10-K

2005

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO

SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2005 Commission File No. 1-7463

Jacobs Engineering Group Inc.

Delaware	95-4081636
State of Incorporation	IRS Employer Identification Number
1111 South Arroyo Parkway Pasadena, California 91105	(626) 578-3500
Address of principal executive offices	Telephone Number (including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $1 par value	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check-mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x  Yes  ¨  No

Indicate by check-mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

Indicate by check-mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act)  x  Yes  ¨  No

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

There were 58,179,603 shares of common stock outstanding as of December 12, 2005. The aggregate market value of the registrant’s common equity held by non-affiliates was approximately $2.98 billion as of March 31, 2005, based upon the last reported sales price on the New York Stock Exchange on that date.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant’s definitive Proxy Statement issued in connection with its 2006 Annual Meeting of Shareholders (Part III).

JACOBS ENGINEERING GROUP INC.

Fiscal 2005 Annual Report on Form 10-K

Table of Contents

Item			Page No.
Part I
	Item 1.	Business	2
	Item 2.	Properties	17
	Item 3.	Legal Proceedings	18
	Item 4.	Submission of Matters to a Vote of Security Holders	18
Part II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	19
	Item 6.	Selected Financial Data	20
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	32
	Item 8.	Financial Statements and Supplementary Data	33
	Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	33
	Item 9A.	Controls and Procedures	33
	Item 9B.	Other Information	34
Part III
	Item 10.	Directors and Executive Officers of the Registrant	35
	Item 11.	Executive Compensation	36
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	36
	Item 13.	Certain Relationships and Related Transactions	36
	Item 14.	Principal Accounting Fees and Services	36
Part IV
	Item 15.	Exhibits, Financial Statement Schedules	37
	Signatures		40

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PART I

Item 1.    BUSINESS

General

Jacobs Engineering Group Inc. was incorporated under the laws of the State of Delaware on January 8, 1987. On March 4, 1987, it succeeded by merger to the business and assets of Jacobs Engineering Group Inc., a California corporation that, in 1974, had succeeded to a business organized originally by Dr. Joseph J. Jacobs in 1947. Unless the context otherwise requires, all references herein to “Jacobs” or the “Registrant” are to Jacobs Engineering Group Inc. and its predecessors, and references to the “Company”, “we”, “us” or “our” are to both Jacobs Engineering Group Inc. and its consolidated subsidiaries. The Registrant’s common stock has been publicly held since 1970 and is currently listed on the New York Stock Exchange.

We are one of the largest professional services firms in the United States. Our business focuses exclusively on providing a broad range of technical, professional, and construction services to a large number of industrial, commercial, and governmental clients around the world. We provide project services (which include engineering, design, architectural, and similar services); process, scientific, and systems consulting services; operations and maintenance services; and construction services (which include direct-hire construction and construction management services). We provide our services through offices and subsidiaries located principally in North America, Europe, Asia, and Australia.

We concentrate our services on selected industry groups and markets including oil and gas exploration, production, and refining; programs for various federal governments; pharmaceuticals and biotechnology; chemicals and polymers; buildings (which includes projects in the fields of health care and education as well as civic, governmental, and other buildings); infrastructure; technology and manufacturing; and pulp and paper, among others.

Business Strategy

General

There are four major components of our business strategy: a relationship-based approach to client interactions, safety, a strong focus on cost control, and an organizational structure that facilitates efficient project management and execution.

Relationship-Based Business Model

Our relationship-based business model is central to our sustained growth and profitability. We aggressively pursue the development of long-term affiliations and alliances with our clients. By working as a partner with our clients on their capital programs, we increase our understanding of their overall business needs as well as the unique technical requirements of their projects. This allows us the opportunity to provide a greater range of services to our clients. We market all of our services to clients for projects where the scope of work required is within our expertise. By integrating and bundling our services (i.e., providing design, engineering, and construction services on the same project), we can price contracts more competitively and enhance overall profitability while delivering superior value to our clients. Our relationship-based business model also helps us more fully understand the risks inherent in the projects, which in turn allows us to manage those risks better. Our approach also provides us with opportunities to market those services our clients will need in the post start-up and commissioning phases of a plant, such as operations and maintenance services. This model, however, does not preclude us from undertaking discrete projects that do not significantly conflict with our business strategy. We will accept and perform discrete projects for our clients if we can negotiate acceptable pricing and other contract terms and conditions.

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Safety

Key to the success of our business strategy is our intense and uncompromising focus on safety. Maintaining safe work environments has long been a mutual and unequivocal condition of the relationship we have with our employees. It is also a paramount issue in our dealings with our clients, and our safety program is a fundamental element of our overall approach to risk management. A safe work environment is critical to our long-term success and growth. We maintain a centralized quality and safety group to help ensure that the services we provide are delivered safely and in accordance with standard work processes. Unsafe job sites and office environments increase employee turnover, increase the cost of a project to our clients, expose us to types and levels of risk that are fundamentally unacceptable, and raise our operating costs as well. Safe job sites and office environments, on the other hand, benefit our clients, promote employee morale, and enhance the long-term relationships we have with our clients, employees, and business partners.

Cost Control

Another important component of our business strategy is our continual emphasis on cost control. As the global economy expands and companies providing technical, professional, and construction services are required to compete against each other across geographic boundaries, the company that can provide its clients with cost efficient solutions to their project needs has the advantage. Our attention to cost control throughout every level of our organization allows us to deliver superior technical, professional, and construction services safely, efficiently, and within the cost and time parameters our clients require.

Organizational Structure

Our organizational structure and integrated system for delivering our services is another key component of our business strategy. Our operating units generally use a matrix organizational structure whereby our project management functions are supported by our various technical engineering, design and construction disciplines that are necessary to effectively execute long-term engineering and construction contracts. Crucial functions, such as project controls and procurement, are local to each of our major offices and serve operations by providing specialized services required by projects. In addition, we actively employ a boundaryless approach to the way we serve our clients. Our operating groups do not compete against each other for contracts. Rather, our organizational structure encourages our operating groups to work cohesively while simultaneously helping to reduce costs and promote an efficient delivery system for all of our services. Our multidomestic geographic strategy supports our approach by allowing each office to compete in the local market place while supporting the needs of global clients in partnership with our global network.

The Role of Acquisitions in Our Business Strategy

Our relationship-based business model is a significant driver of our acquisition strategy. When we review potential acquisition targets, we are conscious of the effect the acquisition may have on our client base. We favor acquisitions that allow us to expand or enhance the range of services we provide our clients, and/or gain access to new geographic areas in which our clients either already operate or plan to expand. By expanding into new geographic areas and adding to our existing technical and project management capabilities, we strive to position ourselves as a preferred, single-source provider of technical, professional, and construction services to our major clients. The following is a brief description of some of our key mergers and acquisitions over the past five years:

• In August 2004, we acquired the Babtie Group Limited (the “Babtie Group”). The Babtie Group is a leading provider of technical and professional services to clients in the infrastructure, facilities, environmental, defense, and governmental outsourcing markets, among others. Headquartered in Scotland, the Babtie Group employs approximately 3,500 people in offices located throughout the United Kingdom and Asia, with smaller operations in India and the Czech

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Republic. The primary purpose for acquiring the Babtie Group was to expand our infrastructure and facilities business in the United Kingdom.

• In October 2001, we acquired McDermott Engineers & Constructors (Canada) Limited (including Delta Catalytic and Delta Hudson Engineering) (collectively, “Delta”). Delta provides engineering, construction, and maintenance services to various industries including upstream oil and gas, petroleum refining, petrochemicals, and chemicals. Delta employed approximately 3,500 employees conducting operations located primarily in Canada.

• In May 2001, we purchased from LawGibb Group Inc. substantially all of its international engineering and construction management business (the “GIBB businesses”). Headquartered in the United Kingdom, the GIBB businesses are a leading international engineering consultancy firm that provides technical, professional, and construction management services in the fields of transportation, civil and structural engineering, water and wastewater, environmental and geotechnical services, infrastructure, building and building services, information technology, defense, finance, and commerce. The GIBB businesses employed approximately 900 employees conducting operations located primarily in the United Kingdom and certain other European countries.

• In February 2001, we finalized the second phase of a two-part transaction to acquire from Stork N.V., the Netherlands, all of its engineering and contracting business (the “Stork E&C businesses”). We completed the first phase of the transaction (“Stork Phase I”) in February 2000. The Stork Phase I entities employed approximately 1,500 technical professional staff in offices located principally in Belgium, Germany, Southeast Asia, and certain locations in the Netherlands. The second phase of the transaction (“Stork Phase II”) involved Stork N.V.’s engineering and construction management operations in the Netherlands and the Middle East. The Stork Phase II entities employed approximately 500 technical professional staff. The Stork E&C businesses, headquartered in Leiden, the Netherlands, provide a broad range of engineering and construction management services to clients in the refining, chemicals, basic resources, and facilities industries, among others.

Services Provided

Our business is to provide technical, professional, and construction services. The services we provide generally fall into four broad categories: project services (which includes engineering, design, architectural, and similar services); construction services; operations and maintenance services; and process, scientific, and systems consulting services. The scope of services we can provide our clients, therefore, ranges from consulting and conceptual design services, which clients often require in the very early stages of a project, to complete, single-responsibility, design-build-operate contracts.

The following table sets forth our revenues from each of our four service categories for each of the five fiscal years ended September 30 (in thousands of dollars):

	2005		2004		2003		2002		2001
Project Services	$	2,469,879	$	2,060,288	$	1,894,777	$	1,977,173	$	1,807,831
Construction		1,884,066		1,581,023		1,751,875		1,775,562		1,569,781
Operations and Maintenance		895,356		704,206		743,094		626,559		445,742
Process, Scientific and Systems Consulting		385,700		248,718		225,855		176,367		133,639
	$	5,635,001	$	4,594,235	$	4,615,601	$	4,555,661	$	3,956,993

Certain amounts for fiscal years 2003 and 2002 have been reclassified to conform to the current year presentation.

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Project Services

We employ all of the engineering, design, architectural, and related disciplines necessary to design and engineer modern process plants (including projects for clients in the chemicals and polymers, pharmaceuticals and biotechnology, oil & gas, refining, food and consumer products, and basic resources industries); buildings (including facilities in the health care, education, and criminal justice markets, as well as other buildings for clients in the private sector); infrastructure projects (including highways, roads, bridges, and other transportation systems, and wastewater treatment and similar facilities); technology and manufacturing facilities (for clients in the semiconductor, electronics, automotive, aerospace, and defense industries); pulp and paper plants; and other facilities. We also employ many of the requisite scientific, technical, and program management capabilities necessary to provide program integration, testing, and evaluation services for clients in the defense and aerospace industries; for the United States Department of Defense (“DOD”) in support of information systems for weapons acquisition centers; and for various agencies of the United States federal government in support of environmental programs.

We are capable of providing our clients with a variety of value engineering services including “safety in design”. Through safety in design we integrate best practices, hazard analysis, and risk assessment methods early in the design phase of projects, taking those steps necessary to eliminate or mitigate injury and damage during the construction, start-up, testing and commissioning, and operations phases of a project.

In the area of construction management, we provide our clients with a wide range of services as an agent for our clients. We may act as the program director, whereby we oversee, on the owner’s behalf, the complete planning, design, and construction phases of the project; alternatively, our services may be limited to providing construction consulting.

Also included in the category of “Project Services” are construction related services (such as cost engineering, planning, scheduling, procurement, estimating, project accounting, and quality and safety) necessary to support our engineering, design, construction, construction and program management, operations and maintenance, and consulting services.

Construction

We provide traditional field construction services to private and public sector clients in virtually all of the industries to which we provide project services. We also provide many of our clients with modular construction technology. Our modular approach is an advanced form of off-site engineering and design, fabrication, assembly, and field erection. A modular approach provides clients with an alternative approach to traditional methods of engineering and construction, which can compress and shorten the construction schedule. In the environmental area, we provide environmental remedial construction services for a variety of public and private sector clients.

Historically, our field construction activities have focused primarily on those construction projects for which we perform much of the related engineering and design work. By focusing our construction efforts on such projects, we minimize the risks associated with constructing complex plants and facilities based on designs prepared by third parties. The financial risk to us of constructing complex plants and facilities based on designs prepared by third parties may be particularly significant on fixed-price contracts; therefore, we generally avoid this type of project. However, we continue to pursue construction-only projects where we can negotiate pricing and other acceptable contract terms.

Operations and Maintenance (“O&M”)

O&M generally refers to all of the tasks required to operate and maintain large, complex facilities on behalf of clients. In such situations, we can provide key management and support services over all of the facility’s operations, including subcontractors and other on-site personnel. Within the

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environmental area, O&M often includes engineering and technical support services as well as program management services necessary to remediate contaminated sites. Within the aerospace and defense areas, O&M often requires us to provide the management and technical support services necessary to operate and maintain engine test facilities, weapons integration, and high-tech simulation and verification centers. Such O&M contracts also frequently require us to provide facilities management and maintenance services, utilities operations and maintenance services, property management and disposition service, and construction support services.

This category also includes plant maintenance services, which generally involves the tasks required to keep a plant (typically a refinery or chemical plant) in day-to-day operation. This would include the repair and replacement of pumps, piping, heat exchangers, and other equipment as well as “turnaround” work, which involves major refurbishment that can only be performed when the plant is shut down. Since shutdowns are expensive to the owners of the plant, turnaround work often requires maximizing the number of skilled craft personnel that can work efficiently on a project on a 24-hours-per-day, seven-days-per-week basis. We use sophisticated computer scheduling and programming to complete turnaround projects quickly, and we maintain contact with a large pool of skilled craft personnel we can hire as needed on maintenance and turnaround projects.

Although the gross profit margins that we realize from O&M services are generally lower than those associated with the other services we provide, the costs to support maintenance activities are also generally lower. Furthermore, we view O&M contracts as presenting a lower financial risk to the Company as compared to some of the other services we provides because O&M contracts are normally cost-reimbursable in nature. Additionally, although engineering and construction projects may be of a short-term nature, O&M services often result in long-term relationships with clients. For example, we have been providing maintenance services at several major process plants for over 30 years. This aspect of maintenance services greatly reduces the selling costs in respect of such services.

Process, Scientific and Systems Consulting

We employ all of the professional and technical expertise necessary to provide a broad range of consulting services, including: performing pricing studies, market analyses, and financial projections necessary in determining the feasibility of a project; performing gasoline reformulation modeling; analyzing and evaluating layout and mechanical designs for complex processing plants; analyzing automation and control systems; analyzing, designing, and executing biocontainment strategies; developing and performing process protocols with respect to Federal Drug Administration-mandated qualification and validation requirements; providing consultation on proposed railway and airport expansion projects; and performing geological and metallurgical studies.

Also included in the category of “Process, Scientific and Systems Consulting” are the professional and program management services required to assist clients (such as the United States federal government and its agencies) in a wide range of defense and aerospace related programs. Such services typically are more technical and scientific in nature than are other project services we provide, and may involve such tasks as supporting the development and testing of conventional weapons systems; weapons modeling and simulations; computer systems development, maintenance, and support; evaluation and testing of mission-critical control systems; and other highly technical programs and tasks.

Complementary Nature of Resources and Business Systems Utilized

There is a high degree of similarity of the workforces among our service categories. For example, engineering and design services (i.e., services provided by persons who are degreed and in certain circumstances licensed, such as engineers, architects, scientists, and economists) exist in all four

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service categories. In addition, there is a high degree of similarity among a significant component of the workforces we employ to perform on O&M and construction projects. In providing O&M and construction services, we employ a large number of skilled craft labor personnel. These may include welders, pipe fitters, electricians, crane operators, and other personnel that work on very large capital projects (in the case of projects classified within the construction services category) or on smaller capital projects (in the case of maintenance projects classified within the O&M services category).

Our operating units use a matrix organizational structure. Our results, therefore, are dependent on groups representing technical disciplines (e.g., electrical engineering, mechanical engineering, cost engineering, etc.) supporting project management personnel (who maintain the relationship between us and our clients, and who are ultimately responsible for delivering projects to our clients safely, on time, and on budget). Additionally, all of our operating regions and divisions use common tools, policies, and procedures to manage and run their respective businesses. These include practices concerning such things as project review meetings, project performance evaluations, and project execution plans.

The use of technology throughout our organization is highly uniform. Whether it is PC-based computer aided design and drafting (“CADD”) applications used by our engineering and design staff; or PC-based modeling programs used by the scientific and consulting staff; or PC-based scheduling, estimating, and cost control applications used by home-office personnel in support of our construction and maintenance activities, all of the service categories described above are equally vulnerable to changes in technology as they occur in the economy at large.

Industry Groups and Markets

We focus our services on clients that operate in the following industry groups and markets: oil and gas exploration, production, and refining; United States federal programs; chemicals and polymers; pharmaceuticals and biotechnology; infrastructure; buildings (both public and private sector); technology and manufacturing; and pulp and paper. We also provide services to clients in other industries and markets, such as food and consumer products, and basic resources (e.g., mining, minerals, and fertilizers), among others. We believe these industry groups and markets have sufficient common needs to permit cross-utilization of our resources and help to mitigate the negative effects of a downturn in a single industry.

The following table sets forth our revenues from each of these industry groups and markets for each of the five fiscal years ended September 30 (in thousands of dollars):

	2005		2004		2003		2002		2001
Oil & Gas and Refining	$	1,957,471	$	1,270,468	$	1,093,047	$	1,088,758	$	451,103
Federal Programs		1,160,664		1,051,016		1,070,740		973,514		732,362
Chemicals and Polymers		737,872		559,733		559,166		556,011		653,573
Pharmaceuticals and Biotechnology		514,836		713,566		652,036		879,747		715,407
Infrastructure		464,400		304,977		288,193		325,029		246,420
Buildings		462,147		354,742		352,998		349,858		457,488
Technology and Manufacturing		118,059		203,579		464,589		187,432		332,995
Pulp and Paper		63,562		42,339		58,076		72,350		182,456
Other		155,990		93,815		76,756		122,962		185,189
	$	5,635,001	$	4,594,235	$	4,615,601	$	4,555,661	$	3,956,993

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Oil & Gas and Refining

We provide our full line of traditional engineering, design, construction, and construction management services to our clients in the upstream (exploration and development) and downstream (production and refining) areas of this market. Typical projects in this area include new design and construction, revamps or expansions of existing plants, upgrades of individual process units within refineries, and maintenance services. We also provide a broad range of consulting services to our clients including process assessments, facility appraisals, feasibility studies, technology evaluations, project finance structuring and support, and multi-client subscription services.

Historically, revenues from our hydrocarbon business related primarily to projects associated with petroleum refining and the processes and technologies required for the conversion of crude oil and gas into petroleum fuels, chemical feedstocks, and lubricants. More recently, our services and the types of projects we perform have expanded to include the upstream and downstream sectors of the oil and gas industry. These projects include heavy oil processing projects (e.g., oil sands extraction projects); projects involving oil recovery through steam injection; and gas treating, gas gathering, and gas storage projects including extraction of commercially valuable elements of the gas stream. A new area of focus is off-shore production, where we are actively pursuing project opportunities in engineering and design of topside facilities. Higher energy prices and the reduction of traditional reserves are driving the development of new reserves and the expansion of existing ones. We are actively supporting our clients in these initiatives in North America, the Middle East, and Asia.

Government regulations continue to influence the need for project services by our clients in the refining industry. We see ongoing project activity in refining due to Tier II gasoline and on-road Ultra Low Sulfur Diesel requirements. We believe new regulations, such as off-road Ultra Low Sulfur Diesel, and new ambient air quality standards for ozone and particulates will drive new investment requirements in the industry over the next several years. We are actively involved in such regulatory-based projects. We believe we are uniquely positioned to benefit from increased capital spending in this area due to our proprietary sulphur removal technology (Super Claus), which has a significant share of the market for installed capacity.

Refineries are also responding to changes in feedstock price and availability as well as the product market. This is leading to investment to facilitate the processing of heavier crude with higher sulphur content and the production of a different product slate, particularly in response to increased demand for diesel. Our offices in North American and Europe are very involved in this market.

We have also used our modular construction capabilities on a number of projects in the refining and petroleum industry. In the U.S. and European refining markets, many projects involve the revamp of existing processing units or the addition of new processes to an existing refinery. As a result of the close proximity of processing units in these refineries, we believe the use of modular construction can decrease congestion at the construction site. Modular construction can also provide cost and project execution benefits in remote locations.

We provide maintenance services to our clients in the refining industry. We have also established a number of formal alliances with various clients in the refining industry. Some of these alliances are both domestic-U.S. and international in scope.

In this industry group we also include power generation and cogeneration power projects. While this is not a major focus for us, we provide design, engineering, procurement, construction and construction management, and maintenance services to our clients in the power generation and supply industry. Typical projects in this area include simple and combined cycle power projects, cogeneration power plants, aeroderivative and industrial gas turbines, and emergency power generation stations. The industry is now focusing on gasification, as high energy prices, the need for hydrogen and power,

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availability of lower priced solid fuels, and the potential to sequester CO² emissions make this technology a new area for project development.

Federal Programs

We categorize our Federal Programs as generally relating to environmental, aerospace and defense, or building programs.

Environmental

We are one of the leading providers of environmental engineering and consulting services in the United States and abroad, including hazardous and nuclear waste management and site cleanup and closure. Many of our projects for the United States federal government span over many years. Our projects within this market relate to many major federal and state environmental statutes, with particular emphasis on the Comprehensive Environmental Response Compensation and Liability Act and the Resource Conservation and Recovery Act (“CERCLA”). We currently provide environmental investigation, restoration, engineering, construction, and site operations and maintenance services to a number of United States federal government agencies, including the Department of Energy (“DOE”) and the Department of Defense (“DOD”).

As part of our environmental restoration work, we provide support in such areas as underground storage tank removal, contaminated soil and water remediation, and long-term groundwater monitoring. We also design, build, install, operate, and maintain various types of soil and groundwater cleanup systems at multiple project locations across the United States and its territories for the United States Army Corps of Engineers and the United States Air Force Center for Environmental Excellence. Typical projects also include the preparation of feasibility studies and performance of remedial investigations, engineering, design, and remediation services on several national programs.

We provide a full range of environmental consulting services including air quality planning and permitting, water quality compliance, environmental conservation studies, pollution prevention assessments, and compliance with the National Environmental Policy Act.

As part of our support to our clients, we provide asset management services in the form of infrastructure operations and maintenance. This is an integral part of our services for the DOE at the Oak Ridge Environmental Management sites and at the Rocky Flats Environmental Technology Site. Asset management also includes building closures, which involve deactivation, decommissioning, and demolition of government facilities. We are also providing these services to the government of the United Kingdom in support of its nuclear decommissioning program.

Aerospace and Defense

We provide support to aerodynamic, propulsion, and space facilities and systems for government clients at more than a dozen test centers across the continental United States. This includes military systems acquisition management and strategic planning; operations and maintenance of test facilities, ranges, space launch facilities, and space chambers; test and evaluation in computer, laboratory, facility, and range environments; test facility computer systems instrumentation and diagnostics; and test facility design and build. We also provide systems engineering and integration of complex weapons and space systems as well as hardware and software design of complex flight and ground systems. We support and maintain enterprise information systems for government and commercial customers worldwide, ranging from the operation of complex computational networks to the development and validation of specific software applications.

We have provided advanced technology engineering services to the DOD for more than 50 years and currently support defense programs in dozens of locations, both within the United Sates and internationally. In addition to operating and maintaining several DOD test centers, our support includes

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services such as aerodynamic testing of next-generation fighter aircraft; propulsion testing for space programs; launch support services for the Titan, Atlas, and Delta rockets and payloads; and acquisition support for weapons systems such as air-to-air missile systems and precision guided smart weapons for high-value targets. We also support the acquisition and development of systems and equipment for Special Operations Forces as well as the development of biological, chemical, and nuclear detection and protection systems. We also support the DOD in a number of information technology programs including network design, integration, and support; command and control technology; development and sustainment of databases and customized applications; and security solutions.

We provide a broad range of engineering, science, and technical support services to seven NASA centers, delivering support to virtually every major space program including the International Space Station, space shuttle recertification, space observatories, aerospace transportation systems, space propulsion systems, advanced materials research, and advanced research and development activities such as protein crystal growth experiments for the development of new drugs and vaccines. We also provide operations and maintenance services for NASA aerospace and propulsion research test facilities.

Buildings

Also included in Federal Programs are revenues from projects relating to building programs we perform for certain agencies of the United States federal government. We provide a wide range of architectural, engineering, construction, and design-build services to agencies such as the Federal Aviation Administration (“FAA”), the General Services Administration (“GSA”), the United States Departments of State, Treasury, Agriculture, and DOD, among others. Typical projects include the renovation and modernization of terminal radar control centers, air traffic control towers, and other facilities for the FAA. We also provide architectural and engineering services for the United States Pentagon renovation program as well as planning and design services for Internal Revenue Service offices and customer service centers nationwide. More recent contract awards require us to provide design and program management services in connection with certain homeland security initiatives for the GSA and the Department of Homeland Security. We are providing design/build services for the DOD on military family housing; quality of life projects; training, maintenance, and readiness facilities; and command and control centers.

Chemicals and Polymers

The chemicals and polymers industries remain an important element to our overall growth. This market, which is on an upswing after an extended flat period, continues to be an essential part of our diversified business. We continue to expand our presence globally to better meet the needs of our clients as they increase their operations internationally with strong focus in the Middle East and Asia.

The types of projects we execute for our clients in these industries include feedstock synthesis, chemical synthesis, and polymerization. This includes high-pressure processes for the production of industrial chemicals and low-pressure multi-product processes for the production of specialty and fine chemicals. We have extensive knowledge of, and experience with, advanced polymerization reactions and state-of-the-art, post-reactor processing techniques.

Another important aspect of our service to clients in the chemicals and polymers business is in the area of field services. We have contracts with major chemical producers worldwide to provide construction, on-site maintenance, and turnaround activities. Many of these contracts are evergreen in nature, with relationships extending over many years due to our focus on safety, value, and client satisfaction. Like the refining industry, we provide maintenance services to our clients in the chemicals industry. We have also established formal alliances with a number of clients in this industry.

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Our clients in this sector focus on safety, reliability, and maintainability to keep operating costs down. To support this initiative, we apply best practices on capital and maintenance work by leveraging synergy and resources within our alliances and partnerships, which, in one case, involves more than 25 chemical facilities for one owner.

As these multi-site relationships increase in magnitude, the range of services we provide broadens. Other services vary from providing on-site engineering services to single-source responsibility for an entire capital improvement program. We provide technical consulting, project finance structuring, facility appraisal, market analysis, and business consulting services as well as fully-integrated engineering, procurement, construction, and construction management services. Our services can guide and assist our chemical clients from a good project idea to a constructed and operating chemical facility.

Many of our clients currently engage in front-end feasibility planning as global industry volumes and prices strengthen. In addition to large “mega-capacity” projects underway in the Middle East and Asia, we are seeing incremental capacity expansions in North America and Europe. A new area of focus due to high feedstock costs is gasification to produce the feeds for chemicals and fertilizers. Our involvement in these early studies positions us to help owners capitalize on return on investment opportunities by streamlining work processes and optimizing existing plant layouts for future expansions.

Pharmaceuticals and Biotechnology

We furnish our full line of services to our clients in the pharmaceuticals and biotechnology industries including master planning; programming; feasibility studies; engineering; preliminary and detailed design; procurement; construction and construction management; commissioning and start-up; validation; and maintenance. Accordingly, we believe we are fully capable of executing the industry’s largest capital programs on a single-responsibility basis.

Typical projects for clients in these industries include laboratories; research and development facilities; pilot plants; bulk active pharmaceutical ingredient production facilities; full-scale biotechnology production facilities; and secondary manufacturing facilities. In addition to regulatory compliance issues, state-of-the-art technology and expertise are critical to our clients in these industries. Such technology and knowledge encompasses containment; barrier technology; locally controlled environments; process and building systems automation; and off-the-site design and fabrication of process and building modules.

As companies in the pharmaceuticals industry continue to experience pressure to decrease product time-to-market, reduce costs, and increase return on investment, the types of services we provide have grown over the years to include modular construction as well as consulting and strategic planning services to help our clients complete capital projects more quickly and efficiently. As an example of this process, we increased our efforts to integrate commissioning and validation services, helping reduce the amount of time required to introduce a new drug into the marketplace. In the biotechnology industry, our multidomestic structure helps clients as new product discovery and development drives capital spending and our ability to act as a capital program partner helps them effectively manage their strategic investment.

We have cost-effective professional resources located in geographic areas of major pharmaceutical and biotechnology concentration, and we provide single-point engineering, procurement, construction management, and validation (“EPCMV”) project delivery services. We continue to enhance our 3-D design capabilities, project controls, and automation capabilities as well as other technological aspects of our EPCMV services. This allows us to serve our clients better and to ensure that projects transition from their conceptual design phase through engineering, construction, start-up, commissioning, and validation phases as economically and efficiently as possible.

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We have also established formal alliances and preferred provider agreements with numerous clients in the pharmaceuticals and biotechnology industry.

Infrastructure

We provide a broad range of planning, design, consulting, engineering, and construction management services to our clients engaged in civil construction projects throughout the United States, the United Kingdom, Ireland, Asia, and other selected countries. We significantly enhanced our infrastructure capabilities and breadth with our acquisition of the Babtie Group.

Transportation infrastructure development and rehabilitation is a core competency of our infrastructure business. By integrating a broad range of professional disciplines, we provide comprehensive planning, engineering, and construction and program management services for transportation facilities and systems. Interdisciplinary teams work independently or as an extension of agency staff on highway, bridge, transit, tunnel, airport, railroad, intermodal facility, maritime, and lock and dam projects. Representative clients include state departments of transportation, other regional and local agencies, the United States Army Corps of Engineers, and private industry freight transport firms.

Our services in the area of water resources have helped public and private sector clients develop and rehabilitate critical water resource systems. Integrating water, wastewater, air quality, and hazardous waste remediation experience provides these clients with the comprehensive expertise needed to deliver complex projects. We provide planning, design, design-build, and program and construction management services to a diverse market, including regional wastewater treatment agencies, manufacturers and power generators, local water suppliers, and military agencies. We continue to develop water/wastewater conveyance systems and water resources management projects. We have developed micro-tunneling (“trenchless technology”) as a primary service and have successfully applied this specialized process to such projects as water and utility distribution systems and pipelines.

We believe strong opportunities for planning, design, and construction inspection will remain prominent among the types of services we perform. We also believe that opportunities for construction management and design-build services will continue to grow as these project delivery methods gain acceptance in the public sector.

Current projects and programs we are performing include program management services for the public utilities commissions of several major cities in the United States; construction management and asset management services for water treatment plants located in the United States and United Kingdom; design, engineering, and construction management services for various bridge projects in the United States and overseas; and multi-year general design and consulting services for a railway entity in the United Kingdom.

Buildings

Buildings generally refers to our full range of design and construction activities relating to institutional, government, and corporate buildings as well as other specialized facilities, including projects at many of the world’s leading medical and research centers and universities. We are one of the leading providers of architectural, engineering, and construction management services for buildings projects throughout the United States, the United Kingdom, and in many parts of Europe.

We focus our efforts and resources in markets where strong demographic trends and capital spending initiatives drive demand. Typical projects include large, multi-year United States federal and European governments building programs; major primary and secondary education capital

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improvement programs; federal, state, and local government courts and correctional facilities; hospitals and health and research facilities (including projects at many of the world’s leading medical and research centers); and aviation facilities at many of the United States’ largest airports. We also provide design and construction-related services for office and corporate headquarter buildings, municipal and civic facilities, commercial centers, leisure parks, and recreation complexes. We serve a diversified client base encompassing both public and private sector clients.

We provide and/or manage a full range of planning, architectural, engineering, construction, construction and program management services for a variety of unique and technically complex buildings and campuses. We provide our services on projects that emphasize new construction as well as those involving expansion, renovation, and refurbishment of existing facilities.

Of particular significance is our growing success in applying our diversified, in-house technical skill base to both public and private sector clients requiring complete program management. Such contracts typically involve providing technical, professional, and construction management services over multiple years to clients with whom we have long-standing relationships and a tenure of successful service. We also provide integrated facility management services for which we (often through joint ventures with third parties) assume full responsibility for the ongoing operations and maintenance of entire commercial or industrial complexes on behalf of the client.

Technology and Manufacturing

We provide a broad range of project services for a variety of technology, manufacturing, and test facilities. This category includes projects involving highly complex test facilities for clients in the aerospace and automotive industries. Typical projects range from conceptual design and feasibility studies to complete, design-build programs of aero-acoustic wind tunnels; engine test facilities; acoustic enclosures; transmission test stands; powertrain, environmental, emissions, altitude, and electromagnetic compatibility test facilities; in-line and end-of-line component test stands; and computer-based measurement and control systems. We are a leader in providing support to automotive manufacturers and component suppliers for the supply of testing services and the management of test assets, with test facility operations and maintenance contracts and usage agreements in place with Ford Motor Company, Visteon, General Motors, and the United States Air Force at Wright-Patterson Air Force Base.

This category also includes revenues from projects for clients operating in the semiconductor industry. We provide design, engineering, procurement, construction, and construction management services for a variety of clients in this industry. Typical projects range from on-site plant engineering and tool hook-ups to multi-million dollar state-of-the-art wafer fabrication and crystal growing facilities used to produce microprocessors for computers and other consumer electronic devices. Projects in the semiconductor industry can be more complex than many other commercial facilities, requiring a greater emphasis on cleanroom and similar high-end technologies.

Pulp and Paper

We provide a broad range of consulting, engineering, procurement, construction, construction management, and maintenance services to our clients in the pulp and paper industry, both in the United States and internationally. With a strategy of expanding our geographic presence into areas where our clients intend to build facilities, our pulp and paper capabilities now extend through our offices in the United Kingdom, France, Spain, Italy, and Mexico. Typical projects for our clients in this industry range from small mill projects to complex, multi-million dollar paper machine rebuilds, mill expansions, and the construction of new facilities.

Pulp and paper projects encompass many areas of a mill, including pulping and bleaching; papermaking, chemical recovery; material handling; effluent treatment; and power and steam

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generation. In the area of papermaking, our expertise includes tissue and towel; coated and uncoated fine papers; newsprint; and linerboard. Our expertise and skill set also include the converting and packaging of paper products for distribution and consumer use. We have been instrumental in the design and installation of state-of-the-art facilities for recycled fiber, de-inking, and pulp bleaching.

Chemical recovery and power generation are also integral components of the papermaking process. We have broad experience in these areas and apply our expertise in the engineering and construction of such facilities for many of our clients.

A significant portion of our work relates to assisting our clients in their compliance with environmental regulations and standards that affect the pulp and paper industry. We monitor all of the key environmental regulations affecting our clients and offer services including compliance studies; permitting support; and design of pollution control systems. We also provide complete permitting services in support of all of our projects, including associated air modeling. In addition, we provide compliance services regarding air pollutant standards and hazardous air pollutant emission limits from industrial boilers for many of our clients.

The pulp and paper industry has been consolidating for many years, leaving a refined customer base with increased assets and highly focused market strategies. Several of the traditional pulp and paper customers are emerging as major consumer product companies. These customers are creating new opportunities for us in non-traditional areas such as wall board plants and facilities that manufacture diapers and feminine care products.

As in certain other industry groups and markets, we have established formal alliances with various clients in the pulp and paper industry. Such alliances allow us to expand the types of services we provide our clients and enable us to improve the overall quality, consistency, and value of our services under the highest of expectations for confidentiality.

Other

Included in this category are projects not classified into any of the other industry and market categories. This includes projects for clients operating in the food and consumer products industries as well as basic resources (such as mining, minerals and fertilizers).

Backlog

For information regarding our backlog, refer to Item 7.—Management’s Discussion and Analysis of Financial Condition and Results of Operations, below.

Significant Customers

For the fiscal years ended September 30, 2005, 2004, 2003, 2002, and 2001, revenues earned directly or indirectly from agencies of the United States federal government accounted for 21.2%, 22.3%, 22.6%, 21.5%, and 19.0% respectively, of total revenues.

Financial Information About Geographic Areas

For financial information regarding geographic areas in which we operate, please refer to Note 15 to the Consolidated Financial Statements (listed in Item 15, below).

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Contracts

While there is considerable variation in the pricing provisions of the contracts we undertake, our contracts generally fall into three broad categories: cost-reimbursable, fixed-price, and guaranteed maximum price. The following table sets forth the percentages of total revenues represented by these types of contracts during each of the five preceding fiscal years ended September 30:

	2005		2004		2003		2002		2001
Cost-reimbursable	85	%	83	%	82	%	85	%	81	%
Fixed-price	13		15		17		13		16
Guaranteed maximum price	2		2		1		2		3

In accordance with industry practice, most of our contracts are subject to termination at the discretion of the client. Contracts typically provide for reimbursement of costs incurred and payment of fees earned through the date of termination.

When we are directly responsible for engineering, design, procurement, and construction of a project or the maintenance of a client’s plant or facility, we reflect the costs of materials, equipment, and subcontracts in both revenues and costs. On other projects, where the client elects to pay for such items directly, and we have no associated responsibility for such items, these amounts are not reflected in either revenues or costs. The following table presents the approximate amount of such pass-through costs included in revenues for each of the five preceding fiscal years ended September 30 (in millions):

2005	2004	2003	2002	2001
$1,535.5	$1,165.7	$1,389.3	$1,541.7	$1,272.9

Cost-Reimbursable Contracts

Cost-reimbursable contracts generally provide for reimbursement of costs incurred plus an amount of profit. The profit element may be in the form of a simple mark-up applied to the labor costs incurred or it may be in the form of a fee, or a combination of a mark-up and a fee. The fee element can also take several forms. The fee may be a fixed amount as specified in the contract; it may be an amount based on a percentage of the costs incurred; or it may be an incentive fee based on targets, milestones, or performance factors defined in the contract. In general, we prefer cost-reimbursable contracts because we believe the primary reason for awarding a contract to us should be our technical expertise and professional qualifications rather than price.

Fixed-Price Contracts

Fixed-price contracts include both “negotiated fixed-price” contracts and “lump sum bid” contracts. Under a negotiated fixed-price contract, we are selected as the contractor first and then we negotiate a price with our client. Negotiated fixed-price contracts frequently exist in single-responsibility arrangements where we perform some portion of the work before negotiating the total price of the project. Under lump sum bid contracts, we are required to bid against other contractors based on specifications the client furnishes. This type of pricing presents certain inherent risks that are reduced by the negotiation process, including the possibility of ambiguities in the specifications received, problems with new technologies, and economic and other changes that may occur over the contract period. Thus, although both types of contracts involve a firm price for the client, the lump sum bid contract provides the greater degree of risk to us. However, because of economies that may be realized during the contract term, both negotiated fixed-price and lump sum bid contracts may offer greater profit potential than the other types of contracts. Over the past five years, most of our fixed-price work has been either negotiated fixed-price contracts or lump sum bid contracts for project services (rather than turn key construction).

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Guaranteed Maximum Price Contracts

Guaranteed maximum price contracts are performed in the same manner as cost-reimbursable contracts; however, the total actual cost plus the fee cannot exceed the guaranteed price negotiated with the client. If the total actual cost of the contract exceeds the guaranteed maximum price, then we will bear at least some, if not all, of the excess. In those cases where the total actual cost and fee are less than the guaranteed price, we will often share the savings on a predetermined basis with the client. These contracts are not our preferred form of contract because they often contribute to an adversarial relationship with clients, which is contrary to our relationship-based business model.

Competition

We engage in a highly competitive business. Some of our competitors are larger than us or are subsidiaries of larger companies, and therefore may possess greater resources than we do. Furthermore, because the technical professional aspects of our business do not usually require large amounts of capital, there is relative ease of market entry for a new entrant possessing acceptable professional qualifications. Accordingly, we compete with regional, national, and international firms. Within any specific geographic area, certain competitors, including regional competitors, may possess greater resources than we do.

The extent of our competition varies according to the industries and markets we serve as well as the geographic areas in which we operate. Our largest competitors for engineering, construction, and maintenance services for process plants include the Bechtel Group, Inc., Fluor Corporation, Foster Wheeler Corp., Washington Group International, Kellogg Brown & Root, Aker Kvaerner, Technip, and AMEC plc. In the area of buildings, our competitors include several of the competitors previously mentioned as well as HDR, Inc., Hellmuth, Obata & Kassabaum, AeCOM Technology, Turner Construction, and Day & Zimmermann. In the area of infrastructure, our competitors include several of the competitors previously mentioned as well as Parsons Brinckerhoff, URS Corporation, HNTB, and W.S. Atkins. In the area of U.S. federal programs, our principal competitors include several of the companies listed above as well as the Shaw Group, SAIC, CH2M Hill, Weston Solutions, Lockheed Martin Corporation, Tetra Tech, and Computer Sciences Corporation. And in the area of pulp and paper, our principal competitors include BE&K, and AMEC plc.

Employees

At September 30, 2005, we had approximately 27,200 full-time, staff employees (including contract staff). Additionally, as of September 30, 2005, there were approximately 11,400 persons employed in the field on a project basis. The number of field employees varies in relation to the number and size of the maintenance and construction projects in progress at any particular time.

Available Information

We regularly file various reports with the Securities and Exchange Commission (“SEC”). These reports include annual reports on Form 10-K and quarterly reports on Form 10-Q. We also file from time to time current reports on Form 8-K. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room located at 450 Fifth Street, N.W., Washington, D.C., 20549. In order obtain information about the operation of the Public Reference Room, a person may call the SEC at 1-800-732-0330. The SEC also maintains a site on the Internet that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC The SEC’s website is http://www.sec.gov. You may also read and download the various reports we file with the SEC free of charge from our website, http://www.jacobs.com.

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Item 2.    PROPERTIES

We own and lease offices in the locations set forth below, which are used by our technical professional and administrative staff. Our Charleston, South Carolina facilities are also the principal manufacturing and fabrication site for our modular construction activities. The total amount of space used by us for all of our operations is approximately 4.2 million square feet. The following is a representative list of our principal locations:

Country	State / Province	Cities
U.S.A.	California	Pasadena, Bakersfield, Cypress, Sacramento, San Francisco, San Mateo, and Walnut Creek
	Alabama	Huntsville
	Alaska	Anchorage
	Arizona	Phoenix
	Colorado	Denver
	Florida	Ft. Walton Beach, Lakeland, Miami, Orlando, and Tampa
	Georgia	Atlanta
	Illinois	Chicago
	Indiana	Indianapolis
	Louisiana	Baton Rouge
	Maryland	Baltimore
	Massachusetts	Boston
	Michigan	Battle Creek, Dearborn, and Detroit
	Missouri	St. Louis
	New Jersey	Mt. Laurel
	New York	New York
	North Carolina	Raleigh
	Ohio	Cincinnati and Beavercreek
	Oregon	Portland
	Pennsylvania	Conshohocken and Philadelphia
	South Carolina	Greenville and Charleston
	Texas	Houston and Dallas
	Tennessee	Oak Ridge and Tullahoma
	Virginia	Arlington and Hampton
	Washington	Seattle
	Wisconsin	Green Bay
	District of Columbia	Washington
Canada	Alberta	Calgary, Edmonton, and Ft. McMurray
Mexico	—	Mexico City
United Kingdom	—	Aylesford, Birmingham, Derby, Edinburgh, Glasgow, Leeds, London, Maidstone, Manchester, Reading, Southampton, and York
Republic of Ireland	—	Cork and Dublin
France	—	Bordeaux, Lyon, and Paris
Italy	—	Milan
Spain	—	Madrid
The Netherlands	—	Leiden, Meerssen, and Rotterdam
Belgium	—	Antwerp, Ghent, Ittre, and Westerlo

[continued]

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Item 2.    PROPERTIES—Continued

Country	State / Province	Cities
Germany	—	Cologne, Merseburg (Schkopau), Stade, and Sulingen
Sweden	—	Stockholm (Stenungsund)
Finland	—	Porvoo
Poland	—	Warsaw
Greece	—	Athens
India	—	Mumbai and New Delhi
Singapore	—	Singapore
Australia	—	Canberra
Saudi Arabia	—	Al-Khobar
United Arab Emirates	—	Abu Dhabi
Puerto Rico	—	Guaynabo
China	—	Hong Kong

In addition to these properties, we lease smaller, project offices located throughout the United States, the United Kingdom, and in certain other countries. We maintain sales offices at many of our principal locations. The majority of our offices and locations are leased. We also rent a portion of our construction equipment on a short-term basis.

Item 3.    LEGAL PROCEEDINGS

In the normal course of business, we are subject to certain contractual guarantees, litigation and investigations. Generally, such guarantees relate to project schedules and plant performance. Most of the litigation involves us as a defendant in workers’ compensation, personal injury, environmental, environmental exposure, professional liability, and other similar lawsuits. In addition, as a contractor providing services to agencies of the United States government, we are subject to many levels of audits, investigations and claims by, or on behalf of, the government with respect to contract performance, pricing, costs, cost allocations, and procurement practices.

Management believes, after consultation with counsel, that such guarantees, litigation, United States government contract-related audits, investigations and claims should not have any material adverse effect on our consolidated financial statements.

In addition to the matters described above, we are involved in a dispute with a client relating to a large waste incineration project in Europe. The contract was entered into by one of our subsidiaries several years ago, prior to the acquisition of that subsidiary. The dispute involves proper waste feed, content of residues, final acceptance of the plant, and costs of operation and maintenance of the plant. We have initiated litigation against the client and are seeking in excess of €40.0 million (approximately $48.1 million) in damages. The client has filed a counterclaim against us, which we believe is without merit. We believe our claims are valid and enforceable and that we will be ultimately successful in obtaining a favorable judgment.

Item 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

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PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is listed on the New York Stock Exchange (“NYSE”), and trades under the symbol “JEC”. According to the records of our transfer agent, there were 1,123 stockholders of record as of December 12, 2005. The following table sets forth the low and high sales price of our common stock, during each of the fiscal quarters presented, based on the NYSE consolidated transaction report:

	Low Sales Price		High Sales Price
Fiscal 2005:
First quarter	$	37.48	$	48.18
Second quarter		44.65		56.80
Third quarter		47.51		57.25
Fourth quarter		55.00		68.10
Fiscal 2004:
First quarter	$	41.87	$	49.94
Second quarter		41.76		48.22
Third quarter		38.50		47.16
Fourth quarter		36.86		40.35

Our policy is to use cash flow from operations to fund future growth, pay down debt, and repurchase common stock under a stock buy-back program approved by our Board of Directors. Accordingly, we have not paid a cash dividend since fiscal 1984. Although our Board of Directors periodically reviews the merits of paying cash dividends, we currently have no plans to pay cash dividends in the foreseeable future.

The following table presents certain information about our equity compensation plans as of September 30, 2005:

	Column A	Column B		Column C
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants, and rights	Weighted-average exercise price of outstanding options, warrants, and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in Column A)
Equity compensation plans approved by shareholders—Note (a)	5,094,402	$	33.83	3,774,602
Equity compensation plans not approved by shareholders	—		—	—
Total	5,094,402	$	33.83	3,774,602

Note (a): The number in Column A excludes purchase rights accruing under our two, broad-based, shareholder-approved employee stock purchase plans: The Jacobs Engineering Group Inc. 1989 Employee Stock Purchase Plan (the “1989 ESPP”), and the Global Employee Stock Purchase Plan (the “GESPP”). These plans give employees the right to purchase shares at an amount and price that are not determinable until the end of the specified purchase periods, which generally occurs at semi-annual intervals each year. Our shareholders have authorized a total of 11.4 million shares of common stock to be issued through the 1989 ESPP and the GESPP, which our Board of Directors voluntarily reduced by 0.6 million shares on July 26, 2001. From the inception of the 1989 ESPP and the GESPP through September 30, 2005, a total of 9.5 million shares have been issued, leaving 1.3 million shares of common stock available for future issuance at that date.

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Item 6. SELECTED FINANCIAL DATA

The following table presents selected financial data for the last five fiscal years. This selected financial data should be read in conjunction with the Consolidated Financial Statements and related notes included in Item 8 of this Form 10-K. Amounts are expressed in thousands, except for per share information:

	2005			2004			2003			2002			2001
Results of Operations:
Revenues	$	5,635,001		$	4,594,235		$	4,615,601		$	4,555,661		$	3,956,993
Net earnings		151,020			128,975			128,010			109,690			87,760
Financial Position:
Current ratio		1.70 to 1			1.58 to 1			1.59 to 1			1.32 to 1			1.35 to 1
Working capital	$	552,336		$	397,599		$	358,683		$	234,486		$	245,500
Current assets		1,337,431			1,083,513			970,097			974,903			946,159
Total assets		2,353,721			2,071,044			1,670,510			1,673,984			1,557,040
Long-term debt		89,632			78,758			17,806			85,732			164,308
Stockholders’ equity		1,140,642			1,005,027			842,083			689,613			591,801
Return on average equity		14.08	%		13.97	%		16.71	%		17.12	%		16.14	%
Backlog (a):
Technical professional services	$	4,329,000		$	3,989,000		$	3,383,200		$	3,045,600		$	2,490,100
Field services		4,314,000			3,463,500			3,657,800			3,628,600			3,422,400
Total	$	8,643,000		$	7,452,500		$	7,041,000		$	6,674,200		$	5,912,500
Per Share Information (b):
Basic earnings per share	$	2.65		$	2.30		$	2.32		$	2.03		$	1.65
Diluted earnings per share		2.57			2.25			2.27			1.98			1.61
Stockholders’ equity		19.44			17.50			14.93			12.45			10.86
Average Number of Shares of Common Stock and Common Stock Equivalents Outstanding (Diluted)		58,690			57,433			56,392			55,396			54,496

Note (a): In fiscal 2002, we began classifying as “field services” backlog certain engineering and scientific and systems consulting activities relating to operations and maintenance contracts that had been classified previously as “technical professional services” backlog. Backlog for fiscal year 2001 has been reclassified to conform to the fiscal 2002 presentation.

Note (b): Per share information for fiscal 2001 has been restated to reflect a two-for-one stock split effected in the form of a 100% stock dividend that was distributed to stockholders on April 1, 2002.

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The purpose of this Management’s Discussion and Analysis (“MD&A”) is to provide an overview of the Company’s financial condition and results of operations as well as an analysis of the factors that caused certain key elements of our financial statements to change from one year to the next.

In this discussion, we may make statements that are not based on historical fact. All such statements are expressly “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although such statements are based on management’s current estimates and expectations, and currently available competitive, financial, and economic data, forward-looking statements are inherently uncertain. We therefore caution the reader that there are a variety of factors could cause business conditions and results to differ materially from what is contained in our forward-looking statements. A list of some of the factors most likely to occur that could cause actual results to differ from our forward-looking statements is presented at the end of this MD&A.

In this MD&A, we use certain terms and abbreviations that are defined as follows:

APB	Accounting Principles Board
Babtie Group	The Babtie Group Limited is a leading provider of technical and professional services to clients operating in the infrastructure, facilities, environmental, defense, and outsourcing markets, among other. The Babtie Group employs approximately 3,500 people in offices located throughout primarily the United Kingdom and Asia, and was acquired during the fourth quarter of fiscal 2004.
Backlog	Backlog represents the total dollar amount of revenues we expect to record in the future as a result of performing work under contracts that have been awarded to us. Our policy with respect to O&M contracts, however, is to include in backlog the amount of revenues we expect to receive for one succeeding year, regardless of the remaining life of the contract. For federal programs (other than federal O&M contracts), our policy is to include in backlog the full contract award, whether funded or unfunded, and exclude option periods.
Operating profit	From the Consolidated Statements of Earnings; operating profit means revenues, less direct costs of contracts and SG&A expenses.
SFAS	Statement of Financial Accounting Standards; an accounting standard adopted by the Financial Accounting Standards Board (“FASB”).
SG&A expenses	From the Consolidated Statements of Earnings; SG&A expenses means selling, general and administrative expenses.

Overview

Net earnings in fiscal 2005 increased by 17.1% as compared to last year, and EPS (diluted) grew by 14.2%. We saw increased revenues from clients operating in many of the industry groups and markets we serve, but in particular, oil & gas and refining, and infrastructure. Contributing to the increase in revenues were the effects of including the results of operations of the Babtie Group for all

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of fiscal 2005, and a 31.7% increase in pass-through costs. When we are responsible for subcontract labor or third-party materials and equipment, we reflect the costs of such items in both revenues and costs. Since pass-through costs (which are incurred primarily on projects requiring field services) typically do not have significant margins, it is not unusual for us to experience an increase or decrease in revenues without experiencing a corresponding increase or decrease in our gross margins and operating profit.

Our cash balances more than doubled during fiscal 2005. Cash and cash equivalents increased from $100.1 million at September 30, 2004 to $239.8 million at September 30, 2005. Our “net cash” (defined as cash and cash equivalents less bank debt) increased from $20.1 million at September 30, 2004 to $143.9 million at September 30, 2005. Additions to property and equipment used $43.9 million of cash and cash equivalents during fiscal 2005 as compared to $37.1 million last year. Our cash balances, combined with a borrowing capacity of $290.0 million under our long-term, unsecured revolving credit facility, provide sufficient capital resources for us to fund our on-going operations.

Critical Accounting Policies

In order to understand better the changes that may occur to key elements of our financial condition and operating results, a reader of this MD&A should endeavor to understand 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 accounting principles generally accepted in the United States. The preparation of our consolidated financial statements and the financial statements of any business entity performing long-term engineering and construction-type contracts requires management to make estimates and judgments that affect both the entity’s results of operations as well as the carrying values of its assets and liabilities. Although our significant accounting polices are described in Note 2 of the Notes to Consolidated Financial Statements, the following discussion is intended to describe those accounting policies most critical to the preparation of our consolidated financial statements.

Revenue Accounting for Contracts and Use of Joint Ventures—In accounting for long-term engineering and construction-type contracts, we follow the provisions of the AICPA’s Statement of Position 81-1—Accounting for Performance of Construction-Type and Certain Production-Type Contracts. In general, we recognize revenues at the time we provide services. Depending on the commercial terms of the contract, we recognize revenues either when costs are incurred, or using the percentage-of-completion method of accounting by relating contract costs incurred to date to the total estimated costs at completion. This method of revenue recognition requires us to prepare estimates of costs to complete contracts in progress. In making such estimates, judgments are required to evaluate contingencies such as potential variances in schedule, the cost of materials and labor, and productivity; and the impact of change orders, liability claims, contract disputes, and achievement of contractual performance standards. Many of our engineering and construction contracts provide for reimbursement of costs plus a fixed or percentage fee. In some of the markets we serve there is an increasing trend towards cost-reimbursable contracts with incentive-fee arrangements. In certain instances, we base our incentive fees on achievement of target completion dates, target costs, and/or other performance criteria. Failure to meet these targets or increases in contract costs can result in unrealized incentive fees or non-recoverable costs, which could exceed revenues recognized from the project. One such contract is with the U.S. Department of Energy for the Fernald Closure Project. This contract provides for incentive fees based on schedule and cost. In addition, the terms of the contract stipulate that the incentive fees may not be fully billed to the DOE until the completion of the project, currently estimated to occur in 2007. At September 30, 2005 we had recognized $38.4 million of deferred fees relating to this contract-completion.

We provide for contract losses in their entirety in the period they become known, without regard to the percentage of completion.

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The nature of our business results in clients, subcontractors or vendors occasionally presenting claims against us for recovery of costs they incurred in excess of what they expected to incur, or for which they believe they are not contractually responsible. Similarly, and in the normal course of business, we may present claims to our clients for costs we have incurred for which we believe we are not contractually responsible. In those situations where a claim against us may result in additional costs to the contract, we would include in the total estimated costs of the contract (and therefore, the estimated amount of margin to be earned under the contract) an estimate, based on all relevant facts and circumstances available, of the additional costs to be incurred. In those situations where we have incurred additional costs for which we believe the client is contractually responsible, we may present a claim to the client for such costs. In such situations, we include in revenues the amount of costs incurred, without profit, to the extent it is probable that the claims will result in additional contract revenue, and the amount of such additional revenue can be reliably estimated. Costs associated with unapproved change orders are included in revenues using substantially the same criteria used for claims.

Certain cost-reimbursable contracts with government customers as well as certain commercial clients provide that contract costs are subject to audit and adjustment. In this situation, revenues are recorded at the time services are performed based upon the amounts we expect to realize upon completion of the contracts. In those situations where an audit indicates that we may have billed a client for costs not allowable under the terms of the contract, we estimate the amount of such nonbillable costs and adjust our revenues accordingly.

As is common in the industry, we execute certain contracts jointly with third parties through various forms of joint ventures. For certain of these joint ventures (i.e., where we have an undivided interest in the assets and liabilities of the venture), we recognize our proportionate share of joint venture revenues, costs and operating profit in our Consolidated Statements of Earnings. For other investments in engineering and construction joint ventures, we use the equity method of accounting.

Accounting for Stock Issued to Employees—We account for stock-based employee compensation using the intrinsic value method, in accordance with APB Opinion No. 25—Accounting for Stock Issued to Employees. Accordingly, on the date a stock option is granted to an employee, we measure compensation cost based on the excess, if any, of the market price of the Company’s common stock over the exercise price of the awarded option.

In accordance with current accounting standards, we compute a pro forma expense amount for stock options issued, and we disclose this pro forma expense amount in the notes to our consolidated financial statements. We use the Black-Scholes option pricing model to compute the pro forma expense amount. The Black-Scholes model, however, was developed for use in estimating the value of publicly-traded options that have no vesting restrictions and which are fully transferable. In addition, the Black-Scholes model requires the use of assumptions in order to compute the hypothetical, fair value of an option. Changes in these assumptions can cause drastically different values being assigned to a stock option. Accordingly, we caution the readers of our consolidated financial statements that the results of applying the Black-Scholes model are not necessarily a reliable measure of the true fair value of stock options granted to employees.

In December 2004, the FASB adopted SFAS No. 123R—Accounting for Share-Based Payment. SFAS 123R supersedes APB 25 and requires companies to record an expense in their financial statements for stock-based awards using valuation methods like Black-Scholes. SFAS 123R will be effective for the Company beginning with the first quarter of fiscal 2006. Although we presently intend to adopt SFAS 123R retrospectively, there are several reasons why the expense we expect to record in the future relating to share-based compensation may differ from the amounts we’ve disclosed in our prior pro forma disclosures. First, we have modified certain provisions of our broad-based employee

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stock purchase plans to substantially eliminate the amount of expense that would otherwise be recorded under SFAS 123R. Second, the amount of stock options we will grant in the future is likely to be different from the level of awards that were made in the past. And third, the value assigned to the stock options we award in the future will be dependent on the assumptions used to value them. To the extent these assumptions change, the amount of expense we’ll recognize in the future will most likely vary from amounts recognized in the past.

Accounting for Pension Plans—In accounting for pension plans, we follow the provisions of SFAS No. 87—Employers’ Accounting for Pensions. SFAS 87 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 involve discount rates, investment returns, and projected salary increases, among others. We rely on qualified actuaries to assist us in valuing the financial position of the plans, and to provide advice regarding the actuarial assumptions used. The expected rates of return on plan assets for fiscal 2005 ranged from 6.0% to 9.0%; unchanged from last year. We believe this range of rates reflects the long-term returns expected on the plans’ assets, considering 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 were lowered from a range of 5.3% to 6.3% in fiscal 2004 to a range of 4.0% to 5.5% in fiscal 2005. Changes in the actuarial assumptions may have a material affect on the plans’ assets and liabilities, and the associated pension expense. Management, together with our actuaries, monitors trends in the marketplace within which our pension plans operate in order to assure the fairness of the actuarial assumptions used.

In connection with the fiscal 2001 acquisition of certain engineering and contracting businesses from Stork N.V., we are negotiating the value of certain plan assets and prior service obligations that may be transferred from a multiemployer pension plan into a new, single-employer pension plan we formed during fiscal 2004 for the benefit of our employees in the Netherlands. If such a transfer were to occur presently, we believe the value of the assets we would receive would be less than the value of the prior service pension obligations we would assume. Included in “Other Deferred Liabilities” in the accompanying Consolidated Balance Sheet at September 30, 2005 is approximately $40.4 million for the prior service obligations relating to the multiemployer pension plan in the Netherlands.

Accounting for Income Taxes—We account for income taxes in accordance with SFAS No. 109—Accounting for Income Taxes. Judgment is required in determining our worldwide provision for income taxes. In the normal course of our business, we may engage in numerous transactions every day for which the ultimate tax outcome (including the period in which the transaction will ultimately be included in income or deducted as an expense) is uncertain. Additionally, we file income, franchise, gross receipts and similar tax returns in many jurisdictions. Our tax returns are subject to audit and investigation by the Internal Revenue Service, most states in the United States, and by various government agencies representing many jurisdictions outside the United States. Our effective tax rate increased from 35% during each of fiscal 2003 and fiscal 2004 to 36% during fiscal 2005. We routinely monitor the appropriateness of our worldwide tax rate, and we adjust our income tax expense in the period it is probable that actual results will differ from our estimates.

Insurance Matters, Litigation, Claims, and Contingencies—In the normal course of business, we are subject to certain contractual guarantees and litigation. Generally, such guarantees relate to project schedules and plant performance. Most of the litigation in which we are concerned involves the Company as a defendant in workers’ compensation, personal injury, environmental, environmental exposure, professional liability, and other similar lawsuits. We maintain insurance coverage for various aspects of our business and operations. However, we have elected to retain a portion of losses that may occur through the use of various deductibles, limits, and retentions under our insurance programs.

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This situation may subject us to some future liability for which we are only partially insured, or completely uninsured. In addition, as a contractor providing services to various agencies of the United States federal government, we are subject to many levels of audits, investigations, and claims by, or on behalf of, the U.S. federal government with respect to contract performance, pricing, costs, cost allocations, and procurement practices.

In accordance with SFAS No. 5—Accounting for Contingencies, we record in our Consolidated Balance Sheets amounts representing our estimated liability relating to such claims, guarantees, litigation, and audits and investigations. We rely on qualified actuaries to assist us in determining the level of reserves to establish for insurance-related claims that are known and have been asserted against us, and for insurance-related claims that are believed to have been incurred based on actuarial analysis, but have not yet been reported to our claims administrators as of the respective balance sheet dates. We include any adjustments to such insurance reserves in our consolidated results of operations.

Testing Goodwill for Impairment—In accordance with SFAS No. 142—Goodwill and Other Intangible Assets, the amount of goodwill carried in our Consolidated Balance Sheets is tested annually for possible impairment. In conducting the impairment test, we may apply, in accordance with the provisions of SFAS 142, various valuation techniques to estimate the fair value of our reporting units. The values resulting from the application of these valuation techniques are not necessarily representative of the values we might obtain in a sale of our reporting units to a willing third party. Since the adoption of SFAS 142 in fiscal 2002, we have not recorded any impairment loss associated with our goodwill.

Foreign Currencies—In general, our principal exposure to fluctuating exchange rates relates to the effects of translating the financial statements of our subsidiaries operating outside the United States, which are denominated in currencies other than the U.S. dollar, into the U.S. dollar. We follow the provisions of SFAS No. 52—Foreign Currency Translation in preparing our consolidated financial statements.

We believe our exposure to the effects that fluctuating foreign currencies may have on our consolidated results of operations is limited because our various operations invoice clients and satisfy their financial obligations primarily in their respective local functional currencies. In situations where our operations incur contract costs in currencies other than their functional currencies, we strive to have a portion of the related contract revenues denominated in the same currencies as the costs.

Results of Operations

General

Our business focuses exclusively on providing technical, professional, and construction services to a large number of industrial, commercial, and governmental clients around the world. The services we provide generally fall into four broad categories:

• project services (which includes engineering, design, architectural, and similar services);

• construction services (which includes revenues earned from traditional field construction activities as well as modular construction activities);

• operations and maintenance (“O&M”) services (which includes revenues from contracts requiring us to operate and maintain large, complex facilities on behalf of clients as well as contracts involving process plant maintenance services and activities); and

• process, scientific, and systems consulting services (which includes revenues earned from providing a wide variety of scientific and consulting services to clients).

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The scope of services we can provide our clients, therefore, ranges from consulting and conceptual design services (which are often required by clients in the very early stages of a project) to complete, single-responsibility, design-build-operate contracts.

The following table sets forth our revenues by type of service for each year ended September 30 (in thousands):

	2005		2004		2003
Project Services	$	2,469,879	$	2,060,288	$	1,894,777
Construction		1,884,066		1,581,023		1,751,875
Operations and Maintenance		895,356		704,206		743,094
Process, Scientific and Systems Consulting		385,700		248,718		225,855
	$	5,635,001	$	4,594,235	$	4,615,601

Certain amounts for fiscal 2003 have been reclassified to conform to the fiscal 2004 and fiscal 2005 presentation.

We focus our services on clients operating in certain industry groups and markets. We believe these industry groups and markets have sufficient common needs to permit cross-utilization of our resources. The following table sets forth our revenues by these industry groups and markets for each year ended September 30 (in thousands):

	2005		2004		2003
Oil & Gas and Refining	$	1,957,471	$	1,270,468	$	1,093,047
Federal Programs		1,160,664		1,051,016		1,070,740
Chemicals and Polymers		737,872		559,733		559,166
Pharmaceuticals and Biotechnology		514,836		713,566		652,036
Infrastructure		464,400		304,977		288,193
Buildings		462,147		354,742		352,998
Technology and Manufacturing		118,059		203,579		464,589
Pulp and Paper		63,562		42,339		58,076
Other		155,990		93,815		76,756
	$	5,635,001	$	4,594,235	$	4,615,601

“Other” includes projects for clients operating in a number of industries including food and consumer products, and basic resources (such as mining, minerals, and fertilizers).

Fiscal 2005 Compared to Fiscal 2004

We recorded net earnings of $151.0 million, or $2.57 per diluted share, for fiscal year ended September 30, 2005, compared to net earnings of $129.0 million, or $2.25 per diluted share for fiscal 2004.

Total revenues for fiscal 2005 increased by $1.0 billion, or 22.7%, to $5.6 billion, compared to total revenues of $4.6 billion for fiscal 2004. Revenues increased among most of the industry groups and markets we serve, lead by a 54.1% increase in revenues from clients operating in the oil & gas and refining industries, and a 52.3% increase in revenues from clients operating in the infrastructure market. The increase in revenues from our clients operating in the oil & gas and refining industries was due primarily to continuing projects we’re executing in the area of clean fuels, combined with new awards of projects assisting refiners improve and enhance capacity. Also contributing to the increase in revenues were new awards in the upstream area of this market relating to oil sands extraction projects. The increase in revenues from clients operating in the infrastructure market was due primarily to the

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inclusion of the Babtie Group for all of fiscal 2005. The Babtie Group contributed approximately $324.1 million of revenue during fiscal 2005, compared to approximately $54.0 million last year (the Babtie Group was acquired during the fourth quarter of fiscal 2004). Also contributing to the increase in revenues was a $369.8 million increase in pass-through costs. When we are responsible for subcontract labor or third-party materials and equipment, we reflect the costs of such items in both revenues and costs. The level of pass-through costs included in revenues and costs will vary between reporting periods depending principally on the amount of procurement that clients choose to do themselves as opposed to using our services as well as on the normal winding down of field services activities on construction and O&M projects. See Note 2 of the Notes to Consolidated Financial Statements for additional information regarding pass-through costs.

As a percentage of revenues, direct costs of contracts were 85.7% for fiscal 2005, compared to 85.5% for fiscal 2004. The percentage relationship between direct costs of contracts and revenues will fluctuate between reporting periods depending on a variety of factors including the mix of business during the reporting periods being compared as well as the level of margins earned from the various types of services provided. The increase in direct costs of contracts as a percentage of revenues was due to the increase in pass-through costs, off-set in part by the inclusion of the Babtie Group for all of fiscal 2005 (whose revenues are weighted towards project services). Since pass-through costs (which are incurred primarily on projects requiring field services) typically do not generate significant margins, it is not unusual for us to experience an increase or decrease in revenues without experiencing a corresponding increase or decrease in our gross margins and operating profit.

SG&A expenses during fiscal 2005 increased by $98.4 million, or 21.1%, to $564.8 million, compared to $466.4 million during fiscal 2004. Contributing to the increase in SG&A expenses during fiscal 2005 was the inclusion of the Babtie Group for the entire year. The Babtie Group contributed approximately $89.6 million of SG&A expenses during fiscal 2005, versus approximately $13.5 million of SG&A expenses last year. The balance of the increase was due primarily to the effects of foreign currency translation, and higher spending in support of our professional technical services activities.

Operating profit fiscal 2005 increased by $43.2 million, or 21.8%, to $241.5 million, compared to $198.3 million during fiscal 2004. The increase in operating profit during fiscal 2005 as compared to last year was due to the overall increase in business activity. As a percentage of revenues, operating profit was 4.3% for fiscal 2005 and 2004. In spite of the significant increase in pass-through costs, the Company was able to maintain its level of operating profit by limiting the increase in SG&A expenses.

Interest income increased by $1.3 million to $4.3 million during fiscal 2005, compared to $3.1 million of interest income during fiscal 2004. The increase in interest income was due primarily to higher cash balances on deposit during fiscal 2005 as compared to last year. Interest expense increased by $2.9 million to $6.5 million during fiscal 2005, compared to $3.6 million of interest expense during fiscal 2004. The increase in interest expense reflects the effects of the debt incurred in connection with the acquisition of the Babtie Group being outstanding for all of fiscal 2005, versus only a portion of fiscal 2004.

We recorded income tax expense of $85.0 million during fiscal 2005, compared to $69.4 million during fiscal 2004. Our overall effective tax rate was 36.0% for fiscal 2005 and 35.0% for fiscal 2004. In the normal course of our business, we may engage in numerous transactions for which the ultimate tax outcome (including the period in which the transaction will ultimately be included in income or deducted as an expense) is uncertain. Additionally, we file income, franchise, gross receipts and similar tax returns in many jurisdictions. Our tax returns are subject to audit and investigation by the Internal Revenue Service, most states in the United States, and by various government agencies representing many jurisdictions outside the United States. We continually monitor the appropriateness of the rate, and we adjust our income tax expense in the period it is probable that actual results will differ from our

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estimates. The increase in our overall tax rate during fiscal 2005 as compared to last year was due primarily the effects of the non-deductibility for tax purposes of the amortization of certain intangible assets we acquired in connection with the Babtie Group, combined with a shift in earnings among our non-U.S. operations.

Fiscal 2004 Compared to Fiscal 2003

We recorded net earnings of $129.0 million, or $2.25 per diluted share, for fiscal year ended September 30, 2004, compared to net earnings of $128.0 million, or $2.27 per diluted share for fiscal 2003.

Total revenues for fiscal 2004 remained relatively unchanged from fiscal 2003 at $4.6 billion. The amount of pass-through costs included in revenues in fiscal 2004 declined by approximately $223.6 million, or 16.1%, as compared to fiscal 2003. Off-setting this decline in field services activity in part was approximately $54.0 million of revenues of the Babtie Group, which we acquired in the fourth quarter of fiscal 2004.

As a percentage of revenues, direct costs of contracts were 85.5% for fiscal 2004 compared to 86.4% for fiscal 2003. In general, the percentage improvement in this performance indicator from fiscal 2003 to 2004 was due primarily to a higher portion of our total revenues being derived from technical professional services versus field services.

SG&A expenses for fiscal 2004 increased by $37.6 million, or 8.8%, to $466.4 million, compared to $428.8 million for fiscal 2003. Included in SG&A expenses for fiscal 2004 is approximately $13.5 million of SG&A expenses from the Babtie Group. The balance of the increase was due primarily to the effects of foreign currency translation, and higher spending in support of our professional technical services activities.

Operating profit for fiscal 2004 totaled $198.3 million; relatively unchanged from the fiscal 2003 amount of $197.1 million. As a percentage of revenues, operating profit was 4.3% for both fiscal 2004 and 2003.

Interest income increased by $1.7 million to $3.1 million for fiscal 2004, compared to $1.4 million for fiscal 2003. The increase in interest income was due primarily to higher cash balances on deposit during fiscal 2004 as compared to fiscal 2003. Interest expense increased by $0.3 million, or 9.6%, to $3.6 million for fiscal 2004, compared to $3.3 million for fiscal 2003. The increase in interest expense was due primarily to slightly higher borrowings under our long-term, revolving credit facility.

Contractual Obligations

The following table sets forth certain information about our contractual obligations as of September 30, 2005 (in thousands):

			Payments Due by Fiscal Period
	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		More than 5 Years
Bank debt	$	95,983	$	6,351	$	—	$	89,632	$	—
Operating leases		342,414		78,753		123,824		80,859		58,978
Obligations under defined benefit pension plans (a)		246,420		36,141		76,677		82,934		50,668
Obligations under nonqualified deferred compensation plans (b)		59,009		4,519		9,588		10,370		34,532
Purchase obligations (c)		558,168		558,168		—		—		—
Total	$	1,301,994	$	683,932	$	210,089	$	263,795	$	144,178

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(a) Assumes that future contributions will be consistent with amounts projected to be contributed in fiscal 2006, allowing for certain growth based on rates of inflation and salary increases, but limited to the amount recorded as of September 30, 2005. Actual contributions will depend on a variety of factors, including amounts required by local laws and regulations, and other funding requirements.

(b) Assumes that future payments will be consistent with amounts paid in fiscal 2005, allowing for certain growth. Due to the nonqualified nature of the plans, and the fact that benefits are based in part on years of service, the payments included in the schedule was limited to the amount recorded as of September 30, 2005.

(c) Represents those liabilities estimated to be under firm contractual commitments as of September 30, 2005.

Backlog

The following table summarizes our total backlog at September 30, 2005, 2004, and 2003 (in millions):

	2005		2004		2003
Technical professional services	$	4,329.0	$	3,989.0	$	3,383.2
Total		8,643.0		7,452.5		7,041.0

Because the entire value of contracts is added to backlog as soon as the contracts are awarded to us (rather than adding the contracts to backlog gradually over time), and many of our contracts require us to provide services that span over a number of fiscal quarters (and sometimes over fiscal years), we evaluate our backlog on a year-over-year basis, rather than on a sequential, quarter-over-quarter basis. Our backlog at September 30, 2005 increased by $1.2 billion, or 16.0%, to $8.6 billion from $7.5 billion at September 30, 2004. The increase in backlog during fiscal 2005 was attributable primarily to new awards from clients operating within the oil & gas, federal programs, and the civil and infrastructure industry groups and markets.

In accordance with industry practice, substantially all of our contracts are subject to cancellation or termination at the discretion of the client. However, we have not experienced cancellations that have had a material effect on the reported backlog amounts. In a situation where a client terminates a contract, we would ordinarily be entitled to receive payment for work performed up to the date of termination and, in certain instances, we may be entitled to allowable termination and cancellation costs. While management uses all information available to it to determine backlog, our backlog at any given time 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.

Total backlog at September 30, 2005 included approximately $2.2 billion, or 25.3% of total backlog, relating to work to be performed either directly or indirectly for the U.S. federal government and its agencies. This compares to approximately $2.3 billion, or 30.2% of total backlog, and $1.9 billion, or 27.7% of total backlog, of U.S. federal backlog at September 30, 2004 and 2003, respectively. Most of our federal 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 $4.3 billion, or 50.2% of total backlog at September 30, 2005 will be realized as revenues within the next fiscal year.

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Effects of Inflation

During fiscal 2005, 2004, and 2003, approximately 85%, 83%, and 82%, respectively, of our consolidated revenues were earned under cost-reimbursable type contracts. Because a significant portion of our revenues is earned from such contracts, the effects of inflation on our financial condition and results of operations continue to be generally low. However, as we expand our business into markets and geographic areas where fixed-price and lump-sum work is more prevalent, inflation may have a larger impact on our results of operations in the future. To the extent permitted by competition, we intend to continue to emphasize contracts which are either cost-reimbursable or negotiated fixed-price. For contracts with fixed-price and lump-sum terms, we closely monitor the actual costs on the project as compared to the original estimates. On these projects, we also attempt to secure fixed-price commitments from key subcontractors and vendors. However, due to the competitive nature of our business, combined with the fluctuating demands and prices associated with personnel, equipment and materials we traditionally need in order to perform on our contracts, there can be no guarantee that inflation will not affect our results of operations in the future.

Liquidity and Capital Resources

We finance our operations primarily through cash provided by operations. At September 30, 2005, our principal source of liquidity consisted of $239.8 million of cash and cash equivalents, and $200.4 million of available capacity under our $290.0 million unsecured, revolving credit facility discussed below.

During fiscal 2005, our cash and cash equivalents increased by $139.8 million, to $239.8 million. This compares to a net decrease in cash and cash equivalents of $26.1 million during fiscal 2004, and to a net increase of $77.7 million during fiscal 2003. During fiscal 2005, we experienced net cash inflows from operating activities and financing activities of $161.3 million and $49.7 million, respectively. These inflows were offset in part by net cash outflows from investing activities and the effect of exchange rate changes of $68.3 million and $2.9 million, respectively.

Our operations provided net cash of $161.3 million during fiscal 2005. This compares to net cash inflows of $87.8 million and $147.5 million during fiscal 2004 and 2003, respectively. The $73.6 million increase in cash provided by operations in fiscal 2005 as compared to fiscal 2004 was due primarily to a $22.0 million increase in net earnings and a $20.2 million increase relating to the timing of cash receipts and payments within our working capital accounts. Also contributing to the increase in cash flows from operations were a $12.2 million increase in depreciation and amortization expense (a non-cash expense); an $11.2 million decrease in gains attributable to the sale of assets (a common reclassification within the Consolidated Statements of Cash Flows so that the cash flows from the sales of assets may be shown in the investing section of the statements); and the effects of a $6.9 million change in the deferred income tax accounts.

We used $68.3 million of cash and cash equivalents during fiscal 2005 for investing activities. This compares to net cash outflows of $203.1 million and $17.7 million during fiscal 2004 and 2003, respectively. In comparing our investing activities during fiscal 2005 to last year, the largest single variance related to cash used for acquisitions of businesses; we used $163.8 million of cash and cash equivalents for acquisitions last year, and zero during fiscal 2005. This reduction in cash outflows was partially off-set by a $17.8 million increase in miscellaneous, non-current assets (relating primarily to increases in prepaid pension assets), and a $6.8 million increase in additions to property, plant and equipment.

Our financing activities resulted in net cash inflows of $49.7 million during fiscal 2005. This compares to net cash inflows of $91.4 million during fiscal 2004, and net cash outflows of $55.0 million during fiscal 2003. The $41.7 million decrease in cash flows from financing activities during fiscal 2005 as compared to fiscal 2004 was due primarily to a $46.4 million decrease in borrowings, net of

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repayments, under our long-term credit facilities, combined with a net $8.6 million increase during fiscal 2005 in short-term borrowings. The higher borrowing activity during fiscal 2004 was due primarily to the acquisition of the Babtie Group. Also contributing to the improvement in cash flows from financing activities during fiscal 2005 as compared to last year was a $9.4 million increase in proceeds from issuances of common stock through our stock option and stock purchase plans.

We believe we have adequate liquidity and capital resources to fund our operations and service our debt for the foreseeable future. We had $239.8 million in cash and cash equivalents at September 30, 2005, compared to $100.1 million at September 30, 2004. Our consolidated working capital position at September 30, 2005 was $552.3 million, compared to $397.6 million at September 30, 2004. We have a long-term, unsecured revolving credit facility providing up to $290.0 million of debt capacity, under which only $89.6 million was utilized at September 30, 2005 in the form of direct borrowings. We believe that the capacity, terms and conditions of our long-term revolving credit facility is adequate for our working capital and general business requirements. We also had, at September 30, 2005, $36.0 million of borrowing capacity available to us through committed, short-term credit facilities.

Under our stock repurchase program, we are authorized by our Board of Directors to buy-back up to 6.0 million shares of the common stock of the Company in the open market. Repurchases of common stock are financed from existing credit facilities and available cash balances. From inception of the program through September 30, 2005, we have repurchased a total of 3,732,400 shares of common stock in the open market at a total cost of $59.0 million. No shares of common stock were repurchased during fiscal 2005 and 2004. Substantially all shares of common stock held in treasury were eventually reissued for our employee stock purchase and incentive stock plans.

New Accounting Pronouncements

On December 16, 2004, SFAS No. 123R—Accounting for Share-Based Payment was issued. SFAS 123R is a revision of SFAS 123 and supersedes APB 25. SFAS 123R requires companies to record compensation expense for stock-based awards using a fair value method and is effective for annual periods beginning after June 15, 2005 (effective in fiscal 2006 for the Company). Compensation expense will be recorded over the requisite service period, which is typically the vesting period of the award. We currently plan to adopt SFAS 123R effective October 1, 2005, using the modified retrospective application method, and have begun the process of collecting and analyzing the information required. We estimate that the adoption of SFAS 123R will have an after tax impact of approximately $8.5 million in fiscal 2006.

Factors That May Affect Forward-Looking Statements

As mentioned above, there are a variety of factors that could cause business conditions and results to differ materially from the forward-looking statements contained in this MD&A, including, in no particular order, the following:

• Increase in competition by United States and international competitors;

• Changes in global business, economic, political, and social condition;

• Availability of qualified engineers, architects, designers and other home-office staff needed to execute contracts;

• Availability of qualified craft personnel in the geographic areas where our construction and maintenance sites are located;

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• The timing of new awards and the funding of such awards;

• Delays, cancellations, or suspensions of, or changes in the scope to, existing contracts;

• Our ability to meet performance or schedule guarantees;

• Cost overruns on fixed-price, guaranteed maximum price, or unit priced contracts;

• The possible effects of inflation on margins available on fixed-price contracts;

• The effects that fluctuating exchange rates may have on the U.S. dollar results of our international operations;

• The outcome of pending and future claims, litigation, and any government audits, investigations or proceedings;

• The cyclical nature of the individual markets in which our clients operate;

• Delays or defaults by clients in making payments due under contracts;

• The successful integration of recent and future acquisitions;

• The effect on future earnings due to the implementation of SFAS 123R; and

• The effects (through the force majeure clauses of our contracts, or otherwise) of major disasters globally.

The preceding list is not all-inclusive, and we undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Readers of this Management’s Discussion and Analysis should also read our most recent Annual Report on Form 10-K for a further description of our business, legal proceedings and other information that describes factors that could cause actual results to differ from such forward-looking statements.

Item 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not enter into derivative financial instruments for trading, speculation or other purposes that would expose the Company to market risk. In the normal course of business, our results of operations are exposed to risks associated with fluctuations in interest rates and currency exchange rates.

Interest Rate Risk

Our only source for long-term credit is a $290.0 million syndicated revolving credit facility. The total amount outstanding under this facility at September 30, 2005 was $89.6 million. This agreement expires in January 2010, and provides for both fixed-rate and variable-rate borrowings. Our objectives in managing our interest rate risk are to limit the impact of interest rate changes on earnings and cash flows, and to lower our overall borrowing costs. To achieve these objectives, we maintain fixed rate debt on a majority of our borrowings and minimize our outstanding borrowings by paying down debt from cash provided from operations.

Foreign Currency Risk

In general, our exposure to fluctuating exchange rates relates to the effects of translating the financial statements of our subsidiaries operating outside the United States, which are denominated in currencies other than the U.S. dollar, into the U.S. dollar. We follow the provisions of SFAS No. 52—Foreign Currency Translation in preparing our consolidated financial statements.

Page 32

We believe our exposure to the effects that fluctuating foreign currencies may have on our consolidated results of operations is limited because, in general, our various operations invoice customers and satisfy their financial obligations in their respective local currencies. In situations where our operations incur contract costs in currencies other than their own functional currencies, we strive to have a portion of the related contract revenues denominated in the same currencies as the costs.

Concurrent with the acquisition of the Babtie Group, we entered into a forward contract with a large, U.S. bank in the notional amount of £39.9 million (approximately $73.4 million). The purpose of the contract is to hedge the Company’s exposure to fluctuating foreign currency exchange rates on a £39.9 million intercompany loan between Jacobs and one of its subsidiaries. Based on the terms of the contract, we believe the effect of the loan on future earnings at September 30, 2005 should be limited to $4.1 million of expense. In addition, we entered into a floating-to-fixed interest rate swap agreement with another U.S. bank which fixes the effective rate of interest on £34.0 million (then, approximately $61.1 million) of bank debt incurred in connection with the acquisition of the Babtie Group. This instrument allows us to receive a floating rate payment tied to the 3-month LIBOR plus a spread from the counterparty, in exchange for a fixed-rate payment from us. Both of the aforementioned contracts qualify as cash flow hedges under the provisions SFAS No. 133—Accounting for Derivative Instruments and Hedging Activities.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item is submitted as a separate section of this Form 10-K. See Item 15, below.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

Item 9A.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined by Rule 13a-15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2005 (the end of the period covered by this annual report; the “Evaluation Date”). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of the Evaluation Date were effective in ensuring that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Management’s Report on Internal Control Over Financial Reporting. Management is responsible for establishing and maintaining adequate internal controls over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Management, with the participation of its Chief Executive Officer and Chief Financial Officer, has assessed the effectiveness of the Company’s internal control over financial reporting as of the Evaluation Date based on the framework established in “Internal Control—Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management has concluded that the internal controls of the Company over its financial reporting as of the Evaluation Date were effective.

Page 33

Changes in Internal Control. There were no changes in the Company’s internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act during the Company’s fourth quarter ended September 30, 2005, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Limitations on Effectiveness of Controls. The Company’s management, including its Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures or its system of internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well designed or operated, can provide only reasonable, but not absolute, assurance that the objectives of the system of internal control are met. The design of the Company’s control system reflects the fact that there are resource constraints, and that the benefits of such control system must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control failures and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the intentional acts of individuals, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of management’s assessments of the current effectiveness of the Company’s disclosure controls and procedures and its internal control over financial reporting are subject to risks.

Reports of Others. Ernst & Young LLP (“Ernst & Young”) is the Company’s independent registered public accounting firm. Ernst & Young has audited the consolidated financial statements of the Company as of September 30, 2005 and 2004 and for each of the three years in the period ended September 30, 2005, as well as management’s assessment of the effectiveness of the Company’s internal control over financial reporting and the effectiveness of internal control over financial reporting as of September 30, 2005. Ernst & Young has issued an attestation report on management’s assessment of the Company’s internal control over financial reporting, which is set forth below following the Company’s Consolidated Financial Statements. Ernst & Young conducted its audits in accordance with the standards of the Public Company Accounting Oversight Board (United States), and its reports have been included in this annual report.

Item 9B.    OTHER INFORMATION

None.

Page 34

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by Paragraph (a), and Paragraphs (c) through (j) of Item 401 of Regulation S-K (except for information required by Paragraph (e) of Item 401 to the extent the required information pertains to our executive officers, which is set forth below) is hereby incorporated by reference from our definitive proxy statement to be filed with the Securities and Exchange Commission (the “Commission”) pursuant to Regulation 14A within 120 days after the close of our fiscal year.

Executive Officers of the Registrant

The following table presents the information required by Paragraph (b) of Item 401 of Regulation S-K.

Name	Age	Position with the Company	Year Joined the Registrant
Noel G. Watson	69	Chairman of the Board, and Chief Executive Officer	1965
Craig L. Martin	56	President and Director	1994
Thomas R. Hammond	54	Executive Vice President, Operations	1975
John W. Prosser, Jr.	60	Executive Vice President, Finance and Administration and Treasurer	1974
Walter C. Barber	64	Group Vice President, Middle East	1999
Warren M. Dean	61	Group Vice President, Facilities	1994
Arlan C. Emmert	60	Group Vice President, Asia	1985
Peter M. Evans	60	Group Vice President, Southern Region	2001
Michael J. Higgins	61	Group Vice President, Federal Operations	1994
Andrew F. Kremer	48	Group Vice President, Mainland Europe	1998
George A. Kunberger, Jr.	53	Group Vice President, Northern Region	1979
Gregory J. Landry	57	Group Vice President, Western Region	1984
William G. Mitchell	61	Group Vice President, Infrastructure	2004
Laurence R. Sadoff	58	Group Vice President, Field Services	1993
Rogers F. Starr	62	President, Sverdrup Technology, Inc.	1999
Philip J. Stassi	50	Group Vice President, U.K. & Ireland	1977
Allyn B. Taylor	57	Group Vice President, Civil	1993
James W. Thiesing	61	Group Vice President	1992
Robert M. Clement	57	Senior Vice President, Global Sales	1990
Martin G. Duvivier	53	Senior Vice President, Quality and Safety	2000
William C. Markley, III	60	Senior Vice President, General Counsel and Secretary	1981
John McLachlan	59	Senior Vice President, Acquisitions and Strategy	1974
Patricia H. Summers	48	Senior Vice President, Global Human Resources	2004
Nazim G. Thawerbhoy	58	Senior Vice President and Controller	1979

All of the officers listed in the preceding table serve in their respective capacities at the pleasure of the Board of Directors and, with the exception of Messrs. Evans and Mitchell, and Ms. Summers, have served in executive and senior management capacities with the Company for more than five years.

Prior to joining the Company in 2001, Mr. Evans served as president of Stone & Webster Engineers & Constructors, Inc. from February 1999 to May 2000; as executive vice president of Kellogg Brown & Root from October 1998 to February 1999; and as president and chief operating officer of MW Kellogg from October 1996 to October 1998. In June 2000, Stone & Webster, Inc. filed a

Page 35

voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code. Prior to joining the Company in 2004, Mr. Mitchell served as the Chief Executive of the Babtie Group Limited since 1996. Prior to joining the Company in 2004, Ms. Summers served as corporate vice president of compensation, benefits and executive development for Northrop Grumman Corporation from January 2000 to April 2003. From June 1999 to January 2000, Ms. Summers served as vice president of performance, rewards and benefits for Healthnet, Inc. From September 1991 to June 1999, Ms Summers served in various management and senior management roles for Sempra Energy.

We have adopted a code of ethics for our chief executive, chief financial and principal accounting officers; a code of business conduct and ethics for members of our Board of Directors; and corporate governance guidelines. The full text of the codes of ethics and corporate governance guidelines is available at our website www.jacobs.com. In the event we make any amendment to, or grant any waiver from, a provision of the code of ethics that applies to the principal executive officer, principal financial officer or principal accounting officer that requires disclosure under applicable Commission rules, we will disclose such amendment or waiver and the reasons therefor on our website. We will provide any person without charge a copy of any of the aforementioned codes of ethics upon receipt of a written request. Requests should be addressed to: Jacobs Engineering Group Inc., 1111 S. Arroyo Parkway, Pasadena, California, 91105, Attention: Corporate Secretary.

Item 11. EXECUTIVE COMPENSATION

The information required by this Item is hereby incorporated by reference from our definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the close of our fiscal year.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Certain information required by this Item is hereby incorporated by reference from our definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the close of our fiscal year. Other information required by this Item is submitted in a separate section of this Form 10-K. See Item 5., above.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is hereby incorporated by reference from our definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the close of our fiscal year.

Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required by this Item is hereby incorporated by reference from our definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A within 120 days after the close of our fiscal year.

Page 36

PART IV

Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) Documents filed as part of this report:

(1) The Company’s Consolidated Financial Statements at September 30, 2005 and 2004 and for each of the three years in the period ended September 30, 2005 and the notes thereto, together with the report of the independent auditors on those Consolidated Financial Statements are hereby filed as part of this report, beginning on page F-1.

(2) Financial statement schedules—no financial statement schedules are presented as the required information is either not applicable, or is included in the consolidated financial statements or notes thereto.

(3) See Exhibits and Index to Exhibits, below.

(b) Exhibits and Index to Exhibits:

2.1	Agreement and Plan of Merger Among Sverdrup Corporation, Jacobs Engineering Group Inc., and Jacobs Acquisition Corp, dated as of December 21, 1998. Filed as Exhibit 99.1 to the Registrant’s Current Report on Form 8-K dated January 14, 1999 and incorporated herein by reference.
2.2	Recommended offer for Babtie Group Limited by a Wholly-Owned Subsidiary of Jacobs Engineering Group Inc.; and Agreement for the Sale and Purchase of Certain Shares in Babtie Group Limited. Filed as Exhibit 2.2 to the Registrants Annual Report on Form 10-K for the year ended September 30, 2004 and incorporated herein by reference.
3.1	Certificate of Incorporation of the Registrant, as amended. Filed as Exhibit 3 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2003 and incorporated herein by reference.
3.2	Bylaws of the Registrant. Filed as Exhibit 5.03 to the Registrant’s Current Report on Form 8-K dated November 1, 2004 and incorporated herein by reference.
4.1	See Sections 5 through 18 of Exhibit 3.1.
4.2	See Article II, Section 3.03 of Article III, Article VI and Section 8.04 of Article VIII of Exhibit 3.2.
4.3	Amended and Restated Rights Agreement, amended and restated as of December 20, 2000 by and between the Registrant and Mellon Investor Services LLC, as Rights Agent. Filed as Exhibit 1 to Registrant’s Form 8-A/A filed on December 22, 2000 and incorporated herein by reference.
10.1	The Jacobs Engineering Group Inc. Incentive Bonus Plan for Officers and Key Managers. Filed as Exhibit 10.2 to the Registrant’s Annual Report on Form 10-K for the year ended September 30, 1999 and incorporated herein by reference.
10.2	The Executive Security Program of Jacobs Engineering Group Inc. Filed as Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 1995 and incorporated herein by reference.
10.3	Jacobs Engineering Group Inc. and Subsidiaries 1991 Executive Deferral Plan, effective June 1, 1991. Filed as Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 1995 and incorporated herein by reference.

Page 37

10.4	Jacobs Engineering Group Inc. and Subsidiaries 1993 Executive Deferral Plan, effective December 1, 1993. Filed as Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 1995 and incorporated herein by reference.
10.5	Jacobs Engineering Group Inc. Amended and Restated Executive Deferral Plan. Filed as Exhibit 10.7 to the Registrant’s Annul Report on Form 10-K for the fiscal year ended September 30, 2001 and incorporated herein by reference.
10.6	The Jacobs Engineering Group Inc. 1989 Employee Stock Purchase Plan, as Amended and Restated. Filed as Exhibit 4.1 to the Registration Statement on Form S-8 filed by the Registrant on May 4, 2001, and incorporated herein by reference.
10.7	The Jacobs Engineering Group Inc. Global Employee Stock Purchase Plan. Filed as Exhibit 4.1 to the Registration Statement on Form S-8 filed by the Registrant on August 7, 2001, and incorporated herein by reference.
10.8	Form of Indemnification Agreement entered into between the Registrant and certain of its officers and directors. Filed as Exhibit 10.8 to the Registrant’s Annul Report on Form 10-K for the fiscal year ended September 30, 2003 and incorporated herein by reference.
10.9	Jacobs Engineering Group Inc. 401(k) Plus Savings Plan and Trust, as Amended and Restated August 1, 2000. Filed as Exhibit 10.11 to the Company’s Annul Report on Form 10-K for the fiscal year ended September 30, 2001 and incorporated herein by reference.
10.10	Jacobs Engineering Group Inc. 1999 Stock Incentive Plan, as Amended and Restated. Filed as Exhibit 4.1 to the Registration Statement on Form S-8 filed by the Registrant on July 25, 2003, and incorporated herein by reference.
10.11	Jacobs Engineering Group Inc. 1999 Outside Director Stock Plan. Filed as Exhibit II to the Registrant’s Annual Notice and Proxy Statement dated January 3, 2000 and incorporated herein by reference.
10.12	Credit Agreement dated as of August 22, 2003 among Jacobs Engineering Group Inc. and certain of its subsidiaries (as “Borrowers”), and the Bank of Nova Scotia, Wachovia Bank N.A., ABN AMRO Bank N.V., Bank of America, N.A. (as “Administrative Agent”), and other lender parties, and Banc of America Securities LLC (as “Sole Lead Arranger”). Filed as Exhibit 10.12 to the Registrant’s Annul Report on Form 10-K for the fiscal year ended September 30, 2004 and incorporated herein by reference.
10.13	Assignment Letter Agreement dated February 16, 2005 between the Registrant and Thomas R. Hammond, Executive Vice President. Filed as Exhibit 99.1 to to the Registrant’s current report on Form 8-K dated February 22, 2005
11.	Statement of computation of net income per outstanding share of common stock is incorporated by reference from the Company’s Consolidated Financial Statements and notes thereto (see Item 15(a)(1), above).
14.	Jacobs Engineering Group Inc. Code of Ethics for the Chief Executive Officer and Senior Financial Officers. Filed as Exhibit 14 to the Registrant’s Annul Report on Form 10-K for the fiscal year ended September 30, 2003 and incorporated herein by reference.
†21.	List of Subsidiaries of Jacobs Engineering Group Inc.
†23.	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.

Page 38

†31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
†32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
†32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

† Being filed herewith.

Page 39

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		JACOBS ENGINEERING GROUP INC.
Dated: December 13, 2005	By:	/s/    NOEL G. WATSON
		Noel G. Watson Chief Executive Officer, Director, and Chairman of the Board (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/s/    NOEL G. WATSON       Noel G. Watson	Director, Chairman of the Board, and Principal Executive Officer	December 13, 2005
/s/    CRAIG L. MARTIN       Craig L. Martin	Director and President	December 13, 2005
/s/    JOSEPH R. BRONSON       Joseph R. Bronson	Director	December 13, 2005
Robert C. Davidson, Jr.	Director
/s/    EDWARD V. FRITZKY       Edward V. Fritzky	Director	December 13, 2005
/s/    ROBERT B. GWYN       Robert B. Gwyn	Director	December 13, 2005
/s/    LINDA K. JACOBS       Linda K. Jacobs	Director	December 13, 2005
/s/    DALE R. LAURANCE       Dale R. Laurance	Director	December 13, 2005
/s/    LINDA FAYNE LEVINSON       Linda Fayne Levinson	Director	December 13, 2005
/s/    BENJAMIN F. MONTOYA       Benjamin F. Montoya	Director	December 13, 2005

Page 40

SIGNATURES—Continued

Signature	Title	Date
/s/    THOMAS M.T. NILES       Thomas M.T. Niles	Director	December 13, 2005
David M. Petrone	Director
/s/    JOHN W. PROSSER, JR.       John W. Prosser, Jr.	Executive Vice President, Finance and Administration and Treasurer (Principal Financial Officer)	December 13, 2005
/s/    NAZIM G. THAWERBHOY       Nazim G. Thawerbhoy	Senior Vice President and Controller (Principal Accounting Officer)	December 13, 2005

Page 41

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

WITH REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

September 30, 2005

F-1

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2005

Consolidated Balance Sheets at September 30, 2005 and 2004	F-3
Consolidated Statements of Earnings for the Years Ended September 30, 2005, 2004 and 2003	F-4
Consolidated Statements of Comprehensive Income for the Years Ended September 30, 2005, 2004 and 2003	F-4
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended September 30, 2005, 2004 and 2003	F-5
Consolidated Statements of Cash Flows for the Years Ended September 30, 2005, 2004 and 2003	F-6
Notes to Consolidated Financial Statements	F-7
Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm	F-30

F-2

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30, 2005 and 2004

(In thousands, except share information)

	2005			2004
ASSETS
Current Assets:
Cash and cash equivalents	$	239,849		$	100,075
Receivables		1,029,923			902,444
Deferred income taxes		46,147			59,159
Prepaid expenses and other		21,512			21,835
Total current assets		1,337,431			1,083,513
Property, Equipment and Improvements, Net		154,971			151,182
Other Noncurrent Assets:
Goodwill		547,909			547,601
Miscellaneous		313,410			288,748
Total other noncurrent assets		861,319			836,349
	$	2,353,721		$	2,071,044
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Notes payable	$	6,351		$	1,257
Accounts payable		257,013			195,918
Accrued liabilities		407,771			377,168
Billings in excess of costs		109,978			103,750
Income taxes payable		3,982			7,821
Total current liabilities		785,095			685,914
Long-term Debt		89,632			78,758
Other Deferred Liabilities		331,797			295,689
Minority Interests		6,555			5,656
Commitments and Contingencies
Stockholders’ Equity:
Capital stock:
Preferred stock, $1 par value, authorized—1,000,000 shares; issued and outstanding—none		—			—
Common stock, $1 par value, authorized—100,000,000 shares; issued and outstanding—58,129,997 shares and 56,698,514 shares, respectively		58,130			56,699
Additional paid-in capital		239,176			174,563
Retained earnings		947,519			820,468
Accumulated other comprehensive loss		(97,350	)		(43,942	)
		1,147,475			1,007,788
Unearned compensation		(6,833	)		(2,761	)
Total stockholders’ equity		1,140,642			1,005,027
	$	2,353,721		$	2,071,044

See the accompanying Notes to Consolidated Financial Statements.

F-3

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

For the Years Ended September 30, 2005, 2004 and 2003

(In thousands, except per share information)

	2005			2004			2003
Revenues	$	5,635,001		$	4,594,235		$	4,615,601
Costs and Expenses:
Direct costs of contracts		(4,828,697	)		(3,929,560	)		(3,989,714	)
Selling, general and administrative expenses		(564,830	)		(466,409	)		(428,772	)
Operating Profit		241,474			198,266			197,115
Other (Expense) Income:
Interest income		4,349			3,065			1,356
Interest expense		(6,471	)		(3,565	)		(3,252	)
Miscellaneous income (expense), net		(3,293	)		658			1,720
Total other income (expense), net		(5,415	)		158			(176	)
Earnings Before Taxes		236,059			198,424			196,939
Income Tax Expense		(85,039	)		(69,449	)		(68,929	)
Net Earnings	$	151,020		$	128,975		$	128,010
Net Earnings Per Share:
Basic	$	2.65		$	2.30		$	2.32
Diluted	$	2.57		$	2.25		$	2.27

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Years Ended September 30, 2005, 2004 and 2003

(In thousands)

	2005			2004			2003
Net Earnings	$	151,020		$	128,975		$	128,010
Other Comprehensive (Loss) Income:
Unrealized holding gains (losses) on securities		—			(89	)		109
Less—reclassification adjustment for gains realized in net earnings		—			(118	)		(2,953	)
Unrealized losses on securities, net of reclassification adjustment		—			(207	)		(2,844	)
Foreign currency translation adjustment		(1,626	)		(1,688	)		9,133
Minimum pension liability adjustment		(68,606	)		9,852			(21,519	)
Loss on cash flow hedges		(3,453	)		(683	)		—
Other Comprehensive Income (Loss) Before Income Taxes		(73,685	)		7,274			(15,230	)
Income Tax Benefit (Expense) Relating to Other Comprehensive Income (Loss)		20,277			(2,898	)		9,494
Other Comprehensive Income (Loss)		(53,408	)		4,376			(5,736	)
Total Comprehensive Income	$	97,612		$	133,351		$	122,274

See the accompanying Notes to Consolidated Financial Statements.

F-4

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

For the Years Ended September 30, 2005, 2004 and 2003

(In thousands)

	2005			2004			2003
Common Stock:
Balance at the beginning of the year	$	56,699		$	55,836		$	54,765
Issuances under stock purchase and stock option plans, net		1,576			858			1,115
Repurchases under stock plans		(249	)		(24	)		(67	)
Issuances of restricted stock, net of forfeitures		104			29			23
Balance at the end of the year		58,130			56,699			55,836
Additional Paid-in Capital:
Balance at the beginning of the year		174,563			143,973			110,778
Issuances of common stock under stock purchase and stock option plans, net		60,364			29,525			32,507
Repurchases of common stock under stock plans		(1,170	)		(117	)		(193	)
Issuances of restricted stock, net of forfeitures		5,419			1,182			881
Balance at the end of the year		239,176			174,563			143,973
Retained Earnings:
Balance at the beginning of the year		820,468			692,943			568,957
Net earnings		151,020			128,975			128,010
Repurchases of common stock under stock plans		(23,969	)		(1,450	)		(4,024	)
Balance at the end of the year		947,519			820,468			692,943
Accumulated Other Comprehensive (Loss) Income:
Balance at the beginning of the year		(43,942	)		(48,318	)		(42,582	)
Foreign currency translation adjustments		(1,626	)		(1,688	)		9,133
Minimum pension liability adjustment		(49,494	)		6,632			(13,079	)
Other, net		(2,288	)		(568	)		(1,790	)
Balance at the end of the year		(97,350	)		(43,942	)		(48,318	)
Unearned Compensation:
Balance at the beginning of the year		(2,761	)		(2,351	)		(2,305	)
Issuances of restricted stock		(5,250	)		(1,173	)		(903	)
Amortization		1,178			763			857
Balance at the end of the year		(6,833	)		(2,761	)		(2,351	)
Total Stockholders’ Equity	$	1,140,642		$	1,005,027		$	842,083

See the accompanying Notes to Consolidated Financial Statements.

F-5

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended September 30, 2005, 2004 and 2003

(In thousands)

	2005			2004			2003
Cash Flows from Operating Activities:
Net earnings	$	151,020		$	128,975		$	128,010
Adjustments to reconcile net earnings to net cash flows from operations:
Depreciation and amortization:
Property, equipment and improvements		38,721			33,022			35,350
Intangible assets		7,636			1,132			—
Restricted stock		1,178			763			857
Net losses (gains) on sales of assets		261			(10,932	)		(3,480	)
Changes in assets and liabilities, excluding the effects of businesses acquired:
Receivables		(127,769	)		(43,289	)		117,391
Prepaid expenses and other current assets		205			(9,732	)		7,177
Accounts payable		67,276			(13,098	)		(63,047	)
Accrued liabilities		2,622			20,957			(25,719	)
Billings in excess of costs		6,681			(10,843	)		(63,320	)
Income taxes payable		16,814			1,642			11,289
Deferred income taxes		(4,026	)		(10,923	)		3,036
Other, net		710			88			—
Net cash provided by operating activities		161,329			87,762			147,544
Cash Flows from Investing Activities:
Additions to property and equipment		(43,902	)		(37,110	)		(25,804	)
Disposals of property and equipment		1,354			7,815			3,307
Net increase in miscellaneous, non-current assets		(27,346	)		(9,562	)		(1,996	)
Purchases of investments		—			(8,772	)		(5,606	)
Proceeds from sales of investments		1,564			8,321			12,443
Acquisition of businesses, net of cash acquired		—			(163,752	)		—
Net cash used for investing activities		(68,330	)		(203,060	)		(17,656	)
Cash Flows from Financing Activities:
Proceeds from long-term borrowings		64,700			278,637			182,161
Repayments of long-term borrowings		(52,840	)		(220,374	)		(178,629	)
Net change in short-term borrowings		5,439			(3,121	)		(80,483	)
Proceeds from issuances of common stock		37,059			27,661			27,849
Other, net		(4,696	)		8,549			(5,861	)
Net cash provided by (used for) financing activities		49,662			91,352			(54,963	)
Effect of Exchange Rate Changes		(2,887	)		(2,134	)		2,761
Increase (Decrease) in Cash and Cash Equivalents		139,774			(26,080	)		77,686
Cash and Cash Equivalents at Beginning of Period		100,075			126,155			48,469
Cash and Cash Equivalents at End of Period	$	239,849		$	100,075		$	126,155

See the accompanying Notes to Consolidated Financial Statements.

F-6

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Description of Business and Basis of Presentation

Description of Business

Our principal business is to provide a broad range of technical, professional, and construction services. Such services include engineering, design, and architectural services; construction and construction management services; operations and maintenance services; and process, scientific, and systems consulting services. We provide our services through offices and subsidiaries located primarily in North America, Europe, Asia, and Australia. We provide our services under cost-reimbursable, cost-reimbursable with a guaranteed maximum price, and fixed-price contracts. The percentage of revenues realized from each of these types of contracts for each fiscal year ended September 30 was as follows:

	2005		2004		2003
Cost-reimbursable	85	%	83	%	82	%
Fixed-price	13		15		17
Guaranteed maximum price	2		2		1

Basis of Presentation

The Consolidated Financial Statements include the accounts of the parent company, Jacobs Engineering Group Inc., and its subsidiaries. As used herein, references to the “Company”, “we”, “us” or “our” are to both Jacobs Engineering Group Inc. and its consolidated subsidiaries, and references to “Jacobs” relate to the parent company only. All significant intercompany accounts and transactions have been eliminated in consolidation.

2.    Significant Accounting Policies

Revenue Accounting for Contracts and Use of Joint Ventures

In accounting for long-term engineering and construction-type contracts, we follow the provisions of the AICPA’s Statement of Position 81-1—Accounting for Performance of Construction-Type and Certain Production-Type Contracts. In general, we recognize revenues at the time we provide services. Depending on the commercial terms of the contract, we recognize revenues either when costs are incurred, or using the percentage-of-completion method of accounting by relating contract costs incurred to date to the total estimated costs at completion. Contract losses are provided for in their entirety in the period they become known, without regard to the percentage-of-completion. We recognize as revenues costs associated with claims and unapproved change orders to the extent it is probable that such claims and change orders will result in additional contract revenue, and the amount of such additional revenue can be reliably estimated.

Certain cost-reimbursable contracts with government customers as well as certain commercial clients provide that contract costs are subject to audit and adjustment. In this situation, revenues are recorded at the time services are performed based upon the amounts we expect to realize upon completion of the contracts. In those situations where an audit indicates that we may have billed a client for costs not allowable under the terms of the contract, we estimate the amount of such nonbillable costs and adjust our revenues accordingly.

As is common to the industry, we execute certain contracts jointly with third parties through various forms of joint ventures. In general, such contracts fall within the scope of SOP 81-1. We therefore account for these investments in accordance with SOP 81-1 and Emerging Issues Task Force Issue 00-01—Investor Balance Sheet and Income Statement Display under the Equity Method

F-7

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

for Investments in Certain Partnerships and Other Ventures. Accordingly, for certain of these joint ventures (i.e., where we have an undivided interest in the assets and liabilities of the joint venture), we recognize our proportionate share of joint venture revenues, costs and operating profit in our Consolidated Statements of Earnings. For other investments in engineering and construction joint ventures, we use the equity method of accounting.

Very few of our joint ventures have employees. Although the joint ventures own and hold the contracts with the clients, the services required by the contracts are typically performed by us and our joint venture partners, or by other subcontractors under subcontracting agreements with the joint ventures. The assets of our joint ventures, therefore, consist almost entirely of cash and receivables (representing amounts due from the clients); and the liabilities of our joint ventures consist almost entirely of amounts due to the joint venture partners (for services provided by the partners to the joint ventures) and other subcontractors. In general, at any given time, the equity of our joint ventures represents the undistributed profits earned under the contracts with clients. None of our joint ventures have third-party debt or credit facilities. Our joint ventures, therefore, are simply mechanisms used to deliver engineering and construction services to clients. They do not, in and of themselves, present any risk of loss to us or to our partners. Under accounting principles generally accepted in the United States, our share of losses associated with the contracts held by the joint ventures, if and when they occur, has always been reflected in our consolidated financial statements.

In accordance with the provisions of FASB Interpretation No. 46R—Consolidation of Variable Interest Entities (“FIN 46”), we have analyzed our joint ventures and have classified them into two groups: the first group consists of those variable interest entities (“VIEs”) of which we are the primary beneficiary; the second group consists of those VIEs of which we are not the primary beneficiary. In accordance with FIN 46, we apply the consolidation method of accounting for our investment in material VIEs of which we are the primary beneficiary.

At September 30, 2005, the total assets and liabilities of those VIEs for which we are the primary beneficiary were $94.4 million and $79.9 million, respectively, as compared to total assets of $102.5 million and total liabilities of $83.6 million at September 30, 2004. At September 30, 2005, the total assets and liabilities of those VIEs for which we are not the primary beneficiary were $105.4 million and $103.9 million, respectively, as compared to total assets of $23.9 million and total liabilities of $27.1 million at September 30, 2004.

When we are directly responsible for subcontractor labor or third-party materials and equipment, we reflect the costs of such items in both revenues and costs. On those projects where the client elects to pay for such items directly and we have no associated responsibility for such items, these amounts are not reflected in either revenues or costs. The amount of such “pass-through” costs included in revenues during fiscal 2005, 2004, and 2003, totaled $1.5 billion, $1.2 billion, and $1.4 billion, respectively.

Cash Equivalents

We consider all highly liquid investments with original maturities of less than three months to be cash equivalents. Cash equivalents at September 30, 2005 and 2004 consisted primarily of money market mutual funds.

Receivables and Billings in Excess of Costs

Included in “Receivables” in the accompanying Consolidated Balance Sheets at September 30, 2005 and 2004 were $518.6 million and $450.8 million, respectively, of unbilled receivables. Unbilled

F-8

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

receivables represent costs and amounts earned and reimbursable under contracts in progress as of the date our balance sheet. Such amounts become billable according to the contract terms, which usually consider the passage of time, achievement of certain milestones or completion of the project. Included in these unbilled receivables at September 30, 2005 and 2004 were contract retentions totaling $36.4 million and $44.9 million, respectively. We anticipate that substantially all of such unbilled amounts will be billed and collected over the next twelve months.

“Billings in excess of costs” represent cash collected from clients on contracts in advance of revenues earned thereon as well as advanced billings to clients in excess of costs and earnings on uncompleted contracts. We anticipate that substantially all such amounts will be earned over the next twelve months.

Amounts due from the U.S. federal government included in “Receivables” in the accompanying Consolidated Balance Sheets totaled $194.8 million and $154.5 million at September 30, 2005 and 2004, respectively.

In accordance with industry practice, we include in receivables claims representing the recovery of costs incurred on contracts to the extent it is probable that such claims will result in additional contract revenue and the amount of such additional revenues can be reliably estimated. Such amounts totaled $42.6 million and $38.7 million at September 30, 2005 and 2004, respectively, of which $31.3 million and $32.5 million, respectively, relate to one claim on a waste incineration project performed in Europe (due to the timing of when the claim may be settled, this claim is included in “Other Noncurrent Assets” in the accompanying consolidated balance sheets). The dispute involves proper waste feed, content of residues, final acceptance of, and costs of operation and maintenance of the plant. We have initiated litigation against the client and are seeking in excess of €40.0 million (approximately $48.1 million) in damages. The client has filed a counterclaim against us, which we believe is without merit.

Property, Equipment and Improvements

Property, equipment and improvements are carried at cost, and are shown net of accumulated depreciation and amortization in the accompanying Consolidated Balance Sheets. Depreciation and amortization is computed primarily by using the straight-line method over the estimated useful lives of the assets. The cost of leasehold improvements is amortized using the straight-line method over the lesser of the estimated useful life of the asset or the remaining term of the related lease. Estimated useful lives range from 20 to 40 years for buildings, from 3 to 10 years for equipment and from 4 to 10 years for leasehold improvements.

Goodwill and Other Intangible Assets

Consistent with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 141—Business Combinations and 142—Goodwill and Other Intangible Assets, goodwill and the cost of intangible assets with indefinite lives are not amortized, but are instead evaluated annually for possible impairment. In conducting the impairment test, we may apply, in accordance with the provisions of SFAS 142, various valuation techniques to estimate the fair value of our reporting units. The values resulting from the application of these valuation techniques are not necessarily representative of the values we might obtain in a sale of our reporting units to a willing third party. Since the adoption of SFAS 142 in fiscal 2002, we have not recorded any impairment loss associated with our goodwill

The cost of intangible assets with determinable lives is amortized ratably over the useful lives of the related assets. When events or circumstances or changes in our operations occur that could

F-9

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

indicate that the value of our intangible assets may be impaired, we would conduct an evaluation of the recoverability of the carrying value of our intangible assets with determinable lives to determine whether an adjustment should be made to the carrying value of such assets or their remaining useful lives of the assets, or both.

Earnings Per Share

Earnings per share (“EPS”) is calculated in accordance with SFAS No. 128—Earnings per Share. Basic EPS is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. Diluted EPS gives effect to all dilutive securities that were outstanding during the period. Our dilutive securities consist solely of nonqualified stock options.

Stock-Based Compensation

We have always accounted for stock-based, employee compensation using the intrinsic value method, in accordance with APB Opinion No. 25—Accounting for Stock Issued to Employees (“APB 25”). Accordingly, on the date a stock option is granted to an employee, we measure compensation cost based on the excess, if any, of the market price of the common stock of Jacobs over the exercise price of the awarded option.

SFAS No. 123—Accounting for Stock-Based Compensation prescribes an optional, fair-value based method of accounting for stock issued to employees and others. Had we determined compensation cost under SFAS 123, our net earnings and earnings per share for each fiscal year ended September 30 would have been reduced to the following pro forma amounts (in thousands, except per share data):

	2005		2004		2003
Net earnings as reported	$	151,020	$	128,975	$	128,010
Fair value of stock-based compensation cost, net of tax		19,412		13,401		15,365
Pro forma net earnings	$	131,608	$	115,574	$	112,645
Earnings per share:
Basic:
As reported	$	2.65	$	2.30	$	2.32
Pro forma	$	2.31	$	2.06	$	2.04
Diluted:
As reported	$	2.57	$	2.25	$	2.27
Pro forma	$	2.24	$	2.01	$	2.00

The fair value of each option was estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2005		2004		2003
Dividend yield	0	%	0	%	0	%
Expected volatility	30.46	%	30.92	%	31.61	%
Risk-free interest rate	3.80	%	4.35	%	3.11	%
Expected life of options (in years)	6.50		7.65		7.82

The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. Like all option-pricing models, the Black-Scholes model requires the use of highly subjective assumptions including the

F-10

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

expected volatility of the underlying stock price. Since our stock options possess characteristics significantly different from those of traded options, changes in the subjective input assumptions can materially affect the fair value estimates of our options. We believe that existing models do not necessarily provide a reliable single measure of the fair value of the stock options we grant. The effects of applying SFAS 123 for these pro forma disclosures are not likely to be representative of the effects on reported earnings for future fiscal years as options vest over several years and additional awards may be made each year.

With respect to the issuance of restricted stock, unearned compensation expense equivalent to the market value of the stock issued on the date of award is charged to stockholders’ equity and subsequently amortized against earnings over the periods during which the restrictions lapse. During fiscal years 2005, 2004, and 2003, we recognized compensation expense on restricted stock of $1.2 million, $0.8 million, and $0.9 million, respectively.

New Accounting Pronouncements

On December 16, 2004, SFAS No. 123R—Accounting for Share-Based Payment was issued. SFAS 123R is a revision of SFAS 123 and supersedes APB 25. SFAS 123R requires companies to record compensation expense for stock-based awards using a fair value method and is effective for annual periods beginning after June 15, 2005 (effective in fiscal 2006 for the Company). Compensation expense will be recorded over the requisite service period, which is typically the vesting period of the award. We currently plan to adopt SFAS 123R effective October 1, 2005, using the modified retrospective application method, and have begun the process of collecting and analyzing the information required. We estimate that the adoption of FAS 123R will have an after tax impact of approximately $9.0 million in fiscal 2006.

Concentrations of Credit Risk

Our cash balances and short-term investments are maintained in accounts held by major banks and financial institutions located primarily in the United States, Europe, Canada and Asia. In the normal course of our business, and consistent with industry practices, we grant credit to our clients without requiring collateral. Concentrations of credit risk is the risk that, if we extend a significant amount of credit to clients in a specific geographic area or industry, we may experience disproportionately high levels of default if those clients are adversely affected by factors particular to their geographic area or industry. Concentrations of credit risk relative to trade receivables are limited due to our diverse client base, which includes the U.S. federal government and multi-national corporations operating in a broad range of industries and geographic areas. Additionally, in order to mitigate credit risk, we continually evaluate the credit worthiness of our major commercial clients.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of certain assets and liabilities; amounts contained in certain of the Notes to the Consolidated Financial Statements; and the revenues and expenses reported for the periods covered by the financial statements. Although such assumptions are based on management’s best knowledge of current events and actions the Company may undertake in the future, actual results could differ significantly from those estimates and assumptions.

Earlier in these Notes to Consolidated Financial Statements, we discussed two significant accounting policies that rely on the application of estimates and assumptions: revenue accounting for

F-11

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

contracts; and the process for testing goodwill for possible impairment. The following is a discussion of certain other significant accounting policies that rely on the use of estimates:

Accounting for Pensions—In accounting for pensions, we follow the provisions of SFAS No. 87—Employers’ Accounting for Pensions. SFAS 87 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 involve discount rates, investment returns, and projected salary increases, among others. We rely on qualified actuaries to assist us in valuing the financial position of the plans, and to provide advice regarding the actuarial assumptions used. Changes in the actuarial assumptions may have a material affect on the plans’ assets and liabilities, and the associated pension expense.

Accounting for Income Taxes—We account for income taxes in accordance with SFAS No. 109—Accounting for Income Taxes. Judgment is required in determining our worldwide provision for income taxes. In the normal course of our business, we may engage in numerous transactions every day for which the ultimate tax outcome (including the period in which the transaction will ultimately be included in income or deducted as an expense) is uncertain. Additionally, we file income, franchise, gross receipts and similar tax returns in many jurisdictions. Our tax returns are subject to audit and investigation by the Internal Revenue Service, most states in the United States, and by various government agencies representing many jurisdictions outside the United States.

Insurance Matters, Litigation, Claims, and Contingencies—In the normal course of business, we are subject to certain contractual guarantees and litigation. In accordance with SFAS No. 5—Accounting for Contingencies, we record in the Consolidated Balance Sheets amounts representing our estimated liability relating to such claims, guarantees, litigation, and audits and investigations. We rely on qualified actuaries to assist us in determining the level of reserves to establish for both insurance-related claims that are known and have been asserted against us as well as for insurance-related claims that are believed to have been incurred based on actuarial analysis, but have not yet been reported to our claims administrators as of the respective balance sheet dates. We include any adjustments to such insurance reserves in our consolidated results of operations.

Fair Value of Financial Instruments

The net carrying amounts of cash and cash equivalents; receivables; and notes payable approximate fair value due to the short-term nature of these instruments. Similarly, we believe the carrying value of our long-term debt also approximates fair value based on the interest rates and scheduled maturities applicable to the outstanding borrowings. Certain other assets and liabilities, such as the forward contract and an interest rate swap agreement we purchased as cash-flow hedges (discussed below), are required to be carried in our consolidated financial statements at fair value. The fair values of such instruments are determined based on market information made available to us, and were not significant at September 30, 2005 and 2004.

3.    Stock Purchase and Stock Option Plans

Broad-Based, Employee Stock Purchase Plans

We sponsor two, broad-based, shareholder-approved employee stock purchase plans: the Jacobs Engineering Group Inc. 1989 Employee Stock Purchase Plan (the “1989 ESPP”) and the Jacobs Engineering Group Inc. Global Employee Stock Purchase Plan (the “GESPP”). Both plans give employees the right to purchase shares of the common stock of Jacobs. Under the 1989 ESPP, the purchase price was the lower of (i) 90% of the common stock’s closing market price on the first day of

F-12

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

the option period, or (ii) 90% of the common stock’s closing market price on the last day of the option period. Under the GESPP, the purchase price varied by sub-plan (there is one sub-plan for each foreign country where a participating subsidiary is domiciled), but could not be less than the lower of (i) 90% of the common stock’s closing market price on the first day of the option period, or (ii) 90% of the common stock’s closing market price on the last day of the option period. Option periods under both plans were six months in duration, running from September 1 to February 28 or 29, and from March 1 to August 31. During fiscal 2005, certain amendments were made to both the 1989 ESPP and the GESPP in order to (i) ensure that all option periods ended on September 30, 2005, and (ii) limit the discount employees may realize on purchases occurring after September 30, 2005 to no more than 5% of the market value of the common stock on the last day of the option period.

The following table summarizes the stock issuance activity under the 1989 ESPP and the GESPP during each fiscal year ended September 30:

	2005		2004		2003
Aggregate Purchase Price Paid for Shares Sold:
Under the 1989 ESPP	$	26,533,461	$	22,123,243	$	21,128,603
Under the GESPP		3,028,806		2,085,819		1,786,296
Total	$	29,562,267	$	24,209,062	$	22,914,899
Aggregate Number of Shares Sold:
Under the 1989 ESPP		621,160		593,216		656,308
Under the GESPP		67,096		55,103		55,140
Total		688,256		648,319		711,448

At September 30, 2005, there were 863,933 shares reserved for issuance under the 1989 ESPP, and there were 402,488 shares reserved for issuance under the GESPP.

Stock Option Plans

We sponsor two, continuing, shareholder-approved stock option plans: the 1999 Stock Incentive Plan (the “1999 SIP”) and the 1999 Outside Director Stock Plan (the “1999 OSDP”). The 1999 SIP provides for the issuance of incentive stock options, nonqualified stock options and restricted stock to employees. The 1999 OSDP provides for awards of stock and restricted stock, and grants of nonqualified stock options to our outside (i.e., nonemployee) directors. The 1999 SIP and the 1999 OSDP (the “1999 Plans”) replaced our 1981 Executive Incentive Plan (the “1981 Plan”). The following table sets forth certain information about the 1999 SIP and 1999 OSDP (together, the “1999 Stock Option Plans”):

	1999 SIP	1999 OSDP	Total
Number of shares authorized	7,600,000	400,000	8,000,000
Number of remaining shares reserved for issuance at September 30, 2005	6,483,015	336,500	6,819,515
Number of shares relating to outstanding stock options at September 30, 2005	4,194,334	117,000	4,311,334
Number of shares available for future awards:
At September 30, 2005	2,288,681	219,500	2,508,181
At September 30, 2004	787,375	249,500	1,036,875

F-13

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The number of shares of common stock that may be awarded under the 1999 SIP in the form of restricted stock is limited to 1,560,000 shares, and shares of restricted stock that are subsequently forfeited become available again for issuance as restricted stock. At September 30, 2005, there was a total of 1,338,400 shares of common stock that remained available for issuance in the form of restricted stock under the 1999 SIP.

The following table summarizes the stock option activity under the 1999 Stock Option Plans and the 1981 Plan for each fiscal year ended September 30:

	Number of Options		Weighted Average Exercise Price
Outstanding at September 30, 2002	4,939,711		$	22.88
Granted	660,500		$	39.70
Exercised	(457,148	)	$	16.14
Cancelled or expired	(69,450	)	$	24.76
Outstanding at September 30, 2003	5,073,613		$	25.64
Granted	996,000		$	44.55
Exercised	(227,575	)	$	18.03
Cancelled or expired	(16,875	)	$	30.60
Outstanding at September 30, 2004	5,825,163		$	29.16
Granted	499,550		$	52.61
Exercised	(1,159,055	)	$	18.08
Cancelled or expired	(71,256	)	$	39.95
Outstanding at September 30, 2005	5,094,402		$	33.83

Options outstanding at September 30, 2005 consisted entirely of nonqualified stock options. Included in the number of options outstanding at September 30, 2005 were options to purchase 783,068 shares of common stock granted under the 1981 Plan. Certain other information regarding our stock option plans follows:

	2005		2004		2003
At September 30:
Range of exercise prices for options outstanding	$	10.20–$53.90	$	9.79–$47.15	$	9.79–$46.30
Number of options exercisable		3,478,120		3,634,288		2,799,888
For the fiscal year ended September 30:
Range of prices relating to options exercised	$	9.79–$46.69	$	9.79–$39.92	$	9.79–$39.19
Estimated weighted average fair values of options granted	$	20.93	$	20.38	$	16.92

F-14

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents certain information regarding options outstanding, and options exercisable at September 30, 2005:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number	Weighted Average Remaining Contractual Life (years)	Weighted Average Price		Number	Weighted Average Exercise Price
$10.20–$10.74	46,500	1.7	$	10.41	46,500	$	10.41
$11.05–$15.97	489,618	2.8	$	14.41	489,618	$	14.41
$16.26–$19.66	784,100	4.3	$	17.53	784,100	$	17.53
$21.57–$26.58	38,810	3.9	$	23.39	37,310	$	23.26
$26.99–$32.29	357,000	6.3	$	29.35	293,250	$	29.18
$32.88–$36.98	808,140	5.7	$	33.04	789,890	$	32.97
$38.16–$42.50	1,396,810	6.9	$	39.62	804,480	$	39.53
$43.25–$48.02	736,874	6.1	$	46.30	232,972	$	46.35
$51.95–$53.90	436,550	6.6	$	53.83	—	$	—
	5,094,402	5.7	$	33.83	3,478,120	$	28.56

Our stock option plans allow participants to satisfy the exercise price by tendering shares of Jacobs common stock that have been owned by the participants for at least six months. Shares so tendered are retired and canceled, and are shown as repurchases of common stock in the accompanying Consolidated Statements of Stockholders’ Equity.

During the fiscal years ended September 30, 2005, 2004, and 2003, we issued 104,550 shares, 29,000 shares, and 23,000 shares, respectively, of restricted stock under our stock options plans. The restrictions generally relate to the recipient’s ability to sell or otherwise transfer the stock. There are also restrictions that subject the stock to forfeiture back to us until earned by the recipient through continued employment or service.

4.    Earnings Per Share

The following table reconciles the denominator used to compute basic EPS to the denominator used to compute diluted EPS for each fiscal year ended September 30 (in thousands):

	2005	2004	2003
Weighted average shares outstanding (denominator used to compute Basic EPS)	57,046	56,134	55,145
Effect of stock options and restricted shares	1,644	1,299	1,247
Denominator used to compute Diluted EPS	58,690	57,433	56,392

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5. Business Combination

During the fourth quarter of fiscal 2004, we completed the acquisition of the Babtie Group Limited (the “Babtie Group”) for a total cash purchase price of £92.0 million (then, approximately $169.3 million). The Babtie Group is a leading provider of technical and professional services to clients in the infrastructure, facilities, environmental, defense, and governmental outsourcing markets, among others. Headquartered in Scotland, the Babtie Group employs approximately 3,500 people in offices located throughout the United Kingdom and Asia, with smaller operations in India and the Czech Republic. The purchase price was financed through a combination of cash-on-hand and borrowings under our long-term, revolving credit facility. Our consolidated results of operations include those of the Babtie Group from the date of acquisition.

The purchase price was allocated to the tangible net assets acquired (approximately $42.8 million), and intangible assets acquired (approximately $35.0 million). The intangible assets acquired are being amortized over lives that range from 2.5 years to 8 years (the weighted average life for all intangibles is 5.9 years) and are included in “Miscellaneous Noncurrent Assets” in the accompanying Consolidated Balance Sheet.

Following the completion of the acquisition of the Babtie Group, we completed the purchase price allocation process. This process resulted in increases to goodwill, net of taxes, primarily for an underfunded pension plan (approximately $39.3 million); office consolidations and project-related reserves (approximately $10.2 million); and self-insurance reserves (approximately $6.2 million).

6. Property, Equipment and Improvements, Net

The following table presents the components of our property, equipment and improvements at September 30, 2005 and 2004 (in thousands):

	2005			2004
Land	$	8,775		$	7,990
Buildings		67,729			66,046
Equipment		257,491			240,325
Leasehold improvements		44,042			38,993
Construction in progress		7,909			11,130
		385,946			364,484
Accumulated depreciation and amortization		(230,975	)		(213,302	)
	$	154,971		$	151,182

Operating expenses include provisions for depreciation and amortization of $38.7 million, $33.0 million, and $35.4 million for fiscal 2005, 2004, and 2003, respectively.

7. Borrowings

Short-Term Credit Arrangements

At September 30, 2005, we had approximately $36.0 million available through multiple, committed bank lines of credit, under which we may borrow on an overdraft or short-term basis. Interest under these lines is determined at the time of borrowing based on the banks’ prime or base rates, rates paid on certificates of deposit, the banks’ actual costs of funds or other variable rates. Most of the agreements require the payment of a fee based on the amount of the facility. Some of the agreements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

require us to be in compliance with the covenants, terms and conditions contained in our long-term, revolving credit facility (discussed below). Other agreements require us to maintain certain minimum levels of working capital and net worth.

The following table presents certain information regarding our lines of credit, both committed and uncommitted, for each fiscal year ended September 30 (dollars in thousands):

	2005			2004			2003
Amount outstanding at year end	$	6,351		$	1,257		$	467
Weighted average interest rate at year end		1.85	%		5.25	%		3.29	%
Weighted average borrowings outstanding during the year	$	10,194		$	5,261		$	5,307
Weighted average interest rate during the year		2.26	%		3.61	%		4.14	%
Maximum amount outstanding during the year	$	13,528		$	11,268		$	12,790

Long-term Debt and Credit Arrangements

Amounts shown as “Long-term Debt” in the accompanying Consolidated Balance Sheets represent borrowings under our $290.0 million, long-term, revolving credit facility. This facility expires in January 2010, and provides for unsecured borrowings at either fixed rates offered by the banks (a syndicate consisting of U.S., Canadian, and European banks) at the time of borrowing, or at variable rates based on the agent bank’s base rate, LIBOR or the latest federal funds rate. The agreement requires us to maintain certain minimum levels of net worth, a minimum coverage ratio of certain fixed charges, and a minimum leverage ratio of earnings before interest, taxes, depreciation and amortization to funded debt (all as defined in the agreement). The agreement also restricts the payment of cash dividends and requires us to pay a facility fee based on the total amount of the commitments. During fiscal 2005 and 2004, the weighted average interest rates charged on these borrowings were 4.30% and 3.49%, respectively.

Interest payments made during fiscal 2005, 2004, and 2003 totaled $5.2 million, $2.4 million, and $4.2 million, respectively.

8. Pension Plans

Company-Only Sponsored Plans

We sponsor various defined benefit pension plans covering employees of certain U.S. and international subsidiaries. The one remaining U.S. pension plan, which was acquired in connection with the 1999 merger with Sverdrup Corporation, was frozen in 1999 allowing no new participants to enter.

The pension plans provide pension benefits that are based on the employee’s compensation and years of service. Our funding policy is to fund the actuarially determined accrued benefits, allowing for projected compensation increases using the projected unit method.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table sets forth the change in the plans’ combined net benefit obligation for each fiscal year ended September 30 (in thousands):

	2005			2004
Net benefit obligation at the beginning of the year	$	560,725		$	255,622
Service cost		21,268			7,389
Interest cost		34,869			19,776
Participants’ contributions		14,359			3,940
Actuarial (gains) losses		115,520			(6,321	)
Benefits paid		(24,491	)		(13,259	)
Effect of plan amendments		6,219			17,870
Curtailments/Settlements		(3,840	)		—
Effect of acquisitions		4,459			261,991
Effect of exchange rate changes		(19,104	)		13,717
Net benefit obligation at the end of the year	$	709,984		$	560,725

The following table sets forth the change in the combined fair value of the plans’ assets for each fiscal year ended September 30 (in thousands):

	2005			2004
Fair value of plan assets at the beginning of the year	$	407,180		$	185,560
Actual return on plan assets		62,010			18,730
Employer contributions		33,822			14,920
Participants’ contributions		14,359			3,940
Gross benefits paid		(24,491	)		(13,259	)
Effect of acquisitions		2,962			186,282
Effect of exchange rate changes		(12,662	)		11,007
Curtailments/Settlements		(2,038	)		—
Fair value of plan assets at the end of the year	$	481,142		$	407,180

The following table reconciles the combined funded statuses of the plans as well as amounts recognized and not recognized in the accompanying Consolidated Balance Sheets at September 30, 2005 and 2004 (in thousands):

	2005			2004
Funded status at the end of the year	$	(228,842	)	$	(153,545	)
Unrecognized actuarial losses		166,239			81,874
Unamortized prior service cost		24,646			19,096
Additional minimum liability		(145,774	)		(76,524	)
Contributions after measurement date		29,156			8,913
Effect of exchange rate changes		(7,138	)		771
Net amount recognized at the end of the year	$	(161,713	)	$	(119,415	)

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents the amounts recognized in the accompanying Consolidated Balance Sheets at September 30, 2005 and 2004 (in thousands):

	2005			2004
Prepaid pension asset	$	38,510		$	22,333
Additional minimum liability		(145,774	)		(76,524	)
Accrued benefit liability		(54,449	)		(65,224	)
Net benefit obligation recognized at the end of the year	$	(161,713	)	$	(119,415	)

The following table presents the significant actuarial assumptions used in determining the funded statuses of the plans for each fiscal year ended September 30:

	2005	2004	2003
Weighted average discount rates	4.0% to 5.5%	5.25% to 6.25%	6.0% to 6.3%
Rates of compensation increases	3.0% to 3.5%	2.5% to 4.5%	2.5% to 3.3%
Expected rates of return on plan assets	6.0% to 9.0%	6.0% to 9.0%	8.0% to 9.0%

We consider various factors in developing the estimates for the expected, long-term rates of return on plan assets. These factors include the projected, long-term rates of returns on the various types of assets in which the plans invest, as well as historical returns. The range of 6.0% to 9.0% expected rate of return used in the current valuation of the funded status of the plans was determined after considering the aforementioned factors. In general, investment allocations are determined by each plan’s trustees and/or investment committees. The objectives of the plans’ investment policies are to (i) maximize returns while preserving capital; (ii) provide returns sufficient to meet the current and long-term obligations of the plan as the obligations become due; and (iii) maintain a diversified portfolio of assets so as to avoid concentration of investment risk in any one type of asset, issuer or geography. None of our pension plans hold a material amount of the common stock of Jacobs Engineering Group Inc. The plans’ weighted average asset allocations at June 30, 2005 and 2004 (the measurement dates used in valuing the plans’ assets and liabilities) were as follows:

	2005		2004
Equity securities	56	%	57	%
Debt securities	36	%	34	%
Real estate investments	1	%	1	%
Other	7	%	8	%

We anticipate our contributions into the plans for fiscal 2006 will total approximately $36.1 million. Total benefit payments expected to be paid to the participants of our pension plans for each of the next five fiscal years, and in total for the five years thereafter, are as follows (in thousands):

2006	$	22,106
2007		23,168
2008		24,509
2009		25,629
2010		27,203
For the period 2011 through 2015		157,570

At September 30, 2005, our pension plans were in a net, under-funded status by $228.8 million compared to a net, under-funded status of $153.5 million at September 30, 2004.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents the components of net periodic pension cost recognized in the accompanying Consolidated Statements of Earnings for each fiscal year ended September 30 (in thousands):

	2005			2004			2003
Service cost	$	21,268		$	7,389		$	10,127
Interest cost		34,868			19,775			24,696
Expected return on plan assets		(32,962	)		(20,341	)		(26,834	)
Other		6,218			4,684			2,751
Net pension cost, before settlement charge		29,392			11,507			10,740
Settlement charge		(1,802	)		—			—
Total, net periodic pension cost recognized	$	27,590		$	11,507		$	10,740

Included in other comprehensive income for fiscal 2005 are after-tax charges totaling $49.5 million adjusting the additional minimum liabilities relating to the pension plans. Included in other comprehensive income for fiscal 2004 and 2003 are after-tax credits and charges of $6.6 million and $13.1 million, respectively, relating to the additional minimum liabilities of the pension plans. In general, SFAS 87 requires companies to record a liability in the amount by which a pension plan’s accumulated benefit obligation exceeds the fair value of its assets. This non-cash charge to stockholders’ equity will be reviewed next fiscal year in connection with the annual actuarial valuation of the pension plans and is subject to adjustment at that time.

In connection with the fiscal 2001 acquisition of certain engineering and contracting businesses from Stork N.V., we are negotiating the value of certain plan assets and prior service obligations that may be transferred from a multiemployer pension plan into a new, single-employer pension plan we formed during fiscal 2004 for the benefit of our employees in the Netherlands. If such a transfer were to occur presently, we believe the value of the assets we would receive would be less than the value of the prior service pension obligations we would assume. This difference would be treated in a manner similar to unamortized prior service costs. Included in “Other Deferred Liabilities” in the accompanying Consolidated Balance Sheet at September 30, 2005 is approximately $40.4 million for the prior service obligations relating to the multiemployer pension plan in the Netherlands.

Multiemployer Plans

In the United States and Canada, we contribute to various trusteed pension plans covering hourly construction employees under industry-wide agreements. In selected operations in Europe, we contribute to multiemployer plans covering both hourly and certain salaried employees. Contributions are based on the hours worked by employees covered under these agreements and are charged to direct costs of contracts on a current basis. Information from the plans’ administrators is not available to permit us to determine our share of unfunded benefits, if any. Our contributions to these plans totaled $38.1 million, $39.2 million, and $36.4 million for each of the three fiscal years ended September 30, 2005, 2004, and 2003, respectively.

9.    Savings and Deferred Compensation Plans

Savings Plans

We maintain savings plans for substantially all of our domestic, nonunion employees. These plans allow participants to make contributions by salary deduction pursuant to section 401(k) of the United States Internal Revenue Code. Our contributions to these plans totaled $21.5 million, $20.4 million,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

and $23.5 million, for fiscal 2005, 2004, and 2003, respectively. Company contributions are voluntary for most of the savings plans, and represent a partial matching of employee contributions.

Deferred Compensation Plans

Our Executive Security Plan (“ESP”) and Executive Deferral Plans (“EDP”) are nonqualified deferred compensation programs that provide benefits payable to directors, officers, and certain key employees or their designated beneficiaries at specified future dates, upon retirement, or death. Benefit payments under both plans are funded by a combination of contributions from participants and the Company, and most of the participants are covered by life insurance policies with the Company designated as the beneficiary. Amounts charged to expense relating to these programs for each of the three fiscal years ended September 30, 2005, 2004, and 2003 totaled $3.6 million, $4.9 million, and $2.0 million, respectively.

10.    Income Taxes

The following table presents the components of our consolidated income tax expense for each fiscal year ended September 30 (in thousands):

	2005			2004			2003
Current tax expense:
Federal	$	54,280		$	44,548		$	30,467
State		9,386			7,692			7,497
Foreign		18,318			21,559			10,386
Total current tax expense		81,984			73,799			48,350
Deferred tax expense (benefit):
Federal		(7,393	)		2,077			16,816
State		1,278			435			845
Foreign		9,170			(6,862	)		2,918
Total deferred tax expense (benefit)		3,055			(4,350	)		20,579
Consolidated income tax expense	$	85,039		$	69,449		$	68,929

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Deferred taxes reflect the tax effects of the differences between the amounts recorded as assets and liabilities for financial reporting purposes and the comparable amounts recorded for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The following table presents the components of our net deferred tax assets at September 30, 2005 and 2004 (in thousands):

	2005			2004
Deferred tax assets:
Liabilities relating to employee benefit plans	$	54,661		$	50,613
Defined benefit pension plans		69,413			44,081
Liabilities relating to self-insurance programs		14,758			15,390
Net operating loss carryforwards relating to non-U.S. operations		5,147			—
Incremental U.S. tax on unremitted foreign earnings		4,487			—
Contract revenues and costs		—			8,433
Settlement of pension obligations		—			6,677
Foreign deferred taxes		—			16,602
Other		1,889			2,370
Gross deferred tax assets		150,355			144,166
Deferred tax liabilities:
Depreciation and amortization		(18,515	)		(20,801	)
Contract revenues and costs		(888	)		—
State income and franchise taxes		(734	)		(1,463	)
Residual U.S. tax on unremitted foreign earnings		—			(2,618	)
Other		(1,507	)		(3,224	)
Gross deferred tax liabilities		(21,644	)		(28,106	)
Net deferred tax assets	$	128,711		$	116,060

During fiscal 2005, 2004, and 2003, we realized income tax benefits of $15.4 million, $2.0 million, and $3.8 million, respectively, relating to exercises of nonqualified stock options. Generally, the net operating loss carry forwards of our non-U.S. operations may be carried forward indefinitely until fully utilized.

The reconciliation from the statutory U.S. federal income tax expense to the consolidated effective income tax expense for each fiscal year ended September 30 follows (dollars in thousands):

	2005			2004			2003
Statutory amount	$	82,621		$	69,449		$	68,929
State taxes, net of the federal benefit		6,932			5,283			5,422
Other, net		(4,514	)		(5,283	)		(5,422	)
Consolidated income tax expense	$	85,039		$	69,449		$	68,929
Rates used to compute statutory amount		35.0	%		35.0	%		35.0	%
Consolidated effective income tax rates		36.0	%		35.0	%		35.0	%

During fiscal 2005, 2004, and 2003, we paid approximately $71.5 million, $76.8 million, and $58.0 million, respectively, in income taxes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents the components of our consolidated earnings before taxes for each fiscal year ended September 30 (in thousands):

	2005		2004		2003
United States earnings	$	181,836	$	164,031	$	142,733
Foreign earnings		54,223		34,393		54,206
	$	236,059	$	198,424	$	196,939

United States income taxes, net of applicable credits, have been provided on the undistributed earnings of the Company’s foreign subsidiaries, except in those instances where the earnings are expected to be permanently reinvested. At September 30, 2005, approximately $50.0 million of such undistributed earnings of certain foreign subsidiaries was expected to be permanently reinvested. Should these earnings be repatriated, approximately $9.0 million of income taxes would be payable.

11.    Commitments, Contingencies and Guarantees

Commitments Under Operating Leases

We lease certain of our facilities and equipment under operating leases with net aggregate future lease payments of approximately $304.6 million at September 30, 2005 payable as follows (in thousands):

Year ending September 30,
2006	$	78,752
2007		66,769
2008		57,055
2009		46,658
2010		34,202
Thereafter		58,978
		342,414
Amounts representing sublease income		(37,780	)
	$	304,634

Rent expense for fiscal years 2005, 2004, and 2003 totaled $84.6 million, $70.7 million, and $66.3 million, respectively, and was offset by sublease income of approximately $5.5 million, $6.9 million, and $3.6 million, respectively. Operating leases relating to many of our major offices generally contain renewal options, and provide for additional rental based on escalation in operating expenses and real estate taxes.

Contingencies

Concurrent with the acquisition of the Babtie Group, we entered into a forward contract with a large, U.S. bank in the notional amount of £39.9 million (approximately $73.4 million). The purpose of the contract was to hedge the exposure to fluctuating foreign-currency exchange rates on a £39.9 million intercompany loan. Based on the terms of the contract, we believe the effect of the loan on future earnings at September 30, 2005 should be limited to $4.1 million of expense. In addition, we entered into a floating-to-fixed interest rate swap agreement with another U.S. bank which fixes the effective rate of interest on £34.0 million (then, approximately $61.1 million) of bank debt incurred in

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

connection with the acquisition of the Babtie Group. This instrument allows us to receive a floating rate payment tied to the 3-month LIBOR plus a spread from the counterparty, in exchange for a fixed-rate payment from us. We’ve determined these contracts to be highly effective according to the definitions of SFAS No. 133—Accounting for Derivative Instruments and Hedging Activities. The contracts are recognized in the Consolidated Balance Sheet at their fair values. Changes in the fair values of the derivatives are recorded in other comprehensive income and are released into earnings over the life of the forward contract. Amounts released during fiscal 2005 and 2004 totaled $0.7 million and $0.1 million, respectively. The fair values of the derivatives were not material at September 30, 2005 and 2004.

In the normal course of business, we are subject to certain contractual guarantees, litigation and investigations. Generally, such guarantees relate to project schedules and plant performance. Most of the litigation involves us as a defendant in workers’ compensation, personal injury, environmental, environmental exposure, professional liability, and other similar lawsuits. We maintain insurance coverage for various aspects of our business and operations. We have elected, however, to retain a portion of losses that occur through the use of various deductibles, limits and retentions under our insurance programs. This situation may subject us to some 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 our contracts.

In addition, as a contractor providing services to agencies of the United States federal government, we are subject to many levels of audits, investigations and claims by, or on behalf of, the U.S. federal government with respect to our contract performance, pricing, costs, cost allocations and procurement practices. Furthermore, our income, franchise, and similar tax returns and filings are also subject to audit and investigation by the Internal Revenue Service, most states within the United States as well as by various government agencies representing jurisdictions outside the United States within which we operate.

Management believes, after consultation with counsel, that such guarantees, litigation, United States Government contract-related audits, investigations and claims, and income tax audits and investigations should not have any material adverse effect on our consolidated financial statements.

Letters of credit outstanding at September 30, 2005 totaled $78.6 million.

Guarantees

We lease certain real property located in Houston, Texas which, for the purpose of this disclosure, we refer to as “Houston Tower I”. Houston Tower I consists of an office building which we use in our operations. The operating lease agreement for Houston Tower I gives us the option to purchase the real property at the end of the lease term in 2011 for $49.0 million. We also have the right to request an extension of the lease, or we may assist the owner in selling the property at the end of the lease term. The proceeds from any such sale would be used to reduce our end-of-term return payment obligation of $35.3 million.

During fiscal 2005, we entered into various agreements including a master operating lease agreement for the construction and lease of an approximately 293,000 square foot office building and adjacent parking structure in Houston, Texas (“Houston Tower II”), and the lease of equipment and other tangible personal property. Houston Tower II will be constructed on property that is adjacent to Houston Tower I. Houston Tower II is expected to be completed in early calendar 2007 and, when

F-24

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

finished, will be used by us in our operations. The lease agreement for Houston Tower II is expected to run through 2015 and gives us the option to purchase the real property at any time prior to the expiration of the lease. We also have the right to assist the owner in selling the property at the end of the lease term. The net proceeds from any such sale of the property would be used to reduce our end-of-term residual value guarantee (expected to be approximately $38.8 million).

At September 30, 2005, we had guaranteed the repayment of certain bank debt of an unconsolidated affiliate. The term of the guarantee is equal to the remaining term of the underlying debt, which is scheduled to terminate on July 31, 2006. We would be required to perform on the guarantee in the event of default by the primary obligor. The maximum potential amount of future payments we could be required to make under this guarantee at September 30, 2005 is $3.0 million.

We have determined that the aggregate fair value of the aforementioned financial guarantees is not significant at September 30, 2005.

12.    Common and Preferred Stock

We are authorized to issue two classes of capital stock: common stock and preferred stock (each has a par value of $1.00 per share). The preferred stock may be issued in one or more series. The number of shares to be included in a series as well as each series’ designation, relative powers, dividend and other preferences, rights and qualifications, redemption provisions, and restrictions are to be fixed by our Board of Directors at the time each series is issued. Except as may be provided by the Board of Directors in a preferred stock designation, or otherwise provided for by statute, the holders of our common stock have the exclusive right to vote for the election of Directors and all other matters requiring stockholder action. The holders of our common stock are entitled to dividends if and when declared by the Board of Directors from whatever assets are legally available for that purpose.

Pursuant to our Amended and Restated Rights Agreement dated December 20, 2000, each outstanding share of common stock has attached to it one stock purchase right (a “Right”). Each Right entitles the common stockholder to purchase, in certain circumstances generally relating to a change in control of the Company, one one-hundredth of a share of our Series A Junior Participating Cumulative Preferred Stock, par value $1.00 per share (the “Series A Preferred Stock”) at the exercise price of $87.50 per share, subject to adjustment. Alternatively, the Right holder may purchase our common stock having a market value equal to two times the exercise price, or may purchase shares of common stock of the acquiring corporation having a market value equal to two times the exercise price.

The Series A Preferred Stock confers to its holders, rights as to dividends, voting and liquidation which are in preference to common stockholders. The Rights are nonvoting, are not presently exercisable and currently trade in tandem with the common shares. In accordance with the Rights Plan, we may redeem the Rights at $0.01 per Right. The Rights will expire on December 20, 2010, unless earlier exchanged or redeemed.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

13.    Other Financial Information

The following table presents the components of the items indicated as shown in the accompanying Consolidated Balance Sheets at September 30, 2005 and 2004 (in thousands):

	2005		2004
Miscellaneous Noncurrent Assets:
Deferred income taxes	$	101,847	$	82,078
Cash surrender value of life insurance policies		58,031		54,211
Intangible assets (a)		41,280		49,340
Prepaid pension costs		38,510		22,333
Project related long-term receivables		31,305		32,378
Investments		26,878		32,223
Notes receivable		3,395		3,340
Other		12,164		12,845
Total	$	313,410	$	288,748
Accrued Liabilities:
Accrued payroll and related liabilities	$	241,463	$	210,281
Project-related accruals		52,433		48,093
Insurance liabilities		41,637		34,318
Sales Tax		26,184		24,548
Other		46,054		59,928
Total	$	407,771	$	377,168
Other Deferred Liabilities:
Liabilities relating to defined benefit pension and early retirement plans	$	246,420	$	186,961
Liabilities relating to nonqualified deferred compensation arrangements		46,463		45,045
Deferred income taxes		19,283		25,176
Other		19,631		38,507
Total	$	331,797	$	295,689

(a) Intangible assets consist primarily of intangible assets acquired in connection with the Babtie Group, and an intangible asset relating to one of our international defined benefit pension plans.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

14.    Comprehensive Income

We have disclosed the components of comprehensive income in the accompanying Consolidated Statements of Comprehensive Income and Consolidated Statements of Changes in Stockholders’ Equity. The accumulated balances relating to each component of other comprehensive income (loss), net of any related income tax, for each fiscal year ended September 30 follows (in thousands):

	Foreign Currency Translation Adjustments			Minimum Pension Liability Adjustment			Other			Total Accumulated Other Comprehensive Loss
Balances at September 30, 2002	$	(13,259	)	$	(31,227	)	$	1,904		$	(42,582	)
Changes during the year		9,133			(13,079	)		(1,790	)		(5,736	)
Balances at September 30, 2003		(4,126	)		(44,306	)		114			(48,318	)
Changes during the year		(1,688	)		6,632			(568	)		4,376
Balances at September 30, 2004		(5,814	)		(37,674	)		(454	)		(43,942	)
Changes during the year		(1,626	)		(49,494	)		(2,288	)		(53,408	)
Balances at September 30, 2005	$	(7,440	)	$	(87,168	)	$	(2,742	)	$	(97,350	)

“Other” consists of unrealized gains (losses) on available-for-sale marketable securities, and gains (losses) associated with two cash flow hedges.

F-27

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

15.    Segment Information

As discussed above, we provide a broad range of technical, professional, and construction services. We provide our services primarily from offices located throughout North America and Europe. We also have offices located in selected regions of Asia, Mexico and Australia.

All of our operations share similar economic characteristics. For example, all of our operations are highly influenced by the general availability of qualified engineers and other technical professional staff. They also provide similar services as well as share similar processes for delivering our services. In addition, the use of technology is highly similar and consistent throughout our organization, as is our client base (with the exception of our operations outside the United States, which perform very little work for the U.S. federal government), and our quality assurance and safety programs. Furthermore, the types of information and internal reports used by management to monitor performance, evaluate results of operations, allocate resources, and otherwise manage the business support a single reportable segment. Accordingly, based on these similarities, we have concluded that our operations may be aggregated into one reportable segment for purposes of this disclosure.

The following table presents certain financial information by geographic area for fiscal 2005, 2004, and 2003 (in thousands):

	2005		2004		2003
Revenues (for the fiscal years ended September 30):
United States	$	3,741,257	$	3,045,003	$	2,985,022
Europe		1,285,957		979,498		1,128,274
Canada		525,467		506,387		460,083
Asia		53,577		38,209		29,910
Other		28,743		25,138		12,312
Total	$	5,635,001	$	4,594,235	$	4,615,601
Long-Lived Assets (at September 30):
United States	$	109,198	$	103,469	$	103,994
Europe		28,182		31,895		23,955
Canada		5,072		4,027		2,681
Asia		12,519		11,791		11,473
Total	$	154,971	$	151,182	$	142,103

Revenues were earned from unaffiliated clients located primarily within the various and respective geographic areas shown. Long-lived assets consist of property and equipment, net of accumulated depreciation and amortization.

For each of the three fiscal years ended September 30, 2005, 2004, and 2003, revenues earned directly or indirectly from agencies of the U.S. federal government accounted for 21.2%, 22.3%, and 22.6%, respectively, of total revenues.

F-28

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

16.    Selected Quarterly Information—Unaudited

The following table presents selected quarterly financial information for each of the fiscal years shown (in thousands, except per share amounts):

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Fiscal Year
2005
Revenues	$	1,283,300	$	1,383,195	$	1,449,047	$	1,519,459	$	5,635,001
Operating profit		52,719		57,639		63,773		67,343		241,474
Earnings before taxes		50,829		55,721		62,576		66,933		236,059
Net earnings		32,530		35,660		40,050		42,780		151,020
Earnings per share:
Basic		0.58		0.63		0.70		0.74		2.65
Diluted		0.56		0.61		0.68		0.72		2.57
2004
Revenues	$	1,135,129	$	1,123,884	$	1,119,536	$	1,215,686	$	4,594,235
Operating profit		52,418		52,785		46,631		46,432		198,266
Earnings before taxes		52,000		53,500		46,046		46,878		198,424
Net earnings		33,800		34,775		29,930		30,470		128,975
Earnings per share:
Basic		0.61		0.62		0.53		0.54		2.30
Diluted		0.59		0.61		0.52		0.53		2.25
2003
Revenues	$	1,218,680	$	1,202,606	$	1,131,105	$	1,063,210	$	4,615,601
Operating profit		46,843		48,514		50,550		51,208		197,115
Earnings before taxes		46,369		48,431		50,554		51,585		196,939
Net earnings		30,140		31,480		32,860		33,530		128,010
Earnings per share:
Basic		0.55		0.57		0.59		0.60		2.32
Diluted		0.54		0.56		0.58		0.59		2.27

Operating profit represents revenues, less direct costs of contracts and selling, general and administrative expenses.

F-29

Report of Ernst & Young LLP

Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Jacobs Engineering Group Inc.

We have audited the accompanying consolidated balance sheets of Jacobs Engineering Group Inc. and subsidiaries as of September 30, 2005 and 2004, and the related consolidated statements of earnings, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Jacobs Engineering Group Inc. and subsidiaries at September 30, 2005 and 2004, and the consolidated results of their operations and their cash flows for each of the three years in the period ended September 30, 2005, in conformity with U.S. generally accepted accounting principles.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Jacobs Engineering Group Inc.’s internal control over financial reporting as of September 30, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 2, 2005 expressed an unqualified opinion thereon.

Los Angeles, California

December 2, 2005

F-30

Report of Ernst & Young LLP

Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Jacobs Engineering Group Inc.

We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Jacobs Engineering Group Inc. (the “Company”) maintained effective internal control over financial reporting as of September 30, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of September 30, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2005, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Jacobs Engineering Group Inc. and subsidiaries as of September 30, 2005 and 2004 and the related consolidated statements of earnings, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2005 and our report dated December 2, 2005 expressed an unqualified opinion thereon.

Los Angeles, California

December 2, 2005

F-31

EX-21

EXHIBIT 21

JACOBS ENGINEERING GROUP INC.

SUBSIDIARIES OF THE REGISTRANT

The following table sets forth all subsidiaries of the Company other than subsidiaries that, when considered in the aggregate, would not constitute a significant subsidiary, including the percentage of issued and outstanding voting securities beneficially owned by the Company.

Jacobs Engineering Company, a California corporation	100.00	%
Jacobs Engineering Group of Ohio, Inc., an Ohio corporation	100.00	%
Jacobs Government Services Company, a California corporation	100.00	%
Jacobs Field Services North America, Inc., a Texas corporation	100.00	%
JE Remediation Technologies, Inc., a Louisiana corporation	100.00	%
Jacobs Constructors, Inc., a Louisiana corporation	100.00	%
Jacobs Industrial Maintenance Company LLC., a U.S. Virgin Islands corporation	100.00	%
Jacobs Maintenance, Inc., a Louisiana corporation	100.00	%
Jacobs Consultancy Inc., a Texas corporation	100.00	%
Jacobs Engineering Inc., a Delaware corporation (“JEI”)	100.00	%
CODE International Assurance Ltd., a Nevada corporation	100.00	%
Jacobs Engineering Espana, S.L., a Spanish corporation	100.00	%
Jacobs Engineering Ireland Limited, a Republic of Ireland corporation	100.00	%
Jacobs Lend Lease Ireland Limited, a Republic of Ireland corporation	50.00	%
Jacobs Engineering de Mexico, S.A. de C.V., a Mexican corporation	100.00	%
Uhde Jacobs Mexico, S.A. de C.V.	49.00	%
Jacobs Luxembourg, Sarl, a Luxembourg corporation	100.00	%
Jacobs Holding France SAS, a French corporation	100.00	%
Jacobs France SAS, a French corporation	100.00	%
Jacobs Italia, SpA, an Italian corporation	100.00	%
Jacobs Sereland, S.L., a Spanish corporation	100.00	%
Jacobs Engineering Deutschland GmbH, a German corporation	100.00	%
Jacobs Services GmbH, a German corporation	100.00	%
Jacobs Projects GmbH, a German corporation	100.00	%
Jacobs Alliance Services GmbH, a German corporation	100.00	%
Jacobs Nederland BV, a Netherlands corporation	100.00	%
Jacobs Advanced Manufacturing B.V., a Netherlands corporation	100.00	%
Jacobs Consultancy Nederland B.V., a Netherlands corporation	100.00	%
Jacobs Belgie NV, a Belgian corporation	100.00	%
Interhuis SA, a Belgian corporation	100.00	%
Jacobs Sverige AB, a Swedish corporation	100.00	%
Jacobs U.K. Holdings Ltd., a corporation of England and Wales	100.00	%
Jacobs Engineering U.K. Limited, a corporation of England and Wales (“JEL”)	100.00	%
GIBB Holdings Ltd., a corporation of England and Wales	100.00	%
JacobsGIBB Ltd., a corporation of England and Wales	100.00	%
Jacobs U.K. Limited, a corporation of Scotland	100.00	%
Babtie International Limited, a corporation of Scotland	100.00	%
Babtie Spol s.r.o, a Czech Republic corporation	100.00	%
PPU Babtie Spol s.r.o, a Czech Republic corporation	60.00	%
Cell BG, a corporation of England	100.00	%
Murdoch Green Limited, a corporation of England	100.00	%
Babtie Asia Limited, a Hong Kong corporation	100.00	%
Babtie Asia Pte Limited, a Singapore corporation	100.00	%
Babtie Asia Technical & Management Consultants Sdn Bhd, a Malaysian corporation	100.00	%

Babtie Consultants (India) Private Ltd, an Indian corporation	99.00	%
Westminster & Earley Services Ltd., a corporation of England and Wales	100.00	%
Jacobs Catalytic (UK) Ltd., a corporation of England and Wales	100.00	%
Jacobs Consultancy U.K. Limited, a corporation of England and Wales	100.00	%
JE Professional Resources Limited, a corporation of England and Wales	100.00	%
Jacobs Finland Oy, a corporation of Finland	100.00	%
Jacobs International Holdings, Inc., a Delaware corporation	100.00	%
JacobsGIBB Hellas A.E. a Greek corporation	100.00	%
JacobsGIBB (Polska) SPz.o.o., a Polish corporation	100.00	%
Jacobs H&G Private Limited, an Indian corporation	69.98	%*
HGC Constructors Private Limited., an Indian corporation	80.00	%
Jacobs Puerto Rico, Inc., a Puerto Rican corporation	100.00	%
Jacobs Holdings Singapore Pte. Ltd., a Singapore corporation	100.00	%
Jacobs Constructors Singapore Pte. Ltd, a Singapore corporation	100.00	%
Jacobs Engineering Singapore Pte. Ltd., a Singapore corporation	100.00	%
Jacobs-Lend Lease Singapore Pte. Ltd., a Singapore corporation	50.00	%
Jacobs Pan-American Corporation, a Virgin Islands corporation	100.00	%
Jacobs Canada Inc., a Canadian corporation (“J-CAN”)	100.00	%
Jacobs Catalytic Ltd., a Canadian corporation	100.00	%
Delta Catalytic Ltd., a Cyprus corporation	100.00	%
Delta Catalytic Saudi Arabia Ltd., a Saudi Arabian corporation	50.00	%
Jacobs Advisers, Inc., a California corporation	100.00	%**
JE Professional Resources, Inc., a California corporation	100.00	%
Payne & Keller Company, Inc., a Louisiana corporation	100.00	%
Jacobs Applied Technology, Inc., a Delaware corporation	100.00	%
Jacobs Facilities Inc., a Missouri corporation	100.00	%
GPR Planners Collaborative, Inc., a Missouri corporation	100.00	%
SP Operations and Management Services Company, a Missouri corporation	100.00	%
Resourcing Services Company LLC, a Michigan corporation	100.00	%
Sverdrup Technology, Inc., a Tennessee corporation	100.00	%
Jacobs Sverdrup Australia, Pty Ltd, an Australian corporation	100.00	%
Jacobs Civil Inc., a Missouri corporation	100.00	%
Jacobs Civil Consultants, Inc., a New York corporation	100.00	%
Jacobs Construction Services, Inc., a Delaware corporation	100.00	%
CRSS International, Inc., a South Carolina corporation	100.00	%
Jacobs Engineering New York Inc., a New York corporation	100.00	%
Rocky Flats Closure Site Services LLC, a Delaware corporation	100.00	%

* Ownership is divided between JEI and JEL.

** Ownership is divided between Jacobs Engineering Group Inc. and J-CAN.

All subsidiaries and affiliates are included in the Consolidated Financial Statements.

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statement (Form S-8 No. 333-67048) pertaining to the Jacobs Engineering Group Inc. Global Employee Stock Purchase Plan,

(2) Registration Statement (Form S-8 No. 333-123448) pertaining to the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan,

(3) Registration Statement (Form S-8 No. 333-38984) pertaining to the Jacobs Engineering Group Inc. 1999 Outside Director Stock Plan,

(4) Registration Statement (Form S-8 No. 333-60296) pertaining to the Jacobs Engineering Group Inc. 1989 Employee Stock Purchase Plan, and

(5) Registration Statement (Form S-8 No. 333-45475) pertaining to the Jacobs Engineering Group Inc. 1981 Executive Incentive Plan;

of our reports dated December 2, 2005, with respect to the consolidated financial statements of Jacobs Engineering Group Inc. and subsidiaries, Jacobs Engineering Group Inc. management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Jacobs Engineering Group Inc., included in this Annual Report (Form 10-K) for the year ended September 30, 2005.

/s/    ERNST & YOUNG LLP

Los Angeles, California

December 12, 2005

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Noel G. Watson, certify that:

1. I have reviewed this Annual Report on Form 10-K of Jacobs Engineering Group Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/S/ Noel G. Watson

Noel G. Watson

Chief Executive Officer

December 13, 2005

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John W. Prosser, Jr., certify that:

1. I have reviewed this Annual Report on Form 10-K of Jacobs Engineering Group Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/S/ John W. Prosser, Jr.

John W. Prosser, Jr.

Chief Financial Officer

December 13, 2005

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to 18 U.S.C. Section 1350

Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Jacobs Engineering Group Inc. (the “Company”) on Form 10-K for the year ended September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Noel G. Watson, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/S/ Noel G. Watson

Noel G. Watson

Chief Executive Officer

December 13, 2005

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to 18 U.S.C. Section 1350

Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of Jacobs Engineering Group Inc. (the “Company”) on Form 10-K for the year ended September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John W. Prosser, Jr., Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/S/ John W. Prosser, Jr.

John W. Prosser, Jr.

Executive Vice President,

Finance and Administration

December 13, 2005

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

COVER

Jacobs Engineering Group Inc.

1111 S. Arroyo Parkway

Pasadena, California 91105

via EDGAR

December 13, 2005

United States Securities and Exchange Commission

450 Fifth St., N.W.

Washington, DC 20549-1004

Re: Jacobs Engineering Group Inc.

File No.: 1-7463

2005 Annual Report on Form 10-K

Ladies and Gentlemen:

Please be advised that the subject Form 10-K being filed today contains financial statements which do not reflect any changes from the preceding year in any accounting principle or practice, or in the method of applying any such principle or practice.

Very truly yours,

/s/    John W. Prosser, Jr.

John W. Prosser, Jr.

Executive Vice President

Finance and Administration