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Sale of Energy, Chemicals and Resources ("ECR") Business | 12 Months Ended
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Oct. 02, 2020
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”). The stock and asset purchase agreement for the ECR sale contained a restriction on our ability to sell the Worley shares received in the transaction, which expired in the first fiscal quarter of 2020. 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. As of the year ended October 2, 2020, all of the ECR business to be sold under the terms of the sale has been conveyed to Worley and as such, no amounts remain held for sale. 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)
| October 2, 2020 |  | September 27, 2019 |  | September 28, 2018
Revenues | $ | 11,235 |  |  | $ | 2,725,699 |  |  | $ | 4,404,873 |
Direct cost of contracts | (6,152) |  |  | (2,338,113) |  |  | (3,756,263) |
Gross profit | 5,083 |  |  | 387,586 |  |  | 648,610 |
Selling, general and administrative expenses | 32,668 |  |  | (320,264) |  |  | (412,282) |
Operating Profit (Loss) | 37,751 |  |  | 67,322 |  |  | 236,328 |
Gain on sale of ECR business | 110,236 |  |  | 935,110 |  |  | — |
Other (expense) income, net | 515 |  |  | (47,390) |  |  | (12,604) |
Earnings Before Taxes from Discontinued Operations | 148,502 |  |  | 955,042 |  |  | 223,724 |
Income Tax Expense | (10,518) |  |  | (395,828) |  |  | (55,931) |
Net Earnings of the Group from Discontinued Operations | $ | 137,984 |  |  | $ | 559,214 |  |  | $ | 167,793 |
(1) The ECR business was sold April 26, 2019, therefore the year ended September 27, 2019 includes only seven months of results. Selling, general and administrative expenses includes a reduction for net insurance recoveries of approximately $40.0 million for the year ended October 2, 2020 recorded in connection with the Nui Phao ("NPMC") legal matter described in Note 18- Contractual Guarantees, Litigations, Investigations and Insurance. Additionally, the year ended September 27, 2019 includes a charge for the award and recovery of costs, estimated related interest and attorneys' fees related to the NPMC legal matter. For the year ended October 2, 2020, the gain on sale of $110.2 million relates mainly to the recognition of the deferred gain for the delayed transfer of the ECR-related assets and liabilities of the two international entities discussed below, adjustments for working capital and certain other items in connection with the ECR sale and additional income for the release of a deferred gain upon achievement of the IT Migration Date described below in connection with the delivery to Worley of certain IT application and hardware assets related to the ECR business. For the year ended September 27, 2019, other expense (income), net was comprised of $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. The following tables represent the assets and liabilities held for sale (in thousands):
| September 27, 2019
Cash and cash equivalents | $ | — |
Receivables and contract assets | 871 |
Prepaid expenses and other | 81 |
Current assets held for sale (1) | $ | 952 |
Property, Equipment and Improvements, net | $ | 1,643 |
Goodwill | 24,896 |
Intangibles, net | — |
Miscellaneous | 439 |
Noncurrent assets held for sale (1) | $ | 26,978 |
Notes payable | $ | — |
Accounts payable | — |
Accrued liabilities | 2,495 |
Contract liabilities | 78 |
Current liabilities held for sale (1) | $ | 2,573 |
(1)At September 27, 2019, current assets held for sale and noncurrent assets held for sale were included in the within prepaid expenses and other and miscellaneous, respectively. At September 27, 2019, current liabilities held for sale and noncurrent liabilities held for sale were included within accrued liabilities and other deferred liabilities, respectively. The significant components included in our Consolidated Statements of Cash Flows for discontinued operations are as follows (in thousands):
| For the Year Ended
| September 27, 2019
Depreciation and amortization: |
Property, equipment and improvements | $ | 2,110 |
Intangible assets | $ | 614 |
Additions to property and equipment | $ | (9,204) |
Stock based compensation | $ | 10,852 |
Gain on Sale and Deferred Gain As a result of the ECR sale, the Company recognized a pre-tax gain of $1.0 billion, $935.1 million of which was recognized in fiscal 2019 and $110.2 million of which is included in Net Earnings of the Group from Discontinued Operations on the consolidated statement of earnings for the year ended October 2, 2020, which is further discussed below. Upon closing the ECR sale, the Company retained a noncontrolling interest (with significant influence) in P&PS-related activities in one international legal entity acquired 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 were set to occur at a future date. At the time of the ECR sale, the Company allocated proceeds received to these deferred closing items on a relative fair value basis and recognized a deferred gain of $34.4 million. During the second fiscal quarter of 2020, the delayed transfer of the ECR-related assets and liabilities of these two international entities occurred, and as a result, previously deferred gain amounts were recognized. 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 (“IT Migration Date”) to Worley upon completion of the interim transition services provided under the TSA, 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 December 2019, the deferred proceeds were recognized in earnings from discontinued operations, 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 in connection with the ECR sale. Pursuant to the purchase agreement for the ECR sale, 51.4 million of the shares were considered "restricted" during a lock-up period ending in December 2019. During the lock-up period, Jacobs could 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 fiscal 2019, 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 based on quoted market prices. The 51.4 million ordinary shares currently held are recorded within investment in equity securities in the Company's Consolidated Balance Sheets at their estimated fair value, which is $347.5 million as of October 2, 2020 and $451.1 million as of September 27, 2019. For the years ended October 2, 2020 and September 27, 2019, the Company recognized a loss of $103.6 million and a loss of $78.1 million, respectively, associated with share price and currency changes on this investment, as well as dividend income related to the equity investment in the amount of $16.9 million and $5.2 million, respectively. Quoted market prices are available for these securities in an active market and therefore categorized as a Level 1 input. Transition Services Agreement Upon closing of the ECR sale, the Company entered into a Transition Services Agreement (the "TSA") with Worley pursuant to which the Company, on an interim basis, provided various services to Worley including executive consultation, corporate, information technology, and project services. The initial term of the TSA began immediately following the closing of the ECR sale on April 26, 2019 and expired in April 2020, although the parties mutually agreed to extend certain of the services for additional time periods beyond the initial term. All services under the TSA were terminated in October 2020. Pursuant to the terms of the TSA, the Company received payments for the interim services which approximate costs incurred to perform the services. The Company has recognized costs recorded in SG&A expense incurred to perform the TSA, offset by $15.8 million and $35.4 million in TSA related income for such services that is reported in miscellaneous income (expense) in continuing operations for the year ended October 2, 2020 and September 27, 2019, respectively, before inclusion of certain incremental outside service support costs agreed to be shared equally by the parties.

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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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