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Jacobs Engineering Group Inc. (NYSE:JEC)
Q3 2018 Earnings Conference Call
Aug. 6, 2018, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Krista and I'll be your operator today. At this time, I would like to welcome everyone to the Jacobs' fiscal third quarter 2018 earnings conference call. All lines have been placed on mute to prevent any background noise and after the speakers' remarks will be a question and answer session. If you would like to ask a question during that time, please press * followed by the number 1 on your telephone keypad. And if you would like to withdraw your question, press the # key and please limit yourself to one question and one follow-up question. I will now turn the call over to your host, Jonathan Doros from investor relations. You may begin.

Jonathan Doros -- Head of Investor Relations

Thank you. Good morning and afternoon to all. Our earnings announcement form 10Q were filed this morning and we have posted a copy of this slide presentation to our website which will reference in our prepared remarks. I would like to refer you to our forward-looking statement disclaimer, which is summarized on slide two. Certain statements contained in this presentation constitute forward-looking statements.

As such, the term is defined in section 27-8 Securities Act of 1933 as amended in section 21E of the Securities and Exchange Act of 1934 as amended. And such statements are intended to be covered by the safe harbor provided by the same. Statements made in this presentation that are not based on historical fact of our forward-looking statements. Although such statements are based on management's current estimates and expectations and are currently available competitive, financial, and economic data, forward-looking statements are inherently uncertain and you should not place undue reliance on such statements as actual results may differ materially.

We caution the reader that there are a variety of risks, uncertainties, and other factors that could cause actual results to differ materially from what is contained, projected, or implied by our forward-looking statements. For a description of some risk, uncertainties, and other factors that may occur that could cause actual results to differ from our forward-looking statements, see our annual report on Form 10K for the period ended September 29th, 2017 as well as other filings for securities and exchange commission. We are under no duty to update any forward-looking statements after the date of this presentation to conform to actual results except as required by applicable to law. Please now turn to slide three for a review of the agenda for today's call. I would like to note a few items in regards to our presentation remarks today. Our results reported today include a review by all three lines of business.

For comparative purposes, we have disclosed revenue and operating income from the updated structure reflecting the current quarter and accordingly, the same quarter a year ago. We plan to provide historical segment detail on a rolling quarter basis. During the presentation, we will discuss comparisons of current quarter results of Jacobs and CH2M's performance 2017 calculated on a pro forma basis. The 2017 pro forma figures are adjusted to exclude restructuring and other related charges, the deconsolidation of CH2M's Chalk River venture and CH2M's MoPac project. We believe this information helps provide additional insight into the underlying trends of our business when comparing current performance against prior periods. Turning to the agenda.

Steve will begin by discussing our focus on driving a high-performance culture, a recap of third quarter results including a market review for each of our lines of business, provide an update on the CH2M integration. Kevin will then provide some more in-depth discussion of our financial metrics as well as a review of our balance sheet and capital allocation strategy. Steve will then provide an updated outlook along with some closing remarks and we'll open the call for questions. With that, I'll pass it over to our chairman and CEO, Steve Demetriou.

Steve Demetriou -- Chairman and Chief Executive Officer

Thank you and welcome to our fiscal year 2018 third-quarter earnings call. I'm pleased to report that we're on track to deliver the fiscal year 2018 adjusted earnings per share results at the high end of our previous outlook and well above the guidance we shared last November shortly after announcing the CH2M acquisition. Our year-to-date performance reflects strong execution against our major strategic priorities to further strengthen our winning culture, including an increased focus on inclusion and diversity to transform our core by executing our work with rigor and discipline and to profitability grow by capturing higher margin opportunities in growing end markets and delivering differentiated client-centric solutions.

And with regard to the recent CH2M acquisition, we are exceeding the major cultural and financial integration commitments we made a year ago when we announced this transformative acquisition. I will discuss the Jacobs and CH2M combination in more detail later in my remarks. On a pro forma basis, third quarter revenue grew 14% versus prior year with each line of business posting growth. Adjusted SGNA costs decreased sequentially and was also lower versus the pro forma year ago quarter demonstrating significant progress on achieving cost synergies associated with the CH2M acquisition.

Our third quarter adjusted earnings were a $1.35 per share, an increase of 71% year-over-year. Kevin will cover the components of EPS including abridged to GAAP EPS in his remarks. Free cash flow generation was strong in the third quarter and we demonstrated our ability to deliver with gross debt down from the second quarter. I'm also very pleased to report that the third quarter backlog increased sequentially to $27.2 billion and is up 8% on a pro forma basis from last year's third quarter with all three of our lines of business contributing to the backlog growth. Looking forward, we continue to experience strong demand across both our aerospace technology environmental and nuclear line of business A-10 and our buildings infrastructure and advanced facilities business BIAF.

In addition, supply demand fundamentals are strengthening in our energy chemicals and resources BCR sector where we are taking a disciplined approach to capturing opportunities in an improving market. Turning to slide five, as I highlighted earlier, culture is a key component of our strategy and our people are the heart of our business. To that end, we believe inclusion and diversity are critical to enhancing employee engagement, retaining and attracting industry-leading talent, as well as creating a framework for cross-business collaboration. All necessary for achieving profitable growth. Our employee network groups are an important driver of inclusion and diversity and offer our employees an opportunity to connect with others around the world.

This picture is from an inaugural, global employee network group summit where seven employee networks of Jacobs and CH2M came together to charter their purpose and business objectives going forward. The summit was an important step to further accelerate our journey of creating a differentiated professional services company. More than 25,000 Jacobs employees around the globe identify with one of these network groups and I could tell you that their enthusiasm is infectious. Before turning to the next slide, I would like to note that when the recent wildfires drove some of our employees and families out of their homes around our Redding, California office, our employees set up an emergency fund contributing tens of thousands of dollars within just one week, showing just how authentic our culture of caring is at Jacobs.

Turning to slide six, our third quarter revenue and backlog was strong at $27.2 billion up approximately $700 million versus last quarter. On a pro forma basis, total backlog increased 8% or approximately $2 billion compared to last year's third quarter. We saw an acceleration in field services backlog, which was driven by an increase in major water infrastructure and life sciences design-build projects. From a line of business perspective, on a pro forma basis, A-10 backlog was up 12% year-over-year while BIAF increased by 8% and ECR up 3%. Gross margin in backlog is up more than 100 basis points year-over-year on a reported basis driven by the higher margin mix from CH2M. Our Jacobs and CH2M sales teams are now integrated in capitalizing on the tremendous opportunities to leverage each other's strengths, evidenced by our strong bookings and gross margin in backlog performance across the company.

Turning to slide seven now let me discuss the performance by line of business beginning with aerospace technology, environmental, and nuclear A-10. We posted a strong quarter in A-10 with revenue reaching $1.2 billion up 24% year-over-year on a pro forma basis. And operating profit up more than 22%. The successful ramp-up of our previously awarded major winds including the missile defense agency and special operations command are key drivers to this double-digit revenue and profit growth. Backlog was up 12% versus last year's combined third quarter with both legacy Jacobs and CH2M contributing to the growth. And I'm also pleased that the gross margin on the A-10 backlog increased year-over-year.

From an end market standpoint, we are benefiting from plush ups across our major government customers such as the Department of Defense, Department of Energy, Intelligence Community, and NASA. Within our commercial markets, the 5G wireless build-out continues to provide a robust opportunity for growth with another AT&T win in the quarter. From a competitive standpoint, we believe the high fragment nature of the government services market plays into our strategy that combines strong technical expertise, a unique localized delivery model, and an industry leading efficient cost structure in order to gain market share.

On the back of posting strong double-digit growth in fiscal 2018, we are encouraged that our A-10 pipeline supports further growth over the next several years. Within that pipeline, some of the major opportunities include large-scale nuclear cleanup projects, incremental space opportunities with NASA, as well as overall demand for IT, cyber, and analytics capabilities. During the quarter, we were awarded a scope increase at West Valley nuclear remediation site and the DOE announced the extension of our plateau remediation contract at Hanford. Our nuclear strength positions us well to capture incremental opportunities during the upcoming DOE nuclear cycle. Within our environmental business, we were awarded a contract to provide the defense threat reduction agency solutions for sustainable chemical, biological, and other threat reduction capabilities.

This wind demonstrates the technical expertise in differentiation that CH2M brings to Jacobs. While CH2M integration growth synergies are a clear focus at this time, I'm pleased to also note that our previous acquisitions in the cybersecurity and analytics market, such as Blue Canopy and Van Dyke are also driving revenue synergies. For example, across all of Jacobs our commercial, private, and other public clients are seeking A-10's unique and deep expertise in areas such as at-scale network vulnerability assessments, cloud-based security operations management, and organically developed software solutions to solve many complex cyber and AI initiatives. In summary, the A-10 business is executing well against its strategy and position to deliver a double-digit year-over-year profit increase in fiscal 2018 with continued strong growth into 2019. Now, onto slide eight to discuss our buildings infrastructure and advanced facilities line of business, which posted another solid quarter of results.

On a pro forma basis, BIAF revenue increased 5% versus last year's third quarter and delivered an 80 basis point increase in operating profit margin on a year-over-year basis. Additionally, revenue in backlog was up nearly $1 billion versus pro forma last year. Overall, we are experiencing strong demand driven by population growth, aging infrastructure, and increased urbanization with robust growth in the US, Middle East, and Asia markets. The UK is holding steady in spite of uncertainty in that region. Specifically, in the US, which makes up over half of our BIAF revenue, we're seeing particular strength in the west coast, Texas, and in the Southeast.

Our combination with CH2M is driving increased value for our clients and it is clear that we have elevated our leadership in many of the most crucial global spending priorities. Water is one of these key priorities and as you recall, was a major component of our 2016 strategy that drove the acquisition of CH2M. In July, I met customers and presented at the Singapore water conference, which is a premier event in the water industry. There were over 20,000 participants from more than 100 cities globally in attendance. Our conversations with customers at the conference reinforced our thesis that we are in the early stages of a significant positive water investment cycle that is driven by several factors, including climate change and an increased need for clean water. Our clients are prioritizing upgrades to water filtration, wastewater treatment conveyance, and distribution that had been delayed far too long.

We are not only a leader across these traditional water projects but we are now bringing next-generation technology to our clients by leveraging data analytics into our end to end solution offerings. During the quarter, we were awarded multiple water projects such as San Diego pure water and design-build projects in Arizona, Oregon, northern California, and west Texas. And very importantly, the pipeline over the next 12 months for water projects is strong. In the coming months, BIAF president, Bob Pragada, and his key leadership will be hosting an investor webcast to provide a more in-depth look into the water market.

Another key priority is transportation, which includes aviation, rail, and highways. Within aviation, we are seeing strong demand coupled with industry analyst expectation that $450 billion will be needed by 2020 to keep pace with a record passenger growth outlook. Virtually every major airport and many of the smaller regional airports are undergoing significant capacity expansions. For example, Heathrow is moving forward with their third runway, LAX and La Guardia in the midst of expansions, and Singapore, Denver, and Dubai are all planning to expand their operations. Our leading position in aviation was recently highlighted with a #1 global ranking by engineering news record and we believe we are positioned well to further capitalize on this opportunity.

From a rail and highway standpoint, urbanization continues to be a major driver globally. During the quarter, we were awarded a significant program for Etihad Rail in the United Arab Emirates to design what will be one of the world's largest freight and passenger rail lines. We've also had domestic winds with the New York City Metro Transit Authority and San Francisco Bay Area Rapid Transit System. Highways continue to show steady performance from both new constructions as well as continued operations in maintenance investments. During the quarter, we were awarded two major highway projects on the east coast of the US and renewed our 15-year O&M contract with the Cheshire East Council in the United Kingdom.

With regards to our built environment business, we continue to see solid demand across a variety of verticals including the US government, healthcare, education, and sciences. Specifically, we are excited about the investments being made in K-12 schools as advances in technology within the classroom are spurring state and local government funding to create tailored learning environments. Finally, our advanced facilities business performed better than our expectations during the quarter driven by an upside in electronics and strong performance in life sciences. From an electronic standpoint, we continue to see strong underlying demand for more data center capacity. Semiconductor and chips are being driven by secular growth factors such as artificial intelligence, emerging chip technologies, edge computing, and vehicle automation.

In life sciences, we're seeing pipelines build as US tax legislation is driving potential investment and cell and gene therapy advancements continue to progress. We're seeing substantial revenue synergy opportunities in the advanced facilities pipeline that combines CH2M's design expertise with Jacobs strength and large-scale EPCM delivery. In summary, the BIF line of business is positioned for strong growth across a variety of end markets and regions. The combination of Jacobs and CH2M is surpassing our expectations as revenue synergies are beginning to materialize. And now, to our energy chemicals and resource business on slide nine. In the third quarter, our revenue in ECR increased 19% year-over-year on a pro forma basis, a further acceleration from the second quarter growth of 17%. The double-digit increase in revenue was driven by several factors including increased activity in refining maintenance turnarounds and continued strengthening in our mining business.

On a pro forma basis, ECR revenue and backlog grew by 3% year-over-year; consistent with our ECR strategy we're increasing our sustaining capital footprint, which we view as highly recurring revenue with a more attractive risk posture. I want to reinforce that our strategy in the ECR line of business will be to continue to focus on sustaining capital lower risk segments of the energy chemicals and mining value chain with a high percentage of our revenue aligned to our clients OpEx spent. That said, given recent higher commodity prices, we do see incremental client capital budget opportunities that fit within our risk profile across our ECR business. For example, we're seeing an increase in green fill refining CapEx globally as well as integrated refinery chemical complexes.

Currently, we're delivering the front-end engineering design for a number of these major projects and expect to convert many of these into a larger EPC or EPCM role. There are a handful of ethane cracker projects that are moving forward. We participate both delivering the front-end engineering design of crackers and the derivative chemical complexes. In the second wave, we are involved in feed work for one of the largest crackers as well as several global opportunities for investments in derivative chemical plays. The Marpol 2020 regulations that require shipping vessels to reduce their sulfur emissions have reached a tipping point whereby refiners are now investing in upgrades.

We are currently working on multiple upgrades early engineering works across the globe. As I previously mentioned, our mining business had double-digit revenue growth mainly driven by studies and early engineering work. We are seeing our customers move forward with major projects in iron, ore, and copper. We expect a handful of the studies to convert to large projects in the fiscal year 2019. As it stands today, our mining business is approaching $550 million in run rate revenue, which is still well below its previous peak of over $1 billion indicating potential upside in the business. From a Jacobs connected enterprise standpoint, we continue to make progress leveraging our operational domain expertise to capture adjacent digital opportunities within our core ECR customer base. For example, we were awarded follow end work that is four times the initial engagement from a major chemical customer to remediate vulnerabilities found in their cybersecurity attacks surface.

Overall, we're pleased with the continued progress of our ECR strategy to drive profitable opportunities. We are confident there are multiple drivers that are likely to translate into further backlog growth in fiscal 2019 and '20. Turning to slide 10, just one year since we announced our transformative acquisition of CH2M. We are on pace to exceed our commitments to shareholders, employees, and clients delivering a stronger value proposition resulting from our combination, which is being very well received in the marketplace. This is reflected in our leading position in industry rankings for making end markets like water and transportation. And in Jacobs capture in the top spot among global design firms now ranked #1 by E&R.

Specifically, with regard to our commitment to successfully merge the Jacobs and CH2M cultures and businesses, we are very pleased that CH2M voluntary attrition is in line with pre-announced levels. We are exceeding projective cost synergies and we are delivering strong growth. As a result, we expect to outperform the 15% adjusted EPS accretion target in the first 12 months since closing the acquisition in December. And our robust combined backlog points to further growth synergies materializing in our sales pipeline. Although we have more work ahead, I'm very pleased with the progress we have made to date and extremely excited about our future. Now, I'll turn the call over to Kevin.

Kevin Berryman -- Chief Financial Officer

Thank you, Steve. Moving to slide 11, you will see a more detailed summary of our financial performance for the third quarter of our fiscal 2018-year. Pre-thought that during my remarks today, I will sometimes discuss comparisons of current quarter results to Jacobs and CH2M's performance in 2017 calculated on a pro forma basis. We believe this information will help provide additional insights into the underlying trends of our business when comparing current performance against prior periods. Third quarter pro forma revenue grew 14% year-over-year in line with our strong second-quarter growth of 16%. We had organic revenue growth across all of our business with an increase of 17% and 8% year-over-year for Jacobs and CH2M's legacy businesses respectively.

This growth was supported by a greater than $175 million increase in past due revenues versus the second quarter of 2018. Gross margins of 18.7% are in line with our strong margin performance year-to-date as we continue to benefit from a higher a gross margin mix from CH2M. I will discuss underlying trends in gross margin later in my remarks. Regarding G&A, we realized a good growth leverage on our G&A spend as pro forma G&A was down on an absolute year-over-year and sequentially versus the second quarter. Driven by increased momentum in the delivery of our expected cost synergies.

As a percentage of sales, adjusted G&A was down approximately 200 basis points year-over-year on a pro forma basis and 160 basis points sequentially. As a result, while GAAP operating profit margin was 5.1% due to CH2M related acquisition and integration costs, our adjusted operating profit margin was 6.4% a year-over-year increase of 80 basis points on a reported basis and up 60 basis points on a pro forma basis. OP as a percent of revenue was also up 80 basis points sequentially, again driven by a building momentum in cost synergies. GAAP EPS was a $1.05 up 42% year-over-year. CH2M acquisition-related restructuring charges to achieve synergies and some professional fees and other transaction related expenses impacted EPS by $0.27.

Additionally, a charge resulting from the revaluation of certain deferred tax assets and liabilities in connection with the US tax reform impacted EPS by $0.04. When excluding these costs, our adjusted EPS was $1.35, which is up 71% versus the year-ago figure. The $1.35 includes $0.07 from discrete tax benefits and a $0.01 benefit from our partial reversal related to a legal matter that we previously discussed in the second quarter. Excluding the impact from tax reform, we are on track to exceed the 15% accretion target that we estimated for the first full year benefit associated with our acquisition of CH2M. We also gained some momentum in DSO as we reversed to the Q2 negative trend we saw last quarter.

Importantly, we saw sequential DSO improvement during Q3 given our increased focus on cash flow and accounts receivable management. Finally, turning to our bookings during the quarter, our pro forma book to bill ratio was 1.1 times for the trailing 12 months and 1.2 times for the third quarter period. On slide 12; let's look at the sequential trends in revenue and gross margin in more detail. As we have previously stated, we are focused on disciplined project execution, reducing writedowns and targeting higher margin opportunities throughout the cycles in our end markets.

In Q3, our gross margin was 18.7%, which is up year-over-year on a reported basis. Importantly, the Q3 gross margins were impacted by higher pass-through revenue during the quarter when compared to Q2. When adjusting for the impact on margins through the incremental increase of pass-through revenues, underlying gross margins were actually more in line with our Q2 figures. Regarding our LOB performance, let's turn to slide 13 and begin with A-10. Revenue on our pro forma basis grew 24% year-over-year with growth again being most pronounced in the Jacobs legacy portfolio with strong 36% organic growth driven by our recent large new winds.

For the fourth quarter, we expect mid-single digits sequential revenue growth off of Q3 resulting in double-digit year-over-year growth as we continue to ramp the newly awarded contracts. Operating margin for the quarter was 7.3% down year-over-year to the ramp of the large contracts. In addition, there were a minimal 10 basis points benefit from a partial reversal of the Q2 legal matters that we discussed last quarter. Excluding this impact, our adjusted operating margin was 7.2% and in line with our 7% to 8% expectation.

Longer term, we continue to expect operating margins to improve. BAIF grew revenue 5% year-over-year on a pro forma basis with growth across all regions and strong double-digit growth from CH2M. This growth was partially offset by an expected decline in advanced facilities given the difficult comp we saw in the year-ago period. Operating margin of 8.5% was up 115 basis points from the year-ago quarter and up 90 basis points on a pro forma basis. For the fourth quarter, we continue to expect both sequential and year-over-year growth in BAIF with margins expected to be in the 8% to 9% range. Consistent with our comments last quarter, we see room for margin expansion in BAIF as we continue to drive strong project delivery metrics and benefit from the scale of the combined businesses.

Lastly, our ECR business grew revenue 19% year-over-year on a pro forma basis. Growth was driven by construction, maintenance, and turnaround projects as well as a pick up in front end-mining studies. Operating margin was 5%. While we continue to make good progress driving margin expansion in our ECR business, we are currently evaluating an update in a project estimate. While this impact has been accounted for within our full year updated outlook, it is expected to have a modest impact on Q4 ECR margins.

Longer term, we expect ECR margins to continue to expand as we focus on lower risk, higher margin opportunities and benefit from a recovery in energy and commodity end markets. Before turning to the next slide, a note to let you know that our non-allocated corporate overhead costs were $33 million in line with a year ago. We continue to expect our unallocated corporate overhead costs to be in the range of $25 million to $35 million per quarter excluding discrete items. We are certainly pleased with the overall strong Q3 fund natural performance across each line of business.

On slide 14; now let me provide an update on restructuring and acquisition costs. We made great progress in cost synergies in the quarter and we have now realized a total of over $50 million in cost synergies year-to-date with nearly $30 million realized in Q3 alone. As a result, we now expect, as our updated level of synergies for the 2018 fiscal year will approach approximately $75 million. As a result, we are raising our estimate of net cost synergies to $175 million from our previous estimate of $150 million. We still expect $150 million in run rate synergies achieved by the end of fiscal 2019 with an incremental $25 million to be gained in 2020.

To achieve these additional savings, we also believe our estimated P&L cost to achieve the incremental benefits will grow to $265 million from the previous estimate of 225 million. A couple of other key points. At the end of Q3, we have achieved a run rate of approximately 60% of the revised synergy target of $175 million. By the end of the year, we now expect to achieve a run rate savings of nearly 70% of the total $175 million estimate. Also through Q3, we have incurred 153 million of the now expected $265 million in costs to achieve these synergies. As it relates to the revised $265 million in cost, we expect that it dips over half of these will be cash related and be incurred over the next couple of years.

Finally, as it relates to our CH2M transaction and change of control cause, we have incurred $91 million through Q3. We are largely completed with these discrete one-time costs. Before we move to the balance sheet, let me provide an update on the impacts matter also referenced as the Ichthus matter. There is no change in our expectations relative to when we conducted our original due diligence on the project as part of the acquisition of CH2M. We continue to be early in the process and we expect that any potential resolution of this matter is well into the future.

So now, let's get onto the balance sheet in capital allocation on slide 15. We ended the quarter with cash of $800 million and a gross debt of approximately $2.3 billion. Our gross debt level is down $172 million from our Q2 level supported by a strong underlying cash flow from operations of $215 million during the quarter. We will continue to use excess cash to pay down the plan large of debt position as we focus on maintaining our strong investment grade credit profile. Regardless, our gross debt leverage fell to 1.9 times adjusted EBITDA at the end of Q3 as calculated for the terms of our credit agreements.

We are now within the high end of the range of our gross debt to adjusted EBITDA target of one to two times. We are also maintaining our dividend program. During the third program, we paid $21 million in dividends and we recently announced that our board has declared a fourth quarter dividend of $0.15 per share. As we further strengthen the balance sheet through the end of the year, we will look to continue to consider additional growth opportunities, continue our dividend program, and reinitiate our return of cash to our shareholders via stock purchases. Now, turning it back over to Steve for some closing remarks.

Steve Demetriou -- Chairman and Chief Executive Officer

Thank you, Kevin. We believe our third quarter performance is strong evidence that we are delivering upon our three-year strategy. We're excited about the profitable growth opportunities for the company across all lines of business as well as the trajectory of obtaining the remaining CH2M cost synergies.

As such, we now expect our fiscal 2018 adjusted earnings per share outlook to be at the end of our previous range of $4.00 to $4.40. We're also providing an initial outlook on fiscal 2019 earlier than its normal cadence given the lack of historical pro forma results and seasonality of the newly combined organization. At this time, we expect fiscal 2019 adjusted EPS to be in the range of $5.00 to $5.40. Operator, we'll now open up the call for questions.

Questions and Answers:

Operator

And as a reminder, if you would like to ask a question please press * followed by the number 1 on your telephone keypad and please limit yourself to one question and one follow-up. Your first question comes from the line of Jamie Cook from Credit Suisse. Please go ahead, your line is open.

Jamie Cook -- Credit Suisse -- Analyst

Hi, good morning and congratulations on a nice quarter. One, Kevin, I was surprised obviously that you guys provided guidance already for 2019. If you could just walk us through your assumptions by segment and just a level of visibility you have for 2019 so we know how much you have to actually book to get to that number. I guess that's my first question. And then my second quarter -- obviously, some nice progress on the cash flow side. How do we think about the opportunity to lower the DSOs at siege two in 2019? Thanks.

Kevin Berryman -- Chief Financial Officer

I'm not gonna provide a lot of incremental details as it relates to the 2019 preliminary guidance we gave. We decided to do that just given the fact that we got these two large organizations coming together and the seasonality of the business and the fact that we're not yet fully pro forma out. We thought it was a good idea to just give you a preliminary perspective. We feel good about that. We're actually in the midst of our planning process right now. So we've got some more work to do before we provide some incremental guidance on 2019.

As it relates to the cash flow, as you recall, we discussed in the call on second quarter that we were a little disappointed in the lack of traction we had been seeing on our DSO performance and we had a real full core press in the organization and got the business leaders focused and they've been doing a great job on starting to get some traction on that. We saw that negative trend reverse in Q3 that was great to see. We still think that there are opportunities to continue to deliver improvements in our DSO going forward and that would be into 2019 as well. So more to come on that but clearly we continue to believe there are opportunities to improve on that metric going forward.

Jamie Cook -- Credit Suisse -- Analyst

Okay, because you wouldn't answer my question, let me just ask a follow-up. On A-10 you talked about 7% margins improving from the 7% level but you didn't say the 7% to 8% level. Am I splitting hairs here or is the higher endless achievable? I guess I'm just trying to understand the commentary there.

Kevin Berryman -- Chief Financial Officer

We still have the general range of 7% to 8% for that.

Operator

Your next question comes from the line of Tahira Afzal from KeyBanc Capital Markets. Please go ahead, your line is open.

Tahira Afzal -- KeyBanc Capital Markets -- Analyst

Hi, gentlemen, this is Sean on for Tahira today. Congrats on a great quarter. So I understand its preliminary and you guys don't want to provide too much further guidance around fiscal '19 assumptions, but just hoping to get a little bit more color maybe just around how you guys are thinking about the top end -- maybe just qualitatively particularly around how you guys are thinking about the commodity-oriented end markets? For example, the meaningful upside potential in mining you guys are citing. Any added color on the real key swings actors to get to that top end would be helpful.

Steve Demetriou -- Chairman and Chief Executive Officer

I think the good news is that, as evidenced by our backlog performance over the last couple of quarters, is that we're expecting profit growth across all three lines of business. And again, we're not prepared to go into detail but A-10 is benefiting, will benefit next year from the full ramp-up of all the major winds that have begun to ramp up in the second half of this year. So the two that I mentioned in the earnings call SOCOM and the missile defense but also the judic and Nevada nuclear wind that we had announced earlier this year. So that coupled with additional expected bookings -- A-10 is positioned well for profitable growth next year.

BAIF, as I mentioned, very strong backlog growth recently and the margins improving in the backlog and a very robust global demand profile gets us confidence that we should see profit growth there in 2019. And on the ECR business, as you mentioned, the commodities are strengthening but we're focused first and foremost to continue to drive margin improvement with performance excellence and some of the process improvements of new tools that we've implemented that are specifically gonna benefit the ECR business and gain higher margins with existing business and continue to focus on sustaining capital growth. But clearly, we're seeing demand growth up in certain markets more than others. I'd say the Middle East for us I starting to show some good prospects for 2019 on some of the major projects and so we should benefit there as well.

Tahira Afzal -- KeyBanc Capital Markets -- Analyst

Thanks, Steve. Secondly, I think you guys mentioned in the prepared remarks that the UK's remained stable for Jacobs thus far. I was just hoping you guys could provide a little bit of color on the size of the UK business right now and what we should expect over the next 12 months as the Brexit impact starts to flow through? Anything you guys are planning around there?

Steve Demetriou -- Chairman and Chief Executive Officer

The comments I made about uncertainty are sort of statements of caution just because it is uncertain and we don't -- there's a lot of political negativity going on now in the UK. But from a Jacobs standpoint, things are pretty solid. We have excellent prospects, we have a good pipeline of opportunities, it's across all of the major sectors that we've talked about; water and transportation and climate change and even the energy side on some transmission opportunities.

And so, we're trying to be careful not to get ahead of ourselves and claim that equally exciting as everywhere else just because of the Brexit and political uncertainty but as we sit here today, we believe that's potentially just short-term and we're extremely excited about the prospects. UK is our second largest market for the company, specifically in BAIF, so it's extremely important. We mentioned that the US is more than half but clearly, UK makes an important part of the other remaining size of the business along with a few other key regions.

Operator

Your next question comes from the line of Steven Fisher from UBS. Please go ahead, your line is open.

Steven Fisher -- UBS -- Analyst

Thanks, good morning. I wondered if you could talk about the pro forma revenue growth trend here, was still strong at 14% but dipped down just a couple of points. And I know, again, you don't want to provide a lot of color in 2019 but just really wondering about the trajectory here? If we should be thinking that this is going to start the trend into these single digits sooner than later or if that can still be pushed off a while? I'm just looking at the differential between the ECR backlog growth at 3% and I think last quarter was 2 versus the revenues of '19. So just kind of wondering how all this converges and the trajectory of pro forma revenue growth.

Steve Demetriou -- Chairman and Chief Executive Officer

So let me just start and then turn it over to Kevin. As I've said for the three years that I've been at Jacobs, revenue is important. But to overly focus on it becomes very difficult to really predict and project this business because of pass-through revenues, especially in the area of some of the businesses you mentioned like ECR.

And so, I think for me the bottom line guidance we gave you is really a combination of our revenue growth, our gross margin in our revenue backlog that we're gaining, the synergies and cost efficiencies that we're driving across the company are tools that are giving us the opportunity to preserve higher margins for winds that we get going forward compared to the past. You really just got to look at it across all of those. I think from an ECR specific standpoint that you've mentioned, I think equally important to revenue is the whole strategy execution of driving a higher quality of earnings business that we've been proving over the last 18 to 24 months.

Kevin Berryman -- Chief Financial Officer

So Steve, just some additional commentary. In the Q3 figures, I noted the 175 million incremental pass through for the third quarter. That's 5% of growth effectively. Just note that. Pass through revenues fluctuate and they were a little bit higher than they normally are. So I'll just make that comment and you interpret it as you wish. I do believe, especially given the mix of the profile of ECR, for example, since you're pointing that out. When you win these contracts and you do the turnaround its pretty quick burn stuff and it happens pretty quickly.

You can get some of this disconnect as it relates to how the backlog's trending versus how the revenues come together. So I think what's important is that our gross margin in backlog continues to be positive. And we think that that is leading us to be able to ensure that we have that kind of lower risk profile in our total portfolio with an ability to continue to expand our margins longer term. There will be some fluctuation around the top line just because of the things it's de-set as well.

Steven Fisher -- UBS -- Analyst

That's helpful. Then maybe if you could just give us a little more color on the specific project that you called out in ECR that I think is gonna have an adjustment in your fourth quarter. How far along is it? How comfortable are you that you're gonna capture all the cost headwinds in 2018 and how material is it?

Steve Demetriou -- Chairman and Chief Executive Officer

I think I characterized it appropriately that it's a modest impact on margins. I'll leave it there. We're very comfortable that we have the situation and we're evaluating it and hopefully, it'll even be lower than what I'm suggesting. But ultimately, we're very confident. It can't be that material given what I just described.

Steven Fisher -- UBS -- Analyst

When will the project be done?

Steve Demetriou -- Chairman and Chief Executive Officer

Near the end of this year.

Operator

Your next question comes from the line of Andy Whittmann from Baird. Please go ahead, your line is open.

Andy Whittmann -- Baird -- Analyst

Great, thanks. I just had a clarification actually. In the footnotes to your segment operating profit reconciliations. Footnote three talks about a $15 million charge associated with a certain project in the quarter. But when I look at the value that you put up -- like $33 million seems like that's kind of in line with the range that you've been talking about. Can you just talk about what that is and help us understand it a little better?

Steve Demetriou -- Chairman and Chief Executive Officer

No problem, Andy, thanks for the question. Yes, we had that but we also had a little bit higher than normal fringe kind of true-ups given actuarial work that was performed over the Q3 which largely offset that. So you kind of see that number, there's a plus in there and there's a minus in there which netted to the number that you're looking at. That's why you're not seeing a big change.

Andy Whittmann -- Baird -- Analyst

Well, what was the other corporate charge? It seems like a pretty decent amount there.

Steve Demetriou -- Chairman and Chief Executive Officer

Fringe.

Andy Whittmann -- Baird -- Analyst

Oh, the fringe was the $15 million?

Steve Demetriou -- Chairman and Chief Executive Officer

No, it offset the incremental $15 million. It was a benefit.

Andy Whittmann -- Baird -- Analyst

I'm just saying; what was the charge related to?

Steve Demetriou -- Chairman and Chief Executive Officer

A project that's being evaluated.

Andy Whittmann -- Baird -- Analyst

Okay. And then just also here on some of the numbers. It looks like some of your purchase accounting has moved around a little bit. It looks like it's all contained on the asset side of the balance sheet, Kevin, but goodwill is up, intangibles down. Can you just talk about what some of the drivers of that are? I guess it's a good thing that we're not seeing the liability side increasing but just given some investor sensitivity to this and other deals in the past, I thought I'd give you a chance to talk about some of the purchase accounting migration that's happened in the last couple of quarters.

Kevin Berryman -- Chief Financial Officer

The largest percentage of that is really related to our preliminary estimates of customer lists and PT&E shared value, which ultimately went down versus what ultimately we had in the original estimates. Certainly, some of that was in the ECR business, which we got from CH2M and that's a big chunk of it. There are some other moving pieces in it.

We do have some project accruals that are in there in terms of some potential risk but if you look at the first two that I mentioned, the PP&E fair value and customer list values and customer brand values, that kind of stuff, that's about 200+ million of the incremental changes in the opening balance sheet.

Operator

Your next question comes from the line of Michael Dudas from Vertical Research. Please go ahead, your line is open.

Michael Dudas -- Vertical Research -- Analyst

Good morning, gentlemen. Steve, in your prepared remarks you talked about the current backlog at 100 bps, I believe, greater than a year ago just to clarify that. What are some of the drivers in that chain growth? Is it the CH2 backlog you've brought on? Is it the mix issue relative to just the better-disciplined bidding? Or a better environment on grabbing a little bit better incremental margins as you're being more disciplined in putting projects on the backlog?

Steve Demetriou -- Chairman and Chief Executive Officer

As we've mentioned that, that's up 100 basis points based on Jacobs stand-alone backlog margin last year. And because of the CH2M side, we've talked about the fact that the water business is a high margin business and so that's a major contributor. But I'm also pleased that when you look at the overall backlog performance from the third quarter last year to third quarter this year on a pro forma basis, both Jacobs and the CH2M side of the business from last year have grown the backlog on the revenue side. So it's really a combination of good combined performance but especially in some of the higher margin businesses that we acquired with the CH2M business.

Michael Dudas -- Vertical Research -- Analyst

And Steve, following up on A-10. Of the five delineation markets that you put through on your presentation, you'll have to get to this big bump in the transition on the positive side on the backlog of revenues, what one or two look more promising than some of the others and is there a mix benefit or detriment relative to where you see the growth in new revenue contribution and new business in that segment going into 2019?

Steve Demetriou -- Chairman and Chief Executive Officer

Well just as they're both regionally and sector wise, clearly regionally we see the strongest pipeline moving into 2019 in the US with our core A-10 business as evidenced by obviously some major winds but also a pipeline of opportunities. The nuclear, as you know, the nuclear business, especially what we acquired from CH2M, goes in certain cycles and the 2019-2020 is expected to be an up cycle on several large projects coming onto board.

So that's gonna be important to us as we go forward as well. I'd say those are two specific opportunities. The weapon sustainment area is important to us, as we mentioned in our strategy, and also because of the successful acquisitions and the Jacobs connected enterprise focus. We expect strong growth in cybersecurity and digital analytics, et cetera, as mentioned in my prepared remarks.

Operator

Your next question comes from the line of Jerry Revich from Goldman Sachs. Please go ahead, your line is open.

Jerry Revich -- Goldman Sachs -- Analyst

Hi, good morning, everyone. You folks have had really strong wind rates in A-10 over the past year. Can you just talk about as you ramp up, the revenue on those projects as you mentioned earlier? How does the prospect list look in terms of your ability to continue to grow backlog in that business? Can you just give us a sense for the bookings outlook relative to the revenue ramp that you've laid out earlier in the call?

Steve Demetriou -- Chairman and Chief Executive Officer

That's a great question, Jerry. One that I ask every quarter when we're sitting in our business reviews. The good news is that in spite of the unprecedented or historical high wind back in 2017 and '18 time frame, we still have extremely pipeline of opportunities in the A-10 business. Just kind of repeating what I said, especially in the US as it relates to all of the different military sides and the cybersecurity side, NASA, opportunities both plus ups as well as expanding our presence across all of our list of clients. The pipeline is strong so we're not just depending upon the ramp-up of the previous winds but we're confident in continuing to put winds on the board with new business.

Jerry Revich -- Goldman Sachs -- Analyst

Just for context. Does that translate into backlog growth? Or can you just maybe put a finer point on that?

Steve Demetriou -- Chairman and Chief Executive Officer

Yes. We're still expecting continued backlog growth in A-10 as we move into '19.

Jerry Revich -- Goldman Sachs -- Analyst

And can we just circle up into the CH2M accounting? How much of the brand the adjustment is greater integration? Did you get any benefit in the quarter from the accounting change in terms of the way flow through the P&L? Kevin, it's just a little counter-intuitive considering how well the business is performing to see good will adjusted higher. Can you just flesh that out more in addition to what you've mentioned in an earlier question?

Kevin Berryman -- Chief Financial Officer

No real, fundamental change in the incremental non-cash charges associated with our business in Q3 versus Q2. Now look, we're continuing to evaluate it. We'll look at it again in Q4. But if there's any material change, we'll be providing that insight to you. As of right now, as of Q3, Q3 was very similar to Q2.

Jerry Revich -- Goldman Sachs -- Analyst

But in terms of just the business context -- what's driving a negative adjustment to brand values when the business is performing well, the trade main values et cetera. Can you just give us more context?

Steve Demetriou -- Chairman and Chief Executive Officer

The value of Jacobs is a huge number. The value of CH2M and how we're integrating it into our company in deriving all the view of what the new Jacobs organization looks like actually reduce the value of the CH2M firm. So this is a discussion about the CH2M brand. I don't want to make a comment as if it wasn't important historically for that company.

But within the construct of what we're doing about it and what the value proposition does for us, it is a very different picture. If you were to go to Denver, for example, to the previous headquarters, you won't see very much CH2M there. You'll see Jacobs. And that's because we're driving against an aligned one Jacob entity, which is reducing value implications associated with CH2M.

Operator

Your next question comes from the line of Chad Dillard from Deutsche Bank. Please go ahead, your line is open.

Chad Dillard -- Deutsche Bank -- Analyst

Hi, good morning, guys. I just had a question on earnings seasonality. Historically, you see sequential earnings growth in the fourth quarter but implied guidance suggests that's not the case. So I was just curious to whether it's a big project winding down or differences in seasonality related to CH2M side? I ask because if I probably took the typical seasonality of the fourth quarter, as that rate would suggest, 2019 guidance is pretty conservative. Especially if I factor in the cost savings and the pro forma 8% growth backlog. So just hoping to get some color there.

Steve Demetriou -- Chairman and Chief Executive Officer

First thing: $1.35 had some discrete benefits in it so you got to recognize that. You take the tax and you take the balance out for those items. You're really getting closer to $1.25 figure and then ultimately, our view is our taxes will be up a little bit more as we finalize the figures for the full year. So there'll probably be a little bit higher tax rate than what we've seen in the balance. And if you look at all of those numbers, we think we are targeting a pretty respectable underlying operating result that is actually quite attractive.

Chad Dillard -- Deutsche Bank -- Analyst

And just a question on A-10. Can you just talk about when missile defense and the SOCOM projects hit the full run rate?

Steve Demetriou -- Chairman and Chief Executive Officer

All of our projects end up having stages because these are multi-year projects. But I would say the majority of the ramp up is gonna be completed by the first half of next year. Probably more heavily weighted to the next six months. But for the first half fiscal year, next year.

Operator

Your next question comes from the line of Anna Kaminskaya from Bank of America Merrill Lynch. Please go ahead, your line is open.

Anna Kaminskaya -- Bank of America Merrill Lynch -- Analyst

I was hoping to get maybe just some more color about revenue synergies that you highlight in your press release on whether they're coming from regional upside, any particular markets you highlighted here. Any metrics on employee engagement or ascension ratios, how that has -- year-to-date?

Steve Demetriou -- Chairman and Chief Executive Officer

We've clearly had some preliminary or early on winds that we attribute to the combined company but the biggest impact so far is in the pipeline, which is exciting because we see the bigger opportunities for revenue synergies ahead of us. And it's really coming in all the areas that we talked about. Clearly, bringing CH2M's water and environmental capabilities across all of Jacobs; not only in the infrastructure side where the combined strength is winning business and more business in water and environmental but bringing those capabilities to the industrial side like our mining business and east oil and gas business. And the same thing with environmental.

So we're seeing it across the globe. Nuclear -- the combination positions us well for the big nuclear jobs going forward and so that's kind of in the pipeline as well. So again, I think we'll spend more time over the next year talking about actual winds that are attributable to revenue synergies whereas this first six to nine month has been more about the cost synergies. With regard to the culture and the people, that's going extremely well. As I mentioned, attrition rates are stable, which is always our concern and challenge during a merger of this size and so we believe that the whole integration process, the IMO integration management office that we put in place, which we believe is a best in class process, is paying dividends.

We're clearly keeping the momentum up on getting out in front of our people across the globe. Not only communicating, engaging but understanding where issues are and adjusting to those quickly. And there's a lot of excitement in the hallways of Jacobs offices but also at the client level, which is equally important. It's early; this is only our second full quarter of reporting. We're not gonna led up on the focus to just really drive the right best in class culture going forward on the combined basis.

Anna Kaminskaya -- Bank of America Merrill Lynch -- Analyst

Great. And I just wanted to get more color or commentary on your note on page 15, you continue to evaluate portfolio. Does it relate to your existing portfolio? Do you find some non-core assets? Or is it in relation to you redeploying cash through incremental acquisitions? Or even both?

Steve Demetriou -- Chairman and Chief Executive Officer

I think it's everything. If you look at the three-year history of the company, back in 2016 Jacobs stand-alone was less than 5% operating profit margin. We finished 2017 with over 5%, closer to 5.5%. We just put on the board a third quarter that has ramped up throughout this year over 6%. And so for us, it's not only to drive earnings growth but to continue to demonstrate that we're gonna have higher quality of earnings and so it's to focus on the best end markets to make sure that we continue evaluating our existing portfolio to make sure that everything we do is gonna deliver margin growth.

And if there's anything that we believe is not gonna achieve that, we're gonna assess alternative strategies. But clearly, the acquisition side of it as well will continue to be a part of our strategy moving forward. I think we've mentioned several times we want to demonstrate our success capabilities on merging CH2M and Jacobs and the more we do that, the more confidence we have on pulling the trigger on other things that will drive similar performance in margin improvement and earnings growth going forward.

Operator

Your next question comes from the line of Andrew Kaplowitz from Citi. Please go ahead, your line is open.

Andrew Kaplowitz -- Citi -- Analyst

Hey, good morning, guys. Maybe you could talk just a little bit more about your conversations you're having with ECR customers. Obviously, a lot of noise out there with the threat of trade wars, but oil planes are relatively high. It does seem like you turned the corner in ECR. You tend to be a little earlier cycle than some ENCs given your sustaining model. When you said that you're seeing an increasingly strong obstruction of business on projects and you could see it continuing the next step up to the BCNR backlog or is the inflection more on catching up on turnarounds, environmental spend, more of the sustaining type work?

Steve Demetriou -- Chairman and Chief Executive Officer

It's both. First of all, on the trade war, clearly that's giving some of our clients, especially on the mining side, copper, for example, some concern as they are anticipating what's expected to be a supply demand situation that's gonna be very positive for that business over the next couple of years. But yet, concern about all the trade war noise in the short-term. But what we continue to hear from those clients are that they believe the short-term is not causing them to significantly slow down any of the conversion of studies into full projects over the next 12-24 months. And the same thing I would say from the oil and gas and chemicals side.

For us, I think the key is that we're gonna stay committed even as the market starts rising to our strategy to demonstrate that we can have sustainable growth and steady performance through the ups and downs of this industry. And I think we proved that over the last three years, four years, during the down market where Jacobs backlog reduced significantly less than the rest of the industry. And now, as we go forward, we want to make sure that what we put on the board for backlog growth not only has a good low risk, sustaining capital, maintenance, turn around, growth, which we expect.

But that as we do participate in some of the larger projects, they're projects that we won't regret winning and we'll be able to preserve the margins and deliver the performance as we've done in the past and even in a better way with our new strategy of performance excellence. There is clearly an appetite for more risk out there that our clients are pushing on our industry and so we're being careful and we passed on certain initiatives in the ECR business because we didn't feel it met our risk profile but there are other opportunities emerging now that do meet our risk profile that we're gonna protect to win and we think the balance of that coupled with a sustaining capital of maintenance focus is gonna be a successful strategy over the next couple of years in an improving market.

Andrew Kaplowitz -- Citi -- Analyst

Thanks for that, Steven. And Kevin, you can see when Steve got there you guys have done a really good job on the execution side. Maybe you could evaluate ECR execution in general as was secured today? You already gave us color on the charge and the potential modest issue in Q4 but could you tell us of the charge in Q3 was a CH2 project or maybe a Jacobs project? And you think ECR margin could dip below 5% share awhile before it comes back up?

Kevin Berryman -- Chief Financial Officer

I think there's been a tremendous improvement in execution across the entire portfolio. Probably mostly in ECR and BAIF because A-10 actually had already had a pretty high level of execution performance prior to. But ECR and BAIF -- both of those organizations have done a wonderful job over the last couple of years in improving our potential loss margin versus as hold margin. That's kind of how we think about it. And as you and I have talked in the past, there are always things that are happening. We get a little bit of a pick up because we get an incentive payment or we get a little bit of a knock and we lose a little bit versus the as hold margin.

But the key is we want to protect that as hold margin and go after the incremental incentives. The amount of activity that we're seeing in terms of that -- those tick downs -- versus the as hold margin, is becoming smaller and smaller and smaller. Now look, we never want that number to be zero because I think that that means that we'll be too safe in terms of how we grow the business. But it's getting almost to a level where we continue to try and look for benefits -- absolutely. But we've gotten substantially reduced in terms of those potential ongoing aggravating kind of losses on a margin basis.

And so, the ECR business I think will continue to be able to have this 5+% margin I think going forward. And the expectation is we want it to be higher longer term. Could there be a blip here and there? Of course. If, in fact, the 15 million that we talked about -- that was at Jacobs. But within the context of the holistic view of writedowns or losses versus as hold margin, an extraordinary reduction where we're probably a third of the numbers that we were back at our high point in 2015.

Steve Demetriou -- Chairman and Chief Executive Officer

Specifically, I think building on what Kevin said, that this is not something that we're expecting to drag into 2019. It's a one-quarter commentary.

Operator

Your next question comes from the line of Brent Edward Thielman from D.A. Davidson. Please go ahead. Your line is open.

Brent Edward Thielman -- D.A. Davidson -- Analyst

Thank you. Great quarter. Just a couple of quick follow-ups on ECR. The backlog is 80% reimbursable. Understand the appetite for a little more risk here going forward. But is it your desire to sustain a portfolio that's still majority the inverse of that?

Steve Demetriou -- Chairman and Chief Executive Officer

Yes. And no takes to our strategy there.

Brent Edward Thielman -- D.A. Davidson -- Analyst

And then I guess also net segment -- as you think about going after some of these capital project opportunities when they come to fruition, any sense what the margin opportunity is relative to that 5% that the segment's been running at?

Steve Demetriou -- Chairman and Chief Executive Officer

Honestly higher. As Kevin outlined, we've had success in that business. If you go back to 2016, we're up about 100 basis points in that business from low fours to five or 4% to 5%. And our ECR king has the sub-strategies to take that higher.

Thanks again for joining our call and we'd like to end the call by reiterating that we're well on our way to our mission to create a new kind of professional services company and we'd like to describe it like one that doesn't exist in our industries today. So thank you again and we'll look forward to talking to you next quarter.

Operator

And this concludes today's conference call. Thank you for your participation and you may now disconnect.

Duration: 75 minutes

Call participants:

Jonathan Doros -- Head of Investor Relations

Steve Demetriou -- Chairman and Chief Executive Officer

Kevin Berryman -- Chief Financial Officer

Jamie Cook -- Credit Suisse -- Analyst

Tahira Afzal -- KeyBanc Capital Markets -- Analyst

Steven Fisher -- UBS -- Analyst

Andy Whittmann -- Baird -- Analyst

Michael Dudas -- Vertical Research -- Analyst

Jerry Revich -- Goldman Sachs -- Analyst

Chad Dillard -- Deutsche Bank -- Analyst

Anna Kaminskaya -- Bank of America Merrill Lynch -- Analyst

Andrew Kaplowitz -- Citi -- Analyst

Brent Edward Thielman -- D.A. Davidson -- Analyst

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