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Executives

Kenneth Burk – SVP and CFO

Ronald Tutor – Chairman and CEO

Robert Band – President and COO

Analysts

John Rogers – D.A. Davidson

Richard Paget – Morgan Stanley [ph]

Steven Fisher – UBS

Avi Fisher – BMO Capital Markets

Perini Corporation (PCR) Q3 2008 Earnings Call Transcript November 6, 2008 4:30 PM ET

Operator

Good day, ladies and gentlemen, and welcome to the Q3 2008 Perini Corporation earnings conference call. My name is Misal [ph] and I will be your operator for today. At this time all participants are in listen-only mode. We will conduct a question-and-answer session toward the end of this conference. (Operator instructions) As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the call over to Mr. Kenneth Burk, Senior Vice President and Chief Financial Officer. Please proceed, sir.

Kenneth Burk

Good afternoon, everyone. Thanks for joining us on Perini's Third Quarter 2008 Conference Call. With us today are Ronald Tutor, Chairman and Chief Executive Officer and our President and Chief Operating Officer, Robert Band.

For our agenda today, Ron Tutor will discuss the highlights of the third quarter and Bob Band will share details about new contract wins, prospects and other successes. After that I will review the Company's third quarter financial results in detail and provide guidance for fiscal year 2008 and 2009. Then Ron is going to come back and make some closing remarks and at that point we will open up the call for questions.

Before we start, I would like to remind our listeners that our comments today will contain forward-looking statements including statements about future guidance. Management may also make additional forward-looking statements in response to your questions. These types of written and oral disclosures are made pursuant to the Safe Harbor provision contained in the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from anticipated results.

The Company cautions that any such forward-looking statements are based upon assumptions that the Company believes are reasonable but that are subject to a wide range of risk and actual results may differ materially. These risks and uncertainties are discussed in detail in our filings with the SEC including Perini's annual report on Form 10-K for the fiscal year ended 2007, our quarterly report on Form 10-Q for the quarter-ended June 30, 2008 and our definitive proxy statement filed on August 6, 2008 as well as in today's news release.

Our statements on this call are made as of today, November 6, 2008, and the Company undertakes no obligation to update any of these forward-looking statements contained in the call whether as a result of new information, future events, changes in expectations or otherwise.

And with those formalities out of the way, it's my pleasure to turn the call over to Ron Tutor.

Ronald Tutor

Thanks, Ken. Good afternoon everyone and thank you for joining us today. This was another exceptional quarter with record revenues of $1.41 billion, up 14% from a year ago and record net income of $34.1 million, up 42% from a year ago. Diluted earnings per share were $1.01 for the third quarter of 2008.

On September 8, we finally closed the transaction to merge with Tutor-Saliba Corporation. As discussed last quarter, we believe that the combination of Perini and Tutor-Saliba will create for our shareholders a stronger and more diversified construction company in each of our core markets and operating segments.

With the added resources, relationships and market position of Tutor-Saliba as one of the stronger public works contractors in the United States, we believe there will be many opportunities to lessen the impact of reduced spending in the private nonresidential markets by rapidly redeploying our resources to where the prospects to win new projects in the public sector continue to increase.

We estimate that we will be within the range of our guidance for 2008 for both revenues and earnings per share. For 2009, we have lowered our guidance in response to current economic conditions that we anticipate will likely impact our owners and prospects for new business that we would have ultimately started next year.

We are seeing a slowdown in construction starts as some of our customers are directly impacted by the challenges in the credit markets. As a result, some of the pending awards and prospects we were tracking will take longer to enter our backlog than we originally anticipated. Fortunately, we have a significant backlog of business that will carry us through 2009 into some time in the first quarter of 2010 as we evaluate new opportunities and capture the work that is available in our markets.

It should also be noted that we have not experienced a situation where we have had a major project under contract included in our backlog get canceled. Backlog of uncompleted construction work at September 30, 2008 was $8.3 billion. In addition, we have approximately $5.8 billion pending awards for which we have received either letters of intent or notices from customers informing us we are their preferred contractor. Approximately $5 billion of those pending awards are now expected to enter our backlog over the next 12 months to 24 months representing a shift of over a year longer than we estimated last quarter.

Last quarter indicated there could be positive news announced in the third quarter coming from our strategy to enter the Middle East building market in Dubai. While we have progressed our relationships in that country with joint venture partners and signed a preconstruction services agreement with a major Dubai developer for a potential $8 billion building project, it now appears as though its start could be put back a year or longer before that contract will be signed and the work started. Our share of this joint venture project is 25%.

MGM Atlantic City has also announced that their program is on hold and our customer for a high-end luxury condo project in Los Angeles is working through financing plans that have again then delayed. Therefore, we are basically in a situation where we must focus our energy on new business opportunities such as both public work buildings and civil projects in our marketplace.

I am very optimistic that our government contracting will seize the opportunity to provide a much needed boost to the economy by releasing funds for public works projects on an accelerated basis through 2009. We are currently seeing those in a number of very major projects in our heavy construction group on the East Coast and we will continue to work closely with our private clients as they sort out their priorities and await the thawing of the credit markets.

Now I would like Bob Band to share more details of the third quarter results and prospects.

Robert Band

Thanks, Ron. Our success in the quarter was a result of an outstanding performance by our building and management services segments. We have also made progress in improving the profitability of our civil operations. We have a platform to deliver respectable financial results even in the face of the current economic conditions.

The September 30, 2008 backlog includes new contract awards and adjustments to contracts and process added during the third quarter totaling approximately $2.9 billion which includes a $1.2 billion contract to build the new Terminal 3 at McCarran International Airport in Las Vegas. $1.2 billion of backlog was added due to the acquisition of Tutor-Saliba and approximately $193 million of additional work in the hospitality and gaming market in Las Vegas. Civil operations added $73 million contract for a new roadway project in Virginia.

Management Services added $360 million of new awards primarily for work in Iraq including continued overhead cover force protection projects and in Guam, we have secured our first major project for a runway at Andersen Air Force Base valued at $50 million. This project represents an important step for our Company as we build on our position as an Air Force SATOC contract using the valued resources of Black Construction, our newly acquired business on the island from Tutor-Saliba.

In addition to the pending awards of $5.8 billion that Ron mentioned earlier, we have targeted prospects totaling approximately $3.1 billion in the gaming and hospitality market that could be awarded in the next 12 months to 24 months. This does represent a shift of approximately $6 billion at the 2010 or later from 2009 prospects identified in the second quarter.

The spending on education, healthcare and civil transportation projects should remain fairly strong. For example, we have identified approximately $5.2 billion in targeted projects in the education, healthcare and office and industrial building markets in California and Florida.

The market for public building and civil infrastructure projects should continue to open up over the course of 2009. Several funding initiatives that should give way to good bidding opportunities in our markets are on the docket. The size of this market is well over $30 billion. There are several promising opportunities in Guam and other locations under our SATOC contract.

On Guam, the estimates range from $10 billion to $15 billion in construction spending over the next several years for the relocation of US Marines from Okinawa, Japan to the island. The process is proceeding under the agreement between the two countries and includes work available in both Guam and Okinawa.

The construction market in Dubai and Abu Dhabi is extraordinary – with well-publicized spending estimates in excess of $300 billion. However, as previously noted, that region is wrestling with the challenges that the credit markets currently present. In the meantime, we intend to develop long-term opportunities and relationships for Perini in this market and throughout the Middle East.

Our building segment continued work on ongoing complex large scale projects. We are making good progress on each of the main structures at the 76-acre site of MGM Mirage City Center in Las Vegas with a current contract value of $6 billion. The guaranteed maximum prices have been determined.

Our work at the Cosmopolitan Resort and Casino in Las Vegas continues. All current amounts continue to be paid monthly under our agreement with Deutsche Bank who has now completed the foreclosure process and has established a development entity. We are confident that the project will be completed in accordance with the schedule in 2010.

Our work on the 31-story Sheraton Phoenix downtown hotel was completed three months early and the grand opening was held on October 9.

In the West, mobilization has begun on the $1.2 billion McCarran Airport Terminal 3 project in Las Vegas. This project is scheduled to be complete in 2011.

Rudolph and Sletten and James A. Cummings continue to deliver solid performance in their respective markets in California and Florida. Regarding our civil segment, we have seen improvement in the performance and profitability of our businesses in New York and Washington, DC and believe we are well-positioned to benefit from public infrastructure work in the near future.

Integration with Tutor-Saliba is well underway with specific emphasis placed on centralizing our estimating functions for public works and leveraging our overall equipment fleet. Our management services segment delivered another quarter of excellent performance due to our work with the U.S. Army Corps of Engineers and the U.S. Department of State on overhead coverage systems in the Green Zone and elsewhere in Iraq as well as upgrading fuel and water storage infrastructure at military bases.

Our new awards are proceeding through the design and engineering process as we speak. We are currently proposing on CENTCOM 3 another multi-year task order contract covering the Central Command's area of operation.

And with that, I will turn the call over to Ken, who will give you the financial details for the quarter.

Kenneth Burk

Thank you, Bob. I will now review the third quarter results in some detail. The results include Tutor-Saliba beginning in September and reported in each of our reporting segments building, civil and management services. Black Construction in Guam is reported in our management services segment. The breakdown by segment of our backlog of $8.3 billion at September 30, 2008 is as follows

Building $7.2 billion; civil, $620 million; management services, $500 million.

In the third quarter of '08, revenues were $1.41 billion, an increase of 14% from the $1.24 billion reported in the third quarter of '07. Most of the revenue increases are due to the addition of Tutor-Saliba.

On a reportable segment basis, revenues from our building segment were $1.29 billion, an increase of 13% from $1.15 billion in the third quarter of '07. Revenues from our civil segment were $74 million, up 18% from $63 million reported in the third quarter of '07. And management services revenues were $44 million, up 28% from $35 million a year a go.

Our total gross profit increased 34% to $85.5 million from $63.9 million in the third quarter of '07. This increase is primarily due to improved operating performance contributed by the civil segment including the avoidance of charges that we recorded last year in the third quarter.

General and administrative expenses were $33.2 million, up 9% from $30.4 million in the third quarter of '07. This was primarily due to the addition of Tutor-Saliba during the third quarter.

Total general and administrative expenses were 2.4% of revenues compared to 2.5% in the third quarter of '07 reflecting good scalability with a 14% increase in revenues for the same period.

Income from construction operations was $52.3 million in the third quarter of '08, an increase of 56% from $33.5 million in the third quarter of '07. Breaking down income from construction operations by segment, the building segment income from construction operations for the quarter was $35.2 million, an increase of 6% from $33.3 million in the third quarter of '07. This increase is primarily due to the higher revenues that we discussed earlier.

Civil segment income from construction operations was $10 million in the third quarter of '08 compared to a loss from construction operations of $6.8 million in the third quarter of '07. The addition of Tutor-Saliba made a positive impact along with improved operating performance for both our New York and Cherry Hill operations.

Management Services income from construction operations was $12.1 million in the third quarter of '08 compared to $12.8 million in the third quarter of '07. Management Services operating margin was 27% for the quarter versus 37%, a year ago. This decrease in margin reflects extraordinary operating results we recorded last year due to favorable performance in the – on projects in Iraq.

Other income was $2.6 million in the third quarter of '08 compared to $4.4 million in the third quarter of '07 due primarily to a $1.3 million gain on sale of parcels of developed land that we held for sale in '07. This expense increased to (inaudible) in the third quarter of '08 from $400,000 in the third quarter of '07 due primarily to debt assumed in connection with the acquisition of Tutor-Saliba.

The provision for income taxes was $19.8 million compared to $13.5 million in the third quarter of '07 and net income was $34.1 million in the third quarter of '08 compared to $24 million in the same quarter a year ago. Diluted earnings per share were $1.01 in the third quarter of '08 compared to $0.87 for the same period in '07.

Now looking at our balance sheet at September 30, 2008, our working capital stood at $254.9 million, down from $293.5 million at December 31, 2007. This represents a current ratio of 1.15 to 1. As mentioned last quarter, the decrease in working capital reflects the classification of $100.3 million of our investment and auction rate securities as long-term at September 30, 2008.

The Company used operating cash of $41.7 million during the third quarter primarily due to the startup of new projects such as McCarran Airport and other civil work and reduction in project advances previously received from a customer in our gaming and hospitality business, all of which we estimate to be short-term timing issues.

As of September 30, 2008, we had $400.7 million in cash and equivalents compared to $459 million at December 31, 2007. The decrease in our cash balance at September 30 is primarily a result of investments we made earlier in the year in auction rate securities that were not converted to cash prior to September 30, 2008; $52.1 million for net cash purchases of property and equipment, and $29.5 million of repayments of debt.

Increases in cash since the beginning of the year include $31.2 million of cash flow from operations and $92.5 million in cash recorded from the acquisition of Tutor-Saliba.

At September 30, 2008, long-term debt stood at $49 million excluding the current portion and we had $137 million available under our revolving credit facility plus an additional $111.3 million available under a temporary standby line of credit for incremental liquidity support should we need it while we await opportunities to liquidate investments in auction rate securities.

The temporary standby line of credit will reduce dollar for dollar as we liquidate our positions in auction rate securities. In September, we (inaudible) revolving credit facility from $125 million to $155 million and retained an option subject to certain conditions to increase the revolver by another $45 million.

Stockholders equity increased $978 million to $1.35 billion from $368.3 million at December 31, 2007, primarily due to the equity issued in connection with the acquisition of Tutor-Saliba.

We believe that our current financial position and credit arrangements provide us with the adequate resources to meet our liquidity and working capital requirements and implement our business plans including planned acquisitions in the future.

The Company is refining our guidance for 2008 revenues to be in the range of $5.6 billion to $5.8 billion from our previous range for revenues in the range of $5.5 billion to $5.9 billion and estimated diluted EPS to be in the range of $3.55 to $3.65 per share from our previous range of $3.50 to $3.75 per share.

For fiscal 2009, the Company is lowering our guidance for revenues and diluted EPS to a range of $6 billion to $6.5 billion and $2.80 to $3.00 respectively. This guidance is reflective of current economic conditions including the challenges in the credit markets and the associated impacts on funding for new construction starts in the latter half of 2008 and 2009.

The Company is currently in the process of its annual impairment testing to assess the potential amount of impairment if any of the goodwill and indefinite live tangible assets initially recorded in connection with the September acquisition of Tutor-Saliba. The 2008 earnings estimates mentioned earlier do not reflect the impact of any impairment charge should it be determined that one is required.

With that update, I'd like to turn the call back over to Ron for closing comments.

Ronald Tutor

Thanks, Ken. The third quarter marked the 12th consecutive quarter of record revenues for Perini and a new record for net income. In spite of the current challenges and speculations in the markets, we are very well positioned geographically and by our expertise and abilities as a true builder of large complex building and civil projects for the public and private sectors. Remember, our strong backlog carries us through 2009 into the first quarter of 2010.

We believe public works and federal government spending will be strong during 2009 and 2010 and we believe that added stimulus will occur in that sector because of the current issues in the United States. As the credit crunch subsides, our pending work will convert to backlog as money once again gets released for many of our very creditworthy customers.

Finally, our strong financial condition is a major plus in this economy. Our acquisition pipeline is full and we expect to both entertain and close transactions in 2009.

That concludes our prepared remarks. Bob Band, Ken Burk and I will now take your questions.

Question-and-Answer Session

Operator

(Operator instructions) Your first question comes from the line of John Rogers with Davidson. Please proceed.

John Rogers – D.A. Davidson

Hi, good afternoon.

Ronald Tutor

Hi, John.

Kenneth Burk

Hi, John.

John Rogers – D.A. Davidson

In terms of your outlook for 2009, Ron, you mentioned that you've got the backlog to perform or meet your expectations. But I just want to be clear; the $6 billion to $6.5 billion in expected revenue is that all in backlog right now? Or –how much more would – do you need to book?

Kenneth Burk

Hi, John, it's Ken Burk. John, we – as you know, we don't normally split out that kind of detail. But it's safe to say that we do have a significant portion of our projected revenues in backlog, which should – as Ron mentioned during the call earlier, that we see (inaudible) through the first quarter of (inaudible). But there certainly is need for new business as you would expect to (inaudible) our pipeline and backlog.

Ronald Tutor

We lost some of the backlog we were basing projections on. However, we have the balance of '08 and significant projects we are bidding in the final quarter of '08 into the first quarter of '09 that we expect to fill. But – it's safe to say the majority of it is under contract and ongoing and that which has been deferred we expect to replace, primarily in the public works sector.

John Rogers – D.A. Davidson

Okay. I guess that's specifically what I was wondering about. Some of the larger projects in the public works sector, when do you expect to hear on those and can you give us – ?

Ronald Tutor

Well, we are so close, we think we are going to be awarded a very sizable project on the East Coast next week. We are in final discussions with the agency. We're bidding a $350 million bridge in New York in December. We're bidding a $200 million apron paving or runway paving job at LAX as a follow on to the last one we just completed. Our pipeline in our public works sector is full and overflowing in very large civil works all of which we contemplate bidding over the next three months, four months and hopefully, with three or four successful contracts in that sector will replace the private work that's been deferred.

John Rogers – D.A. Davidson

Okay. And presumably these are multiyear projects?

Ronald Tutor

They are typically between 2 years and 3-1/2 years.

John Rogers – D.A. Davidson

Okay. And then secondly, in terms of your acquisition pipeline, these would be presumably cash transactions? I assume you are not using stock at these levels?

Ronald Tutor

No. At these levels you don't use stock for anything, but papering your wall.

John Rogers – D.A. Davidson

Okay. And these would be civil type contractors or – ?

Ronald Tutor

I would rather not get that specific because we are talking to the people right now, but not necessarily civil. I have shied away from civil acquisitions because of the contingent liabilities and risks associated with them. We have been more committed along the building line and building associated companies where they are more predictable and less risk.

John Rogers – D.A. Davidson

Okay. Thank you. I will get back in queue.

Ronald Tutor

Sure.

Operator

Your first question comes from the line of Richard Paget with Morgan Stanley [ph]. Please proceed.

Richard Paget – Morgan Stanley

I guess I changed firms within the last couple of minutes during the call. Anyway I wanted to get back into your changing guidance here. It looks like you dropped revenues by 15%, 20%, but then earnings goes down close to 25%, 30%. What's the delta here that causes that the difference and changes?

Kenneth Burk

Hi, Richard, it's Ken. I think, Richard, what this is really is a ground up view of our existing backlog and mix. So I can't really point to one particular or two particular reasons other than to say that it naturally is a function of the expected runoff between a building project, which is at lower margins than our civil work, for example. And so it's really a function of mix that would be driving that relationship. So, in other words, it's not just a one-to-one relationship between revenues and net income.

Richard Paget – Morgan Stanley

Okay. So it's just I guess the natural progression of the existing backlog you have and that's your best estimate?

Kenneth Burk

Yes. Right. There is no one particular – let's say big item per se. It's really again just a function of rolling up each of the building civil and management services segment and their respective margins and then the flow down to net income of course is going to yield that result. So there is no extraordinary items there.

Richard Paget – Morgan Stanley

Okay. And then over in the Middle East, is this more of a macro slowdown like the rest of the world and it's finally hit that market or is this something particular that the customer that you're dealing with has some credit issues?

Robert Band

I will take that. I was just over in Dubai and in talking with our clients over there, I think it's somewhat of a macro slowdown. They were evaluating the credit markets. There are selected projects that are continuing. In fact, we were just contacted this week on another project to provide consulting services on. So I would say that they are like a lot of folks taking a wait and see attitude.

Richard Paget – Morgan Stanley

And then getting back to the civil part. It looks like backlog is at pretty high levels and you talk about bidding right now and a lot to do. But with potential of a stimulus package next year and some of the bonding issues that passed, it seems like there potentially be a lot of work out there. What's your capacity to take on new work if this big deluge of funding comes through?

Ronald Tutor

Well, we think there is going to be a big deluge of civil funding for all the obvious reasons, highway bridge work and transportation work all over the country. I think we could easily double our operation in the civil sector. We have that capacity at Tutor-Saliba. We have regularly worked through billion dollar civil backlog. And as we integrate Perini Civil with our own, we have the capacity to more than double our annual revenue in the civil sector at significantly higher margins as we discussed before than we make in the building business. It's the nature of that business. So we look to that sector to dramatically support the reduced revenue in the building markets while all these financial credit issues get resolved over the next hopefully 12 months. And we wait to see when all that money the federal government bumped into these banks finds its way to the banks customer.

Richard Paget – Morgan Stanley

Alright, thanks. I will get back in queue.

Operator

Your next question comes from the line of Steven Fisher with UBS. Please proceed.

Steven Fisher – UBS

Hi, good afternoon. I'm wondering if you can just run through what's in those $5.8 billion of pending awards today. Number kind of bounces around a bit. I just want to make sure I understand what's in there.

Kenneth Burk

Hi, Steve. It's Ken. We still have some of the – well, from the projects we have been reporting, we have Dubai, we have Atlantic City, we have Dry Creek Casino which we've also mentioned. And then we have a number of projects that we haven't identified in detail because of the position that we're in regarding contract signings and things like that, that represents pretty much the balance of that. I would also point out – for example, in the healthcare and the education markets would make up most of the balance there.

Steven Fisher – UBS

Okay. And just going back to the other question, are any of these things specifically factored into the 2009 guidance?

Kenneth Burk

I think that it's fair to say that we are expecting some of these projects that I just mentioned in the healthcare and education, that yes, we are expecting some of those projects to be awarded. And I think as we mentioned earlier in the call, we singled out a few of the bigger projects that could be outside of '09.

Steven Fisher – UBS

Right. Okay. Then onto the margins and Management Services ramped back up to closer to the 2007 levels. Could you just talk about what was driving that and is that sustainable?

Kenneth Burk

Bob, do you want to take that?

Robert Band

Yes, I will take that. Originally, we said high teens for '08 and as you can see, we are exceeding that and that is an execution results we've had terrific execution in the field. And what I look for is a continued ramping up through the end of '08 is as we finish up some work. Now the new work starting out naturally, I wouldn't be so aggressive on, and I would drop our expectations again to the mid-teens. And we would have to take a wait and see attitude as that work completed.

Steven Fisher – UBS

But there still could be potential for upside to the mid-teens?

Robert Band

Of course.

Steven Fisher – UBS

Okay. Great. Thanks a lot.

Operator

(Operator instructions) Your first question comes from the line of Avi Fisher with BMO Capital Markets. Please proceed.

Avi Fisher – BMO Capital Markets

Hi, thanks for taking my questions and good evening.

Ronald Tutor

Hi.

Avi Fisher – BMO Capital Markets

Were there – I'm not sure if you mentioned this on the call. Sometimes you break out the additions to exist – when you talk about backlog – additions to existing work plus new work. Did you break that out on a segment basis?

Kenneth Burk

No, Avi, we didn't break that out. I think we could give you I'd say probably an estimate of around $190 million to $200 million that could be considered amendments to contracts.

Avi Fisher – BMO Capital Markets

And that's all in building?

Kenneth Burk

That would all be in the building sector.

Avi Fisher – BMO Capital Markets

Right. And then plus – I guess we could add to that the Tutor-Saliba inclusion as well? And did any projects – were any projects that were already in backlog get canceled or were any – ?

Kenneth Burk

As Ron mentioned earlier, we haven't had any projects canceled.

Avi Fisher – BMO Capital Markets

So nothing that's in backlog – that was in backlog last quarter or – ?

Kenneth Burk

We have not taken out, again, any projects out of our backlog.

Avi Fisher – BMO Capital Markets

Okay. I appreciate that. If you've said that, I am sorry; I missed it.

Kenneth Burk

No problem.

Robert Band

Avi, just to amplify, we haven't had a project cancel out of backlog since the Clinch River Breeder Reactor in the 80s.

Avi Fisher – BMO Capital Markets

Okay. Thanks for the color. And on City Center, and I remember last quarter there were still some slices of the project that had not yet reached GMP. Is the entire project now on guaranteed maximum – has the guaranteed maximum price been set for the entire project at this point or all the components of it or – ?

Ronald Tutor

All the components. They are all the varying components, yes.

Avi Fisher – BMO Capital Markets

And is that still scheduled for a late '09 completion?

Ronald Tutor

Yes.

Kenneth Burk

Yes, beginning. It will be a phase completion at the end of 2009 starting.

Avi Fisher – BMO Capital Markets

And I presume they are all still profitable and working – ?

Ronald Tutor

No change in any of the profitability.

Avi Fisher – BMO Capital Markets

Got you. In terms of the share count, it came in a little lighter if I just look at the acquisition straight on. Is that just because you average it over the course of the quarter and what share count should we use for the fourth quarter?

Kenneth Burk

I think what you should be using is pretty much what the current share count is today. It's going to average now beginning from October 1 so I think it's close to 51 million shares. I can follow up – Avi, I can follow up with you on more details, but it's safe to say that the average will be for the full quarter will be in the say 50.5 million shares to 51 million shares.

Avi Fisher – BMO Capital Markets

Got you. Okay so it should –

Kenneth Burk

For the fourth quarter average.

Avi Fisher – BMO Capital Markets

Right, right. And that –

Kenneth Burk

But as you know, you take an average for the full year which averages out and you saw our press release I trust so you can see the count for the average for the share count through the third quarter.

Avi Fisher – BMO Capital Markets

Yes, exactly. I just wanted to clarify that. And also getting back to guidance and I guess everyone has asked about it so I will too. Are you – when you had initially issued guidance, you had looked for significant margin expansion. Do you still see the same kind of margin expansion you originally guided towards or is it a combination of slightly lower revenues and lower margins as well?

Ronald Tutor

It isn't so much margins as it has dramatically reduced revenues by these projects being deferred. This is Ron Tutor. We haven't dropped our margins anywhere even though these markets are as pressured as they are. It's really primarily just deferred revenue. Our civil markups are stronger than ever as evidenced by our increased (inaudible) and they will continue to grow. But the building business, it's just a matter of right now all this work has been deferred until there is actually lending institutions that will support that segment.

Kenneth Burk

Avi, let me add a couple of things to this. If you are getting at as well kind of mix and it's the strategy still in place to increase our margins. The answer is obviously yes. We are expecting margin growth in our building segment in particular by virtue of our strategy to provide more services in the form of mechanical, electrical, things like that and self perform more concrete work in our building operations. That is part of our game plan so we are expecting to maintain and grow our margins from what we've seen in the past.

Avi Fisher – BMO Capital Markets

Got you. And just circling around the margin little more, again, when the deal was originally announced, it implied margins in Tutor-Saliba of high 7s, low 8s. And that was driven I think by increased exposure to the civil side. And you are still talking about obviously a continued mix shift to the civil side. Could there be margin upside even to those numbers? Are those numbers still an appropriate number to think about if a civil project is burning optimally?

Kenneth Burk

Okay. I think the numbers you were talking about are more operating margins, right?

Avi Fisher – BMO Capital Markets

Yes.

Kenneth Burk

Okay. I think that range still fits from an operating profit margin. I think what we have talked about in some cases is gross profit margins. But I think that's a fair range. I don't think we don't see a reason to deviate from again our forecasted business. It's really a function of how much business we are able to bring in and we again expect it to earn at the margins that we have referred to.

Ronald Tutor

Well, let me put in another way. Tutor-Saliba will run all of the public works operations of the new Perini. And our margins have historically significantly higher than that. I believe I mentioned on one call that we have averaged over the last 10 years 16% to 17% gross profit on all of our civil work. We expect to continue on those average margins if not increase them. So although you were referring to a 7% gross profit –

Avi Fisher – BMO Capital Markets

EBIT margin –

Kenneth Burk

Operating profit

Ronald Tutor

Operating profit. It also had a major mix of private building work in that operating profit. I think with us really putting more emphasis in the civil sector and public works under Tutor-Saliba, those margins should go up.

Avi Fisher – BMO Capital Markets

And are you seeing so far – what a lot of people expect is that as private markets slow, everyone flocks to the public side. Are you seeing increased bidding in the public markets?

Ronald Tutor

No. You can – the private sector can shrink to nothing. It's a tremendously difficult transition for a private works builder to go to the public market. But setting that aside, public building market is what it is, but the civil works market with the shrinkage or at least temporarily the shrinkage in the building markets, those building contractors cannot do civil work. They don't have either the capacity, the technical ability or the equipment or organization. So that our civil sector in the United States is still going to be dominated by and directed by a handful of contractors and no matter what happens in the building sectors, not a single building sector contractor says he's going to replace his revenue with bridges or freeways.

Avi Fisher – BMO Capital Markets

Got you. Okay and just –

Ronald Tutor

Better chance to open up a chicken ranch.

Avi Fisher – BMO Capital Markets

Just a quick – I guess looking – when do you expect the Q to be filed? You usually file it right around the press release.

Kenneth Burk

We expect to file it no later than Monday which is when it's due. So we are still working through the filing process.

Avi Fisher – BMO Capital Markets

Got you. I will follow up with you later. I had a few balance sheet questions but I will follow up after the call. Thank you.

Operator Your final question comes from the line of John Rogers of Davidson. Please proceed.

John Rogers – D.A. Davidson

Hi, just to follow up, can you tell us roughly what Tutor-Saliba added in the quarter? I know it's only less than a month.

Kenneth Burk

Yes, John, we really don't get that far into the detail. And it's for one month. I don't have all the numbers honestly right in front of me but –

John Rogers – D.A. Davidson

Okay, but it look like –

Kenneth Burk

I will say that it was on track and it met expectations, okay, from our standpoint.

John Rogers – D.A. Davidson

Okay. And secondly, in terms of when you go to a maximum price, especially, on the MGM project, are your margin expectations for the remainder of the project in line with what you are generating right now?

Ronald Tutor

So you understand when we convert to a guaranteed price, we have a negotiated fee with MGM; we build into that price whatever contingencies we feel protects the fee. We really can't increase the fee. It's a stated fee with a guaranteed price and as I recall, the contract the majority if not all of the savings go to the owner. The fee is pretty static with very few exceptions.

John Rogers – D.A. Davidson

Okay, but there is no – then no significant deterioration in what you expect to earn on the project?

Ronald Tutor

No, there is no deterioration.

Kenneth Burk

No.

John Rogers – D.A. Davidson

Okay. And – I don't know whether you got this in front of you, but what do you expect amortization costs to run in 2009?

Kenneth Burk

Total amortization – John, I think it's in line with what we have put out there in the proxy. I think that's – and I think I saw some of your work actually which I think is pretty much in line.

John Rogers – D.A. Davidson

Okay. Good.

Kenneth Burk

From the Tutor-Saliba deal standpoint, okay, I don't have a forecast that I can share with you in total. But I think if your basic question is, is the Tutor-Saliba amortization more or less in line for '09? The answer is yes.

John Rogers – D.A. Davidson

Okay. And what you mentioned, Ken, in terms of goodwill impairment, that's a function of the reduction in values for every – that you have to test everything again?

Kenneth Burk

Yes.

John Rogers – D.A. Davidson

Okay. Great. Thank you.

Ronald Tutor

That was the last question?

Operator

Yes. This concludes the question-and-answer session. I would now like to pass the call back to Mr. Kenneth Burk. Please proceed.

Kenneth Burk

Okay, well, I would just like – we would like to thank everyone for calling in and we will look forward to our next conference call in the fourth quarter. Thank you very much. Bye-bye.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.

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