JACOBS SOLUTIONS INC. (J) FY 2024 MD&A
This page reproduces the company's own Item 7 MD&A text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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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
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 in accordance with ASC 606, Revenue from Contracts with Customers. Contracts that include engineering, procurement and construction services are generally accounted for as a single deliverable (a single performance obligation). 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). Under the typical payment terms of our engineering, procurement and construction contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms at periodic intervals (e.g., biweekly or monthly) and customer payments are typically due within 30 to 60 days of billing, depending on the contract.
For service contracts, the Company recognizes revenue over time using the cost-to-cost percentage-of-completion method. 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”).
Accounting for Pension Plans
The accounting for pension plans requires the use of assumptions and estimates in order to calculate periodic pension cost and the value of the plans’ assets and liabilities. These assumptions include discount rates, investment returns, and projected salary increases, among others. The actuarial assumptions used in determining the funded status of the respective plans are provided in Note 13- Pension and Other Post Retirement Benefit Plans of the Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K.
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The expected rates of return on plan assets ranged from 5.3% to 7.6% for fiscal 2024 and range from 4.6% to 7.8% for fiscal 2025. We believe the range of rates selected for fiscal 2025 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 ranged from 3.8% to 6.9% in fiscal 2024 and range from 3.4% to 7.0% in fiscal 2025. 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 September 27, 2024 was lower or higher by 1.0%, the PBO would have been higher or lower, respectively, at that date by approximately $158.7 million for non-U.S. plans, and by approximately $21.0 million for U.S. plans. If the expected return on plan assets was lower or higher by 1.0%, the net periodic pension cost for fiscal 2024 would be higher or lower, respectively, by approximately $13.1 million for non-U.S. plans, and by approximately $2.9 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 reasonableness of the actuarial assumptions used.
Redeemable Noncontrolling Interests
In connection with the PA Consulting investment in March 2021, the Company recorded redeemable noncontrolling interests, representing the interest holders' initial 35% equity interest in the form of preferred and common shares of PA Consulting. The preferred shares are entitled to a cumulative annual compounding 12% dividend based on the outstanding preferred share subscription price. These noncontrolling interest holders have certain option rights to put the preferred and common share interests back to the Company at a value based on the fair value of PA Consulting (the redemption values). The primary inputs and assumptions impacting the fair value of PA Consulting include projections of revenue and earnings before interest, taxes, depreciation and amortization and discount rates applied thereto. Additionally, the Company has an option to call the interests for certain individual shareholders in certain circumstances. Because the interests are redeemable at the option of the holders and not solely within the control of the Company, the Company has classified the interests in redeemable noncontrolling interests in the mezzanine section of its Consolidated Balance Sheet at their redemption values. The optional redemption features may become exercisable no earlier than five years from the March 2, 2021 closing date, or upon the occurrence of certain other events.
The Company has deemed these interests probable of becoming redeemable in the future and requiring their measurement at the greater of (i) the redemption amount that would be paid if settlement occurred at the balance sheet date, or (ii) the historical value resulting from the original acquisition date fair value plus the impact of any earnings or loss attribution amounts, including dividends. The fair value of the PA Consulting redeemable noncontrolling interest is determined using a combination of the income and market approaches. Under the income approach, fair value is determined by using the projected discounted cash flows of PA Consulting. Under the market approach, the fair value is determined by reference to guideline companies that are reasonably comparable to PA Consulting, with the fair value estimated based on those companies' valuation multiples of earnings before interest, taxes, depreciation and amortization.
Litigation, Investigations, and Insurance
In the normal course of business, we make contractual commitments, and on occasion we are a party in litigation or arbitration proceedings. The litigation in which we are involved primarily includes personal injury claims, professional liability claims, and breach of contract claims. We are also routinely subject to investigations and audits.
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 certain losses, claims and liabilities that occur through the use of various deductibles, limits, and retentions under our insurance programs and utilize a number of internal financing mechanisms for these self-insurance arrangements including the operation of certain captive insurance entities. 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.
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Our Consolidated Balance Sheets include amounts representing our probable estimated liability relating to such claims, 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.
The Company believes, after consultation with counsel, that such 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.
Goodwill and Intangible Assets
Goodwill represents the excess of the fair value of consideration transferred, plus the fair value of any non-controlling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. We recognize purchased intangible assets in connection with our business acquisitions at fair value on the acquisition date.
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.
We evaluate impairment of goodwill either by assessing qualitative factors to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount, or by performing a quantitative assessment. Qualitative factors include industry and market considerations, overall financial performance, and other relevant events and circumstances affecting the reporting unit. If we choose to perform a qualitative assessment and after considering the totality of events or circumstances, we determine it is more likely than not that the fair value of our reporting unit is less than its carrying amount, we will perform a quantitative fair value test.
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 use 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 facts and circumstances, judgments and assumptions used in estimating the fair value, including with respect to market conditions and the economy, 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.
For the 2024 fiscal year, we performed a quantitative impairment test of the DVS reporting unit at the beginning of the fourth quarter and determined that the fair value of this reporting unit exceeded its respective carrying value. For the remaining reporting units, we determined that the fair values significantly exceeded their carrying values and an analysis beyond the qualitative level was not considered necessary.
Intangible assets with finite lives that arise from business acquisitions are amortized based on the period over which the contractual or economic benefit of the intangible assets are expected to be realized or on a straight-line basis over the useful lives of the underlying assets. These primarily consist of customer relationships, contracts and backlog, developed technology and trade names. We assess the recoverability of the unamortized balance of our intangible assets when indicators of impairment are present based on expected future profitability and undiscounted expected cash flows and their contribution to overall operations. Should the review indicate that the carrying value is not fully recoverable, the excess of the carrying value over the fair value of the intangible assets would be recognized as an impairment loss.
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JACOBS SOLUTIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
For the Fiscal Years Ended September 27, 2024, September 29, 2023 and September 30, 2022
(In thousands, except per share information)
| September 27, 2024 | September 29, 2023 | September 30, 2022 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Revenues | $ | 11,500,941 | $ | 10,851,420 | $ | 9,783,074 | ||||
| Direct cost of contracts | (8,668,185) | (8,140,560) | (7,203,115) | |||||||
| Gross profit | 2,832,756 | 2,710,860 | 2,579,959 | |||||||
| Selling, general and administrative expenses | (2,140,320) | (2,034,376) | (2,040,075) | |||||||
| Operating Profit | 692,436 | 676,484 | 539,884 | |||||||
| Other Income (Expense): | ||||||||||
| Interest income | 34,454 | 24,975 | 4,301 | |||||||
| Interest expense | (169,058) | (168,085) | (100,187) | |||||||
| Miscellaneous income (expense), net | 219,454 | (12,399) | 33,499 | |||||||
| Total other income (expense), net | 84,850 | (155,509) | (62,387) | |||||||
| Earnings from Continuing Operations Before Taxes | 777,286 | 520,975 | 477,497 | |||||||
| Income Tax Expense for Continuing Operations | (131,493) | (101,336) | (66,328) | |||||||
| Net Earnings of the Group from Continuing Operations | 645,793 | 419,639 | 411,169 | |||||||
| Net Earnings of the Group from Discontinued Operations, net of tax | 206,850 | 300,017 | 304,243 | |||||||
| Net Earnings of the Group | 852,643 | 719,656 | 715,412 | |||||||
| Net Earnings Attributable to Noncontrolling Interests from Continuing Operations | (17,990) | (18,900) | (22,420) | |||||||
| Net Earnings Attributable to Redeemable Noncontrolling Interests | (14,999) | (21,614) | (34,585) | |||||||
| Net Earnings Attributable to Jacobs from Continuing Operations | 612,804 | 379,125 | 354,164 | |||||||
| Net Earnings Attributable to Noncontrolling Interests from Discontinued Operations | (13,561) | (13,365) | (14,368) | |||||||
| Net Earnings Attributable to Jacobs from Discontinued Operations | 193,289 | 286,652 | 289,875 | |||||||
| Net Earnings Attributable to Jacobs | $ | 806,093 | $ | 665,777 | $ | 644,039 | ||||
| Net Earnings Per Share: | ||||||||||
| Basic Net Earnings from Continuing Operations Per Share | $ | 4.81 | $ | 3.06 | $ | 2.75 | ||||
| Basic Net Earnings from Discontinued Operations Per Share | $ | 1.54 | $ | 2.26 | $ | 2.25 | ||||
| Basic Earnings Per Share | $ | 6.35 | $ | 5.32 | $ | 5.01 | ||||
| Diluted Net Earnings from Continuing Operations Per Share | $ | 4.79 | $ | 3.05 | $ | 2.74 | ||||
| Diluted Net Earnings from Discontinued Operations Per Share | $ | 1.54 | $ | 2.25 | $ | 2.24 | ||||
| Diluted Earnings Per Share | $ | 6.32 | $ | 5.30 | $ | 4.98 |
Note: Earnings per share amounts may not add due to rounding.
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2024 Overview
Net earnings attributable to the Company from continuing operations for fiscal 2024 were $612.8 million (or $4.79 per diluted share), an increase of $233.7 million, or 61.6%, from $379.1 million (or $3.05 per diluted share) for the prior year. The current year results reflected higher year-over-year operating profit of $16.0 million, which benefited from favorable year-over-year underlying operating results, primarily in the Infrastructure & Advanced Facilities ("I&AF") segment, as discussed below in the Segment Financial Information section. Further, current year results were favorably impacted by $186.9 million in pre-tax mark-to-market gains associated with our investment in Amentum stock recorded in connection with the Separation Transaction (see Note 14- Discontinued Operations). The favorable underlying operating performance was achieved despite higher year over year pre-tax Restructuring and other charges and transaction costs due primarily to expenses incurred relating to the Separation Transaction amounting to $144.2 million (primarily professional services and employee separation costs), compared to fiscal 2023 amounts of $142.5 million mainly associated with the Company's Restructuring and other charges and transaction costs relating to expenses incurred in conjunction with the real estate transformation rescaling initiatives and the PA Consulting restructuring program charges (primarily employee separation costs) and expenses incurred relating to the Separation Transaction (primarily professional services). See Note 17- Restructuring and Other Charges.
Net interest expense was favorable by $8.5 million in the current year compared to the prior year due primarily to the Company's higher levels of cash and lower overall levels of outstanding debt compared to fiscal 2023.
Miscellaneous net income was favorable by $231.9 million for the current year compared to the corresponding fiscal 2023 amount, due mainly to $186.9 million in pre-tax mark-to-market gains associated with the Company's investment in Amentum stock, as well as a $35.2 million realized gain on interest rate swaps settled during the fourth quarter of fiscal 2024, which is further discussed in Note 18- Commitments and Contingencies and Derivative Financial Instruments.
Income taxes were higher in the current year by $30.2 million due primarily to $55.8 million tax expense from higher year-over-year pre-tax book income. The overall higher income tax expense was offset by a $61.6 million discrete income tax benefit related to the election to treat an Australian subsidiary as a corporation versus a partnership for U.S. tax purposes, which resulted in the derecognition of a deferred tax liability in fiscal year 2024. Also, a net tax benefit of $39.4 million was recorded in fiscal year 2023 relating to the effective settlement of uncertain tax positions.
Finally, year-over-year net earnings impacts associated with redeemable noncontrolling interests were lower by $(6.6) million and were attributable mainly to lower after-tax earnings results in our PA Consulting investment compared to the prior year.
Net earnings attributable to Jacobs from discontinued operations for fiscal 2024 were $193.3 million (or $1.54 per diluted share), a decrease of $93.4 million, or 32.6%, from $286.7 million (or $2.25 per diluted share) compared to the prior year due mainly to higher charges associated with the Separation Transaction in the current year.
Backlog at September 27, 2024 was $21.8 billion, up $4.0 billion, from $17.8 billion for the prior year primarily driven by new business awards in our Americas business. New prospects and new sales remain strong, and the Company continues to have a positive outlook for many of the industry groups and sectors in which our clients operate.
Results of Operations
Fiscal 2024 Compared to Fiscal 2023
Revenues for the year ended September 27, 2024 were $11.50 billion, an increase of $0.65 billion, or 6.0%, from $10.85 billion for the prior year. The increase in revenues was due mainly to improved performance of our I&AF business, as well as higher revenues year over year in our PA Consulting business. The I&AF business benefited primarily from stronger performance in its Advanced Facilities and international business operations. Our revenues for fiscal 2024 were favorably impacted by foreign currency translation of $77.0 million in our international businesses, as compared to an unfavorable impact of $175.3 million for the last fiscal year.
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Gross profit for the year ended September 27, 2024 was $2.83 billion, up $121.9 million, or 4.5%, from $2.71 billion for the prior year. The Company's increase in gross profit was mainly attributable to higher revenues as mentioned above, with slight margin impacts from year over year mix and personnel cost impacts. Our gross profit margins showed consistent trends year over year at 24.6% and 25.0% for the years ended September 27, 2024 and September 29, 2023, respectively. Overall project mix impacts in our portfolios, personnel costs and utilization trends primarily in the PA Consulting business had mostly offsetting impacts on our overall margin trends year over year.
See Segment Financial Information discussion for further information on the Company’s results of operations at the operating segment level.
Selling, general & administrative expenses for the year ended September 27, 2024 were $2.14 billion, an increase of $105.9 million, or 5.2%, from $2.03 billion for the prior year. The current year's results were impacted by Restructuring and other charges of $163.4 million in separation activities (mainly professional services and employee separation costs) relating to the Separation Transaction in comparison to prior period costs of $61.1 million. Further our SG&A expenses were impacted by slight increases in other department spend and personnel costs. Lastly, SG&A expenses were impacted by unfavorable foreign exchange impacts of $2.1 million for the year ended September 27, 2024 as compared to favorable impacts of $58.9 million for fiscal 2023.
Net interest expense for the year ended September 27, 2024 was $134.6 million, a decrease of $8.5 million from $143.1 million for the prior year. The decrease in net interest expense for the fiscal year 2024 was due primarily to the Company's higher levels of cash and lower overall levels of outstanding debt compared to the last fiscal year.
Miscellaneous income, net for the year ended September 27, 2024 was income of $219.5 million, favorable by $231.9 million as compared to $(12.4) million for the prior year. The increase in income from fiscal 2023 was due primarily to $186.9 million in mark-to-market gains associated with our investment in Amentum stock in connection with the Separation Transaction and a $35.2 million realized gain on interest rate swaps settled during the fourth quarter of fiscal 2024.
Net earnings attributable to Jacobs from discontinued operations for fiscal 2024 were $193.3 million (or $1.54 per diluted share), a decrease of $93.4 million, or 32.6%, from $286.7 million (or $2.25 per diluted share) for the last year. Included in the current year results from discontinued operations is $98.3 million in costs related to the Separation Transaction and approximately $18 million in pre-tax non-cash charges associated with one-time inventory write downs.
Net earnings attributable to noncontrolling interests including redeemable noncontrolling interests for the year ended September 27, 2024 of $33.0 million and $40.5 million for the corresponding period last year. The year over year changes were primarily due to lower net earnings results in our PA Consulting investment compared to the prior year periods.
Fiscal 2023 Compared to Fiscal 2022
Revenues for the year ended September 29, 2023 were $10.85 billion, an increase of $1,068.3 million, or 10.9%, from $9.78 billion from fiscal 2022. The increase in revenues was due mainly to improved performance of our I&AF business, as well as higher revenues year over year in our PA Consulting business. The I&AF business benefited primarily from stronger performance in its Advanced Facilities and international business operations. Additionally, the increase in revenues for fiscal 2023 were partially offset by an unfavorable impact of foreign currency translation of $175.3 million in our international businesses, as compared to an unfavorable impact of $277.3 million for the corresponding period last fiscal year.
Gross profit for the year ended September 29, 2023 was $2.71 billion, up $130.9 million, or 5.1%, from $2.58 billion for fiscal 2022. Fiscal 2023 gross profit was favorable due to higher revenue as mentioned above and impacts from cost reductions associated mainly with first quarter 2023 changes in employee benefit programs, which were partly offset by higher spend in company technology platforms and other personnel and corporate cost increases. Our gross profit margins were approximately 25.0% for the years ended September 29, 2023 and September 30, 2022, respectively. Project mix impacts in our portfolios, higher personnel costs and lower utilization trends primarily in the PA Consulting business impacted our fiscal 2023 margins, partly offset by new program startups won in fiscal 2023.
See Segment Financial Information discussion for further information on the Company’s results of operations at the operating segment level.
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Selling, general & administrative expenses for the year ended September 29, 2023 were $2.03 billion, a decrease of $5.7 million, or 0.3%, from $2.04 billion for fiscal 2022. Fiscal 2023 results were impacted by Restructuring and other charges of $61.1 million in separation activities (mainly professional services and employee separation costs) relating to the Separation Transaction and by higher incentives of $46.2 million. Fiscal 2022 was impacted by the final pre-tax $91.3 million settlement of the Legacy CH2M Matter, net of previously recorded reserves, mentioned above and approximately $27 million in third party recoveries was recorded as receivables reducing SG&A. Fiscal 2023 results were also impacted by decreases in real estate related costs, as well as other department spend decreases due in part to the Company's transformation initiatives. Lastly, SG&A expenses benefited from favorable foreign exchange impacts of $58.9 million for the year ended September 29, 2023 as compared to favorable impacts of $90.7 million for fiscal 2022.
Net interest expense for the year ended September 29, 2023 was $143.1 million, an increase of $47.2 million from $95.9 million for fiscal 2022.The increase in net interest expense year over year is primarily due to higher interest rates in fiscal 2023 compared to the prior year period. The increase was offset in part by $6.3 million net interest benefit during fiscal 2023 related to the release of interest accruals associated with the effective settlement of uncertain tax positions.
Miscellaneous income (expense), net for the year ended September 29, 2023 was expense of $12.4 million, a decrease of $45.9 million as compared to $33.5 million in income for fiscal 2022. The increase in expense from fiscal 2022 was due primarily to an increase in pension costs associated with higher interest rate impacts in fiscal 2023 along with comparatively unfavorable foreign exchange gains and losses in fiscal 2023. Additionally, fiscal 2022 benefited primarily from a $5.1 million gain related to a lease termination.
Net earnings attributable to Jacobs from discontinued operations for fiscal 2023 were $286.7 million (or $2.25 per diluted share), a decrease of $3.2 million, or 1.1%, from $289.9 million (or $2.24 per diluted share) for the corresponding prior year period.
Net earnings attributable to noncontrolling interests including redeemable noncontrolling interests for the year ended September 29, 2023 of $40.5 million and $57.0 million for the corresponding period last year. The year over year changes were primarily due to lower net earnings results in our PA Consulting investment compared to the prior year periods.
On February 4, 2022, the Company acquired StreetLight Data, Inc. ("StreetLight") and on November 19, 2021, a subsidiary of Jacobs acquired BlackLynx ("BlackLynx"). For further discussion, see Note 16- Other Business Combinations.
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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, 2024, September 29, 2023 and (dollars in thousands):
| For the Years Ended | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 27, 2024 | % | September 29, 2023 | % | September 30, 2022 | % | |||||||||||||||
| Statutory amount | $ | 163,230 | 21.0 | % | $ | 109,405 | 21.0 | % | $ | 100,274 | 21.0 | % | ||||||||
| State taxes, net of the federal benefit | 21,615 | 2.8 | % | 13,938 | 2.7 | % | 9,982 | 2.1 | % | |||||||||||
| Exclusion of tax on non-controlling interests | (5,230) | (0.7) | % | (5,461) | (1.0) | % | (6,871) | (1.4) | % | |||||||||||
| Foreign: | ||||||||||||||||||||
| Difference in tax rates of foreign operations | 17,891 | 2.3 | % | 4,583 | 0.9 | % | (2,514) | (0.5) | % | |||||||||||
| (Benefit)/Expense from foreign valuation allowance change | (27,780) | (3.6) | % | (1,305) | (0.3) | % | 3,043 | 0.6 | % | |||||||||||
| U.S. tax cost of foreign operations | 72,887 | 9.4 | % | 68,662 | 13.2 | % | 37,443 | 7.8 | % | |||||||||||
| Derecognition of deferred tax liabilities related to investment in Australian partnership | (61,614) | (7.9) | % | — | — | % | — | — | % | |||||||||||
| Other Includable Income | 25,952 | 3.3 | % | — | — | % | — | — | % | |||||||||||
| Tax differential on foreign earnings | 27,336 | 3.5 | % | 71,940 | 13.8 | % | 37,972 | 7.9 | % | |||||||||||
| Foreign tax credits | (33,402) | (4.3) | % | (36,180) | (6.9) | % | (29,468) | (6.2) | % | |||||||||||
| Tax Rate Change | (147) | — | % | (9,913) | (1.9) | % | 3,210 | 0.7 | % | |||||||||||
| Valuation allowance | 12,339 | 1.6 | % | (7,169) | (1.4) | % | (59,121) | (12.4) | % | |||||||||||
| Uncertain tax positions | (1,153) | (0.1) | % | (38,844) | (7.5) | % | (1,439) | (0.3) | % | |||||||||||
| Other items: | ||||||||||||||||||||
| Disallowed officer compensation | 5,394 | 0.7 | % | 7,081 | 1.4 | % | 6,034 | 1.3 | % | |||||||||||
| Research and Development Credit | (17,110) | (2.2) | % | (2,133) | (0.4) | % | (1,952) | (0.4) | % | |||||||||||
| Transaction Costs | 8,500 | 1.1 | % | 4 | — | % | 1,806 | 0.4 | % | |||||||||||
| Investment in Amentum | (39,255) | (5.1) | % | — | — | % | — | — | % | |||||||||||
| Other items – net | (10,624) | (1.4) | % | (1,332) | (0.3) | % | 5,901 | 1.2 | % | |||||||||||
| Total other items | (53,095) | (6.8) | % | 3,620 | 0.7 | % | 11,789 | 2.5 | % | |||||||||||
| Income taxes from continuing operations | $ | 131,493 | 16.9 | % | $ | 101,336 | 19.5 | % | $ | 66,328 | 13.9 | % |
Restructuring and Other Charges
During fiscal 2023, the Company implemented restructuring initiatives relating to the Separation Transaction. The Company incurred approximately $42.0 million and $17.5 million in the years ended September 27, 2024 and September 29, 2023, respectively, in pre-tax cash charges in connection with these initiatives. These actions, which are expected to be substantially completed before the end of fiscal 2025, are expected to result in estimated gross annualized pre-tax cash savings of approximately $120 million to $147 million. We will likely incur additional charges under this program through fiscal 2025, which are expected to result in additional savings in future periods.
During third quarter fiscal 2023, the Company approved a plan to improve business processes and cost structures of our PA Consulting investment by reorganizing senior management and reducing headcount. In connection with these initiatives, which are expected to be substantially completed in early fiscal 2025, the Company incurred approximately $6.4 million and $14.3 million in the years ended September 27, 2024 and September 29, 2023, respectively, in pre-tax cash charges. These activities are expected to result in estimated gross annualized pre-tax cash savings of approximately $50 million to $65 million.
During fiscal 2023, the Company implemented restructuring and cost reduction initiatives relating to the formation of the reporting and operating segment, Divergent Solutions, which were substantially completed in fiscal 2023.
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The Company incurred approximately $6.0 million in pre-tax cash charges in connection with these initiatives during the year ended September 29, 2023. These actions are expected to result in estimated gross annualized pre-tax cash savings of approximately $15.6 million to $19.1 million.
During fiscal 2020 and continuing into fiscal 2023, the Company implemented further real estate rescaling efforts that were associated with its fiscal 2020 transformation program relating to real estate. These activities were substantially completed in fiscal 2023. In connection with these efforts, the Company has incurred $45.7 million and $69.7 million in the years ended September 29, 2023 and September 30, 2022, respectively, in pre-tax mainly non-cash charges. These actions resulted in non-cash savings related mainly to the future amortization of lease right-of-use assets over the remaining lease terms. Additionally, the objective of these initiatives was to create a modern, flexible work platform tailored to employees’ needs due to globalization and digital advances and to create total emissions savings that will be realized as we continue to optimize our real estate footprint.
Refer to Note 17– Restructuring and Other Charges for further information regarding restructuring and integration initiatives.
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Segment Financial Information
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 other charges (as defined in Note 17 - Restructuring and Other Charges) and transaction costs (in thousands).
| For the Years Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 27, 2024 | September 29, 2023 | September 30, 2022 | ||||||||
| Revenues from External Customers: | ||||||||||
| Infrastructure & Advanced Facilities | $ | 10,323,255 | $ | 9,693,276 | $ | 8,663,778 | ||||
| PA Consulting | 1,177,686 | 1,158,144 | 1,119,296 | |||||||
| Total | $ | 11,500,941 | $ | 10,851,420 | $ | 9,783,074 |
| For the Years Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 27, 2024 | September 29, 2023 | September 30, 2022 | ||||||||
| Segment Operating Profit: | ||||||||||
| Infrastructure & Advanced Facilities (1) | $ | 632,276 | $ | 585,392 | $ | 500,136 | ||||
| PA Consulting | 239,250 | 237,003 | 232,225 | |||||||
| Total Segment Operating Profit | 871,526 | 822,395 | 732,361 | |||||||
| Restructuring, Transaction and Other Charges (2) | (179,090) | (145,911) | (192,477) | |||||||
| Total U.S. GAAP Operating Profit | 692,436 | 676,484 | 539,884 | |||||||
| Total Other (Expense) Income, net (3) | 84,850 | (155,509) | (62,387) | |||||||
| Earnings from Continuing Operations Before Taxes | $ | 777,286 | $ | 520,975 | $ | 477,497 |
| (1) | Operating profit for Infrastructure & Advanced Facilities includes intangibles amortization of $152.7 million, $147.2 million and $149.8 million for the years ended September 27, 2024, September 29, 2023 and September 30, 2022, respectively. Additionally, fiscal 2023 included approximately $15.0 million in net favorable impacts from cost reductions compared to the prior year period, which was associated mainly with net favorable impacts during first quarter from changes in employee benefit programs of $41.0 million offset by approximately $26.0 million in higher spend in company technology platforms and other personnel and corporate cost increases. |
|---|---|
| (2) | The years ended September 27, 2024, and September 29, 2023 include $163.4 million and $61.1 million respectively, in restructuring and other charges (mainly professional services and employee separation costs) primarily related to the Separation Transaction and $6.4 million and $14.3 million respectively, in restructuring and other charges relating to the Company's investment in PA Consulting (primarily employee separation costs). Included in the years ended September 29, 2023 and September 30, 2022 were $46.7 million and $76.1 million, respectively, in charges associated mainly with real estate impairments. Included in the year ended September 30, 2022 is $91.3 million pre-tax related to the final settlement of the Legacy CH2M Matter and net of previously recorded reserves and approximately $27 million in third party recoveries that was recorded as receivables reducing SG&A. |
| (3) | The year ended September 27, 2024 included $186.9 million in mark-to-market gains associated with our investment in Amentum stock in connection with the Separation Transaction and a $35.2 million realized gain on interest rate swaps settled during the fourth quarter of fiscal 2024. The year ended September 30, 2022 included a gain of $8.7 million related to lease terminations. The increase in net interest expense from fiscal 2022 to fiscal 2023 is due primarily to higher interest rates. |
In evaluating the Company’s performance by operating segment, the chief operating decision maker (" CODM") reviews various metrics and statistical data for Infrastructure & Advanced Facilities and PA Consulting but focuses primarily on revenues and operating profit. In addition, the Company attributes each segment's specific incentive compensation plan costs to the segments. The methods for recognizing revenue, incentive fees, project losses and change orders are consistent among the segments.
Infrastructure & Advanced Facilities
| For the Years Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 27, 2024 | September 29, 2023 | September 30, 2022 | ||||||||
| Revenue | $ | 10,323,255 | $ | 9,693,276 | $ | 8,663,778 | ||||
| Operating Profit | $ | 632,276 | $ | 585,392 | $ | 500,136 |
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Fiscal 2024 vs. 2023
| Revenues for the Infrastructure & Advanced Facilities ("I&AF") segment for the year ended September 27, 2024 were $10.32 billion, up $0.63 billion, or 6.5%, from $9.69 billion for the prior year. The increase in revenue was broad based across most I&AF businesses, particularly due to stronger performance in its Advanced Facilities and Europe business operations as compared to the prior year period. Foreign currency translation had a favorable impact of $37.5 million on our international business for the year ended September 27, 2024, compared to $124.2 million in unfavorable impacts in the prior year. |
|---|
| Operating profit for the segment for the year ended September 27, 2024 was $632.3 million, an increase of $46.9 million, or 8.0%, from $585.4 million for the comparative period in fiscal 2023. The year-over-year increase in operating profit was driven primarily by the revenue growth mentioned above with an unfavorable comparison impact of a one-time net favorable $41 million relating mainly to changes in employee benefits programs during first quarter 2023, partly offset by year over year favorable department spending. Impacts on operating profit from favorable foreign currency translation were approximately $11.5 million for the year ended September 27, 2024, compared to $4.3 million in unfavorable impacts in the prior year. |
Fiscal 2023 vs. 2022
| Revenues for the Infrastructure & Advanced Facilities segment for the year ended September 29, 2023 were $9.69 billion, up $1,029.5 million, or 11.9%, from $8.66 billion for fiscal 2022. The increase in revenues from fiscal 2022 was primarily due to higher fee-based revenue from our Advanced Facilities and international businesses. Foreign currency translation had an unfavorable impact of $124.2 million on our international business for the year ended September 29, 2023, compared to $195.2 million in unfavorable impacts in fiscal 2022. |
|---|
| Operating profit for the segment for the year ended September 29, 2023 was $585.4 million, an increase of $85.3 million, or 17.0%, from $500.1 million for fiscal 2022. The year-over-year increase was driven by the revenue growth mentioned above with approximately $15.0 million in net favorable impacts from cost reductions associated mainly with changes in employee benefit programs in fiscal 2023 offset in part by continued higher investments in company technology platforms and personnel related costs. In addition, fiscal 2022 operating profit was impacted by $19.5 million in net charges related to a legal settlement. Impacts on operating profit from unfavorable foreign currency translation were approximately $4.3 million for the year ended September 29, 2023, compared to $5.7 million in favorable impacts in fiscal 2022. |
PA Consulting
| For the Years Ended | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| September 27, 2024 | September 29, 2023 | September 30, 2022 | ||||||||
| Revenue | $ | 1,177,686 | $ | 1,158,144 | $ | 1,119,296 | ||||
| Operating Profit | $ | 239,250 | $ | 237,003 | $ | 232,225 |
Fiscal 2024 vs. 2023
| Revenues for the PA Consulting segment for the year ended September 27, 2024 were $1.18 billion, up $19.5 million, or 1.7%, from $1.16 billion for the prior year. The increase in revenue was due primarily to growth in PA Consulting's public services businesses. Foreign currency translation had a $39.5 million favorable impact on revenues in our international businesses for the year ended September 27, 2024, compared to an unfavorable impact of $51.1 million for the prior year. |
|---|
| Operating profit for the segment for the year ended September 27, 2024 was $239.3 million, an increase of $2.2 million, or 0.9%, from $237.0 million, for the prior year. Operating profit trends showed consistent levels year over year overall. |
Fiscal 2023 vs. 2022
| Revenues for the PA Consulting segment for the year ended September 29, 2023 were $1.16 billion, up $38.8 million, or 3.5%, from $1.1 billion for fiscal 2022. The increase in revenue was due primarily to growth in PA Consulting's defence & security, public services, and energy & utilities businesses. Foreign currency translation had a $51.1 million unfavorable impact on revenues in our international businesses for the year ended September 29, 2023, compared to an unfavorable impact of $82.2 million for fiscal 2022. |
|---|
| Operating profit for the segment for the year ended September 29, 2023 was $237.0 million, an increase of $4.8 million, or 2.1%, from $232.2 million, for fiscal 2022. The increase in operating profit from the prior year was due mainly to lower personnel related costs, partially offset by unfavorable foreign currency translation impacts. Foreign currency translation had a $7.9 million unfavorable impact on operating profit in our international businesses for the year ended September 29, 2023 and an unfavorable impact of $17.1 million for fiscal 2022. |
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Backlog Information
Backlog represents revenue we expect to realize for work to be completed by our consolidated subsidiaries and our proportionate share of work to be performed by unconsolidated joint ventures. Because of variations in the nature, size, expected duration, funding commitments, and the scope of services required by our contracts, the amount and timing of when backlog will be recognized as revenues includes significant estimates and 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 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 have presented our backlog on a year-over-year basis, rather than on a sequential, quarter-over-quarter basis.
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 September 27, 2024, September 29, 2023 and September 30, 2022 (in millions):
| September 27, 2024 | September 29, 2023 | September 30, 2022 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Infrastructure & Advanced Facilities | $ | 21,472 | $ | 17,526 | $ | 17,187 | ||||
| PA Consulting | 378 | 311 | 269 | |||||||
| Total | $ | 21,850 | $ | 17,837 | $ | 17,456 |
| The increase in backlog in Infrastructure & Advanced Facilities in the year ended September 27, 2024 was primarily driven by new business awards in our Americas business. |
|---|
| The PA Consulting backlog benefited mainly from favorable foreign exchange impacts compared to the prior year. |
Backlog relating to work to be performed either directly or indirectly for the U.S. federal government and its agencies totaled approximately $2.4 billion (or 11.1% of total backlog), $2.6 billion (or 14.7% of total backlog) and $2.3 billion (or 13.2% of total backlog) at September 27, 2024, September 29, 2023 and September 30, 2022, 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 $5.71 billion, or 26.2%, of total backlog at September 27, 2024 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 contract change orders or new wins not yet processed and our national government contracts where our policy is to generally include in backlog the contract award, whether funded or unfunded excluding certain 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 does not include our proportionate share of backlog related to unconsolidated joint ventures in our remaining performance obligations.
Liquidity and Capital Resources
At September 27, 2024, our principal sources of liquidity consisted of $1.14 billion in cash and cash equivalents and $2.11 billion of available borrowing capacity under our $2.25 billion revolving credit agreement (the "Revolving Credit Facility"). We finance much of our operations and growth through cash generated by our operations.
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Cash and cash equivalents at September 27, 2024 represented an increase of $373.9 million from $770.9 million at September 29, 2023, the reasons for which are described below. The following table presents selected cash flow information for the respective periods shown:
| (In thousands) | September 27, 2024 | September 29, 2023 | ||||
|---|---|---|---|---|---|---|
| Net cash provided by operating activities | $ | 1,054,673 | $ | 974,763 | ||
| Cash Flows from Investing Activities: | ||||||
| Additions to property and equipment | (121,114) | (137,486) | ||||
| Disposals of property and equipment and other assets | 6,187 | 1,544 | ||||
| Capital contributions to equity investees, net of return of capital distributions | 1,737 | 7,964 | ||||
| Acquisitions of businesses, net of cash acquired | (14,000) | (17,685) | ||||
| Net cash used for investing activities | (127,190) | (145,663) | ||||
| Cash Flows from Financing Activities: | ||||||
| Proceeds from long-term borrowings | 4,606,697 | 3,860,468 | ||||
| Repayments of long-term borrowings | (3,370,355) | (4,486,679) | ||||
| Proceeds from short-term borrowings | 5,345 | 13,011 | ||||
| Repayments of short-term borrowings | (866,761) | (3,353) | ||||
| Debt issuance costs | (34,331) | (17,177) | ||||
| Proceeds from issuances of common stock | 47,503 | 47,782 | ||||
| Common stock repurchases | (402,668) | (265,714) | ||||
| Taxes paid on vested restricted stock | (41,720) | (24,249) | ||||
| Cash dividends to shareholders | (142,779) | (128,420) | ||||
| Net dividends associated with noncontrolling interests | (21,678) | (23,156) | ||||
| Repurchase of redeemable noncontrolling interests | (55,344) | (92,939) | ||||
| Proceeds from issuances of redeemable noncontrolling interests | 19,761 | 34,016 | ||||
| Cash impact from distribution of SpinCo Business | (495,307) | — | ||||
| Net cash (used for) provided by financing activities | (751,637) | (1,086,410) | ||||
| Effect of Exchange Rate Changes | 41,640 | 32,548 | ||||
| Net Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash | 217,486 | (224,762) | ||||
| Cash and Cash Equivalents, including Restricted Cash, at the Beginning of the Period | 929,445 | 1,154,207 | ||||
| Cash and Cash Equivalents, including Restricted Cash, at the End of the Period | $ | 1,146,931 | $ | 929,445 | ||
| Less Cash and Cash Equivalents included in Assets held for spin | $ | — | $ | (155,728) | ||
| Cash and Cash Equivalents, including Restricted Cash of Continuing Operations at the End of the Period | $ | 1,146,931 | $ | 773,717 |
Our net cash flow provided by operations of $1.05 billion during fiscal 2024 was favorable by $79.9 million in comparison to the cash flow provided by operations of $974.8 million for the corresponding prior year. The year-over-year increase in cash from operations is due mainly to higher cash generated from net earnings (as adjusted for non-cash income statement charges that reflect favorable net impacts mainly in accrued liabilities, prepaid expenses and other deferred liabilities) and favorable accounts receivable collections, offset in part by lower performance in other net working capital performance primarily due to higher year over year cash income tax payments and payments related to the Separation Transaction.
Our net cash used for investing activities for fiscal 2024 was $127.2 million, compared to cash used for investing of $145.7 million in the prior year, with this change due primarily to decreases in additions to property and equipment in the current year.
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Our net cash used for financing activities for the fiscal year ended 2024 of $751.6 million resulted mainly from $495.3 million direct decrease in reported cash on hand in our SpinCo business deconsolidation, $402.7 million of cash used for share repurchases, and $142.8 million in dividends to shareholders. These uses of cash were offset by $374.9 million in net proceeds from borrowings. Cash used for financing activities in the prior year was $1.09 billion, due primarily to net repayments of borrowings of $616.6 million, cash used for share repurchases of $265.7 million, $128.4 million in dividends paid to shareholders and $58.9 million in net PA Consulting related redeemable noncontrolling interests repurchase and issuance activity.
At September 27, 2024, the Company had approximately $164.8 million in cash and cash equivalents held in the U.S. and $980.0 million held outside of the U.S. (primarily in the U.K., India, Canada, the Eurozone, Australia and the Middle East region), which is used primarily for funding operations in those regions. Other than the tax cost of repatriating funds to the U.S. (see Note 7- Income Taxes of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K), there are no material impediments to repatriating these funds to the U.S.
The Company had $306.2 million in letters of credit outstanding at September 27, 2024. Of this amount, $0.5 million was issued under the Revolving Credit Facility and $305.7 million was issued under separate, committed and uncommitted letter-of-credit facilities.
In connection with the Separation Transaction, during the fourth quarter, Jacobs received a cash payment of approximately $911 million from SpinCo which was subsequently used for the repayment of debt, which was inclusive of the outstanding short term 2020 Term Loan Facility totaling $834.9 million. Jacobs is expected to realize additional value through the disposition of its retained equity stake in the combined company within 12 months. Please refer to Note 14 - Discontinued Operations for more details.
Additionally, the Company reclassified $870.4 million of debt from long-term debt to current maturities of long-term debt in the fourth quarter, associated with the 2021 Term Loan Facility - GBP Portion, which is due on September 1, 2025.
On February 6, 2023, the Company refinanced its Revolving Credit Facility and Term Loan Facilities, and on February 16, 2023, the Company issued $500.0 million in bonds. On August 18, the Company issued $600.0 million in bonds. See Note 9 - Borrowings for further discussion relating to the terms of the 5.90% Bonds, the 6.35% Bonds, the Revolving Credit Facility and Term Loan Facilities following the issuances and refinancing.
On April 12, 2022, the Company paid cash of AUD640 million, or approximately $475 million using mid-April 2022 exchange rates, which represented the final settlement of Legacy CH2M Matter. For more information, refer to Note 19- Contractual Guarantees, Litigation, Investigations and Insurance.
On February 4, 2022, the Company acquired StreetLight Data, Inc. ("StreetLight"). StreetLight is a pioneer of mobility analytics who uses its data and machine learning resources to shed light on mobility and enable users to solve complex transportation problems. The Company paid total base consideration of approximately $190.7 million in cash and issued $0.9 million in equity and $5.2 million in in-the-money stock options to the former owners of StreetLight. The Company also paid off StreetLight's debt of approximately $1.0 million simultaneously with the consummation of the acquisition.
On November 19, 2021, Jacobs acquired BlackLynx, a provider of high-performance software, to complement Jacobs' portfolio of digital solutions. The Company paid total base consideration of approximately $235.4 million in cash to the former owners of BlackLynx. In conjunction with the acquisition, the Company also paid off BlackLynx's debt of approximately $5.3 million simultaneously with the consummation of the acquisition.
We believe we have adequate liquidity and capital resources to fund our projected cash requirements for our operations, investing activities including acquisitions, if any, and financing activities such as debt servicing, share buybacks and dividends, for the next twelve months. This is based on the liquidity provided by our cash and cash equivalents on hand, our borrowing capacity and our continuing cash from operations.
We were in compliance with all of our debt covenants at September 27, 2024.
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Supplemental Obligor Group Financial Information
On February 16, 2023, Jacobs Engineering Group Inc., a wholly-owned subsidiary of Jacobs Solutions Inc. (together, the "Obligor Group"), completed an offering of $500 million aggregate principal amount of 5.90% Bonds, due 2033 and on August 18, 2023, completed an offering of $600 million aggregate principal amount of 6.35% Bonds, due 2028 (the “Bonds”). The Bonds are fully and unconditionally guaranteed by the Company (the “Guarantees”). The Bonds and the Guarantees were offered pursuant to prospectus supplements, dated February 13, 2023 and August 15, 2023, respectively, to the prospectus dated February 6, 2023, that forms a part of the Company and JEGI’s automatic shelf registration statement on Form S-3ASR (File Nos. 333-269605 and 333-269605-01) previously filed with the Securities and Exchange Commission.
In accordance with SEC Regulation S-X Rule 13-01, set forth below is the summarized financial information for the Obligor Group on a combined basis after elimination of (i) intercompany transactions and balances between Jacobs and JEGI and (ii) equity in the earnings from and investments in all other subsidiaries of the Company that do not guarantee the registered securities of either Jacobs or JEG. This summarized financial information (in thousands) has been prepared and presented pursuant to Regulation S-X Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and is not intended to present the financial position or results of operations of the Obligor Group in accordance with U.S. GAAP.
| (in thousands) | September 27, 2024 | |
|---|---|---|
| Summarized Statement of Earnings Data | ||
| Revenue | $ | 3,827,328 |
| Direct Costs | $ | 3,195,764 |
| Selling, General and Administrative Expenses | $ | 505,949 |
| Net earnings attributable to Guarantor Subsidiaries from continuing operations | $ | 153,482 |
| Noncontrolling interests | $ | (696) |
| (in thousands) | September 27, 2024 | |
|---|---|---|
| Summarized Balance Sheet Data | ||
| Current assets, less receivables from Non-Guarantor Subsidiaries | $ | 1,733,836 |
| Current receivables from Non-Guarantor Subsidiaries | $ | 573,631 |
| Noncurrent assets, less noncurrent receivables from Non-Guarantor Subsidiaries | $ | 503,444 |
| Noncurrent receivables from Non-Guarantor Subsidiaries | $ | 615,986 |
| Current liabilities | $ | 1,568,187 |
| Current liabilities to Non-Guarantor Subsidiaries | $ | — |
| Long-term Debt | $ | 1,348,594 |
| Other Noncurrent liabilities, less amounts payable to Non-Guarantor Subsidiaries | $ | 237,025 |
| Noncurrent liabilities to Non-Guarantor Subsidiaries | $ | 1,051,899 |
| Noncontrolling interests | $ | 937 |
| Accumulated deficit | $ | (779,745) |
New Accounting Pronouncements
ASU 2023-09, Income Taxes, (Topic 740): Improvements to Income Tax Disclosures, provides qualitative and quantitative updates to the Company's effective income tax rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation by jurisdiction of income taxes paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied prospectively; however, retrospective application is also permitted. ASU
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2023-09 will be effective for the Company's annual fiscal 2026 period. The Company has identified and is implementing changes to processes and internal controls to meet the standard’s updated reporting and disclosure requirements.
ASU 2023-07, Segment Reporting, (Topic 280): Improvements to Reportable Segment Disclosures, requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM. The amendments in this update also expand the interim segment disclosure requirements. ASU 2023-07 is effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the amendments in this update are required to be applied on a retrospective basis. ASU 2023-07 will be effective for the Company's annual fiscal 2025 period. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.
ASU 2023-06, Disclosure Improvements: Amendments - Codification Amendments in Response to the Disclosure Update and Simplification Initiative of the Securities and Exchange Commission ("SEC"). The Financial Accounting Standards Board issued the standard to introduce changes to US GAAP that originate in either SEC Regulation S-X or S-K, which are rules about the form and content of financial reports filed with the SEC. The provisions of the standard are contingent upon instances where the SEC removes the related disclosure provisions from Regulation S-X and S-K. The Company does not expect that the application of this standard will have a material impact on our consolidated financial statements and related disclosures.