Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Documents filed as part of this report:

(1)	The Company’s Consolidated Financial Statements at September 27, 2019 and September 28, 2018 and for each of the three years in the period ended September 27, 2019, and the notes thereto, together with the report of the independent auditors on those Consolidated Financial Statements are hereby filed as part of this report, beginning on page F-1.

(2)	Financial statement schedules – no financial statement schedules are presented as the required information is either not applicable, or is included in the consolidated financial statements or notes thereto.

(3)	See Exhibit Index below.

(b) Exhibit Index:

2.1			Agreement and Plan of Merger among The KeyW Holding Corporation, Jacobs Engineering Group Inc. and Atom Acquisition Sub, Inc., dated April 21, 2019. Filed as Exhibit 2.1 to the Registrant’s Current Report on Form 8-K on April 22, 2019 and incorporated herein by reference.
2.2			Amended and Restated Stock and Asset Purchase Agreement, dated as of April 26, 2019, by and between Jacobs Engineering Group Inc. and WorleyParsons Limited. Filed as Exhibit 2.1 to the Registrant's Current Report on Form 8-K on April 29, 2019 and incorporated herein by reference.
3.1			Amended and Restated Certificate of Incorporation of Jacobs Engineering Group Inc. Filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K on January 28, 2014 and incorporated herein by reference.
3.2			Amended and Restated Bylaws of Jacobs Engineering Group Inc., dated December 18, 2017. Filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K on December 18, 2017 and incorporated herein by reference.
4.1			See Sections 5 through 18 of Exhibit 3.1.
4.2			See Article II, Section 3.03 of Article III, Article VI and Sections 8.04 and 8.06 of Article VIII of Exhibit 3.2.
4.3			See Exhibit 10.4.
4.4			Second Supplemental Indenture, dated as of June 12, 2019, by and between The KeyW Holding Corporation and Wilmington Trust, National Association, as trustee. Filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K on June 12, 2019 and incorporated herein by reference.
10.1			Second Amended and Restated Credit Agreement, dated March 27, 2019, by and among Jacobs Engineering Group Inc., certain of its subsidiaries party thereto, the lenders party thereto and Bank of America, N.A., as administrative agent. Filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K on March 28, 2019 and incorporated herein by reference.
10.2			Credit Agreement, dated as of September 28, 2017, among Jacobs Engineering Group Inc. and the lenders thereto, and BNP Paribas, as administrative agent. Filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K on September 29, 2017 and incorporated herein by reference.
10.3			First Amendment to Credit Agreement, dated as of November 30, 2018, among Jacobs Engineering Group Inc., the lenders party thereto and BNP Paribas, as administrative agent. Filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K on December 4, 2018 and incorporated herein by reference.
10.4			Note Purchase Agreement, dated March 12, 2018, by and between Jacobs Engineering Group Inc. and the Purchasers identified therein. Filed as Exhibit 4.1 to the Registrant’s Current Report on Form 8-K on March 13, 2018, and incorporated herein by reference.
10.5			First Amendment to the Note Purchase Agreement, dated May 11, 2018, by and among Jacobs Engineering Group Inc. and the Purchasers identified therein. Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K on May 15, 2018 and incorporated herein by reference.

Page 65

10.6#			Offer Letter by and between Jacobs Engineering Group Inc. and Steven J. Demetriou, dated July 10, 2015. Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K on July 16, 2015 and incorporated herein by reference.
10.7#			Offer Letter by and between Jacobs Engineering Group Inc. and Kevin C. Berryman, effective November 12, 2014. Filed as Exhibit 99.1 to Amendment No. 1 to the Registrant’s Current Report on Form 8-K/A on November 17, 2014 and incorporated herein by reference.
10.8#			Offer letter by and between Jacobs Engineering Group Inc. and Robert V. Pragada, dated January 28, 2016. Filed as Exhibit 10.61 to the Registrant’s fiscal 2016 Annual Report on Form 10-K and incorporated herein by reference.
10.9#			Offer letter by and between Jacobs Engineering Group Inc. and Michael Tyler dated May 28, 2013. Filed as Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the third quarter of fiscal 2013 and incorporated herein by reference
10.10#			Offer letter by and between Jacobs Engineering Group Inc. and William Benton Allen, Jr. dated October 4, 2016. Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K on October 14, 2016 and incorporated herein by reference.
10.11#			Offer Letter by and between Jacobs Engineering Group Inc. and Dawne Hickton, effective June 3, 2019. Filed as Exhibit 10.2 to the Registrant’s Current Report on Form 10-Q on August 5, 2019 and incorporated herein by reference.
10.12#			Retirement Transition Agreement by and between Jacobs Engineering Group Inc. and Terence Hagen, dated as of June 6, 2019. Filed as Exhibit 10.3 to the Registrant’s Current Report on Form 10-Q on August 5, 2019 and incorporated herein by reference.
10.13#			Retirement Transition Agreement by and between Jacobs Engineering Group Inc. and Gary Mandel, dated November 20, 2018. Filed as Exhibit 10.17 to the Registrant’s Annual Report on Form 10-K for the fiscal year 2019 filed on November 21, 2019 and incorporated herein by reference
10.17#			First Amendment to Retirement Transition Agreement by and between Jacobs Engineering Group Inc. and Gary Mandel, dated April 25, 2019. Filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the second quarter of fiscal 2019 filed on May 7, 2019 and incorporated herein by reference.
10.18#			Form of Indemnification Agreement entered into between Jacobs Engineering Group Inc. and certain of its officers and directors. Filed as Exhibit10.1 to the Registrant's Quarterly Report on Form 10-Q for the third quarter of fiscal 2012 and incorporated herein by reference.
10.19#			Jacobs Engineering Group Inc. 1989 Employee Stock Purchase Plan (as amended and restated on January 19, 2017). Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K on January 24, 2017 and incorporated herein by reference.
10.20#			Jacobs Engineering Group Inc. Global Employee Stock Purchase Plan (as amended and restated on January 19, 2017). Filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K on January 24, 2017 and incorporated herein by reference.
10.21#			Jacobs Engineering Group Inc. Executive Deferral Plan, effective January 1, 2018. Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K on October 2, 2017 and incorporated herein by reference.
10.22#			Jacobs Engineering Group Inc. Directors Deferral Plan, effective January 1, 2018. Filed as Exhibit 10.2 to the Registrant’s Current Report on Form 8-K on October 2, 2017 and incorporated herein by reference.
10.23#			Jacobs Engineering Group Inc. Management Incentive Plan, as amended and restated effective November 19, 2015. Filed as an exhibit to the Registrant’s fiscal 2015 Annual Report on Form 10-K and incorporated herein by reference.
10.24#			Jacobs Engineering Group Inc. 1999 Stock Incentive Plan, as amended and restated, effective January 18, 2018. Filed as Exhibit 10.10 to the Registrant's Quarterly Report on Form 10-Q for the first quarter of fiscal 2018 and incorporated herein by reference.
10.25#			Jacobs Engineering Group Inc. 1999 Outside Director Stock Plan, as amended and restated. Filed as Exhibit 10.11 to the Registrant's Quarterly Report on Form 10-Q for the first quarter of fiscal 2018 and incorporated herein by reference.
10.26#			Jacobs Engineering Group Inc. Executive Severance Plan, effective May 2, 2018. Filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K on May 4, 2018 and incorporated herein by reference.

Page 66

10.27#			Form of Restricted Stock Unit Agreement (with dividend equivalent rights) (awarded pursuant to the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan). Filed as Exhibit 10.39 to the Registrant's fiscal 2017 Annual Report on Form 10-K and incorporated herein by reference.
10.28#			Form of Restricted Stock Unit Agreement (Performance Shares – Earnings Per Share Growth – 2017 Award) (awarded pursuant to the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan). Filed as Exhibit 10.45 to the Registrant's fiscal 2017 Annual Report on Form 10-K and incorporated herein by reference.
10.29#			Form of Restricted Stock Unit Agreement (Performance Shares – ROIC – 2017 Award) (awarded pursuant to the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan). Filed as Exhibit 10.46 to the Registrant's fiscal 2017 Annual Report on Form 10-K and incorporated herein by reference.
10.30#			Form of Restricted Stock Unit Agreement (Cash Settled Non-US Employees) (awarded pursuant to the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan). Filed as Exhibit 10.48 to the Registrant’s fiscal 2015 Annual Report on Form 10-K and incorporated herein by reference.
10.31#			Form of Restricted Stock Unit Award Agreement (awarded pursuant to the Jacobs Engineering Group Inc. 1999 Outside Directors Stock Plan). Filed as Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the second quarter of fiscal 2017 and incorporated herein by reference.
10.32#			Form of Restricted Stock Unit Agreement (Performance Shares - Earnings Per Share Growth - 2018 Award) (awarded pursuant to the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan). Filed as Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the first quarter of fiscal 2018 and incorporated herein by reference.
10.33#			Form of Restricted Stock Unit Agreement (Performance Shares - ROIC - 2018 Award) (awarded pursuant to the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan). Filed as Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for the first quarter of fiscal 2018 and incorporated herein by reference.
10.34#			Form of Restricted Stock Unit Agreement (Performance Shares - Earnings Per Share Growth - 2019 Award) (awarded pursuant to the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan). Filed as Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the first quarter of fiscal 2018 filed February 6, 2019 and incorporated herein by reference.
10.35#			Form of Restricted Stock Unit Agreement (Performance Shares - ROIC - 2019 Award) (awarded pursuant to the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan). Filed as Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the first quarter of fiscal 2018 filed February 6, 2019 and incorporated herein by reference.
10.36#			Form of Restricted Stock Unit Agreement (Time-Based Vesting) (awarded pursuant to the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan). Filed as Exhibit 10.6 to the Registrant's Quarterly Report on Form 10-Q for the first quarter of fiscal 2018 and incorporated herein by reference.
10.37#			Form of Restricted Stock Unit Agreement (awarded pursuant to the Jacobs Engineering Group, Inc. 1999 Outside Director Stock Plan). Filed as Exhibit 10.7 to the Registrant's Quarterly Report on Form 10-Q for the first quarter of fiscal 2018 and incorporated herein by reference.
10.38			Transition Services Agreement, dated as of April 26, 2019, by and between Jacobs Engineering Group Inc. and WorleyParsons Limited. Filed as Exhibit 10.1 to the Registrant's Current Report on Form 8-K on April 29, 2019 and incorporated herein by reference.
21†			List of Subsidiaries of Jacobs Engineering Group Inc.
23†			Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
31.1†			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2†			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1†			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
32.2†			Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.

Page 67

95†			Mine Safety Disclosure.
101.INS†			XBRL Instance Document
101.SCH†			XBRL Taxonomy Extension Schema Document
101.CAL†			XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF†			XBRL Taxonomy Extension Definition Linkbase Document
101.LAB†			XBRL Taxonomy Extension Label Linkbase Document
101.PRE†			XBRL Taxonomy Extension Presentation Linkbase Document
10.4†			XBRL Coverpage interactive data file

†	Being filed herewith.

#	Management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

				JACOBS ENGINEERING GROUP INC.
Dated:		November 25, 2019		By:		/S/ Steven J. Demetriou
						Steven J. Demetriou
						Chair of the Board and Chief Executive Officer (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Page 68

Signature		Title		Date
/S/ Steven J. Demetriou		Chair of the Board and Chief Executive Officer (Principal Executive Officer)		November 25, 2019
Steven J. Demetriou
/S/ Joseph R. Bronson		Director		November 25, 2019
Joseph R. Bronson
/S/ Barbara L. Loughran		Director		November 25, 2019
Barbara L. Loughran
/S/ Robert C. Davidson, Jr.		Director		November 25, 2019
Robert C. Davidson, Jr.
/S/ Ralph E. Eberhart		Director		November 25, 2019
Ralph E. Eberhart
/S/ Georgette D. Kiser		Director		November 25, 2019
Georgette D. Kiser
/S/ Linda Fayne Levinson		Director		November 25, 2019
Linda Fayne Levinson
/S/ Robert A. McNamara		Director		November 25, 2019
Robert A. McNamara
/S/ Peter J. Robertson		Director		November 25, 2019
Peter J. Robertson
/S/ Christopher M.T. Thompson		Director		November 25, 2019
Christopher M.T. Thompson
/S/ Barry Williams		Director		November 25, 2019
Barry Williams
/S/ Kevin C. Berryman		Executive Vice President, Chief Financial Officer (Principal Financial Officer)		November 25, 2019
Kevin C. Berryman
/S/ William B. Allen		Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)		November 25, 2019
William B. Allen

Page 69

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

WITH REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

September 27, 2019

F-1

J****ACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

September 27, 2019

Consolidated Balance Sheets at September 27, 2019 and September 28, 2018		F-3
Consolidated Statements of Earnings for the Fiscal Years Ended September 27, 2019, September 28, 2018 and September 29, 2017		F-4
Consolidated Statements of Comprehensive Income for the Fiscal Years Ended September 27, 2019, September 28, 2018 and September 29, 2017		F-5
Consolidated Statements of Stockholders’ Equity for the Fiscal Years Ended September 27, 2019, September 28, 2018 and September 29, 2017		F-6
Consolidated Statements of Cash Flows for the Fiscal Years Ended September 27, 2019, September 28, 2018 and September 29, 2017		F-7
Notes to Consolidated Financial Statements		F-9
Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm		F-62

F-2

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share information)

	September 27, 2019				September 28, 2018
ASSETS
Current Assets:
Cash and cash equivalents	$	631,068			$	634,870
Receivables and contract assets	2,840,209				2,513,934
Prepaid expenses and other	639,539				171,096
Current assets held for sale	952				1,236,684
Total current assets	4,111,768				4,556,584
Property, Equipment and Improvements, net	308,143				257,859
Other Noncurrent Assets:
Goodwill	5,432,544				4,795,856
Intangibles, net	665,076				572,952
Miscellaneous	918,202				760,854
Noncurrent assets held for sale	26,978				1,701,690
Total other noncurrent assets	7,042,800				7,831,352
	$	11,462,711			$	12,645,795
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-term debt	$	199,901			$	3,172
Accounts payable	1,072,645				776,189
Accrued liabilities	1,384,379				1,167,002
Contract liabilities	414,208				442,760
Current liabilities held for sale	2,573				756,570
Total current liabilities	3,073,706				3,145,693
Long-term Debt	1,201,245				2,144,167
Other Deferred Liabilities	1,419,005				1,260,977
Noncurrent liabilities held for sale	97				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 - 132,879,395 shares and 142,217,933 shares as of September 27, 2019 and September 28, 2018, respectively	132,879				142,218
Additional paid-in capital	2,559,450				2,708,839
Retained earnings	3,939,174				3,809,991
Accumulated other comprehensive loss	(916,812		)		(806,703		)
Total Jacobs stockholders’ equity	5,714,691				5,854,345
Noncontrolling interests	53,967				90,009
Total Group stockholders’ equity	5,768,658				5,944,354
	$	11,462,711			$	12,645,795

See the accompanying Notes to Consolidated Financial Statements.

F-3

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

For the Fiscal Years Ended September 27, 2019**,** September 28, 2018 and September 29, 2017

(In thousands, except per share information)

	September 27, 2019				September 28, 2018				September 29, 2017
Revenues	$	12,737,868			$	10,579,773			$	6,330,126
Direct cost of contracts	(10,260,840		)		(8,421,223		)		(5,070,091		)
Gross profit	2,477,028				2,158,550				1,260,035
Selling, general and administrative expenses	(2,072,177		)		(1,771,107		)		(1,015,893		)
Operating Profit	404,851				387,443				244,142
Other Income (Expense):
Interest income	9,487				8,984				8,748
Interest expense	(83,847		)		(76,760		)		(12,035		)
Miscellaneous income (expense), net	20,468				11,314				2,299
Total other (expense) income, net	(53,892		)		(56,462		)		(988		)
Earnings from Continuing Operations Before Taxes	350,959				330,981				243,154
Income Tax Benefit (Expense) for Continuing Operations	(36,954		)		(325,632		)		(73,103		)
Net Earnings of the Group from Continuing Operations	314,005				5,349				170,051
Net Earnings of the Group from Discontinued Operations	559,214				167,793				117,324
Net Earnings of the Group	873,219				173,142				287,375
Net (Earnings) Loss Attributable to Noncontrolling Interests from Continuing Operations	(23,045		)		(9,534		)		116
Net Earnings (Loss) Attributable to Jacobs from Continuing Operations	290,960				(4,185		)		170,167
Net (Earnings) Loss Attributable to Noncontrolling Interests from Discontinued Operations	(2,195		)		(177		)		6,236
Net Earnings Attributable to Jacobs from Discontinued Operations	557,019				167,616				123,560
Net Earnings Attributable to Jacobs	$	847,979			$	163,431			$	293,727
Net Earnings (Loss) Per Share:
Basic Net Earnings (Loss) from Continuing Operations Per Share	$	2.11			$	(0.03	)		$	1.41
Basic Net Earnings from Discontinued Operations Per Share	$	4.03			$	1.21			$	1.02
Basic Earnings Per Share	$	6.14			$	1.18			$	2.43
Diluted Net Earnings (Loss) from Continuing Operations Per Share	$	2.09			$	(0.03	)		$	1.40
Diluted Net Earnings from Discontinued Operations Per Share	$	4.00			$	1.21			$	1.02
Diluted Earnings Per Share	$	6.08			$	1.18			$	2.42

See the accompanying Notes to Consolidated Financial Statements.

F-4

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Fiscal Years Ended September 27, 2019**,** September 28, 2018 and September 29, 2017

(In thousands)

	September 27, 2019				September 28, 2018				September 29, 2017
Net Earnings of the Group	$	873,219			$	173,142			$	287,375
Other Comprehensive Income (Loss):
Foreign currency translation adjustment	15,972				(109,877		)		(140,527		)
Gain (loss) on cash flow hedges	1,369				118				(1,350		)
Change in pension and retiree medical plan liabilities	(157,632		)		(27,231		)		123,427
Other comprehensive income (loss) before taxes	(140,291		)		(136,990		)		(18,450		)
Income Tax (Expense) Benefit:
Cash flow hedges	(568		)		859				(90		)
Change in pension and retiree medical plan liabilities	30,750				(17,058		)		(24,380		)
Income Tax (Expense) Benefit:	30,182				(16,199		)		(24,470		)
Net other comprehensive income (loss)	(110,109		)		(153,189		)		(42,920		)
Net Comprehensive Income (Loss) of the Group	763,110				19,953				244,455
Net (Earnings) Loss Attributable to Noncontrolling Interests	(25,240		)		(9,711		)		6,352
Net Comprehensive Income (Loss) Attributable to Jacobs	$	737,870			$	10,242			$	250,807

See the accompanying Notes to Consolidated Financial Statements including the Company's note on

Accumulated Other Comprehensive Income for a presentation of amounts reclassified to net income during the period.

F-5

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Fiscal Years Ended September 27, 2019**,** September 28, 2018 and September 29, 2017

(In thousands)

	Common Stock				Additional Paid-in Capital				Retained Earnings				Accumulated Other Comp-rehensive Income (Loss)				Total Jacobs Stock-holders’ Equity				Non-controlling Interests				Total Group Stock-holders’ Equity
Balances at September 30, 2016	$	120,951			$	1,168,272			$	3,586,647			$	(610,594	)		$	4,265,276			$	64,906			$	4,330,182
Net earnings	—				—				293,727				—				293,727				(6,352		)		287,375
Foreign currency translation adjustments	—				—				—				(140,527		)		(140,527		)		—				(140,527		)
Pension liability, net of deferred taxes of $24,380	—				—				—				99,047				99,047				—				99,047
Loss on derivatives, net of deferred taxes of $90	—				—				—				(1,440		)		(1,440		)		—				(1,440		)
Noncontrolling interest acquired / consolidated	—				—				—				—				—				445				445
Dividends	—				—				(72,765		)		—				(72,765		)		—				(72,765		)
Distributions to noncontrolling interests	—				—				(4,559		)		—				(4,559		)		—				(4,559		)
Issuances of equity securities, net of deferred taxes of $1,015	1,468				99,117				—				—				100,585				—				100,585
Repurchases of equity securities	(2,033		)		(27,607		)		(81,352		)		—				(110,992		)		—				(110,992		)
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	—				—				163,431				—				163,431				9,711				173,142
Foreign currency translation adjustments	—				—				—				(109,877		)		(109,877		)		—				(109,877		)
Pension and retiree medical plan liability, net of deferred taxes of $17,058	—				—				10,160				(44,289		)		(34,129		)		—				(34,129		)
Gain on derivatives, net of deferred taxes of $(859)	—				—				—				977				977				—				977
Noncontrolling interest acquired / consolidated	—				3,456				—				—				3,456				33,690				37,146
Dividends	—				—				(85,608		)		—				(85,608		)		—				(85,608		)
Distributions to noncontrolling interests	—				—				7,705				—				7,705				(12,391		)		(4,686		)
Stock based compensation	—				81,196				(1,954		)		—				79,242				—				79,242
Issuances of equity securities	21,881				1,385,316				(3,420		)		—				1,403,777				—				1,403,777
Repurchases of equity securities	(49		)		(911		)		(2,021		)		—				(2,981		)		—				(2,981		)
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	—				—				847,979				—				847,979				25,240				873,219
Disposition of ECR business, net of deferred taxes of $5,402	—				—				—				112,764				112,764				(45,727		)		67,037
Adoption of ASC 606, net of deferred taxes of ($10,285)	—				—				(37,209		)		—				(37,209		)		—				(37,209		)
Foreign currency translation adjustments	—				—				—				(84,456		)		(84,456		)		—				(84,456		)
Pension and retiree medical plan liability, net of deferred taxes of $25,348	—				—				—				(139,218		)		(139,218		)		—				(139,218		)
Gain on derivatives, net of deferred taxes of $568	—				—				—				801				801				—				801
Noncontrolling interest acquired / consolidated	—				(1,113		)		—				—				(1,113		)		—				(1,113		)
Dividends	—				—				(92,980		)		—				(92,980		)		—				(92,980		)
Distributions to noncontrolling interests	—				—				—				—				—				(15,555		)		(15,555		)
Stock based compensation	—				69,128				9				—				69,137				—				69,137
Issuances of equity securities including shares withheld for taxes	1,681				43,508				(6,872		)		—				38,317				—				38,317
Repurchases of equity securities	(11,020		)		(260,912		)		(581,744		)		—				(853,676		)		—				(853,676		)
Balances at September 27, 2019	$	132,879			$	2,559,450			$	3,939,174			$	(916,812	)		$	5,714,691			$	53,967			$	5,768,658

See the accompanying Notes to Consolidated Financial Statements.

F-6

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Fiscal Years Ended September 27, 2019, September 28, 2018 and September 29, 2017

(In thousands)

F-7

	September 27, 2019				September 28, 2018				September 29, 2017
Cash Flows from Operating Activities:
Net earnings (loss) attributable to the Group	$	873,219			$	173,142			$	287,375
Adjustments to reconcile net earnings to net cash flows (used for) provided by operations:
Depreciation and amortization:
Property, equipment and improvements	90,171				117,856				76,418
Intangible assets	79,098				80,731				46,095
Gain on sale of ECR business	(935,110		)		—				—
(Gain) Loss on disposal of other businesses and investments	9,608				20,967				(10,058		)
(Gain) Loss on investment in equity securities	78,108				—				—
Stock based compensation	69,137				79,242				38,764
Tax deficiency from stock based compensation	—				—				(2,877		)
Equity in (earnings) loss of operating ventures, net	(8,784		)		(2,639		)		(7,788		)
(Gain) Loss on disposals of assets, net	6,222				17,491				14,876
(Gain) Loss on pension and retiree medical plan changes	(33,087		)		5,414				(9,955		)
Deferred income taxes	(105,939		)		288,126				36,663
Changes in assets and liabilities, excluding the effects of businesses acquired:
Receivables and contract assets	(401,770		)		(435,198		)		75,441
Prepaid expenses and other current assets	(13,117		)		(19,134		)		(23,755		)
Accounts payable	295,146				183,057				153,961
Income taxes payable	(294,995		)		68,970				4,264
Accrued liabilities	(305,716		)		(37,746		)		(56,279		)
Contract liabilities	333,876				6,268				(31,976		)
Other deferred liabilities	(106,256		)		(79,280		)		(33,547		)
Other, net	3,753				13,885				17,259
Net cash (used for) provided by operating activities	(366,436		)		481,152				574,881
Cash Flows from Investing Activities:
Additions to property and equipment	(135,977		)		(94,884		)		(118,060		)
Disposals of property and equipment and other assets	7,177				3,293				2,387
Distributions of capital from (contributions to) equity investees	(8,761		)		(5,416		)		31,701
Acquisitions of businesses, net of cash acquired	(575,110		)		(1,488,336		)		(150,190		)
Disposals of investment in equity securities	64,708				—				—
Proceeds (payments) related to sales of businesses	2,801,425				7,736				(2,036		)
Purchases of noncontrolling interests	(1,113		)		—				—
Net cash provided by (used for) investing activities	2,152,349				(1,577,607		)		(236,198		)
Cash Flows from Financing Activities:
Proceeds from long-term borrowings	2,782,193				5,784,355				1,694,023
Repayments of long-term borrowings	(3,996,970		)		(4,572,182		)		(1,846,797		)
Proceeds from short-term borrowings	200,001				712				1,347
Repayments of short-term borrowings	(28,566		)		(3,391		)		(702		)
Debt issuance costs	(3,915		)		—				—
Proceeds from issuances of common stock	64,958				53,584				62,645
Common stock repurchases	(853,676		)		(2,981		)		(97,180		)
Excess tax benefits from stock based compensation	—				—				2,877
Taxes paid on vested restricted stock	(26,641		)		(31,108		)		—
Cash dividends, including to noncontrolling interests	(106,396		)		(86,569		)		(58,793		)
Net cash (used for) provided by financing activities	(1,969,012		)		1,142,420				(242,580		)
Effect of Exchange Rate Changes	20,809				(26,758		)		22,332
Net (Decrease) Increase in Cash and Cash Equivalents	(162,290		)		19,207				118,435
Cash and Cash Equivalents at the Beginning of the Period	793,358				774,151				655,716
Cash and Cash Equivalents at the End of the Period	631,068				793,358				774,151
Less Cash and Cash Equivalents included in Assets held for Sale	—				(158,488		)		(166,330		)
Cash and Cash Equivalents of Continuing Operations at the End of the Period	$	631,068			$	634,870			$	607,821

See the accompanying Notes to Consolidated Financial Statements.

F-8

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

1.	Description of Business and Basis of Presentation

Description of Business

Jacobs is a leading global professional services company that designs and deploys technology-centric solutions to solve many of the world’s most complex challenges. We operate in two lines of business: Critical Mission Solutions (formerly Aerospace, Technology and Nuclear), and People & Places Solutions (formerly known as Buildings, Infrastructure and Advanced Facilities). These lines of business are changing names to better reflect outcome-focused solutions for their customers and these name changes have no impact on reported financial statements, line of business leadership or customer relationships.

We provide a broad range of technical, professional and construction services including engineering, design and architectural services; construction and construction management services; operations and maintenance services; and 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, New Zealand and Asia. We provide our services under cost-reimbursable and fixed-price contracts, with our fixed-price contracts comprised mainly of professional services arrangements and in some limited cases, construction. The percentage of revenues realized from each of these types of contracts for the fiscal years ended September 27, 2019, September 28, 2018 and September 29, 2017 was as follows:

	For the Years Ended
	September 27, 2019			September 28, 2018			September 29, 2017
Cost-reimbursable	76	%		74	%		76	%
Fixed-price	24	%		26	%		24	%

Basis of Presentation, Definition of Fiscal Year, and Other Matters

The accompanying Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") and include the accounts of Jacobs Engineering Group Inc. and its subsidiaries and affiliates which it controls. All intercompany accounts and transactions have been eliminated in consolidation.

The Company’s fiscal year ends on the Friday closest to September 30 (determined on the basis of the number of workdays) and, accordingly, an additional week of activity is added every five-to-six years. Fiscal 2015 included, and fiscal 2020 will include, an extra week of activity.

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). Please refer to Note 11- Revenue Accounting for Contracts and Adoption of ASC Topic 606.

On June 12, 2019, Jacobs completed the acquisition of The KeyW Holding Corporation (“KeyW”), a U.S.-based national security solutions provider to the intelligence, cyber, and counterterrorism communities by acquiring 100% of the outstanding shares of KeyW common stock. The Company paid total consideration of $902.6 million which was comprised of approximately $604.2 million in cash to the former stockholders and certain equity award holders of KeyW and the assumption of KeyW’s convertible debt of $22.6 million and first and second lien notes which totaled approximately $275.8 million. Immediately following the effective time of the acquisition, the Company repaid KeyW’s first and second lien notes. In July 2019, the Company repaid KeyW's outstanding convertible debt of $22.6 million. The Company has recorded its preliminary purchase price allocation associated with the acquisition, which is summarized in Note 5- Business Combinations.

On April 26, 2019, Jacobs completed the sale of its Energy, Chemicals and Resources ("ECR") business to Worley Limited, a company incorporated in Australia ("Worley"), 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”).

F-9

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

As a result of the ECR sale, substantially all ECR-related assets and liabilities have been 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 Consolidated Statements of Earnings as discontinued operations for all periods presented. Additionally, current and non-current assets and liabilities of the Disposal Group are reflected as held-for-sale in the Consolidated Balance Sheet as of September 28, 2018. Further, as of the year ended September 27, 2019, a portion of the ECR business remains held by Jacobs and continues to be classified as held for sale as of fiscal year 2019 in accordance with U.S. GAAP. For further discussion see Note 7- 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.	Significant Accounting Policies

Revenue Accounting for Contracts

Engineering, Procurement & Construction Contracts and Service Contracts

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 recognizes engineering, procurement, and construction contract revenue over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer. Upon adoption of ASC Topic 606, contracts which include engineering, procurement and construction services are generally accounted for as a single deliverable (a single performance obligation) and are no longer segmented between types of services. In some instances, the Company’s services associated with a construction activity are limited to specific tasks such as customer support, consulting or supervisory services. In these instances, the services are typically identified as separate performance obligations.

The Company recognizes revenue using the percentage-of-completion method, based primarily on contract costs incurred to date compared to total estimated contract costs. The percentage-of-completion method (an input method) is the most representative depiction of the Company’s performance because it directly measures the value of the services transferred to the customer. Subcontractor materials, labor and equipment and, in certain cases, customer-furnished materials and labor and equipment are included in revenue and cost of revenue when management believes that the company is acting as a principal rather than as an agent (e.g., the company integrates the materials, labor and equipment into the deliverables promised to the customer or is otherwise primarily responsible for fulfillment and acceptability of the materials, labor and/or equipment). The Company recognizes revenue, but not profit, on certain uninstalled materials that are not specifically produced, fabricated, or constructed for a project. Revenue on these uninstalled materials is recognized when control is transferred. Changes to total estimated contract cost or losses, if any, are recognized in the period in which they are determined as assessed at the contract level. Pre-contract costs are expensed as incurred unless they are expected to be recovered from the client. Project mobilization costs are generally charged to project costs as incurred when they are an integrated part of the performance obligation being transferred to the client. Under the typical payment terms of our engineering, procurement and construction contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms at periodic intervals (e.g., biweekly or monthly) and customer payments are typically due within 30 to 60 days of billing, depending on the contract.

F-10

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

For service contracts, the Company recognizes revenue over time using the cost-to-cost percentage-of-completion method. Service contracts that include multiple performance obligations are segmented between types of services. For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation using an estimate of the stand-alone selling price of each distinct service in the contract. In some instances where the Company is standing ready to provide services, the Company recognizes revenue ratably over the service period. Under the typical payment terms of our service contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, and customer payments are typically due within 30 to 60 days of billing, depending on the contract.

Direct costs of contracts include all costs incurred in connection with and directly for the benefit of client contracts, including depreciation and amortization relating to assets used in providing the services required by the related projects. The level of direct costs of contracts may fluctuate between reporting periods due to a variety of factors, including the amount of pass-through costs we incur during a period. On those projects where we are acting as principal for subcontract labor or third-party materials and equipment, we reflect the amounts of such items in both revenues and costs (and we refer to such costs as “pass-through costs”).

Back charges to suppliers or subcontractors are recognized as a reduction of cost when it is determined that recovery of such cost is probable and the amounts can be reliably estimated. Disputed back charges are recognized when the same requirements described above have been satisfied.

Variable Consideration

The nature of the Company’s contracts gives rise to several types of variable consideration, including claims and unpriced change orders; awards and incentive fees; and liquidated damages and penalties. The Company recognizes revenue for variable consideration when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The Company estimates the amount of revenue to be recognized on variable consideration using the expected value (i.e., the sum of a probability-weighted amount) or the most likely amount method, whichever is expected to better predict the amount. Factors considered in determining whether revenue associated with claims (including change orders in dispute and unapproved change orders in regard to both scope and price) should be recognized include the following: (a) the contract or other evidence provides a legal basis for the claim, (b) additional costs were caused by circumstances that were unforeseen at the contract date and not the result of deficiencies in the company’s performance, (c) claim-related costs are identifiable and considered reasonable in view of the work performed, and (d) evidence supporting the claim is objective and verifiable. If the requirements for recognizing revenue for claims or unapproved change orders are met, revenue is recorded only when the costs associated with the claims or unapproved change orders have been incurred and only up to the amount of cost incurred.

The Company generally provides limited warranties for work performed under its engineering and construction contracts. The warranty periods typically extend for a limited duration following substantial completion of the Company’s work on the project. Historically, warranty claims have not resulted in material costs incurred for which the Company was not compensated for by the customer.

Practical Expedient

If the Company has a right to consideration from a customer in an amount that corresponds directly with the value of the Company’s performance completed to date (a service contract in which the company bills a fixed amount for each hour of service provided), the Company recognizes revenue in the amount to which it has a right to invoice for services performed.

The Company does not adjust the contract price for the effects of a significant financing component if the Company expects, at contract inception, that the period between when the Company transfers a service to a customer and when the customer pays for that service will be one year or less.

See Note 11- Revenue Accounting for Contracts and Adoption of ASC Topic 606 for further discussion.

F-11

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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. In general, at any given time, the equity of our joint ventures represents the undistributed profits earned on contracts the joint ventures hold with clients. Very few of our joint ventures have employees or third-party debt or credit facilities. The debt held by the joint ventures is non-recourse to the general credit of Jacobs.

The assets of a joint venture are restricted for use to the obligations of the particular joint venture and are not available for general operations of the Company. Our risk of loss on these arrangements is usually shared with our partners. The liability of each partner is usually joint and several, which means that each partner may become liable for the entire risk of loss on the project. Furthermore, on some of our projects, the Company has granted guarantees which may encumber both our contracting subsidiary company and the Company for the entire risk of loss on the project. The Company is unable to estimate the maximum potential amount of future payments that we could be required to make under outstanding performance guarantees related to joint venture projects due to a number of factors, including but not limited to, the nature and extent of any contractual defaults by our joint venture partners, resource availability, potential performance delays caused by the defaults, the location of the projects, and the terms of the related contracts. See Note 17- Contractual Guarantees, Litigation, Investigations and Insurance for further discussion.

Most of the joint ventures are deemed to be variable interest entities (“VIE”) because they lack sufficient equity to finance the activities of the joint venture. The Company uses a qualitative approach to determine if the Company is the primary beneficiary of the VIE, which considers factors that indicate a party has the power to direct the activities that most significantly impact the joint venture’s economic performance. These factors include the composition of the governing board, how board decisions are approved, the powers granted to the operational manager(s) and partner that holds that position(s), and to a certain extent, the partner’s economic interest in the joint venture. The Company analyzes each joint venture initially to determine if it should be consolidated or unconsolidated.

•	Consolidated if the Company is the primary beneficiary of a VIE, or holds the majority of voting interests of a non-VIE (and no significant participative rights are available to the other partners).

•	Unconsolidated if the Company is not the primary beneficiary of a VIE, or does not hold the majority of voting interest of a non-VIE.

See Note 8- Joint Ventures and VIEs for further discussion.

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.

F-12

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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 10- Borrowings for a discussion of the fair value of long-term debt.

Certain other assets and liabilities, such as forward contracts and interest rate swap agreements we purchased as cash-flow hedges discussed in Note 16- Commitments and Contingencies and Derivative Financial Instruments and the Company's investment in Worley ordinary shares discussed in Note 7- Sale of Energy, Chemicals and Resources are required to be carried in our Consolidated Financial Statements at Fair Value.

The fair value of the Company’s reporting units (used for purposes of determining whether there is an indication of possible impairment of the carrying value of goodwill) is determined using an income approach. Both approaches require us to make certain estimates and judgments. Under the income approach, fair value is determined by using the discounted cash flows of our reporting units. Under the market approach, the fair values of our reporting units are determined by reference to guideline companies that are reasonably comparable to our reporting units; the fair values are estimated based on the valuation multiples of the invested capital associated with the guideline companies. In assessing whether there is an indication that the carrying value of goodwill has been impaired, we utilize the results of both valuation techniques and consider the range of fair values indicated.

With respect to equity-based compensation (i.e., share-based payments), we estimate the fair value of stock options granted to employees and directors using the Black-Scholes option-pricing model. Like all option-pricing models, the Black-Scholes model requires the use of subjective assumptions including (i) the expected volatility of the market price of the underlying stock, and (ii) the expected term of the award, among others. Accordingly, changes in assumptions and any subsequent adjustments to those assumptions can cause different fair values to be assigned to our future stock option awards. For restricted stock awards (including restricted stock units) containing market conditions, compensation expense is based on the fair value of such awards using a Monte Carlo simulation. For restricted stock awards (including restricted stock units) containing service and performance conditions, compensation expense is based on the closing stock price on the date of grant.

The fair values of the assets owned by the various pension plans that the Company sponsors are determined based on the type of asset, consistent with U.S. GAAP. Equity securities are valued by using market observable data such as quoted prices. Publicly traded corporate equity securities are valued at the last reported sale price on the last business day of the year. Securities not traded on the last business day are valued at the last reported bid price. Fixed income investment funds categorized as Level 2 are valued by the trustee using pricing models that use verifiable observable market data (e.g., interest rates and yield curves observable at commonly quoted intervals), bids provided by brokers or dealers, or quoted prices of securities with similar characteristics. Real estate consists primarily of common or collective trusts, with underlying investments in real estate. These investments are valued using the best information available, including quoted market price, market prices for similar assets when available, internal cash flow estimates discounted at an appropriate interest rate, or independent appraisals, as appropriate. Management values insurance contracts and hedge funds using actuarial assumptions and certain values reported by fund managers.

The methodologies described above and elsewhere in these Notes to Consolidated Financial Statements may produce a fair value measure that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement.

Cash Equivalents

We consider all highly liquid investments with original maturities of less than three months to be cash equivalents. Cash equivalents at September 27, 2019 and September 28, 2018 consisted primarily of money market mutual funds and overnight bank deposits.

Receivables, Contract Assets and Contract Liabilities

Receivables include amounts billed, net and unbilled receivables. 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.

F-13

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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 unbilled receivables when the right to consideration becomes unconditional and are transferred to amounts billed upon invoicing. The increase in contract assets was a result of normal business activity and not materially impacted by any other factors.

Contract liabilities represent amounts billed to clients in excess of revenue recognized to date. We anticipate that substantially all such amounts will be earned over the next twelve months.

Property, Equipment, and Improvements

Property, equipment and improvements are carried at cost, and are shown net of accumulated depreciation and amortization in the accompanying Consolidated Balance Sheets. Depreciation and amortization is computed primarily by using the straight-line method over the estimated useful lives of the assets. The cost of leasehold improvements is amortized using the straight-line method over the lesser of the estimated useful life of the asset or the remaining term of the related lease. Estimated useful lives range from 20 to 40 years for buildings, from 3 to 10 years for equipment and from 4 to 10 years for leasehold improvements.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the cost of an acquired business over the fair value of the net tangible and intangible assets acquired. Goodwill and intangible assets with indefinite lives are not amortized; instead, on an annual basis we test goodwill and intangible assets with indefinite lives for possible impairment. Intangible assets with finite lives are amortized on a straight-line basis over the useful lives of those assets.

Interim testing for impairment is performed if indicators of potential impairment exist. For purposes of impairment testing, goodwill is assigned to the applicable reporting units based on the current reporting structure. We have determined that our operating segments are also our reporting units based on management’s conclusion that the components comprising each of our operating segments share similar economic characteristics and meet the aggregation criteria in accordance with ASC 350.

When testing goodwill for impairment quantitatively, the Company first compares the fair value of each reporting unit with its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, a second step is performed to measure the amount of potential impairment. In the second step, the Company compared the implied fair value of the reporting unit goodwill with the carrying amount of the reporting unit's goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized. During 2019, we completed our annual goodwill impairment test and quantitatively determined that none of our goodwill was impaired. We have determined that the fair value of our reporting units substantially exceeded their respective carrying values for the Consolidated Balance Sheets presented.

Foreign Currencies

In preparing our Consolidated Financial Statements, it is necessary to translate the financial statements of our subsidiaries operating outside the U.S., which are denominated in currencies other than the U.S. dollar, into the U.S. dollar. In accordance with U.S. GAAP, revenues and expenses of operations outside the U.S. are translated into U.S. dollars using weighted-average exchange rates for the applicable periods being translated while the assets and liabilities of operations outside the U.S. are generally translated into U.S. dollars using period-end exchange rates. The net effect of foreign currency translation adjustments is included in stockholders’ equity as a component of accumulated other comprehensive income (loss) in the accompanying Consolidated Balance Sheets.

F-14

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Share-Based Payments

We measure the value of services received from employees and directors in exchange for an award of an equity instrument based on the grant-date fair value of the award. The computed value is recognized as a non-cash cost on a straight-line basis over the period the individual provides services, which is typically the vesting period of the award with the exception of awards containing an internal performance measure, such as Earnings Per Share growth and Return on Invested Capital, which is recognized on a straight-line basis over the vesting period subject to the probability of meeting the performance requirements and adjusted for the number of shares expected to be earned. The cost of these awards is recorded in selling, general and administrative expense in the accompanying Consolidated Statements of Earnings.

Concentrations of Credit Risk

Our cash balances and cash equivalents are maintained in accounts held by major banks and financial institutions located in North America, South America, Europe, the Middle East, India, Australia, Africa and Asia. In the normal course of business, and consistent with industry practices, we grant credit to our clients without requiring collateral. Concentrations of credit risk is the risk that, if we extend a significant amount of credit to clients in a specific geographic area or industry, we may experience disproportionately high levels of default if those clients are adversely affected by factors particular to their geographic area or industry. Concentrations of credit risk relative to trade receivables are limited due to our diverse client base, which includes the U.S. federal government and multi-national corporations operating in a broad range of industries and geographic areas. Additionally, in order to mitigate credit risk, we continually evaluate the credit worthiness of our major commercial clients.

Pensions

We use certain assumptions and estimates in order to calculate periodic pension cost and the value of the assets and liabilities of our pension plans. These assumptions involve discount rates, investment returns and projected salary increases, among others. Changes in the actuarial assumptions may have a material effect on the plans’ liabilities and the projected pension expense.

We use a corridor approach to amortize actuarial gains and losses. Under this approach, net gains or losses in excess of ten percent of the larger of the pension benefit obligation or the market-related value of the assets are amortized on a straight-line basis. The period of amortization is the average remaining service of active participants who are expected to receive benefits under certain plans and the average remaining future lifetime of plan participants for certain plans.

We measure our defined benefit plan assets and obligations as of the end of the month closest to their fiscal year end, which is September 30, 2019 as the alternative measurement date in accordance with FASB guidance ASU 2015-04, Compensation Retirement Benefit (Topic 715): Practical Expedient for the Measurement Date of an Employer’s Defined Benefit Obligation and Plan Asset. This guidance allows employers with fiscal year ends that do not coincide with a calendar month end to make an accounting policy election to measure defined benefit plan assets and obligations as of the end of the month closest to their fiscal year end.

Income Taxes

We determine our consolidated income tax expense using the asset and liability method prescribed by U.S. GAAP. Under this method, deferred tax assets and liabilities are recognized for the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. Such deferred tax assets and liabilities are adjusted, as appropriate, to reflect changes in tax rates expected to be in effect when the temporary differences reverse. If and when we determine that a deferred tax asset will not be realized for its full amount, we will recognize and record a valuation allowance with a corresponding charge to earnings. Judgment is required in determining our provision for income taxes. In the normal course of business, we may engage in numerous transactions every day for which the ultimate tax outcome (including the period in which the transaction will ultimately be included in taxable income or deducted as an expense) is uncertain. Additionally, we file income, franchise, gross receipts and similar tax returns in many jurisdictions. Our tax returns are subject to audit and investigation by the Internal Revenue Service, most states in the U.S., and by various government agencies representing many jurisdictions outside the U.S.

F-15

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Contractual Guarantees, Litigation, Investigations and Insurance

In the normal course of business we are subject to certain contractual guarantees and litigation. We record in the Consolidated Balance Sheets amounts representing our estimated liability relating to such guarantees, litigation and insurance claims. Guarantees are accounted for in accordance with ASC 460-10, Guarantees, at fair value at the inception of the guarantee. We perform an analysis to determine the level of reserves to establish for both insurance-related claims that are known and have been asserted against us as well as for insurance-related claims that are believed to have been incurred based on actuarial analysis, but have not yet been reported to our claims administrators as of the respective balance sheet dates. We include any adjustments to such insurance reserves in our Consolidated Statements of Earnings. In addition, as a contractor providing services to various agencies of the U.S. federal government, we are subject to many levels of audits, investigations, and claims by, or on behalf of, the U.S. federal government with respect to contract performance, pricing, costs, cost allocations and procurement practices. We adjust revenues based upon the amounts we expect to realize considering the effects of any client audits or governmental investigations.

Business Combinations

U.S. GAAP requires that the purchase price paid for business combinations accounted for using the acquisition method be allocated to the assets and liabilities acquired based on their respective Fair Values. Determining the Fair Value of contract assets and liabilities acquired often requires estimates and judgments regarding, among other things, the estimated cost to complete such contracts. The Company must also make certain estimates and judgments relating to other assets and liabilities acquired as well as any identifiable intangible assets acquired.

During the third fiscal quarter of 2019, the Company acquired KeyW. During the first fiscal quarter of 2018, the Company acquired CH2M HILL Companies, Ltd. ("CH2M"). During the fourth fiscal quarter of 2017, the Company acquired Blue Canopy LLC. During the second fiscal quarter of 2017, the Company acquired Aquenta Consulting Pty Ltd. Other than the KeyW and CH2M acquisitions discussed in Note 5- Business Combinations, these acquisitions were not material to the Company’s consolidated results for fiscal 2019, 2018 or 2017.

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 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.

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 and expects to use the modified retrospective transition approach without adjusting the comparative periods presented and expects a significant increase to the balance sheet in its assets for the lease right of use asset and a significant increase to the balance sheet in its liabilities for the lease obligation.

F-16

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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 in the first quarter did not impact the Company’s financial position, results of operations or cash flows. However, as described in Note 7- Sale of Energy, Chemicals and Resources ("ECR") Business, the Company received ordinary shares of Worley during the third quarter of 2019 which are measured at fair value through net income in accordance with ASU 2016-01.

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.

3. Employee Stock Purchase and Stock Option Plans

Employee Stock Purchase Plans

Under the 1989 ESPP and the GESPP, eligible employees who elect to participate in these plans are granted the right to purchase shares of the common stock of Jacobs at a discount that is limited to 5% of the per-share market value on the day shares are sold to employees. The following table summarizes the stock issuance activity under the 1989 ESPP and the GESPP for the fiscal years ended September 27, 2019, September 28, 2018 and September 29, 2017:

	For the Years Ended
	September 27, 2019				September 28, 2018				September 29, 2017
Aggregate Purchase Price Paid for Shares Sold:
Under the 1989 ESPP	$	24,824,232			$	21,590,858			$	21,084,657
Under the GESPP	2,471,193				2,240,609				2,105,834
Total	$	27,295,425			$	23,831,467			$	23,190,491
Aggregate Number of Shares Sold:
Under the 1989 ESPP	354,580				357,899				403,652
Under the GESPP	34,843				36,405				39,648
Total	389,423				394,304				443,300

F-17

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

On January 19, 2017, the Company’s stockholders approved an increase in the number of shares authorized by 4,350,000 shares for the 1989 ESPP and by 150,000 shares for the GESPP.

At September 27, 2019, there remains 3,833,375 shares reserved for issuance under the 1989 ESPP and 103,732 shares reserved for issuance under the GESPP.

Stock Incentive Plans

We also sponsor the 1999 Stock Incentive Plan, as amended and restated (the "SIP") and the 1999 Outside Director Stock Plan, as amended and restated (the "ODSP"). The 1999 SIP provides for the issuance of incentive stock options, non-qualified stock options, share appreciation rights ("SARs"), restricted stock and restricted stock units to employees. The 1999 ODSP provides for awards of shares of common stock, restricted stock, restricted stock units and grants of non-qualified stock options to our outside (i.e., nonemployee) directors. The following table sets forth certain information about the 1999 Plans:

	1999 SIP			1999 ODSP			Total
Number of shares authorized	29,850,000			1,100,000			30,950,000
Number of remaining shares reserved for issuance at September 27, 2019	5,719,617			427,002			6,146,619
Number of shares relating to outstanding stock options at September 27, 2019	755,856			170,750			926,606
Number of shares available for future awards:
At September 27, 2019	4,963,761			256,252			5,220,013
At September 28, 2018	5,335,741			295,630			5,631,371

Effective September 28, 2012, all grants of shares under the 1999 SIP are issued on a fungible basis. An award other than an option or SAR are granted on a 1.92-to-1.00 basis (“Fungible”). An award of an option or SAR are granted on a 1-to-1 basis (“Not Fungible”).

The following table presents the fair value of shares (of restricted stock and restricted stock units) vested for the years ended September 27, 2019, September 28, 2018 and September 29, 2017 (in thousands):

	For the Years Ended
	September 27, 2019				September 28, 2018				September 29, 2017
Restricted Stock and Restricted Stock Units (service condition)	$	37,864			$	64,121			$	34,466
Restricted Stock Units (service, market, and performance conditions at target)	17,124				2,626				4,183
Total	$	54,988			$	66,747			$	38,649

At September 27, 2019, the amount of compensation cost relating to non-vested awards not yet recognized in the financial statements is approximately $77.2 million. The majority of these unrecognized compensation costs will be recognized by the first quarter of fiscal 2021. The weighted average remaining contractual term of options currently exercisable is 2.1 years.

F-18

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Stock Options

The following table summarizes the stock option activity for the years ended September 27, 2019, September 28, 2018 and September 29, 2017:

	Number of Stock Options			Weighted Average Exercise Price
Outstanding at September 30, 2016	3,577,512			$	45.69
Granted	—			$	—
Exercised	(906,648	)		$	43.79
Cancelled or expired	(154,039	)		$	48.79
Outstanding at September 29, 2017	2,516,825			$	46.19
Granted	—			$	—
Exercised	(636,019	)		$	46.93
Cancelled or expired	(114,047	)		$	52.26
Outstanding at September 28, 2018	1,766,759			$	45.53
Granted	—			$	—
Exercised	(828,529	)		$	45.63
Cancelled or expired	(11,624	)		$	42.10
Outstanding at September 27, 2019	926,606			$	45.48

Cash received from the exercise of stock options, net of tax remitted, during the year ended September 27, 2019 was $37.8 million.

Stock options outstanding at September 27, 2019 consisted entirely of non-qualified stock options. The following table presents the total intrinsic value of stock options exercised for the fiscal years ended September 27, 2019, September 28, 2018 and September 29, 2017 (in thousands):

For the Years Ended
September 27, 2019		September 28, 2018		September 29, 2017
$27,720		$13,931		$14,713

F-19

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The total intrinsic value of stock options exercisable at September 27, 2019 was approximately $38.7 million. The following table presents certain other information regarding our 1999 SIP and 1999 OSDP for the fiscal years ended September 27, 2019, September 28, 2018 and September 29, 2017:

	September 27, 2019				September 28, 2018				September 29, 2017
At fiscal year end:
Range of exercise prices for options exercisable	$32.51–$60.43				$32.51–$60.43				$32.51–$80.63
Number of options exercisable	860,114				1,557,900				1,992,022
For the fiscal year:
Range of prices relating to options exercised	$36.88–$60.43				$35.93–$61.26				$37.03–$55.53
Estimated weighted average fair values of options granted	$	—			$	—			$	—

The following table presents certain information regarding stock options outstanding and stock options exercisable at September 27, 2019:

	September 27, 2019
	Options Outstanding									Options Exercisable
Range of Exercise Prices	Number			Weighted Average Remaining Contractual Life (years)		Weighted Average Price				Number			Weighted Average Exercise Price
$32.51 - $37.03	60,500			2.65		$	36.99			60,500			$	36.99
$37.43 - $46.09	607,119			4.76		$	42.90			540,627			$	43.02
$47.11 - $55.13	227,612			3.46		$	52.54			227,612			$	52.54
$60.08 - $80.63	31,375			4.31		$	60.36			31,375			$	60.36
	926,606			4.29		$	45.48			860,114			$	45.75

The 1999 ODSP and the 1999 SIP allow participants to satisfy the exercise price of stock options by tendering shares of Jacobs common stock that have been owned by the participants for at least six months. Shares so tendered are retired and canceled, and are shown as repurchases of common stock in the accompanying Consolidated Statements of Stockholders’ Equity. The weighted average remaining contractual term of options currently exercisable is 4.15 years.

Restricted Stock

The following table presents the number of shares of restricted stock and restricted stock units issued as common stock under the 1999 SIP for the years ended September 27, 2019, September 28, 2018 and September 29, 2017:

	For the Years Ended
	September 27, 2019			September 28, 2018			September 29, 2017
Restricted stock	—			—			—
Restricted stock units (service condition)	318,056			1,087,724			496,951
Restricted stock units (service, market and performance conditions)	240,068			254,784			237,058

The amount of restricted stock units issued for awards with performance and market conditions in the above table are issued based on performance against the target amount. The number of shares ultimately issued, which could be greater or less than target, will be based on achieving specific performance conditions related to the awards.

F-20

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table presents the number and weighted average grant-date fair value of restricted stock and restricted stock units at September 27, 2019:

	Number of Shares			Weighted Average Grant-Date Fair Value
Outstanding at September 28, 2018	2,329,535			$	56.11
Granted	710,718			$	73.12
Vested	(1,093,926	)		$	51.54
Canceled	(223,290	)		$	57.87
Outstanding at September 27, 2019	1,723,037			$	65.80

The following table presents the number of shares of restricted stock and restricted stock units canceled and withheld for taxes under the 1999 SIP for the years ended September 27, 2019, September 28, 2018 and September 29, 2017:

	For the Years Ended
	September 27, 2019			September 28, 2018			September 29, 2017
Restricted stock	105,301			284,254			365,481
Restricted stock units (service condition)	295,122			336,516			128,536
Restricted stock units (service, market and performance conditions)	183,654			95,063			86,742

The amount of unvested restricted stock units canceled for awards with service and performance conditions in the above table is based on the service period achieved and performance against the target amount.

The restrictions attached to restricted stock and restricted stock units generally relate to the recipient’s ability to sell or otherwise transfer the stock or stock units. There are also restrictions that subject the stock and stock units to forfeiture back to the Company until earned by the recipient through continued employment or service.

The following table provides the number of shares of restricted stock units outstanding at September 27, 2019 under the 1999 SIP. No shares of restricted stock were issued under the 1999 ODSP during such periods.

	September 27, 2019
	Total
Restricted stock	95,626
Restricted stock units (service condition)	833,091
Restricted stock units (service, market and performance conditions)	668,252

The following table presents the number of shares of restricted stock and restricted stock units issued under the 1999 ODSP for the years ended September 27, 2019, September 28, 2018 and September 29, 2017:

	For the Years Ended
	September 27, 2019			September 28, 2018			September 29, 2017
Restricted stock units (service condition)	26,372			21,620			21,123

F-21

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table provides the number of shares of restricted stock and restricted stock units outstanding at September 27, 2019 under the 1999 ODSP:

	September 27, 2019
Restricted stock	34,000
Restricted stock units (service condition)	92,068

All shares granted under the 1999 ODSP are issued on a 1.92-to-1.00 basis.

4.	Earnings Per Share and Certain Related Information

Basic and Diluted Earnings Per Share

Basic and diluted earnings per share (“EPS”) are computed using the two-class method, which is an earnings allocation method that determines EPS for common shares and participating securities. The undistributed earnings are allocated between common shares and participating securities as if all earnings had been distributed during the period. Participating securities and common shares have equal rights to undistributed earnings. Net earnings used for the purpose of determining basic and diluted EPS is determined by taking net earnings, less earnings available to participating securities.

F-22

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table reconciles the denominator used to compute basic EPS to the denominator used to compute diluted EPS for the years ended September 27, 2019, September 28, 2018 and September 29, 2017 (in thousands):

	For the Years Ended
	September 27, 2019				September 28, 2018				September 30, 2017
Numerator for Basic and Diluted EPS:
Net earnings (loss) attributable to Jacobs from continuing operations	$	290,960			$	(4,185	)		$	170,167
Net earnings (loss) from continuing operations allocated to participating securities	(415		)		—				(1,783		)
Net earnings (loss) from continuing operations allocated to common stock for EPS calculation	$	290,545			$	(4,185	)		$	168,384
Net earnings (loss) attributable to Jacobs from discontinued operations	$	557,019			$	167,616			$	123,560
Net earnings (loss) from discontinued operations allocated to participating securities	(795		)		(808		)		(1,294		)
Net earnings (loss) from discontinued operations allocated to common stock for EPS calculation	$	556,224			$	166,808			$	122,266
Net earnings allocated to common stock for EPS calculation	$	846,769			$	162,623			$	290,650
Denominator for Basic and Diluted EPS:
Weighted average basic shares	138,104				138,182				120,689
Shares allocated to participating securities	(197		)		(646		)		(1,319		)
Shares used for calculating basic EPS attributable to common stock	137,907				137,536				119,370
Effect of dilutive securities:
Stock compensation plans (1)	1,299				—				777
Shares used for calculating diluted EPS attributable to common stock	139,206				137,536				120,147
Net Earnings Per Share:
Basic Net Earnings (Loss) from Continuing Operations Per Share	$	2.11			$	(0.03	)		$	1.41
Basic Net Earnings from Discontinued Operations Per Share	$	4.03			$	1.21			$	1.02
Basic EPS	$	6.14			$	1.18			$	2.43
Diluted Net Earnings (Loss) from Continuing Operations Per Share	$	2.09			$	(0.03	)		$	1.40
Diluted Net Earnings from Discontinued Operations Per Share	$	4.00			$	1.21			$	1.02
Diluted EPS	$	6.08			$	1.18			$	2.42

(1)	For the fiscal 2018 period, because net earnings (loss) from continuing operations was a loss, the effect of antidilutive securities of 1,176 was excluded from the denominator in calculating diluted EPS.

F-23

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Share Repurchases

On July 23, 2015, the Company’s Board of Directors authorized a share repurchase program of up to $500 million of the Company’s common stock, to expire on July 31, 2018. On July 19, 2018, the Company's Board of Directors authorized the continuation of this share repurchase program for an additional three years, to expire on July 31, 2021. As of September 27, 2019, no authorized amounts remain outstanding under this program. The following table summarizes the activity under this program during fiscal 2019:

Amount Authorized		Average Price Per Share (1)		Shares Repurchased		Total Shares Retired
$500,000,000		$61.74		4,005,007		4,005,007

(1)	Includes commissions paid and calculated at the average price per share since the repurchase program authorization date.

On January 17, 2019, the Company’s Board of Directors authorized an additional share repurchase program of up to $1.0 billion of the Company’s common stock, to expire on January 16, 2022. On February 19, 2019, the Company launched accelerated share repurchase programs by advancing $250 million to two financial institutions in privately negotiated transactions (collectively, the "First 2019 ASR Program"). The specific number of shares that the Company repurchased under the First 2019 ASR Program was determined based generally on a discount to the volume-weighted average price per share of the Company's common stock during a calculation period completed on June 5, 2019. The purchase was recorded as a share retirement for purposes of calculating earnings per share.

On August 21, 2019, the Company launched a second accelerated share repurchase program by advancing $250 million to a financial institution in a privately negotiated transaction (the "Second 2019 ASR Program"). The specific number of shares that the Company ultimately will repurchase under the Second 2019 ASR Program will be determined based generally on a discount to the volume-weighted average price per share of the Company's common stock during a calculation period to be completed no later than December 2019. The purchase will be recorded as a share retirement for purposes of calculating earnings per share.

Subsequent to the launch of the First 2019 ASR Program, the Second 2019 ASR Program and other share repurchases, the Company has $393.7 million remaining under its $1.0 billion share repurchase authorization. The following table summarizes the activity under this program during fiscal 2019:

Amount Authorized	Average Price Per Share (1)		Shares Repurchased		Total Shares Retired
$1,000,000,000	$86.43		7,014,633		7,014,633

(1)	Includes commissions paid and calculated at the average price per share since the repurchase program authorization date.

Share repurchases may be executed through various means including, without limitation, accelerated share repurchases, open market transactions, privately negotiated transactions, purchases pursuant to a Rule 10b5-1 plan or otherwise. The share repurchase program does not obligate the Company to purchase any shares. The authorization for the share repurchase program may be terminated, increased or decreased by the Company’s Board of Directors in its discretion at any time. The timing and amount of share repurchases may depend upon market conditions and economic circumstances, availability of investment opportunities, the availability and costs of financing, currency fluctuations, the market price of the Company's common stock, other uses of capital and other factors.

Common and Preferred Stock

Jacobs is authorized to issue two classes of capital stock designated “common stock” and “preferred stock” (each has a par value of $1.00 per share). The preferred stock may be issued in one or more series. The number of shares to be included in a series as well as each series’ designation, relative powers, dividend and other preferences, rights and qualifications, redemption provisions and restrictions are to be fixed by the Company’s Board of Directors at the time each series is issued. Except as may be provided by the Company’s Board of Directors in a preferred stock designation, or otherwise provided for by statute, the holders of shares of common stock have the exclusive right to vote for the election of directors and on all other matters requiring stockholder action. The holders of shares of common stock are entitled to dividends if and when declared by the Company’s Board of Directors from whatever assets are legally available for that purpose.

F-24

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Dividends

On September 19, 2019, the Company’s Board of Directors declared a quarterly dividend of $0.17 per share of the Company’s common stock which was paid on November 1, 2019, to shareholders of record on the close of business on October 4, 2019. Future dividend declarations are subject to review and approval by the Company’s Board of Directors. Dividends paid through September 27, 2019 and the preceding fiscal year are as follows:

Declaration Date		Record Date		Payment Date		Cash Amount (per share)
July 11, 2019		July 26, 2019		August 23, 2019		$0.17
May 2, 2019		May 17, 2019		June 14, 2019		$0.17
January 17, 2019		February 15, 2019		March 15, 2019		$0.17
September 11, 2018		September 28, 2018		October 26, 2018		$0.15
July 19, 2018		August 3, 2018		August 31, 2018		$0.15
May 3, 2018		May 18, 2018		June 15, 2018		$0.15
January 18, 2018		February 16, 2018		March 16, 2018		$0.15
September 27, 2017		October 13, 2017		November 10, 2017		$0.15

5.	Business Combinations

KeyW

On June 12, 2019, Jacobs completed the acquisition of The KeyW Holding Corporation (“KeyW”), a U.S. based national security solutions provider to the intelligence, cyber, and counterterrorism communities by acquiring 100% of the outstanding shares of KeyW common stock. The acquisition allows Jacobs to further expand its government services business. The Company paid total consideration of $902.6 million which was comprised of approximately $604.2 million in cash to the former stockholders and certain equity award holders of KeyW and the assumption of KeyW’s debt of $298.4 million. As of July 2019, the Company has repaid all of KeyW's debt.

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

Assets
Cash and cash equivalents	$	29.1
Receivables	80.1
Inventories, net	21.3
Prepaid expenses and other	2.5
Property, equipment and improvements, net	25.9
Deferred tax asset and other	36.7
Goodwill	611.8
Identifiable intangible assets	179.0
Total Assets	$	986.4
Liabilities
Accounts payable	$	8.3
Accrued expenses	68.7
Short term debt	298.4
Other current liabilities	3.9
Other non-current liabilities	2.9
Total Liabilities	$	382.2
Net assets acquired	$	604.2

F-25

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The purchase price allocation is based upon preliminary information and is subject to change when additional information is obtained. Goodwill recognized results from a substantial assembled workforce, which does not qualify for separate recognition, as well as expected future synergies from combining operations. $136.0 million of the goodwill recognized is expected to be deductible for tax purposes.The Company has not completed its final assessment of the fair values of purchased receivables, tax balances or contingent liabilities. The final purchase price allocation will result in adjustments to certain assets and liabilities, including the residual amount allocated to goodwill.

During the three months ended September 27, 2019, the Company updated certain provisional amounts reflected in the preliminary purchase price allocation, as summarized in the estimated fair values of KeyW assets acquired and liabilities assumed above. Specifically, the carrying amount of the intangible assets discussed above were decreased by $9.3 million, all other assets excluding goodwill increased by $7.4 million and total liabilities increased by $7.5 million. These updates led to a $9.4 million increase in goodwill. These 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.

Identified intangible assets include customer relationships, contracts and backlog and developed technology. The customer relationships, contracts and backlog intangible represents the fair value of existing contracts, underlying customer relationships and backlog. The customer relationships, contract and backlog intangible, and the developed technology intangible have lives of 10 and 12 years, respectively. Other intangible liabilities consist of the fair value of office leases and have a weighted average life of approximately 9 years.

Fair value measurements relating to the KeyW acquisition are made primarily using Level 3 inputs including discounted cash flow techniques. Fair value is estimated using inputs primarily for 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. 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 June 12, 2019 through September 27, 2019, KeyW contributed approximately $136.3 million in revenue and $17.7 million in pre-tax loss included in the accompanying Consolidated Statement of Earnings. Included in these results were approximately $12.9 million in pre-tax transaction costs which related primarily to professional services and other transaction related expenses.

The following presents summarized unaudited pro forma operating results of Jacobs assuming that the Company had acquired KeyW at October 1, 2017. 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):

		For the Years Ended
		September 27, 2019				September 28, 2018
Revenues		$	13,068.7			$	11,087.2
Net earnings of the Group from Continuing Operations		$	326.0			$	2.8
Net earnings (loss) attributable to Jacobs from continuing operations		$	303.0			$	(6.7	)
Net earnings (loss) attributable to Jacobs from continuing operations per share:
Basic earnings (loss) from continuing operations per share		$	2.19			$	(0.05	)
Diluted earnings (loss) from continuing operations per share		$	2.17			$	(0.05	)

Included in the table above are the unaudited pro forma operating results of continuing operations. Additionally, charges relating to transaction expenses, severance expense and other items are removed from the year ended September 27, 2019 and are reflected in the prior fiscal year due to the assumed timing of the transaction. Also, income tax expense (benefit) for the fiscal year pro forma periods ended September 27, 2019 and September 28, 2018 were $41.3 million and $305.7 million, respectively.

F-26

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

CH2M

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 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.

The following summarizes the estimated 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	3,165.5
Identifiable intangible assets:
Customer relationships, contracts and backlog	412.3
Lease intangible assets	4.4
Total identifiable intangible assets	416.7
Miscellaneous	530.8
Total Assets	$	5,796.6
Liabilities
Notes payable	$	2.2
Accounts payable	309.6
Accrued liabilities	787.4
Contract liabilities	260.8
Identifiable intangible liabilities:
Lease intangible liabilities	9.6
Long-term debt	706.0
Other deferred liabilities	659.0
Total Liabilities	$	2,734.6
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 related to estimates for various legal and other pre-acquisition contingent liabilities accounted for under ASC 450. See Note 17- Contractual Guarantees, Litigation, Investigations and Insurance 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 the measurement

F-27

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

period, including results of preliminary mediation discussions, recommendations from external advisors and claims for damages filed against Jacobs related to pre-acquisition contingencies, as summarized in the fair values of CH2M assets acquired and liabilities assumed as set forth above. 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. With respect to measurement period adjustments recognized in the first quarter of 2019, 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. Subsequently, during the fourth quarter of 2019, the Company identified and corrected income tax errors related to the purchase price allocation resulting to an increase in accrued liabilities of $51.8 million, and a decrease in miscellaneous long-term assets of $12.8 million, with an offset to goodwill. As a result of the total adjustments to the purchase price allocation in fiscal 2019, goodwill increased $36.4 million.

Customer relationships, contracts and backlog 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.

Fair value measurements relating to the CH2M acquisition are made 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 reflect 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. Personal property assets with an active and identifiable secondary market are valued using the market approach. 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 September 28, 2018, CH2M consolidated, including both continuing and discontinued operations, contributed approximately $3.8 billion in revenue and $185.9 million in pretax income included in the accompanying consolidated statement of earnings. Included in these results were approximately $99.3 million in pre-tax restructuring and transaction costs.

Transaction costs associated with the CH2M acquisition in the accompanying consolidated statements of earnings for the year ended September 28, 2018 are comprised of the following (in millions):

	For the Year Ended
	September 28, 2018
Personnel costs	$	50.2
Professional services and other expenses	27.5
Total	$	77.7

Personnel costs above include change of control payments and related severance costs.

The following presents summarized unaudited pro forma operating results 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). Additionally, these pro forma operating results have not been recast for the sale of our ECR business.

F-28

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

	For the Year Ended
	September 28, 2018
Revenues	$	16,012.4
Net earnings	$	196.3
Net earnings (loss) attributable to Jacobs	$	184.5
Net earnings (loss) attributable to Jacobs per share:
Basic earnings (loss) per share	$	1.28
Diluted earnings (loss) per share	$	1.27

Included in the unaudited pro forma operating results are charges relating to transaction expenses, severance expense and other items that are removed from the year ended September 28, 2018 and are reflected in the year ended September 29, 2017 due to the assumed timing of the transaction. Also, income tax expense (benefit) for the twelve- month pro forma period ended September 28, 2018 was $409.7 million.

John Wood Group's Nuclear Business

On August 20, 2019, Jacobs announced the entry into an agreement to acquire John Wood Group's Nuclear consulting, remediation and program management business for an enterprise value of £250 million (approx. $300 million) on a debt-free, cash-free basis. The transaction is expected to close by the end of fiscal 2020 second quarter.

6.	Goodwill and Intangibles

As a result of the refinement of the segment realignment this year, see Note 19- Segment Information, a portion of the historical carrying value of goodwill for the former Aerospace, Technology, Environmental and Nuclear segment was allocated to the People & Places Solutions 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- 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 Sheet for the year ended September 28, 2018. The carrying value of goodwill associated with continuing operations and appearing in the accompanying Consolidated Balance Sheets for the year ended September 27, 2019 was as follows (in millions):

	Critical Mission Solutions				People & Places Solutions				Total
Balance September 28, 2018	$	1,581			$	3,215			$	4,796
Acquired	612				—				612
Post-Acquisition Adjustments relating to prior year acquisition	17				34				51
Foreign Exchange Impact	(8		)		(18		)		(26		)
Balance September 27, 2019	$	2,202			$	3,231			$	5,433

The following table provides a roll-forward of the Company’s acquired intangibles in the accompanying Consolidated Balance Sheets for the year ended September 27, 2019 (in thousands):

	Customer Relationships, Contracts and Backlog				Developed Technology				Trade Names				Lease Intangible Assets				Total
Balances, September 28, 2018	$	568,323			$	—			$	2,102			$	2,527			$	572,952
Acquired	137,000				42,000				—				—				179,000
Disposal	—				—				—				(883		)		(883		)
Amortization	(76,565		)		(1,167		)		(920		)		(446		)		(79,098		)
Foreign currency translation	(6,366		)		—				1				(530		)		(6,895		)
Balance at September 27, 2019	$	622,392			$	40,833			$	1,183			$	668			$	665,076
Weighted Average Amortization Period (years)	8				12				9				2				8

F-29

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

In addition, we acquired $4.7 million in lease intangible liabilities in connection with the CH2M and KeyW acquisitions, of which $4.0 million remain unamortized at September 27, 2019.

The weighted average amortization period includes the effects of foreign currency translation.

The following table presents estimated amortization expense of intangible assets for fiscal 2019 and for the succeeding years. The amounts below include preliminary amortization estimates for the KeyW opening balance sheet fair values that are still preliminary and are subject to change.

Fiscal Year		(in millions)
2020		$	86.6
2021		82.8
2022		81.7
2023		81.4
2024		81.4
Thereafter		247.2
Total		$	661.1

7.	Sale of Energy, Chemicals and Resources ("ECR") Business

On April 26, 2019, Jacobs completed the sale of its ECR business to Worley 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”).

On April 26, 2019, the Company and Worley entered into an Amended and Restated Stock and Asset Purchase Agreement (the “A&R Purchase Agreement”), pursuant to which the previously executed purchase agreement dated October 21, 2018 was amended in connection with the closing of the ECR sale. Among other things, the amendments in the A&R Purchase Agreement modified the lock-up period for share consideration to apply to 9.9% of Worley’s ordinary shares and extended the end date of the lock-up period to eight weeks following the ECR Business IT Migration Date (as defined in the related Transition Services Agreement ("TSA")) in the event such date had not occurred on or prior to October 1, 2019. Subsequent to year end, the ECR Business IT Migration Date occurred, and as a result, the eight-week lock up period is expected to end in December 2019.

Gain on Sale and Deferred Gain

As a result of the ECR sale, the Company recognized a pre-tax gain of $935.1 million which is included in Net Earnings of the Group from Discontinued Operations on the consolidated statement of earnings for the fiscal year ended September 27, 2019.

Upon closing the ECR sale, the Company retained a noncontrolling interest (with significant influence) in PPS-related activities in one international legal entity that is now controlled and consolidated by Worley. The fair value of the Company’s retained interest in the net assets and liabilities of this entity was estimated at $33.0 million and recorded at closing. For another international legal entity, the closing and transfer of ECR-related assets to Worley will occur at a future date. Accordingly, the Company allocated proceeds received to this deferred closing on a relative fair value basis and recognized a deferred gain of $34.4 million, which will be recorded in income when the ECR-related assets are transferred.

In addition to consideration received for the sale of the ECR business, the proceeds received included advanced consideration for the Company to deliver IT application and related hardware assets at a future date (ECR Business “IT Migration Date”) to Worley upon completion of the interim transition services, described further below. This deliverable of IT assets is considered to be a separate element of the ECR business sale transaction, and accordingly, we have allocated a portion of the proceeds received of $95.3 million on a relative fair value basis to this separate deliverable and recognized deferred income. Upon completion and acceptance of this deliverable by Worley in fiscal year 2020, the deferred proceeds will be recognized in income, along with expenses associated with any costs incurred and deferred by the Company for this deliverable.

Investment in Worley Stock

F-30

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

As discussed above, the Company received 58.2 million in ordinary shares of Worley. Pursuant to the A&R Purchase Agreement, 51.4 million of the shares are considered "restricted" during a lock-up period expected to expire in December 2019. During the lock-up period, Jacobs may not, without Worley's consent, directly or indirectly dispose of the "restricted" shares. The remaining 6.8 million shares not considered "restricted" were sold in the current year, netting a loss of $4.9 million, which was recognized in miscellaneous Income (Expense), net. Dividend income and unrealized gains and losses on changes in fair value of Worley shares are recognized in miscellaneous income (expense), net in continuing operations.

The Company's investment in Worley is measured at fair value through net income as it is an equity investment with a readily determinable fair value. The 51.4 million ordinary shares considered "restricted" are recorded within Prepaid expenses and other at their estimated fair value, which is $451.1 million as of September 27, 2019. Quoted market prices are available for these securities in an active market and therefore categorized as a Level 1 input. During the year ended September 27, 2019 Jacobs received dividend income related to the equity investment in the amount of $5.2 million.

Transition Services Agreement

Upon closing of the sale, the Company entered into a TSA with Worley pursuant to which the Company, on an interim basis, provides various services to Worley including executive consultation, corporate, information technology, and project services. The term of the TSA began immediately following the closing of the ECR sale on April 26, 2019 and will continue for up to one year, with an option to extend the period if mutually agreed upon. Pursuant to the terms of the TSA, the Company will receive payments for the interim services which approximate costs incurred to perform the services. Since inception of the TSA agreement, the Company has recognized costs recorded in SG&A expense incurred to perform the TSA, offset by $35.4 million in TSA related income for such services that is reported in miscellaneous income (expense) in continuing operations for the year ended September 27, 2019 before inclusion of certain incremental outside service support costs agreed to be shared equally by the parties.

Discontinued Operations

As a result of the ECR sale, substantially all ECR-related assets and liabilities have been 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 Consolidated Statements of Earnings as discontinued operations for all periods presented. Additionally, current and non-current assets and liabilities of the Disposal Group are reflected as held-for-sale in the Consolidated Balance Sheet as of September 28, 2018. Further, as of the year ended September 27, 2019, a portion of the ECR business remains held by Jacobs as described above and continues to be classified as held for sale for the in accordance with U.S. GAAP.

Summarized Financial Information of Discontinued Operations

The following table represents earnings (loss) from discontinued operations, net of tax (in thousands):

	For the Years Ended (1)
	September 27, 2019				September 28, 2018				September 29, 2017
Revenues	$	2,725,699			$	4,404,873			$	3,692,662
Direct cost of contracts	(2,338,113		)		(3,756,263		)		(3,191,747		)
Gross profit	387,586				648,610				500,915
Selling, general and administrative expenses	(320,264		)		(412,282		)		(366,284		)
Operating Profit (Loss)	67,322				236,328				134,631
Gain on sale of ECR business	935,110				—				—
Other (expense) income, net (2)	(47,390		)		(12,604		)		15,432
Earnings Before Taxes from Discontinued Operations	955,042				223,724				150,063
Income Tax Expense	(395,828		)		(55,931		)		(32,739		)
Net Earnings of the Group from Discontinued Operations	$	559,214			$	167,793			$	117,324

(1)	The ECR business was sold April 26, 2019, therefore the year ended September 27, 2019 includes only seven months of results.

F-31

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(2)

For the year ended September 27, 2019, other (expense) income, net includes $35.0 million in interest expense relating to the Nui Phao settlement, $6.0 million in foreign currency revaluations, $9.6 million in loss on the sale of a joint venture which is offset by $4.4 million in miscellaneous income. For the year ended September 28, 2018, other expense (income), net was comprised of an approximate $21.0 million loss on the sale of the Guimar joint venture, offset by $8.4 million in miscellaneous income.

Selling, general and administrative expenses includes $95.0 million and total other (expense) income, net includes $35.0 million for the year ended September 27, 2019 recorded in connection with charges recognized related to the Nui Phao ("NPMC") legal matter described in Note 17- Contractual Guarantees, Litigation, Investigations and Insurance.

The following tables represent the assets and liabilities held for sale (in thousands):

	September 27, 2019 (1)				September 28, 2018
Cash and cash equivalents	$	—			$	158,488
Receivables and contract assets	871				1,040,996
Prepaid expenses and other	81				37,200
Current assets held for sale	$	952			$	1,236,684

Property, Equipment and Improvements, net	$	1,643			$	199,847
Goodwill	24,896				1,308,000
Intangibles, net	—				83,005
Miscellaneous	439				110,838
Noncurrent assets held for sale	$	26,978			$	1,701,690

Notes payable	$	—			$	1,782
Accounts payable	—				351,482
Accrued liabilities	2,495				321,627
Contract liabilities	78				81,679
Current liabilities held for sale	$	2,573			$	756,570

Long-term Debt	$	—			$	2,710
Other Deferred Liabilities	97				147,894
Noncurrent liabilities held for sale	$	97			$	150,604

(1)	The September 27, 2019 held for sale balances above pertain to certain ECR entities that will be conveyed at a later date. Please refer to the Gain on Sale and Deferred Gain section above for more information.

The significant components included in our Consolidated Statements of Cash Flows for the discontinued operations are as follows (in thousands):

	For the Years Ended
	September 27, 2019				September 28, 2018
Depreciation and amortization:
Property, equipment and improvements	$	2,110			$	26,627
Intangible assets	$	614			$	13,327
Additions to property and equipment	$	(9,204	)		$	(19,669	)
Stock based compensation	$	10,852			$	10,838

The decrease in depreciation and amortization period over period is due to the cessation of such charges under assets held-for-sale accounting rules.

F-32

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

8.	Joint Ventures and VIEs

For consolidated joint ventures, the entire amount of the revenue recognized for 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 sheet. There are no consolidated VIEs that have debt or credit facilities. Summary financial information of consolidated VIEs is as follows (in millions):

	September 27, 2019				September 28, 2018
Current assets	$	192.6			$	161.9
Non-Current assets	—				0.3
Total assets	$	192.6			$	162.2
Current liabilities	$	138.5			$	85.7
Non-current liabilities	—				—
Total liabilities	$	138.5			$	85.7

	For the Years Ended
	September 27, 2019				September 28, 2018				September 29, 2017
Revenue	$	571.6			$	481.4			$	72.5
Direct cost of contracts	(526.7		)		(452.9		)		(71.8		)
Gross profit	$	44.9			$	28.5			$	0.7
Net earnings	$	45.2			$	28.4			$	0.7

Unconsolidated joint ventures are accounted for under the equity method or proportionate consolidation. 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 $61.1 million and $63.7 million as of September 27, 2019, respectively and $85.1 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 is 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 their 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 September 27, 2019, the Company’s equity method investments exceeded its share of venture net assets by $71.8 million. Our investments in equity method joint ventures on the Consolidated Balance Sheets as of September 27, 2019 and September 28, 2018 was a net asset of $157.9 million and $150.1 million, respectively. During the years ended September 27, 2019, September 28, 2018, and September 29, 2017, we recognized income from equity method joint ventures of $48.5 million, $47.9 million, and $38.1 million, respectively.

Summary financial information of unconsolidated joint ventures accounted for under the equity method, as derived from their unaudited financial statements, is as follows (in millions):

	September 27, 2019				September 28, 2018
Current assets	$	1,443.5			$	1,509.8
Non-Current assets	29.9				32.8
Total assets	$	1,473.4			$	1,542.6
Current liabilities	$	692.1			$	832.9
Non-current liabilities	473.6				664.0
Total liabilities	1,165.7				1,496.9
Joint ventures' equity	307.7				45.7
Total liabilities & joint venture equity	$	1,473.4			$	1,542.6

F-33

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

	For the Years Ended
	September 27, 2019				September 28, 2018				September 29, 2017
Revenue	$	3,533.1			$	3,165.0			$	1,853.7
Direct cost of contracts	(3,176.2		)		(2,902.5		)		(1,706.6		)
Gross profit	$	356.9			$	262.5			$	147.1
Net earnings	$	227.0			$	221.1			$	130.3

Accounts receivable from unconsolidated joint ventures accounted for under the equity method is $19.5 million and $11.1 million as of September 27, 2019 and September 28, 2018, respectively.

In July 2019, the Company sold 10% of its share of the equity method investment in Jasara, a Saudi Arabia joint venture. The Company sold the participation percentage for $1.2 million and recognized a $0.4 million gain on the sale.

9. Restructuring and Other Charges

During fiscal 2019, the Company implemented certain restructuring and pre-separation initiatives associated with the sale of the ECR business, the acquisition of KeyW and other related cost reduction initiatives. The restructuring activities and related costs were comprised mainly of separation 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 ECR-business separation.

During the fourth fiscal quarter of 2017, the Company implemented certain restructuring and pre-integration plans associated with the pending acquisition of CH2M, which closed on December 15, 2017. The restructuring activities and related costs under these plans 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 integration management efforts. Following the closing of the CH2M acquisition, these activities have continued through fiscal 2019 and continue to be comprised mainly of severance, lease abandonment, IT related, consulting and other professional services as well as internal personnel costs.

The activities of the above-mentioned programs are expected to be substantially completed before the end of fiscal 2020.

During fiscal 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 referred to these initiatives, in the aggregate, as the “2015 Restructuring”. During fiscal 2017, the Company entered into strategic business restructuring activities associated with realignment of its Europe, United Kingdom ("U.K.") and Middle East regional operations in our PPS segment. These activities were completed in fiscal 2017.

Collectively, the above-mentioned restructuring activities are referred to as “Restructuring and other charges”.

F-34

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table summarizes the impacts of the Restructuring and other charges by LOB in connection with the CH2M and KeyW acquisitions and the ECR sale for the year ended September 27, 2019, the CH2M acquisition for the year ended September 28, 2018 and the 2015 Restructuring and realignment of the Company's Europe, U.K. and Middle East regional operations for the year ended September 29, 2017 (in thousands):

	September 27, 2019				September 28, 2018				September 29, 2017
Critical Mission Solutions	$	17,989			$	20,254			2,356
People & Places Solutions	108,835				56,238				47,743
Corporate (1)	184,646				77,148				42,781
Continuing Operations	311,470				153,640				92,880
Energy, Chemicals and Resources (included in Discontinued Operations)	(138		)		37,166				42,558
Total	$	311,332			$	190,806			$	135,438

(1)	Includes $35.0 million in pre-tax gains associated with the Company's CH2M retiree medical plan settlement during the year ended September 27, 2019.

The activity in the Company’s accrual for the Restructuring and other charges, other than the 2015 Restructuring and the realignment of the Company's Europe, U.K. and Middle East regional operations, as these are no longer active programs, for the year ended September 27, 2019 is as follows (in thousands):

Balance at Balance at September 28, 2018	$	102,297
ECR Sale Transfer	(6,884		)
Net Charges (1)	311,470
Payments & Usage	(244,181		)
Balance at September 27, 2019	$	162,702

(1)	Includes $35.0 million in pre-tax gains associated with the Company's CH2M retiree medical plan settlement during the year ended September 27, 2019.

The following table summarizes the Restructuring and other charges by major type of costs in connection with the CH2M and KeyW acquisitions and the ECR sale for the year ended September 27, 2019, the CH2M acquisition for the year ended September 28, 2018 and the 2015 Restructuring and realignment of the Company's Europe, U.K. and Middle East regional operations for the year ended September 29, 2017 (in thousands):

	September 27, 2019				September 28, 2018				September 29, 2017
Lease Abandonments	$	99,976			$	61,526			$	40,575
Involuntary Terminations	33,742				29,056				34,797
Outside Services	133,148				35,987				4,236
Other (1)	44,604				27,071				13,272
Total	$	311,470			$	153,640			$	92,880

(1)	Includes $35.0 million in pre-tax gains associated with the Company's CH2M retiree medical plan settlement during the year ended September 27, 2019.

F-35

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Cumulative amounts incurred to date for Restructuring and other charges by each major type of cost, other than the 2015 Restructuring and the realignment of the Company's Europe, U.K. and Middle East regional operations, as these are no longer active programs, as of September 27, 2019 are as follows (in thousands):

Lease Abandonments	$	161,501
Involuntary Terminations	75,678
Outside Services	169,135
Other (1)	71,428
Total	$	477,742

(1)	Includes $35.0 million in pre-tax gains associated with the Company's CH2M retiree medical plan settlement during the year ended September 27, 2019.

10. Borrowings

Short-Term Debt

At September 27, 2019, short-term debt consisted of a bilateral term loan facility and uncommitted credit arrangements with several banks providing short-term borrowing capacity and overdraft protection with an aggregate principal balance of $200.0 million. Offset from the term loan are deferred financing fees of $0.1 million.

On June 12, 2019, Jacobs entered into a $200.0 million bilateral term loan facility. This facility incurs interest at LIBOR plus a margin of 1% and matures in June 2020. Amounts outstanding under the bilateral 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. The Company was in compliance with the covenants under the bilateral term loan facility at September 27, 2019.

Long-term Debt

The following table presents certain information regarding the Company’s long-term debt at September 27, 2019 and September 28, 2018 (dollars in thousands):

	Interest Rate		Maturity		September 27, 2019				September 28, 2018
New Credit Agreement	LIBOR + applicable margin (1)		March 2024		$	303,780			$	—
Revolving Credit Facility	LIBOR + applicable margin (2)		February 2020		—				149,129
Term Loan Facility	LIBOR + applicable margin (3)		December 2020		400,000				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					(2,535		)		(4,998		)
Other	Varies		Varies		—				36
Total Long-term debt, net					$	1,201,245			$	2,144,167

(1)

Depending on the Company’s Consolidated Leverage Ratio (as defined in the credit agreement governing the New Credit Agreement (defined below)), 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 rate, including applicable margin, at September 27, 2019 was approximately 1.00%.

(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, including applicable margin, at September 28, 2018 were approximately 1.38% to 3.47%.

(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 rate, including applicable margin, at September 27, 2019 and September 28, 2018 was approximately 3.05% and 3.71%, respectively.

F-36

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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 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 sale and (ii) eliminate the net worth covenant upon the removal of the same covenant from the Company’s existing Note Purchase Agreement (defined below). The Company was in compliance with the covenants under the New Credit Agreement at September 27, 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.

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 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. The Company was in compliance with the covenants under the Term Loan Facility at September 27, 2019.

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 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. The Company was in compliance with the covenants under the Note Purchase Agreement at September 27, 2019.

We believe the carrying value of the New Credit Agreement, the Term Loan Facility, the Bilateral Term Loan 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 $532.9 million at September 27, 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 $2.3 million in letters of credit under the New Credit Agreement, leaving $1.94 billion of available borrowing capacity under the New Credit Agreement at September 27, 2019. In addition, the Company had issued $259.9 million under separate, committed and uncommitted letter-of-credit facilities for total issued letters of credit of $262.2 million at September 27, 2019.

F-37

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table presents the amount of interest paid by the Company during September 27, 2019, September 28, 2018 and September 29, 2017 (in thousands):

For the Years Ended
September 27, 2019		September 28, 2018		September 29, 2017
$81,582		$68,467		$12,862

11. 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 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.

F-38

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table presents how the adoption of ASC Topic 606 affected certain line items in the Consolidated Statements of Earnings:

	Year Ended
	September 27, 2019
(in thousands)	Recognition Under Previous Guidance				Impact of the Adoption of ASC Topic 606				Recognition Under ASC Topic 606
Revenues	$	12,714,710			$	23,158			$	12,737,868
Direct costs of contracts	(10,260,840		)		—				(10,260,840		)
Gross profit	2,453,870				23,158				2,477,028
Selling, general and administrative expenses	(2,072,177		)		—				(2,072,177		)
Operating Profit	381,693				23,158				404,851
Earnings from Continuing Operations Before Taxes	327,801				23,158				350,959
Income tax expense for Continuing Operations	(32,308		)		(4,646		)		(36,954		)
Net Earnings of the Group from Continuing Operations	295,493				18,512				314,005
Net Earnings of the Group from Discontinued Operations	554,464				4,750				559,214
Net Earnings of the Group	849,957				23,262				873,219
Net Earnings Attributable to Jacobs from Continuing Operations	272,448				18,512				290,960
Net Earnings Attributable to Jacobs from Discontinued Operations	552,269				4,750				557,019
Net Earnings Attributable to Jacobs	$	824,717			$	23,262			$	847,979

The following table presents how the adoption of ASC Topic 606 affected certain line items in the Consolidated Balance Sheets:

	September 27, 2019
(in thousands)	Recognition Under Previous Guidance				Impact of the Adoption of ASC Topic 606				Recognition Under ASC Topic 606
Receivables and contract assets (previously presented as Receivables)	$	2,839,813			$	396			$	2,840,209
Current assets held for sale	$	952			$	—			$	952
Miscellaneous noncurrent assets	$	917,448			$	754			$	918,202
Contract Liabilities (previously presented as Billings in excess of costs)	$	410,464			$	3,744			$	414,208
Current liabilities held for sale	$	2,573			$	—			$	2,573

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. Our contracts are with many different customers in numerous industries. Refer to Note 19- Segment Information for additional information on how we disaggregate our revenues by reportable segment and for a disaggregation of our revenue by geographic area.

Contract Liabilities

Contract liabilities represent amounts billed to clients in excess of revenue recognized to date. Amounts classified as “Billings in excess of costs” on the Consolidated Balance Sheets of our 2018 Form 10-K have been renamed to “Contract liabilities” on the Consolidated Balance Sheets.

The increase in contract liabilities was a result of normal business activity and not materially impacted by any other factors. Revenue recognized for the year ended September 27, 2019 that was included in the contract liability balance on September 28, 2018 was $350.3 million.

F-39

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Remaining Performance Obligations

The Company’s remaining performance obligations as of September 27, 2019 represent a measure of the total dollar value of work to be performed on contracts awarded and in progress. The Company had approximately $13.4 billion in remaining performance obligations as of September 27, 2019. The Company expects to recognize 48.0% of our remaining performance obligations within the next twelve months and the remaining 52.0% thereafter.

Although remaining performance obligations reflect business that is considered to be firm, cancellations, scope adjustments, foreign currency exchange fluctuations or deferrals may occur that impact their volume or the expected timing of their recognition. Remaining performance obligations are adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate.

12. Pension and Other Postretirement Benefit Plans

Company-Only Sponsored Plans

We sponsor various defined benefit pension and other post retirement plans covering employees of certain U.S. and international subsidiaries. The pension plans provide pension benefits that are based on the employee’s compensation and years of service. Our funding policy varies by country and plan according to applicable local funding requirements and plan-specific funding agreements.

The accounting for pension and other post-retirement benefit plans requires the use of assumptions and estimates in order to calculate periodic benefit cost and the value of the plans’ assets and benefit obligations. These assumptions include discount rates, investment returns, and projected salary increases, among others. The discount rates used in valuing the plans' benefit obligations were determined with reference to high quality corporate and government bonds that are appropriately matched to the duration of each plan's obligations. The expected long-term rate of return on plan assets is generally based on using country-specific simulation models which select a single outcome for expected return based on the target asset allocation. The expected long-term rates of return used in the valuation are the annual average returns generated by these assumptions over a 20-year period for each asset class based on the expected long-term rate of return of the underlying assets.

As a result of the ECR sale, ECR-related pension assets and liabilities that have been sold are reported as discontinued operations in accordance with ASC 210-05, Discontinued Operations. However, the 2018 Non-U.S Plans balances have not been restated to exclude ECR pension plan activity, rather activity for the two years is shown in the appropriate rows and the balances as of the sale date are shown in the Disposition of ECR Plans rows below.

The following table sets forth the changes in the plans’ combined net benefit obligation (segregated between plans existing within and outside the U.S.) for the years ended September 27, 2019 and September 28, 2018 (in thousands):

	U.S. Plans								Non-U.S. Plans**(1)**
	September 27, 2019				September 28, 2018				September 27, 2019				September 28, 2018
Net benefit obligation at the beginning of the year	$	448,402			$	169,942			$	2,149,246			$	1,306,807
Service cost	2,784				4,765				7,171				8,269
Interest cost	16,697				13,778				52,627				49,324
Participants’ contributions	243				839				367				451
Actuarial (gains)/losses	52,720				(30,730		)		314,889				(43,595		)
Benefits paid	(30,648		)		(27,914		)		(72,453		)		(75,711		)
Curtailments/settlements/plan amendments	(39,388		)		(9,434		)		30,124				(6,136		)
Acquisition of CH2M Plans	—				327,156				—				924,233
Disposition of ECR Plans	—				—				(99,504		)		—
Effect of exchange rate changes and other, net	(2,270		)		—				(124,338		)		(14,396		)
Net benefit obligation at the end of the year	$	448,540			$	448,402			$	2,258,129			$	2,149,246

F-40

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table sets forth the changes in the combined Fair Value of the plans’ assets (segregated between plans existing within and outside the U.S.) for the years ended September 27, 2019 and September 28, 2018 (in thousands):

	U.S. Plans								Non-U.S. Plans**(1)**
	September 27, 2019				September 28, 2018				September 27, 2019				September 28, 2018
Fair value of plan assets at the beginning of the year	$	390,829			$	147,788			$	1,867,481			$	1,076,928
Actual return on plan assets	31,140				9,891				280,785				(19,883		)
Employer contributions	10,668				58,097				32,063				31,556
Participants’ contributions	243				839				367				451
Gross benefits paid	(30,648		)		(27,914		)		(72,453		)		(75,711		)
Curtailments/settlements/plan amendments	(9,751		)		(9,434		)		(5,814		)		(5,496		)
Acquisition of CH2M Plans	—				211,562				—				869,414
Disposition of ECR Plans	—				—				(76,111		)		—
Effect of exchange rate changes and other, net	(2,271		)		—				(109,681		)		(9,778		)
Fair value of plan assets at the end of the year	$	390,210			$	390,829			$	1,916,637			$	1,867,481

During fiscal 2019, the Company incurred combined curtailment and settlement gains on our defined benefit plans of approximately $33.1 million primarily related to our CH2M retiree medical (further discussed below) and Ireland. During fiscal 2018, the Company incurred combined curtailment and settlement losses on its defined benefit plans of approximately $5.4 million primarily related to its Sverdrup and Ireland pension plans.

The following table reconciles the combined funded statuses of the plans recognized in the accompanying Consolidated Balance Sheets at September 27, 2019 and September 28, 2018 (segregated between plans existing within and outside the U.S.) (in thousands):

	U.S. Plans								Non-U.S. Plans (1)
	September 27, 2019				September 28, 2018				September 27, 2019				September 28, 2018
Net benefit obligation at the end of the year	$	448,540			$	448,402			$	2,258,129			$	2,149,246
Fair value of plan assets at the end of the year	390,210				390,829				1,916,637				1,867,481
Under funded amount recognized at the end of the year	$	58,330			$	57,573			$	341,492			$	281,765

The following table presents the accumulated benefit obligation at September 27, 2019 and September 28, 2018 (segregated between plans existing within and outside the U.S.) (in thousands):

	U.S. Plans								Non-U.S. Plans (1)
	September 27, 2019				September 28, 2018				September 27, 2019				September 28, 2018
Accumulated benefit obligation at the end of the year	$	447,609			$	447,549			$	2,244,710			$	2,123,839

The following table presents the amounts recognized in the accompanying Consolidated Balance Sheets at September 27, 2019 and September 28, 2018 (segregated between plans existing within and outside the U.S.) (in thousands):

F-41

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

	U.S. Plans								Non-U.S. Plans (1)
	September 27, 2019				September 28, 2018				September 27, 2019				September 28, 2018
Prepaid benefit cost included in noncurrent assets	$	—			$	—			$	2,939			$	19,736
Accrued benefit cost included in current liabilities	85				2,548				4,177				3,671
Accrued benefit cost included in noncurrent liabilities	58,245				55,025				340,254				297,830
Net amount recognized at the end of the year	$	58,330			$	57,573			$	341,492			$	281,765

The following table presents the significant actuarial assumptions used in determining the funded statuses and the following year's benefit cost of the Company’s U.S. plans for the years ended September 27, 2019, September 28, 2018 and September 29, 2017:

	For the Years Ended
	September 27, 2019		September 28, 2018		September 29, 2017
Discount rates	2.8% to 3.1%		3.9% to 4.2%		3.5	%
Rates of compensation increases	3.5%		3.5%		—	%
Return on Assets	5.1%		5.8% to 5.9%		7.5	%

The following table presents the significant actuarial assumptions used in determining the funded statuses and the following year's benefit cost of the Company’s non-U.S. plans for the years ended September 27, 2019, September 28, 2018 and September 29, 2017:

	For the Years Ended
	September 27, 2019		September 28, 2018		September 29, 2017
Discount rates	0.2% to 7.1%		1.3% to 8.1%		1.3% to 7.0%
Rates of compensation increases	3.7% to 7.5%		3.8% to 7.5%		5.5% to 7.5%
Expected long-term rates of return on assets	2.3% to 7.5%		3.8% to 7.5%		5.3% to 8.5%

The following table presents certain amounts relating to our U.S. plans recognized in accumulated other comprehensive (gain) loss at September 27, 2019, September 28, 2018 and September 29, 2017 (in thousands):

	September 27, 2019				September 28, 2018				September 29, 2017
Arising during the period:
Net actuarial (gain) loss	$	36,108			$	(7,514	)		$	(11,372	)
Reclassification adjustments:
Net actuarial losses	(2,282		)		(2,913		)		(2,431		)
Total	$	33,826			$	(10,427	)		$	(13,803	)

The following table presents certain amounts relating to our non-U.S. plans recognized in accumulated other comprehensive (gain) loss at September 27, 2019, September 28, 2018 and September 29, 2017 (in thousands):

F-42

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

	September 27, 2019				September 28, 2018				September 29, 2017
Arising during the period:
Net actuarial (gain) loss	$	83,368			$	59,827			$	(76,860	)
Net (gain) loss on Sale of ECR	(12,520		)		—				—
Prior service cost (benefit)	29,829				215				119
Total	100,677				60,042				(76,741		)
Reclassification adjustments:
Net actuarial losses	(6,546		)		(5,507		)		(8,732		)
Prior service cost	(1,075		)		181				229
Total	(7,621		)		(5,326		)		(8,503		)
Total	$	93,056			$	54,716			$	(85,244	)

The following table presents certain amounts relating to our plans recorded in accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit cost at September 27, 2019 and September 28, 2018 (segregated between U.S. and non-U.S. plans) (in thousands):

	U.S. Plans								Non-U.S. Plans
	September 27, 2019				September 28, 2018				September 27, 2019				September 28, 2018
Net actuarial loss	$	71,083			$	37,255			$	365,661			$	273,312
Prior service cost	—				—				28,346				(700		)
Total	$	71,083			$	37,255			$	394,007			$	272,612

The following table presents the amount of accumulated comprehensive income that will be amortized against earnings as part of our net periodic benefit cost in fiscal 2020 based on 2019 exchange rates (segregated between U.S. and non-U.S. plans) (in thousands):

	U.S. Plans				Non-U.S. Plans
Unrecognized net actuarial loss	$	3,546			$	7,500
Unrecognized prior service cost	—				1,392
Accumulated comprehensive loss to be recorded against earnings	$	3,546			$	8,892

We consider various factors in developing the estimates for the expected, long-term rates of return on plan assets. These factors include the projected, long-term rates of returns on the various types of assets in which the plans invest, as well as historical returns. In general, investment allocations are determined by each plan’s trustees and/or investment committees. The objectives of the plans’ investment policies are to (i) maximize returns while preserving capital; (ii) provide returns sufficient to meet the current and long-term obligations of the plan as the obligations become due; and (iii) maintain a diversified portfolio of assets so as to reduce the risk associated with having a disproportionate amount of the plans’ total assets invested in any one type of asset, issuer or geography. None of our pension plans hold Jacobs common stock directly (although some plans may hold shares indirectly through investments in mutual funds). The plans’ weighted average asset allocations at September 27, 2019 and September 28, 2018 (the measurement dates used in valuing the plans’ assets and liabilities) were as follows:

	U.S. Plans						Non-U.S. Pans
	September 27, 2019			September 28, 2018			September 27, 2019			September 28, 2018
Equity securities	3	%		27	%		20	%		24	%
Debt securities	58	%		39	%		52	%		49	%
Real estate investments	—	%		—	%		7	%		8	%
Other	39	%		34	%		21	%		19	%

F-43

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table presents the Fair Value of the Company’s Domestic U.S. plan assets at September 27, 2019, segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands):

	September 27, 2019
	Fair Value, Determined Using Fair Value Measurement Inputs
	Level 1				Level 2				Level 3				Investments measured at Net Asset Value				Total
Domestic equities	$	10,890			$	—			$	—			$	—			$	10,890
Overseas equities	—				—				—				—				—
Domestic bonds	65,490				134,594				—				—				200,084
Overseas bonds	—				20,020				—				—				20,020
Cash and equivalents	28,972				—				—				—				28,972
Mutual funds	130,244				—				—				—				130,244
Hedge funds	—				—				—				—				—
Total	$	235,596			$	154,614			$	—			$	—			$	390,210

The following table presents the Fair Value of the Company’s non-U.S. plan assets at September 27, 2019, segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands):

	September 27, 2019
	Fair Value, Determined Using Fair Value Measurement Inputs
	Level 1				Level 2				Level 3				Investments measured at Net Asset Value				Total
Domestic equities	$	—			$	17,255			$	—			$	19,413			$	36,668
Overseas equities	—				182,600				—				50,127				232,727
Domestic bonds	—				306,225				—				34,408				340,633
Overseas bonds	—				728,616				—				39,292				767,908
Cash and equivalents	37,811				(16		)		—								37,795
Real estate	—				24,735				97,539				15,198				137,472
Insurance contracts	—				4,478				72,788								77,266
Derivatives	—				—				—								—
Hedge funds	—				—				130,200				7,156				137,356
Mutual funds	—				148,812				—				—				148,812
Total	$	37,811			$	1,412,705			$	300,527			$	165,594			$	1,916,637

F-44

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table presents the Fair Value of the Company’s U.S. plan assets at September 28, 2018, segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands):

	September 28, 2018
	Fair Value, Determined Using Fair Value Measurement Inputs
	Level 1				Level 2				Level 3				Investments measured at Net Asset Value				Total
Domestic equities	$	13,861			$	63,937			$	—			$	—			$	77,798
Overseas equities	26,699				—				—				—				26,699
Domestic bonds	84,894				58,229				—				—				143,123
Overseas bonds	938				9,570				—				—				10,508
Cash and equivalents	6,631				—				—				—				6,631
Mutual funds	126,042				—				—				—				126,042
Hedge funds	—				—				—				28				28
Total	$	259,065			$	131,736			$	—			$	28			$	390,829

The following table presents the Fair Value of the Company’s non-U.S. plan assets at September 28, 2018, segregated by level of Fair Value measurement inputs within the Fair Value hierarchy promulgated by U.S. GAAP (in thousands):

	September 28, 2018
	Fair Value, Determined Using Fair Value Measurement Inputs
	Level 1				Level 2				Level 3				Investments measured at Net Asset Value				Total
Domestic equities	$	—			$	31,868			—				36,642				$	68,510
Overseas equities	—				327,309				—				44,675				371,984
Domestic bonds	252				222,282				—				1,080				223,614
Overseas bonds	—				641,966				—				60,804				702,770
Cash and equivalents	33,482				7,822				—								41,304
Real estate	—				26,987				99,587				17,568				144,142
Insurance contracts	—				4,188				95,782								99,970
Derivatives	69				(26,656		)		—								(26,587		)
Hedge funds	—				—				135,786				8,047				143,833
Mutual funds	—				97,941				—								97,941
Total	$	33,803			$	1,333,707			$	331,155			$	168,816			$	1,867,481

The following table summarizes the changes in the Fair Value of the Company’s U.S. plans’ Level 3 assets for the years ended September 28, 2018 and September 27, 2019 (in thousands):

	Hedge Funds
Balance at September 29, 2017	$	6,176
Purchases, sales and settlements	(6,176		)
Realized and unrealized gains	—
Balance at September 28, 2018	$	—

F-45

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table summarizes the changes in the Fair Value of the Company’s non-U.S. Pension Plans’ Level 3 assets for the years ended September 28, 2018 and September 27, 2019 (in thousands):

	Real Estate				Insurance Contracts				Hedge Funds
Balance at Balance at September 29, 2017	$	58,974			$	74,353			$	303,729
Purchases, sales, and settlements	42,711				21,626				(154,446		)
Realized and unrealized gains	(784		)		1,551				(6,650		)
Effect of exchange rate changes	(1,314		)		(1,748		)		(6,847		)
Balance at September 28, 2018	$	99,587			$	95,782			$	135,786
Purchases, sales, and settlements	(17,902		)		(5,126		)		(26,591		)
Realized and unrealized gains (losses)	21,838				9,134				29,161
Disposition of ECR Assets	—				(22,885		)		—
Effect of exchange rate changes	(5,984		)		(4,117		)		(8,156		)
Balance at September 27, 2019	$	97,539			$	72,788			$	130,200

The following table presents the amount of cash contributions we anticipate making into the plans during fiscal 2020 (in thousands):

	U.S. Plans				Non-U.S. Plans
Anticipated cash contributions	$	—			$	28,282

The following table presents the total benefit payments expected to be paid to plan participants during each of the next five fiscal years, and in total for the five years thereafter (in thousands):

	U.S. Plans				Non-U.S. Pans
2020	$	35,064			$	65,131
2021	33,225				64,968
2022	32,230				66,765
2023	31,594				68,097
2024	30,431				68,636
For the periods 2025 through 2029	137,252				388,015

The following table presents the components of net periodic benefit cost for the Company’s U.S. plans recognized in the accompanying Consolidated Statements of Earnings for the years ended September 27, 2019, September 28, 2018 and September 29, 2017 (in thousands):

	September 27, 2019				September 28, 2018				September 29, 2017
Service cost	$	2,784			$	4,765			$	1,000
Interest cost	16,697				13,778				5,757
Expected return on plan assets	(21,508		)		(19,663		)		(9,942		)
Actuarial loss	3,026				3,845				3,985
Prior service cost	—				—				—
Net pension cost, before special items	$	999			$	2,725			$	800
Curtailment expense/Settlement (gain) loss	(35,020		)		4,146				1,781
Total net periodic pension cost recognized	$	(34,021	)		$	6,871			$	2,581

The following table presents the components of net periodic benefit cost for the Company’s Non-U.S. plans recognized in the accompanying Consolidated Statements of Earnings for the years ended September 27, 2019, September 28, 2018 and September 29, 2017 (in thousands):

F-46

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

	September 27, 2019				September 28, 2018				September 29, 2017
Service cost	$	7,171			$	8,269			$	7,509
Interest cost	52,627				49,324				31,205
Expected return on plan assets	(82,274		)		(83,328		)		(56,269		)
Actuarial loss	7,854				6,655				10,616
Prior service cost	1,263				(257		)		(329		)
Net pension cost, before special items	$	(13,359	)		$	(19,337	)		$	(7,268	)
Curtailment expense/Settlement (gain) loss	1,933				1,268				(298		)
Total net periodic pension (income) cost recognized	$	(11,426	)		$	(18,069	)		$	(7,566	)
Total net periodic pension (income) cost recognized from Discontinued Operations	$	2,282			$	3,606			$	3,279
Total net periodic pension (income) cost recognized from Continuing Operations	$	(13,708	)		$	(21,675	)		$	(10,845	)

As a result of the adoption of ASU 2017-07, Compensation- Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost in the first quarter of fiscal 2019, the service cost component of net periodic pension expense has been presented in the same line item as other compensation costs (direct cost of contracts and selling, general and administrative expenses) and the other components of net periodic pension expense have been reclassified from selling, general and administrative expense and direct cost of contracts and instead presented in miscellaneous income (expense), net on the Consolidated Statements of Earnings for the years ended September 27, 2019, September 28, 2018 and September 29, 2017 in the amounts of $24.4 million, $24.2 million and $13.5 million, respectively.

In the first quarter of fiscal 2019, the Company elected to discontinue the CH2M Hill Retiree Medical Plan and the OMI Retiree Medical Plan, effective December 31, 2018. Lump sum payments were made to participants in fiscal 2019, resulting in a plan settlement and related settlement gain of $35.0 million recognized in fiscal 2019.

On January 1, 2019, the CH2M Hill Pension Plan and the CH2M Hill IDC Pension Plan merged into the Company's Sverdrup Pension Plan. The newly combined plan is called the Jacobs Consolidated Pension Plan.

Due to a recent ruling by the High Court in the United Kingdom regarding equalization between men and women of a tranche of pension (the Guaranteed Minimum Pension) accrued between 1990 and 1997, Jacobs measured the estimated impact of this ruling in its consolidated financial statements, resulting in an increase of approximately $38.2 million in the ASC 715 balance sheet liability in fiscal 2019, with an offset to other comprehensive income, net of tax. Additionally, the Company has recognized an additional $1.5 million in additional net periodic benefit cost during the year ended September 27, 2019 as a result of the ruling.

Multiemployer Plans

In Canada and the U.S., we contribute to various trusteed pension plans covering hourly construction employees under industry-wide agreements. We also contribute to various trusteed plans in Australia and certain countries in Europe covering both hourly and certain salaried employees. Contributions are based on the hours worked by employees covered under these agreements and are charged to direct costs of contracts on a current basis.

The majority of the contributions the Company makes to multiemployer pension plans are outside the U.S. With respect to these multiemployer plans, the Company's liability to fund these plans is generally limited to the contributions we are required to make under collective bargaining agreements.

Based on our review of our multiemployer pension plans under the guidance provided in ASU 2011-09— Compensation-Retirement Benefits-Multiemployer Plans, we have concluded that none of the multiemployer pension plans into which we contribute are individually significant to our Consolidated Financial Statements.

The following table presents the Company’s contributions to these multiemployer plans for the years ended September 27, 2019, September 28, 2018 and September 29, 2017 (in thousands):

F-47

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

	September 27, 2019				September 28, 2018				September 29, 2017
Canada	$	16,625			$	36,354			$	35,182
Europe	9,413				10,677				6,212
United States	7,149				9,536				4,548
Contributions to multiemployer pension plans	$	33,187			$	56,567			$	45,942

Other Benefit Plans

During the second fiscal quarter of 2017, the Company restructured certain employee welfare trust plans benefiting certain of its employees within its India operations by moving these plans under the legal ownership and operation of the Company’s legal entity structure in the region. Historically, the Company structured these plans as separate, stand-alone entities outside of the Company’s consolidated legal entity framework. As a result of these changes, the Company has recorded a one-time, non-cash benefit of $9.9 million reported in selling, general and administrative expense in its Consolidated Statement of Earnings for the year ended September 29, 2017, with corresponding assets in the plans associated with restricted investments of $7.7 million and employee loans receivable of $2.2 million and both recorded in Total other non-current assets in our Consolidated Balance Sheet at September 29, 2017.

13. Savings and Deferred Compensation Plans

Savings Plans

We sponsor various defined contribution savings plans which allow participants to make voluntary contributions by salary deduction. Such plans cover substantially all of our domestic, nonunion employees in the U.S. and are qualified under Section 401(k) of the U.S. Internal Revenue Code. Similar plans outside the U.S. cover various groups of employees of our international subsidiaries and affiliates. Several of these plans allow the Company to match, on a voluntary basis, a portion of the employee contributions. The following table presents the Company’s contributions to these savings plans for the years ended September 27, 2019, September 28, 2018 and September 29, 2017 (in thousands):

September 27, 2019				September 28, 2018				September 29, 2017
$	103,375			$	113,135			$	82,882

Deferred Compensation Plans

Our Executive Security Plan, Executive Deferral Plans, Directors Deferral Plan, legacy CH2M Supplemental Executive Retirement and Retention Plan and legacy CH2M Deferred Compensation Plan are non-qualified deferred compensation programs that provide benefits payable to directors, officers, and certain key employees or their designated beneficiaries at specified future dates, upon retirement, or death. The plans are unfunded; therefore, benefits are paid from the general assets of the Company. Participants' cash deferrals earn a return based on the participants' selection of investments in several hypothetical investment options. Participants are also able to defer stock based compensation in the plans, which must remain invested in Company stock and are distributed in shares of Jacobs common stock. Since no investment diversification is permitted, changes in the fair value of Jacobs' common stock are not recognized. For the deferred compensation held in company stock, the number of shares needed to settle the liability is included in the denominator in both the basic and diluted earnings per share calculations. The following table presents the amount charged to expense for the Company’s deferred compensation plans for the years ended September 27, 2019, September 28, 2018 and September 29, 2017 (in thousands):

September 27, 2019				September 28, 2018				September 29, 2017
$	2,395			$	4,445			$	4,368

F-48

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

14.	Accumulated Other Comprehensive Income

The following table presents the Company's roll forward of accumulated income (loss) after-tax for the years ended September 27, 2019 and September 28, 2018 (in thousands):

	Change in Pension and Retiree Medical Plan Liabilities				Foreign Currency Translation Adjustment				Gain/(Loss) on Cash Flow Hedges				Total
Balance at September 29, 2017	$	(265,578	)		$	(386,140	)		$	(1,796	)		$	(653,514	)
Other comprehensive income (loss)	(52,528		)		(119,070		)		618				(170,980		)
Reclassifications from other comprehensive income (loss)	8,239				9,193				359				17,791
Balance at September 28, 2018	$	(309,867	)		$	(496,017	)		$	(819	)		$	(806,703	)
Other comprehensive income (loss)	(104,434		)		(84,456		)		990				(187,900		)
Reclassifications from other comprehensive income (loss)	(22,448		)		100,428				(189		)		77,791
Balance at September 27, 2019	$	(436,749	)		$	(480,045	)		$	(18	)		$	(916,812	)

F-49

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

15.	Income Taxes

The following table presents the components of our consolidated income tax expense for continuing operations for years ended September 27, 2019, September 28, 2018 and September 29, 2017 (in thousands):

	For the Years Ended
	September 27, 2019				September 28, 2018				September 29, 2017
Current income tax (benefit) expense from continuing operations:
Federal	$	25,549			$	49,829			$	22,825
State	6,639				(1,546		)		7,481
Foreign	57,156				20,858				9,194
Total current tax expense from continuing operations	89,344				69,141				39,500
Deferred income tax expense (benefit) from continuing operations:
Federal	6,607				230,358				22,854
State	20,408				17,318				1,832
Foreign	(79,405		)		8,815				8,917
Total deferred tax expense (benefit) from continuing operations	$	(52,390	)		$	256,491			$	33,603
Consolidated income tax expense from continuing operations	$	36,954			$	325,632			$	73,103

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”) was enacted in the United States and significantly revised the U.S. corporate income tax laws. Given the significance of the legislation, the SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118), which allows registrants to record provisional amounts during a one year “measurement period” like that used when accounting for business combinations. As of December 22, 2018, we have completed our accounting for the tax effects of the enactment of the Act. For the deferred tax balances, we remeasured the U.S. deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. The Company’s revised remeasurement resulted in cumulative charges to income tax expense of $144.4 million attributable to fiscal year 2018. Additionally, in fiscal year 2019, the Company recorded $24.4 million of tax expense associated with the revaluation of U.S. net operating losses that were expected to be recovered at 35%, but were actually utilized at 21%.

The Act calls for a one-time tax on deemed repatriation of foreign earnings. This one-time transition tax is based on our total post-1986 earnings and profits (E&P) of certain of our foreign subsidiaries. The Company has made a revised provisional estimate of the transition tax. In fiscal 2019, the Company filed its tax return which reflected the transition tax. The net tax liability after considering foreign tax credits resulted in a tax liability of $0.8 million.

In the prior fiscal year, the Company adopted ASU No 2018-02*, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income*. The guidance gives entities the option to reclassify to retained earnings tax effects related to items in accumulated other comprehensive income that the FASB refers to as having been stranded in accumulated other comprehensive income as a result of tax reform. As a result of adoption of ASU 2018-02, the Company reclassified $10.2 million in accumulated other comprehensive income to retained earnings relating to the fiscal 2018 year deferred tax activity for its U.S. pension plans resulting from the Act.

Deferred taxes reflect the tax effects of temporary differences between the amounts recorded as assets and liabilities for financial reporting purposes and the comparable amounts recorded for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

F-50

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table presents the components of our net deferred tax assets at September 27, 2019 and September 28, 2018 (in thousands):

	September 27, 2019				September 28, 2018
Deferred tax assets:
Obligations relating to:
Defined benefit pension plans	$	56,854			$	39,777
Other employee benefit plans	149,276				135,713
Net operating losses	241,033				149,256
Foreign tax credit	84,553				145,931
Other credits	13,881				13,972
Contract revenues and costs	62,318				144,383
Deferred rent	21,847				5,654
Restructuring	8,205				5,289
Other	3,821				—
Valuation allowance	(153,257		)		(256,948		)
Gross deferred tax assets	488,531				383,027
Deferred tax liabilities:
Depreciation and amortization	(177,002		)		(159,312		)
Self-insurance programs					—
Unremitted earnings	(29,761		)		(48,578		)
Other, net	(246		)		(8,345		)
Gross deferred tax liabilities	(207,009		)		(216,235		)
Net deferred tax assets	$	281,522			$	166,792

A valuation allowance is recorded to reduce deferred tax assets to the amount that is more likely than not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts. The valuation allowance was $153.3 million at September 27, 2019 and $256.9 million at September 28, 2018. Of the $103.7 million decrease in the valuation allowance, $85.4 million relates to the direct net write-off of the gross deferred tax asset which has no impact on income tax expense. The remaining decrease includes $29.1 million related to a change in judgment in the realizability of certain deferred tax assets in the current year which resulted in a benefit recorded to income tax expense, offset by a $10.9 million increase associated with acquisitions.

Net operating loss carry forwards of foreign subsidiaries at September 27, 2019 and September 28, 2018 totaled $710.5 million and $470.4 million, respectively. In addition, as of September 27, 2019, the Company has U.S. federal net operating loss carryforwards of $234.6 million. The Company's net operating losses have various expiration periods between 2020 and indefinite periods. At September 27, 2019, the Company has foreign tax and research credit carryforwards of $84.6 million and $6.1 million, respectively, expiring between 2022 and 2037.

The following table presents the income tax benefits from continuing operations realized from the exercise of non-qualified stock options and disqualifying dispositions of stock sold under our employee stock purchase plans for the years ended September 27, 2019, September 28, 2018 and September 29, 2017 (in millions):

For the Years Ended
September 27, 2019				September 28, 2018				September 29, 2017
$	7.9			$	2.2			$	1.8

The Company’s consolidated effective income tax rate is lower than the US statutory rate of 21.0% primarily due to a $29.1 million benefit from foreign valuation allowance releases, $15.7 million of foreign tax and other credits generated in the current year, a benefit of $17.9 million from foreign deferred adjustments and a reduction in uncertain tax positions of $6.9 million. The decreases in tax expense were offset by a $36.6 million charge from the remeasurement of net deferred tax assets and other miscellaneous U.S. tax reform charges.

F-51

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table reconciles total income tax expense from continuing operations using the statutory U.S. federal income tax rate to the consolidated income tax expense for continuing operations shown in the accompanying Consolidated Statements of Earnings for the years ended September 27, 2019, September 28, 2018 and September 29, 2017 (dollars in thousands):

	For the Years Ended
	September 27, 2019				%			September 28, 2018				%			September 29, 2017				%
Statutory amount	$	73,701			21.0	%		$	81,421			24.6	%		$	85,104			35	%
State taxes, net of the federal benefit	10,183				2.9	%		15,772				4.8	%		6,983				2.9	%
Exclusion of tax on non-controlling interests	(4,839)				(1.4	)%		(2,389		)		(0.7	)%		2,223				0.9	%
Foreign:
Difference in tax rates of foreign operations	1,083				0.3	%		2,815				0.9	%		(880		)		(0.4	)%
Benefit from foreign valuation allowance release	(29,125)				(8.3	)%		(5,088		)		(1.5	)%		(3,085		)		(1.3	)%
Nontaxable income from foreign affiliate	—				—	%		—				—	%		(1,320		)		(0.5	)%
U.S. tax cost (benefit) of foreign operations	(17,760		)		(5.1	)%		4,030				1.2	%		10,147				4.2	%
Tax differential on foreign earnings	(45,802		)		(13.1	)%		1,757				0.6	%		4,862				2.0	%
Foreign tax credits	(15,682)				(4.5	)%		(21,735		)		(6.6	)%		(16,337		)		(6.7	)%
Tax reform	36,674				10.4	%		155,756				47.1	%		—				—
Valuation allowance	(207)				(0.1	)%		104,221				31.5	%		—				—
Uncertain tax positions	(6,883)				(2.0	)%		(1,402		)		(0.4	)%		(5,624		)		(2.3	)%
Other items:
IRS §179D deduction	(2,957)				(0.8	)%		(4,557		)		(1.4	)%		(2,613		)		(1.1	)%
IRS §199D deduction	—				—			—				—	%		(1,647		)		(0.7	)%
Disallowed officer compensation	5,568				1.6	%		1,510				0.5	%		1,255				0.5	%
Stock compensation	(7,864)				(2.2	)%		(2,158		)		(0.7	)%		(1,783		)		(0.7	)%
Foreign partnership income/(loss)	—				—	%		(3,678		)		(1.1	)%		(725		)		(0.3	)%
Other items – net	(4,938)				(1.4	)%		1,114				0.3	%		1,405				0.6	%
Total other items	(10,191)				(2.8	)%		(7,769		)		(2.4	)%		(4,108		)		(1.7	)%
Taxes on income from continuing operations	$	36,954			10.5	%		$	325,632			98.4	%		$	73,103			30.1	%

The Company’s consolidated effective income tax rate for continuing operations for the year ended September 27, 2019 decreased to 10.5% from 98.4% for fiscal 2018. Key drivers for this year over year decrease in the effective tax rate include a reduction of $119.1 million associated with remeasurement of U.S. deferred tax items due to tax reform and a decrease in the amount charged for valuation allowance related to foreign tax credits of $104.2 million.

The Company’s consolidated effective income tax rate for continuing operations for the year ended September 28, 2018 increased to 98.4% from 30.1% for fiscal 2017. Key drivers for this year over year increase include the reduction in the U.S. statutory tax rate in fiscal year 2018 causing a detriment for remeasurement of the deferred tax items in the U.S. of $139.8 million, as well as a charge for valuation allowance related to foreign tax credits of $104.2 million. In addition, there was an increase due to the difference in foreign tax rates compared to the new U.S. statutory rate of $19.8 million. These detriments were partially offset by a $4.6 million benefit related to internal revenue service code section 179D, a nonrecurring benefit of $2.8 million related to tax accounting method changes and a $5.7 million federal hurricane credit.

The following table presents income tax payments made during the years ended September 27, 2019, September 28, 2018 and September 29, 2017 (in millions):

September 27, 2019				September 28, 2018				September 29, 2017
$	291.7			$	44.3			$	78.4

F-52

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

The following table presents the components of our consolidated earnings from continuing operations before taxes for the years ended September 27, 2019, September 28, 2018 and September 29, 2017 (in thousands):

	For the Years Ended
	September 27, 2019				September 28, 2018				September 29, 2017
United States earnings	$	225,898			$	263,991			$	177,599
Foreign earnings	125,061				66,990				65,555
	$	350,959			$	330,981			$	243,154

The tax cost, net of applicable credits, have been provided on the undistributed earnings of the Company’s foreign subsidiaries. As of September 27, 2019, the estimate of repatriating earnings to the United States is estimated at $29.8 million. The Company does not assert any earnings to be permanently reinvested.

The Company accounts for unrecognized tax benefits in accordance with ASC Topic 740, Income Taxes. It accounts for interest and penalties on unrecognized tax benefits as interest and penalties (i.e., not as part of income tax expense). The Company’s liability for gross unrecognized tax benefits was $85.2 million and $76.7 million at September 27, 2019 and September 28, 2018, respectively, all of which, if recognized, would affect the Company’s consolidated effective income tax rate. The Company had $51.1 million and $56.3 million in accrued interest and penalties at September 27, 2019 and September 28, 2018, respectively. The Company estimates that, within twelve months, we may realize a decrease in our uncertain tax positions of approximately $4.3 million as a result of concluding various tax audits and closing tax years. As of September 27, 2019, the Company’s U.S. federal income tax returns for tax years 2010 and forward remain subject to examination.

The following table presents the reconciliation of the beginning and ending amount of unrecognized tax benefits for both continuing and discontinued operations, with ECR-sale related impacts removed in the current year Acquisitions/Divestitures row, for the years ended September 27, 2019, September 28, 2018 and September 29, 2017 (in thousands):

	For the Years Ended
	September 27, 2019				September 28, 2018				September 29, 2017
Balance, beginning of year	$	179,140			$	38,580			$	44,167
Acquisitions/Divestitures	(31,004		)		137,912				—
Additions based on tax positions related to the current year	7,455				9,780				5,900
Additions for tax positions of prior years	1,994				5,561				237
Reductions for tax positions of prior years	(49,849		)		(8,962		)		(4,524		)
Settlement	(3,381		)		(3,731		)		(7,200		)
Balance, end of year	$	104,355			$	179,140			$	38,580

On June 12, 2019, the Company completed the acquisition of KeyW and on December 15, 2017 the Company completed the acquisition of CH2M. For income tax purposes, the transactions were accounted for as stock purchases. As a result of the acquisitions, the Company adjusted its U.S. GAAP opening balance sheet of KeyW and CH2M to reflect estimates of the fair value of the net assets acquired. For income tax purposes, the tax attributes and basis of net assets acquired carryover without any step-up to fair value. For KeyW, the Company has made preliminary estimates and recorded deferred taxes associated with the purchase accounting. It is expected that the Company will make adjustments to the purchase accounting over the relevant measurement period as allowed by ASC 805. For CH2M, the Company completed its purchase accounting in the first quarter of the current fiscal year.

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16.	Commitments and Contingencies and Derivative Financial Instruments

Commitments Under Operating Leases

We lease certain of our facilities and equipment under operating leases with net aggregate future lease payments at September 27, 2019, payable as follows (in thousands):

In fiscal years,
2020	$	190,287
2021	172,017
2022	151,452
2023	131,250
2024	116,381
Thereafter	352,194
	1,113,581
Amounts representing sublease income	(31,884		)
	$	1,081,697

We recognize rent expense, inclusive of landlord concessions and tenant allowances, over the lease term on a straight-line basis. We also recognize rent expense on a straight-line basis for leases containing fixed escalation clauses and rent holidays. Contingent rentals are included in rent expense as incurred. Operating leases relating to many of our major offices generally contain renewal options and provide for additional rental based on escalation in operating expenses and real estate taxes.

The following table presents rent expense and sublease income offsetting the Company’s rent expense for the years ended September 27, 2019, September 28, 2018 and September 29, 2017 (in thousands):

	For the Years Ended
	September 27, 2019				September 28, 2018				September 29, 2017
Rent expense	$	167,365			$	169,931			$	96,875
Sublease income	(11,514		)		(5,087		)		(3,160		)
Net rent expense	$	155,851			$	164,844			$	93,715

Derivative Financial Instruments

In situations where our operations incur contract costs in currencies other than their functional currency, we attempt to have a portion of the related contract revenues denominated in the same currencies as the costs. In those situations where revenues and costs are transacted in different currencies, we sometimes enter into foreign exchange contracts in order to limit our exposure to fluctuating foreign currencies. The Company does not currently have outstanding foreign currency derivatives that would have a material effect on our consolidated financial statements or results of operations.

Letters of Credit

At September 27, 2019, the Company had issued and outstanding approximately $262.2 million in LOCs and $2.0 billion in surety bonds. Of the outstanding LOC amount, $2.3 million has been issued under the New Credit Agreement and $259.9 million are issued under separate, committed and uncommitted letter-of-credit facilities.

	17. Contractual Guarantees, Litigation, Investigations and Insurance

In the normal course of business, we make contractual commitments some of which are supported by separate guarantees; and on occasion we are a party in a litigation or arbitration proceeding. The litigation or arbitration in which we are involved primarily includes personal injury claims, professional liability claims and breach of contract claims. Where we provide a separate guarantee it is strictly in support of the underlying contractual commitment. Guarantees take various forms including surety bonds required by law, or standby letters of credit ("LOC") (also referred to as “bank guarantees”) or corporate guarantees given to induce a party to enter into a contract with a subsidiary. Standby LOCs are

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also used as security for advance payments or in various other transactions. The guarantees have various expiration dates ranging from an arbitrary date to completion of our work (e.g., engineering only) to completion of the overall project. See Note 16- Commitments and Contingencies and Derivative Financial Instruments for more information surrounding LOCs and surety bonds.

We maintain insurance coverage for most insurable aspects of our business and operations. Our insurance programs have varying coverage limits depending upon the type of insurance, and include certain conditions and exclusions which insurance companies may raise in response to any claim that the Company brings. We have also elected to retain a portion of losses and liabilities that occur through the use of various deductibles, limits, and retentions under our insurance programs. As a result, we may be subject to a future liability for which we are only partially insured or completely uninsured. We intend to mitigate any such future liability by continuing to exercise prudent business judgment in negotiating the terms and conditions of the contracts which the Company enters with its clients. Our insurers are also subject to business risk and, as a result, one or more of them may be unable to fulfill their insurance obligations due to insolvency or otherwise.

Additionally, as a contractor providing services to the U.S. federal government we are subject to many types of audits, investigations and claims by, or on behalf of, the government including with respect to contract performance, pricing, cost allocations, procurement practices, labor practices and socioeconomic obligations. Furthermore, our income, franchise and similar tax returns and filings are also subject to audit and investigation by the Internal Revenue Service, most states within the U.S., as well as by various government agencies representing jurisdictions outside the U.S.

Our Consolidated Balance Sheets include amounts representing our probable estimated liability relating to such claims, guarantees, litigation, audits and investigations. We perform an analysis to determine the level of reserves to establish for insurance-related claims that are known and have been asserted against us, and for insurance-related claims that are believed to have been incurred based on actuarial analysis, but have not yet been reported to our claims administrators as of the respective balance sheet dates. We include any adjustments to such insurance reserves in our consolidated results of operations. Insurance recoveries are recorded as assets if recovery is probable and estimated liabilities are not reduced by expected insurance recoveries.

The Company believes, after consultation with counsel, that such guarantees, litigation, U.S. government contract-related audits, investigations and claims and income tax audits and investigations should not have a material adverse effect on our consolidated financial statements, beyond amounts currently accrued.

On September 30, 2015, Nui Phao Mining Company Limited (“NPMC”) commenced arbitration proceedings against Jacobs E&C Australia Pty Limited (“Jacobs E&C”) in Singapore before the Singapore International Arbitration Centre. Jacobs E&C was engaged by NPMC for the provision of management, design, engineering, and procurement services for a Nui Phao mine/mineral processing project in Vietnam as part of the Company’s Energy, Chemicals & Resources (“ECR”) line of business. A three-week hearing on the merits concluded on December 15, 2017. On March 28, 2019, the arbitration panel issued a decision finding against Jacobs E&C and awarding damages to NPMC of approximately $95.0 million. NPMC subsequently asserted an additional claim for interest, costs and attorneys' fees for approximately $70.0 million, which the Company disputed. On June 28, 2019, the Company filed an application in Singapore to set aside the award. In addition, NPMC filed an application to enforce the award in Australia. On August 30, 2019, NPMC and Jacobs E&C settled all of the foregoing proceedings. Under the terms of the settlement, Jacobs E&C made a payment to NPMC in the amount of $130.0 million. The settlement otherwise remains confidential. The Company expects that a portion of the settlement amount is subject to recovery from insurance; however, the Company currently has not recognized any income for related insurance recoveries. Under the terms of the sale of the Company’s ECR business to Worley on April 26, 2019, the Company has retained liability with respect to this matter.

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In 2012, CH2M HILL Australia Pty Limited, a subsidiary of CH2M, entered into a 50 /50 integrated joint venture with Australian construction contractor UGL Infrastructure Pty Limited. The joint venture entered into a Consortium Agreement with General Electric and GE Electrical International Inc. The Consortium was awarded a subcontract by JKC Australia LNG Pty Limited for the engineering, procurement, construction and commissioning of a 360 MW Combined Cycle Power Plant for INPEX Operations Australia Pty Limited at Blaydin Point, Darwin, NT, Australia. In January 2017, the Consortium terminated the Subcontract because of JKC’s repudiatory breach and demobilized from the work site. JKC claimed the Consortium abandoned the work and itself purported to terminate the Subcontract. The Consortium and JKC are now in dispute over the termination. In August 2017, the Consortium filed an International Chamber of Commerce arbitration against JKC and is seeking compensatory damages in the amount of approximately $530.0 million for repudiatory breach or, in the alternative, seeking damages for unresolved contract claims and change orders. JKC has provided a preliminary estimate of the monetary value of its claims, which we believe will result in alleged damages in excess of $1.7 billion, and has drawn on bonds. This draw on bonds does not impact the Company's ultimate liability. A hearing on this matter is scheduled to begin in February 2020 and no decision is expected before 2021. In September 2018, JKC filed a declaratory judgment action in Western Australia alleging that the entities which executed parent company guaranties for the Consortium, including CH2M Hill Companies, Ltd., have an obligation to pay JKC’s ongoing costs to complete the project after termination. A hearing on that matter was held on March 12 and 13, 2019, and a decision in favor of the Consortium was issued. JKC has appealed the decision. If the Consortium is found liable, these matters could have a material adverse effect on the Company’s business, financial condition, results of operations and /or cash flows, particularly in the short term. However, the Consortium has denied liability and is vigorously defending these claims and pursuing its affirmative claims against JKC, and based on the information currently available, the Company does not expect the resolution of this matter to have a material adverse effect on the Company’s business, financial condition, results of operations or cash flows, in excess of the current reserve for this matter. See Note 5- Business Combinations for further information relating to CH2M contingencies.

On December 22, 2008, a coal fly ash pond at the Kingston Power Plant of the Tennessee Valley Authority (“TVA”) was breached, releasing fly ash waste into the Emory River and surrounding community. In February 2009, TVA awarded a contract to the Company to provide project management services associated with the clean-up. All remediation and dredging were completed in August 2013 by other contractors under direct contracts with TVA. The Company did not perform the remediation, and its scope was limited to program management services. Certain employees of the contractors performing the cleanup work on the project filed lawsuits against the Company beginning in August 2013, alleging they were injured due to the Company’s failure to protect the plaintiffs from exposure to fly ash, and asserting related personal injuries. There are currently six separate cases, the primary case, Greg Adkisson, ET AL v. Jacobs Engineering Group Inc., case No. 3:13-CV-505-TAV-HBG in the US District Court for the Eastern District of Tennessee, consists of 10 consolidated cases. This case and the related cases involve several hundred plaintiffs that have been filed against the Company by employees of the contractors. The cases are at various stages of litigation, and several of the cases are currently stayed by the court pending resolution of other cases. In May 2019, Roane County filed a claim against TVA and the Company alleging that they misled the public about risks associated with the released fly ash. This matter is scheduled for trial in 2021. In addition, in November 2019, a resident of Roane County filed a purported class action against TVA and the Company alleging they failed to adequately warn local residents about risks associated with the released fly ash. There has been no finding of liability against the Company or that any of the alleged illnesses are the result of exposure to fly ash in any of the cases. The Company disputes the claims asserted in all of the above matters and is vigorously defending these claims.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

18.	Other Financial Information

Receivables and contract assets

The following table presents the components of receivables appearing in the accompanying Consolidated Balance Sheets at September 27, 2019 and September 28, 2018 as well as certain other related information (in thousands):

	September 27, 2019				September 28, 2018
Components of receivables:
Amounts billed, net	$	1,222,339			$	1,107,250
Unbilled receivables and other	1,216,028				1,393,246
Contract assets	401,842				13,438
Total receivables and contract assets, net	$	2,840,209			$	2,513,934
Other information about receivables:
Amounts due from the United States federal government included above, net of advanced billings	$	630,975			$	472,846

Amounts billed, net consist of amounts invoiced to clients in accordance with the terms of the 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 unbilled receivables when the right to consideration becomes unconditional and are transferred to amounts billed upon invoicing. The increase in contract assets was a result of the adoption of ASC 606 and was not materially impacted by any other factors.

Property, Equipment and Improvements, Net

The following table presents the components of our property, equipment and improvements, net at September 27, 2019 and September 28, 2018 (in thousands):

	September 27, 2019				September 28, 2018
Land	$	355			$	1,340
Buildings	14,331				12,867
Equipment	533,804				482,783
Leasehold improvements	247,660				198,287
Construction in progress	8,781				17,684
	804,931				712,961
Accumulated depreciation and amortization	(496,788		)		(455,102		)
	$	308,143			$	257,859

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Miscellaneous Noncurrent Assets

The following table presents the components of “Miscellaneous noncurrent assets” shown in the accompanying Consolidated Balance Sheets at September 27, 2019 and September 28, 2018 (in thousands):

	September 27, 2019				September 28, 2018
Deferred income taxes	$	514,633			$	319,405
Deferred compensation arrangement investments	219,948				280,337
Equity Method Investments	157,919				150,052
Other	25,702				11,060
Total	$	918,202			$	760,854

Deferred compensation arrangement investments are comprised of the cash surrender value of life insurance policies and pooled-investment funds. The fair value of the pooled investment funds is derived using Level 2 inputs.

Accrued Liabilities

The following table presents the components of “Accrued liabilities” shown in the accompanying Consolidated Balance Sheets at September 27, 2019 and September 28, 2018 (in thousands):

	September 27, 2019				September 28, 2018
Accrued payroll and related liabilities	$	677,313			$	633,404
Project-related accruals	58,835				40,378
Non project-related accruals	258,312				295,463
Insurance liabilities	83,968				58,666
Sales and other similar taxes	34,390				58,728
Deferred rent	68,914				58,252
Dividends payable	23,439				22,111
Deferred gain on ECR disposition (1)	179,208				—
Total	$	1,384,379			$	1,167,002

(1)	See Note 7- Sale of Energy, Chemicals and Resource ("ECR") Business for discussion regarding deferred gain.

Other Deferred Liabilities

The following table presents the components of “Other deferred liabilities” shown in the accompanying Consolidated Balance Sheets at September 27, 2019 and September 28, 2018 (in thousands):

	September 27, 2019				September 28, 2018
Liabilities relating to defined benefit pension and early retirement plans	$	398,499			$	329,604
Liabilities relating to nonqualified deferred compensation arrangements	177,401				216,068
Deferred income taxes	233,111				152,613
Miscellaneous	609,994				562,692
Total	$	1,419,005			$	1,260,977

19.	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 was 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 CMS segment to the PPS segment to further align with the management and reporting structure of the business. As a result of the reorganization mentioned above and prior to the ECR sale, the three global LOBs are as follows: Critical Mission Solutions ("CMS"); People & Places Solutions ("PPS"); and Energy, Chemicals and Resources ("ECR"). Because the results from our ECR business formerly reported as a stand-alone segment are reflected in our

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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- Sale of Energy, Chemicals and Resources ("ECR") Business. The Company’s LOB leadership and internal reporting structures report to the Chief Executive Officer, who is also the Chief Operating Decision Maker (“CODM”), and enable the CODM to evaluate the performance of each of these segments and make appropriate resource allocations among each of the segments. The sales function is managed on an LOB basis, and accordingly, the associated cost is embedded in the new 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 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).

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.

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 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 and expenses relating to the restructuring and other charges and transaction costs associated with the CH2M transaction and integration costs and the ECR sale (in thousands). Prior period information has been recast to reflect the current period presentation.

	For the Years Ended
	September 27, 2019				September 28, 2018				September 29, 2017
Revenues from External Customers:
Critical Mission Solutions	$	4,551,162			$	3,725,365			$	2,467,501
People & Places Solutions	8,186,706				6,854,408				3,862,625
Total	$	12,737,868			$	10,579,773			$	6,330,126

	For the Years Ended
	September 27, 2019				September 28, 2018				September 29, 2017
Segment Operating Profit:
Critical Mission Solutions (1)	$	310,043			$	255,718			$	197,196
People & Places Solutions (2)	714,394				527,900				265,928
Total Segment Operating Profit	1,024,437				783,618				463,124
Other Corporate Expenses (3)	(264,351		)		(161,788		)		(110,234		)
Restructuring and Other Charges	(337,066		)		(153,951		)		(91,648		)
Transaction Costs	(18,169		)		(80,436		)		(17,100		)
Total U.S. GAAP Operating Profit	404,851				387,443				244,142
Total Other (Expense) Income, net (4)	(53,892		)		(56,462		)		(988		)
Earnings from Continuing Operations Before Taxes	$	350,959			$	330,981			$	243,154

(1)	Includes $15.0 million in charges during the year ended September 28, 2018 associated with a legal matter.

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(2)	Includes $25.0 million in charges associated with a certain project for the year ended September 27, 2019. Excludes $23.8 million in restructuring and other charges for the year ended September 29, 2017. See Note 9, Restructuring and Other Charges.

(3)

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 amount of $14.8 million, $25.6 million and $29.1 million for the years ended September 27, 2019, September 28, 2018 and September 29, 2017, respectively. Other corporate expenses also include intangibles amortization of $79.1 million, $68.1 million and $33.5 million for the years ended September 27, 2019, September 28, 2018 and September 29, 2017, respectively.

(4)

Includes gain on the settlement of the CH2M retiree medical plans of $35.0 million and the amortization of deferred financing fees related to the CH2M acquisition of $3.2 million and $1.8 million for the years ended September 27, 2019 and September 28, 2018 respectively. Also includes revenues under the Company's TSA agreement with Worley of $35.4 million offset by $64.8 million for fair value adjustments (unrealized losses) and dividend income related to our investment in Worley stock and certain foreign currency revaluations relating to ECR sale proceeds for the year ended September 27, 2019.

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 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” includes 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 and therefore should not be attributed to the LOB.

We provide a broad range of technical, professional and construction services including engineering, design and architectural services; construction and construction management services; operations and maintenance services; and process, scientific and systems consulting services. We provide our services through offices and subsidiaries located primarily in North America, South America, Europe, the Middle East, India, Australia, Africa and Asia. We provide our services under cost-reimbursable and fixed-price contracts.

The following tables presents certain financial information by geographic area (in thousands):

	For the Years Ended
	September 27, 2019				September 28, 2018				September 29, 2017
Revenues:
United States	$	9,006,730			$	6,908,988			$	3,881,696
Europe	2,242,976				2,495,805				1,754,036
Canada	213,172				189,865				6,531
Asia	195,023				163,761				111,646
India	62,543				52,533				40,469
Australia and New Zealand	533,251				578,108				519,575
South America and Mexico	7,416				17,656				244
Middle East and Africa	476,757				173,057				15,929
Total	$	12,737,868			$	10,579,773			$	6,330,126

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

Revenues were earned from unaffiliated clients located primarily within the various and respective geographic areas shown.

	For the Years Ended
	September 27, 2019				September 28, 2018
Property, equipment and improvements, net:
United States	$	230,476			$	118,073
Europe	52,775				58,739
Canada	3,199				21,559
Asia	5,652				3,588
India	2,379				19,446
Australia and New Zealand	12,091				16,151
South America and Mexico	—				3,650
Middle East and Africa	1,571				16,653
Total	$	308,143			$	257,859

The following table presents the revenues earned directly or indirectly from the U.S. federal government and its agencies, expressed as a percentage of total revenues:

For the Years Ended
September 27, 2019		September 28, 2018		September 29, 2017
27%		32%		30%

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0. Selected Quarterly Information — Unaudited

The following table presents selected quarterly financial information. (in thousands, except for per share amounts):

	First Quarter				Second Quarter				Third Quarter				Fourth Quarter				Fiscal Year
September 27, 2019
Revenues	$	3,083,788			$	3,091,596			$	3,169,622			$	3,392,862			$	12,737,868
Operating profit (a)	$	113,130		(b)	$	102,681		(b)	$	89,954		(b)	$	99,086		(b)	$	404,851
Earnings from Continuing Operations Before Taxes	$	92,191			$	111,832			$	93,399			$	53,537			$	350,959
Net earnings of the Group from Continuing Operations	$	69,433			$	119,779			$	95,380			$	29,413			$	314,005
Net earnings Attributable to Jacobs from Continuing Operations	$	64,894		(b)	$	114,755		(b)	$	89,365		(b)	$	21,946		(b)	$	290,960
Net Earnings Attributable to Jacobs	$	124,296		(b)	$	56,917		(b)	$	524,442		(b)	$	142,324		(b)	$	847,979
Earnings per share:
Basic Net Earnings from Continuing Operations Per Share	$	0.45			$	0.83			$	0.65			$	0.16			$	2.11
Basic Net Earnings (Loss) from Discontinued Operations Per Share	$	0.42			$	(0.42	)		$	3.18			$	0.89			$	4.03
Basic Earnings Per Share	$	0.87			$	0.41			$	3.83			$	1.06			$	6.14
Diluted Net Earnings from Continuing Operations Per Share	$	0.45		(b)	$	0.82		(b)	$	0.65		(b)	$	0.16		(b)	$	2.09
Diluted Net Earnings (Loss) from Discontinued Operations Per Share	$	0.41			$	(0.41	)		$	3.15			$	0.88		(c)	$	4.00
Diluted Earnings Per Share	$	0.86			$	0.41			$	3.80			$	1.04			$	6.08
September 28, 2018
Revenues	$	1,783,999			$	2,870,295			$	2,933,623			$	2,991,856			$	10,579,773
Operating profit (Loss) (a)	$	(4,670	)	(d)	$	68,755		(d)	$	162,512		(d)	$	160,846		(d)	$	387,443
Earnings (Loss) from Continuing Operations Before Taxes	$	(6,703	)		$	48,651			$	146,633			$	142,400			$	330,981
Net Earnings (Loss) of the Group from Continuing Operations	$	(33,903	)		$	(3,205	)		$	115,459			$	(73,002	)		$	5,349
Net Earnings (Loss) Attributable to Jacobs from Continuing Operations	$	(34,234	)	(d)	$	(6,290	)	(d)	$	113,336		(d)	$	(76,997	)	(d)	$	(4,185	)
Net Earnings (Loss) Attributable to Jacobs	$	2,163		(d)	$	48,587		(d)	$	150,222		(d)	$	(37,541	)	(d)	$	163,431
Earnings per share:
Basic Net Earnings (Loss) from Continuing Operations Per Share	$	(0.27	)		$	(0.04	)		$	0.79			$	(0.54	)		$	(0.03	)
Basic Net Earnings from Discontinued Operations Per Share	$	0.29			$	0.39			$	0.26			$	0.28			$	1.21
Basic Earnings (Loss) Per Share	$	0.02			$	0.34			$	1.05			$	(0.26	)		$	1.18
Diluted Net Earnings (Loss) from Continuing Operations Per Share	$	(0.27	)	(d)	$	(0.04	)	(d)	$	0.79		(d)	$	(0.54	)	(d)	$	(0.03	)
Diluted Net Earnings from Discontinued Operations Per Share	$	0.29			$	0.39			$	0.26			$	0.28			$	1.21
Diluted Earnings (Loss) Per Share	$	0.02			$	0.34			$	1.05			$	(0.26	)		$	1.18

(a)	Operating profit represents revenues less (i) direct costs of contracts and (ii) selling, general and administrative expenses.

(b)

Includes $47.2 million in operating profit and $46.8 million in net earnings from continuing operations attributable to Jacobs, or $0.33 per diluted share from continuing operations in the first quarter of fiscal 2019; includes $119.0 million in operating profit, $50.8 million in net earnings from continuing operations attributable to Jacobs, or $0.36 per diluted share from continuing operations in the second quarter of fiscal 2019; includes $142.8 million in operating profit and $103.8 million in net earnings from continuing operations attributable to Jacobs, or $0.75 per diluted share from continuing operations in the third quarter of fiscal 2019; includes $154.2 million in operating profit, $179.3 million in both net earnings from continuing operations attributable to Jacobs, and net earnings attributable to Jacobs, or $1.32 per diluted share in the fourth quarter of fiscal 2019 related to restructuring and other charges, transaction costs, amortization of intangibles and fair value adjustments and dividend income related to our investment in Worley stock and certain foreign currency revaluations relating to ECR sale proceeds. On a year to date basis, impacts on net earnings from continuing operations attributable to Jacobs were (i) $243.7 million in restructuring and other charges, (ii) $16.1 million in transaction costs, (iii) $59.0 million of intangible asset amortization and (iv) $48.6 million in fair value adjustments partly offset by dividend income related to our investment in Worley stock and certain foreign currency revaluations relating to ECR sale proceeds.

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

(c)

For the three-month period ended September 27, 2019, diluted net earnings (loss) per share from discontinued operations included $89.7 million related to revisions to previous income tax expense estimates, $17.4 million in finalization of the pre-tax gain on the sale of our ECR business and $9.8 million related to the difference between Nui Phao loss contingency as originally recorded and fourth quarter 2019 settlement amount.

(d)

Includes $83.4 million in operating profit, $92.1 million in net earnings attributable to Jacobs, or $0.73 per diluted share from continuing operations in the first quarter of fiscal 2018; includes $105.9 million in operating profit, $130.3 million in net earnings attributable to Jacobs, or $0.91 per diluted share in the second quarter of fiscal 2018; includes $60.7 million in operating profit and $64.8 million in net earnings from continuing operations attributable to Jacobs, or $0.45 per diluted share from continuing operations in the third quarter of fiscal 2018; includes $60.2 million in operating profit, $241.8 million in net earnings from continuing operations attributable to Jacobs, or $1.67 per diluted share from continuing operations in the fourth quarter of fiscal 2018 related to restructuring and other charges, transaction costs, amortization of intangibles and US tax reform charges. On a year to date basis, impacts on net earnings from continuing operations attributable to Jacobs were (i) $112.8 million in restructuring and other charges, (ii) $60.7 million in transaction costs, (iii) $51.5 million of intangible asset amortization and (iv) $259.2 million in US tax reform charges.

F-63

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Jacobs Engineering Group Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Jacobs Engineering Group Inc. and subsidiaries (the Company) as of September 27, 2019 and September 28, 2018, the related consolidated statements of earnings, comprehensive income, stockholders' equity and cash flows for each of the three fiscal years in the period ended September 27, 2019, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 27, 2019 and September 28, 2018, and the results of its operations and its cash flows for each of the three fiscal years in the period ended September 27, 2019, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 27, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated November 25, 2019 expressed an unqualified opinion thereon.

Adoption of ASU No. 2014-09 (Topic 606)

As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for revenue recognition on contracts with customers in the 2019 financial statements to reflect the accounting method change due to the adoption of ASU 2014-09, Revenue from Contracts with Customers (Topic 606).

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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		Revenue Recognition for Fixed-Price Engineering, Procurement and Construction Contracts
Description of the Matter		As explained in Note 2 to the consolidated financial statements, the Company recognizes engineering, procurement and construction contract revenue over time, as performance obligations are satisfied, using the percentage-of-completion method (an input method) based primarily on contract costs incurred to date compared to total estimated contract costs. Revenue recognition under this method is judgmental, as it requires the Company to prepare estimates of total contract revenue and total contract costs, including costs to complete in-process contracts. Auditing the Company’s estimates of total contract revenue and costs used to recognize revenue on fixed-price engineering, procurement and construction contracts involved significant auditor judgment, as it required the evaluation of subjective factors, such as assumptions related to estimated labor, forecasted material and subcontractor costs and variable consideration estimates related to incentive fees and unpriced change orders. These assumptions involved significant management judgment, which affects the measurement of revenue recognized by the Company.
How We Addressed the Matter in Our Audit		We tested certain of the Company’s controls over the estimation process that affect revenue recognized on fixed-price engineering, procurement and construction contracts. For example, we tested controls over management’s monitoring and review of project cost and variable consideration estimates, including the Company’s procedures to validate the completeness and accuracy of the data used to determine the estimates. To test the Company’s contract estimates related to revenues recognized on fixed-price engineering, procurement, and construction projects, our audit procedures included selecting a sample of projects and, among other procedures, we obtained and inspected related contract agreements, amendments, and change orders to test the existence of customer arrangements and understand the scope and pricing of the related projects; observed selected project team status meetings at the Company and interviewed project team personnel to obtain an understanding of the status of operational performance and progress on the related projects; evaluated the reasonableness of the Company’s estimated costs to complete by obtaining and analyzing supporting documentation for a sample of cost estimate components; and compared contract profitability estimates in the current year to historical estimates and actual performance for the same projects.
		Accounting for Discontinued Operations and Related Gain Recognition
Description of the Matter		As discussed in Notes 1 and 7 to the consolidated financial statements, on April 26, 2019, the Company completed the sale of its Energy, Chemicals and Resources (“ECR”) business to WorleyParsons Limited (“WorleyParsons”) for proceeds that included $2.8 billion in cash and 58.2 million ordinary shares of WorleyParsons stock. In connection with the sale of the ECR business, the Company recognized a pre-tax gain of $935.1 million in discontinued operations. The Company also retained a noncontrolling interest (with significant influence) in one legal entity that is now controlled and consolidated by WorleyParsons. The fair value of the Company’s retained interest in the net assets and liabilities of this entity was estimated at $33.0 million. Auditing the Company’s discontinued operations was complex and judgmental due to the non-routine process to identify and compile the specific assets and liabilities included within the scope of the divestiture and the required measurement and accounting for the multiple elements of the transaction, including the retained noncontrolling interest. Management’s assumptions with respect to the valuation of the multiple elements of the transaction including the retained noncontrolling interest involved significant management judgments that had a significant effect on the pre-tax gain recognized on the sale.

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How We Addressed the Matter in Our Audit		We tested the Company’s controls over the process to account for the sale and related gain recognition. For example, we tested controls over management’s review of the calculation of the gain on the sale of the ECR business, including controls over management’s review of the significant assumptions and other inputs used to estimate the fair value of the Company’s retained noncontrolling interest. To test the pre-tax gain recognized in discontinued operations, we performed audit procedures that included, among others, testing the existence and valuation of cash and equity proceeds received; inspecting the related sale agreement to obtain an understanding of the assets, liabilities and legal entities included in the scope of the sale transaction; testing the completeness and accuracy of assets and liabilities included in the gain calculation on a sample basis by comparing amounts to the Company’s accounting records; and testing the Company’s fair value estimate related to the retained noncontrolling interest, which the Company valued using a discounted cash flow method. We tested the key assumptions used in connection with discounted cash flows which included assessing the reasonableness of estimates of revenue growth rates and profitability. To test the revenue growth rates and estimates of profitability, we compared the Company’s assumptions with historical results. In addition, with the assistance of our valuation specialists, we assessed the discount rate by comparing the rate to business and other industry benchmarks.
		Income Taxes - Accrued Uncertain Tax Positions
Description of the Matter		As more fully described in Note 15 to the consolidated financial statements, the Company is subject to income taxes in multiple tax jurisdictions, including the United States and international jurisdictions. The Company uses significant judgment to (1) determine whether, based on the technical merits, a tax position is more likely than not to be sustained and (2) measure the amount of tax benefit that qualifies for recognition. At September 27, 2019, the Company’s accrued liability for unrecognized tax benefits was $155.5 million, which includes potential payments related to income taxes as well as interest and penalties for various tax positions. Auditing the Company’s uncertain tax positions involved challenging auditor judgment because management’s estimates are complex, highly judgmental and based on interpretations of tax laws, and includes significant assumptions related to transfer pricing in connection with intercompany transactions.
How We Addressed the Matter in Our Audit		We tested certain of the Company’s controls over the realization and measurement of uncertain tax positions. For example, we tested the Company’s controls related to management’s review of its open tax positions and its assessment of whether it is more likely than not that uncertain tax positions will be sustained. We involved our tax professionals to assess the technical merits of the Company’s tax positions. We evaluated the appropriateness of the Company’s accounting for its tax positions taking into consideration relevant international and local income tax laws. We also evaluated the Company’s assumptions used to determine the amount of tax benefit to recognize and tested the completeness and accuracy of data used in the calculations. For certain tax positions related to intercompany transactions, we assessed the assumptions and pricing method used in setting arm’s length prices and the documentation to support the pricing. We also evaluated the adequacy of the Company’s financial statement disclosures related to these tax matters.
		Legal Contingencies
Description of the Matter		As described in Note 17 to the consolidated financial statements, the Company is subject to litigation and arbitration proceedings, including a material legal contingency related to a dispute with JKC Australia LNG Pty Limited. Auditing the Company’s estimates related to legal contingencies was especially subjective due to the judgment required to evaluate information used by management to determine whether a probable loss exists and whether a loss can be reasonably estimated, and if so, the assumptions used by management to estimate the potential range of losses. Management’s assumptions had a significant effect on loss contingency accruals recorded.

F-66

How We Addressed the Matter in Our Audit		We tested the Company’s controls over the identification and evaluation of the completeness and valuation of contingent liabilities related to legal matters. For example, we tested controls over the Company’s assessment and valuation of loss contingencies, including their evaluation of whether a loss is probable, and measurement of the contingent liability associated with probable losses. To test the Company’s accounting and disclosure for legal contingencies, we performed audit procedures that included, among others, inspecting legal claim documentation submitted by counterparties, assessing management’s assumptions regarding cost estimates related to potential loss contingencies, inspecting minutes of meetings of the board of directors, and obtaining audit inquiry responses from external and internal legal counsel related to loss contingencies.

/s/ Ernst & Young LLP

We have served as the Company's auditor since 1987.

Dallas, Texas

November 25, 2019

F-67

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Jacobs Engineering Group Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Jacobs Engineering Group Inc. and subsidiaries’ internal control over financial reporting as of September 27, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Jacobs Engineering Group Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of September 27, 2019, based on the COSO criteria.

As indicated in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of KeyW, which is included in the 2019 consolidated financial statements of the Company and constituted 9% of total assets as of September 27, 2019 and 1% of revenues for the fiscal year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of KeyW.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of September 27, 2019 and September 28, 2018, the related consolidated statements of earnings, comprehensive income, stockholders’ equity and cash flows for each of the three fiscal years in the period ended September 27, 2019, and the related notes and our report dated November 25, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

F-68

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Ernst & Young LLP

Dallas, Texas

November 25, 2019

F-69