Company Quick10K Filing
Quick10K
Jacobs Engineering Group
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$78.63 137 $10,740
10-Q 2019-03-29 Quarter: 2019-03-29
10-Q 2018-12-28 Quarter: 2018-12-28
10-K 2018-09-28 Annual: 2018-09-28
10-Q 2018-06-29 Quarter: 2018-06-29
10-Q 2018-03-30 Quarter: 2018-03-30
10-Q 2017-12-29 Quarter: 2017-12-29
10-K 2017-09-29 Annual: 2017-09-29
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-Q 2016-12-30 Quarter: 2016-12-30
10-K 2016-09-30 Annual: 2016-09-30
10-Q 2016-07-01 Quarter: 2016-07-01
10-Q 2016-04-01 Quarter: 2016-04-01
10-Q 2016-01-01 Quarter: 2016-01-01
10-K 2015-10-02 Annual: 2015-10-02
10-Q 2015-06-26 Quarter: 2015-06-26
10-Q 2015-03-27 Quarter: 2015-03-27
10-Q 2014-12-26 Quarter: 2014-12-26
10-K 2014-09-26 Annual: 2014-09-26
10-Q 2014-06-27 Quarter: 2014-06-27
10-Q 2014-03-28 Quarter: 2014-03-28
10-Q 2013-12-27 Quarter: 2013-12-27
8-K 2019-06-12 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2019-05-29 Officers, Exhibits
8-K 2019-05-07 Earnings, Exhibits
8-K 2019-05-02 M&A, Exhibits
8-K 2019-05-01 Officers, Exhibits
8-K 2019-04-30 Officers
8-K 2019-04-26 Enter Agreement, M&A, Other Events, Exhibits
8-K 2019-04-21 Enter Agreement, Other Events, Exhibits
8-K 2019-03-28 Other Events
8-K 2019-03-20 Regulation FD
8-K 2019-02-06 Earnings, Exhibits
8-K 2019-01-16 Shareholder Vote, Other Events
8-K 2018-11-30 Enter Agreement, Regulation FD, Exhibits
8-K 2018-11-20 Earnings, Exhibits
8-K 2018-10-21 Enter Agreement, Earnings, Regulation FD, Exhibits
8-K 2018-09-26 Officers
8-K 2018-08-06 Earnings, Exhibits
8-K 2018-05-11 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-05-02 Officers, Exhibits
8-K 2018-03-12 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-01-17 Officers, Shareholder Vote
LITE Lumentum Holdings 4,540
CCMP Cabot Microelectronics 3,320
LTC LTC Properties 1,800
CVRS Corindus Vascular Robotics 589
BW Babcock & Wilcox Enterprises 81
STAF Staffing 360 Solutions 14
DDR DDR 0
HICKA Hickok 0
IBAL International Baler 0
CELZ Creative Medical Technology 0
JEC 2019-03-29
Part I - Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosure.
Item 5. Other Information.
Item 6. Exhibits.
EX-10.3 exhibit103firstamendmentma.htm
EX-31.1 exhibit311q2fy2019.htm
EX-31.2 exhibit312q2fy2019.htm
EX-32.1 exhibit321q2fy2019.htm
EX-32.2 exhibit322q2fy2019.htm
EX-95 exhibit95minesafetyq2fy2019.htm

Jacobs Engineering Group Earnings 2019-03-29

JEC 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 jecfy2019q210-q.htm 10-Q Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark one)
x
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 29, 2019
o
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
JEC
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:     x Yes    o  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).    x  Yes    o  No



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
x
 
Accelerated filer
o
Non-accelerated filer
o
 
Smaller reporting company
o
Emerging growth company
o
 
 
 
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. o
Indicate by check-mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    o  Yes   x  No
Number of shares of common stock outstanding at April 25, 2019: 136,608,836



JACOBS ENGINEERING GROUP INC.
INDEX TO FORM 10-Q

 
 
 
Page No.
PART I
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
PART II
 
 
 
 
 
 
Item 1.
 
 
 
 
 
Item 1A.
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
 
 
Item 5.
 
 
 
 
 
Item 6.
 
 
 


Page 2


Part I - FINANCIAL INFORMATION
Item 1.
Financial Statements.
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share information)
(Unaudited)
 
March 29, 2019
 
September 28, 2018
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
674,548

 
$
634,870

Receivables and contract assets
2,747,172

 
2,513,934

Prepaid expenses and other
127,320

 
171,096

Current assets held for sale
1,297,430

 
1,236,684

Total current assets
4,846,470

 
4,556,584

Property, Equipment and Improvements, net
268,800

 
257,859

Other Noncurrent Assets:
 
 
 
Goodwill
4,774,849

 
4,795,856

Intangibles, net
533,638

 
572,952

Miscellaneous
847,076

 
760,854

Noncurrent assets held for sale
1,675,012

 
1,701,690

Total other noncurrent assets
7,830,575

 
7,831,352

 
$
12,945,845

 
$
12,645,795

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current Liabilities:
 
 
 
Notes payable
$
24

 
$
3,172

Accounts payable
828,522

 
776,189

Accrued liabilities
1,177,632

 
1,167,002

Contract liabilities
450,864

 
442,760

Current liabilities held for sale
731,158

 
756,570

Total current liabilities
3,188,200

 
3,145,693

Long-term Debt
2,841,536

 
2,144,167

Other Deferred Liabilities
1,237,535

 
1,260,977

Noncurrent liabilities held for sale
122,993

 
150,604

Commitments and Contingencies

 

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—136,432,304 shares and 142,217,933
shares as of March 29, 2019 and September 28, 2018, respectively
136,432

 
142,218

Additional paid-in capital
2,568,809

 
2,708,839

Retained earnings
3,620,873

 
3,809,991

Accumulated other comprehensive loss
(860,260
)
 
(806,703
)
Total Jacobs stockholders’ equity
5,465,854

 
5,854,345

Noncontrolling interests
89,727

 
90,009

Total Group stockholders’ equity
5,555,581

 
5,944,354

 
$
12,945,845

 
$
12,645,795


Page 3


See the accompanying Notes to Consolidated Financial Statements – Unaudited.

Page 4


JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Three and Six Months Ended March 29, 2019 and March 30, 2018
(In thousands, except per share information)
(Unaudited)
 
For the Three Months Ended
 
For the Six Months Ended
 
March 29, 2019
 
March 30, 2018
 
March 29, 2019
 
March 30, 2018
Revenues
$
3,091,596


$
2,870,295


$
6,175,384


$
4,654,294

Direct cost of contracts
(2,474,755
)

(2,268,667
)

(4,990,023
)

(3,710,572
)
Gross profit
616,841


601,628


1,185,361


943,722

Selling, general and administrative expenses
(514,160
)

(532,873
)

(969,551
)

(879,637
)
Operating Profit
102,681


68,755


215,810


64,085

Other Income (Expense):







Interest income
1,670


1,785


3,774


5,619

Interest expense
(29,423
)

(19,228
)

(54,749
)

(26,320
)
Miscellaneous income (expense), net
36,904


(2,661
)

39,186


(1,436
)
Total other (expense) income, net
9,151


(20,104
)

(11,789
)

(22,137
)
Earnings from Continuing Operations Before Taxes
111,832


48,651


204,021


41,948

Income Tax Benefit (Expense) for Continuing Operations
7,947


(51,856
)

(14,811
)

(79,056
)
Net Earnings (Loss) of the Group from Continuing Operations
119,779


(3,205
)

189,210


(37,108
)
Net Earnings (Loss) of the Group from Discontinued Operations
(57,006
)

55,137


3,153


91,601

Net Earnings of the Group
62,773


51,932


192,363


54,493

Net Earnings Attributable to Noncontrolling Interests from Continuing Operations
(5,024
)

(3,085
)

(9,562
)

(3,416
)
Net Earnings (Loss) Attributable to Jacobs from Continuing Operations
114,755


(6,290
)

179,648


(40,524
)
Net Earnings Attributable to Noncontrolling Interests from Discontinued Operations
(832
)

(260
)

(1,588
)

(327
)
Net Earnings (Loss) Attributable to Jacobs from Discontinued Operations
(57,838
)

54,877


1,565


91,274

Net Earnings Attributable to Jacobs
$
56,917


$
48,587


$
181,213


$
50,750

Net Earnings Per Share:







Basic Net Earnings from Continuing Operations Per Share
$
0.83


$
(0.04
)

$
1.28


$
(0.30
)
Basic Net Earnings from Discontinued Operations Per Share
$
(0.42
)

$
0.39


$
0.01


$
0.68

Basic Earnings Per Share
$
0.41


$
0.34


$
1.29


$
0.38









Diluted Net Earnings from Continuing Operations Per Share
$
0.82


$
(0.04
)

$
1.27


$
(0.30
)
Diluted Net Earnings from Discontinued Operations Per Share
$
(0.41
)

$
0.39


$
0.01


$
0.68

Diluted Earnings Per Share
$
0.41


$
0.34


$
1.28


$
0.38

See the accompanying Notes to Consolidated Financial Statements - Unaudited.

Page 5


JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Three and Six Months Ended March 29, 2019 and March 30, 2018
(In thousands)
(Unaudited)
 
For the Three Months Ended
 
For the Six Months Ended
 
March 29, 2019
 
March 30, 2018
 
March 29, 2019
 
March 30, 2018
Net Earnings of the Group
$
62,773

 
$
51,932

 
$
192,363

 
$
54,493

Other Comprehensive Income (Loss):
 
 
 
 
 
 
 
Foreign currency translation adjustment
31,352

 
9,714

 
(21,048
)
 
27,694

Gain (loss) on cash flow hedges
348

 
179

 
2,138

 
1,061

Change in pension and retiree medical plan liabilities
(43,835
)
 
2,594

 
(42,010
)
 
8,866

Other comprehensive income (loss) before taxes
(12,135
)
 
12,487

 
(60,920
)
 
37,621

Income Tax (Expense) Benefit:
 
 
 
 
 
 
 
Cash flow hedges
10

 
(149
)
 
(533
)
 
(149
)
Change in pension and retiree medical plan liabilities
8,417

 
(418
)
 
7,896

 
(1,022
)
Income Tax (Expense) Benefit:
8,427

 
(567
)
 
7,363

 
(1,171
)
Net other comprehensive income (loss)
(3,708
)
 
11,920

 
(53,557
)
 
36,450

Net Comprehensive Income (Loss) of the Group
59,065

 
63,852

 
138,806

 
90,943

Net (Earnings) Loss Attributable to Noncontrolling Interests
(5,856
)
 
(3,345
)
 
(11,150
)
 
(3,743
)
Net Comprehensive Income (Loss) Attributable to Jacobs
$
53,209

 
$
60,507

 
$
127,656

 
$
87,200

See the accompanying Notes to Consolidated Financial Statements - Unaudited.

Page 6


JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
For the Three Months Ended March 29, 2019 and March 30, 2018
(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 December 29, 2017
$
141,557

 
$
2,628,012

 
$
3,728,527

 
$
(628,985
)
 
$
5,869,111

 
$
92,636

 
$
5,961,747

Net earnings

 

 
48,587

 

 
48,587

 
3,345

 
51,932

Foreign currency translation adjustments

 

 

 
9,714

 
9,714

 

 
9,714

Pension and retiree medical plan liability, net of deferred taxes of $418

 

 

 
2,177

 
2,177

 

 
2,177

Gain on derivatives, net of deferred taxes of $149

 

 

 
30

 
30

 

 
30

Noncontrolling interest acquired / consolidated

 

 

 

 

 
(2,773
)
 
(2,773
)
Dividends

 

 
(21,384
)
 

 
(21,384
)
 

 
(21,384
)
Distributions to noncontrolling interests

 

 

 

 

 
(4,299
)
 
(4,299
)
Stock based compensation

 
22,570

 
 
 

 
22,570

 

 
22,570

Issuances of equity securities including shares withheld for taxes
207

 
8,616

 
(110
)
 

 
8,713

 

 
8,713

Repurchases of equity securities
(49
)
 
(2,933
)
 
31

 

 
(2,951
)
 

 
(2,951
)
Balances at March 30, 2018
$
141,715

 
$
2,656,265

 
$
3,755,651

 
$
(617,064
)
 
$
5,936,567

 
$
88,909

 
$
6,025,476


 
 
 
 
 
 
 
 
 
 
 
 
 
Balances at December 28, 2018
$
140,400

 
$
2,672,390

 
$
3,796,864

 
$
(856,552
)
 
$
5,753,102

 
$
87,932

 
$
5,841,034

Net earnings

 

 
56,917

 

 
56,917

 
5,856

 
62,773

Foreign currency translation adjustments

 

 


 
31,352

 
31,352

 

 
31,352

Pension and retiree medical plan liability, net of deferred taxes of ($8,417)

 

 


 
(35,418
)
 
(35,418
)
 

 
(35,418
)
Gain on derivatives, net of deferred taxes of ($10)

 

 


 
358

 
358

 

 
358

Dividends

 

 
(23,696
)
 

 
(23,696
)
 
 
 
(23,696
)
Distributions to noncontrolling interests

 

 


 

 

 
(4,061
)
 
(4,061
)
Stock based compensation

 
13,322

 
 
 

 
13,322

 

 
13,322

Issuances of equity securities including shares withheld for taxes
407

 
16,362

 
(216
)
 

 
16,553

 

 
16,553

Repurchases of equity securities
(4,375
)
 
(133,265
)
 
(208,996
)
 

 
(346,636
)
 

 
(346,636
)
Balances at March 29, 2019
$
136,432

 
$
2,568,809

 
$
3,620,873

 
$
(860,260
)
 
$
5,465,854

 
$
89,727

 
$
5,555,581


Page 7


JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)
For the Six Months Ended March 29, 2019 and March 30, 2018
(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 September 29, 2017
$
120,386

 
$
1,239,782

 
$
3,721,698

 
$
(653,514
)
 
$
4,428,352

 
$
58,999

 
$
4,487,351

Net earnings

 

 
50,750

 

 
50,750

 
3,743

 
54,493

Foreign currency translation adjustments

 

 

 
27,694

 
27,694

 

 
27,694

Pension and retiree medical plan liability, net of deferred taxes of $1,022

 

 

 
7,844

 
7,844

 

 
7,844

Gain on derivatives, net of deferred taxes of $149

 

 

 
912

 
912

 

 
912

Noncontrolling interest acquired / consolidated

 

 

 

 

 
38,193

 
38,193

Dividends

 

 
(21,384
)
 

 
(21,384
)
 

 
(21,384
)
Distributions to noncontrolling interests

 

 
7,705

 

 
7,705

 
(12,026
)
 
(4,321
)
Stock based compensation

 
49,043

 
(1,854
)
 

 
47,189

 

 
47,189

Issuances of equity securities including shares withheld for taxes
21,378

 
1,370,373

 
(1,295
)
 

 
1,390,456

 

 
1,390,456

Repurchases of equity securities
(49
)
 
(2,933
)
 
31

 

 
(2,951
)
 

 
(2,951
)
Balances at March 30, 2018
$
141,715

 
$
2,656,265

 
$
3,755,651

 
$
(617,064
)
 
$
5,936,567

 
$
88,909

 
$
6,025,476

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balances at September 28, 2018
$
142,218

 
$
2,708,839

 
$
3,809,991

 
$
(806,703
)
 
$
5,854,345

 
$
90,009

 
$
5,944,354

Net earnings

 

 
181,213

 

 
181,213

 
11,150

 
192,363

Adoption of ASC 606, net of deferred taxes of ($10,285)

 

 
(37,209
)
 

 
(37,209
)
 

 
(37,209
)
Foreign currency translation adjustments

 

 

 
(21,048
)
 
(21,048
)
 

 
(21,048
)
Pension and retiree medical plan liability, net of deferred taxes of ($7,896)

 

 

 
(34,114
)
 
(34,114
)
 

 
(34,114
)
Gain on derivatives, net of deferred taxes of $533

 

 

 
1,605

 
1,605

 

 
1,605

Noncontrolling interest acquired / consolidated

 
(1,113
)
 

 
 
 
(1,113
)
 

 
(1,113
)
Dividends

 

 
(23,929
)
 

 
(23,929
)
 

 
(23,929
)
Distributions to noncontrolling interests

 

 

 

 

 
(11,432
)
 
(11,432
)
Stock based compensation

 
28,910

 
6

 

 
28,916

 

 
28,916

Issuances of equity securities including shares withheld for taxes
913

 
9,854

 
(5,144
)
 

 
5,623

 

 
5,623

Repurchases of equity securities
(6,699
)
 
(177,681
)
 
(304,055
)
 

 
(488,435
)
 

 
(488,435
)
Balances at March 29, 2019
$
136,432

 
$
2,568,809

 
$
3,620,873

 
$
(860,260
)
 
$
5,465,854

 
$
89,727

 
$
5,555,581



Page 8


JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended March 29, 2019 and March 30, 2018
(In thousands)
(Unaudited)
 
For the Six Months Ended
 
March 29, 2019
 
March 30, 2018
Cash Flows from Operating Activities:
 
 
 
Net earnings attributable to the Group
$
192,363

 
$
54,493

Adjustments to reconcile net earnings to net cash flows (used for) provided by operations:
 
 
 
Depreciation and amortization:
 
 
 
Property, equipment and improvements
43,812

 
59,139

Intangible assets
37,963

 
36,048

(Gain) Loss on disposal of businesses and investments

 
(444
)
Stock based compensation
28,916

 
47,189

Equity in earnings of operating ventures, net
(5,325
)
 
787

(Gain) Losses on disposals of assets, net
3,730

 
3,917

Loss (Gain) on pension and retiree medical plan changes
(34,621
)
 
3,819

Deferred income taxes
(31,008
)
 
6,799

Changes in assets and liabilities, excluding the effects of businesses acquired:
 
 
 
Receivables and contract assets
(252,731
)
 
(171,912
)
Prepaid expenses and other current assets
47,733

 
(2,361
)
Accounts payable
(6,754
)
 
17,972

Accrued liabilities
(57,763
)
 
(20,625
)
Contract liabilities
57,881

 
33,599

Other deferred liabilities
(48,761
)
 
(17,420
)
      Other, net
(30,667
)
 
3,204

           Net cash (used for) provided by operating activities
(55,232
)
 
54,204

Cash Flows Used for Investing Activities:
 
 
 
Additions to property and equipment
(61,480
)
 
(44,845
)
Disposals of property and equipment and other assets
7,240

 
428

Distributions of capital from (contributions to) equity investees
(3,904
)
 
(7,696
)
Acquisitions of businesses, net of cash acquired

 
(1,484,817
)
Proceeds (payments) related to sales of businesses

 
3,403

Purchases of noncontrolling interests
(1,113
)
 

           Net cash used for investing activities
(59,257
)
 
(1,533,527
)
Cash Flows Provided by Financing Activities:
 
 
 
Proceeds from long-term borrowings
1,648,903

 
3,058,088

Repayments of long-term borrowings
(949,176
)
 
(1,495,887
)
Proceeds from short-term borrowings
1

 
699

Repayments of short-term borrowings
(4,157
)
 
(699
)
Debt issuance costs
(3,741
)
 

Proceeds from issuances of common stock
25,945

 
26,636

Common stock repurchases
(488,435
)
 
(2,951
)
Taxes paid on vested restricted stock
(20,317
)
 
(17,140
)
Cash dividends, including to noncontrolling interests
(56,390
)
 
(44,233
)

Page 9


           Net cash provided by (used for) financing activities
152,633

 
1,524,513

Effect of Exchange Rate Changes
19,136

 
16,074

Net Increase in Cash and Cash Equivalents
57,280

 
61,264

Cash and Cash Equivalents at the Beginning of the Period
793,358

 
774,151

Cash and Cash Equivalents at the End of the Period
850,638

 
835,415

Less Cash and Cash Equivalents included in Assets held for Sale
(176,090
)
 
(164,612
)
Cash and Cash Equivalents of Continuing Operations at the End of the Period
$
674,548

 
$
670,803

See the accompanying Notes to Consolidated Financial Statements – Unaudited.


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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED
March 29, 2019
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 September 28, 2018 (“2018 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 March 29, 2019, and for the three and six month periods ended March 29, 2019.
Our interim results of operations are not necessarily indicative of the results to be expected for the full fiscal year.
Effective the beginning of fiscal first quarter 2019, the Company adopted ASC Topic 606, Revenue from Contracts with Customers, including the subsequent ASUs that amended and clarified the related guidance. The Company adopted ASC Topic 606 using the modified retrospective method, and accordingly the new guidance was applied retrospectively to contracts that were not completed or substantially completed as of September 29, 2018 (the date of initial application). See Note 13 - Revenue Accounting for Contracts and Adoption of ASC Topic 606 to the consolidated financial statements.
On October 21, 2018, the Company and WorleyParsons Limited, a company incorporated in Australia (“Buyer”), entered into a Stock and Asset Purchase Agreement pursuant to which Buyer agreed to acquire the Company’s ECR business for a purchase price of $3.3 billion consisting of (i) $2.6 billion in cash plus (ii) 58.2 million ordinary shares of the Buyer, subject to adjustments for changes in working capital and certain other items (the “Transaction”). The transaction closed on April 26, 2019.
As a result of the Transaction and all facts, management concluded that the disposal group, which represents our entire ECR business, met the criteria to be held for sale beginning in the first fiscal quarter of 2019. Furthermore, we determined that the assets held for sale qualify for discontinued operations reporting under U.S. GAAP. Consequently, the financial results of the ECR business are reflected in our unaudited consolidated statements of earnings as discontinued operations for all periods presented. Furthermore, current and non-current assets and liabilities of the disposal group are reflected in the unaudited consolidated balance sheets for both periods presented. For further discussion see Note 7- Discontinued Operations - Sale of Energy, Chemicals and Resources ("ECR") Business to the consolidated financial statements.
On December 15, 2017, the Company completed the acquisition of CH2M HILL Companies, Ltd. (CH2M), an international provider of engineering, construction, and technical services, by acquiring 100% of the outstanding shares of CH2M common stock and preferred stock. The Company paid total consideration of approximately $1.8 billion in cash (excluding $315.2 million of cash acquired) and issued approximately $1.4 billion of Jacobs’ common stock, or 20.7 million shares, to the former stockholders and certain equity award holders of CH2M. In connection with the acquisition, the Company also assumed CH2M’s revolving credit facility and second lien notes, including a $20.0 million prepayment penalty, which totaled approximately $700 million of long-term debt. Immediately following the effective time of the acquisition, the Company repaid CH2M’s revolving credit facility and second lien notes including the related prepayment penalty. The Company has finalized its purchase accounting processes associated with the acquisition, which is summarized in Note 5- Business Combinations.
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

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

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, 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 2018 Form 10-K for a discussion of the significant estimates and assumptions affecting our consolidated financial statements. See also Note 13- Revenue Accounting for Contracts and Adoption of ASC 606 for a discussion of our updated policies related to revenue recognition.
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 2018 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.
The net carrying amounts of cash and cash equivalents, trade receivables and payables, and notes payable approximate fair value due to the short-term nature of these instruments. See Note 12- Long-term Debt for a discussion of the fair value of long-term debt.
4.
New Accounting Pronouncements
Lease Accounting
In February 2016, the FASB issued ASU 2016-02 Leases. ASU 2016-02 requires lessees to recognize assets and liabilities for most leases. ASU 2016-02 is effective for public entity financial statements for annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted, including adoption in an interim period. The new guidance currently requires a modified retrospective transition approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. ASU 2016-02 was further clarified and amended within ASU 2017-13, ASU 2018-01, ASU 2018-10 and ASU 2018-11 which included provisions that would provide us with the option to adopt the provisions of the new guidance using a modified retrospective transition approach, without adjusting the comparative periods presented. The Company is evaluating the impact of the new guidance on its consolidated financial statements. This standard could have a significant administrative impact on its operations, and the Company will further assess the impact through its implementation program.
Other Pronouncements
In the first quarter of fiscal 2019, the Company adopted ASU 2016-01, Financial Instruments - Overall - Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and to recognize any changes in fair value in net income unless the investments qualify for a practicability exception. The adoption of ASU 2016-01 did not have any impact on the Company’s financial position, results of operations or cash flows.

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2017-12 provides financial reporting improvements related to hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. Additionally, ASU No. 2017-12 makes certain targeted improvements to simplify the application of the hedge accounting guidance. The revised guidance becomes effective for fiscal years beginning after December 15, 2018 with early adoption permitted. The Company is evaluating the impact of the new guidance on its consolidated financial statements. It is not expected that the updated guidance will have a significant impact on the Company’s consolidated financial statements.
ASU 2017-04, Simplifying the Test for Goodwill Impairment, is effective for fiscal years beginning after December 15, 2019 with early adoption permitted. ASU 2017-04 removes the second step of the goodwill impairment test, which requires a hypothetical purchase price allocation. An entity will now recognize a goodwill impairment charge for the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the amount of goodwill allocated to the reporting unit. Management does not expect the adoption of ASU 2017-04 to have any impact on the Company's financial position, results of operations or cash flows.
ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments requires entities to use a current lifetime expected credit loss methodology to measure impairments of certain financial assets. Using this methodology will result in earlier recognition of losses than under the current incurred loss approach, which requires waiting to recognize a loss until it is probable of having been incurred. There are other provisions within the standard that affect how impairments of other financial assets may be recorded and presented, and that expand disclosures. This standard will be effective for our interim and annual periods beginning with the first quarter of fiscal 2021, and must be applied on a modified retrospective basis. We are currently evaluating the potential impact of this standard.
5.
Business Combinations
On April 21, 2019, Jacobs entered into an Agreement and Plan of Merger (the “Merger Agreement”) with The KeyW Holding Corporation, a Maryland corporation (“KeyW”), and Atom Acquisition Sub, Inc., a Maryland corporation and a wholly owned indirect subsidiary of Jacobs (“Merger Sub”). Pursuant to and subject to the terms and conditions of the Merger Agreement, Merger Sub will commence an all-cash tender offer within fifteen business days after the date of the Merger Agreement to acquire all of KeyW’s issued and outstanding shares of common stock, par value $0.001 per share (the “Shares”) at a price per share of $11.25, payable net to the seller in cash, without interest, and subject to any required withholding taxes (the "Offer"). Pursuant to and subject to the terms and conditions of the Merger Agreement, as soon as reasonably practicable (and in no event later than two (2) business days) following the time at which the Shares validly tendered (and not properly withdrawn) pursuant to the Offer are first accepted for payment by Merger Sub, Merger Sub will merge with and into KeyW, with the separate existence of Merger Sub ceasing and KeyW continuing as the surviving corporation and as a wholly owned indirect subsidiary of Jacobs. Jacobs expects to finance the transaction through a combination of cash on hand and its existing credit facility. The obligation of Merger Sub to purchase Shares validly tendered (and not properly withdrawn) pursuant to the Offer is subject to the satisfaction of customary closing conditions, including the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and is expected to be completed by August 31, 2019.
On December 15, 2017, the Company completed the acquisition of CH2M HILL Companies, Ltd., an international provider of engineering, construction, and technical services, by acquiring 100% of the outstanding shares of CH2M common stock and preferred stock. The purpose of the acquisition was to further diversify the Company’s presence in the water, nuclear and environmental remediation sectors and to further the Company’s profitable growth strategy. The Company paid total consideration of approximately $1.8 billion in cash (excluding $315.2 million of cash acquired) and issued approximately $1.4 billion of Jacobs’ common stock, or 20.7 million shares, to the former stockholders and certain equity award holders of CH2M. In connection with the acquisition, the Company also assumed CH2M’s revolving credit facility and second lien notes, including a $20.0 million prepayment penalty, which totaled approximately $700 million of long-term debt. Immediately following the effective time of the acquisition, the Company repaid CH2M’s revolving credit facility and second lien notes including the related prepayment penalty.

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

The following summarizes the fair values of CH2M assets acquired and liabilities assumed as of the acquisition date (in millions):
Assets
 
Cash and cash equivalents
$
315.2

Receivables
1,120.6

Prepaid expenses and other
72.7

Property, equipment and improvements, net
175.1

Goodwill
3,101.0

Identifiable intangible assets:
 
Customer relationships, contracts and backlog
412.3

Lease intangible assets
4.4

Total identifiable intangible assets
416.7

Miscellaneous
543.6

Total Assets
$
5,744.9

 
 
Liabilities
 
Notes payable
$
2.2

Accounts payable
309.6

Accrued liabilities
735.7

Billings in excess of costs
260.8

Identifiable intangible liabilities:
 
Lease intangible liabilities
9.6

Long-term debt
706.0

Other deferred liabilities
659.0

Total Liabilities
2,682.9

Noncontrolling interests
(37.3
)
Net assets acquired
$
3,024.7

Goodwill recognized results from a substantial assembled workforce, which does not qualify for separate recognition, as well as expected future synergies from combining operations. None of the goodwill recognized is expected to be deductible for tax purposes. During the first quarter of fiscal 2019, the Company completed its final assessment of the fair values of the acquired assets and liabilities of CH2M. Accrued liabilities and other deferred liabilities include approximately $404.7 million for estimates related to various legal and other pre-acquisition contingent liabilities accounted for under ASC 450. See Note 18- Commitments and Contingencies relating to CH2M contingencies.
Since the preliminary estimates reported in the fiscal 2018 Form 10-K, the Company updated certain amounts reflected in the final purchase price allocation due to additional information that became available during such period, as summarized in the fair values of CH2M assets acquired and liabilities assumed as set forth above. Specifically, receivables decreased $4.0 million and accrued liabilities and other deferred liabilities decreased $11.5 million, respectively, primarily related to provisional estimates related to various legal and other pre-acquisition contingent liabilities. Further, miscellaneous long-term assets increased $20.7 million largely due to the deferred tax impact of these valuation adjustments. As a result of these adjustments to the preliminary purchase price allocation reported in the fiscal 2018 Form 10-K, goodwill decreased $28.1 million. Measurement period adjustments are recognized in the reporting period in which the adjustments are determined and calculated as if the accounting had been completed at the acquisition date.
Customer relationships, contracts and backlog intangibles represent the fair value of existing contracts, the underlying customer relationships and backlog of consolidated subsidiaries and have lives ranging from 9 to 11 years (weighted average life of approximately 10 years). Other intangible assets and liabilities primarily consist of the fair value of office leases and have a weighted average life of approximately 10 years.

Page 14

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

Fair value measurements relating to the CH2M acquisition are made primarily using Level 3 inputs including discounted cash flow techniques. Fair value is estimated using inputs primarily from the income approach, which include the use of both the multiple period excess earnings method and the relief from royalties method. The significant assumptions used in estimating fair value include (i) the estimated life the asset will contribute to cash flows, such as attrition rate of customers or remaining contractual terms, (ii) profitability and (iii) the estimated discount rate that reflects the level of risk associated with receiving future cash flows. The estimated fair value of land has been determined using the market approach, which arrives at an indication of value by comparing the site being valued to sites that have been recently acquired in arm’s-length transactions. Buildings and land improvements are valued using the cost approach using a direct cost model built on estimates of replacement cost. 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.
From the acquisition date of December 15, 2017 through March 30, 2018, CH2M contributed approximately $1.3 billion in revenue and $6.5 million in pretax loss included in the accompanying Consolidated Statement of Earnings. Included in these results were approximately $78.0 million in pre-tax restructuring and transaction costs.
Transaction costs associated with the CH2M acquisition in the accompanying Consolidated Statements of Earnings for the three and six month periods ended March 30, 2018 are comprised of the following (in millions): 
 
Three Months Ended March 30, 2018
 
Six Months Ended March 30, 2018
Personnel costs
$
4.7

 
$
45.9

Professional services and other expenses
0.2

 
26.9

Total
$
4.9

 
$
72.8

Personnel costs above include change of control payments and related severance costs.
The following presents summarized unaudited pro forma operating results of Jacobs assuming that the Company had acquired CH2M at October 1, 2016. These pro forma operating results are presented for illustrative purposes only and are not indicative of the operating results that would have been achieved had the related events occurred (in millions, except per share data):
 
Six Months Ended March 30, 2018
Revenues
$
7,713.1

Net earnings of the Group
$
77.7

Net earnings (loss) attributable to Jacobs
$
71.8

Net earnings (loss) attributable to Jacobs per share:

Basic earnings (loss) per share
$
0.50

Diluted earnings (loss) per share
$
0.50

Included in the table above are the unaudited pro forma operating results of the entire Company, including both continuing and discontinued operations. Additionally, charges relating to transaction expenses, severance expense and other items that are removed from the six months ended March 30, 2018 and are reflected in the prior fiscal year due to the assumed timing of the transaction. Also, income tax expense (benefit) for both continuing and discontinued operations for the six-month pro forma period ended March 30, 2018 was $137.7 million.

6.
Goodwill and Intangibles
As a result of the refinement of the segment realignment in the first quarter of fiscal 2019 (See Note 8- Segment Information), a portion of the historical carrying value of goodwill for the former Aerospace, Technology, Environmental and Nuclear segment was allocated to the Buildings, Infrastructure and Advanced Facilities segment on a relative fair value basis to reflect the movement of the Global Environmental Solutions ("GES") business between segments. Additionally, because of the sale of the Energy, Chemicals and Resources ("ECR") line of business (see Note 7- Discontinued Operations - Sale of Energy, Chemicals and Resources ("ECR") Business) which is now reflected as discontinued operations, the goodwill balance associated with ECR has been reclassified to noncurrent assets held for sale on the Consolidated Balance Sheets. The carrying value of goodwill associated with continuing

Page 15

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

operations and appearing in the accompanying Consolidated Balance Sheets at March 29, 2019 and September 28, 2018 was as follows (in millions):
 
Aerospace, Technology and Nuclear
 
Buildings, Infrastructure and Advanced Facilities
 
Total
Balance September 28, 2018
$
1,581

 
$
3,215

 
$
4,796

Post-Acquisition Adjustments
(10
)
 
(4
)
 
(14
)
Foreign Exchange Impact
(2
)
 
(5
)
 
(7
)
Balance March 29, 2019
$
1,569

 
$
3,206

 
$
4,775

The following table provides certain information related to the Company’s acquired intangibles in the accompanying Consolidated Balance Sheets at March 29, 2019 and September 28, 2018 (in thousands):
 
Customer Relationships, Contracts and Backlog
 
Trade Names
 
Lease Intangible Assets
 
Total
Balances September 28, 2018
$
568,323

 
$
2,102

 
$
2,527

 
$
572,952

Amortization
(36,168
)
 
(889
)
 
(292
)
 
(37,349
)
Foreign currency translation
(2,004
)
 
39

 

 
(1,965
)
Balances March 29, 2019
$
530,151

 
$
1,252

 
$
2,235

 
$
533,638

In addition, we acquired $9.6 million in lease intangible liabilities in connection with the CH2M acquisition, of which $8.1 million remain unamortized at March 29, 2019.
The following table presents estimated amortization expense of intangible assets for the remainder of fiscal 2019 and for the succeeding years.
Fiscal Year
 
(in millions)
2019
 
$
31.8

2020
 
70.0

2021
 
66.4

2022
 
65.3

2023
 
65.0

Thereafter
 
227.0

Total
 
$
525.5

7.
Discontinued Operations - Sale of Energy, Chemicals and Resources ("ECR") Business
On October 21, 2018, Jacobs and WorleyParsons Limited ("Buyer"), a company incorporated in Australia, entered into a Stock and Asset Purchase Agreement pursuant to which Buyer agreed to acquire the Company’s ECR business for a purchase price of $3.3 billion consisting of (i) $2.6 billion in cash plus (ii) 58.2 million ordinary shares of the Buyer, subject to adjustments for changes in working capital and certain other items. The Transaction closed on April 26, 2019.
As a result of the Transaction and all relevant facts, the Company concluded that the assets and liabilities sold in the Transaction (the "Disposal Group"), which represents our entire ECR business, met the criteria to be classified as held for sale beginning in the first fiscal quarter of 2019 in accordance with U.S. GAAP. Furthermore, 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 will have 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. Furthermore, current and non-current assets and liabilities of the Disposal Group are reflected in the unaudited Consolidated Balance Sheets for both periods presented.
Amounts reflected below as of September 28, 2018 include certain reclassifications to amounts previously disclosed in our first quarter 2019 Form 10-Q in order to conform to the current quarter classifications of assets and liabilities held for sale based on

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

the current terms of the sale transaction. Amounts classified as of September 28, 2018 include an increase to cash and cash equivalents of $137.0 million and a reduction to contract liabilities of $65.0 million. Subsequent to the first quarter of fiscal 2019, it was determined that additional cash remain with ECR entities being sold, an equal amount of which will increase the purchase price.
The Company incurred approximately $2.3 million and $8.6 million in related transaction costs (mainly professional service fees) for the ECR sale during the three and six month periods ended March 29, 2019.
Summarized Financial Information of Discontinued Operations
The following table represents earnings (loss) from discontinued operations, net of tax (in thousands):
 
Three Months Ended
 
For the Six Months Ended
 
March 29, 2019
 
March 30, 2018
 
March 29, 2019
 
March 30, 2018
Revenues
$
1,161,083

 
$
1,064,733

 
$
2,325,790

 
$
2,031,045

Direct cost of contracts
(999,944
)
 
(898,292
)
 
(1,995,550
)
 
(1,724,795
)
Gross profit
161,139

 
166,441

 
330,240

 
306,250

Selling, general and administrative expenses
(202,590
)
 
(94,959
)
 
(293,600
)
 
(188,505
)
Operating Profit (Loss)
(41,451
)
 
71,482

 
36,640

 
117,745

Total other (expense) income, net
(34,413
)
 
2,034

 
(32,293
)
 
4,390

Earnings (Loss) Before Taxes from Discontinued Operations
(75,864
)
 
73,516

 
4,347

 
122,135

Income Tax Benefit (Expense)
18,858

 
(18,379
)
 
(1,194
)
 
(30,534
)
Net Earnings (Loss) of the Group from Discontinued Operations
$
(57,006
)
 
$
55,137

 
$
3,153

 
$
91,601

Selling, general and administrative expenses and total other (expense) income, net in the table above include amounts recorded in connection with charges recognized in the second quarter of 2019 related to the Nui Phao ("NPMC") legal matter described in Note 18.
The following tables represent the assets and liabilities held for sale (in thousands):
 
March 29, 2019
 
September 28, 2018
Cash and cash equivalents
$
176,090

 
$
158,488

Receivables and contract assets
1,087,492

 
1,040,996

Prepaid expenses and other
33,848

 
37,200

Current assets held for sale
$
1,297,430

 
$
1,236,684

Property, Equipment and Improvements, net
$
199,207

 
$
199,847

Goodwill
1,291,794

 
1,308,000

Intangibles, net
82,396

 
83,005

Miscellaneous
101,615

 
110,838

Noncurrent assets held for sale
$
1,675,012

 
$
1,701,690

Notes payable
$
1,118

 
$
1,782

Accounts payable
283,481

 
351,482

Accrued liabilities
304,454

 
321,627

Contract liabilities
142,105

 
81,679

Current liabilities held for sale
$
731,158

 
$
756,570

Long-term Debt
$
1,384

 
$
2,710

Other Deferred Liabilities
$
121,609

 
$
147,894

Noncurrent liabilities held for sale
$
122,993

 
$
150,604

    

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

The significant components included in our Consolidated Statements of Cash Flows for the discontinued operations are as follows (in thousands):
 
For the Six Months Ended
 
March 29, 2019
 
March 30, 2018
Depreciation and amortization:
 
 
 
Property, equipment and improvements
$
2,110

 
$
13,899

Intangible assets
$
614

 
$
6,296

Additions to property and equipment
$
(2,571
)
 
$
(11,346
)
Stock based compensation
$
7,220

 
$
4,866

8.     Segment Information
During the second quarter of fiscal 2018, we reorganized our operating and reporting structure around three lines of business (“LOBs”), which also serve as the Company’s operating segments. This reorganization occurred in conjunction with the integration of CH2M into the Company's legacy businesses, and is intended to better serve our global clients, leverage our workforce, help streamline operations and provide enhanced growth opportunities. Additionally, in the first quarter of fiscal 2019, we further refined our operating segment structure to move the GES business from the ATN segment to the BIAF segment to further align with the management and reporting structure of the business. The three global LOBs are as follows: Aerospace, Technology and Nuclear ("ATN"); Buildings, Infrastructure and Advanced Facilities ("BIAF"); and Energy, Chemicals and Resources. Because the results from our ECR business formerly reported as a stand-alone segment are reflected in our unaudited consolidated financial statements as discontinued operations for all periods presented, they are not reflected in the separate segment disclosures below. For further information, refer to Note 7- Discontinued Operations - Sale of Energy, Chemicals and Resources ("ECR") Business.
The Company’s Chief Executive Officer is the Chief Operating Decision Maker (“CODM”) and can evaluate the performance of each of these segments and make appropriate resource allocations among each of the segments. For purposes of the Company’s goodwill impairment testing, it has been determined that the Company’s operating segments are also its reporting units based on management’s conclusion that the components comprising each of its operating segments share similar economic characteristics and meet the aggregation criteria for reporting units in accordance with ASC 350, Intangibles-Goodwill and Other.
Under this organization, the sales function is managed on an LOB basis, and accordingly, the associated cost is embedded in the segments and reported to the respective LOB presidents. In addition, a portion of the costs of other support functions (e.g., finance, legal, human resources, and information technology) is allocated to each LOB using methodologies which, we believe, effectively attribute the cost of these support functions to the revenue generating activities of the Company on a rational basis. The cost of the Company’s cash incentive plan, the Management Incentive Plan (“MIP”), and the expense associated with the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan (“1999 SIP”) have likewise been charged to the LOBs except for those amounts determined to relate to the business as a whole (which amounts remain in other corporate expenses).
Financial information for each LOB is reviewed by the CODM to assess performance and make decisions regarding the allocation of resources. The Company generally does not track assets by LOB, nor does it provide such information to the CODM.
The CODM evaluates the operating performance of our LOBs using segment operating profit, which is defined as margin less “corporate charges” (e.g., the allocated amounts described above). The Company incurs certain Selling, General and Administrative costs (“SG&A”) that relate to its business as a whole which are not allocated to the LOBs.
The following tables present total revenues and segment operating profit from continuing operations for each reportable segment (in thousands) and includes a reconciliation of segment operating profit to total U.S. GAAP operating profit by including certain corporate-level expenses, Restructuring and other charges and transaction and integration costs (in thousands). Prior period information has been recast to reflect the current period presentation.

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

 
For the Three Months Ended
 
For the Six Months Ended
 
March 29, 2019
 
March 30, 2018
 
March 29, 2019
 
March 30, 2018
Revenues from External Customers:
 
 
 
 
 
 
 
Aerospace, Technology and Nuclear
$
1,059,508

 
$
923,905

 
$
2,094,537

 
$
1,634,780

Buildings, Infrastructure and Advanced Facilities
2,032,088

 
1,946,390

 
4,080,847

 
3,019,514

              Total
$
3,091,596

 
$
2,870,295

 
$
6,175,384

 
$
4,654,294

 
For the Three Months Ended
 
For the Six Months Ended
 
March 29, 2019
 
March 30, 2018
 
March 29, 2019
 
March 30, 2018
Segment Operating Profit:
 
 
 
 
 
 
 
Aerospace, Technology and Nuclear
$
73,831

 
$
52,458

 
$
145,982

 
$
113,524

Buildings, Infrastructure and Advanced Facilities
172,689

 
144,755

 
332,148

 
211,615

Total Segment Operating Profit
246,520

 
197,213

 
478,130

 
325,139

Other Corporate Expenses (1)
(49,901
)
 
(47,133
)
 
(121,149
)
 
(96,361
)
Restructuring and Other Charges
(93,938
)
 
(76,473
)
 
(141,171
)
 
(92,200
)
Transaction Costs

 
(4,852
)
 

 
(72,493
)
Total U.S. GAAP Operating Profit
102,681

 
68,755

 
215,810

 
64,085

Total Other (Expense) Income, net (2)
9,151

 
(20,104
)
 
(11,789
)
 
(22,137
)
Earnings from Continuing Operations Before Taxes
$
111,832

 
$
48,651

 
$
204,021

 
$
41,948

(1)
Other corporate expenses include costs that were previously allocated to the ECR segment prior to discontinued operations presentation in connection with the ECR sale in the approximate amounts of $6.4 million for the three-month periods ended March 29, 2019 and March 30, 2018, respectively, and $12.8 million for the six-month periods ended March 29, 2019 and March 30, 2018, respectively. Other corporate expenses also include intangibles amortization of $18.7 million and $18.2 million for the three-month periods ended March 29, 2019 and March 30, 2018, respectively and $37.3 million and $29.8 million for the six-month periods ended March 29, 2019 and March 30, 2018, respectively.
(2)
Includes gain on the settlement of the CH2M retiree medical plans of $32.4 million and $34.6 million and the amortization of deferred financing fees related to the CH2M acquisition of $0.5 million and $1.0 million for the three- and six-month periods ended March 29, 2019, as well as amortization of deferred financing fees related to the CH2M acquisition of $0.5 million and $0.7 million for the three- and six-month periods ended March 30, 2018.
Included in “other corporate expenses” in the above table are costs and expenses which relate to general corporate activities as well as corporate-managed benefit and insurance programs. Such costs and expenses include: (i) those elements of SG&A expenses relating to the business as a whole; (ii) those elements of the Management Incentive Plan and the 1999 SIP relating to corporate personnel whose other compensation costs are not allocated to the LOBs; (iii) the amortization of intangible assets acquired as part of purchased business combinations; (iv) the quarterly variances between the Company’s actual costs of certain of its self-insured integrated risk and employee benefit programs and amounts charged to the LOBs; and (v) certain adjustments relating to costs associated with the Company’s international defined benefit pension plans. In addition, other corporate expenses may also include from time to time certain adjustments to contract margins (both positive and negative) associated with projects where it has been determined, in the opinion of management, that such adjustments are not indicative of the performance of the related LOB.

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

9.    Receivables and contract assets
The following table presents the components of receivables appearing in the accompanying Consolidated Balance Sheets at March 29, 2019 and September 28, 2018, as well as certain other related information (in thousands):
 
March 29, 2019
 
September 28, 2018
Components of receivables and contract assets:
 
 
 
Amounts billed, net
$
1,171,636

 
$
1,107,250

Unbilled receivables and other
1,531,998

 
1,393,245

Contract assets
43,538

 
13,439

Total receivables and contract assets, net
$
2,747,172

 
$
2,513,934

Other information about receivables:
 
 
 
Amounts due from the United States federal government, included above, net of advanced billings
$
557,118

 
$
472,846

Amounts billed, net consist of amounts invoiced to clients in accordance with the terms of our client contracts and are shown net of an allowance for doubtful accounts. We anticipate that substantially all of such billed amounts will be collected over the next twelve months.
Unbilled receivables and other, which represent an unconditional right to payment subject only to the passage of time, are reclassified to amounts billed when they are billed under the terms of the contract. Prior to adoption of ASC 606, receivables related to contractual milestones or achievement of performance-based targets were included in unbilled receivables. These are now included in contract assets. We anticipate that substantially all of such unbilled amounts will be billed and collected over the next twelve months.
Contract assets represent unbilled amounts where the right to payment is subject to more than merely the passage of time and includes performance-based incentives and services provided ahead of agreed contractual milestones. Contract assets are transferred to amounts billed when the right to consideration becomes unconditional. The increase in contract assets was a result of normal business activity and not materially impacted by any other factors.
10.
Joint Ventures and VIEs
As is common to the industry, we execute certain contracts jointly with third parties through various forms of joint ventures. Although the joint ventures own and hold the contracts with the clients, the services required by the contracts are typically performed by us and our joint venture partners, or by other subcontractors under subcontracting agreements with the joint ventures. Many of these joint ventures are formed for a specific project. The assets of our joint ventures generally consist almost entirely of cash and receivables (representing amounts due from clients), and the liabilities of our joint ventures generally consist almost entirely of amounts due to the joint venture partners (for services provided by the partners to the joint ventures under their individual subcontracts) and other subcontractors. Many of the joint ventures are deemed to be variable interest entities (“VIE”) because they lack sufficient equity to finance the activities of the joint venture.
For consolidated joint ventures, the entire amount of the services performed, and the costs associated with these services, including the services provided by the other joint venture partners, are included in the Company's result of operations. Likewise, the entire amount of each of the assets and liabilities are included in the Company’s Consolidated Balance Sheets. For the consolidated VIEs, the carrying value of assets and liabilities was $135.7 million and $97.5 million, respectively, as of March 29, 2019 and $162.3 million and $86.1 million, respectively as of September 28, 2018. There are no consolidated VIEs that have debt or credit facilities.
Unconsolidated joint ventures are accounted for under proportionate consolidation or the equity method. Proportionate consolidation is used for joint ventures that include unincorporated legal entities and activities of the joint venture are construction-related. For those joint ventures accounted for under proportionate consolidation, only the Company’s pro rata share of assets, liabilities, revenue, and costs are included in the Company’s balance sheet and results of operations. For the proportionate consolidated VIEs, the carrying value of assets and liabilities was $83.8 million and $86.1 million as of March 29, 2019, respectively and $85.2 million and $75.9 million as of September 28, 2018, respectively. For those joint ventures accounted for under the equity method, the Company's investment balances for the joint venture are included in Other Noncurrent Assets: Miscellaneous on the balance sheet and the Company’s pro rata share of net income is included in revenue. In limited cases, there are basis differences between the equity in the joint venture and Jacobs' investment created when Jacobs purchased its share of the joint venture. These basis differences are amortized based on an internal allocation to underlying net assets, excluding allocations to goodwill.. As of March 29, 2019, the Company’s equity method investments exceeded its share of venture net assets by $74.7 million. Our investments

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

in equity method joint ventures on the Consolidated Balance Sheets as of March 29, 2019 and September 28, 2018 were a net asset of $160.6 million and $148.4 million, respectively. During the three months ended March 29, 2019 and March 30, 2018, we recognized income from equity method joint ventures of $12.4 million and $19.6 million, respectively. During the six months ended March 29, 2019 and March 30, 2018, we recognized income from equity method joint ventures of $25.9 million and $27.2 million, respectively.
Accounts receivable from unconsolidated joint ventures accounted for under the equity method is $13.9 million and $11.1 million as of March 29, 2019 and September 28, 2018, respectively.
11.    Restructuring and Other Charges
ECR Sale Restructuring
During fiscal 2019, the Company implemented certain restructuring and pre-separation initiatives associated with the sale of the ECR business, which closed April 26, 2019. The restructuring activities and related costs were comprised mainly of severance and lease abandonment programs, while the pre-separation activities and costs were mainly related to the engagement of consulting services and internal personnel and other related costs dedicated to the Company’s sales management efforts.
Leading up to the ECR sale, these activities include restructuring and other charges amounting to approximately $0.8 million and $(5.8) million, respectively, for the three and six months ended March 29, 2019. The $(5.8) million credit for the six month period ended March 29, 2019 includes the reversal of reserves for prior lease termination exit costs as we re-entered the previously impaired space. Combined with costs of $31.6 million and $37.0 million in pre-separation activities for the same periods, these restructuring and pre-separation activities approximated $32.4 million and $31.2 million, respectively, in combined pre-tax charges for the three and six months ended March 29, 2019. These activities are expected to continue into fiscal 2020.
CH2M Restructuring
During the fourth fiscal quarter of 2017, the Company implemented certain restructuring and pre-integration initiatives associated with the impending acquisition of CH2M, which closed on December 15, 2017.  The restructuring activities and related costs were comprised mainly of severance and lease abandonment programs, while the pre-integration activities and costs were mainly related to the engagement of consulting services and internal personnel and other related costs dedicated to the Company’s acquisition integration management efforts. 
Following the closing of the CH2M acquisition, these activities have continued into fiscal 2019 and include restructuring charges amounting to approximately $49.6 million and $64.3 million during the three and six month periods ended March 29, 2019, respectively, and $55.2 million and $60.7 million in pre-tax charges during the three and six month periods ended March 30, 2018, respectively. Combined with costs from integration activities of $(12.3) million and $13.5 million for the three and six month periods ended March 29, 2019, and $14.1 million and $28.0 million during the three and six month periods ended March 30, 2018, respectively, the total cost of these restructuring and integration activities approximated $37.3 million and $77.8 million, in pre-tax charges for three and six month periods ended March 29, 2019, respectively, and $69.3 million and $88.7 million, respectively, in pre-tax charges for the three and six months ended March 30, 2018. The $(12.3) million credit for the three month period ended March 29, 2019 includes the CH2M retiree medical plan settlement gains associated with the Company's continuing integration efforts for the CH2M acquisition. These activities are expected to continue through fiscal 2019. These activities are not expected to involve the exit of any service types or client end-markets.
2015 Restructuring
During the second fiscal quarter of 2015, the Company began implementing a series of initiatives intended to improve operational efficiency, reduce costs, and better position itself to drive growth of the business in the future. We refer to these initiatives, in the aggregate, as the “2015 Restructuring”. These activities evolved and developed over time as management identified and evaluated opportunities for changes in the Company’s operations (and related areas of potential cost savings), as economic conditions changed and as the realignment of the Company’s operations into its then four global LOBs was implemented. Actions related to the 2015 Restructuring included involuntary terminations, the abandonment of certain leased offices, combining operational organizations, the colocation of employees into other existing offices, and the realignment of the Company's Europe, U.K. and Middle East regional operations. These activities did not involve the exit of any service types or client end-markets. The 2015 Restructuring was completed in fiscal 2017, although related cash payments continue to be made under the related accruals recorded in connection with these activities.
Collectively, the above-mentioned restructuring activities are referred to as “Restructuring and other charges.”
The following table summarizes the impacts of the Restructuring and other charges (or recoveries, which primarily relate to the reversals of lease abandonment accruals) by LOB in connection with the CH2M acquisition and the ECR sale for the three and six

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

months ended March 29, 2019 and the CH2M acquisition and the 2015 Restructuring for the three and six months ended March 30, 2018 (in thousands):
 
Three Months Ended
 
Six Months Ended
 
March 29, 2019
 
March 30, 2018
 
March 29, 2019
 
March 30, 2018
Aerospace, Technology and Nuclear
$
341

 
$
1,409

 
$
790

 
$
1,722

Buildings, Infrastructure and Advanced Facilities
47,626

 
18,287

 
58,025

 
21,178

Corporate(1)
18,854

 
57,243

 
53,065

 
69,768

Continuing Operations
66,821

 
76,939

 
111,880

 
92,668

Energy, Chemicals and Resources (included in Discontinued Operations)
2,801

 
(7,588
)
 
(2,857
)
 
(3,967
)
Total
$
69,622

 
$
69,351

 
$
109,023

 
$
88,701

(1) Includes $34.6 million in pre-tax gains associated with the Company's CH2M retiree medical plan settlement during the six months ended March 29, 2019.
The activity in the Company’s accrual for the Restructuring and other charges for the six-month period ended March 29, 2019 is as follows (in thousands):
Balance at September 28, 2018
$
175,476

Net Charges(1)
141,472

Payments and Usage
(125,019
)
Balance at March 29, 2019
$
191,929

(1) Includes $34.6 million in pre-tax gains associated with the Company's CH2M retiree medical plan settlement during the six months ended March 29, 2019.
The balance at March 29, 2019 includes $21.1 million of ECR divestiture liabilities reported as held for sale.
The following table summarizes the Restructuring and other charges by major type of costs in connection with the CH2M acquisition and the ECR sale for the three and six months ended March 29, 2019, and the CH2M acquisition for the three and six months ended March 30, 2018 (in thousands):
 
Three Months Ended
 
Six Months Ended
 
March 29, 2019
 
March 30, 2018
 
March 29, 2019
 
March 30, 2018
Lease Abandonments
$
40,875

 
$
37,073

 
$
43,359

 
$
40,436

Involuntary Terminations
8,050

 
16,936

 
10,959

 
19,120

Outside Services
37,709

 
8,170

 
56,134

 
16,759

Other(1)
(17,012
)
 
7,172

 
(1,429
)
 
12,386

Total
$
69,622

 
$
69,351

 
$
109,023

 
$
88,701

(1) Includes $34.6 million in pre-tax gains associated with the Company's CH2M retiree medical plan settlement during the six months ended March 29, 2019.
Cumulative amounts incurred to date under our various restructuring and other programs since fiscal 2015 by each major type of cost as of March 29, 2019 are as follows (in thousands):
Lease Abandonments
$
336,132

Involuntary Terminations
232,601

Outside Services
116,811

Other(1)
94,823

Total
$
780,367

(1) Includes $34.6 million in pre-tax gains associated with the Company's CH2M retiree medical plan settlement during the six months ended March 29, 2019.


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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

12.    Long-term Debt
At March 29, 2019 and September 28, 2018, long-term debt consisted of the following (principal amounts in thousands):
 
Interest Rate
 
Maturity
 
March 29, 2019
 
September 28, 2018
New Credit Agreement
LIBOR + applicable margin (1)
 
March 2024
 
$
845,785

 
$

Revolving Credit Facility
LIBOR + applicable margin (2)
 
February 2020
 
$

 
$
149,129

Term Loan Facility
LIBOR + applicable margin (3)
 
December 2020
 
1,500,000

 
1,500,000

Fixed-rate notes due:
 
 
 
 
 
 
 
Senior Notes, Series A
4.27%
 
May 2025
 
190,000

 
190,000

Senior Notes, Series B
4.42%
 
May 2028
 
180,000

 
180,000

Senior Notes, Series C
4.52%
 
May 2030
 
130,000

 
130,000

Less: Deferred Financing Fees
 
 
 
 
(4,249
)
 
(4,998
)
Other
Varies
 
Varies
 

 
36

Total Long-term debt, net
 
 
 
 
$
2,841,536

 
$
2,144,167

(1)
Depending on the Company’s Consolidated Leverage Ratio (as defined in the credit agreement governing the New Credit Agreement), borrowings under the New Credit Agreement bear interest at either a eurocurrency rate plus a margin of between 0.875% and 1.5% or a base rate plus a margin of between 0% and 0.5%. The applicable LIBOR rates at March 29, 2019 were approximately 1.38% to 3.78%.
(2)
Depending on the Company’s Consolidated Leverage Ratio (as defined in the credit agreement governing the Revolving Credit Facility), borrowings under the Revolving Credit Facility bear interest at either a eurocurrency rate plus a margin of between 1.0% and 1.5% or a base rate plus a margin of between 0% and 0.5%. The applicable LIBOR rates at September 28, 2018 were approximately 1.38% to 3.47%, respectively.
(3)
Depending on the Company’s Consolidated Leverage Ratio (as defined in the credit agreement governing the Term Loan Facility), borrowings under the Term Loan Facility bear interest at either a eurocurrency rate plus a margin of between 1.0% and 1.5% or a base rate plus a margin of between 0% and 0.5%. The applicable LIBOR rates at March 29, 2019 and September 28, 2018 were approximately 3.87% and 3.71%, respectively.
On February 7, 2014, Jacobs and certain of its subsidiaries entered into a $1.6 billion long-term unsecured, revolving credit facility (as amended, the “Revolving Credit Facility”) with a syndicate of large U.S. and international banks and financial institutions. On November 30, 2018, the Company entered into a Third Amendment to the Revolving Credit Facility, which provided for, among other things, the designation as a permitted transaction of the disposition of all or any portion of the ECR business, including in a transaction with WorleyParsons Limited which is consistent in all material respects with the sale transaction announced by the Company on October 21, 2018 (the “ECR Disposition”), and the automatic release of certain designated borrowers party to the Revolving Credit Facility in connection with the closing of the ECR Disposition (upon the concurrent repayment of any direct borrowings under the Revolving Credit Facility by such designated borrowers). On March 27, 2019, the Company entered into a second amended and restated credit agreement (the "New Credit Agreement") which amended and restated the Revolving Credit Facility by, among other things, (a) extending the maturity date of the credit facility to March 27, 2024, (b) increasing the facility amount to $2.25 billion (with an accordion feature that allows a further increase of the facility amount up to $3.25 billion), (c) eliminating the covenants restricting investments, joint ventures and acquisitions by the Company and its subsidiaries and (d) adjusting the financial covenants to (i) increase the Consolidated Leverage Ratio test until the closing of the ECR Disposition and (ii) eliminate the net worth covenant upon the removal of the same covenant from the Company’s existing Note Purchase Agreement dated March 12, 2018. We were in compliance with the covenants under the New Credit Agreement at March 29, 2019.
The New Credit Agreement permits the Company to borrow under two separate tranches in U.S. dollars, certain specified foreign currencies, and any other currency that may be approved in accordance with the terms of the New Credit Agreement. The New Credit Agreement also provides for a financial letter of credit sub facility of $400.0 million, permits performance letters of credit, and provides for a $50.0 million sub facility for swing line loans. Letters of credit are subject to fees based on the Company’s Consolidated Leverage Ratio. The Company pays a facility fee of between 0.08% and 0.20% per annum depending on the Company’s Consolidated Leverage Ratio. Subsequent to the sale of ECR, the Company repaid the entire U.S. portion and €20.0 million of the Euro portion outstanding under the New Credit Agreement.
On September 28, 2017, the Company entered into a $1.5 billion unsecured delayed-draw term loan facility (as amended, the “Term Loan Facility”) with a syndicate of financial institutions as lenders and letter of credit issuers. We incurred loans under the Term Loan Facility on December 15, 2017 in connection with the closing of the CH2M acquisition in order to pay cash consideration for the acquisition, and to pay fees and expenses related to the acquisition and the Term Loan Facility. Amounts outstanding under the

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

Term Loan Facility may be prepaid at the option of the Company without premium or penalty, subject to customary breakage fees in connection with the prepayment of eurocurrency loans. On November 30, 2018, the Company entered into a First Amendment to the Term Loan Facility, which provides for, among other things, the amendment of certain provisions of the Term Loan Facility to permit the ECR Disposition. The Term Loan Facility contains affirmative, negative and financial covenants customary for financings of this type, including, among other things, limitations on certain other indebtedness, investments, liens, acquisitions, dispositions fundamental changes and transactions with affiliates. In addition, the Term Loan Facility contains customary events of default. We were in compliance with the covenants under the Term Loan Facility at March 29, 2019. Subsequent to sale of ECR, the Company repaid $1.0 billion of the balance outstanding under the term loan.
On March 12, 2018, Jacobs entered into a note purchase agreement (as amended, the "Note Purchase Agreement") with respect to the issuance and sale in a private placement transaction of $500.0 million in the aggregate principal amount of the Company’s senior notes in three series (collectively, the “Senior Notes”). The Note Purchase Agreement provides that if the Company's consolidated leverage ratio exceeds a certain amount, the interest on the Senior Notes may increase by 75 basis points. The Senior Notes may be prepaid at any time subject to a make-whole premium. The sale of the Senior Notes closed on May 15, 2018. The Company used the net proceeds from the offering of Senior Notes to repay certain existing indebtedness and for other general corporate purposes. The Note Purchase Agreement contains affirmative, negative and financial covenants customary for financings of this type, including, among other things, covenants to maintain a minimum consolidated net worth and maximum consolidated leverage ratio and limitations on certain other indebtedness, liens, mergers, dispositions and transactions with affiliates. In addition, the Note Purchase Agreement contains customary events of default. We were in compliance with the covenants under the Note Purchase Agreement at March 29, 2019.
We believe the carrying value of the New Credit Agreement, the Term Loan Facility and Other debt outstanding approximates fair value based on the interest rates and scheduled maturities applicable to the outstanding borrowings. The fair value of the Senior Notes is estimated to be $516.2 million at March 29, 2019, based on Level 2 inputs. The fair value is determined by discounting future cash flows using interest rates available for issuances with similar terms and average maturities.
The Company has issued $2.5 million in letters of credit under the New Credit Agreement, leaving $1.40 billion of available borrowing capacity under the New Credit Agreement at March 29, 2019. In addition, the Company had issued $448.0 million under separate, committed and uncommitted letter-of-credit facilities for total issued letters of credit of $450.5 million at March 29, 2019.
13.    Revenue Accounting for Contracts and Adoption of ASC Topic 606
On September 29, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers, including the subsequent ASUs that amended and clarified the related guidance.
The Company adopted ASC Topic 606 using the modified retrospective method, and accordingly the new guidance was applied retrospectively to contracts that were not completed or substantially completed as of September 29, 2018 (the date of initial application). As a result, the Company recorded a cumulative effect adjustment of $37.2 million which is net of $10.3 million of tax. The entry decreased retained earnings related to continuing operations by $21.2 million (net of tax) and retained earnings related to discontinued operations by $16.0 million (net of tax) as of September 29, 2018. Additionally, the following cumulative effect adjustments were recorded:
Continuing operations
An increase to Deferred Income Tax Assets included within miscellaneous assets of $5.4 million;
An increase to Contract liabilities of $15.2 million;
A decrease to Receivables of $11.4 million;
Discontinued operations
An increase to Current liabilities held for sale of $0.6 million;
A decrease to Current assets held for sale of $15.4 million;
The decrease in retained earnings primarily resulted from a change in the manner in which the Company determines the performance obligations for its projects. Prior to the adoption of ASC 606, the Company typically segmented contracts that contained multiple services by service type - for instance, engineering, procurement and construction services - for purposes of revenue and margin recognition. Under ASC 606, multiple-service contracts where the Company is responsible for providing a single deliverable (e.g. a constructed asset) will be treated as a single performance obligation for purposes of revenue recognition

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

and thus no longer will be segmented if the individual service types are not identified as distinct performance obligations under the contract. Typically, this will occur when the Company is contracted to perform both engineering and construction on a project.
The following table presents how the adoption of ASC Topic 606 affected certain line items in the Consolidated Statements of Earnings:
 
Three Months Ended
 
Six Months Ended

March 29, 2019
 
March 29, 2019
(in thousands)
Recognition
Under Previous
Guidance
 
Impact of the
Adoption of
ASC Topic 606
 
Recognition
Under ASC
Topic 606
 
Recognition
Under Previous
Guidance
 
Impact of the
Adoption of
ASC Topic 606
 
Recognition
Under ASC
Topic 606
Revenues
$
3,083,889


$
7,707


$
3,091,596

 
$
6,161,353


$
14,031


$
6,175,384

Direct costs of contracts
(2,474,755
)



(2,474,755
)
 
(4,990,023
)



(4,990,023
)
Gross profit
609,134


7,707


616,841

 
1,171,330


14,031


1,185,361

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