<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 June 30, 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
- --------------------------------------------------------------------------------
(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 August 11, 1999: $25,923,979
Page 1
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JACOBS ENGINEERING GROUP INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
- ---------------------------------------------------------------------------------
<S> <C>
Part I - Financial Information
Item 1. Financial Statements (unaudited):
Consolidated Condensed Balance Sheets -
June 30, 1999 and September 30, 1998 3
Consolidated Condensed Statements of Income -
Three and nine months ended June 30, 1999 and 1998 4
Consolidated Condensed Statements of Cash Flows -
Nine months ended June 30, 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 6. Exhibits and Reports on Form 8-K 15
Signatures 16
</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>
June 30, September 30,
1999 1998
----------- --------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 52,019 $101,328
Marketable securities 1,837 16,482
Receivables 673,638 394,841
Deferred income taxes 62,874 45,419
Prepaid expenses and other 20,627 7,937
- ---------------------------------------------- ---------- --------
Total current assets 810,995 566,007
- ---------------------------------------------- ---------- --------
Property, Equipment and Improvements, Net 142,980 100,565
- ---------------------------------------------- ---------- --------
Other Noncurrent Assets:
Goodwill, net 229,991 77,246
Other 99,642 63,671
- ---------------------------------------------- ---------- --------
Total other noncurrent assets 329,633 140,917
- ---------------------------------------------- ---------- --------
$1,283,608 $807,489
============================================== ========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 5,957 $ 217
Accounts payable 161,831 101,846
Accrued liabilities 257,201 161,552
Customers' advances in excess of
related revenues 196,269 85,049
Income taxes payable 16,132 19,684
- ---------------------------------------------- ---------- --------
Total current liabilities 637,390 368,348
- ---------------------------------------------- ---------- --------
Long-term Debt 168,387 26,221
- ---------------------------------------------- ---------- --------
Other Deferred Liabilities 49,600 35,170
- ---------------------------------------------- ---------- --------
Minority Interests 5,545 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;
25,913,500 shares issued and
outstanding at June 30, 1999;
25,866,795 shares issued in 1998 25,913 25,867
Additional paid-in capital 60,808 55,698
Retained earnings 342,323 300,296
Other (6,358) (2,856)
- ---------------------------------------------- ---------- --------
422,686 379,005
Less, cost of common stock held
in treasury (254,028 shares at
September 30, 1998) - 7,600
- ---------------------------------------------- ---------- --------
Total stockholders' equity 422,686 371,405
- ---------------------------------------------- ---------- --------
$1,283,608 $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 Nine Months
Ended June 30, Ended June 30,
-------------------- -----------------------
1999 1998 1999 1998
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $771,905 $525,034 $2,106,951 $1,556,169
- ----------------------------------- -------- -------- ---------- ----------
Costs and Expenses:
Direct costs of contracts 663,442 457,679 1,817,876 1,354,240
Selling, general and
administrative expenses 79,948 44,881 209,253 137,488
Interest (income) expense, net 2,683 (580) 3,939 (1,755)
Other (income) expense, net (986) 301 (861) 604
- ----------------------------------- -------- -------- ---------- ----------
745,087 502,281 2,030,207 1,490,577
- ----------------------------------- -------- -------- ---------- ----------
Income before taxes 26,818 22,753 76,744 65,592
- ----------------------------------- -------- -------- ---------- ----------
Income Tax Expense 10,058 8,873 28,659 25,582
- ----------------------------------- -------- -------- ---------- ----------
Net Income $ 16,760 $ 13,880 $ 48,085 $ 40,010
=================================== ======== ======== ========== ==========
Net Income Per Share:
Basic $ 0.65 $ 0.54 $ 1.87 $ 1.55
Diluted $ 0.63 $ 0.53 $ 1.82 $ 1.53
=================================== ======== ======== ========== ==========
</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 Nine Months Ended June 30
---------------------------------
1999 1998
--------- --------
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 48,085 $ 40,010
Adjustments to reconcile net income to net
cash flows provided by operating activities:
Depreciation and amortization 23,429 18,128
Gain on sale of assets (2,042) -
Amortization of deferred gains - (205)
Changes in assets and liabilities, excluding the
effects of business acquired:
Receivables (102,373) (8,923)
Prepaid expenses and other
current assets (5,399) (2,706)
Accounts payable (5,337) (7,834)
Accrued liabilities 34,603 (13,397)
Customers' advances 73,455 14,341
Income taxes payable (3,084) 17,128
Deferred income taxes (3,713) 506
Other, net 352 269
- ------------------------------------------------------ --------- --------
Net cash provided by operating activities 57,976 57,317
- ------------------------------------------------------ --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business, net of cash acquired (199,840) -
Additions to property and equipment, net
of disposals (31,642) (33,380)
Proceeds from sales of marketable securities
and investments 18,626 4,195
Purchases of marketable securities and
investments (1,470) (6,120)
Net increase in other noncurrent assets (6,037) (2,616)
Other, net - 347
- ------------------------------------------------------ --------- --------
Net cash used by investing activities (220,363) (37,574)
- ------------------------------------------------------ --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 170,000 -
Repayments of long-term borrowings (63,935) -
Exercises of stock options, including the
related income tax benefits 7,728 7,290
Increase (decrease) in short-term borrowings, net 3,496 (583)
Change in other deferred liabilities, net (701) (1,958)
Purchase of common stock for treasury - (12,074)
- ------------------------------------------------------ --------- --------
Net cash provided (used) by financing activities 116,588 (7,325)
- ------------------------------------------------------ --------- --------
Effect of Exchange Rate Changes (3,510) (1,174)
- ------------------------------------------------------ --------- --------
(Decrease) increase in cash and cash equivalents (49,309) 11,244
Cash and cash equivalents at the beginning
of period 101,328 55,992
- ------------------------------------------------------ --------- --------
Cash and cash equivalents at the end
of period $ 52,019 $ 67,236
====================================================== ========= ========
</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
June 30, 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 June 30,
1999 and September 30, 1998, its consolidated results of operations for the
three and nine months ended June 30, 1999 and 1998, and its consolidated
cash flows for the nine months ended June, 30 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 June 30, 1999 and September 30, 1998 were
recoverable amounts under contracts in progress totaling $311,776,800 and
$106,072,200, respectively. These represent amounts earned under contracts
in progress but not billable at the balance sheet date. The Company
anticipates that substantially all of such unbilled amounts will be
billed and collected over the next twelve months.
3. Property, equipment and improvements are stated at cost and consisted of
the following at June 30, 1999 and September 30, 1998 (in thousands):
<TABLE>
<CAPTION>
June 30, September 30,
1999 1998
- ----------------------------------- ---------- --------------
<S> <C> <C>
Land $ 14,999 $ 11,416
Buildings 56,497 33,440
Equipment 167,983 133,379
Leasehold improvements 13,015 10,642
Construction in progress 6,730 12,595
- ----------------------------------- --------- ---------
259,224 201,472
Accumulated depreciation
and amortization (116,244) (100,907)
- ----------------------------------- --------- ---------
$ 142,980 $ 100,565
=================================== ========= =========
===================================
</TABLE>
Page 6
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 1999
4. Other noncurrent assets consisted of the following at June 30, 1999 and
September 30, 1998 (in thousands):
<TABLE>
<CAPTION>
June 30, September 30,
- ------------------------------------- -------- -------------
<S> <C> <C>
Prepaid pension costs $22,918 $11,929
Cash surrender value of life
insurance policies 29,996 26,920
Investments 31,486 20,277
Notes receivable 6,035 1,785
Miscellaneous 9,207 2,760
- ------------------------------------- ------- -------
$99,642 $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 Nine Months Ended
June 30, June 30,
-------- --------
1999 1998 1999 1998
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Weighted average shares
outstanding (denominator
used to compute Basic EPS) 25,899 25,773 25,745 25,731
Effect of employee and outside
director stock options 772 511 742 364
------ ------ ------ ------
Denominator used to compute
Diluted EPS 26,671 26,284 26,487 26,095
====== ====== ====== ======
</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
June 30, 1999
For the three months and nine months ended June 30, 1999, total
comprehensive income (net of taxes) was $18,486,700 and $46,836,700,
respectively. For the three months and nine months ended June 30, 1998,
total comprehensive income (net of taxes) was $13,923,200 and $38,983,500,
respectively.
7. During the nine months ended June 30, 1999 and 1998, the Company made cash
payments of approximately $5,341,000 and $1,806,600, respectively, for
interest and $35,329,800 and $19,202,800, 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
June 30, 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 $160.3
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>
Nine Months Ended
June 30,
-----------------------
1999 1998
- -------------------------------- ---------- ----------
<S> <C> <C>
Pro forma revenues $2,366,523 $2,289,266
Pro forma net income 48,545 39,617
Pro forma earnings per share:
Basic 1.89 1.54
Diluted 1.83 1.52
- -------------------------------- ---------- ----------
</TABLE>
Page 9
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
June 30, 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 $160.3 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 January 1, 1999. See Note 8 to Consolidated Condensed Financial
Statements for additional discussion of the Sverdrup transaction.
The Company recorded net income of $16.8 million, or $0.63 per diluted share,
for the three months ended June 30, 1999, compared to net income of $13.9
million, or $0.53 per diluted share, for the same period last year. For the
nine months ended June 30, 1999, the Company recorded net income of $48.1
million, or $1.82 per diluted share, compared to net income of $40.0 million, or
$1.53 per diluted share, for the same period last year.
During the three months ended June 30, 1999, total revenues increased by $246.9
million, or 47.0 %, to $771.9 million, compared to $525.0 million for the same
quarter in fiscal 1998. This increase was attributable primarily to the business
volume generated by Sverdrup's operations, which contributed 28% to the
Company's revenues during the current quarter.
Total revenues for the nine months ended June 30, 1999 increased by $550.8
million, or 35.4%, to $2,107.0 million, compared to $1,556.2 million for the
same period in fiscal 1998. Approximately 81% 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 $163.3 million, or 49.4%, to $493.8 million during the third quarter of
fiscal 1999, compared to $330.4 million for the third quarter of fiscal 1998.
For the nine months ended June 30, 1999, revenues from field services increased
by $386.8 million, or 40.4%, to $1,344.3 million, compared to $957.4 million for
the same period in fiscal 1998. Approximately 77% of the increase in field
service revenues during the first nine months 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 $83.5 million, or
42.9%, to $278.1 million during the third quarter of fiscal 1999, compared to
$194.6 million for the third quarter of fiscal 1998. For the nine months ended
June 30, 1999, revenues from engineering services increased by $163.9 million,
or 27.4%, to $762.7 million, compared to $598.7 million for the same period in
fiscal 1998. Approximately 88% of the increase in engineering service revenues
during the first nine months 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 86.0% and
86.3%, respectively, for the three and nine months ended June 30, 1999,
respectively, compared to 87.2% and 87.0% for the third quarter and the first
nine months of fiscal 1998, respectively. The percentage relationship between
direct costs of contracts and revenues will fluctuate between reporting periods
depending on a variety of factors including the mix of business during the
reporting periods being compared, as well as the level of margins earned from
the various services provided by the Company. The improvements in this
percentage relationship during the current periods, compared to the same periods
last year, were due primarily to the relatively higher margins on Sverdrup's
engineering and field services operations. Also contributing to the improvement
was the favorable effect of the proportionately higher margins earned on the new
volume of engineering services activities generated, relative to field services
activities.
Selling, general and administrative ("SG & A") expenses for the third quarter of
fiscal 1999 increased by $35.1 million, or 78.1%, to $79.9 million, compared to
$44.9 million for the third quarter of fiscal 1998. For the nine months ended
June 30, 1999, SG & A expenses increased by $71.8 million, or 52.2%, to $209.3
million, compared to $137.5 million for the same period in fiscal 1998. The
increases in SG & A expenses during the three and nine months ended June 30,
1999 were due almost entirely to the results of operations of Sverdrup.
During the third quarter of fiscal 1999, the Company's operating profit (defined
as revenues, less direct costs of contracts and SG & A expenses) increased by
$6.0 million, or 26.9%, to $28.5 million, compared to $22.5 million for the
third quarter of fiscal 1998. For the nine months ended June 30, 1999, the
Company's operating profit increased by $15.4 million, or 23.9%, to $79.8
million, compared to $64.4 million for the same period in fiscal 1998.
Page 11
<PAGE>
The Company recorded $2.7 million and $3.9 million, respectively, of net
interest expense during the three and nine months ended June 30, 1999, compared
to net interest income of $0.6 million and $1.8 million, respectively, for the
comparable periods in fiscal 1998. During the prior fiscal period ended June 30,
1998, the Company was a net investor of excess cash. During the current fiscal
period ended June 30, 1999, as a result of the merger with Sverdrup Corporation,
the Company became a net borrower of cash. As discussed above, the Company
financed the merger price with a new, $230.0 million revolving credit facility,
under which the Company initially borrowed $165.0 million. At June 30, 1999,
outstanding borrowings relating to the Sverdrup merger under this facility were
$130.0 million.
The Company recorded $1.0 million and $0.9 million, respectively, of net other
income during the three and nine months ended June 30, 1999, compared to net
other expense of $0.3 million and $0.6 million, respectively, for the comparable
periods in fiscal 1998. The increases in net other income during the current
quarter and year to date periods were due primarily to higher gains realized on
the sales of securities, partially offset by an increase in other miscellaneous
expenses.
The Company's overall effective tax rates were 37.5% and 37.3%, for the third
quarter of fiscal 1999 and the nine months ended June 30, 1999, respectively.
This compares to an effective tax rate of 39.0% for both the three and nine
months ended June 30, 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 June 30, 1999 and 1998
(in millions):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Engineering services backlog $1,614.2 $1,000.5
Total backlog $4,340.0 $3,210.5
</TABLE>
Liquidity and Capital Resources
- -------------------------------
During the nine months ended June 30, 1999, the Company's cash and cash
equivalents decreased by $49.3 million, to $52.0 million. This compares to a
net increase of $11.2 million, to $67.2 million, during the same period in
fiscal 1998. During the nine months ended June 30, 1999, the Company
experienced net cash outflows from investing activities and the effect of
exchange rate changes, of $220.4 million and $3.5 million, respectively, offset
in part by net cash inflows from financing and operating activities of $116.6
million and $58.0 million, respectively.
Page 12
<PAGE>
The Company's operating activities contributed $58.0 million of cash and cash
equivalents during the first nine months of fiscal 1999. This compares to a net
contribution of $57.3 million during the same period in fiscal 1998. Cash flows
from operating activities were benefited by an $8.1 million increase in net
income during the first nine months of fiscal 1999 as compared to fiscal 1998,
and a $5.3 million increase in depreciation and amortization expense (which are
non-cash charges), offset in part by a $6.7 million increase in net cash
outflows relating to the timing of cash receipts and payments within the
Company's working capital accounts. Net cash outflows from deferred income tax
benefits and gains on sales of assets account for the remainder of the change in
cash flows from operating activities in fiscal 1999 as compared to last year.
The Company's investing activities resulted in a net cash outflow of $220.4
million during the nine months ended June 30, 1999, compared to a net cash
outflow of $37.6 million during the comparable period last year. The $182.8
million net increase in cash used by investing activities during the first nine
months of fiscal 1999 as compared to fiscal 1998 was due primarily to the merger
with Sverdrup, requiring $199.8 million in cash (which included the associated
costs of the merger), combined with a $3.4 million net increase in other
noncurrent assets. Offsetting these cash outflows in part was a $14.4 million
increase from fiscal 1998 to fiscal 1999 in proceeds from sales of marketable
securities and investments. The proceeds from the sales of marketable
securities and investments in fiscal 1999 were used to partially fund the merger
with Sverdrup and pay down indebtedness relating to the merger.
The Company's financing activities generated $116.6 million in cash and cash
equivalents during the first nine months of fiscal 1999 compared to a net cash
outflow of $7.3 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 related costs
of $199.8 million, and $21.0 million of Sverdrup indebtedness existing at
closing. During the June 30, 1999 quarter, the Company paid down $40.0 million
of its long-term, $230.0 million revolving credit facility relating primarily to
the Sverdrup transaction. See Note 8 to Consolidated Condensed Financial
Statements for additional discussion of the Sverdrup transaction.
The Company 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
second quarter of the current fiscal year, against which $151.0 million was
outstanding at June 30, 1999 in the form of direct borrowings. These borrowings
relate to the merger indebtedness, and other refinanced amounts that were
outstanding under the old $45.0 million revolving credit agreement. The
Company's committed short-term credit facilities totaled $30.8 million at June
30, 1999, against which $11.4 million was outstanding in the form of direct
borrowings and letters of credit.
Page 13
<PAGE>
Year 2000 Readiness-Update
- ----------------------------
The Company has had an ongoing Year 2000 ("Y2K") program that began 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 June 30, 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.
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.
Page 14
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27. Financial Data Schedule
(b) Reports on Form 8-K
None
Page 15
<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: August 12, 1999
Page 16
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