Good morning. My name is Ashley and I will be your conference operator today. At this time, I would like to welcome everyone to Jacobs fourth quarter earnings conference call. (Operator instructions) I would now like to turn the conference over to [Patty Bruner] for the opening statements. Then she will turn it over to management. Ms. [Bruner], you may begin your conference. [Patty Bruner]: Thank you, Ashley. Good morning. The company requests that we point out that any statements that the company makes today that are not based on historical facts are forward-looking statements. Although such statements are based on management's current estimates and expectations and currently available competitive, financial and economic data, forward-looking statements are inherently uncertain and involve risks and uncertainties that could cause actual results of the company to differ materially from what may be inferred from the forward-looking statements. For a description of some of the factors which may occur that could cause or contribute to such period ending September 30th, 2007, including Item 1A, Risk Factors; Item 3, Legal Proceedings and Item 7, management's discussion and analysis of financial condition and results of operations contained therein, and the most recent Form 10-Q for the period ending June 30th, 2008 for a description of our business, legal proceedings and other information that describes the factors that could cause actual results to differ from such forward-looking statements. The company undertakes no obligation to release publicly any revisions or updates to any forward-looking statements, whether as a result of new information, future events or otherwise. Now I turn the call over to John Prosser, CFO, to discuss the period's results. John W. Prosser: Thank you, Patty. Good morning, everyone. I'll briefly go over the financial highlights for the quarter and the year and then I'll turn it over to Craig L. Martin who will give us a business overview. If you go to slide four, the financial highlights, it was a very good year and a very good quarter. Our EPS was $3.38. That included the $0.04 one time gain that we had reported in the first quarter. The EPS for the quarter was $0.92, again a strong quarter and that actually included some effects of the hurricanes we had in the Gulf Coast this quarter that probably had an effect of between $0.01 and $0.02 on the quarter. Net earnings for the year was $420.7 million, again a strong growth over prior year and a very good result. Backlog at $16.7 billion is up 22.8% from the prior year. Our balance sheet continues to be strong with net cash of $547.8 million. We're initiating fiscal year '09 guidance at a range of $3.55 to $4.05 per share. If you go to the next slide, slide five, this gives just a history of our growth. Look at the bars underneath the chart. We continue to grow above our historical target rate of the 15%. If you look at the last five years compounded through the end of '08, we're tracking just a little bit above 30% on an annual compounded growth rate. Going to the next slide, slide six, again, backlog for the end of the year, $16.7 billion, is up nicely from last year. It is down slightly from the prior quarter as we reported in the press release. We did have a removal of $2.36 billion as a result of a customer removing future phases of a project in Canada to another contractor. But even with that reduction, we still have a very good backlog and the outlook for the year and the future remains strong. With that, I will turn the call over to Craig L. Martin, our CEO to review the business overview. Craig L. Martin: Thank you, John. Good morning, everyone. I'm going to spend a few minutes this morning talking about our strategies to continue to maintain that long term objective of 15% growth. I'm going to take you through our key factors that really drive our business in that regard and I'll probably spend a little more time on it than usual here to help you understand where we think the markets are and why we think that's good for Jacobs. The five key things we continue to do is first and foremost, we're going to remain committed to our business model. I'm going to talk about that business model at length but we think it's the ideal model for the times that we're in today. We're going to continue to focus on our diversity of markets, we're going to our multi-domestic strategy. We think more than every, localness counts and I'll talk more about that in a minute. Acquisitions remain an important part of our strategy going forward and we believe that driving down costs is critical at any time but it's especially important in the times we might face coming up. So let's talk now about our relationship based business model. I know many of you have seen this chart before. I'm on slide eight now. But I think it's important to kind of contrast the business models and why I think those differences could prove to be significant. The industry model on the right is one that is dominated by what we call transactional projects. These are the things that are big events, giant jobs in faraway places or giant lump sum turnkey events around the world, and most of the industry favors those kinds of projects. They are the kinds of things that can drive significant profit and rapid growth but they are lumpy and they occur less frequently in turbulent times than they do in really strong times. Contrasting that to our model where we work on preferred relationships almost exclusively, we're dealing with turnkey clients, that's long term business, it's evenly spread across the markets, and it's significantly base loaded. By base loaded I mean small cap work, alliances—the kind of work that tends to go in year in and year out without regard to what's going on in the marketplaces. And for the most part, if you look at any of our offices around the world, a third or more of their day in and day out business is base load business. Another key element of our business is the discrete projects area and discrete projects are likely to become more competitive as we go forward. Price will tend to be more of an issue and we're well positioned to address that issue if it comes up. So we think our business model, this relationship based focus, will drive significant advantage for us as we go forward over the next couple of years. The business is going to be good but I think we're in a better position to capitalize on it. Going now to slide nine, Revenue by Market, we have a couple slides on this issue today so I'm going to cover some of the markets here and then we'll turn the page to the next slide and talk about the rest. Let me start with the chemicals business. Chemicals is, for the most part, a GDP-driven business. It is sensitive to recession but if you look at our history in this part of the business, we've had a very steady percentage of our revenues that came from the chemicals business. It's one of those places we're very well positioned on the small cap side, doing mostly small cap and maintenance. So that business is more or less recession insensitive on our side as compared to the chemicals market generally. We are seeing activity in the Middle East. I'll talk about that more and there is some strength in polysilicon that we're taking advantage of. But I would tell you the chemicals market probably is going to be okay, maybe a little bit better than that going forward. Turning now to pulp and paper, high-tech, food and consumer products. There are various drivers for these businesses. Pulp and paper interestingly is slightly up. It's still a very small business for us, mostly in North America, but it is a business that's slightly up and there are fewer players in the business every year. So we're benefiting from increasing market share in pulp and paper. Food and consumer products is obviously a recession dependent business but we're growing in alliances and small cap work and we're pretty positive about what that means in terms of our ability to sustain that business. High tech is weak but our prospects are improving slightly. Some of our customers maybe making investments in the future. It'll be interesting from a growth point of view. Overall, it's still a very small part of our business but it's not bad. It's okay. Turning now to national government, there are two parts to that business—our research and development test engineering scientific and technical services business, and that's a good business with continuing growth. You will have seen in the last quarter awards from NASA, the UK Ministry of Defense. The Department of Energy has announced an award of Hadford (ph) that's then been protested. We'll see how that turns out. But that business continues to be good. We see continuing opportunities in the future with both the Air Force, NASA, the Army, the Special Operations Command. We believe we'll see good growth out of that business going forward before you think about any sort of pump priming that might occur to stimulate the economy. On the environmental side, environmental work in the U.S., the other part of our national governments business, is pretty flat but our share is rebounding and we're pretty pleased with that. So we see us as increasing our share of that market, maybe getting back to some historic levels or closer to them. In the UK of course, the environmental cleanup market, particularly on the nuclear side, remains very robust. That $150 billion, most of it still needs spending and we continue to be able to participate at all three levels, tier one, tier two, tier three in all of that nuclear cleanup opportunity. The AWE process is also continuing. We like our position with AWE and we're optimistic about the outcome there. Moving on now to buildings, you need to recall that our buildings are technical buildings, so these are government and institutional owners for the most part and in the their abilities with what's on the inside is more critical than what the building looks like. So it's science facilities, it's hospitals, it's schools, it's jails, it's courthouses, it's that kind of work. It's a great market. It's a very large market in which we still are a very small share of players so we have lots of opportunity there. And we've had a lot of awards and strong prospects as we sit here today. Just looking at bond issues, of the many, many bond issues that are out there, we're tracking about 14 bond issues in the buildings business right now, totaling about $18.5 billion. All of those, without exception, are polling to pass. We'll see whether that actually turns out to be true sometime tonight but the fact that they're all polling to pass and that most only require a majority is really good news from our perspective. We think there's going to be a lot of good business there in the markets that we serve. Moving on now to slide 10, we'll talk about the rest of the markets. Oil and gas market remains very robust globally and we see lots of them spending. Many of our customers have announced they're going to continue to spend at the same levels they have been spending in the oil and gas market generally. But we see the oil stands in Canada as weaker. The market was probably about a $120 billion market in terms of projects out there. I think we told you 115 last quarter and it's hard to predict exactly what's going to happen. But if you took Suncor's decision to cut back by about a third, it would still be $80 billion market and $80 billion of work up there is more than there is capacity to do. So while the sands are clearly weaker it's still a huge market for us and a great opportunity. A lot of you are always wondering what happens to the SAGD projects and the mining projects at different oil prices. We took a hard look at SAGD because that's one of the areas where we are a leader up there in Canada. And even at $60 to $70 oil, we see $19 billion of SAGD projects that make good on our IRR returns. I guess that’s duplicative, IRR, just IRR. Anyway, it's a huge market. There' s a lot of opportunity. It actually plays to our strengths and of course, again, our focus on small cap and alliance will also help us baseload our business in Canada. We are getting a grip in the Middle East. I told you I think when we made the acquisition of Zait and started to focus more on the Middle East that it would be a long haul. It still will be but things are starting to come our way in ways that we're really pleased about and probably happening a little faster than maybe we originally thought. We've got about 800 people locally now between Abu Dhabi and Al Kabar and our model is at work. Our localness is one of those things that will continue to drive projects to us as compared to people who want to export all the work. So we see the Jacobs multi-domestic model is working well and I'll mention that again in a minute. On the infrastructure side, there clearly are some funding issues out there. The credit crunch has probably impacted infrastructure from the standpoint of the PPPs, the public private partnerships, the private finance of projects It's harder to get capital for those jobs and there are certainly some states where tax revenues are a problem. However, it is still a huge market and once again, I'll remind you that our market share is pretty small. We do have robust prospects and really strong sales in that area and again, there are a lot of bond issues out there that represent major investment. We're tracking just eight of them specifically right now but they represent almost $60 billion and all but one of those is polling to pass. Now, one of the ones that's not polling to pass is the biggest one of all at about 30 billion but the rest of them are all polling to pass; some of them as high as 80% show the polls in favor. So we think the infrastructure business is going to be good and we're hopeful after the bond elections today, it'll be an even more robust market going forward. I talked about the other markets generally but I wanted to mention pharmaceuticals specifically. We're seeing a slight pickup in the number of projects, not big-big projects but the number of projects and we're really benefiting from the fact that we're sort of a last man standing in the industry. Most of our competitors have run off to do other things and left us a market that's not as competitive a it had been historically, so we're pretty happy about that and we think that will drive some nice growth. The last market I wanted to talk about was refining, an awful lot of what we think we'll see going forward that would be environmentally driven but not all of it. We polled our core clients, key clients, six of them, not all of them but six, and they have a plan of about $32 billion in capex for chemicals and refining in '09, so that's a very robust market in the refining and chemicals business and the bulk of that is refining. People like Husky have announced they're moving forward major programs at places like Lima. I think they said $2 billion to $3 billion at Lima. So there's a lot of things going on that are positives from the overall marketplace. But I think the environmental side of it is probably the best news. We have the EMSAT-2 work for the removal of benzene going on now. That's about a $4 billion to $6 billion market. It is now moving into the EPC phase. Most of the front end work is done and we'll see a lot of activity over the next couple years as we get into the implementation of those projects. We have the new point source regulations, the subpart J-A. We're going to drive another $1 billion, $1.5 billion in work in the 2009 to 2014 timeframe. This is perfect work from our position because it's small project related. We're looking at projects on the average that are $10 million to $30 million in size and when you get $1.2 billion of those, that's good news for Jacobs. Following that, we see Marpole-6 (ph). Our guys think that's about an $80 billion investment, $13 billion of that in the U.S. They think Marpole-6 will drive about $4 billion of new business opportunities and the '09-'10 timeframe. And then following that, you've got this whole greenhouse gas thing and the numbers are too enormous to contemplate. Just in hydrocarbons alone, we think the next five years has $5 billion to $10 billion of GHG work and maybe $120 billion long term and that's dwarfed by what will happen in the power sector if the greenhouse gas things continue to go the way they are. So a lot going on in the marketplace. It's certainly a turbulent time. The bubble, we have passed it more than once. I think the bubble's burst but that doesn't mean it's not a great opportunity in the marketplace for Jacobs. Turning now to slide 11, Acquisitions, we've had great success. I've mentioned in particular how our acquisition in Saudi Arabia has benefited us recently but our infrastructure business continues to grow and is real positive. We continue to look for additional opportunity in infrastructure, particularly outside the U.S. We're looking for oil and gas acquisitions anywhere we can find them. And interestingly, aerospace and defense acquisitions have finally become economic and that may be a good opportunity to build our business with the governments around the world on the defense side. So we think acquisitions will be really solid for Jacobs going forward. We think pricing is going to come down partly because of private equity, difficulty in accessing capital, partly because generally multiplies have been depressed for some time now. So we think it's going to be a great opportunity over the next couple of years to make some really clever and profitable acquisitions. Turning to slide 12, our growth across the world, this is our multi-domestic slide, if you will. You can see that we've gotten great growth rates out of all of our businesses around the world. None of those growth rates are anything to sneeze at but I will point out again that our localness is what's working well for us. We're right there with the customer in the country and that's driving good business growth for us that probably isn't easily accessible on an export basis. We're finding it's a lot easier to win work if you're going to do a big part of it in Saudi Arabia than if you're going to take it all to England or the U.S. or Holland for that matter. We are making some slight progress in penetrating China. We have our first real work starting to show up in China and sometime in one of these calls, we'll actually color that country blue, maybe not next quarter but not too far in the future. Turning to slide 13, you can see we've had 22 years of keeping our costs where they ought to be. The gray line is just an indexed actuals. The blue line is indexed and adjusted for the consumer price index. We think that's a great story and a particularly great story when the markets are turbulent. If you look at that slide you'll see it turns up sharply in '08 like we weren't controlling our costs, but the fact of the matter is, that a major acquisition in '08 in Carter and Burgess and if you look at each one of those peaks, you can attribute it to an acquisition, Sierra Assess in '94, Seret in '97, Sverdrup in '99, Babte in 2004, and now Carter and Burgess in 2008. And if you look at the chart to the right of each one of those acquisitions, you see what kind of opportunity that represents for us. I think having a great cost posture is a terrific place to be in a turbulent market. Turning now to slide 14, this is sort of my commercial. We think we've got a great business model. We've had really good success over the last three or four years but we frankly think that we're in our sweet spot today. That customer-driven business model, that relationship-based approach, the baseload of business, our diversified business, our ability to stay close to our customers locally in what is actually a pretty good market but not the kind of market it was a year ago, represents a real positive for us. We've got a strong balance sheet to help support our acquisitions and we're confident we're going to be able to continue to crow 15% on the average year in and year out forever more. And with that, I will turn it over for questions.

(Operator instructions) Our first question comes from the line of Steven Fisher with UBS.

Good morning. I'm not sure how much you can talk about the customer in the oil sense but I'm wondering if you can give us any sense for whether this was specific project performance related or was it more contractual in nature. Craig L. Martin: Well, I don't want to talk about this a lot because I'm embarrassed by it. But the simple fact is that like a lot of big projects in today's marketplace, there were struggles with the project itself. But that's not usually a problem because usually our relationship approach to the customer allows us to deal with those issues and work our way through them. And frankly, we didn't do a good job of managing the customer relationship and doing the right thing with respect to the customer's concern and that was the end of that. So it's an embarrassment to us. It's not something we like to happen. It's not like it's a big factor in our P&L. It's less than 1% of our gross margin for '09. But the fact of the matter is, it's a real embarrassment to us because this doesn't normally happen to Jacobs

Okay. Was this project booked in fiscal '07 or fiscal '08? Craig L. Martin: In both.

Both, okay. What kind of capacity does that free up for you? How would you characterize that and what can you do with that capacity? Craig L. Martin: Well, it freed up quite a bit of capacity, most of which we've already sold.

Okay. In terms of outside of this issue, the pace of bookings looks pretty good in the quarter. I wonder if you can just talk about how that progressed between July, August, September and then what kinds of trends you're seeing in October versus September. Craig L. Martin: Sure. The bookings were relatively even, probably stronger in July and September than in August because of the silly season in Europe. We always suffer a little bit of seasonality in sales when the Europeans go on vacation. What's interesting to us though is that October was quite strong. Not ridiculously strong compared to any previous month but it was a good, solid month and so while I guess we're looking over our shoulders in paranoia about what all's happening in the marketplace and stock prices and all those things, the fact of the matter is it isn't showing up in the sales yet.

Okay and then lastly here, the outlook, you mentioned for backlog is pretty strong. Would you think you could continue booking at a pace of say $4 billion a quarter for the rest of the year? Craig L. Martin: We don’t' forecast bookings so I'm not going to speak to a specific number. But there's no reason in our minds right now that we can't continue to grow the business nicely and that the market won't support continuing growth.

Okay. I'll get back with you. Thanks.

Our next question comes from the line of Jamie Cook with Credit Suisse.

Good morning and congratulations. Just walk me through your EPS forecast for 2009. It's a broad range and I understand the uncertainty in the market out there but how much of that is—is the 355 based on basically just what we have in the Canadian business going away. Can you walk me through the range in what the different drivers are getting to the lower end and the higher end.

As we've said before, we don’t have a lot of guidance within our guidance. I think the lower end reflects the uncertainty in the marketplace. We haven't seen any significant changes but it's out there. The Canadian market is weakening but it's not going away as you characterize it. Even our weaker market is going to be down and just won't go to zero, we don't believe. There's an awful lot of activity that's ongoing so I think the lower end represents a weakening maybe of the conditions out there and the upper end continues things with a little bit of upside to them. But that's kind of how we normally do our ranges in our forecast. Craig L. Martin: If I can amplify, Jamie. Some of the customers like Suncor have come out and said they're going to spend less than they'd originally planned. Other's have come out like Husky and said they're going to spend what they plan to spend. Certainly people like Exxon and Chevron have confirmed their numbers but there's enough sort of noise about cancellations, there's enough of what we've talked about before, people taking projects and stretching them out. There's more uncertainty in the marketplace than there's been. I meant what I said earlier when I said we think the bubble has broken. We're not in a bubble anymore and so the markets are going to behave a little more like they have historically. On the other hand, if you do the math, the percentage of spread that we had this year, even though it's wide, is lower than last year.

Okay. But just to be clear when we think about this issue with the one customer in the oil sense, do you think that this is a sign of something broader to come or is this just one specific one-off project? Craig L. Martin: Let me be clear about this one last time. I hope I can clear this up for everybody. That project went out of our backlog because we didn't do what we know to do and it has really nothing to do with the market out there.

Okay. And then can you just talk and then I'll get back in queue. Historically Jacobs' guidance is we're going to grow at least 15% a year or so. The low end assume slower than that I guess but can you talk about your appetite for acquisitions in this market and specifically where you would want to do acquisitions and whether in this type of market you would take advantage to get to your targeted EPS range assuming 6% gains like it's going to happen. Craig L. Martin: Okay, that's a complicated question. Let me try to deal. We think that some time in the relatively near future, three, six, nine months, the market will adjust its expectation for these acquisitions are worth and that acquisition opportunities will get significantly cheaper than they were over the last couple of years. And that represents, in our mind, really good buying opportunities. So we're in the business of hoarding our cash to be positioned to make what we think will be some really good deals in the spaces I talked about earlier, infrastructure, oil and gas, aerospace, and defense over the next year or two. So it's a very positive market from the standpoint of what acquisitions might do for us long term. Remember though that we make an acquisition these days, we have to amortize intangibles. So the creativeness of acquisitions in the first year or two, pretty much the first two years, is not very high. Once the amortization of intangibles starts to go away, that's when the real pop in earnings starts to occur as a result of the acquisition. So in terms of our ability to use acquisitions to significantly change our forecast in the current year, those will be deals we've already made if they help us that way, not deals we might make going forward. Does that answer your question.

Jamie, on the opening part of your question, the 15% growth, what we said is that 15% is an average annual growth rate. We've always said that there may be years that are a little bit below it and other years that are above it, so we've never guaranteed that that's a floor.

I know, John. There's just few years worth the wait. Craig L. Martin: Just want to make sure you're clear on that.

I've been following you awhile. I'll get back in the queue. Thanks.

Our next question comes from the line of Michael Udest with Jeffries

Good morning everybody. I would expect some of your major customers are giving second looks to their near-to-intermediate term budgets. Is that going to be helpful relative to Jacobs because the customers that go forward will be lining up in your preferred relationships and to your comments Craig and John, it seems like gaining share and taking advantage of maybe a little slackness in the market is going to be much more helpful to Jacobs and possibly some of your competition. Could you comment on that. Craig L. Martin: Sure. I think you said what we believe very clearly. We just finished our annual business meeting here about a week ago, two weeks ago now maybe and one of the key things we talked with our own management team about was the fact that in up markets, strong in the upmarket, we might even lose a little share because we don't run after big projects in faraway places. We kind of stay home and stick to our knitting. But in these down markets, we're ideally positioned to take market share from our competition. We're closer to the customers locally and we're better positioned for the projects that need to be done, whether the markets are strong or weak. So we actually except this market, if it's what we think it is, will be a positive for Jacobs going forward and that we will be able to increase our market share maybe substantially.

Second question is did anybody in the management team or the board have any inkling of potentially using some of that cash to purchase your stock given that your stock prices where it was back in say at the low end of 2005? Craig L. Martin: We've given that a lot of thought, a lot of discussion. We'll discuss it again at our upcoming board meeting because it's something you always have to look at. But we haven't made any decision that says that we can't use that cash most effectively to buy other people's cheap stock rather than our own.

My final question is relative to other cycle that Jacobs has been in over the past 20, 30 years, any characterization of how quickly this turned, or is it kind of like what it was like in maybe the early mid '70s, given where the market is seem to be going right now. Any thoughts? Craig L. Martin: Well, you know what, I guess again, I'll tell you what I think and we had an economist come in and chat with us a little bit about this cycle. We had some pretty good data as well, so that's influenced my thinking. I don't think this will be a particularly deep or stressful recession. It is definitely going to be a recession, I think it'll be a couple of quarters of negative growth, maybe three, but it won't be as bad as say the early '80s, but it might be a little worse than say 2000. But the basic message we got out of our economist at our conference was that this too will pass. Michael S. Dudas: Thank you for your thoughts.

Our next question comes from the line of Andy Kaplowitz with Barclays Capital.

Good morning, guys. Craig L. Martin: Good morning, Andy.

If we could talk a little bit more about refining. Craig, you gave some good examples about refining spend for you guys. The one thing that I have a hard time reconciling is you see some of your customers, some customers in general lowering CapEx spending and that's what we see, and then you give these examples bout environmental spending, how should we look at it? Is it that within this lowered CapEx spending there's still robust environmental spending and potentially you could still grow your backlog in refining in 2009? Is that the right way to look at it? Craig L. Martin: I think there's every chance we can grow our backlog in refining in 2009. What we see and what we hear from our customers is obviously the environmental stuff they have to do, and then you layer on top of that the things they want to do to try to deal with worse sourer crudes. Remember that Saudi Arabian crudes are pretty sour and getting worse. Canadian stuff is obviously not very good from an API point of view, so we're seeing investments that would let them take cheaper crudes as well. Also, since the oil prices have started back down, the crack spread is open, and so refining is a little more profitable today than it was, say, a year ago, and we think that may drive our customers to look at ways to try to maintain that profitability. I don't think we're going to see any big capacity expansions like Motiva did going forward, but that's really not what we need to grow.

Got you. Great. And, Craig, given sort of the new reality of the market, when we look at your margins obviously they've been sort of trending in about the same area for the last few quarters, but you just lost what was a very high pass through contract and you've talked about sort of field services ramping up and margins coming down on that, so what do you think about things now? I mean, how sustainable are margins at these levels given the new reality of the world, but also the tradeoff with this low margin project coming on the backlog? Craig L. Martin: I'll let John address that. John W. Prosser: Well, I think as we've been saying for a while, the margins have been driven by the professional services, and even with this removal, you got to remember, that project was going to be executed probably over the next three years so it wasn't all going to happen in one fiscal year, so it does have and take some backlog out, but we still have significant backlog in the field service and we still expect the field services to continue to grow. And probably maybe not as quite as fast a rate as we would have thought, but still at a very, very strong rate and it's still a very big focus of our business to move forward on the professional services. We haven't seen any impact on selling rates and such with the economy at this point. That's one of the reasons we continued to focus on our costs last year is that we believe as long as we keep our costs under control that we continue to be profitable at even a little bit lower selling rates and much better than maybe the average in the industry, so that's always been a strong focus and will continue to be a strong focus for us on managing our costs and keeping that under control.

Great. One more quick one if I could, just following up on Jaime's question around acquisitions. If it's true that a lot of these targets are going to become cheaper over the next several months and already have in fact, what about larger consolidation? Is it just not something that you guys want to do? Should we be thinking more about that? I mean, just your thoughts. Craig L. Martin: I think we would certainly be open to larger deals, but I don't think we have a lot of interest in a merger of peers or anything close to that. So we're going to continue to look for deals that are 10, 20% our size, or in that range or less, and we're going to continue to focus on subsidiaries of public companies and private companies. We still don't like the dynamics of a public company to public company deal.

Got you. Thank you.

Our next questions comes from the line of Andrew Obin with Narrow Ledge.

It's still Merrill Lynch. Craig L. Martin: How are you doing, Andrew? We wondered.

Hi. How are you? Just two questions just to clarify, you said $32 billion of CapEx in '09 for your downstream customers. How does that compare to '08? John W. Prosser: It's only six of our downstream customers, and it's essentially about flat from '08.

Great. Just a broader question; you sort of said that the bubble has burst and we're going back to a more normal environment. In a more normal environment, the business model of customer driven sort of cost plus contracts was an exception, not the rule, and you have benefited over the past several years from the fact that your competitors have been embracing a model because of inflation, because of tight capacity—how do you see those dynamics playing out over the next 12 to 24 months? Craig L. Martin: Let me ask Noel to comment. Noel?

Well, when the market softens a little bit, the competitors are driven more and more going back into the lump sum mode, taking more risks. You've seen that from some of our competitors already in the last couple of weeks. (Inaudible) particularly from the owner's side to get more price protection, but since we've lived in this atmosphere all our lives we understand how to deal with it, and the core clients we deal with on a routine basis will probably continue to contact with us in the same way they always have. So the dynamics of the market will be, in softer markets, the clients do demand and do ask for more transactional type projects, but we've been able, with our model, to avoid that and to continue to work on a more rational basis, and to do that you've got to deliver better value. As long as we continue to deliver better value, we'll continue to be very successful and (inaudible) going forward.

Is it fair to say that capacity constraints in the industry that we've seen over the past couple of years have been alleviated somewhat and there is a bit more spare capacity?

I would tell you that certainly it is not as competitive in terms of resources and availability of people, or at least I don't believe it's going to be as it was. I'm not yet of an opinion that it's going to be uncompetitive or that there's going to be excess resources in any way. So what I kind of look at, what we think's happening to our business—we think it's going to be a little easier to get people, but we think we're going to still need to get them, and we think there will still be a fair level of competition for talent out there in the workplace, it just won't be quite as intense as it has been. And we probably won't see quite the salary escalation that we've been seeing.

Thank you very much.

Our next question comes from the line of Barry Bannister with Stifel Nicolaus.

Hi. I question the statement as to whether this was really a bubble. I mean, if I go back and look, John, you joined the company in 1974 and Craig, you joined it in 1994. If I split the difference and start with the 1991 recession, though your revenues at 15% a year since then, would be doing revenues at $11.15 billion, and you reported $11.25 billion, so you are compounding at your long-term growth rate goal of 15%, it's only in the last three years that you've caught up with the very slow period in 2002 to 2004. Craig L. Martin: Yes. You know, I think if you look at the bottom line numbers you'll see a little faster growth rate, but what I guess I would tell you is that the market over the last two or three years has been more robust, certainly than in my memory in this industry, and therefore we've been a beneficiary of that. And you can argue that it's helped us catch up to our long-term growth curve, which I mean, that's cool with me. I like that. But I would argue that what's been going on in the marketplace in the last couple three years is unusual, driven in part by $150 barrel oil price and a lot of other fairly aggressive assumptions in the marketplace and spending by our customers, and that that's going to moderate pretty significantly in 2009. So I don't—if you don't want to call it a bubble that's fine with me, but I do think the market has been more robust, and it's going to be less robust.

Well, it can certainly be the case. Now, as far as your ability to pounce on opportunities when that occurs, I would think that you'd want to step pretty quickly because the public market has taken these stocks up since late October by about 30-35%. And so my guess is your best opportunities would be private companies that are smaller and of high quality where they're more affected by the credit crunch and not by—affected or getting the effect of market price markups. Is that the right read? John W. Prosser: You certainly could have been listening into some of our conversations because we've had exactly that dialogue.

Okay. And I'll get back in queue.

Our next question comes from the line of John Rogers with DA Davidson. John B. Rogers: Good morning. Craig L. Martin: Hi, John. John B. Rogers: Hi. John, I think you mentioned that you hadn't seen any real change in the pricing, but I am curious, Craig, as you went through the various end markets and talked about which are strong and which are less strong, is there a big difference in margins between those segments? In other words, is it, given the mix that we're looking at, do we naturally see some changes in margins over the next year? John W. Prosser: Well, there isn't a lot of difference between the markets, because I mean—at the operating margin level. There's some minor differences and particularly between those that have—particularly pure pro services versus those that are part of a mix of construction as those margins have moved apart a little bit. But no, I think that different pricing models and different activities of the public market—those margins are pretty consistent up and down because basically they're driven by federal regulations. And you get your overheads plus a fee, and then the other margins we haven't—they've been driven up because of increasing salaries as we've talked about before, and as those salaries moderate and don't grow as fast, certainly the growth rate of those margins will stop. But from a selling price, in margins, I don't think we've seen any slowdown or change in margins. As we said was, as our reported margins were going up, we weren't seeing a huge increase in the selling price, we were seeing it more driven by the salaries and other factors like over time and such like that, the multiplier, more than the selling rate. We were getting a little bit of that, but very little was driven by the pure selling rate. With our relationship model, the selling rates don't change that much through the ups or downs. John B. Rogers: Okay. In terms of the preferred relationships, do you have more of what you would classify as preferred relationships now than what you had a year ago? Or, could you give us a sense of not so much the budgets there, but whether there's more or less of them or what rate that's growing at? Craig L. Martin: If you look at the growth of the company, we're maintaining the ratio of preferred relationships on a margin basis or revenue basis to the business pretty consistently. John B. Rogers: But, Craig, it's not getting more concentrated with any select group of customers I guess is what I'm wondering. Craig L. Martin: Well, it's more concentrated in one sense in that some—one select group of customers may be spending more money than another group of customers, but in terms of long-term concentration, no. It's actually—we add a few core clients every year to our list and we add a few preferred relationships to our list to sort of maintain that 75-80% balance. We need those discrete projects because that's where we find the new relationships. And frankly that's where I think there might be a little more price competition going forward than there has been in the past for us because I think weaning discrete projects will have a little more of a price factor in them, but I think the toughest part will be the transactional projects. If the market goes where I think, they could get very competitive over the next couple years. It might not right away, but over the next couple of years. John B. Rogers: All right. Well, thank you very much and congratulations on another good year. Craig L. Martin: Well, thank you. John W. Prosser: Thanks, John.

Our next question comes from the line of Alex Rygiel with Friedman, Billings, Ramsey. Alex J. Rygiel: Thank you. Good morning, gentlemen. Craig L. Martin: Good morning, Alex. Alex J. Rygiel: A couple quick questions. First, I don't remember you mentioning anything about a share repurchase program. If you could conceptually comment on where you stand on that and your philosophy on that?

Well, we don't have a share repurchase program, we don't have plans for one. We have talked about it a number of times both at the management level and at the board level and I think as Craig said earlier, the focus of our cash we believe is better used to acquire others and grow the business that way rather than to buy back stock and so I think we're being protective of our cash and looking at it as a resource for growing the business by acquisition rather than getting a little bit of business on the EPS by buying our stock back. I think Craig's comment was we'd rather buy other stock than buy our own. Craig L. Martin: Other cheap stock than buy our own.

Other cheap stock, yeah. Alex J. Rygiel: Sure. Understandable. And then when did your oil sands customers notify you of the decision to discontinue the relationship? Craig L. Martin: That's one of those things that doesn't happen on an instant, but I would say probably late September was when we really were at that point. Is that fair? Yeah. I'm getting some nods around the table, so late September is probably about right. They had to draw a line in the sand. Alex J. Rygiel: Thanks. And, Craig, in your remarks, you discussed market share in the government environmental work segment picking up. Approximately what do you think your market share is next — Craig L. Martin: Oh. It's insignificant. I mean, single digits. Alex J. Rygiel: Great. Thank you very much.

Our next questions comes from the line of Avi Fisher with BMO Capital Markets.

Hi. Good morning, thanks for taking my questions. Craig L. Martin: Good morning, Avi.

You mentioned when you were talking about environmental services, you talked about greenhouse gases, potential size of it, and durability in the power sector. Does that imply an interest in getting into the power sector or just the environmental services portion of it? I'm just trying to get a sense of that. Craig L. Martin: Well, I think we continue to watch the power sector with some care. In fact, we've just finished a study of the power sector that I'm going to get a report out on this afternoon, and what we're trying to do is understand where that market's going, how big it's going to be, how transactional it's going to be, because as you know, we've resisted being in it for transactional reasons mostly up to now. If the greenhouse gas thing comes to fruition and it turns out to be real, the size of that market will be enormous, but again, we'll make a decision whether we go participate in that market or fill in behind others who go over there with our existing customers. So just to kind of get to the answer, we've made no decision, nor are we hinting that we're going into the power market, but we're not hinting that we're not either. Is that really like a middle of the road no answer?

Well, it's more than adamantly opposed to it, which I think you did in the past. (Laughter). Craig L. Martin: Yeah. We are no longer adamantly opposed to it. That's a fair characterization.

And when you talk about it from the GHG side, are we talking about nuclear power or different—something else? Craig L. Martin: Well, when you're talking about GHG you're talking first to look at the existing installed base, and what has to be done there to sequester carbon, that sort of thing. You're looking at investment in nuclear in a different pile altogether, but we're talking about hundreds of billions of dollars of potential work in the power sector if the greenhouse gas thing goes the way it looks like it will.

And do you think that would be an area that you'd acquire into or can build organically or a little of both? Craig L. Martin: A little of both. We probably want to make an acquisition.

Got you. And moving on, your CapEx number this quarter was fairly low relative to last quarter, fairly low to my forecast, was that a function of the cancellation, is it a new rate, does it imply something—I mean, I'm just trying to get some color around that. Craig L. Martin: I don't think you should read anything into that. The CapEx kind of goes in little up and down cycles for us. We looked at it again before we went through the CapEx with our team at the annual business meeting. Our long-term plan is to spend right about depreciation levels for CapEx. If we go through a period of sustained growth like we just did, we tend to hit a peak and then it stabilizes for awhile as we get the utilization up of the newly acquired assets, and then we'll have another burst of CapEx.

Got you. Okay. And then on the infrastructure side, and again I realize its' about 8% of your business, I have kind of two questions around that. One is you had a decline in infrastructure in the quarter in the business in the quarter, and this was even in spite of the Carter Burgess field not having anniversaried yet. I wonder if you could talk a little about that, and I'm also curious what your biggest states are for infrastructure, i.e. which bond issues we should sort of be looking at most essentially? Craig L. Martin: I'm struggling a little bit with the data. My data shows we're up 2% quarter-over-quarter, 2.1%.

Quarter-over-quarter, correct, but maybe I'm doing the data wrong. I thought — Craig L. Martin: And then we're up 37% year-over-year.

Okay. Then I may have something going on here, so I apologize with that. Craig L. Martin: Well, either you do or I do. One of us has got some bad data.

And if you can talk about the states, which states are the biggest states for you guys? Craig L. Martin: Well, we're big all along the east coast and all along the east and south and southwest, plus we have a nice little business in the Rockies and a nice little business up in the Pacific Northwest. So we're across a lot of the marketplace, and if you look at where things are good and bad, setting aside what happens with these bond issue sand the fact that there are a lot of other previous bond issues that are still spending money; some of the states are having a little trouble from a tax perspective. California is certainly having some trouble. Florida appears to have gone through a phase of reconsidering, and now they're back to spending. Texas was a concern for awhile, but it also is not so bad as we thought it might be. But pretty much every state we're in has some kind of a tax concern going forward, and that is affecting our business, but it's just affecting the business in the sense you got to be more competitive as you continue to grow.

Okay. I appreciate the color, and just to clarify, on the slide, your infrastructure for the last 12 months is 8% of total revenues, correct? Craig L. Martin: Let me get the exact number, 8.3.

Okay. Then I am just probably banking on a bad number somewhere. All right. Thanks for the color, and good quarter. Craig L. Martin: Thanks.

Our next question comes from the line of Chris Hussey with Goldman Sachs.

Hi, guys. Craig L. Martin: Hey, Chris.

Question, because now that I know Noel's in the room. If we hearken back to 1983, maybe you could help us understand how you guided a little different. Back then you guys lost money two years in a row, your margins fell off a cliff in 1982. The stock is trading at 10 times earnings if you hit your earnings—maybe a little bit better now. Why is this time different?

Well, it's like this Chris, I made an about statement these guys have already heard that if I ever saw 1983 coming again, I'd be long gone. So you could take that. The difference today probably is more in terms of there is an enthusiasm for alternative energy, and that type of thing going back into the late '70s, early '80s, whether it was oil shale or the tar sands or methane gas out of feed lots, I mean it was a time that was just irrational in character, driven a lot by our government I might add. And today, all the work we've got is not government driven, it's all driven by the big private enterprise and the government hasn't mobilized even today like they did in the late '70s, so I think I'm totally with Craig and that the bubble is gone, but what we're looking at is really a strong business going forward, but in fact when you go to talk about resources or stuff like that, the work that was all out there about a year ago couldn't get done anyway. So I don't see anything like a repeat of that timeframe of the early '80s. It's just not in the cards. This is just a different time, different involvement, we do have probably a mild recession going on, but we've been through lots of mild recessions since the 1984 timeframe without real negative effect, so it's just a totally different scenario. Craig L. Martin: Yeah, Chris, I'll add a little color. I talked about our annual business meeting, one of the things we did at the annual business meeting is we had a little thing called a cautionary tale, and we took all of our current leadership through what happened in the '78 to '85 timeframe and reminded them of all the lessons about what to do and what not to do and kind of concluded that if we do what we do best, the things that Jacobs' business model drives us to do, we're in great shape going forward.

Let me segway then that back into a question about the project in the Canadian oil sands where you didn't do what you did best. Was this a project that was a problem with labor where you weren't able to keep the pace of construction up for your customer or was it cost? Did your customer feel that you were just billing him too much, you weren't doing it as efficiently? I mean, how can we characterize it? Craig L. Martin: You're asking—you're getting into details I'm really not prepared to share. Obviously the job wasn't in construction or the backlog differences wouldn't have been so large, so this was in the early stages of engineering, and like a lot of projects, scope and things like that are challenges; getting it right, getting the price right, getting the work done on schedule. There are a lot of things moving around, and that's not unusual for projects. What's unusual is how we managed the relationship with the customer in that case and that's the embarrassment, and I really don't want to talk about it anymore.

Okay. Yes, sir. Last question then on the Middle East. That's a market that traditionally has been fix priced and that's probably one of the reasons that you stayed out of it so long. With the bubble burst, can you be effective there? Craig L. Martin: Well, we believe we can and we think so for a couple of reasons. First, we'll position on major projects and programs up in the PMC feed arena which is traditionally not lump sum, rather than in the EPC project execution arena which is traditionally lump sum turnkey, and in fact there's still a lot of that lump sum turnkey work out there in the individual project execution there. We're also positioned though to start taking on small cap, maintenance, and alliance work, and that's because to build that local base, and that work really doesn't lend itself to lump sum, or if the work is lump sum, it's tiny lump sums where the risks are very low. I mean, tiny like $200,000, and so we think our business model is ideally positioned for us to (inaudible) in the Middle East. And what makes us salivate is there's this huge installed base of facilities that really aren't being addressed by a globally competent contractor like Jacobs. There are a lot of locals doing little bits of this and that. We know of one customer who has 14 different little contractors working for him, or maybe it's 17, some silly number like that. Over time, we'll consolidate a lot of that business with Jacobs. So, what we'll end up with is a bunch of people in the Middle East, in Saudi Arabia for example, doing that day in and day out work that we love so much. We'll have the relationships with the customer that lets them come to us for PMC feed kind of things when they have big projects, but the EPC stuff probably will always go to some extent, lump sum turnkey, and there are plenty of people out there who are willing to do that, so we don't need to have that work too.

Okay. Hey, thanks, guys.

Our next question comes from the line of Tahira Afzal with KeyBanc Capital.

Good morning or rather good afternoon, gentlemen. Craig L. Martin: Good afternoon.

I guess I don't want to dwell on history too much, but correct me if I'm wrong, if I go back to 1982-83, wasn't that just right before Joe Jacobs turned over the company to a transaction model; you moved to fixed price, after you saw a big hedge you moved back your model to cost plus and ever since it's been the same model? Craig L. Martin: I'll let Noel respond to that.

No. That's not right. The company under Joe Jacobs never moved in its fundamental relationship model, even though we didn't define the relationship model for the '90s. It operated all through the '60s, '70s, and '80s, as a pseudo relationship company, although nowhere near as pure as we are today, but there was no move in that timeframe to become a fixed price contractor. We did take on some fixed price jobs, but that's because we occasionally did that, but there wasn't a huge model shift in those days.

If we go back to 1983, you had your cost plus content went down to 46%. Would you say that's the lowest it's ever been?

Oh yeah.

Yeah? So, I mean since 1983, you haven't really gone back to doing fixed price to the same extent?

Well, I think the other thing we had in 1983, you got to go look at the total numbers, we didn't have a lot of work in 1983. I mean, if you go look at the total revenue in' 83, and while I don't remember them exactly, I know '84 was about $190 million, so we went from $400 million to $190 million in '84 from '81.

So I mean, structurally speaking, it won't be correct—it won't be fair to compare Jacobs as it is today to back in 1983?

No. Not at all.

Okay. The other question I just wanted to ask you, and Craig, I know you don't want to talk about the oil sands as a particular project in particular, but if I read through what Suncorp has been saying in its CapEx outlook and what Shell have been saying, they've been talking about contract pricing lagging oil prices and, in essence, also subsiding over the next year or so. If you look at the pricing you've implied in the guidance, would we say you've put a bit of a cushion in that? Craig L. Martin: I'm not sure I understand the question. Could you expand on it a little bit?

Sure. If you look at the pricing in your sector in general, so if you look at your multiplier and how that has moved, would you say that you've built a fair bit of a cushion in that? Craig L. Martin: Well, I don't ever think of multipliers as having cushion in them. I think that what we are seeing is that multipliers are remaining pretty steady in the oil sands right now. We're not seeing a lot of downward pressure. We don't think there's a lot of upward opportunity, and the margins are good, they're not poor margins by any means. So, we think the multipliers are (inaudible). We think most of the big customers will continue to do business with the companies they trust.

Right. Okay, so if you look back maybe to the last cycle let's say, would you say that basically whatever you were building at for the underlying inherent pricing, did that by any chance get—did that sort of move down in any sense? And given your historical experience, whether it's—whatever you've seen in terms of depths, would you have sort of reflected that in the guidance you've provided? John W. Prosser: Well, take that in two parts I guess. First off, in (inaudible), while we see the transactional pricing softening or dipping, we don't see that same kind of strong dips in our relationships because we do have these long-term relationship models. Just like we don't see and haven't see strong multiple upswings during this growth. Now, we do see in soft markets, the multiples go down a little bit, but not in line with what you might see on the transactional side. In good markets, they do go up a little bit, but not in line with what you see in the transactional side of the business which tends to be much more reflective of the, I guess, marginal sales effort as opposed to the core sales relationships that we have. Now, to your last question was have we factored this into our guidance, just like yes we factor it into our plans, so yes, we factor it into our guidance.

Okay. Great. So I mean, are you assumed a cushion even if you think the recession is let's say two or three quarters long, I would assume you've built enough of a cushion in terms of pricing within your guidance. John W. Prosser: I'm not sure what you mean by cushion. What we're seeing is the projects we have, we're expecting to continue at the levels we've sold them at and we don't see any significant changes happening in the short term.

I've got, just to amplify, I think our guidance reflects what we think the market is going to do, so both the pieces of optimism and the pieces of pessimism you've heard from us today are factored into our guidance, and we feel pretty good about that.

Okay. And last question is just to do with back to the refinery question, and you've highlighted again that $32 billion and that if you look back this year, essentially it was flat. Would that kind of suggest that as we look forward, and you seemed pretty confident that you can grow your refinery backlog, that you're expecting market share gains? Craig L. Martin: Yes. Absolutely.

And would those be coming from smaller fragmented players by any chance? Craig L. Martin: I think the small players will suffer enormously as the market tightens up, particularly the ones that aren't big enough to have back office operations in places like India. So that'll be a very difficult time for them. I also think we'll be able to take a little bit of share from most of our big time competitors, simply because they don't come down to the little projects very well. When you're really good at really big projects in far away places, you have to be really good at really little projects in your backyard.

Okay. And just one last question. You said that you've gained—you've done better in the Middle East than you expected, would this be along the lines of what you've just pointed out, some market share gains against some of your smaller competitors, would it be sort of more base load operation and maintenance work rather than large high profile projects? Craig L. Martin: Well, I'd like to say that we've reached the position in the Middle East where we're taking share from our competitors. We're certainly gaining share because we had none when we started and now we have some, but I think actually what's happening here is the market has been so good that it's allowed us to penetrate. The growth in the market's allowed us to get a foothold in the Middle East that we didn't have before and that now we're in a position to leverage that as the market goes forward. We don't see anything about Middle East investment that suggests it's going to go down. Unlike the tar sands, we think that business is going to continue to be very robust for us and all of our competitors, but we do think our business model, and the fact that we've been able to get in and get our foot in the door bodes well for us to increase our share, and it obviously will be at the expense of someone. Some of it will be at the expense of the little guys in country and in the area, and hopefully some of it will be at the expense of our big competitors.

(Inaudible), thank you very much, gentlemen. Craig L. Martin: Thank you.

Our next question comes from the line of David Yuschak with SMH Capital.

Good morning, guys. Craig L. Martin: Good morning, David.

Just real quick if I could ask one simple question. You guys, when you were—back in the beginning of the decade the energy was about 8%, 10% of your revenue and now it's 43, and as you look at your other verticals in this kind of market for the next two to three years, do you see anything in the way of shift because I think that's kind of one of the things that kind of helps you here in the last few years is just seeing that percentage moving up there. Is there anything in your other verticals that's going to maybe help mitigate should we see some softness in that percent (inaudible) energy, or do you think energy could even drive further here from the 43% you've produced in this current year? That's all I got. Thanks. Craig L. Martin: David, I would say I don't think that we're going to get energy taking up a significantly larger share of the pie except to the extent of construction dollars. And one of the things that I always want to caution you all about is that there are some businesses here that are pure technical professional services businesses, or almost pure like infrastructure. And other business like refining oil and gas, chemicals to some extent, that have a very high volume of construction, so the curves—the percentages are a little bit misleading in terms of you were to try to compare that to the profit contribution of those businesses. Because you will recall the pass through costs, well, we ought to be able to get good margin on them. We don't always do that, and so the net effect of some of those construction dollars through our system is not as much profit as pure technical professional services businesses have. For a long time we said they were about equal, but there's an advantage on the TPS (ph) side. So, could it grow in terms of percentage? Yeah. As a result of construction dollars it could grow a little. Will it grow a lot? I don't think so. Will other businesses grow to kind of balance out or offset any lack of growth in that area? I feel pretty good about some of our businesses in the other parts of the pie there in terms of their ability to contribute profitability on a growing basis. I know it's a longwinded answer, but I think it gets to your question.

Is there any particular ones that stand out? Craig L. Martin: Well, I think—we like the national governments building, we like business, we like building and infrastructure a lot, huge markets globally. We think Pharma may be a little stronger for us going forward, so that side of the pie chart would be where I'd expect to see some real positive from a P&L point of view.

Thanks. Appreciate it.

And there are no further questions at this time. I will now turn the conference back over to Craig Martin. Craig L. Martin: Well, thank you all very much for your time. I feel like we have a good story for last year and frankly I think we've got a pretty good story going forward. We're excited about it. If we can execute well and do what we know how to do on a consistent basis, I think we're going to turn in a good result. Thank you all very much.

Thank you for participating in today's Jacobs' fourth quarter earnings conference call. (Operator instructions) You may now disconnect.