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1996
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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)
251 SOUTH LAKE AVENUE, PASADENA, CALIFORNIA 91101
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's telephone number, including area code (818) 449-2171
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
-------------------------- -----------------------
Common Stock, $1 par value New York Stock Exchange
INDICATE BY CHECK-MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. ( X ) YES ( ) NO
INDICATE BY CHECK-MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF THE REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF FORM 10-K OR ANY AMENDMENT
TO THIS FORM 10-K. ( )
___________________
The aggregate market value of the Registrant's voting stock held by non-
affiliates was approximately $502,823,700 as of December 26, 1996, based upon
the last reported sales price on the New York Stock Exchange. For this purpose,
the Registrant considers Dr. Joseph J. Jacobs to be its only affiliate.
As of December 26, 1996, the Registrant had outstanding 25,679,827 shares of its
common stock.
DOCUMENTS INCORPORATED BY REFERENCE
Part II: Annual Report for the fiscal year ended September 30, 1996, only
portions of which are incorporated by reference.
Part III: Proxy Statement for the Annual Meeting of Shareholders to be filed
with the Securities and Exchange Commission within 120 days after the close of
the Registrant's fiscal year, only portions of which are incorporated by
reference.
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PART I
ITEM 1. BUSINESS
GENERAL
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Jacobs Engineering Group Inc. (the "Company") is one of the largest
professional service firms in the United States providing engineering, design
and consulting services; construction and construction management services; and
process plant maintenance services to a broad range of industrial, commercial
and governmental clients. The Company provides its services through offices and
subsidiaries located throughout the United States, the United Kingdom and
Ireland, as well as through affiliated entities located throughout Europe and
India.
The Company focuses its services on selected industry groups and markets
including chemicals; petroleum refining; semiconductor; pulp and paper;
pharmaceuticals and biotechnology; federal programs; and buildings and
infrastructure (this last group includes transportation and health care
projects, commercial and governmental buildings, and other industrial projects).
In July 1994, the Company acquired all of the engineering and construction
management services businesses of CRSS Inc. The Company acquired substantially
all of the assets, subject to certain assumed liabilities, of CRS Sirrine
Engineers, Inc., and all of the issued and outstanding equity securities of CRSS
Constructors, Inc. and CRSS International, Inc. Together, these businesses
provide comprehensive design, engineering and construction management services
to government and commercial clients in the pulp and paper, semiconductor, and
buildings and infrastructure markets, among others, primarily within the
continental United States.
In January 1996, the Company completed the purchase of a 49% equity
interest in the Serete Group. Headquartered in France, the Serete Group
provides engineering, design, construction and construction management services
to commercial and governmental clients located throughout Europe. The purchase
price totaled $19.0 million, and the purchase agreement provides for the Company
to increase its ownership interest if the Serete Group achieves certain
operating goals over the two years immediately following the initial investment.
The Company accounts for its investment in the Serete Group using the equity
method.
The Company is a Delaware corporation and was originally incorporated in
1957 as a successor to a business organized by Dr. Joseph J. Jacobs in 1947.
The Company's common stock has been publicly held since 1970 and is currently
listed on the New York Stock Exchange.
SERVICES PROVIDED
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The Company offers three broad categories of professional services:
engineering (which includes design, consulting and other related services);
construction and construction management; and plant maintenance. The Company
will often establish a relationship with a client where it is awarded a contract
for the initial phases of an engineering and/or construction project. These
services may include feasibility studies, consulting or design work. Because of
the range of technical expertise the Company possesses, it is often retained for
additional work as the project develops. The scope of services provided by the
Company, therefore, ranges from consulting to complete single-responsibility
contracts.
Page 1
The following table sets forth the total revenues of the Company from each
of its three basic service categories for each of the five years ended September
30, 1996 (in thousands of dollars):
1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ----------
Engineering Services $ 355,483 $ 453,247 $ 476,491 $ 588,399 $ 627,622
Field Services:
Construction 503,406 424,259 456,750 881,574 925,681
Maintenance 247,538 265,420 232,513 253,084 245,667
---------- ---------- ---------- ---------- ----------
$1,106,427 $1,142,926 $1,165,754 $1,723,057 $1,798,970
========== ========== ========== ========== ==========
Engineering
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The Company employs all of the engineering and related disciplines to
engineer and design modern process plants (including projects for clients in the
chemicals, pharmaceuticals and biotechnology, refining, food, and minerals and
fertilizers industries), semiconductor facilities, pulp and paper plants, and
other facilities (such as high technology manufacturing operations and other
specialized plants).
With respect to the environmental area of the Company's business (see
"Industry Groups and Markets - Federal Programs", below), the Company employs
all of the requisite engineering, scientific, public health and related skills
to consult, investigate, study, manage and provide remedial engineering for
major environmental programs. The Company's capabilities in process engineering
and construction combined with its environmental expertise allow it to offer its
clients a wide range of services as a single-source provider. Accordingly, the
Company has been awarded contracts requiring a combination of traditional
process engineering and environmental services.
The Company also employs all of the professional and technical expertise
necessary to provide a broad range of consulting services including: performing
pricing studies, market analyses and financial projections necessary in
determining the feasibility of a project; performing gasoline reformulation
modeling; analyzing and evaluating layout and mechanical designs for complex
processing plants; analyzing automation and control systems; analyzing,
designing and executing biocontainment strategies; developing and performing
process protocols in respect of Federal Drug Administration mandated
qualification/validation requirements; and performing geological and
metallurgical studies.
Also included in the category of "Engineering" are all of the related
support services necessary for the proper and effective delivery of the
Company's engineering and related services. Among these are cost engineering,
planning, scheduling, procurement, estimating, project accounting, quality and
safety.
Construction
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The Company provides traditional field construction as well as
construction management services to private and public sector clients in
virtually all of the industries to which it provides engineering services. The
Company can also provide its clients with Advanced Construction Technology
("ACT")(R). ACT is an advanced form of off-site engineering, design,
fabrication and assembly, and field erection. ACT provides clients with an
alternative approach to traditional methods of engineering and construction
which can significantly reduce new plant costs. In the environmental area,
recent contract awards from clients in the public sector require the Company to
provide environmental remedial construction services.
The Company's field construction activities are focused primarily on those
construction projects for which the Company has performed the engineering and
design work. By focusing its construction efforts on such projects, the Company
avoids the risk of constructing complex plants based on designs prepared by
others. The financial risk to the Company of constructing complex plants based
on designs prepared by third parties may be particularly significant on fixed-
price contracts.
The Company actively markets all of its services to clients on projects
where the scope of services required is within the Company's fields of
expertise. The Company believes that by integrating and bundling its services
(i.e., providing design, engineering and construction services on the same
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project) it can price its services more competitively and can enhance the
overall contract profitability. The Company also believes that clients benefit
from such an approach because they can look to the Company as a single-source
provider of design/build services. However, the Company will continue to pursue
construction-only projects where it can negotiate pricing and other contract
terms acceptable to the Company.
In the area of construction management, the Company can provide a wide
range of services to its clients. The Company may act as the program
director, whereby it oversees, on behalf of the owner of the project, the
complete planning, design and construction phases of the project. Or, its
services may be limited to providing construction consulting, estimating,
scheduling or value engineering services.
Maintenance
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Maintenance generally refers to all of the tasks required to keep a plant
in day-to-day operations, including the repair and replacement of pumps, piping,
heat exchangers and other equipment. It also includes "turnaround" work which
involves major refurbishment which can only be performed when the plant is shut
down. Since shutdowns are expensive to the owners of the plant, turnaround work
will often require maximizing the number of skilled craft personnel that can
work efficiently on a project on a 24 hours per day, seven days per week basis.
The Company employs sophisticated computer scheduling and programming to
complete turnaround projects quickly and it maintains contact with a large pool
of skilled craftsmen it can hire as needed on maintenance and turnaround
projects.
Although the profit margins that can be realized from maintenance services
are generally lower than those associated with the other services the Company
provides, the costs to support maintenance activities are also generally lower
than those associated with the Company's other services. Furthermore, since
maintenance contracts are normally cost-reimbursable in nature, they present
less risk to the Company. Additionally, although engineering and construction
projects may be of a short-term nature, maintenance services often result in
long-term relationships with clients. For example, the Company has been
providing maintenance services at several major process plants for over 30
years. This aspect of maintenance services greatly reduces the selling costs in
respect of such services.
INDUSTRY GROUPS AND MARKETS
- ---------------------------
The Company has chosen to focus its efforts on the following industry
groups and markets: chemicals; petroleum refining; semiconductor; buildings and
infrastructure; pulp and paper; pharmaceuticals and biotechnology; and U.S.
federal programs. The Company believes these industry groups and markets have
sufficient common needs to permit cross-utilization of the Company's resources
which help to mitigate the negative effects of a downturn in a single industry.
The following table sets forth the total revenues of the Company from each
of these industry groups and markets for each of the five years ended September
30, 1996 (in thousands of dollars):
1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ----------
Chemicals $ 321,991 $ 306,296 $ 315,991 $ 377,731 $ 452,448
Refining 362,005 404,462 372,769 480,472 417,739
Semiconductor 120,022 70,249 83,477 264,492 268,520
Buildings and
Infrastructure 104,799 87,946 88,228 174,183 189,834
Pulp and Paper - - 7,258 85,476 170,553
Pharmaceuticals
and Biotechnology 29,346 80,248 97,301 123,683 147,840
Federal Programs 105,608 161,964 175,846 175,200 145,275
Other 62,656 31,761 24,884 41,820 6,761
---------- ---------- ---------- ---------- ----------
$1,106,427 $1,142,926 $1,165,754 $1,723,057 $1,798,970
========== ========== ========== ========== ==========
In the area of federal programs, the Company historically has provided
primarily environmental restoration, engineering and consulting services.
However, several of the more recent contracts awarded
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to the Company are for engineering, construction and project management services
for the remediation of sites contaminated with hazardous wastes. Maintenance
services are provided primarily to the chemicals and refining industries.
Chemicals
---------
The Company has always considered the chemicals industry a cornerstone of
its business. Revenues from this industry group have consistently accounted for
a significant share of each year's total revenues. Historically, whenever the
Company has sought to expand its business, the impact of such expansion on the
Company's chemicals business has always been an important consideration. The
Company's first office outside the United States was opened in support of a
bulk-chemical project for a large, U.S. company seeking to expand its operations
internationally. In 1993, when the Company sought to expand its international
operations, it acquired H&G Process Contracting Limited ("Humphreys & Glasgow"),
based in England. Humphreys & Glasgow is an engineering and construction
business with broad-based process engineering and design skills, and a large
client base in the chemicals, pharmaceuticals and refining industries. And as
discussed above, in January 1996, the Company completed its purchase of a 49%
equity interest in the Serete Group (headquartered in France). The Serete Group
possesses strong engineering skills, and services a large number of clients in
the chemicals industries, among others.
Currently, the Company furnishes its full line of services to its clients
operating in the chemicals industries. The Company has provided technical,
financial, marketing and management consulting services to many of the largest
chemical manufacturers in the world. The Company can perform feasibility
studies, as well as preliminary and detailed design and engineering services,
construction, and construction management services to its clients in this
industry. Typical projects range from high-pressure polymer processes for the
production of bulk chemicals, to low-pressure, multi-product processes for the
production of fine and specialty chemicals. The Company has also completed
projects dealing with the modernization and upgrading of polyethelene and liquid
polymer production facilities. The Company has extensive knowledge of, and
experience with, advance polymer technologies, as well as many specialty
chemicals.
Over the years, the Company has continued to grow the chemicals business
through acquisitions and internal initiatives. As discussed above, the Company
acquired Humphreys & Glasgow in 1993. Since then, the Company has expanded its
involvement with U.S.-based companies doing business in the U.K., as well as
expanding its European client base.
Refining
--------
The Company provides its full line of services to its clients in the
petroleum refining industry. Typical projects in the refining area include
retrofits, revamps or expansions of existing plants, upgrading individual
process units within refineries, new construction and maintenance services. The
Company also provides a broad range of consulting services to its clients,
including feasibility and multi-client studies.
Over the past several years, many of the Company's contract awards in the
refining area have been for plants producing oxygenates and other high-octane
fuel blending components for gasoline (such components are required by the Clean
Air Act of 1990 in reformulated gasolines in order to reduce the emissions of
unburned hydrocarbons and carbon monoxide from automobiles), as well as plants
that hydrotreat various fuel fractions to reduce the sulfur content of blended
products. The Company has completed several major projects to design, engineer,
procure and construct methyl tertiary butyl ether ("MTBE") units and tertiary
amyl butyl ether ("TAME") units for a number of major refiners at facilities
located throughout the United States. The Company has also utilized its off-
site construction capabilities in the construction and installation of these
units. The use of off-site construction can help decongest the construction
site and allow for parallel construction to proceed simultaneously with the
modular activity.
A significant aspect of the Company's service to this industry is in the
area of contract maintenance. The Company has contracts with several major oil
refiners for on-site maintenance and
Page 4
turnaround activities. Many of these contracts are evergreen in nature and tend
to be extended over many years.
Another important aspect of this industry group has been the development of
performance-based partnering relationships with clients. Over the past several
years, the Company has entered into evergreen engineering services contracts
with several clients. Such agreements have been both site-specific and national
in scope. Often, these alliances provide the Company with opportunities to
expand its services to include fully-integrated engineering, procurement,
construction and construction management services. The Company has broadened
this area of its business through internal growth and acquisitions. One
acquisition completed in 1993 expanded the Company's geographic presence to
include the West Coast refining market; the acquisition also added to its client
base.
Semiconductor
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The Company provides engineering, procurement, construction, and
construction management services to its clients in the semiconductor industry.
Typical projects in this industry include multi-million dollar state-of-the-art
wafer fabrication and crystal growing facilities used to produce microprocessors
for computers and other consumer electronic devices. Generally, projects in the
semiconductor industry are more complex than other facilities projects and have
greater emphasis on cleanroom, and similar high-end technologies.
Buildings and Infrastructure
----------------------------
Buildings and infrastructure refers to those contracts requiring the
Company to provide comprehensive architectural, engineering, design,
construction and/or construction management services for projects such as high
technology manufacturing operations, specialized plants for clients in the food
industry, and research and development facilities that require technically
complex structures. It also includes programming, design, program management
and construction management services for public, institutional and corporate
clients. Typical projects include civic centers, correctional facilities,
health care facilities and transportation systems, as well as multi-purpose
buildings for industrial, commercial and government clients.
Pulp and Paper
--------------
The Company provides a broad range of engineering and construction
services to its clients in the pulp and paper industry. Additionally, the
Company provides strategic planning and conceptual studies for many of its
clients, as well as environmental services relating to compliance with EPA
emission standards. Typical projects in the pulp and paper area range from
small mill projects to complex, multi-million dollar paper machine rebuilds,
mill expansions and construction of new facilities. Such projects encompass all
areas of a mill, including woodyards, pulping and bleaching, papermaking,
chemical recovery, material handling and power and steam generation. In the
area of papermaking, the Company's expertise includes tissue and towel, coated
and uncoated fine papers, newsprint and linerboard. The Company's expertise
also includes the converting and packaging of paper products for consumer use.
The Company has been instrumental in the design and installation of state-of-
the-art facilities for recycle fiber, deinking and pulp bleaching. Chemical
recovery and power generation are an integral part of the papermaking process.
The Company has broad experience in these areas and has applied its expertise in
the engineering and construction of such facilities for the pulp and paper
industry.
As with clients in the petroleum refining industry, the Company has
established formal partnering arrangements with certain clients in the pulp and
paper industry. Such arrangements provide for the delivery of on-site
engineering services, and often expand to include procurement, construction and
construction management services.
Page 5
Pharmaceuticals and Biotechnology
---------------------------------
The Company furnishes its full line of services to its clients operating
in the pharmaceuticals and biotechnology industries. The scope of services the
Company can provide its clients in these markets include feasibility studies,
preliminary and detailed design and engineering services, construction, and
construction management services. The Company can also provide conceptual
design services with emphasis on production strategy, current good manufacturing
practices ("cGMP") compliance, regulatory compliance and
qualification/validation services for pharmaceutical and biotechnology research,
development and production facilities. Accordingly, the Company is fully
capable of executing multi-million dollar, single-responsibility projects in the
areas of pharmaceuticals and biotechnology.
Typical projects for clients in this industry include sterile fill,
pharmaceutical manufacturing facilities, state-of-the-art biotechnology
laboratories and pilot plants, and design services for technologically-advanced
barrier micro-environment systems. Many projects in this industry group require
facilities with highly complex environmental controls and advanced automation
systems for manufacturing and distribution management. Over the past several
years, the Company has expanded this area of its business through acquisitions
and internal growth.
Federal Programs
----------------
Most of the Company's Federal Programs revenues are derived from
environmental projects. The Company believes it is one of the leading providers
in the United States of environmental restoration, engineering and consulting
services, including hazardous waste management and site cleanup and closure.
Although this business continues to represent an important area of the Company's
overall operations, revenues have declined over the past two years. The decline
in revenues occurred in large part due to reduced funding levels for government
projects, combined with an overall decline in governmental regulatory and
enforcement actions. Currently, there are numerous proposals being offered for
consideration to overhaul the U.S. federal regulatory process, the ultimate
outcome of which cannot yet be determined. Nevertheless, the Company believes
that the U.S. Department of Energy ("DOE") and Department of Defense ("DOD")
will continue to devote increasingly more of their resources to site remediation
and cleanup. The Company experienced an increase in activity in this area of
its business during the latter part of fiscal 1996, and believes that demand for
environmental services will continue to grow in the future.
Many of the projects for the U.S. government span several years. For
larger programs, the scope of services is such that the Company sometimes teams
with other companies in order to execute the project. The Company is currently
providing environmental restoration, engineering, construction and site
operations and maintenance services for a number of U.S. federal government
agencies including the DOE, DOD, and the U.S. Environmental Protection Agency.
Typical projects for U.S. government agencies include the preparation of
feasibility studies and performance of remedial investigations, engineering,
design and remediation services on several national programs. Many of the
Company's contracts relate to the Comprehensive Environmental Response
Compensation and Liability Act of 1980 ("CERCLA" or "Superfund") and the related
Superfund Amendments and Reauthorization Act of 1986 ("SARA"), as reauthorized
in 1990. More recently, the Company has been awarded multi-year contracts from
the U.S. Air Force to provide full-service remedial action services for the U.S.
Air Force Center for Environmental Excellence ("AFCEE") at several bases located
in the U.S., as well as a "nationwide" award to provide services under the U.S.
Base Realignment and Closure ("BRAC") program. And in 1995, the Company was
awarded the Alaska TERC (Total Environmental Restoration Contract). The Alaska
TERC is a multi-year program to provide engineering and site cleanup services
throughout that state. The Company also provides project management services
over site cleanup activities at various government installations, as well as
detailed scientific and support services, groundwater restoration management and
action plans, and services relating to the decommissioning of nuclear weapons
production and other defense facilities.
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BACKLOG
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For information regarding the Company's backlog, reference should be made
to Item 7. - Management's Discussion and Analysis of Financial Condition and
Results of Operations, incorporated by reference in this report.
CUSTOMERS
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For the years ended September 30, 1992, 1993, 1994, 1995 and 1996,
revenues from agencies of the U.S. federal government accounted for 9.4%, 14.1%,
15.4%, 11.4% and 8.7%, respectively, of total revenues. Due to the amount of
pass-through costs (see "Contracts" below) that may be incurred on construction
and maintenance projects, it is not unusual for a client in the private sector
to account for more than 10% of revenues in any given year. For the year ended
September 30, 1992, two clients in the private sector accounted for 12.5% and
10.8%, respectively, of total revenues. A different client accounted for
11.6% and 13.1% of total revenues in 1994 and 1995, respectively. No single
client in the private sector accounted for 10% or more of total revenues in
1993 or 1996.
FOREIGN OPERATIONS
- ------------------
For the years ended September 30, 1992, 1993, 1994, 1995 and 1996,
revenues from projects outside of North America were approximately 16.3%, 10.8%,
5.6%, 5.4% and 10.3%, respectively, of total revenues. For the year ended
September 30, 1992, substantially all such revenues related to the Company's
offices in Ireland. Beginning with the year ended September 30, 1993, such
revenues relate primarily to the Company's offices in the U.K. and Ireland.
As discussed above, during fiscal 1996, the Company acquired a 49% equity
interest in the Serete Group (headquartered in France). The Serete Group has
operations throughout Europe, and executes projects for commercial clients in
the chemicals, pharmaceuticals and semiconductor industries, as well as
buildings and infrastructure projects for both commercial and governmental
clients. The Company also has operations in India through its 40% interest in
an engineering and design firm specializing in projects for clients in the
chemical, pharmaceuticals and petroleum refining markets. The Company has
executed contracts jointly with the Indian company, and expects to expand this
activity in the future. The Company accounts for the Indian company using the
equity method.
CONTRACTS
- ---------
While there is considerable variation in the pricing provisions of the
contracts undertaken by the Company, they can generally be grouped into three
broad categories: Cost-reimbursable; guaranteed maximum price and fixed-price.
The following table sets forth the percentages of total revenues represented by
these types of contracts during each of the five years ended September 30, 1996:
1992 1993 1994 1995 1996
----- ----- ----- ----- -----
Cost-reimbursable 87% 90% 83% 88% 82%
Guaranteed maximum price 4 3 8 1 2
Fixed-price 9 7 9 11 16
In accordance with industry practice, most of the Company's contracts are
subject to termination at the discretion of the client. Contracts typically
provide for reimbursement of costs incurred and payment of fees earned through
the date of such termination.
When the Company is directly responsible for engineering, design,
procurement and construction of a project or the maintenance of a process plant,
the Company reflects the cost of materials, equipment and subcontracts in both
revenues and costs. On other projects, where the client elects to pay for such
items directly, these amounts are not reflected in either revenues or costs.
The approximate amounts of such costs included in revenues for the years ended
September 30, 1992, 1993, 1994, 1995 and 1996 totaled $659.2 million, $610.7
million, $629.0 million, $1,001.3 million and $1,019.5 million, respectively.
Page 7
Cost-reimbursable contracts
---------------------------
Cost-reimbursable contracts provide for reimbursement of costs incurred
by the Company plus a predetermined fee, or a fee based on a percentage of the
costs incurred. The Company prefers this type of contract since it believes
that the primary basis for its selection should be its technical expertise and
professional qualifications rather than price considerations.
Guaranteed maximum price contracts
----------------------------------
Guaranteed maximum price contracts are performed in the same manner as
cost-reimbursable contracts; however, the total actual cost plus the fee cannot
exceed the guaranteed price negotiated with the client. If the total actual
cost of the contract exceeds the guaranteed maximum price, then the Company will
bear all or a portion of the excess. In those cases where the total actual cost
and fee are less than the guaranteed price, the Company will often share the
savings on a predetermined basis with the client.
Fixed-price contracts
---------------------
Fixed-price contracts include both "negotiated fixed-price" contracts and
"lump sum bid" contracts. Under a negotiated fixed-price contract, the Company
is first selected as the contractor, and then the contract price is negotiated.
Negotiated fixed-price contracts frequently exist in single-responsibility
arrangements where the Company has the opportunity to perform engineering and
design work before negotiating the total price of the project. Under lump sum
bid contracts, the Company must bid against other contractors based upon
specifications furnished by the client. This type of pricing presents certain
inherent risks, including the possibility of ambiguities in the specifications,
problems with new technologies and economic and other changes that may occur
over the contract period, that are reduced by the negotiation process. Thus,
although both types of contracts involve a firm price for the client, the lump
sum bid contract provides the greater degree of risk to the Company. However,
because of economies that may be realized during the contract term, both
negotiated fixed-price and lump sum bid contracts may offer greater profit
potential than the other types of contracts.
COMPETITION
- -----------
The Company is engaged in a highly competitive business. Some of its
competitors are larger than the Company, or are subsidiaries of larger
companies, and may possess greater resources than the Company. Furthermore,
because the engineering aspect of the business does not usually require large
amounts of capital, there is relative ease of market entry for a new potential
entrant possessing acceptable professional qualifications. Accordingly, the
Company competes with both national and international firms in sizes ranging
from very large to a wide variety of small, regional and specialty firms.
The extent of the Company's competition varies according to the industries
and markets it serves, as well as the regions in which the Company is located.
The Company's largest competitors for engineering, construction and maintenance
services for process plants include such well-known companies as Bechtel Group,
Inc., Fluor Corporation, Foster-Wheeler Corp., Raytheon Engineers, M.W. Kellogg,
Parsons Co., Brown & Root, Inc., and John Brown. In the semiconductor industry,
the Company's principal competitor is Industrial Design Corporation. In the
area of pulp and paper, the Company's principal competitors include BE&K, Brown
& Root, and Rust International. In the area of environmental engineering and
hazardous waste cleanup, the Company's principal competitors include many of the
companies listed above, as well as other specialized companies such as IT
Corporation, ICF Kaiser and Roy F. Weston, Inc.
Page 8
EMPLOYEES
- ---------
At September 30, 1996, the Company had approximately 7,350 full-time
employees. Additionally, as of September 30, 1996, there were
approximately 6,800 persons employed by the Company in the field on a project
basis. The number of such field employees varies in relation to the number and
size of the maintenance and construction projects in progress at any particular
time.
EXECUTIVE OFFICERS OF THE COMPANY
Pursuant to the requirements of Item 401(b) and 401(e) of Regulation S-K,
the following information is being furnished with respect to the Company's
executive officers:
Year Joined
Name Age Position with the Company the Registrant
- -------------------------------------- --- ----------------------------------------- --------------
Joseph J. Jacobs 80 Director and Chairman of the Board 1947
Noel G. Watson 60 President, Chief Executive Officer
and Director 1965
Robert M. Barton 74 Secretary 1957
William R. Kerler 67 Executive Vice President, Operations 1980
Donald J. Boutwell 59 Group Vice President, Field Services 1984
Andrew E. Carlson 63 Group Vice President, Field Services 1990
Socrates S. Christopher 61 President, Jacobs - Sirrine Engineers
(a Division of Jacobs Engineering
Group Inc.) 1994
Arlan C. Emmert 51 Group Vice President, Western Region 1985
Thomas R. Hammond 45 Group Vice President, Central Region 1975
John McLachlan 50 Group Vice President, Northern Region 1974
Richard J. Slater 50 Group Vice President, European Region 1980
Roger L. Williams 58 Group Vice President, Southern Region 1983
Gregory J. Landry 48 Senior Vice President, Quality and Safety 1984
Craig L. Martin 47 Senior Vice President, General Sales
and Marketing 1994
Paul A. Miskimin 56 Senior Vice President, Federal Programs 1987
John W. Prosser, Jr. 51 Senior Vice President, Finance and 1974
Administration and Treasurer
Nazim G. Thawerbhoy 49 Senior Vice President and Controller 1979
William C. Markley, III 51 Vice President, Law 1981
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. Christopher and Martin, 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 1994, Messrs. Christopher and Martin were part of the
management of CRSS Inc. or one of its subsidiaries for at least five years. Mr.
Christopher retired from full-time employment with the Company effective
December 1, 1996, but will continue to make his services available as a Senior
Consultant focusing on strategic acquisitions, marketing studies and other
initiatives, particularly for the Pulp and Paper industry.
Page 9
ITEM 2. PROPERTIES
The Company owns and leases offices for its professional, technical and
administrative staff totaling approximately 1.8 million square feet. The
following is a list of the Company's principal locations:
Country State City
------- ----- ----
U.S.A. California Pasadena
Long Beach
Martinez
Sacramento
Arizona Phoenix
Colorado Denver
Florida Lakeland
Louisiana Baton Rouge
New Mexico Albuquerque
North Carolina Raleigh
Ohio Cincinnati
Oregon Portland
Pennsylvania Philadelphia
South Carolina Greenville
Orangeburg
Texas Houston
Tennessee Oak Ridge
Virginia Arlington
United Kingdom - London
- Glasgow
- Manchester
Republic of Ireland - Cork
- Dublin
In addition to these properties, the Company leases smaller, project
offices located throughout the United States. The Company maintains sales
offices at many of its principal locations. The Company has equipment yards
located in Houston, Texas and Baton Rouge, Louisiana. The majority of the
Company's offices are leased. The Company also rents a portion of its
construction equipment on a short-term basis.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, the Company is subject to certain
contractual guarantees and litigation. Generally, such guarantees relate to
construction schedules and plant performance. Most of the litigation involves
the Company as a defendant in workers' compensation, personal injury and other
similar lawsuits. Management believes, after consultation with counsel, that
these guarantees and litigation should not have any material adverse effect on
the Company's consolidated financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Page 10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The information required by this Item is hereby incorporated by
reference from the Financial Statements section of the Company's 1996 Annual
Report to Shareholders, copies of which financial statements section is being
delivered to the Commission (but not filed with, except to the extent
incorporated herein) as an Exhibit to this report.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is hereby incorporated by reference
from the Financial Statements section of the Company's 1996 Annual Report to
Shareholders, copies of which are being delivered to the Commission (but not
filed with, except to the extent incorporated herein) as an Exhibit to this
report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by this Item is hereby incorporated by
reference from the Financial Statements section of the Company's 1996 Annual
Report to Shareholders, copies of which are being delivered to the Commission
(but not filed with, except to the extent incorporated herein) as an Exhibit to
this report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is hereby incorporated by reference
from the Financial Statements section of the Company's 1996 Annual Report to
Shareholders, copies of which are being delivered to the Commission (but not
filed with, except to the extent incorporated herein) as an Exhibit to this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL AND
DISCLOSURE MATTERS
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Paragraph (a) and Paragraphs (c) through (g) of
Item 401 and by Item 405 of Regulation S-K is hereby incorporated by reference
from the Company's definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A within 120 days after the close of the Company's
fiscal year.
See the information under the caption "Executive Officers of the Company"
in Part I of this report for information required by Paragraph (b) of Item 401
of Regulation S-K.
Page 11
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is hereby incorporated by reference
from the Company's definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A within 120 days after the close of the Company's
fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is hereby incorporated by reference
from the Company's definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A within 120 days after the close of the Company's
fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is hereby incorporated by reference
from the Company's definitive proxy statement to be filed with the Commission
pursuant to Regulation 14A within 120 days after the close of the Company's
fiscal year.
Page 12
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The Company's consolidated financial statements at September 30, 1996
and 1995 and for each of the three years in the period ended September
30, 1996, together with the report of the independent auditors on
those consolidated financial statements are hereby incorporated by
reference from the Financial Statements section of the Company's 1996
Annual Report to Shareholders, copies of which are being delivered to
(but not filed with, except to the extent incorporated herein) the
Commission as an exhibit to this report.
(b) Not applicable.
(c) Exhibits and Index to Exhibits:
2.1 Purchase Agreement dated July 29, 1994 between Jacobs Engineering
Group Inc. and CRSS Inc. including a schedule of annexes and
exhibits. Filed as Exhibit 1. to the Registrant's Current Report
on Form 8-K dated August 5, 1994 and incorporated herein by
reference.
3.1 Certificate of Incorporation of the Registrant, as amended.
Filed as Exhibit 3.1 to the Registrant's Quarterly Report on Form
10-Q for the period ended June 30, 1995 and incorporated herein
by reference.
3.2 Bylaws of the Registrant, as amended. Filed as Exhibit 3.2 to
the Registrant's Quarterly Report on Form 10-Q for the period
ended June 30, 1995 and incorporated herein by reference.
4.1 See Sections 5 through 18 of Exhibit 3.1.
4.2 See Article II, Section 3.03 of Article III, Article VI and
Section 8.04 of Article VIII of Exhibit 3.2.
4.3 Rights Agreement dated as of December 20, 1990 by and between
Registrant and First Interstate Bank, Ltd. as Rights Agent.
Filed as Exhibit 4.4 to Registrant's Quarterly Report on Form 10-
Q for the period ended June 30, 1995 and incorporated herein by
reference.
10.1 The Jacobs Engineering Group Inc. 1981 Executive Incentive Plan
(As Amended and Restated). Filed as Exhibit 10.1 to the
Registrant's Quarterly Report on Form 10-Q for the period ended
June 30, 1995 and incorporated herein by reference.
10.2 The Jacobs Engineering Group Inc. Incentive Bonus Plan for
Officers and Key Managers. Filed as Exhibit 10.2 to the
Registrant's Quarterly Report on Form 10-Q for the period ended
June 30, 1995 and incorporated herein by reference.
10.3 Agreement dated as of November 30, 1993 between the Registrant
and Dr. Joseph J. Jacobs, and the Agreement dated as of November
30, 1994 between the Registrant and Dr. Joseph J. Jacobs. Filed
as Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q
for the period ended June 30, 1995 and incorporated herein by
reference.
Page 13
10.4 Agreement dated as of November 30, 1995 between the Registrant
and Dr. Joseph J. Jacobs. Filed as Exhibit 10.4 to the
Registrant's 1995 Annual Report on Form 10-K and incorporated
herein by reference.
(S) 10.5 Agreement dated as of December 5, 1996 between the
Registrant and Dr. Joseph J. Jacobs.
10.6 The Executive Security Program of Jacobs Engineering Group Inc.
Filed as Exhibit 10.4 to the Registrant's Quarterly Report on
Form 10-Q for the period ended June 30, 1995 and incorporated
herein by reference.
10.7 Jacobs Engineering Group Inc. and Subsidiaries 1991 Executive
Deferral Plan, effective June 1, 1991. Filed as Exhibit 10.5 to
the Registrant's Quarterly Report on Form 10-Q for the period
ended March 31, 1995 and incorporated herein by reference.
10.8 Jacobs Engineering Group Inc. and Subsidiaries 1993 Executive
Deferral Plan, effective December 1, 1993. Filed as Exhibit 10.6
to the Registrant's Quarterly Report on Form 10-Q for the period
ended March 31, 1995 and incorporated herein by reference.
10.9 The Jacobs Engineering Group Inc. 1989 Employee Stock Purchase
Plan. Filed as Exhibit 10.9 to the Registrant's Quarterly Report
on Form 10-Q for the period ended June 30, 1995 and incorporated
herein by reference.
10.10 Form of Indemnification Agreement entered into between the
Registrant and its officers and directors. Filed as Exhibit
10.10 to the Registrant's Quarterly Report on Form 10-Q for the
period ended June 30, 1995 and incorporated herein by reference.
10.11 Jacobs Engineering Group Inc. 401(k) Plus Savings Plan and
Trust. Filed as Exhibit 10.11 to the Registrant's Quarterly
Report on Form 10-Q for the period ended March 31, 1995 and
incorporated herein by reference.
(S) 11. Statement of computation of net income per outstanding share
of common stock is hereby incorporated by reference from the
Financial Statements section of the Company's 1996 Annual Report
to Shareholders, copies of which are being delivered to (but not
filed with, except to the extent incorporated herein) the
Commission as an exhibit to this report.
(S) 13. Financial Statements section of Jacobs Engineering Group
Inc. Annual Report to Shareholders for the fiscal year ended
September 30, 1996.
(S) 21. List of Subsidiaries of Jacobs Engineering Group Inc.
(S) 23. Consent of Independent Auditors.
(S) 27.1 Financial Data Schedules.
______________
(S) Being filed herewith.
Page 14
UNDERTAKINGS
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned Registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into the Registrant's Registration Statements on Form
S-8 Nos. 33-45914 (filed February 21, 1992) and 33-45927 (filed February 24,
1992):
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by final adjudication of such issue.
Page 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
JACOBS ENGINEERING GROUP INC.
Dated: December 27, 1996 By: NOEL G. WATSON
----------------------------
Noel G. Watson
President, Chief Executive
Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
and in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
NOEL G. WATSON Director and December 27, 1996
- ----------------------------------- Principal Executive Officer
Noel G. Watson
JOSEPH J. JACOBS Director December 27, 1996
- -----------------------------------
Joseph J. Jacobs
JOSEPH F. ALIBRANDI Director December 27, 1996
- -----------------------------------
Joseph F. Alibrandi
PETER H. DAILEY Director December 27, 1996
- -----------------------------------
Peter H. Dailey
ROBERT B. GWYN Director December 27, 1996
- -----------------------------------
Robert B. Gwyn
LINDA K. JACOBS Director December 27, 1996
- -----------------------------------
Linda K. Jacobs
J. CLAYBURN LaFORCE Director December 27, 1996
- -----------------------------------
J. Clayburn LaForce
DALE R. LAURANCE Director December 27, 1996
- -----------------------------------
Dale R. Laurance
LINDA FAYNE LEVINSON Director December 27, 1996
- -----------------------------------
Linda Fayne Levinson
Director December 27, 1996
- -----------------------------------
David M. Petrone
JAMES L. RAINEY, JR. Director December 27, 1996
- -----------------------------------
James L. Rainey, Jr.
JOHN W. PROSSER, JR. Senior Vice President December 27, 1996
- ----------------------------------- Finance and Administration,
John W. Prosser, Jr. and Treasurer (Principal
Financial Officer)
NAZIM G. THAWERBHOY Senior Vice President and December 27, 1996
- ----------------------------------- Controller (Principal Accounting
Nazim G. Thawerbhoy Officer)
Page 16