Press Release Aug 5, 2019

Jacobs Reports Earnings for the Third Quarter of Fiscal 2019

Strong Top- and Bottom-Line Q3 Results; Increasing Fiscal 2019 Outlook Delivering Innovative Solutions and Disciplined Execution

DALLAS, Aug. 5, 2019 /PRNewswire/ -- Jacobs Engineering Group Inc. (NYSE: JEC) today announced its financial results for the fiscal third quarter ended June 28, 2019.

Q3 2019 Highlights:

  • Gross revenue of $3.2 billion1 grew 8.0% year-over-year; net revenue grew organically by 11.1%2
  • EPS from continuing operations of $0.65, results impacted by higher restructuring and transaction costs
  • Adjusted EPS from continuing operations of $1.40, up 13% year-over-year, including a discrete tax benefit
  • Backlog increased $2.6 billion to $22.5 billion, up 8% on an organic basis2
  • Increasing fiscal 2019 adjusted pro forma EPS outlook to $4.75 - $5.00 (excluding full year ECR)3
  • Completed $350 million of $1 billion share repurchase authorization through August 2nd

Jacobs' Chair and CEO Steve Demetriou commented, "Our strong third quarter results and increased earnings outlook are yet another example of driving an innovative culture, strengthening our execution discipline and scaling our global network of expertise. As we execute against our strategy, we are profitably winning a greater level of business in our existing sectors, while diversifying into new high margin growth opportunities. We are creating a company like no other, putting our knowledge and imagination together to shape the next generation of innovative solutions. Our KeyW acquisition is already delivering with a growing pipeline of new and enhanced opportunities as we bring the two organizations together."

Jacobs' CFO Kevin Berryman added, "We delivered another quarter of solid results across both lines of business with accelerating growth in our sales pipelines, during the most transformative period in our company's history. The CH2M integration has exceeded our revenue and cost targets and is on track to be completed by the end of calendar 2019. Our divestiture of ECR is moving into the final stages of separation. We are raising our fiscal 2019 outlook and now expect adjusted EBITDA in the range of $965 million - $1 billion and adjusted pro forma EPS of $4.75 - $5.00.3 From a long-term standpoint, we have created a transformed business with a stronger balance sheet."

Third Quarter Review
 
 

Fiscal 3Q 2019

Fiscal 3Q 2018

Change

Revenue

$3.2 billion

$2.9 billion

$0.3 billion

Net Revenue

$2.6 billion

$2.4 billion

$0.2 billion

GAAP Net Earnings from Continuing Operations

$89 million

$113 million

-$24 million

GAAP Earnings Per Diluted Share (EPS) from Continuing Operations

$0.65

$0.79

-$0.14

Adjusted Net Earnings from Continuing Operations

$193 million

$178 million

$15 million

Adjusted EPS from Continuing Operations

$1.40

$1.24

$0.16

The company's adjusted net earnings from continuing operations and adjusted EPS from continuing operations for the third quarter of fiscal 2019 and fiscal 2018 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-GAAP Financial Measures" at the end of this release.

 

Fiscal 3Q 2019

Fiscal 3Q 2018

After-tax restructuring and other charges ($93.2 million and $30.1 million for the fiscal 2019 and 2018 periods, respectively before income taxes)

$70 million ($0.51 per share)

$22 million ($0.15 per share)

After-tax transaction costs incurred in connection with the closing of the CH2M and KeyW acquisitions ($13.3 million and $5.4 million for the fiscal 2019 and 2018 periods, respectively before income taxes)

$10 million ($0.07 per share)

$4 million ($0.03 per share)

Other adjustments include:

 (a) addback of amortization of intangible assets of $18.4 million and $19.3 million in the 2019 and 2018 periods, respectively,

 (b) the allocation to discontinued operations of estimated stranded corporate costs of $2.0 million and $6.4 million in the 2019 and 2018 periods, respectively, that will be reimbursed or otherwise eliminated in connection with the sale of the ECR business,

 (c) the allocation to discontinued operations of estimated interest expense amounts in 2019 and 2018 related to long-term debt that has been paid down in connection with the sale of the ECR business of $5.8 million and $16.1 million, respectively,

(d) the reclassification of revenues under the Company's Transition Services Agreement (TSA) with WorleyParsons of $14.1 million included in other income for U.S. GAAP reporting purposes to SG&A and the exclusion of $3.2 million in remaining unreimbursed costs associated with the TSA during the fiscal 2019 third quarter,

 (e) the add-back of charges resulting from the revaluation of certain deferred tax assets/liabilities in connection with U.S. tax reform of $5.3 million in the 2018 period and other income tax adjustments of $1.5 million in the current quarter and

 (f) associated income tax expense adjustments for the above pre-tax adjustment items.

$24 million ($0.17 per share)

$38 million ($0.27 per share)

Adjusted EPS from Continuing Operations

$193 million ($1.40 per share)

$178 million ($1.24 per share)
 

(note: earnings per share amounts may not add due to rounding)

Fiscal third quarter 2019 earnings per share from continuing operations reflect an adjusted effective tax rate of 22.6%, excluding discrete tax items of 16 cents per share. Fiscal third quarter 2018 included an 8 cent benefit from discrete tax items.

Jacobs is hosting a conference call at 11:00 A.M. ET on Monday August 5, 2019, which it is webcasting live at www.jacobs.com.

Energy, Chemicals and Resources (ECR) Sale to WorleyParsons

On April 26, 2019, Jacobs completed the previously announced sale of the Jacobs' ECR business to WorleyParsons Limited.

KeyW Acquisition

On June 12, 2019, Jacobs completed the previously announced acquisition of The KeyW Holding Corporation.

About Jacobs

Jacobs leads the global professional services sector providing solutions for a more connected, sustainable world. With approximately $12 billion in revenue and a talent force of more than 50,000, 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, and connect with Jacobs on www.jacobs.com, LinkedIn, Twitter, Facebook and Instagram.

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 28, 2018, 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 quarters ended December 28, 2018 and March 29, 2019, 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.

1Reflects continuing operations as reported in accordance with GAAP.

2Excludes $23.9 million in revenue and $1.1 billion in backlog contribution from KeyW.

3Reconciliation of the adjusted pro forma EPS outlook and adjusted EBITDA outlook for the full fiscal year to the most directly comparable GAAP measure is not available without unreasonable efforts because the Company cannot predict with sufficient certainty all the components required to provide such reconciliation, including with respect to the costs and charges relating to transaction expenses, restructuring and integration to be incurred in fiscal 2019.

Financial Highlights:
 

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

For the Three Months Ended

  

For the Nine Months Ended

Unaudited

June 28, 2019

  

June 29, 2018

  

June 28, 2019

  

June 29, 2018

Revenues

$

3,169,622

    

$

2,933,623

    

$

9,345,005

    

$

7,587,916

  

Direct cost of contracts

(2,543,488)

    

(2,325,028)

    

(7,533,511)

    

(6,035,598)

  

Gross profit

626,134

    

608,595

    

1,811,494

    

1,552,318

  

Selling, general and administrative expenses

(536,180)

    

(446,083)

    

(1,505,731)

    

(1,325,722)

  

Operating Profit

89,954

    

162,512

    

305,763

    

226,596

  

Other Income (Expense):

              

Interest income

3,398

    

1,277

    

7,172

    

6,896

  

Interest expense

(18,978)

    

(23,788)

    

(73,727)

    

(50,107)

  

Miscellaneous income (expense), net

19,025

    

6,632

    

58,211

    

5,195

  

Total other (expense) income, net

3,445

    

(15,879)

    

(8,344)

    

(38,016)

  

Earnings from Continuing Operations Before Taxes

93,399

    

146,633

    

297,419

    

188,580

  

Income Tax Benefit (Expense) for Continuing Operations

1,981

    

(31,174)

    

(12,829)

    

(110,230)

  

Net Earnings of the Group from Continuing Operations

95,380

    

115,459

    

284,590

    

78,350

  

Net Earnings of the Group from Discontinued Operations

435,684

    

34,612

    

438,837

    

126,215

  

Net Earnings of the Group

531,064

    

150,071

    

723,427

    

204,565

  

Net Earnings Attributable to Noncontrolling Interests from Continuing Operations

(6,015)

    

(2,123)

    

(15,578)

    

(5,539)

  

Net Earnings Attributable to Jacobs from Continuing Operations

89,365

    

113,336

    

269,012

    

72,811

  

Net (Earnings) Losses Attributable to Noncontrolling Interests from Discontinued Operations

(607)

    

2,274

    

(2,195)

    

1,946

  

Net Earnings Attributable to Jacobs from Discontinued Operations

$

435,077

    

$

36,886

    

$

436,642

    

$

128,161

  

Net Earnings Attributable to Jacobs

$

524,442

    

$

150,222

    

$

705,654

    

$

200,972

  

Net Earnings Per Share:

              

Basic Net Earnings from Continuing Operations Per Share

$

0.65

    

$

0.79

    

$

1.93

    

$

0.53

  

Basic Net Earnings from Discontinued Operations Per Share

$

3.18

    

$

0.26

    

$

3.14

    

$

0.94

  

Basic Earnings Per Share

$

3.83

    

$

1.05

    

$

5.07

    

$

1.47

  
               

Diluted Net Earnings from Continuing Operations Per Share

$

0.65

    

$

0.79

    

$

1.92

    

$

0.53

  

Diluted Net Earnings from Discontinued Operations Per Share

$

3.15

    

$

0.26

    

$

3.11

    

$

0.93

  

Diluted Earnings Per Share

$

3.80

    

$

1.05

    

$

5.02

    

$

1.46

  
               

 

Segment Information (in thousands):
 
 

For the Three Months Ended

  

For the Nine Months Ended

Unaudited

June 28, 2019

  

June 29, 2018

  

June 28, 2019

  

June 29, 2018

Revenues from External Customers:

              

Aerospace, Technology and Nuclear

$

1,156,488

    

$

1,021,523

    

$

3,251,024

    

$

2,656,303

  

Buildings, Infrastructure and Advanced Facilities

2,013,134

    

1,912,100

    

6,093,981

    

4,931,613

  

Pass Through Revenue

(533,935)

    

(583,423)

    

(1,840,572)

    

(1,603,930)

  

Buildings, Infrastructure and Advanced Facilities Net Revenue

$

1,479,199

    

$

1,328,677

    

$

4,253,409

    

$

3,327,683

  

Total Revenue

$

3,169,622

    

$

2,933,623

    

$

9,345,005

    

$

7,587,916

  

Net Revenue

$

2,635,687

    

$

2,350,200

    

$

7,504,433

    

$

5,983,986

  
       
 

For the Three Months Ended

  

For the Nine Months Ended
 

June 28, 2019

  

June 29, 2018

  

June 28, 2019

  

June 29, 2018

Segment Operating Profit:

              

Aerospace, Technology and Nuclear

$

76,306

    

$

69,085

    

$

222,289

    

$

182,609

  

Buildings, Infrastructure and Advanced Facilities

183,318

    

163,193

    

515,465

    

374,809

  

Total Segment Operating Profit

259,624

    

232,278

    

737,754

    

557,418

  

Other Corporate Expenses (1)

(64,525)

    

(34,802)

    

(185,674)

    

(131,163)

  

Restructuring and Other Charges

(92,407)

    

(30,544)

    

(233,579)

    

(122,744)

  

Transaction Costs

(12,738)

    

(4,420)

    

(12,738)

    

(76,915)

  

Total U.S. GAAP Operating Profit

89,954

    

162,512

    

305,763

    

226,596

  

Total Other (Expense) Income, net (2)

3,445

    

(15,879)

    

(8,344)

    

(38,016)

  

Earnings from Continuing Operations Before Taxes

$

93,399

    

$

146,633

    

$

297,419

    

$

188,580

  
 

(1) Other corporate expenses include costs that were previously allocated to the ECR segment prior to discontinued operations presentation in connection with the ECR sale in the approximate amounts of $2.0 million and $6.4 million for the three-month periods ended June 28, 2019 and June 29, 2018, respectively, and $14.8 million and $19.2 million for the nine-month periods ended June 28, 2019 and June 29, 2018, respectively. Other corporate expenses also include intangibles amortization of $18.4 million and $19.3 million for the three-month periods ended June 28, 2019 and June 29, 2018, respectively, and $55.7 million and $49.1 million for the nine-month periods ended June 28, 2019 and June 29, 2018, respectively.
 

(2) Includes gain on the settlement of the CH2M retiree medical plans of $0.0 million and $34.6 million, respectively, and the amortization of deferred financing fees related to the CH2M acquisition of $0.5 million and $1.5 million, respectively, for the three- and nine-month periods ended June 28, 2019, as well as amortization of deferred financing fees related to the CH2M acquisition of $0.5 million and $1.2 million, respectively, for the three- and nine-month periods ended June 29, 2018. Also includes revenues under the Company's TSA with WorleyParsons of $14.1 million, respectively, for the three- and nine-month periods ended June 28, 2019, for which the related costs are included in SG&A.

 

Other Operational Information (in thousands):
 

Unaudited

For the Nine Months Ended

Continuing Operations

June 28, 2019

  

June 29, 2018

Depreciation (pre-tax)

$

67,553

    

$

69,663

  

Amortization of Intangibles (pre-tax)

$

55,732

    

$

49,052

  

Pass-Through Costs Included in Revenues

$

1,840,572

    

$

1,603,930

  

Capital Expenditures

$

97,466

    

$

48,975

  

 

Balance Sheet (in thousands):
 

Unaudited

June 28, 2019

  

September 28, 2018

ASSETS

      

Current Assets:

      

Cash and cash equivalents

$

998,242

    

$

634,870

  

Receivables and contract assets

2,779,189

    

2,513,934

  

Prepaid expenses and other

695,810

    

171,096

  

Current assets held for sale

2,704

    

1,236,684

  

Total current assets

4,475,945

    

4,556,584

  

Property, Equipment and Improvements, net

305,266

    

257,859

  

Other Noncurrent Assets:

      

Goodwill

5,370,741

    

4,795,856

  

Intangibles, net

694,117

    

572,952

  

Miscellaneous

768,102

    

760,854

  

Noncurrent assets held for sale

27,091

    

1,701,690

  

Total other noncurrent assets

6,860,051

    

7,831,352

  
 

$

11,641,262

    

$

12,645,795

  

LIABILITIES AND STOCKHOLDERS' EQUITY

      

Current Liabilities:

      

Short-term debt

$

222,687

    

$

3,172

  

Accounts payable

884,992

    

776,189

  

Accrued liabilities

1,673,272

    

1,167,002

  

Contract liabilities

506,394

    

442,760

  

Current liabilities held for sale

2,103

    

756,570

  

Total current liabilities

3,289,448

    

3,145,693

  

Long-term Debt

1,025,198

    

2,144,167

  

Other Deferred Liabilities

1,218,499

    

1,260,977

  

Noncurrent Liabilities Held for Sale

—

    

150,604

  

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—135,848,893 shares and 142,217,933 shares as of June 28, 2019 and September 28, 2018, respectively

135,849

    

142,218

  

Additional paid-in capital

2,634,177

    

2,708,839

  

Retained earnings

4,053,626

    

3,809,991

  

Accumulated other comprehensive loss

(763,589)

    

(806,703)

  

Total Jacobs stockholders' equity

6,060,063

    

5,854,345

  

Noncontrolling interests

48,054

    

90,009

  

Total Group stockholders' equity

6,108,117

    

5,944,354

  
 

$

11,641,262

    

$

12,645,795

  

 

Statement of Cash Flow (in thousands):
 
 

For the Three Months Ended

  

For the Nine Months Ended

Unaudited

June 28, 2019

  

June 29, 2018

  

June 28, 2019

  

June 29, 2018

Cash Flows from Operating Activities:

              

Net earnings attributable to the Group

$

531,064

    

$

150,071

    

$

723,427

    

$

204,565

  

Adjustments to reconcile net earnings to net cash flows provided by operations:

              

Depreciation and amortization:

              

Property, equipment and improvements

25,851

    

29,576

    

69,663

    

88,715

  

Intangible assets

18,383

    

22,447

    

56,346

    

58,495

  

(Gain) Loss on disposal of ECR business

(917,697)

    

—

    

(917,697)

    

—

  

(Gain) Loss on disposal of other businesses and investments

9,608

    

(444)

    

9,608

    

(444)

  

(Gain) Loss on investment in equity securities

(2,175)

    

—

    

(2,175)

    

—

  

Stock based compensation

18,425

    

14,939

    

47,341

    

61,821

  

Equity in earnings of operating ventures, net

(2,307)

    

(9,174)

    

(7,632)

    

(8,387)

  

(Gain) Losses on disposals of assets, net

(1,732)

    

6,138

    

1,998

    

10,055

  

Loss (Gain) on pension and retiree medical plan changes

—

    

—

    

(34,621)

    

3,819

  

Deferred income taxes

83,600

    

(14,173)

    

52,592

    

(7,374)

  

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

              

Receivables and contract assets

(149,885)

    

(144,474)

    

(402,616)

    

(316,386)

  

Prepaid expenses and other current assets

(41,734)

    

7,981

    

5,999

    

5,620

  

Accounts payable

74,532

    

120,741

    

67,778

    

138,713

  

Accrued liabilities

(103,416)

    

28,708

    

(161,179)

    

8,083

  

Contract liabilities

361,881

    

1,096

    

419,762

    

34,695

  

 Other deferred liabilities

(80,707)

    

(3,587)

    

(129,468)

    

(21,007)

  

      Other, net

11,228

    

4,901

    

(19,439)

    

7,967

  

          Net cash (used for) provided by operating activities

(165,081)

    

214,746

    

(220,313)

    

268,950

  

Cash Flows from Investing Activities:

              

Additions to property and equipment

(45,190)

    

(18,563)

    

(106,670)

    

(63,408)

  

Disposals of property and equipment and other assets

60

    

—

    

7,300

    

428

  

Distributions of capital from (contributions to) equity investees

—

    

15,310

    

(3,904)

    

7,614

  

Acquisitions of businesses, net of cash acquired

(575,110)

    

(3,729)

    

(575,110)

    

(1,488,546)

  

Disposals of investment in equity securities

64,708

    

—

    

64,708

    

—

  

Proceeds (payments) related to sales of businesses

2,796,734

    

—

    

2,796,734

    

3,403

  

Purchases of noncontrolling interests

—

    

—

    

(1,113)

    

—

  

           Net cash provided by (used for) investing activities

2,241,202

    

(6,982)

    

2,181,945

    

(1,540,509)

  

Cash Flows from Financing Activities:

              

Net (payments) proceeds from borrowings

(1,895,959)

    

(159,814)

    

(1,200,388)

    

1,402,387

  

Debt issuance costs

—

    

—

    

(3,741)

    

—

  

Proceeds from issuances of common stock

20,198

    

6,952

    

46,143

    

33,588

  

Common stock repurchases

(36,183)

    

(31)

    

(524,618)

    

(2,982)

  

Taxes paid on vested restricted stock

(5,870)

    

(10,835)

    

(26,187)

    

(27,975)

  

Cash dividends, including to noncontrolling interests

(25,867)

    

(20,999)

    

(82,257)

    

(65,232)

  

Net cash provided by (used for) financing activities

(1,943,681)

    

(184,727)

    

(1,791,048)

    

1,339,786

  

Effect of Exchange Rate Changes

15,164

    

(34,082)

    

34,300

    

(18,008)

  

Net Increase (decrease) in Cash and Cash Equivalents

147,604

    

(11,045)

    

204,884

    

50,219

  

Cash and Cash Equivalents at the Beginning of the Period

850,638

    

835,415

    

793,358

    

774,151

  

Cash and Cash Equivalents at the End of the Period

998,242

    

824,370

    

998,242

    

824,370

  

Less Cash and Cash Equivalents included in Assets held for Sale

—

    

(161,666)

    

—

    

(161,666)

  

Cash and Cash Equivalents of Continuing Operations at the End of the Period

$

998,242

    

$

662,704

    

$

998,242

    

$

662,704

  

 

Backlog (in millions):
 
 

June 28, 2019

  

June 29, 2018

Aerospace, Technology and Nuclear

$

8,456

    

$

7,147

  

Buildings, Infrastructure and Advanced Facilities

14,011

    

12,693

  

            Total

$

22,467

    

$

19,840

  

Non-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 net revenue, adjusted net earnings from continuing operations, adjusted EPS from continuing operations and adjusted EBITDA.

Adjusted net earnings from continuing operations and adjusted EPS from continuing operations are non-GAAP financial measures that are calculated by (i) excluding the 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) excluding costs and other charges associated with restructuring activities implemented in connection with the CH2M acquisition, the ECR divestiture, the KeyW acquisition and other related cost reduction initiatives, which included involuntary terminations, costs associated with co-locating Jacobs and KeyW and CH2M offices, separating physical locations of ECR and continuing operations, costs and expenses of the Integration Management Office and Separation Management Office, including professional services and personnel costs, costs and charges associated with the divestiture of joint venture interests to resolve potential conflicts arising from the CH2M acquisition, expenses relating to certain commitments and contingencies relating to discontinued operations of the CH2M business, and similar costs and expenses (collectively referred to as the "Restructuring and other charges"); (iii) excluding transaction costs and other charges incurred in connection with closing of the KeyW and CH2M acquisitions and sale of the ECR business, including advisor fees, change in control payments, costs and expenses relating to the registration and listing of Jacobs stock issued in connection with the CH2M acquisition, and similar transaction costs and expenses (collectively referred to as "transaction costs"); (iv) excluding charges resulting from the revaluation of certain deferred tax assets/liabilities in connection with U.S. tax reform; (v) adding back depreciation and amortization relating to the ECR business of the Company that was ceased as a result of the application of held-for-sale accounting; (vi) adding back amortization of intangible assets; (vii) allocating to discontinued operations estimated stranded corporate costs that will be reimbursed or otherwise eliminated in connection with the sale of the ECR business; (viii) allocating to discontinued operations estimated interest expense relating to long-term debt that was paid down with the proceeds of the ECR sale; (ix) the reclassification of revenue under the Company's transition services agreement (TSA) included in other income for U.S. GAAP reporting purposes to SG&A and the exclusion of remaining unreimbursed costs associated with the TSA; (x) the exclusion of a one-time favorable adjustment in the fiscal 2019 period associated with a reduction of deferred income taxes for permanently reinvested earnings from non-U.S. subsidiaries in connection with the sale of the ECR business; and (xi) other income tax adjustments. Adjustments to derive adjusted net earnings from continuing operations and adjusted EPS from continuing operations are calculated on an after-tax basis. Adjusted EBITDA is calculated by adding depreciation expense to adjusted operating profit from continuing operations. Net revenue is calculated by excluding pass-through revenues of the BIAF line of business.  We believe that net revenue, adjusted net earnings from continuing operations, adjusted EPS from continuing operations and adjusted EBITDA 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 or adding back the effects of the items described above, the inclusion or exclusion of which can obscure underlying trends. Additionally, management uses net revenue, adjusted net earnings from continuing operations, adjusted EPS from continuing operations and adjusted EBITDA 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 revenue, net earnings from continuing operations, EPS from continuing operations 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 (note: earnings per share amounts may not add across due to rounding). Reconciliation of the adjusted EPS and adjusted EBITDA outlook for the full fiscal year to the most directly comparable GAAP measure is not available without unreasonable efforts because the Company cannot predict with sufficient certainty all the components required to provide such reconciliation.

U.S. GAAP Reconciliation for the third quarter of fiscal 2019 and 2018
 
 

Three Months Ended
 

June 28, 2019

Unaudited

U.S. GAAP

  

Effects of

Restructuring

and Other

Charges

  

Effects of

Transaction

Costs (1)

  

Other

Adjustments

(2)

  

Adjusted

Revenues

$

3,169,622

    

$

—

    

$

—

    

$

—

    

$

3,169,622

  

Pass through revenue

—

    

—

    

—

    

(533,935)

    

(533,935)

  

Net revenue

3,169,622

    

—

    

—

    

(533,935)

    

2,635,687

  

Direct cost of contracts

(2,543,488)

    

2,481

    

—

    

533,935

    

(2,007,072)

  

Gross profit

626,134

    

2,481

    

—

    

—

    

628,615

  

Selling, general and administrative expenses

(536,180)

    

89,926

    

12,738

    

37,714

    

(395,802)

  

Operating Profit

89,954

    

92,407

    

12,738

    

37,714

    

232,813

  

Total other (expense) income, net

3,445

    

831

    

515

    

(8,362)

    

(3,571)

  

Earnings from Continuing Operations Before Taxes

93,399

    

93,238

    

13,253

    

29,352

    

229,242

  

Income Tax Benefit (Expense) for Continuing Operations

1,981

    

(22,924)

    

(3,259)

    

(5,823)

    

(30,025)

  

Net Earnings of the Group from Continuing Operations

95,380

    

70,314

    

9,994

    

23,529

    

199,217

  

Net Earnings Attributable to Noncontrolling Interests from Continuing Operations

(6,015)

    

—

    

—

    

—

    

(6,015)

  

Net Earnings from Continuing Operations attributable to Jacobs

89,365

    

70,314

    

9,994

    

23,529

    

193,202

  

Net Earnings Attributable to Discontinued Operations

435,077

    

2,058

    

2,447

    

(7,823)

    

431,759

  

Net earnings attributable to Jacobs

$

524,442

    

$

72,372

    

$

12,441

    

$

15,706

    

$

624,961

  

Diluted Net Earnings from Continuing Operations Per Share

$

0.65

    

$

0.51

    

$

0.07

    

$

0.17

    

$

1.40

  

Diluted Net Earnings from Discontinued Operations Per Share

$

3.15

    

$

0.01

    

$

0.02

    

$

(0.06)

    

$

3.13

  

Diluted Earnings Per Share

$

3.80

    

$

0.52

    

$

0.09

    

$

0.11

    

$

4.53

  

Operating profit margin

2.84

%

              

8.83

%
 

(1) Includes after-tax CH2M transaction costs and adjustments of $0.4 million, after-tax transaction costs associated with the sale of our ECR line of business of $2.4 million and after-tax transaction costs associated with the acquisition of KeyW of $9.6 million.
 

(2) Includes (a) the removal of pass through revenues and costs for the BIAF line of business for the calculation of operating profit margin as a percentage of net revenue of $533.9 million, (b) the removal of amortization of intangible assets of $18.4 million, (c) the allocation to discontinued operations of estimated stranded corporate costs of $2.0 million for the month of April prior to the sale that will be reimbursed under the ECR transition services agreement (TSA) with Worley Parsons or otherwise eliminated from the ongoing operations in connection with the sale of the ECR business, (d) the allocation to discontinued operations of estimated interest expense for the month of April prior to the sale related to long-term debt that has been paid down as a result of the ECR sale of $5.8 million, (e) the add-back of depreciation relating to the ECR business that was ceased as a result of the application of held-for-sale accounting of $2.6 million, (f) the reclassification of revenues under the Company's TSA of $14.1 million included in other income for U.S. GAAP reporting purposes to SG&A and the exclusion of $3.2 million in remaining unreimbursed costs associated with this agreement, (g) other income tax adjustments of $1.5 million and (h) associated income tax expense adjustments for all the above pre-tax adjustment items.

 

 

Three Months Ended
 

June 29, 2018

Unaudited

U.S. GAAP

  

Effects of

Restructuring

and Other

Charges

  

Effects of

CH2M

Transaction

Costs

  

Other

 Adjustments

(1)

  

Adjusted

Revenues

$

2,933,623

    

$

—

    

$

—

    

$

—

    

$

2,933,623

  

Pass through revenue

—

    

—

    

—

    

(583,423)

    

(583,423)

  

Net revenue

2,933,623

    

—

    

—

    

(583,423)

    

2,350,200

  

Direct cost of contracts

(2,325,028)

    

2,576

    

—

    

583,423

    

(1,739,029)

  

Gross profit

608,595

    

2,576

    

—

    

—

    

611,171

  

Selling, general and administrative expenses

(446,083)

    

27,967

    

4,422

    

25,699

    

(387,995)

  

Operating Profit

162,512

    

30,543

    

4,422

    

25,699

    

223,176

  

Total other (expense) income, net

(15,879)

    

(466)

    

933

    

16,069

    

657

  

Earnings from Continuing Operations Before Taxes

146,633

    

30,077

    

5,355

    

41,768

    

223,833

  

Income Tax Benefit (Expense) for Continuing Operations

(31,174)

    

(7,433)

    

(1,483)

    

(3,478)

    

(43,568)

  

Net Earnings of the Group from Continuing Operations

115,459

    

22,644

    

3,872

    

38,290

    

180,265

  

Net Earnings Attributable to Noncontrolling Interests from Continuing Operations

(2,123)

    

(577)

    

—

    

—

    

(2,700)

  

Net Earnings from Continuing Operations attributable to Jacobs

113,336

    

22,067

    

3,872

    

38,290

    

177,565

  

Net Earnings Attributable to Discontinued Operations

36,886

    

12,683

    

—

    

(14,800)

    

34,769

  

Net earnings attributable to Jacobs

$

150,222

    

$

34,750

    

$

3,872

    

$

23,490

    

$

212,334

  

Diluted Net Earnings from Continuing Operations Per Share

$

0.79

    

$

0.15

    

$

0.03

    

$

0.27

    

$

1.24

  

Diluted Net Earnings from Discontinued Operations Per Share

$

0.26

    

$

0.09

    

$

—

    

$

(0.10)

    

$

0.24

  

Diluted Earnings Per Share

$

1.05

    

$

0.24

    

$

0.03

    

$

0.16

    

$

1.48

  

Operating profit margin

5.54

%

              

9.50

%
 

(1) Includes (a) the removal of pass through revenues and costs for the BIAF line of business for the calculation of operating profit margin as a percentage of net revenue of $583.4 million, (b) the removal of amortization of intangible assets of $22.4 million, (c) the allocation to discontinued operations of estimated stranded corporate costs of $6.4 million that would have been reimbursed under the ECR transition services agreement (TSA) with Worley Parsons or otherwise eliminated from the ongoing operations in connection with the sale of the ECR business, (d) estimated 2018 impacts of $19.2 million from overhead allocation realignments in connection with the Company's CH2M business in the first quarter of fiscal 2019 had those changes been put into effect in first quarter of fiscal 2018 (the net impact of which was zero for consolidated selling, general and administrative expenses), (e) the allocation to discontinued operations of estimated interest expense for the full period related to long-term debt that has been paid down as a result of the ECR sale of $16.1 million, (f) the add-back of charges resulting from the revaluation of certain deferred tax assets/liabilities in connection with U.S. tax reform of $5.3 million and (g) associated income tax expense adjustments for all the above pre-tax adjustment items.

 

 

Nine Months Ended
 

June 28, 2019

Unaudited

U.S. GAAP

  

Effects of

Restructuring

and Other

Charges

  

Effects of

Transaction

Costs (1)

  

Other

Adjustments

(2)

  

Adjusted

Revenues

$

9,345,005

    

$

—

    

$

—

    

$

—

    

$

9,345,005

  

Pass through revenue

—

    

—

    

—

    

(1,840,572)

    

(1,840,572)

  

Net revenue

9,345,005

    

—

    

—

    

(1,840,572)

    

7,504,433

  

Direct cost of contracts

(7,533,511)

    

1,969

    

—

    

1,840,572

    

(5,690,970)

  

Gross profit

1,811,494

    

1,969

    

—

    

—

    

1,813,463

  

Selling, general and administrative expenses

(1,505,731)

    

231,610

    

12,738

    

87,863

    

(1,173,520)

  

Operating Profit

305,763

    

233,579

    

12,738

    

87,863

    

639,943

  

Total other (expense) income, net

(8,344)

    

(28,460)

    

1,544

    

28,109

    

(7,151)

  

Earnings from Continuing Operations Before Taxes

297,419

    

205,119

    

14,282

    

115,972

    

632,792

  

Income Tax Expense for Continuing Operations

(12,829)

    

(44,443)

    

(3,509)

    

(53,782)

    

(114,563)

  

Net Earnings of the Group from Continuing Operations

284,590

    

160,676

    

10,773

    

62,190

    

518,229

  

Net (Earnings) Loss Attributable to Noncontrolling Interests from Continuing Operations

(15,578)

    

—

    

—

    

—

    

(15,578)

  

Net Earnings from Continuing Operations attributable to Jacobs

269,012

    

160,676

    

10,773

    

62,190

    

502,651

  

Net Earnings Attributable to Discontinued Operations

436,642

    

(587)

    

8,948

    

(55,622)

    

389,381

  

Net earnings attributable to Jacobs

$

705,654

    

$

160,089

    

$

19,721

    

$

6,568

    

$

892,032

  

Diluted Net Earnings from Continuing Operations Per Share

$

1.92

    

$

1.14

    

$

0.08

    

$

0.44

    

$

3.58

  

Diluted Net Earnings from Discontinued Operations Per Share

$

3.11

    

$

—

    

$

0.06

    

$

(0.40)

    

$

2.77

  

Diluted Earnings Per Share

$

5.02

    

$

1.14

    

$

0.14

    

$

0.05

    

$

6.35

  

Operating profit margin

3.27

%

              

8.53

%
 

(1) Includes after-tax CH2M transaction costs and adjustments of $1.2 million, after-tax transaction costs associated with the sale of our ECR line of business of $8.9 million and after-tax transaction costs associated with the acquisition of KeyW of $9.6 million.
 

(2) Includes (a) the removal of pass through revenues and costs for the BIAF line of business for the calculation of operating profit margin as a percentage of net revenue of $1.84 billion, (b) the removal of amortization of intangible assets of $55.7 million, (c) the allocation to discontinued operations of estimated stranded corporate costs of $14.8 million for the month of April prior to the sale that will be reimbursed under the ECR  transition services agreement (TSA) with Worley Parsons or otherwise eliminated from the ongoing operations in connection with the sale of the ECR business, (d) the allocation to discontinued operations of estimated interest expense for the month of April prior to the sale related to long-term debt that has been paid down as a result of the ECR sale of $42.3 million, (e) the exclusion of approximately $37.0 million in one-time favorable income tax adjustment from the second quarter associated with reduction of deferred income taxes for permanently reinvested earnings from non-U.S. subsidiaries in connection with the sale of the ECR business, (f) the add-back of charges resulting from the revaluation of certain deferred tax assets/liabilities in connection with U.S. tax reform from the first quarter of $11.0 million and other adjustments of $1.5 million,  (g) the add-back of depreciation relating to the ECR business that was ceased as a result of the application of held-for-sale accounting of $17.3 million, (h) the reclassification of revenues under the Company's TSA of $14.1 million included in other income for U.S. GAAP reporting purposes to SG&A and the exclusion of $3.2 million in remaining unreimbursed costs associated with this agreement and (i) associated income tax expense adjustments for all the above pre-tax adjustment items.

 

 

Nine Months Ended
 

June 29, 2018

Unaudited

U.S. GAAP

  

Effects of

Restructuring

and Other

Charges

  

Effects of

CH2M

Transaction

Costs

  

Other

Adjustments

(1)

  

Adjusted

Revenues

$

7,587,916

    

$

—

    

$

—

    

$

—

    

$

7,587,916

  

Pass through revenue

—

    

—

    

—

    

(1,603,930)

    

(1,603,930)

  

Net revenue

7,587,916

    

—

    

—

    

(1,603,930)

    

5,983,986

  

Direct cost of contracts

(6,035,598)

    

2,576

    

—

    

1,603,930

    

(4,429,092)

  

Gross profit

1,552,318

    

2,576

    

—

    

—

    

1,554,894

  

Selling, general and administrative expenses

(1,325,722)

    

120,168

    

76,915

    

68,252

    

(1,060,387)

  

Operating Profit

226,596

    

122,744

    

76,915

    

68,252

    

494,507

  

Total other (expense) income, net

(38,016)

    

—

    

1,189

    

33,205

    

(3,622)

  

Earnings from Continuing Operations Before Taxes

188,580

    

122,744

    

78,104

    

101,457

    

490,885

  

Income Tax Expense for Continuing Operations

(110,230)

    

(31,352)

    

(19,363)

    

51,210

    

(109,735)

  

Net Earnings of the Group from Continuing Operations

78,350

    

91,392

    

58,741

    

152,667

    

381,150

  

Net (Earnings) Loss Attributable to Noncontrolling Interests from Continuing Operations

(5,539)

    

(577)

    

—

    

—

    

(6,116)

  

Net Earnings from Continuing Operations attributable to Jacobs

72,811

    

90,815

    

58,741

    

152,667

    

375,034

  

Net Earnings Attributable to Discontinued Operations

128,161

    

9,794

    

—

    

(32,607)

    

105,348

  

Net earnings attributable to Jacobs

$

200,972

    

$

100,609

    

$

58,741

    

$

120,060

    

$

480,382

  

Diluted Net Earnings from Continuing Operations Per Share

$

0.53

    

$

0.66

    

$

0.43

    

$

1.11

    

$

2.72

  

Diluted Net Earnings from Discontinued Operations Per Share

$

0.93

    

$

0.07

    

$

—

    

$

(0.24)

    

$

0.76

  

Diluted Earnings Per Share

$

1.46

    

$

0.73

    

$

0.43

    

$

0.87

    

$

3.49

  

Operating profit margin

2.99

%

              

8.26

%
 

(1) Includes (a) the removal of pass through revenues and costs for the BIAF line of business for the calculation of operating profit margin as a percentage of net revenue of $1.60 billion; (b) the removal of amortization of intangible assets of $58.5 million, (c) the allocation to discontinued operations of estimated stranded corporate costs of $19.2 million that would have been reimbursed under the ECR  transition services agreement (TSA) with Worley Parsons or otherwise eliminated from the ongoing operations in connection with the sale of the ECR business, (d) estimated 2018 impacts of $51.2 million from overhead allocation realignments in connection with the Company's CH2M business in the first quarter of fiscal 2019 had those changes been put into effect in first quarter of fiscal 2018 (the net impact of which was zero for consolidated selling, general and administrative expenses), (e) the allocation to discontinued operations of estimated interest expense for the full period related to long-term debt that has been paid down as a result of the ECR sale of $33.2 million, (f) the add-back of charges resulting from the revaluation of certain deferred tax assets/liabilities in connection with U.S. tax reform of $74.7 million and (g) associated income tax expense adjustments for all the above pre-tax adjustment items.

 

Earnings Per Share:
 
 

Three Months Ended

  

Nine Months Ended

Unaudited

June 28, 2019

  

June 29, 2018

  

June 28, 2019

  

June 29, 2018

Numerator for Basic and Diluted EPS:

              

Net earnings (loss) attributable to Jacobs from continuing operations

$

89,365

    

$

113,336

    

$

269,012

    

$

72,811

  

Net earnings (loss) from continuing operations allocated to participating securities

(105)

    

(475)

    

(444)

    

(325)

  

Net earnings (loss) from continuing operations allocated to common stock for EPS calculation

$

89,260

    

$

112,861

    

$

268,568

    

$

72,486

  
               

Net earnings (loss) attributable to Jacobs from discontinued operations

$

435,077

    

$

36,886

    

436,642

    

128,161

  

Net earnings (loss) from discontinued operations allocated to participating securities

(513)

    

(155)

    

(720)

    

(573)

  

Net earnings (loss) from discontinued operations allocated to common stock for EPS calculation

$

434,564

    

$

36,731

    

$

435,922

    

$

127,588

  
               

Net earnings allocated to common stock for EPS calculation

$

523,824

    

$

149,592

    

$

704,490

    

$

200,074

  
               

Denominator for Basic and Diluted EPS:

              

Weighted average basic shares

136,772

    

142,612

    

139,263

    

136,717

  

Shares allocated to participating securities

(161)

    

(597)

    

(230)

    

(743)

  

Shares used for calculating basic EPS attributable to common stock

136,611

    

142,015

    

139,033

    

135,974

  
               

Effect of dilutive securities:

              

Stock compensation plans

1,212

    

1,014

    

1,206

    

1,028

  

Shares used for calculating diluted EPS attributable to common stock

137,823

    

143,029

    

140,239

    

137,002

  
               

Net Earnings Per Share:

              

Basic Net Earnings from Continuing Operations Per Share

$

0.65

    

$

0.79

    

$

1.93

    

$

0.53

  

Basic Net Earnings from Discontinued Operations Per Share

$

3.18

    

$

0.26

    

$

3.14

    

$

0.94

  

Basic EPS

$

3.83

    

$

1.05

    

$

5.07

    

$

1.47

  

Diluted Net Earnings from Continuing Operations Per Share

$

0.65

    

$

0.79

    

$

1.92

    

$

0.53

  

Diluted Net Earnings from Discontinued Operations Per Share

$

3.15

    

$

0.26

    

$

3.11

    

$

0.93

  

Diluted EPS

$

3.80

    

$

1.05

    

$

5.02

    

$

1.46

  

For additional information contact:

Investors:

Jonathan Doros, 214-583-8596

jonathan.doros@jacobs.com

Media:

Marietta Hannigan, 214-920-8035

marietta.hannigan@jacobs.com

 

View original content to download multimedia:http://www.prnewswire.com/news-releases/jacobs-reports-earnings-for-the-third-quarter-of-fiscal-2019-300896088.html

SOURCE Jacobs