jec-10q_20171229.htm

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). ☒ Yes ☐ No

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

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

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

	December 29, 2017 (Unaudited)			September 29, 2017
ASSETS
Current Assets:
Cash and cash equivalents	$	1,059,839		$	774,151
Receivables		3,293,502			2,102,543
Prepaid expenses and other		193,614			119,486
Total current assets		4,546,955			2,996,180
Property, Equipment and Improvements, net		574,034			349,911
Other Noncurrent Assets:
Goodwill		5,720,875			3,009,826
Intangibles, net		921,000			332,920
Miscellaneous		928,893			692,022
Total other noncurrent assets		7,570,768			4,034,768
	$	12,691,757		$	7,380,859
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Notes payable	$	5,450		$	3,071
Accounts payable		947,199			683,605
Accrued liabilities		1,472,865			939,687
Billings in excess of costs		637,542			299,864
Total current liabilities		3,063,056			1,926,227
Long-term Debt		2,587,933			235,000
Other Deferred Liabilities		1,079,021			732,281
Commitments and Contingencies
Stockholders’ Equity:
Capital stock:
Preferred stock, $1 par value, authorized - 1,000,000 shares; issued and outstanding - none		—			—
Common stock, $1 par value, authorized - 240,000,000 shares; issued and outstanding—141,556,705 shares and 120,385,544 shares as of December 29, 2017 and September 29, 2017, respectively		141,557			120,386
Additional paid-in capital		2,628,012			1,239,782
Retained earnings		3,728,527			3,721,698
Accumulated other comprehensive loss		(628,985	)		(653,514	)
Total Jacobs stockholders’ equity		5,869,111			4,428,352
Noncontrolling interests		92,636			58,999
Total Group stockholders’ equity		5,961,747			4,487,351
	$	12,691,757		$	7,380,859

	For the Three Months Ended
	December 29, 2017			December 30, 2016
Revenues	$	2,750,311		$	2,551,604
Direct cost of contracts		(2,263,131	)		(2,132,292	)
Gross Profit		487,180			419,312
Selling, general and administrative expenses		(439,536	)		(330,684	)
Operating Profit		47,644			88,628
Other Income (Expense):
Interest income		3,834			1,486
Interest expense		(7,092	)		(3,518	)
Miscellaneous expense, net		(2,470	)		(716	)
Total other expense, net		(5,728	)		(2,748	)
Earnings Before Taxes		41,916			85,880
Income Tax Expense		(39,355	)		(24,727	)
Net Earnings of the Group		2,561			61,153
Net Earnings Attributable to Noncontrolling Interests		(398	)		(617	)
Net Earnings Attributable to Jacobs	$	2,163		$	60,536
Net Earnings Per Share:
Basic	$	0.02		$	0.50
Diluted	$	0.02		$	0.50

	For the Three Months Ended
	December 29, 2017			December 30, 2016
Net Earnings of the Group	$	2,561		$	61,153
Other Comprehensive Income (Loss):
Foreign currency translation adjustment		20,168			(287,524	)
Gain (loss) on cash flow hedges		890			(942	)
Change in pension liabilities		3,596			24,753
Other comprehensive income (loss) before taxes		24,654			(263,713	)
Income Tax Expense:
Cash flow hedges		—			(82	)
Change in pension liabilities		(125	)		(4,522	)
Income Tax Expense:		(125	)		(4,604	)
Net other comprehensive income (loss)		24,529			(268,317	)
Net Comprehensive Income (Loss) of the Group		27,090			(207,164	)
Net Earnings Attributable to Noncontrolling Interests		(398	)		(617	)
Net Comprehensive Income (Loss) Attributable to Jacobs	$	26,692		$	(207,781	)

	For the Three Months Ended
	December 29, 2017			December 30, 2016
Cash Flows from Operating Activities:
Net earnings attributable to the Group	$	2,561		$	61,153
Adjustments to reconcile net earnings to net cash flows provided by operations:
Depreciation and amortization:
Property, equipment and improvements		24,832			16,621
Intangible assets		14,695			11,914
Debt Issuance Costs		218			—
(Gain) Loss on sales of business		(444	)		822
Stock based compensation		24,619			10,205
Tax deficiency from stock based compensation					(1,205	)
Equity in earnings of operating ventures, net		(3,631	)		(902	)
(Gain) Losses on disposals of assets, net		(20	)		2,847
Change in pension plan obligations		(10,227	)		(5,301	)
Pension Settlement Charge		3,819			—
Change in deferred compensation plans		(985	)		463
Deferred income taxes		(11,951	)		(565	)
Changes in assets and liabilities, excluding the effects of businesses acquired:
Receivables		15,749			(19,627	)
Prepaid expenses and other current assets		(1,550	)		(2,612	)
Accounts payable		(38,875	)		(10,782	)
Accrued liabilities		(110,140	)		(69,638	)
Billings in excess of costs		71,587			111,862
Other deferred liabilities		5,997			(576	)
Non-current assets and other, net		60,632			5,748
Net cash provided by operating activities		46,886			110,427
Cash Flows Used for Investing Activities:
Additions to property and equipment		(22,450	)		(21,054	)
Disposals of property and equipment		104			4
Purchases of investments		(370	)		—
Additions to intangibles		(237	)		—
Acquisitions of businesses, net of cash acquired		(1,365,809	)		—
Sales of business		—			(2,036	)
Net cash used for investing activities		(1,388,762	)		(23,086	)
Cash Flows Provided by Financing Activities:
Proceeds from long-term borrowings		2,733,475			314,460
Repayments of long-term borrowings		(1,090,329	)		(303,128	)
Proceeds from short-term borrowings		721			669
Repayments of short-term borrowings		(721	)		—
Proceeds from issuances of common stock		14,454			37,396
Common stock repurchases		—			(30,221	)
Excess tax benefits from stock based compensation		—			1,205
Taxes paid on vested restricted stock		(13,780	)		(5,053	)
Cash dividends		(18,143	)		—
Net cash provided by financing activities		1,625,677			15,328
Effect of Exchange Rate Changes		1,887			(21,839	)
Net Increase in Cash and Cash Equivalents		285,688			80,830
Cash and Cash Equivalents at the Beginning of the Period		774,151			655,716
Cash and Cash Equivalents at the End of the Period	$	1,059,839		$	736,546

The accompanying consolidated financial statements and financial information included herein have been prepared pursuant to the interim period reporting requirements of Form 10-Q. Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted. Readers of this Quarterly Report on Form 10-Q should also read our consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 29, 2017 (“2017 Form 10-K”).

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of our consolidated financial statements at December 29, 2017, and for the three-month period ended December 29, 2017.

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

Please refer to Note 17 Definitions of Notes to Consolidated Financial Statements included in our 2017 Form 10-K for the definitions of certain terms used herein.

The preparation of financial statements in conformity with U.S. GAAP requires us to employ estimates and make assumptions that affect the reported amounts of certain assets and liabilities, the revenues and expenses reported for the periods covered by the accompanying consolidated financial statements, and certain amounts disclosed in these Notes to the Consolidated Financial Statements. Although such estimates and assumptions are based on management’s most recent assessment of the underlying facts and circumstances utilizing the most current information available and past experience, actual results could differ significantly from those estimates and assumptions. Our estimates, judgments, and assumptions are evaluated periodically and adjusted accordingly. Please refer to Note 2 Significant Accounting Policies of Notes to Consolidated Financial Statements included in our 2017 Form 10-K for a discussion of the significant estimates and assumptions affecting our consolidated financial statements.

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

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

Please refer to Note 2 Significant Accounting Policies of Notes to Consolidated Financial Statements included in our 2017 Form 10-K for a more complete discussion of the various items within the consolidated financial statements measured at fair value and the methods used to determine fair value.

The net carrying amounts of cash and cash equivalents, trade receivables and payables, and notes payable approximate Fair Value due to the short-term nature of these instruments. Similarly, we believe the carrying value of long-term debt also approximates Fair Value based on the interest rates and scheduled maturities applicable to the outstanding borrowings.

From time to time, the Financial Accounting Standards Board (“FASB”) issues accounting standards updates (each being an “ASU”) to its Accounting Standards Codification (“ASC”), which constitutes the primary source of U.S. GAAP. The Company regularly monitors ASUs as they are issued and considers their applicability to its business. All ASUs applicable to the Company are adopted by the due date and in the manner prescribed by the FASB.

In May 2014, the FASB issued ASU No. 2014-09 Revenue from Contracts with Customers. The new guidance provided by ASU 2014-09 is intended to remove inconsistencies and perceived weaknesses in the existing revenue requirements, provide a more robust framework for addressing revenue issues, improve comparability, provide more useful information and simplify the preparation of financial statements. ASU 2014-09 was initially effective for annual and interim reporting periods beginning after December 15, 2016. On July 9, 2015, the FASB approved a one-year deferral of the effective date of this standard. The revised effective date for the standard is for annual reporting periods beginning after December 15, 2017 and interim periods therein. The FASB also approved changes allowing for early adoption of the standard as of the original effective date.

The Company’s adoption activities will be performed over three phases: (i) assessment, (ii) design, and (iii) implementation. Our assessment phase is complete. We have established a cross-functional team to implement ASU 2014-09. We have identified and are in the process of implementing changes to our systems, processes and internal controls to meet the standard’s updated reporting and disclosure requirements. The following are the potential significant differences identified during the assessment phase:

Under current U.S. GAAP, the Company typically considers engineering and construction services as separate performance obligations. Under ASU 2014-09, the Company has determined, in most instances, it is likely that engineering and construction services will be required to be combined into a single performance obligation. In these instances, this will likely change the timing and pattern of revenue recognition.

In many instances, the Company enters into contracts for construction services subsequent to entering in to engineering services contracts (“Phased Projects”). Under ASU 2014-09, the construction services contract may be deemed to modify the engineering contract, or may be required to be combined with the engineering contract. This modification or combination of contracts may result in a cumulative catchup adjustment, which will have an immediate impact on the Company’s results of operations in the period the contract combination or modification occurs. In addition, it will change the timing and pattern of revenue recognition after the period the contracts have been combined or modified. The Company analyzed its current Phased Projects and concluded that a significant number of these arrangements would be combined under ASU 2014-09.

The Company currently intends to adopt the new standard using the Modified Retrospective application. This standard could have a significant impact on the Company’s Consolidated Financial Statements and an administrative impact on its operations and will depend on the magnitude of the items discussed above. The Company will continue to evaluate the impact through the design and implementation phases.

In February 2016, the FASB issued ASU 2016-02 Leases. ASU 2016-02 requires lessees to recognize assets and liabilities for most leases. ASU 2016-02 is effective for public entity financial statements for annual periods beginning after December 15, 2018, and interim periods within those annual periods. Early adoption is permitted, including adoption in an interim period. The guidance must be adopted using a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company is evaluating the impact of the new guidance on its consolidated

financial statements. This standard could have a significant administrative impact on its operations, and the Company will further assess the impact through its implementation program.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU No. 2017-12 makes targeted improvements to the current guidance on accounting for hedges so that it provides a better view of an entity’s risk management activities and how the entity’s hedging strategies are being used to manage risk. In addition, ASU No. 2017-12 further simplifies the application of certain aspects of hedge accounting, including the measurement of hedge effectiveness. The revised guidance becomes effective for fiscal years beginning after December 15, 2018. The Company is evaluating the impact of the new guidance on its consolidated financial statements. It is not expected that the updated guidance will have a significant impact on the Company’s consolidated financial statements.

On December 15, 2017, the Company completed the acquisition of CH2M HILL Companies, Ltd. (CH2M), an international provider of engineering, construction, and technical services, by acquiring 100% of the outstanding shares of CH2M common stock and preferred stock. The purpose of the acquisition is to further diversify the Company’s presence in the water, nuclear and environmental remediation sectors and to further the Company’s profitable growth strategy. The Company paid total consideration of approximately $1.8 billion in cash and issued approximately $1.4 billion of Jacobs’ common stock, or 20.7 million shares, to the former stockholders and certain equity award holders of CH2M. In connection with the acquisition, the Company also assumed CH2M’s revolving credit facility and second lien notes, including a $20 million prepayment penalty, which totaled approximately $700 million of long-term debt. Immediately following the effective time of the acquisition, the Company repaid CH2M’s revolving credit facility and second lien notes including the related prepayment penalty.

The following summarizes the estimated fair values of CH2M assets acquired and liabilities assumed as of the acquisition date (in millions):

Assets
Cash and cash equivalents	$	315.2
Receivables	1,201.9
Prepaid expenses and other	72.7
Property, equipment and improvements, net	225.6
Goodwill	2,698.8
Identifiable intangible assets:
Customer relationships, contracts and backlog	557.0
Trade name	40.0
Lease intangible assets	5.9
Total identifiable intangible assets	602.9
Miscellaneous	277.4
Total Assets	$ 5,394.5
Liabilities
Notes payable	2.2
Accounts payable	309.6
Accrued liabilities	659.0
Billings in excess of costs	263.5
Identifiable intangible liabilities:
Lease intangible liabilities	9.6
Long-term debt	702.3
Other deferred liabilities	382.7
Total Liabilities	2,328.9
Noncontrolling interests	(40.9)
Net assets acquired	$	3,024.7

Customer relationships, contracts and backlog represent the fair value of existing contracts, the underlying customer relationships and backlog of consolidated subsidiaries and have lives ranging from 5 to 13 years (weighted average life of approximately 8 years). The fair value of the acquired trade name has an estimated life of three years. Other intangible assets and liabilities primarily consist of the fair value of office leases and have a weighted average life of approximately 12 years.

Estimated fair value measurements relating to the CH2M acquisition are made using Level 3 inputs including discounted cash flow techniques. Fair value is estimated using inputs primarily from the income approach, which include the use of both the multiple period excess earnings method and the relief from royalties method. The significant assumptions used in estimating fair value include (i) the estimated life the asset will contribute to cash flows, such as attrition rate of customers or remaining contractual terms, (ii) profitability and (iii) the estimated discount rate that reflect the level of risk associated with receiving future cash flows. The estimated fair value of land has been determined using the market approach, which arrives at an indication of value by comparing the site being valued to sites that have been recently acquired in arm’s-length transactions. Personal property assets with an active and identifiable secondary market are valued using the market approach. Buildings and land improvements are valued using the cost approach using a direct cost model built on estimates of replacement cost. Other personal property assets such as furniture, fixtures and equipment are valued using the cost approach which is based on replacement or reproduction costs of the asset less depreciation.

Other deferred liabilities were comprised of pensions and other long-term employee related liabilities totaling approximately $291.0 million.

The purchase price allocation is based upon preliminary information and is subject to change when additional information is obtained. Goodwill recognized largely results from a substantial assembled workforce, which does not qualify for separate recognition, as well as expected future synergies from combining operations. None of the goodwill recognized is expected to be deductible for tax purposes. The Company has not completed its final assessment of the fair values of purchased receivables, intangible assets and liabilities, property and equipment, tax balances, contingent liabilities, long-term leases or acquired contracts. The final purchase price allocation will result in adjustments to certain assets and liabilities, including the residual amount allocated to goodwill. See Note 18, Commitments and Contingencies, relating to CH2M contingencies.

From the acquisition date of December 15, 2017 through the end of the first fiscal quarter of 2018, CH2M contributed approximately $131 million in revenue and $15.7 million in net earnings included in the accompanying consolidated statement of earnings. Included in these results were approximately $30 million in pre-tax restructuring and transaction costs.

Transaction costs associated with the CH2M acquisition in the accompanying consolidated statements of operations for the three months ended December 29, 2017 are comprised of the following (in millions):

The following presents summarized unaudited pro forma operating results assuming that the Company had acquired CH2M at October 1, 2016. These pro forma operating results are presented for illustrative purposes only and are not indicative of the operating results that would have been achieved had the related events occurred (in millions):

The carrying value of goodwill by reportable segment appearing in the accompanying Consolidated Balance Sheets at December 29, 2017 and September 29, 2017 were as follows (in millions):

During the preparation of the Form 10-Q for the first fiscal quarter of 2017, the Company determined that its prior financial statements contained immaterial misstatements related to incorrect translation of the Company’s non-U.S. goodwill balances from local currency to the U.S. Dollar reporting currency. It was determined that the Company had incorrectly used historical translation rates for the U.S. Dollar in place at the time of the Company’s recording of its foreign goodwill balances rather than using current translation rates at each balance sheet date in accordance with U.S. GAAP. The error dated back to the time of our initial reporting of non-US goodwill balances in the late 1990s and affected our historical quarterly and annual reporting periods through the first fiscal quarter of 2017. Goodwill and accumulated other comprehensive income in the Company’s September 30, 2016 consolidated balance sheet (which have not been adjusted) were each overstated by $209.9 million and was corrected in the first fiscal quarter of 2017 foreign currency translation adjustment. Consequently, the correction was a direct component of the overall translation adjustment amount of $287.5 million that was reported for the three months ended December 30, 2016. These adjustments had no impact on the Company’s Consolidated Statements of Earnings or Cash Flows.

The following table provides certain information related to the Company’s acquired intangibles in the accompanying Consolidated Balance Sheets at December 29, 2017 and September 29, 2017 (in thousands):

	Customer Relationships, Contracts, and Backlog			Developed Technology			Trade Names			Patents			Lease Intangible Assets		Other			Total


Balances, September 29, 2017	$	301,468		$	14,462		$	6,699		$	10,180		$ -		$	111		$	332,920
Acquisitions and additions		557,000			237			40,000			-		5,951			-				603,188
Amortization		(12,852	)		(384	)		(1,344	)		(104	)	-			(11	)			(14,695	)
Foreign currency translation		(346	)		-			26			(93	)	-			-				(413	)
Balances, December 29, 2017	$	845,270		$	14,315		$	45,381		$	9,983		$	5,951	$	100		$		921,000

In addition, we acquired $9.6 million in lease intangible liabilities in connection with the CH2M acquisition.

The following table presents estimated amortization expense of intangible assets for the remainder of fiscal 2018 and for the succeeding years. The amounts below include preliminary amortization estimates for the CH2M opening balance sheet fair values that are still preliminary and are subject to change.

The Company’s operations are organized around four global lines of business (“LOBs”), which also serve as the Company’s operating segments: Aerospace & Technology, Buildings & Infrastructure, Industrial and Petroleum & Chemicals. The Company’s LOB leadership and internal reporting structures report to the Chief Executive Officer, who is also the Chief Operating Decision Maker (“CODM”), and enable the CODM to evaluate the performance of each of these segments and make appropriate resource allocations among each of the segments. For purposes of the Company’s goodwill impairment testing, it has been determined that the Company’s operating segments are also its reporting units based on management’s conclusion that the components comprising each of its operating segments share similar economic characteristics and meet the aggregation criteria in accordance with ASC 350, Intangibles-Goodwill and Other.

Under the current organization, each LOB has a president that reports directly to the CODM. In addition, the sales function, which had been managed centrally for many years, is managed on an LOB basis, and accordingly, the associated cost is embedded in the new segments and reported to the respective LOB presidents. In addition, a portion of the costs of other support functions (e.g., finance, legal, human resources, and information technology) is allocated to each LOB using methodologies which, we believe, effectively attribute the cost of these support functions to the revenue generating activities of the Company on a rational basis. The cost of the Company’s cash incentive plan, the Management Incentive Plan (“MIP”) and the expense associated with the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan (“1999 SIP”) have likewise been charged to the LOBs except for those amounts determined to relate to the business as a whole (which amounts remain in corporate’s results of operations).

Financial information for each LOB is reviewed by the CODM to assess performance and make decisions regarding the allocation of resources. The Company generally does not track assets by LOB, nor does it provide such information to the CODM.

The CODM evaluates the operating performance of our LOBs using segment operating profit, which is defined as margin less “corporate charges” (e.g., the allocated amounts described above). The Company incurs certain Selling, General and Administrative costs (“SG&A”) that relate to its business as a whole which are not allocated to the LOBs.

On December 15, 2017, the Company completed the acquisition of CH2M. For purposes of the Company’s first quarter fiscal 2018 segment reporting, the operating financial information of CH2M has been categorized within the Company’s existing LOB business structure, with its sales and operating profit results for the time period during which CH2M has been under the ownership of the Company (December 15, 2017 - December 29, 2017) being allocated to the Company’s A&T, B&I and P&C lines of business under a transitional business organization structure. Additionally, the preliminary purchase accounting for the acquisition, including opening balance sheet fair value determinations as well as final segment categorizations are still in process.

The following tables present total revenues and segment operating profit for each reportable segment (in thousands) and includes a reconciliation of segment operating profit to total U.S. GAAP operating profit by including certain corporate-level expenses and expenses relating to the Restructuring and other charges and CH2M transaction and integration costs (in thousands).


	For the Three Months Ended
	December 29, 2017			December 30, 2016
Segment Operating Profit:
Aerospace & Technology	$	65,820		$	51,087
Buildings & Infrastructure		45,273			38,797
Industrial		38,113			25,129
Petroleum & Chemicals		27,557			23,652
Total Segment Operating Profit		176,763			138,665
Other Corporate Items		(42,129	)		(18,296	)
Restructuring and Other Charges		(19,349	)		(31,741	)
CH2M Transaction Costs		(67,641	)		—
Total U.S. GAAP Operating Profit		47,644			88,628
Total Other Expense (1)		(5,728	)		(2,748	)
Earnings Before Taxes	$	41,916		$	85,880

During the fourth fiscal quarter of 2017, the Company implemented certain restructuring activities (primarily severance related activities) associated with the Company’s announced definitive agreement to acquire CH2M. Following the closing of the CH2M acquisition, these activities have continued into the first fiscal quarter of 2018 and include associated charges for professional services, personnel costs, severance and costs associated with co-locating Jacobs and CH2M offices, amounting to approximately $19.3 million in pre-tax charges during first quarter ended December 29, 2017. These activities are expected to continue through 2019. These activities are not expected to involve the exit of any service types or client end-markets.

Included in “other corporate items” in the above table are costs and expenses which relate to general corporate activities as well as corporate-managed benefit and insurance programs. Such costs and expenses include: (i) those elements of SG&A expenses relating to the business as a whole; (ii) those elements of the Management Incentive Plan and the 1999 SIP relating to corporate personnel whose other compensation costs are not allocated to the LOBs; (iii) the amortization of intangible assets acquired as part of purchased business combinations; (iv) the quarterly variances between the Company’s actual costs of certain of its self-insured integrated risk and employee benefit programs and amounts charged to the LOBs; and (v) certain adjustments relating to costs associated with the Company’s international defined benefit pension plans. In addition, “other corporate items” includes adjustments to contract margins (both positive and negative) associated with projects where it has been determined, in the opinion of management, that such adjustments are not indicative of the performance of the related LOB and therefore should not be attributed to the LOB.

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

The following tables present total services revenues for each reportable segment for the three months ended December 29, 2017 and December 30, 2016 (in thousands).

	For the Three Months Ended
	December 29, 2017
	Aerospace & Technology		Buildings & Infrastructure		Industrial		Petroleum & Chemicals		Total
Technical Professional Services Revenues
Project Services	$	274,945		615,238		67,672		401,166		1,359,021
Process, Scientific, and Systems Consulting		244,128		-		-		6,945		251,073
Total Technical Professional Services Revenues		519,073		615,238		67,672		408,111		1,610,094
Field Services Revenues
Construction		121,869		42,653		496,632		212,415		873,569
Operations and Maintenance (“O&M”)		80,625		575		185,017		431		266,648
Total Field Services Revenues		202,494		43,228		681,649		212,846		1,140,217
Total Revenues	$	721,567	$	658,466	$	749,321	$	620,957	$	2,750,311

	For the Three Months Ended
	December 30, 2016
	Aerospace & Technology		Buildings & Infrastructure		Industrial		Petroleum & Chemicals		Total
Technical Professional Services Revenues
Project Services	$	176,464	$	509,849	$	2,616	$	369,262	$	1,058,191
Process, Scientific, and Systems Consulting		199,829		—		—		6,917		206,746
Total Technical Professional Services Revenues		376,293		509,849		2,616		376,179		1,264,937
Field Services Revenues
Construction		82,787		66,641		535,336		262,183		946,947
Operations and Maintenance (“O&M”)		118,356		4,127		213,786		3,451		339,720
Total Field Services Revenues		201,143		70,768		749,122		265,634		1,286,667
Total Revenues	$	577,436	$	580,617	$	751,738	$	641,813	$	2,551,604

The following table presents the components of receivables appearing in the accompanying Consolidated Balance Sheets at December 29, 2017 and September 29, 2017, as well as certain other related information (in thousands):

Amounts billed, net consist of amounts invoiced to clients in accordance with the terms of our client contracts and are shown net of an allowance for doubtful accounts. We anticipate that substantially all of such billed amounts will be collected over the next twelve months.

Unbilled receivables and other and Retentions receivable represent reimbursable costs and amounts earned and reimbursable under contracts in progress as of the respective balance sheet dates. Such amounts become billable according to the contract terms, which usually provide that such amounts become billable upon the passage of time, achievement of certain milestones, or completion of the project. We anticipate that substantially all of such unbilled amounts will be billed and collected over the next twelve months.

Claims receivable are included in receivables in the accompanying Consolidated Balance Sheets and represent certain costs incurred on contracts to the extent it is probable that such claims will result in additional contract revenue and the amount of such additional revenue can be reliably estimated.

Property, Equipment and Improvements, Net in the accompanying Consolidated Balance Sheets at December 29, 2017 and September 29, 2017 consist of the following (in thousands):

Following the closing of the CH2M acquisition, these activities have continued into the first fiscal quarter of 2018 and include associated charges for professional services, personnel costs, severance and costs associated with co-locating Jacobs and CH2M offices amounting to approximately $19.3 million in pre-tax charges during first quarter ended December 29, 2017. These activities are expected to continue through 2019. These activities are not expected to involve the exit of any service types or client end-markets.

During the second fiscal quarter of 2017, the Company entered into strategic business restructuring activities associated with realignment of its Europe, U.K. and Middle East regional operations in our B&I segment. Pre-tax net charges of $22.6 million were recorded associated mainly with net realizable value write-offs on contract accounts receivable of $16.5 million, with additional charges recorded for statutory redundancy and severance costs of $1.4 million and other liabilities of $4.7 million which are both expected to be paid or settled within the next 12 months. Additional charges of $1.2 million were recorded under this business exit during third quarter fiscal 2017 associated mainly with contract accounts receivable charges.

During the second fiscal quarter of 2015, the Company began implementing a series of initiatives intended to improve operational efficiency, reduce costs, and better position itself to drive growth of the business in the future. We refer to these initiatives, in the aggregate, as the “2015 Restructuring”. These activities evolved and developed over time as management identified and evaluated opportunities for changes in the Company’s operations (and related areas of potential cost savings), as economic conditions changed and as the realignment of the Company’s operations into its four global LOBs was implemented. Actions related to the 2015 Restructuring included involuntary terminations, the abandonment of certain leased offices, combining operational organizations, and the colocation of employees into other existing offices. These activities did not involve the exit of any service types or client end-markets. The 2015 Restructuring was completed in fiscal 2017 although related cash payments continue to be made under the related obligations recorded in connection with these activities.

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

The following table summarizes the impacts of the Restructuring and other charges on the Company’s reportable segment income by line of business in connection with the CH2M acquisition for the three months ended December 29, 2017 and the 2015 Restructuring for the three months ended December 30, 2016 (in thousands):

The activity in the Company’s accrual for the Restructuring and other activities for the three-month period ended December 29, 2017 is as follows (in thousands):


Delaware	95-4081636
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

1999 Bryan Street, Suite 1200, Dallas, Texas	75201
(Address of principal executive offices)	(Zip Code)

			Page No.
PART I	FINANCIAL INFORMATION

	Item 1.	Financial Statements	3

		Consolidated Balance Sheets	3

		Consolidated Statements of Earnings - Unaudited	4

		Consolidated Statements of Comprehensive Income (Loss) - Unaudited	5

		Consolidated Statements of Cash Flows - Unaudited	6

		Notes to Consolidated Financial Statements - Unaudited	7

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36

	Item 4.	Controls and Procedures	37

PART II	OTHER INFORMATION

	Item 1.	Legal Proceedings	38

	Item 1A.	Risk Factors	38

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

	Item 3.	Defaults Upon Senior Securities	38

	Item 4.	Mine Safety Disclosures	38

	Item 5.	Other Information	38

	Item 6.	Exhibits	40

		SIGNATURES	42

Personnel costs	$	41,222
Professional service, real estate-related, and other expenses	26,675
Total	$	67,897

	Three Months Ended
See note 1	December 29, 2017		December 30, 2016

Revenues	$	3,778	$	3,652
Net earnings (loss)	$ 25.8		$	(47.0)
Net earnings (loss) attributable to Jacobs	$	23.2	$	(56.6)
Net earnings (loss) attributable to Jacobs per share:
Basic earnings (loss) per share	$	0.16	$	(0.40)
Diluted earnings (loss) per share	$	0.16	$	(0.40)

		Aerospace & Technology		Buildings & Infrastructure		Industrial		Petroleum & Chemicals		Total
Balance September 29, 2017	$	1,025.8	$	751.4	$	561.8	$	670.8	$	3,009.8
Acquired		945.2		1,417.9		–		335.7		2,698.8
Foreign Exchange Impact		4.2		3.1		2.3		2.7		12.3
Balance December 29, 2017	$	1,975.2	$	2,172.4	$	564.1	$	1,009.2	$	5,720.9

Large accelerated filer	☒		Accelerated filer	☐

Non-accelerated filer	☐		Smaller reporting company	☐
Emerging growth company		☐

Fiscal Year	(in millions)
2018 (nine months remaining)	$	90.5
2019	119.2
2020	117.1
2021	102.3

	December 29, 2017		September 29, 2017
Components of receivables:
Amounts billed, net	$	1,691,229	$	949,060
Unbilled receivables and other		1,577,005		1,118,144
Retentions receivable		25,268		35,339
Total receivables, net	$	3,293,502	$	2,102,543
Other information about receivables:
Amounts due from the United States federal government, included above, net of advanced billings	$	314,543	$	226,236
Claims receivable	$	4,600	$	4,600

	December 29, 2017			September 29, 2017
Land	$	20,644		$	17,197
Buildings		137,336			93,313
Equipment		777,361			627,609
Leasehold improvements		274,141			220,295
Construction in progress		22,372			21,300
		1,231,854			979,714
Accumulated depreciation and amortization		(657,820	)		(629,803	)
	$	574,034		$	349,911

Balance at September 29, 2017	$	174,343
CH2M Charges		19,349
Payments

2022	98.2
Thereafter	384.1
Total	$	911.4