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Item 2. Management’s Discussion and Analysis

2023-08-08 compared with 2023-05-09 · 159 added, 140 removed, 234 unchanged (56% of the section changed)

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

The purpose of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is to provide a narrative analysis explaining the reasons for material changes in the Company’s (i) financial condition from the most recent fiscal year-end to March 31, 2023 and (ii) results of operations during the current fiscal period(s) as compared to the corresponding period(s) of the preceding fiscal year.

The purpose of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is to provide a narrative analysis explaining the reasons for material changes in the Company’s (i) financial condition from the most recent fiscal year-end to June 30, 2023 and (ii) results of operations during the current fiscal period(s) as compared to the corresponding period(s) of the preceding fiscal year.

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

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When used herein, words such as “expects,” “anticipates,” “believes,” “seeks,” “estimates,” “plans,” “intends,” “future,” “will,” “would,” “could,” “can,” “may,” "target," "goal" and similar words are intended to identify forward-looking statements.

Examples of forward-looking statements include, but are not limited to, statements we make concerning our business, financial condition and results of operations and our expectations as to our future growth, prospects, financial outlook and business strategy, our expectations for the percentage of backlog we will realize as revenue in fiscal year 2023, and the anticipated benefits of any acquisition or the strategic investment in PA Consulting.

Examples of forward-looking statements include, but are not limited to, statements regarding our expectations as to our future growth, prospects, financial outlook and business strategy, including our expectations for the percentage of backlog we will realize as revenue in fiscal year 2023, the anticipated benefits of any acquisition or the strategic investment in PA Consulting, our plans to separate the Critical Missions Solutions ("CMS") business through a spin-off that is intended to be tax-free to stockholders for U.S.

federal income tax purposes, the description of the CMS business following the separation, the timing of completion for the separation, and the perceived benefits for both Jacobs and CMS to be derived from the separation.

Although such statements are based on management’s current estimates and expectations, and/or currently available competitive, financial, and economic data, forward-looking statements are inherently uncertain, and you should not place undue reliance on such statements as actual results may differ materially.

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

Such factors include uncertainties as to the final structure and timing of the separation of our Critical Mission Solutions ("CMS") business, the possibility that closing conditions for a separation transaction may not be satisfied or waived, the impact of the separation on the Company’s and CMS’s businesses, and a possible decrease in the trading price of their shares, if the separation is completed, the possibility that the separation may not qualify for the expected tax treatment, the risk that any consents or approvals required in connection with the separation may not be received, the risk that the separation may be more difficult, time-consuming or costly than expected, and the possibility that we may not retain key employees while the separation is pending or after it is completed, as well as factors related to our business, such as our ability to execute on our three-year corporate strategy, including our ability to invest in the tools needed to fully implement our strategy, competition from existing and future competitors in our target markets, our ability to achieve the cost-savings and synergies contemplated by our recent acquisitions within the expected time frames or to achieve them fully and to successfully integrate acquired businesses while retaining key personnel, the impact of any pandemic, and any resulting economic downturn on our results, prospects and opportunities, measures or restrictions imposed by governments and health officials in response to such pandemic, the timing of the award of projects and funding and potential changes to the amounts provided for, under the Infrastructure Investment and Jobs Act, any changes in U.S.

Such factors include uncertainties as to the final structure and timing of the separation of the CMS business, including with respect to the scope of the businesses to be separated or retained by the Company, the possibility that closing conditions for a separation transaction may not be satisfied or waived, the impact of the separation on the Company’s and CMS’s businesses and a possible decrease in the trading price of their shares, if the separation is completed, the possibility that the separation may not qualify for the expected tax treatment, the risk that any consents or approvals required in connection with the separation may not be received, the risk that the separation may be more difficult, time-consuming or costly than expected, and the possibility that we may not retain key employees while the separation is pending or after it is completed, as well as factors related to our business, such as our ability to fully execute on our three-year corporate strategy, including our ability to invest in the tools needed to implement our strategy, competition from existing and future competitors in our target markets, our ability to achieve the cost-savings and synergies contemplated by our recent acquisitions within the expected time frames or to achieve them fully and to successfully integrate acquired businesses while retaining key personnel, the impact of any pandemic, and any resulting economic downturn on our results, prospects and opportunities, measures or restrictions imposed by governments and health officials in response to the pandemic, the timing of the award of projects and funding and potential changes to the amounts provided for, under the Infrastructure Investment and Jobs Act, any changes in U.S.

or foreign tax laws, statutes, rules, regulations or ordinances that may adversely impact our future financial positions or results of operations, financial market risks that may affect the Company, including by affecting the Company's access to capital, the cost of such capital and/or the Company's funding obligations under defined benefit pension and postretirement plans, as well as general economic conditions, including inflation and the actions taken by monetary authorities in response to inflation, changes in interest rates and foreign currency exchange rates, changes in capital markets, the current banking crisis, the impact of a possible recession or economic downturn on our results, prospects and opportunities, and geopolitical events and conflicts, among others.

The impact of such matters includes, but is not limited to, the possibility that we will not complete the spin-off or any separation transaction, the possible reduction in demand for certain of our product solutions and services and the delay or abandonment of ongoing or anticipated projects due to the financial condition of our clients and suppliers or to governmental budget constraints or changes to governmental budgetary priorities;

The impact of such matters includes, but is not limited to, the possibility that we will not complete the spin-off or any separation transaction or that the transaction will occur on terms or conditions that are different or less favorable than expected;

the possible reduction in demand for certain of our product solutions and services and the delay or abandonment of ongoing or anticipated projects due to the financial condition of our clients and suppliers or to governmental budget constraints or changes to governmental budgetary

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

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difficulties associated with retaining and hiring additional employees;

and the inability of governments in certain of the countries in which we operate to effectively mitigate the financial or other impacts of pandemics on their economies and

workforces and our operations therein.

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

The foregoing factors and potential future developments are inherently uncertain, unpredictable and, in many cases, beyond our control.

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"Challenging today.

Reinventing tomorrow." signals our transition to a global technology-forward solutions company.

Reinventing tomorrow." signals our transition to a global technology-forward solutions

We began trading as “J” on the New York Stock Exchange in December 2019, and in March 2021 our Global Industry Classifications Standard code changed to Research & Consulting Services.

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We leverage our deep experience to support clients in the Aerospace, Automotive, Space, Telecom, Intel, Defense and Energy sectors to develop lasting solutions in the communities where we live and work.

On May 9, 2023, the Company announced its intention to separate its CMS business, resulting in two independent publicly traded companies.

Jacobs expects to complete the separation in fiscal 2024 through a distribution to Jacobs' stockholders that is intended to be tax-free to Jacobs’ stockholders 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.

People & Places Solutions (P&PS)

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

Recently, PA Consulting supported the launch of a new Electric Vehicle Infrastructure Fund to drive the roll-out of electric vehicle charging infrastructure in the U.K.;

innovated cell and gene therapy manufacturing with Ori Biotech in the U.S.;

and designed a growth strategy for Green Boom, a U.S.-based start-up that has developed a patent-pending and sustainable way to help prevent, reduce and clean up oil spills.

Recently, PA Consulting has led the digitalization of Schiphol Airport in the Netherlands – one of the busiest in Europe – delivering digital transformation at scale, and managing the migration of operations from legacy systems.

PA Consulting also expanded its work with patented sustainable product and packaging solution, PulPac, with the Blister Packs Collective – an initiative whose aim is to reduce and eliminate the use of PVC and other plastics in tablet packs;

and led leading offshore wind developer, Corio Generation, to secure a fixed-price electricity contract in Ireland’s first offshore wind auction, further establishing it in the renewables space.

Together, the collective strengths of PA Consulting and Jacobs drive value creation for clients around the globe and support projects to address five key trends:

product and service innovation, the future of work, sustainability and climate change.

Results of Operations for the three and six months ended March 31, 2023 and April 1, 2022

Results of Operations for the three and nine months ended June 30, 2023 and July 1, 2022

(in thousands, except per share information)

For the Three Months Ended For the Six Months Ended

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

For the Three Months Ended For the Nine Months Ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Revenues $ 4,186,702 $ 3,827,093 $ 12,063,702 $ 11,041,777

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Miscellaneous (expense) income, net (7,099) 31,440 (14,920) 51,802

Total other expense, net (37,550) (10,933) (77,873) (19,177)

Total other (expense) income, net (43,056) 6,353 (120,930) (12,825)

Earnings from Continuing Operations Before Taxes 226,685 272,115 676,478 596,485

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Net Earnings of the Group from Continuing Operations 172,519 212,624 553,149 474,940

Net Loss of the Group from Discontinued Operations (75) (1) (783) (233)

Net Earnings (Loss) of the Group from Discontinued Operations 294 (343) (489) (576)

Net Earnings of the Group 172,813 212,281 552,660 474,364

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Diluted Earnings Per Share $ 1.29 $ 1.52 $ 4.06 $ 3.23

Overview – Three and Six Months Ended March 31, 2023

Net earnings attributable to the Company from continuing operations for the second fiscal quarter ended March 31, 2023 were $216.6 million (or $1.70 per diluted share), an increase of $127.8 million, from net earnings of $88.8 million (or $0.68 per diluted share) for the corresponding period last year, driven mainly by higher operating profit levels during the current quarterly period.

Second fiscal quarter of 2023 was impacted by $19.1 million in pre-tax Restructuring and other charges and transaction costs compared to fiscal 2022 amounts of $115.3 million, with the comparative periods both impacted by the Company's transformation initiatives relating to real estate, which is discussed in Note 16- Restructuring and Other Charges.

Fiscal 2022 was also impacted by the final $91.3 million settlement of a legacy litigation matter involving a subsidiary of CH2M (the "Legacy CH2M Matter"), net of previously recorded reserves, which is further discussed in Note 17- Commitments and Contingencies and Derivative Financial Instruments .

Second quarter fiscal 2023 other expense, net, was $37.6 million, an increase of $26.6 million versus second quarter fiscal 2022 amounts of $10.9 million, with the current period primarily impacted by unfavorable higher net interest expense and higher pension costs compared to the prior year quarter, as discussed further below.

Further, our reported net earnings for the current year quarter were favorably impacted by lower income taxes of $27.1 million compared to the fiscal 2022 period, attributable to lower effective tax rates in the current quarter due mainly to uncertain tax positions in the United States that were effectively settled and other current quarter income tax items further discussed in Note 9- Income Taxes.

For the six months ended March 31, 2023, net earnings attributable to the Company from continuing operations were $352.9 million (or $2.77 per diluted share), an increase of $129.9 million, from net earnings of $223.1 million (or $1.71 per diluted share) for the corresponding period last year.

Operating profit levels were also up for the respective year-to-date periods of fiscal 2023 (mainly in P&PS), and were also impacted by the Restructuring and other charges and transactions costs activities mentioned above relating to real estate transformation, only to a larger degree for the year-to-date period, and the final Legacy CH2M Matter settlement in fiscal 2022.

Overview – Three and Nine Months Ended June 30, 2023

Net earnings attributable to the Company from continuing operations for the third fiscal quarter ended June 30, 2023 were $163.9 million (or $1.29 per diluted share), a decrease of $32.4 million, from net earnings of $196.3 million (or $1.52 per diluted share) for the corresponding period last year.

Higher year over year underlying operating performance in the third fiscal quarter of 2023 was impacted by $25.0 million higher pre-tax Restructuring and other charges and transaction costs compared to the same fiscal quarter of 2022, with this increase due primarily to PA Consulting restructuring program charges (primarily employee separation costs) and CMS separation expenses (mainly professional services), which is discussed in Note 16- Restructuring and Other Charges.

Third quarter fiscal 2023 other expense, net, was $43.1 million, an increase of $49.4 million versus third quarter fiscal 2022 income of $6.4 million, with the current period primarily impacted by unfavorable higher net interest expense, unfavorable currency exchange gains and losses and higher pension costs compared to the prior year quarter, as discussed further below, with fiscal 2022 benefiting from a $13.9 million pre-tax gain related to a cost method investment sold during the period.

Further, our reported net earnings for the current year quarter were favorably impacted by lower income taxes of $5.3 million compared to the fiscal 2022 period, attributable to lower earnings before taxes offset by a higher effective tax rate in the current quarter.

Finally, net earnings attributable to redeemable noncontrolling interests were $7.2 million lower for the quarter-to-date period due to lower net after-tax earnings results in our PA Consulting investment compared to the prior year.

For the nine months ended June 30, 2023, net earnings attributable to the Company from continuing operations were $516.9 million (or $4.06 per diluted share), an increase of $97.5 million, from net earnings of $419.4 million (or $3.23 per diluted share) for the corresponding period last year.

Operating profit levels were up more significantly for the respective year-to-date periods of fiscal 2023 (mainly in P&PS), and were also impacted by the Restructuring and other charges and transactions costs activities mentioned above relating to real estate transformation, the fiscal 2023 PA Consulting and CMS separation related items and the final fiscal 2022 $91.3 million settlement of a legacy litigation matter involving a subsidiary of CH2M (the "Legacy CH2M Matter"), net of previously recorded reserves, which is further discussed in Note 17- Commitments and Contingencies and Derivative Financial Instruments.

Additionally, the 2023 year-to-date period was impacted by approximately $15.0 million in net favorable impacts from cost reductions associated mainly with first quarter 2023 changes in employee benefit programs, which were partly offset by higher spend in company technology platforms and other personnel and corporate cost increases.

Also, year-to-date fiscal 2023 other expense, net, of $77.9 million was higher by $58.7 million versus the same period in fiscal 2022 amounts of $19.2 million, with the current period impacted by the same unfavorable higher net interest expense and higher pension costs as mentioned above.

Our reported net earnings for the first half of the fiscal year were unfavorably impacted by higher income taxes of $7.1 million compared to the fiscal 2022 period, due to higher levels of pre-tax income but offset by the overall lower effective tax rates in the current quarter due mainly to uncertain tax positions in the United States that were effectively settled, combined with other current quarter income tax items further discussed in Note 9- Income Taxes.

Finally, earnings attributable to redeemable noncontrolling interests were $6.9 million lower for the year-to-date period due to unfavorable net earnings results in our PA Consulting investment compared to the prior year quarter.

Also, year-to-date fiscal 2023 other expense, net, of $120.9 million was higher by $108.1 million versus the same period in fiscal 2022 amounts of $12.8 million, with the current period impacted by the same unfavorable higher net interest expense, unfavorable currency exchange gains and losses and higher pension costs, with fiscal 2022 benefiting from the cost method investment sold mentioned above.

Finally, net earnings attributable to redeemable noncontrolling interests were $14.0 million lower for the year-to-date period due to lower net after-tax earnings results in our PA Consulting investment compared to the prior year.

On May 9, 2023, the Company announced its intention to separate its CMS business into an independent publicly traded company.

For further discussion, see Note 1- Basis of Presentation.

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

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Consolidated Results of Operations

Revenues for the second fiscal quarter of 2023 were $4.08 billion, an increase of $244.3 million, or 6.4%, from $3.83 billion for the corresponding period last year.

For the six months ended March 31, 2023, revenues were $7.88 billion, an increase of $662.3 million, or 9.2%, from $7.21 billion for the corresponding period last year.

Revenue increases for the year over year periods were due mainly to the Company's P&PS and CMS legacy businesses and in addition, to a smaller degree, fiscal 2023 incremental revenues benefited from the StreetLight acquisition (owned for the full period in fiscal 2023) and other increases in our DVS business.

Revenues for the third fiscal quarter of 2023 were $4.19 billion, an increase of $359.6 million, or 9.4%, from $3.83 billion for the corresponding period last year.

For the nine months ended June 30, 2023, revenues were $12.06 billion, an increase of $1.02 billion, or 9.3%, from $11.04 billion for the corresponding period last year.

Revenue increases for the year over year periods were due mainly to the Company's P&PS and CMS legacy businesses and in addition, to a smaller degree, other increases in our DVS and PA Consulting businesses.

The P&PS business benefited primarily from stronger performance in its Advanced Facilities and U.S.

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Department of Energy.

Due to foreign currency translation impacts, our U.S.

dollar reported revenues from our PA Consulting investment increased only slightly for the current quarterly period and decreased for the year-to-date period (on a local currency basis, PA Consulting experienced a more significant quarter over quarter growth as well as overall year over year growth).

Also, revenue was unfavorably impacted by foreign currency translation of $109.0 million and $267.0 million for the three and six months ended March 31, 2023, respectively, across our international businesses, as compared to an unfavorable $51.7 million and $42.5 million for the three and six months ended April 1, 2022, respectively.

Pass-through costs included in revenues for the three and six months ended March 31, 2023 amounted to $646.7 million and $1.32 billion, an increase of $74.1 million and $269.7 million, or 12.9% and 25.7%, respectively, from $572.6 million and $1.05 billion from the corresponding periods last year.

Gross profit for the second fiscal quarter of 2023 was $890.3 million, an increase of $19.9 million, or 2.3%, from $870.4 million from the corresponding period last year.

Our gross profit margins were 21.8% and 22.7% for the three months ended March 31, 2023 and April 1, 2022, respectively.

Gross profit for the six months ended March 31, 2023 was $1.71 billion, an increase of $38.1 million, or 2.3%, from $1.67 billion from the corresponding period last year.

Our gross profit margins were 21.6% and 23.1% for the six months ended March 31, 2023 and April 1, 2022, respectively.

These margin differences were mainly attributable to project mix impacts in our legacy CMS and P&PS portfolios and lower utilization trends primarily in the PA Consulting business, partly offset by new program startups won in fiscal 2022.

Also, revenue was unfavorably impacted by foreign currency translation of $12.4 million and $279.0 million for the three and nine months ended June 30, 2023, respectively, across our international businesses, as compared to an unfavorable $130.1 million and $176.8 million for the three and nine months ended July 1, 2022, respectively.

Pass-through revenues for the three and nine months ended June 30, 2023 amounted to $804.1 million and $2.23 billion, an increase of $124.3 million and $433.5 million, or 18.3% and 24.1%, respectively, from $679.7 million and $1.80 billion from the corresponding periods last year.

Pass-through revenues for the prior periods presented include certain minor adjustments to properly reflect amounts that had not been previously included and conform with the fiscal 2023 amounts presented.

Gross profit for the third fiscal quarter of 2023 was $856.7 million, an increase of $32.3 million, or 3.9%, from $824.5 million from the corresponding period last year and reflecting related gross profit margins of 20.5% and 21.5% for the respective periods.

Gross profit for the nine months ended June 30, 2023 was $2.56 billion, an increase of $70.4 million, or 2.8%, from $2.49 billion from the corresponding period last year with respective gross profit margins of 21.2% and 22.6%.

Project mix impacts in our legacy CMS and P&PS portfolios and lower utilization trends primarily in the PA Consulting business impacted our current year margins, partly offset by new program startups won in fiscal 2022.

Additionally, for the year-to-date period, gross profit was affected by net favorable impacts from cost reductions associated mainly with first quarter 2023 changes in employee benefit programs, which were partly offset by higher spend in company technology platforms and other personnel and corporate cost increases, as mentioned above, and unfavorable foreign currency translation impacts.

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

SG&A expenses for the three and six months ended March 31, 2023 were $600.4 million and $1.18 billion, respectively, a decrease of $103.8 million and $146.0 million or (14.7)% and (11.0)%, from $704.2 million and $1.32 billion for the corresponding periods last year.

The fiscal 2022 periods were impacted by the final pre-tax $91.3 million settlement of the Legacy CH2M Matter, net of previously recorded reserves, mentioned above.

Also, Restructuring and other charges for the six months ended March 31, 2023 and April 1, 2022 included $37.2 million and $74.6 million, respectively, in costs associated with the Company's transformation initiatives relating to real estate.

The current year's three and six months ended results were also impacted by higher investments in company technology platforms, offset in part by decreases in real estate related costs, as well as other department spend decreases due in part to the Company's transformation initiatives.

Lastly, SG&A expenses benefited from favorable foreign exchange impacts of $23.1 million and $50.6 million, respectively, for the three and six months ended March 31, 2023 as compared to favorable impacts of $11.3 million and $9.0 million for the corresponding periods last year.

Net interest expense for the three and six months ended March 31, 2023 was $33.0 million and $70.1 million, respectively, an increase of $11.4 million and $30.5 million from $21.6 million and $39.5 million, or 52.6% and 77.2%, for the corresponding periods last year.

The increase in net interest expense for the three and six month periods was due to higher interest rates and higher levels of debt outstanding in the current year, with the higher average debt levels during the current year attributable mainly to the funding of the StreetLight and BlackLynx acquisitions and increased borrowings associated with the payment of the settlement of the Legacy CH2M Matter in fiscal 2022.

These increases were offset in part by $6.3 million net interest benefit related to the release of interest accruals associated with the effective settlement of uncertain tax positions during the quarter.

Miscellaneous (expense) income, net for the three and six months ended March 31, 2023 was $(4.6) million and $(7.8) million, respectively, in comparison to $10.7 million and $20.4 million for the corresponding periods last year.

The unfavorable $15.2 million and $28.2 million impacts compared to the prior three and six month comparable periods were due primarily to an increase in pension costs due to higher interest rate impacts in the current year along with unfavorable foreign currency revaluations in the current year compared to the prior year and, additionally, the six-month period of fiscal 2022 also included a $7.1 million gain related to a lease termination.

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 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.

SG&A expenses for the three and nine months ended June 30, 2023 were $587.0 million and $1.76 billion, respectively, compared $558.7 million and $1.88 billion for the corresponding periods last year and representing an increase of $28.3 million or 5.1% and a decrease of $117.7 million or (6.3)%, respectively.

Restructuring and other charges for the three and nine months ended June 30, 2023 included approximately $30.0 million in costs associated with the Company's restructuring initiatives relating to its investment in PA Consulting (primarily employee separation costs) and separation activities (mainly professional services) relating to the CMS separation transaction and June 30, 2023 and July 1, 2022 included $38.1 million and $74.6 million, respectively, in costs associated with the Company's transformation initiatives relating to real estate.

Also, the year-to-date fiscal 2022 period was impacted by the final pre-tax $91.3 million settlement of the Legacy CH2M Matter, net of previously recorded reserves, mentioned above.

The current year's three and nine months ended results were also impacted by higher investments in company technology platforms, offset in part by decreases in real estate related costs, as well as other department spend decreases due in part to the Company's transformation initiatives.

Lastly, SG&A expenses benefited from favorable foreign exchange impacts of $2.9 million and $53.4 million, respectively, for the three and nine months ended June 30, 2023 as compared to favorable impacts of $26.4 million and $36.8 million for the corresponding periods last year.

Net interest expense for the three and nine months ended June 30, 2023 was $36.0 million and $106.0 million, respectively, an increase of $10.9 million and $41.4 million from $25.1 million and $64.6 million, or 43.3% and 64.0%, for the corresponding periods last year.

The increase in net interest expense for the three and nine month periods was due primarily to higher interest rates in the current year compared to the prior year periods.

These increases were offset in part by $6.3 million net interest benefit during the nine-month period related to the release of interest accruals associated with the effective settlement of uncertain tax positions.

Miscellaneous (expense) income, net for the three and nine months ended June 30, 2023 was $(7.1) million and $(14.9) million, respectively, in comparison to $31.4 million and $51.8 million for the corresponding periods last year.

The unfavorable $38.5 million and $66.7 million impacts compared to the prior three and nine month comparable periods were due primarily to an increase in pension costs associated with higher interest rate impacts in the current year along with comparatively unfavorable foreign exchange gains and losses in the current year periods.

Also, the three and nine-month periods of fiscal 2022 included a $13.9 million pre-tax gain related to a cost method investment sold during the period and the nine-month period included a $7.1 million gain related to a lease termination.

The Company’s effective tax rates from continuing operations for the three months ended June 30, 2023 and July 1, 2022 were 23.9% and 21.9%, respectively.

For the three months ended June 30, 2023, the primary differences between the statutory U.S.

federal corporate tax rate of 21% and the Company’s effective tax rate were associated with U.S.

state income tax expense of $5.3 million and U.S.

tax on foreign earnings of $4.6 million.

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 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.

tax on foreign earnings of $5.4 million, partly offset by a $3.5 million tax benefit for the release of previously valued foreign tax credits.

For the three months ended July 1, 2022 the main differences were attributable to U.S.

state income tax expense of $8.4 million and U.S tax on foreign earnings of $5.3 million, partly offset by a $9.1 million tax benefit related to the reversal of a withholding tax accrual on certain intercompany loans.

The Company's effective tax rates from continuing operations for the nine months ended June 30, 2023 and July 1, 2022 were 18.2% and 20.4%, respectively.

The primary differences between the statutory U.S.

federal corporate tax rate of 21.0% and the Company’s effective tax rate for the nine months ended June 30, 2023 were related to net tax benefits of $39.4 million mostly related to uncertain tax positions in the U.S.

that were effectively settled, of which $30.8 million related to positions carried forward from the fiscal 2018 acquisition of CH2M Hill Companies Ltd., as well as a tax benefit of $12.1 million for the release of previously valued foreign tax credits.

These benefits were partly offset by U.S.

state income tax expense of $15.8 million and U.S.

tax on foreign earnings of $13.6 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.

For the nine months ended July 1, 2022, the main differences were associated with tax benefits of $15.4 million for the release of previously valued foreign tax credits, $9.1 million related to the reversal of a withholding tax accrual on certain intercompany loans, and $4.9 million from filing amended state tax returns.

These benefits were partly offset by U.S.

state income tax expense of $17.4 million and U.S.

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The Company believes that it has adequately provided for reasonably foreseeable outcomes related to these matters.

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

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

Restructuring and Other Charges

During fiscal 2023, the Company implemented certain restructuring and integration initiatives relating to the formation of the reporting and operating segment, Divergent Solutions, which were substantially completed this year.

The Company incurred approximately $8.0 million in pre-tax cash charges in connection with these initiatives during the nine month period ended June 30, 2023, with no significant costs incurred in the current fiscal quarter.

These actions are expected to result in estimated gross annualized pre-tax cash savings of approximately $20 million to $24 million.

During fiscal 2022 and continuing into fiscal 2023, the Company implemented further real estate rescaling efforts that were associated with its fiscal 2020 transformation program relating to real estate.

These activities are expected to be substantially completed before the end of fiscal 2023.

In connection with these efforts, the Company has incurred $39.1 million and $69.9 million for the nine month periods ended June 30, 2023 and July 1, 2022, respectively, with minimal impacts to the three month periods ended June 30, 2023 and July 1, 2022 in pre-tax mainly non-cash charges.

The total amount incurred in costs to date for this program were $111.5 million and the Company expects to incur additional costs of approximately $6.1 million during fiscal 2023.

These actions resulted in non-cash savings related to the future amortization of lease right-of-use assets over the remaining lease terms.

Additionally, the objective of these initiatives was to create a modern, flexible work platform tailored to employees’ needs due to globalization and digital advances and to create total emissions savings that will be realized as we continue to optimize our real estate footprint.

During third quarter fiscal 2023, the Company approved a plan to improve business processes and cost structure of our PA Consulting investment by reorganizing senior management and reducing headcount.

In connection with these initiatives, the Company incurred approximately $17 million in pre-tax charges during the three and nine month periods ended June 30, 2023, which are expected to be settled in cash by the end of the fiscal year.

These activities, which are expected to be substantially completed before the end of fiscal 2023, are expected to result in estimated gross annualized pre-tax cash savings of approximately $40 million to $50 million.

Refer to Note 16– Restructuring and Other Charges for further information regarding restructuring and integration initiatives.

Segment Financial Information

The following table provides selected financial information for our operating segments and includes a reconciliation of segment operating profit to total U.S.

The following tables provide selected financial information for our operating segments and includes a reconciliation of segment operating profit to total U.S.

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Revenues from External Customers:

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Total $ 4,186,702 $ 3,827,093 $ 12,063,702 $ 11,041,777

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Segment Operating Profit:

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GAAP Operating Profit 269,741 265,762 797,408 609,310

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

Total Other (Expense) Income, net (3) (43,056) 6,353 (120,930) (12,825)

Earnings Before Taxes from Continuing Operations

$ 226,685 $ 272,115 $ 676,478 $ 596,485

(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.

(1) Other corporate expenses included intangibles amortization of $52.0 million and $51.6 million for the three months ended June 30, 2023 and July 1, 2022, respectively, and $152.2 million and $146.9 million, for the nine months ended June 30, 2023 and July 1, 2022, respectively.

Additionally, the nine 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 and nine months ended June 30, 2023 included $17.2 million in restructuring and other charges relating to the Company's investment in PA Consulting (primarily employee separation costs) and $13.4 million relating to the separation activities (mainly professional services) around the CMS separation, and the nine months ended June 30, 2023 and July 1, 2022 included $38.1 million and $74.6 million, respectively in real estate impairment charges relating to the Company's transformation initiatives.

Also included in the nine months ended July 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 three and nine month periods ended July 1, 2022 included a $13.9 million gain related to a cost method investment sold during the period.

The nine months ended July 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.

Critical Mission Solutions

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Revenue $ 1,190,845 $ 1,109,034 $ 3,457,076 $ 3,220,193

Operating Profit $ 99,141 $ 88,328 $ 275,304 $ 274,184

Critical Mission Solutions (CMS) segment revenues for the three and six months ended March 31, 2023 were $1.19 billion and $2.27 billion, respectively, an increase of $56.7 million and $155.1 million, or 5.0% and 7.3%, from $1.13 billion and $2.11 billion for the corresponding periods last year.

During the three and six months ended March 31, 2023, revenue benefited from contracts awarded in fiscal 2022, including a nuclear remediation program with the Department of Energy.

Also, impacts on revenues from unfavorable foreign currency translation were approximately $25.5 million and $58.6 million for the three and six-month periods ended March 31, 2023, compared to $10.1 million and $7.9 million in unfavorable impacts in the corresponding prior year periods.

Operating profit for the segment was $93.9 million and $176.2 million, respectively, for the three and six months ended March 31, 2023, which was relatively flat for the quarter-to-date period compared to the prior year and a decrease of $9.7 million, or 5.2%, from $185.9 million for the year-to-date period last year.

Operating profit level trends year over year were impacted by large contract wind downs in early fiscal 2022, which carried higher profit margins, and were offset in part by growth in the nuclear remediation market and the U.S.

government space market.

Impacts on operating profit from unfavorable foreign currency translation were approximately $3.3 million and $7.2 million for the three and six months ended March 31, 2023, as compared to insignificant impacts in the corresponding prior year periods.

Subsequent Event

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

Jacobs is targeting to complete the separation in the second half of fiscal year 2024 through a distribution that is intended to be tax-free to Jacobs’ shareholders for U.S.

Critical Mission Solutions segment revenues for the three and nine months ended June 30, 2023 were $1.19 billion and $3.46 billion, respectively, an increase of $81.8 million and $236.9 million, or 7.4% and 7.4%, from $1.11 billion and $3.22 billion for the corresponding periods last year.

During the three and nine months ended June 30, 2023, revenue benefited from new contracts in the nuclear remediation sector as well across multiple markets in the U.S.

and United Kingdom.

Also, impacts on revenues from unfavorable foreign currency translation were approximately $2.9 million and $61.5 million for the three and nine-month periods ended June 30, 2023, compared to $26.7 million and $34.6 million in unfavorable impacts in the corresponding prior year periods.

Operating profit for the segment was $99.1 million and $275.3 million, respectively, for the three and nine months ended June 30, 2023, which was an increase of $10.8 million, or 12.2%, from $88.3 million for the quarter-to-date period compared to the prior year and relatively flat compared to the year-to-date period last year.

Operating profit level trends for the year over year quarterly periods were favorably impacted by growth in the nuclear remediation market, U.S.

government space market and international defense market, and for the year to date period, were offset in part by large contract wind downs in early fiscal 2022 that carried higher profit margins.

Impacts on operating profit from unfavorable foreign currency translation were approximately $0.2 million and $7.4 million for the three and nine months ended June 30, 2023, as compared to unfavorable foreign currency translation of approximately $3.9 million and $5.0 million for the three and nine months ended July 1, 2022, respectively.

On May 9, 2023, the Company announced its intention to separate its CMS business, resulting in two independent publicly traded companies.

Jacobs is targeting to complete the separation in fiscal 2024 through a distribution to Jacobs' stockholders that is intended to be tax-free to Jacobs’ shareholders for U.S.

federal income tax purposes.

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People & Places Solutions

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Revenue $ 2,469,694 $ 2,222,530 $ 7,041,744 $ 6,306,520

Operating Profit $ 242,673 $ 213,930 $ 701,498 $ 595,485

Revenues for the People & Places Solutions (P&PS) segment for the three and six-months ended March 31, 2023 were $2.35 billion and $4.57 billion, respectively, an increase of $182.1 million and $488.1 million, or 8.4% and 12.0%, from $2.16 billion and $4.08 billion for the corresponding periods last year.

The increases in revenue for the three and six months ended March 31, 2023 were primarily driven by growth in both our advanced facilities and U.S.

businesses as compared to the prior year corresponding periods.

Foreign currency translation had a $51.2 million and $134.5 million unfavorable impact on revenues in our international businesses for the three and six month periods ended March 31, 2023, respectively, as compared to unfavorable impacts of $32.0 million and $34.6 million in the corresponding prior year periods.

Operating profit for the segment for the three and six month period ended March 31, 2023 were $232.2 million and $458.8 million, respectively, an increase of $39.5 million and $77.3 million, or 20.5% and 20.3%, from $192.7 million and $381.6 million for the corresponding periods last year.

The year-over-year increases in operating profit for the three and six months ended March 31, 2023 were driven primarily by the revenue growth mentioned above while holding selling, general and administrative expenses relatively flat.

Foreign currency translation had a $9.5 million and $25.4 million unfavorable impact on operating profit in our international businesses for the three and six month periods ended March 31, 2023, respectively as compared to unfavorable impacts of $6.6 million and $6.8 million in the corresponding prior year periods.

Revenues for the People & Places Solutions segment for the three and nine-months ended June 30, 2023 were $2.47 billion and $7.04 billion, respectively, an increase of $247.2 million and $735.2 million, or 11.1% and 11.7%, from $2.22 billion and $6.31 billion for the corresponding periods last year.

The increases in revenue for the three and nine months ended June 30, 2023 were primarily driven by growth in our advanced facilities, U.S.

and Asia Pacific and Middle East businesses as compared to the corresponding prior year periods.

Foreign currency translation had $10.1 million and $144.6 million in unfavorable impacts on revenues in our international businesses for the three and nine month periods ended June 30, 2023, respectively, as compared to unfavorable impacts of $69.1 million and $103.7 million in the corresponding prior year periods.

Operating profit for the segment for the three and nine month period ended June 30, 2023 was $242.7 million and $701.5 million, respectively, an increase of $28.7 million and $106.0 million, or 13.4% and 17.8%, from $213.9 million and $595.5 million for the corresponding periods last year.

The year-over-year increases in operating profit for the three and nine months ended June 30, 2023 were driven primarily by the revenue growth mentioned above while holding selling, general and administrative expenses relatively flat.

Foreign currency translation had a $3.4 million and $28.7 million unfavorable impact on operating profit in our international businesses for the three and nine month periods ended June 30, 2023, respectively as compared to unfavorable impacts of $11.9 million and $18.7 million in the corresponding prior year periods.

Divergent Solutions

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Revenue $ 239,289 $ 217,949 $ 694,978 $ 650,120

Operating Profit $ 20,794 $ 12,093 $ 57,623 $ 52,256

Revenues for the Divergent Solutions segment for the three and six months ended March 31, 2023 were $241.2 million and $455.7 million, respectively, an increase of $1.9 million and $23.5 million, or 0.8% and 5.4%, from $239.3 million and $432.2 million for the corresponding periods last year.

The increases in revenue for the three and six months ended March 31, 2023 benefited from incremental revenues from the StreetLight acquisition (owned for the full period in fiscal 2023) and the startup of new programs previously won in fiscal 2022.

Foreign currency translation impacts on revenue were not significant for any period presented.

Operating profit for the segment was $24.9 million and $36.8 million, respectively, for the three and six months ended March 31, 2023, an increase of $7.8 million and a decrease of $3.3 million, or 45.8% and (8.3)%, from $17.1 million and $40.2 million for the corresponding periods last year.

The increase in operating profit for the three month period was due mainly to favorable year over year software licensing revenue, with the decrease in operating profit for the six months ended March 31, 2023, primarily driven by unfavorable impacts from overhead billing rate differences during the first quarter of 2023 versus the prior year first quarter mainly in our cyber intelligence market, offset in part by the licensing revenue in the current quarter mentioned above.

Impacts on operating profit from foreign currency were not significant for any periods presented.

Revenues for the Divergent Solutions segment for the three and nine months ended June 30, 2023 were $239.3 million and $695.0 million, respectively, an increase of $21.3 million and $44.9 million, or 9.8% and 6.9%, from $217.9 million and $650.1 million for the corresponding periods last year.

The increases in revenue for the three and nine months ended June 30, 2023 were due mainly to favorable year over year software licensing revenue and the startup of new programs previously won in fiscal 2022.

Also the year-to-date period benefited from incremental revenues from the StreetLight acquisition (owned for the full period in fiscal 2023).

Foreign currency translation impacts on revenue were not significant for the periods presented.

Operating profit for the segment was $20.8 million and $57.6 million, respectively, for the three and nine months ended June 30, 2023, an increase of $8.7 million and $5.4 million, or 72.0% and 10.3%, from $12.1 million and $52.3 million for the corresponding periods last year.

The increases in operating profit for the three and nine month periods were due mainly to favorable year over year software licensing, and for the year-to-date period, slightly offset by unfavorable impacts from overhead billing rate differences during the first quarter of 2023 versus the prior year first quarter mainly in our cyber intelligence business.

Impacts on operating profit from foreign currency were not significant for the periods presented.

PA Consulting

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

June 30, 2023 July 1, 2022 June 30, 2023 July 1, 2022

Revenue $ 286,874 $ 277,580 $ 869,904 $ 864,944

Operating Profit $ 60,864 $ 51,448 $ 177,521 $ 182,850

Revenues for the PA Consulting segment for the three and six months ended March 31, 2023 were $301.0 million and $583.0 million, respectively, an increase of $3.6 million and a decrease $4.3 million, or 1.2% and (0.7)%, from $297.4 million and $587.4 million for the corresponding periods last year.

Revenues for the three and six-months ended March 31, 2023 were impacted by foreign currency translation, which had a $30.7 million and $72.3 million unfavorable impact in our international businesses, and unfavorable impacts of $9.5 million and $4.1 million in the corresponding prior year periods.

In local currency (primarily GBP), PA Consulting experienced an approximate 10% increase in revenues as compared to the prior year periods, primarily due to higher volumes in PA Consulting's existing business for previously delayed projects in fiscal 2022.

Operating profit for the segment for the three and six months ended March 31, 2023 was $65.6 million and $116.7 million, respectively, a decrease of $2.7 million and $14.7 million, or 4.0% and 11.2%, from $68.3 million and $131.4 million, for the corresponding periods last year.

These decreases are mainly due to unfavorable foreign currency translation impacts in our international business of $6.5 million and $13.4 million, for the three and six months ended March 31, 2023, respectively, as compared to $1.4 million and $2.5 million in unfavorable impact in the corresponding prior year periods.

Additionally, operating profit was impacted in the year periods by higher labor costs due to a competitive labor market and lower utilization.

Revenues for the PA Consulting segment for the three and nine months ended June 30, 2023 were $286.9 million and $869.9 million, respectively, an increase of $9.3 million and $5.0 million, or 3.3% and 0.6%, from $277.6 million and $864.9 million for the corresponding periods last year, primarily due to growth in PA Consulting's Defence & Security, Public Sector and Energy & Utilities businesses.

Revenues for the three-months ended June 30, 2023 were immaterially impacted by foreign currency translation and for the nine-months ended June 30, 2023 were unfavorably impacted by $71.7 million for our international businesses, and for the corresponding prior year periods, were unfavorably impacted by $34.0 million and $38.1 million.

Operating profit for the segment for the three and nine months ended June 30, 2023 was $60.9 million and $177.5 million, respectively, an increase of $9.4 million and a decrease of $5.3 million, or 18.3% and (2.9)%, from $51.4 million and $182.9 million, for the corresponding periods last year.

The increase for the quarter to date period is mainly due to lower incentive costs and includes immaterial impacts from foreign currency in our international business, while the decrease for the year to date period is mainly due to unfavorable foreign currency translation impacts of $12.3 million, as compared to $6.7 million and $8.1 million in unfavorable impact in the corresponding prior year periods.

Additionally, operating profit was impacted in the current year period by higher labor costs due to a competitive labor market and lower utilization.

Other Corporate Expenses

Other corporate expenses for the three and six months ended March 31, 2023 were $107.6 million and $201.3 million, an increase of $18.4 million and $6.7 million, or 20.6% and 3.5%, from $89.2 million and $194.6 million for the corresponding periods last year.

The increase for the three month period ended March 31, 2023 was primarily driven by continued higher investments in company technology platforms and higher incentive and other compensation charges.

The increase for the year-to-date period was attributable to these higher IT and people costs in the second quarter offset by approximately $15.0 million in net favorable impacts during first quarter 2023 from cost reductions associated mainly with changes in employee benefit programs, partly offset by higher spend in company technology platforms and other personnel and corporate cost increases.

Other corporate expenses for the three and nine months ended June 30, 2023 were $118.5 million and $319.8 million, an increase of $28.6 million and $35.3 million, or 31.8% and 12.4%, from $89.9 million and $284.5 million for the corresponding periods last year.

The increase for the three month period ended June 30, 2023 was primarily driven by continued higher investments in company technology platforms and higher incentive and other compensation charges.

The increase for the year-to-date period was attributable to these higher technology and personnel costs in the third quarter offset by approximately $15.0 million in net favorable impacts during first quarter 2023 from cost reductions associated mainly with changes in employee benefit programs, partly offset by higher spend in company technology platforms and other personnel and corporate cost increases.

Included in other corporate expenses are costs and expenses which relate to general corporate activities as well as corporate-managed benefit and insurance programs.

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

Restructuring and Other Charges

See Note 16- Restructuring and Other Charges for information on the Company’s activity relating to restructuring and other charges.

Backlog Information

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

The following table summarizes our backlog at March 31, 2023 and April 1, 2022 (in millions):

March 31, 2023 April 1, 2022

The following table summarizes our backlog at June 30, 2023 and July 1, 2022 (in millions):

June 30, 2023 July 1, 2022

Critical Mission Solutions $ 8,097 $ 7,218

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Total $ 28,915 $ 28,090

The increase in backlog in Critical Mission Solutions (CMS) from April 1, 2022 was primarily driven by new business awards in the U.S.

government space and nuclear remediation sectors offsetting slower growth in the U.S.

The increase in backlog in Critical Mission Solutions from July 1, 2022 was primarily driven by new business awards in the U.S.

government space sector along with growth in the U.K.

defence, nuclear power, and nuclear remediation sectors that offset slower growth in the U.S.

Defense market.

The increase in backlog in People & Places Solutions (P&PS) from April 1, 2022 was primarily driven by new business awards in our federal, environmental and advanced facilities business.

The decrease in backlog in Divergent Solutions (DVS) from April 1, 2022 was primarily driven by delays in new awards and shorter contract extensions specifically within the government markets.

The increase in backlog in PA Consulting from April 1, 2022 was primarily driven by strategic focus on long-term projects as well as organic year over year growth of the business.

Backlog levels in People & Places Solutions and Divergent Solutions remained consistent year-over-year.

The increase in backlog in PA Consulting from July 1, 2022 was primarily driven by strategic focus on long-term projects as well as organic year over year growth of the business.

Consolidated backlog differs from the Company’s remaining performance obligations as defined by ASC 606 primarily because of contract change orders or new wins not yet processed and our national government contracts where our policy is to generally include in backlog the contract award, whether funded or unfunded excluding certain option periods while our remaining performance obligations represent a measure of the total dollar value of work to be performed on contracts awarded and in progress.

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Liquidity and Capital Resources

At March 31, 2023, our principal sources of liquidity consisted of $1.22 billion in cash and cash equivalents and $1.17 billion of available borrowing capacity under our $2.25 billion r evolving credit agreement (the "Revolving Credit Facility").

At June 30, 2023, our principal sources of liquidity consisted of $1.09 billion in cash and cash equivalents and $1.44 billion of available borrowing capacity under our $2.25 billion r evolving credit agreement (the "Revolving Credit Facility").

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

The amount of cash and cash equivalents at March 31, 2023 represented an increase of $82.9 million from $1.14 billion at September 30, 2022 , the reasons for which are described below.

Our net cash flow provided by operations of $434.3 million during the six months ended March 31, 2023 was unfavorable by $11.9 million in co mparison to the cash flow provided by operations of $446.3 million for the corresponding prior year period.

The year-over-year decrease in cash from operations is primarily attributable to a decrease in working capital performance compared to the prior period, offset in part by higher earnings after adjustments for non-cash items compared to the prior period.

Our net cash used for investing activities for the six months ended March 31, 2023 wa s $76.7 million , compared to cash used for investing activities of $458.8 million in the corresponding prior year period, with this change due primarily to the acquisition of BlackLynx and StreetLight in the prior year.

Our net cash used for financing activities of $336.0 million for the six months ended March 31, 2023 resulted mainly from cash used for share repurchases of $140.5 million, $58.4 million in repurchase of PA Consulting related redeemable noncontrolling interests, $62.8 million in dividends to shareholders and $53.8 million in net repayments of long-term borrowing, partly offset by net proceeds from issuance of common stock of $25.4 million.

Cash provided by financing activities in the corresponding prior year period was $235.1 million, due primarily to net proceeds from borrowings of $387.1 million, offset by cash used for repurchases of PA Consulting related redeemable noncontrolling interests of $35.1 million and $57.2 million in dividends to shareholders and $9.4 million in net dividends to noncontrolling interest holders.

At March 31, 2023, the Company had approximately $217.3 million in cash and cash equivalents held in the U.S.

and $1.0 billion held outside of the U.S.

(primarily in the U.K., the Eurozone, Australia, India, Canada, Israel and the United Arab Emirates), which is used primarily for funding operations in those regions.

Cash and cash equivalents at June 30, 2023 were $1.09 billion, representing a decrease of $48.4 million from $1.14 billion at September 30, 2022 , the reasons for which are described below.

Our net cash flow provided by operations of $755.4 million during the nine months ended June 30, 2023 was favorable by $558.2 million in co mparison to the cash flow provided by operations of $197.2 million for the corresponding prior year period.

The year-over-year increase in cash from operations is primarily attributable to the payment of the Legacy CH2M Matter cash settlement in the third fiscal quarter of 2022 and also included other overall net favorable working capital performance during the 2023 period.

Our net cash used for investing activities for the nine months ended June 30, 2023 wa s $106.4 million , compared to cash used for investing activities of $491.2 million in the corresponding prior year period, with this change due primarily to the BlackLynx and StreetLight acquisitions in the prior year.

Our net cash used for financing activities of $770.3 million for the nine months ended June 30, 2023 resulted mainly from $338.6 million in net repayments of borrowings, cash used for share repurchases of $265.6 million, $55.7 million in net PA Consulting related redeemable noncontrolling interests purchase and issuance activity and $95.7 million in dividends to shareholders.

Cash provided by financing activities in the corresponding prior year period was $461.8 million, due primarily to net proceeds from borrowings of $799.2 million, offset by cash used for share repurchases of $250.7 million and $86.6 million in dividends to shareholders.

At June 30, 2023, the Company had approximately $194.3 million in cash and cash equivalents held in the U.S.

and $897.8 million held outside of the U.S.

(primarily in the U.K., the Eurozone, Australia, India, Canada, Saudi Arabia and the United Arab Emirates), which is used primarily for funding operations in those regions.

Other than the tax cost of repatriating funds to the U.S.

(see Note 7- Income Taxes of Notes to Consolidated Financial Statements included in our 2022 Form 10-K), there are no material impediments to repatriating these funds to the U.S.

The Compan y had $322.4 million in letters of credit outstanding at March 31, 2023.

The Compan y had $326.2 million in letters of credit outstanding at June 30, 2023.

Of this amount, $0.9 million was issued under the Revolving Credit Facility and $325.3 million was issued under separate, committed and uncommitted letter-of-credit facilities.

On February 6, 2023, the Company refinanced its Revolving Credit Facility and Term Loan Facilities and on February 16, the Company issued $500.0 million in Bonds.

On May 9, 2023, the Company announced its intention to separate its CMS business, resulting in two independent publicly traded companies.

Jacobs expects to complete the separation in fiscal 2024 through a distribution to Jacobs' stockholders that is intended to be tax-free to Jacobs’ stockholders for U.S.

federal income tax purposes.

On February 6, 2023, the Company refinanced its Revolving Credit Facility and Term Loan Facilities and on February 16, the Company issued $500.0 million in Bonds (defined below).

See Note 11- Borrowings for further discussion relating to the terms of the Bonds, the Revolving Credit Facility and Term Loan Facilities following the issuance and refinancing.

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We believe we have adequate liquidity and capital resources to fund our projected cash requirements for the next twelve months based on the liquidity provided by our cash and cash equivalents on hand, our borrowing capacity and our continuing cash from operations.

We were in compliance with all of our debt covenants at March 31, 2023.

We were in compliance with all of our debt covenants at June 30, 2023.

Supplemental Obligor Group Financial Information

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This summarized financial information (in thousands) has been prepared and presented pursuant to Regulation S-X Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and is not intended to present the financial position or results of operations of the Obligor Group in accordance with U.S.

Six Months Ended

(in thousands) March 31, 2023

Nine Months Ended

(in thousands) June 30, 2023

Summarized Statement of Earnings Data

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Noncontrolling interests $ (940)

(in thousands) March 31, 2023 September 30, 2022

(in thousands) June 30, 2023 September 30, 2022

Summarized Balance Sheet Data

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis