Jacobs Engineering Group Inc. (JEC)
F2Q10 (Qtr End 04/02/10) Earnings Call Transcript
April 27, 2010 11:00 am ET
Patty Bruner – IR
John Prosser – CFO, EVP of Finance & Administration, and Treasurer
Craig Martin – President and CEO
Noel Watson – Chairman
Alex Rygiel – FBR Capital Markets
Michael Dudas – Jefferies
Andrew Kaplowitz – Barclays Capital
Andrew Obin – Merrill Lynch
Scott Levine – JPMorgan
Tahira Afzal – KeyBanc
Richard Paget – Morgan Joseph
Barry Bannister – Stifel Nicolaus
Steven Fisher – UBS
Avram Fisher – BMO Capital Markets
John Rogers – D.A. Davidson
Will Gabrielski – Broadpoint AmTech
Chase Jacobsen – Sterne Agee
Justin Hauke – Robert W. Baird
Jamie Cook – Credit Suisse
Previous Statements by JEC
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Good morning. My name is Kelly and I will be your conference operator for today. At this time I would like to welcome everyone to the Jacob's second quarter 2010 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers remarks, there will be a question and answer session. (Operator Instructions) Ms. Bruner, you may begin your conference.
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 entered October 2, 2009, including item 1A – Risk Factors, item 3 – Legal proceedings and item 7 – Management's Discussion and Analysis of Financial Conditions and Results of Operations contained therein in the most recent Form 10-Q for the period ending January 1st 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.
Now, John Prosser, CFO of Jacobs will discuss the financial results.
Thank you, Patty, and good morning. I will briefly go over the financial highlights for the quarter and then I'll turn it over to Craig Martin, our CEO to go through the overview of the business and what we are seeing out there in the marketplace.
We go to slide 4, the financial highlights. As was covered in our press release, the diluted EPS for the quarter was $0.62, net earnings of $77.5 million and for the year-to-date, that brings us to $1.20 and net earnings of $149.9 million. Our backlog was at $14.7 billion, down a couple of hundred million sequentially from last quarter and we continue to have a very strong sheet. Our Q will be filed by the end of the week. So you'll be able to see the details of the financial statements at that point.
The net cash at the end of the quarter was $743 million. This compares to $941 million last quarter and the decrease really is a result of a couple of acquisitions that we've made since the beginning of the year. We have revised our guidance. Our fiscal year 10 guidance is now at $2.15 to $2.65. So it's up slightly from the previous range.
Moving on to slide 5 a track of our earnings history. Obviously we've been disappointed the last two [ph] years with the downturn. We have still shown, as you see the bars at the bottom of the graph that even with this downturn we still are averaging well above the 15% compounded growth rates that we talk about as our long term target. Now if you look through the end this last quarter, our last 10 year growth rate is at 18%.
Looking at our backlog, which is slide 6, again the backlog came in at $14.7 billion for the total backlog but which is down slightly from last quarter but the professional services backlog at $8.3 billion is actually up about $100 million from last quarter when we had a backlog of $8.2 billion.
So we are seeing a pickup in good activity on the professional services as we still see some weakness as we work through some of the – particularly one large project that we have in backlog on the field services side. We have the one acquisition this quarter and it actually added less than $100 million in backlog because it was relatively small in all of professional services.
So with that I will turn it over to Craig to go through the overview of the quarter.
Thank you, John, and good morning everyone. I'm on slide 7 now. I want to take just a minute or two to talk about how we're going to continue to grow at that 15% compound rate that John mentioned. We've got five bullets here, the first two bullets remaining committed to our business model and our focus on market diversity. I'll talk about it in a little bit more detail later.
So for now, we'll move on to the next three bullets and let me talk first about growth through our multi domestic strategy. As we've told you many times, we believe that it is important for us to be local to our customers and we believe there's significant opportunity to drive growth through continuing geographic expansion. We're particularly excited about opportunities to grow in the Middle East and in China.
Particularly the Middle East chose opportunities in both the public sector and the private sector. I ran across the data point just the other day about Middle East CapEx in the process, the private sector side of the business and there is something like $178 billion to be spent in the next five years just in that area alone. So we think our expansion in the Middle East area is important to us. We're making good progress there and we're going to continue to keep pressure on the system to expand our Middle East presence and grow domestically.
Remember that we'd like to be local because that's what drives our base load work and that base load is very important. I'll talk about that more in a minute. Our next bullet here is drive down costs continuously. We have had another good quarter in terms of cost control, from the perspective, maybe the way we look at it, you may not entirely agree when you look at the numbers but we feel pretty good about the cost control we've demonstrated and we think of it as a pretty positive trend going forward.
So we continue to see benefits from our aggressive approach to controlling costs. Frankly margin pressure continues to be an issue. I'll talk more about that in a little bit and so we need to continue to drive our cost down in order to maintain the good strong profitable position in this market.
And then finally the bullet on acquisitions. We've always made acquisitions a part of our growth strategy. We continue to believe that this is a great time for acquisitions. We've just finished the JJG deal this last quarter. That's a water and waste water acquisition, the first of what we think will be a series of those.
We think there's lots of growth in that business and lots of opportunity to grow. As we sit here today we're focusing on acquisitions in about five or six areas, geographic acquisitions in the Middle-East and to a lesser extent in China, market acquisitions in the upstream business, in the water and waste water business, in Aerospace and Defense are all areas of focus for us.
We're also looking at opportunities in other markets, particularly power and mining and minerals but that would be on an opportunistic basis. Frankly we're doing pretty well on growing our power business on a bootstrap basis but an acquisition would still be nice.