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Original Source: FD (FAIR DISCLOSURE) WIRE
. Patty Bruener, Jacobs Engineering Group, IR . John Prosser, Jacobs Engineering Group, CFO . Noel Watson, Jacobs Engineering Group, CEO & Director . Craig Martin, Jacobs Engineering Group, President & Director
Co. reported FY03 EPS of $2.27 and 4Q03 EPS of $0.59. Earnings were $128m for the year and $35.5m for 4Q03. Stronger markets included petroleum, pharma-bio, infrastructure, buildings and defense. Weaker markets included chemicals, pulp and paper, and semiconductors. Q&A focus: acquisitions, clean fuel business.
A. Key Data From Call The following is the key financial data from the conference call.
1. EPS for FY03 = $2.27. 2. EPS for 4Q03 = $0.59. 3. Total Profit for FY03 = $128m. 4. Total Profit for 4Q03 = $35.5m.
S1. 4Q03 Financial Results (J.P.) 1. EPS: $2.27 for year; $0.59 for quarter. 1. Up 15% for year and 13% for quarter. 2. Earnings were up to $128m for year, a 17% increase. 1. $33.5m for 4Q03, up 16%. 2. Within guidance. 3. Guidance. 1. 1Q04. 1. Saw effects of projects slow to move from feasibility phase to detailed design phase. 2. Trend may impact 1Q04, as well. 3. Looking for flat quarter. 4. Range: $0.57-0.60 for EPS. 2. FY04: Looking for strong growth between 10-15%. 4. Backlog and sales: very strong for quarter. 1. Strengths came from field services bookings.
2. These bookings will take longer to work off and won't show
effects until late 2004, into 2005. 3. Sales strong for quarter: highest level of bookings for a fiscal year or a quarter. 5. Net cash: continues to improve. 1. Up $151m for the year.
2. Up $32m for quarter. 3. Debt came down to about $18m total.
6. Have consistently grown over a decade and a half. 7. Backlog was up significantly for the quarter and the year. 1. QoverQ was up almost $500m. 2. YoverY, up about $300m. 3. Much of the strength came from the field service bookings. 4. Pro services for technical professional services were also up about $100m for the quarter.
S2. Strategies to Maintain 15% Growth (N.W.) 1. Relationship-based business model. 1. A unique business model in the industry. 2. All businesses have some preferred relationships, but Jacobs
concentrates primarily on those preferred customers. 3. 75-80% of business comes from this model. 4. Preferred relationships are long-term clients, formal alliances. 5. Benefits of this model. 1. High percentage of repeat business. 2. Provides a more stable earnings pattern. 3. Risk is much more manageable.
6. Also have discrete projects in order to get new customers and
make money. 7. 25-30% of business should always be on discrete projects. 8. Occasionally do a transactional project, i.e., bidding money on a hard money basis. 2. Jacobs Market diversity.
1. Reduces overall cyclical nature of business. 2. In 1992, 67% of business was from heavy process (chemicals and petroleum).
3. Today, it's 37%. 4. Although have reduced heavy process, chemicals and petroleum business has grown dramatically. 5. This diversity has allowed Jacobs to weather difficult economic conditions. 3. Broadened life cycle services. 1. Goal: provide each life cycle services to each customer in a preferred relationship.
2. In some relationships, doing engineering or architectural
work. 3. In some, doing construction and maintenance. 4. There is an opportunity in each relationship to sell a broader
pattern of services. 5. One of key sales strategies: measure percent of client's usage in each area, then devise strategies to get more. 4. Acquisitions. 1. Spent 15 months paying down debts to get cash positive. 2. Are in the hunt for acquisitions.
3. Look at markets, clients and geographies. 4. Looking at markets, are in a lot of markets but have some where would like to participate. 1. Upstream oil and gas market. 2. Broader play in the infrastructure market. 3. Looking at acquisitions in these areas but no deal has come together. 5. Looking at clients, looking at groups of clients. 6. Most of geographic expansion has been through acquisition. 1. Major presence in Western Europe all through acquisition. 2. However, operation in Singapore, which is between 150-200 people, has all been done from scratch.
5. Markets. 1. Weaker markets. 1. Chemicals market: while signs of life in individual companies, not roaring back any time soon. 2. Pulp and paper market: has been operating at the bottom for a long time. 1. There are signs it is coming up. 2. Jacobs has grown in market share, so receiving a larger percentage of what's available. 3. Semiconductor market: has been slow and major fab has not been released in the past few years. 1. Expect some fabs to be released soon. 2. Strong markets. 1. Petroleum market: both upstream and downstream continues strong. 1. Upstream is the hunt for oil; JEC not a big player there. 2. Downstream is the processing market; a lot of activity driven by clean fuels legislation in U.S. and Europe. 3. Have worked through most clean gasoline programs, now working on clean diesel. 4. After that, will have clean aviation and clean offroads. 2. Pharma-bio business: very strong. 1. Have projects coming and going because clients have
difficulty sorting out what they want to do. 2. Pharma companies are starting to favor getting started early with production capacity for new drugs. 3. Infrastructure business: had slowed down in late '02 and into '03, but has picked up. 1. Certainly better today than a year ago. 2. Picking up work; continue to sell more backlog than work off. 4. Buildings business: has slowed a bit. 1. A lot of buildings work is for the government: GSA and Justice Department, etc. 2. While still strong, not as robust due to many projects waiting on funding. 5. Defense business: going strong. 1. Selling a lot of work, being successful in this area. 2. Will continue to grow at double-digit rates for a long time.
S3. Major wins in 4Q03 (C.M.) 1. Saudi Aramco. 1. Natural gas liquids and gas plant expansion for the Saudis. 2. $100m worth of cost reimbursable services. 3. Feed and PMC work. 2. DOE work at Oak Ridge. 1. Bechtel Jacobs joint venture. 2. Extension of existing contract to close site. 3. Bechtel and Jacobs will be there together until site closed out completely. 3. Suncor.
1. Firebag 3 work, which is in-situ recovery of oil sands in
Canada. 2. Modernization of the Suncor refinery in Denver, a $200m project. 3. Suncor has been a customer for about 37 years. 4. Scottish and Southern Energy. 1. Gas compression and storage project. 2. Will put gas into …