JACOBS ENGINEERING GROUP INC /DE/ [J] Filings

10-Q 1 jec-20220401.htm 10-Q jec-20220401

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended April 1, 2022

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 1-7463

JACOBS ENGINEERING GROUP INC.

(Exact name of registrant as specified in its charter)

Delaware

95-4081636

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

1999 Bryan Street

Suite 1200

Dallas

Texas

75201

(Address of principal executive offices)

(Zip Code)

(214) 583 – 8500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

_________________________________________________________________



Title of Each Class		Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock	$1 par value	J	New York Stock Exchange

Indicate by check-mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: ☒ Yes ☐ No

Indicate by check-mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Page 1

Indicate by check-mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check-mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Number of shares of common stock outstanding at April 22, 2022: 128,627,268

Page 2

JACOBS ENGINEERING GROUP INC.

INDEX TO FORM 10-Q


			Page No.
PART I	FINANCIAL INFORMATION

	Item 1.	Financial Statements	4

		Consolidated Balance Sheets - Unaudited	5

		Consolidated Statements of Earnings - Unaudited	6

		Consolidated Statements of Comprehensive Income - Unaudited	7

		Consolidated Statements of Stockholders’ Equity - Unaudited	8

		Consolidated Statements of Cash Flows - Unaudited	10

		Notes to Consolidated Financial Statements - Unaudited	11

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51

	Item 4.	Controls and Procedures	52

PART II	OTHER INFORMATION

	Item 1.	Legal Proceedings	54

	Item 1A.	Risk Factors	54

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54

	Item 3.	Defaults Upon Senior Securities	54

	Item 4.	Mine Safety Disclosures	55

	Item 5.	Other Information	55

	Item 6.	Exhibits	56

		SIGNATURES	57

Page 3

Part I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Page 4

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share information)


	April 1, 2022		October 1, 2021
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	1,235,422	$	1,014,249
Receivables and contract assets	3,302,868		3,101,418
Prepaid expenses and other	152,989		176,228

Total current assets	4,691,279		4,291,895
Property, Equipment and Improvements, net	326,596		353,117
Other Noncurrent Assets:
Goodwill	7,492,015		7,197,000
Intangibles, net	1,553,283		1,565,758
Deferred income tax assets	68,376		103,193
Operating lease right-of-use assets	556,686		650,097
Miscellaneous	495,057		471,549
Total other noncurrent assets	10,165,417		9,987,597
	$	15,183,292	$	14,632,609
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current maturities of long-term debt	$	52,911	$	53,456
Accounts payable	921,372		908,441
Accrued liabilities	1,955,327		1,533,559
Operating lease liability	162,817		172,414
Contract liabilities	672,265		542,054
Total current liabilities	3,764,692		3,209,924
Long-term Debt	3,196,374		2,839,933
Liabilities relating to defined benefit pension and retirement plans	366,788		418,080
Deferred income tax liabilities	211,341		214,380
Long-term operating lease liability	688,604		758,358
Other deferred liabilities	163,988		559,375
Commitments and Contingencies
Redeemable Noncontrolling interests	669,527		657,722
Stockholders’ Equity:
Capital stock:
Preferred stock, $1 par value, authorized - 1,000,000 shares; issued and outstanding - none	—		—
Common stock, $1 par value, authorized - 240,000,000 shares; issued and outstanding 128,899,796 shares and 128,892,540 shares as of April 1, 2022 and October 1, 2021, respectively	128,900		128,893
Additional paid-in capital	2,667,256		2,590,012
Retained earnings	4,069,664		4,015,578
Accumulated other comprehensive loss	(788,374)		(794,442)
Total Jacobs stockholders’ equity	6,077,446		5,940,041
Noncontrolling interests	44,532		34,796
Total Group stockholders’ equity	6,121,978		5,974,837
	$	15,183,292	$	14,632,609

See the accompanying Notes to Consolidated Financial Statements – Unaudited.

Page 5

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

Three and Six Months Ended April 1, 2022 and April 2, 2021

(In thousands, except per share information)

(Unaudited)


	For the Three Months Ended				For the Six Months Ended
	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Revenues	$	3,834,059	$	3,547,873	$	7,214,684	$	6,929,708
Direct cost of contracts	(2,963,649)		(2,780,860)		(5,547,800)		(5,530,636)
Gross profit	870,410		767,013		1,666,884		1,399,072
Selling, general and administrative expenses	(704,195)		(808,125)		(1,323,336)		(1,226,246)
Operating Profit (Loss)	166,215		(41,112)		343,548		172,826
Other Income (Expense):
Interest income	381		608		1,882		1,732
Interest expense	(21,995)		(15,464)		(41,421)		(32,777)
Miscellaneous income (expense), net	10,681		(56,313)		20,362		100,047
Total other (expense) income, net	(10,933)		(71,169)		(19,177)		69,002
Earnings (Loss) from Continuing Operations Before Taxes	155,282		(112,281)		324,371		241,828
Income Tax (Expense) Benefit from Continuing Operations	(46,166)		20,772		(62,054)		(66,250)
Net Earnings (Loss) of the Group from Continuing Operations	109,116		(91,509)		262,317		175,578
Net (Loss) Earnings of the Group from Discontinued Operations	(1)		11,320		(233)		11,305
Net Earnings (Loss) of the Group	109,115		(80,189)		262,084		186,883
Net Earnings Attributable to Noncontrolling Interests from Continuing Operations	(10,261)		(10,158)		(19,514)		(20,184)
Net (Earnings) Loss Attributable to Redeemable Noncontrolling interests	(10,038)		101,392		(19,721)		101,392
Net Earnings (Loss) Attributable to Jacobs from Continuing Operations	88,817		(275)		223,082		256,786
Net Earnings Attributable to Jacobs	$	88,816	$	11,045	$	222,849	$	268,091
Net Earnings Per Share:
Basic Net Earnings from Continuing Operations Per Share	$	0.69	$	—	$	1.72	$	1.97
Basic Net Earnings from Discontinued Operations Per Share	$	—	$	0.09	$	—	$	0.09
Basic Earnings Per Share	$	0.69	$	0.08	$	1.72	$	2.06

Diluted Net Earnings from Continuing Operations Per Share	$	0.68	$	—	$	1.71	$	1.96
Diluted Net Earnings from Discontinued Operations Per Share	$	—	$	0.09	$	—	$	0.09
Diluted Earnings Per Share	$	0.68	$	0.08	$	1.71	$	2.04

See the accompanying Notes to Consolidated Financial Statements - Unaudited.

Page 6

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three and Six Months Ended April 1, 2022 and April 2, 2021

(In thousands)

(Unaudited)


	For the Three Months Ended				For the Six Months Ended
	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Net Earnings (Loss) of the Group	$	109,115	$	(80,189)	$	262,084	$	186,883
Other Comprehensive Income:
Foreign currency translation adjustment	(45,827)		(15,450)		(54,512)		70,888
Gain on cash flow hedges	46,491		27,604		55,346		31,187
Change in pension and retiree medical plan liabilities	12,036		1,490		20,075		(17,863)
Other comprehensive income before taxes	12,700		13,644		20,909		84,212
Income Tax (Expense) Benefit:
Foreign currency translation adjustment	(400)		3,409		2,590		(11,036)
Cash flow hedges	(12,290)		(7,315)		(15,235)		(7,094)
Change in pension and retiree medical plan liabilities	(728)		(838)		(2,196)		(1,664)
Income Tax Expense:	(13,418)		(4,744)		(14,841)		(19,794)
Net other comprehensive (loss) income	(718)		8,900		6,068		64,418
Net Comprehensive Income (Loss) of the Group	108,397		(71,289)		268,152		251,301
Net Earnings Attributable to Noncontrolling Interests	(10,261)		(10,158)		(19,514)		(20,184)
Net (Earnings) Loss Attributable to Redeemable Noncontrolling interests	(10,038)		101,392		(19,721)		101,392
Net Comprehensive Income Attributable to Jacobs	$	88,098	$	19,945	$	228,917	$	332,509

See the accompanying Notes to Consolidated Financial Statements - Unaudited.

Page 7

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended April 1, 2022 and April 2, 2021

(In thousands)

(Unaudited)


	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Jacobs Stockholders’ Equity		Noncontrolling Interests		Total Group Stockholders’ Equity
Balances at January 1, 2021	$	130,035	$	2,597,586	$	4,249,408	$	(877,539)	$	6,099,490	$	43,877	$	6,143,367
Net earnings	—		—		11,045		—		11,045		10,158		21,203
Foreign currency translation adjustments, net of deferred taxes of $(3,409)	—		—		—		(12,041)		(12,041)		—		(12,041)
Pension liability, net of deferred taxes of $838	—		—		—		652		652		—		652
Gain on derivatives, net of deferred taxes of $7,315	—		—		—		20,289		20,289		—		20,289
Dividends	—		—		(27,482)		—		(27,482)		—		(27,482)
Redeemable Noncontrolling interests redemption value adjustment to Common Shareholders	—		—		(107,238)		—		(107,238)		—		(107,238)
Noncontrolling interests - distributions and other	—		—		—		—		—		(18,728)		(18,728)
Stock based compensation	—		15,136		—		—		15,136		—		15,136
Issuances of equity securities including shares withheld for taxes	137		8,732		(133)		—		8,736		—		8,736
Repurchases of equity securities	—		—		(148)		—		(148)		—		(148)
Balances at April 2, 2021	$	130,172	$	2,621,454	$	4,125,452	$	(868,639)	$	6,008,439	$	35,307	$	6,043,746

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
Foreign currency translation adjustments, net of deferred taxes of $400	—		—		—		(46,227)		(46,227)		—		(46,227)
Pension liability, net of deferred taxes of $728	—		—		—		11,308		11,308		—		11,308
Gain on derivatives, net of deferred taxes of $12,290	—		—		—		34,201		34,201		—		34,201
Dividends	—		—		(29,871)		—		(29,871)		—		(29,871)
Redeemable Noncontrolling interests redemption value adjustment	—		—		(35,117)		—		(35,117)		—		(35,117)

Noncontrolling interests - distributions and other	—		—		—		—		—		4,272		4,272
Stock based compensation	—		18,147		—		—		18,147		—		18,147
Issuances of equity securities including shares withheld for taxes	142		16,134		(33)		—		16,243		—		16,243
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

See the accompanying Notes to Consolidated Financial Statements – Unaudited.

Page 8

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Six Months Ended April 1, 2022 and April 2, 2021

(In thousands)

(Unaudited)


	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Jacobs Stockholders’ Equity		Noncontrolling Interests		Total Group Stockholders’ Equity
Balances at October 2, 2020	$	129,748	$	2,598,446	$	4,020,575	$	(933,057)	$	5,815,712	$	39,955	$	5,855,667
Net earnings	—		—		268,091		—		268,091		20,184		288,275
Foreign currency translation adjustments, net of deferred taxes of $11,036	—		—		—		59,852		59,852		—		59,852
Pension liability, net of deferred taxes of $1,664	—		—		—		(19,527)		(19,527)		—		(19,527)
Gain on derivatives, net of deferred taxes of $7,094	—		—		—		24,093		24,093		—		24,093
Dividends	—		—		(27,515)		—		(27,515)				(27,515)
Redeemable Noncontrolling interests redemption value adjustment to Common Shareholders	—		—		(107,238)		—		(107,238)		—		(107,238)
Noncontrolling interests - distributions and other	—		—		—		—		—		(24,832)		(24,832)
Stock based compensation	—		26,977		—		—		26,977		—		26,977
Issuances of equity securities including shares withheld for taxes	675		1,058		(8,790)		—		(7,057)		—		(7,057)
Repurchases of equity securities	(251)		(5,027)		(19,671)		—		(24,949)		—		(24,949)
Balances at April 2, 2021	$	130,172	$	2,621,454	$	4,125,452	$	(868,639)	$	6,008,439	$	35,307	$	6,043,746

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
Gain on derivatives, 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	—		—		(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

See the accompanying Notes to Consolidated Financial Statements – Unaudited.

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended April 1, 2022 and April 2, 2021

(In thousands)

(Unaudited)


	For the Six Months Ended
	April 1, 2022		April 2, 2021
Cash Flows from Operating Activities:
Net earnings attributable to the Group	$	262,084	$	186,883
Adjustments to reconcile net earnings to net cash flows provided by operations:
Depreciation and amortization:
Property, equipment and improvements	52,620		48,079
Intangible assets	95,338		53,753
Gain on sale of ECR business	—		(15,608)
Gain on investment in equity securities	—		(114,443)
Stock based compensation	25,161		26,977
Equity in earnings of operating ventures, net of return on capital distributions	13,280		6,353
Loss on disposals of assets, net	421		353

Impairment of long-lived assets and equity method investment	74,585		33,197

Deferred income taxes	16,040		41,063
Changes in assets and liabilities, excluding the effects of businesses acquired:
Receivables and contract assets, net of contract liabilities	(33,881)		73,542
Prepaid expenses and other current assets	15,916		14,521
Miscellaneous other assets	67,201		76,401
Accounts payable	18,448		(152,750)
Accrued liabilities	(119,982)		99,198
Other deferred liabilities	(33,305)		(22,490)
Other, net	(7,670)		(4,797)
Net cash provided by operating activities	446,256		350,232
Cash Flows from Investing Activities:
Additions to property and equipment	(48,223)		(45,053)
Disposals of property and equipment and other assets	1,064		427
Capital contributions to equity investees, net of return of capital distributions	1,082		(4,193)
Acquisitions of businesses, net of cash acquired	(412,748)		(1,741,062)
Disposal of investment in equity securities	—		13,027
Proceeds related to sales of businesses	—		36,360
Net cash used for investing activities	(458,825)		(1,740,494)
Cash Flows from Financing Activities:
Proceeds from long-term borrowings	1,519,000		3,118,315
Repayments of long-term borrowings	(1,125,528)		(1,328,283)
Proceeds from short-term borrowings	—		—
Repayments of short-term borrowings	(6,359)		(7,675)
Debt issuance costs	—		(2,697)
Proceeds from issuances of common stock	28,187		18,585
Common stock repurchases	(50,000)		(24,949)
Taxes paid on vested restricted stock	(28,398)		(25,642)
Cash dividends to shareholders	(57,247)		(52,438)
Net (dividends) contributions associated with noncontrolling interests	(9,416)		(29,442)
Repurchase of redeemable noncontrolling interests	(35,095)		—
Net cash provided by financing activities	235,144		1,665,774
Effect of Exchange Rate Changes	(12,792)		28,918
Net Increase in Cash and Cash Equivalents and Restricted Cash	209,783		304,430
Cash and Cash Equivalents, including Restricted Cash, at the Beginning of the Period	1,026,575		862,424
Cash and Cash Equivalents, including Restricted Cash, at the End of the Period	$	1,236,358	$	1,166,854

See the accompanying Notes to Consolidated Financial Statements – Unaudited.

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Basis of Presentation

Unless the context otherwise requires:

•References herein to “Jacobs” are to Jacobs Engineering Group Inc. and its predecessors;

•References herein to the “Company”, “we”, “us” or “our” are to Jacobs Engineering Group Inc. and its consolidated subsidiaries; and

•References herein to the “Group” are to the combined economic interests and activities of the Company and the persons and entities holding noncontrolling interests in our consolidated subsidiaries.

The accompanying consolidated financial statements and financial information included herein have been prepared pursuant to the interim period reporting requirements of Form 10-Q. Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted. Readers of this Quarterly Report on Form 10-Q should also read our consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended October 1, 2021 (“2021 Form 10-K”).

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of our consolidated financial statements at April 1, 2022, and for the three and six month periods ended April 1, 2022.

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

On February 4, 2022, the Company acquired StreetLight Data, Inc. ("StreetLight"). StreetLight is a pioneer of mobility analytics who uses its data and machine learning resources to shed light on mobility and enable users to solve complex transportation problems. The Company paid total base consideration of approximately $190.7 million in cash, and issued $0.9 million in equity and $5.2 million in in-the-money stock options to the former owners of StreetLight. The Company also paid off StreetLight's debt of approximately $1.0 million simultaneously with the consummation of the acquisition. The Company has recorded its preliminary purchase price allocation associated with the acquisition, which is summarized in Note 16- Other Business Combinations.

On November 19, 2021, a subsidiary of Jacobs acquired all outstanding shares of common stock of BlackLynx ("BlackLynx"), a provider of high-performance software, to complement Jacobs' portfolio of cyber, intelligence and digital solutions. The Company paid total base consideration of approximately $235.4 million in cash to the former owners of BlackLynx. In addition, the transaction involved the potential payment of future consideration that is contingent upon the achievement of certain revenue and gross margin thresholds being achieved in calendar year 2022. The estimated fair value of the contingent consideration on the acquisition date is $0.4 million. The future contingent consideration will be paid, if and to the extent achieved, in the second quarter of fiscal 2023. In conjunction with the acquisition, the Company also paid off BlackLynx's debt of approximately $5.3 million simultaneously with the consummation of the acquisition. The Company has recorded its preliminary purchase price allocation associated with the acquisition, which is summarized in Note 16- Other Business Combinations.

On March 2, 2021, Jacobs completed the strategic investment of a 65% interest in PA Consulting Group Limited ("PA Consulting"), a UK-based leading innovation and transformation consulting firm. The total consideration paid by the Company was $1.7 billion, funded through cash on hand, proceeds from a new term loan and draws on the Company's existing revolving credit facility. Further, in connection with the transaction, an additional $261 million in investment proceeds had not yet been distributed at the investment date due to continuing employment requirements of associated management owners. Consequently, this amount represented compensation expense incurred related to the investment that was expensed subsequent to the date of the transaction, and was reflected in selling, general and administrative expense and cash from operations for the fiscal year ended October 1, 2021. The remaining 35% interest was acquired by PA Consulting employees, whose redeemable noncontrolling interests had a fair value of $582.4 million on the closing date, including subsequent purchase accounting adjustments. PA Consulting is accounted for as a consolidated subsidiary and as a separate operating segment. See Note 15- PA Consulting Business Combination for more discussion on the investment and Note 12- Borrowings for more discussion on the financing for the transaction.

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

Page 11

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

government clients. The Company paid total consideration of $190.1 million, which was comprised of approximately $182.4 million in cash to the former owners of Buffalo Group and contingent consideration of $7.7 million. The contingent consideration was subsequently recognized as an offset to selling, general and administrative expense when it was determined no amounts would be paid. In conjunction with the acquisition, the Company assumed the Buffalo Group's debt of approximately $7.7 million. The Company repaid all of the assumed Buffalo Group debt by the end of the first fiscal quarter of 2021. The Company has recorded its final purchase price allocation associated with the acquisition, which is summarized in Note 16- Other Business Combinations.

On April 26, 2019, Jacobs completed the sale of its Energy, Chemicals and Resources ("ECR") business to Worley Limited ("Worley"), a company incorporated in Australia, for a purchase price of $3.4 billion consisting of (i) $2.8 billion in cash plus (ii) 58.2 million ordinary shares of Worley, subject to adjustments for changes in working capital and certain other items (the “ECR sale”). As a result of the ECR sale, substantially all ECR-related assets and liabilities were sold (the "Disposal Group"). We determined that the Disposal Group should be reported as discontinued operations in accordance with ASC 210-05, Discontinued Operations because their disposal represents a strategic shift that had a major effect on our operations and financial results. As such, the financial results of the ECR business are reflected in our unaudited Consolidated Statements of Earnings as discontinued operations for all periods presented. As of October 1, 2021, all of the ECR business to be sold under the terms of the ECR sale had been conveyed to Worley and as such, no amounts remain held for sale. For further discussion, see Note 17- Sale of Energy, Chemicals and Resources ("ECR") Business to the consolidated financial statements.

2. Use of Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires us to employ estimates and make assumptions that affect the reported amounts of certain assets and liabilities, the revenues and expenses reported for the periods covered by the accompanying consolidated financial statements, and certain amounts disclosed in these Notes to the Consolidated Financial Statements. Although such estimates and assumptions are based on management’s most recent assessment of the underlying facts and circumstances utilizing the most current information available and past experience including considerations for potential impacts of the continuing coronavirus (COVID-19) pandemic, actual results could differ significantly from those estimates and assumptions. Our estimates, judgments, and assumptions are evaluated periodically and adjusted accordingly.

Please refer to Note 2- Significant Accounting Policies of Notes to Consolidated Financial Statements included in our 2021 Form 10-K for a discussion of other significant estimates and assumptions affecting our consolidated financial statements.

3. Fair Value and Fair Value Measurements

Certain amounts included in the accompanying consolidated financial statements are presented at fair value. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as of the date fair value is determined (the “measurement date”). When determining fair value, we consider the principal or most advantageous market in which we would transact, and we consider only those assumptions we believe a typical market participant would consider when pricing an asset or liability. In measuring fair value, we use the following inputs in the order of priority indicated:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices in active markets included in Level 1, such as (i) quoted prices for similar assets or liabilities; (ii) quoted prices in markets that have insufficient volume or infrequent transactions (e.g., less active markets); and (iii) model-driven valuations in which all significant inputs are observable or can be derived principally from, or corroborated with, observable market data for substantially the full term of the asset or liability.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the fair value measurement.

Please refer to Note 2- Significant Accounting Policies of Notes to Consolidated Financial Statements included in our 2021 Form 10-K for a more complete discussion of the various items within the consolidated financial statements measured at fair value and the methods used to determine fair value. Please also refer to Note 19- Commitments and Contingencies and Derivative Financial Instruments for discussion regarding the Company's derivative instruments.

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The net carrying amounts of cash and cash equivalents, trade receivables and payables and short-term debt approximate fair value due to the short-term nature of these instruments. See Note 12- Borrowings for a discussion of the fair value of long-term debt.

Fair value measurements relating to our business combinations are made primarily using Level 3 inputs including discounted cash flow and to the extent applicable, Monte Carlo simulation techniques. Fair value for the identified intangible assets is generally estimated using inputs primarily for the income approach using the multiple period excess earnings method and the relief from royalties method. The significant assumptions used in estimating fair value include (i) revenue projections of the business, including profitability, (ii) attrition rates and (iii) the estimated discount rate that reflects the level of risk associated with receiving future cash flows. Other personal property assets, such as furniture, fixtures and equipment, are valued using the cost approach, which is based on replacement or reproduction costs of the asset less depreciation. The fair value of the contingent consideration is estimated using a Monte Carlo simulation and the significant assumptions used include projections of revenues and probabilities of meeting those projections. Key inputs to the valuation of the noncontrolling interests include projected cash flows and the expected volatility associated with those cash flows.

4. New Accounting Pronouncements

ASU 2020-04, Reference Rate Reform, (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting is intended to provide relief for entities impacted by reference rate reform and contains provisions and optional expedients designed to simplify requirements around designation of hedging relationships, probability assessments of hedged forecasted transactions and accounting for modifications of contracts that refer to LIBOR or other rates affected by reference rate reform. The guidance is elective and is effective on the date of issuance. ASU 2020-04 is applied prospectively to contract modifications and as of the effective date for existing and new eligible hedging relationships. The guidance is temporary and will generally not be applicable to contract modifications which occur after December 31, 2022. The adoption of the new guidance in the first quarter of fiscal 2022 allowed the Company to continue its British pound denominated interest rate hedge relationships which previously defined LIBOR as the benchmark interest rate and in December 2021 were amended to replace LIBOR with the Sterling Overnight Index Average rate ("SONIA").

ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, is effective for fiscal years beginning after December 15, 2022. ASU 2021-08 requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. The Company adopted the new guidance in the first quarter of fiscal 2022 and the adoption had no impact on the Company's financial position, results of operations or cash flows.

5. Revenue Accounting for Contracts

Disaggregation of Revenues

Our revenues are principally derived from contracts to provide a diverse range of technical, professional, and construction services to a large number of industrial, commercial, and governmental clients. We provide a broad range of engineering, design, and architectural services; construction and construction management services; operations and maintenance services; and technical, digital, process, scientific and systems consulting services. We provide our services through offices and subsidiaries located primarily in North America, Europe, the Middle East, India, Australia, Africa, and Asia. We provide our services under cost-reimbursable and fixed-price contracts. Our contracts are with many different customers in numerous industries. Refer to Note 20- Segment Information for additional information on how we disaggregate our revenues by reportable segment.

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The following table further disaggregates our revenue by geographic area for the three and six months ended April 1, 2022 and April 2, 2021 (in thousands):


	Three Months Ended				Six Months Ended
	April 1, 2022		April 2, 2021		April 1, 2022		April 2, 2021
Revenues:
United States	$	2,499,737	$	2,474,672	$	4,648,289	$	4,931,712
Europe	937,864		756,474		1,804,216		1,395,789
Canada	67,152		53,687		132,192		109,315
Asia	36,533		28,650		68,620		56,055
India	28,844		16,463		50,992		31,010
Australia and New Zealand	181,650		159,778		359,302		297,186
Middle East and Africa	82,279		58,149		151,073		108,641
Total	$	3,834,059	$	3,547,873	$	7,214,684	$	6,929,708

Contract Liabilities

Contract liabilities represent amounts billed to clients in excess of revenue recognized to date. Revenue recognized for the three and six months ended April 1, 2022 that was previously included in the contract liability balance on October 1, 2021 was $79.6 million and $371.0 million, respectively. Revenue recognized for the three and six months ended April 2, 2021 that was included in the contract liability balance on October 2, 2020 was $