Competition & Fluctuations: Risks to Jacobs Engineering's Contracts & Margins, Study notes of Engineering

Download Competition & Fluctuations: Risks to Jacobs Engineering's Contracts & Margins and more Study notes Engineering in PDF only on Docsity! UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _________________________________________________________________ FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended October 2, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission File No. 1-7463 _________________________________________________________________ Jacobs Engineering Group Inc. Delaware 95-4081636 (State or other jurisdiction of incorporation or organization) (IRS Employer identification number) 1999 Bryan Street Suite 1200 Dallas Texas 75201 (Address of principal executive offices) (Zip Code) (214) 583 – 8500 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: _________________________________________________________________ Title of Each Class Trading Symbol(s) Name of Each Exchange on Which Registered Common Stock $1 par value J New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None _________________________________________________________________ Indicate by check-mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: ☒ Yes ☐ No Indicate by check-mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. ☐ Yes ☒ No Indicate by check-mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No Indicate by check-mark whether the Registrant: has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). ☒ Yes ☐ No Indicate by check-mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Indicate by check-mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act) ☐ Yes ☒ No There were 129,623,428 shares of common stock outstanding as of November 12, 2020. The aggregate market value of the Registrant’s common equity held by non-affiliates was approximately $9.6 billion as of March 27, 2020, based upon the last reported sales price on the New York Stock Exchange on that date. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant’s definitive proxy statement to be issued in connection with its 2021 annual meeting of shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. Item 1. BUSINESS At Jacobs, we’re challenging today to reinvent tomorrow by solving the world’s most critical problems for thriving cities, resilient environments, mission-critical outcomes, operational advancement, scientific discovery and cutting-edge manufacturing, turning abstract ideas into realities that transform the world for good. Leveraging a talent force of more than 55,000, Jacobs provides a full spectrum of professional services including consulting, technical, scientific and project delivery for the government and private sector. Our deep global domain knowledge - applied together with the latest advances in technology - are why customers large and small choose to partner with Jacobs. We operate in two lines of business: Critical Mission Solutions and People & Places Solutions. After spending three years transforming our portfolio and setting the foundation to get us where we are today, we launched a three-year accelerated profitable growth strategy at our Investor Day in February 2019, focused on innovation and continued transformation to build upon our position as the leading solutions provider for our clients. This transformation included the $3.2 billion acquisition of CH2M Hill Companies, Ltd ("CH2M") and the $3.4 billion divestiture of the Company's energy, chemicals and resources business. The alignment of revenue synergies was key to the successful integration of CH2M and created a model for successful follow-on integrations like The KeyW Holding Corporation and John Wood Group’s nuclear business. These acquisitions further position us as a leader in high-value government services and technology-enabled solutions, enhancing our portfolio by adding intellectual property-driven technology with unique proprietary C5ISR (command, control, communications, computer, combat systems, intelligence, surveillance and reconnaissance) rapid solutions, and amplifying Jacobs’ position as a Tier-1 global nuclear services provider. We have turned the course of Jacobs’ future and are now focused on broadening our leadership in sustainable, high growth sectors. As part of our strategy, our new brand was created from an understanding of where we’ve been, what’s true to our culture and our strategy going forward. We articulate our bold creativity in our brand promise: Challenging today. Reinventing tomorrow. Signaling our transition from an engineering and construction company to a global technology-forward solutions company, we began trading as “J” on the New York Stock Exchange in December 2019. Our Transformation Office is charged with driving further innovation, delivering value-creating solutions for our clients and leveraging an integrated digital and technology strategy to improve our efficiency and effectiveness, ultimately freeing up valuable time and resources for reinvestment in our people. Revenue by Type (Fiscal Year 2020) Page 4 Technology and Consulting includes cybersecurity, data analytics, systems and software application integration services and consulting, enterprise and mission IT services, engineering and design, nuclear services, enterprise level operations and maintenance and other highly technical consulting solutions within Critical Mission Solutions (CMS) and data analytics, artificial intelligence and automation, software development as well as digitally-driven consulting, planning and architecture, program management and other highly technical consulting solutions within People & Places Solutions (P&PS). Project Delivery Services includes management and execution of wind-tunnel design-build projects in CMS and progressive design-build for water and construction management for our Advanced Facilities business in P&PS. We believe these services are lower risk than typical lump-sum type construction contracting. Pass-through Revenue includes P&PS procurement activities and revenue where we are acting as principal for subcontract labor or third-party materials and equipment and are consequently reflected in both revenues and costs. Page 5 Challenging today. Reinventing tomorrow Our values continue to guide our behaviors, relationships and outcomes - allowing us to act as one company and unify us worldwide when interacting with our clients, employees, communities and shareholders. • We do things right. We always act with integrity - taking responsibility for our work, caring for our people and staying focused on safety and sustainability. We make investments in our clients, people and communities, so we can grow together. • We challenge the accepted. We know that to create a better future, we must ask the difficult questions. We always stay curious and are not afraid to try new things. • We aim higher. We do not settle - always looking beyond to raise the bar and deliver with excellence. We are committed to our clients by bringing innovative solutions that lead to profitable growth and shared success. • We live inclusion. We put people at the heart of our business. We have an unparalleled focus on inclusion, with a diverse team of visionaries, thinkers and doers. We embrace all perspectives, collaborating to make a positive impact. Our three-pillar strategy is based on the foundation of these values, as we drive to become the employer of choice, deliver connected and sustainable solutions, and leverage technology-enabled execution. Page 6 From volunteering, employee matching campaigns and other fundraising, to providing wide-ranging technical and logistics support, every day, Jacobs employees around the world make a positive difference for our clients and communities. As part of our PlanBeyond™ sustainability strategy, the Collectively program (our Global Giving and Volunteering program) governs and centralizes our giving strategy and budget and provides a user-friendly way for employees to donate and volunteer. The program unites our approximately 55,000 employees to support more than 2 million charities around the globe. ℠ Page 9 We challenge the accepted We know that to create a better future, we must ask the difficult questions. We always stay curious and are not afraid to try new things. What we do is more than a job, we work every day to make the world better for all. To us, everything we do - whether water scarcity, aging infrastructure, access to life-saving therapies or sophisticated cyberattacks - is more than projects outlined in proposals and business plans. They’re our challenges as human beings, too. Transforming our innovation culture For us, innovation means creating and delivering value — whether it’s new or different ideas, ways of working, services or solutions. In the past year, we continued pushing our innovative mindset. We established our Innovation as a Service series of workshops and embraced an innovation portfolio management platform to enable collaboration across internal and external teams, facilitating knowledge sharing and leading commercial practices. We launched two Jacobs podcasts series, If/When and Inflection Points, and virtual engagement platforms like our Trends & Directions videocasts and In the kNOW webinar series. Beyond If is our award-winning global innovation program instilling and sustaining our innovation culture. It represents our creativity and agility to challenge the accepted, with the domain expertise to push beyond our boundaries and deliver for today and into tomorrow. We act to turn ideas into reality and create outcomes that deliver value for our clients and society at large. Page 10 We aim higher We do not settle - always looking beyond to raise the bar and deliver with excellence. We are committed to our clients by bringing innovative solutions that lead to profitable growth and shared success. We take on some of the world’s biggest challenges, bringing a different way of thinking to everything we do, challenging the status quo and questioning what others might accept. We craft solutions that affect the way people live. From first-of-its-kind environmental cleanup efforts to digital twin technologies, from helping communities adapt and thrive to retrofitting vaccine facilities to protect public health, we solve for better, never losing sight of our responsibility to each other. We work with NASA scientists to leverage remotely-sensed data and images shot from 240 miles overhead on the International Space Station to provide critical disaster response aid, and help communities recover. And, we’re on the ground assisting with critical Federal Emergency Management Agency (FEMA) disaster-related operations throughout the U.S. and its territories. The table below highlights examples of our key focus areas where we combine our deep domain knowledge with the latest advances in technology to deliver solutions to solve our customer's most complex challenges. BeyondExcellence℠ is our global program focused on quality, performance excellence and recognizing those who set the new standard through our awards program. Page 11 We maintain agile and disciplined capital deployment Consistent with our profitable growth strategy, Jacobs pursues acquisitions, divestitures and other transactions to maximize long-term value by continuing to reshape its portfolio to higher value solutions. 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”). ECR provided engineering and construction services mainly for energy, chemicals and resources sectors. With the sale of ECR, the Company has exited direct hire construction and fixed price lump sum energy related construction. The Company has deployed capital to accelerate its profitable growth strategy through the following recent acquisitions: • On March 6, 2020, we acquired the nuclear consulting, remediation and program management business of John Wood Group ("John Wood Group" or "Wood Group"), a U.K.-based energy services company. • On June 12, 2019, we acquired The KeyW Holding Corporation (“KeyW”), a U.S. based national security technology solutions provider to the intelligence, cyber, and counterterrorism communities • On December 15, 2017, we acquired CH2M, a provider of consulting and other services in the water, environmental, transportation and nuclear remediation sectors. During fiscal 2020 the Company repurchased $337.3 million of shares and paid $144.0 million in dividends to shareholders and noncontrolling interests. For additional information regarding certain issues related to our acquisition strategy, please refer to Item 1A- Risk Factors below. Impact of COVID-19 on Our Business On March 11, 2020, the World Health Organization characterized the outbreak of the novel coronavirus (“COVID-19”) as a global pandemic and recommended certain containment and mitigation measures. On March 13, 2020, the United States declared a national emergency concerning the outbreak, and the vast majority of states and many municipalities declared public health emergencies or took similar actions. Along with these declarations, there were extraordinary and wide-ranging actions taken by international, federal, state and local public health and governmental authorities to contain and combat outbreaks of COVID-19 in regions across the United States and around the world. These actions included quarantines and “stay-at-home” or “shelter-in-place” orders, social distancing measures, travel restrictions, school closures and similar mandates for many individuals in order to substantially restrict daily activities and orders for many businesses to curtail or cease normal operations unless their work is critical, essential or life-sustaining. Although certain jurisdictions have subsequently taken steps to lift or ease such restrictions to various degrees, many jurisdictions have subsequently reversed, or indicated they are considering reversing, such lifting or easing in response to increased cases of COVID-19. In addition, governments and central banks in the United States and other countries in which we operate have enacted fiscal and monetary stimulus and assistance measures to counteract the economic impacts of COVID-19. As it became clear that the pandemic was unparalleled in the rate of community spread, we took early, decisive action to put people first, help flatten the curve and take care of our clients and communities. In early March, we swiftly restricted travel and established return protocols for both client- related and personal travel. In 10 days, we successfully transitioned more than 85% of our employees to a remote working environment to support physical distancing. Where the essential and mission-critical nature of our work requires us to maintain staff at certain sites or locations, we worked closely with our clients and established project-specific plans designed to ensure the safety of our people and the integrity of our operation. Using technology and optimizing our networks, we continue to offer flexible work scenarios for our people, and to deliver business continuity for and continued collaboration with our clients. Our Executive Leadership Team met daily for the first three months and weekly thereafter, focusing on transparency, agile response and business resiliency; and our global and regional crisis management teams continued to maintain consistent messaging and direct local responses. Regular global Town Halls, a weekly Chair and CEO email and short, self-produced leadership videos share open, transparent information to connect and unite our global community. Page 14 We are a company operating in a critical infrastructure industry, as defined by the U.S. Department of Homeland Security. Consistent with international, federal, state and local requirements to date, we continue to materially operate. In addition, demand for certain of our services, including those supporting health care relief efforts relating to COVID-19, has increased, and could continue to increase, as a result of COVID-19. Notwithstanding our continued critical operations, COVID-19 has negatively impacted our business, and may have further adverse impacts on our continued operations, including those listed and discussed in Item 1A, Risk Factors included in this Annual Report on Form 10-K. Accordingly, we have reduced spending broadly across the Company, only proceeding with operating and capital spending that is critical. We have also ceased all non-essential hiring and reduced discretionary expenses, including certain employee benefits and compensation. Looking ahead, we have developed contingency plans to reduce costs further if the situation further deteriorates or lasts longer than current expectations. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be necessary or appropriate for the health and safety of employees, contractors, customers, suppliers or others or as required by international, federal, state or local authorities. Based on current estimates, we expect the impact of COVID-19 to continue in the first half of fiscal 2021, although to a lesser degree than what was seen in fiscal 2020. Although this business disruption is expected to be temporary, significant uncertainty exists concerning the magnitude, duration and impacts of the COVID-19 pandemic, including with regard to the effects on our customers and customer demand for our services. Accordingly, actual results for future fiscal periods could differ materially versus current expectations and current results and financial condition discussed herein may not be indicative of future operating results and trends. For a discussion of risks and uncertainties related to COVID-19, including the potential impacts on our business, financial condition and results of operations, see Item 1A - Risk Factors. Page 15 Lines of Business The services we provide fall into the following two lines of business (LOB): Critical Mission Solutions (CMS) and People & Places Solutions (P&PS) which are also the Company’s reportable segments. For additional information regarding our segments, including information about our financial results by segment and financial results by geography, see Note 19 - Segment Information of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K. Critical Mission Solutions (CMS) Our Critical Mission Solutions line of business provides a full spectrum of cyber, data analytics, systems and software application integration services and consulting, enterprise level operations and maintenance and mission IT, engineering and design, enterprise operations and maintenance, program management, and other highly technical consulting solutions to government agencies as well as commercial customers. Our representative clients include the U.S. Department of Defense (DoD), the Combatant Commands, the U.S. Intelligence Community, NASA, the U.S. Department of Energy (DoE), Ministry of Defence in the U.K., the U.K. Nuclear Decommissioning Authority (NDA), and the Australian Department of Defence, as well as private sector customers mainly in the aerospace, automotive, energy and telecom sectors. Serving mission-critical end markets Critical Mission Solutions serves broad sectors, including U.S. government services, cyber, nuclear, commercial, and international sectors. Fiscal Year 2020   The U.S. government is the world’s largest buyer of technical services, and in fiscal 2020, approximately 79% of CMS’s revenue was earned from serving the DoD, Intelligence Community and Federal Civilian governmental entities. Trends affecting our government clients include information warfare, cyber, IT modernization, space exploration and intelligence, defense systems and intelligent asset management, which are driving demand for our highly technical solutions. Page 16 People & Places Solutions (P&PS) Jacobs' People & Places Solutions line of business provides end-to-end solutions for our clients’ most complex projects - whether connected mobility, integrated water management, smart cities, advanced manufacturing or environmental stewardship. In doing so, we employ predictive analytics, artificial intelligence and automation, digital twin technology, IoT smart sensors, geospatial visualization and advanced delivery processes and tools for consulting, planning, architecture, design, engineering, and implementation, as well as long-term operation of facilities and infrastructure. Solutions may be delivered as standalone engagements or through comprehensive program management that integrates disparate workstreams to yield additional benefits not attainable through project-by-project implementation. We also provide progressive design-build and construction management at-risk delivery for our P&PS clients. Our clients include national, state and local government in the U.S., Europe, U.K., Middle East, Australia, New Zealand and Asia, as well as multinational private sector clients throughout the world. Fiscal Year 2020   Serving broad market sectors that support people and places Aging infrastructure; climate action; urbanization; water, food and energy security; global supply chains; pandemic preparedness and response; environmental, social, and corporate governance (ESG); and digital transformation are driving new challenges and opportunities for our clients. These drivers are highlighting the need for holistic, integrated technology solutions that draw on the domain knowledge resident in the multidisciplinary consulting and delivery expertise of our global workforce. For example, an airport is no longer simply aviation infrastructure but is now a smart city with extensive operational, cybersecurity and autonomous mobility requirements, as well as the contactless travel requirements necessary to best manage COVID-19. Master planning for a city now requires advanced analytics to plan for climate adaption and next-generation mobility as well as revenue generating fiber infrastructure. Furthermore, the future of nearly all water infrastructure will be highly technology-enabled, leveraging solutions with digital twins, predictive analytics and smart metering technology to ensure we're giving communities, industries and regions the secure water resource they need to flourish and expand. This increase in technology requirements is a key factor in our organic growth strategy as well as our recent acquisitions and divestitures. Moreover, our business model is evolving to provision a broader spectrum of digital- and technology-enabled solutions to address our infrastructure clients' challenges with less exposure to craft construction services. Our focus on the five core sectors of Transportation, Water, Built Environment, Environmental and Advanced Facilities provides us with the ability to leverage our expansive domain expertise across all global markets, enabling truly end-to-end connected solutions for our clients' most complex major projects and programs, including the London 2012 Olympic and Paralympic Games, Expo 2020 Dubai, and the LaGuardia Airport Redevelopment. Page 19 Today, we are executing complex solutions that pull expertise from all markets, fused with digital expertise, for major developments in places like London, Dubai, Sydney, Singapore, Miami, Los Angeles and Toronto. Leveraging our global platform to deliver integrated solutions to clients One of our key differentiators is our global integrated delivery model, which harnesses deep domain expertise from our global Solutions and Technology organization that is leveraged with the benefits of scale when we focus the world’s best talent to deliver innovative solutions and value to our clients. • Within transportation, we provide sustainable solutions to plan, develop, finance, design engineer, construct, operate and maintain next generation mobility across all modes, including highway, bridge, rail and transit, aviation, port and maritime infrastructure. For example, we do this by assessing the impact of autonomous vehicles on roadways and cities for transportation agencies, engineering and specifying vehicles for mass-transit; delivering consulting services for digital fare payment systems; providing program management of the largest airport developments, designing cutting edge automated container terminals and ports infrastructure and utilizing big data to develop cross modal mobility solutions. Our clients encompass the world’s largest transportation agencies as well as private shipping and logistics companies worldwide, including the multi-modal Port Authority of New York and New Jersey, Transport for London, Highways England, Transport for New South Wales and Etihad Rail. • Water is one of the most precious resources in the world. Extreme weather events in the form of droughts, desertification and flooding are stressing water supplies, at the same time as population growth and industrialization are increasing demand. Addressing these challenges, we provide integrated solutions across water and wastewater treatment, water reuse, and water resources such as the deployment of next generation smart metering, digital twin technology and highly technical consulting, engineering, design-build and operation of complex water systems. We support our clients on some of the world’s largest water infrastructure projects such as California WaterFix, Thames Tideway, Houston Water and Singapore National Water Agency. • For the built environment, we deliver full-service architecture, engineering, interiors, planning, urban design, landscape architecture and project delivery solutions for government, corporate, commercial, institutional and industrial clients across diverse sectors. Our technology-enabled expertise ranges from the future of work, transaction advisory and asset management to transportation hubs, urban developments, government, healthcare, higher education and science facilities, as well as sports and entertainment venues. We plan and deliver resilient, triple bottom line-based solutions that are connected, secure and smart, including the rebuild of Tyndall Air Force Base in Florida into a visionary Installation of the Future; the corporate headquarters and research facility relocation of Spark Therapeutics in Philadelphia, Pennsylvania; and the expanded Blacktown Mount Druitt Hospital in New South Wales, Australia. • In our environmental business, we utilize a multidisciplinary, systems-oriented approach to develop environmental planning for infrastructure development; data-driven site remediation and regeneration for per- and polyfluoroalkyl substances (PFAS) and other known and emerging contaminants; environmental health & safety (EHS) operational excellence and information management; and climate action solutions that incorporate sustainability and resiliency principles as essential to the well-being of all people and of our planet. We also provide post-disaster response and recovery services in support of the Federal Emergency Management Agency’s mission throughout the U.S. In addition to providing end-to-end technology-enabled solutions for multinational oil & gas, chemical and life sciences, mining, manufacturing and energy clients, Jacobs provides comprehensive environmental services for the U.S. Department of Defense, the U.S. Environmental Protection Agency, NASA and other civilian agencies, the UK Environment Agency, and the Australian Department of Defense. • Within advanced facilities, we provide fully integrated solutions for highly specialized facilities in the fields of medical research, sustainable manufacturing, nanoscience, biotechnology, semiconductor and data centers. Our services span the full range of facility work, from early planning and site selection through architecture, engineering, construction and facility operations, all tailored to specific client needs in the life sciences and pharmaceutical, specialty manufacturing, microelectronics and data intensive industries. As the largest professional services provider to the biopharmaceutical industry, we are working with our multinational clients to rapidly increase capacity for vaccines and therapeutics, as well as reshoring manufacturing facilities, in response to the COVID-19 pandemic. Representative projects include the retrofit of AstraZeneca’s West Chester, Ohio manufacturing facility to deliver a potential COVID-19 vaccine; Page 20 the Mountbatten Nanotechnology Electronics Research Complex, University of Southampton, U.K.; and the Procter & Gamble, Singapore Innovation Center. Applying internally developed technology A strong foundation of data-rich innovative solutions is woven into every project that we deliver. This may include Jacobs-developed proprietary software that employs an array of technical expertise to enable the most efficient, effective and predictable solutions for our clients. Examples of these technologies include: • TrackRecord is a workflow automation and compliance management platform for the delivery of major projects. • AquaDNA is a predictive analytics platform that integrates innovative technologies for wastewater asset management through an AI learning platform, facilitating a move from reactive to proactive maintenance and reduced operation and maintenance costs. • Travel Service Optimisation (TSO) is Jacobs' travel sharing solution for Special Education needs children which centers on the children’s ability to travel together rather than focusing on their disability. • SafetyWeb is a site hazard management and compliance tool. • ProjectMapper is a web based geospatial mapping and project visualization software platform. • Flood Modeller provides proactive decision-making to help manage our environment and the challenges associated with flood risk. It is suitable for a wide range of engineering and environmental applications, from calculating simple backwater profiles and modeling entire catchments to mapping potential flood risk for entire countries. • ion© is an Industrial Internet of Things (IoT) multi-protocol wireless application networking system which provides an open, integrated, secure and scalable system for data aggregation and viewing. • Replica™ is Jacobs’ digital twin solution software platform and consists of the following capabilities: Replica Parametric Design™ (formerly CPES™) provides outputs on construction quantities and costs, life cycle quantities and costs, and estimates of environmental impacts. Rapid process design in Replica Process and the resulting development of the Replica Parametric Designs allows for thorough alternatives analysis and enhanced team communication. Replica Preview™ is used for early stage visualization of facility designs. This software rapidly creates scaled three-dimensional designs, which can be placed on Google Earth®. Rapid design development in Replica Parametric Design and visualization with Replica Preview allows for informed analysis of many alternatives and sound decision-making. Replica Systems Analysis™ (formerly Voyage™) is a flexible platform that can simulate resource systems dynamically, over time. Examples of modeled systems include water resources, energy, solid waste and traffic. The ability to connect complex systems together in a single interface that is visually intuitive leads to informed team collaboration and creative solutions. Replica Process™ allows Jacobs' world-renowned expertise in water treatment to be simulated both statically and dynamically over time in Replica Process™ software. Much of the process predictive capabilities in Replica Process are founded on the Jacobs' Pro2D2™ and Source™ software. Informed decisions are founded on the ability of Replica Process to provide details on system performance among many alternatives, very quickly. Replica Hydraulics™ was designed to simulate all pressurized and gravity flow hydraulics of a system, simultaneously. Replica’s hydraulic blocks were built on accepted engineering practice equations and have been successfully verified on hundreds of projects. The Replica Hydraulics library is the foundation for complete, dynamic water system analysis and can be used exclusively for hydraulic analysis of a system or in conjunction with Replica Process, Replica Controls and/or Replica Air. Replica Controls™ allows for dynamic simulation of system instrumentation such as flow meters, indicator transmitters, limit switches and stream analyzers as well as the logic objects including PID controllers, sequencers, units, controller and alarms. The software's controls capabilities and functionality align with industry design standards and its ability to predict full scale performance is unmatched due to the connectivity with Replica Hydraulics. Page 21 spotlight on ensuring that Jacobs is an employer of choice in every way: we aspire to be a merit-based organization that is inclusive and diverse; we are building an inclusive culture where all employees feel they belong. Our culture is the foundation for selecting, developing and retaining the best and brightest minds at Jacobs. Our eight Jacobs Employee Networks (JENs) play a critical role in attracting new talent into our business, helping to shape our recruiting strategies and policies, our science, technology, engineering, arts and math programs, and our accessibility practices. In fiscal 2020, more than1,300 graduates, interns and apprentices were welcomed to our global team. In fiscal 2020, we launched our new employee experience e3: engage. excel. elevate. From a talent profile for every employee to providing continuous celebrations and feedback, and learning new skills and driving performance, e3 is our unique approach to ensuring every employee can engage, excel in their role and elevate their career. We also introduced GlobalShare to enhance our ability to resolve short-term staffing needs and enable employees to pursue opportunities across Jacobs. We also made enhancements to some of our policies to deliver greater work-day flexibility to employees. Additionally, we undertook several new initiatives related to our Total Rewards Program, including implementing our Global Career Structure framework, combining career planning and development resources and tools within a consistent career structure, and a global pay equity review of our pay systems and processes to make pay equity a lasting reality at Jacobs. Focus on Inclusion and Diversity At Jacobs we have an unparalleled focus on inclusion, with a diverse team of visionaries, thinkers and doers. We embrace all perspectives, collaborating to make a positive impact. The aperture of inclusion is broader than lifestyle and culture. Joining, belonging and thriving are Jacobs’ key elements in retaining talent and developing a culture where people want to stay – and a place where you can bring your best, whole self to work. TogetherBeyond is our approach to living inclusion every day and enabling diversity and equality globally – it is not just about numbers and statistics, but about every one of our people and the collective strength we take from their unique perspectives and ambitions. Having a culture of belonging where everyone can join in and thrive allows us to recruit and retain the best global talent and drive innovative solutions for our business, clients and communities. “We live inclusion” is supported by the strength of tangible leadership commitment and accountability at Jacobs. In that regard, we have tied inclusive behavior to our leaders’ performance review and compensation programs and delivered conscious inclusion training to nearly all (98%) of our people. As of October 2, 2020, our U.S. employees had the following race and ethnicity demographics: October 2, 2020 All U.S. Employees (1) White 71.4 % Hispanic / Latino 8.9 % Black 8.5 % Asian 6.8 % Multiracial 2.0 % American Indian or Alaska Native 0.4 % Native Hawaiian / Other Pacific Islander 0.3 % Not provided 1.7 % (1) Includes U.S. employee population only (excluding approximately 2,000 craft employees) Over the last year, we have seen tangible examples of progress resulting from our approach to inclusion. In fiscal 2020, we launched our global Action Plan for Advancing Justice and Equality. Driven by members of our Black employee network, Harambee, in partnership with our Executive Leadership Team and Jacobs’ Board of Directors, the Action Plan sets out actionable initiatives and measurable objectives to address advance equality within the company and around the communities where we work. ℠ Page 24 As of October 2, 2020, our global employees had the following gender demographics: October 2, 2020 Women Men All employees 29.5% 70.5% Looking ahead, we will continue to focus on inclusion and diversity by: • Following through on our global Action Plan for Advancing Justice and Equality • Striving to achieve our aspirational goals of creating a more gender-balanced and racially/ethnically diverse workforce around the globe to more appropriately reflect the labor markets and communities in which we live and serve • Amplifying our culture of belonging • Measuring employee sense of inclusion and belonging through a global survey • Identifying, developing and promoting allies across Jacobs We know we have more to do when it comes to increasing the representation of historically underrepresented groups within our global workforce, and we are committed to taking action and ensuring Jacobs is, and remains, an employer of choice. Our Employees’ Safety and Wellbeing BeyondZero® is our approach to the health, safety and security of our people, the protection of the environment and the resilience of Jacobs. In fiscal 2020, we continued to demonstrate safety excellence with another year of zero employee fatalities at work, a 25% reduction in employee recordable incidents from fiscal 2019, and a total recordable incident rate of 0.17 (recorded in accordance with OSHA record keeping requirements) as of October 2, 2020 – compared to the North American Industry Classification System’s most recently reported aggregate rate of 0.60. While our BeyondZero journey started with safety, as we continued to drive our injury rates down, we also expanded our thinking to our broader culture of caring and particularly mental health. It was this strong foundation that helped us act swiftly at the start of the COVID-19 pandemic. The foundation elements of our existing “Mental Health Matters” program enabled us to respond quickly to launch our “Mental Health Matters Resiliency” program and to promote our suicide awareness campaign in fiscal 2020. In fiscal 2020, almost 2,000 Positive Mental Health Champions (an 11% increase from fiscal 2019) trained to support the mental wellbeing of our employees and one in every 29 employees trained as a Positive Mental Health Champion. In addition, 100% of Jacobs’ Executive Leadership Team participated in Positive Mental Health training. Information About Our Executive Officers The information required by Paragraph (a), and Paragraphs (c) through (g) of Item 401 of Regulation S-K (except for information required by Paragraph (e) of that Item to the extent the required information pertains to our executive officers) and Item 405 of Regulation S-K is set forth under the captions “Members of the Board of Directors” and “Delinquent Section 16(a) Reports” in our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year and is incorporated herein by reference. Page 25 The following table presents the information required by Paragraph (b) of Item 401 of Regulation S-K. Name Age Position with the Company Year Joined the Company Steven J. Demetriou 62 Chair and Chief Executive Officer 2015 Kevin C. Berryman 61 President and Chief Financial Officer 2014 Robert V. Pragada 52 President and Chief Operating Officer 2016 Dawne S. Hickton 63 Executive Vice President and COO Critical Mission Solutions 2019 Joanne E. Caruso 60 Executive Vice President, Chief Legal and Administrative Officer 2012 William B. Allen, Jr. 56 Senior Vice President, Chief Accounting Officer 2016 Michael R. Tyler 64 Senior Vice President, General Counsel and Chief Compliance Officer 2013 All of the officers listed in the preceding table serve in their respective capacities at the pleasure of the Board of Directors of the Company. Mr. Demetriou joined the Company in August 2015. Mr. Demetriou served as Chairman and CEO of Aleris Corporation for 14 years, a global downstream aluminum producer based in Cleveland, Ohio. Over the course of his career, he has gained broad experience with companies in a range of industries including metals, specialty chemicals, oil & gas, manufacturing and fertilizers. Mr. Berryman joined the Company in December 2014. Mr. Berryman served as EVP and CFO for five years at International Flavors and Fragrances Inc., an S&P 500 company and leading global creator of flavors and fragrances used in a wide variety of consumer products. Prior to that, he spent 25 years at Nestlé in a number of finance roles including treasury, mergers & acquisitions, strategic planning and control. Mr. Pragada rejoined the Company in February 2016 after serving as President and Chief Executive Officer of The Brock Group since August 2014. From March 2006 to August 2014 Mr. Pragada served in executive and senior leadership capacities with the Company. Ms. Hickton joined the Company as Chief Operating Officer and President of Critical Mission Solutions in 2019. Prior to this role, Ms. Hickton served as a member of the Board of Directors of the Company and was previously the Vice Chair and Chief Executive Officer for eight years at RTI International Metals, Inc., a global supplier of advanced titanium products and services in commercial aerospace, defense, propulsion, medical device and energy markets. Ms. Caruso joined the Company in 2012. Prior to becoming Executive Vice President, Chief Legal and Administrative Officer, Ms. Caruso was Senior Vice President, Chief Administrative Officer, and previously held the positions of Senior Vice President, Global Human Resources and Vice President, Global Litigation. Prior to joining the Company, Ms. Caruso was a partner in two international law firms, Howrey LLP and Baker & Hostetler LLP. Mr. Allen joined the Company in October 2016. Mr. Allen served as Vice President, Finance and Principal Accounting Officer at Lyondellbasell Industries, N.V. from 2013 to 2016. Prior to that, he was with Albemarle Corporation, where he served as Vice President, Corporate Controller and Chief Accounting Officer from 2009 to 2013 after serving in CFO roles for their Catalysts and Fine Chemistry businesses from 2005 to 2009. Mr. Tyler joined the Company in June 2013. He previously served as Executive Vice President, General Counsel and Secretary of Sanmina Corporation, a global electronics manufacturing services provider from April 2007 to June 2013, and Chief Legal and Administrative Officer of Gateway, Inc., a computer hardware company, from January 2004 to April 2007. Page 26 • We may be required to contribute additional cash to meet any underfunded benefit obligations associated with retirement and post- retirement benefit plans we manage. • Demand for our services is cyclical as the sectors and industries in which our clients operate are impacted by economic downturns, reductions in government or private spending and times of political uncertainty. • Rising inflation, interest rates, and/or construction costs could reduce the demand for our services as well as decrease our profit on our existing contracts, in particular with respect to our fixed-price contracts. • Our global presence could give rise to material fluctuations in our income tax rates. • Our businesses could be materially and adversely affected by events outside of our control. • Climate change and related environmental issues could have a material adverse impact on our business, financial condition and results of operations. • Our continued success is dependent upon our ability to hire, retain, and utilize qualified personnel. • Our business strategy relies in part on acquisitions to sustain our growth. Acquisitions of other companies present certain risks and uncertainties. Risks Related to Regulatory Compliance • Past and future environmental, health, and safety laws could impose significant additional costs and liabilities. • If we fail to comply with federal, state, local or foreign governmental requirements, our business may be adversely affected. • We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws. • We may be affected by market or regulatory responses to climate change. Risks Related to Our Indebtedness • We rely on cash provided by operations and liquidity under our credit facilities to fund our business. Negative conditions in the credit and financial markets and delays in receiving client payments could adversely affect our cost of borrowing and our business. • Maintaining adequate bonding and letter of credit capacity is necessary for us to successfully bid on and win some contracts. Risks Related to Our Common Stock • Our quarterly results may fluctuate significantly, which could have a material negative effect on the price of our common stock. • There can be no assurance that we will pay dividends on our common stock. • In the event we issue stock as consideration for certain acquisitions we may make, we could dilute share ownership, and if we receive stock in connection with a divestiture, the value of stock is subject to fluctuation. • Delaware law and our charter documents may impede or discourage a takeover or change of control. Risks Related to Our Operations The COVID-19 pandemic, including the measures that international, federal, state and local public health and other governmental authorities implement to address it, have adversely affected, and may continue to adversely affect, our business, financial condition and results of operations. On March 11, 2020, the World Health Organization characterized the outbreak of the novel coronavirus (“COVID-19”) as a global pandemic and recommended certain containment and mitigation measures. On March 13, 2020, the United States declared a national emergency concerning the outbreak, and the vast majority of states and many municipalities declared public health emergencies or taken similar actions. Since then, there have been extraordinary and wide-ranging actions taken by international, federal, state and local public health and governmental authorities to contain and combat the outbreak of COVID-19 in regions across the United States and around the world. These actions include quarantines and “stay-at-home” or “shelter-in-place” orders, social distancing measures, travel restrictions, school closures and similar mandates for many individuals in order to substantially restrict daily activities and orders for many businesses to curtail or cease normal operations unless their work is critical, essential or life- Page 29 sustaining. Although certain jurisdictions have taken steps to lift or ease such restrictions to various degrees, some jurisdictions have subsequently reversed such lifting or easing in response to increased cases of COVID-19. The COVID-19 pandemic has adversely affected, and may continue to adversely affect, certain elements of our business, including, but not limited to, the following: • We have experienced, and may continue to experience, reductions in demand for certain of our services and the delay or abandonment of ongoing or anticipated projects due to our clients’, suppliers’ and other third parties’ diminished financial conditions or financial distress, as well as governmental budget constraints. These impacts are expected to continue or worsen if “stay-at-home”, “shelter-in- place”, social distancing, travel restrictions and other similar orders, measures or restrictions remain in place for an extended period of time or are re-imposed after being lifted or eased. Although we have experienced, and may continue to experience, an increase in demand for certain of our services as a result of new projects that have arisen in response to the COVID-19 pandemic, there can be no assurance that any such increased demand would be sufficient to offset lost or delayed demand. • Government-sponsored stimulus or assistance programs enacted to-date in the United States and in the foreign countries in which we operate in response to the COVID-19 pandemic have only been available to us or our customers or suppliers on a limited basis and are insufficient to address the full impact of the COVID-19 pandemic. For example, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) contains provisions that authorize Federal Agencies to pay contractors to retain key workers where regular work schedules are not possible due to quarantines or other social isolation measures. We have pursued payment for these alternative work arrangements with applicable Federal Agencies or contracting officials and will continue to assess the availability of such subsidies on a contract-by-contract basis. Certain foreign governments are also permitting contracting authorities to revise the terms of government contracts and/or providing various forms of subsidies to compensate companies who maintain their workforce rather than impose layoffs or furloughs. Certain other governments have provided partial expense reimbursement for furloughed employees and also provided for the deferral of payroll taxes. Although we expect to recover a significant portion of COVID-19 related labor costs, we do not expect to recover the full amount of either our labor cost or associated fee. Additionally, these and other government-sponsored assistance and stimulus programs are subject to renewal, modification or termination by the applicable governing bodies. If any government-sponsored program from which we receive benefits is modified or terminated, our benefits thereunder could decline or cease altogether, which could have a material adverse effect on our business, financial position, results of operations, and/or cash flows. • Our clients may be unable to meet their payment obligations to us in a timely manner, including as a result of deteriorating financial condition or bankruptcy resulting from the COVID-19 pandemic and resulting economic impacts. Further, other third parties, such as suppliers, subcontractors, joint venture partners and other outside business partners, may experience significant disruptions in their ability to satisfy their obligations with respect to us, or they may be unable to do so altogether. • Many employers, including us, and governments continue to require all or a significant portion of employees to work from home or not go into their offices. While many of our employees can effectively perform their responsibilities while working remotely, some work is not well-suited for remote work, and that work may not be completed as efficiently as if it were performed on site. Additionally, we may be exposed to unexpected cybersecurity risks and additional information technology-related expenses as a result of these remote working requirements. • Illness, travel restrictions or other workforce disruptions could adversely affect our supply chain, our ability to timely and satisfactorily complete our clients’ projects, our ability to provide services to our clients or our other business processes. Even after the COVID-19 pandemic subsides, we could experience a longer-term impact on our operating expenses, including, for example, due to the need for enhanced health and hygiene requirements or the periodic revival of social distancing or other measures in one or more regions in attempts to counteract future outbreaks. • We have furloughed certain employees and may need to further furlough or reduce the number of employees that we employ. We may experience difficulties associated with hiring additional employees or replacing employees, in particular with respect to roles that require security clearances or other special qualifications that may be limited or difficult to obtain. Increased turnover rates of our employees could increase operating costs and create challenges for us in maintaining high levels of employee awareness of Page 30 and compliance with our internal procedures and external regulatory compliance requirements, in addition to increasing our recruiting, training and supervisory costs. • In addition to existing travel restrictions implemented in response to the COVID-19 pandemic, jurisdictions may continue to close borders, impose prolonged quarantines and further restrict travel and business activity, which could materially impair our ability to support our operations and clients (both domestic and international), to source supplies through the global supply chain and to identify, pursue and capture new business opportunities, and which could continue to restrict the ability of our employees to access their workplaces. We also face the possibility of increased overhead or other expenses resulting from compliance with any future government orders or other measures enacted in response to the COVID-19 pandemic. • The COVID-19 pandemic has increased volatility and pricing in the capital markets, and that increased volatility is likely to continue. While we entered into a new $1 billion term loan facility in the second quarter of fiscal 2020, we might not be able to access further sources of liquidity on acceptable pricing or borrowing terms if at all. Our credit facilities contain customary covenants restricting, among other things, our ability to incur certain liens and indebtedness. We are also subject to certain financial covenants, including maintenance of a maximum consolidated leverage ratio. A breach of any covenant or our inability to comply with the required financial ratios, whether as a result of the impact of the COVID-19 pandemic on our business or otherwise, could result in a default under one or more of our credit facilities and limit our ability to do further borrowing. Any inability to obtain additional liquidity as and when needed, or to maintain compliance with the instruments governing our indebtedness, could have a material adverse effect on our business, financial condition and results of operations. • We operate in many countries around the world, and certain of those countries’ governments may be unable to effectively mitigate the financial or other impacts of the COVID-19 pandemic on their economies and workforces and our operations therein. The continued global spread of the COVID-19 pandemic and the responses thereto are complex and rapidly evolving, and the extent to which the pandemic impacts our business, financial condition and results of operations, including the duration and magnitude of such impacts, will depend on numerous evolving factors that we may not be able to accurately predict or assess. COVID-19, and the volatile regional and global economic conditions stemming from the pandemic, as well as reactions to future pandemics or resurgences of COVID-19, could also precipitate or aggravate the other risk factors that we identify in in this Annual Report on Form 10-K, which in turn could materially adversely affect our business, financial condition and results of operations. There may be other adverse consequences to our business, financial condition and results of operations from the spread of COVID-19 that we have not considered or have not become apparent. As a result, we cannot assure you that if COVID-19 continues to spread, it would not have a further adverse impact on our business, financial condition and results of operations. Project sites are inherently dangerous workplaces. If we, the owner, or others working at the project site fail to maintain safe work sites, and our employees or others become injured, disabled or even lose their lives, we can be exposed to significant financial losses and reputational harm, as well as civil and criminal liabilities. Project sites often put our employees and others in close proximity with large pieces of mechanized equipment, moving vehicles, chemical and manufacturing processes and highly regulated materials, in a challenging environment and often in geographically remote locations. If we, or others working at such sites, fail to implement such procedures or if the procedures we implement are ineffective, or if others working at the site fail to implement and follow appropriate safety procedures, our employees and others may become injured, disabled or even lose their lives, the completion or commencement of our projects may be delayed and we may be exposed to litigation or investigations. Unsafe work sites also have the potential to increase employee turnover, increase the cost of a project to our clients and raise our operating and insurance costs. Any of the foregoing could result in financial losses or reputational harm, which could have a material adverse impact on our business, financial condition and results of operations. In addition, our projects can involve the handling of hazardous and other highly regulated materials, which, if improperly handled or disposed of, could subject us to civil and/or criminal liabilities. We are also subject to regulations dealing with occupational health and safety. Although we maintain functional groups whose primary purpose is to ensure we implement effective health, safety and environmental (“HSE”) work procedures throughout our organization, including project sites and maintenance sites, the failure to comply with such regulations could subject Page 31 audits by various government authorities as well as profit and cost controls, which could result in withholding or delay of payments to us. Government contracts are also exposed to uncertainties associated with funding such as sequestration and budget deficits. Contracts with the U.S. federal government, for example, are subject to the uncertainties of Congressional funding. U.S. government shutdowns or any related under- staffing of the government departments or agencies that interact with our business could result in program cancellations, disruptions and/or stop work orders, could limit the government’s ability to effectively progress programs and make timely payments, and could limit our ability to perform on our existing U.S. government contracts and successfully compete for new work. Governments are typically under no obligation to maintain funding at any specific level, and funds for government programs may even be eliminated. Legislatures typically appropriate funds on a year-by-year basis, while contract performance may take more than one year. As a result, contracts with government agencies may be only partially funded or may be terminated, and we may not realize all of the potential revenue and profit from those contracts. Our government clients may reduce the scope of or terminate our contracts for convenience or decide not to renew our contracts with little or no prior notice. Since government contracts represent a significant percentage of our revenues (for example, those with the U.S. federal government represented approximately 33% of our total revenue in fiscal 2020), a significant reduction in government funding or the loss of such contracts could have a material adverse impact on our business, financial condition, and results of operations. Most government contracts are awarded through a rigorous competitive process. The U.S. federal government has increasingly relied upon multiple-year contracts with multiple contractors that generally require those contractors to engage in an additional competitive bidding process for each task order issued under a contract. This process may result in us facing significant additional pricing pressure and uncertainty and incurring additional costs. Moreover, we may not be awarded government contracts because of existing policies designed to protect small businesses and under-represented minorities. Our inability to win new contracts or be awarded work under existing contracts could have a material adverse impact on our business, financial condition and results of operations. In addition, government contracts are subject to specific procurement regulations and a variety of other socio-economic requirements, which affect how we transact business with our clients and, in some instances, impose additional costs on our business operations. For example, for contracts with the U.S. federal government, we must comply with the Federal Acquisition Regulation, the Truth in Negotiations Act, the Cost Accounting Standards, and numerous regulations governing environmental protection and employment practices. Government contracts also contain terms that expose us to heightened levels of risk and potential liability than non-government contracts. This includes, for example, unlimited indemnification obligations. We also are subject to government audits, investigations, and proceedings. For example, government agencies such as the U.S. Defense Contract Audit Agency routinely review and audit us to determine the adequacy of and our compliance with our internal control systems and policies and whether allowable costs are in accordance with applicable regulations. These audits can result in a determination that a rule or regulation has been violated or that adjustments are necessary to the amount of contract costs we believe are reimbursable by the agencies and the amount of our overhead costs allocated to the agencies. If we violate a rule or regulation, fail to comply with a contractual or other requirement or do not satisfy an audit, a variety of penalties can be imposed on us including monetary damages and criminal and civil penalties. For example, in so-called “qui tam” actions brought by individuals or the government under the U.S. Federal False Claims Act or under similar state and local laws, treble damages can be awarded. In addition, any or all of our government contracts could be terminated, we could be suspended or debarred from all government contract work, or payment of our costs could be disallowed. The occurrence of any of these actions could have a material adverse impact on our business, financial condition and results of operations. Many of our federal government contracts require us to have security clearances, which can be difficult and time consuming to obtain. If our employees or our facilities are unable to obtain or retain the necessary security clearances, our clients could terminate or not renew existing contracts or award us new contracts, which could have a material adverse impact on our business, financial condition and results of operations could be negatively impacted. Our project execution activities may result in liability for faulty services. If we fail to provide our services in accordance with applicable professional standards or contractual requirements, we could be exposed to significant monetary damages or even criminal violations. Our engineering practice, for example, involves professional judgments regarding the planning, design, development, construction, Page 34 operations and management of industrial facilities and public infrastructure projects. While we do not generally accept liability for consequential damages in our contracts, and although we have adopted a range of insurance, risk management and risk avoidance programs designed to reduce potential liabilities, a catastrophic event at one of our project sites or completed projects resulting from the services we have performed could result in significant professional or product liability and warranty or other claims against us as well as reputational harm, especially if public safety is impacted. These liabilities could exceed our insurance limits or the fees we generate, may not be covered by insurance at all due to various exclusions in our coverage and could impact our ability to obtain insurance in the future. Further, even where coverage applies, the policies have deductibles, which result in our assumption of exposure for certain amounts with respect to any claim filed against us. In addition, clients or subcontractors who have agreed to indemnify us against any such liabilities or losses might refuse or be unable to pay us. An uninsured claim, either in part or in whole, as well as any claim covered by insurance but subject to a high deductible, if successful and of a material magnitude, could have a material adverse impact on our business, financial condition and results of operations. The outcome of pending and future claims and litigation could have a material adverse impact on our business, financial condition, and results of operations. We are a party to claims and litigation in the normal course of business, including litigation inherited through acquisitions. Since we engage in engineering and construction activities for large facilities and projects where design, construction or systems failures can result in substantial injury or damage to employees or others, we are exposed to substantial claims and litigation and investigations if there is a failure at any such facility or project. Such claims could relate to, among other things, personal injury, loss of life, business interruption, property damage, pollution and environmental damage and be brought by our clients or third parties, such as those who use or reside near our clients’ projects. We can also be exposed to claims if we agreed that a project will achieve certain performance standards or satisfy certain technical requirements and those standards or requirements are not met. In many of our contracts with clients, subcontractors and vendors, we agree to retain or assume potential liabilities for damages, penalties, losses and other exposures relating to projects that could result in claims that greatly exceed the anticipated profits relating to those contracts. In addition, while clients and subcontractors may agree to indemnify us against certain liabilities, such third parties may refuse or be unable to pay us. With a workforce of approximately 55,000 people globally, we are also party to labor and employment claims in the normal course of business. Such claims could relate to allegations of harassment and discrimination, pay equity, denial of benefits, wage and hour violations, whistleblower protections, concerted protected activity, and other employment protections, and may be pursued on an individual or class action basis depending on applicable laws and regulations. Some of such claims may be insurable, while other such claims may not. We maintain insurance coverage for various aspects of our business and operations. Our insurance programs have varying coverage limits as well as exclusions for matters such as fraud, and insurance companies may attempt to deny claims for which we seek coverage. In addition, we have elected to retain a portion of losses that may occur through the use of various deductibles, retentions and limits under these programs. As a result, we may be subject to future liability for which we are only partially insured, or completely uninsured. Although in the past we have been generally able to cover our insurance needs, there can be no assurances that we can secure all necessary or appropriate insurance in the future, or that such insurance can be economically secured. For example, catastrophic events can result in decreased coverage limits, coverage that is more limited, or increased premium costs or higher deductibles. We monitor the financial health of the insurance companies from which we procure insurance, which is one of the factors we take into account when purchasing insurance. Our insurance is purchased from a number of the world's leading providers, often in layered insurance or quota share arrangements. If any of our third party insurers fail, abruptly cancel our coverage or otherwise cannot satisfy their insurance requirements to us, then our overall risk exposure and operational expenses could be increased and our business operations could be interrupted. In addition, the nature of our business sometimes results in clients, subcontractors and vendors presenting claims to us for, among other things, recovery of costs related to certain projects. Similarly, we occasionally present change orders and claims to our clients, subcontractors and vendors for, among other things, additional costs exceeding the original contract price. If we fail to document properly the nature of our claims and change orders or are otherwise unsuccessful in negotiating reasonable settlements with our clients, subcontractors and vendors, we could incur cost overruns, reduced profits or, in some cases, a loss for a project. Further, these claims can be the subject of lengthy negotiations, arbitration or litigation proceedings, which could result in the investment of significant amounts Page 35 of working capital pending the resolution of the relevant change orders and claims. A failure to promptly recover on these types of claims could have a material adverse impact on our liquidity and financial results. Additionally, irrespective of how well we document the nature of our claims and change orders, the cost to prosecute and defend claims and change orders can be significant. Litigation and regulatory proceedings are subject to inherent uncertainties and unfavorable rulings can and do occur. Pending or future claims against us could result in professional liability, product liability, criminal liability, warranty obligations, default under our credit agreements and other liabilities which, to the extent we are not insured against a loss or our insurer fails to provide coverage, could have a material adverse impact on our business, financial condition, and results of operations. Our use of joint ventures and partnerships exposes us to risks and uncertainties, many of which are outside of our control. As is common in our industry, we perform certain contracts as a member of joint ventures, partnerships, and similar arrangements. This situation exposes us to a number of risks, including the risk that our partners may be unable to fulfill their obligations to us or our clients. Further, we have limited ability to control the actions of our joint venture partners, including with respect to nonperformance, default, bankruptcy or legal or regulatory compliance. Our partners may be unable or unwilling to provide the required levels of financial support to the partnerships. If these circumstances occur, we may be liable for claims and losses attributable to the partner by operation of law or contract. These circumstances could also lead to disputes and litigation with our partners or clients, all of which could have a material adverse impact on our reputation, business, financial condition and results of operations. We depend on the management effectiveness of our joint venture partners. Differences in views among the joint venture participants may result in delayed decisions or in failures to agree on major issues, which could materially affect the business and operations of these ventures. In addition, in many of the countries in which we engage in joint ventures, it may be difficult to enforce our contractual rights under the applicable joint venture agreement. If we are not able to enforce our contractual rights, we may not be able to realize the benefits of the joint venture or we may be subject to additional liabilities. We participate in joint ventures and similar arrangements in which we are not the controlling partner. In these cases, we have limited control over the actions of the joint venture. These joint ventures may not be subject to the same requirements regarding internal controls and internal control over financial reporting that we follow. To the extent the controlling partner makes decisions that negatively impact the joint venture or internal control problems arise within the joint venture, it could have a material adverse impact on our business, financial condition and results of operations. The failure by a joint venture partner to comply with applicable laws, regulations or client requirements could negatively impact our business and, for government clients, could result in fines, penalties, suspension or even debarment being imposed on us, which could have a material adverse impact on our business, financial condition and results of operations. We are dependent on third parties to complete many of our contracts. Third-party subcontractors we hire perform a significant amount of the work performed under our contracts. We also rely on third-party equipment manufacturers or suppliers to provide much of the equipment and materials used for projects. If we are unable to hire qualified subcontractors or find qualified equipment manufacturers or suppliers, our ability to successfully complete a project could be impaired. If we are not able to locate qualified third-party subcontractors or the amount we are required to pay for subcontractors or equipment and supplies exceeds what we have estimated, especially in a lump sum or a fixed-price contract, we may suffer losses on these contracts. If a subcontractor, supplier, or manufacturer fails to provide services, supplies or equipment as required under a contract for any reason, we may be required to source these services, equipment or supplies to other third parties on a delayed basis or on less favorable terms, which could impact contract profitability. There is a risk that we may have disputes with our subcontractors relating to, among other things, the quality and timeliness of work performed, customer concerns about the subcontractor, or our failure to extend existing task orders or issue new task orders under a contract. In addition, faulty workmanship, equipment or materials could impact the overall project, resulting in claims against us for failure to meet required project specifications. Page 36 Act, pose increasingly complex compliance challenges and potentially elevate costs, and any failure to comply with these laws and regulations could result in significant penalties and legal liability. We continuously evaluate the need to upgrade and/or replace our systems and network infrastructure to protect our computing environment, to stay current on vendor supported products and to improve the efficiency of our systems and for other business reasons. The implementation of new systems and information technology could adversely impact our operations by imposing substantial capital expenditures, demands on management time and risks of delays or difficulties in transitioning to new systems. In addition, our systems implementations may not result in productivity improvements at the levels anticipated. Systems implementation disruption and any other information technology disruption, if not anticipated and appropriately mitigated, could have an adverse effect on our business. We are subject to professional standards, duties and statutory obligations on professional reports and opinions we issue, which could subject us to monetary damages. We issue reports and opinions to clients based on our professional engineering expertise as well as our other professional credentials that subject us to professional standards, duties and obligations regulating the performance of our services. For example, we issue opinions and reports to government clients in connection with securities offerings. If a client or another third party alleges that our report or opinion is incorrect or it is improperly relied upon and we are held responsible, we could be subject to significant monetary damages. In addition, our reports and other work product may need to comply with professional standards, licensing requirements, securities regulations and other laws and rules governing the performance of professional services in the jurisdiction where the services are performed. We could be liable to third parties who use or rely upon our reports and other work product even if we are not contractually bound to those third parties. These events could in turn result in monetary damages and penalties. We may not be able to protect our intellectual property or that of our clients. Our technology and intellectual property provide us, in certain instances, with a competitive advantage. Although we protect our property through registration, licensing, contractual arrangements, security controls and similar mechanisms, we may not be able to successfully preserve our rights and they could be invalidated, circumvented, challenged or become obsolete. Trade secrets are generally difficult to protect. Our employees and contractors are subject to confidentiality obligations, but this protection may be inadequate to deter or prevent misappropriation of our confidential information and/or infringement of our intellectual property. In addition, the laws of some foreign countries in which we operate do not protect intellectual property rights to the same extent as the U.S. If we are unable to protect and maintain our intellectual property rights or if there are any successful intellectual property challenges or infringement proceedings against us, our ability to differentiate our service offerings could be reduced. Litigation to determine the scope of intellectual property rights, even if ultimately successful, could be costly and could divert leadership’s attention away from other aspects of our business. We also hold licenses from third parties which may be utilized in our business operations. If we are no longer able to license such technology on commercially reasonable terms or otherwise, our business and financial performance could be adversely affected. If our intellectual property rights or work processes become obsolete, we may not be able to differentiate our service offerings and some of our competitors may be able to offer more attractive services to our customers. Our competitors may independently attempt to develop or obtain access to technologies that are similar or superior to our technologies. Our clients or other third parties may also provide us with their technology and intellectual property. There is a risk we may not sufficiently protect our or their information from improper use or dissemination and, as a result, could be subject to claims and litigation and resulting liabilities, loss of contracts or other consequences that could have a material adverse impact on our business, financial condition and results of operations. If we do not have adequate indemnification for our nuclear services, it could adversely affect our business, financial condition and results of operations. The Price-Anderson Nuclear Industries Indemnity Act, commonly called the Price-Anderson Act (“PAA”), is a U.S. federal law, which, among other things, regulates radioactive materials and the nuclear energy industry, including liability and compensation in the event of nuclear related incidents. The PAA provides certain protections and indemnification to nuclear energy plant operators and U.S. Department of Energy (“DOE”) contractors. The PAA Page 39 protections and indemnification apply to us as part of our services to the U.S. nuclear energy industry and DOE for new facilities, maintenance, modification, decontamination and decommissioning of nuclear energy, weapons and research facilities. We offer similar services in other jurisdictions outside the U.S. For those jurisdictions, varying levels of nuclear liability protection is provided by international treaties, and/or domestic laws, such as the Nuclear Liability and Compensation Act of Canada and the Nuclear Installations Act of the United Kingdom, insurance and/or assets of the nuclear installation operators (some of which are backed by governments) as well as under appropriate enforceable contractual indemnifications and hold-harmless provisions. These protections and indemnifications, however, may not cover all of our liability that could arise in the performance of these services. To the extent the PAA or other protections and indemnifications do not apply to our services, the cost of losses associated with liability not covered by the available protections and indemnifications, or by virtue of our loss of business because of these added costs could have a material adverse impact on our business, financial condition and results of operations. Our actual results could differ from the estimates and assumptions used to prepare our financial statements. In preparing our financial statements, our leadership is required under U.S. GAAP to make estimates and assumptions as of the date of the financial statements. These estimates and assumptions affect the reported values of assets, liabilities, revenue and expenses and disclosure of contingent assets and liabilities. Areas requiring significant estimates by our leadership include: • Recognition of contract revenue, costs, profit or losses in applying the principles of percentage of completion accounting; • Estimated amounts for expected project losses, warranty costs, contract close-out or other costs; • Recognition of recoveries under contract change orders or claims; • Collectability of billed and unbilled accounts receivable and the need and amount of any allowance for doubtful accounts; • Estimates of other liabilities, including litigation and insurance revenues/reserves and reserves necessary for self-insured risks; • Accruals for estimated liabilities, including litigation reserves; • Valuation of assets acquired, and liabilities, goodwill, and intangible assets assumed, in acquisitions and ongoing assessment of impairment; • Valuation of stock-based compensation; • The determination of liabilities under pension and other post-retirement benefit programs; • Income tax provisions and related valuation allowances; and • Valuation of investment in Worley stock. Our actual business and financial results could differ from our estimates of such results, which could have a material adverse impact on our financial condition and results of operations. Page 40 An impairment charge on our goodwill or intangible assets could have a material adverse impact on our financial position and results of operations. Because we have grown in part through acquisitions, goodwill and intangible assets represent a substantial portion of our assets. Under U.S. GAAP, we are required to test goodwill carried in our Consolidated Balance Sheets for possible impairment on an annual basis based upon a fair value approach. We also assess the recoverability of the unamortized balance of our intangible assets when indications of impairment are present based on expected future probability and undiscounted expected cash flows and their contribution to our overall operations. As of October 2, 2020, we had $5.64 billion of goodwill, representing 45.6% of our total assets of $12.35 billion. We have chosen to perform our annual impairment reviews of goodwill at the beginning of the fourth quarter of our fiscal year. We also are required to test goodwill for impairment between annual tests if events occur or circumstances change that would more likely than not reduce our enterprise fair value below its book value. These events or circumstances could include a significant change in the business climate, including a significant sustained decline in a reporting unit’s market value, legal factors, operating performance indicators, competition, sale or disposition of a significant portion of our business, potential government actions toward our facilities and other factors. If our market capitalization drops significantly below the amount of net equity recorded on our balance sheet, it might indicate a decline in our fair value and would require us to further evaluate whether our goodwill has been impaired. If the fair value of our reporting units is less than their carrying value, we could be required to record an impairment charge. The amount of any impairment could be significant and could have a material adverse impact on our financial position and results of operations for the period in which the charge is taken. For a further discussion of goodwill impairment testing, please see Item 7- Management’s Discussion and Analysis of Financial Condition and Results of Operations below. Impairment of long-lived assets or restructuring activities may require us to record a significant charge to earnings. Our long-lived assets, including our lease right-of-use assets, equity investments and other, are subject to periodic testing for impairment. Failure to achieve sufficient levels of cash flow at the asset group level could result in impairment of our long-lived assets. Further changes in the business environment could lead to changes in the scope of operations of our business. These changes, including the closure of one or more offices, could result in restructuring and/or asset impairment charges. The COVID-19 pandemic raises the possibility of an extended global economic downturn which increase the risk of long-lived asset impairment charges. We may be required to contribute additional cash to meet any underfunded benefit obligations associated with retirement and post- retirement benefit plans we manage. We have various employee benefit plan obligations that require us to make contributions to satisfy, over time, our underfunded benefit obligations, which are generally determined by calculating the projected benefit obligations minus the fair value of plan assets. For example, as of October 2, 2020 and September 27, 2019, our defined benefit pension and post-retirement benefit plans were underfunded by $400.4 million and $399.8 million, respectively. See Note 13- Pension and Other Postretirement Benefit Plans in the Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K for additional disclosure. In the future, our benefit plan obligations may increase or decrease depending on changes in the levels of interest rates, pension plan asset performance and other factors. If we are required to contribute a significant amount of the deficit for underfunded benefit plans, our cash flows could be materially and adversely affected. Page 41 Our global presence could give rise to material fluctuations in our income tax rates. We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. We are regularly under audit by tax authorities. Although we believe that our tax estimates and tax positions are reasonable, they could be materially affected by many factors including the final outcome of tax audits and related litigation, the introduction of new tax accounting standards, legislation, regulations and related interpretations, our global mix of earnings, the realizability of deferred tax assets and changes in uncertain tax positions. An increase or decrease in our effective tax rate, or an ultimate determination that the Company owes more taxes than the amounts previously accrued, could have a material adverse impact on our financial condition and results of operations. Our businesses could be materially and adversely affected by events outside of our control. Extraordinary or force majeure events beyond our control, such as natural or man-made disasters, could negatively impact our ability to operate. As an example, from time to time we face unexpected severe weather conditions which may result in weather-related delays that are not always reimbursable under a fixed-price contract; evacuation of personnel and curtailment of services; increased labor and material costs in areas resulting from weather-related damage and subsequent increased demand for labor and materials for repairing and rebuilding; inability to deliver materials, equipment and personnel to job sites in accordance with contract schedules; and loss of productivity. We may remain obligated to perform our services after any such natural or man-made event, unless a force majeure clause or other contractual provision provides us with relief from our contractual obligations. If we are not able to react quickly to such events, or if a high concentration of our projects are in a specific geographic region that suffers from a natural or man-made catastrophe, our operations may be significantly affected, which could have a material adverse impact on our operations. In addition, if we cannot complete our contracts on time, we may be subject to potential liability claims by our clients which may reduce our profits. Climate change and related environmental issues could have a material adverse impact on our business, financial condition and results of operations. In 2020, the World Economic Forum identified failure to act on climate change and related environmental issues as one of the top ten risks in terms of impact and likelihood for the first time. In 2017, the Task-force on Climate-related Financial Disclosures (TCFD),which is an industry-led group tasked within bringing climate related financial reporting into the mainstream, estimated that the value of the global stock of manageable assets at risk from climate change between now and the year 2100 could be up to $43 trillion USD. The risk framework put forward by the TCFD encourages organizations to consider climate risks and their materiality in four domains (Market/technology; Reputation; Policy/legal; Physical) and across two climate scenarios (“Paris Agreement”, or low carbon scenario; and “Business As Usual (BAU)”, or high carbon scenario). As further described below, each domain could pose a material risk to the Company at a business and/or project level and could have a material adverse impact on our business, financial condition and results of operations: • Market and technological shifts: We expect that climate-related market and technological shifts will likely be driven by urban development, population growth, quality of life expectations of an emerging middle class in historically developing countries and developments in digital technologies. This could create demand for: low and zero carbon energy, industrial processes and infrastructure; resilience services for natural environments, infrastructure and communities; and the application of “smart”, data-driven technologies. • Reputation: Our reputation is influenced by our delivery performance, client engagement, innovation, price (of our labor and projects), regulatory compliance and risk management. We anticipate, particularly under our Paris Agreement (1.5°C) scenario, that our reputation with external and internal stakeholders could also be increasingly influenced by our values and practices regarding low/zero carbon transformation. • Policy and legal: Policy and legal environments are expected to diverge sharply between our 4°C (BAU) and 1.5°C (Paris Agreement) scenarios, with the divergence mainly relating to greenhouse gas emissions and the extent to which low/zero carbon transitions are driven. We expect that some national and sub-national jurisdictions and some of our clients may advocate for the transition, regardless of the extent to which there is global alignment with the Paris Agreement. In contrast, both scenarios are expected to converge on climate change-related litigation and policy advocacy and regulatory support for climate resilience. Page 44 • Physical risks: There could be significant physical risks from climate change under both our 4°C and 1.5°C scenarios. These risks could be driven by increased temperature, increased storm intensities, sea level rise and changes in rainfall amount, seasonality and the intensity of extreme events. The types of change are similar under the two scenarios, but their expressions could be much more severe under the 4°C scenario. Fluctuations in commodity prices may affect our customers’ investment decisions and therefore subject us to risks of cancellation, delays in existing work, or changes in the timing and funding of new awards. Commodity prices can affect our customers in a number of ways. For example, for those customers that produce commodity products such as oil, gas, copper, or fertilizers, fluctuations in price can have a direct effect on their profitability and cash flow and, therefore, their willingness to continue to invest or make new capital investments. Furthermore, declines in commodity prices can negatively impact our business in regions whose economies are substantially dependent on commodity prices, such as the Middle East. To the extent commodity prices decline or fluctuate and our customers defer new investments or cancel or delay existing projects, the demand for our services decreases, which may have a material adverse impact on our business, financial condition and results of operations. Commodity prices can also strongly affect the costs of projects. Rising commodity prices can negatively impact the potential returns on investments that are planned, as well as those in progress, and result in customers deferring new investments or canceling or delaying existing projects. Cancellations and delays have affected our past results and may continue to do so in significant and unpredictable ways and could have a material adverse impact on our business, financial condition and results of operations. Our continued success is dependent upon our ability to hire, retain, and utilize qualified personnel. The success of our business is dependent upon our ability to hire, retain and utilize qualified personnel, including engineers, architects, designers, craft personnel and corporate leadership professionals who have the required experience and expertise at a reasonable cost. The market for these and other personnel is competitive. From time to time, it may be difficult to attract and retain qualified individuals with the expertise, and in the timeframe, demanded by our clients, or to replace such personnel when needed in a timely manner. In certain geographic areas, for example, we may not be able to satisfy the demand for our services because of our inability to successfully hire and retain qualified personnel. Furthermore, some of our personnel hold government granted clearance that may be required to obtain government projects. If we were to lose some or all of these personnel, they would be difficult to replace. Loss of the services of, or failure to recruit, qualified technical and leadership personnel could limit our ability to successfully complete existing projects and compete for new projects. In addition, in the event that any of our key personnel retire or otherwise leave the Company, we need to have appropriate succession plans in place and to successfully implement such plans, which requires devoting time and resources toward identifying and integrating new personnel into leadership roles and other key positions. If we cannot attract and retain qualified personnel or effectively implement appropriate succession plans, it could have a material adverse impact on our business, financial condition and results of operations. The cost of providing our services, including the extent to which we utilize our workforce, affects our profitability. For example, the uncertainty of contract award timing can present difficulties in matching our workforce size with our contracts. If an expected contract award is delayed or not received, we could incur costs resulting from excess staff, reductions in staff, or redundancy of facilities that could have a material adverse impact on our business, financial condition and results of operations. Our business strategy relies in part on acquisitions to sustain our growth. Acquisitions of other companies present certain risks and uncertainties. Our business strategy involves growth through, among other things, the acquisition of other companies. Acquiring companies, including CH2M HILL Companies, Ltd., which we acquired in December 2017, KeyW, which we acquired in June 2019, and John Wood Group’s nuclear business, which we acquired in March 2020, presents a number of risks, including: • Assumption of liabilities of an acquired business, including liabilities that were unknown at the time the acquisition was negotiated; • Failure of the acquired business to comply with U.S. federal, state, local and foreign laws and regulations and/or contractual requirements with government clients; Page 45 • Valuation methodologies may not accurately capture the value of the acquired business; • Failure to realize anticipated benefits, such as cost savings, synergies, business opportunities and growth opportunities; • The loss of key customers or suppliers, including as a result of any actual or perceived conflicts of interest; • Difficulties or delays in obtaining regulatory approvals, licenses and permits; • Difficulties relating to combining previously separate entities into a single, integrated, and efficient business; • The effects of diverting leadership’s attention from day-to-day operations to matters involving the integration of acquired companies; • Potentially substantial transaction costs associated with business combinations; • Potential impairment resulting from the overpayment for an acquisition or post-acquisition deterioration in an acquired business; • Difficulties relating to assimilating the leadership, personnel, benefits, services, and systems of an acquired business and to assimilating marketing and other operational capabilities; • Difficulties retaining key personnel of an acquired business; • Increased burdens on our staff and on our administrative, internal control and operating systems, which may hinder our legal and regulatory compliance activities; • Difficulties in applying and integrating our system of internal controls to an acquired business; • Increased financial and accounting challenges and complexities in areas such as tax planning, treasury management, financial reporting and internal controls; • The potential requirement for additional equity or debt financing, which may not be available, or if available, may not have favorable terms; and • The risks discussed in this Item 1A. Risk Factors that may relate to the activities of the acquired business prior to the acquisition. While we may obtain indemnification rights from the sellers of acquired businesses and/or insurance that could mitigate certain of these risks, such rights may be difficult to enforce, the losses may exceed any dedicated escrow funds and the indemnitors may not have the ability to financially support the indemnity, or the insurance coverage may be unavailable or insufficient to cover all losses. If our leadership is unable to successfully integrate acquired companies or implement our growth strategy, our operating results could be harmed. In addition, even if the operations of an acquisition are integrated successfully, we may not realize the full benefits of an acquisition, including the synergies, cost savings, or sales or growth opportunities that we expect. These benefits may not be achieved within the anticipated time frame, or at all. Moreover, we cannot assure that we will continue to successfully expand or that growth or expansion will result in profitability. In addition, there is no assurance that we will continue to locate suitable acquisition targets or that we will be able to consummate any such transactions on terms and conditions acceptable to us. Existing cash balances and cash flow from operations, together with borrowing capacity under our credit facilities, may be insufficient to make acquisitions. Future acquisitions may require us to obtain additional equity or debt financing, which may not be available on attractive terms, or at all. Acquisitions may also bring us into businesses we have not previously conducted and expose us to additional business risks that are different than those we have traditionally experienced. Acquisitions and divestitures create various business risks and uncertainties during the pendency of the transaction. Consummation of any merger or divestiture is subject to the satisfaction of customary conditions, including one or more of the following: (i) due diligence and its associated time and cost commitments, (ii) board and shareholder approval, (iii) regulatory approvals, (iv) the absence of any legal restraint that would prevent the consummation of the transaction, (v) the absence of material adverse conditions which can prevent the consummation of the transaction, and (vi) compliance with covenants and the accuracy of representations and warranties contained in the transaction agreement, among others. One or more of these conditions may not be fulfilled and, accordingly, the transaction may not be consummated or may be significantly delayed. In such case, our ongoing business, financial condition and results of operations may be materially adversely affected and the market price of our common stock Page 46 could negatively impact our clients’ ability to fund their projects and, therefore, utilize our services, which could have a material adverse impact on our business, financial condition, and results of operations. In addition, we are subject to the risk that the counterparties to our credit agreements may go bankrupt if they suffer catastrophic demand on their liquidity that will prevent them from fulfilling their contractual obligations to us. We also routinely enter into contracts with counterparties including vendors, suppliers and subcontractors that may be negatively impacted by events in the credit markets. If those counterparties are unable to perform their obligations to us or our clients, we may be required to provide additional services or make alternate arrangements on less favorable terms with other parties to ensure adequate performance and delivery of services to our clients. These circumstances could also lead to disputes and litigation with our partners or clients, which could have a material adverse impact on our reputation, business, financial condition and results of operations. Some of our customers, suppliers and subcontractors depend on access to commercial financing and capital markets to fund their operations. Disruptions of the credit or capital markets could adversely affect our clients’ ability to finance projects and could result in contract cancellations or suspensions, project delays and payment delays or defaults by our clients. In addition, clients may be unable to fund new projects, may choose to make fewer capital expenditures or otherwise slow their spending on our services or to seek contract terms more favorable to them. Our government clients may face budget deficits that prohibit them from funding proposed and existing projects or that cause them to exercise their right to terminate our contracts with little or no prior notice. In addition, any financial difficulties suffered by our subcontractors or suppliers could increase our cost or adversely impact project schedules. These disruptions could materially impact our backlog and have a material adverse impact on our business, financial condition and results of operations. In addition, we typically bill our clients for our services in arrears and are, therefore, subject to our clients delaying or failing to pay our invoices after we have already committed resources to their projects. In weak economic environments, we may experience increased delays and failures due to, among other reasons, our clients’ unwillingness to pay for alleged poor performance or to preserve their own working capital. If one or more clients delays in paying or fails to pay us a significant amount of our outstanding receivables, it could have a material adverse impact on our liquidity, financial condition and results of operations. Furthermore, our cash balances and short-term investments are maintained in accounts held by major banks and financial institutions located primarily in North America, Europe, South America, Australia and Asia. Some of our accounts hold deposits in amounts that exceed available insurance. Although none of the financial institutions in which we hold our cash and investments have gone into bankruptcy or forced receivership, or have been seized by their governments, there is a risk that such events may occur in the future. If any such events were to occur, we would be at risk of not being able to access our cash, which may result in a temporary liquidity crisis that could impede our ability to fund our operations, which could have a material adverse impact on our business, financial condition and results of operations. Maintaining adequate bonding and letter of credit capacity is necessary for us to successfully bid on and win some contracts. In line with industry practice, we are often required to provide performance or payment bonds or letters of credit to our customers. These instruments indemnify the customer should we fail to perform our obligations under the contract. If a bond or a letter of credit is required for a particular project and we are unable to obtain an appropriate bond or letter of credit, we cannot pursue that project. Historically, we have had adequate bonding and letter of credit capacity but, as is typically the case, the issuance of a bond is at the surety’s sole discretion and the issuance of a letter of credit is based on the Company's credit-worthiness. Because of an overall lack of worldwide bonding capacity, we may find it difficult to find sureties who will provide required levels of bonding or such bonding may only be available at significant additional cost. There can be no assurance that our bonding capacity will continue to be available to us on reasonable terms. In addition, future projects may require us to obtain letters of credit that extend beyond the term of our existing credit facilities. Our inability to obtain adequate bonding and, as a result, to bid on new contracts that require such bonding or letter of credit could have a material adverse impact on our business, financial condition and results of operations. Page 49 Risks Related to Our Common Stock Our quarterly results may fluctuate significantly, which could have a material negative effect on the price of our common stock. Our quarterly operating results may fluctuate significantly or fall below the expectations of securities analysts, which could have a material adverse impact on the price of our common stock. Fluctuations are caused by a number of factors, including: • Legal proceedings, disputes and/or government investigations; • Fluctuations in the spending patterns of our government and commercial customers; • The number and significance of projects executed during a quarter; • Unanticipated changes in contract performance, particularly with contracts that have funding limits; • The timing of resolving change orders, requests for equitable adjustments, and other contract adjustments; • Delays incurred in connection with a project; • Changes in prices of commodities or other supplies; • Changes in foreign currency exchange rates; • Weather conditions that delay work at project sites; • The timing of expenses incurred in connection with acquisitions or other corporate initiatives; • The decision by the Board of Directors to begin or cease paying a dividend, and the expectation that if the Company pays dividends, it would declare dividends at the same or higher levels in the future; • Natural disasters or other crises; • Staff levels and utilization rates; • Changes in prices of services offered by our competitors; and • General economic and political conditions. There can be no assurance that we will pay dividends on our common stock. Our Board of Directors initiated a quarterly cash dividend program in fiscal 2017 under which we have paid, and intend to continue paying, regular quarterly dividends. The declaration, amount and timing of such dividends are subject to capital availability and determinations by our Board of Directors that cash dividends are in the best interest of our stockholders and are in compliance with all respective laws and applicable agreements. Our ability to pay dividends will depend upon, among other factors, our cash balances and potential future capital requirements for strategic transactions, including acquisitions, debt service requirements, results of operations, financial condition and other factors that our Board of Directors may deem relevant. A reduction in or elimination of our dividend payments and/or our dividend program could have a material negative effect on our stock price. In the event we issue stock as consideration for certain acquisitions we may make, we could dilute share ownership, and if we receive stock in connection with a divestiture, the value of stock is subject to fluctuation. One method of acquiring companies or otherwise funding our corporate activities is through the issuance of additional equity securities. If we issue additional equity securities, such issuances could have the effect of diluting our earnings per share as well as our existing shareholders’ individual ownership percentages in the Company. Page 50 In addition, if we receive stock or other equity securities in connection with a sale or divestiture of a business, the value of such stock will fluctuate and/or be subject to trading restrictions. Stock price changes may result from, among other things, changes in the business, operations or prospects of the issuer prior to or following the transaction, litigation or regulatory considerations, general business, market, industry or economic conditions, the ability to sell all or a portion of the stock based on current market conditions, and other factors both within and beyond the control of the Company. In addition, if the stock received is valued in a currency other than U.S. dollars, the value of such stock will also fluctuate based on foreign currency rates. For example, in connection with the ECR sale, the Company still holds 51.3 million ordinary shares of Worley received as a portion of the purchase price. The value of such shares will fluctuate based on the trading price of the Worley shares on the Australian Securities Exchange and the exchange rate of the Australian dollar. Delaware law and our charter documents may impede or discourage a takeover or change of control. We are a Delaware corporation. Certain anti-takeover provisions of the Delaware general corporation law impose restrictions on the ability of others to acquire control of us. In addition, certain provisions of our charter documents may impede or discourage a takeover. For example: • Only our Board of Directors can fill vacancies on the board; • There are various restrictions on the ability of a shareholder to nominate a director for election; and • Our Board of Directors can authorize the issuance of preferred shares. These types of provisions, as well as our ability to adopt a shareholder rights agreement in the future, could make it more difficult for a third party to acquire control of us, even if the acquisition would be beneficial to our shareholders. Accordingly, shareholders may be limited in the ability to obtain a premium for their shares. Page 51 Unregistered Sales of Equity Securities. None. Performance Graph The following graph and table shows the changes over the five-year period ended October 2, 2020 in the value of $100 as of the close of market on October 2, 2015 in (1) the common stock of Jacobs Engineering Group Inc., (2) the Standard & Poor’s 500 Stock Index and (3) the Standard & Poor's 1500 IT Consulting & Other Services Index. The values of each investment are based on share price appreciation, with reinvestment of all dividends, provided any were paid. The investments are assumed to have occurred at the beginning of the period presented. The stock performance included in this graph is not necessarily indicative of future stock price performance. 2015 2016 2017 2018 2019 2020 Jacobs Engineering Group Inc. 100.00 138.18 156.97 208.45 251.00 256.72 S&P 500 100.00 115.43 136.91 161.43 168.30 193.80 S&P 1500 IT Consulting & Other Services 100.00 114.30 125.05 146.93 142.84 146.88 Page 54 Item 6. SELECTED FINANCIAL DATA The following table presents selected financial data for each of the last five fiscal years. This selected financial data should be read in conjunction with the Consolidated Financial Statements and related notes beginning on page F-1 of this Annual Report on Form 10-K. On April 26, 2019, Jacobs completed the sale of its ECR business to Worley. As a result of the ECR sale, substantially all ECR-related assets and liabilities were sold (the "Disposal Group"). We determined that the Disposal Group should be reported as discontinued operations in accordance with ASC 210-05, Discontinued Operations because their disposal represented 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, for the year ended September 27, 2019, a portion of the ECR business remained held by Jacobs and was classified as held for sale as of fiscal year 2019 in accordance with U.S. GAAP. For further discussion see Note 15- Sale of Energy, Chemicals and Resources ("ECR") Business to the consolidated financial statements. Dollar amounts are presented in thousands, except for per share information: 2020 (a) 2019 (b) 2018 (c) 2017 (d) 2016 (e) Results of Operations: Revenues $ 13,566,975 $ 12,737,868 $ 10,579,773 $ 6,330,126 $ 6,257,478 Net Earnings (Loss) Attributable to Jacobs from Continuing Operations $ 353,861 $ 290,960 $ (4,185) $ 170,167 $ 159,998 Financial Position: Current ratio 1.54 to 1 1.34 to 1 1.45 to 1 1.56 to 1 1.61 to 1 Working capital $ 1,598,002 $ 1,038,062 $ 1,410,891 $ 1,069,953 $ 1,081,784 Current assets $ 4,539,599 $ 4,111,768 $ 4,556,584 $ 2,996,180 $ 2,864,470 Total assets $ 12,354,353 $ 11,462,711 $ 12,645,795 $ 7,380,859 $ 7,360,022 Cash $ 862,424 $ 631,068 $ 634,870 $ 607,821 $ 507,169 Long-term debt $ 1,676,941 $ 1,201,245 $ 2,144,167 $ 235,000 $ 385,330 Total Jacobs stockholders’ equity $ 5,815,712 $ 5,714,691 $ 5,854,345 $ 4,428,352 $ 4,265,276 Return on average equity 6.14% 5.03% (0.08)% 3.91% 3.74% Backlog: $ 23,818 $ 22,569 $ 19,955 $ 13,147 $ 11,535 Per Share Information: Basic Net Earnings (Loss) from Continuing Operations Per Share $ 2.69 $ 2.11 $ (0.03) $ 1.41 $ 1.33 Diluted Net Earnings (Loss) from Continuing Operations Per Share $ 2.67 $ 2.09 $ (0.03) $ 1.40 $ 1.32 Stockholders’ equity $ 43.82 $ 41.05 $ 42.21 $ 36.78 $ 35.26 Average Number of Shares of Common Stock and Common Stock Equivalents Outstanding (Diluted) 132,721 139,206 137,536 120,147 121,483 Common Shares Outstanding At Year End 129,748 132,879 142,218 120,386 120,951 Cash Dividends Declared Per Common Share $ 0.76 $ 0.68 $ 0.60 $ 0.60 $ — (a) Includes after-tax costs of $248.2 million, or $1.87 per diluted share from continuing operations, related to the Company's restructuring, transactions, and other initiatives during fiscal 2020. Also includes amortization of intangible assets of $68.3 million, or $0.51 per diluted share from continuing operations, and $56.9 million, or $0.43 per diluted share from continuing operations 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 (b) Includes after-tax costs of $259.8 million, or $1.87 per diluted share from continuing operations, related to the Company's restructuring, transactions, and other initiatives during fiscal 2019. Also includes amortization of intangible assets of $59.0 million, or $0.42 per diluted share from continuing operations, and $48.1 million, or $0.34 per diluted share from continuing operations 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 (c) Includes after-tax costs of $112.8 million, or $0.81 per diluted share from continuing operations, related to the Company's restructuring and other initiatives during fiscal 2018. Also included in fiscal 2018 are after-tax charges of $60.7 million, or $0.44 per diluted share, in professional fees and related costs associated with the CH2M acquisition and pending ECR sale, $259.2 million, or $1.86 per diluted share from continuing operations, in charges related to tax reform and amortization of intangible assets of $51.5 million, or $0.37 per diluted share from continuing operations Page 55 (d) Includes after-tax costs of $65.0 million, or $0.54 per diluted share from continuing operations, related to the Company's restructuring and other initiatives during fiscal 2017. Also included in the fourth quarter of fiscal 2017 are after-tax charges of $10.6 million, or $0.09 per diluted share from continuing operations, respectively, in professional fees and related costs associated with the CH2M acquisition. Also includes amortization of intangible assets of $33.5 million, or $0.28 per diluted share from continuing operations (e) Includes after-tax costs of $75.2 million, or $0.62 per diluted share from continuing operations, related to the Company's restructuring initiatives during fiscal 2016. Also included in the fourth quarter of fiscal 2016 are (i) a loss on sale of our French subsidiary of $17.1 million or $0.14 per diluted share from continuing operations; and (ii) a non-cash write-off on an equity investment of $10.4 million or $0.09 per diluted share from continuing operations. Also includes amortization of intangible assets of $47.6 million, or $0.28 per diluted share from continuing operations. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Critical Accounting Policies and Estimates In order to better understand the changes that occur to key elements of our financial condition, results of operations and cash flows, a reader of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be aware of the critical accounting policies we apply in preparing our consolidated financial statements. The consolidated financial statements contained in this report were prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements and the financial statements of any business performing long-term professional services, engineering and construction-type contracts requires management to make certain estimates and judgments that affect both the entity’s results of operations and the carrying values of its assets and liabilities. Although our significant accounting policies are described in Note 2- Significant Accounting Policies of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K, the following discussion is intended to highlight and describe those accounting policies that are especially critical to the preparation of our consolidated financial statements. 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 only 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. Estimated contract costs include the Company’s latest estimates using judgments with respect to labor hours and costs, materials, and subcontractor 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 on are typically due within 30 to 60 days of billing, depending on the contract. Page 56 The expected rates of return on plan assets range from 2.3% to 7.5% for fiscal 2020 and 1.8% to 7% fiscal 2021. We believe the range of rates selected for fiscal 2020 reflects the long-term returns expected on the plans’ assets, considering recent market conditions, projected rates of inflation, the diversification of the plans’ assets, and the expected real rates of market returns. The discount rates used to compute plan liabilities decreased year over year with a range of 1.3% to 8.1% in fiscal 2019 and a range of 0.2% to 7.1% 2020. These assumptions represent the Company’s best estimate of the rates at which its pension obligations could be effectively settled. Changes in the actuarial assumptions often have a material effect on the values assigned to plan assets and liabilities, and the associated pension expense. For example, if the discount rate used to value the net pension benefit obligation (“PBO”) at October 2, 2020 was higher by 0.5%, the PBO would have been lower at that date by approximately $212.4 million for non-U.S. plans, and by approximately $19.8 million for U.S. plans. If the expected return on plan assets was higher by 1.0%, the net periodic pension cost for fiscal 2020 would be lower by approximately $20.3 million for non-U.S. plans, and by approximately $3.4 million for U.S. plans. Differences between actuarial assumptions and actual performance (i.e., actuarial gains and losses) that are not recognized as a component of net periodic pension cost in the period in which such differences arise are recorded to accumulated other comprehensive income (loss) and are recognized as part of net periodic pension cost in future periods in accordance with U.S. GAAP. Management monitors trends in the marketplace within which our pension plans operate in an effort to assure the fairness of the actuarial assumptions used. 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 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 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. 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 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 United States, as well as by various government agencies representing jurisdictions outside the United States. Our Consolidated Balance Sheets include amounts representing our probable estimated liability relating to such claims, guarantees, litigation, audits, and investigations. Our estimates of probable liabilities require us to make assumptions related to potential losses regarding our determination of amounts considered probable and estimable. We perform an analysis to determine the level of reserves to establish for insurance- related claims that are known and have been asserted against us, as well as for insurance-related claims that are believed to have been incurred based on actuarial analysis, but have not yet been reported to our claims administrators as of the respective balance sheet dates. We include any adjustments to such insurance reserves in our consolidated results of operations. Insurance recoveries are recorded as assets if recovery is probable and estimated liabilities are not reduced by expected insurance recoveries. Page 59 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. Testing Goodwill for Possible Impairment The goodwill carried on our Consolidated Balance Sheets is tested annually for possible impairment, and on an interim basis if indicators of possible impairment exist. For purposes of impairment testing, goodwill is assigned to the applicable reporting units based on the current reporting structure. In performing the annual impairment test, we evaluate our goodwill at the reporting unit level. The Company performs the annual goodwill impairment test for the reporting units at the beginning of the fourth quarter of its fiscal year. U.S. GAAP does not prescribe a specific valuation method for estimating the fair value of reporting units. Any valuation technique used to estimate the fair value of a reporting unit requires the use of significant estimates and assumptions, including revenue growth rates, operating margins, discount rates and future market conditions, among others. We used income and market approaches to test our goodwill for possible impairment which requires us to make estimates and judgments. Under the income approach, fair value is determined by using the discounted cash flows of our reporting units. The Company’s discount rate reflects a weighted average cost of capital (“WACC”) for a peer group of companies representative of the Company’s respective 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. It is possible that changes in market conditions, economy, facts and circumstances, judgments and assumptions used in estimating the fair value could change, resulting in possible impairment of goodwill in the future. The fair values resulting from the valuation techniques used are not necessarily representative of the values we might obtain in a sale of the reporting units to willing third parties. We have determined that the fair value of our reporting units substantially exceeded their respective carrying values for the Consolidated Balance Sheets presented. Impairment of Long-Lived Assets Our long-lived assets other than goodwill principally consist of right-of-use lease assets, property, equipment and improvements, and finite- lived intangible assets. These long-lived assets are evaluated for impairment for each of our asset groups in accordance with ASC 360 by first identifying whether indicators of impairment exist. If such indicators are present, we assess long-lived asset groups for recoverability based on estimated future undiscounted cash flows. For asset groups where the recoverability test fails, the fair value of each asset group is then estimated and compared to its carrying amount. An impairment loss is recognized for the amount by which an asset group’s carrying value exceeds its fair value. Page 60 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS For the Fiscal Years Ended October 2, 2020, September 27, 2019 and September 28, 2018 (In thousands, except per share information) October 2, 2020 September 27, 2019 September 28, 2018 Revenues $ 13,566,975 $ 12,737,868 $ 10,579,773 Direct cost of contracts (10,980,307) (10,260,840) (8,421,223) Gross profit 2,586,668 2,477,028 2,158,550 Selling, general and administrative expenses (2,050,695) (2,072,177) (1,771,107) Operating Profit 535,973 404,851 387,443 Other Income (Expense): Interest income 4,729 9,487 8,984 Interest expense (62,206) (83,847) (76,760) Miscellaneous (expense) income, net (37,293) 20,468 11,314 Total other expense, net (94,770) (53,892) (56,462) Earnings from Continuing Operations Before Taxes 441,203 350,959 330,981 Income Tax Expense for Continuing Operations (55,320) (36,954) (325,632) Net Earnings of the Group from Continuing Operations 385,883 314,005 5,349 Net Earnings of the Group from Discontinued Operations 137,984 559,214 167,793 Net Earnings of the Group 523,867 873,219 173,142 Net Earnings Attributable to Noncontrolling Interests from Continuing Operations (32,022) (23,045) (9,534) Net Earnings (Loss) Attributable to Jacobs from Continuing Operations 353,861 290,960 (4,185) Net Earnings Attributable to Noncontrolling Interests from Discontinued Operations — (2,195) (177) Net Earnings Attributable to Jacobs from Discontinued Operations 137,984 557,019 167,616 Net Earnings Attributable to Jacobs $ 491,845 $ 847,979 $ 163,431 Net Earnings (Loss) Per Share: Basic Net Earnings (Loss) from Continuing Operations Per Share $ 2.69 $ 2.11 $ (0.03) Basic Net Earnings from Discontinued Operations Per Share $ 1.05 $ 4.03 $ 1.21 Basic Earnings Per Share $ 3.74 $ 6.14 $ 1.18 Diluted Net Earnings (Loss) from Continuing Operations Per Share $ 2.67 $ 2.09 $ (0.03) Diluted Net Earnings from Discontinued Operations Per Share $ 1.04 $ 4.00 $ 1.21 Diluted Earnings Per Share $ 3.71 $ 6.08 $ 1.18 Page 61 for the delayed conveyance of the international entities and for the delivery of the ECR IT assets, as discussed in Note 15- Sale of Energy, Chemicals and Resources ("ECR") Business and adjustments for working capital and certain other items in connection with the ECR sale. Additionally, the year-over-year change was also driven by the gain on sale recognized in the fiscal 2019 period and the absence of normal operating results of the ECR business as reported in the prior year. Included in the current year results from discontinued operations is the pre-tax gain on sale of the ECR business of $110.2 million. Included in prior year results from discontinued operations is the pre-tax gain on the sale of the ECR business of $935.1 million, see Note 15- Sale of Energy, Chemicals and Resources ("ECR") Business. The Company’s consolidated effective income tax rate of 12.5% is lower than the U.S. statutory rate primarily due to a $16.9 million benefit from foreign valuation allowance releases, $26.5 million of foreign tax generated in the current year, a benefit of $7.3 million from the application of the Internal Revenue Code Section 179D, a reduction in uncertain tax positions of $11.3 million and benefits from tax rate changes and stock compensation. These decreases in tax expense were offset by $43.0 million of U.S. foreign inclusions within U.S. tax costs of foreign operations. The following table reconciles total income tax expense on continuing operations using the statutory U.S. federal income tax rate to the consolidated income tax expense on continuing operations shown in the accompanying Consolidated Statements of Earnings for the years ended October 2, 2020 and September 27, 2019 (dollars in thousands): For the Years Ended October 2, 2020 % September 27, 2019 % Statutory amount $ 92,652 21.0 % $ 73,701 21.0 % State taxes, net of the federal benefit 7,254 1.6 % 10,183 2.9 % Exclusion of tax on non-controlling interests (6,622) (1.5)% (4,839) (1.4)% Foreign: Difference in tax rates of foreign operations (6,267) (1.4)% 1,083 0.3 % Benefit from foreign valuation allowance release (16,861) (3.8)% (29,125) (8.3)% U.S. tax cost (benefit) of foreign operations 42,992 9.7 % (17,760) (5.1)% Tax differential on foreign earnings 19,864 4.5 % (45,802) (13.1)% Foreign tax credits (26,471) (6.0)% (15,682) (4.5)% Tax Rate Change (6,811) (1.5)% — — Tax reform — — % 36,674 10.4 % Valuation allowance — — % (207) (0.1)% Uncertain tax positions (11,338) (2.6)% (6,883) (2.0)% Other items: IRS §179D deduction (7,267) (1.6)% (2,957) (0.8)% Disallowed officer compensation 5,081 1.2 % 5,568 1.6 % Stock compensation (10,234) (2.3)% (7,864) (2.2)% Foreign partnership income/(loss) — — % — — % Other items – net (788) (0.2)% (4,938) (1.4)% Total other items (13,208) (3.0)% (10,191) (2.8)% Taxes on income from continuing operations $ 55,320 12.5 % $ 36,954 10.5 % The Company’s consolidated effective income tax rate for the year ended October 2, 2020 increased to 12.5% from 10.5% for fiscal 2019. Key drivers for this year over year increase in the effective tax rate include a reduction in valuation allowance releases in fiscal 2020, as well as an increase in tax on foreign earnings in the U.S. Fiscal 2019 Compared to Fiscal 2018 Revenues for the year ended September 27, 2019, were $12.74 billion, an increase of $2.16 billion, or 20.4%, from $10.58 billion for the corresponding period in 2018. The increase in revenues was due primarily to the CH2M acquisition in December fiscal 2018 included in fiscal 2019 for the full year, impacts from the KeyW acquisition included in the fiscal 2019 results since closing in mid-June and growth in our legacy CMS and P&PS businesses. Page 64 Pass-through costs included in revenues for the year ended September 27, 2019 were $2.54 billion in comparison to $2.25 billion in the prior year. These year-over-year increases are due primarily to impacts from the CH2M acquisition included for the full year of fiscal 2019. Gross profit for the year ended September 27, 2019 was $2.48 billion, an increase of $318.5 million, or 14.8% from $2.16 billion for the corresponding period in 2018. Our gross profit margins were 19.4% and 20.4% for the years ended September 27, 2019 and September 28, 2018, respectively. Revenue mix primarily drove the lower gross profit and margin for the year over year periods. Selling, general & administrative expenses for the year ended September 27, 2019 were $2.07 billion, an increase of $0.30 billion, or 17.0%, from $1.77 billion for the corresponding period in 2018. The increase in SG&A expenses is due mainly to incremental SG&A expense from the CH2M and KeyW businesses acquired. Also, included in the 2019 results were $350.3 million of restructuring and other charges and transaction costs, as well as higher personnel related costs year over year due in part to costs to service the TSA with Worley. In comparison, the prior year included $230.5 million of restructuring and other charges and transaction costs. Net interest expense for the year ended September 27, 2019 was $74.4 million, an increase of $6.6 million from $67.8 million for the corresponding period in 2018. The increase in net interest expense as compared to the corresponding period in 2018 was due primarily to higher levels of debt outstanding and our fixed rate notes having been outstanding for the full year of fiscal 2019 and only five months in fiscal 2018. Miscellaneous income (expense), net for the year ended September 27, 2019 was $20.5 million, an increase of $9.2 million, as compared to $11.3 million for the corresponding period in 2018. The increase was due primarily to the gain on the settlement of the CH2M retiree medical plan of $35.0 million and income from the TSA with Worley of $35.4 million, offset by $64.8 million, net, relating to ECR related 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. Net earnings of the group from discontinued operations was $559.2 million for the year ended September 27, 2019, an increase of $391.4 million from $167.8 million for the corresponding period in 2018. Included in 2019 was the pre-tax gain on the sale of the ECR business of $935.1 million, offset in part by a charge for the final settlement of the Nui Phao legal matter. The 2018 fiscal year included a $21.0 million loss associated with the disposal of the Company's equity investment in its Guimar joint venture. Page 65 The Company’s consolidated effective income tax rate was lower than the U.S. statutory rate of 21.0% primarily due to a $29.1 million benefit from foreign valuation allowance releases in fiscal 2019, $15.7 million of foreign tax and other credits generated in fiscal 2019 and a reduction in the tax contingency reserves of $6.9 million. The decreases in tax expense were offset by a $36.7 million charge from the remeasurement of net deferred tax assets and other miscellaneous U.S. tax reform changes. The following table reconciles total income tax expense on continuing operations using the statutory U.S. federal income tax rate to the consolidated income tax expense on continuing operations shown in the accompanying Consolidated Statements of Earnings for the years ended September 27, 2019 and September 28, 2018 (dollars in thousands): For the Years Ended September 27, 2019 % September 28, 2018 % Statutory amount $ 73,701 21.0 % $ 81,421 24.6 % State taxes, net of the federal benefit 10,183 2.9 % 15,772 4.8 % Exclusion of tax on non-controlling interests (4,839) (1.4)% (2,389) (0.7)% Foreign: Difference in tax rates of foreign operations 1,083 0.3 % 2,815 0.9 % Benefit from foreign valuation allowance release (29,125) (8.3)% (5,088) (1.5)% U.S. tax cost (benefit) of foreign operations (17,760) (5.1)% 4,030 1.2 % Tax differential on foreign earnings (45,802) (13.1)% 1,757 0.6 % Foreign tax credits (15,682) (4.5)% (21,735) (6.6)% 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)% Other items: IRS §179D deduction (2,957) (0.8)% (4,557) (1.4)% Disallowed officer compensation 5,568 1.6 % 1,510 0.5 % Stock compensation (7,864) (2.2)% (2,158) (0.7)% Other items – net (4,938) (1.4)% (2,564) (0.8)% Total other items (10,191) (2.8)% (7,769) (2.4)% Taxes on income from continuing operations $ 36,954 10.5 % $ 325,632 98.4 % The Company’s consolidated effective income tax rate 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 $104.4 million. Page 66 Fiscal 2020 vs. 2019 Revenues for the People & Places Solutions (P&PS) segment for the year ended October 2, 2020 were $8.60 billion, up $414.3 million, or 5.1%, from $8.19 billion for the prior year. The increases in revenue were due in part to portfolio growth across our businesses, highlighted by strong investment in advanced facilities, water and transport infrastructure and project management/construction management ("PMCM") sectors, along with the extra week of activity in fiscal 2020. These favorable performance trends more than offset unfavorable COVID-19 related revenue impacts mainly due to challenges from physical distancing requirements, client scheduling changes and other related factors. Impacts on revenues from unfavorable foreign currency translation were approximately $26.2 million for fiscal 2020. Operating profit for the segment for the year ended October 2, 2020 was $740.7 million, an increase of $26.3 million, or 3.7%, from $714.4 million for the comparative period in 2019. The year-over-year increase in operating profit was due primarily to positive impacts from the higher year- over-year revenues for the segment, along with the extra week of activity in fiscal 2020 and reductions in costs related to COVID-19 impacts and mitigation efforts. Impacts on operating profit from unfavorable foreign currency translation were approximately $6.1 million for fiscal 2020. Unfavorable revenue impacts from COVID-19 mentioned above were largely offset by the Company’s mitigating actions in discretionary operating spend and benefits costs, government assistance programs and other areas of improved operating performance. Fiscal 2019 vs. 2018 Revenues for the P&PS segment for the year ended September 27, 2019 were $8.19 billion, an increase of $1.34 billion, or 19.6%, from $6.85 billion for the corresponding period in 2018. The increase in revenues was due in part to favorable impacts resulting from the CH2M acquisition included for the full year of fiscal 2019 together with revenue increases across all our businesses given the strong investment by customers in Life Sciences, Electronics, Water and Transport Infrastructure sectors. Impacts on revenues from unfavorable foreign currency were approximately $57.8 million for fiscal 2019. Operating profit for the segment for the year ended September 27, 2019 was $714.4 million, up $186.5 million, or 35.3%, compared to $527.9 million for the corresponding period in 2018. The increase in operating profit was in part due to favorable impacts from the CH2M acquisition, together with positive impacts from the higher year over year revenues for the segment. Included in fiscal 2019 results was a $25.0 million charge associated with a project. SG&A for the P&PS segment increased for fiscal 2019, with this increase being attributable mainly to incremental SG&A associated with the CH2M acquisition in December of fiscal 2018. Other Corporate Expenses Other corporate expenses were $249.4 million, $264.4 million and $161.8 million for the years ended October 2, 2020, September 27, 2019 and September 28, 2018, respectively. The decrease from fiscal 2019 to fiscal 2020 was due primarily to cost-reduction programs implemented through prior restructuring initiatives and the current year COVID-19 pandemic response. The increase from fiscal 2018 to fiscal 2019 was due primarily to higher intangible amortization expense from the KeyW and John Wood Group nuclear business acquisitions, as well as impacts from company benefit program enhancements. These increases were partly offset by employee related and other cost reductions across the Company's corporate functions. Fiscal 2019 also included approximately $70.2 million of year-to-date other current year cost allocation realignments that occurred in the first quarter of fiscal 2019 in conjunction with the CH2M acquisition. Prior periods were not restated for the cost allocation realignments. Included in other corporate expenses in the above table are costs and expenses that 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 our incentive compensation plans 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 may also include from time to time certain adjustments to contract margins (both positive and negative) associated with projects, as well as other items, where it has been determined that such adjustments are not indicative of the performance of the related LOB. Page 69 The Company currently holds a 24.5% interest in AWE Management Ltd (AWE ML) that is accounted for under the equity method, and the carrying value of the Company’s investment as of October 2, 2020 was approximately $38 million. As of October 2, 2020, AWE ML was under a contractual operating arrangement with the UK Ministry of Defence (MoD) with multiple years remaining under the arrangement. Subsequent to year end, on November 2, 2020, the MoD unexpectedly announced plans to change its current operating agreements with AWE ML that would result in the early termination of the current contract in 2021. The Company is currently evaluating this subsequent development, including the potential impact on our accounting for this equity method investment in future quarters. Restructuring and Other Charges For discussion regarding restructuring and other charges, see Note 16- Restructuring and Other Charges to the Consolidated Financial Statements. Page 70 Backlog Information We include in backlog the total dollar amount of revenues we expect to record in the future as a result of performing work under contracts that have been awarded to us. Our policy with respect to Operations & Maintenance ("O&M") contracts, however, is to include in backlog the amount of revenues we expect to receive for one succeeding year, regardless of the remaining life of the contract. For national government programs (other than national government O&M contracts, which are subject to the same policy applicable to all other O&M contracts), our policy is to include in backlog the full contract award, whether funded or unfunded, excluding option periods. Because of variations in the nature, size, expected duration, funding commitments and the scope of services required by our contracts, the timing of when backlog will be recognized as revenues can vary greatly between individual contracts. Consistent with industry practice, substantially all of our contracts are subject to cancellation or termination at the option of the client, including our U.S. government work. While management uses all information available to it to determine backlog, at any given time our backlog is subject to changes in the scope of services to be provided as well as increases or decreases in costs relating to the contracts included therein. Backlog is not necessarily an indicator of future revenues. Because certain contracts (e.g., contracts relating to large Engineering, Procurement & Construction ("EPC") projects as well as national government programs) can cause large increases to backlog in the fiscal period in which we recognize the award, and because many of our contracts require us to provide services that span over several fiscal quarters (and sometimes over fiscal years), we evaluate our backlog generally on a year-over-year basis, but also on a sequential, quarter-over-quarter basis, where appropriate. Please refer to Item 1A- Risk Factors, above, for a discussion of other factors that may cause backlog to ultimately convert into revenues at different amounts. The following table summarizes our backlog for the years ended October 2, 2020, September 27, 2019 and September 28, 2018 (in millions): October 2, 2020 September 27, 2019 September 28, 2018 Critical Mission Solutions $ 9,104 $ 8,460 $ 7,130 People & Places Solutions 14,714 14,109 12,825 Total $ 23,818 $ 22,569 $ 19,955 The increase in backlog in Critical Mission Solutions for the years presented was primarily the result of new awards from the U.S. federal government and the acquisition of John Wood Group's nuclear consulting, remediation and program management business in fiscal 2020. The increase in backlog in People & Places Solutions for the years presented was primarily the result of new awards in the U.K. and U.S. markets. Backlog relating to work to be performed either directly or indirectly for the U.S. federal government and its agencies totaled approximately $8.5 billion (or 35.7% of total backlog), $8.8 billion (or 39.1% of total backlog) and $6.8 billion (or 34.1% of total backlog) at October 2, 2020, September 27, 2019 and September 28, 2018, respectively. Most of our federal government contracts require that services be provided beyond one year. In general, these contracts must be funded annually (i.e., the amounts to be spent under the contract must be appropriated by the U.S. Congress to the procuring agency, and then the agency must allot these sums to the specific contracts). We estimate that approximately $7.48 billion, or 31.4%, of total backlog at October 2, 2020 will be realized as revenues within the next fiscal year. Consolidated backlog differs from the Company’s remaining performance obligations as defined by ASC 606 primarily because of our national government contracts (other than national government O&M contracts). Our policy is to include in backlog the full contract award, whether funded or unfunded excluding the option periods while our remaining performance obligations represent a measure of the total dollar value of work to be performed on contracts awarded and in progress. Additionally, the Company includes our proportionate share of backlog related to unconsolidated joint ventures which is not included in our remaining performance obligations. Page 71 Contractual Obligations The following table sets forth certain information about our contractual obligations as of October 2, 2020 (in thousands): Payments Due by Fiscal Period Total 1 Year or Less 1 - 3 Years 3 - 5 Years More than 5 Years Debt obligations $ 1,678,620 $ — $ — $ 1,368,620 $ 310,000 Interest (1) 188,238 36,844 73,689 53,854 23,851 Operating leases 994,678 184,967 307,834 235,338 266,539 Unfunded portion of defined benefit pension plans (2) 400,391 31,258 66,317 71,728 231,088 Obligations under nonqualified deferred compensation plans (3) 171,130 12,614 26,762 28,946 102,808 Purchase obligations (4) 2,842,462 2,297,161 545,301 — — Total $ 6,275,519 $ 2,562,844 $ 1,019,903 $ 1,758,486 $ 934,286 (1) Determined based on borrowings outstanding at the end of fiscal 2020 using the interest rates in effect at that time, considering the effects of interest rate swap agreements, and for our outstanding long-term debt, concluding with the expiration date of the debt facilities as defined below. (2) Assumes that future contributions will be consistent with amounts contributed in fiscal 2020, allowing for certain growth based on rates of inflation and salary increases, but limited to the amount recorded as of October 2, 2020. Actual contributions will depend on a variety of factors, including amounts required by local laws and regulations, and other funding requirements. (3) Assumes that future payments will be consistent with amounts paid in fiscal 2020. Due to the non-qualified nature of the plans, and the fact that benefits are based in part on years of service, the payments included in the schedule were limited to the amount recorded as of October 2, 2020. (4) Represents those liabilities estimated to be under firm contractual commitments as of October 2, 2020; primarily accounts payable, accrued payroll and accrued dividends. Effects of Inflation and Changing Prices The effects of inflation and changing prices on our business is discussed in Item 1A- Risk Factors, and is incorporated herein by reference. Off-Balance Sheet Arrangements We are party to financial instruments with off-balance sheet risk in the form of guarantees not reflected in our balance sheet that arise in the normal course of business. However, such off-balance sheet arrangements are not reasonably likely to have a material adverse effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or resources. See Note 17- Commitments and Contingencies and Derivative Financial Instruments of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K. Page 74 New Accounting Pronouncements 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. Management does not expect the adoption of ASU 326 to have a material impact on the Company's financial position, results of operations or cash flows. Page 75 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We do not enter into derivative financial instruments for trading, speculation or other purposes that would expose the Company to market risk. In the normal course of business, our results of operations are exposed to risks associated with fluctuations in interest rates and currency exchange rates. Interest Rate Risk Please see the Note 9- Borrowings in Notes to Consolidated Financial Statements beginning on Page F-1 of this Annual Report on Form 10-K, which is incorporated herein by reference, for a discussion of the Revolving Credit Facility and Note Purchase Agreement. Our Revolving Credit Facility, 2020 Term Loan Facility and certain other debt obligations are subject to variable rate interest which could be adversely affected by an increase in interest rates. As of October 2, 2020, we had an aggregate of $1.2 billion in outstanding borrowings under our Revolving Credit Facility and 2020 Term Loan Facility. Interest on amounts borrowed under these agreements is subject to adjustment based on the Company’s Consolidated Leverage Ratio (as defined in the credit agreements governing the Revolving Credit Facility and the 2020 Term Loan Facility). Depending on the Company’s Consolidated Leverage Ratio, borrowings under the Revolving Credit Facility and the 2020 Term Loan Facility bear interest at 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%. Additionally, if our consolidated leverage ratio exceeds a certain amount, the interest on the Senior Notes may increase by 75 basis points. However, as discussed in Note 17- Commitments and Contingencies and Derivative Financial Instruments, we have entered into swap agreements with an aggregate notional value of $911.5 million to convert the variable rate interest based liabilities associated with a corresponding amount of our debt into fixed interest rate liabilities, leaving $267.1 million in principal amount subject to variable interest rate risk. For the year ended October 2, 2020, our weighted average floating rate borrowings were approximately $1.2 billion. If floating interest rates had increased by 1.00%, our interest expense for the year ended October 2, 2020 would have increased by approximately $12.2 million. Foreign Currency Risk In situations where our operations incur contract costs in currencies other than their functional currency, we sometimes enter into foreign exchange contracts to limit our exposure to fluctuating foreign currencies. We follow the provisions of ASC No. 815, Derivatives and Hedging in accounting for our derivative contracts. The Company has $521.5 million in notional value of exchange rate sensitive instruments at October 2, 2020. See Note 17- Commitments and Contingencies and Derivative Financial Instruments for discussion. Page 76 PART III Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors, Executive Officers, Promoters and Control Persons The information required by Paragraph (a), and Paragraphs (c) through (g) of Item 401 of Regulation S-K (except for information required by Paragraph (e) of that Item to the extent the required information pertains to our executive officers) and Item 405 of Regulation S-K is set forth under the captions “Members of the Board of Directors,” “Corporate Governance” and “Delinquent Section 16(a) Reports” in our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year and is incorporated herein by reference. The information required by Paragraph (b) of Item 401 of Regulation S-K, as well as the information required by Paragraph (e) of that Item to the extent the required information pertains to our executive officers, is set forth in Part I, Item 1 of this Annual Report on Form 10-K under the heading “Information About Our Executive Officers.” Code of Ethics We have adopted a code of ethics for our Chief Executive Officer and senior financial officers; a code of business conduct and ethics for members of our Board of Directors and corporate governance guidelines. The full text of these codes of ethics and corporate governance guidelines are available at our website at www.jacobs.com. In the event we make any amendment to, or grant any waiver from, a provision of the code of ethics that applies to the principal executive officer, principal financial officer or principal accounting officer that requires disclosure under applicable SEC rules, we will disclose such amendment or waiver and the reasons therefor on our website. We will provide any person without charge a copy of any of the aforementioned codes of ethics upon receipt of a written request. Requests should be addressed to: Jacobs Engineering Group Inc., 1999 Bryan Street, Suite 1200, Dallas, Texas 75201, Attention: Corporate Secretary. Corporate Governance The information required by Items 407(d)(4) and (d)(5) of Regulation S-K is set forth under the caption “Corporate Governance” in our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year and is incorporated herein by reference. Item 11. EXECUTIVE COMPENSATION The information required by this Item is set forth under the captions “Corporate Governance,” “Compensation Committee Report,” “Compensation Discussion and Analysis” and “Executive Compensation” in our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year and is incorporated herein by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by this Item is set forth in our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year and is incorporated herein by reference. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE The information required by this Item is set forth under the captions “Members of The Board of Directors,” “Corporate Governance,” and “Certain Relationships and Related Transactions” in our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year and is incorporated herein by reference. Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by this Item is set forth under the captions “Report of the Audit Committee” and “Audit and Non-Audit Fees” in our definitive proxy statement to be filed with the SEC pursuant to Regulation 14A within 120 days after the close of our fiscal year and is incorporated herein by reference. Page 79 PART IV EXHIBITS AND FINANCIAL STATEMENTS Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Documents filed as part of this report: (1) The Company’s Consolidated Financial Statements at October 2, 2020 and September 27, 2019 and for each of the three years in the period ended October 2, 2020, 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 as of October 5, 2020. Filed as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K on September 18, 2020 and incorporated herein by reference. 4.1† Description of the Registrant’s Securities. 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. 10.6 Credit Agreement, dated as of March 25, 2020, among Jacobs Engineering Group Inc. and Jacobs U.K. Limited, as borrowers, the lenders party thereto, Bank of America, N.A. as administrative agent, Bank of America, N.A., BNP Paribas and Wells Fargo Bank, N.A., as co- syndication agents, The Bank of Nova Scotia, HSBC Bank USA, National Association, USA, PNC Bank, National Association, TD Bank, N.A., Truist Bank and U.S. Bank National Association, as co-documentation agents, and BofA Securities, Inc., BNP Paribas Securities Corp. and Wells Fargo Securities, LLC, as joint lead arrangers and joint bookrunners. Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K on March 27, 2020 and incorporated herein by reference. Page 80 10.7# 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. 10.8# 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. 10.9# 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. 10.10# 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 10.11# 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. 10.12# 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. 10.13# 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. 10.14# 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. 10.15# 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. 10.16# 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. 10.17# 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. 10.18# 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. 10.19# 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. 10.20# 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. 10.21# 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. 10.22# 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. 10.23# 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. 10.24# 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. Page 81 Signature Title Date /S/ Steven J. Demetriou Chair of the Board and Chief Executive Officer (Principal Executive Officer) November 24, 2020 Steven J. Demetriou /S/ Joseph R. Bronson Director November 24, 2020 Joseph R. Bronson /S/ Vincent K. Brooks Director November 24, 2020 Vincent K. Brooks /S/ Robert C. Davidson, Jr. Director November 24, 2020 Robert C. Davidson, Jr. /S/ Ralph E. Eberhart Director November 24, 2020 Ralph E. Eberhart /S/ Manny Fernandez Director November 24, 2020 Manny Fernandez /S/ Georgette D. Kiser Director November 24, 2020 Georgette D. Kiser /S/ Linda Fayne Levinson Director November 24, 2020 Linda Fayne Levinson /S/ Barbara L. Loughran Director November 24, 2020 Barbara L. Loughran /S/ Robert A. McNamara Director November 24, 2020 Robert A. McNamara /S/ Peter J. Robertson Director November 24, 2020 Peter J. Robertson /S/ Christopher M.T. Thompson Director November 24, 2020 Christopher M.T. Thompson /S/ Kevin C. Berryman Executive Vice President, Chief Financial Officer (Principal Financial Officer) November 24, 2020 Kevin C. Berryman /S/ William B. Allen Senior Vice President and Chief Accounting Officer (Principal Accounting Officer) November 24, 2020 William B. Allen Page 84 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS WITH REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM October 2, 2020 F-1 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS October 2, 2020 Consolidated Balance Sheets at October 2, 2020 and September 27, 2019 F-3 Consolidated Statements of Earnings for the Fiscal Years Ended October 2, 2020, September 27, 2019 and September 28, 2018 F-4 Consolidated Statements of Comprehensive Income for the Fiscal Years Ended October 2, 2020, September 27, 2019 and September 28, 2018 F-5 Consolidated Statements of Stockholders’ Equity for the Fiscal Years Ended October 2, 2020, September 27, 2019 and September 28, 2018 F-6 Consolidated Statements of Cash Flows for the Fiscal Years Ended October 2, 2020, September 27, 2019 and September 28, 2018 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 STATEMENTS OF COMPREHENSIVE INCOME For the Fiscal Years Ended October 2, 2020, September 27, 2019 and September 28, 2018 (In thousands) October 2, 2020 September 27, 2019 September 28, 2018 Net Earnings of the Group $ 523,867 $ 873,219 $ 173,142 Other Comprehensive Income (Loss): Foreign currency translation adjustment 64,052 15,972 (109,877) Gain (loss) on cash flow hedges (21,883) 1,369 118 Change in pension and retiree medical plan liabilities (75,334) (157,632) (27,231) Other comprehensive income (loss) before taxes (33,165) (140,291) (136,990) Income Tax (Expense) Benefit: Foreign currency translation adjustment (3,722) — — Cash flow hedges 7,285 (568) 859 Change in pension and retiree medical plan liabilities 13,357 30,750 (17,058) Income Tax (Expense) Benefit: 16,920 30,182 (16,199) Net other comprehensive income (loss) (16,245) (110,109) (153,189) Net Comprehensive Income (Loss) of the Group 507,622 763,110 19,953 Net (Earnings) Loss Attributable to Noncontrolling Interests (32,022) (25,240) (9,711) Net Comprehensive Income (Loss) Attributable to Jacobs $ 475,600 $ 737,870 $ 10,242 See the accompanying Notes to Consolidated Financial Statements including the Company's note on Other Financial Information 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 October 2, 2020, September 27, 2019 and September 28, 2018 (In thousands) Common Stock Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Jacobs Stockholders’ Equity Noncontrolling Interests Total Group Stockholders’ Equity Balances at 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 $(10,825) — — (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 Net earnings — — 491,845 — 491,845 32,022 523,867 Foreign currency translation adjustments, net of deferred taxes of $3,722 — — — 60,330 60,330 — 60,330 Pension and retiree medical plan liability, net of deferred taxes of $(13,357) — — — (61,977) (61,977) — (61,977) (Loss) Gain on derivatives, net of deferred taxes of $(7,285) — — — (14,598) (14,598) — (14,598) Dividends — — (99,921) — (99,921) — (99,921) Noncontrolling interests - distributions and other — 5,002 — — 5,002 (46,034) (41,032) Stock based compensation — 47,048 1,102 — 48,150 — 48,150 Issuances of equity securities including shares withheld for taxes 998 17,890 (9,447) — 9,441 — 9,441 Repurchases of equity securities (4,129) (30,944) (302,178) — (337,251) — (337,251) Balances at October 2, 2020 $ 129,748 $ 2,598,446 $ 4,020,575 $ (933,057) $ 5,815,712 $ 39,955 $ 5,855,667 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 October 2, 2020, September 27, 2019 and September 28, 2018 (In thousands) October 2, 2020 September 27, 2019 September 28, 2018 Cash Flows from Operating Activities: Net earnings attributable to the Group $ 523,867 $ 873,219 $ 173,142 Adjustments to reconcile net earnings to net cash flows provided by (used for) operations: Depreciation and amortization: Property, equipment and improvements 91,070 90,171 117,856 Intangible assets 90,563 79,098 80,731 Gain on sale of ECR business (110,236) (935,110) — Loss on disposal of other businesses and investments — 9,608 20,967 Loss on investment in equity securities 103,623 78,108 — Stock based compensation 48,150 69,137 79,242 Equity in earnings of operating ventures, net of return on capital distributions 9,172 (8,784) (2,639) Loss on disposals of assets, net 766 6,222 17,491 Impairment of long-lived assets 162,238 —  —  Loss (Gain) on pension and retiree medical plan changes 4,598 (33,087) 5,414 Deferred income taxes 82,275 (105,939) 288,126 Changes in assets and liabilities, excluding the effects of businesses acquired: Receivables and contract assets, net of contract liabilities (107,784) (67,894) (428,930) Prepaid expenses and other current assets (27,280) (13,117) (19,134) Accounts payable (92,838) 295,146 183,057 Income taxes payable 35,194 (294,995) 68,970 Accrued liabilities (27,849) (305,716) (37,746) Other deferred liabilities (64,390) (106,256) (79,280) Other, net 85,710 3,753 13,885 Net cash provided by (used for) operating activities 806,849 (366,436) 481,152 Cash Flows from Investing Activities: Additions to property and equipment (118,269) (135,977) (94,884) Disposals of property and equipment and other assets 96 7,177 3,293 Capital contributions to equity investees, net of return of capital distributions (12,278) (8,761) (5,416) Acquisitions of businesses, net of cash acquired (293,580) (575,110) (1,488,336) Disposals of investment in equity securities — 64,708 — (Payments) proceeds related to sales of businesses (5,061) 2,801,425 7,736 Purchases of noncontrolling interests — (1,113) — Net cash (used for) provided by investing activities (429,092) 2,152,349 (1,577,607) Cash Flows from Financing Activities: Proceeds from long-term borrowings 2,986,661 2,782,193 5,784,355 Repayments of long-term borrowings (2,521,467) (3,996,970) (4,572,182) Proceeds from short-term borrowings 78 200,001 712 Repayments of short-term borrowings (200,008) (28,566) (3,391) Debt issuance costs (1,807) (3,915) — Proceeds from issuances of common stock 37,235 64,958 53,584 Common stock repurchases (337,251) (853,676) (2,981) Taxes paid on vested restricted stock (27,794) (26,641) (31,108) Cash dividends, including to noncontrolling interests (143,962) (106,396) (86,569) Net cash (used for) provided by financing activities (208,315) (1,969,012) 1,142,420 Effect of Exchange Rate Changes 61,914 20,809 (26,758) Net Increase (Decrease) in Cash and Cash Equivalents 231,356 (162,290) 19,207 Cash and Cash Equivalents at the Beginning of the Period 631,068 793,358 774,151 Cash and Cash Equivalents at the End of the Period 862,424 631,068 793,358 Less Cash and Cash Equivalents included in Assets held for Sale — — (158,488) Cash and Cash Equivalents of Continuing Operations at the End of the Period $ 862,424 $ 631,068 $ 634,870 See the accompanying Notes to Consolidated Financial Statements. F-7 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 3- Revenue Accounting for Contracts for further discussion. F-10 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 18- 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. Our unconsolidated joint ventures (including equity method investments) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable, and impairment losses are recognized for such investments if there is a decline in fair value below carrying value that is considered to be other-than-temporary. 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. F-11 JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) Level 3 - Unobservable inputs to the valuation methodology that are significant to the fair value measurement. 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 9- 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 17- Commitments and Contingencies and Derivative Financial Instruments and the Company's investment in Worley ordinary shares discussed in Note 15- 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 and market 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 October 2, 2020 and September 27, 2019 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-12