filings.toolsJacobs Solutions 10-Q 2022-04-01
Filed 2022-05-03. 8 sections, 227K characters. Original on sec.gov · Markdown · JSON
Cover and table of contents
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 April 1, 2022
☐ 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)
Securities registered pursuant to Section 12(b) of the Act:
_________________________________________________________________
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | |||||||||
| Common Stock | $1 par value | J | New York Stock Exchange |
Indicate by check-mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: ☒ Yes ☐ No
Indicate by check-mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). ☒ Yes ☐ No
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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 22, 2022: 128,627,268
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JACOBS ENGINEERING GROUP INC.
INDEX TO FORM 10-Q
Page 3
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements.
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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share information)
| April 1, 2022 | October 1, 2021 | ||||||||||
| (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | 1,235,422 | $ | 1,014,249 | |||||||
| Receivables and contract assets | 3,302,868 | 3,101,418 | |||||||||
| Prepaid expenses and other | 152,989 | 176,228 | |||||||||
| Total current assets | 4,691,279 | 4,291,895 | |||||||||
| Property, Equipment and Improvements, net | 326,596 | 353,117 | |||||||||
| Other Noncurrent Assets: | |||||||||||
| Goodwill | 7,492,015 | 7,197,000 | |||||||||
| Intangibles, net | 1,553,283 | 1,565,758 | |||||||||
| Deferred income tax assets | 68,376 | 103,193 | |||||||||
| Operating lease right-of-use assets | 556,686 | 650,097 | |||||||||
| Miscellaneous | 495,057 | 471,549 | |||||||||
| Total other noncurrent assets | 10,165,417 | 9,987,597 | |||||||||
| $ | 15,183,292 | $ | 14,632,609 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current Liabilities: | |||||||||||
| Current maturities of long-term debt | $ | 52,911 | $ | 53,456 | |||||||
| Accounts payable | 921,372 | 908,441 | |||||||||
| Accrued liabilities | 1,955,327 | 1,533,559 | |||||||||
| Operating lease liability | 162,817 | 172,414 | |||||||||
| Contract liabilities | 672,265 | 542,054 | |||||||||
| Total current liabilities | 3,764,692 | 3,209,924 | |||||||||
| Long-term Debt | 3,196,374 | 2,839,933 | |||||||||
| Liabilities relating to defined benefit pension and retirement plans | 366,788 | 418,080 | |||||||||
| Deferred income tax liabilities | 211,341 | 214,380 | |||||||||
| Long-term operating lease liability | 688,604 | 758,358 | |||||||||
| Other deferred liabilities | 163,988 | 559,375 | |||||||||
| Commitments and Contingencies | |||||||||||
| Redeemable Noncontrolling interests | 669,527 | 657,722 | |||||||||
| 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 128,899,796 shares and 128,892,540 shares as of April 1, 2022 and October 1, 2021, respectively | 128,900 | 128,893 | |||||||||
| Additional paid-in capital | 2,667,256 | 2,590,012 | |||||||||
| Retained earnings | 4,069,664 | 4,015,578 | |||||||||
| Accumulated other comprehensive loss | (788,374) | (794,442) | |||||||||
| Total Jacobs stockholders’ equity | 6,077,446 | 5,940,041 | |||||||||
| Noncontrolling interests | 44,532 | 34,796 | |||||||||
| Total Group stockholders’ equity | 6,121,978 | 5,974,837 | |||||||||
| $ | 15,183,292 | $ | 14,632,609 |
See the accompanying Notes to Consolidated Financial Statements – Unaudited.
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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Three and Six Months Ended April 1, 2022 and April 2, 2021
(In thousands, except per share information)
(Unaudited)
| For the Three Months Ended | For the Six Months Ended | ||||||||||||||||||||||
| April 1, 2022 | April 2, 2021 | April 1, 2022 | April 2, 2021 | ||||||||||||||||||||
| Revenues | $ | 3,834,059 | $ | 3,547,873 | $ | 7,214,684 | $ | 6,929,708 | |||||||||||||||
| Direct cost of contracts | (2,963,649) | (2,780,860) | (5,547,800) | (5,530,636) | |||||||||||||||||||
| Gross profit | 870,410 | 767,013 | 1,666,884 | 1,399,072 | |||||||||||||||||||
| Selling, general and administrative expenses | (704,195) | (808,125) | (1,323,336) | (1,226,246) | |||||||||||||||||||
| Operating Profit (Loss) | 166,215 | (41,112) | 343,548 | 172,826 | |||||||||||||||||||
| Other Income (Expense): | |||||||||||||||||||||||
| Interest income | 381 | 608 | 1,882 | 1,732 | |||||||||||||||||||
| Interest expense | (21,995) | (15,464) | (41,421) | (32,777) | |||||||||||||||||||
| Miscellaneous income (expense), net | 10,681 | (56,313) | 20,362 | 100,047 | |||||||||||||||||||
| Total other (expense) income, net | (10,933) | (71,169) | (19,177) | 69,002 | |||||||||||||||||||
| Earnings (Loss) from Continuing Operations Before Taxes | 155,282 | (112,281) | 324,371 | 241,828 | |||||||||||||||||||
| Income Tax (Expense) Benefit from Continuing Operations | (46,166) | 20,772 | (62,054) | (66,250) | |||||||||||||||||||
| Net Earnings (Loss) of the Group from Continuing Operations | 109,116 | (91,509) | 262,317 | 175,578 | |||||||||||||||||||
| Net (Loss) Earnings of the Group from Discontinued Operations | (1) | 11,320 | (233) | 11,305 | |||||||||||||||||||
| Net Earnings (Loss) of the Group | 109,115 | (80,189) | 262,084 | 186,883 | |||||||||||||||||||
| Net Earnings Attributable to Noncontrolling Interests from Continuing Operations | (10,261) | (10,158) | (19,514) | (20,184) | |||||||||||||||||||
| Net (Earnings) Loss Attributable to Redeemable Noncontrolling interests | (10,038) | 101,392 | (19,721) | 101,392 | |||||||||||||||||||
| Net Earnings (Loss) Attributable to Jacobs from Continuing Operations | 88,817 | (275) | 223,082 | 256,786 | |||||||||||||||||||
| Net Earnings Attributable to Jacobs | $ | 88,816 | $ | 11,045 | $ | 222,849 | $ | 268,091 | |||||||||||||||
| Net Earnings Per Share: | |||||||||||||||||||||||
| Basic Net Earnings from Continuing Operations Per Share | $ | 0.69 | $ | — | $ | 1.72 | $ | 1.97 | |||||||||||||||
| Basic Net Earnings from Discontinued Operations Per Share | $ | — | $ | 0.09 | $ | — | $ | 0.09 | |||||||||||||||
| Basic Earnings Per Share | $ | 0.69 | $ | 0.08 | $ | 1.72 | $ | 2.06 | |||||||||||||||
| Diluted Net Earnings from Continuing Operations Per Share | $ | 0.68 | $ | — | $ | 1.71 | $ | 1.96 | |||||||||||||||
| Diluted Net Earnings from Discontinued Operati |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
General
The purpose of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is to provide a narrative analysis explaining the reasons for material changes in the Company’s (i) financial condition from the most recent fiscal year-end to April 1, 2022 and (ii) results of operations during the current fiscal period(s) as compared to the corresponding period(s) of the preceding fiscal year. In order to better understand such changes, readers of this MD&A should also read:
-
The discussion of the critical and significant accounting policies used by the Company in preparing its consolidated financial statements. The most current discussion of our critical accounting policies appears in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations of our 2021 Form 10-K, and the most current discussion of our significant accounting policies appears in Note 2- Significant Accounting Polices in Notes to Consolidated Financial Statements of our 2021 Form 10-K;
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The Company’s fiscal 2021 audited consolidated financial statements and notes thereto included in our 2021 Form 10-K; and
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Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2021 Form 10-K.
In addition to historical information, this MD&A and other parts of this Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that do not directly relate to any historical or current fact. When used herein, words such as “expects,” “anticipates,” “believes,” “seeks,” “estimates,” “plans,” “intends,” “future,” “will,” “would,” “could,” “can,” “may,” and similar words are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements we make concerning the potential continued effects of the COVID-19 pandemic on our business, financial condition and results of operations and our expectations as to our future growth, prospects, financial outlook and business strategy for fiscal 2022 or future fiscal years and the anticipated benefits of acquisitions and the strategic investment in PA Consulting. You should not place undue reliance on these forward-looking statements. Although such statements are based on management’s current estimates and expectations, and/or 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. Such factors include our ability to execute on our newly-announced three-year corporate strategy, including our ability to invest in the tools needed to fully implement our strategy, competition from existing and future competitors in our target markets, our ability to achieve the cost-savings and synergies contemplated by our recent acquisitions within the expected time frames and to successfully integrate acquired businesses while retaining key personnel, the impact of the COVID-19 pandemic, including the emergence and spread of variants of COVID-19, and any resulting economic downturn on our results, prospects and opportunities, measures or restrictions imposed by governments and health officials in response to the pandemic, the timing of the award of projects and funding under the Infrastructure Investment and Jobs Act, as well as general economic conditions, including inflation, changes in interest rates and foreign currency exchange rates and changes in capital markets, and geopolitical events and conflicts, among others. The impact of such matters includes, but is not limited to, the possible reduction in demand for certain of our product solutions and services and the delay or abandonment of ongoing or anticipated projects due to the financial condition of our clients and suppliers or to governmental budget constraints or changes to governmental budgetary priorities; the inability of our clients to meet their payment obligations in a timely manner or at all; potential issues and risks related to a significant portion of our employees working remotely; illness, travel restrictions and other workforce disruptions that have and could continue to negatively affect our supply chain and our ability to timely and satisfactorily complete our clients’ projects; difficulties associated with retaining key personnel or hiring additional employees; and the inability of governments in certain of the countries in which we operate to effectively mitigate the financial or other impacts of the COVID-19 pandemic on their economies and workforces and our operations therein. The foregoing factors and potential future developments are inherently uncertain, unpredictable and, in many cases, beyond our control. For a description of these and additional factors that may occur that could cause actual results to differ from our forward-looking statements, see those listed and discussed in Item 1A, Risk Factors included in our 2021 Form 10-K and our Quarterly Reports on Form 10-Q. We undertake no obligation to release publicly any revisions or updates to any forward-looking statements. We encourage you to read carefully the risk factors, as well as the financial and business disclosures contained in this Quarterly Report on Form 10-Q and in other documents we file from time to time with the United States Securities and Exchange Commission ("the SEC").
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Impact of COVID-19 on Our Business
On March 11, 2020, the World Health Organization characterized the outbreak of the novel coronavirus (“COVID-19”) as a global pandemic and recommended certain containment and mitigation measures. On March 13, 2020, the United States declared a national emergency concerning the outbreak, and the vast majority of states and many municipalities declared public health emergencies or took similar actions. Along with these declarations, there were extraordinary and wide-ranging actions taken by international, federal, state and local public health and governmental authorities to contain and combat outbreaks of COVID-19 in regions across the United States and around the world. These actions included quarantines and “stay-at-home” or “shelter-in-place” orders, social distancing measures, travel restrictions, school closures and similar mandates for many individuals in order to substantially restrict daily activities and orders for many businesses to curtail or cease normal operations unless their work is critical, essential or life-sustaining. Although most jurisdictions in which we operate have lifted or eased such restrictions to various degrees, some jurisdictions have subsequently reimposed restrictions to varying degrees in response to increased cases caused by variants of COVID-19. In addition, governments and central banks in the United States and other countries in which we operate have periodically enacted fiscal and monetary stimulus and assistance measures to counteract the economic impacts of COVID-19.
As it became clear that the pandemic was unparalleled in the rate of community spread, we took early, decisive action to put people first, help flatten the curve and take care of our clients and communities. We successfully transitioned the vast majority of our employees to a remote working environment to support physical distancing. Where the essential and mission-critical nature of our work requires us to maintain staff at certain sites or locations, we worked closely with our clients and established project-specific plans designed to ensure the safety of our people and the integrity of our operations. Using technology and optimizing our networks, we continue to offer flexible work scenarios for our people, and to deliver business continuity for and continued collaboration with our clients.
Notwithstanding our continued critical operations, COVID-19 negatively impacted our business, and may have further adverse impacts, on our operations, including those listed and discussed in Item 1A, Risk Factors included in our 2021 Form 10-K. Accordingly, at the height of the pandemic, we temporarily reduced spending broadly across the Company, only proceeding with operating and capital spending that was critical. We had also temporarily ceased all non-essential hiring and reduced discretionary expenses, including temporarily suspending certain employee benefits and compensation through the end of fiscal 2020. Subsequently, we have adjusted our response according to the circumstances and local laws in the jurisdictions in which we operate, including the emergence and spread of variants, such as the omicron variant. Looking ahead, we have developed contingency plans if the situation further deteriorates or lasts longer than current expectations. We will continue to actively monitor the situation and may take further actions that alter our business operations as may be necessary or appropriate for the health and safety of employees, contractors, customers, suppliers or others or as required by international, federal, state or local authorities.
The impacts of the COVID-19 pandemic continue to be felt in our operating results as compared to business levels pre-pandemic, although not significantly impacting the current fiscal quarter as compared to the corresponding quarter of the 2021 fiscal year. Further, for future periods, significant uncertainty continues to exist concerning the magnitude, duration and impacts of the COVID-19 pandemic, including with regard to the effects on our customers, customer demand for our services, disruptions to supply chains and labor forces and increasing inflationary pressures. Accordingly, actual results for future fiscal periods could differ materially versus current expectations and current results and financial condition discussed herein may not be indicative of future operating results and trends.
For a discussion of risks and uncertainties related to COVID-19, including the potential impacts on our business, financial condition and results of operations, see Item 1A - Risk Factors contained in our 2021 Form 10-K.
Business Overview
At Jacobs, we’re challenging today to reinvent tomorrow by solving the world’s most critical problems for thriving cities, resilient environments, mission-critical outcomes, operational advancement, scientific discovery and cutting-edge manufacturing.
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Revenue by Type (Q2 FY2022)
Lines of Business
The services we provide fall into the following two lines of business (LOB): Critical Mission Solutions (CMS) and People & Places Solutions (P&PS). The LOBs and a majority investment in PA Consulting (PA) constitute the Company’s reportable segments. For additional information regarding our segments, including information about our financial results by segment and financial results by geography, see Note 5 - Revenue Accounting for Contracts of Notes to Consolidated Financial Statements.
Critical Mission Solutions (CMS)
Our Critical Mission Solutions line of business provides a full spectrum of cyber, data analytics, systems and software application integration services and consulting, enterprise level operations and maintenance and mission IT, engineering and design, enterprise operations and maintenance, program management, and other highly technical consulting solutions to government agencies as well as commercial customers and international markets. Our representative clients include the U.S. Department of Defense (DoD), the Combatant Commands, the U.S. Intelligence Community, NASA, the U.S. Department of Energy (DoE), U.K. Ministry of Defence, the U.K. Nuclear Decommissioning Authority (NDA) and the Australian Department of Defence, as well as private sector customers mainly in the aerospace, automotive, energy and telecom sectors.
The U.S. government is the world’s largest buyer of technical services, and in fiscal 2021, approximately 74% of CMS’s revenue was earned from serving the DoD, intelligence community and Federal Civilian governmental entities. Our international customers, which accounted for 18% of fiscal 2021 revenue, have also increased demand for our IT and cybersecurity solutions and nuclear projects, and the U.K. Ministry of Defence continues to focus on accelerating its strategic innovative and technology focused initiatives.
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People & Places Solutions (P&PS)
Jacobs' People & Places Solutions line of business provides end-to-end solutions for our clients’ most complex challenges - whether climate change, energy transition, connected mobility, integrated water management, smart cities or vaccine manufacturing. In doing so, we incorporate the full spectrum of data science and technology-enabled toolsets within a human-centric solution development and delivery framework. We embrace inclusive engagement of partners and stakeholders and generate enduring social equity/value through consulting, planning, architecture, design and engineering project outcomes, as well as long-term operation of facilities and infrastructure. Solutions may be delivered as standalone engagements or through comprehensive program management that integrates disparate workstreams to yield additional benefits not attainable through project-by-project implementation. We also provide progressive design-build and construction management at-risk delivery solutions in targeted markets.
Our clients include national, state and local government in the U.S., Canada, Europe, U.K., Middle East, Australia, New Zealand and Asia, as well as multinational private sector clients throughout the world.
PA Consulting
In fiscal 2021, Jacobs invested in a 65% stake in PA Consulting, the consultancy that is Bringing Ingenuity to Life. Its diverse teams of experts combine innovative thinking and breakthrough use of technologies to progress further, faster. PA Consulting’s clients adapt and transform and achieve enduring results. An innovation and transformation consultancy, PA's roughly 3,300 employees work across seven sectors: consumer and manufacturing, defense and security, energy and utilities, financial services, government, health and life sciences, and transport. PA Consulting people are strategists, innovators, designers, consultants, digital experts, scientists, engineers and technologists. The team operates globally from offices across the U.K., U.S., Nordics and the Netherlands.
PA Consulting offers end-to-end innovation, accelerating new growth ideas from concept, through design, development, and to commercial success, and revitalizing organizations, building the leadership, culture, systems and processes to make innovation a reality. PA Consulting has a diverse mix of private and public sector clients, from global household names to start-ups, to national and local public services.
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Results of Operations for the three and six months ended April 1, 2022 and April 2, 2021
(in thousands, except per share information)
| For the Three Months Ended | For the Six Months Ended | ||||||||||||||||||||||
| April 1, 2022 | April 2, 2021 | April 1, 2022 | April 2, 2021 | ||||||||||||||||||||
| Revenues | $ | 3,834,059 | $ | 3,547,873 | $ | 7,214,684 | $ | 6,929,708 | |||||||||||||||
| Direct cost of contracts | (2,963,649) | (2,780,860) | (5,547,800) | (5,530,636) | |||||||||||||||||||
| Gross profit | 870,410 | 767,013 | 1,666,884 | 1,399,072 | |||||||||||||||||||
| Selling, general and administrative expenses | (704,195) | (808,125) | (1,323,336) | (1,226,246) | |||||||||||||||||||
| Operating Profit (Loss) | 166,215 | (41,112) | 343,548 | 172,826 | |||||||||||||||||||
| Other Income (Expense): | |||||||||||||||||||||||
| Interest income | 381 | 608 | 1,882 | 1,732 | |||||||||||||||||||
| Interest expense | (21,995) | (15,464) | (41,421) | (32,777) | |||||||||||||||||||
| Miscellaneous income (expense), net | 10,681 | (56,313) | 20,362 | 100,047 | |||||||||||||||||||
| Total other (expense) income, net | (10,933) | (71,169) | (19,177) | 69,002 | |||||||||||||||||||
| Earnings (Loss) from Continuing Operations Before Taxes | 155,282 | (112,281) | 324,371 | 241,828 | |||||||||||||||||||
| Income Tax (Expense) Benefit from Continuing Operations | (46,166) | 20,772 | (62,054) | (66,250) | |||||||||||||||||||
| Net Earnings (Loss) of the Group from Continuing Operations | 109,116 | (91,509) | 262,317 | 175,578 | |||||||||||||||||||
| Net (Loss) Earnings of the Group from Discontinued Operations | (1) | 11,320 | (233) | 11,305 | |||||||||||||||||||
| Net Earnings (Loss) of the Group | 109,115 | (80,189) | 262,084 | 186,883 | |||||||||||||||||||
| Net Earnings Attributable to Noncontrolling Interests from Continuing Operations | (10,261) | (10,158) | $ | (19,514) | $ | (20,184) | |||||||||||||||||
| Net (Earnings) Loss Attributable to Redeemable Noncontrolling interests | (10,038) | 101,392 | (19,721) | 101,392 | |||||||||||||||||||
| Net Earnings (Loss) Attributable to Jacobs from Continuing Operations | 88,817 | (275) | 223,082 | 256,786 | |||||||||||||||||||
| Net Earnings Attributable to Jacobs | $ | 88,816 | $ | 11,045 | $ | 222,849 | $ | 268,091 | |||||||||||||||
| Net Earnings Per Share: | |||||||||||||||||||||||
| Basic Net Earnings from Continuing Operations Per Share | $ | 0.69 | $ | — | $ | 1.72 | $ | 1.97 | |||||||||||||||
| Basic Net Earnings from Discontinued Operations Per Share | $ | — | $ | 0.09 | $ | — | $ | 0.09 | |||||||||||||||
| Basic Earnings Per Share | $ | 0.69 | $ | 0.08 | $ | 1.72 | $ | 2.06 | |||||||||||||||
| Diluted Net Earnings from Continuing Operations Per Share | $ | 0.68 | $ | — | $ | 1.71 | $ | 1.96 | |||||||||||||||
| Diluted Net Earnings from Discontinued Operations Per Share | $ | — | $ | 0.09 | $ | — | $ | 0.09 | |||||||||||||||
| Diluted Earnings Per Share | $ | 0.68 | $ | 0.08 | $ | 1.71 | $ | 2.04 |
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Overview – Three and Six Month Periods Ended April 1, 2022
Net earnings attributable to the Company from continuing operations for the second fiscal quarter ended April 1, 2022 were $88.8 million (or $0.68 per diluted share), an increase of $89.1 million, from net loss of $(0.3) million (or $0.00 per diluted share) for the corresponding period last year. The second fiscal quarter of 2022 benefited from our StreetLight, BlackLynx and the full quarter impact of our PA Consulting investment acquired on March 2, 2021, partly offset by pre-tax Restructuring and other charges and transactions costs of $115.3 million, comprised mainly of the final pre-tax $91.3 million settlement of the Legacy CH2M Matter, net of previously recorded reserves, of $91.3 million, which is further discussed in Note 19 - Commitments and Contingencies and Derivative Financial Instruments. The comparable period ended April 2, 2021 included $296.1 million in pre-tax deal related charges associated with the investment in PA Consulting, in part classified as compensation costs and reported in selling, general and administration expenses, as well as $(29.7) million and $(34.1) million in pre-tax fair value losses recorded in miscellaneous income (expense), net, associated with our former investments in Worley stock (net of Worley stock dividend) which includes impacts of certain foreign currency revaluations related to the ECR sale and C3.ai, Inc. ("C3"), respectively. Lastly, current quarter selling, general and administrative expense includes pre-tax intangible amortization costs of $48.4 million, an increase of $17.8 million (or 58%), from the corresponding prior year period of $30.6 million due to acquired intangible assets from recent acquisitions mainly associated with the PA Consulting investment.
For the six months ended April 1, 2022, net earnings attributable to the Company from continuing operations were $223.1 million (or $1.71 per diluted share), a decrease of $(33.7) million, or (13.1)%, from $256.8 million (or $1.96 per diluted share) for the corresponding period last year. The current year-to-date period benefited from the same recent investing activities mentioned above, partially offset by pre-tax Restructuring and other charges and transactions costs of $190.3 million, which included the final pre-tax settlement charges on the Legacy CH2M Matter mentioned above of $91.3 million and $74.6 million in charges associated with the Company's transformation initiatives relating to real estate which is discussed in Note 18 - Restructuring and Other Charges. In comparison, the corresponding period in the prior year period included pre-tax costs incurred in connection with the investment in PA Consulting, in part classified as compensation costs and reported in selling, general and administrative expenses, of $300.2 million. In addition, the corresponding prior year period included $63.5 million and $48.6 million in pre-tax fair value gains recorded in miscellaneous income (expense), net, associated with our former investments in Worley stock (net of Worley stock dividend) which includes impacts of certain foreign currency revaluations related to the ECR sale and C3, respectively. The prior year comparable period also included a pre-tax other loss of $33.2 million for an other-than-temporary impairment of our investment in AWE Management Ltd. ("AWE ML"). Lastly, current year to date period selling, general and administrative expense includes pre-tax intangible amortization costs of $95.3 million, an increase of $41.6 million (or 77%), from the corresponding prior year period of $53.8 million due to acquired intangible assets from recent acquisitions mainly associated with PA Consulting investment.
For discussion of discontinued operations, see Note 17 - Sale of Energy, Chemicals and Resources ("ECR") Business.
On February 4, 2022, the Company acquired StreetLight Data, Inc., ("StreetLight"). On November 19, 2021, a subsidiary of Jacobs acquired BlackLynx. For further discussion, see Note 16 - Other Business Combinations.
On March 2, 2021, Jacobs completed the strategic investment of a 65% interest in PA Consulting. For further discussion, see Note 15 - PA Consulting Business Combination.
On November 24, 2020, a subsidiary of Jacobs completed the acquisition of Buffalo Group. For further discussion, see Note 16 - Other Business Combinations.
Consolidated Results of Operations
Revenues for the second fiscal quarter of 2022 were $3.83 billion, an increase of $286.2 million, or 8.1%, from $3.55 billion for the corresponding period last year. For the six months ended April 1, 2022, revenues were $7.21 billion, an increase of $285.0 million, or 4.1%, from $6.93 billion for the corresponding period last year. Revenue increases for the year over year periods were due mainly to fiscal 2022 incremental revenues from the PA Consulting investment and the StreetLight, BlackLynx and Buffalo group acquisitions, as well as benefits from increased spending in our U.S. government business sector client base. These increases in revenues for the three and six months ended April 1, 2022 were partially offset by declines in pass-through revenues in advanced facilities business. The six months ended April 1, 2022 was
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unfavorably impacted by certain large contract wind downs in the U.S. Also, revenue was unfavorably impacted from foreign currency translation of $51.7 million and $42.5 million for the three and six months ended April 1, 2022, respectively, in our international businesses as compared to favorable impacts of $75.6 million and $113.0 million in the corresponding periods last year. Pass-through costs included in revenues for the three and six months ended April 1, 2022 amounted to $563.7 million and $1.04 billion, respectively, a decrease of $13.0 million and $189.3 million, or (2.2)% and (15.4)%, from $576.6 million and $1.23 billion from the corresponding periods last year.
Gross profit for the second quarter of 2022 was $870.4 million, an increase of $103.4 million, or 13.5%, from $767.0 million from the corresponding period last year. Our gross profit margins were 22.7% and 21.6% for the three months ended April 1, 2022 and April 2, 2021, respectively, with these margin differences being mainly attributable to favorable margin impacts from the business results of our recent PA Consulting investment and the StreetLight, BlackLynx and Buffalo Group acquisitions, as well as benefits from increased spending by customers in the U.S. government business sector. Gross profit for the six months ended April 1, 2022 was $1.67 billion, an increase of $267.8 million, or 19.1%, from $1.40 billion from the corresponding period to date last year. Our gross profit margins were 23.1% and 20.2% for the six months ended April 1, 2022 and April 2, 2021, respectively, with benefits from the similar favorable margin trends and increased spending in the U.S. government business sector noted above, partially offset by certain large contract wind downs in the U.S as well as increases in labor costs associated with moderation of COVID-19 mitigation efforts and a competitive labor market, and incremental investments to support projected top-line growth.
See Segment Financial Information discussion for further information on the Company’s results of operations at the operating segment.
SG&A expenses for the three and six months ended April 1, 2022 were $704.2 million and $1.32 billion, respectively, a decrease of $103.9 million and increase of $97.1 million, or (12.9)% and 7.9%, from $808.1 million and $1.23 billion for the corresponding periods last year. The three and six months ended results for fiscal 2022 were impacted by incremental SG&A expenses from recent business acquisitions (mainly PA Consulting) of $98.5 million and $192.0 million, respectively, as compared to approximately $40 million (excluding compensation costs associated with the PA strategic investment mentioned below) in the corresponding prior year periods due to the prior comparable periods including PA Consulting activity only for the partial periods subsequent to the March 2, 2021 investment date. Additionally, Restructuring and other charges and transaction costs for the periods of 2022 included $91.3 million attributable to final pre-tax settlement of the Legacy CH2M Matter, which is further discussed in Note 19- Commitments and Contingencies and Derivative Financial Instruments. Also, the current 2022 periods SG&A expenses were impacted by higher personnel related costs due mainly to the moderation of COVID-19 mitigation efforts and related impacts. Also, the current year-to-date Restructuring and other charges and transaction costs were impacted by $74.6 million in costs associated in part with the Company's transformation initiatives relating to real estate. The three and six months ended April 2, 2021 include amounts of $296.1 million and $300.2 million, respectively, for pre-tax costs incurred in connection with the investment in PA Consulting, in part classified as compensation costs reported in selling, general and administrative expenses, in addition to the Company's transformation initiatives. Lastly, SG&A expenses benefited from favorable foreign exchange impacts of $11.3 million and $9.0 million, respectively, for the three and six months ended April 1, 2022 as compared to unfavorable impacts of $41.3 million and $47.4 million for the corresponding periods last year.
Net interest expense for the three and six months ended April 1, 2022 was $21.6 million and $39.5 million, respectively, an increase of $6.8 million and $8.5 million from $14.9 million and $31.0 million for the corresponding periods last year. The increase in net interest expense for the three and six month periods year over year is due to higher levels of average debt outstanding relating in part to the funding of the PA Consulting investment as well as the StreetLight and BlackLynx acquisitions, in addition to higher interest rates.
Miscellaneous income (expense), net for the three and six months ended April 1, 2022 was $10.7 million and $20.4 million, respectively, in comparison to $(56.3) million and $100.0 million for the corresponding periods last year. The favorable improvement of $67.0 million from the prior three-month comparable period was due primarily to impacts in the prior year periods of pre-tax fair losses of $(29.7) million associated with our former investments in Worley stock (net of Worley stock dividend) and certain foreign currency revaluations relating to the ECR sale and pre-tax fair value losses associated with our investment in C3 of $(34.1) million, which were both sold during fiscal year 2021. The decrease of $79.7 million from the prior year-to-date comparable period is attributable to full year pre-tax fair value gains of $63.5 million and $48.6 million in the Company's previously mentioned investment holdings in Worley (net of Worley stock dividend) which includes impacts of certain foreign currency revaluations related to the ECR sale and C3, respectively. Additionally, the corresponding prior year periods included other-than-temporary impairment charges on our investment in AWE ML of $5.3 million and $33.2 million.
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The Company’s effective tax rates from continuing operations for the three months ended April 1, 2022 and April 2, 2021 were 29.7% and 18.5%, respectively, with the change due primarily to the absence of a $7.7 million benefit the Company recognized in the three months ended April 2, 2021 associated with a change in the Company’s assertion about the indefinite reinvestment of certain foreign unremitted earnings in India, other discrete foreign tax items and higher state taxes, partly offset by the absence in the current year of certain nondeductible compensation related charges associated with our PA Consulting investment that occurred in the three month period of fiscal 2021.
The Company's effective tax rates from continuing operations for the six months ended April 1, 2022 and April 2, 2021 were 19.1% and 27.4%, respectively, with the decrease primarily due to a tax benefit of $15.7 million related to the release of valuation allowance on foreign tax credits for the six months ended April 1, 2022 and the absence of certain non-deductible pre-tax compensation charges associated with our investment in PA Consulting for the six month period in fiscal 2021, partly offset by the absence of the 2021 period benefit from the India unremitted earnings reinvestment item mentioned above.
The amount of income taxes the Company pays is subject to ongoing audits by tax jurisdictions around the world. In the normal course of business, the Company is subject to examination by tax authorities throughout the world, including such major jurisdictions as Australia, Canada, India, the Netherlands, the United Kingdom and the United States. Our estimate of the potential outcome of any uncertain tax issue is subject to our assessment of the relevant risks, facts, and circumstances existing at the time. The Company believes that it has adequately provided for reasonably foreseeable outcomes related to these matters. However, future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, which may impact our effective tax rate.
Segment Financial Information
The following table provides selected financial information for our operating segments and includes a reconciliation of segment operating profit to total U.S. GAAP operating profit from continuing operations by including certain corporate-level expenses, Restructuring and other charges and transaction and integration costs (in thousands).
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| April 1, 2022 | April 2, 2021 | April 1, 2022 | April 2, 2021 | ||||||||||||||||||||
| Revenues from External Customers: | |||||||||||||||||||||||
| Critical Mission Solutions | $ | 1,366,313 | $ | 1,309,573 | $ | 2,528,818 | $ | 2,604,860 | |||||||||||||||
| People & Places Solutions | 2,170,356 | 2,139,990 | 4,098,502 | 4,226,538 | |||||||||||||||||||
| PA Consulting | 297,390 | 98,310 | 587,364 | 98,310 | |||||||||||||||||||
| Total | $ | 3,834,059 | $ | 3,547,873 | $ | 7,214,684 | $ | 6,929,708 |
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| April 1, 2022 | April 2, 2021 | April 1, 2022 | April 2, 2021 | ||||||||||||||||||||
| Segment Operating Profit: | |||||||||||||||||||||||
| Critical Mission Solutions | $ | 113,241 | $ | 113,933 | $ | 224,737 | $ | 224,002 | |||||||||||||||
| People & Places Solutions | 191,144 | 202,030 | 382,837 | 398,330 | |||||||||||||||||||
| PA Consulting | 68,332 | 27,917 | 131,402 | 27,917 | |||||||||||||||||||
| Total Segment Operating Profit | 372,717 | 343,880 | 738,976 | 650,249 | |||||||||||||||||||
| Other Corporate Expenses (1) | (89,232) | (63,327) | (194,592) | (133,667) | |||||||||||||||||||
| Restructuring, Transaction and Other Charges (2) | (117,270) | (321,665) | (200,836) | (343,756) | |||||||||||||||||||
| Total U.S. GAAP Operating Profit (Loss) | 166,215 | (41,112) | 343,548 | 172,826 | |||||||||||||||||||
| Total Other (Expense) Income, net (3) | (10,933) | (71,169) | (19,177) | 69,002 | |||||||||||||||||||
| Earnings Before Taxes from Continuing Operations | $ | 155,282 | $ | (112,281) | $ | 324,371 | $ | 241,828 |
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| (1) | Other corporate expenses also include intangibles amortization of $48.4 million and $30.6 million for the three months ended April 1, 2022 and April 2, 2021, respectively, and $95.3 million and $53.8 million for the six months ended April 1, 2022 and April 2, 2021, respectively, with the increase mainly attributable to the PA Consulting investment. | ||||
| (2) | Included in the three and six months ended April 1, 2022 is $91.3 million related to the final pre-tax settlement of the Legacy CH2M Matter, net of previously recorded reserves and included in the six months ended April 1, 2022 are $74.6 million of real estate impairment charges related to the Company's transformation initiatives. Included in the three and six months ended April 2, 2021 are $296.1 million and $300.2 million, respectively, of costs incurred in connection with the investment in PA Consulting, in part classified as compensation costs. | ||||
| (3) | The six months ended April 1, 2022 include $3.5 million in income associated with final exit activities associated with our AWE ML investment and a gain of $7.1 million related to a lease termination. The three and six months ended April 2, 2021 include $29.7 million and $(63.5) million, respectively, in fair value adjustments related to our investment in Worley stock (net of Worley stock dividend) and certain foreign currency revaluations relating to the ECR sale and $34.1 million and $(48.6) million, respectively, in fair value adjustments related to our investment in C3 stock. The six months ended April 2, 2021 also includes $33.2 million related to impairment of our AWE ML investment. The investments in Worley and C3 were sold in fiscal 2021 and therefore there are no comparable amounts in the current quarter. |
Critical Mission Solutions
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| April 1, 2022 | April 2, 2021 | April 1, 2022 | April 2, 2021 | ||||||||||||||||||||
| Revenue | $ | 1,366,313 | $ | 1,309,573 | $ | 2,528,818 | $ | 2,604,860 | |||||||||||||||
| Operating Profit | $ | 113,241 | $ | 113,933 | $ | 224,737 | $ | 224,002 |
Critical Mission Solutions (CMS) segment revenues for the three and six months ended April 1, 2022 were $1.37 billion and $2.53 billion, respectively, an increase of $56.7 million and decrease of $76.0 million, or 4.3% and (2.9)%, from $1.31 billion and $2.60 billion for the corresponding periods last year. During the three and six months ended April 1, 2022, revenue benefited from increased spending by customers in the U.S. government business sector and our legacy international clients, incremental revenue from recent acquisitions and a recent contract award with the Department of Energy Nuclear remediation program. Revenue during the six months ended April 1, 2022 was impacted by several large contracts winding down in the U.S. Also, impacts on revenues from unfavorable foreign currency translation were approximately $10.2 million and $7.9 million for the three and six-month periods ended April 1, 2022, respectively, compared to $20.3 million and $27.6 million in favorable impacts in the corresponding prior year periods.
Operating profit for the segment was $113.2 million and $224.7 million, respectively, for the three and six months ended April 1, 2022, a decrease of $0.7 million and increase of $0.7 million, or (0.6)% and 0.3%, from $113.9 million and $224.0 million for the corresponding periods last year. Operating profit levels were generally consistent and in line with prior year comparable periods presented, with the business benefiting from higher margin U.S. government business sectors as well as our recent acquisitions but with offsetting impacts from the large contract wind downs mentioned above. Impacts on operating profit from foreign currency translation were not significant in the three and six months ended April 1, 2022, compared to favorable impacts of approximately $3.2 million and $4.5 million in the corresponding prior year periods.
People & Places Solutions
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| April 1, 2022 | April 2, 2021 | April 1, 2022 | April 2, 2021 | ||||||||||||||||||||
| Revenue | $ | 2,170,356 | $ | 2,139,990 | $ | 4,098,502 | $ | 4,226,538 | |||||||||||||||
| Operating Profit | $ | 191,144 | $ | 202,030 | $ | 382,837 | $ | 398,330 |
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Revenues for the People & Places Solutions (P&PS) segment for the three months ended April 1, 2022 was $2.17 billion and $4.10 billion, respectively, an increase of $30.4 million and decrease of $128.0 million, or 1.4% and (3.0)%, from $2.14 billion and $4.23 billion for the corresponding periods last year. The increase in revenue for the three months ended April 1, 2022 was primarily driven by growth in our advanced facilities business as compared to the prior year corresponding period. The decrease in revenue for the six months ended April 1, 2022 was primarily due to lower pass through revenues from our advanced facilities business as compared to the prior year corresponding period. Foreign currency translation had a $32.0 million and $34.6 million unfavorable impact on revenues in our international businesses for the three and six-month periods ended April 1, 2022, respectively as compared to favorable impacts of $55.3 million and $85.4 million in the corresponding prior year periods.
Operating profit for the segment for the three and six month periods ended April 1, 2022 was $191.1 million and $382.8 million, respectively, a decrease of $10.9 million and $15.5 million, or (5.4)% and (3.9)% from $202.0 million and $398.3 million for the corresponding periods last year. The year-over-year decrease in operating profit for the three months ended April 1, 2022 was driven by higher labor costs due to moderation of COVID-19 mitigation efforts and a competitive labor market, and incremental investments to support projected top-line growth, partially offset by benefits from higher revenue growth. For the six months ended April 1, 2022, operating profit decreased year-over-year due mainly to the cost increases mentioned above for the six-month period. Foreign currency translation had a $6.7 million and $6.8 million unfavorable impact on operating profit in our international businesses for the three and six-month periods ended April 1, 2022, respectively as compared to favorable impacts of $9.6 million and $13.8 million in the corresponding prior year periods.
PA Consulting
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| April 1, 2022 | April 2, 2021 | April 1, 2022 | April 2, 2021 | ||||||||||||||||||||
| Revenue | $ | 297,390 | $ | 98,310 | $ | 587,364 | $ | 98,310 | |||||||||||||||
| Operating Profit | $ | 68,332 | $ | 27,917 | $ | 131,402 | $ | 27,917 |
Revenues for the PA Consulting segment for the three and six months ended April 1, 2022 were $297.4 million and $587.4 million, respectively, an increase of $199.1 million and $489.1 million, or 202.5% and 497.5%, from $98.3 million for the corresponding periods last year. Operating profit for the segment for the three and six months ended April 2, 2021 was $68.3 million and $131.4 million, respectively, an increase of $40.4 million and $103.5 million, or 144.8% and 370.7%, from $27.9 million for the corresponding periods last year. The increase in revenue and operating profit was due to only approximately one month of activity from the investment in PA Consulting in the prior periods due to the timing of the investment. Foreign currency translation had a $9.5 million and $2.5 million unfavorable impact on revenues and operating profit, respectively, in our international businesses for the three months ended April 1, 2022, respectively. Due to the partial period in the corresponding prior year, foreign currency impact was not significant for both revenue and operating profit.
Other Corporate Expenses
Other corporate expenses for the three and six months ended April 1, 2022 were $89.2 million and $194.6 million, respectively, an increase of $25.9 million and $60.9 million from $63.3 million and $133.7 million for the corresponding periods last year. This increase was due primarily to higher intangible amortization expense from the PA Consulting investment and other acquisitions, as well as impacts from higher Company benefit program costs and other department spend increases.
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 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
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positive and negative) associated with projects, as well as other items, where it has been determined that such adjustments are not indicative of the performance of the related LOB.
Restructuring and Other Charges
See Note 18- Restructuring and Other Charges for information on the Company’s activity relating to restructuring and other charges.
Backlog Information
We include in backlog the total dollar amount of revenues we expect to record in the future as a result of performing work under contracts that have been awarded to us. Our policy with respect to Operations & Maintenance ("O&M") contracts, however, is to include in backlog the amount of revenues we expect to receive for one succeeding year, regardless of the remaining life of the contract. For national government programs (other than national government O&M contracts, which are subject to the same policy applicable to all other O&M contracts), our policy is to include in backlog the full contract award, whether funded or unfunded, excluding option periods. Because of variations in the nature, size, expected duration, funding commitments, and the scope of services required by our contracts, the timing of when backlog will be recognized as revenues can vary greatly between individual contracts.
Consistent with industry practice, substantially all of our contracts are subject to cancellation or termination at the option of the client, including our U.S. government work. While management uses all information available to determine backlog, at any given time our backlog is subject to changes in the scope of services to be provided as well as increases or decreases in costs relating to the contracts included therein. Backlog is not necessarily an indicator of future revenues.
Because certain contracts (e.g., contracts relating to large Engineering, Procurement & Construction ("EPC") projects as well as national government programs) can cause large increases to backlog in the fiscal period in which we recognize the award, and because many of our contracts require us to provide services that span over several fiscal quarters (and sometimes over fiscal years), we have presented our backlog on a year-over-year basis, rather than on a sequential, quarter-over-quarter basis.
The following table summarizes our backlog at April 1, 2022 and April 2, 2021 (in millions):
| April 1, 2022 | April 2, 2021 | ||||||||||
| Critical Mission Solutions | $ | 10,556 | $ | 9,779 | |||||||
| People & Places Solutions | 16,965 | 15,512 | |||||||||
| PA Consulting | 269 | 280 | |||||||||
| Total | $ | 27,790 | $ | 25,571 |
The increase in backlog in Critical Mission Solutions (CMS) from April 2, 2021 was primarily driven by success in closing on a number of key opportunities in the U.S government space and the BlackLynx acquisition.
The increase in backlog in People & Places Solutions (P&PS) from April 2, 2021 was primarily driven by new business awards in our advanced facilities business and the StreetLight acquisition.
The PA Consulting backlog was consistent and in line with the prior year comparable period backlog.
Consolidated backlog differs from the Company’s remaining performance obligations as defined by ASC 606 primarily because of our national government contracts (other than national government O&M contracts). Our policy is to generally include in backlog the full contract award, whether funded or unfunded excluding the option periods while our remaining performance obligations represent a measure of the total dollar value of work to be performed on contracts awarded and in progress. Additionally, the Company includes our proportionate share of backlog related to unconsolidated joint ventures which is not included in our remaining performance obligations.
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Liquidity and Capital Resources
At April 1, 2022, our principal sources of liquidity consisted of $1.24 billion in cash and cash equivalents and $1.50 billion of available borrowing capacity under our $2.25 billion revolving credit agreement (the "Revolving Credit Facility"). We finance much of our operations and growth through cash generated by our operations.
The amount of cash and cash equivalents at April 1, 2022 represented an increase of $221.2 million from $1.01 billion at October 1, 2021, the reasons for which are described below.
Our net cash flow provided by operations of $446.3 million during the six months ended April 1, 2022 was favorable by $96.0 million in comparison to the cash flow provided by operations of $350.2 million for the corresponding prior year period. This improvement was due mainly to higher operating profit levels year over year, due in part to the investment in PA Consulting. This improvement was partly offset by working capital performance year over year being impacted by higher payouts of employee incentives, higher estimated tax payments and impacts from timing of receivable collections with these impacts being offset in part by favorable impacts from timing of other payments on accounts payable and cash received on the settlement of foreign currency forward contracts (mainly AUD).
Our net cash used for investing activities for the six months ended was $458.8 million, compared to cash used for investing activities of $1.74 billion in the corresponding prior year period, with this change due primarily to the acquisitions of StreetLight and BlackLynx in the current year and our investment in PA Consulting and acquisition of Buffalo Group in the prior year.
Our net cash provided by financing activities of $235.1 million for the six months ended April 1, 2022 resulted mainly from net proceeds from borrowings of $387.1 million primarily in connection with the StreetLight and BlackLynx acquisitions, partly offset by cash used for share repurchases of $50.0 million, cash used for repurchase of redeemable noncontrolling interests of $35.1 million and $57.2 million in dividends to shareholders and $9.4 million in dividends to noncontrolling interest holders. Cash provided by financing activities in the corresponding prior year period was $1.67 billion, due primarily to net proceeds from borrowings of $1.78 billion, offset by cash used for share repurchases of $24.9 million and $52.4 million in dividends to shareholders and $29.4 million in net dividends to (contributions from) noncontrolling interest holders.
At April 1, 2022, the Company had approximately $181.3 million in cash and cash equivalents held in the U.S. and $1.05 billion held outside of the U.S. (primarily in the U.K., the Eurozone, Australia, India, Japan and the United Arab Emirates), which is used primarily for funding operations in those regions. Other than the tax cost of repatriating funds to the U.S. (see Note 7 - Income Taxes of Notes to Consolidated Financial Statements included in our 2021 Form 10-K), there are no material impediments to repatriating these funds to the U.S.
The Company had $274.6 million in letters of credit outstanding at April 1, 2022. Of this amount, $1.7 million was issued under the Revolving Credit Facility and $272.9 million was issued under separate, committed and uncommitted letter-of-credit facilities.
On April 12, 2022, the Company paid cash of AUD640 million, or approximately $475 million using mid-April 2022 exchange rates, which represents the final pre-tax settlement of Legacy CH2M Matter. For more information please refer to Note 19 - Commitments and Contingencies and Derivative Financial Instruments.
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On February 4, 2022, the Company acquired StreetLight Data, Inc. ("StreetLight"). StreetLight is a pioneer of mobility analytics who uses its data and machine learning resources to shed light on mobility and enable users to solve complex transportation problems. The Company paid total base consideration of approximately $190.7 million in cash, and issued $0.9 million in equity and $5.2 million in in-the-money stock options to the former owners of StreetLight. The Company also paid off StreetLight's debt of approximately $1.0 million simultaneously with the consummation of the acquisition.
On November 19, 2021, a subsidiary of Jacobs acquired all outstanding shares of common stock of BlackLynx, a provider of high-performance software, to complement Jacobs' portfolio of cyber, intelligence and digital solutions. The Company paid total base consideration of approximately $235.4 million in cash to the former owners of BlackLynx. In addition, the transaction involved the potential payment of future consideration that is contingent upon the achievement of certain revenue and gross margin thresholds being achieved in calendar year 2022. The estimated fair value of the contingent consideration on the acquisition date is $0.4 million. The future contingent consideration will be paid, if and to the extent achieved, in second quarter of fiscal 2023. In conjunction with the acquisition, the Company also paid off BlackLynx's debt of approximately $5.3 million simultaneously with the consummation of the acquisition.
On March 2, 2021, Jacobs completed the strategic investment of a 65% interest in PA Consulting, a UK-based leading innovation and transformation consulting firm. The total consideration paid by the Company was $1.7 billion, funded through cash on hand, proceeds from a new term loan and draws on the Company's existing revolving credit facility. Further, in connection with the transaction, an additional $261 million in investment proceeds had not yet been distributed at the investment date due to continuing employment requirements of associated management owners. Consequently, this amount represented compensation expense incurred related to the investment that was expensed subsequent to the acquisition date, and was reflected in selling, general and administrative expense and cash from operations for the fiscal year ended October 1, 2021. The remaining 35% interest was acquired by PA Consulting employees, whose redeemable noncontrolling interests had a fair value of $582.4 million on the closing date, including subsequent purchase accounting adjustments. PA Consulting is accounted for as a consolidated subsidiary and as a separate operating segment under U.S. GAAP accounting rules.
On January 20, 2021, the Company entered into an unsecured delayed draw term loan facility (the “2021 Term Loan Facility”) with a syndicate of financial institutions as lenders. Under the 2021 Term Loan Facility, the Company borrowed an aggregate principal amount of $200.0 million and £650.0 million. The proceeds of the term loans were used primarily to fund the investment in PA Consulting. The 2021 Term Loan Facility contains affirmative and negative covenants and events of default customary for financings of this type that are consistent with those included in the Revolving Credit Facility and the 2020 Term Loan Facility.
On November 24, 2020, a subsidiary of Jacobs completed the acquisition of Buffalo Group, a leader in advanced cyber and intelligence solutions, which allows Jacobs to further expand its cyber and intelligence solutions offerings to government clients. The Company paid total consideration of $190.1 million, which was comprised of approximately $182.4 million in cash to the former owners of Buffalo Group and contingent consideration of $7.7 million, The contingent consideration was subsequently recognized as an offset to selling, general and administrative expense when it was determined no amounts would be paid. In conjunction with the acquisition, the Company assumed the Buffalo Group's debt of approximately $7.7 million. The Company repaid all of the assumed Buffalo Group debt by the end of the first fiscal quarter of 2021. The Company has recorded its final purchase price allocation associated with the acquisition, which is summarized in Note 16- Other Business Combinations.
We believe we have adequate liquidity and capital resources to fund our projected cash requirements for the next twelve months based on the liquidity provided by our cash and cash equivalents on hand, our borrowing capacity and our continuing cash from operations. We further believe that our financial resources and discretionary spend controls, as well as near term benefits from government assistance programs, will allow us to continue managing the negative impacts of the COVID-19 pandemic on our business operations for the foreseeable future. We continue to evaluate the impact of the pandemic on our business and reassess accordingly.
We were in compliance with all of our debt covenants at April 1, 2022.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We do not enter into derivative financial instruments for trading, speculation or other similar purposes that would expose the Company to market risk. In the normal course of business, our results of operations are exposed to risks associated with fluctuations in interest rates and currency exchange rates.
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Interest Rate Risk
Please see the Note 12 - Borrowings in Notes to Consolidated Financial Statements appearing under Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference, for a discussion of the Revolving Credit Facility, Term Loan Facilities and Note Purchase Agreement.
Our Revolving Credit Facility, Term Loan Facilities and certain other debt obligations are subject to variable rate interest which could be adversely affected by an increase in interest rates. As of April 1, 2022, we had an aggregate of $2.75 billion in outstanding borrowings under our Revolving Credit Facility and Term Loan Facilities. Interest on amounts borrowed under these agreements is subject to adjustment based on the Company’s Consolidated Leverage Ratio (as defined in the credit agreements governing the Revolving Credit Facility and the Term Loan Facilities). Depending on the Company’s Consolidated Leverage Ratio, borrowings denominated in U.S. dollars under the Revolving Credit Facility and the Term Loan Facilities bear interest at a Eurocurrency rate plus a margin of between 0.875% and 1.625% or a base rate plus a margin of between 0.0% and 0.625% including applicable margins while borrowings denominated in British pounds under these respective facilities bear interest at an adjusted SONIA rate plus a margin of between 0.875% and 1.625%. Additionally, if our Consolidated Leverage Ratio exceeds a certain amount, the interest on the Senior Notes may increase by 75 basis points. However, as discussed in Note 19 - Commitments and Contingencies and Derivative Financial Instruments, we are party to swap agreements with an aggregate notional value of $914.9 million to convert the variable rate interest based liabilities associated with a corresponding amount of our debt into fixed interest rate liabilities, leaving $1.84 billion in principal amount subject to variable interest rate risk.
For the six months ended April 1, 2022, our weighted average borrowings that are subject to floating rate exposure were approximately $1.97 billion. If floating interest rates had increased by 1.00%, our interest expense for the six months ended April 1, 2022 would have increased by approximately $9.9 million.
Foreign Currency Risk
In situations where the Company incurs costs in currencies other than our functional currency, we sometimes enter into foreign exchange contracts to limit our exposure to fluctuating foreign currencies. We follow the provisions of ASC No. 815, Derivatives and Hedging in accounting for our derivative contracts. The Company has $576.5 million in notional value of exchange rate sensitive instruments at April 1, 2022. See Note 19 - Commitments and Contingencies and Derivative Financial Instruments for discussion.
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Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are those controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chair and Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), to allow timely decisions regarding required disclosure.
The Company’s management, with the participation of its Chair and Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), evaluated the effectiveness of the Company’s disclosure controls and procedures as defined by Rule 13a-15(e) of the Exchange Act defined above, as of April 1, 2022, the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”). Based on that evaluation, the Company’s management, with the participation of the Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) concluded that the Company’s disclosure controls and procedures, as of the Evaluation Date, were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to the Company’s management, including the Company’s Chair and Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes to our internal control over financial reporting which were identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act during the quarter ended April 1, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The information required by this Item 1 is included in the Note 19 - Commitments and Contingencies and Derivative Financial Instruments included in the Notes to Consolidated Financial Statements appearing under Part I, Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.
Item 1A. Risk Factors.
Please refer to Item 1A- Risk Factors in our 2021 Form 10-K, which is incorporated herein by reference, for a discussion of some of the factors that have affected our business, financial condition, and results of operations in the past and which could affect us in the future. There have been no material changes to those risk factors. Before making an investment decision with respect to our common stock, you should carefully consider those risk factors, as well as the financial and business disclosures contained in this Quarterly Report on Form 10-Q and our other current and periodic reports filed with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On February 4, 2022 the Company issued 6,620 shares of restricted stock in connection with its acquisition of Streetlight to certain stockholders in exchange for certain of their vested stock awards in StreetLight. These shares are subject to certain lockup restrictions agreed to by the Company and the shareholders. For further discussion of the StreetLight acquisition, see Note 16 - Other Business Combinations.
These shares were issued in a transaction exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) in reliance upon Section 4(a)(2) of the Securities Act. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the share certificates issued in these transactions.
Share Repurchases
On January 16, 2020, the Company's Board of Directors authorized a share repurchase program of up to $1.0 billion of the Company's common stock, to expire on January 15, 2023 (the "2020 Repurchase Authorization"). A summary of repurchases of the Company’s common stock made during the second quarter of fiscal 2022 under the share repurchase program is as follows:
| Period | Total Number of Shares Purchased | Average Price Per Share (1) | Total Number of Shares Purchased under the 2020 Repurchase Authorization | Approximate Dollar Value of Shares that May Yet Be Purchased Under the 2020 Repurchase Authorization | ||||||||||||||||||||||
| February 28, 2022 - April 1, 2022 | 395,315 | $126.49 | 395,315 | $732,922,539 |
(1)Includes commissions paid and calculated at the average price per share
Our share repurchase program does not obligate the Company to purchase any shares. Share repurchases may be executed through various means including, without limitation, accelerated share repurchases, open market transactions, privately negotiated transactions, purchases pursuant to Rule 10b5-1 plans or otherwise. The authorization for the share repurchase programs may be terminated, increased or decreased by the Company’s Board of Directors in its discretion at any time. The timing, amount and manner of share repurchases may depend upon market conditions and economic circumstances, availability of investment opportunities, the availability and costs of financing, currency fluctuations, the market price of the Company's common stock, other uses of capital and other factors.
Item 3. Defaults Upon Senior Securities
None.
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Item 4. Mine Safety Disclosure.
None.
Item 5. Other Information.
None.
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Item 6. Exhibits.
| 31.1* | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. | ||||
| 31.2* | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. | ||||
| 32.1* | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||||
| 32.2* | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||||
| 101 | The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Earnings, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags | ||||
| 104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended April 1, 2022, (formatted as Inline XBRL and contained in Exhibit 101). | ||||
- Filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
JACOBS ENGINEERING GROUP INC.
| By: | /s/ Kevin C. Berryman | ||||
| Kevin C. Berryman | |||||
| President | |||||
| and Chief Financial Officer | |||||
| (Principal Financial Officer) | |||||
| Date: | May 3, 2022 |
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