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Sale of Energy, Chemicals and Resources ("ECR") Business | 12 Months Ended
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Sep. 27, 2019
Discontinued Operations and Disposal Groups [Abstract] |
Sale of Energy, Chemicals and Resources (ECR) Business | Sale of Energy, Chemicals and Resources ("ECR") Business On April 26, 2019, Jacobs completed the sale of its ECR business to Worley for a purchase price of $3.4 billion consisting of (i) $2.8 billion in cash plus (ii) 58.2 million ordinary shares of Worley, subject to adjustments for changes in working capital and certain other items (the “ECR sale”). On April 26, 2019, the Company and Worley entered into an Amended and Restated Stock and Asset Purchase Agreement (the “A&R Purchase Agreement”), pursuant to which the previously executed purchase agreement dated October 21, 2018 was amended in connection with the closing of the ECR sale. Among other things, the amendments in the A&R Purchase Agreement modified the lock-up period for share consideration to apply to 9.9% of Worley’s ordinary shares and extended the end date of the lock-up period to eight weeks following the ECR Business IT Migration Date (as defined in the related Transition Services Agreement ("TSA")) in the event such date had not occurred on or prior to October 1, 2019. Subsequent to year end, the ECR Business IT Migration Date occurred, and as a result, the eight-week lock up period is expected to end in December 2019. Gain on Sale and Deferred Gain As a result of the ECR sale, the Company recognized a pre-tax gain of $935.1 million which is included in Net Earnings of the Group from Discontinued Operations on the consolidated statement of earnings for the fiscal year ended September 27, 2019. Upon closing the ECR sale, the Company retained a noncontrolling interest (with significant influence) in PPS-related activities in one international legal entity that is now controlled and consolidated by Worley. The fair value of the Company’s retained interest in the net assets and liabilities of this entity was estimated at $33.0 million and recorded at closing. For another international legal entity, the closing and transfer of ECR-related assets to Worley will occur at a future date. Accordingly, the Company allocated proceeds received to this deferred closing on a relative fair value basis and recognized a deferred gain of $34.4 million, which will be recorded in income when the ECR-related assets are transferred. In addition to consideration received for the sale of the ECR business, the proceeds received included advanced consideration for the Company to deliver IT application and related hardware assets at a future date (ECR Business “IT Migration Date”) to Worley upon completion of the interim transition services, described further below. This deliverable of IT assets is considered to be a separate element of the ECR business sale transaction, and accordingly, we have allocated a portion of the proceeds received of $95.3 million on a relative fair value basis to this separate deliverable and recognized deferred income. Upon completion and acceptance of this deliverable by Worley in fiscal year 2020, the deferred proceeds will be recognized in income, along with expenses associated with any costs incurred and deferred by the Company for this deliverable. Investment in Worley Stock As discussed above, the Company received 58.2 million in ordinary shares of Worley. Pursuant to the A&R Purchase Agreement, 51.4 million of the shares are considered "restricted" during a lock-up period expected to expire in December 2019. During the lock-up period, Jacobs may not, without Worley's consent, directly or indirectly dispose of the "restricted" shares. The remaining 6.8 million shares not considered "restricted" were sold in the current year, netting a loss of $4.9 million, which was recognized in miscellaneous Income (Expense), net. Dividend income and unrealized gains and losses on changes in fair value of Worley shares are recognized in miscellaneous income (expense), net in continuing operations. The Company's investment in Worley is measured at fair value through net income as it is an equity investment with a readily determinable fair value. The 51.4 million ordinary shares considered "restricted" are recorded within Prepaid expenses and other at their estimated fair value, which is $451.1 million as of September 27, 2019. Quoted market prices are available for these securities in an active market and therefore categorized as a Level 1 input. During the year ended September 27, 2019 Jacobs received dividend income related to the equity investment in the amount of $5.2 million. Transition Services Agreement Upon closing of the sale, the Company entered into a TSA with Worley pursuant to which the Company, on an interim basis, provides various services to Worley including executive consultation, corporate, information technology, and project services. The term of the TSA began immediately following the closing of the ECR sale on April 26, 2019 and will continue for up to one year, with an option to extend the period if mutually agreed upon. Pursuant to the terms of the TSA, the Company will receive payments for the interim services which approximate costs incurred to perform the services. Since inception of the TSA agreement, the Company has recognized costs recorded in SG&A expense incurred to perform the TSA, offset by $35.4 million in TSA related income for such services that is reported in miscellaneous income (expense) in continuing operations for the year ended September 27, 2019 before inclusion of certain incremental outside service support costs agreed to be shared equally by the parties. Discontinued Operations As a result of the ECR sale, substantially all ECR-related assets and liabilities have been sold (the "Disposal Group"). We determined that the Disposal Group should be reported as discontinued operations in accordance with ASC 210-05, Discontinued Operations because their disposal represents a strategic shift that had a major effect on our operations and financial results. As such, the financial results of the ECR business are reflected in our Consolidated Statements of Earnings as discontinued operations for all periods presented. Additionally, current and non-current assets and liabilities of the Disposal Group are reflected as held-for-sale in the Consolidated Balance Sheet as of September 28, 2018. Further, as of the year ended September 27, 2019, a portion of the ECR business remains held by Jacobs as described above and continues to be classified as held for sale for the in accordance with U.S. GAAP. Summarized Financial Information of Discontinued Operations The following table represents earnings (loss) from discontinued operations, net of tax (in thousands):
| For the Years Ended (1)
| September 27, 2019 |  | September 28, 2018 |  | September 29, 2017
Revenues | $ | 2,725,699 |  |  | $ | 4,404,873 |  |  | $ | 3,692,662 |
Direct cost of contracts | (2,338,113 | ) |  | (3,756,263 | ) |  | (3,191,747 | )
Gross profit | 387,586 |  |  | 648,610 |  |  | 500,915 |
Selling, general and administrative expenses | (320,264 | ) |  | (412,282 | ) |  | (366,284 | )
Operating Profit (Loss) | 67,322 |  |  | 236,328 |  |  | 134,631 |
Gain on sale of ECR business | 935,110 |  |  | — |  |  | — |
Other (expense) income, net (2) | (47,390 | ) |  | (12,604 | ) |  | 15,432 |
Earnings Before Taxes from Discontinued Operations | 955,042 |  |  | 223,724 |  |  | 150,063 |
Income Tax Expense | (395,828 | ) |  | (55,931 | ) |  | (32,739 | )
Net Earnings of the Group from Discontinued Operations | $ | 559,214 |  |  | $ | 167,793 |  |  | $ | 117,324 |
(1) | The ECR business was sold April 26, 2019, therefore the year ended September 27, 2019 includes only seven months of results.
(2) | For the year ended September 27, 2019, other (expense) income, net includes $35.0 million in interest expense relating to the Nui Phao settlement, $6.0 million in foreign currency revaluations, $9.6 million in loss on the sale of a joint venture which is offset by $4.4 million in miscellaneous income. For the year ended September 28, 2018, other expense (income), net was comprised of an approximate $21.0 million loss on the sale of the Guimar joint venture, offset by $8.4 million in miscellaneous income.
Selling, general and administrative expenses includes $95.0 million and total other (expense) income, net includes $35.0 million for the year ended September 27, 2019 recorded in connection with charges recognized related to the Nui Phao ("NPMC") legal matter described in Note 17- Contractual Guarantees, Litigation, Investigations and Insurance. The following tables represent the assets and liabilities held for sale (in thousands):
| September 27, 2019 (1) |  | September 28, 2018
Cash and cash equivalents | $ | — |  |  | $ | 158,488 |
Receivables and contract assets | 871 |  |  | 1,040,996 |
Prepaid expenses and other | 81 |  |  | 37,200 |
Current assets held for sale | $ | 952 |  |  | $ | 1,236,684 |
Property, Equipment and Improvements, net | $ | 1,643 |  |  | $ | 199,847 |
Goodwill | 24,896 |  |  | 1,308,000 |
Intangibles, net | — |  |  | 83,005 |
Miscellaneous | 439 |  |  | 110,838 |
Noncurrent assets held for sale | $ | 26,978 |  |  | $ | 1,701,690 |
Notes payable | $ | — |  |  | $ | 1,782 |
Accounts payable | — |  |  | 351,482 |
Accrued liabilities | 2,495 |  |  | 321,627 |
Contract liabilities | 78 |  |  | 81,679 |
Current liabilities held for sale | $ | 2,573 |  |  | $ | 756,570 |
Long-term Debt | $ | — |  |  | $ | 2,710 |
Other Deferred Liabilities | 97 |  |  | 147,894 |
Noncurrent liabilities held for sale | $ | 97 |  |  | $ | 150,604 |
(1) | The September 27, 2019 held for sale balances above pertain to certain ECR entities that will be conveyed at a later date. Please refer to the Gain on Sale and Deferred Gain section above for more information.
The significant components included in our Consolidated Statements of Cash Flows for the discontinued operations are as follows (in thousands):
| For the Years Ended
| September 27, 2019 |  | September 28, 2018
Depreciation and amortization: |  |  |
Property, equipment and improvements | $ | 2,110 |  |  | $ | 26,627 |
Intangible assets | $ | 614 |  |  | $ | 13,327 |
Additions to property and equipment | $ | (9,204 | ) |  | $ | (19,669 | )
Stock based compensation | $ | 10,852 |  |  | $ | 10,838 |
The decrease in depreciation and amortization period over period is due to the cessation of such charges under assets held-for-sale accounting rules.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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