Jacobs Engineering - 10-Q quarterly report FY

(Mark one)

x

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended December 31, 2002

o

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from_______ to _______

Commission File Number 1-7463

JACOBS ENGINEERING GROUP INC.

(Exact name of Registrant as specified in its charter)

Delaware

95-4081636

(State of incorporation)

(I.R.S. employer identification number)

1111 South Arroyo Parkway, Pasadena, California

91105

(Address of principal executive offices)

(Zip code)

(626) 578 - 3500

(Registrant’s telephone number, including area code)

o

No

Page No.

Financial Statements

Consolidated Balance Sheets -
     December 31, 2002 (Unaudited) and September 30, 2002

3

Consolidated Statements of Earnings - Unaudited
     Three Months Ended December 31, 2002 and 2001

4

Consolidated Statements of Comprehensive Income  - Unaudited
     Three Months Ended December 31, 2002 and 2001

5

Consolidated Statements of Cash Flows - Unaudited
     Three Months Ended December 31, 2002 and 2001

6

Notes to Consolidated Financial Statements

7 - 10

Management’s Discussion and Analysis of
Financial Condition and Results of Operations

11 - 15

Qualitative and Quantitative Disclosures about Market Risks

15

Controls and Procedures

15

Exhibits and Reports on Form 8-K

16

Signatures

17

CERTIFICATIONS

18 - 19

December 31,

September 30,

2002

2002

(Unaudited)

826,733

845,360

14,500

14,465

965,143

974,903

150,286

149,905

147,156

158,223

540,574

549,176

$

1,656,003

$

1,673,984

$

214

$

5,962

311,005

322,618

38,534

27,144

694,298

740,417

73,344

85,732

160,599

152,340

5,200

5,882

54,804

54,765

598,756

568,957

(2,470

)

(2,305

)

722,562

689,613

$

1,656,003

$

1,673,984

2002

2001

(104,203

)

(96,519

)

46,843

41,002

(1,231

)

(2,263

)

(16,229

)

(13,931

)

$

30,140

$

25,870

$

0.54

$

0.47

2002

2001

12

319

3,026

(2,997

)

1,726

(3,418

)

2002

2001

$

30,140

$

25,870

8,643

8,571

436

4,403

(10,749

)

27,528

11,685

5,093

193

145

—  

(43,529

)

383

274

(3,266

)

(1,374

)

164,354

88,309

(5,911

)

45,150

—  

(2,003

)

48,469

49,263

1.

The accompanying consolidated financial statements and financial information included herein have been prepared pursuant to the interim period reporting requirements of Form 10-Q.  Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted.  Readers of this report should refer to the consolidated financial statements and the notes thereto incorporated into the latest Annual Report on Form 10-K of Jacobs Engineering Group Inc. and subsidiaries (the “Company”).

In the opinion of management of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the Company’s consolidated financial position at December 31, 2002 and September 30, 2002, its consolidated results of operations for the three months ended December 31, 2002 and 2001, its consolidated comprehensive income for the three months ended December 31, 2002 and 2001, and its consolidated cash flows for the three months ended December 31, 2002 and 2001.

The Company’s interim results of operations are not necessarily indicative of the results to be expected for the full year.

2.

Included in “Receivables” in the accompanying consolidated balance sheets at December 31, 2002 and September 30, 2002 were $392.0 million and $440.9 million, respectively, representing amounts earned and reimbursable under contracts in progress 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 December 31, 2002 and September 30, 2002 were contract retentions totaling $24.9 million and $24.2 million, respectively.  The Company anticipates that substantially all of such unbilled amounts will be billed and collected over the next twelve months.

Amounts due from the U.S. federal government included in “Receivables” in the accompanying consolidated balance sheets totaled $147.8 million and $141.2 million at December 31, 2002 and September 30, 2002, respectively.

3.

Property, equipment and improvements, net, are stated at cost in the accompanying consolidated balance sheets and consisted of the following at December 31, 2002 and September 30, 2002 (in thousands):

December 31,
2002

September 30,
2002

54,814

54,010

29,134

27,987

(183,228

)

(182,144

)

4.

Other noncurrent assets in the accompanying consolidated balance sheets consisted of the following at December 31, 2002 and September 30, 2002 (in thousands):

December 31,
2002

September 30,
2002

39,324

44,083

15,847

15,993

9,500

9,928

5.

Accrued liabilities in the accompanying consolidated balance sheets consisted of the following at December 31, 2002 and September 30, 2002 (in thousands):

December 31,
2002

September 30,
2002

41,454

42,761

55,962

58,381

6.

Other deferred liabilities in the accompanying consolidated balance sheets consisted of the following at December 31, 2002 and September 30, 2002 (in thousands):

December 31,
2002

September 30,
2002

44,397

36,346

12,022

11,247

7.

When the Company is directly responsible for subcontract 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.  The amount of such “pass-through” costs included in revenues during the first quarter of fiscal 2003 and 2002 totaled $426.8 million and $314.8 million, respectively.

8.

The following table reconciles the denominator used to compute basic earnings per share to the denominator used to compute diluted earnings per share (in thousands):

For the Three Months Ended
December 31

2002

2001

1,024

1,372

The weighted average numbers of shares outstanding for the three months ended December 31, 2001 have been adjusted to reflect the Company’s two-for-one stock split effected in the form of a 100% stock dividend and distributed to stockholders on April 1, 2002.

9.

During the three months ended December 31, 2002 and 2001, the Company made cash payments of approximately $1.0 million and $2.1 million, respectively, for interest and $6.3 million and $7.5 million, respectively, for income taxes.

10.

The Company adopted Statement of Financial Accounting Standards No. 142 – Goodwill and Other Intangible Assets (“SFAS 142”) in fiscal 2002.  SFAS 142 eliminates the amortization of goodwill and intangible assets deemed to have indefinite lives.  Instead, these assets must be tested for impairment using a fair value approach in accordance with SFAS 142.  There has been no impairment of goodwill since adoption of SFAS 142.

11.

In November 2002, the Financial Accounting Standards Board issued FASB Interpretation No. 45 - Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (“FIN 45”).  FIN 45 requires that, upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee.  In addition, FIN 45 requires additional disclosures about the guarantees that an entity has issued. The initial recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, and the disclosure requirements of FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002.  The recognition and measurement provisions of FIN 45 are not expected to have a material effect on the Company’s financial position, results of operations or cash flows

At December 31, 2002, the Company had guaranteed certain financial liabilities, the majority of which relate to debt obligations of unconsolidated affiliates.  The term of each of the guarantees is equal to the remaining term of the underlying debt, which ranges from three to seven months.  Payment by the Company would be required upon default by the unconsolidated affiliate.  The maximum potential amount of future payments, which the Company could be required to make under these guarantees at December 31, 2002, is $7.7 million.  Additionally, the Company had guaranteed the residual value ($35.3 million) of the synthetic lease agreement associated with its offices in Houston, Texas.  The guarantee extends through the maturity of the lease in 2011.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

2002

2001

% Change

580,160

392,632

47.8

%

54,609

43,702

25.0

%

2002

2001

6,675.9

6,396.5

•

increase in competition by foreign and domestic competitors;

•

changes in global business, economic, political and social conditions;

•

availability of qualified engineers, architects, designers and other professional staff needed to execute contracts;

•

the timing of new awards and the funding of such awards;

•

cancellations of, or changes in the scope to, existing contracts;

•

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 any governmental audits, investigations, or proceedings;

•

the cyclical nature of the individual markets in which the Company’s clients operate;

•

delays or defaults by clients in making payments due under contracts; and

•

the successful closing and/or subsequent integration of any merger or acquisition transaction.

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.

Item 3.

Qualitative and Quantitative Disclosures About Market Risk.

Item 4.

Controls and Procedures.

Item 6.

Exhibits and Reports on Form 8-K.

(a)

Exhibits

99.1 –

Separation Agreement dated December 24, 2002, entered into between the Registrant and Richard J. Slater.

(b)

Reports on Form 8-K

None.

JACOBS ENGINEERING GROUP INC.

By:

/s/ JOHN W. PROSSER, JR.

John W. Prosser, Jr.
Senior Vice President, Finance
and Administration and Treasurer

Date:     February 13, 2003

1.

I have reviewed this quarterly report on Form 10-Q for the fiscal quarter ended December 31, 2002 of Jacobs Engineering Group Inc.;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)

Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)

Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)

All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.

The registrant’s other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  February 13, 2003

/s/ NOEL G. WATSON

Noel G. Watson
Chief Executive Officer

1.

I have reviewed this quarterly report on Form 10-Q for the fiscal quarter ended December 31, 2002 of Jacobs Engineering Group Inc.;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)

Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c)

Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)

All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6.

The registrant’s other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  February 13, 2003

/s/ JOHN W. PROSSER, JR.

John W. Prosser, Jr.
Senior Vice President
Finance and Administration