What changed in this filing

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Item 1. Financial Statements

2023-05-09 compared with 2023-02-07 · 282 added, 256 removed, 650 unchanged (45% of the section changed)

4 unchanged sentences

(In thousands, except share information)

December 30, 2022 September 30, 2022

March 31, 2023 September 30, 2022

Current Assets:

32 unchanged sentences

Common stock, $ 1 par value, authorized - 240,000,000 shares;

issued and outstanding - 126,668,513 shares and 127,393,378 shares as of December 30, 2022 and September 30, 2022, respectively

issued and outstanding - 126,805,092 shares and 127,393,378 shares as of March 31, 2023 and September 30, 2022, respectively

126,805 127,393

10 unchanged sentences

CONSOLIDATED STATEMENTS OF EARNINGS

Three Months Ended December 30, 2022 and December 31, 2021

Three and Six Months Ended March 31, 2023 and April 1, 2022

(In thousands, except per share information)

For the Three Months Ended

December 30, 2022 December 31, 2021

For the Three Months Ended For the Six Months Ended

March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Revenues $ 4,078,332 $ 3,834,059 $ 7,877,001 $ 7,214,684

28 unchanged sentences

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended December 30, 2022 and December 31, 2021

Three and Six Months Ended March 31, 2023 and April 1, 2022

(In thousands)

For the Three Months Ended

December 30, 2022 December 31, 2021

For the Three Months Ended For the Six Months Ended

March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Net Earnings of the Group $ 233,178 $ 109,115 $ 379,849 $ 262,084

1 unchanged sentence

Foreign currency translation adjustment 21,951 ( 45,827 ) 187,285 ( 54,512 )

(Loss) gain on cash flow hedges ( 10,144 ) 8,855

Change in cash flow hedges ( 19,811 ) 46,491 ( 29,955 ) 55,346

Change in pension and retiree medical plan liabilities 6 12,036 ( 22,259 ) 20,075

Other comprehensive income before taxes 2,146 12,700 135,071 20,909

Income Tax (Expense) Benefit:

Income Tax Benefit (Expense):

Foreign currency translation adjustment 968 ( 400 ) ( 5,641 ) 2,590

3 unchanged sentences

5,664 ( 13,418 ) 2,017 ( 14,841 )

Net other comprehensive income 129,278 6,786

Net other comprehensive income (loss) 7,810 ( 718 ) 137,088 6,068

Net Comprehensive Income of the Group 240,988 108,397 516,937 268,152

6 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended December 30, 2022 and December 31, 2021

For the Three Months Ended March 31, 2023 and April 1, 2022

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

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

Net earnings — — 88,816 — 88,816 10,261 99,077

3 unchanged sentences

— — — 11,308 11,308 — 11,308

Gain on derivatives, net of deferred taxes of $ 2,945

Change in cash flow hedges, net of deferred taxes of $ 12,290

— — — 34,201 34,201 — 34,201

1 unchanged sentence

Redeemable Noncontrolling interests redemption value adjustment — — ( 35,117 ) — ( 35,117 ) — ( 35,117 )

Repurchase of Redeemable Noncontrolling interests — — 7,761 — 7,761 — 7,761

Noncontrolling interests - distributions and other — — — — — 4,272 4,272

2 unchanged sentences

Repurchases of equity securities ( 395 ) ( 8,084 ) ( 41,521 ) — ( 50,000 ) — ( 50,000 )

Balances at April 1, 2022

$ 128,900 $ 2,667,256 $ 4,069,664 $ ( 788,374 ) $ 6,077,446 $ 44,532 $ 6,121,978

Balances at December 30, 2022 $ 126,669 $ 2,672,421 $ 4,230,866 $ ( 845,852 ) $ 6,184,104 $ 49,494 $ 6,233,598

Net earnings — — 216,512 — 216,512 7,803 224,315

Foreign currency translation adjustments, net of deferred taxes of $( 968 )

— — — 22,919 22,919 — 22,919

Pension liability, net of deferred taxes of $ 351

— — — ( 345 ) ( 345 ) — ( 345 )

Change in cash flow hedges, net of deferred taxes of $( 5,047 )

— — — ( 14,764 ) ( 14,764 ) — ( 14,764 )

Dividends — — ( 32,564 ) — ( 32,564 ) — ( 32,564 )

Redeemable Noncontrolling interests redemption value adjustment — — ( 21,177 ) — ( 21,177 ) — ( 21,177 )

Noncontrolling interests - distributions and other — — — — — ( 8,910 ) ( 8,910 )

Stock based compensation — 15,054 — — 15,054 — 15,054

Issuances of equity securities including shares withheld for taxes 136 10,048 ( 286 ) — 9,898 — 9,898

Balances at March 31, 2023 $ 126,805 $ 2,697,523 $ 4,393,351 $ ( 838,042 ) $ 6,379,637 $ 48,387 $ 6,428,024

See the accompanying Notes to Consolidated Financial Statements – Unaudited.

JACOBS SOLUTIONS INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Six Months Ended March 31, 2023 and April 1, 2022

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

Net earnings — — 222,849 — 222,849 19,514 242,363

Foreign currency translation adjustments, net of deferred taxes of $( 2,590 )

— — — ( 51,922 ) ( 51,922 ) — ( 51,922 )

Pension liability, net of deferred taxes of $ 2,196

— — — 17,879 17,879 — 17,879

Change in cash flow hedges, net of deferred taxes of $ 15,235

— — — 40,111 40,111 — 40,111

Dividends — — ( 29,994 ) — ( 29,994 ) ( 29,994 )

Redeemable Noncontrolling interests redemption value adjustment to Common Shareholders — — ( 50,320 ) — ( 50,320 ) — ( 50,320 )

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

Noncontrolling interests - distributions and other — — — — — ( 9,778 ) ( 9,778 )

Stock based compensation — 25,161 — — 25,161 — 25,161

Issuances of equity securities including shares withheld for taxes 744 17,040 ( 11,904 ) — 5,880 — 5,880

Repurchases of equity securities ( 737 ) 35,043 ( 84,306 ) — ( 50,000 ) — ( 50,000 )

Balances at April 1, 2022 $ 128,900 $ 2,667,256 $ 4,069,664 $ ( 788,374 ) $ 6,077,446 $ 44,532 $ 6,121,978

Balances at September 30, 2022 $ 127,393 $ 2,682,009 $ 4,225,784 $ ( 975,130 ) $ 6,060,056 $ 44,336 $ 6,104,392

4 unchanged sentences

— — — ( 22,918 ) ( 22,918 ) — ( 22,918 )

Loss on derivatives, net of deferred taxes of $( 3,270 )

Change in cash flow hedges, net of deferred taxes of $( 8,317 )

— — — ( 21,638 ) ( 21,638 ) — ( 21,638 )

6 unchanged sentences

Repurchases of equity securities ( 1,238 ) ( 26,057 ) ( 113,227 ) — ( 140,522 ) — ( 140,522 )

Balances at December 30, 2022 $ 126,669 $ 2,672,421 $ 4,230,866 $ ( 845,852 ) $ 6,184,104 $ 49,494 $ 6,233,598

Balances at March 31, 2023 $ 126,805 $ 2,697,523 $ 4,393,351 $ ( 838,042 ) $ 6,379,637 $ 48,387 $ 6,428,024

See the accompanying Notes to Consolidated Financial Statements – Unaudited.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended December 30, 2022 and December 31, 2021

For the Six Months Ended March 31, 2023 and April 1, 2022

(In thousands)

For the Three Months Ended

December 30, 2022 December 31, 2021

For the Six Months Ended

March 31, 2023 April 1, 2022

Cash Flows from Operating Activities:

7 unchanged sentences

Loss on disposals of assets, net 828 421

Impairment of long-lived assets 27,142 72,266

Impairment of long-lived assets and equity method investment 37,217 74,585

Deferred income taxes 20,785 16,040

18 unchanged sentences

Repayments of short-term borrowings — ( 6,359 )

Debt issuance costs ( 11,388 ) —

Proceeds from issuances of common stock 25,374 28,187

28 unchanged sentences

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 September 30, 2022 (“2022 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 December 30, 2022, and for the three month period ended December 30, 2022.

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 March 31, 2023, and for the three and six months ended March 31, 2023.

Our interim results of operations are not necessarily indicative of the results to be expected for the full fiscal year.

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Refer to Note 18- Segment Information for additional information on how we disaggregate our revenues by reportable segment.

The following table further disaggregates our revenue by geographic area for the three months ended December 30, 2022 and December 31, 2021 (in thousands):

Three Months Ended

December 30, 2022 December 31, 2021

The following table further disaggregates our revenue by geographic area for the three and six months ended March 31, 2023 and April 1, 2022 (in thousands):

Three Months Ended Six Months Ended

March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

United States $ 2,694,735 $ 2,499,737 $ 5,231,013 $ 4,648,289

8 unchanged sentences

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

Revenue recognized for the three months ended December 30, 2022 that was previously included in the contract liability balance on September 30, 2022 was $ 330.3 million.

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

Revenue recognized for the three and six months ended March 31, 2023 that was previously included in the contract liability balance on September 30, 2022 was $ 82.7 million and $ 413.0 million, respectively.

Revenue recognized for the three and six months ended April 1, 2022 that was included in the contract liability balance on October 1, 2021 was $ 79.6 million and $ 371.0 million, respectively.

Remaining Performance Obligation

The Company’s remaining performance obligations as of December 30, 2022 represent a measure of the total dollar value of work to be performed on contracts awarded and in progress.

The Company had approximately $ 17.2 billion in remaining performance obligations as of December 30, 2022.

The Company’s remaining performance obligations as of March 31, 2023 represent a measure of the total dollar value of work to be performed on contracts awarded and in progress.

The Company had approximately $ 16.7 billion in remaining performance obligations as of March 31, 2023.

The Company expects to recognize approximately 48 % of our remaining performance obligations into revenue within the next twelve months and the remaining 52 % thereafter.

9 unchanged sentences

Net earnings used for the purpose of determining basic and diluted EPS is determined by taking net earnings less earnings available to participating securities.

The following table reconciles the denominator used to compute basic EPS to the denominator used to compute diluted EPS for the three months ended December 30, 2022 and December 31, 2021 (in thousands):

Three Months Ended

December 30, 2022 December 31, 2021

The following table reconciles the denominator used to compute basic EPS to the denominator used to compute diluted EPS for the three and six months ended March 31, 2023 and April 1, 2022 (in thousands):

Three Months Ended Six Months Ended

March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Numerator for Basic and Diluted EPS:

14 unchanged sentences

Diluted Earnings Per Share $ 1.70 $ 0.68 $ 2.76 $ 1.71

Per share amounts may not add due to rounding.

Share Repurchases

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 (the "2020 Repurchase Authorization").

In the fourth quarter of fiscal 2021, the Company initiated an accelerated share repurchase program under the 2020 Repurchase Authorization 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.

JACOBS SOLUTIONS INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The following table summarizes the activity under the 2020 Repurchase Authorization through the first fiscal quarter of 2023:

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 (the "2020 Repurchase Authorization").

The 2020 Repurchase Authorization expired on January 15, 2023.

On January 25, 2023, the Company's Board of Directors authorized an incremental share repurchase program of up to $ 1.0 billion of the Company's common stock, to expire on January 25, 2026 (the "2023 Repurchase Authorization").

No repurchase activity has taken place under the 2023 Share Repurchase Authorization to date.

Subsequent to the expiration of the 2020 Repurchase Authorization and the approval of the 2023 Repurchase Authorization, the Company has $ 1.0 billion remaining under the 2023 Repurchase Authorization.

The following table summarizes the activity under the 2020 Repurchase Authorization through the second fiscal quarter of 2023:

Amount Authorized

2 unchanged sentences

(1) Includes commissions paid and calculated at the average price per share

The 2020 Repurchase Authorization expired on January 15, 2023.

On January 25, 2023, the Company's Board of Directors authorized an incremental share repurchase program of up to $ 1.0 billion of the Company's stock, to expire on January 25, 2026 (the "2023 Repurchase Authorization").

No repurchase activity has taken place under the 2023 Share Repurchase Authorization to date.

Our share repurchase program does not obligate the Company to purchase any shares.

2 unchanged sentences

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.

On January 25, 2023, the Company’s Board of Directors declared a quarterly dividend of $ 0.26 per share of the Company’s common stock to be paid on March 24, 2023, to shareholders of record on the close of business on February 24, 2023.

On April 27, 2023, the Company’s Board of Directors declared a quarterly dividend of $ 0.26 per share of the Company’s common stock to be paid on June 23, 2023, to shareholders of record on the close of business on May 26, 2023.

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

Dividends paid through the first fiscal quarter of 2023 and the preceding fiscal year are as follows:

Dividends paid through the second fiscal quarter of 2023 and the preceding fiscal year are as follows:

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

January 25, 2023 February 24, 2023 March 24, 2023 $ 0.26

September 15, 2022 September 30, 2022 October 28, 2022 $ 0.23

4 unchanged sentences

Goodwill and Intangibles

As a result of the formation of a new operating segment this quarter, Divergent Solutions, see Note 1- b asis of Presentation, the historical carrying value of a portion of goodwill has been reallocated to the Divergent Solutions segment based on a relative fair value basis to the Divergent Solutions segment.

The carrying value of goodwill appearing in the

As a result of the formation of our new Divergent Solutions operating segment beginning in the first quarter of fiscal 2023, the historical carrying value of a portion of goodwill has been reallocated to this segment based on a relative

JACOBS SOLUTIONS INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

accompanying Consolidated Balance Sheets at December 30, 2022 and September 30, 2022 was as follows (in thousands):

fair value basis.

The carrying value of goodwill appearing in the accompanying Consolidated Balance Sheets at March 31, 2023 and September 30, 2022 was as follows (in thousands):

Critical Mission Solutions People & Places Solutions Divergent Solutions PA Consulting Total

3 unchanged sentences

Foreign currency translation and other ( 4,445 ) 15,927 19,334 137,703 168,519

Balance December 30, 2022 $ 2,262,184 $ 3,209,826 $ 579,666 $ 1,289,406 $ 7,341,082

The following table provides certain information related to the Company’s acquired intangibles in the accompanying Consolidated Balance Sheets at December 30, 2022 and September 30, 2022 (in thousands):

Balance March 31, 2023 $ 2,247,279 $ 3,212,585 $ 596,320 $ 1,309,688 $ 7,365,872

The following table provides certain information related to the Company’s acquired intangibles in the accompanying Consolidated Balance Sheets at March 31, 2023 and September 30, 2022 (in thousands):

Customer Relationships, Contracts and Backlog Developed Technology Trade Names Total

4 unchanged sentences

Foreign currency translation and other 63,308 496 18,142 81,946

Balances December 30, 2022 $ 1,145,567 $ 85,440 $ 180,952 $ 1,411,959

Balances March 31, 2023 $ 1,157,758 $ 81,755 $ 140,366 $ 1,379,879

The following table presents estimated amortization expense of intangible assets for the remainder of fiscal 2023 and for the succeeding years.

6 unchanged sentences

Receivables and Contract Assets

The following table presents the components of receivables and contract assets appearing in the accompanying Consolidated Balance Sheets at December 30, 2022 and September 30, 2022, as well as certain other related information (in thousands):

December 30, 2022 September 30, 2022

The following table presents the components of receivables and contract assets appearing in the accompanying Consolidated Balance Sheets at March 31, 2023 and September 30, 2022, as well as certain other related information (in thousands):

March 31, 2023 September 30, 2022

Components of receivables and contract assets:

12 unchanged sentences

Accumulated Other Comprehensive Income

The following table presents the Company's roll forward of accumulated other comprehensive income (loss) after-tax as of December 30, 2022 (in thousands):

The following table presents the Company's roll forward of accumulated other comprehensive income (loss) after-tax as of March 31, 2023 (in thousands):

Change in Net Pension Obligation Foreign Currency Translation Adjustment (1)

Gain/(Loss) on Cash Flow Hedges Total

Gain/(Loss) on Cash Flow Hedges (2)

Balance at September 30, 2022

$ ( 307,395 ) $ ( 786,040 ) $ 118,305 $ ( 975,130 )

Other comprehensive income (loss) ( 22,574 ) 158,726 ( 2,758 ) 133,394

Other comprehensive (loss) income ( 22,918 ) 181,644 ( 9,907 ) 148,819

Reclassifications from accumulated other comprehensive income (loss) — — ( 11,731 ) ( 11,731 )

Balance at December 30, 2022

Balance at March 31, 2023

$ ( 330,313 ) $ ( 604,396 ) $ 96,667 $ ( 838,042 )

( 1) Included in the overall foreign currency translation adjustment for the three months ended December 30, 2022 and December 31, 2021 are $( 74.9 ) million and $ 18.9 million, respectively in unreali zed gains (losses) on long-term foreign currency denominated intercompany loans not anticipated to be settled in the foreseeable future.

Included in the Company’s cumulative net unrealized gains from interest rate and cross currency swaps recorded in accumulated other comprehensive income as of December 30, 2022 were appro ximately $ 21.8 million in unrealized gains, net of taxes, which are expected to be realized in earnings during the twelve months subsequent to December 30, 2022 .

( 1) Included in the overall foreign currency translation adjustment for the six months ended March 31, 2023 and April 1, 2022 are $( 87.2 ) million and $ 38.3 million, respectively in unreali zed gains (losses) on long-term foreign currency denominated intercompany loans not anticipated to be settled in the foreseeable future.

(2) Included in the Company’s cumulative net unrealized gains from interest rate and cross currency swaps recorded in accumulated other comprehensive income as of March 31, 2023 were approximately $ 19.6 million in unrealized gains, net of taxes, which are expected to be realized in earnings during the twelve months subsequent to March 31, 2023.

JACOBS SOLUTIONS INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The Company’s effective tax rates from continuing operations for the three months ended December 30, 2022 and December 31, 2021 were 25.4 % and 9.4 %, respectively.

The Company’s effective tax rates from continuing operations for the three months ended March 31, 2023 and April 1, 2022 were 7.6 % and 29.7 %, respectively.

The most significant items contributing to the difference between the statutory U.S.

federal corporate tax rate of 21.0% and the Company’s effective tax rate for the three months ended December 30, 2022 were U.S.

federal corporate tax rate of 21.0% and the Company’s effective tax rate for the three months ended March 31, 2023 were a tax benefit of $ 40.2 million related to uncertain tax positions (“UTPs”) in the United States that were effectively settled, of which $ 30.8 million relates to positions carried forward from the acquisition of CH2M Hill Companies Ltd.

that was completed in 2018, as well as a tax benefit of $ 8.6 million for the release of previously valued foreign tax credits.

These benefits were partly offset by U.S.

state income tax expense of $ 5.9 million and U.S.

tax on foreign earnings of $ 4.6 million.

Both items are expected to have a continuing impact on the Company's effective tax rate for the remainder of the fiscal year.

These expense items are expected to have a continuing impact on the Company’s effective tax rate for the remainder of the fiscal year.

The most significant items contributing to the difference between the statutory U.S.

federal corporate tax rate of 21.0% and the Company's effective tax rate for the three months ended December 31, 2021 were a tax benefit of $ 15.7 million related to the release of previously reserved foreign tax credit assets, $ 4.2 million excess tax benefit attributable to stock compensation, and $ 4.0 million benefit from filing amended state returns.

federal corporate tax rate of 21.0% and the Company's effective tax rate for the three months ended April 1, 2022 were U.S.

state income tax expense of $ 5.8 million, discrete foreign tax items of $ 5.2 million, none of which are individually significant, and U.S tax on foreign earnings of $ 1.3 million.

The Company's effective tax rates from continuing operations for the six months ended March 31, 2023 and April 1, 2022 were 15.4 % and 19.1 %, respectively.

The most significant items contributing to the difference between the statutory U.S.

federal corporate tax rate of 21.0% and the Company’s effective tax rate for the six months ended March 31, 2023 were net tax benefits of $ 39.0 million mostly related to UTPs mentioned above and a tax benefit of $ 8.6 million for the release of previously valued foreign tax credits, partly offset by U.S.

state income tax expense of $ 10.5 million and U.S.

tax on foreign earnings of $ 8.2 million.

The most significant items contributing to the difference between the statutory U.S.

federal corporate tax rate of 21.0% and the Company's effective tax rate for the six months ended April 1, 2022 were a net tax benefit of $ 12.6 million from the change in valuation allowances for previously valued foreign tax credits and India’s minimum alternate tax credit and a tax benefit of $ 4.9 million related to filing amended state returns, partly offset by U.S.

state income tax expense of $ 8.9 million and U.S.

tax on foreign earnings of $ 4.0 million.

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

3 unchanged sentences

However, future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, which may impact our effective tax rate.

During the next 12 months, it is reasonably possible that U.S.

tax audit resolutions may reduce unrecognized tax benefits by up to $ 44.2 million, resulting in a reduction of the Company's provision for taxes on earnings.

Joint Ventures, VIEs and Other Investments

We execute certain contracts jointly with third parties through various forms of joint ventures.

Although the joint ventures own and hold the contracts with the clients, the services required by the contracts are typically performed by us and our joint venture partners, or by other subcontractors under subcontracting agreements with the joint ventures.

Many of these joint ventures are formed for a specific project.

The assets of our joint ventures generally consist almost entirely of cash and receivables (representing amounts due from clients), and the liabilities of our joint ventures generally consist almost entirely of amounts due to the joint venture partners (for services provided by the partners to the joint ventures under their individual subcontracts) and other subcontractors.

Many of the joint ventures are deemed to be variable interest entities (“VIE”) because they lack sufficient equity to finance the activities of the joint venture.

The assets of a joint venture are restricted for use to the obligations of the particular joint venture and are not available for general operations of the Company.

Our risk of loss on these arrangements is usually shared with our partners.

The liability of each partner is usually joint and several, which means that each partner may become liable for the entire risk of loss on the project.

Furthermore, on some of our projects, the Company has granted guarantees that may encumber both our contracting subsidiary company and the Company for the entire risk of loss on the project.

The Company is unable to estimate the maximum potential amount of future payments that we could be required to make under outstanding performance guarantees related to joint venture projects due to a number of factors, including but not limited to, the nature and extent of any contractual defaults by our joint venture partners, resource availability, potential performance delays caused by the defaults, the location of the projects, and the terms of the related contracts.

Refer to Note 17- Commitments and Contingencies and Derivative Financial Instruments for further discussion relating to performance guarantees.

For consolidated joint ventures, the entire amount of the services performed, and the costs associated with these services, including the services provided by the other joint venture partners, are included in the Company's results of operations.

Likewise, the entire amount of each of the assets and liabilities are included in the Company’s Consolidated Balance Sheets.

For the consolidated VIEs, the carrying value of assets and liabilities was $ 358.2 million and $ 218.4 million, respectively, as of December 30, 2022 and $ 353.9 million and $ 228.1 million, respectively, as of September 30, 2022.

For the Company's consolidated variable interest entities ("VIE") joint ventures, the carrying value of assets and liabilities was $ 362.6 million and $ 223.7 million, respectively, as of March 31, 2023 and $ 353.9 million and $ 228.1 million, respectively, as of September 30, 2022.

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

Unconsolidated joint ventures are accounted for under proportionate consolidation or the equity method.

Proportionate consolidation is used for joint ventures that include unincorporated legal entities and activities of the joint venture that are construction-related.

For those joint ventures accounted for under proportionate consolidation, only the Company’s pro rata share of assets, liabilities, revenue, and costs are included in the Company’s balance sheet and results of operations.

For the Company's proportionate consolidated VIEs, the carrying value of assets and liabilities was $ 123.5 million and $ 139.8 million, respectively, as of March 31, 2023, and $ 109.3 million and $ 129.2 million, respectively, as of September 30, 2022.

Our investments in equity method joint ventures on the Consolidated Balance Sheets (reported in Other Noncurrent Assets:

Miscellaneous) as of March 31, 2023 and September 30, 2022 were $ 54.3 million and $ 56.6 million, respectively.

Additionally, income from equity method joint ventures (reported in Revenue) was $ 7.5 million and $ 12.5 million, respectively, during the three months ended March 31, 2023 and April 1, 2022, with $ 17.5 million and $ 19.3 million, respectively, reporting in the corresponding six month periods.

As of March 31, 2023, the Company does not have any material equity method investments that exceed its share of venture net assets.

JACOBS SOLUTIONS INC.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

For the proportionate consolidated VIEs, the carrying value of assets and liabilities was $ 118.7 million and $ 139.2 million, respectively, as of December 30, 2022, and $ 109.3 million and $ 129.2 million, respectively, as of September 30, 2022.

For those joint ventures accounted for under the equity method, the Company's investment balances for the joint venture are included in Other Noncurrent Assets:

Miscellaneous on the balance sheet and the Company’s pro rata share of net income is included in Revenues.

In limited cases, there are basis differences between the equity in the joint venture and the Company's investment created when the Company purchased its share of the joint venture.

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

As of December 30, 2022, the Company does not have any equity method investments that exceed its share of venture net assets.

Our investments in equity method joint ventures on the Consolidated Balance Sheets as of December 30, 2022 and September 30, 2022 were $ 55.9 million and $ 56.6 million, respectively.

During the three months ended December 30, 2022 and December 31, 2021, we recognized income from equity method joint ventures of $ 10.0 million and $ 6.8 million, respectively.

Accounts receivable from unconsolidated joint ventures accounted for under the equity method was $ 23.1 million and $ 21.1 million as of December 30, 2022 and September 30, 2022, respectively.

At December 30, 2022 and September 30, 2022, long-term debt consisted of the following (principal amounts in thousands):

Interest Rate Maturity December 30, 2022 September 30, 2022

Revolving Credit Facility Benchmark + applicable margin (1) (2) March 2024 $ 1,610,794 $ 1,105,294

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

March 2024 987,410 923,580

Accounts receivable from unconsolidated joint ventures accounted for under the equity method was $ 19.3 million and $ 21.1 million as of March 31, 2023 and September 30, 2022, respectively.

At March 31, 2023 and September 30, 2022, long-term debt consisted of the following (principal amounts in thousands):

Interest Rate Maturity March 31, 2023 September 30, 2022

Revolving Credit Facility Benchmark + applicable margin (1) (2) February 2028 $ 1,077,794 $ 1,105,294

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

February 2026 200,000 200,000

2021 Term Loan Facility - GBP Portion Benchmark + applicable margin (3)

September 2025 802,295 723,580

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

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Fixed-rate notes due:

Bonds, Sustainability-Linked 5.9 % (5)

March 2033 500,000 —

Senior Notes, Series A 4.27 % May 2025 (6) — 190,000

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Total Long-term debt, net $ 3,402,471 $ 3,357,256

(1) During fiscal 2022, 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 30, 2022 and September 30, 2022 were approximately 5.76 % and 4.08 %.

(1) During the second quarter of fiscal 2023, the aggregate principal amounts denominated in U.S.

dollars under the Revolving Credit Facility, the 2021 Term loan facility and the 2020 Term Loan Facility (each as defined below) transitioned from underlying LIBOR benchmarked rates to the Term Secured Overnight Financing Rate ("SOFR").

During fiscal 2022, 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 Sterling Overnight Index Average ("SONIA") rates.

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

dollar denominated borrowings under the Revolving Credit Facility bear interest at either a SOFR rate plus a margin of between 0.975 % and 1.725 % or a base rate plus a margin of between 0 % and 0.625 %.

The applicable SOFR rates, or LIBOR rate for the prior fiscal year end, including applicable margins at March 31, 2023 and September 30, 2022 were approximately 6.24 % and 4.08 %.

Borrowings denominated in British pounds bear interest at an adjusted SONIA rate plus a margin of between 0.908 % and 1.658 %.

There were no amounts drawn in British pounds as of December 30, 2022.

(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 30, 2022 and September 30, 2022 was approximately 5.76 % and 4.06 %.

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 4.84 % and 3.60 % at December 30, 2022 and September 30, 2022, respectively.

(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 30, 2022 and September 30, 2022 were approximately 5.76 % and 4.49 %.

Borrowings denominated in British pounds bear interest at an adjusted SONIA rate plus

There were no amounts drawn in British pounds as of March 31, 2023.

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

dollar denominated borrowings under the 2021 Term Loan Facility bear interest at either a SOFR rate plus a margin of between 0.975 % and 1.725 % or a base rate plus a margin of between 0 % and 0.625 %.

The applicable SOFR, or LIBOR rate for the prior fiscal year end, including applicable margins for borrowings denominated in U.S.

dollars at March 31, 2023 and September 30, 2022 was approximately 6.23 % and 4.06 %.

Borrowings denominated in British pounds bear interest at an adjusted SONIA rate plus a margin of between 0.908 % and 1.658 %, which was approximately 5.58 % and 3.60 % at March 31, 2023 and September 30, 2022, respectively.

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

dollar denominated borrowings under the 2020 Term Loan Facility bear interest at either a SOFR rate plus a margin of between 0.975 % and 1.725 % or a base rate plus a margin of between 0 % and 0.625 %.

The applicable SOFR, or LIBOR rate for the prior fiscal year end, including applicable margins for borrowings denominated in U.S.

dollars at March 31, 2023 and September 30, 2022 were approximately 6.28 % and 4.49 %.

(5) From and including September 1, 2028 (the “First Step Up Date”), the interest rate payable on the Bonds (as defined below) will be increased by an additional 12.5 basis points to 6.025 % per annum (the “First Step Up Interest Rate”) unless the Company notifies the Trustee (as defined below) on or before the date that is 15 days prior to the First Step Up Date that the Percentage of Gender Diversity Performance Target (as defined in the First Supplemental Indenture (as defined below)) has been satisfied and receives a

JACOBS SOLUTIONS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

a margin of between 0.875 % and 1.625 %, which was approximately 4.84 % and 3.60 % at December 30, 2022 and September 30, 2022, respectively.

related assurance letter verifying such compliance.

From and including September 1, 2030 (the “Second Step Up Date”) the interest rate payable on the Bonds will be increased by 12.5 basis points to (x) 6.150 % per annum if the First Step Up Interest Rate was in effect immediately prior to the Second Step Up Date or (y) 6.025 % per annum if the initial interest rate was in effect immediately prior to the Second Step Up Date, unless the Company notifies the Trustee on or before the date that is 15 days prior to the Second Step Up Date that the GHG Emissions Performance Target (as defined in the First Supplemental Indenture) has been satisfied and receives a related assurance letter verifying such compliance.

(6) All amounts due under the Note Purchase Agreement pursuant to which the Senior Notes (each as defined below) were issued were repaid in the first fiscal quarter of 2023.

(7) 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.

(6) All amounts due under the Note Purchase Agreement pursuant to which the Senior Notes were issued were repaid in the first fiscal quarter of 2023.

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.

On March 12, 2018, the Company 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, “Senior Notes”).

In connection with the Holding Company Reorganization, which was completed in August 2022, the Company launched an offer to repurchase its outstanding Senior Notes at par plus accrued and unpaid interest, and without any make-whole premium.

In fiscal first quarter 2023, the Company repurchased $ 481 million of Senior Notes held by holders who accepted the offer with proceeds from the Revolving Credit Facility.

In December 2022, the Company repurchased the remaining $ 19 million of Senior Notes.

Revolving Credit Facility and Term Loans

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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 December 30, 2022.

The Revolving Credit Facility permits the Company to borrow under two separate tranches in U.S.

On February 6, 2023, the Company amended and restated the Revolving Credit Facility to, among other things:

(a) extend the maturity date to February 6, 2028, (b) replace and adjust interest rates based on market conditions and incorporate a sustainability-linked pricing adjustment, (c) increase the Consolidated Leverage Ratio financial covenant to 3.50 :1.00 (subject to temporary increases to 4.00 :1.00 following the closing of certain material acquisitions), (d) eliminate the net worth financial covenant, and (e) add Jacobs Solutions Inc.

as a guarantor of the obligations of JEGI and its subsidiaries under the Revolving Credit Facility.

The Revolving Credit Facility permits the Company to borrow in U.S.

dollars, certain specified foreign currencies, and any other currency that may be approved in accordance with the terms of the Revolving Credit Facility.

The Revolving Credit Facility also provides for a financial letter of credit sub facility of $ 400.0 million, permits performance letters of credit, and provides for a $ 100.0 million sub facility for swing line loans.

Letters of credit are subject to fees based on the Company’s Consolidated Leverage Ratio.

The Company pays a facility fee of between 0.08 % and 0.23 % per annum depending on the Company’s Consolidated Leverage Ratio.

Letters of credit are subject to fees based on the Company’s Consolidated Leverage Ratio and Debt Rating, whichever is more favorable to the Company.

The Company pays a facility fee of between 0.10 % and 0.25 % per annum depending on the Company’s Consolidated Leverage Ratio and Debt Rating.

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.

Under the 2021 Term Loan Facility, the Company borrowed an aggregate principal amount of $ 200.0 million and £ 650.0 million.

The proceeds of the term loans were used primarily to fund the Company's investment in PA Consulting.

The 2021 Term Loan Facility contains affirmative and negative covenants and events of default customary for financings of this type that are consistent with those included in the Revolving Credit Facility and the 2020 Term Loan Facility.

On February 6, 2023, the Company amended and restated the 2021 Term Loan Facility to, among other things:

(a) extend the maturity date of the U.S.

dollar term loan to February 6, 2026 and the British sterling term loan to September 1, 2025, (b) replace and adjust interest rates based on market conditions and incorporate a sustainability-linked pricing adjustment, (c) increase the Consolidated Leverage Ratio financial covenant to 3.50 :1.00 (subject to temporary increases to 4.00 :1.00 following the closing of certain material acquisitions), (d) eliminate the net worth financial covenant, and (e) add Jacobs as a guarantor of the obligations of JEGI under the 2021 Term Loan Facility.

On March 25, 2020, the Company entered into an unsecured term loan facility (the “2020 Term Loan Facility”) with a syndicate of financial institutions as lenders.

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The 2020 Term Loan Facility contains affirmative and negative covenants and events of default customary for financings of this type that are consistent with those included in the Revolving Credit Facility.

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.

Under the 2021 Term Loan Facility, the Company borrowed an aggregate principal amount of $ 200.0 million and £ 650.0 million.

The proceeds of the term loans were used primarily to fund the Company's investment in PA Consulting.

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

On February 6, 2023, the Company amended the 2020 Term Loan Facility to, among other things:

(a) replace and adjust interest rates based on market conditions and incorporate a sustainability-linked pricing adjustment, (b) increase the Consolidated Leverage Ratio financial covenant to 3.50 :1.00 (subject to temporary increases to 4.00 :1.00 following the closing of certain material acquisitions), (c) eliminate the net worth financial covenant, and (d) add Jacobs as a guarantor of the obligations of JEGI and Jacobs U.K.

JACOBS SOLUTIONS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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

In the fourth quarter of fiscal year 2022, the Revolving Credit Facility and Term Loan Facilities were amended to permit the Holding Company Reorganization.

We were in compliance with the covenants under the Term Loan Facilities at December 30, 2022.

On February 6, 2023, the Company refinanced its Revolving Credit Facility and Term Loan Facilities (the "Refinancing").

In connection with the Refinancing, the Revolving Credit Facility was amended and restated to, among other things:

The 2021 Term Loan Facility was amended and restated to, among other things:

(a) extend the maturity date of the U.S.

Finally, the Company amended the 2020 Term Loan Facility to, among other things:

We were in compliance with the covenants under the Revolving Credit Facility and Term Loan Facilities at March 31, 2023.

Bonds, Sustainability-Linked

On February 16, 2023, JEGI completed an offering of $ 500 million aggregate principal amount of Sustainability-Linked Senior Notes due 2033 (the “Bonds”).

The Bonds are fully and unconditionally guaranteed by the Company (the “Guarantee”).

The Bonds and the Guarantee were offered pursuant to a prospectus supplement, dated February 13, 2023, to the prospectus dated February 6, 2023, that forms a part of the Company's and JEGI’s automatic shelf registration statement on Form S-3ASR previously filed with the Securities and Exchange Commission, and were issued pursuant to an Indenture, dated as of February 16, 2023, between JEGI, as issuer, the Company, as guarantor, and U.S.

Bank Trust Company, National Association, as trustee (the “Trustee”), as amended and supplemented by the First Supplemental Indenture, dated as of February 16, 2023 (the “First Supplemental Indenture”).

Interest on the Bonds is payable semi-annually in arrears on each March 1 and September 1, commencing on September 1, 2023, until maturity.

The Bonds bear interest at 5.9 % per annum, subject to adjustments, as discussed in note (5) to the table above.

Prior to December 1, 2032 (the “Par Call Date”), JEGI may redeem the Bonds at its option, in whole or in part, at any time and from time to time, at the redemption price calculated by JEGI (expressed as a percentage of principal amount and rounded to three decimal places) equal to the greater of:

(1) (a) the sum of the present values of the remaining scheduled payments of principal and interest on the Bonds being redeemed, assuming that such Bonds matured on the Par Call Date, discounted to the redemption date on a semiannual basis (assuming a 360-day year of twelve 30-day months), at the Treasury Rate (as defined in the First Supplemental Indenture) plus 35 basis points, less (b) interest accrued to the redemption date, and (2) 100 % of the principal amount of such Bonds to be redeemed, plus, in either case, accrued and unpaid interest on the Bonds, if any, to, but excluding, the redemption date.

At any time and from time to time on or after the Par Call Date, JEGI may redeem the Bonds, at its option, in whole or in part, at a redemption price equal to 100 % of the principal amount of the Bonds to be redeemed, plus accrued and unpaid interest thereon, if any, up to, but excluding, the redemption date.

Senior Notes, Series A, B and C

In fiscal first quarter 2023, the Company repurchased $ 481 million of Senior Notes held by holders who accepted the offer with proceeds from the Revolving Credit Facility.

In December 2022, the Company repurchased the remaining $ 19 million of Senior Notes.

The fair value of the Bonds is estimated to be $ 497.1 million at March 31, 2023, based on Level 2 inputs.

The fair value is determined by discounting future cash flows using interest rates available for issuances with similar terms and average maturities.

Other arrangements

During fiscal 2022 the Company entered into two treasury locks to manage its interest rate exposure with the anticipated issuance of fixed rate debt before December 2023.

During fiscal 2020, the Company entered into interest rate and cross currency derivative contracts to swap a portion of our variable rate debt to fixed rate debt.

See Note 17- Commitments and Contingencies and Derivative Financial Instruments for discussion regarding the Company's derivative instruments.

The Company has issued $ 1.3 million in letters of credit under the Revolving Credit Facility, leaving $ 637.9 million of available borrowing capacity under the Revolving Credit Facility at December 30, 2022.

In addition, the Company had issued $ 291.2 million under separate, committed and uncommitted letter-of-credit facilities for total issued letters of credit of $ 292.5 million at December 30, 2022.

The Company’s right-of use assets and lease liabilities relate to real estate, project assets used in connection with long-term construction contracts, IT assets and vehicles.

The Company’s leases have remaining lease terms of one year to thirteen years .

The Company’s lease obligations are primarily for the use of office space and are primarily operating leases.

Certain of the Company’s leases contain renewal, extension, or termination options.

The Company assesses each option on an individual basis and will only include options reasonably certain of exercise in the lease term.

The Company generally considers the base term to be the term provided in the contract.

None of the Company’s lease agreements contain material options to purchase the lease property, material residual value guarantees, or material restrictions or covenants.

Long-term project asset and vehicle leases (leases with terms greater than twelve months), along with all real estate and IT asset leases, are recorded on the Consolidated Balance Sheet at the present value of the minimum lease payments not yet paid, net of impairments taken.

Because the Company primarily acts as a lessee and the rates implicit in its leases are not readily determinable, the Company generally uses its incremental borrowing rate on the lease commencement date to calculate the present value of future lease payments.

Certain leases include payments that are based solely on an index or rate.

These variable lease payments are included in the calculation of the right-of-use ("ROU") asset and lease liability and are initially measured using the index or rate at the lease commencement date.

Other variable lease payments, such as payments based on use and for property taxes, insurance, or common area maintenance that are based on actual assessments are excluded from the ROU asset and lease liability and are expensed as incurred.

In addition to the present value of the future lease payments, the calculation of the ROU asset also includes any deferred rent, lease pre-payments and initial direct costs of obtaining the lease, such as commissions.

During fiscal 2022, the Company entered into two treasury lock agreements with an aggregate notional value of $ 500.0 million to manage its expected interest rate exposure in anticipation of issuing up to $ 500 million of fixed rate debt.

On February 13, 2023 and with the issuance of the Bonds, the Company settled these treasury lock agreements.

See Note 17- Commitments and Contingencies and Derivative Financial Instruments for more discussion around this transaction.

JACOBS SOLUTIONS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Certain lease contracts contain nonlease components such as maintenance and utilities.

The Company has made an accounting policy election, as allowed under ASC 842-10-15-37 and discussed above, to capitalize both the lease component and nonlease components of its contracts as a single lease component for all of its right-of-use assets.

Short-term project asset and vehicle leases (project asset and vehicle leases with an initial term of twelve months or less or leases that are cancellable by the lessee and lessor without significant penalties) are not recorded on the Consolidated Balance Sheet and are expensed on a straight-line basis over the lease term.

The majority of the Company’s short-term leases relate to equipment used on construction projects.

These leases are entered into at agreed upon hourly, daily, weekly or monthly rental rates for an unspecified duration and typically have a termination for convenience provision.

Such equipment leases are considered short-term in nature unless it is reasonably certain that the equipment will be leased for a term greater than twelve months.

The components of lease expense (reflected in selling, general and administrative expenses) for th e three months ended December 30, 2022 and December 31, 2021 were as follows (in thousands):

Three Months Ended

December 30, 2022 December 31, 2021

During fiscal 2020, the Company entered into interest rate and cross currency derivative contracts to swap a portion of our variable rate debt to fixed rate debt.

See Note 17- Commitments and Contingencies and Derivative Financial Instruments for discussion regarding the Company's derivative instruments.

The Company has issued $ 1.3 million in letters of credit under the Revolving Credit Facility, leaving $ 1.17 billion of available borrowing capacity under the Revolving Credit Facility at March 31, 2023.

In addition, the Company had issued $ 321.1 million under separate, committed and uncommitted letter-of-credit facilities for total issued letters of credit of $ 322.4 million at March 31, 2023.

The components of lease expense (reflected in selling, general and administrative expenses) for th e three and six months ended March 31, 2023 and April 1, 2022 were as follows (in thousands):

Three Months Ended Six Months Ended

March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Lease expense

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Total lease expense $ 40,541 $ 42,145 $ 80,763 $ 86,100

Supplemental information related to the Company's leases for the three months ended December 30, 2022 and December 31, 2021 was as follows (in thousands):

Three Months Ended

December 30, 2022 December 31, 2021

Supplemental information related to the Company's leases for the six months ended March 31, 2023 and April 1, 2022 was as follows (in thousands):

Six Months Ended

March 31, 2023 April 1, 2022

Cash paid for amounts included in the measurements of lease liabilities $ 92,142 $ 119,031

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

During fiscal 2023 and 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.

During the fiscal first quarter of 2023 and 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 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.

As a result of the analysis, the Company recognized impairment losses during the first quarters of fiscal 2023 and 2022 of $ 27.1 million and $ 72.3 million, respectively, which is included in selling, general and administrative expenses in the accompanying statement of earnings.

As a result of the analysis, the Company recognized impairment losses during the three and six months ended March 31, 2023 of $ 10.1 million and $ 37.2 million, respectively, compared to $ 2.3 million and $ 74.6 million from the corresponding periods last year, which are included in selling, general and administrative expenses in the accompanying statement of earnings.

The impairment losses recorded include $ 32.4 million and $ 56.6 million related to right-of-use lease assets and $ 4.8 million and $ 18.0 million related to other long-lived assets, including property, equipment and improvements and leasehold improvements for the fiscal 2023 and 2022 periods, respectively.

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Pension and Other Postretirement Benefit Plans

The following table presents the components of net periodic pension benefit recognized in earnings during the three months ended December 30, 2022 and December 31, 2021 (in thousands):

Three Months Ended

December 30, 2022 December 31, 2021

The following table presents the components of net periodic pension benefit recognized in earnings during the three and six months ended March 31, 2023 and April 1, 2022 (in thousands):

Three Months Ended Six Months Ended

March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Service cost $ 1,748 $ 1,709 $ 3,496 $ 3,418

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The following table presents certain information regarding the Company’s cash contributions to our pension plans for fiscal 2023 (in thousands):

Cash contributions made during the first three months of fiscal 2023

Cash contributions made during the first six months of fiscal 2023

Cash contributions projected for the remainder of fiscal 2023

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PA Consulting Business Combination

Deal Summary and Opening Balance Sheet Financial Information

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.

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See Note 11- Borrowings for more discussion on the financing for the transaction.

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

Cash and cash equivalents $ 134.9

Receivables 166.5

Property, equipment and improvements, net 40.5

Goodwill 1,454.0

Identifiable intangible assets 1,004.2

Prepaid expenses and other current assets 9.5

Miscellaneous long term assets 84.0

Total Assets $ 2,893.6

Accounts payable $ 6.5

Accrued liabilities and other current liabilities 354.8

Other long term liabilities 248.0

Total Liabilities 609.3

Redeemable Noncontrolling Interests

Net assets acquired $ 1,701.9

Goodwill recognized results from a substantial assembled workforce, which does not qualify for separate recognition, as well as expected future economic benefits.

No ne of the goodwill recognized was deductible for tax purposes.

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

Since the initial preliminary estimates reported in the second quarter of fiscal 2021, the Company updated certain provisional amounts reflected in the final purchase price allocation, as summarized in the estimated fair values of PA Consulting assets acquired and liabilities assumed above.

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 SOLUTIONS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Redeemable Noncontrolling Interests

In connection with the PA Consulting investment, the Company recorded redeemable noncontrolling interests, including subsequent purchase accounting adjustments, representing the noncontrolling interest holders' equity interests 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 2023 and 2022, PA Consulting repurchased certain shares of the redeemable noncontrolling interest holders for $ 58.4 million and $ 35.1 million, respectively, in cash.

Changes in the redeemable noncontrolling interests d uring the three months ended December 30, 2022 are as follows (in thousands):

During the first half of fiscal 2023 and 2022, PA Consulting repurchased certain shares of the redeemable noncontrolling interest holders for $ 58.4 million and $ 35.1 million, respectively, in cash.

Changes in the redeemable noncontrolling interests d uring the six months ended March 31, 2023 are as follows (in thousands):

Balance at September 30, 2022

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Cumulative translation adjustment and other 45,826

Balance at December 30, 2022

Balance at March 31, 2023

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

During first quarter of fiscal 2023 and 2022, the Company recorded $ 4.3 million and $ 0.2 million, respectively, in expenses associated with these agreements which is reflected in selling, general and administrative expenses in the consolidated statements of earnings.

During first six months of fiscal 2023 and 2022, the Company recorded $ 1.1 million and $ 1.0 million, respectively, in expenses associated with these agreements which is reflected in selling, general and administrative expenses in the consolidated statements of earnings.

Restricted Cash

The Company, through its investment in PA Consulting, held $ 2.3 million and $ 13.7 million at December 30, 2022 and September 30, 2022, respectively, in cash that is restricted from general use and is included in prepaid expenses and other current assets on the Consolidated Balance Sheets.

The Company, through its investment in PA Consulting, held $ 2.3 million and $ 13.7 million at March 31, 2023 and September 30, 2022, respectively, in cash that is restricted from general use and is included in prepaid expenses and other current assets on the Consolidated Balance Sheets.

JACOBS SOLUTIONS INC.

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None of the goodwill recognized was deductible for tax purposes.

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

Since the initial preliminary estimates reported in the first quarter of fiscal 2022, the Company has updated certain amounts reflected in the preliminary purchase price allocation, as summarized in the fair values of BlackLynx's assets acquired and liabilities assumed as of the acquisition date set forth above, the majority of which related to reclassifications between goodwill and intangibles and for deferred taxes.

Identifiable intangibles are technology and customer relationships, contracts and backlog and have estimated lives of 8 and 4 years, respectively.

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These initiatives are expected to continue through the remainder of fiscal 2023.

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

During fiscal 2021, the Company implemented certain restructuring and integration initiatives relating to the acquisition of Buffalo Group LLC ("Buffalo Group") as well as integration related activities associated with our PA Consulting investment.

The activities of the Buffalo Group initiative are substantially completed and the activities of the PA Consulting initiative are expected to end before the end of fiscal 2025.

During fiscal 2019 and continuing into fiscal 2020, the Company implemented certain restructuring, separation and integration initiatives associated with the ECR sale, the acquisition of KeyW Holding Corporation ('KeyW"), and other related cost reduction initiatives.

Additionally, in fiscal 2020, the Company implemented certain restructuring and

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

JACOBS SOLUTIONS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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 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.

The activities of these initiatives have been substantially completed.

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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 reportable segment in connection with the CH2M, KeyW, John Wood Group's nuclear business, Buffalo Group, StreetLight and BlackLynx acquisitions, the PA Consulting investment, the ECR sale and the Company's transformation initiatives relating to real estate and other staffing programs for the three months ended December 30, 2022 and December 31, 2021 (in thousands):

Three Months Ended

December 30, 2022 December 31, 2021

The following table summarizes the impacts of the Restructuring and other charges by reportable segment in connection with the CH2M, KeyW, John Wood Group's nuclear business, Buffalo Group, StreetLight and BlackLynx acquisitions, the PA Consulting investment, the ECR sale and the Company's transformation initiatives relating to real estate and other staffing programs for the three and six months ended March 31, 2023 and April 1, 2022 (in thousands):

Three Months Ended Six Months Ended

March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Critical Mission Solutions $ 1,052 $ 3,462 $ 3,264 $ 4,616

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$ 12,840 $ 108,164 $ 47,284 $ 177,524

(1) Included in the three month periods ended December 30, 2022 and December 31, 2021 were $ 27.8 million and $ 71.0 million in charges associated mainly with real estate impairments and related charges, the majority of which related to People and Places Solutions.

(2) The three month periods ended December 30, 2022 and December 31, 2021 included gains of $ 0.6 million and $ 6.9 million related to lease terminations.

(1) Included in the three and six month periods ended March 31, 2023 were $ 11.0 million and $ 38.7 million, respectively, and the six month period in fiscal 2022 included approximately $ 71.0 million in charges associated mainly with real estate impairments and related charges, the majority of which related to People and Places Solutions.

Included in the three and six month periods ended April 1, 2022 was $ 91.3 million related to the final pre-tax settlement of the Legacy CH2M Matter (defined below), net of previously recorded reserves.

(2) The six month periods ended March 31, 2023 and April 1, 2022 included gains of $ 0.7 million and $ 7.1 million, respectively, related to lease terminations.

JACOBS SOLUTIONS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

The activity in the Company’s accruals for Restructuring and other charges for the three months ended December 30, 2022 is as follows (in thousands):

The activity in the Company’s accruals for Restructuring and other charges for the six months ended March 31, 2023 is as follows (in thousands):

Balance at September 30, 2022

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Payments and other ( 9,603 )

Balance at December 30, 2022 $ 7,644

(1) Excludes $ 27.8 million associated mainly with real estate related impairments and other transformation activities described above during the three months ended December 30, 2022.

T he following table summarizes the Restructuring and other charges by major type of costs for the three months ended December 30, 2022 and December 31, 2021 (in thousands):

Three Months Ended

December 30, 2022 December 31, 2021

Balance at March 31, 2023 $ 3,115

(1) Excludes $ 38.7 million associated mainly with real estate related impairments and other transformation activities described above during the six months ended March 31, 2023.

The following table summarizes the Restructuring and other charges by major type of costs for the three and six months ended March 31, 2023 and April 1, 2022 (in thousands):

Three Months Ended Six Months Ended

March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Lease Abandonments and Impairments $ 10,443 $ 2,294 $ 37,273 $ 67,837

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Total $ 12,840 $ 108,164 $ 47,284 $ 177,524

Cumulative amounts incurred to date under our various Restructuring and other activities described above by each major type of cost as of December 30, 2022 are as follows (in thousands):

(1) The three and six month periods ended April 1, 2022 amounts are comprised mainly of $ 91.3 million in other charges related to the final pre-tax settlement of the Legacy CH2M Matter, net of previously recorded reserves.

Cumulative amounts incurred to date under our various Restructuring and other activities described above by each major type of cost as of March 31, 2023 are as follows (in thousands):

Lease Abandonments and Impairments $ 424,875

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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.

During fiscal 2022, the Company entered into two treasury lock agreements with a total notional value of $ 500.0 million to manage its interest rate exposure to the anticipated issuance of fixed rate debt before December 2023.

The fair value of the treasury locks at December 30, 2022 and September 30, 2022 was $ 41.5 million and $ 40.9 million, respectively, all of which is included in current assets within receivables and contract assets on the consolidated balance sheets.

The unrealized net gain on these instruments was $ 31.3 million and $ 30.8 million, net of tax, and is included in accumulated other comprehensive income as of December 30, 2022 and September 30, 2022, respectively.

Upon issuance of up to $ 500 million of fixed rate debt, the gain (loss) will be amortized to interest expense over the term of the debt.

The Company is party to interest rate swap agreements and a cross-currency swap agreement with notional values of $ 766.7 million and $ 127.8 million, respectively, as of December 30, 2022 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

During fiscal 2022, the Company entered into two treasury lock agreements with an aggregate notional value of $ 500 million to manage its interest rate exposure to the anticipated issuance of fixed rate debt before December 2023.

On February 13, 2023, the Company settled these treasury lock agreements and issued the Bonds in the aggregate principal amount of $ 500 million, which resulted in the receipt of cash and a gain of $ 37.4 million, before tax, which is being amortized to interest expense and recognized over the term of the Bonds.

See Note 11- Borrowings for further discussion relating to the terms of the Bonds .

The fair value of the treasury locks at September 30, 2022 was $ 40.9 million, all of which was included in current assets within receivables and contract assets on the consolidated balance sheet.

The net gain on these instruments was $ 27.9 million and $ 30.8 million, net of tax, and is included in accumulated other comprehensive income as of March 31, 2023 and September 30, 2022, respectively.

JACOBS SOLUTIONS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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 .

The Company is party to interest rate swap agreements and a cross-currency swap agreement with notional values of $ 771.7 million and $ 127.8 million, respectively, as of March 31, 2023 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 .

During the second quarter of fiscal 2023, the aggregate liability amounts denominated in U.S.

dollars transitioned from underlying LIBOR benchmarked rates to the Secured Overnight Financing Rate ("SOFR") a nd the terms of the swaps were amended accordingly.

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 December 30, 2022 and September 30, 2022 was $ 108.0 million and $ 128.2 million, respectively, which 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 $ 80.2 million and $ 87.5 million, net of tax, and was included in accumulated other comprehensive inc ome as of December 30, 2022 and September 30, 2022, 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 $ 382.5 million at December 30, 2022 and $ 298.2 million at September 30, 2022 .

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

The fair value of the foreign exchange contracts at December 30, 2022 and September 30, 2022 w as $ 12.1 million and $( 3.2 ) million , respectively, which is included within receivables and contract assets for the current period and within accounts payable for the prior period 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 interest rate and cross currency swaps at March 31, 2023 and September 30, 2022 was $ 91.3 million and $ 128.2 million, respectively, which 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 $ 68.8 million and $ 87.5 million, net of tax, and was included in accumulated other comprehensive inc ome as of March 31, 2023 and September 30, 2022, 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 $ 720.9 million at March 31, 2023 and $ 298.2 million at September 30, 2022 .

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

The fair value of the foreign exchange contracts at March 31, 2023 and September 30, 2022 w as $ 20.4 million and $( 3.2 ) million , respectively, which is included within receivables and contract assets for the current period and within accounts payable for the prior period 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 observable 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 December 30, 2022 and September 30, 2022, the Company had issued and outsta nding approximately $ 292.5 million and $ 280.5 million, respectively, in LOCs and $ 2.0 billion and $ 2.2 billion, respectively, in surety bonds.

At March 31, 2023 and September 30, 2022, the Company had issued and outstanding approximately $ 322.4 million and $ 280.5 million, respectively, in LOCs and $ 2.0 billion and $ 2.2 billion, respectively, in surety bonds.

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

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federal government, we are subject to many types of audits, investigations, and claims by, or on behalf of, the government including with respect to contract performance, pricing, cost allocations, procurement practices, labor practices, and socioeconomic obligations.

Furthermore, our income, franchise, and similar tax returns and filings are also subject to audit and investigation by the Internal Revenue Service, most states within the United States, as well as by various government agencies representing jurisdictions outside the United States.

Our Consolidated Balance Sheets include amounts representing our probable estimated liability relating to such claims, guarantees, litigation, audits, and investigations.

We perform an analysis to determine the level of reserves to

Furthermore, our income, franchise, and similar tax returns and filings are also subject to audit and investigation by the Internal Revenue Service,

JACOBS SOLUTIONS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

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.

most states within the United States, as well as by various government agencies representing jurisdictions outside the United States.

Our Consolidated Balance Sheets include amounts representing our probable estimated liability relating to such claims, guarantees, litigation, audits, and investigations.

We perform an analysis to determine the level of reserves to establish for insurance-related claims that are known and have been asserted against us, as well as for insurance-related claims that are believed to have been incurred based on actuarial analysis but have not yet been reported to our claims administrators as of the respective balance sheet dates.

We include any adjustments to such insurance reserves in our consolidated results of operations.

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Litigation and Investigations

In 2012, CH2M HILL Australia PTY Limited, a subsidiary of CH2M, entered into a 50 /50 integrated joint venture with Australian construction contractor UGL Infrastructure Pty Limited.

The joint venture entered into a Consortium Agreement with General Electric and GE Electrical International Inc.

The Consortium was awarded a subcontract by JKC Australia LNG Pty Limited ("JKC") for the engineering, procurement, construction and commissioning of a 360 MW Combined Cycle Power Plant for INPEX Operations Australia Pty Limited at Blaydin Point, Darwin, NT, Australia (the "Legacy CH2M Matter").

The subcontract was terminated in January 2017.

In or around August 2017, the Consortium commenced an arbitration.

On April 12, 2022, JKC and the Consortium entered into a confidential deed of settlement (“Settlement Agreement”).

Under the terms of the Settlement Agreement, CH2M, as guarantor of CH2M Australia PTY Limited’s obligations with respect to the subcontract with JKC, made a cash payment to JKC in April 2022 of AUD 640 million (or approximately $ 475 million using mid-April 2022 exchange rates).

As a result of the settlement agreement, additional pre-tax charges of $ 91.3 million were recorded during the second quarter of fiscal 2022 for this matter (over amounts previously reserved and reported in long-term Other Deferred Liabilities in the Company's Consolidated Balance Sheet).

The Settlement Agreement provided for a release of claims between JKC and each member of the Consortium, and in connection with this agreement the members of the Consortium also waived all claims against each other and their respective parent guarantors relating to the project.

On December 22, 2008, a coal fly ash pond at the Kingston Power Plant of the Tennessee Valley Authority ("TVA") was breached, releasing fly ash waste into the Emory River and surrounding community.

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There has been no finding of liability against the Company or that any of the alleged illnesses are the result of exposure to fly ash in any of the above matters.

The Company disputes the allegations asserted in all of the above matters and is vigorously defending these matters.

The Company does not expect the resolution of these matters to have a material adverse effect on the Company's business, financial condition, results of operations or cash flows.

In the second fiscal quarter of 2023, the Company entered into a settlement agreement with the remaining plaintiffs;

the amount of the settlement is not material to the Company's business, financial condition, results of operations or cash flows.

JACOBS SOLUTIONS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Segment Information

During the first quarter of fiscal 2023, the Company reorganized its operating and reporting structure to report results under a new operating segment, Divergent Solutions (DVS), in addition to the current operating segments.

During the first quarter of fiscal 2023, the Company reorganized its operating and reporting structure to report results under a new operating segment, Divergent Solutions, in addition to the current operating segments.

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

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

The formation of the DVS operating segment resulted in certain portions of our CMS and PPS businesses moving to the new segment to align with the Company's business strategy.

The formation of the DVS operating segment resulted in certain portions of our CMS and P&PS businesses moving to the new segment to align with the Company's business strategy.

The Company’s Chief Executive Officer is the Chief Operating Decision Maker (“CODM”) and can evaluate the performance of each of these segments and make appropriate resource allocations among each of the segments.

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In addition, a portion of the costs of other support functions (e.g., finance, legal, human resources, and information technology) is allocated to each segment using methodologies which, we believe, effectively attribute the cost of these support functions to the revenue generating activities of the Company on a rational basis.

The cost of the Company’s cash incentive plan, the Leadership Performance Plan ("LPP"), formerly named the Management Incentive Plan, and the expense associated with the Jacobs 1999 Stock

JACOBS SOLUTIONS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Incentive Plan, which was amended and restated in the second quarter of 2023 and is now referred to as the Jacobs 2023 Stock Incentive Plan (the "2023 SIP") have likewise been charged to the segments except for those amounts determined to relate to the business as a whole (which amounts remain in other corporate expenses).

The cost of the Company’s cash incentive plan, the Leadership Performance Plan ("LPP"), formerly named the Management Incentive Plan, and the expense associated with the Jacobs 1999 Stock Incentive Plan, which was amended and restated in the second quarter of 2023 and is now referred to as the Jacobs 2023 Stock Incentive Plan (the "2023 SIP") have likewise been charged to the segments except for those amounts determined to relate to the business as a whole (which amounts remain in other corporate expenses).

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

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GAAP operating profit by including certain corporate-level expenses, Restructuring and other charges (as defined in Note 16- Restructuring and Other Charges ) and transaction and integration costs (in thousands).

For the Three Months Ended

December 30, 2022 December 31, 2021

For the Three Months Ended For the Six Months Ended

March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Revenues from External Customers:

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Total $ 4,078,332 $ 3,834,059 $ 7,877,001 $ 7,214,684

For the Three Months Ended

December 30, 2022 December 31, 2021

JACOBS SOLUTIONS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

For the Three Months Ended For the Six Months Ended

March 31, 2023 April 1, 2022 March 31, 2023 April 1, 2022

Segment Operating Profit:

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GAAP Operating Profit 289,863 166,215 527,668 343,548

Total Other Income (Expense), net (3) ( 40,324 ) ( 8,243 )

Total Other Expense, net (3) ( 37,550 ) ( 10,933 ) ( 77,873 ) ( 19,177 )

Earnings from Continuing Operations Before Taxes $ 252,313 $ 155,282 $ 449,795 $ 324,371

(1) Other corporate expenses included intangibles amortization of $ 49.8 million and $ 46.9 million for the three months ended December 30, 2022 and December 31, 2021, respectively.

Additionally, the three month period of fiscal 2023 included approximately $ 15.0 million in net favorable impacts from cost reductions compared to the prior year period, which was associated mainly with net favorable impacts during the current quarter from changes in employee benefit programs of $ 41 million offset by approximately $ 26 million in higher quarter over quarter spend in company technology platforms and other personnel and corporate cost increases.

(2) Included in the three months ended December 30, 2022 and December 31, 2021 are $ 27.1 million and $ 72.3 million, respectively, in real estate impairment charges related to the Company's transformation initiatives.

(3) The three months ended December 31, 2021 included a gain of $ 6.9 million related to a lease termination.

Additionally, the increase in net interest expense year over year is primarily due to the higher levels of debt outstanding due to the funding of the StreetLight and BlackLynx acquisitions in fiscal 2022 and increased borrowings associated with the payment of the Legacy CH2M Matter settlement also in the prior year, in addition to higher interest rates.

JACOBS SOLUTIONS INC.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

(1) Other corporate expenses included intangibles amortization of $ 50.5 million and $ 48.4 million for the three months ended March 31, 2023 and April 1, 2022, respectively, and $ 100.2 million and $ 95.3 million, for the six months ended March 31, 2023 and April 1, 2022, respectively.

Additionally, the six month period of fiscal 2023 included approximately $ 15.0 million in net favorable impacts from cost reductions compared to the prior year period, which was associated mainly with net favorable impacts during first quarter from changes in employee benefit programs of $ 41 million offset by approximately $ 26 million in higher spend in company technology platforms and other personnel and corporate cost increases.

(2) The three months ended March 31, 2023 and April 1, 2022 included real estate impairment charges related to the Company's transformation initiatives of $ 10.1 million and $ 2.3 million, respectively, and $ 37.2 million and $ 74.6 million for the six months ended March 31, 2023 and April 1, 2022, respectively.

Also 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.

(3) The six month period ended April 1, 2022 included $ 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.

Additionally, the unfavorable change in Other Expense, net for the periods presented are attributable mainly to higher net interest expense year over year, primarily due to higher interest rates as well as the full 2023 period impacts of increased levels of debt outstanding due to fiscal 2022 incremental borrowings associated with the funding of the StreetLight and BlackLynx acquisitions and the payment of the Legacy CH2M Matter settlement.

(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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See also the further description o f results of operations for our operating segments in Item 2- Management’s Discussion and Analysis of Financial Condition and Results of Operations .

JACOBS SOLUTIONS INC.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

Subsequent Event

On May 9, 2023, the Company announced its intention to spin-off its CMS business into an independent publicly traded company to Jacobs’ stockholders.

Jacobs expects to complete the separation by the end of fiscal year 2024 through a distribution that is intended to be tax-free to Jacobs’ shareholders for U.S.

federal income tax purposes.

There can be no assurances with respect to the timing or form of a separation transaction and completion remains subject to final approval by Jacobs’ Board of Directors and other customary conditions.

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