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 June 30, 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.
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(Exact name of Registrant as specified in its charter)
Delaware 95-4081636
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(State of incorporation) (I.R.S. employer identification number)
1111 South Arroyo Parkway, Pasadena, California 91105
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(Address of principal executive offices) (Zip code)
(626) 578 - 3500
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(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 August 11, 2000: 26,251,509
Page 1
JACOBS ENGINEERING GROUP INC.
INDEX TO FORM 10-Q
Page No.
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Part I - Financial Information
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets -
June 30, 2000 and September 30, 1999 3
Condensed Consolidated Statements of Earnings -
Three and Nine Months Ended June 30, 2000 and 1999 4
Condensed Consolidated Statements of
Comprehensive Income -
Three and Nine Months Ended June 30, 2000 and 1999 5
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended June 30, 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 6. Exhibits and Reports on Form 8-K 18
Signatures 19
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)
June 30, September 30,
2000 1999
- -----------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 61,920 $ 53,482
Receivables 684,565 586,005
Deferred income taxes 75,734 76,405
Prepaid expenses and other 19,075 13,728
-------------------------------------------------------------------------------
Total current assets 841,294 729,620
------------------------------------------------------------------------------
Property, Equipment and Improvements, Net 151,763 139,653
---------------------------------------------------------------------------------
Other Noncurrent Assets:
Goodwill, net 250,109 245,451
Other 118,832 105,462
-------------------------------------------------------------------------------
Total other noncurrent assets 368,941 350,913
---------------------------------------------------------------------------------
$1,361,998 $1,220,186
===================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 7,742 $ 9,465
Accounts payable 212,857 186,287
Accrued liabilities 290,916 281,967
Customers' advances in excess of related revenues 91,613 93,303
Income taxes payable 19,097 13,960
---------------------------------------------------------------------------------
Total current liabilities 622,225 584,982
---------------------------------------------------------------------------------
Long-term Debt 210,250 135,371
---------------------------------------------------------------------------------
Other Deferred Liabilities 46,007 44,988
---------------------------------------------------------------------------------
Minority Interests 5,866 6,128
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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 - 26,248,950 shares
and 26,142,992 shares, respectively 26,249 26,143
Additional paid-in capital 73,041 68,049
Retained earnings 386,497 358,958
Accumulated other comprehensive loss (7,508) (3,595)
-------------------------------------------------------------------------------
478,279 449,555
Unearned compensation (629) (838)
-------------------------------------------------------------------------------
Total stockholders' equity 477,650 448,717
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$1,361,998 $1,220,186
===================================================================================
See the accompanying Notes to Condensed Consolidated Financial Statements.
Page 3
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Three and Nine Months Ended June 30, 2000 and 1999
(In thousands, except per-share information)
(Unaudited)
For the Three Months For the Nine Months
Ended June 30, Ended June 30,
--------------- ---------------
2000 1999 2000 1999
-------- -------- ---------- ----------
Revenues $857,828 $771,905 $2,548,715 $2,106,951
Costs and Expenses:
Direct costs of contracts 745,931 663,442 2,223,599 1,817,876
Selling, general and
administrative expenses 80,188 79,948 233,171 209,253
-------- -------- ---------- ----------
Operating Profit 31,709 28,515 91,945 79,822
-------- -------- ---------- ----------
Other (Expense) Income:
Interest income 1,900 442 2,913 2,544
Interest expense (3,522) (3,125) (8,211) (6,483)
Miscellaneous income, net 473 986 1,643 861
Provision for litigation settlement - - (38,000) -
-------- -------- ---------- ----------
Total other expense, net (1,149) (1,697) (41,655) (3,078)
Earnings Before Taxes 30,560 26,818 50,290 76,744
Income Tax Expense 11,460 10,058 18,859 28,659
-------- -------- ---------- ----------
Net Earnings $ 19,100 $ 16,760 $ 31,431 $ 48,085
======== ======== ========== ==========
Net Earnings Per Share:
Basic $ 0.73 $ 0.65 $ 1.20 $ 1.87
Diluted $ 0.72 $ 0.63 $ 1.19 $ 1.82
======== ======== ========== ==========
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 Nine Months Ended June 30, 2000 and 1999
(In thousands)
(Unaudited)
For the Three Months For the Nine Months
Ended June 30, Ended June 30,
------------------------- -------------------------
2000 1999 2000 1999
------- -------- ------- ---------
Net Earnings $19,100 $16,760 $31,431 $48,085
------- ------- ------- ---------
Other Comprehensive Income (Loss):
Unrealized holding gains
on securities 920 - 5,825 -
Less: reclassification adjustment
for gains realized in net earnings (555) - (1,455) -
------- ------- ------- ---------
Unrealized gains on securities, net
of reclassification adjustment 365 - 4,370 -
Foreign currency translation
adjustments (1,964) (1,563) (6,647) (6,309)
------- ------- ------- ---------
Other Comprehensive Loss
Before Income Taxes (1,599) (1,563) (2,277) (6,309)
Income Tax Expense Relating to Other
Comprehensive Loss (137) - (1,636) -
------- ------- ------- ---------
Other Comprehensive Loss (1,736) (1,563) (3,913) (6,309)
------- ------- ------- ---------
Total Comprehensive Income $17,364 $15,197 $27,518 $41,776
======= ======= ======= =========
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 Nine Months Ended June 30, 2000 and 1999
(In thousands)
(Unaudited)
2000 1999
- -----------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net earnings $ 31,431 $ 48,085
Adjustments to reconcile net earnings to net cash flows from operations:
Depreciation and amortization 28,822 23,429
Gains on sales of assets (3,142) (2,042)
Changes in assets and liabilities, excluding
the effects of businesses acquired:
Receivables (34,096) (102,373)
Prepaid expenses and other
current assets (5,758) (5,399)
Accounts payable 19,108 (5,337)
Accrued liabilities (4,075) 34,603
Customers' advances (6,523) 73,455
Income taxes payable 5,319 (3,084)
Deferred income taxes 671 (3,713)
Other, net 361 352
-------- ---------
Net cash provided by operating activities 32,118 57,976
-------- ---------
Cash Flows from Investing Activities:
Acquisitions of businesses, net of cash acquired (26,924) (199,840)
Loans to acquisition target (39,000) -
Additions to property and equipment, net
of disposals (31,934) (31,642)
Proceeds from sales of marketable securities
and investments 5,253 18,626
Purchases of marketable securities and
investments (2,368) (1,470)
Net decrease in other noncurrent assets (701) (6,037)
-------- ---------
Net cash used for investing activities (95,674) (220,363)
-------- ---------
Cash Flows from Financing Activities:
Proceeds from long-term borrowings 102,481 170,000
Repayments of long-term borrowings (25,700) (63,935)
Exercises of stock options, including the
related income tax benefits 9,518 7,728
Purchases of common stock for treasury (8,152) -
Net change in short-term borrowings (1,284) 3,496
Change in other deferred liabilities (1,851) (701)
-------- ---------
Net cash provided by financing activities 75,012 116,588
-------- ---------
Effect of Exchange Rate Changes (3,018) (3,510)
-------- ---------
Increase (decrease) in Cash and Cash Equivalents 8,438 (49,309)
Cash and Cash Equivalents at Beginning of Period 53,482 101,328
-------- ---------
Cash and Cash Equivalents at End of Period $ 61,920 $ 52,019
======== =========
See the accompanying Notes to Condensed Consolidated Financial Statements.
Page 6
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 June 30,
2000 and September 30, 1999, its consolidated results of operations for the
three and nine months ended June 30, 2000 and 1999, its consolidated
comprehensive income for the three and nine months ended June 30, 2000 and
1999, and its consolidated cash flows for the nine months ended June 30,
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 June 30, 2000 and September 30, 1999 were
amounts due under contracts in progress of $320,289,200 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 June 30, 2000 and September 30, 1999 (in thousands):
June 30, September 30,
2000 1999
- ------------------------------------------------------------------------------
Land $ 14,441 $ 14,407
Buildings 60,042 47,313
Equipment 189,770 164,538
Leasehold improvements 19,674 18,913
Construction in progress 16,176 10,419
--------- ---------
300,103 255,590
Accumulated depreciation and amortization (148,340) (115,937)
--------- ---------
$ 151,763 $ 139,653
========= =========
Page 7
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
4. Other noncurrent assets consisted of the following at June 30, 2000 and
September 30, 1999 (in thousands):
June 30, September 30,
2000 1999
- -------------------------------------------------------------
Prepaid pension costs $ 18,637 $ 18,704
Reimbursable pension costs 10,639 11,059
Cash surrender value of life
insurance policies 34,401 30,228
Investments 36,422 32,024
Notes receivable 6,853 6,597
Miscellaneous 11,880 6,850
-------- --------
$118,832 $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 Nine Months Ended
June 30, June 30,
------------------ -----------------
2000 1999 2000 1999
------ ------ ------ ------
Weighted average shares
outstanding (denominator
used to compute basic EPS) 26,219 25,899 26,142 25,745
Effect of employee and outside
director stock options 256 772 241 742
------ ------ ------ ------
Denominator used to compute
diluted EPS 26,475 26,671 26,383 26,487
====== ====== ====== ======
6. During the nine months ended June 30, 2000 and 1999, the Company made cash
payments of approximately $8,844,700 and $5,341,000, respectively, for
interest and $17,715,100 and $35,329,800, respectively, for income taxes.
During the quarter ended June 30, 2000, the Company received an income tax
refund of $4,110,600.
Page 8
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 also 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
June 30, 2000
9. 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 required to be
adopted for all fiscal quarters of all fiscal years beginning after June
15, 2000. SFAS 133 and SFAS 137 provide guidance for the way enterprises
account for certain derivatives and hedging activities in annual financial
statements and interim financial reports. Although management of the
Company is completing an analysis of the Company's outstanding contracts
and agreements, because of the Company's minimal use of derivatives,
management does not anticipate that the adoption of SFAS 133 will have a
significant effect on earnings or the financial position of the Company.
10. On June 2, 2000, the Company signed a definitive asset purchase agreement
with Stone & Webster, Incorporated ("Stone & Webster") to acquire
substantially all of Stone & Webster's assets for $150 million in cash and
stock, and to assume specified liabilities related to the ongoing business
of Stone & Webster. In anticipation of this transaction, the Company had
earlier agreed to advance up to $50 million in working capital funds to
Stone & Webster under a secured, revolving credit agreement entered into on
May 9, 2000.
On July 7, 2000, the Company terminated its definitive asset purchase
agreement with Stone & Webster. The termination resulted from the Company
not being the successful bidder in the auction of the business of Stone &
Webster in a proceeding under Chapter 11 of the U.S. Bankruptcy Code. On
July 18, 2000, pursuant to the provisions of the asset purchase agreement,
Stone & Webster paid the Company $10.0 million consisting of a breakup
fee of $9.0 million and expense reimbursement of $1.0 million. The Company
was also repaid all of the $39.0 million that it had advanced to Stone &
Webster for working capital, together with the related interest of
approximately $607,000. The Company anticipates that the actual expenses
incurred relating to due diligence will exceed the expense reimbursement
amount of $1.0 million, and will be offset against the breakup fee of $9.0
million.
Page 10
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
June 30, 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
third quarter and first nine months of fiscal 2000), compared to only the second
and third quarters 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 $19.1 million, or $0.72 per diluted share,
for the three months ended June 30, 2000, compared to net earnings of $16.8
million, or $0.63 per diluted share for the same period last year. For the nine
months ended June 30, 2000, the Company recorded net earnings of $31.4 million,
or $1.19 per diluted share, compared to net earnings of $48.1 million, or $1.82
per diluted share, for the same period last year.
Page 11
Net earnings during the nine months ended June 30, 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 nine months ended June 30, 2000 resulted in net earnings
of $55.2 million, or $2.09 per diluted share.
During the three months ended June 30, 2000, total revenues increased by $85.9
million, or 11.1%, to $857.8 million, compared to $771.9 million for the same
quarter in fiscal 1999. Approximately 88% 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 nine months ended June 30, 2000 increased by $441.8
million, or 21.0%, to $2,548.7 million, compared to $2,107.0 million for the
same period in fiscal 1999. This increase reflects the inclusion of Sverdrup's
operations for the entire first nine months of fiscal 2000 as compared to only
the second and third quarters 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 $218.5 million, or 10.4% on a year-to-date basis,
with approximately 87% 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 $107.9 million, or
29.1%, to $478.8 million during the third quarter of fiscal 2000, compared to
$370.9 million during the same period in fiscal 1999. For the nine months ended
June 30, 2000, revenues from project services activities increased by $395.2
million, or 40.8%, to $1,365.1 million, compared to $969.9 million for the same
period in fiscal 1999.
Revenues from construction services decreased by $25.6 million, or 10.6%, to
$215.1 million during the third quarter of fiscal 2000, compared to $240.6
million during the third quarter of fiscal 1999. Revenues from construction
services during the nine months ended June 30, 2000 decreased by $31.4 million,
or 4.3%, to $694.2 million, compared to $725.6 million during the same period
last year. These decreases related primarily to reductions in the level of flow-
through activity such as subcontract costs, equipment and materials.
Revenues from operations and maintenance ("O&M") activities were relatively flat
at $133.3 million during the third quarter of fiscal 2000, compared to $132.6
million during the third quarter of fiscal 1999. For the nine months ended June
30, 2000, revenues from O&M activities increased by $48.4 million, or 13.6%, to
$403.3 million, compared to $355.0 million for the same period in fiscal 1999.
The increase of $48.4 million reflects the inclusion of Sverdrup's operations
for the entire first nine months of fiscal 2000 as compared to only the second
and third quarters of fiscal 1999.
Page 12
Revenues from process, scientific and systems consulting services increased by
$2.9 million, or 10.6%, to $30.7 million during the third quarter of fiscal
2000, compared to $27.8 million for the third 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 nine months ended June 30, 2000, revenues from process,
scientific and systems consulting services increased by $29.6 million, or 52.4%,
to $86.1 million, compared to $56.5 million during the same period in fiscal
1999. The increase of $29.6 million reflects the inclusion of Sverdrup's
operations for the entire first nine months of fiscal 2000 as compared to only
the second and third quarters of fiscal 1999.
As a percentage of revenues, direct costs of contracts were 87.0% and 87.2%,
respectively, for the three and nine months ended June 30, 2000, compared to
86.0% and 86.3% for the third quarter and the first nine months 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 third quarter of
fiscal 2000 were relatively flat at $80.2 million, compared to $79.9 million for
the third quarter of fiscal 1999. For the nine months ended June 30, 2000, SG&A
expenses increased by $23.9 million, or 11.4%, to $233.2 million, compared to
$209.3 million for the same period last year. Approximately 72% of the increase
in SG&A expenses during the nine months ended June 30, 2000 was generated by the
Company's continuing U.S. and international operations, with the balance
attributable to Sverdrup's operations. As a percentage of revenues, however,
SG&A expenses for the three and nine months ended June 30, 2000 decreased to
9.4% and 9.2%, respectively, compared to 10.4% and 9.9%, respectively, for the
same periods last year, reflecting the Company's continuing efforts to control
costs.
During the third quarter of fiscal 2000, the Company's operating profit (defined
as revenues, less direct costs of contracts and SG&A expenses) increased by $3.2
million, or 11.2%, to $31.7 million, compared to $28.5 million for the third
quarter of fiscal 1999. For the nine months ended June 30, 2000, the Company's
operating profit increased by $12.1 million, or 15.2%, to $91.9 million,
compared to $79.8 million for the same period last year. The increases in the
Company's operating profit for the third quarter and first nine 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
During the three months ended June 30, 2000, the Company recorded $3.5 million
of interest expense, compared to interest expense of $3.1 million for the same
period last year. For the nine months ended June 30, 2000, the Company recorded
$8.2 million of interest expense, compared to interest expense of $6.5 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. As discussed below, the Company borrowed $102.5 million from the
same facility during the current fiscal period. At June 30, 2000, outstanding
borrowings (net of repayments) under this facility were $203.6 million.
The Company recorded net miscellaneous income of $1.6 million for the nine
months ended June 30, 2000, compared to net miscellaneous income of $0.9 million
during the same period in fiscal 1999. The increase of $0.8 million in net
miscellaneous income during the current period compared to the same period last
year was due primarily to a $1.0 million increase in gains realized on the sales
of equity securities.
Backlog Information
- -------------------
The following table summarizes the Company's backlog at June 30, 2000 and 1999
(in millions):
2000 1999
-------- --------
Professional technical services $2,191.6 $1,614.2
Total backlog 4,768.4 4,340.0
Liquidity and Capital Resources
- -------------------------------
The Company's cash and cash equivalents increased by $8.4 million to $61.9
million during the nine months ended June 30, 2000. This compares to a net
decrease of $49.3 million to $52.0 million during the nine months ended June 30,
1999. During the current fiscal period, the Company experienced net cash
outflows from investing activities and the effect on cash of exchange rate
changes, of $95.7 million and $3.0 million, respectively, offset in part by net
cash inflows from financing and operating activities of $75.0 million and $32.1
million, respectively.
Operations resulted in net cash inflows of $32.1 million during the first nine
months of fiscal 2000. This compares to a net contribution of $58.0 million
during the same period last year. The $25.9 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 in inflows of $17.9 million relating to the
timing of cash receipts and payments within the Company's working capital
accounts, and a decrease of $16.7 million in net earnings, due primarily to the
after-tax provision for litigation settlement of $23.7 million as discussed
earlier. These outflows were partially offset by increases in inflows from
depreciation and amortization, and deferred income taxes of $5.4 million and
$4.4 million, respectively.
Page 14
The Company's investing activities resulted in net cash outflows of $95.7
million during the nine months ended June 30, 2000. This compares to net cash
outflows of $220.4 million during the same period last year. The net decrease
of $124.7 million in cash used for investing activities in the current fiscal
period as compared to last year was due primarily to a $172.9 million decrease
in cash used for acquisitions of businesses, partially offset by the $39.0
million advanced to Stone & Webster for working capital and a $13.4 million
decrease in proceeds from sales of marketable securities and investments. See
Note 10 of the Notes to Condensed Consolidated Financial Statements for
additional discussion of the Stone & Webster transaction. During the first nine
months of fiscal 2000, the Company completed the first phase of an anticipated
two-part transaction to acquire Stork for $26.9 million, which includes
incidental costs of acquisition. During the same period last year, the Company
merged with Sverdrup, requiring $199.8 million in cash, which included the
associated costs of the merger. The proceeds from sales of equity 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 $75.0 million
during the first nine months of fiscal 2000. This compares to net cash inflows
of $116.6 million during the same period in fiscal 1999. The $41.6 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 $67.5
million in proceeds from long-term borrowings, and to $8.2 million used for the
purchases of common stock for treasury, partially offset by a decrease of $38.2
million in the repayments of long-term borrowings. During the nine months ended
June 30, 1999, the Company borrowed $165.0 million under a new long-term $230.0
million revolving credit facility to pay the initial merger consideration and
the costs of the Sverdrup merger of $199.8 million, and $21.0 million of
Sverdrup indebtedness existing at closing. During the nine months ended June
30, 2000, the Company borrowed $102.5 million from the same facility, primarily
to pay the $35.0 million litigation settlement and second quarter tax payments
of $8.9 million, to partially finance the first phase of the Stork acquisition
for approximately $14.8 million, to fund $22.0 million of advances to Stone &
Webster and $8.2 million of stock repurchases as discussed below, and to cover
working capital requirements of $13.0 million. See Notes 7 and 10 to the Notes
to Condensed Consolidated Financial Statements for additional discussion of the
Stork and Stone & Webster transactions.
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 $219.1 million at June 30, 2000. As discussed earlier, the
Company has a long-term $230.0 million revolving credit facility against which
$203.6 million was outstanding at June 30, 2000 in the form of direct
borrowings. At June 30, 2000, the Company had $55.5 million available through
committed short-term credit facilities, of which $20.9 million was outstanding
at that date in the form of direct borrowings and letters of credit.
Page 15
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.
As discussed in Note 10 to the Notes to Condensed Consolidated Financial
Statements, in connection with the asset purchase agreement with Stone & Webster
that was subsequently terminated, during the current quarter, the Company
advanced $39.0 million in working capital funds to Stone & Webster under a
separate secured revolving credit agreement. On July 18, 2000, pursuant to the
terms of the secured revolving credit agreement and as result of the termination
of the asset purchase agreement, the Company was repaid all of the $39.0 million
that it had advanced to Stone & Webster, together with the related interest of
approximately $607,000. The proceeds were used to pay down amounts outstanding
under the Company's $230.0 million revolving credit facility.
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.
Page 17
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27. Financial Data Schedule.
(b) Reports on Form 8-K
On June 9, 2000, the Company filed with the Securities and Exchange
Commission (the "SEC"), a Form 8-K dated June 2, 2000, announcing
that it had signed a definitive asset purchase agreement with Stone &
Webster, Incorporated to acquire substantially all of Stone &
Webster's assets for $150.0 million in cash and stock, and to assume
substantially all of Stone & Webster's liabilities.
On July 12, 2000, the Company filed with the SEC, a Form 8-K dated
July 7, 2000, announcing that it had terminated the definitive asset
purchase agreement with Stone & Webster. The termination resulted
from the Company not being the successful bidder in the auction for
the business of Stone & Webster in a proceeding under Chapter 11 of
the United States Bankruptcy Code.
Page 18
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: August 11, 2000
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