<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Confidential, for Use of the
[_] Preliminary Proxy Statement Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
JACOBS ENGINEERING GROUP INC.
(Name of Registrant as Specified in Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials:
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement no.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO OF JACOBS ENGINEERING]
Notice of 2001
Annual Meeting of Shareholders
Proxy Statement
Annual Financial Statements and
Review of Operations
<PAGE>
JACOBS ENGINEERING GROUP INC.
1111 South Arroyo Parkway
Pasadena, California 91105
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
AND PROXY STATEMENT
TO OUR SHAREHOLDERS
The Annual Meeting of Shareholders of Jacobs Engineering Group Inc. will be
held on Tuesday, February 13, 2001, at 3:30 p.m. at 1111 South Arroyo Parkway,
Pasadena, California, for the following purposes:
1. To elect five directors to hold office until the 2004 annual meeting;
2. To approve an amendment to the Company's 1989 Employee Stock Purchase Plan
to provide for a 2,000,000 share increase in the number of shares reserved
for the Plan;
3. To approve an amendment of the Certificate of Incorporation to increase the
authorized common stock to 100,000,000 shares;
4. To approve the appointment of Ernst & Young LLP as auditors for the year
ending September 30, 2001; and
5. To act upon such other matters as may properly come before the meeting.
The shareholders of record at the close of business on January 8, 2001, will
be entitled to vote at such meeting and any adjournment thereof. This notice
and proxy statement and the accompanying proxy are being mailed to such
shareholders on or about January 11, 2001. The stock transfer books will not
close.
By Order of the Board of Directors
WILLIAM C. MARKLEY, III
Vice President, General Counsel and
Secretary
Dated: January 8, 2001
You are urged to date, sign, and return promptly the enclosed proxy in the
envelope provided.
PLEASE NOTE THE ADDRESS WHERE THE ANNUAL MEETING WILL BE HELD
<PAGE>
JACOBS ENGINEERING GROUP INC.
1111 South Arroyo Parkway
Pasadena, California 91105
----------------
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation by the
Board of Directors of Jacobs Engineering Group Inc., a Delaware corporation
(the "Company"), of proxies to be used at the annual meeting of shareholders
of the Company to be held on February 13, 2001, and any adjournment thereof.
The expenses of the solicitation will be paid by the Company. Some officers
and regular employees may solicit proxies personally and by telephone if
deemed necessary. The proxy is revocable by you by written notice to the
Secretary of the Company at any time prior to the exercise of the authority
granted thereby or by your being present at the meeting and electing to vote
in person.
The holders of common stock of record at the close of business on January 8,
2001, the record date fixed by the Board of Directors (the "Record Date"),
will be entitled to one vote per share on all business of the meeting. This
proxy statement and the accompanying proxy are being mailed on or about
January 11, 2001, to the shareholders of record on the Record Date. As of the
Record Date the Company had 26,471,282 shares of common stock outstanding.
In connection with the solicitation of proxies by the Board of Directors for
the Annual Meeting of Shareholders, the Board of Directors has designated
Joseph J. Jacobs, Noel G. Watson and John W. Prosser, Jr. as proxies. Shares
represented by all properly executed proxy cards received in time for the
meeting will be voted in accordance with the choices specified on the proxy
card. Unless contrary instructions are indicated on the proxy card, the shares
of common stock will be voted FOR the election of the nominees listed below
under "1. Election of Directors." Where no choice is specified, the shares of
common stock will be voted FOR an amendment to the 1989 Employee Stock
Purchase Plan described below under "2. Approval of Amendment to the 1989
Employee Stock Purchase Plan," FOR an increase in the authorized common stock
described below under "3. Approval of Amendment to the Certificate of
Incorporation to Increase the Authorized Common Stock" and FOR the appointment
of Ernst & Young LLP as the independent auditors for the Company for the year
ending September 30, 2001, as described under "4. Approval of Ernst & Young
LLP as Auditors," below. The Board of Directors is not aware of any other
issue to be brought before the meeting. If other matters are properly brought
before the meeting, then the proxies will vote in accordance with their best
judgment.
The presence in person or by proxy of the holders of a majority of the
outstanding shares of common stock will constitute a quorum for the
transaction of business at the meeting. Votes cast by proxy or in person at
the Annual Meeting will be counted by the persons appointed by the Company to
act as election inspectors for the meeting. The election inspectors will treat
shares represented by proxies that reflect abstentions as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum and for purposes of determining the outcome of any matter submitted to
the shareholders for a vote. Abstentions, however, do not constitute a vote
"for" or "against" any matter and thus will be disregarded in the calculation
of a plurality or of "votes cast."
The election inspectors will treat shares referred to as "broker non-votes"
(i.e., shares held by brokers or nominees over which the broker or nominee
lacks discretionary power to vote and for which the broker or nominee has not
received specific voting instructions from the beneficial owner) as shares
that are present and entitled to vote for purposes of determining the presence
of a quorum. However, for purposes of determining the outcome of any matter as
to which the broker has indicated on the proxy that it does not have
discretionary authority to vote, those shares will be treated as not present
and not entitled to vote with respect to that matter (even though those shares
are considered entitled to vote for quorum purposes and may be entitled to
vote on other matters).
1
<PAGE>
Directors are elected by a plurality, and the five nominees who receive the
most votes will be elected. Abstentions and broker non-votes will not be taken
into account in determining the outcome of the election.
To be adopted, Proposals 2 and 4 in this Proxy Statement must receive the
affirmative vote of the majority of the shares present in person or by proxy
at the meeting and entitled to vote. To be adopted, Proposal 3 in this Proxy
Statement must receive the affirmative vote of the majority of the Company's
outstanding shares of common stock. Abstentions have the effect of negative
votes.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables, based in part upon information supplied by officers,
directors and principal shareholders, set forth certain information regarding
the ownership of the common stock of the Company as of the Record Date by (i)
all those persons known by the Company to be beneficial owners of more than
five percent of the outstanding common stock of the Company; (ii) each
director; (iii) each executive officer named in the compensation tables,
below; and (iv) all officers and directors of the Company as a group. Unless
otherwise indicated, each of these shareholders has sole voting and investment
power with respect to the shares beneficially owned, subject to community
property laws where applicable.
Security Ownership of Certain Beneficial Owners (a)
<TABLE>
<CAPTION>
Amount
and
Nature of Percent of
Name and Address Ownership Class
---------------- --------- ----------
<S> <C> <C>
Joseph J. Jacobs...................................... 3,338,474(b) 12.61%(b)
1111 South Arroyo Parkway
Pasadena, California 91105
FMR Corp. ............................................ 2,834,690 10.71%
82 Devonshire Street
Boston, Massachusetts 02109
</TABLE>
--------
(a) Security ownership information for beneficial owners is taken from
statements filed with the Securities and Exchange Commission pursuant to
Sections 13(d), (f) and (g) of the Securities Exchange Act of 1934, as
amended, and information made known to the Company.
(b) Dr. Jacobs has sole voting and dispositive power over all shares except
7,780 shares that are owned by the Jacobs Family Foundation as to which he
shares voting and dispositive power.
2
<PAGE>
Security Ownership of Directors, Nominees and Named Executive Officers
<TABLE>
<CAPTION>
Amount of
Common Stock Unexercised Percent
Name of Beneficial Owner Beneficially Owned(a) Options(b) Total of Class(c)
------------------------ --------------------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Outside Directors:
Joseph F. Alibrandi..... 2,500 7,300 9,800 *
Peter H. Dailey......... 2,500 7,300 9,800 *
Robert B. Gwyn.......... 1,500(d) 5,300 6,800(d) *
Linda K. Jacobs......... 190,787(e) 7,300 198,087(e) 0.75%
William R. Kerler....... 39,369 2,600 41,969 0.16%
James Clayburn LaForce.. 3,125 7,300 10,425 *
Dale R. Laurance........ 1,500 6,300 7,800 *
Linda Fayne Levinson.... 500 4,300 4,800 *
David M. Petrone........ 16,850 950 17,800 *
James L. Rainey, Jr..... 1,950(f) 6,050 8,000(f) *
Named Executive
Officers:
Noel G. Watson.......... 194,857 150,000 344,857 1.30%
Joseph J. Jacobs........ 3,338,474(e) -- 3,338,474(e) 12.61%
Richard E. Beumer....... 5,000 4,000 9,000 *
Thomas R. Hammond....... 16,761 51,100 67,861 0.26%
Richard J. Slater....... 36,798 69,600 106,398 0.40%
James C. Uselton........ 5,000 4,000 9,000 *
All directors and
executive officers as a
group.................. 4,077,800 649,758 4,727,558 17.86%
</TABLE>
--------
* Less than 0.1%
(a) Ownership is direct unless indicated otherwise, and includes 500 shares of
restricted stock awarded to each Outside Director, with the exception of
Mr. Kerler, in December 2000 under the 1999 Outside Director Stock Plan.
(b) Includes only unexercised options exercisable within 60 days following the
date of this proxy statement.
(c) Calculation is based on 26,471,282 shares of Common Stock outstanding as
of January 8, 2001.
(d) Includes 1,000 shares held in a family limited partnership over which Mr.
Gwyn has voting and dispositive power.
(e) Includes 7,780 shares held by the Jacobs Family Foundation as to which Dr.
Linda K. Jacobs and Dr. Joseph J. Jacobs share voting and dispositive
power with the other directors and officers of the Foundation.
(f) Includes 750 shares held in a trust for the benefit of Mr. Rainey's spouse
as to which Mr. Rainey shares voting and dispositive power.
1. ELECTION OF DIRECTORS
The bylaws of the Company presently provide for thirteen directors. The
Certificate of Incorporation and the bylaws of the Company divide the Board of
Directors into three classes with the terms of office of the directors of each
Class ending in different years. The terms of Classes I, II and III presently
end at the annual meetings in 2003, 2001 and 2002, respectively. Class I has
four directors, Class II has five directors, and Class III has four directors.
The nominees for Class II are to be voted upon at this annual meeting. The
directors in Classes I and III will continue in office until expiration of
their respective terms. Mr. Joseph F. Alibrandi, a director of the Company
since 1988, and William R. Kerler, an executive officer of the Company from
1985 to 2000 and a director of the Company since 1998, who are both currently
directors in Class II, have stated that they do not wish to stand for re-
election. Mr. Alibrandi's and Mr. Kerler's contributions to
3
<PAGE>
the Company were many and are greatly appreciated. The Board of Directors has
nominated Peter H. Daily, Robert B. Gwyn, Linda K. Jacobs, Robert C. Davidson,
Jr. and Benjamin F. Montoya for election as Class II directors for three year
terms expiring at the 2004 annual meeting.
The persons named as proxies on the accompanying proxy card intend to vote
the shares as to which they are granted authority to vote for the election of
the nominees listed above. The proxies may not vote for a greater number of
persons than five.
Although the Board of Directors does not know of any reason why any nominee
will be unavailable for election, in the event any nominee should be
unavailable at the time of the meeting, the proxies may be voted for a
substitute nominee as selected by the Board of Directors.
The following table sets forth information about these nominees and the
directors whose terms of office do not expire at the 2001 annual meeting. THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR MESSRS. DAILEY, GWYN, DAVIDSON
AND MONTOYA, AND DR. LINDA JACOBS AS DIRECTORS.
NOMINEES
<TABLE>
<CAPTION>
Director
Name and Positions Held with the Company Class Since
---------------------------------------- ----- --------
<S> <C> <C>
The Hon. Peter H. Dailey, Director. Mr. Dailey, age 70 is
Chairman of Enniskerry Financial, a private investment firm
and The Dailey Foundation. He is also Chairman of the Board
and a director of Fedco, Inc. He was formerly U.S. Ambassador
to Ireland and Special Envoy to NATO. Prior to government
service, he was Vice-chairman of Interpublic Group, Chairman
of the Dailey International Group and a director of The Walt
Disney Company. He is a Director of Krause Furniture and
Wirthlin Worldwide............................................ II 1991
Robert C. Davidson Jr., Nominee for Director. Mr. Davidson, age
55, is the Chairman and Chief Executive Officer of Surface
Protection Industries, Inc. where he has been an executive
since 1978. He serves as a member of the Boards of Morehouse
College, The Los Angeles Area Chamber of Commerce, Fulcrum
Venture Capital Corporation, Children's Hospital Los Angeles,
The Los Angeles Urban League and the University of
Chicago Graduate School of Business Advisory Council.......... II - -
Robert B. Gwyn, Director. Mr. Gwyn, age 61, is retired. He was
a Managing Director of Amaryn Group, a private investment
company, from 1994 until 1998. He was President, CEO and
Chairman of the Board of Agricultural Minerals and Chemicals,
Inc., a company engaged in the fertilizer and methanol
businesses, from 1990 until 1994, when that company was sold.. II 1995
Linda K. Jacobs, Director. Dr. Linda K. Jacobs, age 53, is
President of Middle East Technology Assistance, a non-profit
corporation. From 1985 until 1993 she was a principal in
Jabara-Jacobs Associates, a consulting firm. She is a daughter
of Dr. Joseph J. Jacobs....................................... II 1986
Rear Admiral Benjamin F. Montoya (U.S.N., Retired), Nominee for
Director. Mr. Montoya, age 65, is retired. He served as the
Commander, Naval Facilities Engineering Command and Chief of
Civil Engineers from 1987 to 1989. He was Senior Vice
President and General Manager of the Gas Supply Business Unit
of Pacific Gas and Electric Company from 1989 to 1991. He was
President and CEO of Public Service Company of New Mexico from
1993 until 2000 and was elected Chairman of the Board in 1999
and served until he retired in October 2000. Mr. Montoya
serves as a member of the Boards of Public Service Company of
New Mexico, Furrs Corp., National Park Foundation, Wells Fargo
and Company, The Environmental Company and Brown and Caldwell
Engineers..................................................... II - -
</TABLE>
4
<PAGE>
CONTINUING DIRECTORS
<TABLE>
<CAPTION>
Director
Name and Positions Held with the Company Class Since
---------------------------------------- ----- --------
<S> <C> <C>
Joseph J. Jacobs, Chairman of the Board and Director.
Dr. Jacobs, age 84, was chief executive officer of the Company
and its predecessors from 1957 until November 19, 1992. Dr.
Jacobs founded the Company as a sole proprietorship in 1947
and incorporated it in 1957................................... III 1974
Noel G. Watson, President, Chief Executive Officer and
Director. Mr. Watson, age 64, has been with the Company since
1965 and has been President and Chief Executive Officer of the
Company for more than the past five years..................... I 1986
Richard E. Beumer, Vice Chairman of the Board and Director. Mr.
Beumer, age 62, joined the Company in January 1999 in
connection with the Company's merger with Sverdrup
Corporation. Mr. Beumer joined Sverdrup in 1959. He became a
member of Sverdrup's board of directors in 1979. Mr. Beumer
was elected president of Sverdrup Corporation in 1993, assumed
the additional role of CEO in 1994, and became the chairman of
Sverdrup's board of directors in 1996. Mr. Beumer is also a
director of Aid Association for Lutherans (a fraternal
insurance company), and he serves on the Board of Trustees of
Valparaiso University......................................... III 1999
James Clayburn LaForce, Director. Dr. LaForce, age 72, is
retired. He was Dean of the Anderson Graduate School of
Management, University of California at Los Angeles from 1978
until 1993, when he retired. Dr. LaForce is a director of
Blackrock Funds, The Timken Company, Motor Cargo Industries,
Inc., Provident Investment Counsel Mutual Funds and Payden and
Rygel Investment Trust, and he is a trustee of the Trust for
Investment Managers........................................... I 1987
Dale R. Laurance, Director. Dr. Laurance, age 55, is the
president and a director of Occidental Petroleum Corporation
where he has been an executive since 1983. He is also the
Chairman and Chief Executive Officer of Occidental Oil & Gas
Corporation................................................... III 1994
Linda Fayne Levinson, Director. Ms. Levinson, age 58, is a
Partner of Global Retail Partners, L.P., a venture capital
firm that invests in early stage internet and retail
companies. Ms. Levinson served as President of Fayne Levinson
Associates from 1982 until January 1998. Ms. Levinson was an
executive at Creative Artists Agency, Inc. from 1993 through
February 1994 and was a partner of Wings Partners, a Los
Angeles-based merchant bank, from 1989 until 1993. From 1984
until 1987 Ms. Levinson was a Senior Vice President of
American Express Travel Related Services Co., Inc., and from
1972 through 1981 she was at McKinsey & Co., a worldwide
general management consulting firm, where she became the first
woman partner in 1979. Ms. Levinson also serves as a member of
the Boards of Administaff, Inc., CyberSource Corporation,
GoTo.com, Inc., Lastminute.com, plc, 24/7 Media Inc. and NCR
Corporation................................................... III 1996
David M. Petrone, Director. Mr. Petrone, age 56, is Chairman of
Housing Capital Company, a real estate lending firm. He was
Vice Chairman of Wells Fargo & Co. from 1986 until March 1,
1992. He is a director of Alexandria Real Estate Equities,
Inc., Spieker Properties, Inc. and Finelite, Inc. ............ I 1987
James L. Rainey, Jr., Director. Mr. Rainey, age 71, is retired.
He was President and Chief Executive Officer of Farmland
Industries, Inc., an agricultural cooperative, from 1986 until
1991. Mr. Rainey is a director of Wirthlin Worldwide.......... I 1993
</TABLE>
5
<PAGE>
COMMITTEES OF THE BOARD
The Board has two standing committees. The Audit Committee advises the Board
on internal and external audit matters affecting the Company, including
recommendations as to the appointment of the independent auditors of the
Company; reviews with such auditors the scope and results of their examination
of the financial statements of the Company and any investigations by such
auditors. The Audit Committee is governed by a charter which it has adopted,
which is attached to this Proxy Statement as Exhibit A. The Company's
securities are listed on the New York Stock Exchange and are governed by its
listing standards. All of the members of the Audit Committee meet the
independence standards of Section 303.01(B)(2) and (3) of the New York Stock
Exchange's listing standards. During fiscal 2000 the Audit Committee held two
meetings. The members of the Audit Committee are Messrs. Petrone (Chairman),
Alibrandi, Dailey and Rainey. Further information regarding the Audit
Committee is set out in the Audit Committee Report below.
The Compensation Committee approves the salaries and bonuses of the
executive officers and approves all grants of stock options and awards of
restricted stock under the Jacobs Engineering Group Inc. 1999 Stock Incentive
Plan (the "1999 Stock Plan"). The Compensation Committee also administers the
1989 Employee Stock Purchase Plan, and approves the employment contract
between the Company and Dr. Joseph J. Jacobs. During fiscal 2000 this
committee held nine meetings. The members of the Compensation Committee are
Dr. LaForce (Chairman), Ms. Levinson, Mr. Gwyn and Dr. Laurance.
COMPENSATION OF DIRECTORS
The Company pays directors who are not employed by the Company ("Outside
Directors") a retainer in the amount of $25,000 per year plus a fee of $1,000
for each meeting of the board and each committee on which they serve that they
attend. Pursuant to the terms of the Jacobs Engineering Group Inc. 1999
Outside Director Stock Plan, each of the Outside Directors receives an option
for 2,000 shares of common stock on the date of their first election to the
Board and also receives an option for 1,000 shares at an option price equal to
the Fair Market Value (as defined in the plan) of common stock on the first
day of March of each year. On March 23, 2000, the Board of Directors
unanimously decided to add to the compensation of Outside Directors an
additional annual award of 500 shares of restricted stock under the plan.
The Board of Directors held ten meetings during fiscal 2000. All directors
attended at least 75% of all meetings of the Board of Directors and of the
committees on which they served during fiscal 2000.
6
<PAGE>
AUDIT COMMITTEE
REPORT OF THE AUDIT COMMITTEE
The Audit Committee reviews the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility
for the financial statements and the reporting process. The Company's
independent auditors are responsible for expressing an opinion on the
conformity of our audited financial statements to accounting principles
generally accepted in the United States.
In this context, the Audit Committee has reviewed and discussed with
management and the independent auditors the audited financial statements. The
Audit Committee has discussed with the independent auditors the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees). In addition, the Audit Committee has
received from the independent auditors the written disclosures required by
Independence Standards Board No. 1 (Independence Discussions with Audit
Committees) and discussed with them their independence from the Company and
its management.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board has approved,
that the audited financial statements be included in the Company's Annual
Report on SEC Form 10-K for the year ended September 30, 2000, for filing with
the Securities and Exchange Commission.
DAVID M. PETRONE, Chairman
JOSEPH F. ALIBRANDI
PETER H. DAILEY
JAMES L. RAINEY, JR.
7
<PAGE>
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The overall objectives of the Company's executive compensation program are
as follows:
--To enable the Company to attract, motivate and retain highly-qualified
executives by offering competitive base salaries that are consistent with the
Company's size.
--To reward executives for past performance through a bonus program that
places a substantial component of their pay at risk based on Company
performance as measured by its return on net equity.
--To provide an incentive for continued service and future performance
through the use of stock options.
--To encourage executives to have an equity ownership in the Company.
The Compensation Committee of the Board of Directors is responsible for
reviewing and approving the compensation of all executive officers and all
stock option grants to all employees.
Base Salary. In setting executive officer base salaries for fiscal 2000 the
Committee considered the recommendations of Dr. Jacobs and Mr. Watson, who
made salary recommendations as to all executive officers except themselves,
the Committee's own subjective evaluations of those executive officers, the
salary spread that has normally been maintained by the Company between levels
of management, and information compiled by the Company regarding prevailing
salaries for professional engineers being offered by companies that the
Company regards as its competitors.
The Committee considered the fact that the principal provisions for the
retirement of the employees of the Company are the various (S)401(k) plans and
the 1989 Employee Stock Purchase Plan. The Committee also considered that the
only domestic employees of the Company who are participants in defined benefit
retirement plans are employees of certain acquired companies. Enrollment in
those plans was frozen at the time of acquisition, and benefits under those
plans have been adjusted to align them with the Company's overall compensation
structure. The Committee also considered that employees receiving bonuses
through the Company's Incentive Bonus Plan may elect to participate in a
nonqualified deferred compensation plan whereby a portion of a participant's
salary and bonus may be deferred and paid to the employee at retirement.
The Committee also considered a study by an outside compensation and
benefits consulting company that it had commissioned. The consulting company
reviewed the compensation, benefits and stock option award history of the
Company's executive officers against two peer groups that were developed by
the consulting company: an industry peer group and a peer group with market
capitalization levels between $800 million and $1.2 billion. The consultants
concluded that the industry peer group would provide information regarding the
competitive pay structure of the Company's direct competitors, while the
market capitalization peer group would provide information regarding the
competitive pay structure for companies employing similar resources.
The consultants approached their analysis using two methods: First, they
compared the Company's top five officers (ranked by total cash compensation)
to the top five officers in the industry and market capitalization groups.
Second, they compared the compensation levels of the CEO and the Executive
Vice Presidents of Operations to the top two positions in both the industry
and market capitalization groups, and the remaining executive officers of the
Company to the fifth highest paid position in both peer groups. Lastly, the
consultants compared the compensation levels of all of the Company's executive
officers to certain published survey information.
Mr. Watson's base salary for 2000 was established in the same manner as the
base salaries of the other executive officers of the Company. The Committee
believes that the total salary and bonus paid to Mr. Watson and each of the
Named Executive Officers was reasonable in light of the performance of the
Company for fiscal 2000.
8
<PAGE>
Dr. Jacobs was the Chief Executive Officer of the Company from its
organization in 1957 until he resigned that position in November 1992; he
continues to serve as Chairman of the Board and as a full-time employee of the
Company. The Company has an employment agreement, originally entered into on
October 1, 1987, with Dr. Jacobs that establishes, among other matters, his
base salary. The original agreement received the approval of the Board of
Directors of the Company in 1987, without dissent and with Dr. Jacobs not
voting. The Board subsequently delegated all decisions regarding this
agreement to the Committee, which has approved subsequent amendments to it,
including extensions of its term, which now expires on September 30, 2005 but
there has been no change to Dr. Jacobs' base salary since 1987. The Committee
has approved these amendments based on its subjective judgment of Dr. Jacobs'
past and continuing contributions to the business strategy, marketing and
reputation of the Company.
Annual Incentive Bonuses. Pursuant to the Company's Incentive Bonus Plan,
each year the Compensation Committee approves a target percentage of pre-tax
profits to the net equity of the Company that must be achieved before any
bonuses are paid. This target percentage is established on the basis of the
Committee's judgment of what constitutes a reasonable minimum return for the
shareholders on their investment in the Company. If pre-tax profits exceed the
target, then a predetermined percentage of profits in excess of the target is
placed in the bonus pool; if pre-tax earnings exceed two times the target,
then a larger percentage of the excess is placed into the bonus pool. A major
percentage of the bonus pool is allocated to the officers and key managers of
the Company. Fifty percent of the allocation to the officers and key employees
is then individually allocated to them in proportion to their weighted
salaries, with the salaries of the executive officers given the greatest
weight. The remainder of the executive officer pool is usually allocated in
the same proportions as the initial allocations, but individual allocations
are in some cases adjusted on the basis of the Committee's subjective
evaluations of individual performance. Generally, bonuses are paid in three
annual installments contingent upon continued employment and may be further
deferred by participants in the Company's deferred compensation plans.
Stock Options. In determining stock option awards to executive officers for
2000 the Committee considered Dr. Jacobs' and Mr. Watson's recommendations
with respect to all executive officers other than themselves, the Committee's
own subjective evaluations of the executive officers and previous option
awards to the executive officers. The Committee also considered the stock
option awards information and recommended guidelines included in the
compensation and benefits study discussed previously.
Because of Dr. Jacobs' percentage interest in the outstanding stock of the
Company, the Committee has never granted Dr. Jacobs stock options, nor awarded
shares of restricted stock to him.
Tax Deductibility Considerations. In 1993, the Internal Revenue Code was
amended to limit the deductibility of certain compensation and benefits paid
to the chief executive officer and the four highest paid executive officers in
excess of $1 million to each of them. The Committee believes that the
compensation payable for fiscal year 2001 will not result in any loss of tax
deductions for the Company. It is the Committee's intent to adopt policies to
obtain maximum deductibility of executive compensation, consistent with the
objectives of the Company's executive compensation program outlined above. The
Committee will continue to monitor the regulations issued by the IRS under
this provision as they are finalized to determine whether any program changes
are appropriate.
JAMES CLAYBURN LAFORCE, Chairman
ROBERT B. GWYN
DALE R. LAURANCE
LINDA FAYNE LEVINSON
9
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning the annual and long-
term compensation of the Chief Executive Officer and the other four most
highly compensated offices, and the Chairman of the Board ("Named Executive
Officers") of the Company for services in all capacities to the Company and
its subsidiaries during its 1998, 1999 and 2000 fiscal years:
<TABLE>
<CAPTION>
Annual Long-term
Compensation(1) Compensation
-------------------- Other Annual ------------
Compensation Options/SARs
Name Year Salary ($) Bonus ($) ($)(2) (Shares)(3) Other(4)
---- ---- ---------- --------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Noel G. Watson.......... 2000 723,340 339,790 -- 150,000 5,370
Chief Executive Officer 1999 655,320 601,710 -- -- 5,180
1998 591,160 542,350 7,420 100,000 5,120
Joseph J. Jacobs........ 2000 432,200 239,000 -- -- --
Chairman of the Board 1999 432,200 400,000 -- -- --
1998 432,200 450,000 -- -- --
Richard E. Beumer....... 2000 408,340 191,820 -- -- 3,900
Vice Chairman of the
Board 1999 277,500 254,800 -- 20,000 4,000
Thomas R. Hammond....... 2000 420,340 197,450 -- 30,000 5,100
Executive Vice
President 1999 388,000 356,260 -- 20,000 5,000
1998 294,850 218,230 1,230 59,000 5,000
Richard J. Slater....... 2000 420,340 197,450 -- 30,000 5,370
Executive Vice
President 1999 388,000 356,260 -- 20,000 4,960
1998 297,040 219,740 2,430 59,000 5,160
James C. Uselton........ 2000 390,000 183,200 -- -- 3,550
Executive Vice
President 1999 266,250 244,470 -- 20,000 4,000
</TABLE>
--------
(1) Represents amounts earned by the named executive during the year
indicated, and includes amounts deferred under the Jacobs Engineering
Group Inc. 401(k) Plus Savings Plan and Trust (the "401(k) Plan") and the
Company's nonqualified Executive Deferral Plans (the "EDPs").
(2) These amounts represent interest credited to the employees' deferred
compensation account balances under the EDPs in excess of 120% of the
applicable federal rate in effect at the times the interest crediting
rates were set for the EDPs.
(3) Consists solely of non-qualified stock options pursuant to the 1999 Stock
Plan.
(4) Consists solely of Company contributions to the 401(k) Plan.
10
<PAGE>
Option/SAR Grants in Last Fiscal Year
Stock options granted during fiscal year 2000 to all of the Company's
executive officers, including the Named Executive Officers, were granted under
the 1999 Stock Plan. The 1999 Stock Plan permits the granting of stock options
and the awarding of restricted stock to employees of the Company and its
subsidiaries, as well as to employees of "related companies" (as defined in
the 1999 Stock Plan). The 1999 Stock Plan was adopted by the board of
directors, and approved by the Company's shareholders, as the successor stock
award plan to the Jacobs Engineering Group Inc. 1981 Executive Incentive Plan
(the "1981 Plan"). The following table contains information concerning options
granted during fiscal year 2000 to those Named Executive Officers.
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Market Price Appreciation for Option
Exercise Price on Term
Options Percentage or Base Date of (10 Yrs.)
Granted of Price Grant Expiration ---------------------------------
Name (shares)(1) Total(2) ($/share) ($/share) Date 0% $ 5% $ 10% $
---- ----------- ---------- --------- --------- ---------- ---- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Noel G. Watson.......... 150,000 26.77% 33.4375 33.4375 25-May-10 -- $ 3,154,300 $ 7,993,610
Thomas R. Hammond....... 30,000 5.35% 33.4375 33.4375 25-May-10 -- 630,860 1,598,720
Richard J. Slater....... 30,000 5.35% 33.4375 33.4375 25-May-10 -- 630,860 1,598,720
Gain for all shareholders (based on 26,386,238 shares outstanding at September 30,
2000, and a stock price of $40.3125 per share).................................... $668,952,210 $1,695,256,240
============ ==============
Gain to Named Executive Officers as a percent of total gain to all shareholders.... 0.66% 0.66%
============ ==============
</TABLE>
--------
(1) All grants consisted of non-qualified options pursuant to the 1999 Stock
Plan.
(2) Calculation based upon grants of options for 560,250 shares during fiscal
2000.
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option SAR Values
The following table sets forth information regarding option exercises during
the fiscal year 2000 by the Named Executive Officers and the value of their
unexercised options on September 30, 2000. All options were granted under the
1981 Plan. The Company has never granted any stock appreciation rights.
<TABLE>
<CAPTION>
Value of Unexercised
Total Number of Unexercised In-the-Money
Shares Value Options at FYE (shares) Options at FYE ($)
Acquired on Realized ------------------------- -------------------------
Name Exercises ($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Noel G. Watson.......... 115,000 1,327,813 128,000 242,000 $1,679,500 $2,040,500
Richard E. Beumer....... -- -- 4,000 16,000 15,750 63,000
Thomas R. Hammond....... 19,600 169,278 57,100 93,400 775,800 852,800
Richard J. Slater....... 10,000 26,875 69,600 87,400 1,067,100 756,600
James C. Uselton........ -- -- 4,000 16,000 15,750 63,000
</TABLE>
11
<PAGE>
Sverdrup Pension Plan
Effective with the merger with Sverdrup Corporation in fiscal 1999, the
Company became one of the sponsoring employers of the Sverdrup Corporation
Pension Plan (the "Pension Plan"). Messrs. Beumer and Uselton are the only
Named Executive Officers participating in the Pension Plan. Under the Pension
Plan, benefits are based on the average compensation (salary and bonus as
reported in the Summary Compensation Table) of a participant for the five
consecutive calendar years preceding or coinciding with retirement (whichever
produces the greatest benefit). The following table shows the estimated annual
pension benefits payable to a covered participant at normal retirement age
(which is age 65) under the Pension Plan. As of the latest determination date,
Messrs. Beumer's and Uselton's covered compensation under the Pension Plan was
$160,000 each (because there is not a defined benefit or excess award plan
attached to or associated with the Pension Plan, a participant's covered
compensation is limited to amounts allowed under the Internal Revenue Code).
Also as of the latest determination date, Mr. Beumer, age 62, had 40.75 years
of credited service, and Mr. Uselton, age 60, had 37.95 years of credited
service. Benefits shown are computed as a ten-year certain and life annuity
beginning at age 65, with no deduction for Social Security or other offset
amounts:
<TABLE>
<CAPTION>
Years of Service
---------------------------------------------------
Remuneration 20 25 30 35 40 45
------------ ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$150,000.................... $85,500 $93,750 $102,000 $110,250 $118,500 $126,750
$160,000 and above.......... $86,520 $95,100 $103,680 $112,260 $120,840 $129,420
</TABLE>
12
<PAGE>
PERFORMANCE GRAPHS
The following graphs show the changes over the past five- and ten-year
periods in the value of $100 invested in (1) the common stock of Jacobs
Engineering Group Inc.; (2) the Standard & Poor's 500 Index; and (3) the Dow
Jones Heavy Construction Group Index. The values of each investment are based
on share price appreciation, with reinvestment of all dividends (assuming any
were paid). For each graph, the investments are assumed to have occurred at
the beginning of each period presented.
Comparison of Five Year Cumulative Total Return*
Among Jacobs Engineering Group Inc., the S&P 500 Index, and
the Dow Jones Heavy Construction Group Index
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Cumulative Total Return
-----------------------------
9/95 9/96 9/97 9/98 9/99 9/00
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Jacobs............................................ $100 $ 90 $123 $125 $131 $162
S&P 500........................................... 100 120 169 184 236 267
Dow Jones Heavy Construction...................... 100 114 114 89 100 107
</TABLE>
13
<PAGE>
Comparison of Ten Year Cumulative Total Return*
Among Jacobs Engineering Group Inc., the S&P 500 Index, and
the Dow Jones Heavy Construction Group Index
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Cumulative Total Return
------------------------------------------------------
9/90 9/91 9/92 9/93 9/94 9/95 9/96 9/97 9/98 9/99 9/00
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Jacobs.................. $100 $303 $319 $255 $267 $273 $247 $336 $340 $356 $442
S&P 500................. 100 131 146 165 171 221 266 374 408 522 591
Dow Jones Heavy
Construction........... 100 100 101 97 112 124 141 141 110 124 133
</TABLE>
--------
* The cumulative total return information used to prepare the preceding graphs
was provided by Research Data Group, Inc.
14
<PAGE>
2. APPROVAL OF AMENDMENT TO THE 1989 EMPLOYEE STOCK PURCHASE PLAN.
There will be presented to the meeting a proposal to approve the 1989
Employee Stock Purchase Plan (the "Stock Purchase Plan" or the "Plan") as it
has been amended by action of the Board of Directors. The amendment increases
the number of shares reserved for the Stock Purchase Plan by 2,000,000 shares
of Common Stock. The complete text of the Stock Purchase Plan reflecting all
amendments approved by the Board of Directors will be found in Exhibit B to
this Proxy Statement. The following discussion is qualified in all respects by
reference to Exhibit B.
The Stock Purchase Plan was originally adopted by the Board of Directors on
December 15, 1988, and by the shareholders on February 14, 1989. When the
Stock Purchase Plan was adopted in 1989 the shareholders reserved 200,000
shares of Common Stock. The 200,000 shares were subsequently increased by two
two-for-one stock splits to 800,000 shares. In 1992, 1996 and 1999 the
shareholders approved additional increases in the number of shares reserved
for the Plan of 606,777, 1,500,000 and 500,000, respectively. As a result, a
total of 3,406,777 shares have been reserved for the Stock Purchase Plan. Of
these shares a total of 3,097,936 shares have been purchased by employees. The
amended Plan being presented to the shareholders reflect the addition of
2,000,000 shares to the reserve, and shows a total of 2,308,841 shares
available for issuance under the Plan.
Purpose of the Plan
The Board of Directors believes that the opportunity for all eligible, full-
time employees to acquire shares of common stock of the Company through
participation in the Stock Purchase Plan provides an important incentive to
the employees of the Company and that the Stock Purchase Plan assists the
Company in attracting new employees.
Administration
The Stock Purchase Plan is administered by the Compensation Committee of the
Board of Directors (the "Committee"). The members of the Committee must be
directors who are not eligible to receive options under the Stock Purchase
Plan or awards of stock, stock options or stock appreciation rights under any
other plan of the Company other than automatic option grants and an annual
award of 500 shares of restricted stock under the 1999 Outside Director Stock
Plan, and who have not been eligible to receive such options or other awards
for at least one year prior to their service on the Committee. The Committee
is authorized to construe and interpret the Stock Purchase Plan, to prescribe
rules and regulations for its administration and to take any other necessary
action in relation to the Plan.
Eligibility
All employees of the Company and its domestic subsidiaries and all employees
of any foreign subsidiaries designated from time to time by the Board of
Directors, except employees who normally work fewer than 20 hours each week or
five or fewer months during any fiscal year and employees who have completed
less than one year of service with the Company or a participating subsidiary,
are eligible to receive options under the Plan. Any employee who would own
five percent or more of the common stock immediately after an option is
granted will not be eligible to receive options. The Company estimates that,
at December 31, 2000, there were approximately 17,000 employees eligible to
receive options under the Stock Purchase Plan.
Terms of Options
The Stock Purchase Plan permits eligible employees of the Company to
purchase shares of common stock from the Company by electing to exercise
options to purchase common stock. These options are granted in the form of
successive six-month options on March 1 and September 1 of each
15
<PAGE>
year. An employee may exercise an option in amounts based upon a percentage of
his or her salary or wages ranging from 2% to 15% of basic compensation. An
employee may elect to participate or not to participate on each March 1 and
September 1 commencement date. The Company will make withholdings from the
employee's salary or wages during the six-month term of the option, and the
employee's purchases of the shares are effected without any further action on
the part of the employee at the completion of the six-month period. If an
employee ceases to be an employee for any reason during any six-month period,
then that employee's option will immediately terminate, and the Company will
refund to the employee, or the employee's designated beneficiary in the case
of the employee's death, the full amount of all withholdings without interest.
The price at which shares may be purchased is the lesser of 90% of the fair
market value of the common stock on the first day of a six-month term of each
option that is exercised, or 90% of the fair market value of the common stock
on the last day of the six-month term of the option. However, as amended, the
Plan now permits the Committee, if it deems such change desirable and in the
best interests of the Company, to approve a price equal to the fair market
value of the shares on the last day of the six month option periods multiplied
by a percentage figure of from 85% to 100% as selected by the Committee.
The fair market value for the purpose of these formulas is the closing price
of the common stock as reported in the New York Stock Exchange Composite
Transactions report for the relevant date. The maximum fair market value of
common stock that an employee may purchase under the Stock Purchase Plan in
any calendar year is $25,000.
Amendment and Termination
The Board of Directors may at any time amend or terminate the Stock Purchase
Plan, except that no such amendment may be made without the approval of the
shareholders if it would increase the number of shares of common stock
authorized to be issued under the Stock Purchase Plan, materially increase the
benefits accruing to employees under the Stock Purchase Plan, materially
modify the requirements as to eligibility for participation or withdraw
administration of the Stock Purchase Plan from the Committee.
As amended, the Stock Purchase Plan will terminate on March 31, 2009, unless
the Board of Directors terminates the Stock Purchase Plan at an earlier date
or the shares reserved for the Stock Purchase Plan are exhausted, and the
shareholders do not vote to reserve additional shares for it.
Federal Tax Consequences
The Stock Purchase Plan is intended to be an "employee stock purchase plan"
as defined in Section 423 of the Internal Revenue Code of 1986, which provides
that an employee does not have to pay any federal income tax either when he or
she elects to exercise an option under such a stock purchase plan, or when the
six-month option period ends and the employee receives shares of common stock
of the Company. The employee is, however, required to pay federal income tax
on any gain realized on the sale of the shares, as described below.
If the employee has owned shares purchased through the Stock Purchase Plan
for more than one year and disposes of them at least two years after the
commencement date of the six-month option term of the option pursuant to which
they were purchased, then the employee will be taxed as follows.
If the sale price is greater than the price paid under the Stock Purchase
Plan, then the employee will recognize ordinary income in an amount equal to
the lesser of (i) the excess of the market price of the shares on the date the
offering commenced over the price paid or (ii) the excess of the sale price
over the price paid. Any further gain is treated as a long-term capital gain.
16
<PAGE>
If the market price of the shares on the date they are sold is less than the
price paid for the shares under the Stock Purchase Plan, then the employee
will incur a long-term capital loss in the amount equal to the price paid over
the sale price.
If the employee sells the shares before he has owned them for more than one
year or before the expiration of the two-year period commencing on the date
the option period commenced, then the employee will recognize ordinary income
on the amount of the difference between the actual purchase price and the
market price of the shares on the date of purchase, and the Company will
receive a deduction for federal income tax purposes for the same amount. The
employee will recognize a long-term capital gain or loss on the difference
between the sale price and the fair market value on the date of purchase.
If the employee still owns shares purchased under the Stock Purchase Plan at
the time of death, the employee's estate will recognize ordinary income in the
year of death equal to the lower of (i) the amount by which the fair market
value of the shares on the date of death exceeds the purchase price, or (ii)
ten percent (10%) of the fair market value of the shares on the commencement
date of the six month option period during which the shares were acquired.
Adjustments of Options
In the event of a stock split, stock dividend, merger or other like
recapitalization or reorganization, the Board of Directors is required to make
appropriate and proportionate adjustments in the maximum number of shares
subject to the Plan and the price per share subject to outstanding options,
or, in the event of a merger or reorganization, the substitution of shares in
any successor corporation for common stock of the Company.
Change of Control of the Company
As amended, the Plan now provides that the purchase of shares being paid for
pursuant to the exercise of options under the Plan will be accelerated if the
Company were to be acquired by merger or sale of all or substantially all of
its assets or outstanding stock (a "change of control"). If a change of
control were to occur, then on the effective date of the change of control all
amounts withheld from the compensation of employees who had exercised options
under the Plan would be used to purchase shares of common stock at a price
equal to 90% of the lower of (i) the fair market value of the shares on the
first day of the option period during which the change of control occurs and
(ii) the fair market value of the shares immediately prior to the effective
date of the change of control. However, in no event will the clause (i) fair
market value be less than the fair market value per share on the commencement
date of the six month option period in which the change of control occurs.
Current Accounting Treatment
The issuance of common stock under the Stock Purchase Plan will not, under
current generally accepted accounting principles, result in a direct
compensation expense chargeable against the reported earnings of the Company.
However, the Company must disclose in the notes to its consolidated financial
statements the pro forma impact that the options granted under the Stock
Purchase Plan would have upon the reported earnings of the Company if the
value of the options were treated as compensation expense.
Stock Issuances Pursuant to the Stock Purchase Plan
The table below shows as to each Named Executive Officer, all current
executive officers as a group, and all employees as a group, (i) the number of
shares purchased under the Stock Purchase Plan between the period September 1,
1995 and August 31, 2000 (the most recent purchase date under the Stock
Purchase Plan) and (ii) the weighted average purchase price paid per share.
17
<PAGE>
EMPLOYEE STOCK PURCHASE PLAN TRANSACTIONS
<TABLE>
<CAPTION>
Shares Purchased During the
Period
-------------------------------
As a
Percentage
of the Weighted
Total Average
Number of Purchase
Shares Price
Number Purchased ($)
--------- ----------- --------
<S> <C> <C> <C>
Noel G. Watson................................. 0 0 0
Joseph J. Jacobs............................... 0 0 0
Richard E. Beumer.............................. 0 0 0
Thomas R. Hammond.............................. 2,732 Less than 1% $24.64
Richard J. Slater.............................. 0 0 0
James C. Uselton............................... 0 0 0
All current Executive Officers as a group (8
persons participating)........................ 13,832 Less than 1% $24.64
Total shares issued during the period
(consisting of a total of 19,413 separate
issuances).................................... 1,802,197 100% $24.64
</TABLE>
As illustrated in the preceding table, over the past five years, executive
officers participating in the Stock Purchase Plan purchased less than 1% of
the total shares sold to employees during that period.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE AMENDED 1989
EMPLOYEE STOCK PURCHASE PLAN.
3. APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED COMMON STOCK.
The Board of Directors has approved resolutions to amend the Certificate of
Incorporation to increase the authorized capitalization of the Company from
60,000,000 shares of common stock to 100,000,000 shares of common stock with a
par value of $1.00 per share. The amendment will not effect any other changes
to the Certificate of Incorporation. The 1,000,000 authorized shares of
preferred stock with a par value of $1.00 per share, of which none are
outstanding, will remain unchanged.
Purpose of the Proposed Amendment
The purpose of the proposed increase in capitalization is to provide
additional shares for use in connection with such future stock splits and
stock dividends, financings, acquisitions and other uses not presently
determinable, as may be deemed to be feasible and in the best interests of the
Company and its shareholders. The Company has no present plans for issuing any
shares other than pursuant to its various stock option plans and its employee
stock purchase plan discussed elsewhere in this Proxy Statement. As of
September 30, 2000, there were 4,518,191 shares reserved for issuance under
these shareholder-approved plans, and an additional 2,000,000 shares will be
reserved upon the approval of the proposed increase in shares available for
issuance under the 1989 Employee Stock Purchase Plan.
Whether or not and when the Company might issue any additional shares, the
purpose of such issuance and the consideration in cash or property that might
be received therefore would be determined by the Board of Directors without
further action by the shareholders. For example, the issue of additional
shares, of warrants to purchase additional shares or of securities convertible
into
18
<PAGE>
additional shares, for cash or property, including the issue of shares to
directors, officers or employees (other than pursuant to stock options), or as
a stock dividend would not ordinarily require shareholder approval. However,
shareholder approval of some kinds of transactions in which additional shares
were to be issued, such as merger transactions, might be required. In addition,
the issue of additional shares by the Company would be subject to the approval
for listing of the shares by the New York Stock Exchange, and might require
approval or review by federal and state regulatory agencies. Shareholder
authorization for the additional shares is being sought at this time to enable
the directors to meet possible future developments without the expense and
delay of holding a special meeting of shareholders to secure their
authorization when a specific need arises.
Possible Effect of the Proposed Amendment
The issuance of any additional shares might result in the dilution of the
voting power of the existing shareholders of the Company and in their equity in
the Company. Since the common stock has no preemptive rights, the directors of
the Company have the power to issue authorized but unissued shares at such
times and for such purposes and for such consideration as they may determine
without first offering shares to the holders of common stock and without
further action by those holders.
It should be noted that the increased availability for issuance of shares of
common stock could enable the Board of Directors to render more difficult or
discourage an attempt to obtain control of the Company by means of a merger,
tender offer or other business combination transaction directed at the Company.
For example, the issuance of shares of common stock in a public or private
sale, merger or similar transaction would increase the number of outstanding
shares, thereby diluting the interest of a party attempting to obtain control
of the Company. The Company is not aware of any attempt, whether formal or
informal, to acquire a controlling interest in the Company; moreover, the
Company has no present plan or intention to utilize the additional shares of
common stock.
Mechanics and Required Vote for the Amendment
The proposal to increase the authorized capitalization of the Company will be
enacted by filing with the Secretary of State of Delaware a Certificate of
Amendment amending Article 5 of the Certificate of Incorporation. The Company
plans to make this filing promptly after the meeting. However, under Delaware
law, the Board of Directors may abandon the proposed amendment without any
further action by the stockholders of the Company. The full text of Article 5
as it is proposed to be amended by the shareholders is set forth in Exhibit C
to this Notice of Annual Meeting and Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE AMENDMENT TO THE
CERTIFICATE OF INCORPORATION.
4. APPROVAL OF ERNST & YOUNG LLP AS AUDITORS
The Board of Directors, with the concurrence of the Audit Committee, has
selected Ernst & Young LLP to audit the accounts of the Company for its fiscal
year ending September 30, 2001. The Company has been advised by Ernst & Young
LLP that the firm has no relationship with the Company or its subsidiaries
other than that arising from the firm's engagement as auditors, tax advisors
and consultants.
If the selection of Ernst & Young LLP is not approved by the holders of a
majority of the shares represented at the meeting and voting on the proposal,
or if prior to the Annual Meeting to be held in February, Ernst & Young LLP
should decline to act or become incapable of acting, or if its employment
should be otherwise discontinued by the Board of Directors, then in any such
case the Board of
19
<PAGE>
Directors will appoint other independent auditors whose employment for any
period subsequent to the 2001 Annual Meeting will be subject to ratification
by the shareholders at the 2002 Annual Meeting.
The Company has been advised that representatives of Ernst & Young LLP will
be present at the Annual Meeting where they will have an opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE SELECTION OF ERNST &
YOUNG LLP AS AUDITORS FOR THE YEAR ENDING SEPTEMBER 30, 2001.
5. OTHER BUSINESS
The Board of Directors does not intend to present any other business for
action at the meeting and does not know of any business intended to be
presented by others.
SECTION 16(a) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own beneficially more than
ten percent of a registered Class of the Company's equity securities to file
with the Securities and Exchange Commission ("SEC") and the New York Stock
Exchange initial reports of ownership and reports of changes in ownership of
common stock and other equity securities of the Company. Officers, directors
and greater than ten-percent shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms filed by them.
To the Company's knowledge, based solely on a review of the copies of such
filings on file with the Company and written representations from its
directors and executive officers, all Section 16(a) filing requirements
applicable to the Company's directors, officers and greater-than-ten-percent
beneficial owners were complied with on a timely basis during the fiscal year
ended September 30, 2000 except as follows: (1) Dr. Joseph J. Jacobs filed one
Form 4 late, which reported the receipt of 694 shares of the Company's common
stock; and (2) Mr. Thomas R. Hammond filed one Form 4 late, which reported the
exercise of stock options resulting in the net acquisition of 659 shares of
the Company's common stock.
EXECUTIVE OFFICERS
For information about the Executive Officers of the Company, see Exhibit D
to this Proxy Statement.
SHAREHOLDERS' PROPOSALS
Under the bylaws of the Company shareholders who wish to nominate persons
for election to the Board of Directors must submit their nominations to the
Company not less than 60 nor more than 90 days prior to the date of the
shareholders' meeting at which they wish a nomination to be considered.
Nominations must include certain information concerning the nominee and the
proponent's ownership of common stock of the Company. Nominations not meeting
these requirements will not be entertained at the annual meeting. The
Secretary of the Company should be contacted in writing at the address on the
first page of this proxy statement to submit a nomination or to obtain
additional information as to the proper form of a nomination.
20
<PAGE>
Proposals other than nominations for consideration at the 2002 annual
meeting of shareholders must be submitted to the Company no later than
November 14, 2001. However, in order to be included in the Company's proxy
statement and proxy relating to the 2002 annual meeting, proposals of
shareholders must be received by the Secretary of the Company no later than
September 3, 2001. If timely notice is not given of a shareholder proposal,
then the proxies named on the proxy cards distributed by the Company for the
annual meeting may use the discretionary voting authority granted them by the
proxy cards if the proposal is raised at the meeting, whether or not there is
any discussion of the matter in the proxy statement.
ANNUAL REPORT AND FINANCIAL INFORMATION
Exhibit E to this Proxy Statement contains the Annual Financial Statements
and Review of Operations of the Company. A copy of the Company's Summary
Annual Report for the year ended September 30, 2000, is being mailed
concurrently with this Proxy Statement to each shareholder of record on the
Record Date.
The Company's Annual Report on Form 10-K is available from the United States
Securities and Exchange Commission at its WEB site: http://www.sec.gov/cgi-
bin/srch-edgar?0000052988. The Company will furnish without charge a copy of
the Company's report on Form 10-K, including the financial statements and
schedules thereto, to the United States Securities and Exchange Commission to
any person requesting in writing and stating that he or she was the beneficial
owner of common stock of the Company on January 8, 2001. The Company will also
furnish copies of any exhibits to the Form 10-K to eligible persons requesting
exhibits at $0.50 per page, paid in advance. The Company will indicate the
number of pages to be charged for upon written inquiry. Requests and inquiries
should be addressed to:
Investor Relations
Jacobs Engineering Group Inc.
1111 South Arroyo Parkway
Pasadena, California 91105
Neither the Summary Annual Report, Exhibit E, nor the Form 10-K is to be
regarded as proxy soliciting material or as a communication by means of which
a solicitation of proxies is to be made.
By Order of the Board of Directors
WILLIAM C. MARKLEY, III
Vice President, General Counsel and
Secretary
Pasadena, California
January 8, 2001
21
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EXHIBIT A
JACOBS ENGINEERING GROUP INC.
AUDIT COMMITTEE CHARTER
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AUDIT COMMITTEE CHARTER
1. Members. The Board of Directors (the "Board") shall appoint an Audit
Committee of at least three members, consisting entirely of "independent"
directors of the Board, and shall designate one member as chairperson. For
purposes hereof, "independent" shall mean a director who meets the New York
Stock Exchange definition of "independence," as determined by the Board.
Each member of the Company's Audit Committee must be financially literate
and at least one member of the Audit Committee shall have accounting or
related financial management expertise, both as provided in the Board's
judgment.
2. Purposes, Duties, and Responsibilities. The Audit Committee shall
represent the Board in discharging its responsibilities relating to the
accounting, reporting, and financial practices of the Company and its
subsidiaries, and shall have general responsibility for surveillance of
internal controls and accounting and audit activities of the Company and its
subsidiaries. Specifically, the Audit Committee shall:
(i) Recommend to the Board, and evaluate, the firm of independent
certified public accountants to be appointed as auditor of the Company,
which firm shall be ultimately accountable to the Board through the Audit
Committee.
(ii) Review with the independent auditor their audit procedures,
including the scope, fees and timing of the audit, and the results of the
annual audit examination and any accompanying management letters.
(iii) Review with the independent auditor the written statement from the
auditor, required by the Independence Standards Board, concerning any
relationships between the auditor and the Company or any other
relationships that may adversely affect the independence of the auditor
and, based on such review, assess the independence of the auditor.
(iv) Review and discuss with management and the independent auditor the
Company's annual audited financial statements, including a discussion of
the auditor's judgment as to the quality of the Company's accounting
principles.
(v) Review with management and the independent auditor the results of any
significant matters identified as a result of the independent auditor's
interim review procedures prior to the filing of each Company's Quarterly
Report on Form 10-Q or as soon thereafter as possible. The Audit Committee
Chairperson may perform this responsibility on behalf of the Audit
Committee.
(vi) Recommend to the Board whether, based on the review and discussions
described in paragraphs (iii) through (v) above, the financial statements
should be included in the Company's Annual Report on Form 10-K.
(vii) Review the adequacy of the Company's internal controls.
(viii) Review significant changes in the accounting policies of the
Company and accounting and financial reporting rule changes that may have a
significant impact on the Company's financial reports.
(ix) Review material pending legal proceedings involving the Company and
other contingent liabilities.
(x) Review the adequacy of the Audit Committee Charter on an annual
basis, and recommend changes if the Committee determines changes are
appropriate.
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3. Meetings. The Audit Committee shall meet as often as may be deemed
necessary or appropriate in its judgment, generally four times each year, or
if the Chairperson is performing the responsibility set forth in paragraph (v)
above on behalf of the Audit Committee, then at least two times each year,
either in person or telephonically. The Audit Committee shall meet in
executive session with the independent auditors at least annually. The Audit
Committee shall report to the full Board with respect to its meetings and
shall make such reports to shareholders as are required by applicable
regulations or as are deemed advisable in the Committee's judgment. The
majority of the members of the Audit Committee shall constitute a quorum.
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EXHIBIT B
JACOBS ENGINEERING GROUP INC.
1989 EMPLOYEE STOCK PURCHASE PLAN
(As Amended and Restated)
1. Purpose of the Plan.
This Employee Stock Purchase Plan (the "Plan") is intended to encourage
stock ownership by employees of Jacobs Engineering Group Inc. (the "Company")
and certain subsidiaries of the Company. The Plan is intended to qualify as an
employee stock purchase plan under Section 423 of the Internal Revenue Code
(the "Code").
2. Administration.
The Plan shall be administered by a committee (the "Committee") appointed by
the Board of Directors of the Company (the "Board") from among its members and
shall be comprised of not less than three (3) members of the Board. Unless and
until its members are not qualified to serve on the Committee pursuant to the
provisions of the Plan, the Compensation Committee of the Board shall function
as the Committee. Members of the Committee shall be members of the Board who
are not eligible to participate under the Plan or any other plan of the
Company or its affiliates authorizing discretionary grants or awards of stock,
stock options or stock appreciation rights and who have not been eligible to
so participate for at least one (1) year prior to service as an administrator
of the Plan. Eligibility requirements for members of the Committee shall
comply with Rule 16b-3 promulgated pursuant to the Securities Exchange Act of
1934, as amended (the "1934 Act") or any successor rule or regulation. No
person, other than members of the Committee, shall have any discretion
concerning decisions regarding the Plan except as otherwise provided in this
Plan. The Committee is authorized to construe and interpret the Plan, to
define the terms used herein, to prescribe, amend and rescind rules and
regulations for the administration of the Plan, and to take any other action
in connection with the administration of the Plan and Options granted
hereunder that it deems proper.
3. Grant of Options.
(a) The Company shall grant to all Eligible Employees Options ("Options") to
purchase Common Stock of the Company ("Shares") in accordance with this Plan.
All employees granted Options under the Plan shall have the same rights and
privileges.
(b) The Options granted under this Plan shall be granted effective only on
the first day of a six-month election period referred to in Paragraph 5 of the
Plan ("Election Period"). No Option shall be treated as granted prior to the
first day of such Election Period.
4. Eligible Employees.
(a) The employees eligible to receive Options under the Plan ("Eligible
Employee") shall be all employees of the Company and all corporations that now
are or hereafter become domestic United States subsidiary corporations (as
defined in Section 424(f) of the Code) and all employees of any foreign
subsidiary corporation designated from time to time by the Board of Directors.
The Board of Directors of the Company may change the designation of the
subsidiaries participating in the Plan ("participating subsidiaries") at any
time.
(b) However, the following employees shall not be Eligible Employees under
the Plan:
(i) Employees who normally work fewer than 20 hours per week;
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(ii) Employees who normally work five or fewer months during the fiscal
year of the Company;
(iii) Employees who have completed less than one year of employment by the
Company or a participating subsidiary of the Company; and
(iv) Employees who are not actively employed by the Company at the
beginning of a six month Election Period, including employees who are on
disability leave or leave of absence.
(c) Employees of participating subsidiaries that have become subsidiaries by
reason of having been acquired by the Company or a subsidiary and companies
that have been merged with the Company or a subsidiary shall, in the
discretion of the Committee, receive credit for the time they have worked for
such acquired or merged company.
(d) Any employee who would own more than five percent of the Common Stock in
the Company immediately after an Option under this Plan is granted shall also
be excluded from eligibility. Stock that the employee may purchase under all
outstanding stock options granted to him by the Company shall be treated as
stock owned by the employee for such purposes, even though the option is not
presently exercisable.
5. Exercise of Option.
(a) An Eligible Employee may exercise his or her Option to acquire Common
Stock by completing a Payroll Deduction Authorization Form in such form as
shall have been approved from time to time by the Committee. The election to
exercise the Option shall be effective for a six month election period. The
six-month Election Periods shall be from September 1 to February 28/29, and
from March 1 to August 31 of each year. An Eligible Employee's election to
participate in this Plan shall be irrevocable during each Election Period.
(b) Eligible Employees who have elected to exercise their Options for any
Election Period are sometimes referred to as "Participants" in this Plan.
(c) In no event may an Option be exercised later than the period of time
specified in Section 423(b)(7)(B) of the Code. Except as otherwise provided in
Paragraph 12, an Option shall be treated as exercised on the last day of the
six-month Election Period.
6. Payment of Purchase Price.
(a) Each Participant shall pay for the stock subject to his or her option
with after-tax salary reduction contributions. The Company shall reduce each
Participant's salary or wages by any whole percentage from 2% to 15% of basic
compensation. A Participant's basic compensation shall include only regular
fixed basic compensation, and shall not include any bonus, overtime payment,
contribution to an employee benefit plan or other similar payment or
contribution.
(b) Each Participant shall specify the amount of salary reduction on a
Payroll Deduction Authorization Form to be furnished by the Company. The
salary reduction contributions shall continue throughout the six-month
Election Period.
(c) The Company shall begin salary reductions during the pay periods as
close as practicable to each March 1 and September 1 of each year and shall
cease such reductions during the pay periods as close as practicable to each
February 28/29 and August 31 of each year.
(d) As soon as practicable after the end of each six-month Election Period,
the Company shall issue to the Participants who have exercised their Options
Common Stock of the Company at the prices specified in Paragraph 8 of this
Plan. The number of Shares purchased shall be based upon the aggregate amount
of salary reduction contributions during the six-month Election Period plus
any
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excess contributions carried forward from any previous Election Period. No
interest shall accrue on the salary reduction contributions.
7. Fractional Shares.
The Company shall not issue or transfer fractional Shares under the Plan. In
the event that the amount of salary reduction contributions of any employee is
not exactly equal to the purchase price for a whole number of Shares, then any
excess amount shall be used to purchase additional Shares during the next six-
month Election Period, or refunded to the Participant without interest if the
Participant is not, for any reason, a Participant in the Plan during the next
six-month Election Period.
8. Purchase Price.
(a) The purchase price for the Shares shall be the lower of (a) 90% of the
fair market value of the Shares on the first day of a six-month Election
Period for which an Option has been exercised, or (b) 90% of the fair market
value of the Shares on the last day of such Election Period; provided,
however, that the Committee may at such time as it deems such change desirable
and in the best interests of the Company, approve, in lieu of the foregoing
formula for determining the exercise price of Options under this Plan, the
fair market value of the Shares on the last day of the Election Period
multiplied by any percentage figure from 85% to 100% as selected by the
Committee. Such approval may be for one or more Election Periods and shall
remain in effect until changed by the Committee.
In no event, however, may the Committee select a purchase price that would
be lower than that allowed under Section 423(b)(6) of the Code or any
successor section.
(b) The fair market value for such purposes shall be the closing price of
the Shares on the composite transactions report of the national securities
exchange on which the Shares are then listed for the day on which the value is
to be determined. If such date is a Saturday, Sunday, legal holiday or other
date on which such exchange is closed, then the fair market value shall be
determined as the closing price on the first immediately preceding trading
date.
9. Stock Subject to the Plan.
The total number of Shares of Common Stock authorized to be issued under
this Plan is 5,406,777 Shares, subject to adjustment as provided in Paragraph
17. These Shares may be authorized but unissued Shares, or issued Shares which
have been reacquired by the Company from any person.
10. Maximum Amount of Option Stock.
(a) The maximum fair market value of Shares that an employee may accrue the
right to purchase under the Plan and any other employee stock purchase plan of
the Company or any subsidiary in any calendar year may not exceed $25,000 or
such greater amount as Section 423(b)(8)(C) of the Code, or any successor
section, may hereafter allow. The fair market value of the Shares for such
purposes shall be determined on the first day of each six-month Election
Period.
(b) The maximum number of Shares that a Participant may purchase for any
six-month Election Period shall be determined on the first day of each
Election Period. The maximum number shall be determined by dividing 15 percent
of total salary or wages to be earned by each Participant during the six-month
Election Period (based on the assumption that the Participant's basic
compensation does not change after the first day of the Election Period) by an
amount equal to 90% of the fair market value of the Shares on the first day of
the Election Period.
(c) Any excess withholdings shall be refunded to the Participant without
interest.
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11. Restrictions on Transferability.
A Participant may not transfer an Option other than by will or the laws of
descent and distribution. Only the Participant may exercise an Option during
his lifetime.
12. Termination of Employment.
In the event that a Participant ceases to be employed by the Company or a
participating subsidiary for any reason, including death, disability,
retirement or voluntary or involuntary termination, then the Participant's
rights under the Plan shall terminate. Except as provided in Paragraph 13,
below, the Company shall refund to the Participant without interest the salary
reduction contributions made by the Participant during the Election Period in
which termination occurs.
13. Designation of Beneficiary.
(a) Participant may file, in a manner prescribed by the Committee, a written
designation of a beneficiary who is to receive any Shares or cash under this
Plan in the event of such participant's death. If a Participant's death occurs
subsequent to the end of an Election Period but prior to the delivery to him
or her of any Shares deliverable under the terms of this Plan, such Shares and
any remaining balance of cash shall be delivered to such beneficiary (or such
other person as set forth in Section 13(b)) as soon as administratively
practicable after the Company receives notice of such Participant's death the
Participant's Option shall terminate. If a Participant's death occurs at any
other time, the balance of such Participant's contributions shall be paid to
such beneficiary (or such other person as set forth in Section 13(b)) in cash
as soon as administratively practicable after the Company receives notice of
such Participant's death and such Participant's Option shall terminate. If a
Participant is married and the designated beneficiary is not his or her
spouse, spousal consent shall be required for such designation to be
effective.
(b) Beneficiary designations may be changed by the Participant (and his or
her spouse, if required) at any time on forms provided and in the manner
prescribed by the Committee. If a Participant dies with no validly designated
beneficiary under this Plan who is living at the time of such Participant's
death, then the Participant's surviving spouse, if any, shall be deemed to be
the beneficiary. If a Participant dies without a surviving spouse and with no
validly designated beneficiary under this Plan who is living at the time of
such Participant's death, the Company shall deliver all Shares and/or cash
payable pursuant to the terms hereof to the executor or administrator of the
estate of the Participant, or if no such executor or administrator has been
appointed, the Company, in its discretion, may deliver such Shares and/or cash
to any one or more dependents or relatives of the Participant, or if no
dependent or relative is known to the Company, then to such other person as
the Committee deems appropriate.
14. Rights as a Stockholder.
No Participant shall have any rights as a stockholder as to Shares being
purchased during any six-month Election Period until after the end of such
six-month Election Period when the Common Stock has actually been issued to
the Participant. No adjustment shall be made or additional amount paid as a
result of dividends or other rights for which the record date is prior to the
date of such issuance.
15. Listing, Registration and Qualification of Shares.
The issuance of Shares under this Plan shall be subject to applicable
securities and other laws, including listing of the Shares on all stock
exchanges on which the Shares may be, from time to time, listed and the
registration of the Shares and Options under the Securities Act of 1933.
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16. Term of the Plan.
The term of the Plan shall be for a period commencing on March 1, 1989 and
ending on March 31, 2009.
17. Amendments.
(a) The Board may terminate the Plan, in whole or in part, may suspend the
Plan, in whole or in part, from time to time and may amend the Plan from time
to time, including the adoption of amendments deemed necessary or desirable to
qualify the Plan under the laws of various countries (including tax laws) and
under rules and regulations promulgated by the Securities and Exchange
Commission (the "SEC") with respect to employees who are subject to the
provisions of Section 16 of the 1934 Act, or to correct any defect or supply
an omission or reconcile any inconsistency in the Plan or in any Option
granted thereunder, without the approval of the stockholders of the Company;
provided, however, that no action shall be taken without the approval of the
stockholders of the Company to increase the number of Shares of Stock on which
Options may be granted, or materially increase the benefits accruing to
participants under the Plan, or materially modify the requirements as to
eligibility for participation in the Plan, or withdraw administration from the
Committee, or permit any person while a member of the Committee to be eligible
to receive, other than pursuant to a non-discretionary formula plan, a grant
or award of a stock option, a stock appreciation right or other equity
security of the Company. Without limiting the foregoing, the Committee may
make amendments or adopt rules and procedures applicable or inapplicable only
to Participants who are subject to Section 16 of the 1934 Act.
(b) No amendment or termination or modification of the Plan shall in any
manner affect any Option theretofore granted without the consent of the
optionee, except that the Committee may amend or modify the Plan in a manner
that does affect Options theretofore granted upon a finding by the Committee
that such amendment or modification is in the best interest of holders of
outstanding Options affected thereby.
(c) This Plan is intended to comply with all applicable requirements of Rule
16b-3 or its successors under the 1934 Act, insofar as participants subject to
Section 16 of that Act are concerned. To the extent any provision of the Plan
does not so comply, and cannot for any reason be amended by the Board, the
provision shall, to the extent permitted by law and deemed advisable by the
Committee, be deemed null and void with respect to such participants.
18. Adjustments for Changes in Common Stock.
(a) In the event of any stock split, stock dividend, recapitalization,
merger, consolidation, reorganization or other similar event, the Board shall
make appropriate and proportionate adjustments, including the substitution and
issuance of securities of any successor corporation for the Shares of the
Company to be issued under the Plan, to the maximum number of Shares subject
to the Plan, and the price per share subject to outstanding Options.
(b) If the Company is acquired by merger or sale of all or substantially all
of the Company's assets or outstanding voting stock, then all outstanding
Options under the Plan will automatically be exercised immediately prior to
the effective date of such acquisition. The exercise price in such event shall
be equal to 90% of the lower of (i) the fair market value per share of the
Common Stock on the first day of the Election Period in which such acquisition
occurs and (ii) the fair market value per share of the Common Stock
immediately prior to the effective date of such acquisition.
19. Miscellaneous.
This Plan is subject to all of the requirements of Section 423 of the Code
and the regulations thereunder.
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This Plan shall not confer any right on an employee to continue in the
employment of the Company or any subsidiary or division of the Company.
The Company shall not be obligated to issue any Shares under the Plan unless
and until there has been compliance with such laws and regulations as the
Company deems applicable.
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EXHIBIT C
Article 5 of the Certificate of Incorporation
(as proposed to be amended)
5. (a) The Corporation is authorized to issue two classes of capital stock,
designated Common Stock and Preferred Stock. The total mount of authorized
capital stock of the Corporation is 101,000,000 shares, divided into
100,000,000 shares of Common Stock, par value $1.00 per share, and 1,000,000
shares of Preferred Stock, par value $1.00 per share.
(b) The Preferred Stock may be issued in one or more series. The Board of
Directors is hereby authorized to issue the shares of Preferred Stock in such
series and to fix from time to time before issuance the number of shares to be
included in any series and the designation, relative powers, preferences and
rights and qualifications, limitations or restrictions of all shares of such
series. The authority of the Board of Directors with respect to each series
shall include, without limiting the generality of the foregoing, the
determination of any or all of the following:
(1) the number of shares of any series and the designation to distinguish
the shares of such series from the shares of all other series;
(2) the voting powers, if any, and whether such voting powers are full or
limited, in any such series;
(3) the redemption provisions, if any, applicable to such series,
including the redemption price or prices to be paid;
(4) whether dividends, if any, shall be cumulative or noncumulative, the
dividend rate, or method of determining the dividend rate, of such series,
and the dates and preferences of dividends on such series;
(5) the rights of such series upon the voluntary or involuntary
dissolution of, or upon any distribution of the assets of, the Corporation;
(6) the provisions, if any, pursuant to which the shares of such series
are convertible into, or exchangeable for, shares of any other class or
classes or of any other series of the same or any other class or classes of
stock, or any other security, of the Corporation or any other corporation,
and the price or prices or the rates of exchange applicable thereto;
(7) the right, if any, to subscribe for or to purchase any securities of
the Corporation or any other corporation;
(8) the provisions, if any, of a sinking fund applicable to such series;
and
(9) any other relative, participating, optional or other special powers,
preferences, rights, qualifications, limitations or restrictions thereof;
all as shall be determined from time to time by the Board of Directors and
shall be stated in a resolution or resolutions providing for the issuance of
such Preferred Stock (a "Preferred Stock Designation").
(c) The number of authorized shares of Preferred Stock may be increased or
decreased (but not below the number of shares then outstanding) by the
affirmative vote of the holders of not less then 75% of the total voting power
of all outstanding securities of the Corporation then entitled to vote
generally in the election of directors, considered for this purpose as one
class.
(d) Except as may be provided by the Board of Directors in a Preferred Stock
Designation or by law,
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(i) dividends may be declared and paid or set apart for payment upon
the Common Stock out of any assets or funds of the Corporation legally
available for the payment of dividends;
(ii) the holders of Common Stock shall have the exclusive right to vote
for the election of directors and on all other matters requiring
stockholder action, each share being entitled to one vote, said
(iii) upon the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the net assets of the Corporation shall be
distributed pro rata to the holders of the Common Stock in accordance
with their respective rights and interests.
(e) The Corporation shall be entitled to treat the person in whose name may
share of its stock is registered as the owner thereof for all purposes, and
shall not be bound to recognize any equitable or other claim to, or interest
in, such share on the part, of any other person, whether or not the
Corporation shall have notice thereof, except as expressly provided by
applicable law.
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EXHIBIT D
EXECUTIVE OFFICERS OF THE COMPANY
The following table presents the names and ages of each Executive Officer of
the Company, as well as their current position with the Company, and the year
in which they first joined the Company.
<TABLE>
<CAPTION>
Year
Joined the
Name Age Position with the Company Registrant
---- --- ------------------------- ----------
<C> <C> <S> <C>
Joseph J. Jacobs............ 84 Director and Chairman of the 1947
Board
Noel G. Watson.............. 64 President, Chief Executive 1965
Officer and Director
Richard E. Beumer........... 62 Vice Chairman of the Board 1999
Thomas R. Hammond........... 49 Executive Vice President, 1975
Operations
Craig L. Martin............. 51 Executive Vice President, 1994
Global Sales
Richard J. Slater........... 54 Executive Vice President, 1980
Operations
James C. Uselton............ 61 Executive Vice President, 1999
Operations
Walter C. Barber............ 59 Group Vice President, Asia 1999
Andrew E. Carlson........... 67 President, Jacobs Sverdrup 1990
Constructors, Inc.
Robert M. Clement........... 52 Group Vice President, Central 1990
Region
Warren M. Dean.............. 56 Group Vice President, 1994
Facilities
Stephen K. Fritschle........ 57 Group Vice President, Field 1989
Services
Michael J. Higgins.......... 56 Group Vice President, Civil 1994
George A. Kunberger, Jr. ... 48 Group Vice President, Northern 1975
Region
Gregory J. Landry........... 52 Group Vice President, 1984
International Operations
John McLachlan.............. 54 Group Vice President, 1974
International Operations
H. Gerard Schwartz, Jr. .... 62 Group Vice President, Civil 1999
Rogers F. Starr............. 57 President, Sverdrup Technology, 1999
Inc.
Philip J. Stassi............ 45 Group Vice President, Southern 1977
Region
Roger L. Williams........... 62 Group Vice President, Federal 1983
Operations
John W. Prosser, Jr. ....... 55 Senior Vice President, Finance 1974
and Administration and
Treasurer
Laurence R. Sadoff.......... 53 Senior Vice President, Quality 1993
and Safety
Nazim G. Thawerbhoy......... 53 Senior Vice President and 1979
Controller
William C. Markley, III..... 55 Vice President, General Counsel 1981
and Secretary
</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. Beumer, Uselton, Schwartz, Starr and Barber, 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 1999, Messrs. Beumer,
Uselton, Schwartz and Starr were part of the senior management group of
Sverdrup Corporation, or one of its subsidiaries, for more than five years.
Prior to joining the Company in 1999, Mr. Barber was president and CEO of GTI,
INC. (an environmental services firm) for at least five years.
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EXHIBIT E
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
WITH REPORT OF INDEPENDENT AUDITORS
September 30, 2000
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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
SELECTED HIGHLIGHTS
For the Years Ended September 30, 2000, 1999 and 1998
(Dollars in thousands, except per share information)
<TABLE>
<CAPTION>
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Revenues.................................... $3,418,942 $2,875,007 $2,101,145
Net earnings................................ 50,981 65,445 54,385
---------- ---------- ----------
Per share information:
Basic EPS.................................. $ 1.95 $ 2.54 $ 2.12
Diluted EPS................................ 1.93 2.47 2.08
Net book value............................. 18.72 16.95 14.23
Closing year-end stock price............... 40.3125 32.50 31.00
---------- ---------- ----------
Total assets................................ $1,384,376 $1,220,186 $ 807,489
Stockholders' equity........................ 495,543 448,717 371,405
Return on average equity.................... 10.80% 15.96% 15.63%
Stockholders of record...................... 1,115 1,208 1,352
---------- ---------- ----------
Backlog:
Professional technical services............ $2,375,300 $1,760,000 $1,004,500
Total...................................... 5,430,100 4,448,200 3,329,500
---------- ---------- ----------
Permanent staff............................. 18,812 15,900 10,080
---------- ---------- ----------
</TABLE>
Net earnings for fiscal 2000 includes an after-tax charge of $23,749, or
$0.89 per diluted share, relating to the settlement of certain litigation.
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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
For the Years Ended September 30
(In thousands, except per share information)
<TABLE>
<CAPTION>
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Results of Operations:
Revenues............... $3,418,942 $2,875,007 $2,101,145 $1,780,616 $1,798,970
Net earnings........... 50,981 65,445 54,385 46,895 40,360
---------- ---------- ---------- ---------- ----------
Financial Position:
Current ratio.......... 1.24 to 1 1.25 to 1 1.54 to 1 1.56 to 1 1.68 to 1
Working capital........ $ 167,160 $ 144,638 $ 197,659 $ 178,203 $ 155,569
Current assets......... 851,023 729,620 566,007 497,361 383,644
Total assets........... 1,384,376 1,220,186 807,489 737,643 572,505
Long-term debt......... 146,820 135,371 26,221 54,095 36,300
Stockholders' equity... 495,543 448,717 371,405 324,308 283,387
Return on average
equity................ 10.80% 15.96% 15.63% 15.43% 15.46%
Backlog:
Professional technical
services............. $2,375,300 $1,760,000 $1,004,500 $ 912,057 $ 845,300
Total................. 5,430,100 4,448,200 3,329,500 3,050,000 2,750,200
---------- ---------- ---------- ---------- ----------
Per share Information:
Basic EPS.............. $ 1.95 $ 2.54 $ 2.12 $ 1.82 $ 1.58
Diluted EPS............ 1.93 2.47 2.08 1.80 1.56
Stockholders' equity... 18.72 16.95 14.23 12.48 10.93
---------- ---------- ---------- ---------- ----------
Average Number of Common
and Common Stock
Equivalents Outstanding
(Diluted).............. 26,473 26,478 26,096 25,989 25,921
---------- ---------- ---------- ---------- ----------
</TABLE>
Net earnings for fiscal 2000 includes an after-tax charge of $23,749, or
$0.89 per diluted share, relating to the settlement of certain litigation.
E-3
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
For the Years Ended September 30
(In thousands, except per share information)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Results of Operations:
Revenues............... $1,723,057 $1,165,754 $1,142,926 $1,106,427 $1,036,289
Net earnings........... 32,242 18,767 28,670 26,605 20,385
---------- ---------- ---------- ---------- ----------
Financial Position:
Current ratio.......... 1.44 to 1 1.41 to 1 1.61 to 1 1.56 to 1 1.41 to 1
Working capital........ $ 113,339 $ 106,058 $ 100,688 $ 92,706 $ 60,580
Current assets......... 368,614 367,485 264,949 258,206 206,576
Total assets........... 533,947 504,364 351,020 316,731 260,142
Long-term debt......... 17,799 25,000 -- -- --
Stockholders' equity... 238,761 200,433 173,797 139,813 106,936
Return on average
equity................ 14.68% 10.03% 18.28% 21.56% 21.47%
Backlog:
Professional technical
services............. $ 828,400 $ 793,060 $ 736,600 $ 647,100 $ 457,300
Total................. 2,625,000 2,500,000 1,858,600 1,760,000 1,605,000
---------- ---------- ---------- ---------- ----------
Per share Information:
Basic EPS.............. $ 1.28 $ 0.75 $ 1.17 $ 1.14 $ 0.89
Diluted EPS............ 1.27 0.75 1.15 1.11 0.86
Stockholders' equity... 9.41 7.96 6.96 5.81 4.50
---------- ---------- ---------- ---------- ----------
Average Number of Common
and Common Stock
Equivalents Outstanding
(Diluted).............. 25,384 25,173 24,964 24,070 23,763
---------- ---------- ---------- ---------- ----------
</TABLE>
Net earnings for fiscal 1994 included special charges totaling $10,200, or
$0.40 per diluted share.
Net earnings for fiscal 1992 included a net gain of $2,118, or $0.09 per
diluted share, from the sale of 40% of the Company's holdings of the common
stock of Genetics Institute, Inc.
E-4
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
The following table sets forth the Company's revenues by type of service
provided for each year ended September 30 (in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Project Services........................... $1,809,309 $1,318,027 $ 861,608
Construction............................... 969,792 994,479 961,576
Operations and Maintenance................. 521,609 474,511 266,798
Process, Scientific and Systems Consulting. 118,232 87,990 11,163
---------- ---------- ----------
$3,418,942 $2,875,007 $2,101,145
========== ========== ==========
</TABLE>
The Company focuses its services on certain industry groups and markets,
which the Company believes has sufficient common needs to permit cross-
utilization of its resources. The following table sets forth the Company's
revenues by these industry groups and markets for each year ended September 30
(in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Chemicals and Polymers...................... $ 693,034 $ 796,501 $ 785,727
Federal Programs............................ 614,048 481,302 169,474
Buildings................................... 539,691 454,589 314,293
Pharmaceuticals and Biotechnology........... 481,947 373,520 211,501
Exploration, Production and Refining........ 280,942 243,311 255,579
Pulp and Paper.............................. 254,861 99,189 191,595
Infrastructure.............................. 238,278 218,828 11,278
Technology and Manufacturing................ 213,557 173,023 128,501
Other....................................... 102,584 34,744 33,197
---------- ---------- ----------
$3,418,942 $2,875,007 $2,101,145
========== ========== ==========
</TABLE>
"Other" includes projects for clients operating in a number of industries,
including food and beverage, and basic resources (mining, minerals and
fertilizers).
2000 Compared to 1999
On February 16, 2000, the Company completed the first phase of an
anticipated two-part transaction to acquire the engineering and contracting
business of Stork N.V., the Netherlands ("Stork") for a total purchase price
of EUR 25.0 million (approximately $24.2 million). The first phase of the
Stork transaction was 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 $32.4 million, which is being
amortized over 40 years on a straight-line basis. The Company's consolidated
results of operations for fiscal 2000 include the results of Stork's
operations since the acquisition date. The effect of Stork on the Company's
consolidated results of operations for fiscal 2000 was not material. The
Company's consolidated revenues of $3,418.9 million for fiscal 2000 include
$87.2 million of revenues from Stork's operations since the acquisition date.
In January 1999, the Company completed its merger with Sverdrup Corporation
("Sverdrup"). Accordingly, Sverdrup's results of operations are included in
the Company's consolidated results of operations for all of fiscal 2000,
compared to only the second, third and fourth quarters of fiscal 1999.
E-5
<PAGE>
The Company recorded net earnings of $51.0 million, or $1.93 per diluted
share, for the fiscal year ended September 30, 2000, compared to net earnings
of $65.4 million, or $2.47 per diluted share for fiscal 1999.
Net earnings for fiscal 2000 included a first quarter pre-tax provision for
litigation settlement of $38.0 million ($23.7 million after-tax). This
special, one-time pre-tax charge, which consisted of the settlement amount of
$35.0 million and related litigation costs of $3.0 million, resulted from an
agreement with the United States Department of Justice to settle a previously
disclosed whistleblower suit. The suit alleged that the Company improperly
charged the U.S. government for lease costs associated with its former
headquarters building, which the Company sold and leased back in 1982, and
then permanently vacated in 1997. The Company denied the government's
allegations in the suit but agreed to the settlement to avoid the costs and
risks of further litigation. The settlement was paid in March 2000 and has no
continuing impact on the Company's operating results.
Excluding the after-tax impact of this special litigation charge, the
Company's operations for fiscal 2000 resulted in net earnings of $74.7
million, or $2.82 per diluted share.
Total revenues for fiscal 2000 increased by $543.9 million, or 18.9%, to
$3,418.9 million, compared to $2,875.0 million for fiscal 1999. This increase
reflects the inclusion of Sverdrup's operations for the entire fiscal 2000 as
compared to only the second, third and fourth quarters of fiscal 1999.
Excluding the impact of Sverdrup's operations on the Company's revenues during
the first quarter of fiscal 2000, total revenues increased by $320.7 million,
or 11.2% on a year-to-date basis.
Revenues from project services activities, which includes design,
engineering and agency construction management services, increased by $491.3
million, or 37.3%, to $1,809.3 million during fiscal 2000, compared to
$1,318.0 million for fiscal 1999. Excluding the impact of Sverdrup's
operations on the Company's revenues during the first quarter of fiscal 2000,
revenues from project services activities increased by $345.0 million, or
26.2% on a year-to-date basis.
Revenues from construction services of $969.8 million in fiscal 2000 were
consistent with revenue levels during fiscal 1999 and 1998 of $994.5 million
and $961.6 million, respectively.
Revenues from operations and maintenance ("O&M") activities increased by
$47.1 million, or 9.9%, to $521.6 million during fiscal 2000, compared to
$474.5 million for fiscal 1999. The increase of $47.1 million in O&M revenues
in fiscal 2000 was due to the inclusion of Sverdrup's operations for the
entire fiscal 2000 as compared to only the second, third and fourth quarters
of fiscal 1999.
Revenues from process, scientific and systems consulting services increased
by $30.2 million, or 34.4%, to $118.2 million during fiscal 2000, compared to
$88.0 million for fiscal 1999. Approximately $24.4 million, or 81% of the
increase in revenues from process, scientific and systems consulting services
during fiscal 2000 was due to the inclusion of Sverdrup's operations for the
entire fiscal 2000 as compared to only the second, third and fourth quarters
of fiscal 1999. Prior to the merger with Sverdrup, the Company's revenues from
process, scientific and systems consulting service activities were minimal.
As a percentage of revenues, direct costs of contracts was 87.3% for the
fiscal year ended September 30, 2000, compared to 86.2% for fiscal 1999. 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 movement in this percentage relationship was due primarily to
proportionately lower margins earned on the Company's new volume of business
during fiscal 2000 as compared to fiscal 1999.
E-6
<PAGE>
Selling, general and administrative ("SG&A") expenses for fiscal 2000
increased by $22.0 million, or 7.6%, to $311.1 million, compared to $289.0
million in fiscal 1999. The increase of $22.0 million in SG&A expenses during
fiscal 2000 was due to the inclusion of Sverdrup's operations for the entire
fiscal 2000 as compared to only the second, third and fourth quarters of
fiscal 1999. As a percentage of revenues, however, SG&A expenses for fiscal
2000 decreased to 9.1%, compared to 10.1% last year, reflecting the Company's
continuing efforts to control costs.
During fiscal 2000, the Company's operating profit (defined as revenues,
less direct costs of contracts and SG&A expenses) increased by $16.3 million,
or 15.1%, to $124.6 million, compared to $108.3 million during fiscal 1999.
The increase in the Company's operating profit for fiscal 2000 as compared to
last year was due primarily to significant increases in business volume and
reduced SG&A expenses as a percentage of revenues.
During fiscal 2000, interest expense increased by 30.3%, or $2.7 million, to
$11.4 million, compared to interest expense of $8.8 million last year. The
increase in interest expense in fiscal 2000 as compared to fiscal 1999 was due
to additional borrowings from the Company's $230.0 million revolving credit
facility at higher interest rates compared to fiscal 1999. At September 30,
2000 and 1999, outstanding borrowings under this facility were $138.9 million
and $118.1 million, respectively. During fiscal 2000, the Company borrowed
$103.9 million from the same facility, primarily to pay the $35.0 million
litigation settlement, to partially finance the first phase of the Stork
acquisition for approximately $14.8 million, to fund $13.7 million of stock
repurchases as discussed below, and the balance to cover working capital
requirements.
The Company recorded $2.2 million of net miscellaneous income during fiscal
2000, compared to net miscellaneous income of $2.0 million for fiscal 1999.
Included in net miscellaneous income in fiscal 2000 were one-time charges
totaling $4.6 million relating to a terminated retirement plan and impairment
of a non-operating investment. Offsetting these one-time charges was
approximately $5.2 million representing the break-up fee and expense
reimbursement amount received from Stone & Webster, Inc., net of associated
costs and expenses. The fee and expense reimbursement was received as a result
of the termination of an asset purchase agreement between the Company and
Stone & Webster, Inc.
The Company recorded income tax expense of $30.3 million and $39.1 million
in fiscal 2000 and 1999, respectively. The Company's overall effective tax
rate was 37.3% for fiscal 2000, compared to an effective tax rate of 37.4% for
fiscal 1999.
1999 Compared to 1998
As discussed above, the Company completed its merger with Sverdrup
Corporation in January 1999. 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 $176.3 million. The
Company's consolidated results of operations include the results of Sverdrup's
operations since January 1, 1999.
The Company recorded net earnings of $65.4 million, or $2.47 per diluted
share, for the fiscal year ended September 30, 1999, compared to net earnings
of $54.4 million, or $2.08 per diluted share, for fiscal 1998.
Total revenues for fiscal 1999 increased by $773.9 million, or 36.8%, to
$2,875.0 million, compared to $2,101.1 million for fiscal 1998. Approximately
89% of the increase in total revenues 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).
E-7
<PAGE>
Revenues from project services activities increased by $456.4 million, or
53.0%, to $1,318.0 million during fiscal 1999, compared to $861.6 million for
fiscal 1998. Approximately 40.4% of the increase in project services revenues
during the current fiscal year was generated by the Company's continuing U.S.
and European operations, with the balance attributable to Sverdrup's
operations.
Revenues from construction services increased by $32.9 million, or 3.4%, to
$994.5 million during fiscal 1999, compared to $961.6 million for fiscal 1998.
With the resources and complementary technical and professional skills that
the merger with Sverdrup added to the Company's skills base, and with the new
clients Sverdrup added to the Company's client base, the Company has expanded
its capabilities in the areas of O&M, and process, scientific and systems
consulting services. Revenues from O&M activities increased by $207.7 million,
or 77.9%, to $474.5 million during fiscal 1999, compared to $266.8 million for
fiscal 1998. Approximately 71.2% of the increase in O&M revenues during the
current fiscal year was generated by Sverdrup's operations, with the balance
attributable to the Company's continuing U.S. and European operations. During
fiscal 1999, the Company realized revenues of $88.0 million from process,
scientific and systems consulting services. Prior to fiscal 1999 and the
merger with Sverdrup, the Company's revenues from process, scientific and
systems consulting service activities were minimal.
As a percentage of revenues, direct costs of contracts decreased to 86.2%
for the twelve months ended September 30, 1999, compared to 87.1% for the same
period last year. The improvement in this percentage relationship during
fiscal 1999 compared to fiscal 1998 was due primarily to the relatively higher
margins on Sverdrup's project services. Also contributing to the improvement
was the favorable effect of the proportionately higher margins earned on the
higher volume of project service activities generated, relative to
construction service activities.
SG&A expenses for fiscal 1999 increased by $105.0 million, or 57.0%, to
$289.0 million, compared to $184.0 million for fiscal 1998. The increase in
SG&A expenses during the twelve months ended September 30, 1999 was due almost
entirely to the operations of Sverdrup.
During fiscal 1999, the Company's operating profit increased by $21.8
million, or 25.2%, to $108.3 million, compared to $86.5 million for fiscal
1998. The increase in the Company's operating profit from 1998 to 1999 was due
primarily to the increase in business volume, combined with an increase in
margin rates, as discussed above.
The Company recorded $5.7 million of net interest expense during the twelve
months ended September 30, 1999, compared to net interest income of $2.7
million last year. During fiscal 1998, the Company was a net investor of
excess cash. During fiscal 1999, however, as a result of the merger with
Sverdrup Corporation, the Company became a net borrower of cash. The Company
financed the merger price of $201.1 million (which included the associated
costs of the merger) with a new, $230.0 million revolving credit facility,
under which the Company initially borrowed $165.0 million. Outstanding
borrowings under this facility was reduced to $118.1 million at September 30,
1999. Also contributing to the increase in interest expense in fiscal 1999 as
compared to fiscal 1998 was $19.9 million of Sverdrup pre-merger indebtedness
that was assumed by the Company at closing of the merger transaction.
The Company recorded $2.0 million of net miscellaneous income during fiscal
1999, compared to net miscellaneous expense of $0.4 million for fiscal 1998.
The increase in net miscellaneous income during fiscal 1999 was due primarily
to gains realized on the sales of marketable equity securities.
The Company recorded income tax expense of $39.1 million and $34.4 million
in fiscal 1999 and 1998, respectively. The Company's overall effective tax
rate was 37.4% for fiscal 1999, compared to
E-8
<PAGE>
an effective tax rate of 38.7% for fiscal 1998. The reduction in the Company's
effective tax rate was attributable primarily to a lower effective tax rate
relating to the Company's non-U.S. operations, off-set in part by the effect
of nondeductible goodwill.
Backlog
Backlog represents the total dollar amount of revenues the Company expects
to record in the future as a result of performing work under contracts that
have been awarded to it. The Company's policy with respect to O&M contracts,
however, is to include in backlog the amount of revenues it expects to receive
for one succeeding year, regardless of the life of the contract. For federal
programs (other than federal O&M contracts), the Company's policy is to
include in backlog the full contract award, whether funded or unfunded, and
exclude option periods.
In accordance with industry practice, substantially all of the Company's
contracts are subject to cancellation or termination at the option of the
client. However, the Company has not experienced cancellations that have had a
material effect on the reported backlog amounts. In a 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.
While management uses all information available to it to determine backlog,
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.
The following table summarizes the Company's total backlog at September 30,
2000, 1999 and 1998 (in millions):
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Professional technical services.................. $2,375.3 $1,760.0 $1,004.5
Total............................................ 5,430.1 4,448.2 3,329.5
======== ======== ========
</TABLE>
Total backlog at September 30, 2000 included approximately $1.4 billion, or
26.4% of total backlog, relating to work to be performed either directly or
indirectly for the U.S. federal government and its agencies. This compares to
approximately $1.5 billion and $800.0 million of U.S. federal backlog at
September 30, 1999 and 1998, respectively. Most of these federal 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).
The Company's backlog for fiscal 2000 increased by $981.9 million, or 22.1%,
to $5.4 billion, compared to fiscal 1999, and increased in fiscal 1999 by $1.1
billion, or 33.6%, to $4.4 billion, compared to fiscal 1998. The increase in
fiscal 2000 as compared to fiscal 1999 was attributable primarily to new
awards in the semiconductor, pharmaceuticals and biotechnology, and
infrastructure areas of the Company's business. The increase in fiscal 1999 as
compared to fiscal 1998 was attributable primarily to the Sverdrup merger,
combined with new awards in the pharmaceuticals area of the Company's
business.
The Company estimates that approximately $2.8 billion, or 52.5% of total
backlog at September 30, 2000 will be realized as revenues within the next
fiscal year.
Effects of Inflation
During fiscal 2000 and 1999, 77% and 73%, respectively, of the Company's
revenues were realized from cost-reimbursable type contracts. Because a
significant portion of the Company's revenues continues to be earned under
cost-reimbursable type contracts, the effects of inflation on the
E-9
<PAGE>
Company's financial condition and results of operations have been generally
low. However, as the Company expands its business into markets and
geographical areas where fixed-price and lump-sum work may be more prevalent,
inflation may begin to have a larger impact on the Company's results of
operations. To the extent permitted by competition, the Company intends to
continue to emphasize contracts which are either cost-reimbursable or
negotiated fixed-price. For contracts the Company accepts with fixed-price or
lump-sum terms, the Company monitors closely the actual costs on the project
as they compare to the budget estimates. On these projects, the Company also
attempts to secure fixed-price commitments from key subcontractors and
vendors. However, due to the competitive nature of the Company's industry,
combined with the fluctuating demands and prices associated with personnel,
equipment and materials the Company traditionally needs in order to perform on
its contracts, there can be no guarantee that inflation will not effect the
Company's results of operations in the future.
Liquidity and Capital Resources
During fiscal year 2000, the Company's cash and cash equivalents increased
by $12.4 million, to $65.8 million. This compares to a net decrease of $47.8
million, to $53.5 million, during fiscal 1999, and to a net increase of $45.3
million, to $101.3 million, during fiscal 1998. During fiscal 2000, the
Company experienced net cash outflows from investing activities and the effect
on cash of exchange rate changes, of $106.7 million and $5.1 million,
respectively, offset in part by net cash inflows from operating and financing
activities of $81.3 million and $42.8 million, respectively.
Operations resulted in net cash inflows of $81.3 million during fiscal 2000.
This compares to a net contribution of $83.5 million and $91.7 million during
fiscal 1999 and 1998, respectively. The $2.2 million decrease in cash provided
by operations in fiscal 2000 as compared to fiscal 1999 was due primarily to a
decrease in inflows of $18.6 million relating to the timing of cash receipts
and payments within the Company's working capital accounts, and a decrease of
$14.5 million in net earnings, due primarily to the after-tax provision for
litigation settlement of $23.7 million as discussed above. These outflows were
partially offset by the effects of deferred income taxes, and depreciation and
amortization of $21.6 million and $8.5 million, respectively.
The Company's investing activities resulted in net cash outflows of $106.7
million during fiscal 2000. This compares to net cash outflows of $220.6
million and $9.6 million during fiscal 1999 and 1998, respectively. The net
decrease of $113.9 million in cash used for investing activities in
fiscal 2000 as compared to fiscal 1999 was due primarily to a $173.8 million
decrease in cash used for acquisitions of businesses. This was partially
offset by an increase of $28.9 million in other noncurrent assets, a decrease
of $19.4 million in proceeds from sales of marketable securities and
investments, and increases of $6.3 million and $5.4 million, respectively, in
purchases of investments and additions to fixed assets. During the second
quarter of fiscal 2000, the Company completed the first phase of an
anticipated two-part transaction to acquire Stork for $27.3 million, which
included merger related costs for the acquisition. During the same period last
year, the Company merged with Sverdrup, requiring $201.1 million in cash,
which included the associated costs of the merger. The proceeds from sales of
equity 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 resulted in net cash inflows of $42.8
million during fiscal 2000. This compares to a net cash inflow of $92.6
million during fiscal 1999 and a net cash outflow of $36.7 million in fiscal
1998. The $49.8 million net decrease in cash provided by financing activities
in fiscal 2000 as compared to fiscal 1999 was due primarily to a decrease of
$66.3 million in proceeds from long-term borrowings, and to $13.7 million used
for the purchases of common stock for treasury. These outflows were partially
offset by a decrease of $18.8 million in the repayments of long-term
borrowings. During fiscal 1999, the Company borrowed $165.0 million under a
new long-term $230.0 million revolving credit facility to pay the initial
merger consideration and the costs of the Sverdrup
E-10
<PAGE>
merger of $201.1 million, and $21.0 million of Sverdrup indebtedness existing
at closing, and $5.1 million for other purposes. During fiscal 2000, the
Company borrowed $103.9 million from the same facility, primarily to pay the
$35.0 million litigation settlement, to partially finance the first phase of
the Stork acquisition for approximately $14.8 million, to fund $13.7 million
of stock repurchases as discussed below, and the balance to cover working
capital requirements.
The Company believes it has adequate capital resources to fund its
operations in fiscal 2001 and beyond. The Company's consolidated working
capital position was $167.2 million at September 30, 2000 compared to $144.6
million at September 30, 1999. As discussed earlier, the Company has a long-
term $230.0 million revolving credit facility against which $138.9 million was
outstanding at September 30, 2000 in the form of direct borrowings. At
September 30, 2000, the Company had $49.8 million available through committed
short-term credit facilities, of which $30.4 million was outstanding at that
date in the form of direct borrowings and letters of credit.
In December 1999, the Company reactivated its stock repurchase program that
was suspended in September 1998 due to the then pending merger with Sverdrup
in January 1999. The program authorizes the Company to buy-back up to 3.0
million shares of its common stock in the open market. Repurchases of common
stock will be financed from existing credit facilities and available cash
balances. During fiscal 2000, the Company repurchased 423,900 shares of its
common stock in the open market at a cost of $13.7 million, all of which were
subsequently reissued for its employee stock purchase and stock option plans.
The Company has repurchased a total of 1,657,100 shares of its common stock
since the inception of the program in 1996.
The Company has filed a protective claim with the Internal Revenue Service.
The nature of the claim involves monies the Company believes it is due from
the government relating to the research and development tax credit for fiscal
years 1991 through 1998. Although the Company has been working on quantifying
the amount of the credit, the final tax refund amount has not yet been
determined. Based on a preliminary review of the information available, the
ultimate refund amount may have a significant and positive effect on the
Company's overall liquidity.
Year 2000 Compliance
The Company completed its Year 2000 ("Y2K") compliance program prior to
December 31, 1999 and made the transition into the Year 2000 with no
disruptions to its systems or operations. The Company continues to monitor its
internal systems, equipment and third-party relationships for any Y2K problems
that may develop. A contingency plan for critical business applications and
continuing project operations is in place in the event unidentified issues
cause business disruptions. However, the Company does not expect such
disruptions, if they occur, to have a materially adverse effect on its results
of operations or financial condition.
Current Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133 -- Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"). As amended by
Statement of Financial Accounting Standards No. 137 -- Accounting for
Derivative Instruments and Hedging Activities -- Deferral of the Effective
Date of FASB Statement No. 133 ("SFAS 137"), SFAS 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000. In June
2000, the FASB issued Statement of Financial Accounting Standards No. 138--
Accounting for Certain Derivative Instruments and Certain Hedging Activities
("SFAS 138"). SFAS 138 amends the accounting and reporting standards of SFAS
133 for certain derivative instruments and certain hedging activities. SFAS
138 will be adopted concurrently with SFAS 133.
At September 30, 2000, the Company had no significant derivative financial
instruments. Therefore, as of September 30, 2000, SFAS 133, 137 and 138 would
have had no material impact on the Company's financial position or results of
operations.
E-11
<PAGE>
Forward-Looking Statements
Statements included in this Management's Discussion and Analysis 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. Such
statements are based on management's current estimates, expectations and
projections about the issues discussed, the industries in which the Company's
clients operate and the services the Company 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, but are not necessarily limited to, 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 the funding of 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; the successful
closing and/or subsequent integration of any merger or acquisition
transaction; and, the amount of any contingent consideration the Company may
be required to pay in the future in connection with the Sverdrup merger
(including the availability of financing that may be required). 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 Management's
Discussion and Analysis 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.
E-12
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2000 and 1999
(In thousands, except share information)
<TABLE>
<CAPTION>
2000 1999
---------- ----------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................. $ 65,848 $ 53,482
Receivables........................................... 710,979 586,005
Deferred income taxes................................. 61,968 76,405
Prepaid expenses and other............................ 12,228 13,728
---------- ----------
Total current assets................................. 851,023 729,620
---------- ----------
Property, Equipment and Improvements, Net.............. 150,491 139,653
---------- ----------
Other Noncurrent Assets:
Goodwill, net......................................... 269,043 245,451
Other................................................. 113,819 105,462
---------- ----------
Total other noncurrent assets........................ 382,862 350,913
---------- ----------
$1,384,376 $1,220,186
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable......................................... $ 18,460 $ 9,465
Accounts payable...................................... 224,063 186,287
Accrued liabilities................................... 274,991 281,967
Customers' advances in excess of related revenues..... 145,708 93,303
Income taxes payable.................................. 20,641 13,960
---------- ----------
Total current liabilities............................ 683,863 584,982
---------- ----------
Long-term Debt......................................... 146,820 135,371
---------- ----------
Other Deferred Liabilities............................. 52,946 44,988
---------- ----------
Minority Interests..................................... 5,204 6,128
---------- ----------
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 -- 26,386,238 and
26,142,992 shares, respectively..................... 26,386 26,143
Additional paid-in capital............................ 79,352 68,049
Retained earnings..................................... 400,791 358,958
Accumulated other comprehensive loss.................. (10,515) (3,595)
---------- ----------
496,014 449,555
Unearned compensation................................. (471) (838)
---------- ----------
Total stockholders' equity........................... 495,543 448,717
---------- ----------
$1,384,376 $1,220,186
========== ==========
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
E-13
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
For the Years Ended September 30, 2000, 1999 and 1998
(In thousands, except per share information)
<TABLE>
<CAPTION>
2000 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
Revenues................................ $ 3,418,942 $ 2,875,007 $ 2,101,145
----------- ----------- -----------
Costs and Expenses:
Direct costs of contracts.............. (2,983,247) (2,477,678) (1,830,618)
Selling, general and administrative
expenses.............................. (311,082) (289,034) (184,043)
----------- ----------- -----------
Operating Profit........................ 124,613 108,295 86,484
Other (Expense) Income:
Interest income........................ 3,961 3,031 5,092
Interest expense....................... (11,420) (8,767) (2,356)
Miscellaneous income (expense), net.... 2,168 1,963 (436)
Provision for litigation settlement.... (38,000) -- --
----------- ----------- -----------
Total other (expense) income.......... (43,291) (3,773) 2,300
----------- ----------- -----------
Earnings Before Taxes................... 81,322 104,522 88,784
Income Tax Expense...................... (30,341) (39,077) (34,399)
----------- ----------- -----------
Net Earnings............................ $ 50,981 $ 65,445 $ 54,385
=========== =========== ===========
Net Earnings Per Share:
Basic.................................. $ 1.95 $ 2.54 $ 2.12
Diluted................................ $ 1.93 $ 2.47 $ 2.08
=========== =========== ===========
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
E-14
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Years Ended September 30, 2000, 1999 and 1998
(In thousands)
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Net Earnings....................................... $50,981 $65,445 $54,385
------- ------- -------
Other Comprehensive Income (Loss):
Unrealized gains (losses) on securities........... 2,101 3,470 (188)
Foreign currency translation adjustments.......... (8,236) (3,946) (9)
------- ------- -------
Other Comprehensive Loss Before Income Taxes....... (6,135) (476) (197)
Income Tax (Expense) Benefit Relating to Other
Comprehensive
Income (Loss)..................................... (785) (1,319) 75
------- ------- -------
Other Comprehensive Loss........................... (6,920) (1,795) (122)
------- ------- -------
Total Comprehensive Income......................... $44,061 $63,650 $54,263
======= ======= =======
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
E-15
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Years Ended September 30, 2000, 1999 and 1998
(In thousands)
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Common Stock:
Balance at the beginning of the year............ $ 26,143 $ 25,867 $ 25,811
Issuances under stock plans, net................ 440 399 103
Repurchases under stock plans................... (197) (131) (59)
Issuances of restricted stock, net of
forfeitures.................................... -- 8 12
-------- -------- --------
Balance at the end of the year.................. 26,386 26,143 25,867
-------- -------- --------
Additional Paid-in Capital:
Balance at the beginning of the year............ 68,049 55,698 52,186
Issuances of common stock under stock plans,
net............................................ 12,078 12,399 3,521
Repurchases of common stock under stock plans... (764) (293) (353)
Issuances of restricted stock, net of
forfeitures.................................... (11) 245 344
-------- -------- --------
Balance at the end of the year.................. 79,352 68,049 55,698
-------- -------- --------
Retained Earnings:
Balance at the beginning of the year............ 358,958 300,296 249,791
Net earnings.................................... 50,981 65,445 54,385
Issuances of treasury stock for stock option
exercises...................................... (2,922) (1,618) (2,272)
Repurchases of common stock under stock plans... (6,226) (5,165) (1,608)
-------- -------- --------
Balance at the end of the year.................. 400,791 358,958 300,296
-------- -------- --------
Accumulated Other Comprehensive Income (Loss):
Balance at the beginning of the year............ (3,595) (1,800) (1,678)
Foreign currency translation adjustments........ (8,236) (3,946) (9)
Net unrealized gains (losses) on securities..... 1,316 2,151 (113)
-------- -------- --------
Balance at the end of the year.................. (10,515) (3,595) (1,800)
-------- -------- --------
Unearned Compensation:
Balance at the beginning of the year............ (838) (1,056) (1,066)
Amortization, net of issuances of restricted
stock.......................................... 367 218 10
-------- -------- --------
Balance at the end of the year.................. (471) (838) (1,056)
-------- -------- --------
Treasury Stock, at Cost:
Balance at the beginning of the year............ -- (7,600) (736)
Purchases of common stock for treasury.......... (13,714) -- (18,046)
Reissuances of treasury stock for stock option
exercises...................................... 13,714 7,600 11,182
-------- -------- --------
Balance at the end of the year.................. -- -- (7,600)
-------- -------- --------
Total Stockholders' Equity....................... $495,543 $448,717 $371,405
======== ======== ========
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
E-16
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended September 30, 2000, 1999 and 1998
(In thousands)
<TABLE>
<CAPTION>
2000 1999 1998
--------- --------- --------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net earnings.................................. $ 50,981 $ 65,445 $ 54,385
Adjustments to reconcile net earnings to net
cash flows from operations:
Depreciation and amortization of property,
equipment and improvements................... 33,192 26,259 20,847
Amortization of goodwill..................... 6,906 5,327 2,337
Amortization of deferred gains............... -- -- (205)
Gains on sales of assets..................... (3,143) (3,986) (8,577)
Changes in assets and liabilities, excluding
the effects of businesses acquired:
Receivables................................. (105,541) (10,897) (25,135)
Prepaid expenses and other current assets... 142 476 6,010
Accounts payable............................ 35,807 17,035 10,076
Accrued liabilities......................... (10,497) 25,107 16,757
Customers' advances......................... 50,134 (30,879) 7,384
Income taxes payable........................ 8,526 (3,650) 12,525
Deferred income taxes........................ 14,437 (7,195) (5,067)
Other, net................................... 357 470 366
--------- --------- --------
Net cash provided by operating activities..... 81,301 83,512 91,703
--------- --------- --------
Cash Flows from Investing Activities:
Acquisitions of businesses, net of cash
acquired..................................... (27,284) (201,052) --
Additions to property and equipment........... (44,369) (38,970) (46,335)
Disposals of property and equipment........... 3,357 4,926 26,766
Net (increase) decrease in other noncurrent
assets....................................... (33,806) (4,868) 8,620
Purchases of marketable securities............ -- (1,800) (5,386)
Proceeds from sales of marketable securities.. -- 18,282 10,034
Purchases of investments...................... (7,772) (1,442) (3,319)
Proceeds from sales of investments............ 3,169 4,285 --
--------- --------- --------
Net cash used for investing activities........ (106,705) (220,639) (9,620)
--------- --------- --------
Cash Flows from Financing Activities:
Proceeds from long-term borrowings............ 103,900 170,220 --
Repayments of long-term borrowings............ (78,244) (97,027) (29,264)
Net change in short-term borrowings........... 9,622 9,141 (1,257)
Exercises of stock options.................... 16,006 12,947 10,251
Purchases of common stock for treasury........ (13,714) -- (18,046)
Other, net.................................... 5,277 (2,652) 1,639
--------- --------- --------
Net cash provided (used) by financing
activities................................... 42,847 92,629 (36,677)
--------- --------- --------
Effect of Exchange Rate Changes................ (5,077) (3,348) (70)
--------- --------- --------
Increase (Decrease) in Cash and Cash
Equivalents................................... 12,366 (47,846) 45,336
Cash and Cash Equivalents at Beginning of
Period........................................ 53,482 101,328 55,992
--------- --------- --------
Cash and Cash Equivalents at End of Period..... $ 65,848 $ 53,482 $101,328
========= ========= ========
</TABLE>
See the accompanying Notes to Consolidated Financial Statements.
E-17
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
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 to provide professional engineering,
design, and architectural services, scientific and technical support services,
construction and construction management services, and plant maintenance
services to its industrial, commercial and government clients. The Company
provides its services from offices located primarily throughout the United
States, Europe and Asia. 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 for each year ended September 30 was as follows:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Cost-reimbursable............................................. 77% 73% 81%
Fixed-price................................................... 18 22 18
Guaranteed maximum............................................ 5 5 1
</TABLE>
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 may 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 at the time services were performed
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 profit in its consolidated statements of
earnings.
When the Company is directly responsible for subcontractor labor, or third-
party materials and equipment, the Company reflects the costs of such items in
both revenues and costs. On other projects, where the client elects to pay for
such items directly and the Company has no associated responsibility for such
items, these amounts are not reflected in either revenues or costs.
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, 2000 and 1999 consisted primarily of time certificates of deposit.
E-18
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Marketable Securities and Investments
The Company's investments in equity and debt securities are classified as
trading securities, held-to-maturity securities or available-for-sale
securities. 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 recorded at fair value. Changes in the fair value of
trading securities are recognized in earnings in the period in which the
change occurs and is included in "Miscellaneous income (expense), net" in the
accompanying consolidated statements of earnings.
Held-to-maturity securities and available-for-sale securities are included
as long-term investments in "Other noncurrent assets" in the accompanying
consolidated balance sheets. Held-to-maturity securities are carried at cost,
or amortized cost, adjusted for the amortization (accretion) of any related
premiums (discounts) over the estimated remaining period until maturity.
Marketable equity securities that are not held for trading, and debt
securities that are not classified as held-to-maturity, are classified as
available-for-sale securities. Securities designated as available-for-sale are
recorded at fair value. Changes in the fair value of securities available-for-
sale are recorded in the "Accumulated Other Comprehensive Income (Loss)"
section of stockholders' equity as unrealized gains or losses, net of the
related tax effect.
Receivables and Customers' Advances
Included in receivables at September 30, 2000 and 1999 were recoverable
amounts under contracts in progress of $371,997,400 and $240,964,600,
respectively, that represent amounts earned under contracts in progress but
not billable at the respective balance sheet dates. 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 these unbilled receivables at September 30, 2000 and 1999 were
contract retentions totaling $4,979,300 and $7,965,100, respectively. The
Company anticipates that substantially all of such unbilled amounts will be
billed and collected over the next twelve months.
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.
The Company anticipates that substantially all such amounts will be earned
over the next twelve months.
Property, Equipment and Improvements
Property, equipment and improvements are stated at cost in the accompanying
consolidated balance sheets. Depreciation and amortization of property and
equipment is computed primarily by using the straight-line method over the
estimated useful lives of the assets. The cost of leasehold improvements is
amortized using the straight-line method over the lesser of the life of the
asset or the remaining term of the related lease. 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.
Goodwill
Goodwill represents the excess of the purchase price paid over the fair
value of the net assets of acquired companies and is being amortized against
earnings using the straight-line method over periods not exceeding 40 years.
The carrying value of goodwill is subject to review for recoverability,
E-19
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
and if there are indications of impairment, the Company assesses any potential
impairment based upon undiscounted cash flow forecasts. No impairment losses
have been recognized in any of the periods presented. Goodwill is shown in the
accompanying consolidated balance sheets net of accumulated amortization of
$20,766,300 and $14,816,800 at September 30, 2000 and 1999, respectively.
Earnings Per Share
Earnings per share ("EPS") is calculated in accordance with Statement of
Financial Accounting Standards No. 128 -- Earnings per Share ("SFAS 128").
Basic EPS was computed by dividing net earnings by the weighted average number
of shares of common stock outstanding for the period. Diluted EPS gives effect
to all dilutive securities that were outstanding during the period. The
Company's dilutive securities consisted solely of nonqualified stock options.
Stock-based Compensation
The Company accounts for stock issued to employees and outside directors in
accordance with APB Opinion No. 25 -- Accounting for Stock Issued to Employees
("APB 25"). Accordingly, no compensation cost has been recorded in connection
with grants of stock options. With respect to the issuance of restricted
stock, unearned compensation expense equivalent to the market value of the
stock issued on the date of award is charged to stockholders' equity and
subsequently amortized against earnings over the periods during which the
restrictions lapse. During fiscal years 2000, 1999 and 1998, the Company
recognized compensation expense on restricted stock of $356,700, $470,300 and
$366,300, respectively.
Concentrations of Credit Risk, Uncertainties and Use of Estimates
The Company's cash balances and short-term investments are maintained in
accounts held by major banks and financial institutions located primarily in
the United States and Europe. In the normal course of its business and
consistent with industry practices, the Company grants credit to its clients
without requiring collateral. Concentrations of credit risk is the risk that,
if the Company extends a significant portion of its credit to clients in a
specific geographical area or industry, the Company may experience
disproportionately high levels of default, if those clients are adversely
affected by factors particular to their geographic area or industry.
Concentrations of credit risk relative to trade receivables are limited due to
the Company's diverse client base, which includes the U.S. federal government
and multi-national corporations operating in a broad range of industries and
geographic areas. Additionally, in order to mitigate credit risk, the Company
continually evaluates the credit worthiness of its major commercial clients.
In preparing the consolidated financial statements, management is required
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities as of the
dates of the balance sheets and revenues and expenses for the periods covered.
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 significantly from
those estimates and assumptions.
E-20
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Earnings Per Share
The following table reconciles the denominator used to compute basic EPS to
the denominator used to compute diluted EPS for each year ended September 30
(in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
------ ------ ------
<S> <C> <C> <C>
Weighted average shares outstanding (denominator used
to compute Basic EPS)................................ 26,179 25,803 25,689
Effect of employee and outside director stock options. 294 675 407
------ ------ ------
Denominator used to compute Diluted EPS............... 26,473 26,478 26,096
====== ====== ======
</TABLE>
The weighted average number of shares outstanding for fiscal 1998 excludes
common shares in treasury.
3. Business Combinations
On February 16, 2000, the Company completed the first phase of an
anticipated two-part transaction to acquire the engineering and contracting
business of Stork N.V., the Netherlands ("Stork") for a total purchase price
of EUR 25.0 million (approximately $24.2 million). The purchase price was
financed in part by long-term borrowings of EUR 15.0 million (approximately
$14.8 million) under an existing $230.0 million revolving credit facility. The
transaction was 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 $32.4 million, which is being
amortized over 40 years using the straight-line method.
The Company's consolidated results of operations for fiscal 2000 include
those of Stork since the date of acquisition. The first phase includes Stork's
operations in Belgium, Germany, Southeast Asia and certain offices in the
Netherlands. These offices employ over 1,500 professional technical staff. The
second phase, involving the balance of Stork's engineering and construction
operations in the Netherlands and the Middle East, is expected to close at a
later date. The first phase of the Stork transaction did not have a material
pro forma effect on the Company's consolidated results of operations.
In January 1999, the Company completed its Agreement and Plan of Merger with
Sverdrup Corporation ("Sverdrup"). Under the terms of the merger agreement,
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. No amount was payable as Deferred Merger
Consideration on January 14, 2000, the first anniversary of the date of the
merger agreement.
The Sverdrup transaction has been accounted for as a purchase. The purchase
price allocation resulted in goodwill of approximately $176.3 million, which
is being amortized over 40 years using the straight-line method.
E-21
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
4. Investments
At September 30, 2000, the Company had available-for-sale securities of
$10,044,000 included in "Other Noncurrent Assets", for which a net unrealized
gain of $1,316,300 was recorded in stockholders' equity during fiscal 2000. At
September 30, 1999, the Company had available-for-sale securities of
$9,716,300, for which a net unrealized gain of $2,151,200 was recorded in
stockholders' equity during fiscal 1999.
The following table summarizes certain information regarding the Company's
available-for-sale equity securities at September 30, 2000 and 1999, and for
each year ended September 30 (in thousands):
<TABLE>
<CAPTION>
2000 1999
------- ------
<S> <C> <C>
Total cost (specific identification method).................. $ 4,472 $6,246
Gross unrealized gains....................................... 5,572 3,470
Estimated fair value......................................... 10,044 9,716
Gross realized gains......................................... 3,147 3,648
Gross proceeds from sales.................................... 5,262 4,285
</TABLE>
5. Property, Equipment and Improvements, Net
Property, equipment and improvements consisted of the following at September
30, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Land................................................... $ 11,579 $ 14,407
Buildings.............................................. 59,369 47,313
Equipment.............................................. 201,896 164,538
Leasehold improvements................................. 19,755 18,913
Construction in progress............................... 11,497 10,419
--------- ---------
304,096 255,590
Accumulated depreciation and amortization.............. (153,605) (115,937)
--------- ---------
$ 150,491 $ 139,653
========= =========
</TABLE>
Operating expenses include provisions for depreciation and amortization of
$33,192,300, $26,259,500 and $20,847,500 for fiscal 2000, 1999 and 1998,
respectively.
6. Borrowings
Short-term Credit Arrangements
At September 30, 2000, the Company had approximately $49,843,000 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. Most of the agreements require the payment of a fee based on the amount
of the facility. The Company is also required to maintain certain minimum
levels of working capital and net worth.
E-22
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Other information regarding the lines of credit for each year ended
September 30 follows (dollars in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- ------
<S> <C> <C> <C>
Amount outstanding at year end.................... $18,077 $ 6,868 $ 217
Weighted average interest rate at year end........ 8.8% 6.5% 24.6%
Weighted average borrowings outstanding during the
year............................................. $ 7,952 $ 2,295 $ 537
Weighted average interest rate during the year.... 6.77% 6.02% 11.54%
Maximum amount outstanding during the year........ $30,955 $14,210 $3,313
</TABLE>
Long-term Debt and Credit Arrangements
Long-term debt consisted of the following at September 30, 2000 and 1999 (in
thousands):
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Borrowings under the $230.0 million long-term, revolving
credit agreement......................................... $138,879 $118,051
Mortgage loans payable.................................... 6,833 17,158
Other..................................................... 1,491 2,759
-------- --------
147,203 137,968
Less -- current maturities (included in "Notes payable" in
the accompanying consolidated balance sheets)............ 383 2,597
-------- --------
$146,820 $135,371
======== ========
</TABLE>
Borrowings under the $230,000,000 long-term, revolving credit agreement are
unsecured, and 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. During fiscal 2000 and 1999, the
weighted average interest rates on these borrowings were 7.85% and 5.68%,
respectively. The agreement requires the Company to maintain certain minimum
levels of net worth, a minimum coverage ratio of certain fixed charges, and a
minimum leverage ratio of earnings before interest, taxes, depreciation and
amortization to funded debt (all as defined in the agreement). The agreement
also restricts the payment of cash dividends and requires the Company to pay a
facility fee based on the total amount of the commitment. The agreement
expires in March 2004.
The scheduled maturities of the Company's long-term debt at September 30,
2000 were as follows (in thousands):
<TABLE>
<S> <C>
Year ending September 30,
2001............................................................. $ 383
2002............................................................. 1,907
2003............................................................. 451
2004............................................................. 139,368
2005............................................................. 530
Thereafter....................................................... 4,564
--------
$147,203
========
</TABLE>
The mortgage loan at September 30, 2000 relates to, and is secured by,
certain real property located in St. Louis, Missouri, with an interest rate of
8.125%. The property has a book value of approximately $13,142,800 at
September 30, 2000.
E-23
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Interest payments made during fiscal 2000, 1999 and 1998 totaled
$11,819,800, $8,959,500 and $2,517,100, respectively.
7. Pension Plans
Company-only Sponsored Plans
The Company sponsors various pension plans covering employees of certain
U.S. domestic and international subsidiaries. These plans provide pension
benefits that are based on the employee's compensation and years of service.
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 sets forth the change in the plans' net benefit
obligation for each year ended September 30 (in thousands):
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Net benefit obligation at the beginning of the year...... $316,875 $105,857
Service cost............................................. 10,530 8,828
Interest cost............................................ 22,902 18,833
Participants' contributions.............................. 2,361 2,449
Actuarial gains.......................................... (9,482) (13,228)
Benefits paid............................................ (21,010) (13,076)
Settlements.............................................. (1,060) (23,449)
Effects of plan amendments............................... -- (2,680)
Special termination benefits............................. -- 592
Effect of Sverdrup merger................................ -- 241,749
Other.................................................... (11,526) (9,000)
-------- --------
Net benefit obligation at the end of the year............ $309,590 $316,875
======== ========
</TABLE>
The following table sets forth the change in the plans' assets for each year
ended September 30 (in thousands):
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Fair value of plan assets at the beginning of the year... $320,920 $122,449
Actual return on plan assets............................. 27,369 13,016
Employer contributions................................... 13,287 10,675
Participants' contributions.............................. 2,361 2,449
Gross benefits paid...................................... (21,010) (36,524)
Customer note payment.................................... (3,182) (2,000)
Settlements.............................................. (1,060) --
Effect of Sverdrup merger................................ -- 220,411
Other.................................................... (13,978) (9,556)
-------- --------
Fair value of plan assets at the end of the year......... $324,707 $320,920
======== ========
</TABLE>
In both of the preceding tables, "Other" consists primarily of the effects
of exchange rate fluctuations used to translate the information disclosed
therein.
E-24
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table reconciles the funded status of the plans, as well as
amounts recognized and not recognized in the accompanying consolidated balance
sheets at September 30, 2000 and 1999 (in thousands):
<TABLE>
<CAPTION>
2000 1999
------- ------
<S> <C> <C>
Funded status at the end of the year........................ $15,117 $4,045
Unrecognized actuarial (gains) losses....................... (6,267) 1,246
Other....................................................... 668 (75)
------- ------
Net amount recognized at end of the year.................... $ 9,518 $5,216
======= ======
</TABLE>
Amounts recognized in the accompanying consolidated balance sheets at
September 30, 2000 and 1999 consisted of the following (in thousands):
<TABLE>
<CAPTION>
2000 1999
------- -------
<S> <C> <C>
Prepaid pension asset....................................... $16,795 $18,704
Accrued benefit liability................................... 7,277 13,488
------- -------
Net amount recognized at the end of the year................ $ 9,518 $ 5,216
======= =======
</TABLE>
The pension plans have a total, net over-funded status of approximately
$15,117,000 and $4,045,000 at September 30, 2000 and 1999, respectively.
Included in the September 30, 2000 amount is a domestic pension plan sponsored
in connection with an operating contract with the United States government
which was under-funded by approximately $6,101,000 at that date. Included in
the September 30, 1999 amount are two domestic pension plans sponsored in
connection with operating contracts with the United States government which
were under-funded in total by approximately $14,865,000 at that date. Included
in "Other noncurrent assets" in the accompanying consolidated balance sheets
at September 30, 2000 and 1999 is $11,690,600 and $11,059,000, respectively,
representing the accumulated excess funding of benefits over the amounts
reimbursed by the U.S. government in connection with an operating contract.
The components of net periodic pension cost for each year ended September 30
were as follows (in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- -------
<S> <C> <C> <C>
Service costs.................................. $ 10,530 $ 8,857 $ 2,451
Interest cost.................................. 22,902 18,899 6,468
Expected return on plan assets................. (28,978) (24,957) (8,259)
Other.......................................... 9 -- --
-------- -------- -------
Net periodic costs, before the effects of
special termination........................... 4,463 2,799 660
Special termination charge..................... -- 820 --
-------- -------- -------
Total net periodic pension cost................ $ 4,463 $ 3,619 $ 660
======== ======== =======
</TABLE>
The significant actuarial assumptions used in determining the funded status
of the plans for each year ended September 30 were as follows:
<TABLE>
<CAPTION>
2000 1999 1998
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate.............. 6.1% to 7.75% 6.5% to 7.75% 6.5%
Rate of compensation increases.............. 4.0% to 4.5% 4.0% to 4.5% 4.5%
Expected return on plan assets.............. 7.3% to 9.5% 7.3% to 9.5% 7.0%
============= ============= ====
</TABLE>
E-25
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Multiemployer Plans
In the United States, the Company contributes to various trusteed pension
plans covering hourly construction employees under industry-wide agreements.
In selected operations in the Netherlands, the Company contributes to
multiemployer plans covering both hourly and certain salaried employees.
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 totaled $5,650,500, $3,835,300 and $4,025,300 for
each of the three years ended September 30, 2000, 1999 and 1998, respectively.
8. Savings and Deferred Compensation Plans
Savings Plans
The Company maintains savings plans for substantially all of its domestic,
nonunion employees, which allow participants to make contributions by salary
deduction pursuant to section 401(k) of the Internal Revenue Code. The
Company's contributions to these plans totalled $19,564,500, $16,044,700 and
$9,568,700, for fiscal 2000, 1999 and 1998, respectively. Company
contributions are voluntary for most of the savings plans, and represent a
partial matching of employee contributions.
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 each of the three years
ended September 30, 2000, 1999 and 1998 were $5,688,500, $2,394,900 and
$1,588,800, respectively. Included in "Other deferred liabilities" in the
accompanying consolidated balance sheets at September 30, 2000 and 1999 was
$38,385,800 and $22,778,800, respectively, relating to the ESP and EDP plans.
Included in "Other noncurrent assets" at September 30, 2000 and 1999 were life
insurance policies with cash surrender values of $35,762,200 and $30,227,600,
respectively, relating to the ESP and EDP plans.
9. Stock Purchase and Stock Option Plans
Stock Purchase Plan
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% of the common stock's closing market price on either the first or last day
of the option period. Option periods are six months in duration, running from
September 1 to February 28 or 29, and from March 1 to August 31, of each year.
A summary of shares issued through the 1989 ESPP for each year ended September
30 follows:
<TABLE>
<CAPTION>
2000 1999 1998
----------- ----------- ----------
<S> <C> <C> <C>
Aggregate purchase price................. $12,685,179 $10,306,530 $7,495,590
Shares purchased......................... 499,032 385,017 302,514
----------- ----------- ----------
</TABLE>
At September 30, 2000, there were 308,841 shares reserved for issuance under
the 1989 ESPP.
E-26
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Stock Option Plans
In February 2000, the Company's shareholders approved the 1999 Stock
Incentive Plan and the 1999 Outside Director Stock Plan (the "1999 Plans").
The 1999 Stock Incentive Plan authorizes the issuance of incentive stock
options, nonqualified stock options and restricted stock to employees to
acquire up to an aggregate of 2,000,000 shares of the Company's common stock.
The 1999 Outside Director Stock Plan reserves 200,000 shares of the Company's
common stock for grants of nonqualified stock options and awards of stock and
restricted stock to outside directors. At September 30, 2000, there were
2,195,000 shares of common stock reserved for issuance under the 1999 Plans.
The 1999 Plans replace the Company's 1981 Stock Incentive Plan (the "1981
Plan") which would have expired on March 1, 2001. Effective February 14, 2000,
by resolution of the Company's Board of Directors, no further incentive awards
may be made under the 1981 Plan, and all shares reserved for issuance that
were not subject to outstanding incentive awards were released from the
reserve. At September 30, 2000, there were 2,014,350 shares of common stock
reserved for issuance under the 1981 Plan.
The following is a summary of the stock option activity under the 1981 Plan
and the 1999 Plans (collectively, the "Stock Option Plans") for each year
ended September 30:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Options Price
--------- --------
<S> <C> <C>
Outstanding at September 30, 1997........................ 1,928,834 $22.85
Granted.................................................. 577,500 28.80
Exercised................................................ (216,904) 18.78
Cancelled or expired..................................... (74,980) 23.50
--------- ------
Outstanding at September 30, 1998........................ 2,214,450 24.79
Granted.................................................. 611,000 34.62
Exercised................................................ (306,819) 23.55
Cancelled or expired..................................... (18,400) 26.31
--------- ------
Outstanding at September 30, 1999........................ 2,500,231 27.33
Granted.................................................. 560,250 33.03
Exercised................................................ (401,281) 24.36
Cancelled or expired..................................... (115,600) 28.88
--------- ------
Outstanding at September 30, 2000........................ 2,543,600 $29.00
========= ======
</TABLE>
E-27
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Certain other information regarding the Company's stock options follows:
<TABLE>
<CAPTION>
2000 1999 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
At September 30:
Range of exercise prices for
options outstanding.......... $17.32 - $39.31 $16.58 - $37.36 $16.58 - $31.94
Options exercisable........... 1,000,800 994,681 907,900
Options available for grant... 1,665,750 151,250 748,850
For the fiscal year ended:
Range of prices for options
exercised.................... $16.58 - $30.92 $16.58 - $28.79 $ 5.31 - $27.88
Estimated weighted average
fair value of options
granted...................... $15.35 $17.33 $13.79
--------------- --------------- ---------------
</TABLE>
The following table presents information regarding options outstanding and
exercisable at September 30, 2000:
<TABLE>
<CAPTION>
Options Outstanding
------------------------------ Options
Weighted Exercisable
Average ------------------
Remaining Weighted Weighted
Contractual Average Average
Range of Life Exercise Exercise
Exercise Prices Number (in years) Price Number Price
--------------- --------- ----------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
$17.32 - $19.87........... 186,550 1.7 $18.95 183,650 $18.94
$20.40 - $24.01........... 402,800 5.0 $21.83 264,700 $21.89
$24.13 - $28.00........... 468,900 6.7 $26.12 245,100 $26.17
$28.09 - $31.94........... 555,100 7.5 $30.48 220,400 $30.16
$32.73 - $35.86........... 720,250 9.2 $34.13 46,300 $35.64
$36.38 - $39.31........... 210,000 8.7 $36.54 40,650 $36.43
--------- --- ------ --------- ------
2,543,600 7.1 $29.00 1,000,800 $25.44
========= === ====== ========= ======
</TABLE>
Options outstanding at September 30, 2000 consisted entirely of nonqualified
stock options. The Stock Option Plans allow 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.
During the years ended September 30, 2000, 1999 and 1998, the Company issued
5,000, 8,000 and 12,000 shares, respectively, of restricted stock under the
Stock Option Plans. 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.
Pro Forma Disclosures
As discussed in Note 1, the Company accounts for stock issued to employees
and outside directors in accordance with APB 25. Statement of Financial
Accounting Standards No. 123 -- Accounting for Stock-Based Compensation ("SFAS
123") prescribes an optional, fair-value based method of accounting for stock
issued to employees and others. Had the Company determined compensation cost
under SFAS 123, the Company's net earnings and earnings per share for each
E-28
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
year ended September 30 would have been reduced to the pro forma amounts as
follows (in thousands, except per share data):
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Net earnings:
As reported......................................... $50,981 $65,445 $54,385
Pro forma........................................... 42,355 57,976 50,418
Earnings per share:
Basic:
As reported........................................ $ 1.95 $ 2.54 $ 2.12
Pro forma.......................................... 1.62 2.25 1.96
Diluted:
As reported........................................ 1.93 2.47 2.08
Pro forma.......................................... 1.60 2.19 1.93
======= ======= =======
</TABLE>
The fair value of each option is estimated on the date of the grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
2000 1999 1998
----- ----- -----
<S> <C> <C> <C>
Dividend yield.......................................... 0% 0% 0%
Expected volatility..................................... 27.62% 25.30% 24.22%
Risk-free interest rate................................. 6.70% 5.40% 5.62%
Expected life of options (in years)..................... 6.85 6.76 7.40
----- ----- -----
</TABLE>
The Black-Scholes option-pricing model was developed for use in estimating
the fair value of traded options, which have no vesting restrictions and are
fully transferable. Like all option-pricing models, the Black-Scholes model
requires the use of highly subjective assumptions including the expected
volatility of the underlying stock price. Since the Company's stock options
possess characteristics significantly different from those of traded options,
changes in the subjective input assumptions can materially affect the fair
value estimates of the Company's options. The Company believes that existing
models do not necessarily provide a reliable single measure of the fair value
of its stock options.
The effects of applying SFAS 123 for these pro forma disclosures are not
likely to be representative of the effects on reported earnings for future
years as options vest over several years and additional awards are generally
made each year.
E-29
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. Income Taxes
The following is a summary of the Company's consolidated income tax expense
for each year ended September 30 (in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
------- ------- -------
<S> <C> <C> <C>
Current taxes:
Federal.......................................... $14,980 $31,603 $25,873
State............................................ 4,707 5,137 4,729
Foreign.......................................... 4,810 4,053 6,528
------- ------- -------
Total current tax expense....................... 24,497 40,793 37,130
------- ------- -------
Deferred taxes:
Federal.......................................... 6,948 (1,263) (2,340)
State............................................ (1,104) (453) (391)
------- ------- -------
Total deferred tax expense...................... 5,844 (1,716) (2,731)
------- ------- -------
Consolidated income tax expense................... $30,341 $39,077 $34,399
======= ======= =======
</TABLE>
Deferred taxes reflect the tax effects of differences between the amounts
recorded as assets and liabilities for financial reporting purposes and the
amounts recorded for income tax purposes. Deferred tax assets and liabilities
are measured using the enacted tax rates and laws that will be in effect when
the differences are expected to reverse. The components of the Company's net
deferred tax asset at September 30, 2000 and 1999 were as follows (in
thousands):
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Liabilities relating to employee benefit plans.......... $ 36,599 $ 34,250
Self-insurance reserves................................. 18,349 19,851
Contract revenues and costs............................. 23,428 22,625
Accrual for office consolidations....................... 643 1,660
Other, net.............................................. 347 --
-------- --------
Gross deferred tax assets............................... 79,366 78,386
-------- --------
Deferred tax liabilities:
Depreciation and amortization........................... (5,264) (4,977)
Settlement of pension obligations....................... (4,511) (4,367)
Unremitted foreign earnings............................. (4,717) (2,709)
State income and franchise taxes........................ (2,735) (1,534)
Unrealized gain on securities available-for-sale........ (2,584) (1,599)
Other, net.............................................. -- (447)
-------- --------
Gross deferred tax liabilities.......................... (19,811) (15,633)
-------- --------
Net deferred tax asset................................... $ 59,555 $ 62,753
======== ========
</TABLE>
Included in other deferred liabilities in the accompanying consolidated
balance sheets at September 30, 2000 and 1999 are deferred tax liabilities of
$2,413,100 and $13,652,300, respectively.
Included in the change in income taxes payable in the accompanying
consolidated statements of cash flows for fiscal 2000, 1999 and 1998 are
income tax benefits of $1,430,000, $1,245,000 and $1,720,000, respectively,
realized by the Company upon the exercises of nonqualified stock options.
E-30
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The reconciliation from the statutory federal income tax expense to the
consolidated effective income tax expense for each year ended September 30
follows (dollars in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
-------- ------- -------
<S> <C> <C> <C>
Statutory amount................................. $ 28,463 $36,583 $31,075
State taxes, net of the federal benefit.......... 2,341 3,045 2,819
Other, net....................................... (463) (551) 505
-------- ------- -------
$ 30,341 $39,077 $34,399
======== ======= =======
Rate used to compute statutory amount............ 35.0% 35.0% 35.0%
======== ======= =======
Consolidated effective income tax rate........... 37.3% 37.4% 38.7%
======== ======= =======
</TABLE>
During fiscal 2000, 1999 and 1998, the Company paid approximately
$19,526,800, $45,459,800 and $26,240,900, respectively, in income taxes.
Consolidated earnings before taxes consisted of the following for each year
ended September 30 (in thousands):
<TABLE>
<CAPTION>
2000 1999 1998
------- -------- -------
<S> <C> <C> <C>
United States earnings............................. $64,125 $ 87,247 $62,193
Foreign earnings................................... 17,197 17,275 26,591
------- -------- -------
$81,322 $104,522 $88,784
======= ======== =======
</TABLE>
United States income taxes, net of applicable credits, have been provided on
the undistributed earnings of foreign subsidiaries, except in those instances
where the earnings are expected to be permanently reinvested. At September 30,
2000, $7,830,800 of such undistributed earnings was expected to be permanently
reinvested. Should these earnings be repatriated, approximately $2,070,700 of
income taxes would be payable.
11. Commitments and Contingencies
The Company leases certain of its facilities and equipment under operating
leases with net aggregate future lease payments of approximately $236,249,900
at September 30, 2000 payable as follows (in thousands):
<TABLE>
<S> <C>
Year ending September 30,
2001............................................................. $ 47,382
2002............................................................. 36,501
2003............................................................. 30,323
2004............................................................. 25,218
2005............................................................. 21,721
Thereafter....................................................... 92,638
--------
253,783
Less -- amounts representing sublease income....................... (17,533)
--------
$236,250
========
</TABLE>
Rent expense for fiscal years 2000, 1999 and 1998 amounted to $54,761,600,
$47,382,500 and $29,393,000, respectively, and was offset by sublease income
of approximately $3,584,100, $3,716,300 and $4,112,000, respectively.
E-31
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Letters of credit outstanding at September 30, 2000 totaled $108,188,800.
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 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.
In the normal course of business, the Company is subject to certain
contractual guarantees and litigation. Generally, such guarantees relate to
project schedules and plant performance. Most of the litigation involves the
Company as a defendant in workers' compensation, personal injury and other
similar lawsuits. In addition, as a contractor for many agencies of the United
States Government, the Company is subject to many levels of audits,
investigations and claims by, or on behalf of, the Government with respect to
its contract performance, pricing, costs, cost allocations and procurement
practices. Management believes, after consultation with counsel, that such
guarantees, litigation, and United States Government contract-related audits,
investigations and claims should not have any material adverse effect on the
Company's consolidated financial statements.
The Company has entered into an employment agreement expiring September 30,
2005 with the Chairman of its Board of Directors. The agreement provides for
annual base payments of $432,000 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 1998, the Company was notified by the U.S. Department of Justice that it
was intervening in a lawsuit filed against the Company by a former employee
under the False Claims Act (the "Act"). The lawsuit alleged that the Company
improperly charged the U.S. government for lease costs paid by the Company and
relating to its former headquarters building, which the Company sold and
leased back in 1982, and then permanently vacated in 1997. The Company denied
any wrongdoing, but agreed to a settlement in the amount of $35.0 million to
avoid the costs and risks of further litigation. The settlement amount of
$35.0 million and the related costs and expenses of $3.0 million were charged
to "Other expense" in the accompanying consolidated statement of earnings for
fiscal 2000. The settlement was paid in March 2000 and has no continuing
impact on the Company's operating results.
12. Common and Preferred Stock
The Company is authorized to issue two classes of capital stock: common
stock and preferred stock (each has a par value of $1.00 per share). The
preferred stock may be issued in one or more series. The number of shares to
be included in a series, as well as each series' designation, relative powers,
dividend and other preferences, rights and qualifications, redemption
provisions and restrictions are to be fixed by the Company's Board of
Directors at the time such series are issued. Except as may be provided by the
Board of Directors in a preferred stock designation, or otherwise provided for
by statute, the holders of the Company's common stock have the exclusive right
to vote for the election of Directors and all other matters requiring
stockholder action. The holders of the Company's common stock are entitled to
dividends if and when declared by the Board of Directors from whatever assets
are legally available for that purpose.
E-32
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Pursuant to the Company's Amended and Restated Rights Agreement, 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 one-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 $175.00 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. In accordance with the Rights Plan, the Company
may redeem the Rights at $0.01 per Right. The Rights will expire on
December 20, 2010, unless earlier exchanged or redeemed.
13. Other Financial Information
Other noncurrent assets consisted of the following at September 30, 2000 and
1999 (in thousands):
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Prepaid pension costs..................................... $ 16,795 $ 18,704
Reimbursable pension costs................................ 11,691 11,059
Cash surrender value of life insurance policies........... 35,762 30,228
Investments............................................... 27,496 32,024
Notes receivable.......................................... 11,847 6,597
Miscellaneous............................................. 10,228 6,850
-------- --------
$113,819 $105,462
======== ========
</TABLE>
Accrued liabilities consisted of the following at September 30, 2000 and
1999 (in thousands):
<TABLE>
<CAPTION>
2000 1999
-------- --------
<S> <C> <C>
Accrued payroll and related liabilities................... $131,921 $143,110
Project related accruals.................................. 24,786 53,440
Insurance liabilities..................................... 46,332 48,406
Other..................................................... 71,952 37,011
-------- --------
$274,991 $281,967
======== ========
</TABLE>
14. Comprehensive Income
Effective with the first quarter of fiscal 1999 ending December 31, 1998,
the Company adopted Statement of Financial Accounting Standards No. 130 --
Reporting Comprehensive Income ("SFAS 130"). SFAS 130 establishes reporting
and disclosure standards for comprehensive income and its components.
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.
E-33
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company has disclosed the components of comprehensive income in the
accompanying consolidated statements of comprehensive income and consolidated
statements of changes in stockholders' equity. SFAS 130 does not have any
effect on the amounts previously reported for net earnings or stockholders'
equity.
The accumulated balances related to each component of other comprehensive
income (loss), net of related income tax, for each year ended September 30
follows (in thousands):
<TABLE>
<CAPTION>
Total
Unrealized Foreign Accumulated
Gains Currency Other
(Losses) on Translation Comprehensive
Securities Adjustments Income (Loss)
----------- ----------- -------------
<S> <C> <C> <C>
Balances at September 30, 1997......... $ 114 $ (1,792) $ (1,678)
Changes during the year................ (113) (9) (122)
------ -------- --------
Balances at September 30, 1998......... 1 (1,801) (1,800)
Changes during the year................ 2,151 (3,946) (1,795)
------ -------- --------
Balances at September 30, 1999......... 2,152 (5,747) (3,595)
Changes during the year................ 1,316 (8,236) (6,920)
------ -------- --------
Balances at September 30, 2000......... $3,468 $(13,983) $(10,515)
====== ======== ========
</TABLE>
15. Segment Information
As discussed above, the Company's principal business is to provide various
professional and technical services. The Company provides its services from
offices located primarily throughout the United States, Europe and Asia.
All of the Company's operations share similar economic characteristics. For
example, all of the Company's operations are highly influenced by the general
availability of qualified engineers and other professional staff. They also
provide similar services, as well as share similar processes for delivering
the Company's services. In addition, the use of technology among the Company's
performance units is highly similar and consistent throughout the Company's
organization, as is the Company's customer base (although the Company's
operations outside the United States do very little work with the U.S. federal
government), and the Company's quality assurance and safety programs.
Accordingly, based on these similarities, the Company has concluded that its
operations may be aggregated into one reportable segment for purposes of this
disclosure.
E-34
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table presents certain information by geographic area for
fiscal 2000, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
Long-
Total lived
Revenues Assets
---------- --------
<S> <C> <C>
2000:
United States........................................... $2,858,197 $120,396
Europe.................................................. 532,887 17,486
Asia.................................................... 27,858 12,609
---------- --------
Total.................................................. $3,418,942 $150,491
========== ========
1999:
United States........................................... $2,421,871 $116,984
Europe.................................................. 440,545 10,376
Asia.................................................... 12,591 12,293
---------- --------
Total.................................................. $2,875,007 $139,653
========== ========
1998:
United States........................................... $1,676,997 $ 78,742
Europe.................................................. 410,944 11,032
Asia.................................................... 13,204 10,791
---------- --------
Total.................................................. $2,101,145 $100,565
========== ========
</TABLE>
Revenues were earned from unaffiliated customers located primarily within
the respective geographic areas. Long-lived assets consist of property and
equipment, net of accumulated depreciation and amortization. The results of
the Company's operations in Mexico, Chile and Australia, and the Company's
investment in long-lived assets in those geographic areas are not material.
For each of the three years ended September 30, 2000, 1999 and 1998,
projects with or for the benefit of agencies of the U.S. federal government
accounted for 17.7%, 17.4% and 12.1%, respectively, of total revenues. Within
the private sector, no single client accounted for 10% or more of total
revenues in the past three fiscal years.
E-35
<PAGE>
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. Quarterly Data -- Unaudited
Summarized quarterly financial information for each year ended September 30
is presented below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
First Second Third Fourth Fiscal
Quarter Quarter Quarter Quarter Year
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
2000
Revenues........................ $809,088 $881,799 $857,828 $870,227 $3,418,942
Operating profit................ 30,028 30,208 31,709 32,668 124,613
(Loss) earnings before taxes.... (9,232) 28,962 30,560 31,032 81,322
Net (loss) earnings............. (5,769) 18,100 19,100 19,550 50,981
(Loss) earnings per share:
Basic.......................... (0.22) 0.69 0.73 0.74 1.95
Diluted........................ (0.22) 0.69 0.72 0.73 1.93
Stock price:
High........................... 35.750 33.125 36.813 40.375 40.375
Low............................ 29.250 26.188 29.375 32.875 26.188
-------- -------- -------- -------- ----------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
1999
Revenues......................... $555,172 $779,874 $771,905 $768,056 $2,875,007
Operating profit................. 23,165 28,142 28,515 28,473 108,295
Earnings before taxes............ 24,054 25,872 26,818 27,778 104,522
Net earnings..................... 15,155 16,170 16,760 17,360 65,445
Earnings per share:
Basic........................... 0.59 0.63 0.65 0.67 2.54
Diluted......................... 0.58 0.61 0.63 0.65 2.47
Stock price:
High............................ 40.750 42.750 42.688 38.563 42.750
Low............................. 26.938 35.250 35.563 32.125 26.938
-------- -------- -------- -------- ----------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
1998
Revenues......................... $506,359 $524,776 $525,034 $544,976 $2,101,145
Operating profit................. 20,250 21,717 22,474 22,043 86,484
Earnings before taxes............ 21,001 21,838 22,753 23,192 88,784
Net earnings..................... 12,810 13,320 13,880 14,375 54,385
Earnings per share:
Basic........................... 0.50 0.52 0.54 0.56 2.12
Diluted......................... 0.49 0.51 0.53 0.55 2.08
Stock price:
High............................ 31.000 32.375 34.250 33.250 34.250
Low............................. 24.688 24.750 29.500 25.125 24.688
-------- -------- -------- -------- ----------
</TABLE>
The Company's common stock is listed on the New York Stock Exchange. At
September 30, 2000, there were 1,115 stockholders of record.
E-36
<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, 2000 and 1999, and
the related consolidated statements of earnings, comprehensive income, changes
in stockholders' equity, and cash flows for each of the three years in the
period ended September 30, 2000. 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 auditing standards generally
accepted in the United States. 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, 2000 and 1999, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended September 30, 2000, in conformity with
accounting principles generally accepted in the United States.
Ernst & Young LLP
Los Angeles, California
October 31, 2000
E-37
<PAGE>
MANAGEMENT'S RESPONSIBILITIES FOR FINANCIAL REPORTING
The consolidated financial statements and other information included in this
exhibit to this proxy statement have been prepared by management, which is
responsible for their fairness, integrity, and objectivity. The consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior years and
contain some amounts that are based upon management's best estimates and
judgment. The other financial information contained in this exhibit has been
prepared in a manner consistent with the preparation of the financial
statements.
In meeting its responsibility for the fair presentation of the Company's
financial statements, management necessarily relies on the Company's system of
internal accounting controls. This system is designed to provide reasonable,
but not absolute, assurance that assets are safeguarded and that transactions
are executed in accordance with management's instructions and are properly
recorded in the Company's books and records. The concept of reasonable
assurance is based on the recognition that in any system of internal controls,
there are certain inherent limitations and that the cost of such systems
should not exceed the benefits to be derived. We believe the Company's system
of internal accounting controls is cost-effective and provides reasonable
assurance that material errors and irregularities will be prevented, or
detected and corrected on a timely basis.
The Company's consolidated financial statements have been audited by
independent auditors, whose report thereon was based on examinations conducted
in accordance with generally accepted auditing standards and is presented on
the preceding page. As part of their audit, the independent auditors perform a
review of the Company's system of internal accounting controls for the purpose
of determining the amount of reliance to place on those controls relative to
the audit tests they perform.
The Company has provided written affirmation to the New York Stock Exchange
that it is in compliance with the Exchange's membership, independence, and
other requirements relating to the Audit Committee of its Board of Directors.
The Company's Audit Committee, which is composed entirely of nonemployee
directors, meets regularly with both management and the independent auditors
to review the Company's financial results and to ensure that both management
and the independent auditors are properly performing their respective
functions.
E-38
<PAGE>
--------------------------------------------------------------------------------
PROXY
SOLICITED BY THE BOARD OF DIRECTORS OF JACOBS ENGINEERING GROUP INC.
ANNUAL MEETING OF SHAREHOLDERS--Tuesday February 13, 2001
JACOBS ENGINEERING GROUP INC.
THE UNDERSIGNED hereby appoints Joseph J. Jacobs, Noel G. Watson and John W.
Prosser, Jr. his true and lawful proxies (with full power of substitution) to
vote in his name, place and stead all shares in Jacobs Engineering Group Inc.
that the undersigned owns or is entitled to vote at the Annual Meeting of
Shareholders to be held February 13, 2001, and at any adjournment thereof,
upon the matters listed below in accordance with the following instructions:
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. Please specify choices,
date, sign and return the proxy in the enclosed envelope. No postage is
required if returned in the enclosed envelope and mailed in the United States.
(Continued, and to be marked, dated and signed, on the other side)
--------------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
<PAGE>
-------------------------------------------------------------------------------
Please mark [X]
your votes as
indicat in
this example
If any of the following boxes are checked, the shares covered by this proxy
will be voted in accordance therewith. If no box is checked under any of the
following, the shares will be voted for the persons nominated as directors by
the Board of Directors and for the approval of items 2, 3 and 4. On other
matters presented, the shares will be voted in accordance with the proxies'
best judgment.
1. To elect Peter H. Dailey, Robert C. Davidson, Jr., Robert B. Gwyn,
Dr. Linda K. Jacobs and Benjamin F. Montoya as directors.
WITHHELD
FOR FOR ALL
[_] [_]
2. To approve the amendment to the 1989 Employee Stock Purchase Plan.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. To approve the amendment to the Company's Certificate of Incorporation.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. To approve Ernst & Young LLP as auditors.
FOR AGAINST ABSTAIN
[_] [_] [_]
(To withhold authority to vote for any individual nominee write that nominee's
name in the space provided below.)
-------------------------------------------------------------------------------
Receipt of the Jacobs Engineering Group Inc. Proxy Statement dated January 8,
2001, including all exhibits thereto, is hereby acknowledged. Please vote my
(our) shares as indicated above.
Signature(s) ___________________________ Date ___________________________, 2001
NOTE: Attorneys, executors, trustees, etc. should show such capacity when
signing and unless the certificate(s) is (are) registered in their names,
should submit a Proxy from the record owner. Evidence of their authority
should accompany the Proxy. Joint owners should each sign individually.
-------------------------------------------------------------------------------
