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, 1996
--------------
( ) 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)
251 South Lake Avenue, Pasadena, California 91101
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(Address of principal executive offices) (Zip code)
(818) 449 - 2171
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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 May 10, 1996: 25,714,755
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:
Consolidated Condensed Balance
Sheets as of March 31, 1996
and September 30, 1995 3
Consolidated Condensed Statements
of Income for the Three Months
and Six Months Ended March 31,
1996 and 1995 4
Consolidated Condensed Statements of
Cash Flows for the Six Months
Ended March 31, 1996 and 1995 5
Notes to Consolidated Condensed
Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8 - 10
Part II - Other Information
Item 4. Submission of Matters to a Vote
of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 12
Page 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
AT MARCH 31, 1996 AND SEPTEMBER 30, 1995
(In thousands, except share information)
(Unaudited)
March 31, September 30,
1996 1995
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ASSETS
Current Assets:
Cash and cash equivalents $ 69,304 $ 39,118
Marketable securities 2,764 2,806
Receivables 280,710 292,108
Deferred income taxes 33,516 31,980
Prepaid expenses and other 3,833 2,602
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Total current assets 390,127 368,614
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Property, Equipment and
Improvements, Net 81,768 80,115
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Other Noncurrent Assets:
Goodwill, net 40,957 41,882
Other 65,809 43,336
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Total other noncurrent assets 106,766 85,218
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$578,661 $533,947
============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 15,885 $ 16,632
Accounts payable 73,874 63,767
Accrued liabilities 109,622 109,168
Customers' advances in excess
of related revenues 51,254 54,496
Income taxes payable 8,203 11,212
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Total current liabilities 258,838 255,275
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Long-term Debt 36,305 17,799
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Deferred Gain on Real Estate Transaction 1,435 1,845
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Other Deferred Liabilities 20,223 20,267
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Commitments and Contingencies
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Stockholders' Equity:
Capital stock:
Preferred stock, $1 par value,
authorized - 1,000,000 shares,
issued and outstanding - none - -
Common stock, $1 par value,
authorized - 60,000,000 shares,
issued and outstanding -
25,709,884 and 25,495,711
shares, respectively 25,710 25,496
Additional paid-in capital 48,358 43,957
Retained earnings 187,061 168,203
Other 731 1,105
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Total stockholders' equity 261,860 238,761
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$ 578,661 $ 533,947
============================================================================
See the accompanying notes.
Page 3
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 1996 AND 1995
(In thousands, except per-share information)
(Unaudited)
For the Three Months For the Six Months
Ended March 31, Ended March 31,
---------------------- -------------------
1996 1995 1996 1995
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Revenues $487,021 $396,746 $958,142 $809,102
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Costs and Expenses:
Direct costs of contracts 434,303 350,936 856,126 719,523
Selling, general and
administrative expenses 36,542 33,780 70,516 65,521
Interest (income)
expense, net (44) (13) (334) 32
Other income, net (138) (462) (335) (565)
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470,663 384,241 925,973 784,511
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Income before taxes 16,358 12,505 32,169 24,591
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Provision for Income Taxes 6,478 4,953 12,739 9,739
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Net Income $ 9,880 $ 7,552 $ 19,430 $ 14,852
====================================================================================================
Net Income Per Share $ .38 $ .30 $ .75 $ .59
====================================================================================================
See the accompanying notes.
Page 4
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND 1995
(In thousands)
(Unaudited)
1996 1995
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Cash Flows from Operating Activities:
Net income $ 19,430 $ 14,852
Adjustments to reconcile net income
to net cash flows from operations:
Depreciation and amortization 8,269 7,506
Amortization of deferred gains (410) (410)
Gains (losses) on disposals of
assets 54 (228)
Changes in assets and liabilities, net:
Receivables 10,752 (4,324)
Prepaid expenses and other (1,246) 678
Accounts payable 10,279 (34,288)
Accrued liabilities 312 3,692
Customers' advances (3,127) 6,256
Income taxes payable (2,976) 358
Deferred income taxes (1,535) (580)
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Net cash provided (used) 39,802 (6,488)
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Cash Flows from Investing Activities:
Additions to property and equipment, net
of disposals (10,017) (5,240)
Net increase in investments (21,717) (2,728)
Net increase in other noncurrent assets (1,270) (2,312)
Proceeds from sales of marketable
securities - 188
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Net cash used (33,004) (10,092)
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Cash Flows from Financing Activities:
Exercise of stock options 4,687 3,183
Bank borrowings (repayments), net 18,820 (10,233)
Other, net (44) (321)
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Net cash provided (used) 23,463 (7,371)
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Effect of Exchange Rate Changes (75) 81
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Increase (Decrease) in Cash and Cash
Equivalents 30,186 (23,870)
Cash and Cash Equivalents at the Beginning
of the Period 39,118 45,612
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Cash and Cash Equivalents at the End
of the Period $ 69,304 $ 21,742
======================================================================
See the accompanying notes.
Page 5
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1996
1. The accompanying consolidated condensed financial statements and financial
information included herein have been prepared by the Company, without
audit, 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 Company's latest Annual Report on Form 10-K.
In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary for the fair presentation of its
consolidated financial position at March 31, 1996 and September 30, 1995,
its consolidated results of operations for the three months and six months
ended March 31, 1996 and 1995, and its consolidated cash flows for the six
months ended March 31, 1996 and 1995.
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, 1996 and September 30, 1995 were
unbilled amounts totaling $66,282,400 and $52,790,600, respectively.
3. Property, equipment and improvements are stated at cost and consisted of
the following at March 31, 1996 and September 30, 1995 (in thousands):
March 31, September 30,
1996 1995
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Land $ 9,961 $ 10,529
Buildings 38,367 38,976
Equipment 95,952 87,186
Leasehold improvements 12,626 12,319
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156,906 149,010
Less - accumulated depreciation
and amortization 75,138 68,895
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$ 81,768 $ 80,115
======================================================================
Page 6
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1996
4. Other assets consisted of the following at March 31, 1996 and September 30,
1995 (in thousands):
March 31, September 30,
1996 1995
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Prepaid pension costs $10,981 $11,503
Cash surrender value of life
insurance policies 19,388 16,498
Investments 33,150 11,517
Miscellaneous 2,290 3,818
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$65,809 $43,336
=================================================================
Included in investments at March 31, 1996 was the Company's purchase of a
49% interest in the engineering and construction operations of the Serete
Group of France. The investment totaled $19.0 million, exclusive of the
related costs of the investment.
5. During the six months ended March 31, 1996 and 1995, the Company made cash
payments of approximately $1,355,200 and $947,500, respectively, for
interest and approximately $16,457,200 and $9,493,000, respectively, for
income taxes.
6. Net income per share for the three and six months ended March 31, 1996 and
1995 has been computed based upon the weighted average number of shares of
common stock and, if dilutive, common stock equivalents outstanding as
follows:
Three Months Ended Six months Ended
March 31, March 31,
----------------------- -----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
Average number of shares
of common stock
outstanding 25,580,700 25,122,000 25,545,700 25,103,100
Average number of shares
of common stock
equivalents outstanding 400,500 47,400 355,600 110,200
---------- ---------- ---------- ----------
25,981,200 25,169,400 25,901,300 25,213,300
========== ========== ========== ==========
Page 7
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
MARCH 31, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with management's
discussion and analysis of financial condition and results of operations
incorporated by reference into the Company's latest Annual Report on Form 10-K.
Results of Operations
- ---------------------
Revenues for the three months ended March 31, 1996 (the "second quarter of
fiscal 1996") totaled $487.0 million; this was $90.3 million, or 22.8%, more
than the amount for the three months ended March 31, 1995 (the "second quarter
of fiscal 1995"). For the second quarter of fiscal 1996, revenues from
engineering services were 15.5% higher than the amount for the second quarter of
fiscal 1995. The Company billed approximately 3.3 million professional services
hours to projects during the second quarter of fiscal 1996; this was 0.3 million
more hours than were billed during the corresponding period last year. Revenues
from construction and maintenance services for the second quarter of fiscal 1996
were 26.4% higher as compared to the second quarter of fiscal 1995. Much of
this increase was due to higher subcontract and procurement activity.
For the six months ended March 31, 1996, revenues totaled $958.1 million; this
was $149.0 million, or 18.4%, more than the amount for the corresponding period
last year. Revenues from engineering services for the six months ended March
31, 1996 were 11.8% higher than the amount for the corresponding period last
year. The Company billed 6.5 million professional services hours to projects
during the six months ended March 31, 1996; this was 0.8 million more hours than
were billed during the corresponding period last year. Revenues from
construction and maintenance services for the six months ended March 31, 1996
were 21.7% higher as compared to the corresponding period last year. Much of
this increase was due to higher subcontract and procurement activity.
As a percent of revenues, direct costs of contracts were 89.2% for the second
quarter of fiscal 1996, as compared to 88.5% for the second quarter of fiscal
1995. For the six months ended March 31, 1996, direct costs of contracts were
89.4% of revenues, as compared to 88.9% for the six months ended March 31, 1995.
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
increases in this percentage relationship during the current year as compared to
the corresponding periods last year were due to a higher level of construction
and maintenance services relative to engineering services.
Page 8
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
MARCH 31, 1996
Selling, general and administrative ("SG & A") expenses for the second quarter
of fiscal 1996 totaled $36.5 million; this was $2.8 million, or 8.2%, more than
the amount for the second quarter of fiscal 1995. For the six months ended March
31, 1996, SG & A expenses totaled $70.5 million; this was $5.0 million, or 7.6%,
more than the amount for the six months ended March 31, 1995. In general, these
increases were due primarily to higher levels of SG & A spending in support of
the increased level of business activity discussed above.
The Company's operating profit (defined as revenues, less costs of contracts and
SG & A expenses) was $16.2 million for the second quarter of fiscal 1996; this
was $4.1 million more than the amount for the second quarter of fiscal 1995.
For the six months ended March 31, 1996, the Company's operating profit totaled
$31.5 million; this was $7.4 million more than the amount for the six months
ended March 31, 1995. These increases in operating profit were due to improved
margin rates on the Company's engineering services, the higher level of business
volume discussed above, and a lower level of overall SG & A spending relative
to the business volume.
Interest income, net totaled $0.3 million for the six months ended March 31,
1996; this was $0.4 million more than the amount for the six months ended March
31, 1995. In general, the increase in net interest income was due primarily to
higher average cash balances on deposit during the current fiscal year as
compared to the corresponding period last year.
Other income, net totaled $0.1 million for the second quarter of fiscal 1996;
this was $0.3 million less than the amount for the second quarter of fiscal
1995. The amount for the second quarter of fiscal 1995 included higher gains
from sales of investments as compared to the second quarter of fiscal 1996.
Backlog Information
- -------------------
The following table summarizes the Company's backlog at the dates indicated (in
millions):
At March 31,
-----------------------
1996 1995
-------- ---------
Engineering services backlog $ 825.0 $ 824.8
Total backlog 2,695.0 2,561.0
Page 9
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
MARCH 31, 1996
Liquidity and Capital Resources
- -------------------------------
The Company's cash and cash equivalents increased $30.2 million during the six
months ended March 31, 1996. This compares to a net decrease of $23.9 million
of cash and cash equivalents during the corresponding period last year. The
current year increase in cash and cash equivalents was due to cash provided by
operations ($39.8 million) and financing activities ($23.5 million), offset in
part by cash used in investing activities ($33.0 million) and the effects of
exchange rate changes on cash ($0.1 million).
Operations contributed $39.8 million of cash and cash equivalents during the six
months ended March 31, 1996. This compares to a net use of cash of $6.5 million
during the six months ended March 31, 1995. The $46.3 million increase from
1995 to 1996 in cash provided by operations was due primarily to a $4.6 million
increase in net income, a $15.1 million increase in collections of customer
receivables, and a $31.8 million reduction in cash used to pay-down trade
payables and accrued liabilities. Off-setting these items in part was a net
reduction in customer advances and other items totaling $5.2 million.
The Company's investing activities used $33.0 million of cash and cash
equivalents during the six months ended March 31, 1996. This compares to a net
use of cash of $10.1 million during the six months ended March 31, 1995. Most
of the variance was attributable to the Company's purchase of a 49% interest in
the engineering and construction operations of the Serete Group of France. The
investment was completed effective January 31, 1996 and totaled $19.0 million,
exclusive of the related costs of the investment. Also contributing to the
variance was a $4.8 million increase in additions, net of disposals, to property
and equipment. Most of this variance was attributable to an increase in
purchases of computers and CAD stations and the related software for use in
those offices experiencing the increase in engineering services activity
discussed above.
Cash flows from financing activities generated $23.5 million in cash and cash
equivalents during the six months ended March 31, 1996. This compares to a net
use of cash of $7.4 million during the six months ended March 31, 1995. Most of
the variance was attributable to additional bank borrowings incurred in
connection with the Company's investment in the Serete Group discussed above.
Effective April 5, 1996, the Company amended its $45.0 million, long-term,
revolving credit agreement to allow multi-currency borrowings, as well as
extending the termination date of the agreement to August 31, 1997. In
connection with this amendment, the Company also reduced the borrowing limit
under one of its short-term credit facilities.
The Company believes it has adequate capital resources to fund its operations
for the remainder of 1996 and beyond. At March 31, 1996, the Company's short-
term committed credit facilities totaled $51.0 million, which includes the
effects of the reduction in borrowing limits to one of the credit facilities
discussed above. These short-term facilities have been made available through
banks in the U.S. and the U.K., against which $17.4 million was utilized at
March 31, 1996, either through direct borrowings, or in the form of committed
letters of credit.
Page 10
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
MARCH 31, 1996
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of stockholders was held on February 13, 1996 at
3:30 p.m. as announced in its Notice of Annual Meeting of Shareholders and Proxy
Statement dated January 5, 1996, copies of which have been filed with the
Commission pursuant to Regulation 14A.
There were three matters voted upon by the stockholders at the annual meeting.
Those matters were:
1. To elect a slate of directors nominated in the proxy statement (Drs.
Joseph J. Jacobs and Dale R. Laurance, and Ms. Linda Fayne Levinson);
2. To approve an increase of 1.5 million shares of common stock reserved
for issuance under the Company's 1989 Employee Stock Purchase Plan;
and,
3. To approve the appointment of Ernst & Young LLP as independent
auditors for the year ending September 30, 1996.
The results of the shareholder voting were as follows (all shares voted were
voted by proxy):
With respect to the first matter, the following table presents the results of
the shareholder voting for each of the individual nominees:
Nominee
-------------------------------------
Joseph J. Dale R. Linda Fayne
Jacobs Laurance Levinson
---------- ---------- -----------
Shares voting for
the nominee 19,935,181 19,946,288 19,935,261
Shares instructing
the proxy not to
vote for the
nominee 1,847,578 1,836,471 1,847,498
Shares not voted 3,727,962 3,727,962 3,727,962
---------- ---------- ----------
Total 25,510,721 25,510,721 25,510,721
========== ========== ==========
With respect to the second matter, there were 16,753,129 shares which voted in
favor of increasing the number of shares authorized for issuance under the 1989
Employee Stock Purchase Plan. There were 2,391,718 shares which voted against
the proposition; there were 110,280 shares instructing the proxy not to vote;
there were 2,527,632 broker non-votes; and there were 3,727,962 shares which
were not present and for which no proxies were received.
With respect to the third matter, there were 19,903,726 shares which voted in
favor of the appointment of Ernst & Young LLP as the Company's independent
auditors for the year ending September 30, 1996. There were 1,838,168 shares
which voted against the appointment; there were 40,865 shares instructing the
proxy not to vote; and there were 3,727,962 shares which were not present and
for which no proxies were received.
Page 11
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
MARCH 31, 1996
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:
Not applicable.
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.
s/n John W. Prosser, Jr.
___________________________
John W. Prosser, Jr.
Senior Vice President, Finance
and Administration and Treasurer
Date: May 10, 1996
Page 12