UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report on
FORM 10-Q
(Mark one)
( X ) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2000
--------------
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from_______ to _______
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)
(626) 578 - 3500
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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
Number of shares of common stock outstanding at May 11, 2000: 26,224,522
Page 1
JACOBS ENGINEERING GROUP INC.
INDEX TO FORM 10-Q
Page No.
- --------------------------------------------------------------------------------
Part I - Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets -
March 31, 2000 and September 30, 1999 3
Condensed Consolidated Statements of Operations -
Three and Six Months Ended March 31, 2000 and 1999 4
Condensed Consolidated Statements of
Comprehensive Income -
Three and Six Months Ended March 31, 2000 and 1999 5
Condensed Consolidated Statements of Cash Flows
Six Months Ended March 31, 2000 and 1999 6
Notes to Condensed Consolidated Financial Statements 7 - 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11 - 17
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
Page 2
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share information)
(Unaudited)
March 31, September 30,
2000 1999
- -------------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 47,849 $ 53,482
Receivables 643,827 586,005
Deferred income taxes 78,229 76,405
Prepaid expenses and other 16,673 13,728
---------------------------------------------------------------------------------
Total current assets 786,578 729,620
-----------------------------------------------------------------------------------
Property, Equipment and Improvements, Net 149,273 139,653
-----------------------------------------------------------------------------------
Other Noncurrent Assets:
Goodwill, net 251,054 245,451
Other 111,913 105,462
---------------------------------------------------------------------------------
Total other noncurrent assets 362,967 350,913
-----------------------------------------------------------------------------------
$1,298,818 $1,220,186
=====================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 8,021 $ 9,465
Accounts payable 197,834 186,287
Accrued liabilities 287,841 281,967
Customers' advances in excess of related revenues 91,572 93,303
Income taxes payable 7,741 13,960
-----------------------------------------------------------------------------------
Total current liabilities 593,009 584,982
-----------------------------------------------------------------------------------
Long-term Debt 195,393 135,371
-----------------------------------------------------------------------------------
Other Deferred Liabilities 45,161 44,988
-----------------------------------------------------------------------------------
Minority Interests 6,197 6,128
-----------------------------------------------------------------------------------
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 - 26,182,903 shares
and 26,142,992 shares, respectively 26,183 26,143
Additional paid-in capital 71,032 68,049
Retained earnings 368,217 358,958
Accumulated other comprehensive loss (5,772) (3,595)
---------------------------------------------------------------------------------
459,660 449,555
Unearned compensation (602) (838)
---------------------------------------------------------------------------------
Total stockholders' equity 459,058 448,717
- -------------------------------------------------------------------------------------
$1,298,818 $1,220,186
=====================================================================================
See the accompanying Notes to Condensed Consolidated Financial Statements.
Page 3
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended March 31, 2000 and 1999
(In thousands, except per-share information)
(Unaudited)
For the Three Months For the Six Months
Ended March 31, Ended March 31,
--------------------- ------------------------
2000 1999 2000 1999
- ------------------------------------------------------------------------------------------------------
Revenues $881,799 $779,874 $1,690,887 $1,335,046
Costs and Expenses:
Direct costs of contracts 772,310 667,582 1,477,668 1,154,434
Selling, general and
administrative expenses 79,281 84,150 152,983 129,305
- ------------------------------------------------------------------------------------------------------
Operating Profit 30,208 28,142 60,236 51,307
- ------------------------------------------------------------------------------------------------------
Other (Expense) Income:
Interest income 663 841 1,013 2,102
Interest expense (2,586) (3,079) (4,689) (3,358)
Miscellaneous income
(expense), net 677 (32) 1,170 (125)
Provision for litigation settlement - - (38,000) -
- ------------------------------------------------------------------------------------------------------
Total other expense, net (1,246) (2,270) (40,506) (1,381)
Earnings Before Taxes 28,962 25,872 19,730 49,926
Income Tax Expense 10,862 9,702 7,399 18,601
- ------------------------------------------------------------------------------------------------------
Net Earnings $ 18,100 $ 16,170 $ 12,331 $ 31,325
======================================================================================================
Net Earnings Per Share:
Basic $ 0.69 $ 0.63 $ 0.47 $ 1.22
Diluted $ 0.69 $ 0.61 $ 0.47 $ 1.19
======================================================================================================
See the accompanying Notes to Condensed Consolidated Financial Statements.
Page 4
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Six Months Ended March 31, 2000 and 1999
(In thousands)
(Unaudited)
For the Three Months For the Six Months
Ended March 31, Ended March 31,
------------------------------ ------------------------------
2000 1999 2000 1999
- ----------------------------------------------------------------------------------------------------------
Net Earnings $ 18,100 $ 16,170 $ 12,331 $ 31,325
- ----------------------------------------------------------------------------------------------------------
Other Comprehensive Income (Loss):
Unrealized holding gains
on securities 4,230 - 4,905 -
Less: reclassification adjustment
for gains realized in net earnings - - (900) -
- ----------------------------------------------------------------------------------------------------------
Unrealized gains on securities, net
of reclassification adjustment 4,230 - 4,005 -
Foreign currency translation
adjustments (2,368) (2,799) (4,683) (4,746)
- ----------------------------------------------------------------------------------------------------------
Other Comprehensive Income (Loss)
Before Income Taxes 1,862 (2,799) (678) (4,746)
Income Tax Expense Relating to Other
Comprehensive Income (Loss) (1,586) - (1,499) -
- ----------------------------------------------------------------------------------------------------------
Other Comprehensive Income (Loss) 276 (2,799) (2,177) (4,746)
- ----------------------------------------------------------------------------------------------------------
Total Comprehensive Income $ 18,376 $ 13,371 $ 10,154 $ 26,579
==========================================================================================================
See the accompanying Notes to Condensed Consolidated Financial Statements.
Page 5
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2000 and 1999
(In thousands)
(Unaudited)
2000 1999
- -------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net earnings $ 12,331 $ 31,325
Adjustments to reconcile net earnings
to net cash flows from operations:
Depreciation and amortization 19,246 14,315
Gains on sales of assets (2,313) -
Changes in assets and liabilities, excluding
the effects of businesses acquired:
Receivables (27,004) (51,861)
Prepaid expenses and other
current assets (3,562) (3,913)
Accounts payable 3,641 (10,043)
Accrued liabilities (4,890) 36,177
Customers' advances (6,714) 19,565
Income taxes payable (6,069) (3,581)
Deferred income taxes (1,824) (1,093)
Other, net 236 301
------------------------------------------------------------------------------------------------------
Net cash (used for) provided by operating activities (16,922) 31,192
------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
Acquisitions of businesses, net of cash acquired (26,084) (199,092)
Additions to property and equipment, net
of disposals (21,174) (21,602)
Proceeds from sales of marketable securities
and investments 2,878 16,482
Purchases of marketable securities and
investments (1,655) (1,493)
Net decrease (increase) in other noncurrent assets 905 (6,390)
------------------------------------------------------------------------------------------------------
Net cash used for investing activities (45,130) (212,095)
------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
Proceeds from long-term borrowings 77,481 170,000
Repayments of long-term borrowings (15,603) (21,615)
Exercises of stock options, including the
related income tax benefits 8,236 6,831
Purchases of common stock for treasury (8,152) -
Net change in short-term borrowings (1,213) 3,706
Change in other deferred liabilities (2,229) (3,260)
------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 58,520 155,662
------------------------------------------------------------------------------------------------------
Effect of Exchange Rate Changes (2,101) (2,564)
- -------------------------------------------------------------------------------------------------------
Decrease in Cash and Cash Equivalents (5,633) (27,805)
Cash and Cash Equivalents at Beginning of Period 53,482 101,328
- -------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 47,849 $ 73,523
=======================================================================================================
See the accompanying Notes to Condensed Consolidated Financial Statements.
Page 6
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
1. The accompanying condensed consolidated financial statements and financial
information included herein have been prepared pursuant to the interim
period reporting requirements of Form 10-Q. Consequently, certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted. Readers of this report should refer to the
consolidated financial statements and the notes thereto incorporated into
the latest Annual Report on Form 10-K of Jacobs Engineering Group Inc.
("Jacobs", or the "Company").
In the opinion of management of the Company, the accompanying unaudited
condensed consolidated financial statements contain all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation of the Company's consolidated financial position at March 31,
2000 and September 30, 1999, its consolidated results of operations for the
three and six months ended March 31, 2000 and 1999, its consolidated
comprehensive income for the three and six months ended March 31, 2000 and
1999, and its consolidated cash flows for the six months ended March 31,
2000 and 1999.
The Company's interim results of operations are not necessarily indicative
of the results to be expected for the full year.
2. Included in receivables at March 31, 2000 and September 30, 1999 were
amounts due under contracts in progress of $329,956,100 and $240,964,600,
respectively, but which were not billed at the respective balance sheet
dates. The Company anticipates that substantially all of such unbilled
amounts will be billed and collected over the next twelve months.
3. Property, equipment and improvements are stated at cost and consisted of
the following at March 31, 2000 and September 30, 1999 (in thousands):
March 31, September 30,
2000 1999
-------------------------------------------------------------------------
Land $ 14,525 $ 14,407
Buildings 55,646 47,313
Equipment 184,102 164,538
Leasehold improvements 20,538 18,913
Construction in progress 13,278 10,419
-----------------------------------------------------------------------
288,089 255,590
Accumulated depreciation and amortization (138,816) (115,937)
-----------------------------------------------------------------------
$ 149,273 $ 139,653
=========================================================================
Page 7
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
4. Other noncurrent assets consisted of the following at March 31, 2000 and
September 30, 1999 (in thousands):
March 31, September 30,
2000 1999
---------------------------------------------------------
Prepaid pension costs $ 18,785 $ 18,704
Reimbursable pension costs 11,184 11,059
Cash surrender value of life
insurance policies 34,409 30,228
Investments 33,044 32,024
Notes receivable 6,023 6,597
Miscellaneous 8,468 6,850
--------------------------------------------------------
$111,913 $105,462
=========================================================
5. The following table reconciles the denominator used to compute basic
earnings per share to the denominator used to compute diluted earnings per
share (in thousands):
Three Months Ended Six Months Ended
March 31, March 31,
------------------------ ------------------------
2000 1999 2000 1999
-------- -------- -------- --------
Weighted average shares
outstanding (denominator
used to compute basic EPS) 26,073 25,721 26,104 25,677
Effect of employee and outside
director stock options 196 780 234 695
-------- -------- -------- --------
Denominator used to compute
diluted EPS 26,269 26,501 26,338 26,372
======== ======== ======== ========
6. During the six months ended March 31, 2000 and 1999, the Company made cash
payments of approximately $4,947,500 and $2,733,500, respectively, for
interest and $15,241,400 and $23,601,200, respectively, for income taxes.
Page 8
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
7. On February 16, 2000, the Company completed the first phase of an
anticipated two-part transaction to acquire the engineering and contracting
business of Stork N.V., the Netherlands ("Stork") for a total purchase
price of EUR 25.0 million (approximately $24.2 million). The purchase price
was financed in part by long-term borrowings of EUR 15.0 million
(approximately $14.8 million) under an existing $230.0 million revolving
credit facility. The transaction was accounted for as a purchase.
Accordingly, the Company's consolidated results of operations include those
of Stork since the date of acquisition. The first phase includes Stork's
operations in Belgium, Germany, Southeast Asia and certain offices in the
Netherlands. These offices employ over 1,500 professional technical staff.
The second phase, involving the balance of Stork's engineering and
construction operations in the Netherlands and the Middle East, is expected
to close at a later date.
In January 1999, the Company completed its Agreement and Plan of Merger
with Sverdrup Corporation ("Sverdrup"). This transaction was accounted for
as a purchase. Accordingly, the Company's consolidated results of
operations include those of Sverdrup beginning January 1999 (that is, since
the beginning of the Company's second quarter of last fiscal year). For
more information about Sverdrup and the merger transaction, readers of this
Form 10-Q should refer to Note 3 to the Company's 1999 Consolidated
Financial Statements included as Exhibit 13 to its 1999 Annual Report on
Form 10-K.
8. 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 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. In accordance with the provisions of SFAS
131, the Company has concluded that its operations may be aggregated into
one reportable segment for purposes of this disclosure.
Page 9
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
9. On May 8, 2000, the Company signed a letter of intent with Stone & Webster,
Incorporated ("Stone & Webster") to acquire substantially all of its assets
and contracts. Under the terms of the letter of intent, the Company will
pay $150 million in cash and stock and assume specified liabilities related
to the ongoing business of Stone & Webster. In connection with the
proposed transaction, the Company has agreed to advance up to $50 million
in working capital funds to Stone & Webster under a secured, revolving
credit agreement. The proposed transaction is subject to the satisfactory
completion of due diligence by the Company, the negotiation of a definitive
purchase agreement, approval under the Hart-Scott-Rodino Act and other
customary conditions. With annual revenues exceeding $1 billion and 5,000
professional staff, Stone & Webster provides engineering, construction and
consulting services for the power, process/industrial, environmental, and
infrastructure markets in North America and Europe.
Page 10
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
March 31, 2000
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
- -------
The following discussion should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
(incorporated by reference from pages A-4 through A-12 of Exhibit 13 of the
Company's 1999 Annual Report on Form 10-K).
Results of Operations
- ---------------------
On February 16, 2000, the Company completed the first phase of an anticipated
two-part transaction to acquire the engineering and contracting business of
Stork N.V., the Netherlands ("Stork") for a total purchase price of EUR 25.0
million (approximately $24.2 million). The first phase of the Stork transaction
was 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 $11.0 million, which is being amortized over 40
years on a straight-line basis. The Company's consolidated results of
operations include the results of Stork's operations since the acquisition date.
The effect of Stork on the Company's consolidated results of operations for the
current fiscal periods was not material. See Note 7 of the Notes to Condensed
Consolidated Financial Statements for additional discussion of the Stork
transaction.
In January 1999, the Company completed its merger with Sverdrup Corporation.
Accordingly, Sverdrup's results of operations are included in the Company's
consolidated results of operations for the current fiscal periods (that is, the
second quarter and first half of fiscal 2000), compared to only the second
quarter of fiscal 1999. See Note 7 of the Notes to Condensed Consolidated
Financial Statements for additional discussion of the Sverdrup transaction.
The Company recorded net earnings of $18.1 million, or $0.69 per diluted share,
for the three months ended March 31, 2000, compared to net earnings of $16.2
million, or $0.61 per diluted share for the same period last year. For the six
months ended March 31, 2000, the Company recorded net earnings of $12.3 million,
or $0.47 per diluted share, compared to net earnings of $31.3 million, or $1.19
per diluted share, for the same period last year.
Page 11
The net earnings during the first half of fiscal 2000 included a first quarter
pre-tax provision for litigation settlement of $38.0 million ($23.7 million
after-tax). This special, one-time pre-tax charge, consisting of the settlement
amount of $35.0 million and related litigation costs of $3.0 million, resulted
from an agreement with the United States Department of Justice to settle a
previously disclosed whistleblower suit. The suit alleged that the Company
improperly charged the U.S. government for lease costs associated with its
former headquarters building, which the Company sold and leased back in 1982,
and vacated in 1997. The Company denied the government's allegations in the suit
but agreed to the settlement to avoid the costs and risks of further litigation.
The settlement was paid in March 2000 and has no continuing impact on the
Company's operating results.
Excluding the after-tax impact of this special litigation charge, the Company's
operations during the first six months of fiscal 2000 resulted in net earnings
of $36.1 million, or $1.37 per diluted share.
During the three months ended March 31, 2000, total revenues increased by $101.9
million, or 13.1%, to $881.8 million, compared to $779.9 million for the same
quarter in fiscal 1999. Approximately 81% of the increase in total revenues was
generated by the Company's continuing U.S. and international operations, with
the balance attributable to Sverdrup's operations.
Total revenues for the six months ended March 31, 2000 increased by $355.8
million, or 26.7%, to $1,690.9 million, compared to $1,335.0 million for the
same period in fiscal 1999. This increase reflects the inclusion of Sverdrup's
operations for the entire first half of fiscal 2000 as compared to only the
second quarter of fiscal 1999. Excluding the impact of Sverdrup's operations on
the Company's revenues during the first quarter of fiscal 2000, total revenues
increased by $132.3 million, or 9.9% on a year-to-date basis, with approximately
86% of this increase generated by the Company's continuing U.S. and
international operations.
Revenues from project services activities, which includes design, engineering
and agency construction management services, increased by $100.7 million, or
27.3%, to $469.0 million during the second quarter of fiscal 2000, compared to
$368.3 million during the same period in fiscal 1999. For the first half of
fiscal 2000, revenues from project services activities increased by $287.4
million, or 48.0%, to $886.3 million, compared to $599.0 million for the same
period in fiscal 1999. Approximately 57% of the increase in project service
revenues during the first half of fiscal 2000 was generated by Sverdrup's
operations, with the balance attributable to the Company's continuing U.S. and
international operations.
Revenues from construction services were relatively flat at $242.4 million and
$479.2 million, respectively, during the three and six months ended March 31,
2000, compared to $243.6 million and $485.0 million, respectively, during the
comparable periods in fiscal 1999.
Revenues from operations and maintenance ("O&M") activities were relatively flat
at $141.8 million during the second quarter of fiscal 2000, compared to $141.7
million during the second quarter of fiscal 1999. For the first half of fiscal
2000, revenues from O&M activities increased by $47.7 million, or 21.5%, to
$270.0 million, compared to $222.3 million for the same period in fiscal 1999.
Substantially all of the increase in O&M revenues during the first half of
fiscal 2000 was generated by Sverdrup's operations.
Page 12
Revenues from process, scientific and systems consulting services were
relatively flat at $28.6 million for the second quarter of fiscal 2000, compared
to $26.3 million for the second quarter of fiscal 1999. Prior to the merger
with Sverdrup in the second quarter of fiscal 1999, the Company's revenues from
process, scientific and systems consulting service activities were minimal.
During the six months ended March 31, 2000, revenues from process, scientific
and systems consulting services increased by $26.7 million, or 92.9%, to $55.4
million, compared to $28.7 million during the same period in fiscal 1999.
As a percentage of revenues, direct costs of contracts were 87.6% and 87.4%,
respectively, for the three and six months ended March 31, 2000, compared to
85.6% and 86.5% for the second quarter and the first half of fiscal 1999,
respectively. 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 movement in this percentage relationship was due
primarily to proportionately lower margins earned on the Company's new volume of
business generated by Sverdrup's operations during the current fiscal periods as
compared to the same periods last year.
Selling, general and administrative ("SG&A") expenses for the second quarter of
fiscal 2000 decreased by $4.9 million, or 5.8%, to $79.3 million, compared to
$84.2 million for the second quarter of fiscal 1999. For the six months ended
March 31, 2000, SG&A expenses increased by $23.7 million, or 18.3%, to $153.0
million, compared to $129.3 million for the same period last year.
Approximately 48% of the increase in SG&A expenses during the first half of
fiscal 2000 was generated by Sverdrup's operations, with the balance
attributable to the Company's continuing U.S. and international operations. As
a percentage of revenues, however, SG&A expenses for the three and six months
ended March 31, 2000 decreased to 9.0% and 9.1%, respectively, compared to 10.8%
and 9.7%, respectively, for the same periods last year, reflecting the Company's
continuing efforts to control costs.
During the second quarter of fiscal 2000, the Company's operating profit
(defined as revenues, less direct costs of contracts and SG&A expenses)
increased by $2.1 million, or 7.3%, to $30.2 million, compared to $28.1 million
for the second quarter of fiscal 1999. For the first half of fiscal 2000, the
Company's operating profit increased by $8.9 million, or 17.4%, to $60.2
million, compared to $51.3 million for the same period last year. The increases
in the Company's operating profit for the second quarter and first six months of
fiscal 2000 compared to the same periods last year were due primarily to
significant increases in business volume and reduced SG&A expenses as a
percentage of revenues.
Page 13
The Company recorded $1.9 million of net interest expense during the three
months ended March 31, 2000, compared to net interest expense of $2.2 million
during the same period last year. For the six months ended March 31, 2000, the
Company recorded $3.7 million of net interest expense, compared to net interest
expense of $1.3 million during the same period last year. The Company became a
net borrower of cash since its merger with Sverdrup Corporation last year.
During the second quarter of fiscal 1999, the Company initially borrowed $165.0
million under a new $230.0 million revolving credit facility to finance a
portion of the Sverdrup merger consideration. The Company also assumed $21.0
million of Sverdrup pre-merger indebtedness at closing of the merger
transaction. During the current quarter ended March 31, 2000, the Company
borrowed EUR 15.0 million (approximately $14.8 million) from the $230.0 million
revolving credit facility to partially fund the first phase of the acquisition
of Stork. The Company also borrowed an additional $55.0 million from the same
facility to fund the $35.0 million litigation settlement discussed earlier, to
finance its reactivated stock repurchase program as discussed below, and to
cover working capital needs. Outstanding borrowings under this facility were
$178.7 million at March 31, 2000.
The Company recorded net miscellaneous income of $1.2 million for the first half
of fiscal 2000, compared to net miscellaneous expense of $0.1 million during the
same period in fiscal 1999. The increase in net miscellaneous income during the
current period compared to the same period last year was due primarily to gains
realized on the sales of marketable equity securities.
Backlog Information
- -------------------
The following table summarizes the Company's backlog at March 31, 2000 and 1999
(in millions):
2000 1999
-------- --------
Professional technical services $1,997.7 $1,650.0
Total backlog 4,426.6 4,300.0
Liquidity and Capital Resources
- -------------------------------
The Company's cash and cash equivalents decreased by $5.6 million to $47.8
million during the six months ended March 31, 2000. This compares to a net
decrease of $27.8 million to $73.5 million during the six months ended March 31,
1999. During the first six months of fiscal 2000, the Company experienced net
cash outflows from investing activities, operations and the effect on cash of
exchange rate changes, of $45.1 million, $16.9 million and $2.1 million,
respectively, offset in part by net cash inflows from financing activities of
$58.5 million.
Operations resulted in net cash outflows of $16.9 million during the first half
of fiscal 2000. This compares to a net contribution of $31.2 million during the
same period last year. The $48.1 million decrease in cash provided by
operations in the current fiscal period as compared to the same period last year
was due primarily to a decrease of $30.9 million relating to the timing of cash
receipts and payments within the Company's working capital accounts, and a
decrease of $19.0 million in net earnings, due primarily to the after-tax
provision for litigation settlement of $23.7 million as discussed earlier.
Page 14
The Company's investing activities resulted in net cash outflows of $45.1
million during the six months ended March 31, 2000. This compares to net cash
outflows of $212.1 million during the same period last year. The $167.0 million
net decrease in cash used for investing activities in the first half of fiscal
2000 as compared to the same period last year was due primarily to a $173.0
million decrease in cash used for acquisitions of businesses, partially offset
by a $13.6 million decrease in proceeds from sales of marketable securities and
investments. During the first half of fiscal 2000, the Company completed the
first phase of an anticipated two-part transaction to acquire Stork for $26.1
million, which includes incidental costs of acquisition. During the same period
last year, the Company merged with Sverdrup, requiring $199.1 million in cash.
The proceeds of $16.4 million from sales of marketable securities and
investments in the prior year period were used to partially fund the merger with
Sverdrup and pay down indebtedness relating to the merger.
The Company's financing activities resulted in net cash inflows of $58.5 million
during the first six months of fiscal 2000. This compares to net cash inflows
of $155.7 million during the same period in fiscal 1999. The $97.1 million net
decrease in cash provided by financing activities in the current period as
compared to the same period last year was due primarily to a decrease of $92.5
million in proceeds from long-term borrowings, and to the purchases of common
stock for treasury which required $8.2 million, partially offset by a decrease
of $6.0 million in the repayments of long-term borrowings. During the first half
of fiscal 1999, the Company obtained a long-term $230.0 million revolving credit
facility and borrowed $165.0 million to pay the initial merger consideration and
the costs of the Sverdrup merger of $199.1 million, certain indebtedness of
Sverdrup existing at closing, and other refinanced amounts that were outstanding
under an old $45.0 million revolving credit agreement. During the first half of
fiscal 2000, the Company borrowed $77.5 million from the same facility,
primarily to pay the $35.0 million litigation settlement, to partially finance
the first phase of the Stork acquisition for approximately $14.8 million, to
fund its reactivated stock repurchase program as discussed below, and to cover
working capital requirements.
The Company believes it has adequate capital resources to fund its operations
for the remainder of fiscal 2000 and beyond. The Company's consolidated working
capital position was $193.6 million at March 31, 2000. As discussed above, the
Company has a long-term $230.0 million revolving credit facility against which
$178.7 million was outstanding at March 31, 2000 in the form of direct
borrowings. At March 31, 2000, the Company had $43.2 million available through
committed short-term credit facilities, of which $17.8 million was outstanding
at that date in the form of direct borrowings and letters of credit. On May 8,
2000, the Company obtained a $20 million increase to one of its short-term
credit facilities.
In December 1999, the Company reactivated its stock repurchase program that was
suspended in September 1998 due to the then pending merger with Sverdrup in
January 1999. The program authorizes the Company to buy-back up to 3.0 million
shares of its common stock in the open market. Repurchases of common stock will
be financed from existing credit facilities and available cash balances. During
the first half of fiscal 2000, the Company repurchased 278,300 shares of its
common stock in the open market at a cost of $8.2 million, all of which were
subsequently reissued for its employee stock purchase and stock option plans.
The Company has repurchased 1,511,500 shares of its common stock, since the
inception of the program in 1996.
Page 15
As discussed in Note 9 to the Notes to Condensed Consolidated Financial
Statements, on May 8, 2000, the Company signed a letter of intent with Stone &
Webster, Incorporated ("Stone & Webster") to acquire substantially all of its
assets and contracts. Under the terms of the letter of intent, the Company will
pay $150 million in cash and stock and assume specified liabilities related to
the ongoing business of Stone & Webster. In connection with the proposed
transaction, the Company has agreed to advance up to $50 million in working
capital funds to Stone & Webster under a secured, revolving credit agreement.
Year 2000 Readiness - Update
- ----------------------------
The Company substantially completed its Year 2000 compliance program prior to
December 31, 1999. (Readers should refer to pages A-9 through A-11 of Exhibit
13 to the Company's 1999 Annual Report on Form 10-K for a more complete
discussion of the Company's Year 2000 Readiness program). The Company made the
transition into the Year 2000 without any significant disruptions to its systems
or operations. The Company continues to monitor the impact of Year 2000 on its
operations, and a contingency plan for critical business applications and
continuing project operations is in place in the event unidentified issues cause
business disruptions. The Company also continues to monitor the Year 2000
readiness of its clients, suppliers, subcontractors and vendors.
The failure to identify and correct a Year 2000 problem could result in an
interruption in, or failure of, certain normal business activities or
operations. However, the Company does not expect such failures, if they occur,
to have a materially adverse effect on its results of operations or financial
condition.
Page 16
Forward-Looking Statements
- --------------------------
Statements included in this Quarterly Report on Form 10-Q 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. These 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 for
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 any 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 any Year 2000 issues. 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 Form 10-Q 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.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The information required by this Item is hereby incorporated by reference from
Item 4 of the Company's Quarterly Report on Form 10-Q for the period ended
December 31, 1999 filed with the with the Securities and Exchange Commission on
February 11, 2000.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27. Financial Data Schedule.
(b) Reports on Form 8-K:
None.
Page 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JACOBS ENGINEERING GROUP INC.
- -----------------------------
(Registrant)
s/n John W. Prosser, Jr.
___________________________
John W. Prosser, Jr.
Senior Vice President, Finance
and Administration and Treasurer
Date: May 12, 2000
Page 18