SEC Filing Summary
Filing: Form 10-Q for the quarter ended April 1, 2011. The source identifies the registrant as Jacobs Engineering Group Inc., not Jacobs Solutions Inc.; investors should verify the requested company identity.
Business Context and Reporting Period
The filing covers the three and six months ended April 1, 2011, compared with the corresponding periods ended April 2, 2010. Results include approximately two months of operations acquired from Aker Solutions ASA’s process and construction business, acquired February 1, 2011. The company provides technical professional services, construction, and operations and maintenance services.
Financial Metrics
| Metric | Three Months 2011 | Three Months 2010 | Six Months 2011 | Six Months 2010 |
|---|---|---|---|---|
| Revenue | $2.558 billion | $2.587 billion | $4.914 billion | $5.065 billion |
| Operating profit | $128.0 million | $122.0 million | $231.6 million | $235.5 million |
| Net earnings attributable to Jacobs | $80.3 million | $77.5 million | $146.1 million | $149.9 million |
| Diluted EPS | $0.63 | $0.62 | $1.15 | $1.20 |
| Net cash from operations | Not provided for the quarter | Not provided for the quarter | $77.0 million | $117.2 million |
Approximate operating margins were 5.0% for the quarter and 4.7% for the six-month period, versus 4.7% and 4.6%, respectively, in the prior-year periods. Approximate net margins were 3.1% for the quarter and 3.0% for the six-month period, versus 3.0% and 3.0%.
- Cash and cash equivalents were $747.9 million at April 1, 2011, down from $938.8 million at October 1, 2010.
- Current assets were $2.934 billion and current liabilities were $1.486 billion, implying working capital of approximately $1.447 billion.
- Notes payable totaled $54.5 million and long-term debt totaled $379.7 million.
- The company reported $251.0 million of available capacity under its $290.0 million long-term revolving credit facility; approximately $39.0 million was utilized through direct borrowings and letters of credit.
- Backlog was $14.006 billion at April 1, 2011, down 4.4% from $14.654 billion a year earlier. Aker-related backlog was approximately $634.3 million.
Material Changes Versus the Prior Comparable Period
- Quarterly revenue declined 1.1%, while six-month revenue declined 3.0%. The decrease primarily reflected lower construction revenue and reduced pass-through costs.
- Project Services revenue increased 15.9% in the quarter and 8.3% year to date, primarily due to the Aker acquisition. Operations and Maintenance revenue increased 22.0% and 26.3%, respectively.
- Construction revenue decreased 23.5% in the quarter and 21.7% year to date, partly because a large energy and refining project was winding down.
- Direct contract costs declined faster than revenue, and direct costs as a percentage of revenue improved to 84.8% from 86.0% for the quarter and to 85.3% from 85.9% year to date.
- Quarterly SG&A increased to $261.2 million from $241.2 million. Year-to-date SG&A increased to $488.6 million from $476.9 million, although underlying SG&A declined after excluding Aker, acquisition and integration costs, and the prior-year Houston sublease effects.
- Six-month operating cash flow decreased $40.1 million, primarily because of timing-related working-capital changes, including increased receivables.
- Investing cash use increased to $632.5 million from $406.1 million, primarily due to acquisitions. Financing cash inflow increased to $364.5 million from $92.8 million, principally reflecting acquisition-related borrowings.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management stated that the Aker acquisition was expected to be modestly accretive to fiscal 2011 earnings. No specific full-year earnings or revenue guidance was provided in the filing.
- Management stated that liquidity and capital resources were adequate to fund operations, support the acquisition strategy, and service debt for the next twelve months.
- The Aker transaction had a preliminary purchase price of approximately $877 million funded with cash and new borrowings. Preliminary goodwill was approximately $304 million, and the purchase price allocation remained subject to revision.
- Working-capital and net-cash adjustments under the Aker purchase agreement remained unresolved and were subject to a potential payment or receipt capped at $175.8 million.
- Subsequent to quarter-end, the company acquired a Houston office building and completed the acquisition of Aker Projects (Shanghai) Company Limited. Combined cash paid for these transactions was approximately $79.1 million.
- The company recognized a prior-year after-tax charge of $5.8 million, or $0.04 per diluted share, related to ceasing use of a Houston office and entering into a sublease.
- Risks include contract cancellations, government contract audits and investigations, claims and litigation, pension obligations, foreign currency and interest-rate exposure, and execution and integration risks related to acquisitions.
- The company disclosed litigation related to the I-35W bridge collapse. Management stated that the matter was not expected to have a material adverse effect, but proceedings remained active as of the filing.
- Management reported effective disclosure controls and procedures and no material changes in internal control over financial reporting.
Important Facts for Investors to Verify
- Confirm that the filing belongs to Jacobs Engineering Group Inc. rather than Jacobs Solutions Inc.
- Review the final purchase price allocation, goodwill, intangible assets, and any working-capital adjustment related to the Aker acquisition.
- Assess whether backlog declines, especially in field services, indicate sustained pressure on future revenue.
- Monitor cash conversion, receivables growth, and the effect of acquisition-related working-capital requirements.
- Reconcile total debt, new bilateral credit facilities, revolving-credit availability, and future interest expense.
- Track the integration, profitability contribution, and geographic and market expansion attributed to the Aker operations.
- Review the status and potential exposure of the I-35W bridge litigation and government contract audits.