Tutor Perini Corp (TPC) 2006 Q1 法說會逐字稿

Good afternoon. My name is Michelle, and I will be your conference operator today. At this time I would like to welcome everyone to the Perini first-quarter 2006 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. (OPERATOR INSTRUCTIONS). Mr. Coulson, you may begin your conference call.

Thank you, Michelle. Good afternoon, everybody. Thanks for joining us on Perini's first-quarter fiscal 2006 conference call. With us today are Perini's President, Robert Band and also the Company's Chief Financial Officer, Mike Ciskey. Our agenda today follows the usual format, Bob is going to start off by discussing the highlights of the first quarter, new contract wins, other successes and issues. After that, Mike Ciskey is going to review the Company's first quarter financial results in detail. Then Bob is going to come back and make some closing remarks and at that point we are going to open up the call to your questions.

But before we start I would like to remind our listeners that the Company's comments today will contain forward-looking statements and management may make some 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 upon assumptions that the Company believes are reasonable but that are subject to wide risks and actual results made differ materially. These types of statements and the underlying factors related to those statements are listed in the filed information with the SEC and in particular Perini's annual report on form 10-K for the fiscal year ended December 31, 2005, as well as in today's news release.

Our statements on this call are made as of today May 3, 2006, 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 expectation or otherwise. With those formalities out of the way it is now my pleasure to turn the call over to Bob Band.

Thanks, Crocker, and good afternoon everyone, and thank you for joining us on the call today. The first quarter of 2006 was an excellent one for Perini. Our revenues reached a record $613 million, up 65% from a year ago and net income climbed 46% to $8.1 million. Our building division was the key driver of this growth due in large part to the addition of Rudolph and Sletten, as well as the new business we were awarded in the second half of 2005. Our civil division realized additional revenues in gross margin improvement from the addition of Cherry Hill Construction. The management services segment also contributed to our profitability, although to a lesser extent than in the first quarter of 2005. Mike Ciskey will review our financial results in more detail later in the call.

In fiscal 2005 the U.S. building market experienced solid growth, and this has carried over into 2006. The level of preconstruction activity remains high, particularly in the hospitality and gaming markets, our two main areas of focus in recent years. During the first quarter of 2006 new contract awards totaled $626 million, which replaced the revenues recognized in the quarter, leaving our backlog relatively unchanged from year end at a record $7.9 billion as of March 31, 2006. New contract awards and adjustments to contracts in process added to backlog in the first quarter, included the $198 million Sheraton Hotel in downtown Phoenix, Arizona; $122 million of additional work at the Redrock Resort Spa Casino in Las Vegas for stations; a $62 million parking garage in West Palm Beach, Florida to be performed by James A. Cummings and, $146 million in various other building work awards to Rudolph and Sletten.

As we said in our last call, we believe that we are near full capacity in the Las Vegas market and are soliciting for new projects in the Las Vegas area with start dates beyond 2007. However, we have been actively seeking new work in other areas around the country. Our success in generating new business in markets other than Las Vegas is evident from the new work added to our backlog this quarter, which reflects Perini's reputation for on-time delivery and execution of large, complex projects that is unmatched in our industry.

Our work in the Las Vegas market has begun ramping up and our building division continues to make good progress on each of our high profile projects. Our largest project, the $3.4 billion dollar MGM Project CityCenter includes a 4000 room hotel tower, casino, convention center, showroom, approximately 500,000 square feet of retail and restaurants, three branded boutique hotels and numerous residential towers. We have finished construction of the 100,000 square foot MGM office building which was turned over on May 1, 2006, and we are also finalizing our work on the 10-level 5000 car parking garage and are currently pouring concrete on the top level of that facility.

Our next phase involves the implosion of the Boardwalk Casino Hotel which will begin within the next week or so. We broke ground on the $1 billion plus cosmopolitan resort and casino in Las Vegas in October of last year and are making steady progress on this project, as well. Our contract involves the construction of two high-rise hotel and condo hotel towers with approximately 3000 luxury hotel rooms, suites and condo hotel residences. We are just about 50% complete with the slurry walls and micro piles and are scheduled to begin excavation in July. The project is scheduled for completion in mid 2008.

Our work on the Trump International Hotel and Tower in Las Vegas is also on track. This $370 million contract includes the condominium hotel tower with over 1200 units, a 36,000 square foot recreation deck and pool and a 5-story parking garage. We broke ground on this job in July, 2005. To date we have completed parking levels one through five, and have begun work on the deck area. We expect to complete construction in the first quarter of 2008.

The $469 million expansion of the Foxwoods Resort Casino in southeastern Connecticut continues to move forward. The project features a 26-story, 825 room hotel tower and will emphasize non gaining activities, including a 25,000 square foot spa, 4000 seat theater and 115,000 square feet of meeting and convention space. We broke ground in November of last year and are currently forming the third level of the hotel tower. We are also working on the foundations for the lowrise and parking structure. In June we will begin steel erection on the lowrise and precast direction on the parking facility.

Our $635 million joint venture contract for the Gaylord National Resort and Convention Center in Prince Georges County, Maryland, involves 1500 hotel rooms, over 400,000 square feet of convention and meeting space and parking for 2600 cars located on the Potomac River just outside of Washington, D.C. We have made good progress on this project and have completed all footings and poured about 40% of the concrete and completed 40% of site utilities. This project is scheduled for completion in midspring of 2008.

In addition with our work in Las Vegas, southeastern Connecticut and Washington, D.C., Rudolph and Sletten has played a major role in our building operations in the first quarter of 2006. This business unit produced profitable earnings and continues to meet our expectations. As we stated in our last call, we see a lot of opportunity for Rudolph and Sletten in the Native American gaming market particularly in California, and we are actively pursuing projects with them in this area.

Turning to our civil operation, the market remains strong but contracts in this area typically take a minimum of three to four months to be awarded. We are awaiting award on a recent low bid for a bridge rehab project. We remain an active bidder on projects that meet our profit margin requirements. Cherry Hill Construction which we acquired in January of 2005 enhanced this division's profitability in the first quarter of 2006.

In our know management services segment work is well underway on the two contracts we were awarded last fall for work in Iraq. We are proceeding with the overhead coverage systems on approximately 50 existing facilities at a number of U.S. military locations across Iraq in support of the U.S. Army Corps of Engineers construction programs. We are now in the design completion stage and have begun the (indiscernible) facilities fabrication and are erecting steel structures.

At this point our work in Afghanistan is in its final stages, just in completing the two last bases constructed, and we do not foresee any new work in this area at this time. In April a Perini led team was one of fifteen contractors awarded a newly developed indefinite delivery, indefinite quantity contract by the U.S. Air Force to support the design and construction of new facilities and infrastructure and to remodel and upgrade existing facilities in infrastructure worldwide. This heavy engineering repair and construction known as HERC, H E R C, is currently funded at $6 billion for all contracts awarded to support military construction and base realignment enclosure and other DOD activities over the next several years. We believe there are good opportunities for additional contracts with the U.S. Navy, Air Force and the Department of Defense and are actively pursuing these contracts as well.

As you recall, indefinite delivery, indefinite quantity contracts are typically not valued in backlog until individual task orders are awarded. Also in April our Board of Directors approved the grant of approximately $1.3 million restricted stock units to our executive offices and other key personnel which will vest over a four-year period. Our reputation in the industry as the builder of choice is due largely to the quality of our key personnel. Given the recent boom in construction particularly in Las Vegas, we felt this program was a prudent one designed to retain key members of our team, particularly in our building division.

All in all the first quarter of 2006 was a solid quarter for Perini. We produced very strong growth in revenues and net income. Now our outlook for the remainder of the year is for continued growth in revenues and earnings for both the building and civil divisions, along with profitable results in the management services segment.

In regards to guidance for 2006, we reaffirm our revenue guidance in the range of $2.6 to $2.8 billion. However we are adjusting our diluted earnings per share guidance to a range of $1.00 to $1.10, down from $1.30 to $1.45, reflecting the stock based compensation expense associated with the restricted stock units discussed earlier. Now let me turn the discussion over to Mike Ciskey who will give you all the financial details for the quarter.

Thank you, Bob. I will now cover the first quarter financial results in some detail. In the first quarter of 2006 revenues were $613 million, an increase of 65% from the 372 million reported in the first quarter of 2005. On a reportable segment basis revenues from our building segment were $484 million, an increase of 101% from the $241 million in the first quarter of 2005. This increase in first quarter building revenue reflects both the addition of Rudolph and Sletten, which we acquired in October 2005, and increased volume of work associated with new contract awards we've received in the second half of 2005 in the hospitality and gaming markets. Without the addition of Rudolph and Sletten, building revenues would have increased by $58 million for the quarter.

Revenues from our civil segment were $71 million, an increase of 40% from the $51 million reported in the first quarter of 2005. This increase is a result of increased volume in both of our civil business units with a strong contribution in the first quarter from the Cherry Hill subsidiary compared to the first quarter of 2005.

Management services revenues were $58 million, down 27% from $80 million a year ago. This decrease was due to a decrease in the volume of work related to work in Afghanistan which was largely completed in 2005. Our total gross profit increased $9.6 million or 43% to $32.3 million from $22.7 million in the first quarter of 2005. Overall gross margin percentage for the quarter declined to 5.3% from 6.1% a year ago. This decline in gross margin percentage is the result of the change in overall mix of our work to the building segment in the first quarter of 2006 which has a lower margin and risk profile than the civil and management services segments.

General and administrative expenses were $17.9 million or 2.9% of revenues in the quarter compared to $13.3 million or 3.6% of revenues in the first quarter of 2005. This increase was primarily due to increased general and administrative expenses to Rudolph and Sletten, offset by lower corporate general and administrative expenses in the first quarter of 2006, which was favorably impacted by an $850,000 decline in compensation expense related to the amortization of certain restricted stock awards.

Income from construction operations before corporate G&A was $17.1 million in the first quarter 2006 versus the $12.8 million reported in the first quarter of 2005. Breaking down income from construction operations by segment, the building segment income from construction operations for the quarter was $9.3 million, an increase of 98% from $4.7 million in the first quarter of 2005. Rudolph and Sletten accounted for $4.6 million of this increase while new work in the hospitality and gaming market accounted for the remaining $1.9 million.

Operating margin for the building segment was 1.9% in the first quarter of 2006 compared to 2% in the first quarter of 2005. Civil segment income from construction operations was $4.4 million in the first quarter of 2006 versus income from construction operations of $1.5 million in the first quarter of 2005. This increase was due to increased revenues, as well as improved gross margins at Cherry Hill. Operating margin for the civil segment was 6.2% in the first quarter of 2006 compared to 2.9% in the first quarter of 2005.

Management services income from construction operations was $3.4 million compared to $6.6 million in this first quarter of 2005. This was due to the previously mentioned decrease in revenues associated with the work in Afghanistan. Management services operating margins declined to 5.8% versus 8.2% a year ago, largely due to the decline in revenues as well as the profit increases that we were recognized upon the completion of contract finalization of two projects in 2005.

Other income was $400,000 in the first quarter of 2006 compared to other expense of $100,000 in the first quarter of 2005. Correspondingly interest expense was $900,000, up from $400,000 in the first quarter of 2005. Both of these categories reflects the interest income earned and paid on a portion of the funds received from a $30 million term loan related to our credit agreement, which was amended in October 2005 for the acquisition of Rudolph and Sletten.

The provision for income taxes was $5.8 million compared to $3.3 million in the first quarter of 2005. The higher than normal effective tax rate for 2006 is due primarily to the estimated impact of certain non-deductible executive officer compensation. Net income was $8.1 million in the first quarter of 2006 compared to $5.6 million in the same quarter a year ago. And diluted earnings per share was $0.30 versus $0.20 versus the same period of 2005.

Looking at our balance sheet, at March 31, 2006 our working capital stood at $155.7 million up from $153.3 million at December 31, 2005. This represents a current ratio of 1.25 compared to 1.23 to 1 at December 31, 2005. As of March 31, 2006 we had $107.7 million in cash and cash equivalents compared to the December 31, 2005 balance of $139.9 million. The $32.2 million decrease in cash was a result of $26.4 million in cash flow used in operations including the $40.4 million in cash used to pay the WMATA judgment. $1.6 million in cash used in the investing activities related to the purchase of construction equipment and for $4.2 million in cash used by financing activities was used to pay down a portion of our term loan and equipment financing debt assumed in conjunction with the Cherry Hill acquisition.

At March 31, 2006 long-term debt stood at $37 million, excluding current portions down from $40 million at December 31, 2005. Our long-term debt is comprised primarily of a secured term loan which was used to refinance a portion of the purchase price of Rudolph and Sletten. At March 31, 2006 we had $7.2 million committed as security for letters of credit on our $50 million revolving credit agreement and the balance was available for operating capital.

Stockholders equity increased to $191 million compared to $183 million at December 31, 2005. In April we announced our intention to redeem the remaining shares of our $2.125 preferred stock. We will conclude the redemption on May 17th with the payment of $25 per share plus accrued non paid dividends through that date which amounts to a total payment of approximately $8.8 million.

As Bob mentioned earlier, our backlog at March 31, 2006 was $7.9 billion relatively unchanged from year end. Backlog by segment is building segment backlog of $7.3 billion, civil segment backlog of $357 million and management services backlog of $250 million. In addition as Bob mentioned, we have lowered our diluted earnings per share guidance for the impact of non-cash stock based compensation expense, resulting from the recent granting of restricted stock units to certain executives and employees as long-term retention of performance incentives. Although our original guidance had some provision for this expense, our 2006 results have been unfavorably impacted due to changes in the vesting of these restricted stock units and in the price appreciation of our stock between the original forecast and the final approval of the grants.

With that said, I will now turn the call back over to Bob for his closing comments.

Thanks, Mike. While the first quarter of 2006 was a strong one for Perini, our revenues reached a record $613 million, up 65% from a year ago and net income climbed 46% to $8.1 million. We added $626 million of new contract awards to our backlog, which remains at a record $7.9 billion. Our success in this quarter was driven primarily by our building operations where Perini remains the builder of choice for large-scale projects. The addition of Rudolph and Sletten is expanded Perini's reach into the western U.S. and contributed significantly to both our top and bottom lines. Our civil division continues to improve profitability and our management services division provided another quarter of profitable earnings. We expect more of the same as we move through 2006 and look forward to updating you on our progress next quarter.

That ends our prepared remarks. Mike Ciskey and I, and hopefully Dick Rizzo if he's on the line, are happy to take your questions.

(OPERATOR INSTRUCTIONS) Richard Paget, Morgan Joseph.

Good afternoon, everyone. I wondered if you could get us a little bit more insight into the mechanics of how this stock option expense is going to work. Whether it is going to be spread out equally amongst the quarters; whether you're going to take a big hit next quarter. And going into out years is this kind of -- I don't want to call it a onetime event, but is there something out of the ordinary that going into '07 we are not going to have big grants out this magnitude?

What you have to understand is that these grants vest over a four-year period. Some are tied to performance units. Some are cliff vesting and some are phased vesting. So there will be charges as we move through '07, '08 and '09 for these is stock and grants and won't necessarily be spread evenly. Needless to say, the increase in stock price between the discussion of these and the final approval impacted us; our original forecast was in at a lower stock valuation naturally and a different vesting schedule. The compensation committee had adjusted that. So we will include the amortization of these grants as we release guidance going forward.

Okay, so that $0.31 for this year is just for this year, that doesn't cover the whole $1.3 million?

First of all, the $0.31 is a delta number as I said. There were -- there was some provision in our original forecast, but not to the amount that it wound up being at the time it was approved. And back to your other question about the vesting, there are all different vesting schedules, so the expense does run through the really four-year period of time '06 through '09, but clearly the heaviest portion of the expense is in '06. And more significantly, yes there will be a significant charge in the second quarter associated with those.

Okay, I mean is that kind of two-thirds of that $0.31 delta? Just trying to get a sense of.

No, it's probably not that high.

We generally don't forecast the quarters because of the lumpiness. So that is -- we wouldn't probably forecast that one element either, Rich.

Okay. Looking at the broader markets, there has been some talk in Las Vegas some of the residential condo projects getting shelved. How is that indirectly affected you? Has that opened up some labor capacity?

Yes. Initially when we had looked at all the work in Vegas, not just our work and run histograms of all the trades required, right, we had a lot of those mid-range residential projects that did get shelved in that analysis. So it may open up a little bit on the trade label, we still believe that travelers will be required though, especially from the electricians and some of the other specialty trades.

Okay, and the recent announcement with the partnership between Foxwoods and MGM, will that expand your guidance current plans or is that going to pretty much keep that expansion the same?

At this moment it is good news for us, as well, because both are clients. But we are not sure that there will be an impact on the value of the program. I was just going to say so we've left backlog and all that stays the same related to Foxwoods, and we don't know of any increase in the program at this time.

All right, and then the higher tax rate in the quarter, is that what we should think about for the rest of the year, or is that just --

Yes.

Okay, I will get back in queue. Thanks.

Steven Fisher, UBS.

Good afternoon. I just have a follow-up on the stock compensation expense; you mentioned I think part of it is because of stock price triggering and investing. Are you able to or are you resetting any of these programs out in the future? So that it might not result in such a charge going forward, or it just is what it is?

No. It is what it is. The price of the grants gets valued at the time they are granted. So regardless of what happens with the stock price at that point in time or after that point in time, the grants are still valued based on the grant date or approval date.

So they have been approved, so that is fixed and so that price element won't be a varying element going forward,

Okay. You mentioned the bridge project that you are currently the lowest bidder.

That's not in the backlog at this time. We don't put projects in the backlog until they are finally awarded.

Right, so historically with these types of projects and bids when you are named the lowest bidder, how long does it typically take before you could be putting into backlog, and what uncertainties still are there? What could happen from here?

Well, two to four months I would say is a normal period. The uncertainties, you know they run the gamut from funding not being available to bid protest extending the period, so there is various elements that could impact the timing of the award.

Do you think this one looks pretty good?

Well, we do, but again I'm not going to predict when it will fall into backlog.

Okay. On that $6 billion IDIQ contract I guess it was that you talked about, how much of that do you think could end up going your way, and how does that work and what kind of timing might we expect there?

Well, again, that $6 billion is to cover the 15 contracts that were awarded. The task orders will either be bid amongst the parties or selectively assigned to the contract awardees. And it is covering the initial period of the contract, the five-year base period, and it is very hard to predict how much will come our way. So I usually don't value those until we see the task orders starting to flow. In fact, there is a conference with the Air Force this month, later towards the end of this month that will clarify a lot of those issues. So we will just stay on schedule and hope that good things happen; we've had other task order contracts that have produced good results.

And lastly here, looking out into the future of bids based on what you know about the projects planned in the Las Vegas market, when do you think this labor situation will really come to a head? When will a shortage really start affecting project costs or potentially start causing projects to be delayed if you think that is what would happen?

Is Dick on the line? Well, I would say 2008 would probably see the peak requirements especially in some of the trades, maybe late 2007, early 2008. But at the present time we are not predicting delays. We have incorporated the need for travelers into our plans. So right now we're not predicting delays, but we think it will peak probably in late '07 and into '08.

Okay. Thank you.

Richard Rossi, Ferris Baker Watts.

Good afternoon, everybody. Just getting back to the 123(R) impact for a second, have you been able to go back and look at what '05's numbers would have been had you applied that accounting rule to your '05 results?

Not really, because you would have to pro forma an '06 expense into '05. We did have some '05 amortization expense associated with grants, but it was not anywhere near the magnitude of what we are anticipating the '06 amount to be.

But on the grants that we've issued since '04 anyway, we have set those up and expensed those (indiscernible).

And this really isn't a 123(R) issue, Rich. This is really the way that the stock grants have been treated for some time relative to.

I'm sorry; my mistake.

That more effects options then.

You are right, you are right.

We haven't issued any recent options.

Okay. The first quarter, did you have any charge in the first quarter or are these charges you're talking about all going forward?

The charges are largely going forward. There was a relatively minor charge in the first quarter, not for the grants that happened in April, obviously, but for grants that really date back two years.

Moving on, you closed on a couple of jobs, you are moving forward on jobs. Have you seen any pickup in incentives that you been getting for this completed or near completed work that has had an impact at least on the first-quarter numbers?

At the present time it is too early in these jobs to predict any schedule or safety-related incentives.

I think he is talking about jobs that we are completing.

Right, right.

There was some impact in the first quarter. The margin at some of our Perini West group was a little higher than normal, perhaps because of some contract adjustments, but not really a significant amount. Now there was some impact of that in '05, and that is why the '05 total margin was a little higher than normal.

All right. Iraq work in the first quarter, do you have a revenue number there?

Yes. In the first quarter we did about $27 million worth of revenue in Iraq compared to last year to about $21 million in the first quarter 2005.

Looking forward also, the new highway bill is in place, etc. we're well into the bidding season, are you looking at a larger book of work to bid on in the infrastructure area as we move into the summer period. Or is that changed materially over let's say the last three to six months in terms of what you're looking at as potential jobs?

It hasn't changed. It still continues to be a robust market in the civil side, but again, we're pretty much focused on those jobs that we think we can attain the fees that we are looking for. So while there is a lot of targets, its a target rich environment, we're still picky eaters in terms of picking and choosing projects with enough level of difficulty that would justify a high fee.

One then one final thing, manpower capacity issues outside of the Las Vegas market, again I am looking for any changes in what the environment is like. Has there been much of a change in that environment over the last three to six months?

We haven't seen a change. It continues to be a very tight environment almost like a zero sum game for experienced management. We are pleased that we've got a good team that we continually look at methods of holding onto and retaining. We don't want to lose folks like the Red Sox do.

Now, don't be bitter. Okay I guess that's about it.

[Brent Thalman], D.A. Davidson.

Good afternoon. Thanks for taking my call. Do you have a depreciation number for the quarter? I guess I have a follow-up, too, can maybe directed towards Bob. Could you comment on what kind of opportunities you're seeing, maybe kind of broader nonconstruction, nonresidential construction market sort of outside hotel and casino type work?

Well, we see a lot of -- continue to see a lot of education related work in Florida -- fairly strong market there as well as some condominium type construction. We do see in the California market a continuing stream of health care and hospital type projects, as well as some high-tech construction. So the building markets in the side markets that we are in are active. There are continuing transportation markets that are strong. So we don't see any diminished level in these other areas where we have expertise, and we do look for a pickup in corrections, as well perhaps within a year or two. So we think those markets are still strong. And again of course gaming is really a large part of the story here.

Did you want depreciation or depreciation and amortization?

Depreciation and amortization, if you have it.

It was $2.5 million, roughly.

Okay, that's great. That's all I've got. Thank you.

[Lynn Laws], [Saker Investment]

I just wanted to get back to the restricted stock unit grants again, and I was wondering that's pretty material change, why didn't you change your guidance at that time of issuance?

You mean at the date that it was approved?

Yes.

The actual accrual of those really dragged well into April very close to the finalization of our quarters numbers, so we felt that we would do that --.

It says on April 5th it was approved.

Yes, I don't think we wanted to just threw it out there in a press release without the ability to address it directly. We would have wound up getting a bunch of individual phone calls, which of course is an issue from a FD reg issue.

Okay. That's all.

Steven Fisher, UBS.

A couple follow-ups here. Project CityCenter, you mentioned still about $3.4 billion in backlog. You still see a potential for the size of that contract to increase over time?

We do, Steve, but at this point we are still working with the budget numbers, and the individual elements of that project while there have been detail estimated are being reviewed with the owner, so none of the individual guaranteed maximum price agreements have been reached on MGM. So we are just staying with the budget numbers at this point. We believe that is the most prudent course to take.

Okay, and then secondly, your plate is pretty full these days in Vegas, and you mentioned some other work you're doing at winning projects around the country. It seems like when you look at Biloxi that is an area for gaming, that seems to be picking up momentum. But again your plate is pretty full in Vegas. What would it take for you pursue business there as a second or third gaming hub?

It would probably take an acquisition really to effectively pursue and compete in that marketplace.

Is that something you would be open to at some point?

Well in the past we have looked at opportunities very selectively, and we have not made a move in that direction yet. Again, as you said our plate is full in gaming, and we are comfortable where we are right now.

Okay. Thank you.

[Jeff Ketshaw, Trifeld]

It's actually [Trefley.] Couple questions. First of all, if you just take that $0.31 from the stock and subtract it from your previous guidance it looks like you're revising the high-end down by a further $0.04. What do you attribute that to?

Is just rounding really. I could have said $1.15 I guess.

I wished you would have.

Well business is lumpy enough so that based on long-term contract accounting, we're recognizing sales based on progress made on jobs. So it is lumpy enough that we don't give individual quarter forecast so that level of precision is a little difficult.

These stock grants, where these proposed and issued in the March, early April timeframe? It seems like you knew the magnitude of them back on February 23rd when you issued the guidance; if the stock is $2 higher resulted in that much of a difference, am I understanding that correctly?

The whole stock grant issue was --

And actually Bob you said before that the subsequent stock price was irrelevant as far as the expenses associated with it so if that's the case I guess I am a little confused as to how you would not have known it was a $0.31 hit two months ago when you issued the original guidance.

I didn't issue guidance two months ago. We issued guidance in --

We issued guidance in (multiple speakers).

Reiterate it then.

It was in November last year and the stock grants have been talked about for some period of time.

I understand that. That is why my question is how come on February 23rd when you reported Q4 -- you weren't aware of this $0.31 hit.

The approval had not been given at that point in time, and it was still subject to discussion at the comp committee. And I am sure there was a possibility that that program wouldn't be approved.

And the vesting schedule has changed the approved grants so that changed the amount of expense between the various years.

Okay.

Shaun Nicholson, Kennedy Capital.

Most questions have been answered; I may have missed this, did you guys talk about the Air Force or Department of Defense authorizing the Air Force to spend $6 billion over the next ten years, and they listed you guys as a favorite contractor?

That was that program that we were selected as a contract heavy (technical difficulty) heavy engineering repair contract which is known as HERC. There haven't been any individual awards made; it is a task order type contract, but it is funded. The current funding level is at $6 billion, which is covering a base period of five years base ordering period plus I think three 1-year option periods. And there is potential under that contract for some significant work, but it is difficult to put a valuation on it at the current time. So we're taking a wait and see attitude, and will be attending a preconstruction conference with the Air Force later this month.

So have they decided when they would start to award those contracts, or is it just whenever they -- is there a date?

I don't think there is any firm date for award of any individual task orders.

Okay.

We will know more once we attend that conference.

Thanks. That's all I had.

There are no questions at this time.

Okay, I want to thank everybody for their attention and attendance on the call and look forward to next quarter's results and next quarter's call. Thank you very much.

This concludes today's conference. You may now disconnect.