( 933,057 ) Total Jacobs stockholders’ equity 6,099,490 5,815,712 Noncontrolling interests 43,877 39,955 Total Group stockholders’ equity 6,143,367 5,855,667 $ 12,767,625 $ 12,354,353 See the accompanying Notes to Consolidated Financial Statements – Unaudited. Page 4 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS Three Months Ended January 1, 2021 and December 27, 2019 (In thousands, except per share information) (Unaudited) For the Three Months Ended January 1, 2021 December 27, 2019 Revenues $ 3,381,836 $ 3,360,049 Direct cost of contracts ( 2,749,776 ) ( 2,715,478 ) Gross profit 632,060 644,571 Selling, general and administrative expenses ( 418,120 ) ( 493,226 ) Operating Profit 213,940 151,345 Other Income (Expense): Interest income 1,124 946 Interest expense ( 17,313 ) ( 14,817 ) Miscellaneous income (expense), net 156,360 116,695 Total other income (expense), net 140,171 102,824 Earnings from Continuing Operations Before Taxes 354,111 254,169 Income Tax Expense from Continuing Operations ( 87,023 ) ( 68,489 ) Net Earnings of the Group from Continuing Operations 267,088 185,680 Net (Loss) Earnings of the Group from Discontinued Operations ( 14 ) 77,587 Net Earnings of the Group 267,074 263,267 Net Earnings Attributable to Noncontrolling Interests from Continuing Operations ( 10,026 ) ( 6,257 ) Net Earnings Attributable to Jacobs from Continuing Operations 257,062 179,423 Net Earnings Attributable to Jacobs $ 257,048 $ 257,010 Net Earnings Per Share: Basic Net Earnings from Continuing Operations Per Share $ 1.98 $ 1.35 Basic Net Earnings from Discontinued Operations Per Share $ — $ 0.58 Basic Earnings Per Share $ 1.98 $ 1.93 Diluted Net Earnings from Continuing Operations Per Share $ 1.96 $ 1.33 Diluted Net Earnings from Discontinued Operations Per Share $ — $ 0.58 Diluted Earnings Per Share $ 1.96 $ 1.91 See the accompanying Notes to Consolidated Financial Statements - Unaudited. Page 5 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Three Months Ended January 1, 2021 and December 27, 2019 (In thousands) (Unaudited) For the Three Months Ended January 1, 2021 December 27, 2019 Net Earnings of the Group $ 267,074 $ 263,267 Other Comprehensive Income: Foreign currency translation adjustment 86,338 52,297 Gain on cash flow hedges 3,583 18 Change in pension and retiree medical plan liabilities ( 19,353 ) ( 16,251 ) Other comprehensive income before taxes 70,568 36,064 Income Tax (Expense) Benefit: Foreign currency translation adjustment ( 14,445 ) — Cash flow hedges 221 — Change in pension and retiree medical plan liabilities ( 826 ) 582 Income Tax (Expense) Benefit: ( 15,050 ) 582 Net other comprehensive income 55,518 36,646 Net Comprehensive Income of the Group 322,592 299,913 Net Earnings Attributable to Noncontrolling Interests ( 10,026 ) ( 6,257 ) Net Comprehensive Income Attributable to Jacobs $ 312,566 $ 293,656 See the accompanying Notes to Consolidated Financial Statements - Unaudited. Page 6 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY For the Three Months Ended January 1, 2021 and December 27, 2019 (In thousands) (Unaudited) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Jacobs Stockholders’ Equity Noncontrolling Interests Total Group Stockholders’ Equity Balances at September 27, 2019 $ 132,879 $ 2,559,450 $ 3,939,174 $ ( 916,812 ) $ 5,714,691 $ 53,967 $ 5,768,658 Net earnings — — 257,010 — 257,010 6,257 263,267 Foreign currency translation adjustments — — — 52,297 52,297 — 52,297 Pension and retiree medical plan liability, net of deferred taxes of $ 582 — — — ( 15,669 ) ( 15,669 ) — ( 15,669 ) Gain on derivatives, net of deferred taxes of $ — — — — 18 18 — 18 Dividends — — ( 68 ) — ( 68 ) — ( 68 ) Noncontrolling interests - distributions and other — — — — — ( 2,478 ) ( 2,478 ) Stock based compensation — 13,200 1,079 — 14,279 — 14,279 Issuances of equity securities including shares withheld for taxes 474 ( 10,115 ) ( 8,492 ) — ( 18,133 ) — ( 18,133 ) Repurchases of equity securities ( 352 ) 43,230 ( 42,878 ) — — — — Balances at December 27, 2019 $ 133,001 $ 2,605,765 $ 4,145,825 $ ( 880,166 ) $ 6,004,425 $ 57,746 $ 6,062,171 Balances at October 2, 2020 $ 129,748 $ 2,598,446 $ 4,020,575 $ ( 933,057 ) $ 5,815,712 $ 39,955 $ 5,855,667 Net earnings — — 257,048 — 257,048 10,026 267,074 Foreign currency translation adjustments, net of deferred taxes of $ 14,445 — — — 71,893 71,893 — 71,893 Pension liability, net of deferred taxes of $ 826 — — — ( 20,179 ) ( 20,179 ) — ( 20,179 ) Gain on derivatives, net of deferred taxes of $( 221 ) — — — 3,804 3,804 — 3,804 Dividends — — ( 34 ) — ( 34 ) — ( 34 ) Noncontrolling interests - distributions and other — — — — — ( 6,104 ) ( 6,104 ) Stock based compensation — 11,841 — — 11,841 — 11,841 Issuances of equity securities including shares withheld for taxes 538 ( 7,674 ) ( 8,658 ) — ( 15,794 ) — ( 15,794 ) Repurchases of equity securities ( 251 ) ( 5,027 ) ( 19,523 ) — ( 24,801 ) — ( 24,801 ) Balances at January 1, 2021 $ 130,035 $ 2,597,586 $ 4,249,408 $ ( 877,539 ) $ 6,099,490 $ 43,877 $ 6,143,367 See the accompanying Notes to Consolidated Financial Statements – Unaudited. . Page 7 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended January 1, 2021 and December 27, 2019 (In thousands) (Unaudited) For the Three Months Ended January 1, 2021 December 27, 2019 Cash Flows from Operating Activities: Net earnings attributable to the Group $ 267,074 $ 263,267 Adjustments to reconcile net earnings to net cash flows provided by (used for) operations: Depreciation and amortization: Property, equipment and improvements 22,989 22,152 Intangible assets 23,155 21,845 Gain on sale of ECR business — ( 61,943 ) Gain on investment in equity securities ( 190,368 ) ( 105,319 ) Stock based compensation 11,841 14,279 Equity in earnings of operating ventures, net of return on capital distributions 1,159 ( 715 ) (Gain) Loss on disposals of assets, net ( 134 ) 36 Impairment of equity method investment 27,902 — Loss on pension and retiree medical plan changes — 2,651 Deferred income taxes 53,008 102,487 Changes in assets and liabilities, excluding the effects of businesses acquired: Receivables and contract assets, net of contract liabilities 33,250 ( 96,075 ) Prepaid expenses and other current assets 25,144 ( 4,152 ) Miscellaneous other assets 16,564 34,634 Accounts payable ( 63,985 ) ( 35,380 ) Accrued liabilities ( 131,576 ) ( 236,090 ) Other deferred liabilities 16,491 ( 60,562 ) Other, net 104 1,699 Net cash provided by (used for) operating activities 112,618 ( 137,186 ) Cash Flows from Investing Activities: Additions to property and equipment ( 16,766 ) ( 22,260 ) Capital contributions to equity investees, net of return of capital distributions ( 3,430 ) ( 12,000 ) Acquisitions of businesses, net of cash acquired ( 173,012 ) — Net cash used for investing activities ( 193,208 ) ( 34,260 ) Cash Flows from Financing Activities: Proceeds from long-term borrowings 603,500 841,544 Repayments of long-term borrowings ( 500,827 ) ( 631,000 ) Proceeds from short-term borrowings — 78 Repayments of short-term borrowings ( 7,675 ) ( 6 ) Proceeds from issuances of common stock 9,541 6,201 Common stock repurchases ( 24,801 ) — Taxes paid on vested restricted stock ( 25,335 ) ( 24,334 ) Cash dividends, including to noncontrolling interests ( 35,718 ) ( 25,618 ) Net cash provided by financing activities 18,685 166,865 Effect of Exchange Rate Changes 36,493 ( 7,275 ) Net Decrease in Cash and Cash Equivalents ( 25,412 ) ( 11,856 ) Cash and Cash Equivalents at the Beginning of the Period 862,424 631,068 Cash and Cash Equivalents at the End of the Period $ 837,012 $ 619,212 See the accompanying Notes to Consolidated Financial Statements – Unaudited. Page 8 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation Unless the context otherwise requires: • References herein to “Jacobs” are to Jacobs Engineering Group Inc. and its predecessors; • References herein to the “Company”, “we”, “us” or “our” are to Jacobs Engineering Group Inc. and its consolidated subsidiaries; and • References herein to the “Group” are to the combined economic interests and activities of the Company and the persons and entities holding noncontrolling interests in our consolidated subsidiaries. The accompanying consolidated financial statements and financial information included herein have been prepared pursuant to the interim period reporting requirements of Form 10-Q. Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted. Readers of this Quarterly Report on Form 10-Q should also read our consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended October 2, 2020 (“2020 Form 10-K”). In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of our consolidated financial statements at January 1, 2021, and for the three months ended January 1, 2021. Our interim results of operations are not necessarily indicative of the results to be expected for the full fiscal year. Effective the beginning of fiscal first quarter 2020, the Company adopted ASU 2016-02, Leases (" ASC 842"), including the subsequent ASU's that amended and clarified the related guidance. The Company adopted ASC 842 using a modified retrospective approach, and accordingly the new guidance was applied to leases that existed or were entered into after the first day of adoption without adjusting the comparative periods presented. Please refer to Note-13 Leases for required disclosures related to leases. On November 24, 2020, a subsidiary of Jacobs completed the acquisition of Buffalo Group LLC ("Buffalo Group"), a leader in advanced cyber and intelligence solutions. The Company paid total consideration of $ 212.8 million, which was comprised of approximately $ 181.4 million in cash to the former owners of Buffalo Group and the assumption of Buffalo Group's debt of approximately $ 7.7 million and $ 23.7 million in other assumed liabilities. The Company repaid all of the assumed Buffalo Group debt by the end of the first fiscal quarter of 2021. The Company has recorded its preliminary purchase price allocation associated with the acquisition, which is summarized in Note 15- Business Combinations . On March 6, 2020, a subsidiary of Jacobs completed the acquisition of the nuclear consulting, remediation and program management business of John Wood Group, a U.K.-based energy services company, 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 price allocation associated with the acquisition, which is summarized in Note 15- Business Combinations . 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 represents a strategic shift that had a major effect on our operations and financial results. As such, the financial results of the ECR business are reflected in our unaudited Consolidated Statements of Earnings as discontinued operations for all periods presented. As of October 2, 2020, all of the ECR business to be sold under the terms of the ECR sale had been conveyed to Worley and as such, no amounts remain held for sale. For further discussion, see Note 16- Sale of Energy, Chemicals and Resources ("ECR") Business to the consolidated financial statements. Page 9 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 2. Use of Estimates and Assumptions The preparation of financial statements in conformity with U.S. GAAP requires us to employ estimates and make assumptions that affect the reported amounts of certain assets and liabilities, the revenues and expenses reported for the periods covered by the accompanying consolidated financial statements, and certain amounts disclosed in these Notes to the Consolidated Financial Statements. Although such estimates and assumptions are based on management’s most recent assessment of the underlying facts and circumstances utilizing the most current information available and past experience including considerations for potential impacts of the continuing coronavirus (COVID-19) pandemic, actual results could differ significantly from those estimates and assumptions. Our estimates, judgments, and assumptions are evaluated periodically and adjusted accordingly. Please refer to Note 2- Significant Accounting Policies of Notes to Consolidated Financial Statements included in our 2020 Form 10-K for a discussion of other significant estimates and assumptions affecting our consolidated financial statements. 3. Fair Value and Fair Value Measurements Certain amounts included in the accompanying consolidated financial statements are presented at “fair value.” Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as of the date fair value is determined (the “measurement date”). When determining fair value, we consider the principal or most advantageous market in which we would transact, and we consider only those assumptions we believe a typical market participant would consider when pricing an asset or liability. In measuring fair value, we use the following inputs in the order of priority indicated: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than quoted prices in active markets included in Level 1, such as (i) quoted prices for similar assets or liabilities; (ii) quoted prices in markets that have insufficient volume or infrequent transactions (e.g., less active markets); and (iii) model-driven valuations in which all significant inputs are observable or can be derived principally from, or corroborated with, observable market data for substantially the full term of the asset or liability. Level 3 - Unobservable inputs to the valuation methodology that are significant to the fair value measurement. Please refer to Note 2- Significant Accounting Policies of Notes to Consolidated Financial Statements included in our 2020 Form 10-K for a more complete discussion of the various items within the consolidated financial statements measured at fair value and the methods used to determine fair value. Please also refer to Note 16- Sale of Energy, Chemicals and Resources for discussion regarding the Company's investment in Worley ordinary shares and Note 18- Commitments and Contingencies and Derivative Financial Instruments for discussion regarding the Company's derivative instruments. The net carrying amounts of cash and cash equivalents, trade receivables and payables and short-term debt approximate fair value due to the short-term nature of these instruments. See Note 12- Borrowings for a discussion of the fair value of long-term debt. 4. New Accounting Pronouncements ASU 2017-04, Simplifying the Test for Goodwill Impairment, is effective for fiscal years beginning after December 15, 2019. ASU 2017-04 removed the second step of the goodwill impairment test, which requires a hypothetical purchase price allocation. An entity will now recognize a goodwill impairment charge for the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the amount of goodwill allocated to the reporting unit. The adoption of ASU 2017-04 did not have a material impact on the Company's financial position, results of operations or cash flows. Page 10 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) ASU No. 2016-13, Financial Instruments - Credit Losses ("ASC 326"): Measurement of Credit Losses on Financial Instruments requires entities to use a current lifetime expected credit loss methodology to measure impairments of certain financial assets. Using this methodology will result in earlier recognition of losses than under the current incurred loss approach, which requires waiting to recognize a loss until it is probable of having been incurred. There are other provisions within the standard that affect how impairments of other financial assets may be recorded and presented, and that expand disclosures. This standard is effective beginning with the current fiscal quarter. The adoption of ASU 326 did not have a material impact on the Company's financial position, results of operations or cash flows. 5. Revenue Accounting for Contracts Disaggregation of Revenues Our revenues are principally derived from contracts to provide a diverse range of technical, professional, and construction services to a large number of industrial, commercial, and governmental clients. We provide a broad range of engineering, design, and architectural services; construction and construction management services; operations and maintenance services; and process, scientific, and systems consulting services. We provide our services through offices and subsidiaries located primarily in North America, South America, Europe, the Middle East, India, Australia, Africa, and Asia. We provide our services under cost-reimbursable and fixed-price contracts. Our contracts are with many different customers in numerous industries. Refer to Note 19- Segment Information for additional information on how we disaggregate our revenues by reportable segment. The following table further disaggregates our revenue by geographic area for the three months ended January 1, 2021 and December 27, 2019 (in thousands): Three Months Ended January 1, 2021 December 27, 2019 Revenues: United States $ 2,457,041 $ 2,532,716 Europe 639,315 551,272 Canada 55,627 55,396 Asia 27,405 30,440 India 14,548 5,980 Australia and New Zealand 137,408 129,194 Middle East and Africa 50,492 55,051 Total $ 3,381,836 $ 3,360,049 Contract Liabilities Contract liabilities represent amounts billed to clients in excess of revenue recognized to date. Revenue recognized for the three months ended January 1, 2021 and December 27, 2019 that was included in the contract liability balance on October 2, 2020 and September 27, 2019, respectively was $ 259.0 million and $ 244.1 million, respectively. Remaining Performance Obligations The Company’s remaining performance obligations as of January 1, 2021 represent a measure of the total dollar value of work to be performed on contracts awarded and in progress. The Company had approximately $ 17.3 billion in remaining performance obligations as of January 1, 2021. The Company expects to recognize approximately 44 % of our remaining performance obligations into revenue within the next twelve months and the remaining 56 % thereafter. Although remaining performance obligations reflect business that is considered to be firm, cancellations, scope adjustments, foreign currency exchange fluctuations or deferrals may occur that impact their volume or the expected timing of their recognition. Remaining performance obligations are adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate. Page 11 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 6. Earnings Per Share and Certain Related Information Basic and diluted earnings per share (“EPS”) are computed using the two-class method, which is an earnings allocation method that determines EPS for common shares and participating securities. The undistributed earnings are allocated between common shares and participating securities as if all earnings had been distributed during the period. Participating securities and common shares have equal rights to undistributed earnings. Net earnings used for the purpose of determining basic and diluted EPS is determined by taking net earnings, less earnings available to participating securities. During the three months ended January 1, 2021, the Company did not have any outstanding participating securities. The following table reconciles the denominator used to compute basic EPS to the denominator used to compute diluted EPS for the three months ended January 1, 2021 and December 27, 2019 (in thousands): Three Months Ended January 1, 2021 December 27, 2019 Numerator for Basic and Diluted EPS: Net earnings attributable to Jacobs from continuing operations $ 257,062 $ 179,423 Net earnings from continuing operations allocated to participating securities — ( 92 ) Net earnings from continuing operations allocated to common stock for EPS calculation $ 257,062 $ 179,331 Net earnings attributable to Jacobs from discontinued operations $ ( 14 ) $ 77,587 Net earnings from discontinued operations allocated to participating securities — ( 40 ) Net earnings from discontinued operations allocated to common stock for EPS calculation $ ( 14 ) $ 77,547 Net earnings allocated to common stock for EPS calculation $ 257,048 $ 256,878 Denominator for Basic and Diluted EPS: Weighted average basic shares 129,968 133,202 Shares allocated to participating securities — ( 68 ) Shares used for calculating basic EPS attributable to common stock 129,968 133,134 Effect of dilutive securities: Stock compensation plans 1,182 1,484 Shares used for calculating diluted EPS attributable to common stock 131,150 134,618 Net Earnings Per Share: Basic Net Earnings from Continuing Operations Per Share $ 1.98 $ 1.35 Basic Net Earnings from Discontinued Operations Per Share $ — $ 0.58 Basic Earnings Per Share $ 1.98 $ 1.93 Diluted Net Earnings from Continuing Operations Per Share $ 1.96 $ 1.33 Diluted Net Earnings from Discontinued Operations Per Share $ — $ 0.58 Diluted Earnings Per Share $ 1.96 $ 1.91 Share Repurchases On January 17, 2019, the Company’s Board of Directors authorized a share repurchase program of up to $ 1.0 billion of the Company’s common st ock, to expire on January 16, 2022 (the "2019 Repurchase Authorization"). On January 16, 2020, the Company's Board of Directors authorized an additional share repurchase program of up to $ 1.0 billion of the Company's common stock, to expire on January 15, 2023 (the "2020 Repurchase Authorization"). Page 12 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) The following table summarizes the activity under the 2019 and 2020 Repurchase Authorizations in the first quarter of fiscal 2021: Amount Authorized (2019 and 2020 Repurchase Authorizations) Average Price Per Share (1) Shares Repurchased Total Shares Retired $ 2,000,000,000 $ 98.81 251,001 251,001 (1) Includes commissions paid and calculated at the average price per share As a precautionary measure in light of the COVID-19 pandemic, the Company temporarily suspended purchases under the share repurchase plan in March 2020, with such suspension remaining in effect through the fiscal third quarter of 2020. During the fourth fiscal quarter of 2020, the Company resumed share repurchases on a limited basis while we continue to monitor developments in fiscal 2021 with the pandemic. As of January 1, 2021, the Company h as $ 33.1 million rema ining under the 2019 Repurchase Authorization and $ 1.0 billion remaining under the 2020 Repurchase Authorization. The share repurchase programs do not obligate the Company to purchase any shares. Share repurchases may be executed through various means including, without limitation, accelerated share repurchases, open market transactions, privately negotiated transactions, purchases pursuant to Rule 10b5-1 plans or otherwise. The authorization for the share repurchase programs may be terminated, increased or decreased by the Company’s Board of Directors in its discretion at any time. The timing, amount and manner of share repurchases may depend upon market conditions and economic circumstances, availability of investment opportunities, the availability and costs of financing, currency fluctuations, the market price of the Company's common stock, other uses of capital and other factors. Dividend Program On January 27, 2021, the Company’s Board of Directors declared a quarterly dividend of $ 0.21 per share of the Company’s common stock to be paid on March 26, 2021, to shareholders of record on the close of business on February 26, 2021. Future dividend declarations are subje ct to review and approval by the Company’s Board of Directors. Dividends pai d through the first fiscal quarter of 2021 and the preceding fiscal year are as follows: Declaration Date Record Date Payment Date Cash Amount (per share) September 17, 2020 October 2, 2020 October 30, 2020 $ 0.19 July 9, 2020 July 24, 2020 August 21, 2020 $ 0.19 May 5, 2020 May 20, 2020 June 17, 2020 $ 0.19 January 16, 2020 January 31, 2020 February 28, 2020 $ 0.19 September 19, 2019 October 4, 2019 November 1, 2019 $ 0.17 7. Goodwill and Intangibles The carrying value of goodwill associated with continuing operations and appearing in the accompanying Consolidated Balance Sheets at January 1, 2021 and October 2, 2020 was as follows (in thousands): Critical Mission Solutions People & Places Solutions Total Balance October 2, 2020 $ 2,409,081 $ 3,230,010 $ 5,639,091 Acquired 139,550 — 139,550 Foreign Exchange Impact 12,379 17,170 29,549 Post-Acquisition Adjustments 294 — 294 Balance January 1, 2021 $ 2,561,304 $ 3,247,180 $ 5,808,484 Page 13 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) The following table provides certain information related to the Company’s acquired intangibles in the accompanying Consolidated Balance Sheets at January 1, 2021 and October 2, 2020 (in thousands): Customer Relationships, Contracts and Backlog Developed Technology Trade Names Total Balances October 2, 2020 $ 614,045 $ 43,572 $ 723 $ 658,340 Amortization ( 22,063 ) ( 985 ) ( 107 ) ( 23,155 ) Acquired 71,000 — — 71,000 Foreign currency translation 9,112 339 5 9,456 Balances January 1, 2021 $ 672,094 $ 42,926 $ 621 $ 715,641 The following table presents estimated amortization expense of intangible assets for the remainder of fiscal 2021 and for the succeeding years. Fiscal Year (in millions) 2021 $ 75.4 2022 98.8 2023 98.6 2024 98.6 2025 98.2 Thereafter 246.0 Total $ 715.6 8. Receivables and contract assets The following table presents the components of receivables appearing in the accompanying Consolidated Balance Sheets at January 1, 2021 and October 2, 2020, as well as certain other related information (in thousands): January 1, 2021 October 2, 2020 Components of receivables and contract assets: Amounts billed, net $ 1,384,558 $ 1,294,204 Unbilled receivables and other 1,439,632 1,449,184 Contract assets 441,070 423,922 Total receivables and contract assets, net $ 3,265,260 $ 3,167,310 Other information about receivables: Amounts due from the United States federal government, included above, net of advanced billings $ 637,937 $ 600,207 Amounts billed, net consist of amounts invoiced to clients in accordance with the terms of our client contracts and are shown net of an allowance for doubtful accounts. We anticipate that substantially all of such billed amounts will be collected over the next twelve months. Unbilled receivables and other, which represent an unconditional right to payment subject only to the passage of time, are reclassified to amounts billed when they are billed under the terms of the contract. Prior to adoption of ASC 606, receivables related to contractual milestones or achievement of performance-based targets were included in unbilled receivables. These are now included in contract assets. We anticipate that substantially all of such unbilled amounts will be billed and collected over the next twelve months. Page 14 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Contract assets represent unbilled amounts where the right to payment is subject to more than merely the passage of time and includes performance-based incentives and services provided ahead of agreed contractual milestones. Contract assets are transferred to unbilled receivables when the right to consideration becomes unconditional and are transferred to amounts billed upon invoicing. The increase in contract assets was a result of normal business activity and not materially impacted by any other factors. 9. Accumulated Other Comprehensive Income The following table presents the Company's roll forward of accumulated other comprehensive income (loss) after-tax for the three months ended January 1, 2021 (in thousands): Change in Pension Liabilities Foreign Currency Translation Adjustment Gain/(Loss) on Cash Flow Hedges Total Balance at October 2, 2020 $ ( 498,726 ) $ ( 419,715 ) $ ( 14,616 ) $ ( 933,057 ) Other comprehensive income (loss) ( 20,179 ) 71,893 1,968 53,682 Reclassifications from accumulated other comprehensive income (loss) — — 1,836 1,836 Balance at January 1, 2021 $ ( 518,905 ) $ ( 347,822 ) $ ( 10,812 ) $ ( 877,539 ) 10. Income Taxes The Company’s effective tax rates from continuing operations for the three months ended January 1, 2021 and December 27, 2019 were 24.6 % and 27.0 %, respectively. The Company’s effective tax rate from continuing operations for the three months ended January 1, 2021 was lower than the corresponding rate in the prior period primarily due to one-time income tax charges associated with partnership interest basis differences generated during the quarter ending December 27, 2019. For the three months ended January 1, 2021, the effective tax rate was impacted by a $ 1.4 million benefit from an Internal Revenue Code section 179D energy credit, a $ 2.2 million excess tax benefit attributable to stock compensation, and a $ 5.0 million benefit related to a change in the Company’s assertion about indefinite reinvestment of certain foreign unremitted earnings in Canada. The Company is continuing to accrue taxes related to all other foreign earnings. See Note 16- 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. 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. 11. Joint Ventures, VIEs and Other Investments We execute certain contracts jointly with third parties through various forms of joint ventures. Although the joint ventures own and hold the contracts with the clients, the services required by the contracts are typically performed by us and our joint venture partners, or by other subcontractors under subcontracting agreements with the joint ventures. Many of these joint ventures are formed for a specific project. The assets of our joint ventures generally consist almost entirely of cash and receivables (representing amounts due from clients), and the liabilities of our joint ventures generally consist almost entirely of amounts due to the joint venture partners (for services provided by the partners to the joint ventures under their individual subcontracts) and other subcontractors. Many of the joint ventures are deemed to be variable interest entities (“VIE”) because they lack sufficient equity to finance the activities of the joint venture. Page 15 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) The assets of a joint venture are restricted for use to the obligations of the particular joint venture and are not available for general operations of the Company. Our risk of loss on these arrangements is usually shared with our partners. The liability of each partner is usually joint and several, which means that each partner may become liable for the entire risk of loss on the project. Furthermore, on some of our projects, the Company has granted guarantees that may encumber both our contracting subsidiary company and the Company for the entire risk of loss on the project. The Company is unable to estimate the maximum potential amount of future payments that we could be required to make under outstanding performance guarantees related to joint venture projects due to a number of factors, including but not limited to, the nature and extent of any contractual defaults by our joint venture partners, resource availability, potential performance delays caused by the defaults, the location of the projects, and the terms of the related contracts. Refer to Note 18 - Commitments and Contingencies and Derivative Financial Instruments, for further discussion relating to performance guarantees. For consolidated joint ventures, the entire amount of the services performed, and the costs associated with these services, including the services provided by the other joint venture partners, are included in the Company's result of operations. Likewise, the entire amount of each of the assets and liabilities are included in the Company’s Consolidated Balance Sheets. For the consolidated VIEs, the carrying value of assets and liabilities was $ 297.6 million and $ 217.9 million, respectively, as of January 1, 2021 and $ 261.8 million and $ 190.3 million, respectively, as of October 2, 2020. There are no consolidated VIEs that have debt or credit facilities. Unconsolidated joint ventures are accounted for under proportionate consolidation or the equity method. Proportionate consolidation is used for joint ventures that include unincorporated legal entities and activities of the joint venture that are construction-related. For those joint ventures accounted for under proportionate consolidation, only the Company’s pro rata share of assets, liabilities, revenue, and costs are included in the Company’s balance sheet and results of operations. For the proportionate consolidated VIEs, the carrying value of assets and liabilities was $ 67.2 million and $ 65.9 million, respectively, as of January 1, 2021, and $ 64.1 million and $ 63.0 million, respectively, as of October 2, 2020. For those joint ventures accounted for under the equity method, the Company's investment balances for the joint venture are included in Other Noncurrent Assets: Miscellaneous on the balance sheet and the Company’s pro rata share of net income is included in revenue. In limited cases, there are basis differences between the equity in the joint venture and the Company's investment created when the Company purchased its share of the joint venture. These basis differences are amortized based on an internal allocation to underlying net assets, excluding allocations to goodwill. As of January 1, 2021, the Company’s equity method investments exceeded its share of venture net assets by $ 44 million. Our investments in equity method joint ventures on the Consolidated Balance Sheets as of January 1, 2021 and October 2, 2020 were $ 140.2 million and $ 161.3 million, respectively. During the three months ended January 1, 2021 and December 27, 2019, we recognized income from equity method joint ventures of $ 18.3 million and $ 17.3 million, respectively. Accounts receivable from unconsolidated joint ventures accounted for under the equity method is $ 5.4 million and $ 8.3 million as of January 1, 2021 and October 2, 2020, respectively. The Company currently holds a 24.5 % interest in AWE Management Ltd ("AWE ML") that is accounted for under the equity method, and the carrying value of the Company’s investment as of October 2, 2020 was approximately $ 38 million. As of October 2, 2020, AWE ML was under a contractual operating arrangement with the UK Ministry of Defence (MoD) with multiple years remaining under the arrangement. Subsequent to year end, on November 2, 2020, the MoD unexpectedly announced plans to change its current operating agreements with AWE ML that would result in the early termination of the current contract in 2021. During the three months ended January 1, 2021, the Company recorded an other-than-temporary impairment on its investment in AWE ML in the amount of $ 27.9 million, which is included in miscellaneous income (expense), net in the consolidated statement of earnings. At October 2, 2020 , the Company held a cost method investment in C3.ai, Inc. ("C3") of approximately $ 2.5 million. On December 9, 2020, C3 completed an initial public offering and as a result the Company now carries its investment in C3 at fair value, with mark to market changes reflected in net income as it is an investment in equity securities with a readily determinable fair value based on quoted market prices. In connection with the IPO, the Company became subject to a 180-day lock-up period, which restricts sales of the shares, subject to certain conditions that permit partial share sales based on C3's share performance during the lock-up period. The fair value of the Company's investment at January 1, 2021 was $ 85.2 million and is included in investment in equity securities in the consolidated balance sheet. Dividend income and unrealized gains and losses on changes in fair value of C3 shares are recognized in miscellaneous income (expense), net in the consolidated statement of earnings. Quoted market prices are available for these securities in an active market, however a discount is applied to account for the lock-up period restrictions and therefore the investment is categorized as a Level 2 input. Page 16 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 12. Borrowings Long-Term Debt At January 1, 2021 and October 2, 2020, long-term debt consisted of the following (principal amounts in thousands): Interest Rate Maturity January 1, 2021 October 2, 2020 Revolving Credit Facility LIBOR + applicable margin (1) March 2024 $ 268,794 $ 152,794 Term Loan Facility LIBOR + applicable margin (2) March 2025 1,029,889 1,025,826 Fixed-rate notes due: Senior Notes, Series A 4.27 % May 2025 190,000 190,000 Senior Notes, Series B 4.42 % May 2028 180,000 180,000 Senior Notes, Series C 4.52 % May 2030 130,000 130,000 Less: Deferred Financing Fees ( 1,614 ) ( 1,679 ) Total Long-term debt, net $ 1,797,069 $ 1,676,941 (1) Depending on the Company’s Consolidated Leverage Ratio (as defined in the credit agreement governing the Revolving Credit Facility (defined below)), borrowings under the Revolving Credit Facility bear interest at either a eurocurrency rate plus a margin of between 0.875 % and 1.625 % or a base rate plus a margin of between 0 % and 0.625 %. including applicable margins The applicable LIBOR rates at January 1, 2021 and October 2, 2020 were approxim ately 1.16 % a nd 1.39 %. (2) Depending on the Company’s Consolidated Leverage Ratio (as defined in the credit agreement governing the Term Loan Facility (defined below)), borrowings under the Term Loan Facility bear interest at either a eurocurrency rate plus a margin of between 0.875 % and 1.5 % or a base rate plus a margin of between 0 % and 0.5 % including applicable margins. Th e applicable LIBOR rates at January 1, 2021 and October 2, 2020 were approximately 1.11 % and 1.37 % . On February 7, 2014, Jacobs and certain of its subsidiaries entered into a $ 1.6 billion long-term unsecured, revolving credit facility (as amended, the “2014 Revolving Credit Facility”) with a syndicate of U.S. and international banks and financial institutions. On March 27, 2019, the Company entered into a second amended and restated credit agreement (the "Revolving Credit Facility"), which amended and restated the 2014 Revolving Credit Facility by, among other things, (a) extending the maturity date of the credit facility to March 27, 2024, (b) increasing the facility amount to $ 2.25 billion (with an accordion feature that allows a further increase of the facility amount up to $ 3.25 billion), (c) eliminating the covenants restricting investments, joint ventures and acquisitions by the Company and its subsidiaries and (d) adjusting the financial covenants to eliminate the net worth covenant upon the removal of the same covenant from the Company’s existing Note Purchase Agreement (defined below). We were in compliance with the covenants under the Revolving Credit Facility at January 1, 2021. On December 16, 2020, Jacobs entered into a first amendment to the Revolving Credit Facility, which provides for, among other things, (a) administrative changes allowing a one-time limited conditionality draw under the Revolving Credit Facility in connection with the consummation of the proposed acquisition by the Company, indirectly through a subsidiary of the Company, of a majority interest in PA Consulting Group Limited, a private limited company organized under the laws of England and Wales and (b) an increase in the interest rate applicable margin to 1.625 % per annum if the Consolidated Leverage Ratio (as defined in the Revolving Credit Facility) of the Company is equal to or greater than 3.00 to 1.00. The Revolving Credit Facility permits the Company to borrow under two separate tranches in U.S. dollars, certain specified foreign currencies, and any other currency that may be approved in accordance with the terms of the Revolving Credit Facility. The Revolving Credit Facility also provides for a financial letter of credit sub facility of $ 400.0 million, permits performance letters of credit, and provides for a $ 50.0 million sub facility for swing line loans. Letters of credit are subject to fees based on the Company’s Consolidated Leverage Ratio. The Company pays a facility fee of between 0.08 % and 0.20 % per annum depending on the Company’s Consolidated Leverage Ratio. Page 17 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) On March 25, 2020, the Company entered into an unsecured term loan facility (the “Term Loan Facility”) with a syndicate of financial institutions as lenders. Under the Term Loan Facility, the Company borrowed an aggregate principal amount of $ 730.0 million and one of the Company's U.K. subsidiaries borrowed an aggregate principal amount of £ 250.0 million. The proceeds of the term loans were used to repay an existing term loan with a maturity date of June 2020 and for general corporate purposes. The Term Loan Facility contains affirmative and negative covenants and events of default customary for financings of this type that are consistent with those included in the Revolving Credit Facility. During fiscal 2020, the Company entered into interest rate and cross currency derivative contracts to swap a portion of our variable rate debt to fixed rate debt. See Note 18- Commitments and Contingencies and Derivative Financial Instruments for discussion regarding the Company's derivative instruments. On March 12, 2018, Jacobs entered into a note purchase agreement (as amended, the "Note Purchase Agreement") with respect to the issuance and sale in a private placement transaction o f $ 500 million in the aggregate principal amount of the Company’s senior notes in three series (collectively, the “Senior Notes”). The Note Purchase Agreement provides that if the Company's consolidated leverage ratio exceeds a certain amount, the interest on the Senior Notes may increase by 75 basis points. The Senior Notes may be prepaid at any time subject to a make-whole premium. The sale of the Senior Notes closed on May 15, 2018. The Company used the net proceeds from the offering of Senior Notes to repay certain existing indebtedness and for other general corporate purposes. The Note Purchase Agreement contains affirmative, negative and financial covenants customary for financings of this type, including, among other things, covenants to maintain a minimum consolidated net worth and maximum consolidated leverage ratio and limitations on certain other liens, mergers, dispositions and transactions with affiliates. In addition, the Note Purchase Agreement contains customary events of default. We were in compliance with the covenants under the Note Purchase Agreement at January 1, 2021. We believe the carrying value of the Revolving Credit Facility, the Term Loan Facility and other debt outstanding approximates fair value based on the interest rates and scheduled maturities applicable to the outstanding borrowings. The fair value of the Senior Notes is estimated to be $ 547.8 million at January 1, 2021, based on Level 2 inputs. The fair value is determined by discounting future cash flows using interest rates available for issuances with sim ilar terms and average maturities. On January 20, 2021, Jacobs entered into a delayed draw term loan facility (the "Delayed Draw Term Loan Facility) with a syndicate of financial institutions as lenders. The Delayed Draw Term Loan Facility matures on the third anniversary of the date of closing. Under the Delayed Draw Term Loan Facility, the Company may borrow up to $ 200 million of U.S. dollar denominated term loans and up to £ 650 million U.K. pound sterling denominated loans. The proceeds of the term loans may be used to fund the acquisition of a majority interest in PA Consulting Group Limited, refinance certain existing indebtedness and pay related transaction costs and expenses. The Delayed Draw Term Loan Facility contains affirmative and negative covenants and events of default customary for financings of this type and that are consistent with those included in the Revolving Credit Facility and the Term Loan Facility. Depending on the Company’s consolidated leverage ratio, borrowings under the Delayed Draw Term Loan Facility will bear interest at either a eurocurrency rate plus a margin of between 0.875 % and 1.625 % or a base rate plus a margin of between 0 % and 0.625 %. From the date that is 90 days after the closing of the Delayed Draw Term Loan Facility, the Company must pay a ticking fee with respect to undrawn commitments under the facility at a rate that will range between 0.80 % and 0.225 % based on the Company’s Consolidated Leverage Ratio. The Company has issue d $ 2.3 million in letters of credit under the Revolving Credit Facility, leaving $ 1.98 billion of available borrowing capacity under the Revolving Credit Facility at January 1, 2021. In addition, the Company had issued $ 249.8 million u nder separate, committed and uncommitted letter-of-credit facilities for total issued letters of credit of $ 252.1 million a t January 1, 2021. 13. Leases The Company’s right-of use assets and lease liabilities relate to real estate, project assets used in connection with long-term construction contracts, IT assets and vehicles. The Company’s leases have remaining lease terms of one year to thirteen years . The Company’s lease obligations are primarily for the use of office space and are primarily operating leases. Certain of the Company’s leases contain renewal, extension, or termination options. The Company assesses each option on an individual basis and will only include options reasonably certain of exercise in the lease term. The Company generally considers the base term to be the term provided in the contract. None of the Company’s lease agreements contain material options to purchase the lease property, material residual value guarantees, or material restrictions or covenants. Page 18 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Long-term project asset and vehicle leases (leases with terms greater than twelve months), along with all real estate and IT asset leases, are recorded on the consolidated balance sheet at the present value of the minimum lease payments not yet paid. Because the Company primarily acts as a lessee and the rates implicit in its leases are not readily determinable, the Company generally uses its incremental borrowing rate on the lease commencement date to calculate the present value of future lease payments. Certain leases include payments that are based solely on an index or rate. These variable lease payments are included in the calculation of the right-of-use ("ROU") asset and lease liability and are initially measured using the index or rate at the lease commencement date. Other variable lease payments, such as payments based on use and for property taxes, insurance, or common area maintenance that are based on actual assessments are excluded from the ROU asset and lease liability and are expensed as incurred. In addition to the present value of the future lease payments, the calculation of the ROU asset also includes any deferred rent, lease pre-payments and initial direct costs of obtaining the lease, such as commissions. Certain lease contracts contain nonlease components such as maintenance and utilities. The Company has made an accounting policy election, as allowed under ASC 842-10-15-37 and discussed above, to capitalize both the lease component and nonlease components of its contracts as a single lease component for all of its right-of-use assets. Short-term project asset and vehicle leases (project asset and vehicle leases with an initial term of twelve months or less or leases that are cancellable by the lessee and lessor without significant penalties) are not recorded on the consolidated balance sheet and are expensed on a straight-line basis over the lease term. The majority of the Company’s short-term leases relate to equipment used on construction projects. These leases are entered into at agreed upon hourly, daily, weekly or monthly rental rates for an unspecified duration and typically have a termination for convenience provision. Such equipment leases are considered short-term in nature unless it is reasonably certain that the equipment will be leased for a term greater than twelve months. The components of lease expense (reflected in selling, general and administrative expenses) for th e three months ended January 1, 2021 and December 27, 2019 were as follows (in thousands): Three Months Ended January 1, 2021 December 27, 2019 Lease cost Operating lease cost $ 39,444 $ 44,080 Variable lease cost 8,183 8,597 Sublease income ( 3,396 ) ( 3,334 ) Total lease cost $ 44,231 $ 49,343 Supplemental information related to the Company's leases for the three months ended January 1, 2021 was as follows (in thousands): Three Months Ended Cash paid for amounts included in the measurements of lease liabilities $ 48,909 Right-of-use assets obtained in exchange for new operating lease liabilities $ 27,569 Weighted average remaining lease term - operating leases 7 years Weighted average discount rate - operating leases 2.7 % Page 19 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) Total remaining lease payments under the Company's leases for the remainder of fiscal 2021 and for the succeeding years is as follows (in thousands): Fiscal Year Operating Leases 2021 $ 141,552 2022 170,667 2023 151,661 2024 132,968 2025 111,438 Thereafter 277,047 985,333 Less Interest ( 85,357 ) $ 899,976 14. Pension and Other Postretirement Benefit Plans The following table presents the components of net periodic pension benefit recognized in earnings during the three months ended January 1, 2021 and December 27, 2019 (in thousands): Three Months Ended January 1, 2021 December 27, 2019 Component: Service cost $ 1,735 $ 1,465 Interest cost 11,785 13,031 Expected return on plan assets ( 25,427 ) ( 27,665 ) Amortization of previously unrecognized items 4,032 3,110 Plan Amendment and settlement loss (gain) — 2,651 Total net periodic pension benefit recognized $ ( 7,875 ) $ ( 7,408 ) The service cost component of net periodic pension benefit is presented in the same line item as other compensation costs (direct cost of contracts and selling, general and administrative expenses) and the other components of net periodic pension expense are presented in miscellaneous income (expense), net on the Consolidated Statements of Earnings. In the first fiscal quarter of 2020, the Company incurred a settlement loss on one of its U.S. defined benefit plans of approximately $ 2.7 million. The following table presents certain information regarding the Company’s cash contributions to our pension plans for fiscal 2021 (in thousands): Cash contributions made during the first three months of fiscal 2021 $ 9,096 Cash contributions projected for the remainder of fiscal 2021 28,942 Total $ 38,038 Page 20 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 15. Business Combinations Buffalo Group On November 24, 2020, a subsidiary of Jacobs completed the acquisition of Buffalo Group, a leader in advanced cyber and intelligence solutions. The Company paid total consideration of $ 212.8 million, which was comprised of approximately $ 181.4 million in cash to the former owners of Buffalo Group and the assumption of Buffalo Group's debt of approximately $ 7.7 million and $ 23.7 million in other assumed liabilities. The Company repaid all of the assumed Buffalo Group debt by the end of the first fiscal quarter of 2021. Additionally, the Company recorded contingent consideration of $ 14.6 million which is expected to be settled in fiscal 2022. The acquisition of Buffalo Group allows Jacobs to further expand its cyber and intelligence solutions offering to government clients. The following summarizes the fair values of The Buffalo Group's assets acquired and liabilities assumed as of the acquisition date (in millions): Assets Cash and cash equivalents $ 8.4 Receivables 19.2 Property, equipment and improvements, net 2.3 Goodwill 139.6 Identifiable intangible assets 71.0 Prepaid expenses and other current assets 6.2 Total Assets $ 246.7 Liabilities Accounts payable, accrued expenses and other current liabilities $ 46.9 Contingent consideration 14.6 Other long term liabilities 3.8 Total Liabilities 65.3 Net assets acquired $ 181.4 The purchase price allocation is based upon preliminary information and is subject to change when additional information is obtained. Goodwill recognized results from a substantial assembled workforce, which does not qualify for separate recognition, as well as expected future synergies from combining operations. All of the goodwill recognized is expected to be deductible for tax purposes, given the acquisition was structured as an asset acquisition. The Company has not completed its final assessment of the fair values of Buffalo Group's assets acquired and liabilities assumed. The final purchase price allocation could result in adjustments to certain assets and liabilities, including the residual amount allocated to goodwill. Identified intangibles are customer relationships, contracts and backlog and have estimated lives of 9 years. Fair value measurements relating to the Buffalo Group are made primarily using Level 3 inputs including discounted cash flow and Monte Carlo simulation techniques. Fair value for the identified intangible assets is estimated using inputs primarily for the income approach, which include the use of both the multiple period excess earnings method and the relief from royalties method. The significant assumptions used in estimating fair value include (i) the estimated life the asset will contribute to cash flows, such as attrition rate of customers or remaining contractual terms, (ii) profitability and (iii) the estimated discount rate that reflects the level of risk associated with receiving future cash flows. Other personal property assets, such as furniture, fixtures and equipment, are valued using the cost approach, which is based on replacement or reproduction costs of the asset less depreciation. The fair value of the contingent consideration is estimated using a Monte Carlo simulation and the significant assumptions used include projections of revenues for Buffalo Group through fiscal 2021 and probabilities of meeting those projections. No summarized unaudited pro forma results are provided for the Buffalo Group due to the immateriality of this acquisition relative to the Company's consolidated financial position and results of operations. Page 21 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) John Wood Group's Nuclear Business On March 6, 2020, a subsidiary of Jacobs completed the acquisition of the nuclear consulting, remediation and program management business of John Wood Group, a U.K.-based energy services company, for an enterprise value of £ 246 million, or approximately $ 317.9 million, less cash acquired of $ 24.3 million, as updated for additional working capital adjustments. The John Wood Group nuclear business allows Jacobs to further expand its lifecycle nuclear services business. The following summarizes the fair values of John Wood Group's assets acquired and liabilities assumed as of the acquisition date (in millions): Assets Cash and cash equivalents $ 24.3 Receivables 74.2 Other current assets 5.2 Property, equipment and improvements, net 8.3 Goodwill 206.2 Identifiable intangible assets 80.0 Miscellaneous 19.4 Total Assets $ 417.6 Liabilities Accounts payable, accrued expenses and other current liabilities $ 70.7 Long term liabilities 29.0 Total Liabilities 99.7 Net assets acquired $ 317.9 The purchase price allocation is based upon preliminary information and is subject to change when additional information is obtained. Goodwill recognized results from a substantial assembled workforce, which does not qualify for separate recognition, as well as expected future synergies from combining operations. None of the goodwill recognized is expected to be deductible for tax purposes. The Company has not completed its final assessment of the fair values of John Wood Group's assets acquired and liabilities assumed. The final purchase price allocation could result in adjustments to certain assets and liabilities, including the residual amount allocated to goodwill. Identified intangibles include customer relationships, contracts and backlog and developed technology. The customer relationships, contracts and backlog intangible represents the fair value of existing contracts, underlying customer relationships and backlog. The customer relationships, contracts and backlog intangible and the developed technology intangible have lives of 12 and 15 years, respectively. Fair value measurements relating to the John Wood Group nuclear business are made primarily using Level 3 inputs including discounted cash flow techniques. Fair value is estimated using inputs primarily for the income approach, which include the use of both the multiple period excess earnings method and the relief from royalties method. The significant assumptions used in estimating fair value include (i) the estimated life the asset will contribute to cash flows, such as attrition rate of customers or remaining contractual terms, (ii) profitability and (iii) the estimated discount rate that reflects the level of risk associated with receiving future cash flows. Other personal property assets, such as furniture, fixtures and equipment, are valued using the cost approach, which is based on replacement or reproduction costs of the asset less depreciation. No summarized unaudited pro forma results are provided for the John Wood Group nuclear business due to the immateriality of this acquisition relative to the Company's consolidated financial position and results of operations. Page 22 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) PA Consulting Group Limited On November 27, 2020, the Company entered into an agreement to make an investment in PA Consulting Group Limited by acquiring approximately 65 % of its share capital in the form of preferred and common equity for an aggregate amount of £ 1.8 billion. The transaction is expected to close in the second quarter of fiscal 2021. 16. Sale of Energy, Chemicals and Resources ("ECR") Business 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 (the “ECR sale”). Discontinued Operations 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 represent a strategic shift that had a major effect on our operations and financial results. As such, the financial results of the ECR business are reflected in our unaudited Consolidated Statements of Earnings as discontinued operations for all periods presented. Additionally, assets and liabilities of the ECR business were reflected as held-for-sale in the Consolidated Balance Sheets through December 27, 2019. As of the fiscal year ended October 2, 2020, all of the ECR business to be sold under the terms of the ECR sale had been conveyed to Worley and as such, no amounts remain held for sale. Summarized Financial Information of Discontinued Operations The following table represents earnings (loss) from discontinued operations, net of tax (in thousands): For the Three Months Ended January 1, 2021 December 27, 2019 Revenues $ — $ 7,099 Direct cost of contracts — ( 4,692 ) Gross profit — 2,407 Selling, general and administrative expenses ( 19 ) 47,159 Operating (Loss) Profit ( 19 ) 49,566 Gain on sale of ECR business — 61,943 Other (expense) income, net — 1 Earnings Before Taxes from Discontinued Operations ( 19 ) 111,510 Income Tax Expense 5 ( 33,923 ) Net Earnings of the Group from Discontinued Operations $ ( 14 ) $ 77,587 Page 23 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) For the three months ended December 27, 2019, selling, general and administrative expenses included an offsetting insuranc e recovery of $ 50.0 million recorded in connection with a legal matter. The gain on sale of the ECR business of $ 61.9 million for the three months ended December 27, 2019, primarily included additional income for the release of a deferred gain upon achievement of the IT Migration Date described below in connection with the delivery to Worley of certain IT application and hardware assets related to the ECR business, as well as adjustments to the purchase price for working capital and certain other items in connection with the ECR sale. The Company expects to finalize the remaining purchase price adjustments in connection with the ECR sale before the end of fiscal 2021. Gain on Sale and Deferred Gain As a result of the ECR sale, the Company recognized a pre-tax gain of approximately $ 1.0 billion, $ 935.1 million of which was recognized in fiscal 2019, $ 110.2 million for the year ended October 2, 2020 and $— million for the three months ended January 1, 2021. Upon closing the ECR sale, the Company retained a noncontrolling interest (with significant influence) in People & Places Solutions ("P&PS")-related activities in one international legal entity acquired by Worley. The fair value of the Company’s retained interest in the net assets and liabilities of this entity was estimated at $ 33.0 million and recorded at closing. For another international legal entity, the closing and transfer of ECR-related assets to Worley were set to occur at a future date. At the time of the ECR sale, the Company allocated proceeds received to these deferred closing items on a relative fair value basis and recognized a deferred gain of $ 34.4 million. During the second fiscal quarter of 2020, the delayed transfer of the ECR-related assets and liabilities of these two international entities occurred, and as a result, previously deferred gain amounts were recognized. In addition to consideration received for the sale of the business, the proceeds received included advanced consideration for the Company to deliver IT application and related hardware assets at a future date (“IT Migration Date”) to Worley upon completion of the interim transition services, described further below. This deliverable of IT assets was considered to be a separate element of the ECR business sale transaction, and accordingly, we allocated a portion of the proceeds received of $ 95.3 million on a relative fair value basis to this separate deliverable and recognized deferred income. Upon completion and acceptance of this deliverable by Worley in December 2019, the deferred proceeds were recognized in income, along with expenses associated with any costs incurred and deferred by the Company for this deliverable. Investment in Worley Stock As discussed above, subsequent to the ECR sale, the Company holds 51.4 million in ordinary shares of Worley. Dividend income and unrealized gains and losses on changes in fair value of Worley shares are recognized in miscellaneous income (expense), net in continuing operations. The Company's investment in Worley is measured at fair value through net income as it is an equity investment with a readily determinable fair value based on quoted market prices and is $ 455.2 million at January 1, 2021 and $ 347.5 million at October 2, 2020. For the three months ended January 1, 2021 and December 27, 2019, the Company recognize d a gain of $ 107.7 million and $ 105.3 million, respectively, associated with share price and currency changes on this investment. Quoted market prices are available for these securities in an active market and therefore categorized as a Level 1 input. Transition Service Agreement Upon closing of the ECR sale, the Company entered into a Transition Services Agreement (the "TSA") with Worley pursuant to which the Company, on an interim basis, provided various services to Worley, including executive consultation, corporate, information technology, and project services. The initial term of the TSA began immediately following closing of the ECR sale on April 26, 2019 and expired in April 2020, although the parties mutually agreed to extend certain of the services for additional time periods beyond the initial term. Pursuant to the terms of the TSA, the Company received payments for the interim services which approximate costs incurred to perform the services. The Company has recognized costs recorded in SG&A expense incurred to perform the TSA, offset b y $ 0.2 million and $ 12.0 million in TSA related income for such services that is reported in miscellaneous income (expense) for the three months ended January 1, 2021 and December 27, 2019, respectively, before inclusion of certain incremental outside service support costs agreed to be shared equally by the parties . Page 24 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) 17. Restructuring and Other Charges During fiscal 2021, the Company implemented certain restructuring and integration initiatives relating to the Buffalo Group acquisition. The activities of these initiatives are expected to be substantially completed before the end of fiscal 2021. Additionally, the Company recorded an impairment on its investment in AWE during the first quarter of fiscal 2021. See related discussion in Note 11- Joint ventures, VIEs and other investments. During fiscal 2020, the Company implemented certain restructuring and separation initiatives, including the Company's fourth quarter fiscal 2020 transformation initiatives relating to real estate and other staffing programs. The activities of these initiatives are expected to continue into fiscal 2023. During fiscal 2019 and continuing into fiscal 2020, the Company implemented certain restructuring, separation and integration initiatives associated with the ECR sale, the acquisition of KeyW Holding Corporation ("KeyW"), and other related cost reduction initiatives. Additionally, in fiscal 2020, the Company implemented certain restructuring and integration initiatives associated with the acquisition of John Wood Group's nuclear business. The restructuring activities and related costs were comprised mainly of separation and lease abandonment and sublease programs, while the separation and integration activities and costs were mainly related to the engagement of consulting services and internal personnel and other related costs dedicated to the Company’s ECR-business separation and integration of KeyW and the John Wood Group’s nuclear business. The activities of these initiatives are expected to be substantially completed before the end of fiscal 2021. During the fourth fiscal quarter of 2017, the Company implemented certain restructuring and pre-integration plans associated with the then-pending acquisition of CH2M, which closed on December 15, 2017. The restructuring activities and related costs under these plans were comprised mainly of severance and lease abandonment programs, while the integration activities and costs were mainly related to the engagement of professional services and internal personnel and other related costs dedicated to the Company’s integration management efforts. Following the closing of the CH2M acquisition, these activities have continued through fiscal 2020 and are expected to be substantially completed before the end of fiscal 2022. Collectively, the above-mentioned restructuring activities are referred to as “Restructuring and other charges.” The following table summarizes the impacts of the Restructuring and other charges by LOB in connection with the CH2M, KeyW, John Wood Group's nuclear business and Buffalo Group acquisitions, the ECR sale and the Company's fourth quarter fiscal 2020 transformation initiatives relating to real estate and other staffing programs and impairment of the AWE Management Ltd. investment for the three months ended January 1, 2021 and the CH2M and KeyW acquisitions and the ECR sale for the December 27, 2019 (in thousands): Three Months Ended January 1, 2021 December 27, 2019 Critical Mission Solutions $ 3,209 $ 4,291 People & Places Solutions 5,167 10,153 Corporate 40,017 37,597 Total (1) $ 48,393 $ 52,041 (1) For the three months ended January 1, 2021 and December 27, 2019, amounts include $ 20.5 million and $ 49.7 million, respectively, in items impacting operating profit, along with items recorded in other income (expense), net, which include $( 27.9 ) million related to the impairment of our AWE Management Ltd. investment which is reflected in other income (expense) for the three months ended January 1, 2021 and the loss on settlement of the CH2M portion of the U.S. pension plan of $( 2.4 ) million for the three months ended December 27, 2019. See Note 19 - Segment Information. Page 25 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) The activity in the Company’s accrual for the Restructuring and other charges, including the program activities described above, for the three months ended January 1, 2021 is as follows (in thousands): Balance at October 2, 2020 $ 52,854 Net Charges 48,393 Payments and Usage ( 70,973 ) Balance at January 1, 2021 $ 30,274 The following table summarizes the Restructuring and other charges by major type of costs for the three months ended January 1, 2021 and December 27, 2019 (in thousands): Three Months Ended January 1, 2021 December 27, 2019 Lease Abandonments and Impairments $ 148 $ — Voluntary and Involuntary Terminations 9,503 13,153 Outside Services 7,399 31,466 Other (1) 31,343 7,422 Total $ 48,393 $ 52,041 (1) Includes $ 27.9 million related to the impairment of our AWE Management Ltd. investment for the three months ended January 1, 2021. Cumulative amounts since 2017 incurred to date under our various restructuring and other activities described above by each major type of cost as of January 1, 2021 are as follows (in thousands): Lease Abandonments and Impairments $ 313,665 Voluntary and Involuntary Terminations 138,472 Outside Services 266,523 Other 131,657 Total $ 850,317 18. Commitments and Contingencies and Derivative Financial Instruments Derivative Financial Instruments The Company is exposed to interest rate risk under its variable rate borrowings and additionally, due to the nature of the Compan y's international operations, we are at times exposed to foreign currency risk. As such, we sometimes enter into foreign exchange hedging contracts and interest rate hedging contracts in order to limit our exposure to fluctuating foreign currencies and interest rates. In fiscal 2020 we entered into interest rate swap agreements with a notional value of $ 798.4 million as of January 1, 2021 to manage the interest rate exposure on our variable rate loans. Additionally, we entered into a cross-currency swap agreement with a notional value of $ 127.8 million to manage the interest rate and foreign currency exposure on our USD borrowings by a European subsidiary. By entering into the swap agreements, the Company converted the LIBOR rate based liability into a fixed rate liability and, for the cross currency swap, our LIBOR rate based borrowing in USD to a fixed rate Euro liability, for periods ranging from three and a half to ten years . Under the interest rate swap agreements, the Company receives the one month LIBOR rate and pays monthly a fixed rate ranging from .704 % to 1.116 % and under the cross currency swap agreement, the Company receives the one month LIBOR rate plus 0.875 % in USD and pays monthly a Euro fixed rate of .726 % to .746 % for the term of the swaps. The swaps were designated as cash-flow hedges in accordance with ASC 815, Derivatives and Hedging . The fair value of the interest rate and cross currency swaps at January 1, 2021 was $( 34.8 ) million, which is included in other deferred liabilities on the consolidated balance Page 26 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) sheet. The unrealized net losses on these interest rate and cross currency swaps was $ 10.8 million, net of tax, and was included in accumulated other comprehensive income as of January 1, 2021. Additionally, the Company held foreign exchange forward contracts in currenc ies that support our operations, including British Pound, Euro, Australian Dollar and other currencies, with notional values of $ 425.8 million at January 1, 2021. The length of these contracts currently ranges from one to 12 months. The fair value of the foreign exchange contracts at January 1, 2021 was $ 82.3 million, which is included in current assets within re ceivables and contract assets on the consolidated balance sheet and with associated income statement impacts included in miscellaneous income (expense) in the consolidated statement of earnings. The fair value measurements of these derivatives are being made using Level 2 inputs under ASC 820, Fair Value Measurement , as the measurements are based on o bservable inputs other than quoted prices in active markets . We are exposed to risk from credit-related losses resulting from nonperformance by counterparties to our financial instruments. We perform credit evaluations of our counterparties under forward exchange and interest rate contracts and expect all counterparties to meet their obligations. We have not experienced credit losses from our counterparties. Contractual Guarantees and Insurance In the normal course of business, we make contractual commitments (some of which are supported by separate guarantees) and on occasion we are a party in a litigation or arbitration proceeding. The litigation or arbitration in which we are involved includes personal injury claims, professional liability claims and breach of contract claims. Where we provide a separate guarantee, it is strictly in support of the underlying contractual commitment. Guarantees take various forms including surety bonds required by law, or standby letters of credit ("LOC" and also referred to as “bank guarantees”) or corporate guarantees given to induce a party to enter into a contract with a subsidiary. Standby LOCs are also used as security for advance payments or in various other transactions. The guarantees have various expiration dates ranging from an arbitrary date to completion of our work (e.g., engineering only) to completion of the overall project. We record in the Consolidated Balance Sheets amounts representing our estimated li ability relating to such guarantees, litigation and insurance claims. Guarantees are accounted for in accordance with ASC 460-10, Guarantees , at fair value at the inception of the guarantee. At January 1, 2021 and October 2, 2020, the Company had issued and outstanding approximate ly $ 252.1 million and $ 263.0 million, respectively, in LOCs and $ 2.1 billion an d $ 2.3 billion, respectively, in surety bonds. We maintain insurance coverage for most insurable aspects of our business and operations. Our insurance programs have varying coverage limits depending upon the type of insurance and include certain conditions and exclusions which insurance companies may raise in response to any claim that is asserted by or against the Company. We have also elected to retain a portion of losses and liabilities that occur through using various deductibles, limits, and retentions under our insurance programs. As a result, we may be subject to a future liability for which we are only partially insured or completely uninsured. We intend to mitigate any such future liability by continuing to exercise prudent business judgment in negotiating the terms and conditions of the contracts which the Company enters with its clients. Our insurers are also subject to business risk and, as a result, one or more of them may be unable to fulfill their insurance obligations due to insolvency or otherwise. Additionally, as a contractor providing services to the U.S. federal government, we are subject to many types of audits, investigations, and claims by, or on behalf of, the government including with respect to contract performance, pricing, cost allocations, procurement practices, labor practices, and socioeconomic obligations. Furthermore, our income, franchise, and similar tax returns and filings are also subject to audit and investigation by the Internal Revenue Service, most states within the United States, as well as by various government agencies representing jurisdictions outside the United States. Our Consolidated Balance Sheets include amounts representing our probable estimated liability relating to such claims, guarantees, litigation, audits, and investigations. We perform an analysis to determine the level of reserves to establish for insurance-related claims that are known and have been asserted against us, as well as for insurance-related claims that are believed to have been incurred based on actuarial analysis but have not yet been reported to our claims administrators as of the respective balance sheet dates. We include any adjustments to such insurance reserves in our consolidated results of operations. Insurance recoveries are recorded as assets if recovery is probable and estimated liabilities are not reduced by expected insurance recoveries. Page 27 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) The Company believes, after consultation with counsel, that such guarantees, litigation, U.S. government contract-related audits, investigations and claims, and income tax audits and investigations should not have a material adverse effect on our consolidated financial statements, beyond amounts currently accrued. Litigation and Investigations In 2012, CH2M HILL Australia Pty Limited, a subsidiary of CH2M, entered into a 50/50 integrated joint venture with Australian construction contractor UGL Infrastructure Pty Limited. The joint venture entered into a Consortium Agreement with General Electric and GE Electrical International Inc. The Consortium was awarded a subcontract by JKC Australia LNG Pty Limited ("JKC") for the engineering, procurement, construction and commissioning of a 360 MW Combined Cycle Power Plant for INPEX Operations Australia Pty Limited at Blaydin Point, Darwin, NT, Australia. In January 2017, the Consortium terminated the Subcontract because of JKC’s repudiatory breach and demobilized from the work site. JKC claimed the Consortium abandoned the work and itself purported to terminate the Subcontract. The Consortium and JKC are now in dispute over the termination. In August 2017, the Consortium filed an International Chamber of Commerce arbitration against JKC and is seeking compensatory damages in the amount of approximately $ 530.0 million for repudiatory breach or, in the alternative, seeking damages for unresolved contract claims and change orders. JKC is seeking damages in excess of $ 1.7 billion and has drawn on the bonds. In light of the COVID-19 pandemic, a November 2020 date for commencement of the hearing has been vacated and the hearing has been rescheduled for opening arguments in April and the remaining proceedings in July and August 2021. Although an earlier decision is possible, no decision is expected before 2022. In September 2018, JKC filed a declaratory judgment action in Western Australia alleging that the entities which executed parent company guaranties for the Consortium, including CH2M Hill Companies, Ltd., have an obligation to pay JKC’s ongoing costs to complete the project after termination. A hearing on that matter was held in March 2019, and a decision in favor of the Consortium was issued. JKC appealed the decision, a hearing on the appeal took place in March 2020 and a decision was handed down on July 22, 2020 denying JKC’s appeal in its entirety. The Consortium has denied liability and is vigorously defending JKC's claims and pursuing its affirmative claims against JKC. Based on the information currently available, the Company does not expect the resolution of this matter to have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows, in excess of the current reserve for this matter. See Note 14- Business Combinations in the Company's fiscal 2020 Form 10K for further information related to CH2M contingencies. On December 22, 2008, a coal fly ash pond at the Kingston Power Plant of the Tennessee Valley Authority ("TVA") was breached, releasing fly ash waste into the Emory River and surrounding community. In February 2009, TVA awarded a contract to the Company to provide project management services associated with the clean-up. All remediation and dredging were completed in August 2013 by other contractors under direct contracts with TVA. The Company did not perform the remediation, and its scope was limited to program management services. Certain employees of the contractors performing the cleanup work on the project filed lawsuits against the Company beginning in August 2013, alleging they were injured due to the Company's failure to protect the plaintiffs from exposure to fly ash, and asserting related personal injuries. The primary case, Greg Adkisson, et al. v. Jacobs Engineering Group Inc., case No. 3:13-CV-505-TAV-HBG, filed in the U.S. District Court for the Eastern District of Tennessee, consists of 10 consolidated cases. This case and the related cases involve several hundred plaintiffs that have been filed against the Company by employees of the contractors that completed the remediation and dredging work. The cases are at various stages of litigation, and several of the cases are currently stayed pending resolution of other cases. Additionally, in May 2019, Roane County and the cities of Kingston and Harriman filed a claim against TVA and the Company alleging that they misled the public about risks associated with the released fly ash. In October 2020, the Court granted Jacobs and TVA’s motion to dismiss the Roane County litigation and closed the case. In addition, in November 2019, a resident of Roane County, Margie Delozier, filed a putative class action against TVA and the Company alleging they failed to adequately warn local residents about risks associated with the released fly ash. The Company and TVA filed separate motions to dismiss the Delozier case in April 2020, which remain pending before the Court. In February 2020, the Company learned that the district attorney in Roane County recommended that the Tennessee Bureau of Investigation investigate issues pertaining to clean up worker safety at Kingston, with that investigation still pending. There has been no finding of liability against the Company or that any of the alleged illnesses are the result of exposure to fly ash in any of the above matters. The Company disputes the claims asserted in all of the above matters and is vigorously defending these claims. The Company does not expect the resolution of these matters to have a material adverse effect on the Company's business, financial condition, results of operations or cash flows. Page 28 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) On October 31, 2019, the Company received a request from the Enforcement Division of the Securities and Exchange Commission (the "SEC") for the voluntary production of certain information and documents. The information and documents sought by the SEC primarily relate to the operations of a joint venture in Morocco which was at one time partially-owned by the Company (and subsequently divested), including in respect of possible corrupt practices. The Company is fully cooperating with the SEC and is producing the requested information and documents in its possession. The Company does not expect the resolution of this matter to have a material adverse effect on the Company's business, financial condition, results of operations or cash flows. 19. Segment Information The Company's two operating segments and global lines of business ("LOBs") are as follows: Critical Mission Solutions ("CMS") and People & Places Solutions ("P&PS"), with the previous Energy, Chemicals and Resources ("ECR") LOB reported as discontinued operations. For further information on ECR, refer to Note 16- Sale of Energy, Chemicals and Resources ("ECR") Business. The Company’s Chair and Chief Executive Officer is the Chief Operating Decision Maker (“CODM”) and can evaluate the performance of each of these segments and make appropriate resource allocations among each of the segments. For purposes of the Company’s goodwill impairment testing, it has been determined that the Company’s operating segments are also its reporting units based on management’s conclusion that the components comprising each of its operating segments share similar economic characteristics and meet the aggregation criteria for reporting units in accordance with ASC 350, Intangibles-Goodwill and Other . Under this organization, the sales function is managed by LOB, and accordingly, the associated cost is embedded in the segments and reported to the respective head of each LOB. In addition, a portion of the costs of other support functions (e.g., finance, legal, human resources, and information technology) is allocated to each LOB using methodologies which, we believe, effectively attribute the cost of these support functions to the revenue generating activities of the Company on a rational basis. The cost of the Company’s cash incentive plan, the Leadership Performance Plan ("LPP"), formerly named the Management Incentive Plan, and the expense associated with the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan (“1999 SIP”) have likewise been charged to the LOBs except for those amounts determined to relate to the business as a whole (which amounts remain in other corporate expenses). Financial information for each LOB is reviewed by the CODM to assess performance and make decisions regarding the allocation of resources. The Company generally does not track assets by LOB, nor does it provide such information to the CODM. The CODM evaluates the operating performance of our LOBs using segment operating profit, which is defined as margin less “corporate charges” (e.g., the allocated amounts described above). The Company incurs certain Selling, General and Administrative costs (“SG&A”) that relate to its business as a whole which are not allocated to the LOBs. The following tables present total revenues and segment operating profit from continuing operations for each reportable segment (in thousands) and includes a reconciliation of segment operating profit to total U.S. GAAP operating profit by including certain corporate-level expenses, Restructuring and other charges (as defined in Note 17 - Restructuring and Other Charges) and transaction and integration costs (in thousands). For the Three Months Ended January 1, 2021 December 27, 2019 Revenues from External Customers: Critical Mission Solutions $ 1,295,287 $ 1,182,457 People & Places Solutions 2,086,549 2,177,592 Total $ 3,381,836 $ 3,360,049 Page 29 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED) For the Three Months Ended January 1, 2021 December 27, 2019 Segment Operating Profit: Critical Mission Solutions $ 110,072 $ 90,422 People & Places Solutions 196,300 178,328 Total Segment Operating Profit 306,372 268,750 Other Corporate Expenses (1) ( 70,341 ) ( 66,719 ) Restructuring, Transaction and Other Charges ( 22,091 ) ( 50,686 ) Total U.S. GAAP Operating Profit 213,940 151,345 Total Other Income (Expense), net (2) 140,171 102,824 Earnings from Continuing Operations Before Taxes $ 354,111 $ 254,169 (1) Other corporate expenses also include intangibles amortization of $ 23.2 million a nd $ 21.8 million for the three-month periods ended January 1, 2021 and December 27, 2019, respectively. (2) For the three month period ended January 1, 2021, i ncludes $ 93.1 million in fair value adjustments related to our investment in Worley stock and certain foreign currency revaluations relating to the ECR sale, $ 82.6 million in fair adjustments related to our investment in C3 stock and $( 27.9 ) million related to impairment of our AWE Management Ltd. investment. For the three month period ended December 27, 2019, includes revenues under the Company's TSA with Worley of $ 12.0 million, $ 99.1 million in fair value adjustments related to our investment in Worley stock and certain foreign currency revaluations relating to the ECR sale, the amortization of deferred financing fees related to the CH2M acquisition of $ 0.6 million and the loss on settlement of the CH2M portion of the U.S. pension plan of $ 2.4 million . (1) 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 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 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, as well as other items, where it has been determined that such adjustments are not indicative of the performance of the related LOB. See also MD&A results of operations for our operating segments in Item 2- Management’s Discussion and Analysis of Financial Condition and Results of Operations . Page 30