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Sale of Energy, Chemicals and Resources ("ECR") Business | 9 Months Ended
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Jun. 28, 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 WorleyParsons for a purchase price of $3.4 billion consisting of (i) $2.8 billion in cash plus (ii) 58.2 million ordinary shares of WorleyParsons, subject to adjustments for changes in working capital and certain other items (the “ECR sale”). On April 26, 2019, the Company and WorleyParsons 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 closing the sale transaction. 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 WorleyParsons’ ordinary shares and extend to eight weeks following the ECR Business IT Migration Date (as defined in the related Transition Services Agreement ("TSA")) in the event such date has not occurred on or prior to October 1, 2019. Gain on Sale and Deferred Gain As a result of the sale of the ECR business, the Company recognized a pre-tax gain of $917.7 million which is included in Net Earnings of the Group from Discontinued Operations on the consolidated statement of earnings for the quarter ended June 28, 2019. Upon closing the sale of the ECR business, the Company retained a noncontrolling interest (with significant influence) in BIAF-related activities in one international legal entity that is now controlled and consolidated by WorleyParsons. The fair value of the Company’s retained interest in the net assets and liabilities of this entity was estimated at $33.0 million and recorded at closing. For another international legal entity, the closing and transfer of ECR-related assets to WorleyParsons 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 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 WorleyParsons upon completion of the interim TSA services, described further below. This future 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 future deliverable by WorleyParsons, 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 WorleyParsons Stock As discussed above, the Company received 58.2 million in ordinary shares of WorleyParsons. Pursuant to the A&R Purchase Agreement, 51.4 million of the shares are considered "restricted" during a lock-up period beginning April 26, 2019 and ending on October 26, 2019, subject to an eight week extension if the ECR Business IT Migration Date has not occurred on or prior to October 1, 2019. During the lock-up period Jacobs may not, without WorleyParsons' consent, directly or indirectly dispose of the "restricted" shares. The remaining 6.8 million shares not considered "restricted" were sold in the current quarter, netting a loss of $4.9 million. The Company's investment in WorleyParsons 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 $531.4 million as of June 28, 2019. Quoted market prices are available for these securities in an active market and therefore categorized as a Level 1 input. Transition Service Agreement Upon closing of the sale the Company entered into a TSA with WorleyParsons pursuant to which the Company, on an interim basis, provides various services to WorleyParsons including executive consultation, corporate, information technology, and project services. The term of the TSA agreement began immediately following closing of the ECR sale on April 26, 2019 and will continue for up to 1 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 $14.1 million in TSA related income for such services that is reported in miscellaneous income (expense) for the three and nine month periods ended June 28, 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 unaudited 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 unaudited Consolidated Balance Sheet as of September 28, 2018. Further, as of the quarter ended June 28, 2019, a portion of the ECR business remains held by Jacobs as described above and continues to be classified as held for sale during the third fiscal quarter of 2019 in accordance with U.S. GAAP. Amounts reflected below as of September 28, 2018 include certain reclassifications to amounts previously disclosed in our first quarter 2019 Form 10-Q in order to conform to the current quarter classifications of assets and liabilities held for sale based on the current terms of the sale transaction. The Company incurred approximately $33.3 million and $41.9 million in related transaction costs (mainly professional service fees) for the ECR sale during the three and nine month periods ended June 28, 2019. Summarized Financial Information of Discontinued Operations The following table represents earnings (loss) from discontinued operations, net of tax (in thousands):
| Three Months Ended (1) |  | For the Nine Months Ended (1)
| June 28, 2019 |  | June 29, 2018 |  | June 28, 2019 |  | June 29, 2018
Revenues | $ | 392,526 |  |  | $ | 1,223,040 |  |  | $ | 2,718,317 |  |  | $ | 3,254,085 |
Direct cost of contracts | (340,525 | ) |  | (1,060,548 | ) |  | (2,336,076 | ) |  | (2,785,343 | )
Gross profit | 52,001 |  |  | 162,492 |  |  | 382,241 |  |  | 468,742 |
Selling, general and administrative expenses | (39,556 | ) |  | (118,324 | ) |  | (333,155 | ) |  | (306,829 | )
Operating Profit (Loss) | 12,445 |  |  | 44,168 |  |  | 49,086 |  |  | 161,913 |
Gain on sale of ECR business | 917,697 |  |  | — |  |  | 917,697 |  |  | — |
Other (expense) income, net | (7,864 | ) |  | 1,983 |  |  | (40,158 | ) |  | 6,374 |
Earnings Before Taxes from Discontinued Operations | 922,278 |  |  | 46,151 |  |  | 926,625 |  |  | 168,287 |
Income Tax Expense | (486,594 | ) |  | (11,538 | ) |  | (487,788 | ) |  | (42,072 | )
Net Earnings of the Group from Discontinued Operations | $ | 435,684 |  |  | $ | 34,613 |  |  | $ | 438,837 |  |  | $ | 126,215 |
(1) The ECR business was sold April 26, 2019, therefore the three-month and nine-month periods ended June 28, 2019 include only one month and seven months, respectively, of results. Selling, general and administrative expenses includes $111.0 million and total other (expense) income, net includes $36.0 million for the nine months ended June 29, 2018 recorded in connection with charges recognized in the second quarter of 2019 related to the Nui Phao ("NPMC") legal matter described in Note 18. The following tables represent the assets and liabilities held for sale (in thousands):
| June 28, 2019 |  | September 28, 2018
Cash and cash equivalents | $ | — |  |  | $ | 158,488 |
Receivables and contract assets | 2,704 |  |  | 1,040,996 |
Prepaid expenses and other | — |  |  | 37,200 |
Current assets held for sale | $ | 2,704 |  |  | $ | 1,236,684 |
Property, Equipment and Improvements, net | $ | 1,665 |  |  | $ | 199,847 |
Goodwill | 24,896 |  |  | 1,308,000 |
Intangibles, net | — |  |  | 83,005 |
Miscellaneous | 530 |  |  | 110,838 |
Noncurrent assets held for sale | $ | 27,091 |  |  | $ | 1,701,690 |
Notes payable | $ | — |  |  | $ | 1,782 |
Accounts payable | — |  |  | 351,482 |
Accrued liabilities | 2,040 |  |  | 321,627 |
Contract liabilities | 63 |  |  | 81,679 |
Current liabilities held for sale | $ | 2,103 |  |  | $ | 756,570 |
Long-term Debt | $ | — |  |  | $ | 2,710 |
Other Deferred Liabilities | — |  |  | 147,894 |
Noncurrent liabilities held for sale | $ | — |  |  | $ | 150,604 |
The significant components included in our Consolidated Statements of Cash Flows for the discontinued operations are as follows (in thousands):
| For the Nine Months Ended
| June 28, 2019 |  | June 29, 2018
Depreciation and amortization: |  |  |
Property, equipment and improvements | $ | 2,110 |  |  | $ | 19,052 |
Intangible assets | $ | 614 |  |  | $ | 9,443 |
Additions to property and equipment | $ | (9,204 | ) |  | $ | (14,433 | )
Stock based compensation | $ | 10,852 |  |  | $ | 7,637 |
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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