Jacobs Reports Fiscal Fourth Quarter and Fiscal Year 2020 Earnings
DALLAS, Nov. 24, 2020 /PRNewswire/ -- Jacobs Engineering Group Inc. (NYSE: J) today announced its financial results for the fiscal fourth quarter and fiscal year ended October 2, 2020.
Q4 2020 Financial Highlights:
-- Revenue of $3.5 billion(1) grew 3.7% year-over-year; net revenue up 2%
pro forma
-- EPS from continuing operations of $0.53, includes impact from Focus 2023
initiative
-- Adjusted EPS from continuing operations of $1.63, including $0.24 in
discrete tax benefits
-- Backlog increased $1.2 billion to $23.8 billion, up 6% year-over-year
and up 3% on a pro forma basis
-- Cash flow from operations of $432 million and free cash flow of $403
million, driven by strong DSO performance
Fiscal Year 2020 Highlights:
-- Revenue growth of 6.5% and pro forma net revenue growth of 2.5%
-- Net earnings from continuing operations of $354 million and adjusted
EBITDA growth of 7% to $1.05 billion
-- FY20 EPS(1) of $2.67 up 28% and adjusted EPS of $5.48, up 9%
year-over-year
-- Cash flow from operations of $807 million and free cash flow of $689
million, representing strong cash conversion
Jacobs' Chair and CEO Steve Demetriou commented, "Our strong FY20 results and solid FY21 outlook demonstrate the mission-critical nature of our solutions, and when combined with the diversity of our end markets, enables us to thrive in varying economic environments. The pandemic has served as a catalyst for us to materially accelerate our digital vision and quickly pivot to an effective virtual workforce." Demetriou continued, "At Jacobs, our mindset of continuously challenging today to reinvent tomorrow has enabled us to capitalize on enhanced technologies, positioning us for sustainable, long-term growth."
Jacobs' President and CFO Kevin Berryman added, "Our focus on delivering innovative and technology-enabled solutions for a more connected, sustainable world is even more critical today than any time in our company's history. During fiscal 2020 we grew revenue and profits year-over-year, generated $689 million in free cash flow and are positioned for operating profit growth and strong cash flow generation in fiscal 2021. The next phase of our growth will be propelled by Jacobs' Focus 2023 initiative - further accelerating our global integrated delivery of technology-enabled solutions."
Financial Outlook(2)
The company expects fiscal 2021 adjusted EBITDA of $1,055 million to $1,155 million and adjusted EPS of $5.20 to $6.00.
We have launched our Focus 2023 initiative with expected benefits of over $200 million versus fiscal 2020.
Looking beyond fiscal 2021 the company expects developing business momentum leading to double-digit growth in adjusted EBITDA.
Fourth Quarter Review
Fiscal Q4 2020
Fiscal Q4 2019
Change
Revenue
$3.5 billion
$3.4 billion
$0.1 billion
---
Net Revenue
$2.8 billion
$2.7 billion
$0.1 billion
---
GAAP Net Earnings from Continuing Operations
$70 million
$22 million
$48 million
---
GAAP Earnings Per Diluted Share (EPS) from Continuing $0.53 $0.16 $0.37
Operations
---
Adjusted Net Earnings from Continuing Operations
$214 million
$201 million
$13 million
---
Adjusted EPS from Continuing Operations $1.63 $1.48 $0.15
---
The company's adjusted net earnings from continuing operations and adjusted EPS from continuing operations for the fourth quarter of fiscal 2020 and fiscal 2019 exclude the adjustments 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, as well as a reconciliation of net revenue to revenue, refer to the section entitled "Non-GAAP Financial Measures" at the end of this release.
Fiscal Q4 2020
Fiscal Q4 2019
GAAP Net Earnings from Continuing Operations and Diluted Earnings Per Share
$70 million ($0.53 per
$22 million ($0.16 per
(EPS) share) share)
---
After-tax restructuring, transaction costs and other charges ($211.9 million and $113.5 million for the fiscal 2020 and 2019 periods, respectively, before
income taxes).
$161 million ($1.22 per
$88 million ($0.65 per
diluted share) diluted share)
---
Other adjustments include:
$(16) million ($(0.12) per
$91 million ($0.67 per
diluted share) diluted share)
(a) addback of amortization of intangible assets of $23.5 million and $23.4 million in the 2020 and 2019 periods, respectively,
(b) the reclassification of revenues under the Company's Transition Services Agreement (TSA) with Worley of $0.6 million and $21.3 million included in
other income for U.S. GAAP reporting purposes to SG&A and the exclusion of $(0.5) million and $0.7 million in remaining unreimbursed costs associated with
the TSA during the fiscal 2020 and 2019 fourth quarters, respectively,
(c) the removal of $(44.5) million and $64.8 million in fair value adjustments related to our investment in Worley stock (net of Worley stock dividend) and
certain foreign currency revaluations relating to ECR sale in the 2020 and 2019 periods, respectively,
(d) the add-back of charges resulting from the revaluation of certain deferred tax assets/liabilities in connection with U.S. tax reform of $24.0 million
in 2019 and
(e) associated income tax expense adjustments for the above pre-tax adjustment items.
---
Adjusted Net Earnings from Continuing Operations and Adjusted EPS from Continuing Operations
$214 million ($1.63 per
$201 million ($1.48 per
diluted share) diluted share)
---
(note: earnings per share
amounts may not add due to
rounding)
Fiscal fourth quarter 2020 adjusted earnings per share from continuing operations reflect an adjusted effective tax rate of 22.9%, excluding favorable discrete tax impacts of $31.6 million, or $0.24 per share.
Fiscal 2020 Review
Fiscal 2020 Fiscal 2019 Change
Revenue
$13.6 billion
$12.7 billion
$0.9 billion
---
Net Revenue
$11.0 billion
$10.2 billion
$0.8 billion
---
GAAP Net Earnings from Continuing Operations
$354 million
$291 million
$63 million
---
GAAP Earnings Per Diluted Share (EPS) from Continuing $2.67 $2.09 $0.58
Operations
---
Adjusted Net Earnings from Continuing Operations
$727 million
$704 million
$23 million
---
Adjusted EPS from Continuing Operations $5.48 $5.05 $0.43
---
The company's adjusted net earnings and adjusted EPS for fiscal 2020 and fiscal 2019 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, as well as a reconciliation of net revenue to revenue, refer to the section entitled "Non-GAAP Financial Measures" at the end of this release.
Fiscal 2020
Fiscal 2019
GAAP Net Earnings from Continuing Operations and Diluted Earnings Per Share
$354 million ($2.67 per
$291 million ($2.09 per
(EPS) share) share)
---
After-tax restructuring and other charges ($330.2 million and $311.5 million for the fiscal 2020 and 2019 periods, respectively, before income taxes).
$248 million ($1.87 per
$260 million ($1.86 per
diluted share) diluted share)
---
Other adjustments include:
$125 million ($0.94 per
$153 million ($1.10 per
diluted share) diluted share)
(a) addback of amortization of intangible assets of $90.6 million and $79.1 million in the 2020 and 2019 periods, respectively,
(b) the allocation to discontinued operations of estimated stranded corporate costs of $14.8 million in the fiscal 2019 year that were reimbursed or
otherwise eliminated in connection with the sale of the ECR business,
(c) the reclassification of revenues under the Company's Transition Services Agreement (TSA) with Worley of $15.8 million and $35.4 million included in
other income for U.S. GAAP reporting purposes to SG&A and the exclusion of $0.3 million and $3.9 million in remaining unreimbursed costs associated with
the TSA during in the 2020 and 2019 periods, respectively,
(d) the allocation to discontinued operations of estimated interest expense amounts in 2019 related to long-term debt that has been paid down in
connection with the sale of the ECR business of $42.3 million,
(e) the removal of $74.5 million and $64.8 million in fair value adjustments related to our investment in Worley stock (net of Worley stock dividend) and
certain foreign currency revaluations relating to ECR sale in the 2020 and 2019 periods, respectively,
(f) the exclusion of a $37 million one-time favorable adjustment in the 2019 period 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,
(g) the add-back of charges resulting from the revaluation of certain deferred tax assets/liabilities in connection with U.S. tax reform of $35.0 million
and other income tax adjustments of $1.5 million in the 2019 period and
(h) associated income tax expense adjustments for the above pre-tax adjustment items.
---
Adjusted Net Earnings from Continuing Operations and Adjusted EPS from Continuing Operations
$727 million ($5.48 per
$704 million ($5.05 per
diluted share) diluted share)
---
(note: earnings per share
amounts may not add due to
rounding)
Fiscal year 2020 adjusted earnings per share from continuing operations reflect an adjusted effective tax rate of 23.2%, excluding net favorable discrete tax impacts of $39.9 million, or $0.30 cents per share.
Jacobs is hosting a conference call at 10:00 A.M. ET on Tuesday November 24, 2020, which will be webcast live at www.jacobs.com.
About Jacobs
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, turning abstract ideas into realities that transform the world for good. With approximately $14 billion in annual revenue and a talent force of approximately 55,000, Jacobs provides a full spectrum of professional services including consulting, technical, scientific and project delivery for the government and private sectors. Visit jacobs.com and connect with Jacobs on 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. 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 2021 or future fiscal years. 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. Such factors include the magnitude, timing, duration and ultimate impact of the COVID-19 pandemic and any resulting economic downturn on our results, prospects and opportunities, the timeline for easing or removing "shelter-in-place", "stay-at-home", social distancing, travel restrictions and similar orders, measures or restrictions imposed by governments and health officials in response to the pandemic, or if such orders, measures or restrictions are re-imposed after being lifted or eased, including as a result of increases in cases of COVID-19; and the development, effectiveness and distribution of vaccines or treatments for COVID-19. The impact of such matters includes, but is not limited to, the possible reduction in demand for certain of our 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; 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 could negatively affect our supply chain and our ability to timely and satisfactorily complete our clients' projects; difficulties associated with hiring additional employees or replacing any furloughed employees; increased volatility in the capital markets that may affect our ability to access sources of liquidity on acceptable pricing or borrowing terms or at all; 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 our Annual Report on Form 10-K for the year ended October 2, 2020, and in particular the discussions contained therein 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, as well as the Company's other filings with the Securities and Exchange Commission. The Company is not under any duty to update any of the forward-looking statements after the date of this press release to conform to actual results, except as required by applicable law.
Financial Highlights:
Results of Operations (in thousands, except per-share data) (Quarterly data unaudited):
---
For the Three Months Ended For the Years Ended
---
October 2, September 27, October 2, September 27,
2020 2019 2020 2019
---
Revenues $
3,519,689 $
3,392,862 $
13,566,975 $
12,737,868
Direct cost of contracts (2,854,754) (2,727,329) (10,980,307) (10,260,840)
Gross profit 664,935 665,533 2,586,668 2,477,028
Selling, general and administrative expenses (642,461) (566,447) (2,050,695) (2,072,177)
Operating Profit 22,474 99,086 535,973 404,851
Other Income (Expense):
Interest income 1,550 2,315 4,729 9,487
Interest expense (14,131) (10,120) (62,206) (83,847)
Miscellaneous income (expense), net 50,265 (37,744) (37,293) 20,468
Total other income (expense), net 37,684 (45,549) (94,770) (53,892)
Earnings From Continuing Operations Before Taxes 60,158 53,537 441,203 350,959
Income Tax Benefit (Expense) for Continuing Operations 19,721 (24,124) (55,320) (36,954)
Net Earnings of the Group from Continuing Operations 79,879 29,413 385,883 314,005
Net Earnings of the Group from Discontinued Operations 12,474 120,378 137,984 559,214
Net Earnings of the Group 92,353 149,791 523,867 873,219
Net Earnings Attributable to Noncontrolling Interests from (10,360) (7,467) (32,022) (23,045)
Continuing Operations
Net Earnings Attributable to Jacobs from Continuing 69,519 21,946 353,861 290,960
Operations
Net Earnings Attributable to Noncontrolling Interests from - (2,195)
Discontinued Operations
Net Earnings Attributable to Jacobs from Discontinued 12,474 120,378 137,984 557,019
Operations
Net Earnings Attributable to Jacobs $
81,993 $
142,324 $
491,845 $
847,979
Net Earnings Per Share:
Basic Net Earnings from Continuing Operations Per Share $
0.53 $
0.16 $
2.69 $
2.11
Basic Net Earnings from Discontinued Operations Per $
0.10 $
0.89 $
1.05 $
4.03
Share
Basic Earnings Per Share $
0.63 $
1.06 $
3.74 $
6.14
Diluted Net Earnings from Continuing Operations Per $
0.53 $
0.16 $
2.67 $
2.09
Share
Diluted Net Earnings from Discontinued Operations Per $
0.09 $
0.88 $
1.04 $
4.00
Share
Diluted Earnings Per Share $
0.62 $
1.04 $
3.71 $
6.08
Segment Information (in thousands) (Quarterly data and Non-GAAP unaudited):
---
For the Three Months Ended For the Years Ended
October 2, 2020 September 27, October 2, 2020 September 27,
2019 2019
---
Revenues from External Customers:
Critical Mission Solutions $
1,328,975 $
1,300,137 $
4,965,952 $
4,551,162
People & Places Solutions 2,190,714 2,092,725 8,601,023 8,186,706
Pass Through Revenue (687,980) (702,786) (2,609,843) (2,543,358)
People & Places Solutions Net Revenue $
1,502,734 $
1,389,939 $
5,991,180 $
5,643,348
Total Revenue $
3,519,689 $
3,392,862 $
13,566,975 $
12,737,868
Net Revenue $
2,831,709 $
2,690,076 $
10,957,132 $
10,194,510
For the Three Months Ended For the Years Ended
---
October 2, 2020 September 27, October 2, 2020 September 27,
2019 2019
---
Segment Operating Profit:
Critical Mission Solutions $
107,748 $
87,754 $
372,070 $
310,043
People & Places Solutions (1) 182,843 198,929 740,707 714,394
Total Segment Operating Profit 290,591 286,683 1,112,777 1,024,437
Other Corporate Expenses (2) (56,243) (78,679) (249,391) (264,351)
Restructuring and Other Charges (211,874) (108,918) (327,413) (355,235)
Total U.S. GAAP Operating Profit 22,474 99,086 535,973 404,851
Total other income (expense), net (3) 37,684 (45,549) (94,770) (53,892)
Earnings from Continuing Operations Before Taxes $
60,158 $
53,537 $
441,203 $
350,959
(1) Includes $25.0 million in charges
associated with a certain project
for the year ended September 27,
2019.
(2) 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 amount
of $6.4 million for the year ended
September 27, 2019. Other corporate
expenses also includes intangibles
amortization of $23.5 million and
$23.4 million for the three-month
periods ended October 2, 2020 and
September 27, 2019, respectively,
and $90.6 million and $79.1 million
for the years ended October 2, 2020
and September 27, 2019,
respectively.
(3) Other income and expense includes
gain on the settlement of the CH2M
retiree medical plans of $0.4
million and $35.0 million for the
three month period and year ended
September 27, 2019. Includes the
amortization of deferred financing
fees related to the CH2M
acquisition of $1.8 million and
$3.2 million for the three month
period and year ended September 27,
2019, respectively. Includes
revenues under the Company's TSA
with Worley of $0.1 million and
$21.3 million for the three-month
periods ended October 2, 2020 and
September 27, 2019, respectively,
and $15.8 million and $35.4 million
and for the years ended October 2,
2020 and September 27, 2019,
respectively. Also includes $44.5
million and $64.8 million in fair
value adjustments related to our
investment in Worley stock (net of
Worley Stock dividends) and certain
foreign currency revaluations
relating to ECR sale proceeds for
the three-month periods ended
October 2, 2020 and September 27,
2019, respectively, and $74.3
million and $64.8 million for the
years ended October 2, 2020 and
September 27, 2019, respectively.
Balance Sheet (in thousands):
---
October 2, 2020 September 27, 2019
---
ASSETS
Current Assets:
Cash and cash equivalents $
862,424 $
631,068
Receivables and contract assets 3,167,310 2,840,209
Prepaid expenses and other 162,355 189,358
Investment in equity securities 347,510 451,133
Total current assets 4,539,599 4,111,768
Property, Equipment and Improvements, net 319,371 308,143
Other Noncurrent Assets:
Goodwill 5,639,091 5,432,544
Intangibles, net 658,340 665,076
Deferred income tax assets 211,047 514,633
Operating lease right-of-use assets 576,915
Miscellaneous 409,990 430,547
Total other noncurrent assets 7,495,383 7,042,800
$
12,354,353 $
11,462,711
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt
$ $
199,901
Accounts payable 1,061,754 1,072,645
Accrued liabilities 1,249,883 1,386,952
Operating lease liability 164,312
Contract liabilities 465,648 414,208
Total current liabilities 2,941,597 3,073,706
Long-term debt 1,676,941 1,201,245
Liabilities relating to defined benefit pension and retirement plans 568,176 575,897
Deferred income tax liabilities 3,366 233,111
Long-term operating lease liability 735,202
Other deferred liabilities 573,404 610,094
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 129,748 132,879
outstanding - 129,747,783 shares and 132,879,395 shares as of October 2,
2020 and September 27, 2019, respectively
Additional paid-in capital 2,598,446 2,559,450
Retained earnings 4,020,575 3,939,174
Accumulated other comprehensive loss (933,057) (916,812)
Total Jacobs stockholders' equity 5,815,712 5,714,691
Noncontrolling interests 39,955 53,967
Total Group stockholders' equity 5,855,667 5,768,658
$
12,354,353 $
11,462,711
Cash Flows (In thousands) (Quarterly data unaudited)
For the Three Months Ended For the Years Ended
---
October 2, 2020 September 27, October 2, 2020 September 27,
2019 2019
---
Cash Flows from Operating Activities:
Net earnings attributable to the Group $
92,353 $
149,791 $
523,867 $
873,219
Adjustments to reconcile net earnings to net cash flows provided by (used for)
operations:
Depreciation and amortization:
Property, equipment and improvements 24,076 20,508 91,070 90,171
Intangible assets 23,489 22,752 90,563 79,098
Gain on sale of ECR business 3,130 (17,416) (110,236) (935,110)
Loss on disposal of other businesses and investments - 9,608
(Gain) Loss on investment in equity securities (35,252) 80,283 103,623 78,108
Stock based compensation 11,942 21,796 48,150 69,137
Equity in earnings of operating ventures, net of return on capital distributions 10,861 (1,152) 9,172 (8,784)
Loss on disposals of assets, net 1,067 4,224 766 6,222
Impairment of long-lived assets 162,238 162,238
Loss (Gain) on pension and retiree medical plan changes 1,947 1,534 4,598 (33,087)
Deferred income taxes 19,802 (158,531) 82,275 (105,939)
Changes in assets and liabilities, excluding the effects of businesses acquired:
Receivables and contract assets, net of contract liabilities 27,831 (85,040) (107,784) (67,894)
Prepaid expenses and other current assets (47,182) (19,116) (27,280) (13,117)
Accounts payable 22,242 227,368 (92,838) 295,146
Income taxes payable 5,036 (367,659) 35,194 (294,995)
Accrued liabilities 81,172 (71,873) (27,849) (305,716)
Other deferred liabilities (7,964) 23,212 (64,390) (106,256)
Other, net 35,585 23,196 85,710 3,753
Net cash provided by (used for) operating activities 432,373 (146,123) 806,849 (366,436)
Cash Flows from Investing Activities:
Additions to property and equipment (29,448) (29,307) (118,269) (135,977)
Disposals of property and equipment and other assets - (123) 96 7,177
Capital contributions to equity investees, net of return of capital distributions 80 (4,857) (12,278) (8,761)
Acquisitions of businesses, net of cash acquired (7,046) (293,580) (575,110)
Disposals of investment in equity securities - 64,708
Proceeds (payments) related to sales of businesses - 4,691 (5,061) 2,801,425
Purchases of noncontrolling interests - (1,113)
Net cash (used for) provided by investing activities (36,414) (29,596) (429,092) 2,152,349
Cash Flows from Financing Activities:
Net (repayments of) proceeds from borrowings (491,244) 157,046 265,264 (1,043,342)
Debt issuance costs - (174) (1,807) (3,915)
Proceeds from issuances of common stock 8,442 18,815 37,235 64,958
Common stock repurchases (51,429) (329,058) (337,251) (853,676)
Taxes paid on vested restricted stock (139) (454) (27,794) (26,641)
Cash dividends, including to noncontrolling interests (46,441) (24,139) (143,962) (106,396)
Net cash used for financing activities (580,811) (177,964) (208,315) (1,969,012)
Effect of Exchange Rate Changes 22,466 (13,491) 61,914 20,809
Net (Decrease) Increase in Cash and Cash Equivalents (162,386) (367,174) 231,356 (162,290)
Cash and Cash Equivalents at the Beginning of the Period 1,024,810 998,242 631,068 793,358
Cash and Cash Equivalents at the End of the Period $
862,424 $
631,068 $
862,424 $
631,068
See the accompanying Notes to Consolidated Financial Statements.
Backlog (in millions):
---
Unaudited October 2, 2020 September 27, 2019
--- ---
Critical Mission Solutions $
9,104 $
8,460
People & Places Solutions 14,714 14,109
Total $
23,818 $
22,569
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, adjusted EBITDA and free cash flow.
Net revenue is calculated excluding pass-through revenue of the Company's People & Places Solutions segment from the Company's revenue from continuing operations. Adjusted net earnings from continuing operations and adjusted EPS from continuing operations are calculated by (i) excluding the costs related to our 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; (ii) excluding costs and other charges associated with restructuring activities implemented in connection with the acquisitions of The KeyW Holding Corporation ("KeyW"), CH2M and John Wood Group nuclear business, the sale of the ECR business and other related cost reduction initiatives, which included involuntary terminations, costs associated with co-locating Jacobs, 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, charges associated with certain operations in India, which included write-offs on contract accounts receivable and other accruals, and similar costs and expenses; (iii) excluding the costs and other charges associated with the Focus 2023 initiatives commenced in the fourth quarter of fiscal 2020, which included costs and charges associated with the re-scaling and repurposing of physical office space, voluntary employee separations and related expenses (the amounts referred in (i), (ii) and (iii) are collectively referred to as the "Restructuring and other charges"); (iv) excluding transaction costs and other charges incurred in connection with closing of the KeyW, CH2M and John Wood Group nuclear business acquisitions, and sale of the ECR business (to the extent incurred prior to the closing), 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"); (v) adding back amortization of intangible assets; (vi) allocating to discontinued operations estimated stranded corporate costs that will be reimbursed or otherwise eliminated in connection with the sale of the ECR business; (vii) the reclassification of revenue under the Company's transition services agreement (TSA) with Worley included in other income for U.S. GAAP reporting purposes to SG&A and the exclusion of remaining unreimbursed costs associated with the TSA; (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 removal of fair value adjustments and dividend income related to the Company's investment in Worley stock and certain foreign currency revaluations relating to ECR sale proceeds; (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; (xi) excluding charges resulting from the revaluation of certain deferred tax assets/liabilities in connection with U.S. tax reform; (xii) 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; and (xiii) 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. We believe that net revenue, adjusted net earnings from continuing operations, adjusted EPS from continuing operations, adjusted EBITDA and free cash flow 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 and below, the inclusion or exclusion of which can obscure underlying trends. Additionally, management uses such measures 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 calculates adjusted EBITDA by adding income tax expense, depreciation expense and interest expense, and deducting interest income from adjusted net earnings from continuing operations.
Free cash flow is calculated using the reported statement of cash flows, provided from operations less additions to property and equipment.
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, and EPS from continuing operations to the corresponding "adjusted" amounts and the reconciliation of cash flow from operations to free cash flow and adjusted net earnings to adjusted EBITDA. 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 2021 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 (note: earnings per share amounts may not add across due to rounding).
U.S. GAAP Reconciliation for the fourth quarter of fiscal 2020 and 2019
---
Three Months Ended
October 2, 2020
Unaudited U.S. GAAP Effects of Other Adjusted
Restructuring, Adjustments
Transaction and (2)
Other Charges (1)
--- ---
Revenues $
3,519,689
$
$ $
3,519,689
Pass through revenue - (687,980) (687,980)
Net revenue 3,519,689 (687,980) 2,831,709
Direct cost of contracts (2,854,754) 449 687,980 (2,166,325)
Gross profit 664,935 449 665,384
Selling, general and administrative expenses (642,461) 211,425 23,567 (407,469)
Operating Profit 22,474 211,874 23,567 257,915
Total other income (expense), net 37,684 (45,046) (7,362)
Earnings from Continuing Operations Before Taxes 60,158 211,874 (21,479) 250,553
Income Tax Benefit (Expense) for Continuing Operations 19,721 (50,861) 5,287 (25,853)
Net Earnings of the Group from Continuing Operations 79,879 161,013 (16,192) 224,700
Net Earnings Attributable to Noncontrolling Interests from (10,360) (10,360)
Continuing Operations
Net Earnings from Continuing Operations attributable to 69,519 161,013 (16,192) 214,340
Jacobs
Net Earnings attributable to Discontinued Operations 12,474 12,474
Net Earnings attributable to Jacobs $
81,993 $
161,013 $
(16,192) $
226,814
Diluted Net Earnings from Continuing Operations Per Share $
0.53 $
1.22 $
(0.12) $
1.63
Diluted Net Earnings from Discontinued Operations Per Share $
0.09
$
$ $
0.09
Diluted Earnings Per Share $
0.62 $
1.22 $
(0.12) $
1.73
Operating Profit Margin 0.64
% 9.11
%
===
(1) Includes after-tax charges for the
Company's fourth quarter fiscal
2020 transformation initiatives
relating to real estate of $123.1
million, and other staffing
programs of $23.5 million and $14.4
million of other restructuring,
transaction and other charges.
(2) Includes (a) the removal of pass
through revenues and costs for the
People & Places Solutions line of
business for the calculation of
operating profit margin as a
percentage of net revenue of $688.0
million, (b) the removal of
amortization of intangible assets
of $23.5 million, (c) the
reclassification of revenues under
the Company's TSA of $0.6 million
included in other income for U.S.
GAAP reporting purposes to SG&A,
(d) the removal of $44.5 million 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 (e) associated income tax
expense adjustments for the above
pre-tax adjustment items.
Three Months Ended
September 27, 2019
Unaudited U.S. GAAP Effects of Other Adjusted
Restructuring, Adjustments
Transaction and (2)
Other Charges (1)
---
Revenues $
3,392,862
$
$ $
3,392,862
Pass through revenue (702,786) (702,786)
Net revenue 3,392,862 (702,786) 2,690,076
Direct cost of contracts (2,727,329) 3,000 702,786 (2,021,543)
Gross profit 665,533 3,000 668,533
Selling, general and administrative expenses (566,447) 105,918 45,301 (415,228)
Operating Profit 99,086 108,918 45,301 253,305
Total other (expense) income, net (45,549) 4,534 43,530 2,515
Earnings from Continuing Operations Before Taxes 53,537 113,452 88,831 255,820
Income Tax Expense for Continuing Operations (24,124) (25,089) 2,060 (47,153)
Net Earnings of the Group from Continuing Operations 29,413 88,363 90,891 208,667
Net Earnings Attributable to Noncontrolling Interests from (7,467) (7,467)
Continuing Operations
Net Earnings from Continuing Operations attributable to 21,946 88,363 90,891 201,200
Jacobs
Net Earnings attributable to Discontinued Operations 120,378 120,378
Net Earnings attributable to Jacobs $
142,324 $
88,363 $
90,891 $
321,578
Diluted Net Earnings from Continuing Operations Per Share $
0.16 $
0.65 $
0.67 $
1.48
Diluted Net Earnings from Discontinued Operations Per Share $
0.88
$
$ $
0.88
Diluted Earnings Per Share $
1.04 $
0.65 $
0.67 $
2.36
Operating Profit Margin 2.92% 9.42%
(1) Includes after-tax CH2M transaction
costs and adjustments of $1.3
million, after-tax transaction costs
associated with the acquisition of
KeyW of $0.2 million and after tax-
transaction costs associated with the
acquisition of John Wood Group's
Nuclear Business of $3.9 million.
(2) Includes (a) the removal of pass
through revenues and costs for the
People & Places Solutions line of
business for the calculation of
operating profit margin as a
percentage of net revenue of $702.8
million, (b) the removal of
amortization of intangible assets of
$23.4 million, (c) the
reclassification of revenues under
the Company's TSA of $21.3 million
included in other income for U.S.
GAAP reporting purposes to SG&A, (d)
the removal of $64.8 million 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, (e) the
add-back of charges resulting from
the revaluation of certain deferred
tax assets/liabilities in connection
with U.S. tax reform of $24.0 million
and (f) associated income tax expense
adjustments for the above pre-tax
adjustment items.
U.S. GAAP Reconciliation for fiscal years 2020 and 2019
---
For the Year Ended
October 2, 2020
Unaudited U.S. GAAP Effects of Other Adjusted
Restructuring, Adjustments
Transaction and (2)
Other Charges (1)
--- ---
Revenues $
13,566,975
$
$ $
13,566,975
Pass through revenue - (2,609,843) (2,609,843)
---
Net revenue 13,566,975 (2,609,843) 10,957,132
Direct cost of contracts (10,980,307) 2,290 2,609,843 (8,368,174)
---
Gross profit 2,586,668 2,290 2,588,958
Selling, general and administrative expenses (2,050,695) 325,123 106,529 (1,619,043)
---
Operating Profit 535,973 327,413 106,529 969,915
Total other expense, net (94,770) 2,799 58,674 (33,297)
---
Earnings from Continuing Operations Before Taxes 441,203 330,212 165,203 936,618
Income Tax Expense for Continuing Operations (55,320) (81,995) (39,782) (177,097)
---
Net Earnings of the Group from Continuing Operations 385,883 248,217 125,421 759,521
Net Earnings Attributable to Noncontrolling Interests from (32,022) (32,022)
Continuing Operations
---
Net Earnings from Continuing Operations attributable to 353,861 248,217 125,421 727,499
Jacobs
---
Net Earnings attributable to Discontinued Operations 137,984 137,984
---
Net Earnings attributable to Jacobs $
491,845 $
248,217 $
125,421 $
865,483
===
Diluted Net Earnings from Continuing Operations Per Share $
2.67 $
1.87 $
0.94 $
5.48
Diluted Net Earnings from Discontinued Operations Per Share $
1.04
$
$ $
1.04
---
Diluted Earnings Per Share $
3.71 $
1.87 $
0.94 $
6.52
===
Operating Profit Margin 3.95% 8.85%
===
(1) Includes after-tax charges for the
Company's fourth quarter fiscal
2020 transformation initiatives
relating to real estate of $123.1
million, and other staffing
programs of $23.5 million and
$101.6 million of other
restructuring, transaction and
other charges.
(2) Includes (a) the removal of pass
through revenues and costs for the
People & Places Solutions line of
business for the calculation of
operating profit margin as a
percentage of net revenue of $2.6
billion, (b) the removal of
amortization of intangible assets
of $90.6 million, (c) the
reclassification of revenues under
the TSA of $16.1 million included
in other income for U.S. GAAP
reporting purposes to SG&A, (d) the
removal of $74.5 million 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 (e)
associated income tax expense
adjustments for the above pre-tax
adjustment items.
For the Year Ended
September 27, 2019
Unaudited U.S. GAAP Effects of Other Adjusted
Restructuring, Adjustments
Transaction and (2)
Other Charges (1)
---
Revenues $
12,737,868
$
$ $
12,737,868
Pass through revenue (2,543,358) (2,543,358)
Net revenue 12,737,868 (2,543,358) 10,194,510
Direct cost of contracts (10,260,840) 4,969 2,543,358 (7,712,513)
Gross profit 2,477,028 4,969 2,481,997
Selling, general and administrative expenses (2,072,177) 350,266 133,164 (1,588,747)
Operating Profit 404,851 355,235 133,164 893,250
Total other expense, net (53,892) (22,382) 71,639 (4,635)
Earnings from Continuing Operations Before Taxes 350,959 332,853 204,803 888,615
Income Tax Expense for Continuing Operations (36,954) (73,041) (51,722) (161,717)
Net Earnings of the Group from Continuing Operations 314,005 259,812 153,081 726,898
Net Earnings Attributable to Noncontrolling Interests from (23,045) (23,045)
Continuing Operations
Net Earnings from Continuing Operations attributable to 290,960 259,812 153,081 703,853
Jacobs
Net Earnings attributable to Discontinued Operations 557,019 8,361 (55,622) 509,758
Net Earnings attributable to Jacobs $
847,979 $
268,173 $
97,459 $
1,213,611
Diluted Net Earnings from Continuing Operations Per Share $
2.09 $
1.87 $
1.10 $
5.05
Diluted Net Earnings from Discontinued Operations Per $
4.00 $
0.06 $
(0.40) $
3.66
Share
Diluted Earnings Per Share $
6.08 $
1.92 $
0.70 $
8.71
Operating Profit Margin 3.18% 8.76%
(1) Includes after-tax CH2M transaction
costs and adjustments of $2.4
million, after tax-transaction costs
associated with the sale of our ECR
line of business of $8.9 million,
after-tax transaction costs
associated with the acquisition of
KeyW of $9.8 million and after-tax
transaction costs associated with the
acquisition of John Wood Group's
Nuclear Business of $3.9 million.
(2) Includes (a) the removal of pass
through revenues and costs for the
People & Places Solutions line of
business for the calculation of
operating profit margin as a
percentage of net revenue of $2.54
billion, (b) the removal of
amortization of intangible assets of
$79.1 million, (c) the allocation to
discontinued operations of estimated
stranded corporate costs of $14.8
million prior to the sale that was
reimbursed under the ECR transition
service agreement (TSA) with Worley
or otherwise eliminated from the
ongoing operations in connection with
the sale of the ECR business, (d)
the reclassification of revenues
under the Company's TSA of $35.4
million included in other income for
U.S. GAAP reporting purposes to SG&A
and the exclusion of $3.9 million in
remaining unreimbursed costs
associated with this agreement, (e)
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, (f) the removal of $64.8
million 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 (g) 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, (h) 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 $35.0 million and other
adjustments of $1.5 million, (i) 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
and (j) associated income tax expense
adjustments for the above pre-tax
adjustment items.
Reconciliation of Adjusted EBITDA
---
Twelve Months Ended Twelve Months Ended
10/2/2020 9/27/2019
---
Adj Net earnings from Continuing Operations $
727,499 $
703,853
Adj. Income Tax Expense for Continuing Operations (177,097) (161,717)
Adj. Net earnings from Continuing Operations attributable to Jacobs 904,596 865,570
before income taxes
Depreciation expense 91,070 88,061
Interest income (4,729) (9,487)
Interest expense 61,508 38,399
Adjusted EBITDA $
1,052,445 $
982,543
Reconciliation of Free Cash Flow
---
Three Months Ended Twelve Months Ended
10/2/2020 10/2/2020
---
Net cash provided by (used for) operating activities $
432,373 $
806,849
Additions to property and equipment (29,448) (118,269)
Free cash flow $
402,925 $
688,580
Earnings Per Share:
---
For the Three Months Ended For the Years Ended
---
October 2, 2020 September 27, October 2, 2020 September 27,
2019 2019
---
Numerator for Basic and Diluted EPS:
Net earnings attributable to Jacobs from continuing $
69,519 $
21,946 $
353,861 $
290,960
operations
Net earnings from continuing operations allocated to - (16) (72) (415)
participating securities
Net earnings from continuing operations allocated to $
69,519 $
21,930 $
353,789 $
290,545
common stock for EPS calculation
Net earnings attributable to Jacobs from discontinued $
12,474 $
120,378 $
137,984 $
557,019
operations
Net earnings from discontinued operations allocated to - (88) (28) (795)
participating securities
Net earnings from discontinued operations allocated to $
12,474 $
120,290 $
137,956 $
556,224
common stock for EPS calculation
Net earnings allocated to common stock for EPS $
81,993 $
142,220 $
491,745 $
846,769
calculation
Denominator for Basic and Diluted EPS:
Weighted average basic shares 130,180 134,625 131,541 138,104
Shares allocated to participating securities - (99) (27) (197)
Shares used for calculating basic EPS attributable to 130,180 134,526 131,514 137,907
common stock
Effect of dilutive securities:
Stock compensation plans 1,266 1,579 1,207 1,299
Shares used for calculating diluted EPS attributable to 131,446 136,105 132,721 139,206
common stock
Net Earnings Per Share:
Basic Net Earnings from Continuing Operations Per $
0.53 $
0.16 $
2.69 $
2.11
Share
Basic Net Earnings from Discontinued Operations Per $
0.10 $
0.89 $
1.05 $
4.03
Share
Basic EPS $
0.63 $
1.06 $
3.74 $
6.14
Diluted Net Earnings from Continuing Operations Per $
0.53 $
0.16 $
2.67 $
2.09
Share
Diluted Net Earnings from Discontinued Operations $
0.09 $
0.88 $
1.04 $
4.00
Per Share
Diluted EPS $
0.62 $
1.04 $
3.71 $
6.08
For additional information contact:
Investors:
Jonathan Doros, 214-583-8596
jonathan.doros@jacobs.com
Media:
Marietta Hannigan, 214-920-8035
marietta.hannigan@jacobs.com
(1)Reflects continuing operations as reported in accordance with GAAP.
(2)Reconciliation of the adjusted 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 2021.
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SOURCE Jacobs
