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Executives

Jorge Casado – Director of Investor Relations

Ronald N. Tutor – Chairman and Chief Executive Officer

Robert Band – President, Executive Director and Chief Executive Officer of Tutor Perini's Management Services Group

Michael J. Kershaw – Executive Vice President and Chief Financial Officer

Analysts

Steven M. Fisher – UBS Securities LLC

Alexander J. Rygiel – FBR Capital Markets & Co

John B. Rogers – D.A. Davidson & Co.

Tutor Perini Corporation (TPC) Q4 2013 Earnings Conference Call February 24, 2014 5:00 PM ET

Operator

Good day, ladies and gentlemen, and welcome to the Tutor Perini Corporation Fourth Quarter 2013 Earnings Conference call. My name is Esteban and I will be your coordinator for today. At this time all participants are in a listen-only mode. Later, we will be conducting a question-and-answer session. As a reminder, this conference is being recorded for replay purposes. (Operator Instructions)

I would now like to turn the conference over to your host for today, Mr. Jorge Casado, Director of Investor Relations. Please proceed.

Jorge Casado

Good afternoon, and thank you for your interest and participation today. Joining us on the call are Ronald Tutor, Chairman and CEO; Robert Band, President; and Mike Kershaw, Executive Vice President and CFO.

Before we discuss our results for the fourth quarter and fiscal 2013, I would like to remind everyone that during today's call, we will be making forward-looking statements, which reflect our current analysis of existing trends and information.

There is an inherent risk that actual results and experience could differ materially. You can find the discussion of our risk factors, which could potentially contribute to such differences, in our Form 10-K, which is being filed today.

During this call, we may discuss certain non-GAAP financial measures. Reconciliations of these amounts with the comparable GAAP measures are reflected in our earnings release, which is posted in the Investor Relations section of our website at www.tutorperini.com.

With that, I will turn the call over to our Chairman and CEO, Ron Tutor.

Ronald N. Tutor

Thanks, Jorge. Good afternoon, and thank you for joining us. I’m pleased to report that we had an extremely successful year in 2013. As anticipated, we won several mega-scale civil projects, and we believe have transitioned our business to one increasingly driven by our higher margin civil and specialty disciplined.

The nearly doubling of our Civil Groups backlog provides us with a strong foundation for continued growth and improved profitability over the next several years. We concluded the year with a solid fourth quarter performance exceeding our expectations. We had the strongest quarterly operating margin in more than three years driven by our Civil Group.

We also generated positive free cash for third consecutive quarter. And we increased our backlog level, which is expected to climb further due to several large pending awards, which we were tentatively awarded in January, which I will discuss in a moment.

Mike Kershaw will review all our financial details a bit later, but I would like to highlight for you our 2013 results. While our revenue for the year grew 2% combined 2012, and as I remind all of us, much of that limited growth tied around CM at-risk where we do not achieve the revenue associated with the margins on the Hudson Yards project.

Our operating income adjusted for the goodwill impairment and other one-time items in 2012 grew 28% year-over-year once again driven by the growth in our Civil Group’s profit and a significant improvement in our Building Group. Our adjusted diluted earnings per share grew 23% over year-over-year.

And finally, our backlog grew 24% in 2013 due in large to the major projects we’ve growth throughout the year such as the San Francisco, Central Subway Station, the California High-Speed Rail and the Hudson Yards platform all of which were civil projects just to name a few. Our backlog remains at the highest level since 2008. I’d also like to remind you all of the unique competitive advantage that we have continued to talk about through our strong self-performed capability.

Unlike other general contractors, we are able to offer our customers turnkey services including such specialty contracting as foundation piles, steel erection, concrete climbing, plumbing, heating, ventilating and air conditioning, fire protection in last but probably most significant electrical installation. This enables us to provide more competitive project cost and schedule, while enhancing our margins by capturing profits, which would otherwise be recognized by others.

As we continue to successfully win and execute larger civil and building projects, we expect to increasingly utilize our specialty units to self-performed larger components of our work in 2013. Our reported revenues were net of approximately $149 million of intersegment revenue, which were eliminated in consolidation under GAAP reporting. That intersegment revenue is expected to increase notably over the next several years with a significant involvement of our Specialty Group in some of the major civil projects we are just awarded.

So you all understand under GAAP when we are awarded a $500 million job as a general contractor and turnaround and resub 400 million to our subcontracting Specialty operation, we in effect have margins on all of the awards however we can only report the gross revenue once it netted out in all our subsidiary.

Continuing, I would like to provide an update on some of our key large projects that are underway, our work at Hudson Yards is advancing well, we are well out of the ground at this point on the South Tower, which we called Tower C and are also well underway with our work on the Amtrak tunnel.

The tunnel is scheduled to be completed in somewhere around Thanksgiving and the South Tower in late 2015. We are completing in the next few months our work on the residential project adjacent the Hudson Yards for related and are about to begin work on the platform that will service the foundation for all the future buildings at Hudson Yards.

On the Seattle SR99 you are probably all aware the tunnel boring machine stoppage is ongoing as the joint venture determines the extent of damage to the outer seals of the main bearing and repairs those seals before continuing mining.

The stoppage occurred when our TBM cutterhead became clogged after hitting the steel well casing. Previously installed by the water excuse me by the Washington Department of Transportation which was not shown on our drawings and we were not informed of its being within the right away.

The repairs should take less than four months and the joint venture believes that cost would be borne by others. Our work on the California High-Speed Rail project is progressing as planned. We continue to perform early design tasks and other work in preparation for actual construction to begin this summer.

The state has began the process of acquiring the land parcels it needs, and if necessary through eminent domain. You may have heard or read in the media about two recent unfavorable court rulings affecting the High-Speed Rail projects, those rulings have had no direct unfavorable impact on our work, and the state is in the process of an accelerated appeal to try to correct the issues.

Now, I would like to share with you some information about our recent new orders, backlog, and pending award, I’ll start at the company level then give you some details by segments. In the first quarter we had $1.2 billion of new awards and adjustments to existing contract for a book to bill of just over one to one. We ended the quarter with a backlog of $7 billion up slightly from where we were at the end of the third quarter, but up $1.4 million compared to the end of 2012.

Our backlog mix is now 49% civil, 24%, building, 24%, specialty and 3%, management services. This is the highest proportion of civil backlog we have had since 2007, and it is likely to increase even further over the next several quarters. Our pending awards are now up to $6.3 billion compared to $4.5 billion last quarter. The significant increase in pending awards is due to a number of large civil and building projects that are now projected to be booked in the backlog over the coming quarter.

Our Civil Group at fourth quarter new awards and adjustments totaling $775 million, their largest orders included the $510 million Hudson Yards platform and there are approximately $200 million share of the St. Croix Crossing bridge joint venture project the Civil Group’s backlog was $3.4 billion up 94% compared to last year, the Civil Group has several additional substantial awards pending, including the recently announced in January award of the $294 million metropolitan transit CM006, and the $550 million metropolitan transit CS179 contracts, bodes in New York city, these contracts are for work on the East Side Access project which will connect the Long Island Railroad to the Grand Central Terminal.

In addition earlier this month, the Civil Group was awarded the $92 million i-564 intermodal connector project in Virginia. As a reminder, because our Civil Group typically generates the highest margins across the company, their strong backlog and volume of pending awards bodes very favorably for our future results. Our Building Group had new awards and adjustments in the fourth quarter totaling $130 million, which included the award of the $61 million Baronne Street mixed-use development in New Orleans.

The Building Group’s backlog stood at $1.7 billion, down 16% compared to last year. However, keep in mind once again that while the Building Group’s backlog only includes $220 million related to Tower C and 500 West 30th Street for related in New York. We are earning our construction fees based on a total value of $880 million as well as the normal margin on our self performed components.

The Building Group has many large pending awards including over $2 billion in approaching faces of the Hudson Yards development, which are expected to be booked in the backlog as they are awarded over the next 18 months. In addition to Hudson Yards, there are number of condominium developments in the Northeast and Southeast mixed-use hospitality and gaming projects on the East Coast and a retail development in the Southern U.S. These projects are expected to be awarded over the next several quarters.

The Specialty Contractors Group had fourth quarter new awards and adjustments totaling approximately $300 million with their backlog at $1.7 billion, up 10% compared to last year. In addition, the group also had several substantial pending awards and including an approximate $400 million share of the MTA CS179 contract in New York as well as for recently announced mechanical and plumbing awards worth $145 million.

The Management Services Group experienced a relatively low volume of new task orders and IDIQ contract in 2013, largely due to federal budget uncertainties and sequestration. Management Services backlog was $201 million, a decrease of 44% compared to last year. The significant reduction in their backlog was due to the cancellation for convenience by the federal government of a large contract in Afghanistan.

However, there is a bright side for management services. Lack construction are Guam and South Pacific construction arm just concluded its biggest and most profitable year ever and even greater success lies ahead. The federal bidding environment is extremely active for projects in Guam and the Western Pacific and Black continues to propose almost weekly a major work on the Islands with over $700 million bidding during 2014.

Now, let me turn your attention to the strength of our end markets and give you an idea of the types of key prospects we will be pursuing in 2014. The civil markets remained the most robust and attractive of all our end markets. Geographically, that East Coast in particular continues to present a large number of opportunities. For example, The Port Authority of New York and New Jersey recently issued its 10-year proposed capital plan, which calls for $27.6 billion in spending on various airports, tunnels, bridges, ports, and rail projects.

We see a strong $11 billion pipeline of prospective civil work to be bid and awarded over the next 12 months. The largest of these prospects include the bundled construction of packages two and three of the California high-speed rail, estimated by the state to be between 1.5 and two point and 2 billion. And more than $2.5 billion in various bridge projects and roughly $1.5 billion in highway and airport projects.

The building markets continue to gradually improve following the severe market turndown we experienced over the past several years. Certain regions of the country such as New York City, South Florida, and parts of Northern and Southern California are leading the recovery due to strong demand for high-end commercial real estate in multifamily housing. A strong demand is being fueled by developers and investors that continue to identify good long-term investment opportunities in the U.S.

Our Building Group has $10 billion pipeline of prospective work to be bid and proposed upon over the next 12 months. The Civil Building and Specialty Groups are currently working together on the largest single prospect, the LaGuardia central terminal building replacement, which the port authority estimates at $2.4 billion of construction costs. This project will be bid and executed under public private partnership model combining the various design build own operate and fiancé elements.

We’ve assembled a formidable team that includes KPF as the architect designer, the same architect we’re working Hudson yards. Goldman Sachs is the equity partner and financial lead, and airports deeper read and TAV airports as the terminal operators and managers of the day today.

In addition, only four teams will be competing for this project. So, overall we believe we’ve an excellent chance of being selected for this very large and high profile contract. As the building markets continued to improve in the civil markets remain very active more and larger opportunities for our specialty units continue to develop. We see a $5 billion pipeline of perspective opportunity for Specialty Contractors Group over the next 12 months.

Our New York electrical and mechanical operations are already extremely busy and being very selective about what they propose on. These projects I spoke to include various transit, government agencies, schools and private work with particular emphasis the demand continuing to grow in New York.

For our Management Services Group we anticipate that because of the recent passage of a bipartisan budget agreement, raising the discretionary spending limits for fiscal 2014 and 2015, we may see increased government spending on Military and other Federal construction programs especially for embassy security upgrades and in places like Guam where the budget act enclosed close to $700 million in various projects. Some of which as I said earlier are already bidding.

I will now turn it over let me add one more comment. Based on our current backlog our assessment of our end markets and perspective work continues to be outstanding and we are introducing our guidance for 2014 for revenue in a range of $4.5 billion to $5 billion and diluted earnings per share of range of $2.20 to $2.40. For diluted earnings per share the guidance implies 28% at the midpoint with 22% and 33% growth at the low and high-ends respectively. We have based this on a 40% tax rate and $49 million average diluted shares. $77 million of $0.95 of share of depreciation and $17 million or $0.20 a share of amortization.

I will now turn the call over to Mike Kershaw to go over the details of our financial results. Mike?

Michael J. Kershaw

Okay, and thanks, Ron. Revenue in the fourth quarter of 2013 was roughly flat at $1.1 billion for both years. The activity in the fourth quarter of last year due to the Hurricane Sandy work was partially offset this year by strong activity in the Civil segment with a balance of the upside coming across the Board.

Our gross profit in the fourth quarter of $140 million was up a 11% from our $126 million in the fourth quarter of 2012 and our gross profit margin of 12.7% is up 140 basis points from last year’s 11.3%. SG&A at $70 million is up $4 million from last year is driven by increased performance-based incentive compensation expense this year and a number of other net changes and expenses.

Our income from construction operations in the fourth quarter of this year is up 16% at $70 million versus $61 million in last year and our operating margin of 6.4% the highest quality quarterly operating margin over three years up 90 basis points from last year’s 5.5%, and net income of $33 million was lower than last year’s $42 million but that was basically because of a tax benefit that was associated with the goodwill impairment that we took last year.

Once you adjust for that, our diluted EPS at 68% - $0.68 this year is up 3% from last year’s adjusted EPS of $0.66.

Overall our fourth quarter results were in line with our internal expectations with strong operating performance in civil offsetting the lower revenue and building and lower profitability and specialty contractors and we expect both of those declines to improve as we move into 2014.

Finally, we close that out at a year without – within our previous EPS guidance range. As a reminder our backlog volume as Ron mentioned earlier is understated by about $540 million due to that construction management not-at-risk works that’s associated with Hudson Yards.

Moving on to this segment-by-segment on our civil segment we’re up $26 million in revenue this quarter $416 million versus last year’s $329 million. And that increased revenue is due primarily to the start up of our civil projects at Hudson Yards both the Amtrak Tunnel and Hudson Yards platform is helping that growth 26%, sorry $416 million versus $329 million

We also had some increased activity on pipeline projects in the Midwest but that was partially offset by reduced activity this year in a large tunnel project in California. Our income from construction operations at $70 million is up 59% from last year’s $44 million. And that increase is due primarily to the revenue volume changes mentioned above and an increase mix of higher margin work in certain parts of our Civil business. Our operating margin in the fourth quarter at 16.7% is up 340 basis points from last year’s 13.3% and for the year we ended at 12.5%.

Moving on to the building segment our revenue in the fourth quarter was $324 million down 20% from last year’s $406 million however on a pro forma basis after you adjust for the revenue that’s related to construction management not-at- risk a building segment revenue was only down 7% compared with this time last year.

The decrease this year is predominantly driven by reduced activity on some large healthcare and office projects in Northern California. Our income from construction operations however at $3 million for the quarter is vastly better than last year’s loss of $2 million and that increase is a result amongst other things, of progress made on settling some hospitality and gaming projects and general improvements.

Our operating margin of 0.9% versus the loss of 0.4% last year is driven by the fact as previously discussed, for the year we ended up with building at 1.6%. Our Specialty Contractors segment revenue was down 5% at $309 million this year versus $324 million last year however that decrease was due primarily to last year’s work on Hurricane Sandy in New York and excluding that that increase Specialties revenue on an apples-to-apples basis would have been up 10% in the fourth quarter of this year.

Our income from construction operations at $4 million down from the $25 million last year, and that decrease is due to favorable productivity last year on several mechanical and electrical projects in New York, the Hurricane Sandy projects last year, and the impact of unfavorable execution on various smaller concrete placement projects in the fourth quarter 2013.

Our operating margin at 1.4% this quarter compared with 7.8% last year was below our margin expectations for the segment, and for the year specialty ended up at 4.1% and we are obviously working diligently to address that poor execution and for specialty return to where it used to be.

Our Management Services segment revenue was at $51 million for the quarter, down 8% versus $55 million in the fourth quarter of last year, that decrease is due to the wind down of our containerized housing projects in Southern Iraq, partially offset by increased activity on an aircraft parking apron project in Guam.

Our income from construction operations at $4 million is down from last years $6 million and that’s driven primarily by the changes that I discussed about, but the favorable productivity on our aircraft parking apron project help to offset that.

Our operating margin in the fourth quarter was at 8.5% versus 10.4% in the fourth quarter of last year. In other expenses, our depreciation and amortization expense in the fourth quarter of this year was $18 million, as compared with $15 million last year for the year that we ended up with depreciation and amortization of $59 million versus $61 million in 2012.

As Ron mentioned earlier, we anticipate approximately $94 million of D&A in 2014, that large increase is a result of various new and pending civil projects in next year. Our interest expense this year versus last year was virtually flat $12 million versus $11 million and of course our income tax expenses is the more normal $20 million associated with that, as opposed to $6 million last year, which was driven by the $30 million tax benefit that we have last year from goodwill.

Our effective rate for the fourth quarter of 2013 was 37.8% and for 2013 was 37.5%. On our balance sheet, our working capital at December of this year was $797 million, up $39 million from last years $748 million and represents about a 5% increase and our cash is at a $120 million this year, compared with a $168 million last year.

Our current ratio of 1.61 is flat this year versus last year, and we generated $62 million in cash from operating activities in the fourth quarter of 2013, a significant change from last year’s usage of $40 million, which was impacted by the Hurricane Sandy projects that necessitated an increased cash usage this time last year.

Strong operating cash resulted in $59 million of free cash flow in the fourth quarter of 2013, compared with the use of $48 million last year. We ended up with $8 million of free cash flow for this year, a result of our strong cash focus on cash management throughout 2013. Our total debt ended at $734 million virtually unchanged from last year’s $737 million and our debt-to-equity capital ratio ended up at 0.59 versus last year’s 0.64.

I’ll hand the call back over to Ron for closing comments.

Ronald N. Tutor

Thank you, Mike. At the risk of sounding redundant, I’m pleased to have reported what we considered an extremely good year with a strong fourth quarter finish. But most importantly, a significant and continuing successful trend of landing the large mega-civil work on a national scale that we have committed to.

Not only the fourth quarter last year, but the first quarter of this year, significant civil awards that will drive our earnings over the next four to five years, with a stream of major work in front of us the likes of which we’ve never seen. We are more excited than ever as we look forward.

This concludes our prepared remarks. We’ll now ask the operator to open the call to you good gentlemen for questions.

Question-and-Answer Session

Operator

Ladies and gentlemen, at this time we will take your questions. (Operator Instructions) Our first question comes from Steven Fisher with UBS.

Steven M. Fisher – UBS Securities LLC

Hi, good afternoon.

Ronald N. Tutor

Hi, Steven.

Steven M. Fisher – UBS Securities LLC

Hi, I know you guys expect profits in the Building and Specialty Contractor segments to improve, can you just talk about the trajectory of that improvement and then what do you think has to be done to fix specialty contractors profits? And I guess the third element of that question is, seasonally Q1 is typically lighter, and how should we think about the seasonality of earnings and backlog growth this year?

Ronald N. Tutor

Well, since that’s a multiple question, let me see if I can remember all the components. I think you started out with a trajectory and fixed the profits of both specialty and building. I don’t know that there is anything we can do about fixing our building profits; I think we will generate more backlog, I think we are successfully signing up more building work which will generate more backlog, more revenue, but our profitability of that division continues to be strained and I don’t believe you are going to see any as you call it trajectory.

I think you will just see hopefully and orderly progression and awards and the profits that follow, but it will take an extraordinary turnaround in the U.S. building markets for our Building Group to ever once again rival what we do in the civil and for that matter the Specialty Groups.

As far as the Specialty Group, what happened to us in 2013 was very simple. We had a Contracting Group in New York that took two significant write-downs on work that just should not have taken place. We have taken the steps with stricter controls on systems and costing and verification of the profitability of work during its course to drive for one don’t believe we’ll get anymore surprises like that.

If there is a trajectory, it’s not only the Civil business, but our Specialty business because in many cases as we – our Civil business takes off we are taking the Specialty Group with it, because as you heard today much of our major awards in civil carries with it major awards to our specialty, electrical and mechanical, and at very positive margins for both.

So I believe that with the enormity of civil work we are bidding and even if we drag our Specialty Group along as I call it. Their trajectory should match civil. What was the last one Steve you had one more question after that, I don’t recall seasonality.

Steven M. Fisher - UBS Securities LLC

Yes, sure in seasonality because Q1 is typically little later, just kind of wondering what to expect to that?

Ronald N. Tutor

It hasn’t changed in 17 years have been running Perini. On the East Coast I've never every other week there is six inches to snow there is no, I mean it just first quarter is just to killer to generate any revenue.

Robert Band

Northern Midwest as well.

Ronald N. Tutor

And even the Midwest with Lunda, the Lunda seems to have a capacity to work under a foot and a half of snow where our Easter gentlemen don't. But the weather in New York has been just terrible the first quarter and we just struggle the work.

Steven M. Fisher - UBS Securities LLC

Okay, that’s helpful and then.

Ronald N. Tutor

Any better let’s put it that way.

Steven M. Fisher - UBS Securities LLC

Sure, how are you guys accounting for the Seattle tunnel project with the tunneling halted and how does that factored into guidance and then I guess, how confident are you there won’t be charges on that project?

Ronald N. Tutor

Well, I think the project is in excellent condition as far as what caused the work stoppage, we mention the fact we hit a well case and you can start by the Washington DOT that in their wisdom they never put on our drawings or informed us was even there. That coupled with other issues I would rather not speak to is being specific, we don’t feel we have any responsibility for either the delays of the costs, associated with the repairs of the machine, so we believe the machine will be up and running in probably three to three and half months and at that time we’ll begin to mine again.

We were mining at a heck of a clip when we hit the casing and the machine was severely damaged and we expect once repaired to be back accomplishing the same, what it might affect which we already hedged in our projections was just delaying revenue, while we repair the machine, the job didn’t stop we have all the peripheral work, concrete framing, structures et cetera that continue to operate but let’s face it, the tunnel is almost half of our contract, so when it stops revenue was reduced with a reduce in revenue of course the earn profit is reduced, but we took that in to consideration when we compiled our guidance, so it wasn’t, it won’t be a surprise.

Steven M. Fisher - UBS Securities LLC

Okay, thank you very much.

Operator

Our next question comes from Alex Rygiel with FBR Company.

Alexander J. Rygiel – FBR Capital Markets & Co

Thank you. Nice quarter Ron and Mike.

Ronald N. Tutor

Thank you.

Michael J. Kershaw

Thank you.

Alexander J. Rygiel – FBR Capital Markets & Co

Couple of quick questions, first Ron can you talk a little bit about sort of your outlook for profit margins and the confidence that you have that profit margins continue to improve over the next year or two?

Ronald N. Tutor

Are you talking generically across all our businesses or anyone’s in specific?

Unidentified Analyst

Alexander J. Rygiel – FBR Capital Markets & Co

No, I’m talking generically.

Ronald N. Tutor

Well, let me say this in our building business I don’t think they could go any lower than they’re we would be paying owners for the right to build their work. So I believe they’ve stabilized through at least there is low as we would ever consider working for anyone. So, although I don’t see any hopes of returning to where we were generating 4% to 6% gross margins, it will go up marginally but I don’t look for any short-term significant recoveries in the Building business.

Our Specialty Groups but most importantly our Civil business. Our margins are strong as they’ve ever been. And when you realize setting our Specialty Group misadventures we haven’t money on a civil projects since 1996. And we continue to make what we say we’re going to make. As we significantly add more and more work to our backlog. Key to our Civil growth and earnings is to be able to continue to add these large projects with limited competition where we’re really good at building up and that’s where we make our money and I don’t see anything slowing us down in that area.

Alexander J. Rygiel – FBR Capital Markets & Co

That’s helpful. And then could you also provide us a little bit more color or visibility on sort of timing of next awards that are expected with expected at the Hudson Yards project?

Ronald N. Tutor

We’re starting the platform as we speak, we’re working on pre-construction already on the retail component in the Tower D component, which is a combination of residential and retail, those two components are over $1.2 billion. And I don’t believe there will be any contract awards probably till the end of this year, but we’re doing all the pre-construction in budgeting. So, if I had to hazard a guess and I really haven’t spoken to related as to when they think we will actually be awarded and released to proceed. I’m going to say latter part of the fourth quarter first part of the first quarter of 2015.

Alexander J. Rygiel – FBR Capital Markets & Co

That’s helpful. Thank you very much.

Ronald N. Tutor

Sure.

Operator

(Operator Instructions) Our next question comes from John Rogers with D.A. Davidson.

John B. Rogers – D.A. Davidson & Co.

Hi, good afternoon. Congratulations on the year. My first question is just in terms of their margins in the Building segment the $860 million in fees that you talk about with Hudson Yards, don’t those end up coming in at very high margins than as you recognize those and what’s the pace at which you recognize?

Ronald N. Tutor

Oh, no, quite the contrary, you’ve got to understand how it works there, John let me explain it. We get an $860 million in two contracts at Hudson Yards. We self perform or bill for our general conditions all our supervision and staffing that we provide. We oversee the subcontract awards, but those awards are then taken by related who writes the contract and pays the subs direct.

We get our fees on the full $860 million, but they are a very – shall we say reduced level of fee. However, in the case of Tower C, we competitively bid the concrete frame against New York City concrete subcontractors and we’re awarded the frame for $143 million. So that went into our backlog with what you’d assume would be a specialty contractors fee.

And we bid Five Star Electric bid the electrical and was awarded $56 electrical subcontract at a typical specialty contractors fee. But those are separate and apart. When you look at that $860 million that goes through at a what I call the typical reduced building contractors fees as opposed to when we self perform work at the higher level. So I wish it was true, but it isn’t.

John B. Rogers – D.A. Davidson & Co.

Okay, thank you. I appreciate that.

Ronald N. Tutor

Not at all.

John B. Rogers – D.A. Davidson & Co.

And in the second question I had is in terms of your, well just in terms of guidance and your expectations, what are you thinking on your debt level this year. I mean, do you have chances for refinancing and what sort of a plan on that? I assume interest could be about the same in 2014?

Ronald N. Tutor

I expect to make a significant reduction in our debt level with certain shall we say transactions that are pending over the next three to six months. We intend to pay down, God willing and certain of our owners stepping up to the play we intend to pay down our debt significantly.

John B. Rogers – D.A. Davidson & Co.

Okay. And then lastly, one if I could, you talk about the increase in D&A that’s $94 million this year, what are you assuming in terms of capital spending, I mean, is there a lot of equipment that has to be out of this year or if you added already?

Ronald N. Tutor

We’ve added it already; well we’re in the processes of adding most of that is being finance. So that the – that’s what’s driving the D&A, the equipment is going to be used…

Michael J. Kershaw

Depreciation.

Ronald N. Tutor

Is depreciation, yes. Yes, we bought a significant amount of drilling equipment for BECO, our foundation subsidiary because BECO who had heretofore been doing $25 million, $30 million a year of revenue signed up over a 120 million wroth of drilling basically working only for us between Hudson Yards, the Amtrak Tunnel, California High-Speed Rail and San Francisco subway system, we had actually go up and spend almost $15 million in new capital equipment expenditures for BECO, then we turnaround with the tier-4 requirements of the California High-Speed Rail.

We elected at Tutor Perini to purchase all the major equipment to build the high-speed rail and rented to the joint venture that was another approximately $21 million worth of equipment. Probably another 10 to 12 in cranes to support the steel erection in Hudson Yards all of which we financed at rates between two and a quarter and two and three quarters. Those jobs will offer significant rental rates that hopefully will differ the majority of the costs. So yes we did make some very significant equipment expenditures the first quarter.

John B. Rogers – D.A. Davidson & Co.

Okay, great. Thank you very much.

Ronald N. Tutor

Sure, John.

Operator

That’s all we have for questions at the moment. I will now hand the call back to Ron Tutor.

Ronald N. Tutor

Thank you everyone for joining us, hopefully we’ll continue on our upward trajectory as you called it. Thank you.

Operator

That concludes today’s presentation. You may now disconnect. Have a great day.

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