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Item 2. Management’s Discussion and Analysis

2022-05-03 compared with 2022-02-08 · 133 added, 117 removed, 189 unchanged (57% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The purpose of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is to provide a narrative analysis explaining the reasons for material changes in the Company’s (i) financial condition from the most recent fiscal year-end to December 31, 2021 and (ii) results of operations during the current fiscal period(s) as compared to the corresponding period(s) of the preceding fiscal year.

The purpose of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is to provide a narrative analysis explaining the reasons for material changes in the Company’s (i) financial condition from the most recent fiscal year-end to April 1, 2022 and (ii) results of operations during the current fiscal period(s) as compared to the corresponding period(s) of the preceding fiscal year.

In order to better understand such changes, readers of this MD&A should also read:

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We caution the reader that there are a variety of risks, uncertainties and other factors that could cause actual results to differ materially from what is contained, projected or implied by our forward-looking statements.

Such factors include the magnitude, timing, duration and ultimate impact of the COVID-19 pandemic, including the emergence and spread of variants of COVID-19, and any resulting economic downturn on our results, prospects and opportunities, measures or restrictions imposed by governments and health officials in response to the pandemic, or if such orders, measures or restrictions are re-imposed after being lifted or eased, including as a result of increases in cases of COVID-19;

the effectiveness and distribution of vaccines or treatments for COVID-19;

the timing and scope of any government stimulus programs enacted in response to the impacts of the COVID-19 pandemic, including, but not limited to, any additional infrastructure-related stimulus programs, and the timing of the award of projects and funding under the Infrastructure Investment and Jobs Act signed into law by President Biden on November 15, 2021.

The impact of such matters includes, but is not limited to, the possible reduction in demand for certain of our services and the delay or abandonment of ongoing or anticipated projects due to the financial condition of our clients and suppliers or to governmental budget constraints or changes to governmental budgetary priorities;

Such factors include our ability to execute on our newly-announced three-year corporate strategy, including our ability to invest in the tools needed to fully implement our strategy, competition from existing and future competitors in our target markets, our ability to achieve the cost-savings and synergies contemplated by our recent acquisitions within the expected time frames and to successfully integrate acquired businesses while retaining key personnel, the impact of the COVID-19 pandemic, including the emergence and spread of variants of COVID-19, and any resulting economic downturn on our results, prospects and opportunities, measures or restrictions imposed by governments and health officials in response to the pandemic, the timing of the award of projects and funding under the Infrastructure Investment and Jobs Act, as well as general economic conditions, including inflation, changes in interest rates and foreign currency exchange rates and changes in capital markets, and geopolitical events and conflicts, among others.

The impact of such matters includes, but is not limited to, the possible reduction in demand for certain of our product solutions and services and the delay or abandonment of ongoing or anticipated projects due to the financial condition of our clients and suppliers or to governmental budget constraints or changes to governmental budgetary priorities;

the inability of our clients to meet their payment obligations in a timely manner or at all;

potential issues and risks related to a significant portion of our employees working remotely;

illness, travel restrictions and other workforce disruptions that could negatively affect our supply chain and our ability to timely and satisfactorily complete our clients’ projects;

difficulties associated with hiring additional employees;

illness, travel restrictions and other workforce disruptions that have and could continue to negatively affect our supply chain and our ability to timely and satisfactorily complete our clients’ projects;

difficulties associated with retaining key personnel or hiring additional employees;

and the inability of governments in certain of the countries in which we operate to effectively mitigate the financial or other impacts of the COVID-19 pandemic on their economies and workforces and our operations therein.

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On March 11, 2020, the World Health Organization characterized the outbreak of the novel coronavirus (“COVID-19”) as a global pandemic and recommended certain containment and mitigation measures.

On March 13, 2020,

the United States declared a national emergency concerning the outbreak, and the vast majority of states and many municipalities have declared public health emergencies or taken similar actions.

On March 13, 2020, the United States declared a national emergency concerning the outbreak, and the vast majority of states and many municipalities declared public health emergencies or took similar actions.

Along with these declarations, there were extraordinary and wide-ranging actions taken by international, federal, state and local public health and governmental authorities to contain and combat outbreaks of COVID-19 in regions across the United States and around the world.

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The impacts of the COVID-19 pandemic continue to be felt in our operating results as compared to business levels pre-pandemic, although not significantly impacting the current fiscal quarter as compared to the corresponding quarter of the 2021 fiscal year.

Further, for future periods, significant uncertainty continues to exist concerning the magnitude, duration and impacts of the COVID-19 pandemic, including with regard to the effects on our customers, customer demand for our services and disruptions to supply chains and labor forces.

Further, for future periods, significant uncertainty continues to exist concerning the magnitude, duration and impacts of the COVID-19 pandemic, including with regard to the effects on our customers, customer demand for our services, disruptions to supply chains and labor forces and increasing inflationary pressures.

Accordingly, actual results for future fiscal periods could differ materially versus current expectations and current results and financial condition discussed herein may not be indicative of future operating results and trends.

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Revenue by Type (Q2 FY2022)

1 Due to COVID-19 and the actions taken by governmental authorities and others related thereto, some of the information provided in this summary relating to sources of revenue could be substantially different in the remainder of fiscal 2022.

Lines of Business

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PA Consulting

In fiscal 2021, Jacobs invested in a 65% stake in PA, the consultancy that is Bringing Ingenuity to Life.

In fiscal 2021, Jacobs invested in a 65% stake in PA Consulting, the consultancy that is Bringing Ingenuity to Life.

Its diverse teams of experts combine innovative thinking and breakthrough use of technologies to progress further, faster.

PA’s clients adapt and transform and achieve enduring results.

PA Consulting’s clients adapt and transform and achieve enduring results.

An innovation and transformation consultancy, PA's roughly 3,300 employees work across seven sectors:

consumer and manufacturing, defense and security, energy and utilities, financial services, government, health and life sciences, and transport.

PA people are strategists, innovators, designers, consultants, digital experts, scientists, engineers and technologists.

PA Consulting people are strategists, innovators, designers, consultants, digital experts, scientists, engineers and technologists.

The team operates globally from offices across the U.K., U.S., Nordics and the Netherlands.

PA offers end-to-end innovation, accelerating new growth ideas from concept, through design, development, and to commercial success, and revitalizing organizations, building the leadership, culture, systems and processes to make innovation a reality.

PA has a diverse mix of private and public sector clients, from global household names to start-ups, to national and local public services.

Results of Operations for the three months ended December 31, 2021 and January 1, 2021

PA Consulting offers end-to-end innovation, accelerating new growth ideas from concept, through design, development, and to commercial success, and revitalizing organizations, building the leadership, culture, systems and processes to make innovation a reality.

PA Consulting has a diverse mix of private and public sector clients, from global household names to start-ups, to national and local public services.

Results of Operations for the three and six months ended April 1, 2022 and April 2, 2021

(in thousands, except per share information)

For the Three Months Ended

December 31, 2021 January 1, 2021

For the Three Months Ended For the Six Months Ended

April 1, 2022 April 2, 2021 April 1, 2022 April 2, 2021

Revenues $ 3,834,059 $ 3,547,873 $ 7,214,684 $ 6,929,708

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Selling, general and administrative expenses (704,195) (808,125) (1,323,336) (1,226,246)

Operating Profit 177,333 213,940

Operating Profit (Loss) 166,215 (41,112) 343,548 172,826

Other Income (Expense):

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Interest expense (21,995) (15,464) (41,421) (32,777)

Miscellaneous income, net 9,682 156,360

Miscellaneous income (expense), net 10,681 (56,313) 20,362 100,047

Total other (expense) income, net (10,933) (71,169) (19,177) 69,002

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

Income Tax Expense from Continuing Operations (15,889) (87,023)

Net Earnings of the Group from Continuing Operations 153,201 267,088

Net Earnings of the Group from Discontinued Operations (232) (14)

Net Earnings of the Group 152,969 267,074

Earnings (Loss) from Continuing Operations Before Taxes 155,282 (112,281) 324,371 241,828

Income Tax (Expense) Benefit from Continuing Operations (46,166) 20,772 (62,054) (66,250)

Net Earnings (Loss) of the Group from Continuing Operations 109,116 (91,509) 262,317 175,578

Net (Loss) Earnings of the Group from Discontinued Operations (1) 11,320 (233) 11,305

Net Earnings (Loss) of the Group 109,115 (80,189) 262,084 186,883

Net Earnings Attributable to Noncontrolling Interests from Continuing Operations (10,261) (10,158) $ (19,514) $ (20,184)

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

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

Net (Earnings) Loss Attributable to Redeemable Noncontrolling interests (10,038) 101,392 (19,721) 101,392

Net Earnings (Loss) Attributable to Jacobs from Continuing Operations 88,817 (275) 223,082 256,786

Net Earnings Attributable to Jacobs $ 88,816 $ 11,045 $ 222,849 $ 268,091

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Diluted Earnings Per Share $ 0.68 $ 0.08 $ 1.71 $ 2.04

Overview – Three Months Ended December 31, 2021

Net earnings attributable to the Company from continuing operations for the first fiscal quarter ended December 31, 2021 were $134.3 million (or $1.03 per diluted share), a decrease of $122.8 million, or 47.8%, from net earnings of $257.1 million (or $1.96 per diluted share) for the corresponding period last year.

The first fiscal quarter of 2022 was impacted by $75.0 million in pre-tax Restructuring and other charges and transaction costs associated mainly with the Company's transformation initiatives relating to real estate which is discussed in Note 18- Restructuring and Other Charges .

This decrease was partially offset by the current quarter operating results benefiting from our BlackLynx, Inc.

("BlackLynx"), PA Consulting and Buffalo Group investing activities.

The comparable period ended January 1, 2021 benefited from $93.1 million in pre-tax unrealized appreciation gains recorded in miscellaneous income (expense), net, associated with our investment in Worley stock and certain foreign currency revaluations relating to the ECR sale and pre-tax unrealized appreciation gains associated with our investment in C3.ai, Inc.

("C3") of $82.6 million, which were both sold during the fiscal year ended 2021.

These were partially offset by $27.9 million in fiscal 2021 pre-tax other-than-temporary impairment charges in respect of our AWE investment.

Overview – Three and Six Month Periods Ended April 1, 2022

Net earnings attributable to the Company from continuing operations for the second fiscal quarter ended April 1, 2022 were $88.8 million (or $0.68 per diluted share), an increase of $89.1 million, from net loss of $(0.3) million (or $0.00 per diluted share) for the corresponding period last year.

The second fiscal quarter of 2022 benefited from our StreetLight, BlackLynx and the full quarter impact of our PA Consulting investment acquired on March 2, 2021, partly offset by pre-tax Restructuring and other charges and transactions costs of $115.3 million, comprised mainly of the final pre-tax $91.3 million settlement of the Legacy CH2M Matter, net of previously recorded reserves, of $91.3 million, which is further discussed in Note 19 - Commitments and Contingencies and Derivative Financial Instruments.

The comparable period ended April 2, 2021 included $296.1 million in pre-tax deal related charges associated with the investment in PA Consulting, in part classified as compensation costs and reported in selling, general and administration expenses, as well as $(29.7) million and $(34.1) million in pre-tax fair value losses recorded in miscellaneous income (expense), net, associated with our former investments in Worley stock (net of Worley stock dividend) which includes impacts of certain foreign currency revaluations related to the ECR sale and C3.ai, Inc.

("C3"), respectively.

Lastly, current quarter selling, general and administrative expense includes pre-tax intangible amortization costs of $48.4 million, an increase of $17.8 million (or 58%), from the corresponding prior year period of $30.6 million due to acquired intangible assets from recent acquisitions mainly associated with the PA Consulting investment.

For the six months ended April 1, 2022, net earnings attributable to the Company from continuing operations were $223.1 million (or $1.71 per diluted share), a decrease of $(33.7) million, or (13.1)%, from $256.8 million (or $1.96 per diluted share) for the corresponding period last year.

The current year-to-date period benefited from the same recent investing activities mentioned above, partially offset by pre-tax Restructuring and other charges and transactions costs of $190.3 million, which included the final pre-tax settlement charges on the Legacy CH2M Matter mentioned above of $91.3 million and $74.6 million in charges associated with the Company's transformation initiatives relating to real estate which is discussed in Note 18 - Restructuring and Other Charges .

In comparison, the corresponding period in the prior year period included pre-tax costs incurred in connection with the investment in PA Consulting, in part classified as compensation costs and reported in selling, general and administrative expenses, of $300.2 million.

In addition, the corresponding prior year period included $63.5 million and $48.6 million in pre-tax fair value gains recorded in miscellaneous income (expense), net, associated with our former investments in Worley stock (net of Worley stock dividend) which includes impacts of certain foreign currency revaluations related to the ECR sale and C3, respectively.

The prior year comparable period also included a pre-tax other loss of $33.2 million for an other-than-temporary impairment of our investment in AWE Management Ltd.

Lastly, current year to date period selling, general and administrative expense includes pre-tax intangible amortization costs of $95.3 million, an increase of $41.6 million (or 77%), from the corresponding prior year period of $53.8 million due to acquired intangible assets from recent acquisitions mainly associated with PA Consulting investment.

For discussion of discontinued operations, see Note 17 - Sale of Energy, Chemicals and Resources ("ECR") Business.

On February 4, 2022, the Company acquired StreetLight Data, Inc., ("StreetLight").

On November 19, 2021, a subsidiary of Jacobs acquired BlackLynx.

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Consolidated Results of Operations

Revenues for the first fiscal quarter of 2022 were $3.38 billion, in line with our revenues reported in the corresponding period last year.

The slight decrease in revenues for the year over year period was in part due to certain contract wind downs in the U.S.

and volume decreases in our P&PS America's business due to softer U.S.

market conditions as well as lower pass-through revenues in advanced facilities.

In addition, revenue decreases from the prior year resulted from prior year favorable foreign currency translation in our international businesses of $24.1 million, with no significant impact in the current period.

This is partly offset due to fiscal 2022 incremental revenues from the PA Consulting investment and the BlackLynx and Buffalo Group acquisitions.

Pass-through costs included in revenues for the three months ended December 31, 2021 amounted to $472.4 million, a decrease of $176.3 million, or 27.2%, from $648.7 million from the corresponding period last year, which was primarily attributable to our advanced facilities business.

Gross profit for the first quarter of 2022 was $796.5 million, an increase of $164.4 million, or 26.0%, from $632.1 million from the corresponding period last year.

Our gross profit margins were 23.6% and 18.7% for the three months ended December 31, 2021 and January 1, 2021, respectively, with these trend differences being mainly attributable to favorable margin trends from our recent PA Consulting investment, the BlackLynx and Buffalo Group acquisitions, partially offset by market conditions and certain contract wind downs in our U.S.

Revenues for the second fiscal quarter of 2022 were $3.83 billion, an increase of $286.2 million, or 8.1%, from $3.55 billion for the corresponding period last year.

For the six months ended April 1, 2022, revenues were $7.21 billion, an increase of $285.0 million, or 4.1%, from $6.93 billion for the corresponding period last year.

Revenue increases for the year over year periods were due mainly to fiscal 2022 incremental revenues from the PA Consulting investment and the StreetLight, BlackLynx and Buffalo group acquisitions, as well as benefits from increased spending in our U.S.

government business sector client base.

These increases in revenues for the three and six months ended April 1, 2022 were partially offset by declines in pass-through revenues in advanced facilities business.

The six months ended April 1, 2022 was

unfavorably impacted by certain large contract wind downs in the U.S.

Also, revenue was unfavorably impacted from foreign currency translation of $51.7 million and $42.5 million for the three and six months ended April 1, 2022, respectively, in our international businesses as compared to favorable impacts of $75.6 million and $113.0 million in the corresponding periods last year.

Pass-through costs included in revenues for the three and six months ended April 1, 2022 amounted to $563.7 million and $1.04 billion, respectively, a decrease of $13.0 million and $189.3 million, or (2.2)% and (15.4)%, from $576.6 million and $1.23 billion from the corresponding periods last year.

Gross profit for the second quarter of 2022 was $870.4 million, an increase of $103.4 million, or 13.5%, from $767.0 million from the corresponding period last year.

Our gross profit margins were 22.7% and 21.6% for the three months ended April 1, 2022 and April 2, 2021, respectively, with these margin differences being mainly attributable to favorable margin impacts from the business results of our recent PA Consulting investment and the StreetLight, BlackLynx and Buffalo Group acquisitions, as well as benefits from increased spending by customers in the U.S.

government business sector.

Gross profit for the six months ended April 1, 2022 was $1.67 billion, an increase of $267.8 million, or 19.1%, from $1.40 billion from the corresponding period to date last year.

Our gross profit margins were 23.1% and 20.2% for the six months ended April 1, 2022 and April 2, 2021, respectively, with benefits from the similar favorable margin trends and increased spending in the U.S.

government business sector noted above, partially offset by certain large contract wind downs in the U.S as well as increases in labor costs associated with moderation of COVID-19 mitigation efforts and a competitive labor market, and incremental investments to support projected top-line growth.

See Segment Financial Information discussion for further information on the Company’s results of operations at the operating segment.

SG&A expenses for the three months ended December 31, 2021 were $619.1 million, an increase of $201.0 million, or 48.1%, from $418.1 million for the corresponding period last year.

The current year's three months ended results were impacted by incremental SG&A expenses from recent business acquisitions (mainly PA Consulting), of $93.5 million and higher personnel-related costs, partly offset by lower other operational overhead costs.

Additionally, higher Restructuring and other charges for the three-month period of 2022 related in part to $73.2 million in costs associated in part with the Company's transformation initiatives relating to real estate which is discussed in Note 18- Restructuring and Other Charges .

Prior year SG&A expenses included unfavorable impacts from foreign currency of $3.8 million, with no significant impact in the current year period.

Net interest expense for the three months ended December 31, 2021 was $17.9 million, an increase of $1.7 million from $16.2 million for the corresponding period last year.

The increase in net interest expense for the three month

period year over year is due to higher levels of average debt outstanding relating in part to the funding of the PA Consulting investment and the BlackLynx acquisition, in addition to higher interest rates.

Miscellaneous income, net for the three months ended December 31, 2021 was $9.7 million in comparison to $156.4 million for the corresponding period last year.

The $146.7 million decrease from the prior year three-month period was due primarily to prior year pre-tax unrealized gains on the Company's equity investments in Worley and C3, which were sold during fiscal year 2021.

The three months ended January 1, 2021 included $93.1 million in pre-tax unrealized gains associated with changes in the fair value of our investment in Worley stock and certain foreign currency revaluations relating to the ECR sale and $82.6 million in net gains related to the C3 investment.

These were partially offset by $27.9 million in fiscal 2021 pre-tax other-than-temporary impairment charges in respect of our AWE investment.

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.

SG&A expenses for the three and six months ended April 1, 2022 were $704.2 million and $1.32 billion, respectively, a decrease of $103.9 million and increase of $97.1 million, or (12.9)% and 7.9%, from $808.1 million and $1.23 billion for the corresponding periods last year.

The three and six months ended results for fiscal 2022 were impacted by incremental SG&A expenses from recent business acquisitions (mainly PA Consulting) of $98.5 million and $192.0 million, respectively, as compared to approximately $40 million (excluding compensation costs associated with the PA strategic investment mentioned below) in the corresponding prior year periods due to the prior comparable periods including PA Consulting activity only for the partial periods subsequent to the March 2, 2021 investment date.

Additionally, Restructuring and other charges and transaction costs for the periods of 2022 included $91.3 million attributable to final pre-tax settlement of the Legacy CH2M Matter, which is further discussed in Note 19- Commitments and Contingencies and Derivative Financial Instruments.

Also, the current 2022 periods SG&A expenses were impacted by higher personnel related costs due mainly to the moderation of COVID-19 mitigation efforts and related impacts.

Also, the current year-to-date Restructuring and other charges and transaction costs were impacted by $74.6 million in costs associated in part with the Company's transformation initiatives relating to real estate.

The three and six months ended April 2, 2021 include amounts of $296.1 million and $300.2 million, respectively, for pre-tax costs incurred in connection with the investment in PA Consulting, in part classified as compensation costs reported in selling, general and administrative expenses, in addition to the Company's transformation initiatives.

Lastly, SG&A expenses benefited from favorable foreign exchange impacts of $11.3 million and $9.0 million, respectively, for the three and six months ended April 1, 2022 as compared to unfavorable impacts of $41.3 million and $47.4 million for the corresponding periods last year.

Net interest expense for the three and six months ended April 1, 2022 was $21.6 million and $39.5 million, respectively, an increase of $6.8 million and $8.5 million from $14.9 million and $31.0 million for the corresponding periods last year.

The increase in net interest expense for the three and six month periods year over year is due to higher levels of average debt outstanding relating in part to the funding of the PA Consulting investment as well as the StreetLight and BlackLynx acquisitions, in addition to higher interest rates.

Miscellaneous income (expense), net for the three and six months ended April 1, 2022 was $10.7 million and $20.4 million, respectively, in comparison to $(56.3) million and $100.0 million for the corresponding periods last year.

The favorable improvement of $67.0 million from the prior three-month comparable period was due primarily to impacts in the prior year periods of pre-tax fair losses of $(29.7) million associated with our former investments in Worley stock (net of Worley stock dividend) and certain foreign currency revaluations relating to the ECR sale and pre-tax fair value losses associated with our investment in C3 of $(34.1) million, which were both sold during fiscal year 2021.

The decrease of $79.7 million from the prior year-to-date comparable period is attributable to full year pre-tax fair value gains of $63.5 million and $48.6 million in the Company's previously mentioned investment holdings in Worley (net of Worley stock dividend) which includes impacts of certain foreign currency revaluations related to the ECR sale and C3, respectively.

Additionally, the corresponding prior year periods included other-than-temporary impairment charges on our investment in AWE ML of $5.3 million and $33.2 million.

The Company’s effective tax rates from continuing operations for the three months ended April 1, 2022 and April 2, 2021 were 29.7% and 18.5%, respectively, with the change due primarily to the absence of a $7.7 million benefit the Company recognized in the three months ended April 2, 2021 associated with a change in the Company’s assertion about the indefinite reinvestment of certain foreign unremitted earnings in India, other discrete foreign tax items and higher state taxes, partly offset by the absence in the current year of certain nondeductible compensation related charges associated with our PA Consulting investment that occurred in the three month period of fiscal 2021.

The Company's effective tax rates from continuing operations for the six months ended April 1, 2022 and April 2, 2021 were 19.1% and 27.4%, respectively, with the decrease primarily due to a tax benefit of $15.7 million related to the release of valuation allowance on foreign tax credits for the six months ended April 1, 2022 and the absence of certain non-deductible pre-tax compensation charges associated with our investment in PA Consulting for the six month period in fiscal 2021, partly offset by the absence of the 2021 period benefit from the India unremitted earnings reinvestment item mentioned above.

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

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GAAP operating profit from continuing operations by including certain corporate-level expenses, Restructuring and other charges and transaction and integration costs (in thousands).

Three Months Ended

December 31, 2021 January 1, 2021

Three Months Ended Six Months Ended

April 1, 2022 April 2, 2021 April 1, 2022 April 2, 2021

Revenues from External Customers:

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Total $ 3,834,059 $ 3,547,873 $ 7,214,684 $ 6,929,708

Three Months Ended

December 31, 2021 January 1, 2021

Three Months Ended Six Months Ended

April 1, 2022 April 2, 2021 April 1, 2022 April 2, 2021

Segment Operating Profit:

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Restructuring, Transaction and Other Charges (2) (117,270) (321,665) (200,836) (343,756)

GAAP Operating Profit 177,333 213,940

GAAP Operating Profit (Loss) 166,215 (41,112) 343,548 172,826

Total Other (Expense) Income, net (3) (10,933) (71,169) (19,177) 69,002

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$ 155,282 $ (112,281) $ 324,371 $ 241,828

(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.

(1) Other corporate expenses also include intangibles amortization of $48.4 million and $30.6 million for the three months ended April 1, 2022 and April 2, 2021, respectively, and $95.3 million and $53.8 million for the six months ended April 1, 2022 and April 2, 2021, respectively, with the increase mainly attributable to the PA Consulting investment.

(2) Included in the three and six months ended April 1, 2022 is $91.3 million related to the final pre-tax settlement of the Legacy CH2M Matter, net of previously recorded reserves and included in the six months ended April 1, 2022 are $74.6 million of real estate impairment charges related to the Company's transformation initiatives.

Included in the three and six months ended April 2, 2021 are $296.1 million and $300.2 million, respectively, of costs incurred in connection with the investment in PA Consulting, in part classified as compensation costs.

(3) The six months ended April 1, 2022 include $3.5 million in income associated with final exit activities associated with our AWE ML investment and a gain of $7.1 million related to a lease termination.

The three and six months ended April 2, 2021 include $29.7 million and $(63.5) 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 and $34.1 million and $(48.6) million, respectively, in fair value adjustments related to our investment in C3 stock.

The six months ended April 2, 2021 also includes $33.2 million related to impairment of our AWE ML investment.

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

Critical Mission Solutions

Three Months Ended

December 31, 2021 January 1, 2021

Three Months Ended Six Months Ended

April 1, 2022 April 2, 2021 April 1, 2022 April 2, 2021

Revenue $ 1,366,313 $ 1,309,573 $ 2,528,818 $ 2,604,860

Operating Profit $ 113,241 $ 113,933 $ 224,737 $ 224,002

Critical Mission Solutions (CMS) segment revenues for the three months ended December 31, 2021 were $1.16 billion, a decrease of $132.8 million, or 10.3%, from $1.30 billion for the corresponding period last year.

The decrease in revenue was primarily driven by several large contracts winding down in the U.S., partially offset by revenue growth from certain elements of our legacy portfolio, driven by increased spending by customers in the U.S.

government business sector and our legacy international clients.

Impacts on revenues from favorable foreign currency translation were approximately $2.2 million for the three month period ended December 31, 2021 compared to $4.6 million in favorable impacts in the corresponding prior year period.

Operating profit for the segment was $111.5 million for the three months ended December 31, 2021, an increase of $1.4 million, or 1.3%, from $110.1 million for the corresponding period last year.

This slight increase from the prior year was mainly attributable to growth in higher margin U.S.

government business sectors as well as our recent acquisitions, offsetting impacts from the large contract wind downs mentioned above.

Impacts on operating profit from foreign currency were not significant for either period.

Critical Mission Solutions (CMS) segment revenues for the three and six months ended April 1, 2022 were $1.37 billion and $2.53 billion, respectively, an increase of $56.7 million and decrease of $76.0 million, or 4.3% and (2.9)%, from $1.31 billion and $2.60 billion for the corresponding periods last year.

During the three and six months ended April 1, 2022, revenue benefited from increased spending by customers in the U.S.

government business sector and our legacy international clients, incremental revenue from recent acquisitions and a recent contract award with the Department of Energy Nuclear remediation program.

Revenue during the six months ended April 1, 2022 was impacted by several large contracts winding down in the U.S.

Also, impacts on revenues from unfavorable foreign currency translation were approximately $10.2 million and $7.9 million for the three and six-month periods ended April 1, 2022, respectively, compared to $20.3 million and $27.6 million in favorable impacts in the corresponding prior year periods.

Operating profit for the segment was $113.2 million and $224.7 million, respectively, for the three and six months ended April 1, 2022, a decrease of $0.7 million and increase of $0.7 million, or (0.6)% and 0.3%, from $113.9 million and $224.0 million for the corresponding periods last year.

Operating profit levels were generally consistent and in line with prior year comparable periods presented, with the business benefiting from higher margin U.S.

government business sectors as well as our recent acquisitions but with offsetting impacts from the large contract wind downs mentioned above.

Impacts on operating profit from foreign currency translation were not significant in the three and six months ended April 1, 2022, compared to favorable impacts of approximately $3.2 million and $4.5 million in the corresponding prior year periods.

People & Places Solutions

Three Months Ended

December 31, 2021 January 1, 2021

Three Months Ended Six Months Ended

April 1, 2022 April 2, 2021 April 1, 2022 April 2, 2021

Revenue $ 2,170,356 $ 2,139,990 $ 4,098,502 $ 4,226,538

Operating Profit $ 191,144 $ 202,030 $ 382,837 $ 398,330

Revenues for the People & Places Solutions (P&PS) segment for the three months ended December 31, 2021 was $1.93 billion, a decrease of $158.4 million, or 7.6%, from $2.09 billion for the corresponding period last year.

The decrease in revenue for the three months ended December 31, 2021 was primarily driven by volume decreases in our U.S.

markets and lower pass through costs within our advanced facilities business.

Foreign currency translation had a $2.6 million unfavorable impact on revenues in our international businesses for the current year period.

Comparatively, favorable impacts on revenues from foreign currency translation was approximately $19.5 million for the three month period ended January 1, 2021.

Operating profit for the segment for the three months ended December 31, 2021 was $191.7 million, a decrease of $4.6 million, or 2.3%, from $196.3 million for the corresponding period last ye ar.

The year-over-year decrease in operating profit for the three months ended December 31, 2021 was driven mainly by the decline in lower revenues mentioned above and higher costs associated labor, travel, and other spending as COVID-19 mitigation efforts were moderated as well as incremental investments in support of projected future growth later this year.

Impacts on operating profit from foreign currency were not significant for the current year period, compared to $2.1 million in favorable impacts in the corresponding prior year period.

Revenues for the People & Places Solutions (P&PS) segment for the three months ended April 1, 2022 was $2.17 billion and $4.10 billion, respectively, an increase of $30.4 million and decrease of $128.0 million, or 1.4% and (3.0)%, from $2.14 billion and $4.23 billion for the corresponding periods last year.

The increase in revenue for the three months ended April 1, 2022 was primarily driven by growth in our advanced facilities business as compared to the prior year corresponding period.

The decrease in revenue for the six months ended April 1, 2022 was primarily due to lower pass through revenues from our advanced facilities business as compared to the prior year corresponding period.

Foreign currency translation had a $32.0 million and $34.6 million unfavorable impact on revenues in our international businesses for the three and six-month periods ended April 1, 2022, respectively as compared to favorable impacts of $55.3 million and $85.4 million in the corresponding prior year periods.

Operating profit for the segment for the three and six month periods ended April 1, 2022 was $191.1 million and $382.8 million , r espectively, a decrease of $10.9 million and $15.5 million, or (5.4)% and (3.9)% from $202.0 million and $398.3 million for the corresponding periods last year.

The year-over-year decrease in operating profit for the three months ended April 1, 2022 was driven by higher labor costs due to moderation of COVID-19 mitigation efforts and a competitive labor market, and incremental investments to support projected top-line growth, partially offset by benefits from higher re venue growth.

For the six months ended April 1, 2022, operating profit decreased year-over-year due mainly to the cost increases mentioned above for the six-month period .

Foreign currency translation had a $6.7 million and $6.8 million unfavorable impact on operating profit in our international businesses for the three and six-month periods ended April 1, 2022, respectively as compared to favorable impacts of $9.6 million and $13.8 million in the corresponding prior year periods.

PA Consulting

Three Months Ended

December 31, 2021 January 1, 2021

Three Months Ended Six Months Ended

April 1, 2022 April 2, 2021 April 1, 2022 April 2, 2021

Revenue $ 297,390 $ 98,310 $ 587,364 $ 98,310

Operating Profit $ 68,332 $ 27,917 $ 131,402 $ 27,917

Revenues for the PA Consulting segment for the three months ended December 31, 2021 were $290.0 million.

Operating profit for the segment for the three months ended January 1, 2021 was $63.1 million.

There were no comparable periods in the prior year, given the transaction closed on March 2, 2021.

Revenues for the PA Consulting segment for the three and six months ended April 1, 2022 were $297.4 million and $587.4 million, respectively, an increase of $199.1 million and $489.1 million, or 202.5% and 497.5%, from $98.3 million for the corresponding periods last year.

Operating profit for the segment for the three and six months ended April 2, 2021 was $68.3 million and $131.4 million, respectively, an increase of $40.4 million and $103.5 million, or 144.8% and 370.7%, from $27.9 million for the corresponding periods last year.

The increase in revenue and operating profit was due to only approximately one month of activity from the investment in PA Consulting in the prior periods due to the timing of the investment.

Foreign currency translation had a $9.5 million and $2.5 million unfavorable impact on revenues and operating profit, respectively, in our international businesses for the three months ended April 1, 2022, respectively.

Due to the partial period in the corresponding prior year, foreign currency impact was not significant for both revenue and operating profit.

Other Corporate Expenses

Other corporate expenses for the three months ended December 31, 2021 were $105.4 million, an increase of $35.0 million from $70.3 million for the corresponding period last year.

Other corporate expenses for the three and six months ended April 1, 2022 were $89.2 million and $194.6 million, respectively, an increase of $25.9 million and $60.9 million from $63.3 million and $133.7 million for the corresponding periods last year.

This increase was due primarily to higher intangible amortization expense from the PA Consulting investment and other acquisitions, as well as impacts from higher Company benefit program costs and other department spend increases.

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and (v) certain adjustments relating to costs associated with the Company’s international defined benefit pension plans.

In addition, other corporate expenses may also include from time to time certain adjustments to contract margins (both positive and negative) associated with projects, as well as other items, where it has been determined that such adjustments are not indicative of the performance of the related LOB.

In addition, other corporate expenses may also include from time to time certain adjustments to contract margins (both

positive and negative) associated with projects, as well as other items, where it has been determined that such adjustments are not indicative of the performance of the related LOB.

Restructuring and Other Charges

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government work.

While management uses all information available to determine

backlog, at any given time our backlog is subject to changes in the scope of services to be provided as well as increases or decreases in costs relating to the contracts included therein.

While management uses all information available to determine backlog, at any given time our backlog is subject to changes in the scope of services to be provided as well as increases or decreases in costs relating to the contracts included therein.

Backlog is not necessarily an indicator of future revenues.

Because certain contracts (e.g., contracts relating to large Engineering, Procurement & Construction ("EPC") projects as well as national government programs) can cause large increases to backlog in the fiscal period in which we recognize the award, and because many of our contracts require us to provide services that span over several fiscal quarters (and sometimes over fiscal years), we evaluate our backlog on a year-over-year basis, rather than on a sequential, quarter-over-quarter basis.

The following table summarizes our backlog at December 31, 2021 and January 1, 2021 (in millions):

December 31, 2021 January 1, 2021

Because certain contracts (e.g., contracts relating to large Engineering, Procurement & Construction ("EPC") projects as well as national government programs) can cause large increases to backlog in the fiscal period in which we recognize the award, and because many of our contracts require us to provide services that span over several fiscal quarters (and sometimes over fiscal years), we have presented our backlog on a year-over-year basis, rather than on a sequential, quarter-over-quarter basis.

The following table summarizes our backlog at April 1, 2022 and April 2, 2021 (in millions):

April 1, 2022 April 2, 2021

Critical Mission Solutions $ 10,556 $ 9,779

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Total $ 27,790 $ 25,571

The increase in backlog in Critical Mission Solutions (CMS) from January 1, 2021 was primarily driven by success in closing on a number of key opportunities in the U.S government space and the BlackLynx acquisition.

The increase in backlog in People & Places Solutions (P&PS) from January 1, 2021 was primarily driven by new business awards in our advanced facilities business.

Backlog in PA Consulting as of December 31, 2021 was $276.0 million.

The PA Consulting transaction closed on March 2, 2021.

The increase in backlog in Critical Mission Solutions (CMS) from April 2, 2021 was primarily driven by success in closing on a number of key opportunities in the U.S government space and the BlackLynx acquisition.

The increase in backlog in People & Places Solutions (P&PS) from April 2, 2021 was primarily driven by new business awards in our advanced facilities business and the StreetLight acquisition.

The PA Consulting backlog was consistent and in line with the prior year comparable period backlog.

Consolidated backlog differs from the Company’s remaining performance obligations as defined by ASC 606 primarily because of our national government contracts (other than national government O&M contracts).

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Liquidity and Capital Resources

At December 31, 2021, our principal sources of liquidity consisted of $ 1.25 billion in cash and cash equivalents and $1.67 billion of available borrowing capacity under our $2.25 billion r evolving credit agreement (the "Revolving Credit Facility").

At April 1, 2022, our principal sources of liquidity consisted of $ 1.24 billion in cash and cash equivalents and $1.50 billion of available borrowing capacity under our $2.25 billion r evolving credit agreement (the "Revolving Credit Facility").

We finance much of our operations and growth through cash generated by our operations.

The amount of cash and cash equivalents at December 31, 2021 represented an increase of $230.8 million from $1.01 billion at October 1, 2021 , the reasons for which are described below.

Our cash flow provided by operations of $321.6 million during the three months ended December 31, 2021 was favorable by $209.0 million in co mparison to the cash flow provided by operations o f $112.6 million for the corresponding prior year peri od.

This improvement was due mainly to improved working capital performance along with favorable impacts from net cash earnings year over year.

The improvement in working capital performance was primarily driven by favorability in accounts receivable collections trends along with less cash used in accrued liabilities year over year.

Our cash used for investing activities for the three months ended wa s $249.6 million, compared to cash used for investing activities of $193.2 million in the corresponding prior year period, with this change due primarily to the acquisition of BlackLynx in the current quarter and Buffalo Group in the prior year.

Our cash provided by financing activities o f $144.4 million for the three months ended December 31, 2021 resulted mainly from net proceeds from borr owings of $231.4 million ma inly in connection with the BlackLynx acquisition,

partly offset by cash used for repurchase of redeemable noncontrolling interests of $35.1 million and $41.6 million in dividends to shareholders and noncontrolling interests .

Cash provided by financing activities in the corresponding prior year period was $18.7 million, due primarily to net proceeds from borrowings of $95.0 million, offset by cash used for share repurchases of $24.8 million and $35.7 million in div idends to shareholders and noncontrolling interests.

At December 31, 2021, the Company had approximately $162.2 million in cash and cash equivalents held in the U.S.

The amount of cash and cash equivalents at April 1, 2022 represented an increase of $221.2 million from $1.01 billion at October 1, 2021 , the reasons for which are described below.

Our net cash flow provided by operations of $446.3 million during the six months ended April 1, 2022 was favorable by $96.0 million in co mparison to the cash flow provided by operations of $350.2 million for the corresponding prior year period.

This improvement was due mainly to higher operating profit levels year over year, due in part to the investment in PA Consulting.

This improvement was partly offset by working capital performance year over year being impacted by higher payouts of employee incentives, higher estimated tax payments and impacts from timing of receivable collections with these impacts being offset in part by favorable impacts from timing of other payments on accounts payable and cash received on the settlement of foreign currency forward contracts (mainly AUD).

Our net cash used for investing activities for the six months ended wa s $458.8 million, compared to cash used for investing activities of $1.74 billion in the corresponding prior year period, with this change due primarily to the acquisitions of StreetLight and BlackLynx in the current year and our investment in PA Consulting and acquisition of Buffalo Group in the prior year.

Our net cash provided by financing activities o f $235.1 million for the six months ended April 1, 2022 resulted mainly from net proceeds from borr owings of $387.1 million primarily in connection with the StreetLight and BlackLynx acquisitions, partly offset by cash used for share repurchases of $50.0 million, cash used for repurchase of redeemable noncontrolling interests of $35.1 million and $57.2 million in dividends to shareholders and $9.4 million in dividends to noncontrolling interest holders .

Cash provided by financing activities in the corresponding prior year period was $1.67 billion, due primarily to net proceeds from borrowings of $1.78 billion, offset by cash used for share repurchases of $24.9 million and $52.4 million in div idends to shareholders and $29.4 million in net dividends to (contributions from) noncontrolling interest holders.

At April 1, 2022, the Company had approximately $181.3 million in cash and cash equivalents held in the U.S.

and $1.05 billion held outside of the U.S.

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(see Note 7 - Income Taxes of Notes to Consolidated Financial Statements included in our 2021 Form 10-K), there are no material impediments to repatriating these funds to the U.S.

The Company had $273.7 million in letters of credit outstanding at December 31, 2021.

The Company had $274.6 million in le tters of credit outstanding at April 1, 2022.

Of this amount, $1.7 million was issued under the Revolving Credit Facility and $272.9 million was issued under separate, committed and uncommitted letter-of-credit facilities.

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.

On April 12, 2022, the Company paid cash of AUD640 million, or approximately $475 million using mid-April 2022 exchange rates, which represents the final pre-tax settlement of Legacy CH2M Matter.

For more information please refer to Note 19 - Commitments and Contingencies and Derivative Financial Instruments.

On February 4, 2022, the Company acquired StreetLight Data, Inc.

("StreetLight").

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 $190.7 million in cash, and issued $0.9 million in equity and $5.2 million in in-the-money stock options to the former owners of StreetLight.

The Company also paid off StreetLight's debt of approximately $1.0 million simultaneously with the consummation of the acquisition.

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.

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GAAP accounting rules.

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 January 20, 2021, the Company entered into an unsecured delayed draw term loan facility (the “2021 Term Loan Facility”) with a syndicate of financial institutions as lenders.

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We continue to evaluate the impact of the pandemic on our business and reassess accordingly.

We were in compliance with all of our debt covenants at December 31, 2021.

We were in compliance with all of our debt covenants at April 1, 2022.

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 2. Management’s Discussion and Analysis