JACOBS ENGINEERING GROUP INC. - 10-Q Summary
Business Context and Reporting Period
This Quarterly Report on Form 10-Q covers the period ended June 30, 2002. Jacobs Engineering Group Inc. (Jacobs) provides engineering, construction, and maintenance services. The reporting period includes the impact of a two-for-one stock split distributed on April 1, 2002, and the consolidation of the Delta acquisition (McDermott Engineers & Constructors) completed in October 2001. The company adopted SFAS 142 effective October 1, 2001, eliminating goodwill amortization.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2002 | Nine Months Ended June 30, 2002 |
|---|---|---|
| Revenues | $1,169.1 million | $3,343.9 million |
| Operating Profit | $43.5 million | $126.9 million |
| Net Earnings | $27.9 million | $80.7 million |
| Diluted EPS | $0.50 | $1.46 |
| Operating Cash Flow (9mo) | $136.2 million | |
| Total Debt | $118.1 million (Notes payable + Long-term debt) | |
| Cash and Equivalents | $50.3 million | |
| Working Capital | $232.8 million |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 12.3% ($127.7 million) for the quarter and 12.2% ($363.5 million) for the nine months compared to the prior year. Approximately 12-13% of current period revenue is attributed to the Delta acquisition.
- Profitability: Operating profit increased 18.4% for the quarter and 20.8% for the nine months. Net earnings rose 24% for the quarter and 25.7% for the nine months.
- Accounting Change: The elimination of goodwill amortization under SFAS 142 contributed to higher reported earnings. Adjusted prior-year net earnings would have been $24.1 million (quarter) and $68.8 million (nine months) without amortization.
- Debt Reduction: Total debt decreased from $191.2 million (June 30, 2001) to $118.1 million (June 30, 2002), resulting in a 33.4% reduction in interest expense for the nine-month period.
- Backlog: Total backlog increased to $6.63 billion from $5.91 billion in the prior year.
Outlook, Risks, and Management Commentary
Management believes the company has adequate capital resources to fund operations, citing a strong working capital position and access to $230 million in revolving credit and a $40 million long-term facility. The company continues to execute a stock repurchase program (authorized up to 3.0 million shares), though no repurchases occurred in the second and third quarters of fiscal 2002.
Risks and Contingencies: Forward-looking statements are subject to risks including increased competition, availability of qualified staff, timing of new awards, cost overruns on fixed-price contracts, and the outcome of pending litigation. The company also notes the cyclical nature of its customer markets.
Investor Verification Checklist
- Stock Split Impact: Verify that all per-share data and share counts reflect the retroactive adjustment for the 2-for-1 stock split effective April 1, 2002.
- Goodwill Amortization: Confirm that year-over-year comparisons account for the elimination of goodwill amortization in 2002, which artificially inflates current period earnings relative to 2001.
- Acquisition Contribution: Assess the sustainability of revenue growth by isolating the ~13% contribution from the Delta acquisition.
- Debt Structure: Review the conversion of the $50 million short-term Delta acquisition facility into a $40 million long-term facility due in January 2004.
- Unbilled Receivables: Note that $412.4 million of receivables represents amounts earned but not yet billable, expected to be collected within 12 months.