Jacobs Engineering Group Inc. 2016 Annual Report
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2016 ANNUAL REPORT I I I I m m m m a a a a g g g g e e e e c © c c o o o 2 u u u 0 r r r t t t 1 e e e 6 s s s , y y y O N B I r y v r A u i i t n S i s T g A h o O l A g i l o i r i w L a L y C s , i 3 a 6 l l 0 r i g / h V t i s s u r a e l s A e r i r v e d A&T B&I Industrial P&C AEROSPACE & TECHNOLOGY 4 BUILDINGS & INFRASTRUCTURE 8 INDUSTRIAL 12 PETROLEUM & CHEMICALS 16 Jacobs’ ongoing business and culture transformation has changed, and will continue to enhance, the way we think and act at every level. Our new strategy is helping us drive Jacobs’ business to places it’s never been and is requiring us to do things we have never done, for our clients, our employees, and our shareholders. Working together, we are building a high-performance culture, transforming our core, and growing profitably. Financial Highlights Dollars in thousands, except per-share information 2016 2015 2014 September 30 October 2 September 26 Revenues $10,964,157 $12,114,832 $12,695,157 Net earnings attributable to Jacobs 210,463 302,971 328,108 Per share information: Basic EPS $ 1.75 $ 2.42 $ 2.51 Diluted EPS 1.73 2.40 2.48 Stockholders’ equity 35.26 34.85 33.92 Closing year-end stock price 51.72 37.40 49.68 Total assets $ 7,360,022 $ 7,785,926 $ 8,453,659 Total Jacobs stockholders’ equity 4,265,276 4,291,745 4,469,255 Return on average equity 4.92% 6.92% 7.56% Stockholders of record 1,073 1,116 1,169 Backlog: Technical professional services $12,013,121 $11,692,404 $12,607,029 Total 18,760,529 18,806,570 18,380,034 Permanent staff 43,800 49,900 53,500 $18,806,570 $18,760,529 $12,695,157 $18,380,034 $12,114,832 $10,964,157 $3.08 $373,555 $2.48 $2.40 $328,108 $302,971 $1.73 $210,463 D D E E T T S S P P U U A A J J A A D D A A G G 14 15 16 14 15 16 14 15 16 14 15 16 REVENUES NET EARNINGS EARNINGS PER SHARE TOTAL BACKLOG in thousands in thousands in thousands in thousands 1 Chairman & CEO ’s Message: Transforming the Core FY16 HIGHLIGHTS is an amazing time to be a part of Jacobs. We are a strong company with enormous potential, thanks to our people’s enthusiasm, talent, collective knowledge, commitment to safety and Revenues of $11 billion willingness to do what it takes to succeed. In 2016, we began our effort to Transform the Core Adjusted Net Earnings IT to create a Jacobs that is ready to meet the challenges of tomorrow. The effort is centered on of $374 million ($3.08 per share) delivering superior value to our clients and, in turn, enhancing shareholder value. We have a strong foundation to build upon, particularly our passionate commitment to safety and culture of caring, our Backlog of $18.8 billion deep client relationships, and our unparalleled end-market diversity. Record free cash flow I am pleased to report that 2016 was a year of noteworthy change for Jacobs and we implemented of $612 million several key initiatives: $7.8 billion in client savings We made significant progress on our restructuring plan, which will save approximately $260 to through our JacobsValue+ SM $270 million annually. This included office consolidations around the globe, reducing or eliminating program 33 percent of our footprint. Reduced our clients’ carbon We implemented our new line of business leadership structure to better serve our clients and leverage footprints by approximately best practices globally. 54.2 million metric tons of CO 2 SM through JacobsSustainability+ We integrated our sales and operational teams within each line of business. program We centralized Field Services to create a business unit with enhanced capability across multiple industries, including sustaining services operations and pure construction delivery. We enhanced our portfolio with acquisitions, including J.L. Patterson & Associates, focused in the rail market; The Van Dyke Technology Group, Inc., adding cyber security capability, and BAYQIK® Sulfuric Acid Converter Technology, which enhanced our technology offerings. We strengthened accountability, implementing a new annual incentive plan to focus on improvements in working capital and operating profit. Within an environment of depressed commodity markets, sluggish oil prices, limited capital expenditure in mining, and fragility in many economies around the world, Jacobs achieved solid financial performance in fiscal 2016. Our operational discipline and focus delivered significant improvements. Our free cash flow reached $612 million for the year, a record for Jacobs. This was driven by a strong focus on reducing working capital, especially accounts receivable. Our days sales outstanding (DSO) was reduced from a 2015 year- end level of 77 to 70 in 2016. We also supported our operating profit through efficiency improvements across the business. By adjusting our cost structure, we achieved a positive increase in our margin profile in the second half of the year. Most importantly, our healthy financial position in 2016 enables us to further invest in our business strategy and our global tools and processes which will help us drive greater efficiency across the business. In addition, despite ongoing market volatility, we grew our backlog in Q4 to a near record $18.8 billion and we continued to build strong partnerships with our clients by delivering solutions for their critical business challenges. In fact, we were able to provide our clients with $7.8 billion in savings through our JacobsValue+™ program. 2 Our clients have recognized Jacobs with multiple awards including one from NASA for outstanding contributions to the human space flight program. Also, the Royal Society for Prevention of Accidents has recognized Jacobs for 10 consecutive years of safe operations. And we received the Construction Users Roundtable (CURT) 2016 Workforce Development Award in recognition of our JacobsWay program, which provides career advancement opportunities in construction. Fortune Magazine ranked Jacobs as one of the Most Admired Companies in the world in the engineering, construction category. Forbes also named Jacobs to the inaugural Forbes Just 100 list of America’s best corporate citizens. Jacobs continues to be a thought leader in each of our business segments. One example is our work with the 100 Resilient Cities, pioneered by The Rockefeller Foundation. As a Platform Partner, we have committed to give urban centers across the world access to tools to help them plan and implement citywide resilience strategies and establish measures for success. Another example is our role in the Coalition for Deep Space Exploration. As a member of this US space advocacy organization, we endorse its vision to pursue the benefits returned to our country from long-term national investment in space exploration and scientific discovery. Finally in 2016, we announced our headquarter relocation to Dallas. For many years Pasadena successfully served as Jacobs’ headquarters since it was founded in 1947 by Dr. Joseph J. Jacobs. However, our new location strengthens Jacobs’ ability to attract top talent and is more accessible to our valued global clients. Looking forward, our transformation, together with our established strengths in many markets and broad global footprint, frame an exciting potential for our business. With our strategy now firmly in place we expect clear growth and margin expansion opportunities. We are ready to capitalize on these with a flexible balance sheet bolstered by strong free cash flow generation to support our growth initiatives. The future represents a new era for a stronger Jacobs, as a company defined by greater discipline, accountability and focus. We have achieved a great deal in a relatively short time and we are ready to leverage our potential to create an even stronger platform for growth and deliver greater value to you, our shareholders. All of us at Jacobs, including our Board of Directors, thank you for your interest and commitment to our company. Steve Demetriou Chairman and Chief Executive Officer 3 Aerospace & Technology “My job provides me the opportunity to affect change – both within Jacobs and for our clients. We are experiencing a period of unprecedented transformation within our industries and Jacobs is positioned to lead that digital evolution across industrial, infrastructure and mission critical government landscapes. That’s a very satisfying way to go to work every day.” Jed Vice President Jacobs Connected Enterprise Columbia, Maryland, USA ur Aerospace & Technology line of business serves our global aerospace, defense and nuclear clients across the U.S., the U.K., Australia and other markets. We have developed a strong reputation for delivering services for the entire life cycle of a project, including research and O development, test and evaluation, and acquisition support. Our robust technical capabilities, breadth and depth of services, and established relationships with our core clients have enabled Jacobs to maintain a strong position in the markets we serve. We saw stable program funding from our clients in 2016, which helped us experience market share growth. We focused on core client program rebids and high-value new business wins, while achieving a strong track record of performance and lean cost structure. We are proud of our numerous project wins this year, including the New Bedford Harbor Remediation contract and the NASA Glenn Acoustic Wind Tunnel upgrades.