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, 1997 -------------- ( ) 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 May 12, 1997: 25,743,567 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 March 31, 1997 and September 30, 1996 3 Consolidated Condensed Statements of Income for the Three Months and Six Months Ended March 31, 1997 and 1996 4 Consolidated Condensed Statements of Cash Flows for the Six Months Ended March 31, 1997 and 1996 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 </TABLE> Page 2
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS AT MARCH 31, 1997 AND SEPTEMBER 30, 1996 (In thousands, except share information) (Unaudited) <TABLE> <CAPTION> March 31, September 30, 1997 1996 - ----------------------------------------------- --------- ------------- <S> <C> <C> ASSETS Current Assets: Cash and cash equivalents $100,324 $ 62,865 Marketable securities - 2,764 Receivables 276,824 276,668 Deferred income taxes 39,204 37,564 Prepaid expenses and other 4,214 3,783 - ----------------------------------------------- -------- -------- Total current assets 420,566 383,644 - ----------------------------------------------- -------- -------- Property, Equipment and Improvements, Net 83,115 79,009 - ----------------------------------------------- -------- -------- Other Noncurrent Assets: Goodwill, net 41,960 40,481 Other 72,134 69,371 - ----------------------------------------------- -------- -------- Total other noncurrent assets 114,094 109,852 - ----------------------------------------------- -------- -------- $617,775 $572,505 =============================================== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Notes payable to bank $ 2,458 $ 694 Accounts payable 48,759 60,799 Accrued liabilities 124,883 110,061 Customers' advances in excess of related revenues 64,782 47,052 Income taxes payable 10,562 9,469 - ----------------------------------------------- -------- -------- Total current liabilities 251,444 228,075 - ----------------------------------------------- -------- -------- Long-term Debt 35,068 36,300 - ----------------------------------------------- -------- -------- Deferred Gains on Real Estate Transactions 615 1,025 - ----------------------------------------------- -------- -------- Other Deferred Liabilities 27,151 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 - 25,755,841 and 25,745,329 shares, respectively 25,756 25,745 Additional paid-in capital 50,439 49,191 Retained earnings 226,860 207,639 Other 808 1,039 - ----------------------------------------------- -------- -------- 303,863 283,614 Less, cost of common stock held in treasury (15,000 and 10,000 shares, respectively) 366 227 - ----------------------------------------------- -------- -------- Total stockholders' equity 303,497 283,387 - ----------------------------------------------- -------- -------- $617,775 $572,505 =============================================== ======== ======== </TABLE> 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, 1997 and 1996 (In thousands, except per-share information) (Unaudited) <TABLE> <CAPTION> For the Three Months For the Six Months Ended March 31, Ended March 31, ---------------------- ------------------- <S> <C> <C> <C> <C> 1997 1996 1997 1996 - ----------------------------------------------------------------------------------------- Revenues $437,735 $487,021 $871,384 $958,142 - ----------------------------------------------------------------------------------------- Costs and Expenses: Direct costs of contracts 382,705 434,303 762,913 856,126 Selling, general and administrative expenses 37,269 36,542 73,721 70,516 Interest income, net (709) (44) (1,374) (334) Other income, net (437) (138) (780) (335) - ----------------------------------------------------------------------------------------- 418,828 470,663 834,480 925,973 - ----------------------------------------------------------------------------------------- Income before taxes 18,907 16,358 36,904 32,169 - ----------------------------------------------------------------------------------------- Provision for Income Taxes 7,487 6,478 14,614 12,739 - ----------------------------------------------------------------------------------------- Net Income $ 11,420 $ 9,880 $ 22,290 $ 19,430 ========================================================================================= Net Income Per Share $.44 $.38 $.86 $.75 ========================================================================================= </TABLE> 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, 1997 AND 1996 (In thousands) (Unaudited) <TABLE> <CAPTION> 1997 1996 - ------------------------------------------------------------------------ <S> <C> <C> Cash Flows from Operating Activities: Net income $ 22,290 $ 19,430 Adjustments to reconcile net income to net cash flows from operations: Depreciation and amortization 9,375 8,269 Amortization of deferred gains (410) (410) (Gains) losses on disposals of assets (697) 54 Changes in assets and liabilities, net: Receivables 18,940 10,752 Prepaid expenses and other current assets (399) (1,246) Accounts payable (12,176) 10,279 Accrued liabilities 12,819 312 Customers' advances 599 (3,127) Income taxes payable 1,126 (2,976) Deferred income taxes (1,640) (1,535) Other, net 161 - - ------------------------------------------------------------------------ Net cash provided 49,988 39,802 - ------------------------------------------------------------------------ Cash Flows from Investing Activities: Additions to property and equipment, net of disposals (9,697) (10,017) Net increase in other noncurrent assets (1,441) (1,270) Proceeds from sales of marketable securities 3,551 - Acquisitions of businesses (2,673) - Increase in investments (507) (21,717) - ------------------------------------------------------------------------ Net cash used (10,767) (33,004) - ------------------------------------------------------------------------ Cash Flows from Financing Activities: Exercises of stock options 4,955 4,687 Purchases of treasury stock (5,961) - Net increase in short-term borrowings 198 - Net increase in long-term borrowings - 18,820 Other, net (323) (44) - ------------------------------------------------------------------------ Net cash provided (used) (1,131) 23,463 - ------------------------------------------------------------------------ Effect of Exchange Rate Changes (631) (75) - ------------------------------------------------------------------------ Increase in Cash and Cash Equivalents 37,459 30,186 Cash and Cash Equivalents at the Beginning of the Period 62,865 39,118 - ------------------------------------------------------------------------ Cash and Cash Equivalents at the End of the Period $100,324 $ 69,304 ======================================================================== </TABLE> See the accompanying notes. Page 5
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS MARCH 31, 1997 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, 1997 and September 30, 1996, and its consolidated results of operations for the three months and six months ended March 31, 1997 and March 31, 1996, and its consolidated cash flows for the six months ended March 31, 1997 and March 31, 1996. The Company's interim results of operations are not necessarily indicative of the results to be expected for the full year. 2. During February 1997, the Company acquired certain physical assets and contracts of an engineering business with operations in Denver, Colorado and Santiago, Chile. In addition, the Company acquired a controlling interest in an affiliated entity located in India. Both of these acquisitions are accounted for as purchases. The results of operations of these businesses since their respective dates of acquisition were not material. 3. Included in receivables at March 31, 1997 and September 30, 1996 were unbilled amounts totaling $66,930,200 and $50,770,100, respectively. 4. Property, equipment and improvements are stated at cost and consisted of the following at March 31, 1997 and September 30, 1996 (in thousands): <TABLE> <CAPTION> March 31, September 30, 1997 1996 - ------------------------------------------------------------------------ <S> <C> <C> Land $ 10,024 $ 10,028 Buildings 38,772 38,762 Equipment 107,814 100,874 Leasehold improvements 15,403 12,812 ------------------------------------------------------------------ 172,013 162,476 Less - accumulated depreciation and amortization 88,898 83,467 ------------------------------------------------------------------ $ 83,115 $ 79,009 ======================================================================== </TABLE> Page 6
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS MARCH 31, 1997 5. Other assets consisted of the following at March 31, 1997 and September 30, 1996 (in thousands): <TABLE> <CAPTION> March 31, September 30, 1997 1996 - ------------------------------------------------------------------------ <S> <C> <C> Prepaid pension costs $11,736 $11,201 Cash surrender value of life insurance policies 22,286 20,758 Investments 34,635 35,000 Miscellaneous 3,477 2,412 ------------------------------------------------------------------ $72,134 $69,371 ======================================================================== </TABLE> 6. During the six months ended March 31, 1997 and 1996, the Company made cash payments of $1,053,700 and $1,355,200, respectively, for interest and $14,278,100 and $16,457,200, respectively, for income taxes. 7. Net income per share for the three months and six months ended March 31, 1997 and 1996 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> Three Months Ended Six months Ended March 31, March 31, -------------------- -------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- <S> <C> <C> <C> <C> Average number of shares of common stock outstanding 25,684 25,581 25,703 25,546 Average number of shares of common stock equivalents outstanding 251 400 215 355 ------ ------ ------ ------ 25,935 25,981 25,918 25,901 ====== ====== ====== ====== </TABLE> Page 7
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES MARCH 31, 1997 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, 1997 (the "second quarter of 1997") were $437.7 million; this was $49.3 million less than the amount for the three months ended March 31, 1996 (the "second quarter of 1996"). For the six months ended March 31, 1997, revenues totaled $871.4 million; this was $86.8 million less than the amount for the corresponding period last year. These differences were due to lower construction activity, and reflect the completion and/or winding-down of several large projects during fiscal 1996. However, revenues from engineering services for both the second quarter of 1997 and the six months ended March 31, 1997 were higher as compared to the corresponding periods last year. As a percent of revenues, direct costs of contracts were 87.4% for the second quarter of 1997, as compared to 89.2% for the second quarter of 1996. For the six months ended March 31, 1997, direct costs of contracts were 87.6% of revenues, as compared to 89.4% for the six months ended March 31, 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 improvements in this percentage relationship during both the current quarter and the current year-to-date period as compared to the corresponding periods last year were 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 second quarter of 1997 totaled $37.3 million; this was $0.7 million more than the amount for the second quarter of 1996. For the six months ended March 31, 1997, SG & A expenses totaled $73.7 million; this was $3.2 million more than the amount for the six months ended March 31, 1996. In general, these variances were due to higher spending in support of the increased engineering services discussed above, combined with an increase in sales and marketing activity. The Company's operating profit (defined as revenues, less costs of contracts and SG & A expenses) was $17.8 million for the second quarter of 1997; this was $1.6 million more than the amount for the first quarter of 1996. For the six months ended March 31, 1997, the Company's operating profit was $34.8 million; this was $3.3 million more than the amount for the six months ended March 31, 1996. These increases in operating profit were due primarily to the higher level of engineering services activity discussed above, combined with improved margin rates for all of the Company's services. Page 8
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES MARCH 31, 1997 Interest income, net totaled $0.7 million for the second quarter of 1997; this was $0.7 million more than the amount for the second quarter of 1996. For the six months ended March 31, 1997, net interest income totaled $1.4 million; this was $1.0 million more than the amount for the comparable period last year. In general, the increases in net interest income were due to higher average cash balances kept on deposit during 1997 as compared to 1996. In addition, the amount of short-term bank debt outstanding during the first half of 1997 was substantially less than the average amount outstanding during the corresponding period last year, which caused an overall reduction in the amount of interest expense. Backlog Information - ------------------- The following table summarizes the Company's backlog at March 31, 1997 and 1996 (in millions): <TABLE> <CAPTION> 1997 1996 -------- -------- <S> <C> <C> Engineering services backlog $ 878.0 $ 825.0 Total backlog 2,910.9 2,695.0 </TABLE> Liquidity and Capital Resources - ------------------------------- The Company's cash and cash equivalents increased $37.5 million during the six months ended March 31, 1997. This compares to a net increase of $30.2 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 ($50.0 million), offset in part by cash used in investing activities ($10.8 million), financing activities ($1.1 million), and the effect of exchange rate changes ($0.6 million). Operations contributed $50.0 million of cash and cash equivalents during the six months ended March 31, 1997. This compares to net contributions of cash of $39.8 million during the six months ended March 31, 1996. The $10.2 million increase in cash provided by operations during 1997 as compared to 1996 was due to a $2.9 million increase in net income, combined with the effects from the timing of cash receipts and payments relating to the Company's trade receivables, payables and accrued liabilities. The Company's investing activities used $10.8 million of cash and cash equivalents during the six months ended March 31, 1997. This compares to a net use of cash of $33.0 million during the six months ended March 31, 1996. Included in the 1996 figure was the Company's purchase of a 49% interest in the engineering and construction operations of the Serete Group of France; no similar transaction was made in 1997. During 1997, the Company sold certain marketable securities which generated approximately $3.6 million of cash, and it spent approximately $2.7 million, net, towards the acquisition of two engineering and construction companies. Page 9
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES MARCH 31, 1997 Cash flows from financing activities used $1.1 million in cash and cash equivalents during the six months ended March 31, 1997. This compares to a net source of cash of $23.5 million during the six months ended March 31, 1996. Included in the 1996 figure were bank borrowings made under the Company's long- term revolving credit agreement used to finance the purchase of its 49% interest in the Serete Group. During 1997, the Company repurchased 237,600 shares of its common stock under a buy-back program it initiated during the second half of 1996. Total cost of the shares repurchased during 1997 was $6.0 million. Since initiating this repurchase program last year, the Company has bought-back a total of 397,600 shares of its common stock at a total cost of $9.6 million. The Company believes it has adequate capital resources to fund its operations for the remainder of 1997 and beyond. At March 31, 1997, the Company's short- term committed credit facilities totaled $40.9 million through banks in the U.S. and the U.K., against which $0.9 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 10
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES MARCH 31, 1997 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 11, 1997 at 3:30 p.m. as announced in its Notice of Annual Meeting of Shareholders and Proxy Statement dated January 3, 1997, 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 as nominated in the proxy statement (Messrs. James Clayburn LaForce, David M. Petrone, James L. Rainey, Jr. and Noel G. Watson); 2. To approve amendments to the 1981 Executive Incentive Plan, and to reserve an additional 1,200,000 shares for that plan, and to extend the expiration date of the plan to March 1, 2001; and, 3. To approve the appointment of Ernst & Young LLP as independent auditors for the year ending September 30, 1997. 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: <TABLE> <CAPTION> Nominee ----------------------------------------------------- James C. David M. James L. Noel G. LaForce Petrone Rainey, Jr. Watson ---------- ---------- ----------- ---------- <S> <C> <C> <C> <C> Shares voting for the nominee 20,747,083 20,748,726 20,703,588 20,745,008 Shares instructing the proxy not to vote for the nominee 881,627 879,984 925,122 883,702 Shares not voted 4,057,617 4,057,617 4,057,617 4,057,617 ---------- ---------- ---------- ---------- Total 25,686,327 25,686,327 25,686,327 25,686,327 ========== ========== ========== ========== </TABLE> With respect to the second matter, there were 15,485,702 shares which voted in favor of the amendments (and other changes) to the 1981 Executive Incentive Plan. There were 3,606,051 shares which voted against the proposition; there were 127,546 shares instructing the proxy not to vote; there were 2,409,411 broker non-votes; and there were 4,057,617 shares which were not present and for which no proxies were received. With respect to the third matter, there were 20,715,908 shares which voted in favor of the appointment of Ernst & Young LLP as the Company's independent auditors for the year ending September 30, 1997. There were 811,968 shares which voted against the appointment; there were 100,834 shares instructing the proxy not to vote; and there were 4,057,617 shares which were not present and for which no proxies were received. Page 11
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES MARCH 31, 1997 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/ John W. Prosser, Jr. ___________________________ John W. Prosser, Jr. Senior Vice President, Finance and Administration and Treasurer Date: May 12, 1997 Page 12