What changed in this filing

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Item 1. Financial Statements

2022-02-08 compared with 2021-08-03 · 316 added, 439 removed, 655 unchanged (54% of the section changed)

4 unchanged sentences

(In thousands, except share information)

July 2, 2021 October 2, 2020

December 31, 2021 October 1, 2021

Current Assets:

2 unchanged sentences

Prepaid expenses and other 134,165 176,228

Investment in equity securities 450,113 347,510

Total current assets 4,372,003 4,291,895

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issued and outstanding 129,153,184 shares and 128,892,540

shares as of July 2, 2021 and October 2, 2020, respectively

shares as of December 31, 2021 and October 1, 2021, respectively

129,153 128,893

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CONSOLIDATED STATEMENTS OF EARNINGS

Three and Nine Months Ended July 2, 2021 and June 26, 2020

Three Months Ended December 31, 2021 and January 1, 2021

(In thousands, except per share information)

For the Three Months Ended For the Nine Months Ended

July 2, 2021 June 26, 2020 July 2, 2021 June 26, 2020

For the Three Months Ended

December 31, 2021 January 1, 2021

Revenues $ 3,380,625 $ 3,381,836

6 unchanged sentences

Interest expense ( 19,426 ) ( 17,313 )

Miscellaneous income (expense), net 38,658 126,249 138,705 ( 87,470 )

Total other income (expense), net 19,648 109,305 88,650 ( 132,453 )

Miscellaneous income, net 9,682 156,360

Total other (expense) income, net ( 8,243 ) 140,171

Earnings from Continuing Operations Before Taxes 169,090 354,111

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Net Earnings Attributable to Noncontrolling Interests from Continuing Operations ( 9,252 ) ( 10,026 )

Net Loss Attributable to Redeemable Noncontrolling interests 384 — 101,776 —

Net Earnings Attributable to Redeemable Noncontrolling interests ( 9,683 ) —

Net Earnings Attributable to Jacobs from Continuing Operations 134,266 257,062

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three and Nine Months Ended July 2, 2021 and June 26, 2020

Three Months Ended December 31, 2021 and January 1, 2021

(In thousands)

For the Three Months Ended For the Nine Months Ended

July 2, 2021 June 26, 2020 July 2, 2021 June 26, 2020

For the Three Months Ended

December 31, 2021 January 1, 2021

Net Earnings of the Group $ 152,969 $ 267,074

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Foreign currency translation adjustment ( 8,685 ) 86,338

Loss (gain) on cash flow hedges ( 7,017 ) ( 20,944 ) 24,170 ( 20,926 )

Gain on cash flow hedges 8,855 3,583

Change in pension and retiree medical plan liabilities 8,039 ( 19,353 )

Other comprehensive (loss) income before taxes ( 5,062 ) 58,749 79,150 6,956

Other comprehensive income before taxes 8,209 70,568

Income Tax Benefit (Expense):

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Change in pension and retiree medical plan liabilities ( 1,468 ) ( 826 )

Income Tax Benefit (Expense):

Income Tax Expense:

( 1,423 ) ( 15,050 )

Net other comprehensive (loss) income ( 1,772 ) 34,625 62,646 5,120

Net other comprehensive income 6,786 55,518

Net Comprehensive Income of the Group 159,755 322,592

Net Earnings Attributable to Noncontrolling Interests ( 9,252 ) ( 10,026 )

Net Loss Attributable to Redeemable Noncontrolling interests 384 — 101,776 —

Net Earnings Attributable to Redeemable Noncontrolling interests ( 9,683 ) —

Net Comprehensive Income Attributable to Jacobs $ 140,820 $ 312,566

3 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended July 2, 2021 and June 26, 2020

For the Three Months Ended December 31, 2021 and January 1, 2021

(In thousands)

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 March 27, 2020 $ 129,985 $ 2,569,417 $ 3,808,698 $ ( 946,317 ) $ 5,561,783 $ 51,200 $ 5,612,983

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

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Issuances of equity securities including shares withheld for taxes 538 ( 7,674 ) ( 8,658 ) — ( 15,794 ) — ( 15,794 )

Balances at June 26, 2020

$ 130,180 $ 2,589,263 $ 4,028,062 $ ( 911,692 ) $ 5,835,813 $ 49,181 $ 5,884,994

Balances at April 2, 2021 $ 130,172 $ 2,621,454 $ 4,125,452 $ ( 868,639 ) $ 6,008,439 $ 35,307 $ 6,043,746

Net earnings, excluding $( 0.4 ) million in loss relating to redeemable noncontrolling interests

— — 165,794 — 165,794 9,182 174,976

Foreign currency translation adjustments, net of deferred taxes of $( 2,361 )

— — — 538 538 — 538

Pension liability, net of deferred taxes of $ 845

— — — 2,933 2,933 — 2,933

(Loss) Gain on derivatives, net of deferred taxes of $( 1,774 )

— — — ( 5,243 ) ( 5,243 ) — ( 5,243 )

Dividends — — ( 27,586 ) — ( 27,586 ) — ( 27,586 )

Redeemable Noncontrolling interests redemption value adjustment — — ( 17,487 ) — ( 17,487 ) — ( 17,487 )

Noncontrolling interests - distributions and other — — — — — ( 10,778 ) ( 10,778 )

Stock based compensation — 14,542 — — 14,542 — 14,542

Issuances of equity securities including shares withheld for taxes 121 10,855 — — 10,976 — 10,976

Balances at July 2, 2021 $ 130,293 $ 2,646,851 $ 4,246,173 $ ( 870,411 ) $ 6,152,906 $ 33,711 $ 6,186,617

See the accompanying Notes to Consolidated Financial Statements – Unaudited.

JACOBS ENGINEERING GROUP INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Nine Months Ended July 2, 2021 and June 26, 2020

(In thousands)

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 — — 409,855 — 409,855 21,662 431,517

Foreign currency translation adjustments, net of deferred taxes of $ 3,633

— — — 8,377 8,377 — 8,377

Pension and retiree medical plan liability, net of deferred taxes of $ 4,465

— — — 11,407 11,407 — 11,407

(Loss) Gain on derivatives, net of deferred taxes of $( 6,262 )

— — — ( 14,664 ) ( 14,664 ) — ( 14,664 )

Dividends — — ( 50,379 ) — ( 50,379 ) ( 50,379 )

Noncontrolling interests - distributions and other — 5,002 — — 5,002 ( 26,448 ) ( 21,446 )

Stock based compensation — 35,106 1,102 — 36,208 — 36,208

Issuances of equity securities including shares withheld for taxes 877 9,652 ( 9,391 ) — 1,138 — 1,138

Repurchases of equity securities ( 251 ) ( 5,027 ) ( 19,523 ) — ( 24,801 ) — ( 24,801 )

Balances at June 26, 2020 $ 130,180 $ 2,589,263 $ 4,028,062 $ ( 911,692 ) $ 5,835,813 $ 49,181 $ 5,884,994

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, excluding $( 101,776 ) in loss relating to redeemable noncontrolling interests

Balances at January 1, 2021

$ 130,035 $ 2,597,586 $ 4,249,408 $ ( 877,539 ) $ 6,099,490 $ 43,877 $ 6,143,367

Balances at October 1, 2021 $ 128,893 $ 2,590,012 $ 4,015,578 $ ( 794,442 ) $ 5,940,041 $ 34,796 $ 5,974,837

Net earnings — — 134,034 — 134,034 9,252 143,286

Foreign currency translation adjustments, net of deferred taxes of $( 2,990 )

6 unchanged sentences

Redeemable Noncontrolling interests redemption value adjustment — — ( 15,203 ) — ( 15,203 ) — ( 15,203 )

Repurchase of redeemable noncontrolling interests — — 7,761 — 7,761 — 7,761

Noncontrolling interests - distributions and other — — — — — ( 14,049 ) ( 14,049 )

2 unchanged sentences

Repurchases of equity securities ( 342 ) 43,127 ( 42,785 ) — — — —

Balances at July 2, 2021 $ 130,293 $ 2,646,851 $ 4,246,173 $ ( 870,411 ) $ 6,152,906 $ 33,711 $ 6,186,617

Balances at December 31, 2021 $ 129,153 $ 2,641,059 $ 4,087,390 $ ( 787,656 ) $ 6,069,946 $ 29,999 $ 6,099,945

See the accompanying Notes to Consolidated Financial Statements – Unaudited.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended July 2, 2021 and June 26, 2020

For the Three Months Ended December 31, 2021 and January 1, 2021

(In thousands)

For the Nine Months Ended

July 2, 2021 June 26, 2020

For the Three Months Ended

December 31, 2021 January 1, 2021

Cash Flows from Operating Activities:

4 unchanged sentences

Intangible assets 46,907 23,155

Gain on sale of ECR business ( 15,608 ) ( 113,366 )

(Gain) loss on investment in equity securities ( 152,145 ) 138,875

Gain on investment in equity securities — ( 190,368 )

Stock based compensation 7,014 11,841

1 unchanged sentence

Loss (gain) on disposals of assets, net 151 ( 134 )

Impairment of equity method investment and other long term assets 40,138 —

Loss on pension and retiree medical plan changes — 2,651

Impairment of long-lived assets and equity method investment 72,266 27,902

Deferred income taxes ( 17,659 ) 53,008

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Acquisitions of businesses, net of cash acquired ( 229,813 ) ( 173,012 )

Disposal of investment in equity securities 52,021 —

Proceeds (payments) related to sales of businesses 36,360 ( 5,061 )

Net cash used for investing activities ( 249,568 ) ( 193,208 )

2 unchanged sentences

Repayments of long-term borrowings ( 400,287 ) ( 500,827 )

Proceeds from short-term borrowings — 78

Repayments of short-term borrowings ( 5,326 ) ( 7,675 )

Debt issuance costs ( 2,747 ) ( 1,807 )

Proceeds from issuances of common stock 17,862 9,541

2 unchanged sentences

Cash dividends, including to noncontrolling interests ( 41,565 ) ( 35,718 )

Repurchase of redeemable noncontrolling interests ( 35,095 ) —

Net cash provided by financing activities 144,363 18,685

Effect of Exchange Rate Changes 2,722 36,493

Net Increase in Cash and Cash Equivalents and Restricted Cash 116,307 393,742

Net Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash 219,162 ( 25,412 )

Cash and Cash Equivalents, including Restricted Cash, at the Beginning of the Period 1,026,575 862,424

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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 1, 2021 (“2021 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 July 2, 2021, and for the three and nine month periods ended July 2, 2021.

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 December 31, 2021, and for the three month periods ended December 31, 2021 and 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 19, 2021, a subsidiary of Jacobs acquired all outstanding shares of common stock of BlackLynx, a provider of high-performance software, to complement Jacobs' portfolio of cyber, intelligence and digital solutions.

The Company paid total base consideration of approximately $ 234.9 million in cash to the former owners of BlackLynx.

In addition, the transaction involved the potential payment of future consideration that is contingent upon the achievement of certain revenue and gross margin thresholds being achieved in calendar year 2022.

The estimated fair value of the contingent consideration on the acquisition date is $ 1.3 million.

The future contingent consideration will be paid, if and to the extent achieved, in second quarter of fiscal 2023.

In conjunction with the acquisition, the Company also paid off BlackLynx's debt of approximately $ 5.3 million simultaneously with the consummation of the acquisition.

The Company has recorded its preliminary purchase price allocation associated with the acquisition, which is summarized in Note 16- Other Business Combinations.

On March 2, 2021, Jacobs completed the strategic investment of a 65 % interest in PA Consulting, a UK-based leading innovation and transformation consulting firm.

The total consideration paid by the Company was $ 1.7 billion, funded through cash on hand, a new term loan and draws on the Company's existing revolver.

Further, in connection with the transaction, an estimated additional $ 267 million had not yet been distributed at April 2, 2021 due to continuing employment requirements.

Consequently, this amount represented compensation expense incurred related to the acquisition that was expensed in the second quarter, and was reflected in selling, general and administrative expense on the consolidated income statement for the six month period ended April 2, 2021.

During the third quarter of fiscal 2021, an amount of $ 5.6 million of the above estimated charges was forfeited by employees that left the Company before payment, and as such, was recognized in earnings in the three month period ended July 2, 2021.

The updated amount of $ 261 million is reflected in earnings and cash from operations for the nine month period ended July 2, 2021.

The remaining 35 % interest is held by PA Consulting employees, whose redeemable noncontrolling interests had a fair value of $ 582.4 million on the closing date, including subsequent purchase accounting adjustments.

PA Consulting is accounted for as a consolidated subsidiary and as a separate operating segment under U.S.

GAAP accounting rules.

See Note 12- Borrowings for more discussion on the financing for the transaction.

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 $ 190.1 million, which was comprised of approximately $ 182.4 million in cash to the former owners of Buffalo Group and contingent consideration of $ 7.7 million, which is expected to be settled in fiscal 2022.

During the third fiscal quarter, the Company recorded an adjustment to the contingent consideration of $ 3.8 million to selling, general and administrative expense, resulting in contingent consideration of $ 3.9 million at July 2, 2021.

The total consideration paid by the Company was $ 1.7 billion, funded through cash on hand, proceeds from a new term loan and draws on the Company's existing revolving credit facility.

Further, in connection with the transaction, an additional $ 261 million in investment proceeds had not yet been distributed at the investment date due to continuing employment requirements of associated management owners.

Consequently, this amount represented compensation expense incurred related to the investment that was expensed subsequent to the date of the transaction, and was reflected in selling, general and administrative expense and cash from operations for the fiscal year ended October 1, 2021.

The remaining 35 % interest was acquired by PA Consulting employees, whose redeemable noncontrolling interests had a fair value of $ 582.4 million on the closing date, including subsequent purchase accounting adjustments.

PA Consulting is accounted for as a consolidated subsidiary and as a separate operating segment.

See Note 15- PA Consulting Business Combination for more discussion on the investment and Note 12- Borrowings for more discussion on the financing for the transaction.

On November 24, 2020, a subsidiary of Jacobs completed the acquisition of Buffalo Group, a leader in advanced cyber and intelligence solutions which allows Jacobs to further expand its cyber and intelligence solutions offerings to government clients.

The contingent consideration was subsequently recognized as an offset to selling, general and administrative expense when it was determined no amounts would be paid.

In conjunction with the acquisition, the Company assumed the Buffalo Group's debt of approximately $ 7.7 million.

The Company repaid all of the assumed Buffalo Group debt by the end of the first fiscal quarter of 2021.

The acquisition of Buffalo Group allows Jacobs to further expand its cyber and intelligence solutions offering to government clients.

The Company has recorded its final purchase price allocation associated with the acquisition, which is summarized in Note 16- Other Business Combinations.

JACOBS ENGINEERING GROUP INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

£ 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 Company has recorded its final purchase price allocation associated with the acquisition, which is summarized in Note 16- Other 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”).

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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”).

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.

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Please refer to Note 2- Significant Accounting Policies of Notes to Consolidated Financial Statements included in our 2021 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 17- Sale of Energy, Chemicals and Resources for discussion regarding the Company's investment in Worley ordinary shares and Note 19- Commitments and Contingencies and Derivative Financial Instruments for discussion regarding the Company's derivative instruments.

Please also refer to Note 19- 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.

Fair value measurements relating to our business combinations are made primarily using Level 3 inputs including discounted cash flow and to the extent applicable, Monte Carlo simulation techniques.

Fair value for the identified intangible assets is generally estimated using inputs primarily for the income approach using the multiple period excess earnings method and the relief from royalties method.

The significant assumptions used in estimating fair value include (i)

JACOBS ENGINEERING GROUP INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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.

revenue projections of the business, (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 and probabilities of meeting those projections.

Key inputs to the valuation of the noncontrolling interests include projected cash flows and the expected volatility associated with those cash flows.

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.

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 was effective beginning with the first fiscal quarter 2021.

The adoption of ASU 326 did not have a material impact on the Company's financial position, results of operations or cash flows.

ASU 2020-04, Reference Rate Reform , (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting is intended to provide relief for entities impacted by reference rate reform and contains provisions and optional expedients designed to simplify requirements around designation of hedging relationships, probability assessments of hedged forecasted transactions and accounting for modifications of contracts that refer to LIBOR or other rates affected by reference rate reform.

The guidance is elective and is effective on the date of issuance.

ASU 2020-04 is applied prospectively to contract modifications and as of the effective date for existing and new eligible hedging relationships.

The guidance is temporary and will generally not be applicable to contract modifications which occur after December 31, 2022.

The adoption of the new guidance in the first quarter of fiscal 2022 allowed the Company to continue its British pound denominated interest rate hedge relationships which previously defined LIBOR as the benchmark interest rate and in December 2021 were amended to replace LIBOR with the Sterling Overnight Index Average rate ("SONIA").

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , is effective for fiscal years beginning after December 15, 2022.

ASU 2021-08 requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers.

Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree.

The Company adopted the new guidance in the first quarter of fiscal 2022 and the adoption had no impact on the Company's financial position, results of operations or cash flows.

Revenue Accounting for Contracts

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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.

and technical, digital, p rocess, scientific and systems consulting process, scientific, and systems consulting services.

We provide our services through offices and subsidiaries located primarily in North America, Europe, the Middle East, India, Australia, Africa, and Asia.

We provide our services under cost-reimbursable and fixed-price contracts.

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Refer to Note 20- 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 and nine months ended July 2, 2021 and June 26, 2020 (in thousands):

Three Months Ended Nine Months Ended

July 2, 2021 June 26, 2020 July 2, 2021 June 26, 2020

JACOBS ENGINEERING GROUP INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The following table further disaggregates our revenue by geographic area for the three months ended December 31, 2021 and January 1, 2021 (in thousands):

Three Months Ended

December 31, 2021 January 1, 2021

United States $ 2,148,554 $ 2,457,041

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Contract liabilities represent amounts billed to clients in excess of revenue recognized to date.

Revenue recognized for the three and nine months ended July 2, 2021 that was included in the contract liability balance on October 2, 2020 was $ 24.8 million and $ 380.4 million , resp ectively.

Revenue recognized for the three and nine months ended June 26, 2020 that was included in the contract liability balance on September 27, 2019, was $ 42.4 million and $ 352.9 million , respectively.

JACOBS ENGINEERING GROUP INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Remaining Performance Obligations

The Company’s remaining performance obligations as of July 2, 2021 represent a measure of the total dollar value of work to be performed on contracts awarded and in progress.

The Company had approximately $ 13.8 billion in remaining performance obligations as of July 2, 2021.

Revenue recognized for the three months ended December 31, 2021 and January 1, 2021 that was included in the contract liability balance on October 1, 2021 and October 2, 2020 was $ 291.5 million and $ 259.0 million respectively.

Remaining Performance Obligation

The Company’s remaining performance obligations as of December 31, 2021 represent a measure of the total dollar value of work to be performed on contracts awarded and in progress.

The Company had approximately $ 13.2 billion in remaining performance obligations as of December 31, 2021.

The Company expects to recognize approximately 57 % of our remaining performance obligations into revenue within the next twelve months and the remaining 43 % thereafter.

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Net earnings used for the purpose of determining basic and diluted EPS is determined by taking net earnings, less earnings available to participating securities and the preferred redeemable noncontrolling interests redemption value adjustment associated with the PA Consulting transaction.

During the three and nine months ended July 2, 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 and nine months ended July 2, 2021 and June 26, 2020 (in thousands):

The following table reconciles the denominator used to compute basic EPS to the denominator used to compute diluted EPS for the three months ended December 31, 2021 and January 1, 2021 (in thousands):

JACOBS ENGINEERING GROUP INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Three Months Ended Nine Months Ended

July 2, 2021 June 26, 2020 July 2, 2021 June 26, 2020

Three Months Ended

December 31, 2021 January 1, 2021

Numerator for Basic and Diluted EPS:

Net earnings attributable to Jacobs from continuing operations $ 165,410 $ 226,886 $ 422,195 $ 284,344

Preferred Redeemable Noncontrolling interests redemption value adjustment (See Note 15- PA Consulting Business Combination )

( 57,307 ) — ( 57,307 ) —

Net earnings from continuing operations allocated to participating securities — ( 24 ) — ( 77 )

Net earnings from continuing operations allocated to common stock for EPS calculation $ 134,266 $ 257,062

Net earnings attributable to Jacobs from discontinued operations $ 384 $ 18,043 $ 11,690 $ 125,511

Net earnings from discontinued operations allocated to participating securities — ( 2 ) — ( 34 )

Net earnings from discontinued operations allocated to common stock for EPS calculation $ ( 232 ) $ ( 14 )

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Denominator for Basic and Diluted EPS:

Weighted average basic shares 130,385 130,229 130,205 131,995

Shares allocated to participating securities — ( 14 ) — ( 36 )

Shares used for calculating basic EPS attributable to common stock 129,342 129,968

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On January 16, 2020, the Company's Board of Directors authorized a 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").

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").

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 through the third fiscal quarter of 2021:

In the fourth quarter of fiscal 2021, the Company initiated an accelerated share repurchase program by advancing $ 250 million to a financial institution in a privately negotiated transaction, with final non-cash settlement on the program during the first quarter of fiscal 2022 of 342,054 shares as depicted in the table below.

The following table summarizes the activity under the 2020 Repurchase Authorization through the first fiscal quarter of 2022:

Amount Authorized

(2019 and 2020 Repurchase Authorizations) Average Price Per Share (1) Shares Repurchased Total Shares Retired

(2020 Repurchase Authorization) Average Price Per Share (1) Shares Repurchased Total Shares Retired

$ 1,000,000,000 $ 137.55 342,054 342,054

(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 July 2, 2021, the Company has $ 33.1 million remaining 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.

JACOBS ENGINEERING GROUP INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

As of December 31, 2021, the Company has $ 782.9 million remaining under the 2020 Repurchase Authorization.

Our share repurchase program does 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.

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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 July 14, 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 August 27, 2021, to shareholders of record on the close of business on July 30, 2021.

On January 26, 2022, the Company’s Board of Directors declared a quarterly dividend of $ 0.23 per share of the Company’s common stock to be paid on March 25, 2022, to shareholders of record on the close of business on February 25, 2022.

Future dividend declarations are subject to review and approval by the Company’s Board of Directors.

Dividends paid through the third fiscal quarter of 2021 and the preceding fiscal year are as follows:

Dividends paid through the first fiscal quarter of 2022 and the preceding fiscal year are as follows:

Declaration Date Record Date Payment Date Cash Amount (per share)

September 23, 2021 October 15, 2021 October 29, 2021 $ 0.21

July 14, 2021 July 30, 2021 August 27, 2021 $ 0.21

April 22, 2021 May 28, 2021 June 25, 2021 $ 0.21

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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

JACOBS ENGINEERING GROUP INC.

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Goodwill and Intangibles

The carrying value of goodwill associated with continuing operations and appearing in the accompanying Consolidated Balance Sheets at July 2, 2021 and October 2, 2020 was as follows (in thousands):

The carrying value of goodwill and appearing in the accompanying Consolidated Balance Sheets at December 31, 2021 and October 1, 2021 was as follows (in thousands):

Critical Mission Solutions People & Places Solutions PA Consulting Total

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Post-Acquisition Adjustments — — 2,197 2,197

Balance July 2, 2021 $ 2,554,976 $ 3,245,682 $ 1,431,612 $ 7,232,270

The following table provides certain information related to the Company’s acquired intangibles in the accompanying Consolidated Balance Sheets at July 2, 2021 and October 2, 2020 (in thousands):

Balance December 31, 2021 $ 2,708,431 $ 3,239,448 $ 1,402,615 $ 7,350,494

The following table provides certain information related to the Company’s acquired intangibles in the accompanying Consolidated Balance Sheets at December 31, 2021 and October 1, 2021 (in thousands):

Customer Relationships, Contracts and Backlog Developed Technology Trade Names Total

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Foreign currency translation ( 2,734 ) ( 20 ) ( 725 ) ( 3,479 )

Balances July 2, 2021 $ 1,370,197 $ 40,916 $ 224,108 $ 1,635,221

Balances December 31, 2021 $ 1,351,364 $ 54,420 $ 213,129 $ 1,618,913

The following table presents estimated amortization expense of intangible assets for the remainder of fiscal 2022 and for the succeeding years.

The amounts below include preliminary amortization estimates for the BlackLynx and PA Consulting opening balance sheet fair values that are still preliminary and are subject to change.

Fiscal Year (in millions)

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Receivables and Contract Assets

The following table presents the components of receivables appearing in the accompanying Consolidated Balance Sheets at July 2, 2021 and October 2, 2020, as well as certain other related information (in thousands):

July 2, 2021 October 2, 2020

The following table presents the components of receivables appearing in the accompanying Consolidated Balance Sheets at December 31, 2021 and October 1, 2021, as well as certain other related information (in thousands):

December 31, 2021 October 1, 2021

Components of receivables and contract assets:

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Other information about receivables:

Amounts due from the United States federal government, included above, net of advanced billings $ 608,444 $ 600,207

Amounts due from the United States federal government, included above, net of contract liabilities $ 629,365 $ 563,009

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.

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Accumulated Other Comprehensive Income

The following table presents the Company's roll forward of accumulated other comprehensive income (loss) after-tax as of July 2, 2021 (in thousands):

The following table presents the Company's roll forward of accumulated other comprehensive income (loss) after-tax as of December 31, 2021 (in thousands):

Change in Pension Liabilities Foreign Currency Translation Adjustment Gain/(Loss) on Cash Flow Hedges Total

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Reclassifications from accumulated other comprehensive income (loss) — — 1,937 1,937

Balance at July 2, 2021

Balance at December 31, 2021

$ ( 387,990 ) $ ( 412,935 ) $ 13,269 $ ( 787,656 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The Company’s effective tax rates from continuing operations for the three months ended July 2, 2021 and June 26, 2020 were 38.5 % and 22.3 % , respectively.

The Company’s effective tax rate from continuing operations for the three months ended July 2, 2021 was higher than the corresponding rate in the prior period primarily due to a tax expense of $ 30.8 million attributable to a revaluation of the deferred tax asset and liabilities for a tax rate increase in the UK during the current quarter, with offsetting benefits of $ 2.2 million for the release of uncertain tax positions due to the statute of limitations expiring and $ 0.9 million of Internal Revenue Code section 179D energy credit.

Comparatively, for the three months ended June 26, 2020, the Company had a $ 12.6 million benefit for the release of a valuation allowance in the UK.

The Company's effective tax rates from continuing operations for the nine months ended July 2, 2021 and June 26, 2020 were 33.4 % and 19.7 % , respectively.

The Company’s effective tax rate from continuing operations for the nine months ended July 2, 2021 was higher than the corresponding rate in the prior period primarily due to the revaluations of deferred tax assets and liabilities for the tax rate increase in the UK mentioned above and $ 15.0 million attributable to US foreign inclusions in the current year.

Also contributing to the higher year to date rate is the absence of a prior year favorable benefit of $ 5.8 million from amended returns for foreign tax credits and research and development credits, a $ 4.1 million benefit related to an India withholding tax rate change and $ 7.0 million benefit from an Internal Revenue Code section 179D energy credit for the period ending June 26, 2020.

The current year increase was further offset by a $ 4.2 million excess tax benefit attributable to stock compensation and a $ 12.1 million benefit related to a change in the Company’s assertion about indefinite reinvestment of certain foreign unremitted earnings in Canada and India.

See Note 17 - 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 Company’s effective tax rates from continuing operations for the three months ended December 31, 2021 and January 1, 2021 were 9.4 % and 24.6 %, respectively.

The Company’s effective tax rate from continuing operations for the three months ended December 31, 2021 was lower than the corresponding rate in the prior period primarily due to a current year tax benefit of $ 15.7 million related to the release of previously reserved foreign tax credits, $ 4.2 million excess tax benefit attributable to stock compensation, and $ 4.0 million benefit from filing amended status returns.

The amount of income taxes the Company pays is subject to ongoing audits by tax jurisdictions around the world.

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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.

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.

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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 $ 273.7 million and $ 211.7 million, respectively, as of July 2, 2021 and $ 261.8 million and $ 190.3 million, respectively, as of October 2, 2020.

For the consolidated VIEs, the carrying value of assets and liabilities was $ 266.8 million and $ 208.7 million, respectively, as of December 31, 2021 and $ 289.8 million and $ 220.8 million, respectively, as of October 1, 2021.

There are no consolidated VIEs that have debt or credit facilities.

On March 2, 2021, Jacobs completed the strategic investment of a 65 % interest in PA Consulting, a UK-based leading innovation and transformation consulting firm.

The remaining 35 % interest is held by PA Consulting employees.

The remaining 35 % interest was acquired by PA Consulting employees.

PA Consulting is accounted for as a consolidated subsidiary under U.S.

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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 $ 50.3 million and $ 53.6 million, respectively, as of July 2, 2021, and $ 64.1 million and $ 63.0 million, respectively, as of October 2, 2020.

JACOBS ENGINEERING GROUP INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

For the proportionate consolidated VIEs, the carrying value of assets and liabilities was $ 114.2 million and $ 127.5 million, respectively, as of December 31, 2021, and $ 115.1 million and $ 129.5 million, respectively, as of October 1, 2021.

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:

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These basis differences are amortized based on an internal allocation to underlying net assets, excluding allocations to goodwill.

As of July 2, 2021, the Company’s equity method investments exceeded its share of venture net assets by $ 38.8 million.

Our investments in equity method joint ventures on the Consolidated Balance Sheets as of July 2, 2021 and October 2, 2020 were $ 128.9 million and $ 161.3 million, respectively.

During the three months ended July 2, 2021 and June 26, 2020, we recognized income from equity method joint ventures of $ 16.6 million and $ 18.8 million, respectively.

During the nine months ended July 2, 2021 and June 26, 2020, we recognized income from equity method joint ventures of $ 46.9 million and $ 54.8 million, respectively.

Accounts receivable from unconsolidated joint ventures accounted for under the equity method is $ 15.3 million and $ 8.3 million as of July 2, 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 nine months ended July 2, 2021, the Company recorded an other-than-temporary impairment on its investment in AWE ML in the amount of $ 38.9 million, which is included in miscellaneous income (expense), net in the consolidated statement of earnings.

As of December 31, 2021, the Company’s equity method investments exceeded its share of venture net assets by $ 36.6 million.

Our investments in equity method joint ventures on the Consolidated Balance Sheets as of December 31, 2021 and October 1, 2021 were $ 106.7 million and $ 121.3 million, respectively.

During the three months ended December 31, 2021 and January 1, 2021, we recognized income from equity method joint ventures of $ 6.8 million and $ 18.3 million, respectively.

Accounts receivable from unconsolidated joint ventures accounted for under the equity method is $ 16.1 million and $ 19.7 million as of December 31, 2021 and October 1, 2021, respectively.

The Company held a 24.5 % interest in AWE Management Ltd ("AWE ML") that was accounted for under the equity method.

AWE ML was previously under a contractual operating arrangement with the UK Ministry of Defence (MoD) with multiple years remaining under the arrangement, and during fiscal 2021, the MoD unexpectedly announced plans to change its operating agreements with AWE ML that resulted 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 charge on its investment in AWE ML in the amount of $ 27.9 million, which was included in miscellaneous income (expense), net in the consolidated statement of earnings as a result of the contract termination.

The Company held a cost method investment in C3.ai, Inc.

("C3") and in the first quarter of fiscal 2021, C3 completed an initial public offering and as a result the Company carried its investment in C3 at fair value, with changes reflected in net income as it is an investment in equity securities with a readily determinable fair value based on quoted market prices.

During fiscal 2021 and subsequent to the IPO, the Company sold all shares owned in C3.

Dividend income, unrealized gains and losses on changes in fair value and related realized gains and losses on disposal of the C3 shares were recognized in miscellaneous income (expense), net in the consolidated statement of earnings, which was $ 82.6 million, net, for the three months ended January 1, 2021 .

JACOBS ENGINEERING GROUP INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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 carried 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 restricted sales of the shares, subject to certain conditions that permit partial share sales based on C3's share performance during the lock-up period.

During the second fiscal quarter of fiscal 2021, the Company sold 153,374 shares, the maximum allowable shares under the lock-up period discussed above, at a realized gain of $ 12.5 million.

During the current fiscal quarter, the Company sold the remaining shares owned in C3, at a realized pre-tax gain of $ 37.0 million.

Dividend income, unrealized gains and losses on changes in fair value and related realized gains and losses on disposal of the C3 shares have been recognized in miscellaneous income (expense), net in the consolidated statement of earnings.

At July 2, 2021 and October 2, 2020, long-term debt consisted of the following (principal amounts in thousands):

Interest Rate Maturity July 2, 2021 October 2, 2020

Revolving Credit Facility LIBOR + applicable margin (1) March 2024 $ 517,795 $ 152,794

2021 Term Loan Facility LIBOR + applicable margin (2)

At December 31, 2021 and October 1, 2021, long-term debt consisted of the following (principal amounts in thousands):

Interest Rate Maturity December 31, 2021 October 1, 2021

Revolving Credit Facility Benchmark + applicable margin (1) (2) March 2024 $ 577,794 $ 327,794

2021 Term Loan Facility Benchmark + applicable margin (1) (3)

March 2024 1,078,800 1,081,724

2020 Term Loan Facility LIBOR + applicable margin (3)

2020 Term Loan Facility Benchmark + applicable margin (1) (4)

March 2025 (5) 974,550 988,940

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Total Long-term debt, net $ 3,073,067 $ 2,839,933

(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 including applicable margins at July 2, 2021 and October 2, 2020 were approximately 1.59 % and 1.39 %.

(2) Depending on the Company’s Consolidated Leverage Ratio (as defined in the credit agreement governing the 2021 Term Loan Facility (defined below)), borrowings under the 2021 Term Loan 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 rate including applicable margin at July 2, 2021 was approximately 1.56 %.

(3) Depending on the Company’s Consolidated Leverage Ratio (as defined in the credit agreement governing the 2020 Term Loan Facility (defined below)), borrowings under the 2020 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.

The applicable LIBOR rates including applicable margins at July 2, 2021 and October 2, 2020 were approximately 1.58 % and 1.37 %.

(1) During the three months ended December 31, 2021, the aggregate principal amounts denominated in British pounds under the Revolving Credit Facility, 2021 Term Loan Facility and 2020 Term Loan Facility transitioned from underlying LIBOR benchmarked rates to SONIA rates.

Borrowings denominated in U.S.

dollars remained benchmarked to LIBOR rates.

(2) Depending on the Company’s Consolidated Leverage Ratio (as defined in the credit agreement governing the Revolving Credit Facility (defined below)), U.S.

dollar denominated 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 %.

The applicable LIBOR rates including applicable margins at December 31, 2021 and October 1, 2021 were approximately 1.46 % and 1.45 %.

Borrowings denominated in British pounds bear interest at an adjusted SONIA rate plus a margin of between 0.875 % and 1.625 %.

There were no amounts drawn in British pounds as of December 31, 2021.

(3) Depending on the Company’s Consolidated Leverage Ratio (as defined in the credit agreement governing the 2021 Term Loan Facility (defined below)), U.S.

dollar denominated borrowings under the 2021 Term Loan 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 %.

The applicable LIBOR rate including applicable margins for borrowings denominated in U.S.

dollars at December 31, 2021 and October 1, 2021 was approximately 1.48 % and 1.43 %.

Borrowings denominated in British pounds bear interest at an adjusted SONIA rate plus a margin of between 0.875 % and 1.625 %, which was approximately 1.60 % at December 31, 2021.

(4) Depending on the Company’s Consolidated Leverage Ratio (as defined in the credit agreement governing the 2020 Term Loan Facility (defined below)), U.S.

dollar denominated borrowings under the 2020 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 %.

The applicable LIBOR rates including applicable margins for borrowings denominated in U.S.

dollars at December 31, 2021 and October 1, 2021 were approximately 1.48 % and 1.45 %.

Borrowings denominated in British pounds bear interest at an adjusted SONIA rate plus a margin of between 0.875 % and 1.625 %, which was approximately 1.55 % at December 31, 2021.

(5) The 2020 Term Loan requires quarterly principal repayments of 1.25 %, or $ 9.125 million and £ 3.125 million, of the aggregate initial principal amount borrowed.

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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 July 2, 2021.

We were in compliance with the covenants under the Revolving Credit Facility at December 31, 2021.

JACOBS ENGINEERING GROUP INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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 March 2, 2021 investment by the Company, indirectly through a subsidiary of the Company, of a majority interest in PA Consulting, 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.

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The 2020 Term Loan Facility and the 2021 Term Loan Facility are together referred to as the "Term Loan Facilities".

We were in compliance with the covenants under the Term Loan Facilities at July 2, 2021.

We were in compliance with the covenants under the Term Loan Facilities at December 31, 2021.

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”).

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In addition, the Note Purchase Agreement contains customary events of default.

We were in compliance with the covenants under the Note Purchase Agreement at July 2, 2021.

We were in compliance with the covenants under the Note Purchase Agreement at December 31, 2021.

We believe the carrying value of the Revolving Credit Facility, the Term Loan Facilities 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 $ 556.9 million at July 2, 2021, based on Level 2 inputs.

The fair value of the Senior Notes is estimated to be $ 547.5 million at December 31, 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.

The Company has issue d $ 1.7 million in letters of credit under the Revolving Credit Facility, leaving $ 1.73 billion of available borrowing capacity under the Revolving Credit Facility at July 2, 2021.

In addition, the Company had issued $ 267.2 million u nder separate, committed and uncommitted letter-of-credit facilities for total issued letters of credit of $ 268.9 million a t July 2, 2021.

JACOBS ENGINEERING GROUP INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The Company has issue d $ 1.7 million in letters of credit under the Revolving Credit Facility, leaving $ 1.67 billion of available borrowing capacity under the Revolving Credit Facility at December 31, 2021.

In addition, the Company had issued $ 272.0 million u nder separate, committed and uncommitted letter-of-credit facilities for total issued letters of credit of $ 273.7 million a t December 31, 2021.

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.

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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.

The Company generally

JACOBS ENGINEERING GROUP INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The components of lease expense (reflected in selling, general and administrative expenses) for th e three and nine months ended July 2, 2021 and June 26, 2020 were as follows (in thousands):

Three Months Ended Nine Months Ended

July 2, 2021 June 26, 2020 July 2, 2021 June 26, 2020

Operating lease cost $ 41,619 $ 39,123 $ 121,870 $ 126,855

Variable lease cost 7,836 9,508 23,255 26,307

The components of lease expense (reflected in selling, general and administrative expenses) for th e three months ended December 31, 2021 and January 1, 2021 were as follows (in thousands):

Three Months Ended

December 31, 2021 January 1, 2021

Lease expense

Operating lease expense $ 40,538 $ 39,444

Variable lease expense 7,084 8,183

Sublease income ( 3,668 ) ( 3,396 )

Total lease cost $ 46,962 $ 45,127 $ 135,703 $ 142,474

Supplemental information related to the Company's leases for the nine months ended July 2, 2021 was as follows (in thousands):

Nine Months Ended

Total lease expense $ 43,954 $ 44,231

Supplemental information related to the Company's leases for the three months ended December 31, 2021 was as follows (in thousands):

Three Months Ended

December 31, 2021

Cash paid for amounts included in the measurements of lease liabilities $ 65,430

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Less Interest ( 84,016 )

Right-of-Use and Other Long-Lived Asset Impairment

In the first quarter of fiscal 2022, as a result of the Company's transformation initiatives including the changing nature of the Company's use of office space for its workforce, the Company evaluated its existing real estate lease portfolio.

These initiatives during the current quarter resulted in the abandonment of certain leased office spaces and the establishment of a formal plan to sublease certain other leased spaces that will no longer be utilized by the Company.

In connection with the Company’s actions related to these initiatives, the Company evaluated certain of its lease right-of-use assets and related property, equipment and leasehold improvements for impairment under ASC 360.

JACOBS ENGINEERING GROUP INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

As a result of the analysis, the Company recognized an impairment loss during the first quarter of fiscal 2022 of $ 72.3 million, which is included in selling, general and administrative expenses in the accompanying statement of earnings for the current fiscal quarter.

The impairment loss recorded includes $ 54.9 million related to right-of-use lease assets and $ 17.4 million related to other long-lived assets, including property, equipment and improvements and leasehold improvements.

The fair values for the asset groups relating to the impaired long-lived assets were estimated primarily using discounted cash flow models (income approach) with Level 3 inputs.

The significant assumptions used in estimating fair value include the expected downtime prior to the commencement of future subleases, projected sublease income over the remaining lease periods and discount rates that reflect the level of risk associated with receiving future cash flows.

Pension and Other Postretirement Benefit Plans

The following table presents the components of net periodic pension benefit recognized in earnings during the three and nine months ended July 2, 2021 and June 26, 2020 (in thousands):

Three Months Ended Nine Months Ended

July 2, 2021 June 26, 2020 July 2, 2021 June 26, 2020

The following table presents the components of net periodic pension benefit recognized in earnings during the three months ended December 31, 2021 and January 1, 2021 (in thousands):

Three Months Ended

December 31, 2021 January 1, 2021

Service cost $ 1,709 $ 1,735

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Amortization of previously unrecognized items 3,092 4,032

Plan Amendment and settlement loss (gain) — — — 2,651

Total net periodic pension benefit recognized $ ( 4,678 ) $ ( 7,875 )

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.

On March 2, 2021, Jacobs completed the strategic investment of a 65 % interest in PA Consulting, a UK-based leading innovation and transformation consulting firm.

PA Consulting has defined benefit plans that Jacobs now includes in our consolidated financial statements.

See Note 15- PA Consulting Business Combination for more discussion on the investment and the related defined benefit plans.

The following table presents certain information regarding the Company’s cash contributions to our pension plans for fiscal 2022 (in thousands):

Cash contributions made during the first nine months of fiscal 2021

Cash contributions made during the first three months of fiscal 2022

Cash contributions projected for the remainder of fiscal 2022

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On March 2, 2021, Jacobs completed the strategic investment of a 65 % interest in PA Consulting, a UK-based leading innovation and transformation consulting firm.

The total consideration paid by the Company was $ 1.7 billion, funded through cash on hand, a new term loan and draws on the Company's existing revolver.

Further, in connection with the transaction, an estimated additional $ 267 million had not yet been distributed at April 2, 2021 due to continuing employment requirements.

The updated amount of $ 261 million is reflected in earnings and cash from operations for the nine month period ended July 2, 2021.

PA Consulting is accounted for as a consolidated subsidiary and as a separate operating segment under U.S.

GAAP accounting rules.

The total consideration paid by the Company was $ 1.7 billion, funded through cash on hand, proceeds from a new term loan and draws on the Company's existing revolving credit facility.

Further, in connection with the transaction, an estimated additional $ 261 million in investment proceeds had not yet been distributed at the investment date due to continuing employment requirements of associated management owners.

Consequently, this amount represented compensation expense incurred related to the investment that was expensed subsequent to the date of the transaction, and was reflected in selling, general and administrative expense on the consolidated income statement for the fiscal year ended October 1, 2021.

PA Consulting is accounted for as a consolidated subsidiary and as a separate operating segment.

See Note 12- Borrowings for more discussion on the financing for the transaction.

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See below for further discussion on updates to redeemable noncontrolling interests.

Identifiable intangibles are customer relationships, contracts and backlog and trade name and have estimated lives ranging from 9 to 20 years (weighted average life of approximately 12 years).

JACOBS ENGINEERING GROUP INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Identifiable intangibles are customer relationships, contracts and backlog and trade name and have estimated lives ranging from 9 to 20 years (weighted average life of approximately 12 years).

Fair value measurements relating to PA Consulting are made primarily using Level 3 inputs including discounted cash flow techniques.

Fair value is estimated using inputs primarily from 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 buildings, furniture, fixtures and equipment, are valued using the cost approach, which is based on estimates of replacement cost.

Key inputs to the valuation of the noncontrolling interests include projected cash flows and the expected volatility with those cash flows.

Pre-tax transaction costs associated with the PA Consulting investment in the accompanying Consolidated Statements of Earnings for the nine months ended July 2, 2021 were $ 36.4 million.

The following presents summarized unaudited pro forma operating results of Jacobs from continuing operations assuming that the Company had the PA Consulting investment at September 28, 2019.

These pro forma operating results are presented for illustrative purposes only and are not indicative of the operating results that would have been achieved had the related events occurred (in millions, except per share data):

For the Nine Months Ended

July 2, 2021 June 26, 2020

For the Three Months Ended

January 1, 2021

Revenues $ 3,632.7

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Diluted earnings per share $ 2.02

Included in the table above are charges relating to transaction expenses, a nonrecurring compensation charge, an EPS numerator adjustment relating to the PA preference shares redemption value which does not affect net earnings.

and other items that are removed from the nine months ended July 2, 2021 and are reflected in the prior fiscal year due to the assumed timing of the transaction.

Also, income tax (expense) benefit for the ni ne-month p ro forma periods ended July 2, 2021 and June 26, 2020 wa s $( 231.3 ) million and $( 29.5 ) million, respectively.

JACOBS ENGINEERING GROUP INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

I ncome tax expense for the three -month p ro forma period ended January 1, 2021 wa s $ 76.7 million.

Redeemable Noncontrolling Interest

In connection with the PA Consulting investment, the Company recorded redeemable noncontrolling interests of approximately $ 582.4 million, including subsequent purchase accounting adjustments, representing the interest holders' 35 % equity interest in the form of preferred and common shares of PA Consulting, with substantially all of the value associated with these interests allocable to the preferred shares.

The preferred shares are entitled to a cumulative compounding 12 % dividend based on the outstanding preferred share subscription price.

These interest holders have certain option rights to put the preferred and common share interests back to the Company at a value based on the fair value of PA Consulting (the redemption values).

Additionally, the Company has an option to call the interests in certain circumstances.

Because the interests are redeemable at the option of the holders and not solely within the control of the Company, the Company classified the interests in redeemable noncontrolling interests within its Consolidated Balance Sheet at their redemption values.

The optional redemption features may become exercisable no earlier than five years from the March 2, 2021 closing date , or upon the occurrence of certain other events.

The Compa ny has deemed these interests probable of becoming redeemable in the future and requiring their measurement at the greater of (i) the redemption amount that would be paid if settlement occurred at the balance sheet date, or (ii) the historical value resulting from the original acquisition date fair value plus or minus any earnings or loss attribution amounts, including divi dends, in accordance with U.S.

generally accepted accounting principles.

Further, any excess in redemption amounts over the historical values of the interests is recognized as an increase to redeemable noncontrolling interests and an offsetting decrease in consolidated retained earnings.

Additionally, particular to the preference share component of redeemable noncontrolling interests, this retained earnings decrease is also reflected as a corresponding downward adjustment to net earnings attributable to Jacobs for purposes of the calculation of consolidated earnings per share.

During the third quarter of fiscal 2021, updates to the Company’s preliminary opening balance sheet fair value estimates of the noncontrolling interests resulted in an offsetting decrease and increase in fair value of the preference share and common share components of the interests by $ 57.3 million, respectively, with the corresponding redemption value adjustment associated with the preference share portion decreasing consolidated retained earnings and earnings per share by $ 0.44 .

See Note 6- Earnings Per Share and Certain Related Information .

The results of these adjustments had no impact on the Company’s overall results of operations, financial position, or cash flows.

Changes in the redeemable noncontrolling interest d uring the nine months ended July 2, 2021 are as follows (in thousands):

Fair value of redeemable noncontrolling interests at acquisition on March 2, 2021 $ 581,119

Cumulative Accrued Preferred Dividend to Preference Shareholders 23,151

In connection with the PA Consulting investment, the Company recorded redeemable noncontrolling interests, including subsequent purchase accounting adjustments, representing the noncontrolling interest holders' equity interest in the form of preferred and common shares of PA Consulting, with substantially all of the value associated with these interests allocable to the preferred shares.

During the first quarter of fiscal 2022, PA Consulting repurchased certain shares of the redeemable noncontrolling interest holders for $ 35.1 million in cash.

The difference between the cash purchase price and the recorded book value of these repurchased interests was recorded in the Company’s consolidated retained earnings.

Changes in the redeemable noncontrolling interest d uring the three months ended December 31, 2021 are as follows (in thousands):

Balance at October 1, 2021

Accrued Preferred Dividend to Preference Shareholders 16,687

Attribution of Preferred Dividend to Common Shareholders ( 16,687 )

Net loss attributable to redeemable noncontrolling interest to Common Shareholders ( 101,776 )

Net income attributable to redeemable noncontrolling interest to Common Shareholders 9,683

Redeemable Noncontrolling interests redemption value adjustment 15,203

Repurchase of redeemable noncontrolling interests ( 42,856 )

Cumulative translation adjustment and other ( 2,088 )

Balance at July 2, 2021

(1) Includes impacts from updates to the preliminary opening balance fair value estimates of the noncontrolling interests and corresponding redemption value adjustments described above.

In addition, certain employees and nonemployees of PA Consulting are expected to receive equity-based incentive grants in the future under the terms of the applicable agreements.

Employee Benefit Trust, Defined Contribution Plans and Defined Benefit Plans

PA Consulting is party to an employee benefit trust arrangement, defined contribution plans and defined benefit plans.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

PA Consulting is party to an employee benefit trust that is a separately administered discretionary trust for the benefit of employees and is consolidated under US G AAP.

At July 2, 2021, t he Company held $ 12.6 million in cash within the employee benefit trust that is restricted from general use and is included in prepaid expenses and other current assets on the consolidated balance sheet.

The PA Consulting defined benefit plans include UK and Germany based plans.

The UK arrangement is a defined benefit plan which has been closed to new participants since 1998 and is expected to wind down in the current fiscal year.

Prior to the investment in PA Consulting, PA Consulting completed a pension buy-in transaction for the primary UK defined benefit pension plan where the assets of the plan were invested in a bulk-purchase annuity policy with an insurance company.

As such, the UK defined benefit plan is fully funded.

Regarding the defined contribution plans, PA Consulting matches a certain amount on behalf of the employees and pays the administration costs, which are both recognized in the income statement in the period in which they become payable.

Balance at December 31, 2021

In addition, certain employees and nonemployees of PA Consulting are eligible to receive equity-based incentive grants in the future under the terms of the applicable agreements.

Employee Benefit Trust

PA Consulting is party to an employee benefit trust that is a separately administered discretionary trust for the benefit of employees and is consolidated under U.S.

At December 31, 2021, t he Company held $ 0.7 million in cash within the employee benefit trust that is restricted from general use and is included in prepaid expenses and other current assets on the consolidated balance sheet.

JACOBS ENGINEERING GROUP INC.

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Other 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.

In conjunction with the acquisition, the Company assumed the Buffalo Group's debt of approximately $ 7.7 million.

The Company repaid all of the assumed Buffalo Group debt by the end of the first fiscal quarter of 2021.

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):

StreetLight Data, Inc.

On February 4, 2022, the Company acquired StreetLight Data, Inc., ("StreetLight") for a purchase price based on an enterprise value of $209 million on a cash-free, debt-free basis, subject to customary post-closing adjustments.

StreetLight is a pioneer of mobility analytics who uses its data and machine learning resources to shed light on mobility and enable users to solve complex transportation problems.

The Company paid total base consideration of approximately $ 234.9 million in cash to the former owners of BlackLynx.

The estimated fair value of the contingent consideration on the acquisition date is $ 1.3 million.

The future contingent consideration will be paid, if and to the extent achieved, in second quarter of fiscal 2023.

In conjunction with the acquisition, the Company also paid off BlackLynx's debt of approximately $ 5.3 million simultaneously with the consummation of the acquisition.

The following summarizes the fair values of BlackLynx's assets acquired and liabilities assumed as of the acquisition date (in millions):

Cash and cash equivalents $ 5.1

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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.

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 BlackLynx'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.

Identifiable 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.

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.

Identifiable intangibles are customer relationships, contracts and backlog and technology and have estimated lives of 12 and 15 years, respectively.

No summarized unaudited pro forma results are provided for the BlackLynx acquisition due to the immateriality of this acquisition relative to the Company's consolidated financial position and results of operations.

Buffalo Group

JACOBS ENGINEERING GROUP INC.

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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):

The contingent consideration was subsequently recognized in fiscal 2021 as an offset to selling, general and administrative expense when it was determined no amounts would be paid.

In conjunction with the acquisition, the Company assumed the Buffalo Group's debt of approximately $ 7.7 million.

The Company repaid all of the assumed Buffalo Group debt by the end of the first fiscal quarter of 2021.

The following summarizes the fair values of Buffalo Group's assets acquired and liabilities assumed as of the acquisition date (in millions):

Cash and cash equivalents $ 8.4

Receivables 19.2

Other current assets 3.8

Property, equipment and improvements, net 2.3

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Identifiable intangible assets 74.0

Miscellaneous 19.4

Prepaid expenses and other current assets 6.2

Total Assets $ 240.8

Accounts payable, accrued expenses and other current liabilities $ 46.9

Long term liabilities 28.5

Other long term liabilities 3.8

Total Liabilities

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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 completed its final assessment of the fair values of the acquired assets and liabilities of John Wood Group's nuclear business.

Since the initial preliminary estimates reported in the second quarter of fiscal 2020, the Company has updated certain amounts reflected in the final purchase price allocation, as summarized in the fair values of John Wood Group's nuclear business assets acquired and liabilities assumed as of the acquisition date as set forth above.

Identifiable 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.

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

All of the goodwill recognized is expected to be deductible for tax purposes, given the acquisition was structured as an asset acquisition for tax purposes.

The Company has completed its final assessment of the fair values of Buffalo Group's assets acquired and liabilities assumed.

Since the initial preliminary estimates reported in the first quarter of fiscal 2021, the Company has updated certain amounts reflected in the final purchase price allocation, as summarized in the fair values of Buffalo Group's assets acquired and liabilities assumed as of the acquisition date set forth above.

Identifiable intangibles are customer relationships, contracts and backlog and have estimated lives of 9 years.

No summarized unaudited pro forma results are provided for the Buffalo Group acquisition due to the immateriality of this acquisition relative to the Company's consolidated financial position and results of operations.

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").

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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 For the Nine Months Ended

July 2, 2021 June 26, 2020 July 2, 2021 June 26, 2020

Revenues $ — $ 59 $ — $ 11,221

Direct cost of contracts — ( 69 ) — ( 6,124 )

Gross profit — ( 10 ) — 5,097

Selling, general and administrative expenses — ( 801 ) ( 34 ) 43,359

Operating (Loss) Profit — ( 811 ) ( 34 ) 48,456

Gain on sale of ECR business — 31,456 15,608 113,366

Other expense, net 509 1,472 ( 72 ) 112

Earnings Before Taxes from Discontinued Operations 509 32,117 15,502 161,934

Income Tax (Expense) Benefit ( 125 ) ( 14,074 ) ( 3,812 ) ( 36,423 )

Net Earnings of the Group from Discontinued Operations $ 384 $ 18,043 $ 11,690 $ 125,511

In t he second quarter of fiscal 2021, the Company received final working capital settlement proceeds of $ 36.4 million from Worley and as such, recorded a pre-tax gain of $ 15.6 million.

Offsetting the proceeds from the settlement to arrive at the net gain amount were previously recorded accounts receivable from Worley.

For the nine months ended June 26, 2020, selling, general and administrative expenses included an offsetting insuranc e recovery of $ 50.0 million recorded in connection with a legal matter.

For the nine months ended June 26, 2020, the gain on sale of $ 113.4 million relates mainly to the recognition of the deferred gain for the delayed transfer of the ECR-related assets and liabilities of the two international entities discussed below, adjustments for working capital and certain other items in connection with the sale and 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.

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 $ 0.0 million and $ 15.6 million for the three and nine months ended July 2, 2021 respectively.

As a result of the ECR sale, the Company recognized a pre-tax gain of approximately $ 1.1 billion, $ 935.1 million of which was recognized in fiscal 2019, $ 110.2 million for the year ended October 2, 2020 and $ 15.6 million for the year ended October 1, 2021.

JACOBS ENGINEERING GROUP INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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.

In the second quarter of fiscal 2021, the Company received final working capital settlement proceeds of $ 36.4 million from Worley and as such, recorded a pre-tax gain of $ 15.6 million.

Offsetting the proceeds from the settlement to arrive at the net gain amount were previously recorded accounts receivable from Worley.

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 $ 450.1 million at July 2, 2021 and $ 347.5 million at October 2, 2020.

For the three months ended July 2, 2021 and June 26, 2020, the Company recognize d $ 36.8 million and $ 131.4 million , respectively in gains associated with share price and currency changes on this investment.

For the nine months ended July 2, 2021 and June 26, 2020, the Company recognize d a gain of $ 102.6 million and a loss o f $ 138.9 million, respectively, associated with share price and currency changes on this investment.

The nine months ended July 2, 2021 include Worley stock dividends of $ 9.8 million and for the nine months ended June 26, 2020, $ 7.7 million.

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 $ 15.2 million in TSA related income for such services that is reported in miscellaneous income (expense) for the nine months ended July 2, 2021 and June 26, 2020, respectively, before inclusion of certain incremental outside service support costs agreed to be shared equally by the parties .

As discussed above, the Company held ordinary shares of Worley that it received in connection with the ECR sale.

Dividend income, realized gains and losses on sale and unrealized gains and losses on changes in fair value of Worley shares were recognized in miscellaneous income (expense), net in continuing operations prior to sale.

The Company's investment in Worley was measured at fair value through net income as it was an equity investment with a readily determinable fair value based on quoted market prices and for the three months ended January 1, 2021, the Company recognized a $ 107.7 million gain associated with share price and currency changes on this investment.

The Company completed the sale of all ordinary shares of Worley it held in the fourth fiscal quarter of fiscal 2021.

Restructuring and Other Charges

During first quarter fiscal 2022, the Company implemented certain restructuring and integration initiatives relating to the BlackLynx acquisition, the activities of which are expected to be substantially completed before the end of fiscal 2022.

Also, during first quarter fiscal 2022, the Company implemented further real estate rescaling efforts that were associated with its fiscal 2020 transformation program relating to real estate and other staffing initiatives.

These initiatives are expected to continue into fiscal 2023.

During fiscal 2021, the Company implemented certain restructuring and integration initiatives relating to the Buffalo Group acquisition and the PA Consulting investment.

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 fiscal 2021.

The activities of these initiatives are substantially completed and are expected to end before the end of fiscal 2022.

Additionally, the Company recorded impairment charges on its investment in AWE during 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.

JACOBS ENGINEERING GROUP INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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.

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 The 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 Hill Companies, Ltd.

("CH2M"), an international provider of engineering, construction and technical services (the "CH2M acquisition"), 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.

The activities of these initiatives have been substantially completed.

As part of the Company's acquisition of CH2M Hill Companies, Ltd.

("CH2M") during fiscal 2018, the Company implemented certain restructuring plans that were comprised mainly of severance and lease abandonment programs as well as integration activities involving the engagement of professional services and internal personnel dedicated to the Company's integration management efforts.

These activities have continued through fiscal 2021 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 line of business ("LOB") in connection with the CH2M, KeyW, John Wood Group's nuclear business and Buffalo Group acquisitions and the PA Consulting investment, 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 and nine months ended July 2, 2021 and the CH2M, KeyW and John Wood Group's nuclear business acquisitions and the ECR sale for the three and nine months ended June 26, 2020 (in thousands):

Three Months Ended Nine Months Ended

July 2, 2021 June 26, 2020 July 2, 2021 June 26, 2020

The following table summarizes the impacts of the Restructuring and other charges by line of business ("LOB") in connection with the CH2M, John Wood Group's nuclear business, Buffalo Group and BlackLynx acquisitions and the PA Consulting investment, the ECR sale and the Company's first quarter fiscal 2022 transformation initiatives relating to real estate and other staffing programs and impairment of the AWE Management Ltd.

investment for the three months ended December 31, 2021 and 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 AWE Management Ltd.

investment for the three months ended January 1, 2021 (in thousands):

JACOBS ENGINEERING GROUP INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Three Months Ended

December 31, 2021 January 1, 2021

Critical Mission Solutions $ 1,153 $ 3,209

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Total (1) $ 69,359 $ 48,393

(1) For the three months ended July 2, 2021 and June 26, 2020, amounts include $ 8.0 million and $ 19.7 million, respectively, and for the nine months ended July 2, 2021 and June 26, 2020, amounts include $ 53.6 million and $ 109.6 million, respectively, in items impacting operating profit, along with items recorded in other income (expense), net, which includes a $ 38.9 million charge related to the impairment of our AWE Management Ltd.

investment which is reflected in other income (expense) for the nine months ended July 2, 2021 and the loss on settlement of the CH2M portion of the U.S.

pension plan of $ 2.1 million for the nine months ended June 26, 2020.

(1) For the three months ended December 31, 2021 and January 1, 2021, amounts include $ 77.9 million and $ 20.5 million, respectively, in items impacting operating profit, along with items recorded in other income (expense), net, which includes $ 1.7 million in income associated with final distributions from the exit of our AWE investment and a $( 27.9 ) million charge, respectively, related to the impairment charges on our AWE Management Ltd.

investment and a gain of $ 6.9 million related to a lease termination which is reflected in other income (expense) for the three months ended January 1, 2021.

See Note 20 - Segment Information.

JACOBS ENGINEERING GROUP INC.

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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 nine months ended July 2, 2021 is as follows (in thousands):

The activity in the Company’s accruals for restructuring and other charges for the three months ended December 31, 2021 is as follows (in thousands):

Balance at October 1, 2021

Net Charges 92,509

Payments and Usage ( 131,758 )

Balance at July 2, 2021 $ 13,605

The following table summarizes the Restructuring and other charges by major type of costs for the three and nine months ended July 2, 2021 and June 26, 2020 (in thousands):

Three Months Ended Nine Months Ended

July 2, 2021 June 26, 2020 July 2, 2021 June 26, 2020

Net (Credits) Charges (1) ( 1,594 )

Payments and other ( 1,672 )

Balance at December 31, 2021 $ 10,765

(1) Excludes $ 70,953 in other net charges associated mainly with real estate related impairments and other transformation activities described above.

The following table summarizes the Restructuring and other charges by major type of costs for the three months ended December 31, 2021 and January 1, 2021 (in thousands):

Three Months Ended

December 31, 2021 January 1, 2021

Lease Abandonments and Impairments $ 65,542 $ 148

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Total $ 69,359 $ 48,393

(1) Includes $ 38.9 million related to the impairment of our AWE Management Ltd.

investment for the nine months ended July 2, 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 July 2, 2021 are as follows (in thousands):

(1) Includes $( 27.9 ) million related to the impairment charges on our AWE Management Ltd.

investment for the three months ended January 1, 2021.

Cumulative amounts incurred to date under our various restructuring and other activities described above by each major type of cost as of December 31, 2021 are as follows (in thousands):

Lease Abandonments and Impairments $ 383,341

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Total $ 970,873

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Commitments and Contingencies and Derivative Financial Instruments

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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 $ 801.9 million as of July 2, 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 Company is party to interest rate swap agreements and a cross-currency swap agreement with notional values of $ 795.7 million and $ 127.8 million, respectively, as of December 31, 2021 to manage the interest rate exposure on our variable rate loans and the foreign currency exposure on our USD borrowings by a European subsidiary.

By entering into the swap agreements, the Company converted the LIBOR and SONIA rate based liabilities into fixed rate liabilities 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 .

dollar denominated interest rate swap agreements, the Company receives the one month LIBOR rate and pays monthly a fixed rate ranging from 0.704 % to 1.116 %.

For interest rate swaps denominated in British pounds, the Company receives a one month adjusted SONIA rate and pays a monthly fixed rate of 0.820 %.

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 0.726 % to 0.746 % 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 July 2, 2021 and October 2, 2020 was $( 9.2 ) million and $( 31.5 ) million, respectively, of which $( 14.7 ) million is inc luded in

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other deferred liabilities and $ 5.5 million is included in miscellaneous other assets on the consolidated balance sheets at July 2, 2021.

The entire amount was included in other deferred liabilities at October 2, 2020.

The unrealized net gain (loss) on these interest rate and cross currency swaps was $ 4.2 million and $( 14.6 ) million, net of tax, and was included in accumulated other comprehensive inc ome as of July 2, 2021 and October 2, 2020, respectively .

Additionally, the Company held foreign exchange forward contracts in currenc ies that support our operations, in cluding British Pound, Euro, Australian Dollar and other currencies, with notional values of $ 498.0 million at July 2, 2021 and $ 393.7 million at October 2, 2020 .

See Note 4- New Accounting Pronouncements for additional discussion related to the application of SONIA to existing hedge contracts.

The fair value of the interest rate and cross currency swaps at December 31, 2021 and October 1, 2021 was $ 11.2 million and $( 0.8 ) million, respectively, of which $( 7.4 ) million is inc luded in other deferred liabilities and $ 18.6 million is included in miscellaneous other assets on the consolidated balance sheets at December 31, 2021.

As of October 1, 2021, $( 11.0 ) million is inc luded in other deferred liabilities and $ 10.2 million is included in miscellaneous other assets on the consolidated balance sheets.

The unrealized net gain (loss) on these interest rate and cross currency swaps was $ 13.3 million and $ 7.4 million, net of tax, and was included in accumulated other comprehensive inc ome as of December 31, 2021 and October 1, 2021, respectively .

Additionally, the Company held foreign exchange forward contracts in currenc ies that support our operations, in cluding British Pound, Euro, Australian Dollar and other currencies, with notional values of $ 503.5 million at December 31, 2021 and $ 506.5 million at October 1, 2021 .

The length of these contracts currently ranges from one to 12 months.

The fair value of the foreign exchange contracts at July 2, 2021 and October 2, 2020 w as $ 67.5 million and $ 53.5 million , respectively, which is included in current assets within re ceivables and contract assets on the consolidated balance sheets and with associated income statement impacts included in miscellaneous income (expense) in the consolidated statements of earnings.

The fair value of the foreign exchange contracts at December 31, 2021 and October 1, 2021 w as $ 53.8 million and $ 55.5 million , respectively, which is included in current assets within re ceivables and contract assets on the consolidated balance sheets and with associated income statement impacts included in miscellaneous income (expense) in the consolidated statements 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 .

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Guarantees are accounted for in accordance with ASC 460-10, Guarantees , at fair value at the inception of the guarantee.

At July 2, 2021 and October 2, 2020, the Company had issued and outstanding approximate ly $ 268.9 million and $ 263.0 million , respectively, in LOCs and $ 2.1 billion an d $ 2.3 billion, respectively, in surety bonds.

At December 31, 2021 and October 1, 2021, the Company had issued and outstanding approximate ly $ 273.7 million and $ 263.8 million , respectively, in LOCs and $ 2.3 billion an d $ 2.1 billion, respectively, in surety bonds.

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We maintain insurance coverage for most insurable aspects of our business and operations.

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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

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consolidated results of operations.

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.

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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.

JKC appealed the decision, a hearing on the appeal took place in March 2020 and a decision was handed down in July 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 10-K for further information related to CH2M contingencies.

See Note 15- Other Business Combinations in the Company's fiscal 2021 Form 10-K for further information related to CH2M contingencies.

JACOBS ENGINEERING GROUP INC.

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In February 2021, the Court granted dismissal of the Delozier Complaint with prejudice, with the exception of plaintiffs’ nuisance cause of action, which plaintiffs voluntarily dismissed in July 2021.

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.

Finally, in August 2021, a resident of Roane County filed an action against Jacobs and TVA claiming personal injury and property damage.

Separately, 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.

On November 15, 2021, the Roane County district attorney announced that it had concluded its investigation into issues pertaining to the Kingston coal ash spill cleanup.

No indictments were issued.

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.

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Segment Information

The Company's three operating segments and global lines of business ("LOBs") are as follows:

Critical Mission Solutions ("CMS") and People & Places Solutions ("P&PS"), along with the addition of a new LOB in the second quarter of fiscal year 2021, PA Consulting, as a result of the recent strategic investment in this business.

The Company's three operating segments are comprised of its two global lines of business ("LOBs"):

Critical Mission Solutions ("CMS") and People & Places Solutions ("P&PS") and its majority investment in PA Consulting.

For further information on the PA Consulting investment, refer to Note 15 - PA Consulting Business Combination .

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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.

Under this organization, the sales function is managed by LOB and PA Consulting, and accordingly, the associated cost is embedded in the segments and reported to the respective head of each segment.

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.

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Financial information for each LOB is reviewed by the CODM to assess performance and make decisions regarding the allocation of resources.

Financial information for each segment 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 CODM evaluates the operating performance of our operating segments 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 segments.

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 18 - Restructuring and Other Charges) and transaction and integration costs (in thousands).

For the Three Months Ended For the Nine Months Ended

July 2, 2021 June 26, 2020 July 2, 2021 June 26, 2020

For the Three Months Ended

December 31, 2021 January 1, 2021

Revenues from External Customers:

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Total $ 3,380,625 $ 3,381,836

For the Three Months Ended For the Nine Months Ended

July 2, 2021 June 26, 2020 July 2, 2021 June 26, 2020

For the Three Months Ended

December 31, 2021 January 1, 2021

Segment Operating Profit:

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Restructuring, Transaction and Other Charges (2) ( 83,566 ) ( 22,091 )

GAAP Operating (Loss) Profit 263,746 194,376 436,572 513,500

GAAP Operating Profit 177,333 213,940

Total Other (Expense) Income, net (3) ( 8,243 ) 140,171

Earnings from Continuing Operations Before Taxes $ 169,090 $ 354,111

(1) Other corporate expenses also include intangibles amortization of $ 49.6 million and $ 23.1 million for the three months ended July 2, 2021 and June 26, 2020, respectively, and $ 103.3 million and $ 67.1 million for the nine months ended July 2, 2021 and June 26, 2020, respectively.

(2) Included in the three and nine months ended July 2, 2021 are $( 2.8 ) million and $ 297.4 million , respectively, of costs incurred in connection with the investment in PA Consulting, in part classified as compensation costs.

(3) The three and nine months ended July 2, 2021 include $ 38.7 million and $ 102.2 million, respectively, in fair value adjustments related to our investment in Worley stock (net of Worley stock dividend) and certain foreign currency revaluations relating to the ECR sale, $ 1.0 million and $ 49.6 million, respectively, in fair value adjustments related to our investment in C3 stock.

The nine months ended July 2, 2021 also includes $( 38.9 ) million related to impairment of our AWE Management Ltd.

The three and nine months ended June 26, 2020 include revenues under the Company's TSA with Worley of $ 1.0 million and $ 15.2 million, respectively, and $ 123.1 million and $( 119.0 ) million, respectively, in fair value adjustments related to our investment in Worley stock (net of Worley stock dividend) and certain foreign currency revaluations relating to the ECR sale.

(1) Other corporate expenses also include intangibles amortization of $ 46.9 million and $ 23.2 million for the three months ended December 31, 2021 and January 1, 2021, respectively, with this increase mainly attributable to the PA Consulting investment.

(2) Included in the three months ended December 31, 2021 is $ 72.3 million of real estate impairment charges related to the Company's transformation initiatives.

(3) The three months ended December 31, 2021 include $ 1.7 million in income associated with final distributions from the exit of our AWE investment and a gain of $ 6.9 million related to a lease termination.

The three months ended January 1, 2021 include $ 93.1 million in fair value adjustments related to our investment in Worley stock (net of Worley stock dividend) and certain foreign currency revaluations relating to the ECR sale, $ 82.6 million in fair value adjustments related to our investment in C3 stock and $( 27.9 ) million related to impairment charges on our AWE Management Ltd.

The investments in Worley and C3 were sold in fiscal 2021 and therefore there are no comparable amounts in the current quarter.

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(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.

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(iii) the amortization of intangible assets acquired as part of business combinations;

(iv) the quarterly variances between the Company’s actual

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costs of certain of its self-insured integrated risk and employee benefit programs and amounts charged to the LOBs;

(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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements