Tutor Perini Corporation Q1 2010 Earnings Call Transcript

May. 6.10 | About: Perini Corp. (PCR)

Tutor Perini Corporation (PCR) Q1 2010 Earnings Call May 6, 2010 5:30 PM ET

Executives

Ken Burk – EVP and CFO

Ronald Tutor – Chairman and CEO

Robert Band – President

Analysts

Richard Paget – Morgan Joseph

Steven Fisher – UBS

John Rogers – D.A. Davidson

Richard Rossi – Wunderlich

Avi Fisher – BMO Capital Markets

Kalpesh Patel – Jefferies

Operator

Good day, ladies and gentlemen, and welcome to the Q1 2010 Tutor Perini Corporation earnings conference call. My name is Kiana and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I will now like to turn the conference over to your host for today, Mr. Ken Burk, Executive Vice President and Chief Financial Officer. You may proceed.

Ken Burk

Good afternoon, everyone. Thank you for joining us on Tutor Perini’s first quarter 2010 conference call. With us today is our Chairman and CEO Ronald Tutor, and our President Robert Band.

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. 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 risk 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 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 Tutor Perini’s annual report on Form 10-K for the fiscal year ended December 31, 2009 our definitive proxy statement filed on April 28, 2010 as well as in today’s news release.

Our statements on this call are made as of today, May 6, 2010 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.

With those formalities out of the way, it is my pleasure to turn the call over to Ronald Tutor.

Ronald Tutor

Thanks Ken, and good afternoon, everyone, and thank you for joining us on the call today. With the completion of MGM’s project CityCenter in December of 2009, we have moved forward with the new set of challenges and opportunities. Bidding activity in our civil group is at all time high and we continue to compete for our share of the available work.

During the months of March and April 2010, we were identified as the low bidder on four civil projects in California, New Jersey, New York and Maryland, totaling approximately $366 million in contract value. In our building group, we have pending awards in the amount of $969 million, consisting primarily of healthcare, education, and hospitality, and gaming projects.

We expect these and other promising new work opportunities to bolster our $3.8 billion backlog in the coming quarters. As we look ahead to the remainder of 2010, our civil business continues to provide us with the best growth opportunities in terms of new awards as well as higher margins.

With the first quarter behind us, we still look for our civil group to provide more than 40% of our operating income this year. We estimate the size of prospective opportunities in our civil infrastructure target market to be $16.5 billion for 2010. The breakdown is $5.7 million in bridgework, $5.2 billion in highway, $3 billion in mass transit, and $2.6 billion of other civil work including power, rail, and water projects.

In the non-residential markets, there are some signs of economic recovery. Our customers are seeing an improvement in the financial markets. And in the building group, we have identified and are tracking approximately $11 billion in targeted projects that we could bid this year. A significant portion of this market is the public sector, including corrections, education, municipal office, and transportation buildings.

With respect to MGM CityCenter, approximately $491 million is due and owed to us and our subcontractors, which consist primarily of contract, receivables, and subcontractor change or a request for additional work, requested by the owner. Amounts dues include pass through subcontractor billings for contract work, including their retention in the amount of $299 million and subcontractor change orders for extra work of approximately $81 million.

In March of this year, we filed a lawsuit against MGM alleging breach of contract among other allegations and subsequently filed a $491 million (inaudible) against the project. Needless to say we are very disappointed with the manner in which MGM has handled the closeout and final payments of this project.

The Fontainebleau property has been sold through bankruptcy proceedings through a development team led by Carl Icahn and approximately $105 million has been set aside from this sale and is available for distribution to satisfy creditor claims, based on seniority as will be determined by the courts. It essentially boils down to the banks disputing the creditors for who goes first.

Terminal 3 at McCarran Airport is approximately 51% complete and continues to be significantly ahead of schedule with what we hope to have a successful completion occur in 2011.

Now I would like Bob Band to share more details of our management services group.

Robert Band

Well, thanks Ron. In the management services group, we are continuing to see some of the larger proposal and bid opportunities in Guam come to the surface which should contribute to newer awards in a more meaningful way in the second half of 2010. The strategic realignment of US forces including the relocation of 8000 US marines and their dependents from Okinawa to Guam is starting to generate project opportunities for the company.

Our team has submitted its proposal to the US Navy for a $4 billion in definite delivery and definite quantity IDIQ construction contract. The Navy intends to award at least three IDIQ contracts covering a base year and four one-year option periods, where under these contracts will include wharf repairs and construction, aircraft parking aprons, taxiways, runways and hangars as well as general and special-purpose buildings.

Selection is anticipated any day for this contract. In addition, separate competitive construction opportunities on Guam for infrastructure utilities, housing, healthcare, education and other facilities are in the proposal and bid process, and more are anticipated throughout 2010, ‘11, and beyond. For example, the Mamisu (ph) program is the Japanese government-funded portion of the construction program on Guam, and is expected to exceed $2.2 billion.

Tutor Perini has marshaled the resources of all of its companies to pursue these opportunities through Black construction, our wholly-owned subsidiary on Guam.

Prospects for new work in Iraq and Afghanistan continue and are very competitive. We are tracking projects with US Departments of State and Defense, and also Department of Homeland Security, which are expected to be bid in 2010, as well as private work through sureties and multinational clients. We are closely tracking the Haiti reconstruction related projects with the US Air Force, USAID, and the non-governmental organizations, which are expected to be bid in 2010. We have resources on the ground in Haiti.

Under our US Air Force SATOC Task Order contract, PMSI and Cherry Hill Construction of our civil group were notified of the award of an $81.2 million project for the repair and replacement of West Runway 1 Left (p) at Joint Base Andrews in Maryland. This project is included in the pending awards Ron mentioned earlier. In addition, after clearing two protest, the US Coast Guard has awarded its IDIQ contract to eight contractors including Perini Management Services. Each contractor is funded for up to $500 million of Task Order work.

Excellent progress continues today on the $190 million of contracts currently underway in Iraq.

Now Ken will give you the financial details for the quarter. Ken?

Ken Burk

Thank you, Bob. Our net income was $20.9 million for the first quarter of 2010 as compared to net income of $39 million for the first quarter of ‘09. Diluted earnings per share were $0.42 for the first quarter of ‘10 as compared to $0.80 for the first quarter of 2009.

We ended the first quarter with a backlog of $3.8 billion. The breakdown by business group of our backlog at March 31, 2010 is as follows: building $2.7 billion; civil $922 million; and management services a $150 million.

The breakdown of the total building group backlog by major end market type is as follows: healthcare $651 million, transportation facilities $593 million; hospitality and gaming $552 million; municipal buildings $461 million; education $167 million; and industrial $165 million; and other building markets $96 million.

The civil group backlog breakdown is as follows: mass transit $419 million; highways $303 million; bridges $163 million; and other civil work $37 million. Management services backlog is predominantly all government contracts.

In the first quarter of 2010, revenues were $865.1 million, a decrease of $1.5 billion reported in the first quarter a year-ago. On a reportable segment basis, revenues from our building group were at $686.3 million, a decrease of 48.9% from the $1.3 billion in the first quarter of ‘09. The decrease is primarily related to completion of CityCenter and the impact associated with lower levels of new work acquired during the latter part of ‘09.

Revenues from our civil group were a $124.7 million, which increased by 39.6% from $89.3 million reported a year-ago. The increase is primarily due to the new work we acquired in ‘09, such as the JFK Runway Project and the Greenwich Corridor at the World Trade Center site.

Management services revenues were $54.1 million which decreased by 37.1% from the $86 million we had reported in the first quarter of ‘09. The decrease is due to the completion of a significant portion of our work in Iraq.

Our total gross profit decreased 28.8% to $76.1 million from a $106.7 million in the first quarter of ‘09. Most of the decrease is due to the reduced revenue volume in our building group and higher margins that we achieved for work in Iraq during the first quarter of ‘09.

General and administrative expenses were $42 million, a decrease of 5.2% or $2.3 million from the $44.3 million in the first quarter of 2009. As we ramp up our backlog with new business, we expect our G&A to be remain flat through the next several quarters.

We had income from construction operations of $34.2 million in the first quarter ‘10, compared to $62.6 million in the first quarter of ‘09. Breaking down income from construction operations by business group, our building income from the construction operations for the quarter was $32.3 million, a decrease of 25.4% from the $43.3 million in the first quarter of ‘09. This decrease was primarily due to the completion of our work at CityCenter.

However, the building group generated an increase in operating margins from 3.2% in the first quarter of ‘09 to 4.7% in the first quarter of ‘10. This was primarily due to a higher mix of public working projects during the quarter.

Civil group income from construction operations was $8.3 million in the first quarter of ‘10, a decrease of $4.4 million from $12.7 million in the first quarter of ‘09. The decrease is primarily due to better-than-expected operating results we achieved in the first quarter of ‘09, coupled with under absorbed overhead as new contracts recently awarded ramp up.

Management services income from construction operations was $3.1 million for the first quarter of ‘10, a decrease of 80.1% from $15.6 million in the first quarter of ‘09. Again this decrease is due to the completion of work in Iraq, which realized higher margins in the first quarter of ‘09. Other income was $0.3 million in the first quarter of ‘10 compared to $1.3 million in the first quarter of ‘09.

This decrease was primarily due to lower interest income along investments as we had lower average investment balances during the first quarter of ‘10. Interest expense increased to $1.5 million in the first quarter of ‘10 from $1.2 million in the first quarter of 2009, this is due to higher primarily through higher average outstanding debt balances during the first quarter of ‘10.

Provision for income taxes was $12 million compared to $23.7 million in the first quarter of ‘09. If you look at our balance sheet at March 31, 2010 our working capital stood $324 million up from $303.1 million at December 31, 2009. As of March 31, 2010 our current ratio was 1.26 to 1 as compared to 1.23 to 1 as of December 31, 2009. As of March 31, 2010 we had $256.9 million in cash and cash equivalence compared to $348.3 million at December 31 2009. The decrease in our cash balance during 2010 is primarily due to increased receivables associated with City Center as well as $23.5 million of restricted cash we used to secure insurance related contingent obligations and a lieu of more expensive letters of credit.

For the first quarter, operating cash use was $60.3 million. At March 31, 2010 a long term debt stood at $87.7 million excluding the current portion and we had $311.5 million available under our credit facilities. Shareholders equity remained consistent at 1.3 for both periods of March of ‘10 as well – $1.3 billion excuse me at March 31, 2010 and December 31, 2009.

We believe our current financial position in our credit arrangements provide us with adequate resources to meet our working capital requirements for executing existing a new project. Our guidance is estimated to be within the ranges we previously provided. Revenues were estimated to be in the range of $3.4 billion to $3.9 billion and diluted earnings per share estimated to be in the range of $2 to $2.20 per share.

Ranges reflect our current view of our new work prospects that could interrupt a backlog in the converted revenue and process this year. With that I’ll turn the call back over to Ron for his closing comments.

Ronald Tutor

Thanks Ken. We believe there are notable signs of improvement in our economy that should help the construction industry. The non-residential building markets are beginning to grow and we have many bidding opportunities in our civil work that existed beyond what we could foresee a year ago.

Meanwhile we continue to focus on continued project execution and cost control as we grow our backlog with prospect of new business. That concludes our prepared remarks. Now Bob Band, Ken Burk, and I will take your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Richard Paget of Morgan Joseph. You may proceed.

Richard Paget – Morgan Joseph

Good afternoon guys.

Ken Burk

Hey there Richard.

Richard Paget – Morgan Joseph

Ken I just want to make sure that I heard up everything correctly for the backlog breakdown, for buildings it looks like you have about $2.685 billion. Is that the total?

Ken Burk

Yes, that’s right.

Richard Paget – Morgan Joseph

Okay, and then what would be managed services then, I know I view the balance but just for rounding, I want to make sure.

Ken Burk

$150 million.

Richard Paget – Morgan Joseph

150. Okay, I wondered if you could talk a little bit more about Guam and what kind of margin expectations you guys might be having for that work, because it sounds like we’ve heard more companies trying to throw their hat in the ring and I’m wondering what the competitive environment will be and ultimately how that will impact potential profitability there?

Ronald Tutor

This is Ron Tutor. I assume that other companies will come from the US and either maybe some other parts of the work but our margin philosophy remains consistent, we see that as a high margin market pretty much like our civil works operations. It’s significantly across the Pacific. There is logistics problems associated with working there, you have to bring in your work men from other parts of the world. It’s just – we see it is the same consistent level of margin we’ve always had and more consistent with our civil sector than our building sector.

Richard Paget – Morgan Joseph

Okay, so given your inherent cost advantage there that might be your margins versus some of the other players trying to come in there?

Ronald Tutor

We assume others might go in with a lesser margin but there is also very significant risks with someone coming from the US and working in Guam for the first time. It is very obvious to all our competitors and all we can do is maintain our discipline and bid what we think. Only time will tell how that’s fair.

Richard Paget – Morgan Joseph

Okay and then moving onto City Center. Is this something that might go to arbitration sooner as supposed to later or does this quite…

Ronald Tutor

It will take (inaudible).

Richard Paget – Morgan Joseph

Okay, so the resolution of this will take a while then?

Ronald Tutor

I would assume 18 months to two years.

Richard Paget – Morgan Joseph

So in the mean time will you possibly taken your reserves out?

Ronald Tutor

No. We’ll collect every penny you can quote me.

Richard Paget – Morgan Joseph

Okay. Thanks I’ll get back in queue.

Operator

Our next question comes from the line of Steven Fisher of UBS. You may proceed.

Steven Fisher – UBS

Hi good afternoon. It looks like some nice words their on the civil side of things. So I’m just wondering will that full $366 million go into your backlog in the second quarter?

Ronald Tutor

The answer is yes.

Steven Fisher – UBS

Okay. So that after any JV partner shares running that’s all Tutor Perini’s share?

Ronald Tutor

Yes. Only one of them is a JV, the rest are all us.

Steven Fisher – UBS

Okay, great. And then are you still targeting double-digit operating margins in civil and how quickly do you think you can ramp up to that level?

Ronald Tutor

We would expect civil ramp up to where we’d like it by the end of the third quarter, beginning of the fourth quarter and we haven’t seen or done anything to change our attitude on double-digit civil margins.

Steven Fisher – UBS

Okay and that’s operating margins right?

Ronald Tutor

Yes. And as you saw Steve, the first quarter, I mean we’re still ramping the business. I think it’s fair to say the second quarter is going to be much stronger in terms of the volume of business that we’re generating.

Steven Fisher – UBS

Great. Okay and in terms of the City Center, what are you expectations for timing of payments to sub-contractors, I mean do you think you can hold them off for that 18 month time period?

Ronald Tutor

We’re primarily a pay one paid and it’s not a matter of whether we can hold them off, unfortunately for them there in the litigation with us, against NGM and as long as NGM continues to avoid the payments, they in with it a still a better end.

Steven Fisher – UBS

Okay, so there is no subcontractors that can force you through legal action to pay in advance?

Ronald Tutor

No.

Steven Fisher – UBS

Okay. And then Bob, I mean any kind of guestimate you can make or what targets do you have in mind in terms of task orders that you hope to book in Guam in 2010?

Robert Band

Well we’re anxiously awaiting the award of the large multiple award contract. I think right after that there will be projects to propose under that contract right away, I’ll give you – you probably know but that US coast guard task order contract have to fighting back to protest was finally awarded this week and they’ve told us they have seven projects right away with the combined value of 350 to $400 million to propose on. So that’s the coast guard, I think Guam will start off with the similar bang as well.

Steven Fisher – UBS

Does any of that coast guard relates to the Gulf oil situation?

Robert Band

Not to my knowledge.

Steven Fisher – UBS

And then just lastly, the municipal buildings backlog held exactly flat, was that coincidence or is there a stalled project there?

Ronald Tutor

There is stalled project. So there is a coincidental.

Steven Fisher – UBS

Okay, great. Thank you.

Operator

Our next question comes from the line of John Rogers at D.A. Davidson. You may proceed.

John Rogers – D.A. Davidson

Hi good afternoon.

Ronald Tutor

Hi John

Ken Burk

Hi John.

John Rogers – D.A. Davidson

In terms of the building work that you announced your low bid or appending, who quickly does that ramp into backlog?

Ken Burk

There is – it’s going to vary of course, we have in health care for example we’re still working through terms and conditions. So I think with all of that $969 million that we mentioned we are expecting this year.

John Rogers – D.A. Davidson

Okay.

Ken Burk

But if I wouldn’t be able to give you any real good prediction whether it will fall, how much will it fall in the second and third quarter John.

John Rogers – D.A. Davidson

Okay. And then it’s a smaller portion of your business but the electrical and mechanical subcontracting or operations that you have, are they seemed to pickup in commercial building work that you referred to?

Ronald Tutor

No I would say that they have been fairly level. Their focus is almost more in supporting our civil work of operation while they try to maintain their building awards but I would say, I wouldn’t say they’re growing, I’d say they’re maintaining their revenues.

John Rogers – D.A. Davidson

Okay. And as far as the civil work that you’re pursuing now, you’ve talked in the past about New York and California. Are those still the primary markets, that you’re targeting?

Ronald Tutor

They are the primary markets but we’re also in Pennsylvania and we’re looking at a major project in Washington D.C. Where our (inaudible) is typically the east coast from Washington D.C up through New York and Florida and then the West Coast from California up through the State of Washington including Nevada and Arizona. So we really cover both codes and unless there is significant project in the Midwest or the South that we feel suited to most of the really big work falls on the coast.

John Rogers – D.A. Davidson

Yes.

Ronald Tutor

Chicago and Illinois is not a place we would venture and neither we had the deep south much. So there are parts of the country we don’t typically go but I would say the primary civil markets are the Eastern and Western Coasts.

John Rogers – D.A. Davidson

Okay. Thank you and one of the thing I guess, we haven’t seen the complete balance sheet yet but the $491 million from MGM is that what we’ll show up as a receivable and then be offset by pending payable.

Ronald Tutor

No that will show up John, as we mentioned on the call remarks, there is about $81 million of subcontractor claims that would not be booked in our balance sheet. Those wood only come in on the basis of their approved status and as we stand right now, we don’t see that happening in the near term.

John Rogers – D.A. Davidson

Okay, but still so 400 change.

Ronald Tutor

Correct.

John Rogers – D.A. Davidson

Okay. Thank you very much.

Operator

Our next question comes from the line of Richard Rossi of Wunderlich. You may proceed.

Richard Rossi – Wunderlich

Good afternoon everybody.

Ronald Tutor

Good afternoon.

Ken Burk

Hi Richard.

Richard Rossi – Wunderlich

Just a couple of things. On the bidding in the civil area, what’s the competition on that bidding looking like? Has it been much of a change?

Ronald Tutor

No it’s been fairly consistent. So long as we stay in the markets of a 150 to $200 million and up and their work up certain level of complexity and difficulties we still find ourselves bidding against anywhere from three to four other general contractors.

Richard Rossi – Wunderlich

Okay and just one thing on Guam, you mentioned the Japanese financed portion of that. Is that the work that you believe you have a shot at, given the normal reluctance of the Japanese to share?

Ronald Tutor

Well the Japanese don’t control us, they have funded it in the US Navy controls the award of those contracts and we have been assured that in as much as we are bidding them along that there will be no threat for particular with the US Navy administering the programs.

Richard Rossi – Wunderlich

That’s certainly good to hear. And then finally, regarding the MGM situation, 12, 18 months, maybe even longer, any sense of how much legal fees that might involve on our part?

Ronald Tutor

I would expect them to be significant as we make MGM do what they are supposed to do.

Richard Rossi – Wunderlich

And is there any reimbursement?

Ronald Tutor

There is legal fees, there is interest, there is all sorts of ways for whoever turns out to be the losing party to pay the price.

Operator

(Operator Instructions) Our next question comes from the line of Avi Fisher of BMO Capital. You may proceed.

Avi Fisher – BMO Capital Markets

I am curious about Harmon, is that still in the backlog and if so how much does it represent?

Ronald Tutor

There is no backlog in Harmon. Part of MGM is completed and it’s in the litigation.

Avi Fisher – BMO Capital Markets

And the Cosmopolitan?

Ronald Tutor

Well, the cosmopolitan is still ongoing, it will probably complete in the fourth quarter of this year. And let me see if we can – do you want to know the amount of backlog remaining at Harmon – I mean the Cosmo?

Avi Fisher – BMO Capital Markets

Yes, I guess it’s not the $552 million, is it?

Ronald Tutor

No, it’s just under $500 million.

Avi Fisher – BMO Capital Markets

Just to clarify, the backlog number that you have with (38) which I thought was excellent. That includes Harmon being removed from it?

Ronald Tutor

Harmon’s never been in it, Harmon was done last year as part of a conclusion. And all of the MGM CityCenter was removed from backlog. The only backlog really remaining in Las Vegas is the backlog associated with Cosmopolit and Terminal 3 in McCarran field.

Avi Fisher – BMO Capital Markets

In regards to the McCarran, I mean that burns off I think in 20/11, I guess the question following up John’s question on electrical and mechanical work, just so want to clarify, is most of the electrical and mechanical subwork in the Southwest Nevada region?

Ronald Tutor

In Nevada and California, (lot in) California.

Avi Fisher – BMO Capital Markets

And I guess they are involved in the McCarran?

Ronald Tutor

Yes, there is reforming at the mechanical contract around McCarran with $140 million of contract from Perini building company.

Avi Fisher – BMO Capital Markets

What’s next in Nevada after McCarran? I mean what could we look forward to –

Ronald Tutor

Cleaning streets and sweeping upside walls.

Avi Fisher – BMO Capital Markets

It’s got to be better than that?

Ronald Tutor

I don’t think it’s much better, could be very (candid).

Avi Fisher – BMO Capital Markets

Got you, okay. So you would look more to expanding your regional geography –

Ronald Tutor

I would assume that there will be very little work for us in Nevada for a number of years to procure. And all our people are just preparing to get on airplanes since I have told them get ready to move.

Avi Fisher – BMO Capital Markets

Right, just go where the work is going?

Ronald Tutor

Absolutely. We are nomadic group.

Avi Fisher – BMO Capital Markets

In terms of your cash, it sounds like based on the balance of the receivables and payables, there is about $110 of the CityCenter payment that would be yours free and clear?

Ronald Tutor

Yes.

Avi Fisher – BMO Capital Markets

And that’s tied up in working capital. I guess I am concerned, do you have any limitations on what you can book given your cash balance and –

Ronald Tutor

Not at all. We have significant working capital, we have got $300 million in credit facilities we haven’t tapped. As you can see, we have little or no debt. Our only debt relates to some collateralized equipment as well as building facilities. We are virtually debt free with lines of credit as well as other receivables of substance we expect to collect this year. So I would say of anything. Even despite them holding a $100 million of our cash, we are very strong working capital wise.

Avi Fisher – BMO Capital Markets

And in terms of you have a share buyback authorized, have you been in the market for your shares and do you expect to be at these levels or –

Ronald Tutor

We are contemplating.

Ken Burk

Furthermore we have noted from our board and that’s the extent of it at this stage.

Operator

Our next question comes from the line of John Rogers of D.A. Davidson. You may proceed.

John Rogers – D.A. Davidson

Just one follow-up. Relative to your case with the MPA, is there anything new in terms of updates there?

Ronald Tutor

Well, let’s just say that it’s been very, very positive for the last few months, John. And I think the case has been stripped – has been reduced is a better term by the court to where neither side can win much of anything. We feel that the case in many ways has turned and is on RBF and we don’t feel we have any exposure remaining and we feel we have an opportunity to actually after the misery of the last 15 years to put a more positive spin on it.

John Rogers – D.A. Davidson

And I mean is it possible it’s cleared up soon or is this –

Ronald Tutor

We have (inaudible) set back but right now I think we have a current trial date in October, roughly October we don’t think the trial should take three weeks.

Operator

Our next question comes from the line of Kalpesh Patel of Jefferies. You may proceed.

Kalpesh Patel – Jefferies

Hello, can you hear me now?

Ronald Tutor

Yes, we can hear you Kal.

Kalpesh Patel – Jefferies

Okay, sorry about that. So my first question is regarding the $969 million awards. What’s the timeline there and I guess what’s holding those awards up in the decision process for your clients?

Ken Burk

Kal, it’s Ken Burk, basically it’s – there are (inaudible) stages of negotiation for final contract terms and conditions.

Ronald Tutor

A big of that part, guys.

Ken Burk

Yes, where we have the healthcare project, that represents the biggest piece of that. And then the other projects, we believe all of these projects will flow in the backlog this year. But we haven’t provided any –

Ronald Tutor

A majority of that will flow in the backlog in the second quarter. One of the big hospitals was awaiting a corporate guarantee that I just signed this morning, and it’s all very near.

Kalpesh Patel – Jefferies

Okay, so pretty much second, third quarter and you are very confident that you will be entering, there is not going to some change that’s going to say, okay, we are going to cancel this because of the economy or our financings are off?

Ronald Tutor

We don’t see – we see very little risk in that regard, Kal.

Kalpesh Patel – Jefferies

Okay, no, that’s good news. You also mentioned Fontainebleau in your initial remarks here. How much exposure do you have on that project?

Ronald Tutor

We have about 16.7 million that we have recorded on our balance sheet.

Kalpesh Patel – Jefferies

Okay, so that’s where you are going to try to get reimbursed on that under that $105 million?

Ronald Tutor

(Inaudible) accounts, out of the proceeds.

Kalpesh Patel – Jefferies

And with your Guam business, can you tell me what your resources are in Guam, like how many people you have on the ground at Guam?

Ronald Tutor

I don’t think that’s something we want to respond to. We have a lot of competition, there is no reason for them to know what we have. Let’s just say we are the largest employer on the Island of Guam after through government.

Kalpesh Patel – Jefferies

Okay, and we will just go with that, right? All right, those were my questions. Thank you.

Operator

With no further questions, I would now like to turn the conference over to Mr. Ken Burk for final remarks.

Ken Burk

Thank you all for joining the call today.

Operator

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect and have a great day.

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THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

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