-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HIOzWD+v3HhdSDQ7Cbsi9nOrVbHv3K+1YPZApW/hPUecxvytuoCnL2FX2gYAjk61 Rh9OGT8saQ1TKG/fOxzWdQ== 0000898430-02-004659.txt : 20021227 0000898430-02-004659.hdr.sgml : 20021227 20021227145526 ACCESSION NUMBER: 0000898430-02-004659 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021227 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JACOBS ENGINEERING GROUP INC /DE/ CENTRAL INDEX KEY: 0000052988 STANDARD INDUSTRIAL CLASSIFICATION: HEAVY CONSTRUCTION OTHER THAN BUILDING CONST - CONTRACTORS [1600] IRS NUMBER: 954081636 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-07463 FILM NUMBER: 02870127 BUSINESS ADDRESS: STREET 1: 1111 S ARROYO PARKWAY CITY: PASADENA STATE: CA ZIP: 91105-3063 BUSINESS PHONE: 8184492171 10-K 1 d10k.htm FORM 10-K Form 10-K
2002
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-K
 
(Mark one)
x
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
    
 
For the fiscal year ended September 30, 2002
 
OR
 
¨
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File Number 1-7463
 
 
Jacobs Engineering Group Inc.
(Exact name of Registrant as specified in its charter)
 
Delaware
(State of incorporation)
  
95-4081636
(I.R.S. employer
identification number)
 
1111 South Arroyo Parkway, Pasadena, California
(Address of principal executive offices)
  
91105
(Zip code)
 
Registrant’s telephone number, including area code (626) 578-3500
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of Each Class
  
Name of Each Exchange on Which Registered
Common Stock, $1 par value
  
New York Stock Exchange
 
 
Indicate by check-mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  x  Yes  ¨  No
 
Indicate by check-mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of Form 10-K or any amendment to this Form 10-K.  ¨
 
The aggregate market value of the Registrant’s voting stock held by non-affiliates was approximately $1.795 billion as of December 24, 2002, based upon the last reported sales price on the New York Stock Exchange. For this purpose, the Registrant considers Dr. Joseph J. Jacobs to be its only affiliate.
 
As of December 24, 2002, the Registrant had outstanding 54,802,384 shares of its common stock.
 
DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the Registrant’s definitive Proxy Statement issued in connection with its 2003 Annual Meeting of Shareholders (Part II and Part III).
 

 
PART I
 
Item 1.    BUSINESS
 
General
Jacobs Engineering Group Inc. was incorporated under the laws of the State of Delaware on January 8, 1987. On March 4, 1987, it succeeded by merger to the business and assets of Jacobs Engineering Group Inc., a California corporation that, in 1974, had succeeded to a business organized originally by Dr. Joseph J. Jacobs in 1947. Unless the context otherwise requires, all references herein to “Jacobs” or the “Registrant” are to Jacobs Engineering Group Inc. and its predecessors, and references to the “Company”, “we”, “us” or “our” are to both Jacobs Engineering Group Inc. and its consolidated subsidiaries. The Registrant’s common stock has been publicly held since 1970 and is currently listed on the New York Stock Exchange.
 
The Company is one of the largest professional services firms in the United States. Our business is focused exclusively on providing a broad range of technical, professional, and construction services to a large number of industrial, commercial, and governmental clients around the world. Specifically, we provide project services (which includes engineering, design, architectural and similar services); process, scientific and systems consulting services; operations and maintenance services; and construction services. We provide these services through offices and subsidiaries located in the United States, Canada, Europe, Asia, Mexico and Australia.
 
We concentrate our services on selected industry groups and markets including chemicals and polymers; buildings (which includes projects in the fields of health care and education, as well as civic, governmental, and commercial buildings); federal programs; pharmaceuticals and biotechnology; exploration, production and refining; infrastructure; technology and manufacturing; and pulp and paper, among others.
 
Over the past several years, we have grown our business through both internal initiatives and strategic mergers and acquisitions. These mergers and acquisitions have allowed us to (i) expand or enhance the range of services we provide our clients; (ii) expand our client base; and/or (iii) provide access to new geographic areas. A discussion of some of the more recent mergers and acquisitions follows:
 
 
•
 
In October 2001, we acquired McDermott Engineers & Constructors (Canada) Limited (including Delta Catalytic and Delta Hudson Engineering) (collectively, “Delta”). Delta provides engineering, construction, and maintenance services to various industries including upstream oil and gas, petroleum refining, petrochemicals, and chemicals. The businesses acquired have approximately 3,500 employees conducting operations located primarily in Canada and the United Kingdom.
 
 
•
 
In May 2001, we purchased from LawGibb Group Inc. substantially all of its international engineering, and construction management business (the “GIBB businesses”). Headquartered in the United Kingdom, the GIBB businesses are a leading international engineering consultancy firm, providing technical, professional, and construction services in the fields of transportation, civil and structural engineering, water and wastewater, environmental and geotechnical services, infrastructure, building and building services, information technology, defense, finance, and commerce. The businesses acquired have approximately 900 employees conducting operations located primarily in the United Kingdom and certain other European countries.
 
 
•
 
In February 2001, we finalized the second phase of a two-part transaction to acquire from Stork N.V., the Netherlands, all of its engineering and contracting business (the “Stork E&C businesses”). The first phase of the transaction (“Stork Phase I”) was completed in February 2000. The Stork Phase I entities employ approximately 1,500 technical professional staff in offices located principally in Belgium, Germany, Southeast Asia, and certain locations in the Netherlands. The second phase of the transaction (“Stork Phase II”) involved the balance of Stork N.V.’s engineering and construction management operations in the Netherlands and the Middle East. The Stork Phase II entities employ approximately 500 technical professional staff. The Stork businesses, headquartered in Leiden, the Netherlands, provide a broad range of

Page 1

 
engineering and construction management services to clients in the refining, chemicals, basic resources, and facilities industries, among others.
 
 
•
 
In fiscal 1999, we merged with the Sverdrup Corporation (“Sverdrup”). As a result of this transaction, Sverdrup became a wholly-owned subsidiary of Jacobs. Headquartered in St. Louis, Missouri, Sverdrup provides engineering, architecture, construction, and scientific services for the development, design, construction, and operation of buildings, infrastructure projects and advanced technical systems for public and private sector clients in the United States and internationally. At the time of the merger, Sverdrup employed more than 5,600 people in offices located throughout the United States and in selected countries abroad. The Sverdrup transaction expanded our business opportunities in several key markets (e.g., infrastructure and defense), added professional staff, and provided us with presence in new geographies.
 
In addition to the particular advantages described above, these mergers and acquisitions have allowed us to grow our relationships with our major clients. By expanding into new geographic areas and adding to our existing technical and project management capabilities, we strive to position ourselves as a preferred, single-source provider of technical, professional, and construction services to our major clients.
 
Services Provided
As discussed above, our business is to provide technical, professional, and construction services. The services we provide can be generally classified into four broad categories: project services (which includes engineering, design, architectural, and similar services); process, scientific, and systems consulting services; operations and maintenance services; and construction services. The scope of services we can provide our clients, therefore, range from consulting services, which are often required by clients in the very early stages of a project, to complete, single-responsibility, design-build-operate contracts.
 
The following table sets forth the revenues of the Company from each of its four service categories for each of the five fiscal years ended September 30 (in thousands of dollars):
 
    
2002
   
2001
   
2000
   
1999
   
1998
Project Services
   
$
1,977,173
   
$
1,807,831
   
$
1,746,148
   
$
1,137,810
   
$
861,608
Construction
   
 
1,932,613
   
 
1,569,781
   
 
1,091,788
   
 
1,232,181
   
 
961,575
Operations and Maintenance
   
 
469,508
   
 
445,742
   
 
462,774
   
 
417,026
   
 
266,799
Process, Scientific and Systems Consulting
   
 
176,367
   
 
133,639
   
 
118,232
   
 
87,990
   
 
11,163
    
  
  
  
  
    
$
4,555,661
   
$
3,956,993
   
$
3,418,942
   
$
2,875,007
   
$
2,101,145
    
  
  
  
  
 
Project Services
We employ all of the engineering, design, architectural and related disciplines needed to design and engineer modern process plants (including projects for clients in the chemicals and polymers, pharmaceuticals and biotechnology, oil & gas, refining, food and consumer products, and basic resources industries); industrial and commercial buildings (including facilities in the health care, education, and criminal justice markets, as well as commercial buildings for clients in the private sector); infrastructure projects (including highways, roads, bridges, and other transportation systems and facilities); technology and manufacturing facilities (for clients in the semiconductor, electronics, automotive, aerospace, and defense industries); pulp and paper plants; and other facilities. We also employ many of the requisite scientific, technical, and program management capabilities necessary to provide program integration, testing and evaluation services for clients in the defense and aerospace industries and in support of environmental programs, primarily for agencies of the U.S. federal government.
 
Also included in the category of “Project Services” are construction management services as well as all of the related services (such as cost engineering, planning, scheduling, procurement, estimating, project accounting, and quality and safety) necessary to support our engineering, design, construction, construction and program management, operations and maintenance, and consulting services.

Page 2

 
In the area of construction management, we provide our clients with a wide range of services as an agent for our clients. We may act as the program director, whereby we oversee, on the project owner’s behalf, the complete planning, design, and construction phases of the project; alternatively, our services may be limited to providing construction consulting.
 
Construction
We provide traditional field construction services to private and public sector clients in virtually all of the industries to which we provide project services. We can also provide our clients with modular construction technology. Our modular approach is an advanced form of off-site engineering and design, fabrication, assembly, and field erection. A modular approach provides clients with an alternative approach to traditional methods of engineering and construction, which can compress and shorten the construction schedule. And in the environmental area, recent contract awards from clients in the public sector require us to perform environmental remedial construction services.
 
Historically, our field construction activities have focused primarily on those construction projects for which we performed the related engineering and design work. By focusing our construction efforts on such projects, we seek to avoid the risk of constructing complex plants and facilities based on designs prepared by third parties. The financial risk to us of constructing complex plants and facilities based on designs prepared by third parties may be particularly significant on fixed-price contracts.
 
We actively market all of our services to clients for projects where the scope of services required is within our fields of expertise. We believe that by integrating and bundling our services (i.e., providing design, engineering, and construction services on the same project), we can price our services more competitively and can enhance the overall contract profitability. We also believe that clients benefit from such an approach because they can look to us as a single-source provider of design/build services. However, we will continue to pursue construction-only projects where we can negotiate pricing and other contract terms we find acceptable.
 
Operations & Maintenance (“O&M”)
O&M generally refers to all of the tasks required to operate and maintain large, complex facilities on behalf of clients. In such situations, we can provide key management and support services over all of the facility’s operations, including subcontractors and other on-site personnel. Within the environmental area, O&M often includes engineering and technical support services as well as program management services necessary to remediate contaminated sites. Within the aerospace and defense areas, O&M often requires us to provide all of the management and technical support services necessary to operate and maintain engine test facilities, weapons integration, and high-tech simulation and verification centers. Such O&M contracts also frequently require us to provide facilities management and maintenance services, utilities operations and maintenance services, property management and disposition service, and construction support services.
 
This category also includes plant maintenance services, which generally involve all of the tasks required to keep a plant (typically a refinery or chemical plant) in day-to-day operation. This includes the repair and replacement of pumps, piping, heat exchangers and other equipment as well as “turnaround” work, which involves major refurbishment that can only be performed when the plant is shut-down. Since shutdowns are expensive to the owners of the plant, turnaround work often requires maximizing the number of skilled craft personnel that can work efficiently on a project on a 24-hours-per-day, seven-days-per-week basis. We utilize sophisticated computer scheduling and programming to complete turnaround projects quickly, and we maintain contact with a large pool of skilled craft personnel we can hire as needed on maintenance and turnaround projects.
 
Although the gross profit margins that we realize from O&M services are generally lower than those associated with the other services we provide, the costs to support maintenance activities are also generally lower. Furthermore, since O&M contracts are normally cost-reimbursable in nature, they present less financial risk to the Company. Additionally, although engineering and construction projects may be of a short-term nature, O&M services often result in long-term relationships with clients. For example, the Company has been providing maintenance services at several major process plants for over 30 years. This aspect of maintenance services greatly reduces the selling costs in respect of such services.

Page 3

 
Process, Scientific, and Systems Consulting
We employ all of the professional and technical expertise necessary to provide a broad range of consulting services, including: performing pricing studies, market analyses, and financial projections necessary in determining the feasibility of a project; performing gasoline reformulation modeling; analyzing and evaluating layout and mechanical designs for complex processing plants; analyzing automation and control systems; analyzing, designing, and executing biocontainment strategies; developing, and performing process protocols in respect of Federal Drug Administration mandated qualification/validation requirements; and performing geological and metallurgical studies.
 
Also included in “Process, Scientific, and Systems Consulting” are the professional and program management services required to assist clients (such as the U.S. federal government and its agencies) in a wide range of defense and aerospace related programs. Such services typically are more technical and scientific in nature than are other project services we provide, and may involve such tasks as supporting the development and testing of conventional weapons systems; weapons modeling and simulations; computer systems development, maintenance, and support; evaluations and testing of mission-critical control systems; and other highly technical programs and tasks.
 
Complementary Nature of Resources and Business Systems Utilized
There is a high degree of similarity of the workforces among the Company’s service categories. For example, engineering and design-type services (i.e., services provided by persons who are degreed and in certain circumstances licensed, such as engineers, architects, scientists, and economists) exist in all four service categories. In addition, there is a high degree of similarity of a significant component of the workforces used to perform on O&M and construction projects. In providing O&M and construction services, we employ a large number of skilled craft labor personnel. These include welders, pipe-fitters, electricians, crane operators, and other personnel that work on very large capital projects (in the case of the projects classified within the construction services category) or on smaller capital projects (in the case of maintenance projects classified within the O&M services category).
 
The Company operates a matrix organization throughout most of its operations. The Company’s results, therefore, are dependent on groups representing technical disciplines (e.g., cost engineering, electrical engineering, mechanical engineering, etc.) supporting project management personnel (who maintain the relationship between the Company and the client, and are ultimately responsible for delivering the project to the client on-time and on-budget). Additionally, all of the Company’s operating regions and divisions utilize common tools, policies, and procedures to manage and run the business. These include uniform practices concerning such things as project review meetings, project performance evaluations, and project execution plans. The use of technology throughout the organization is highly uniform. Whether it is PC-based computer aided design and drafting (“CADD”) applications used by the Company’s engineering and design staff, or PC-based modeling programs used by the scientific and consulting staff, or PC-based scheduling, estimating and cost control applications used by home-office personnel in support of the Company’s construction and maintenance activities, all of the service categories described above are equally vulnerable to changes in technology as they occur in the economy at large.

Page 4

 
Industry Groups and Markets
We focus our services to clients that operate in the following industry groups and markets: Oil and gas exploration, production, and refining; U.S. federal programs; pharmaceuticals and biotechnology; chemicals and polymers; buildings (both public and private sector); infrastructure; technology and manufacturing; and pulp and paper, among others. We believe these industry groups and markets have sufficient common needs to permit cross-utilization of our resources and help to mitigate the negative effects of a downturn in a single industry.
 
The following table sets forth the revenues of the Company from each of these industry groups and markets for each of the five fiscal years ended September 30 (in thousands of dollars):
 
    
2002
   
2001
   
2000
   
1999
   
1998
Oil & Gas, and Refining
   
$
1,088,758
   
$
451,103
   
$
280,942
   
$
243,311
   
$
255,579
Federal Programs
   
 
973,514
   
 
732,362
   
 
614,048
   
 
481,302
   
 
169,474
Pharmaceuticals and Biotechnology
   
 
879,747
   
 
715,407
   
 
481,947
   
 
373,520
   
 
211,501
Chemicals and Polymers
   
 
556,011
   
 
653,573
   
 
693,034
   
 
796,501
   
 
785,727
Buildings
   
 
349,858
   
 
457,488
   
 
539,691
   
 
454,589
   
 
314,293
Infrastructure
   
 
325,029
   
 
246,420
   
 
238,278
   
 
218,828
   
 
11,278
Technology and Manufacturing
   
 
187,432
   
 
332,995
   
 
213,557
   
 
173,023
   
 
128,501
Pulp and Paper
   
 
72,350
   
 
182,456
   
 
254,861
   
 
99,189
   
 
191,595
Other
   
 
122,962
   
 
185,189
   
 
102,584
   
 
34,744
   
 
33,197
    
  
  
  
  
    
$
4,555,661
   
$
3,956,993
   
$
3,418,942
   
$
2,875,007
   
$
2,101,145
    
  
  
  
  
 
Oil & Gas and Refining
We provide our full line of traditional engineering, design and construction services to our clients in the exploration, production, and refining industries. Typical projects in this area include new design and construction, revamps or expansions of existing plants, upgrades of individual process units within refineries, and maintenance services. We also provide a broad range of consulting services to our clients, including process assessments, feasibility studies, technology evaluations, project finance structuring and support, and multi-client subscription services.
 
The Company’s revenues from its hydrocarbon business have, historically, related primarily to projects associated with petroleum refining and the processes and technologies required for the conversion of crude oil and gas into petroleum fuels, chemical feedstocks and lubricants. More recently, with the acquisitions of Stork and Delta, our services and projects have expanded to the upstream and midstream sectors of the natural gas industry, with projects involving gas gathering, contaminant removal, and extraction of commercially valuable elements of the gas stream. The Delta acquisition also allowed us to expand our services to the oil industry upstream of refiners, with projects relating to the production of heavy oil from the oil sands resources. The Company’s operations in Canada have been designing and building heavy oil facilities in Alberta’s oil sands region for over 25 years. Current projects include contracts requiring the use of both surface mining and in-situ extraction methodologies.
 
The volume of business activity in this market group is often influenced by government regulations. We believe several specific regulations are providing momentum for project services by the Company to the refining industry. The requirement for lower sulfur fuels has been seen in numerous awards for Tier II gasoline and Ultra Low Sulfur Diesel projects. Additionally, consent decrees between the U.S. Environmental Protection Agency and various refining companies are resulting in additional project services work for us, particularly for nitrous oxide (NOx) emission reductions. We believe the finalized European clean fuels specifications for 2005 will provide additional opportunity for the Company in its European operations. The Company is actively involved in such regulatory based projects.
 
We have also utilized our modular construction capabilities on a number of projects in the refining and petroleum industry. In the U.S. and European refining markets, many projects involve the revamp of existing processing units or the addition of new processes to an existing refinery. As a result of the close proximity of processing units in these refineries, we believe the use of modular construction can decrease congestion at the construction site. We also believe that modular construction can offer cost and project execution benefits in remote locations.

Page 5

 
Like the chemicals industry, we provide a significant amount of maintenance services to our clients in the refining industry. Also like the chemicals industry, we have established a number of formal alliances with various clients in the refining industry. Some of these alliances have been both national and international in scope.
 
Also included in this revenue category are power generation and cogeneration power projects. The Company’s capabilities in this area were significantly enhanced as a result of the Delta acquisition. We provide design, engineering, procurement, construction and construction management, and maintenance services to our clients in the power generation and supply industry. Typical projects in this area include simple and combined cycle power projects, cogeneration power plants, aeroderivative and industrial gas turbines and emergency power generation stations.
 
Federal Programs
The Company’s Federal Programs can generally be categorized as relating to environmental, aerospace and defense, or building programs.
 
Environmental
We believe we are one of the leading providers of environmental engineering and consulting services in the United States and abroad, including hazardous and nuclear waste management and site cleanup and closure. Many of our projects for the U.S. federal government span several years. The Company’s projects within this market generally relate to all major federal and state environmental statutes with particular emphasis on the Comprehensive Environmental Response Compensation and Liability Act and the Resource Conservation and Recovery Act. We are currently providing environmental investigation, restoration, engineering, construction, and site operations and maintenance services to a number of U.S. federal government agencies, including the U.S. Department of Energy (“DOE”) and the U.S. Department of Defense (“DOD”).
 
As part of our environmental restoration work, we provide support in such areas as underground storage tank removal, contaminated soil and water remediation, and long-term groundwater monitoring. We also design, build, install, operate and maintain various types of soil and groundwater cleanup systems at multiple project locations across the United States and its territories for the U.S. Army Corps of Engineers and the U.S. Air Force Center for Environmental Excellence. Typical projects also include the preparation of feasibility studies and performance of remedial investigations, engineering, design and remediation services on several national programs.
 
We provide a full range of environmental consulting services including air quality planning and permitting, water quality compliance, environmental conservation studies, pollution prevention assessments, and compliance with the National Environmental Policy Act.
 
Demand for the Company’s services in this area is strongly affected by the level of enforcement of environmental laws and regulations as well as the spending patterns of public and private clients.
 
As part of our support to our major clients, we provide asset management services in the form of infrastructure operations and maintenance. This is an integral part of the services to the DOE at the Oak Ridge National Laboratory and at the Rocky Flats Environmental Technology Site. Asset management also includes building closures, which involve deactivation, decommissioning, and demolition of government facilities.
 
Aerospace and Defense
We provide a wide range of professional services to clients for a variety of aerospace and defense facilities and systems, including wind tunnels, turbine and rocket engine test facilities, and launch facilities as well as computer-based simulation and other systems. We operate and maintain ground mobile weapon system test facilities, multi-media laboratories, and artillery test ranges. We support and maintain enterprise information systems for various weapons acquisition centers. We also operate and maintain aerodynamic, propulsion, and space facilities and systems for government clients at more than a dozen test centers across the continental United States.
 
We have been a provider of technical services to the DOD for more than 50 years, and currently support defense programs in dozens of locations, both within the United States and internationally. In

Page 6

 
addition to operating and maintaining several DOD test centers, our support includes services such as aerodynamic testing of next-generation fighter aircraft; propulsion testing for space programs; launch support services for Titan, Atlas, and Delta rockets and payloads; and acquisition support to weapons systems such as air-to-air missile systems and precision guided, smart weapons used for various high-value targets. We also support the acquisition and development of Special Operation Forces systems and equipment as well as nuclear, biological, and chemical detection and protection systems. We also support the DOD in a number of information technology programs, including networks, command and control technology, intelligence, and information warfare.
 
In addition to the services described above, we provide technical assistance and program management support at several NASA facilities. We provide O&M services for these facilities, including support of spacecraft and aeronautical systems testing; aerodynamic test facilities and systems; biological and life sciences experiments; and aircraft for research and development missions. We provide a broad range of engineering, science, and technical support services to four NASA centers, representing support to virtually every major space program – including the International Space Station and preparation for inter-planetary missions as well as protein crystal growth research needed to develop new drugs and vaccines.
 
Building Programs
Also included in Federal Program revenues are building programs performed for certain agencies of the U.S. federal government. We provide a wide range of architectural, engineering, construction, and design-build services to agencies such as the Federal Aviation Administration (“FAA”), the General Services Administration (“GSA”), the U.S. Department of Treasury and the United States Department of Agriculture, among others. Typical projects include contracts requiring the renovation and modernization of terminal radar control centers, air traffic control towers and other facilities for the FAA. We also provide architectural and engineering services for the U.S. Pentagon renovation program, as well as planning design services for Internal Revenue Service offices and customer service centers nationwide. More recent contract awards require us to provide design and program management services in connection with certain homeland security initiatives for the GSA.
 
Pharmaceuticals and Biotechnology
We furnish our full line of services to our clients in the pharmaceutical and biotechnology industries. The scope of services we provide to clients in these markets includes master planning, programming, feasibility studies, engineering, preliminary and detailed design, procurement, construction, construction management, commissioning and start-up, validation, and maintenance. Accordingly, we are fully capable of executing the industry’s largest capital programs on a single-responsibility basis.
 
Typical projects for clients in these industries include laboratories, research and development facilities, pilot plants, bulk active pharmaceutical ingredient production facilities, full-scale biotechnology production facilities, and secondary manufacturing facilities. Regulatory considerations on these projects include current Good Laboratory Practices (“cGLP”) and current Good Manufacturing Practices (“cGMP”). In addition, state-of-the-art technology and know-how are critical to our clients in these industries. Such technology and know-how encompasses containment, barrier technology, locally controlled environments, process and building systems automation, and off-the-site design and fabrication of process and building modules.
 
As the worldwide market demand for ethical and over-the-counter products continues to grow, pressure increases on companies within the pharmaceutical industry to decrease product time to market, reduce costs, and increase return on investment. Accordingly, the scope of services we provide our clients in this industry has expanded over the years to include assisting them in delivering capital projects more quickly and efficiently. The Company has local, cost-effective professional resources in areas of major pharmaceutical and biotechnology concentration, and provides single-point engineering, procurement, construction management, and validation (“EPCMV”) project delivery. We continue to enhance our 3-D design capabilities, project controls, and automation capabilities as well as other technological aspects of our EPCMV services. This allows us to better serve our clients and to ensure that projects transition from their conceptual design phase through engineering, construction, start-up and commissioning, and validation phases as economically and efficiently as possible.
 
We have also established formal alliances and preferred provider agreements with numerous clients in the pharmaceutical and biotechnology industry.

Page 7

 
Chemicals and Polymers
The Company has always considered the chemicals and polymers industries an integral part of its diversified business and growth strategy. Revenues from this industry group and market historically account for a significant share of each year’s total revenues. In addition, the Company’s first office outside the United States was opened in support of a bulk-chemical project for a large U.S. company seeking to expand its operations internationally.
 
Currently, we furnish our full line of services to our clients operating in the chemicals industries. We believe our unique relationship-based approach to project execution and business development has helped us establish long-term, multi-site enabling and alliance agreements with several of the industry’s leading manufacturers. As their full-service provider of technical professional services, we execute projects ranging from providing on-site engineering services to completion of an entire capital improvement program. We are continually expanding our presence globally to better meet the needs of our clients as they increase their operations internationally.
 
As the Company continues to develop multi-site alliances with clients, the range of services we provide has expanded. We have provided technical, financial, marketing, and business consulting services to many of our clients in this industry group. We have assisted our clients with their merger and acquisition due diligence activities. We have also performed feasibility studies, provided preliminary and detailed design and engineering services, and provided construction and construction management services for our chemicals industry clients. Typical projects range from various basic, intermediate, and polymer chemicals to low-pressure, multi-product processes for the production of fine and specialty chemicals. We have also completed projects dealing with the modernization and upgrading of polyethylene and liquid polymer production facilities. We believe we have extensive knowledge of, and experience with, advanced polymerization reactions and state-of-the-art, post-reactor processing techniques as well as many other specialty chemicals.
 
Another important aspect of the services we provide our clients in the chemicals and polymers industries is in the area of contract maintenance. We have contracts with major chemical producers worldwide to provide on-site maintenance and turnaround activities. Many of these contracts are evergreen in nature and tend to be extended over many years.
 
Although capital spending by clients in this industry group has been negatively affected by issues relating to overcapacity, reduced demand, and rising feedstock prices, the Company has responded by focusing its services to help clients reduce production costs and increase plant efficiencies. In addition, through our alliance-related projects, we have assisted clients in increasing plant reliability and safety by consolidating and managing multi-site programs.
 
Buildings
Buildings generally refers to the Company’s full range of design and construction activities relating to institutional, government, corporate and commercial buildings and other specialized facilities. We believe we are one of the leading providers of architectural, engineering and construction management services for buildings projects throughout the United States and in many parts of Europe.
 
We focus our efforts and resources in major growth markets we believe are being driven by strong demographic trends and capital spending initiatives. Typical projects include large, multi-year U.S. federal and European government building programs; major primary and secondary education capital improvement programs; federal, state and local government courts and correctional facilities; hospitals and health and research facilities (including projects at many of the worlds leading medical and research centers); and aviation facilities at many of the United States’ largest airports. We also provide design and construction-related services for office and corporate headquarter buildings, municipal and civic facilities, retail and commercial centers, leisure parks, and recreation complexes. We serve a diversified client base encompassing both public and private sector clients.
 
We provide and/or manage a full range of planning, architectural, engineering, design, construction, construction management, and/or total program management services for a variety of unique and technically complex buildings and complexes. We provide our services on projects that emphasize new construction as well as those involving expansion, renovation, and refurbishment of existing facilities.

Page 8

 
Of significance is the Company’s growing success in applying its diversified, in-house technical skill base to clients requiring complete program management in both the private and public sectors. Such contracts typically involve providing technical, professional, and construction services over multiple years to many clients with whom the Company has long-standing relationships and tenure of successful service. We also provide “resourcing” services for which the Company (often through joint ventures with third parties) assumes full responsibility for the ongoing operations and maintenance of entire commercial or industrial complexes on behalf of the client.
 
Infrastructure
We provide a broad range of planning, design, consulting, engineering, construction and construction management services to our clients engaged in civil construction projects throughout the United States, and in selected countries overseas.
 
Transportation infrastructure development and rehabilitation have been a mainstay of the Company’s infrastructure business for many years. By integrating a broad range of professional disciplines, we provide comprehensive planning, engineering, construction, and program management services for transportation facilities and systems. Interdisciplinary teams work independently or as an extension of agency staff on highway, bridge, transit, tunnel, airport, railroad, intermodal facility, and lock and dam projects. Representative clients include state departments of transportation and district agencies, the U.S. Army Corps of Engineers, branches of the U.S. military, and private industry freight transport firms.
 
The growth in the transportation market over the past several years was due primarily to the Transportation Equity Act for the 21st Century (“TEA-21”). TEA-21 was a large U.S. federal program that provided $218 billion in funding to improve transportation infrastructure and allowed considerable flexibility by state and local governments in selecting projects. TEA-21 expired at the end of fiscal year 2002, but hearings are underway for reauthorization of this act to provide funding for the next five years. Our “concept through completion” approach to infrastructure projects provides complete location selection, condition assessment, environmental analyses, preliminary design, documentation, final design, detailed construction planning, management, public involvement, resident engineering, and maintenance engineering management services to agencies utilizing TEA-21 funding.
 
As public pressure grows to accelerate the rehabilitation and expansion of aging infrastructure, we are providing a wide range of project delivery techniques as an alternative to the traditional design-bid-build process. An increasing number of clients are using design-build as a means to accelerate project completion, and we are involved in a number of large highway, bridge, transit, and water projects throughout the United States. Public clients are also utilizing program management contracts as a means to increase their capacity to deliver major projects. The Company has won several large contract for such projects including program management and construction management on the Gwinnett County Department of Public Utilities Wastewater program, the South Florida Water Management District Everglades Restoration Program, and Florida’s Turnpike Maintenance and Traffic Operations Management Consultant program. Other recent major projects include development of a major study and report for the Washington State DOT Alaskan Way Viaduct Replacement-Phase 2 and engineering services for the Dallas Area Rapid Transit Southwest and Northwest corridors projects.
 
Our services in the area of water resources have helped public and private sector clients develop and rehabilitate critical water resource systems. Integrating water, wastewater, air quality, and hazardous waste remediation experience provides these clients with the comprehensive expertise needed to deliver complex projects. We provide planning, design, design-build, and program and construction management services to a diverse market, including regional wastewater treatment agencies, manufacturers and power generators, local water suppliers, and military agencies. New state and federal government regulations and funding authorizations under the Safe Drinking Water Act continue to influence the environmental market. We continue to develop water/wastewater conveyance systems and water resources management projects as specialty markets. We have developed micro-tunneling as a primary service and have successfully applied this specialized process to such projects as water distribution systems and pipelines.
 
Typical public sector projects in this area include managing multi-project water and wastewater capital improvement programs, delivering design-build water/wastewater projects, conducting technology and planning studies, and managing construction of major water/wastewater infrastructure projects.

Page 9

 
Industrial services include planning, design, and construction of air quality, high purity water and industrial wastewater treatment systems.
 
We believe that opportunities for construction-management and design-build services will continue to grow as these project delivery methods gain acceptance in the public sector. Recent projects include construction management services on the Bay Area Rapid Transit District system and the New York City Department of Environmental Protection Hillview Reservoir project, as well as design-build services on the Washington Metropolitan Area Transit Authority Largo Transit Line Extension.
 
Technology and Manufacturing
We provide a broad range of project services for a variety of technology, manufacturing and test facilities.
 
Included in this category are projects involving highly complex test facilities for clients in the aerospace and automotive industries. Typical projects range from conceptual design and feasibility studies to complete design/build programs of wind tunnels and engine test facilities; propulsion and certification test facilities; power-train and other automotive component parts test facilities; environmental and emissions test facilities; climatic test facilities; and computer-based measurement and control systems. We believe we are a leader in providing support to automotive manufacturers and component suppliers for the supply of testing services and the management of test assets, with test facility operations and maintenance contracts in place with both Ford Motor Company and Delphi Automotive Systems.
 
Also included in this category are projects for clients operating in the semiconductor industry. We provide design, engineering, procurement, construction, and construction management services for a variety of clients in this industry. Typical projects range from on-site plant engineering and tool hook-ups, to multi-million dollar state-of-the-art wafer fabrication and crystal growing facilities used to produce microprocessors for computers and other consumer electronic devices. Generally speaking, projects in the semiconductor industry are more complex than many other commercial facilities, requiring a greater emphasis on cleanroom and similar high-end technologies.
 
Pulp and Paper
We provide a broad range of engineering, procurement, construction, construction management and maintenance services to our clients in the pulp and paper industry, both domestically and abroad. With a strategy of expanding our geographic presence into areas where our clients intend to build facilities, our pulp and paper capability now extends to our offices in the U.K., France, Spain, Italy, and Mexico. Typical projects for our clients in this industry range from small mill projects to complex, multi-million dollar paper machine rebuilds, mill expansions, and construction of new facilities. As an example of our service capabilities to our clients in this industry, we recently provided preliminary engineering and detail design services on a large paper machine rebuild project for one of the world’s largest paper producers.
 
Pulp and paper projects can and frequently do encompass many areas of a mill, including pulping and bleaching, papermaking, chemical recovery, material handling and power and steam generation. In the area of papermaking, our expertise includes tissue and towel, coated and uncoated fine papers, newsprint and linerboard. Our expertise and skill set also include the converting and packaging of paper products for distribution and consumer use. We have been instrumental in the design and installation of state-of-the-art facilities for recycled fiber, deinking and pulp bleaching. Chemical recovery and power generation are also integral components of the papermaking process. We have broad experience in these areas and have applied our expertise in the engineering and construction of such facilities for clients in the pulp and paper industry.
 
A significant portion of our work relates to assisting our clients comply with environmental regulations and standards as they affect the pulp and paper industry. We track all of the key environmental regulations affecting our clients and offer services including compliance studies, permitting support, and design of pollution control systems. One set of standards issued by the U. S. EPA for control of hazardous air pollutants is the Maximum Achievable Control Technology standards. We provide fully integrated services ranging from strategic studies and conceptual designs to total installed cost estimates, and environmental design services in support of our clients’ projects. As an example of this integrated service approach to projects, we were recently awarded a job with an international manufacturer of pulp and paper products. Our charge is to develop a compliance plan for the U.S. EPA Cluster Rule at multiple sites. We are evaluating compliance options and developing a conceptual design and installed cost estimate for each

Page 10

 
site. We will support our clients’ internal capital appropriation processes and then provide detailed design services. Our management of this program should allow our client to control the emission of methanol and total reduced sulfide gases and comply with the EPA standard for hazardous air pollutants from kraft pulp mills. We are also providing similar services for compliance with nitrogen oxides emissions and hazardous air pollutant emission limits from industrial boilers for many of our clients.
 
Like certain other markets, we have established formal alliances with various clients in the pulp and paper industry. Such alliances have allowed us to expand the types of services we provide our clients while improving the overall quality and consistency of the engineering, construction, and maintenance services our clients receive.
 
Other
Included in “Other” are projects not classified into any of the other industry and market categories. This would include projects for clients in the food and consumer products industries, and basic resources (such as mining, minerals and fertilizers), among other industries.
 
Backlog
For information regarding the Company’s backlog, reference should be made to Item 7.—Management’s Discussion and Analysis of Financial Condition and Results of Operations, incorporated by reference in this report.
 
Customers
For the fiscal years ended September 30, 2002, 2001, 2000, 1999 and 1998, revenues earned directly or indirectly from agencies of the U.S. federal government accounted for 21.5%, 19.0%, 20.0%, 19.5% and 12.1%, respectively, of total revenues.
 
Foreign Operations
For the fiscal years ended September 30, 2002, 2001, 2000, 1999 and 1998, revenues from the Company’s operations outside the United States comprised approximately 33.3%, 22.3%, 16.4%, 15.8% and 20.2%, respectively, of total revenues. For fiscal years 1998 and 1999, substantially all such foreign revenues related to the Company’s offices in the United Kingdom, Ireland, France, Spain and Italy, with a small portion relating to the Company’s operations in India. As a result of the acquisition of the Stork E&C businesses (parts of which were completed in fiscal 2000 and fiscal 2001), we expanded our European operations into the Netherlands, Belgium and Germany, and we acquired operations in South East Asia. As a result of the acquisition of the GIBB businesses (which was completed in fiscal 2001), we further expanded our operations in the United Kingdom, and acquired businesses in other European countries. And as a result of the acquisition of Delta (completed in October 2001) we further expanded our business in North America to include Canada. Although the Company has foreign operations located elsewhere around the world in addition to those in Europe, Canada and Asia, revenues earned over the past five years from these other operations were not material.
 
Contracts
While there is considerable variation in the pricing provisions of the contracts undertaken by the Company, our contracts can generally be grouped into three broad categories: Cost-reimbursable; fixed-price and guaranteed maximum price. The following table sets forth the percentages of total revenues represented by these types of contracts during each of the five fiscal years ended September 30:
 
    
2002
     
2001
     
2000
     
1999
     
1998
  
Cost-reimbursable
   
85
%
   
81
%
   
77
%
   
73
%
   
81
%
Fixed-price
   
13
 
   
16
 
   
18
 
   
22
 
   
18
 
Guaranteed maximum price
   
2
 
   
3
 
   
5
 
   
5
 
   
1
 
 
In accordance with industry practice, most of our contracts are subject to termination at the discretion of the client. Contracts typically provide for reimbursement of costs incurred and payment of fees earned through the date of such termination.

Page 11

 
When we are directly responsible for engineering, design, procurement and construction of a project or the maintenance of a process plant, we reflect the costs of materials, equipment and subcontracts in both revenues and costs. On other projects, where the client elects to pay for such items directly, these amounts are not reflected in either revenues or costs. The following table presents the approximate amount of such pass-through costs included in revenues for each of the five fiscal years ended September 30 (in millions):
 
2002
     
2001
     
2000
     
1999
     
            1998            
$1,541.7
     
$1,272.9
     
$1,442.1
     
$1,167.0
     
        $1,066.4        
 
Cost-reimbursable contracts
Cost-reimbursable contracts provide for reimbursement of costs incurred by the Company, plus an amount of profit. The profit element may be in the form of a simple mark-up applied to the labor costs incurred on a contract, or it may be in the form of a fee, or a combination of a mark-up and a fee. The fee element can also take several forms. The fee may be a fixed amount as specified in the contract, or it may be an amount based on a percentage of the costs incurred, or it may be an incentive fee based on targets, milestones or performance factors defined in the contract. The Company prefers this type of contract since it believes that the primary basis for its selection should be its technical expertise and professional qualifications rather than price considerations.
 
Fixed-price contracts
Fixed-price contracts include both “negotiated fixed-price” contracts and “lump sum bid” contracts. Under a negotiated fixed-price contract, the Company is first selected as the contractor, and then the contract price is negotiated. Negotiated fixed-price contracts frequently exist in single-responsibility arrangements where the Company has the opportunity to perform engineering and design work before negotiating the total price of the project. Under lump sum bid contracts, the Company must bid against other contractors based upon specifications furnished by the client. This type of pricing presents certain inherent risks, including the possibility of ambiguities in the specifications, problems with new technologies and economic and other changes that may occur over the contract period, that are reduced by the negotiation process. Thus, although both types of contracts involve a firm price for the client, the lump sum bid contract provides the greater degree of risk to the Company. However, because of economies that may be realized during the contract term, both negotiated fixed-price and lump sum bid contracts may offer greater profit potential than the other types of contracts. Over the past five years, most of the Company’s fixed price work has been either negotiated fixed-price contracts, or lump-sum bid contracts for services (rather than turn-key construction).
 
Guaranteed maximum price contracts
Guaranteed maximum price contracts are performed in the same manner as cost-reimbursable contracts; however, the total actual cost plus the fee cannot exceed the guaranteed price negotiated with the client. If the total actual cost of the contract exceeds the guaranteed maximum price, then the Company will bear all or a portion of the excess. In those cases where the total actual cost and fee are less than the guaranteed price, the Company will often share the savings on a predetermined basis with the client.
 
Competition
The Company is engaged in a highly competitive business. Some of our competitors are larger than us, or are subsidiaries of larger companies, and therefore may possess greater resources than the Company. Furthermore, because the engineering and technical support aspects of the business does not usually require large amounts of capital, there is relative ease of market entry for a new potential entrant possessing acceptable professional qualifications. Accordingly, we compete with both national and international firms in sizes ranging from very large, to a wide variety of small, regional and specialty firms.
 
The extent of the Company’s competition varies according to the industries and markets it serves, as well as the geographic areas in which the Company operates. The Company’s largest competitors for engineering, construction and maintenance services for process plants include Bechtel Group, Inc., Fluor Corporation, Foster Wheeler Corp., Parsons Corporation, Kellogg Brown & Root, Kvaerner, ABB Lummus, and AMEC plc. In the area of buildings, the Company’s competitors include several of the competitors previously mentioned, as well as HDR, Inc., Hellmuth, Obata & Kassabaum, AeCOM Technology, Turner Construction, and Day & Zimmermann. In the area of civil engineering and construction, the Company’s competitors include several of the competitors previously mentioned, as well as Parsons Brinckerhoof, URS

Page 12

 
Corporation, HNTB, and W.S. Atkins. In the area of pulp and paper, the Company’s principal competitors include BE&K, and AMEC plc. And in the area of U.S. federal programs, the Company’s principal competitors include several of the companies listed above, as well as the Shaw Group, Montgomery Watson, SAIC, CH2M Hill, Roy F. Weston, Lockheed Martin Corporation, Computer Sciences Corporation and Dyncorp.
 
Employees
At September 30, 2002, the Company had approximately 21,900 full-time, staff employees (including contract staff). Additionally, as of September 30, 2002, there were approximately 13,000 persons employed by the Company in the field on a project basis. The number of field employees varies in relation to the number and size of the maintenance and construction projects in progress at any particular time.

Page 13

 
EXECUTIVE OFFICERS OF THE REGISTRANT
 
Pursuant to the requirements of Item 401(b) and 401(e) of Regulation S-K, the following information is being furnished with respect to the Company’s executive officers:
 
Name
   
Age
   
Position with the Company
     
Year Joined the Registrant
Joseph J. Jacobs
   
86
   
Director and Chairman of the Board
     
1947
Noel G. Watson
   
66
   
Chief Executive Officer and Director
     
1965
Craig L. Martin
   
53
   
President and Director
     
1994
Thomas R. Hammond
   
51
   
Executive Vice President, Operations
     
1975
Richard J. Slater
   
56
   
Executive Vice President
     
1980
Walter C. Barber
   
61
   
Group Vice President, Asia
     
1999
Robert M. Clement
   
54
   
Group Vice President, International Operations
     
1990
Warren M. Dean
   
58
   
Group Vice President, Facilities
     
1994
Peter M. Evans
   
57
   
Group Vice President, Central Region
     
2001
Michael J. Higgins
   
58
   
Group Vice President, Civil
     
1994
George A. Kunberger, Jr.
   
50
   
Group Vice President, Northern Region
     
1975
Gregory J. Landry
   
54
   
Group Vice President, Field Services
     
1984
John McLachlan
   
56
   
Group Vice President, International Operations
     
1974
Robert T. McWhinney, Jr.
   
62
   
Group Vice President, Consulting Operations
     
2001
Laurence R. Sadoff
   
55
   
Group Vice President, Field Services
     
1993
H. Gerard Schwartz, Jr.
   
64
   
Group Vice President, Civil
     
1999
Rogers F. Starr
   
59
   
President, Sverdrup Technology, Inc.
     
1999
Philip J. Stassi
   
47
   
Group Vice President, Western Region
     
1977
Allyn B. Taylor
   
54
   
Group Vice President, Southern Region
     
1993
James W. Thiesing
   
58
   
Group Vice President, Federal Operations
     
1992
Andrew F. Kremer
   
45
   
Senior Vice President, Quality and Safety
     
1998
William C. Markley, III
   
57
   
Senior Vice President, General Counsel and Secretary
     
1981
Michael P. Miller
   
42
   
Senior Vice President, Information Technology
     
2001
John W. Prosser, Jr.
   
57
   
Senior Vice President, Finance and Administration and Treasurer
     
1974
Nazim G. Thawerbhoy
   
55
   
Senior Vice President and Controller
     
1979
 
All of the officers listed in the preceding table serve in their respective capacities at the pleasure of the Board of Directors and, with the exception of Messrs. Barber, Evans, Kremer, McWhinney, Miller, Schwartz, and Starr, have served in executive and senior management capacities with the Company for more than five years.
 
Prior to joining the Company in 1999, Mr. Barber served as President and Chief Executive Officer (“CEO”) of GTI, INC. (an environmental services firm) for more than five years. Prior to joining the Company in 2001, Mr. Evans served as President of Stone & Webster Engineers & Constructors, Inc. from February 1999 to May 2000; as Executive Vice President of Kellogg Brown & Root from October 1998 to February 1999; and as President and Chief Operating Officer of MW Kellogg from October 1996 to October 1998. In June 2000, Stone & Webster, Inc. filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code.
 
Prior to joining the Company in 1998, Mr. Kremer served as Vice President – Corporate Development for Diamond Fields International from August 1997 to November 1998, and as Vice President, Global Sales – Mining & Metals for Fluor Daniel from April 1996 to August 1997. Prior to joining the Company in 2001, Mr. McWhinney served as President and CEO of Stone & Webster Management Consultants, Inc. from February 1997 to December 2000, and as Senior Vice President of International Resources Group, Ltd. from September 1995 to September 1996.

Page 14

 
Prior to joining the Company in 2001, Mr. Miller served as Senior Vice President of Technology for Precision Response Corporation, a division of USA Networks, from April 1999 until he joined the Company. Mr. Miller served as Chief Technology Officer for Aegis Communications Group, Inc. from July 1997 to March 1999, and as Chief Information Officer for Softbank Exposition and Conference Company from August 1995 to March 1997. Prior to joining the Company in 1999, Messrs. Schwartz and Starr were part of the senior management of Sverdrup Corporation, or one of its subsidiaries, for more than five years.
 
Item 2.     PROPERTIES
 
The Company owns and leases offices for its technical professional and administrative staff. It also owns property (located in Charleston, South Carolina) which is the principal manufacturing facility for the Company’s modular construction activities. The total amount of space used by the Company for all its operations is approximately 4.5 million square feet. The following is a representative list of the Company’s principal locations:
 
Country
   
State / Province
   
Cities
U.S.A.
   
California
   
Pasadena, Cypress, Ridgecrest, Sacramento, San Francisco and Walnut Creek
    
Arizona
   
Phoenix
    
Colorado
   
Golden (Denver)
    
Florida
   
Ft. Walton Beach, Lakeland, Jacksonville, Orlando and Tampa
    
Indiana
   
Indianapolis
    
Louisiana
   
Baton Rouge
    
Massachusetts
   
Boston
    
Michigan
   
Auburn Hills, Dearborn, Detroit and Novi
    
Missouri
   
St. Louis
    
New Mexico
   
Albuquerque
    
New York
   
New York and Purchase
    
North Carolina
   
Raleigh
    
Ohio
   
Cincinnati and Beavercreek
    
Oregon
   
Lake Oswego (Portland)
    
Pennsylvania
   
Conshohocken and Philadelphia
    
South Carolina
   
Greenville and Charleston
    
Texas
   
Houston and Dallas
    
Tennessee
   
Nashville, Oak Ridge and Tullahoma
    
Virginia
   
Arlington
    
Washington
   
Bellevue (Seattle)
    
Wisconsin
   
DePere (Green Bay)
Canada
   
Alberta
   
Calgary and Edmonton
    
Ontario
   
Mississauga and Sarnia
Mexico
   
—  
   
Mexico City
United Kingdom
   
—  
   
Birmingham, Croydon, Edinburgh, Glasgow, London, Manchester, Reading and York
Republic of Ireland
   
—  
   
Cork and Dublin
France
   
—  
   
Lyon, Paris and Toulouse
Italy
   
—  
   
Milan
Spain
   
—  
   
Madrid
The Netherlands
   
—  
   
Leiden, Meerssen and Rotterdam
 
[ continued ]

Page 15

 
Item 2.    PROPERTIES—Continued
 
Country
   
State
   
Cities
Belgium
   
—  
   
Antwerp
Germany
   
—  
   
Colon and Magdeburg
Poland
   
—  
   
Warsaw
Portugal
   
—  
   
Lisbon and Oporto
India
   
—  
   
Mumbai and New Delhi
Singapore
   
—  
   
Singapore
Australia
   
—  
   
Canberra
Turkey
   
—  
   
Istanbul
Udnited Arab Emirates
   
—  
   
Abu Dhabi
Oman
   
—  
   
Muscat
 
In addition to these properties, the Company leases smaller, project offices located throughout the United States and in certain other countries around the world. The Company maintains sales offices at many of its principal locations. The majority of the Company’s offices are leased. The Company also rents a portion of its construction equipment on a short-term basis.
 
Item 3.    LEGAL PROCEEDINGS
 
In the normal course of business, the Company is subject to certain contractual guarantees and litigation. Generally, such guarantees relate to project schedules and plant performance. Most of the litigation involves the Company as a defendant in workers’ compensation, personal injury and other similar lawsuits. In addition, as a contractor for many agencies of the United States Government, the Company is subject to many levels of audits, investigations and claims by, or on behalf of, the government with respect to its contract performance, pricing, costs, cost allocations and procurement practices.
 
Management believes, after consultation with counsel, that such guarantees, litigation, and United States Government contract-related audits, investigations and claims should not have any material adverse effect on the Company’s consolidated financial statements.
 
In addition to the matters described above, the Company is involved in a dispute with a client relating to a large waste incineration project in Europe. The contract was entered into by a subsidiary of the Company prior to the acquisition of that subsidiary several years ago. The dispute involves proper waste feed, content of residues, final acceptance of the plant and costs of operation and maintenance of the plant. The Company has initiated litigation against the client and is seeking in excess of $25.0 million in damages. The Company believes that its claims are valid and enforceable and that it will be ultimately successful in obtaining a favorable judgment.
 
Item 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
Not applicable.

Page 16

 
PART II
 
Item 5.    MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
The information required by this Item is hereby incorporated by reference from Exhibit F to the Company’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the close of the Company’s fiscal year.
 
Item 6.    SELECTED FINANCIAL DATA
 
The information required by this Item is hereby incorporated by reference from Exhibit F to the Company’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the close of the Company’s fiscal year.
 
Item 7.
 
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
The information required by this Item is hereby incorporated by reference from Exhibit F to the Company’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the close of the Company’s fiscal year.
 
Item 7A.    QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
 
The Company does not enter into derivative financial instruments for trading, speculation or other purposes.
 
In the normal course of business, the Company’s results of operations are exposed to risks associated with fluctuations in interest rates and currency exchange rates.
 
Interest Rate Risk
Our only source for long-term credit are two revolving credit agreements totaling $275.0 million. The total amounts outstanding under these facilities at September 30, 2002 was $85.7 million. Both agreements expire in January 2004 and provide for both fixed-rate and variable-rate borrowings. Our objectives in managing our interest rate risk is to limit the impact of interest rate changes on earnings and cash flows, and to lower our overall borrowing costs. To achieve these objectives, we maintain fixed rate debt on a majority of our borrowings and minimize our outstanding borrowings by paying down debt from cash provided from operations.
 
Foreign Currency Risk
In general, the Company’s exposure to fluctuating exchange rates relates to the effects of translating the financial statements of its foreign subsidiaries, which are denominated in currencies other than the U.S. dollar, into the U.S. dollar. The Company follows the provisions of Statement of Financial Accounting Standards No. 52 – Foreign Currency Translation in preparing its consolidated financial statements.
 
We believe our exposure to the effects that fluctuating foreign currencies may have on our consolidated results of operations is limited because, generally speaking, our various operations invoice customers and satisfy their financial obligations in their respective local currencies. In situations where our operations incur contract costs in currencies other than their own functional currencies, we strive to have a portion of the related contract revenues denominated in the same currencies as the costs.

Page 17

 
Item 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
The information required by this Item is hereby incorporated by reference from Exhibit F to the Company’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the close of the Company’s fiscal year.
 
Item 9.  
 
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON FINANCIAL AND DISCLOSURE MATTERS
 
Not applicable.
 
PART III
 
Item 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
The information required by Paragraph (a) and Paragraphs (c) through (g) of Item 401 and by Item 405 of Regulation S-K is hereby incorporated by reference from the Company’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the close of the Company’s fiscal year.
 
See the information under the caption “Executive Officers of the Company” in Part I of this report for information required by Paragraph (b) of Item 401 of Regulation S-K.
 
Item 11.   EXECUTIVE COMPENSATION
 
The information required by this Item is hereby incorporated by reference from the Company’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the close of the Company’s fiscal year.
 
Item 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The information required by this Item is hereby incorporated by reference from the Company’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the close of the Company’s fiscal year.
 
Item 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
The information required by this Item is hereby incorporated by reference from the Company’s definitive proxy statement to be filed with the Commission pursuant to Regulation 14A within 120 days after the close of the Company’s fiscal year.

Page 18

 
PART IV
 
Item 14.   CONTROLS AND PROCEDURES
 
The consolidated financial statements incorporated by reference into this Annual Report on Form 10-K were prepared by management, which is responsible for their fairness, integrity, and objectivity. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, and include amounts based on management’s best estimates and judgments. The other financial information contained in this report has been prepared in a manner consistent with the preparation of the consolidated financial statements.
 
In meeting its responsibility for the fair presentation of the Company’s consolidated financial statements, management has established, maintains and necessarily relies on the Company’s system of internal accounting controls. This system is designed to provide reasonable, but not absolute, assurance that (a) the Company’s transactions are properly authorized, (b) the Company’s assets are safeguarded against unauthorized or improper use, and (c) the Company’s transactions are properly recorded and reported; all to permit the preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States. The concept of reasonable assurance is based on the recognition that in any system of internal controls, there are certain inherent limitations and that the cost of such systems should not exceed the benefits to be derived.
 
The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed in the Company’s periodic filings made in accordance with the rules and regulations promulgated by the U.S. Securities and Exchange Commission (the “Commission”) is (a) recorded, processed, accumulated and summarized within the time periods specified by the Commission, (b) communicated to the Company’s management, including its chief executive and financial officers, as appropriate to allow timely decisions regarding required disclosure, and (c) presented in the Company’s periodic filings in a manner that fairly portrays the information being presented (i) in light of all available facts and circumstances relating to the matters disclosed, and (ii) in conformity with the disclosure requirements promulgated by the Commission.
 
Within 90 days prior to the filing of this Annual Report on Form 10-K, an evaluation of the Company’s disclosure controls and procedures was performed under the supervision and with the participation of the Company’s management, including the chief executive and financial officers. Based on that evaluation, management, including the Company’s chief executive and financial officers, concluded that, as of September 30, 2002, (a) the Company’s disclosure controls and procedures were effective,, in timely alerting them to material information relating to the Company that is required to be included in the Company’s periodic filings and (b) the Company’s system of internal accounting controls were effective to provide reasonable assurance that the Company’s financial statements are fairly presented in conformity with accounting principles generally accepted in the United States. Since September 30, 2002, there have been no significant changes in the Company’s system of internal accounting controls, or in other factors that could significantly affect those controls.

Page 19

 
Item 15.
 
EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
 
(a)
 
The Company’s consolidated financial statements at September 30, 2002 and 2001 and for each of the three years in the period ended September 30, 2002, together with the report of the independent auditors on those consolidated financial statements are hereby incorporated by reference from Exhibit 13 to this report.
 
 
(b)
 
On July 9, 2002, the Registrant filed with the Securities and Exchange Commission a Current Report on Form 8-K reporting, in Item No. 5 thereto, its public announcement of the promotion of Craig L. Martin to President of the Company; and,
 
On August 2, 2002, the Registrant filed with the Securities and Exchange Commission a Current Report on Form 8-K reporting, in Item No. 9 thereto, statements made under oath by the Company’s Principal Executive Officer and Principal Financial Officer pursuant to Section 21(a)(1) of the Securities Exchange Act of 1934.
 
 
(c)
 
Exhibits and Index to Exhibits:
                 2.1
   
Agreement and Plan of Merger Among Sverdrup Corporation, Jacobs Engineering Group Inc., and Jacobs Acquisition Corp, dated as of December 21, 1998. Filed as Exhibit 99.1 to the Registrant’s Current Report on Form 8-K dated January 14, 1999 and incorporated herein by reference.
                 3.1
   
Certificate of Incorporation of the Registrant, as amended. Filed as Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 1995 and incorporated herein by reference.
                 †3.2
   
Bylaws of the Registrant.
4.1
   
See Sections 5 through 18 of Exhibit 3.1.
4.2
   
See Article II, Section 3.03 of Article III, Article VI and Section 8.04 of Article VIII of Exhibit 3.2.
4.3
   
Amended and Restated Rights Agreement, amended and restated as of December 20, 2000 by and between the Registrant and Mellon Investor Services LLC, as Rights Agent. Filed as Exhibit 1 to Registrant’s Form 8-A/A filed on December 22, 2000 and incorporated herein by reference.
10.1
   
The Jacobs Engineering Group Inc. Incentive Bonus Plan for Officers and Key Managers. Filed as Exhibit 10.2 to the Registrant’s Annual Report on Form 10-K for the year ended September 30, 1999 and incorporated herein by reference.
10.2
   
The Executive Security Program of Jacobs Engineering Group Inc. Filed as Exhibit 10.4 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 1995 and incorporated herein by reference.
10.3
   
Jacobs Engineering Group Inc. and Subsidiaries 1991 Executive Deferral Plan, effective June 1, 1991. Filed as Exhibit 10.5 to the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 1995 and incorporated herein by reference.
10.4
   
Jacobs Engineering Group Inc. and Subsidiaries 1993 Executive Deferral Plan, effective December 1, 1993. Filed as Exhibit 10.6 to the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 1995 and incorporated herein by reference.

Page 20

                 10.5
   
Jacobs Engineering Group Inc. Amended and Restated Executive Deferral Plan. Filed as Exhibit 10.7 to the Company’s Annul Report on Form 10-K for the fiscal year ended September 30, 2001 and incorporated herein by reference.
10.6
   
The Jacobs Engineering Group Inc. 1989 Employee Stock Purchase Plan, as Amended and Restated. Filed as Exhibit 4.1 to the Registration Statement on Form S-8 filed by the Registrant on May 4, 2001, and incorporated herein by reference.
10.7
   
The Jacobs Engineering Group Inc. Global Employee Stock Purchase Plan. Filed as Exhibit 4.1 to the Registration Statement on Form S-8 filed by the Registrant on August 7, 2001, and incorporated herein by reference.
10.8
   
Form of Indemnification Agreement entered into between the Registrant and certain of its officers and directors. Filed as Exhibit 10.10 to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 1995 and incorporated herein by reference.
10.9
   
Jacobs Engineering Group Inc. 401(k) Plus Savings Plan and Trust, as Amended and Restated August 1, 2000. Filed as Exhibit 10.11 to the Company’s Annul Report on Form 10-K for the fiscal year ended September 30, 2001 and incorporated herein by reference.
10.10
   
Jacobs Engineering Group Inc. 1999 Stock Incentive Plan, as Amended. Filed as Exhibit 10.12 to the Company’s Annul Report on Form 10-K for the fiscal year ended September 30, 2001 and incorporated herein by reference.
10.11
   
Jacobs Engineering Group Inc. 1999 Outside Director Stock Plan. Filed as Exhibit II to the Registrant’s Annual Notice and Proxy Statement dated January 3, 2000 and incorporated herein by reference.
11.    
   
Statement of computation of net income per outstanding share of common stock is hereby incorporated by reference from Exhibit F to the Registrant’s Notice of 2003 Annual Meeting of Shareholders and Proxy Statement, copies of which are being delivered to (but not filed with, except to the extent incorporated herein) the Commission as an exhibit to this report.
†13.    
   
Exhibit F to the Registrant’s Notice of 2003 Annual Meeting of Shareholders and Proxy Statement (which contains the consolidated financial statements and financial information of Jacobs Engineering Group Inc. and subsidiaries for the fiscal year ended September 30, 2002).
†21.    
   
List of Subsidiaries of Jacobs Engineering Group Inc.
†23.    
   
Consent of Independent Auditors.
    
 
†
 
Being filed herewith.

Page 21

 
UNDERTAKINGS
 
For the purposes of complying with the amendments to the rules governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned Registrant hereby undertakes as follows, which undertaking shall be incorporated by reference into the Registrant’s Registration Statements on Form S-8 Nos. 333-67048 (relating to the Jacobs Engineering Group Inc. Global Employee Stock Purchase Plan filed with the Commission on August 7, 2001), 333-38974 (relating to the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan, filed with the Commission on June 9, 2000), 333-38984 (relating to the Jacobs Engineering Group Inc. 1999 Outside Director Stock Plan, filed with the Commission on June 9, 2000), 333-60296 (relating to the Jacobs Engineering Group Inc. 1989 Employee Stock Purchase Plan, filed with the Commission on May 4, 2001), and 333-45475 (relating to the Jacobs Engineering Group Inc. 1981 Executive Incentive Plan, filed with the Commission on February 3, 1998):
 
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by final adjudication of such issue.

Page 22

 
SIGNATURES
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
       
JACOBS ENGINEERING GROUP INC.
Dated: December 27, 2002
      
By:
  
/s/    NOEL G. WATSON       
               
Noel G. Watson
Chief Executive Officer and
Director (Principal Executive Officer)
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated:
 
Signature
   
Title
  
Date
/s/    NOEL G. WATSON         
Noel G. Watson
   
Director and
Principal Executive Officer
  
December 27, 2002
/s/    JOSEPH J. JACOBS         
Joseph J. Jacobs
   
Director and
Chairman of the Board
  
December 27, 2002
/s/    CRAIG L. MARTIN         
Craig L. Martin
   
Director and
President
  
December 27, 2002
/s/    PETER H. DAILEY        
Peter H. Dailey
   
Director
  
December 27, 2002
/s/    ROBERT C. DAVIDSON, JR.         
Robert C. Davidson, Jr.
   
Director
  
December 27, 2002
/s/    ROBERT B. GWYN         
Robert B. Gwyn
   
Director
  
December 27, 2002
/s/    LINDA K. JACOBS        
Linda K. Jacobs
   
Director
  
December 27, 2002
/s/    J. CLAYBURN LAFORCE         
J. Clayburn LaForce
   
Director
  
December 27, 2002
/s/    LINDA FAYNE LEVINSON         
Linda Fayne Levinson
   
Director
  
December 27, 2002
/s/    BENJAMIN F. MONTOYA         
Benjamin F. Montoya
   
Director
  
December 27, 2002

Page 23

 
SIGNATURES—Continued
 
Signature
   
Title
  
Date
/s/    DALE R. LAURANCE        
Dale R. Laurance
   
Director
  
December 27, 2002
/s/    DAVID M. PETRONE        
David M. Petrone
   
Director
  
December 27, 2002
James L. Rainey, Jr.
   
Director
  
December     , 2002
/s/    JOHN W. PROSSER, JR.         
John W. Prosser, Jr.
   
Senior Vice President,
Finance and Administration and Treasurer
(Principal Financial Officer)
  
December 27, 2002
/s/    NAZIM G. THAWERBHOY        
Nazim G. Thawerbhoy
   
Senior Vice President Controller
(Principal Accounting Officer)
  
December 27, 2002

Page 24

 
CERTIFICATION
 
I, Noel G. Watson, Chief Executive Officer of Jacobs Engineering Group Inc., certify that:
 
1.
 
I have reviewed this annual report on Form 10-K for the fiscal year ended September 30, 2002 of Jacobs Engineering Group Inc.;
 
2.
 
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
 
3.
 
Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
 
4.
 
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
 
 
a)
 
Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
 
 
b)
 
Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
 
 
c)
 
Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
 
5.
 
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
 
 
a)
 
All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
 
 
b)
 
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
 
6.
 
The registrant’s other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
Date: December 27, 2002
  
/s/ Noel G. Watson
       
Noel G. Watson
Chief Executive Officer
 
 

 
CERTIFICATION
 
I, John W. Prosser, Jr., Senior Vice President, Finance and Administration of Jacobs Engineering Group Inc., certify that:
 
1.
 
I have reviewed this annual report on Form 10-K for the fiscal year ended September 30, 2002 of Jacobs Engineering Group Inc.;
 
2.
 
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
 
3.
 
Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
 
4.
 
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
 
 
a)
 
Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
 
 
b)
 
Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the “Evaluation Date”); and
 
 
c)
 
Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
 
5.
 
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
 
 
a)
 
All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
 
 
b)
 
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and
 
6.
 
The registrant’s other certifying officer and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
 
Date: December 27, 2002
      
/s/ John W. Prosser, Jr.
           
John W. Prosser, Jr.
Senior Vice President
Finance and Administration
EX-3.2 3 dex32.htm BYLAWS OF THE REGISTRANT Bylaws of the Registrant
EXHIBIT 3.2
 
BYLAWS OF
JACOBS ENGINEERING GROUP INC.
(A DELAWARE CORPORATION)
 
June 27, 2002
(COMPOSITE CONFORMED COPY)
 
ARTICLE I.
 
OFFICES
 
SECTION 1.01  REGISTERED OFFICE.    The registered office of Jacobs Engineering Group Inc. (hereinafter called the “Corporation”) in the State of Delaware shall be at 1209 Orange Street, Wilmington, and the name of the registered agent at that address shall be The Corporation Trust Company.
 
SECTION 1.02  PRINCIPAL OFFICE.    The principal office for the transaction of the business of the Corporation shall be at 1111 South Arroyo Parkway, Pasadena, California. The Board of Directors (hereinafter called the “Board”) is hereby granted full power and authority to change said principal office from one location to another.
 
SECTION 1.03  OTHER OFFICES.    The Corporation may also have an office or offices at such other place or places, either within or without the State of Delaware, as the Board may from time to time determine or as the business of the Corporation may require.
 
ARTICLE II.
 
MEETINGS OF STOCKHOLDERS
 
SECTION 2.01  ANNUAL MEETINGS.    Annual meetings of the stockholders of the Corporation for the purpose of electing directors and for the transaction of such other proper business as may come before such meetings shall be held on the second Tuesday in February of each year if not a legal holiday, and if a legal holiday, then on the next business day following, at 3:30 P.M., or at such other time or date as the Board shall determine by resolution.
 
SECTION 2.02  SPECIAL MEETINGS.    Special meetings of the stockholders for any purpose or purposes may be called by the Board, by a committee of the Board that has been duly designated by the Board and whose powers and authority, as provided in a resolution of the Board or in these Bylaws, include the power to call such meetings or by the Chairman of the Board. Unless otherwise prescribed by statute or by the Certificate of Incorporation, special meetings may not be called by any other person or persons. No business may be transacted at any special meeting of stockholders other than such business as may be designated in the notice calling such meeting.
 
SECTION 2.03  PLACE OF MEETINGS.    All meetings of the stockholders shall be held at such places, within or without the State of Delaware, as may from time to time be designated by the person or persons calling the respective meeting and specified in the respective notices or waivers of notice thereof.
 
SECTION 2.04  RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.    In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment

thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) nor less than ten (10) days prior to any other action.
 
If the Board does not so fix a record date, then: (i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (ii) The record date for determining stockholders for any other purpose shall be at the day on which the first written consent is expressed; (iii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.
 
A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.
 
SECTION 2.05  NOTICE OF MEETINGS.    Except as otherwise required by law, notice of each meeting of the stockholders, whether annual or special, shall be given not less than ten (10) days nor more than sixty (60) days before the date of the meeting to each stockholder of record entitled to vote at such meeting by delivering a typewritten or printed notice thereof to the stockholder personally, or by depositing such notice in the United States mail, in a postage prepaid envelope, directed to the stockholder at the address furnished by the stockholder to the Secretary of the Corporation for such purpose or, if the stockholder shall not have furnished to the Secretary of the Corporation an address for such purpose, then at the address of the stockholder last known to the Secretary, or by a form of electronic transmission consented to by the stockholder to whom the notice is given, except to the extent prohibited by Section 232(e) of the Delaware General Corporation Law.
 
Any consent to receive notice by electronic transmission shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if (i) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (ii) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.
 
Notice given as provided above shall be deemed given to the stockholder as follows: (i) if by personal delivery, when delivered to the stockholder; (ii) if by mail, when deposited in the United States mail; (iii) if by facsimile, when directed to a number at which the stockholder has consented to receive notice; (iv) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (v) if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (a) such posting and (b) the giving of such separate notice; and (vi) if by any other form of electronic transmission, when directed to the stockholder. An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other

agent of the Corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
 
Except as otherwise expressly required by law, no publication of any notice of a meeting of the stockholders shall be required. Every notice of a meeting of the stockholders shall state the place, date and hour of the meeting, and, in the case of a special meeting, shall also state the purpose or purposes for which the meeting is called. Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall have waived such notice and such notice shall be deemed waived by any stockholders who shall attend such meeting in person or by proxy, except as for stockholders who shall attend such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Except as otherwise expressly required by law, notice of any adjourned meeting of the stockholders need not be given if the time and place thereof are announced at the meeting at which the adjournment is taken.
 
SECTION 2.06  ADVANCE NOTICE OF STOCKHOLDER NOMINEES.    Only persons who are nominated in accordance with the procedures set forth in this Section 2.06 shall be eligible for election as Directors. Nominations of persons for election to the Board of the Corporation may be made at a meeting of stockholders by or at the direction of the Board or by any stockholder of the Corporation entitled to vote in the election of Directors at the meeting who complies with the notice procedures set forth in this Section 2.06. Such nominations, other than those made by or at the direction of the Board, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event that less than 70 days’ notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder’s notice shall set forth: (a) as to each person whom the stockholder proposed to nominate for election or re-election a Director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Corporation which are beneficially owned by such person and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including without limitation such persons’ written consent to being named in the proxy statement, if any, as a nominee and to serving as a Director if elected); and (b) as to the stockholder giving the notice (i) the name and address, as they appear on the Corporation’s books, of such stockholder and (ii) the class and number of shares of the Corporation that are beneficially owned by such stockholder. At the request of the Board any person nominated by the Board for election as a Director shall furnish to the Secretary of the Corporation that information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee. No person shall be eligible for election as a Director of the Corporation unless nominated in accordance with the procedures set forth in this Section 2.06. The Chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a nomination was not made in accordance with the procedures prescribed by the bylaws, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded.

 
SECTION 2.07  QUORUM.    Except in the case of any meeting for the election of directors summarily ordered as provided by law, the holders of record of a majority in voting interest of the shares of stock of the Corporation entitled to be voted thereat, present in person or by proxy, shall constitute a quorum for the transaction of business at any meeting of the stockholders of the Corporation or any adjournment thereof. In the absence of a quorum at any meeting or any adjournment thereof, a majority in voting interest of the stockholders present in person or by proxy and entitled to vote thereat or, in the absence therefrom of all the stockholders, any officer entitled to preside at, or to act as secretary of, such meeting may adjourn such meeting from time to time. At any such adjourned meeting at which a quorum is present any business may be transacted that might have been transacted at the meeting as originally called.
 
SECTION 2.08  VOTING.
 
(a)  Each stockholder shall, at each meeting of the stockholders, be entitled to vote in person or by proxy each share or fractional share of the stock of the Corporation that has voting rights on the matter in question and that has been held by him and registered in his name on the books of the Corporation (i) on the date fixed pursuant to Section 6.05 of these Bylaws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting, or (ii) if no such record date shall have been so fixed, then (a) at the close of business on the day next preceding the day on which notice of the meeting shall be given or (b) if notice of the meeting shall be waived, at the close of business on the day next preceding the day on which the meeting shall be held.
 
(b)  Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors in such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes. Persons holding stock of the Corporation in a fiduciary capacity shall be entitled to vote such stock. Persons whose stock is pledged shall be entitled to vote, unless in the transfer by the pledgor on the books of the Corporation he shall have expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent such stock and vote thereon. Stock having voting power standing of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or otherwise, or with respect to which two or more persons have the same fiduciary relationship, shall be voted in accordance with the provisions of the General Corporation Law of the State of Delaware.
 
(c)  Any such voting rights may be exercised by the stockholder entitled thereto in person or by his proxy appointed by an instrument in writing, subscribed by such stockholder or by his attorney thereunto authorized and delivered to the secretary of the meeting; provided, however, that no proxy shall be voted or acted upon after three years from its date unless said proxy shall provide for a longer period. The attendance at any meeting of a stockholder who may theretofore have given a proxy shall not have the effect of revoking the same unless he shall in writing so notify the secretary of the meeting prior to the voting of the proxy. At any meeting of the stockholders all matters, except as otherwise provided by the Certificate of Incorporation, in these Bylaws or by law, shall be decided by the vote of a majority of the shares present in person or by proxy and entitled to vote thereat and thereon, a quorum being present. The vote at any meetings of the stockholders on any question need not be by ballot, unless so directed by the chairman of the meeting. On a vote by ballot each ballot shall be signed by the stockholder voting, or by his proxy, if there be such proxy, and it shall state the number of shares voted.

 
SECTION 2.09  LIST OF STOCKHOLDERS.    The Secretary of the Corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the duration thereof, and may be inspected by any stockholder who is present. Such list shall presumptively determine the identity of the stockholders entitled to notice of and to vote at the meeting and the number of shares held by each of them.
 
SECTION 2.10  JUDGES.    If at any meeting of the stockholders a vote by written ballot shall be taken on any question, the chairman of such meeting may appoint a judge or judges to act with respect to such vote. Each judge so appointed shall first subscribe an oath faithfully to execute the duties of a judge at such meeting with strict impartiality and according to the best of his ability. Such judges shall decide upon the qualification of the voters and shall report the number of shares represented at the meeting and entitled to vote on such question, shall conduct and accept the votes, and, when the voting is completed, shall ascertain and report the number of shares voted respectively for and against the question. Reports of judges shall be in writing and subscribed and delivered by them to the Secretary of the Corporation. The judges need not be stockholders of the Corporation, and any officer of the Corporation may be a judge on any question other than a vote for or against a proposal in which he shall have a material interest.
 
SECTION 2.11  ACTION WITHOUT A MEETING NOT PERMITTED.    No action shall be taken by the stockholders except at an annual or special meeting of stockholders. The power of the stockholders to consent in writing without a meeting to the taking of any action is specifically denied.
 
SECTION 2.12  CONDUCT OF MEETINGS OF STOCKHOLDERS.    Subject to the following, meetings of stockholders generally shall follow accepted rules of parliamentary procedure:
 
(a)  The chairman of the meeting shall have absolute authority over matters of procedure and there shall be no appeal from the ruling of the chairman. If the chairman, in his absolute discretion, deems it advisable to dispense with the rules of parliamentary procedure as to any one meeting of stockholders or part thereof, the chairman shall so state and shall clearly state the rules under which the meeting or appropriate part thereof shall be conducted.
 
(b)  If disorder should arise that prevents continuation of the legitimate business of the meeting, the chairman may quit the chair and announce the adjournment of the meeting; and, upon his so doing, the meeting shall be immediately adjourned.
 
(c)  The chairman may ask or require that anyone not a bona fide stockholder or proxy leave the meeting.
 
(d)  A resolution or motion shall be considered for vote only if proposed by a stockholder or duly authorized proxy and seconded by an individual who is a stockholder or a duly authorized proxy, other than the individual who proposed the resolution or motion.

 
ARTICLE III.
 
BOARD OF DIRECTORS
 
SECTION 3.01  GENERAL POWERS.    The property, business and affairs of the Corporation shall be managed by the Board.
 
SECTION 3.02  NUMBER AND TERM OF OFFICE.    The authorized number of directors shall be thirteen (13) until changed by a duly adopted amendment to this Bylaw. Each of the directors of the Corporation shall hold office until his successor shall have been duly elected and shall qualify or until he shall resign or shall have been removed in the manner hereinafter provided.
 
SECTION 3.03  ELECTION OF DIRECTORS.    The directors shall be elected by the stockholders of the Corporation, and at each election the persons receiving the greatest number of votes, up to the number of directors then to be elected, shall be the persons then elected. The election of directors is subject to any provisions contained in the Certificate of Incorporation relating thereto, including any provisions for cumulative voting.
 
SECTION 3.04  RESIGNATIONS.    Any director of the Corporation may resign at any time by giving written notice to the Board or to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein, or, if the time be not specified, it shall take effect immediately upon its receipt; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
 
SECTION 3.05  VACANCIES.    Except as otherwise provided in the Certificate of Incorporation, any vacancy in the Board, whether because of death, resignation, disqualification, an increase in the number of directors, or any other cause, may be filled by vote of the majority of the remaining directors, although less than a quorum. Each director so chosen to fill a vacancy shall hold office until his successor shall have been elected and shall qualify or until he shall resign or shall have been removed in the manner hereinafter provided.
 
SECTION 3.06  PLACE OF MEETING.    The Board may hold any of its meetings at such place or places within or without the State of Delaware as the Board may from time to time by resolution designate or as shall be designated by the person or persons calling the meeting or in the notice or a waiver of notice of any such meeting. Directors may participate in any regular or special meeting of the Board by means of conference telephone or similar communications equipment pursuant to which all persons participating in the meeting of the Board can hear each other, and such participation shall constitute presence in person at such meeting.
 
SECTION 3.07  FIRST MEETING.    The Board shall meet as soon as practicable after each annual election of directors and notice of such first meeting shall not be required.
 
SECTION 3.08  REGULAR MEETINGS.    Regular meetings of the Board may be held at such times as the Board may from time to time by resolution determine. If any day fixed for a regular meeting shall be a legal holiday at the place where the meeting is to be held, then the meeting shall be held at the same hour and place on the next succeeding business day not a legal holiday. Except as provided by law, notice of regular meetings need not be given.
 
SECTION 3.09  SPECIAL MEETINGS.    Special meetings of the Board may be called by the Chairman of the Board of Directors, the Vice Chairmen of the

Board, if any, or the Chief Executive Officer and shall be called by the Chief Executive Officer or Secretary on the written request of two directors. Notice of all special meetings of the Board shall be given to each director at the address, facsimile number or electronic mail address provided by the director to the Secretary of the Corporation, or in the absence of such information, at the last known address, facsimile number or electronic mail address of the director, as follows:
 
(a)  By first-class mail, postage prepaid, deposited in the United States mail in the city where the principal office of the Corporation is located at least five (5) days before the date of such meeting; or
 
(b)  By personal delivery at least twenty-four (24) hours prior to the time of holding such meeting; or
 
(c)  By facsimile directed to the director’s facsimile number at least twenty-four (24) hours prior to the time of holding such meeting; or
 
(d)  By electronic mail directed to the director’s electronic mail address at least twenty-four (24) hours prior to the time of holding such meeting.
 
It shall not be necessary that the same method of giving notice be employed in respect of all directors.
 
Such notice may be waived by any director and any meeting shall be a legal meeting without notice having been given if all the directors shall be present thereat or if those not present shall, either before or after the meeting, sign a written waiver of notice of, or a consent to, such meeting or shall after the meeting sign the approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or be made a part of the minutes of the meeting.
 
SECTION 3.10  QUORUM AND MANNER OF ACTING.    Except as otherwise provided in the Certificate of Incorporation or these Bylaws or by law, the presence of a majority of the total number of directors then in office shall be required to constitute a quorum for the transaction of business at any meeting of the Board. Except as otherwise provided in the Certificate of Incorporation or these Bylaws or by law, all matters shall be decided at any such meeting, a quorum being present, by the affirmative votes of a majority of the directors present. In the absence of a quorum, a majority of directors present at any meeting may adjourn the same from time to time until a quorum shall be present. Notice of any adjourned meeting need not be given. The directors shall act only as a Board, and the individual directors shall have no power as such.
 
SECTION 3.11  ACTION BY CONSENT.    Any action required or permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board or committee.
 
SECTION 3.12  MANIFESTATION OF DISSENT.    A director of the Corporation who is present at a meeting of the Board at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the Corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.

 
SECTION 3.13  COMPENSATION.    The directors shall receive only such compensation for their services as directors as may be allowed by resolution of the Board. The Board may also provide that the Corporation shall reimburse each such director for any expense incurred by him on account of his attendance at any meetings of the Board or Committees of the Board. Neither the payment of such compensation nor the reimbursement of such expenses shall be construed to preclude any director from serving the Corporation or its subsidiaries in any other capacity and receiving compensation therefor.
 
SECTION 3.14  EXECUTIVE COMMITTEE.    There may be an Executive Committee of three or more directors appointed by the Board, who may meet at stated times, or on notice to all members of such Committee by any of their own number, during the intervals between the meetings of the Board; they shall advise and aid the officers of the Corporation in all matters concerning its interests and the management of its business, and generally perform such duties and exercise such powers as may be directed or delegated by the Board from time to time. To the full extent permitted by law, the Board may delegate to such Committee authority to exercise all the powers of the Board while the Board is not in session. Vacancies in the members of the Committee shall be filled by the Board at a regular meeting or at a special meeting for that purpose. The Executive Committee shall keep written minutes of its meeting and report the same to the Board when required. The provisions of Sections 3.08, 3.09 and 3.11 of these Bylaws shall apply, mutatis mutandis, to any Executive Committee of the Board.
 
SECTION 3.15  EMERGENCY MANAGEMENT COMMITTEE.    The Board of Directors, by resolution, may provide for an Emergency Management Committee and appoint members or designate the manner in which membership of the Committee shall be determined. The emergency powers granted hereunder shall be operative during any emergency resulting from an attack on the United States or during any nuclear or atomic disaster or during the existence of any catastrophe, or other similar emergency condition, as a result of which a quorum of the Board of Directors or a standing committee thereof cannot readily be convened for action (an “emergency condition”). Said Committee shall have and may exercise all of the powers of the Board of Directors in the management of the business and affairs of the Corporation. It shall act only during such emergency condition and so long as the number of Directors able to act shall have been reduced to fewer than five, and until a Board of Directors has been elected by the stockholders. Such Committee shall meet as promptly as possible after the commencement of such an emergency condition as would activate the Committee and at such subsequent time or times as it may designate until a Board of Directors has been duly elected. Such Committee shall as the first order of business elect an Emergency Executive Committee from among its members and a chairman thereof, who shall be the chief executive officer of the Corporation. Such Executive Committee shall function in the same manner and possess the same powers as the Executive Committee of the Board of Directors, as provided in Article III of these Bylaws, and shall have as many members as shall be provided by resolution of the Board. Such Committees shall make their own rules of procedure except to the extent otherwise provided by resolution of the Board. A majority of the members of the Committees able to act shall constitute a quorum. The physical presence of a member shall not be required if his vote on an action to be taken can be obtained by available means of communication. Any vacancy occurring in said Committees caused by resignation, death or other incapacity may be filled by a majority of the remaining members of the Emergency Management Committee and any member so chosen shall serve until a Board of Directors has been duly elected.
 
SECTION 3.16  OTHER COMMITTEES.    The Board may, by resolution passed by a majority of the whole Board, designate one or more other committees, each such committee to consist of one or more of the directors of the Corporation. To

the full extent permitted by law, any such committee shall have and may exercise such powers and authority as the Board may designate in such resolution. Vacancies in the membership of a committee shall be filled by the Board at a regular meeting or a special meeting for that purpose. Any such committee shall keep written minutes of its meetings and report the same to the Board when required. The provisions of Sections 3.08, 3.09, 3.10, 3.11 and 3.12 of these Bylaws shall apply, mutatis mutandis, to any such committee of the Board.
 
ARTICLE IV.
 
OFFICERS
 
SECTION 4.01  NUMBER.    The officers of the Corporation shall be a Chairman of the Board, a Chief Executive Officer, a President, one or more Vice Presidents (including Executive Vice Presidents, Group Vice Presidents and Senior Vice Presidents), a Secretary and a Treasurer. The Board may also elect a Vice Chairman of the Board and one or more Assistant Secretaries and Assistant Treasurers. A person may hold more than one office provided that the duties thereof can be consistently performed by the same person.
 
SECTION 4.02  OTHER OFFICERS.    The Board may appoint such other officers as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board.
 
SECTION 4.03  ELECTION.    Each of the officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 4.02 or Section 4.05 of this Article, shall be chosen annually by the Board and shall hold his office until he shall resign or shall be removed or otherwise disqualified to serve, or his successor shall be elected and qualified.
 
SECTION 4.04  SALARIES.    The salaries of all officers of the Corporation shall be fixed by the Board.
 
SECTION 4.05  REMOVAL; VACANCIES.    Subject to the express provisions of a contract authorized by the Board, any officer may be removed, either with or without cause, at any time by the Board or by any officer upon whom such power of removal may be conferred by the Board. Any vacancy occurring in any office of the Corporation shall be filled by the Board.
 
SECTION 4.06  THE CHAIRMAN OF THE BOARD.    The Chairman of the Board shall preside at all meetings of the stockholders and directors and shall have such other powers and duties as may be prescribed by the Board or by applicable law. He shall be an ex-officio member of standing committees, if so provided in the resolutions of the Board appointing the members of such committees.
 
SECTION 4.07  THE VICE CHAIRMAN OF THE BOARD.    In the absence of the Chairman of the Board the Vice Chairman of the Board, if there be such an officer, shall have all the powers and shall exercise all the duties of the Chairman of the Board.
 
SECTION 4.08  THE CHIEF EXECUTIVE OFFICER.    Subject to the direction and control of the Board, the Chief Executive Officer shall have general supervision, control and management of the affairs and business of the Corporation, and general charge and supervision of all officers, agents and employees of the Corporation; shall ensure that all orders and resolutions of the Board are carried into effect; shall, in the absence of the Chairman of the Board and Vice Chairman of the Board, if any, preside at all meetings of

the stockholders and the Board; and in general shall exercise all powers and perform all duties incident to the office of Chief Executive Officer and such other powers and duties as may from time to time be assigned to him by the Board or as may be prescribed by these Bylaws.
 
The Chief Executive Officer may execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board to some other officer or agent of the Corporation.
 
SECTION 4.09  THE PRESIDENT.    Subject to the direction and control of the Chief Executive Officer and the Board, the President shall be the chief operating officer of the Corporation, shall have general and active management of the business and affairs of the Corporation; shall ensure that all orders and resolutions of the Board are carried into effect; shall, in the absence of the Chairman of the Board, the Vice Chairman of the Board, if any, and the Chief Executive Officer, preside at all meetings of the stockholders and the Board; and shall exercise all powers and perform all duties incident to the office of the President and chief operating officer and such other powers and duties as may from time to time be assigned to him by the Board or as may be prescribed by these Bylaws or the Board.
 
The President may execute bonds, mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board to some other officer or agent of the Corporation.
 
SECTION 4.10  THE EXECUTIVE VICE PRESIDENTS.    In the absence of the President or in the event of the inability or refusal of the President to act, the Executive Vice Presidents, if any, (in the order of their rank, as specified by the Board, or in the absence of such specification then in the order of their elections) shall perform all duties of the President, and when so acting shall have all of the powers of and be subject to all the restrictions upon, the President. The Executive Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them by the Chief Executive Officer, the President, the Board or these Bylaws.
 
SECTION 4.11  THE VICE PRESIDENTS.    In the absence of the Executive Vice Presidents or in the event of the inability or refusal of the Executive Vice Presidents to act, the Group Vice Presidents and Senior Vice Presidents, if any, or, if none, the Vice Presidents, (in the order of their rank, as specified by the Board, or in the absence of such specification, then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Group Vice Presidents, Senior Vice Presidents and Vice Presidents shall have such other powers and perform such other duties as may from time to time be prescribed for them by the Chief Executive Officer, the President, the Board or these Bylaws.
 
SECTION 4.12  THE SECRETARY AND ASSISTANT SECRETARY.    The Secretary shall attend all meetings of the Board and all meetings of the stockholders and record all the proceedings of the meetings of the Corporation and of the Board in a book to be kept for that purpose and shall perform like duties for the standing and special committees of the Board when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board, and shall perform such other duties as may be prescribed by the Board or Chief Executive Officer, under whose supervision he shall act. He shall have custody of the corporate seal of the Corporation and

he, or an assistant secretary, shall have authority to affix the same to an instrument requiring it and, when so affixed, it may be attested by his signature or by the signature of such assistant secretary. The Board may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing of his signature.
 
The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the Board (or if there be no such determination, then in the order of their election), shall, in the absence of the Secretary or in the event of his inability or his refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board may from time to time prescribe.
 
SECTION 4.13  THE TREASURER.    The Treasurer shall be the chief financial officer of the Corporation and may be referred to by that title shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board.
 
The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board, making proper vouchers for such disbursements, and shall render to the Chief Executive Officer and the Board, at its regular meetings, or when the Board so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation.
 
If required by the Board, the Treasurer shall give the Corporation a bond in such sum and with such surety as shall be satisfactory to the Board for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.
 
SECTION 4.14  THE ASSISTANT TREASURER.    The assistant treasurer, or if there be more than one, the assistant treasurers in the order determined by the Board (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board may from time to time prescribe.
 
ARTICLE V.
 
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
 
SECTION 5.01  CHECKS, DRAFTS, ETC.    All checks, drafts or other orders for payment of money, notes or other evidence of indebtedness payable by the Corporation shall be signed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board. Each such person or persons shall give such bond, if any, as the Board may require.
 
SECTION 5.02  DEPOSITS.    All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositories as the Board may select, or as may be selected by any officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. For the purpose of deposit and for the purpose of collection for the account of the Corporation, the Chief

Executive Officer, the President, any Executive, Group, Senior or other Vice President or the Treasurer (or any other officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation who shall from time to time be determined by the Board) may endorse, assign and deliver checks, drafts and other orders for the payment of money which are payable to the order of the Corporation.
 
SECTION 5.03  GENERAL AND SPECIAL BANK ACCOUNTS.    The Board may from time to time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositories as the Board may select or as may be selected by any officer or officers, assistant or assistants, agent or agents, or attorney or attorneys of the Corporation to whom such power shall have been delegated by the Board. The Board may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of these Bylaws, as it may deem expedient.
 
ARTICLE VI.
 
SHARES AND THEIR TRANSFER
 
SECTION 6.01  CERTIFICATES FOR STOCK.    Every owner of stock of the Corporation shall be entitled to have a certificate or certificates, to be in such form as the Board shall prescribe, certifying the number and class of shares of the stock of the Corporation owned by him. The certificates representing shares of such stock shall be numbered in the order in which they shall be issued and shall be signed in the name of the Corporation by the Chairman, Vice Chairman or Chief Executive Officer or President or an Executive, Group, Senior or other Vice President, and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer. Any of or all of the signatures on the certificates may be a facsimile. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon, any such certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may nevertheless be issued by the Corporation with the same effect as though the person who signed such certificate, or whose facsimile signature has been placed upon, any such certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may nevertheless be issued by the Corporation with the same effect as though the person who signed such certificate, or whose facsimile signature shall have been placed thereupon, were such officer, transfer agent or registrar at the date of issue. A record shall be kept of the respective names of the persons, firms or corporations owning the stock represented by such certificates, the number and class of shares represented by such certificates, respectively, and the respective dates thereof, and in case of cancellation, the respective dates of cancellation. Every certificate surrendered to the Corporation for exchange or transfer shall be cancelled, and no new certificate or certificates shall be issued in exchange for any existing certificate until such existing certificate shall have been so cancelled, except in cases provided for in Section 6.04.
 
SECTION 6.02  TRANSFERS OF STOCK.    Transfers of shares of stock of the Corporation shall be registered on the books of the Corporation or a transfer agent appointed as provided in Section 6.03, only upon surrender of the certificate or certificates for such shares properly endorsed by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed, and the payment of all taxes thereon. The person in whose name shares of stock stand on the books of the Corporation shall be deemed the owner thereof for all purpose as regards the Corporation. Whenever any transfer of shares shall be made for collateral security, and not absolutely, such fact shall be so expressed in the entry of transfer if, when

the certificate or certificates shall be presented to the Corporation for registration of transfer, both the transferor and the transferee request the Corporation to do so.
 
SECTION 6.03  REGULATIONS.    The Board may make such rules and regulations as it may deem expedient, not inconsistent with these Bylaws, concerning the issue, transfer and registration of certificates for shares of the stock of the Corporation. It may appoint, or authorize any officer or officers to appoint, one or more transfer clerks or one or more transfer agents and one or more registrars, and may require all certificates for stock to bear the signature or signatures of any of them.
 
SECTION 6.04  LOST, STOLEN, DESTROYED, AND MUTILATED CERTIFICATES.    In any case of loss, theft, destruction or mutilation of any certificate of stock, another may be issued in its place upon proof of such loss, theft, destruction or mutilation and upon the giving of a bond of indemnity to the Corporation in such form and in such sums as the Board may direct; provided, however, that a new certificate may be issued without requiring any bond when, in the judgment of the Board, it is proper so to do.
 
SECTION 6.05  FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.    In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any other change, conversion or exchange of stock or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than sixty (60) nor less than twenty (20) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If in any case involving the determination of stockholders for any purpose other than notice of or voting at a meeting of stockholders the Board shall not fix such a record date, the record date for determining stockholders for such purpose shall be the close of business on the day on which the Board shall adopt the resolution relating thereto. A determination of stockholders entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of such meeting; provided, however, that the Board may fix a new record date for the adjourned meeting.
 
ARTICLE VII.
 
INDEMNIFICATION
 
SECTION 7.01  ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION.    The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or as a member of any committee or similar body, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in

a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, that he had reasonable cause to believe that his conduct was unlawful.
 
SECTION 7.02  ACTIONS BY OR IN THE RIGHT OF THE CORPORATION.    The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or as a member of any committee or similar body, against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
 
SECTION 7.03  DETERMINATION OF RIGHT OF INDEMNIFICATION.    Any indemnification under Section 7.01 or 7.02 (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 7.01 and 7.02. Such determination shall be made (i) by the Board by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders.
 
SECTION 7.04  INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.    Notwithstanding the other provisions of this Article, to the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 7.01 or 7.02, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith.
 
SECTION 7.05  ADVANCE OF EXPENSES.    Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board upon receipt of an undertaking by or on behalf of the director or officer, to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the Board deems appropriate.
 
SECTION 7.06  OTHER RIGHTS AND REMEDIES.    The benefits provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any statute, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a

director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
 
SECTION 7.07  INSURANCE.    Upon resolution passed by the Board, the Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him or hold him harmless against such liability under the provisions of this Article.
 
SECTION 7.08  CONSTITUENT CORPORATIONS.    For the purposes of this Article, references to “the Corporation” include all constituent corporations absorbed in a consolidation or merger as well as the resulting or surviving corporation, and shall also include without limitation Jacobs Engineering Group Inc., a California corporation, so that any person who is or was a director, officer, employee or agent of such a constituent corporation or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as he would if he had served the resulting or surviving corporation in the same capacity.
 
SECTION 7.09  EMPLOYEE BENEFIT PLANS.    For purposes of this Article, references to “other enterprises” shall include employee benefit plans, and references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation that imposes a duty on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries.
 
SECTION 7.10  BROADEST LAWFUL INDEMNIFICATION.    In addition to the foregoing, the Corporation shall, to the broadest and maximum extent permitted by Delaware law, as the same exists from time to time (but, in case of any amendment to or change in Delaware law, only to the extent that such amendment or change permits the Corporation to provide broader rights of indemnification than is permitted to the Corporation prior to such amendment or change), indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding than is permitted to the Corporation prior to such amendment or change), pay to such person any and all expenses (including attorneys' fees) incurred in defending or settling any such action, suit or proceeding in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer, to repay such amount if it shall ultimately be determined by a final judgment or other final adjudication that he is not entitled to be indemnified by the Corporation as authorized in this Section 7.10. The first sentence of this Section 7.10 to the contrary notwithstanding, the Corporation shall not indemnify any such person with respect to any of the following matters: (i) remuneration paid to such person if it shall be determined by a final judgment or other final adjudication that such remuneration was in violation of law; or (ii) any accounting of profits

 
made from the purchase or sale by such person of the Corporation’s securities within the meaning of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or similar provisions of any federal, state or local statutory law; or (iii) actions brought about or contributed to by the dishonesty of such person, if a final judgment or other final adjudication adverse to such person establishes that acts of active and deliberate dishonesty were committed or attempted by such person with actual dishonest purpose and intent and were material to the adjudication; or (iv) actions based on or attributable to such person having gained any personal profit or advantage to which he was not entitled, in the event that a final judgment or other final adjudication adverse to such person establishes that such person in fact gained such personal profit or other advantage to which he was not entitled; or (v) any matter in respect of which a final decision by a court with competent jurisdiction shall determine that indemnification is unlawful; provided, however, that the Corporation shall perform its obligations under the second sentence of this Section 7.10 on behalf of such person until such time as it shall be ultimately determined by a final judgment or other final adjudication that he is not entitled to be indemnified by the Corporation as authorized by the first sentence of this Section 7.10 by virtue of any of the preceding clauses (i), (ii), (iii), (iv) or (v).
 
SECTION 7.11 INDEMNITY FUND.    Upon resolution passed by the Board, the Corporation may establish a trust or other designated account, grant a security interest or use other means (including, without limitation, a letter of credit), to ensure the payment of any or all of its obligations arising under this Article VII and/or any agreements that may be entered into between the Corporation and its officers and directors from time to time.
 
SECTION 7.12 SEVERABILITY.    If any part of this Article VII shall be found, in any action, suit or proceeding or appeal therefrom or in any other circumstances or as to any particular officer, director, employee or agent to be unenforceable, ineffective or invalid for any reason, the enforceability, effect and validity of the remaining parts or of such parts in other circumstances shall not be affected, except as otherwise required by applicable law.
 
SECTION 7.13 AMENDMENTS.    The foregoing provisions of this Article VII shall be deemed to constitute an agreement between the Corporation and each of the persons entitled to indemnification hereunder, for as long as such provisions remain in effect. Any amendment to the foregoing provisions of this Article VII which limits or otherwise adversely affects the scope of indemnification or rights of any such persons hereunder shall, as to such persons, apply only to claims arising, or causes of action based on actions or events occurring, after such amendment and delivery of notice of such amendment is given to the person or persons so affected. Until notice of such amendment is given to the person or persons whose rights hereunder are adversely affected, such amendment shall have no effect on such rights of such persons hereunder. Any person entitled to indemnification under the foregoing provisions of this Article VII shall as to any act or omission occurring prior to the date of receipt of such notice, be entitled to indemnification to the same extent as had such provisions continued as Bylaws of the Corporation without such amendment.
 
ARTICLE VIII.
 
MISCELLANEOUS
 
SECTION 8.01 SEAL.    The Board shall provide a corporate seal, which shall be in the form of a circle and shall bear the name of the Corporation and

 
words and figures showing that the Corporation was incorporated in the State of Delaware and the year of incorporation.
 
SECTION 8.02 WAIVER OF NOTICES.    Whenever notice is required to be given by these Bylaws or the Certificate of Incorporation or by law, the person entitled to said notice may waive such notice in writing, either before or after the time stated therein, and such waiver shall be deemed equivalent to notice.
 
SECTION 8.03 FISCAL YEAR.    The fiscal year of the Corporation shall begin the first day of October in each year.
 
SECTION 8.04 AMENDMENTS.    Subject to the provisions of the Certificate of Incorporation, these Bylaws and applicable law, these Bylaws or any of them may be amended or repealed and new Bylaws may be adopted (a) by the Board, by vote of a majority of the number of directors then in office or (b) by the vote of the holders of not less than seventy-five (75%) percent of the total voting power of all outstanding shares of voting stock of the Corporation in an annual meeting of stockholders, without previous notice, or at any special meeting of stockholders, provided that notice of such proposed amendment, repeal or adoption is given in the notice of special meeting. Subject to the provisions of the Certificate of Incorporation, any Bylaws adopted or amended by the stockholders may be amended or repealed by the Board or the stockholders.
 
SECTION 8.05 VOTING STOCK.    Unless otherwise ordered by the Board, the Chairman of the Board, the Chief Executive Officer, the President, and each Executive, Group, Senior or other Vice President shall have full power and authority on behalf of the Corporation to attend and to act and vote at any meeting of the stockholders of any corporation in which the Corporation may hold stock and at any such meeting shall possess and may exercise any and all rights and powers that are incident to the ownership of such stock and which as the owner thereof the Corporation may have possessed and exercised if present. The Board by resolution from time to time may confer like powers upon any other person or person.

EX-13 4 dex13.htm EXHIBIT F TO THE REGISTRANT'S NOTICE & PROXY STMNT Exhibit F to the Registrant's Notice & Proxy Stmnt
EXHIBIT 13
 
 
JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
CONSOLIDATED FINANCIAL STATEMENTS
 
WITH REPORT OF INDEPENDENT AUDITORS
 
September 30, 2002

F-1

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
SELECTED HIGHLIGHTS
 
For the Years Ended September 30
(Dollars in thousands, except per share information)
 
    
2002
     
2001
     
2000
  
Revenues
   
$
4,555,661
 
   
$
3,956,993
 
   
$
3,418,942
 
Net earnings
   
 
109,690
 
   
 
87,760
 
   
 
50,981
 
    
  
  
Per share information(a):
                           
Basic earnings per share
   
$
2.03
 
   
$
1.65
 
   
$
0.97
 
Diluted earnings per share
   
 
1.98
 
   
 
1.61
 
   
 
0.96
 
Net book value
   
 
12.45
 
   
 
10.86
 
   
 
9.36
 
Closing year-end stock price
   
 
30.88
 
   
 
31.20
 
   
 
20.16
 
    
  
  
Total assets
   
$
1,673,984
 
   
$
1,557,040
 
   
$
1,384,376
 
Stockholders’ equity
   
 
689,613
 
   
 
591,801
 
   
 
495,543
 
Return on average equity
   
 
17.12
%
   
 
16.14
%
   
 
10.80
%
Number of stockholders of record
   
 
986
 
   
 
1,036
 
   
 
1,115
 
    
  
  
Backlog(b):
                           
Technical, professional services
   
$
3,045,600
 
   
$
2,490,100
 
   
$
2,217,200
 
Field services
   
 
3,628,600
 
   
 
3,422,400
 
   
 
3,212,900
 
    
  
  
Total
   
$
6,674,200
 
   
$
5,912,500
 
   
$
5,430,100
 
    
  
  
Permanent staff
   
 
21,932
 
   
 
20,628
 
   
 
18,812
 
    
  
  
 
Net earnings for fiscal 2000 included an after-tax charge of $23.7 million, or $0.45 per diluted share, relating to the settlement of certain litigation.
 
 
(a)
 
Per share information for all prior fiscal years have been restated to reflect the Company’s two-for-one stock split effected in the form of a 100% stock dividend and distributed to stockholders on April 1, 2002.
 
(b)
 
In fiscal 2002, the Company began classifying as “field services” backlog, certain engineering and scientific and systems consulting activities relating to operations and maintenance contracts that had been classified previously as “technical, professional services” backlog. Backlog for fiscal years 1999, 2000 and 2001 have been reclassified to conform to the fiscal 2002 presentation.

F-2

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
SELECTED FINANCIAL DATA
 
For the Years Ended September 30
(In thousands, except per share information)
 
    
2002
       
2001
       
2000
       
1999
       
1998
  
Results of Operation:
                                                     
Revenues
   
$
4,555,661
 
     
$
3,956,993
 
     
$
3,418,942
 
     
$
2,875,007
 
     
$
2,101,145
 
Net earnings
   
 
109,690
 
     
 
87,760
 
     
 
50,981
 
     
 
65,445
 
     
 
54,385
 
    
    
    
    
    
Financial Position:
                                                     
Current ratio
   
 
1.32 to 1
 
     
 
1.35 to 1
 
     
 
1.24 to 1
 
     
 
1.25 to 1
 
     
 
1.54 to 1
 
Working capital
   
$
234,486
 
     
$
245,500
 
     
$
167,160
 
     
$
144,638
 
     
$
197,659
 
Current assets
   
 
974,903
 
     
 
946,159
 
     
 
851,023
 
     
 
729,620
 
     
 
566,007
 
Total assets
   
 
1,673,984
 
     
 
1,557,040
 
     
 
1,384,376
 
     
 
1,220,186
 
     
 
807,489
 
Long-term debt
   
 
85,732
 
     
 
164,308
 
     
 
146,820
 
     
 
135,371
 
     
 
26,221
 
Stockholders’ equity
   
 
689,613
 
     
 
591,801
 
     
 
495,543
 
     
 
448,717
 
     
 
371,405
 
Return on average equity
   
 
17.12
%
     
 
16.14
%
     
 
10.80
%
     
 
15.96
%
     
 
15.63
%
Backlog(b):
                                                     
Technical, professional services
   
$
3,045,600
 
     
$
2,490,100
 
     
$
2,217,200
 
     
$
1,628,100
 
     
$
1,004,500
 
Field services
   
 
3,628,600
 
     
 
3,422,400
 
     
 
3,212,900
 
     
 
2,820,100
 
     
 
2,325,000
 
    
    
    
    
    
Total
   
$
6,674,200
 
     
$
5,912,500
 
     
$
5,430,100
 
     
$
4,448,200
 
     
$
3,329,500
 
    
    
    
    
    
Per Share Information(a):
                                                     
Basic earnings per share
   
$
2.03
 
     
$
1.65
 
     
$
0.97
 
     
$
1.27
 
     
$
1.06
 
Diluted earnings per share
   
 
1.98
 
     
 
1.61
 
     
 
0.96
 
     
 
1.24
 
     
 
1.04
 
Stockholders’ equity
   
 
12.45
 
     
 
10.86
 
     
 
9.36
 
     
 
8.47
 
     
 
7.12
 
Average Number of Common Stock and Common Stock Equivalents Outstanding (Diluted)
   
 
55,396
 
     
 
54,496
 
     
 
52,947
 
     
 
52,956
 
     
 
52,192
 
    
    
    
    
    
 
Net earnings for fiscal 2000 included an after-tax charge of $23.7 million, or $0.45 per diluted share, relating to the settlement of certain litigation.
 
 
(a)
 
Per share information for all prior fiscal years have been restated to reflect the Company’s two-for-one stock split effected in the form of a 100% stock dividend and distributed to stockholders on April 1, 2002.
 
(b)
 
In fiscal 2002, the Company began classifying as “field services” backlog, certain engineering and scientific and systems consulting activities relating to operations and maintenance contracts that had been classified previously as “technical, professional services” backlog. Backlog for fiscal years 1999, 2000 and 2001 have been reclassified to conform to the fiscal 2002 presentation.

F-3

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
SELECTED FINANCIAL DATA
 
For the Years Ended September 30
(In thousands, except per share information)
 
    
1997
       
1996
       
1995
       
1994
       
1993
  
Results of Operation:
                                                     
Revenues
   
$
1,780,616
 
     
$
1,798,970
 
     
$
1,723,057
 
     
$
1,165,754
 
     
$
1,142,926
 
Net earnings
   
 
46,895
 
     
 
40,360
 
     
 
32,242
 
     
 
18,767
 
     
 
28,670
 
    
    
    
    
    
Financial Position:
                                                     
Current ratio
   
 
1.56 to 1
 
     
 
1.68 to 1
 
     
 
1.44 to 1
 
     
 
1.41 to 1
 
     
 
1.61 to 1
 
Working capital
   
$
178,203
 
     
$
155,569
 
     
$
113,339
 
     
$
106,058
 
     
$
100,688
 
Current assets
   
 
497,361
 
     
 
383,644
 
     
 
368,614
 
     
 
367,485
 
     
 
264,949
 
Total assets
   
 
737,643
 
     
 
572,505
 
     
 
533,947
 
     
 
504,364
 
     
 
351,020
 
Long-term debt
   
 
54,095
 
     
 
36,300
 
     
 
17,799
 
     
 
25,000
 
     
 
—  
 
Stockholders’ equity
   
 
324,308
 
     
 
283,387
 
     
 
238,761
 
     
 
200,433
 
     
 
173,797
 
Return on average equity
   
 
15.43
%
     
 
15.46
%
     
 
14.68
%
     
 
10.03
%
     
 
18.28
%
Backlog(b):
                                                     
Technical, professional services
   
$
912,057
 
     
$
845,300
 
     
$
828,400
 
     
$
793,060
 
     
$
736,600
 
Field services
   
 
2,137,943
 
     
 
1,904,900
 
     
 
1,796,600
 
     
 
1,706,940
 
     
 
1,122,000
 
    
    
    
    
    
Total
   
$
3,050,000
 
     
$
2,750,200
 
     
$
2,625,000
 
     
$
2,500,000
 
     
$
1,858,600
 
    
    
    
    
    
Per Share Information(a):
                                                     
Basic earnings per share
   
$
0.91
 
     
$
0.79
 
     
$
0.64
 
     
$
0.38
 
     
$
0.58
 
Diluted earnings per share
   
 
0.90
 
     
 
0.78
 
     
 
0.64
 
     
 
0.37
 
     
 
0.57
 
Stockholders’ equity
   
 
6.24
 
     
 
5.47
 
     
 
4.70
 
     
 
3.98
 
     
 
3.48
 
Average Number of Common Stock and Common Stock Equivalents Outstanding (Diluted)
   
 
51,978
 
     
 
51,842
 
     
 
50,768
 
     
 
50,346
 
     
 
49,929
 
    
    
    
    
    
 
Net earnings for fiscal 1994 included special charges totaling $10.2 million, or $0.20 per diluted share.
 
 
(a)
 
Per share information for all prior fiscal years have been restated to reflect the Company’s two-for-one stock split effected in the form of a 100% stock dividend and distributed to stockholders on April 1, 2002.
 
(b)
 
In fiscal 2002, the Company began classifying as “field services” backlog, certain engineering and scientific and systems consulting activities relating to operations and maintenance contracts that had been classified previously as “technical, professional services” backlog. Backlog for fiscal years 1999, 2000 and 2001 have been reclassified to conform to the fiscal 2002 presentation.

F-4

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
MANAGEMENT’S DISCUSSION AND ANALYSIS
 
Critical Accounting Policies
 
The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of the Company’s consolidated financial statements, and the financial statements of any business entity performing long-term engineering and construction-type contracts, requires management to make estimates and judgments that affect both the entity’s results of operations as well as the carrying values of its assets and liabilities. Although the Company’s significant accounting polices are described in Note 1 of the Notes to Consolidated Financial Statements, the following discussion is intended to describe those accounting policies most critical to the preparation of the Company’s consolidated financial statements.
 
Revenue Accounting for Contracts—In accounting for long-term, engineering and construction-type contracts, the Company follows the provisions of the AICPA’s Statement of Position 81-1—Accounting for Performance of Construction-Type and Certain Production-Type Contracts. In general, the Company recognizes revenues at the time it provides services. Depending on the commercial terms of the contracts, the Company recognizes revenues either when costs are incurred, or using the percentage-of-completion method of accounting by relating contract costs incurred to date to the total estimated costs at completion. Contract losses are provided for in their entirety in the period they become known, without regard to the percentage-of-completion.
 
The nature of the Company’s business sometimes results in clients, subcontractors or vendors presenting claims against the Company for recovery of costs they incurred in excess of what they expected to incur, or for which they believe they are not contractually responsible. Similarly, and in the normal course of business, the Company may present claims to its clients for costs, which it has incurred, for which it believes it is not contractually responsible. In those situations where a claim against the Company may result in additional costs to the contract, the Company includes in the total estimated costs of the contract (and therefore, the estimated amount of margin to be realized) an estimate, based on the relevant facts and circumstances available, of the additional costs to be incurred. In those situations where the Company has incurred costs for which it believes the client, and not the Company, is contractually responsible, the Company may present a claim to the client for such costs. The Company will include in revenues the amount of costs incurred, without profit, to the extent it is probable that the claims will result in additional contract revenue, and the amount of such additional revenue can be reliably estimated. Costs associated with unapproved change orders are included in revenues using substantially the same criteria used for claims.
 
Certain cost-reimbursable contracts with the U.S. federal government, as well as certain commercial clients, provide that contract costs are subject to audit and adjustment. For all such contracts, revenues are recorded at the time services are performed based upon the amounts the Company expects to realize upon completion of the contracts. In those situations where an audit indicates the Company may have billed a client for costs not allowable under the terms and provisions of the contract, the Company will estimate the amount of such nonbillable costs and adjust its revenues accordingly.
 
As is common in the industry, the Company executes certain contracts jointly with third parties through partnerships and joint ventures. For certain of these contracts (i.e., where the Company has an undivided interest in the assets and liabilities of the venture), the Company recognizes its proportionate share of venture revenues, costs and operating profit in its consolidated statements of earnings.

F-5

 
For contracts that are not long-term, engineering and construction-type contracts, the Company recognizes revenues at the time services are provided. The Company includes in revenues an estimate of fees earned on the contracts based on milestones achieved or other conditions specified in the contract for determining the amount of fees earned and otherwise due.
 
Insurance Matters, Litigation and Contingencies—In the normal course of business, the Company is subject to certain contractual guarantees and litigation. Generally, such guarantees relate to project schedules and plant performance. Most of the litigation involves the Company as a defendant in workers’ compensation, personal injury and other similar lawsuits. The Company maintains insurance coverage for various aspects of its business and operations. However, the Company has elected to retain a portion of losses that may occur through the use of various deductibles, limits and retentions under its insurance programs. This situation may subject the Company to some future liability for which it is only partially insured, or completely uninsured.
 
In accordance with Statement of Financial Accounting Standards No. 5—Accounting for Contingencies, the Company records in its consolidated balance sheets amounts representing its estimated liability for claims, guarantees, costs and litigation. The Company employs qualified actuaries to assist it in determining the level of reserves to establish for both claims that are known and have been asserted against the Company, as well as for claims that are believed to have been incurred based on actuarial analysis, but have not yet been reported to the Company’s claims administrators as of the balance sheet date. The Company includes any adjustments to such insurance reserves in its consolidated results of operations.
 
Operations Outside the United States—In general, the Company’s exposure to fluctuating exchange rates relates primarily to the effects of translating the financial statements of its foreign subsidiaries, which are denominated in currencies other than the U.S. dollar, into the U.S. dollar. The Company follows the provisions of Statement of Financial Accounting Standards No. 52—Foreign Currency Translation in preparing its consolidated financial statements.
 
The Company believes its exposure to the effects that fluctuating foreign currencies may have on its consolidated results of operations is limited because the Company’s various operations invoice clients and satisfy their financial obligations primarily in their respective local currencies. In situations where the Company’s operations incur contract costs in currencies other than their functional currencies, the Company strives to have a portion of the related contract revenues denominated in the same currencies as the costs.
 
Results of Operations
 
The following table sets forth the Company’s revenues by type of service for each year ended September 30 (in thousands):
 
    
2002
   
2001
   
2000
Project Services
   
$
1,977,173
   
$
1,807,831
   
$
1,746,148
Construction
   
 
1,932,613
   
 
1,569,781
   
 
1,091,788
Operations and Maintenance
   
 
469,508
   
 
445,742
   
 
462,774
Process, Scientific and Systems Consulting
   
 
176,367
   
 
133,639
   
 
118,232
    
  
  
    
$
4,555,661
   
$
3,956,993
   
$
3,418,942
    
  
  
 
In general, project services revenues include revenues earned from engineering, design and architectural activities. Construction revenues include revenues earned from both traditional field construction and modular construction activities. Operations and maintenance (“O&M”) revenues include

F-6

revenues from contracts requiring the Company to operate and maintain large, complex facilities on behalf of clients, as well as contracts involving process plant maintenance services and activities. Process, scientific and systems consulting services revenues include revenues earned from providing a variety of scientific and consulting services to clients.
 
In fiscal 2002, the Company began classifying certain elements of revenues as Construction that had been classified previously as Project Services. Revenues for fiscal 2001 and 2000 have been reclassified to conform to the fiscal 2002 presentation.
 
The Company focuses its services on certain industry groups and markets which the Company believes have sufficient common needs to permit cross-utilization of its resources. The following table sets forth the Company’s revenues by these industry groups and markets for each year ended September 30 (in thousands):
 
    
2002
   
2001
   
2000
Oil & Gas, and Refining
   
$
1,088,758
   
$
451,103
   
$
280,942
Federal Programs
   
 
973,514
   
 
732,362
   
 
614,048
Pharmaceuticals and Biotechnology
   
 
879,747
   
 
715,407
   
 
481,947
Chemicals and Polymers
   
 
556,011
   
 
653,573
   
 
693,034
Buildings
   
 
349,858
   
 
457,488
   
 
539,691
Infrastructure
   
 
325,029
   
 
246,420
   
 
238,278
Technology and Manufacturing
   
 
187,432
   
 
332,995
   
 
213,557
Pulp and Paper
   
 
72,350
   
 
182,456
   
 
254,861
Other
   
 
122,962
   
 
185,189
   
 
102,584
    
  
  
    
$
4,555,661
   
$
3,956,993
   
$
3,418,942
    
  
  
 
“Other” includes projects for clients operating in a number of industries, including food and beverage, and basic resources (such as mining, minerals and fertilizers).
 
Fiscal 2002 Compared to Fiscal 2001
 
On April 1, 2002, the Company completed a two-for-one stock split which was distributed in the form of a 100% stock dividend to stockholders of record on March 1, 2002. Accordingly, earnings per share calculations for all periods presented have been restated to give effect to the stock split retroactively. See Note 2 of the Notes to Consolidated Financial Statements for a discussion of the stock split transaction.
 
On October 31, 2001, the Company completed the acquisition of McDermott Engineers & Constructors (Canada) Limited (including Delta Catalytic and Delta Hudson Engineering; collectively, “Delta”). As more fully explained in Note 4 of the Notes to Consolidated Financial Statements, Delta provides engineering, construction, and maintenance services to clients in a variety of industries, with significant revenues attributable to clients in the upstream oil and gas, petroleum refining, energy and other industries.
 
The Company’s consolidated results of operations include those of Delta, GIBB and Stork Phase II from the dates of their respective acquisitions. The operations of Stork Phase II and GIBB were acquired and consolidated in the second and third quarters, respectively, of fiscal 2001. The Company’s operating results during the current and prior fiscal periods were not significantly impacted by the operations of Stork Phase II and GIBB. See Note 4 of the Notes to Consolidated Financial Statements for a discussion of the Stork and GIBB transactions.
 
The Company recorded net earnings of $109.7 million, or $1.98 per diluted share, for the fiscal year ended September 30, 2002, compared to net earnings of $87.8 million, or $1.61 per diluted share for fiscal 2001.

F-7

 
Effective October 1, 2001, the Company eliminated the amortization of goodwill in accordance with Statement of Financial Accounting Standards No. 142—Goodwill and Other Intangible Assets. The Company’s results of operations for prior years have not been restated. Goodwill amortization on a pre-tax basis was $7.6 million ($4.9 million after-tax) in fiscal 2001, and $6.9 million ($4.4 million after-tax) in fiscal 2000. See Note 1 of the Notes to Consolidated Financial Statements for additional discussion of SFAS 142.
 
Total revenues for fiscal 2002 increased by $598.7 million, or 15.1%, to $4.6 billion, compared to total revenues of $4.0 billion in fiscal 2001. Approximately 12.4%, or $564.1 million of revenues in fiscal 2002 were generated by Delta’s operations.
 
Selling, general and administrative (“SG&A”) expenses for fiscal 2002 increased by $50.5 million, or 14.0%, to $411.3 million, compared to $360.8 million for fiscal 2001. The increase in SG&A expenses during the current fiscal year reflects the inclusion of the operations of Delta, GIBB and Stork Phase II, which contributed a combined total of $40.2 million to SG&A expenses. Excluding the impact of the Delta and GIBB acquisitions, and the impact of eliminating goodwill amortization in fiscal 2002, SG&A expenses increased by $31.6 million, or 9.3%, in fiscal 2002. As a percentage of revenues, consolidated SG&A expenses was 9.0% in fiscal 2002, compared to 9.1% in fiscal 2001.
 
During fiscal 2002, the Company’s operating profit (defined as revenues, less direct costs of contracts and SG&A expenses) increased by $28.5 million, or 19.8%, to $172.4 million, compared to $143.9 million in fiscal 2001. The increase in the Company’s operating profit for fiscal 2002 compared to fiscal 2001 was due primarily to increases in business volume, combined with the elimination of goodwill amortization, and with keeping direct costs of contracts and SG&A expenses as percentages of revenues at approximately the same levels as fiscal 2001. Operating profit was 3.8% of revenues in fiscal 2002, compared to 3.6% of revenues in fiscal 2001. Excluding the impact of goodwill amortization on last year’s results, operating profit would have been 3.8% of revenues in fiscal 2001.
 
During fiscal 2002, interest expense decreased by $4.2 million, or 36.0%, to $7.5 million, compared to interest expense of $11.7 million during fiscal 2001. The decrease in interest expense was due to significantly reduced borrowing levels. At September 30, 2002, the Company had total debt of $91.7 million, compared to $184.0 million at September 30, 2001. The Company financed the Delta acquisition in October 2001 with a new, short-term $50.0 million credit facility. By September 2002, the Company had converted this credit facility to a long-term, $45.0 million facility due in January 2004. At September 30, 2002, this long-term facility had an outstanding balance of $28.1 million bearing interest of 3.4%. At September 30, 2002 and 2001, outstanding borrowings (and the associated interest rates) under the $230.0 million revolving credit facility were $57.6 million (bearing interest of 4.0%), and $164.3 million (bearing interest of 4.1%), respectively. See Note 7 of the Notes to Consolidated Financial Statements for additional information on the Company’s borrowings.
 
The Company recorded income tax expense of $59.1 million and $50.4 million in fiscal 2002 and 2001, respectively. The Company’s overall effective tax rate was 35.0% for fiscal 2002, compared to an effective tax rate of 36.5% for fiscal 2001.
 
Fiscal 2001 Compared to Fiscal 2000
 
On May 3, 2001, the Company completed the purchase from LawGibb Group Inc. of substantially all of its international engineering and construction management business (the “GIBB” businesses). The Company’s consolidated results of operations for fiscal 2001, which included the results of GIBB’s operations since the date of acquisition, were not significantly impacted by GIBB’s operations. The Company’s consolidated revenues for fiscal 2001 included $46.1 million of revenues from GIBB’s operations.

F-8

 
On February 23, 2001, the Company finalized the second phase of the two-part transaction to acquire from Stork N.V., the Netherlands all of its engineering and contracting business (“Stork Phase II”). The first phase was completed in February 2000. The Company’s consolidated results of operations for fiscal 2001 included the operating results of Stork Phase II since the date of acquisition. The Company’s consolidated results of operations for both fiscal 2001 and 2000 were not significantly impacted by Stork’s operations. The Company’s consolidated revenues for fiscal 2001 included $36.4 million of revenues from Stork Phase II operations.
 
The Company recorded net earnings of $87.8 million, or $1.61 per diluted share for the fiscal year ended September 30, 2001, compared to net earnings of $51.0 million, or $0.96 per diluted share for fiscal 2000.
 
Net earnings for the prior year included a first-quarter, pre-tax provision for litigation settlement of $38.0 million ($23.7 million after-tax). Excluding the after-tax impact of this special litigation charge, the Company’s operations during fiscal 2000 resulted in pro forma net earnings of $74.7 million, or $1.41 per diluted share.
 
Total revenues for fiscal 2001 increased by $538.1 million, or 15.7%, to $4.0 billion, compared to $3.4 billion for fiscal 2000. The Stork Phase II and GIBB transactions contributed approximately $80.8 million of revenues during fiscal 2001.
 
As a percentage of revenues, direct costs of contracts were 87.2% for fiscal 2001 as compared to 87.3% for fiscal 2000. The percentage relationship between direct costs of contracts and revenues generally fluctuate between reporting periods depending on a variety of factors including the mix of business during the reporting periods being compared, as well as the level of margins earned from the various types of services provided by the Company.
 
SG&A expenses for fiscal 2001 increased by $49.7 million, or 16.0%, to $360.8 million, compared to $311.1 million for fiscal 2000. Approximately $19.9 million, or 40% of the increase in SG&A expenses was attributable to the Stork Phase II and GIBB operations. However, as a percentage of revenues, SG&A expenses for fiscal 2001 remained at the prior fiscal year level of 9.1%, reflecting the Company’s continuing efforts to control costs.
 
During fiscal 2001, the Company’s operating profit increased by $19.2 million, or 15.4%, to $143.9 million, compared to $124.6 million in fiscal 2000. The increase in the Company’s operating profit for fiscal 2001 was due primarily to significant increases in business volume while keeping direct costs of contracts and SG&A expenses as percentages of revenues at approximately the same levels as fiscal 2000.
 
During fiscal 2001, interest expense increased minimally by 2.5%, or $0.3 million, to $11.7 million, compared to $11.4 million in fiscal 2000, due to additional borrowings from the Company’s $230.0 million revolving credit facility at lower interest rates. At September 30, 2001 and 2000, outstanding borrowings (and the associated interest rates) under this facility were $164.3 million (bearing interest at 4.1%) and $138.9 million (bearing interest at 8.2%), respectively. During fiscal 2001, the Company borrowed $162.4 million from the same facility, primarily to partially finance the GIBB acquisition for approximately $20.3 million, to fund $9.5 million of stock repurchases as discussed below, and the balance to cover working capital requirements.
 
The Company recorded income tax expense of $50.4 million and $30.3 million in fiscal 2001 and 2000, respectively. The Company’s overall effective tax rate was 36.5% for fiscal 2001, compared to an effective tax rate of 37.3% for fiscal 2000.

F-9

Backlog
 
Backlog represents the total dollar amount of revenues the Company expects to record in the future as a result of performing work under contracts that have been awarded to it. The Company’s policy with respect to O&M contracts, however, is to include in backlog the amount of revenues it expects to receive for one succeeding year, regardless of the remaining life of the contract. For federal programs (other than federal O&M contracts), the Company’s policy is to include in backlog the full contract award, whether funded or unfunded, and exclude option periods.
 
In accordance with industry practice, substantially all of the Company’s contracts are subject to cancellation or termination at the option of the client. However, the Company has not experienced cancellations that have had a material effect on the reported backlog amounts. In a situation where a client terminates a contract, the Company would ordinarily be entitled to receive payment for work performed up to the date of termination and, in certain instances, may be entitled to allowable termination and cancellation costs. While management uses all information available to it to determine backlog, the Company’s backlog at any given time is subject to changes in the scope of services to be provided as well as increases or decreases in costs relating to the contracts included therein.
 
The following table summarizes the Company’s total backlog at September 30, 2002, 2001 and 2000 (in millions):
 
    
2002
   
2001
   
2000
Technical, professional services
   
$
3,045.6
   
$
2,490.1
   
$
2,217.2
Total
   
 
6,674.2
   
 
5,912.5
   
 
5,430.1
    
  
  
 
In fiscal 2002, the Company began classifying as “field services” backlog, certain engineering and scientific and systems consulting activities relating to operations and maintenance contracts that had been classified previously as “technical, professional services” backlog. Backlog for fiscal years 2001 and 2000 have been reclassified to conform to the fiscal 2002 presentation.
 
Total backlog at September 30, 2002 included approximately $1.8 billion, or 27.6% of total backlog, relating to work to be performed either directly or indirectly for the U.S. federal government and its agencies. This compares to approximately $1.9 billion (or 32.4%) and $1.4 billion (or 26.4%) of U.S. federal backlog at September 30, 2001 and 2000, respectively. Most of these federal contracts extend beyond one year. In general, these contracts must be funded annually (i.e., the amounts to be spent under the contract must be appropriated by Congress to the procuring agency, and then the agency must allot these sums to the specific contracts).
 
The Company’s backlog for fiscal 2002 increased by $761.7 million, or 12.9%, to $6.7 billion, compared to fiscal 2001, and increased in fiscal 2001 by $482.4 million, or 8.9%, to $5.9 billion, compared to fiscal 2000. The increase in fiscal 2002 as compared to fiscal 2001 was attributable primarily to energy and refining backlog added as a result of the Delta acquisition, combined with new awards in both the civil and infrastructure, and the U.S. federal programs sectors of the Company’s business. The increase in fiscal 2001 as compared to fiscal 2000 was attributable primarily to new awards in the defense and aerospace, and exploration, production and refining areas of the Company’s business, and the impact of the acquisitions of Stork and GIBB.
 
The Company estimates that approximately $3.7 billion, or 55.7% of total backlog at September 30, 2002 will be realized as revenues within the next fiscal year.
 
Effects of Inflation
 
During fiscal 2002 and 2001, approximately 85% and 81%, respectively, of the Company’s consolidated revenues were realized from cost-reimbursable type contracts. Because a significant

F-10

portion of the Company’s revenues continues to be earned under cost-reimbursable type contracts, the effects of inflation on the Company’s financial condition and results of operations have been generally low. However, as the Company expands its business into markets and geographic areas where fixed-price and lump-sum work is more prevalent, inflation may begin to have a larger impact on the Company’s results of operations. To the extent permitted by competition, the Company intends to continue to emphasize contracts which are either cost-reimbursable or negotiated fixed-price. For contracts with fixed-price and lump-sum terms, the Company monitors closely the actual costs on the project as compared to the original estimates. On these projects, the Company also attempts to secure fixed-price commitments from key subcontractors and vendors. However, due to the competitive nature of the Company’s business, combined with the fluctuating demands and prices associated with personnel, equipment and materials the Company traditionally needs in order to perform on its contracts, there can be no guarantee that inflation will not effect the Company’s results of operations in the future.
 
Liquidity and Capital Resources
 
During fiscal 2002, the Company’s cash and cash equivalents decreased by $0.8 million, to $48.5 million. This compares to a net decrease of $16.6 million, to $49.3 million, during fiscal 2001, and to a net increase of $12.4 million, to $65.8 million during fiscal 2000. During fiscal 2002, the Company experienced net cash outflows from investing and financing activities, and the effect on cash of exchange rate changes, of $92.5 million, $64.7 million, and $4.3 million, respectively. These outflows were offset by net cash inflows from operating activities of $160.8 million.
 
Operations resulted in net cash inflows of $160.8 million during fiscal 2002. This compares to net cash inflows of $15.1 million and $81.3 million during fiscal 2001 and 2000, respectively. The $145.7 million increase in cash provided by operations in fiscal 2002 as compared to fiscal 2001 was due primarily to an increase in inflows of $135.7 million relating to the timing of cash receipts and payments within the Company’s working capital accounts, increases in net earnings and depreciation and amortization of fixed assets of $21.9 million and $3.7 million, respectively, partially offset by decreases in inflows relating to deferred income taxes, and to the elimination of the amortization of goodwill, of $7.7 million and $7.6 million, respectively.
 
The Company’s investing activities resulted in net cash outflows of $92.5 million during fiscal 2002. This compares to net cash outflows of $63.6 million and $106.7 million during fiscal 2001 and 2000, respectively. The net increase of $28.9 million in cash used for investing activities during fiscal 2002 as compared to fiscal 2001 was due primarily to a net increase in other noncurrent assets of $16.1 million, an increase of $14.9 million in net cash used for acquisitions, and a decrease in disposals of property and equipment of $12.1 million. These outflows were partially offset by a decrease of $7.3 million in additions to property and equipment, an increase of $5.5 million in proceeds from sales of investments, and a decrease of $1.5 million in purchases of investments.
 
The Company’s financing activities resulted in net cash outflows of $64.7 million during fiscal 2002. This compares to net cash inflows of $32.2 million and $42.8 million during fiscal 2001 and 2000, respectively. The $96.9 million net increase in cash used for financing activities during fiscal 2002 as compared to fiscal 2001 was due primarily to increases in repayments of long-term borrowings of $397.3 million. These outflows were partially offset by increases in proceeds from long-term and short-term borrowings of $262.5 million and $24.1 million, respectively, and by decreases in purchases of common stock for treasury, and an increase in proceeds from issuances of common stock of $7.5 million and $3.5 million, respectively. Total borrowing activity for fiscal 2002 resulted in net repayments of $93.6 million, compared to net additional borrowings of $17.1 million and $35.3 million, in fiscal 2001 and 2000, respectively.

F-11

 
The Company believes it has adequate capital resources to fund its operations in fiscal 2003 and beyond. The Company’s consolidated working capital position was $234.5 million at September 30, 2002. As discussed earlier, the Company has long-term, revolving credit facilities totaling $275.0 million at September 30, 2002, against which $85.7 million was outstanding at that date in the form of direct borrowings. At September 30, 2002, the Company had $46.2 million available through committed short-term credit facilities, against which $6.0 million was outstanding in the form of direct borrowings.
 
Under its stock repurchase program, the Company is authorized to buy-back up to 6.0 million shares of its common stock in the open market. Repurchases of common stock will be financed from existing credit facilities and available cash balances. From inception of the program through September 30, 2002, the Company had repurchased a total of 3,732,400 shares of its common stock in the open market at a total cost of $59.0 million. During fiscal 2002, the Company repurchased 61,000 shares of its common stock at a total cost of $2.0 million. Substantially all shares of common stock held in treasury were eventually reissued for the Company’s employee stock purchase and incentive stock plans.
 
The Company has filed a protective claim with the Internal Revenue Service. The nature of the claim involves monies the Company believes it is due from the government relating to the research and development tax credit for fiscal years 1991 through 1998. Although the Company has been working on quantifying the amount of the credit, the final tax refund amount has not yet been determined. Based on a preliminary review of the information available, the ultimate refund amount may have a significant and positive effect on the Company’s overall liquidity.
 
Current Accounting Pronouncements
 
In August 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 143—Accounting for Asset Retirement Obligations (“SFAS 143”). SFAS 143 establishes accounting standards for recognition and measurement of a liability for the costs of asset retirement obligations. Under SFAS 143, the costs of retiring an asset will be recorded as a liability when the retirement obligation arises, and will be amortized to expense over the life of the asset. SFAS 143 is effective for fiscal years beginning after June 15, 2002.
 
In October 2001, the FASB issued SFAS No. 144—Accounting for the Impairment or Disposal of Long-Lived Assets (“SFAS 144”). SFAS 144 supercedes SFAS No. 121—Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. SFAS 144 requires that long-lived assets be reported at the lower of the carrying amount or fair value, less costs to sell, whether included in continuing operations or in discontinued operations. SFAS 144 is effective for fiscal years beginning after December 15, 2001.
 
In July 2002, the FASB issued Statements of Financial Accounting Standards No. 146—Accounting for Costs Associated with Exit and Disposal Activities (“SFAS 146”). SFAS 146 revises the accounting for exit and disposal activities under EITF Issue No. 94-3—Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity. Under SFAS 146, a formal commitment to a plan to exit an activity or dispose of long-lived assets will no longer be sufficient to record a cost for most exit and disposal costs. Instead, companies will record exit or disposal costs when they are incurred and can be measured at fair value, and will subsequently adjust the recorded liability for changes in estimated cash flows. The provisions of SFAS 146 are effective prospectively for exit or disposal activities initiated after December 31, 2002. Companies may not restate previously issued financial statements for the effect of the provisions of SFAS 146 and liabilities that a company previously recorded under EITF Issue No. 94-3 are not affected.
 

F-12

The Company does not believe the adoption of any of the aforementioned standards will have a material effect on its consolidated financial statements.
 
Forward-Looking Statements
 
Statements included in this Management’s Discussion and Analysis that are not based on historical facts are “forward-looking statements”, as that term is defined in the Private Securities Litigation Reform Act of 1995. Such statements are based on management’s current estimates, expectations and projections about the issues discussed, the industries in which the Company’s clients operate and the services the Company provides. By their nature, such forward-looking statements involve risks and uncertainties. The Company has tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and words and terms of similar substance in connection with any discussion of future operating or financial performance. The Company cautions the reader that a variety of factors could cause business conditions and results to differ materially from what is contained in its forward-looking statements including the following:
 
 
•
 
increase in competition by foreign and domestic competitors;
 
 
•
 
changes in global business, economic, political and social conditions;
 
 
•
 
availability of qualified engineers, architects, designers and other professional staff needed to execute contracts;
 
 
•
 
the timing of new awards and the funding of such awards;
 
 
•
 
cancellations of, or changes in the scope to, existing contracts;
 
 
•
 
the ability of the Company to meet performance or schedule guarantees;
 
 
•
 
cost overruns on fixed, maximum or unit priced contracts;
 
 
•
 
the outcome of pending and future litigation and any governmental audits, investigations, or proceedings;
 
 
•
 
the cyclical nature of the individual markets in which the Company’s clients operate;
 
 
•
 
delays or defaults by clients in making payments due under contracts; and
 
 
•
 
the successful closing and/or subsequent integration of any merger or acquisition transaction.
 
The preceding list is not all-inclusive, and the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Readers of this Management’s Discussion and Analysis should also read the Company’s most recent Annual Report on Form 10-K for a further description of the Company’s business, legal proceedings and other information that describes factors that could cause actual results to differ from such forward-looking statements.

F-13

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 
September 30, 2002 and 2001
(In thousands, except share information)
 
    
2002
     
2001
  
ASSETS
                  
Current Assets:
                  
Cash and cash equivalents
   
$
48,469
 
   
$
49,263
 
Receivables
   
 
845,360
 
   
 
817,160
 
Deferred income taxes
   
 
66,609
 
   
 
64,651
 
Prepaid expenses and other
   
 
14,465
 
   
 
15,085
 
    
  
Total current assets
   
 
974,903
 
   
 
946,159
 
    
  
Property, Equipment and Improvements, Net
   
 
149,905
 
   
 
149,979
 
    
  
Other Noncurrent Assets:
                  
Goodwill, net
   
 
390,953
 
   
 
317,664
 
Other
   
 
158,223
 
   
 
143,238
 
    
  
Total other noncurrent assets
   
 
549,176
 
   
 
460,902
 
    
  
    
$
1,673,984
 
   
$
1,557,040
 
    
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
Current Liabilities:
                  
Notes payable
   
$
5,962
 
   
$
19,688
 
Accounts payable
   
 
229,579
 
   
 
197,712
 
Accrued liabilities
   
 
322,618
 
   
 
295,763
 
Billings in excess of costs
   
 
155,114
 
   
 
163,833
 
Income taxes payable
   
 
27,144
 
   
 
23,663
 
    
  
Total current liabilities
   
 
740,417
 
   
 
700,659
 
    
  
Long-term Debt
   
 
85,732
 
   
 
164,308
 
    
  
Other Deferred Liabilities
   
 
152,340
 
   
 
95,174
 
    
  
Minority Interests
   
 
5,882
 
   
 
5,098
 
    
  
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—100,000,000 shares; issued and outstanding—54,765,374 shares and 26,872,358 shares, respectively
   
 
54,765
 
   
 
26,872
 
Additional paid-in capital
   
 
110,778
 
   
 
105,612
 
Retained earnings
   
 
568,957
 
   
 
472,010
 
Accumulated other comprehensive loss
   
 
(42,582
)
   
 
(10,620
)
    
  
    
 
691,918
 
   
 
593,874
 
Unearned compensation
   
 
(2,305
)
   
 
(2,073
)
    
  
Total stockholders’ equity
   
 
689,613
 
   
 
591,801
 
    
  
    
$
1,673,984
 
   
$
1,557,040
 
    
  
 
See the accompanying Notes to Consolidated Financial Statements.

F-14

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF EARNINGS
 
For the Years Ended September 30, 2002, 2001 and 2000
(In thousands, except per share information)
 
    
2002
     
2001
     
2000
  
Revenues
   
$
4,555,661
 
   
$
3,956,993
 
   
$
3,418,942
 
Costs and Expenses:
                           
Direct costs of contracts
   
 
(3,971,984
)
   
 
(3,452,320
)
   
 
(2,983,247
)
Selling, general and administrative expenses
   
 
(411,307
)
   
 
(360,821
)
   
 
(311,082
)
    
  
  
Operating Profit
   
 
172,370
 
   
 
143,852
 
   
 
124,613
 
    
  
  
Other (Expense) Income:
                           
Interest income
   
 
2,359
 
   
 
3,718
 
   
 
3,961
 
Interest expense
   
 
(7,496
)
   
 
(11,705
)
   
 
(11,420
)
Miscellaneous income, net
   
 
1,521
 
   
 
2,341
 
   
 
2,168
 
Provision for litigation settlement
   
 
—  
 
   
 
—  
 
   
 
(38,000
)
    
  
  
Total other expense, net
   
 
(3,616
)
   
 
(5,646
)
   
 
(43,291
)
    
  
  
Earnings Before Taxes
   
 
168,754
 
   
 
138,206
 
   
 
81,322
 
Income Tax Expense
   
 
(59,064
)
   
 
(50,446
)
   
 
(30,341
)
    
  
  
Net Earnings
   
$
109,690
 
   
$
87,760
 
   
$
50,981
 
    
  
  
Net Earnings Per Share:
                           
Basic
   
$
2.03
 
   
$
1.65
 
   
$
0.97
 
Diluted
   
$
1.98
 
   
$
1.61
 
   
$
0.96
 
    
  
  
 
 
See the accompanying Notes to Consolidated Financial Statements.

F-15

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
For the Years Ended September 30, 2002, 2001 and 2000
(In thousands)
 
    
2002
       
2001
       
2000
  
Net Earnings
   
$
109,690
 
     
$
87,760
 
     
$
50,981
 
    
    
    
Other Comprehensive (Loss) Income:
                               
Unrealized holding gains on securities
   
 
816
 
     
 
2,395
 
     
 
3,556
 
Less—reclassification adjustment for gains realized in net earnings
   
 
(3,667
)
     
 
(2,083
)
     
 
(1,455
)
    
    
    
Unrealized (loss) gains on securities, net of reclassification adjustment
   
 
(2,851
)
     
 
312
 
     
 
2,101
 
Foreign currency translation adjustments
   
 
1,048
 
     
 
(324
)
     
 
(8,236
)
Minimum pension liability adjustment
   
 
(47,904
)
     
 
—  
 
     
 
—  
 
    
    
    
Other Comprehensive Loss Before Income Taxes
   
 
(49,707
)
     
 
(12
)
     
 
(6,135
)
Income Tax Benefit (Expense) Relating to Other Comprehensive Loss
   
 
17,745
 
     
 
(93
)
     
 
(785
)
    
    
    
Other Comprehensive Loss
   
 
(31,962
)
     
 
(105
)
     
 
(6,920
)
    
    
    
Total Comprehensive Income
   
$
77,728
 
     
$
87,655
 
     
$
44,061
 
    
    
    
 
 
See the accompanying Notes to Consolidated Financial Statements.

F-16

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
 
For the Years Ended September 30, 2002, 2001 and 2000
(In thousands)
 
    
2002
       
2001
       
2000
  
Common Stock:
                               
Balance at the beginning of the year
   
$
26,872
 
     
$
26,386
 
     
$
26,143
 
Two-for-one stock split, paid in the form of a stock dividend (see Note 2)
   
 
27,137
 
     
 
—  
 
     
 
—  
 
Issuances under stock purchase and stock option plans, net
   
 
892
 
     
 
625
 
     
 
440
 
Repurchases under stock plans
   
 
(158
)
     
 
(187
)
     
 
(197
)
Issuances of restricted stock, net of forfeitures
   
 
22
 
     
 
48
 
     
 
—  
 
    
    
    
Balance at the end of the year
   
 
54,765
 
     
 
26,872
 
     
 
26,386
 
    
    
    
Additional Paid-in Capital:
                               
Balance at the beginning of the year
   
 
105,612
 
     
 
79,352
 
     
 
68,049
 
Two-for-one stock split, paid in the form of a stock dividend (see Note 2)
   
 
(27,137
)
     
 
—  
 
     
 
—  
 
Issuances of common stock under stock purchase and stock option plans, net
   
 
31,957
 
     
 
24,910
 
     
 
12,078
 
Repurchases of common stock under stock plans
   
 
(543
)
     
 
(696
)
     
 
(764
)
Issuances of restricted stock, net of forfeitures
   
 
889
 
     
 
2,046
 
     
 
(11
)
    
    
    
Balance at the end of the year
   
 
110,778
 
     
 
105,612
 
     
 
79,352
 
    
    
    
Retained Earnings:
                               
Balance at the beginning of the year
   
 
472,010
 
     
 
400,791
 
     
 
358,958
 
Net earnings
   
 
109,690
 
     
 
87,760
 
     
 
50,981
 
Issuances of treasury stock for option exercises
   
 
(380
)
     
 
(1,381
)
     
 
(2,922
)
Repurchases of common stock under stock plans
   
 
(12,363
)
     
 
(15,160
)
     
 
(6,226
)
    
    
    
Balance at the end of the year
   
 
568,957
 
     
 
472,010
 
     
 
400,791
 
    
    
    
Accumulated Other Comprehensive (Loss) Income:
                               
Balance at the beginning of the year
   
 
(10,620
)
     
 
(10,515
)
     
 
(3,595
)
Foreign currency translation adjustments
   
 
1,048
 
     
 
(324
)
     
 
(8,236
)
Net unrealized (losses) gains on securities
   
 
(1,783
)
     
 
219
 
     
 
1,316
 
Minimum pension liability adjustment
   
 
(31,227
)
     
 
—  
 
     
 
—  
 
    
    
    
Balance at the end of the year
   
 
(42,582
)
     
 
(10,620
)
     
 
(10,515
)
    
    
    
Unearned Compensation:
                               
Balance at the beginning of the year
   
 
(2,073
)
     
 
(471
)
     
 
(838
)
Issuances of restricted stock
   
 
(911
)
     
 
(2,094
)
     
 
(153
)
Amortization
   
 
679
 
     
 
492
 
     
 
520
 
    
    
    
Balance at the end of the year
   
 
(2,305
)
     
 
(2,073
)
     
 
(471
)
    
    
    
Treasury Stock, at Cost:
                               
Balance at the beginning of the year
   
 
—  
 
     
 
—  
 
     
 
—  
 
Purchases of common stock for treasury
   
 
(2,003
)
     
 
(9,523
)
     
 
(13,714
)
Reissuances of treasury stock for stock option exercises
   
 
2,003
 
     
 
9,523
 
     
 
13,714
 
    
    
    
Balance at the end of the year
   
 
—  
 
     
 
—  
 
     
 
—  
 
    
    
    
Total Stockholders’ Equity
   
$
689,613
 
     
$
591,801
 
     
$
495,543
 
    
    
    
 
See the accompanying Notes to Consolidated Financial Statements.

F-17

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
For the Years Ended September 30, 2002, 2001 and 2000
(In thousands)
 
    
2002
       
2001
       
2000
  
Cash Flows from Operating Activities:
                               
Net earnings
   
$
109,690
 
     
$
87,760
 
     
$
50,981
 
Adjustments to reconcile net earnings to net cash flows from operations:
                               
Depreciation and amortization of property, equipment and improvements
   
 
35,087
 
     
 
31,388
 
     
 
33,192
 
Amortization of goodwill
   
 
—  
 
     
 
7,552
 
     
 
6,906
 
Gains on sales of assets
   
 
(3,922
)
     
 
(3,318
)
     
 
(3,143
)
Changes in assets and liabilities, excluding the effects of businesses acquired:
                               
Receivables
   
 
36,935
 
     
 
(68,669
)
     
 
(105,541
)
Prepaid expenses and other current assets
   
 
4,187
 
     
 
(1,482
)
     
 
142
 
Accounts payable
   
 
11,458
 
     
 
(27,849
)
     
 
35,807
 
Accrued liabilities
   
 
(12,301
)
     
 
(17,906
)
     
 
(10,497
)
Billings in excess of costs
   
 
(24,850
)
     
 
(7,313
)
     
 
50,134
 
Income taxes payable
   
 
7,438
 
     
 
10,356
 
     
 
8,526
 
Deferred income taxes
   
 
(3,639
)
     
 
4,097
 
     
 
14,437
 
Other, net
   
 
680
 
     
 
492
 
     
 
357
 
    
    
    
Net cash provided by operating activities
   
 
160,763
 
     
 
15,108
 
     
 
81,301
 
    
    
    
Cash Flows from Investing Activities:
                               
Acquisition of businesses, net of cash acquired
   
 
(43,529
)
     
 
(28,605
)
     
 
(27,284
)
Additions to property and equipment
   
 
(37,182
)
     
 
(44,451
)
     
 
(44,369
)
Disposals of property and equipment
   
 
5,376
 
     
 
17,506
 
     
 
3,357
 
Net increase in other, non-current assets
   
 
(23,009
)
     
 
(6,892
)
     
 
(33,806
)
Purchases of investments
   
 
(2,686
)
     
 
(4,209
)
     
 
(7,772
)
Proceeds from sales of investments
   
 
8,499
 
     
 
3,023
 
     
 
3,169
 
    
    
    
Net cash used for investing activities
   
 
(92,531
)
     
 
(63,628
)
     
 
(106,705
)
    
    
    
Cash Flows from Financing Activities:
                               
Proceeds from long-term borrowings
   
 
424,892
 
     
 
162,403
 
     
 
103,900
 
Repayments of long-term borrowings
   
 
(542,791
)
     
 
(145,516
)
     
 
(78,244
)
Net change in short-term borrowings
   
 
24,288
 
     
 
235
 
     
 
9,622
 
Proceeds from issuances of common stock
   
 
21,672
 
     
 
18,198
 
     
 
16,006
 
Purchases of common stock for treasury
   
 
(2,003
)
     
 
(9,523
)
     
 
(13,714
)
Other, net
   
 
9,239
 
     
 
6,354
 
     
 
5,277
 
    
    
    
Net cash (used for) provided by investing activities
   
 
(64,703
)
     
 
32,151
 
     
 
42,847
 
    
    
    
Effect of Exchange Rate Changes
   
 
(4,323
)
     
 
(216
)
     
 
(5,077
)
    
    
    
(Decrease) Increase in Cash and Cash Equivalents
   
 
(794
)
     
 
(16,585
)
     
 
12,366
 
Cash and Cash Equivalents at Beginning of Period
   
 
49,263
 
     
 
65,848
 
     
 
53,482
 
    
    
    
Cash and Cash Equivalents at End of Period
   
$
48,469
 
     
$
49,263
 
     
$
65,848
 
    
    
    
 
 
See the accompanying Notes to Consolidated Financial Statements.

F-18

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    Accounting Policies
 
Basis of Presentation
 
The consolidated financial statements include the accounts of Jacobs Engineering Group Inc. and its subsidiaries (the “Company”). All significant intercompany accounts and transactions have been eliminated.
 
Description of the Business
 
The Company’s principal business is to provide a broad range of technical, professional, and construction services. Such services include engineering, design, and architectural services; construction and construction management services; operations and maintenance services; and process, scientific, and systems consulting services. The Company provides its services primarily through offices and subsidiaries located in the United States, Canada, Europe, Asia, Mexico and Australia. The Company provides its services under cost-reimbursable, cost-reimbursable with a guaranteed maximum price, and fixed-price contracts. The percentage of revenues realized from each of these types of contracts for each `year ended September 30 was as follows:
 
    
2002
     
2001
     
2000
  
Cost-reimbursable
   
85 
%
   
81 
%
   
77 
%
Fixed-price
   
13
 
   
16
 
   
18
 
Guaranteed maximum price
   
2
 
   
3
 
   
5
 
 
Revenue Accounting for Contracts
 
In general, the Company recognizes revenues at the time services are performed. On cost-reimbursable contracts, revenue is recognized as costs are incurred, and includes applicable fees earned through the date services are provided. On fixed-price contracts, revenues are recorded using the percentage-of-completion method of accounting by relating contract costs incurred to date to total estimated contract costs at completion. Contract costs may include both direct and indirect costs. Contract losses are provided for in their entirety in the period they become known, without regard to the percentage-of-completion. The Company recognizes as revenues costs associated with claims and unapproved change orders to the extent it is probable that such claims and change orders will result in additional contract revenue, and the amount of such additional revenue can be reliably estimated.
 
Some of the Company’s contracts with the U.S. federal government, as well as certain contracts with commercial clients, provide that contract costs (including indirect costs) are subject to audit and adjustment. For all such contracts, revenues have been recorded at the time services were performed based upon those amounts expected to be realized upon completion of the contracts.
 
As is common in the industry, the Company executes certain contracts jointly with third parties through partnerships and joint ventures. For certain of these contracts (i.e., where the Company has an undivided interest in the assets and liabilities of the venture), the Company recognizes its proportionate share of venture revenues, costs and operating profit in its consolidated statements of earnings.
 
When the Company is directly responsible for subcontractor labor, or third-party materials and equipment, the Company reflects the costs of such items in both revenues and costs. On other projects, where the client elects to pay for such items directly and the Company has no associated

F-19

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

responsibility for such items, these amounts are not reflected in either revenues or costs. The amount of such “pass-through” costs included in revenues during fiscal 2002, 2001 and 2000 totaled $1.5 billion, $1.3 billion and $1.4 billion, respectively.
 
Cash Equivalents
 
The Company considers all highly liquid investments with original maturities of less than three months as cash equivalents. Cash equivalents at September 30, 2002 and 2001 consisted primarily of time certificates of deposit.
 
Marketable Securities and Investments
 
The Company’s investments in equity and debt securities are classified as trading securities, held-to-maturity securities or available-for-sale securities. Management determines the appropriate classification of all its investments at the time of purchase and reviews such designations at each balance sheet date.
 
Trading securities are recorded at fair value. Changes in the fair value of trading securities are recognized in earnings in the period in which the change occurs and is included in “Miscellaneous income, net “ in the accompanying consolidated statements of earnings.
 
Held-to-maturity securities and available-for-sale securities are included as long-term investments in “Other Noncurrent Assets” in the accompanying consolidated balance sheets. Held-to-maturity securities are carried at cost, or amortized cost, adjusted for the amortization (accretion) of any related premiums (discounts) over the estimated remaining period until maturity. Marketable equity securities that are not held for trading, and debt securities that are not classified as held-to-maturity, are classified as available-for-sale securities. Securities designated as available-for-sale are recorded at fair value. Changes in the fair value of securities available-for-sale are recorded as unrealized gains or losses, net of the related tax effect in “Accumulated Other Comprehensive (Loss) Income” in the accompanying consolidated statements of changes in stockholders’ equity.
 
Receivables and Billings in Excess of Costs
 
Included in “Receivables” in the accompanying consolidated balance sheets at September 30, 2002 and 2001 were $440.9 million and $420.6 million, respectively, representing amounts earned and reimbursable under contracts in progress at the respective balance sheet dates. These amounts become billable according to the contract terms, which usually consider the passage of time, achievement of certain milestones or completion of the project. Included in these unbilled receivables at September 30, 2002 and 2001 were contract retentions totaling $24.2 million and $6.6 million, respectively. The Company anticipates that substantially all of such unbilled amounts will be billed and collected over the next twelve months.
 
“Billings in excess of costs” represent cash collected from clients on contracts in advance of revenues earned thereon, as well as advanced billings to clients in excess of costs and earnings on uncompleted contracts. The Company anticipates that substantially all such amounts will be earned over the next twelve months.
 
Amounts due from the U.S. federal government included in “Receivables” in the accompanying consolidated balance sheets totaled $141.2 million and $137.4 million at September 30, 2002 and 2001, respectively.
 

F-20

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In accordance with industry practice, the Company includes in “Receivables” claims representing the recovery of costs incurred on contracts to the extent it is probable that such claims will result in additional contract revenue and the amount of such additional revenues can be reliably estimated. Such amounts included in “Receivables” in the accompanying consolidated balance sheets totaled $25.3 million and $10.6 million at September 30, 2002 and 2001, respectively, of which $18.4 million and $7.3 million, respectively, relate to one claim on a project being performed in Europe.
 
Property, Equipment and Improvements
 
Property, equipment and improvements are stated at cost in the accompanying consolidated balance sheets. Depreciation and amortization of property and equipment is computed primarily by using the straight-line method over the estimated useful lives of the assets. The cost of leasehold improvements is amortized using the straight-line method over the lesser of the estimated useful life of the asset or the remaining term of the related lease. Estimated useful lives range from 20 to 40 years for buildings, from 3 to 10 years for equipment and from 4 to 10 years for leasehold improvements.
 
Goodwill
 
Effective October 1, 2001, with the adoption of Statement of Financial Accounting Standards No. 142—Goodwill and Other Intangible Assets (“SFAS 142”), goodwill is no longer amortized, but instead tested for impairment using a fair value approach in accordance with SFAS 142. There was no impairment of goodwill upon adoption of SFAS 142.
 
The Company’s results for prior years have not been restated for SFAS 142. Goodwill amortization on a pre-tax basis was $7.6 million ($4.9 million after-tax) in fiscal 2001, and $6.9 million ($4.4 million after-tax) in fiscal 2000. Had goodwill amortization not been recorded in fiscal 2001 and 2000, net earnings would have been $94.0 million (or $1.73 per diluted share) and $56.0 million (or $1.06 per diluted share), respectively.
 
Earnings Per Share
 
Earnings per share (“EPS”) is calculated in accordance with Statement of Financial Accounting Standards No. 128—Earnings per Share. Basic EPS is computed by dividing net earnings by the weighted average number of shares of common stock outstanding during the period. Diluted EPS gives effect to all dilutive securities that were outstanding during the period. The Company’s dilutive securities consisted solely of nonqualified stock options.
 
Stock-based Compensation
 
The Company accounts for stock issued to employees and outside directors in accordance with APB Opinion No. 25—Accounting for Stock Issued to Employees (“APB 25”). Accordingly, compensation cost is measured based on the excess, if any, of the market price of the Company’s common stock over the exercise price of a stock option, determined on the date the option is granted. With respect to the issuance of restricted stock, unearned compensation expense equivalent to the market value of the stock issued on the date of award is charged to stockholders’ equity and subsequently amortized against earnings over the periods during which the restrictions lapse. During fiscal years 2002, 2001 and 2000, the Company recognized compensation expense on restricted stock of $0.7 million, $0.5 million and $0.5 million, respectively.
 

F-21

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Concentrations of Credit Risk, Uncertainties and Use of Estimates
 
The Company’s cash balances and short-term investments are maintained in accounts held by major banks and financial institutions located primarily in the United States, Europe, Canada and Asia. In the normal course of its business and consistent with industry practices, the Company grants credit to its clients without requiring collateral. Concentrations of credit risk is the risk that, if the Company extends a significant portion of its credit to clients in a specific geographic area or industry, the Company may experience disproportionately high levels of default, if those clients are adversely affected by factors particular to their geographic area or industry. Concentrations of credit risk relative to trade receivables are limited due to the Company’s diverse client base, which includes the U.S. federal government and multi-national corporations operating in a broad range of industries and geographic areas. Additionally, in order to mitigate credit risk, the Company continually evaluates the credit worthiness of its major commercial clients.
 
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates of the balance sheets and revenues and expenses for the periods covered. The more significant estimates affecting amounts reported in the consolidated financial statements relate to revenues under long-term construction contracts and self-insurance accruals. Actual results could differ significantly from those estimates and assumptions.
 
2.    Stock Split
 
On February 12, 2002, the Company’s Board of Directors approved a two-for-one stock split. The stock split was distributed on April 1, 2002 in the form of a 100% stock dividend to stockholders of record on March 1, 2002.
 
The stock split resulted in the issuance of 27.1 million shares of common stock. Par value of the common stock is unchanged at $1 per share and accordingly, $27.1 million was transferred from additional paid-in capital to common stock on April 1, 2002.
 
The effect of the stock split has been recognized retroactively. Accordingly, all references in the financial statements to price per share and stock option plan data have been restated to reflect the stock split.
 
3.    Earnings Per Share
 
The following table reconciles the denominator used to compute basic EPS to the denominator used to compute diluted EPS for each year ended September 30 (in thousands):
 
    
2002
   
2001
   
2000
Weighted average shares outstanding (denominator used to compute Basic EPS)
   
54,136
   
53,230
   
52,358
Effect of employee and outside director stock options
   
1,260
   
1,266
   
589
    
  
  
Denominator used to compute Diluted EPS
   
55,396
   
54,496
   
52,947
    
  
  

F-22

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
4.    Business Combinations
 
On October 31, 2001, the Company completed the acquisition of McDermott Engineers & Constructors (Canada) Limited (including Delta Catalytic and Delta Hudson Engineering) (collectively, “Delta”). At that date, Delta had $67.2 million in total assets (including $63.8 million in current assets) and $56.8 million in total liabilities (substantially all of which were current liabilities). The primary purpose for acquiring Delta was to expand the Company’s business in North America in several markets, including upstream oil and gas, petroleum refining, petrochemicals, chemicals and energy. Delta has approximately 3,500 employees, providing engineering, construction, and maintenance services to clients in these industries. The total cash purchase price was $47.5 million, and was determined through negotiations with Delta’s owner, McDermott International, Inc. The purchase price was financed with a new, short-term $50.0 million credit facility. The Delta acquisition was accounted for as a purchase. Accordingly, the Company’s consolidated results of operations include those of Delta from the date of acquisition. The purchase price has been allocated to the assets and liabilities acquired based on their estimated fair values. The purchase price allocation resulted in goodwill, net of related tax benefits, of approximately $51.5 million.
 
On May 3, 2001, the Company completed the purchase from LawGibb Group Inc. of substantially all of its international engineering and construction management businesses (the “GIBB” businesses). GIBB is a leading international engineering consultancy firm, providing technical, professional services in the fields of transportation, civil and structural engineering, water and wastewater, environmental and geotechnical services, infrastructure, building and building services, information technology, defense, finance and commerce. GIBB has approximately 900 employees conducting operations located primarily in the United Kingdom, southern Africa, and certain other countries located primarily in Europe. The total purchase price of $34.5 million in cash was financed with a combination of internal funds and borrowings made under the Company’s $230.0 million revolving credit facility. The GIBB transaction was accounted for as a purchase. Accordingly, the Company’s consolidated results of operations include the results of GIBB’s operations since the date of acquisition. The purchase price has been allocated to the assets and liabilities acquired based on their estimated fair values. The purchase price allocation resulted in goodwill, net of related tax benefits, of approximately $31.3 million.
 
On February 23, 2001, the Company finalized the second phase of a two-part transaction to acquire from Stork N.V., the Netherlands (“Stork N.V.”) the balance of its engineering and contracting businesses (“Stork Phase II”). This second phase involved the remainder of Stork N.V.’s engineering and construction operations in the Netherlands and the Middle East. These offices employ approximately 500 technical, professional staff. The second phase of the transaction was accounted for as a purchase. Accordingly, the Company’s consolidated results of operations include the operating results of Stork Phase II since the date of acquisition. The purchase price for Stork Phase II has been allocated to the assets and liabilities acquired based on their estimated fair values. The purchase price allocation resulted in goodwill, net of related tax benefits, of approximately $29.9 million.
 
During the second quarter of fiscal 2000, the Company completed the first phase of the Stork transaction. The first phase included Stork N.V.’s operations in Belgium, Germany, Southeast Asia and certain locations in the Netherlands. These offices employ approximately 1,500 technical, professional staff. The purchase price of EUR 25.0 million (approximately $24.2 million) was financed in part by long-term borrowings of EUR 15.0 million (approximately $14.8 million) under the Company’s $230.0 million revolving credit facility. The transaction was accounted for as a purchase. Accordingly, the purchase price has been allocated to the assets and liabilities acquired based on their estimated fair

F-23

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

values. The purchase price allocation resulted in goodwill, net of related tax benefits, of approximately $29.0 million.
 
In January 1999, the Company completed its Agreement and Plan of Merger with Sverdrup Corporation (“Sverdrup”). In accordance with the merger agreement, each outstanding share of common stock of Sverdrup was converted into the right to receive (i) a proportional share of the total amount of initial merger consideration of $198.0 million paid at closing; and, (ii) a proportional amount of any additional merger consideration payable after each of the first three anniversaries of the date of the merger (“Deferred Merger Consideration”). The final amount payable as Deferred Merger Consideration of $11.1 million was paid during fiscal 2002.
 
5.    Investments
 
At September 30, 2002, the Company had available-for-sale securities of $5.4 million included in “Other Noncurrent Assets” in the accompanying consolidated balance sheet, for which a net unrealized loss of $1.8 million was recorded in stockholders’ equity during fiscal 2002. At September 30, 2001, the Company had available-for-sale securities of $10.2 million, for which a net unrealized gain of $0.2 million was recorded in stockholders’ equity during fiscal 2001.
 
The following table summarizes certain information regarding the Company’s available-for-sale equity securities at September 30, 2002 and 2001, and for each year ended September 30 (in thousands):
 
    
2002
   
2001
Total cost (specific identification method)
   
$
2,318
   
$
4,297
Gross unrealized gains
   
$
3,032
   
$
5,883
Estimated fair value
   
$
5,350
   
$
10,180
Gross realized gains
   
$
3,435
   
$
2,847
Gross proceeds from sales
   
$
5,414
   
$
3,023
 
6.    Property, Equipment and Improvements, Net
 
Property, equipment and improvements, net, consisted of the following at September 30, 2002 and 2001 (in thousands):
 
    
2002
     
2001
  
Land
   
$
7,903
 
   
$
7,106
 
Buildings
   
 
54,010
 
   
 
51,725
 
Equipment
   
 
239,159
 
   
 
231,322
 
Leasehold improvements
   
 
27,987
 
   
 
16,126
 
Construction in progress
   
 
2,990
 
   
 
16,290
 
    
  
    
 
332,049
 
   
 
322,569
 
Accumulated depreciation and amortization
   
 
(182,144
)
   
 
(172,590
)
    
  
    
$
149,905
 
   
$
149,979
 
    
  

F-24

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
Operating expenses include provisions for depreciation and amortization of $35.1 million, $31.4 million and $33.2 million for fiscal 2002, 2001 and 2000, respectively.
 
7.    Borrowings
 
Short-term Credit Arrangements
 
At September 30, 2002, the Company had approximately $46.2 million available through multiple bank lines of credit, under which the Company may borrow on an overdraft or short-term basis. Interest under these lines is determined at the time of borrowing based on the banks’ prime or base rates, rates paid on certificates of deposit, the banks’ actual costs of funds or other variable rates. Most of the agreements require the payment of a fee based on the amount of the facility. The Company is also required to maintain certain minimum levels of working capital and net worth.
 
Other information regarding the lines of credit for each year ended September 30 follows (dollars in thousands):
 
    
2002
       
2001
       
2000
  
Amount outstanding at year end
   
$
5,962
 
     
$
19,688
 
     
$
18,077
 
Weighted average interest rate at year end
   
 
5.40
%
     
 
5.19
%
     
 
8.80
%
Weighted average borrowings outstanding during the year
   
$
6,699
 
     
$
5,748
 
     
$
7,952
 
Weighted average interest rate during the year
   
 
5.99
%
     
 
6.90
%
     
 
6.77
%
Maximum amount outstanding during the year
   
$
13,798
 
     
$
19,688
 
     
$
30,955
 
 
Long-term Debt and Credit Arrangements
 
Long-term debt consisted of the following at September 30 (in thousands):
 
    
2002
   
2001
Borrowings under long-term, revolving credit agreements:
              
$230.0 million agreement
   
$
57,632
   
$
164,308
$45.0 million agreement
   
 
28,100
   
 
—  
    
  
    
$
85,732
   
$
164,308
    
  
 
In October 2001, the Company financed the Delta acquisition with a new, short-term $50.0 million credit facility (See Note 4., above). In May 2002, this short-term facility was converted into a long-term, $40.0 million facility. In September 2002, the commitment was increased to $45.0 million.
 
The Company’s $230.0 million and $45.0 million long-term, revolving credit agreements expire in January 2004. Borrowings under these agreements are unsecured, and bear interest at either fixed rates offered by the banks at the time of borrowing, or at variable rates based on the agent bank’s base rate, LIBOR or the latest federal funds rate. During fiscal 2002 and 2001, the weighted average interest rates on these borrowings were 3.35% and 6.02%, respectively. The agreements require the Company to maintain certain minimum levels of net worth, a minimum coverage ratio of certain fixed charges, and a minimum leverage ratio of earnings before interest, taxes, depreciation and amortization to funded debt (all as defined in the agreements). The agreements also restrict the payment of cash dividends and require the Company to pay a facility fee based on the total amount of the commitments.

F-25

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
Interest payments made during fiscal 2002, 2001 and 2000 totaled $6.2 million, $11.1 million and $11.8 million, respectively.
 
8.    Pension Plans
 
Company-only Sponsored Plans
 
The Company sponsors various pension plans covering employees of certain U.S. domestic and international subsidiaries. There are two pension plans in the United States, both of which were acquired by the Company in connection with the 1999 merger with Sverdrup Corporation. One of the Sverdrup pension plans covers certain employees assigned to a particular operating contract with the U.S. government; it is the intention of the parties to the contract that the cost of this plan be fully reimbursed by the U.S. government in accordance with applicable cost accounting standards. The second Sverdrup pension plan was frozen in 1999, allowing no new participants to enter.
 
The pension plans (U.S. and international) provide pension benefits that are based on the employee’s compensation and years of service. The Company’s funding policy is to fund the actuarially determined accrued benefits, allowing for projected compensation increases using the projected unit method.
 
The following table sets forth the change in the plans’ net benefit obligation for each year ended September 30 (in thousands):
 
    
2002
     
2001
  
Net benefit obligation at the beginning of the year
   
$
326,964
 
   
$
309,590
 
Service cost
   
 
10,298
 
   
 
10,216
 
Interest cost
   
 
23,507
 
   
 
22,527
 
Participants’ contributions
   
 
3,162
 
   
 
2,903
 
Actuarial losses
   
 
15,931
 
   
 
5,083
 
Benefits paid
   
 
(31,818
)
   
 
(22,712
)
Effect of plan amendments
   
 
—  
 
   
 
(1,050
)
Effect of exchange rate changes
   
 
6,841
 
   
 
407
 
    
  
Net benefit obligation at the end of the year
   
$
354,885
 
   
$
326,964
 
    
  
 
The following table sets forth the change in the fair value of the plans’ assets for each year ended September 30 (in thousands):
 
    
2002
     
2001
  
Fair value of plan assets at the beginning of the year
   
$
303,503
 
   
$
324,707
 
Actual return on plan assets
   
 
(8,254
)
   
 
(9,291
)
Employer contributions
   
 
11,219
 
   
 
11,162
 
Participants’ contributions
   
 
3,162
 
   
 
2,903
 
Gross benefits paid
   
 
(31,818
)
   
 
(22,712
)
Client note payment
   
 
(1,236
)
   
 
(2,961
)
Effect of exchange rate changes
   
 
5,852
 
   
 
(332
)
Other
   
 
(451
)
   
 
27
 
    
  
Fair value of plan assets at the end of the year
   
$
281,977
 
   
$
303,503
 
    
  

F-26

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
The following table reconciles the funded status of the plans, as well as amounts recognized and not recognized in the accompanying consolidated balance sheets at September 30, 2002 and 2001 (in thousands):
 
    
2002
     
2001
  
Funded status at the end of the year
   
$
(72,908
)
   
$
(23,461
)
Unrecognized actuarial losses
   
 
86,170
 
   
 
37,987
 
Additional minimum liability
   
 
(47,904
)
   
 
—  
 
Effect of exchange rate changes
   
 
1,502
 
   
 
199
 
Other
   
 
(307
)
   
 
(10
)
    
  
Net amount recognized at the end of the year
   
$
(33,447
)
   
$
14,715
 
    
  
 
Amounts recognized in the accompanying consolidated balance sheets at September 30, 2002 and 2001 consisted of the following (in thousands):
 
    
2002
     
2001
  
Prepaid pension asset
   
$
15,993
 
   
$
16,377
 
Additional minimum liability
   
 
(47,904
)
   
 
—  
 
Accrued benefit liability
   
 
(1,536
)
   
 
(1,662
)
    
  
Net benefit obligation at the end of the year
   
$
(33,447
)
   
$
14,715
 
    
  
 
At September 30, 2002, all three of the Company’s pension plans are in a net, under-funded status by $72.9 million. At September 30, 2001, two of the pension plans were under-funded by a total of $23.6 million (the aggregate fair value of plan assets and net benefit obligations of these plans were approximately $197.3 million and $220.9 million, respectively).
 
Included in “Other Noncurrent Assets” in the accompanying consolidated balance sheets at September 30, 2002 and 2001 is approximately $9.9 million and $11.4 million, respectively, representing the accumulated excess funding of benefits over the amounts reimbursed by the U.S. government in connection with an operating contract.
 
The components of net periodic pension cost included in the accompanying consolidated statements of earnings for each year ended September 30 were as follows (in thousands):
 
    
2002
     
2001
     
2000
  
Service cost
   
$
10,298
 
   
$
10,216
 
   
$
10,530
 
Interest cost
   
 
23,507
 
   
 
22,527
 
   
 
22,902
 
Expected return on plan assets
   
 
(27,997
)
   
 
(28,233
)
   
 
(28,978
)
Other
   
 
22
 
   
 
—  
 
   
 
9
 
    
  
  
Net pension cost, before settlement charge
   
 
5,830
 
   
 
4,510
 
   
 
4,463
 
Settlement charge
   
 
4,560
 
   
 
—  
 
   
 
—  
 
    
  
  
Total, net periodic pension cost
   
$
10,390
 
   
$
4,510
 
   
$
4,463
 
    
  
  
 
Included in other comprehensive income for fiscal 2002 is an after-tax charge of $31.2 million relating to an additional minimum liability for the pension plans. In general, Statement of Financial Accounting Standards No. 87—Employers’ Accounting for Pensions requires companies to record a liability in the amount by which a pension plan’s accumulated benefit obligation exceeds the fair value of its assets. This non-cash charge to stockholders’ equity will be reviewed next year in connection with the annual actuarial valuation of the pension plans and is subject to adjustment at that time.

F-27

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
The significant actuarial assumptions used in determining the funded status of the plans for each year ended September 30 were as follows:
 
    
2002
   
2001
   
2000
Weighted average discount rates
   
6.3% to 7.5%
   
6.5% to 7.8%
   
6.1% to 7.8%
Rates of compensation increases
   
3.5% to 4.3%
   
4.0% to 4.5%
   
4.0% to 4.5%
Expected rates of return on plan assets
   
8.0% to 9.5%
   
8.0% to 9.5%
   
7.3% to 9.5%
 
In connection with the acquisition of the Stork group of companies (see Note 4, above), the Company is obligated to form a pension plan and an early-retirement plan (“VUT”) for substantially all of its employees located in the Netherlands. These plans will replace existing programs sponsored by Stork N.V. When the replacement plans are formed, the Company will negotiate with both Stork N.V. and the trustees of the existing multi-employer plans to set a value of the assets to be transferred into the replacement plans. Although the Company has not finalized the design of the replacement pension and VUT plans and thus has not commenced negotiations of the value of the assets to be transferred into the replacement plans, the Company expects that the value of the assets to be transferred will be less than the value of the assumed benefit obligations. Included in “Other Deferred Liabilities” in the accompanying consolidated balance sheet at September 30, 2002 is approximately $35.0 million relating to the replacement pension and VUT plans.
 
Multiemployer Plans
 
In the United States, the Company contributes to various trusteed pension plans covering hourly construction employees under industry-wide agreements. In selected operations in the Netherlands and the U.K., the Company contributes to multi-employer plans covering both hourly and certain salaried employees. Contributions are based on the hours worked by employees covered under these agreements and are charged to direct costs of contracts on a current basis. Information from the plans’ administrators is not available to permit the Company to determine its share of unfunded benefits, if any. Company contributions to these plans totaled $12.1 million, $7.9 million and $5.7 million for each of the three years ended September 30, 2002, 2001 and 2000, respectively.
 
9.    Savings and Deferred Compensation Plans
 
Savings Plans
 
The Company maintains savings plans for substantially all of its domestic, nonunion employees, which allow participants to make contributions by salary deduction pursuant to section 401(k) of the Internal Revenue Code. The Company’s contributions to these plans totaled $21.8 million, $20.8 million and $19.6 million, for fiscal 2002, 2001 and 2000, respectively. Company contributions are voluntary for most of the savings plans, and represent a partial matching of employee contributions.
 
Deferred Compensation Plans
 
The Company’s Executive Security Plan (“ESP”) and Executive Deferral Plans (“EDP”) are nonqualified deferred compensation programs that provide benefits payable to directors, officers and certain key employees or their designated beneficiaries at specified future dates, upon retirement, or death. Benefit payments under both plans are funded by a combination of contributions from participants and the Company, and most of the participants are covered by life insurance policies with the Company designated as the beneficiary. Amounts charged to expense relating to these programs for each of the three years ended September 30, 2002, 2001 and 2000 were $2.8 million, $2.6 million and $5.7 million, respectively.

F-28

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
10.    Stock Purchase and Stock Option Plans
 
Broad-based, Employee Stock Purchase Plans
 
The Company sponsors two broad-based, employee stock purchase plans: the Jacobs Engineering Group Inc. 1989 Employee Stock Purchase Plan (the “1989 ESPP”) and the Jacobs Engineering Group Inc. Global Employee Stock Purchase Plan (the “GESPP”). Both plans provide for the granting of options to participating employees to purchase shares of the Company’s common stock. The purchase price for the stock varies by plan. Under the 1989 ESPP, the purchase price is generally the lower of (i) 90% of the common stock’s closing market price on the first day of the option period, or (ii) 90% of the common stock’s closing market price on the last day of the option period. Under the GESPP, the purchase price varies by sub-plan (there being one sub-plan for each foreign country where a participating subsidiary is domiciled), but may not be less than the lower of (i) 90% of the common stock’s closing market price on the first day of the option period, or (ii) 90% of the common stock’s closing market price on the last day of the option period. Under both the 1989 ESPP and GESPP, option periods are six months in duration, running from September 1 to February 28 or 29, and from March 1 to August 31.
 
A summary of shares issued under the 1989 ESPP and the GESPP during each year ended September 30 follows:
 
    
2002
   
2001
   
2000
Aggregate Purchase Price Paid for Shares Sold:
                     
Under the 1989 ESPP
   
$
17,571,800
   
$
13,538,734
   
$
12,685,179
Under the GESPP
   
 
592,531
   
 
—  
   
 
—  
    
  
  
Total
   
$
18,164,331
   
$
13,538,734
   
$
12,685,179
    
  
  
Aggregate Number of Shares Sold:
                     
Under the 1989 ESPP
   
 
628,669
   
 
654,404
   
 
998,064
Under the GESPP
   
 
20,173
   
 
—  
   
 
—  
    
  
  
Total
   
 
648,842
   
 
654,404
   
 
998,064
    
  
  
 
Both the 1989 ESPP and the GESPP have been approved by the Company’s stockholders. At September 30, 2002, there were 2,734,617 shares reserved for issuance under the 1989 ESPP, and there were 579,827 shares reserved for issuance under the GESPP.
 
Stock Option Plans
 
In February 2000, the Company’s stockholders approved the 1999 Stock Incentive Plan and the 1999 Outside Director Stock Plan (the “1999 Plans”). The 1999 Plans replaced the Company’s 1981 Executive Incentive Plan (the “1981 Plan”), which would have expired on March 1, 2001. Effective February 14, 2000, the Company’s Board of Directors resolved that no further incentive awards would be made under the 1981 Plan.
 
The 1999 Stock Incentive Plan authorizes the issuance of incentive stock options, nonqualified stock options and restricted stock to employees to acquire up to an aggregate of 4,000,000 shares of the Company’s common stock. The total number of shares of restricted stock that can be awarded under the 1999 Stock Incentive Plan is limited to 10% (or 400,000 shares) of the total number of shares authorized, and any forfeited shares of restricted stock awarded is available again for issuance as restricted stock.

F-29

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
The 1999 Outside Director Stock Plan reserves 400,000 shares of the Company’s common stock for grants of nonqualified stock options and awards of stock and restricted stock to nonemployee directors.
 
At September 30, 2002, there were 4,074,851 shares of common stock reserved for issuance under the 1999 Plans (3,693,851 shares of common stock reserved for issuance under the 1999 Stock Incentive Plan, and 381,000 shares of common stock reserved for issuance under the 1999 Outside Director Stock Plan).
 
The following is a summary of the stock option activity under the 1981 Plan and the 1999 Plans (collectively, the “Stock Option Plans”) for each year ended September 30:
 
    
Number
of
Options
     
Weighted
Average
Exercise
Price
Outstanding at September 30, 1999
   
5,000,462
 
   
$
13.67
Granted
   
1,120,500
 
   
$
16.51
Exercised
   
(802,562
)
   
$
12.18
Cancelled or expired
   
(231,200
)
   
$
14.44
    
      
Outstanding at September 30, 2000
   
5,087,200
 
   
$
14.50
Granted
   
1,344,000
 
   
$
29.84
Exercised
   
(1,216,336
)
   
$
12.17
Cancelled or expired
   
(213,750
)
   
$
16.04
    
      
Outstanding at September 30, 2001
   
5,001,114
 
   
$
19.10
Granted
   
842,000
 
   
$
36.50
Exercised
   
(846,503
)
   
$
14.49
Cancelled or expired
   
(56,900
)
   
$
16.84
    
      
Outstanding at September 30, 2002
   
4,939,711
 
   
$
22.88
    
      
 
Options outstanding at September 30, 2002 consisted entirely of nonqualified stock options. Included in the number of options outstanding at September 30, 2002 are options to purchase 1,943,110 shares of common stock granted under the defunct 1981 Plan.
 
Certain other information regarding the Company’s stock options follows:
 
    
2002
   
2001
   
2000
At September 30:
               
Range of exercise prices for options outstanding
   
$9.79–$39.19
   
$9.56–$32.88
   
$8.66–$19.66
Number of options exercisable
   
2,049,661
   
1,749,238
   
2,001,600
Number of options available for future grants
   
1,078,250
   
1,931,750
   
3,331,500
For the fiscal year ended September 30:
               
Range of prices relating to options exercised
   
$9.57–$32.88
   
$8.66–$18.68
   
$8.29–$15.46
Estimated weighted average fair values of options granted
   
$17.18
   
$15.21
   
$7.68

F-30

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
The following table presents information regarding options outstanding, and options exercisable at September 30, 2002:
 
    
Options Outstanding
   
Options Exercisable
Range of Exercise Prices
   
Number
     
Weighted
Average
Remaining
Contractual
Life
(years)
   
Weighted
Average
Price
   
Number
   
Weighted
Average
Exercise
Price
$9.79–$11.35
   
199,510
     
4.2
   
$
10.48
   
187,110
   
$
10.46
$11.85–$15.52
   
959,900
     
5.3
   
$
13.71
   
724,700
   
$
13.51
$15.78–$19.13
   
1,725,241
     
7.0
   
$
17.19
   
842,791
   
$
17.12
$19.66–$23.30
   
126,560
     
8.3
   
$
22.60
   
28,310
   
$
22.39
$25.44–$27.21
   
24,000
     
9.1
   
$
26.81
   
3,000
   
$
26.73
$27.52–$31.27
   
319,000
     
8.7
   
$
28.06
   
52,750
   
$
27.73
$31.40–$34.78
   
1,003,500
     
8.9
   
$
32.74
   
211,000
   
$
32.88
$38.16–$39.19
   
582,000
     
9.6
   
$
39.18
   
—  
   
$
—  
    
    
  
  
  
    
4,939,711
     
7.4
   
$
22.88
   
2,049,661
   
$
17.22
    
    
  
  
  
 
The Stock Option Plans allow participants to satisfy the exercise price by tendering shares of the Company’s common stock that have been owned by the participants for at least six months. Shares so tendered are retired and canceled by the Company and are shown as repurchases of common stock in the accompanying consolidated statements of stockholders’ equity.
 
During the years ended September 30, 2002, 2001 and 2000, the Company issued 27,000, 96,000 and 10,000 shares, respectively, of restricted stock under the Stock Option Plans. The restrictions generally relate to the recipient’s ability to sell or otherwise transfer the stock. There are also restrictions that subject the stock to forfeiture back to the Company until earned by the recipient through continued employment or service.
 
Pro Forma Disclosures
 
As discussed in Note 1, the Company accounts for stock issued to employees and outside directors in accordance with APB 25. Statement of Financial Accounting Standards No. 123—Accounting for Stock-Based Compensation (“SFAS 123”) prescribes an optional, fair-value based method of accounting for stock issued to employees and others. Had the Company determined compensation cost under SFAS 123, the Company’s net earnings and earnings per share for each year ended September 30 would have been reduced to the pro forma amounts as follows (in thousands, except per share data):
 
    
2002
   
2001
   
2000
Net earnings:
                     
As reported
   
$
109,690
   
$
87,760
   
$
50,981
Pro forma
   
$
97,475
   
$
75,876
   
$
42,355
Earnings per share:
                     
Basic:
                     
As reported
   
$
2.03
   
$
1.65
   
$
0.97
Pro forma
   
$
1.80
   
$
1.43
   
$
0.81
Diluted:
                     
As reported
   
$
1.98
   
$
1.61
   
$
0.96
Pro forma
   
$
1.76
   
$
1.39
   
$
0.80

F-31

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
The fair value of each option is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions:
 
    
2002
     
2001
     
2000
  
Dividend yield
   
0
%
   
0
%
   
0
%
Expected volatility
   
37.46
%
   
39.72
%
   
27.62
%
Risk-free interest rates
   
4.67
%
   
4.29
%
   
6.70
%
Expected life of options (in years)
   
6.26
 
   
6.63
 
   
6.85
 
 
The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. Like all option-pricing models, the Black-Scholes model requires the use of highly subjective assumptions including the expected volatility of the underlying stock price. Since the Company’s stock options possess characteristics significantly different from those of traded options, changes in the subjective input assumptions can materially affect the fair value estimates of the Company’s options. The Company believes that existing models do not necessarily provide a reliable single measure of the fair value of its stock options.
 
The effects of applying SFAS 123 for these pro forma disclosures are not likely to be representative of the effects on reported earnings for future years as options vest over several years and additional awards are generally made each year.
 
11.    Income Taxes
 
The following is a summary of the Company’s consolidated income tax expense for each year ended September 30 (in thousands):
 
    
2002
   
2001
     
2000
  
Current taxes:
                         
Federal
   
$
33,669
   
$
31,882
 
   
$
14,980
 
State
   
 
7,810
   
 
6,570
 
   
 
4,707
 
Foreign
   
 
10,089
   
 
5,519
 
   
 
4,810
 
    
  
  
Total current tax expense
   
 
51,568
   
 
43,971
 
   
 
24,497
 
    
  
  
Deferred taxes:
                         
Federal
   
 
7,452
   
 
6,707
 
   
 
6,948
 
State
   
 
44
   
 
(232
)
   
 
(1,104
)
    
  
  
Total deferred tax expense
   
 
7,496
   
 
6,475
 
   
 
5,844
 
    
  
  
Consolidated income tax expense
   
$
59,064
   
$
50,446
 
   
$
30,341
 
    
  
  
 

F-32

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Deferred taxes reflect the tax effects of differences between the amounts recorded as assets and liabilities for financial reporting purposes and the amounts recorded for income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The components of the Company’s net deferred tax asset at September 30, 2002 and 2001 were as follows (in thousands):
 
    
2002
     
2001
  
Deferred tax assets:
                  
Liabilities relating to employee benefit plans
   
$
45,810
 
   
$
41,420
 
Contract revenues and costs
   
 
20,304
 
   
 
26,483
 
Defined benefit pension plans
   
 
16,677
 
   
 
—  
 
Liabilities relating to self-insurance programs
   
 
16,161
 
   
 
16,798
 
Settlement of pension obligations
   
 
7,330
 
   
 
7,649
 
Foreign deferred taxes
   
 
6,274
 
   
 
—  
 
Accrual for office consolidations
   
 
—  
 
   
 
682
 
    
  
Gross deferred tax assets
   
 
112,556
 
   
 
93,032
 
    
  
Deferred tax liabilities:
                  
Depreciation and amortization
   
 
(11,292
)
   
 
(5,680
)
Unremitted foreign earnings
   
 
(4,366
)
   
 
(5,521
)
State income and franchise taxes
   
 
(1,986
)
   
 
(2,251
)
Unrealized gains on available-for-sale securities
   
 
(1,130
)
   
 
(2,198
)
Foreign deferred taxes
   
 
—  
 
   
 
(1,545
)
Other, net
   
 
(36
)
   
 
(1,221
)
    
  
Gross deferred tax liabilities
   
 
(18,810
)
   
 
(18,416
)
    
  
Net deferred tax assets
   
$
93,746
 
   
$
74,616
 
    
  
 
Included in the change in “Income taxes payable” in the accompanying consolidated statements of cash flows for fiscal 2002, 2001 and 2000 are income tax benefits of $6.1 million, $7.3 million and $1.4 million, respectively, realized by the Company upon the exercises of nonqualified stock options.
 
The reconciliation from the statutory federal income tax expense to the consolidated effective income tax expense for each year ended September 30 follows (dollars in thousands):
 
    
2002
     
2001
     
2000
  
Statutory amount
   
$
59,064
 
   
$
48,372
 
   
$
28,463
 
State taxes, net of the federal benefit
   
 
5,105
 
   
 
4,119
 
   
 
2,341
 
Other, net
   
 
(5,105
)
   
 
(2,045
)
   
 
(463
)
    
  
  
    
$
59,064
 
   
$
50,446
 
   
$
30,341
 
    
  
  
Rates used to compute statutory amount
   
 
35.0
%
   
 
35.0
%
   
 
35.0
%
    
  
  
Consolidated effective income tax rates
   
 
35.0
%
   
 
36.5
%
   
 
37.3
%
    
  
  

F-33

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
During fiscal 2002, 2001 and 2000, the Company paid approximately $41.1 million, $29.6 million and $19.5 million, respectively, in income taxes.
 
Consolidated earnings before taxes consisted of the following for each year ended September 30 (in thousands):
 
    
2002
   
2001
   
2000
United States earnings
   
$
130,927
   
$
103,419
   
$
64,125
Foreign earnings
   
 
37,827
   
 
34,787
   
 
17,197
    
  
  
    
$
168,754
   
$
138,206
   
$
81,322
    
  
  
 
United States income taxes, net of applicable credits, have been provided on the undistributed earnings of foreign subsidiaries, except in those instances where the earnings are expected to be permanently reinvested. At September 30, 2002, $7.8 million of such undistributed earnings was expected to be permanently reinvested. Should these earnings be repatriated, approximately $2.1 million of income taxes would be payable.
 
12.    Commitments and Contingencies
 
 
The Company leases certain of its facilities and equipment under operating leases with net aggregate future lease payments of approximately $268.4 million at September 30, 2002 payable as follows (in thousands):
 
Year ending September 30,
         
2003
   
$
56,975
 
2004
   
 
50,583
 
2005
   
 
43,261
 
2006
   
 
36,998
 
2007
   
 
31,121
 
Thereafter
   
 
89,769
 
    
    
 
308,707
 
Amounts representing sublease income
   
 
(40,275
)
    
    
$
268,432
 
    
 
Rent expense for fiscal years 2002, 2001 and 2000 amounted to $65.2 million, $57.5 million and $54.8 million, respectively, and was offset by sublease income of approximately $3.4 million, $3.9 million and $3.6 million, respectively.
 
Included in the lease payout table above are the amounts due under the Company's lease agreement for its offices in Houston, Texas. This agreement constitutes a “synthetic lease” whereby an unrelated entity owns the real property that is the subject of the lease. Under accounting principles generally accepted in the United States, the Houston lease is properly accounted for as an operating lease relating to real property with a depreciated value to the owner of approximately $45.4 million at September 30, 2002 (and associated debt of approximately $49.0 million). The lease agreement gives the Company the option to purchase the property at the end of the lease term in 2011 for $49.0 million. Under the terms of the lease agreement, the Company may request an extension to the lease term, or it may assist the owner in selling the property to a third party. The proceeds from any third-party sale would be used to reduce the Company's end-of-term return payment obligation of $35.3 million.

F-34

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
Letters of credit outstanding at September 30, 2002 totaled $69.1 million.
 
The Company maintains insurance coverage for various aspects of its business and operations. The Company has elected, however, to retain a portion of losses that occur through the use of various deductibles, limits and retentions under its insurance programs. This situation may subject the Company to some future liability for which it is only partially insured, or completely uninsured. The Company intends to mitigate any such future liability by continuing to exercise prudent business judgment in negotiating the terms and conditions of its contracts.
 
In the normal course of business, the Company is subject to certain contractual guarantees and litigation. Generally, such guarantees relate to project schedules and plant performance. Most of the litigation involves the Company as a defendant in workers’ compensation, personal injury and other similar lawsuits. In addition, as a contractor for many agencies of the United States Government, the Company is subject to many levels of audits, investigations and claims by, or on behalf of, the Government with respect to its contract performance, pricing, costs, cost allocations and procurement practices. Management believes, after consultation with counsel, that such guarantees, litigation, and United States Government contract-related audits, investigations and claims should not have any material adverse effect on the Company’s consolidated financial statements.
 
Included in “Other Expense” in the accompanying consolidated statement of earnings for fiscal 2000 is a $38.0 million charge relating to a negotiated settlement of a lawsuit between the Company and the U.S. federal government, which was originally filed against the Company by a former employee under the False Claims Act. The subject of the lawsuit was the accounting treatment of the occupancy costs associated with the Company’s former headquarters building, which the Company sold and leased back in 1982, and then permanently vacated in 1997. The charge, which has no continuing impact on the Company’s operating results, consisted of the settlement amount of $35.0 million (which was paid in March 2000) and $3.0 million of related costs and expenses.
 
13.    Common and Preferred Stock
 
The Company is authorized to issue two classes of capital stock: common stock and preferred stock (each has a par value of $1.00 per share). The preferred stock may be issued in one or more series. The number of shares to be included in a series, as well as each series’ designation, relative powers, dividend and other preferences, rights and qualifications, redemption provisions and restrictions are to be fixed by the Company’s Board of Directors at the time each series is issued. Except as may be provided by the Board of Directors in a preferred stock designation, or otherwise provided for by statute, the holders of the Company’s common stock have the exclusive right to vote for the election of Directors and all other matters requiring stockholder action. The holders of the Company’s common stock are entitled to dividends if and when declared by the Board of Directors from whatever assets are legally available for that purpose.
 
Pursuant to the Company’s Amended and Restated Rights Agreement dated December 20, 2000, each outstanding share of common stock has attached to it one stock purchase right (a “Right”). Each Right entitles the common stockholder to purchase, in certain circumstances generally relating to a change in control of the Company, one one-hundredth of a share of the Company’s Series A Junior Participating Cumulative Preferred Stock, par value $1.00 per share (the “Series A Preferred Stock”) at the exercise price of $87.50 per share, subject to adjustment. Alternatively, the Right holder may purchase common stock of the Company having a market value equal to two times the exercise price,

F-35

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

or may purchase shares of common stock of the acquiring corporation having a market value equal to two times the exercise price.
 
The Series A Preferred Stock confers to its holders rights as to dividends, voting and liquidation which are in preference to common stockholders. The Rights are nonvoting, are not presently exercisable and currently trade in tandem with the common shares. In accordance with the Rights Plan, the Company may redeem the Rights at $0.01 per Right. The Rights will expire on December 20, 2010, unless earlier exchanged or redeemed.
 
14.    Other Financial Information
 
Other noncurrent assets consisted of the following at September 30, 2002 and 2001 (in thousands):
 
    
2002
   
2001
Cash surrender value of life insurance policies
   
$
44,083
   
$
42,800
Deferred tax asset
   
 
43,195
   
 
18,054
Investments
   
 
27,691
   
 
31,801
Prepaid pension costs
   
 
15,993
   
 
16,377
Notes receivable
   
 
10,483
   
 
9,764
Reimbursable pension costs
   
 
9,928
   
 
11,388
Miscellaneous
   
 
6,850
   
 
13,054
    
  
    
$
158,223
   
$
143,238
    
  
 
Accrued liabilities consisted of the following at September 30, 2002 and 2001 (in thousands):
 
    
2002
   
2001
Accrued payroll and related liabilities
   
$
181,016
   
$
150,978
Insurance liabilities
   
 
42,761
   
 
41,439
Project related accruals
   
 
40,460
   
 
28,922
Other
   
 
58,381
   
 
74,424
    
  
    
$
322,618
   
$
295,763
    
  
 
Other deferred liabilities consisted of the following at September 30, 2002 and 2001 (in thousands):
 
    
2002
   
2001
Liabilities relating to defined benefit pension and early retirement plans
   
$
88,689
   
$
41,120
Liabilities relating to nonqualified deferred compensation arrangements
   
 
36,346
   
 
37,089
Deferred income taxes
   
 
16,058
   
 
8,090
Other
   
 
11,247
   
 
8,875
    
  
    
$
152,340
   
$
95,174
    
  
 
15.    Comprehensive Income
 
The Company has disclosed the components of comprehensive income in the accompanying consolidated statements of comprehensive income and consolidated statements of changes in stockholders’ equity.
 

F-36

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The accumulated balances related to each component of other comprehensive income (loss), net of related income tax, for each year ended September 30 follows (in thousands):
 
    
Unrealized
Gains on
Securities
     
Foreign
Currency
Translation
Adjustments
     
Minimum
Pension
Liability
Adjustment
       
Total
Accumulated
Other
Comprehensive
Loss
  
Balances at September 30, 1999
   
$
2,152
 
   
$
(5,747
)
   
$
—  
 
     
$
(3,595
)
Changes during the year
   
 
1,316
 
   
 
(8,236
)
   
 
—  
 
     
 
(6,920
)
    
  
  
    
Balances at September 30, 2000
   
 
3,468
 
   
 
(13,983
)
   
 
—  
 
     
 
(10,515
)
Changes during the year
   
 
219
 
   
 
(324
)
   
 
—  
 
     
 
(105
)
    
  
  
    
Balances at September 30, 2001
   
 
3,687
 
   
 
(14,307
)
   
 
—  
 
     
 
(10,620
)
Changes during the year
   
 
(1,783
)
   
 
1,048
 
   
 
(31,227
)
     
 
(31,962
)
    
  
  
    
Balances at September 30, 2002
   
$
1,904
 
   
$
(13,259
)
   
$
(31,227
)
     
$
(42,582
)
    
  
  
    
 
16.    Segment Information
 
As discussed above, the Company’s principal business is to provide a broad range of technical, professional, and construction services. The Company provides its services primarily from offices located throughout the United States and Europe. With the acquisition of the Delta companies in fiscal 2002, the Company expanded its North American operations to include Canada. The Company also has offices located in selected regions of Asia, Mexico and Australia.
 
All of the Company’s operations share similar economic characteristics. For example, all of the Company’s operations are highly influenced by the general availability of qualified engineers and other technical, professional staff. They also provide similar services, as well as share similar processes for delivering the Company’s services. In addition, the use of technology is highly similar and consistent throughout the Company’s organization, as is the Company’s client base (with the exception of the Company’s operations outside the United States which perform very little work for the U.S. federal government), and the Company’s quality assurance and safety programs. Accordingly, based on these similarities, the Company has concluded that its operations may be aggregated into one reportable segment for purposes of this disclosure.
 

F-37

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following table presents certain information by geographic area for fiscal 2002, 2001 and 2000 (in thousands):
 
    
2002
   
2001
   
2000
Revenues (for the fiscal years ended September 30):
                     
United States
   
$
3,040,373
   
$
3,075,969
   
$
2,858,197
Europe
   
 
892,050
   
 
825,456
   
 
532,887
Canada
   
 
564,144
   
 
—  
   
 
—  
Asia
   
 
34,965
   
 
44,345
   
 
22,448
Other
   
 
24,129
   
 
11,223
   
 
5,410
    
  
  
Total
   
$
4,555,661
   
$
3,956,993
   
$
3,418,942
    
  
  
Long-Lived Assets (at September 30):
                     
United States
   
$
114,319
   
$
116,196
   
$
120,396
Europe
   
 
21,917
   
 
22,332
   
 
17,486
Canada
   
 
2,069
   
 
—  
   
 
—  
Asia
   
 
11,242
   
 
11,322
   
 
12,609
Other
   
 
358
   
 
129
   
 
—  
    
  
  
Total
   
$
149,905
   
$
149,979
   
$
150,491
    
  
  
 
Revenues were earned from unaffiliated clients located primarily within the respective geographic areas. Long-lived assets consist of property and equipment, net of accumulated depreciation and amortization. “Other” consists primarily of the Company’s operations in Australia and the Middle East.
 
For each of the three years ended September 30, 2002, 2001 and 2000, projects with or for the benefit of agencies of the U.S. federal government accounted for 21.5%, 19.0% and 20.0%, respectively, of total revenues.
 

F-38

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

17.    Quarterly Data—Unaudited
 
Summarized quarterly financial information for each year ended September 30 is presented below (in thousands, except per share amounts):
 
    
First
Quarter
     
Second
Quarter
   
Third
Quarter
   
Fourth
Quarter
   
Fiscal
Year
2002
                                     
Revenues
   
$
1,028,186
 
   
$
1,146,611
   
$
1,169,122
   
$
1,211,742
   
$
4,555,661
Operating profit
   
 
41,002
 
   
 
42,360
   
 
43,548
   
 
45,460
   
 
172,370
Earnings before taxes
   
 
39,801
 
   
 
41,353
   
 
42,955
   
 
44,645
   
 
168,754
Net earnings
   
 
25,870
 
   
 
26,880
   
 
27,920
   
 
29,020
   
 
109,690
Earnings per share:
                                     
Basic
   
 
0.48
 
   
 
0.50
   
 
0.51
   
 
0.53
   
 
2.03
Diluted
   
 
0.47
 
   
 
0.49
   
 
0.50
   
 
0.52
   
 
1.98
Stock price:
                                     
High
   
 
37.85
 
   
 
36.50
   
 
42.90
   
 
36.70
   
 
42.90
Low
   
 
29.65
 
   
 
29.06
   
 
33.40
   
 
28.20
   
 
28.20
2001
                                     
Revenues
   
$
929,182
 
   
$
1,009,869
   
$
1,041,417
   
$
976,525
   
$
3,956,993
Operating profit
   
 
33,187
 
   
 
35,127
   
 
36,770
   
 
38,768
   
 
143,852
Earnings before taxes
   
 
31,654
 
   
 
33,953
   
 
35,464
   
 
37,135
   
 
138,206
Net earnings
   
 
20,100
 
   
 
21,560
   
 
22,520
   
 
23,580
   
 
87,760
Earnings per share:
                                     
Basic
   
 
0.38
 
   
 
0.41
   
 
0.42
   
 
0.44
   
 
1.65
Diluted
   
 
0.37
 
   
 
0.40
   
 
0.41
   
 
0.43
   
 
1.61
Stock price:
                                     
High
   
 
24.59
 
   
 
29.50
   
 
37.84
   
 
35.29
   
 
37.84
Low
   
 
18.98
 
   
 
21.12
   
 
28.20
   
 
25.35
   
 
18.98
2000
                                     
Revenues
   
$
809,088
 
   
$
881,799
   
$
857,828
   
$
870,227
   
$
3,418,942
Operating profit
   
 
30,028
 
   
 
30,208
   
 
31,709
   
 
32,668
   
 
124,613
(Loss) earnings before taxes
   
 
(9,232
)
   
 
28,962
   
 
30,560
   
 
31,032
   
 
81,322
Net (loss) earnings
   
 
(5,769
)
   
 
18,100
   
 
19,100
   
 
19,550
   
 
50,981
(Loss) earnings per share:
                                     
Basic
   
 
(0.11
)
   
 
0.35
   
 
0.36
   
 
0.37
   
 
0.97
Diluted
   
 
(0.11
)
   
 
0.34
   
 
0.36
   
 
0.37
   
 
0.96
Stock price:
                                     
High
   
 
17.88
 
   
 
16.56
   
 
18.41
   
 
20.19
   
 
20.19
Low
   
 
14.62
 
   
 
13.09
   
 
14.69
   
 
16.44
   
 
13.09
 
The Company’s common stock is listed on the New York Stock Exchange. At September 30, 2002, there were 986 stockholders of record.

F-39

Report of Ernst & Young LLP
Independent Auditors
 
The Board of Directors and Stockholders
Jacobs Engineering Group Inc.
 
We have audited the accompanying consolidated balance sheets of Jacobs Engineering Group Inc. and subsidiaries as of September 30, 2002 and 2001, and the related consolidated statements of earnings, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2002. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Jacobs Engineering Group Inc. and subsidiaries at September 30, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended September 30, 2002, in conformity with accounting principles generally accepted in the United States.
 
ERNST & YOUNG LLP
 
Los Angeles, California
October 30, 2002

F-40
EX-21 5 dex21.htm LIST OF SUBSIDIARIES List of Subsidiaries
 
EXHIBIT 21.
 
JACOBS ENGINEERING GROUP INC.
 
PARENTS AND SUBSIDIARIES
 
The following table sets forth all subsidiaries of the Company other than subsidiaries that, when considered in the aggregate, would not constitute a significant subsidiary, including the percentage of issued and outstanding voting securities beneficially owned by the Company.
 
Jacobs Engineering Company, a California corporation
   
100.00%
 
Jacobs Engineering Group of Ohio, Inc., an Ohio corporation
   
100.00%
 
Jacobs Services Company, a California corporation
   
100.00%
 
JE Merit Constructors, Inc., a Texas corporation
   
100.00%
 
JE Remediation Technologies, Inc., a Louisiana corporation
   
100.00%
 
Jacobs Constructors, Inc., a Louisiana corporation
   
100.00%
 
Jacobs Industrial Maintenance Inc., a U.S. Virgin Islands corporation
   
80.00%
 
Jacobs Maintenance, Inc., a Louisiana corporation
   
100.00%
 
Jacobs Consultancy, Inc., a Texas corporation
   
100.00%
 
Jacobs International Limited Inc., a Panamanian corporation
   
100.00%
 
Jacobs Engineering U.K. Limited, a corporation of England and Wales (“JEL”)
   
100.00%
 
JacobsGIBB Ltd., a corporation of England and Wales
   
100.00%
 
JacobsGIBB (Ireland) Limited, an Irish corporation
   
100.00%
 
Crispin Wride Architectural Design Studio Ltd., a corporation of England and Wales
   
100.00%
 
Jacobs Catalytic (UK) Ltd., a corporation of England and Wales
   
100.00%
 
JE Professional Resources Limited, a corporation of England and Wales
   
100.00%
 
Jacobs Engineering Inc., a Delaware corporation (“JEI”)
   
100.00%
 
Jacobs Engineering Espana, S.L., a Spanish corporation
   
100.00%
 
Jacobs Engineering Ireland Limited, a Republic of Ireland corporation
   
100.00%
 
Jacobs Lend Lease Ireland Limited, a Republic of Ireland corporation
   
50.00%
 
Jacobs Consultancy U.K. Limited, a corporation of England and Wales
   
100.00%
 
Jacobs Engineering de Mexico, S.A. de C.V., a Mexican corporation
   
100.00%
 
Uhde Jacobs Mexico, S.A. de C.V.
   
49.00%
 
Jacobs Luxembourg, Sarl, a Luxembourg corporation
   
100.00%
 
Jacobs France SAS, a French corporation
   
100.00%
 
Jacobs Switzerland, GmbH, a Switzerland corporation
   
100.00%
 
Jacobs Serete SAS, a French corporation
   
100.00%
 
Jacobs Italia, SpA, an Italian corporation
   
100.00%
 
Jacobs Sereland, S.L., a Spanish corporation
   
100.00%
 
Jacobs Engineering Deutschland GmbH, a German corporation
   
100.00%
 
Jacobs MBK GmbH, a German corporation
   
100.00%
 
Jacobs Services GmbH, a German corporation
   
100.00%
 
Jacobs Deutschland GmbH, a German corporation
   
100.00%
 
Jacobs Nederland BV, a Netherlands corporation
   
100.00%
 
Jacobs Advanced Manufacturing B.V., a Netherlands corporation
   
100.00%
 
Jacobs Consultancy Nederland B.V., a Netherlands corporation
   
100.00%
 
Jacobs International Holdings, Inc., a Delaware corporation
   
100.00%
 
JacobsGIBB Hellas Consulting Engineers SA, a Greek corporation
   
100.00%
 
JacobsGIBB (Polska) SPz.o.o., a Polish corporation
   
100.00%
 
JacobsGIBB Portugal Lda, a Portuguese corporation
   
100.00%
 
Jacobs H&G Private Limited, an Indian corporation
   
69.98%
*
HGC Constructors, Ltd., an Indian corporation
   
56.00%
 

 
EXHIBIT 21.
Continued
 
Jacobs Puerto Rico, Inc., a Puerto Rican corporation
   
100.00%
Jacobs Engineering Singapore Pte. Ltd., a Singapore corporation
   
100.00%
Jacobs-Lend Lease Singapore Pte. Ltd., a Singapore corporation
   
50.00%
Jacobs Pan American Corp., a Virgin Islands corporation
   
100.00%
Jacobs Belgie NV, a Belgian corporation
   
100.00%
Interhuis SA, a Belgian corporation
   
100.00%
Jacobs Canada Inc., a Canadian corporation
   
100.00%
Jacobs Catalytic Ltd., a Canadian corporation
   
100.00%
Delta Catalytic Ltd., a Cyprus corporation
   
100.00%
Delta Catalytic Saudi Arabia Ltd., a Saudi Arabian corporation
   
50.00%
JE Professional Resources, Inc., a California corporation
   
100.00%
Payne & Keller Company, Inc., a Louisiana corporation
   
100.00%
Jacobs Applied Technology, Inc., a Delaware corporation
   
100.00%
Jacobs Facilities, Inc., a Missouri corporation
   
100.00%
GPR Planners Collaborative, Inc., a Missouri corporation
   
100.00%
SP Operations and Management Services Company, a Missouri corporation
   
100.00%
Sverdrup Technology, Inc., a Tennessee corporation
   
100.00%
Sverdrup Technology Australia, Pty Ltd, an Australian corporation
   
100.00%
Jacobs Civil, Inc., a Missouri corporation
   
100.00%
Sverdrup Asia Ltd., an Indian corporation
   
100.00%
Sverdrup & Parcel Consultants, Inc., a New York corporation
   
100.00%
Sverdrup of Puerto Rico, a Puerto Rican corporation
   
100.00%
Sverdrup Canada, ULC, a Nova Scotia corporation
   
100.00%
Sverdrup Investments, Inc., a Delaware corporation
   
100.00%
Riverport Development, Inc., a Missouri corporation
   
100.00%
Jacobs Construction Services, Inc., a Delaware corporation
   
100.00%
CRSS International, Inc., a South Carolina corporation
   
100.00%
Jacobs Engineering New York, Inc., a New York corporation
   
100.00%
Jacobs Engineering Foreign Sales Corporation, a Barbados corporation
   
100.00%
Jacobs Engineering Chile S.A., a Chilean corporation
   
100.00%
Rocky Flats Closure Site Services LLC, a Delaware corporation
   
100.00%
 
* Ownership is divided between JEI and JEL.
 
All subsidiaries and affiliates are included in the Consolidated Financial Statements.
 
Dr. Joseph J. Jacobs may be deemed to be a “parent” of Jacobs Engineering Group Inc. under the federal securities laws. Refer to Item 12 of the accompanying report on Form 10-K for information about Dr. Jacobs’ share ownership and position with the Company.

EX-23 6 dex23.htm CONSENT OF INDEPENDENT AUDITORS Consent of Independent Auditors
 
EXHIBIT 23.
 
CONSENT OF INDEPENDENT AUDITORS
 
We consent to the incorporation by reference in this Annual Report (Form 10-K) of Jacobs Engineering Group Inc. of our report dated October 30, 2002, included in Exhibit F to the Notice of 2003 Annual Meeting of Shareholders and Proxy Statement of Jacobs Engineering Group Inc.
 
We also consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-67048) pertaining to the Jacobs Engineering Group Inc. Global Employee Stock Purchase Plan, in the Registration Statement (Form S-8 No. 333-38974) pertaining to the Jacobs Engineering Group Inc. 1999 Stock Incentive Plan, in the Registration Statement (Form S-8 No. 333-38984) pertaining to the Jacobs Engineering Group Inc. 1999 Outside Director Stock Plan, in the Registration Statement (Form S-8 No. 333-60296) pertaining to the Jacobs Engineering Group Inc. 1989 Employee Stock Purchase Plan, and in the Registration Statement (Form S-8 No. 333-45475) pertaining to the Jacobs Engineering Group Inc. 1981 Executive Incentive Plan of our report dated October 30, 2002 with respect to the consolidated financial statements of Jacobs Engineering Group Inc. and subsidiaries incorporated by reference in the Annual Report (Form 10-K) for the year ended September 30, 2002.
 
ERNST & YOUNG LLP
 
Los Angeles, California
December 27, 2002

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