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Jacobs Engineering Group Inc. (JEC)

F4Q2010 Earnings Call Transcript

November 16, 2010 11:00 am ET


Patty Bruner – IR

John Prosser – EVP, Finance & Administration and Treasurer

Craig Martin – President and CEO

Tom Hammond – EVP, Operations

George Kunberger – EVP, Operations

Greg Landry – EVP, Operations

Bill Birkhofer – SVP, Public Sector Sales


Avi Fisher – BMO Capital Markets

Peter Chang – Credit Suisse

John Rogers – D. A. Davidson

Glosho [ph] – Barclays Capital

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Good day, and welcome to the Jacobs Engineering fourth quarter conference call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Ms. Patty Bruner. Please go ahead, ma’am.




Thank you. Good morning. The company requests that we point out that any statements that the company makes today that are not based on historical fact are forward-looking statements. Although such statements are based on management's current estimates and expectations and currently available competitive financial and economic data, forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause actual results of the company to differ materially from what may be inferred from the forward-looking statements.

For a description of some of the factors which may occur that could cause or contribute to such differences, the company requests that you read its most recent annual report on Form 10-K for the period ending October 2, 2009, including Item 1A - Risk Factors, Item 3 - Legal Proceedings, and Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations contained therein, and the most recent Form 10-Q for the period ended June 30, 2010 for a description of our business, legal proceedings and other information that describes the factors that could cause actual results to differ from such forward-looking statements. The company undertakes no obligation to release publicly any revisions or updates to any forward-looking statements, whether as a result of new information, future events, or otherwise.

Please note that there will be a webcast replay of today’s call available on Jacobs’ website starting at 1:00 PM Eastern today. The webcast will be available through the end of this quarter, December 31st.

And now, I’ll turn it over to John Prosser, CFO of Jacobs, to discuss the financial results.

John Prosse


Thank you, Patty. I'll go through the financial highlights for the quarter and then I'll turn it over to Noel Watson – Craig Martin – sorry about that – Craig Martin, our CEO, to go through the business overview. If we go to slide four that gives the financial highlights, we did report earnings of $0.61 for the quarter. Net earnings attributable to Jacobs were $77 million. For the year, the GAAP reported earnings EPS were $1.96, and the net earnings attributable to Jacobs were $246 million for the year.

We continue to have a strong balance sheet. Our net cash position was at $858.9 million. This is up slightly from the third quarter. But during the quarter, we did have the large payment related to the settlement judgment on the SIVOM case. So that was just over $60 million. So with that cash outflow, we still had growth in the cash.

Our backlog at the end of the quarter was $13.2 billion. I’ll talk about that a little bit more on a later slide. And we are initiating our fiscal year ’11 guidance at the range of $2.30 to $2.80 per share. If you exclude the SIVOM judgment and the Houston sublease, which we’ve discussed earlier, that affected both our first and third quarters, the EPS for the year was $2.48 and the net earnings attributable to Jacobs was $312.1 million.

Turning to slide five, this is the earnings history. The last two years we’ve been affected by the recession. But even with that decrease in earnings over the last two years, if you look at the bars underneath the graph, which give you the compounded growth rate over the prior ten years through ’10, we still are exceeding the goal that we have of a long-term growth rate of excess of 15%. So we are at 16.8% for the ten-year compounded growth rate. So longer-term, we still are meeting that goal.

Moving on slide six, I will spend a little bit more time on the backlog. For the quarter, the backlog, as I said, was – ended at $13.2 billion. Professional services backlog ended at $7.6 billion. During the quarter, we’ve made adjustments to a number of our contracts, mostly in the public sector, mostly related to indefinite quantity, capacity kinds of contracts, the IDIQ kinds of contracts, where we did a review, and in some cases, it just became clear that we were not going to be able to use the full capacity.

This isn’t a case where contracts were cancelled. It’s just the case of, as we evaluate what’s the utilization of that would be over the expected life, there were a number of things that needed to be adjusted downward, and that amounted to $390 million in adjustments to the pro services part of the backlog. So if you adjust our sales rate for that, our bookings for the quarter were good. We’re actually a little bit higher than the work-off, which is a very positive sign and a good sign going forward for the booking trends in the backlog trends.

With that, I will turn it over to Mr. Martin to go over the highlights – the strategies.

Craig Martin

Thank you, John. I’m glad to know we’re not making a leadership change like some of our competition. That was – got me nervous there for a minute. We’re going to talk about our strategies for growth. For those of you who have been on this call any time in the last four or five years, none of these have changed. And I’m going to talk about each one individually. So I won’t go through them on this slide.

Let’s go on now to slide eight, and I want to talk about our relationship-based business model. I know you’ve heard about this from us over and over again. But I think it’s important to understand the differences in the way we run our business from the way much of our competition runs theirs.

Let me start with the industry model on the right. As we’ve said I think more than once, most of the industry focuses on transactional projects. By transactional projects, we mean big events in faraway places; we mean lump sum, turnkey, compatibly bid assignments; we mean the big elephants that some of our competitors describe. Over the last few days, I’ve read all of the transcripts for most of our competitors’ webcasts, and I was struck by the degree which almost every one of our competitors characterize their business in terms of the big transactions that were going to affect the next quarter or the next year or the next couple years. And I think that’s a fine business model. There is nothing wrong with it, but it’s not ours.

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