Good morning. My name Carrie and I will be your conference operator today. At this time, I would like to welcome everyone to the Jacobs Third Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. [Operator Instructions]. Ms. Bruner, please go ahead with your opening remarks.

Thank you, Carrie. Good morning. 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 requests that you read its most recent annual report on Form 10-K for the period ending September 30, 2007, 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 March 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. And now, I will pass it over to John Prosser, Jacob's CFO who will begin today's discussion.

Thank you, Patty. I'll briefly go over the financial highlights of the quarter and then I'll turn it over to Craig Martin, our CEO for a more in-depth discussion of our... a business overview. We'll go to slide four, the financial highlights. Clearly, this was a very strong quarter. The EPS reported, the diluted EPS at $0.87 and for the year-to-date, excluding the one-time gain, was $2.42 for the nine months. Backlog grew nicely and ended the quarter at $18.3 billion. We continue to have a very strong balance sheet and our 10-Q will be filed by the end of the week. You will be able to get the details there. Our net cash balance as of June 30th was $496.8 million, up nicely from the last quarter. And as you've... sure you saw in the press release, we have increased our guidance for fiscal year '08 ended 9/30 to $3.15 to $3.40 per share. That includes the one-time gain that I mentioned above. If you go to slide five, this is a tracking of our earnings growth. The top line this just shows how the trailing 12 months through June 30th compare to the fiscal year ends over the last ten years or so. The bars underneath the graph show the five year... compounded earnings growth rate. And while we historically have said that we expect to be able to grow consistently at 15% per year on a compounded rate, clearly, in the last few years, we've accelerated growth above that amount and that growth has continued through this quarter. Looking at slide six, the backlog, very strong growth year-over-year. Also good growth quarter-over-quarter. Strong growth on the field services side, but also the technical professional services backlog continues to grow and I think speaks well of our prospects for the future. And now with that brief summary, I will turn it over to Craig to talk about our strategies and a market overview.

Thank you, John. Good morning. I'm now on slide seven. I want to just run through our strategies for maintaining that 15% growth in the long run sort of forever more. And these haven't changed any. You've seen them all before. We remain committed to our business model, our relationship-based business model. We are going to continue to focus on selective market diversity, try to make sure our business is balanced across the markets. And I'll talk more about each of those in a minute. We are going to continue to grow through a multi-domestic strategy. And our strategy has been and continues to be to follow our core clients into geographies where they need our services. That will continue to be our approach as we go forward and we will be able to do that both through bootstrap kind to investments and perhaps through some acquisitions. A recent example of that would have been the deal we made with ZATE in Saudi Arabia to give ourselves a presence in the Middle East in Saudi Arabia to match our presence in Abu Dhabi. So that's an area where we continue to see opportunities for growth and we are going to continue to focus on that client-driven geographic expansion. Acquisitions are going to continue to be a part of our mix of business. Now there is lots of opportunities out there right now. It's an interesting time in the marketplace in that a number of mid-sized players have concluded that they can't compete with the global players. We think there will be ongoing opportunities for additional growth from acquisitions. Pricing is moderating, which we also think is a good thing. And we are going to stick to our sort of standard approach in dealing with these acquisitions, buy good companies with...…

[Operator Instructions]. And your first question comes from Michael Dudas with Jefferies.

Hey Patty.

Hi Michael.

First question regarding staffing. How do you guys look relative to your year-end targets for home office and field personnel? And do you feel you still have the capability to grow the billable hours at the home office or job sites [ph] and not add as much G&A to the overhead given the expansive growth you have seen?

Mike, it looks to me like that the continuing challenges of getting staff are going to be there. It's been a tough market to recruit in for some time now, a couple years. But we are able to get the people that we need to get. I think we have a pretty good brand. I think some of the story we just told in terms of the diversity of the projects you can work on, the sort of long history of success in the company are starting to help us be more attractive to potential recruits, maybe even some of our competition. And so all in all, I think we are going to be able to get the home office staff we need for a long time to come. And it is a big world out there. There are lots of ways to find that staff if it ultimately becomes a problem say in the U.S. or in Northern Europe, someplace like that, because we... the back office, our ability to wheel to work around helps us a lot in that regard. And we are not wheeling the work nearly as much as we could do if we needed to. With respect to the craft side of the business, I think everybody is concerned about the availability of craft. You've got a lot of construction out there, some pretty significant projects. And recruiting craft is going to be a big challenge. We are taking steps to provide for foreign workers and some of our locations like up in Canada. And we think the work will get down and we will find the crafts people to do it. It will and, without a doubt in my mind, impact schedules; it already has. We are predicting longer constructions cycle for the projects that we working on engineering in today than we might have three or four years ago because of craft availability. But there is no reason to think that the projects won't get done and at least at this point, customers aren't running away from projects based on the extended duration or the higher cost that that might represent.

My follow-up question, Craig, is in your prepared... you and John prepared remarks, you talked about two issues: one, on the acquisition side, companies are realizing it's much more difficult to compete against a company like yourselves. Obviously, this hiring issue is one of the drivers. But secondly, you said that the competition amongst maybe bidding and negotiating on projects from clients may not be as strong as maybe you would have thought. Could you maybe clarify those two issues and is this going to lead towards a reasonable round of mid-sized consolidation in the global business?

Let me take the consolidation question first. I believe and I think I see evidence when I am out there talking to companies that might be interested in considering that as an alternative that there is a movement in the mid tier kind of players toward being a part of the bigger organization because of the challenges of growth. It's not just a people challenge; it's a cash flows challenge, it's a matter of retiring baby boomer shareholders. I mean there's a lot of issues that are driving that. But what's pretty clear is that these mid tier companies are struggling to both grow, pay off their shareholders and recruit the talent they need for the next 10 to 20 years. And we think that's a good thing. Certainly, it plays to our strategy to continue to use acquisitions as part of our growth strategy. With respect to the bidding climate, certainly, in the marketplace today, the bidding climate is not as intense as it might have been a few years ago. There are fewer bidders even on some of... there are certainly many fewer bidders on some of this lump sum turnkey work, which should ask that it may be more profitable in the future. We won't find out. And certainly, even on the services-based business, the number of competitors for the bigger projects is down relative to what it might have been a few years back. So it's still a relatively benign marketplace from a competition point of view. That's not to say there is not competition; there is, but not as intensive as we would see it in a down cycle.

Great, thank you very much.

Your next question comes from Jamie Cook with Credit Suisse.

Hey guys, it's actually Peter Cheng [ph] with Jamie. How are you doing?

We'd like to know why Jamie is on, but you told us [ph].

I think that's two times in a row here.

Yes, I think you are right.

Real quick, I guess I just had a quick question on your guidance. I mean you guys have done... and congratulation on the quarter, but you guys have done about 40% EPS growth in the past three quarters and it looks like your implied guidance for Q4 is about 26% EPS growth. Are you guys... would you guys characterize that as somewhat conservative? How should we be kind of thinking about that? Was that because field services in the backlog just picked up so much that there was going to be some margin compression?

Well, that's part of it... is not margin concerns; it's just that the percentage margins are flattening. Obviously, they flattened this quarter over last quarter and such. But we decided over the last couple of years that we wanted to keep the guidance range fairly broad. And I think with the strong quarter, we felt we needed to increase it this quarter. And I think that it represents a range that certainly has some potential for upside, but also there is some concerns because there is some uncertainty out there in the market. We are not seeing it significantly in any of our sales results, or our backlog, but it's still out there. And so I guess we've just decided to keep a broad range and keep it within what we think is a reasonable range.

And most of that concern I suppose would be in the infrastructure or the PharmaBio type markets?

Well you could certainly say it could be there, but we could also find that one of the major clients gets cold feet about their capital program and decides to go backwards. I mean we haven't heard that, we're not seeing it. But I think it's prudent to consider given what... some of the things that are going on in the economy that we might see something like that. And we just really don't want to have a range that we have to be outside of.

Great. One last question, it looks like CapEx sort of ramped up pretty significantly. Looks like it's at $87 million. Was there some major investments that you guys were making?

A lot that... well, it's really two areas that's driving that. One is just the growth of people, additional capital that's going into tenant improvements. We have expanded our real estate holding significantly as far as lease space down in Houston, up in Calgary and various other places. So I think we just... we've had a lot of capital improvement dollars going into tenant improvements and furniture and fixtures and computers and things like that as we bring people on. The other area is as we continue to expand our systems, drive our global financial system into acquisitions and such, we've continued to make significant investment there. So really, it has been driven by kind of plateau growth, step stair growth, I should say, as we have to add people.

Great. Well thanks guys. Congratulations again.

Thank you.

Thank you.

Your next question comes from Steven Fisher with UBS.

Good morning. Nice quarter.

Thank you.

Just the theme of my questions here initially are slowing in Europe, and I guess I'm starting off. Is your mix of business in Europe overall and then UK specifically similar to your companywide mix? And I guess I might expect that the UK probably could be less hydrocarbon-driven.

Yes. If you look at our businesses in the UK and on the Continent, it is a... the mix that the company has is representative in terms of markets served. So we serve most of the markets we serve in the U.S. We also serve those markets in Europe. But the relative weight of the hydrocarbons business is lower. To your point, it's significantly lower for example in the UK, it's somewhat lower in Northern Europe and it's very much lower in Southern Europe.

Okay. And then within the UK, I mean it seems like things are slowing down. I mean how big a market is that for you in terms of revenues and how much of your work there is maybe driven by Olympics projects, which may have a little bit more support to them?

Well, we don't break out the countries in that kind of detail. But the slowdown in the UK has impacted the real estate market fairly significantly. It hasn't had a significant impact on our businesses as we sit here today. Again, remember, we are focused on things like the infrastructure business in the UK, the scientific and technical building types, hospitals, prisons, laser facilities, those kinds of things. The pharma business in the UK has been soft for a long time, a little better in Ireland. But a lot of the investment is not going to Europe just at the moment. So it's a mix of business that's a little different than here. But frankly, we are growing nicely in both the UK and on the mainland. And I think that will continue.

Okay. And then in terms of the state budgets, you mentioned about the bond passage rate and some other opportunities. Given that July 1st was the timing for most of the states to pass their budgets, what have you seen so far? What's your takeaway from the process? Anything that surprised you?

We don't have all the data in from what the various states have done. So I can't give you a complete answer to that. But my sense in talking with our folks who are involved directly in those markets is that while there is some softening in isolated locations and more locations maybe than six months ago, the business is still pretty good. Remember, though, that we have a very small market share in that particular area. And so our opportunities for growth really aren't limited in any significant way by whether the market is $60 billion or $50 billion.

Okay. And then I guess can you just touch upon I suppose beyond California, New York what are your top four or five states for infrastructure today?

Beyond California and New York. Florida, Texas would certainly be on the list; Massachusetts, New Jersey, Maryland would all be... they are pretty strong in that part of the world. Arizona, Nevada would also be strong, Colorado.

Washington.

More than I bargained for it. Okay.

Well I think what the point of that is it really is that we are spread across pretty much all the United Sates. And we have some that are stronger than others, but we have a little bit everywhere. And that's back to Craig's comment about we are looking at opportunities to grow market share as much as just participate in increased spending.

Right, fine. And then just lastly, I want to confirm what I heard you said about the fourth quarter. It sounds like you have all the work in your backlog all ready to hit the numbers. But you are maybe being a little bit cautious in case of project cancellations. But just confirming that you did say you are not having any discussions like that with your clients today and you haven't heard of any people, any clients starting to talk about projects that might be cancelled, was that right?

Yes, I think that's right. I mean we talk with clients all the time about their thoughts. And certainly among other things, we talk about whether these projects are going to go forward or not go forward and what their decision criteria are going to be. What we are finding is for the most part, these projects, if they are struggling it's a project. It's a project that has challenges. What you tend to find is the same thing we've described in the past. You tend to find not the outright cancellations so much as you find they will escalate just a little bit or let's scope this now. We'll make this piece of the project a little smaller to make it manageable. And so the project is constantly moving around in the scheme of things in terms of the precise execution of the projects. But then when you sort of add them all together, it's business as usual. Does that answer your question?

Yes, it does. I will get back in queue. Thanks.

Okay.

Your next question comes from Andrew Kaplowitz with Lehman Brothers.

Good morning guys. Nice quarter.

Good morning

Thank you. Thanks.

Sojust wondering about your backlog, the last several quarters, you've blown away your expectations in terms of reporting good backlog. And so this quarter again, we have got a very nice number in there. And so I guess two questions. One is I know you have relationship-based... that's how you do... you get your projects. But how much of what we are seeing here is scope growth in existing projects and how much is maybe new projects with your same customers or different customers? Is there any way to tell us that?

Craig threw that one to me. Basically, we're not getting tons of scope growth to get in there. The big increase has been new awards or projects moving from the feed phase to the phase I, phase II, phase III, phase IV. Remember, we don't backlog the downstream phases until we are pretty sure that we've got them and we are moving ahead on them. So these projects get backlog in phases. But it's not scope growth, it's not like we've got a $300 million job that's all of a sudden $500 million and we are adding $200 million to the backlog. That's not happening. I mean I can't think of an example where that's happened. So it's basically newer and it's also the extrapolation of the phases as we move downstream.

That's great. And Craig, is it fair to say that the strength still is coming disproportionately from oil and gas versus your other segments when I look at the backlog you reported this quarter?

As I look at it, I would say certainly oil and gas is one of the stronger markets, right. And so it's certainly contributing disproportionately when compared to a market like say PharmaBio. But we are getting some pretty strong contribution out of our infrastructure business. I know the revenue numbers look small, but remember, that's almost entirely a pro service business. And so the national governments piece, the infrastructure piece are also pretty solid growth elements as we go forward.

Got you. And Craig, it might be a little early, but focusing on '09 for a second, obviously, you've put up strong new awards so far this year. Probably you'll put up strong new awards again in 4Q. And so can you in 2009, do you think still grow your backlog versus 2008 given the growth we've seen in 2008 versus 2007?

We certainly believe that we have the opportunity to continue to grow our backlog based on what we see out there in prospect. Beyond that, we are not really giving any guidance for '09.

I didn't think you would. Just one more follow up, if I could. So it doesn't sound like you are seeing sort of material delays in your projects. Maybe you are seeing people sort of take their time. But people worry about cost escalation and its effect on these projects, but in general, the customers are sort of... they might be delaying something a bit, but you've generally seen these projects go forward. Is that a first statement?

It is.

Okay. I'll get back in queue. Thank you.

Your next question comes from John Rogers with D.A. Davidson. John B. Rogers - D.A. Davidson & Co.: Hi. Good morning.

Good morning John.

Good morning John. John B. Rogers - D.A. Davidson & Co.: A couple of things. First of all, just on the backlog again for a second. Are you seeing projects extend out further? I mean of the backlog that you have, the $18 billion, are they longer projects than you've seen in the past? Is that part of the growth or is it just... is this all going to be completed over the next 18, 24 months?

Well I would say that certainly the size of some of our projects have increased, you look at a Motiva, or some of these larger projects, those tend to be a little bit longer than what would be... historically have been in our backlog. But when you look at the biggest part of our backlog as far as number of projects, they are still in that same scope that are 18, 24 months. When you look at professional services side of the contract, that tends to be the front-end part of that design and such. And other than in some of the government contracts that go on for multi years, tends to be shorter. And while the duration maybe... has extended a little bit, it's probably not that much different than it was a year or two ago. But I would say that projects in general are stretching out a little bit just because of availability of labor, availability of materials, getting into queues in fabrication and shops and things like that. So what took 18 months or 20 months a couple of years ago might take 22 to 24 months now or even a little longer depending on what kinds of equipment, what kinds specialty stuff or the concentration of labor or equipment that you need to put on the job. John B. Rogers - D.A. Davidson & Co.: And then, secondly, I guess Craig or Noel [ph], when you guys were talking about the balance of your business, and while revenue isn't necessarily a good measure of relative contribution, it's still near... the oil side and chemical side of the business are a disproportionate amount of it. And as you at look at acquisitions and expansion, is it your intent to balance... to rebalance that portfolio or is it across segments? Or are you looking... thinking more about multi-domestic, I guess was the phrase used, balancing it that way or is that a consideration at all?

No, it's definitely a consideration. What we continue to look at from an acquisition perspective is markets that we think have solid long-term prospects. So we are still bullish on oil and gas business upstream because we remain a very small player in a very big market. And an acquisition or two can help us considerably there in terms of accelerating our growth. But we are also very interested in sort of the other side of the equation, our growth in the government services side, our growth in infrastructure, our opportunities, what we think... again, long-term pent-up demand, very large markets. And that will tend to keep the wheel in balance over time. Again, remember that part of why we had this market diversity is because we tend to see countercyclical spending in some of these markets. So when things like oil and gas get weak, there tends to be an offsetting spending going on in things like infrastructure. And you can recall back not so long ago, refining was 8% of our revenue. And I suspect someday it will be 8% again. I hope not, but I suppose it could happen. And we want to try to have the balance in the wheel that lets us continue to grow even in those times. John B. Rogers - D.A. Davidson & Co.: Hopefully, all the other segments grow more.

Right.It's sort of what... we have always said if you think of this as, I don't know, maybe we've got nine cylinders now, so our analogy doesn't work. We used to say there is eight cylinders in the engine and if five were firing, we can continue to make our growth targets. And it's kind of any five. And I think to a large extent that's still true. John B. Rogers - D.A. Davidson & Co.: Right. Thank you and congratulations on the quarter.

Thanks.

Your next question comes from Alex Rygiel with FBR.

Good morning and congratulations gentlemen.

Thanks Alex.

Craig, you mentioned earlier that at this time you were... if you were to see a customer get cold feet and pull back on CapEx, I guess your comment was if you were maybe... obviously something would pull out of your backlog, if that were the case, what market would that customer be in?

That's a good question, because it could be any of them outside of the government markets. You rarely see that in the government side of the business. So...

Well what's the most likely?

Well, I'd say the most likely is oil and gas.

Okay. And would that be a relatively large project or a relatively small project?

To have any impact, it would have to be a relatively large project. I mean to have a meaningful impact on a quarter, it would have to be a relatively large project. But it could... there is a remote possibility it could be in refining as well... not remote, I shouldn't say remote... there is a possibility it could be in refining as well. But an awful of the refinery work we are doing right now is environmentally driven and really can't go away. But there are some of these big crude [ph] projects or the capacity expansions, and those could also be impacted on the refining side.

And if I remember three or four years back, when there were two projects that you pulled out of backlog, particularly in your pharma sector, they came back in just in a different version. Would that be the likely scenario for a project that we are hypothetically talking about here in the --?

Well, understand that we are being very hypothetical. That would be my expectation is that that work would get done in the future. The question would be would it get done in the same location and would it be configured in the same way? And probably it would be a little bit of a different project and it might very well be in different location. But remember, we are being very hypothetical here.

Sure. And in that customer's decision process right now, is he taking into consideration the higher material costs of the project at this time? Is that significant or is it more a function of his internal cash flow position today and demand of the end product?

I have no idea what the customer is thinking to that level of degree. I would expect that the cost of these projects is a factor if you are thinking about whether you want to continue or not. But really, the return issues are the critical ones, right. Is this going to be a profitable investment for our company based on the facts as they exist today? And I think for the most part, our customers are concluding yes, it's still a profitable investments or it simply has to do because the law requires it.

Two more questions. Could you define the size of a mid tier company either in employees or potential revenue?

Yes, sure, I would guess the mid tier companies that we are talking about today are probably in the range of 2000 to 6000 people.

Great. And then one last question. Could update us on the acquisition of ZATE and any kind of integration or opportunities that you've seen in the last couple of months or so?

I'll give that to Mr. Watson since he is our expert.

I am the Middle East expert, guys. The acquisition of ZATE has gone well. We have only had the deal close since sometime in April. And we've just visited the Middle East and things are moving ahead rather nicely. This is a long game. I think we've said before that there is no change in profit stream in Jacobs before the end of the decade probably. It will be profitable, but you won't see it in the numbers. But it does look like we've got ourselves into a unique position in terms of we are on the ground in Saudi. We have control of a really good organization and we expect that business to double by the end of the decade or by 2011. And who knows where we go after that, a lot will depend on the market. So everything so far sums up.

Excellent, thank you.

Your next question comes from Avi Fisher with BMO Capital Markets.

Hi, good morning. Thanks for taking my questions.

Good morning.

You mentioned in your prepared remarks you are seeing some moderate in pricing, but that's a good thing. I am wondering, doesn't that imply some slack in the system overall? Why is it a good thing?

No, I am not sure that's what I said.

Okay.

Or maybe it is what I said, but not what I intended to say.

Okay. Well are you seeing moderating prices?

In terms of turning down?

Yes, well let me back up a little bit because I am just taking your comments and maybe apologies if it's out of context. But at least the producer price index for architectural, engineering services shows weakening growth rates. And that would imply slack in the system, and your comments sort of reiterated that. So what kind of trends are you seeing in pricing?

Well I guess, it depends again, it's kind of market specific, but for the most part, in the markets that I just described as robust, we are not seeing any significant moderation in the growth rates. And as a result, there is lots of work being chased by relatively few people. I think I commented earlier that the number of bidders on some of these lump sum turnkey projects was lower, that we are not seeing the level of competition on individual project opportunities that we have seen historically. So for the most part, I would guess that it isn't moderating. Now I think if you are in the arena, say, of the buildings business, particularly that part of the buildings business that is more dependent on commercial, retail, residential multi-family, that's a whole different world. But that's not a space that we're involved in. I did say... I did make comment about moderating pricing with respect to acquisitions however.

Okay, I'm sorry.

Okay.

I took...then that is a good thing.

Then that is a very good thing.

Got you. I am trying to reconcile your comments, your robust comments for the refining market with thinning refining margins at your clients. Can you sort of discuss that a little bit?

Well, again, an awful lot of what our refining customers are doing are either to address thinner margins by getting lower cost crude. There is a lot of those crude slate changes that's going on that are driving a lot of these major programs. But then you have layered on the MSAT II programs for benzene removal, you have the non-road diesel still is a fairly big activity in terms of sulfur removal, non-road diesel. So I think our refining clients are in a little bit of a catch 22 here. It's money they have to spend to be competitive in the future, because if you are the only refiner who doesn't deal with their crude slate problem, then your refining margins, your crack spread is going to be ugly. And so I think even some of our customers who are pure refiners, and don't... aren't throwing off the cash flow that the upstream side of oil and gas represents find themselves forced to make these investments in order to remain competitive and get themselves positioned in the marketplace. But it is a tough time for refiners right now.

You have... switching gears a little bit, you have two elephant projects in your field service backlog that could represent up to 20% of that backlog. And you've talked about as projects convert into construction and the impact that could have on margins. But since these are long cycle projects and complex projects, can we expect that they would have higher margins for a construction business than we've seen in the past?

I wouldn't expect that if I were you.

Okay.

Remember that the customers here are highly sophisticated buyers, right. They are some of the biggest companies in the world and they know what they should pay. And they do have a slate of players to choose from even if they are doing a sole source negotiation. There is a bandwidth that you can't get outside of.

Okay. That's just because it's complex, just because it's big?

You do your best to get a little extra and maybe get a little, extra but I think it's rounding here in the scheme of things.

Got you. And finally one last question, and again, I appreciate your taking them. And I think Michael alluded to this earlier, your SG&A costs came down quarter-over-quarter quite significantly from 10.5... SG&A [indiscernible] revenues. Was most of that sort of some rightsizing and some acquisitions or where are you getting that from?

Most of it is a result of the change in mix from... dominated by home office to an increasing share of field services.

Okay, thanks very much.

Your next question comes from Tahira Afzal with KeyBanc.

Good afternoon gentlemen.

Hi Tahira.

Again, super quarter.

Thank you.

I had a couple of questions. But before I start, just wanted to ask, I don't think you guys commented that pricing is going up at all and throughout whole upcycle, if I remember from any of your quarters, so. But anyhow, that's a different thing. I just wanted to ask you a couple of questions in regards to if you look back to the last election cycle, which is 2004, and you compare it to what you expect now, is there any sort of slowdown? And I am not talking about cancellations, but any slowdown that you could potentially see in terms of federal spending based on any particular dislocation you think that people might be anticipating?

Well the election results will... regardless who wins... there will be some period of time where particularly releases of new programs and projects, i.e. new prospect opportunities will decline.

Right. Okay.

We've seen that with every change in administration for as long as we've been in the business. They all have to scurry around and get their new under secretaries and assistant under secretaries and so on. And in that period of time, sort of new business grinds to a halt.

And would that be sort of your first fiscal quarter of '09? How should we look at it in terms of timing?

Well this is a federal government discussion we're having here obviously.

Right.

But it generally will be in the first or second calendar quarter.

Okay.

That you'll see the most impact. There is sort of a scurry to get things done before the elections. So our fourth fiscal quarter, the third calendar quarter might have more activity than usual in it because of the change in administration. But then it will start to slow down. Now what that impacts mostly is the timing of new awards. So it does seem to have a significant impact on the work we currently have. The work we currently have tends to be under continuing resolutions, it gets funded and it may be the amount of funding varies a little bit. Some gets more, some gets less. But that hasn't been the issue. It's just been delays in getting new project opportunities kicked off from the line.

Right. So I should look at it more as a timing issue?

Yes. And those... the effect of that is in kind of out quarters.

Right. And then if I look at what you are talking about and what we are hearing about in terms of inflation, bottlenecks et cetera and how they are translating into cost increases on these projects, if you go back and you look at what price of oil these projects become economical and you look at oil sands versus offshore versus some of the conventional projects that are out there on the oil and gas side. Are you seeing any sort of feedback from sponsors on where these economical points fall now?

Well, the only data point I really have with any comfort is a conversation we had recently with one of our customers in the oil sands who continues to believe that $65 plus or minus is the right breakpoint for oil sands investment.

Right.

And so clearly that's not a mark we can be very concerned about right now. I haven't had a chance to have a dialogue on the sort of deepwater, the high investment offshore stuff, so I can't really answer the question with that regard. I might be able to answer it next quarter, though, because I will have had... I hopefully will have had a chance to have that conversation.

Right, okay. Okay, that's helpful. And then I guess lastly, if you are looking at something in terms of I think what Steve asked earlier in terms of Europe and we see what Skanska and some of your other peers are seeing in terms of infrastructure. If there is a slow down over there, I mean how much of the impact is something that you can push off to let's say the Middle East or something like that? Are you sort of geared and leveraged and ready to transfer some of the momentum over there or would you just let it just translate for the time being?

Well again, the potential downturn in that business in Europe which certainly drive us to look for other places to keep our volume and our backlog up. We have been working hard to position ourselves for example in the Middle East not just in the oil and gas arena, but also to get start get position for the up strength of the infrastructure and buildings business. And I think there is probably some opportunity to take advantage of that market presently oil and gas stays strong and therefore there is lots of money to invest as we sit here today. And we are particularly interested in some of the things that are gone in the in the way of healthcare where we have a strong position, we think that might represent some opportunities for growth. Another aspect is India. We clearly believe that there is going to be lots of investment in India. It's a place where we have a good position already. But I think we have to [ph] again expand our position with respect to infrastructure and the technical buildings business and continue to find opportunities for growth.

And if you look at your positioning in India versus some of your E&C peers that we usually come across, how would you regard that? Is it the same kind of landscape or are you better positioned?

Well we are positioned differently. I wouldn't say better or not. For the most part, a lot of our competitors' position in India is purely based on back office engineering for major projects and programs around the world. So their operations there are essentially dedicated to doing big projects in faraway places. We have positioned our India operations slightly differently. It is first and foremost a domestic engineering business like virtually all of our operations; that's why we call them multi domestic. So a substantial part of our business in India is doing engineering for Indian companies or for foreign direct investors in India. And then we layer on top of that things like the work sharing and back office engineering. So our position is probably more diverse and more localized than most of our competitors.

Great. And I guess my last question is for... would be more directed towards Mr. Watson. Are you sort of... any update on looking at the power sector again in terms of an acquisition?

I'll let you take that.

I'll take that. At the power sector, I think Craig said it before and I certainly said it before, one day we will be in the power sector. We are not rushing to get there right now. We have got so much on our plate and we have got so many expansion opportunities now within what we call lines of business we are already in including some of the geographical moves were making in the Middle East and other places. We try to buy stone and Webster unless seven or eight years, or six, seven years ago now, we didn't get it done. We certainly would look at a good opportunity for came buy that makes sense, but I think as Craig said before his priorities today are still infrastructure business in upstream oil and gas and that's what really driving the acquisition process today. But we would look at other things.

And would you look at on the power side something, and I know you guys are very focused on your business model. Would it be more along the lines of let's say companies like black and peach [ph] type of company or would it be more of a construction-oriented company?

Well I think it probably would not be a construction-oriented company per say just because the likely business model there is very transactional.

Right.

And wehaven't had a lot of success acquiring companies with that kind of business model.

Got it.

So we'd be looking for company who's culture is like ours. That is very relationship based, very long term oriented. I won't try to speak to which of those companies out there in that business might have that culture or might not. But certainly that would be our focused rather if the opportunity came up rather than some sort of a contract.

Thank you very much gentlemen. Take care.

Thank you.

It'sbeginning the sound like there are no more questions.

Your next question comes from Chris Hussey with Goldman Sachs.

I am sorry guys.

No, Chris, we love to hear from you, buddy.

It's the shortest question after the myriad of questions that you guys have been riddled with. But maybe just on your refining business, what percentage of that 32% is U.S. versus outside of the U.S. at this point?

I'm thinking here. We don't break it out, so I don't have the numbers right in front of me. I guess of course [ph] certainly more than half is U.S.

Yes.

But I took... without going back and double checking, I couldn't give you a better number than that.

Yes. And as you guys look at your prospects going forward, should we expect that looking out to that 2011 comment Noel... you made about your growth prospects in the Middle East, should we expect that to stay there? Or could you see it switch over by 2011 where you guys are bigger outside of the U.S. in refinery?

Well I could see it switch over. I mean as I mentioned I think in the prepared remarks, there is a lot of prospects in the refining industry right now in the U.S., so near term growth there is going to be quite good and it's probably our strongest market. So in the short term, I certainly don't expect a big swing. But we expect over time to be a player everywhere there is a major opportunity in the refining business. So the Middle East, Singapore, the U.S., Northern Europe are all going to be factors. And that could swing the balance away from the U.S. at one point or another.

Thanks guys.

Your next question comes from Barry Bannister with Stifel Nicolaus.

Hey Barry.

Hey guys, it's actually Robert Hahn [ph], it was a good quarter. Just on the commodity side, as do you see the cycle continuing to progress and projects move out at the design phase and into the field, can costs continue to be kept under control, especially as fuel service revenue continues to pick up as we saw in this quarter?

If you think of it from the standpoint of our income state, yes, I expect you will see that costs will continue under control, or I'll have some new executives. No, I am being a little facetious. The fact is that the field costs part of this business, the sort of cost of goods sold part is pass through. And so you will tend to see is, you may tend to see an escalating revenue line and an escalating cost of good sold as that goes through the books. That the G&A cost of running the business to support that, will actually probably moderate against it. It will stay lower relative to those increasing costs they are not. We make sure labor per step and that sort of thing just like anybody else will, but we expect that as the business goes, if there is any inflationary pressure on our customers and it bound to be some; that won't impact our costs of delivering the work at the G&A line.

So just on top on that, and you had alluded to earlier as far as SG&A just being a function of the mix, you would probably expect to see some improvement there to offset that field service or are we at a best case scenario right now as far as SG&A as a percent of revenues?

Well, as we... if we see that the field services revenues growing as a percent of the overall revenues, it does not drive an increase in the dollar amount of G&A like you would see if you were seeing the pro services, because you don't have all the space, requirements and such like that to support the field services. So if you are talking as a percent of revenue, as that mix changes, the percentage will come down. Absolute dollars, we'll still see some continue just because of inflation and such that the absolute dollars will continue to probably increase as the business grows. But it will be at a rate much less of than what we are looking at least for currently at field labor and some of our field costs and things like that.

Okay. And then just could you update us a little bit as far as what you are hearing from your clients on the oil sands market? A recent ENR article had talked about cost increase in the regions of 40% to 60% over the past two years. And if you talking on a capital cost basis projects, it spoke [ph] into about $40,000 per barrel of daily production versus only $25,000 two years ago. Are we seeing more of just like push backs and rescoping and not necessarily cancellation at this point or --?

I am looking at our executive that's responsible of that area. I am not aware of any cancellations. Are you?

There is no cancellation on the books at this point in time. Cost pressure is all there, but it's being watched closely as it moves on. The investments are still alive.

I think the economics are just overwhelming in terms $120, $140 oil and a $60 all in cost.

Yes, you have to remember, a couple of years ago that $60 all in cost was $40 or $35 depending on the type of activity. So what you are talking about in the form of cost increase and capital costs is translated into higher breakevens. But the higher breakevens still are significantly below where the market price of oil is.

Okay. Thank you.

This concludes the Q&A portion of today's call. I will now turn it back over to management for closing remarks.

Thank you all for listening and dialing in. We're pretty happy with the results for the quarter and we are looking forward to having a similar call here in about 90 days.

This concludes today's conference. You may now disconnect.