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 December 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. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Delaware 95-4081636 - -------------------------------------------------------------------------------- (State of incorporation) (I.R.S. employer identification number) 251 South Lake Avenue, Pasadena, California 91101 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) (818) 449 - 2171 - -------------------------------------------------------------------------------- (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 February 12, 1997: 25,701,662 Page 1
JACOBS ENGINEERING GROUP INC. INDEX TO FORM 10-Q <TABLE> <CAPTION> Page No. -------- <S> <C> Part I - Financial Information Item 1. Financial Statements: Consolidated Condensed Balance Sheets as of December 31, 1996 and September 30, 1996 3 Consolidated Condensed Statements of Income for the Three Months Ended December 31, 1996 and 1995 4 Consolidated Condensed Statements of Cash Flows for the Three Months Ended December 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 - 9 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K 10 Signatures 10 </TABLE> Page 2
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS AT DECEMBER 31, 1996 AND SEPTEMBER 30, 1996 (In thousands, except share information) (Unaudited) <TABLE> <CAPTION> December 31, September 30, 1996 1996 - ------------------------------------------------------------------------------ <S> <C> <C> ASSETS Current Assets: Cash and cash equivalents $ 79,798 $ 62,865 Marketable securities - 2,764 Receivables 259,201 276,668 Deferred income taxes 37,322 37,564 Prepaid expenses and other 3,769 3,783 --------------------------------------------------------------------------- Total current assets 380,090 383,644 ---------------------------------------------------------------------------- Property, Equipment and Improvements, Net 79,030 79,009 ---------------------------------------------------------------------------- Other Noncurrent Assets: Goodwill, net 40,596 40,481 Other 74,270 69,371 ---------------------------------------------------------------------------- Total other noncurrent assets 114,866 109,852 - ------------------------------------------------------------------------------ $573,986 $572,505 ============================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes payable to bank $ 1,464 $ 694 Accounts payable 48,739 60,799 Accrued liabilities 109,829 110,061 Customers' advances in excess of related revenues 42,529 47,052 Income taxes payable 15,805 9,469 --------------------------------------------------------------------------- Total current liabilities 218,366 228,075 ---------------------------------------------------------------------------- Long-term Debt 36,798 36,300 ---------------------------------------------------------------------------- Deferred Gains on Real Estate Transactions 820 1,025 ---------------------------------------------------------------------------- Other Deferred Liabilities 23,256 23,718 ---------------------------------------------------------------------------- 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 - 25,727,127 and 25,745,329 shares, respectively 25,727 25,745 Additional paid-in capital 49,047 49,191 Retained earnings 217,554 207,639 Other 3,150 1,039 --------------------------------------------------------------------------- 295,478 283,614 Less, cost of common stock held in treasury (10,000 and 31,500 shares, respectively) 732 227 --------------------------------------------------------------------------- Total stockholders' equity 294,746 283,387 - ------------------------------------------------------------------------------ $573,986 $572,505 ============================================================================== </TABLE> See the accompanying notes. Page 3
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995 (In thousands, except per-share information) (Unaudited) <TABLE> <CAPTION> 1996 1995 - ------------------------------------------------------------------------ <S> <C> <C> Revenues $433,649 $471,122 - ------------------------------------------------------------------------ Costs and Expenses: Direct costs of contracts 380,207 421,823 Selling, general and administrative expenses 36,452 33,974 Interest income, net (665) (290) Other income, net (342) (197) ---------------------------------------------------------------------- 415,652 455,310 - ------------------------------------------------------------------------ Income before taxes 17,997 15,812 - ------------------------------------------------------------------------ Provision for Income Taxes 7,127 6,262 - ------------------------------------------------------------------------ Net Income $ 10,870 $ 9,550 ======================================================================== Net Income Per Share $.42 $.37 ======================================================================== </TABLE> See the accompanying notes. Page 4
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995 (In thousands) (Unaudited) <TABLE> <CAPTION> 1996 1995 - ------------------------------------------------------------------------- <S> <C> <C> Cash Flows from Operating Activities: Net income $ 10,870 $ 9,550 Adjustments to reconcile net income to net cash flows from operations: Depreciation and amortization 4,795 4,086 Amortization of deferred gains (205) (205) Gains on disposals of assets (203) - Changes in assets and liabilities, net: Receivables 18,252 9,372 Prepaid expenses and other current assets 72 (1,115) Accounts payable (12,337) 2,820 Accrued liabilities (1,015) 229 Customers' advances (4,772) (111) Income taxes payable 6,260 4,437 Deferred income taxes 242 (787) Other, net 79 - ------------------------------------------------------------------------ Net cash provided 22,038 28,276 ------------------------------------------------------------------------ Cash Flows from Investing Activities: Additions to property and equipment, net of disposals (3,445) (5,054) Net increase in other noncurrent assets (2,214) (2,431) Proceeds from the sale of marketable securities 2,963 - Net increase in investments (1,677) - ------------------------------------------------------------------------ Net cash used (4,373) (7,485) ------------------------------------------------------------------------ Cash Flows from Financing Activities: Exercises of stock options 349 265 Purchases of treasury stock (1,540) - Increase (decrease) in short-term borrowings 618 (829) Other, net (462) 192 ------------------------------------------------------------------------ Net cash used (1,035) (372) ------------------------------------------------------------------------ Effect of Exchange Rate Changes 303 (52) - ------------------------------------------------------------------------- Increase in Cash and Cash Equivalents 16,933 20,367 Cash and Cash Equivalents at the Beginning of the Period 62,865 39,118 - ------------------------------------------------------------------------- Cash and Cash Equivalents at the End of the Period $ 79,798 $59,485 ========================================================================= </TABLE> See the accompanying notes. Page 5
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS DECEMBER 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 December 31, 1996 and September 30, 1996, and its consolidated results of operations and cash flows for the three months ended December 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 December 31, 1996 and September 30, 1996 were unbilled amounts totaling $51,007,300 and $50,770,100, respectively. 3. Property, equipment and improvements are stated at cost and consisted of the following at December 31, 1996 and September 30, 1996 (in thousands): <TABLE> <CAPTION> December 31, September 30, 1996 1996 - ------------------------------------------------------------------------- <S> <C> <C> Land $ 10,215 $ 10,028 Buildings 39,604 38,762 Equipment 103,991 100,874 Leasehold improvements 13,291 12,812 - ------------------------------------------------------------------------- 167,101 162,476 Less - accumulated depreciation and amortization 88,071 83,467 - ------------------------------------------------------------------------- $ 79,030 $ 79,009 ========================================================================= </TABLE> Page 6
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS DECEMBER 31, 1996 4. Other assets consisted of the following at December 31, 1996 and September 30, 1996 (in thousands): <TABLE> <CAPTION> December 31, September 30, 1996 1996 --------------------------------------------------------------- <S> <C> <C> Prepaid pension costs $12,000 $11,201 Cash surrender value of life insurance policies 22,285 20,758 Investments 36,838 35,000 Miscellaneous 3,147 2,412 -------------------------------------------------------------- $74,270 $69,371 =============================================================== </TABLE> 5. During the three months ended December 31, 1996 and 1995, the Company made cash payments of $605,000 and $584,200, respectively, for interest and $332,500 and $2,455,500, respectively, for income taxes. 6. Net income per share for the three months ended December 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 (in thousands): <TABLE> <CAPTION> 1996 1995 ------ ------ <S> <C> <C> Average number of shares of common stock outstanding 25,717 25,502 Average number of shares of common stock equivalents outstanding 166 300 ------ ------ 25,883 25,802 ====== ====== </TABLE> Page 7
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES DECEMBER 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 December 31, 1996 (the "first quarter of 1997") were $433.6 million; this was $37.5 million less than the amount for the three months ended December 31, 1995 (the "first quarter of 1996"). This decline in revenues was due to lower construction activity, and reflects the completion and/or winding-down of several large projects during fiscal 1996. Revenues from engineering services for the first quarter of 1997 were up slightly as compared to last year. As a percent of revenues, direct costs of contracts were 87.7% for the first quarter of 1997, as compared to 89.5% for the first quarter of 1996. The percentage relationship between direct costs of contracts and revenues will fluctuate between reporting periods depending on a variety of factors including the mix of business during the reporting periods being compared, as well as the level of margins earned from the various services provided by the Company. The improvement in this percentage relationship during the current quarter as compared to the corresponding period last year was due to a proportionately higher level of the Company's overall business volume coming from engineering services relative to construction and maintenance services. Selling, general and administrative ("SG & A") expenses for the first quarter of 1997 totaled $36.5 million; this was $2.5 million more than the amount for the first quarter of 1996. The increase in S,G & A expenses was due primarily to an increase in sales and marketing expenses. The Company's operating profit (defined as revenues, less costs of contracts and SG & A expenses) was $17.0 million for the first quarter of 1997; this was $1.7 million more than the amount for the first quarter of 1996. The increase in operating profit was due primarily to the higher level of engineering services activity discussed above, combined with improved margin rates for all of the Company's services. Interest income, net totaled $0.7 million for the first quarter of 1997; this was $0.4 million more than the amount for the first quarter of 1996. The increase was due to higher average cash balances kept on deposit during the first quarter of 1997 as compared to the corresponding period last year. Page 8
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES DECEMBER 31, 1996 Backlog Information - ------------------- The following table summarizes the Company's backlog at December 31, 1996 and 1995 (in millions): <TABLE> <CAPTION> 1996 1995 -------- -------- <S> <C> <C> Engineering services backlog $ 852.0 $ 841.0 Total backlog 2,847.0 2,663.0 </TABLE> Liquidity and Capital Resources - ------------------------------- The Company's cash and cash equivalents increased $16.9 million during the three months ended December 31, 1996. This compares to a net increase of $20.4 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 and the effect of exchange rate changes on cash ($22.3 million in total), offset in part by cash used in investing activities ($4.4 million) and financing activities ($1.0 million). Operations contributed $22.0 million of cash and cash equivalents during the three months ended December 31, 1996. This compares to net contributions of cash of $28.3 million during the three months ended December 31, 1995. The $6.2 million decrease in cash provided by operations in the first quarter of 1997 as compared to the corresponding period last year occurred in spite of a $1.3 million increase in net income, and was due primarily to the timing of cash receipts and payments relating to the Company's trade receivables, payables and accrued liabilities. The Company's investing activities used $4.4 million of cash and cash equivalents during the three months ended December 31, 1996. This compares to a net use of cash of $7.5 million during the three months ended December 31, 1995. Most of the variance was due to a $3.0 million increase in 1997 in cash provided from sales of marketable securities. Cash flows from financing activities used $1.0 million in cash and cash equivalents during the three months ended December 31, 1996. This compares to a net use of cash of $0.4 million during the three months ended December 31, 1995. The variance was due primarily to an increase in treasury stock purchases, offset in part by higher short-term bank borrowings, net of repayments. The Company believes it has adequate capital resources to fund its operations for the remainder of 1997 and beyond. At December 31, 1996, the Company's short-term committed credit facilities totaled $51.7 million through banks in the U.S. and the U.K., against which $1.5 million was outstanding in the form of direct borrowings (relating entirely to the Company's U.K. subsidiary), and another $1.5 million was utilized in support of outstanding letters of credit. Page 9
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES DECEMBER 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: February 12, 1997 Page 10