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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 to the Perini Corporation Third Quarter Earnings Call, hosted by CCG Investor Relations, Perini. Today's conference is being recorded. For opening remarks and introductions, I will now turn the call over to Mr. Crocker Coulson. Please go ahead.

Crocker Coulson

Good afternoon, everyone. Thanks for joining us on Perini's third quarter 2007 conference call. With us today are Perini's President, Bob Band; the Company's Chief Financial Officer, Ken Burk; and Dick Rizzo, who is Vice Chairman of Perini Building Company, the largest business unit of the Company.

Our agenda for today follows our usual format. First, Bob is going to discuss the highlights of the third quarter, new contract wins and other successes, as well as provide updated guidance. After that, Ken Burk will review the company's third quarter financial results in detail. Then Bob is going to come back and make some closing remarks. At that point, we are going to open up the call to your questions.

Before we start, though, I would like to remind our listeners that management's comments today will contain forward-looking statements and management may make additional forward-looking statements in response to your questions. These types of written and oral disclosures are made pursuant to the Safe Harbor provision contained in the Private Securities Litigation Reform Act of 1995.

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

Our statements on this call are made as of today, November 8, 2007, 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.

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

Bob Band

Thank you, Crocker. Good afternoon, everyone, and thank you for joining us on the call today. The third quarter of 2007 marks our eighth consecutive quarter of record revenues, which totaled $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 the comparable period of 2006, and we have achieved the largest net income for nine months in the company's 113-year history, $74.2 million as compared to $22.2 million for the nine months ended 9/30/2006.

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

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

The September 30, 2007, backlog includes new contract awards, and adjustments to contracts in process added during the third quarter of '07, totaling $385 million, which include approximately $68 million of additional work on security projects in Iraq, a new $70 million high school in Orlando, Florida, and $196 million in various new awards at Rudolph & Sletten, primarily in the Healthcare and Office Building segment.

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

Over the last several months, the residential construction market has slowed, and the credit market environment has fueled concerns over the health of the economy. But at this point, we have not seen an impact on the on the hospitality and gaming and other building projects currently under construction in our backlog.

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

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

Work at the $1.8 billion Cosmopolitan Resort and Casino in Las Vegas is also on track. We continue with structural steel erection, and have completed all footings and foundations. Within the next month, we will begin forming and placing concrete in both towers. This project is on track for completion at the end of 2009. At the $373 million Trump International Hotel and Tower in Las Vegas, we have completed finishes through the 59th floor, and expect to complete floors 60 to 64 by year-end. This project is on schedule for completion in March of 2008.

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

There are a number of new gaming and hospitality prospects in New Jersey, New York and Pennsylvania, many of which Perini has a strong chance of winning, due to our reputation, client relationships, and strong position in the market. The Las Vegas market also has a number of attractive opportunities, and we are actively pursuing new business for preconstruction and construction starts in late 2008 and 2009.

The new work awards added to our backlog this quarter demonstrate the diverse building projects available to Perini 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 leader in California construction with a reputation for quality and expertise in building medical facilities, 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 for Rudolph & Sletten to win additional Native American gaming contracts in California, particularly if 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 a contract from the University of Florida for preconstruction services for a new parking facility on the Gainesville campus. This is one of many projects we have an opportunity to win future construction contracts on. James A. Cummings has achieved record performance so far this year in terms of revenues, which have more than doubled, and pre-tax profitability, which has increased over four times, compared to 2006. James A. Cummings continues to build on its reputation of quality construction of public and private construction projects.

We continue to bid on new civil work 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 of additional work on a water pollution control plant in New York. And in addition, subsequent to quarter end as previously mentioned, the Civil segment was awarded a contract in the amount of $86.8 million for a highway project in Maryland. This project is for the Maryland Transportation Authority and is for the construction of express toll lanes along I-95 section 100.

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

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

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

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

In addition, we note that the U.S. Department of State has requested that Congress approve $1.5 billion to protect U.S. diplomats in Iraq, which includes Overhead Cover projects as well as other security programs. We continue 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 for Perini. We had our eighth consecutive quarter of record revenues and, again, generated record year-to-date net income. And our backlog remains strong at a healthy $7.8 billion. As a result of the strong performance in the first nine months of the year by the Building and Management Services segment, we are increasing our guidance for 2007 revenues from a range of $4.1 billion-$4.3 billion to a range of $4.4 billion to $4.6 billion, and diluted earnings per share 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 initial guidance for 2008 is for revenues in the range of $5 billion to $5.4 billion and diluted earnings per share ranging from $3.50 per share to $3.75 per share.

At this point, I'd like to take this opportunity to introduce Ken Burk, Perini's new Chief Financial Officer and Senior Vice President. Ken has over 24 years of experience in the engineering/construction industry, and we welcome him as a key member of our executive 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 the call over to Ken who will give you the financial details for the quarter.

Ken Burk

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

As Bob mentioned earlier, our backlog 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: Building segment, $7.4 billion; the Civil segment, $279 million; and Management Services, $156 million.

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

Also, I'd like to point out that our building businesses in California and Florida have increased their revenues by 45% and 93%, respectively. Revenues from our Civil segment were $63 million, 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 primarily due to a decreased volume of work in Iraq and the completion of our nuclear power plant maintenance and modification contract with Exelon at the end of 2006.

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

General and administrative expenses were $30.4 million, up 16% from $26.2 million in the third quarter of 2006. This was primarily the result of a $3.5 million increase in building construction-related general and administrative expenses.

Overall, looking at total general and administrative expenses, they're at 2.4% of revenues in 2007 compared with 3.5% in 2006. Income from construction operations was $33.5 million in the third quarter of 2007, an increase of 98% from $17 million in the third quarter of 2006.

Breaking down income from construction operations by segment, the Building segment income from construction 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 due primarily to increased revenues as discussed earlier.

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

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

Management Services income from construction operations was $12.8 million in the third quarter of 2007 compared to $14 million in the third quarter of 2006. Management Services operating margin was 36.9% for the quarter versus 21.3% a year ago. This increase in margin was due to continued favorable performance on projects in Iraq.

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

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

Net income, $24 million in the third 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 $0.36 for the same period of 2006.

Now I'd like to talk about our balance sheet. At September 30, 2007, our working capital stood at $262.4 million, up from $194 million at December 31, 2006. This represents a current ratio 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-term investments compared to the December 31, 2006 balance of $225.5 million.

The $136.3 million increase in cash and cash equivalents was a result of $182.1 million in cash flows provided by operating activities, due to the substantial increase in our Building segment revenues combined with favorable performance by the Management Services segment.

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

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

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

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

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

Bob Band

Well, thanks, Ken. Our third quarter was another exceptional quarter for Perini, with $1.24 billion in revenues, and net income of $24 million. As expected, our Building segment continued to perform well on each of our major hospitality and gaming projects in Las Vegas, Connecticut and Maryland, and both Rudolph & Sletten and James A. Cummings had great performance. The Management Services segment continued its excellent work on overhead coverage projects in Iraq, making a significant contribution to profitability in this quarter. Our backlog remain strong at $7.8 billion.

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

We are also seeking to extend our Management Services competencies by targeting companies with expertise and geographic presence in the international markets to fuel our growth. Perini has a solid track record of identifying high-quality companies that are leaders in their markets and successfully integrating them into the Perini family. We are confident in our ability to do so in the future.

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

Question-and-Answer Session

Operator

(Operator Instructions). And it looks like we will take our first question from the side of Richard Paget with Morgan 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 of last year when your backlog was close to $9 billion, and you gave initial '07 guidance, and I think it was a range of $2-$2.20. Now you have a backlog of about $7.8 billion, and the outlook for next year is $3.50-$3.75. What things have changed over the course of the year that the profitability of that backlog is so considerably different and the numbers are up as much as they are?

Bob Band

Richard, I think we can point to several factors. One, is that we have a great track record now in executing the large projects in Las Vegas in terms of our costs matching our forecasts and in many cases actually coming in 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 Coverage jobs in Iraq with a good view on results there, coupled with our feeling of containment of the lost side of some of the legacy projects on the Civil operation. So I would say those factors contribute to the different outlook.

Richard Paget - Morgan Joseph

Okay. Because I know when we talked at the end of last year margin sustainability and Management Services was a question. Do you think with the way that you re-upped some of those overhead 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't initially forecast those levels of margins, we certainly will try to maximize through our execution the results from those projects.

Richard Paget - Morgan Joseph

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

Bob Band

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

Richard Paget - Morgan Joseph

Then I just want to make sure I heard 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 going international in acquisitions with Management Services. Given some of the casino activity overseas, and I know you mentioned that you wouldn't plan going overseas a while ago, would you change your stance on that?

Bob Band

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

Richard Paget - Morgan Joseph

Okay. Thanks. I will get back in queue.

Operator

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

Steven Fisher - UBS

Good afternoon, guys. Another nice 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 like you 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, if anything, we see very strong markets there. You know, this is such a lumpy business and I know you've hung in with us quarter after quarter as we talked our way through new projects that are just about in the backlog. So that is the issue we face...is a lumpiness in the bookings.

Steven Fisher - UBS

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

Bob Band

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

Steven Fisher - UBS

You also mentioned you are pursuing some gaming projects in the Northeast. What kind of timing might you expect 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 that the New York work would start to show its face in the first or second quarter of next year. Connecticut continues to show positive signs of further rehabbing of existing facilities. That doesn't look like it's going to change much. Pennsylvania is off to a slow start but I think ultimately you will start to see some real significant progress there in the next year as well.

Steven Fisher - UBS

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

Bob Band

It is our feeling that we may get variances in that nature, and that's due to timing of costs and the overheads and what not. I don't see any significant change in our margin and backlog or in our ask. You know, there's always a bid and ask when you deal with honors on margins. So we are asking our owners for very strong margins. There are pressures out there in the market geographically. We are seeing some pressures on margins in the Florida market, but overall we think we can hold our margin targets, and we are fairly confident there.

Ken Burk

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

Steven Fisher - UBS

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

Bob Band

You didn't missed it, but the entire 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 spike out that chart separately. As soon as we have a final agreement, we will issue a full release detailing that.

Steven Fisher - UBS

Okay. Great. Thanks a lot.

Bob Band

You bet.

Operator

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

John Rogers - D.A. Davidson

Congratulations. I guess first thing, 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 $66 million 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 the quarter-end backlog. The subsequent projects in Cherry Hill for $86.8 million and for $239 million in Rudolph are not in the backlog.

John Rogers - D.A. Davidson

Not in the backlog.

Bob Band

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

John Rogers - D.A. Davidson

And that would be the same with the $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 got that right. Then, secondly, you know with your revenue guidance there of $5 billion relative to your backlog, I am just curious. How much of that revenue that 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 I would say that anywhere from 70%- 75% is probably in backlog. And I would say that is pretty much the target number right now.

John Rogers - D.A. Davidson

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

Bob Band

Yes. Historically, we would usually go into a year with about 50% of current year's revenue in backlog and then we would have to book and burn. You would have to book the work early enough to burn a substantial amount to hit your targets and here with a larger backlog 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 cash position right now, how much of that -- or what size of acquisitions are you looking for? Obviously, if you get another Rudolph & Sletten, you can do something huge, but -- ?

Bob Band

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

So I mean, the exception is any international marketplace we would look at, and we have looked at companies more in the $100 million size to match 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 job and that runs more to your bonding capacity than anything else. So I would say that we have very strong bonding capacity in excess of $1.5 billion of bonding capacity. And so, that is generally plenty of capacity, and if we had to surge some 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 - BMO Capital Markets

Hi, thank you. Avi Fisher from BMO Capital Markets. Good afternoon, 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 bookings anytime in the fourth quarter or--?

Bob Band

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

Avi Fisher - BMO Capital Markets

What project is that?

Bob Band

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

Avi Fisher - BMO Capital Markets

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

Bob Band

Dick? I think we're still targeting November of '09, aren't we?

Dick Rizzo

We are. Yes, and it was also set.

Avi Fisher - BMO Capital Markets

Okay. Thanks, Dick. On some of the projects that you might be bidding on, I mean some of the big names, obviously City Center East in Atlantic 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 provided conceptual pricing to the [Cruiser] International folks on the second assemblage 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. But they are hoping to start it by the middle of '08 and we will be in a position to show them what we can do to help them in the near-term here.

Avi Fisher - BMO Capital Markets

I mean, that's really…I mean, that is a core market of yours. 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 the middle of '08. That's pretty aggressive in my book, but I believe it will be some time in '08, and we will be in a position to show them what we can do to help them get started. We're actually working on that as we speak.

Avi Fisher - BMO Capital Markets

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

Bob Band

Well, Avi, as we get past the 50% complete mark on an international job, we get a lot more confident in our ability to complete within budget. So within historical trends, typically so, as we start this new workup, we only forecast, say, the as bid margins on that work, and we wouldn't get any more confidence until we hit the 50% mark. So this $68 million that has just 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 - BMO Capital Markets

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

Bob Band

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

Ken Burk

For the quarter was $31.7 million.

Avi Fisher - BMO Capital Markets

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

Ken Burk

Correct.

Avi Fisher - BMO Capital Markets

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

Ken Burk

No, that was year-to-date.

Avi Fisher - BMO Capital Markets

That was the year-to-date?

Ken Burk

Yes. Make a note of that.

Avi Fisher - BMO Capital Markets

Also one last question. It looks like most of the bookings you had in the quarter was for new work, whereas through the first half of the year, 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 a first-half event?

Bob Band

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

Avi Fisher - BMO Capital 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 - Bishop Rosen

Hi.

Bob Band

Hi, Ben.

Ken Burk

Hi, Ben.

Ben Warman - Bishop Rosen

Great quarter, as usual. I'm getting used to giving you a lot of plaudits. I noticed that yesterday MGM Mirage announced plans to develop a multi-billion dollar MGM Grand Abu Dhabi in conjunction with their partners Mubadala Development 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 work outside of the U.S. Notionally, we look at that market this way, we are in much demand in the U.S. Our resources are stressed in handling that demand and we don't see any point in splitting the team to attack it internationally. So we are going to stay right here where we know the client base, where we know the project uniqueness and also the legal environment.

Ben Warman - Bishop Rosen

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

Bob Band

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

Ben Warman - Bishop Rosen

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 with Morgan Joseph. Please continue.

Richard Paget - Morgan Joseph

Just quick housekeeping, and I apologize if you already gave this 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 the Building segment, $279 million for Civil, and $156 million for Management Services.

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 Avi Fisher with BMO Capital Markets. Your line is now open.

Avi Fisher - BMO Capital Markets

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

Dick Rizzo

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

Avi Fisher - BMO Capital Markets

Started on the 2.5% range?

Ken Burk

Yes.

Avi Fisher - BMO Capital Markets

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

Bob Band

Thanks, Avi.

Operator

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

Ryan Levinson - Private Fund

Hi, thanks for taking my question. Nice quarter. I'm relatively new to following your company and I was just wondering if you could help me understand the difference between the second quarter's backlog or excuse me, new business awarded and this quarter's new business awarded? I was just wondering if there was something special about the second quarter versus this 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 of additions 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 to Rudolph & Sletten, the Tower project, Foothills, Oak Casino, so all of those plus some additions to contract values of about $494 million. That was in the second quarter, and I think we covered some of the activity already in our message 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 understand the -- 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 just trying to figure out just directionally. Even if I include the subsequent award, the Rudolph & Sletten, the $239 million, and I add that to the $196 million, that's still just $500 million of new adds. And I guess looking back also at the second quarter's backlog, if I strip out the two things that you mentioned, the $658 million and $494 million, that's still $1 billion -- what is 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 Ken said. He said that in the second quarter we had $658 million increase in value of City Center, which we did not have in the third quarter.

Ryan Levinson - Private Fund

No, no. I understand that. What I'm looking at -- okay, you have got $2.341 billion of new business awarded. This is from the Q, from your second quarter 10-Q. So $658 million of that was City Center additions. $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 first quarter 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 additional questions in the queue. (Operator Instructions). And it looks as if we have no additional questions.

Bob Band

Ken and I want to -- and Dick want to thank you all for devoting this amount of time at the end of the day to the call. We appreciate it and we look forward to talking with you on the next release. Thank you very much.

Ken Burk

Thanks a lot.

Operator

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

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