雅各布工程 (J) 2013 Q2 法說會逐字稿

Good morning, and welcome to the Jacobs Engineering Second Quarter 2013 Earnings Conference Call.

All participants will be in listen-only mode.

(Operator Instructions)

After today's presentation, there will be an opportunity to ask questions.

(Operator Instructions)

Please note, this event is being recorded.

I would now like to turn the conference over to Patty Bruner, to read the forward statement.

Please go ahead.

Thank you Denise.

The Company requests that we point out that any statements that the Company makes today that are not based on historical fact are forward-looking statements.

Although such statements are based on management's current estimates and expectations, and currently available competitive, financial, and economic data, forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause actual results of the Company to differ materially from what may be inferred from the forward-looking statements.

For a description of some of the factors which may occur that could cause or contribute to such differences, the Company requests that you read its most recent Earnings Release and its annual report on Form 10-K for the period ended September 28th, 2012.

Including Item 1A, Risk Factors, Item 3, Legal Proceedings, and Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations contained therein, and the most recent Form 10-Q for the period ended December 28th, 2012, for a description of Jacobs business, Legal Proceedings, and other information that describes the factors that could cause actual results to differ from such forward-looking statements.

The Company undertakes no obligation to release publicly any revisions or updates to any forward-looking statements, whether as a result of new information, future events, or otherwise.

And now I'll turn the call over the to John Prosser, Chief Financial Officer, who will begin the discussion regarding financial results.

Thank you Patty, and good morning everyone.

I'll briefly go over the financial highlights for the quarter, and then I'll turn it over to Craig Martin, our CEO, to review the business strategies and the growth going forward.

If you turn to slide 4 on our package, this gives the highlight.

These are also included in our Earnings Release that went out last night.

It was a very solid quarter, in line with our expectations.

The diluted EPS of $0.80 a share.

Net earnings at $104.4 million.

Backlog had a nice growth, up to $16.8 billion, nice growth both on a quarter-over-quarter and year-over-year.

And I'll get into that in a few minutes.

Our book-to-bill ratio on the trailing 12 months continues to run at the 1.15 for the quarter, it was actually higher than that.

So if you look at the balance sheet information and such, we continue to have a very strong balance sheet.

Cash continues at about $1.2 billion, net of debt it's $715 million.

And we continue our fiscal year '13 guidance in the range of $3 to $3.50 per share, with the midpoint of that being $3.25.

Looking at slide 5, this just gives a track of our last two years earnings history.

You can see it's been nice growth since the bottom of the market in 2010.

And as we see this year as we look at the trailing 12 is a nice growth over last year, and we expect to see that continue.

If you look at the bars underneath the graph, that just kind of gives the 10 year compounded growth rate.

And while we target the 15%, we're slightly below that, but certainly we're showing a pick-up from this last year as we go forward, just under the 15%.

As I mentioned, the backlog growth was strong.

It was up a little over 11% year-over-year, with good growth in both professional services and field services, both quarter-over-quarter and year-over-year.

With that, I'll you now turn it over to Craig Martin to review the operations for the quarter and our prospects.

Thank you John, and good morning everyone.

Take a minute here just to run through our growth strategy, pretty much the same slide we always show you.

We've got a really solid relationship based business model.

I'll talk more about that.

Our geographic and market diversity I think is a strength.

I'll also talk more about that.

I want to chat briefly about acquisitions.

But with respect to this part, I want to just take a minute to talk about keeping costs down.

We continue to be in an environment where low cost capability produces an advantage, and we're certainly in a position to take advantage of that.

We had excellent cost control in the second quarter, and that cost advantage tends to and continues to be a strength.

Frankly, especially in the public markets where we're seeing more emphasis on cost in the selection process.

So we see that as a positive going forward, as well as the other four key parts of our strategy.

Moving on now to slide 8. Our relationship based business model.

We've shown this to you dozens of times, I suspect by now.

But the model continues to work for us.

We continue to have this virtuous circle of building our relationships with our clients and their trust in us, getting high repurchase loyalty as a result, which then drives our business growth and allows us to reinvest to continue that virtuous cycle.

This last quarter, we had 94% repeat business from our clients, which we think is pretty spectacular as you think about it.

Moving on now briefly to slide 9, you can kind of see how the markets are performing for us in terms of the percentage of our revenues.

We've broken those into three parts, public institutional, industrial and process, and I'll talk about each one of those independently.

Let me start first with public institutional, and then I'll go counterclockwise around the pie.

Public institutional business is made up of three main parts for us, the work we do for National Governments, the work we do in infrastructure, and the work we do in Buildings.

Let me talk about each one of those individually.

The National Government's business is still for us at least stable.

We're dealing with the impacts of sequestration quite well, and this whole business of Multiple Award Task Order Contracts continues to be favorable to us and our cost model.

So that's another positive.

We've been successful in delivering these large government owned contract or operated programs, both here and in the UK, and that continues to be an area of strength in the Company.

A couple of major wins in the second quarter.

In the US, both Johnson and [Michude] as well as good strength in the UK as we go forward.

And then of course the nuclear cleanup business in the UK remains very strong.

The clients are releasing some pretty significant opportunities, and we see that as a positive going forward as well.

So we think in spite of the negative view of the National Government's markets, we're going to continue to do pretty well, and our business will be able to continue to grow, although perhaps not at as big a clip as we might like.

On the infrastructure side, we see that as a strong market.

There's a lot of money that needs to be spent in that market.

The long-term prospects for that market are extraordinary, and we see some momentum building.

A lot of that's coming from user-driven projects in terms of where user fees are funding the work, and from bond programs.

We've seen almost $30 billion in bond programs approved just in the US recently.

We're also seeing major investments in pipeline and gas infrastructure as a part of our business.

That's a multi-billion dollar market.

We see about $6 billion in programs and projects just in pipeline safety alone.

So we think the infrastructure market as we define it, it's going to be a good positive market going forward.

The Buildings business continues to improve.

That's a technical Buildings business for us.

So we're not building high-rise office buildings or multi-family housing.

We're doing [technica] complex buildings.

And those markets are quite strong.

I told you last quarter that I was really proud of our repositioning of our business away from the government sector.

We continue to do extremely well.

We're very strong in mission critical markets.

These are data centers, and operations centers, strategic facilities for our customers.

Our healthcare business remains quite strong, and we see a lot of opportunity in healthcare.

And then K-12 and Higher Ed continues to also be an opportunity area in the institutional marketplace.

We've got eight programs that we're managing, and nine others in assessment, all of those I think will contribute well to our business.

And you can see in spite of the apparent headwinds, we've got really nice backlog growth both quarter-over-quarter and year-over-year in that business.

On the industrial side of our business, the pharma bio business first, it is improving.

It continues to improve.

The product pipeline has improved for a number of our customers.

That's driving new capital investment.

Our core clients have taken advantage of our geographic positioning, and our strengths to improve their posture and ours with them.

And there's a lot of investment in secondary manufacturing around the world, as the customers try to put their facilities where the future users of their drugs will be.

So we see that as a good solid market, and continuing to improve.

Mining and Minerals, we've characterized it as strong.

I guess that's probably not a fair characterization of the market overall, but it is a fair characterization of the market for us.

While Australia has been weak, we continue to have a strong position in the Mining and Minerals market in the Americas, and we're doing quite well.

We're also repositioning a number of our capabilities around what our traditional strength is, which is that business of small cap and mid-cap investments.

That's where a lot of the big Mining and Minerals companies tell me they're going to put the bulk of their capital as they go forward.

Our relationship model continues to be strong, and resonate with the Mining and Minerals customers.

And of course, we bring buildings and infrastructure capability to these projects that many of our competitors do not.

Also as a part of the Mining and Minerals business, we have a strong position in phosphates and a growing position in potash.

Both of those markets are quite strong, and we think they represent significant opportunities for us as we go forward.

The last part of that is a sort of our other category.

So it's Power, Pulp and Paper, High-Tech, Food and Consumer products.

We characterize that market as mixed, because it is such a diverse group of customers.

We've got a lot of alliances with our clients.

Those alliances are continuing to be a good factor.

We're getting more and more both greenfield and brownfield opportunities with those customers where we have an alliance.

Capital facility spending is pretty good, actually.

Some of it is being driven by environmental considerations in places like the US.

The EPA estimates about $5.4 billion in upgrades to industrial facilities in the US over the next few years.

And then of course, while we're a small player in Power, we happen to be well positioned in the UK and Europe, and there's a significant opportunity there for us to continue to grow.

You can see the backlog is down quarter-over-quarter and year-over-year.

But I do think there are some significant potential adds to the backlog out there in both Mining and Minerals and pharma.

And so that downturn doesn't concern me at this point in time in the industrial part of our business.

Moving on to the process part of our business, clearly the strongest part.

We've characterized the three businesses here, Refining, Chemicals and Oil and Gas as either strong or very strong.

Refining, we've actually raised the rating from improving to strong.

We're seeing a lot of activity in Refining right now.

Our relationship based model and our focus on traditional and mid-cap work, which we really think of as our sweet spot, is getting a lot of focus and energy from our customers.

Their margins are good, at least in North America right now, and somewhat better in other places.

And since cash flow tends to drive investments in the Refining business, we're seeing some additional investments.

We're also seeing an uptick in capital spending as a result of the EPA.

Again, the ultra low sulfur gasoline.

The standards are stringent, and the deadline at least at the moment is sooner than anyone expected.

And as a result, we think that's going to fuel sort of a newer and shorter time frame on releasing these projects.

We're also seeing some of the advantaged crude's that are coming out of unconventional oil as driving investments as well.

So the Refining business is picking up for us, and we're pleased with what we see.

Oil and Gas is very strong.

E&P spending continues to increase, something north of $5 billion, with a 6% increase expected in '13.

Of that, we think the amenable spend work that Jacobs could do is around $160 billion.

So we've got a lot of opportunity for growth there.

The unconventional gas market, where we think our greatest opportunity for penetration would as be, is pretty significant.

We're seeing average annual spends per client in the $2 billion plus range.

We're also continuing to see good investment in the heavy oils, particularly oil sands.

The majors continue to invest, and most of them are telling me they've got steady programs of 45,000-barrel a day projects as expansions, just one right after the other.

And then we're also seeing modular construction as an increasingly important aspect.

There's clearly going to be a significant shortfall of labor, craft labor to support all these programs and projects in the Refining, Oil and Gas and Chemicals area.

And modular construction is going to be a major factor in moving some of that labor offsite.

We're very well positioned to take advantage of that.

And then finally, the Chemicals business, very strong as well.

We have a long history of being a significant player in the secondary Chemicals part of the Chemicals marketplace in dealing with very technically complex facilities with very complex engineering requirements, and that low cost feed stock is just driving unprecedented growth in North America and the Middle East.

So we're seeing lots of opportunity for the business there.

In fact, opportunities continue at a very robust pace.

You can see that backlog is up 14% year-over-year, and 24% over two years ago.

So we see that market as one where that whole sector, I guess I'd call it, as one that's a real positive for us as we go forward.

Moving to geographic diversity, I'm going to spend just a little bit more time on slide 13, talking about how the individual geographies are doing.

The North American markets are frankly very strong.

We just talked about Chemicals and natural gas, Mining and Minerals, all of those things are real positives in the North American marketplace.

But we're also seeing lots of activity in infrastructure and Buildings as well, and all of that combined together says North America is going to be a very, very good business for Jacobs in the next few years.

South America is also strong, mostly in the focus on Mining an Minerals and us and our position with key customers in Chile and Peru.

But we think there's lots of additional opportunities for growth in places like Brazil, and in the Oil and Gas business as we go forward, both Oil and Gas in the sense of upstream, but also in terms of the downstream part of the business.

Europe, probably not so good.

I'd characterize it as stable.

There are projects and activities for us, and I think we'll be able to eek out some growth.

But the European market probably won't be the strongest market we're in.

We do see, as I said earlier, some opportunities in Power.

There are some big increases in fundings for highways and local authority schemes in the UK.

And we participate actively in those.

Water and utilities is also going to be a strong market in Europe, and we think we're going to be able to take advantage of that.

So it isn't going to be awful in any sense, but I don't think Europe's going to be the strongest market we face.

The Middle East and Africa continues to be very strong for us.

We continue to get dramatic growth.

We have a terrific relationship with OCP in Morocco, and the tremendous backlog of projects in our joint venture.

We're up something north of 600 employees just supporting that customer and those projects.

Lots of process activity, as people try to monetize gas and deliver higher value products from the feed stocks that are available in the region.

Plus major investments in Buildings and infrastructure across the Middle East that we're now being able to take advantage of our position to win.

Moving on to India.

A very strong market for us.

We're doing very well, both in the process side of the Indian market as well as the infrastructure side of the market.

And it's a great leverage point for us, not only for the work in India, but for work around the world as we back office or high value engineering work in India both in infrastructure and in process.

China and southeast Asia, strong markets for us, a growing position in China.

We're able to leverage a lot of our customer's investments there such as the pharma bio, and specialty chemical businesses, and we think that's going to continue to be good.

So we see that area as a strong market.

Australia, maybe not so much.

I'd characterize that market right now as mixed.

Mining and Minerals is under pressure, and continues to be challenged.

But there is heavy process activity, Oil and Gas work, and we're doing well there.

We had a couple nice announcements in the quarter, and we're continuing to grow our business in infrastructure and with National Governments.

So some parts of Australia are going to do quite well.

The Mining and Minerals part of it maybe not quite as well.

Overall when you go through all of the geographic markets, the conclusion you reach is that the markets overall are pretty good geographically.

And we're doing a good job of taking advantage of those things, and being where the growth opportunities are.

I'm now on slide 14, growth through acquisition.

As you know, we continue to plan for and attempt to get about 5%, about a third of our growth from acquisitions plus or minus.

There's lots of opportunity out there right now.

We continue to focus on China, Australia, and South America from a geographic point of view.

The markets that we're chasing haven't changed much.

Oil and Gas, Mining, infrastructure, and other kind of niche additions to our business.

And of course any time we can add a core client, that's important.

It's a particularly active area for us, as we look forward over the next couple quarters.

We expect that due diligence costs may be a factor in our SG&A over the next couple quarters, as there is an awful lot going on.

That brings me to slide 15.

We've got a history of very, very good, steady and substantial growth.

That track continues.

Our business model works.

It really does drive client loyalty, and finds increasing opportunities for us, and hopefully we can put the results on the bottom line for you to see.

Our diversification in terms of markets, geographies and services, both fuels our growth and helps minimize our exposures.

We're coming into the new quarter here with the highest backlog we've had in the history of the Company, with the exception of one quarter in Q3 of 2008.

So the backlog story is a good one.

We've got a great balance sheet, so these acquisition opportunities that are out there we can take advantage of those and do them.

And of course, our cost position continues to put us in a great competitive position.

So we think the outlook for the Company is in fact quite good.

With that, I will turn it over for questions.

Thank you.

Ladies and gentlemen, we will now begin the question-and-answer session.

(Operator Instructions)

Jamie Cook of Credit Suisse.

Hello.

Good morning, and congratulations on a nice quarter and margin performance.

Just a couple questions.

First John, not to -- I'll try to ask questions about guidance even though you won't like it.

I'm just trying to figure out why such a wide range given you already have the first half of the year in front of you.

And it doesn't seem, while the order backlog and margin trajectory looks pretty good, it doesn't seem like the high end would really be on the table.

So if you could just comment under what scenario do you think you could get there.

And then also, just your margin performance in the quarter was quite impressive.

Just want to get color on how much of that was your ability to get pricing versus mix, and how the constraints on craft labor are impacting the market.

Thank you.

Okay Jamie.

On the backlog -- on the guidance part, we didn't change the midpoint.

The midpoint is still at the $3.25, which is somewhat lower than what you on the street have kind of raised us up to.

That's why we believe that the quarter was pretty much in line with our expectations toward that kind of a midpoint guidance.

And as far as why we didn't narrow the range, I guess part of it is because we didn't feel like we had to.

The other is just kind of continue to send the message that it is a volatile market out there.

There are some very good things that are happening, and there's some very difficult headwinds.

Craig mentioned the fact that we are seeing pickup activity in the M&A market, and that's going to probably drive up some of our G&As a little bit over the next couple quarters which is somewhat of a headwind.

But when you put it all together, I'll go back to my old analogy of the bell curve, and as you get out to the ends of that guidance, the likelihood is pretty small.

And as you get closer to the middle, the likelihood is more -- is stronger.

So I guess, that's a long-winded way of saying that we left it the way it was because we could, and because things haven't changed -- (multiple speakers)

On the second question, or the second comment about margins, I think it was a good margin performance.

If you look at it, it really is -- it's in line with kind of where our operating margins have been for the last three or four quarters.

So I think it just shows a consistency.

We are continuing to press for pricing improvements and things like that.

But it's a tough market.

It's a very competitive market.

And we do serve some of the largest and most sophisticated buyers in the world.

So it's not something that we can do based on our own desires, but it's something that's driven by a marketplace that is still very fragmented, and still doesn't have anybody that can give any real market dominance that can drive prices up.

We are seeing improvements in pricing, modest improvements here in North America particularly, a little bit in South America.

But there is still softness in Europe and Australia as far as pricing is concerned, and there certainly is a lot of pressure that our customers continue to put on it.

But I think we will continue to see modest abilities to improve pricing, and that will show up in the margins, offset what we would expect to see some pressure on margins as we start to see our field services grow a little bit.

So I think you're going to see not a lot of opportunities to have our overall margins go up much, but they should be able to be balanced so they won't go down very much as we see the field services grow later this year and into '14 and '15.

All right.

Thank you.

I'll get back in queue.

Andy Kaplowitz of Barclays.

Good morning guys.

Craig, John, your revenues continue to sort of stay relatively flat.

They're up a little bit sequentially here in that $2.8 billion range, but your backlog is up low double digits, and field services is up more than that.

Has your burn rate actually slowed a bit over the last couple of quarters?

I know you said that you should pick up in the second half of the year, and we still expect that.

But I guess maybe you could just talk about the revenue expectation here.

Well, certainly we have seen some improvement in the backlog, and that is driving what was modest growth in revenues this quarter.

We expect to see that to pick up.

It's hard to get exact timings, because things sometimes start slower than what we anticipate.

And sometimes I think there's a real caution on the part of a lot of our customers to make sure that they have the engineering well at hand, and get these phased approach to these projects so that they don't get ahead of themselves.

Because they are still very focused on controlling costs and making sure that the scope and activity level parameters for the projects are well-defined before they launch off into the field.

And so I think the process has gotten a little bit more deliberate, maybe a little more controlled, and for the long run that's probably a good thing.

In the short run, it just means that it takes a little longer to get things moving.

Okay, that's helpful John.

So Craig or John, you've had very little lumpiness actually in your backlog sequential growth over the last several quarters.

It seems like, Craig, from your comments you still have pretty good visibility that that should continue to increase, but maybe you could talk about that.

Is your visibility because of what's going on in North America a little above average still in terms of backlog growth over the next few quarters?

Well we certainly see -- the visibility of projects and prospects is probably as good as it ever is, and that's not bad, it's not great, because our customers do tend to keep their cards pretty close to their vest.

But as you look forward, there's a lot of work out there.

There's a lot of work already under contract in some way.

I happened to look at the wins for the Houston office, just one of our offices on the Gulf Coast over the last two quarters, and we won some part of $8 million worth of work from a TIC point of view.

Hardly any of that $8 million is in backlog at this stage.

Some of it never will be, because the customer will procure on the customer's paper but we'll still derive the revenue of the work and the profit that comes from managing it.

Some of it will end up in backlog.

So yes, there's good visibility about what backlog should do in the broad sense.

But the visibility about that timing is still tough.

Will the customer commit to a project in the third quarter this year or the fourth quarter?

Will they decide to do the procurement on their paper, and the construction on ours, or vice versa?

Or will we do both?

Or will we do neither?

And do it as a construction management project, put the procurement on their paper.

And all of that unfortunately affects what shows up in backlog.

And so it's notwithstanding we have that good visibility, predicting what backlog will be is not easy.

Got you.

John, just a very quick detail question.

The 10.6% SG&A as a percent of sales, did that already include some increase in due diligence costs around M&A?

Did you already see an uptick in 2Q?

There's a little bit in there.

But there always is a little bit just as we look at these, and engage outside consultants and such even on early phases of discussions.

But we are seeing an uptick in the activity levels.

So going forward we would expect to see a little bit more.

Okay.

Thanks guys.

Tahira Afzal of KeyBanc.

Hello folks.

Congratulations on a good quarter.

Thank you Tahira.

If I look at last year and your G&A it also popped up in the second quarter, and partly you were coming off of a holiday season, but partly the explanation was really some project push-outs, and hence some underutilization and unallocated costs.

So as a consequence, as the utilization adjusted in the second half, you basically saw margins jump up 60 points sequentially on very low revenue growth.

So how should we be looking at G&A flow-through for the rest of the year?

Is it going to stay at these fairly notably high levels, or should we expect some [re-jiggering] on utilization?

Well if you look at the dollars rather than the percents to begin with, other than this pressure of what we've talked about on the due diligence costs, we would expect to see our G&As stay relatively flat going through the rest of the year.

And there's always a step-up from the first quarter to the second, because of the holidays and vacations and such like that.

But I think that was pretty much in line with expectations this year.

But I think coupling that then to percents, certainly as we see the field service revenue picking up, you don't get the same kind of relationship between field services and G&A as you do between professional services.

So the percentage we would expect to see come down a little bit as we drive up the field services part of our revenue and we move away from the 60/40 mix there about, that we've been seeing the professional services dominating revenues over the last actually couple years.

Yes, thank you.

And second question is in regards to really the labor shortages that are likely and projected.

And as you look into the contracts that are being negotiated right now between yourselves and your sponsors, are you seeing some acceptance and acknowledgement that perhaps these labor costs would have to be higher?

We've seen as much as 35% into 2015, 2016, or are you seeing more of turn towards cost plus?

Thank you.

I think what we're seeing in terms of labor costs, and let's separate those into two categories, first the professional service side and then the field service side, the craft side.

On the professional service side we're already seeing, as I think I mentioned last quarter, considerable pressure on costs in terms of what we pay the employees, because the workloads are starting to get toward that typical capacity level in the industry.

And I think what we will continue to see is that sort of increases.

So if you think about the labor cost side of the engineering services part of the business, you're probably going to see something on the order of 10% to 15% compound growth out into '15 and '16.

And probably sometime in the '15 time frame, this current boom will start to dissipate a little bit, and things will come back down a bit or flatten out, I should say.

With respect to craft labor, the craft peaks pretty seriously at the end of '14.

So I would expect craft to be pretty expensive at that point in time, and we expect there will be more work than there is craft, period, available.

So I think that will also drive a pretty significant amount of modular construction coming into these challenged areas like the Gulf Coast.

So yes, I think -- I don't think that 35% increase in labor costs is at all unreasonable for the 2015, 2016 time frame.

Not my number, I haven't studied it that way, but it doesn't seem unrealistic.

In terms of what that's doing to the margins, we are starting to see the ability to get higher margins on our projects.

But remember, higher margin starts with a few basis points at a time and takes a long time to work its way from backlog into the revenue stream and down to the bottom line.

Does that answer your question?

Yes Craig, actually that was very helpful.

Thank you.

Jerry Revich of Goldman Sachs.

Good morning.

In Chemicals, you highlighted complex facility opportunities.

I'm wondering if you could talk about how many greenfield facility contracts you're pursuing, and touch on whether you're more optimistic on your prospects in ethylene versus propylene and nitrogen.

Let me ask George Kunberger who is here with me, he's our head of sales, to comment.

We're not in the ethylene part of the business.

We're in the derivatives, once the ethylene's made.

So that probably changes the picture a little, but I'll give it to George.

Yes.

So certainly as Craig said, we're -- our opportunities really touch all three to varying degrees.

On the ethylene side, we're not in the ISBL, the process part of that business, as you're well aware.

But on a lot of these greenfield opportunities that our various customers are talking about, as you can imagine, there's lots of infrastructure.

There's lots of outside battery limits, lots of utility work that goes along.

And these are significant parts of those overall investments.

And so that's very definitely a part of just the ethane cracker development that we get a chance to play in.

On the derivatives side and the polypropylene side, as you well know, that's really a sweet spot for us both from a process perspective.

And so that will be an inside battery limits as well as potential outside battery limits opportunity for us on all of those projects.

And relative to the nitrogen, I presume you're talking about ammonia, urea, those types of projects that we're starting to hear about?

Is that correct?

That's right.

So in those areas, as also those are typically technology driven plays, as I'm sure your aware, and not a strength of Jacobs from a technology perspective.

However again, those are large projects with lots of varying components to them.

And so our opportunities to play in there in that space while not as strong as the first two I just talked about, is not a null set either, both from a partneringship perspective or playing in the outside battery limits opportunities on those projects.

So all three of those represent opportunities for us to one degree or another, although not the same in either one.

Okay.

Thanks for that.

And you had nice NASA contract awards in the quarter.

Can you just talk about the timing and the magnitude of the sales ramp or the backlog burn on those contracts, just give us a sense when you start to see the benefit flow through?

Sure.

Well, as you know, those contracts are typically longer term contracts, five years, typically, with extended opportunity years beyond that.

And so those are by their very definition slower burn, although very large programs.

Just to amplify on that a little bit, something like Johnson, the total potential award would take 10 years to eat.

But not all that goes into backlog at once, because particularly it's a Johnson, I think was a three year contract with then a number of one year options after that.

And then, so all that goes into backlog until those options are exercised is the base period.

Yes, it was a five year base period.

Sorry, five year base period.

And that's pretty typical for those contracts, although the exact number of years can vary, obviously.

Some cases like the announcement on Michude, that's a one year extension.

Okay.

Thank you.

(Operator Instructions)

Michael Dudas of Sterne Agee.

Good morning everybody.

Hello Michael.

How you doing?

I'm wonderful, thank you.

Craig, Middle East activity continues to gain some momentum.

Anything new with Aramco or some of the GES contracts?

And how are some of the margin unit opportunities for you in that region?

GES remains -- GES Plus, I should say.

To be specific.

Remains a really good program for us.

We're very busy, and continue to be very busy.

The pipeline of project under GES Plus continues to be a positive as well.

And then we're doing pretty well outside of GES Plus by virtue of our position.

Noel Watson is sitting here with me who's kind of the Senior Project guy for everything going on in the Middle East.

So I'll ask him to comment.

Yes Mike.

Things are booming in the Middle East, and I think it's the right way to say it.

Not only has Aramco got a huge spend, Aramco's doing major diversification as they move into chemical [susider] and other joint venture opportunities.

We literally have about a half dozen good customers in the Middle East, and it just seems like the opportunities are virtually unlimited.

That's about all I can say.

It's just a nice place to be and a good time.

Yes, our Chairman is deeply involved in what's going on there and we would be -- we'd miss him greatly if he weren't.

Well I won't make --

Does that answer your question, Mike?

Yes.

I won't make any laker comments about that.

I'll move on.

That's a different conversation.

Yes, he's got more time now to go to the Middle East, exactly.

Canadian Oil Sands, any indication of some delays in final investment decisions by clients with some of the activity in crude price differentials?

And with Keystone, any sense, it's -- could that be a big help to the investment opportunities coming out of that region?

Let me kind of work through the list a little.

Let me start with Keystone.

I've talked to three or four customers in the last month and-a-half about the importance of Keystone to them, all of whom are making significant investments in the oil sands.

They all see it as critically important to their plans going forward, not the only answer but an important answer and more of a problem if it doesn't happen than an opportunity if it does.

That being said, the major players that we do business with have mixed strategies about how they're going forward, but for the most part it's steady incremental investment.

So for example, one of our big integrated oil customers, global customers, has basically said we're going to start at about a 40,000 to 45,000-barrel a day SAG-D project.

Every time that we get to the point where we're ready, and that sounds like it's a decision today, but it's sort of when we get one far enough long we'll start the next one.

And we discussed at some depth the problems with the spread between Canadian crude's and more advantaged crude's.

They weren't put off by that at all.

And of course, as you know, that gap has closed quite a bit here through April.

So it's not nearly as big an issue as they cleared out some of the problems in Cushing.

So overall, the customers we're talking to, although each one has its own flavor, are saying this is a good business.

It's a long-term business, so we're going to continue to invest.

Now there are a couple customers who that's their only business, and they're clearly taking a hard look and when to invest, but even they're in this for the long run.

And finally Craig, in your prepared remarks, you talked about modular construction.

Could you refresh us on what capabilities Jacobs has?

How much of a ramp is required?

Do you need more space or facilities?

And is there going to be a tightness in that market as some of this craft labor and field work picks up, especially in North America over the next three to five years?

Sure.

We actually have five module shops, all of them in North America.

One in the US, and four in Canada.

They are big shops.

And at this point in time, because construction is down, there's not a lot of work in the shops.

But my expectation is the shops are going to load up very quickly.

Our shops vary in terms of capability from very complex, small sort of scale modules to very, very large modules.

But again, usually with fairly complex processes in them.

We don't really try to compete for the stair towers and the office complex kinds of modules, the accommodation modules.

Our focus is on the chemical process, chemical being in the chemical engineering sense, process modules that are technically complicated, and we can build those both in the pharma business and in the upstream Oil and Gas, Chemicals, Refining business as well or better than anybody.

So it's a big potential business for us.

As we look forward, it's been a cyclical business historically.

It will continue to be cyclical.

But we looks to us like we're coming up on another strong up-cycle.

Excellent.

Thank you Craig.

Andrew Wittmann of Robert W. Baird.

Good morning guys.

Good morning.

Hello.

I want to just build just maybe a little bit of color, specifically in the turnaround season in the oil sands.

What are you seeing up there in just in the turnaround business right now?

Turnaround season is very active as we speak.

We have a number of turnarounds ongoing.

I couldn't tell you how many off the top of my head.

I'm looking down the road here to see if somebody can give me a number.

We have six apparently going on as we speak.

Moreover, we think that the Fall turnaround season will even be stronger than the Spring one.

And so we see turnarounds in Canada being a big area of activity for the remainder or for this next quarter and the later part of the fourth quarter and into the first quarter of '14.

Great.

Thank you.

And then just maybe Craig on the Federal side of the business, can you just maybe give us a little bit more texture?

You kind of mentioned some of the wins that you've had.

But when you're looking at bidding new work or competing on task orders against other competitors that maybe have approval for specific contracts, can you just talk about maybe which agencies are maybe more active for you in terms of their contracting pace?

Because we've heard that some agencies have dramatically slowed down contracting pace, while some others have gone normal business procedures.

So can you just give us some context about which industries or which government agencies are stronger versus weaker?

That would be helpful.

I'll let George Kunberger respond.

Well so in the Federal space, specifically on the technology side as we talked about it, the non-Buildings part of it, our two major clients in that space are NASA and the Department of Defense.

And specifically within the Department of Defense, more the Air Force than the others, although certainly the Navy and the Army are good customers as well in that space.

On the Buildings side, that is more the civilian government side, civilian building side, the non DOD part of it, I would say.

And as you well know, that part of the business is definitely slowed down.

And there's been a lot of pullback.

And that's why Craig has made a couple comments in both this quarter and last quarter about our ability to shift our skills and our focus in the Buildings business, the nonfederal business over into private sector, which has been a big boom for that business.

And why that business has not suffered, matter of fact it's actually growing modestly despite that the fact that their traditional customer base has pulled back.

Is that good enough?

Yes.

That's helpful.

Just one final question.

Just wanted to kind of get your view of the cycle in general here.

I think investors have been patiently waited for more of that field service that construction component to come through.

We're still 60/40.

Any view or change in the view about when that field of service work happens?

Is it still later this calendar year?

Or do you feel like some of this might get pushed into next year?

Well I think you'll start to see some of that work drop into backlog in a bigger way in this quarter and next quarter.

In terms of its impacting revenue, it will take a quarter or more before that actually starts to impact our revenue numbers.

So you're probably looking at backlog being impacted a little bit next quarter, and even more in the fourth quarter.

And you're looking at revenues being impacted more in the fourth quarter, and into '14.

Great.

Thank you.

That's all I had.

Alex Rygiel of FBR.

Thank you.

Good morning gentlemen.

Good morning Alex.

Two questions.

First on new awards.

Craig, do you think that your new awards activity is fairly strong more from market growth, or market shared gains?

To go into that a little bit deeper, are you seeing it develop as more new projects or more sort of catch-up maintenance projects?

The boom part of it is clearly new projects.

All right?

But the business, where we're getting growth varies significantly by the business.

So for example, in the National Government's space, it's almost entirely share gain.

We're just taking work away from the competition.

In the Chemicals business, it's a combination of share gain and an expansive market.

So you'd have to go all the way around our little pie chart market by market to give you -- which I'm prepared to do if you want, to give you a sense of where it's more share focused and where it's more robustness in the market itself.

Would you characterize it as --

(multiple speaker) Mining & Minerals where the market is not very good, but we're going to do well, or at least we believe we will.

And that's pure share gain.

Would you characterize in its entirety though more share gain or more market growth?

Wow.

Yes.

(laughter) It's -- our business -- we rarely see the sort of growth in any of our markets that would support 15% growth for us, because it is a highly competitive market.

So it's always partly about taking share.

But our base business is built around taking share from the competitors, not depending on the market cycles.

Now, when we get into cycles like we saw in the 2006, '07, '08 time frame, clearly we and everyone are taking advantage of the bubble in the marketplace to have lots of work.

But what we kept and how we've continued to grow since then has been much more a matter of retaining share, growing market share, particularly at the bottom of the cycle, and then hanging onto that share as the cycle gets bigger so we get a bigger share of the pie overall.

Does that answer your question, Alex?

That does.

That's helpful.

And then lastly, you referenced the growing pipeline market.

Can you characterize that as activity all related to safety or is it new build?

And specifically, where around the globe are you seeing the pipeline opportunities develop?

It is both new build and safety.

The safety issues are largely US North America focused.

So there's a huge amount of [additional] spend there from the utilities.

As well as from the sort of transcontinental pipeline companies.

But then on the top of that, you have a big expansion of these systems driven at the grand scale by things like Keystone, and at a smaller scale by all the unconventional gas, unconventional oil work.

And that kind of pipeline capacity we're seeing not only in North America, but we're also seeing drivers for that in places like the Middle East.

We actually do quite a bit of pipeline work for Aramco for example.

Great.

Thank you very much.

John Rogers of D.A. Davidson.

Hello.

Good morning.

Good morning John.

Just -- I wanted to follow up a little bit on the revenue growth.

You talked a little bit about field services potentially accelerating perhaps into later this year, into 2014.

And I'm just looking at your overall revenue growth, still mid low single digits.

And without acquisitions, and I assume those are coming in.

But when do we start to see this acceleration overall?

That's -- you're saying really out into 2014 to get you to that 15% growth.

Presumably, you're going to need 10% organic growth at some point.

Well, let me remind you.

I'm sure you remember this, but I'm going to remind you anyway.

We're only talking about 15% growth at the bottom line.

Right, no.

but presumably they've got to match it at least for -- (multiple speakers)

No, they don't.

Okay.

No they don't.

I think that's an important aspect of understanding how we run our business, particularly on the cost control side.

If we can grow our revenues and gross margins in the 10% kind of range, we can easily manage costs to get more than 15% bottom line growth.

And that's really the way we try to run the business.

So 15% sort of top line growth would be extraordinary in terms of driving bottom line growth, assuming it were all equally profitable, because of the way we run the business.

And in fact, when you saw those rapid top line growth periods in 2006, '07 and '08, we saw much bigger than 15% compound growth at the bottom line.

That being said, to get more to the fundamental question, I think, I think -- and of course, this is all up to the customers on how they time things, that we should start to see good revenue growth in the fourth quarter of this year, and then on out all through '14.

And that's kind of based on the way we see the pipeline now, and where projects are in the development cycle.

But customers can decide to go back and recycle a front end, to change the prospects of the program or the project, so there's still a little bit of unpredictability in that.

But I think as we're looking at what we expect our numbers to look like, we're certainly expecting to start to see some significant revenue growth from field services in the fourth quarter.

Does that answer your question, John?

That helps, Craig.

I appreciate it.

And the other question I had is, you seem a little more excited about acquisition opportunities.

And is it just there's more of them?

The sellers are a little more realistic?

Or are there some really big transactions potentially out there?

Well, you know, I can't be that specific.

But -- or won't be that specific, maybe it's one or the other.

Where we're at in the cycle is that these acquisitions are always opportunistic.

You've got to have a willing seller and a willing buyer.

You can't time them.

They just happen when they happen.

And before you really know whether you've got a willing buyer and a willing seller, you've got to spend a fair amount of money on due diligence.

So I guess my concern about due diligence costs being a little high as we look forward here at least in the next couple quarters, has to do with the fact that opportunistically speaking, we've got more going on in that area than we usually do.

And that may or may not turn into more in the way of acquisitions.

I don't think we can say the outcome yet.

But it's certainly a bigger factor, and where we're spending money right now than it has been in a couple of the previous quarters.

And I know that's sort of a non answer.

I apologize for that.

But it's really the only one I can give you.

No, that's fair.

But it sounds like certainly you're spending more time out there potentially working on it.

So okay.

Thank you.

Appreciate it.

Brian Konigsberg of Vertical Research.

Yes, hello.

Good morning.

Good morning Brian.

Most of my questions have been answered.

But I guess just conceptually, when I look back at the last cycle and as far as when Jacobs started to benefit from increased pricing, I think that just given the nature of your business, more operations and maintenance and less large project work, you get more of the benefit from utilization rather than renegotiation or winning new projects where pricing is actually higher.

Would you say that the mix or the pipeline that you see today it maybe gives you more opportunity to see an immediate benefit from market pricing than, say, the 2005 to 2007 period?

No, I wouldn't say that.

I think the market we see today is one where there is some opportunity to re-price some of the alliance work and some of the basic ordering agreements, because clearly the competition and pricing in the marketplace is going up.

We've had our teams working hard to do that where they can, and we've made some decent progress there.

Generally, those things though take a while to show up in the bottom line numbers.

Certainly utilization is always the first part of margin expansion in any of these cycles.

I'd have to say that for the most part, that part of it is behind us.

We're running at full-out utilizations, and really don't expect to get much more benefit from utilization, much more benefit from overtime, or much more benefit from facility related savings as the market turns up.

So what we expect to get is better pricing on new work and improvements in pricing, particularly in our long-term arrangements with our clients, and both those things will drive some margin expansion.

Again, remembering that our customers are some of the largest corporations in the world, and they're very good at buying.

They're way better at buying than we are at selling.

Got you.

And just secondly, just secondly on the M&A side, just kind of piggybacking on the previous question.

So as far as the pricing that you're seeing in the market, are assets attractively priced or are they -- is there a lot of competition at what you're looking for?

It depends on the market.

I would say for the most part, acquisitions are attractively priced.

But as you know, whatever the business of the week or the month happens to be, that's where people are all running around spending too much.

So for example, on-shore pipeline engineering when the construction companies are going for ridiculous multiples.

So you can probably bet you won't see much of that in any announcements we make.

But lots of other aspects of the business are going at multiples that are really good and really attractive for our shareholders in terms of the leverage we can get out of those things.

And so there's -- there are good deals, not great deals.

There aren't any steals out there, but there are good, business responsible deals for both us and the target that make a lot of sense for them and us.

And when I say them and us, I mean you, the shareholders.

Right.

Anything that really stands out, or is it just everything except on-shore pipeline?

Well, I'd say rest of the world is probably actually weaker in terms of multiples than the US is right now.

So US investments don't look very attractive.

That's probably okay, because we've got a pretty big business in the US anyway.

But beyond that, I can't really be much more specific.

Got you.

Thank you very much.

Will Gabrielski of Lazard.

Thanks.

Good morning.

Good morning.

So, you guys are laying out a few headwinds right to the margins expanding from here from mix, and then maybe having already squeezed all the juice from the utilization fruit.

And going forward, you do say you can get 15% EPS growth without 15% revenue growth.

But it sounds like you've already pulled a lot of the levers to get EPS to outgrow revenue.

So I'm just wondering besides pricing, is there anything left that you can do internally from a margin standpoint?

Well we can certainly continue to control costs in the manner we have for many, many years now.

And if you do the math and you get say, 10% growth in gross margins revenues, let's assume they're the same for the moment, they aren't always, but let's assume so.

And we can keep G&A growth to 5%, 6%, we can put 15% on the bottom line forever.

And so the leverage of that, it gets better when -- let me put it this way.

It's easier when you're driving utilization, it's harder when you're full-out.

But we've got a team here at Jacobs that's really good at finding ways to make the bottom line grow faster than the top line.

Okay.

Could we -- can you dig into sequester a little bit more?

And specifically I guess, how far along in the process do you think you are in being notified by different agencies about what their furlough plans are?

And can you give maybe a calendar of your expectations on how far along you are, and how definitive those plans are?

Or how much potential risk there might be in the back half of the year should things be a little more negative that you were initially expecting?

I think with respect to '13, we've seen most of it.

I'm looking around the table here with the team, and they're pretty much nodding their heads.

I don't think we'll see much more in '13.

It's been a very lumpy.

We have customers where we had multiple sites for some customers, and some sites that take in a 5%, 6%, 10% hit in terms of staffing, and other sites are being asked to add people.

So it's not a uniform sort of thing that you'd say okay across the board it's been X or it's been Y. But I think with respect to '13, we've already seen virtually everything we're going to see.

Now '14's a bigger question.

All right?

If you look at the budgets for '14, the initial proposals, places where we're active like test and evaluation, are flat to slightly up for '14.

Places where we've repositioned and aren't very active like the Buildings business, are way down.

So as we look at the budgets, again, looking at very preliminary budgets, our outlook for '14 is that it will be as good as '13, maybe better.

But we're really not expecting as we sit here today, and like I say our government -- I don't know what the President's saying as we're sitting here talking.

But we're not expecting to see any more headwind from sequestration in '13 or '14 based on what we know right now.

Okay.

And then if you look at the backlog number sequentially, more than 100% of the growth came from Public & Institutional.

And I'm guessing a big component of that was NASA.

And you guys are very bullish on a lot of your end markets.

But going back over the last three quarters where I think we've seen maybe some acceleration in North America in energy activity and other markets, you guys haven't really posted big backlog gains.

Specifically, industrial is down from where it was a year ago, and processes is up slightly over the last three quarters, four quarters.

So I'm just wondering what's holding backlog back in those markets?

Because if you exclude what I presume was a big dollar component from NASA, it's tough to see the share gains outside of that.

Well, I guess if you think about things like process for example, process backlog can be more lumpy because these are big projects and programs that come in.

And in fact, quarter-over-quarter, Q2 of '12 versus Q3 of '13, backlog and process is up 14%.

So I don't -- I think that backlog growth while it's not big sequentially quarter-over-quarter, it's certainly big year-over-year.

And it's a positive as we look going forward.

The same is true if you look at quarter-over-quarter in the public sector, obviously these big wins this quarter were a factor in the significant growth from last quarter to this.

And we again have excellent growth, something in the just less than 20% range year-over-year.

But we're going off the sort of bottom year of our backlog in that business in the relevant period.

If you go back two years, our backlog growth on a compound basis for the public sector is just a little under 10% compound.

So I actually think backlog growth is not all that inconsistent with what we're talking about.

If there's a disappointment for me, it's the backlog growth in the industrial sector hasn't been what we would have expected it to be.

And that has to do with some projects not coming into backlog at the timing we thought they would, the weakness in the overall Mining and Minerals market, and a couple of decisions by customers to procure on their own paper.

So if there's a disappointment for us from a backlog growth point of view, it's in that industrial sector.

Does that help?

Okay.

It does.

And then just quickly on working capital, if you can touch on that.

And since you closed on the Mining business, [Okers] Mining business, DSOs have been materially higher than they were maybe during the last cycle before you had that business, and is there anything you can do to maybe start converting cash flow a little more quickly from here?

It's something that we're putting a lot of attention on and it really it relates to a number of different things.

The growth of our business in the Middle East, where just traditionally business is a lot slower paying because of the -- just the level of approvals and bureaucracy that they build into some of their -- the cycle.

We've seen some of it from some of our best customers, as they just continue to put pressure on their cash flow, and so they slow down payment beyond what contractual terms are.

In other cases, we're seeing pressure from customers who are on contractual terms.

They want to stretch out payment.

And these are things we're fighting daily.

When you look at working capital, you've got to look at both the asset side and the liability side.

And one thing as we get more into the construction, we historically have always had a better collection cycle on the construction activities.

And also because where we're doing procurement of materials and subcontracting, we're more likely than not to get paid when paid.

So even if the receivable built up, we have a payable that builds up correspondingly so it's more neutral on funding.

So as we see the construction activity and the field service activity build up, we would expect to see a significant improvement in our DSOs.

Helpful.

Thank you very much.

Sorry.

Go ahead.

No, it's just we're not happy with DSO where they are.

And we're putting a lot of energy into trying to find ways to fix that in the face of this headwind John talks about all of our customers wanting to extend terms.

Okay, that's very helpful.

I appreciate the time.

Steven Fisher of UBS.

Hello.

Good morning.

Just to follow up on the acquisition question, does the range of what you're doing due diligence on include deals that are as large or possibly larger than the Aker deal, if you can say?

Can't say.

I'm sorry, I didn't catch that.

Sorry, just can't say.

Oh, you just can't say.

Okay.

That's fine.

And then Craig, you mentioned you expect bigger field services backlog growth in your fiscal Q3 and Q4.

To what extent is this more US Refining and Chemicals versus the Canadian Oil Sands?

And then I guess basically it sounds like these are discrete, larger projects that just need approvals.

It's more Americas focused, but it's across all the Americas where I expect that to come from, not just from the US.

Okay.

Does that -- do you understand what I'm saying?

Yes, I guess I'm just curious, do you think it's more from -- if we were to narrow that down between the US and Canada, which do you think is going to have the bigger impact?

Wow, that's a tough call.

Both are going to be pretty strong.

George thinks the US.

He just gave me the US sign.

So, do you want to comment George?

Yes.

I just think that given the pace of projects that are going to happen and the decision making process that our clients in both those spaces are going to be making.

You've said, Canadian business is a more deliberate decision making process at the present time, and the Gulf Coast, US base is more responding to a very hot marketplace.

And so for one reason, that's a primary reason, I just think that those projects will get approved faster and move faster, because I think the speed to the market is going to be a bigger issue there than it is in Canada.

So I think another factor is that our US market is just bigger than Canada.

And when you take the process side of it by itself, when you look at the process side of the business that is active, part of that comes from Canada, but a much bigger part of it comes from the US.

That's fair.

Did that help, Steve?

Okay.

Yes, yes.

It also just sounds like you have a higher degree of confidence in the US piece of it, generally speaking.

Is that right?

That's not what we said.

Okay.

Yes, yes.

And then I guess you mentioned, Craig, some potential strong adds to your Mining backlog.

Can you just maybe give a little more color on where that might come from, and what type of commodities we're thinking about?

Well I can't be very specific, but we do have a number of projects where we're involved and have been for some time now in the feed and design development phases of projects that we've been told by the customer will be ultimately EPC opportunities for Jacobs.

And of course, when they get to that phase, that will have a significant addition to backlog.

Again, you can always -- the customer may well change their mind either about giving it to us, I don't think that's likely but it's possible, or about how they contract for it.

That isn't as unlikely.

And that will affect what goes into backlog or what doesn't.

But the numbers that come out of that business, largely copper, that talk about the industry, could be significant.

Okay.

Thank you very much.

Robert Connors of Stifel Nicolaus.

Just related to the CapEx, it's really been ramping the past couple years along with the TPS mix rising.

Just wondering if you can give us a flavor of where that money is being spent, and what capabilities you guys have been beefing up on?

Well, actually, here recently a fair amount of the CapEx spend has been related to facilities and such like that as we've come down to the end of leases and either moving into new facilities or renovating, because we've been -- had a real push to go to more open plan and open architecture for the workforce, all the way up to senior management.

So it's resulting in I think better efficiencies, and certainly better communications and such within the workforce.

But as we change buildings and such, you have to spend a little bit of money on the CapEx, so that it gets amortized over the life of the lease terms.

Also, we continued to spend to develop and upgrade our systems.

Continue to put our -- the transition costs of putting acquisitions onto our enterprise-wide systems.

Virtually everyone is now on common systems as we look around the system, both in our financial, our HR, and in other systems.

And we are putting on -- continuing to invest in engineering systems and such like that.

And there's CapEx related to people.

We continue to grow people.

And when you hire people, have you to buy new computers, and add some space and such.

And as Craig mentioned, we've come up the curve.

So the excess space we had say at the bottom of the market two years ago, a lot of that has been absorbed, and in many places we're having to increase space and such like that, and along with that goes along with the headcount growth.

Okay.

And then just related to some of the opportunities, do you guys play in the on purpose propylene and butadiene, butylene plays, or is that mostly technology driven?

And sort of in a separate note, just on the old Methanex booking, was that just for phase one or was phase two included in that?

George?

Let's see, so the first part of your question, that's more open art in its nature.

And we obviously have and we have traditionally had a lot of capability in that open art process development of propylene, butadiene process.

As a respect to the second question, I'm not sure we can answer that question directly.

Okay.

All right.

Thanks for taking the question.

John Ellison of BB&T Capital Markets.

Good morning.

You mentioned that you're pushing price in several markets.

I wanted to know what areas and end markets that you've seen some success with this?

Well, pretty much across the heavy process markets globally.

So Chemicals, Refining, upstream Oil and Gas, we're being successful in getting margin improvements from our customers.

Not so much anywhere in the National Government, Public and Institutional area.

That's more still a lot of pricing pressure there, because of what's going on in the industry.

And then in the industrial arena, it's kind of a mixed bag.

Not much pricing opportunity in the Mining and Minerals business, if anything there's a little downward pressure there.

Probably a little opportunity to move up in the pharma side of it, and not much otherwise.

Commodity markets like Food & Consumer products, it's not doing that well.

Okay.

Thank you.

And lastly, in Chemicals, we've been hearing the argument that the DOE's decision for non-FTA, LNG Exports might be causing some chemical projects to be delayed until after a decision is made.

And if the DOE moves forward for more open ended exports, some of these chemical projects may not go forward due to likely higher nat gas prices.

I wanted to know if that was consistent with what you're hearing, and just kind of what your expectations are here with this.

I wouldn't argue that it's consistent with what we're hearing.

I wouldn't argue necessarily that it's inconsistent either.

Some of our customers are very outspoken about keep all the gas in the US so we can invest in the US, and taken very prominent positions that way.

I am quite sure that some of the customers who are of that mind are the ones who would be threatening investments as a positioning strategy.

But for the most part, even customers that I know to be pretty outspoken about no LNG, also have major plans for capital investment and are spending significant money to get ready to make that investment as we speak.

I think the economics at LNG Export from the US aren't as good as people think they might be, and the impacts of that on feed stock costs are not as significant perhaps as people are being led to believe.

Okay.

Great.

Thank you so much.

And ladies and gentlemen, that will conclude our question-and-answer session.

I would like to turn the conference back over to Mr. Craig Martin for any closing remarks.

I just want to thank you all for dialing in, and listening to our story.

We feel pretty good about where we are and where we're going, and have I think a very positive outlook as we look to the future sitting here today.

I hope you see it the same way.

Thank you all.

Ladies and gentlemen, the conference has now concluded.

We thank you for attending today's presentation.

You may now disconnect.