Press Release Feb 7, 2018

Jacobs Engineering Group Inc. Reports Earnings for the First Quarter of Fiscal 2018

DALLAS--(BUSINESS WIRE)-- Jacobs Engineering Group Inc. (NYSE:JEC) today announced its financial results for the first fiscal quarter ended December 29, 2017.

Highlights:

  • Q1 2018 net earnings of $2.2 M, or $0.02 per share, impacted by one-time tax charge and CH2M acquisition
  • Q1 2018 adjusted net earnings of $97.0 M, or $0.77 per share, up 13% year-over-year
  • Q1 2018 year-over-year organic revenue growth, double-digit organic growth in professional services
  • Continued strong gross margin performance of 18%, up 130 bps year-over-year
  • Backlog of $26.2 B at end of 1Q 2018; Jacobs only backlog up $1.4 B year-over-year
  • Closed CH2M acquisition, cost synergies ramping while targeting incremental revenue opportunities
  • Strong balance sheet financial flexibility with $1.5 B of net debt post CH2M close

Commenting on the results for the first quarter of fiscal 2018, Steve Demetriou, Jacobs Chairman and CEO said, “Our first quarter results further demonstrated progress against our strategy to allocate our resources toward both higher growth and higher margin opportunities. We are seeing continued momentum in our Aerospace & Technology and Buildings & Infrastructure businesses as well as improving trends in our more cyclical Energy and Mining & Minerals businesses. Furthermore, we are off to a solid start capturing the planned CH2M cost synergies and positioning our combined company for incremental revenue opportunities by offering more comprehensive solutions to our clients. Most importantly, Jacobs’ enhanced deep domain knowledge coupled with our digital expertise strengthens our ability to deliver innovative solutions for a more connected, sustainable world.”

Kevin Berryman, Jacobs CFO, added, “The first quarter results displayed our continued focus on profitable growth as we maintained solid margins. While the CH2M acquisition did not materially impact our first quarter results, we are pleased with the performance of CH2M and excited about the combined company’s growth and profitability profile. We are increasing our fiscal 2018 adjusted EPS outlook including the approximately nine-months contribution from the CH2M acquisition to $3.85-$4.25 from $3.55-$3.95. The increase in our outlook is driven by the benefits of the recent change in the U.S. federal tax law.”

                     

First Quarter Review

                   
        Fiscal 1Q 2018     Fiscal 1Q 2017     Change
Revenue       $2.8 billion     $2.6 billion     +$200 million
GAAP Net Earnings       $2 million     $61 million     ($59 million)
GAAP Earnings Per Diluted Share       $0.02     $0.50     ($0.48)
Adjusted Net Earnings       $97 million     $83 million     +$14 million
Adjusted Earnings Per Diluted Share (EPS)       $0.77     $0.68     +$0.09
                     

Included in the first quarter GAAP earnings is the impact of a lower annualized tax rate resulting from the Tax Cuts and Jobs Act, a lump sum pension settlement and the financial results of CH2M during the two week period from the December 15, 2017 closing date to December 29, 2017.

The company’s adjusted net earnings and adjusted EPS for the first quarter of fiscal 2018 and fiscal 2017 exclude the charges and costs set forth in the table below. For additional information regarding these adjustments and a reconciliation of adjusted net earnings and adjusted EPS to net earnings and EPS, respectively, refer to the section entitled “Non-U.S. GAAP Financial Measures” at the end of this release.

               
        Fiscal 1Q 2018     Fiscal 1Q 2017

After-tax restructuring and other charges related to the 2015 restructuring activities

      NA     $23 million ($0.18 per diluted share)

After-tax costs and other charges associated with restructuring activities implemented in connection with the CH2M acquisition

      $15 million ($0.11 per diluted share)     NA

After-tax transaction costs incurred in connection with the closing of the CH2M acquisition

      $51 million ($0.41 per diluted share)     NA

One-time charge resulting from revaluation of certain deferred tax assets/liabilities in connection with U.S. tax reform

      $29 million ($0.23 per diluted share)     NA

Adjusted Earnings (EPS)

      $97 million ($0.77 per diluted share)     $83 million ($0.68 per diluted share)
               

Fiscal first quarter 2018 earnings reflect an effective tax rate of 24.6% and a one-time non-cash tax charge to reflect the impact of the revaluation of certain deferred tax assets/liabilities due to the recent change in U.S. federal tax law.

Jacobs is hosting a conference call at 10:00 A.M. ET on Wednesday, February 7, 2018, which it is webcasting live on the internet at www.jacobs.com.

About Jacobs Engineering Group

Jacobs leads the global professional services sector delivering solutions for a more connected, sustainable world. With $15 billion in fiscal 2017 revenue when combined with full year CH2M revenues and a talent force of more than 74,000, Jacobs provides a full spectrum of services including scientific, technical, professional and construction- and program-management for business, industrial, commercial, government and infrastructure sectors. For more information, visit www.jacobs.com.

Forward-Looking Statements

Certain statements contained in this press release constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. Statements made in this press release that are not based on historical fact are forward-looking statements. Although such statements are based on management's current estimates and expectations, and currently available competitive, financial, and economic data, forward-looking statements are inherently uncertain, and you should not place undue reliance on such statements as actual results may differ materially. We caution the reader that there are a variety of risks, uncertainties and other factors that could cause actual results to differ materially from what is contained, projected or implied by our forward-looking statements. For a description of some additional factors that may occur that could cause actual results to differ from our forward-looking statements see our Annual Report on Form 10-K for the year ended September 29, 2017, and in particular the discussions contained under Item 1 - Business; Item 1A - Risk Factors; Item 3 - Legal Proceedings; and Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations, and our Quarterly Report on Form 10-Q for the quarter ended December 29, 2017, and in particular the discussions contained under Part I, Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations; Part II, Item 1 – Legal Proceedings; and Part II, Item 1A - Risk Factors, as well as the Company’s other filings with the Securities and Exchange Commission. The Company is not under any duty to update any of the forward-looking statements after the date of this press release to conform to actual results, except as required by applicable law.

 
Financial Highlights:

Results of Operations (in thousands, except per-share data):

 

        Three Months Ended
        December 29, 2017     December 30, 2016
Revenues       $ 2,750,311       $ 2,551,604  
Direct cost of contracts         (2,263,131 )       (2,132,292 )
Gross Profit         487,180         419,312  
Selling, general and administrative expenses         (439,536 )       (330,684 )
Operating Profit         47,644         88,628  
Other Income (Expense):              
Interest income         3,834         1,486  
Interest expense         (7,092 )       (3,518 )
Miscellaneous expense, net         (2,470 )       (716 )
Total other expense, net         (5,728 )       (2,748 )
Earnings Before Taxes         41,916         85,880  
Income Tax Expense         (39,355 )       (24,727 )
Net Earnings of the Group         2,561         61,153  

Net Earnings Attributable to Non-controlling Interests

        (398 )       (617 )
Net Earnings Attributable to Jacobs       $ 2,163       $ 60,536  
               
Net Earnings Per Share*:              
Basic       $ 0.02       $ 0.50  
Diluted       $ 0.02       $ 0.50  
               
*See earnings per share calculation on page 9.
 
 

Segment Information (in thousands):

 
        Three Months Ended
        December 29, 2017     December 30, 2016
Revenues from External Customers:              
Aerospace & Technology       $ 721,567     $ 577,436
Buildings & Infrastructure         658,466       580,617
Industrial         749,321       751,738
Petroleum & Chemicals         620,957       641,813
Total       $ 2,750,311     $ 2,551,604
               
         
        Three Months Ended
        December 29, 2017     December 30, 2016
Operating Profit:              
Aerospace & Technology       $ 65,820       $ 51,087  
Buildings & Infrastructure         45,273         38,797  
Industrial         38,113         25,129  
Petroleum & Chemicals         27,557         23,652  
Total Segment Operating Profit         176,763         138,665  
Other Corporate Expenses         (42,129 )       (18,296 )
Restructuring and Other Charges         (19,349 )       (31,741 )
CH2M Transaction costs         (67,641 )        
Total USGAAP Operating Profit         47,644         88,628  
Total Other Expense (1)         (5,728 )       (2,748 )
                       
Earnings Before Taxes       $ 41,916      

$

85,880

 
               

(1) Includes deferred financing fees related to the CH2M acquisition of $256 for the three months ended December 29, 2017.

 

Other Operational Information (in thousands):

        Three Months Ended
        December 29, 2017     December 30, 2016
Depreciation (pre-tax)       $ 24,832     $ 16,621
Amortization of Intangibles (pre-tax)       $ 14,695     $ 11,914
Pass-Through Costs Included in Revenues       $ 596,169     $ 672,979
Capital Expenditures       $ 22,450     $ 21,054
               
 

Balance Sheet (in thousands):

               
        December 29, 2017     September 29, 2017
ASSETS              
Current Assets:              
Cash and cash equivalents       $ 1,059,839       $ 774,151  
Receivables         3,293,502         2,102,543  
Prepaid expenses and other         193,614         119,486  
Total current assets         4,546,955         2,996,180  
Property, Equipment, and Improvements, Net         574,034         349,911  
Other Noncurrent Assets:              
Goodwill         5,720,875         3,009,826  
Intangibles, net         921,000         332,920  
Miscellaneous         928,893         692,022  
Total other noncurrent assets         7,570,768         4,034,768  
        $ 12,691,757       $ 7,380,859  
LIABILITIES AND STOCKHOLDERS’ EQUITY              
Current Liabilities:              
Notes payable       $ 5,450       $ 3,071  
Accounts payable         947,199         683,605  
Accrued liabilities         1,472,865         939,687  
Billings in excess of costs         637,542         299,864  
Total current liabilities         3,063,056         1,926,227  
Long-term Debt         2,587,933         235,000  
Other Deferred Liabilities         1,079,021         732,281  
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—141,556,705 shares and 120,385,544 shares as of December 29, 2017 and September 29, 2017, respectively

        141,557         120,386  
Additional paid-in capital         2,628,012         1,239,782  
Retained earnings         3,728,527         3,721,698  
Accumulated other comprehensive loss         (628,985 )       (653,514 )
Total Jacobs stockholders’ equity         5,869,111         4,428,352  
Non-controlling interests         92,636         58,999  
Total Group stockholders’ equity         5,961,747         4,487,351  
        $ 12,691,757       $ 7,380,859  
               
 

Backlog (in millions):

               
        December 29, 2017     December 30, 2016
Aerospace & Technology       $ 6,323.6     $ 5,135.4
Buildings & Infrastructure         5,355.9       5,151.6
Industrial         2,619.6       2,493.7
Petroleum & Chemicals         5,281.4       5,368.8
CH2M         6,626.3       -
Total       $ 26,206.8     $ 18,149.4
               

Non-U.S. GAAP Financial Measures:

In this press release, the Company has included certain non-GAAP financial measures as defined in Regulation G promulgated under the Securities Exchange Act of 1934, as amended. The non-GAAP financial measures included in this press release are adjusted net earnings and adjusted EPS.

Adjusted net earnings and adjusted EPS are non-GAAP financial measures that are calculated by excluding (i) the after-tax costs related to the 2015 restructuring activities, which included involuntary terminations, the abandonment of certain leased offices, combining operational organizations and the co-location of employees into other existing offices; and charges associated with our Europe, U.K. and Middle East region, which included write-offs on contract accounts receivable and charges for statutory redundancy and severance costs (collectively, the “2015 Restructuring and other items”); (ii) after-tax costs and other charges associated with restructuring activities implemented in connection with the CH2M acquisition, which include involuntary terminations, costs associated with co-locating Jacobs and CH2M offices, costs and expenses of the Integration Management Office, including professional services and personnel costs, and similar costs and expenses (collectively referred to as the “CH2M Restructuring and other charges”), (iii) transaction costs and other charges incurred in connection with closing of the CH2M acquisition, including advisor fees, change in control payments, costs and expenses relating to the registration and listing of Jacobs stock issued in connection with the acquisition, and similar transaction costs and expenses (collectively referred to as “CH2M transaction costs”), and (iv) one-time net charges resulting from the revaluation of certain deferred tax assets and liabilities as a result of the Tax Cuts and Jobs Act. We believe that adjusted net earnings and adjusted EPS are useful to management, investors and other users of our financial information in evaluating the Company’s operating results and understanding the Company’s operating trends by excluding the effects of the items described above, which can obscure underlying trends. Additionally, management uses adjusted net earnings and adjusted EPS in its own evaluation of the Company’s performance, particularly when comparing performance to past periods, and believes these measures are useful for investors because they facilitate a comparison of our financial results from period to period.

The Company provides non-GAAP measures to supplement U.S. GAAP measures, as they provide additional insight into the Company’s financial results. However, non-GAAP measures have limitations as analytical tools and should not be considered in isolation and are not in accordance with, or a substitute for, U.S. GAAP measures. In addition, other companies may define non-GAAP measures differently, which limits the ability of investors to compare non-GAAP measures of the Company to those used by our peer companies.

The following tables reconcile the components and values of U.S. GAAP net earnings and EPS to the corresponding "adjusted" amounts. For the comparable periods presented below, such adjustments consist of amounts incurred in connection with the items described above. Amounts are shown in thousands, except for per-share data:

U.S. GAAP Reconciliation for the first quarter of fiscal 2018 and 2017

       
      Three Months Ended
      December 29, 2017
       
      U.S. GAAP    

Effects of

Restructuring

and Other

Charges

   

Effects of

CH2M

transaction

costs

   

 

One Time

Tax

Reform

Impact

   

Adjusted

Revenue     $ 2,750,311      

$

     

$

 

 

   

$

 

   

$

2,750,311  
Direct cost of contracts       (2,263,131 )                                 (2,263,131 )
Gross profit       487,180                                   487,180  
Selling, general and administrative expenses       (439,536 )       19,349           67,641                 (352,546 )
Operating Profit       47,644         19,349           67,641                 134,634  
Total other (expense) income, net       (5,728 )                 256                 (5,472 )
Earnings before taxes       41,916         19,349           67,897                 129,162  

Income Tax (Expense) Benefit

      (39,355 )       (4,692 )        

(16,536

)

       

28,803

      (31,780 )
Net earnings of the Group       2,561         14,657           51,361           28,803       97,382  
Net earnings attributable to non-controlling interests       (398 )                                 (398 )

Net earnings attributable to Jacobs

    $ 2,163       $

14,657

     

$

 

51,361

     

$

 

28,803

   

$

96,984

 
Diluted earnings per share     $ 0.02       $

0.11

     

$

 

0.41

     

$

 

0.23

   

$

0.77

 
                                                 
         
        Three Months Ended
        December 30, 2016
        U.S. GAAP    

Effects of 2015

Restructuring

and other items

    Adjusted
Revenue       $ 2,551,604       $       $ 2,551,604  
Direct cost of contracts         (2,132,292 )               (2,132,292 )
Gross profit         419,312                 419,312  
Selling, general and administrative expenses         (330,684 )       31,741         (298,943 )
Total other expense, net         (2,748 )               (2,748 )
Earnings before taxes         85,880         31,741         117,621  
Income tax expense         (24,727 )       (8,938 )       (33,665 )
Net earnings of the Group         61,153         22,803         83,956  
Net earnings attributable to non-controlling interests         (617 )               (617 )
Net earnings attributable to Jacobs       $ 60,536       $ 22,803       $ 83,339  
Diluted earnings per share       $ 0.50       $ 0.18       $ 0.68  
                     
 

Earnings Per Share:

         
         
        For the Three Months Ended
       

December 29,

2017

   

December 30,

2016

Numerator for Basic and Diluted EPS:              
Net income       $ 2,163       $ 60,536
Net income allocated to participating securities         (15 )      
Net income allocated to common stock for EPS calculation       $ 2,148       $ 60,536
               
Denominator for Basic and Diluted EPS:              
Weighted average basic shares         124,122         119,438
               
Effect of dilutive securities:              
Stock compensation plans         1,023         1,477
Restricted stock         886         936
               
Diluted shares         126,031         121,851
               
Shares allocated to participating securities         (886 )      
Shares used for calculating diluted EPS attributable to common stock         125,145         121,851
               
Basic EPS       $ 0.02       $ 0.50
Diluted EPS       $ 0.02       $ 0.50
               

View source version on businesswire.com: http://www.businesswire.com/news/home/20180207005483/en/

Source: Jacobs Engineering Group Inc.

Jacobs Engineering Group Inc.



Kevin C. Berryman, 214-583-8500



Executive Vice President and Chief Financial Officer