Good morning and welcome to the Jacobs Engineering second quarter 2016 earnings conference call. All participants will be in listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Kevin Berryman, CFO. Please go ahead. Kevin C. Berryman - Chief Financial Officer & Executive Vice President: Thank you, Austin, and good morning and afternoon to all. We welcome everyone to Jacobs' 2016 second quarter earnings call. I will be joined on the call today by Steve Demetriou, our President and CEO. I must say I love that hold music that was there as we enter into our call. We'll be a little bit more upbeat perhaps than the music that you are hearing. Okay, as you know, turning to slide two, our earnings announcement and Form 10-Q were released this morning, and we will be posting a copy of the slide presentation to our website, which we will reference in our prepared remarks. Before starting, I would like to refer you to our forward-looking statement. Any statements that we made today that are not based on historical fact are forward-looking statements. Although such statements are based on our current estimates and expectations and currently available competitive, financial, and economic data, forward-looking statements are inherently uncertain. And you should not place undue reliance on such statements, as actual results may differ materially. There are variety of risks, uncertainties, and other factors that cause Jacobs' actual results to differ materially from what may be contained, projected, or implied by our forward-looking statements. For a description of some of the risks, uncertainties, and other factors that may occur that could cause actual results to differ from our forward-looking statements, see our most recent earnings release and quarterly report on Form 10-Q as well as…

And our first question comes from Jamie Cook with Credit Suisse. Please go ahead. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Hi, good morning. I guess a couple questions, one strategic and it relates to the guidance too. It's been a recurring theme. We increased our costs again associated with the restructuring. Kevin, is there any way that you can help me understand the savings that is implied for the full-year guidance now in the back half of the year versus your expectations before? Because you keep increasing your costs in the restructuring, and I guess it sounds like there's more to go after that. I guess I'm just trying to understand for 2016 how much of your earnings are being helped by the savings and how much in terms of a deterioration of your organic business, how much is that when I think about your 2016 guideance, if that makes any sense? And then I guess my other question, just more strategically, Steve, it was helpful to provide the margins by line of business. The profitability associated with some of your businesses is very interesting. And I guess based on some of the hires that you've also just announced, is it fair to say when you actually provide your color on your long-term strategy that there could be something more transformational here with Jacobs? Could we see – is there a bigger opportunity for divestitures of some of your businesses, or do you feel like a lot can be accomplished through internal self-help? Thanks. Sorry, I know there was a lot there. Steven J. Demetriou - Chairman & Chief Executive Officer: That's all right, Jamie. So I'll start first, and then Kevin will take your initial part of your question. But look, it's too early to…

Our next question is from Steven Fisher with UBS. Please go ahead.

Thanks, good morning. So it looks like you upgraded your Chemicals characterization from steady to strong. I'm wondering if you can talk about what is the biggest reason for that. I know it sounded like the feed activity picked up a little bit. But where would you say the pipeline is strengthening by type of chemical project? And if you could give some color on a regional basis. Is it still your best opportunities in North America, or is it more balanced now? Steven J. Demetriou - Chairman & Chief Executive Officer: So there are several different things that we can comment on that. North America specifically is clearly our best-performing pipeline, if you will. And globally, when we comment about those numerous feed wins, first of all, they're up significantly from last year, the number of wins on the feed side, which are really the smaller portion of potential larger opportunities because where we've seen in the past is once we get into the feed win, there's a higher probability that we're going to be able to convert that to more work. Whether it's a full EPC or EPCM opportunity, it provides a significant pipeline to grow with those existing clients. So we're optimistic about that. Also, we have shifted very specifically beyond focusing on a set of core clients to spreading our wings and going after more of the pie and more of the market. And that's going very well, and we've announced some recent large framework agreements with some multinational customers that historically we haven't been as strong in. And so I'd say we're extending our reach. And then also there are several factors around the cracker world as far as our participation in some of the peripheral work around some of these large projects, but also more importantly, derivatives. So there are a lot of derivative opportunities that people are going now that a lot of this front-end capacity has put into the market. And that's an area where we're extremely strong. And so those are examples of different opportunities that are making us more bullish about chemicals versus some of the other petroleum and oil and gas markets.

Okay, so part market and part your own strategy, it sounds like. In terms of directionally, how are you thinking about backlog for the remainder of the year? Do you think there are still opportunities to get growth out of this after being pretty flat for the year based on what you're pursuing? I know you mentioned a strategic win in mining and some delayed Aerospace & Technology bookings. Where do you think backlog could go from here over the next few quarters? Steven J. Demetriou - Chairman & Chief Executive Officer: We're not going to give any specific guidance to the backlog. But as I mentioned before, when we look at Petroleum & Chemicals as a whole, and mining, where we've been hardest hit, the theme is stable. Where we are more optimistic is in some of the Building & Infrastructure sectors and Aerospace & Technology. And where all that mix ends up, we'll see. But I think right now we're pleased that in the declining backlog areas, like the mining and upstream side of oil and gas, we feel like we've reached a point where that has stabilized. And so we're just doing our best now to go after wins across the different sectors. I will say one of the focal points for Jacobs as we continue to look at how to strategically adjust to address the market opportunities is we're looking more today than maybe we have in the past around selective larger projects where we're capable of strong project delivery capability. And hopefully at some point in the future, that will contribute to backlog growth.

Okay, thanks a lot.

Our next question is from Andrew Kaplowitz with Citigroup. Please go ahead.

Good morning, guys. So gross margin continued to improve sequentially. You're at 16% from 15.5% last quarter. Gross margin is still a little lower than last year's level. So can you talk about your progress improving? You had some loss-making projects if you go through late year in your portfolio, and the balance really of execution versus a difficult pricing environment. Is your backlog gross margin higher than your revenue gross margin? So would you expect gross margins to continue to rise? Steven J. Demetriou - Chairman & Chief Executive Officer: Look, I would say that there's definitely a lot of discussion here at Jacobs around the whole price/volume relationship or margin/volume relationship, where in this environment we're more focused on strengthening the mix of our backlog going forward rather than chasing low-value business that is just going to not really play out successfully for Jacobs, and we're making good progress on that. And so generally, I would say, starting with Aerospace & Technology, there has been an excellent shift to burning off lower-value business and replacing it with higher-value margin business, and that's underway. And I think that as we go through the other sectors, there are similar success stories around that. And I feel like right now that's our focus, and I like the mix of businesses we're moving forward. And that will start to really pay dividends as some of these commodity cycles turn more positive to position us for profitable growth.

Is it fair to say that the backlog gross margin changes are at least equal to or higher than what you're reporting now? Steven J. Demetriou - Chairman & Chief Executive Officer: I'm sorry. You didn't come through clearly. Can you repeat that question?

Yes, I guess is it fair to say that your backlog gross margin is better than your revenue gross margin at this point? Steven J. Demetriou - Chairman & Chief Executive Officer: Generally, I would say the answer is yes.

Okay. And then, Kevin, could I ask you about cash? Q2 I've never thought of as seasonally a very strong quarter for cash. It seems like you had very strong results. You talked about working capital improvements this year. So maybe you can talk about your outlook for cash moving forward. Was there anything one-time in the quarter in cash, lower taxing and something like that that allowed for such a good result? Kevin C. Berryman - Chief Financial Officer & Executive Vice President: Thanks for the question. We don't really have a lot of significant cash items in the quarter per se. We did mention some things that occurred relative to some of the discrete or one-time items that we called out, but those weren't drivers of big differences in cash. I think ultimately, there are a couple of things I should call out. One, probably our Q1 cash flow was a little bit less than we would have expected. So Q2 is helping put us back on track and then some, so that is one comment I would make. But the other comment is we are focusing the organization on trying to improve our return profile, especially as it relates to our accounts receivable within the construct of the LOBs, and we're attempting to drive efficiencies into our total working capital at the corporate level as well. You've heard me say that I think we have opportunities to improve. I believe that that can continue to play out over the next years. It's pick-and-shovel work. You've also heard me say that. And I think ultimately, this is the first time we've really actually started to see some improvement as it relates to the efforts that have been in place for the last six, nine months. So we're happy to see that, and we're going to continuing to try and drive incremental improvements going forward.

Our next question is from Jerry Revich with Goldman Sachs. Please go ahead. Jerry Revich - Goldman Sachs & Co.: Hi, good morning, everyone. Kevin, can you talk about the Industrial segment margins in the quarter? What was the impact of one-off items? I guess excluding that, Industrial business margins expanded across the board for you folks. I'm wondering if you could also touch on when do the comps get easier for the Industrial businesses? Are they any easier in the back half of the year compared to what we've seen in the comps in the first half? Kevin C. Berryman - Chief Financial Officer & Executive Vice President: Sure, I'm happy to do that, Jerry. I think that there are two things going on in the numbers associated with the Industrial business. There are some unique benefits that were realized in the first half of 2015, and there are some unique negatives that we saw in the first half of 2016. So your comparability figures are a little bit more challenged in the first half of 2016 than they would normally be. So as I think about how the comparability will look going forward, very much, much more favorable. And as I outlined in the call in terms of our prepared remarks, we do expect, especially since we will eliminate some of the one-time items that we saw in the Industrial business in Q2 of 2016, by default we expect the momentum in our Life Science business to start to pick up going forward in that particular business. So I do think we're going to be seeing a much more favorable picture going forward. Jerry Revich - Goldman Sachs & Co.: And, Kevin, just order of magnitude, the extraordinary or one-off items this past quarter, are we talking $1…

Our next question comes from Tahira Afzal with KeyBanc. Please go ahead.

Hi team, congratulations on a good quarter. Steven J. Demetriou - Chairman & Chief Executive Officer: Thank you.

So first question is when I looked through some of the contracts you've announced in the press release, Steve and Kevin, there seem to be some pretty interesting areas where we maybe haven't seen you guys being active. So can you talk about – as you look at your sales initiatives, are you seeing some market share gains and traction in particular you're excited about? Steven J. Demetriou - Chairman & Chief Executive Officer: There's a lot to talk about, but I think you've definitely hit on a strategic shift for us that, as I mentioned earlier, we're still very much focused on our core clients, but we are also equally focused on addressing adjacent opportunities in those markets with more clients that we haven't served in the past. And it is definitely starting to play out and we're gaining some interesting wins. There are some examples of some bright spots across our business where we're seeing good momentum on that activity. I'll just look at Building & Infrastructure and Aviation, where for example, in the UK, our Aviation business has doubled versus 2015. And a lot of that is because of successes we've had some of our core Aviation clients who are now globally expanding their reach and winning aviation projects in Asia-Pacific and some other regions where we haven't been present. But, Tahira, I would just say, overall, it's a big part of our changing strategy, and I think there's going to be more to come as we play out more wins in the future.

Got it, Steve. And is there a common thread in these where you have gained market traction that you've been able to identify and you can maybe replicate in other areas? Steven J. Demetriou - Chairman & Chief Executive Officer: I think a core change in the way we're going after it is the new line of businesses. Now that we have, for example, global Petroleum & Chemicals organized under one leader, the meetings that I've been involved in periodically, there's a lot of excitement and learnings coming out by putting all of our Petroleum & Chemicals regional leadership together and building off each other's regional success. And so we are globalizing previous regional successes at a much faster pace because of the new line of business organization.

Got it, okay. That's helpful. I guess the second question, Steve and Kevin, we've seen technology companies strangely become more visible recently, largely on the facilities, the transportation and the building side, both with Google with Sidewalk. And as you know, Oracle just bought a technology-oriented infrastructure company. Can you talk a bit about what you're seeing in regards to smart city implementation and maybe 3-D buildings? We're seeing a lot of that coming up in the Middle East. Is this an opportunity for you guys? Is it more a long-term opportunity, or is it something that could happen pretty fast? Steven J. Demetriou - Chairman & Chief Executive Officer: I think the answer is this is definitely something that we're in the mix on. I commented on the Australia Education City. But when we look across the globe, our Building & Infrastructure team are on the front end on several of these smart city type initiatives, where we're seeing some preliminary opportunities, feasibility studies, some of the upfront planning. And what we would expect is that as we get through those and these initiatives get funded, we'll play a much bigger part. I think the question always is going to come down to funding. I'd say generally on the global infrastructure business, that's the big question mark. There's clearly a pent-up demand for infrastructure growth across the globe. And what we're seeing right now just hold that back generally across the globe is funding. And we're starting to see new creative funding mechanisms to start to move these necessary infrastructure projects forward. The question really is just at what pace that is. I can't comment on how quickly we'll see it, but the whole sustainable smart city opportunity is clearly an area of opportunity for Jacobs in the future.

Thanks, Steve.

Our next question is from Chad Dillard with Deutsche Bank. Please go ahead.

Hi, thanks for taking my questions. I just want to go back to your comments about project renewals in Aerospace & Technology. So have you seen any change in pricing in terms of the contracts that you renewed? Steven J. Demetriou - Chairman & Chief Executive Officer: As far as these rebids, I would say the margins have stayed solid. There has been nothing material that we can comment on with regard to what we're winning. I'd say the mix is better is really what my comment earlier was. As we are winning those rebids, if you will, and gaining some new additional business in different areas like mission-critical, et cetera, overall that mix is up versus historically, specifically last year. But as far as rebid contracts, I'd say they have been very stable in the margin rebids.

Okay. And now that you've given the new segments, I was wondering if you could perhaps talk about maybe some longer-term margin targets by segments in terms of how to think about that. Steven J. Demetriou - Chairman & Chief Executive Officer: I'm sorry, some longer-term what?

Margin targets for your new segments, just how to think about that? Kevin C. Berryman - Chief Financial Officer & Executive Vice President: Look, I think more to come on where we're going to be working through on the strategy over the next two to three months. You heard Steve talk to the fact that we've done a deep dive on the economics of the portfolio. Now we're marrying that up with the strategic wins on competitive advantage, positioning across the globe, risk profiles to determine where we're going to be driving our profitable growth agenda. And look, I think it will certainly entail – at least some pieces of the strategy will be about ensuring that we have good solid gross margin, which leads to our ability to have profitable growth. But we're not in a position at this particular point to provide any perspective or specificity around that.

Okay, thanks. I'll pass it on.

Our next question comes from Andrew Wittmann with Robert W. Baird. Please go ahead. Andrew John Wittmann - Robert W. Baird & Co., Inc. (Broker): Hey, guys. Andy asked earlier if backlog margin or job-level margins are higher than what's currently being realized in the P&L today. I guess when you marry that – and you guys said yes a little bit. So when you marry that with the incremental cost savings that you announced today, do you feel like the operating margin in total next year sees a lift? It feels like to this point that the margin and the actions have been more margin preservative than incremental. I'm wondering if we're getting to the point where we can actually talk about these being additive to the profitability of the company. Steven J. Demetriou - Chairman & Chief Executive Officer: Andy, I think one of the key messages we shared today is that our cost optimization, cost reduction is not over, even though we talk about completing our previous restructuring. And so we continue to see opportunity at Jacobs to drive improvement in efficiency across the company in a meaningful way in many different areas of our spend. The restructuring was clearly heavily focused on adjusting our head count to the marketplace with some office initiatives. I think as we're now moving into the more strategic phase of our cost optimization, we're broadening that – all of our spend across Jacobs. And our initial assessment and the strategy work shows some significant opportunity over the next several years. So the reason why we're talking about that and doing that is we're not satisfied with the margins in this business, and we believe that there should be margin growth in all terms. So I would just say that our strategy…

Our next question comes from Anna Kaminskaya with Bank of America Merrill Lynch. Please go ahead.

Good morning, guys. Can you hear me okay? Steven J. Demetriou - Chairman & Chief Executive Officer: Yes.

Hi. So I just wanted to go back to your comments about scrubbing some of the underperforming projects and regions, particularly in the Petroleum & Chemicals business. Do you find that it's more of contract pricing or structure or project structure, or is it more just cost inefficiency? And if it's more of a contract structure, how do you address the issue in the current environment, particularly with pricing pressure, more competition? I'll start with that. Steven J. Demetriou - Chairman & Chief Executive Officer: Look, I think generally you hit them all. I would say the answer is yes, yes, yes. And that's what's exciting us about now getting this information and deciding what to do with it. And so there are things that are in our control, like optimizing our office footprint and some of those – including also looking at where potentially we're not making money or just extremely low-value business, trying to decide how to shift our focus on those resources to higher-value opportunities that are clearly out there. But also, this is giving our organization much more capability to sit down with clients and have more discussion around win-win. And in many cases that wasn't happening. In many cases the awareness of the margin problem on our side wasn't as evident to our own people. And I think part of our next phase is going to move into really addressing even some of the pricing equations when it comes to opportunities out there. So just a high-level answer that all of those are showing up as an issue, which should lead to opportunity.

And if you I guess go to the client and ask for pricing increase and you do not get it, is that part of your potential exit strategy, or how would you address that? Steven J. Demetriou - Chairman & Chief Executive Officer: I think that needs to be considered. If we're not getting a minimal return in an opportunity out there, I think we need to question whether that's the right use of our resources versus redeploying our people to higher-value opportunities. The one thing that I've learned at Jacobs through my early days here is that our people generally have capability to work across different markets, opportunities, businesses. And so again, I think this is something that strategically we're pretty excited about, optimizing the whole business model going forward.

Great. And just to follow up on cash redeployment, I think you mentioned that acquisitions are potentially part of the mix. How quickly can you build up the pipeline of acquisitions or targets given that you've effectively been so much internally focused over the past two years? And I think you didn't bring up potential consideration of dividends. Is that still on the table for the August meeting, the board meeting? If you could address those two issues. Steven J. Demetriou - Chairman & Chief Executive Officer: So just addressing the dividend one, Kevin mentioned about capital deployment strategy being part of our review. And so we'll have more to talk about all elements of our capital deployment at that strategic review. But as far as M&A, again, I'm really excited about the line of business structure, and that is another clear opportunity and momentum that's building in the company around all aspects of running a global business, which include more focus on reviewing a strategic M&A opportunity. I think Van Dyke was just a perfect example of an outstanding bolt-on acquisition that was initiated and led by our Aerospace & Technology team. And we're starting to have more discussion internally across all four lines of businesses on strategically profitable, attractive high-value M&A opportunities are starting to come into the discussion.

So if you do decide that M&A is part of the strategy, you could potentially do something bolt-on relatively sizeable in the next 12 months. How should I think about the timing of returning to the M&A market? Steven J. Demetriou - Chairman & Chief Executive Officer: I would just leave it with where it's starting to – the discussion is increasing. But as far as the pace, I'd just wait till we come out with our strategy to talk about where organic versus inorganic fits in.

Great, thank you very much. Thank you for your time. Steven J. Demetriou - Chairman & Chief Executive Officer: Thank you. Kevin C. Berryman - Chief Financial Officer & Executive Vice President: Hey, Austin, perhaps we can take two more questions.

Okay, sure. Our next question is from Jeff Volshteyn with JPMorgan. Please go ahead.

Thank you for taking my questions, a couple of quick ones. When you look at the cost reductions, can you break them out for us? Where are they coming from by business line or by geography? Kevin C. Berryman - Chief Financial Officer & Executive Vice President: It's pretty broad-based across the world actually. I do believe that we have in the 10-Q, and I don't have it in front of me, Jeff, but we do have some information in the 10-Q as it relates to our current spending on restructuring by the lines of businesses. So I would refer you to the 10-Q.

Okay. And as a follow-up, so when you look at the early takeaways from your strategic review as you have it today, is it fair to say that whatever you have already identified has been reflected in these cost reductions, or are there still opportunities before we get to the final stages of the review? Steven J. Demetriou - Chairman & Chief Executive Officer: The specific message is that what Kevin has talked about in cost reduction and restructuring, I think you've just got to look at that as the previous initiative, and we bucketed it all under that frame of numbers that Kevin shared. When we talk about now strategic, further strategic cost initiatives, we're targeting and expecting additional savings, and so more to come on giving some guidance on what that looks like as we complete the strategy work.

Okay, thank you very much.

And our next question comes from Michael Dudas with Sterne Agee. Please go ahead.

Thank you. For Steve, when you look at the foreign lines of businesses that you've created here in the past nine to 12 months, are there any that are positioned currently to take more aggressive projects, maybe trying to grab more margin, or maybe take a little bit more risk or fixed price on some opportunities than some of the others, or is that something that is going to evolve at the strategic review and you set up these businesses to work on their own footing? Steven J. Demetriou - Chairman & Chief Executive Officer: Okay, I'll take the latter, great question. The one thing I want to always repeat on these calls is we're going to challenge ourselves to look at how to take more intelligent risk, but I definitely don't want to leave our investor community thinking this is going to be a radical shift in strategy. We'd highlight what has happened at Jacobs over the last many decades and I think has built up a great company. I think we all believe there are things that we can do more of. That could be again a bolt-on adjustment to some of the risk profile that we've taken in the past, and I think the strategy work will help us articulate that. So I think the latter part of your question/answer was the right way to look at it.

Thanks, Steve. Kevin C. Berryman - Chief Financial Officer & Executive Vice President: Jeff, just back to your question on the restructuring, I took a quick glance. And the restructuring, as you would imagine, is mostly Petroleum & Chemicals related, more than 50%. Steven J. Demetriou - Chairman & Chief Executive Officer: Okay, thanks, Kevin. I appreciate all the questions and the time today. Look, I want to leave the call that we're excited about what we're talking about as it relates to the future. Jacobs is a strong company, a long history of delivering for our customers and our shareholders. Hopefully, you get a sense that we're implementing change to complement and support our existing strengths. And the things that we're talking about are capitalizing on our diversity, really continuing to leverage off of our client relationship focus, and deploy capital and cash in a smart way. We're focused on winning more business. I believe there's good momentum in a tough market. I hope you get a sense we're driving stronger, deeper accountability, and we're also trying to achieve world-class standards in our most important product, which is our project delivery. And our value proposition has always been a key differentiator at Jacobs, and the global team is really driving forward to get Jacobs back on track to grow profitability. And we look forward to continuing to talk about this over the next several quarters. So thanks for your time and have a great rest of the day. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.