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Executives

Ken Burk – SVP and CFO

Ronald Tutor – Chairman and CEO

Robert Band – President and COO

Analysts

Richard Paget – Morgan Joseph

John Rogers – D.A. Davidson

Steve Fisher – UBS

Avi Fisher – BMO Capital

Shaun Kelley – Banc of America

Dennis Sybil [ph] – Dechoses [ph] Capital

Perini Corporation (PCR) Q2 2008 Earnings Call Transcript August 7, 2008 4:30 PM ET

Operator

Good day, ladies and gentlemen, and welcome to the second quarter 2008 Perini Corporation earnings conference call. At this time, all participants are in a listen-only mode. We will be a facilitating a question-and-answer session towards the end of today’s conference. (Operator instructions) As a reminder, this conference call is being recorded for replay purposes.

I will now turn the call over to Mr. Ken Burk, Senior Vice President and Chief Financial Officer. Please proceed.

Ken Burk

Good afternoon, everyone. Thanks for joining us on Perini’s second quarter of 2008 conference call. My name’s Ken Burk, Chief Financial Officer of Perini Corporation. With us today are Ronald Tutor, Chairman and CEO, and our President and Chief Operating Officer, Robert Band.

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

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

These risks and uncertainties are discussed in detail in our filings with the SEC, including Perini's Annual Report on Form 10-K for the fiscal year ended 2007; our quarterly report on Form 10-Q for the quarter ended March 31st, 2008; our definitive proxy statement, which was filed on August 6th, 2008; as well as in today's news release. Our statements on this call are made as of today, August 7, 2008, and the company undertakes no obligation to update any of these forward-looking statements contained in the call whether as a result of new information, future events, changes in expectations, or otherwise.

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

Ronald Tutor

Thanks, Ken. Good afternoon, everyone, and thank you again for joining us on the call. This was another outstanding quarter with record revenues of $1.39 billion, up 21% from the year ago. And record net income of $28.6 million, up 4% from a year ago. Diluted earnings per share were $1.03 for the second quarter of 2008.

The backlog of uncompleted construction work at June 30th was $6.8 billion, which does not include the recently announced July 15th signing of a $1.2 billion construction contract to build a new Terminal 3 at McCarran International Airport in Las Vegas.

In addition, we have approximately $2.8 billion of pending award – awards, for which we have received letters of intent or notices that we are the apparent low bidder. The pending awards, excuse me, are expected to enter our backlog over the next two to three quarters with most of the new work coming from our building segment. For example, we announced last quarter that we had been selected to build a substantial portion of the new MGM Grand Atlantic City with a budgeted scope in the $1 billion to $1.2 billion range. In California, we announced that Rudolph and Sletten had signed a preconstruction services agreement with a developer for a high-end luxury condominium project in Beverly Hills, which would lead to a construction contract in excess of $550 million.

Overall, we continue to see many opportunities to secure new business in each of our business segments, both domestic and international. Bob will share more details of our prospects in a few minutes, including our strategy to become a significant contractor in both Dubai and Abu Dhabi in the Middle East.

The current economic climate involving the credit market has caused some customers delay, and certain new projects start primarily in hospitality. In the gaming market, some customers have decided to postpone preconstruction activity until financial markets regain their footing and open up credit capacity. What we see is the probability of a shift of new starts for certain of our customers for up to a year. There have been no indications that any of our prospects have cancelled any of the programs being considered. We have a solid backlog of contracts pending awards, and excellent prospects that can put us in a position to sustain the momentum we have generated over the past few years.

On August 6th, 2008, we filed our definitive proxy statement with the SEC. As most of you know, we announced that we entered into a merger agreement with Tutor-Saliba Corporation. Pursuant to which, Tutor-Saliba will become a wholly-owned subsidiary of Perini upon the completion of the merger contemplate. As discussed last quarter, we believe that the combination of Perini and Tutor-Saliba will create for our shareholders a stronger and more diversified construction company in each of our core markets and operating segments capable of generating enhanced value. With the added resources, relationships, and market position of Tutor-Saliba, we’re excited about its growth prospect with the new Perini.

Now, I’d like Bob Band, our President and CEO, to share more details of the second quarter results, Bob.

Robert Band

Thanks, Ron. Our success in the quarter was a result of an outstanding performance by our building and management services segments. We remained focus on superior execution and customer satisfaction. As anticipated, our building business continued to convert our significant backlog of worth into revenues and profits, and cash flows as anticipated. Management services made a solid contribution to our performance this quarter, continuing its fine work for the US government on all the head coverage protection systems in Iraq as well as fuel and water storage projects also in Iraq.

With our backlog of – at $6.8 billion as of June 30, 2008, combined with the July 15th award of the $1.2 billion construction contract to build the new Terminal 3 at McCarran International Airport in Las Vegas, and the pending awards and targeted prospects in 2008 and 2009, we believe we have a platform to deliver solid financial results for the foreseeable future. The June 30, 2008 backlog includes new contract awards and adjustments to contracts and process added during the second quarter of 2008 totaling approximately $1 billion, which includes approximately $200 million of additional work in the hospitality and gaming market, principally in Las Vegas, and approximately $694 million of primarily healthcare and office building projects at Rudolph and Sletten in California.

The civil operation added a $73 million bridge rehab project in Westchester County, New York for the New York State DOT. In addition to the pending awards of $2.8 billion that Ron mentioned earlier, we have targeted prospects totaling approximately $11.1 billion in the gaming and hospitality markets that could be awarded in the next 24 months. In addition, spending on education, healthcare, and civil transportation projects continues to make those areas very attractive markets for Perini. For example, we’ve identified approximately $5.4 billion in targeted projects that could be awarded in ’08 or 2009 in the education, healthcare, and office and industrial building markets in California or in Florida.

Our building segment continued its work on the ongoing large scale projects. We are making good progress on each of the main structures that the 76-acre site of MGM Mirage CityCenter in Las Vegas with a current contract value in total of approximately $6 billion. We have poured the 60th of the 66-storey (inaudible) tower hotel casino recently named ARIA, and in the process of installing curtain walls on the 50th and 51st floors. Having topped off the 66th-floor of the Vdara Condo Hotel, we are currently installing exterior curtain wall on the 58th through 63rd floors. We are currently pouring the 53rd floor of the Mandarin Tower, with exterior enclosure up to level 22. We have begun pouring decks at both the Twin Veer Towers, and are up to the 26th floor at the West Tower and the 19th floor at the East Tower. We are preparing to pour the 21st floor at the Harmon Hotel. And structural steel erection nears completion at the retail and entertainment district with exterior closure walls well under way. Our work at the Cosmopolitan Resort & Casino in Las Vegas continues.

All current amounts due to us have been paid, and we have an interim agreement with Deutsche Bank for payments continuing on a monthly basis with certain areas on hold while they work out an agreement with a new developer and flagship operator. Structural steel has been completed, and we are up to the 32nd floor at the West Tower and up to the 29th floor at the East Tower. Due to the on-hold status of certain areas at the Cosmo, it has been agreed with Deutsche Bank that a new completion date will be mutually agreed to once the foreclosure is complete, and the new developer and operator have been selected. Our work on the 31st storey – 31-storey Sheraton Phoenix Downtown Hotel continues ahead of schedule, with the certificate of occupancy received August 1st, four months in advance of the October 9th, 2008 Grand Opening.

As mentioned in our last quarterly report, in our continuing efforts to acquire projects in the Northeast, preconstruction services have commenced at the MGM Atlantic City with an anticipated fourth quarter 2009 construction start. The value of Perini’s portion of that work is estimated to be $1 billion to $1.2 billion. In the West, our contract has been awarded and notice to proceed has been received for the $1.2 billion expansion to McCarran Airport in Las Vegas. The McCarran Airport project is scheduled to be complete in the fourth quarter of 2011. In California, Rudolph and Sletten continues to build on its reputation of quality and expertise in constructing healthcare and educational facilities, corporate campuses, and biotech labs. We have signed a contract for preconstruction activities for a high-end luxury condominium in Los Angeles, which should lead to a contract over $550 million once the developer has finalized their plans and received approval from local government agencies.

Ken, are you still on the call?

Ken Burk

Yes.

Robert Band

Okay. In addition, Rudolph and Sletten continues preconstruction services, and recently started the site work for the 600,000-square foot resort hotel and casino in Sonoma County, California for the Dry Creek Rancheria Band of Pomo Indians. This project, currently budgeted at $325 million, will not be added to our backlog until the customer finalizes their financing for the entire development. As discussed last quarter, we’re expected to benefit from the February 2008 approval of gaming compacts in California. These measures allow the Pechanga, Morongo, and Sycuan bands of Native Americans to expand their gaming operations. We believe we are in an excellent position to win substantial new work in this area, especially since we have worked with these three tribes in the past. There are also some opportunities for Native American gaming projects in Florida for our James A. Cummings unit. In Florida, James A. Cummings has approximately $207 million of new pending awards of education, gaming, and hospitality projects in Dade County, and should be entered into our backlog in 2008 and early 2009.

Regarding our civil segment, there has been some growing concerns that lower toll collections resulting from higher gas prices could impact the funding for civil projects. While there maybe some pressure on funding and delay in bidding work, overall in our markets in New York, Maryland, and Washington DC, we continue to see plenty of opportunities to win our share of larger, more complex work that fits our expertise.

Our management services segment delivered another quarter of excellent performance due to our work with the Army Corps of Engineers in the US Department of State on overhead coverage systems in the green zone and elsewhere in Iraq in upgrading fuel and a lot of storage and infrastructure at various military bases throughout the country. We currently have approximately $125 million of pending awards for new work in Iraq, including a $25 million administrative building and $100 million of additional overhead cover projects. These projects will likely be awarded as we get closer to the September 30, 2008 end of the US Government’s fiscal year.

There are several promising project opportunities in Guam under our existing SATOC contract with the US Air Force, which will be proposed on prior to September 30, 2008. And the estimates range from $10 billion to $15 billion for construction spending for the relocation of the previously announced move of the Marines from Okinawa, Japan to Guam.

The construction market in Dubai and Abu Dhabi is extraordinary with well-publicized spending estimates in excess of $400 billion. Through our reputation in gaming and hospitality and network of relationships and strategic alliances, we have been introduced to a number of strategic partners and customers who have expressed interest in teaming with Perini and Tutor-Saliba in that market. Therefore, we have dedicated some of our talented resources from our gaming and hospitality building business and our international businesses in the anticipation of becoming a significant contractor in this part of the world. In Dubai, we have agreements in principle with substantial local and international partners to participate in construction joint ventures, which may be awarded within 90 days. These are for large hospitality and mixed-use projects, for which we have participated in several design workshops today. The value of our joint venture share of these project opportunities is in excess of $4 billion.

We are also pursuing the additional task order based work on our HERC project at an existing (inaudible) base in the United Kingdom.

With that, I’m going to turn the call over to Ken who will give you the financial details for the quarter.

Ken Burk

Thank you, Bob. I will now review the second quarter results in some detail. As Bob mentioned earlier, our backlog at June 30th is $6.8 billion, down 10% from $7.6 billion at the end of ’07. However, this excludes the $1.2 billion that we recently signed at McCarran Airport. Backlog by segment is building $6.3 billion, civil $430 million, and management services is $110 million.

In the second quarter of ’08, revenues were $1.39 billion, and increase of 21% from $1.15 billion reported in the second quarter a year ago. On a recordable segment basis, revenues from or building segment were $1.3 billion, an increase of 24% from $1.05 billion in the second quarter of ’07. This increase was primarily due to the conversion of our substantial backlog into revenues, primarily from our hospitality and gaming projects, and to a lesser extent, from our Rudolph and Sletten operations, healthcare and office building projects in California. Revenues from our civil segment were $59 million, down 7% from $63 million a year ago. Management services were $30 million, down 15% from $36 million a year ago. This decline was primarily due to the decreased volume of work in Iraq.

Our total gross profit increased 9% to $71 million from $64.9 million in the second quarter of ’07. This increase is primarily due to the revenue growth and associated profitability in our building segment. The extraordinary results by our management services segment in the second quarter of ’07 was partially offset – partially offset the overall gross profit increase in ’08.

General and administrative expenses were $28.4 million, up 17% from $24.2 million in the second quarter of ’07. This was primarily the result of increases and building construction G&A expenses. Total G&A expenses were 2% of revenues, compared to 2.1% in the second quarter of ’07, reflecting a continued improvement in efficiency of overhead against the 21% increase in revenues for the same period.

Income from construction operations was $42.6 million in the second quarter of ’08, a 5% increase from $40.7 million in the second quarter of ’07. Breaking down income from construction operations by segment, the building segment income from construction operations over the quarter was $42.2 million, an increase of 18% from $35.6 million in the second quarter of ’07. This increase was due to – due primarily to the higher revenues as I discussed earlier. Civil segment income from construction operations was $700,000 in the second quarter of ’08, compared to a loss from construction operations of $2.1 million a year ago.

The second quarter of ’07 included a downward profit adjustment for a few – and a few projects in Metropolitan in the New York region. Management services income from construction operations was $5.3 million in the second quarter of ’08, compared to $12 million in the second quarter of ’07. Management services operating margin was 17.7% for the quarter versus 33.6% a year ago. This decrease in margin reflects extraordinary operating results we recorded in the second quarter of ’07 due to favorable performance on certain projects in Iraq.

Other income was $2.5 million in the second quarter of ’08, compared to $2.8 million in the second quarter of ’07. And interest expense was $400,000 in both second quarter of ’08 and second quarter of ’07. Provision for income taxes was $16.2 million, compared to $15.5 million a year ago. And finally, net income was $28.6 million in the second quarter of ’08, compared to $27.6 million in the same quarter a year ago.

Diluted earnings per share were $1.03 in the second quarter of ’08, compared to $1.01 for the same period of ’07.

Looking now at our balance sheet at June 30, 2008, our working capital stood at $244.5 million, down from $293.5 million at the December 31, 2007. This represents a current ratio of 1.18 to 1.0. While we were able to generate substantial cash flow from operations during the first six months of ’08, the decrease of working capital reflects a classification of $101 million of our investment and auction rate securities as long term at June 30, 2008 due to the well-publicized liquidity issues currently surrounding this type of investment.

As of June 30th, 2008, we had $416.7 million in cash and equivalents, compared to the December 31, 2007 cash balance of $459.2 million. The decrease in our cash balance is a result of the investments that we made in auction right securities in the amount of $104.8 million not converted to cash before June 30th. For the first six months of 2008, we generated $72.9 million in operating cash flows due to the substantial increase in building segment revenues combined with favorable performance by the management services segment.

In the first six months of ’08, cash used by investing activities was $121.4 million, primarily for the net purchase of auction right securities and the purchase of construction equipment to be used in support of our construction operations. In addition, cash provided from financing activities was $6 million, due primarily to the proceeds received from financing of a portion of our construction equipment purchases.

At June 30th, long term debt stood at $17.5 million excluding current portion. And we had $113.7 million available under our revolving credit facility, plus an additional $112.8 million available under a temporary standby line of credit for the incremental liquidity support, should we need it, while we await opportunities to liquidate our investment and auction right securities. The temporary standby line of credit will reduce dollar per dollar as we liquidate our positions in option rate securities.

Stockholders equity increased 16% to $428 million, from $368.3 million at December 31, 2007. We believe that our strong financial position and credit arrangements provide us with adequate resources to meet our liquidity and working capital requirements, and implement our business plans in the future. We expect to complete the merger with Tutor-Saliba in early September following the annual meeting, which is now scheduled for September 5th, 2008. The transaction is expected to be accretive to earnings per share beginning in the first full fiscal year of combined operations.

Assuming the merger closes in September, the company is maintaining its existing guidance for 2008 revenues in the range of $5.5 billion to $5.9 billion and diluted earnings per share in the range $3.50 to $3.75. Beyond fiscal 2008, the company is continuing to target fiscal 2009 revenue and diluted earnings per share in the range of $7.3 billion to $7.8 billion and $4 to $4.20, respectively, and continuing to target diluted earnings per share growth in 2010 of 10% to 20%.

I’ll now turn the call back over to Ron for his closing comments.

Ronald Tutor

Thanks, Ken. The second quarter marked the eleventh consecutive quarter of record revenues for Perini and a new record for net income.

Our building segment continues to deliver strong performance as we complete large-scale complex projects for customers in Las Vegas, California, Connecticut, and Maryland. Rudolph and Sletten and James A. Cummings have sustained their leadership positions with the execution of healthcare, educational building construction, as well as our significant role in the Native American gaming projects.

Our management services segment continues to deliver outstanding performance in Iraq on overhead coverage systems in the design and construction of water and fuel storage projects, and believe ourselves to be uniquely positioned to capture new business in Guam and Dubai. Our civil business will continue to improve its performance through the course of this year.

Finally, I want to share my confidence that we have in the proposed combination of Perini and Tutor-Saliba, and my personal commitment to realize all of these synergies and market opportunities in front of us. It is truly an extraordinary time for the venture of these companies, and we expect to combine companies that deliver outstanding returns for our shareholders by leveraging the strengths of both companies in the markets we serve.

That concludes our prepared remarks. Now, Bob, Ken, and I will take your questions.

Question-and-Answer Session

Operator

(Operator instructions) Your first question will be from the line of Richard Paget of Morgan Joseph. Please proceed.

Richard Paget – Morgan Joseph

Good afternoon, everyone.

Ronald Tutor

Hi, Richard.

Richard Paget – Morgan Joseph

I wonder if you could talk about kind of the change here and how you guys have identified the – your targeted prospects over the next couple of quarters. It seems $11.1 billion was – I think you said that maybe $18 billion on the last call. I wondered what are one of the big changes there.

Ken Burk

Okay. Richard, this is Ken. Basically, what we have is we’ve seen the movement of some projects out a little bit as we discussed, out into perhaps into 2010. And we’ve also seen some movement inward, which includes some of the projects that we mentioned like Atlantic City MGM, which now become pending awards. So really what we suggest you do is you look at backlog, and then you look at pending awards. And then the last one is what we refer to as the targeted prospects. So I think you’ll see that it’s still – we’re still pretty much on target with the overall picture that we painted for the markets, with the notable exception that there could be some shift in the 2010.

Richard Paget – Morgan Joseph

Okay. So it’s more of a timing issue than some of these projects going away.

Ken Burk

That is correct. We did mention – I think Ron was the one that mentioned that we haven’t seen any of our targeted projects or prospects cancel programs. What we have experienced have been some of our customers have indicated that they like to delay some of the starts – some of the preconstruction activity has slowed, but none of them that we have on our targeted list have indicated any reason or any indication of canceling the program.

Richard Paget – Morgan Joseph

And then, with the Middle East, you talked about $4 billion of opportunities there. Is that part of that $11 billion or is that incremental?

Ken Burk

Well, again, it comes back to the timing of when it actually comes in. So that when you consider that some of the projects would go in to 2010, then you would bring in the Dubai in the shorter term. So it is included in the overall number.

Richard Paget – Morgan Joseph

Okay. And then how are those JVs going to work? I mean are you providing more management capabilities or are you actually going to be moving equipment over there, and personnel?

Robert Band

This is Bob. We’ll principally be providing management talent into those projects. Then our partners will provide the trade labor. And the joint venture itself will probably provide the equipment.

Richard Paget – Morgan Joseph

Okay. And then finally, in terms of volumes right now at CityCenter, do you think we’ve kind of hit peak levels right now and we might not see the sequential increase, I mean the second quarter would be a good run rate?

Ronald Tutor

Hi, this is Ron Tutor. I think that’s a fair statement on CityCenter. We and MGM have a handle on the overall budget with a completion target at the end of 2009. I think you’ll see it pretty much go at this level. I don’t see it jumping up any further. You’ll probably level off.

Richard Paget – Morgan Joseph

Okay. Thanks. I’ll get back in queue.

Operator

Your next question will be from the line of John Rogers of D.A. Davidson. Please proceed.

John Rogers – D.A. Davidson

Hi, good afternoon.

Ken Burk

Hi, John.

John Rogers – D.A. Davidson

I guess first, Ken, how much cash do you have as of the end of the quarter?

Ken Burk

Including equivalents, $416.6 million.

John Rogers – D.A. Davidson

And that does not include auction right securities and –?

Ken Burk

That’s correct. We reclassified those out into longer term investments.

John Rogers – D.A. Davidson

Okay. And then secondly, in terms of your work in Dubai and the Middle East, would that be similar contract terms to what you’re doing in the building segment where it’s guaranteed or fees basis?

Robert Band

John, this is Bob. The terms that we’ve discussed with the owners on the current projects in Dubai do not incorporate a guaranteed max feature. They are cost plus projects.

John Rogers – D.A. Davidson

Similar to what you’re doing in Las Vegas now?

Robert Band

Well, some of the work in Las Vegas provides for guaranteed max prices. The work we’re discussing in Dubai does not.

Ronald Tutor

This is Ron Tutor. The work in Dubai also affords the partners higher fees than we normally achieve in Las Vegas.

John Rogers – D.A. Davidson

Okay. That was my second question.

Ronald Tutor

So I beat you to it.

John Rogers – D.A. Davidson

Okay. Well, and I don’t know whether you’re going to answer this, but can you give us an update on how to – (inaudible) this business is?

Ronald Tutor

Yes. I can share that at this particular stage, John, we’re on track. We’ve gone through review of forecast. And we’re happy to say that we see the business is on track and according to our expectations.

John Rogers – D.A. Davidson

Okay. Great. Thank you.

Operator

Your next question will be from the line of Steve Fisher of UBS. Please proceed.

Steve Fisher – UBS

Hi, good afternoon.

Ken Burk

Hi, Steve.

Steve Fisher – UBS

I just want to like clarify on the Dubai. You said $4 billion within 90 days. What happens in 90 days? You get awarded and sign a contract, then that will go in your backlog in 90 days?

Robert Band

We’re anticipating at least a portion of that. We’ll go into contract within 90 days, correct.

Steve Fisher – UBS

Okay. Will you say it’ll be the majority of it or a small piece of it? I’m just trying to get a sense if there’s going to be a huge ramp up in backlog 90 days from now.

Ronald Tutor

This is Ron Tutor. A major portion of it will go to contract. If we close, it’ll close within 90 days that’s the timeframe. You still have to close, and we’re in the final stages of discussions. But there’s no contract until it’s executed.

Steve Fisher – UBS

Okay. And then, I guess that’s the – some of these projects get pushed out by another year or so, but at the same time you still keep the $4, excuse me, $4 to $4.20 of guidance for 2009. What is the offsetting benefit there? Is it this Dubai work? Is it the extra $100 million of overhead coverage systems? How should we think about that?

Ronald Tutor

This is Ron Tutor. First of all, we have ramped up significantly our civil and public works operation, particularly with this pending merger in its final stages. You don’t have our prospects list, but there is an enormous amount of public sector work, which generates significantly higher margins of profit, as well as we believe that our Dubai operation is definitely ramping up from our initial call some three months or four months ago when we were just getting involved. It appeared that we thought we had the opportunity for a certain of revenue. There’s no question in my mind that we have an opportunity to replace whatever casino work slips with – not casino, but work in our other sectors, meaning Rudolph and Sletten. And even more significantly so in the public sectors where Perini has been a very small player, with the exception of this civil operation.

Steve Fisher – UBS

Okay. Great. And then on MGM Atlantic City, has MGM actually made a final investment decision on that project?

Ronald Tutor

No.

Steve Fisher – UBS

Okay. When do you anticipate that might happen?

Ronald Tutor

You’d have to ask them. Right now, our take is diverted a year from when our original anticipated start. But if they’re like all our other good casino customers, I don’t know that that decision’s been made, and they haven’t shared it with us.

Robert Band

But one of the reasons for the deferral too is they wanted to get it much further along on the design before they start it.

Steve Fisher – UBS

Okay. That’s fair. And then, when do you think the Pomo Indian contract could come into backlog?

Ken Burk

We indicated, Steve, that we started the site work and continued the preconstruction. I think what they’re doing is trying to finalize their financing now. And I think the last indication we had was it could be as much as six months. So they are going ahead to get the site work going. And then they’d like to go ahead and fill in the rest of that, which is the time we see that in our backlog.

Steve Fisher – UBS

Okay. Great. Then lastly, Ken, you’re just talking about the Tutor-Saliba estimates and expectations, just to clarify, that’s $1.9 billion to $2 billion of revenues, then $145 to $165 million of operating income in 2009. Is that still right?

Ken Burk

Basically, Steve, we’re not really able to get into all the details, but what our message is when we have – when we look at the combined forecast including the contributions from Tutor-Saliba that we are on track.

Steve Fisher – UBS

Okay. Great. Thanks a lot.

Operator

Your next question will be from the line of Avi Fisher of BMO Capital. Please proceed.

Avi Fisher – BMO Capital

Hi, good afternoon. Excuse me. Thanks for taking my call. The Cosmopolitan, you mentioned it was continuing, how much – but there’s a new completion date. Is there a new completion date and how much backlog is left to complete?

Ronald Tutor

It’s Ron Tutor. Since I watch it, right now, we are negotiating a new completion date because, A, they have significantly increased our work. On the one hand, they’ve slowed work in the restaurants, gaming, and certain areas specific to whomever takes over, which has put on hold to about $100 million to $150 million worth of work. At the same time, where we have shelved in significant areas of space that the owner or another builder might do the completions. They’re now talking to us about completing it. So the net result of that is all delays that’s probably in the order of magnitude of as much as three to four months.

But really, instead of a decrease in our contract projections, it’s probably ending up a net increase. So we see the completion sliding and we’re in a project – in the process of working with Deutsche Bank (inaudible) to see when they’re going to release the areas they put a hold on, which at this point is only a fraction of the project. Everything else, as you can see, the (inaudible) are completing and finishing. It’s only limited to certain spaces. It’s already been framed out, and in terms of the interior finishes and people closed. So the net result of what I’ve been looking at is an ultimate increase in the contract value and a delay consistent with re-looking at some of those spaces. And if I had to hazard, I guess, I’d say three to four months in delay in completion.

Avi Fisher – BMO Capital

And getting back – thanks for those comments, Ron. And sort of getting back, you’re guidance implies, okay, some of the things that are in backlog now get pushed out, but they get replaced by other opportunities.

Ronald Tutor

Yes.

Ken Burk

Yes. That’s right. And then, Avi, to answer your other question, the backlog for the Cosmopolitan is at $1 billion.

Avi Fisher – BMO Capital

Okay.

Ronald Tutor

Let me add one other thing. Right now, we’re experiencing an extraordinary influx of major civil and public works that is helping a great deal to reduce that commitment to the Vegas casino work. Between New York, California, and Las Vegas, we have absolutely covered up with public works we’re currently doing.

Avi Fisher – BMO Capital

Got you. Keeping to Las Vegas for a second though, what portion – and it’s really impressive the amount of work you’ve been doing there. What portion of that project has, from my understanding or I’m not sure if I’m right, either (inaudible) triggered into a GMP or where you have the maximum price set already?

Robert Band

Which project are you talking about?

Avi Fisher – BMO Capital

Well, they’re all different – within CityCenter.

Robert Band

CityCenter, we’re in the final throws of concluding our guaranteed prices, which from a timeline varies from building to building. But my guess is we’ll complete our guarantees probably by October, November.

Avi Fisher – BMO Capital

When you say that, you mean in October, November, you’ll have a guarantee price.

Robert Band

Yes. But it isn’t – well I suppose that once we guarantee them all, you’ll add them up, and it’ll be a – we’re ending up guaranteeing them component by component because they’re all in different stages.

Avi Fisher – BMO Capital

Okay. And just circling to (inaudible) for a second, where there any charges on auction rate securities in the quarter?

Ken Burk

No. Not in the second quarter, Avi.

Avi Fisher – BMO Capital

Not in the second quarter. It was just in the first quarter.

Ken Burk

That’s right.

Avi Fisher – BMO Capital

The McCarran bid, and congratulations for winning that, I presume that all goes into civil. Is that the way to look at it?

Robert Band

Buildings.

Ronald Tutor

No. That’s in our building business.

Ken Burk

Public, building.

Avi Fisher – BMO Capital

Okay. McCarran’s a building. But it’s a fixed price contract, right?

Ken Burk

Right.

Avi Fisher – BMO Capital

Okay. McCarran, building.

Robert Band

There are civil components to the project, but that’s not the significant portion.

Avi Fisher – BMO Capital

Okay. And do you have any expectation of what kind of margins you’ll get – you can get on that? It sounds like it will have a different margin component than your typical building work.

Robert Band

We’ll just say that on our – all of our public sector projects where we take substantially more risk, we believe we’re entitled with substantially more reward.

Avi Fisher – BMO Capital

Okay. And do you – since I’ve been watching you guys, you haven’t been done too much civil works. I haven’t (inaudible) to it, but – or I should say, fixed price for it. Is there any accounting, anything in terms of how you time the recognition of profits or do you recognize profits from day one or –?

Robert Band

There are no differences. We’re on the same percentage of completion, which are based on our estimated cost, including our contingencies. And those are all accounted for the same way.

Avi Fisher – BMO Capital

Got you. All right. Well thank you. Thanks for taking my questions.

Operator

(Operator instructions) Your next question will be from the line of Shaun Kelley of Banc of America.

Shaun Kelley – Banc of America

Great. Thanks. Good afternoon, everyone. Just a quick question just to clarify on MGM Grand Atlantic City, did you say that it has moved from pending awards – or from the backlog to pending awards? Did I catch that correctly?

Robert Band

No. No. It’s never been added to our backlog. It’s in our pending awards from the first quarter conference call that we had. And that’s where it is today.

Shaun Kelley – Banc of America

Got it. Thanks. And then, the $200 million of additional work on Las Vegas, was that related to Cosmopolitan piece that you just talked about and the potential increase there? Or is that related to something else?

Ken Burk

These are related primarily to budget and scope changes on CityCenter, primarily.

Robert Band

None of that – and none of the Cosmopolitan increases have been added to backlog because we’re various stages in negotiation in them. So I was only pointing out that that’s how it’ll end up. We have not adjusted the backlog to them.

Shaun Kelley – Banc of America

Understood. It was related to CityCenter. And then, any update on progress for the Cursor [ph] opportunity up on the north part of the strip?

Ronald Tutor

We haven’t spoken to them in the last 60 days. In fact, this is Ron Tutor, I’ve asked our people to talk to Jim Booker who was in Dubai to get an update on when they’re talking about that going forward. Our take is that has an opportunity to stay in place for a start toward the end of next year. But we haven’t been able to get anyone to confirm it one way or the other.

Ken Burk

I think MGM recently announced that, as Bob indicated, that they’re looking at spending more time in the planning and design area to try and lock in a tighter budget for financing and other reasons.

Shaun Kelley – Banc of America

And then just one last one on, obviously, there’s a large development that was delayed on the strip for the foreseeable future. Any thoughts of what that kind of does to the market out there in terms of labor, and I guess the (inaudible) –?

Robert Band

I assume you’re talking about the Boyd Gaming.

Shaun Kelley – Banc of America

That’s right.

Robert Band

Mothballing of the Echelon.

Shaun Kelley – Banc of America

I mean do your big picture perspective, and then kind of how it actually would trickle into availability, labor, and that kind of thing.

Robert Band

Well, what it really means without any immediate new starts and Echelon mothball, my take is it’s a dramatic play. And it’s one thing to mothball, it’s another thing to start it up. Right now, labor is freeing up already. We’re wrapping up the wind at Tutor-Saliba. MGM will take over the next few months. And then it’ll begin to lay-off. I think what you’re going to see over the next 90 to 180 days is a dramatic reduction in demand on staff. And the people will become more and more available because they’re simply – the new work is not replacing the enormity of that, for one thing, MGM CityCenter itself.

Shaun Kelley – Banc of America

Great. Thanks for taking my questions.

Robert Band

Sure.

Operator

Your next question is a follow-up from the line of Steve Fisher. Please proceed.

Steve Fisher – UBS

Great. Thank you. I’m wondering if you can just us a sense of – assuming the timing on the Dubai works out with your 90-day plan, any sense of how much revenues you could generate from that opportunity in 2009.

Ken Burk

Steve, we’re not really in a position to comment on that level of detail right now.

Steve Fisher – UBS

Okay. And then, in terms of the MGM, a follow-up there, you said that the Atlantic City was delayed a year from your original expectations. Could you just remind me what your original expectation was?

Robert Band

We thought it would start the first quarter of ’09. That was our original belief in the discussions we have. We’re not deferring it to the first quarter of ’10.

Steve Fisher – UBS

Okay. Great. And then lastly, the prospects more work in the overhead coverage system is certainly very good. I’m just wondering in terms of the margin, how it looked there. It looks like the last couple of quarters have started to come down. Do you think we’ll see a continued kind of ramping down of the margins there or could they sustain in this upper teens streak.

Robert Band

Steve, the margins, in a way, they’re pretty much where we said they would be, in the high teens. And we expect that to continue over the additional $80 million to $100 million of additional overhead cover projects.

Steve Fisher – UBS

Okay. Terrific. Thanks.

Operator

Your next question is a follow-up from the line of Avi Fisher. Please proceed.

Avi Fisher – BMO Capital

Hi. Thanks for taking the follow-up, just two other quick questions, one on Dubai. The prospective work you’re talking about doing. It sounds like it will be through a JV. Will the fee be based on the backlog or are you just getting a fee that hits – that (inaudible) that line directly? How might that look? Or should I wait until you have more disclosure on it?

Robert Band

Well, no. A joint venture – we would recognize our share of the revenues. And it would flow through just like any other project.

Avi Fisher – BMO Capital

Got you.

Robert Band

We wouldn’t be booking it on a pure fee basis, in other words.

Avi Fisher – BMO Capital

So you’ll generate backlog and burn the backlog just like a typical –?

Robert Band

(inaudible) Yes. That’s correct.

Avi Fisher – BMO Capital

And any sense of what the margins would be on that? Would that look like a Vegas buildings project, or like Ron said before, you take on more risk, you got to more and more –?

Ronald Tutor

We’re in the middle of negotiations. This is Ron Tutor. It will be higher than Las Vegas. When we concluded those negotiations, I’ll be happy to share with you.

Avi Fisher – BMO Capital

All right. I look forward to that. And then just a follow-up –

Ronald Tutor

So do I.

Avi Fisher – BMO Capital

And then just a final follow-up question. You talked about labor – the labor market in Las Vegas. If that is softening up, do you expect to see or are you seeing both labor price improvements from your perspective, and also material price improvements?

Robert Band

There doesn’t to be any relief for material price improvements anywhere in the United States. If anything, they’re hardening and going up. And because there’s so much more labor available, we’re getting more competitive pricing from our subcontractors because of that availability. But if you ever do a study on the major labor components of a construction building project, they’re pretty much controlled by a very limited group of suppliers, who very quietly are buying up all of our resources. And they set prices. It’s a mini version of the oil companies. It has nothing to do with inflation or deflation. It’s a control pricing atmosphere. And there are no such thing that I’m aware of material prices going down.

Avi Fisher – BMO Capital

How about any sense on the rate of change? Is it still inflating at the same rates we’ve been seeing or –?

Robert Band

No. I don’t think so. I think labor is stabilizing dramatically. I mean if we’re looking at inflation – I think we had such enormous material increases over the last two to three years. At this point, it’s relatively flat, although, I always wait for the next crop.

Avi Fisher – BMO Capital

Right. Right. And what about on the material side?

Robert Band

That’s what I’m talking about is purely material. The risk in exposure is material escalation.

Avi Fisher – BMO Capital

All right. Well thank you for the follow-ups.

Robert Band

Sure.

Avi Fisher – BMO Capital

Good night.

Operator

Your next question will be from the line of Dennis Sybil [ph] of Dechoses [ph] Capital. Please proceed.

Dennis Sybil – Dechoses Capital

Thank you for taking my call. A quick question, it was mentioned earlier that MGM hasn’t committed to the financing of the Atlantic City project. And yet I think it was stated that you expect to recognize $1 billion to $1.2 billion in contract wins over the next two quarters. I’m not sure I understand the discrepancy there.

Ken Burk

Yes. Dennis, it’s Ken Burk. I think what we meant – I think the question was, has the project been committed to – we haven’t really – we haven’t really dialed in to MGM’s financing plan. So I think that was the basis for that. So I don’t think there’s really any disconnect. And we have it as a pending project the same way we had it in the first quarter.

Robert Band

There’s no reference to that producing revenue in the next two quarters.

Dennis Sybil – Dechoses Capital

Okay.

Robert Band

There’s no reference to it. It’s been put back a year. I think what you’re talking about is we originally indicated in the call months ago that we thought we’d get a start in the first quarter of ’09. We have now, subsequent to conversations and MGM announcements, believe that it would get put back to the first quarter of ’10.

Dennis Sybil – Dechoses Capital

Okay. So you’ll see the project, it’s just pushed back. But you’re pretty confident that it pull out.

Robert Band

We’re seeing every – well that’s the way we see it.

Ken Burk

And we do – we are continuing to have contract discussions with them too. They still want to continue down that path. So that leads us to believe that we’re going to continue. It’s just a matter of timing.

Dennis Sybil – Dechoses Capital

Okay. Thank you.

Operator

And there are no more questions at this time. I’ll turn the call back over to Mr. Ken Burk for closing remarks.

Ken Burk

Okay. We just like to thank everyone for joining in on the call. And we’ll look forward to our call in the third quarter. Thank you all very much.

Operator

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

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