<PAGE>
1996
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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)
Registrant's telephone number, including area code (818) 449-2171
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
-------------------------- -----------------------
Common Stock, $1 par value New York Stock Exchange
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
INDICATE BY CHECK-MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF FORM 10-K OR ANY AMENDMENT
TO THIS FORM 10-K. ( )
___________________
The aggregate market value of the Registrant's voting stock held by non-
affiliates was approximately $502,823,700 as of December 26, 1996, based upon
the last reported sales price on the New York Stock Exchange. For this purpose,
the Registrant considers Dr. Joseph J. Jacobs to be its only affiliate.
As of December 26, 1996, the Registrant had outstanding 25,679,827 shares of its
common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Part II: Annual Report for the fiscal year ended September 30, 1996, only
portions of which are incorporated by reference.
Part III: Proxy Statement for the Annual Meeting of Shareholders to be filed
with the Securities and Exchange Commission within 120 days after the close of
the Registrant's fiscal year, only portions of which are incorporated by
reference.
================================================================================
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
- -------
Jacobs Engineering Group Inc. (the "Company") is one of the largest
professional service firms in the United States providing engineering, design
and consulting services; construction and construction management services; and
process plant maintenance services to a broad range of industrial, commercial
and governmental clients. The Company provides its services through offices and
subsidiaries located throughout the United States, the United Kingdom and
Ireland, as well as through affiliated entities located throughout Europe and
India.
The Company focuses its services on selected industry groups and markets
including chemicals; petroleum refining; semiconductor; pulp and paper;
pharmaceuticals and biotechnology; federal programs; and buildings and
infrastructure (this last group includes transportation and health care
projects, commercial and governmental buildings, and other industrial projects).
In July 1994, the Company acquired all of the engineering and construction
management services businesses of CRSS Inc. The Company acquired substantially
all of the assets, subject to certain assumed liabilities, of CRS Sirrine
Engineers, Inc., and all of the issued and outstanding equity securities of CRSS
Constructors, Inc. and CRSS International, Inc. Together, these businesses
provide comprehensive design, engineering and construction management services
to government and commercial clients in the pulp and paper, semiconductor, and
buildings and infrastructure markets, among others, primarily within the
continental United States.
In January 1996, the Company completed the purchase of a 49% equity
interest in the Serete Group. Headquartered in France, the Serete Group
provides engineering, design, construction and construction management services
to commercial and governmental clients located throughout Europe. The purchase
price totaled $19.0 million, and the purchase agreement provides for the Company
to increase its ownership interest if the Serete Group achieves certain
operating goals over the two years immediately following the initial investment.
The Company accounts for its investment in the Serete Group using the equity
method.
The Company is a Delaware corporation and was originally incorporated in
1957 as a successor to a business organized by Dr. Joseph J. Jacobs in 1947.
The Company's common stock has been publicly held since 1970 and is currently
listed on the New York Stock Exchange.
SERVICES PROVIDED
- -----------------
The Company offers three broad categories of professional services:
engineering (which includes design, consulting and other related services);
construction and construction management; and plant maintenance. The Company
will often establish a relationship with a client where it is awarded a contract
for the initial phases of an engineering and/or construction project. These
services may include feasibility studies, consulting or design work. Because of
the range of technical expertise the Company possesses, it is often retained for
additional work as the project develops. The scope of services provided by the
Company, therefore, ranges from consulting to complete single-responsibility
contracts.
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The following table sets forth the total revenues of the Company from each
of its three basic service categories for each of the five years ended September
30, 1996 (in thousands of dollars):
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Engineering Services $ 355,483 $ 453,247 $ 476,491 $ 588,399 $ 627,622
Field Services:
Construction 503,406 424,259 456,750 881,574 925,681
Maintenance 247,538 265,420 232,513 253,084 245,667
---------- ---------- ---------- ---------- ----------
$1,106,427 $1,142,926 $1,165,754 $1,723,057 $1,798,970
========== ========== ========== ========== ==========
</TABLE>
Engineering
-----------
The Company employs all of the engineering and related disciplines to
engineer and design modern process plants (including projects for clients in the
chemicals, pharmaceuticals and biotechnology, refining, food, and minerals and
fertilizers industries), semiconductor facilities, pulp and paper plants, and
other facilities (such as high technology manufacturing operations and other
specialized plants).
With respect to the environmental area of the Company's business (see
"Industry Groups and Markets - Federal Programs", below), the Company employs
all of the requisite engineering, scientific, public health and related skills
to consult, investigate, study, manage and provide remedial engineering for
major environmental programs. The Company's capabilities in process engineering
and construction combined with its environmental expertise allow it to offer its
clients a wide range of services as a single-source provider. Accordingly, the
Company has been awarded contracts requiring a combination of traditional
process engineering and environmental services.
The Company also employs all of the professional and technical expertise
necessary to provide a broad range of consulting services including: performing
pricing studies, market analyses and financial projections necessary in
determining the feasibility of a project; performing gasoline reformulation
modeling; analyzing and evaluating layout and mechanical designs for complex
processing plants; analyzing automation and control systems; analyzing,
designing and executing biocontainment strategies; developing and performing
process protocols in respect of Federal Drug Administration mandated
qualification/validation requirements; and performing geological and
metallurgical studies.
Also included in the category of "Engineering" are all of the related
support services necessary for the proper and effective delivery of the
Company's engineering and related services. Among these are cost engineering,
planning, scheduling, procurement, estimating, project accounting, quality and
safety.
Construction
------------
The Company provides traditional field construction as well as
construction management services to private and public sector clients in
virtually all of the industries to which it provides engineering services. The
Company can also provide its clients with Advanced Construction Technology
("ACT")(R). ACT is an advanced form of off-site engineering, design,
fabrication and assembly, and field erection. ACT provides clients with an
alternative approach to traditional methods of engineering and construction
which can significantly reduce new plant costs. In the environmental area,
recent contract awards from clients in the public sector require the Company to
provide environmental remedial construction services.
The Company's field construction activities are focused primarily on those
construction projects for which the Company has performed the engineering and
design work. By focusing its construction efforts on such projects, the Company
avoids the risk of constructing complex plants based on designs prepared by
others. The financial risk to the Company of constructing complex plants based
on designs prepared by third parties may be particularly significant on fixed-
price contracts.
The Company actively markets all of its services to clients on projects
where the scope of services required is within the Company's fields of
expertise. The Company believes that by integrating and bundling its services
(i.e., providing design, engineering and construction services on the same
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project) it can price its services more competitively and can enhance the
overall contract profitability. The Company also believes that clients benefit
from such an approach because they can look to the Company as a single-source
provider of design/build services. However, the Company will continue to pursue
construction-only projects where it can negotiate pricing and other contract
terms acceptable to the Company.
In the area of construction management, the Company can provide a wide
range of services to its clients. The Company may act as the program
director, whereby it oversees, on behalf of the owner of the project, the
complete planning, design and construction phases of the project. Or, its
services may be limited to providing construction consulting, estimating,
scheduling or value engineering services.
Maintenance
-----------
Maintenance generally refers to all of the tasks required to keep a plant
in day-to-day operations, including the repair and replacement of pumps, piping,
heat exchangers and other equipment. It also includes "turnaround" work which
involves major refurbishment which can only be performed when the plant is shut
down. Since shutdowns are expensive to the owners of the plant, turnaround work
will often require maximizing the number of skilled craft personnel that can
work efficiently on a project on a 24 hours per day, seven days per week basis.
The Company employs sophisticated computer scheduling and programming to
complete turnaround projects quickly and it maintains contact with a large pool
of skilled craftsmen it can hire as needed on maintenance and turnaround
projects.
Although the profit margins that can be realized from maintenance services
are generally lower than those associated with the other services the Company
provides, the costs to support maintenance activities are also generally lower
than those associated with the Company's other services. Furthermore, since
maintenance contracts are normally cost-reimbursable in nature, they present
less risk to the Company. Additionally, although engineering and construction
projects may be of a short-term nature, maintenance services often result in
long-term relationships with clients. For example, the Company has been
providing maintenance services at several major process plants for over 30
years. This aspect of maintenance services greatly reduces the selling costs in
respect of such services.
INDUSTRY GROUPS AND MARKETS
- ---------------------------
The Company has chosen to focus its efforts on the following industry
groups and markets: chemicals; petroleum refining; semiconductor; buildings and
infrastructure; pulp and paper; pharmaceuticals and biotechnology; and U.S.
federal programs. The Company believes these industry groups and markets have
sufficient common needs to permit cross-utilization of the Company's resources
which help to mitigate the negative effects of a downturn in a single industry.
The following table sets forth the total revenues of the Company from each
of these industry groups and markets for each of the five years ended September
30, 1996 (in thousands of dollars):
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Chemicals $ 321,991 $ 306,296 $ 315,991 $ 377,731 $ 452,448
Refining 362,005 404,462 372,769 480,472 417,739
Semiconductor 120,022 70,249 83,477 264,492 268,520
Buildings and
Infrastructure 104,799 87,946 88,228 174,183 189,834
Pulp and Paper - - 7,258 85,476 170,553
Pharmaceuticals
and Biotechnology 29,346 80,248 97,301 123,683 147,840
Federal Programs 105,608 161,964 175,846 175,200 145,275
Other 62,656 31,761 24,884 41,820 6,761
---------- ---------- ---------- ---------- ----------
$1,106,427 $1,142,926 $1,165,754 $1,723,057 $1,798,970
========== ========== ========== ========== ==========
</TABLE>
In the area of federal programs, the Company historically has provided
primarily environmental restoration, engineering and consulting services.
However, several of the more recent contracts awarded
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to the Company are for engineering, construction and project management services
for the remediation of sites contaminated with hazardous wastes. Maintenance
services are provided primarily to the chemicals and refining industries.
Chemicals
---------
The Company has always considered the chemicals industry a cornerstone of
its business. Revenues from this industry group have consistently accounted for
a significant share of each year's total revenues. Historically, whenever the
Company has sought to expand its business, the impact of such expansion on the
Company's chemicals business has always been an important consideration. The
Company's first office outside the United States was opened in support of a
bulk-chemical project for a large, U.S. company seeking to expand its operations
internationally. In 1993, when the Company sought to expand its international
operations, it acquired H&G Process Contracting Limited ("Humphreys & Glasgow"),
based in England. Humphreys & Glasgow is an engineering and construction
business with broad-based process engineering and design skills, and a large
client base in the chemicals, pharmaceuticals and refining industries. And as
discussed above, in January 1996, the Company completed its purchase of a 49%
equity interest in the Serete Group (headquartered in France). The Serete Group
possesses strong engineering skills, and services a large number of clients in
the chemicals industries, among others.
Currently, the Company furnishes its full line of services to its clients
operating in the chemicals industries. The Company has provided technical,
financial, marketing and management consulting services to many of the largest
chemical manufacturers in the world. The Company can perform feasibility
studies, as well as preliminary and detailed design and engineering services,
construction, and construction management services to its clients in this
industry. Typical projects range from high-pressure polymer processes for the
production of bulk chemicals, to low-pressure, multi-product processes for the
production of fine and specialty chemicals. The Company has also completed
projects dealing with the modernization and upgrading of polyethelene and liquid
polymer production facilities. The Company has extensive knowledge of, and
experience with, advance polymer technologies, as well as many specialty
chemicals.
Over the years, the Company has continued to grow the chemicals business
through acquisitions and internal initiatives. As discussed above, the Company
acquired Humphreys & Glasgow in 1993. Since then, the Company has expanded its
involvement with U.S.-based companies doing business in the U.K., as well as
expanding its European client base.
Refining
--------
The Company provides its full line of services to its clients in the
petroleum refining industry. Typical projects in the refining area include
retrofits, revamps or expansions of existing plants, upgrading individual
process units within refineries, new construction and maintenance services. The
Company also provides a broad range of consulting services to its clients,
including feasibility and multi-client studies.
Over the past several years, many of the Company's contract awards in the
refining area have been for plants producing oxygenates and other high-octane
fuel blending components for gasoline (such components are required by the Clean
Air Act of 1990 in reformulated gasolines in order to reduce the emissions of
unburned hydrocarbons and carbon monoxide from automobiles), as well as plants
that hydrotreat various fuel fractions to reduce the sulfur content of blended
products. The Company has completed several major projects to design, engineer,
procure and construct methyl tertiary butyl ether ("MTBE") units and tertiary
amyl butyl ether ("TAME") units for a number of major refiners at facilities
located throughout the United States. The Company has also utilized its off-
site construction capabilities in the construction and installation of these
units. The use of off-site construction can help decongest the construction
site and allow for parallel construction to proceed simultaneously with the
modular activity.
A significant aspect of the Company's service to this industry is in the
area of contract maintenance. The Company has contracts with several major oil
refiners for on-site maintenance and
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turnaround activities. Many of these contracts are evergreen in nature and tend
to be extended over many years.
Another important aspect of this industry group has been the development of
performance-based partnering relationships with clients. Over the past several
years, the Company has entered into evergreen engineering services contracts
with several clients. Such agreements have been both site-specific and national
in scope. Often, these alliances provide the Company with opportunities to
expand its services to include fully-integrated engineering, procurement,
construction and construction management services. The Company has broadened
this area of its business through internal growth and acquisitions. One
acquisition completed in 1993 expanded the Company's geographic presence to
include the West Coast refining market; the acquisition also added to its client
base.
Semiconductor
-------------
The Company provides engineering, procurement, construction, and
construction management services to its clients in the semiconductor industry.
Typical projects in this industry include multi-million dollar state-of-the-art
wafer fabrication and crystal growing facilities used to produce microprocessors
for computers and other consumer electronic devices. Generally, projects in the
semiconductor industry are more complex than other facilities projects and have
greater emphasis on cleanroom, and similar high-end technologies.
Buildings and Infrastructure
----------------------------
Buildings and infrastructure refers to those contracts requiring the
Company to provide comprehensive architectural, engineering, design,
construction and/or construction management services for projects such as high
technology manufacturing operations, specialized plants for clients in the food
industry, and research and development facilities that require technically
complex structures. It also includes programming, design, program management
and construction management services for public, institutional and corporate
clients. Typical projects include civic centers, correctional facilities,
health care facilities and transportation systems, as well as multi-purpose
buildings for industrial, commercial and government clients.
Pulp and Paper
--------------
The Company provides a broad range of engineering and construction
services to its clients in the pulp and paper industry. Additionally, the
Company provides strategic planning and conceptual studies for many of its
clients, as well as environmental services relating to compliance with EPA
emission standards. Typical projects in the pulp and paper area range from
small mill projects to complex, multi-million dollar paper machine rebuilds,
mill expansions and construction of new facilities. Such projects encompass all
areas of a mill, including woodyards, pulping and bleaching, papermaking,
chemical recovery, material handling and power and steam generation. In the
area of papermaking, the Company's expertise includes tissue and towel, coated
and uncoated fine papers, newsprint and linerboard. The Company's expertise
also includes the converting and packaging of paper products for consumer use.
The Company has been instrumental in the design and installation of state-of-
the-art facilities for recycle fiber, deinking and pulp bleaching. Chemical
recovery and power generation are an integral part of the papermaking process.
The Company has broad experience in these areas and has applied its expertise in
the engineering and construction of such facilities for the pulp and paper
industry.
As with clients in the petroleum refining industry, the Company has
established formal partnering arrangements with certain clients in the pulp and
paper industry. Such arrangements provide for the delivery of on-site
engineering services, and often expand to include procurement, construction and
construction management services.
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Pharmaceuticals and Biotechnology
---------------------------------
The Company furnishes its full line of services to its clients operating
in the pharmaceuticals and biotechnology industries. The scope of services the
Company can provide its clients in these markets include feasibility studies,
preliminary and detailed design and engineering services, construction, and
construction management services. The Company can also provide conceptual
design services with emphasis on production strategy, current good manufacturing
practices ("cGMP") compliance, regulatory compliance and
qualification/validation services for pharmaceutical and biotechnology research,
development and production facilities. Accordingly, the Company is fully
capable of executing multi-million dollar, single-responsibility projects in the
areas of pharmaceuticals and biotechnology.
Typical projects for clients in this industry include sterile fill,
pharmaceutical manufacturing facilities, state-of-the-art biotechnology
laboratories and pilot plants, and design services for technologically-advanced
barrier micro-environment systems. Many projects in this industry group require
facilities with highly complex environmental controls and advanced automation
systems for manufacturing and distribution management. Over the past several
years, the Company has expanded this area of its business through acquisitions
and internal growth.
Federal Programs
----------------
Most of the Company's Federal Programs revenues are derived from
environmental projects. The Company believes it is one of the leading providers
in the United States of environmental restoration, engineering and consulting
services, including hazardous waste management and site cleanup and closure.
Although this business continues to represent an important area of the Company's
overall operations, revenues have declined over the past two years. The decline
in revenues occurred in large part due to reduced funding levels for government
projects, combined with an overall decline in governmental regulatory and
enforcement actions. Currently, there are numerous proposals being offered for
consideration to overhaul the U.S. federal regulatory process, the ultimate
outcome of which cannot yet be determined. Nevertheless, the Company believes
that the U.S. Department of Energy ("DOE") and Department of Defense ("DOD")
will continue to devote increasingly more of their resources to site remediation
and cleanup. The Company experienced an increase in activity in this area of
its business during the latter part of fiscal 1996, and believes that demand for
environmental services will continue to grow in the future.
Many of the projects for the U.S. government span several years. For
larger programs, the scope of services is such that the Company sometimes teams
with other companies in order to execute the project. The Company is currently
providing environmental restoration, engineering, construction and site
operations and maintenance services for a number of U.S. federal government
agencies including the DOE, DOD, and the U.S. Environmental Protection Agency.
Typical projects for U.S. government agencies include the preparation of
feasibility studies and performance of remedial investigations, engineering,
design and remediation services on several national programs. Many of the
Company's contracts relate to the Comprehensive Environmental Response
Compensation and Liability Act of 1980 ("CERCLA" or "Superfund") and the related
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), as reauthorized
in 1990. More recently, the Company has been awarded multi-year contracts from
the U.S. Air Force to provide full-service remedial action services for the U.S.
Air Force Center for Environmental Excellence ("AFCEE") at several bases located
in the U.S., as well as a "nationwide" award to provide services under the U.S.
Base Realignment and Closure ("BRAC") program. And in 1995, the Company was
awarded the Alaska TERC (Total Environmental Restoration Contract). The Alaska
TERC is a multi-year program to provide engineering and site cleanup services
throughout that state. The Company also provides project management services
over site cleanup activities at various government installations, as well as
detailed scientific and support services, groundwater restoration management and
action plans, and services relating to the decommissioning of nuclear weapons
production and other defense facilities.
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BACKLOG
- -------
For information regarding the Company's backlog, reference should be made
to Item 7. - Management's Discussion and Analysis of Financial Condition and
Results of Operations, incorporated by reference in this report.
CUSTOMERS
- ---------
For the years ended September 30, 1992, 1993, 1994, 1995 and 1996,
revenues from agencies of the U.S. federal government accounted for 9.4%, 14.1%,
15.4%, 11.4% and 8.7%, respectively, of total revenues. Due to the amount of
pass-through costs (see "Contracts" below) that may be incurred on construction
and maintenance projects, it is not unusual for a client in the private sector
to account for more than 10% of revenues in any given year. For the year ended
September 30, 1992, two clients in the private sector accounted for 12.5% and
10.8%, respectively, of total revenues. A different client accounted for
11.6% and 13.1% of total revenues in 1994 and 1995, respectively. No single
client in the private sector accounted for 10% or more of total revenues in
1993 or 1996.
FOREIGN OPERATIONS
- ------------------
For the years ended September 30, 1992, 1993, 1994, 1995 and 1996,
revenues from projects outside of North America were approximately 16.3%, 10.8%,
5.6%, 5.4% and 10.3%, respectively, of total revenues. For the year ended
September 30, 1992, substantially all such revenues related to the Company's
offices in Ireland. Beginning with the year ended September 30, 1993, such
revenues relate primarily to the Company's offices in the U.K. and Ireland.
As discussed above, during fiscal 1996, the Company acquired a 49% equity
interest in the Serete Group (headquartered in France). The Serete Group has
operations throughout Europe, and executes projects for commercial clients in
the chemicals, pharmaceuticals and semiconductor industries, as well as
buildings and infrastructure projects for both commercial and governmental
clients. The Company also has operations in India through its 40% interest in
an engineering and design firm specializing in projects for clients in the
chemical, pharmaceuticals and petroleum refining markets. The Company has
executed contracts jointly with the Indian company, and expects to expand this
activity in the future. The Company accounts for the Indian company using the
equity method.
CONTRACTS
- ---------
While there is considerable variation in the pricing provisions of the
contracts undertaken by the Company, they can generally be grouped into three
broad categories: Cost-reimbursable; guaranteed maximum price and fixed-price.
The following table sets forth the percentages of total revenues represented by
these types of contracts during each of the five years ended September 30, 1996:
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Cost-reimbursable 87% 90% 83% 88% 82%
Guaranteed maximum price 4 3 8 1 2
Fixed-price 9 7 9 11 16
</TABLE>
In accordance with industry practice, most of the Company's contracts are
subject to termination at the discretion of the client. Contracts typically
provide for reimbursement of costs incurred and payment of fees earned through
the date of such termination.
When the Company is directly responsible for engineering, design,
procurement and construction of a project or the maintenance of a process plant,
the Company reflects the cost of materials, equipment and subcontracts in both
revenues and costs. On other projects, where the client elects to pay for such
items directly, these amounts are not reflected in either revenues or costs.
The approximate amounts of such costs included in revenues for the years ended
September 30, 1992, 1993, 1994, 1995 and 1996 totaled $659.2 million, $610.7
million, $629.0 million, $1,001.3 million and $1,019.5 million, respectively.
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Cost-reimbursable contracts
---------------------------
Cost-reimbursable contracts provide for reimbursement of costs incurred
by the Company plus a predetermined fee, or a fee based on a percentage of the
costs incurred. The Company prefers this type of contract since it believes
that the primary basis for its selection should be its technical expertise and
professional qualifications rather than price considerations.
Guaranteed maximum price contracts
----------------------------------
Guaranteed maximum price contracts are performed in the same manner as
cost-reimbursable contracts; however, the total actual cost plus the fee cannot
exceed the guaranteed price negotiated with the client. If the total actual
cost of the contract exceeds the guaranteed maximum price, then the Company will
bear all or a portion of the excess. In those cases where the total actual cost
and fee are less than the guaranteed price, the Company will often share the
savings on a predetermined basis with the client.
Fixed-price contracts
---------------------
Fixed-price contracts include both "negotiated fixed-price" contracts and
"lump sum bid" contracts. Under a negotiated fixed-price contract, the Company
is first selected as the contractor, and then the contract price is negotiated.
Negotiated fixed-price contracts frequently exist in single-responsibility
arrangements where the Company has the opportunity to perform engineering and
design work before negotiating the total price of the project. Under lump sum
bid contracts, the Company must bid against other contractors based upon
specifications furnished by the client. This type of pricing presents certain
inherent risks, including the possibility of ambiguities in the specifications,
problems with new technologies and economic and other changes that may occur
over the contract period, that are reduced by the negotiation process. Thus,
although both types of contracts involve a firm price for the client, the lump
sum bid contract provides the greater degree of risk to the Company. However,
because of economies that may be realized during the contract term, both
negotiated fixed-price and lump sum bid contracts may offer greater profit
potential than the other types of contracts.
COMPETITION
- -----------
The Company is engaged in a highly competitive business. Some of its
competitors are larger than the Company, or are subsidiaries of larger
companies, and may possess greater resources than the Company. Furthermore,
because the engineering aspect of the business does not usually require large
amounts of capital, there is relative ease of market entry for a new potential
entrant possessing acceptable professional qualifications. Accordingly, the
Company competes with both national and international firms in sizes ranging
from very large to a wide variety of small, regional and specialty firms.
The extent of the Company's competition varies according to the industries
and markets it serves, as well as the regions in which the Company is located.
The Company's largest competitors for engineering, construction and maintenance
services for process plants include such well-known companies as Bechtel Group,
Inc., Fluor Corporation, Foster-Wheeler Corp., Raytheon Engineers, M.W. Kellogg,
Parsons Co., Brown & Root, Inc., and John Brown. In the semiconductor industry,
the Company's principal competitor is Industrial Design Corporation. In the
area of pulp and paper, the Company's principal competitors include BE&K, Brown
& Root, and Rust International. In the area of environmental engineering and
hazardous waste cleanup, the Company's principal competitors include many of the
companies listed above, as well as other specialized companies such as IT
Corporation, ICF Kaiser and Roy F. Weston, Inc.
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EMPLOYEES
- ---------
At September 30, 1996, the Company had approximately 7,350 full-time
employees. Additionally, as of September 30, 1996, there were
approximately 6,800 persons employed by the Company in the field on a project
basis. The number of such field employees varies in relation to the number and
size of the maintenance and construction projects in progress at any particular
time.
EXECUTIVE OFFICERS OF THE COMPANY
Pursuant to the requirements of Item 401(b) and 401(e) of Regulation S-K,
the following information is being furnished with respect to the Company's
executive officers:
<TABLE>
<CAPTION>
Year Joined
Name Age Position with the Company the Registrant
- -------------------------------------- --- ----------------------------------------- --------------
<S> <C> <C> <C>
Joseph J. Jacobs 80 Director and Chairman of the Board 1947
Noel G. Watson 60 President, Chief Executive Officer
and Director 1965
Robert M. Barton 74 Secretary 1957
William R. Kerler 67 Executive Vice President, Operations 1980
Donald J. Boutwell 59 Group Vice President, Field Services 1984
Andrew E. Carlson 63 Group Vice President, Field Services 1990
Socrates S. Christopher 61 President, Jacobs - Sirrine Engineers
(a Division of Jacobs Engineering
Group Inc.) 1994
Arlan C. Emmert 51 Group Vice President, Western Region 1985
Thomas R. Hammond 45 Group Vice President, Central Region 1975
John McLachlan 50 Group Vice President, Northern Region 1974
Richard J. Slater 50 Group Vice President, European Region 1980
Roger L. Williams 58 Group Vice President, Southern Region 1983
Gregory J. Landry 48 Senior Vice President, Quality and Safety 1984
Craig L. Martin 47 Senior Vice President, General Sales
and Marketing 1994
Paul A. Miskimin 56 Senior Vice President, Federal Programs 1987
John W. Prosser, Jr. 51 Senior Vice President, Finance and 1974
Administration and Treasurer
Nazim G. Thawerbhoy 49 Senior Vice President and Controller 1979
William C. Markley, III 51 Vice President, Law 1981
</TABLE>
All of the officers listed in the preceding table serve in their respective
capacities at the pleasure of the Board of Directors and, with the exception of
Messrs. Christopher and Martin, have served in executive capacities with the
Company or have been part of its management for more than five years. Prior to
joining the Company in 1994, Messrs. Christopher and Martin were part of the
management of CRSS Inc. or one of its subsidiaries for at least five years. Mr.
Christopher retired from full-time employment with the Company effective
December 1, 1996, but will continue to make his services available as a Senior
Consultant focusing on strategic acquisitions, marketing studies and other
initiatives, particularly for the Pulp and Paper industry.
Page 9
<PAGE>
ITEM 2. PROPERTIES
The Company owns and leases offices for its professional, technical and
administrative staff totaling approximately 1.8 million square feet. The
following is a list of the Company's principal locations:
<TABLE>
<CAPTION>
Country State City
------- ----- ----
<S> <C> <C>
U.S.A. California Pasadena
Long Beach
Martinez
Sacramento
Arizona Phoenix
Colorado Denver
Florida Lakeland
Louisiana Baton Rouge
New Mexico Albuquerque
North Carolina Raleigh
Ohio Cincinnati
Oregon Portland
Pennsylvania Philadelphia
South Carolina Greenville
Orangeburg
Texas Houston
Tennessee Oak Ridge
Virginia Arlington
United Kingdom - London
- Glasgow
- Manchester
Republic of Ireland - Cork
- Dublin
</TABLE>
In addition to these properties, the Company leases smaller, project
offices located throughout the United States. The Company maintains sales
offices at many of its principal locations. The Company has equipment yards
located in Houston, Texas and Baton Rouge, Louisiana. The majority of the
Company's offices are leased. The Company also rents a portion of its
construction equipment on a short-term basis.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, the Company is subject to certain
contractual guarantees and litigation. Generally, such guarantees relate to
construction schedules and plant performance. Most of the litigation involves
the Company as a defendant in workers' compensation, personal injury and other
similar lawsuits. Management believes, after consultation with counsel, that
these guarantees and litigation should not have any material adverse effect on
the Company's consolidated financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Page 10
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information required by this Item is hereby incorporated by
reference from the Financial Statements section of the Company's 1996 Annual
Report to Shareholders, copies of which financial statements section is being
delivered to the Commission (but not filed with, except to the extent
incorporated herein) as an Exhibit to this report.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is hereby incorporated by reference
from the Financial Statements section of the Company's 1996 Annual Report to
Shareholders, copies of which are being delivered to the Commission (but not
filed with, except to the extent incorporated herein) as an Exhibit to this
report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is hereby incorporated by
reference from the Financial Statements section of the Company's 1996 Annual
Report to Shareholders, copies of which are being delivered to the Commission
(but not filed with, except to the extent incorporated herein) as an Exhibit to
this report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is hereby incorporated by reference
from the Financial Statements section of the Company's 1996 Annual Report to
Shareholders, copies of which are being delivered to the Commission (but not
filed with, except to the extent incorporated herein) as an Exhibit to this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL AND
DISCLOSURE MATTERS
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Paragraph (a) and Paragraphs (c) through (g) of
Item 401 and by Item 405 of Regulation S-K is hereby incorporated by reference
from the Company's definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A within 120 days after the close of the Company's
fiscal year.
See the information under the caption "Executive Officers of the Company"
in Part I of this report for information required by Paragraph (b) of Item 401
of Regulation S-K.
Page 11
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is hereby incorporated by reference
from the Company's definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A within 120 days after the close of the Company's
fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is hereby incorporated by reference
from the Company's definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A within 120 days after the close of the Company's
fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is hereby incorporated by reference
from the Company's definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A within 120 days after the close of the Company's
fiscal year.
Page 12
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The Company's consolidated financial statements at September 30, 1996
and 1995 and for each of the three years in the period ended September
30, 1996, together with the report of the independent auditors on
those consolidated financial statements are hereby incorporated by
reference from the Financial Statements section of the Company's 1996
Annual Report to Shareholders, copies of which are being delivered to
(but not filed with, except to the extent incorporated herein) the
Commission as an exhibit to this report.
(b) Not applicable.
(c) Exhibits and Index to Exhibits:
2.1 Purchase Agreement dated July 29, 1994 between Jacobs Engineering
Group Inc. and CRSS Inc. including a schedule of annexes and
exhibits. Filed as Exhibit 1. to the Registrant's Current Report
on Form 8-K dated August 5, 1994 and incorporated herein by
reference.
3.1 Certificate of Incorporation of the Registrant, as amended.
Filed as Exhibit 3.1 to the Registrant's Quarterly Report on Form
10-Q for the period ended June 30, 1995 and incorporated herein
by reference.
3.2 Bylaws of the Registrant, as amended. Filed as Exhibit 3.2 to
the Registrant's Quarterly Report on Form 10-Q for the period
ended June 30, 1995 and incorporated herein by reference.
4.1 See Sections 5 through 18 of Exhibit 3.1.
4.2 See Article II, Section 3.03 of Article III, Article VI and
Section 8.04 of Article VIII of Exhibit 3.2.
4.3 Rights Agreement dated as of December 20, 1990 by and between
Registrant and First Interstate Bank, Ltd. as Rights Agent.
Filed as Exhibit 4.4 to Registrant's Quarterly Report on Form 10-
Q for the period ended June 30, 1995 and incorporated herein by
reference.
10.1 The Jacobs Engineering Group Inc. 1981 Executive Incentive Plan
(As Amended and Restated). Filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the period ended
June 30, 1995 and incorporated herein by reference.
10.2 The Jacobs Engineering Group Inc. Incentive Bonus Plan for
Officers and Key Managers. Filed as Exhibit 10.2 to the
Registrant's Quarterly Report on Form 10-Q for the period ended
June 30, 1995 and incorporated herein by reference.
10.3 Agreement dated as of November 30, 1993 between the Registrant
and Dr. Joseph J. Jacobs, and the Agreement dated as of November
30, 1994 between the Registrant and Dr. Joseph J. Jacobs. Filed
as Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q
for the period ended June 30, 1995 and incorporated herein by
reference.
Page 13
<PAGE>
10.4 Agreement dated as of November 30, 1995 between the Registrant
and Dr. Joseph J. Jacobs. Filed as Exhibit 10.4 to the
Registrant's 1995 Annual Report on Form 10-K and incorporated
herein by reference.
(S) 10.5 Agreement dated as of December 5, 1996 between the
Registrant and Dr. Joseph J. Jacobs.
10.6 The Executive Security Program of Jacobs Engineering Group Inc.
Filed as Exhibit 10.4 to the Registrant's Quarterly Report on
Form 10-Q for the period ended June 30, 1995 and incorporated
herein by reference.
10.7 Jacobs Engineering Group Inc. and Subsidiaries 1991 Executive
Deferral Plan, effective June 1, 1991. Filed as Exhibit 10.5 to
the Registrant's Quarterly Report on Form 10-Q for the period
ended March 31, 1995 and incorporated herein by reference.
10.8 Jacobs Engineering Group Inc. and Subsidiaries 1993 Executive
Deferral Plan, effective December 1, 1993. Filed as Exhibit 10.6
to the Registrant's Quarterly Report on Form 10-Q for the period
ended March 31, 1995 and incorporated herein by reference.
10.9 The Jacobs Engineering Group Inc. 1989 Employee Stock Purchase
Plan. Filed as Exhibit 10.9 to the Registrant's Quarterly Report
on Form 10-Q for the period ended June 30, 1995 and incorporated
herein by reference.
10.10 Form of Indemnification Agreement entered into between the
Registrant and its officers and directors. Filed as Exhibit
10.10 to the Registrant's Quarterly Report on Form 10-Q for the
period ended June 30, 1995 and incorporated herein by reference.
10.11 Jacobs Engineering Group Inc. 401(k) Plus Savings Plan and
Trust. Filed as Exhibit 10.11 to the Registrant's Quarterly
Report on Form 10-Q for the period ended March 31, 1995 and
incorporated herein by reference.
(S) 11. Statement of computation of net income per outstanding share
of common stock is hereby incorporated by reference from the
Financial Statements section of the Company's 1996 Annual Report
to Shareholders, copies of which are being delivered to (but not
filed with, except to the extent incorporated herein) the
Commission as an exhibit to this report.
(S) 13. Financial Statements section of Jacobs Engineering Group
Inc. Annual Report to Shareholders for the fiscal year ended
September 30, 1996.
(S) 21. List of Subsidiaries of Jacobs Engineering Group Inc.
(S) 23. Consent of Independent Auditors.
(S) 27.1 Financial Data Schedules.
______________
(S) Being filed herewith.
Page 14
<PAGE>
UNDERTAKINGS
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned Registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into the Registrant's Registration Statements on Form
S-8 Nos. 33-45914 (filed February 21, 1992) and 33-45927 (filed February 24,
1992):
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by final adjudication of such issue.
Page 15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
JACOBS ENGINEERING GROUP INC.
Dated: December 27, 1996 By: NOEL G. WATSON
----------------------------
Noel G. Watson
President, Chief Executive
Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
NOEL G. WATSON Director and December 27, 1996
- ----------------------------------- Principal Executive Officer
Noel G. Watson
JOSEPH J. JACOBS Director December 27, 1996
- -----------------------------------
Joseph J. Jacobs
JOSEPH F. ALIBRANDI Director December 27, 1996
- -----------------------------------
Joseph F. Alibrandi
PETER H. DAILEY Director December 27, 1996
- -----------------------------------
Peter H. Dailey
ROBERT B. GWYN Director December 27, 1996
- -----------------------------------
Robert B. Gwyn
LINDA K. JACOBS Director December 27, 1996
- -----------------------------------
Linda K. Jacobs
J. CLAYBURN LaFORCE Director December 27, 1996
- -----------------------------------
J. Clayburn LaForce
DALE R. LAURANCE Director December 27, 1996
- -----------------------------------
Dale R. Laurance
LINDA FAYNE LEVINSON Director December 27, 1996
- -----------------------------------
Linda Fayne Levinson
Director December 27, 1996
- -----------------------------------
David M. Petrone
JAMES L. RAINEY, JR. Director December 27, 1996
- -----------------------------------
James L. Rainey, Jr.
JOHN W. PROSSER, JR. Senior Vice President December 27, 1996
- ----------------------------------- Finance and Administration,
John W. Prosser, Jr. and Treasurer (Principal
Financial Officer)
NAZIM G. THAWERBHOY Senior Vice President and December 27, 1996
- ----------------------------------- Controller (Principal Accounting
Nazim G. Thawerbhoy Officer)
</TABLE>
Page 16
<PAGE>
EXHIBIT 10.5
AGREEMENT
---------
This agreement is made as of the 5th day of December, 1996, between JACOBS
ENGINEERING GROUP, INC. a Delaware corporation ("Company") and JOSEPH J. JACOBS
("Jacobs").
In accordance with previous practice, the term for the ending of the
outstanding November 30, 1993 employment agreement between the parties is
extended from September 30, 2000 to September 30, 2001. All of the other
provisions of the agreement shall remain in force.
IN WITNESS WHEREOF, the Company has caused this agreement to be executed by
its duly authorized representatives and Jacobs has affixed his signature, as of
the date first above written.
JOSEPH J. JACOBS
("Jacobs")
/s/ Joseph J. Jacobs
----------------------------
335 West Bellevue Avenue
Pasadena, California 91105
JACOBS ENGINEERING GROUP INC.
("Company")
By /s/ Noel G. Watson
-------------------------
Noel G. Watson,
President
By /s/ John W. Prosser, Jr.
-------------------------
John W. Prosser, Jr.,
Senior Vice President
Finance and Administration
<PAGE>
EXHIBIT 13
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT AUDITORS
SEPTEMBER 30, 1996
<PAGE>
SELECTED HIGHLIGHTS
For Fiscal Years Ended September 30
(Dollars in thousands, except per-share information)
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $1,798,970 $1,723,057 $1,165,754
Net income 40,360 32,242 18,767
---------- ---------- ----------
Per-share information:
Net income $ 1.56 $ 1.27 $ 0.75
Net book value 10.93 9.41 7.96
Closing year-end stock
price 22.50 24.875 24.375
---------- ---------- ----------
Total assets $ 572,505 $ 533,947 $ 504,364
Stockholders' equity 283,387 238,761 200,433
Return on average equity 15.46% 14.68% 10.03%
Stockholders of record 1,965 2,971 2,635
---------- ---------- ----------
Backlog:
Engineering services $ 845,300 $ 828,400 $ 793,060
Total 2,750,200 2,625,000 2,500,000
---------- ---------- ----------
Permanent staff 7,350 7,600 6,940
---------- ---------- ----------
</TABLE>
Net income for fiscal 1994 included special charges totaling $10,200, or $0.40
per share.
<PAGE>
Selected Financial Data
- -----------------------
For Fiscal Years Ended September 30
(In thousands, except per-share information)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Results of Operations:
Revenues $1,798,970 $1,723,057 $1,165,754 $1,142,926 $1,106,427
Net income 40,360 32,242 18,767 28,670 26,605
---------- ---------- ---------- ---------- ----------
Financial Position:
Current ratio 1.68 to 1 1.44 to 1 1.41 to 1 1.61 to 1 1.56 to 1
Working capital $ 155,569 $ 113,339 $ 106,058 $ 100,688 $ 92,706
Current assets 383,644 368,614 367,485 264,949 258,206
Total assets 572,505 533,947 504,364 351,020 316,731
Long-term debt 36,300 17,799 25,000 - -
Stockholders' equity 283,387 238,761 200,433 173,797 139,813
Return on average equity 15.46% 14.68% 10.03% 18.28% 21.56%
Backlog:
Engineering services $ 845,300 $ 828,400 $ 793,060 $ 736,600 $ 647,100
Total 2,750,200 2,625,000 2,500,000 1,858,600 1,760,000
---------- ---------- ---------- ---------- ----------
Per-share Information:
Net income $ 1.56 $ 1.27 $ 0.75 $ 1.15 $ 1.11
Stockholders' equity 10.93 9.41 7.96 6.96 5.81
---------- ---------- ---------- ---------- ----------
Average Number of Common
and Common Stock
Equivalents Outstanding 25,921 25,384 25,173 24,964 24,070
---------- ---------- ---------- ---------- ----------
</TABLE>
Net income for fiscal 1994 included special charges totaling $10,200, or $0.40
per share.
Net income for fiscal 1992 included a net gain of $2,118, or $0.09 per share,
from the sale of 40 percent of the Company's holdings of the common stock of
Genetics Institute, Inc.
<PAGE>
Selected Financial Data
- -----------------------
For Fiscal Years Ended September 30
(In thousands, except per-share information)
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987
---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Results of Operations:
Revenues $1,036,289 $ 881,757 $793,577 $757,410 $320,307
Net income 20,385 14,390 10,220 6,552 3,512
---------- ---------- -------- -------- --------
Financial Position:
Current ratio 1.41 to 1 1.24 to 1 1.24 to 1 1.18 to 1 1.42 to 1
Working capital $ 60,580 $ 39,544 $ 32,965 $ 22,021 $ 26,657
Current assets 206,576 202,404 172,489 143,951 89,629
Total assets 260,142 253,707 212,680 179,642 116,849
Long-term debt - - 6,332 9,244 12,277
Stockholders' equity 106,936 82,964 58,806 37,503 30,967
Return on average equity 21.47% 20.30% 21.22% 19.14% 12.13%
Backlog:
Engineering services $ 457,300 $ 329,400 $222,830 $154,950 $ 87,736
Total 1,605,000 1,343,300 970,010 822,252 351,554
---------- ---------- -------- -------- --------
Per-share Information:
Net income $ 0.86 $ 0.64 $ 0.48 $ 0.34 $ 0.18
Stockholders' equity 4.50 3.70 2.74 1.93 1.62
---------- ---------- -------- -------- --------
Average Number of Common
and Common Stock
Equivalents Outstanding 23,763 22,439 21,501 19,390 19,150
---------- ---------- -------- -------- --------
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The following table sets forth total revenues from each of the industry groups
and markets serviced by the Company for each year in the three year period ended
September 30, 1996 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Chemicals $ 452,448 $ 377,731 $ 315,991
Refining 417,739 480,472 372,769
Semiconductor 268,520 264,492 83,477
Buildings and
infrastructure 189,834 174,183 88,228
Pulp and paper 170,553 85,476 7,258
Pharmaceuticals and
biotechnology 147,840 123,683 97,301
Federal programs 145,275 175,200 175,846
Other 6,761 41,820 24,884
---------- ---------- ----------
$1,798,970 $1,723,057 $1,165,754
========== ========== ==========
</TABLE>
The following table sets forth total revenues from each of the types of services
the Company provides its clients for each year in the three year period ended
September 30, 1996 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Engineering services $ 627,622 $ 588,399 $ 476,491
Field services:
Construction 925,681 881,574 456,750
Maintenance 245,667 253,084 232,513
---------- ---------- ----------
$1,798,970 $1,723,057 $1,165,754
========== ========== ==========
</TABLE>
1996 Compared to 1995:
- ----------------------
Consolidated revenues increased 4.4 percent from 1995 to 1996. Revenues from
the Company's engineering services increased 6.7 percent from 1995 to 1996. The
Company considers the level of engineering services it provides an important
indicator of the Company's overall financial performance because engineering
services absorb a significant portion of the Company's general and
administrative expenses. The Company also believes that engineering services
activity is a leading indicator of possible future opportunities to provide
construction and construction management services. The increase in engineering
services revenues from 1995 to 1996 was evidenced by an increase in the number
of professional services hours billed to projects. The Company billed 12.8
million hours to projects in 1996; this was 0.8 million more hours than the
number billed last year.
Revenues from field services activities increased 3.2 percent from 1995 to 1996.
While revenues from construction activities increased 5.0 percent from last
year, revenues from
<PAGE>
maintenance activities were down 2.9 percent from the previous year.
Construction revenues increased during 1996 in spite of the fact the Company
completed construction on two large projects during the year (one for a client
in the refining industry, and another for a client in the semiconductor
industry), and it substantially completed construction on a third major project
(for a client in the buildings and infrastructure industry group). Also
contributing to the increase in field services revenues from 1995 to 1996 was an
$18.2 million increase in subcontract and procurement activity (the costs of
which are included in both revenues and costs).
As a percent of revenues, direct costs of contracts was 88.4 percent in 1996,
versus 89.0 percent in 1995. The percentage relationship between direct costs
of contracts and revenues will fluctuate from year to year depending on a
variety of factors, including the mix of business and services in the years
being compared. In general, the decrease in this percentage relationship from
1995 to 1996 was due to a proportionally higher percentage of the Company's
total business volume coming from engineering services relative to field
services.
The Company's selling, general and administrative ("S,G & A") expenses totalled
$143.5 million for 1996; this was only $6.9 million, or 5.0 percent, more than
the 1995 amount. The increase in S,G & A expenses corresponds to the increase
in the overall business volume discussed above, and reflects the Company's
continuing efforts to control such expenses throughout its operations.
The Company's operating profit (defined as total revenues, less direct costs of
contracts, and selling, general and administrative expenses) totalled $64.6
million for 1996; this was $11.9 million more than the 1995 amount. In general,
the improvement was due to increased business volume, combined with higher
margin rates for the Company's services.
Interest income, net totalled $1.4 million for 1996; this was $1.1 million more
than the 1995 amount. The increase in net interest income was due primarily to
higher levels of cash invested during 1996 as compared to 1995, combined with
slightly better rates of interest earned on such investments.
Other income, net totalled $0.8 million for 1996; this was $0.4 million more
than the 1995 amount. The increase in other income, net was due primarily to
higher gains from sales of marketable securities and other assets in 1996 as
compared to 1995.
1995 Compared to 1994:
- ----------------------
Consolidated revenues increased 47.8 percent from 1994 to 1995. Of the
increase, approximately 55 percent was due to the inclusion in 1995 of a full
twelve-months results of operations of two businesses the Company acquired in
July 1994. The Company purchased substantially all of the assets of CRS Sirrine
Engineers, Inc. ("Sirrine"), subject to certain assumed liabilities, and all of
the issued and outstanding equity securities of CRSS Constructors, Inc. and CRSS
International, Inc. (together, "CRSS Constructors" - see Note 1 to the
Consolidated Financial Statements).
Engineering services revenues increased 23.5 percent from 1994 to 1995. Of the
increase, approximately 76 percent was due to the inclusion of a full twelve-
months of operations of Sirrine. The increase in engineering services revenues
was evidenced by an increase in the number of professional services hours billed
to projects. The Company billed 12.0
<PAGE>
million hours to projects in 1995; this was 2.8 million more hours than the
number billed in 1994.
Revenues from field services activities increased 64.6 percent from 1994 to
1995. Most of the increase was due to higher construction activities, and in
particular from projects being executed and managed by Sirrine and CRSS
Constructors. Also contributing to the increase in field services revenues from
1994 to 1995 was a $372.3 million increase in subcontract and procurement
activity.
As a percent of revenues, direct costs of contracts was 89.0 percent in 1995,
versus 87.9 percent in 1994. The increase in this percentage relationship from
1994 to 1995 was due primarily to the acquisition of CRSS Constructors, which
contributed to an increase in field services revenues relative to engineering
services revenues.
The Company's S,G & A expenses totalled $136.6 million for 1995; this was $27.0
million more than the 1994 amount. Most of the increase was attributable to the
effects of the inclusion in 1995 of a full year's results of operations of
Sirrine and CRSS Constructors.
The Company's operating profit totalled $52.7 million for 1995; this was $20.8
million more than 1994. Approximately $15.8 million of the increase relates to
the special charge recorded in 1994 (see below) which decreased operating profit
for that year. The balance of the improvement was due to increased business
volume combined with higher margin rates.
Other income, net totalled $0.3 million for 1995, as compared to other expense,
net of $0.7 million for 1994. The variance was due primarily to higher
employee-benefit related costs recorded in 1994 than in 1995.
Special Charge:
- ---------------
During the fourth quarter of 1994, the Company recorded a special charge
totaling $10.2 million after taxes, or $0.40 per share. In general, the special
charge related to various acquisitions the Company had completed in 1993 and
1994, which added overhead and administrative infrastructures that were in many
cases duplicative of resources already existing within the Company. In 1994,
the Company began to implement plans to consolidate certain of its offices, and
to review where certain projects were being executed. In certain instances,
projects and personnel were re-assigned to other offices within the Company.
During 1995, the Company substantially completed its plans and programs. During
1996 and 1995, the Company charged $2.9 million and $2.2 million, respectively,
of cash expenditures and write-offs against these reserves.
BACKLOG
The following table summarizes the Company's total backlog at September 30,
1996, 1995, and 1994 (in millions):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Engineering services $ 845.3 $ 828.4 $ 793.1
Total 2,750.2 2,625.0 2,500.0
-------- -------- --------
</TABLE>
At any given time, backlog represents the amount of revenues the Company expects
to record in the future from performing work under contracts that have been
awarded to it.
<PAGE>
With respect to maintenance projects, however, it is the Company's policy to
include in backlog only the amount of revenues it expects to receive during the
succeeding year, regardless of the remaining life of the contract, unless the
Company does not expect the contract to be renewed. With respect to contracts
relating to projects for agencies of the U.S. federal government, it is the
Company's policy to include in backlog the full contract award.
Total backlog at September 30, 1996 included approximately $1.0 billion of
contracts for work to be performed either directly or indirectly for agencies of
the federal government. This compares to approximately $1.1 billion at both
September 30, 1995 and 1994. Most of these contracts extend beyond one year.
In general, these contracts must be funded annually (i.e., the amounts to be
spent under the contract must be appropriated by Congress to the procuring
agency, and then the agency must allot these sums to the specific contracts).
Net of work-off, the Company's backlog increased $125.0 million from 1994 to
1995, and it increased by $125.2 million from 1995 to 1996. Most of the
1995 increase was attributable to new project awards in the semiconductor and
pulp and paper areas of the Company's business. Most of the 1996 increase was
due to new awards in the refining and chemicals areas of the Company's business,
combined with scope expansions on a project in the semiconductor industry.
Of total backlog at September 30, 1996, the Company estimates that approximately
one-half will be realized as revenues within the next year.
In accordance with industry practice, substantially all of the Company's
contracts may be terminated by the client. However, the Company has not
experienced cancellations which have had a material effect on the reported
backlog amounts. In the situation where a client terminates a contract, the
Company would ordinarily be entitled to receive payment for work performed up to
the date of termination and, in certain instances, may be entitled to allowable
termination and cancellation costs. Additionally, the Company's backlog at any
given time is subject to changes in the scope of services to be provided as well
as increases or decreases in costs relating to the contracts included therein.
EFFECTS OF INFLATION
The effects of inflation on the Company's financial condition and results of
operations have decreased in recent years due primarily to the Company receiving
an increasing amount of its revenues under cost-reimbursable type contracts.
To the extent permitted by competition, the Company continues to mitigate its
exposure to the effects of inflation by, among other things, emphasizing
contracts which are either cost-reimbursable or negotiated fixed-price.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents increased $23.7 million during 1996.
This compares to a net decrease of $6.5 million during 1995, and a net increase
of $25.1 million during 1994. The current year increase was due primarily to
cash provided by operations ($54.3 million) and financing activities ($9.6
million), offset in part by cash used in investing activities ($40.0 million).
<PAGE>
Operations provided $54.3 million of cash and cash equivalents in 1996. This
compares to net contributions of cash of $32.0 million in 1995 and $41.3 million
in 1994. The $22.3 million increase in cash provided by operations from 1995 to
1996 occurred primarily as a result of higher net income ($8.1 million) and
depreciation and amortization expense ($3.1 million), combined with the positive
impact of the timing of cash receipts and payments relating to receivables and
prepaid expenses, and trade payables and liabilities ($9.6 million).
The Company's investing activities used $40.0 million of cash and cash
equivalents in 1996. This compares to net uses of cash of $45.0 million in 1995
and $51.1 million in 1994. The $5.0 million decrease from 1995 to 1996 was due
primarily to the $4.7 million payment the Company made in 1995 to complete the
acquisition of Sirrine and CRSS Constructors; there was no similar payment made
in 1996. Additions to property and equipment decreased $18.3 million from 1995
to 1996. Included in last year's additions was the purchase of real property in
Dublin, Ireland, which included the Company's office building. The total
purchase price was approximately $18.4 million, and was financed entirely with
an Irish Punt mortgage loan. Additions to investments increased $18.7 million
from 1995 to 1996. Included in the 1996 figure is the purchase of a 49 percent
interest in the engineering and construction operations of the Serete Group
(headquartered in France). The purchase price totalled $19.0 million, and was
financed entirely with French Franc-denominated bank debt. The purchase
agreement provides for the Company to increase its ownership interest if the
Serete Group achieves certain operating goals over the two years following the
initial investment.
The Company's financing activities provided $9.6 million of cash and cash
equivalents in 1996. This compares to a net contribution to cash of $6.6
million in 1995 and $34.4 million in 1994. The increase in cash provided from
financing activities from 1995 to 1996 was due primarily to higher cash flows
from the issuance of stock to employees ($1.7 million), increased bank
borrowings, net of repayments ($3.1 million), and other, miscellaneous cash
flows ($1.8 million). Offsetting these amounts in part was cash used to
repurchase the Company's common stock ($3.6 million in 1996). In July 1996, the
Company announced a stock buy-back program of up to 1.0 million shares. During
the remainder of 1996, the Company purchased 160,000 shares of stock in the open
market, most of which were used to fund the share requirements under the
Company's 1989 Employee Stock Purchase Plan.
The Company believes it has adequate capital resources available to fund
operations in 1997 and beyond. The Company's consolidated working capital
position totalled $155.6 million at September 30, 1996; this was $42.2 million
more than the comparable 1995 amount. At September 30, 1996, the Company had a
total of $51.7 million available under all of its short-term bank credit
facilities, against which $0.7 million was outstanding in the form of direct
borrowings (relating entirely to the Company's U.K. subsidiary) and $1.5 million
was utilized in support of outstanding letters of credit.
EFFECT OF RECENTLY-ISSUED ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board adopted Statement of
Financial Accounting Standards No. 123 - Accounting for Stock-Based Compensation
("SFAS No. 123"). SFAS No. 123 allows companies either to continue to account
for stock option awards using existing standards, or they may adopt a new, fair
value based method of accounting as prescribed in SFAS No. 123. The Company
does not intend to change its
<PAGE>
method of accounting for stock issued to employees. The pro forma disclosure
requirements of SFAS No. 123 will be effective for the Company beginning next
year.
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995
(In thousands, except share information)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 62,865 $ 39,118
Marketable securities 2,764 2,806
Receivables 276,668 292,108
Deferred income taxes 37,564 31,980
Prepaid expenses and other 3,783 2,602
-------- --------
Total current assets 383,644 368,614
-------- --------
Property, Equipment and Improvements, Net 79,009 80,115
-------- --------
Other Noncurrent Assets:
Goodwill, net 40,481 41,882
Other 69,371 43,336
-------- --------
Total other noncurrent assets 109,852 85,218
-------- --------
$572,505 $533,947
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 694 $ 16,632
Accounts payable 60,799 63,767
Accrued liabilities 110,061 109,168
Customers' advances in excess of
related revenues 47,052 54,496
Income taxes payable 9,469 11,212
-------- --------
Total current liabilities 228,075 255,275
-------- --------
Long-term Debt 36,300 17,799
-------- --------
Deferred Gains on Real Estate Transactions 1,025 1,845
-------- --------
Other Deferred Liabilities 23,718 20,267
-------- --------
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 - 25,745,329
and 25,495,711 shares, respectively 25,745 25,496
Additional paid-in capital 49,191 43,957
Retained earnings 207,639 168,203
Other 1,039 1,105
-------- --------
283,614 238,761
Less, cost of common stock held
in treasury (10,000 shares in 1996,
none in 1995) 227 -
-------- --------
Total stockholders' equity 283,387 238,761
-------- --------
$572,505 $533,947
======== ========
</TABLE>
See the accompanying notes.
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
(In thousands, except per-share information)
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Revenues $1,798,970 $1,723,057 $1,165,754
---------- ---------- ----------
Costs and Expenses:
Direct costs of contracts 1,590,906 1,533,832 1,024,361
Selling, general and administrative
expenses 143,456 136,562 109,574
Interest income, net (1,444) (359) (276)
Other (income) expense, net (769) (359) 718
---------- ---------- ----------
1,732,149 1,669,676 1,134,377
---------- ---------- ----------
Income before taxes 66,821 53,381 31,377
---------- ---------- ----------
Income Tax Expense 26,461 21,139 12,610
---------- ---------- ----------
Net Income $ 40,360 $ 32,242 $ 18,767
========== ========== ==========
Net Income Per Share $1.56 $1.27 $0.75
========== ========== ==========
</TABLE>
See the accompanying notes.
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
(In thousands)
<TABLE>
<CAPTION>
Additional Treasury
Common Paid-in Retained Stock
Stock Capital Earnings Other (at cost)
------- ---------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Balances, September 30, 1993 $24,757 $30,436 $118,555 $ 48 $ -
Net foreign currency
translation adjustment - - - 1,302 -
Net unrealized gains on
marketable securities - - - 531 -
Repurchases of common
stock (59) (265) (1,116) - -
Exercises of stock options,
including the related
income tax benefits 397 7,080 - - -
Net income - - 18,767 - -
------- ------- -------- ------- -------
Balances, September 30, 1994 25,095 37,251 136,206 1,881 -
Net foreign currency
translation adjustment - - - 293 -
Net unrealized gains on
marketable securities - - - 213 -
Repurchases of common
stock (52) (900) (245) - -
Exercises of stock options,
including the related
income tax benefits 392 6,317 - - -
Issuance of restricted stock,
net of amortization 61 1,289 - (1,282) -
Net income - - 32,242 - -
------- ------- -------- ------- -------
Balances, September 30, 1995 25,496 43,957 168,203 1,105 -
Net foreign currency
translation adjustment - - - 8 -
Net unrealized losses on
marketable securities - - - (123) -
Repurchases of common
stock (13) (23) (716) - (3,590)
Exercises of stock options,
including the related
income tax benefits 253 5,028 (208) - 3,363
Issuance of restricted stock,
net of amortization 9 229 - 49 -
Net income - - 40,360 - -
------- ------- -------- ------- -------
Balances, September 30, 1996 $25,745 $49,191 $207,639 $ 1,039 $ (227)
======= ======= ======== ======= =======
</TABLE>
See the accompanying notes.
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 40,360 $ 32,242 $ 18,767
Adjustments to reconcile net income to net
cash flows from operations:
Depreciation and amortization 18,118 15,013 11,973
Amortization of deferred gains (820) (820) (966)
(Gains) losses on disposals of property,
equipment and other assets (259) 22 (1,058)
Changes in assets and liabilities,
excluding the effects of
businesses acquired:
Receivables 15,255 (7,402) (17,506)
Prepaid expenses and other (1,182) 737 510
Accounts payable (2,911) (24,146) 941
Accrued liabilities (1,588) 11,791 505
Customers' advances (7,420) 7,082 14,862
Income taxes payable (1,743) 2,725 (2,427)
Deferred income taxes (3,818) (5,313) (5,474)
Special charge not requiring cash - - 21,140
Other 287 68 -
-------- -------- --------
Net cash provided 54,279 31,999 41,267
-------- -------- --------
Cash Flows from Investing Activities:
Additions to property and equipment (16,694) (34,971) (24,271)
Disposals of property and equipment 745 784 417
Increase in other assets, net (2,689) (3,228) (6,400)
Additions to investments (21,705) (3,001) (5,150)
Proceeds from sales of investments 301 - 642
Purchases of marketable securities - - (873)
Proceeds from sales of marketable
securities - 91 18,040
Acquisitions of businesses - (4,683) (33,513)
-------- -------- --------
Net cash used (40,042) (45,008) (51,108)
-------- -------- --------
Cash Flows from Financing Activities:
Exercises of stock options, including
the related income tax benefits 8,258 6,521 6,824
Purchases of treasury stock (3,590) - -
Increases to long-term debt 18,881 17,799 25,000
Payments on long-term debt - (25,000) -
Increase (decrease) in short-term
borrowings (15,739) 7,242 2,608
Other, net 1,768 - -
-------- -------- --------
Net cash provided 9,578 6,562 34,432
-------- -------- --------
Effect of Exchange Rate Changes (68) (46) 505
-------- -------- --------
Increase (Decrease) in Cash and Cash
Equivalents 23,747 (6,493) 25,096
Cash and Cash Equivalents at Beginning
of Period 39,118 45,611 20,515
-------- -------- --------
Cash and Cash Equivalents at End of Period $ 62,865 $ 39,118 $ 45,611
======== ======== ========
</TABLE>
See the accompanying notes.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Basis of Presentation
---------------------
The consolidated financial statements include the accounts of Jacobs
Engineering Group Inc. and its subsidiaries (the "Company"). All significant
intercompany accounts and transactions have been eliminated.
Description of the Business
---------------------------
The Company's principal business is that of providing professional
engineering, construction and construction management, and maintenance services
to its industrial, commercial and government clients. The Company provides its
services from offices located throughout the United States, the United Kingdom
and Ireland, as well as through affiliated entities (investees which the Company
accounts for using the equity method) located throughout Europe and India. The
Company provides its services under cost-reimbursable, cost-reimbursable with a
guaranteed maximum, and fixed-price contracts. The percentage of revenues
realized from each of these types of contracts in each of the years ended
September 30, 1996, 1995, and 1994 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Cost-reimbursable 82% 88% 83%
Guaranteed maximum 2 1 8
Fixed-price 16 11 9
---- ---- ----
</TABLE>
For the years ended September 30, 1996, 1995, and 1994, agencies of the
U.S. federal government accounted for 8.7 percent, 11.4 percent and 15.4
percent, respectively, of total revenues. Within the private sector, no single
client accounted for 10 percent or more of total revenues in 1996. One client
accounted for 13.1 percent and 11.6 percent of total revenues in 1995 and 1994,
respectively.
Revenue Accounting for Contracts
--------------------------------
In general, the Company recognizes revenues at the time services are
performed. On cost-reimbursable contracts, revenue is recognized as costs are
incurred, and includes applicable fees earned through the date services are
provided. On fixed-price contracts, revenues are recorded using the percentage-
of-completion method of accounting by relating contract costs incurred to date
to total estimated contract costs at completion. Contract costs include both
direct and indirect costs. Contract losses are provided for in their entirety
in the period they become known, without regard to the percentage-of-completion.
Some of the Company's contracts with the U.S. federal government, as well
as certain contracts with commercial clients, provide that contract costs
(including indirect costs) are subject to audit and adjustment. For all such
contracts, revenues have been recorded based upon those amounts expected to be
realized upon final settlement.
As is common in the industry, the Company executes certain contracts
jointly with third parties through partnerships and joint ventures. For certain
of these contracts, the Company recognizes its proportionate share of venture
revenues, costs and operating income in its consolidated statements of income.
<PAGE>
When the Company is responsible for the procurement of materials,
equipment, or subcontracts, it includes such amounts in both revenues and costs.
The approximate amount of such costs included in revenues for each of the years
ended September 30, 1996, 1995, and 1994 was $1,019,499,500, $1,001,277,400 and
$629,001,500, respectively.
Foreign Operations
------------------
Revenues from the Company's U.K. and Irish operations totalled
$176,426,600, $92,514,400 and $64,790,400 for the years ended September 30,
1996, 1995, and 1994, respectively, and were earned from unaffiliated clients
located primarily in Europe.
Operating profit (defined as total revenues, less direct costs of
contracts, and selling, general and administrative expenses) for the U.K. and
Irish operations was approximately $6,494,400, $1,053,300 and $617,900 for 1996,
1995, and 1994, respectively. Identifiable assets of the U.K. and Irish
operations totalled $83,916,600 and $74,265,300 at September 30, 1996 and 1995,
respectively.
Cash Equivalents
----------------
The Company considers all highly liquid investments with original
maturities of less than three months as cash equivalents. Cash equivalents at
September 30, 1996 and 1995 consisted primarily of time certificates of deposit.
Marketable Securities and Investments
-------------------------------------
The Company's investments in equity and debt securities have been
classified as either trading securities (shown as "Marketable securities" in the
accompanying consolidated balance sheets), held-to-maturity securities or
available-for-sale securities (the latter two are included as long-term
investments in "Other noncurrent assets" in the accompanying consolidated
balance sheets). Management determines the appropriate classification of all
its investments at the time of purchase and reviews such designations at each
balance sheet date.
Trading securities are stated at fair value with unrealized gains or losses
included in "Other income, net" in the accompanying consolidated statements of
income. Held-to-maturity securities are carried at cost, or amortized cost if a
premium was paid or a discount received at the time of purchase. Marketable
equity securities not held for trading and debt securities not classified as
held-to-maturity are classified as available-for-sale. Available-for-sale
securities are stated at fair value, with the unrealized gains or losses, net of
taxes, reported in the "Other" component of stockholders' equity. The amount of
unrealized gains, net of taxes, recorded at September 30, 1996 and 1995 totalled
$621,600 and $744,000, respectively.
<PAGE>
The following table summarizes certain information regarding the Company's
available-for-sale equity securities at September 30, 1996 and 1995, and for
each of the years then ended (in thousands):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Total cost (specific identification
method) $ 368 $ 414
Gross unrealized gains 1,351 1,241
Estimated fair value 1,719 1,655
Gross realized gains 156 -
Gross proceeds from sales 201 -
------ ------
</TABLE>
Receivables and Customers' Advances
-----------------------------------
Included in receivables at September 30, 1996 and 1995 were unbilled
amounts of $50,770,100 and $52,790,600, respectively. Unbilled receivables
represent amounts earned under contracts in progress, but not yet billable under
the terms of those contracts. These amounts become billable according to the
contract terms which usually consider the passage of time, achievement of
certain milestones or completion of the project. Included in unbilled
receivables at September 30, 1996 and 1995 were contract retentions totaling
$12,616,000 and $14,710,100, respectively. Substantially all unbilled
receivables are billed and collected in the subsequent fiscal year.
Customers' advances in excess of related revenues represent cash collected
from clients on contracts in advance of revenues earned thereon, as well as
billings to clients in excess of costs and earnings on uncompleted contracts.
Substantially all such amounts are earned in the subsequent fiscal year.
Property, Equipment and Improvements
------------------------------------
Property, equipment and improvements are stated at cost and consisted of
the following at September 30, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Land $ 10,028 $ 10,529
Buildings 38,762 38,976
Equipment 100,874 87,186
Leasehold improvements 12,812 12,319
-------- --------
162,476 149,010
Less - accumulated depreciation
and amortization 83,467 68,895
-------- --------
$ 79,009 $ 80,115
======== ========
</TABLE>
Depreciation and amortization are provided using primarily the straight-
line method over the estimated useful lives of the assets, or, in the case of
leasehold improvements, over the remaining term of the lease, if shorter.
Estimated useful lives range from 20 to 40 years for buildings, from 3 to 10
years for equipment and from 4 to 10 years for leasehold improvements.
Other Noncurrent Assets
-----------------------
Goodwill represents the costs in excess of the fair values of the net
assets of acquired companies and is amortized against earnings using the
straight-line method over periods not exceeding 40 years. Goodwill is shown in
the accompanying
<PAGE>
consolidated balance sheets net of accumulated amortization of $4,997,700 and
$4,153,800 at September 30, 1996 and 1995, respectively.
Other noncurrent assets consisted of the following at September 30, 1996
and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Prepaid pension costs $11,201 $11,503
Cash surrender value of life
insurance policies 20,758 16,498
Investments 35,000 11,517
Miscellaneous 2,412 3,818
------- -------
$69,371 $43,336
======= =======
</TABLE>
During 1996, the Company purchased a 49 percent interest in the engineering
and construction operations of the Serete Group (which is headquartered in
France). The purchase price was approximately $19,000,000. The purchase
agreement provides for the Company to increase its ownership interest if the
Serete Group achieves certain operating goals over the two years following the
initial investment. The Company accounts for its investment in the Serete Group
using the equity method.
Deferred Gains on Real Estate Transactions
------------------------------------------
In 1983, the Company entered into a real estate transaction which
resulted in a gain totaling $12,299,800. Since the transaction involved a long-
term lease agreement, the gain was deferred and is being amortized ratably into
income over the lease term (which ends December 31, 1997).
Net Income Per Share
--------------------
For the years ended September 30, 1996, 1995, and 1994, net income per
share has been computed based on the weighted average number of shares of common
stock and, if dilutive, common stock equivalents outstanding as follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Average number of
shares of common
stock outstanding 25,613 25,208 24,916
Average number of
common stock
equivalents outstanding 308 176 257
------ ------ ------
25,921 25,384 25,173
====== ====== ======
</TABLE>
Business Combination
--------------------
Effective July 31, 1994, the Company acquired the engineering and
construction management services businesses of CRSS Inc. in a transaction
accounted for as a purchase. The cash purchase price was $38,196,200 (of which,
$4,683,200 was paid in fiscal 1995). The funds used to acquire the businesses
were provided by operations and long-term debt. The purchase price was
allocated to the assets and liabilities acquired based on their estimated fair
values, and the Company's consolidated results of operations include the results
of the acquired businesses since the date of acquisition.
<PAGE>
Concentrations of Credit Risk / Use of Estimates
------------------------------------------------
The Company's cash balances and short-term investments are maintained in
accounts held by major banks and financial institutions in the U.S. and Europe.
Also, as is customary in the industry, the Company grants uncollateralized
credit to its clients, which include the federal government and large, multi-
national corporations operating in a broad range of industries. In order to
mitigate its credit risk, the Company continually evaluates the credit
worthiness of its major commercial clients.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company to make estimates and
assumptions that necessarily affect certain amounts reported in its consolidated
financial statements. The more significant estimates affecting amounts reported
in the consolidated financial statements relate to revenues under long-term
construction contracts and self-insurance accruals. Actual results could differ
from those estimates.
<PAGE>
2. NOTES PAYABLE TO BANKS AND LONG-TERM DEBT
Short-term Credit Arrangements
------------------------------
At September 30, 1996, the Company had $51,660,000 available through
multiple bank lines of credit, under which the Company may borrow on an
overdraft or short-term basis. Interest under these lines is determined at the
time of borrowing based on the banks' prime or base rates, rates paid on
certificates of deposit, the banks' actual costs of funds or other variable
rates. The agreements require payment of a fee of 0.25 percent of the average
unused portion of the facilities, as well as require the Company to maintain
certain minimum levels of working capital and net worth. Two of the agreements
limits borrowings by the amount of letters of credit outstanding under the
facility. Borrowings under the lines are unsecured and the lines generally
extend through March 1997.
Other information regarding the lines of credit for the years ended
September 30, 1996, 1995, and 1994 was as follows (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Amount outstanding at
year end $ 694 $16,587 $ 9,152
Weighted average interest
rate at year end 7.00% 7.63% 6.18%
Weighted average borrowings
outstanding during the
year $12,270 $12,328 $ 9,685
Weighted average interest
rate during the year 7.10% 7.11% 5.45%
Maximum amount outstanding
during the year $17,406 $28,203 $24,763
------- ------- -------
</TABLE>
Long-term Debt and Credit Arrangements
---------------------------------------
Long-term debt consisted of the following at September 30, 1996 and 1995
(in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Mortgage loan, due May 2000 $17,640 $17,799
Borrowings under the Company's
unsecured, $45,000 revolving
credit agreement 18,660 -
------- -------
$36,300 $17,799
======= =======
</TABLE>
The mortgage loan was incurred in connection with the purchase of the
Company's real property located in Dublin, Ireland, and is secured by the
property. The loan bears interest at variable rates for selected periods from
one to twelve months based on the Dublin Interbank Offered Rate, and is payable
at the end of each selected period. The interest rate in effect at September
30, 1996 was 6.27 percent.
Borrowings under the revolving credit agreement bear interest at either
fixed rates offered by the banks at the time of borrowing, or at variable rates
based on the agent bank's base rate, LIBOR or the latest federal funds rate.
The agreement requires the Company to maintain a minimum tangible net worth of
at least $160,000,000 plus 50 percent of consolidated net income after October
1, 1994, a minimum coverage ratio of certain defined fixed charges and a minimum
ratio of debt to tangible net worth. The
<PAGE>
agreement also restricts the payment of cash dividends and requires the Company
to pay a facility fee of 0.15 percent of the total amount of the commitment. The
agreement extends through December 1997.
Interest expense for the years ended September 30, 1996, 1995, and 1994 was
$2,777,400, $2,216,000 and $792,000, respectively, and has been included with
interest income in the accompanying consolidated statements of income. Interest
payments made during each of these years totalled $2,552,300, $2,044,500 and
$595,400, respectively.
3. STOCK PLANS
The Company's 1989 Employee Stock Purchase Plan (the "1989 ESPP") provides
for the granting of options to participating employees to purchase shares of the
Company's common stock. The participants' purchase price is the lower of 90
percent of the common stock's closing market price on either the first or last
day of the option period (as defined). A summary of shares issued through the
1989 ESPP for the years ended September 30, 1996, 1995, and 1994 follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Aggregate purchase price $6,310,960 $5,604,570 $4,837,480
Shares purchased 290,430 314,300 222,210
---------- ---------- ----------
</TABLE>
At September 30, 1996, there were 1,320,612 shares reserved for issuance
under the 1989 ESPP.
The Company has an incentive stock plan (the "1981 Plan") which provides
for the issuance of shares of common stock to employees and outside directors.
Under the 1981 Plan, the Company may grant four types of incentive awards:
incentive stock options, nonqualified stock options, stock appreciation rights,
and restricted stock. At September 30, 1996, there were 2,271,673 shares of
common stock reserved for issuance under the 1981 Plan, and there were 484,350
shares available for future awards at that date (839,300 shares were available
at September 30, 1995).
The Company issued 9,000 and 61,000 shares of restricted stock under the
1981 Plan during 1996 and 1995, respectively. Upon issuance of restricted
stock, unearned compensation equivalent to the market value of the stock issued
(determined on the date of grant) is charged to stockholders' equity and
subsequently amortized against income over the periods during which the
restrictions lapse ($353,200 and $67,500 of compensation expense was recognized
in 1996 and 1995, respectively). The restrictions generally relate to the
recipient's ability to sell or otherwise transfer the stock. There are also
restrictions that subject the stock to forfeiture back to the Company until
earned by the recipient through continued employment. The restrictions lapse
over five years.
<PAGE>
Stock option activity and other related information for the 1981 Plan for
the years ended September 30, 1996, 1995, and 1994 follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Options outstanding at
beginning of year 1,576,059 1,412,959 1,237,000
Options granted 406,000 324,000 438,000
Options exercised (134,686) (77,400) (174,941)
Options expired (60,050) (83,500) (87,100)
---------- ---------- ----------
Options outstanding at
end of year 1,787,323 1,576,059 1,412,959
========== ========== ==========
Average price of options
exercised $10.96 $10.27 $ 9.30
Range of prices of options
outstanding $ 5.31 - $ 4.25 - $ 4.25 -
$28.56 $28.20 $28.20
Average price of options
outstanding $21.68 $19.80 $19.63
Options exercisable 781,653 637,229 413,919
---------- ---------- ----------
</TABLE>
Options outstanding at September 30, 1996 consisted entirely of
nonqualified stock options. The 1981 Plan allows participants to satisfy the
exercise price on exercises of stock options by tendering to the Company shares
of the Company's common stock already owned by the participants. Shares so
tendered are retired and canceled by the Company and are shown as repurchases of
common stock in the accompanying consolidated statements of stockholders'
equity.
4. SAVINGS, DEFERRED COMPENSATION AND PENSION PLANS
Savings Plans
-------------
The Company maintains employee savings plans (qualified 401(k) retirement
plans) covering substantially all of the Company's domestic, nonunion employees.
Company contributions to these plans totalled $8,000,100, $7,719,400 and
$6,000,200 for the years ended September 30, 1996, 1995, and 1994, respectively.
Deferred Compensation Plans
---------------------------
The Company's Executive Security Plan ("ESP") and Executive Deferral
Plans ("EDP") are nonqualified deferred compensation programs that provide
benefits payable to directors, officers and certain key employees or their
designated beneficiaries at specified future dates, upon retirement or death.
Benefit payments under both plans are funded by a combination of contributions
from participants and the Company, and most of the participants are covered by
life insurance policies with the Company designated as the beneficiary. Amounts
charged to expense relating to these programs for the years ended September 30,
1996, 1995, and 1994 were $1,781,200, $1,601,000 and $5,568,000, respectively.
Included in other deferred liabilities in the accompanying consolidated balance
sheets at September 30, 1996 and 1995 was $19,092,700 and $17,597,200,
respectively, relating to the ESP and EDP plans.
<PAGE>
Pension Plans
-------------
In the United States, the Company contributes to various trusteed pension
plans covering hourly construction employees under industry-wide agreements.
Contributions are based on the hours worked by employees covered under these
agreements and are charged to direct costs of contracts on a current basis.
Information from the plans' administrators is not available to permit the
Company to determine its share of unfunded benefits, if any. Company
contributions to these plans totalled $3,538,900, $5,044,400 and $2,631,900 for
the years ended September 30, 1996, 1995, and 1994, respectively.
The Company's U.K. subsidiary sponsors a contributory defined benefit
pension plan covering substantially all permanent, full-time employees at least
21 years of age. Benefits are based on length of service and the employee's
highest average salary for any three consecutive years in the plan, or, if
higher, the employee's salary in the final year in the plan. The Company's
funding policy is to fund the actuarially-determined accrued benefits, allowing
for projected compensation increases using the projected unit method. The
following table presents the funded status of the plan as of September 30, 1996
and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
Fair value of plan assets $84,996 $77,330
------- -------
Actuarial present value of
benefit obligations (all
vested) 69,604 68,121
------- -------
Accumulated benefit obligation 69,604 68,121
Effect of projected
compensation increases 2,368 2,081
------- -------
Projected benefit obligation 71,972 70,202
------- -------
Plan assets in excess of
projected benefit obligation 13,024 7,128
Unrecognized (gains) losses (1,823) 4,375
------- -------
Prepaid pension asset $11,201 $11,503
======= =======
</TABLE>
The components of net periodic pension cost (benefit) for each of the years
ended September 30, 1996, 1995, and 1994 were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Service costs $ 1,258 $ 1,283 $ 1,206
Interest 5,624 5,399 4,878
Actual return on plan assets (14,242) (8,092) (3,816)
Net amortization and deferral 7,418 1,530 (2,347)
-------- ------- -------
Net pension cost (benefit) $ 58 $ 120 $ (79)
======== ======= =======
</TABLE>
The significant actuarial assumptions used in determining the funded status
of the plan were as follows: weighted average discount rate - 8 percent;
weighted average rate of increase in compensation - 6 percent; and, weighted
average rate of return on pension assets - 8.5 percent. At September 30, 1996,
the majority of the plan's assets were invested in equity securities (primarily
those of companies trading in the U.K.) and fixed income securities.
<PAGE>
5. PROVISION FOR INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 - Accounting for Income Taxes.
Accordingly, deferred tax assets and liabilities are determined based on the
differences between the financial reporting and tax bases of assets and
liabilities, and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.
For the years ended September 30, 1996, 1995, and 1994, the provisions for
income taxes consisted of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Taxes currently payable:
Federal $22,927 $19,071 $13,196
State 5,316 4,026 2,912
Foreign 1,577 1,359 246
------- ------- -------
29,820 24,456 16,354
------- ------- -------
Taxes deferred:
Federal (2,768) (2,870) (3,057)
State (591) (447) (687)
------- ------- -------
(3,359) (3,317) (3,744)
------- ------- -------
$26,461 $21,139 $12,610
======= ======= =======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and their related amounts used for income tax purposes. The significant
components of the Company's deferred tax assets (liabilities) at September 30,
1996 and 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Assets:
Liabilities relating to employee
benefit plans $21,733 $17,711
Self-insurance reserves 11,038 9,396
Contract revenues and costs 5,559 4,044
Accruals for office
consolidations and other
special charges 914 2,102
Deferred gains on real
estate transactions 293 657
------- -------
Total deferred tax assets 39,537 33,910
------- -------
Liabilities:
Depreciation and amortization (3,816) (2,225)
Unremitted foreign earnings (1,102) (1,102)
State income and franchise taxes (1,410) (1,039)
Other, net (271) (233)
------- -------
Total deferred tax liabilities (6,599) (4,599)
------- -------
Net deferred tax asset $32,938 $29,311
======= =======
</TABLE>
<PAGE>
The reconciliations of the tax provisions recorded for the years ended
September 30, 1996, 1995, and 1994 to those based on the federal statutory rate
were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Statutory amount $23,388 $18,683 $10,982
------- ------- -------
State taxes, net of
the federal benefit 3,071 2,326 1,447
Other, net 2 130 181
------- ------- -------
$26,461 $21,139 $12,610
======= ======= =======
Rate used to compute
statutory amount 35.00% 35.00% 35.00%
======= ======= =======
</TABLE>
For the years ended September 30, 1996, 1995, and 1994, the Company paid
approximately $30,940,000, $22,153,000 and $20,351,000, respectively, in income
taxes.
For the years ended September 30, 1996, 1995, and 1994, consolidated income
(loss) before income taxes included $4,707,100, $380,200 and ($3,017,500),
respectively, from foreign operations. U.S. income taxes, net of applicable
credits, have been provided on the undistributed profits of foreign
subsidiaries, except in those instances where such profits are expected to be
permanently reinvested (the amount of such profits expected to be permanently
reinvested totalled $9,094,000 at September 30, 1996). Should these earnings be
repatriated, approximately $2,447,000 of income taxes would be payable.
6. COMMITMENTS AND CONTINGENCIES
The Company leases certain of its facilities and equipment under operating
leases with net aggregate future lease payments of $77,486,900 at September 30,
1996 payable as follows (in thousands):
<TABLE>
<CAPTION>
Year ending September 30,
<S> <C>
1997 $24,624
1998 18,124
1999 14,074
2000 11,193
2001 6,113
Thereafter 8,728
-------
82,856
Less - amounts representing
sublease income 5,369
-------
$77,487
=======
</TABLE>
Rent expense for the years ended September 30, 1996, 1995, and 1994 was
approximately $27,190,200, $24,601,700 and $22,235,500, respectively, and was
offset by sublease income of approximately $2,313,500, $1,326,700 and
$1,085,100, respectively.
The Company maintains insurance coverage for various aspects of its
business and operations. The Company has elected, however, to retain a portion
of losses that occur through the use of various deductibles, limits and
retentions under its insurance programs. This situation may subject the Company
to some future liability for which it is
<PAGE>
only partially insured, or completely uninsured. The Company intends to mitigate
any such future liability by continuing to exercise prudent business judgment in
negotiating the terms and conditions of its contracts.
The Company has entered into an employment agreement expiring September 30,
2001 with the Chairman of its Board of Directors. The agreement provides for
base payments of $432,000 per year to either the Chairman or, in the event of
his death, his beneficiary. The agreement also provides that the Chairman may
participate in any bonus plan sponsored by the Company, specifies certain
promotional and other activities to be performed by the Chairman in the event he
leaves employment with the Company and contains other provisions, including some
intended to prevent the Chairman from entering into any form of competition with
the Company.
In the normal course of business, the Company is subject to certain
contractual guarantees and litigation. Generally, such guarantees relate to
construction schedules and plant performance. Most of the litigation involves
the Company as a defendant in workers' compensation, personal injury, and other
similar lawsuits. Management believes, after consultation with counsel, that
these guarantees and litigation should not have any material adverse effect on
the Company's consolidated financial statements.
Letters of credit outstanding at September 30, 1996 totalled $33,714,500.
<PAGE>
7. COMMON AND PREFERRED STOCK
Pursuant to the Company's 1990 Stockholder Rights Plan, each outstanding
share of common stock has attached to it one stock purchase right (a "Right").
Each Right entitles the common stockholder to purchase, in certain circumstances
generally relating to a change in control of the Company, one two-hundredth of a
share of the Company's Series A Junior Participating Cumulative Preferred Stock,
par value $1.00 per share (the "Series A Preferred Stock") at the exercise price
of $90 per share, subject to adjustment. Alternatively, the Right holder may
purchase common stock of the Company having a market value equal to two times
the exercise price, or may purchase shares of common stock of the acquiring
corporation having a market value equal to two times the exercise price.
The Series A Preferred Stock confers to its holders rights as to dividends,
voting and liquidation which are in preference to common stockholders. The
Rights are nonvoting, are not presently exercisable and currently trade in
tandem with the common shares. The Rights may be redeemed at $0.01 per Right by
the Company in accordance with the Rights Plan. The Rights will expire on
December 20, 2000, unless earlier exchanged or redeemed.
8. OTHER FINANCIAL INFORMATION
Accrued liabilities at September 30, 1996 and 1995 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Accrued payroll and
related liabilities $ 60,772 $ 57,418
Insurance liabilities 27,888 24,254
Office consolidations
and other special
charge reserves 4,677 10,143
Other 16,724 17,353
-------- --------
$110,061 $109,168
======== ========
</TABLE>
<PAGE>
9. QUARTERLY DATA - UNAUDITED
Summarized quarterly financial information for the years ended September
30, 1996, 1995, and 1994 is presented below (in thousands, except per-share
amounts):
<TABLE>
<CAPTION>
First Second Third Fourth Fiscal
1996 Quarter Quarter Quarter Quarter Year
---- -------- -------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $471,121 $487,021 $436,820 $404,008 $1,798,970
Income
before
taxes 15,811 16,358 17,185 17,467 66,821
Net income 9,550 9,880 10,380 10,550 40,360
Net income
per share .37 .38 .40 .41 1.56
Stock price:
High 25.375 29.375 28.375 27.375 29.375
Low 21.500 24.750 25.625 19.625 19.625
-------- -------- -------- -------- ----------
1995
----
Revenues $412,356 $396,746 $444,626 $469,329 $1,723,057
Income
before
taxes 12,086 12,505 13,909 14,881 53,381
Net income 7,300 7,552 8,402 8,988 32,242
Net income
per share .29 .30 .33 .35 1.27
Stock price:
High 24.250 20.750 22.250 25.750 25.750
Low 16.875 17.250 19.125 21.625 16.875
-------- -------- -------- -------- ----------
1994
----
Revenues $260,610 $272,646 $263,768 $368,730 $1,165,754
Income (loss)
before
taxes 12,339 12,172 12,045 (5,179) 31,377
Net income
(loss) 7,280 7,300 7,275 (3,088) 18,767
Net income
(loss) per
share .29 .29 .29 (.12) .75
Stock price:
High 26.625 26.875 24.500 24.750 26.875
Low 22.000 23.250 18.000 19.875 18.000
-------- -------- -------- -------- ----------
</TABLE>
Beginning August 1, 1994, the Company's results of operations include the
results of certain businesses acquired from CRSS Inc. - see Note 1 above. Net
income for the fourth quarter of 1994 included special charges totaling
$10,200,000, or $0.40 per share.
The Company's common stock is listed on the New York Stock Exchange. At
September 30, 1996, there were 1,965 shareholders of record.
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Jacobs Engineering Group Inc.
We have audited the accompanying consolidated balance sheets of Jacobs
Engineering Group Inc. and subsidiaries as of September 30, 1996 and 1995, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the three years in the period ended September 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Jacobs Engineering
Group Inc. and subsidiaries at September 30, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended September 30, 1996, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Los Angeles, California
October 30, 1996
<PAGE>
EXHIBIT 21
JACOBS ENGINEERING GROUP INC.
PARENTS AND SUBSIDIARIES
The following table sets forth all subsidiaries of the Company other than
inactive and insignificant subsidiaries that, considered in the aggregate, would
not constitute a significant subsidiary, including the percentage of issued and
outstanding voting securities beneficially owned by the Company.
<TABLE>
<S> <C>
Jacobs Engineering Company, a California corporation.................... 100%
Jacobs Engineering Group of Ohio, Inc., an Ohio corporation............. 100%
Jacobs Services Company, a California corporation....................... 100%
Jacobs Engineering, Inc., a Delaware corporation........................ 100%
Jacobs Computing Services Limited, A Republic of Ireland company....... 100%
Pegasus Engineering Holdings Limited, a Republic of Ireland company.... 100%
Jacobs/Pegasus Engineering Limited, a Republic of Ireland company... 100%
Forgael Limited, a Republic of Ireland company...................... 100%
Jacobs International Limited, Inc., a Panama corporation................ 100%
Jacobs International Limited, a Republic of Ireland company............ 100%
Jacobs Engineering Limited, an English company......................... 100%
JE Professional Resources Limited, an English company............... 100%
Jacobs/H&G Engineering Limited, an English company.................. 100%
Jacobs/Humphreys & Glasgow Limited, an English company.............. 100%
Jacobs Constructors, Inc., a Louisiana corporation...................... 100%
Jacobs Constructors of California Inc., a California corporation....... 100%
Jacobs Maintenance, Inc., a Louisiana corporation...................... 100%
Jay Property Systems, Inc., a California corporation.................... 100%
JE Merit Constructors, Inc., a Texas corporation........................ 100%
JE Remediation Technologies, Inc., a Louisiana corporation............. 100%
JE Professional Resources, Inc., a California corporation............... 100%
The Pace Consultants, Inc., a Texas corporation......................... 100%
Payne & Keller Company, Inc., a Louisiana corporation................... 100%
Jacobs Applied Technology, Inc., a Delaware corporation................. 100%
Applied Engineering Company - Ohio, Inc., a South
Carolina corporation................................................ 100%
Triad Technologies, Inc., a Delaware corporation........................ 100%
Willow Street Properties, Inc., a California corporation................ 100%
CRSS Constructors, Inc., a Delaware corporation......................... 100%
CRSS International, Inc., a South Carolina corporation.................. 100%
CRSS of New York, Inc., a New York corporation.......................... 100%
Jacobs Engineering Foreign Sales Corporation, a Barbados corporation.... 100%
Jacobs Engineering, S.A. de C.V., a Mexican corporation................. 100%
</TABLE>
All subsidiaries are included in the Consolidated Financial Statements.
Dr. Joseph J. Jacobs may be deemed to be a "parent" of Jacobs Engineering
Group Inc. under the federal securities laws. Refer to Item 12 of the
accompanying report on Form 10-K for information about Dr. Jacobs' share
ownership and position with the Company.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Jacobs Engineering Group Inc. of our report dated October 30, 1996 included
in the 1996 Annual Report to Shareholders of Jacobs Engineering Group Inc.
We also consent to the incorporation by reference in both the Registration
Statement (Form S-8 No. 33-45914) pertaining to the Jacobs Engineering Group
Inc. 1981 Executive Incentive Plan and in the Registration Statement (Form S-8
No. 33-45927) pertaining to the Jacobs Engineering Group Inc. 1989 Employee
Stock Purchase Plan of our report dated October 30, 1996 with respect to the
consolidated financial statements of Jacobs Engineering Group Inc. and
subsidiaries incorporated by reference in the Annual Report (Form 10-K) for the
year ended September 30, 1996.
ERNST & YOUNG LLP
Los Angeles, California
December __, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 62,865
<SECURITIES> 2,764
<RECEIVABLES> 276,668
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 383,644
<PP&E> 162,476
<DEPRECIATION> 83,467
<TOTAL-ASSETS> 572,505
<CURRENT-LIABILITIES> 228,075
<BONDS> 0
0
0
<COMMON> 25,745
<OTHER-SE> 257,642
<TOTAL-LIABILITY-AND-EQUITY> 572,505
<SALES> 0
<TOTAL-REVENUES> 1,798,970
<CGS> 0
<TOTAL-COSTS> 1,590,906
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,444)
<INCOME-PRETAX> 66,821
<INCOME-TAX> 26,461
<INCOME-CONTINUING> 40,360
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,360
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.56
</TABLE>
