UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Quarterly Report on

FORM 10-Q

(Mark one)
x	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended March 31, 2003
o	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from __________ to __________
Commission File Number 1-7463
JACOBS ENGINEERING GROUP INC.
(Exact name of Registrant as specified in its charter)
Delaware		95-4081636
(State of incorporation)		(I.R.S. employer identification number)
1111 South Arroyo Parkway, Pasadena, California		91105
(Address of principal executive offices)		(Zip code)
(626) 578 - 3500
(Registrant’s telephone number, including area code)

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 o  No

Number of shares of common stock outstanding at May 12, 2003: 55,329,669

 

JACOBS ENGINEERING GROUP INC.

INDEX TO FORM 10-Q

		Page No.
Part I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets - March 31, 2003 (Unaudited) and September 30, 2002	3
	Consolidated Statements of Earnings - Unaudited Three and Six Months Ended March 31, 2003 and 2002	4
	Consolidated Statements of Comprehensive Income  - Unaudited Three and Six Months Ended March 31, 2003 and 2002	5
	Consolidated Statements of Cash Flows - Unaudited Six Months Ended March 31, 2003 and 2002	6
	Notes to Consolidated Financial Statements - Unaudited	7 - 11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12 - 17
Item 3.	Qualitative and Quantitative Disclosures about Market Risks	17
Item 4.	Controls and Procedures	17
Part II – OTHER INFORMATION
Item 4.	Submission of Matters to a Vote of Security Holders	18
Item 6.	Exhibits and Reports on Form 8-K	19
Signatures		19
CERTIFICATIONS		20 - 21

Page 2

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements.

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share information)

	March 31, 2003			September 30, 2002
		(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	76,884		$	48,469
Receivables		822,365			845,360
Deferred income taxes		59,520			66,609
Prepaid expenses and other		15,560			14,465
Total current assets		974,329			974,903
Property, Equipment and Improvements, Net		147,470			149,905
Other Noncurrent Assets:
Goodwill		393,469			390,953
Other		146,267			158,223
Total other noncurrent assets		539,736			549,176
	$	1,661,535		$	1,673,984
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Notes payable	$	37,685		$	5,962
Accounts payable		201,952			229,579
Accrued liabilities		325,689			322,618
Billings in excess of costs		126,015			155,114
Income taxes payable		33,948			27,144
Total current liabilities		725,289			740,417
Long-term Debt		—			85,732
Other Deferred Liabilities		160,580			152,340
Minority Interests		5,204			5,882
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, 55,287,167 shares issued and outstanding at March 31, 2003; 54,765,374 shares issued and outstanding at September 30, 2002		55,287			54,765
Additional paid-in capital		124,701			110,778
Retained earnings		629,445			568,957
Accumulated other comprehensive loss		(36,663	)		(42,582	)
		772,770			691,918
Unearned compensation		(2,308	)		(2,305	)
Total stockholders’ equity		770,462			689,613
	$	1,661,535		$	1,673,984

See the accompanying Notes to Consolidated Financial Statements.

Page 3

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
For the Three and Six Months Ended March 31, 2003 and 2002
(In thousands, except per share information)
(Unaudited)

	For the Three Months Ended March 31,						For the Six Months Ended March 31,
	2003			2002			2003			2002
Revenues	$	1,202,606		$	1,146,611		$	2,421,286		$	2,174,797
Costs and Expenses:
Direct costs of contracts		(1,043,745	)		(1,000,071	)		(2,111,379	)		(1,890,736	)
Selling, general and administrative expenses		(110,347	)		(104,180	)		(214,550	)		(200,699	)
Operating Profit		48,514			42,360			95,357			83,362
Other (Expense) Income:
Interest income		139			443			390			1,061
Interest expense		(777	)		(1,825	)		(2,008	)		(4,088	)
Miscellaneous income, net		555			375			1,061			819
Total other expense, net		(83	)		(1,007	)		(557	)		(2,208	)
Earnings Before Taxes		48,431			41,353			94,800			81,154
Income Tax Expense		(16,951	)		(14,473	)		(33,180	)		(28,404	)
Net Earnings	$	31,480		$	26,880		$	61,620		$	52,750
Net Earnings Per Share:
Basic	$	0.57		$	0.50		$	1.12		$	0.98
Diluted	$	0.56		$	0.49		$	1.10		$	0.96

See the accompanying Notes to Consolidated Financial Statements.

Page 4

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three and Six Months Ended March 31, 2003 and 2002
(In thousands)
(Unaudited)

	For the Three Months Ended March 31,						For the Six Months Ended March 31,
	2003			2002			2003			2002
Net Earnings	$	31,480		$	26,880		$	61,620		$	52,750
Other Comprehensive Income (Loss):
Unrealized holding (losses) gains on securities		(30	)		662			(18	)		981
Less: reclassification adjustment for gains realized in net earnings		(637	)		(632	)		(1,949	)		(1,372	)
Unrealized (losses) gains on securities, net of reclassification adjustment		(667	)		30			(1,967	)		(391	)
Foreign currency translation adjustments		4,132			(1,455	)		7,158			(4,452	)
Other Comprehensive Income (Loss) Before Income Tax Benefit		3,465			(1,425	)		5,191			(4,843	)
Income Tax Benefit Relating to Other Comprehensive Income (Loss)		246			4			728			168
Other Comprehensive Income (Loss)		3,711			(1,421	)		5,919			(4,675	)
Total Comprehensive Income	$	35,191		$	25,459		$	67,539		$	48,075

See the accompanying Notes to Consolidated Financial Statements.

Page 5

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended March 31, 2003 and 2002
(In thousands)
(Unaudited)

	2003			2002
Cash Flows from Operating Activities:
Net earnings	$	61,620		$	52,750
Adjustments to reconcile net earnings to net cash flows from operations:
Depreciation and amortization of property, equipment and improvements		17,688			16,787
Gains on sales of assets		(2,424	)		(1,362	)
Changes in assets and liabilities, excluding the effects of businesses acquired:
Receivables		49,295			95,174
Prepaid expenses and other current assets		(257	)		2,159
Accounts payable		(36,626	)		(43,642	)
Accrued liabilities		9,077			26,885
Billings in excess of costs		(32,987	)		(51,616	)
Income taxes payable		14,143			(405	)
Deferred income taxes		269			6,798
Other, net		462			314
Net cash provided by operating activities		80,260			103,842
Cash Flows from Investing Activities:
Acquisitions of businesses, net of cash acquired		—			(43,529	)
Additions to property and equipment		(15,685	)		(19,633	)
Disposals of property and equipment		2,856			731
Proceeds from sales of marketable securities and investments		3,367			5,007
Purchases of marketable securities and investments		(1,944	)		(1,949	)
Net decrease (increase) in other noncurrent assets		5,430			(8,484	)
Net cash used for investing activities		(5,976	)		(67,857	)
Cash Flows from Financing Activities:
Proceeds from long-term borrowings		164,354			200,708
Repayments of long-term borrowings		(178,629	)		(258,111	)
Net change in short-term borrowings		(44,346	)		18,786
Proceeds from issuances of common stock		13,240			10,154
Purchases of common stock for treasury		—			(2,003	)
Change in other deferred liabilities		(694	)		3,385
Net cash used for financing activities		(46,075	)		(27,081	)
Effect of Exchange Rate Changes		206			(4,036	)
Increase in Cash and Cash Equivalents		28,415			4,868
Cash and Cash Equivalents at Beginning of Period		48,469			49,263
Cash and Cash Equivalents at End of Period	$	76,884		$	54,131

See the accompanying Notes to Consolidated Financial Statements.

Page 6

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
MARCH 31, 2003

1.	The accompanying consolidated financial statements and financial information included herein have been prepared pursuant to the interim period reporting requirements of Form 10-Q.  Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted.  Readers of this report should refer to the consolidated financial statements and the notes thereto incorporated into the latest Annual Report on Form 10-K of Jacobs Engineering Group Inc. and subsidiaries (the “Company”).
	In the opinion of management of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the Company’s consolidated financial position at March 31, 2003 and September 30, 2002, its consolidated results of operations for the three and six months ended March 31, 2003 and 2002, its consolidated comprehensive income for the three and six months ended March 31, 2003 and 2002, and its consolidated cash flows for the six months ended March 31, 2003 and 2002.
	The Company’s interim results of operations are not necessarily indicative of the results to be expected for the full year.
2.	As allowed by Statement of Financial Accounting Standards No. 123 – Accounting for Stock-Based Compensation (“SFAS 123”) – the Company has elected to continue to account for stock issued to its 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.

Page 7

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
MARCH 31, 2003

SFAS 123 prescribes an optional, fair-value based method of accounting for stock-based compensation plans.  The following table illustrates the effect on net earnings and earnings per share if the Company determined compensation cost under SFAS 123 (in thousands, except per share data):

	Three Months Ended March 31,				Six Months Ended March 31,
	2003		2002		2003		2002
Net earnings as reported	$	31,480	$	26,880	$	61,620	$	52,750
Fair value of stock based compensation cost, net of tax		2,657		2,913		4,281		4,334
Pro forma net earnings	$	28,823	$	23,967	$	57,339	$	48,416
Earnings per share:
Basic:
As reported	$	0.57	$	0.50	$	1.12	$	0.98
Pro forma	$	0.52	$	0.44	$	1.05	$	0.90
Diluted:
As reported	$	0.56	$	0.49	$	1.10	$	0.96
Pro forma	$	0.51	$	0.43	$	1.02	$	0.88

The fair value of each option was estimated on the date of the grant using the Black-Scholes option pricing model with the following weighted average assumptions:

	Three Months Ended March 31,						Six Months Ended March 31,
	2003			2002			2003			2002
Dividend yield		—			—			—			—
Expected volatility		23.85	%		35.62	%		36.03	%		37.36	%
Risk-free interest rates		3.74	%		4.51	%		3.74	%		4.51	%
Expected life of options (in years)		7.6			7.0			7.6			7.0

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.

Page 8

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
MARCH 31, 2003

3.	Included in “Receivables” in the accompanying consolidated balance sheets at March 31, 2003 and September 30, 2002 were $369.0 million and $440.9 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 March 31, 2003 and September 30, 2002 were contract retentions totaling $24.3 million and $24.2 million, respectively.  The Company anticipates that substantially all of such unbilled amounts will be billed and collected over the next twelve months.
	Amounts due from the U.S. federal government included in “Receivables” in the accompanying consolidated balance sheets totaled $129.7 million and $141.2 million at March 31, 2003 and September 30, 2002, respectively.
4.	Property, equipment and improvements, net, are stated at cost in the accompanying consolidated balance sheets and consisted of the following at March 31, 2003 and September 30, 2002 (in thousands):

	March 31, 2003			September 30, 2002
Land	$	7,855		$	7,903
Buildings		56,098			54,010
Equipment		230,966			239,159
Leasehold improvements		29,446			27,987
Construction in progress		5,752			2,990
		330,117			332,049
Accumulated depreciation and amortization		(182,647	)		(182,144	)
	$	147,470		$	149,905

5. Other noncurrent assets in the accompanying consolidated balance sheets consisted of the following at March 31, 2003 and September 30, 2002 (in thousands):

		March 31, 2003		September 30, 2002
Deferred tax asset	$	43,221	$	43,195
Cash surrender value of life insurance policies		41,889		44,083
Investments		21,920		27,691
Prepaid pension costs		15,297		15,993
Notes receivable		8,860		10,483
Reimbursable pension costs		9,678		9,928
Miscellaneous		5,402		6,850
	$	146,267	$	158,223

Page 9

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
MARCH 31, 2003

6. Accrued liabilities in the accompanying consolidated balance sheets consisted of the following at March 31, 2003 and September 30, 2002 (in thousands):

	March 31, 2003		September 30, 2002
Accrued payroll and related liabilities	$	186,975	$	181,016
Insurance liabilities		35,966		42,761
Project related accruals		40,577		40,460
Other		62,171		58,381
	$	325,689	$	322,618

7. Other deferred liabilities in the accompanying consolidated balance sheets consisted of the following at March 31, 2003 and September 30, 2002 (in thousands):

	March 31, 2003		September 30, 2002
Liabilities relating to defined benefit pension and early retirement plans	$	88,535	$	88,689
Liabilities relating to nonqualified deferred compensation arrangements		44,364		36,346
Deferred income taxes		15,355		16,058
Other		12,326		11,247
	$	160,580	$	152,340

8. When the Company is directly responsible for subcontract 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 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 the second quarter and first half of fiscal 2003 and 2002 totaled $377.2 million and $804.0 million, and $374.0 million and $688.8 million, respectively.

Page 10

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
MARCH 31, 2003

9. The following table reconciles the denominator used to compute basic earnings per share to the denominator used to compute diluted earnings per share (in thousands):

	Three Months Ended March 31,				Six Months Ended March 31,
	2003		2002		2003		2002
Weighted average shares outstanding (denominator used to compute basic EPS)		54,940		53,953		54,868		53,876
Effect of employee and outside director stock options		1,251		1,229		1,141		1,302
Denominator used to compute diluted EPS		56,191		55,182		56,009		55,178

10.	During the six months ended March 31, 2003 and 2002, the Company made cash payments of approximately $2.1 million and $3.6 million, respectively, for interest and $21.7 million and $19.7 million, respectively, for income taxes.
11.	The Company adopted Statement of Financial Accounting Standards No. 142 – Goodwill and Other Intangible Assets (“SFAS 142”) in fiscal 2002.  SFAS 142 eliminates the amortization of goodwill and intangible assets deemed to have indefinite lives.  Instead, these assets must be tested for impairment using a fair value approach in accordance with SFAS 142.  There has been no impairment of goodwill since adoption of SFAS 142.
12.	In November 2002, the Financial Accounting Standards Board issued FASB Interpretation No. 45 - Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (“FIN 45”).  FIN 45 requires that, upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee.  In addition, FIN 45 requires additional disclosures about the guarantees that an entity has issued. The initial recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002, and the disclosure requirements of FIN 45 are effective for financial statements of interim or annual periods ending after December 15, 2002.
	At March 31, 2003, the Company had guaranteed certain financial liabilities, the majority of which relate to debt obligations of unconsolidated affiliates.  The term of each of the guarantees is equal to the remaining term of the underlying debt, which ranges from two to twelve months.  Payment by the Company would be required upon default by the unconsolidated affiliate.  The maximum potential amount of future payments, which the Company could be required to make under these guarantees at March 31, 2003, is $7.6 million.  Additionally, the Company had guaranteed the residual value ($35.3 million) of the synthetic lease agreement associated with its offices in Houston, Texas.  The guarantee extends through the maturity of the lease in 2011.

Page 11

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
MARCH 31, 2003

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

General

The following discussion should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations (incorporated by reference from pages F-5 through F-13 of Exhibit 13 to the Company’s 2002 Annual Report on Form 10-K).

Results of Operations

The Company recorded net earnings of $31.5 million, or $0.56 per diluted share, for the three months ended March 31, 2003, compared to net earnings of $26.9 million, or $0.49 per diluted share for the same period last year.  For the first half of fiscal 2003, the Company recorded net earnings of $61.6 million, or $1.10 per diluted share, compared to net earnings of $52.8 million, or $0.96 per diluted share, for the first half of fiscal 2002.

Total revenues for the second quarter of fiscal 2003 increased by $56.0 million, or 4.9%, to $1.2 billion, compared to total revenues of $1.1 billion in the second quarter of fiscal 2002.  During the first half of fiscal 2003, total revenues increased by $246.5 million, or 11.3%, to $2.4 billion, compared to total revenues of $2.2 billion for the first half of fiscal 2002.

As more fully discussed in the Company’s 2002 Form 10-K, the Company’s business is focused exclusively on providing technical, professional, and construction services to a large number of industrial, commercial, and governmental clients around the world.  The Company’s services can be generally classified into four broad categories:  project services (which includes engineering, design, architectural, and similar services); construction services (which includes revenues earned from traditional field construction activities as well as modular construction activities); operations and maintenance services (which includes 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); and process, scientific, and systems consulting services (which includes revenues earned from providing a wide variety of scientific and consulting services to clients).

The scope of services the Company can provide its clients, therefore, range from consulting and conceptual design-type services (which are often required by clients in the very early stages of a project) to complete, single-responsibility, design-build-operate contracts.

Page 12

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
MARCH 31, 2003

The following tables set forth the Company’s revenues by type of service for the quarter and six months ended March 31 of each fiscal year (in thousands):

     Three months ended March 31:

	2003		2002		% Change
Project Services	$	486,741	$	489,910		(0.6	)%
Construction		538,933		503,125		7.1	%
Operations and Maintenance		120,806		106,477		13.5	%
Process, Scientific and Systems Consulting		56,126		47,099		19.2	%
	$	1,202,606	$	1,146,611		4.9	%

     Six months ended March 31:

	2003		2002		% Change
Project Services	$	956,498	$	965,868		(1.0	)%
Construction		1,119,093		895,757		24.9	%
Operations and Maintenance		234,960		222,371		5.7	%
Process, Scientific and Systems Consulting		110,735		90,801		21.9	%
	$	2,421,286	$	2,174,797		11.3	%

Beginning with the second quarter of fiscal 2002, the Company classified certain elements of revenues as Construction that had been previously classified as Project Services.  Consequently, the Company reclassified approximately $110.4 million of project services revenues in the first quarter of fiscal 2002 to construction revenues.

As a percentage of revenues, direct costs of contracts was 86.8% and 87.2%, respectively, for the three and six months ended March 31, 2003, compared to 87.2% and 86.9% for the same periods in fiscal 2002.  The percentage relationship between direct costs of contracts and revenues will 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.

The amount of pass-through costs included in revenues during the second quarter and first half of fiscal 2003 and 2002 totaled $377.2 million and $804.0 million, and $374.0 million and $688.8 million, respectively.  See Note 8 of the Notes to Consolidated Financial Statements for a discussion of pass-through costs.

Page 13

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
MARCH 31, 2003

Selling, general and administrative (“SG&A”) expenses for the second quarter of fiscal 2003 increased by $6.2 million, or 5.9%, to $110.3 million, compared to $104.2 million for the second quarter of fiscal 2002.  For the first six months of fiscal 2003, SG&A expenses increased by $13.9 million, or 6.9%, to $214.6 million, compared to $200.7 million for the same period last year.  The increases in SG&A expenses during the current fiscal periods, which are primarily attributable to the growth in business volume, also reflect the acquisition of McDermott Engineers & Constructors (Canada) Limited (including Delta Catalytic and Delta Hudson Engineering; collectively “Delta”) and the inclusion of Delta’s operations for a full six months in the current period compared to only five months during the first half of fiscal 2002.   The Company completed the acquisition of Delta on October 31, 2001.  Had Delta’s operations been included for a full six months last year, SG&A expenses during the first quarter of fiscal 2002 would have been higher by an additional $0.9 million.  On a sequential basis, SG&A expenses during the second quarter of fiscal 2003 increased by $6.1 million, or 5.9%, from $104.2 million recorded during the first quarter of fiscal 2003.

As a percentage of revenues, consolidated SG&A expenses remained relatively unchanged at 9.2% during the second quarter of fiscal 2003 compared to 9.1% during the second quarter of fiscal 2002, and decreased to 8.9% during the first half of fiscal 2003 compared to 9.2% for the second half of fiscal 2002, reflecting the Company’s continuing efforts to control costs. 

During the second quarter ended March 31, 2003, the Company’s operating profit (defined as revenues, less direct costs of contracts and SG&A expenses) increased by $6.2 million, or 14.5%, to $48.5 million, compared to $42.4 million during the same period last year.  For the six months ended March 31, 2003, the Company’s operating profit increased by $12.0 million, or 14.4%, to $95.4 million, compared to $83.4 million during the same period last year.  The increases in the Company’s operating profit for the second quarter and first six months of fiscal 2003 as compared to the same periods in fiscal 2002 were due primarily to increases in business volume.  On a sequential basis, operating profit during the second quarter of fiscal 2003 increased by $1.7 million, or 3.6%, from $46.8 million during the first quarter of fiscal 2003.  Operating profit was 4.0% and 3.9% of revenues, respectively, in the second quarter and first half of fiscal 2003, compared to 3.7% and 3.8% of revenues, respectively, in the second quarter and first half of fiscal 2002. 

Interest expense decreased by $1.0 million, or 57.4%, to $0.8 million during the second quarter of fiscal 2003, compared to $1.8 million during the second quarter of fiscal 2002.  During the first half of fiscal 2003, interest expense decreased by $2.1 million, or 50.9%, to $2.0 million, compared to interest expense of $4.1 million for the same period last year.  On a sequential basis, interest expense during the second quarter of fiscal 2003 decreased by $0.5 million, or 36.9% from $1.2 million during the first quarter of fiscal 2003.  The decreases in interest expense during the current fiscal periods were due to significantly reduced borrowing levels.  The Company continues to pay down its debt under its revolving credit facilities, which had an outstanding balance of $37.1 million at March 31, 2003 (bearing interest of 3.6%), compared to $142.4 million at March 31, 2002 (bearing interest of 3.4%), and  $85.7 million at September 30, 2002 (bearing interest of 3.8%). 

Page 14

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
MARCH 31, 2003

The Company’s revolving credit facilities will terminate on January 11, 2004.  Accordingly, all outstanding balances under these credit facilities were classified as current liabilities beginning January 2003.  The Company is currently in negotiations for a new, long-term revolving credit facility and expects this new facility to be in place by the end of fiscal 2003.  Management of the Company believes that the capacity, terms and conditions of the new facility will be sufficient for the Company’s working capital and business growth requirements.

Backlog Information

The following table summarizes the Company’s backlog at March 31, 2003 and 2002 (in millions):

	2003		2002
Technical professional services	$	3,239.0	$	2,769.5
Total backlog		6,677.2		6,527.3

Liquidity and Capital Resources

During the six months ended March 31, 2003, the Company’s cash and cash equivalents increased by $28.4 million, to $76.9 million.  This compares to a net increase of $4.9 million, to $54.1 million, during the same period in fiscal 2002.  During the six months ended March 31, 2003, the Company experienced net cash inflows from operating activities and the effect on cash of exchange rate changes of $80.3 million and $0.2 million, respectively, offset in part by net cash outflows from investing and financing activities of $6.0 million and $46.1 million, respectively.

Operations resulted in net cash inflows of $80.3 million during the first half of fiscal 2003.  This compares to net cash inflows of $103.8 million during the same period last year.  The $23.6 million decrease in cash provided by operations in the current fiscal period as compared to last year was due primarily to a decrease in inflows relating to the timing of cash receipts and payments within the Company’s working capital accounts and to deferred income taxes of $25.9 million and $6.5 million, respectively, partially offset by an increase in net earnings of $8.9 million.

The Company’s investing activities resulted in net cash outflows of $6.0 million during the first six months of fiscal 2003.  This compares to net cash outflows of $67.9 million during the same period in fiscal 2002.  The net decrease of $61.9 million in cash used for investing activities during the current fiscal period as compared to last year was due primarily to a decrease of $43.5 million in net cash used for acquisitions, a net decrease in other noncurrent assets of $13.9 million, and a decrease of $6.1 million in additions to property and equipment, net of disposals.  These reduced outflows were partially offset by a decrease of $1.6 million in proceeds from sales of marketable securities and investments.

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
MARCH 31, 2003

The Company’s financing activities resulted in net cash outflows of $46.1 million during the first half of fiscal 2003.  This compares to net cash outflows of $27.1 million during the same period in fiscal 2002.  The $19.0 million net increase in cash used for financing activities during the current fiscal period as compared to last year was due primarily to decreases in proceeds from long-term borrowings, net reductions in short-term borrowings, and other deferred liabilities, of $36.4 million, $63.1 million and $4.1 million, respectively.  These outflows were partially offset by a decrease of $79.5 million in repayments of long-term borrowings, an increase of $3.1 million in proceeds from issuances of common stock, and by a decrease of $2.0 million in purchases of common stock for treasury.  The outstanding balances under the Company’s long-term credit facilities were classified as current liabilities in the second quarter of fiscal 2003.  Total borrowing activity during the first six months of fiscal 2003 resulted in net repayments of $58.6 million, compared to net repayments of $38.6 million during the same period last year.

The Company believes it has adequate capital resources to fund its operations during the remainder of fiscal 2003 and beyond.  The Company’s consolidated working capital position was $249.0 million at March 31, 2003.  The Company has $45.9 million available through committed short-term credit facilities, and $275.0 million available through its revolving credit facilities.  Borrowings under the $275.0 million credit facilities were previously classified as long-term debt.  Because the $275.0 million credit facilities are scheduled to terminate in January 2004, all outstanding borrowings under these facilities have been classified as current obligations at March 31, 2003.  However, the Company is currently in negotiations for a new, long-term revolving credit facility and expects this new facility to be in place by the end of fiscal 2003.  At March 31, 2003, $0.6 million and $37.1 million were outstanding in the form of direct borrowings under the $45.9 million and $275.0 million credit facilities, respectively. 

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;

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
MARCH 31, 2003

• 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;

• the ability of the Company to successfully negotiate and syndicate a new long-term credit facility; 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.

Item 3. Qualitative and Quantitative Disclosures About Market Risk.

There have been no material changes in the information provided under “Item 7A. Qualitative and Quantitative Disclosures About Market Risk” included in the Company’s 2002 Annual Report on Form 10-K.

Item 4. Controls and Procedures.

Within the 90 days prior to the date of this report (the “Evaluation Date”), the Company carried out an evaluation, under the supervision and participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) to ensure that information required to be disclosed by the Company under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.

Since the Evaluation Date, there have not been any significant changes in the Company’s internal controls or in other factors that could significantly affect such controls.

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
MARCH 31, 2003

PART II - OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

The Company’s 2003 Annual Meeting of Shareholders was held at the Company’s headquarters on February 11, 2003, as previously announced in its Notice of Annual Meeting of Shareholders and Proxy Statement dated January 6, 2003, copies of which have been filed with the Commission pursuant to Regulation 14A.

There were three matters voted upon by the stockholders at the Annual Meeting.  Those matters were:

1.	To elect four directors to hold office until the 2006 annual meeting;
2.	To approve an amendment to the Company’s 1999 Stock Incentive Plan, increasing the number of authorized shares by 1,600,000; and,
3.	To approve the appointment of Ernst & Young LLP as independent auditors for the year ending September 30, 2003.

The results of the shareholder voting were as follows (all shares voted were voted by proxy):

		Votes For		Votes Against or Withheld		Abstentions		Broker Non-votes
1.	Election of Directors:
	Noel G. Watson		48,056,863		316,565		-0-		-0-
	Joseph R. Bronson		47,937,794		435,634		-0-		-0-
	Thomas M.T. Niles		47,938,725		434,703		-0-		-0-
	David M. Petrone		47,006,485		1,366,943		-0-		-0-
2.	Approval of an Amendment to the 1999 Stock Incentive Plan, increasing the number of authorized shares by 1,600,000		43,915,551		4,344,939		112,938		-0-
3.	Ratification of the Appointment of Ernst & Young LLP as independent auditors		45,622,918		2,676,278		74,232		-0-

The Directors who did not stand for election at the Annual Meeting and whose terms of office continued after the Annual Meeting were:  Drs. Joseph J. Jacobs, Linda K. Jacobs and Dale R. Laurance; Messrs. Peter H. Dailey, Robert C. Davidson, Jr., Robert B. Gwyn, Craig L. Martin and Benjamin F. Montoya; and, Ms. Linda Fayne Levinson.

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JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES
MARCH 31, 2003

Item 6.		Exhibits and Reports on Form 8-K.
	(a)	Exhibits
		99.1 –	Certification Pursuant to 18 U.S.C. Section 1350
	(b)	Reports on Form 8-K
		None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

JACOBS ENGINEERING GROUP INC.
By:	/s/ JOHN W. PROSSER, JR.
	John W. Prosser, Jr. Senior Vice President, Finance and Administration
Date:	May 13, 2003

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CERTIFICATION

I, Noel G. Watson, Chief Executive Officer of Jacobs Engineering Group Inc., certify that:

1.	I have reviewed this quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2003 of Jacobs Engineering Group Inc.;
2.	Based on my knowledge, this quarterly 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 quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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 quarterly 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 quarterly report (the “Evaluation Date”); and
		c)	Presented in this quarterly 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 quarterly report whether or not 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:  May 13, 2003	/s/ NOEL G. WATSON
	Noel G. Watson Chief Executive Officer

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CERTIFICATION

I, John W. Prosser, Jr., Senior Vice President, Finance and Administration of Jacobs Engineering Group Inc., certify that:

1.	I have reviewed this quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2003 of Jacobs Engineering Group Inc.;
2.	Based on my knowledge, this quarterly 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 quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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 quarterly 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 quarterly report (the “Evaluation Date”); and
		c)	Presented in this quarterly 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 quarterly report whether or not 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:  May 13, 2003	/s/ JOHN W. PROSSER, JR.
	John W. Prosser, Jr. Senior Vice President Finance and Administration

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