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Executives

Crocker Coulson - IR

Bob Band - President

Ken Burk - CFO

Dick Rizzo - Vice Chairman,Perini Building Company

Analysts

Richard Paget - Morgan Joseph

Steven Fisher - UBS

John Rogers - D.A. Davidson

Avi Fisher - BMO Capital Markets

Ben Warman - Bishop Rosen

Ryan Levinson - Private Fund

Perini Corporation (PCR) Q3 2007 Earnings Call November 8, 2007 4:30 PM ET

Operator

Good day, everyone. Welcome tothe Perini Corporation Third Quarter Earnings Call, hosted by CCG InvestorRelations, Perini. Today's conference is being recorded. For opening remarksand introductions, I will now turn the call over to Mr. Crocker Coulson. Pleasego ahead.

Crocker Coulson

Good afternoon, everyone. Thanksfor joining us on Perini's third quarter 2007 conference call. With us todayare Perini's President, Bob Band; the Company's Chief Financial Officer, KenBurk; and Dick Rizzo, who is Vice Chairman of Perini Building Company, thelargest business unit of the Company.

Our agenda for today follows ourusual format. First, Bob is going to discuss the highlights of the thirdquarter, new contract wins and other successes, as well as provide updatedguidance. After that, Ken Burk will review the company's third quarterfinancial results in detail. Then Bob is going to come back and make someclosing remarks. At that point, we are going to open up the call to yourquestions.

Before we start, though, I wouldlike to remind our listeners that management's comments today will containforward-looking statements and management may make additional forward-lookingstatements in response to your questions. These types of written and oraldisclosures are made pursuant to the Safe Harbor provisioncontained in the Private Securities Litigation Reform Act of 1995.

Investors are cautioned that suchforward-looking statements do involve risks and uncertainties that could causeactual results to differ materially from anticipated results. The companycautions that any such forward-looking statements are based on assumptions thatPerini believes are reasonable but that are subject to a wide range of risks,and actual results may differ materially. These types of statements, and theunderlying factors related to the statements, are listed in filed informationwith the SEC, including Perini's Annual Report on Form 10-K for the fiscal yearended December 31, 2006, as well as in today's news release.

Our statements on this call aremade as of today, November 8, 2007, and the company undertakes no obligation toupdate any of these forward-looking statements contained in the call, whetheras a result of new information, future events, changes in expectations, orotherwise.

Well, with those formalities nowout of the way, it is my pleasure to turn the call over to Bob Band.

Bob Band

Thank you, Crocker. Goodafternoon, everyone, and thank you for joining us on the call today. The thirdquarter of 2007 marks our eighth consecutive quarter of record revenues, whichtotaled $1.24 billion for the quarter, up 61% from last year.

Net income for the quarter was$24 million, up over 150% from the comparable quarter last year. Year-to-date,we have recorded revenues of $3.38 billion as compared to $2.1 billion in thecomparable period of 2006, and we have achieved the largest net income for ninemonths in the company's 113-year history, $74.2 million as compared to $22.2million for the nine months ended 9/30/2006.

Our strong performance thisquarter was driven by our Building segment, which continued to convert oursubstantial backlog of work into revenues and profits, as anticipated.Management Services had another outstanding quarter, due to work on overheadcoverage systems in Iraq.Ken Burk will review our financial results in more detail later in the call.

During the third quarter, wesuccessfully converted $1.24 billion of our backlog into revenues. The backlogof uncompleted construction work at September 30, 2007 was $7.8 billion, downapproximately 7.6% from the backlog of $8.5 billion reported at December 31,2006.

The September 30, 2007, backlogincludes new contract awards, and adjustments to contracts in process addedduring the third quarter of '07, totaling $385 million, which includeapproximately $68 million of additional work on security projects in Iraq, a new$70 million high school in Orlando, Florida, and $196 million in various newawards at Rudolph & Sletten, primarily in the Healthcare and OfficeBuilding segment.

Subsequent to the quarter end,Rudolph & Sletten was awarded another office complex, The Jay Paul companyin California,in the amount of $239 million. And our Civil segment was awarded an $86.8million contract for a highway project in Maryland.

Over the last several months, theresidential construction market has slowed, and the credit market environmenthas fueled concerns over the health of the economy. But at this point, we havenot seen an impact on the on the hospitality and gaming and other buildingprojects currently under construction in our backlog.

In fact, there is a strong and activepipeline of new work prospects available, not only in Las Vegas, but also inCalifornia, the Northeast, and in Florida. Perini is known for our ability todeliver complex, large-scale projects on-time and on-budget. During thequarter, our Building segment continued its track record of consistent andsteady execution on each of our major projects.

Work on each of the mainstructures at the 66-acre site of our largest project, the $5.3 billion MGM Project City Centerin Las Vegas,is moving forward on schedule. We have poured the 28th floor of the 61-story ResortCasino. We are up to the 28th floor on the Vdara Condo Hotel and the 15th floorof the Mandarin Tower. We are currently working onfoundations of both the twin Veer Towers and the Harmon Hotel, and structural steelerection continues at the Retail and Entertainment Center.

Work at the $1.8 billionCosmopolitan Resort and Casino in Las Vegas is also on track. We continue with structuralsteel erection, and have completed all footings and foundations. Within thenext month, we will begin forming and placing concrete in both towers. Thisproject is on track for completion at the end of 2009. At the $373 millionTrump International Hotel and Tower in Las Vegas, we have completed finishes through the 59thfloor, and expect to complete floors 60 to 64 by year-end. This project is onschedule for completion in March of 2008.

Our work at the $500 millionFoxwoods Resort Casino in Connecticutis currently about 75% complete, with final completion scheduled on time inMarch 2008. The $761 million joint venture contract for the Gaylord NationalResort and Convention Center in Prince Georges County, Maryland, isapproximately 79% complete, and project completion is scheduled for early 2008.With several building projects in the Northeast scheduled for completion inearly 2008, we are actively seeking new work in this region.

There are a number of new gamingand hospitality prospects in New Jersey, New York and Pennsylvania, many ofwhich Perini has a strong chance of winning, due to our reputation, clientrelationships, and strong position in the market. The Las Vegas market also has a number ofattractive opportunities, and we are actively pursuing new business forpreconstruction and construction starts in late 2008 and 2009.

The new work awards added to ourbacklog this quarter demonstrate the diverse building projects available toPerini throughout the country. Of the $196 million in new work at Rudolph &Sletten, $78 million were primarily for projects in the healthcare market in California. As a leaderin Californiaconstruction with a reputation for quality and expertise in building medicalfacilities, corporate campuses and biotech labs, we believe Rudolph &Sletten is in an excellent position to win new work in their markets.

We also see opportunities forRudolph & Sletten to win additional Native American gaming contracts in California, particularlyif the gaming compacts with the state's five largest tribes are approved.

James A. Cummings was awarded a$70 million project to build a new Timber Creek high school in Orlando, Florida,and the market for education projects in that region remains very strong.

Last week, we were awarded acontract from the University of Florida for preconstruction services for a newparking facility on the Gainesvillecampus. This is one of many projects we have an opportunity to win futureconstruction contracts on. James A. Cummings has achieved record performance sofar this year in terms of revenues, which have more than doubled, and pre-taxprofitability, which has increased over four times, compared to 2006. James A.Cummings continues to build on its reputation of quality construction of publicand private construction projects.

We continue to bid on new civilwork and there are a number of attractive projects up for bid in the Northeast,Baltimore and the Washington, D.C.areas. During the quarter, a Perini joint venture was awarded $12 million ofadditional work on a water pollution control plant in New York. And in addition, subsequent toquarter end as previously mentioned, the Civil segment was awarded a contractin the amount of $86.8 million for a highway project in Maryland. This project is for the MarylandTransportation Authority and is for the construction of express toll lanesalong I-95 section 100.

Further, the Civil segment waslow bidder on a transit project in New York City in the amount of $139 million.

Our Civil segment incurred anoperating loss this quarter due to a charge we recorded for a pending civilsettlement with the U.S. Attorney's Office concerning an investigation of NewYork City construction industry practices regarding contracting withdisadvantaged-, minority-, and women-owned businesses. We have cooperativelyengaged in discussions with the U.S. Attorney on this matter and hope tofinalize the settlement soon. We have decided to pursue this civil settlementto put this matter behind us.

Our Management Services segmenthad another excellent quarter due to the continued delivery of several overheadcoverage projects in Iraq.I'm proud to report that Perini was recently recognized by General Petraeus andBrigadier General Walsh for our role in providing protection for U.S. personnelwith quality and timely construction services under the Overhead Coverage program.

In October, Perini ManagementServices was awarded $68 million under four new task orders from the Army Corpsof Engineers for work on Overhead Coverage systems in Iraq and upgrading infrastructure at militarybases in northern Iraq.These task orders have options for an additional $45 million worth of workwhich may be exercised within 120 days from date of award.

In addition, we note that theU.S. Department of State has requested that Congress approve $1.5 billion toprotect U.S. diplomats in Iraq,which includes Overhead Cover projects as well as other security programs. Wecontinue to pursue work in other areas through the hurricane CENTCOM programs,and with our surety clients in the U.S.

This was another great quarter forPerini. We had our eighth consecutive quarter of record revenues and, again,generated record year-to-date net income. And our backlog remains strong at ahealthy $7.8 billion. As a result of the strong performance in the first ninemonths of the year by the Building and Management Services segment, we areincreasing our guidance for 2007 revenues from a range of $4.1 billion-$4.3billion to a range of $4.4 billion to $4.6 billion, and diluted earnings pershare from a range of $2.80-$3 per share to a range of $3.30-$3.45 per share.

Based on our current backlog,profitability and the strength of our position in the marketplace, our initialguidance for 2008 is for revenues in the range of $5 billion to $5.4 billionand diluted earnings per share ranging from $3.50 per share to $3.75 per share.

At this point, I'd like to takethis opportunity to introduce Ken Burk, Perini's new Chief Financial Officerand Senior Vice President. Ken has over 24 years of experience in theengineering/construction industry, and we welcome him as a key member of ourexecutive team. Ken replaces Mike Ciskey who ,as Senior Vice President of Civil,will play an integral role in the growth of the Civil segment.

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

Ken Burk

Thank you for the introductionand words of welcome, Bob. I'm happy to be part of the Perini team. I will nowreview the third quarter financial results in some detail.

As Bob mentioned earlier, ourbacklog at September 30, 2007, totaled $7.8 billion, down approximately 7.6%from $8.5 billion at December 31, 2006. Backlog by each segment is: Buildingsegment, $7.4 billion; the Civil segment, $279 million; and ManagementServices, $156 million.

In the third quarter of 2007,revenues were $1.24 billion, an increase of 61% from $773 million reported inthe third quarter of 2006. On a reportable segment basis, revenues from ourBuilding segment were $1.15 billion, an increase of 78% from $644 million inthe third quarter of 2006. This increase was primarily due to the conversion ofour Building segment into revenues as expected in the hospitality and gamingmarket.

Also, I'd like to point out thatour building businesses in California and Florida have increased theirrevenues by 45% and 93%, respectively. Revenues from our Civil segment were $63million, down slightly from $64 million reported in the third quarter of 2006.

Management Services revenues were$35 million, down 47% from $66 million a year ago. This decline was primarilydue to a decreased volume of work in Iraq and the completion of ournuclear power plant maintenance and modification contract with Exelon at theend of 2006.

Looking at gross profit, ourtotal gross profit increased $20.8 million to $63.9 million, a 48% increasefrom $43.1 million in the third quarter of 2006. This increase is due to the Buildingsegment revenue growth in all of our building businesses.

General and administrativeexpenses were $30.4 million, up 16% from $26.2 million in the third quarter of2006. This was primarily the result of a $3.5 million increase in buildingconstruction-related general and administrative expenses.

Overall, looking at total generaland administrative expenses, they're at 2.4% of revenues in 2007 compared with3.5% in 2006. Income from construction operations was $33.5 million in thethird quarter of 2007, an increase of 98% from $17 million in the third quarterof 2006.

Breaking down income fromconstruction operations by segment, the Building segment income fromconstruction operations for the quarter was $33.3 million, an increase of 115%from $15.5 million in the third quarter of 2006. This increase was dueprimarily to increased revenues as discussed earlier.

Operating margin for the Buildingsegment was 2.9% in the third quarter of 2007, up from 2.4% in the thirdquarter of 2006. Again, we have realized significant profitability improvementin all of our building businesses. Civil segment loss from constructionoperations was $6.8 million in the third quarter of 2007 compared to a $6.7million loss in the third quarter of 2006.

The loss in the current quarterwas due to the charge taken in anticipation of the civil settlement with theU.S. Attorney, which Bob discussed earlier. The loss in 2006 was due todownward profit adjustments recorded on several projects in the mid-Atlanticregion, including a roadway project in Maryland.

Management Services income fromconstruction operations was $12.8 million in the third quarter of 2007 comparedto $14 million in the third quarter of 2006. Management Services operatingmargin was 36.9% for the quarter versus 21.3% a year ago. This increase inmargin was due to continued favorable performance on projects in Iraq.

Looking at other income was $4.4million in the third quarter of 2007, compared to $0.6 million in the thirdquarter of 2006. This increase was primarily the result of higher interestincome due to a significant positive cash flow from operations in the firstnine months of 2007, resulting in an increased amount of cash available forshort-term investment. In addition, we recognized a $1.1 million net gain fromthe sale of a parcel of developed land held for sale in the third quarter of2007.

Interest expense was $0.4 million,compared to $1 million in the third quarter of '06. This decline was the resultof decreased borrowings on our term loan, which was paid in full in conjunctionwith the closing of our new credit agreement in February of 2007. The provisionfor income taxes was $13.5 million compared to $7 million in the third quarterof 2006. The effective tax rate for the third quarter of 2007 was 36%, comparedto 42.3% in the same quarter a year ago.

Net income, $24 million in thethird quarter of 2007, compared to $9.6 million in the same quarter a year ago.Diluted earnings per share were $0.87 in the third quarter of 2007 versus $0.36for the same period of 2006.

Now I'd like to talk about ourbalance sheet. At September 30, 2007, our working capital stood at $262.4million, up from $194 million at December 31, 2006. This represents a currentratio of 1.22 to 1, which is unchanged from year-end. As of September 30, 2007,we had $361.8 million in cash and cash equivalents and $8 million in short-terminvestments compared to the December 31, 2006 balance of $225.5 million.

The $136.3 million increase incash and cash equivalents was a result of $182.1 million in cash flows providedby operating activities, due to the substantial increase in our Buildingsegment revenues combined with favorable performance by the Management Servicessegment.

In the first nine months of 2007,cash used by investing activities was $24.8 million, primarily for the purchaseof construction equipment and property to be used in support of ourconstruction operations and for the purchase of $8 million in short-terminvestments.

Cash used by financing activitieswas $21 million of which $22.5 million was used to pay the outstanding balanceof our term loan. At September 30, 2007, long-term debt stood at $14.9 millionexcluding current portion, and we had $ 113.5 million available under ourcredit facility.

Stockholders equity increased 37%to $334 million from $244 million at December 31, 2006. We believe that ourstrong financial position and credit arrangements provide us with the adequateresources to meet our liquidity and working capital requirements.

Finally, we are increasing ourguidance for 2007 revenues to a range of $4.4 billion-$4.6 billion, and dilutedearnings per share to a range of $3.30-$3.45. For 2008, our guidance forrevenues will range from $5 billion-$5.4 billion, and diluted earnings pershare to a range of $3.50-$3.75.

I will now turn the call over toBob for his closing comments.

Bob Band

Well, thanks, Ken. Our thirdquarter was another exceptional quarter for Perini, with $1.24 billion inrevenues, and net income of $24 million. As expected, our Building segmentcontinued to perform well on each of our major hospitality and gaming projectsin Las Vegas, Connecticutand Maryland,and both Rudolph & Sletten and James A. Cummings had great performance. TheManagement Services segment continued its excellent work on overhead coverageprojects in Iraq,making a significant contribution to profitability in this quarter. Our backlogremain strong at $7.8 billion.

Looking forward, we will continueto focus on converting our existing backlog of work to revenues, profits andcash flow through consistent and steady execution of our large-scale projects.In addition to the opportunities and new work prospects currently available tous through our existing operations, we are actively seeking to acquirecompanies to complement our building operations in the United States.

We are also seeking to extend ourManagement Services competencies by targeting companies with expertise andgeographic presence in the international markets to fuel our growth. Perini hasa solid track record of identifying high-quality companies that are leaders intheir markets and successfully integrating them into the Perini family. We areconfident in our ability to do so in the future.

Well that concludes our preparedremarks. Ken Burk and Dick Rizzo and I are happy to take your questions.Operator?

Question-and-Answer Session

Operator

(Operator Instructions). And itlooks like we will take our first question from the side of Richard Paget withMorgan Joseph. Your line is now open.

Richard Paget - Morgan Joseph

Good afternoon everyone.

Bob Band

Hey, Richards.

Richard Paget - Morgan Joseph

If we go back to third quarter oflast year when your backlog was close to $9 billion, and you gave initial '07guidance, and I think it was a range of $2-$2.20. Now you have a backlog ofabout $7.8 billion, and the outlook for next year is $3.50-$3.75. What thingshave changed over the course of the year that the profitability of that backlogis so considerably different and the numbers are up as much as they are?

Bob Band

Richard, I think we can point toseveral factors. One, is that we have a great track record now in executing thelarge projects in Las Vegasin terms of our costs matching our forecasts and in many cases actually comingin a little ahead of schedule in terms of the revenue burn. And, in addition,we have yet again another year's worth of experience on the Overhead Coveragejobs in Iraq with a good view on results there, coupled with our feeling ofcontainment of the lost side of some of the legacy projects on the Civiloperation. So I would say those factors contribute to the different outlook.

Richard Paget - Morgan Joseph

Okay. Because I know when wetalked at the end of last year margin sustainability and Management Serviceswas a question. Do you think with the way that you re-upped some of thoseoverhead contracts, are they under similar terms, where you can get that 30% plus or minus margins going forward?

Bob Band

Well, Richard, while we don'tinitially forecast those levels of margins, we certainly will try to maximizethrough our execution the results from those projects.

Richard Paget - Morgan Joseph

So your guidance now, is thatassuming any considerable wins, or is this just based on kind of the backlogyou have currently and maybe keeping it at this level?

Bob Band

I would say, other than in theVegas market, we are anticipating some level of new awards and burn off ofthose projects in the '08 numbers.

Richard Paget - Morgan Joseph

Then I just want to make sure Iheard correctly with some of the numbers. In Civil, on the operating income,that was a loss of 6.8 million?

Ken Burk

Yes. That was a loss, right.

Richard Paget - Morgan Joseph

Then you mentioned maybe goinginternational in acquisitions with Management Services. Given some of thecasino activity overseas, and I know you mentioned that you wouldn't plan goingoverseas a while ago, would you change your stance on that?

Bob Band

At the current time, I would haveto say, no. I would say we are looking more to build a synergy with theinternational capabilities we have with regards to logistics and operations inremote hardship areas. So there are some analogous businesses that we havelooked at in like, and we will be working towards those.

Richard Paget - Morgan Joseph

Okay. Thanks. I will get back inqueue.

Operator

And our next question comes fromthe site of Steven Fisher with UBS.

Steven Fisher - UBS

Good afternoon, guys. Anothernice earnings quarter.

Bob Band

Hello, Steve.

Ken Burk

Good afternoon. Hi, Steve.

Steven Fisher - UBS

The bookings at Rudolph &Sletten were down about 40 or 50% from last quarter's rate, but it sounded likeyou had a big project come in after the quarter. It was the lower bookings,just timing or is there some weakening in the market there?

Bob Band

There's no weakening. In fact, ifanything, we see very strong markets there. You know, this is such a lumpybusiness and I know you've hung in with us quarter after quarter as we talkedour way through new projects that are just about in the backlog. So that is theissue we face...is a lumpiness in the bookings.

Steven Fisher - UBS

Then one of the areas you citedthere of strength, was the office building markets, but what is your sense ofthat market for 2008?

Bob Band

Since we don't build speculativeoffice buildings, we are in a build-to-suit mode. So once we are contracted foran office building, we are actually building for the end user, even if he isusing a developer to have it built. So with that in mind, any office buildingprojects that we have as targets are very solid in terms of their ultimate enduse and financing prospects.

Steven Fisher - UBS

You also mentioned you arepursuing some gaming projects in the Northeast. What kind of timing might youexpect there for some bookings?

Bob Band

Dick.

Dick Rizzo

Hi, Steve. How are you doing?

Steven Fisher - UBS

Good.

Dick Rizzo

We are still anticipating thatthe New Yorkwork would start to show its face in the first or second quarter of next year. Connecticut continues toshow positive signs of further rehabbing of existing facilities. That doesn'tlook like it's going to change much. Pennsylvaniais off to a slow start but I think ultimately you will start to see some realsignificant progress there in the next year as well.

Steven Fisher - UBS

Great. Then as you compare themargin of the Building Services this quarter, versus what you had in the secondquarter, it's kind of a 2.9 versus 3.4. What's the key differences that drivesthat kind of 50 basis point change?

Bob Band

It is our feeling that we may getvariances in that nature, and that's due to timing of costs and the overheadsand what not. I don't see any significant change in our margin and backlog orin our ask. You know, there's always a bid and ask when you deal with honors onmargins. So we are asking our owners for very strong margins. There arepressures out there in the market geographically. We are seeing some pressureson margins in the Floridamarket, but overall we think we can hold our margin targets, and we are fairlyconfident there.

Ken Burk

Steve, part of that, too, is justthe pure volume effect as well as, you know, the volume being up significantlyover the third quarter in 2006.

Steven Fisher - UBS

Then lastly, how much was thecharge, if I missed it on the Civil side?

Bob Band

You didn't missed it, but theentire Civil operation would have been about breakeven, but for that charge.And since we are still in discussions with the U.S. Attorney, we didn't spikeout that chart separately. As soon as we have a final agreement, we will issuea full release detailing that.

Steven Fisher - UBS

Okay. Great. Thanks a lot.

Bob Band

You bet.

Operator

And our next question comes fromthe site of John Rogers with D.A. Davidson. Please continue.

John Rogers - D.A. Davidson

Congratulations. I guess firstthing, Bob, I just want to make sure I understood the contracts right.Subsequent to the end of the quarter, you mentioned $239 million with Rudolph& Sletten, and a $86 or $87 million highway project. And then the $66million award in Iraq.Is that subsequent to the end of the quarter or is that -- ?

Bob Band

No. The $68 million in Iraq is in thequarter-end backlog. The subsequent projects in Cherry Hill for $86.8 million and for $239 million in Rudolph are not inthe backlog.

John Rogers - D.A. Davidson

Not in the backlog.

Bob Band

Yes, and the $45 million ofoptions on the base contract values on work in Iraq is obviously not in thebacklog. And we would wait until that work is awarded.

John Rogers - D.A. Davidson

And that would be the same withthe $139 million transit project where you are low bidder?

Bob Band

Correct. Correct. Yes that takes-- that's like a 90-120 day process.

John Rogers - D.A. Davidson

Just wanted to make sure I gotthat right. Then, secondly, you know with your revenue guidance there of $5billion relative to your backlog, I am just curious. How much of that revenuethat you see over the next 12 months--or even beyond--is in backlog right now?Is it 80% of it?

Bob Band

That's a tough question but Iwould say that anywhere from 70%- 75% is probably in backlog. And I would saythat is pretty much the target number right now.

John Rogers - D.A. Davidson

Historically, that is stillrelatively high to what it's been.

Bob Band

Yes. Historically, we wouldusually go into a year with about 50% of current year's revenue in backlog andthen we would have to book and burn. You would have to book the work earlyenough to burn a substantial amount to hit your targets and here with a largerbacklog we have the luxury of, let's say, we are at 75% of revenue forecast,already in backlog.

John Rogers - D.A. Davidson

Then in terms of your cashposition right now, how much of that -- or what size of acquisitions are youlooking for? Obviously, if you get another Rudolph & Sletten, you can dosomething huge, but -- ?

Bob Band

Yes. I mean, we are targeting companies, and you just haveto bear with us. We have looked at companies that have all different revenuesizes, but generally in the $300 million-$600 million, $700 million range. Imean that's the preferred size, because you are going to put as much effortinto the acquisition of a company that size as you would, say, $100 millioncompany.

So I mean, the exception is any international marketplace wewould look at, and we have looked at companies more in the $100 million size tomatch up with PMSI.

John Rogers - D.A. Davidson

And how much cash, I don't know which way to answer this,but…do your clients expect you to have?

Bob Band

How much cash? Well, you know, it's an interesting question,but I don't think we have ever had a figure laid out as a precondition to a joband that runs more to your bonding capacity than anything else. So I would saythat we have very strong bonding capacity in excess of $1.5 billion of bondingcapacity. And so, that is generally plenty of capacity, and if we had to surgesome for a large project, we could do that, too.

John Rogers - D.A. Davidson

Okay. All right. Thank you.

Bob Band

Thank you, John.

Operator

And our next question comes from the site of Avi Fisher.Please continue. Your line is open.

Avi Fisher - BMOCapital Markets

Hi, thank you. Avi Fisher from BMO Capital Markets. Goodafternoon, and welcome aboard, Ken. You mentioned you were the low bidder on a$139 million transit project in New York. Would that be expected to hit the bookingsanytime in the fourth quarter or--?

Bob Band

Optimistically we would like it to hit the bookings in thefourth quarter, but we just can't predict it. Yes. It's New York.

Avi Fisher - BMOCapital Markets

What project is that?

Bob Band

I had rather say when we get the job. All right I don't wantto hold out too much in the way.

Avi Fisher - BMOCapital Markets

Okay. I have just a few more questions then. The City Centerin Vegas, I don't know if you had mentioned a completion date on that. Has thatchanged or is it still --?

Bob Band

Dick? I think we're still targeting November of '09, aren'twe?

Dick Rizzo

We are. Yes, and it was also set.

Avi Fisher - BMOCapital Markets

Okay. Thanks, Dick. On some of the projects that you mightbe bidding on, I mean some of the big names, obviously City Center East inAtlantic City--is that in the near future, or is that kind of a ways of -- ?

Bob Band

Well, Dick, correct me if I'm wrong, but I think we providedconceptual pricing to the [Cruiser] International folks on the secondassemblage of land that MGM has.

Dick Rizzo

In Las Vegas,yes, we have. And the East Coast one is in Atlantic City is reported to be underway. Butthey are hoping to start it by the middle of '08 and we will be in a positionto show them what we can do to help them in the near-term here.

Avi Fisher - BMOCapital Markets

I mean, that's really…I mean, that is a core market ofyours. I would think you could (inaudible), so you are talking that's in mid'08. That's when they will probably announce kind of a contract around that?

Bob Band

Yes. Their intention is to do something starting in themiddle of '08. That's pretty aggressive in my book, but I believe it will besome time in '08, and we will be in a position to show them what we can do tohelp them get started. We're actually working on that as we speak.

Avi Fisher - BMOCapital Markets

Okay. Thanks. In Management Services, your EBIT margins,what would need to change to impact those margins? It seems like you're consistentlyreporting these amazing margins there. What would need to change to impactthat?

Bob Band

Well, Avi, as we get past the 50% complete mark on aninternational job, we get a lot more confident in our ability to completewithin budget. So within historical trends, typically so, as we start this newworkup, we only forecast, say, the as bid margins on that work, and we wouldn'tget any more confidence until we hit the 50% mark. So this $68 million that hasjust been awarded, we would be most likely at that 50% mark, towards the end of'08. And we will be able to be in a much better position to make that call.

Avi Fisher - BMOCapital Markets

Did you guys say what CFO was? Cash flow from operations wasfor the quarter, I got from investing to financing.

Bob Band

The cash flow from operations for the year-to-date is $182million.

Ken Burk

For the quarter was $31.7 million.

Avi Fisher - BMOCapital Markets

$31.7 million for the quarter. And all the numbers you gavefor investing and financing, that was for the quarter right?

Ken Burk

Correct.

Avi Fisher - BMOCapital Markets

$24.8 million and the $21 million, or was that for the year?

Ken Burk

No, that was year-to-date.

Avi Fisher - BMOCapital Markets

That was the year-to-date?

Ken Burk

Yes. Make a note of that.

Avi Fisher - BMOCapital Markets

Also one last question. It looks like most of the bookingsyou had in the quarter was for new work, whereas through the first half of theyear, most of the bookings were for additions to contracts already in backlog.Is there any seasonality to additions to work? I mean, is that a one usually afirst-half event?

Bob Band

Avi, I would look at the additions we made to City Centerand Cosmo as unique to those projects. And any other large project that comesinto the house will also run their course as the budgets are refined and asowners make decisions, the project has a tendency to grow. At this point, wedon't see any more of that growth on City Center and Cosmo. And soyou are correct in saying that the new work coming in is all new projectawards. But there's not a seasonal effect. It's more unique to the individualproject.

Avi Fisher - BMOCapital Markets

Got you. All right. Thanks again for taking my questions.

Bob Band

You bet.

Operator

And it looks as if our next question comes from [Ben Warman]with Bishop Rosen.

Ben Warman - BishopRosen

Hi.

Bob Band

Hi, Ben.

Ken Burk

Hi, Ben.

Ben Warman - BishopRosen

Great quarter, as usual. I'm getting used to giving you alot of plaudits. I noticed that yesterday MGM Mirage announced plans to developa multi-billion dollar MGM Grand Abu Dhabi in conjunction with their partners MubadalaDevelopment Company. Are you in line to do any of that work?

Bob Band

No, at this point we are not doing any of the gaming workoutside of the U.S. Notionally, we look at that market this way, we are in muchdemand in the U.S.Our resources are stressed in handling that demand and we don't see any pointin splitting the team to attack it internationally. So we are going to stayright here where we know the client base, where we know the project uniquenessand also the legal environment.

Ben Warman - BishopRosen

Okay. Then the other question is, any plans afoot topossibly consider a dividend or stock split?

Bob Band

No, at this point, Ben, we again haven't talked about italthough we have a Board meeting next week which I'm sure that will merit somediscussion next week. But I would say that for now we would reserve theliquidity of the company for acquisitions in future growth.

Ben Warman - BishopRosen

Okay. Thank you very much and congratulations again.

Bob Band

Thank you Ben.

Operator

And our next question is a follow-up from Richard Paget withMorgan Joseph. Please continue.

Richard Paget - Morgan Joseph

Just quick housekeeping, and I apologize if you already gavethis out. Do you have a breakdown of the backlog by the segments?

Ken Burk

Yes. Backlog by segments. Sure. It's $7.4 billion for theBuilding segment, $279 million for Civil, and $156 million for ManagementServices.

Richard Paget - Morgan Joseph

Okay. Thanks. That's it.

Bob Band

Thanks, Richard.

Operator

And it looks as if we have an additional question from AviFisher with BMO Capital Markets. Your line is now open.

Avi Fisher - BMOCapital Markets

Sorry, I forgot to ask. Your SG&A margins have beenpretty healthy through the year and down year-over-year. Given how the year hasbeen going, are there any kind of compensation or bonuses or anything thatmight push that up to year ago levels or should we assume quarter-over-quarterroughly around the same rates? Kind of looking at the SG&A, the percent ofrevenue?

Dick Rizzo

We think the SG&A is going to hold track with where weare, even considering incentive comp and things like that. We feel like we arein pretty good shape. We are not expecting any kind of surprise uptick.

Avi Fisher - BMOCapital Markets

Started on the 2.5% range?

Ken Burk

Yes.

Avi Fisher - BMOCapital Markets

That's been for the year? That was it. I just needed tofollow up on that.

Bob Band

Thanks, Avi.

Operator

And it looks as if we have an additional question from thesite of [Ryan Levinson] with Private Fund. Please continue.

Ryan Levinson -Private Fund

Hi, thanks for taking my question. Nice quarter. I'mrelatively new to following your company and I was just wondering if you couldhelp me understand the difference between the second quarter's backlog orexcuse me, new business awarded and this quarter's new business awarded? I wasjust wondering if there was something special about the second quarter versusthis quarter, in particular in the Building segment?

Bob Band

Go ahead, you want to do that?

Ken Burk

Basically, in the second quarter we had a number ofadditions to the current contracts that we had under contract with City Center.That was about $658 million. Also, we had a number of large projects awarded toRudolph & Sletten, the Tower project, Foothills, Oak Casino, so all ofthose plus some additions to contract values of about $494 million. That was inthe second quarter, and I think we covered some of the activity already in ourmessage to you earlier about the third quarter awards.

Ryan Levinson -Private Fund

Yes. I think that there was some data, I'm just trying to understandthe -- just trying to get a kind of sense of what the lumpiness will look like?I mean, it's really not fair to look on a quarter to quarter basis, but justtrying to figure out just directionally. Even if I include the subsequentaward, the Rudolph & Sletten, the $239 million, and I add that to the $196million, that's still just $500 million of new adds. And I guess looking backalso at the second quarter's backlog, if I strip out the two things that youmentioned, the $658 million and $494 million, that's still $1 billion -- whatis that $1.1 billion of other work. What was that?

Bob Band

What, was that 1.1 billion?

Ryan Levinson -Private Fund

Yes.

Bob Band

Well first of all this is -- you have to look at what Kensaid. He said that in the second quarter we had $658 million increase in valueof City Center, which we did not have in thethird quarter.

Ryan Levinson -Private Fund

No, no. I understand that. What I'm looking at -- okay, youhave got $2.341 billion of new business awarded. This is from the Q, from yoursecond quarter 10-Q. So $658 million of that was City Centeradditions. $494 million was new work for Rudolph & Sletten, correct?

Bob Band

Yes.

Ryan Levinson -Private Fund

What was the other roughly --

Bob Band

You are looking at awards for the whole year in the Q.

Ryan Levinson -Private Fund

That's for the entire --

Bob Band

The first six months, right?

Ryan Levinson -Private Fund

That's for the first -- is that what that is?

Bob Band

Yes, that's what that is. There's another -- in the firstquarter there was another $550 million of additions to City Center.

Ryan Levinson -Private Fund

Okay. That was my question. Thank you.

Operator

And at this time, it appears that we have no additionalquestions in the queue. (Operator Instructions). And it looks as if we have noadditional questions.

Bob Band

Ken and I want to -- and Dick want to thank you all fordevoting this amount of time at the end of the day to the call. We appreciateit and we look forward to talking with you on the next release. Thank you verymuch.

Ken Burk

Thanks a lot.

Operator

This does conclude today's teleconference. Thank you forjoining us and have a great day.

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