Good morning. My name is Allison and I will be your conference operator today. At this time, I would like to welcome everyone to the Jacobs' second quarter earning conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. (Operator Instructions) Thank you. Miss Bruner, you may begin your conference.

Thank you. The company requests that we point out that any statements that the company makes today that are not based on historical facts are forward-looking statements. Although, such statements are based on management's current estimates and expectations and currently available competitive financial and economic data, forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause actual results of the company to differ materially from what may be inferred from the forward-looking statements. For a description of some of the factors, which may occur that could cause or contribute to such differences, the company request that you read its most recent annual report on Form 10-K for the period ending September 30th, 2008, including Item 1A, Risk Factors; Item 3, Legal Proceedings; and Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations contained therein and the most recent Form 10-Q for the period ending December 31, 2008 for a description of our business, legal proceedings and other information that describes the factors that could cause actual results to differ from such forward-looking statements. The company undertakes no obligation to release publicly any revisions or updates to any forward-looking statements, whether as a result of new information, future events, or otherwise. Now, John Prosser, CFO of Jacobs will discuss the quarter's results.

Thank you, Patty. Good morning, everyone. I'll go over the financial highlights and then I'll turn it over to Craig Martin, our CEO to review the business overview for the quarter and kind of look forwards. If you turn to slide four, our financial highlights, we did have report, diluted earnings per share of $0.88 for the quarter. That was on net earnings of $109.3 million. For the six months, our earnings per share were $1.82 and net earnings of $225.6 million. Backlog was reported at $16.6 billion, which is up about $600 million from the prior quarter. We continue to have a strong balance sheet. Net cash position at $746 million was about the same as the first quarter, but up substantially from last year-end. The difference there was we had some changes in certain payments and receipts. So while the outlook for the year still remains strong, the cash for the quarter was about flat. Then we did lower our guidance as reported in the press release. The current guidance of $3.10 to $3.50, which is a reduction from our previous issued guidance of $3.55 to $3.90. Turning to slide five, this is the history of our earnings growth, it shows that we still have a good track record for the last trailing five years and also for the last trailing 12, the reported earnings continue to be good, although the outlook is a little bit more complex and difficult. Going to slide six, history of consistent backlog growth, again, backlog was up over not only last quarter, but over year-over-year. In the backlog, in this quarter, there were a few cancellations, but nothing that was significant. In fact, the total cancellations were under $100 million for the quarter, which is kind of in line with the kinds of cancellations we could see even in a normal market. We do have some work in the backlog that continues to be delayed or stretched out, which is affecting some of the workouts, but overall the backlog numbers were good. Professional services continued to grow slightly. It was up couple hundred million over the last quarter and up nicely from the prior year. With that, I'll turn, it over to Craig to review the outcome of the quarter.

Thank you, John. Good morning, everyone. I'm now on slide seven. I'm going to speak about five topics this morning, pretty much the same five topics we always speak about. The first two, I am going to go into in some detail in subsequent slides, so I'll skip over those for now. And I'd like to talk about the bottom three individually here. Let me talk first about our multidomestic strategy. We've talked a lot about that over the years. It's our idea that we want to be local to our customers and then bring those local customers global capability, not only in terms of know-how globally, but in terms of being able to deliver things like high value engineering from some of our centers in places like India. We think this benefits us in a number of ways, particularly because of our positioning in the market, one of our challenges is always to be more competitive with the local and regional competitors and that combination of multidomestic strategy and high value engineering let’s us do that. So, it's an important part of our strategy and important part of why we've been able to maintain 15% growth over the long-term. The next [bullet] is about acquisitions. This is an interesting part of the business for us. As you know, we get about a third of our growth, plus or minus from acquisitions year in and year out. It's a good business right now from our perspective, good position right now. Activity is up and growing and the multiples are dropping very fast. So, we're seeing a real improvement in the buyability of target companies. You couple that with our strong cash position and we think we're in a great position to take advantage of acquisitions over the next 12 months…

(Operator Instructions) Your first question is from Michael Dudas with Jefferies.

Craig, you mentioned in your press release or maybe in your prepared remarks the complicated nature of the heavy process market. I wondered if you could get a little bit more color into that. I think we're all understanding of the marketplace and the pressures put on, maybe is it more client specific what Jacobs provides to the clients? Is it overall just general malaise and concern? Could you maybe expand a little bit about how that is impacting your near-term visibility and results?

Absolutely. In the simplest way I can characterize it, Mike, is like this. As you know, we get out and see customers very aggressively. I've seen a number of CEO's or COOs of our customers over the last quarter and as I talk with each of these, it's almost like I could tell them what they're going to say because the speech goes something like this. It says things aren't so bad. Our company is doing better than the overall market would suggest that we ought to be. And so we feel pretty good about our business and that sounds really good. And then comes the [but], and the but is, but we're not sure what's going to happen and we see a lot of uncertainty in others, so we are not making commitments quite like we did. We are going to think about these investments a little differently and it's going to change the way we think. Generally the change in the way they think involves different approaches to projects, different hurdle rates, more investigative or development kind of work around their projects and that makes not so much the projects themselves, but the timing of them more uncertain and it's amazing how uniform that response is. And that's why I'd say it's a highly uncertain marketplace because it's almost down to how does the customer feel instinctually about the market.

And to follow-up on that a bit, you did an excellent job in your overhead reduction in the first and second fiscal quarters of this year. Is that more reflective of what you think is more of a run rate business level from a gross margin absolute basis over the next four quarters, or is it being a bit more proactive and taking this as an opportunity for you to kind of improve utilizations or move people from the office to the field or vice versa?

Well, it's both, Mike. As the run rate goes down, we get some natural reduction in our G&As just as a consequence. We run the company with a very high level of billability and we maintain that sort of regardless of what the market situation is, so some part of it is, in fact, just a benefit that comes with a reduced market, we get a reduced G&A, but back in about September, we thought we could see some challenges in the marketplace and that being aggressive about controlling costs or even about driving costs down, would be a really good idea. So, we put a very strong push on getting our costs sort of minimized, and focusing on just doing only things that absolutely have to be done to run the business. I think the combination of those two, is what's led us perform as well as we have on the G&A side.

And you anticipate that through the rest of the fiscal year?

We're going to continue to be very aggressive about controlling our costs.

Thank you, Craig.

Your next question is from Steven Fisher with UBS.

John, you gave us the cancellations, but can you confirm what the gross bookings were in the quarter?

We don't look at gross and net. You can just kind of walk your way through it. It's about, the sales for the quarter were about 3.5.

Okay. Good. That's about what I had in…

So if you take out somewhere around a little bit under $100 million, that was the cancellations, then I guess the gross would be [3.6].

I just wanted to confirm that. So, Craig, you went around the wheel of the end markets, but can you just comment on what the real drivers were for the new bookings in the quarter? That's a pretty good number and included in there were there any big projects booked in the quarter? And I guess I'd define big as say, $300 million or above.

Yeah, the answer to that is there were some big bookings in a couple of markets. I was hoping that we would have had a chance to press release them before this call, we have not. So, I can't say more than that, but there was a big booking related to crude slate work and a couple of big bookings in the infrastructure and buildings business.

Okay. And then so given the nice solid bookings, I'm just trying to get an understanding of the guidance reduction. I mean how much of it is margins and or how much is it maybe since you mentioned in the conversations with your customers there is timing uncertainties, you just give a little color about what the thought process is behind the guidance reduction?

Sure. Part of it is that we believe that there's a significant chance that bookings and activities will go slower than they had historically, and so we were trying to be conservative in terms of what that means to billable hours and revenue and profits in the next couple of quarters. Part of it is that the legacy of cancellations and delays is also impacting the numbers a little more, frankly, a little more than I thought it would. And so that's also impacting our outlook for the next couple of quarters. So, we view the outlook on the next couple of quarters to have been impacted by those things and we also think there’ll be a continuing pressure on margins. You can already see, in fact, we already are seeing cases where the bidding for projects in that discreet projects arena is getting increasingly competitive. We went through a cycle where we told you we were getting modest improvements in our alliance relationships multiples, now we're getting requests for modest reductions. But we have a lot of modest reductions; they start to add up to real money. So it's a combination of those things.

And are you seeing the same type of competitive pressures on the infrastructure side of the, and the government side of the business as well, or is that mainly just in the energy and other areas?

Yeah. We see some competitive pressures margin wise in the national governments business, where there is a lot of value based procurement and prices factor. We don't see any to speak of in the buildings or infrastructure business. Those businesses are relatively speaking very gentile.

So the stimulus work that comes in should be pretty solid on the margins?

Yes, that's what we expect.

Your next question is from Andrew Kaplowitz with Barclays Capital.

Good. So, Craig, you said that, you know, you're thinking that there could be a booking slowdown, but have you seen one yet is I guess the question?

No. I don't think there is going to be a bookings slowdown. I actually feel pretty good about our prospects going forward. Our sales numbers are tracking pretty well, frankly, with our plan, we're a little under and a little bit ahead of last year. But overall, I think that's not going to be the challenge. The challenge is going to be the timing of releases inside those programs and projects. I think there’ll be probably more steady work and more front end work and it’ll take longer than it has historically.

I got you. So can you give us, then, I think you gave it to us last quarter, you know that historically you burn about 60% to 65% of your back log. It seems like that number would change, then, over the next year. Is there anyway to think about, you know, what the new number is?

Well, it, let me first be sure we're clear on what the, how the back log relates to the business. In a given year, at the beginning of any basic 12-month period. In that 12 months, about 60% to 65% of work-off comes from backlog. That's a little different than the way you just said it.

Got you, got you.

Okay?

Yeah. Yeah.

So what we think may happen is that, we'll be at the low end of that range in terms of what we expect to be able to eat out of backlog going forward.

Got you.

And we also think that’ll affect, then, the new sales in terms of the rate at which we're able to eat that. So we think that the business is going to continue to build backlog, we think the prospects longer term are very good, but in the near terms certainly for the next couple of quarters, it's going to be challenging to eat backlog at the rate, we'd like.

And then, you know when I look at your revenue in the quarter, you know was down a little bit from the last quarter. If I look at the guidance, it assumes I think revenue coming down some more and, roughly $1.50 of EPS for the second half of the year. Do you guys have any like you have pretty good visibility from your backlog? So is it going to sort of level off at the next couple of quarters run rate, for the next four to six quarters? Is it just kind of push out so we're going to see a level off of current volume or are we going to continue to see declines? How should we think about it as we go forward in 2010?

Certainly, your assumption is over the next couple of quarters, the direction we're talking about, if they are going to be going down. At this point, we're not giving any guidance or any forecast of the 2010 year. We typically don't do that until, closer to the end of the year or at the end of the year for the next year. But, directionally, it really depends on when we see and when we hit the bottom and at this point we're not predicting or forecasting that. You have that crystal ball. We'd be happy to have it, but I think the shape we would expect to see, is this is going to come down in the next couple of quarters and find a bottom and then the recovery will be a little longer term and maybe slower than what we saw the ramp-up over the last few years.

Yeah, I think we'd like to believe it's going to level off and then, after a few quarters turn back up sharply. But it is as I said earlier, hard to predict.

Right. And I think, what I'm trying to get at is that, it would seem that you maybe have a little bit better visibility and that you do have all of this backlog, even if it's slower burning. And so to me it means that maybe it should just be stretched out more and you could see that a little bit better than sort of, the average industrial company. Is that fair or?

Yeah, I think that's fair.

And then just one other question, if I could. It sounds like you guys are much more positive on the stimulus in terms of, infrastructure and buildings. Is that a fair assessment? Is there something you're seeing that's getting you more excited about the business? I know you've always been positive, but the new statistics that you've brought up, it sounds like from where you guys are, you're more positive.

Well, yeah, I think let me break it into two parts. With respect to stimulus and the environmental area and in the buildings area, I'm significantly more positive. It's really clear that the money is going places where we're very well positioned to take advantage of it. And so when you look at the money that's been added on the stimulus side, we expect will be a disproportionate beneficiary compared to our competition because we just you know our public buildings business is the strongest part of our buildings business. And all of the stimulus money, for example, there went to public buildings. So those customers are getting a lot of money, they don't have the resources to spend it quickly like they'd like, so they're having us help them. And so we're pretty upbeat about that side. On the infrastructure side, we remain pretty cautious about its impact in the near term, but we do think the stimulus and frankly some of these bond issues got approved in November and still haven't been funded, those two things combined are going to have a very positive impact on infrastructure, but I would caution you, we think that's in the out quarters.

Got you. That's great. John, can you tell us how many employees you had at the end of the quarter? Just, do you have that number available?

We were down from the year end, in total I think we're right around 53,000 - 54,000.

Okay.

We continue to hire some people in some markets and obviously with the reduction in G&As and such, that's a reduction in people and as some of the markets slowdown, we reduce the headcounts.

Thank you very much.

Your next question is from Alex Rygiel with FRB Capital Markets.

Thank you. That's FBR. Good morning gentlemen. Nice quarter.

Good morning Alex. We know who you are.

Okay, thanks. Couple of simple questions first. Craig, you had mentioned what percent of your business comes from or what percent of your revenue is [eaten] from backlog. Any sense as to what percent of your profit is eaten through backlog?

It's actually not a lot different if you talk about at least at the gross margin level.

Right.

In fact, internally, we don't pay a lot of attention to revenue. Frankly, we look at gross margin from our projects as our primary top-line.

Okay.

So when I talk about that 60% to 65%, it would apply to gross margin and/or to revenue. It would be more accurate about gross margin, actually.

Sure. And secondly, speaking of the UK, there's a number of different opportunities over there, both on the environmental side and the infrastructure side, particularly with the upcoming Olympics in a few years. Can you talk a little bit about the developments over in the UK over the last few months and whether or not they've changed, improved or weakened?

The UK is struggling from a GDP point of view. The situation if anything is worse in the UK than it is in the US, but interestingly enough, the spending is in areas on the infrastructure side at least where we're very well positioned. So we're getting a lot of benefit from Olympics and related spending in terms of transit, in particular in the London area. We're seeing a fair amount of activity in the water business as well. So, overall, our infrastructure business in the UK looks a lot like our business in the US. It's growing at a modest rate and we think it's going to continue to do so. If you want to go on to the environmental side, it continues to be a very lethargic pace in getting the environmental projects out there and bid and re-competed, but we do think there are some major programs that are going to be very positive for the company as well as a lot of other opportunities. There are also some interesting acquisitions opportunities out there that we're continuing to evaluate.

And lastly, on the nuclear front, you've talked in the past about possibly being in owner's engineer, any new updates on that strategy?

Well, I think we're making good progress. I think we have at least for the near-term decided to focus on being on the customer's side of that whole industry, not trying to compete for the EPC work, again kind of partly because that's just a big event thing whereas the owner's relationships last quite a bit longer. We are also looking to develop a capability in the maintenance of nuclear facilities. And I'm frankly pretty pleased with our progress so far, although I don't have any giant events in terms of a big alliance win to report this quarter.

Great. Thank you very much.

Our next question is from Tahira Afzal with KeyBanc.

Just had a couple of questions, number one, if you look at the bookings, you've booked in the fiscal second quarter, from the sounds of it, it seems that the underlying margins within that, would you say they're fairly similar to what you've been booking in the prior quarters?

No, I think they're a little thinner.

Got it.

Nothing dramatic, but we're not seeing the margins in new bookings that we saw a year ago.

Got it. Okay. So when you say that they're a little thinner, am I pushing my luck here by trying to define it within, let's say the context of your margins over the last couple of years, your operating margins have been and maybe I should look at your gross margins rather, but your operating margins since the last cycle have gone up from 13% to the 15% level or so, and then spun back to the 13%. How different are the margins here versus what's we saw in the prior cycle in terms of the down cycle?

We think overall our margins are less susceptible on the downside, in this cycle compared to prior cycles. We have more alliance business where we're negotiating the reduction as multiples and getting a little bit better deal. So, our promise when we told you our margins wouldn't go up as much as some of our competitors, but they wouldn't go down as much. I think we're seeing some of that and I also think the diversification of the company across markets and geographies has made a big difference in terms of our ability to sustain margins in the down cycle. Now, that's not to say that the oil and gas business or the heavy process business isn't going to impact our multiple or our margins and our multiples, I believe it will, but I don't think the impact will be as big as in prior cycles.

Got it.

Got it.

Also, Tahira, on the gross margin level, we are seeing the effect of the mix.

Got it. Okay.

Got it. Okay.

If you'll notice, we have moved over and the mix has moved a little bit to the field services side. So, part of that swings from the 15% that we saw here last year and also the [13%] is a mix, it's not all margin reduction, but we've been able to maintain our operating margins over the last couple of quarters as much by the G&A reductions as by what's happening at the gross margin. We have seen some reductions in the gross margins, but we've been able to offset that with the reductions in our G&A.

Got it. Thanks. And could you give us a bit of color on your market share with the GSA in the past in terms of construction and retrofit activity? It seems that it's going to be a lot of spending at least whether GSA is concerned. Would love to get some idea of where you stand over there?

Got it. Thanks. And could you give us a bit of color on your market share with the GSA in the past in terms of construction and retrofit activity? It seems that it's going to be a lot of spending at least whether GSA is concerned. Would love to get some idea of where you stand over there?

I don't think we can give you a market share percentage or a number, but we have a very strong relationship with GSA in every region and it's probably one of our very best customers in the buildings arena as we go forward.

Got it. And then, if I was to really view the potential offset as the you know, the energy side of your story comes under some pressure where the potential offset on the infrastructure side in the fiscal year '10 timeframe, just looking at the color you've provided on the infrastructure bidding and pipeline side, how should we view the two in terms of an offset?

Got it. And then, if I was to really view the potential offset as the you know, the energy side of your story comes under some pressure where the potential offset on the infrastructure side in the fiscal year '10 timeframe, just looking at the color you've provided on the infrastructure bidding and pipeline side, how should we view the two in terms of an offset?

That's one of those uncertainties I don't think we can address, quite honestly. You know, we expect that there will be some offset. We feel pretty good about it, but I think that's one of those questions that gets to what's 2010 going to be and we're not ready to say.

Your next question is from John Rogers with D.A. Davidson.

Or maybe not…

Mr. Rogers, your line is open. Please proceed with your question. One moment for Mr. Rogers question.

Let's move to the next person in queue, operator.

Your next question is from Joseph Ritchie with Goldman Sachs.

My first question is just going back to your margins for a second, you saw margins increase sequentially throughout this quarter. So I guess, I'm just trying to understand the implications of your guidance on margins for the remainder of the year. Just doing some quick back of the envelope math that looks like the midpoint would suggest margins are going to be down about 50 bits for the back half of the year. So going back to the question, and one of my colleagues just asked regarding your mix versus pricing pressure on projects. Can you give us a sense for how much of this is mix? How much of is it potential pricing pressure that you're seeing today?

Well, certainly it is a combination of the two, but, we don't give guidance on margin percentages rather than, we would expect to see them continue to the pressure will be on there. We've been saying for a while that we saw the pressure that margins would be coming down and I think that's nothing new. I mean we've gotten the benefit of G&A reductions and as we will try and continue to keep those right sized, the first fruits are always the easiest to get, and if as things continue to come down, if they do continue to come down dramatically, we will try to stay ahead of that curve, but it gets more difficult as that curve goes down a little bit. And so the, I think we will see it, but we're not ready to quantify exactly, it's going to be X number of basis points or whatever, but it will be a mix of the two and we would expect probably to see, revenues coming down a little bit over the next few quarters and the margin coming down slightly as well.

Okay. I guess maybe asking in a little different way, if you think about the -- your revenue for the back half of the year, is your mix going to change much, are you going to be doing much less work on the downstream and upstream side, more work on the public works side, is there some, potential margin compression that you are seeing because of a mix change?

No, I think you won't see the mix of, at least you won't see it appear to change very much over the next couple of quarters. We've got a substantial amount of construction work out in front of us, so the field services part of our business will continue to affect the margins a little bit as well. So I think in terms of seeing the mix from where you sit, you probably won't see the mix change dramatically. On the other hand, if you look at our business from a home office point of view, the home office mix between public sector and private sector is round numbers 50/50, and so in the professional services end of the market, I think you will see a shift in the mix to the public sector markets, but it probably won't become transparent before the FY '10 kind of timeframe.

Okay, okay, great. And then as I think about the, you booked a nice award quarter inline EPS, the your guidance was lower. Just trying to get a sense for the impact of Motiva on your lower guidance for the rest of the year?

We don't speak to individual customer impacts.

Okay.

Motiva is a good client, we expect that to be a good program, we're going to be there for the long term, but we really can't say more than that.

Okay. Okay, great. And I guess one last question for you. On AWE, is there any update that you can give us on the EU Commission approval that was expected between March and May of this year?

We expect that we'll be able to move forward to closing that, the EU Commission approval, process is nearly complete, and so we expect that deal could get done in the next couple of weeks.

Your next question is from Barry Bannister with Stifel Nicolaus.

When I look at your year-to-date, in the first quarter you beat by a nickel the consensus and the second quarter you beat by $0.03. Your revenues in the first half exactly equaled the street and, there's a fine line between conservatism and setting the bar too low. When I listen to the commentary, your gross margin is tracking exactly what we calculate to be where it should be on the field service mix and you don't sound like a company that wants to put a lot of money into SG&A, which has really helped save the year. So the only way I can get to the back half being down as much as your low-end of guidance is if your revenues disappoint because of project stretch outs that you probably know about now, but you can't really speak to or you're going to invest heavily in SG&A or you're going to do an M&A that's going to boost cost in the short-term. I mean is it one of those three? Stifel Nicolaus: When I look at your year-to-date, in the first quarter you beat by a nickel the consensus and the second quarter you beat by $0.03. Your revenues in the first half exactly equaled the street and, there's a fine line between conservatism and setting the bar too low. When I listen to the commentary, your gross margin is tracking exactly what we calculate to be where it should be on the field service mix and you don't sound like a company that wants to put a lot of money into SG&A, which has really helped save the year. So the only way I can get to the back half being down as much as your low-end of guidance is if your revenues disappoint because of project stretch outs that you probably know about now, but you can't really speak to or you're going to invest heavily in SG&A or you're going to do an M&A that's going to boost cost in the short-term. I mean is it one of those three?

Well, as I said Barry, the revenue expectation, the business level expectation is going to be down and we're going to see some continued margin deterioration. I don't think we're going to be seeing a big investment in G&A, but the market slows and we're ahead of the curve right now with the SG&A, that becomes more difficult to stay under that curve just because it gets down into more of the meat and less of the things that are the low-hanging fruit so to speak. And with the big growth we've had over the last few years, as much as we focused on G&As continually, things have crept into the system that were anticipatory of continued growth and those are the first things that we got out, as the market slowed. So that's kind of a long-winded answer. We see it as a potential for declining activities over the next couple of quarters, more so than what we thought at the beginning of the year or even at the last quarter and the pressure on margins, particularly on the process side has been a little bit more intense than what we would have even anticipated in the last quarter, and shown up a little bit earlier and while the changes are modest we work out and that's been margins anyway, that's even modest changes have an impact on the bottom-line.

I can see the argument being made for the delays on the civil infrastructure side and those that are most sensitive to short-term corporate CapEx within technical professional services, but you've made tremendous progress in the Middle East in oil and gas, particularly at Saudi Aramco. And they indicate, that they are going ahead with their spending, albeit stretched a little bit but that business even stretched is the best business you can do. It's the highest margin. It shows up, that the energy portion of your sales perfectly inversely correlates with margins being good and SG&A being low. So even a bad day in the Middle East is a better day than a lot of your civil work, I would say. So what are you seeing specifically in terms of what areas are being pushed out, stretched out because we just can't get to your back half numbers? Stifel Nicolaus: I can see the argument being made for the delays on the civil infrastructure side and those that are most sensitive to short-term corporate CapEx within technical professional services, but you've made tremendous progress in the Middle East in oil and gas, particularly at Saudi Aramco. And they indicate, that they are going ahead with their spending, albeit stretched a little bit but that business even stretched is the best business you can do. It's the highest margin. It shows up, that the energy portion of your sales perfectly inversely correlates with margins being good and SG&A being low. So even a bad day in the Middle East is a better day than a lot of your civil work, I would say. So what are you seeing specifically in terms of what areas are being pushed out, stretched out because we just can't get to your back half numbers?

Let me comment on that. We certainly agree with you that our push in the Middle East is a big positive for the company, but I will tell you that the customer and their partners in the Middle East are being very cautious about programs and study phases are very extended compared to what we might normally expect. So, while the business is good, it isn't contributing the volume that you would expect it would after this amount of time. So, that's one of our challenges. Noel is here with me, he may want to comment on the Middle East. Noel?

Yeah. What I would say on that is there's no doubt the profit margins out of the Middle East appear to be solid, but to say they're wildly better than our big infrastructure business or something like that, I think stretching it very [by the way]. We generally look at these businesses and by the time we get to the bottom-line and ratio and the sales costs and all that, the profit margins are solid, but are they just a lot better? No. I just don't agree with that statement. The Middle East is developing, it's developing at a neat pace, the big guys over there are going to continue to spend. I was there less than six weeks ago at a big conference listening to what their plans are, but Craig is right. They are being cautious. They know the market has changed and everybody in the world is being cautious because frankly nobody understands what's going to happen to oil prices and in the downstream business some of the margins, so people are just being more cautious than they have been and certainly than they were 24 months ago.

Your next question is from John Rogers with D. A. Davidson.

Just going back to, I guess, Craig some of your comments and John's as well. I think you've talked about a lot of the work being pushed out, but at one point I thought I heard John say that, you're expecting now a much slower recovery than what you've seen in past cycles. Did I hear that right?

Just going back to, I guess, Craig some of your comments and John's as well. I think you've talked about a lot of the work being pushed out, but at one point I thought I heard John say that, you're expecting now a much slower recovery than what you've seen in past cycles. Did I hear that right?

I think it's going to be slower than what we saw in the last run up, which was in the last three years.

Okay. Okay. But you weren't talking about…

Okay. Okay. But you weren't talking about…

I wasn't referring to the past cycle.

Okay. Okay. And then secondly, in terms of acquisitions, you know, it sounds like there is more opportunities out there. Given your size now, are you more inclined to look for larger acquisitions or I mean do you look at this market and as a lot of transactions here?

Okay. Okay. And then secondly, in terms of acquisitions, you know, it sounds like there is more opportunities out there. Given your size now, are you more inclined to look for larger acquisitions or I mean do you look at this market and as a lot of transactions here?

You know, I think, John, it's a little bit of both. I think that we will be, we are in a position to do a little bit bigger deals, and we probably will you know, if we find the right deals at the right price, we'll do some of those. We're still not have don't have any appetite for a merger of equals or anything like that. That's just, we just think that's too risky in the long term, but I think, you know, deals that are, you know, Carter burgess size or twice that size would not be off the page at all. But there is on the other hand, there is still a lot of opportunity for us and what I would characterize as a niche and bolt-on acquisitions to help us develop markets or skills or services in these markets and that will continue to be a big piece of what we do, because there's a lot of leverage in it for us. So it and in the I guess to summarize my answer, yes.

And lastly, in terms of what you're seeing competitively in the market, compared to previous downturns, I guess any of you, Noel or but how is the competition reacting to this? I mean do you see anything in terms of crazy pricing or risk taking equity positions, that kind of stuff that we've seen in previous downturns?

And lastly, in terms of what you're seeing competitively in the market, compared to previous downturns, I guess any of you, Noel or but how is the competition reacting to this? I mean do you see anything in terms of crazy pricing or risk taking equity positions, that kind of stuff that we've seen in previous downturns?

I don't believe we have yet seen the bottom in terms of the competitive part of the cycle, and I will tell you that while margins are coming down, you know, in a really tough cycle on the Gulf Coast, if we get to that point and we could. Margins will go to, where gross margins and projects are zero. I mean that's how competitive it can get? So and we're not seeing that yet. So I don't want you to suggest the competitive environment is as bad as it's going to be, and we expect it to get better I actually expect the competitive environment to get worse, as we go forward for at least a few quarters. Right now, I think a lot of the competition is still working off backlog and not quite at the stage where they're starving for work. None of us are. But I think it’ll be a difficult time, for a while in places like the Gulf Coast, when the work dries up and the backlog evaporates. That's a more negative statement than I actually mean it to be, but, you know, I think there will be more pressure on margins in places like the Gulf Coast.

Your next question is from Sameer Rathod with Macquarie.

Just a quick question, one of my colleagues touched upon it earlier. I was wondering if you could expand a little bit on Motiva, where it stands in the current cost review process?

We are really not in a position to comment on Motiva. Motiva gets to comment on Motiva if you know what I mean. You know, I can say because I think it's in the general noise, the project is moving forward and we're moving forward with it, but I really can't say anymore than that.

Your next question is from David Yuschak with SMH Capital. Actually, your next question will be from Mark Thomas with Simmons & Company. Mark Thomas - Simmons & Company: I just wanted to touch real quick on your nuclear comment. You know, you're talking about focusing more on the owner's side and you're pleased with the progress, but you don't have any large alliance contracts to announce this quarter. Is that something we should expect to see in the near future, sometime this year?

Well, we continue to work to try to build those alliance relationships. I can't predict when we'll have announcements. You know we announced the alliance with British Energy, I think it was last quarter before last. Mark Thomas - Simmons & Company: Right.

And so we continue to work with customers in that arena. And they happen when they happen, unfortunately, Mark, so we can't predict. I'm not even trying to foreshadow that there is some big award coming up. Mark Thomas - Simmons & Company: Okay. And then just real quick on the Pharma Bio segment, you said you had good market share in that segment; can you elaborate on that what your estimated market share is?

Well, if you base it on E&R data for the companies doing that business, it would be north of 60%.

Your next question is a follow-up from Tahira Afzal with KeyBanc.

Just wanted a follow-up on something Craig you said during your prepared commentary. You know if you look at the out years, do you see them improving as of right now. Is that in regards to bidding activity, revenues or margins?

Well, I really only think about margins when it comes right down to it in terms of profit.

Got it. Okay. So you think that you know second half challenging, out years would mean post fiscal year '10 or would that include fiscal year '10?

Well actually, we're not prepared to give any guidance for '10 or beyond, but we'd like to believe that things will flatten out over the next couple of quarters and remember, I said we'd like to believe that they'll flatten over the next couple of quarters and you will start to see recovery after that. Certainly that matches what the pundits are predicting for the economy.

Right

Now when that turns to profit is a function of remembering that we are a late cycle company.

Exactly.

Okay so you have to keep that in mind in thinking about what a recovery in the economy means to a recovery in our profit line.

Got it. And assuming that some of these infrastructure projects you might be seeing carry fairly similar margins in a sense, are these going to be both sort of front-end loaded, sort of a higher burn rate type of profile?

No, I don't think so. I think the profile for the infrastructure projects that we're going to benefit from will tend to be the same profile we've seen in the past.

Got it. And Craig last question, as you look at the pipeline of these projects, what type of size ranges are you seeing? If I look at some of your [Army Go] kind of work, those projects are sort of $10 million in size, even less than that sometimes, but it seems some of the infrastructure projects are larger. Are you seeing sort of $300 million, $400 million projects in this mix, sort of similar to what you saw with the recently announced London rails project?

Yeah, what we find, Tahira is that project sizes in the infrastructure business are tending to grow. I was looking at our prospect list the other day and we have just in infrastructure alone, more than 60 prospects bigger than $100 million in construction value.

All right, okay.

And I remember that we predominantly provide engineering and construction supervision services in that industry.

Right.

So our share of that $100 million project may be under $10 million.

Got it. Okay.

But there is a lot of projects out there and they are definitely getting bigger in that industry.

Right. Last question, Craig, sorry, I lied about that one being the last one. If you look at the three segments you've highlighted as being areas where you can do acquisitions, upstream, infrastructure and aerospace, of the three, as you look at the opportunities in multiples right now, as you look at acquisitions that could be more than just niche small acquisitions, which one of these sectors could you potentially be seeing or looking at opportunities that are fairly large in size?

Well, we're looking at opportunities that are fairly large in size in all three of those sectors.

Got it, okay.

The sector, the infrastructure sector, because of what I still think is a little bit of an over belief in the value of the stimulus.

Right.

It's probably the one that has the worst pricing.

Got it.

The other two are more interesting from a pricing point of view.

Your next question is from Chase Becker with Credit Suisse.

Just a quick question. Most of my questions have been answered, but in terms of, you talked about you're seeing some competitive pricing on discreet projects, but I was wondering how over the next 12 months to 18 months you're balancing your views of some of the infrastructure work. I mean clearly, some of these smaller projects that have been announced from the stimulus, seems like they're running under budget or it seems like people are trying to take any kind of margin to keep their people busy. I was wondering how you think about that business over the next 12 months to 18 months and the list of projects that you have, how should we think about your bidding activity on those?

Okay. In the segment of the infrastructure business where we operate, there's virtually no price competition. In other words, the selection process has to do with your qualifications to do the work and not whether you're inexpensive or expensive in terms of your price. So, we don't expect that stimulus will have much impact one way or the other on pricing and we don't expect to see people dive bombing prices in that industry to keep their folks busy. Frankly, none of us are having any trouble keeping our folks busy in that industry as it is and somebody would get cheap in that industry would be of no value in the near-term. In the long-term, however, I think there is more infrastructure work to do than there is money to do it with and I believe that in time, maybe not but sooner rather than later, but in time price will be an important factor in who wins the work in that industry and we are salivating for that opportunity because we clearly have a cost structure that is well below the competition in the infrastructure industry. So, in some sense from our perspective it's bad news that there is no price competition in infrastructure.

Okay. I appreciate it.

You got to remember when we're talking about the infrastructure; we're talking on the design side. On the construction side, there tends to be a little bit more competitiveness because more of that has done on a lump-sum competitively bid basis, so our comment there is really focused on the services side, on field administration and design side of the business.

Make sense. I appreciate it.

Your next question is from David Yuschak with SMH Capital.

As far as the energy outlook is concerned, as you talk to some of your customers, is the volatility in the commodity markets one of those things that they can't get a grasp on to know how you valuated project at all that is causing some of the stretch outs or pullouts or whatever that is causing some of the discussions you've had with your clients?

I certainly think that's a factor in their thinking. To the extent that a number of our customers are in commodity markets, their investment decisions are swinging on two things, cash flow and what their prospective look at the industry is. So, where customers are constrained by cash flow, we're seeing projects stretched out. Where customers are concerned about futures pricing of that commodity, we're seeing some stretch out. We're also seeing a tendency in the customer to take whatever the most recent direction of the commodity might be and forecast that it's going to get better or worse along those same lines. It's interesting that if you do studies just in the oil and gas industry. If you look at what the forecasting trend is, whenever oil is going up, the forecast is up, whenever it's going down, the forecast is down. So there's a little bit of…

Trend following kind of activity…

Yeah, that's a good way to describe it, trend following activity there that swings back and forth, depending on just where commodities are at any given moment. Most of the [pundits] I read right now are saying the oil prices will stabilize at 50, 53 now and go to 60 next year. No one on earth knows if that's true or not, but that's sort of what our customers are starting to hear and think about and that should drive some expansion of investment, particularly up in the oil sands.

The credit side of it, is that as much of a factor too in their thought process or is it more just the pricing of the commodity itself?

Most of our customers spend cash flow and don't focus on the credit side of the market. If you get over into the mineral side of the business, there are some credit issues there, but in terms of the energy side, commodity chemical side, that tends not to be driven by credit markets, but more by GDP, demand and forecasts about cash flow.

Looking ahead here, just kind of a plan A versus maybe a plan B, if for whatever reason we continue to see the stretch out in energy spending because of whatever factors the customer doesn't want to go ahead, how do you see because you showed 45% of your current business basically out of the energy area. Would you see any kind of shifts in that mix in the different market verticals you have that could help offset or mitigate any potential weakness that could follow because of the inability to add much to the energy backlog relative to maybe some other places?

I mean there's two parts to that question, I think. With respect to inside the sort of energy spectrum, I think there continues to be opportunity for Jacobs, particularly upstream, to expand its market share. You know spending is a huge number in upstream at any time, good times or bad, $10 oil or $50 oil relative to our participation and penetration.

Okay.

So I think in terms of where you might see a shift is our ability to get more upstream work.

Versus downstream.

Relative to our downstream book of business.

Okay.

Where we have a little bigger market position?

Okay.

With respect to the balance between energy and other businesses. I think as energy overall is soft relative to the way it's been, we should expect that some of these other businesses diversification that we've put in place would help us and that we'd see business growth in some of those other arenas.

Is there anything that particularly stands out as far as opportunities there that can help?

Well, I think that's sort of part of the pie that's national governments, infrastructure and buildings is where the lot of that should come from?

Your next question is a follow-up from Barry Bannister with Stifel Nicolaus.

Guys, I just pulled it out here of the Middle East economic digest and a couple of other sources and Saudi Aramco's budget which is revised every year, five-year spending plan. Actually increased last month from $58 billion last year to $60 billion. It's up $9 billion over two years ago, it’s a 144 projects, 53% of them were downstream, and one of the contract provisions and most of it is going to be [in kingdom] EPC in the next three years. One of the provisions, is it has to create a joint venture for international firms with domestic firms and you have the Zamel 60% share, so you're ahead of your competitors. So I'm trying to reconcile that with Noel's conservatism regarding Saudi awards where you've made a major push. You seem to be in a perfect position for that kind of work and they are spending.

Well, Barry, I'm not talking about Aramco when I had this conversation, okay, I'm talking about the Middle East, because we can't get specific on this, but I still go back to my point, yes, the spending plans are there, actually, I attended the conference that that number was put out at, okay? And so the spending plans are there all through the Middle East, but the bottom line is that they are being more and they haven't pulled back on any of them, any of them. There's ADNOC or ALAMCO or any of these guys, they’ll get our petroleum, they're all still doing the spending, they have the spending plans and they are moving forward, but the pace has slowed and they're looking harder at their projects and even some of the projects over in the Middle East that were bid, let's say, nine months ago are being re-bid now to take advantage of price competition. And so the even the contract negotiations, we've been involved in an award over there for months in a contract negotiation that's dragged out, I guess since October 1, and it looks like we're going to get it finalized here in the next, week or two. Of course, we've heard that week or two [Congress] and this has nothing to do with one of the big oil companies over there, this has to do with a mid-sized company that you would have never have heard of, but it's a fairly sizable job. But we've heard this every two weeks now since October. That the project will go ahead, we are going to win it, but it is dragged out beyond belief in terms of the award and so we are seeing this drag-out, there is a little more thoughtful approach to projects, and so that's where our caution comes from. Are we ideally positioned? Yeah, we think we have we've done it just about exactly right. We do believe that. It was a very conscious effort. We've gone and done it. We have ourselves positioned exactly where we want to be. So that you know, that's just what we believe, Barry.

If I look at the bar chart, though, that they provided, the in kingdom, out of kingdom EP lump sum turn keys, looks like it's transitioning more to In kingdom EPC, and so where they're trying extract cost concessions would tend to be in purchased materials which on a pass through basis wouldn't effect the engineers that much.

No, but on the they actually companies in the Middle East have actually gone back out and re-bid the whole thing in their lump sum EPC bids, just to take advantage of better pricing.

On mostly purchased materials?

Well, yeah, but they're trying to work back in to the lump sum EPC.

Okay. I have a follow up later.

Remember, Barry, just one other thing here. Our participation in the Middle East is dominated by engineering, feeds and PMC. We're not now nor do we intend to be a lump sum EPC contractor. So there's a significant part of the CapEx that you're looking at that is planned release of lump sum EPC contracts where we will not participate.

That’s right. But we would be involved with the engineering, the feed?

Yes, that would be right.

Gentlemen, at this time, there are no further questions. Would you like to proceed with your remarks?

Sure. I'll just close out for a second. As we said in the press release, we're disappointed not to be producing quarter-over-quarter earnings growth. It's a tough time in the market, but that's you know, that's just an excuse. We'd like to be able to continue to grow, regardless of the marketplace. We do feel pretty good about our performance relative to the prior year and we feel pretty good about the long-term prospects that are out there going forward. It's just a tough market to be in right now and the uncertainties are pretty high. So we look forward to your support and we'll talk to you again in 90 days or so. Thank you.

Thank you all for participating in today's conference. You may now disconnect.