Jacobs Solutions Inc. (J) Q2 2016 Earnings Report, Transcript and Summary

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 our Annual Report on Form 10-K for the period ended October 2, 2015, including: Item 1, Business; Item 1A, Risk Factors; Item 3, Legal Proceedings; and Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations; as well as other filings with Securities and Exchange Commission. We undertake no obligation to update any forward-looking statements. So please now turn to slide three for a quick review of the agenda for today's call. Steve will begin with some comments on our Beyond Zero safety culture here at Jacobs, followed by a summary of our second quarter financial results. He will include summary comments on the portfolio of our four lines of business, or LOBs, and also provide some commentary on end market conditions for each. I will then provide a more in-depth discussion on our financial metrics, backlog, and financials for our new lines of business segment reporting. I will continue with comments on our current restructuring efforts and capital allocation. Steve will then discuss some next steps for the company, focusing on our project delivery initiative, strategic review, and some closing comments. We will then open it up for some questions. With that, I will pass it now over to Steve Demetriou, our President and CEO. Steven J. Demetriou - Chairman & Chief Executive Officer: Thank you, Kevin, and welcome to our fiscal year 2016 second quarter earnings call. I'm on slide four. And before we dive into the results, I'd like to discuss our industry-leading Beyond Zero safety culture. At all Jacobs offices and customer job sites, there's an unquestionable commitment to a safety-first behavior. And our culture of caring is not just what we do, but it's who we are. Through our relentless drive to improve safety performance, we have seen the number of incidents trend down over the last several years. For the first six months of this fiscal year, our overall injury rate as measured by industry-standard TRIR, total recordable incident rate, was at 0.24, considered top quartile performance and highly valued by our customers. This week, Jacobs is involved in the industry-wide Global Safety Week, during which our employees are engaged with customers and local communities on improving safety awareness, focusing on five topics, safe driving, energy risks, positive mental health, travel security, and safety innovation. We recently appointed Catriona Schmolke, a Jacobs veteran of 28 years, as our new head of Global Safety. And I have no doubt she'll continue to strengthen Jacobs' position as an industry safety leader. And importantly for shareholders, we recognize that companies that have sustainable best-in-class safety performance typically achieve superior operating and financial results. So at Jacobs, we believe safety is also a leading indicator and a key management metric which supports business performance and accountability. Moving to slide five, I'll summarize our second quarter business performance. We continue to experience very challenging global economic conditions, particularly in the petroleum and mining sectors. However, demonstrating the strength of our diverse portfolio, the more positive markets such as Aerospace & Technology, pharma/bio, and buildings and infrastructure helped us mitigate these more challenged sectors. Our revenue for the quarter was $2.8 billion and our backlog ended at $18.2 billion, holding stable versus the previous quarter. A relentless focus on rightsizing our cost structure and driving efficiencies continues to benefit Jacobs. Through the first six months of this fiscal year, we have delivered $70 million of adjusted G&A cost savings to the bottom line, a 10% cost reduction versus last year. Our strong focus on upgrading and standardized project delivery tools, processes, and capabilities is showing early signs of success. In the second quarter, improved project performance was a key contributor to a sequential increase in our total Professional Services gross margin. Our bottom line results were solid, with adjusted earnings for the second quarter at $0.75 per share. And I'm also pleased with cash flow performance, which helped us end the quarter with a strengthened balance sheet. And we look forward to further improvements as our heightened focus on working capital takes hold in the second half. I'm now on slide six. And as we announced at the beginning of last quarter, we're now managing the company by four global lines of business. These are: Petroleum & Chemicals, which is comprised of upstream, refining, and petrochemicals; Buildings & Infrastructure; Aerospace & Technology, which covers our national public government business, primarily supporting U.S. and UK government agencies in the areas of defense, space, nuclear, and technology; and Industrial, which is comprised of Mining & Minerals, food, beverage, and consumer goods, Specialty Chemicals, Life Sciences, and Field Services. The charts on this slide show the breakouts of revenues and adjusted segment operating profit by each line of business excluding non-allocated corporate expenses. Kevin will cover more financial details on the LOB shortly, but here we provide insight into the differing economics of each business, which provides a greater sense of profitability versus the top line. We believe the new financial disclosure will provide valuable insight on the diversity of our portfolio. For example, it's important to note that over 70% of our LOB profits year to date were driven by businesses that are not directly impacted by the hard-hit oil and mining industries. The stability of our Aerospace & Technology, Buildings & Infrastructure, and certain Industrial businesses form a strong foundation to drive profitable growth. And even within the Petroleum & Chemicals line of business, end market diversity has helped Jacobs remain resilient in a challenging macroeconomic and provides long-term opportunities to achieve profitable growth when oil and gas market dynamics improve. I'll cover our Petroleum & Chemicals group on slide seven. Crude oil prices fell below $30 per barrel earlier in the quarter and have rebounded to over $40 most recently. However, much of this increase does not appear to be based on supply/demand dynamics. Price volatility is expected to continue, and there's significant uncertainty in which direction oil prices will move. The most pressured segment is clearly the upstream side of our business, where it's all about cash preservation. For many of our upstream clients, it's a wait-and-see spending strategy. And any capital being spent is primarily going to projects to drive costs out, ensure regulatory compliance, and outsourcing plant maintenance programs, all areas of strength for Jacobs. Although our global Petroleum & Chemicals backlog is down from last year, mainly due to the heavily hit upstream sector, especially in the Canadian Oil Sands, this line of business started to stabilize over the last several months. We are pleased that the second quarter held flat versus first quarter, demonstrating the success our team has had in focusing on markets where capital is being spent. This includes the midstream side of the industry, where we're winning business in pipelines, terminals, and storage as our clients strive for more distribution flexibility and access to cheaper feedstock. The refining sector remains profitable, although margins have narrowed in recent months. We're seeing continued opportunities in global refining, with a focus on maintenance, turnaround activity and sustaining capital projects, as well as compliance mandated initiatives. One example of a recent success is a confidential client win for a significant five-year sustaining services contract. We're also involved in the early stages of a few large-scale refinery expansions and grass roots capacity projects across the globe. And we're seeing increased opportunities in process safety, an area where we can offer clients industry-leading capability. Recent momentum in the petrochemical sector is also helping us to mitigate headwinds. Our strategy to geographically expand in chemicals is paying dividends, as we're winning new framework agreements with several of the key global players. Many of our clients are adapting their facilities to capitalize on lower-cost gas feedstock, creating several opportunities for us to win plant revamp projects. Two recent examples of strategic client wins include a major engineering and procurement contract to support Monsanto's plant expansion in Louisiana, and also a cracker revamp project in Europe. We have also won a significant number of front-end engineering design projects in the first six months of this fiscal year, up versus 2015, providing Jacobs a great opportunity to convert these to larger-scope projects in the near future. So across our global footprint, our petrochemical project pipeline is getting stronger. Moving to slide eight, as announced in February, Bob Pragada rejoined Jacobs as President of Global Industrial. Consistent with his new responsibilities, we have added the Field Service businesses unit to the Industrial line of business, which is reflected in the backlog reporting shown here for all periods. Our mining clients are facing one of the most challenging commodity recessions of our generation. And similar to the oil and gas situation, it's all about preserving capital, reducing spending, and deferring projects for as long as possible. We believe we've hit a bottom in mining and that stabilized the business, especially in Asia and the Americas, with a successful focus on sustaining capital programs. We're also well positioned for a few larger capital projects that may get sanctioned in the mining industry and hope to announce a significant strategic win in the near term. Although our global mining backlog plummeted from 2015, our total Industrial backlog is up approximately $1 billion from last year due to our strong growth in Life Sciences, and held flat through the first six months of the current fiscal year. Our Life Sciences segment continues to benefit from a strong wave of new product approvals. For example, the number of new molecular entities that were approved were the most since 1996, and we see the strength continuing. As a result, the biopharmaceutical majors are heavily investing in new capacity. We had success winning many of the first wave of next-generation projects, including the large-cap programs for Biogen, BMS, and Novo Nordisk. The second wave is now in its initial stage, with planned investments by many of the leading global biopharmaceutical players. And we expect to continue to win a large share of these opportunities due to our industry-leading technical expertise and strong project delivery track record. In our Specialty Chemicals & Manufacturing sector, we're experiencing modest growth in the phosphate fertilizer market, which is driven by continued population increases and agricultural demand. Our team is doing an excellent job and following our customers to emerging markets such as Brazil, Russia, and Indonesia, and expanding from our traditional technology licensing model to full design supply contracts. In our Field Services business unit, we've had a number of growth opportunities in construction and maintenance as our clients continue to focus on near-term capital budget optimization and longer-term sustaining CapEx gains. Our diversity in services uniquely positions us to be a critical partner to drive best-in-class results for our products. Moving to slide nine, our Buildings & Infrastructure group saw a slight uptick in backlog to just over $4.8 billion. This global line of business covers a number of sectors. Beginning with Buildings, we continue to maintain our strong global brand, particularly in the federal space. We were recently awarded major contracts with the Naval Facilities Engineering Command, the U.S. Army Corps of Engineers, General Services Administration, and the National Guard. The healthcare industry continues to grow due to an aging population and new medical technologies, and we're well positioned as evidenced by recent hospital project wins in San Francisco, Cincinnati, and Sydney. The corporate commercial building market is expanding for us. We recently won a major EPCM [Engineering, Procurement, Construction Management] contract for two manufacturing centers in the defense industry. We have also been awarded several national building contracts, including Vanguard, Sanofi, Amgen, and SAP. Very exciting is also an opportunity to provide planning, design, and program management for a major Education City in Australia. This represents a wave of future-connected, resilient, sustainable smart cities of the future. In mission-critical, cloud computing, the Internet of Things, and a switch to software and apps is driving an expansion of data centers globally. We were impacted in the last few quarters by a temporary spending decline by our largest client due to a strategic schedule change. However, we expect to resume growth there soon. Infrastructure markets are also growing steadily. In the highway sector, our largest infrastructure market globally, we see continued opportunity to grow. The passage of the U.S. Highways bill is providing increased spending confidence and represents growth in high-mobility areas such as the West Coast, Texas, Southeast, and Virginia Mid-Atlantic. We are working on the largest integrated transport and revitalization project in Australia, and we were recently awarded a highway upgrade project in Adelaide. And in the UK, where we're a top provider of planning and design, we were recently awarded three significant contracts for Highways England. The global rail market is also steadily growing, as exemplified by the Los Angeles Metropolitan Area positioning for a new $130 billion transportation revenue package. Recent major awards include a metro rail project in the Middle East, construction management for a large metro rail project in Seattle, and a multiyear CM contract for BART in San Francisco. Finally, we see increased investment in global aviation, where we're a leading planning and asset management company and a top design firm. We recently were awarded an airport design in New York and were selected to assist the American-US Airways rebranding for 80 airports across the U.S. Our Aerospace & Technology line of business is summarized on slide 10. We're pleased with the underlying backlog trends in this business. Although the year-over-year backlog declined, lower margin revenue burn has been replaced by new higher-value strategic sales, which is reflected in the strong second quarter operating profit performance. Also, as we've previously reported, the backlog excludes approximately $250 million of recently awarded but protested contracts, which by the way is three times the protest level of last year. We're confident, however, that most of this delayed backlog will be confirmed in the near future. Another positive trend is that Jacobs has won all our major contract rebids through the first half of this fiscal year, which contrasts with a 2015 industry benchmark of only a 25% incumbent win rate. Our recently announced U.S. Army Aberdeen Test Center and NASA Ames Research Aerospace Testing and Facilities contacts are significant examples of this rebid success. Our U.S. government work, particularly with Homeland Security and intelligence-related markets, remains strong. Significant commercial investment in mission-critical and advanced investment design facilities continues in our pipeline of opportunities, and this area is increasing. As announced last month, we acquired the Van Dyke Technology Group, a 180-person firm, which enhances our capabilities in the fast-growing cyber security and intelligence-related markets. We expect to significantly leverage the acquired capabilities globally across Jacobs' public and private sector clients. The U.S. environmental market sector represents excellent growth potential for Jacobs. Most notably, we recently finalized a framework agreement with BP, a core client of Jacobs, for environmental remediation. In addition, we leveraged our strong environmental experience to win a significant construction services contract with the Tennessee Valley Authority. In the UK, the Nuclear Decommissioning Authority funding is projected to be around $20 billion over the next five years. A large portion of the spend will be at Sellafield and prioritized around high hazard risk mitigation, where we are positioned well as an incumbent. The final sanctioning of the Hinkley Point C nuclear new build project, which represents a long-term upside for Jacobs, has been delayed, but is expected in the relatively near future. In Defense, we reached an agreement with the UK Ministry of Defence to extend the financially significant maintenance and operations contract for the Atomic Weapons Establishment, known as AWE, with a contract term through 2025. Also promising for us is the UK's decision to invest in naval shipyards, the F-35 fighter jet, and other platforms, providing an improved opportunity pipeline for Jacobs. I'll now pass to Kevin to present more details on our financial results. Kevin C. Berryman - Chief Financial Officer & Executive Vice President: Thanks, Steve. And I'm now turning to slide 12. As we previously communicated on our last earnings call, we were expecting some continued short-term challenges on revenue. And as expected, revenue for the quarter was $2.8 billion, which is down just over 4% from a year ago. Our backlog stands at $18.2 billion, as Steve already highlighted, flat versus Q1 in a relatively challenging environment. We actually feel good about that stability. In addition, our book-to-bill on a trailing 12-month basis was 0.94, slightly up from the last quarter. Gross margin dollars for the quarter were $444 million, resulting in an improved gross margin profile versus Q1, up 50 basis points to 16%. Importantly, this improvement was driven by our Professional Services gross margins, which was at the highest level since 2014, an indication of our improving execution. This has allowed the company to more than offset some of the pricing pressure that exist in certain of our more challenged end markets. Benefits associated with our restructuring continue to gain momentum, resulting in our adjusted G&A being down $22 million versus the year-ago quarter. As Steve talked to, on a year-to-date basis, our adjusted G&A costs have now fallen over 10% versus the year-ago period, a clear indication of solid execution against our restructuring program. As a result, adjusted operating profit for the quarter was $122 million, down modestly from our Q1 level. Adjusted EPS was $0.75 for the quarter. This includes a net positive impact of $0.03 from several items, including the successful resolution of an international tax litigation, a one-time benefit to non-controlling interest related to certain work performed with one of our partially owned subsidiaries, the costs associated with a litigation settlement, and the negative impact of a customer bankruptcy. Finally, operating working capital improved during the quarter, resulting in our net debt position at Q1 of $181 million turning to actually a positive net cash position of $27 million in Q2, the first net cash positive position that Jacobs has seen since the fourth quarter of 2013. This was driven by an improved free cash flow of $200 million during the quarter. And importantly, the improvement in our net cash position is after having spent an additional $30 million in share repurchases during the second quarter. Moving on to slide 13, I would like to provide some brief commentary on our total backlog. Our backlog currently stands at the combined $18.2 billion recently noted, which is flat from the Q1 figures. We are pleased with this performance, as our stability in backlog versus the last quarter was seen across the portfolio, including the Petroleum & Chemicals business. With regard to our Professional and Field Services backlog mix for the quarter, Professional Services now stands at $11.4 billion, and Field Services at $6.9 billion, both stable figures versus our Q1 figures. Our backlog at the end of the quarter again exemplifies the benefits of our diversity, where certain of our lines of businesses that target customers in stronger end markets have held steady and helped mitigate some of the pressures from reduced CapEx spending by oil and gas and mining customers. So turning to slide 14, I would like to spend a bit of time discussing our new segment reporting. For SEC guidelines, we have aligned our segment reporting with how we now manage in the business. To simplify our discussion and since this is our first time reporting our segment information, I've noted here on the slide our six-month results. I believe these six-month results are indicative of the overall trends in our business, but I will provide some additional color on quarterly numbers as appropriate in my following comments. You will note that three of the four LOBs have actually shown relatively stable adjusted operating profit performance over the first half of 2016, resulting in an improved margin profile in the first six months versus the year-ago period for our LOB segments. Our Petroleum & Chemicals operating profit margin, up 60 basis points to 3.5%, has shown resiliency in their year-to-date performance and actually held operating profit levels relatively flat in a tough environment. In fact, Petroleum & Chemicals adjusted profit levels increased in Q2 2016 versus the year-ago period, as our aggressive restructuring efforts resulted in cost reductions, which allowed for us to offset the drop in revenues year over year. Industrial profit is down versus the year-ago period, driven by the challenged Mining & Minerals end market and the margin benefits last year that were associated with large mining project closeout benefits. The business was also impacted negatively during Q2 this year by a litigation settlement and a customer bankruptcy. Going forward, the elimination of these items and the growing momentum in our Life Sciences unit bodes well for improving profitability in the second half of 2016. Regarding Aerospace & Technology, revenue declines and lower margin business have impacted the top line versus the six-month year-to-date figures of 2015. However, this business still delivered flat adjusted operating profit for the fiscal year first half, improving operating margins actually to 7.7%, up 50 basis points versus the year-ago period. The LOB also realized operating profit growth in the second quarter versus the year-ago period. Lastly, B&I revenue, while decreasing over the six months, we are optimistic about its ability to grow and deliver profitable growth going forward. Substantial benefits associated with our restructuring effort drove the LOB's improvement in adjusted operating profit over the first half of the year. This resulted in operating margin rising to 7.3%, or 70 basis points up versus the year-ago period. As we look ahead, we like the makeup of the LOB diversity, as long-term market dynamics in our Buildings & Infrastructure, Aerospace & Technology, and Industrial, specifically Life Sciences businesses, position the company well for growth. And with Petroleum & Chemicals, we believe this line of business provides long-term opportunities to profitably grow when oil and gas market dynamics ultimately improve. Finally, a few comments about our corporate related costs, these non-allocated corporate costs consist of cost elements that some are inherently predictable, such as routine G&A expenses related to the corporation as a whole, acquisition-related expenses, primarily amortization of intangible assets, and other routine costs and expenses, but also includes other items that are inherently less predictable, including adjustments to employee fringe benefit programs, around medical, pensions, and other employee benefits, certain litigation costs, including defense and settlement expenditures, and margin adjustments on projects not related to LOB performance. These non-allocated corporate costs rose by approximately $19 million over the first half of 2016 versus the year-ago period. Increased legal defense costs, fringe rate true-ups, and expenses related to our strategy work represent the majority and the bulk of the increase in costs. We believe that especially as it relates to the more predictable elements of this line item that we now present in our segment reporting, we will be able to reduce these non-allocated corporate costs longer term. So before turning to make some additional comments on our restructuring, a few words about our segment reporting efforts. I really would like to call out the extraordinary efforts of the finance and accounting team here at Jacobs. I am thrilled that they were more than up to the formidable challenge to meet the aggressive timetable we set once we put in place the decision to transition to an LOB management structure. I know that the board and certainly myself would like to personally thank them. So I'd like to turn now to slide 15, where I would like to provide an update on the restructuring effort that was announced in July of last year. As we have discussed in past quarters, the primary focus of our restructuring effort has been to simplify Jacobs globally and to ensure we have a lean cost-effective structure. We have been very successful with our restructuring efforts and these are already benefiting our financials, as evidenced by the significant reduction in G&A over the last 12 months. These actions support the company's ability to deliver satisfactory profit levels regardless of the economic environment in which we are operating. And we look forward to continued benefits in the second half of this fiscal year and the full-year impact in next fiscal year 2017. Our restructuring efforts are now nearing completion. Our primary focus continues to be on reducing our fixed cost infrastructure, primarily on labor and real estate. Given the incremental opportunities identified as part of the reorganization that we announced late last year or calendar year, we are now forecasting that total one-time costs of our restructuring effort to be $330 million to $350 million through the end of Q3 approximately, with final expected gross savings of $240 million to $270 million. Importantly, the cash portion of both our costs and savings result in a cash payback of less than one year relative to this effort. Steve will discuss further in his closing comments coming up, but our cost reduction efforts to become more cost effective are not over as we close the books on this specific restructuring effort. Our initiatives to date have targeted reducing costs to match the realities of current market conditions, while on the next phase we will seek further cost synergies that are aligned with our strategic agenda and our ability to support a strategic growth agenda that is profitable. Finally, turning to slide 16, a few comments on our share buyback status. We continue to execute per our previous, resulting in $30 million of repurchases as in Q2 and increasing our year-to-date figures through the first six months of 2016 to $72 million, representing approximately 1.8 million shares being repurchased. Our previous guidance remains in place at this point in time that we will spend in a relatively consistent manner over the three-year term of the program. Again, we continue to work through our strategic review and our plan is to provide an update on our use of cash and capital structure at our Investor Day later this year. With that, let me hand it back over to Steve. Steven J. Demetriou - Chairman & Chief Executive Officer: All right. Thank you, Kevin. Turning to slide 18 and as we discussed during the last several earnings calls, strengthening our project delivery performance is a top Jacobs priority. Our specific goals include providing our clients increased value with industry-best quality and execution while our shareholders benefit from increased Jacobs project profitability. To achieve this, we're driving several initiatives, including upgrading project tools, streamlining our procedures, and strengthening our global strategic sourcing. We're also defining top quartile benchmarks, driving innovation, and engaging all leaders to achieve best practices. We're beginning to see measurable improvement. Our project write-downs have been reduced by 21% versus last year, and our low-cost high-value India Execution Center work has increased significantly. We're also receiving positive feedback from our customers. Our client-approved value plus project savings currently stand at $4.7 billion through the first six months, and client satisfaction is running at greater than 92%. This is a long-term transformation, and much of the improvement is ahead. Many initiatives are underway, and we expect full rollout in fiscal year 2017. I'm excited for our employees when it comes to project delivery excellence. We're committing resources and investment that will unleash our people to excel at a high level that they desire to be proud about the work we deliver for our clients. Moving to slide 19, as previously discussed, we believe that developing and executing a profitable global strategy is necessary for Jacobs to deliver mid and long-term industry-leading shareholder value. Demonstrating our commitment to this, Alan Dick, who has led large global functions and businesses utilizing strategic planning to achieve success, has joined Jacobs to lead our global strategy efforts. Late last year we commenced our strategic review. The first phase of this involves a deep dive on where we make money, by office, by customer, by our different project delivery models, and many other analytical slices. Our business leaders are now combining this data with a strategic lens to further optimize our global office footprint, with the goal of better serving our clients and extracting further cost synergies. When we roll out our strategy later this year, we will provide an update on the new and additional 2017 cost savings. To be clear, as we now approach the successful completion of the restructuring initiative which was tied to rightsizing Jacobs to the challenged market conditions, the next phase of strategic cost optimization will be more aligned with our strategic growth agenda. We're now moving into assessing current end markets and geographies along with potential new growth opportunities. Additionally, we'll evaluate those industries and businesses that do not earn an adequate return and make decisions on how to manage these to create shareholder value. Our goal is to have an overarching Jacobs strategy that provides a blueprint focused on profitable growth and additional cost efficiency opportunities, which leads to an improved return profile for the Jacobs portfolio longer term. Our strategy blueprint will also provide clarity on other key elements such as capital deployment and risk profile. We're targeting to review this with our board in July, and soon after will provide a strategic review to the investment community. So the last slide, while our second quarter and first half generally met our expectations, we continue to be pressured by a challenging global environment. The economic dynamics of commodity prices such as oil and mining will continue to impact our business, although our portfolio diversity remains a strength. Our cost savings initiatives should benefit the company as they continue to ramp up and our market strategies play out in certain businesses. We expect both of these initiatives will yield additional improvements as we move through the second half of fiscal year 2016. Our first half performance gave us increased confidence that we'll meet objectives for the year. Consequently, we're narrowing our fiscal year 2016 EPS guidance to $2.90 to $3.20. With that, I'd like to thank you for listening, and we'll now open it up for questions. Austin?

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 comment on the strategy. We're looking at everything. As I mentioned, we're not moving into the phase of really understanding with the help of some outside experts where each of our markets are projected to go, and also look at things that we're not potentially strong or involved in, in the market could be exciting moving forward. And so there's a lot going on. We'll obviously look first and foremost at how do we organically go after that. And inorganic could – also M&A could also play into that. And I did comment we are going to look at underperforming markets and sectors equally as strong, and that could lead to some decisions, potential divestitures as well. But it's premature to talk about what that will look like. Is it going to be several different small to mid-size initiatives that add up to something big, or is it going to involve some transformational steps? I would say everything is on the table, and we'll have a lot more to talk about later this year. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Okay, I just wanted to make sure you understood my question, because I knew it was long-winded. Kevin C. Berryman - Chief Financial Officer & Executive Vice President: No, I think I'm good. Let me take a stab and we can go forward and see if there's any additional clarity. Look, the dynamic of the restructuring, certainly there was phase one that we did before we initiated our realignment into the LOB structure. And so as the LOB structure came into play, and as you recall, this was announced in our first quarter I believe officially and formally in the first quarter of this year, and the teams have been forming and ultimately coming up with an idea of what the new structure looks like to help support their growth agendas. And so that has been a big driver to incremental benefits associated with the restructuring as you now see it. Specifically, as it relates to what's in the forecast for 2016, the reality is if you look at where we are right now in terms of our total costs to date, I think we're somewhere in the neighborhood of – in the middle $250 million figure numbers roughly. And so given that we've still got close to $100 million to go, that means that as we're executing now, the benefits of that really won't happen in a material way on a full annualized basis until we enter into fiscal year 2017. So certainly some of it is occurring this year. It certainly is helping as it relates to our ability to perform against our original expectations. And I would say that our guidance that Steve has provided is prudent as it relates to the current economic uncertainties that we're facing. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): But I guess the question I'm trying to ask is: is there a deterioration in the core business based on where you thought we were last quarter and the beginning of the year? Let's take your savings aside. Is there a change, or do you feel like for the most part the businesses that were showing declines are bad, but they've at least stabilized? Is there a change in your core business assumptions? Steven J. Demetriou - Chairman & Chief Executive Officer: Look, I think our overall theme today is stabilization. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Okay. Steven J. Demetriou - Chairman & Chief Executive Officer: Whereas a lot of things were declining throughout 2015 and even in the early part of our fiscal year, the last several months I think we've seen pretty strong evidence that we're hovering around the bottom in some of these more hard-hit markets. And we're not predicting when that's going to turn up, but feel like we've hit the stabilization point. Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker): Okay, I'll let someone else go. Thank you.

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 million or $2 million, or is it more significant than that? Can you just frame it for us? And then just to confirm, just to your points, so the comps are easier in the back half of 2016 than they were in the first half because you don't have the positives that you alluded to? Kevin C. Berryman - Chief Financial Officer & Executive Vice President: Yes, and to be clear, it's not $1 million or $2 million. It's more substantive than that in Q2 in terms of the takeaways relative to those issues. Jerry Revich - Goldman Sachs & Co.: Okay, great. And then in the 10-Q for the Aerospace & Technology business, you spoke about some customers' preference for awarding contracts toward smaller businesses. Can you just say more about that? Is that a small subset of the customer base? Can you just expand that point, please? Kevin C. Berryman - Chief Financial Officer & Executive Vice President: It's really related to the federal government. And a lot of their work they're looking to do set-asides for small businesses, minority businesses. And so the contracts that are being let by the federal government oftentimes have pieces of the business that we would have normally had access to are being set aside for these other smaller organizations. We partner with those organizations oftentimes. But it just means the percentage of the profit pool available to Jacobs is a little bit less. Jerry Revich - Goldman Sachs & Co.: Okay, thank you.

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 expectation is for margin improvement over the next several years, and that's what we're going to go after with both the efficiency and mix of business that we're going after. And I'll just end that by saying what you should expect is that when some of the commodity businesses cycle back up with all this work we're doing on cost improvement, we should see eventually stronger margins in those businesses as well. Kevin C. Berryman - Chief Financial Officer & Executive Vice President: I would add a comment specifically, and it's important to note the line of business margin profiles that have been presented today for the first time actually. And it's worth noting that in a challenged environment where actually many of the businesses have the reduction in revenues, their margins, operating profit margins were up year over year. And I think that's indicative of what Steve was saying is that, one, we're taking costs out of the system. And if you look at the core level of our segments and our operating profit by the lines of business, even within the construct of having some challenges on the top line, margins are going up year over year. And so I think that's consistent with the message that Steve is delivering. Andrew John Wittmann - Robert W. Baird & Co., Inc. (Broker): That's helpful. You talked about some of those non-allocated corporate costs burning off over time. Are you able to give us some context about what that level could be, $19 million for the year over year in the first half? So from here, is it a $40 million run rate for the year that next year could be $30 million or $20 million? Is that the right order of magnitude to be thinking about? Kevin C. Berryman - Chief Financial Officer & Executive Vice President: Look, I would say that ultimately I hope that we don't have the elevated level of legal costs forever. Let's put it that way. Andrew John Wittmann - Robert W. Baird & Co., Inc. (Broker): Okay. Can I ask one follow-up on refining? It's interesting. A year ago refiners were making a lot of money. Crack spreads were wide. They've narrowed here more recently. And I was wondering if that's having an impact on their desire to spend. Your commentary has been fairly stable for a while. But I would imagine maybe that their economics are changing might affect you. Are you seeing any of that today? Steven J. Demetriou - Chairman & Chief Executive Officer: Clearly we are, in our customer discussions, understanding that some of the more positive margin trends have now turned the other way. But where we participate, we're still seeing some good steady opportunities on the whole maintenance turnaround, a lot of regulatory opportunities. One significant opportunity in refining which is a real strong point for us is alkylation. With the change in regulations on C4s, there is a lot of work to build alkylation units to convert those C4s to high-octane blending opportunities for gasoline. And we fit right into that mix and believe that there's a pretty interesting pipeline of opportunities. So when you put all those type of things together, we continue to view this as a good steady opportunity for us.

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.