Jacobs Engineering Group reported $2 million in net earnings for its latest financial quarter, a steep year-over-year dive from $61 million linked to its recent acquisition of CH2M.
Earnings for Jacobs’ fiscal 2018 first quarter ended Dec. 31, 2017, took a hit from the $3.27 billion CH2M acquisition and a one-time tax charge, the company said in a press release. Jacobs reported a number of charges for the quarter, including a $51 million after-tax charge associated with completing the CH2M deal.
Because the CH2M merger closed on Dec. 15, the earnings report includes a two-week “stub period” of CH2M ownership, from Dec. 16 through Dec. 31, Jacobs executives said during a conference call with financial analysts. Financial filings Wednesday to the U.S. Securities and Exchange Commission include the two weeks of CH2M operations in Jacobs’ overall financials for the reporting period.
Jacobs reported $2.8 billion in revenue for the quarter, $200 million more than the $2.6 billion recorded during the same three-month period a year ago. Net earnings landed at $97 million, or $0.77 per share, up 13 percent year over year from $83 million, or $0.68.
“Another key pillar of our Aerospace & Technology strategy is to become a Tier 1 nuclear and environmental services provider,” said Jacobs Chairman and CEO Steven Demetriou during the conference call. “The addition of CH2M’s nuclear and environmental business catapults us into a leading position. In many instances, these nuclear opportunities are highly selective multiyear government contracts worth billions of dollars, often decades-long in duration.”
Jacobs and CH2M both have had stakes in the domestic and global nuclear cleanup sector. Jacobs is doing work at the sites including the Magnox and Sellafield projects in the United Kingdom, among other locations. CH2M led the corporate partnership that in 2015 received the contract to manage and operate Canadian Nuclear Laboratories, encompassing radioactive waste management and decommissioning. This side of the business, though, was addressed only briefly in Jacobs’ latest earnings report and call.
CH2M’s contracts with the Energy Department’s Office of Environmental Management have been placed under Jacobs’ Aerospace and Technology segment. Later this year, this unit will be merged with Jacobs’ Environmental and Nuclear business, management said during the call.
Recently, DOE shifted management of the troubled Plutonium Finishing Plant demolition at DOE’s Hanford Site in Washington state to Jacobs, which is now owner of cleanup contractor CH2M Hill Plateau Remediation Co. CH2M also plays key roles in environmental cleanup programs at DOE sites including the Oak Ridge Reservation in Tennessee and the West Valley Demonstration Project near Buffalo, N.Y.
Having acquired CH2M and its Hanford cleanup contract, Jacobs is moving to sell of its 41 percent stake in Hanford Site support services provider Mission Support Alliance to avoid any conflict of interest. Jacobs is also part of the Honeywell-led Mission Support and Test Services group that landed the new management and operations contract for DOE’s Nevada National Security Site last year.
Demetriou said few CH2M staff have left in the wake of the merger. “We remain as bullish as we were when we announced the deal,” he said.
A 10-Q financial report filed with the SEC said, as part of the CH2M deal, Jacobs acquired almost $5.4 billion in assets, which includes everything from cash to properties to “intangible” assets. Jacobs also acquired slightly less than $2.33 billion in total CH2M liabilities. The bottom line is Jacobs ended up with more than a $3 billion upside, according to the filing.
