JACOBS ENGINEERING GROUP INC /DE/, 10-K405, 1999-12-17

JACOBS ENGINEERING GROUP INC /DE/
10-K405, 1999-12-17
HEAVY CONSTRUCTION OTHER THAN BLDG CONST - CONTRACTORS

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<PAGE>

1999
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark one)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended September 30, 1999

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission File Number 1-7463
Jacobs Engineering Group Inc.
(Exact name of Registrant as specified in its charter)

Delaware 95-4081636
(State of incorporation) (I.R.S. employer identification number)

1111 South Arroyo Parkway, Pasadena, California 91105
(Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code (626) 578-3500
Securities registered pursuant to Section 12(b) of the Act:

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

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 Form 10-K or any amendment
to this Form 10-K. (X)

___________________

The aggregate market value of the Registrant's voting stock held by non-
affiliates was approximately $686,965,700 as of December 16, 1999, based upon
the last reported sales price on the New York Stock Exchange. For this purpose,
the Registrant considers Dr. Joseph J. Jacobs to be its only affiliate.

As of December 16, 1999, the Registrant had outstanding 26,146,156 shares of its
common stock.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement issued in connection
with its 2000 Annual Meeting of Shareholders (Part II and Part III).

================================================================================
<PAGE>

PART I

Item 1. BUSINESS

General
- -------
Jacobs Engineering Group Inc. (the "Company") is one of the largest
professional services firms in the United States providing a broad range of
project services; process, scientific and systems consulting services;
operations and maintenance services; and construction services to a broad range
of industrial, commercial and governmental clients. The Company provides its
services through offices and subsidiaries located in the United States, Europe,
India, Mexico, Chile and Australia.

The Company focuses its services on selected industry groups and markets
including chemicals and polymers; buildings (which includes projects in the
fields of health care and education, as well as commercial, civic and
governmental buildings); federal programs; pharmaceuticals and biotechnology;
petroleum; infrastructure; technology and manufacturing; and pulp and paper,
among others.

Over the past several years, the Company has grown its business through
both internal initiatives and strategic mergers and acquisitions. These merger
and acquisition transactions have allowed the Company to (i) expand or enhance
the range of services it provides its clients; (ii) expand its client base; and
(iii) provide access to new geographical areas. Some of the more significant
transactions that have occurred over the past five years include: the Sverdrup
merger; the acquisition of the Serete Group; and the acquisition of CRS Sirrine
and CRSS Constructors.

In January 1999, the Company completed its merger with the Sverdrup
Corporation ("Sverdrup"). As a result of this transaction, Sverdrup became a
wholly-owned subsidiary of the Company. Sverdrup provides engineering,
architecture, construction and scientific services for the development, design,
construction and operation of buildings, infrastructure projects and advanced
technical systems for public and private sector clients in the United States and
internationally. Sverdrup employs more than 5,600 people in offices located
throughout the United States, and in selected countries abroad. The Sverdrup
transaction expanded the Company's business opportunities in several key
markets, added professional staff, as well as presence in new geographies. It
also added civil and defense capabilities to the Company's range of professional
services. The merger has been accounted for as a purchase, and the results of
operations of Sverdrup have been included in the Company's consolidated results
of operations since January 1999.

In Fiscal 1997, the Company acquired The Serete Group (headquartered in
Paris, France). This acquisition provided the Company with an established
presence in France, Spain and Italy. It added professional staff, and enhanced
the Company's existing engineering capabilities. It also expanded the Company's
client base in several key market groups. Also in Fiscal 1997, the Company
increased its ownership interest (such that the Company became the majority
owner) in Humphreys & Glasgow Consultants Limited (headquartered in Mumbai,
India). This acquisition gave the Company access to the Southern Asia market,
expanded the Company's client base and added professional staff.

In Fiscal 1994, the Company acquired CRS Sirrine and CRSS Constructors
(whose principal offices are located primarily within the United States). These
acquisitions greatly expanded the Company's professional staff. They provided
broad-based skills in the pulp and paper market (which was a new market for the
Company at that time), and enhanced the Company's capabilities for its clients
in both the buildings and high technology manufacturing markets. These
acquisitions also strengthened the Company's capabilities in the area of
construction management services, expanded the Company's client base, and
provided increased resources in the southeast region of the United States.

Page 1
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In addition to the particular advantages described above, these
acquisitions have allowed the Company to grow its relationships with its major
clients. By expanding into new geographical areas, and by adding to its
existing technical and project management capabilities, the Company strives to
position itself as a preferred, single-source provider of professional services
to its major clients.

The Company is a Delaware corporation and was originally incorporated in
1957 as a successor to a business organized by Dr. Joseph J. Jacobs in 1947. The
Company's common stock has been publicly held since 1970 and is currently listed
on the New York Stock Exchange.

Services Provided
- -----------------

The Company offers four broad categories of professional services:
project services (which includes engineering, design, architectural and other
related services); process, scientific and systems consulting services;
operations and maintenance ("O&M") services; and construction services. The
Company will often establish a relationship with a client when it is awarded a
contract for the initial phases of an engineering and/or construction project.
These services may include feasibility studies, consulting or design work.
Because of the range of technical expertise the Company possesses, it is often
retained for additional work as the project develops. The scope of services
provided by the Company, therefore, ranges from consulting to complete single-
responsibility contracts.

The following table sets forth the total revenues of the Company from
each of its four basic service categories for each of the five years ended
September 30, 1999 (in thousands of dollars):

<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Project Services $ 592,846 $ 655,248 $ 734,619 $ 861,608 $1,318,027
Process, Scientific and
Systems Consulting 11,566 12,950 11,587 11,163 87,990
Operations and
Maintenance 253,084 245,667 264,622 266,798 474,511
Construction 865,561 885,105 769,788 961,576 994,479
---------- ---------- ---------- ---------- ----------
$1,723,057 $1,798,970 $1,780,616 $2,101,145 $2,875,007
========== ========== ========== ========== ==========
</TABLE>

Project Services
----------------
The Company employs all of the engineering and related disciplines needed
to engineer and design modern process plants (including projects for clients in
the chemicals and polymers, pharmaceuticals and biotechnology, petroleum, food
and consumer products, and the basic resources industries); industrial and
commercial buildings (including facilities in the health care, education and
criminal justice markets, as well as commercial buildings for clients in the
private sector); infrastructure projects (including highways, roads, bridges and
other transportation facilities); technology and manufacturing facilities (for
clients in the semiconductor, electronics, automotive, aerospace and defense
industries); pulp and paper plants; and other facilities. The Company also
employs 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 and in support of
environmental programs primarily for agencies of the U.S. federal government.

Also included in the category of "Project Services" are construction
management services, as well as all of the related support services necessary
for the proper and effective delivery of the Company's engineering and other
home-office services (among these are cost engineering, planning, scheduling,
procurement, estimating, project accounting, and quality and safety). In the
area of construction management, the Company can provide a wide range of
services as an agent for its clients. The Company may act as the program
director, whereby it oversees, on behalf of the owner of the project, the
complete planning, design and construction phases of the project, or, its
services may be limited to providing construction consulting.

Page 2
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Process, Scientific and Systems Consulting
------------------------------------------
The Company employs 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 in respect of Federal Drug Administration mandated
qualification/validation requirements; and performing geological and
metallurgical studies.

Also included in "Process, Scientific and Systems Consulting" are the
professional and program management services required to assist clients
(typically, the U.S. 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 provided by
the Company, and may involve such tasks as supporting the development and
testing of conventional weapons systems; weapons modeling and simulations;
computer systems maintenance and support; evaluations and testing of mission-
critical control systems; and other, highly technical programs and tasks.

Operations & Maintenance ("O&M")
--------------------------------
O&M activities generally refer to all of the tasks required to operate and
maintain large, complex facilities on behalf of clients. In such situations,
the Company provides key management and support services over all of the
facility's operations, including subcontractors and other on-site personnel.
Within the environmental area, O&M activities often include engineering and
technical support services, as well as program management services necessary to
remediate contaminated sites. Within the aerospace and defense areas, O&M
activities often include providing all of the management and technical support
services to operate and maintain engine test facilities, weapons integration and
high-tech simulation and verification centers. Such O&M contracts frequently
require the Company to provide facilities management and maintenance services,
utilities operations and maintenance services, property management and
disposition and construction support services.

Also included in this category are plant maintenance services. Plant
maintenance services generally include all of the tasks required to keep a plant
(typically a refinery or chemical plant) in day-to-day operation, including the
repair and replacement of pumps, piping, heat exchangers and other equipment.
It also includes "turnaround" work, which involves major refurbishment which can
only be performed when the plant is shut down. Since shutdowns are expensive to
the owners of the plant, turnaround work will often require 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. The Company employs sophisticated
computer scheduling and programming to complete turnaround projects quickly and
it maintains contact with a large pool of skilled craftsmen it can hire as
needed on maintenance and turnaround projects.

Although the profit margins that can be realized from O&M services are
generally lower than those associated with the other services the Company
provides, the costs to support maintenance activities are also generally lower
than those associated with the Company's other services. Furthermore, since O&M
contracts are normally cost-reimbursable in nature, they present less financial
risk to the Company. 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, the Company has 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.

Page 3
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Construction
------------
The Company provides traditional field construction services to private and
public sector clients in virtually all of the industries to which it provides
project services. The Company can also provide its clients with Advanced
Construction Technology ("ACT")/(R)/. ACT is an advanced form of off-site
engineering and design (the revenues for which are included in project
services), fabrication, assembly and field erection. ACT provides clients with
an alternative approach to traditional methods of engineering and construction,
which can compress and shorten the construction schedule, as well as help to
reduce costs. In the environmental area, recent contract awards from clients in
the public sector require the Company to provide environmental remedial
construction services.

Historically, the Company's field construction activities have been focused
primarily on those construction projects for which the Company performed the
related engineering and design work. By focusing its construction efforts on
such projects, the Company seeks to avoid the risk of constructing complex
plants based on designs prepared by others. The financial risk to the Company
of constructing complex plants based on designs prepared by third parties may be
particularly significant on fixed-price contracts.

The Company actively markets all of its services to clients on projects
where the scope of services required is within the Company's fields of
expertise. The Company believes that by integrating and bundling its services
(i.e., providing design, engineering and construction services on the same
project) it can price its services more competitively and can enhance the
overall contract profitability. The Company also believes that clients benefit
from such an approach because they can look to the Company as a single-source
provider of design/build services. However, the Company will continue to pursue
construction-only projects where it can negotiate pricing and other contract
terms acceptable to the Company.

Industry Groups and Markets
- ---------------------------
The Company focuses its efforts on the following industry groups and
markets: chemicals and polymers; buildings; U.S. federal programs;
pharmaceuticals and biotechnology; petroleum; infrastructure; technology and
manufacturing; and pulp and paper. The Company believes these industry groups
and markets have sufficient common needs to permit cross-utilization of the
Company's resources which help to mitigate the negative effects of a downturn in
a single industry.

The following table sets forth the total revenues of the Company from each
of these industry groups and markets for each of the five years ended September
30, 1999 (in thousands of dollars):

<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Chemicals and
Polymers $ 374,554 $ 396,515 $ 490,347 $ 785,727 $ 796,501
Buildings 161,836 175,645 169,286 314,293 454,589
Federal Programs 175,200 145,275 201,643 169,474 481,302
Pharmaceuticals and
Biotechnology 102,561 147,840 140,545 211,501 373,520
Petroleum 480,472 417,739 248,799 255,579 243,311
Infrastructure 11,099 11,135 11,748 11,278 218,828
Technology and
Manufacturing 264,493 268,520 335,627 128,501 173,023
Pulp and Paper 85,652 170,552 154,135 191,595 99,189
Other 67,190 65,749 28,486 33,197 34,744
---------- ---------- ---------- ---------- ----------
$1,723,057 $1,798,970 $1,780,616 $2,101,145 $2,875,007
========== ========== ========== ========== ==========
</TABLE>

Page 4
<PAGE>

Chemicals and Polymers
----------------------
The Company has always considered the chemicals industry a cornerstone of
its business. Revenues from this industry group have consistently accounted for
a significant share of each year's total revenues. Historically, whenever the
Company has sought to expand its business, the impact of such expansion on the
Company's chemicals business has always been an important consideration. The
Company's first office outside the United States was opened in support of a
bulk-chemical project for a large, U.S. company seeking to expand its operations
internationally.

Currently, the Company furnishes its full line of services to its clients
operating in the chemicals industries. The Company has provided technical,
financial, marketing and business consulting services for many of the largest
chemical manufacturers in the world. The Company has performed feasibility
studies, as well as preliminary and detailed design and engineering services,
construction, and construction management services for its chemicals industry
clients. Typical projects range from various basic, intermediate and polymer
chemicals, to low-pressure, multi-product processes for the production of fine
and specialty chemicals. The Company has also completed projects dealing with
the modernization and upgrading of polyethylene and liquid polymer production
facilities. The Company has extensive knowledge of, and experience with,
advanced polymerization reactions and state-of-the-art, post-reactor processing
techniques, as well as many other specialty chemicals.

A significant aspect of the Company's service to this industry is in the
area of contract maintenance. The Company has contracts with several major
chemical producers to provide on-site maintenance and turnaround activities.
Many of these contracts are evergreen in nature and tend to be extended over
many years.

Another important aspect of our chemicals business has been the development
of performance-based partnering relationships (alliances) with clients. In an
alliance, the Company contracts with the client to perform a broad range of
services, as the client requires. Projects can range from providing on-site
engineering services, to completion of an entire capital improvement program.
Occasionally, a small initial evaluation performed for a client expands to
include fully-integrated engineering, procurement, construction and construction
management services.

Buildings
---------
Buildings generally refers to the Company's engineering and construction
activities relating to commercial buildings and other specialized structures.

The Company provides and/or manages comprehensive architectural,
engineering, design, construction, construction management and/or total program
management services for a variety of unique and technically complex buildings
and complexes. Typical projects include major federal building programs, both K-
12 (kindergarten through high school) and higher education facilities, justice,
and health and research facilities, as well as corporate buildings, and other
municipal, civic and institutional facilities. The Company provides its services
on projects that emphasize both new construction as well as those involving
renovation and refurbishment of existing facilities. The Company has also been
successful in applying its skill base to clients requiring complete program
management (referred to as "resourcing"). For such contracts, the Company, 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.

Page 5
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Federal Programs
----------------
The Company's Federal Programs can generally be categorized as relating to
either environmental programs, or defense and aerospace programs.

Environmental
-------------
The Company believes it is one of the leading providers of environmental
restoration, engineering and consulting services, including hazardous waste
management and site cleanup and closure in the United States. Many of the
projects for the U.S. government span several years. For larger programs, the
scope of services is such that the Company sometimes teams with other companies
in order to execute the project. The Company's projects within this market
generally relate to the Comprehensive Environmental Response Compensation and
Liability Act ("CERCLA" or "Superfund"), the National Environmental Policy Act
("NEPA") and the Resource Conservation and Recovery Act ("RCRA"). The Company
is currently providing environmental restoration, engineering, construction and
site operations and maintenance services for a number of U.S. federal government
agencies including the U.S. Department of Energy ("DOE"), the Department of
Defense ("DOD") and the U.S. Environmental Protection Agency ("USEPA").

The Company provides environmental support such as underground storage tank
(UST) removal, contaminated soil and water remediation, building demolition and
decommissioning, and design, build, installation, operation and maintenance of
various types of soil and groundwater cleanup systems at multiple project
locations across the United States for the U.S. Army Corps of Engineers and the
U.S. 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. In addition to contracts involving the remediation of contaminated
sites, the government has let contracts to private contractors to provide full
operations and maintenance services to entire government facilities.

Demand for the Company's services in this area is strongly affected by the
level of enforcement of environmental laws and regulations, and the spending
patterns of public and private clients.

Defense and Aerospace
---------------------
The Company provides a wide range of professional services for a variety of
aerospace facilities and systems, including wind tunnels, turbine and rocket
engine test facilities, and launch facilities, as well as computer-based
simulation and other systems. The Company also operates and maintains
aerodynamic, propulsion, and space facilities and systems for government clients
at more than a dozen test centers.

The Company, through its merger with Sverdrup Corporation, has been a
provider of technical services to the DOD for many years, and currently supports
defense programs in more than a dozen locations, both in the U.S. and
internationally. In addition to operating and maintaining several DOD test
centers, the Company's support includes services such as aerodynamic testing of
next-generation fighter aircraft; propulsion testing for space programs; launch
of Titan, Atlas, and Delta rockets and payloads; and support to weapons systems
such as air-to-air missile systems and precision guided, smart weapons used for
various high-value targets. The Company also supports DOD in a number of
information technology programs, including networks, command and control
technology, intelligence, and information warfare.

The Company also provides technical assistance and program management
support at several NASA facilities. The Company provides O&M services for these
facilities, including support of tests of spacecraft and aeronautical systems;
aerodynamic test facilities and systems; biological and life sciences
experiments; and aircraft for research and development missions. The Company
currently supports several NASA programs ranging from Space Shuttle experiments
to the International Space Station, and from advanced propulsion/transportation
systems to protein crystal growth research needed to develop new drugs and
vaccines.

Page 6
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Pharmaceuticals and Biotechnology
---------------------------------
The Company furnishes a full line of services to its clients in the
pharmaceutical and biotechnology industry. The scope of services the Company
provides its clients in these markets includes master planning, programming,
feasibility studies, engineering, preliminary and detailed design, procurement,
construction, construction management, validation, and maintenance.
Accordingly, the Company is fully capable of executing some of the industry's
largest capital programs on a single-responsibility basis.

Typical projects for clients in this industry include laboratories,
research and development facilities, vivariums, pilot plants, bulk active
pharmaceutical ingredient production facilities, full-scale biotechnology
production facilities, and secondary manufacturing facilities. Regulatory
considerations on these projects include current Good Laboratory Practices
("cGLP") and current Good Manufacturing Practices ("cGMP"). In addition, state-
of-the-art technology and know-how are critical to the Company's clients. These
include containment, barrier technology, locally controlled environments,
process and building systems automation and off-the-site design and fabrication
of process and building modules.

As the worldwide market demand for ethical and over-the-counter products
continues to escalate, the pressure increases on the pharmaceutical industry to
decrease product time to market, decrease costs and increase return on
investment. The Company's role is expanded to deliver capital projects sooner
and more efficiently. The Company provides local, economical resources in major
pharmaceutical and biotechnology areas, and provides single-point EPCMV
(engineering, procurement, construction, maintenance and validation) project
delivery. The Company continues to enhance its 3-D CADD design capabilities, as
well as other technological aspects of its engineering and design services, in
order to better serve its clients, and to ensure that projects transition from
their conceptual design phase through and including the construction and
validation phases as economically and efficiently as possible.

The Company also has established formal alliances with numerous clients in
the pharmaceutical and biotechnology industry.

Petroleum
---------
The Company provides its full line of services to its clients in the
petroleum industry. Typical projects in the petroleum area include retrofits,
revamps or expansions of existing plants, upgrading individual process units
within refineries, new construction and maintenance services. The Company also
provides a broad range of consulting services to its clients, including process
assessments, feasibility studies, technology evaluations and multi-client
studies. Although the Company's revenues historically have 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 recent contract awards have also included
services to pipeline companies and companies in businesses upstream of refiners.

The volume of business activity in this industry group is sometimes
influenced by government regulations. For example, as the government issues
regulations requiring the reduction of the sulfur content of motor fuels,
capital spending by clients for desulfurization projects have increased. There
are also significant levels of economically-driven work associated with
reconfiguring refineries to handle increasing levels of imported, heavy sour
crude feedstocks. The Company is actively involved in both such regualtions- and
economically-driven projects.

The Company has also utilized its Advanced Construction Technology
capabilities (i.e., modular construction) on a number of projects in the
petroleum industry. In the U.S. and European refining industries, many projects
involve the revamp of an existing processing unit, or the addition of a new
process to an existing refinery. As a result of the close proximity of
processing units in these refineries, the Company believes the use of off-site
construction can decrease congestion at the construction site. The Company also
believes that modular construction can offer cost and project execution benefits
in remote locations.

Page 7
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Like the chemicals industry, the Company provides a significant amount of
maintenance services to its clients in the petroleum industry. Also like the
chemicals industry, the Company has established a number of formal alliances
with various clients in the petroleum industry. Some of these alliances have
been national in scope.

Infrastructure
--------------
The Company provides a broad range of planning, design, consulting,
engineering, construction and construction management services to its clients
engaged in civil construction projects throughout the United States, as well as
in selected countries overseas. Typical projects in this area include
transportation and water resources type projects. The Company's expertise and
skills-base in civil and infrastructure projects was greatly enhanced in 1999 as
a result of the Sverdrup merger.

Transportation infrastructure development and rehabilitation have been a
mainstay of Sverdrup's infrastructure business for many years. By integrating a
broad range of professional disciplines, the Company provides comprehensive
planning, engineering, 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, and lock and dam projects.
Representative clients include state departments of transportation and district
agencies, the U.S. Army Corps of Engineers, branches of the U.S. military and
private industry freight transport firms.

Fueling the growth in this market is the Transportation Equity Act for the
21st Century (TEA-21). Providing $218 billion over five years - with
considerable state and local flexibility in project selection - TEA-21 is a
large U.S. federal commitment to improving transportation infrastructure. The
Company's concept through completion approach provides complete location
selection, condition assessment, environmental analyses, preliminary design,
documentation, final design, detailed construction planning, management, public
involvement, resident engineering and maintenance engineering management
services to agencies seeking to qualify for TEA-21 funding.

As public sector acceptance of design-build delivery grows, the Company has
won and successfully completed large-scale projects such as Utah's I-15 corridor
reconstruction and CSX Transportation Inc's Midwestern corridor capacity
upgrade.

The Company's 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. The Company provides 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 facilities.

Typical public sector projects include managing multi-project water and
wastewater capital improvement programs, delivering design-build
water/wastewater projects, conducting technology and planning studies, and
managing construction of major water/wastewater infrastructure projects.
Industrial services include planning, design and construction of air quality,
high purity water and industrial wastewater treatment systems.

State and federal government regulations are important influences in the
environmental market. New regulations and funding authorizations under the Safe
Drinking Water Act are increasing water suppliers' capital spending levels. The
Company is developing water/wastewater conveyance systems and water resources
management projects as two promising specialty markets.

Private sector projects may be driven by regulatory or economic factors.
For example, new air and wastewater treatment regulations are increasing capital
project spending in the pharmaceutical and

Page 8
<PAGE>

petroleum industries. The Company may provide planning, design or construction
services as part of a larger industrial expansion program, or as a stand-alone
project.

The Company believes that opportunities for design-build and construction
management projects are expanding as these project delivery methods gain
acceptance in the public sector. Recent projects include design-build of three
major water treatment plants for the Orlando Utilities Commission and
construction management of a large water/wastewater treatment complex for the
city of Scottsdale, Arizona.

Technology and Manufacturing
----------------------------
The Company provides a broad range of project services for a variety of
technology, manufacturing and test facilities.

Included in this category are 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 wind tunnels and engine test facilities; propulsion and
certification test facilities; powertrain and other automotive component parts
test facilities; environmental and emissions test facilities; climatic test
facilities; and computer-based measurement and control systems.

Also included in this category are projects for clients operating in the
semiconductor industry. The Company provides engineering, procurement,
construction, and construction management services to its clients in this
industry. Typical projects in this industry 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. Generally, projects in the
semiconductor industry are very complex; requiring a greater emphasis on
cleanroom, and similar high-end technologies.

Pulp and Paper
--------------
The Company provides a broad range of engineering and construction services
to its clients in the pulp and paper industry. Typical projects in the pulp and
paper area range from small mill projects to complex, multi-million dollar paper
machine rebuilds, mill expansions and construction of new facilities. Currently,
the Company is performing the single largest engineering, procurement and
construction paper machine installation project in the United States for a
national newsprint producer.

Pulp and paper projects can and frequently encompass all areas of a mill,
including woodyards, pulping and bleaching, papermaking, chemical recovery,
material handling and power and steam generation. In the area of papermaking,
the Company's expertise includes tissue and towel, coated and uncoated fine
papers, newsprint and linerboard. The Company's expertise also includes the
converting and packaging of paper products for consumer use. The Company has
been instrumental in the design and installation of state-of-the-art facilities
for recycle fiber, deinking and pulp bleaching. Chemical recovery and power
generation are an integral part of the papermaking process. The Company has
broad experience in these areas and has applied its expertise in the engineering
and construction of such facilities for the pulp and paper industry.

Additionally, the Company provides strategic planning and conceptual
studies for many of its clients, as well as environmental services relating to
compliance with USEPA emission standards. As an example, the Company is
currently providing detail design and consulting services to International Paper
for its environmentally-driven Cluster Rule related work at three of their
mills.

Like certain other markets, the Company has established formal alliances
with various clients in the pulp and paper industry. Such alliances have allowed
the Company to expand the services it provides its clients, while improving the
overall quality and consistency of the engineering and construction services
such clients receive.

Page 9
<PAGE>

Other
-----
Included in "Other" are projects that cannot be classified into any of the
other industry and market categories. This would include projects for clients
in the food and consumer products industries, as well as basic resources
(mining, minerals and fertilizers).

Backlog
- -------
For information regarding the Company's backlog, reference should be made
to Item 7. - Management's Discussion and Analysis of Financial Condition and
Results of Operations, incorporated by reference in this report.

Customers
- ---------
For the years ended September 30, 1995, 1996, 1997, 1998 and 1999, revenues
directly or indirectly from agencies of the U.S. federal government accounted
for 11.4%, 8.7%, 12.0%, 12.1% and 17.4%, respectively, of total revenues. Due
to the amount of pass-through costs (see "Contracts" below) that may be incurred
on construction and maintenance projects, it is not unusual for a client in the
private sector to account for more than 10% of revenues in any given year. One
client in the private sector accounted for 13.1% of total revenues in 1995. A
different client accounted for 15.3% of total revenues in 1997. No single
client in the private sector accounted for 10% or more of total revenues in
1996, 1998 or 1999.

Foreign Operations
- ------------------
For the years ended September 30, 1995, 1996, 1997, 1998 and 1999, revenues
from the Company's international operations were approximately 5.4%, 10.3%,
23.5%, 20.2% and 15.8%, respectively, of total revenues. For fiscal years 1995
and 1996, substantially all such revenues related to the Company's offices in
the U.K. and Ireland. In 1997, as discussed above, the Company completed the
acquisitions of the Serete Group and HGC India. The Serete Group has operations
throughout Europe, and executes projects for commercial clients in the
chemicals, pharmaceuticals and semiconductor industries, as well as buildings
and infrastructure projects for both commercial and governmental clients. HGC
India has operations in India and executes projects for commercial clients in
the chemical, pharmaceuticals and petroleum markets. Revenues earned in fiscal
1997, 1998 and 1999 from the Company's offices in Mexico and Chile were not
material.

Contracts
- ---------
While there is considerable variation in the pricing provisions of the
contracts undertaken by the Company, they can generally be grouped 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 fiscal years ended September
30, 1999:

<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Cost-reimbursable 88% 82% 82% 81% 73%
Fixed-price 11 16 16 18 22
Guaranteed maximum price 1 2 2 1 5
</TABLE>

In accordance with industry practice, most of the Company's 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 such termination.

When the Company is directly responsible for engineering, design,
procurement and construction of a project or the maintenance of a process plant,
the Company reflects the cost of materials, equipment

Page 10
<PAGE>

and subcontracts in both revenues and costs. On other projects, where the client
elects to pay for such items directly, 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 fiscal years ended
September 30, 1999 (in millions):

Cost-reimbursable contracts
---------------------------
Cost-reimbursable contracts provide for reimbursement of costs incurred by
the Company plus a predetermined fee, or a fee based on a percentage of the
costs incurred. The Company prefers this type of contract since it believes that
the primary basis for its selection should be its technical expertise and
professional qualifications rather than price considerations.

Fixed-price contracts
---------------------
Fixed-price contracts include both "negotiated fixed-price" contracts and
"lump sum bid" contracts. Under a negotiated fixed-price contract, the Company
is first selected as the contractor, and then the contract price is negotiated.
Negotiated fixed-price contracts frequently exist in single-responsibility
arrangements where the Company has the opportunity to perform engineering and
design work before negotiating the total price of the project. Under lump sum
bid contracts, the Company must bid against other contractors based upon
specifications furnished by the client. This type of pricing presents certain
inherent risks, including the possibility of ambiguities in the specifications,
problems with new technologies and economic and other changes that may occur
over the contract period, that are reduced by the negotiation process. 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 the Company. 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
the Company's fixed price work have been either negotiated fixed-price
contracts, or lump-sum bid contracts for services (rather than turn-key
construction).

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 the Company will
bear all or a portion of the excess. In those cases where the total actual cost
and fee are less than the guaranteed price, the Company will often share the
savings on a predetermined basis with the client.

Competition
- -----------
The Company is engaged in a highly competitive business. Some of its
competitors are larger than the Company, or are subsidiaries of larger
companies, and may possess greater resources than the Company. Furthermore,
because the engineering and technical support aspects of the business does not
usually require large amounts of capital, there is relative ease of market entry
for a new potential entrant possessing acceptable professional qualifications.
Accordingly, the Company competes with both national and international firms in
sizes ranging from very large to a wide variety of small, regional and specialty
firms.

The extent of the Company's competition varies according to the industries
and markets it serves, as well as the geographical areas in which the Company
operates. The Company's largest competitors for engineering, construction and
maintenance services for process plants include such well-known companies as
Bechtel Group, Inc., Fluor Corporation, Foster-Wheeler Corp., Raytheon
Engineers, M.W. Kellogg, Parsons Co., Kellogg Brown & Root, and Kvaerner. In the
area of buildings, the Company's competitors include several of the competitors
previously mentioned, as well as HDR, Inc., Hellmuth,

Page 11
<PAGE>

Obata & Kassabaum, AeCOM Technology and Day & Zimmermann. In the area of civil
engineering and construction, the Company's competitors include several of the
competitors previously mentioned, as well as Parsons Brinckerhoof and HNTB. In
the area of pulp and paper, the Company's principal competitors include BE&K,
Kellogg Brown & Root, and Raytheon Engineers. And in the area of U.S. federal
programs, the Company's principal competitors include several of the companies
listed above, as well as AlliedSignal, BDM, Morrison Knudsen Corporation, and
other specialized companies such as IT Group, Inc., ICF Kaiser and Roy F.
Weston.

Employees
- ---------
At September 30, 1999, the Company had approximately 15,900 full-time
employees. Additionally, as of September 30, 1999, there were approximately
7,300 persons employed by the Company in the field on a project basis. The
number of such field employees varies in relation to the number and size of the
maintenance and construction projects in progress at any particular time.

Page 12
<PAGE>

EXECUTIVE OFFICERS OF THE COMPANY

Pursuant to the requirements of Item 401(b) and 401(e) of Regulation S-K,
the following information is being furnished with respect to the Company's
executive officers:
<TABLE>
<CAPTION>

Year Joined
Name Age Position with the Company the Registrant
- ---------------------------- --- ---------------------------------------------- --------------
<S> <C> <C> <C>

Joseph J. Jacobs 83 Director and Chairman of the Board 1947
Noel G. Watson 63 President, Chief Executive Officer
and Director 1965
Richard E. Beumer 61 Vice Chairman of the Board 1999
William R. Kerler 70 Executive Vice President, Operations
and Director 1980
Thomas R. Hammond 48 Executive Vice President, Operations 1975
Richard J. Slater 53 Executive Vice President, Operations 1980
James C. Uselton 60 Executive Vice President., Operations 1999
Donald J. Boutwell 62 Group Vice President, Field Services 1984
Andrew E. Carlson 66 President, Jacobs Sverdrup Constructors, Inc. 1990
Robert M. Clement 51 Group Vice President, Central Region 1990
Warren M. Dean 55 Group Vice President, Facilities 1994
Stephen K. Fritschle 56 Group Vice President, Southern Region 1989
George A. Kunberger, Jr. 47 Group Vice President, Northern Region 1975
Gregory J. Landry 51 Group Vice President, International Operations 1984
John McLachlan 53 Group Vice President, International Operations 1974
H. Gerard Schwartz, Jr. 61 Group Vice President, Civil 1999
Roger L. Williams 61 Group Vice President, Federal Operations 1983
Michael J. Higgins 55 Senior Vice President, Federal Programs 1994
Craig L. Martin 50 Senior Vice President, General Sales
and Marketing 1994
John W. Prosser, Jr. 54 Senior Vice President, Finance and
Administration and Treasurer 1974
Laurence R. Sadoff 52 Senior Vice President, Quality and Safety 1993
Nazim G. Thawerbhoy 52 Senior Vice President and Controller 1979
William C. Markley, III 53 Vice President, General Counsel
and Secretary 1981
</TABLE>

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. Beumer, Uselton and Schwartz, have served in executive capacities with
the Company or have been part of its management for more than five years. Prior
to joining the Company in 1999, Messrs. Beumer, Uselton and Schwartz were part
of the senior management group of Sverdrup Corporation, or one of its
subsidiaries, for at least five years.

Page 13
<PAGE>

Item 2. PROPERTIES

The Company owns and leases offices for its professional, technical and
administrative staff. It also owns property (located in Charleston, South
Carolina) which is the principal manufacturing facility for the Company's
modular construction activities. The total amount of space used by the Company
for all its operations is approximately 2.8 million square feet. The following
is a representative list of the Company's principal locations:

<TABLE>
<CAPTION>
Country State City
----------- --------- ----------
<S> <C> <C>
U.S.A. California Pasadena
Costa Mesa
Long Beach
Ridgecrest
Sacramento
Walnut Creek
Arizona Phoenix
Colorado Denver
Florida Lakeland
Jacksonville
Niceville
Tampa
Louisiana Baton Rouge
Massachusetts Boston
Michigan Auburn Hills
Novi
Missouri Maryland Heights
St. Louis
New Mexico Albuquerque
New York New York
North Carolina Raleigh
Ohio Cincinnati
Beavercreek
Oregon Lake Oswego (Portland)
Pennsylvania Conshohocken (Philadelphia)
South Carolina Greenville
Charleston
Texas Houston
Tennessee Nashville
Oak Ridge
Tullahoma
Virginia Arlington
Falls Church
Washington Seattle
Wisconsin De Pere
</TABLE>

[continued]

Page 14
<PAGE>

Item 2. PROPERTIES - Continued

<TABLE>
<CAPTION>
Country State City
- ----------------- ----- ----------------
<S> <C> <C>
Australia - Canberra
United Kingdom - Croydon (London)
- Glasgow
- Manchester
Republic of Ireland - Cork
- Dublin
France - Paris
- Lyon
Italy - Milan
Spain - Madrid
India - Mumbai
- New Delhi
- Calcutta
Chile - Santiago

</TABLE>

In addition to these properties, the Company leases smaller, project
offices located throughout the United States and in certain other countries
around the world. The Company maintains sales offices at many of its principal
locations. The Company has equipment yards located in Houston, Texas and Baton
Rouge, Louisiana. The majority of the Company's offices are leased. The
Company also rents a portion of its construction equipment on a short-term
basis.

Page 15
<PAGE>

Item 3. LEGAL PROCEEDINGS

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

In March 1998, the U.S. Attorney for the Central District of California
announced that it was intervening in a lawsuit filed against the Company by a
former employee under the False Claims Act (the "Act"). The lawsuit alleges that
the Company overbilled the U.S. government for lease costs paid by the Company
and relating to its former headquarters building located in Pasadena,
California. The building had once been owned by the Company, but was sold by it
in calendar 1982, at which time the Company entered into a 15-year lease of the
property. The lawsuit seeks damages of approximately $17.0 million against the
Company, which, if a violation of the Act is found, would be trebled. Additional
remedies available to the government include possible administrative or civil
liabilities, and, if a violation of the Act is found, the imposition of civil
penalties for each billing. Although the number of billings is contested, civil
penalties, if imposed, would be at least $10.0 million.

The Company has denied any wrongdoing in the method it used to account for
the lease costs in question and has denied that it acted with the intent
required for liability under the Act. The Company contends that all of the facts
regarding its 1982 sale and leaseback were disclosed to the government, which
repeatedly approved the Company's lease charges after conducting annual audits.

In November 1999, the court made rulings, which the Company is challenging,
that limit the Company's defenses in this matter. The rulings also included
dismissal of the whistleblower from the case, and the government is proceeding
on its own. The final outcome of this matter cannot be determined at the present
time. Trial is set for late January 2000. The Company intends to continue to
vigorously defend itself against the lawsuit.

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

Not applicable.

Page 16
<PAGE>

PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

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

Item 6. SELECTED FINANCIAL DATA

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

Item 7A. QUALITATIVE and QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

Not applicable.

Page 17
<PAGE>

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by Paragraph (a) and Paragraphs (c) through (g) of
Item 401 and by Item 405 of Regulation S-K is hereby incorporated by reference
from the Company's definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A within 120 days after the close of the Company's
fiscal year.

See the information under the caption "Executive Officers of the Company"
in Part I of this report for information required by Paragraph (b) of Item 401
of Regulation S-K.

Item 11. EXECUTIVE COMPENSATION

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

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Page 18
<PAGE>

PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The Company's consolidated financial statements at September 30,
1999 and 1998 and for each of the three years in the period ended
September 30, 1999, together with the report of the independent
auditors on those consolidated financial statements are hereby
incorporated by reference from Exhibit 13 to this report.

(b) Not applicable.

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.

3.1 Certificate of Incorporation of the Registrant, as amended.
Filed as Exhibit 3.1 to the Registrant's Quarterly Report on Form
10-Q for the period ended June 30, 1995 and incorporated herein
by reference.

(S) 3.2 Bylaws of the Registrant, as amended.

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 Rights Agreement dated as of December 20, 1990 by and between
Registrant and First Interstate Bank, Ltd. as Rights Agent.
Filed as Exhibit 4.4 to Registrant's Quarterly Report on Form 10-
Q for the period ended June 30, 1995 and incorporated herein by
reference.

10.1 The Jacobs Engineering Group Inc. 1981 Executive Incentive Plan
(as Amended and Restated). Filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the period ended
June 30, 1995 and incorporated herein by reference.

(S) 10.2 The Jacobs Engineering Group Inc. Incentive Bonus Plan for
Officers and Key Managers.

10.3 Agreement dated as of November 30, 1993 between the Registrant
and Dr. Joseph J. Jacobs. Filed as Exhibit 10.3 to the
Registrant's Quarterly Report on Form 10-Q for the period ended
June 30, 1995 and incorporated herein by reference.

(S) 10.4 Agreement dated as of December 2, 1999 between the
Registrant and Dr. Joseph J. Jacobs.

10.5 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.

10.6 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

Page 19
<PAGE>

on Form 10-Q for the period ended March 31, 1995 and incorporated
herein by reference.

10.7 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.

10.8 The Jacobs Engineering Group Inc. 1989 Employee Stock Purchase
Plan. Filed as Exhibit 4.1 to the Registrant's Registration
Statement on Form S-8 (Registration No. 333-72977) filed with the
Commission on February 26, 1999 and incorporated herein by
reference.

10.9 Form of Indemnification Agreement entered into between the
Registrant and its officers and directors. Filed as Exhibit
10.10 to the Registrant's Quarterly Report on Form 10-Q for the
period ended June 30, 1995 and incorporated herein by reference.

10.10 Jacobs Engineering Group Inc. 401(k) Plus Savings Plan and
Trust. Filed as Exhibit 10.11 to the Registrant's Quarterly
Report on Form 10-Q for the period ended March 31, 1995 and
incorporated herein by reference.

11. Statement of computation of net income per outstanding share of
common stock is hereby incorporated by reference from Appendix A
to the Registrant's Notice of 2000 Annual Meeting of Shareholders
and Proxy Statement, copies of which are being delivered to (but
not filed with, except to the extent incorporated herein) the
Commission as an exhibit to this report.

(S) 13. Appendix A to the Registrant's Notice of 2000 Annual Meeting of
Shareholders and Proxy Statement (which contains the annual
financial statements and financial information of Jacobs
Engineering Group Inc. for the fiscal year ended September 30,
1999).

(S) 21. List of Subsidiaries of Jacobs Engineering Group Inc.

(S) 23. Consent of Independent Auditors.

(S) 27.1 Financial Data Schedule.

___________________________________________

(S) Being filed herewith.

Page 20
<PAGE>

UNDERTAKINGS

For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned Registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into the Registrant's Registration Statements on Form
S-8 Nos. 333-45475 (filed with the Commission on February 3, 1998) and 333-72977
(filed with the Commission on February 26, 1999):

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by final adjudication of such issue.

Page 21
<PAGE>

SIGNATURES

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

JACOBS ENGINEERING GROUP INC.

Dated: December 2, 1999 By: /s/ NOEL G. WATSON
------------------------------------
Noel G. Watson
President, Chief Executive
Officer and Director
(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 Company
and in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ NOEL G. WATSON Director and December 2, 1999
- ---------------------------------------- Principal Executive Officer
Noel G. Watson

/s/ JOSEPH J. JACOBS Director December 2, 1999
- ----------------------------------------
Joseph J. Jacobs

/s/ JOSEPH F. ALIBRANDI Director December 2, 1999
- ----------------------------------------
Joseph F. Alibrandi

/s/ RICHARD E. BEUMER Director December 2, 1999
- ----------------------------------------
Richard E. Beumer

/s/ PETER H. DAILEY Director December 2, 1999
- ----------------------------------------
Peter H. Dailey

/s/ ROBERT B. GWYN Director December 2, 1999
- ----------------------------------------
Robert B. Gwyn

/s/ LINDA K. JACOBS Director December 2, 1999
- ----------------------------------------
Linda K. Jacobs

/s/ WILLIAM R. KERLER Director December 2, 1999
- ----------------------------------------
William R. Kerler

/s/ J. CLAYBURN LaForce Director December 2, 1999
- ----------------------------------------
J. Clayburn LaForce

/s/ DALE R. LAURANCE Director December 2, 1999
- ----------------------------------------
Dale R. Laurance

Director December __, 1999
Linda Fayne Levinson

/s/ DAVID M. PETRONE Director December 2, 1999
- ----------------------------------------
David M. Petrone

/s/ JAMES L. RAINEY, JR. Director December 2, 1999
- ----------------------------------------
James L. Rainey, Jr.
</TABLE>

Page 22
<PAGE>

SIGNATURES - Continued

Senior Vice President
Finance and Administration,
and Treasurer (Principal
/s/ JOHN W. PROSSER, JR. Financial Officer) December 2, 1999
- -----------------------------
John W. Prosser, Jr.

Senior Vice President and
Controller (Principal
/s/ NAZIM G. THAWERBHOY Accounting Officer) December 2, 1999
- -----------------------------
Nazim G. Thawerbhoy

Page 23

<PAGE>

EXHIBIT 3.2

BYLAWS OF
JACOBS ENGINEERING GROUP INC.
(A DELAWARE CORPORATION)

(COMPOSITE CONFORMED COPY)

ARTICLE I.

OFFICES

SECTION 1.01 REGISTERED OFFICE. The registered office of Jacobs
Engineering Group Inc. (hereinafter called the "Corporation") in the State of
Delaware shall be at 1209 Orange Street, Wilmington, and the name of the
registered agent at that address shall be The Corporation Trust Company.

SECTION 1.02 PRINCIPAL OFFICE. The principal office for the transaction of
the business of the Corporation shall be at 251 South Lake Avenue, Pasadena,
California. The Board of Directors (hereinafter called the "Board") is hereby
granted full power and authority to change said principal office from one
location to another.

SECTION 1.03 OTHER OFFICES. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board may from time to time determine or as the business of the
Corporation may require.

ARTICLE II.

MEETINGS OF STOCKHOLDERS

SECTION 2.01 ANNUAL MEETINGS. Annual meetings of the stockholders of the
Corporation for the purpose of electing directors and for the transaction of
such other proper business as may come before such meetings shall be held on the
second Tuesday in February of each year if not a legal holiday, and if a legal
holiday, then on the next business day following, at 3:30 P.M., or at such other
time or date as the Board shall determine by resolution.

SECTION 2.02 SPECIAL MEETINGS. Special meetings of the stockholders for
any purpose or purposes may be called by the

1
<PAGE>

Board, by a committee of the Board that has been duly designated by the Board
and whose powers and authority, as provided in a resolution of the Board or in
these Bylaws, include the power to call such meetings or by the Chairman of the
Board. Unless otherwise prescribed by statute or by the Certificate of
Incorporation, special meetings may not be called by any other person or
persons. No business may be transacted at any special meeting of stockholders
other than such business as may be designated in the notice calling such
meeting.

SECTION 2.03 PLACE OF MEETINGS. All meetings of the stockholders shall be
held at such places, within or without the State of Delaware, as may from time
to time be designated by the person or persons calling the respective meeting
and specified in the respective notices or waivers of notice thereof.

SECTION 2.04 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.
In order that the Corporation may determine the stockholders entitled to notice
of or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board may fix, in advance, a record date, which shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) nor less than ten (10) days prior to any other action.

If the Board does not so fix a record date:

(i) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the
day on which the meeting is held.

(ii) The record date for determining stockholders for any other
purpose shall be at the day on which the first written consent is
expressed.

(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on

2
<PAGE>

the day on which the Board adopts the resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.

SECTION 2.05 NOTICE OF MEETINGS. Except as otherwise required by law,
notice of each meeting of the stockholders, whether annual or special, shall be
given not less than twenty (20) nor more than sixty (60) days before the date of
the meeting to each stockholder of record entitled to vote at such meeting by
delivering a typewritten or printed notice thereof to him personally, or by
depositing such notice in the United States mail, in a postage prepaid envelope,
directed to him at his post office address furnished by him to the Secretary of
the Corporation for such purpose or, if he shall not have furnished to the
Secretary of the Corporation his address for such purpose, then at his post
office address last known to the Secretary, or by transmitting a notice thereof
to him at such address by telegraph, cable, or wireless. Except as otherwise
expressly required by law, no publication of any notice of a meeting of the
stockholders shall be required. Every notice of a meeting of the stockholders
shall state the place, date and hour of the meeting, and, in the case of a
special meeting, shall also state the purpose or purposes for which the meeting
is called. Notice of any meeting of stockholders shall not be required to be
given to any stockholder who shall have waived such notice and such notice shall
be deemed waived by any stockholders who shall attend such meeting in person or
by proxy, except as for stockholders who shall attend such meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Except as otherwise expressly required by law, notice of any
adjourned meeting of the stockholders need not be given if the time and place
thereof are announced at the meeting at which the adjournment is taken.

SECTION 2.06 ADVANCE NOTICE OF STOCKHOLDER NOMINEES. Only persons who are
nominated in accordance with the procedures set forth in this Section 2.06 shall
be eligible for election as Directors. Nominations of persons for election to
the Board of the Corporation may be made at a meeting of stockholders by or at
the direction of the Board or by any stockholder of the Corporation entitled to
vote in the election of Directors at the

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meeting who complies with the notice procedures set forth in this Section 2.06.
Such nominations, other than those made by or at the direction of the Board,
shall be made pursuant to timely notice in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice shall be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than 60 days nor more than 90 days prior to the meeting; provided, however,
that in the event that less than 70 days' notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposed to
nominate for election or re-election a Director, (i) the name, age, business
address and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of the
Corporation which are beneficially owned by such person and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including without limitation such persons' written consent to being
named in the proxy statement, if any, as a nominee and to serving as a Director
if elected); and (b) as to the stockholder giving the notice (i) the name and
address, as they appear on the Corporation's books, of such stockholder and (ii)
the class and number of shares of the Corporation that are beneficially owned by
such stockholder. At the request of the Board any person nominated by the Board
for election as a Director shall furnish to the Secretary of the Corporation
that information required to be set forth in a stockholder's notice of
nomination which pertains to the nominee. No person shall be eligible for
election as a Director of the Corporation unless nominated in accordance with
the procedures set forth in this Section 2.06. The Chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the procedures prescribed by the
bylaws, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded.

SECTION 2.07 QUORUM. Except in the case of any meeting for the election of
directors summarily ordered as provided by law, the holders of record of a
majority in voting interest of the

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shares of stock of the Corporation entitled to be voted thereat, present in
person or by proxy, shall constitute a quorum for the transaction of business at
any meeting of the stockholders of the Corporation or any adjournment thereof.
In the absence of a quorum at any meeting or any adjournment thereof, a majority
in voting interest of the stockholders present in person or by proxy and
entitled to vote thereat or, in the absence therefrom of all the stockholders,
any officer entitled to preside at, or to act as secretary of, such meeting may
adjourn such meeting from time to time. At any such adjourned meeting at which a
quorum is present any business may be transacted that might have been transacted
at the meeting as originally called.

SECTION 2.08 VOTING.

(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation that has voting rights on the matter in question and
that has been held by him and registered in his name on the books of the
Corporation:

(i) on the date fixed pursuant to Section 6.05 of these Bylaws as
the record date for the determination of stockholders entitled to notice of
and to vote at such meeting, or

(ii) if no such record date shall have been so fixed, then (a) at the
close of business on the day next preceding the day on which notice of the
meeting shall be given or (b) if notice of the meeting shall be waived, at
the close of business on the day next preceding the day on which the
meeting shall be held.

(b) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors in such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity
shall be entitled to vote such stock. Persons whose stock is pledged shall be
entitled to vote, unless in the transfer by the pledgor on the books of the
Corporation he shall have expressly empowered the pledgee to vote thereon, in
which case only the pledgee, or his proxy, may represent such stock and vote
thereon. Stock having voting power standing of record in the

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names of two or more persons, whether fiduciaries, members of a partnership,
joint tenants, tenants in common, tenants by the entirety or otherwise, or with
respect to which two or more persons have the same fiduciary relationship, shall
be voted in accordance with the provisions of the General Corporation Law of the
State of Delaware.

(c) Any such voting rights may be exercised by the stockholder entitled
thereto in person or by his proxy appointed by an instrument in writing,
subscribed by such stockholder or by his attorney thereunto authorized and
delivered to the secretary of the meeting; provided, however, that no proxy
shall be voted or acted upon after three years from its date unless said proxy
shall provide for a longer period. The attendance at any meeting of a
stockholder who may theretofore have given a proxy shall not have the effect of
revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At any meeting of the stockholders
all matters, except as otherwise provided by the Certificate of Incorporation,
in these Bylaws or by law, shall be decided by the vote of a majority of the
shares present in person or by proxy and entitled to vote thereat and thereon, a
quorum being present. The vote at any meetings of the stockholders on any
question need not be by ballot, unless so directed by the chairman of the
meeting. On a vote by ballot each ballot shall be signed by the stockholder
voting, or by his proxy, if there be such proxy, and it shall state the number
of shares voted.

SECTION 2.09 LIST OF STOCKHOLDERS. The Secretary of the Corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder for any purpose germane to the meeting
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the duration
thereof, and may be inspected by any stockholder who is present. Such list
shall presumptively determine the identity of the stockholders entitled to
notice of and to vote at the meeting and the number of shares held by each of
them.

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SECTION 2.10 JUDGES. If at any meeting of the stockholders a vote by
written ballot shall be taken on any question, the chairman of such meeting may
appoint a judge or judges to act with respect to such vote. Each judge so
appointed shall first subscribe an oath faithfully to execute the duties of a
judge at such meeting with strict impartiality and according to the best of his
ability. Such judges shall decide upon the qualification of the voters and
shall report the number of shares represented at the meeting and entitled to
vote on such question, shall conduct and accept the votes, and, when the voting
is completed, shall ascertain and report the number of shares voted respectively
for and against the question. Reports of judges shall be in writing and
subscribed and delivered by them to the Secretary of the Corporation. The
judges need not be stockholders of the Corporation, and any officer of the
Corporation may be a judge on any question other than a vote for or against a
proposal in which he shall have a material interest.

SECTION 2.11 ACTION WITHOUT A MEETING NOT PERMITTED. No action shall be
taken by the stockholders except at an annual or special meeting of
stockholders. The power of the stockholders to consent in writing without a
meeting to the taking of any action is specifically denied.

SECTION 2.12 CONDUCT OF MEETINGS OF STOCKHOLDERS. Subject to the
following, meetings of stockholders generally shall follow accepted rules of
parliamentary procedure.

(a) The chairman of the meeting shall have absolute authority over matters
of procedure and there shall be no appeal from the ruling of the chairman. if
the chairman, in his absolute discretion, deems it advisable to dispense with
the rules of parliamentary procedure as to any one meeting of stockholders or
part thereof, the chairman shall so state and shall clearly state the rules
under which the meeting or appropriate part thereof shall be conducted.

(b) If disorder should arise that prevents continuation of the legitimate
business of the meeting, the chairman may quit the chair and announce the
adjournment of the meeting; and, upon his so doing, the meeting shall be
immediately adjourned.

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(d) A resolution or motion shall be considered for vote only if proposed
by a stockholder or duly authorized proxy and seconded by an individual who is a
stockholder or a duly authorized proxy, other than the individual who proposed
the resolution or motion.

ARTICLE III.

BOARD OF DIRECTORS

SECTION 3.01 GENERAL POWERS. The property, business and affairs of the
Corporation shall be managed by the Board.

SECTION 3.02 NUMBER AND TERM OF OFFICE. The authorized number of directors
shall be thirteen (13) until changed by a duly adopted amendment to this bylaw.
Each of the directors of the Corporation shall hold office until his successor
shall have been duly elected and shall qualify or until he shall resign or shall
have been removed in the manner hereinafter provided.

SECTION 3.03 ELECTION OF DIRECTORS. The directors shall be elected by the
stockholders of the Corporation, and at each election the persons receiving the
greatest number of votes, up to the number of directors then to be elected,
shall be the persons then elected. The election of directors is subject to any
provisions contained in the Certificate of Incorporation relating thereto,
including any provisions for cumulative voting.

SECTION 3.04 RESIGNATIONS. Any director of the Corporation may resign at
any time by giving written notice to the Board or to the Secretary of the
Corporation. Any such resignation shall take effect at the time specified
therein, or, if the time be not specified, it shall take effect immediately upon
its receipt; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.

SECTION 3.05 VACANCIES. Except as otherwise provided in the Certificate of
Incorporation, any vacancy in the Board, whether because of death, resignation,
disqualification, an increase in the number of directors, or any other cause,
may be filled by vote of the majority of the remaining directors, although less
than a quorum. Each director so chosen to fill a vacancy shall hold office
until his successor shall have been

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elected and shall qualify or until he shall resign or shall have been removed in
the manner hereinafter provided.

SECTION 3.06 PLACE OF MEETING. The Board may hold any of its meetings at
such place or places within or without the State of Delaware as the Board may
from time to time by resolution designate or as shall be designated by the
person or persons calling the meeting or in the notice or a waiver of notice of
any such meeting. Directors may participate in any regular or special meeting
of the Board by means of conference telephone or similar communications
equipment pursuant to which all persons participating in the meeting of the
Board can hear each other, and such participation shall constitute presence in
person at such meeting.

SECTION 3.07 FIRST MEETING. The Board shall meet as soon as practicable
after each annual election of directors and notice of such first meeting shall
not be required.

SECTION 3.08 REGULAR MEETINGS. Regular meetings of the Board may be held
at such times as the Board may from time to time by resolution determine. if any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting shall be held at the same hour and place
on the next succeeding business day not a legal holiday. Except as provided by
law, notice of regular meetings need not be given.

SECTION 3.09 SPECIAL MEETINGS. Special meetings of the Board may be called
by the Chairman of the Board of Directors or the President and shall be called
by the President or Secretary on the written request of two directors. Notice
of all special meetings of the Board shall be given to each director at such
director's address as it appears on the records of the Corporation, as follows:

(a) by first-class mail, postage prepaid, deposited in the United
States mail in the city where the principal office of the Corporation is
located at least five (5) days before the date of such meeting; or

(b) by telegram, charges prepaid, such notice to be delivered to the
telegraph company in the city of the principal office of the Corporation at
least forty-eight (48) hours before the time of holding such meeting; or

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Such notice may be waived by any director and any meeting shall be a legal
meeting without notice having been given if all the directors shall be present
thereat or if those not present shall, either before or after the meeting, sign
a written waiver of notice of, or a consent to, such meeting or shall after the
meeting sign the approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or be made a part of the
minutes of the meeting.

SECTION 3.10 QUORUM AND MANNER OF ACTING. Except as otherwise provided in
the Certificate of Incorporation or these Bylaws or by law, the presence of a
majority of the total number of directors then in office shall be required to
constitute a quorum for the transaction of business at any meeting of the Board.
Except as otherwise provided in the Certificate of Incorporation or these Bylaws
or by law, all matters shall be decided at any such meeting, a quorum being
present, by the affirmative votes of a majority of the directors present. In
the absence of a quorum, a majority of directors present at any meeting may
adjourn the same from time to time until a quorum shall be present. Notice of
any adjourned meeting need not be given. The directors shall act only as a
Board, and the individual directors shall have no power as such.

SECTION 3.11 ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of the Board or of any committee thereof may be taken
without a meeting if a written consent thereto is signed by all members of the
Board or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board or committee.

SECTION 3.12 MANIFESTATION OF DISSENT. A director of the Corporation who
is present at a meeting of the Board at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless his dissent
shall be entered in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as the secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.

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SECTION 3.13 COMPENSATION. The directors shall receive only such
compensation for their services as directors as may be allowed by resolution of
the Board. The Board may also provide that the Corporation shall reimburse each
such director for any expense incurred by him on account of his attendance at
any meetings of the Board or Committees of the Board. Neither the payment of
such compensation nor the reimbursement of such expenses shall be construed to
preclude any director from serving the Corporation or its subsidiaries in any
other capacity and receiving compensation therefor.

SECTION 3.14 EXECUTIVE COMMITTEE. There may be an Executive Committee of
three or more directors appointed by the Board, who may meet at stated times, or
on notice to all members of such Committee by any of their own number, during
the intervals between the meetings of the Board; they shall advise and aid the
officers of the Corporation in all matters concerning its interests and the
management of its business, and generally perform such duties and exercise such
powers as may be directed or delegated by the Board from time to time. To the
full extent permitted by law, the Board may delegate to such Committee authority
to exercise all the powers of the Board while the Board is not in session.
Vacancies in the members of the Committee shall be filled by the Board at a
regular meeting or at a special meeting for that purpose. The Executive
Committee shall keep written minutes of its meeting and report the same to the
Board when required. The provisions of Sections 3.08, 3.09 and 3.11 of these
Bylaws shall apply, mutatis mutandis, to any Executive Committee of the Board.

SECTION 3.15 EMERGENCY MANAGEMENT COMMITTEE. The Board of Directors, by
resolution, may provide for an Emergency Management Committee and appoint
members or designate the manner in which membership of the Committee shall be
determined. The emergency powers granted hereunder shall be operative during
any emergency resulting from an attack on the United States or during any
nuclear or atomic disaster or during the existence of any catastrophe, or other
similar emergency condition, as a result of which a quorum of the Board of
Directors or a standing committee thereof cannot readily be convened for action
(an "emergency condition"). Said Committee shall have and may exercise all of
the powers of the Board of Directors in the management of the business and
affairs of the Corporation. It shall act only during such emergency condition
and so long as the number of Directors able to act shall have been reduced to
fewer than five, and until a Board of Directors has been elected

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by the stockholders. Such Committee shall meet as promptly as possible after the
commencement of such an emergency condition as would activate the Committee and
at such subsequent time or times as it may designate until a Board of Directors
has been duly elected. Such Committee shall as the first order of business elect
an Emergency Executive Committee from among its members and a chairman thereof,
who shall be the chief executive officer of the Corporation. Such Executive
Committee shall function in the same manner and possess the same powers as the
Executive Committee of the Board of Directors, as provided in Article III of
these Bylaws, and shall have as many members as shall be provided by resolution
of the Board. Such Committees shall make their own rules of procedure except to
the extent otherwise provided by resolution of the Board. A majority of the
members of the Committees able to act shall constitute a quorum. The physical
presence of a member shall not be required if his vote on an action to be taken
can be obtained by available means of communication. Any vacancy occurring in
said Committees caused by resignation, death or other incapacity may be filled
by a majority of the remaining members of the Emergency Management Committee and
any member so chosen shall serve until a Board of Directors has been duly
elected.

SECTION 3.16 OTHER COMMITTEES. The Board may, by resolution passed by a
majority of the whole Board, designate one or more other committees, each such
committee to consist of one or more of the directors of the Corporation. To the
full extent permitted by law, any such committee shall have and may exercise
such powers and authority as the Board may designate in such resolution.
Vacancies in the membership of a committee shall be filled by the Board at a
regular meeting or a special meeting for that purpose. Any such committee shall
keep written minutes of its meetings and report the same to the Board when
required. The provisions of Sections 3.08, 3.09, 3.10, 3.11 and 3 '.12 of these
Bylaws shall apply, mutatis mutandis, to any such committee of the Board.

ARTICLE IV.

OFFICERS

SECTION 4.01 NUMBER. The officers of the Corporation shall be a Chairman
of the Board, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chief Executive Officer of the Corporation shall be such officer
as the Board shall from time to time designate. The Board may also elect one

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or more Assistant Secretaries and Assistant Treasurers. A person may hold more
than one office providing the duties thereof can be consistently performed by
the same person.

SECTION 4.02 OTHER OFFICERS. The Board may appoint such other officers as
it shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board.

SECTION 4.03 ELECTION. Each of the officers of the Corporation, except
such officers as may be appointed in accordance with the provisions of Section
4.02 or Section 4.05 of this Article, shall be chosen annually by the Board and
shall hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and qualified.

SECTION 4.04 SALARIES. The salaries of all officers of the Corporation
shall be fixed by the Board.

SECTION 4.05 REMOVAL; VACANCIES. Subject to the express provisions of a
contract authorized by the Board, any officer may be removed, either with or
without cause, at any time by the Board or by any officer upon whom such power
of removal may be conferred by the Board. Any vacancy occurring in any office
of the Corporation shall be filled by the Board.

SECTION 4.06 THE CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of the stockholders and directors and shall have such
other powers and duties as may be prescribed by the Board or by applicable law.
He shall be an ex-officio member of standing committees, if so provided in the
resolutions of the Board appointing the members of such committees.

SECTION 4.07 THE VICE CHAIRMAN OF THE BOARD. In the absence of the
Chairman of the Board the Vice Chairman of the Board, if there be such an
officer, shall have all the powers and shall exercise all the duties of the
Chairman of the Board.

SECTION 4.08 THE PRESIDENT. The President shall be the managing officer of
the Corporation. Subject to the control of the Board, the President shall have
general supervision, control and management of the affairs and business of the
Corporation, and general charge and supervision of all officers, agents and

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<PAGE>

employees of the Corporation; shall see that all orders and resolutions of the
Board are carried into effect; shall, in the absence of the Chairman of the
Board and Vice Chairman of the Board, preside at all meetings of the
stockholders and the Board; and in general shall exercise all powers and perform
all duties incident to the office of President and managing officer of the
Corporation and such other powers and duties as may from time to time be
assigned to him by the Board or as may be prescribed in these Bylaws.

The President may execute bonds, mortgages and other contracts requiring a
seal, under the seal of the Corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board to some other
officer or agent of the Corporation.

The President shall be an ex-officio member of standing committees, if so
provided in the resolutions of the Board appointing the members of such
committees.

SECTION 4.09 THE VICE PRESIDENTS. In the absence of the President or in the
event of his inability or refusal to act, the Vice President (or in the event
there be more than one Vice President, the Vice Presidents in the order
designated, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall perform such other duties and have such
other powers as the Board or the President may from time to time prescribe.

SECTION 4.10 THE SECRETARY AND ASSISTANT SECRETARY. The Secretary shall
attend all meetings of the Board and all meetings of the stockholders and record
all the proceedings of the meetings of the Corporation and of the Board in a
book to be kept for that purpose and shall perform like duties for the standing
and special committees of the Board when required. He shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
Board, and shall perform such other duties as may be prescribed by the Board or
President, under whose supervision he shall act. He shall have custody of the
corporate seal of the Corporation and he, or an assistant secretary, shall have
authority to affix the same to an instrument requiring it and, when so affixed,
it may be attested by his signature or by the signature of such assistant

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secretary. The Board may give general authority to any other officer to affix
the seal of the Corporation and to attest the affixing of his signature.

The assistant secretary, or if there be more than one, the assistant
secretaries in the order determined by the Board (or if there be no such
determination, then in the order of their election), shall, in the absence of
the Secretary or in the event of his inability or his refusal to act, perform
the duties and exercise the powers of the Secretary and shall perform such other
duties and have such other powers as the Board may from time to time prescribe.

SECTION 4.11 THE TREASURER. The Treasurer shall be the chief financial
officer of the Corporation and may be referred to by that title shall have the
custody of the corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the
Board.

The Treasurer shall disburse the funds of the Corporation as may be ordered
by the Board, making proper vouchers for such disbursements, and shall render to
the President and the Board, at its regular meetings, or when the Board so
requires, an account of all his transactions as Treasurer and of the financial
condition of the Corporation.

If required by the Board, the Treasurer shall give the Corporation a bond
in such sum and with such surety as shall be satisfactory to the Board for the
faithful performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.

SECTION 4.12 THE ASSISTANT TREASURER. The assistant treasurer, or if there
be more than one, the assistant treasurers in the order determined by the Board
(or if there be no such determination, then in the order of their election),
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and

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have such other powers as the Board may from time to time prescribe.

ARTICLE V.

CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.

SECTION 5.01 CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
payment of money, notes or other evidence of indebtedness payable by the
Corporation shall be signed by such person or persons and in such manner as,
from time to time, shall be determined by resolution of the Board. Each such
person or persons shall give such bond, if any, as the Board may require.

SECTION 5.02 DEPOSITS. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board may select, or as may
be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. For the purpose of deposit and for the purpose
of collection for the account of the Corporation, the President, any Vice
President or the Treasurer (or any other officer or officers, assistant or
assistants, agent or agents, or attorney or attorneys of the Corporation who
shall from time to time be determined by the Board) may endorse, assign and
deliver checks, drafts and other orders for the payment of money which are
payable to the order of the Corporation.

SECTION 5.03 GENERAL AND SPECIAL BANK ACCOUNTS. The Board may from time to
time authorize the opening and keeping of general and special bank accounts with
such banks, trust companies or other depositories as the Board may select or as
may be selected by any officer or officers, assistant or assistants, agent or
agents, or attorney or attorneys of the Corporation to whom such power shall
have been delegated by the Board. The Board may make such special rules and
regulations with respect to such bank accounts, not inconsistent with the
provisions of these Bylaws, as it may deem expedient.

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ARTICLE VI.

SHARES AND THEIR TRANSFER

SECTION 6.01 CERTIFICATES FOR STOCK. Every owner of stock of the
Corporation shall be entitled to have a certificate or certificates, to be in
such form as the Board shall prescribe, certifying the number and class of
shares of the stock of the Corporation owned by him. The certificates
representing shares of such stock shall be numbered in the order in which they
shall be issued and shall be signed in the name of the Corporation by the
Chairman, Vice Chairman or President or a Vice President, and by the Secretary
or an Assistant Secretary or the Treasurer or an Assistant Treasurer. Any of or
all of the signatures on the certificates may be a facsimile. In case any
officer, transfer agent or registrar who has signed, or whose facsimile
signature has been placed upon, any such certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued,
such certificate may nevertheless be issued by the Corporation with the same
effect as though the person who signed such certificate, or whose facsimile
signature has been placed upon, any such certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued,
such certificate may nevertheless be issued by the Corporation with the same
effect as though the person who signed such certificate, or whose facsimile
signature shall have been placed thereupon, were such officer, transfer agent or
registrar at the date of issue. A record shall be kept of the respective names
of the persons, firms or corporations owning the stock represented by such
certificates, the number and class of shares represented by such certificates,
respectively, and the respective dates thereof, and in case of cancellation, the
respective dates of cancellation. Every certificate surrendered to the
Corporation for exchange or transfer shall be cancelled, and no new certificate
or certificates shall be issued in exchange for any existing certificate until
such existing certificate shall have been so cancelled, except in cases provided
for in Section 6.04.

SECTION 6.02 TRANSFERS OF STOCK. Transfers of shares of stock of the
Corporation shall be registered on the books of the Corporation or a transfer
agent appointed as provided in Section 6.03, only upon surrender of the
certificate or certificates for such shares properly endorsed by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney

17
<PAGE>

duly executed, and the payment of all taxes thereon. The person in whose name
shares of stock stand on the books of the Corporation shall be deemed the owner
thereof for all purpose as regards the Corporation. Whenever any transfer of
shares shall be made for collateral security, and not absolutely, such fact
shall be so expressed in the entry of transfer if, when the certificate or
certificates shall be presented to the Corporation for registration of transfer,
both the transferor and the transferee request the Corporation to do so.

SECTION 6.03 REGULATIONS. The Board may make such rules and regulations as
it may deem expedient, not inconsistent with these Bylaws, concerning the issue,
transfer and registration of certificates for shares of the stock of the
Corporation. It may appoint, or authorize any officer or officers to appoint,
one or more transfer clerks or one or more transfer agents and one or more
registrars, and may require all certificates for stock to bear the signature or
signatures of any of them.

SECTION 6.04 LOST, STOLEN, DESTROYED, AND MUTILATED CERTIFICATES. In any
case of loss, theft, destruction or mutilation of any certificate of stock,
another may be issued in its place upon proof of such loss, theft, destruction
or mutilation and upon the giving of a bond of indemnity to the Corporation in
such form and in such sums as the Board may direct; provided, however, that a
new certificate may be issued without requiring any bond when, in the judgment
of the Board, it is proper so to do.

SECTION 6.05 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any other
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board may fix, in advance, a record date, which shall not be more
than sixty (60) nor less than twenty (20) days before the date of such meeting,
nor more than sixty (60) days prior to any other action. If in any case
involving the determination of stockholders for any purpose other than notice of
or voting at a meeting of stockholders the Board shall not fix such a record
date, the record date for determining stockholders for such purpose shall be the
close of business on the day on which the Board shall adopt the resolution
relating thereto. A determination of stockholders

18
<PAGE>

entitled to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of such meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.

ARTICLE VII.

INDEMNIFICATION

SECTION 7.01 ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise or as a member of any committee or similar body, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contenders or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in, or
not opposed to, the best interests of the Corporation, and, with respect to any
criminal action or proceeding, that he had reasonable cause to believe that his
conduct was unlawful.

SECTION 7.02 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Corporation to procure a judgment in its favor by reason of the fact that
he is or was a director, officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other

19
<PAGE>

enterprise, or as a member of any committee or similar body, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in, or not opposed to,
the best interests of the Corporation, except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.

SECTION 7.03 DETERMINATION OF RIGHT OF INDEMNIFICATION. Any indemnification
under Section 7.01 or 7.02 (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Sections 7.01 and 7.02. Such determination shall be made (i) by the Board by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even
if obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders.

SECTION 7.04 INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Article, to the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Section 7.01 or 7.02, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.

SECTION 7.05 ADVANCE OF EXPENSES. Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding as authorized by the
Board upon receipt of an undertaking by or on behalf of the director or officer,
to repay such amount if it shall ultimately be

20
<PAGE>

determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article. Such expenses incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the Board deems
appropriate.

SECTION 7.06 OTHER RIGHTS AND REMEDIES . The benefits provided by this
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any statute, Bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.

SECTION 7.07 INSURANCE. Upon resolution passed by the Board, the
Corporation may purchase and maintain insurance on behalf of any person who is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him or hold him harmless against
such liability under the provisions of this Article.

SECTION 7.08 CONSTITUENT CORPORATIONS. For the purposes of this Article,
references to "the Corporation" include all constituent corporations absorbed in
a consolidation or merger as well as the resulting or surviving corporation, and
shall also include without limitation Jacobs Engineering Group Inc., a
California corporation, so that any person who is or was a director, officer,
employee or agent of such a constituent corporation or is or was serving request
of such constituent corporation as a director, officer, employee agent of
another corporation, partnership, joint venture, trust or other enterprise shall
stand in the same position under the provisions of this Article with respect to
the resulting or surviving corporation as he would if he had served the
resulting or surviving corporation in the same capacity.

SECTION 7.09 EMPLOYEE BENEFIT PLANS. For purposes of this Article,
references to "other enterprises" shall include employee benefit plans, and
references to "serving at the

21
<PAGE>

request of the Corporation" shall include any service as a director, officer,
employee or agent of the Corporation that imposes a duty on, or involves
services by, such director, officer, employee or agent with respect to an
employee benefit plan, its participants or beneficiaries.

SECTION 7.10 BROADEST LAWFUL INDEMNIFICATION. In addition to the foregoing,
the Corporation shall, to the broadest and maximum extent permitted by Delaware
law, as the same exists from time to time (but, in case of any amendment to or
change in Delaware law, only to the extent that such amendment or change permits
the Corporation to provide at the or broader rights of indemnification than is
permitted to the Corporation prior to such amendment or change), indemnify each
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he is or
was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding than is permitted to the Corporation prior to such
amendment or change), pay to such person any and all expenses (including
attorneys' fees) incurred in defending or settling any such action, suit or
proceeding in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer, to repay such amount if it shall ultimately be determined by a final
judgment or other final adjudication that he is not entitled to be indemnified
by the Corporation as authorized in this Section 7.10. The first sentence of
this Section 7.10 to the contrary notwithstanding, the Corporation shall not
indemnify any such person with respect to any of the following matters: (i)
remuneration paid to such person if it shall be determined by a final judgment
or other final adjudication that such remuneration was in violation of law; or
(ii) any accounting of profits made from the purchase or sale by such person of
the Corporation's securities within the meaning of Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions of
any federal, state or local statutory law; or (iii) actions brought about or
contributed to by the dishonesty of such person, if a final judgment or other
final adjudication adverse to such person establishes that acts of active and
deliberate dishonesty were

22
<PAGE>

committed or attempted by such person with actual dishonest purpose and intent
and were material to the adjudication; or (iv) actions based on or attributable
to such person having gained any personal profit or advantage to which he was
not entitled, in the event that a final judgment or other final adjudication
adverse to such person establishes that such person in fact gained such personal
profit or other advantage to which he was not entitled; or (v) any matter in
respect of which a final decision by a court with competent jurisdiction shall
determine that indemnification is unlawful; provided, however, that the
Corporation shall perform its obligations under the second sentence of this
Section 7.10 on behalf of such person until such time as it shall be ultimately
determined by a final judgment or other final adjudication that he is not
entitled to be indemnified by the Corporation as authorized by the first
sentence of this Section 7.10 by virtue of any of the preceding clauses (i),
(ii), (iii), (iv) or (v).

SECTION 7.11 INDEMNITY FUND. Upon resolution passed by the Board, the
Corporation may establish a trust or other designated account, grant a security
interest or use other means (including, without limitation, a letter of credit),
to ensure the payment of any or all of its obligations arising under this
Article VII and/or any agreements that may be entered into between the
Corporation and its officers and directors from time to time.

SECTION 7.12 SEVERABILITY. If any part of this Article VII shall be found,
in any action, suit or proceeding or appeal therefrom or in any other
circumstances or as to any particular officer, director, employee or agent to be
unenforceable, ineffective or invalid for any reason, the enforceability, effect
and validity of the remaining parts or of such parts in other circumstances
shall not be affected, except as otherwise required by applicable law.

SECTION 7.13 AMENDMENTS. The foregoing provisions of this Article VII shall
be deemed to constitute an agreement between the Corporation and each of the
persons entitled to indemnification hereunder, for as long as such provisions
remain in effect. Any amendment to the foregoing provisions of this Article VII
which limits or otherwise adversely affects the scope of indemnification or
rights of any such persons hereunder shall, as to such persons, apply only to
claims arising, or causes of action based on actions or events occurring, after
such amendment and delivery of notice of such amendment is given

23
<PAGE>

to the person or persons so affected. Until notice of such amendment is given to
the person or persons whose rights hereunder are adversely affected, such
amendment shall have no effect on such rights of such persons hereunder. Any
person entitled to indemnification under the foregoing provisions of this
Article VII shall as to any act or omission occurring prior to the date of
receipt of such notice, be entitled to indemnification to the same extent as had
such provisions continued as Bylaws of the Corporation without such amendment.

ARTICLE VIII.

MISCELLANEOUS

SECTION 8.01 SEAL. The Board shall provide a corporate seal, which shall be
in the form of a circle and shall bear the name of the Corporation and words and
figures showing that the Corporation was incorporated in the State of Delaware
and the year of incorporation.

SECTION 8.02 WAIVER OF NOTICES. Whenever notice is required to be given by
these Bylaws or the Certificate of Incorporation or by law, the person entitled
to said notice may waive such notice in writing, either before or after the time
stated therein, and such waiver shall be deemed equivalent to notice.

SECTION 8.03 FISCAL YEAR. The fiscal year of the Corporation shall begin
the first day of October in each year.

SECTION 8.04 AMENDMENTS. Subject to the provisions of the Certificate of
Incorporation, these Bylaws and applicable law, these Bylaws or any of them may
be amended or repealed and new Bylaws may be adopted (a) by the Board, by vote
of a majority of the number of directors then in office or (b) by the vote of
the holders of not less than seventy-five (75%) percent of the total voting
power of all outstanding shares of voting stock of the Corporation in an annual
meeting of stockholders, without previous notice, or at any special meeting of
stockholders, provided that notice of such proposed amendment, repeal or
adoption is given in the notice of special meeting. Subject to the provisions of
the Certificate of Incorporation, any Bylaws adopted or amended by the
stockholders may be amended or repealed by the Board or the stockholders.

24
<PAGE>

SECTION 8.05 VOTING STOCK. Unless otherwise ordered by the Board, the
Chairman of the Board, the President and each Vice President shall have full
power and authority on behalf of the Corporation to attend and to act and vote
at any meeting of the stockholders of any corporation in which the Corporation
may hold stock and at any such meeting shall possess and may exercise any and
all rights and powers that are incident to the ownership of such stock and which
as the owner thereof the Corporation may have possessed and exercised if
present. The Board by resolution from time to time may confer like powers upon
any other person or persons.

<PAGE>

EXHIBIT 10.2

JACOBS ENGINEERING GROUP INC.

INCENTIVE BONUS PLAN

FOR OFFICERS AND KEY MANAGERS

Summary of the Program

This program is designed to cover all officers and key managers of Jacobs
Engineering Group Inc. Key managers are normally defined as management level
personnel who do not normally receive overtime compensation and who have been
approved for participation by the President and the Chairman.

Each year a bonus pool will be determined by formula. The Compensation
Committee of the Board may designate up to 5% of the pool to be set aside to
fund charitable and/or civic activities. Contributions to such charities and/or
civic activities from this fund shall be determined by a committee consisting of
the Chairman of the Board, President and Chief Financial Officer and shall be in
the interests of Jacobs Engineering Group Inc. and its officers and employees.
From the pool 80 percent, less the amount designated above for charitable and/or
civic activities, will be allocated to participants in the Incentive Bonus Plan,
and 20 percent will be reserved for distribution to nonparticipating employees
who have made an outstanding contribution during the year. The allocation of
the participant's portion of the pool will be 50 percent by formula and 50
percent at the discretion of the President and the Chairman. The allocation of
the nonparticipant's portion of the pool is totally at the discretion of the
President and Chairman of the Board.

Bonuses will be paid in three annual installments unless the company and the
participant involved mutually agree to a different arrangement. The first
installment will be paid approximately three months after the close of the first
fiscal year to which it pertains. A participant is not vested in any future
installments. A participant must be employed by the company at the date each
future installment is paid since it is contemplated that the bonus is not only
for service done in a particular year but also for services to be rendered in
the years when future installments are to be paid. In other words, the bonus
reflects a recognition of services rendered and to be rendered. If an employee
is a participant in the plan for less than a full year, the measure of his bonus
will be chronologically prorated. If a participant's employment is severed from
the company prior to the time a future installment is to be paid, such
installment and any subsequent installments are forfeited. For the purposes of
this program, a participant will be considered employed by the company for
purposes of receiving future installments only if on such date the participant
is an active full time employee.
<PAGE>

Bonus Pool Formula

The bonus pool would be established as a percentage of pretax earnings above a
preset trigger point. The trigger point for each fiscal year will be
established by the Board of Directors. The trigger point for 1999 has been set
at 10 percent of the consolidated net worth at the middle of the fiscal year.
Once the trigger point is reached, the bonus pool would accrue at 20 percent of
pretax income in excess of the trigger point. When pretax earnings reach two
times the trigger point, the accrual would increase to 25 percent of pretax
income in excess of two times the trigger point. The percentage rate used for
calculating the trigger point will be established each year based on economic
and market conditions in effect at that time.

Allocation of Bonus Pool

Twenty percent of the bonus pool will be reserved for nonparticipants in the
plan. The balance of the pool will be allocated to the plan participants, 50
percent based on their weighted salary (see table below) versus the total
weighted salaries of all participants of the plan and 50 percent at the
discretion of the President and Chairman. The weighted salaries will be
determined by multiplying the salary earned while a participant in the plan
times the following weighting factors:

Level Weighting Factor
--------------------------------------------------
Executive Officers 4
Group and Senior Officers 3
Corporate Level Officers 2
Other Officers and Managers 1

If a participant moves from one level to another during the year, the different
weighting factors would be applied to the salary earned at each level.

Modifications

This plan is provided at the discretion of the Board of Directors and the Board
of Directors reserves the right to alter or modify it in the future.

<PAGE>

EXHIBIT 10.4

AGREEMENT
---------

This agreement is made as of the 2nd day of December, 1999, between JACOBS
ENGINEERING GROUP INC., a Delaware corporation ("Company") and JOSEPH J. JACOBS
("Jacobs").

In accordance with previous practice, the term for the ending of the
outstanding November 30, 1993 employment agreement between the parties is
extended from September 30, 2003 to September 30, 2004. All of the other
provisions of the agreement shall remain in force.

IN WITNESS WHEREOF, the Company has caused this agreement to be executed by
its duly authorized representatives, and Jacobs has affixed his signature, as of
the date first above written.

JOSEPH J. JACOBS
("Jacobs")

/s/ Joseph J. Jacobs
-------------------------------
1111 S. Arroyo Parkway
Pasadena, California 91105

JACOBS ENGINEERING GROUP INC.
("Company")

By /s/ Noel G. Watson
---------------------------
Noel G. Watson,
President

By /s/ John W. Prosser, Jr.
---------------------------
John W. Prosser, Jr.,
Senior Vice President
Finance and Administration

<PAGE>

EXHIBIT 13

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

WITH REPORT OF INDEPENDENT AUDITORS

September 30, 1999
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
SELECTED HIGHLIGHTS
For Fiscal Years Ended September 30
(Dollars in thousands, except per share information)

<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Revenues.................................... $2,875,007 $2,101,145 $1,780,616
Net earnings................................ 65,445 54,385 46,895
---------- ---------- ----------
Per share information:
Basic EPS.................................. $ 2.54 $ 2.12 $ 1.82
Diluted EPS................................ 2.47 2.08 1.80
Net book value............................. 16.95 14.23 12.48
Closing year-end stock price............... 32.50 31.00 30.625
---------- ---------- ----------
Total assets................................ $1,220,186 $ 807,489 $ 737,643
Stockholders' equity........................ 448,717 371,405 324,308
Return on average equity.................... 15.96% 15.63% 15.43%
Stockholders of record...................... 1,208 1,352 1,592
---------- ---------- ----------
Backlog:
Professional services...................... $1,760,000 $1,004,500 $ 912,057
Total...................................... 4,448,200 3,329,500 3,050,000
---------- ---------- ----------
Permanent staff............................. 15,900 10,080 9,570
---------- ---------- ----------
</TABLE>

As disclosed last year, the Company adopted Statement of Financial
Accounting Standards No. 128 -- Earnings per Share ("SFAS 128") effective with
the first quarter of fiscal 1998 ending December 31, 1997. Earnings per share
("EPS") for prior periods have been restated to conform to the provisions of
SFAS 128.

1
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
For Fiscal Years Ended September 30
(In thousands, except per share information)

<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Results of Operations:
Revenues............... $2,875,007 $2,101,145 $1,780,616 $1,798,970 $1,723,057
Net earnings........... 65,445 54,385 46,895 40,360 32,242
---------- ---------- ---------- ---------- ----------
Financial Position:
Current ratio.......... 1.25 to 1 1.54 to 1 1.56 to 1 1.68 to 1 1.44 to 1
Working capital........ $ 144,638 $ 197,659 $ 178,203 $ 155,569 $ 113,339
Current assets......... 729,620 566,007 497,361 383,644 368,614
Total assets........... 1,220,186 807,489 737,643 572,505 533,947
Long-term debt......... 135,371 26,221 54,095 36,300 17,799
Stockholders' equity... 448,717 371,405 324,308 283,387 238,761
Return on average
equity................ 15.96% 15.63% 15.43% 15.46% 14.68%
Backlog:
Professional services. $1,760,000 $1,004,500 $ 912,057 $ 845,300 $ 828,400
Total................. 4,448,200 3,329,500 3,050,000 2,750,200 2,625,000
---------- ---------- ---------- ---------- ----------
Per share Information:
Basic EPS.............. $ 2.54 $ 2.12 $ 1.82 $ 1.58 $ 1.28
Diluted EPS............ 2.47 2.08 1.80 1.56 1.27
Stockholders' equity... 16.95 14.23 12.48 10.93 9.41
---------- ---------- ---------- ---------- ----------
Average Number of
Common and Common Stock
Equivalents Outstanding
(Diluted).............. 26,478 26,096 25,989 25,921 25,384
---------- ---------- ---------- ---------- ----------
</TABLE>

2
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
For Fiscal Years Ended September 30
(In thousands, except per share information)

<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Results of Operations:
Revenues............... $1,165,754 $1,142,926 $1,106,427 $1,036,289 $ 881,757
Net earnings........... 18,767 28,670 26,605 20,385 14,390
---------- ---------- ---------- ---------- ----------
Financial Position:
Current ratio.......... 1.41 to 1 1.61 to 1 1.56 to 1 1.41 to 1 1.24 to 1
Working capital........ $ 106,058 $ 100,688 $ 92,706 $ 60,580 $ 39,544
Current assets......... 367,485 264,949 258,206 206,576 202,404
Total assets........... 504,364 351,020 316,731 260,142 253,707
Long-term debt......... 25,000 -- -- -- --
Stockholders' equity... 200,433 173,797 139,813 106,936 82,964
Return on average
equity................ 10.03% 18.28% 21.56% 21.47% 20.30%
Backlog:
Professional services. $ 793,060 $ 736,600 $ 647,100 $ 457,300 $ 329,400
Total................. 2,500,000 1,858,600 1,760,000 1,605,000 1,343,300
---------- ---------- ---------- ---------- ----------
Per share Information:
Basic EPS.............. $ 0.75 $ 1.17 $ 1.14 $ 0.89 $ 0.66
Diluted EPS............ 0.75 1.15 1.11 0.86 0.64
Stockholders' equity... 7.96 6.96 5.81 4.50 3.70
---------- ---------- ---------- ---------- ----------
Average Number of
Common and Common Stock
Equivalents Outstanding
(Diluted)............... 25,173 24,964 24,070 23,763 22,439
---------- ---------- ---------- ---------- ----------
</TABLE>

Net earnings for fiscal 1994 included special charges totaling $10,200, or
$0.40 per share.

Net earnings for fiscal 1992 included a net gain of $2,118, or $0.09 per
share, from the sale of 40% of the Company's holdings of the common stock of
Genetics Institute, Inc.

3
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS

Results of Operations

The following table sets forth the Company's revenues by industry group and
by market serviced for the past three fiscal years ended September 30 (in
thousands):

<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Chemicals and Polymers..................... $ 796,501 $ 785,727 $ 490,347
Buildings.................................. 454,589 314,293 169,286
Federal Programs........................... 481,302 169,474 201,643
Pharmaceuticals and Biotechnology.......... 373,520 211,501 140,545
Petroleum.................................. 243,311 255,579 248,799
Infrastructure............................. 218,828 11,278 11,748
Technology and Manufacturing............... 173,023 128,501 335,627
Pulp and Paper............................. 99,189 191,595 154,135
Other...................................... 34,744 33,197 28,486
---------- ---------- ----------
$2,875,007 $2,101,145 $1,780,616
========== ========== ==========

"Other" includes projects for clients operating in a number of industries,
including food and beverage, and basic resources (mining, minerals and
fertilizers).

The following table sets forth the Company's revenues by type of service
provided, for the past three fiscal years ended September 30 (in thousands):

<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Project Services........................... $1,318,027 $ 861,608 $ 734,619
Construction............................... 994,479 961,576 769,788
Operations and Maintenance................. 474,511 266,798 264,622
Process, Scientific and Systems Consulting. 87,990 11,163 11,587
---------- ---------- ----------
$2,875,007 $2,101,145 $1,780,616
========== ========== ==========
</TABLE>

1999 Compared to 1998

On January 14, 1999, the Company completed its merger with Sverdrup
Corporation ("Sverdrup"). Sverdrup provides engineering, architecture,
construction and scientific services for public and private sector clients in
the United States and internationally.

The Sverdrup transaction has been accounted for as a purchase. Accordingly,
the purchase price has been allocated to the assets and liabilities acquired
based on their estimated fair values. The purchase price allocation, which may
be adjusted further, resulted in goodwill of approximately $176.3 million. The
Company's consolidated results of operations include the results of Sverdrup's
operations since January 1, 1999.

The Company recorded net earnings of $65.4 million, or $2.47 per diluted
share, for the fiscal year ended September 30, 1999, compared to net earnings
of $54.4 million, or $2.08 per diluted share, for fiscal 1998.

Total revenues for fiscal 1999 increased by $773.9 million, or 36.8%, to
$2,875.0 million, compared to $2,101.1 million for fiscal 1998. Approximately
89% of the increase in total revenues was generated by Sverdrup's operations,
with the balance attributable to the Company's continuing U.S. and European
operations (that is, those offices operating during the comparable periods of
both fiscal 1999 and fiscal 1998).

4
<PAGE>

Revenues from project services activities, which includes design,
engineering and agency construction management services, increased by $456.4
million, or 53.0%, to $1,318.0 million during fiscal 1999, compared to $861.6
million for fiscal 1998. Approximately 40.4% of the increase in project
services revenues during the current fiscal year was generated by the
Company's continuing U.S. and European operations, with the balance
attributable to Sverdrup's operations.

Revenues from construction services increased by $32.9 million, or 3.4%, to
$994.5 million during fiscal 1999, compared to $961.6 million for fiscal 1998.

With the resources and complementary technical and professional skills that
the merger with Sverdrup added to the Company's skills base, and with the new
clients Sverdrup added to the Company's client base, the Company has expanded
its capabilities in the areas of operations and maintenance ("O&M"), and
process, scientific and systems consulting services. Revenues from O&M
activities increased by $207.7 million, or 77.9%, to $474.5 million during
fiscal 1999, compared to $266.8 million for fiscal 1998. Approximately 71.2%
of the increase in O&M revenues during the current fiscal year was generated
by Sverdrup's operations, with the balance attributable to the Company's
continuing U.S. and European operations. During fiscal 1999, the Company
realized revenues of $88.0 million from process, scientific and systems
consulting services. Prior to fiscal 1999 and the merger with Sverdrup, the
Company's revenues from process, scientific and systems consulting service
activities were minimal.

As a percentage of revenues, direct costs of contracts decreased to 86.2%
for the twelve months ended September 30, 1999, compared to 87.1% for the same
period last year. 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
services provided by the Company. The improvement in this percentage
relationship during fiscal 1999 compared to fiscal 1998 was due primarily to
the relatively higher margins on Sverdrup's project services. Also
contributing to the improvement was the favorable effect of the
proportionately higher margins earned on the higher volume of project service
activities generated, relative to construction service activities.

Selling, general and administrative ("SG & A") expenses for fiscal 1999
increased by $105.0 million, or 57.0%, to $289.0 million, compared to $184.0
million for fiscal 1998. The increase in SG & A expenses during the twelve
months ended September 30, 1999 was due almost entirely to the operations of
Sverdrup.

During fiscal 1999, the Company's operating profit (defined as revenues,
less direct costs of contracts and SG & A expenses) increased by $21.8
million, or 25.2%, to $108.3 million, compared to $86.5 million for fiscal
1998. The increase in the Company's operating profit from 1998 to 1999 was due
primarily to the increase in business volume, combined with an increase in
margin rates, as discussed above.

The Company recorded $5.7 million of net interest expense during the twelve
months ended September 30, 1999, compared to net interest income of $2.7
million last year. During fiscal 1998, the Company was a net investor of
excess cash. During fiscal 1999, however, as a result of the merger with
Sverdrup Corporation, the Company became a net borrower of cash. The Company
financed the merger price of $201.1 million (which included the associated
costs of the merger) with a new, $230.0 million revolving credit facility,
under which the Company initially borrowed $165.0 million. Outstanding
borrowings under this facility was reduced to $118.1 million at September 30,
1999. Also contributing to the increase in interest expense in fiscal 1999 as
compared to fiscal 1998 was $19.9 million of Sverdrup pre-merger indebtedness
that was assumed by the Company at closing of the merger transaction.

The Company recorded $2.0 million of net miscellaneous income during fiscal
1999, compared to net miscellaneous expense of $0.4 million for fiscal 1998.
The increase in net miscellaneous income during fiscal 1999 was due primarily
to gains realized on the sales of marketable equity securities.

5
<PAGE>

The Company recorded income tax expense of $39.1 million and $34.4 million
in fiscal 1999 and 1998, respectively. The Company's overall effective tax
rate was 37.4% for fiscal 1999, compared to an effective tax rate of 38.7% for
fiscal 1998. The reduction in the Company's effective tax rate was
attributable primarily to a lower effective tax rate relating to the Company's
non-U.S. operations, off-set in part by the effect of nondeductible goodwill.

1998 Compared to 1997

The Company recorded net earnings of $54.4 million, or $2.08 per diluted
share, for the fiscal year ended September 30, 1998, compared to net earnings
of $46.9 million, or $1.80 per diluted share, for the same period in fiscal
1997.

Total revenues for fiscal 1998 increased by $320.5 million, or 18.0%, to
$2,101.1 million, compared to $1,780.6 million for the same period in fiscal
1997. More than half of this increase was attributable to the Company's
continuing U.S. and European operations. The balance of the increase was
attributable to the effect of companies acquired in 1997, and in particular,
to the Serete Group.

Revenues from project services activities increased by $127.0 million, or
17.3%, to $861.6 million during fiscal 1998, compared to $734.6 million for
fiscal 1997. Project services revenues in 1998 from the Company's continuing
U.S. and European operations were approximately 8% higher that the 1997
amount, with the balance of the increase attributable to businesses the
Company acquired in 1997.

During fiscal 1998, revenues from construction services increased by $191.8
million, or 24.9%, to $961.6 million, compared to $769.8 million for fiscal
1997. This increase occurred in spite of the completion of construction on a
large semiconductor project late in fiscal 1997. Also contributing to the
overall increase in construction services revenues from fiscal 1997 to fiscal
1998 was a $96.2 million increase in subcontract and procurement activity (the
costs of which are included in both revenues and costs).

During fiscal 1998, revenues from O&M and process, scientific and systems
consulting services of $266.8 million and $11.2 million, respectively, were
relatively unchanged compared to fiscal 1997 revenues.

As a percentage of revenues, direct costs of contracts increased to 87.1%
for the twelve months ended September 30, 1998, compared to 86.9% for the same
period in fiscal 1997. The increase in the direct costs of the Company's
services as a percentage of revenues during fiscal 1998 as compared to fiscal
1997 was due primarily to a proportionally higher percentage of the Company's
total business volume coming from construction services relative to project
services. This was partially offset by an increase in the total profit margin
on the Company's construction service activities.

Selling, general and administrative expenses for fiscal 1998 increased by
$23.9 million, or 14.9%, to $184.0 million, compared to $160.2 million for
fiscal 1997. The increase in fiscal 1998 reflects the full year operating
impact of businesses acquired in fiscal 1997. The SG & A expenses incurred by
the Company's continuing U.S. and European operations during fiscal 1998 were
approximately $1.2 million lower than the corresponding 1997 amount.

During fiscal 1998, the Company's operating profit increased by $12.9
million, or 17.6%, to $86.5 million, compared to $73.6 million for fiscal
1997. The improvement in operating profit was due to the overall increase in
business volume in fiscal 1998 compared to fiscal 1997, combined with better
control of SG & A expenses throughout much of the Company's continuing U.S.
and European operations.

Net interest income decreased by 7.5%, or $0.2 million, to $2.7 million
during the twelve months ended September 30, 1998, compared to $3.0 million in
fiscal 1997. The decrease in net interest

6
<PAGE>

income was due primarily to a reduction of rates earned on slightly higher
levels of average cash invested during fiscal 1998 as compared to fiscal 1997,
combined with a small increase in consolidated interest expense.

The Company recorded $0.4 million of net miscellaneous expense during fiscal
1998, compared to net miscellaneous income of $0.9 million for fiscal 1997.
Included in the 1998 amount was the approximate $8.8 million gain realized by
the Company on the sale of its office building located in Dublin, Ireland (the
"Merrion House"). Merrion House was purchased in 1995, and the Company
continues to occupy a minor portion of the property under a lease agreement.
Offsetting the Merrion House gain were reserves recorded in the fourth quarter
of 1998 for certain settled and pending litigation.

Backlog

Backlog represents the total dollar amount of revenues the Company expects
to record in the future as a result of performing work under contracts that
have been awarded to it. The Company's policy with respect to operations and
maintenance ("O&M") contracts, however, is to include in backlog the amount of
revenues it expects to receive for one succeeding year, regardless of the life
of the contract. For federal programs (other than federal O&M contracts), the
Company's policy is to include in backlog the full contract award, whether
funded or unfunded, and exclude option periods.

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

The following table summarizes the Company's total backlog at September 30,
1999, 1998 and 1997 (in millions):

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Professional services............................. $1,760.0 $1,004.5 $ 912.1
Total............................................. 4,448.2 3,329.5 3,050.0
======== ======== ========
</TABLE>

Total backlog at September 30, 1999 included approximately $1.5 billion, or
34% 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 $800.0 million and $923.0 million of federal backlog at
September 30, 1998 and 1997, respectively. Most of these federal contracts
extend 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
Congress to the procuring agency, and then the agency must allot these sums to
the specific contracts).

The Company's backlog for fiscal 1999 increased by $1.1 billion, or 33.6%,
to $4.4 billion, compared to fiscal 1998, and increased in fiscal 1998 by
$279.5 million, or 9.2%, to $3.3 billion, compared to fiscal 1997. Most of the
1999 increase was attributable to the Sverdrup merger, combined with new
awards in the pharmaceuticals area of the Company's business. The 1998
increase was due to new awards in the chemicals, refining and pharmaceuticals
areas of the Company's business.

The Company estimates that approximately $2.3 billion, or 52% of total
backlog at September 30, 1999 will be realized as revenues within the next
fiscal year.

7
<PAGE>

Effects of Inflation

Because a significant portion of the Company's revenues over recent years
has been earned under cost-reimbursable type contracts, the effects of
inflation on the Company's financial condition and results of operations have
been generally low. However, as the Company expands its business into markets
and geographical areas where fixed-price and lump-sum work is more prevalent,
inflation may begin to have a larger impact on the Company's results of
operations. To the extent permitted by competition, the Company intends to
continue to emphasize contracts which are either cost-reimbursable or
negotiated fixed-price. For contracts the Company accepts with fixed-price or
lump-sum terms, the Company monitors closely the actual costs on the project
as they compare to the budget estimates. On these projects, the Company also
attempts to secure fixed-price commitments from key subcontractors and
vendors. However, due to the competitive nature of the Company's industry,
combined with the fluctuating demands and prices associated with personnel,
equipment and materials the Company traditionally needs to perform on its
contracts, there can be no guarantee that inflation will not effect the
Company's results of operations in the future.

Liquidity and Capital Resources

During fiscal year 1999, the Company's cash and cash equivalents decreased
by $47.8 million, to $53.5 million. This compares to a net increase of $45.3
million, to $101.3 million, during fiscal 1998, and to a net decrease of $6.9
million, to $56.0 million during fiscal 1997. During fiscal year 1999, the
Company experienced net cash outflows from investing activities and the effect
on cash of exchange rate changes, of $220.6 million and $3.3 million,
respectively, offset in part by net cash inflows from financing activities and
operating activities of $94.3 million and $81.8 million, respectively.

Operations contributed $81.8 million of cash and cash equivalents during
fiscal 1999. This compares to a net contribution of $90.5 million and $43.9
million during fiscal 1998 and fiscal 1997, respectively. The $8.7 million
decrease in cash provided by operations in fiscal 1999 as compared to fiscal
1998 was due primarily to an increase of $30.9 million in net cash outflows
relating to the timing of cash receipts and payments within the Company's
working capital accounts. This use of cash was offset in part by an increase
in net earnings of $11.1 million, and an increase of $8.4 million in
depreciation and amortization expense. Gains on sales of assets and the change
in deferred income taxes had a $2.5 million improvement in cash flows from
operating activities in 1999 as compared to 1998.

The Company's investing activities resulted in a net cash outflow of $220.6
million during fiscal 1999. This compares to net cash outflows of $9.6 million
and $69.5 million during fiscal 1998 and 1997, respectively. The $211.0
million net increase in cash used in investing activities in fiscal 1999 as
compared to fiscal 1998 was due primarily to the merger with Sverdrup,
requiring $201.1 million in cash (which included the associated costs of the
merger), combined with a $13.5 million net increase in other noncurrent
assets. Partially offsetting these cash outflows was a $12.5 million increase
from fiscal 1998 to fiscal 1999 in proceeds from sales of marketable
securities and investments. The proceeds from the sales of marketable
securities and investments in fiscal 1999 were used to partially fund the
merger with Sverdrup and pay down indebtedness relating to the merger.

The Company's financing activities generated $94.3 million in cash and cash
equivalents during fiscal 1999 compared to a net cash outflow of $35.4 million
during fiscal 1998, and a net cash inflow of $20.3 million in fiscal 1997. In
connection with the merger with Sverdrup in January 1999, the Company
terminated an existing long-term $45.0 million revolving credit agreement and
entered into a new, $230.0 million revolving credit agreement. The Company
borrowed $165.0 million under the new facility to pay the initial merger
consideration and related costs of $201.1 million, $21.0 million of Sverdrup
indebtedness existing at closing, and $5.1 million during the year for other
purposes. During fiscal 1999, the Company paid down $73.0 million of its long-
term, $230.0 million revolving credit facility relating primarily to the
Sverdrup transaction.

8
<PAGE>

The Company believes it has adequate capital resources to fund its
operations in fiscal 2000 and beyond. The Company's consolidated working
capital position was $144.6 million at September 30, 1999 compared to $197.7
million at September 30, 1998. And as discussed above, the Company entered
into a new, long-term $230.0 million revolving credit facility during the
second quarter of fiscal 1999, against which $118.1 million was outstanding at
September 30, 1999 in the form of direct borrowings. These borrowings relate
to the merger indebtedness, and other refinanced amounts that were outstanding
under the old $45.0 million revolving credit agreement. At September 30, 1999,
the Company had $43.6 million available through committed short-term credit
facilities, of which $19.0 million was outstanding at that date in the form of
direct borrowings and letters of credit.

The Company has filed a protective claim with the Internal Revenue Service.
The nature of the claim involves monies the Company believes it is due from
the government relating to the research and development tax credit for fiscal
years 1991 through 1998. Although the Company has been working on quantifying
the amount of the credit, the final tax refund amount has not yet been
determined. Based on a preliminary review of the information available, the
ultimate refund amount may have a significant and positive effect on the
Company's overall liquidity.

Year 2000 Readiness

The following discussion of the Year 2000 issue contains numerous "forward-
looking statements". See "Forward-Looking Statements and Other Safe Harbor
Applications", below, for a discussion of factors to be considered in reading
forward-looking statements.

This discussion of "Year 2000" (or "Y2K") relates to the possible inability
of computers, hardware or software to perform properly because they are unable
to interpret date information correctly after December 31, 1999, and includes
all of the associated consequences of such failures on the Company's
operations. If not corrected, such situations could result in computer-system
failures or miscalculations causing disruptions in the Company's operations,
including a temporary inability to process transactions, pay employees,
vendors and subcontractors, send invoices or engage in similar, normal
business activities.

The Year 2000 Task Force

The Company began its assessment of its Year 2000 readiness during fiscal
1997. In that year the Company organized a Year 2000 task force comprised
primarily of Company employees. The Company identified four information
technology ("IT") and non-IT business areas for which Y2K compliance is
critical to the normal and routine operations of the Company. These business
areas were: (1) internally developed computer software; (2) commercial off-
the-shelf software; (3) computer hardware; and (4) facilities-related
applications and processes, such as telecommunications and equipment with
embedded chips.

Financial and Accounting Systems

Also included in the Company's Year 2000 compliance program are the
hardware, software, and other applications issues relating to the Company's
financial and accounting systems. In 1997 the Company embarked upon a
completely separate initiative (referred to as the "Global Financial Systems
Project") to migrate most of its existing financial and accounting systems to
a single accounting system, which eventually will be utilized by all of the
Company's operations worldwide. Most of the Company's U.S. operations were
migrated to the Global Financial Systems Project during 1999. The Global
Financial Systems Project utilizes commercial off-the-shelf software with
internally developed program interfaces. Based on assurances from the third
party provider of the commercial off-the-shelf software, and discussions with
the third party consultants employed by the Company to

9
<PAGE>

assist in the system conversion, the Company believes its Global Financial
Systems Project is Y2K compliant. The critical operational elements of the
financial and accounting systems have been tested and their Y2K readiness has
been verified. The critical financial, accounting and payroll applications in
the United Kingdom, Ireland, Europe and India, have been tested and
remediated, and the Y2K compliant versions of most critical software
applications are operational.

The Year 2000 Program

The Company's systems and hardware components have been through a rigorous
process to address the Y2K problem. This process involved the following
phases: inventory, assessment, remediation, testing and implementation. In
addition, a contingency plan for critical business applications and continuing
project operations is in place. The Year 2000 program also includes a
transition plan for the rollover period from 1999 to 2000. Included in this
transition plan are data backup, shutdown and startup, and a network of
command centers, which will be operational through the year 2000.

Third Party Compliance

The Company continues to evaluate the possible effects of the Y2K issue on
its clients, suppliers, subcontractors and vendors. Although the possible
effects of the Y2K issue on these parties are beyond the control of the
Company, the Company has initiated and maintained a process to communicate
with these parties to inform them of the Company's Y2K strategy and to
determine their own Y2K strategy and progress. Third party vendors have also
been notified of their responsibility and contractual clauses incorporated in
procurement documents.

Cost of the Year 2000 Program

The Company estimates the total cost of its Y2K compliance program at
approximately $4.0 million. This estimate consists of both internal and
external costs, and includes a maximum of $2.0 million for new hardware and
software, although a substantial portion of such new hardware and software
would have been purchased by the Company through the regular and routine
upgrading of systems. Such hardware and software will be capitalized and
depreciated over the estimated useful lives of the related assets. All other
expenditures will be charged to expense. As of September 30, 1999, the Company
had spent most of its estimated budget.

Progress of the Year 2000 Program

As of September 30, 1999, the Company was actively engaged in one or more
compliance phases with respect to each of the four business areas described
above. Although there can be no guarantee of complete readiness by the Year
2000, the Company believes each of the business areas described above is
substantially Y2K compliant, such that further remediation and testing, if
any, will not be significant to its operations. However, as discussed above,
the Company is in the contingency planning phase of its Y2K compliance
program. In the event the Company does not complete its program, or fails to
properly identify and modify critical business applications, there may be an
interruption to the Company's business that may have a materially adverse
effect on its future financial condition and results of operations. In
addition, Y2K-related disruptions in the economy in general may also have a
materially adverse effect on its future financial condition and results of
operations.

Risks

The failure to identify and correct a Y2K problem could result in an
interruption in, or failure of, certain normal business activities or
operations. The Company does not expect such failures to have a materially
adverse effect on its results of operations or financial condition. However,
because

10
<PAGE>

of the general uncertainty about Year 2000 readiness throughout the world
economy, which results in uncertainties regarding the readiness of the
Company's vendors, contractors and clients, the Company is currently unable to
determine whether Y2K problems may have a materially adverse effect on its
results of operations or financial condition. As the Company's Y2K compliance
program progresses, the level of uncertainty about this matter is being
reduced, especially as to uncertainties about the Company's own degree of Y2K
compliance and the compliance of its suppliers, contractors and clients.

Worst Case Scenario

It is not presently possible to describe a reasonably likely "worst case
Year 2000 scenario" without making numerous assumptions. The Company presently
believes that a most likely worst case scenario would make it necessary for
the Company to replace some suppliers or contractors, rearrange some work
plans, or interrupt some office and field activities. Assuming this scenario
is correct, the Company does not believe that such circumstances would have a
materially adverse effect on its financial condition or results of operations,
even if additional costs to correct unanticipated compliance failures are
incurred.

Contingency Plans

The Company currently has contingency plans in place in the event it does
not complete all phases of its Y2K compliance program by December 31, 1999, or
in the event unidentified issues cause business disruptions. The Company has
identified the critical business areas, and specific contingency plans have
been developed. The resources, critical elements, and activating mechanisms
for the contingency plans are in place. The Company continues to monitor
carefully the progress of its Y2K program and its state of readiness on a
regular basis. The Company's contingency plans were based on its best
estimates of numerous factors, which, in turn were derived by relying on
numerous assumptions about future events. However, there can be no assurance
that these assumptions or estimates will have been correctly made, or that the
Company will have anticipated all relevant factors, or that there will not be
a delay in or increased costs associated with the Company's Y2K program. Any
delay in implementation of the Y2K program could affect the Company's Y2K
readiness. Specific factors that might cause the actual outcome to differ from
the projected outcome include, without limitation, the continued availability
of personnel and consultants trained in the computer programming skills
necessary for remediation of Y2K problems, the ability to locate and correct
all relevant computer codes and embedded software, timely responses by third
parties, including suppliers, contractors and clients, and the ability to
implement interfaces between new systems and systems not being replaced.

The foregoing discussion regarding the Y2K issue is a "Year 2000 Readiness
Disclosure" as that term is discussed in the Year 2000 Information and
Readiness Disclosure Act of 1998.

Current Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 -- Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"). As amended by
Statement of Financial Accounting Standards No. 137 -- Accounting for
Derivative Instruments and Hedging Activities Deferral of the Effective Date
of FASB Statement No. 133 ("SFAS 137"), SFAS 133 is effective for all fiscal
quarters of all fiscal years beginning after June 2000. SFAS 133 requires
recognition of all derivative instruments as either assets or liabilities.
Gain or loss recognition is determined based on the intended use and resulting
designation of the derivative instrument.

At September 30, 1999, the Company had no significant derivative financial
instruments. Therefore, as of September 30, 1999, SFAS 133 would have had no
material impact on the Company's financial position or results of operations.

11
<PAGE>

Forward-Looking Statements and Other Safe Harbor Applications

Statements included in this Management's Discussion and Analysis that are
not based on historical facts are "forward-looking statements", as that term
is discussed in the Private Securities Litigation Reform Act of 1995. Such
statements are based on management's current estimates, expectations and
projections about the issues discussed, the industries in which the Company
operates and the services it provides. By their nature, such forward-looking
statements involve risks and uncertainties. The Company cautions the reader
that a variety of factors could cause business conditions and results to
differ materially from what is contained in its forward-looking statements.
These factors include, but are not necessarily limited to, the following:
increase in competition by foreign and domestic competitors; availability of
qualified engineers and other professional staff needed to execute contracts;
the timing of new awards and the funding of such awards; the ability of the
Company to meet performance or schedule guarantees; cost overruns on fixed,
maximum or unit priced contracts; the outcome of pending and future litigation
and governmental proceedings; the cyclical nature of the individual markets in
which the Company's customers operate; the successful closing and/or
subsequent integration of any merger or acquisition transaction; the amount of
any contingent consideration the Company may be required to pay in the future
in connection with the Sverdrup merger (including the availability of
financing that may be required); and the Company's success in dealing with the
Year 2000 issues discussed above under "Year 2000 Readiness". The preceding
list is not all-inclusive, and the Company undertakes 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 the Company's most recent Annual
Report on Form 10-K for a further description of the Company's business, legal
proceedings and other information that describes factors that could cause
actual results to differ from such forward-looking statements.

12
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 1999 and 1998
(In thousands, except share information)

<TABLE>
<CAPTION>
1999 1998
---------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................... $ 53,482 $101,328
Marketable securities................................... -- 16,482
Receivables............................................. 586,005 394,841
Deferred income taxes................................... 76,405 45,419
Prepaid expenses and other.............................. 13,728 7,937
---------- --------
Total current assets................................... 729,620 566,007
---------- --------
Property, Equipment and Improvements, Net................ 139,653 100,565
---------- --------
Other Noncurrent Assets:
Goodwill, net........................................... 245,451 77,246
Other................................................... 105,462 63,671
---------- --------
Total other noncurrent assets.......................... 350,913 140,917
---------- --------
$1,220,186 $807,489
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable........................................... $ 9,465 $ 217
Accounts payable........................................ 186,287 101,846
Accrued liabilities..................................... 281,967 161,552
Customers' advances in excess of related revenues....... 93,303 85,049
Income taxes payable.................................... 13,960 19,684
---------- --------
Total current liabilities.............................. 584,982 368,348
---------- --------
Long-term Debt........................................... 135,371 26,221
---------- --------
Other Deferred Liabilities............................... 44,988 35,170
---------- --------
Minority Interests....................................... 6,128 6,345
---------- --------
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 -- 60,000,000
shares, issued and outstanding -- 26,142,992 shares in
1999; issued -- 25,866,798 shares in 1998............. 26,143 25,867
Additional paid-in capital.............................. 68,049 55,698
Retained earnings....................................... 358,958 300,296
Accumulated other comprehensive loss.................... (3,595) (1,800)
---------- --------
449,555 380,061
Unearned compensation................................... (838) (1,056)
Common stock in treasury, at cost (254,028 shares in
1998).................................................. -- (7,600)
---------- --------
Total stockholders' equity............................. 448,717 371,405
---------- --------
$1,220,186 $807,489
========== ========
</TABLE>

See the accompanying Notes to Consolidated Financial Statements.

13
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
For the Years Ended September 30, 1999, 1998 and 1997
(In thousands, except per share information)

<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Revenues................................ $ 2,875,007 $ 2,101,145 $ 1,780,616
----------- ----------- -----------
Costs and Expenses:
Direct costs of contracts.............. (2,477,678) (1,830,618) (1,546,898)
Selling, general and administrative
expenses.............................. (289,034) (184,043) (160,157)
----------- ----------- -----------
Operating Profit........................ 108,295 86,484 73,561

Other Income (Expense):
Interest income........................ 3,031 5,092 5,185
Interest expense....................... (8,767) (2,356) (2,226)
Miscellaneous income (expense), net.... 1,963 (436) 929
----------- ----------- -----------
Total other income (expense).......... (3,773) 2,300 3,888
----------- ----------- -----------
Earnings Before Taxes................... 104,522 88,784 77,449
Income Tax Expense...................... (39,077) (34,399) (30,554)
----------- ----------- -----------
Net Earnings............................ $ 65,445 $ 54,385 $ 46,895
=========== =========== ===========
Net Earnings Per Share:
Basic.................................. $ 2.54 $ 2.12 $ 1.82
Diluted................................ $ 2.47 $ 2.08 $ 1.80
=========== =========== ===========
</TABLE>

See the accompanying Notes to Consolidated Financial Statements.

14
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended September 30, 1999, 1998 and 1997
(In thousands)

<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Net Earnings........................................ $65,445 $54,385 $46,895
------- ------- -------
Other Comprehensive Income (Loss):
Unrealized gains (losses) on securities............ 3,470 (188) (846)
Foreign currency translation adjustments........... (3,946) (9) (3,444)
------- ------- -------
Other Comprehensive Loss Before Income Taxes........ (476) (197) (4,290)
Income Tax (Expense) Benefit Relating To Other
Comprehensive Income (Loss)........................ (1,319) 75 339
------- ------- -------
Other Comprehensive Loss............................ (1,795) (122) (3,951)
------- ------- -------
Total Comprehensive Income.......................... $63,650 $54,263 $42,944
======= ======= =======
</TABLE>

See the accompanying Notes to Consolidated Financial Statements.

15
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended September 30, 1999, 1998 and 1997
(In thousands)

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Common Stock:
Balance at the beginning of the year............ $ 25,867 $ 25,811 $ 25,745
Issuances from stock option exercises........... 399 103 133
Repurchases from stock option exercises......... (131) (59) (73)
Issuances of restricted stock................... 8 12 6
-------- -------- --------
Balance at the end of the year.................. 26,143 25,867 25,811
-------- -------- --------
Additional Paid-in Capital:
Balance at the beginning of the year............ 55,698 52,186 49,191
Stock option exercises, including the related
income tax benefits............................ 12,399 3,521 3,285
Repurchases of common stock from stock option
exercises...................................... (293) (353) (446)
Issuances of restricted stock................... 245 344 156
-------- -------- --------
Balance at the end of the year.................. 68,049 55,698 52,186
-------- -------- --------
Retained Earnings:
Balance at the beginning of the year............ 300,296 249,791 207,639
Net earnings.................................... 65,445 54,385 46,895
Income tax benefits related to stock option
exercises...................................... (1,618) (2,272) (2,847)
Repurchases of common stock from stock option
exercises...................................... (5,165) (1,608) (1,896)
-------- -------- --------
Balance at the end of the year.................. 358,958 300,296 249,791
-------- -------- --------
Accumulated Other Comprehensive Income (Loss):
Balance at the beginning of the year............ (1,800) (1,678) 2,273
Foreign currency translation adjustments........ (3,946) (9) (3,444)
Net unrealized gains (losses) on securities..... 2,151 (113) (507)
-------- -------- --------
Balance at the end of the year.................. (3,595) (1,800) (1,678)
-------- -------- --------
Unearned Compensation:
Balance at the beginning of the year............ (1,056) (1,066) (1,234)
Issuances of restricted stock, net of the
related amortization........................... 218 10 168
-------- -------- --------
Balance at the end of the year.................. (838) (1,056) (1,066)
-------- -------- --------
Treasury Stock, at Cost:
Balance at the beginning of the year............ (7,600) (736) (227)
Purchases of common stock for treasury.......... -- (18,046) (12,075)
Reissuances of treasury stock from stock option
exercises...................................... 7,600 11,182 11,566
-------- -------- --------
Balance at the end of the year.................. -- (7,600) (736)
-------- -------- --------
Total Stockholders' Equity....................... $448,717 $371,405 $324,308
======== ======== ========
</TABLE>

See the accompanying Notes to Consolidated Financial Statements.

16
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended September 30, 1999, 1998 and 1997
(In thousands)

<TABLE>
<CAPTION>
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings................................... $ 65,445 $ 54,385 $ 46,895
Adjustments to reconcile net earnings to net
cash flows from operations:
Depreciation and amortization................. 31,586 23,184 19,626
Amortization of deferred gains................ -- (205) (820)
Gains on sales of assets...................... (3,986) (8,577) (742)
Changes in assets and liabilities, excluding
the effects of businesses acquired:
Receivables.................................. (10,897) (25,135) (34,849)
Prepaid expenses and other current assets.... 476 6,010 (416)
Accounts payable............................. 17,035 10,076 783
Accrued liabilities.......................... 25,107 16,757 18,537
Customers' advances.......................... (30,879) 7,384 (1,685)
Income taxes payable......................... (5,370) 11,280 (932)
Deferred income taxes......................... (7,195) (5,067) (2,784)
Other, net.................................... 470 366 330
--------- -------- --------
Net cash provided by operating activities...... 81,792 90,458 43,943
--------- -------- --------
Cash Flows from Investing Activities:
Additions to property and equipment............ (38,970) (46,335) (28,025)
Disposals of property and equipment............ 4,926 26,766 289
Net (increase) decrease in other noncurrent
assets......................................... (4,868) 8,620 (16,780)
Purchases of marketable securities............. (1,800) (5,386) (20,000)
Proceeds from sales of marketable securities... 18,282 10,034 1,837
Purchases of investments....................... (1,442) (3,319) (4,491)
Proceeds from sales of investments............. 4,285 -- 936
Acquisitions of businesses, net of cash
acquired....................................... (201,052) -- (3,307)
--------- -------- --------
Net cash used for investing activities......... (220,639) (9,620) (69,541)
--------- -------- --------
Cash Flows from Financing Activities:
Exercises of stock options, including the
related income tax benefits.................... 14,667 11,496 10,970
Purchases of common stock for treasury......... -- (18,046) (12,075)
Proceeds from long-term borrowings............. 170,220 -- 21,415
Repayments of long-term borrowings............. (97,027) (29,264) --
Net change in short-term borrowings............ 9,141 (1,257) --
Other, net..................................... (2,652) 1,639 --
--------- -------- --------
Net cash provided (used) by financing
activities..................................... 94,349 (35,432) 20,310
--------- -------- --------
Effect of Exchange Rate Changes................. (3,348) (70) (1,585)
--------- -------- --------
(Decrease) increase in Cash and Cash
Equivalents.................................... (47,846) 45,336 (6,873)
Cash and Cash Equivalents at Beginning of
Period......................................... 101,328 55,992 62,865
--------- -------- --------
Cash and Cash Equivalents at End of Period...... $ 53,482 $101,328 $ 55,992
========= ======== ========
</TABLE>

See the accompanying Notes to Consolidated Financial Statements.

17
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of Jacobs
Engineering Group Inc. and its subsidiaries (the "Company"). All significant
intercompany accounts and transactions have been eliminated. Certain
reclassifications have been made to prior years' consolidated financial
statements to conform to the September 30, 1999 presentation.

Description of the Business

The Company's principal business is to provide professional engineering,
design, and architectural services, scientific and technical support services,
construction and construction management services, and plant maintenance
services to its industrial, commercial and government clients. The Company
provides its services from offices located primarily throughout the United
States, Europe, India and Australia. The Company provides its services under
cost-reimbursable, cost-reimbursable with a guaranteed maximum, and fixed-
price contracts. The percentage of revenues realized from each of these types
of contracts in each of the years ended September 30, 1999, 1998 and 1997 was
as follows:

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cost-reimbursable............................................. 73% 81% 82%
Fixed-price................................................... 22 18 16
Guaranteed maximum............................................ 5 1 2
</TABLE>

Revenue Accounting for Contracts

In general, the Company recognizes revenues at the time services are
performed. On cost-reimbursable contracts, revenue is recognized as costs are
incurred, and includes applicable fees earned through the date services are
provided. On fixed-price contracts, revenues are recorded using the
percentage-of-completion method of accounting by relating contract costs
incurred to date to total estimated contract costs at completion. Contract
costs may include both direct and indirect costs. Contract losses are provided
for in their entirety in the period they become known, without regard to the
percentage-of-completion.

Some of the Company's contracts with the U.S. federal government, as well as
certain contracts with commercial clients, provide that contract costs
(including indirect costs) are subject to audit and adjustment. For all such
contracts, revenues have been recorded at the time services were performed
based upon those amounts expected to be realized upon final settlement.

As is common in the industry, the Company executes certain contracts jointly
with third parties through partnerships and joint ventures. For certain of
these contracts, the Company recognizes its proportionate share of venture
revenues, costs and operating profit in its consolidated statements of
earnings.

When the Company is directly responsible for subcontractor labor, or third-
party material and equipment, the Company reflects the costs of such items in
both revenues and costs. On other projects, where the client elects to pay for
such items directly and the Company has no associated responsibility for such
items, these amounts are not reflected in either revenues or costs.

18
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Cash Equivalents

The Company considers all highly liquid investments with original maturities
of less than three months as cash equivalents. Cash equivalents at September
30, 1999 and 1998 consisted primarily of time certificates of deposit.

Marketable Securities and Investments

The Company's investments in equity and debt securities are classified as
trading securities, held-to-maturity securities or available-for-sale
securities. Management determines the appropriate classification of all its
investments at the time of purchase and reviews such designations at each
balance sheet date.

Trading securities are recorded at fair value and shown as "Marketable
securities" in the consolidated balance sheets. Changes in fair value of
trading securities are recognized in earnings in the period in which the
change occurs and is included in "Miscellaneous income (expense), net" in the
accompanying consolidated statements of earnings.

Held-to-maturity securities and available-for-sale securities are included
as long-term investments in "Other noncurrent assets" in the consolidated
balance sheets. Held-to-maturity securities are carried at cost, or amortized
cost, adjusted for the amortization (accretion) of any related premiums
(discounts) over the estimated remaining period until maturity. Marketable
equity securities that are not held for trading, and debt securities that are
not classified as held-to-maturity, are classified as available-for-sale
securities. Securities designated as available-for-sale are recorded at fair
value. Changes in the fair value of securities available-for-sale are recorded
in the "Accumulated Other Comprehensive Income (Loss)" section of
stockholders' equity as unrealized gains or losses, net of the related tax
effect.

Receivables and Customers' Advances

Included in receivables at September 30, 1999 and 1998 were recoverable
amounts under contracts in progress of $240,964,600 and $106,072,200,
respectively. These represent amounts earned under contracts in progress but
not billable at the respective balance sheet dates. These 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, 1999 and 1998 were
contract retentions totaling $7,965,100 and $11,808,000, respectively. The
Company anticipates that substantially all of such unbilled amounts will be
billed and collected over the next twelve months.

Customers' advances in excess of related revenues represent cash collected
from clients on contracts in advance of revenues earned thereon, as well as
billings to clients in excess of costs and earnings on uncompleted contracts.
The Company anticipates that substantially all such amounts will be earned
over the next twelve months.

Property, Equipment and Improvements

Property, equipment and improvements are stated at cost in the accompanying
consolidated balance sheets. Depreciation and amortization of property and
equipment 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 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.

19
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Goodwill

Goodwill represents the excess of the purchase price paid over the fair
value of the net assets of acquired companies and is being amortized against
earnings using the straight-line method over periods not exceeding 40 years.
The carrying value of goodwill is reviewed for recoverability, and if there
are indications of impairment, the Company assesses any potential impairment
based upon undiscounted cash flow forecasts. No impairment losses have been
recognized in any of the periods presented. Goodwill is shown in the
accompanying consolidated balance sheets net of accumulated amortization of
$14,816,800 and $9,317,300 at September 30, 1999 and 1998, respectively.

Earnings Per Share

The Company adopted Statement of Financial Accounting Standards No. 128 --
Earnings per Share ("SFAS 128") effective with the first quarter of fiscal
1998 ending December 31, 1997, and accordingly restated prior period earnings
per share ("EPS") data. Basic EPS was computed by dividing net earnings by the
weighted average number of shares of common stock outstanding for the period.
Diluted EPS gives effect to all dilutive securities that were outstanding
during the period. The Company's dilutive securities consisted solely of
nonqualified stock options.

Stock-based Compensation

The Company accounts for stock issued to employees and outside directors in
accordance with APB Opinion No. 25 -- Accounting for Stock Issued to Employees
("APB 25"). Accordingly, no compensation cost has been recorded in connection
with grants of stock options. With respect to the issuance of restricted
stock, unearned compensation expense equivalent to the market value of the
stock issued on the date of grant is charged to stockholders' equity and
subsequently amortized against earnings over the periods during which the
restrictions lapse. During fiscal years 1999, 1998 and 1997, the Company
recognized compensation expense on restricted stock of $470,300, $366,300 and
$329,900, respectively.

Concentrations of Credit Risk, Uncertainties and Use of Estimates

The Company's cash balances and short-term investments are maintained in
accounts held by major banks and financial institutions located primarily in
the United States and Europe. In the normal course of its business and
consistent with industry practices, the Company grants credit to its clients
without requiring collateral. Concentrations of credit risk is the risk that,
if the Company extends a significant portion of its credit to clients in a
specific geographical area or industry, the Company 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
the Company's diverse client base, which includes the federal government and
multi-national corporations operating in a broad range of industries and
geographic areas. Additionally, in order to mitigate credit risk, the Company
continually evaluates the credit worthiness of its major commercial clients.

In preparing the consolidated financial statements, management is required
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities as of the
dates of the balance sheets and revenues and expenses for the periods covered.
The more significant estimates affecting amounts reported in the consolidated
financial statements relate to revenues under long-term construction contracts
and self-insurance accruals. Actual results could differ significantly from
those estimates and assumptions.

20
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2. Earnings Per Share

The following table reconciles the denominator used to compute basic EPS to
the denominator used to compute diluted EPS (in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Weighted average shares outstanding (denominator used
to compute Basic EPS)................................ 25,803 25,689 25,727
Effect of employee and outside director stock options. 675 407 262
------ ------ ------
Denominator used to compute Diluted EPS............... 26,478 26,096 25,989
====== ====== ======
</TABLE>

The weighted average number of shares outstanding for fiscal years 1998 and
1997 exclude common shares in treasury.

3. Business Combinations

On January 14, 1999, the Company completed its Agreement and Plan of Merger
with Sverdrup Corporation ("Sverdrup"). Sverdrup provides engineering,
architecture, construction and scientific and technical support services for
the development, design, construction and operation of capital facilities,
infrastructure projects and advanced technical systems for public and private
sector clients in the United States and internationally. Sverdrup employs more
than 5,600 people in 35 offices.

Under the terms of the merger agreement, at closing, a wholly-owned
subsidiary of the Company ("Merger Subsidiary") was merged with and into
Sverdrup. Thereupon, each outstanding share of common stock of Sverdrup was
converted into the right to receive a proportional share of the total amount
of initial merger consideration of $198.0 million paid at closing. Each
outstanding share of common stock of Sverdrup will also receive a proportional
amount of any additional merger consideration that may be paid in the future
("Deferred Merger Consideration"). Amounts payable as Deferred Merger
Consideration, if any, will be payable shortly after each of the first three
anniversaries of the date of the merger agreement, and is contingent upon the
Company's stock price exceeding certain price thresholds as defined in the
merger agreement. The total amount payable as Deferred Merger Consideration is
limited to a maximum of $31.0 million. After the merger and conversion, the
Merger Subsidiary ceased to exist, and Sverdrup survives as a new, wholly-
owned subsidiary of the Company. The terms of the merger were arrived at by
arms-length negotiations between the parties.

Of the total initial merger consideration of $198.0 million paid at closing,
$10.0 million was paid into an escrow account, the purpose of which will be to
settle certain claims or disputes relating to certain contracts and litigation
matters identified in the merger agreement.

The initial merger consideration was financed in part by a new, $230.0
million revolving credit facility obtained by the Company from a group of
banks. Amounts borrowed under this facility initially were used to fund that
portion of the initial merger consideration not financed using existing
internal funds, and the repayment of certain Sverdrup indebtedness existing at
closing.

The acquisition has been accounted for as a purchase. Accordingly, the
purchase price has been allocated to the assets and liabilities acquired based
on their estimated fair values. The purchase price allocation, which may be
adjusted further, resulted in goodwill of approximately $176.3 million, which
is being amortized in accordance with the Company's accounting policies.

21
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following unaudited pro forma financial information presents the
combined results of operations of Jacobs and Sverdrup, after giving effect to
certain adjustments, including amortization of goodwill, additional interest
expense, and related income tax effects, and assuming the acquisition occurred
at the beginning of the periods presented. The pro forma financial information
does not necessarily reflect the results of operations that would have
occurred had Jacobs and Sverdrup constituted a single entity during such
periods (in thousands, except per share data):

<TABLE>
<CAPTION>
Years Ended September
30,
---------------------
1999 1998
---------- ----------
Unaudited
<S> <C> <C>
Pro forma revenues.................................... $3,134,579 $3,097,627
Pro forma net earnings................................ $ 65,905 $ 51,278
Pro forma earnings per share:
Basic................................................ $ 2.55 $ 2.00
Diluted.............................................. $ 2.49 $ 1.96
========== ==========
</TABLE>

In February 1997, the Company acquired for cash certain physical assets and
contracts of an engineering business with operations in Denver, Colorado and
Santiago, Chile. Also in February 1997, the Company increased, in a cash
transaction, its ownership interest from 40% to 51% in an affiliated entity
headquartered in Mumbai, India (this interest was increased to 70% in a cash
transaction in September 1997). In April 1997, the Company acquired for cash
and notes certain assets and liabilities of an engineering business
headquartered in Green Bay, Wisconsin. Finally, in July 1997, the Company
completed the acquisition of the remaining interests of several engineering
and construction companies comprising the Serete Group, which is headquartered
in France. The sum of the individual purchase prices totalled $29,781,500.
Each of these acquisitions has been accounted for as a purchase, and the
results of operations of each acquired business have been included in the
Company's consolidated results of operations since the respective dates of
acquisition. The purchase price allocations resulted in goodwill of
approximately $39,036,000.

4. Marketable Securities and Investments

Included in marketable securities at September 30, 1998 was a $16,059,200
deposit with a U.S. bank made under a managed investment program. During the
first quarter of fiscal 1999, the Company liquidated this portfolio of
marketable debt securities for approximately $16,500,000.

At September 30, 1999, the Company had available-for-sale securities of
$9,716,300 which are included in "Other Noncurrent Assets", for which a net
unrealized gain of $2,151,200 was recorded in stockholders' equity. At
September 30, 1998, the Company had available-for-sale securities of $118,900
and recorded net unrealized losses of $113,100 in its stockholders' equity.

The following table summarizes certain information regarding the Company's
available-for-sale equity securities at September 30, 1999 and 1998, and for
each of the years then ended (in thousands):

<TABLE>
<CAPTION>
1999 1998
------ ----
<S> <C> <C>
Total cost (specific identification method)..................... $6,246 $117
Gross unrealized gains.......................................... 3,470 2
Estimated fair value............................................ 9,716 119
Gross realized gains............................................ 3,648 --
Gross proceeds from sales....................................... 4,285 --
</TABLE>

22
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

5. Property, Equipment and Improvements, Net

Property, equipment and improvements consisted of the following at September
30, 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Land................................................... $ 14,407 $ 11,416
Buildings.............................................. 47,313 33,440
Equipment.............................................. 164,538 133,379
Leasehold improvements................................. 18,913 10,642
Construction in progress............................... 10,419 12,595
--------- ---------
255,590 201,472
Accumulated depreciation and amortization.............. (115,937) (100,907)
--------- ---------
$ 139,653 $ 100,565
========= =========
</TABLE>

Operating expenses include provisions for depreciation and amortization of
$26,259,500, $20,847,500 and $18,217,100 for fiscal 1999, 1998 and 1997,
respectively.

6. Borrowings

Short-term Credit Arrangements

At September 30, 1999, the Company had approximately $43,558,000 available
through multiple bank lines of credit, under which the Company 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. The Company is also required to maintain certain minimum
levels of working capital and net worth. Three of the agreements limit
borrowings by the amount of letters of credit outstanding under the respective
agreements. Borrowings under the lines are generally unsecured, and the lines
extend through the second and third fiscal quarters of 2000.

Other information regarding the lines of credit for the years ended
September 30, 1999, 1998 and 1997 follows (dollars in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Amount outstanding at year end..................... $ 6,868 $ 217 $1,317
Weighted average interest rate at year end......... 6.5% 24.6% 8.23%
Weighted average borrowings outstanding during the
year.............................................. $ 2,295 $ 537 $ 183
Weighted average interest rate during the year..... 6.02% 11.54% 9.48%
Maximum amount outstanding during the year......... $14,210 $3,313 $1,368
</TABLE>

The amount outstanding and the weighted average interest rate at September
30, 1998 related entirely to Chilean peso borrowings by the Company's
subsidiary in Chile.

23
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Long-term Debt and Credit Arrangements

Long-term debt consisted of the following at September 30, 1999 and 1998 (in
thousands):

<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Borrowings under long-term, revolving credit agreements:
$230.0 Million agreement................................. $118,051 $ --
$45.0 Million agreement.................................. -- 26,221
Mortgage loans payable..................................... 17,158 --
Other...................................................... 2,759 --
-------- -------
137,968
Less--current maturities (included in "Notes payable" in
the accompanying consolidated balance sheet).............. 2,597 --
-------- -------
$135,371 $26,221
======== =======
</TABLE>

Borrowings under the $230,000,000 long-term, revolving credit agreement are
unsecured, and bear interest at either fixed rates offered by the 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 the Company 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 the Company to pay a facility fee based on the total amount of
the commitment. The agreement expires in March 2004.

The scheduled maturities of the Company's long-term debt at September 30,
1999 were as follows (in thousands):

<TABLE>
<S> <C>
Year ending September 30,
2000............................................................. $ 2,597
2001............................................................. 596
2002............................................................. 557
2003............................................................. 592
2004............................................................. 118,543
Thereafter....................................................... 15,083
--------
$137,968
========
</TABLE>

The Company's $45,000,000 long-term, revolving credit agreement was also
unsecured. It was terminated in January 1999 and replaced by the $230,000,000
long-term, revolving credit agreement discussed above.

The mortgage loans were assumed as a result of the merger with Sverdrup.
These mortgage loans relate to, and are secured by, certain real property
owned in St. Louis, Missouri, with a weighted average interest rate of 7.76%
at September 30, 1999. The properties have a combined net book value of
approximately $19,457,000 at September 30, 1999.

Interest expense for the years ended September 30, 1999, 1998 and 1997 was
$8,767,000, $2,356,400 and $2,226,100, respectively. Interest payments made
during fiscal 1999, 1998 and 1997 totalled $8,959,500, $2,517,100 and
$1,801,500, respectively.

24
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

7. Pension Plans

Effective September 30, 1999, the Company adopted Statement of Financial
Accounting Standards No. 132 -- Employees' Disclosure about Pensions and Other
Postretirement Benefits ("SFAS 132"). SFAS 132 amends existing disclosure
requirements, but does not change measurement standards, of pension and other
postretirement benefit plans. SFAS 132 standardizes the disclosure
requirements for such plans to the extent practicable, and requires
disclosures of additional information on changes in benefit obligations and
fair values of plan assets.

Company-only Sponsored Plans

The Company sponsors various pension plans covering employees of certain
U.S. domestic and international subsidiaries. These plans provide pension
benefits that are based on the employee's compensation and years of service.
The Company's funding policy is to fund the actuarially-determined accrued
benefits, allowing for projected compensation increases using the projected
unit method.

The following table sets forth the change in the plans' net benefit
obligation for each of the years ended September 30, 1999 and 1998 (in
thousands):

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Net benefit obligation at the beginning of the year...... $105,857 $ 78,972
Effect of Sverdrup merger................................ 241,749 --
Service cost............................................. 8,828 2,451
Interest cost............................................ 18,833 6,468
Participants' contributions.............................. 2,449 817
Actuarial (gains) losses................................. (13,228) 12,943
Benefits paid............................................ (13,076) (4,966)
Effects of plan amendments............................... (2,680) --
Special termination benefits............................. 592 --
Settlements.............................................. (23,449) --
Other.................................................... (9,000) 9,172
-------- --------
Net benefit obligation at the end of the year............ $316,875 $105,857
======== ========
</TABLE>

The following table sets forth the change in the plans' assets for each of
the years ended September 30, 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Fair value of plan
assets at the beginning
of the year............ $122,449 $ 97,979
Effect of Sverdrup
merger................. 220,411 --
Actual return on plan
assets................. 13,016 17,893
Employer contributions.. 10,675 --
Participants'
contributions.......... 2,449 817
Customer note payment... (2,000) --
Gross benefits paid..... (36,524) (4,966)
Other................... (9,556) 10,726
-------- --------
Fair value of plan
assets at the end of
the year............... $320,920 $122,449
======== ========
</TABLE>

25
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In both of the preceding tables, "Other" consists primarily of the effects
of exchange rate fluctuations used to translate the information disclosed
therein.

The following table reconciles the funded status of the plans, as well as
amounts recognized and not recognized in the accompanying consolidated balance
sheets at September 30, 1999 and 1998 (in thousands):

<TABLE>
<CAPTION>
1999 1998
------ -------
<S> <C> <C>
Funded status at the end of the year........................ $4,045 $16,592
Unrecognized actuarial (gains) losses....................... 1,246 (4,320)
Other....................................................... (75) (343)
------ -------
Net amount recognized at end of the year.................... $5,216 $11,929
====== =======
</TABLE>

Amounts recognized in the accompanying consolidated balance sheets at
September 30, 1999 and 1998 consisted of the following (in thousands):

<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Prepaid pension asset....................................... $18,704 $11,929
Accrued benefit liability................................... 13,488 --
------- -------
Net amount recognized at the end of the year................ $ 5,216 $11,929
======= =======
</TABLE>

The pension plans have a total, net over-funded status of approximately
$4,045,000 and $16,592,000 at September 30, 1999 and 1998, respectively. The
1999 amount is net of two pension plans under operating contracts with the
United States government which were under funded by a total of approximately
$14,865,000. Included in other assets at September 30, 1999 is $11,059,000
representing the accumulated excess funding of benefits over the amounts
reimbursed by the U.S. government in connection with an operating contract.

The components of net periodic pension cost for each of the years ended
September 30, 1999, 1998 and 1997 were as follows (in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
Service costs................................... $ 8,857 $ 2,451 $ 1,258
Interest cost................................... 18,899 6,468 5,624
Expected return on plan assets.................. (24,957) (8,259) (6,824)
-------- ------- -------
Net periodic costs, before the effects of
special termination............................ 2,799 660 58
Special termination............................. 820 -- --
-------- ------- -------
Total net periodic pension cost................. $ 3,619 $ 660 $ 58
======== ======= =======
</TABLE>

The significant actuarial assumptions used in determining the funded status
of the plans were as follows:

<TABLE>
<CAPTION>
1999 1998 1997
------------- ---- ----
<S> <C> <C> <C>
Weighted average discount rate..................... 6.5% to 7.75% 6.5% 8.0%
Rate of compensation increases..................... 4.0% to 4.5% 4.5% 6.0%
Expected return on plan assets..................... 7.3% to 9.5% 7.0% 8.5%
============= === ===
</TABLE>

26
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Multiemployer Plans

In the United States, the Company contributes to various trusteed pension
plans covering hourly construction employees under industry-wide agreements.
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 the
Company to determine its share of unfunded benefits, if any. Company
contributions to these plans totalled $3,835,300, $4,025,300 and $2,694,700
for the years ended September 30, 1999, 1998 and 1997, respectively.

8. Savings and Deferred Compensation Plans

Savings Plans

The Company maintains savings plans for substantially all of its domestic,
nonunion employees, which allow participants to make contributions by salary
deduction pursuant to section 401(k) of the Internal Revenue Code. The
Company's contributions to these plans totalled $16,044,700, $9,568,700 and
$8,710,500, for fiscal 1999, 1998 and 1997, respectively. Company
contributions are generally voluntary, and represent a partial matching of
employee contributions.

Deferred Compensation Plans

The Company's 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 the years ended September
30, 1999, 1998 and 1997 were $2,394,900, $1,588,800 and $1,672,600,
respectively. Included in other deferred liabilities in the accompanying
consolidated balance sheets at September 30, 1999 and 1998 was $22,778,800 and
$22,847,700, respectively, relating to the ESP and EDP plans.

9. Stock Purchase and Stock Option Plans

Stock Purchase Plan

The Company's 1989 Employee Stock Purchase Plan (the "1989 ESPP") provides
for the granting of options to participating employees to purchase shares of
the Company's common stock. The participants' purchase price is the lower of
90% of the common stock's closing market price on either the first or last day
of the option period (as defined). A summary of shares issued through the 1989
ESPP for the years ended September 30, 1999, 1998 and 1997 follows:

<TABLE>
<CAPTION>
1999 1998 1997
----------- ---------- ----------
<S> <C> <C> <C>
Aggregate purchase price.................. $10,306,530 $7,495,590 $7,067,700
Shares purchased.......................... 385,017 302,514 325,110
----------- ---------- ----------
</TABLE>

At September 30, 1999, there were 807,949 shares reserved for issuance under
the 1989 ESPP.

27
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Stock Option Plan

The Company has an incentive stock plan (the "1981 Plan") which provides for
the issuance of shares of common stock to employees and outside directors. The
Company may grant four types of incentive awards under the 1981 Plan:
incentive stock options, nonqualified stock options, stock appreciation rights
and restricted stock. At September 30, 1999, there were 2,651,481 shares of
common stock reserved for issuance under the 1981 Plan.

The following is a summary of the transactions under the 1981 Plan for each
of the years ended September 30, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Options Price
--------- --------
<S> <C> <C>
Outstanding at September 30, 1996........................ 1,789,323 $21.69
Granted.................................................. 472,000 22.66
Exercised................................................ (270,969) 15.35
Cancelled or expired..................................... (61,520) 20.46
--------- ------
Outstanding at September 30, 1997........................ 1,928,834 22.85
Granted.................................................. 577,500 28.80
Exercised................................................ (216,904) 18.78
Cancelled or expired..................................... (74,980) 23.50
--------- ------
Outstanding at September 30, 1998........................ 2,214,450 24.79
Granted.................................................. 611,000 34.62
Exercised................................................ (306,819) 23.55
Cancelled or expired..................................... (18,400) 26.31
--------- ------
Outstanding at September 30, 1999........................ 2,500,231 27.33
========= ======
</TABLE>

Certain other information regarding the Company's stock options follows:

<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- --------------
<S> <C> <C> <C>
At September 30:
Range of exercise prices for
options outstanding........... $16.58 - $37.36 $16.58 - $31.94 $5.31 - $28.56
Options exercisable............ 994,681 907,900 807,034
Options available for grant.... 151,250 748,850 1,266,370
For the fiscal year ended:
Range of prices for options
exercised..................... $16.58 - $28.79 $ 5.31 - $27.88 $7.94 - $27.88
Weighted average fair value of
options granted............... $17.33 $13.79 $10.83
--------------- --------------- --------------
</TABLE>

28
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents information regarding options outstanding and
exercisable at September 30, 1999:

<TABLE>
<CAPTION>
Options
Options Outstanding Exercisable
------------------------------ ----------------
Weighted
Average
Remaining Weighted Weighted
Contractual Average Average
Range of Life Exercise Exercise
Exercise Prices Number (in years) Price Number Price
--------------- --------- ----------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
$16.58 - $20.61.............. 386,831 4.4 $19.52 242,931 $19.13
$20.72 - $25.84.............. 712,300 5.2 $23.43 417,600 $23.27
$26.88 - $28.79.............. 577,600 6.8 $27.89 286,100 $27.94
$29.38 - $37.36.............. 823,500 9.2 $33.99 48,050 $31.83
--------- --- ------ ------- ------
2,500,231 6.8 $27.33 994,681 $24.01
========= === ====== ======= ======
</TABLE>

Options outstanding at September 30, 1999 consisted entirely of nonqualified
stock options. The 1981 Plan allows participants to satisfy the exercise price
on exercises of stock options by tendering to the Company shares of the
Company's common stock already owned by the participants. Shares so tendered
are retired and canceled by the Company and are shown as repurchases of common
stock in the accompanying consolidated statements of stockholders' equity.

During the years ended September 30, 1999, 1998 and 1997, the Company issued
8,000, 12,000 and 5,500 shares, respectively, of restricted stock under the
1981 Plan. 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 the Company until earned by the recipient
through continued employment. The restrictions lapse over five years.

Pro Forma Disclosures

As discussed in Note 1, the Company accounts for stock issued to employees
and outside directors in accordance with APB 25. Statement of Financial
Accounting Standards No. 123 -- Accounting for Stock-Based Compensation ("SFAS
123") prescribes an optional, fair-value based method of accounting for stock
issued to employees and others. Had the Company determined compensation cost
under SFAS 123, the Company's net earnings and earnings per share would have
been reduced to the pro forma amounts as follows (in thousands, except per
share data):

<TABLE>
<CAPTION>
For the Years Ended
September 30,
-----------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Net earnings:
As reported......................................... $65,445 $54,385 $46,895
Pro forma........................................... 57,976 50,418 43,022
Earnings per share:
Basic:
As reported........................................ $ 2.54 $ 2.12 $ 1.82
Pro forma.......................................... 2.25 1.96 1.67
Diluted:
As reported........................................ 2.47 2.08 1.80
Pro forma.......................................... 2.19 1.93 1.66
======= ======= =======
</TABLE>

29
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Dividend yield.......................................... 0% 0% 0%
Expected volatility..................................... 25.30% 24.22% 21.57%
Risk-free interest rate................................. 5.40% 5.62% 6.50%
Expected life of options (in years)..................... 6.76 7.40 6.25
----- ----- -----
</TABLE>

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 expected
volatility of the underlying stock price. Since the Company's 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 the Company's options. The Company believes that existing
models do not necessarily provide a reliable single measure of the fair value
of its stock options.

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
years as options vest over several years and additional awards are generally
made each year.

10. Income Taxes

The following is a summary of the Company's consolidated income tax expense
(in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Current taxes:
Federal.......................................... $31,603 $25,873 $23,255
State............................................ 5,137 4,729 4,515
Foreign.......................................... 4,053 6,528 4,519
------- ------- -------
40,793 37,130 32,289
------- ------- -------
Deferred taxes:
Federal.......................................... (1,263) (2,340) (1,563)
State............................................ (453) (391) (172)
------- ------- -------
(1,716) (2,731) (1,735)
------- ------- -------
Consolidated income tax expense................... $39,077 $34,399 $30,554
======= ======= =======
</TABLE>

30
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Deferred taxes reflect the tax effects of differences between the amounts
recorded as assets and liabilities for financial reporting purposes and the
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 components of the Company's net
deferred tax asset at September 30, 1999 and 1998 were as follows (in
thousands):

<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Deferred tax assets:
Liabilities relating to employee benefit plans........... $ 34,250 $27,177
Self-insurance reserves.................................. 19,851 8,838
Contract revenues and costs.............................. 22,625 10,481
Accrual for office consolidations........................ 1,660 161
Other, net............................................... -- 150
-------- -------
Gross deferred tax assets................................ 78,386 46,807
-------- -------
Deferred tax liabilities:
Depreciation and amortization............................ (4,977) (4,805)
Settlement of pension obligations........................ (4,367) --
Unremitted foreign earnings.............................. (2,709) (2,458)
State income and franchise taxes......................... (1,534) (1,732)
Unrealized gain on securities available-for-sale......... (1,599) --
Other, net............................................... (447) --
-------- -------
Gross deferred tax liabilities........................... (15,633) (8,995)
-------- -------
Net deferred tax asset.................................... $ 62,753 $37,812
======== =======
</TABLE>

Included in other deferred liabilities in the consolidated balance sheets at
September 30, 1999 and 1998 are deferred tax liabilities of $13,652,300 and
$7,606,700, respectively.

The reconciliations from the statutory federal income tax expense to the
consolidated effective income tax expense for each of the years ended
September 30, 1999, 1998 and 1997 follows (in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Statutory amount.................................. $36,583 $31,075 $27,107
State taxes, net of the federal benefit........... 3,045 2,819 2,824
Other, net........................................ (551) 505 623
------- ------- -------
$39,077 $34,399 $30,554
======= ======= =======
Rate used to compute statutory amount............. 35.0% 35.0% 35.0%
======= ======= =======
Consolidated effective income tax rate............ 37.4% 38.7% 39.5%
======= ======= =======
</TABLE>

During fiscal 1999, 1998 and 1997, the Company paid approximately
$45,459,800, $26,240,900 and $32,038,000, respectively, in income taxes.

31
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

For the years ended September 30, 1999, 1998 and 1997, consolidated earnings
before taxes consisted of the following (in thousands):

<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- -------
<S> <C> <C> <C>
United States earnings............................. $ 87,247 $62,193 $61,420
Foreign earnings................................... 17,275 26,591 16,029
-------- ------- -------
$104,522 $88,784 $77,449
======== ======= =======
</TABLE>

United States income taxes, net of applicable credits, have been provided on
the undistributed earnings of foreign subsidiaries, except in those instances
where the earnings are expected to be permanently reinvested. At September 30,
1999, $7,830,800 of such undistributed earnings were expected to be
permanently reinvested. Should these earnings be repatriated, approximately
$2,070,700 of income taxes would be payable.

11. Commitments and Contingencies

The Company leases certain of its facilities and equipment under operating
leases with net aggregate future lease payments of approximately $123,669,800
at September 30, 1999 payable as follows (in thousands):

<TABLE>
<S> <C>
Year ending September 30,
2000............................................................. $ 37,657
2001............................................................. 28,650
2002............................................................. 21,028
2003............................................................. 15,320
2004............................................................. 11,916
Thereafter....................................................... 33,468
--------
148,039
Less -- amounts representing sublease income....................... (24,369)
--------
$123,670
========
</TABLE>

Rent expense for fiscal years 1999, 1998 and 1997 amounted to $47,382,500,
$29,393,000 and $29,978,000, respectively, and was offset by sublease income
of approximately $3,716,300, $4,112,000 and $2,780,000, respectively.

Letters of credit outstanding at September 30, 1999 totalled $68,397,300.

The Company maintains insurance coverage for various aspects of its business
and operations. The Company has elected, however, to retain a portion of
losses that occur through the use of various deductibles, limits and
retentions under its insurance programs. This situation may subject the
Company to some future liability for which it is only partially insured, or
completely uninsured. The Company intends to mitigate any such future
liability by continuing to exercise prudent business judgment in negotiating
the terms and conditions of its contracts.

The Company has entered into an employment agreement expiring September 30,
2004 with the Chairman of its Board of Directors. The agreement provides for
annual base payments of $432,000 to either the Chairman or, in the event of
his death, his beneficiary. The agreement also provides that the Chairman may
participate in any bonus plan sponsored by the Company, specifies certain
promotional and other activities to be performed by the Chairman in the event
he leaves employment with the Company and contains other provisions, including
some intended to prevent the Chairman from entering into any form of
competition with the Company.

32
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In the normal course of business, the Company is subject to certain
contractual guarantees and litigation. Generally, such guarantees relate to
project schedules and plant performance. Most of the litigation involves the
Company as a defendant in workers' compensation, personal injury and other
similar lawsuits. In addition, as a contractor for many agencies of the United
States Government, the Company is subject to many levels of audits,
investigations and claims by, or on behalf of, the Government with respect to
its contract performance, pricing, costs, cost allocations and procurement
practices. Management believes, after consultation with counsel, that such
guarantees, litigation, and United States Government contract-related audits,
investigations and claims should not have any material adverse effect on the
Company's consolidated financial statements.

In 1998, the Company was notified by the U.S. Department of Justice that was
intervening in a lawsuit filed against the Company by a former employee under
the False Claims Act (the "Act"). The lawsuit alleges that the Company
overbilled the U.S. government for lease costs paid by the Company and
relating to its former headquarters building located in Pasadena, California.
The lawsuit seeks actual damages of approximately $17.0 million, which, if a
violation of the Act is found, would be trebled. Additional remedies available
to the government include the possible imposition of civil penalties for each
billing. Although the number of billings is contested, if a violation of the
Act is found, such penalties would be at least $10.0 million. The Company has
denied any wrongdoing in the method it used to account for the lease costs in
question and has denied that it acted with the intent required for liability
under the Act. The Company contends that all of the facts regarding the 1982
transaction-in-question were disclosed to the government, which repeatedly
approved the Company's lease charges after conducting annual audits. The
Company intends to continue to vigorously defend itself against the lawsuit.

12. Common and Preferred Stock

The Company is authorized to issue two classes of capital stock: common
stock and preferred stock (each have 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 the Company's Board of
Directors at the time such series are 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 the Company's common stock have the exclusive right
to vote for the election of Directors and all other matters requiring
stockholder action. The holders of the Company's 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 the Company's 1990 Stockholder Rights Plan, 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
two-hundredth of a share of the Company's Series A Junior Participating
Cumulative Preferred Stock, par value $1.00 per share (the "Series A Preferred
Stock") at the exercise price of $90 per share, subject to adjustment.
Alternatively, the Right holder may purchase common stock of the Company
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. The rights may be redeemed at

33
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

$0.01 per right by the Company in accordance with the Rights Plan. The rights
will expire on December 20, 2000, unless earlier exchanged or redeemed.

13. Other Financial Information

Other noncurrent assets consisted of the following at September 30, 1999 and
1998 (in thousands):

<TABLE>
<CAPTION>
1999 1998
-------- -------
<S> <C> <C>
Prepaid pension costs...................................... $ 18,704 $11,929
Reimbursable pension costs................................. 11,059 --
Cash surrender value of life insurance policies............ 30,228 26,920
Investments................................................ 32,024 20,277
Notes receivable........................................... 6,597 1,785
Miscellaneous.............................................. 6,850 2,760
-------- -------
$105,462 $63,671
======== =======
</TABLE>

Accrued liabilities consisted of the following at September 30, 1999 and
1998 (in thousands):

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Accrued payroll and related liabilities................... $143,110 $103,626
Reserves.................................................. 53,440 14,430
Insurance liabilities..................................... 48,406 23,154
Other..................................................... 37,011 20,342
-------- --------
$281,967 $161,552
======== ========
</TABLE>

The increase of $39,010,000 in reserves was due primarily to the merger with
Sverdrup, and related to accruals for various litigation exposures, costs of
consolidating offices, and costs to complete planned workforce reductions.

14. Comprehensive Income

Effective with the first quarter of fiscal 1999 ending December 31, 1998,
the Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes reporting
and disclosure standards for comprehensive income and its components.
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from non-owner sources.

The Company has disclosed the components of comprehensive income in the
Statements of Consolidated Comprehensive Income and the Statements of Changes
in Stockholders' Equity. SFAS 130 does not have any effect on the amounts
previously reported for net earnings or stockholders' equity.

34
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The accumulated balances related to each component of other comprehensive
income (loss), net of related income tax, are as follows (in thousands):

<TABLE>
<CAPTION>
Total
Unrealized Foreign Accumulated
Gains Currency Other
(Losses) on Translation Comprehensive
Securities Adjustments Income (Loss)
----------- ----------- -------------
<S> <C> <C> <C>
Balances at September 30, 1996......... $ 621 $ 1,652 $ 2,273
Changes during the year................ (507) (3,444) (3,951)
------ ------- -------
Balances at September 30, 1997......... 114 (1,792) (1,678)
Changes during the year................ (113) (9) (122)
------ ------- -------
Balances at September 30, 1998......... 1 (1,801) (1,800)
Changes during the year................ 2,151 (3,946) (1,795)
------ ------- -------
Balances at September 30, 1999......... $2,152 $(5,747) $(3,595)
====== ======= =======
</TABLE>

15. Segment Information

Effective September 30, 1999, the Company adopted Statement of Financial
Accounting Standards No. 131 -- Disclosure About Segments of an Enterprise and
Related Information ("SFAS 131"). SFAS 131 supercedes Statement of Financial
Accounting Standards No. 14 -- Financial Reporting for Segments of a Business
Enterprise ("SFAS 14"). SFAS 131 replaces the "industry approach" definition
of "segment" that was promulgated by SFAS 14 with the "management approach" to
identify an entity's reportable segments. Under the management approach, an
entity's reportable segments are determined by the internal organization used
by the entity's management for making operating decisions and assessing
performance.

The Company's principal business is to provide professional and technical
services. The Company provides its services from offices located primarily
throughout the United States, Europe, India and Australia.

All of the Company's operations share similar economic characteristics. For
example, all of the Company's operations are highly influenced by the general
availability of qualified engineers and other professional staff. They also
provide similar services, as well as share similar processes for delivering
the Company's services. In addition, the use of technology among the Company's
performance units is highly similar and consistent throughout the Company's
organization, as is the Company's customer base (although the Company's
operations outside the United States do very little work with the U.S. federal
government), and the Company's quality assurance and safety programs.
Accordingly, based on these similarities, the Company has concluded that its
operations may be aggregated into one reportable segment for purposes of this
disclosure.

35
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents information by geographic area:

<TABLE>
<CAPTION>
Long-
Total lived
Revenues Assets
---------- --------
<S> <C> <C>
1999:
United States........................................... $2,421,871 $116,984
Europe.................................................. 440,545 10,376
Asia.................................................... 12,591 12,293
---------- --------
Total.................................................. $2,875,007 139,653
---------- --------
1998:
United States........................................... $1,676,997 $ 78,742
Europe.................................................. 410,944 11,032
Asia.................................................... 13,204 10,791
---------- --------
Total.................................................. $2,101,145 $100,565
---------- --------
1997:
United States........................................... $1,363,016 $ 59,758
Europe.................................................. 412,298 23,667
Asia.................................................... 5,302 9,976
---------- --------
Total.................................................. $1,780,616 $ 93,401
---------- --------
</TABLE>

Asia consists primarily of the Company's operations in India. Revenues were
earned from unaffiliated customers located primarily within the respective
geographic areas. Long-lived assets consist of property and equipment, net of
accumulated depreciation and amortization. The results of the Company's
operations in Mexico, Chile and Australia, and the Company's investment in
long-lived assets in those geographic areas were not material.

For the years ended September 30, 1999, 1998 and 1997, projects with or for
the benefit of agencies of the U.S. federal government accounted for 17.4%,
12.1% and 12.0%, respectively, of total revenues. Within the private sector,
no single client accounted for 10% or more of total revenues in either 1999 or
1998. One private-sector client accounted for 15.3% of total revenues in 1997.

36
<PAGE>

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

16. Quarterly Data -- Unaudited

Summarized quarterly financial information for the years ended September 30,
1999, 1998 and 1997 is presented below (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter Year
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
1999
Revenues......................... $555,172 $779,874 $771,905 $768,056 $2,875,007
Operating profit................. 23,165 28,142 28,515 28,473 108,295
Earnings before taxes............ 24,054 25,872 26,818 27,778 104,522
Net earnings..................... 15,155 16,170 16,760 17,360 65,445
Earnings per share:
Basic........................... 0.59 0.63 0.65 0.67 2.54
Diluted......................... 0.58 0.61 0.63 0.65 2.47
Stock price:
High............................ 40.750 42.750 42.688 38.563 42.750
Low............................. 26.938 35.250 35.563 32.125 26.938
-------- -------- -------- -------- ----------
1998
Revenues......................... $506,359 $524,776 $525,034 $544,976 $2,101,145
Operating profit................. 20,250 21,717 22,474 22,043 86,484
Earnings before taxes............ 21,001 21,838 22,753 23,192 88,784
Net earnings..................... 12,810 13,320 13,880 14,375 54,385
Earnings per share:
Basic........................... 0.50 0.52 0.54 0.56 2.12
Diluted......................... 0.49 0.51 0.53 0.55 2.08
Stock price:
High............................ 31.000 32.375 34.250 33.250 34.250
Low............................. 24.688 24.750 29.500 25.125 24.688
-------- -------- -------- -------- ----------
1997
Revenues......................... $433,649 $437,735 $430,177 $479,055 $1,780,616
Operating profit................. 16,989 17,761 18,596 20,215 73,561
Earnings before taxes............ 17,997 18,907 19,818 20,727 77,449
Net earnings..................... 10,870 11,420 11,970 12,635 46,895
Earnings per share:
Basic........................... 0.42 0.44 0.47 0.49 1.82
Diluted......................... 0.42 0.44 0.46 0.48 1.80
Stock price:
High............................ 25.000 28.500 27.875 32.563 32.563
Low............................. 21.250 23.500 23.250 26.250 21.250
-------- -------- -------- -------- ----------
</TABLE>

As disclosed last year, the Company adopted SFAS 128 -- Earnings per Share
effective with the first quarter of fiscal 1998 ending December 31, 1997, and
accordingly restated prior period EPS data.

The Company's common stock is listed on the New York Stock Exchange. At
September 30, 1999, there were 1,208 stockholders of record.

37
<PAGE>

REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS

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, 1999 and 1998, 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, 1999. 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 generally accepted auditing
standards. 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, 1999 and 1998, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended September 30, 1999, in conformity with
generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
November 3, 1999

38
<PAGE>

MANAGEMENT'S RESPONSIBILITIES FOR FINANCIAL REPORTING

The consolidated financial statements and other information included in this
appendix to this proxy statement have been prepared by management, which is
responsible for their fairness, integrity, and objectivity. The consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior years and
contain some amounts that are based upon management's best estimates and
judgment. The other financial information contained in this appendix has been
prepared in a manner consistent with the preparation of the financial
statements.

In meeting its responsibility for the fair presentation of the Company's
financial statements, management necessarily relies on the Company's system of
internal accounting controls. This system is designed to provide reasonable,
but not absolute, assurance that assets are safeguarded and that transactions
are executed in accordance with management's instructions and are properly
recorded in the Company's books and records. The concept of reasonable
assurance is based on the recognition that in any system of internal controls,
there are certain inherent limitations and that the cost of such systems
should not exceed the benefits to be derived. We believe the Company's system
of internal accounting controls is cost-effective and provides reasonable
assurance that material errors and irregularities will be prevented, or
detected and corrected on a timely basis.

The Company's consolidated financial statements have been audited by
independent auditors, whose report thereon was based on examinations conducted
in accordance with generally accepted auditing standards and is presented on
the preceding page. As part of their audit, the independent auditors perform a
review of the Company's system of internal accounting controls for the purpose
of determining the amount of reliance to place on those controls relative to
the audit tests they perform.

The Company's Board of Directors, through its Audit Committee which is
composed entirely of nonemployee directors, meets regularly with both
management and the independent auditors to review the Company's financial
results and to ensure that both management and the independent auditors are
properly performing their respective functions.

<PAGE>

EXHIBIT 21.

JACOBS ENGINEERING GROUP INC.

PARENTS AND SUBSIDIARIES

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.

<TABLE>
<S> <C>
Jacobs Engineering Company, a California corporation 100.00%
Jacobs Engineering Group of Ohio, Inc., an Ohio corporation 100.00%
Jacobs Services Company, a California corporation 100.00%
Jacobs Engineering, Inc., a Delaware corporation ("JEI") 100.00%
Jacobs Engineering Ireland, Ltd. a Republic of Ireland company 100.00%
Jacobs Engineering Espana, S.L., a Spanish company 100.00%
Pegasus Engineering Holdings Limited, a Republic of Ireland company 100.00%
Jacobs Engineering Mexico, S.A. de C.V., a Mexican corporation 100.00%
Jacobs Engineering Belgique S.A. de db, a Belgian company 100.00%
Jacobs Engineering Luxembourg, SARL, a Luxembourg company 100.00%
Jacobs International Limited, Inc., a Panama corporation 100.00%
Jacobs International Limited, a Republic of Ireland company 100.00%
Jacobs Engineering U.K. Limited, an English company ("JEL") 100.00%
JE Professional Resources Limited, an English company 100.00%
Jacobs/H&G Engineering Limited, an English company 100.00%
Jacobs/Humphreys & Glasgow Limited, an English company 100.00%
Jacobs H&G Limited, an Indian company 69.98% *
HGC Constructors, Ltd., an Indian company 56.00%
Niryaat Overseas (India) Ltd., an Indian company 100.00%
Jacobs Computing Services Limited, A Republic of Ireland company 100.00%
Jacobs Sereland SL, a Spanish company 86.76%
Jacobs Sereland Argentina SA, an Argentinean company 100.00%
Jacobs Engineering SARL, a French company 100.00%
Jacobs Serete SA a DCS, a French company 100.00%
Jacobs Serete Italia SPA, an Italian company 100.00%
Jacobs Construction Management (Malaysia) Sdn. Bhd.,
a Malaysian company 100.00%
Jacobs Engineering Singapore Pte. Ltd., a Singapore company 100.00%
Jacobs Pan American Corp., a Virgin Islands company 100.00%
Jacobs Constructors, Inc., a Louisiana corporation 100.00%
Jacobs Constructors of California Inc., a California corporation 100.00%
Jacobs Maintenance, Inc., a Louisiana corporation 100.00%
JE Merit Constructors, Inc., a Texas corporation 100.00%
JE Remediation Technologies, Inc., a Louisiana corporation 100.00%
JE Professional Resources, Inc., a California corporation 100.00%
The Pace Consultants, Inc., a Texas corporation 100.00%
Payne & Keller Company, Inc., a Louisiana corporation 100.00%
Jacobs Applied Technology, Inc., a Delaware corporation 100.00%
Applied Engineering Company - Ohio, Inc., a South
Carolina corporation 100.00%
Jacobs Facilities, Inc., a Missouri Corporation 100.00%
GPR Planners Collaborative, Inc., a Missouri corporation 100.00%
Sverdrup Building Corporation, a Missouri corporation 100.00%
</TABLE>
<PAGE>

<TABLE>
<S> <C>
SP Operations and Management Services Company, a Missouri corporation 100.00%
Sverdrup Technology, Inc., a Tennessee Corporation 100.00%
Sverdrup Technology Australia, Pty Ltd, an Australian company 100.00%
Sverdrup Civil, Inc., a Missouri Corporation 100.00%
Sverdrup & Parcel Consultants, Inc., a New York Corporation 100.00%
Sverdrup of Puerto Rico, PSC, a Puerto Rican corporation 100.00%
Sverdrup Canada, ULC, a Nova Scotian corporation 100.00%
Jacobs Sverdrup Constructors, Inc., a Delaware Corporation 100.00%
Sverdrup Investments, Inc., a Delaware Corporation 100.00%
Riverport Development, Inc., a Missouri corporation 100.00%
CRSS International, Inc., a South Carolina corporation 100.00%
CRSS of New York, Inc., a New York corporation 100.00%
Jacobs Engineering Foreign Sales Corporation, a Barbados corporation 100.00%
Jacobs Engineering Chile, S.A., a Chilean corporation 100.00%
Rocky Flats Closure Site Services LLC, a Delaware company 100.00%
</TABLE>

* Ownership is divided between JEI and JEL.

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

Dr. Joseph J. Jacobs may be deemed to be a "parent" of Jacobs Engineering
Group Inc. under the federal securities laws. Refer to Item 12 of the
accompanying report on Form 10-K for information about Dr. Jacobs' share
ownership and position with the Company.

<PAGE>

EXHIBIT 23.

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Jacobs Engineering Group Inc. of our report dated November 3, 1999 included
in Appendix A to the Company's 2000 Annual Notice and Proxy Statement.

We also consent to the incorporation by reference in both the Registration
Statement (Form S-8 No. 333-45475) pertaining to the Jacobs Engineering Group
Inc. 1981 Executive Incentive Plan and in the Registration Statement (Form S-8
No. 333-72977) pertaining to the Jacobs Engineering Group Inc. 1989 Employee
Stock Purchase Plan of our report dated November 3, 1999 with respect to the
consolidated financial statements of Jacobs Engineering Group Inc. and
subsidiaries incorporated by reference in the Annual Report (Form 10-K) for the
year ended September 30, 1999.

ERNST & YOUNG LLP

Los Angeles, California
December 17, 1999

<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 53,482
<SECURITIES> 0
<RECEIVABLES> 586,005
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 729,620
<PP&E> 255,590
<DEPRECIATION> 115,937
<TOTAL-ASSETS> 1,220,186
<CURRENT-LIABILITIES> 584,982
<BONDS> 135,371
0
0
<COMMON> 26,143
<OTHER-SE> 422,574
<TOTAL-LIABILITY-AND-EQUITY> 1,220,186
<SALES> 0
<TOTAL-REVENUES> 2,875,007
<CGS> 0
<TOTAL-COSTS> 2,477,678
<OTHER-EXPENSES> 284,040
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,767
<INCOME-PRETAX> 104,522
<INCOME-TAX> 39,077
<INCOME-CONTINUING> 65,445
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,445
<EPS-BASIC> 2.54
<EPS-DILUTED> 2.47

</TABLE>