UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 14, 1999
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JACOBS ENGINEERING GROUP INC.
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(Exact name of Registrant as specified in its charter)
Delaware 1-7463 95-4081636
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(State of (Commission File (I.R.S. Employer
Incorporation) File Number) Identification
Number)
1111 S. Arroyo Parkway, Pasadena CA 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)
Item 2. Acquisition or Disposition of Assets.
On January 14, 1999, Jacobs Engineering Group Inc. ("Jacobs") completed its
Agreement and Plan of Merger with the Sverdrup Corporation ("Sverdrup").
Founded in 1928, Sverdrup Corporation provides engineering, architecture,
construction and scientific services for the development, design, construction
and operation of capital facilities, infrastructure projects and advanced
technical systems for public and private sector clients in the United States and
internationally. Sverdrup employs more than 5,600 people in 35 offices.
Under the terms of the merger agreement, at closing, a wholly-owned subsidiary
of Jacobs ("Merger Subsidiary") was merged with and into Sverdrup. Thereupon,
each outstanding share of common stock of Sverdrup was converted into the right
to receive a proportional share of the total amount of initial merger
consideration paid at closing ($198.0 million), plus a proportional amount of
any additional merger consideration that may be paid in the future ("Deferred
Merger Consideration"). Amounts payable as Deferred Merger Consideration, if
any, will be payable shortly after each of the first three anniversaries of the
date of the merger agreement, and is contingent upon Jacobs' stock price
reaching certain price thresholds as defined in the merger agreement. After the
merger and conversion, the Merger Subsidiary ceased to exist, and Sverdrup
survives as a new, wholly-owned subsidiary of Jacobs. The terms of the merger
were arrived at by arms-length negotiations between the parties.
Of the total initial merger consideration paid at closing, $10.0 million was
paid into an escrow account, the purpose of which will be to settle certain
claims or disputes relating to certain contracts and litigation matters
identified in the merger agreement.
The initial merger consideration was financed in part by a new, $230.0 million
revolving credit facility obtained by Jacobs from a group of banks led by Bank
of America NT&SA. Amounts borrowed under this facility initially were used to
fund that portion of the initial merger consideration not financed using
existing internal funds, and the repayment of certain Sverdrup indebtedness
existing at closing.
The shareholders of Sverdrup consisted of approximately 400 employees and former
employees of Sverdrup. The merger will be accounted for as a purchase.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
(i) Filed as Exhibit 99.2 to this Form 8-K are the audited, consolidated
financial statements of Sverdrup Corporation at December 31, 1997,
and 1996 and for each of the three years in the period ended December
31, 1997, together with the report of the independent auditors on
those consolidated financial statements.
(ii) Filed as Exhibit 99.3 to this Form 8-K are the unaudited, condensed
consolidated financial statements of Sverdrup Corporation at October
2, 1998 and October 3, 1997, and for each of the nine month periods
then ended.
(b) Pro Form Financial Information.
Introductory Paragraphs:
As a result of the transaction described under Item 2., above, Jacobs
Engineering Group Inc. (the "Company") acquired all of the assets and
liabilities of the Sverdrup Corporation ("Sverdrup") effective January 1,
1999 for an initial cash purchase price of $198.0 million.
The transaction will be accounted for as a purchase. Accordingly, the
purchase price will be allocated among the assets and liabilities
acquired based upon their relative estimated fair values. The excess of
the purchase price over the sum of the fair values of the net assets
acquired will be classified as goodwill and will be amortized in
accordance with the Company's existing policies.
Any additional purchase price that may be paid in the future, as well any
reduction of the purchase price that may be received in the future, will
be accounted for as either an increase or decrease in goodwill as the
case may be, and will be recognized at the time any such additional
payments are made or as any such reductions are received.
In connection with the purchase of Sverdrup, the Company terminated its
existing $45.0 million revolving credit agreement and entered into a new,
$230.0 million revolving credit agreement. At closing, the Company
borrowed approximately $165.0 million under the new facility which it
used, along with approximately $56.1 million of internal funds, to pay
(i) the initial purchase price of $198.0 million, (ii) certain fees
incurred in connection with the transaction ($2.1 million), and (iii) to
pay-off certain existing indebtedness of Sverdrup ($21.0 million).
The accompanying Unaudited Pro Forma Condensed Combined Balance Sheet
presents, in columnar form, the consolidated balance sheet of the Company
as of September 30, 1998, as filed with the Commission, the consolidated
balance sheet of Sverdrup as of October 2, 1998 (its normal month-end
date for the month of September 1998), the pro forma adjustments thereto,
and the pro forma combined balance sheet. The Unaudited Pro Forma
Condensed Combined Balance Sheet was prepared assuming the transaction
was consummated on September 30, 1998.
The accompanying Unaudited Pro Forma Condensed Combined Statement of
Income presents, in columnar form, the consolidated statement of income
of the Company for the year ended September 30, 1998, as filed with the
Commission, the consolidated statement of income of Sverdrup for the year
ended October 2, 1998, the pro forma adjustments thereto, and the pro
forma combined statement of income. Sverdrup's normal year-end is
December 31. Accordingly, the historical financial information of
Sverdrup has been adjusted to conform to a September 30 year-end. The
Unaudited Pro Forma Condensed Combined Statement of Income was prepared
assuming the transaction was consummated on October 1, 1997, and includes
those adjustments that are directly attributable to the transaction and
which are expected to have a continuing impact on the Company.
Readers of the accompanying Unaudited Pro Forma Condensed Combined
Balance Sheet and Unaudited Pro Forma Condensed Combined Statement of
Income should also read the explanations of the pro forma adjustments
immediately following the Unaudited Pro Forma Condensed Combined
Statement of Income.
Jacobs Engineering Group Inc.
Pro Forma Condensed Combined Balance Sheet
September 30, 1998
(In thousands of dollars - unaudited)
Jacobs Sverdrup
Engineering Corp. Pro Forma Pro Forma
(as reported) (Historical) Adjustments Combined
------------- ------------ ------------ -----------
ASSETS:
Current Assets:
Cash and cash equivalents $101,328 $ 6,524 $(56,063)(a) $ 51,789
Marketable securities 16,482 - 16,482
Receivables 394,841 176,264 571,105
Deferred income taxes 45,419 - 45,419
Other 7,937 12,621 20,558
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Total current assets 566,007 195,409 705,353
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Property and Equipment, Net 100,565 30,384 130,949
Other Noncurrent Assets, Net 140,917 34,782 139,905 (b) 315,604
-------- -------- ----------
Total Assets $807,489 $260,575 $1,151,906
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LIABILITIES AND STOCKHOLDERS'
EQUITY:
Current Liabilities:
Notes payable $ 217 $ 10,019 (7,000)(c) $ 3,236
Accounts payable 101,846 62,597 6,170 (b) 170,613
Accrued liabilities 161,552 29,024 190,576
Customer advances 85,049 37,249 122,298
Income taxes payable 19,684 3,558 23,242
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Total current liabilities 368,348 142,447 509,965
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Long-term Debt 26,221 34,639 151,000 (c) 211,860
Other Long-term Liabilities 35,170 17,161 52,331
Minority Interests 6,345 - 6,345
Stockholders' Equity:
Preferred stock - -
Common stock 25,867 - 25,867
Additional paid-in capital 55,698 - 55,698
Retained earnings 300,296 - 300,296
Other (10,456) - (10,456)
Equity of Sverdrup - 66,328 (66,328)(d) -
-------- -------- ----------
Total stockholders' equity 371,405 66,328 371,405
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$807,489 $260,575 $1,151,906
======== ======== ==========
Jacobs Engineering Group Inc.
Pro Forma Condensed Combined Statement of Income
For the Year Ended September 30, 1998
(In thousands of dollars - unaudited)
Jacobs Sverdrup
Engineering Corp. Pro Forma Pro Forma
(as reported) (Historical) Adjustments Combined
------------- ------------ ----------- -----------
Revenues $2,101,145 $996,482 $3,097,627
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Costs and Expenses:
Direct costs of contracts 1,830,618 866,028 2,696,646
Selling, general and
administrative expenses 184,043 103,731 3,498 (e) 291,272
Other (income) expense 436 (615) (179)
Interest (income) expense (2,736) 2,576 13,436 (f) 13,276
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Total costs and expenses 2,012,361 971,720 3,001,015
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Income Before Taxes 88,784 24,762 (x) 96,612 (x)
Income Tax Expense 34,399 10,397 (5,206)(g) 39,590
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Net Income $ 54,385 $ 14,365 $ 57,022
========== ======== ==========
Net Income Per Share:
Basic $ 2.12 $ 2.22
Diluted $ 2.08 $ 2.19
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Jacobs Engineering Group Inc.
Notes to Unaudited Pro Forma Condensed Financial Statements
(a) This adjustment reflects the pro forma effect on cash at September 30, 1998
giving effect to the amount of internal funds used by the Company to
finance the acquisition of Sverdrup.
(b) This adjustment reflects the initial pro forma increase to goodwill
resulting from the acquisition, and includes an estimated amount for
certain known, direct costs of the acquisition. The final purchase price
allocation, which will yield the final goodwill amount to be recorded in
connection with this transaction, will be completed in accordance with APB
Opinion No. 16, as amended.
(c) As discussed above, in connection with the acquisition of Sverdrup, the
Company entered into a new, $230.0 million revolving credit facility which
it used to assist in the financing of the acquisition. Also in connection
with the acquisition, the Company modified one of its existing short-term
credit facilities under which it refinanced amounts outstanding under its
old $45.0 million revolving credit facility. This adjustment reflects the
effects of the aforementioned financings and refinancings on the September
30, 1998 pro forma balance sheet.
(d) This adjustment eliminates the equity of Sverdrup as of the date of
acquisition from the pro forma combined balance sheet.
(e) This adjustment reflects the pro forma amortization of goodwill, computed
in accordance with the established policies of the Company.
(f) This adjustment reflects the pro forma effect on net interest expense as a
result of the additional debt incurred as a result of the acquisition,
combined with the reduction of interest income caused by the pro forma use
of the Company's internal funds.
(g) This adjustment reflects the pro forma effects on consolidated income tax
expense resulting from the other pro forma adjustments to the pro forma
combined results of operations.
(x) Includes $2,909,000 of gains from sales of real estate, which, although
included in the historical results of operations of Sverdrup, are non-
recurring in nature.
Item 7. Financial Statements and Exhibits (continued).
(c) Exhibits.
99.1 Agreement and Plan of Merger Among Sverdrup Corporation, Jacobs
Engineering Group Inc., and Jacobs Acquisition Corp., dated as of
December 21, 1998.
99.2 The consolidated financial statements of Sverdrup Corporation at
December 31, 1997 and 1996 and for each of the three years in the
period ended December 31, 1997, together with the report of the
independent auditors on those consolidated financial statements.
99.3 The unaudited, condensed consolidated financial statements of
Sverdrup Corporation at October 2, 1998 and October 3, 1997, and
for each of the nine month periods then ended.
99.4 The $230,000,000 Revolving Credit Agreement dated as of January 11,
1999 Among Jacobs Engineering Group Inc. and Certain of its
Designated Subsidiaries, Bank of America NT&SA (as Administrative
Agent and Issuing Bank), ABN AMRO Bank, N.A., The First National
Bank of Chicago, First Union National Bank and Wells Fargo Bank,
N.A. (as the Managing Agents), and NationsBank Montgomery
Securities LLC (as Lead Arranger)
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/ John W. Prosser, Jr.
___________________________
John W. Prosser, Jr.
Senior Vice President, Finance
and Administration and Treasurer
Date: January 15, 1999