<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report on
FORM 10-Q
(Mark one)
( X ) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1999
--------------
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from_______ to _______
Commission File Number 1-7463
JACOBS ENGINEERING GROUP INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 95-4081636
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(State of incorporation) (I.R.S. employer identification number)
1111 South Arroyo Parkway, Pasadena, California 91105
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(626) 578-3500
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(Registrant's telephone number, including area code)
Indicate by check-mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
( X ) YES - ( ) NO
Number of shares of common stock outstanding at May 12, 1999: 25,903,003
Page 1
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JACOBS ENGINEERING GROUP INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Part I - Financial Information
Item 1. Financial Statements (unaudited)
Consolidated Condensed Balance Sheets -
March 31, 1999 and September 30, 1998 3
Consolidated Condensed Statements of Income -
Three and six months ended March 31, 1999 and 1998 4
Consolidated Condensed Statements of Cash Flows -
Six months ended March 31, 1999 and 1998 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
Page 2
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share information)
(Unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
1999 1998
----------- --------------
<S> <C> <C>
- ----------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 73,523 $101,328
Marketable securities - 16,482
Receivables 627,655 394,841
Deferred income taxes 60,253 45,419
Prepaid expenses and other 19,767 7,937
- ---------------------------------------------- ---------- --------
Total current assets 781,198 566,007
- ---------------------------------------------- ---------- --------
Property, Equipment and Improvements, Net 141,074 100,565
- ---------------------------------------------- ---------- --------
Other Noncurrent Assets:
Goodwill, net 231,673 77,246
Other 98,117 63,671
- ---------------------------------------------- ---------- --------
Total other noncurrent assets 329,790 140,917
- ---------------------------------------------- ---------- --------
$1,252,062 $807,489
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 4,604 $ 217
Accounts payable 159,878 101,846
Accrued liabilities 259,370 161,552
Customers' advances in excess of
related revenues 143,056 85,049
Income taxes payable 15,778 19,684
- ---------------------------------------------- ---------- --------
Total current liabilities 582,686 368,348
- ---------------------------------------------- ---------- --------
Long-term Debt 209,229 26,221
- ---------------------------------------------- ---------- --------
Other Deferred Liabilities 49,093 35,170
- ---------------------------------------------- ---------- --------
Minority Interests 6,843 6,345
- ---------------------------------------------- ---------- --------
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;
25,881,919 shares issued and
outstanding at March 31, 1999;
25,866,795 shares issued in 1998 25,882 25,867
Additional paid-in capital 59,220 55,698
Retained earnings 326,729 300,296
Other (7,620) (2,856)
- ---------------------------------------------- ---------- --------
404,211 379,005
Less, cost of common stock held
in treasury (254,028 shares at
September 30, 1998) - 7,600
- ---------------------------------------------- ---------- --------
Total stockholders' equity 404,211 371,405
- ---------------------------------------------- ---------- --------
$1,252,062 $807,489
========== ========
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
Page 3
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except per-share information)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended March 31, Ended March 31,
--------------------------- ------------------------
1999 1998 1999 1998
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Revenues $779,874 $524,776 $1,335,046 $1,031,135
- ----------------------------------- -------- -------- ---------- ----------
Costs and Expenses:
Direct costs of contracts 667,582 455,774 1,154,434 896,561
Selling, general and
administrative expenses 84,150 47,285 129,305 92,607
Interest (income) expense, net 2,238 (489) 1,256 (1,175)
Other expense, net 32 368 125 303
- ----------------------------------- -------- -------- ---------- ----------
754,002 502,938 1,285,120 988,296
-------- -------- ---------- ----------
Income before taxes 25,872 21,838 49,926 42,839
- ----------------------------------- -------- -------- ---------- ----------
Income Tax Expense 9,702 8,518 18,601 16,709
- ----------------------------------- -------- -------- ---------- ----------
Net Income $ 16,170 $ 13,320 $ 31,325 $ 26,130
=================================== ======== ======== ========== ==========
Net Income Per Share:
Basic $ 0.63 $ 0.52 $ 1.22 $ 1.02
Diluted $ 0.61 $ 0.51 $ 1.19 $ 1.00
=================================== ======== ======== ========== ==========
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
Page 4
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Six Months Ended March 31
---------------------------------
1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 31,325 $ 26,130
Adjustments to reconcile net income to net
cash flows provided by operating activities:
Depreciation and amortization 14,315 11,396
Amortization of deferred gains - (205)
Changes in assets and liabilities, excluding the
effects of business acquired:
Receivables (51,861) (12,227)
Prepaid expenses and other
current assets (3,913) (1,360)
Accounts payable (10,043) 5,049
Accrued liabilities 36,177 (391)
Customers' advances 19,565 (1,726)
Income taxes payable (3,581) 12,079
Deferred income taxes (1,093) (982)
Other, net 301 175
- ------------------------------------------------------ --------- --------
Net cash provided by operating activities 31,192 37,938
- ------------------------------------------------------ --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business, net of cash acquired (199,092) -
Additions to property and equipment, net
of disposals (21,602) (15,605)
Proceeds from sales of marketable securities 16,482 343
Purchases of investments and marketable
securities (1,493) (4,374)
Net increase in other noncurrent assets (6,390) (2,493)
Other, net - 10
- ------------------------------------------------------ --------- --------
Net cash used by investing activities (212,095) (22,119)
- ------------------------------------------------------ --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 170,000 -
Repayments of long-term borrowings (23,867) -
Exercises of stock options, including the
related income tax benefits 6,831 5,581
Increase (decrease) in short-term borrowings, net 3,706 (1,443)
Change in other deferred liabilities, net (1,008) (1,733)
Purchase of common stock for treasury - (5,127)
- ------------------------------------------------------ --------- --------
Net cash provided (used) by financing activities 155,662 (2,722)
- ------------------------------------------------------ --------- --------
Effect of Exchange Rate Changes (2,564) (1,182)
- ------------------------------------------------------ --------- --------
Increase (decrease) in cash and cash equivalents (27,805) 11,915
Cash and cash equivalents at the beginning
of period 101,328 55,992
- ------------------------------------------------------ --------- --------
Cash and cash equivalents at the end
of period $ 73,523 $ 67,907
====================================================== ========= ========
</TABLE>
See the accompanying Notes to Consolidated Condensed Financial Statements.
Page 5
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1999
1. The accompanying consolidated condensed financial statements and financial
information included herein have been prepared pursuant to the interim
period reporting requirements of Form 10-Q. Consequently, certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted. Readers of this report should refer to the
consolidated financial statements and the notes thereto incorporated into
the latest Annual Report on Form 10-K of Jacobs Engineering Group Inc. (the
"Company").
In the opinion of management of the Company, the accompanying unaudited
consolidated condensed financial statements contain all adjustments
(consisting solely of normal recurring adjustments) necessary for a fair
presentation of the Company's consolidated financial position at March 31,
1999 and September 30, 1998, its consolidated results of operations for the
three and six months ended March 31, 1999 and 1998, and its consolidated
cash flows for the six months ended March 31, 1999 and 1998.
The Company's interim results of operations are not necessarily indicative
of the results to be expected for the full year.
2. Included in receivables at March 31, 1999 and September 30, 1998 were
unbilled amounts totaling $242,906,300 and $106,072,200, respectively.
3. Property, equipment and improvements are stated at cost and consisted of
the following at March 31, 1999 and September 30, 1998 (in thousands):
<TABLE>
<CAPTION>
March 31, September 30,
1999 1998
---------- --------------
<S> <C> <C>
Land $ 15,230 $ 11,416
Buildings 49,535 33,440
Equipment 154,452 133,379
Leasehold improvements 12,613 10,642
Construction in progress 19,564 12,595
- ----------------------------------- --------- ---------
251,394 201,472
Accumulated depreciation
and amortization (110,320) (100,907)
- ----------------------------------- --------- ---------
$ 141,074 $ 100,565
========= =========
</TABLE>
Page 6
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1999
4. Other noncurrent assets consisted of the following at March 31, 1999 and
September 30, 1998 (in thousands):
<TABLE>
<CAPTION>
March 31, September 30,
1999 1998
- -----------------------------------------------------------------
<S> <C> <C>
Prepaid pension costs $23,058 $11,929
Cash surrender value of life
insurance policies 29,993 26,920
Investments 29,156 20,277
Notes receivable 6,653 1,785
Miscellaneous 9,257 2,760
- -----------------------------------------------------------------
$98,117 $63,671
=================================================================
</TABLE>
5. Basic earnings per share ("EPS") shown in the accompanying consolidated
condensed statements of income was computed by dividing net income by the
weighted average number of shares of common stock outstanding for the
period. Diluted EPS was computed by dividing net income by the weighted
average number of shares of common stock and dilutive securities
outstanding (consisting solely of nonqualified stock options). The
following table reconciles the denominator used to compute basic EPS to the
denominator used to compute diluted EPS (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ------------------
1999 1998 1999 1998
--------- ------ --------- ------
<S> <C> <C> <C> <C>
Weighted average shares
outstanding (denominator
used to compute Basic EPS) 25,721 25,678 25,677 25,718
Effect of employee and outside
director stock options 780 369 695 332
------ ------ ------ ------
Denominator used to compute
Diluted EPS 26,501 26,047 26,372 26,050
====== ====== ====== ======
</TABLE>
6. Effective October 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130").
SFAS 130 requires the disclosure of comprehensive income, either in a
separate statement of comprehensive income, or as part of a combined
statement of income and comprehensive income in a full-set of general-
purpose financial statements. Comprehensive income is defined as the change
in equity of a business enterprise during a period from transactions and
other events and circumstances from non-owner sources. SFAS 130 requires
that the unrealized gains and losses from the Company's available-for-sale
securities, and foreign currency translation adjustments be included in
comprehensive income. However, SFAS 130 does not have any effect on the
Company's net income or stockholders' equity, or how these items are
computed.
Page 7
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1999
For the three months and six months ended March 31, 1999, total
comprehensive income (net of taxes) was $14,421,500 and $28,350,000,
respectively. For the three months and six months ended March 31, 1998,
total comprehensive income (net of taxes) was $12,316,100 and $25,060,300,
respectively.
7. During the six months ended March 31, 1999 and 1998, the Company made cash
payments of approximately $2,733,500 and $957,900, respectively, for
interest and $23,601,200 and $15,530,500, respectively, for income taxes.
8. On January 14, 1999, the Company completed its Agreement and Plan of Merger
with the Sverdrup Corporation ("Sverdrup"). Sverdrup provides engineering,
architecture, construction and scientific services for the development,
design, construction and operation of capital facilities, infrastructure
projects and advanced technical systems for public and private sector
clients in the United States and internationally. Sverdrup employs more
than 5,600 people in 35 offices.
Under the terms of the merger agreement, at closing, a wholly-owned
subsidiary of the Company ("Merger Subsidiary") was merged with and into
Sverdrup. Thereupon, each outstanding share of common stock of Sverdrup
was converted into the right to receive a proportional share of the total
amount of initial merger consideration of $198.0 million paid at closing.
Each outstanding share of common stock of Sverdrup will also receive a
proportional amount of any additional merger consideration that may be paid
in the future ("Deferred Merger Consideration"). Amounts payable as
Deferred Merger Consideration, if any, will be payable shortly after each
of the first three anniversaries of the date of the merger agreement, and
is contingent upon the Company's stock price exceeding certain price
thresholds as defined in the merger agreement. The total amount payable as
Deferred Merger Consideration is limited to a maximum of $31.0 million.
After the merger and conversion, the Merger Subsidiary ceased to exist, and
Sverdrup survives as a new, wholly-owned subsidiary of the Company. The
terms of the merger were arrived at by arms-length negotiations between the
parties.
Of the total initial merger consideration of $198.0 million paid at
closing, $10.0 million was paid into an escrow account, the purpose of
which will be to settle certain claims or disputes relating to certain
contracts and litigation matters identified in the merger agreement.
Page 8
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1999
The initial merger consideration was financed in part by a new, $230.0
million revolving credit facility obtained by the Company from a group of
banks led by Bank of America NT&SA. Amounts borrowed under this facility
initially were used to fund that portion of the initial merger
consideration not financed using existing internal funds, and the repayment
of certain Sverdrup indebtedness existing at closing.
The acquisition has been accounted for as a purchase. Accordingly, the
purchase price has been allocated to the assets and liabilities acquired
based on their estimated fair values. The purchase price allocation, which
may be adjusted further, resulted in goodwill of approximately $159.5
million, which is being amortized over 40 years on a straight-line basis.
The following unaudited pro forma financial information presents the
combined results of operations of Jacobs and Sverdrup, after giving effect
to certain adjustments, including amortization of goodwill, additional
interest expense, and related income tax effects, and assuming the
acquisition occurred at the beginning of the periods presented. The pro
forma financial information does not necessarily reflect the results of
operations that would have occurred had Jacobs and Sverdrup constituted a
single entity during such periods (in thousands, except per-share data):
<TABLE>
<CAPTION>
Six Months Ended
March 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Pro forma revenues $1,594,618 $1,519,941
Pro forma net income 31,785 26,830
Pro forma earnings per share:
Basic 1.24 1.04
Diluted 1.21 1.03
- -------------------------------- ---------- ----------
</TABLE>
Page 9
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
March 31, 1999
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General
- -------
The following discussion should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operation
(incorporated by reference from pages A-3 through A-11 of Exhibit 13 of the
Company's 1998 Annual Report on Form 10-K).
Results of Operations
- ---------------------
On January 14, 1999, the Company completed its merger with the Sverdrup
Corporation ("Sverdrup"). Sverdrup provides engineering, architecture,
construction and scientific services for public and private sector clients in
the United States and internationally.
The Sverdrup transaction has been accounted for as a purchase. Accordingly, the
purchase price has been allocated to the assets and liabilities acquired based
on their estimated fair values. The purchase price allocation, which may be
adjusted further, resulted in goodwill of approximately $159.5 million, which is
being amortized over 40 years on a straight-line basis. The Company's
consolidated results of operations include the results of Sverdrup's operations
since the completion date of the merger. See Note 8 to Consolidated Condensed
Financial Statements for additional discussion of the Sverdrup transaction.
The Company recorded net income of $16.2 million, or $0.61 per diluted share,
for the three months ended March 31, 1999, compared to net income of $13.3
million, or $0.51 per diluted share, for the same period last year. For the six
months ended March 31, 1999, the Company recorded net income of $31.3 million,
or $1.19 per diluted share, compared to net income of $26.1 million, or $1.00
per diluted share, for the same period last year.
During the three months ended March 31, 1999, total revenues increased by $255.1
million, or 48.6 %, to $779.9 million, compared to $524.8 million for the same
quarter in fiscal 1998. This increase was attributable mainly to the business
volume generated by Sverdrup's operations, which contributed $224.5 million to
the Company's revenues during the current quarter.
Total revenues for the six months ended March 31, 1999 increased by $303.9
million, or 29.5%, to $1,335.0 million, compared to $1,031.1 million for the
same period in fiscal 1998. Approximately 74% of this increase was generated by
Sverdrup's operations, with the balance attributable to the Company's continuing
U.S. and European operations (that is, those offices operating during the
comparable periods of both fiscal 1999 and fiscal 1998).
Page 10
<PAGE>
Revenues from field (construction and maintenance) service activities increased
by $188.8 million, or 61.7%, to $494.7 million during the second quarter of
fiscal 1999, compared to $305.9 million for the second quarter of fiscal 1998.
For the six months ended March 31, 1999, revenues from field services increased
by $223.5 million, or 35.6%, to $850.5 million, compared to $627.0 million for
the same period in fiscal 1998. Approximately 69% of the increase in field
service revenues during the first half of fiscal 1999 was generated by
Sverdrup's operations, with the balance attributable to the Company's continuing
U.S. and European operations.
Revenues from engineering service activities increased by $66.3 million, or
30.3%, to $285.2 million during the second quarter of fiscal 1999, compared to
$218.9 million for the second quarter of fiscal 1998. For the six months ended
March 31, 1999, revenues from engineering services increased by $80.4 million,
or 19.9%, to $484.6 million, compared to $404.1 million for the same period in
fiscal 1998. Approximately 87% of the increase in engineering service revenues
during the first half of fiscal 1999 was generated by Sverdrup's operations,
with the balance attributable to the Company's continuing U.S. and European
operations.
As a percentage of revenues, direct costs of contracts decreased to 85.6% and
86.5%, respectively, for the three and six months ended March 31, 1999,
respectively, compared to 86.9% for both the second quarter and the first half
of fiscal 1998. The percentage relationship between direct costs of contracts
and revenues will fluctuate between reporting periods depending on a variety of
factors including the mix of business during the reporting periods being
compared, as well as the level of margins earned from the various services
provided by the Company.
The improvement in this percentage relationship during the current periods,
compared to the same periods last year, was due to increases in the margin rates
on the Company's engineering and field services activities. Also contributing
to the improvement was the favorable effect of the proportionately higher
margins earned on the new volume of engineering services activities generated
during the current fiscal year periods.
Selling, general and administrative ("SG & A") expenses for the second quarter
of fiscal 1999 increased by $36.9 million, or 78.0%, to $84.2 million, compared
to $47.3 million for the second quarter of fiscal 1998. For the six months
ended March 31, 1999, SG & A expenses increased by $36.7 million, or 39.6%, to
$129.3 million, compared to $92.6 million for the same period in fiscal 1998.
The increases in SG & A expenses during the three and six months ended March 31,
1999 were due almost entirely to the results of operations of Sverdrup.
During the second quarter of fiscal 1999, the Company's operating profit
(defined as revenues, less direct costs of contracts and SG & A expenses)
increased by $6.4 million, or 29.6%, to $28.1 million, compared to $21.7 million
for the second quarter of fiscal 1998. Approximately 78% of the Company's
operating profit during the second quarter of fiscal 1999 was generated by its
continuing U.S. and European operations, with the balance attributable to
Sverdrup's operations.
For the six months ended March 31, 1999, the Company's operating profit
increased by $9.3 million, or 22.3%, to $51.3 million, compared to $42.0 million
for the same period in fiscal 1998. Approximately 88% of the Company's operating
profit during the first half of fiscal 1999 was generated by its continuing U.S.
and European operations, with the balance attributable to Sverdrup's operations.
Page 11
<PAGE>
The Company recorded $2.2 million and $1.3 million, respectively, of net
interest expense during the three and six months ended March 31, 1999, compared
to $0.5 million and $1.2 million, respectively, of net interest income for the
comparable periods in fiscal 1998. The increases in interest expense of $2.7
million and $2.4 million, respectively, during the second quarter and first half
of fiscal 1999 were due primarily to approximately $2.3 million of interest
expense incurred on the $165.0 million of merger indebtedness, and the loss of
interest income that would have been earned on the internal funds committed to
finance the merger with Sverdrup.
The Company's overall effective tax rates were 37.5% and 37.3%, for the second
quarter of fiscal 1999 and the six months ended March 31, 1999, respectively.
This compares to an effective tax rate of 39.0% for both the three and six
months ended March 31, 1998. The reduction in the Company's effective tax rate
is attributable primarily to a lower tax rate on the Company's non-U.S.
operations.
Backlog Information
- -------------------
The following table summarizes the Company's backlog at March 31, 1999 and 1998
(in millions):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Engineering services backlog $1,650.0 $ 985.3
Total backlog $4,300.0 $3,006.6
</TABLE>
Liquidity and Capital Resources
- -------------------------------
During the six months ended March 31, 1999, the Company's cash and cash
equivalents decreased by $27.8 million, to $73.5 million. This compares to a net
increase of $11.9 million, to $67.9 million, during the same period in fiscal
1998. During the six months ending March 31, 1999, the Company experienced net
cash outflows from investing activities and the effect of exchange rate changes,
of $212.1 million and $2.6 million, respectively, offset in part by net cash
inflows from financing and operating activities of $155.7 million and $31.2
million, respectively.
The Company's operating activities contributed $31.2 million of cash and cash
equivalents during the first half of fiscal 1999. This compares to a net
contribution of $37.9 million during the first half of fiscal 1998. The net
decrease of $6.7 million in cash provided by operating activities during the
first half of fiscal 1999 as compared to the same period in fiscal 1998 occurred
in spite of a $5.2 million increase in net income, and was due primarily to net
cash outflows of $15.1 million resulting from the timing of cash receipts and
payments within the Company's working capital accounts.
Page 12
<PAGE>
The Company's investing activities resulted in a net cash outflow of $212.1
million during the six months ended March 31, 1999, compared to a net cash
outflow of $22.1 million during the comparable period last year. The $190.0
million net increase in cash used by investing activities during the first half
of fiscal 1999 as compared to fiscal 1998 was due primarily to the merger with
Sverdrup, requiring $199.1 million in cash (which included the associated costs
of the merger), combined with a $6.0 million increase in additions to property
and equipment, net of disposals. Offsetting these cash outflows in part was a
$16.1 million increase from fiscal 1998 to fiscal 1999 in cash flows from sales
of marketable securities. The proceeds from the sales in fiscal 1999 were used
to partially fund the merger with Sverdrup.
The Company's financing activities generated $155.7 million in cash and cash
equivalents during the first half of fiscal 1999 compared to a net cash outflow
of $2.7 million during the same period last year. In January 1999, in connection
with the merger with Sverdrup, the Company terminated its existing long-term
$45.0 million revolving credit agreement and entered into a new, $230.0 million
revolving credit agreement. The Company borrowed $165.0 million under the new
facility to pay the initial merger consideration and the costs of the merger of
$199.1 million, and $21.0 million of indebtedness of Sverdrup existing at
closing. At that time, the Company also modified one of its existing short-term
credit facilities under which it refinanced amounts outstanding under the old
$45.0 million revolving credit agreement. See Note 8 to Consolidated Condensed
Financial Statements for additional discussion of the Sverdrup transaction.
The Company believes it has adequate capital resources to fund its operations
for the remainder of fiscal 1999 and beyond. As discussed above, the Company
entered into a new, long-term, $230.0 million revolving credit facility during
the current fiscal quarter against which $192.2 million was outstanding at March
31, 1999 in the form of direct borrowings. The Company's committed short-term
credit facilities totaled $32.5 million at March 31, 1999, against which $10.5
million was outstanding in the form of direct borrowings and letters of credit.
Year 2000 Readiness-Update
- ----------------------------
The Company has had an ongoing Year 2000 ("Y2K") program that was begun in
fiscal 1997 to ensure that its operational and financial systems would not be
adversely affected by Y2K data processing hardware and software failures arising
from processing errors involving calculations using the Year 2000 date. (Readers
should refer to pages A-7 through A-10 of Exhibit 13 to the Company's 1998
Annual Report on Form 10-K for a more complete discussion of the Company's Y2K
compliance program). As of March 31, 1999, the Company continues to be actively
engaged in one or more compliance phases with respect to each of the business
areas it has identified as critical to normal and routine operations.
Additionally, the Company has integrated the Y2K compliance program of Sverdrup
into the Company's overall Y2K compliance program. Sverdrup's separate Y2K
compliance program was begun prior to the completion of the merger. The Company
is also continuing its communications program with third parties (clients,
vendors and suppliers) regarding the Company's Y2K readiness.
Page 13
<PAGE>
Forward-Looking Statements
- --------------------------
Statements included in this Quarterly Report on Form 10-Q that are not based on
historical facts are "forward-looking statements", as that term is discussed in
the Private Securities Litigation Reform Act of 1995. These statements are
based on management's current estimates, expectations and projections about the
industries in which the Company operates and the services it provides. By their
nature, such forward-looking statements involve risks and uncertainties. The
Company cautions the reader that a variety of factors could cause business
conditions and results to differ materially from what is contained in its
forward-looking statements. These factors include the following: increase in
competition by foreign and domestic competitors; availability of qualified
engineers and other professional staff needed to execute contracts; the timing
of new awards and of funding for such awards; the ability of the Company to meet
performance or schedule guarantees; cost overruns on fixed, maximum or unit
priced contracts; the outcome of pending and future litigation and governmental
proceedings; the cyclical nature of the individual markets in which the
Company's customers operate; and the ability to integrate successfully the
operations of Sverdrup Corporation. The preceding list is not all-inclusive,
and the Company undertakes no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
Readers of this Form 10-Q should also read the Company's most recent Annual
Report on Form 10-K for a further description of the Company's business, legal
proceedings and other information that describes factors that could cause actual
results to differ from such forward-looking statements.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The information required by this Item is hereby incorporated by reference from
Item 4 of the Company's Quarterly Report on Form 10-Q for the period ended
December 31, 1998 filed with the Commission on February 10, 1999.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27. Financial Data Schedule
(b) Reports on Form 8-K:
None
Page 14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JACOBS ENGINEERING GROUP INC.
- -----------------------------
(Registrant)
By: /s/ John W. Prosser, Jr.
___________________________
John W. Prosser, Jr.
Senior Vice President, Finance
and Administration and Treasurer
Date: May 13, 1999
Page 15
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