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EX-95 - EX-95 - JACOBS ENGINEERING GROUP INC /DE/jec-ex95_10.htm
EX-32.2 - EX-32.2 - JACOBS ENGINEERING GROUP INC /DE/jec-ex322_6.htm
EX-32.1 - EX-32.1 - JACOBS ENGINEERING GROUP INC /DE/jec-ex321_8.htm
EX-31.2 - EX-31.2 - JACOBS ENGINEERING GROUP INC /DE/jec-ex312_7.htm
EX-31.1 - EX-31.1 - JACOBS ENGINEERING GROUP INC /DE/jec-ex311_9.htm
EX-10.4 - EX-10.4 - JACOBS ENGINEERING GROUP INC /DE/jec-ex104_105.htm
EX-10.3 - EX-10.3 - JACOBS ENGINEERING GROUP INC /DE/jec-ex103_104.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

(Mark one)

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

For the quarterly period ended March 31, 2017

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 or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

 

 

1999 Bryan Street, Suite 1200, Dallas, Texas

75201

(Address of principal executive offices)

(Zip Code)

 

(214) 583 – 8500

(Registrant’s telephone number, including area code)

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:      Yes      No

Indicate by check-mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes      No

Indicate by check-mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check-mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes     No

Number of shares of common stock outstanding at April 28, 2017: 120,424,867

 

 

 


JACOBS ENGINEERING GROUP INC.

INDEX TO FORM 10-Q

 

 

 

 

Page No.

PART I

FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Financial Statements

3

 

 

 

 

 

 

Consolidated Balance Sheets

3

 

 

 

 

 

 

Consolidated Statements of Earnings - Unaudited

4

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income - Unaudited

5

 

 

 

 

 

 

Consolidated Statements of Cash Flows - Unaudited

6

 

 

 

 

 

 

Notes to Consolidated Financial Statements - Unaudited

7

 

 

 

 

 

Item 2.

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

20

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

 

 

 

 

 

Item 4.

Controls and Procedures

31

 

 

 

PART II

OTHER INFORMATION

 

 

 

 

 

 

Item 1.

Legal Proceedings

32

 

 

 

 

 

Item 1A.

Risk Factors

32

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

33

 

 

 

 

 

Item 4.

Mine Safety Disclosures

33

 

 

 

 

 

Item 5.

Other Information

33

 

 

 

 

 

Item 6.

Exhibits

34

 

 

 

SIGNATURES

35

 

Page 2


Part I - FINANCIAL INFORMATION

Item 1.

Financial Statements.

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share information)

 

 

 

March 31,
2017

(Unaudited)

 

 

September 30,

2016

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

674,596

 

 

$

655,716

 

Receivables

 

 

2,058,005

 

 

 

2,115,663

 

Prepaid expenses and other

 

 

88,545

 

 

 

93,091

 

Total current assets

 

 

2,821,146

 

 

 

2,864,470

 

Property, Equipment and Improvements, Net

 

 

316,077

 

 

 

319,673

 

Other Noncurrent Assets:

 

 

 

 

 

 

 

 

Goodwill

 

 

2,862,364

 

 

 

3,079,628

 

Intangibles

 

 

319,821

 

 

 

336,922

 

Miscellaneous

 

 

766,595

 

 

 

759,329

 

Total other non-current assets

 

 

3,948,780

 

 

 

4,175,879

 

 

 

$

7,086,003

 

 

$

7,360,022

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Notes payable

 

$

2,941

 

 

$

2,421

 

Accounts payable

 

 

468,138

 

 

 

522,427

 

Accrued liabilities

 

 

872,858

 

 

 

938,378

 

Billings in excess of costs

 

 

389,279

 

 

 

319,460

 

Total current liabilities

 

 

1,733,216

 

 

 

1,782,686

 

Long-term Debt

 

 

334,925

 

 

 

385,330

 

Other Deferred Liabilities

 

 

843,606

 

 

 

861,824

 

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 - 240,000,000 shares;

   issued and outstanding—120,453,954 shares and 120,950,899

   shares as of March 31, 2017 and September 30, 2016, respectively

 

 

120,454

 

 

 

120,951

 

Additional paid-in capital

 

 

1,217,248

 

 

 

1,168,272

 

Retained earnings

 

 

3,611,953

 

 

 

3,586,647

 

Accumulated other comprehensive loss

 

 

(835,008

)

 

 

(610,594

)

Total Jacobs stockholders’ equity

 

 

4,114,647

 

 

 

4,265,276

 

Noncontrolling interests

 

 

59,609

 

 

 

64,906

 

Total Group stockholders’ equity

 

 

4,174,256

 

 

 

4,330,182

 

 

 

$

7,086,003

 

 

$

7,360,022

 

 

See the accompanying Notes to Consolidated Financial Statements.

 

 

Page 3


JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

For the Three Months and Six Months Ended March 31, 2017 and April 1, 2016

(In thousands, except per share information)

(Unaudited)

 

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

March 31, 2017

 

 

April 1, 2016

 

 

March 31, 2017

 

 

April 1, 2016

 

Revenues

 

$

2,302,567

 

 

$

2,781,763

 

 

$

4,854,171

 

 

$

5,629,697

 

Costs and Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Direct cost of contracts

 

 

(1,883,283

)

 

 

(2,337,547

)

 

 

(4,015,575

)

 

 

(4,745,007

)

Selling, general and administrative expenses

 

 

(351,111

)

 

 

(357,435

)

 

 

(681,795

)

 

 

(738,459

)

Operating Profit

 

 

68,173

 

 

 

86,781

 

 

 

156,801

 

 

 

146,231

 

Other Income (Expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

2,088

 

 

 

2,264

 

 

 

3,574

 

 

 

4,484

 

Interest expense

 

 

(3,755

)

 

 

(2,200

)

 

 

(7,273

)

 

 

(5,743

)

Miscellaneous (expense) income, net

 

 

(6,015

)

 

 

3,611

 

 

 

(6,731

)

 

 

3,271

 

Total other (expense) income, net

 

 

(7,682

)

 

 

3,675

 

 

 

(10,430

)

 

 

2,012

 

Earnings Before Taxes

 

 

60,491

 

 

 

90,456

 

 

 

146,371

 

 

 

148,243

 

Income Tax Expense

 

 

(16,326

)

 

 

(27,067

)

 

 

(41,053

)

 

 

(34,548

)

Net Earnings of the Group

 

 

44,165

 

 

 

63,389

 

 

 

105,318

 

 

 

113,695

 

Net Earnings Attributable to Noncontrolling Interests

 

 

5,853

 

 

 

1,861

 

 

 

5,236

 

 

 

(1,931

)

Net Earnings Attributable to Jacobs

 

$

50,018

 

 

$

65,250

 

 

$

110,554

 

 

$

111,764

 

Net Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.41

 

 

$

0.54

 

 

$

0.91

 

 

$

0.93

 

Diluted

 

$

0.41

 

 

$

0.54

 

 

$

0.91

 

 

$

0.92

 

 

See the accompanying Notes to Consolidated Financial Statements.

 

Page 4


JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Three Months and Six Months Ended March 31, 2017 and April 1, 2016

(In thousands)

(Unaudited)

 

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

March 31, 2017

 

 

April 1, 2016

 

 

March 31, 2017

 

 

April 1, 2016

 

Net Earnings of the Group

 

$

44,165

 

 

$

63,389

 

 

$

105,318

 

 

$

113,695

 

Other Comprehensive Income (Loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

41,441

 

 

 

17,248

 

 

 

(246,083

)

 

 

746

 

Gain (loss) on cash flow hedges

 

 

5,690

 

 

 

(2,965

)

 

 

4,748

 

 

 

(413

)

Change in pension liabilities

 

 

(2,458

)

 

 

6,975

 

 

 

22,295

 

 

 

18,418

 

Other comprehensive income (loss) before taxes

 

 

44,673

 

 

 

21,258

 

 

 

(219,040

)

 

 

18,751

 

Income Tax (Expense) Benefit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flow hedges

 

 

(1,024

)

 

 

727

 

 

 

(1,106

)

 

 

4

 

Change in pension liabilities

 

 

253

 

 

 

(1,705

)

 

 

(4,269

)

 

 

(4,187

)

Income Tax (Expense) Benefit:

 

 

(771

)

 

 

(978

)

 

 

(5,375

)

 

 

(4,183

)

Net other comprehensive income (loss)

 

 

43,902

 

 

 

20,280

 

 

 

(224,415

)

 

 

14,568

 

Net Comprehensive Income of the Group

 

 

88,067

 

 

 

83,669

 

 

 

(119,097

)

 

 

128,263

 

Net Comprehensive Income Attributable to Noncontrolling Interests

 

 

5,853

 

 

 

1,861

 

 

 

5,236

 

 

 

(1,931

)

Net Comprehensive Income (Loss) Attributable to Jacobs

 

$

93,920

 

 

$

85,530

 

 

$

(113,861

)

 

$

126,332

 

 

See the accompanying Notes to Consolidated Financial Statements.

 

 

Page 5


JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended March 31, 2017 and April 1, 2016

(In thousands)

(Unaudited)

                                                                                                                                                              For the Six Months Ended

 

 

March 31, 2017

 

 

April 1, 2016

 

Cash Flows from Operating Activities:

 

 

 

 

 

 

 

 

Net earnings attributable to the Group

 

$

105,318

 

 

$

113,695

 

Adjustments to reconcile net earnings to net cash flows from operations:

 

 

 

 

 

 

 

 

Depreciation and amortization:

 

 

 

 

 

 

 

 

Property, equipment and improvements

 

 

34,479

 

 

 

43,226

 

Intangible assets

 

 

23,213

 

 

 

23,451

 

Loss on sales of business

 

 

822

 

 

 

 

Stock based compensation

 

 

21,158

 

 

 

17,107

 

Tax deficiency from stock based compensation

 

 

(1,433

)

 

 

(29

)

Equity in earnings of operating ventures, net

 

 

(4,056

)

 

 

(10,382

)

Losses on disposals of assets, net

 

 

1,751

 

 

 

9,624

 

Change in pension plan obligations

 

 

(11,187

)

 

 

2,371

 

Gain on benefits plan change

 

 

(9,955

)

 

 

 

Change in deferred compensation plans

 

 

43

 

 

 

(703

)

Deferred income taxes

 

 

(11,720

)

 

 

(13,096

)

Changes in assets and liabilities, excluding the effects of businesses acquired:

 

 

 

 

 

 

 

 

Receivables

 

 

59,653

 

 

 

134,619

 

Prepaid expenses and other current assets

 

 

3,522

 

 

 

15,180

 

Accounts payable

 

 

(47,422

)

 

 

(84,465

)

Accrued liabilities

 

 

(33,570

)

 

 

(38,365

)

Billings in excess of costs

 

 

82,534

 

 

 

65,657

 

Income taxes payable

 

 

(11,882

)

 

 

3,131

 

Other deferred liabilities

 

 

(1,022

)

 

 

(21,229

)

Other, net

 

 

803

 

 

 

4,508

 

Net cash provided by operating activities

 

 

201,049

 

 

 

264,300

 

Cash Flows from Investing Activities:

 

 

 

 

 

 

 

 

Additions to property and equipment

 

 

(45,761

)

 

 

(29,309

)

Disposals of property and equipment

 

 

50

 

 

 

250

 

Purchases of investments

 

 

 

 

 

(3,406

)

Acquisitions of businesses, net of cash acquired

 

 

(24,782

)

 

 

(10,500

)

Sales of business

 

 

(2,036

)

 

 

 

Net cash used for investing activities

 

 

(72,529

)

 

 

(42,965

)

Cash Flows from Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from long-term borrowings

 

 

644,255

 

 

 

988,796

 

Repayments of long-term borrowings

 

 

(687,068

)

 

 

(1,041,486

)

Proceeds from short-term borrowings

 

 

669

 

 

 

618

 

Repayments of short-term borrowings

 

 

 

 

 

(11,466

)

Proceeds from issuances of common stock

 

 

46,915

 

 

 

15,735

 

Common stock repurchases

 

 

(81,178

)

 

 

(72,291

)

Excess tax benefits from stock based compensation

 

 

1,433

 

 

 

29

 

Cash Dividends

 

 

(18,104

)

 

 

 

Dividends paid to noncontrolling interests

 

 

 

 

 

(2,709

)

Net cash used by financing activities

 

 

(93,078

)

 

 

(122,774

)

Effect of Exchange Rate Changes

 

 

(16,562

)

 

 

302

 

Net (Decrease) Increase in Cash and Cash Equivalents

 

 

18,880

 

 

 

98,863

 

Cash and Cash Equivalents at the Beginning of the Period

 

 

655,716

 

 

 

460,859

 

Cash and Cash Equivalents at the End of the Period

 

$

674,596

 

 

$

559,722

 

 

See the accompanying Notes to Consolidated Financial Statements.

 

 

Page 6


JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

March 31, 2017

 

Basis of Presentation

Unless the context otherwise requires:

 

References herein to “Jacobs” are to Jacobs Engineering Group Inc. and its predecessors;

 

References herein to the “Company”, “we”, “us” or “our” are to Jacobs Engineering Group Inc. and its consolidated subsidiaries; and

 

References herein to the “Group” are to the combined economic interests and activities of the Company and the persons and entities holding noncontrolling interests in our consolidated subsidiaries.

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 (“U.S. GAAP”) have been condensed or omitted. Readers of this Quarterly Report on Form 10-Q should also read our consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2016 (“2016 Form 10-K”), as well as Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our 2016 Form 10-K.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of our consolidated financial statements at March 31, 2017, and for the three and six month periods ended March 31, 2017.

Our interim results of operations are not necessarily indicative of the results to be expected for the full fiscal year.

Please refer to Note 17—Definitions of Notes to Consolidated Financial Statements included in our 2016 Form 10-K for the definitions of certain terms used herein.

 

During the second fiscal quarter of 2017, the Company restructured certain employee welfare trust plans benefitting certain of its employees within its India operations by moving these plans under the legal ownership and operation of the Company’s legal entity structure in the region.  Historically, the Company structured these plans as separate, stand-alone entities outside of the Company’s consolidated legal entity framework.  As a result of these changes, the Company has recorded a one-time, non-cash benefit of $9.9 million reported in Selling, general and administrative expense in its consolidated statement of income for the three and six month period ended March 31, 2017, with corresponding assets in the plans associated with restricted investments of $7.7 million and employee loans receivable of $2.2 million and both recorded in Other non-current assets in our consolidated balance sheet at March 31, 2017.

 

During the preparation of the Form 10-Q for the first fiscal quarter of 2017, the Company determined that its prior financial statements contained immaterial misstatements related to incorrect translation of the Company’s non-U.S. goodwill balances from local currency to the U.S. Dollar reporting currency. It was determined that the Company had incorrectly used historical translation rates for the U.S. Dollar in place at the time of the Company’s recording of its foreign goodwill balances rather than using current translation rates at each balance sheet date in accordance with U.S. GAAP.  The error dated back to the time of our initial reporting of non-US goodwill balances in the late 1990s and affected our historical quarterly and annual reporting periods through the first fiscal quarter of 2017.

 

Goodwill and accumulated other comprehensive income in the Company’s September 30, 2016 consolidated balance sheet (which have not been adjusted) were each overstated by $209.9 million and was corrected in the first fiscal quarter of 2017 foreign currency translation adjustment.  Consequently, the correction was a direct component of the overall translation adjustment amount of $287.5 million that was reported for the three months ended December 31, 2016.  These adjustments had no impact on the Company’s Consolidated Statements of Earnings or Cash Flows.  Also, in our first fiscal quarter of 2016 other comprehensive income was overstated by $18.4 million as a result of these misstatements.

 

Use of Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires us to employ estimates and make assumptions that affect the reported amounts of certain assets and liabilities, the revenues and expenses reported for the periods covered by the

Page 7


JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

March 31, 2017

(continued)

 

accompanying consolidated financial statements, and certain amounts disclosed in these Notes to the Consolidated Financial Statements. Although such estimates and assumptions are based on management’s most recent assessment of the underlying facts and circumstances utilizing the most current information available and past experience, actual results could differ significantly from those estimates and assumptions. Our estimates, judgments, and assumptions are evaluated periodically and adjusted accordingly. Please refer to Note 2—Significant Accounting Policies of Notes to Consolidated Financial Statements included in our 2016 Form 10-K for a discussion of the significant estimates and assumptions affecting our consolidated financial statements.

Fair Value and Fair Value Measurements

Certain amounts included in the accompanying consolidated financial statements are presented at “fair value.” Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as of the date fair value is determined (the “measurement date”). When determining fair value, we consider the principal or most advantageous market in which we would transact, and we consider only those assumptions we believe a typical market participant would consider when pricing an asset or liability. In measuring fair value, we use the following inputs in the order of priority indicated:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices in active markets included in Level 1, such as (i) quoted prices for similar assets or liabilities; (ii) quoted prices in markets that have insufficient volume or infrequent transactions (e.g., less active markets); and (iii) model-driven valuations in which all significant inputs are observable or can be derived principally from, or corroborated with, observable market data for substantially the full term of the asset or liability.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the fair value measurement.

Please refer to Note 2—Significant Accounting Policies of Notes to Consolidated Financial Statements included in our 2016 Form 10-K for a more complete discussion of the various items within the consolidated financial statements measured at fair value and the methods used to determine fair value.

 

 

New Accounting Standards

From time to time, the Financial Accounting Standards Board (“FASB”) issues accounting standards updates (each being an “ASU”) to its Accounting Standards Codification (“ASC”), which constitutes the primary source of U.S. GAAP.  The Company regularly monitors ASUs as they are issued and considers their applicability to its business.  All ASUs applicable to the Company are adopted by the due date and in the manner prescribed by the FASB.

In May 2014, the FASB issued ASU No. 2014-09—Revenue from Contracts with Customers. The new guidance provided by ASU 2014-09 is intended to remove inconsistencies and perceived weaknesses in the existing revenue requirements, provide a more robust framework for addressing revenue issues, improve comparability, provide more useful information and simplify the preparation of financial statements.  ASU 2014-09 was initially effective for annual and interim reporting periods beginning after December 15, 2016. On July 9, 2015, the FASB approved a one-year deferral of the effective date of this standard.  The revised effective date for the standard is for annual reporting periods beginning after December 15, 2017 and interim periods therein.  The FASB also approved changes allowing for early adoption of the standard as of the original effective date.  The Company has completed its initial assessment of the new standard and is in the process of assessing its contracts with customers.  The Company currently intends to adopt the new standard using the Modified Retrospective application.  This standard could have a significant impact on the Company’s Consolidated Financial Statements and an administrative impact on its operations.  The Company will further assess the impact through its implementation program.

In February 2016, the FASB issued ASU 2016-02—Leases. ASU 2016-02 requires lessees to recognize assets and liabilities for most leases. ASU 2016-02 is effective for public entity financial statements for annual periods beginning after December 15, 2018, and interim periods within those annual periods.  Early adoption is permitted, including adoption in an interim period.  The guidance must be adopted using a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements.  The Company is evaluating the impact of the new guidance on its consolidated financial statements.  This standard could have a significant administrative impact on its operations, and the Company will further assess the impact through its implementation program.

Page 8


JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

March 31, 2017

(continued)

 

In March 2016, the FASB issued ASU 2016-09—Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.  ASU 2016-09 is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods.  Early adoption is permitted for any entity in any interim or annual period for which financial statements have not been issued or made available for issuance.  If an entity early adopts the amendments in an interim period, any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period.  An entity that elects early adoption must adopt all of the amendments in the same period.  The Company is evaluating the impact of the new guidance on its consolidated financial statements and does not plan to early adopt this pronouncement.

 

 

Segment Information

During the second fiscal quarter of 2016, we reorganized our operations around four global lines of business (“LOB”), which also serve as our operating segments:  Petroleum & Chemicals, Buildings & Infrastructure, Aerospace & Technology, and Industrial. We determined that this new organization would better support the needs of managing each unique set of customers that fall within each segment.  As a result of the new organization, we subsequently realigned our internal reporting structures to enable our Chief Executive Officer, who is also our Chief Operating Decision Maker (“CODM”), to evaluate the performance of each of these segments and make appropriate resource allocations among each of the segments. For purposes of our goodwill impairment testing, we have determined that our operating segments are also our reporting units based on management’s conclusion that the components comprising each of our operating segments share similar economic characteristics and meet the aggregation criteria in accordance with ASC 350.

 

Under the current organization, each LOB has a president that reports directly to the Company's Chairman and CEO or CODM.  In addition, the sales function, which had been managed centrally for many years, is now managed on an LOB basis, and accordingly, the associated cost is now embedded in the new segments and reported to the respective LOB presidents.  In addition, a portion of the costs of other support functions (e.g., finance, legal, human resources, and information technology) are allocated to each LOB using methodologies which, we believe, effectively attribute the cost of these support functions to the revenue-generating activities of the Company on a rational basis.  The cost of the Company’s cash incentive plan, the Management Incentive Plan (“MIP”) and the expense associated with the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan (“1999 SIP”) have likewise been charged to the LOBs except for those amounts determined to relate to the business as a whole (which amounts remain in corporate’s results of operations).

 

Financial information for each LOB is reviewed by the CODM to assess performance and make decisions regarding the allocation of resources.  The Company generally does not track assets by LOB, nor does it provide such information to the CODM.

 

The CODM evaluates the operating performance of our LOBs using operating profit, which is defined as margin less “corporate charges” (e.g., the allocated amounts described above).  The Company incurs certain selling, general and administrative (“SG&A”) costs which relate to its business as a whole which are not allocated to the LOBs.

 

The following tables present total revenues and operating profit for each reportable segment. Prior period information has been restated to reflect the current period presentation (in thousands).

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

March 31,
2017

 

 

April 1,
2016

 

 

March 31,
2017

 

 

April 1,
2016

 

Revenues from External Customers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace & Technology

$

577,040

 

 

$

669,464

 

 

$

1,154,476

 

 

$

1,339,655

 

Buildings & Infrastructure

 

585,242

 

 

 

579,128

 

 

 

1,165,859

 

 

 

1,142,458

 

Industrial

 

582,458

 

 

 

666,556

 

 

 

1,334,196

 

 

 

1,338,656

 

Petroleum & Chemicals

 

557,827

 

 

 

866,615

 

 

 

1,199,640

 

 

 

1,808,928

 

Total

$

2,302,567

 

 

$

2,781,763

 

 

$

4,854,171

 

 

$

5,629,697

 

 

 

Page 9


JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

March 31, 2017

(continued)

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

March 31,
2017

 

 

April 1,
2016

 

 

March 31,
2017

 

 

April 1,
2016

 

Operating Profit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aerospace & Technology

$

45,057

 

 

$

55,121

 

 

$

96,144

 

 

$

103,120

 

Buildings & Infrastructure

 

43,987

 

 

 

42,463

 

 

 

82,784

 

 

 

82,915

 

Industrial

 

24,073

 

 

 

12,417

 

 

 

49,202

 

 

 

39,772

 

Petroleum & Chemicals

 

35,619

 

 

 

30,945

 

 

 

59,271

 

 

 

62,548

 

Total Segment Operating Profit

 

148,736

 

 

 

140,946

 

 

 

287,401

 

 

 

288,355

 

Other Corporate Expenses

 

(8,338

)

 

 

(18,797

)

 

 

(26,634

)

 

 

(38,373

)

Restructuring and Other Charges

 

(72,225

)

 

 

(35,368

)

 

 

(103,966

)

 

 

(103,751

)

Total Operating Profit

 

68,173

 

 

 

86,781

 

 

 

156,801

 

 

 

146,231

 

Total Other (Expense) income

 

(6,449

)

 

 

3,675

 

 

 

(9,197

)

 

 

2,012

 

Total Other (Expense) income - Restructuring

 

(1,233

)

 

 

-

 

 

 

(1,233

)

 

 

-

 

Earnings Before Taxes

$

60,491

 

 

$

90,456

 

 

$

146,371

 

 

$

148,243

 

 

Included in “Other Corporate Expenses” in the above table are costs and expenses which relate to general corporate activities as well as corporate-managed benefit and insurance programs.  Such costs and expenses include: (i) those elements of SG&A expenses relating to the business as a whole; (ii) those elements of our incentive compensation plans relating to corporate personnel whose other compensation costs are not allocated to the LOBs; (iii) the amortization of intangible assets acquired as part of purchased business combinations; (iv) the quarterly variances between the Company’s actual costs of certain of its self-insured integrated risk and employee benefit programs and amounts charged to the LOBs; and (v) certain adjustments relating to costs associated with the Company’s international defined benefit pension plans.  In addition, “Other Corporate Expenses” may also include from time to time certain adjustments to contract margins (both positive and negative) associated with projects where it has been determined, in the opinion of management, that such adjustments are not indicative of the performance of the related LOB and therefore should not be attributed to the LOB.

 

The following tables present total services revenues for each reportable segment for the three months and six months ended March 31, 2017 and April 1, 2016 (in millions).

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

March 31, 2017

 

 

March 31, 2017

 

 

Aerospace & Technology

 

 

 

 

Buildings & Infrastructure

 

 

 

 

Industrial

 

 

 

 

Petroleum & Chemicals

 

 

Total

 

 

Aerospace & Technology

 

 

Buildings & Infrastructure

 

 

Industrial

 

 

Petroleum & Chemicals

 

 

Total

 

Technical Professional Services Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Project Services

$

265.1

 

 

 

 

$

532.0

 

 

 

 

$

166.9

 

 

 

 

$

339.8

 

 

$

1,303.8

 

 

$

482.5

 

 

$

1,046.0

 

 

$

383.3

 

 

$

712.6

 

 

$

2,624.4

 

Process, Scientific, and Systems Consulting

 

184.9

 

 

 

 

 

-

 

 

 

 

 

-

 

 

 

 

 

9.5

 

 

 

194.4

 

 

 

384.8

 

 

 

-

 

 

 

-

 

 

 

16.4

 

 

 

401.2

 

Total Technical Professional Services Revenues

 

450.0

 

 

 

 

 

532.0

 

 

 

 

 

166.9

 

 

 

 

 

349.3

 

 

 

1,498.2

 

 

 

867.3

 

 

 

1,046.0

 

 

 

383.3

 

 

 

729.0

 

 

 

3,025.6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Field Services Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Construction

 

10.3

 

 

 

 

 

49.6

 

 

 

 

 

326.2

 

 

 

 

 

208.5

 

 

 

594.6

 

 

 

54.8

 

 

 

112.5

 

 

 

766.7

 

 

 

470.5

 

 

 

1,404.5

 

Operations and Maintenance ("O&M")

 

116.7

 

 

 

 

 

3.6

 

 

 

 

 

89.4

 

 

 

 

 

0.0

 

 

 

209.7

 

 

 

232.4

 

 

 

7.4

 

 

 

184.2

 

 

 

0.1

 

 

 

424.1

 

Total Field Services Revenues

 

127.0

 

 

 

 

 

53.2

 

 

 

 

 

415.6

 

 

 

 

 

208.5

 

 

 

804.3

 

 

 

287.2

 

 

 

119.9

 

 

 

950.9

 

 

 

470.6

 

 

 

1,828.6

 

Total Revenues

$

577.0

 

 

 

 

$

585.2

 

 

 

 

$

582.5

 

 

 

 

$

557.8

 

 

$

2,302.6

 

 

$

1,154.5

 

 

$

1,165.9

 

 

$

1,334.2

 

 

$

1,199.6

 

 

$

4,854.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Page 10


JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – UNAUDITED

March 31, 2017

(continued)

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

April 1, 2016

 

 

April 1, 2016

 

 

Aerospace & Technology

 

 

 

 

Buildings & Infrastructure

 

 

 

 

Industrial

 

 

 

 

Petroleum & Chemicals

 

 

 

 

Total

 

 

Aerospace & Technology

 

 

Buildings & Infrastructure

 

 

Industrial

 

 

Petroleum & Chemicals

 

 

Total

 

Technical Professional Services Revenues